Wool Services Intl profit disappoints
NZ Wool Services International has reported a net profit for the year to June 30 of $2.24 million down from $6.64m in the prior fiscal year reflecting tough market conditions.
The wool exporter and scourer said total operating revenue during the year was $201.97m up from $200.11m in the fiscal year to June 30, 2011.
The Christchurch-based company did not declare a final dividend.
WSI managing director Michael Dwyer said the result was below directors' expectations for the year and below last year's record profit of $6.64m, reflecting unfavourable global market conditions.
"The company's fundamentals are nevertheless sound and strong and it remains keenly focused on delivering value to shareholders," he said.
The company had noted in its 2011 annual review that the exceptional 2011 result would not be repeated. A strong performance by the company for the first three quarters of the year in review was achieved and an interim dividend of 1.5 cents per share was paid to shareholders in May.
"(But) the fourth quarter saw a sharp decline in wool prices followed in July by unprecedented high volumes of wool on the market," Dwyer said in a statement to the NZX.
"These events, compounded by the high New Zealand dollar, impacted on the value of our stocks and work in progress. It has therefore been necessary to make a provision at year end to reflect this fall."
Factors affecting the fall in wool prices included reduced consumer demand in Europe, particularly for floor coverings, and a fall in demand from China's textile industry. China's economic activity had been hampered as a flow-on effect of the recession in Europe. China buys 48 per cent of wool produced in New Zealand.
There had also been a major decline in the consumption of carpet wool in Australasia, the second largest single market for New Zealand carpet wool. This follows higher wool prices 12 months ago, precipitating a major swing to nylon carpets and carpet tiles.
The market outlook for wool depends largely on the performance of world markets, and as such remained uncertain, Dwyer said.
"However we remain positive despite the international downturn. This confidence is evidenced by recent wool sales where prices have shown a firming tendency which is welcome."
WSI shares were untraded this morning.