New Zealand Merino Company Returns to Profit with $160,000 Gain

The New Zealand Merino Company has announced a return to profitability, reporting an after-tax net profit of $160,000 for the fiscal year ending June 30, 2023. This marks a significant turnaround from the previous year’s loss of $3.45 million. The company’s earnings before interest and tax (EBIT) also showed robust improvement, reaching $1.23 million, an increase of $3.86 million compared to last year.

In a recent update to the Unlisted Securities Exchange (USX), the company revealed that it has eliminated all trade facility debt, reducing borrowings from $10 million to zero as of June 30. A total of 85,000 bales were sold during this period, with 69% of these under contract, down from 115,000 bales sold the previous year. Consistent with its dividend policy, no dividend was declared.

Strategic Progress Amid Industry Challenges

The New Zealand Merino Company is one year into its three-year EpicFibre strategy, which focuses on optimizing operational costs and enhancing efficiency. The company has invested in systems and resources to improve its business model while managing its reputation and commercial risks. Despite ongoing challenges in the wool industry, including reduced clip sizes globally and environmental factors impacting production in Australia, the company remains committed to promoting the benefits of wool.

Kate Mitchell, chairwoman of the company, expressed optimism about the results, stating, “This year’s result is pleasing after a period of significant challenge in the wool industry. It is heartening to see the impact of our efforts. However, we must remain cognisant of the work still ahead of us.” She added that while the company has achieved its initial goal of returning to profitability, it must maintain focus on long-term growth and resilience.

Looking ahead, the company plans to continue investing in systems, personnel, and processes that will facilitate scalable growth, enhance product differentiation, and secure a reliable global supply chain. Mitchell acknowledged the persistent challenges faced by the industry, including global economic uncertainties that are not expected to diminish in the near term.

Leadership Changes on the Horizon

In related news, both Kate Mitchell and director Paul Ensor, who were appointed by growers, will retire from their positions at the upcoming annual meeting in November. Both directors have indicated their intention to seek re-election. If re-elected, Mitchell plans to serve for one additional year before retiring at the 2026 annual meeting. At that time, she will also step down as chairwoman, with the board unanimously deciding to appoint John Penno, co-founder of Synlait, as her successor.

The New Zealand Merino Company’s latest financial performance demonstrates a successful rebound from previous difficulties, as it continues to navigate a complex and evolving industry landscape.