Woolworks scour reopens after $50m rebuild
The world’s largest wool processing facility, badly damaged by Cyclone Gabrielle over one year ago, has re-opened following a $50 million rebuild and refurbishment project.
The move has been made in light of the impact of Cyclone Gabrielle on 24 of its farms, along with softer milk prices.
The company now anticipates a full year net operating profit of between $34 and $44 million compared to its original forecast of $55m contained in its Statement of Corporate Intent.
Pāmu chief executive Mark Leslie, who has been in the role for approximately one year, says early assessments of the damage caused by the Cyclone Gabrielle add up to $6.5 million over the next to years, with $2.5 million falling into the current financial year.
“The cost will be a mixture of operating and capital expenditure,” he says.
The change also reflects a reduction in forecast revenue from both dairy and livestock.
The drop in forecast milk price from $9.00/kgMS in February to $8.50/kgMS, combined with lower-than-expected milk production has reduced forecast milk revenue by $14.6 million.
“Lower milk production mainly occurred in the first half of the season due to wet spring conditions impacting pasture growth although a wet summer has seen a small recovery in milk production,” Leslie says.
Offsetting the lower forecast milk price is a forecast $13m gain on the organisation’s milk futures hedge position.
Pāmu expects livestock revenue to be $14.3m lower due to a combination of Cyclone Gabrielle, softer sheep prices, and lighter animals from Southland and Te Anau farms which have experienced dry conditions for the past two summers.
The co-op says the cyclones that hit in January and February exacerbated wet conditions in the North Island which have required a lower margin store stock sales versus planned animal sales to processors.
Farm working expenses continued to remain high due to interrupted supply chain and the Russian-Ukraine war.
The annual increase to December 2022 in the farm expenses price index of 15% is more than double the consumer price index for that same period.
“Despite these challenges, forecast net operating profit remains significantly higher than $22 million the year prior,” says Leslie.
“This forecast obviously assumes there will be no adverse weather conditions over the remainder of the season, material changes in foreign exchange rates, or market prices.”
