25 Nov 2011

Godfrey Hirst considers more wool processing overseas

7:31 am on 25 November 2011

Godfrey Hirst is considering moving more of its processing overseas after the courts backed a decision that would let Cavalier Wool Holdings gain monopoly control of the wool scouring industry.

The High Court dismissed Godfrey Hirst's appeal against a Commerce Commission decision that allows Cavalier Wool to buy the scouring operations of its only local rival, Wool Services International.

Godfrey Hirst's general manager Tania Pauling says it's a bad decision for the wool industry, which is under severe pressure from rising wool costs and intense competition from synthetic rivals.

Ms Pauling says it may now make sense to bypass New Zealand for China.

She says part of the argument for allowing the monopoly is that there won't be a significant price increase and therefore it won't have any impact on the end product pricing.

But Ms Pauling says at the moment the company is struggling with such tight margins that any increase in cost is damaging.

She says the company is also concerned about constraints on servicing in busy times, so it's having to look at the most efficient use of resources which includes looking at what's available off shore.

But Cavalier Wool chief executive Nigel Hales says rationalisation is needed to compete with Chinese rivals.

He says in the last 12 months there has been a drop of over 10% in the wool clip, amounting to about 100,000 farm bales, which is significant.

Mr Hales says there's also been a significant rise in unprocessed wool leaving New Zealand for China and what was predicted a couple of years ago is unfortunately happening.

He says if there is no rationalisation then the opportunity to further process onshore in New Zealand may be lost.

Mr Hales repeated that if the company's successful in buying Wool Services, it intends selling Wool Services trading arm.