Australian Wool Innovation’s financial health ‘as strong as ever’ despite reduced levy rate as volumes soar
Australian Wool Innovation’s financial health is “as strong” as ever as demand for woollen garments remains steady, COVID-19 lockdowns end and farmers continue to sell more bales of wool.
AWI director David Webster made the bold statement during a webinar for woolgrowers last Tuesday, just one day before the Eastern Market Indicator closed at 1402c — its highest level since the beginning of February.
Mr Webster attributed what he said was AWI’s sound financial health to a reining in of expenditure during the past two years, allowing AWI to accumulate “very good reserves”.
He said AWI had “pulled back” on planned projects in the western and northern hemisphere as cities went into COVID-19 lockdowns, because it would have been a “complete waste of those funds” to progress while the world was dealing with a global pandemic.
“We had to pull back on projects because of lockdowns… it would have been a waste of funds to spend them and target people who couldn’t go and buy woollen garments due to lockdowns,” he said.
“We are now in a very strong position and we will come out of this globally… we deal in a high-end fibre which was under serious pressure around the world.
Mr Webster said the way demand for wool and prices had “held up” during the COVID-19 disruption of the past two years had left wool bosses “remarkably surprised”.
“It’s been very strong… prices have hovered around where they are now, I think most farmers are getting a stable return,” he said.
“The fact is that our revenue has gone up, largely because of the increase in volume during the past three good seasons.
“That’s given us further income. We’ve been able to sustain any push back and lowering of reserves.
“We are in a strong position to go into an era now where the world will open up, people will come out of COVID-19, and we are in a strong position.”
AWI director Georgia Hack — who joined the board in November and works as the head of marketing for department store behemoth David Jones — said there were three key areas driving wool demand.
“One is the luxury sector, it is continuing to see significant growth and this is a global phenomenon… we are seeing it in Australia and more broadly,” she said.
“Their use of wool is growing and I don’t think that will slow down any time soon.
“The next factor is the eco-conscious consumer… the younger consumer is definitely buying in a different way to the older consumers and that is their perception of value being defined by quality and longevity.
“The last piece is about the innovation of the fibre, particularly in the sportswear sector.
“The innovation of the fibre is a lesson that we have to continue to innovate and find new markets for growth.”
AWI director Don Macdonald said he believed global supply chain issues were still hamstringing prices for middle micron wool, which should be “a couple of hundred cents” higher than where they were now.
“I think the situation with logistics in the pipeline is masking the true recovery of the wool market, we have seen a very good recovery in the (fine) sector and we have anticipated a much stronger recovery in the middle micron wools post-Christmas,” he said.
“That hasn’t happened because buyers, exporters and mills are experiencing lag times in getting wool through the pipeline… anyone waiting on machinery knows this is not just a wool situation, there are hold-ups (everywhere).
“The problem is that exporters are strung right out to their maximum financial limitations.”
Australian woolgrowers in November voted to keep the status quo and pay a 1.5 per cent levy on the sale of their wool for the next three years, ignoring AWI’s pleas for more funding and a 2 per cent levy.
Woolgrowers voted for a 1.5 per cent levy rate for the first time three years ago when they slashed the levy down from 2 per cent for the first time in WoolPoll’s 11 year history.
The reduced levy rate — coupled with drought and the COVID-19 pandemic — meant AWI’s revenue plummeted to its lowest level in its 20-year existence in 2020-21.
Its most recent annual report revealed its revenue was $56.9m in 2020-21, down 18 per cent year-on-year after a 32 per cent drop in 2019-20.
The webinar last Tuesday was the first for the year, with AWI chair Jock Laurie saying he hoped to hold the events every “few months” to improve woolgrowers’ communication with the board.
“We want feedback on how useful they are (the webinars) and how frequently they should be held,” he said.
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