Wool-only future prompts sale of carpet factory
Carpet-maker Cavalier Corporation is selling its Auckland factory for about $24 million.
It’s all part of a new strategy to focus on making wool carpets after struggling for several years making synthetic and wool carpets.
The company has the approval of its shareholders, who voted at a special meeting on Thursday, for that and the leasing back of the Auckland factory from the new owners, Kinleith Land and Infrastructure.
The company’s chairman George Adams said the long-term dangers posed by plastics were becoming clear. ‘‘It’s a global problem and manufacturers need to be part of the solution,’’ Adams said.
Cavalier chief executive Paul Alston told the special meeting that the company had not considered when defining its new strategy that the world would be hit by a pandemic.
But the company believed the new business model of making and selling wool carpets would benefit it ‘‘in this new normal’’.
Sales would fall in the next two years as the synthetic carpets business wound down and more spending would be needed on adjusting the manufacturing and operations to the new wool focus, ‘‘because we will not grow if we do not invest’’.
Revenue was expected to grow
from the 2023 and 2024 financial years onwards as sales of woollen carpets grew and the economy recovered from Covid-19. The full benefits from the changes were expected from 2025.
Post-lockdowns carpet sales had been stronger than expected in New Zealand. It was partly because of pent up demand and people spending money on their homes instead of on discretionary spending like overseas travel, and because retailers had been stocking up on synthetic carpets before the company moved to making only wool carpets.
Since July 1, the beginning of Cavalier’s financial year, its sales revenue was more than 10 per cent higher due to a better mix of product sold. During the same period, wool volumes on their own were up 7.5 per cent on last year and sales revenue was up 21 per cent, highlighting the higher prices paid for wool carpets.
In Australia, while volumes were down about 13 per cent, the sales revenue was down by 6 per cent.
That was the result of renewed Covid restrictions in Victoria and New South Wales, as well as the need to rebuild woollen carpet stocks in Australia after the shutdown of manufacturing in New Zealand.
More than 80 per cent of Cavalier’s sales in Australia were wool. Cavalier had started strongly this month in Australia and was expecting a lift in the market as Covid restrictions were relaxed.