China-owned NZ Wool Services loss widens on loan impairment

NZ Wool Services' loss has widened to $3.2m. Photo/Dannevirke News.

Correction: An earlier version of this story incorrectly referred to increased financing costs as the reason for the loss. Finance costs increased only slightly; instead it was a loan impairment expense that affected the company's result. Apologies for the error.

Wool processor and trader New Zealand Wool Services International - utimately owned by Chinese textiles investor Shandong RuYi Science and Technology Group - reported a $3.2 million loss in 2018 due to largely to an impairment expense.

The loss compared with a $824,000 shortfall in the previous year, according to accounts lodged with the Companies Office.

Revenue increased to $152.6m from $139m in the year to December 31, 2018.

However, the accounts showed an impairment expense of $4.88m relating to a loan receivable which dragged the bottom line.

NZ Wool Services said a provision for impairment of receivables came to $6.1m compared $1.21m in 2018.

A note to the accounts says the figure related to an interest bearing loan to a related party.

Loans from related parties came to $31.1m in 2018 from $39.5m a year earlier.

The company maintains a strong balance sheet with shareholder funds of over $43.6m.

Ownership of NZ Wool Services - the country's largest wool exporter - changed hands in 2016 after its parent in Australia - Lempriere - was taken over by a Shandong RuYi.

NZ Wool Services, which has a wool scouring joint venture with NZX-listed Cavalier, was originally established as a subsidiary of the New Zealand Wool Board in 1991 to market New Zealand wool worldwide.

It was acquired by Lempriere, one of the world's largest wool merchants and processors, in 2013.

In 2016, Lempriere was taken over by its then half owner, Shandong RuYi.

In April 2016, Shandong Ruyi bought a controlling stake in French fashion firm SMCP for €1.3 billion in one of the largest overseas acquisition deals in China's fashion industry.

After the acquisition, SMCP stepped up its global expansion plans, especially in China's e-commerce sector.