CMW’s funding debts send earnings below par

Cape Mohair and Wool’s (CMW’s) reliance on borrowings for funding, together with the loss incurred in sales of accumulated wool stocks, has resulted in lower earnings than expected, according to chairperson Peter Cawood. “Because of the continued and escalated rate of business growth and the drop in wool earnings the cost of financing has increased considerably,” said Cawood.
Issue Date 16 March 2007

Cape Mohair and Wool’s (CMW’s) reliance on borrowings for funding, together with the loss incurred in sales of accumulated wool stocks, has resulted in lower earnings than expected, according to chairperson Peter Cawood. “Because of the continued and escalated rate of business growth and the drop in wool earnings the cost of financing has increased considerably,” said Cawood.

Reporting an operating profit of just over R1 million for 2006, Cawood said CMW is positioned to reach its goal of R5 million profit this year. “The venture between CMW and the community company Simunye has helped to raise the price of livestock of participants in the former Ciskei/Transkei region by 37% within a year,” he said.

Cawood said Simunye is the first true BEE company for the former homelands agricultural sector and promises much in terms of upliftment for farmers in the area, but “we are still working on building a marketing infrastructure in an environment which until recently had only NWGA shearing sheds and support staff”. While the national wool and mohair clips continue to shrink, CMW sold an average of 3 000 smallstock units per day in 2006 mirrored in a 37% growth in livestock and game trading for the company.

 “The system of auction sales and weekly internet auctions results in animals being exposed to minimum handling and trauma and cuts buyer input costs,” said Cawood. The profitability of Pure Cape Textiles has been negatively affected by the high mohair prices and fluctuations in the exchange rate. “An exchange rate of R7,50 to the dollar will make a significant difference to earnings as we enter the new year with more and new export orders as well as manufacturing contracts for well-known brands,” he added. CMW is also aggressively upgrading its shearing service, which Cawood said continues to be hampered by an undersupply of well-trained new recruits and experienced shearers. – Roelof Bezuidenhout