Innovation flags revenue hit

Headshot of Bob Garnant
Bob GarnantCountryman
AWI CEO Stuart McCullough confronts a revenue shortfall.
Camera IconAWI CEO Stuart McCullough confronts a revenue shortfall. Credit: Bob Garnant

Australian Wool Innovation is in cost control after its profit was hit by a “perfect storm”, fuelling further staff cuts and a $27.3 million hit to its revenue forecast.

The company is forecasting a revenue of $73.8 million for the 2019-20 financial year, $27.3 million lower than the previous year and the lowest in the past eight years.

In AWI’s 2018-19 annual report, released in October to its 21,730 shareholders, it had forecast a $21.5 million drawdown on reserves, leaving $102 million in the coffers for the 2019-20 budget.

That total left AWI chief executive Stuart McCullough begging for an additional $8.5 million, to support a $95 million budget spend.

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“AWI’s budgeted strategic intent towards its marketing and research projects would be dependent on the company’s board approving further drawdown on reserves,” he said.

“We will release a confirmed board decision on a more accurate drawdown figure at the November 22 annual meeting.”

AWI’s 2018-19 financial status, which reported a profit of $1.77 million, down from $15.5 million from the previous year, was hit by a perfect storm, Mr McCullough said.

AWI was targeting cost cutting across all marketing and research projects, he said.

“Human resources, although a delicate matter, have already seen a reduction of 20 people and we have to consider an additional 20 staff reductions,” he said.

He also said there’d been rewarding progress over the financial year.

“We have been actively successful in both the traditional market like suiting and pursuing growing markets, especially in sports and athletic leisurewear apparel,” he said.

In the annual report AWI chairman Colette Garnsey said the impact of the Eastern States drought along with the 1.5 per cent levy rate vote from the 2018 WoolPoll would reduce AWI’s revenue during the strategic period from 2019-20 to 2021-22.

“The company’s highest priority during the new three-year strategic period is to ensure we invest in projects that will deliver outcomes that benefit all woolgrowers,” she said.

Mr McCullough said the effects of the drought, widespread throughout Australia, were very unfortunate on many woolgrowers, their land, sheep and finances.

“AWI forecasts national sheep numbers to drop to 67.9 million in 2019-20, which would result in a record low wool production of 285 million kg, which could fall a further 10 per cent,” he said.

“Our budgeted wool levy income is being revised down from $48.6 million to approximately $37 million.”

Also affecting AWI’s budget was recent wool market volatility, which had revised down its forecasted Eastern Market Indicator level to an average price of 1865¢/kg clean for 2019-20.

“The first quarter of the 2018-19 financial year saw EMI hovering round or above the $20/kg mark. It reached an all-time high of $21.16/kg mid-August,” Mr McCullough said.

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