SOUTH Australian-based Quality Wool, aims to expand its livestock business after its acquisition of Olam International’s eastern states wool brokering network, Western Wool Marketing.

The two companies announced the deal today, with settlement expected to be completed later this month, subject to customary conditions, for an undisclosed price.

Quality Wool managing director, Mark Dyson, said the acquisition would give QW a larger footprint and drawing area.

“With a diminishing wool clip and us being 100 percent focused on wool and livestock, it gives us a very good opportunity to expand from our current platform.

“It is going to increase our business by just under 50 percent.”

Livestock platform development plans

Mr Dyson said Quality Wool and WWM have very stable staff bases and there a lot of synergies in the way the businesses operate.

“Once I get the wool business bedded down and consolidated, I would be looking then at the livestock platform, as we have done in South Australia.

“Our main focus is to be in sheep and wool,” he said.

“We have a supply-to-demand balance in wool production at the moment, or very close to it, with our customers overseas.

“If you look at want it is happening in the south-east zone and globally, this red meat protein market is well and truly in the spotlight, so we will enhance that in the years to come.”

Quality Wool to be one of largest wool companies

Western Wool Marketing has wool brokering offices across NSW and Victoria, and also services growers into Queensland. It is owned by Queensland Cotton, a wholly owned subsidiary of Olam Australia, itself an arm of agri-business Olam International Ltd.

Quality Wool is a wool brokering, country buying, exporting and livestock business with company-owned stores at Port Adelaide, Naracoorte and Jamestown in SA, as well as at Geelong, Bendigo, Ballarat and Benalla in Victoria.

The addition of the Western Wool Marketing business would make Quality Wool one of Australia’s largest, independent, family-owned and operated wool companies. Mr Dyson said the WWM business was a strategic fit with Quality Wool’s existing operations, extending its network in Victoria as well as NSW, where it already had a strong presence in the western region.

“We look forward to welcoming Western Wool Marketing staff to our team, building on the company’s marketing services and providing support to sheep and wool growers and further expanding the Quality Wool brand throughout the eastern states,’’ Mr Dyson said.

Staffing due diligence underway

The Western Wool Marketing offices will be re-branded after settlement. Quality Wool was still doing its due diligence on staffing across the WWM network but the intent was to retain as many positions as possible.

“Absolutely – they were a very lean outfit anyway and the only duplication was not from a field point of view,” Mr Dyson said.

QW was operating more in western and central Victoria – Geelong, Ballarat, Bendigo and Benalla — while WWM had an office in Horsham and also worked into Gippsland.

“We were in western NSW and they were more central.

“That was a good fit; because we just don’t go that far east,” he said.

“They push up into northern NSW and into Queensland, so it was a very good strategic fit for us.”

Mr Dyson said Queensland Cotton was no longer selling wool in Sydney, only in Melbourne, while Quality Wool sells in Melbourne every week.

“There are lots of economies of scale for us.”

Acquisition follows Olam’s wool trading exit

In August last year Olam Australia announced it would exit wool trading and exporting, citing ongoing poor demand for greasy wool and diminished margins in an over-competitive environment.

QC’s general manager of wool Michael Avery then said Olam International would maintain and strengthen its commitment to the Australian wool industry through continued support for its broking network, Western Wool Marketing.

Last year Queensland Cotton said it had 40 export business and broking staff in its three Western Wool Marketing stores in New South Wales – at Parkes, Orange and Wagga — and at six depot offices in Victoria – at Melbourne, Ararat, Edenhope, Derrimut, Horsham and Mortlake. It supported growers as far north as Longreach in Queensland, down to the Central West and Riverina in NSW, and as far south as Gippsland in Victoria.

Mr Avery said the business moved about 65,000 bales through the depots, including handling for Michells in New South Wales and Victoria. He said Olam International saw wool broking as a low-capital usage, high overhead business offering steady repeatable incomes that are volume-driven with good service.

Sale in line with Olam global strategy

In a statement today, Olam Australia executive director and country head, Bob Dall’Alba, said the sale of Western Wool Marketing to Quality Wool was in line with Olam’s global strategy of unlocking intrinsic value and pursuing growth opportunities selectively, while exiting non-core operations.

“Olam has been a keen participant within the Australian wool industry.

“However, given Olam’s strategy to optimise our Natural Fibres business, and the fact that Olam’s wool business has been a niche operation restricted to Australia, we decided to exit the business with the sale of Western Wool Marketing to achieve the best strategic and economic outcome for our company.”

Olam International Limited is a leading agri-business operating across the value chain in 65 countries. It commenced operations in Australia following its takeover of Queensland Cotton in 2007. Since this time, Olam Australia has grown and diversified and now operates an integrated supply chain for five key products – cotton, almonds, pulses, grains and dairy – delivering these to more than 500 customers worldwide.