BusinessDesk: Cavalier, subsidiary cut 42 jobs amid rising wool prices, union says

Carpet maker Cavalier Corp. and one of its subsidiaries are laying off 42 staff in their yarn operations as rising wool prices put the squeeze on manufacturers, according to FIRST Union.

Cavalier, which reported a 4% annual increase in underlying earnings in August, has made about 22 workers and some management redundancies at its Wiri, Napier and Whanganui mills, while subsidiary Norman Ellison Carpets will lay off 20 workers at its Onehunga mill next week, the labour union said in a statement. FIRST Union secretary Robert Reid said yarn makers are blaming surging wool prices for putting the industry under pressure.

“While the increase in wool prices may be good for farmers, it is making woollen carpets uncompetitive,” Reid said. “Other yarn makers in New Zealand have also notified the union that their orders are down and the union would not be surprised to see further job losses at other mills.”

Wool prices have climbed to 20-year highs in the past year due to a worldwide shortage of cross-bred wools and the replenishing of stocks by carpet mills which had been run down during the global financial crisis.

In August, Cavalier said that pushed up the price of its woollen carpets by between 10% and 20%, and it said it was wary of cheaper synthetic alternatives.

The carpet maker reported net profit of $18.2 million in the 12 months ended June 30, up 60% from the previous year due to one-off tax adjustments.

The latest round of redundancies follows the 120 staff laid off by Cavalier rival Godfrey Hirst NZ in March, when it was forced to shut its Bromley plant in Christchurch after the Feb. 22 earthquake.

Cavalier is seeking to buy the wool scouring assets of NZ Wool Services International and will probably lay off more staff if the deal goes ahead when it closes two of WSI’s scours and mothballs two of its own plants. The acquisition, which would create a monopoly, has been authorised by the Commerce Commission, though that’s currency subject to appeal in the High Court.

The carpet maker’s shares fell 1% to $3.10 in trading yesterday.

(BusinessDesk)