Alan Wood

A man with 43 years service is one of 60 employees to be axed from LWR International's Christchurch factory. Roy Williams, 58, said the mood was grim, not just for himself as "the longest server", but for his workmates with young families and mortgages.

Some were eyeing Australia for jobs, he said. He remembers the "glory days" when the Rudkin family owners of clothing-based LWR would reward employees on a Saturday with fish and chips and drinks, and when "it was a joy to come to work".

Things had tightened considerably under successive owners of the Sydenham factory, including Brierley Investments, American David Teece and now Ken Anderson.

But yesterday things got considerably tighter for Williams, who was told he will finish in the textile operations two days before Christmas. His wife died a couple of years ago, leaving him to care for a daughter, now 10. "We all got our letters just five minutes ago with a termination date on it," he said at the site. "It's just sad. It's the young ones I feel sorry for." He had already explored other work options, but said younger skilled workers were considering moving to Australia. Fourteen staff finished yesterday.

LWR chief executive Malcolm Walkinshaw said the business case for merino, polyester and other textile-making to be based in Otara, Auckland, rather than Sydenham was compelling. "We simply couldn't afford to operate duplicate textile plants in both locations. In the end, we chose Auckland because of that site's greater throughput and its space for future expansion," he said.

While the move was not prompted by the financial climate, the recent world downturn had left business leaders around New Zealand worried about the economic outlook, Walkinshaw said.

Unions fear the LWR cuts could be the beginning of a series of redundancies at small to large firms around New Zealand, with Christchurch having already seen jobs lost at G.L. Bowron, Skellerup, Dynamic Controls, Click Clack, Tip Top and Feltex.

Walkinshaw said Christchurch would retain a major manufacturing presence.

LWR have about 240 employees in Christchurch after the 60 lay-offs that will be staggered through to the first quarter of next year.

National Distribution Union organiser Kaelene Churton said there were a few others with nearly the same length of LWR service as Williams, and many other reliable workers of 20 or 30 years. "The impact that it has on people's lives for them it's going to be life-changing."

Christchurch's Lane Walker Rudkin Industries' offer for textile group Pod has experienced significant resistance from some shareholders.  Last week, LWR chairman Ken Anderson extended the offer from July 26 to August 9, by which date he expects a late flurry of acceptances.

But Christchurch sharebroker Grant Williamson, of Hamilton Hindin Greene, said he was telling smaller shareholders to hold on at least until closer to the closing date. The offer price of 50c was too low, given the company's assets and the potential to build value under strong management.  Williamson said he knew of shareholders who would not accept the offer "at this stage at that price".  "I'd imagine some of the other larger shareholders would feel exactly the same way."

While directors George Gould and Kevin Arscott had agreed to accepted the bid, which is conditional on 90% acceptance, that did not necessarily mean other shareholders would follow, Williamson said. He noted Gould had sold a large chunk of Mike Pero Mortgages, but with other shareholders holding on for a better takeover price.  Another big Pod shareholder said the offer was "not one I'm rushing to accept", a signal the person considers the bid is light.

Anderson said he expected to reach about 50% of Pod at the end of yesterday's trading. With another three key shareholders, ACC, Salvus Strategic Investments and Hemat Lal Patel, acceptance would rise to at least about 67%.  His representatives had spoken to these shareholders. They had not yet indicated whether they would accept.  But he "would expect them to" accept the offer given it had been recommended by the board with an independent appraisal report valuing the shares between 48c and 54c.

Anderson said Pod had a conditional agreement for the sale its Otara property for $9.5m, dependent on final due diligence. While a successful sale would be above book value of $1.15m, the price was less than an expected $12m, which would knock about 5c off Pod's share price, Anderson said.  "We were very careful when we put together our price."

Spokesmen for both ACC and Salvus said they did not want to comment yet. Patel was not available for comment.

--------------------
CAPTION:  Picture perfect: Lane Walker Rudkin Industries chairman Ken Anderson is confident of the takeover bid for Pod. Photo: Stacy Squires

Lane Walker Rudkin Industries says it is confident an offer for rival textile group Pod will reach 90 per cent acceptance by July 26 as investors realise the bid's real value.  Textile manufacturers were having to pay 30-40% more for wool than a year ago, just one factor that made the 50c a share offer for Pod look more attractive in hindsight, LWR chairman Ken Anderson said.

Textile and clothing exports were also being hit by a kiwi dollar hovering at US78c after hitting post-1985 float highs, a factor weighing on the value of Pod -- which has substantial Christchurch ownership. 

"We think there's no reason why people won't accept it. I'd be very surprised if they don't," Anderson said.  It was not his intention to increase the offer price, and he would be reluctant to extend the offer date. "As time drifts by, for those economic reasons ... it would have to be a bit of a worry if (the offer has to) sit on the shelf for too long."  Meanwhile, Anderson said LWR could yesterday confirm a new royalty-based licence agreement with Adidas, to produce branded sporting team wear for schools and clubs.

The three-year deal had been welcomed by Adidas New Zealand managing director Greig Bramwell who had noted LWR had high-profile customers including David Jones, Myer and Target in Australia.  That sporting arm was one of LWR's three business units with the others based around knitted textiles and hosiery and undergarments, including the Jockey brand, with the firm turning over hundreds of millions of dollars.

Anderson said LWR now had "towards" 50% of Pod, having gained around 3.6% of Pod through an acceptance by Timaru businessman Allan Hubbard.  He planned to this week talk to large shareholders, including ACC, TEA Custodians (Salvus Strategic Investments) and Hemat Lal Patel, which between them held about 17% of Pod. 

He added he was surprised the offer had not had immediate acceptance given that it was about a 50% premium on the 33c on Pod shares' price when the letter of intent was sent.  "Some people felt that it might have been too low, but to be honest it surprised me because previously it had been trading at 33c-34c and we came in at 50c which I felt was a substantial premium."

LWR gained initial traction for its offer by securing 30.5% from Christchurch-based Pod directors George Gould and Kevin Arscott. Neither had a "long-term focus" on Pod, whereas LWR had a history going back to 1904, Anderson said.

Anderson bought LWR from David Teece in 2001 after Brierley Investments delisted the company in 1989.

If successful with the Pod bid, LWR would look for cost savings through the scale of the combined trading, he said.
--------------------
CAPTION:
On the shopfloor: Lane Walker Rudkin Industries chairman Ken Anderson in the firm's Christchurch factory. Photo: Stacy Squires

Manufacturers are unlikely to see any short-term respite from the high Kiwi dollar - which hit a fresh post-1985 float high of US78.35 cents early yesterday. Some economists and currency experts are picking the currency to stay around current levels till at least the end of the calendar year.

Westpac is among those that have raised forecasts for the New Zealand dollar, which closed at 78.12, now picking it to reach US79c by year's end. "That's a fairly decent revision from our last track, which was around US74c," Westpac currency strategist Michael Gordon said.

High dairy prices were helping farmers and could bolster the economy "in the order of 1 per cent to 1.5 per cent of gdp" growth. The Kiwi has also gained ground against the Australian dollar - after weak retail spending data across the Tasman yesterday pointed to Reserve Bank of Australia rates being kept on hold.

The Kiwi finished at A91.2c yesterday. With this country's Reserve Bank having increased the official cash rate to 8 per cent early in June, New Zealand has the highest interest rates in the industrialised world. The Kiwi continues to attract the "carry trade", particularly from Japanese switching out of yen into the Kiwi to get higher returns.

BNZ chief economist Tony Alexander said there was little sign of a pullback in economic growth that would allow the Reserve Bank to start an easing cycle. The currency was headed toward US80c. Only a negative economic event such as a downturn in immigration or pressure on house prices would cause the dollar to fall. He said that while some sectors of the economy were hurting, the "cries of pain" from manufacturers had not been as shrill as in the past when the Kiwi had been at lower levels. Manufacturers were investing in plant, building and information technology to boost productivity, Mr Alexander said. "They're able to handle the higher currency better."

But Canterbury Manufacturers Association chief executive John Walley said foreign-owned companies such as GL Bowron, and textile manufacturer Gale Pacific, were at the forefront of decisions to restructure and move overseas. "What that's saying is that the (firms) with no sentiment are upping stakes ... these offshore-owned companies are a bit like the canary down the coalmine."

In February, Charles Levin, an independent currency trader and adviser to exporters, predicted the Kiwi would be trading as high as US80c at a time when manufacturers were saying anywhere above US70c was too high. The Reserve Bank could best work to help exporters by making the Kiwi less attractive to currency traders, he said.

NZX-listed Freightways has bought a small Christchurch company as part of its plans to grow a significant trans-Tasman information management business. Managing director Dean Bracewell said document storage company MSS Christchurch would be integrated into its New Zealand information management unit, Archive Security.

MSS was bought for $1 million, and would consolidate the unit's No. 2 information management place behind multinational Recall, he said. Separately Freightways yesterday announced the purchase of Queensland-based document destruction and recycling company Shred-X Group for $A8.7m ($NZ9.6m). Shred-X had a small Victorian operation, and overall was complementary to the recent purchase of data storage business DataBank in Queensland. "We want to replicate what we've done in Queensland elsewhere in Australia for sure ..." Bracewell said.

Information management was an underdeveloped market, and, as that market grew, Freightways wanted to increase its presence.

Freightways was eyeing or in talks over other similar companies that offered storage, back-up storage and destruction solutions, but it could not give a timeframe for any purchases, he said. Including synergies, MSS was expected to add earnings before interest, tax, depreciation and amortisation (Ebitda) of $300,000 to the group in the 2008 financial year. Shred-X was expected to add Ebitda of more than $A1.4m in the June 2008 year. Freightways remained confident of hitting internal financial targets for its full-year result due to be released around August, Bracewell said. One analyst has picked a $27m net profit.

About 80 per cent of Freightways' revenue is from its express package brands – including SUB60, New Zealand Couriers, Post Haste Couriers, and Kiwi Express – where it competes with NZ Post. The remainder of its revenue was from information management and its business mail unit.

Freightways' shares yesterday closed up 7c at 400c.

Skellerup Holdings' shares retreated on news of a surprise business revamp including job losses to allow the rubber product maker to focus on international expansion.

Skellerup gave an annual "earnings reduction" guidance of a $9 million net profit, before abnormals, ending June 30, hit by a slowdown in trading and the high kiwi dollar.

But given abnormal restructuring costs of $16m, that net profit would turn into a $7m net loss, Skellerup added.  Skellerup's shares yesterday closed off 12c, or 9.8 per cent, at 111c, on high turnover of almost 700,000 shares crossed.

The shares fell below the 115c, 2002 issue price.

Managing director Donald Stewart said yesterday up to 100 redundancies would occur as Skellerup changed its business mix to focus on specialist rubber and technical polymer products.  The company's forecast result was based on turnover of about $190m. The loss after abnormals compares to a $13.4m net profit in the 2006 year.

Skellerup is forecasting a net profit of $12.5m in the year to June 30, 2008, and continues to target a long range annual revenue target of around $500m over the next five years or so.

"It's still possible that ($500m) target. But we're not going to reach that unless we get into some high-value growth areas and that's why we've wound up with this announcement," chief financial officer Neil Campbell said.

The kiwi dollar continued to weigh on the company despite it being an importer of material, particularly of rubber from countries like Malaysia.  But it wants to reinvigorate its offshore operations.

About 140 staff are based at Skellerup's factory north of Shanghai, in China, making products including the company's classic gumboots, which have not been manufactured in New Zealand for many years.

Stewart said an extensive review of Skellerup's business mix had led to a board decision to specialise as a global technical polymer-rubber company.  In Christchurch this would lead to a reduction in non-dairy related activities, and the sale of some operations. Dairy-based work comprised between 30 - 50 per cent of the total Christchurch workplace.

Campbell said Skellerup expected to continue to grow by acquisition to build a stronger presence in the larger, higher-growth markets.

Such technical rubber products companies were being eyed in the United States, reflecting the recent purchase of Italian firm Tumedei – a maker of custom-designed products for the vehicle and industrial products – for around $16m.

"We'll be looking along the lines of companies similar to that in other jurisdictions, and one of our key focuses will be on the US ... we know of several opportunities over there," he said.

Campbell said restructuring costs included $10m of plant and equipment writedowns and $6m of costs relating to redundancy payouts and other restructuring costs.  The decision to restructure was driven by the need to be cost competitive in a global market.

The company had the advantage of some natural hedging relating to the kiwi dollar. It was in a "net import position", meaning it imported slightly more than was exported.

But the 2007 result is to include a currency impact of approximately $4.7 million.  "For the import position that we have that is over and above the amount of exports, we are hedged going forward at around 68c for about three years ..." Campbell said.  "We would anticipate for the 2008 forward years there won't be huge forex impacts on us."

The firm with 800 employees spread around the world is keeping back office functions including human resources in Christchurch, where George Skellerup opened the first retail store in 1910.

But the upcoming redundancies – which could go as high as 100 – will hurt the local economy further.

Last month electronics exporter Dynamic Controls announced 200 jobs would be axed and a big chunk of production would shift to China.  Heinz Wattie is replacing 35 staff with machines at the Hornby factory, beverageware maker Click Clack is laying off 70 workers, as is wool tanner G. L Bowron.  Tip Top is closing its Christchurch plant with the loss of 70 jobs.

Big clothing company Pacific Brands has concentrated its New Zealand operations within Christchurch's "apparel hub" as it commits to a larger design team and keeping manufacturing onshore.

Pacific Brands Clothing New Zealand general manager, Mark Jordan ,said the company now had a stronger Canterbury focus and was looking to hire creative people.

New staff were being sought in the design and marketing areas to push brands such as Bonds and Jockey. Pacific Brands employed around 8000 staff globally.

Some of its best-known brands include Jockey, Bonds, Rio and Holeproof.

Two of Pacific Brands' most successful marketing campaigns – the Jockey campaign with All Black Dan Carter and the Liberty campaign had been Christchurch initiatives, using agency Harvey Cameron Advertising.

The New Zealand firm would look at both acquisitions and organic growth of existing clothing and home comfort brands, Jordan said.

Pacific Brands has four divisions: footwear, bedding, apparel and outer wear-sport.

"We're in the type of industry where new product development is important – putting new things in front of consumers."

Pacific Brands' share price closed untraded yesterday, and last traded at NZ357c near the top of a 12-month range of 245c to 365c.

Despite having gone through a period of expansion, the cashflow-based business was not at a point of needing extra capital, Jordan said.

In November 2006 Pacific Brands bought the bedware and merino business of Christchurch firm Arthur Ellis.

Last week it confirmed the purchase of Australasian workwear supplier Yakka Group, which has annual sales of around $300m and was bought for an estimated $A200m to $A250m ($NZ226m-$283.4m).

Within Christchurch the business was retaining its sock manufacturing base in Montreal Street, but had recently rebased its head office to Victoria Street, Jordan said.

Pacific Brands main head office was based in Melbourne, and other business units, including Bonds, based in Australia.

In New Zealand it also had a Palmerston North-based thermal underwear factory, and while most of its manufacturing was out of China "more than a quarter of the product is still locally made".

The company was always looking for acquisitions, Jordan said. "I think the good thing is they've been prepared to invest in the New Zealand market," he said.

Two big exporters are laying off 140 workers, blaming a stubbornly high Kiwi dollar and cheaper Asian competition for the job losses.

Click Clack, a maker of plastic glasses and storage containers that it exports to 60 countries, will close its factory in Sydenham, Christchurch, at the end of June and lay off 70 employees.

Christchurch wool tanner GL Bowron also said it was cutting 70 jobs, shrinking its workforce to 110. The company has had several rounds of job cuts in the past five years since its workforce peaked at 700 in 2001.

Both companies blamed the high New Zealand currency reducing their returns from exports, and cheap competition from factories and labour in Asia.

The chief executive of the Canterbury Manufacturers Association, John Walley, predicted more manufacturing redundancies were looming.

Click Clack group chief executive John Heng said: "Other manufacturers are bleeding out there and they are bleeding for the same reason.

"We make and sell more product than we did four years ago and earn less."

Click Clack's exports were worth $30 million at present, compared with $40 million four years ago when the New Zealand dollar was US55c.

The dollar was about US71c yesterday.

Twenty technical staff and die-makers in Christchurch would be offered jobs at Levin. Some of the production there would be contracted to Chinese manufacturers already making wire brushes for the company.

Christchurch Click Clack staff said they were disappointed at the news but had suspected it was coming. Management had said for a couple of years that the factory was struggling. Click Clack is owned by the Malaysian Tiong family.

Mr Heng said shifting Click Clack manufacturing from Levin to China was not on the radar at present, but that could be done if necessary.

Exporter GL Bowron said the Woolston operation had also been hit by the departure of key executive staff over the years.

But engineering manager Neil Shewan said the factory would not close.

The New Zealand base had been assured of its survival by its Japanese owner, Maruhachi, which had pointed to technical and product development as the way forward for the large site, he said.

Bowron's plan was to simplify and reduce its operation, locating the finishing of salted and tanned sheepskin product to Thailand and perhaps selling and leasing part of the Woolston site, Mr Shewan said.

Managing director Sam Uuno said that in New Zealand the company wanted to focus on the production of smaller volumes of high quality "Star Grade" products for existing customers and new niche markets.

Production in overseas tanneries was being expanded.

New Zealand's high dollar will cause more redundancies in the Canterbury's manufacturing sector in coming months, manufacturers' representatives say.

Members of the Canterbury Manufacturers' Association (CMA) have warned of upcoming job cuts, and comments the kiwi could go to US80c were not helping, CMA chief executive John Walley said.

Christchurch yesterday was hit by the news of 140 job cuts by export-based firms G. L. Bowron & Co and Click Clack, following signalled factory closures by icecream maker Tip Top and carpetmaker Feltex.

The CMA's latest survey shows some firms and sectors doing better than others, but that meant that some were really suffering, Walley said.  Recent political comment and media stories that a high New Zealand dollar was here to stay were being met with disdain by the CMA's board and membership, he said.

National leader John Key yesterday said a higher currency was on the cards. "I think the exchange rate is going to US80c. It doesn't show any signs it wants to go down."
Key added the New Zealand economy could not work above US70c for any length of time. Something had to be done.

Walley said there needed to be a politically-led solution, and the kiwi dollar, even at this level, was trouble.  "We've had news from Click Clack and Bowron's today (but) there's going to be more," he said.

He could not add detail of those expected redundancies at this stage, but the exchange rate was seeing job losses "beginning to crystallise", Walley said.

"We have heard that exporters will get used to a high currency, perhaps, but this is a bit like getting used to a chronic terminal disease – you can deal with it for a for a while but the (negative) outcome remains certain," he said.

"There will be no point in asking about the level of sales activity, confidence or performance at US80c because if the dollar hits that point, activity will all but stop."

Political intervention to help manufacturers and the Reserve Bank cope with dollar and inflationary pressures would be a step in the right direction.  The economic framework should include an inflation control that did not "beat exports to death", he said.

"That means maybe capital controls on the banks, more aggressive application of existing tax rules with regard to speculative investments in property (plus) some real targeted support for the productive sector."

Without a strong export sector, New Zealand living standards would eventually suffer, he said.

Supermarket chain Foodstuffs South Island will add nine liquor stores to its co-operative structure from June 1 as part of an aggressive growth plan.

The nine Imperial Discount Liquor stores – owned by Keith Miles and Carl Wild – will rebrand and join Foodstuffs' existing Henry's Beer Wine and Spirits outlet in Queenstown to form a new chain of full service liquor outlets.

Foodstuffs co-operative business is based on independently owned Pak `N' Save, New World and Four Square supermarkets.

Imperial would pay a one-off membership fee of $500, Foodstuffs general manager retail operations Alan Malcolmson said.

There was no other financial transaction, but Foodstuffs would also benefit through its liquor distribution channel, Trents Wholesale.

"We get the benefit of the supply and building equity in our brand," he said.

The co-operative had been in talks with Imperial for five months, and the move would bring significant benefits for both businesses. The Foodstuffs Henry's brand would gain outlets in Kaikoura, Rangiora and Christchurch, but the stores would continue to be operated by individual owners.

"Foodstuffs has aggressive plans to roll out the Henry's brand around the South Island as part of its ambition to support independent liquor retailers," Malcolmson said.