 So Michelle Wall 146 year story in the making five generations of traders we evolved into a manufacturing company We currently process about 8% of the Australian wall clip and we turn over a lot of money to do it Sometimes making it sometimes not but that's commerce. Our main focus is carbonizing now carbonizing is the The process of removing vegetable matter from wall using acid and also scouring at the same time We tried a lot of things in our journey over a hundred and forty six years some worked and some not And I've really given away the punchline as to Why we're still here, but you'll see the theme of constant innovation right through my talk today But first a quick summary of a hundred and forty six years So we began in 1870 mid north and south Australia a hundred Ks north of Adelaide We traded raw wool the original founder was paid for his Labor's of fixing pots and pans in wool So we had to do something with it He sent it by bullet train to Adelaide which was then sent to the UK for sale and you got paid six months later To add value or reduce cost he decided to build a scour in the Wakefield River So to remove the dirt so there's less to ship the UK which he then shipped off to UK and you got paid for it six months later and In the 1900s the family decided to move to Adelaide and the good course I set up their scour again this time in the Torren River in Central Adelaide and did the same thing They bought wool in this case rather than getting paid for their Labor's and they scoured it sent it to the UK got paid six months later Moving on to the second generation of the family there were four brothers involved The war years prompted more experimentation We stepped into coaming wool In the UK and India we added more value by taking scour to the next step We added value to it and it was now ready for spinning now this brought a whole new raft of challenges for us We had to find new customers new markets as we're now selling a technical manufactured product So several of the family went off to Europe to work out how to do that China also ended our world in in the mid 40s And we sent one of their family there to find out how it worked and we set up an office in 1948 To serve as our major communist buyers and we've been there ever ever since Moving on to third and fourth generation and more experimentation And even the fifth generation in this period of time up to 1999 There are more resources around in terms of family members. In fact, they're almost too many of us That meant that we had more resources to to enable experimentation. So we did We added more trials more machinery And we threw into the into the mix of focus on marketing We explored markets that were difficult at the time They are the Middle East India Russia China USA Korea South America New Zealand and Canada Which is basically the world China was still in its infancy But the rest of the world was still going great guns So making a product was difficult, but selling it was actually the key for us Now we added new combing machinery in Adelaide. We added the latest shrink-proofing processes at which we still use today We even tried a non-water solvent scouring Methodology, but that was way too dangerous because it was basically a bomb sitting there to go off So we get gave that one the miss it's been tried since and it's also the same fate resulted We were knitters and dies of 15 years. We dealt with mixing wool and synthetics We even became bankers and a founding member of the Sydney futures exchange. We've tried a lot We outgrew our factory in the 70s and decided to build a new state-of-the-art one, which we did About 20 Ks north of Adelaide. We increased our capacity by three times about 35 million kilos per year of manufactured wool Increasing our weekly input need to 5,000 bales a week The stockpile emerged in this same time the late 80s And we ended up trading about one third or nearly one million bales of that Into various parts of the world a lot of it into Russia a lot of into China That sort of helped get rid of that big problem Now while this was happening. We also traded another 20 or 30 million kilos of Virgin wool to the rest of the world as well So 35 million kilos of Manufactured wool another 30 million kilos of greasy wool. We were actually suddenly a major world leader in processing and trading wool But on the horizon China was looming So the 2000s and now period the world of marketing and processing wool changed significantly out particularly after the stockpile disappeared Martins vanished deal sizes were large mainly driven by China because they were still in their large central buying inspired thought process And we needed to keep a factory running at the same time. It had to be really good at the manufacturing process So the game had definitely changed and other markets began to shrink as China dominated So combing in Australia was too expensive. So we closed that down in 2001 and The focus was now singularly on carbonizing wool Which is one it was still a bit of a mystery to the Chinese which was great because we could still do it But we couldn't rely on that for long A major change in company ownership in 2004 gave us now just two owners the ability to make fast decisions So since 2004 these fast decisions are things like we purchased the carbonizing competitor and moved the machine into China And built a new facility in China at the same time. We bought into a combing and spinning plant in Malaysia And moved all our Australian coming machinery to Malaysia That was Then sold about three years later Because we just got a deal we couldn't refuse We solved one of several major environmental issues, which was water supply We developed some new products with some new non-wool technology Which we still use today and we reduced our processing cost by 80% Which is the only reason that we're still here today. I'll expand on a couple of these in a second Before I do that though, where do we sit in the industry? So this graph shows you the spread of volume versus uses by micron We're not your normal wool company. We don't focus very much on the men's suiting or the fleece wool We focus on knitting felt and bedding markets in particular Our supply is the so-called bottom 10% of the clip as those red circles not there The the the woolen knits and the bedding market. Sorry. There's a couple that's missing on the side The pieces about these locks and crutchings and lambs are our major inputs Customers range from industrial spinners to high-street fashion brands worldwide and we blend to a really tight Specification removing 99.85% of all the impurities in that first kilo of greasy wool We source that wool from far north Queensland through the Perth and everywhere in between and The market we find ourselves in shows the benefits or otherwise of the wool More than any other process. So a bad input than think of coarse coarse wool stained or mixed breed fibers Shows up in the form of pilling uneven yarn sweaters that hold easily or black and uncoloured fibers sticking on the outside of the garment And these cause retailers and therefore us significant heartburn In the Worcester fabric or the men's suiting fabrics You can get away with a lot more because you can put it through more finishing processes to hide the faults That's where we sit So we moved to China In 05 a competitor stopped carbonizing and we decided to buy his his machinery over a filing cabinet one afternoon Why we've been there since 1948. We thought we knew the market in more importantly We could use wool from right around the world where it's Australia can only use Australian wool And lastly would be closer to our competition. There was nothing in there about going to China for cheaper production because it was a myth So in 05 we built a building 70 meters wide to 50 meters long and move 80 containers machinery And built an Australian style factory We began with no title to the land no environmental license and no business license. It was pretty exciting So this is what we built It's a smaller facility than that late Adelaide process is about 10 million kilos. This is about five or six million It's located one hour from Shanghai and we employed originally 180 people to two expat Aussies to manage it and We also installed our shrink briefing technology there as well One of the things we did do smarter up there was address the environmental issues We decided to build Western standards because we thought China were going to change the rules and lo and behold 10 years later They did that was a bit longer than we expected But he caught up with everybody last year in 2015 Our investment has finally paid off because a big chunk of the industry was closed down because they couldn't comply with environmental outflows We are now running the factory much more like Australia We've got one Australian Chinese manager and we employ 90 Chinese rather than 180. So the cost down focuses alive and well Back to Australia The focus is similar. It's all about efficiency in the last 10 years our production costs have Reduced by 80 percent. That's eight zero We're running one line not two for the same volume We comply with environmental rules because we've invested an awful amount of money in In effluent treatment, but as the city continues to grow around us We're gonna have to come up with a smarter solution on that again so We've come a long way, but we need more Our next focus is independence from energy and recycling our waste streams One big success we had was back in 2002 about then we We decided to invest in a water supply replacement program And we fixed the cost for eight decades. We tend to think a bit long-term in our business We use 800 megalitres year of water Up until 2003 it was all coming from the Murray River It now comes entirely from a recharge aquifer right next door to us on the Parifield Airport Since establishing this operation the water cost has risen by two to three dollars per kilo liter Think of two to three million dollars extra cost per year, which we haven't had to pay And it would have jeopardised business if we had to so the solution called the attention of an author Which is that book in the top right hand corner He thought it was groundbreaking and Fascinating and we just thought it was a interesting idea. So you get some of these these kicks occasion that sort of work for no reason at all Simple and cost efficient But very costly to build So what's next? Environmental issues new markets new products and finding a regular supply are currently the main focuses We do remain open for anything else that might come out and hit us from the field But we're looking at co-gen plant for power and heat generation Using the methane derived from our waste streams It's complex but has real potential and would get us ahead of the competition in spades Who are in particular China who are facing rising power and gas and environmental costs Plus labor plus rules plus you name it. It's all coming in China With their growing population And it's finally as drought continues to impact supply. We have an appetite for 3,000 miles a week And a starting another business or reinventing another business, which is buying direct from the growers again We did this back in the 80s And providing in this karma a brokering service So this means we're going to go up against the major merchandising companies, which is going to be a lot of fun in itself They should be selling to us happily, but they'd rather sell to somebody else. So we have to go and fight for our own market share So what does it take to stay in the wool industry? Patient capital innovative thinking and just keep your eye on the risks Our current list of things to do and fix should keep us at the forefront of the industry for at least the next few years Assuming we're successful at least one of the ideas Who knows what'll happen, but ultimately future generations will make the call on whether it's enough for now and whether they want to continue on So thank you