ADELAIDE family company Michell Wool was hit hard by the high $A but stands to make a handsome profit as it falls, after cutting extra fat from its cost structure.
Michell holds about 22 per cent of the global market in wool carbonisation, a specialist process where fibres have impurities removed and the cleaned product is sold to spinning mills.
The company operates one factory in the northern Adelaide suburb of Salisbury and another at Suzhou, China.
It has been forced to cut costs by up to 80pc in the past 10 years and increase productivity to keep up with vast changes in the sector.
Directors David Michell, 54, and his younger brother Peter, 44, took control of the wool processing business in 2004 when the family business G.H. Michell & Sons, with a history dating back to 1870, was split into two parts. The rest of the family controls the group's pastoral and investment interests.
Michell Wool invested $20 million in 2006 in a new factory at Suzhou which employs about 200 people. The Salisbury plant, which opened in 1972, employs 60 people.
David says the "double-barrelled strategy'' is working. He says there are 52 wool carbonising plants around the world, of which 43 are in China.
Three events have forced major changes at Michell Wool: a drought in Australia, which has reduced the nation's wool clip to around 350 million kilograms, about one third of what it was in its heyday; a strong $A that has made it tough for exporters; and a broad shift of the world's textiles industry to China.
"It's forced us to become lean and mean,'' Peter said.
Full report in Stock Journal, November 7 issue, 2013.
