Donaghys Rural Merchant

New Zealand’s oldest rural manufacturer, Donaghys, has been transformed from a rope maker into a manufacturer of animal health, pasture and crop management, dairy mineral supplement and dairy shed products. New lines have been installed at its Dunedin factory making innovative products including aerosol and liquid tail-paints, veterinary medicines, agricultural chemicals and nitrogen fertiliser booster.

Agriculture provides 75 per cent of Donaghys’ business turnover and is growing. The company has 45 products in development and 20 going undergoing registration.

Donaghys was established in Dunedin in 1876, making rope from natural fibre and has survived 140 years by being adaptable and innovative. Recent years have seen significant restructuring in response to competition from cheaper overseas manufacturers and new opportunities in the farm products sector. Between the mid-1990s when the company owned 12 factories on both sides of the Tasman and employed 2000 staff; and 2001, turnover dropped from $400 million to $200 million. In 1999 financial services company AMP oversaw the business’ transformation from a public to private company, backing a management buyout of publically owned shares.

Assets have since been sold off, employee numbers cut and production rationalised back to the original Dunedin factory.

Today Donaghys has three business strands with rope and cordage and crop packaging each making up 25% of the business and agriculture (excluding packaging) 50% and growing.

When Jeremy Silva got the call asking if he would consider becoming Donaghys’ managing director, he was instantly interested. Having stepped down from overseeing a cold storage business’ increase in turnover from $5 million to $65 million, this businessman and part-time farmer was on the lookout for another business with untapped potential.

Multinationals with big overheads, overseas-based management staff and research and development efforts focused on human and companion animal health are the largest suppliers of consumables to farmers, says Silva. “This created a gap in the market for Donaghys, as a manufacturer and intellectual property owner developing innovative, cost-effective products targeting the New Zealand sheep, beef and dairy industries.”

When Silva joined the company in late 2001, restructuring was already well underway with only four of the original 12 factories remaining and staff pared back from a peak of 2000 in the mid-1990s to 700. Financial services company AMP had financed its transformation from a public to a private company, supporting management in a buyout of publically owned shares which had been trading at half their net asset value.

However, the business remained vulnerable with the bank sitting at its board table. Its structure was still complex, with several subsidiaries making products from down sleeping bags to packaging, industrial rope, plastics and textiles.

Silva’s first step was to simplify the business by liquidating assets, fixing and selling others and further cutting staff numbers. Returns were banked and costs cut. Revenue fell from $200m in 2002 to $30m in 2005 and employee numbers from 700 to 150, but profitability improved.

Management, board members and several associates have since bought AMP’s shares. Today Donaghys employs 100 staff, 35 at the original Dunedin factory, 30 at head office in Christchurch and the rest work remotely, including regional managers.

Rope and cordage and (imported) crop packaging each make up 25 per cent of business and agriculture 50 per cent and growing. “Agriculture is where the excitement is,” says Silva.

Money raised by divestments was used to acquire agricultural technology companies including animal remedies business Jenkins Biolabs and Tasman Dairy Hygiene, both used as a platform for developing and launching Donaghys’ products.

The company is becoming a leader in microbial manufacturing techniques and chemistry, following a formula of evaluating new product ranges, introducing generic products, closely studying these, then making improvements and introducing their own version. Donaghys has lodged 15 new patents in the last five years with more in the pipeline.

There is a strong R&D focus with a team of four scientists employed, all with PhDs in either chemistry or microbiology. Forty five agricultural products are under development and 20 are currently going through the registration process, helped by research grants from Callaghan Innovation.

Achievements have included developing a patented nitrogen-booster which Silva says doubles the efficiency of each kilogram of urea applied to pasture, meaning application rates can be halved based on the published trial results. N-Boost reduced nitrogen leaching by 15% while also reducing greenhouse gas emissions. The technology has been tested in 320 replicated trials carried out by 43 organisations around the world. With 750,000 tonnes of urea applied on New Zealand farms each year, Silva sees great potential for a product which can reduce both leaching and greenhouse gas emissions.

“Farmers mostly won’t change the way they do things unless there’s an incentive or a penalty not to,” he says. “That day is fast coming, as farmers are being required to measure nitrogen leaching from their farms and reduce catchment impacts.”

Other innovations include dairy shed cleaner Pureflush made entirely of milk components, launched 12 months ago. With 3.5 million litres of nitric acid going down the drain after cleaning sheds, there is likely to be strong demand for this more natural product potentially from the wine as well as dairy industry.

Donaghys scientists have also perfected surfactant-loaded liquid glyphosate to increase uptake of herbicide.

Other scientific achievements include a sheep pour-on which controls both internal and external parasites, simpler to use and easier to apply than traditional oral drenches. This product breaks down the lanolin in wool to be absorbed through the skin into the bloodstream. A New Zealand patent has been registered for this two-in-one pour-on and the product is expected to be on the shelf by late March 2017.

For cattle, there’s the world’s first triple-acting pour on combination white, clear and abamectin drench to help overcome growing resistance. ProDairy uses probiotic extracts to stimulate microbes in the rumen to enhance digestion and feed conversion, boosting milk production an average 6 per cent.

Also in the pipeline are a range of herbicides targeting pests and weeds in fodder beet.

The seventeen manufacturing lines in Donaghys’ Dunedin factory include a state-of-the-art aerosol canning operation making tail paint stock marker. There are also mussel rope machines and micro-breweries where microbial-based probiotic extracts are made to enhance livestock digestion. Injectable veterinary medicines including anthelmintics, vitamins and 5-in-1 drenches are in the planning stage.

Products imported by the company include ultra-thin silage wrap which uses less plastic than mainstream wraps without compromising strength and enables farmers to run machinery 20 per cent longer before changing rolls.

Traditional Donaghys’ lines, rope and cordage have been retained because of their closeness to agriculture. Ropes for the New Zealand aquaculture industry are made in Dunedin along with electric fencing poly-wire and tape. The company also operates supply contracts with overseas manufacturers, importing about 500 types of rope for diverse markets from leisure marine to telecommunications as well as farming.

The company has remained in Dunedin where it retains access to an adaptable engineering team with the practical skills to do anything from making a gearbox to a microbrewery. Many of these tradesmen have worked for the company for 20-40 years.

With half of its products going south and half north, the factory is logistically well located both for bringing raw materials in and exporting. The Dunedin City Council is good to work with, going out of its way to support projects such as the development of the South Island’s only aerosol factory, says Silva.