Two farmer-owned wool companies have agreed to continue discussions on a possible merger.
The boards of Primary Wool Co-operative and investment company Wool Equities met last week for exploratory talks.
Primary Wool was formed almost 40 years ago and has a growing membership, with more than 1100 farmers in the co-op.
Wool Equities, set up with farmer money from the former Wool Board, operates the Bruce Woollen Mill at Milton, in South Otago, rescued from closure several years ago, as well as a small weaving plant in Palmerston North.
Wool Equities' chairman Cliff Heath said the idea of bringing the companies together in a unified structure had been discussed previously and they had agreed there was merit in taking a fresh look.
"We now need to look at the detail - how does it work, what's going to happen and from there the next proposition would come out to the shareholders 'is this worth progressing or not'?
"So we've got quite a bit of work to do around how does this actually work, what are the financial ramifications, that's what comes next. But the meeting decided yes, it was worth continuing with the concept," Mr Heath said.
Primary Wool Co-operative has just announced the biggest profit in its history but Wool Equities is still trying to reach profitability after investing in the Bruce Woollen Mill about two years ago.
Mr Heath said it was close to being in profit on a month-to-month basis but was looking for more capital as it focused on the export market.
It had made a conscious effort to look for offshore business during the past six months and currently had orders worth $300,000 for the next two months.
"And we've got another couple of significant prospects in front of us, one into the US and another one into Australia, which will build the export part of the business," he said.
"The business can't survive on the New Zealand manufacturing alone, it does actually need offshore."