Rain and an improved cash flow have convinced Namoi Cotton to delay its expected capital raising plans until next year – and prune back the amount it needs from shareholders.
Chairman, Stuart Boydell, said the ginning and marketing company’s initial capital upgrade agenda, intended to be largely funded by releasing extra shares on the Australian Securities Exchange (ASX), could now be catered for by current earnings cash flows.
Last month Namoi converted from a farmer co-operative with a dual share listing on the ASX to a fully-listed public company.
A key reason for the decision to abandon its 55-year-old co-op status was to give the business better access to funds from shareholders via a more liquid share market.
Namoi had flagged to farmer shareholders and capital unitholders it wanted to raise about $35 million to pay for upgrades to ginning operations, improvements to its technology systems and to start expanding its non-cotton commodity business.
Future growth plans may also tap the stock market for capital in the future.
The current financial year’s forecast cash flow from operating activities combined with the positive operating outlook ... are resulting in a reassessment of the overall quantum of the capital raising
However, Mr Boydell said since Namoi’s share market restructure was successfully implemented on October 10, directors had been able to consider the proposed capital raising and its timing against a backdrop of improved operational prospects.
The board now expected its capital raising would be “materially less than the previously guided amount of up to $35m”, said Mr Boydell, a Moree district grower and Namoi chairman since 1995.
Rainfall events in key cotton growing areas in NSW and southern Queensland in the past month and the prospect of a positive La Nina-dominated seasonal outlook promised better weather conditions into summer and a positive operating outlook for the company.
“The current financial year’s forecast cash flow from operating activities combined with the positive operating outlook, strategic intentions and effective capital management are resulting in a reassessment of the overall quantum of the capital raising,” Mr Boydell said.
“Subject to market conditions, the capital raising is intended to now take place early in the 2018 calendar year.”
Shareholders would be provided with further details “as material decisions are made”.
Namoi has 12 operational ginning sites, plus lint marketing and cottonseed marketing services in NSW and southern Queensland.
It also operates a grain containerisation and marketing business and intends expanding its commodity packing activities.