Namoi Cotton posts $14.3m half year profit

Namoi Cotton posts $14.3m half year profit

Agribusiness
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Profits on track, but poor irrigation outlook has Namoi Cotton hoping for dryland planting luck

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Namoi Cotton has posted a $14 million after-tax profit for its half-year to August 31, but flagged the full-year profit will be only $4m to $7m.

Its forecast of a deflated full-year result for 2018-19 reflects the impact of Namoi’s costly ginning maintenance program, which incurs expenses in the second half of the year.

Conversely, most of the company’s revenue is recorded in the first six months.

Like the rest of the cotton sector, Namoi is also bracing for the coming 2019 crop to likely yield about half last season’s lint volumes because drought has seriously drained irrigation water reserves.

Chief executive officer, Jeremy Callachor, said a 20 per cent increase in the size of the cotton crop harvested last autumn contributed to Namoi’s strong underlying financial performance.

However, the company’s 15pc share in the Cargill Oilseeds Australia and Cargill Processing partnership was hurt by “challenging cotton seed pricing parameters”.

The Cargill factor cut $3.1m from Namoi’s profit result, subsequently pushing the first-half profit result below the $15.8m recorded for the same period in 2016-17.

Highlights included ginning volumes up from 1.01m bales last season to 1.2m bales.

Namoi’s ginning and cotton seed volumes along with the joint venture Namoi Cotton Alliance’s  lint procurement volumes all benefited from the bigger 2018 crop, with the improved ginning throughput coupled with reduced variable costs.

NCA marketed 812,000 bales – up from 634,000 in 2016-17.

“The contribution from Namoi cotton’s investment in NCA was broadly consistent with the prior half year,” Mr Callachor said.

Jeremy Callachor

Jeremy Callachor

“Improved marketing volumes were offset by lower commodity packing volumes lower trading margins and increased finance costs.”

Chairman, Tim Watson, said while extremely pleased with the half-year result, attention was now firmly focused on next year and the lack of general rainfall in the past 10 months.

Irrigation water allocations to farmers had been impacted, particularly in the northern part of the Murray Darling Basin.

Namoi Cotton is anticipating a total Australian cotton crop of about 2.1m bales in 2019 – down 53pc on this year.

“There is a large volume of country prepared for planting should a rainfall event occur between now and the beginning of December,” Mr Watson said.

“That could potentially result in a large dryland crop which may benefit Namoi Cotton.”

Full-year net cash flows from operating activities is expected to be within previous market guidance ranges of $18m and $21m.

The first half saw a $4.7m improvement in net cash flow on the prior half.

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