Australia’s largest cotton ginner Namoi Cotton Limited is preparing for a reasonable FY25 season following “above average” ginning volumes in FY24 - ending February 28/29 this year.
This is despite an overall slump in Australian cotton production that led to a 362,000-bale drop in Namoi’s cotton catchment area production to 3.2 million in FY24.
Namoi Cotton Limited is Australia’s largest cotton ginner, operating 11 cotton gins in regional NSW and QLD, and operates a cotton marketing business through its joint venture with Louis Dreyfus Company, Namoi Cotton Alliance (NCA) established in 2013.
The drop in catchment area production led to a 9,000-bale drop in ginned cotton volumes to 1.16 million bales, which represented 21 per cent of Australia’s cotton production for the period according to Namoi.
“Above average rain across most of Australia, and above average dam water storage levels, that supported above average cotton production in the 2023 season, continued for the 2024 season,” Namoi reported today.
“Current dam water storage levels in our catchment areas, at around 66%, could potentially support average to above average cotton planting for the 2025 season.”
Namoi noted that industry participants are forecasting above average Australian 2024 season cotton production to be between 4.5 million to 4.9 million. This is expected to translate into above average ginning volume for Namoi of between 0.9 to 1.1 million bales for the FY25 season - around 600,000 bales less than in FY24.
“We have currently contracted over 75% of our expected 2024 season volume and have commenced receiving cotton modules for ginning from this month.”
The drop in ginning volumes has then led to an $11.5 million drop in revenue, income and profit share to $247 million. However, earnings before interest, tax, depreciation and amortisation (EBITDA) was up by $4.9 million to $22.9 million, with net cash inflow hitting $31.3 million.
After the drought affected period between FY20 and FY22, Namoi has focussed its attention on its balance sheet, reducing term debt by $8 million to $24.5 million in FY24.
The latest update comes weeks after Namoi received a takeover bid from Singaporean-based farming business Olam Agri Holdings Limited for a total cash consideration of $0.59 per share.
This includes Namoi being permitted to pay a special dividend of $0.01 per share as part of the total cash consideration - which amounts to around $122 million.
The recently made offer also provides that Olam is willing to contemplate concurrently making an off-market takeover bid for total cash consideration of $0.57 per share - inclusive of the $0.01 per share permitted special dividend.
That offer came two months after Namoi entered into a scheme implementation agreement (SIA) with Louis Dreyfus Company Asia Pte. Ltd (LDC), another global agriculture business, to acquire the remaining 83 per cent of issued shares in Namoi that it did not currently own.
https://www.ragtrader.com.au/news/namoi-cotton-limited-fields-120-million-takeover-offer