BIG LOSSES in its joint-venture operations with Cargill and Louis Dreyfus have impacted on the results for Australian ginner Namoi Cotton Limited.
Despite a positive operating performance for its core ginning segment, the company has recorded a consolidated net loss after tax of $556,000 for the year to 28 February 2019, which compares with a profit in 2018-19 of $6.77 million.
The Cargill Oilseeds Australia (COA) partnership and Cargill Processing Limited (CPL) investment recorded a loss of $4.8 million, which included the impact of trading losses, the mothballing of the Narrabri oilseed-crushing facility, and associated staff-redundancy costs.
Namoi has owned a 15-per-cent stake in the Narrabri plant, which closed last year and is not expected to crush cottonseed in the foreseeable future.
“In respect to the COA and CPL result, we continue to request detailed information from Cargill Australia Limited as manager of the partnership,” Namoi chairman Tim Watson said.
“This matter remains subject to a commercial dispute with pre-discovery hearings now scheduled.”
The company’s shareholders will not receive a final dividend for the year ended 28 February 2019.
The Namoi Cotton Alliance (NCA) joint venture with Louis Dreyfus has recorded an operating loss in its lint business of $443,000 and packing business of $639,000 due to delays to lint shipping which increased finance costs, and adverse seasonal conditions which resulted in low packing volumes.
A formal assessment of the carrying value has also resulted in an impairment of the NCA investment in the amount of $3.56m, which has had a non-cash impact on Namoi’s consolidated net loss.
“While disappointed with the results of the NCA joint venture, significant structural changes have been implemented, with the appointment of a dedicated general manager for the NCA business.”
Namoi Cotton’s consolidated net profit before tax for FY2019 was $124,000, compared with $9.67m in FY2018, while positive cash flows from operating activities were recorded at $21.03m, up from $17.32m in FY2018.
Mr Watson said the 2018-19 results contained some bright spots.
“Underlying profit remains strong, with higher volumes processed by our core ginning business.”
Last season, Namoi Cotton ginned 1.202m bales at its 12 solely owned and joint-venture sites, up from 1.015m ginned in 2017, while its cottonseed-trading arm shipped and handled 260,000t, compared with 266,000t in 2017.
“Greater throughput rates have improved the ginning contribution by a reduction to per-unit processing costs.
“The associated seed trading has similarly provided a positive contribution to the segment.”
Namoi has estimated the 2018 Australian cotton crop at 4.5m bales, up from 3.8m bales in 2017, and in 2018 procured 817,000 bales, up from 636,000 bales in 2017, which have been on-sold to NCA.
The NCA commodity-packing operations packed 55,000t of cottonseed, grain and pulses in 2018, less than one-third of the 2017 total of 168,000t.
Namoi Cotton’s forecast for the 2019 Australian crop is approximately 2.3m bales, almost half the 2018 total.
The company’s solely owned and joint-venture sites are forecast to gin a total of 450,000-500,000 bales in the season currently under way.
NCA’s lint-marketing volumes are estimated at 300,000-400,000 bales for the crop now being processed, and containerised volumes remain largely dependent upon autumn rainfall in key growing regions.
Source: Namoi Cotton Limited