AUSTRALIA’S largest cotton ginner, Namoi Cotton, has announced a growth in earnings for the financial year 2024, amid ongoing uncertainty surrounding the company’s future ownership.

Namoi has reported earnings before interest, taxes, depreciation, and amortisation of $22.9 million for the full year ending February, up $4.9M on FY23.

There was also jump in the company’s net profit after tax, up $2.9M on FY23 to $6.9M, despite a drop in revenue of $11.5M to $247M.

The financial year saw a slight decline in Namoi’s production figures, with ginned cotton at 1,164,000 bales, down 9000 bales on FY23, and cottonseed delivered dropping almost 20pc to 302,000 tonnes.

This correlated with a reduction in Namoi’s catchment cotton production for FY24 which was estimated at 3,224,000b, down 362,000b on the previous year.

Through Namoi’s supply chain and marketing joint venture businesses, over 1Mb was shipped in FY24, up 30pc on FY23.

Namoi Cotton executive chair Tim Watson said in a letter released to the ASX that the result “was driven by improved gin operating conditions, record warehousing volumes, complementary cottonseed and grain packing, and greater discipline applied to cottonseed trading”.

“Ginning operations were positively impacted by better-quality cotton and lower moisture levels, both leading to more efficient ginning,” Mr Watson said in a statement.

“This, together with an earlier start to ginning, led to a significant improvement in our ginning performance, demonstrated by the ginning progress reported at the half year.

“Supply chain and marketing benefited from larger crop volumes generally and more efficient supply chain execution allowing for higher throughput.”

He said ginning was 86pc completed at the end of August 2023, compared to 81pc at the end of August 2022.

“The Goondiwindi and Wee Waa sites broke longstanding throughput records.

“Significant grain volumes, specifically pulses in Wee Waa, kept rail utilisation high in the October-to-February period.”

Nine out of ten Namoi gins operated for the 2023 season, with the company opting not to utilise the North Bourke site, instead relocating cotton grown in the region to its Trangie and Moomin gins.

During the year, Namoi invested a further $2M in the Kimberley Cotton Company to support the construction of the gin at Kununurra.

Mr Watson said construction of the gin started in August last year and commissioning is on track for mid-2025.

“Namoi Cotton is supporting the project by providing project management resources, some ancillary equipment and, later in 2024, skilled ginning staff to install the ginning equipment.”

Acquisition uncertainty

The FY24 results and accompanying annual report made little mention of the company’s plans relating to two current, competing acquisition proposals.

On 19 January 2024, Namoi announced it had entered into a Scheme Implementation Agreement with Louis Dreyfus Company to acquire all remaining shares in the company, then 83pc.

For the acquisition to come into effect, Namoi shareholders, the ACCC and the Foreign Investment Review would need to approve the proposal.

A date for a shareholder meeting is yet to be made public, although Namoi originally indicated that more information on the acquisition and meeting would be released in late March.

A competing offer by Olam Agri, owners of the Queensland Cotton Corporation, announced on March 21, put the LDC acquisition plans on hold.

Olam also proposed to acquire all Namoi shares, offering 59 cents per share, including a 1c permitted special dividend, higher than LDC’s offer of 51c.

Under the terms of the SIA, LDC is permitted to match or increase its offer and could be entitled to receive a break fee from Namoi.

LDC is yet to comment on the situation.

In the company’s annual report, Namoi stated there was continuing uncertainty over the LDC offer.

“As at 29 February 2024, the directors were of the view that there was not sufficient evidence available to conclude that it was probable that the proposed acquisition of the group by [LDC] complete as it remained subject to various regulatory approvals as well as final approval from shareholders,” the statement said.

The company also noted that under the Corporations Act 2001, a scheme of arrangement requires support from 50pc of members in number and 75pc of voting interests.

ACCC reviews

The ACCC is currently conducting reviews into both acquisition proposals.

Commenced on February 24, the inquiry into LDC’s offer has closed public submissions, with May 16 set as the provisional date for the announcement of ACCC’s findings.

A review into Olam’s proposal began on April 12, and the ACCC is accepting public submissions until April 29.

The ACCC expects to release its findings into the acquisition on July 4.