AUSTRALIAN ginner Namoi Cotton has reported a 133 per cent increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), in the half year to August 31 (HY23) results released on Tuesday.
This outcome, which saw EBITDA jump from $9 million in the half year 2022 (HY22) period to $20.9M in HY23, comes despite significant logistics and operational challenges due to prolonged flooding in parts of New South Wales.
Profit after tax also surged in HY23 at $12.4M, up from $4.8M in the previous corresponding period.
These results can be attributed to a doubling in cotton ginned from 456,000 bales in HY22 to 953,000 bales in HY23 and a gain of 97pc in the cottonseed marketing business volumes.
Namoi Cotton chief executive officer John Stevenson said the company is “very pleased with the result” and the success of operations during a trying season.
He highlighted the challenges over the period, which included rising inflation and logistics costs and weather conditions.
One location impacted by the flooding was the Wee Waa distribution centre that Mr Stevenson said was recently closed for “the third or fourth time this season”.
He said thankfully the building and infrastructure were not damaged, but the flooding caused delays at the site.
“It does impact our operations and we have trains that we can’t get in there to pack,” Mr Stevenson said.
“This highlights the challenges that we have had this season in execution, in logistics.”
Cottonseed hits record
Namoi chief financial officer Sonya Ryan said the company out-loaded a “record volume” of cottonseed in HY23, at 134,000 tonnes up from 68,000t in HY22.
She said this result allowed Namoi to reduce the per bale ginning margin, which alone rose by 18pc due to inflationary pressures.
“We have managed to maintain our ginning margin despite our increase in costs and that’s predominately due to the increased contribution from cottonseed,” Ms Ryan said.
She said much of the cash flow benefits from the cottonseed contracts will not be realised until FY23.
“Most of the cottonseed inventory will be executed in the second half of this year.”
Projects under way
The cottonseed operation was the main beneficiary of the Boggabri shed project, which was completed in HY23.
Namoi executive general manager strategy & business development Neil Johns said the shed will add value to business as well as creating another source of income via the recovery and sale of, mote, a waste product of the ginning process.
“Storage is critical to our business,” Mr Johns said.
“If you can store cottonseed, you can capture value in that storage and also service our domestic and export customers.”
Mr Johns said the company also finished major upgrades to the Merah North gin in the financial period, despite logistics issues.
“We updated the gin that delivered cost savings and also enabled us to gin faster and deliver a better service to our growers, particularly with the larger season.
“We are pleased that we completed that on time before the picking season and ginning.”
He said similar upgrades to the Trangie gin, to add more automation and speed, and progress with the Kimberley gin project in Western Australia will be key features of the upcoming six months.
He said the company still expects to start the procurement process for the Kimberley gin, with a view to begin construction in November.
“We are targeting operation for the 2025 season.”
Full year outlook
Mr Stevenson said Namoi is expecting to gin 1.2 million bales (Mb) from the 2022 crop, with 247,000 bales ginned by FY23.
The final 20pc was pushed into the following financial period because of a six to eight-week delay in ginning from the wet weather conditions.
He said the company is also forecasting a “break even” EBITDA result for the rest of the financial year, which is consistent with the cyclical nature of cotton ginning.
“The current conditions with the weather and flooding will delay logistics, there is no doubt about that, but at this point in time we maintain the EBITDA outlook of $19-21M for FY23.”
Currently, the Australian production for the 2023 season is forecasted at 5-5.5Mb, with Namoi predicted to gin 1.1-1.3Mb.