Namoi Cotton posts loss but braces for bumper crop

Up to 15 ginning specialists will eventually join the company on temporary work visas to help first stage processing of lint delivered to its 11 sites during the next six months.

With labour generally in short supply in the bush, the company is also relying on a big contingent of overseas workers to fill 300 casual jobs during the current harvest season.

It will run all but one of its gins around the clock with the goal of processing 95 per cent of its intake by August.

This year's throughput is likely to be 40pc more than its previous ginning average.

Namoi specifically engaged immigration lawyers last year and deliberately went head hunting to sign up the talent it needed, spending about $500,000 in the process.

The arrival of overseas help follows a revamp of its ginning strategy and spending upgrades at several sites, including $2m at its 56-year-old Merah North gin in its Namoi Valley heartland.

However, Namoi has just posted another full year trading loss, although the result was a 69pc improvement on last year.

Australia's biggest cotton ginning business has dragged itself back into top gear after drought-ravaged seasons in 2019, below average ginning throughput in 2020 and 2021 and a cost cutting blitz and restructure in 2019-20 where more than a third of its permanent workforce was made redundant.

The company's fortunes are looking vastly improved this season, with the current national cotton harvest tipped to be up by 90pc to about 5 million bales.

About 3.75m bales are forecast to be picked in Namoi's ginning catchment areas, or about 150pc more than was produced last year.

Namoi is also responding to burgeoning production in northern Australia, consulting with North Queensland growers on building and operating a joint venture gin at either Charters Towers, Julia Creek, Hughenden or Georgetown.

The 60-year-year old company has already committed to building a $40m-plus gin to service the Ord River Irrigation Area as a 10pc shareholder in West Australia's Kimberley Cotton Company.

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However, while the outlook for 2022-23 is bullish and last year's post-drought rebound in cotton ginning and marketing revenue was significant, it was not enough to stop Namoi posting a $4.4m loss for the trading year to February 28.

The result compared with a $14.4m loss the previous year.

The latest trading figures showed a welcome turnaround in ginning volumes - up from 124,000 bales to almost 500,000 - and a big revenue jump from $19m in 2020-21 to $47m, with earnings before interest, tax, depreciation and amortisation up 112pc from a $12.7m loss to $1.7m.

Net debt also shrank $2.2m to $48.6m and gearing dipped to 30pc.

Chief executive officer, John Stevenson, said operational efficiencies associated with the company's revamped ginning model were already evident, with a 9pc reduction in labour cost per bale last season (against previous similar years).

Namoi's 4PP business strategy had adopted different ginning service priorities to lift cotton quality and financial returns to growers.

Rather than ginning crops on a field by field or farm by farm basis, Namoi now aimed to segregate and gin incoming deliveries according to common harvest quality characteristics.

Cleaner crops will be processed together, and ginning equipment can then be adjusted to run slower to handle consistent volumes of weathered fibre or higher trash levels.

Digital and new technology initiatives were providing better, more timely information to improve ginners' and growers' decision making options.

At the same time, modifications and upgrades to Namoi's gins would help energy use efficiency, with the revamped Merah North site's gas and electricity costs down 10pc to 15pc in its first weeks of operation.

The 4PP strategy also includes geographically broadening Namoi's revenue base to better shield it from dry years in the Murray Darling Basin.

Mr Stevenson said consistent rainfall was set to deliver about 400,000 bales from northern WA and Queensland within five years, "and 600,000 within 10 years is quite possible".

"About 160,000 bales of cotton will be picked across northern Australia this year, but at the moment there are no northern sites to gin the crop," he said.

He hoped Namoi would have commitments for a new ginning venture with North Queensland grower partners "maybe in six months, but in a best case scenario possibly three months".

Meanwhile Mr Stevenson, whose background includes senior roles with livestock businesses Consolidated Pastoral Company and Wellard Limited and RIFA Salutary, wants Namoi to make greater use of its cottonseed options in the livestock market, particularly in northern Australia, where the feed supplement has not been readily available.

The company is also also spending $2.5m on a new cottonseed shed at its Boggabri gin in northern NSW to cut its livestock costs and improve services to producers and lot feeders.

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