Namoi Cotton is about to start a series of meetings with grower members and shareholders to promote corporatising the 54-year-old co-operative and listing all its shares on the Australian Securities Exchange (ASX).
Strapped for spare cash, but with ambitions to significantly expand its grain handling and packing activities and boost cotton ginning services, management considers a corporatised structure the best chance to attract capital to fund business growth.
Prospects for a much bigger cotton crop this summer and a massive chickpea harvest in NSW and Queensland bode well for Namoi’s business after tight seasonal conditions and tight markets halved 2015-16 ginning volumes and cut trading margins.
The co-op ended last trading year reporting a consolidated net loss of $7.6 million (adjusted to $1.1m after a later asset revaluation).
Term debt at the end of February totalled $47.5m after increasing $2.5m to buy the North Bourke cotton gin.
Since 1998 Namoi has had a dual-class share ownership structure, controlled by growers.
All active growers’ hold a stake in the business, while a further 110m capital units are listed on the ASX and owned by 1600 growers, former growers and other outside investors.
However, trading activity in Namoi capital units has tended to be relatively modest, although the unit price has risen from a 25 cent low in October to about 42c this week.
After commissioning a review into the company’s strategic business plans late last year, directors have supported the idea of a capital restructure to improve access to investment from outside its traditional farmer base.
Any new corporatised structure would, however, “recognise growers” said chief executive officer, Jeremy Callachor, although he could not say what grower recognition structures might be locked in until stakeholder briefings began.
No timeline for a capital restructure had been outlined to date, but he said the initial consultation process with Namoi’s 200-plus farmer members and others was intended to begin and be concluded within the next three months.
“We are not rushing into anything,” Mr Callachor said.
“From the board’s perspective a single ASX class of share is the best way forward, but I can’t comment on how long it will take to go through the process.
“Any potential move requires approval from grower members, unit holders and corporate regulators, so change will not happen without full communication and feedback involving them.”
Meanwhile, a long-term strategic plan for Namoi’s growth has highlighted a series of goals ranging from upgrading its information technology platform to greater country cottonseed storage capacity and increasing its ginning infrastructure effectiveness.
With cotton cropping spreading deeper into southern NSW and even Victoria, Namoi is also considered likely to look to expand its 12-gin network in the south to complement its most southern operation at Hillston, although Mr Callachor would not be drawn on whether an extra gin was a current priority.
“We’ve already increased capacity and throughput rates in recent years and will continue to look at how to grow the business and where we need to grow,” he said.
After a big increase in containerised grain output - up from 79,000 tonnes to 150,000t last financial year - Namoi is intent on further expanding its grain supply chain activities, which currently include packing chickpeas and other pulses, wheat and sorghum.
It has container sites on the Queensland border at Goondiwindi, at Wee Waa and Trangie.
“Our focus today is on grain, although it could be broadly anything that fits with the supply chain to service the clear demand for food commodities from South-East Asia, China and the sub-continent,” Mr Callachor said.
“We want to handle more volume, leveraging our existing infrastructure and market contacts to develop scale.”
NAM Price at posting:
40.5¢ Sentiment: None Disclosure: Held
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