I kind of agree with you Stocking.
Not sure about the Austco business and how it may have performed lately. Don’t imagine a huge uptick given shutdowns and strange messaging from some countries as to demand.
I would say the hay business is having a tough time of it based on the following observations.
Haymaking in Victoria this year was very challenging with a number of rainfall events during the peak hay making times. This caused moderate to significant weather damage on most hay made in Victoria there were only a few pockets that would have escaped the rain (A few % of the total)
China and Taiwan are not fans of weather damaged hay and tend not to buy it, Japan and South Korea will buy it but at a low to very low price.
Haymaking in Western Australia this year was almost perfect with great yields for farmers and basically no rain during the hay making period, most hay was mid to high grade and the buy price to farmers in that state was generally $200 - $250 per Tonne depending on the analysis as the visual appearance was very good due to low to no rain at haymaking.
WNR’s carryover stock in the September presentation was ~20,000 Tonnes with a carrying value of over $5.5 Million or approximately $275 / Tonne. The quality of that 2019 hay was likely to be a little lower or maybe similar to to WA 2020 crop.
The sales price of these grades has fallen sharply as new cheaper crop became available and also as US exporters lowered the price of products that compete with Oaten hay (US products are Timothy, Sudan, Klien grass and to a lesser degree Alfalfa) They lowered prices due to bumper harvests in the US and sluggish demand from some markets mostly Covid related.
The AUD has strengthened ~10% in the last 3 months as well, given every 1c movement adds or removes ~$4 / Tonne this could equate to a loss of ~$40 / Tonne depending on how well or if they hedge the currency.
Hay making in South Australia was even worse than Victoria and large volumes of hay have been sold to exporters for <$100 / Tonne this hay is in north Asian markets at very low prices probably break even to some exporters just to pay the overhead and keep there press plants in operation.
In Victoria most farmers will not sell hay that cheaply preferring to keep it in the shed and wait for domestic markets in winter which generally pick up price wise in June / July.
Shipping is also very challenging at the moment with bookings hard to get and many vessels omitting ports as they are already behind schedule due to congestion in major ports such as Singapore, where a shipment would arrive in north Asia typically ~21 days from departing the last few months has seen this blow out typically to 40 - 50 days, this is unlikely to change before mid year. In addition shipping lines have been quick to raise their prices with 30 - 50 % increases fairly common of late.
In a nutshell I would say its pretty challenging for them to make much if any margin given the above. With 104 staff (As per H1 FY21) to take care of managing the cashflow must be keeping the CFO on his toes. Mix in some pretty high fixed costs, It makes me pretty concerned about how they are travelling.
I only have a small holding but have not been impressed with the share price performance to date.
I hope the people at NAOS that own 27% of the company are comfortable with how its going.
Wingara’s claim for 110,000 capacity is fairly pointless when they have only managed to ship ~40 - 50K Tonnes per year. Other Oaten hay exporters in Australia typically ship the following volumes;
Tonnes
Hay Australia 150,000
Balco 200,000
Mallee hay (Pentarch group) 120,000
JT Johnson 180,000
Gilmac 300,000
Bodium 70,000
Narrikine 50,000
A few other small players ~100,000 combined
The total market for Australian hay and straw is a little over 1.2 million tonnes. Typical year; Japan 550,000, South Korea 250,000, Taiwan 75,000, China 300,000 and a few other countries combined ~ 30,000 to 50,000. China is growing but not at the rate it was, they are growing large volumes of Oaten hay which impacts demand from Australia, the other 3 countries volumes are not really changing, there are no other markets ready to buy large volumes of Oaten at the moment.
Most exporters have built additional pressing capacity in recent years and installed capacity for Australia would be well in excess of 2 million Tonnes, so the scene is set for some very tough and competitive years ahead, The large exporters play fairly roughly so all the best Wingara growing your volume to 250,000 Tonnes in the next 5 years.
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