Namoi Cotton Limited releases Half year 2019/20 Financial Results
Namoi Cotton Limited (“Namoi”) today reported a $4.02 million loss for the six months ended 31 August 2019, which was $18.31m unfavourable to the prior comparative period (‘pcp’). The result was profoundly impacted by the severe drought conditions being experienced in Eastern Australia and particularly in the core Australian cotton growing regions.
The drought conditions impacted cotton supply and thus Namoi’s 2019 cotton season ginning volumes were down by 677,524 bales or 60.8% on pcp. This was in line with the decline in volume for the entire Australian cotton crop in the 2019 season.
The reduction in ginning volumes caused significant decreases in Namoi’s major revenue streams in H1 FY20, although revenue declines were less than the underlying ginning volume decrease. This was achieved on the back of increases in ginning price per bale and higher prices per metric tonne on cotton seed sales.
Given the scale of the revenue decline that it was confronted with, and its significant fixed cost base, Namoi was unable to reduce its costs sufficiently in H1 FY20 to maintain profit levels. That said, 50% to 60% cost reductions were achieved in casual labour costs, electricity charges, ‘hessian, ties and tags’ charges, maintenance costs and depreciation expense. The latter arose as a result of Namoi’s ‘units of production’ depreciation methodology.