- Cotton grower Namoi Cotton (NAM) has revealed a $7 million operating cashflow loss for the August quarter of 2020
- However, the company assured investors that this was largely due to the seasonality of the cotton business.
- According to Namoi, the August quarter is when most of the company's cotton is ginned, resulting in slightly higher costs
- On the flip side, the company's November and February quarters are when it pulls in the most customer receipts — meaning its expecting to start earning more money soon
- Thus, the August negative cashflow is typical for the company and shareholders should expect to see better results in the next quarterly report
- Shares in Namoi have been in a trading halt since Wednesday, September 23, but last traded for 32 cents each
Cotton grower Namoi Cotton (NAM) has revealed a $7 million operating cashflow loss for the August quarter of 2020.
The company announced the negative cashflow in an aftermarket financial report, highlighting $50.3 million in customer receipts that were slightly overshadowed by its operating costs.
Nevertheless, Namoi assured investors this is nothing to worry about.
According to the company, operating cashflows are typically lower during the May and August quarters. Most of the year's cotton ginning — the process of removing cotton fibres from their seeds — occurs during the September quarter of each year, Namoi explained, meaning costs are usually higher over this period compared to the rest of the year.
In line with this, customer receipts are highest during its November and February quarters. Thus, Namoi said it is expecting to generate positive cashflow over the current quarter, which will be used to repay and replenish its working capital debt facility.
Namoi had just $4.15 million in the bank at the end of August, but the company said it has a $10 million working capital facility that will be more than enough to get it through the quarter as it pulls in more customer receipts.
Thus, though Namoi technically had just over half a financial quarter left of funds in the bank, the company said this is largely expected due to the seasonality of the cotton business.
Namoi operates 12 cootton gins across New South Wales and queensland, making it one of the country's biggest cotton processors. The company also operates a cotton marketing business, Namoi Cotton Alliance, which was formed in a joint venture with the Louis Dreyfus Company.
Given Namoi's quarterly report was released as the ASX closed for the day, it's not yet known how shareholders will react to the news.
Shares in Namoi have been in a trading halt since Wednesday, September 23, but last traded for 32 cents each.