NAMOI Cotton's strategic plans to strengthen its position in the commodity export and farm service sector are edging towards their goals with the company appointing stockbroking and financial planning firm Morgans to review its capital structure.
The pioneering cotton industry co-operative wants to take greater advantage of the fast growing demand for food and other agricultural exports in Asia, but after spending up on two cotton gin purchases in the past two years and being challenged by a much-reduced cotton crop last season, Namoi needs extra capital.
The farmer co-op's hybridised share listing on the Australian Securities Exchange (ASX) is certain to be a big part of the Morgans review given growers are now estimated to represent fewer than half the company's capital unit holders.
Many of its sizeable unit holders and investor groups are also understood to be reluctant to invest further in Namoi unless its "shares" better reflect the company's full capital value and give shareholders more voting influence.
"We have two classes of shares. Some shareholders - more those on the institutional side - are not so happy about all the current arrangements," conceded chairman Stuart Boydell.
Significant shareholders include global commodities giant Louis Dreyfus with a 13 per cent stake; fund manager Kaplan Equity, which is chaired by ports and logistics entrepreneur Chris Corrigan (about 9pc); Australian Rural Capital (11pc), and several former grower families with shareholdings of about 3pc each.
"I think the cotton industry, and agriculture generally, has changed quite a bit since our capital structure went with an ASX listing (in 1998), which is why we're having a look at where, or if, any changes might be necessary."
Namoi expects to start 2016 with term debt of $45 million having followed up its 2014 buyout of Twynam's stake in its Hillston ginning joint venture with June's $4m purchase of Darling Farms' North Bourke cotton gin from the Bengerang-Webster group.
However, after the past season's reduced ginning volumes and lint and cottonseed sales, and with the prospect of another below-average crop in 2016 due to more irrigation water constraints, the co-op has its sights on lifting its grain packing, storage and handling activities.
Namoi operates cottonseed, pulse and cereal container packing sites at Goondiwindi, Wee Waa and Trangie as part of its Namoi Cotton Alliance venture with Louis Dreyfus.
"We certainly have aspirations to get a bigger footprint in that area, and have good people and good capacity to expand in other activities, too," said chief executive officer, Jeremy Callachor.
Although its capital expenditure budget will be constrained in 2015-16, Namoi's strategic plan is to grow across the food and fibre supply chain.
The co-op, which formed to service the emerging NSW cotton industry back in 1962, wants to better use its operations between southern NSW and southern Queensland to connect with farmers' wider business activities.
It also hopes to beef up the logistics capacity of its 13-gin network, even making greater use of its expertise in gin management, construction and maintenance for other cotton sector players.
Mr Boydell said Asia's growing middle-class customer base not only provided a myriad of opportunities for agricultural exports but overseas investors, notably the Chinese, had made strong moves into Australian production areas and related supply chain areas.
"We're trying to position ourselves to take advantage of these developments," he said.
"As part of our overall strategy, the board has an obligation to look at what's the best capital structure to make the most of what's happening."
Mr Callachor said while it was too early to say if the capital structure needed much tweaking, he did not feel the co-op's specialist shareholder arrangements were hobbling business growth.
"But we do need to take a look at what else we can do to facilitate delivery of the strategic plan."