Omnia delivers another strong set of results
- Published: Monday, 21 June 2004 08:00
Omnia, a specialist chemical services company providing customised solutions in the agriculture, mining and chemical markets, today announced strong results for the year ended 31 March 2004.
Group revenue increased by 42% to R3.3 billion (2003: R2.3 billion), reflecting the inclusion of Prochem's revenue for the seven months to March 2004. The Group's operating margin, including Prochem, amounted to 10.1%. Although this was a decline from the exceptional 18.6% for the prior year ended March 2003, it compared favourably with the 9.3% achieved for the year ended March 2002 before the inclusion of Prochem*.
The Group also announced today that it exceeded its internal five-year performance target, approved by shareholders in 1999, by 21%. This is the third consecutive five-year performance target that has been exceeded by the Group. Employees are now eligible for options and ordinary shares under two broad based employee share schemes. The dilutionary effect has been taken into account in the weighted average number of fully diluted shares in issue.
As expected, earnings declined but were in line with the historical earnings growth trend. The Group's headline earnings and headline earnings per share declined to
R 174.3 million (2003: R 239.9 million) and R 4.44 per share (2003: R 6.32 per share. The allotment of 1.831 million shares to the management vendors of Prochem, as part of the purchase price, had a dilutionary effect of almost 3% on headline earnings per share.
Compared to the headline earnings per share achieved for the more comparable year to March 2002, growth in headline earnings per share after the inclusion of Prochem were 56%, notwithstanding the dilution.
*As indicated in the Group’s annual report for the year ended 2003 and in the interim results announcement for the six months ended 30 September 2003, the 2003 financial year was exceptional. This was primarily due to unusually high export volumes and margins driven by the weak rand and the R27.4 million settlement of an outstanding loss of profits claim for a compressor failure at the Group’s Sasolburg plant during 2000. The results for this year have therefore reverted to the Group’s historical earnings growth trend and the full-year results ended March 2002 are a more appropriate comparison.
“We are very pleased with our strong results this year and the fact that we have again exceeded our five-year target. We have shown real growth in earnings of 15% over the last five years, bearing testimony to our established strategy. Over the last year, we have successfully put a strong platform for continued growth in place. We have made good progress in exploiting the inherent synergies and opportunities across all the businesses and consolidated our operations to ensure long-term growth. The Prochem acquisition has bedded down well and the transition into the Omnia stable was very smooth, “said Omnia MD, Rod Humphris.
Cash flow from operating activities of R214 million (2003: R358 million) was considerably better than anticipated despite a high taxation payment of R 124 million this year. The strong cash flow was used to pay down debt, resulting in a debt: equity ratio of 28%. This was achieved despite the R 200 million term-loan introduced to partly fund the acquisition of Prochem in September 2003. This loan is repayable in three equal annual instalments, with the first one being due in February 2005.
Agriculture revenues decreased by 11% from exceptionally high levels achieved in 2003 due to hectares planted to maize in South Africa increasing by 18% above the 14-year average last year. Revenues for this period were R1.6 billion (2003: R 1.8 billion) as fertilizer sales volumes returned to their normal levels in the local markets, maize prices reduced to previous levels, drier soil conditions and the much stronger Rand.
“Given the tough adverse weather conditions at the beginning of the season, the return to a 14 year average in annual plant food consumption indicates the resilience of the industry and demonstrates the strength of our value-added offer and agronomical services to our farming customers in South Africa. We are pleased with our robust results,” said Humphris.
The ratio between the international price of urea, a widely traded fertilizer commodity, and that of ammonia, the raw material for the nitrogen component in fertilizers, was also less favourable than in the previous comparable period. Coupled with the strength of the Rand, operating margins decreased to 13% (2003: 21%).
The Group's production facilities in South Africa performed extremely well, making it possible to double the volumes sold into the wholesale market.
The Group's speciality fertilizer operations in Australia and New Zealand, particularly the humate business in Australia, are progressing well. The joint venture with Ravensdown, a large fertilizer distributor in New Zealand, commenced operations toward the end of the financial year and progress is on track.
Mining revenues increased by 37% to R 577 million (2003: R 422 million) following the inclusion of Prochem's existing mining business and the higher production levels at South African coal mines. However, sales were negatively impacted by the strength of the Rand, particularly in respect of African operations.
An increase in value added services and a number of innovative cost reduction initiatives in the mining business buffered the impact of the expected losses from the electronic detonator business on the operating margin. Margins declined by only 1% to 11% (2003: 12%).
“Our established position in a range of mining sectors has again allowed us to tap into opportunities in this environment. We have a strong base in place and significant strides have already been made in improving and perfecting the technology in the electronic detonator business. We are on schedule to turn profitable in that business by March 2006.”
Chemical revenues of R 1.1 billion are not directly comparable with the R 94 million of the prior year due to the inclusion of Prochem, the leading chemical warehousing and distribution company in South Africa, for the seven months to March 2004.
“The integration of the Prochem business has been very smooth. No unexpected costs have arisen, with fees limited to the costs directly related to negotiations and legal formalities of the acquisition. The acquisition has diversified our business and is set to start ramping up the Group results as Prochem continues on its historic trend of growing volumes and generating strong cash flow,” added Humphris.
Commenting on the group’s prospects, Humphris said:
“The production of maize has returned to sustainable levels, resulting in more stable pricing. The national fertilizer market is expected to remain in line with the long-term average of two million tons per annum. International fertilizer prices, although remaining volatile, are still at a high level in US Dollar terms and are expected to remain so for the coming season.
“The continuing strong Rand remains one of the major impacts on financial performance of the Group in the near term. Export margins will therefore remain depressed as long as these conditions prevail.”
He said the outlook for mining continues to be positive and with the reduction in the loss associated with developing the electronic detonator business, it can be expected that this division's earnings for the forthcoming year will be stronger than in the year under review.
The impact of Prochem’s results after interest to the mining business and the Group will continue to increase as the purchase debt is re-paid.
The board therefore expects group earnings for March 2005 to show an improvement over the results of the year ended March 2004.