Omnia’s good results show benefits of diversified business
- Published: Tuesday, 22 November 2011 13:00
Omnia the diversified, specialist chemical services provider with business interests balanced across chemical, mining and agricultural markets, today announced strong interim results for the period ended September 2011.
- Revenue up 16%
- Profit for the period up 38% to R230 million
- EPS up 2% on 37% increase in shares in issue following rights issue before benefits of new Nitric Acid Complex funded by the rights issue
- Debt: equity ratio constant at 35% after capital expenditure in past 12 months of R379 million on new Nitric Acid Complex
- New R1.4bn Nitric Acid Complex on track for commissioning in Q1 2012
- Resumption of dividend – interim dividend of 100cps
KEY DRIVERS OF RESULTS
- Good demand for mining and agriculture commodities
- Strong rand had a negative impact on all three divisions
- Low activity levels in the South African manufacturing sector
Commenting on the results, Rod Humphris, Omnia Group Managing Director, said: “We are pleased to be reporting a very pleasing set of financial results, bolstered by the group’s strategic positioning in the markets of our Chemical, Mining and Agriculture divisions. The macro environment for this period was positive for our Mining and Agriculture divisions but difficult for our Chemical division which services the manufacturing sector. Improved commodity prices and increased demand, benefited the Mining and Agriculture divisions.”
“The Mining division performed extremely well despite an estimated loss of R18 million as a result of an explosion at the megamite plant in March this year which resulted in the plant being out of operation until August. Difficult conditions persisted in the Chemical division as volumes declined further on the back of a continued reduction in the output of the South African manufacturing sector.”
The rand continued to strengthen against the US dollar, negatively impacting all three divisions’ selling prices and margins. The average exchange rate for the period was R6.98, six percent stronger than the average of R7.39 for the prior period.
Group revenue rose 16% to R4 952 million (2010: 4 268 million) on the back of volume and international commodity price increases, partially offset by rand strength, in the Mining and Agriculture divisions. Gross profit increased 19% to R1 037 million (2010: R874 million) and improved to 20.9% of revenue (2010: 20.5%). Other operating income increased by 60% from R35 million to R56 million mainly due to receipt of supplier volume rebates.
Although traditionally Omnia’s borrowings peak in September/October ahead of the agriculture summer planting season, the period ended with a strong balance sheet. Of the R971 million equity raised to partially finance the Nitric Acid Complex, R846 million has been spent to date and the balance of R125 million has been utilised to reduce short term debt.
Says Rod Humphris, Managing Director, “The increase in shares in issue through the rights issue that raised equity to fund part of the new Nitric Complex, impacted our earnings per share, but the 2% increase is commendable because at this stage it is still too early for the Nitric Acid Complex to contribute to earnings. Construction of this Complex is proceeding according to plan and we expect it to be commissioned in record time in the first quarter of 2012.”
The R1.4bn Complex comprises a nitric acid, ammonium nitrate and PGAN plant, and associated ammonia logistics infrastructure. The new plant production capacity is 40% higher than the current fully utilised plant and will significantly improve the Group’s earnings.
Humphris noted, “You will recall that no dividends were paid last year due to the rights issue and capex programme for the Nitric Acid Complex. The Board was only due to review the resumption of a dividend payment in 2012, but we are delighted to announce that the directors have agreed to resume dividends now due to the better than expected cash flow, the strong balance sheet and the good progress made on the new Nitric Acid Complex. An interim dividend of 100 cents per share has been declared.”
The complaint of collusion against Omnia Fertiliser, referred by the Competition Commission to the Competition Tribunal was dismissed by the Competition Appeal Court in 2010. The Competition Commission has applied for leave to appeal to the Supreme Court of Appeal and directly to the Constitutional Court. The matter is set down to be heard in the Constitutional Court on 24 November 2011.
Omnia believes the macro environment for the second half is promising and the weaker rand will positively impact all divisions. The recent weakening of the rand came too late to have a significant impact on the Agriculture division as most customer orders had been placed before September.
The Chemical division is expecting to maintain the improved operating profit performance in the second half of the year even though volumes are not expected to show any meaningful increase. The Mining division is expected to continue to benefit from the buoyant global demand for mining commodities and the recommissioned megamite plant.
The Agriculture division anticipates favourable conditions as maize plantings are expected to increase substantially given that maize surplus inventory has been exported, grain prices are high and agronomic conditions are good. The recent drop in global carbon credit (CER) prices will most likely result in negligible CER revenue for the year despite Omnia’s having two years CERs for sale.
Humphris concluded: “Over the past 18 years we have extended our footprint in Africa and we currently operate in 26 countries on the continent. We believe that our experience in Africa and our expertise in the three markets in which we operate, positions us well to benefit from the exciting growth prospects of Africa, particularly in agriculture and mining.”
For more information contact Omnia Group: 011 709 8850
Rod Humphris, Managing Director
Noel Fitz-Gibbon, Finance Director
Issued by Brunswick: 011 502 7300
Gordon Letsoalo 079 510 6127
Anne Dunn 082 448 2684
Notes to Editors:
Protea Chemicals, operating throughout southern and eastern Africa, is a well-established manufacturer and distributor of speciality, functional and effect chemicals and polymers, with a major presence in every sector of the broader chemical distribution market. It is rated as the 13th largest chemical distribution company in a global survey by the respected industry journal, ICIS Chemical Business.
The Mining division offers a broad range of services to the mining industry through BME and Protea Mining Chemicals. BME, operating throughout Africa, is a market leader in blended bulk explosives formulations for the open cast mining industry, produces electronic delay detonators and shocktube initiation systems and manufactures packaged explosives for underground mining and specialised surface blasting operations.
The company adds value to its products through its world-class blasting consultancy service using its unique in house developed BlastMap software solution, which offer customers support and advice from industry experts and highly qualified mining engineers. Protea Mining Chemicals, operating in Southern Africa, offers value added services to complement its wide range of chemical products. These included offerings such as Protea Process™, a comprehensive service that covers the handling, logistics and on site formulation of chemicals for its customers.
Demand for AXXIS™, the new generation of electronic detonators continues to increase as the product has been well received by the market. Protea Mining Chemicals achieved higher volumes and selling prices resulting in an increase in operating profit. Anticipated growth continues to be affected by delays in a number of customers’ expansion projects, especially those in the uranium industry.
Omnia’s Agriculture division, the market leader in Southern Africa, comprises Omnia Fertilizer and Omnia Specialities. The division produces granular, liquid and speciality fertilizers for a broad customer base of farmers, co-operatives and wholesalers throughout southern and east Africa, Australasia and Brazil. Omnia Specialties exports its product to over 30 countries in Africa, Europe, South America and Asia.