Omnia Credit rating affirmed – outlook upgraded to positive
- Published: Monday, 12 August 2013 10:00
As a result of Omnia’s improved financial profile and its continued solid business performance, the rating agency Global Credit Rating Co. (“GCR”) has affirmed Omnia’s long term rating of A- which is defined as “Investment grade - High credit quality. Protection factors are good. However, risk factors are more variable and greater in periods of economic stress”. Omnia’s short term-rating was affirmed at A1- which is defined as “High grade - High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small”. The rating outlook was upgraded from stable to positive.
The rating report also reflects the following views:
- Omnia has benefited from an African expansion strategy, spurred by a strong demand for mining and agricultural commodities.
- Omnia’s position as a leading domestic producer of mining explosives and fertiliser mining explosives, as well as industrial chemicals. This position was further enhanced by the recently completed nitric acid plant, which gives Omnia substantial local manufacturing capacity and supply stability. As this is at a much lower cost than imported nitrates, it provides an important competitive advantage
- The new nitric acid plant supported an increase in operating margin to 9% in FY13 (FY12: 8%), albeit the full benefit has yet to materialise due to an unfavourable prevailing urea/ammonia price and some plant commissioning issues. The utilisation of pass though pricing has seen a decline in earnings volatility.
- Robust demand for explosives and fertilisers, and favourable exchange rate movements has led to strong volume growth. This in turn resulted in a review period high for revenue in FY13. Combined with the firmer profit margins, operating profit also rose to a review period high of R1.3bn in FY13.
- Credit protection metrics’ improved to review period bests with net gearing and net debt to EBITDA low at 12% and 19% respectively. Similarly, net interest coverage rose to 15 times in FY13.