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Agriculture drives Omnia’s growth

Agriculture drives Omnia’s growth

Omnia, the diversified, specialist chemical services company providing customised solutions in the chemicals, mining and agriculture markets, today announced solid results for the six months ended September 2007.

Financial highlights

· Revenue up 26% to R3,1 billion

· Operating Profit up 33% to R192 million

· Headline earnings per share up 24% to 224.5 cents

· Interim dividend of 83 cents per share declared

The results demonstrate strong Group performance characterised by revenue growth of minimum 20% in all three divisions.

Commenting on the group’s performance, Rod Humphris, Omnia CEO said:

“We are pleased with the performance for the first half of 2007, operating profit was up by 34% and our operating margin increased to 6.3% from 5.9% in the prior period. This performance was characterised by increased sales across all businesses, but we will continue to take action to boost margins in all areas of the business.”

Omnia’s agriculture division showed a strong improvement in the period under review, driving the Group’s positive results. The division is particularly well positioned to take advantage of current market trends, with the need for sustainable fuel sources in particular being a major driver of larger maize crops. Agriculture contributed 40% (2006:11%) to Group operating profit, with significantly stronger margins than in the same period last year.

Omnia’s Protea Chemicals division is the leading speciality, functional and effect chemicals distributor in southern Africa. It has a significant presence in every sector of the chemical distribution market. Protea Chemicals contributed 31% to Group operating profit (2006: 44%). As in the prior year, the bulk of this increase came from the lower margin polymer businesses. However, the volatility in rand exchange rates served to lower selling margins in some instances, and added costs such as the division’s allocation of Group project costs and the increased share based payment charge, further reduced the operating margin.

Pending competition tribunal approval, the Zetachem acquisition is expected to further enhance chemical division earnings. Zetachem is an established supplier of speciality chemicals and chemical management systems to the water treatment and pulp and paper industries

The Group’s Mining division, the market leader in blended bulk explosives formulations for surface mines, continued to benefit from the increased mining activity prevailing in the period. However, the explosives market has become intensely competitive, with rapidly rising raw material costs pressurising margins and causing the division to withdraw from unprofitable contracts. This pressure was further increased by the stronger rand, lost business in Zimbabwe and the division’s inability to secure a continuous supply of shocktube initiating systems. This will be remedied by the construction of the division’s own shocktube plant. The division achieved a 24% growth in revenue to R581m and contributed 29% to Group operating profit (2006: 45%).

Group interest paid increased by 58% to R 44 million (2006: R 28 million) a function of the increase in interest rates being applied to a substantially higher level of debt. Net finance costs were negatively influenced by a R 3 million foreign exchange loss compared with a R 4 million foreign exchange gain in the prior period.

Looking ahead, Humphris is positive about the Group’s prospects:

“We expect the Group’s strong performance to continue, and thus see an improvement in earnings for the year ended March 2008. Omnia remains focused on diversifying its risk profile and pursuing new growth opportunities, while maintaining a firm focus on the Group’s core competencies. Omnia is uniquely positioned to benefit from the surging demand for biofuels. We believe that this demand can only be fulfilled by the use of fertiliser products, and our position in this market will serve to underpin strong growth in our business in future years.”

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