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Omnia delivers strong growth in extraordinary market conditions

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Published: Wednesday, 18 June 2008 08:00

Omnia delivers strong growth in extraordinary market conditions.

Results demonstrate the benefits of the balance of businesses within the Group

Omnia, the JSE listed diversified and specialist chemical services company providing customised solutions in the chemicals, mining and agriculture markets today reported solid results for the year ended 31 March 2008 which underline the Group’s ability to adapt to, and benefit from, unprecedented market conditions.

Revenue for the year increased by 33% to R 7,3 billion (2007: R 5,5 billion) while net profit increased by 27% to R 313 million (2007: R 246 million). Net basic earnings per share rose to 718.2 cents per share (2007: 560.3 cents per share), reflecting a 28% increase, in line with expectations. Headline earnings per share increased by 30% to 724.5 cents (2007: 558.2 cents).

Group operating profit rose by 38% to R 584million (2007: R 422million) and, as a result of the improved margins in Agriculture, Group operating margin increased to 8.0% (2007: 7.6%) for the year under review.

The 2008 financial year was characterised by extraordinary market conditions, with major increases in all of Omnia’s key input costs, soaring food and energy prices and raw material shortages as demand for biofuels increased and eating habits across the globe changed. The macro environment remains extremely positive for Omnia, with strong demand continuing to be experienced in all three of the Group’s key markets.

Omnia CEO Rod Humphris said all three of Omnia’s divisions - agriculture, chemicals and mining – had performed well despite an uncertain and fluid operating environment.

“We are exceptionally well placed to deal with the changes taking place in the macro environment, as evidenced by the effective doubling of earnings in the Agriculture division as the Group benefited from strong demand created by global fertiliser shortages” Humphris said.

This was in line with expectations, given the combination of good rains and the improved maize price which resulted in a favourable maize farming season coupled with increased international fertilizer prices. “We expect demand for fertiliser to remain extremely robust going forward as the buoyant agriculture market remains in place,” Humphris continued.

As a supplier to the manufacturing industry, Protea Chemicals has benefited from the growth in the South African economy. Volumes have increased across almost all business units while the weakening Rand and global product shortages contributed further to price increases.

The mining division continued its volume growth, particularly in mining chemicals, both locally and internationally. Disappointing margins in the previous year’s contracts were renegotiated in the early part of the year under review. Re-negotiated price increases were only completed in the last quarter of the year, but we now expect that declining margins relating to the explosives component of the business have been arrested.

Omnia continues to invest in technology driven productivity improvements across the business, including supply chain optimisation, procurement and efforts to reduce the Group’s carbon footprint.

Humphris said Omnia had made significant progress with a number of key projects in the year under review, including the commissioning of an EcoGypsum plant for the processing of gypsum for the cement industry; the completion of the Envinox plant, which will reduce greenhouse gas emissions at the group’s Sasolburg plant by 96%, and the building of a shocktube assembly plant to benefit from market moves away from outdated capped fuse products. The award winning Envinox plant allows Omnia to earn carbon credits under the Kyoto Protocol’s Clean Development Mechanism, and is expected to contribute R60m to the Group’s bottom line.

The current agriculture environment, coupled with substantially higher prevailing international grain prices, and the related focus on biofuels, should continue to favour the fertilizer business and the Group as a whole. In addition, the division’s strong position in Africa is a growth opportunity with the prospect of more tonnage being sold.

Although the South African economy is expected to slow down, a potentially weaker rand should enable the manufacturing sector to be internationally more competitive. Protea Chemicals, as a supplier to this sector, will continue to find new applications and grow its volumes. With the commissioning of Sasol’s Turbo project, polymer volumes will increase. The division is well positioned to embrace further growth opportunities and to deliver greater value.

Ongoing strong growth in world metal and mineral demand has benefited the explosives and mining chemicals markets and, notwithstanding the depressed margins of the past year, we anticipate achieving continued real growth.

There is significant potential for the Mining division to expand into Africa, and Omnia is directing renewed focus and energy at exploiting opportunities arising from the division’s African activities. We remain particularly bullish on prospects for coal and uranium mining as a host of new projects and expansions come on stream to support global energy demand.

For more information contact: Omnia (011) 709 8850

· Rod Humphris, MD

· Delwin Eggers, FD