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Omnia to increase capital outlay in years ahead

Omnia to increase capital outlay in years ahead

Increased fixed capital investment will feature in diversified and specialist chemicals group Omnia’s next five-year planning cycle, says chairman Neville Crosse.

The increase in capital expenditure will have a negative effect on the company’s earnings.

“We anticipate therefore that for a certain period in the next five- year cycle, earnings growth will be marginally lower than the rate achieved in the previous planning cycle,” Crosse said recently.

The company’s board has set a real growth rate of 8% a year for the next five years off an earnings base of R383m.

The planned investment is meant to prepare Omnia for higher demand in its respective markets.

Omnia has three distinct businesses — chemicals, mining and agriculture.

Commenting in the company’s latest annual report, Crosse said: “New growth opportunities beyond SA will be identified to increase the foreign income streams that play a valuable role in balancing Omnia’s business profile.”

The group said that while it expected the downturn to continue to depress some sectors served by the chemicals business, sales volumes were likely to increase this financial year.

In the past financial year, the chemicals business, which manufactures and distributes chemicals and polymers in southern and eastern Africa, took strain from a collapse of prices in the second half.

Omnia said the prices had since risen and, in some cases, recovered to 2007 levels.

The prices in rand terms had since stabilised but were “still subject to fluctuations”, it said.

Crosse said the chemicals business had made progress in its plan to expand business and geographic reach, in order to counter the effect of the economic downturn. With the acquisition of Nairobi, Kenya- based polymer distributor Highchem Industries, the Protea Polymer business had expanded to Kenya and Uganda.

Highchem had exclusive distribution rights from major polymer producers, Omnia said.

Omnia MD Rod Humphris said Highchem would be merged with the company’s Tanzanian polymer business, “and will result in Omnia representing (petrochemicals group) Sasol as a distributor of their products across the region”.

Crosse said the chemicals division would open an office in China in the new financial year that “will focus on strengthening relationships with suppliers”.

It was also expected that a presence on the ground in China would enhance the division’s ability to diversify its supplier base.