Omnia delivers a strong and resilient performance in a challenging environment
- Published: Monday, 19 June 2023 11:53
Revenue* increased by 24% to R26.6 billion
Operating profit* increased by 19% to R1.9 billion
Robust financial position maintained with R1.8 billion net cash
Ordinary dividend increased by 36% to 375 cents per share
Shareholder approval being sought for a general share repurchase programme
Progressed expansion across the AgriBio and Mining International divisions
Solid delivery on ESG targets enhanced by investments in sustainability initiatives
Celebrates 70 years of innovation and excellence
* Continuing operations
Monday, 19 June 2023: JSE-listed diversified chemicals group, Omnia Holdings Limited (“Omnia” or “the Group”), today published its annual results for the year ended 31 March 2023. The Group delivered a strong and resilient set of results with improved earnings in a challenging and volatile operating environment. Omnia achieved revenue, operating profit and EBITDA growth, generated strong cash flow, managed its net working capital to plan and maintained a resilient financial position.
Omnia’s CEO, Seelan Gobalsamy, commented: “We were steadfast in the execution of our strategy and ensuring security of supply for our customers which saw us deliver a solid financial performance, while our investments in initiatives aligned to our sustainability commitments enhanced safety, and reduced our environmental footprint. Our focus on leveraging our competitive advantage in our integrated manufacturing and supply chain capability was key to our overall performance. We are proud of the progress our teams have made and the milestones achieved despite a challenging macroeconomic environment”.
On a continuing operations basis Group revenue for the period increased by 24% to R26.6 billion and operating profit increased by 19% to R1.9 billion. EBITDA improved by 10% to R2.6 billion and headline earnings per share (HEPS) increased by 10% to 742 cents.
Working capital increased by R905 million to R4.2 billion, mainly due to higher receivables from later sales in Agriculture SADC, and elevated levels of inventory for Mining International in West Africa, where our focus was on security of supply. This, together with an ongoing focus on cost management and disciplined capital allocation, ensured a robust financial position and a positive net cash balance of R1.8 billion.
“We have also made good progress in our international expansion efforts. Enhancing distribution capacity in Brazil and a shift in sales mix towards higher-margin speciality products has led to growth in our AgriBio business. We are engaging with potential distributors in the US and are at an advanced stage of registering certain products in the EU,” said Gobalsamy.
Omnia’s Mining segment is well advanced in mobilising its first surface mining contract in Canada. The Group is confident that the penetration of the new generation AXXIS™ system, along with new business, will support robust growth in the region.
In Indonesia, a joint venture partnership with PT. Multi Nitrotama Kimia (MNK) was concluded. This will allow Omnia to introduce its globally acclaimed AXXIS™ systems and double salt emulsion technology to the Southeast Asia market. In Australia, an active organic growth strategy is being pursued. Good progress has been made on infrastructure-build which will further enable future partnerships.
Safety remains a top priority for Omnia, and the Group continues to embed a culture of safety throughout its operations, in line with its pledge to achieve zero harm. The Group-wide recordable case rate (RCR) decreased to 0.16 (FY2022: 0.21), while both the Mining and Chemicals segments achieved a zero RCR for the period.
Omnia is committed to lowering the environmental impact of its operations, as such, the Group invested in a reverse osmosis water treatment plant and a solar energy plant at its operations in Sasolburg which contributed to improvements in its ESG targets.
The reverse osmosis plant treats cooling water to produce potable water used in the manufacturing process, resulting in a potential saving of approximately 180 megalitres of potable water per annum.
The first phase of Sasolburg’s solar energy plant generates five megawatts of electricity at peak performance while another five megawatts is under construction. Together with the ability to generate electricity from excess process steam at the nitric acid plants, the site's own energy generation will likely average between 35% and 50% of its annual electricity requirement. In addition, the changes to the EnviNox® emission abatement system in Sasolburg resulted in a 44% reduction in the Group’s carbon emissions.
Solar energy projects are also underway locally in Losberg, and Dryden and offshore in Zimbabwe and Australia. In Losberg and Dryden, each site is already generating 250 kW of solar electricity, while the facility in Zimbabwe is still under construction. The solar project in Morwell, Australia, has been successfully completed.
Looking ahead, the Group’s focus is on implementing optimisation initiatives, improving efficiencies, and enhancing liquidity management to maintain a robust and flexible financial position as it extracts further value from its core in the SADC region, and continues to expand its international footprint in both the AgriBio and specialist mining explosives businesses.
For the past 70 years, Omnia has been a pioneer in innovation, overcoming challenges, and nurturing exceptional talent. The company's dedication to customers, pursuit of excellence, and adherence to its values have been the driving force behind its success and the foundation on which it builds for the future. Omnia’s purpose is Innovating to enhance life, together creating a greener future, this will be achieved by positively impacting food, water, and mineral security.
“As we celebrate seven decades of unwavering commitment to excellence and staying true to our core values, we are confident in our ability to remain resilient and are committed to driving further growth, embracing innovation, and capitalising on emerging opportunities to enhance our performance and value creation. Taking into consideration the outlook for the operations and commodity prices, sustaining capital requirements, returns to shareholders, and growth opportunities, the Board has approved a final ordinary dividend of 375 cents per share, or R634 million. In addition, we are seeking shareholder approval for a general share repurchase programme,” concluded Gobalsamy.
Agriculture (including manufacturing)
The Agriculture segment (excluding Zimbabwe) delivered a 31% increase in revenue to R14.7 billion and a 2% increase in operating profit to R1.2 billion. Higher average commodity prices compared to the prior year and an improved performance in the international operations offset lower overall sales volumes. This decrease was due to a more normalised sales cycle in South Africa, a change in crops produced which do not require supplementary products, and adverse weather conditions experienced in South Africa, Australia and Zambia. The sharp drop in commodity prices in the last quarter and ongoing investments in mobilising distribution in the US, impacted margins. The international division’s performance was supported by a strategic focus on the volume-margin mix in Africa and growth in higher margin AgriBio products. Sales volumes were increased in Brazil and other South American markets as well as through strong export sales to Southeast Asia and Eastern Europe from Australia.
Going forward, with the expectation that a challenging macro environment will persist, our manufacturing and supply chain capability aims to optimise operations and increase efficiencies by prioritising the utilisation of Omnia’s current asset base. In addition, the segment will focus on unlocking synergies across the portfolio and closely managing procurement, logistics and plant throughput. Overall demand is expected to remain stable, however international volumes are expected to grow.
In building a sustainable portfolio that remains resilient through adverse agronomic cycles, Omnia’s focus in SADC is on protecting its market and growing its footprint into key regions, while expanding product and service offerings to fully leverage the Nutriology® model. Agriculture International will continue to grow its wholesale distribution footprint and expand its customer proposition through the AgriBio product offerings backed by proven scientific solutions. The growth strategy targets distribution partnerships in key markets identified.
The mining segment delivered a 28% increase in revenue to R8.5 billion and a 54% increase in operating profit to R790 million. This performance was largely due to higher average commodity prices which were partially offset by lower sales volumes, challenging supply chains and above- average inflationary input cost increases. Despite challenges in the operating and economic environment which hampered mining production and used oil availability, the Mining segment prioritised continuous supply to customers, implementing alternate power supplies at its manufacturing facilities and sourcing from alternate international suppliers.
Mining RSA delivered a strong performance supported by various management actions to optimise costs and operational efficiencies. This was complimented by the extension of existing contracts and securing new business in both surface and underground mines.
Mining International acquired new business in Namibia, Zambia, DRC and Lesotho while the local partner distributor model in Botswana was successfully implemented.
In Canada, mobilisation for the first surface mining contract progressed well with onsite emulsion production expected in the second quarter of this year. Underground trials commenced at a large customer and the production facility establishment in Ontario remains on track.
In May 2023, the segment concluded a joint venture with PT. Multi Nitrotama Kimia (MNK), the second largest explosives company in Indonesia, with complete explosives business licenses. MNK is an established ammonium nitrate manufacturer, and the partnership will create a highly differentiated, expanded and integrated offering for mines in the region.
In Australia, the active organic strategy with direct access to market continues. Good progress was made in building infrastructure in-country, with the intention to enable future partnerships.
Mining Chemicals achieved impressive results, driven by significant growth in the mining market and solvent extraction applications. This was achieved from an improved sales mix and an increase in the sales volume in the base, copper and precious metal sectors.
Against persistent headwinds, the Mining segment remains well positioned within its existing customer base and in its primary markets to continue operational development and realise growth. It aims to become a truly diversified mining solutions’ provider through the implementation of well-defined strategic initiatives which will seize opportunities, leverage partnerships, and enhance competitiveness through increased efficiency.
The Chemicals segment progressed well in implementing its Strategic Business Sector model with an emphasis on building a portfolio of high-performance specialty and environmentally friendly products and solutions to supplement traditional chemistries. This focus on strategic growth sectors enabled the division to shift towards an improved value proposition for customers.
Although supply chains generally reverted to normalised levels post Covid-19, structural market changes have been evident, highlighting how essential security of supply and improved service delivery is for our customer procurement strategies. General inflationary pressures continued to be problematic during the year, compounded by the impact of increased load shedding which resulted in an overall decline in the manufacturing sector. This, alongside once-off cost adjustments saw net revenue decrease by 8% to R2.7 billion and operating profit decrease by 7% to R132 million.
Ongoing engagements with new principals yielded positive results with a number of new customer engagements secured.
Looking ahead, the segment is focussed on growing its strategic business sectors. In the medium term, the strategic emphasis is on supplying green, environmentally friendly alternative chemistries and solutions across the sectors.
Financial Communications Advisor: Instinctif Partners
+27 (0)71 605 4294