Jul 13, 2012
Mining underpins Omnia’s earnings growth as chemicals face headwindsBack
Agriculture|Africa|Omnia Holdings|Africa|Chemical Products|Chemicals|Chemicals Division|Manufacturing|Manufacturing Sector|Mining|Products|Service|Services
© Reuse this
Bolstered by a strong performance in its mining business, the group’s overall operating margin increased from 7.3% to 8.1%, with group revenue rising by 16.8% from R9.4-billion in 2011 to R10.9-billion in 2012 on the back of volume and sales price increases in the group’s mining and agriculture divisions.
Gross profit for the year increased 21.8% to R2.4-billion from R1.9-billion in 2011 and improved to 21.9% of revenue as a result of improved gross margins in the mining division, which had been partially offset by reduced margins in the agriculture division. The gross margin in the chemicals division remained on par with the previous year.
While the company reports substantial growth in its mining services division and positive results from its agricultural service business, its chemicals division experienced a challenging year on the back of a mixed global economic performance and minimal price increases for its chemical products.
In addition, the group says despite observing low domestic interest rates, economic activity levels in the South African manufacturing sector remained muted. This is partially a result of the rand strength against the dollar, which hindered the chemicals division, as its primary customer base is drawn from the South African manufacturing sector.
Protea Chemicals, the group’s chemicals divi- sion, which is active throughout Southern and Eastern Africa, reports reduced revenue of 4.9% to R3.4-billion owing to a volume decline of 5.5%, partially offset by a slight improvement in selling prices.
Volumes in the company’s polymer distribution business declined dramatically by 49%, following the implementation of a strategy to focus on increased quality and risk aversion, while volumes in the chemicals divi- sion increased by 2.6%.
Gross profit for the chemicals division decreased in line with the revenue drop, while lower overheads enabled cost-reduction measures, thus enabling operating profit to increase by 34.4% to R86-million, from R64-million in 2011.
The chemicals division’s operating margin at 2.5% is an improvement on the previous year’s 1.8% but is well below the target of between 4.5% and 5.5%.
Omnia’s agricultural services division, comprising Omnia Fertilizer and Omnia Specialities, increased its revenue by 21.6% to R4.5-billion on the back of high fertiliser commodity prices and higher volumes.
Operating profit only grew by 3.5% to R323-million owing to market compression caused by the increased use of costlier nitrates, pricing pressures, as a result of increased domestic competition and significantly lower margins from its Zambian operation as a result of increased competitor activity.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Chemicals News
JSE-listed speciality chemicals group African Explosives and Chemical Industries’ (AECI’s) wholly owned water, energy and air solutions subsidiary ImproChem recently expanded its technology offering and market reach to provide water, energy and air quality management...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
In the next 20 years, it was expected that, in Africa, more people would live in cities and towns than in rural areas, United Nations Habitat executive director Dr Aisa Kirabo Kacyira said at the Human Settlements Indaba that took place earlier this month in...
Tough-talking Human Settlements Minister Lindiwe Sisulu has committed government to building 1.5-million low-cost houses over the next five years, telling the Human Settlements Indaba in Johannesburg on Wednesday that the State would achieve this target through the...
Over the past 20 years there has been persistent concern about deindustrialisation in South Africa, as well as the fact that locally produced manufactured products have been increasingly displaced by imports.
Financial agreement for Ghanian independent power producer (IPP) Cenpower Generation Company’s $900-million, 350 MW combined-cycle gas-turbine power plant was finalised earlier this month, paving the way for the project’s construction to begin before 2015 in Tema,...
The revenue implications for South Africa of ‘base erosion and profit shifting’ by corporate taxpayers are firmly in the crosshairs of the Davis Tax Committee (DTC) and Judge Dennis Davis hinted last week that recommendations were being considered to “detect and...