JSE-listed Omnia Holdings posted positive results for the financial year ended March 31, with group revenue having increased by 7% year-on-year to R17.37-billion, as a result of a stronger performance by the mining and chemicals divisions.
Earnings before interest, taxes, depreciation and amortisation increased by 10% to R1.60-billion, while headline earnings a share rose 13% to 99c.
“Profit for the year was up 12% to R664-million under challenging trading conditions. Despite headwinds in various parts of the business, the performance in the agriculture division was encouraging, while the chemicals division was flat overall, despite the weak South African economy.
“The mining division was lower, based on margin pressures and a substantial provision for a potential bad debt in Angola,” CEO Adriaan de Lange said on Tuesday.
Omnia’s Agriculture division, which includes Fertilizer RSA, Fertilizer International and Agriculture Trading, reported a 2% decrease in revenue to R7.97-billion on the back of lower sales volumes.
The impact of the stronger rand on the value of inventory was mitigated through an effective currency hedging programme that generated a gross total of R110-million in foreign exchange gains.
The total operating profit margin of 8.9% was higher than the prior year’s margin of 5.3%.
Omnia’s mining division, comprising BME and Protea Mining Chemicals, delivered a 16% year-on-year increase in revenue to R5.08-billion, owing to higher volumes and average prices.
“This growth is owing to new business obtained in the Northern Cape and improved volumes from existing customers,” De Lange said.
The operating profit of R387-million was achieved at an operating margin of 7.6%.
“Excluding one-off items, the margin was 9.6% compared with 10.4% in the previous year. Net working capital increased to R1.4-billion, owing to slower paying debtors and higher inventory, as a result of minimum shipping quantities required by international suppliers, and ramping up for additional volumes in certain markets, such as West Africa,” he noted.
The chemicals division reported a 16% year-on-year increase in revenue to R4.33-billion with an 8% increase in volumes sold, mostly attributable to the offshore product and services based on Protea Process and the inclusion of Umongo Petroleum from December 1, 2017.
Operating profit increased by 2% to R146-million, with the operating margin lower at 3.4%.
The South African business continued to struggle, however, owing to the weak local economy, while the division’s strategy to diversify into other African countries was starting to bear fruit.
“The chemicals division included R43-million of equity-accounted earnings from its 50:50 chemicals distribution joint venture in Zimbabwe, where the demand for agrochemicals received a significant boost,” he noted.
De Lange said the company expects its agricultural division to benefit from international growth, diversification into more differentiated products and other crops, as well as the development of new services and solutions.
“We anticipate continued improvement in the production efficiency at Sasolburg and a slight uptick in fertiliser commodity prices that will increase fertiliser selling prices in the new financial year.”
The division will further improve its technological and service offerings, particularly concentrating on the synergies derived from the Oro Agri acquisition, enabling a stronger international focus and further growth, he noted.
"The international mining sector is starting to show signs of recovery with some metal and mineral prices recovering. The international growth of BME’s electronic and nonelectronic detonator sales and the various technological offerings are gaining momentum and are expected to grow further,” De Lange added.
He pointed out that, although the chemicals division faced weak demand for its products from local manufacturing clients, there were a number of pleasing growth opportunities internationally.
“The implementation of the revised group strategy is paramount, as Omnia leverages knowledge, enables technology and builds relationships. This combination delivers trusted performance, innovation for customers and has a positive impact on the environment, resulting in a better world,” he said.