JSE-listed diversified chemicals group Omnia Holdings has delivered on its short-term stabilisation plans during the six months ended September 30, as well as a number of other key milestones during a period marked by tough market conditions.
Speaking to Engineering News Online, Omnia CEO Seelan Gobalsamy on Tuesday said the management team had delivered well on the short-term stabilisation plan and on implementing some of its turnaround plans, helping the group move on from its difficult period of high debt and an unsustainable capital structure.
During the period under review, the management team had remained focused on stabilising the group, initiating a turnaround strategy and improving Omnia’s capital structure following a successful rights offer that was fully underwritten by its shareholders.
Gobalsamy noted that good progress was being made in terms of reducing costs, as well as lowering capital expenditure and working capital requirements.
Operationally, the group’s three divisions delivered varied performances, with the Agriculture division experiencing difficult trading conditions owing to subdued commodity prices.
Agriculture International and Agriculture Biological (AgriBio) performed better than expected owing to earlier deliveries and a strong demand for AgriBio’s products.
The Mining division performed well, supported by higher bulk volumes in South Africa, improved profitability in Mining Chemicals and new international business being secured.
The Chemicals division achieved good margin growth on flat net revenue, while reducing costs following the prior year’s restructure.
“We faced a number of challenges in the first half of the year, including tough market conditions and the need to improve our financial position,” said Gobalsamy.
“The business has been stabilised following the recapitalisation of the group through a successful rights offer, but more work lies ahead to position Omnia for what has become the new normal in an environment where both the climatic conditions and the sectors we service are increasingly unpredictable and volatile.”
Group revenue remained stable at R8.7-billion, while operating profit improved to R294-million from the prior half-year’s R124-million, resulting in a net profit after tax of R35-million, a turnaround from the R93-million net loss incurred in the first half of the prior financial year.
Headline earnings a share were 39c, compared with the 122c headline loss a share for the half-year when restated for the impact of the rights issue.
The successful completion of the R2-billion rights offer enabled Omnia to repay part of the bridge loan facility secured in June.
The lower net interest-bearing borrowings and improved debt structure of the group partially eased the pressure on the balance sheet and provided more financial stability and flexibility.
However, with uncertain macro- and micro-economic conditions persisting across the key divisions, Omnia will continue to restructure the business to increase efficiencies and improve operating margins.
“In recent years, the weather patterns have been more erratic, with late rains impacting negatively on the crop planting cycle and consequently on fertilizer sales, net working capital levels and profit margins.
“During the period under review, we were able to reduce working capital by changing the inventory purchasing profile in Fertilizer RSA, lowering inventory holdings and improving debtor collections.
“In the short term, we will continue to focus on those initiatives while our longer-term strategy to counter external factors will include rationalising our footprint and launching new products in existing and new markets,” Gobalsamy commented.
Since assuming the role of CEO, Gobalsamy has been reviewing all business divisions to reposition Omnia and drive the turnaround strategy.
In the Mining division, the restructuring process was completed at the end of October, resulting in an anticipated annualised saving of R80-million, while the integration of the businesses acquired in recent years continues.
A comprehensive review of Omnia’s footprint, markets and assets is under way which will include identifying and disposing of noncore assets to streamline all divisions, strengthen the balance sheet further and mitigate macroeconomic risks.
“Good progress has been made on our short-term turnaround plan, but we anticipate the environment to remain difficult and headwinds to persist for the remainder of the year. Finalising a new debt package is a key focus while we continue to drive operational efficiencies, reduce working capital and manage capex across the group.
“On a longer-term basis, a comprehensive strategic review of the group’s footprint, markets and assets is under way to position Omnia for its next phase of growth,” said Gobalsamy.