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Omnia expecting future benefit from new underground mining product, H1 profit lower

5th December 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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Specialised chemicals provider Omnia was expecting to see financial gains from its new underground charging unit, which enabled it to take its emulsion into the underground mining space, during the next financial year, MD Rod Humphris said last week.

Speaking at a presentation of the group’s results for the six months ended September 30, he stated that Omnia had always had a low market share in the underground mining space; however, its new product would change that.

“[Through this unit], we are taking our emulsions, that we supply to the surface market, into the underground space,” he said, explaining that this technology was safe, as the emulsion only became an explosive once it had been inserted into the blasting hole.

“This is something we are now rolling out. We have seen tremendous interest coming from a number of quite large customers and we think this has the potential to completely change the face of the underground space,” he stated.

Humphris added that Omnia was specifically targeting gold and platinum mines in South Africa for the distribution of this technology.

“We are not yet seeing financial [benefit] from this, but we would hope that in a year from now we will start being able to report financial [gains],” he noted.

Financial Results
Meanwhile, Omnia last week reported lower half-year profits of R404-million, down from the R424-million recorded in the prior corresponding period, as all three of its operating divisions faced a challenging macro-environment.

Headline earnings per share, at 610c, were 4.1% lower, while basic earnings per share declined by 4.9% to 606c.

Humphris said the rand:dollar exchange rate had, however, helped to offset the macroeconomic impact, with the weaker rand having positively impacted on selling prices across all Omnia’s divisions.

During the six-month period, Omnia’s revenue grew by 1.1% to R7.59-billion on the back of mixed results, while administrative expenses increased by 11.3% to R374-million, as a result of weaker exchange rates and additional costs incurred at new mining operations outside South Africa.

Operating profit for the period remained flat at R630-million, while the company’s operating margin remained steady at 8.31%.

Omnia declared an interim dividend of 190c a share, up 2.7% on the dividend of the prior corresponding period.

Mining
Humphris said the performance of Omnia’s mining division remained relatively flat during the period under review, as lower global commodity prices and the five-month strike in the South African platinum mining industry had contributed to lower volumes and price pressure.

He stated that the West African region had shown a particularly poor performance, having been impacted on by lower gold and iron-ore prices, the outbreak of Ebola and political factors.

During the six-month period, the mining division’s revenue declined by 2.7% to R2.7-billion, while its operating profit fell by 6.4% to R424-million.

The division’s operating margin for the period was 15.8%, which was in line with its target range of between 15% and 16%.

Agriculture
Omnia’s agriculture business grew its revenue by 5.2% to R2.8-billion in the interim period, while the division’s operating profit increased by 40.2% to R171-million, owing to the improved performance of the company’s granulation plants, increased throughput volumes from the new nitric acid complex having been supplied to the mining division and additional efficiency achieved from other downstream plants.

The division had, however, been affected by an unfavourable ammonia:urea price ratio, which was only expected to show improvement in 12 months’ time.

Humphris stated that Omnia believed the agriculture business was on track to achieve its targeted full-year performance, which entailed an operating margin of between 8% and 10%.

Chemicals
Further, Humphris noted that Omnia’s chemicals business remained under pressure as a result of South African industrial and manufacturing conditions.

This division’s revenue for the six-month period grew by 1% to R2.1-billion; however, operating profit was down 34% to R35-million.

Humphris added that, given the state of the South African manufacturing industry, the chemicals division was not expected to reach its operating margin goal of between 4.5% and 5.5% for the full financial year.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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