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Omnia weathers challenges to maintain strong interim financial position

Omnia CEO Seelan Gobalsamy

Omnia CEO Seelan Gobalsamy

Photo by Creamer Media's Marleny Arnoldi

20th November 2023

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed Omnia Holdings’ operations and capital were managed effectively against a backdrop of complex market dynamics, resulting in a strong cash position and balance sheet for the six months ended September 30, CEO Seelan Gobalsamy says.

The group maintained a disciplined focus on costs, prudent capital expenditure and stringent working capital management, which supported its robust financial position with a net cash balance of R1.6-billion, compared with R140-million in the six months ended September 30, 2022.

This strong balance sheet ensures that Omnia is well placed in the current environment with strategic capital allocation optionality, the group avers. 

“We remain committed to our purpose to positively impact global food security and livelihoods, while reducing our environmental footprint. Omnia’s half-year results reflect the diligent execution of our strategy.

“The group’s financial performance was significantly impacted on by challenging macroeconomic conditions including weak economic growth, high inflation, volatile and declining commodity prices and fluctuating exchange rates. Deteriorating infrastructure and utility underperformance locally disrupted transportation of raw materials, impacting performance,” Gobalsamy says.  

He notes that the group’s interim results were characterised by a continued decline in the commodity cycle, with a recovery in the latter part of the six months under review.

This follows two years of higher commodity prices and, as a consequence, revenue and profitability declined.

Despite this, Omnia’s Agriculture segment showed resilience and the Mining segment delivered strong results supported by good execution, particularly from operations in Indonesia and Canada.

During the period, commodity prices declined, with a resultant revenue decline of 14% to R10.4-billion. This was partially offset by strong sales volumes and the depreciation of the rand.

Gross profit margins were also impacted on, which adversely affected the Agriculture segment.

The Mining segment delivered robust margin growth driven by focused cost initiatives and improved profitability in its international business.

Operating profit decreased by 15% to R684-million, while headline earnings a share decreased by 4% to 295c.

Net asset value increased to R10.3-billion.

Working capital decreased by R1.1-billion year-on-year to R4.1-billion, as a result of declining commodity prices and further optimisation in Omnia’s supply, manufacturing and demand cycle, while continuing to provide security of supply to customers, it says.

In October, the Mining segment entered into a strategic partnership with green explosives solutions provider Hypex Bio Explosives Technology, which is expected to strengthen BME’s ability to develop sustainable blasting products. CFO Stephan Serfontein tells Engineering News that it would provide a competitive advantage for the group with companies moving towards greener mining, and with it having secured distribution rights in several countries in which is operates. 

Omnia’s carbon emissions reduced, attributable to the efficient operation of the EnviNOx emission abatement systems.

Also, energy consumption and water use per unit produced continued to decrease. In line with the commitment to promote water stewardship, the amount of water recycled has exceeded the group’s full-year 2020 baseline by over 100% (13% of total water used).

Further investment in the renewable energy plant at the Sasolburg complex was completed in October, bringing the group’s current capacity to over 10 MWh at peak performance. Overall, renewable energy use across the group has increased from 63 MWh in the prior half-year period to 5 348 MWh in the period under review.

OUTLOOK

Omnia says it is committed to executing its strategy in pursuit of sustainable growth and enhanced returns on capital.

The focus remains on enhancing operational stability, optimising costs, and prioritising supply security and value-added services for customers.

The group’s organic growth businesses are said to be positioned to unlock further value as it grows scale and capacity.

Omnia will continue to invest in the AgriBio business by enhancing its distribution footprint. 

Omnia also expects to deliver continued volume growth and profitability in Mining International.

The successful delivery and ramp-up of these projects are also expected to deliver higher margins and further diversification of its business.

Capital discipline, especially working capital management remains a critical focus area to maintain a strong financial position and a sustainable yearly dividend payout.

“By strategically investing in the mining and agriculture sectors, Omnia continues to capitalise on the increasing demand for minerals and food security, which positions it well for sustainable growth in the long term,” the group highlights. 

In terms of capital allocation, Serfontein says that from a strategic perspective, Omnia will look to strengthen its core and grow internationally. 

He points out that owing to the macroeconomic conditions in South Africa, Omnia needs to continue to invest in infrastructure to maintain its competitive advantage. The group considers its integrated supply chain and manufacturing capability as key to that, and has continued to invest in infrastructure supporting its supply chain, which has enabled it to secure supply to its clients. 

 

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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