Omnia expects positive full-year revenue growth but lower earnings

20th March 2019 By: Tasneem Bulbulia - Senior Contributing Editor Online

In line with its stated strategy to become a more diversified and balanced business with exposure to global markets, Omnia Holdings has realised positive revenue growth in the 2019 financial year, to date.

This included revenue growth in new markets owing to a focus on global expansion based on environment-friendly products and technology.

Although Omnia’s 2019 financial year will only end on March 31, the board has considered the estimated financial results for the full-year.

In a trading statement published on Wednesday, the company, noted that, despite the positive revenue growth, there was a reasonable degree of certainty that its basic earnings and earnings per share (EPS) for the full-year would be more than 160% lower than the basic earnings of R666-million and EPS of 985c reported for the prior financial year.

This would likely result in a basic loss of R400-million and a loss a share of at least 591c.

Further, Omnia expects to report a headline loss of R134-million and a headline loss a share of 198c, more than 120% lower that the headline earnings of R670-million and headline earnings a share of 991c reported for the prior financial year.

The decline in earnings for the full-year is mainly attributable to finance charges and other one-off items.

During the 2018 financial year, the group increased its debt to fund two acquisitions, as well as the construction of Phase 1 of the nitrophosphate plant. This resulted in higher interest charges for the 2019 financial year.

Meanwhile, in terms of its operating performance, the company experienced adverse market conditions in the financial year under review, marked by droughts and late rains in key fertiliser markets, a volatile rand currency, the local and international mining industry going through restructuring and overall difficult trading conditions.

Omnia’s mining business continues to experience pressure on volumes and margins across the various commodities and geographies in which the business operates owing to mines in the Southern African Development Community region being under pressure, as well as competitive pressure owing to the oversupply of nitrates coupled with lower demand.

The BME business also invested in its international expansion, with higher product registration and the underlying governance and compliance costs being incurred, while sales grew from a low base and, therefore, did not contribute sustainably to bottom line profits.

BME has previously been structured for growth and benefited from its ability to mobilise quickly and efficiently. Owing to the current market conditions, rightsizing is in process.

South Africa has experienced a serious drought with the rainy season only starting in January, which resulted in lower-than-expected fertiliser volumes.

Margins were impacted by the financial pressure being experienced by farming customers and the increased competition in the local market. The price of phosphoric acid remains inflated owing to an overcharge by its sole supplier, however, this will in part be mitigated with the introduction of the nitrophosphate plant in future years, said Omnia.

These factors resulted in the South African fertiliser business’s profitability being substantially lower than in the prior financial year.

The nitrophosphate plant is on track to be operational before March 31.

Oro Agri, with its biofriendly product range, has performed well and continues to invest for growth.

Umongo Petroleum’s growth into Africa has been delayed compared with the initial plans; however, the business was deemed to have performed well in a difficult market.

The Chemicals business remains under considerable pressure owing to the underperforming manufacturing and mining sectors, along with the general slowdown in the South African economy.

Protea Chemicals experienced margin and volume pressure.

Omnia expects to release its full-year results on or about June 25.