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Omnia Group achieves pleasing performance in very tough trading environment

Key features of results for 12 months ended 31 March 2015

  • Record revenue of R16,8bn
  • Steady cash generation of R1.8bn
  • Operating profit up 4.2% to R1 476 million
  • HEPS 2.6% higher at 1 465cps
  • Final dividend of 300cps and total dividend of 490cps

Commenting on the results, CEO Rod Humphris said: “This was a challenging year with volumes under pressure, mine closures, margin squeeze and competitive pricing which affected our Mining and Chemicals divisions. We were particularly pleased that we increased revenues and maintained a stable profit in the Mining division despite the turmoil in the industry. We experienced solid growth in our Agriculture division which enjoyed high volume increases and an improved performance in the trading and wholesale business.”

Omnia Group revenue rose 3.5% to R16 835 million due to this strong performance in the Agriculture division, but was offset by weaker performances in the Mining and Chemicals divisions as both sectors experienced a general slowdown. Gross profit increased by 9% to R3 937 million.

Operating profit rose 4.2% to R1 476 million as a result of the strong contribution from the Agriculture division, attributable to the improvement in margin, the significant improvement in the performance at the Sasolburg plant and growth in the high margin speciality products business and the retail business in Africa. Operating profit margin of 8.8% (2014: 8.7%) for the year was slightly higher compared to the previous period.

Administrative expenses were unchanged year-on-year at R907 million before taking into consideration the R200 million once-off charge in the prior year for the Long Term Incentive Plan (LTIP). On pro forma basis, excluding this amount, the current year’s expense was 28.1% higher than the R708 million recorded in 2014, partially attributed to the weaker rand and the once-off write-offs and associated restructuring charges relating to both the West Africa business unit in the Mining division and the Angolan and Mozambique business units in the Agriculture division.

EBITDA rose to R1 829 million (2014: R1 711 million), with the year-on-year difference partially due to the higher depreciation and amortisation charge at R353 million.

Profit after tax of R934 million was 5.8% lower year-on-year, due to the higher tax rate resulting from the Section 12I changes and to losses in a few international subsidiaries. Humphris noted that headline earnings per share of 1 465 cents per share were up 2.6% year-on-year - “commendable when you consider the state of the mining industry in the past year when the Mining division contributed just under 50% of Group operating profit,” he said.

The board declared a final gross cash dividend of 300 cps to be paid on 20 July 2015, which gives a total dividend of 490cps for the full year.

DIVISIONAL HIGHLIGHTS

The Agriculture division delivered strong revenue growth of 9.1% to R7 287 million. A step change in operational performance, in reducing raw materials costs, increased production volumes achieved from the nitric acid complex and downstream granulation plants, resulted in operating profit increasing by 52% to R656 million.

The Mining division achieved a good performance in a very tough market, maintaining flat revenue for the year. Factors such as mine closures, the loss of existing contracts and the reduction in tonnes mined added pressure to earnings. The operating profit of R720 million was at an operating margin of 13.5%.

Revenue in the Chemicals division was flat mainly due to the struggling South African manufacturing sector. Excluding the R52 million once-off gain from the sale of Nalco Africa, the R100 million operating profit was marginally lower than the previous year. The successful ongoing restructuring to a centralised “one Protea” model has led to further cost rationalisation, a refined product offering and improved customer service.

PROSPECTS

The Agriculture division envisages continued sales opportunities and the expansion of the nitrophosphate facility. The nitric acid complex ramp up will continue further reducing the unit cost of production. There is an ongoing drive to improve energy and water utilisation and electricity cogeneration optimisation. The division also expects some carbon credit sales in the near term.

Despite the mining sector remaining weak, Omnia will explore potential surface emulsion opportunities. The Chemicals division is targeting the completion of the restructuring and substantial improvements. Progress will be made towards achieving major simplification and focus in the business. Despite expectations that the SA manufacturing sector will remain weak, the significant changes in the business should lead to the achievement of higher margins.

Looking ahead for the Omnia Group as a whole, Humphris said “we expect all our divisions to continue to find organic growth opportunities to build on their strengths and expand the underlying business.”

He continued, “we have identified and investigated opportunities to create further growth for the Group outside Africa. These opportunities range from backward integration and market diversification to potential mergers and acquisitions in similar or related businesses. The Group has a strong and experience management team and business model and this coupled with a robust balance sheet means that Omnia is well positioned to undertake large capital projects or potential acquisitions, when the value-adding opportunity arises.”

Issued by Brunswick on behalf of Omnia Group
For interviews please contact: Yevai Chanyau: 011 502 7300 / 011 502 7407