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Omnia Holdings | Strategic execution delivers strong first half performance

Omnia Holdings Limited (“Omnia”), a JSE-listed diversified chemicals Group, has published its interim results for the six months ended 30 September 2021. The Group delivered a strong financial and operational performance, having successfully navigated a complex global environment characterised by slow recovery of economic activity, steep increases in commodity prices and global shortages of raw material supplies compounded by significant supply chain challenges.

Omnia’s CEO, Seelan Gobalsamy, commented: “In an increasingly complex and uncertain trading environment, we have continued to focus on disciplined execution of our strategy. This relentless focus has enabled us to deliver a strong performance. We captured growing demand, built an agile supply chain, and demonstrated resilience in support of industries vital to many economies. We continued to allocate capital prudently to increase returns as we grow our business, live our purpose and leave a better world.”

The Group’s shift to an integrated Omnia supply chain approach was key to enhancing visibility and agility, enabling Omnia to respond swiftly to key raw material shortages,

The benefits of Omnia’s diversified portfolio were demonstrated by increased offtake from the Mining division which resulted in higher plant throughput and improved cost recoveries which contributed to higher margin and profitability in the Agriculture business. The Manufacturing operation optimised the use of nitrophosphate products, enhancing production efficiencies and plant utilisation, thereby lowering the cost of sales.

A shorter stock-to-cash cycle was implemented to counter supply chain disruptions and higher raw material prices, while early deliveries to customers and the introduction of supply chain finance positively impacted the overall net working capital cycle.

Group revenue from continuing operations for the period increased 31% to R9.9 billion and operating profit from continuing operations rose by 70% to R679 million. Omnia’s earnings before interest, tax, depreciation, and amortisation (EBITDA) excluding impairments from continuing operations, increased 35% to R1 042 million, while headline earnings per share (HEPS) from continuing operations more than doubled to 286 cents.

At the end of the reporting period, Omnia was in a strong net cash position of R719 million compared with net debt of R1.9 billion for the prior period. This improvement was supported by continued strong cash generation from operations of R890 million. Net working capital reduced by a further R700 million to R3 billion.

In October, Omnia announced its agreement to divest 81% of its stake in Umongo Petroleum (excluding the option agreement) to Orkila South Africa, a subsidiary of Azelis S.A., subject to conditions precedent. The divestment will generate approximately R1 billion in cash after the transaction concludes which is anticipated beginning of 2022.

“We are pleased to have negotiated an attractive deal for our divestment from Umongo, a
subsidiary that we identified as non-core during our strategic review process. The transaction is in
the interest of all stakeholders, and it will deliver an excellent cash return which will further bolster
our Balance Sheet,” said Gobalsamy.

Throughout the COVID-19 pandemic, Omnia has continued to reliably deliver essential services, including primary chemicals and solutions for the agriculture, mining and manufacturing sectors which play an essential role in food security, economic stability, and the livelihoods of people globally.

In furthering the fight against the Covid-19 pandemic, Omnia volunteered its suitable facilities as potential vaccination sites, which were approved in September 2021 and are now providing vaccinations to Omnia employees, their families, surrounding communities and staff from neighbouring companies.

Commenting on Omnia’s corporate citizenship, Seelan Gobalsamy said: “The Group is committed to
running sustainable businesses that create meaningful value for our stakeholders. The safety of our
employees, customers, communities and society at large is a top priority. We continue to focus on
reducing our environmental impact, and that of our customers, through solar, water, and recycling
projects as well as product technology advancements. We are proud of BME who recently won the
CAIA Responsible Care® award for their used oil recycling initiative.”

Omnia’s proven safety record allows it to compete effectively in key markets with the Group
maintaining a Recordable Case Rate (RCR) of 0.35, and BME improving its RCR rate to 0.05. Group
greenhouse gas emissions (“GHG”) were reduced by 24% from 150 000 tonnes of carbon dioxide
equivalent in the prior period to 113 829 tonnes. In order for employees to participate in Omnia’s
growth, a Broad-Based Employee Share Scheme was launched to create direct ownership for all
eligible employees as of 1 July 2021.

“Omnia has made good progress in establishing a solid financial and operational foundation. We
continue to execute on growth opportunities through organic and inorganic strategies, whilst
remaining disciplined in capital allocation and managing strong returns on investments made,”
concluded Gobalsamy.

SEGMENTAL REVIEW

Agriculture

The Agriculture division, comprising Agriculture RSA, manufacturing and Agriculture International, reported a 28% increase in net revenue to R5.2 billion and a 15% increase in operating profit to R449 million for the period. Favourable agronomic conditions, an efficient supply chain, strategic market expansion and earlier than usual customer purchases underpinned higher sales volumes.

The benefits of Omnia’s diversified portfolio were demonstrated by increased offtake from the Mining division which resulted in higher plant throughput and improved cost recoveries, contributing to higher margin and profitability.

The South African agriculture business’ timeous procurement of raw materials at competitive prices supported its ability to capture growth in sales volumes, while increased trade sales in various industries and a new contract for gypsum were secured in line with the new strategy. This, together with an overall rise in commodity prices, contributed to strong growth in revenue and higher gross profit.

Increased revenue in Zambia and rising volumes globally in the Biostimulant product range manufactured in Australia, drove a double digit increase in revenue in the international agriculture segment.

The full year outlook for this division is positive given continued strong demand for fertilizer and Omnia’s ability to reliably supply quality products, leveraging its strong brand, extensive expertise and skill in managing local and international supply constraints.

Demand for biological products has been stimulated by technology advancements in the agriculture sector and expanding Omnia’s BioStimulant footprint globally is an important area of focus. This is achieved via strategic partnerships in selected markets, including new distribution agreements and is supported by production capacity expansionsfor humates and liquid kelp in the Australian operations. A USA-based office has also been set up with field trials underway to build data for a local marketing campaign. In addition, Omnia also continued its registration work in numerous European countries.

Mining
Omnia services the mining industry through BME and Protea Mining Chemicals. The division delivered a 31% increase in revenue to R3.3 billion as a result of higher sales volumes and ammonia prices, while cost saving initiatives, diligent contract management and regional consolidation began to yield results, supporting a 28% rise in operating profit to R250 million.

All commodity segments contributed positively to Mining RSA’s performance after several growth initiatives delivered to expectations, specifically the complete mobilisation of a large contract. Volume rebates and pricing pressure due to the highly competitive environment did however offset some of the gains, as did rises in certain costs. Mining International experienced good sales volume growth in Zambia, Botswana and Namibia and operating profit showed solid growth despite competitive pricing pressures in the SADC region.

Protea Mining Chemicals (“PMC”) performed well due to increased sales of high-performance products and solutions and demonstrated sound management of supply chain challenges which minimised disruption to customers. PMC leveraged Omnia’s ammonia supply chain to reliably supply ammonia and associated derivatives to customers throughout the region, despite regional shortages. This made a positive contribution to the loading of Omnia’s manufacturing facilities.

Current higher commodity prices bode well for increased spend on exploration and production and the division expects to capitalise on positive prospects in the period ahead. Expansion opportunities have been identified in SADC, for both surface and underground mining, and growth is anticipated in Canada, after the commissioning of underground trial equipment as well as mobilisation of a large contract.

Growth is also anticipated in Indonesia through strategic partnerships to build scale in selected markets. The imminent launch of the latest AXXIS™ Titanium electronic detonator and greater customer focus on ESG and technology will also play a key role in driving growth, while the “Blast Alliance” approach will further entrench the division’s reputation as a collaborative partner. Distribution and partnership operating models, including the Asia Pacific expansion model will continue to be developed and optimised.

Chemicals
The Chemicals division comprises Protea Chemicals and Umongo Petroleum (“Umongo”). Net revenue for the period increased by 12% to R2.3 billion and operating profit remained stable at R109 million. Protea Chemicals experienced tentative market growth resulting from the lifting of the COVID-19 lockdown in South Africa. Volumes showed signs of recovery in certain sectors such as agriculture, life sciences and bulk trading, all of which delivered improved margins and profits. Umongo experienced an increase in sales and stronger prices due to a supply-demand imbalance as a result of reduced base oil production linked to the impact of COVID-19 on world markets.

The division has made good progress in seeking out new technology partners and principals with which to grow across all facets of the business. Global supply chain delays and disruptions are expected to continue, and the division’s inventory position is anticipated to open up considerable opportunity in the short to medium term. Green technologies that provide sustainable and attractive alternative chemistries to the businesses’ key markets are being explored, including biodegradable polymer technologies in packaging applications and hydrogen energy.

 

 

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