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Omnia - Group Interim Results

Release Date: 13/08/1998 08:07:25      Code(s): OMN
OMNIA HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REG. NO. 67/03680/06)
GROUP INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 1998
CONSOLIDATED INCOME STATEMENT
  AUDITED                                           UNAUDITED   UNAUDITED
     YEAR                                           HALF-YEAR   HALF-YEAR
    ENDED                                               ENDED       ENDED
 31/12/97                                            30/06/98    30/06/97
     R000                                                R000        R000
1 066 213   SALES                                     383 244     404 792
  694 002   COST OF SALES                             232 645     254 179
  372 211   GROSS PROFIT                              150 599     150 613
            OPERATING COSTS NET OF
  253 931   OTHER PROFIT                              134 039     124 640
            PROFIT ON DISPOSAL OF DISCONTINUED
    6 462   OPERATIONS                                      -       4 074
  124 742   OPERATING PROFIT                             16 560    30 047
  118 495   CONTINUING OPERATIONS                        16 676    26 305
    6 247   DISCONTINUED OPERATIONS                        (116)    3 742
   33 989   FINANCIAL COSTS                              14 927    15 906
   90 753   PROFIT BEFORE TAXATION                        1 633    14 141
   18 322   TAXATION                                          -     3 159
   72 431   PROFIT AFTER TAXATION                         1 633    10 982
            SHARE OF RETAINED PROFIT OF
    1 285   ASSOCIATES                                      175         -
   73 716   NET PROFIT                                    1 808    10 982
      614   ATTRIBUTABLE TO OUTSIDE SHAREHOLDERS            108       210
            PROFIT ATTRIBUTABLE TO ORDINARY
   73 102   SHAREHOLDERS                                  1 700    10 772
   28 686   DIVIDENDS                                         -         -
   44 416   RETAINED EARNINGS                             1 700    10 772
   20 782   DEPRECIATION                                 11 359    11 075
            HEADLINE EARNINGS PER
    171,9   SHARE (CENTS)                                   4,4      18,1
    188,6   EARNINGS PER SHARE (CENTS)                      4,4      27,8
            NUMBER OF SHARES IN
   38 765   ISSUE (000)                                  38 765    38 765
     74,0   DIVIDENDS PER SHARE (CENTS)                       -         -
   73 716   FULLY DILUTED EARNINGS                        1 808    10 982
            FULLY DILUTED EARNINGS
    180,9   PER SHARE (CENTS)                               4,4      26,9
            FULLY DILUTED NUMBER OF
   40 745   SHARES IN ISSUE (000)*                       40 745    40 867
* FULLY DILUTED NUMBER OF SHARES IN ISSUE IS CALCULATED AFTER TAKING INTO
ACCOUNT THE DILUTION ARISING ON THE POTENTIAL ISSUE OF 1,5 MILLION SHARES IN
TERMS OF THE  PARTNERSHIP WITH MANAGEMENT SCHEME  AND 0,48 MILLION SHARES FOR
SHARE OPTIONS GRANTED BUT NOT PROVIDED FOR IN THE SHARE INCENTIVE SCHEME.
DISCONTINUED OPERATIONS
THE RESULTS FOR THE PERIOD ENDED 30 JUNE 1997 AS PUBLISHED HAVE BEEN RESTATED
TO REFLECT THE EFFECT OF THE DISCONTINUANCE OF THE FARMING OPERATIONS WHICH
OCCURRED AFTER THE INTERIM RESULTS FOR 1997 WERE RELEASED. RESULTS OF
DISCONTINUED OPERATIONS INCLUDED ABOVE:
    6 247   OPERATING PROFIT/(LOSS)                        (116)    3 742
    2 684   FINANCIAL INCOME                                  -       909
      195   TAXATION PAID                                     -         -
    8 736                                                  (116)    4 651
CONSOLIDATED ABRIDGED BALANCE SHEET
  AUDITED                                               AUDITED UNAUDITED
 31/12/97                                              30/06/98  30/06/97
     R000                                                  R000      R000
            CAPITAL EMPLOYED
  255 852   ORDINARY SHAREHOLDERS' EQUITY               261 706   217 914
    1 500   OUTSIDE SHAREHOLDERS' INTEREST                1 500     1 500
   32 798   LONG-TERM LIABILITIES                       127 017    45 526
      528   DEFERRED TAX                                      -       613
  290 678                                               390 223   265 553
            EMPLOYMENT OF CAPITAL
  208 130   FIXED ASSETS AND INVESTMENTS                238 640   181 186
   82 548   NET CURRENT ASSETS                          151 583    84 367
  427 700   CURRENT ASSETS                              492 496   422 054
  345 152   CURRENT LIABILITIES                         340 913   337 687
  290 678                                               390 223   265 553
   33 309   NET INTEREST BEARING DEBT                   257 838   189 391
            CAPITAL EXPENDITURE
   46 840   INCURRED                                     35 993    11 037
   32 835   AUTHORISED AND COMMITTED                     68 976    45 483
CONSOLIDATED ABRIDGED CASH FLOW
  AUDITED                                             UNAUDITED UNAUDITED
     YEAR                                             HALF-YEAR HALF-YEAR
    ENDED                                                 ENDED     ENDED
 31/12/97                                              30/06/98  30/06/97
     R000                                                  R000      R000
  142 568   GENERATED BY OPERATIONS                      24 253    25 463
  (45 309)  FINANCIAL COSTS AND TAXATION                (18 052)  (19 095)
            GENERATED FROM/(UTILISED FOR)
   20 158   WORKING CAPITAL                            (160 971)  (77 116)
            AVAILABLE FROM/(UTILISED IN) OPERATING
  117 417   ACTIVITIES                                 (154 770)  (70 748)
  (24 581)  DIVIDENDS PAID                              (29 298)  (24 581)
            CASH FLOW FROM/(UTILISED IN) OPERATING
   92 836   ACTIVITIES                                 (184 068)  (95 329)
  (47 604)  UTILISED IN INVESTMENT ACTIVITIES           (40 460)   (9 564)
            PROCEEDS ON DISPOSAL OF DISCONTINUED
   74 792   OPERATIONS                                        -    68 840
  120 024   NET CASH INFLOW/(OUTFLOW)                  (224 528)  (36 053)
            FUNDED BY
            DECREASE/(INCREASE) IN LONG-TERM
   22 305   LIABILITIES                                 (89 116)   13 432
   97 719   DECREASE/(INCREASE) IN CASH AND BANK       (135 412)  (49 485)
  120 024                                              (224 528)  (36 053)
COMMENTS
OPERATING PERFORMANCE
SALES FOR THE GROUP WERE 5% LOWER THAN IN THE SAME PERIOD LAST YEAR DUE TO A
PHASING DIFFERENCE IN FERTILIZER SALES VOLUMES. GROSS PROFIT MARGINS IMPROVED
FROM THE 37.2% IN 1997 TO 39.3%. THE LOWER LEVEL OF SALES IN THE FERTILIZER
DIVISION IN THE FIRST HALF OF THIS YEAR WAS THE MAJOR CONTRIBUTOR TO A 37% DROP
IN OPERATING PROFIT FROM CONTINUING OPERATIONS. LOWER INTEREST RATES AND LOWER
DEBT LEVELS AT THE START OF THE PERIOD RESULTED IN A REDUCTION IN FINANCIAL
COSTS OF 6%. THE SMALL PROFIT BEFORE TAX OF R1,63 MILLION IS NOT UNUSUAL FOR
THE GROUP'S INTERIM RESULTS.
THE LOWER FERTILIZER SALES RESULTED IN SIGNIFICANTLY HIGHER MID-YEAR FERTILIZER
STOCK LEVELS AND THIS IS THE PRIMARY CAUSE OF THE INCREASE IN WORKING CAPITAL
REQUIREMENTS.
FERTILIZER
SOUTH AFRICAN FERTILIZER SALES VOLUMES IN THE FIRST SIX MONTHS OF 1998 DID NOT
COME UP TO EXPECTATIONS AS FARMERS WERE CAUTIOUS NOT TO ENTER INTO COMMITMENTS
WHILE MAIZE AND WHEAT PRICES WERE UNSTABLE. MANY WINTER WHEAT FARMERS WILL
SWITCH TO MAIZE AND SUNFLOWER PLANTINGS IN THE SECOND HALF OF THE YEAR BECAUSE
OF POOR WHEAT PRICES IN THE COUNTRY. ALTHOUGH THE GROSS MARGIN IMPROVED
COMPARED TO THE FIRST HALF OF 1997, THIS DID NOT COMPENSATE FOR THE FIRST HALF
VOLUME DECLINE AND NET PROFIT WAS BELOW THAT OF THE SAME PERIOD LAST YEAR.
INTERNATIONAL NITROGEN PRICES WERE STABLE DURING THE FIRST SIX MONTHS OF 1998.
THE CONSTRUCTION OF THE R96 MILLION GRANULATION PLANT IS PROCEEDING ON SCHEDULE
MINING EXPLOSIVES
TURNOVER WAS SIMILAR TO THAT OF THE PREVIOUS YEAR, HOWEVER, AN IMPROVEMENT IN
MARGINS LED TO AN INCREASE IN NET PROFIT. TWO NEW MAJOR BULK EXPLOSIVES
CONTRACTS HAVE BEEN SECURED WHICH WILL CONTRIBUTE TO PROFIT IN THE LAST
QUARTER. A BULK EXPLOSIVES OPERATION HAS BEEN ESTABLISHED IN TANZANIA WITH THE
FIRST CONTRACTED DELIVERIES STARTING IN AUGUST. THE TECHNICAL DIFFICULTIES AT
THE LOSBERG CARTRIDGE EXPLOSIVES PLANT HAVE BEEN SUBSTANTIALLY RESOLVED AND THE
PLANT OPERATED PROFITABLY IN THE SECOND QUARTER
INDUSTRIAL CHEMICALS
VOLUMES AND PRICES CAME UNDER PRESSURE AS COMMODITY CHEMICAL PRICES FELL. THE
DIVISION HAS ALSO GEARED UP ITS EXPENSES TO COPE WITH SEVERAL NEW PROJECTS
WHICH HAVE NOT YET CONTRIBUTED TO PROFIT. AS A RESULT THE DIVISIONS NET PROFIT
DECLINED FROM THE PREVIOUS YEAR. CONSTRUCTION OF THE ALUMINIUM TRIHYDRATE AND
ALUMINIUM SULPHATE PLANTS HAVE PROCEEDED ACCORDING TO PLAN AND THEY ARE
EXPECTED TO BE COMMISSIONED IN SEPTEMBER 1998.
YEAR 2000
THE GROUP HAS BEEN WORKING ON ITS YEAR 2000 PROJECT SINCE JUNE 1997 AND
PROGRESS IN ENSURING THAT THE GROUP'S OPERATIONAL AND ACCOUNTING SYSTEMS WILL
BE YEAR 2000 COMPLIANT IS WELL ADVANCED. A DECISION WAS TAKEN TO UPGRADE THE
EXISTING VERSION OF THE APPLICATIONS SOFTWARE TO THE YEAR 2000 COMPLIANT
VERSION FOR WHICH
R3,5 MILLION WAS BUDGETED IN 1998. IMPLEMENTATION HAS BEGUN WITH A TARGET
COMPLETION DATE OF MARCH 1999. MANAGEMENT DOES NOT ANTICIPATE THAT PROBLEMS
ASSOCIATED WITH THE YEAR 2000 WILL CAUSE ANY MATERIAL OPERATIONAL DISRUPTION.
SUPPLIERS AND CUSTOMERS ARE BEING APPROACHED FOR SIMILAR COMFORT.
PROSPECTS
THE PROPOSED ACQUISITION OF AECI BY SASOL CAN POTENTIALLY HAVE A MATERIAL
IMPACT ON OMNIA'S FERTILIZER AND EXPLOSIVES OPERATIONS. OMNIA IS FULLY AWARE
THAT THE GLOBALISATION AND MERGING OF PRODUCERS IN COMMODITY INDUSTRIES SUCH AS
THE FERTILIZER AND EXPLOSIVES INDUSTRIES IS A FACT, AND THAT THIS IS DRIVEN BY
CONSUMERS WHO WILL DEMAND LOWER PRICES TOGETHER WITH BETTER SERVICE LEVELS IN
THE FUTURE. FOR THIS REASON, OMNIA BELIEVES THAT RATIONALISATION OF THE SOUTH
AFRICAN FERTILIZER AND EXPLOSIVES INDUSTRIES IN ORDER TO REDUCE COSTS IS BOTH
NECESSARY AND INEVITABLE. CAREFUL ANALYSIS SHOWS THAT OMNIA, AS WELL AS THE
CONSUMER, CAN ALSO BENEFIT FROM THE RATIONALISATION OF THESE INDUSTRIES.
DETAILED PLANNING TO TAKE MAXIMUM ADVANTAGE OF THE INDUSTRY CHANGES ARE WELL
ADVANCED.
THE RECENT SHARP DECLINE IN THE VALUE OF THE RAND HAS IMPROVED THE PROSPECTS
FOR MAIZE PRICES AND HENCE THE OUTLOOK FOR FERTILIZER SALES VOLUMES IN THE
SECOND HALF OF THE YEAR. THE LONG TERM WEATHER FORECAST IS THAT SOUTHERN AFRICA
SHOULD HAVE A NORMAL TO WET SUMMER PLANTING SEASON WHICH, TOGETHER WITH
REASONABLE MAIZE PRICES, SHOULD RESULT IN A NORMAL UPTAKE OF FERTILIZER
NUTRIENTS BY FARMERS. THE DECLINE IN THE VALUE OF THE RAND HAS RESULTED IN
FERTILIZER RAW MATERIAL PRICES INCREASING SUBSTANTIALLY, WHICH WILL PUT
PRESSURE ON MARGINS FOR THE BALANCE OF THE YEAR. NEVERTHELESS, THE FERTILIZER
DIVISION IS EXPECTED TO MAINTAIN NET PROFIT AT THE 1997 LEVEL.
THE MINING EXPLOSIVES DIVISION IS EXPECTED TO CONTINUE WITH ITS IMPROVED
PERFORMANCE AND INCREASE NET PROFIT OVER 1997.
THE INDUSTRIAL CHEMICALS DIVISION'S NEW PROJECTS WILL NOT CONTRIBUTE SUFFICIENT
PROFIT IN THE 1998 YEAR TO ENABLE IT TO RECOVER FROM THE POOR FIRST HALF AND
THE DIVISION WILL END THE YEAR WITH LOWER NET PROFIT THAN FOR 1997.
OVERALL, THE GROUP EXPECTS TO IMPROVE HEADLINE EARNINGS FOR THE FINANCIAL YEAR,
AND THE DEBT:EQUITY RATIO IS NOT EXPECTED TO EXCEED 50%.
DIVIDENDS
IN LINE WITH PAST PRACTICE, THE INTERIM DIVIDEND WILL BE CONSIDERED AT THE
NOVEMBER BOARD MEETING.
BY ORDER OF THE BOARD
J G PRETORIUS - CHAIRMAN                   N J CROSSE - MANAGING DIRECTOR
13 AUGUST 1998
TRANSFER SECRETARIES:
OPTIMUM REGISTRARS (PTY) LIMITED
40 COMMISSIONER STREET
JOHANNESBURG, 2001
PO BOX 62391, MARSHALLTOWN, 2107.
REGISTERED OFFICE:
1ST FLOOR, OMNIA HOUSE
13 SLOANE STREET
EPSOM DRIVE
BRYANSTON, 2021
DIRECTORS:
JG PRETORIUS (CHAIRMAN), NJ CROSSE (MANAGING DIRECTOR), NKH FITZ-GIBBON, AG
FLETCHER, M GERMENA, WT MARAIS (DEPUTY CHAIRMAN), WT MARAIS JR. (ALTERNATE), JC
ROBBERTZE, PA SPRINGETT, DR RKJ WINKLER*, OJ WINKLER* (DEPUTY CHAIRMAN)
*GERMAN



                                        
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