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Omnia - Group Results For The 15 Months Ended 31 March 2001

Release Date: 18/06/2001 08:11:08      Code(s): OMN
Omnia Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 67/003680/06)
("Omnia" or "the Group")
GROUP RESULTS FOR THE 15 MONTHS ENDED 31 MARCH 2001
CONSOLIDATED INCOME STATEMENTS
                               Audited      Pro forma    Audited
                               15 months    12 months    12 months
                               1/1/2000 to  1/4/2000 to  1/1/1999 to
                               31/3/2001    31/3/2001    31/12/1999
R'000
Revenue                        1 767 314    1 479 266    1 144 083
Cost of sales                  (1 219 364)  (1 007 464)  (733 063)
Gross profit                   547 950      471 802      411 020
  At historical cost           567 150                   87 162       414
078
  Hyperinflation adjustments
(offset by the gains included
in finance costs)              (19 200)     (15 360)     (3 058)
Operating costs before
depreciation and net of
other income                   (464 718)    (370 751)    (283 127)
  Historical operating costs
before depreciation and net
of other income                (457 830)    (365 241)    (282 331)
  Hyperinflation adjustments   (6 888)      (5 510)      (796)
EBITDA                         83 232       101 051      127 893
Depreciation                   (43 154)     (34 314)     (29 233)
Operating profit               40 078       66 737       98 660
Finance costs
-  Net interest paid           (55 278)     (47 859)     (42 435)
-  Forward cover costs         (12 467)     (10 341)     (7 959)
-  Net monetary gain/(loss)    14 788       11 830       (396)
Income from associates         842          797          970
(Loss)/Profit before taxation  (12 037)     21 164       48 840
Taxation                       11 598       (585)        375
(Loss)/Profit after taxation   (439)        20 579       49 215
Minority interest              (183)        (147)        (305)
Net (loss)/profit for the
Period                         (622)        20 432       48 910
Headline (loss)/earnings
per share (cents)              (1,6)        53,4         129,6
Basic (loss)/earnings per
share (cents)                  (1,6)        53,4         129,6
Weighted average number of
shares in issue (`000)         38 292       38 292       37 741
Dividends per share (cents)    22           22           60
Fully diluted (loss)/earnings
(R'000)                         (622)       20 432       48 910
Fully diluted earnings per
share (cents)                    (1,6)      53,3         129,5
Weighted average number of
fully diluted shares in
issue ('000)                     38 308     38 308       37 780
CONSOLIDATED BALANCE SHEETS
                            Audited       Pro forma     Audited
                            31/3/2001     31/3/2000     31/12/1999
R'000
Assets
Fixed assets                411 485       395 795       395 593
Unlisted investments
and loans                   1 784         1 364         1 455
Current assets              534 931       546 740       553 783
                            948 200       943 899       950 831
Equity and liabilities
Ordinary shareholders'
Equity                      316 114       264 924        301 344
Minority interest           1 683         1 536          1 500
Long-term liabilities       49 336        71 428         83 406
Deferred tax                6 586         12 179         19 552
Current liabilities         574 481       593 832        545 029
                            948 200       943 899        950 831
Net interest-bearing debt   250 603       358 662        243 690
Net asset value per share
(Rand)                      8,26          6,92           7,98
Debt/equity ratio (%)       79            135            81
Capital expenditure
Incurred                    57 396                       128 358
Authorised and committed    11 259                       21 375
Authorised but not
contracted for              6 058                        30 386
CONSOLIDATED CASH FLOW STATEMENTS
                              Audited      Pro forma     Audited
                              15 months    12 months     12 months
                              1/1/2000 to  1/3/2000 to   1/1/1999 to
                              31/3/2001    31/3/2001     31/12/1999
R'000
Cash generated by operations  145 523      165 048       126 793
Financial costs and taxation  (73 101)     (59 940)      (57 449)
Generated by/(utilised for)
working capital               28 308       86 783        (22 008)
Available from operations     100 730      191 891       47 336
Dividends paid                (17 368)     (8 959)       (30 013)
Cash inflow from operating
Activities                   83 362        182 932       17 323
Cash outflow from
investment activities        (55 040)      (47 730)      (109 048)
Fixed asset additions        (57 396)      (49 457)      (110 503)
Investment in associate
/subsidiary                  (360)         (360)         (2 404)
Other investing cashflows    2 716         2 087         3 859
Cash outflow from financing
Activities                   (41 543)      (27 639)      (24 077)
Net (increase)/decrease in
current bank borrowings      (13 221)      107 563       (115 802)
Net current bank borrowings
at beginning of period       (121 582)     (248 933)     (6 076)
Effects of exchange rate
Changes                      (32 834)      (26 267)      296
Net current bank borrowings
at end of period             (167 637)     (167 637)     (121 582)
SEGMENT ANALYSIS
                               Audited      Pro forma       Audited
                               15 months    12 months       12 months
                               1/1/2000 to  1/4/2000 to     1/1/1999 to
                               31/3/2001    31/3/2001       31/12/1999
R'000
Revenue                        1 767 314    1 479 266       1 144 083
Fertilizer                     1 474 093    1 241 772       1 008 653
  Less: Intersegmental sales   (113 698)    (90 534)        (121 263)
Explosives and chemicals       406 919      328 028         269 509
  Less: Intersegmental sales   -            -               (12 816)
Operating profit               40 078       66 737          98 660
Fertilizer                     9 382        39 990          80 234
Explosives and chemicals       30 696       26 747          18 426
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS' EQUITY
                   Audited     Audited non-   Audited   Audited
                   share       distributable  retained  total
                   capital     reserves       earnings
                   and premium
R'000
At 1 January 1999  73 707      22 101         202 224    298 032
Change in
accounting
policies
- provision
 for
dividends          -           -              16 281     16 281
- treasury shares  (20 231)    -              1 600      (18 631)
- deferred
taxation           -           -              (23 614)   (23 614)
At 1 January
1999 restated      53 476      22 101         196 491    272 068
Movement in
foreign currency
translation
reserve            -           1 947          -          1 947
Transfer to
income statement
of post-
acquisition
retained
earnings and
reserves of
associates          -          (110)          110         -
Treasury shares     (1 377)    -              -           (1 377)
Earnings
attributable to
ordinary
shareholders        -          -              48 910      48 910
Goodwill arising
on acquisition
of subsidiary
written off         -                         (886)       (886)
Goodwill arising
on issue of shares
in terms of the
partnership
with management
scheme written off  -          -              (9 182)     (9 182)
Issue of ordinary
Shares              14 289     -              -           14 289
Ordinary dividends
Paid                -          -              (24 425)    (24 425)
At 31 December 1999 66 388     23 938         211 018     301 344
Movement in
foreign currency
translation reserve -          25 226         -           25 226
Transfer to
income statement
of post-acquisition
retained
earnings and
reserves of
associates          -          (268)          268         -
Treasury shares     (875)      -              -           (875)
Earnings
attributable
to ordinary
shareholders        -          -              (622)       (622)
Ordinary dividends
Paid                -          -              (8 959)     (8 959)
At 31 March 2001    65 513     48 896         201 705     316 114
COMMENTS
OPERATING PERFORMANCE
With the change in year-end from the end of December to the end of March,
the 15-month period under review now incorporates, as indicated in previous
communications, two loss-making January to March quarters associated with
the usual low level of seasonal business.
Despite large increases in the international prices of important basic
commodities for the production of fertilizers and explosives, the Group
performed acceptably in containing the loss for the 15-month period to a
near breakeven R622 000 loss after tax.
Ammonia forms the basic input cost, being the main source of nitrogen for
both fertilizer and explosives. During the summer season from September 2000
to January 2001 the monthly average price of ammonia increased by 70% to
US$219 per ton having reached a peak of US$235 per ton. This, coupled with
the rapidly weakening Rand led to an inevitable squeeze in the Group's
margins.
An improvement in the situation in Zambia, stronger fertilizer sales in
Zimbabwe and improved explosives sales contributed towards a pleasing
improvement in reducing the losses typically incurred in the quarter ended
March. Compared to the same quarter in the previous year this improvement
amounted to approximately R10m.
In order to present a more meaningful picture, pro forma statements for the
12-month period beginning April 2000 and ending March 2001 have been drawn
up as if the period to March 2001 had been a normal financial year. The most
meaningful comparison of these pro forma statements is with the 12-month
period ended December 1999.
Notwithstanding the volatile conditions that had been experienced,
particularly in the October 2000 to March 2001 period, in which significant
cost increases and the earlier losses incurred in Zambia had to be absorbed,
the Group achieved a pro forma profit of R21m for the 12 months to March
2001.
Revenue for the pro forma 12-month period increased by 29 % when compared to
the year ended December 1999 whereas cost of sales increased by 36% leading
to an erosion in the gross profit margin. This temporary erosion is the
result of the increased raw material input costs borne by the Group.
Operating costs net of other income, which include selling expenses as well
as production overheads, increased at a rate of 29 %. Whilst a large portion
of the increase relates to the increased revenue this increase is impacted
by the loss of a portion of the annual fertilizer supply and distribution
tender in Zambia, losses on foreign exchange that had been incurred and
costs that had been capitalized in the previous period.
Cash generated from operating activities during the 12 months ended March
2001, improved 10 fold by R165,6m. Capital expenditure on new plant and
equipment has reduced considerably. The expenditure now mainly represents
ongoing replacement needs. During this past year focus on working capital
management has been intense. This focus has resulted in the Group being able
to reduce its level of debt at the end of March by some 70% compared to
previous levels of debt at this time of the year. A slight improvement in
the debt equity ratio to 79%, compared to the 81% at the end of December
1999 is evident. Net interest paid has reduced substantially if one
considers the interest of R12m that had been capitalised in the year ended
December 1999 compared to R0,8m capitalised during the period under review.
It was previously reported that on 26 September 2000 a critical part of the
nitric acid plant had to be shut down temporarily due to a component
failure. This event has given rise to an insurance claim for loss of profits
not recognised in the results to the end of March 2001.
FERTILIZER
As mentioned in the December interim announcement, planted maize hectarage
in South Africa has reduced. Although fertilizer prices increased by an
average of 21%, effectively in the latter half of last year, these price
adjustments were inadequate to combat the increase in the price of ammonia
experienced in the latter half of last year which caused a severe squeeze on
the margins as the Group had to absorb these cost differences. The price of
ammonia peaked in January 2001.
The situation in Zambia where a substantial reduction in profits, had been
previously incurred, has improved considerably. A number of depots have been
shut eliminating the associated overhead, maize prices have improved and the
Zambian Kwacha strengthened from the December lows.
These factors, taken together, resulted in the operating profit reducing by
50% to R40m for the pro forma 12-month period.
Efforts to add value to our customers through agronomic and other services
as well as the new wave of technical developments in the field of plant
nutrition, continue unabated.
EXPLOSIVES AND CHEMICALS
Ammonia and fuel are primary raw materials for the production of explosives.
The price increase in both ammonia and fuel therefore also impacted on the
explosives industry on a world-wide scale.
Nevertheless, thanks to an improvement in international steam-coal prices,
volumes of exported coal increased and in consequence the use of bulk
explosives also increased. Whilst the explosives margins came under pressure
in percentage terms the increase in volumes resulted in a modest increase in
the Rand margins for the 12 months ended March 2001 compared to the 12
months ended December 1999.
Volumes of packaged explosives produced by the Losberg plant also increased
substantially towards the end of the period under review. With these
increased volumes the low cost Losberg plant is now profitable.
Trading conditions for chemicals were generally good with both volumes and
margins being firmer than in previous years.  Unfortunately, the non-
operation of the aluminium trihydrate plant once again had a significant
effect on the bottom line and effectively eliminated the profits earned from
all the other areas of business.
During the year, a great deal of work was done on re-engineering the
aluminium trihydrate plant to bring it into operation during 2001.  This
exercise was to a large extent completed during April 2001 and a single
commercial size reactor is currently being commissioned.
PROSPECTS
Management is optimistic about the future. All indications are that the
fertilizer industry is on the verge of a turnaround due to a number of
factors. These include the fact that market competition has stabilised, raw
material input costs have reduced substantially and good rainfalls have
resulted in the anticipation of a good planting season. Agricultural and
mining commodity Rand prices have benefited from the weaker Rand leading to
improved purchasing power.
Since January 2001 the international prices of ammonia and urea have reduced
restoring the ratio of the urea price relative to that of ammonia resulting
in the prospect of a recovery of margins to traditional levels.
Added to this, Omnia has world class process plant facilities at the Group's
disposal,  has developed a range of new products, and introduced a number of
exciting new technologies. These have already added value and contributed
substantially to customers' profits. Sound growth is anticipated in this
area both locally and internationally with the Speciality Fertilizer product
range being exported to 18 countries including Australia and various South
American countries.
Internationally, the world investment cycle in nitrogen capacity, largely
completed from the investments of four years ago, and the increasing demand
for food is likely to result in the supply of fertilizer coming into line
with the demand thus slowly increasing the fertilizer commodity prices.
There has been a welcome increase in the demand for bulk explosives which,
together with aggressive cost control measures augers well for this
division. Explosives volumes are also set for growth from the recently
awarded tender to supply into the expanding Zambian Copper Belt revival. In
addition to this, volumes in the low cost packaged Losberg plant are also
expected to continue their growth.
DIVIDENDS
Despite the prospect of a substantial improvement in earnings the board has
decided not to declare a dividend.
NOTES
These condensed consolidated financial statements are prepared in accordance
with AC 127 - "Interim Financial Reporting". The accounting policies used in
the preparation of the condensed consolidated financial statements are
consistent with those used in the annual financial statements for the year
ended 31st December 1999 except as described in the paragraphs below.
The Group has adopted the revised AC 102 - "Income Taxes" and recognised
deferred tax liabilities for temporary differences. The cumulative prior
year net adjustment of R23,614 million (which have been calculated using a
statutory tax rate of 30%) has been included in the statement of changes in
ordinary shareholders equity as a restatement of comparative figures.
Taxation in the current period is disproportionate to the loss before
taxation, mainly as a result of the different treatment of interest for tax
and accounting purposes and the differential in foreign and South African
tax rates, which have been offset by hyperinflation adjustments.
Furthermore the Group also adopted the revised AC115 - "Segment Reporting".
During the period the Group changed its policy to treat the Omnia Share
Incentive Scheme ("the Scheme") as a special purpose entity and to therefore
consolidate the Scheme. The consolidation of the Scheme has resulted in the
shares owned by the Scheme being classified as treasury shares, which have
been offset against share capital. The comparative figures have been
restated accordingly.
The requirements of AC 107 (revised) "Events after the Balance Sheet Date"
have been implemented by the Group during the period, in advance of its
effective date. This has resulted in a change in accounting policy, as
dividends proposed or declared after the balance sheet date are no longer
recognised as a liability at the balance sheet date. The comparative figures
have been restated accordingly. The dividends per share therefore refer to
dividends declared at the beginning of the period in respect of the previous
year ending December 1999.
The debt equity ratio of 81% as at 31 December 1999 is arrived at after the
restating of the prior period equity necessitated by the abovementioned
changes in accounting policies. These changes bring to account, the non-
recognition of dividends proposed or declared after the balance sheet date,
deferred tax as well as the consolidation of the Scheme as detailed in the
statement of changes in ordinary shareholder's equity.
The significant devaluations that occurred in the Zambian Kwacha and the
Zimbabwean Dollar during the year have necessitated material hyperinflation
adjustments as required by the accounting standard AC 124. The most
significant adjustment is that which affects the gross profit by R19,2m
which is offset by the net monetary gain of R14,8m as disclosed. The net
impact on the Group results of all these hyperinflation adjustments is a net
loss of R11,9m.
By order of the Board
N J Crosse                                   R B Humphris
Chairman                                     Managing Director
Johannesburg
14 June 2001                                 Website: www.omnia.co.za
Registered Office: 1st Floor, Omnia House, 13 Sloane Street, Epsom Downs,
Bryanston
Transfer Secretaries: Ultra Registrars (Pty) Limited, 11 Diagonal Street,
Johannesburg 2001. PO Box 4844, Johannesburg 2000
Directors: NJ Crosse (Chairman), RB Humphris (Managing Director), DL Eggers,
MM Doyle, DJ King (alternate), NKH Fitz-Gibbon, WT Marais (Deputy Chairman),
Dr WT Marais (alternate), JG Pretorius, JC Robbertze, PA Springett, OJ
Winkler* (*German)
Company Secretary: PR Janse van Rensburg



                                        
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