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OMN - Omnia - Interim Results For The Six Months Ended 30 September 2009

Release Date: 30/11/2009 08:20:52      Code(s): OMN
OMN - Omnia - Interim Results For The Six Months Ended 30 September 2009        
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
Registration number 1967/003680/06                                              
JSE code OMN & ISIN ZAE000005153                                                
("Omnia" or "the Group")                                                        
Interim results                                                                 
for the six months ended 30 September 2009                                      
KEY DRIVERS                                                                     
*    Downward valuation of inventory                                            
*    Negative market impacts                                                    
*    21% strengthening of the rand                                              
MAJOR FEATURES                                                                  
*    Revenue down 22%                                                           
*    Loss for the period R99 Million (2008: Profit R373 million)                
*    Basic loss per share 218,2 cents (2008: Profit 839,0 cents per             
*    Distribution and administration costs contained                            
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
for the six months ended 30 September 2009                                      
                         Unaudited          Unaudited  Audited                  
                         6 months           6 months   12 months                
Rm                        2009/09/30  %      2008/09/30 2009/03/31              
Continuing operations                                                           
Revenue                   4,249       (22)   5 454      11 111                  
Cost of sales             (3,826)     (12)   (4 367)    (9 045)                 
Gross profit              423         (61)   1 087      2 066                   
Other operating income    40          18     34         30                      
Distribution costs        (272)       1      (268)      (639)                   
Administrative expenses   (243)       (6)    (259)      (546)                   
Operating expenses        -                  -          (34)                    
Operating (loss)/profit   (52)        (109)  594        877                     
Finance cost              (93)        46     (63)       (205)                   
Finance income            8           282    2          41                      
Share of post tax         2                  -          5                       
profits of associate                                                            
(Loss)/profit before     (135)              533        718                      
income tax                                                                      
Income tax expense        36          (122)  (160)      (227)                   
(Loss)/profit for the     (99)        (127)  373        491                     
attributable to:                                                                
Equity holders of the     (99)        (127)  372        491                     
Minority interest         -                  1          -                       
(99)               373        491                      
Basic (loss)/earnings     (218,2)     (126)  839,0      1107,4                  
per share (cents)                                                               
Fully diluted basis       (217,8)     (127)  803,5      1062,2                  
(loss)/earnings per                                                             
share (cents)                                                                   
for the six months ended 30 September 2009                                      
Unaudited   Unaudited   Audited                 
                                6 months    6 months    12 months               
Rm                               2009/09/30  2008/09/30  2009/03/31             
(Loss)/profit for the period     (99)        373         491                    
Other comprehensive income,                                                     
net of tax                                                                      
Movement in foreign currency                                                    
reserve                          (263)       (4)         131                    
Total comprehensive                                                             
(loss)/income for the                                                           
period attributable to:          (362)       369         622                    
Owners of the company            (361)       368         622                    
Minority interest                (1)         1           -                      
                                (362)       369         622                     
CONDENSED CONSOLIDATED BALANCE SHEET                                            
for the six months ended 30 September 2009                                      
                                Unaudited   Unaudited   Audited                 
                                6 months    6 months    12 months               
Rm                               2009/09/30  2008/09/30  2009/03/31             
Non-current assets               1 766       1 565       1 686                  
Property, plant and equipment    1 202       1 025       1 114                  
Intangible assets                505         507         517                    
Available-for-sale financial     1           1           1                      
Investments in associates        48          29          40                     
Deferred income tax assets       10          3           14                     
Current assets                   3 323       4 836       4 071                  
Inventories                      1 597       2 855       2 391                  
Trade and other receivables      1 549       1 681       1 342                  
Derivative financial             142         256         179                    
Current income tax assets        4           -           -                      
Cash and cash equivalents        31          44          159                    
Total assets                     5 089       6 401       5 757                  
Equity attributable to owners    1 745       1 917       2 139                  
of the company                                                                  
Stated capital                   317         201         201                    
Treasury shares                  (10)        (10)        (11)                   
Other reserves                   (15)        141         286                    
Retained earnings                1 453       1 585       1 663                  
Minority interest in equity      (2)         (2)         (2)                    
Total equity                     1 743       1 915       2 137                  
Non-current liabilities          801         453         789                    
Interest-bearing borrowings      787         350         670                    
Deferred income tax              14          103         118                    
Provisions                       -           -           1                      
Current liabilities              2 545       4 033       2 831                  
Trade and other payables         1 354       2 344       1 973                  
Current portion of interest-     461         67          68                     
bearing borrowings                                                              
Current income tax liabilities   -           69          20                     
Bank overdrafts                  296         1 169       373                    
Derivative financial             434         384         397                    
Total liabilities                3 346       4 486       3 620                  
Total equity and liabilities     5 089       6 401       5 757                  
Net interest-bearing debt        1 513       1 542       952                    
Net asset value per share        37,5        43,2        48,2                   
Capital expenditure                                                             
Depreciation                     53          43          102                    
Amortisation                     9           12          21                     
Incurred                         140         93          258                    
Authorised and committed         137         34          91                     
Authorised but not contracted    341         134         9                      
CONDENSED CONSOLIDATED CASH FLOW STATEMENT                                      
for the six months ended 30 September 2009                                      
                                Unaudited   Unaudited  Audited                  
                                6 months    6 months   12 months                
Rm                               2009/09/30  2008/09/30 2009/03/31              
Operating (loss)/profit          (53)        594        877                     
Depreciation and amortisation    61          54         123                     
Adjustment for non-cash items    (185)       (17)       53                      
Generated from/(utilised) in     (32)        (1 369)    (744)                   
working capital                                                                 
                                (209)        (738)      309                     
Interest paid                    (92)        (65)       (214)                   
Interest received                8           2          41                      
Taxation paid                    (86)        (167)      (283)                   
Dividends paid                   (41)        (55)       (96)                    
(Utilised)/generated by          (420)       (1 023)    (243)                   
Cash outflow from investing      (140)       (83)       (257)                   
Cash inflow from financing       511         17         389                     
Net (decrease)/increase in       (49)        (1 089)    (111)                   
Net overdraft at beginning of    (214)       (103)      (103)                   
Net cash and cash equivalents    (263)       (1 192)    (214)                   
                Ordinary Shareholders` Equity                                   
                Stated     Treasury  Other     Retained   Minority              
Rm               capital    shares    reserves  earnings   interest  Total      
At 31 March      201        (13)      127       1 268      (2)       1 581      
2008 (audited)                                                                  
income and                                                                      
Profit for the                                  372        1         373        
Decrease in                                                                     
translation                           (4)                            (4)        
Share-based                           18                             18         
Ordinary                                        (55)                 (55)       
dividends paid                                                                  
Treasury                    3                                        3          
shares sold                                                                     
Movement in                                                (1)       (1)        
At 30                                                                           
September 2008                                                                  
(unaudited)      201        (10)      141       1 585      (2)       1 915      
income and                                                                      
Profit for the                                  120                  120        
Increase in                                                                     
translation                           131                            131        
Share-based                           14                             14         
Ordinary                                        (42)                 (42)       
dividends paid                                                                  
Treasury                (1)                                    (1)              
shares sold                                                                     
At 31 March    201      (11)     286       1 663     (2)       2 137            
income and                                                                      
Loss for the                               (99)                (99)             
Decrease in                                                                     
translation                      (263)                         (263)            
Share-based                      7                             7                
shares issued                                                                   
respect to                                                                      
third partner                                                                   
scheme with    90                (45)      (45)                -                
Capitalisatio  26                          (26)                -                
n award                                                                         
Ordinary                                   (40)                (40)             
Treasury                1                                      1                
shares sold                                                                     
At 30                                                                           
(unaudited)    317      (10)     (15)      1 453     (2)       1 743            
OTHER RESERVES                                                                  
                                  Unaudited   Unaudited  Audited                
                                  6 months    6 months   12 months              
Rm                                 2009/09/30  2008/09/30 2009/03/31            
Share-based payment reserves       39          63         76                    
Foreign currency translation       (57)        75         207                   
Net discount arising on            3           3          3                     
acquisition of shares of                                                        
                                  (15)        141        286                    
SEGMENTAL ANALYSIS                                                              
for the six months                                                              
ended 30 September 2009                                                         
                         Unaudited            Unaudited  Audited                
6 months             6 months   12 months              
Rm                        2009/09/30  %        2008/09/30 2009/03/31            
Revenue, net of           4 249       (22)      5 454      11 111               
intersegmental sales                                                            
Chemicals                 1 844       (20)      2 294      4 528                
Mining                    899         (11)      1 006      2 111                
Agriculture               1 506       (30)      2 154      4 472                
Operating profit           (53)       (109)     594        877                  
Chemicals                 59          (62)      156        198                  
Mining                    106         (16)      126        269                  
Agriculture               (218)       (170)     312        410                  
RECONCILIATION OF HEADLINE EARNINGS                                             
Unaudited   Unaudited  Audited                
                                  6 months    6 months   12 months              
Rm                                 2009/09/30  2008/09/30 2009/03/31            
Net (loss)/profit for the year     (99)        373        491                   
Impairment of assets                                      3                     
Headline (loss)/earnings           (99)        373        494                   
Headline earnings                                                               
Headline (loss)/earnings are (218,2) cents per share (2008: 839,0               
cents per share)                                                                
Diluted headline (loss)/earnings are (217,8) cents per share (2008:             
803,5 cents per share)                                                          
Accounting policies                                                             
The consolidated condensed financial statements for the six months ended 30     
September 2009 were prepared in accordance with International Financial         
Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting and in         
compliance with the Listing Requirements of the JSE Limited. The consolidated   
condensed interim financial statements do not include all of the information    
required by IFRS for full annual financial statements.                          
The principal policies used in the preparation of the results for the six months
ended 30 September 2009 are consistent with those applied in the annual         
financial statements for the year ended 31 March 2009, except for the adoption  
of IAS 1 Revised and IFRS 8 which have no impact on the results but require     
additional information.                                                         
A final dividend of 150 cents per share was declared on 18 June 2009 in respect 
of the earnings of the previous financial year. This dividend is reflected in   
the current period to 30 September 2009.                                        
The future minimum lease payments under non-cancellable operating leases are R4 
million (2008: R22 million) within one year and R1 million (2008: R17 million)  
between two and five years and R0 million (2008: R1 million) beyond five years, 
giving a total of R5 million (2008: R40 million).                               
ADDITIONAL INFORMATION                                                          
                            Unaudited   Unaudited  Audited                      
                            6 months    6 months   12 months                    
Rm                           2009/09/30  2008/09/30 2009/03/31                  
Final dividend paid per      150*        117        117                         
share (cents) in respect of                                                     
prior year                                                                      
Interim dividend declared                                                       
per share (cents) in                                                            
respect of                                                                      
current year                 -           100        100                         
Weighted average number of   45 094      44 285     44 316                      
shares in issue (`000)                                                          
Weighted average number of   45 176      46 241     46 204                      
fully diluted shares in                                                         
issue (`000)                                                                    
Number of shares in issue    46 430      44 321     44 370                      
*Includes a capitalisation award of 150 cents as a final dividend for the year. 
Shareholders could elect to receive a cash dividend of 145 cents instead of the 
capitalisation award                                                            
Omnia is a diversified, specialist chemical services provider with business     
interests balanced across chemical, mining and agricultural markets. The Group`s
business model, which leverages its intellectual capital and technology,        
differentiates it from other commodity chemical companies.                      
The Groups three businesses (chemical, mining and agriculture) continue to      
provide high value, customised solutions built on a continually expanding       
knowledge base. Omnia`s unique business model places it at the forefront of the 
chemical services industry and involves matching customer needs to product      
innovation and application expertise, to add extraordinary value to its         
customers and their businesses.                                                 
MARKET CONDITIONS                                                               
Omnia`s year end results announcement in June 2009 and the trading update of 23 
October 2009, indicated the sensitivity of the Group`s earnings to declining    
commodity prices as well as to the appreciation of the rand.                    
Commodity prices in general declined substantially during the latter part of the
previous financial year. These price reductions also affected the key raw       
materials used by the Group, resulting in a downward valuation to the year end  
Due to the unusual buying patterns in the prior year`s first half period        
("previous corresponding period") and the subsequent reduced sales levels in the
second half period occasioned by reduced plantings following a decline in the   
maize price, the Group was left holding substantial volumes of fertilizer stocks
for its farming customers at the March 2009 year end. This year end inventory   
was fairly valued at the time when the rand exchange rate was R9,49 to the      
US Dollar. While further raw material price reductions took place during the    
period under review, mainly with respect to potash, the rand exchange rate      
strengthened to R7,51 to the US Dollar. This necessitated further material stock
write downs during the period under review.                                     
The continuing strong rand remains one of the major contributors to the weaker  
financial performance of the Group in the short term, impacting negatively on   
each of the three business divisions - chemicals, mining and agriculture. This  
is also having a negative impact on the Group`s customers who in turn find      
themselves to be uncompetitive in export markets and having to compete with     
cheap imported finished goods in the domestic market.                           
All three divisions faced challenges from a combination of softer volumes,      
pricing pressures and weak export prices. Also of significance was the decline  
in production in South Africa, as reflected in the manufacturing index, which   
recorded negative growth, for the ten consecutive months to the end of June     
2009. While margins will remain depressed as long as these conditions prevail   
there has been an improvement in the manufacturing index since                  
June 2009.                                                                      
FINANCIAL REVIEW                                                                
The financial results for the previous corresponding period were extraordinary  
given both the prevailing high commodity prices at the time as well as the      
enhanced, albeit atypical volume off-take of fertilizer products in that        
comparable first half period in which Omnia recorded a R373 million profit. By  
contrast Omnia suffered an earnings loss of R99 million for the half year ended 
30 September 2009, as the Group`s performance continued to be impacted by       
depressed market conditions, declining commodity prices and the strengthening of
the rand by 21% to R7,51 against the US Dollar since March 2009, necessitating  
material inventory devaluations. Fertilizer stocks had to be devalued by R350   
million while polymer stocks traded at near zero margins or even losses.        
Accordingly Group revenue decreased by 22% to R4,2 billion (2008: R5,5 billion) 
and operating profit decreased by R647 million to an operating loss of R52      
million (2008: R594 million profit).                                            
Distribution costs increased by a nominal 1% to R272 million (2008: R268        
million) while administrative costs reduced by 6% to R243 million (2008: R259   
million). This reduction is mainly as a result of reduced incentive bonuses.    
In terms of new reporting standards a statement of comprehensive income has been
included in this announcement. The new statement reflects the material reduction
in the foreign currency translation reserve, within the non-distributable       
reserves, of R263 million (2008: reduction of R4 million) brought about by the  
strong rand when applied to the Group`s equity that lies in its foreign         
operations. This movement is a major component of the adjustment for non-cash   
items reflected in the cash flow statement.                                     
The seasonal nature of Omnia`s Agriculture division causes the Group`s working  
capital requirements to peak around September each year. With the considerable  
decline in commodity prices, the Group`s net working capital requirements       
reduced by R400 million at this peak period in its cycle when compared to the   
previous year`s peak. However a noticeable change, when compared to the previous
corresponding period, is the relatively lower level of supplier funding as much 
of the inventory on hand had already been acquired in the prior year and the    
suppliers settled. This has resulted in working capital needing to be funded to 
a greater extent by short term bank overdraft, causing finance costs to rise by 
45% to R93 million (2008: R63 million).                                         
As a result of this, cash utilised for the period under review is R420 million  
compared to R1 023 million in the previous corresponding period. During the     
period under review the Group raised R400 million in the form of short term     
commercial paper as a means of funding the traditional increase in working      
capital that occurs at the interim stage. This is reflected in the cash inflow  
from financing activities in the cash flow statement.                           
The debt: equity ratio of 87% (2008: 81%) at this interim stage is at its       
traditional peak.                                                               
With the successful completion of the Third Partnership with Management Scheme  
which enabled management to participate in the equity of the Group, together    
with the capitalisation award in June 2009, the stated capital of the Group has 
increased to R317 million (2008: R201 million).                                 
OPERATIONAL REVIEW                                                              
Protea Chemicals is the leading distributor of speciality, functional and effect
chemicals in southern and eastern Africa with an established presence in every  
sector of the chemical distribution market.                                     
Revenue declined by 20% to R1 844 million (2008: R2 294 million) with the       
operating profit falling by 62% to R59 million (2008: R156 million). Operating  
margins reduced to 3% (2008: 7%) as international commodity prices, notably     
those linked to oil such as polymers, also fell considerably. This, combined    
with the strength of the rand, resulted in the significant reduction in         
operating margin. The strong rand has also affected the divisions customers by  
rendering their exports uncompetitive in the global market, and also affecting  
their domestic volumes which had to compete with a flood of cheap finished goods
imports. As a consequence, customers reduced their requirement for chemical     
The recent strategic acquisitions demonstrate that the Group remains focused on 
the longer term growth of the company. The acquisition of Petroleum Fine        
Products, effective 1 December 2009, enhances the existing consumer care        
portfolio and will build on one of Omnia`s stated objectives of growing the     
business and enhancing margins through vertical integration strategies.         
The market leader in blended bulk explosives formulations for surface mines, the
Mining division also manufactures packaged explosives for underground mines and 
specialised surface blasting. The division also markets blasting accessories,   
and a complete range of mining chemicals.                                       
While volumes initially held out surprisingly well, the global recession        
eventually had an impact on South Africa in that  commodity prices went into    
freefall, reducing the demand for commodities such as platinum, copper, nickel  
and zinc. Although the Group is predominantly engaged in coal, gold and uranium 
extraction, the drop in demand of the aforementioned commodities did impact on  
the division`s volumes. Furthermore a number of customers` pipeline expansion   
projects from which the Group would have benefited have progressed at a slower  
pace than previously anticipated.                                               
With the fall in raw material prices, which has a direct impact on selling      
prices of Omnia`s products, the mining division`s revenue reduced by 11% to R899
million (2008: R1 billion) while the operating profit reduced by 16% to R106    
million (2008: R126 million). This saw the operating margin reduce slightly to  
12% from 13% in the previous corresponding period.                              
The Agriculture division produces and supplies granular, liquid and speciality  
fertilizers to individual farmers, co-operatives and wholesalers throughout     
South Africa and, increasingly, to sub-Saharan Africa, as well as to Madagascar,
Australia and New Zealand.                                                      
The extraordinary financial results of the prior year did not reflect the       
typical patterns of the past. This was both in respect of highly inflated       
fertilizer raw material prices as well as volume off-take. Sales volumes and    
value dropped off significantly in the second half of 2009 and the traditional  
peak sales period around September did not materialise. Compared to these       
unusual results in the previous corresponding period revenue in the Agriculture 
division fell by 30% to R1,5 billion (2008: R2,1 billion).                      
The Group traditionally anticipates demand and carries stock for its farming    
customers for deliveries in the forthcoming season. With the fall in demand in  
the latter half of the prior year, as previously explained, this stock had of   
necessity to be carried over into the current financial year. With the          
persistent strengthening rand, further substantial stock write-downs of R350    
million had to be effected in the period under review. Furthermore, in the face 
of falling selling prices operating margins reduced significantly in the        
Agriculture division where an operating loss of R218 million (2008: R312 million
profit) was realised. This translates into an operating loss of 14% (2008:      
operating profit of 14%).                                                       
Omnia`s defence against the Competition Commission`s charges is progressing. The
hearing of the six year long investigation into the alleged collusion within the
fertilizer industry, which hearing was scheduled to be heard in December 2009,  
was postponed to a future date yet to be set. It is hoped that a speedy         
resolution will be possible.                                                    
Short term                                                                      
It is anticipated that the Omnia Group will return to profitability during the  
second half of the 2010 financial year when fertilizer orders return to normal  
levels. Although there has been some indication of an El Nino event occurring   
early in 2010, this is not expected to have a material impact on fertilizer     
volumes in the second half of the year and a normal fertilizer season is        
The volatility in the markets served by the Group continues to provide          
uncertainty. The persistent strength of the rand is of serious concern given the
impact this has on the translation of results of foreign operations, export     
markets and lower sales volumes due to competition from foreign imports.        
Prospects for the Group`s earnings for the full year are clearly depressed when 
compared to the extraordinary performance in the previous year.                 
Against the backdrop of continued uncertainty, the Group is working aggressively
to control costs and improve efficiencies, while at the same time investing to  
improve its people and its production capacity, and in developing technologies  
that differentiate its products thereby delivering more value to its customers. 
The Group continues to actively assess possible acquisitions that fit its       
strategy for growth by expanding its base of product and service technologies.  
There are signs that conditions are improving slowly with demand beginning to   
pick up and Omnia is well positioned in the three critical sectors of the future
(agriculture, water and alternative energy) and will be able to take advantage  
of any sustained improvement in the market.                                     
The Group has become increasingly short of one of its critical raw materials    
namely ammonium nitrate, a major building block in the production of fertilizer 
and explosives. --In order to address this shortage and to prepare the Group for
the expected growth in mining and agriculture in southern Africa, Omnia has been
assessing the feasibility of a second nitric acid plant. As reported previously 
the board has authorised a detailed engineering study. The board is expected to 
announce its final decision in regard to the construction of the nitric acid    
plant in the near future.                                                       
Long term                                                                       
A number of value enhancing growth projects, which include acquisitions as well 
as direct capital expenditure, especially in the critical areas of alternative  
energy and water purification are under investigation by the Group.             
FOURTH PARTNERSHIP WITH MANAGEMENT SCHEME                                       
Shareholders are referred to the announcement on SENS of 26 November 2009 giving
notice of a general meeting to be held on 11 December 2009 in order to approve  
the scheme.                                                                     
Given the need to conserve capital for growth, the Board deems it prudent       
neither to propose nor declare a dividend for the first six months of the year  
under review.                                                                   
NJ CROSSE                         RB HUMPHRIS                                   
Chairman                          Managing Director                             
30 November 2009                                                                
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz- 
R Havenstein, HH Hickey, RB Humphris* (Group Managing Director), Prof SS        
Dr WT Marais, RR Masebelanga*, JG Pretorius, DC Radley, TR Scott    *Executive  
Registered office                                                               
1st Floor, Omnia House,                                                         
13 Sloane Street, Epsom Downs,                                                  
Bryanston, Sandton                                                              
PO Box 69888,                                                                   
Bryanston 2021                                                                  
Telephone (011) 709 8888                                                        
Transfer secretaries                                                            
Link Market Services South Africa (Pty) Ltd                                     
11 Diagonal Street, Johannesburg 2001                                           
PO Box 4844, Johannesburg 2000                                                  
Date: 30/11/2009 08:20:50 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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information disseminated through SENS.                                          

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