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OMN - Omnia - Unaudited results for the six months ended 30 September 2011
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code OMN
ISIN ZAE000005153 ("Omnia" or "the Group")
Unaudited results for the six months ended 30 September 2011
MAJOR FEATURES
- Profit for the period up 38% to R230 million
EPS up 2% on 37% increase in shares in issue before benefits of new Nitric Acid
Complex
- Resumption of dividend payment - interim dividend of 100 cents per share
- Debt:equity ratio constant at 35% after capital expenditure of R379 million on
new Nitric Acid Complex in past 12 months
- New R1,4 billion Nitric Acid Complex on track for commissioning in Q1 2012
KEY DRIVERS
- Good demand for mining and agriculture commodities
- Strong rand
- Low activity levels SA manufacturing sector
Condensed consolidated income statement
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 % 30/9/2010 31/3/2011
Continuing operations
Revenue 4 952 16 4 268 9 368
Cost of sales (3 915) 15 (3 394) (7 403)
Gross profit 1 037 19 874 1 965
Other operating income 56 60 35 85
Administrative expenses (230) (7) (247) (532)
Distribution expenses (474) 37 (345) (790)
Other operating expenses (38) 58 (24) (41)
Operating profit 351 20 293 687
Finance cost (36) (39) (59) (122)
Finance income 3 8 39
Share of losses of (1) (3) (2)
associates
Profit before taxation 317 33 239 602
Income tax expense (87) (72) (151)
Profit for the period 230 38 167 451
Attributable to:
Owners of Omnia Holdings 230 39 165 448
Limited
Non-controlling interest - 2 3
230 38 167 451
Earnings per share from
profit attributable
to owners of Omnia Holdings
Limited during the period
Basic earnings per share 346,8 2 341,4 768,2
(cents)
Diluted earnings per share 346,1 2 340,5 766,8
(cents)
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
Profit for the period 230 167 451
Other comprehensive income, net
of tax
Currency translation difference 197 (43) (67)
Cash flow hedge (1) - 9
Total comprehensive income for 426 124 393
the period
Attributable to:
Owners of Omnia Holdings 426 122 390
Limited
Non-controlling interest - 2 3
426 124 393
Condensed consolidated cash flow statement
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
Operating profit 351 293 687
Depreciation and amortisation 79 73 155
Adjustment for non-cash items 20 (42) (22)
Cash generated from operations 450 324 820
Utilised by working capital (1 029) (1 403) (755)
Interest paid (36) (59) (119)
Interest received 3 8 39
Taxation paid (7) (44) (94)
Utilised by operating (619) (1 174) (109)
activities
Dividends paid - - -
Net cash outflow from operating (619) (1 174) (109)
activities
Cash outflow from investing (370) (478) (783)
activities
Cash (outflow)/inflow from (1) 928 852
financing activities
Net decrease in cash (990) (724) (40)
Net cash at beginning of period 462 508 508
Effects of exchange rate 25 - (6)
movements
Net cash and cash equivalents (503) (216) 462
Condensed consolidated balance sheet
as at 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
ASSETS
Non-current assets 2 862 2 347 2 561
Property, plant and equipment 2 277 1 715 1 938
Intangible assets 516 524 523
Available-for-sale financial 19 18 16
assets
Investments in associates 47 86 78
Deferred income tax assets 3 4 6
Current assets 4 911 3 962 3 743
Inventories 2 489 1 913 1 488
Trade and other receivables 2 329 1 865 1 722
Cash and cash equivalents 93 184 533
Total assets 7 773 6 309 6 304
EQUITY AND LIABILITIES
Capital and reserves 3 769 3 075 3 338
attributable to the owners of
Omnia Holdings Limited
Stated capital 1 289 1 303 1 289
Treasury shares (18) (20) (19)
Other reserves 211 18 11
Retained earnings 2 287 1 774 2 057
Non-controlling interest in 1 - 1
equity
Total equity 3 770 3 075 3 339
Liabilities
Non-current liabilities 406 827 411
Deferred income tax liabilities 126 75 130
Debt 280 752 281
Current liabilities 3 597 2 407 2 554
Trade and other payables 2 391 1 862 1 953
Debt 523 116 523
Current income tax liabilities 87 29 7
Bank overdrafts 596 400 71
Total liabilities 4 003 3 234 2 965
Total equity and liabilities 7 773 6 309 6 304
Net debt 1 306 1 084 342
Net asset value per share 56,8 46,4 50,4
(rand)
Capital expenditure
Depreciation 65 59 127
Amortisation 14 14 28
Incurred 406 478 784
Authorised and committed 474 1 052 322
Authorised but not contracted 633 162 604
for
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2011
Attributable to the owners of
Omnia Holdings Limited
Stated Treasury Other
Rm capital shares reserves
At 31 March 2010 (audited) 318 (8) 54
Total recognised income and (43)
expense for the period
Profit for the period
Currency translation difference (43)
Ordinary shares issued 985
Treasury shares purchased (12)
Share-based payment - value of 7
services provided
At 30 September 2010 (unaudited) 1 303 (20) 18
Total recognised income and (15)
expense for the period
Profit for the period
Cash flow hedge 9
Currency translation difference (24)
Share issue expenses (14)
Treasury shares sold 1
Share-based payment - value of 8
services provided
At 31 March 2011 (audited) 1 289 (19) 11
Total recognised income and 196
expense for the period
Profit for the period
Cash flow hedge (1)
Currency translation difference 197
Ordinary shares issued
Treasury shares sold 1
Share-based payment - value of 4
services provided
At 30 September 2011 (unaudited) 1 289 (18) 211
Condensed consolidated statement of changes in equity (continued)
for the six months ended 30 September 2011
Attributable to the owners of
Omnia Holdings Limited
Non-con-
Retained trolling
Rm earnings interest Total
At 31 March 2010 (audited) 1 609 (2) 1 971
Total recognised income and 165 2 124
expense for the period
Profit for the period 165 2 167
Currency translation difference (43)
Ordinary shares issued 985
Treasury shares purchased (12)
Share-based payment - value of 7
services provided
At 30 September 2010 (unaudited) 1 774 - 3 075
Total recognised income and 283 1 269
expense for the period
Profit for the period 283 1 284
Cash flow hedge 9
Currency translation difference (24)
Share issue expenses (14)
Treasury shares sold 1
Share-based payment - value of 8
services provided
At 31 March 2011 (audited) 2 057 1 3 339
Total recognised income and 230 - 426
expense for the period
Profit for the period 230 - 230
Cash flow hedge (1)
Currency translation difference 197
Ordinary shares issued
Treasury shares sold 1
Share-based payment - value of 4
services provided
At 30 September 2011 (unaudited) 2 287 1 3 770
Reconciliation of headline earnings
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
Net profit for the period 230 165 448
Adjusted for profit on disposal - - (4)
of fixed assets
Adjusted for impairment of - - 3
intangible assets
Headline earnings 230 165 447
Headline earnings per share
Headline earnings are 346,8 cents per share (2010: 341,4 cents
per share)
Diluted headline earnings are 346,1 cents per share (2010: 340,5
cents per share)
Segmental analysis
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 % 30/9/2010 31/3/2011
Revenue, net of 4 952 16 4 268 9 368
intersegmental sales
Chemicals 1 693 (3) 1 748 3 596
Mining 1 378 27 1 081 2 092
Agriculture 1 881 31 1 439 3 680
Operating profit 351 20 293 687
Chemicals 57 78 32 64
Mining 187 9 172 311
Agriculture 107 20 89 312
Other reserves
as at 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
Share-based payment reserve 100 88 96
Foreign currency translation 108 (65) (89)
reserve
Cash flow hedge - (8) 1
Net discount arising on 3 3 3
acquisition of shares of
subsidiaries
211 18 11
Notes
ACCOUNTING POLICIES
The unaudited consolidated condensed interim financial statements for the six
months ended 30 September 2011 were prepared in accordance with International
Financial Reporting Standards (IFRS), IAS 34 Interim Financial Reporting, the AC
500 standards as issued by the Accounting Practices Board and in compliance with
the Listings Requirements of the JSE Limited. The unaudited consolidated
condensed interim financial statements do not include all of the information for
full annual financial statements.
The principal policies used in the preparation of the results for the six months
ended 30 September 2011 are consistent with those applied in the annual
financial statements for the year ended 31 March 2011.
During the year the following accounting pronouncements became effective:
Amended IFRS 1 First-time Adoption of International Reporting, Amended IFRS 7
Financial Instruments: Disclosures, Amended IAS 1 Presentation of Financial
Statements, Revised IAS 24 Related Party Disclosures and Amended IAS 34 Interim
Financial Reporting. These pronouncements had no material impact on the
accounting of transactions or the disclosure thereof.
The accounting standards, amendments to issued accounting standards and
interpretations, which are not yet effective at
30 September 2011, have not been early adopted by the Group. The Group is
currently evaluating the impact of these pronouncements.
The unaudited consolidated condensed interim financial statements and
information for the six months ended 30 September 2011 has not been reviewed or
reported on by the Group`s auditors, PricewaterhouseCoopers. Any reference to
future financial performance included in this announcement, has also not been
reviewed or reported on by the Group`s auditors.
Additional information
for the six months ended 30 September 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30/9/2011 30/9/2010 31/3/2011
Interim dividend declared per 100 - -
share (cents) in respect of
current year
Weighted average number of 66 322 48 336 58 316
shares in issue (`000)
Weighted average number of 66 464 48 456 58 427
diluted shares in issue (`000)
Number of shares in issue 66 340 66 278 66 307
(`000)
Commentary
Introduction
Omnia is a diversified, specialist chemical services provider with business
interests balanced across chemical, mining and agricultural markets. The Group`s
model, which leverages its intellectual capital and technology, differentiates
it from commodity chemical companies.
The Group`s three business divisions (chemical, mining and agriculture) continue
to provide value-add customised solutions built on a continually expanding
knowledge base. Omnia`s business model places it at the forefront of the
chemical services industry and involves uniquely matching customer needs to
product innovation and application expertise to add extraordinary value to its
customers` businesses.
Market conditions
The macro environment for this period was positive for our Mining and
Agriculture divisions and difficult for our Chemical division. Improved
commodity prices and increased demand, benefited the Mining and Agriculture
divisions. Difficult conditions persisted in the Chemical division as volumes
declined further on the back of a continued reduction in the output of the South
African manufacturing sector. The rand continued to strengthen against the US
dollar, negatively impacting all our divisions` selling prices and margins. The
average rand:US dollar exchange rate for the period was 6,98, 6% stronger than
the average of 7,39 for the prior period. The weakening of the rand in September
occurred too late to impact the operating results of this period.
Financial review
Group revenue rose 16% to R4 952 million (2010: R4 268 million) on the back of
volume and international commodity price increases, partially offset by rand
strength, in the Mining and Agriculture divisions.
Gross profit increased 19% to R1 037 million (2010: R874 million) and improved
to 20,9% of revenue (2010: 20,5%).
Other operating income increased by 60% from R35 million to R56 million mainly
due to receipt of supplier volume rebates.
Administrative and distribution expenses increased by 19% to R704 million (2010:
R592 million) primarily due to higher volumes in the Mining and Agriculture
divisions and investment in infrastructure in the Mining division in
anticipation of increased activity especially in West Africa. The year on year
comparison of the individual components of administrative and distribution
expenses are not strictly comparable as certain expenses classified as
administrative expenses in the prior period have been classified as distribution
expenses in this period in order to better align expense management and
reporting with management responsibilities.
Other operating expenses of R38 million (2010: R24 million) comprises foreign
exchange losses on normal trading activities of R24 million (2010: R10 million)
and amortisation of intangible assets of R14 million (2010: R14 million).
Operating profit increased by 20% to R351 million (2010: R293 million) and the
operating margin improved to 7,1% (2010: 6,9%).
Finance costs of R36 million comprises interest paid of R36 million (2010: R55
million) and foreign exchange loss on conversion of foreign bank balances of
R129 000 (2010: R4 million). Interest paid reduced from R55 million to R36
million due to a reduction in debt following receipt of the net proceeds of R971
million from the rights offer that was received on 14 September 2010, lower
overall cost of debt due to lower interest rates, offset by an additional cost
of funding higher level of working capital as a result of higher unit costs
resulting from increased international commodity prices.
Earnings per share increased by 2% to 346,8 cents per share based on a weighted
average 66,32 million shares in issue, a 37% increase over the prior period. The
increase in the weighted average number of shares in issue arose from the rights
issue that was concluded on 14 September 2010 to raise capital for the
construction of the new Nitric Acid Complex which is expected to be commissioned
in the first quarter of 2012. The increase in EPS is commendable because the
benefits of the Nitric Acid Complex have not yet commenced whereas the number of
shares issued to raise requisite capital have been taken into account in the
calculation of EPS.
Total assets increased by 23% from R6 309 million to R7 773 million due
primarily to capital expenditure on the new Nitric Acid Complex and higher
levels of working capital. Property, plant and equipment increased by R562
million to R2 277 million mainly as a result of R379 million spent on the new
Nitric Acid Complex.
Inventory increased 30% from R1 913 million to R2 489 million due to higher unit
costs as a result of higher international commodity prices and a degree of
stocking up in the Agriculture division in anticipation of an improved summer
sales season. Trade and other receivables increased 25% from R1 865 million to
R2 329 million due to a high level of sales towards the end of this period.
Cash flow utilised by operating activities was R619 million compared to R1 174
million utilised in the previous year due to improved cash flow attributable to
working capital and cash generated through operating profits. Cash outflow from
investing activities of R370 million (2010: R478 million) is due primarily to
capital expenditure of R225 million on the Nitric Acid Complex. After taking
into account the cash outflow from finance activities of R1 million (2010: R928
million inflow - to which the rights offer contributed R971 million), there was
a net cash outflow of R990 million (2010: R724 million).
Traditionally Omnia`s borrowings peak in September / October ahead of the
agriculture summer planting season. The period ended with a strong balance sheet
with net debt of R1 306 million (2010: R1 084 million) and a debt:equity ratio
of 35% (2010: 35% - immediately after proceeds of rights issue received). Of the
R971 million equity raised to partially finance the Nitric Acid Complex, R846
million has been spent to date on the Nitric Acid Complex and the balance of
R125 million has been utilised to reduce short-term debt.
Divisional review
Chemicals
Protea Chemicals, operating throughout southern and eastern Africa, is a well-
established manufacturer and distributor of speciality, functional and effect
chemicals and polymers, with a major presence in every sector of the broader
chemical distribution market. It is rated as the 13th largest chemical
distribution company in a global survey by the respected industry journal, ICIS
Chemical Business.
Revenue reduced by 3% to R1 693 million (2010: R1 748 million) as a volume
decline of 6% was offset by a small improvement of 3% in selling prices as
international chemical price increases were able to offset the effects of rand
strength. The rand gross profit and the gross profit percentage improved
marginally year on year, and with overheads reduced below the previous periods
level due to cost reduction measures undertaken, operating profit improved 78%
to R57 million (2010: R32 million). The operating margin improved to 3,4% (2010:
1,8%), a noteworthy improvement towards the target.
Mining
The Mining division offers a broad range of services to the mining industry
through BME and Protea Mining Chemicals. BME, operating throughout Africa, is a
market leader in blended bulk explosives formulations for the open cast mining
industry, produces electronic delay detonators and shocktube initiation systems
and manufactures packaged explosives for underground mining and specialised
surface blasting operations. The company adds value to its products through its
world-class blasting consultancy service using its unique in-house developed
BlastMapTrade Mark software solution, which offers customers support and advice
from industry experts and highly qualified mining engineers. Protea Mining
Chemicals, operating in southern Africa, offers value added services to
complement its wide range of chemical products. These include offerings such as
Protea ProcessTrade Mark, a comprehensive service that covers the handling,
logistics and on site formulation of chemicals for its customers.
Revenue increased 27% to R1 378 million (2010: R1 081 million) on the back of
volume growth and a rise in commodity prices. The operating profit increase of
9% to R187 million (2010: R172 million) was negatively impacted by the megamite
plant being out of commission and overheads increasing at a higher rate than the
increase in revenue resulting in the operating margin reducing from 15,9% to
13,6%.
As previously reported, there was an explosion incident at the megamite plant in
March this year which resulted in the megamite plant being out of commission
until August whilst parts of the plant were rebuilt. The megamite plant became
fully operational in September. This negatively affected BME in that alternative
product had to be sourced to supply customers, often at a gross loss and some
revenue was lost due to the non-availability of product. The estimated loss to
BME for the period is approximately R18 million and is the subject of an
insurance claim being processed with insurers. The insurance proceeds for this
loss of profits together with the asset damage claim will be accounted for when
settlement is reached with insurers.
BME`s overhead costs increased at a higher rate than the increase in turnover on
the back of investment in infrastructure to support anticipated higher levels of
activity especially in West Africa.
Demand for AXXISTrade Mark, the new generation of electronic detonators,
continues to increase as the product has been well received by the market.
Protea Mining Chemicals achieved higher volumes and selling prices resulting in
an increase in operating profit. Anticipated growth continues to be affected by
delays in a number of customers` expansion projects, especially those in the
uranium industry.
Agriculture
Omnia`s Agriculture division, the market leader in southern Africa, comprises
Omnia Fertilizer and Omnia Specialities. The division produces granular, liquid
and speciality fertilizers for a broad customer base of farmers, co-operatives
and wholesalers throughout southern and east Africa, Australasia and Brazil.
Omnia Specialities exports its product to over 30 countries in Africa, Europe,
South America and Asia.
Revenue increased 31% to R1 881 million (2010: R1 439 million) on the back of
higher commodity prices and higher volumes. Operating profit increased by 20% to
R107 million (2010: R89 million) due to a degree of margin compression largely
caused by additional input cost attributable to the purchase of more expensive
nitrogen materials, as internal nitric acid production capacity was increasingly
utilised to supply BME`s volume growth. This margin compression will reverse on
start-up of the new Nitric Acid Complex.
Construction of the new Nitric Acid Complex is proceeding according to plan and
within budget, for commissioning, in record time, in the first quarter of 2012.
The R1,4 billion (excluding capitalised interest) Complex comprises a nitric
acid, ammonium nitrate and PGAN plant, and associated ammonia Logistics
Infrastructure. The new nitric acid plant production capacity is 40% higher than
the current fully utilised nitric acid plant. The new Nitric Acid Complex will
significantly improve the Group`s future operating margins.
The complaint of collusion against Omnia Fertilizer referred by the Competition
Commission to the Competition Tribunal was dismissed by the Competition Appeal
Court in 2010. The Competition Commission has filed an application with the
Competition Appeal Court for leave to appeal to the Supreme Court of Appeal
against the judgement of the Competition Appeal Court and has also filed an
application directly with the Constitutional Court to appeal this judgement in
the process seeking to obtain clarity on the powers and duties of the
Competition Commission viz the Competition Act. The application for the matter
to be heard by the Constitutional Court has been set down for 24 November 2011.
Prospects
The macro environment for the second half is promising and the weaker rand will
positively impact all our divisions although the weakening has come too late to
have a significant impact on the Agriculture division as most customer orders
had been placed before September.
The Chemical division is expecting to maintain the improved operating profit
performance in the second half of the year even though volumes are not expected
to show any meaningful increase. The Mining division is expected to continue to
benefit from the buoyant global demand for mining commodities and the
recommissioned megamite plant. The Agriculture division anticipates favourable
conditions as maize plantings are expected to increase substantially given that
the maize surplus inventory has been exported, grain prices are high and
agronomic conditions are good. The recent sharp drop in global carbon credit
(CER) prices will most likely result in negligible CER revenue for the year,
despite having two years of CER`s available for sale.
The weighted average number of shares in issue for the full year will be in the
order of 66,3 million shares, up 14% on the 2011 full year weighted average 58,3
million shares in issue.
Dividends
Shareholders were advised in the 2011 annual report that the Board would
positively review the resumption of dividend payments for this year. In the
light of the better than expected cash flow, the strong balance sheet and the
good progress made on the new Nitric Acid Complex, the Board has declared an
interim dividend of 100 cents per share in respect of shareholders recorded in
the register on Friday, 20 January 2012. The last day to trade cum dividend will
be Friday, 13 January 2012. The shares will commence trading ex dividend on
Monday, 16 January 2012 and the record date will be Friday, 20 January 2012.
The payment date will be Monday, 23 January 2012. Share certificates may not be
dematerialised or rematerialised between Monday, 16 January 2012 and Friday, 20
January 2012, both dates inclusive.
NJ Crosse RB Humphris NKH Fitz-Gibbon
Chairman Group Managing Director Group Finance Director
Bryanston
22 November 2011
The preparation of the Group`s condensed consolidated unaudited interim results
was supervised by NKH Fitz-Gibbon, B Com, CA(SA).
Directors: RC Bowen (British), FD Butler, NJ Crosse (Chairman), NKH Fitz-Gibbon*
(Finance Director), R Havenstein, HH Hickey,
RB Humphris* (Managing Director), Prof SS Loubser, Dr WT Marais, HP Marais
(alternate), SW Mncwango, D Naidoo
*Executive Directors
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, 13th Floor,
Rennies House, 19 Ameshoff Street, Braamfontein
Sponsor: One Capital, 17 Fricker Road, Illovo 2196
www.omnia.co.za
Date: 22/11/2011 07:05:35 Supplied by www.sharenet.co.za
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