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Audited Results for the Year Ended 31 March 2016
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code OMN
ISIN ZAE000005153
(“Omnia” or “the Group”)
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2016
FINANCIAL FEATURES
- Revenue remained flat at R16.8 billion
- Operating profit down 19% to R1 189 million
- Profit before tax of R1 012 million down 24%
- Profit after tax of R702 million down 25%
- Headline earnings per share down 29% to 1 033 cents
- A-Credit rating affirmed by Global Credit Rating in July 2015 at A- (long-term)
and A1- (short-term), with a positive ratings outlook
- Ungeared balance sheet at year-end compares favourably with the 12% gearing
recorded at FY2015
- Cash generated from operations increased to R2.3 billion up R1.3 billion
year-on-year
SUMMARY CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2016
Rm Audited Audited
2016 % 2015
Revenue 16 774 - 16 835
Cost of sales (13 369) 4 (12 898)
Gross profit 3 405 (14) 3 937
Distribution expenses (1 400) (8) (1 524)
Administrative expenses (802) (12) (907)
Other operating expenses (93) 3 (90)
Other operating income 79 32 60
Operating profit 1 189 (19) 1 476
Finance expenses (239) 24 (192)
Finance income 60 28 47
Share of profit of investments
accounted for using the
equity method 2 -
Profit before taxation 1 012 (24) 1 331
Income tax expense (310) (22) (397)
Profit for the year 702 (25) 934
Attributable to:
Owners of Omnia Holdings Limited 701 (25) 939
Non-controlling interest 1 (5)
Profit for the year 702 (25) 934
Earnings per share from profit
attributable to owners of
Omnia Holdings Limited
Basic earnings per share (cents) 1 042 (26) 1 402
Diluted earnings per share (cents) 988 (24) 1 308
Headline earnings per share (cents) 1 033 (29) 1 465
Diluted headline earnings per share (cents) 979 (28) 1 366
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2016
Audited Audited
Rm 2016 % 2015
Profit for the year 702 (25) 934
Other comprehensive income, net of tax
Currency translation differences 682 86 367
Total comprehensive income for
the year attributable to: 1 384 6 1 301
Owners of Omnia Holdings Limited 1 383 6 1 306
Non-controlling interest 1 (5)
1 384 6 1 301
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2016
Audited Audited
Rm 2016 2015
Operating profit 1 189 1 476
Depreciation and amortisation 373 353
Adjustment for non-cash items 484 17
Generated from/(utilised) by working capital 258 (878)
Cash generated from operations 2 304 968
Interest paid (263) (208)
Interest received 60 47
Taxation paid (245) (341)
Net cash inflow from operating activities 1 856 466
Cash outflow from investing activities (469) (578)
Cash outflow from financing activities (432) (466)
Net increase/(decrease) in cash and cash equivalents 955 (578)
Net cash and cash equivalents at beginning of year (699) (131)
Exchange rate movements on cash and cash equivalents 54 10
Net cash and cash equivalents at end of year 310 (699)
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016
Attributable to the owners of
Omnia Holdings Limited
Non-
Stated Treasury Other Retained controlling
Rm capital shares reserves earnings interest Total
At 31 March 2014 1 289 (6) 655 3 980 (6) 5 912
Recognised income and expenses
Profit for the year ended 31 March 2015 939 (5) 934
Currency translation difference 367 367
Change in functional currency of subsidiary 11 (12) (1)
Transactions with shareholders
Ordinary shares issued 211 (37) (405) (231)
Ordinary dividends paid (322) (322)
Treasury shares purchased (66) 15 (51)
Treasury shares sold 2 18 20
Share-based payment –
value of services provided 14 14
At 31 March 2015 1 500 (70) 1 028 4 195 (11) 6 642
Recognised income and expenses
Profit for the year ended 31 March 2016 701 1 702
Currency translation difference 682 682
Change in functional currency of subsidiary 67 (66) 1
Transactions with shareholders
Ordinary dividends paid (324) (324)
Treasury shares purchased (51) (51)
Share-based payment –
value of services provided 10 10
At 31 March 2016 1 500 (121) 1 787 4 506 (10) 7 662
SUMMARY CONSOLIDATED BALANCE SHEET
as at 31 March 2016
Audited Audited
Rm 2016 % 2015
ASSETS
Non-current assets 4 701 5 4 473
Property, plant and equipment 4 060 3 3 927
Intangible assets 543 5 519
Investment accounted for using
the equity method 26 30 20
Trade and other receivables 64 100 -
Deferred income tax assets 8 14 7
Current assets 7 677 3 7 431
Inventories 3 850 (1) 3 886
Trade and other receivables 3 167 3 3 077
Derivative financial instruments 67 63 41
Income tax assets 21 (22) 27
Cash and cash equivalents 572 43 400
Total assets 12 378 4 11 904
EQUITY
Capital and reserves attributable to
the owners of Omnia Holdings Limited 7 672 15 6 653
Stated capital 1 500 - 1 500
Treasury shares (121) (70)
Other reserves 1 787 74 1 028
Retained earnings 4 506 7 4 195
Non-controlling interest (10) (11)
Total equity 7 662 15 6 642
LIABILITIES
Non-current liabilities 621 3 605
Deferred income tax liabilities 565 13 502
Trade and other payables 19 (49) 37
Debt 37 (44) 66
Current liabilities 4 095 (12) 4 657
Trade and other payables 3 606 4 3 478
Debt 45 (18) 55
Derivative financial instruments 182 628 25
Bank overdrafts 262 (76) 1 099
Total liabilities 4 716 (10) 5 262
Total equity and liabilities 12 378 4 11 904
Net (cash)/debt (228) 820
Net asset value per share (Rand) 114 98
Capital expenditure
Depreciation 333 322
Amortisation 40 31
Incurred 494 587
Authorised and committed 293 92
Authorised but not contracted for 68 96
RECONCILIATION OF HEADLINE EARNINGS
for the year ended 31 March 2016
Audited Audited
Rm 2016 % 2015
Profit for the year attributable to
owners of Omnia Holdings Limited 701 (25) 939
Adjusted for (profit)/loss on disposal
of fixed assets/intangible assets (6) 3
Adjusted for impairment of
available-for-sale financial asset – 39
Headline earnings 695 (29) 981
SEGMENTAL ANALYSIS
for the year ended 31 March 2016
Operating Operating
Revenue profit Revenue profit
Rm* Rm Rm* Rm
2016 2016 2015 2015
Agriculture RSA 4 650 452 4 274 450
Agriculture Trading 1 632 (1) 1 055 32
Agriculture Other 1 936 43 1 958 174
Total Agriculture 8 218 494 7 287 656
Mining RSA 1 875 253 2 286 378
Mining Other 2 676 273 3 065 342
Total Mining 4 551 526 5 351 720
Chemicals RSA 3 822 179 3 979 90
Chemicals Other 183 (10) 218 10
Total Chemicals 4 005 169 4 197 100
Total 16 774 1 189 16 835 1 476
*Revenue, net of inter-segmental sales
OTHER RESERVES
as at 31 March 2016
Audited Audited
Rm 2016 2015
Share-based payment reserve 111 101
Foreign currency translation reserve 1 655 906
Gain on treasury shares sold 18 18
Net discount arising on acquisition of
shares of subsidiaries 3 3
1 787 1 028
ADDITIONAL INFORMATION
for the year ended 31 March 2016
Audited Audited
000’s 2016 2015
Weighted average number of shares in issue 67 277 66 970
Weighted average number of diluted shares in issue 70 975 71 799
Number of shares in issue (excluding treasury shares) 67 173 67 471
NOTES
BASIS OF PREPARATION
These provisional summarised financial statements have been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council,
presentation and disclosures as required by IAS 34 Interim Financial Reporting,
the JSE Listings Requirements and the requirements of the Companies Act of South
Africa. The summarised financial statements do not include all of the information
required by IFRS for full annual financial statements. The preparation of these
financial statements was supervised by the Group finance director, WG Koonin
CA(SA).
The financial statements have been prepared using accounting policies that comply
with IFRS and which are consistent with those applied in the preparation of the
financial statements for the year ended 31 March 2015, unless otherwise stated.
The accounting standards, amendments to issued accounting standards and
interpretations, which are not yet effective as at 31 March 2016, have not been
adopted by the Group.
The directors take full responsibility for the preparation of these summarised
financial statements and the financial information has been correctly extracted
from the underlying annual financial statements.
AUDIT OPINION
The Group’s auditors, PricewaterhouseCoopers Inc., have issued their opinion on
the Group’s financial statements for the year ended 31 March 2016. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised financial statements have
been derived from the Group financial statements and are consistent in all
material respects with the Group financial statements. A copy of their audit
report is available for inspection at the company’s registered office. Any
reference to future financial performance included in this announcement, has not
been reviewed or reported on by the auditors.
COMMENTARY
INTRODUCTION
Omnia is a diversified provider of specialised chemicals products and services
used in the agriculture, mining and chemical sectors. Omnia’s corporate office is
based in Johannesburg, South Africa and its main production facility in
Sasolburg, some 70 kilometres south of Johannesburg. The Group has a physical
presence in 23 countries and its operations extend into 18 countries on the
Africa continent, including South Africa, with focused operations also in
Australasia, Brazil and China. Omnia’s client base extends across southern and
West Africa and to other regions such as Europe, South America and South East
Asia. Omnia differentiates itself from other commodity chemical providers by
adding value at every stage of the supply and service chain through technological
innovation and by deploying the company’s intellectual capital. The
sustainability of the business model is based on and strengthened by the Group’s
targeted backward integration through installing technologically advanced plants
to manufacture core materials such as nitric acid and explosives emulsions. In
addition to securing sources of supply, this also enabled Omnia to improve
operational efficiencies throughout the product development and production chain.
Omnia provides customised, knowledge-based solutions through its Agriculture,
Mining and Chemicals divisions. The Group’s proven business model makes Omnia a
market leader in the distribution of industrial chemicals. Omnia continues to
grow and prosper, offering extraordinary value to the Group’s customers by
tailoring solutions to their business needs through product and service
innovation, with the expert application thereof.
GLOBAL ECONOMIC ENVIRONMENT
The past year’s global macro-economic environment was characterised with metals
and minerals remaining in oversupply, with most metal prices continuing to fall
during the year under review. Mines and mining groups are under significant
pressure to reduce debt and restructure their businesses to face the harsh new
realities of lower commodity prices. Downsizing and large-scale retrenchments in
the mining industry have been occurring on a global basis and most mineral
exploration projects have been halted or significantly reduced. As a result,
there is little growth in the mining industry with few, if any, greenfield
start-ups. This has the potential to create supply shortages in the medium- to
long-term, which should support a recovery in metal and mineral prices.
Omnia’s business model, to a large extent, depends on commodity prices – those of
ammonia, its principal bulk feedstock on the cost side, and those of agricultural
and minerals products on the demand side. Feedstock prices declined steadily
during the first three quarters of the past financial year in response to falling
natural-gas prices. Although the free-on-board (FOB) price of ammonia dropped to
a low of $265/tonne in March 2016 from $405/tonne at the start of April 2015,
urea prices also moved in line with those of ammonia. As a result Omnia did not
gain any particular advantage from changes in the ammonia price. Urea prices were
also affected in calendar 2015 by the significant increase in supply from Chinese
manufacturers into the global market seeking to dispose of their production
surplus to domestic demand. Omnia continues to evaluate market conditions and
apply the hedging policy to mitigate these risks wherever applicable.
FINANCIAL REVIEW
INCOME STATEMENT
Group revenue marginally decreased to R16 774 million (2015: R16 835 million)
based on an improved performance by the Agriculture division which was offset by
weaker performances by the Mining and Chemicals divisions due to a general
slowdown in both sectors.
Gross profit decreased by 14% to R3 405 million (2015: R3 937 million) due to
lower volumes in all three divisions and competitive pricing that affected the
performance of the Mining division. The gross margin percentage decreased from
23% in FY2015 to 20% in the current year.
Distribution expenses decreased by 8% to R1 400 million (2015: R1 524 million),
due to sales volumes decreasing in all three divisions resulting in lower
distribution expenses.
Administrative expenses of R802 million (2015: R907 million) were 12% lower year-
on-year, with the decrease in costs partially attributable to the prior year’s
write-offs and once off restructuring charges relating to both the West Africa
business unit’s in the Mining division and the Angolan and Mozambique business
units in the Agriculture division. Included in administrative expenses is the
impairment of available-for-sale financial assets of nil (2015: R39 million).
Other operating expenses of R93 million (2015: R90 million) included R53 million
(2015: R59 million) in foreign exchange losses, largely driven by the weaker
US dollar exchange rate and volatility of the local currencies of various African
countries in which Omnia operates, that fix their currencies against the
US dollar. Amortisation of intangible assets of R40 million (2015: R31 million)
for the year includes the amortisation of that portion of the new Microsoft
Dynamics AX ERP system that came into operation in the current financial year.
Other operating income of R79 million (2015: R60 million) was higher year-on-year.
Operating profit of R1 189 million (2015: R1 476 million) was down 19% year-on-
year. The Agriculture division had a challenging year due to the effect of the
El-Niño weather phenomena, with a decrease of 25% in operating profit to
R494 million (2015: R656 million) due to several factors. This included the lower
production volumes achieved at the nitric acid 2 complex due to the decreased
sales to the Mining division as a result of the slowdown in mining activities.
The lower production volumes at the downstream granulation plants were due to
higher levels of stock at the beginning of the year that resulted in a planned
reduction in volumes produced for the year. As a result, these factors reduced
the overhead recovery cost at the Sasolburg factory. Overall the Agriculture
division’s volumes were down by only 4% despite a 27% reduction in the maize
hectares planted and the overall reduction of summer hectares planted in South
Africa. The Mining division returned a lower operating profit of R526 million
(2015: R720 million), down 27% year-on-year with continued low commodity market
prices resulting in lower volumes being mined and price pressures leading most
mines to reduce output volume and expenditure on explosives and services across
all markets. Market oversupply and customer focus on pricing has led to increased
price competition which in turn has resulted in lower margins. To counteract
these effect on margins, various internal initiatives and projects were
implemented to reduce overall cost elements in the final products sold to
customers. The Chemicals division’s operating profit of R169 million
(2015: R100 million) was 69% higher year-on-year which is commendable when
considering the poor economic environment in South Africa where the manufacturing
sector remains under pressure. Despite the poor market conditions, steps taken to
counter this affect were implemented from January 2015 with the successful
restructuring and simplification of the business as well as the focus on the
revamp of the IT systems and business process. Collectively this has resulted in
a more focused operation with better controls over pricing of product and service
delivery.
Operating profit margin of 7.1% (2015: 8.8%) for the year under review was lower
year-on-year, with the comparison of the divisional operating margins in
percentage terms mixed. The Agriculture division was down at 6.0% (2015: 9.0%),
the Mining division down at 11.6% (2015: 13.5%) and the Chemicals division up at
4.2% (2015: 2.4%). With reference to the past year’s guidance on operating profit
margin and the outlook for the 2017 financial year, the guidance for Agriculture
remains unchanged at 7.0% – 9.0%, Mining revised downwards due to the
prevailing market conditions at 12.0% – 14.0% and Chemicals revised upwards at
4.0% – 5.0% as this business continues to rebuild.
Net finance expenses of R179 million (2015: R145 million) increased year-on-year
due to the cost of hedging the US dollar equity position of R86 million
(2015: R47 million), the high stock levels in the Agriculture divisions and the
higher funding rates due to the increased cost of borrowing in South Africa.
Finance expenses of R239 million (2015: R192 million) are net of the
capitalisation of R24 million (2015: R16 million) of interest costs relating to
capital projects under construction during the current financial year. Finance
income of R60 million (2015: R47 million) increased as a result of higher cash
balances on hand during the year and at year-end.
Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) was lower
at R1 562 million (2015: R1 829 million), with the year-on-year reduction
attributable to the operating profit decreasing by R287 million and partially due
to depreciation and amortisation charges of R20 million being higher at
R373 million (2015: R353 million).
Profit before tax of R1 012 million (2015: R1 331 million) was R319 million or
24% lower year-on-year.
Taxation of R310 million (2015: R397 million) decreased by 22% or R87 million
lower year-on-year. The effective tax rate of 30.6% (2015: 29.8%) remained higher
than normal, with the marginal percentage increase due to a combination of the
losses made by separate legal entities in various countries that could not be
offset against profits made elsewhere in the Group, the mix of profits, varying
tax rates and the year-on-year changes to the tax formulas in the various
countries in which Omnia operates. This was countered in part by the Section 12I
tax incentives claimed in the current financial year of R16 million
(2015: R2 million), that related to the expenditure on the qualifying capital
project, namely the new Dryden HEF plant and distribution centre.
Profit after tax of R702 million (2015: R934 million) was 25% lower year-on-year,
due to the lower operating profit, which is still commendable under the tough
macro-economic environment and prevailing weather conditions.
Total comprehensive income was higher year-on-year at R1 384 million
(2015: R1 301 million), due to the higher foreign-currency translation
differences of R682 million in the 2016 financial year (2015: R367 million),
because of the 21% decrease year-on-year of the year-end rand:US dollar exchange
rate. The majority of the foreign-currency translation reserve relates to the
revaluation of the US dollar denominated equity.
Headline earnings per share of R10.33 (2015: R14.65) was down 29% year-on-year.
LONG-TERM INCENTIVE PLAN CHARGES
The current year’s long-term incentive plan (LTIP) charges resulted in an income
of R1 million (2015: R18 million charge) which consists of: R3 million
(2015: R8 million) for the new cash- and equity-settled Partnership with
Management 5 Share Scheme (Partner 5), reversal of R10 million (2015: R1 million)
for the Share Appreciation Rights scheme due to the year-on-year decrease in
share price and R6 million (2015: R11 million) for the equity-settled Sakhile 1
and Sakhile 2 schemes. This compares to an estimated charge in the order of
R75 million for the current year, if the target for year two of the five-year
plan was met. The lower charge in the current year is due to the cumulative
shortfall in the profit before tax for year one and two of the new five-year plan
that commenced on 1 April 2014. The R10 million year-on-year reduction in the
LTIP charge for the Share Appreciation Rights scheme, is due to the year-on-year
decrease in the share price from R172.50 at 31 March 2015 to R136.50 at
31 March 2016.
BALANCE SHEET
The balance sheet continues to strengthen with total assets increasing by 4% or
R474 million to R12 378 million (2015: R11 904 million). The increase in current
assets of R246 million was largely attributable to the R172 million increase in
cash and cash equivalents as a result of the emphasis on cash generation and
working capital management in recent years resulting in a net debt-free balance
sheet at year-end, a first for the past decade. The net increase in non-current
assets of R228 million is largely attributable to the capital expenditure of
R494 million (2015: R587 million) based on capital projects planned for the year
which are offset by the higher depreciation charges of R333 million
(2015: R322 million) together with trade and other receivables, with an increase
of R64 million which consist of the financial assistance provided for the
emerging farmers project.
Total liabilities at financial year end were R4 716 million
(2015: R5 262 million), down R546 million or 10%. Current liabilities decreased
by R562 million or 12% to R4 095 million (2015: R4 657 million), with trade and
other payables increasing to R3 606 million (2015: R3 478 million) and bank
overdrafts falling from R1 099 million to R262 million, largely due to the strong
emphasis on cash generation and working capital management throughout the year.
Non-current liabilities increased by R16 million to R621 million
(2015: R605 million), with the increase in deferred tax of R63 million, offset by
the decrease in trade and other payables of R18 million and long-term debt of
R29 million.
Net debt was eliminated at year-end with a net cash positive position of
R228 million (2015: negative R820 million) resulting in a debt free balance sheet
at year-end. The ungeared balance sheet at year-end compares favourably with the
12% gearing recorded at the end of the prior year. The net cash positive position
is expected to continue to increase as the market conditions improve and the
underlying assets continue to generate higher levels of profitability and cash
flow with an emphasis on strict working capital management.
Total equity increased to R7 662 million (2015: R6 642 million), a R1 020 million
or 15% net movement year-on-year, due to the net profit after tax of R702 million
and the total increase in the foreign currency translation reserve of
R682 million. This was offset by dividends paid of R324 million, treasury shares
having been purchased in the open market for the new Partner 5 scheme of
R51 million and R11 million for other items. The increase in the foreign currency
translation reserve is due to the weakening of the rand: US dollar exchange rate
at financial year-end that is used to translate the net assets denominated in
US dollars at financial year-end from R12.14 at 31 March 2015 to R14.72 at
31 March 2016. At year-end, the total foreign currency translation reserve was
R1 655 million (2015: R906 million).
CASH FLOW STATEMENT
Cash flow generated from operations rose by R1 336 million to R2 304 million
(2015: R968 million) with the year-on-year increase largely attributable to the
positive R258 million (2015: negative R878 million) net cash funding released for
working capital which normalised in the 2016 financial year compared to the 2015
financial year.
Cash flow from investing activities of R469 million (2015: R578 million) was
lower due to the reduction in expenditure on major capital projects, which
remained in line with the business plan.
Cash flow from financing activities of R432 million (2015: R466 million) was
lower due to slight increase in dividend payments of R324 million
(2015: R322 million), the net settlement of debt amounting to R57 million
(2015: R83 million) and treasury shares purchased for R51 million
(2015: R61 million).
The net increase in cash and cash equivalents for the year was R955 million
(2015: R578 million net decrease) and net borrowings and cash on hand at year end
totalled R310 million (2015: R699 million borrowings and overdrafts).
DIVISIONAL REVIEW
AGRICULTURE
Omnia’s Agriculture division comprises of Omnia Fertilizer and Omnia Specialities
and is the market leader in its field in South Africa and southern Africa. The
division produces and trades in granular, liquid and speciality fertilizers for a
broad customer base of farmers, co-operatives and wholesalers throughout South
Africa, southern and East Africa and to select markets in Australasia, Brazil and
Mauritius.
The Agriculture division’s competitive edge lies in Nutriology®, or what Omnia
calls the “science of growing”. The science of growing is Omnia’s business
philosophy and involves more than just selling fertilizer to farmers – it is
about optimising yield and crop quality to maximize returns while reducing
farming and environmental risk. Achieving this, entails becoming intricately
involved in the producers’ businesses to better understand their objectives and
targets. Nutriology® also includes cutting-edge research and development that
results in the development of new products, services and farming practices. The
Omnia Nutriology® brand is highly regarded in the regional market and strongly
supports management’s vision of creating wealth through knowledge.
Omnia Fertilizer services the South African market through regional sales offices
and a comprehensive network of agents and representatives supported by qualified
agronomists and state of the art research facilities located at the Sasolburg
site. The rest of the southern Africa market is supported from Omnia’s regional
offices located in Mauritius, Mozambique, Zambia and Zimbabwe, while other
markets such as Botswana, Democratic Republic of the Congo (DRC), Kenya, Lesotho,
Tanzania, Malawi, Namibia and Swaziland are supported from South Africa.
Omnia Specialities supplies a comprehensive range of water-soluble and foliar
products, trace elements and organic soil conditioners to the South Africa and
southern African markets and through offices in Australia, New Zealand and
Brazil. Selected speciality products are exported to Europe, Asia and South
America.
The Agriculture division achieved good growth in revenue of 13% to R8 218 million
(2015: R7 287 million) on the back of a 4% decrease in total volumes. South
Africa volumes were down only 1% despite a 27% reduction in the maize total
hectares planted and an overall reduction of 22% in the summer crop hectares
planted. The international volumes were down 3% due to lower sales in Mozambique,
Botswana, the DRC and Namibia as the impact of the drought was felt.
Despite difficult market conditions the Agriculture Trading segment showed solid
volume growth into Africa. However, margins were negatively impacted by losses in
Australia due to a poor inventory position carried forward from the previous
year, resulting in a 100% or R33 million reduction in operating profit. This is a
1.5% reduction in the overall operating margin of the Agriculture division.
The total operating profit margin of 6.0% is lower than the previous year’s
margin of 9.0%, and was below the current year’s guidance of 7.0% to 9.0%. The
3.0% year-on-year decrease in margin was attributable to the 1.5% reduction in
the Agriculture Trading segment, the continued unfavourable ammonia to urea ratio
that negatively impacted the conversion margins at the production facilities and
the reduction in production throughput volumes at Sasolburg, resulting in a
reduction in overhead cost recoveries at the Sasolburg factory and higher unit
costs. Downstream sales of ammonia nitrates to the Mining division also decreased
due to the slowdown in mining activities and related volumes sold to customers.
To counter the effect in part is the improved performance on reducing raw
material costs which depend on the timing of purchases, strong price
negotiations, hedging and management of exchange rate risks. Overall, this
resulted in the current year’s operating profits decreasing by 25% to
R494 million (2015: R656 million).
Net working capital increased by 12% to R2 036 million (2015: R1 821 million) due
to the impact of the year-on-year increase in exchange rates, increasing the rand
unit costs of raw materials, work in progress and finished goods.
MINING
Omnia’s Mining division services the mining industry through BME and Protea
Mining Chemicals.
BME operates throughout Africa with a strong presence in South Africa, southern
and West Africa. BME is a market leader in bulk emulsion and blended bulk
explosives formulations for the opencast mining industry; it produces electronic
delay detonators and shocktube initiating systems; it has its own range of
explosive boosters, and it manufactures packaged explosives for underground
mining and specialised surface blasting operations. BME adds value to its
products through its world-class blasting consultancy service. Omnia’s industry
experts, experienced mining engineers and geologists advise and support customers
in the planning and execution of blasting operations. This is achieved by using
BME’s unique and proprietary BlastMap™ software solution in combination with the
accuracy of the AXXIS® electronic delay detonators that is used to control the
electronic delay detonators in the blasting process.
Protea Mining Chemicals provides a suite of value-added services to complement a
wide range of chemicals and reagents supplied for use by the processing plants on
mines in South Africa and Africa. This includes Protea Process®, a comprehensive
service that covers the design of equipment, logistics and on-site management and
make up of chemicals and reagents.
The Mining division’s total revenue decreased by 15% to R4 551 million
(2015: R5 351 million) on the back of a 17% reduction in volumes with the
continued low commodity market prices and price pressures leading most mines to
seek price reduction through renegotiations with current suppliers or via tender
with potentially new suppliers, reduce output volume and expenditure on
explosives and services across all markets. Market oversupply and customer focus
on pricing has led to increased price competition which in turn has impacted and
resulted in lower margins. Overall, market conditions remain challenging and some
of the key factors affecting market conditions are as follows: softer demand in
mining commodity and mineral markets throughout Africa, especially in gold,
platinum, copper and iron ore; reduced mining activity in metals and minerals
such as coal, uranium, vanadium, gold and platinum; reduced greenfield mining
project activity in sub-Sahara Africa, as well as brownfield expansion
opportunities on existing mines. However despite these market conditions the
division continues to find opportunities and has recently been successful in
securing large volumes in the copper belt of Zambia.
Despite the downturn in world mining revenues and volumes, the Mining division
has been remarkably resilient and continues to forge ahead in maintaining its
position as a leading player in the open cast mining industry on the African
continent. The operating profit of R526 million was at an operating margin of
11.6% (2015: 13.5%), which was 1.9% down on the previous year. This is below the
current year’s guidance of 13.0%–15.0%. This can be attributable to the weakening
rand that was positive for BME’s South African-sourced and manufactured products
sold into Africa, also negatively impacted on product categories where the inputs
are purchased in US dollars. Average sales prices increased by 2% year-on-year
mainly due to the weaker rand. Volumes decreased by 17%, largely attributable to
two major contracts that were lost during the last quarter of FY2015 with the
full effect realised in FY2016. If the contracts were excluded in FY2015 the
volume decrease would have been 5% year-on-year.
Net working capital was well controlled and decreased to R842 million
(2015: R1 090 million), due to the reduction in overall sales revenue causing a
reduction in total net working capital.
CHEMICALS
The Chemicals division’s main business, Protea Chemicals, is a long-established
and well-known manufacturer and distributor of specialty, functional and effect
chemicals and polymers. It has a significant presence in every sector of the
broader chemicals distribution market throughout South Africa, southern and East
Africa. Protea Chemicals represents many leading domestic and international
chemical producers, providing cost-effective and efficient distribution channels
for Omnia’s products into the African market. Protea Chemicals continues to be
rated as the largest chemical distributor in Africa by the respected industry
journal, ICIS Chemical Business. Protea Chemicals also manufactures and
distributes chemicals for the treatment of water to render it potable, a function
mostly undertaken through municipalities.
Revenue decreased by 5% to R4 005 million (2015: R4 197 million) with a 5%
decrease in volumes sold. The operating margin increased by a commendable 1.8% to
4.2% (2015: 2.4%) and was above the current year’s target of 3.0% – 4.0%, with
the exchange rate assisting the rand/kg selling prices to an extent. Disciplined
management of selling prices effectively minimised the decline in US dollar-
denominated unit prices of chemical products partially offsetting the weaker
rand: US dollar exchange rate. As a result, the net impact has not been as marked
as the decline in the oil price alone would suggest. Overall, Protea Chemicals
saw an unchanged unit price over the past year, whilst total turnover declined
mostly due to lower volumes as a result of rationalised product range.
The strategy to divert the division’s marketing and sales efforts in addition to
South Africa to neighbouring countries and throughout Africa has started to
produce encouraging results, though oil based economies continue to struggle
under poor liquidity of US dollars caused by the sustained drop in oil prices.
Further developments beyond Protea Chemicals’ existing operations will continue
to be explored, to allow for sustainable growth in the geographic areas within
which the division operates and the broader chemicals distribution sector.
The strategy to develop a realigned business model to effectively provide an
improved product and service offering to meet customer expectations has
progressed well throughout FY2016 and is on its way to deliver further benefits
in the coming financial year.
Significant restructuring of the division’s resources required to service the
business took place in the second half of the financial year. These savings
assisted in further reducing overhead costs and providing a robust platform for
the new financial year, where the full impact will be seen in the income
statement. The conclusion of the strategy to move away from a product-based model
to a customer-based model has been well managed and has provided a trimmed down
but effective product range sufficient to meet customer expectations. Further
improvements to information technology systems have also assisted the already
successfully restructured business to respond to market dynamics. Such
development has improved margin control and provides a solid platform from which
to further grow the business. All of this has resulted in gross profit percentage
increasing from 11.4% in FY2015 to 14.8% in the current year contributing
significantly to the improvement in operating margin.
Net working capital was well controlled and decreased to R533 million
(2015: R575 million).
PROSPECTS
The domestic and international Agriculture divisions are poised for a good
performance with record high agriculture produce prices and the prospect of the
drought receding, favouring a normal planting season this coming year. Gains made
in establishing new fertilizer markets in the course of last year are likely to
drive volume growth.
The international mining sector has gone through very difficult times since late
2014, but the prices for commodities appear to be stabilising for the moment and
showing modest signs of recovery. Going forward, with the prospect of a better
balance between demand and supply for most commodities, the price recovery in the
near term is more likely and the business is well placed to respond to the
improvement in market conditions. Although the demand for explosives in South
Africa and in Africa has been hard hit over the last two years, with BME’s very
competitive offering, a number of large contracts have been secured which will
have a favourable impact the new financial year. This will ensure that the
division is well placed to restore its level of profitability and also have a
positive impact on the Agriculture division due to higher production throughput
and lower unit costs per unit produced.
Protea Mining Chemicals continues to perform above expectation as it increases
its footprint in regional Africa and is budgeted to have another year of growth.
The Chemicals division has undoubtedly turned a corner and is expected to build
on the considerable improvement in earnings achieved in the FY2016. This will be
done in the face of considerable pressure on margins and volumes in the market
place.
The Business Development team is focusing on raw material backward integration
opportunities, potential acquisitions and energy projects of which a number have
been assessed, and a few of which are in the process of receiving further
consideration.
The Group’s balance sheet is very strong with a positive cash position. This has
positioned the company to investigate a number of investment opportunities, of
which a certain number are at an advanced stage of investigation and analysis.
DIVIDENDS
The board has declared a final gross cash dividend of 180 cents (2015: 300 cents)
per ordinary share payable from income in respect of the year ended 31 March
2016. Together with the interim dividend of 180 cents (2015: 190 cents) per
share, this provides shareholders with a total dividend this financial year of
360 cents (2015: 490 cents) per ordinary share. The number of ordinary shares in
issue at the date of this declaration is 68 293 352 (including 1 120 640 treasury
shares held by the Group). The gross dividend is subject to local dividends tax
of 15% for those shareholders to which local dividends tax is applicable. The
resultant net dividend amount is 153 cents per share for those shareholders
subject to local dividends tax and 180 cents share for those shareholders not
subject to local dividends tax. The company’s tax reference number is 9400087715.
The salient dates for the final dividend are as follows:
Last day to trade cum dividend Tuesday, 19 July 2016
Shares trade ex-dividend Wednesday, 20 July 2016
Record date Friday, 22 July 2016
Payment date Monday, 25 July 2016
Share certificates may not be dematerialised or materialised between Wednesday,
20 July 2016 and Friday, 22 July 2016, both dates inclusive.
CHANGES TO THE BOARD
Mr Noel Fitz-Gibbon retired as non-executive director with effect from
22 June 2015 and Ms Khumo Shongwe resigned as independent non-executive director
with effect from 17 July 2015.
Ms Tina Eboka was appointed as an independent non-executive director with effect
from 26 February 2016.
NJ Crosse RB Humphris WG Koonin
Chairman Group managing director Group finance director
28 June 2016
Directors:
RC Bowen (British), FD Butler, NJ Crosse (Chairman), TNM Eboka,
R Havenstein, HH Hickey, RB Humphris* (Group managing director),
WG Koonin* (Group finance director), Prof SS Loubser, Dr WT Marais,
HP Marais (alternate), SW Mncwango, D Naidoo
*Executive directors
Registered office:
2nd Floor, Omnia House, Epsom Downs Office Park, 13 Sloane Street, Epsom Downs,
Bryanston, 2021. PO Box 69888, Bryanston, 2021
Telephone: (011) 709 8888
Transfer secretaries:
Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House,
19 Ameshoff Street, Braamfontein
Sponsor:
Merchantec Capital, 2nd Floor, North Block, Hyde Park Office Tower, corner 6th
Road and Jan Smuts Avenue, Hyde Park, 2196
www.omnia.co.za
Date: 28/06/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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