Wrap Text
Audited Results for the year ended 31 March 2017
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 2017
FINANCIAL FEATURES
Revenue down 3% to Profit after tax of
R16.3bn R592m
down 8%
Operating profit down 6% to Headline earnings per share of
R1 040m 881 cents down 7%
Profit before tax of A-CREDIT RATING
R856m affirmed by Global Credit Rating in August
down 8% 2016 at A- (long-term) and
A1- (short-term), with a stable outlook
STRONG Cash generated from operations of
BALANCE SHEET R1 349m
Ungeared balance sheet at
year-end of R90m net cash
RESTATEMENT OF Concluded the
FY2016 EARNINGS ACQUISITION OF 90% INTEREST
from R702m to R642m* IN UMONGO PETROLEUM
for R780m
* Due to an ongoing legal dispute regarding the recoverability of amounts overcharged by a third-party supplier
of raw material to the Agriculture division, which remains unresolved at this stage.
SUMMARY CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2017
Restated
Audited Audited
2017 2016 %
Rm
Revenue 16 269 16 774 (3)
Cost of sales (12 802) (13 220) 3
Gross profit 3 467 3 554 (2)
Distribution expenses (1 551) (1 554) -
Administrative expenses (998) (880) (13)
Net other operating income/(expenses) 122 (12) >100
Operating profit 1 040 1 108 (6)
Net finance expenses (184) (179) (3)
Profit before taxation 856 929 (8)
Income tax expense (264) (287) 8
Profit for the year 592 642 (8)
Attributable to:
Owners of Omnia Holdings Limited 593 641 (7)
Non-controlling interest (1) 1 >(100)
Profit for the year 592 642 (8)
Earnings per share from profit attributable to owners
of Omnia Holdings Limited (cents)
Basic earnings per share 885 953 (7)
Diluted earnings per share 823 903 (9)
Headline earnings per share 881 944 (7)
Diluted headline earnings per share 819 895 (9)
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
Restated
Audited Audited
2017 2016 %
Rm
Profit for the year 592 642 (8)
Other comprehensive income, net of tax
Currency translation differences (425) 682 >(100)
Total comprehensive income for the year attributable to:
Owners of Omnia Holdings Limited 168 1 323 (87)
Non-controlling interest (1) 1 >(100)
167 1 324 (87)
SUMMARY CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2017
Restated
Audited Audited
2017 2016 %
Rm
ASSETS
Non-current assets 5 009 4 701 7
Property, plant and equipment 4 283 4 060 6
Goodwill, intangible and other assets 645 569 13
Trade and other receivables 72 64 13
Deferred income tax assets 9 8 13
Current assets 7 755 7 617 2
Inventories 3 229 3 850 (16)
Trade and other receivables 3 096 3 084 -
Derivative financial instruments 55 67 (18)
Income tax assets 73 44 66
Cash and cash equivalents 1 302 572 >100
Total assets 12 764 12 318 4
EQUITY
Capital and reserves attributable to the owners of
Omnia Holdings Limited 7 545 7 612 (1)
Stated capital 1 500 1 500 -
Treasury shares (120) (121) (1)
Other reserves 1 367 1 787 (24)
Retained earnings 4 798 4 446 8
Non-controlling interest (3) (10) (70)
Total equity 7 542 7 602 (1)
LIABILITIES
Non-current liabilities 831 621 34
Deferred income tax liabilities 580 565 3
Trade and other payables 98 19 >100
Debt 153 37 >100
Current liabilities 4 391 4 095 7
Trade payables and other liabilities 3 324 3 606 (8)
Debt 19 45 (58)
Derivative financial instruments 8 182 (96)
Bank overdrafts 1 040 262 >100
Total liabilities 5 222 4 716 11
Total equity and liabilities 12 764 12 318 4
Net cash (Rm) 90 228
Net asset value per share (Rand) 113 113
Capital expenditure (Rm)
Depreciation 366 333
Amortisation 46 40
Incurred 817 494
Authorised and committed at year end 301 293
Authorised but not contracted for at year end 190 68
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2017
Restated
Audited Audited
2017 2016
Rm
Cash generated from operations before working capital movement 1 138 1 963
Generated from working capital 211 341
Cash generated from operations 1 349 2 304
Interest paid (195) (203)
Taxation paid (268) (245)
Net cash inflow from operating activities 886 1 856
Cash outflow from investing activities (772) (469)
Cash outflow from financing activities (139) (432)
Net (decrease)/increase in cash and cash equivalents (25) 955
Net cash and cash equivalents at beginning of year 310 (699)
Exchange rate movements on cash and cash equivalents (23) 54
Net cash and cash equivalents at end of year 262 310
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
Attributable to the owners of
Omnia Holdings Limited
Non-
Stated Treasury Other Retained controlling
capital shares reserves earnings interest Total
Rm
At 31 March 2015 as previously
reported 1 500 (70) 1 028 4 195 (11) 6 642
Recognised income and expenses
Profit for the year ended
31 March 2016 641 1 642
Currency translation
difference 682 682
Change in functional currency
of subsidiary 67 (66) 1
Transactions with shareholders
Ordinary dividends paid (324) (324)
Movement in treasury shares (51) (51)
Share-based payment - value
of services provided 10 10
At 31 March 2016 restated 1 500 (121) 1 787 4 446 (10) 7 602
Recognised income and expenses
Profit for the year ended
31 March 2017 593 (1) 592
Non-controlling interest
buyout (8) 8 -
Currency translation
difference (425) (425)
Transactions with shareholders
Ordinary dividends paid (233) (233)
Movement in treasury shares 1 3 4
Share-based payment - value
of services provided 2 2
At 31 March 2017 1 500 (120) 1 367 4 798 (3) 7 542
RECONCILIATION OF HEADLINE EARNINGS
FOR THE YEAR ENDED 31 MARCH 2017
Restated
Audited Audited
2017 2016 %
Rm
Profit for the year attributable to owners of Omnia
Holdings Limited 593 641 (7)
Adjusted for:
Loss/(profit) on disposal/impairment of property,
plant and equipment 23 (6) >100
Profit on disposal of goodwill, intangible and other
assets (7) - >(100)
Insurance proceeds for replacement of property,
plant and equipment (19) - >(100)
Headline earnings 590 635 (7)
SEGMENTAL ANALYSIS
FOR THE YEAR ENDED 31 MARCH 2017
Operating Operating
Revenue* Revenue* profit profit
2017 2016** 2017 2016**
Rm Rm % Rm Rm %
Rm
Agriculture division 8 159 8 218 (1) 438 411 7
Agriculture RSA 4 443 4 650 (5) 255 369 (31)
Agriculture Trading 1 331 1 632 (18) (10) (1) >(100)
Agriculture International 2 385 1 936 23 193 43 >100
Mining division 4 378 4 551 (4) 457 526 (13)
Mining RSA 1 775 1 875 (5) 152 253 (40)
Mining International 2 603 2 676 (3) 305 273 12
Chemicals division 3 732 4 005 (7) 145 171 (15)
Chemicals RSA 3 472 3 822 (9) 123 179 (31)
Chemicals International 260 183 42 22 (8) >100
Total 16 269 16 774 (3) 1 040 1 108 (6)
* Excludes intercompany revenue
**Restated
OTHER RESERVES
AS AT 31 MARCH 2017
Audited Audited
2017 2016
Rm
Share-based payment reserve 113 111
Foreign currency translation reserve 1 230 1 655
Gain on treasury shares sold 21 18
Net discount arising on acquisition of shares of subsidiaries 3 3
1 367 1 787
ADDITIONAL INFORMATION
FOR THE YEAR ENDED 31 MARCH 2017
Audited Audited
2017 2016
000's
Weighted average number of shares in issue 66 997 67 277
Weighted average number of diluted shares in issue 72 076 70 976
Number of shares in issue (excluding treasury shares) 67 248 67 173
RESTATED SUMMARY INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2016
Restated
Audited Adjustment Adjustment Audited
2016 (1) (2) 2016
Rm
Revenue 16 774 16 774
Cost of sales (13 369) (83) 232 (13 220)
Gross profit 3 405 (83) 232 3 554
Distribution expenses (1 400) (154) (1 554)
Administrative expenses (802) (78) (880)
Net other operating income/(expenses) (12) (12)
Operating profit 1 191 (83) - 1 108
Net finance expenses (179) (179)
Profit before taxation 1 012 (83) - 929
Income tax expense (310) 23 (287)
Profit for the year 702 (60) - 642
Attributable to:
Owners of Omnia Holdings Limited 701 (60) - 641
Non-controlling interest 1 - - 1
Profit for the year 702 (60) - 642
Earnings per share from profit attributable to
owners of Omnia Holdings Limited (cents)
Basic earnings per share 1 042 (89) 953
Diluted earnings per share 988 (85) 903
Headline earnings per share 1 033 (89) 944
Diluted headline earnings per share 979 (84) 895
RESTATED SUMMARY BALANCE SHEET
FOR THE YEAR ENDED 31 MARCH 2016
Restated
Audited Adjustment Audited
2016 (1) 2016
Rm
ASSETS
Non-current assets 4 701 4 701
Current assets 7 677 (60) 7 617
Inventories 3 850 3 850
Trade and other receivables 3 167 (83) 3 084
Derivative financial instruments 67 67
Income tax assets 21 23 44
Cash and cash equivalents 572 572
Total assets 12 378 (60) 12 318
EQUITY
Capital and reserves attributable to owners of
Omnia Holdings Limited 7 672 (60) 7 612
Stated capital 1 500 1 500
Treasury shares (121) (121)
Other reserves 1 787 1 787
Retained income 4 506 (60) 4 446
Non-controlling interest (10) (10)
Total equity 7 662 (60) 7 602
LIABILITIES
Non-current liabilities 621 621
Current liabilities 4 095 4 095
Total liabilities 4 716 4 716
Total equity and liabilities 12 378 (60) 12 318
ADJUSTMENT 1
Since 2014, the Group has been involved in a legal dispute with one of its suppliers of raw material
to the Agriculture division that has continued into the current year. The dispute relates in part to
refunds due to the Group from the supplier. In October 2015, the High Court made a ruling in favour
of the Group. Subsequently in March 2016, the supplier lodged an appeal that resulted in the ruling
being suspended and the supplier being granted leave to appeal. For the year ended 31 March 2016,
the board assessed that it was virtually certain that this income would be realised by the Group
and accordingly an asset to the value of R83 million was recognised. After having reconsidered the
events to date, the board believes that based on the pending appeal and the financial situation of the
supplier, there was insufficient evidence to prove the virtual certainty of the recovery of the amount
in accordance with the international financial reporting standard IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
Accordingly, the board believes that it is appropriate to restate the 31 March 2016 financial
statements, and more specifically the Agriculture RSA division, to derecognise the asset and to
rather disclose the receivable as a contingent asset. Accordingly, no amount is reflected on the
balance sheet at 31 March 2016 (restated) and at 31 March 2017.
The Group continues to pursue the matter through the courts to ensure that the High Court ruling
is upheld, the appeal is dismissed and the refunds paid as originally contemplated. The period to
conclude this matter and the recoverability of the amount remains uncertain.
ADJUSTMENT 2
In the prior year, certain distribution and administrative expenses were incorrectly classified in cost
of sales. This error in the 31 March 2016 financial statements has been restated.
NOTES
BASIS OF PREPARATION
These summarised financial statements (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 Listings Requirements of JSE
Limited and the requirements of the Companies Act of South Africa, Act 71 of 2008, as amended.
The summarised financial statements do not include all of the information required by IFRS for the 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 annual financial statements for the
year ended 31 March 2016, unless otherwise stated.
The accounting standards, amendments to issued accounting standards and interpretations, which are
not yet effective as at 31 March 2017, have not been adopted by the Group.
The Group has restated its financial results for the year ended 31 March 2016, in terms of IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors, for two errors in the prior year. The
Group's profit for the year ended 31 March 2016 reduced by R60 million (R83 million pre-tax).
The directors take full responsibility for the preparation of this summarised report 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 full
financial statements for the year ended 31 March 2017. The audit was conducted in accordance with
International Standards on Auditing. They have issued an unmodified audit opinion. This summarised
report has been derived from the audited Group financial statements and is consistent in all material
respects with the audited Group financial statements, but is not itself audited. A copy of their audit
report is available for inspection at the Group'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 chemical 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 kilometers south of
Johannesburg. The Group has a physical presence in 24 countries and its operations
extend into 18 countries on the African continent, including South Africa, with additional focused
operations 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 deploying the Group'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 enables 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. Omnia
continues to offer 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 global economy continues to experience difficulties with geo-political events and in particular
the extensive number of countries that had elections in the past year. The impact on the major
currencies has been demonstrated in the volatility of the US dollar, pound and euro.
The recovery in commodity prices has slowed but remains steady for now. The fluctuations in the oil
price continues to be a dominant factor in global economics and more specifically for Omnia, which
created a knock-on effect in terms of certain chemical related products. The slowdown in global
economic activity remains a key driver for the demand of the various commodities and therefore,
the inability for a sustained increase in prices for Omnia's products to materialise in the short to
medium term.
SOUTH AFRICAN ECONOMIC ENVIRONMENT
South Africa continues to struggle under the weight of political and economic turbulance which
culminated in various rating downgrades in recent months.
The impact on the currency, investor confidence and the cost of doing business in South Africa
is problematic for businesses and consumers alike. This is evident in the ongoing slowdown in
the mining and manufacturing sectors, which have been under pressure for the past few years.
South Africa officially entered into a recession in the first quarter of 2017, the first time in 14 years.
Inflation remains high around the upper end of the target range of 3%-6% as set by the South
African Reserve Bank and imported inflation continues to be driven through the economy resulting
in uncompetitive higher operating costs.
The recent drought in South Africa was the worst in more than one hundred years. Widespread
rains, in late 2016, brought welcome relief to farmers and the country except for the Western Cape
which continues to experience a severe drought, with precariously low levels of water in dams to
sustain the situation.
FINANCIAL REVIEW
INCOME STATEMENT
Group revenue decreased marginally to R16 269 million (2016: R16 774 million) based on a weaker
performance from the Mining and Chemicals divisions due to a general slowdown in those sectors.
Revenue in the Agriculture division remained relatively flat with excellent growth in the International
Agriculture division which offset the lower revenue in Agriculture Trading as a result of the once-off
large trade in Australia in the prior year that was not repeated in the current year.
Gross profit decreased by 2% to R3 467 million (2016 restated: R3 554 million). The gross margin
percentage remained unchanged at 21% compared to FY2016 (restated).
Distribution expenses remained flat at R1 551 million (2016 restated: R1 554 million), with some
higher volumes being offset by lower pricing.
Administrative expenses of R998 million (2016 restated: R880 million) was 13% higher year-on-year.
Overheads increased in the Mining division on the back of new products, technologies, territories and
contracts.
Other operating income/expenses of R122 million income (2016: R12 million expense) includes
insurance claims of R81 million relating to the Sasolburg's nitric acid plant 2 (NAP2) loss of income and
other inventory claims, and R24 million for a rehabilitation provision in the Agriculture division. Foreign
exchange gains of R46 million (2016: R53 million loss) were largely driven by the stronger SA rand
exchange rate against the US dollar at year-end. Amortisation of intangible assets of R46 million (2016:
R40 million) includes the amortisation cost in respect of the portion of the new Microsoft Dynamics AX
ERP system that commenced operating during the year.
Operating profit of R1 040 million (2016 restated: R1 108 million) was down 6% year-on-year.
The Agriculture division showed an increase of 7% in operating profit to R438 million (2016:
R411 million), driven by strong growth in the international business that was partially offset by costs
relating to the deductible period when the NAP2 plant was not operational and a lower cost recovery
from the Mining division on the back of lower volumes. The Mining division returned a lower
operating profit of R457 million (2016: R526 million), down 13% year-on-year with lower volumes
linked to the low point in the mining cycle, as well as higher overheads. The Chemicals division's
operating profit of R145 million (2016: R171 million) was 15% lower year-on-year due to subdued
growth in the industrial manufacturing sector and lower oil and commodity prices.
Operating profit margin of 6.4% (2016 restated: 6.6%) for the year under review was marginally
lower year-on-year, with the comparison of the divisional operating margins in percentage terms being
mixed. The Agriculture division was up at 5.4% (2016: 5.0%), the Mining division was down at 10.4%
(2016: 11.6%) and the Chemicals division down at 3.9% (2016: 4.3%).
Net finance expenses of R184 million (2016: R179 million) increased marginally year-on-year.
Finance expenses of R251 million (2016: R239 million) are net of the capitalisation of R11 million
(2016: R24 million) of interest costs relating to capital projects under construction during the
year. Finance income of R67 million (2016: R60 million) increased as a result of higher cash
balances on hand.
Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) was 2% lower at
R1 452 million (2016 restated: R1 481 million).
Profit before tax of R856 million (2016 restated: R929 million) was R73 million or 8% lower
year-on-year.
Taxation of R264 million (2016 restated: R287 million) decreased by 8% or R23 million year-on-
year. The effective tax rate of 30.8% (2016 restated: 30.9%) remained higher than normal, with mix
of profits favouring higher tax rate jurisdictions.
Profit after tax of R592 million (2016: restated R642 million) was 8% lower year-on-year, underpinned
by lower operating profit offset by tax savings, which is commendable under the tough macro-
economic environment and prevailing weather conditions.
Total comprehensive income was lower year-on-year at R167 million (2016 restated: R1 324 million),
due to a stronger rand at year-end decreasing the foreign currency translation reserve by R425 million
compared to a weaker rand in 2016 increasing the reserve by R682 million. The majority of the
foreign-currency translation reserve relates to the revaluation of the US dollar denominated equity.
At year-end, the rand strengthened compared to the US dollar by 9% from R14.72 at 31 March 2016
to R13.38 at 31 March 2017.
Headline earnings per share of R8.81 (2016 restated: R9.44) was down 7% year-on-year.
LONG-TERM INCENTIVE PLAN CHARGES
The current year's long-term incentive plan (LTIP) charges amounted to R14 million (2016: R1 million
income) and was made up as follows: R1 million reversal (2016: R3 million) for the cash and equity-
settled Partnership with Management 5 Share Scheme, R10 million (2016: R10 million reversal) for
the Share Appreciation Rights Scheme due to the year-on-year increase in the Omnia share price and
R5 million (2016: R6 million) for the equity-settled Sakhile 2 Scheme.
FINANCIAL REVIEW
BALANCE SHEET
The balance sheet continues to strengthen with total assets increasing by 4% or R446 million to
R12 764 million (2016 restated: R12 318 million). The increase in current assets of R138 million was
largely attributable to the R730 million increase in cash and cash equivalents which could not be offset
against Group overdrafts with other financial institutions at year end. This was partially offset by the
R621 million decrease in inventory, predominantly in the Agriculture division, where the high volume
of stock on hand at the end of FY2016 was reduced in line with the strategy to mitigate the effect
of the drought. The net increase in non-current assets of R308 million is largely attributable to the
capital expenditure of R817 million (2016: R494 million) based on planned capital projects offset by
depreciation and amortisation charges of R412 million (2016: R373 million).
Total liabilities at financial year-end were R5 222 million (2016: R4 716 million), up R506 million or
11%. Current liabilities increased by R296 million or 7% to R4 391 million (2016: R4 095 million),
with trade and other payables decreasing by R282 million to R3 324 million (2016: R3 606 million)
and gross bank overdrafts increasing to R1 040 million from R262 million.
Non-current liabilities increased by R210 million to R831 million (2016: R621 million), with the
increase in long-term debt of R116 million due to the introduction of third party low interest rate
funding to back the financial assistance extended to emerging farmers.
Net debt was eliminated at year-end with the net cash position of R90 million (2016: R228 million)
resulting in a debt free balance sheet at year-end.
Total equity decreased to R7 542 million (2016 restated: R7 602 million) comprising net profit after
tax of R592 million offset by a decrease in the foreign currency translation reserve of R425 million and
dividends paid of R233 million.
CASH FLOW STATEMENT
Cash flow generated from operations reduced by R955 million to R1 349 million (2016 restated:
R2 304 million) with the year-on-year decrease largely attributable to the net cash funding released
in FY2016 for working capital which normalised in FY2017 and the impact of foreign currency
movements. Slower paying customers in the current economic environment also impacted the
cash flow generated from operations. Management have various credit risk mitigation strategies
in place to deal with this risk.
Cash outflow from investing activities of R772 million (2016: R469 million) was higher due to the
increase in expenditure on major capital projects, which remained in line with the business plan.
Cash outflow from financing activities of R139 million (2016: R432 million) was lower due to
the year-on-year reduction in dividends declared and the resultant decreased dividend payments of
R233 million (2016: R324 million), the net proceeds from debt amounting to R90 million, including
the low-cost funding relating to emerging framers and no purchases (2016: R51 million) of treasury
shares for share incentive schemes during the year.
The net decrease for the year of R48 million in cash and cash equivalents to R262 million,
resulted in a reduction of the net cash position from R228 million to R90 million.
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, which Omnia calls the "science
of growing". This is Omnia's business philosophy and involves more than just selling fertilizer to
farmers it is about optimising yield and crop quality to maximise returns while reducing farming
and environmental risk. Achieving this, entails becoming intricately involved in the producers'
business to better understand their objectives and targets. Nutriology also includes cutting-edge
research and development that results in 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 customer wealth by leveraging knowledge.
Omnia Fertilizer services the South African market through regional sales offices, 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 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's revenue decreased by 1% to R8 159 million (2016: R8 218 million) on
the back of a 10% increase in total volumes sold. South Africa's volumes increased by 2.5% while
record sales volumes were noted for speciality fertilizers both locally and internationally.
The total operating profit margin of 5.4% is higher than the previous year's margin of 5.0% (restated),
but was below the current year's target of between 7.0% and 9.0%. The 40 basis point year-on-
year increase in margin was largely attributable to solid growth in all international businesses and
improved hedging strategies against the movement in the SA rand against the US dollar. Overall,
this resulted in the current year's operating profits increasing by 7% to R438 million (2016 restated:
R411 million). Margins in South Africa were lower than anticipated on the back of lower production
volumes due to the slowdown experienced by the Mining division and the impact of the NAP2
breakdown. In addition, the purchase price of a key raw material used in the production of fertilizer
was higher than the Competition Tribunal's confirmed rates. This remains the subject of a long
running legal dispute, and negatively impacted the margin in the current and prior year, as per the
restated results.
Despite difficult market conditions the Agriculture Trading segment showed solid volume growth
from South Africa that were negated by the once off loss in Australia, that negatively affected the
overall margins. The prior year stock position in Australia has now been closed out in full and the
trading results of this business will normalise going forward. In isolation, the operating loss of the
trading business resulted in a 120 basis points reduction in the overall operating margin of the
Agriculture division, from 6.6% to 5.4%.
Net working capital decreased by 23% to R1 506 million (2016: R1 953 million) predominantly due
to lower inventory in South Africa after reducing the excess volumes of stock on hand at 31 March
2016 following the drought and lower production in FY2017 due to the NAP2 breakdown.
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; produces electronic delay detonators and shocktube initiating systems; supplies
its own range of explosive boosters and manufactures packaged explosives for underground
mining and specialised surface blasting operations. BME adds value to these products through its
world-class blasting consultancy service and the use of in-house designed blasting software and
detonators. 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.
Protea Mining Chemicals provides a suite of value-added services to complement a wide range of
chemicals and reagents supplied for use by processing plants on mines in South Africa and Africa.
This includes Protea Process, a comprehensive service that covers the design of equipment,
logistics, on-site management and make up of chemicals and reagents.
The Mining division's total revenue decreased by 4% to R4 378 million (2016: R4 551 million) despite
a 3% increase in volumes. FY2017 was a challenging year for the mining industry, with lower
volumes due to mine closures in South Africa and business lost in Botswana and Namibia. Zambia
volumes increased significantly with the start of a new copper contract that ramped up ahead of
schedule. Bulk volumes increased by 8% but revenue decreased by 9% due to lower prices, partially
due to a strategy to retain key clients' business. Sales prices were negatively affected by the lower
international ammonia price, a key raw material in the production of blasting emulsion. AXXIS?
electronic detonator volumes grew substantially, reflecting the inroads in developing the market for
this high-end blasting detonator. Progress continues to be made into new markets in mining and
construction in South America and the Far East. Lower commodity prices and cost pressures have
continued to put the industry under significant pressure.
Mining Chemicals was able to maintain their volumes sold but continued to see a downturn in the
uranium sector where low uranium prices have resulted in a reduction in the volumes mined. The
outlook for this commodity remains weak.
The operating profit of R457 million (2016: R526 million) was at an operating margin of 10.4%
(2016: 11.6%), which was 120 basis points down on the previous year. This is below the current
year's guidance of 12.0%-14.0%. The negative political climate has resulted in most
mining companies consolidating their position, reducing or restructuring debt and delaying or
deferring capital expenditure and projects. A number of initiatives relating to raw material cost
reduction and increased volumes of AXXIS sales, assisted the gross margin while the
introduction of new technologies, products and geographics increased overheads. These
investments are essential for the future and as the volumes increase, there will be a steady
improvement in overhead recoveries and profitability. Further success in West Africa includes the
extension of certain contracts and the award of a new large scale contract in the gold sector, this
follows the down turn in mining activity in this region in FY2015 due to the lower gold price.
Net working capital was well controlled, however increased to R933 million (2016: R842 million),
due to the financing of growth in Zambia, with the start of the new contracts and an increase
in imported inventory for detonators and accessories.
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 Protea'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 7% to R3 732 million (2016: R4 005 million) with an 8% reduction in
volumes sold due to the subdued manufacturing sector and drought affecting the animal feeds
sector. Overall, Protea Chemicals achieved a small increase in average selling prices, mostly due
to a change in mix. Operating profit decreased by 15% to R145 million (2016: R171 million). The
operating margin decreased by 40 basis points to 3.9% (2016: 4.3%), but was within the current
year's target of 3.5% - 4.5%. The lower volume throughput, along with the impact of lower
crude oil and commodity prices on the average unit selling price achieved, has resulted in an overall
decrease in operating margin despite a contained expense base.
Net working capital was well controlled, however increased to R563 million (2016: R533 million)
due to the division's Africa growth.
PROSPECTS
The domestic and international Agriculture businesses are poised for a challenging performance
going forward, notwithstanding the drought receding across South Africa and southern Africa and
continuing to benefit from gains made in establishing new fertilizer markets in the previous year.
The 2017 financial year saw a record maize crop of 2.6 million hectares and 15.7 million tonnes
(2016: 1.9 million hectares and 7.8 million tonnes), with the white and yellow maize prices peaking
at around R5 100 per tonne and R4 000 per tonne respectively. This was significantly higher than
the current forward price for delivery in March 2018, which is down to R1 880 per tonne for white
maize and R1 998 per tonne for yellow maize. This is a considerable reduction which will impact
the profitability of our customers in the forthcoming year. The demand for fertilizer is expected to
remain stable to positive for the year ahead with farmers needing to replenish nutrients in the soils
following higher yielding crops in the past year. The Agricultural division will continue to pursue the
legal matter pertaining to the supplier of a key raw material, mentioned earlier, through the courts to
ensure that the High Court ruling is upheld, the appeal is dismissed and the refunds paid as originally
contemplated.
The recovery of the mining sector continues with prices remaining in a stable range and trending
upwards in certain commodities. Volumes mined are showing modest increases and this bodes
well for the recovery of our Mining division. Pricing remains competitive and customers continue
to place a premium on service and quality. BME continues to experience a strong recovery outside
South Africa, with a combination of increased volumes under existing contracts and new business
secured. The expansion of BME's global footprint into South America continues to gain traction
with further volumes likely to be secured in the near term. Following the installation of several
automated production lines at the Fochville factory, the ongoing improvement in production quality
of our non-electric and electronic detonators has made a meaningful contribution to the business.
Development of the third generation of the AXXIS electronic detonator continues. Sales of the
underground portable emulsion system continue to gain momentum providing further opportunity
to expand in the underground mining sector. Increased sales of emulsion products are positive for
the Agriculture division, resulting in higher throughput volumes at the NAP1 and NAP2 production
plants and resulting in overall lower unit costs from the Sasolburg factory.
Protea Mining Chemicals continues to perform above expectation as it increases its footprint in
regional Africa and is expected to have another year of growth. However, the impact of softer
uranium prices may potentially weigh down on the overall performance.
The Chemicals division continues to work hard in maintaining its position in a challenging market
with limited to no growth in the manufacturing sector. This remains a leading indicator of the overall
health of the South African economy that has stayed stagnant for the past decade. The strategy to
divert the division's marketing and sales efforts away from South Africa to neighbouring countries
and throughout Africa has started to produce encouraging results. Further developments
beyond Protea Chemicals' existing operations will continue to be explored, in order to allow for
sustainable growth in the geographic areas within which the division operates and the broader
chemicals distribution sector. Pressure on margins and volumes remain key factors in the overall
performance of this business.
The Group wishes to update the guidance given in September 2016 for operating profit margins as
it pertains to the outlook for the 2018 financial year. The guidance for Agriculture has been lowered
to 6.0% - 8.0% due to the impact of the legal claim resulting in higher costs, Mining is unchanged
at 12.0% - 14.0% and Chemicals is unchanged at 3.5% to 4.5%.
The business development team has been successful in concluding the acquisition of a 90% interest
in Umongo Petroleum for R780 million. The Umongo transaction adds base oils, additives and
lubricants as a key segment to the Chemicals division and provides excellent growth opportunities
going forward. Closing of the transaction remains subject to Competition Commission approval.
Other potential opportunities continue to be evaluated.
The board recently approved the construction of a new nitrophosphate plant at the Sasolburg factory
that will allow for significant expansion of Omnia Fertilizer's nitrophosphate production capacity.
The plant has many benefits which include: lower cost of supply, security of supply, agronomic
and environmental benefit that will allow for opportunities for further differentiation and value-add
on farms. The proven in-house developed Nitrophos technology, results in a lower supply cost as
the business backward integrates into using phosphate rock as a source of phosphates in fertilizer
production, rather than the more-expensive downstream products currently purchased, such as
phosphoric acid and monoammonium phosphate (MAP) or diammonium phosphate (DAP). Supply
and price risk will be reduced as phosphate rock can be sourced competitively from various suppliers
around the world. Construction has commenced and is scheduled for completion in the first quarter
of the 2019 calendar year, prior to the commencement of the ramp up of production for the 2019
planting season.
The Group's balance sheet remains robust with a positive cash position reported for the second year
in a row. The net cash position is expected to continue to increase as market conditions improve
and the underlying assets continue to generate higher levels of profitability and cash flow, before
taking into account the cost to finance the acquisition of Umongo and the construction of the
nitrophosphate plant.
DIVIDENDS
The board has declared a final gross cash dividend of 180 cents (2016: 180 cents) per ordinary
share payable from income in respect of the year ended 31 March 2017. Together with the interim
dividend of 160 cents (2016: 180 cents) per share, this provides shareholders with a total dividend
this financial year of 340 cents (2016: 360 cents) per ordinary share. The number of ordinary
shares in issue at the date of this declaration is 68 293 352 (including 1 045 385 treasury shares
held by the Group). The gross dividend is subject to local dividends tax of 20% (2016: 15%) for
those shareholders to which local dividends tax is applicable. The resultant net dividend amount is
144 cents per share for those shareholders subject to local dividends tax and 180 cents per 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, 11 July 2017
Shares trade ex-dividend Wednesday, 12 July 2017
Record date Friday, 14 July 2017
Payment date Monday, 17 July 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 12 July 2017
and Friday, 14 July 2017, both dates inclusive.
CHANGES TO THE BOARD
Professor Stephanus Loubser retired as an independent non-executive director with effect from
1 December 2016. Professor Nick Binedell was appointed as an independent non-executive
director on 24 February 2017.
Neville Crosse retired as non-executive director and chairman and Rod Humphris retired as Group
managing director on 31 May 2017. Rod Humphris remains on the board as a non-executive
director and has been appointed as chairman with effect from 1 June 2017. Adriaan de Lange has
been appointed as executive director and Group managing director with effect from 1 June 2017.
RB Humphris AJ de Lange WG Koonin
Chairman Group managing director Group finance director
27 June 2017
Directors: Prof N Binedell, RC Bowen (British), FD Butler, AJ De Lange* (Group managing director), TNM Eboka,
R Havenstein, HH Hickey, RB Humphris (Chairman), WG Koonin* (Group finance director), 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: +27 (11) 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
http://WWW.OMNIA.CO.ZA
Date: 27/06/2017 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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