Wrap Text
Unaudited Results for the Six Months Ended 30 September 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")
UNAUDITED RESULTS
for the six months ended 30 September 2017
Creating customer wealth by leveraging knowledge
Revenue down 3% to
R7 706m
Operating profit up 19% to
R488m
Profit after tax of
R285m
up 27%
Headline earnings per share
420 cents up 31%
Interim dividend
200 cents up 25%
AGRICULTURE
DECREASE
(11%)
IN REVENUE
to R3 192 million
Normalisation of the Trading business following
a poor trade in HY2017. Good production
performance. South African planting season later
than in the prior period.
INCREASE IN
113%
OPERATING PROFIT
to R111 million
MINING
INCREASE
2%
IN REVENUE
to R2 494 million
Good recovery compared to H2 2017.
Commodity cycle has turned.
INCREASE IN
21%
OPERATING PROFIT
to R337 million
CHEMICALS
INCREASE
7%
IN REVENUE
to R2 020 million
Depressed mannufacturing sector. Some good
product diversification through Protea ProcessTM
DECREASE IN
(8%)
OPERATING PROFIT
to R65 million
SUMMARY CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2017
estated
Unaudited unaudited Audited
6 months 6 months % 12 months
Rm 30 Sep 2017 30 Sep 2016 change 31 Mar 2017
Revenue 7 706 7 947 (3) 16 269
Cost of sales (5 916) (6 475) 9 (12 802)
Gross profit 1 790 1 472 22 3 467
Distribution expenses (874) (771) (13) (1 551)
Administrative expenses (491) (408) (20) (998)
Net other operating income 63 118 (47) 122
Operating profit 488 411 19 1 040
Net finance expenses (90) (97) 7 (184)
Profit before taxation 398 314 27 856
Income tax expense (113) (90) (26) (264)
Profit for the period 285 224 27 592
Attributable to:
Owners of Omnia Holdings Limited 285 221 29 593
Non-controlling interest 3 (100) (1)
Profit for the period 285 224 27 592
Earnings per share from profit attributable to
owners of Omnia Holdings Limited (cents)
Basic earnings per share 423 329 29 885
Diluted earnings per share 400 310 29 823
Headline earnings per share 420 320 31 881
Diluted headline earnings per share 397 301 32 819
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2017
Restated
Unaudited unaudited Audited
6 months 6 months % 12 months
Rm 30 Sep 2017 30 Sep 2016 change 31 Mar 2017
Profit for the period 285 224 27 592
Other comprehensive income, net of tax:
Currency translation difference 35 (276) >100 (425)
Total comprehensive income for the period 320 (52) >100 167
Total comprehensive income attributable to:
Owners of Omnia Holdings Limited 320 (55) >100 168
Non-controlling interest 3 (100) (1)
320 (52) >100 167
SUMMARY CONSOLIDATED BALANCE SHEET
as at 30 September 2017
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017
ASSETS
Non-current assets 5 118 4 722 5 009
Property, plant and equipment 4 326 4 041 4 283
Goodwill, intangible and other assets 730 606 645
Trade and other receivables 53 71 72
Deferred income tax assets 9 4 9
Current assets 9 350 8 831 7 755
Inventories 4 453 4 172 3 229
Trade and other receivables 4 055 3 979 3 096
Derivative financial instruments 50 4 55
Income tax assets 105 87 73
Cash and cash equivalents 687 589 1 302
Total assets 14 468 13 553 12 764
EQUITY
Capital and reserves attributable to the owners of Omnia
Holdings Limited 7 750 7 444 7 545
Stated capital 1 589 1 500 1 500
Treasury shares (120) (121) (120)
Other reserves 1 323 1 521 1 367
Retained earnings 4 958 4 544 4 798
Non-controlling interest (3) (7) (3)
Total equity 7 747 7 437 7 542
LIABILITIES
Non-current liabilities 829 609 831
Deferred income tax liabilities 563 563 580
Trade payables and other liabilities 119 19 98
Debt 147 27 153
Current liabilities 5 892 5 507 4 391
Trade payables and other liabilities 3 920 3 377 3 324
Debt 24 23 19
Derivative financial instruments 13 46 8
Bank overdrafts 1 935 2 061 1 040
Total liabilities 6 721 6 116 5 222
Total equity and liabilities 14 468 13 553 12 764
Net debt/(cash) 1 419 1 522 (90)
Net asset value per share (rand) 114 111 113
Capital expenditure
Depreciation 180 178 366
Amortisation 24 20 46
Incurred 335 281 817
Authorised and committed 470 142 301
Authorised but not contracted for 796 472 190
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2017
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017
Cash generated from operations before working
capital movement 723 509 1 138
(Utilised by)/generated from working capital (1 530) (1 619) 211
(Increase)/decrease in inventory (1 212) (388) 516
Increase in trade and other receivables (927) (1 049) (135)
Increase/(decrease) in trade and other payables 609 (182) (170)
Cash (utilised by)/generated from operations (807) (1 110) 1 349
Interest paid (net) (90) (97) (195)
Taxation paid (162) (131) (268)
Net cash (outflow)/inflow from operating activities (1 059) (1 338) 886
Cash outflow from investing activities (335) (271) (772)
Purchase of property, plant and equipment (226) (225) (696)
Proceeds on disposal of property, plant and
equipment 10 38
Proceeds on disposal of goodwill, intangible and
other assets 7
Additions to goodwill, intangible and other assets (109) (56) (121)
Cash outflow from financing activities (126) (155) (139)
Movement in Treasury shares 4
Debt (repaid)/raised (1) (32) 90
Dividends paid (125) (123) (233)
Net decrease in cash and cash equivalents (1 520) (1 764) (25)
Net cash and cash equivalents at beginning of period 262 310 310
Exchange rate movements on cash and cash
equivalents 10 (18) (23)
Net cash and cash equivalents at end of period (1 248) (1 472) 262
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2017
Attributable to the owners of
Omnia Holdings Limited
Non-
Stated Treasury Other Retained controlling
Rm capital shares reserves earnings interest Total
At 31 March 2016
(audited - restated) 1 500 (121) 1 787 4 446 (10) 7 602
Recognised income and
expense for the period:
Profit for the period 221 3 224
Currency translation
difference (276) (276)
Transactions with shareholders:
Ordinary dividends paid (123) (123)
Share-based payment
value of services provided 10 10
At 30 September 2016
(unaudited - restated) 1 500 (121) 1 521 4 544 (7) 7 437
Total recognised income and
expense for the period:
Profit for the period 372 (4) 368
Currency translation difference (149) (149)
Non-controlling interest buyout (8) 8
Transactions with shareholders:
Ordinary dividends paid (110) (110)
Movement in Treasury shares 1 3 4
Share-based payment
value of services provided (8) (8)
At 31 March 2017 (audited) 1 500 (120) 1 367 4 798 (3) 7 542
Total recognised income and
expense for the period:
Profit for the period 285 285
Currency translation difference 35 35
Transactions with shareholders:
Ordinary shares issued 89 (89)
Ordinary dividends paid (125) (125)
Share-based payment
value of services provided 10 10
At 30 September 2017 (unaudited) 1 589 (120) 1 323 4 958 (3) 7 747
SEGMENTAL ANALYSIS
for the six months ended 30 September 2017
Gross Gross Gross Net Net Net
revenue revenue revenue revenue revenue revenue
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017 30 Sep 2017 30 Sep 2016 31 Mar 2017
Agriculture division 3 843 4 333 9 373 3 192 3 606 8 159
Agriculture RSA 2 279 2 544 5 657 1 632 1 817 4 443
Agriculture Trading 545 808 1 331 541 808 1 331
Agriculture International 1 019 981 2 385 1 019 981 2 385
Mining division 2 495 2 455 4 383 2 494 2 453 4 378
Mining RSA 1 025 915 1 780 1 024 913 1 775
Mining International 1 470 1 540 2 603 1 470 1 540 2 603
Chemicals division 2 023 1 905 3 812 2 020 1 888 3 732
Chemicals RSA 1 795 1 764 3 552 1 792 1 747 3 472
Chemicals International 228 141 260 228 141 260
Head office and elimination (655) (746) (1 299)
Total 7 706 7 947 16 269 7 706 7 947 16 269
Net revenue excludes intercompany transactions and other items eliminated on consolidation.
Profit Profit Profit
Operating Operating Operating before before before
profit profit* profit taxation taxation* taxation
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017 30 Sep 2017 30 Sep 2016 31 Mar 2017
Agriculture division 111 52 436 78 2 355
Agriculture RSA 9 2 255 2 (24) 204
Agriculture Trading 8 (35) (10) 2 (50) (14)
Agriculture International 94 85 191 74 76 165
Mining division 337 278 454 329 271 463
Mining RSA 182 108 152 187 114 163
Mining International 155 170 302 142 157 300
Chemicals division 65 71 143 58 66 125
Chemicals RSA 36 60 123 32 56 118
Chemicals International 29 11 20 26 10 7
Head office and elimination (25) 10 7 (67) (25) (87)
Total 488 411 1 040 398 314 856
*Restated
ADDITIONAL INFORMATION
for the six months ended 30 September 2017
naudited Unaudited Audited
months 6 months 12 months
000's 30 Sep 2017 30 Sep 2016 31 Mar 2017
Weighted average number of shares in issue 67 312 67 173 66 997
Weighted average number of diluted shares in issue 71 194 71 397 72 076
Number of shares in issue (1) 67 900 67 178 67 248
(1) Excluding Treasury shares
RECONCILIATION OF HEADLINE EARNINGS
for the six months ended 30 September 2017
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017
Profit for the period attributable to owners of
Omnia Holdings Limited 285 221 593
Adjusted for:
(Profit)/loss on disposal/impairment of property,
plant and equipment (2) (6) 23
Profit on disposal of goodwill, intangibles and
other assets (7)
Insurance proceeds for replacement of property,
plant and equipment (19)
Headline earnings 283 215 590
OTHER RESERVES
as at 30 September 2017
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 30 Sep 2017 30 Sep 2016 31 Mar 2017
Foreign currency translation reserve 1 265 1 379 1 230
Share-based payment reserve 34 121 113
Gain on Treasury shares sold 21 18 21
Net discount arising on acquisition of shares of
subsidiaries 3 3 3
1 323 1 521 1 367
NOTES
BASIS OF PREPARATION
These summarised interim financial statements (interim results) 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; 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 interim results do not include all the information required by IFRS
for the full annual financial statements. The preparation of these interim results was supervised by the
Group finance director, WG Koonin CA(SA).
The interim results 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 2017, unless otherwise stated.
The accounting standards, amendments to issued accounting standards and interpretations, which are
not yet effective as at 30 September 2017, have not been adopted by the Group.
The Group has restated its financial results for the year ended 31 March 2017 in terms of IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors due to an error in the prior period.
As a result, the Group's profit for the six month period ended 30 September 2016 was reduced by
R34 million (after tax), R47 million (before tax).
The directors take full responsibility for the preparation of these interim results and the results have not
been reviewed or audited by the Group's auditors.
SEASONAL NATURE OF THE GROUP
The Group's interim results are impacted by the seasonal nature of the revenue cycle in the Agriculture
division. In southern Africa, a large portion of fertilizer is purchased and utilised during the summer
planting season which occurs from around September/October through to February. While other
geographic areas have different planting seasons, this division's geographical concentration is
approximately 62% in South Africa. The Group's main fertilizer production plant produces fertilizer
product during the off-season period and therefore inventory will be substantially higher by half year
(September) due to the stock build up compared to the full year (March), by which time the stock has
been reduced through the full year sales cycle.
Based on the business cycle, the Group's peak funding coincides with the start of the planting season
in September/October when fertilizer inventories are at the highest level in the 12 month cycle. This is
reflected in the net debt levels at September compared to March.
CONTINGENT LIABILITIES
LEGAL PROCEEDINGS
The Group is involved in various legal proceedings. As proceedings progress, management make
provision in respect of legal proceedings where appropriate. The litigation, current or pending, is not
likely to have a material adverse effect on the Group and therefore no specific adjustments have been
made in the half-year results.
GUARANTEES
Certain Group companies have guaranteed the fulfillment of various subsidiaries' obligations in terms of
contractual agreements. The Group has guaranteed the borrowing facilities and banking arrangements
of certain of its subsidiaries.
ENVIRONMENTAL PROVISIONS
The Group is continuously assessing the need and possible quantification of environmental provisions
relating to its various sites.
POST BALANCE SHEET EVENTS
UMONGO PETROLEUM
All regulatory approvals, including the South African Competition Commission, Tanzanian Competition
Commission and the South African Reserve Bank, have been received for the acquisition of a 90%
interest in Umongo Petroleum. On this basis, the necessary approvals were received prior to the
long stop date of 10 November 2017 as per the Sale and Purchase Agreement. Accordingly, the
effective date of this acquisition will be 1 December 2017 and the results of Umongo Petroleum will
be consolidated into the Group's results under the Chemicals division from this date.
FOSKOR LITIGATION MATTER
On 6 November 2017, the High Court of South Africa, Pretoria division, dismissed Foskor's appeal,
with costs. Omnia has not yet recognised the benefit of a lower production cost following this award
and will not do so until the legal process is finalised and the matter settled.
ADVANCED INITIATING SYSTEMS
In 2011 Omnia acquired a 65% interest in Advanced Initiating Systems (Pty) Limited (AIS), a blasting
and explosives distribution and service business in Australia. In terms of a call option agreement,
Omnia acquired the remaining 35% interest for A$4.4 million and the transaction was closed on
1 November 2017. The purchase consideration will be settled from cash resources. The results for
AIS will continue to be reported under the Mining International segment. For the six month period to
30 September 2017, the mark-to-market of the option resulted in a R14 million charge to the income
statement.
RESTATED SUMMARY CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2016
Restated
Unaudited unaudited
Rm 30 Sep 2016 Adjustment(1) 30 Sep 2016
Revenue 7 947 7 947
Cost of sales (6 428) (47) (6 475)
Gross profit 1 519 (47) 1 472
Distribution expenses (771) (771)
Administrative expenses (408) (408)
Net other operating income/(expenses) 118 118
Operating profit 458 (47) 411
Net finance expenses (97) (97)
Profit before taxation 361 (47) 314
Income tax expense (103) 13 (90)
Profit for the period 258 (34) 224
Attributable to:
Owners of Omnia Holdings Limited 255 (34) 221
Non-controlling interest 3 3
Profit for the period 258 (34) 224
Earnings per share from profit attributable to
owners of Omnia Holdings Limited (cents)
Basic earnings per share 380 (51) 329
Diluted earnings per share 357 (47) 310
Headline earnings per share 371 (51) 320
Diluted headline earnings per share 349 (48) 301
(1) Refer to page 11 for details about the restatement of prior year financial results
RESTATED SUMMARY CONSOLIDATED BALANCE SHEET
for the period ended 30 September 2016
Restated
Unaudited unaudited
Rm 30 Sep 2016 Adjustment(1) 30 Sep 2016
ASSETS
Non-current assets 4 722 4 722
Current assets 8 925 (94) 8 831
Inventories 4 172 4 172
Trade and other receivables 4 109 (130) 3 979
Derivative financial instruments 4 4
Income tax asset 51 36 87
Cash and cash equivalent 589 589
Total assets 13 647 (94) 13 553
EQUITY
Capital and reserves attributable to owners of
Omnia holdings Limited 7 538 (94) 7 444
Stated capital 1 500 1 500
Treasury shares (121) (121)
Other reserves 1 521 1 521
Retained income 4 638 (94) 4 544
Non-controlling interest (7) (7)
Total equity 7 531 (94) 7 437
LIABILITIES
Non-current liabilities 609 609
Current liabilities 5 507 5 507
Total liabilities 6 116 6 116
Total equity and liabilities 13 647 (94) 13 553
(1) Refer to page 11 for details about the restatement of prior year financial results
RESTATEMENT OF PRIOR YEAR'S RESULTS
For the financial year ended 31 March 2017, the prior year financial results were restated due to
the Foskor litigation and the applicable accounting treatment under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets (IAS 37). At the time of presenting the financial results for 31 March
2017, Foskor's appeal in this matter was still pending and resulted in the decision to restate the year's
results. The 31 March 2016 results were adjusted by R83 million (profit before tax) or R60 million
(profit after tax). As a result, for comparative purposes, the results for the six month period ended
30 September 2016 were reduced by R47 million (profit before tax) or R34 million (profit after tax) to
reflect the impact of this restatement.
On 6 November 2017, judgement was handed down in the High Court of South Africa, Pretoria
division, in favour of Omnia and Foskor's appeal was dismissed, with costs. Although the outcome of
the appeal was favourable for Omnia, no reversal of the previous amounts adjusted in terms of the
restatement of the financial results, was recorded in the current six month period. Omnia continues to
pursue the full settlement of this matter at which time any amount previously reversed from income,
will be adjusted for. The net amount overcharged by Foskor of approximately R300 million has not
been recorded and remains as a contingent asset as at 30 September 2017. This amount will continue
to increase to the extent that Omnia is required to pay the higher price charged by Foskor, until such
time that this matter has been finalised.
The Group estimates the current impact to be in the order of approximately R80 million (before tax) or
R58 million (after tax) for a 12 month period.
COMMENTARY
The Group's performance for the first half of the 2018 financial year is in line with expectation, with
the profit after tax increasing by 27% compared to the previous corresponding period. This increase
was driven principally by the normalisation of the Agriculture Trading business following the losses
on the large trade in Australia of R51 million in the prior period as well as a good recovery from the
Mining division compared to the immediately preceding six months. Agriculture RSA was negatively
impacted by the start of the summer planting season moving into the second half of the year, resulting
in revenue declining by 10%.
Based on the restatement of the financial results for the year ended 31 March 2016, the comparative
results for the corresponding prior period ended 30 September 2016 have been restated to reflect this
adjustment.
Revenue declined by 3% despite top line growth in Fertilizer International and the Chemicals division,
as well as marginal growth in the Mining division in a challenging environment. The gross profit margin
improved from 18.5% to 23.2% due to the negative impact in the prior year of the losses on the
Australian fertilizer trade and the NAP2 breakdown. Other income decreased in the current period by
R55 million, due to the prior period insurance recovery (net of deductibles) for the NAP2 breakdown.
Administration expenses increased by 20% driven by the costs associated with establishing various
new contracts in the Mining division, various once-off transaction costs associated with acquisitions
and share based payment revaluations. Distribution expenses increased by 13% based on increased
transport costs in line with the increase in the oil price and exchange rate.
Operating profit in the Mining division increased by 21% underpinned by various initiatives
implemented this year that improved earnings. The Agriculture division saw operating profit increase
by 113% with an underlying 11% growth rate period-on-period in Agriculture International. The
Chemicals division's operating profit decreased by 8% due to a once-off capital profit of R8.6 million
on the disposal of a property in the prior corresponding period.
All the conditions precedent relating to the Umongo Petroleum acquisition, as announced on 11 May
2017, have been fulfilled and this transaction will be effective from 1 December 2017. No amounts are
included in the current period results.
Subsequent to 30 September 2017, the Group's debt profile and facilities have been restructured to
create a better split between short and long-term funding. Total borrowings were increased to fund
the Umongo Petroleum acquisition, the construction project to build the nitrophosphate plant for the
Agriculture division and other working capital requirements.
ECONOMIC ENVIRONMENTS
On a Group basis, approximately 63% (HY2017: 63%) of revenue is earned in South Africa.
The remaining 37% is predominantly earned in Africa, Brazil and Australia.
The South African mining industry remains under significant pressure due to policy uncertainty and
the prospect of changes to the Mining Charter. Although highly contentious, until such time as these
matters are resolved it weighs heavily on investor sentiment and the future viability of the mining
industry in South Africa.
Following two difficult years commencing in late 2014, the global mining industry appears to have
bottomed out and has been gathering momentum in 2017. Over the last two quarters, growth has
been underpinned by price and volume increases in various commodities. Similarly, mining volumes
in South Africa have been increasing by approximately 1% per month over the past two quarters with
improvements in volumes mined in coal, gold, iron ore and manganese.
For most of the country, except for the Western Cape that continues to experience drought conditions,
the harsh drought conditions across South Africa and southern Africa were broken in early 2017 with
widespread rains and dams refilling to near or at capacity. As a result, the agriculture sector recorded
a record maize harvest in the 2016/17 season of 16.7 million tonnes which has resulted in depleted
levels of fertilizer and minerals in the fields. Due to the excess maize produced both locally and abroad,
the situation in South Africa is compromised by high stock levels and weak export demand. South
African maize prices remain depressed at approximately R2 000 per tonne on SAFEX which compares
to R4 500 per tonne at the peak of the drought two years ago. The low crop prices adds pressure to
farming profitability which results in margin pressure on fertilizer sales. However, expected favourable
farming conditions and generally higher soil moisture levels will increase the potential crop yields. This
in turn should support fertilizer sales volumes, farming yields and the resultant profitability of farmers.
The ammonia:urea ratio has been volatile due to global supply and demand factors, however, on
average has improved significantly from the levels experienced in prior years. In general terms,
based on the procurement/production/sales cycle for fertilizer at the Sasolburg factory, the improved
ammonia:urea ratio in the market will largely only reflect in improved margins in the second half of the
year when the bulk of the sales are made. It is expected that improved ratio levels will persist due to
fundamental changes in the supply and demand factors for ammonia and urea in international markets,
largely supported by additional ammonia capacity in the USA.
South Africa's GDP, and in particular the manufacturing sector, has shown no sign of recovery in the
six months under review nor the past few years. This continues to impact on the broader level of industrial
activity in South Africa, resulting in flat to declining sales volumes of chemicals to the manufacturing
sector. The rand:dollar exchange rate has been somewhat volatile closing at R13.52 on 30 September
2017 (R13.72: 30 September 2016). The average exchange rate for the six month period ended
30 September 2017 was R13.22 compared to R14.51 for the previous six month period.
FINANCIAL REVIEW
INCOME STATEMENT
Group revenue for the six month period decreased marginally to R7 706 million (HY2017 restated:
R7 947 million) mainly due to the weaker performance in the Agriculture division where lower sales
were as a result of the later start to the 2017/2018 summer planting season. Agriculture Trading's
revenue was considerably lower in the current period but at profitable levels compared to the higher
revenue in the prior period that included the large unprofitable trade in Australia.
Gross profit for the six month period increased by 21.6% to R1 790 million (HY2017 restated:
R1 472 million), despite the marginal decrease in revenue. The gross margin percentage increased
from 18.5% to 23.2%. The higher margin is mainly attributable to the Mining division, which continues
to rebuild on the back of new contracts awarded and increased levels of mining activity, as well as the
Agriculture division with increased sales of speciality and other fertilizer products outside South Africa.
Agriculture RSA's gross margin increased primarily due to the normalisation of the prior period effect
of the NAP2 breakdown. The Chemicals division's gross profit was marginally lower under difficult
trading conditions as a result of subdued economic performance in South Africa partially offset by
growth in the international business.
Distribution expenses for the six month period increased from R771 million to R874 million in the
current year. This 13% increase is attributable to increased capacity in the Mining division in anticipation
of new contracts as well as higher volumes and larger distribution areas in Agriculture International.
The increased oil price and exchange rates also impacted these costs.
Administrative expenses for the six month period increased to R491 million (HY2017 restated:
R408 million) representing a 20% increase when compared to the previous corresponding period.
The main contributors to this increase are new contract establishment costs in the Mining division,
acquisition related transaction costs and share based payment revaluations.
Net other operating income for the six month period decreased to R63 million (HY2017: R118 million)
representing a R55 million decrease compared to the previous corresponding period. The prior period
included R57 million insurance recovery (net of deductibles) from the NAP2 breakdown.
Operating profit for the six months of R488 million (HY2017 restated: R411 million) reflected a 19%
increase. The operating profit margin was 6.3% compared to a 5.2% margin in the prior period. The
Agriculture division increased its margin to 3.5% (HY2017: 1.4%) and the Mining division increased its
margin to 13.5% (HY2017: 11.3%), while the Chemicals division's margin reduced to 3.2% (HY2017:
3.8%). Based on the seasonality of the Agriculture business, particularly in South Africa, the margin
for the first half of the year is normally considerably lower than the expected margin for the full year.
Net finance expenses for the six month period of R90 million was down marginally compared to
R97 million for 30 September 2016, predominantly due to a slight decrease in average borrowing rates
and a reduction in average borrowings for the period.
Taxation for the six month period increased to R113 million (HY2017 restated: R90 million)
representing a 26% or R23 million increase for the period, in line with the increase in profit before tax.
The effective tax rate of 28.4% (HY2017 restated: 28.7%) was marginally lower than the prior period.
Profit for the period increased by 27% to R285 million compared to R224 million for 30 September
2016 (restated).
Total comprehensive income was higher for the period with income of R320 million (HY2017
restated: R52 million loss), due to the large prior period currency translation loss not being repeated
in the current year.
Headline earnings per share of R4.20 (HY2017 restated: R3.20) was up 31% compared to the
previous corresponding period.
BALANCE SHEET
The balance sheet continues to strengthen with total assets increasing by 7% or R915 million to
R14 468 million (HY2017 restated: R13 553 million). The increase in current assets of R519 million
was largely attributable to the following: a R281 million increase in inventories, a R98 million increase
in cash and cash equivalents and a R76 million increase in trade and other receivables. In line with
the Group's expansionary strategy, the majority of the increase in inventory is attributable to the
international business units as well as the delayed summer planting season in the Agriculture division.
The net increase in non-current assets of R396 million is largely attributable to capital expenditure of
R335 million (HY2017: R281 million) based on planned capital projects being offset by depreciation and
amortisation charges of R204 million (HY2017: R198 million). A total of R22 million has been spent on
the new nitrophosphate plant construction during the six month period under review and R66 million
on a cumulative basis since the project commenced.
Total liabilities at period end were R6 721 million (HY2017: R6 116 million), representing a R605 million
or 10% increase. Current liabilities increased by R385 million or 7% to R5 892 million (HY2017:
R5 507 million), with the current trade payables and other liabilities component increasing by
R543 million to R3 920 million (HY2017: R3 377 million) which was offset by a decrease in gross bank
overdrafts to R1 935 million from R2 061 million for the comparable period.
Non-current liabilities increased by R220 million to R829 million (HY2017: R609 million), with the
increase in long-term debt amounting to R120 million and an increase in trade payables and other
liabilities of R100 million. The increase in the long-term debt was due to the introduction of low interest
rate funding to back the financial assistance extended to emerging farmers and the increase in trade
payables and other liabilities relates to higher share based payment liabilities and deferred revenue.
Net debt decreased by R103 million to R1 419 million for HY2018 (R1 522 million for HY2017) from
the comparable period due to timing differences on working capital items.
Total equity increased to R7 747 million (HY2017 restated: R7 437 million). Stated capital increased
by R89 million due to the issuance of 652 328 new ordinary shares to settle the vested portion of the
Sakhile 2 share scheme. The remaining portions of the Sakhile 2 share scheme are scheduled to vest
until 2024.
CASHFLOW STATEMENT
Cash flow utilised by operations for the six month period decreased by R303 million to R807 million
(HY2017 restated: R1 110 million). This was mainly attributable to lower net working capital requirements
and higher profitability.
Cash outflow from investing activities for the six month period was R335 million (HY2017:
R271 million), which includes the costs capitalised in terms of the Microsoft AX Dynamics ERP
implementation project that are reflected as intangible assets on the balance sheet.
Cash outflow from financing activities for the six month period of R126 million (HY2017:
R155 million) was lower due to the reduction in repayment of debt.
DIVISIONAL REVIEW
AGRICULTURE
Omnia's Agriculture division comprises of Fertilizer RSA, Fertilizer International and
Agriculture Trading and is a market leader in its field in South Africa and southern Africa.
The Agriculture division's revenue decreased by 11% to R3 192 million (HY2017:
R3 606 million) despite 4% growth in Agriculture International driven primarily by speciality products.
Agriculture RSA's revenue reduced by 10% due to lower volumes as a result of the timing of
the planting season in the summer rain regions and the continued drought in the Western Cape.
Agriculture Trading's revenue was down 33% predominantly due to the large unprofitable fertilizer
trade in Australia in the prior period, lower maize prices and increased competition in the period
under review.
The operating margin of 3.5% is higher than the previous period's margin of 1.4% (March 2017:
5.4%). Due to the seasonality of this business, the profit from the summer rain regions in southern
Africa is only earned in the second half of the year. The 210 basis point period-on-period increase in
the operating margin was largely attributable to the normalisation of the Trading business although
partially hampered by the impact of low food commodity prices on farmers and increased competition.
Agriculture RSA's marginal operating profit of R9 million (HY2017: R2 million) was underpinned by
improved hedging strategies against the movement in the rand against the US dollar, good production
throughput and early benefits from the improved ammonia:urea ratio, offset by lower volumes
following a later summer planting season. Fertilizer demand remained strong after period end, where
volumes delivered increased considerably with the onset of the summer rains.
Agriculture International showed good growth in humates sales in Australia and Brazil, with seasonal
sales in other businesses only expected to pick up in the next couple of months.
Overall, this resulted in the current year's operating profits increasing by 113% to R111 million
(HY2017: R52 million).
MINING
Omnia's Mining division services the mining industry through BME and Protea
Mining Chemicals.
The Mining division's subdued revenue growth of 2% to R2 494 million (HY2017:
R2 453 million) was driven by the global impact of lower international ammonia prices as well as the
delayed start-up of certain contracts and the end of life terminations of other contracts that were not
renewed or extended. This was offset in part by increased sales volumes of non-electric detonators
(MegadetTM) as a result of a larger customer base. Revenue compared to the immediately preceding
six months increased by 30% which is evident of a good recovery.
The operating profit of R337 million (HY2017: R278 million) was at an operating margin of 13.5%
(HY2017: 11.3%), which increased period-on-period by 220 basis points from the previous comparative
period. Although negative pricing pressure was experienced, a concerted effort was made to minimise
product and transport costs on a unit basis, which contributed to this achievement partially offset by
the establishment costs associated with new contracts in South Africa, Africa and abroad.
CHEMICALS
The Chemicals division's main business is Protea Chemicals.
Revenue increased by 7% to R2 020 million (HY2017: R1 888 million), with a 3%
increase in volumes being sold, driven predominantly by Chemicals International and the
inclusion of new service lines. Overall, Protea Chemicals achieved a small increase in average selling
prices largely hindered by limited economic growth in South Africa.
Operating profit decreased by 8% to R65 million (HY2017: R71 million) and the operating margin
decreased by 60 basis points to 3.2% (HY2017: 3.8%). The prior period included once off capital
profits of R8.6 million relating to the sale of a property and tax incentive claims. Excluding these
items, Chemicals reported a flat performance period-on-period underpinned by a poor economic
environment. Although there were pockets of growth and increased value extraction specifically in the
Exports, Water and Customer Care businesses, this was not sufficient to offset the margin pressure
in other parts of the business.
PROSPECTS
The outlook on profitability for Agriculture customers remains a concern due to low crop prices
driven by excess local production of maize and low crop prices. On a regional basis,
the prolonged drought in the Western Cape had a limited impact on our business for the six month
period. Production at the Sasolburg factory continues to improve after the breakdown experienced in
the previous financial year and the increased demand for explosives and fertilizer in the current period
has driven down the unit cost of production. Fertilizer stock levels are in accordance with plan and
the business is well placed to service customers in the 2017/18 planting cycle. The rainfall season in
South Africa and southern Africa is expected to remain at normal levels and growth in the International
Agriculture business is expected to continue. The improved ammonia:urea ratio will support margins
for the second half of the year, however, somewhat offset by margin pressure due to the impact of
low crop prices on farming customers.
The Mining division continues to monitor the near and long-term impact of the proposed Mining
Charter in South Africa. The focus remains on growing the current business and expanding the
footprint outside of South Africa. Pricing pressure from mining customers is expected to continue, as
many set themselves aggressive cash cost targets in order to survive in a challenging environment.
The weak rand bodes well for the mining sector and Omnia at this time. The division continues its
focus on growing the electronic detonators (AXXISTM) business, especially in international markets.
The Chemicals division continues to work hard in maintaining its position in a challenging market
characterised by limited to zero growth in the South African manufacturing sector and the ongoing
decline in the mining sector. The strategy to divert the division's marketing and sales efforts away
from South Africa into Africa and the diversification of products and services has started to produce
encouraging results. The recent uptick in the price of crude oil will create some price inflation for oil
derivative products.
The Group wishes to retain its guidance given in March 2017 for operating profit margins as it pertains
to the outlook for the 2018 financial year, excluding any impact of the Umongo Petroleum acquisition
from 1 December 2017. The guidance for Agriculture is 6.0% - 8.0%, Mining is 12.0% - 14.0% and
Chemicals is 3.0% - 5.0%.
The Group's balance sheet remains robust and will change over the next six to 12 months while
additional debt is incurred to fund the acquisition, construction of the nitrophosphate plant and
additional working capital requirements. The Group has sufficient borrowing capacity and headroom to
fund the business and overall gearing and debt covenants are expected to remain at acceptable levels.
DIVIDENDS
The board has declared an interim gross cash dividend of 200 cents (HY2017: 160 cents) per ordinary
share payable out of income in respect of the six month period ended 30 September 2017. The
number of ordinary shares in issue at the date of this declaration is 68 945 680 (including 1 045 385
Treasury shares held by the Group). The gross dividend is subject to local dividends tax of 20%
(HY2017: 15%) for those shareholders to which local dividends tax is applicable. The resultant net
dividend amount is 160 cents per share for those shareholders subject to local dividends tax and
200 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 interim dividend are as follows:
Last day to trade cum dividend Tuesday, 9 January 2018
Shares trade ex-dividend Wednesday, 10 January 2018
Record date Friday, 12 January 2018
Payment date Monday, 15 January 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 10 January 2018
and Friday, 12 January 2018, both dates inclusive.
CHANGES TO THE BOARD AND COMPANY SECRETARY
Since year end, the following changes have been made to the composition of the board and company
secretary:
- RB Humphris retired as Group managing director on 31 May 2017 and was replaced by AJ De Lange
who was appointed as Group managing director on 1 June 2017
- NJ Crosse retired from the board and as non-executive chairman on 31 May 2017 and was replaced
by RB Humphris who was appointed as non-executive chairman of the board on 1 June 2017
- CD Appollis resigned as the Group's company secretary effective 30 November 2017
RB Humphris AJ De Lange WG Koonin
Chairman Group managing director Group finance director
28 November 2017
BACKGROUND INFORMATION
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 30 countries and its operations extend into 22 countries on the Africa
continent, including South Africa, with additional focused operations in Australasia, Brazil and China.
Omnia differentiates itself from 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 unique
solutions to their business needs through product and service innovation, with the expert application
thereof.
UMONGO PETROLEUM
Umongo Petroleum is a market leading business which is complementary to Protea Chemicals and
which will contribute to its product and market strategy. The addition of a bulk volume base oil, additive
and lubricant business to the Chemicals division, will broaden its current product offering and create
new opportunities to grow the business in South Africa and sub-Saharan Africa.
Executive Directors: AJ De Lange (Group managing director), WG Koonin (Group finance director)
Non-executive Directors: RB Humphris (Chairman), Prof N Binedell, RC Bowen (British), FD Butler, TNM Eboka,
R Havenstein, HH Hickey, Dr WT Marais, HP Marais (alternate), SW Mncwango, D Naidoo
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 (Pty) Ltd, 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: 28/11/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
