JSE-listed chemicals manufacturing group Omnia Holdings experienced favourable market conditions in the agriculture and mining sectors in the financial year ended March 31, including high commodity prices, which helped boost its operating profit by 123% year-on-year to R1.7-billion.

The board declared a total shareholder distribution of R1.4-billion, comprising an ordinary dividend of 275c apiece and a special dividend of 525c apiece.

The company says its latest results reflect an exceptional operating performance, which was enhanced by diligent strategic execution.

“Our renewed and integrated operating model, manufacturing excellence and optimised supply chain enabled increased agility and responsiveness to achieve increased sales volumes, while disciplined cost and working capital management further supported cash generation and enhanced profitability in a challenging macroeconomic environment,” notes CEO Seelan Gobalsamy.

Earnings before interest, taxes, depreciation and amortisation from continuing operations and excluding Zimbabwe increased by 57% year-on-year to R2.5-billion.

Headline earnings a share came to 672c, which was an 86% increase compared with the prior financial year ended March 31, 2021.

The group explains that hyperinflation remains an issue in Zimbabwe, with seasonal fluctuations in inventory, creditors and debtors impacting the monetary gain on hyperinflation. A net impact of hyperinflation on foreign exchange losses of R41-million was recognised in the financial year.

The company’s operations in Zimbabwe experienced an operating loss of R129-million in the year under review, compared with a profit of R364-million reported in the prior financial year.

In the year under review, Omnia divested from Umongo Petroleum for a cash consideration of R1-billion, which, together with improved operating cash generation across the group, resulted in a cash position of R2.4-billion at the end of the period.

However, strong cash generation was slightly offset by net working capital from continuing operations, which increased by 18% to R3.3-billion in the reporting year.

The company continues to manage its working capital cycle and introducing supply chain finance.

From a growth perspective, CFO Stephan Serfontein tells Engineering News & Mining Weekly that Omnia is focused on trialing new biological and organic products for registration in South Africa and globally, as well as developing AgTech innovations and alternative low carbon dioxide emulsion technology. He mentions that the company is growing its agricultural biological products footprint in Europe, Asia and Australia.

On the mining side, Omnia remains focused on growing in the Asian Pacific, North American and African markets, particularly in Indonesia and Canada.

The company's 5 MW solar farm, which is being constructed at a plant in Sasolburg, is due for completion towards the end of June.

This while Omnia's civil construction for a reverse osmosis plant has started and will be commissioned by the end of June.

OPERATIONS

Omnia’s Agriculture segment delivered a 44% increase in net revenue from continuing operations, excluding Zimbabwe, to R11.2-billion, and more than doubled its operating profit to R1.2-billion.  

The company explains that favourable planting conditions and higher average agriculture commodity prices led to increased sales volumes, while optimised procurement and production efficiencies supported the robust performance.

Omnia adds that logistics remain a challenge globally owing to reduced availability of shipping capacity.  

Demand for biostimulants in Australia was stable and customer demand was met despite logistics constraints. Sales into new territories in Brazil boosted revenues and margin growth from that region, while the Southern African Community Development (SADC) region benefitted from a focused market approach and a broader offering.

Distribution and administration costs, as well as a fixed price contract in Zambia, did, however, place pressure on margins in the international agriculture business.

Looking ahead, customers are expected to adopt a cautious approach to early purchasing commitments for the coming season, which, together with higher commodity prices, may require increased stock levels.

Omnia explains that these demand dynamics will be carefully monitored and production plans will be appropriately aligned to respond to changing customer needs.

Consolidation and growth initiatives that have gained momentum will be prioritised across the SADC region.

Demand for biological products and technology solutions has been stimulated by technological advancements and adoption in the agriculture sector.

Omnia is looking to capitalise on these developments and remains focused on expanding its global biostimulant footprint through new distribution channels and strategic international partnerships.

The group’s investments in increasing humates production capacity will service this demand.

Meanwhile, the mining segment delivered a 29% increase in net revenue to R6.7-billion, supported by an increase in sales volumes in South Africa and the rest of Africa and a higher ammonia price environment.

A renewed focus on operating efficiencies drove an operating profit increase of 79% year-on-year to R514-million.

Mining in South Africa, in particular, delivered a robust performance, despite a highly competitive environment and lower mining production owing to inclement weather for most of the second half of the year.

Operational efficiencies, market expansion in the surface and underground segments and gains from large customer contracts underpinned the solid performance.

Mining production in Indonesia and the SADC was also disrupted by inclement weather.

Notwithstanding the volatile macro-environment, compounded by the impact of the Russia/Ukraine conflict and global supply chain challenges, the international division ensured that security of supply was maintained.

Further, Omnia notes that the majority of a large customer contract was retained in Zambia which contributed to the increase in volumes while sustainable localised business partnership models were implemented in the rest of the SADC and a three-year contract extension was secured with the division’s largest customer in West Africa.

In Canada, trials of technology and explosives systems in the underground market were successfully run and the transitioning for a major surface contract was starting to begin operations in the new financial year.

Protea Mining Chemicals’ strong performance was supported by robust growth in the battery metals and platinum group metal markets, which reinforced demand for its specialised metallurgical chemicals and services.

Increased sales of high-performance products and solutions in export markets, demonstrated sound supply chain management and security of supply for customers.

“The mining segment remains agile and well-positioned to continue overcoming challenges to deliver its diverse and reliable product and service offering to its customers.

“Current higher metal commodity prices bode well for mining production, globally, while some countries in SADC have seen a revitalisation of their mining activities resulting in strong demand,” the company states.  

Further, net revenue from continuing operations in the Chemicals segment increased by 2% year-on-year to R3-billion and operating profit from continuing operations increased by 41% to R142-million.

Notwithstanding Covid-19-related supply chain challenges, shortages in chemicals in the second half and higher energy costs, Protea Chemicals delivered a resilient performance.

Omnia’s repositioning of the Chemicals segment in the first half of the year to focus on key strategic sectors and customer service, saw the business deliver a substantially improved performance. This was underpinned by the strength of Protea Chemicals’ supply chain capabilities, distribution footprint and ongoing transition to specialty chemicals and associated services.

Certain sectors within the business segment were affected more than others by Covid-19. The company explains that demand was maintained in the Hygiene and Health Care, Food and Pharma, and the Building and Construction sectors, while the profitability of the Agri Science business improved owing to robust demand.

The Life Science sector increased volume in the Food and Beverage subsector and a strong performance was delivered by the Watercare Solutions sector owing to increased demand for coagulants on the back of the heavy rains across South Africa.

Omnia says higher margins were supported by an improved specialty-functional chemical product mix and disciplined cost containment, which improved operational efficiencies.

After its restructure and repositioning, Protea Chemicals is now focused on specialty chemical products and solutions to deliver value for its customers across key sectors, which combined with a reliable and cost-effective supply chain, is anticipated to unlock growth.

The development of green, environment-friendly and alternative chemistries and technologies across key sectors is gaining momentum, while collaboration with partners in the hydrogen fuel cell market in the region is ongoing.

The company concludes that it will continue taking advantage of value-accretive growth opportunities, navigating headwinds and honouring commitments to stakeholders.

CHAIRPERSON INCOMING

Omnia has appointed Tina Eboka as chairperson-designate, who will succeed Ralph Havenstein effectively on September 21.

Havenstein will be retiring after serving for three years as chairperson of the group.

Eboka has served as an independent nonexecutive director of Omnia for more than six years. Her experience extends across both the private and public sectors, having served in various executive and nonexecutive roles in many industries.