Tough conditions hit Omnia profit
• Economic slowdown and currency volatility weigh on revenue
Omnia, a supplier of specialised chemicals and services to the agriculture, mining and chemical industries, posted a 3% slip in revenue to R16.3bn as operating profit fell 6% to R1bn in the year to March.
Omnia, a supplier of specialised chemicals and services to the agriculture, mining and chemical industries, posted a 3% slip in revenue to R16.3bn as operating profit slid 6% to R1bn in the year to March 2017.
Profit after tax of R592m fell 8%, with headline earnings per share off 7% from previously. But despite SA’s sovereign credit downgrades, Omnia’s global rating outlook was stable, as cash generated from operations came in at R1.4bn.
However, Mish-al Emeran of Electus Fund Managers said on Tuesday it was a “disappointing set of results”.
“Our expectations were below market consensus, but Omnia surprised even our expectations on the downside,” he said. The share fell as much as 10% during the day.
The group said its balance sheet at year-end remained ungeared with net cash of R90m, although this would change after the acquisition of a 90% stake in Umongo Petroleum for R780m was concluded. Based in KwaZulu-Natal, Umongo distributes additives, base oils and related lubricant products to multinational oil majors, including Chevron.
“We’re in transition phase at the moment,” departing group MD Rod Humphris said. He was retiring effective the end of May to become nonexecutive chairman of the company from June 1. Omnia Fertilizer MD Adriaan de Lange would succeed him.
Omnia said the group had been buffeted by geopolitical events such as the US election and Brexit, along with dollar, pound and euro volatility. The recovery in commodity prices had slowed but remained steady, with fluctuations in the oil price continuing to be a dominant factor for certain chemical-related products, it said.
But the overall economic slowdown meant Omnia could not sustain price increases in the short to medium term.
“We are effectively a dollar business with firm hedging positions with respect to currencies.” He said political and economic turmoil and recent rating downgrades had hit the rand, and hit investor confidence and the cost of doing business.
“This is evident in the ongoing slowdown in the economy, and in particular the mining and manufacturing sectors, which have been under pressure for the past few years. The recent drought in SA was the worst in more than 100 years. All of this has resulted in an extremely challenging operating environment,” he said.
Humphris also said a legal dispute with state-owned agricultural raw materials supplier Foskor over pricing refunds remained uncertain. He said Foskor had long overcharged the group for phosphates.
This meant Omnia had restated its 2016 annual financial statements in accordance with international reporting standards to record that the group’s profit for that year was reduced by R60m after tax.
“Despite a high court ruling in favour of Omnia in October 2015 and a denied appeal, Foskor has chosen to lodge an appeal to the full bench of the high court,” Humphris said.
Company Comment: Page 15