Share price: R170,50 JSE code: OMN
HOLD THERE’S ONLY ONE REASON OMNIA IS not an outright buy. Two of its major businesses, mining and chemicals, are not doing that well. But it’s due to factors beyond its control; for example, CE Rod Humphris says mining operations in West Africa are under pressure, with mine closures, Ebola, and a contract that Omnia lost. Overall, softer demand pushed mining volumes down by 2,7%.
Omnia operates in 16 countries in Africa, Australia, Brazil, China and Mauritius.
Right now it’s agriculture that is driving the business. Humphris says it’s about delivering yield. It helps farmers to improve yields and their quality.
Omnia is big on technology. It uses drones to fly over and check orchards, looking for a possible lack of nutrition or moisture. Such detail maintains the high standard of the agriculture business.
In full-year results to the end of March, Omnia declared a total dividend of 490c, up 3% on the previous year. That looks a little stingy. Perhaps shareholders deserved more.
Higher production and sales volumes moved the operating margin in agriculture up to 9% (6,5%), again making the guiding target of 8% to 10%. In mining the operating margin went down to 13,5% (15,2%) and in chemicals the margin declined to 2,4% (3,8%).
When these businesses turn around — though mining may take some time — Omnia will be flying like one of its drones.
The share price has taken a hit the past year, down 26%. Yet a forward PE of 13,1 times looks attractive.