| Wed 26 Nov 2008, 8:00 | | OMN - Omnia - Interim results for the six months ended 30 September 2008 |
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OMN
OMN
OMN - Omnia - Interim results for the six months ended 30 September 2008
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code: OMN
ISIN: ZAE000005153
("Omnia" or "the Group")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
HIGHLIGHTS
- Revenue up 78% to R5,5 billion
- Operating profit up 209% to R594 million
- Headline earnings per share up 281% to 839 cents
- Interim dividend of 100 cents per share declared
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2008
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 % 30/09/07 31/03/08
Revenue 5 454 78 3 061 7 340
Operating profit 594 209 192 584
Net finance cost (61) (45) (112)
Interest paid (65) 48 (44) (143)
Interest received 2 100 1 25
Forex gain/(loss) 2 (2) 6
Profit before taxation 533 263 147 472
Taxation (160) 220 (50) (159)
Net profit for the period 373 285 97 313
Attributable to:
Equity holders of the 372 284 97 317
Company
Minority interest 1 - (4)
373 97 313
Basic earnings per share 839,0 281 220,3 718,2
(cents)
Fully diluted basic 803,5 268 218,3 687,9
earnings per share (cents)
Final dividend paid per 117 30 90 90
share (cents) in respect
of prior year
Interim dividend declared 100 20 83 83
per share (cents) in
respect of current year
Weighted average number of 44 285 44 038 44 132
shares in issue (`000)
Weighted average number of 46 241 44 448 46 073
fully diluted shares in
issue (`000)
Number of shares in issue 44 321 44 189 44 263
(`000)
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 September 2008
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 30/09/07 31/03/08
Assets
Property, plant and equipment 1 025 819 965
Intangible assets 507 429 517
Available-for-sale financial 30 - 30
assets
Deferred taxation 3 3 8
Inventories 2 855 1 446 1 380
Trade and other receivables 1 937 1 373 1 457
Other current receivables 44 33 82
6 401 4 103 4 439
Equity and liabilities
Shareholders` equity 1 915 1 291 1 581
Deferred taxation 103 91 104
Non-current liabilities 350 258 288
Trade and other payables 2 728 1 474 2 142
Taxation 69 31 79
Other current liabilities 1 236 958 245
6 401 4 103 4 439
Net interest-bearing debt 1 542 1 184 451
Net asset value per share (Rand) 43,2 29,2 35,7
Capital expenditure
Depreciation 43 28 71
Amortisation 12 10 21
Incurred 93 86 284
Authorised and committed 34 124 -
Authorised but not contracted for 134 77 102
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2008
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 30/09/07 31/03/08
Operating profit 594 192 584
Depreciation and amortisation 54 38 92
Adjustment for non-cash items (17) (31) 11
Utilised in working capital (1 369) (889) (138)
(738) (690) 549
Interest paid (65) (44) (143)
Interest received 2 1 25
Taxation paid (167) (61) (134)
Dividends paid (55) (39) (76)
(Utilised)/generated by operations (1 023) (833) 221
Cash outflow from investing (83) (86) (413)
activities
Cash inflow from financing activities 17 228 323
Net (decrease)/increase in cash (1 089) (691) 131
Net overdraft at beginning of period (103) (234) (234)
Net overdraft at end of period (1 192) (925) (103)
OTHER RESERVES
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 30/09/07 31/03/08
Share-based payment reserve 63 31 45
Foreign currency 75 (16) 79
translation reserve
Net discount arising on acquisition 3 3 3
of shares of subsidiaries
141 18 127
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 30/09/07 31/03/08
Net profit for the year 372 97 317
Loss on disposal - - 2
of fixed assets
Impairment of assets - 2 -
Headline earnings 372 99 319
Headline earnings
Headline earnings are 839,0 cents per share (2007: 224,5 cents per share)
Diluted headline earnings are 803,5 cents per share (2007: 222,4 cents per
share)
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Ordinary
shareholders`
equity
Stated Treasury Other
R million capital shares reserves
At 31 March 2007 (audited) 201 (16) 36
Recognised income and expenses
Net profit for the period
Decrease in foreign currency
translation reserve (30)
Share-based payment reserve 12
Transaction with shareholders
Ordinary dividends paid
Treasury shares sold 1
At 30 September 2007 (unaudited) 201 (15) 18
Recognised income and expenses
Net profit for the period
Increase in foreign currency
translation reserve 95
Share-based payment reserve 14
Transaction with shareholders
Ordinary dividends paid
Treasury shares sold 2
At 31 March 2008 (audited) 201 (13) 127
Recognised income and expenses
Net profit for the period
Decrease in foreign currency
translation reserve (4)
Share-based payment reserve 18
Transaction with shareholders
Ordinary dividends paid
Treasury shares sold 3
Movement in minorities
At 30 September 2008 (unaudited) 201 (10) 141
Retained Minority
R million earnings interest Total
At 31 March 2007 (audited) 1 027 2 1 250
Recognised income and expenses
Net profit for the period 97 97
Decrease in foreign currency
translation reserve (30)
Share-based payment reserve 12
Transaction with shareholders
Ordinary dividends paid (39) (39)
Treasury shares sold 1
At 30 September 2007 (unaudited) 1 085 2 1 291
Recognised income and expenses
Net profit for the period 220 (4) 216
Increase in foreign currency
translation reserve 95
Share-based payment reserve 14
Transaction with shareholders
Ordinary dividends paid (37) (37)
Treasury shares sold 2
At 31 March 2008 (audited) 1 268 (2) 1 581
Recognised income and expenses
Net profit for the period 372 1 373
Decrease in foreign currency
translation reserve (4)
Share-based payment reserve 18
Transaction with shareholders
Ordinary dividends paid (55) (55)
Treasury shares sold 3
Movement in minorities (1) (1)
At 30 September 2008 (unaudited) 1 585 (2) 1 915
SEGMENTAL ANALYSIS
for the six months ended 30 September 2008
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/08 % 30/09/07 31/03/08
Revenue, net of 5 454 78 3 061 7 340
intersegmental sales
Chemicals 2 294 52 1 509 3 334
Mining 1 006 73 581 1 281
Agriculture 2 154 122 971 2 725
Operating profit 594 209 192 584
Chemicals 156 160 60 148
Mining 126 125 56 125
Agriculture 312 311 76 311
Notes
Accounting policies
The consolidated condensed financial statements for the six months ended 30
September 2008 were prepared in accordance with International Financial
Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting and in
compliance with the Listing Requirements of the JSE Limited. The consolidated
condensed interim financial statements do not include all of the information
required by IFRS for full annual financial statements.
The principal policies used in the preparation of the results for the six months
ended 30 September 2008 are consistent with those applied in the annual
financial statements for the year ended 31 March 2008.
Dividends
A final dividend of 117 cents per share was declared on 13 June 2008 in respect
of the earnings of the previous financial year. This dividend is reflected in
the current period to 30 September 2008.
Commitments
The future minimum lease payments under non-cancellable operating leases are R22
million (2007: R24 million) within one year and R17 million (2007: R38 million)
between two and five years and R1 million (2007: R2 million) beyond five years,
giving a total of R40 million (2007: R64 million).
INTRODUCTION
Omnia is a diversified, specialist chemical services provider with business
interests balanced across chemical, mining and agricultural markets. It is
fundamentally a knowledge business, which leverages its leading intellectual
capital and world-class production assets to differentiate its product and
service offerings. Omnia`s unique business model creates extraordinary value for
its customers, and builds long-term customer relationships, ensuring
maximisation of shareholder value.
All three of Omnia`s business divisions, which are diversified into three
different markets, achieved revenue growth in excess of 50% for the period under
review to September 2008, when compared with the period to September 2007 mainly
driven by a weaker rand on the back of steeply rising international prices.
Market conditions
Omnia continued to experience exceptional market conditions in the period under
review. The extraordinarily high prices for those raw materials of key
importance in the Group`s manufacturing processes, as well as for a wide range
of basic commodities of similar importance, continued to exert considerable
market influence.
In the Chemicals division, the unprecedented oil and gas prices similarly drove
both commodity and speciality chemical prices upwards, while the weakening rand
resulted in increased revenue.
In the Mining division, although metals pricing started to decrease in the
period under review, demand for coal, copper, uranium and iron ore remained
robust, and in consequence mining activity during the period was healthy. This
benefited demand for explosives and related products and services, as well as
the Group`s expanding range of mining chemicals.
The dominant contributor to Group profit was the Agriculture division. This is
due to imbalances in supply and demand during the period under review, which saw
internationally determined fertilizer raw material prices reach unprecedented
highs. This resulted in Omnia`s fertilizer input costs being driven to similar
unprecedented highs, and concomitant higher fertilizer prices.
Many of the Agriculture division`s customers, mindful of international market
conditions and recognising the inevitable rise in fertilizer prices arising
therefrom, purchased and paid for their requirements earlier than usual, and in
so doing fixed their price. Volumes sold during the period under review were
greater than normal as a result of these early sales. As a consequence the
margin achieved in the period was also greater than normally achieved in the
first half of a financial year. This will impact on fertilizer sales (and
margin) during the second half of the financial year which is the normal
planting season.
The Agriculture division`s activities beyond the borders of South Africa fared
well, particularly in Australasia, contributing considerably to the increase in
operating profits.
The economic and financial crisis resulted in a sharp drop in commodity prices
and demand after the period under review, however the long term fundamentals of
all the divisions, particularly the Agriculture division, remain strong.
Financial review
Group revenue increased by 78% to R5,5 billion (2007: R3,1 billion). Operating
profit increased by 209% to R594 million (2007: R192 million). The operating
margin increased to 10,9% (2007: 6,3%) with margins in all three divisions
improving to acceptable levels. Net profit for the period increased by 283% to
R373 million (2007: R97 million), led by the solid contribution from
Agriculture, and supported by increases in operating profits in excess of 120%
from the Chemical and Mining divisions.
The seasonal nature of Omnia`s Agriculture division causes the Group`s working
capital requirements to peak around September each year. As mentioned, raw
material prices - notably ammonia, urea, potash, phosphates and oil derived
products - continued their upward spiral to new highs. This resulted in net
interest bearing debt increasing by 30% to R1,5 billion (2007: R1,2 billion). As
a consequence, and coupled with increases in interest rates, net interest paid
increased by 48% to R63 million (2007: R43 million) for the period under review.
This interest charge is, however, lower than expected because numerous
Agriculture division`s customers in South Africa purchased and paid for their
fertilizer requirements in advance of actual requirement.
With the increase in shareholders` equity to R1,9 billion (2007: R1,3 billion)
the debt: equity ratio reduced to 80% (2007: 92%) when compared with the prior
period. Cash utilised by operations for the period under review increased by
R190 million to R1 023 million (2007: R833 million), mainly due to the increase
in working capital of R480 million when compared with the prior period.
Operational review
Chemicals
The division, comprising Protea Chemicals and Zetachem, is the leading
speciality, functional and effect chemicals distributor in southern Africa. It
has a significant presence in every sector of the chemical distribution market.
Zetachem is a significant producer of speciality chemicals and provides
innovative solutions for the water treatment industry.
Revenue increased 52% to R2 294 million (2007: R1 509 million). While part of
the revenue increase arose from traditional volume growth, it also reflects
international chemical price increase trends, as well as the influence of the
weakening rand and an increase in volumes from the division`s expanding but
lower margin polymer businesses. A renewed focus on the business models within
the division, and the actions taken and referred to previously, have resulted in
the operating margin achieved recovering to 6,8% (2007: 4,0%). Operating profit
increased by 160% to R156 million (2007: R60 million).
Mining
The Mining division is the market leader in blended bulk explosives formulations
for surface mines, and through the BME brand, also manufactures packaged
explosives for underground mines and specialised surface blasting applications.
The division also supplies a diverse range of mining chemicals and blasting
accessories.
The robust demand environment, both for the supply of mining chemicals,
explosives and related services, together with rapidly increasing international
prices, particularly of nitrate products, resulted in revenue growth of 73% to
R1 006 million (2007: R581 million). Operating profit rose by 125% to R126
million (2007: R56 million). Previous communications to Omnia shareholders
indicated that the explosives market had become intensely competitive, with
rapidly rising raw material costs pressurising margins. Following the
unacceptable 14% decline in operating profit in the period to September 2007,
the division opted to withdraw from unprofitable contracts and renegotiate the
pricing of others. This decisive action resulted in a recovery in the operating
margin to 12,5% (2007: 9,7%), although it still remains below historic levels.
Costs for additional resources are also being incurred in respect of new
contracts where these contracts have yet to deliver intended volumes. Costs are
also being impacted negatively by the shortage of competent skills in the
industry, with the division having to face significant additional costs to
retain such skills.
Agriculture
The Agriculture division manufactures and supplies granular, liquid and
speciality fertilizers to individual farmers, co-operatives and wholesalers
across southern Africa. In addition, it supplies speciality fertilizers to
farmers in Australia and New Zealand. Agriculture contributed 53% to Group
operating profit (2007: 40%).
Revenue increased by 122% to R2 154 million (2007: R971 million) while the
operating profit increased by 311% to R312 million (2007: R76 million).
Although operating margins in the Agriculture division are traditionally
considerably lower in the first half of the financial year than those in the
second, in the period under review they increased to 14,5% (2007: 7,8%). As
mentioned earlier, sales that would normally have been expected during the
second half of the year occurred during the first period under review, causing
an increase in margin. Reference has also been made to the strong performance of
the division from markets beyond the borders of South Africa, particularly
Australasia, contributing significantly toward the total fertilizer margin. The
margin contribution from these international markets increased more than six-
fold when compared with the prior period.
PROSPECTS
Chemicals
Demand for the Group`s chemical products will be influenced by the broader
economic environment. The Rand`s recent weakening could have a positive effect
on manufacturing, as exports become more competitive and imported manufactured
components more expensive. The reduction in oil prices from all time high
levels, will impact positively on prices of downstream petrochemical products
and their derivatives. While international chemical prices increased in the
review period in line with an improvement in the global economic environment, it
is anticipated that there may well be price reductions in the near future as is
already evident opposite some industrial chemicals as well as polymer products.
Zetachem`s contribution to divisional results will be for a full 12 month period
as at March 2009.
Mining
The demand for certain commodities, particularly coal and uranium, remains
strong and will benefit both the explosives and mining chemical markets.
The coal mining sector is set to grow domestically due to Eskom`s requirements
and the strong growth of the uranium sector is particularly encouraging given
Omnia`s solid position in this market. Mining activity throughout Africa remains
healthy, with several major projects coming on line.
Growth, particularly within the mining chemicals market is expected to continue,
with margins remaining at acceptable levels. The Mining division is focused on
taking advantage of the opportunities that arise from its growing presence in
Africa where there is significant potential for future growth, notwithstanding
the recently noted decline in commodity prices.
Agriculture
Domestic fertilizer volumes for the current season are expected to be some 5%
below the normal 2 million tons. As indicated there has been a pattern change in
the current season in South Africa, with advance purchasing taking place.
Traditionally, the division`s main activities occur in the second half of the
year which is the normal planting season but the sudden decrease in raw material
prices, coupled with reduced volumes, will place fertilizer operating margins
under pressure in the second period to March 2009.
Thus the division`s performance in the second half of the year will not be at
the same levels relative to the first half, as has been evident in the past.
However, the need for fertilizers is a long-term reality, and is crucial for
achieving an African Green Revolution in the face of a rapidly rising population
and declining soil fertility.
Omnia group
The Group expects a considerable improvement in earnings for the year ending
March 2009 compared with those achieved in the financial year ended March 2008.
Omnia remains well positioned to take advantage of the opportunities in
agriculture and mining, sectors recognised as being key to Africa`s sustainable
development.
In the last quarter of the previous financial year Omnia completed the erection
of its Envinox Clean Development Mechanism plant at the Sasolburg production
facility, through which the company will earn carbon emission reduction ("CER")
credits. No CER`s have been delivered as yet, although the verification of these
is expected in the near future enabling the company to earn the anticipated R30
million in respect of the CER`s generated for approximately half a year.
Omnia is well positioned to benefit from any demand for biofuels which will
positively impact fertilizer products. In line with Omnia`s strategic focus on
pursuing new growth opportunities, both nationally and internationally, the
Group has announced plans to complete a detailed study to erect a second nitric
acid plant and expand nitrate production capacity at its Sasolburg facilities.
This new facility will address the growing demand for products in its
Agricultural and Mining regional markets, and will reduce Omnia`s dependence on
third parties, and in particular on urea imports.
Dividends
The board is pleased to announce that an interim dividend of 100 cents per share
has been declared in respect of shareholders recorded in the register on Friday
9 January 2009. The last day to trade cum dividend will be Friday 2 January
2009. The shares will commence trading ex dividend on Monday 5 January 2009 and
the record date will be Friday 9 January 2009. The payment date will be Monday
12 January 2009. Share certificates may not be dematerialised or rematerialised
between Monday 5 January 2009 and Friday 9 January 2009, both dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
26 November 2008
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers*
(Group Finance Director), NKH Fitz-Gibbon*,
RB Humphris* (Group Managing Director), Prof SS Loubser,
Dr WT Marais, RR Masebelanga*, JG Pretorius, DC Radley,
TR Scott, R Havenstein, HH Hickey *Executive Directors
Registered
Office
1st Floor, Omnia House,
13 Sloane Street, Epsom Downs,
Bryanston, Sandton
PO Box 69888,
Bryanston 2021
Telephone (011) 709 8888
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
www.omnia.co.za
Date: 26/11/2008 08:00:01 Produced by the JSE SENS Department.
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