| Tue 23 Jun 2009, 8:00 | | OMN - Omnia Holdings Limited - Reviewed Provisional Results for the Year |
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OMN - Omnia Holdings Limited - Reviewed Provisional Results for the Year
Ended 31 March 2009
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code OMN & ISIN ZAE000005153
("Omnia" or "the Group")
Reviewed provisional results for the year ended 31 March 2009
Highlights
- Revenue increased by 51% to R11 billion
- Net profit for the year increased by 57% to R491 million
- Basic earnings per share increased by 54% to 1107,4 cents
- Headline earnings per share increased by 54% to 1114,2 cents
- Capitalisation award of 150 cents per share brings the total
dividend to 250 cents for the year, representing an increase of
25% from the prior year
Condensed Consolidated Income Statement
for the year ended 31 March 2009
Reviewed Audited
Rm 2009 % 2008
Revenue 11 111 51 7 340
Cost of sales (9 045) 55 (5 841)
Gross profit 2 066 38 1 499
Operating expenses (1 189) 30 (915)
Operating profit 877 50 584
Net finance cost (164) 46 (112)
?Interest paid (210) 47 (143)
?Interest received 41 64 25
?Forex gain 5 (17) 6
Income from associate 5 -
Profit before taxation 718 52 472
Taxation (227) 43 (159)
Net profit for the year 491 57 313
Attributable to:
-?Equity holders of the Company 491 55 317
-?Minority interest - (4)
491 313
Basic earnings per share (cents) 1 107,4 54 718,2
Fully diluted basic earnings per share 1 062,2 54 687,9
(cents)
Final dividend paid per share (cents) in 117,0 30 90,0
respect of prior year
Interim dividend per share (cents) paid 100,0 20 83,0
in respect of current year
Weighted average number of shares in 44 316 44 132
issue (`000)
Weighted average number of fully diluted 46 204 46 073
shares in issue (`000)
Number of shares in issue (`000) 44 370 44 263
Condensed Consolidated Balance Sheet
as at 31 March 2009
Reviewed Audited
Rm 2009 % 2008
Assets
Property, plant and equipment 1 114 15 965
Intangible assets 517 - 517
Investments 41 37 30
Deferred taxation 14 75 8
Current assets 4 071 39 2 919
5 757 30 4 439
Equity and liabilities
Shareholders` equity 2 137 35 1 581
Deferred taxation 118 13 104
Non-current liabilities 671 133 288
Current liabilities 2 831 15 2 466
5 757 30 4 439
Net interest-bearing debt 952 111 451
Net asset value per share (Rand) 48,16 35 35,72
Capital expenditure
Depreciation 101 71
Amortisation 21 21
Incurred 258 284
Authorised and committed 9 -
Authorised but not contracted for 91 102
Condensed Consolidated Cash Flow Statement
for the year ended 31 March 2009
Reviewed Audited
Rm 2009 2008
Operating profit 877 584
Depreciation and amortisation 122 92
Adjustment for non-cash items 54 13
Utilised by working capital (744) (138)
309 551
Interest paid (210) (143)
Interest received 41 25
Taxation paid (283) (134)
(Utilised)/generated by operations (143) 299
Cash outflow from investing activities (257) (413)
Cash inflow from financing activities 389 323
Dividends paid (96) (76)
Net (decrease)/increase in cash (107) 133
Net overdraft at beginning of year (103) (234)
Effects of exchange rate movements (4) (2)
Net overdraft at end of year (214) (103)
Statement of Changes in Shareholders` Equity
Ordinary Shareholders` Equity
Stated Treasury Other Re- Min-
tained ority
Rm capital shares reserves earnings interest Total
At 31 March 201 (16) 36 1 027 2 1 250
2007
(audited)
Net profit 317 (4) 313
for the year
ended 31
March 2008
Increase in 65 65
foreign
currency
translation
reserve
Share-based 26 26
payment
Treasury 3 3
shares sold
Ordinary (76) (76)
dividends
paid
At 31 March 201 (13) 127 1 268 (2) 1 581
2008
(audited)
Net profit 491 491
for the year
ended 31
March 2009
Increase in 127 127
foreign
currency
translation
reserve
Share-based 32 32
payment
Treasury 2 2
shares sold
Ordinary (96) (96)
dividends
paid
At 31 March 201 (11) 286 1 663 (2) 2 137
2009
(reviewed)
Other Reserves
Rm 2009 2008
Reserves comprise of:
Net discount arising on acquisition of 3 3
shares of subsidiaries
Foreign currency translation reserve 206 79
Share-based payment reserve 77 45
286 127
Segmental Analysis for the year ended 31 March 2009
Reviewed % of Audited % of
Rm 2009 total 2008 total
Revenue, net of intersegmental 11 111 100 7 340 100
sales
?Chemicals 4 528 41 3 334 45
?Mining 2 111 19 1 281 17
?Agriculture 4 472 40 2 725 38
Operating profit 877 100 584 100
?Chemicals 198 23 148 25
?Mining 269 31 125 21
?Agriculture 410 46 311 54
Reconciliation of headline earnings
Reviewed Audited
Rm 2009 % 2008
Net profit for the year 491 317
Loss on disposal of fixed assets - 2
Impairment of assets 3 -
Headline earnings 494 55 319
Headline earnings
Headline earnings is 1 114,2 cents per share
(2008: 724,5 cents per share)
Diluted headline earnings is 1 068,7 cents per share
(2008: 694,0 cents per share)
NOTES
Accounting policies
The Group results are reported in accordance with International Financial
Reporting Standards (IFRS).
The condensed consolidated financial statements for the year ended 31 March
2009 were prepared in accordance with IAS 34 - Interim Financial Reporting,
AC500 Standards as issued by the Accounting Practices Board, the requirements
of the Companies Act of South Africa and in compliance with the Listing
Requirements of the JSE Limited. The condensed consolidated 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 year
ended 31 March 2009 are consistent with those applied for the year ended 31
March 2008.
Dividends
A 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 year to 31 March 2009. In addition an interim dividend of 100
cents per share was declared on 26 November 2008 in respect of the current
year.
Capitalisation award of 150 cents per share brings the total dividend to 250
cents for the year, representing an increase of 25% from the prior year.
Review opinion
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the
condensed consolidated financial information for the year ended 31 March 2009
contained in this report. The unmodified review opinion is available for
inspection at the company`s registered office during normal business hours.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R17 million (2008: R23 million) within one year, R22 million (2008: R21
million) between two and five years and R1 million (2008: R1 million) later
than five years, giving a total of R40 million (2008: R45 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed at 30
September 2008 and updated 31 March 2009. No impairment loss has occurred.
INTRODUCTION
Omnia is a diversified and specialist chemical services company which
provides customised solutions in the chemical, mining and agriculture
markets. The notable performance for the year ended 31 March 2009 was
underpinned by the fundamental benefits arising from the balanced businesses
created by the Group`s diversified business model.
The year under review is characterised by unprecedented market conditions, in
that it reflects neither the typical trading nor growth patterns experienced
in previous years, and can best be described as a year of two distinctly
different halves. This was clearly illustrated in the Agriculture division,
in which spiralling raw material input costs resulted in similar increases in
the division`s selling prices. Volumes and revenue grew exponentially in the
first half as farmers, uncertain of what the future held, stockpiled
fertilizer. The unexpected situation proved shortlived, however, as an
equally dramatic reversal in input costs saw volumes and revenue decline
significantly in the second half on the back of the acute reversal in selling
prices. Traditionally Omnia`s fertilizer sales peak is in the second half of
the year but this, therefore, did not materialise in the year under review.
The review period also brings to a close the five year target set for
management by shareholders in 2004. This target was to achieve a 10% real
growth in earnings per annum over the five years that ended 31 March 2009. It
is pleasing to report that the target has been exceeded by a comfortable
margin. This is the third successive five year target that has been achieved
by Omnia`s management, emphasising the real growth of the Group over the past
fifteen years.
Notwithstanding the dramatic decline in commodity prices that has taken
place, Omnia`s businesses all remain well positioned to grow in the years
ahead and stand to benefit from ongoing positive trends.
One example of this lies in the growing shortage of potable water, which has
for some time emerged as a major concern in the 21st century. Omnia`s
acquisition last year of Zetachem, a chemical company that supplies custom
designed water treatment chemicals used in the purification of water is,
therefore, not only complementary to the Group`s existing chemicals business,
but marks Omnia`s intention to become a major participant in the water care
industry. The critical importance of uncontaminated water will see the demand
for specialised chemical solutions in water treatment increase exponentially.
Another fundamental facet of the macro economic environment which exercises
the Group`s attention is the continuing drive for alternative energy. Strong
demand for coal has been sustained by Eskom, which is dependent on coal fired
technology. Recent announcements have indicated that an additional 40 coal
mines are needed in South Africa by 2020 to meet the expected demand for
electricity. In the wake of the ever increasing burning of fossil fuels,
however, concerns over global warming are driving the demand for more eco-
friendly sources of energy. Omnia is well placed to provide biofuels with its
interests in jatropha in Zambia where research in the agronomics of the plant
as well as the subsequent production of biofuels is being undertaken.
There has also been a renewed focus worldwide on cleaner nuclear energy as an
alternative to coal-generated power. Omnia is also well placed to benefit
from this new development, which is poised to grow at an accelerated pace, by
virtue of its involvement in the supply of explosives and mining chemicals to
uranium mining activities in southern Africa.
The strategic importance of agriculture and related food security has taken
on a new emphasis with the growing world population and changing dietary
habits in the developing world. In the face of relatively low grain stocks,
agriculture will be required to increase yields per hectare significantly,
introduce innovative production practices and address the challenges caused
by increasing urbanisation, which has reduced the arable land available for
cultivation. In Africa it is imperative that countries are made self
sufficient in food production by using available arable land effectively.
Omnia, with its agronomic expertise and extensive research and development
activities, is well placed to work with Government, agricultural bodies and
sector experts to achieve this goal.
FINANCIAL REVIEW
Revenue for the year increased by 51% to R11 billion (2008: R7 billion) while
net profit increased by 57% to R491 million (2008: R313 million). Basic
earnings per share rose to 1107,4 cents per share (2008: 718,2 cents per
share), reflecting a 54% increase. Headline earnings per share increased by
54% to 1 114,2 cents (2008: 724,5 cents).
Operating expenses net of other income increased by 30% to R1,2 billion
(2008: R915 million) reflecting the increased level of activity. The 30%
expenses increase is, however, below the revenue growth as focus on
containing costs remains a priority.
The Group commenced generating carbon credits (CER`s) with the commissioning
of its "EnviNox" plant over a year ago. It was anticipated that some R30
million would have been realised from the sale of these CER`s in the year
under review. The verification of the credits by independent international
auditors, however, took substantially longer and was much more involved than
was anticipated with the result that, together with the uncertainty regarding
the tax treatment of these credits, the decision was made to hold over the
sale to the coming year. By the end of January 2009 503 000 CER`s had been
audited with subsequent production due to be audited shortly. These CER`s are
carried forward as inventory and are valued at the cost of production which
totaled R9,5 million.
As a result of the increase in raw material prices, working capital levels
were on average higher than during the previous financial year, offset by
early purchasing by farming customers who were wishing to limit the impact of
continually increasing commodity prices. The higher levels of working capital
resulted in an increase in net interest paid of 43% to R169 million (2008:
R118 million).
Working capital at year end increased by R846 million to R1,5 billion (2008:
R696 million) due to a higher investment in inventories caused partly by the
drop in fertilizer volume sales in the second half of the year, but also due
to the Group running its nitric acid plant at full capacity to build up stock
for the forthcoming season.
Additional term funding was secured during the year mainly as a result of the
issue of R405 million in three year corporate bonds following the
introduction of a R1,5 billion Domestic Medium Term Note program. This
program will enable the Group to access a different form of funding and
reduces its reliance on short term banking facilities. Non-current
liabilities have accordingly risen to R671 million (2008: R288 million) the
result being that the balance sheet is now in better equilibrium between long
term funds supporting long term assets.
The Group is continuing to work on a number of innovative, technology driven
projects that will significantly improve customer service and productivity.
These improvements include supply chain optimisation, procurement, and the
protection of the environment within which the Group operates.
These investments, together with the increase in working capital, led to an
increase in net interest bearing debt at year end to R952 million (2008: R451
million) with a related increase in the debt:equity ratio to 45% (2008: 29%).
This ratio compares to the 80% that was reported at the interim stage and
reflects the traditional drop in debt each year end after the agriculture
planting season for the previous year has ended.
During the year under review the Group utilised R143 million in cash in its
operating activities (2008: generated R299 million) due to the increase in
working capital. It is expected that cash flow will again be positive in the
new financial year with the marked reduction in commodity prices to more
normalised levels. Cash outflow from investing activities, mainly in the
provision of plant and equipment, reduced to R257 million (2008: R413
million). The prior year included the acquisition of Zetachem.
On 19 June 2009, the Group successfully raised R400 million through an issue
of six month commercial paper under its R1,5 billion DMTN programme. The
proceeds will be utilized to fund, in part, Omnia`s peak annual short-term
working capital requirements.
OPERATIONAL REVIEW
Chemicals
Protea Chemicals is the leading distributor of speciality, functional and
effect chemicals in southern Africa with an established presence in every
sector of the chemical distribution market. The division contributed 23% to
Group operating profit (2008: 25%), with revenue increasing by 36% to R4,5
billion (2008: R3,3 billion) and operating profit increasing by 34% to R198
million (2008: R148 million).
As a supplier to the manufacturing industry, Protea Chemicals benefited from
the growth in the South African economy in the first half of the year.
Volumes increased as a result of the division`s activity in "EcoGypsum" and
the expansion of the polymer business in southern Africa in the first half
while the weakening of the rand contributed to further price increases. Price
increases also occurred as a result of global product shortages that
prevailed in the first half of the year. The economic slowdown had a limited
impact on the division, with strong performances still reported in most of
the businesses during the period under review. This was not the case in the
Polymer business though which was particularly affected by the high prices
that prevailed during the first half of the year followed by steeply falling
prices in the second half. Margins were severely squeezed as higher priced
stock in the system was disposed of at near zero margins.
This feature together with the continuing change in product mix to include
greater polymer and "EcoGypsum" volumes resulted in a decrease in operating
margin to a disappointing 4,4% (2008: 4,5%). Zetachem, the water treatment
business acquired a year ago, performed well in completing its first full
year as part of the Omnia Group.
Mining
The market leader in blended bulk explosives formulations for surface mines,
the Mining division also manufactures packaged explosives for underground
mines and specialised surface blasting. The division also markets blasting
accessories, and a complete range of mining chemicals. The Mining division
contributed 31% to Group operating profits (2008: 21%).
While the mining industry was widely impacted by falling demand for base
metals and minerals in the second half of the year, the Group`s diversified
activities in this sector shielded the division from the downturn. This is
largely due to the escalating demand for coal and uranium used for power
generation.
The division continued its volume growth, particularly in mining chemicals,
both locally and internationally. Revenue increased by 65% to R 2,1 billion
(2008: R1,3 billion), with operating profit increasing by 115% to R269
million (2008: R125 million) resulting in an operating margin of 12,6% (2008:
9,8%). Renegotiated contract pricing allowed for expeditious adjustments but
the continued growth in mining chemicals, which attract lower margins, result
in subdued operating margins.
Continued focus on mine safety has resulted in mine operators moving away
from the traditional capped fuse to the much safer shocktube detonating
system. With the commissioning of Omnia`s new shocktube assembly plant the
Group is poised to commence marketing its blast solutions into deep-level
mines, a market that it has hitherto had a modest share in.
Agriculture
The Agriculture division produces and supplies granular, liquid and
speciality fertilizers to individual farmers, co-operatives and wholesalers
throughout South Africa and, increasingly, to sub-Saharan Africa, as well as
to Madagascar, Australia and New Zealand. The Agriculture division
contributed 46% (2008: 54%) to the Group operating profit.
The division, in the period under review, experienced a significant once off
change in the buying pattern of its customers. Traditionally the bulk of
fertilizer sales take place in the second half of the year with the onset of
the maize planting season. However, during the first half of the year
fertilizer raw material prices, fuelled by world-wide shortages of product,
continued their upward spiral to new record highs with a concomitant increase
in local fertilizer prices. This phenomenon caused farmers to break with
tradition and purchase their fertilizer requirements early, in an attempt to
cap the ever increasing cost of fertilizer. This once off change in pattern
resulted in the first half of the year recording unprecedented levels of
sales. Thus a large component of traditional second half fertilizer sales
took place in the first half, as reported at mid-year.
The onset of the financial crisis shortly afterwards caused commodity prices,
including fertilizer products, to plummet. The Group found itself with high
priced stock on hand, much of which was disposed of at considerably lower
margins than usual, with the value of the residue of stock needing to be
adjusted downwards in line with the drop in prices. This reduced margins in
the second half to 4,2%. The margin for the period under review in
consequence deteriorated to 9,2% (2008: 11,4%). However, the unusual sales
gained in the first half resulted in revenue increasing by 64% to R4,5
billion (2008: R2,7 billion) and operating profit increasing by 32% to R410
million (2008: R311 million).
The six year long investigation by the Competition Commission relates to a
complaint filed by Nutri-Flo, a small blender and distributor of fertilizer,
which was subsequently referred by the Commission to the Tribunal in May 2005
in respect of alleged collusion on the part of Sasol, Omnia and Yara in
nitrogenous fertilizer products. This investigation has raised a range of
complex issues that are in need of clarification so that certainty can
prevail into the future. The charges levelled against Sasol are more numerous
and wide ranging than those levelled against Omnia. The Group has always
strongly adhered to the legal processes as set out by South Africa`s
Competition Commission and continues to cooperate with the authorities while
defending its position.
PROSPECTS
The year under review has been extraordinary and cannot be used as an
indicator of the future. Commodity prices retreated dramatically in the
second half of the year, normalising to 2007 levels. In determining Omnia`s
growth pattern over the next few years trends will be more closely aligned to
the reporting periods prior to the one under review, returning to Omnia`s
historical growth pattern.
However the Group has some exciting potential developments that could be
important growth drivers should they come to fruition. Most of these
developments entail capital investments of some significance.
The current agricultural environment, arising from the prevailing
international grain prices, and the related focus on biofuels, should
continue to favour the fertilizer business and the Group. By increasing
"Nitrophos" production the Agriculture division will be provided with the
opportunity of further optimising raw material costs with the aim of
improving the division`s operating margins over the next year or two. In
addition, the Agriculture division`s strong position in Africa bodes well for
future growth and the prospect of increased tonnage being sold.
The Group remains committed to environmental improvements. The sale of CER`s
will boost the earnings of the Group especially if the fiscus declares the
production of primary CER`s to be tax free as is being proposed in the draft
taxation laws amendment bill.
The considerable growth in uranium mining, in which the Group already has a
strong foothold, also augurs well for Omnia.
The Group announced recently that an investigation into the feasibility of
erecting a second nitric acid plant would be undertaken. This feasibility
study is nearing its final stages and the board expects to be in a position
to make a decision in regard to this major project in the near future.
The essence of Omnia`s future strategy remains consistent. The Group will
pursue opportunities and develop offerings positioned further up the chemical
services value chain in each of its core markets, while leveraging Group-wide
synergies and efficiencies to ensure cost effectiveness. In short, Omnia aims
always to deliver competitive value propositions to its customers rather than
merely low priced commodities.
CAPITALISATION AWARD
Mindful of the growth prospects the directors have resolved to award
capitalisation shares, emanating out of distributable reserves, to ordinary
shareholders recorded in the company`s register at the close of business on
Friday 24 July 2009 ("record date"). Shareholders will have the right in
respect of all or part of their shareholdings to elect to receive a final
cash dividend of 145 cents per ordinary share ("the cash election") for the
year ended 31 March 2009 which will be declared only on those ordinary shares
for which capitalisation shares are not allocated. If the cash election is
not made, shareholders will be deemed to have elected to receive
capitalisation shares.
The capitalisation award
The number of capitalisation shares to be awarded will be 150 cents per share
divided by R59,02 (i.e. the volume weighted average traded price of the
ordinary share of the company on the main board of the JSE Limited ("JSE")
for the three trading days ended at the close of business on Wednesday 17
June 2009) multiplied by the number of shares held by a shareholder on the
record date.
This equates to 2.54151 capitalisation shares for every 100 ordinary shares
held.
The last day for trading in the company`s shares cum dividend will be Friday
17 July 2009. Application will be made to the JSE for the maximum number of
capitalisation shares to be listed with effect from the commencement of
business on or about Monday 20 July when the company`s shares will be
quoted "ex" the capitalisation award. The record date will be Friday, 24 July
2009 and the payment date will be Monday 27 July 2009. Share certificates may
not be dematerialised or rematerialised between Monday 20 July and Friday 24
July 2009, both dates inclusive.
NJ
CROSSE RB HUMPHRIS
Chairman Managing Director
Bryanston
23 June 2009
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH
Fitz-Gibbon*, R Havenstein, H Hickey, RB Humphris* (Group Managing Director),
Prof SS Loubser, Dr WT Marais, RR Masebelanga*, JG Pretorius, DC Radley, TR
Scott
*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: 23/06/2009 08:00:05 Produced by the JSE SENS Department.
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