| Mon 30 Nov 2009, 8:20 | | OMN - Omnia - Interim Results For The Six Months Ended 30 September 2009 |
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OMN
OMN
OMN - Omnia - Interim Results For The Six Months Ended 30 September 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")
Interim results
for the six months ended 30 September 2009
KEY DRIVERS
* Downward valuation of inventory
* Negative market impacts
* 21% strengthening of the rand
MAJOR FEATURES
* Revenue down 22%
* Loss for the period R99 Million (2008: Profit R373 million)
* Basic loss per share 218,2 cents (2008: Profit 839,0 cents per
share)
* Distribution and administration costs contained
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 % 2008/09/30 2009/03/31
Continuing operations
Revenue 4,249 (22) 5 454 11 111
Cost of sales (3,826) (12) (4 367) (9 045)
Gross profit 423 (61) 1 087 2 066
Other operating income 40 18 34 30
Distribution costs (272) 1 (268) (639)
Administrative expenses (243) (6) (259) (546)
Operating expenses - - (34)
Operating (loss)/profit (52) (109) 594 877
Finance cost (93) 46 (63) (205)
Finance income 8 282 2 41
Share of post tax 2 - 5
profits of associate
(Loss)/profit before (135) 533 718
income tax
Income tax expense 36 (122) (160) (227)
(Loss)/profit for the (99) (127) 373 491
period
(Loss)/profit
attributable to:
Equity holders of the (99) (127) 372 491
company
Minority interest - 1 -
(99) 373 491
Basic (loss)/earnings (218,2) (126) 839,0 1107,4
per share (cents)
Fully diluted basis (217,8) (127) 803,5 1062,2
(loss)/earnings per
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
(Loss)/profit for the period (99) 373 491
Other comprehensive income,
net of tax
Movement in foreign currency
translation
reserve (263) (4) 131
Total comprehensive
(loss)/income for the
period attributable to: (362) 369 622
Owners of the company (361) 368 622
Minority interest (1) 1 -
(362) 369 622
CONDENSED CONSOLIDATED BALANCE SHEET
for the six months ended 30 September 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
Assets
Non-current assets 1 766 1 565 1 686
Property, plant and equipment 1 202 1 025 1 114
Intangible assets 505 507 517
Available-for-sale financial 1 1 1
assets
Investments in associates 48 29 40
Deferred income tax assets 10 3 14
Current assets 3 323 4 836 4 071
Inventories 1 597 2 855 2 391
Trade and other receivables 1 549 1 681 1 342
Derivative financial 142 256 179
instruments
Current income tax assets 4 - -
Cash and cash equivalents 31 44 159
Total assets 5 089 6 401 5 757
Equity
Equity attributable to owners 1 745 1 917 2 139
of the company
Stated capital 317 201 201
Treasury shares (10) (10) (11)
Other reserves (15) 141 286
Retained earnings 1 453 1 585 1 663
Minority interest in equity (2) (2) (2)
Total equity 1 743 1 915 2 137
Liabilities
Non-current liabilities 801 453 789
Interest-bearing borrowings 787 350 670
Deferred income tax 14 103 118
liabilities
Provisions - - 1
Current liabilities 2 545 4 033 2 831
Trade and other payables 1 354 2 344 1 973
Current portion of interest- 461 67 68
bearing borrowings
Current income tax liabilities - 69 20
Bank overdrafts 296 1 169 373
Derivative financial 434 384 397
instruments
Total liabilities 3 346 4 486 3 620
Total equity and liabilities 5 089 6 401 5 757
Net interest-bearing debt 1 513 1 542 952
Net asset value per share 37,5 43,2 48,2
(Rand)
Capital expenditure
Depreciation 53 43 102
Amortisation 9 12 21
Incurred 140 93 258
Authorised and committed 137 34 91
Authorised but not contracted 341 134 9
for
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
Operating (loss)/profit (53) 594 877
Depreciation and amortisation 61 54 123
Adjustment for non-cash items (185) (17) 53
Generated from/(utilised) in (32) (1 369) (744)
working capital
(209) (738) 309
Interest paid (92) (65) (214)
Interest received 8 2 41
Taxation paid (86) (167) (283)
Dividends paid (41) (55) (96)
(Utilised)/generated by (420) (1 023) (243)
operations
Cash outflow from investing (140) (83) (257)
activities
Cash inflow from financing 511 17 389
activities
Net (decrease)/increase in (49) (1 089) (111)
cash
Net overdraft at beginning of (214) (103) (103)
period
Net cash and cash equivalents (263) (1 192) (214)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Ordinary Shareholders` Equity
Stated Treasury Other Retained Minority
Rm capital shares reserves earnings interest Total
At 31 March 201 (13) 127 1 268 (2) 1 581
2008 (audited)
Recognised
income and
expenses
Profit for the 372 1 373
period
Decrease in
foreign
currency
translation (4) (4)
reserve
Share-based 18 18
payment
reserve
Transaction
with
shareholders
Ordinary (55) (55)
dividends paid
Treasury 3 3
shares sold
Movement in (1) (1)
minorities
At 30
September 2008
(unaudited) 201 (10) 141 1 585 (2) 1 915
Recognised
income and
expenses
Profit for the 120 120
period
Increase in
foreign
currency
translation 131 131
reserve
Share-based 14 14
payment
reserve
Transaction
with
shareholders
Ordinary (42) (42)
dividends paid
Treasury (1) (1)
shares sold
At 31 March 201 (11) 286 1 663 (2) 2 137
2009
(audited)
Recognised
income and
expenses
Loss for the (99) (99)
period
Decrease in
foreign
currency
translation (263) (263)
reserve
Share-based 7 7
payment
reserve
Transaction
with
shareholders
Ordinary
shares issued
in
respect to
third partner
scheme with 90 (45) (45) -
management
Capitalisatio 26 (26) -
n award
Ordinary (40) (40)
dividends
paid
Treasury 1 1
shares sold
At 30
September
2009
(unaudited) 317 (10) (15) 1 453 (2) 1 743
OTHER RESERVES
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
Share-based payment reserves 39 63 76
Foreign currency translation (57) 75 207
reserve
Net discount arising on 3 3 3
acquisition of shares of
subsidiaries
(15) 141 286
SEGMENTAL ANALYSIS
for the six months
ended 30 September 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 % 2008/09/30 2009/03/31
Revenue, net of 4 249 (22) 5 454 11 111
intersegmental sales
Chemicals 1 844 (20) 2 294 4 528
Mining 899 (11) 1 006 2 111
Agriculture 1 506 (30) 2 154 4 472
Operating profit (53) (109) 594 877
Chemicals 59 (62) 156 198
Mining 106 (16) 126 269
Agriculture (218) (170) 312 410
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
Net (loss)/profit for the year (99) 373 491
Impairment of assets 3
Headline (loss)/earnings (99) 373 494
Headline earnings
Headline (loss)/earnings are (218,2) cents per share (2008: 839,0
cents per share)
Diluted headline (loss)/earnings are (217,8) cents per share (2008:
803,5 cents per share)
NOTES
Accounting policies
The consolidated condensed financial statements for the six months ended 30
September 2009 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 2009 are consistent with those applied in the annual
financial statements for the year ended 31 March 2009, except for the adoption
of IAS 1 Revised and IFRS 8 which have no impact on the results but require
additional information.
Dividends
A final dividend of 150 cents per share was declared on 18 June 2009 in respect
of the earnings of the previous financial year. This dividend is reflected in
the current period to 30 September 2009.
Commitments
The future minimum lease payments under non-cancellable operating leases are R4
million (2008: R22 million) within one year and R1 million (2008: R17 million)
between two and five years and R0 million (2008: R1 million) beyond five years,
giving a total of R5 million (2008: R40 million).
ADDITIONAL INFORMATION
Unaudited Unaudited Audited
6 months 6 months 12 months
Rm 2009/09/30 2008/09/30 2009/03/31
Final dividend paid per 150* 117 117
share (cents) in respect of
prior year
Interim dividend declared
per share (cents) in
respect of
current year - 100 100
Weighted average number of 45 094 44 285 44 316
shares in issue (`000)
Weighted average number of 45 176 46 241 46 204
fully diluted shares in
issue (`000)
Number of shares in issue 46 430 44 321 44 370
(`000)
*Includes a capitalisation award of 150 cents as a final dividend for the year.
Shareholders could elect to receive a cash dividend of 145 cents instead of the
capitalisation award
INTRODUCTION
Omnia is a diversified, specialist chemical services provider with business
interests balanced across chemical, mining and agricultural markets. The Group`s
business model, which leverages its intellectual capital and technology,
differentiates it from other commodity chemical companies.
The Groups three businesses (chemical, mining and agriculture) continue to
provide high value, customised solutions built on a continually expanding
knowledge base. Omnia`s unique business model places it at the forefront of the
chemical services industry and involves matching customer needs to product
innovation and application expertise, to add extraordinary value to its
customers and their businesses.
MARKET CONDITIONS
Omnia`s year end results announcement in June 2009 and the trading update of 23
October 2009, indicated the sensitivity of the Group`s earnings to declining
commodity prices as well as to the appreciation of the rand.
Commodity prices in general declined substantially during the latter part of the
previous financial year. These price reductions also affected the key raw
materials used by the Group, resulting in a downward valuation to the year end
inventories.
Due to the unusual buying patterns in the prior year`s first half period
("previous corresponding period") and the subsequent reduced sales levels in the
second half period occasioned by reduced plantings following a decline in the
maize price, the Group was left holding substantial volumes of fertilizer stocks
for its farming customers at the March 2009 year end. This year end inventory
was fairly valued at the time when the rand exchange rate was R9,49 to the
US Dollar. While further raw material price reductions took place during the
period under review, mainly with respect to potash, the rand exchange rate
strengthened to R7,51 to the US Dollar. This necessitated further material stock
write downs during the period under review.
The continuing strong rand remains one of the major contributors to the weaker
financial performance of the Group in the short term, impacting negatively on
each of the three business divisions - chemicals, mining and agriculture. This
is also having a negative impact on the Group`s customers who in turn find
themselves to be uncompetitive in export markets and having to compete with
cheap imported finished goods in the domestic market.
All three divisions faced challenges from a combination of softer volumes,
pricing pressures and weak export prices. Also of significance was the decline
in production in South Africa, as reflected in the manufacturing index, which
recorded negative growth, for the ten consecutive months to the end of June
2009. While margins will remain depressed as long as these conditions prevail
there has been an improvement in the manufacturing index since
June 2009.
FINANCIAL REVIEW
The financial results for the previous corresponding period were extraordinary
given both the prevailing high commodity prices at the time as well as the
enhanced, albeit atypical volume off-take of fertilizer products in that
comparable first half period in which Omnia recorded a R373 million profit. By
contrast Omnia suffered an earnings loss of R99 million for the half year ended
30 September 2009, as the Group`s performance continued to be impacted by
depressed market conditions, declining commodity prices and the strengthening of
the rand by 21% to R7,51 against the US Dollar since March 2009, necessitating
material inventory devaluations. Fertilizer stocks had to be devalued by R350
million while polymer stocks traded at near zero margins or even losses.
Accordingly Group revenue decreased by 22% to R4,2 billion (2008: R5,5 billion)
and operating profit decreased by R647 million to an operating loss of R52
million (2008: R594 million profit).
Distribution costs increased by a nominal 1% to R272 million (2008: R268
million) while administrative costs reduced by 6% to R243 million (2008: R259
million). This reduction is mainly as a result of reduced incentive bonuses.
In terms of new reporting standards a statement of comprehensive income has been
included in this announcement. The new statement reflects the material reduction
in the foreign currency translation reserve, within the non-distributable
reserves, of R263 million (2008: reduction of R4 million) brought about by the
strong rand when applied to the Group`s equity that lies in its foreign
operations. This movement is a major component of the adjustment for non-cash
items reflected in the cash flow statement.
The seasonal nature of Omnia`s Agriculture division causes the Group`s working
capital requirements to peak around September each year. With the considerable
decline in commodity prices, the Group`s net working capital requirements
reduced by R400 million at this peak period in its cycle when compared to the
previous year`s peak. However a noticeable change, when compared to the previous
corresponding period, is the relatively lower level of supplier funding as much
of the inventory on hand had already been acquired in the prior year and the
suppliers settled. This has resulted in working capital needing to be funded to
a greater extent by short term bank overdraft, causing finance costs to rise by
45% to R93 million (2008: R63 million).
As a result of this, cash utilised for the period under review is R420 million
compared to R1 023 million in the previous corresponding period. During the
period under review the Group raised R400 million in the form of short term
commercial paper as a means of funding the traditional increase in working
capital that occurs at the interim stage. This is reflected in the cash inflow
from financing activities in the cash flow statement.
The debt: equity ratio of 87% (2008: 81%) at this interim stage is at its
traditional peak.
With the successful completion of the Third Partnership with Management Scheme
which enabled management to participate in the equity of the Group, together
with the capitalisation award in June 2009, the stated capital of the Group has
increased to R317 million (2008: R201 million).
OPERATIONAL REVIEW
Chemicals
Protea Chemicals is the leading distributor of speciality, functional and effect
chemicals in southern and eastern Africa with an established presence in every
sector of the chemical distribution market.
Revenue declined by 20% to R1 844 million (2008: R2 294 million) with the
operating profit falling by 62% to R59 million (2008: R156 million). Operating
margins reduced to 3% (2008: 7%) as international commodity prices, notably
those linked to oil such as polymers, also fell considerably. This, combined
with the strength of the rand, resulted in the significant reduction in
operating margin. The strong rand has also affected the divisions customers by
rendering their exports uncompetitive in the global market, and also affecting
their domestic volumes which had to compete with a flood of cheap finished goods
imports. As a consequence, customers reduced their requirement for chemical
products.
The recent strategic acquisitions demonstrate that the Group remains focused on
the longer term growth of the company. The acquisition of Petroleum Fine
Products, effective 1 December 2009, enhances the existing consumer care
portfolio and will build on one of Omnia`s stated objectives of growing the
business and enhancing margins through vertical integration strategies.
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.
While volumes initially held out surprisingly well, the global recession
eventually had an impact on South Africa in that commodity prices went into
freefall, reducing the demand for commodities such as platinum, copper, nickel
and zinc. Although the Group is predominantly engaged in coal, gold and uranium
extraction, the drop in demand of the aforementioned commodities did impact on
the division`s volumes. Furthermore a number of customers` pipeline expansion
projects from which the Group would have benefited have progressed at a slower
pace than previously anticipated.
With the fall in raw material prices, which has a direct impact on selling
prices of Omnia`s products, the mining division`s revenue reduced by 11% to R899
million (2008: R1 billion) while the operating profit reduced by 16% to R106
million (2008: R126 million). This saw the operating margin reduce slightly to
12% from 13% in the previous corresponding period.
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 extraordinary financial results of the prior year did not reflect the
typical patterns of the past. This was both in respect of highly inflated
fertilizer raw material prices as well as volume off-take. Sales volumes and
value dropped off significantly in the second half of 2009 and the traditional
peak sales period around September did not materialise. Compared to these
unusual results in the previous corresponding period revenue in the Agriculture
division fell by 30% to R1,5 billion (2008: R2,1 billion).
The Group traditionally anticipates demand and carries stock for its farming
customers for deliveries in the forthcoming season. With the fall in demand in
the latter half of the prior year, as previously explained, this stock had of
necessity to be carried over into the current financial year. With the
persistent strengthening rand, further substantial stock write-downs of R350
million had to be effected in the period under review. Furthermore, in the face
of falling selling prices operating margins reduced significantly in the
Agriculture division where an operating loss of R218 million (2008: R312 million
profit) was realised. This translates into an operating loss of 14% (2008:
operating profit of 14%).
Omnia`s defence against the Competition Commission`s charges is progressing. The
hearing of the six year long investigation into the alleged collusion within the
fertilizer industry, which hearing was scheduled to be heard in December 2009,
was postponed to a future date yet to be set. It is hoped that a speedy
resolution will be possible.
PROSPECTS
Short term
It is anticipated that the Omnia Group will return to profitability during the
second half of the 2010 financial year when fertilizer orders return to normal
levels. Although there has been some indication of an El Nino event occurring
early in 2010, this is not expected to have a material impact on fertilizer
volumes in the second half of the year and a normal fertilizer season is
expected.
The volatility in the markets served by the Group continues to provide
uncertainty. The persistent strength of the rand is of serious concern given the
impact this has on the translation of results of foreign operations, export
markets and lower sales volumes due to competition from foreign imports.
Prospects for the Group`s earnings for the full year are clearly depressed when
compared to the extraordinary performance in the previous year.
Against the backdrop of continued uncertainty, the Group is working aggressively
to control costs and improve efficiencies, while at the same time investing to
improve its people and its production capacity, and in developing technologies
that differentiate its products thereby delivering more value to its customers.
The Group continues to actively assess possible acquisitions that fit its
strategy for growth by expanding its base of product and service technologies.
There are signs that conditions are improving slowly with demand beginning to
pick up and Omnia is well positioned in the three critical sectors of the future
(agriculture, water and alternative energy) and will be able to take advantage
of any sustained improvement in the market.
The Group has become increasingly short of one of its critical raw materials
namely ammonium nitrate, a major building block in the production of fertilizer
and explosives. --In order to address this shortage and to prepare the Group for
the expected growth in mining and agriculture in southern Africa, Omnia has been
assessing the feasibility of a second nitric acid plant. As reported previously
the board has authorised a detailed engineering study. The board is expected to
announce its final decision in regard to the construction of the nitric acid
plant in the near future.
Long term
A number of value enhancing growth projects, which include acquisitions as well
as direct capital expenditure, especially in the critical areas of alternative
energy and water purification are under investigation by the Group.
FOURTH PARTNERSHIP WITH MANAGEMENT SCHEME
Shareholders are referred to the announcement on SENS of 26 November 2009 giving
notice of a general meeting to be held on 11 December 2009 in order to approve
the scheme.
DIVIDEND
Given the need to conserve capital for growth, the Board deems it prudent
neither to propose nor declare a dividend for the first six months of the year
under review.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
30 November 2009
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz-
Gibbon*,
R Havenstein, HH 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: 30/11/2009 08:20:50 Produced by the JSE SENS Department.
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