| Wed 9 Jun 2010, 7:45 | | OMN - Omnia - Reviewed provisional results for the year ended 31 March 2010 |
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OMN
OMN
OMN - Omnia - Reviewed provisional results for the year ended 31 March 2010
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 2010
OMNIA REMAINS STRATEGICALLY POSITIONED TO BENEFIT FROM CHANGING MARKET DYNAMICS
MAJOR FEATURES:
REVENUE DOWN 21% TO R8,8 BILLION
PROFIT FOR THE year R58 MILLION
(2009: PROFIT R491 MILLION)
BASIC EARNINGS PER SHARE 122,0 CENTS
(2009: 1 097,1 CENTS PER SHARE)
STRONG CASH GENERATION OF R1 BILLION
(2009: R143 MILLION UTILISED)
PLANNED R1,4 BILLION INVESTMENT IN SECOND NITRIC ACID COMPLEX THROUGH EQUITY
CAPITAL RAISING AND DEBT
KEY DRIVERS:
DOWNWARD VALUATION OF INVENTORY
NEGATIVE MARKET IMPACTS
23% STRENGTHENING OF THE RAND AGAINST US DOLLAR SINCE MARCH 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2010
Reviewed Audited
Rm 2010 % 2009
Continuing operations
Revenue 8 827 (21) 11 111
Cost of sales (7 438) (18) (9 045)
Gross profit 1 389 (33) 2 066
Other operating income 77 157 30
Administrative expenses (487) (11) (546)
Distribution expenses (674) 5 (639)
Other expenses (26) (24) (34)
Operating profit 279 (68) 877
Finance cost (217) 6 (205)
Finance income 44 8 41
Share of profit of associates 3 5
Profit before taxation 109 (85) 718
Taxation (51) (227)
Net profit for the year 58 (88) 491
Attributable to:
- Equity holders of the Company 56 491
- Minority interest 2 -
58 491
Basic earnings per share (cents) 122,0 (89) 1 097,1
Fully diluted basic earnings per share 121,7 (88) 1 052,7
(cents)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2010
Reviewed Audited
Rm 2010 2009
Profit for the year 58 491
Other comprehensive income, net of tax
Movement in foreign currency translation reserve (228) 127
Movement in cash flow hedge (8) -
Total comprehensive (loss)/income for the period (178) 618
attributable to:
Equity holders of the Company (180) 618
Minority interest 2 -
(178) 618
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2010
Reviewed Audited
Rm 2010 2009
Operating profit 279 877
Depreciation and amortisation 142 122
Adjustment for non-cash items 101 54
Generated/(utilised) by working capital 805 (744)
1 327 309
Interest paid (217) (210)
Interest received 44 41
Taxation paid (111) (283)
Generated/(utilised) by operations 1 043 (143)
Cash outflow from investing activities (464) (257)
Cash inflow from financing activities 180 389
Dividends paid (40) (96)
Net increase/(decrease) in cash 719 (107)
Net overdraft at beginning of year (214) (103)
Effects of exchange rate movements 3 (4)
Net cash/(overdraft) at end of year 508 (214)
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 March 2010
Reviewed Audited
Rm 2010 % 2009
Assets
Non-current assets 1 944 15 1 686
Property, plant and equipment 1 295 16 1 114
Intangible assets 537 4 517
Available-for-sale financial assets 19 1
Investments in associates 84 110 40
Deferred income tax assets 9 (36) 14
Current assets 3 243 (20) 4 071
Inventories 1 315 (45) 2 391
Trade and other receivables 1 365 (10) 1 521
Cash and cash equivalents 563 254 159
Total assets 5 187 5 757
EQUITY
Equity attributable to owners 1 973 (8) 2 139
of the company
Stated capital 318 58 201
Treasury shares (8) (11)
Other reserves 54 (81) 286
Retained earnings 1 609 (3) 1 663
Minority interest in equity (2) (2)
Total equity 1 971 2 137
Liabilities
Non-current liabilities 885 12 789
Interest-bearing borrowings 804 20 670
Deferred income tax liabilities 80 (32) 118
Provisions 1 1
Current liabilities 2 331 (18) 2 831
Trade and other payables 2 166 (9) 2 370
Current portion of interest-bearing 108 59 68
borrowings
Current income tax liabilities 2 (90) 20
Bank overdrafts 55 (85) 373
Total liabilities 3 216 3 620
Total equity and liabilities 5 187 5 757
Net interest-bearing debt 404 952
Net asset value per share (Rand) 42,40 47,69
Capital expenditure
Depreciation 119 101
Amortisation 23 21
Incurred 385 258
Authorised and committed 9 9
Authorised but not contracted for 420 91
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Audited
Rm 2010 2009
Net profit for the year attributable to ordinary 56 491
shareholders
Loss on disposal of fixed assets 1 -
Impairment of assets - 3
Headline earnings 57 494
HEADLINE EARNINGS
Headline earnings are 124,2 cents per share (2009: 1 103,8 cents per share)
Diluted headline earnings are 123,8 cents per share (2009: 1 059,1 cents per
share)
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
as at 31 March 2010
Ordinary shareholders` equity
Trea- Other Re-tained Mino-
rity
Rm Stated sury re- earn-ings inte- Total
capital shares serves rest
At 31 March 2008 201 (13) 127 1 268 (2) 1 581
Recognised
income and
expenses
Net profit for 491 491
the year ended
31 March 2009
Increase in 127 127
foreign currency
translation
reserve
Share-based 32 32
payment reserve
Transactions
with
shareholders
Treasury shares 2 2
sold
Ordinary (96) (96)
dividends paid
At 31 March 2009 201 (11) 286 1 663 (2) 2 137
Recognised
income and
expenses
Net profit for 56 2 58
the year ended
31 March 2010
Decrease in (228) (228)
foreign currency
translation
reserve
Share-based 49 49
payment reserve
Cash flow hedge (8) (8)
Transactions
with
shareholders
Ordinary shares 91 (45) (44) (2) -
issued in
respect of 3rd
partnership
scheme with
management
Capitalisation 26 (26) -
award
Treasury shares 3 3
sold
Ordinary (40) (40)
dividends paid
At 31 March 2010 318 (8) 54 1 609 (2) 1 971
2010 2009
OTHER RESERVES
Reserves
comprise of:
Share-based 81 77
payment reserve
Foreign currency (22) 206
translation
reserve
Cash flow hedge (8) -
Net discount 3 3
arising on
acquisition of
shares of
subsidiaries
54 286
SEGMENTAL ANALYSIS
for the year ended 31 March 2010
Reviewed Audited
Rm 2010 % 2009
Revenue, net of intersegmental sales 8 827 (21) 11 111
Chemicals 3 340 (26) 4 528
Mining 1 776 (16) 2 111
Agriculture 3 711 (17) 4 472
Operating profit 279 (68) 877
Chemicals 152 (23) 198
Mining 212 (21) 269
Agriculture (85) (121) 410
Notes
Accounting policies
The condensed consolidated financial statements for the year ended 31 March
2010 were prepared in accordance with International Financial Reporting
Standards (IFRS), IAS 34 - Interim Financial Reporting, the AC500 standards as
issued by the accounting practices board and in compliance with the Listings
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 2010 are consistent with those applied 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 disclosure.
Dividends
A final dividend of 150 cents per share was declared on 18 June 2009 in respect
of earnings of the previous financial year. This dividend is reflected in the
current year to 31 March 2010.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R20 million (2009: R17 million) within one year and R79 million (2009: R22
million) between two and five years and R9 million (2009: R1 million) beyond
five years, giving a total of R108 million (2009: R40 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed at 30
September 2009. No impairment loss has occurred.
Review opinion
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed
consolidated financial information for the year ended 31 March 2010 contained
in this report. The review opinion is available for inspection at the Group`s
registered office during normal business hours.
ADDITIONAL INFORMATION
Reviewed Audited
Rm 2010 2009
Final dividend paid per share (cents) in respect of 150 117
prior year*
Interim dividend declared per share (cents) in respect
of
current year - 100
Weighted average number of shares in issue (`000) 45 904 44 755
Weighted average number of fully diluted shares in 46 027 46 643
issue(`000)
Number of shares in issue (`000) 46 491 44 809
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 commodity chemical companies.
The Group`s three business clusters (chemical, mining and agriculture) continue
to provide valued, customised solutions built on a continually expanding
knowledge base. Omnia`s business model places it at the forefront of the
chemical services industry and involves uniquely matching customer needs to
product innovation and application expertise to add extraordinary value to its
customer`s businesses.
MARKET CONDITIONS
Omnia`s year end results announcement in June 2009 and the interim results
announcement in November 2009, indicated the sensitivity of the Group`s
earnings to declining commodity prices and the strengthening of the rand.
In the previous financial year, as a consequence of the buying pattern changes
which brought abnormally high demand from agriculture in the first six months,
the second half of the previous financial year saw significantly reduced sales
levels. The Group was thus left holding substantial fertilizer stocks at the
March 2009 year end. The decline in commodity prices which started during the
latter part of the 2009 financial year continued into the current year and,
combined with the effect of further rand strength, necessitated a R350 million
write down in the value of fertilizer inventory by the September interim stage.
Commodity prices continued their downward spiral into the second half of the
year, when the peak fertilizer season normally occurs, while the rand also
continued to strengthen.
The combined effect of the decline in commodity prices, rand strength and lower
levels of economic activity arising from conditions of global recession, led to
all three divisions facing challenges from a combination of softer volumes,
pricing pressures and weaker export prices. The inevitable reduction in
earnings that came about is amplified by the comparison with the unprecedented
buoyant market conditions that prevailed in the previous 2009 financial year.
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
rand strength is also having a negative impact on the Group`s customers,
particularly those in the Chemical Division, who find themselves in turn
uncompetitive in export markets and having to compete with cheap imported
finished goods in the domestic market.
Although there has been an improvement in volume sales in the second half of
the 2010 financial year, the persistent strength of the rand, the stock write-
downs and a share based payment charge of R41 million relating mainly to the
two new share participation plans implemented in January 2010 has resulted in
Group earnings for the year reaching only R58 million (2009: R491 million).
FINANCIAL REVIEW
Revenue for the year fell by 21% to R8,8 billion
(2009: R11,1 billion) and, after the initial downward stock adjustment of R350
million and further downward price movements, net profit for the year declined
by 88% to R58 million
(2009: R491 million). Included in revenue is an amount of
R50 million from the sale of the first tranche of 400 000 Carbon Credits. Net
production costs for these carbon credits amounted to R7 million.
A loss of profits claim in respect of a plant failure in the prior year
amounting to R32 million is included in the R77 million Other Operating Income.
Administrative expenses reduced by 11% to R487 million
(2009: R546 million) while selling and distribution expenses increased by 5% to
R674 million (2009: R639 million).
Finance costs of R217 million (2009: R205 million) comprise interest paid,
foreign exchange gains or losses and forward cover costs. A combination of
lower interest rates and lower values of working capital needing to be funded
resulted in interest charges reducing by 12% to R185 million (2009: R210
million) while exchange rate losses on foreign bank accounts of R23 million
occurred (2009: R5 million gain).
Profits were impacted by non-deductible tax items comprising amongst other
things mainly non-cash share based payments of R41 million, and a further R32
million incurred in non-tax deductible interest from funding the acquisition of
shares in Zetachem, which resulted in the effective charge for taxation to be
high at 47%.
Stated Capital increased by R117 million to R318 million following the issue of
shares to management in terms of the third partnership with management scheme,
the five year target to financial year end 2009 having been achieved, as well
as the capitalisation award that took place during the year. With the
strengthening of the rand the Foreign Currency Translation Reserve needed to be
adjusted negatively by R228 million, this being the main reason for the
reduction in Other Reserves to R54 million (2009: R286 million) and thus also
the main reason for the
R166 million reduction in Total Equity to R1 971 million
(2009: R2 137 million).
Intangible assets increased by R20 million following the acquisition of
Petroleum Fine Products, a producer of basic personal care ingredients,
petroleum jelly and technical oil, and the capitalisation of ERP implementation
costs. Mainly as a result of entering into a joint venture with Nalco, a world
leader in water treatment activities, as announced on 28 January 2010,
investments in associates grew by R44 million to R84 million (2009: R40
million).
Resulting from the reduction in commodity prices and the relatively high
carryover inventory from the previous year, net working capital reduced by 67%
to R514 million
(2009: R1 542 million) contributing significantly to the cash generation from
operations of R1 043 million (2009: R143 million utilised) as reflected in the
cash flow statement.
Cash outflow from investing activities increased by 81% to
R464 million (2009: R257 million) of which R309 million represents the net
investment in Property Plant and Equipment with the balance being mainly
corporate activity from the acquisition of Petroleum Fine Products and Protea
Polymers Eastern Africa, and the JV with Nalco.
Arising from the excellent cash generation, net interest bearing debt has
reduced to R404 million (2009: R952 million) resulting in a debt:equity ratio
of 20% compared to the 45% that prevailed at the end of the prior year.
Non-current interest bearing borrowings have increased by a net R134 million to
R804 million (2009: R670 million) with the injection of term loans following
the ExecCo (Nanotron) and Sakhile II transactions relating to management and
staff participation plans that were approved by shareholders on
11 December 2009.
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 Chemical Division was impacted by the global financial crisis and, as in
the case of the Agriculture Division, was impacted by both a drop in product
prices as well as the strength of the rand. These phenomena were already
evident towards the end of the 2009 financial year and continued more acutely
into the current year causing an R18 million negative stock adjustment to be
made in the year under review. The strength of the rand also had a negative
impact on Protea Chemicals` customers who became uncompetitive in the
production of their goods with the consequence that volumes sold to these
customers in the 2010 financial year were some 16% below those of the previous
year.
Revenue contracted by 26% to R3,3 billion (2009 : R4,5 billion) with a
concomitant reduction in operating profit of 23% to R152 million (2009: R198
million). The operating profit margin has however been maintained at 4.5%.
MINING
The global financial crisis also impacted on the Mining Division which saw the
price of explosives - the main ingredient of which is ammonium nitrate - rise
in the first half of FY2009 and then drop dramatically in the latter half of
that year, back to levels that prevailed some two years ago. As mentioned the
strength of the rand also impacted mining negatively.
Revenue reduced by 16% to R1,8 billion (2009: R2,1 billion) the main driver
being the reduction in prices compared to those that prevailed during the
previous financial year. Volumes declined only marginally.
Operating profit, at R212 million (2009: R269 million), is 21% below that of
the extraordinary 2009 year with the operating margin declining marginally from
12.7% for the year ended March 2009 to 11,9% for the year under review.
Under the circumstances the Mining Division has performed well.
AGRICULTURE
As expected volumes improved notably in the South African domestic market by
23%, over those of the comparable prior year period when an abnormal and
subdued buying pattern developed amongst the Group`s farming customers, as a
consequence of the exceptionally high fertilizer prices that prevailed during
the first half of the prior financial year. However the subsequent significant
35% reduction in average fertilizer selling prices caused revenue in this
division to fall by 17% to R3,7 billion (2009: R4,5 billion).
The inventory write down of R350 million prior to the September interim period
was the main cause for the Division to show an operating loss of R85 million
for the period (2009: R410 million profit). However commodity prices continued
to fall beyond the September half year and into the peak summer season, while
the rand also continued to strengthen necessitating a further R16 million
adjustment to inventories. The increase in sales volumes of the high priced
carry-over stocks was not sufficient to overcome the combination of falling
prices and rand strength. The result is that as occurred in 2009 the second
half year has again not reflected the traditionally higher earnings within the
Fertilizer Division when compared with the first half.
Some seven years from its inception there is still nothing further to report on
the investigation by the Competition Commission into alleged collusive
practices in the fertilizer industry. Rebuttal of the alleged conduct made
against Omnia has not only brought with it significant legal costs but has also
occupied an enormous amount of Group management time.
PROSPECTS
Commodity prices have settled at realistic levels, gradually increasing in the
light of continued supply and demand dynamics.
A prolonged 14 month period of negative manufacturing output came to an end in
July 2009 with positive statistics evident since then. This augurs well for the
Chemicals Division in particular although a persistently strong rand will
negate much of the benefit that should otherwise flow from the upturn in
manufacturing.
The Mining Division has shown steadily improved results in the last few months
of the current financial year as demand for platinum, copper, iron ore and
other commodities increased while coal continued to be in high demand. Although
the start has been slow, uranium mining activity is also set to increase.
Management is confident of achieving growth in this Division in the forthcoming
year.
The current agricultural environment, with its focus on biofuels, should
continue to favour the fertilizer industry and the Group. As previously
indicated, by increasing "Nitrophos" production the Agriculture Division will
be provided with the opportunity of further optimising raw material costs with
the benefit of increasing the division`s operating margins. In addition, the
Agriculture Division`s strong position in Africa bodes well for future growth
and the prospect of increased tonnage being sold.
Shareholders were originally informed on 23 October 2008 that the board was
examining the possibility of Omnia erecting a second nitric acid complex to
alleviate the growing shortage of raw materials, particularly for its growing
mining division. Feasibility studies were undertaken and the board has approved
a R1,4 billion investment and a R1 billion equity raising program in the form
of a specific issue of shares for cash and a claw back and rights offer.
This is a milestone investment for the Group and in the development of South
African capacity to produce nitric acid and ammonium nitrate by bringing world
class technology to local shores. It is one of Omnia`s biggest investment to
date in South Africa and demonstrates the Group`s commitment to South Africa`s
agriculture and mining sectors, as well as its conviction about the strength of
the growth opportunities in these businesses. While the investment will create
a critical growth path, it is also a major step in ensuring security and
continuity of uninterrupted supply for the Group`s explosives and fertilizer
businesses.
The nitric acid complex is to be developed adjacent to Omnia`s existing plant,
which for some time has operated at capacity and will produce some 1,000 tons
per day, which equates to 140% of the existing plant`s capacity. It is
estimated that it will generate internal cost savings of approximately R280
million per annum (operating at 60% capacity level).
The R1 billion fully subscribed equity capital raising, which is a clear vote
of confidence by Omnia shareholders, will be complimented by a combination of
internally generated funds and project finance. This structure leaves Omnia
with a strong balance sheet to finance suitable growth opportunities as they
arise whilst also safeguarding against further volatility in world financial
markets, thereby significantly reducing the financial risks associated with
embarking on a project of this nature.
DIVIDENDS
Given the need to raise capital for the abovementioned expansion the board has
decided not to propose a dividend for the year.
NJ CROSSE Chairman RB HUMPHRIS Managing Director
Bryanston
9 June 2010
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,
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
Sponsor
One Capital
Date: 09/06/2010 07:45:01 Produced by the JSE SENS Department.
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