| Wed 21 Jun 2006, 8:00 | | Omnia - Reviewed provisional results for the year |
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OMN
OMN
Omnia - Reviewed provisional results for the year ended 31 March 2006
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1967 / 003680 / 06
Share code: OMN & ISIN: ZAE000005153
Reviewed provisional results for the year ended 31 March 2006
Condensed Consolidated Income Statements
for the year ended 31 March 2006
Restated
Reviewed Audited
R"000 2006 % 2005
Revenue 4 324 842 1 4 270 155
Cost of sales (3 467 762) (3 313 159)
Gross profit 857 080 (10) 956 996
Operating expenses (567 874) 1 (559 537)
Operating profit 289 206 (27) 397 459
Net finance cost (58 961) (68 995)
Interest paid (69 666) (65 947)
Interest received 12 741 8 213
Forex loss (2 036) (5 284)
Forward cover cost on foreign - (5 977)
borrowings
Profit before taxation 230 245 (30) 328 464
Taxation (76 222) (111 273)
Net profit for the year 154 023 (29) 217 191
Attributable to:
- Equity holders of the Company 153 695 216 774
- Minority interest 328 417
154 023 217 191
Basic earnings per share (cents) 353,2 (30) 507,7
Fully diluted basic earnings per 347,0 (27) 478,5
share (cents)
Final dividend paid per share
(cents) in respect
of prior year 78,0 (35) 120,0
Interim dividend per share
(cents) declared in
respect of current year 60,0 60,0
Weighted average number of shares 43 509 2 42 699
in issue ("000)
Weighted average number of fully
diluted
shares in issue ("000) 44 291 45 305
Number of shares in issue 43 607 43 424
Condensed Consolidated Balance Sheets
as at 31 March 2006
Restated
Reviewed Audited
R"000 2006 % 2005
Assets
Property, plant and equipment 642 333 6 608 816
Intangible assets 454 845 475 232
Unlisted investments - 60
Deferred taxation 3 737 5 263
Non-current receivables 350 -
Current assets 1 397 231 (4) 1 453 680
2 498 496 2 543 051
Equity and liabilities
Shareholders" equity 1 019 756 11 921 894
Deferred taxation 87 684 83 891
Non-current liabilities 28 933 (70) 98 011
Current liabilities 1 362 123 (5) 1 439 255
2 498 496 2 543 051
Net interest-bearing debt 302 703 372 993
Net asset value per share (Rand) 23,38 10 21,23
Directors" valuation of unlisted - 60
shares
Capital expenditure
Depreciation 54 990 46 324
Amortisation 20 445 21 247
Incurred 92 612 87 798
Authorised and committed 11 765 58 560
Authorised but not contracted for 196 786 76 985
Condensed Consolidated Cash Flow Statements
for the year ended 31 March 2006
Restated
Reviewed Audited
R"000 2006 % 2005
Operating profit 289 206 (27) 397 459
Depreciation and amortisation 75 435 67 571
Adjustment for non-cash items (10 870) (14 087)
Finance costs (56 925) (57 734)
Taxation paid (82 760) (123 069)
Generated/(utilised) by working 1 324 (294 028)
capital
Generated/(utilised) by 215 410 (23 888)
operations
Dividends paid (60 460) (44 227)
Cash inflow/(outflow) from 154 950 (68 115)
operating activities
Cash outflow from investing (87 252) (85 297)
activities
Cash outflow from financing (147 048) (64 818)
activities
Net decrease in cash (79 350) (218 230)
Net (overdraft)/cash at beginning (196 568) 21 750
of year
Effects of exchange rate 472 (88)
movements
Net overdraft at end of year (275 446) (196 568)
Statement of Changes in Shareholders" Equity
Ordinary
Shareholders"
Equity
Stated Other Retained Minority
R"000 capital Reserves earnings interest Total
At 31 March 95 290 (15 538) 658 089 2 005 739 846
2004 -
restated
Net profit for 216 774 417 217 191
the year
Capitalisation
award and
ordinary 35 771 (53 722) (17 951)
dividends
Decrease in
foreign
currency
translation (3 208) (3 208)
reserve
Fair value (1 305) (1 305)
loss on
interest rate
swap
Share-based 6 041 6 041
payment
Preference
shares
converted into
ordinary (1 500) (1 500)
shares
Ordinary 41 652 (40 152) 1 500
shares issued
Preference 1 650 1 650
shares issued
Treasury 5 906 5 906
shares sold
Ordinary (25 771) (25 771)
dividends paid
Preference (505) (505)
dividend
At 31 March 178 619 (14 010) 755 218 2 067 921 894
2005 -
restated
Net profit for 153 695 328 154 023
the year
Decrease in
foreign
currency
translation (4 353) (4 353)
reserve
Fair value 84 84
gain on
interest rate
swap
Share-based 6 448 6 448
payment
Treasury 2 120 2 120
shares sold
Ordinary (60 043) (60 043)
dividends paid
Preference (417) (417)
dividend
At 31 March 180 739 (11 831) 848 870 1 978 1 019 756
2006
Other reserves
2006 2005
Reserves comprise of:
Net discount arising on acquisition of shares 2 517 2 517
of subsidiaries
Foreign currency translation reserve (27 253) (22 900)
Hedging reserve (306) (390)
Capital redemption fund 200 200
Share-based payment reserve 13 011 6 563
(11 831) (14 010)
Segmental Analysis
For the year ended 31 March 2006
Restated
Reviewed Audited
R"000 2006 % 2005
Revenue, net of intersegmental 4 324 842 1 4 270 155
sales
Chemicals 2 103 394 9 1 923 612
Mining 841 149 17 720 940
Agriculture 1 380 299 (15) 1 625 603
Operating profit 289 206 (27) 397 459
Chemicals 112 232 (11) 126 149
Mining 129 442 8 120 061
Agriculture 47 532 (69) 151 249
NOTES
Accounting policies
The condensed consolidated financial statements for the year ended 31 March 2006
were prepared in accordance with IAS 34 - Interim Financial Reporting and in
compliance with the Listing Requirements of the JSE Limited. These are the
Group"s first IFRS condensed consolidated financial statements for which annual
financial statements will be prepared under IFRS. IFRS 1 - First-time Adoption
of International Financial Reporting Standards, has been applied and for detail
of the adjustments, refer to the Transitional Report. 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 2006 are consistent with those applied for the restated year ended 31
March 2005 in terms of IFRS.
Headline earnings
Headline earnings equals basic earnings.
Hyperinflation
The hyperinflation adjustments, as required by the accounting standard IAS 29 -
Financial Reporting in Hyperinflationary Economies, result from the continued
devaluation in the Zimbabwean Dollar. The most significant adjustment is an
increase in gross profit for the year by R0,3 million (2005: R12,4 million
reduction). The net impact of these hyperinflation adjustments to the group, is
a net loss of R1,9 million (2005: R13,5 million loss).
Dividends
A dividend of 78 cents per share was declared on 20 June 2005 in respect of the
earnings of the previous financial year. This dividend is reflected in the
current year to 31 March 2006. In addition an interim dividend of 60 cents per
share was declared on 24 November 2005 in respect of the current year.
A final dividend of 85 cents per share was declared on 19 June 2006 bringing the
dividend for the year to 145 cents per share compared to 138 cents in respect of
the prior year.
Review opinion
The Group"s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed
consolidated financial information for the year ended 31 March 2006 contained in
this report. The 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
R17,1 million (2005: R17,6 million) within one year, R57,3 million (2005: R48,9
million) between two and five years and R0,6 million (2005: R2,9 million) later
than five years, giving a total of R75,0 million (2005: R69,4 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed at 30
September 2005. No impairment loss has occurred.
Transition to International Financial Reporting Standards (IFRS)
Reconciliation of SA GAAP and IFRS
IFRS reconciliation of assets, liabilities and equity
Assets
Audited Audited
R"000 Note 01/04/04 31/03/05
As previously
reported under
SA GAAP 2 105 843 2 502 892
IFRS adjustments 32 055 40 159
IFRS 2 - Share-
based payments 1
IAS 12 -
Income taxes 2 468 5 263
IAS 16 - Revision of
estimated useful lives
of property, plant
and equipment 3 31 587 34 896
IAS 17 - Leases 4
IAS 38 -
Intangible assets 5
Restated under IFRS 2 137 898 2 543 051
Liabilities Equity
Audited Audited Audited Audited
R"000 Note 01/04/04 31/03/05 01/04/04 31/03/05
As previously
reported under
SA GAAP 1 388 309 1 605 661 717 534 897 231
IFRS adjustments 9 743 15 496 22 312 24 663
IFRS 2 - Share-
based payments 1
IAS 12 -
Income taxes 2 468 5 263
IAS 16 - Revision
of
estimated useful
lives
of property, plant
and equipment 3 9 090 9 827 22 497 25 069
IAS 17 - Leases 4 185 406 (185) (406)
IAS 38 -
Intangible assets 5
Restated under 1 398 052 1 621 157 739 846 921 894
IFRS
Reconciliation of income statement
Audited
31/03/2005
as Audited
previously
reported IFRS Audited
under SA adjust- 31/03/2005
R"000 GAAP ments Restated
Revenue 4 263 974 6 181 4 270 155
Operating profit 394 333 3 126* 397 459
Net finance cost (57 734) (11 261) (68 995)
Fair value on derivative instruments (21 536) 21 536
Net monetary gain 17 186 (17 186)
Profit before taxation 332 249 (3 785) 328 464
Taxation (111 368) 95 (111 273)
Net profit for the year 220 881 (3 690) 217 191
Attributable to:
- Equity holders of the Company 220 464 (3 690) 216 774
- Minority interest 417 - 417
220 881 (3 690) 217 191
* IFRS adjustments
IFRS 2 - Share-based payments (6 041)
IAS 17 - Leases (997)
IAS 16 - Revision of estimated useful lives
of property, plant and equipment 3 253
IAS 1 - Forex losses reclassification 5 284
IAS 1 - Forward cover cost reclassification 5 977
IAS 1 - Fair value loss reclassification (21 536)
IAS 1 - Net monetary gain reclassification 17 186
3 126*
Basis of preparation
This report has been prepared in accordance with International Financial
Reporting Standards (IFRS). The Group restated information previously published
under SA GAAP to the equivalent basis under IFRS.
Transitional Arrangements
The date of transition to IFRS for the Group is 1 April 2004. The key principle
of IFRS 1 - First-time adoption of International Financial Reporting Standards
is full retrospective application of IFRS. This statement however provides
exemptions from retrospective application in certain instances due to cost and
practical considerations. The Group has applied the following exemptions in
accordance with IFRS 1:
* Business combinations: The Group adopted IFRS 3 - Business Combinations, from
1 April 2004 and therefore no adjustments were required.
* Property, plant and equipment: A first time adopter may elect to use the fair
value of individual property, plant and equipment at transition date as the
deemed cost. The Group is not making use of this transitional exemption and
elects to measure individual items of property, plant and equipment at original
cost.
* Employee benefits: The Group is electing not to apply the exemption to account
for all deferred actuarial gains or losses, including a 10% tolerance limit for
differences in actuarial assumptions in opening equity as at 1 April 2004. This
exemption is not elected as the Group"s accounting for employee benefits under
previous SA GAAP was already substantially in compliance with IAS 19 - Employee
Benefits.
* Cumulative foreign currency translation adjustments: The cumulative foreign
currency translation reserve existing on transition to IFRS has been retained
and the option to restate the reserve to zero is not elected as the Group"s
accounting for translation adjustments under previous SA GAAP was already
substantially in compliance with IAS 21 - The effects of changes in foreign
exchange rates.
* Share-based payments: The Group is electing not to apply the provisions of
IFRS 2 - Share-based payments to equity-settled awards granted on or before 7
November 2002, or to awards granted after that date but which had vested prior
to 1 January 2005 and has therefore taken the available exemption. (Refer Note 1
below).
* Compound financial instruments and designation of previously recognised
financial instruments: The Group has not taken advantage of the exemption that
allows comparative information presented in the first year of adoption of IFRS
not to comply with IAS 32 - Financial Instruments: Disclosure and Presentation,
and IAS 39 - Recognition and Measurement.
* Exemption from restatement of comparatives for IAS 32 and IAS 39: The Group
has elected to apply the exemption that allows it to apply the previous SA GAAP
principles under AC 125 - Financial Instruments: Disclosure and Presentation and
AC 133 - Financial Instruments: Recognition and Measurement to derivatives,
financial assets and financial liabilities and to hedging relationships for its
comparative information relating to the financial year ended 31 March 2005. It
therefore only applied IAS 32 and IAS 39 with effect from 1 April 2005. It is
the Group"s opinion that there is no material difference between the application
of IAS 32 and IAS 39 and the SA GAAP standards AC 125 and AC 133 as it applies
to the financial results of the Group as at 1 April 2005.
* Decommissioning liabilities included in property, plant and equipment: The
Group has elected in terms of IFRS 1 not to apply the requirements of IFRIC 1 -
Changes in Existing Decommissioning, Restoration and Similar Liabilities for
changes in such liabilities that occurred before 1 April 2004.
* Assets and liabilities of subsidiaries, associates and joint ventures
exemption: This exemption is not applicable, as the use of the exemption is made
at the level of the subsidiary, associate or joint venture that adopts IFRS
later than its parent company.
* Insurance contracts exemption: The Group does not issue insurance contracts;
this exemption is not applicable.
* Fair value measurement of financial assets or liabilities at initial
recognition: The Group has not applied the exemption offered by the revision of
IAS 39 on the initial recognition of the financial instruments measured at fair
value through profit and loss where there is no active market. This exemption is
therefore not applicable.
The Group has applied the following exceptions from retrospective application in
accordance with IFRS 1:
* Derecognition of financial assets and liabilities: The application of the
exemption from restating comparatives for IAS 32 - Financial Instruments:
Disclosure and Presentation and IAS 39 - Financial Instruments: Recognition and
Measurement means that the Group"s effective date for these standards was 1
April 2005. Financial assets and liabilities derecognised before 1 April 2005
have not been re-recognised under IFRS.
* Hedge accounting: On adoption of IFRS the Group is not allowed to designate a
transaction as a hedge, if such transaction was not designated as a hedge and it
qualified for hedge accounting in terms of AC 133 under SA GAAP.
* Estimates: Estimates under IFRS at 1 April 2004 are consistent with the
estimates made at the same date under SA GAAP. The Group therefore did not
adjust any estimates it had made under SA GAAP for information it received
subsequent to the date of transition to IFRS.
* Assets held for sale and discontinued operations: The Group has applied IFRS 5
- Non-current Assets Held for Sale and Discontinued Operations prospectively
from 1 April 2005 to all non-current assets held for sale and/or discontinued
operations.
Adjustments as a result of the Adoption of IFRS
The impact of changing from SA GAAP to IFRS is summarised below. The
quantification of the adjustments is shown in the tables for reconciliation of
assets, liabilities and equity and income statement.
Adjustments implemented with effect from 1 April 2004
Note 1: IFRS 2 - Share-based payments
The Group grants share options to employees under an employee share incentive
scheme. In addition, the third partnership with management scheme was approved
on 30 September 2004. Under SA GAAP, other than costs incurred in administering
the scheme, which were expensed as incurred, the scheme did not result in any
expense in the income statement, but rather a dilution in earnings per share
when the shares were issued. In accordance with the requirements of IFRS 2, the
Group now recognises an expense in the income statement, with a corresponding
credit to equity, representing the fair value of employee share options granted,
recognised over the vesting period of the options.
Note 2: IAS 12 - Income taxes
IAS 12 requires that deferred tax assets and deferred tax liabilities may only
be offset if levied by the same taxation authority. Therefore the deferred tax
assets of foreign subsidiaries previously included in deferred tax liabilities
are now classified as deferred tax assets.
Note 3: IAS 16 - Revision of estimated useful lives of property, plant and
equipment
In calculating the depreciation charge, an entity is required to review the
estimated useful lives of property, plant and equipment on an annual basis at
each balance sheet date in terms of IAS 16. This more robust assessment has
resulted in an increase in estimated useful lives of property, plant and
equipment. The depreciation previously recognised in the income statement has
accordingly been reduced. The opening balance sheet at 1 April 2004 as
previously disclosed in the Group"s interim results at 30 September 2005 has
been adjusted by R6,5 million following a more detailed review of the estimated
useful lives. This has had the consequent impact on the deferred tax and
depreciation charge.
Note 4: IAS 17 - Leases
IAS 17 requires operating lease cost and income to be accounted for on a
straight-line basis. Future lease increases in terms of a lease contract are
estimated and the average lease expense is then recognised in equal amounts over
the lease period. In general, this leads to earlier recognition of lease income
and lease expense, compared with the pattern of recognition under SA GAAP where
income and expenses were recognised at a constant real rate of return on the net
cash investment in the lease. This generally results in higher lease costs for
previously reported periods with a reduction in the 2004 opening equity and an
increase in the 2005 lease costs.
Further analysis of any interpretations issued by standard setters will take
place in order to process any required adjustments for the full year results
ending 31 March 2006.
Note 5: IAS 38 - Intangible assets
Computer software that was previously classified as property, plant and
equipment is now classified as intangible assets.
Note 6: IAS 1 - Presentation of financial statements
Various classifications of income statement items were changed to ensure a more
relevant presentation of results as per the requirements of IAS 1. The Group now
presents an income statement using classifications based on the function of the
expense.
In the process of transition to IFRS, the Group identified instances where
classifications were required between certain balance sheet items and between
certain income statement items compared with the classifications that were
previously represented under SA GAAP. These adjustments had a minor impact on
the Group"s income statement and its net equity.
These reclassifications mainly related to:
a) The presentation of expenses in applying the guidance in IAS 1, certain
reclassifications were made between "revenue", "cost of sales", "operating
expenses" and "finance costs".
b) Deferred tax assets and liabilities have been disclosed separately on the
balance sheet.
Certain presentation changes and reclassifications have been made to the Group"s
cash flow statement in order to present it on an IFRS basis.
The effect of new standards and interpretations which have been issued but which
are not yet effective will be disclosed in the annual report.
Audit opinion of 2005 restated financial information
The restatement of financial information for the year ended 31 March 2005 has
been audited by the Group"s auditors, PricewaterhouseCoopers Inc. and their
opinion is available for inspection at the Group"s registered office.
Commentary
Introduction
Omnia is a diversified and specialist chemical services company which provides
customised solutions in the chemicals, mining and agriculture markets. The
results for the year ended 31 March 2006 demonstrate the anticipated benefits
resulting from an improved balance in the Group profile.
Omnia"s interim results announcement in November 2005 and the trading update of
26 May 2006 indicated the sensitivity of the Group"s 2006 earnings to lower
fertilizer sales and margins as well as reduced polymer margins.
Fertilizer sales were adversely impacted by the significant maize stock overhang
in South Africa which resulted in prices being driven down to export parity
levels, reaching lows of R536 per ton. This low maize price made it uneconomical
for farmers to plant, the result being that 45% fewer hectares were planted to
maize than was the case in the previous year.
However, in the financial period under review to 31 March 2006, Omnia continued
to deliver on its strategy to diversify the Group and achieve a better balance
between its interests in the Chemical, Mining and Agriculture businesses. This
is demonstrated by the improving contribution made to operating profit by the
Chemicals and Mining divisions, which collectively increased to 84% (2005: 62%).
The benefits of a more balanced profile of business interests has therefore to a
large extent shielded the Group from the full impact of the low fertilizer sales
and margins in the period under review.
Financial review
The Group results are reported in accordance with International Financial
Reporting Standards (IFRS). All comparatives have been restated in compliance
with IFRS.
Although revenue for the year increased marginally by 1% to R4 325 million
(2005: R4 270 million) net profit declined by 29% to R154 million (2005: R217
million). In line with previous announcements that such a reduction was to be
expected, the earnings per share reduced to 353.2 cents per share (2005: 507.7
cents per share).
Operating expenses net of other income, after the inclusion of a net monetary
loss of R9 million (2005: R17 million gain) remained virtually static at R568
million (2005: R560 million) but reduced by 3% to R559 million (2005:
R577million) prior to such inclusion.
The reduction in hectares planted to maize nationally together with a marked
increase in raw material prices, particularly nitrogen products which increased
to record highs in the period, exerted pressure on operating margins in the
Agriculture business. The increase in nitrogen prices also depressed margins in
the mining business. The overstocked position in the plastics industry at the
beginning of the year, and the need to reduce high inventory levels in the face
of falling polymer prices, resulted in a squeeze on operating margins in the
Chemical division"s polymer business. Group operating margins consequently
reduced to 6.7% in the period under review (2005: 9.3%).
With working capital levels similar to those that prevailed during the prior
period, net interest paid remained virtually static, reducing by some 1% to R57
million (2005: R58 million). Notwithstanding a reduction in earnings the Group
generated R155 million in cash from its operating activities after dividend
payments during the period under review, resulting in a reduction in the net
interest bearing debt at 31 March 2006 to R303 million (2005: R373 million) and
a related reduction in the debt: equity ratio to 29.7% (2005: 40.5%).
The Group"s activities in Zimbabwe gave rise to a net monetary loss of R9
million (2005: net monetary gain R17 million) which, when seen together with
other related hyperinflation entries, translated into a net loss of R1,9 million
(2005: R13,5 million loss).
The cost of forward exchange contract transactions included in cost of sales and
not qualifying as hedges in terms of the requirements of IAS 39 - Financial
Instruments: Recognition and Measurement - has reduced to R19 million (2005: R30
million) due to the lower levels of fertilizer and polymer imports. On the other
hand, the open forward exchange contracts and other financial instruments at
31 March 2006 resulted in an unrealised loss of R2 million when marked to market
compared to an unrealised profit of R33 million for the comparable prior period.
Operational review
Chemicals
The Chemicals division, Protea Chemicals, is the leading distributor of
speciality, functional and effect chemicals in Southern Africa. It has a
presence in virtually every sector of the chemical distribution market.
Primarily due to volume growth, revenue increased by 9% to R2,1 billion (2005:
R1,9 billion) but operating profit declined by 11% to R112 million (2005: R126
million), reflecting reduced operating margins of 5.3% (2005: 6.6%). The
division contributed 39% to Group operating profits (2005: 32%). The marked to
market of open forward exchange contracts applicable to the chemical business at
31 March 2006 resulted in an unrealised net loss of R7 million (2005: R11
million profit) thus negatively impacting on the margin comparison.
Despite the strength of the local currency and its negative impact on Rand
margins, the chemical business produced a satisfactory performance for the year.
However, the polymer business was impacted by its expensive and high level of
opening stock in the face of falling plastics prices that prevailed for most of
the period under review. Following action taken within Protea Chemicals, the
polymer business returned to acceptable stock and margin levels towards the end
of the financial period.
The restructuring of the business in the prior year has enabled Protea Chemicals
to take advantage of industry opportunities and to respond more efficiently to
trends in market demand. This has allowed for further extraction of synergies
and improved integration of business processes.
Mining
The Mining division is a market leader in blended bulk explosives formulations
for surface mines, and manufactures packaged explosives for underground mines
and specialised surface blasting. It also supplies blasting accessories and a
complete range of mining chemicals.
The division continued its volume growth, particularly in mining chemicals, both
locally and internationally, producing another year of outstanding financial
results. Revenue increased by 17% to R841 million (2005: R721 million) and
operating profit increased by 8% to R129 million (2005: R120 million),
contributing 45% to Group operating profits (2005: 31%). Operating margins
however decreased to 15.4% (2005: 16.7%) in the face of increasing raw material
input costs.
The strong performance of the Mining division during the year was achieved
through capitalising on the growth in mining operations, supplying quality
products and services at competitive prices and applying specialist knowledge to
the benefit of the customer.
The sales of Electronic Detonators increased significantly with sales more than
doubling during the year. This was mainly due to:
* higher levels of field support;
* technical enhancements made to the product and;
* the utilisation of the division"s internally developed blasting software
package, which is used in conjunction with the Deltadet products to achieve
optimal blast results.
However, the development of the new generation electronic detonator,
Deltadet 3, has proceeded more slowly than planned. Sales volumes have grown
significantly but development costs, which are written off as incurred, are
still exceeding revenues. The new Deltadet product is unlikely to contribute
positively to earnings before 2008. Product development is being continued
because of its benefit to current operations as well as its exciting potential.
Agriculture
The Agricultural division produces and supplies granular, liquid and speciality
fertilizers to individual farmers, co-operatives and wholesalers throughout
South Africa, and increasingly sub-Saharan Africa, as well as to Madagascar,
Australia and New Zealand.
A tough year had been anticipated for the fertilizer division. As previously
reported, the maize stock overhang and depressed price forced South African
farmers to cut back on hectares planted to maize with the resultant significant
reduction in fertilizer volumes. Revenue in this division declined to R1,4
billion (2005: R1,6 billion) and operating profit decreased by 69% to R48
million (2005: R151 million) as operating margins fell to 3.4% (2005: 9.3%).
Four main factors influenced the operating performance of the division:
* the reduced sales volumes in the industry led to aggressive pricing;
* the environment of increasing commodity raw material prices continued,
resulting in a squeeze on Rand margins;
* the marked to market of open forward exchange contracts resulted in an
unrealised loss of R6 million whereas the comparable item in the prior period
had resulted in a profit of R6 million; and
* the effect of the persistently strong Rand led to reduced margins in the
export markets.
Prospects
The continued strength of the Rand has exerted pressure on the manufacturing
sector and there has been a noticeable decline in the manufacture of components
which can be imported more economically, especially from Asia. This has had an
impact on the consumption of input chemicals.
Notwithstanding this decline, Protea Chemicals continues to grow its volumes,
finding new applications in the process and is well positioned to embrace growth
opportunities and deliver an enhanced value proposition.
The continued strong growth in world mineral demand is beneficial for the
explosives and mining chemical markets and even after taking into account the
continued costs of further detonator development, continued real growth should
be achieved. There is significant potential for the Mining Division"s future
growth into Africa and renewed focus and energy will be directed at taking
advantage of the opportunities that arise from the division"s presence in
Africa.
Ongoing errors in crop estimates led to an overstatement of the maize crop to be
harvested in the previous 2004/2005 planting season. Many farmers were
discouraged from planting maize with the result that the country will probably
end the season with little or no maize stockpile. Thus the demand for fertilizer
should return to normal levels in the forthcoming season. In addition the
excellent rainfall has resulted in underground water, soil moisture and dam
levels being at unprecedented levels. This environment should impact favourably
on the fertilizer business and the Group as a whole in the period going forward.
The division has a strong position in Zimbabwe and Zambia, and Angola is
considered a growth opportunity with the prospect of more tonnage being sold.
The Group has largely adapted to operating at an exchange rate of R6 to the US
dollar. A weaker Rand will have a positive impact on the Group"s performance.
Notwithstanding the reduced earnings for the year under review the Group is in
line with its five year management target after the second year.
The Group has embarked on a number of innovative projects that will
significantly impact on improved logistical and raw material efficiencies as
well as environmental improvements. These will lead to increased sales including
benefits from greenhouse gas reductions. In addition Omnia remains focused on
balancing the Group"s risk profile and pursuing new growth opportunities, both
nationally and internationally.
Dividend
The Board is pleased to announce that it has declared a final dividend of 85
cents in respect of shareholders recorded in the register on Friday 14 July
2006. This final dividend brings the dividend for the full year ended 31 March
2006 to 145 cents (after inclusion of the interim dividend of 60 cents per
share) compared to the 138 cents paid in respect of the prior period.
The last day to trade in the company"s shares cum dividend will be Friday 7 July
2006. The shares will commence trading ex dividend on Monday 10 July 2006 and
the record date will be Friday 14 July 2006. The payment date will be Monday 17
July 2006. Share certificates may not be dematerialised or rematerialised
between Monday 10 July and Friday 14 July 2006, both dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
Bryanston
21 June 2006
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz-
Gibbon*, RB Humphris* (Group Managing Director), Prof SS Loubser, Dr WT Marais
(Alternate to WT Marais), WT Marais (Deputy Chairman), 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
Ultra Registrars (Pty) Ltd
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
www.omnia.co.za
Date: 21/06/2006 08:00:36 AM Produced by the JSE SENS Department
