Omnia FY17 results pinched by tough economy

27th June 2017 By: Megan van Wyngaardt - Creamer Media Contributing Editor Online

Omnia FY17 results pinched by tough economy

Omnia chairperson Rod Humphris
Photo by: Duane Daws

Chemicals producer Omnia on Tuesday reported a drop in headline earnings a share to 881c for the year ended March 31, from 944c in the prior financial year, owing to a tough economic environment.

This resulted in an 8% drop in its profit before tax, to R856-million.

During a webcast of the group’s results, chairperson Rod Humphris said one of the underlying factors in the weak performance was the ongoing pricing dispute between a raw materials provider and its agriculture division, which resulted in an R83-million impairment.

The group has been involved in a legal dispute with the supplier since 2014.

“We believe [the overcharging of raw materials] is a serious contravention of the Competition Tribunal’s terms and [although we are] unsure of where it will go legally, we are pretty confident [the ruling for payments] will go in our favour,” he explained.

Meanwhile, Humphris also noted that last year’s carry-over stock, as a result of many farmers not having used fertilisers owing to the drought, impacted on its agriculture division’s sales. “We could have had a better year if it weren’t for the carry-over stock,” he noted.

However, the division still increased its operating profit by 7% to R438-million, owing to record sales of local and international speciality fertilisers, with volumes up 11.5% internationally.

Meanwhile, the performance of its chemicals division “remained fairly subdued”, seeing sales volumes drop 8%, with a coinciding 15% drop in profit to R145-million, which Humphris highlighted would remain under pressure, as the flat manufacturing index was putting pressure on the business.

“We are quite pleased to even have held revenue in the tough economic conditions we faced,” he added.

In its mining division, which saw operating profit down 13% year-on-year to R457-million, Humphris noted that mine closures in South Africa and business lost in Botswana and Namibia, had negatively impacted on its results.

“In South Africa, the industry has been shrinking, but in Zambia’s Copperbelt, we are seeing increased growth in the next year. [Omnia also experienced a] massive increase in detonator sales through Axxis,” he pointed out.

Humphris highlighted the proposed R780-million acquisition of additives and base oils manufacturer Umongo Petroleum as a “very exciting” prospect for Omnia.

He believed the transaction, which was awaiting approval from the Competition Commission and was expected to close in the fourth quarter, would provide the company with some leverage in the chemicals industry.

“There is a huge opportunity to expand this business further, as there are many applications,” Humphris pointed out, adding that with global standards aligning more toward “cleaner oils” that contain less sulphur, the company will gain traction.