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Audited Results for the Year Ended 31 March 2015
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code OMN
ISIN ZAE000005153
(“Omnia” or “the Group”)
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2015
FINANCIAL HIGHLIGHTS
- Revenue at an all-time high of R16.8 billion - up 3.5% year-on-year
- Operating profit up 4% - R1 476 million
- Profit before tax level at R1 331 million
- Headline earnings per share rose by 2.6% - R14.65 per share
- Profit after tax of R934 million - down 5.8%, due to an overall higher
effective tax rate
- A- CREDIT RATING - Credit rating affirmed in July 2014 as A- (long-term)
and A1- short-term), with a positive ratings outlook
- Debt: equity ratio higher at 12.3% due to increased short-term working capital
requirements for the Agriculture division
- Cash generated from operations remained steady at R1.8 billion
SUMMARY CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2015
Rm Audited Audited
2015 % 2014
Revenue 16 835 4 16 259
Cost of sales (12 898) 2 (12 647)
Gross profit 3 937 9 3 612
Distribution expenses (1 524) 15 (1 324)
Administrative expenses (907) – (908)
Other operating expenses (90) 14 (79)
Other operating income 60 (48) 115
Operating profit 1 476 4 1 416
Finance expenses (192) 34 (143)
Finance income 47 (16) 56
Profit before taxation 1 331 – 1 329
Income tax expense (397) 18 (337)
Profit for the year 934 (6) 992
Attributable to:
Owners of Omnia Holdings Limited 939 (6) 996
Non-controlling interest (5) – (4)
Profit for the year 934 (6) 992
Earnings per share from profit
attributable to owners of
Omnia Holdings Limited
Basic earnings per share (cents) 1 402 (6) 1 496
Diluted earnings per share (cents) 1 308 (3) 1 344
Headline earnings per share (cents) 1 465 3 1 428
Diluted headline earnings per share (cents) 1 366 6 1 283
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2015
Audited Audited
Rm 2015 % 2014
Profit for the year 934 (6) 992
Other comprehensive income, net of tax
Currency translation differences 367 44 255
Total comprehensive income for the year
attributable to: 1 301 4 1 247
Owners of Omnia Holdings Limited 1 306 4 1 251
Non-controlling interest (5) 25 (4)
1 301 4 1 247
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2015
Audited Audited
Rm 2015 2014
Operating profit 1 476 1 416
Depreciation and amortisation 353 295
Adjustment for non-cash items 17 58
Cash generated from operations 1 846 1 769
Utilised by working capital (878) (52)
Interest paid (208) (169)
Interest received 47 56
Taxation paid (341) (289)
Net cash inflow from operating activities 466 1 315
Cash outflow from investing activities (578) (791)
Cash outflow from financing activities (466) (337)
Net (decrease)/increase in cash and cash equivalents (578) 187
Net cash and cash equivalents at beginning of year (131) (321)
Exchange rate movements on cash and cash equivalents 10 3
Net cash and cash equivalents at end of year (699) (131)
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2015
Attributable to the owners of
Omnia Holdings Limited
Non-
Stated Treasury Other Retained controlling
Rm capital shares reserves earnings interest Total
At 31 March 2013 1 289 (9) 389 3 285 (2) 4 952
Recognised income and expenses
Profit for the year ended 31 March 2014 996 (4) 992
Currency translation difference 255 255
Transactions with shareholders
Ordinary dividends paid (301) (301)
Treasury shares sold 3 3
Share-based payment – value of
services provided 11 11
At 31 March 2014 1 289 (6) 655 3 980 (6) 5 912
Recognised income and expenses
Profit for the year ended 31 March 2015 939 (5) 934
Currency translation difference 367 367
Change in functional currency of
subsidiary 11 (12) (1)
Transactions with shareholders
Ordinary shares issued 211 (37) (405) (231)
Ordinary dividends paid (322) (322)
Treasury shares purchased (66) 15 (51)
Treasury shares sold 2 18 20
Share-based payment – value of
services provided 14 14
At 31 March 2015 1 500 (70) 1 028 4 195 (11) 6 642
SUMMARY CONSOLIDATED BALANCE SHEET
as at 31 March 2015
Audited Audited
Rm 2015 % 2014
ASSETS
Non-current assets 4 473 5 4 270
Property, plant and equipment 3 927 7 3 672
Intangible assets 519 (3) 537
Available-for-sale financial assets – (100) 34
Investment accounted for using the
equity method 20 18 17
Deferred income tax assets 7 (30) 10
Current assets 7 431 18 6 302
Inventories 3 886 21 3 213
Trade and other receivables 3 118 13 2 751
Income tax assets 27 100 –
Cash and cash equivalents 400 18 338
Total assets 11 904 13 10 572
EQUITY
Capital and reserves attributable
to the owners of
Omnia Holdings Limited 6 653 12 5 918
Stated capital 1 500 16 1 289
Treasury shares (70) 100 (6)
Other reserves 1 028 57 655
Retained earnings 4 195 5 3 980
Non-controlling interest (11) 83 (6)
Total equity 6 642 12 5 912
LIABILITIES
Non-current liabilities 605 31 462
Deferred income tax liabilities 502 47 342
Trade and other payables 37 100 –
Debt 66 (45) 120
Current liabilities 4 657 11 4 198
Trade and other payables 3 503 (2) 3 577
Debt 55 (35) 84
Income tax liabilities – (100) 68
Bank overdrafts 1 099 100 469
Total liabilities 5 262 13 4 660
Total equity and liabilities 11 904 13 10 572
Net debt 820 335
Net asset value per share (Rand) 98.44 88.67
Capital expenditure
Depreciation 322 264
Amortisation 31 31
Incurred 587 855
Authorised and committed 92 143
Authorised but not contracted for 96 184
RECONCILIATION OF HEADLINE EARNINGS
for the year ended 31 March 2015
Audited Audited
Rm 2015 % 2014
Profit for the year attributable
to owners of Omnia Holdings Limited 939 (6) 996
Adjusted for loss on disposal of
fixed assets 3 50 2
Adjusted for profit on disposal of
associate – (100) (55)
Adjusted for impairment of
available-for-sale financial asset 39 100 11
Adjusted for insurance proceeds for
replacement of property, plant and equipment – (100) (3)
Headline earnings 981 3 951
SEGMENTAL ANALYSIS
for the year ended 31 March 2015
Audited Audited
Rm 2015 % 2014
Revenue, net of inter-segmental sales 16 835 4 16 259
Agriculture 7 287 9 6 680
Mining 5 351 (2) 5 458
Chemicals 4 197 (2) 4 121
Operating profit 1 476 4 1 416
Agriculture 656 52 431
Mining 720 (13) 829
Chemicals 100 (36) 156
OTHER RESERVES
as at 31 March 2015
Audited Audited
Rm 2015 2014
Share-based payment reserve 101 124
Foreign currency translation reserve 906 528
Gain on treasury shares sold 18 –
Net discount arising on acquisition of
shares of subsidiaries 3 3
1 028 655
NOTES
Basis of preparation
These provisional summarised financial statements have been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council,
presentation and disclosures as required by IAS 34 Interim Financial Reporting,
the JSE Listings Requirements and the requirements of the Companies Act of South
Africa. The summarised financial statements do not include all of the information
required by IFRS for full annual financial statements. The preparation of these
financial statements was supervised by the group finance director, WG Koonin
CA(SA).
The financial statements have been prepared using accounting policies that comply
with IFRS and which are consistent with those applied in the preparation of the
financial statements for the year ended 31 March 2014, unless otherwise stated.
The accounting standards, amendments to issued accounting standards and
interpretations, which are not yet effective as at 31 March 2015, have not been
adopted by the Group.
The directors take full responsibility for the preparation of these summarised
financial statements and the financial information has been correctly extracted
from the underlying annual financial statements.
Audit opinion
The Group’s auditors, PricewaterhouseCoopers Inc., have issued their opinion on
the Group’s financial statements for the year ended 31 March 2015. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised financial statements have
been derived from the Group financial statements and are consistent in all
material respects with the Group financial statements. A copy of their audit
report is available for inspection at the company’s registered office. Any
reference to future financial performance included in this announcement, has not
been reviewed or reported on by the auditors.
ADDITIONAL INFORMATION
for the year ended 31 March 2015
Audited Audited
Rm 2015 2014
Weighted average number of shares in issue ('000) 66 970 66 592
Weighted average number of diluted shares in issue ('000) 71 799 74 127
Number of shares in issue ('000)
(excluding treasury shares) 67 471 66 678
COMMENTARY
Introduction
Omnia is a diversified provider of specialised chemical products and services
used in the agriculture, mining and chemical sectors. Omnia’s corporate office is
in Johannesburg, South Africa and its main production facility in Sasolburg, some
70 kilometers south of Johannesburg. The Group’s operations extend into 16
countries on the Africa continent, including South Africa with focused operations
also in Australasia, Brazil, China and Mauritius. Our client base extends across
southern and West Africa and to other regions such as Europe, South America and
South East Asia. Omnia differentiates itself from other commodity chemical
providers by adding value at every stage of the supply and service chain through
technological innovation and by deploying our intellectual capital. The
sustainability of the business model is based on and strengthened by our targeted
backward integration through installing technologically advanced plants to
manufacture core materials such as nitric acid and explosives emulsions. In
addition to securing sources of supply, this enables us to improve operational
efficiencies throughout the product development and production chain. Omnia
provides customised, knowledge-based solutions through our Agriculture, Mining
and Chemicals divisions. The Group’s proven business model makes us a market
leader in the distribution of industrial chemicals. Omnia continues to grow and
prosper, offering extraordinary value to our customers by tailoring our solutions
to their business needs through product and service innovation, with the expert
application thereof.
Global Economic Environment
The past year’s global macro-economic environment was characterised by several
conflicting developments. The recovery of the US economy continued to gain
momentum, resulting in a strengthening of the US dollar and markets anticipating
the US Federal Reserve raising interest rates for the first time since 2009. In
contrast, the Eurozone continued to struggle with little or no growth and the
possibility of deflation setting in. The decision by the European Central Bank to
launch a Quantitative Easing program of up to s1 trillion and the threat of
Greece defaulting on debt obligations and exiting the Eurozone, weighed further
on the region’s common currency. The recent elections in the United Kingdom,
voted in a majority government, paving the way for a more-stable outlook for the
United Kingdom and sterling. China’s economy continued to grow strongly, albeit
at a slower rate, which has had a knock-on effect in terms of the global economy
and in particular, the demand for commodities. Credit expansion and favourable
monetary policy that previously supported the growth in the Chinese economy, has
started to weigh on the economic outlook for the country due to the high costs of
servicing public sector, corporate and household debt. Further changes
implemented by the Chinese government affecting the import and export of
commodities, combined with stricter environmental laws to deal with chronic air
pollution, have also altered the supply/demand and pricing fundamentals of
certain commodities across the globe.
Commodity prices play a critical role in our business. Commodity prices came
under pressure, virtually across the board with sharp declines being registered
from the middle of calendar 2014 that were caused by a variety of factors
including declining demand and oversupply due to additional production capacity
coming on stream. The strong rise in the US dollar, also contributed to the
decline commodity prices as they are denominated in the US currency. Events in
the Middle East, the reluctance of OPEC to curtail oil production output and the
rapid development of the shale gas industry in the USA, created a significant
oversupply in oil markets with Brent crude dropping by more than 50% to below
$50 per barrel at one stage. The further complication of slowing global growth
and new technology also weighed on oil prices. The short- to medium-term outlook
for commodity prices remains weak and will most likely lead to further
contractions over the next few years in the mining industry, which is a key
market in which Omnia operates.
FINANCIAL REVIEW
Income statement
Group revenue rose 3.5% to R16 835 million (2014: R16 259 million) based on an
improved performance by the Agriculture division which was offset by weaker
performances by the Mining and Chemicals divisions due to a general slowdown in
both sectors.
Gross profit increased by a commendable 9.0% to R3 937 million (2014:
R3 612 million) with a robust improvement in the Agriculture division’s margin,
offset by lower volumes and competitive pricing that affected the performance of
the Mining division, and the tight trading environment in which the Chemicals
division operates that put margins under pressure.
Administrative expenses of R907 million (2014: R908 million) were unchanged
year-on-year, before taking into account the R200 million once-off charge in the
prior year for the Long Term Incentive Plan (LTIP). On a pro forma basis
excluding this amount, the current year’s expense of R907 million (2014:
R708 million on a pro forma basis) was 28.1% higher year-on-year. This year-on-
year increase in costs, is partially attributable to the weaker rand:US dollar
exchange rates which affected the costs of running our businesses outside South
Africa, and the once off write-offs and associated restructuring charges relating
to both the West Africa business unit in the Mining division and the Angolan and
Mozambique business units in the Agriculture division. Included in administrative
expenses is the impairment of available-for-sale financial assets of R39 million
(2014: R11 million).
Distribution expenses increased by 15.1% to R1 524 million (2014:
R1 324 million), due in part to the depreciation charge on capital expenditure
projects completed in the prior year that were subject to a full year
depreciation charge in the current year. Sales volumes increased in the
Agriculture and Chemicals divisions resulting in higher distribution expenses and
an increase in US dollar transport rates outside South Africa, when converted at
the higher amount due to the weakening of the South African rand against the
US dollar.
Other operating expenses of R90 million (2014: R79 million) included R59 million
(2014: R48 million) in foreign exchange losses, largely driven by the weaker
euro:US dollar exchange rate and volatility of the local currencies of various
African countries in which we operate, that fix their currencies against the
US dollar. Amortisation of intangible assets of R31 million (2014: R31 million)
for the year was unchanged.
Other operating income of R60 million (2014: R115 million) was lower year-on-
year, primarily due to the prior year’s R52 million gain on the disposal of the
interest in Nalco Africa.
Operating profit of R1 476 million (2014: R1 416 million) was up 4.2% year-on-
year. The Agriculture division had an excellent year, with a sharp increase of
52.2% in operating profit to R656 million (2014: R431 million) largely due to the
improvement in margin as a result of volume growth, the significant improvement
in the performance at the Sasolburg plant that reduced the unit cost of finished
goods produced, improvement in overhead recoveries based on higher throughput
volumes, a strong performance in the high-margin speciality products business and
growth in the high-margin retail sales in Africa. The Mining division returned a
respectable operating profit of R720 million (2014: R829 million), down 13.1% in
a slow market and after taking various once-off charges primarily on the West
Africa operations. The Chemicals division’s operating profit of R100 million
(2014: R156 million) was 36% lower year-on-year before taking into account the
R52 million gain in the prior year on the disposal of our interest in Nalco
Africa. Excluding this amount, the year-on-year profit on a pro forma basis of
R100 million (2014: R104 million) was 3.8% lower which is commendable when
considering the restructuring initiative that took place in this division and the
poor economic environment in South Africa where the issues in the manufacturing
sector were accentuated by labour strikes and shortages of electricity.
Operating profit margin of 8.8% (2014: 8.7%) for the year under review was
marginally higher year-on-year. The year-on-year comparison of the divisional
operating margins in percentage terms were mixed with the Agriculture division up
at 9.0% (2014: 6.5%), the Mining division down at 13.5% (2014: 15.2%) and the
Chemicals division down at 2.4% (2014: 3.8%). With reference to the past year’s
guidance on operating profit margin and the outlook for the 2016 financial year,
the guidance for Agriculture remains unchanged at 8.0% – 10.0%, Mining would be
slightly lower at 13.5% – 15.0% due to prevailing market conditions and Chemicals
also lower at 3.0% – 4.0% as this business continues to rebuild.
Net finance expenses of R145 million (2014: R87 million) was sharply higher year-
on-year due to the higher levels of working capital required for an extended
period during the latter part of the financial year in the Agriculture division.
This increased requirement was attributable to the higher stock levels that
developed as a result of the better-than-planned performance at Sasolburg, the
late rains that delayed the start to the planting season, a lack of follow up
rains combined with the late summer drought that led to a slowdown in additional
nitrogen fertilizer top dressing sales in the latter part of the season. Finance
expenses of R192 million (2014: R143 million) are net of the capitalisation of
R16 million (2014: R26 million) of interest costs relating to capital projects
under construction during the current financial year. Finance income of
R47 million (2014: R56 million) declined as a result of lower cash balances on
hand during the year and reduced levels of funding provided to farmers and on
which interest income is earned.
EBITDA was higher at R1 829 million (2014: R1 711 million), with the year-on year
difference partially attributable to the higher depreciation and amortisation
charge at R353 million (2014: R295 million).
Profit before tax of R1 331 million (2014: R1 329 million) was flat year-on-year.
Taxation of R397 million (2014: R337 million) increased by 17.8% or R60 million
higher year-on-year due to the higher than normal effective tax rate of 29.8%
(2014: 25.4%). The 4.4 percentage point increase is due to a combination of the
losses made by separate legal entities in various countries that could not be
offset against profits made elsewhere in the Group, the mix of profits, varying
tax rates and formulas in the various countries in which we operate that changes
year-on-year and the lower amount of Section 12I tax incentives claimed in the
past financial year. The Section 12I tax incentive claimed of R1.4 million (2014:
R11.5 million), was due to the reduction in expenditure on the qualifying capital
project, namely the nitric acid 2 complex in Sasolburg.
Profit after tax of R934 million (2014: R992 million) was 5.8% lower year-on-
year, due to the higher effective tax rate.
Total comprehensive income was higher year-on-year at R1 301 million (2014:
R1 247 million), due to the higher foreign-currency translation differences of
R367 million in the 2015 financial year (2014: R255 million).
Headline earnings per share of R14.65 (2014: R14.28) was up 2.6% year-on-year.
Nanotron
The Nanotron incentive scheme operated from 1 April 2009 to 31 March 2014. The
SENS announcement detailing the transaction was issued on 12 December 2014 and
the distribution to participants was finalised shortly thereafter.
Over the five-year period ended 31 March 2014, the Group achieved a compound
annual growth rate of 10.37% above the threshold growth rate set by shareholders
at 8%. As a result of the criteria having been met, on 30 November 2014, the
board of directors of Omnia exercised the option to acquire the remaining 81.446%
interest in Nanotron held by participants at a total cost of R439.7 million. This
was calculated in accordance with the valuation formula and based on the 30-day
VWAP at the exercise date of R210.69. Participants were settled 50% in cash
amounting to R219.9 million and the remaining 50% by way of equity with the
issuance of 1 043 527 new Omnia Holdings shares, with an equivalent value of
R219.9 million. At the inception of the Nanotron scheme, a once off charge of
R29 million was recorded in FY2010 and no further amounts were recorded
thereafter. On this basis, the prior year LTIP charge of R200 million excludes
any amount for Nanotron as detailed below and there was no further LTIP charge in
the year under review on settlement of the amount due to the participants.
Prior year LTIP charges
In order to contextualise the accounting in the Income Statement for the annual
LTIP charge in respect of the various schemes and with reference to the detail
contained in the prior year’s Integrated Annual Report, a summary of the
financial effects is set out below.
Due to the poor profit in the first year (FY2009) of the five-year plan and the
subsequent improvement in financial performance in the fourth (FY2013) and fifth
years (FY2014) of the plan, there was a significant catch-up in the LTIP charges
during the latter period. A substantial portion of the R200 million charge in the
previous financial year was as a result of the Group meeting the overall five-
year target in the final year of the scheme which ended on 31 March 2014. The
prior year LTIP charge of R200 million consisted of: R128 million for the cash-
and equity-settled LTIP for the Partner 4 and the Phantom Share schemes,
R62 million for the Share Appreciation Rights scheme and R10 million for the
equity-settled Sakhile 1 and Sakhile 2 schemes. There was no additional charge in
the 2014 financial year for the Nanotron scheme.
Due to the strong financial performance particularly in the last two years of the
five year scheme that ended on 31 March 2014, a pro forma calculation of the
expenses was performed to normalise the charges for the previous two years as set
out below:
Rm FY2014 FY2013 Total
Actual charges for the year:
cash- and equity-settled schemes 128 34 162
Pro forma charges for the year:
cash- and equity-settled schemes 49 43 92
Pro forma difference on profit before tax (79) 9 (70)
On this basis, the net pro forma adjustment to the profit before tax for FY2014
would be R79 million (or R57 million after tax). The current year’s headline
earnings of R981 million, would be 2.7% lower year-on-year if the prior year’s
headline earnings increased by R57 million, from R951 million to R1 008 million.
The headline earnings per share of 1 465 cents per share would be 3.2% lower
year-on-year if the prior year’s headline earnings per share increased from
1 428 cents per share to 1 514 cents per share.
Current year LTIP charges
The current year’s LTIP charges of R19 million (2014: R200 million) consists of:
R8 million (2014: R128 million) for the new cash- and equity-settled Partnership
with Management 5 Share Scheme (Partner 5), RNil (2014: R62 million) for the
Share Appreciation Rights scheme and R11 million (2014: R10 million) for the
equity-settled Sakhile 1 and Sakhile 2 schemes. This compares to an estimated
charge in the order of R75 million for the current year, if the target for year
one of the five-year plan was met. The lower charge in the current year is due to
the R212 million shortfall in the profit before tax for year one of the new five-
year plan that commenced on 1 April 2014.
As a result of the lower than planned performance against target, the year-on-
year LTIP charge for the cash- and equity-settled scheme decreased by
R120 million, from R128 million in the prior year for Partner 4 and Phantom Share
schemes to R8 million in the current year for the Partner 5 scheme, which also
incorporates a phantom share scheme. The R62 million year-on-year reduction in
the LTIP charge for the Share Appreciation Rights scheme, is due to the year-on-
year decrease in the share price from R211.05 at 31 March 2014 to R172.50 at
31 March 2015.
Balance sheet
The balance sheet continued to strengthen with total assets increasing by 12.6%
or R1 332 million to R11 904 million (2014: R10 572 million). The increase in
current assets of R1 129 million was largely attributable to the R673 million
increase in inventory as a result of the higher-than-normal build-up of
fertilizer stocks in the latter part of the planting season, the R367 million or
13% increase in trade and other receivables due to fertilizer sales taking place
later in the season with associated credit terms that extend beyond the financial
year end. The net increase in non-current assets of R203 million is largely
attributable to lower capital expenditure of R587 million (2014: R855 million)
based on capital projects planned for the year offset by the higher depreciation
charges of R322 million (2014: R264 million), based in part on the increased
capital expenditure in the prior year which is now subject to a full year
depreciation charge.
Total liabilities at financial year end were R5 262 million (2014:
R4 660 million), up R602 million or 12.9%. Current liabilities increased by
R459 million or 10.9% to R4 657 million (2014: R4 198 million), with trade and
other payables reducing marginally to R3 503 million (2014: R3 577 million) and
bank overdrafts rising from R469 million to R1 099 million, largely to fund the
higher than normal fertilizer stockholding in the latter part of the financial
year. Non-current liabilities increased by R143 million to R605 million (2014:
R462 million), with the increase in deferred tax of R160 million and long-term
trade and other payables of R37 million, offset by the decrease in long-term debt
of R54 million.
Net debt at year-end was R820 million (2014: R335 million), due to the funding of
additional working capital for the Agriculture division, a position that will
normalise in the 2016 financial year. Although the gearing ratio of 12.3% at
year-end was higher than the 5.7% recorded at the end of the prior year, it
remains low and is expected to continue to fall as the year-end fertilizer
stockholding normalizes converting back into cash and as the underlying assets
continuing to generate higher levels of profitability and cash flow.
Total equity increased to R6 642 million (2014: R5 912 million), a R730 million
or 12.3% net movement year-on-year, due to the increase in net profit after tax
of R939 million, total increase in the foreign currency translation reserve of
R378 million and new shares issued to settle 50% of the amount due to
participants in the Nanotron transaction in the amount of R211 million (net of
the R8 million in share issuance and transaction costs). This was offset by the
reduction in retained earnings due to the release from the share based payment
reserve for the Nanotron scheme of R405 million, dividends paid of R322 million,
treasury shares purchased in the open market for the new Partner 5 scheme of
R64 million and R7 million for other items. The increase in the foreign currency
translation reserve is due to the weakening of the year end South Africa rand:
US dollar exchange rate, which is used to translate the value at financial year
end of those net assets denominated in US dollars, from R10.53 at 31 March 2014
to R12.14 at 31 March 2015. At year end, the total foreign currency translation
reserve was R906 million (2014: R528 million).
Cashflow Statement
Cashflow from operations rose by R77 million to R1 846 million (2014:
R1 769 million) and net cash inflow from operating activities was R466 million
(2014: R1 315 million), with the year-on-year decrease largely attributable to
the R878 million (2014: R52 million) of net cash funding utilised for inventory
related to working capital funding which will normalise in the following
financial year.
Cash flow from investing activities of R578 million (2014: R791 million) was
lower due to the reduction in expenditure on major capital projects, which
remained in line with the business plan.
Cash flow from financing activities of R466 million (2014: R337 million) was
higher due to increased dividend payments of R322 million (2014: R301 million),
the net settlement of debt amounting to R83 million (2014: R39 million) and
treasury shares purchased for R61 million (2014: R3 million treasury shares
issued).
The net decrease in cash and cash equivalents for the year was R578 million
(2014: R187 million net increase) and net borrowings and overdrafts at year end
totaled R699 million (2014: R131 million).
DIVISIONAL REVIEW
Agriculture
Omnia’s Agriculture division comprises Omnia Fertilizer and Omnia Specialities
and is the market leader in its field in southern Africa. The division produces
and trades in granular, liquid and speciality fertilizers for a broad customer
base of farmers, co-operatives and wholesalers throughout southern and East
Africa and to select markets in Australasia and Brazil.
The Agriculture division’s competitive edge lies in Nutriology®, or what we call
the “science of growing”. The science of growing is our business philosophy and
involves more than just selling fertilizer to farmers – it is about optimising
yield and crop quality to maximize returns while reducing farming and
environmental risk. Achieving this, entails becoming intricately involved in the
producers’ businesses to better understand their objectives and targets.
Nutriology® also includes leading-edge research and development that results in
the development of new products, services and farming practices. The Omnia
Nutriology® brand is highly regarded in the regional market and strongly supports
management’s vision of creating wealth through knowledge.
Omnia Fertilizer services the South African market through regional sales offices
and a comprehensive network of agents and representatives supported by qualified
agronomists. The rest of the southern Africa market is supported from Omnia’s
regional offices located in Angola, Mauritius, Mozambique, Zambia and Zimbabwe,
while other markets such as Botswana, the Democratic Republic of the Congo (DRC),
Kenya, Lesotho, Tanzania, Malawi, Namibia and Swaziland are supported from South
Africa.
Omnia Specialities supplies a comprehensive range of water-soluble and foliar
products, trace elements and organic soil conditioners to the southern African
market and through offices in Australia, New Zealand and Brazil. Selected
speciality products are exported to Europe, Asia and South America.
The Agriculture division turned in an excellent performance with revenue growth
of 9.1% to R7 287 million (2014: R6 680 million) on the back of a 6.0% volume
increase and a 46% or R331 million year-on-year increase in revenue from the
trading and wholesale business, which started in December 2012. Prices were
however under pressure in the current year, due to falling crop prices and
competition from blenders who tend to focus on the lower-priced urea product,
which is generally more attractive to farmers when crop prices are low and
margins are under pressure. In contrast, the overall improvement in the current
year’s performance was achieved in an environment where maize plantings were 1.3%
lower than in the preceding year.
The total operating profit margin of 9.0% is a significant improvement over the
previous year’s margin of 6.5%, and was within the guidance of 8% to 10%. The
2.5 percentage point increase was largely attributable to the import of
significantly less granular fertilizer, the effects of the weaker rand (which is
a key driver in the net profit margin) and increased production volumes achieved
from the nitric acid 2 complex and downstream granulation plants. An improved
performance in reducing raw material costs that is determined by a combination of
factors including the timing of purchases, price negotiations and hedging
strategies, was also recorded. Overall, this resulted in the current year’s
operating profits increasing by 52% to R656 million (2014: R431 million).
Net working capital increased by 140% to R1 837 million (2014: R765 million) due
to higher than normal stockholding due largely to the summer drought that was
experienced during the latter part of the planting season. This drought delayed
the planting season and also had a negative impact on nitrogen fertilizer top
dressing sales in the latter part of the season. Working capital needs were also
boosted by the cost of holding the excess purchases of raw materials that took
place earlier on in the production plan, that were on a precautionary basis but
ultimately not required due to the significant improvement in production
performance from the Sasolburg plant.
Mining
Omnia’s Mining division services the mining industry through BME and Protea
Mining Chemicals.
BME operates throughout Africa with a strong presence in southern and West
Africa. BME is a market leader in bulk emulsion and blended bulk explosives
formulations for the opencast mining industry; it produces electronic delay
detonators and shocktube initiating systems; it has its own range of boosters,
and it manufactures packaged explosives for underground mining and specialised
surface blasting operations. BME adds value to its products through its world-
class blasting consultancy service. Our industry experts, experienced mining
engineers and geologists advise and support customer in the planning and
execution of blasting operations. This is achieved by using BME’s unique and
proprietary BlastMap™ software solutions in combination with the accuracy of the
AXXIS® Digital Initiation System that is used to control the electronic delay
detonators in the blasting process.
Protea Mining Chemicals provides a suite of value-added services to complement a
wide range of chemicals and reagents supplied for use by the processing plants on
mines in South Africa and Africa. This includes Protea Process®, a comprehensive
service that covers the design of equipment, logistics and on-site management and
make up of chemicals and reagents.
The Mining division’s total revenue decreased by 2.0% to R5 351 million (2014:
R5 458 million) on the back of declining volumes of 2.7% following many years of
double digit growth. Due to a combination of factors, the markets in West Africa
stalled resulting in a number of once-off costs being incurred due to the
decrease in contracted tonnes sold as a result of mine closures, the loss of
existing contracts through new tenders, and reduction in tonnes mined in response
to lower profit margins. Revenues and profits were also affected by provisions
for bad debts, the write down in the value of stock on hand and restructuring
charges associated with staff retrenchments and various overhead costs. The onset
of the Ebola epidemic in West Africa had a significant impact on the economies of
countries in that region particularly due to the closure of borders and a general
ban on travel. Although travel was limited based on regulations enforced by local
authorities and the movement of goods in and out of the region was restricted, it
did not hamper the mining and blasting operations of our customers. In contrast,
mines were more at risk due to falling commodity prices. Overall, the intensified
slowdown of mining activities in Africa, together with the loss of a major coal
contract in South Africa, contributed to this disappointing performance overall,
which was nevertheless slightly offset by modest growth in the volumes sold to
clients that mine copper, platinum and iron ore.
Despite the downturn in world mining revenues and volumes, the Mining division
has been remarkably resilient and continues to forge ahead in maintaining its
position as an important player in the open cast mining industry on the African
continent. The operating profit of R720 million was at an operating margin of
13.5% (2014: 15.2%), which was 1.7 percentage points down on the previous year.
This is marginally below the current year’s guidance of 15%–16%. Average sales
prices increased by 0.8% year-on-year mainly due to the weaker rand, while
volumes decreased by 2.7%.
Net working capital was well controlled and increased marginally to
R1 090 million (2014: R1 052 million).
Chemicals
The Chemicals division’s main business, Protea Chemicals, is a long-established
and well-known manufacturer and distributor of specialty, functional and effect
chemicals and polymers. It has a significant presence in every sector of the
broader chemicals distribution market throughout southern and East Africa. Protea
Chemicals represents many leading domestic and international chemical producers,
providing cost-effective and efficient distribution channels for their products
into the African market. Protea Chemicals continues to be rated as the largest
chemical distributor in Africa by the respected industry journal, ICIS Chemical
Business. Subsidiary business, Zetachem, manufactures and distributes chemicals
for the treatment of water to render it potable, a function mostly undertaken
through municipalities.
Revenue increased by 1.8% to R4 197 million (2014: R4 121 million) with a
marginal increase in volumes sold. The operating margin decreased by
1.4 percentage points to 2.4% (2014: 3.8%) and was below the target of
4.5% – 5.5%, largely as a result of margin pressures in a difficult trading
environment. Selling price inflation was lower than overhead cost inflation and
manufacturing cost under-recoveries (particularly in Zetachem), were lower due to
reduced throughput volumes. The once-off costs associated with a revision of the
product and customer service model, facilitated by the re-organisation into the
‘One Protea’ structure implemented from 1 April 2014, also contributed to the
overall reduction in margin year-on-year. As reported in last year’s Integrated
Annual Report, the FY2014 results of R156 million included a R52 million once-off
gain from the sale of our portion of the joint venture with Nalco Africa. On a
pro forma basis excluding the gain, the R100 million operating profit for the
year under review was marginally lower than the prior year’s operating profit of
R104 million excluding this gain.
A considerable amount of investigation was done in FY2014 to prepare our
Chemicals business for a centralised business model – dubbed ‘One Protea’ – that
would simplify the way in which the business was managed going forward. This led
to the implementation of the structural changes at the beginning of the 2015
financial year, in which the ten business units within Protea Chemicals were
re-organised into a single cross functional matrix business unit to rationalise
overheads and avoid duplication of line functions. With the change taking place
in the first quarter of the financial year and the impact of the mining and
manufacturing strikes in the second and third quarters, the Chemicals division
experienced certain disruptions for a large portion of the year. However, during
the fourth quarter, trading conditions started to improve, albeit at a slow pace,
and further work to derive value from the new One Protea structure continued.
PROSPECTS
We expect that all three divisions – Agriculture, Mining and Chemicals – will
continue to find organic growth opportunities to build on their strengths and
expand the underlying business. In terms of the markets in which we operate, a
key area of concern is the international mining sector which is expected to
remain in a depressed state for a few years until global commodity prices start
to improve. South Africa is slightly different in that the domestic demand for
coal in the medium term will grow considerably as Eskom’s new power stations come
on line. BME, as a major supplier to the coal industry, should benefit from the
increase in volumes to be mined.
A multi-disciplinary team has also been working for the past two years or so on
identifying and investigating numerous opportunities to create further growth for
the Group. The opportunities currently being explored range from backward
integration, market diversification as a possible fourth leg to the Group and
potential mergers and acquisitions in similar or related businesses. The focus
areas are sufficiently broad and exciting to present numerous opportunities worth
pursuing however, the timing of these potential events remains uncertain at this
stage.
The Group’s balance sheet is strong with the low level of gearing and debt
considered to be a strength in today’s volatile financial markets. This places
Omnia in an enviable position to gear up the balance sheet to fund large capital
projects or potential acquisitions, when the opportunity arises.
The weakening of the South African rand against the US dollar is positive for the
Group. The weaker rand is a fundamental driver of the Group’s profitability not
only driving margins, which are principally denominated in US dollars, but also
driving volumes as our customers in the main, benefit from a weaker exchange
rate.
DIVIDENDS
The board has declared a final gross cash dividend of 300 cents (2014: 290 cents)
per ordinary share payable from income in respect of the year ended 31 March
2015. Together with the interim dividend of 190 cents (2014: 185 cents) per
share, this provides shareholders with a total dividend this year of 490 cents
(2014: 475 cents) per ordinary share. The number of ordinary shares in issue at
the date of this declaration is 68 293 352 (including 822 342 treasury shares
held by the Group). The gross dividend is subject to local dividends tax of 15%
for those shareholders to which local dividends tax is applicable. The resultant
net dividend amount is 255 cents per share for those shareholders subject to
local dividends tax and 300 cents share for those shareholders not subject to
local dividends tax. The company’s tax reference number is 9400087715.
The salient dates for the final dividend are as follows:
Last day to trade cum dividend Friday, 10 July 2015
Shares trade ex-dividend Monday, 13 July 2015
Record date Friday, 17 July 2015
Payment date Monday, 20 July 2015
Share certificates may not be dematerialised or materialised between Monday,
13 July 2015 and Friday, 17 July 2015, both dates inclusive.
Changes to the Board
As announced in the “Unaudited results for the six months ended 30 September 2014
and interim cash dividend” announcement released on SENS on 25 November 2014,
Mr Noel Fitz-Gibbon retired as executive director and group finance director with
effect from 30 September 2014 but continues to serve on the board as a non-
executive director with effect from 1 October 2014.
Mr Wayne Koonin joined the Group on 1 August 2014 and was appointed as executive
director and group finance director with effect from 1 October 2014.
NJ Crosse RB Humphris WG Koonin
Chairman Group managing director Group finance director
18 June 2015
Directors:
RC Bowen (British)
FD Butler
NJ Crosse (Chairman)
NKH Fitz-Gibbon
WG Koonin* (Finance director)
R Havenstein
HH Hickey
RB Humphris* (Managing director)
Prof SS Loubser
Dr WT Marais
HP Marais (alternate)
SW Mncwango
D Naidoo
KP Shongwe
*Executive directors
Registered office:
2nd floor
Omnia House
Epsom Downs Office Park
13 Sloane Street
Epsom Downs
Bryanston
2021
PO Box 69888
Bryanston
2021
Telephone: (011) 709 8888
Transfer secretaries:
Link Market Services South Africa (Pty) Ltd
13th Floor
Rennie House
19 Ameshoff Street
Braamfontein
Sponsor:
Merchantec Capital
2nd Floor
North Block
Hyde Park Office Tower
corner 6th Road and Jan Smuts Avenue
Hyde Park
2196
WWW.OMNIA.CO.ZA
Date: 23/06/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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