Omnia turnaround strategy stabilises the group’s debt
Companies / 27 November 2019, 08:00am / Sandile Mchunu
DURBAN – JSE-listed diversified chemicals group Omnia, which operates three segments – agriculture, mining and chemical – says its agricultural division is facing some headwinds as a result of a drought. Photo: Supplied’ turnaround plan has stabilised the group in the six months to end September as it cut its debt by R1.4 billion.
However, chief executive Seelan Gobalsamy admitted on Tuesday that the group still had a long way to go, despite successfully delivering on its short-term stabilisation plan.
“We wanted to retain the group’s back to basics by cutting costs and return it to profitability. We have also managed to cut the debt by R1.4bn and management remained focused on stabilising the group by initiating a turnaround strategy and improving our capital structure, following a successful rights offer fully underwritten by our shareholders.
“Good progress was also made in terms of reducing costs as well as lowering capital expenditure and working capital requirements,” Gobalsamy said.
In September, Omnia raised R2bn through a rights offer of 100million new ordinary Omnia shares at a subscription price of R20 a rights offer share, fully underwritten by its shareholders.
As a result, net debt decreased by R1.4bn to R3.3bn at the end of September, down from R4.65bn compared to last year.
Gobalsamy said the lower net interest-bearing borrowings and improved debt structure of the group partially eased the pressure on the balance sheet and provided more financial stability and flexibility.
“However, with uncertain macro- and micro-economic conditions persisting across the key divisions, the group will continue to restructure to increase efficiencies and improve operating margins,” he said.
Omnia, which operates three segments - agriculture, mining and chemical - said its agricultural division was still facing some headwinds as a result of a persistent drought.
Gobalsamy added that in recent years, the weather patterns had been more erratic, with late rains impacting negatively on the crop-planting cycle and consequently on fertiliser sales, networking capital levels and profit margins.
“Despite our challenges in the country our other components in the agricultural division performed well, which includes our Fertiliser International, Agriculture Trading and Agriculture Biological (AgriBio), owing to earlier deliveries and a strong demand for AgriBio’s products,” he said.
The turnaround plan allowed the group to report improved interim earnings with revenue up by 1percent to R8.72bn while profit after tax increased to R35m compared to a R93m loss reported last year.
Its earnings per share came at 39cents a share from an earnings loss of 120c and headline earnings per share was 49c compared to headline loss a share of 122c.
The group did not declare a dividend, with the focus still on reducing the net debt further.
Gobalsamy said good progress had been made on their short-term turnaround plan, but they anticipate the environment to remain difficult and headwinds to persist for the remainder of the year.
Omnia closed 4.79 percent higher at R31.75 on Tuesday.