Omnia pays out special dividend after posting healthy annual earnings

Omnia CEO, Seelan Gobalsamy. SUPPLIED.

Omnia CEO, Seelan Gobalsamy. SUPPLIED.

Published Jun 11, 2024


JSE-listed Omnia Holdings’ shareholders were treated to an ordinary and special dividend of 375 cents and 325c a share respectively after the chemicals group lifted cash generation, improved margins and sustained profitability in the year to March 31.

CEO Seelan Gobalsamy said their delivery of growth and sustainability targets had been commendable over the past few years and the sharp rise in their share price yesterday was not just about the special dividend.

“We are pleased to have returned R4.3 billion cash to shareholders since the 2020 financial year and we are confident our efforts will support value-enhancement in years to come,” he said in an interview yesterday. He said rhey had generated R3bn in cash, sufficient for about R1bn on expansion, for the ordinary and special dividends, and also for the continuing share buybacks.

He said the results reflected strategic execution underpinned by robust capital allocation decisions, international diversification, growth of the Mining segment and operational agility.

He said that compared with three years ago, the group had fundamentally transformed through diversification and global expansion to be in a position to ride out a downward commodity cycle.

“We have enhanced our resilience to economic volatility and fortified our market position, ensuring we remain responsive to customer needs, maintain security of supply and drive long-term stakeholder value,” said Gobalsamy.

Inventory levels were optimised, sales volumes were higher, and capacity utilisation and opportunities for additional third-party ammonia derivative sales were enhanced.

There was volume growth in the Mining and Agriculture RSA divisions and higher manufacturing throughput partially offset a greater than 50% drop in average ammonia prices, thus limiting a decline in revenue.

Operating profit fell 12.2% to R1.7bn. However, higher profitability from the Mining segment, effective cost management and operational efficiencies enhanced operating margins to 8% from 7.6% in 2023.

The strong financial position was maintained through working capital management and cost controls, which returned healthy cash generation of R3bn (R1.8bn). Net cash strengthened to R2.3bn (R1.8bn).

“We responsibly managed our capital, successfully maintaining our financial position and the flexibility to invest in value accretive opportunities as well as to provide solid returns to shareholders,” said Gobalsamy.

Some R679 million was invested in maintenance and organic growth projects, with an additional R184m and R176m invested in Hypex Bio and the Indonesian JV respectively. Other capital projects included investments in renewable energy and water treatment.

The addition of 20 ammonia rail wagons and six road tankers enhanced supply chain flexibility while the mobile manufacturing unit (MMU) fleet renewal and expansion would help growth the mining business.

The Agriculture segment proved resilient amid lower average commodity prices, achieving strong sales volumes in RSA. Across the rest of Africa, market diversification mitigated some of the volume impact of macroeconomic challenges.

In Zimbabwe, volumes and operating profit were lower due to delayed rains, declining commodity prices and macroeconomic challenges.

The international business maintained strong margins and generated export volume growth to new markets. But volumes were lower overall, with exports lost in the first half not fully recovered due to customer operational issues being resolved later in the year.

The Agriculture segment reported lower revenue and operating profit of R11.4bn and R1bn respectively.

The manufacturing and supply chain capability remain focused on increasing plant utilisation, enhanced demand and supply planning, and efficient working capital management.

The outlook for the Agriculture segment was optimistic due to an anticipated shift to more favourable weather and improved agronomic conditions in South Africa.

In Africa, the focus was on protecting this market and growing distribution in key regions and expanding product and service offerings. Due to regulatory and macroeconomic challenges, the segment continued to review its business models in the SADC region.

The segment’s focus was on driving sales volumes and scaling growth in the international AgriBio business through distribution to global markets and a strengthened global brand presence.

Several strategic initiatives were being pursued with current customers in the Asia-Pacific region, while marketing capabilities were being enhanced in Brazil.

The Mining segment overcame macroeconomic and infrastructure challenges for a good performance. It saw market expansion, better efficiencies and a marked increase in operating profit and margins. South Africa grew volumes in a declining market.

Earnings diversity and higher margins were supported by an improved product mix in Mining Chemicals, cost efficiencies and much higher volume and profit contributions from the international operations in Canada, Indonesia and West Africa.

Good progress was made with trials in a significant underground operation in Ontario and plans to trial hydrogen peroxide-based emulsion at the Nairn facility in conjunction with Hypex Bio were advanced to commence in the latter part of 2025.

The deployment of a detonator assembly plant in Western Australia progressed well with production anticipated to begin in the second half of 2025. A potential site had been identified for an emulsion plant in eastern Australia.

Gobalsamy said volume growth and expansion was anticipated in the Mining Chemicals sector. The segment was expected to benefit from recovery of the uranium price in Namibia, further volume growth out of Canada and profitability improvements in Indonesia, while opportunities in Australia and other global markets were being vigorously pursued.

Protea Chemicals’ performance was negatively impacted by significant challenges faced in the South African market, exacerbated by adverse macroeconomic conditions, reduced demand due to lower consumer spending and failing infrastructure.

Difficulties were compounded by supply disruptions, including a prolonged unplanned shutdown at a key supplier. The business was being repositioned for sustained profitability.

Gobalsamy said the outlook for both the agriculture and mining markets globally remained positive, underpinned by strong fundamentals.