Wednesday, January 26

Omnia performs in a difficult environment


The first few paragraphs of Omnia’s management comment on the interim results seemed to set the stage for a horror story rather than a familiar feel-good feature. He described extremely difficult trading conditions that would have satisfied many investors if the loss was not too great.

But Omnia returned to publish excellent results. In the six months to the end of September 2021, after-tax earnings (from continuing operations) more than doubled to R467 million, and overall earnings per share increased almost 130% to R2.86 cents.

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Furthermore, Omnia’s cash reserves increased to a net cash position of R719 million from a net debt of R1.9 billion a year ago.

Read: Omnia Nonessential Asset Network Sale Over R1bn

Omnia CEO Seelan Gobalsamy hinted in an interview with Moneyweb that the good performance of the first half of the financial year will be repeated in the second half. “Shareholders should be happy,” he says.

The current Omnia is different from the Omnia of a few years ago. The group decided to address its (very large) debt problems by asking shareholders to entrust it with new capital in a rights issue, certainly at a good price. It was worth it.

Read:

Should have bought Omnia stock
Omnia shareholders have done well

Challenges

The performance of the last few months was achieved in difficult times.

Management noted that the Covid-19 pandemic worsened during the first quarter of the new financial year as the Delta variant of the virus spread to more countries, making business difficult.

“The increased availability of vaccines in some Western countries has raised hopes that renewed restrictions can be avoided,” read the introduction of the results.

“However, health authorities and governments are fighting to increase fully vaccinated communities. In the poorest countries, vaccines are scarce and most populations are not yet adequately protected.

“The pandemic affected our business units and the countries in which we operate in various ways,” says management.

“Australia (one of the largest mining countries in the world) experienced severe blockages that caused operational disruptions and difficulties in logistics. Travel disruptions affected the speed at which various trade deals were concluded. ”

The bad news continued. “Recent unrest in some parts of South Africa led to the closure of certain Omnia sites, and others operated under increased security with reduced personnel.

“Our focus continued to be protecting employees, communities and our assets to enable a continuous and safe supply of critical chemicals needed for food safety and other key economic sectors,” according to management.

It was so bad that some of Omnia’s products were classified as critical products and were “provided with security escorts.”

Read: Omnia Launches Employee Stock Plan

Additionally, South Africa’s mining sector remains under pressure, with Omnia citing erratic provision of utilities (power outages create havoc in mines), lack of regulatory transparency, and lengthy processes for obtaining mining permits and licenses as some of the factors leading to a continued decline in exploration spending and moderate foreign direct investment.

Diversity delivers

Gobalsamy says that, thankfully, Omnia’s diverse portfolio in the primary agriculture and mining sectors meant that its activities were generally classified as essential services in all geographies, but border crossings and imports to certain countries are still slow.

He says the greatest success story within Omnia over the past six months, and the reason for the good results, is the review and optimization of its supply chain.

“We integrate the supply chain from the acquisition of raw materials to delivery to our customers,” he says.

“It goes beyond just-in-time delivery. We made it a priority that the right stock was in the right place at the right time. We made sure the stock was in Porterville when needed, and not in Sasolburg. ”

At times, this involved working closely with mining companies and commercial farmers to manage their explosives and fertilizer stocks on-site to ensure supply.

The result was a lower inventory level, which reduced cost and the cash cycle, Gobalsamy says.

He laughs when asked if the figures for the first six months can be doubled to get an estimate for the full financial year through March 2022.

“All I can say is that the year started well. Shareholders should smile when the end of the year comes. ”


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