JSE-listed Omnia on Tuesday posted double-digit growth in earnings for the first half of the 2018 financial year as the agriculture segment normalised after harsh drought conditions ended and the mining segment started to show signs of improvement.
Profit after tax increased by 27% to R285-million for the six months ended September 30, while headline earnings a share increased by 31% to 420c.
The increase was mainly attributed to the normalisation of the agricultural trading business after R51-million in losses in Australia in the prior period, as well as a good recovery from the mining division, when compared with the preceding second half of the 2017 financial year.
During the first half of the 2018 financial year, group operating profit increased by 19% to R488-million.
A 21% growth in operating profit to R337-million in the mining division had been the result of various initiatives implemented during the year, including progress on international expansion and reduced product and transport unit costs, besides others, that contributed to an improvement in earnings.
“The mining division recovered strongly and sustainably from the second half of the prior year and continues to focus on international growth,” said Omnia group MD Adriaan de Lange on Tuesday.
The agriculture division saw operating profit increase by 113% to R111-million; however, the local agriculture unit was negatively impacted on by the start of the summer planting season moving into the second half of the year.
Despite this, the local agriculture business benefited from improved pricing fundamentals, including the ammonia to urea ratio and improved production efficiencies.
The international speciality business continued to deliver a solid performance, he added.
The chemicals division's operating profit decreased by 8% to R65-million in the first half of the year under review owing to a one-off capital profit of R8.6-million on the disposal of a property in the prior corresponding period.
“The depressed manufacturing sector continues to hamper the chemicals division. The division, however, delivered a good performance in the international value-added business, albeit from a low base,” De Lange said.
The acquisition of 90% of Umongo Petroleum is expected to boost the division’s performance going forward.
Group revenue for the interim period contracted by 3% to R7.7-billion, mostly owing to the weaker performance in the agriculture division, where lower sales were as a result of the later start to the 2017/18 summer planting season.
“Agriculture trading's revenue was considerably lower in the current period but at profitable levels compared with the higher revenue in the prior period that included the large unprofitable trade in Australia,” De Lange explained.
The agriculture division's revenue decreased by 11% to R3.19-billion, with the local agriculture division reporting a 10% contraction and the trading division recording a 33% decrease in revenue.
The mining division delivered subdued revenue growth of 2% to R2.5-billion, while the chemicals division achieved 7% revenue growth to R2-billion.
Moving forward, the company’s 2018 guidance for agriculture is 6% to 8%, mining is 12% to 14% and chemicals 3% to 5%, excluding the impact of the Umongo Petroleum acquisition, effective December 1.
Omnia declared an interim gross cash dividend of 200c a share, a 25% hike on the 160c declared in the prior corresponding period.