JSE-listed diversified chemicals group Omnia Holdings is now firmly in the "fix and renew" phase of its turnaround strategy, where implementation of the new operating model during the six months ended September 30, was “substantially completed” and had already resulted in improved production reliability.
CEO Seelan Gobalsamy tells Engineering News and Mining Weekly that this follows the group's "very difficult patch" in 2018 and 2019 where the company needed to do a debt restructure and a rights issue, which resulted in a new management team coming in and the company needing to develop "a fixed and stabilised plan" for the business. The first phase of the strategy was to stabilise the balance sheet and deal with the company's debt and capital structure, with the second phase focused on fixing and turning around business operations.
Omnia’s key businesses in Southern Africa have also been consolidated into a South African Development Community (SADC) market facing unit with manufacturing and supply chain being separated to enhance production excellence, while businesses requiring additional investment have been split from the core business.
In a statement on November 24, he said the group was “well positioned to capitalise on growth opportunities”, which marks a key pillar of Omnia’s strategy that will be driven by appropriate capital allocation.
Gobalsamy says these opportunities will likely be in Omnia's core businesses - agriculture and mining - which the company will look to expand and grow. Additionally, Omnia will consider investing in and expanding the production and distribution capabilities of its Australia and Brazil agriculture businesses.
During the interim period, the group further delivered a resilient performance in “an exceptionally challenging and uncertain local and international operating environment”, which reflects the benefits of continued execution against its strategic objectives, the company said in a statement.
Throughout the Covid-19 pandemic, Omnia continued its delivery of essential services, including primary chemicals and solutions for the agriculture, mining, manufacturing and fuel sectors, which play an essential role in food security, economic stability and the livelihoods of people globally.
Key achievements during the first half of the year included improvements in sustainability metrics, a review and refocus of key operating businesses, further improvements in net working capital management and margins, increased cash generation and lower capital expenditure.
“In line with our turnaround plan, we delivered a resilient performance in a challenging operating environment, both locally and internationally. The results demonstrate the ability of our leadership and management teams to act swiftly and decisively to continue delivering on commitments made to our customers, shareholders and other stakeholders,” Gobalsamy commented.
Omnia’s revenue from continuing operations for the period was stable at R8.2-billion, while its operating profit increased by 25% to R341-million, benefitting from ongoing targeted expense savings for the year.
Omnia’s earnings before interest, taxes, depreciation and amortisation (Ebitda) from continuing operations, excluding impairments, increased by 11% to R742-million, while headline earnings per share (HEPS) from continuing operations came in at 141c – an increase of 228% on the HEPS of 43c reported for the prior comparable period.
As at the end of September, Omnia’s net debt decreased by R1.4-billion and stood at R1.9-billion, excluding R77-million from the agricultural biological division, compared with R3.3-billion in the prior period.
This improvement was underpinned by a consistent increase in cash generated from operations of R768-million, where net working capital reduced by a further R900-million from R4.6-billion in the prior period to R3.7-billion, excluding R332-million relating to the agriculture biological division.
“Our concerted efforts to entrench sustainable business practices returned an improved safety performance and empowerment rating as well as reduced greenhouse-gas emissions and hazardous waste volumes,” added Gobalsamy, noting that “Omnia will continue to implement responsible strategies to ensure meaningful and sustainable value creation for all stakeholders”.
Omnia stated that its proven safety record allows it to compete effectively in key markets, with the group having achieved a recordable case rate (RCR) of 0.30 compared with 0.52 in the prior period, and BME having attained an "enviable" RCR of 0.05.
Omnia’s carbon footprint remained a priority in the period, and the replacement of the EnviNOx catalyst resulted in carbon dioxide emissions equivalent reducing by two-thirds to 150 000 t for the period from March to September.
Post period-end, Omnia announced another milestone in that it is now a Level 2 broad-based black economic empowerment contributor, having achieved supplier recognition of 125% and full scores for ownership, enterprise and supplier development and socioeconomic development.
In this regard, Gobalsamy said “transformation is a key focus of Omnia’s turnaround and stabilisation plan, not only to strengthen our competitive position, but because we are committed to drive the transformation of South Africa’s business sector. Going forward, Omnia will continue to focus on improving this position”.
Meanwhile, the nitrophosphate plant in South Africa reached capacity of above 82% following successful modifications. The production for offtake from the mining division increased in line with new business being secured.
In the group’s agriculture division, its product deliveries are mounting ahead of the start of a promising planting season, supported by favourable agronomic conditions compared with previous years.
The immediate strategy is to focus on winning in selected markets with propositions and innovations that create value for customers by finding solutions to their needs, supported by new ways of working that create efficient processes across the supply chain, the company said.
In October, Omnia announced its intention to dispose of Oro Agri to Rovensa, a Europe-headquartered business. The sale, which remains subject to approval by Omnia’s shareholders in December, will generate aggregate cash proceeds of about $146.9-million, thereby de-risking the group’s balance sheet.
Commenting on the proposed Oro Agri disposal, Gobalsamy said the board undertook a comprehensive review of Oro Agri as part of the group’s broader strategy, and that the board resolved to accept Rovensa’s offer, subject to shareholder approval.
In conversation with Engineering News and Mining Weekly, he refers to the sale of Omnia's Oro Agri business (bought for $100-million 18 months ago), which puts Omnia in "a very positive space" to capture organic and inorganic opportunities for growth, and allows Omnia to consider resuming its dividend and, potentially, a special dividend or share buy-back post year-end in March 2021.
“We believe that Oro Agri’s risk profile, the attractive price offered by Rovensa and the opportunity to de-risk our capital structure, outweigh Oro Agri’s long-term potential which would require significant investment to realise,” he added in the separate statement on November 24.