PRESSURED INDUSTRY Omnia’s Mining division achieved a lower operating profit of R526-million for the financial year ended March 31owing to lower volumes being mined
Despite the downturn in global mining revenues and volumes, JSE-listed Omnia’s Mining division has been “remarkably resilient” and continues “to forge ahead in maintaining its position as a leading player” in the opencast mining industry on the African continent, says group CEO Rod Humphris.
The division continues to find opportunities and has recently been successful in securing large volumes in the Copperbelt of Zambia, which will impact on the 2017 financial year’s results, Humphris said at a presentation of the group’s results in Johannesburg last month.
He added that Omnia’s Mining division is “well placed” to respond to an improvement in market conditions.
Despite the demand for explosives in Africa, including South Africa, being “hard hit” in the past two years, group subsidiary and explosives manufacturer BME had secured a number of large contracts, which is expected to have a favourable impact on the new financial year. This will also assist in restoring the division’s level of profitability, as well as have a positive impact on the Agriculture division, owing to higher production throughput and lower unit costs.
“Additionally, BME’s electronic detonators continue to grow in volume,” Humphris said, highlighting the group’s world-record blast at the Daunia opencut coal mine, in Queensland, Australia, where the Axxis digital detonation system and 5 665 electronic delay detonators were used.
Other new markets included high-tech precision blasting applications, such as that used in the city of Singapore for the construction of its mass rapid transport rail system.
Humphris added that the use of emulsion application systems underground, which were introduced about a year ago, was a “fantastic new area for development for underground markets”.
Highlighting the growth opportunities in the mining business, Humphris said the group would increasingly concentrate on underground initiation systems and electronic detonators, as well as continue the roll-out of the portable emulsion systems for the underground markets.
The Mining division achieved a lower operating profit of R526-million for the financial year ended March 31, down 27% year-on-year, owing to lower volumes being mined, while price pressures led most mines to reduce output and cut expenditure on explosives and services, he noted.
“Overall, market conditions remain challenging, affected by softer demand in mining and minerals across Africa, especially in gold, platinum, copper and iron-ore; reduced mining activity in coal, uranium, vanadium, gold and platinum; and reduced greenfield activity in sub-Saharan Africa and brownfield expansions at existing mines,” Humphris reiterated.
Further, market oversupply and customer focus on pricing had led to increased price competition, which, in turn, resulted in lower margins. To counteract this impact, Omnia implemented various internal initiatives and projects to reduce the cost of final products sold to customers.
While the weakening rand was positive for BME’s South Africa sourced and manufactured products sold into Africa, it was negative for inputs bought in dollars. Average sales prices increased 2%, mainly as a result of the weaker rand.