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Johannesburg - Specialist chemical services provider Omnia Holdings [JSE:OMN] on Tuesday reported diluted headline earnings per share of 340.5 cents for the six months ended September 2010 after a loss of 217.8 cents a year ago.
Shareholders were advised in the 2010 annual report that a dividend was not likely to be declared this year in the light of the equity that was raised to fund the Nitric Acid Complex. The board confirmed this approach and no dividend has been proposed.
Revenue at R4.268bn was the same as the previous year and reflected the effect of marginally lower sales prices offset by marginally higher overall volumes.
Operating profit improved to R293 million after a R52m loss in 2009. Adjusting for the 2009 R350m downward valuation of inventory, operating profit was in line with the previous year.
The company said market conditions were more stable than in 2009 and commodity prices in general were marginally higher, albeit off low levels. However, the benefits were negated by the strong rand.
Significantly different demand conditions existed in the markets of the three divisions, Omnia noted. Mining experienced buoyant conditions due to increased international demand for coal, iron ore, copper and platinum, while Chemicals experienced tough trading conditions as low levels of activity persisted in the South Africa manufacturing sector and selling prices came under pressure due to the strong rand and relatively subdued commodity prices.
Agriculture conditions were mixed in that there was a poor winter wheat season, a bumper maize harvest and lower domestic maize prices prevailed. The strong rand and subdued international fertilizer prices led to a small reduction in local fertilizer prices.
Finance costs reduced by 37% due mainly to lower average working capital in 2010 compared to 2009 and further aided by lower interest rates. Net working capital of R1.917bn is in line with the traditional peak seasonal requirements of the Agriculture division.
The group's net working capital requirements reach a peak in September/October each year, and so does net interest bearing debt.
A R1bn equity raising programme was completed in September. Some R467m of the R1bn was utilised to fund capital expenditure on the new Nitric Acid Complex and expenses associated with the equity raising programme, and the balance of R533m was applied to repay short term bank facilities resulting in net interest bearing debt at R1.084bn being lower than the R1.513bn recorded in 2009.
Looking ahead, Omnia said overall domestic commodity prices have stabilised, albeit at lower levels, but the strong rand will negatively impact operating profit. The Group expects to benefit from substantially lower finance costs.
The Chemical division is not expecting any material improvement in volumes and prices and is therefore focusing on aggressive cost reductions and efficiency improvements to improve operating profit.
The Mining division expects the favourable conditions of the first half to continue in the second half reflecting strong demand for its products.
The Agricultural division performance will be influenced by fertilizer sales volumes in the summer planting season. International fertilizer prices have increased significantly as demand improves following the upward move in agriculture produce prices.
"Some turbulence in the market is being experienced because of the withdrawal by Yara from South Africa and the Competition Commission ruling that requires Sasol to withdraw from the fertilizer retail market, the effects of which are difficult to predict," it said.
Overall, Omnia expects effects to revert to the normal pattern of higher second half earnings.
Shareholders were advised in the 2010 annual report that a dividend was not likely to be declared this year in the light of the equity that was raised to fund the Nitric Acid Complex. The board confirmed this approach and no dividend has been proposed.
Revenue at R4.268bn was the same as the previous year and reflected the effect of marginally lower sales prices offset by marginally higher overall volumes.
Operating profit improved to R293 million after a R52m loss in 2009. Adjusting for the 2009 R350m downward valuation of inventory, operating profit was in line with the previous year.
The company said market conditions were more stable than in 2009 and commodity prices in general were marginally higher, albeit off low levels. However, the benefits were negated by the strong rand.
Significantly different demand conditions existed in the markets of the three divisions, Omnia noted. Mining experienced buoyant conditions due to increased international demand for coal, iron ore, copper and platinum, while Chemicals experienced tough trading conditions as low levels of activity persisted in the South Africa manufacturing sector and selling prices came under pressure due to the strong rand and relatively subdued commodity prices.
Agriculture conditions were mixed in that there was a poor winter wheat season, a bumper maize harvest and lower domestic maize prices prevailed. The strong rand and subdued international fertilizer prices led to a small reduction in local fertilizer prices.
Finance costs reduced by 37% due mainly to lower average working capital in 2010 compared to 2009 and further aided by lower interest rates. Net working capital of R1.917bn is in line with the traditional peak seasonal requirements of the Agriculture division.
The group's net working capital requirements reach a peak in September/October each year, and so does net interest bearing debt.
A R1bn equity raising programme was completed in September. Some R467m of the R1bn was utilised to fund capital expenditure on the new Nitric Acid Complex and expenses associated with the equity raising programme, and the balance of R533m was applied to repay short term bank facilities resulting in net interest bearing debt at R1.084bn being lower than the R1.513bn recorded in 2009.
Looking ahead, Omnia said overall domestic commodity prices have stabilised, albeit at lower levels, but the strong rand will negatively impact operating profit. The Group expects to benefit from substantially lower finance costs.
The Chemical division is not expecting any material improvement in volumes and prices and is therefore focusing on aggressive cost reductions and efficiency improvements to improve operating profit.
The Mining division expects the favourable conditions of the first half to continue in the second half reflecting strong demand for its products.
The Agricultural division performance will be influenced by fertilizer sales volumes in the summer planting season. International fertilizer prices have increased significantly as demand improves following the upward move in agriculture produce prices.
"Some turbulence in the market is being experienced because of the withdrawal by Yara from South Africa and the Competition Commission ruling that requires Sasol to withdraw from the fertilizer retail market, the effects of which are difficult to predict," it said.
Overall, Omnia expects effects to revert to the normal pattern of higher second half earnings.
