Omnia: A fallen angel bearing fruit

Written on 11/25/2020
Lizzie Cornwell

Omnia has signalled its intention of rewarding shareholders with a special dividend or share buybacks, if Oro Agri transaction is approved.

Omnia, once a darling of the JSE, published an impressive set of results for its interim period ended 30 September 2020 despite the COVID-19 pandemic and ensuing lockdowns affecting many of the jurisdictions in which the group operates. Omnia’s CEO, Seelan Gobalsamy, who was appointed to the position at the latter end of 2018, has done an incredible job at the helm, having whittled down the diversified chemicals producer’s debt burden and implemented a variety of cost-cutting measures throughout the group.

The operational efficiencies created are evident in the results. Although revenue was slightly down for period, operating profit, profit before tax and EBITDA surged compared to the prior period. The proposed sale of the Oro Agri business, which is still subject to shareholder approval, will provide Omnia with cash proceeds of approximately US$150 million, thereby reducing all debt and likely to move the group into a net cash position.

Of Omnia’s three main operating segments (Agriculture, Mining and Chemicals), only the Mining division underperformed relative to the prior period. The group has highlighted its concerns surrounding the prospects of this division, with mining production continuing to contract which reflects the general global downturn. Prospects for the group as whole remain buoyant, with the agricultural division set to benefit due to forecasted favourable local weather and planting conditions.

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The recapitalisation of the balance sheet combined with the implementation of the group’s operational efficiencies, has left Omnia in a position of strength and flexibility. The results underpin a great financial performance from the group, which has announced that it remains conservative regarding inorganic opportunities, whilst funding selective organic expansionary opportunities. Given the strong financial position of the group, the question has to be asked whether management could afford to be bit more aggressive in outlook regarding potential acquisitions given that the right opportunity arises.    


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