Chemicals group Omnia Holdings is putting together a new BEE agreement to replace its previous unsuccessful scheme that fell apart after the share price collapsed in recent years.
The Sakhile 1 scheme, launched in April 2007, has been a casualty of the spectacular fall in Omnia’s shares in the past few years as the company buckled under a pile of debt.
Omnia’s SA employees own shares in Sakhile, which owns 10% of Omnia.
The deal will give the employees another shot at owning a stake in the chemicals and fertiliser maker while it will also enable Omnia to maintain its BEE credentials.
Speaking after the release of the company’s results for the six months to end-September, Omnia CEO Seelan Gobalsamy said like most BEE schemes at the time, Sakhile was debt-financed and its fate depended on the performance of the company’s share price.
When the scheme matured on April 1 2019, Omnia’s shares had fallen by more than 18% since the launch of the initiative. The stock is down 45.96% since the beginning of 2019.
“During the course of the scheme, Omnia’s share price rose and the debt was repaid. But … when it matured, the company had hit a debt crisis. The scheme had to pay out shareholders and there was no money. That is terrible. We spoke to the Sakhile shareholders and we reached an agreement on how we will settle the shares,” Gobalsamy said.
He said the company had a plan to pay low-ranking employees “some” cash by the end of November.
Gobalsamy did not disclose how much the employees would get.
“It is fair to say that our employees expected more. What is unfortunate is the timing. The company has gone through a terrible time. The share scheme is under water,” he said.
The new deal will mature over a shorter period as 12 years is too long for a BEE scheme, Gobalsamy said.
In a move to reduce debt, Omnia raised R2bn through an oversubscribed rights offer in September, which has enabled the company to reduce debt by R1.4bn to R3.3bn.
Gobalsamy said the company has finalised a “sustainable debt package” that includes R2bn of debt, a R1bn five-year revolving credit facility and R1.8bn working capital.
“That actually stabilises Omnia. We now have a capital structure that works for us. It will see us through the next few years.”
In the six months, revenue was largely unchanged at R8.7bn, while operating profit improved from R124m to R294m. The company reported net profit after tax of R35m, compared with a net loss of R93m last year.
Gobalsamy said that in the six months the company has taken various short-term turnaround steps such as the reduction of working capital by R714m to R4.63bn.
He said the next phase of the turnaround will be a strategic review of the company’s markets and products. The company has a presence in 43 countries.
“We will relook at whether we should be in all these countries and whether we should own all the businesses we own,” he said.
Omnia shares gained 4.79% to R31.75 on Tuesday.