Omnia shares surge to best performance in almost two decades
The chemicals and fertilizer group reports a return to profit as restructuring continues
Chemicals and fertilizer group Omnia Holding's share price surged almost a third on Monday, its best performance in almost two decades, after it said its restructuring was bearing fruit and it returned to profit in its year to end-March.
The group, which produces nitrates used in agriculture and other chemicals, had been buffeted by an exchange rate volatility and decreasing demand in the prior year, when it moved to cut jobs and restructure its businesses.
Omnia had also raised R2bn in a rights issue in 2019, which it used to settle debt. The group said on Monday net debt had fallen to R1.3bn at the end of March, excluding the effect of accounting changes, from R4.4bn previously.
The group, which had 4,755 employees as of its 2019 year-end, has been cutting staff and rationalising its businesses, including Protea Chemicals, whose rapid growth over the past few years had not resulted in a desired increase in profitability.
Headline earnings per share for its year to end-March 2020 is expected to increase 258%-275% from the prior period’s headline loss of 112c, the group said in a trading update on Monday.
Heps is a widely used profit measure that strips out exceptional items to give a better indication of underlying performance.
“Omnia’s prudent cash management strategy and disciplined execution has strengthened its balance sheet and resulted in strong earnings growth,” the group said.
Covid-19 was a headwind, the group said, and was particularly weighing on the fuel sector, in which subsidiary Umongo Petroleum operates. As a result, the group had written down the business by R105m, despite Umongo generating increased revenue over the past year.
“Omnia has confidence in the Umongo Petroleum management team and believes that the business is well placed to respond effectively to market changes,” the group said.
In afternoon trade on Monday Omnia's share price had jumped 29.87% to R30, it's best one-day performance since 2001, putting the group at a four-month high.
Update: June 22 2020
This article has been updated with new information throughout.