Chemicals, fertiliser and explosives group Omnia is upbeat about SA’s agricultural prospects, expecting sustained demand for inputs as favourable weather and prices underpin the sector.
Agriculture operated as an essential service during Covid-19 and even managed to increased output during the first half of 2020.
Omnia is expecting further improvement in the sector, including through improved planting, as well as sustained international demand for citrus and nuts.
The diversified group’s agricultural interests, which account for about half of its revenue, have seen double-digit revenue growth in its six-months to end-September, helping to offset contraction in mining and chemicals as Covid-19 disrupted supply chains and temporarily mothballed mines.
Group revenue from continuing operations declined 1.2% to R8.2bn to end-September, while profit after tax jumped to R252m from R35m previously, with the group saying it saved on staff, travel and vehicle costs.
Agricultural revenue in SA rose 14% to R2.1bn, while the group’s international agriculture segment saw revenue jump 55% to R1.28bn, with Australia exceeding expectations, partly due to increased exports, and early purchases as customers sought to avoid supply chain disruptions.
Omnia is confident about its financial position, with net debt falling to R1.9bn, from R3.3bn previously.
The group announced in October it was selling money-spinner Oro Agri for R2.5bn. This business develops non-chemical pesticides, with Omnia saying while it was a tough decision to sell, the move would extinguish its debt.
In spite of a possible net cash position, Omnia said it would be “extremely conservative” regarding acquisitions, and surplus cash may be returned to shareholders via share buybacks or special dividends.
It expected to continue to benefit from its recent restructuring, which included job cuts and organisational changes aimed at improving management focus on sales and product development.
“The group is well positioned to capitalise on growth opportunities, a key pillar of our strategy that will be driven by appropriate capital allocation,” CEO Seelan Gobalsamy said.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.