Omnia banks on its agribio offerings

Chemicals, fertiliser and explosives group Omnia is upbeat about prospects in the agribio market, saying it aims to achieve double-digit profit growth over the next three years by expanding existing markets, unlocking new geographical markets and seeking new distribution partnerships.

The agribio sector, speciality fertilisers and biostimulants, is forecasted to have an annual compound growth rate of more than 11% between 2022 and 2029 as the move towards food produced in an “environmentally friendly” manner fuels increased demand for organic fertilisers and foods.

“The growth strategy of biostimulant products in international markets is aligned with industry trends centred on increased demand for ‘green’ fertilisers and provides an opportunity for Omnia to gain a competitive advantage in key markets,” Mandla Mpofu, MD of Omnia Nutriology, told Business Day.

Omnia’s strategic ambitions

“Omnia’s agribio solutions match the requirements of these trends and the company is well-positioned to capitalise on its reputable brand and existing superior product quality.”

Biotechnology in agriculture is used to increase productivity and protect crops from damage or infestation, and can improve the quality of crop production.

Biostimulants have become increasingly valuable as the global population explodes, putting food security at risk, while the effects of climate change on agriculture (including reduced crop yields), prevalent declines in nutritional quality and invasive crops and pests hamper farmers.

Additionally, Omnia has bemoaned that the deteriorating road, rail, port, water and electricity infrastructure in SA affects the “normal operating rhythm” of the organisation and the bottom line.

Mpofu said the Johannesburg-based group’s ambitious double-digit profit growth target would be achieved by expanding Omnia’s existing markets, growing distribution in key global regions and segments, as well as expanding product and service offerings.

Some of these growth initiatives include the expansion of agtech offerings and agribio products, especially for the international market. This is in line with Omnia’s strategy of enhanced international growth and expansion.

In 2022, the group announced it had opened sales offices in Europe and the US, which are focused on securing distribution partnerships with leading global brands, aiming to replicate the business’s successful partnership with India-based Deepak.

The international player relies heavily on fertiliser sales and already has products distributed to more than 40 countries globally, but it said it wants to unlock new geographical markets in Southeast Asia and the Middle East.

Simultaneously, Omnia is seeking new distribution partnerships in key markets such as the US, Europe, China and South America.

“These initiatives will promote new market penetration in SA, the rest of Africa and global markets in the Americas, Europe and Asia, while building sustainable markets that remain resilient through agronomic cycles,” said Mpofu.

In the year to end-March, the company stated lower sales volumes due to adverse weather conditions and interruptions to mining activity. But Omnia weathered the storm and declared a 36.4% higher dividend at 375c per share, amounting to R634m.

The group generated R1.8bn net cash in the period, adding that it expected sufficient cash generation over the next 12 months, supported by more normalised net working capital levels. The agriculture segment accounted for the bulk of operating profit, bringing in R1.2bn during the period.

Meanwhile, Omnia CEO Seelan Gobalsamy said the segment had noted a considerable shift among farmers from planting maize to opting for soybean, adding that the growth in soybean production has shown an increasing trend that extends worldwide.

Mpofu said soybean’s considerable surge is motivated by establishment costs and higher soybean prices, despite the crop’s challenging cultivation.

“The notable shift from soya to maize is on the whole less favourable for the SA agriculture landscape,” said the MD. “Soya is predominantly produced for consumption by animals and a relatively small portion of production is consumed by humans. Soya crops also tend to deplete soil nutrients at a faster rate than maize, which on the whole impacts negatively on long-term soil fertility.”

This is further compounded by reduced levels of fertiliser application in soya crops when compared to maize, Mpofu added.

However, he said forecasts point to an eventual shift back to maize, possibly accompanied by an increased cultivation area. Additionally, the upcoming year might witness a slight increase in maize production and a decrease in soybean cultivation.

Omnia’s share price was up 0.88% to R52.93 on Wednesday, having slipped more than 15% over the last year.

gumedemi@businesslive.co.za