Edited Transcript of OMNJ.J earnings conference call or presentation 7-Jul-20 9:30am GMT

Gauteng Aug 2, 2020 (Thomson StreetEvents) — Edited Transcript of Omnia Holdings Ltd earnings conference call or presentation Tuesday, July 7, 2020 at 9:30:00am GMT

Good morning, everybody, and welcome to Omnia’s financial results presentation for the year ended 31st March 2020. On the call with me, I’ve got Stephan. Stephan’s our Financial Director. And between him and I, we will share the presentation.

We will broadly cover a business update. We will then talk a little bit in — of detail into our financial results, which Stephan will do, and I will come back for some final concluding remarks.

I think it would be improper to start an event like this without acknowledging that the world, our business and all of our lives have changed significantly with the COVID-19 pandemic. We called upon to be our best selves to act with patience, understanding, compassion for all of those who have had their lives and livelihoods impacted. At Omnia, we certainly provide an important part of primary chemicals, agriculture and assist with economic growth in the markets and the environments we operate in. And Omnia is committed to do what we can to make this pandemic easier on the lives of all of our customers, staff and partners.

I thought before we go into the presentation, let’s talk a little bit about COVID-19 and how that has impacted our business. There are 3 areas that we look at when we think of the pandemic. The first is our business operations. And generally, Omnia has been classified as essential services. Our primary Chemicals, Agriculture and Explosives businesses have been essential services across the markets we’ve operated in. In some markets, it’s been easier to operate, the rest of the world. Agriculture and Explosives have not slowed down as they have in South Africa. And Chemicals, as well our Protea business, classified as essential services with its cleaning, sanitizers, detergents, water treatment products. Fuels as well, essential services. However, we have seen a slowdown in some of the fuel demand over the months. We will talk in a little bit more detail, and we have shared comments in our long form around how the business has changed and how we have adapted our operations to deal with the COVID-19 pandemic.

From an employee perspective, we comply with the World Health Organization standards across all of our businesses and with the local governmental regulation. All of our staff continue to socially distance. We have sanitizers, cleaning protocols in place, and our plants have operated with an additional shift to allow us to isolate, to test, to move a shift off deep clean and continue operating our plants. We’ve been doing this for a number of months. We’ve also focused on ensuring that our supply chain is managed on a more agile basis. And to date, we’ve not been in a position where we’ve been unable to supply any of our customers. We’ve been able to modify our supply chain and ensure that where there’s demand and where customers need chemicals, fuel, fuel additives, our fertilizer and our explosive solutions, we’ve been able to supply.

From a financial perspective, we focused on safeguarding our balance sheet, disciplined cash management, which you will see coming throughout the presentation. We’ve also focused heavily on supply chain, as I’ve mentioned, and I guess being very prudent around cost reductions, continuing with our disciplined restructuring in our businesses like Agriculture and ensuring that what our customers need and need supply is delivered and delivered on time.

From a humanitarian perspective, I think it’s fair to say that we’ve seen the impacts of the pandemic all around us. So where possible, Omnia has assisted with food hampers, donations of sanitizer and cleaning materials. We’ve also seconded some of our technical expertise, engineers, to some of the national projects around ventilators. And at a more localized level, we’ve encouraged our staff and our people where possible to donate blood and plasma and other goods that can be used to reduce the impact on the people — on our people.

And just moving to our safety record. Clearly, our business is a business that is focused on safety. This year, we’ve split our safety stack into our Explosives, Agriculture and Chemicals business. Our recordable cases is sitting at 0,49. BME, in particular, has had a really good record of 0,15. And I guess our Chemicals and Agriculture business needs to continue focusing and improving their safety record. I guess it’s fair to say that the people across all of our plants and all of our businesses across the world are under an inordinate amount of strain at the moment. They face the challenges, not only of the health issues around the pandemic but also the issues of livelihood and folk in their communities. So it’s more important and critical for us to help and support our people from a psychological perspective, but also to enhance our safety procedures across all of the businesses we operate in.

So then just moving forward and turning to the trading conditions for 2020. 2020 has clearly been a tough year for us, and we’ve separated those into an environment in South Africa, an environment in Southern Africa and international.

From a South African perspective, we had good rainfalls. We saw good volumes moving through our plant and in our fertilizer business. We unfortunately saw an extensive amount of load shedding, stage 6, in December, which impacted the manufacturing sector and the mining sector in December, January and February. And I guess what we saw playing through the calendar year of 2019 is the low business confidence, lower economic growth rates moving all the way into recessions in the first half of this year, and all of that has impacted our businesses. Our SADC and South African business has been going through restructures. We’ve been synergizing, focusing on working capital costs, and you’ll see some of these external tough macro environments have been offset by some of the management action that we’ve taken during the year.

From an international perspective, we’ve seen growth in the mining sector and growth in the AgriBio market. Those 2 areas have been good for our business in the current trading period, and you’ll see some strong growth coming through the businesses that have operated in the international markets. You’ve also had a fair amount of volatility and weakening in the exchange rate, which has impacted our business in — positively and negatively in various areas, and that will come through our results as we move forward.

So then just taking us back to our half year results and maybe last year this time, which was a very, very difficult time for our business, we set out on a plan to stabilize our business during financial year 2020. We had a distressed balance sheet last year. We had a bridge loan in place of ZAR 6.8 billion this time last year, and we needed to execute on a rights issue and a restructured debt package. It’s pleasing to state that in the financial year, we completed the rights issue. We also restructured our debt and termed out our debt into a sustainable debt structure. And all of that was completed towards the end of November, early December. That allowed us to step into the next financial year and to the COVID-19 pandemic in a very strong position.

I also told all of you that we will institute a chunk of fixes and restructures in our business, so focused on reducing the cost base, focused on managing our working capital a lot more robustly, delivering returns on the capital that has already been invested. We had some large acquisitions over the last few years and built a new plant, and also improve the margins across our business. A lot of those fixes have been implemented. There’s still more to come. And what you will see is it’s resulted in fairly robust delivery in the 2020 financial year. There’s a journey still to walk, so there’s more that needs to be done. We are still doing some restructures in our Agriculture business. We still need to do more in terms of synergizing some of our head office costs. And I guess what we also need to focus on is with the new normal, which is the impacts, the economic impacts of COVID-19. We need to think carefully about where we invest and how we do things going forward.

From a results perspective, what we’re proud to show you today is we’ve had cash generated from our operations of over ZAR 2 billion, which is a really great outcome, and we’ve had net working capital reduced by ZAR 357 million as at the year-end. Clearly, the more pleasing part is that at half year, we were able to flatten the deep working capital cycle that we usually had at half year. We’ve also had our CapEx spend well managed, slightly better than budget. And clearly, what you have coming through in our EBITDA is a chunk of interest this year and our — and an IFRS 16 charge, which increases our EBITDA from ZAR 1.56 billion to ZAR 1.8 billion.

From the nitrophos plant perspective, what was caused — what caused us a lot of concern last year is the plant needed certain modifications. We have 6 crystallizers on that plant, 3 of them were modified, and that was enough to get us the instantaneous capacity and the capacity we needed. The plant has now been modified. The plant has been functional, and it’s operating as planned. We have got a dedicated team focused on the plant that were managing this probably on a weekly basis for the last 6 months of last year. And in the month of June, the instantaneous capacity out of our nitrophosphate plant was around — was over 80%, which is what we need and probably a little bit better than what we need. So we’re pleased to say that, that plant is now where we would like it to be.

In terms of going forward, we’ve implemented a new operating model in our business, and that is really to focus our business firstly on manufacturing excellence. All of you know that we’ve got a large amount of plant and pit based in Sasolburg, and that plant needs to be run hard and efficiently. We’ve had our costs over the last few years increase ahead of inflation, and the door is closed in that plant. So we’ve got a current restructure in Agriculture at the moment, which reduces the costs. And I guess what we’ve done is we’ve focused a team of our leaders to ensure that we have a center of manufacturing excellence, which is our Sasolburg plants, which support both our Agriculture and our Explosives business. We then created a front-facing unit of Mining and Agriculture. And really, the key there is that those 2 businesses now focus on delivering winning propositions for our farmers and winning propositions for our mining customers. This ensures focus on manufacturing and focus on winning with the customers. We have implemented a leaner head office and shared services function, and you’ll see some of those benefits coming through in this financial year and a few — a chunk that will come through in future years.

Our new investments, I’ve spoken about nitrophos already, but our new investments being Umongo and Oro, we’ve been running them hard, focused on growth. You’ll see some pleasing performance coming through both those businesses. Both of them have grown in earnings. And we have focused those businesses on expanding their distribution footprint, enhancing sales and enhancing margins. We’ve created a cluster, which are the businesses which are not linked to SADC, and that is Mining, international, our International Fertilizer business, Umongo and Protea. And each of these businesses need to focus on delivering a return on capital that makes sense for us and being run by really great entrepreneurial management teams and leaders.

If I then move to our financial results, and I’m just going to touch on some of the highlights. Our revenue has been stable at ZAR 18.7 billion, ZAR 18.6 billion last year. Our operating profit has increased to ZAR 780 million. Our profit before tax has increased to ZAR 124 million from a loss last year. And our EBITDA, excluding impairments and including the IFRS 16 charge, is ZAR 1.8 billion. If you exclude the IFRS 16 charge, that number is about ZAR 1.56 billion, and Stephan can speak to that a little bit later.

In terms of working capital, a slight reduction in working capital from ZAR 4.2 billion to ZAR 3.9 billion. The 31st of March, clearly, some of our international businesses are still in a high working capital position, but our local business is not. So it’s great to see that all of the fertilizer and the product we’ve produced for the planting season has all gone out and converted back into cash, which is good for us.

From a debt perspective, our debt reduced from ZAR 4.4 billion to ZAR 1.8 billion, which is a really great result. We will talk later, and we have put out disclosure on the new debt package, the covenant and the different structures that we’ve got in place. You will see that in our long form. And our earnings per share — headline earnings per share has increased to ZAR 1.89 from a loss of ZAR 0.97 in the prior year.

From a net debt to EBITDA, we had a ratio of 1:1, which is a great performance. What we did say last year is we would like our debt reduced. And clearly, we are at the bottom end of our cycle. So we — all of you know our business. We have got a deep working capital cycle. So we use a chunk of working capital between now and the planting season to build up our fertilizer stocks for South Africa and SADC.

If I can just move forward to the EBITDA, I think what is great to see, and if you focus on the slide on the right, the red line is what happened last year. And clearly, what you’re seeing is a green line now, which is our business coming back to more normality. I think we still have a lot of work to do, but I think what is great to see is that all of our businesses have started — have rebased themselves back to something which is a more stable and a more normal performance. So when we look at our EBITDA to prior years, you see a rebasing and something that’s a little bit more normal to what we’ve experienced in the prior years.

And then how is that linked into debt? Our debt, ZAR 4.4 billion at the end of last year, we had the rights issue, which broadly takes off ZAR 2 billion, ZAR 1.93 billion after costs, and then ZAR 2.2 billion from cash generated from operations, which is a really great performance. We’ve had outflows in terms of interest, tax and other investing activities, and we will talk a little bit later about the working capital and the CapEx that we intend using in future years. So I think when we look at — and our debt, all went according to plan and what we promised, we will deliver we have.

At half year, we put up a slide on working capital. And I think working capital as well performed as anticipated. What you can see in the financial year, if you take the entire FY 2020 year, you see that we’ve flattened the peak amount of working capital that we need, and a lot of management action went into that. That happened in all 3 of our businesses: Chemicals, Explosives and Agriculture. And then what is great to see is getting to the end of the year, we then reduced the working capital in line with the planting season and the big outflows in the agriculture space. So overall, working capital, well managed. I think we will continue to focus heavily on our CapEx spend, our working capital and our debt to continue managing that in a fairly robust manner.

And just an update on capital expenditure. Our capital expenditure, also within budget and as planned. Maintenance expenditure of ZAR 99 million. Looking forward, we probably see maintenance expenditure between ZAR 99 million and maybe between ZAR 100 million and ZAR 150 million a year. And I guess, from a CapEx perspective, we will spend CapEx as we acquire new customers and when CapEx is needed from an expansion perspective. We don’t view us having needing a deep CapEx investment cycle like we’ve just been through. We have secured some new business in our Explosives division, and that has required some expansion CapEx, and that CapEx has been — some of it has been spent in FY 2020 and a little more of it will be spent in FY 2021. We don’t foresee our CapEx — our total CapEx spend, which is maintenance or expansion exceeding the ZAR 500 million mark in 2021. Obviously, if we do acquire new businesses or we do expand further, that might change.

I thought it’s proper just to talk a little bit further about the nitrophosphate plant. The nitrophosphate plant, unfortunately, did not deliver the benefits that we required in FY 2020. We used the year to fix the crystallizers and to get the plant stable that is all done and behind us. So in our results, you don’t see any benefit coming through of the nitrophosphate plant in 2020. The benefit will start coming through in 2021. Currently, the plant is operating as planned. And as I said previously, our instantaneous capacity is north of 80% in the month of June. The quality of the product is great, and it’s been worked away well in our Agriculture and our Explosives business.

I had one slide that I think I missed, but actually, I won’t go to it. I’ll let Stephan actually pick up the slide. It was really around operating margins. Let me see if I can find that slide. Here it is. I just wanted to share this slide, which is our operating margins per division. And in all of our divisions, Agriculture, Mining and Chemicals, you see a rebasing of our operating margins. Stephan’s got a slide, and there’s a slide in the booklet, which actually splits the operating margin out in a lot more detail. It gives all of you a view of how each business has performed. So here, they’re together in terms of Agriculture, Mining and Chemicals, but there’s a page in the booklet where we split that out, and Stephan will talk about it. But I guess what you’ve seen in all of our businesses, and if we think of Agriculture, we saw good volumes in SADC. Our humates business exceeded expectations. Oro Agri had good sales volumes. Good production in Brazil, U.S. and Europe. And in our Mining business, great volumes out of Zambia. And our international business continued to perform as planned. And I guess, locally, we’re now mobilizing for a parcel of new business that we’ve written.

From a Chemicals perspective, the restructure in our Protea business has worked well. You see a chunk of earnings coming through in that business based on that restructure. Unfortunately, both our Mining and our Chemicals businesses were impacted by the load shedding in December, January, and both those businesses saw a slowdown in demand when we hit stage 6 load shedding. Even with that taking into account, I think what you see is our earnings and our EBITDA is reasonably okay. We would really like our operating margins to increase, and there’s a number of initiatives underway in the business to deliver an enhanced operating margin over the next few years.

I’m going to stop there for a second and hand over to Stephan. Stephan is going to talk through the financial results in a little bit more detail, and I will come back thereafter.

So Stephan, I’m handing control over to you.

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Stephanus Petrus Serfontein, Omnia Holdings Limited – Group Financial Director [2]

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Thank you, Seelan. Just — okay. I want us to jump into the income statement for the year as we start running through it. Revenue was stable at ZAR 18.7 billion for the year. The pleasing sign was the increase in gross profit. Gross profit increased by 15% to ZAR 4.7 billion, and the gross profit margin increased by 22% to 25% for the year. That was on the back of the strong demand in our AgriBio business as well as the weakening of the Zimbabwean dollar, which increased our GPs, and that was slightly offset by ForEx losses, which is sitting in other operating expenses further down in the income statement, and then it was product mix and services coming from our Protea Mining Chemicals business as well as our Protea Chemicals business.

If you look at the distribution expenses, distribution expenses increased by 3% to ZAR 2.2 billion for the year. That is on the back of the increased volumes within Protea Mining Chemicals as well as in West Africa for our Explosives business and the strong demand for the AgriBio products. That was slightly offset by a decrease in our Protea Chemicals business, which came through the restructuring from last year.

If we look at the administration expenses, that reduced by 13% from ZAR 1.5 billion to ZAR 1.3 billion, and that cuts across all our businesses, which is actually quite pleasing to see.

If we look at other operating income reduced to ZAR 179 million, and that’s just because of certain income items that was not repeated in the current year related to insurance claim in Mozambique and the reversal of earnout in Umongo.

If we go to other operating expenses, that increased slightly by 5% to ZAR 400 million for the year, and that was on the back of the foreign exchange losses in Zimbabwe as well as a high amortization of our foreign intangible assets.

If we look at our impairment losses on nonfinancial instruments, that dropped down from ZAR 340 million in the prior year to ZAR 110 million in the current year, and that’s just the difference between the Protea Chemicals impairment in ’19 versus the Umongo — slight Umongo impairment sitting in 2020.

If we look at the impairment losses on financial assets, there’s a slight increase of 20% up to ZAR 116 million, and that’s on the back of the ECLs and COVID that introduced a higher risk premium.

Overall, that all resulted into an operating profit of ZAR 790 million for the year, up from ZAR 24 million in the prior year.

If I look at the finance expense, the finance expense increased with 19% to ZAR 572 million for the year, and that’s on the back of the bridge loan that was in place in H1 of the financial year.

All in all, it falters down into a profit for the year of ZAR 129 million versus a loss of ZAR 407 million in the prior year.

If I look at the movement in operating profit, quite a pleasing graph, everyone contributed. If I can start off with Agriculture, the bulk of the contribution came from our international businesses, the AgriBio business as well as Zimbabwe. Also the effects of hyperinflation filtering through that. If I look at the Mining business, the biggest contribution also from our international businesses coming from Zambia, West Africa and also a strong performance by Protea Mining Chemicals. If I look at our Chemicals business, quite pleasing to see the releasing of the benefits from the FY 2019 restructuring Protea Chemicals coming through and as well as different optimizing of product mixes. Then there was a chunk of increase in the group. The impairments get carried at a group level. I’ve mentioned the difference between the Protea and Umongo impairment, which was also slightly offset by the debt restructuring cost and all in all falters in to a ZAR 789 million operating profit for the year.

As Seelan mentioned, as we start delving into some of the details, if I take the agricultural sector first, in South Africa, the revenues was up by 10%. The operating profits were up by 18%. In Agriculture SA, there were timely rain across Southern Africa, there was a weakening of the rand versus the U.S. dollar exchange rate, and there was also an improved ammonia-urea ratio. Unfortunately, that was slightly offset by the low international commodity prices as well as above inflationary increases in cost and a reduced sales to our Mining division.

If I look at the international side, excluding Zimbabwe, revenue were up by 10%. The operating profit were up by 2%, and that was on the back of a strong demand by the K-humate out of Australia, which enhanced our Australian business, as well as an improved performance in Brazil. There was also a solid performance in Zambia on the back of secured contract business. And across all our South African — Southern African region, there was a reduction in the retail store footprint in order to reduce the cost to make sure we get the operating margins up.

If I look at Zimbabwe, the revenue increase and associated operating profit. Zimbabwe remain a large [AI] market right in our doorstep that we service out of Sasolburg. The core strategy is to continue to focus on USD sales to ensure foreign currency allocations, also to reduce the exposure from an overall Omnia perspective. And the business is well positioned to take advantage of any sort of improvement in future conditions.

If I look at the Trading business, the winding down of the business is almost completed. That should be fully completed in 2021. The increase in operating profit was on the basis of liquidating of the final stock positions.

If I look at the Biological business, just to highlight, the prior year was only 11 months was included in the Omnia results. This year, it’s a first year of full set of results that is including in our results. A strong performance all around; strong revenue growth, up by 29%; operating profit, up by 98%. And that’s on the back of higher sales volumes across the bulk of the regions where they operate: Brazil, the U.S. and South Africa. Also, increased volumes from the sales of new products. And there was a benefit coming through from the weakening of the rand against the U.S. dollar exchange rate.

All in all, if I look at from an agricultural point of view, a blended margin for the segment sitting at 6.9% versus 4.5% in the current period — comparative period.

If I move over to the Mining segment. In South Africa, the mining sector had a very difficult year, as Seelan mentioned, significantly affected by load shedding, which caused several mines to close and reduce production, specifically in December, which led into January, only starting to fire up again in February. Also lower sales volumes compressed the margins with a lower ammonia prices, which were partly offset by the weakening of the exchange rate. Also, there was a bit of delays of the nitrophos benefits to come through, which we’ll only start seeing coming through in FY 2021.

If I move to the international side, strong growth in revenue of 13%, operating profit up by 98%. And from outside South Africa, the whole division performed well from a mining point of view, strong volumes in Zambia and in West Africa, also strong contribution by Protea Mining Chemicals into the copper and precious metals market.

Overall, from a mining perspective, sitting with a blended margin of 6.9% for 2020 versus a margin of 3.5% in 2019.

If we move over to the Chemicals side, starting off with Protea Chemicals first, a drop in revenue year-on-year of about 10%. Quite pleasing, the operating profit significantly up. That’s on the back of the restructure of 2019 coming through and the benefits actually getting realized. The manufacturing sector remains under pressure within the chemicals sector. There was also a strategic withdrawal on certain selected products, and there was an overall weakening of global commodity prices.

If we step over to Umongo Petroleum, the revenue was up by 10%. While the operating profit was down, there was a strong growth in the additives market. Seelan touched on it. There was a sharp decline in the rand versus the U.S. dollars right at year-end, which resulted in a loss in 2020, and there was an associated gain in 2019. But on a normalized basis, if I exclude it, the unrealized ForEx movements, the Umongo margin for the — moved year-on-year from 5.1% to 5.4%.

Overall, if I look at the Chemicals cluster, the blended margin for the year is sitting at 3.5% versus 0.2% in the prior comparative period.

If I step over to the balance sheet. This is the first year of introduction of full sets for IFRS 16. So you will see there’s additional right-of-use assets of just below ZAR 600 million that was added to the balance sheet and associated lease losses after lease liabilities that’s added for just over ZAR 600 million. There was a strong focus, as Seelan mentioned, on cash and the cash generation throughout the cycle, and this increased the cash due to prudent cash flow management and the overall reduction and effective management of net working capital.

If I look at the net debt, which was the biggest focus area for Omnia over the last year, the net debt decreased due to the prudent cash flow management resulting in a very positive free cash flow that was generated throughout the year as well as the successful completion of the rights issue.

If we look at our overall debt, including IFRS 16, we’re sitting at ZAR 1.9 billion versus a net debt last year of ZAR 4.4 billion. Excluding the lease liability on a normalized basis, it reduced from ZAR 4.4 billion to about ZAR 1.3 billion.

If I look at the net working capital, the net working capital reduced from ZAR 4.2 billion to ZAR 3.9 billion, which is 8% year-on-year. If I impact the net working capital a bit in more detail, if I look at the inventory, overall, Seelan mentioned to flatten the curve in H1, which is normally our deep working capital cycle for Omnia. Overall, the inventory decreased due to the change in the purchasing profile within Agriculture SA associated with the manufacturing business as well as the overall lower inventory holding across all our business units.

If we look at our receivables, there was a slight uptick in our receivables at year-end, and that’s on the back of a strong performance of our international business and the sharp change in the currency at year-end. The payables overall were good managed throughout the cycle, and there was an increase in the payables resulting in the decrease overall of just over ZAR 300 million for the year.

If we step over to the debt structure. As we mentioned at the half year results presentation, the sustainable debt package was secured in December. That consists of core term facilities of ZAR 2 billion, maturity over a period of 2 to 5 years; we’ve got an RCF of ZAR 1 billion; we’ve got normal GBF facilities of ZAR 800 million; and then we’ve got structured working capital facilities of ZAR 1 billion resulting overall total facility of ZAR 4.8 billion. We’ve also coupled onto that a ZAR 1.2 billion indirect facilities for guarantees, et cetera. That give us our overall debt picture as at the end of March, where the group had sufficient headroom of ZAR 3.7 billion available.

If I look at the way that we evaluate the capital structure of the group, we look at on a net debt-to-EBITDA basis. The aim in the medium to short term, as previously communicated, is between a range of 2% to 3%. In the longer term, we want to try and achieve a rate below 2%. You would see the capital profile at year-end, we will achieve a rate of 1, which was a fantastic result due to the specific focus on the net debt and the cash throughout.

The covenant that we’re starting to present to the market now, the net debt-to-EBITDA works on adjusted EBITDA and adjusted debt that’s just to be on a normalized basis to exclude IFRS 16 and all sorts of ones-off that could potentially, materially move the numbers. The covenant needs to be below 2.5. And on a net debt-to-EBITDA basis, we were sitting at just below 1. And on the interest cover ratio, the cover ratio needs to be higher than 3.5. We were sitting at 5.6. All the covenants were met by the group at year-end.

If I then step over to the cash flow statement, Seelan highlighted the cash generated from operations. There was a big uptick, and the cash flow generated from operations was just over ZAR 2.2 billion for the year. And that was due to the increase in operating margins throughout all our business units, the effect of management of our net working capital and the implications of IFRS 16 that now falters down the cash flow statement and gets reported under financing activities.

If we look at our investing activities, a big drop from ZAR 2 billion outflow in the prior year down to just below ZAR 500 million for the current year. That’s on the back of last year. We were still completing the final cash outflows of the nitrophos plant as well as the acquisition of Oro Agri and associated cash flows.

If I look at the cash flows from our financing activities were fairly flat year-on-year. That’s due to the decrease as a result of the bridge in the first year that was replaced by the proceeds from the rights offer and the associated leases from IFRS 16 that gets reported now under the financing activities. There was also a chunk of cash in 2019 that was paid out in dividends that won’t repeat it in the current year. But overall, a quite pleasing sign is the free cash flow that was increased. There was a free cash flow generated of just under ZAR 1 billion for the year versus a free cash flow outflow of ZAR 1.7 billion in the prior year.

I’ll pass it now back to Seelan for the conclusion. Thank you.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [3]

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Thank you, Stephan. I think it’s important just to acknowledge as well at this point that the group did have a cyber attack in February, March. And I think our finance team and our IT team have done an incredible job to get all of our systems and processes restored. And our results are timeously under difficult conditions where stock counts and other processes had to be done virtually. It’s important to maybe just acknowledge that. And thank you for all our teams and all the hard work that they’ve done.

Just moving forward and thinking about — I just want to change the slide. There we go. Just moving forward and thinking about our outlook, I think it’s great to see that a company like Omnia, 66 years old, that has been providing primary chemicals, fertilizer and explosives into the market for a number of decades, has gone through a difficult time and is actually coming out the other side stronger. I think there’s a chunk of hard work that we all still have to do. We need to focus our business going forward on being a world-class manufacturer of high-quality products, and there’s value we can generate out of that. There’s a restructure that we’re doing in our Sasolburg and Agriculture business. We also need to continue to continuously improve. So we said at half year and at year-end last year that we’ve got work to do in terms of leaning our group, creating a smaller head office structure and actually creating all of our Chemicals businesses, giving them the space to flourish and to operate in an entrepreneurial environment. So there’s a chunk of value we will generate out of continuously improving.

We need to refocus our attention on winning in the customer space. So whether it’s Agriculture, whether it’s the manufacturing clients we’ve got in Protea or whether it’s our Mining customers, we have got some really, really great solutions. And over the next few years, we will be packaging them, taking them to customers and really focusing on the front end of our business. We’ve seen a great win in our explosives business in terms of a new contract that they’re onboarding. But I fundamentally believe there’s a road to travel in our Agriculture business and in our Chemicals business to show our customers and the market the innovative solutions that Omnia has.

Coupled to that, there’s growth in some of our existing markets. So yes, economic growth rates are low. But if we look at South Africa and SADC, there’s still areas where we, as Omnia, can grow into. And I guess, globally, whether it’s our BME business or whether it’s Oro Agri or humates business, there’s still opportunities to grow and diversify further. In doing all of this, we will do it on a sustainable basis. Safety is important, and I think it’s critical for us to leave the world a better place to ensure that our products, our services are aligned to the sustainable development goals and safety is embedded in the culture of our business.

I mentioned the — our operating model, sorry, the slides are moving a little bit slow. I’ve mentioned our operating model. We will continue on the path of renewing and fixing our business. And I guess what you will see coming through and what that will result in is increased operating margins, and it will result in growth thereafter. I think it’s really great, as Stephan presented, is our balance sheet and our debt position allows us to be — not to be forced sellers or forced into a restructure. We can do that in a considered manner. And it’s great to know that we’re not a forced seller of any of our assets. There are still assets that we’ve got like land, like warehouses and other noncore assets that we will continue to look to exit. And I guess what we have announced at our trading update is we’ve received an unsolicited interest in Oro Agri. It’s something that — another business that we held for sale because we acquired the business in 2018. But I guess, similarly, it’s not something that the Board can ignore. So we are exploring that. And if we get to a point where that results in something — a transaction that could happen, we will then inform our shareholders and the market of that. So we will continue on the path of renewing our business, of restructuring, of completing all of the hard work we started last year and do that over the coming years.

In terms of our customer markets, we would like to operationalize our new contract in BME, and that’s been going well. So when you think of working capital and CapEx, there is a bit of working capital and CapEx that will underpin that contract over the next few years. We will continue to invest in our quality products and our service excellence. A number of our business units are known to be — to excel at what they do. If I just think of our agronomists and the feet on the farm, we’ve got an awesome footprint of people that are ensuring food security in the markets we operate.

If I look at our distribution and our product capability in Oro Agri, we see Oro going into new markets. We’ve just opened an office in India. And taking what products that make a huge impact in agriculture out to those farmers swiftly.

We also need to commercialize some of our new solutions and digital products. We’ve got great software and great solutions in BME and in AXIOTEQ, and those will continue. And I guess globally, we will continue to create partnerships and grow on a capital-light basis and with partners in certain of the territories that we believe is core.

More internally, from an operational perspective, we will continue to embed our new operating model. We will create a culture of leanness. So shared services, cost reduction and focus on tweaking and managing our supply chain as tightly as possible. That is — you’ve seen some benefits come through there from a cost perspective, also from a working capital perspective.

I think it’s fair to say that our company has gone through a very, very difficult time last year, and that does impact our people. It does impact the confidence that some of our customers and our investors have in our business. We’re rebuilding that. We will invest heavy into changing our culture, increasing the performance in our business and support our people through this. There’s a number of changes that are happening in our business. And change is difficult. I think it is really great to think that we had a rights issue, a debt restructure, a cyber attack and COVID-19, and I guess, Omnia putting out a very pleasing, stable, secure set of results.

From a safety and sustainability perspective, safety is critical in our business, in our operations, in our communities, in the — in our customer base. So we will continue to enhance our safety environment. We will focus, at this point, a lot of our people have got emotional stresses and strains with COVID-19. We will assist where we can and help with that. We will also continue to reduce our carbon emissions. We’ve installed a new EnviNox reactor on our plant, which will have a significant impact in coming years. And I guess, we will continue to embrace diversity and be a good corporate citizen in the countries and the territories we operate in. Diversity, not only in terms of sex and culture but also diversity in terms of thinking and doing things differently and on a more sustainable basis going forward.

Just to move forward, so I guess, how will we win? We will win by delivering sustainable returns on capital that’s been invested. We’ve still got a way to go there. We will exceed our customer expectations and deliver to our customers, farmers, mines, manufacturers and others. We will focus on delivering operational optimization and excellence. I think it’s really important that what we do in our plants and our operations, we do them well.

And I think we’ll also focus on protecting our financial — our balance sheet and our financial position. We’ve come through a difficult time last year, and we’re not about to let the stability and the strong position we created go away. So we will continue to protect our balance sheet.

We will proactively engage in terms of expansion opportunities where they exist and where they align to our core competencies. And clearly, we will do all of that, managing the risks, ensuring safety and being very, very clear about what the macro environment looks like. I think we all know that COVID-19 creates a chunk of uncertainty. So while as this uncertainty exists, we will manage the business very prudently to protect the business and ensure that once we have a cure or a vaccine and we’re able to tell how the markets will come out of COVID-19 and what the demand will look like and what the trajectory of that demand looks like, it will allow Omnia to be in a very strong position to leverage itself to win in the world after COVID-19.

Just in closure. I guess our hearts break and goes out to all of our people across the world that have had close relatives, friends, family members succumb to COVID-19. The pandemic has brought death to a number of our doors. And I think it’s proper in a time like this just to recognize the difficult spaces that the people of the world is in, in the moment — in this moment. And from an Omnia perspective to say, we will do our little bit to ensure safety, social distancing. We will continue to supply the water treatment chemicals, the sanitizers, the cleaning, the detergents that are needed to the societies that we operate in. We will continue to ensure food security by supplying the fertilizer, the NPKs, the bio agri products, the humates products across the world. And I guess, from a mining perspective, where mines are going and there’s demand, we will continue to supply them with the explosives needed that drives economic growth, that allows people to be fed, and we will do our little bit to ensure that the world gets through COVID-19.

I want to thank all of you for attending the presentation. And we will open up the session for questions. We have a moderator on the call. So I assume the moderator will manage those and pass them on to Stephan and myself. Thank you very much for attending.

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Questions and Answers

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Unidentified Company Representative, [1]

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Good afternoon to all the participants. Seelan, your first question this morning comes from [Gary] of [Rigsbaum]. And he would like for you to provide some color on your operations during and after the lockdown. Did you experience a challenging period at the beginning? And have you seen any recovery thus far?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [2]

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Thanks, Monica. I think the question is around the lockdown and how did that impact us. During the lockdown, all of our businesses in — let’s start with outside of the continent. All of our businesses outside of Africa was essential services. So whether that’s our Agriculture or our Explosives businesses, they continued. The challenge we had was probably supply chain. Our supply chain leaders and managers were able to adapt our supply chain to allow any customer that needed product to get the product. So we didn’t have any disruption in our end deliveries to customers.

If you come to the African continent, generally, during the lock — so these lockdowns progressed at different levels across the world. And I guess, what we were able to do is as countries went into lockdown and supply changed, we were able to adapt our supply chain to ensure that we would meet our customer demands. When the lockdown started in South Africa, I guess, the rest of Africa didn’t lock down and business continued fairly normally there. Our businesses in Zambia, whether the Explosives or Agriculture, they continued, and if anything, they continued slightly ahead of plans. There were challenges around border posts and moving of product across borders. Our supply chain folk had to come up with very innovative solutions to deal with those. We had trucks drive to a border with one driver. The truck being sanitized and another driver, take the truck to its final destination. So from that perspective, we had to adapt our approach. But none of our customers did not get their supply on time, and none of the end delivery to customers were disrupted.

Coming home to South Africa. South Africa initially saw an impact in the Mining sector. So only coal mines that supplied Eskom were allowed to function in the initial weeks of the lockdown. That changed quite swiftly as the lockdown settled and regulation settled. A number of mines then started opening up again. And I guess, where we are now, the mining demand in South Africa is where we’d like it to be. We work hand in glove with our mining customers around safety, around social distancing, around tracking, around testing. And it’s really great to see the cooperation between suppliers and customers in the space.

Moving to Agriculture in South Africa. Agriculture, also essential services in South Africa. So from a production perspective and a delivery perspective, everything continued as normal. And any issues we had in terms of supply or logistics, we — that was all managed fairly well.

From a Protea Chemicals perspective, all of Protea was essential services, except the cosmetics business, which is a small part of the business. So we continued where there was demand. We continued to supply chlorine, water treatment chemicals, sanitizers, food, chemicals, detergents.

And I guess, from a fuels perspective, in Umongo’s case, in the initial stages of the lockdown, you did see a falloff of demand generally in the fuel sector. However, Umongo, also essential services and where there was demand, we were able to supply.

I think the challenge is twofold. It’s really in your plants and how you’re dealing with the health and safety of the individuals. And we’ve had a team that very early on developed some very robust protocols to deal with that. To give you a sense, our internally trained fire fighters are able to do the sanitizing and deep cleansing of our plants and were able to do those quite swiftly. There’s a big uptick in infections right now in Johannesburg, and we’re able to take a shift or bring a new shift on and have our plants continue through those situations.

So I think that — I think the great thing is that our business is in primary essential services, chemicals and solutions, so we’ve continued to function through the lockdowns.

Monica?

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Unidentified Company Representative, [3]

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Thanks, Seelan. The next question is from Matthew of 36ONE. Matthew would like to know the nondeductible expenses with regards to the income tax that have been included, and will they recur in the next year, firstly? Secondly, what tax rate should we use to model FY ’21? And then maybe if you could just elaborate on running cash balances versus your finance costs, given that you don’t get high returns on cash. Perhaps you should focus on paying down debt. Could you comment on that, please?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [4]

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Thanks, Monica. So Stephan’s got a slide in the pack around a complete reconciliation of the tax. So Stephan, maybe you want to talk through that, first?

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Stephanus Petrus Serfontein, Omnia Holdings Limited – Group Financial Director [5]

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Yes. Sure. Thank you, Seelan. Thanks, Matthew. Yes. So I’ve included a detailed reconciliation that’s — that will be included in the pack. There’s also additional disclosures in the apps regarding the tax reconciliation, just to give you a bit more clarity. But just specifically regarding the nondeductible expenses, that related to the amortization of the intangibles as well as the impairment of goodwill. So that falters all in there. There was also a lot of foreign expenses that was nondeductible. Also, the introduction of IFRIC 23 for the first time.

If I think about the tax rate from going forward into the future, that will definitely start normalizing. This was an abnormal year because — that’s why the effective tax rate is so high. But that will definitely start coming down to a more normalized level from Omnia point of view. But there is additional disclosures in the pack, which is available on the website and also additional disclosures in the AFs.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [6]

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Stephan, the second question was — from Matthew was around the cash balances and — the positive cash balance and the debt. It really just talks to our cash across the world. Do you want to deal with that as well?

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Stephanus Petrus Serfontein, Omnia Holdings Limited – Group Financial Director [7]

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Yes. Sure. Yes, Matthew. So the positive cash balances, if you look at the positive cash balance sitting there, off of a big chunk of that cash, just more of half of that is our cash balance in our international businesses where we don’t do sweepings into South Africa because of various exchange controls and certain regulations and also where they don’t operate without facilities. So they need to have certain cash balances available for the normal operations.

If I look at the cash balances opposite the debt structure and as we highlighted there, as Seelan mentioned, at the beginning of COVID, the introduction of COVID, it was a key focus for us to protect the balance sheet and to make sure we’ve got enough facilities and [ATM] available to run the company sustainably. If you look at the current debt structure that we’ve secured is that once we paid down some of the short-term bullets, we will not be able to draw down on them again. So management has just taken a view to make sure we have enough ATM facilities available for the business into the future.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [8]

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Maybe just to add to that, Matthew, we will continue looking at our cash and our treasury function to optimize further. And last year was a very difficult complex year with a lot of moving parts. So there are certain changes we — Stephan will be putting in place over the next few months to reduce our interest and get our efficiency levels higher.

[Monica]?

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Unidentified Company Representative, [9]

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Seelan, the next question is from [Pit Fulion] of [BTM/Benefit]. He says that historically, your return on equity was around 18% to 20%. Given all the additional equity in the business after the rights issue, do you think you can ever get back to those levels again, in brackets, bearing in mind, this implies around the ZAR 10 EPS? Is your incentive scheme aligned to this? If not, what does it incentivize?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [10]

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Thanks, [Pit]. I think where we were last year, last year was a very, very complicated year for us. So we needed to settle our capital structure down, which we’ve done. What I said at half year is that once the capital structure is done, what we then need to look at is getting a risk-return above the weighted average cost of capital and, over a few years, get to where the company should be. We have revised the incentive scheme. So a lot of shareholders have spoken about how we think about the short versus the long. We’ve put in place measures around — which you will see for last year around cash flow, EBITDA and getting some stability. And going forward, I guess, what we’re working through now is how we rebase the company and how we get to returns that are acceptable.

I think, Pit, I don’t want to answer categorically yes or no. I think what we do recognize is that we need to increase our return on capital, and how we’re thinking about that is to increase the operating margin, in some instances, reduce the amount of capital invested. And in other instances where we’ve spent the money and invested the capital robustly, focus on getting the returns. I think over the next few months, we will — as the capital structure is now settled, we will ensure that there’s adequate KPIs in place and certainly, for all of the management, including myself, and to make sure we are absolutely aligned to the long-term return on capital and the value generated for shareholders.

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Unidentified Company Representative, [11]

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The next question is from [Arun Rajaratnam] from [MIBFA]. He said assuming the nitrophosphate plant produces to spec, can you please spell out and quantify the benefit to the extent you can in your various downstream divisions? And the second question, what will your blended interest rate be on your debt for FY ’21?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [12]

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Yes. Thanks. So I guess, on the nitrophosphate benefit, we would see roughly a 1% margin increase in Agriculture and Explosives in SADC, if nitrophos delivers. We are restructuring our manufacturing business. So what I’m really wanting to do is I’m really wanting the company to settle a little bit so that our investors have a view of the base. We are still taking out costs, and we are still synergizing certain of our businesses. But I guess it would be fair to say that both the Agriculture and the Mining business, the SADC business would have had probably a 1% increase in benefit. So let’s say, broadly more than ZAR 100 million in GP.

And the second part of that question was really around the interest rates and the blended interest rate for our debt. Stephan, do you want to deal with that?

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Stephanus Petrus Serfontein, Omnia Holdings Limited – Group Financial Director [13]

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Yes. Sure, Seelan. I’ll deal with that. Also, maybe just make reference to our financial statements. We’ve got interest rate swaps in place that was put in place in November last year. That’s disclosed in the [Fs] . But I think all in all, if you want to look at a blended interest rate, it’s going to be somewhere between 6% and 7% blended interest rate, but that is disclosed in the Fs as well.

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Unidentified Company Representative, [14]

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The next question comes from Steph Erasmus at Avior Capital Markets. He’s asked if the — I think it’s for the ’20 financial year, the nitric acid plant utilization rates were better at 79%. However, utilization rates are still behind the circa 85% utilization rate in 2014 and 2015. Should we consider around about 80% utilization rate sustainable in the medium term? That’s the first question. The second question is, please provide more details on the thinking around Umongo Petroleum. Would you consider selling this asset? The third question, I’m assuming that taking the Oro Agri offer to the Board is a mere formality. The last question, please provide some details around the mining contract renewals in Africa and South Africa.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [15]

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Thanks, Steph. Let’s deal with the first one around the nitric acid plants. In 2014, 2015, SADC — the SADC Explosives business and SADC Mining was really at a much higher level than what it is now. We saw a number of mines in SADC as commodity prices came down actually slow down and go into care and maintenance and, in most instances, disappear. So I guess, the utilization in those years and our Explosives business in those years had a big element of SADC in it.

Looking at the nitric acid plant utilization, I think it is fair to say that the utilization will increase. We are onboarding a new client, which increases our volumes out of BME, and that will increase our utilization of the plant. It will have a utilization impact on the nitric acid plant and the nitrophosphate plant. So there will be an increase and a ramp-up in utilization in future years. So I think that is correct.

In terms of Umongo, I have said that our Chemicals cluster is a little bit less core to Agriculture and Mining, or Agriculture and Mining is more core to Omnia. Having said that, the first step — and it’s probably back to [Pit’s] point, the first step is that the businesses we’ve invested in and we own and we bought need to deliver an adequate return on capital, and Umongo needs to do that for us, and Protea needs to do that for us. So whilst we own the asset, it’s important for me to run the asset hard and deliver the returns that’s anticipated.

We’re not a forced seller of any of our assets, Steph, so whether that’s Umongo or Oro. I think what we’ve hopefully demonstrated is that there is a level of stability that’s come back into Omnia.

In terms of Oro, whether it’s a formality or not, Steph, I think we haven’t — we need to walk a road. So I think we can’t call whether it’s a formality without knowing what is in the envelope. So you — we need to run a process before we call it. And I guess, you would appreciate that without knowing what’s in the envelope, you can’t make a decision. I think let’s recognize that I think the Board will run a very robust process. And if there is something to discuss further, we will certainly talk to shareholders about that.

The last question was around what? Sorry, Monica, can you repeat the last question for me?

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Unidentified Company Representative, [16]

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Hello, Seelan. Sorry, apologies, just trying to recall that.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [17]

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So it was the Oro being a formality, and then there was another one around mining — something about mining. Steph, did you just want to say that again? We’ll come back to that.

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Unidentified Company Representative, [18]

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I do have it, Seelan. That says, please provide some details around the mining contract renewals in Africa and South Africa.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [19]

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Yes. Thanks, Steph. So there clearly are mining contracts that have moved around, both in South Africa and renewals in SADC. We are onboarding a big mining customer in South Africa, and there are renewals that come up, and there are renewals that are coming up in SADC. I think there’s nothing to — there’s nothing at this point that I can mention that worries us in any way. I think it’s really great that BME has secured the big contract in South Africa. And clearly, as part of the business, there are contracts that come up for renewal that we could win or we could lose going forward, but not something that’s worrying us too significantly now. I mean our sole focus right now is to onboard this — our new — the new contract we’ve got in South Africa.

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Unidentified Company Representative, [20]

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Seelan, the next question comes from [Gary Tegodero] from [Resco]. When you mentioned ahead of expectations for some ex-SA businesses, were those relatively lowered expectations given COVID-19? Or was it an absolute noticeable improvement over last year?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [21]

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Thanks, [Gary]. I think the improvement in Oro Agri, so you’ll see Oro had a great run and an improvement in our humates business in Australia, all of those expectations were not lowered because of COVID-19. All these budgets were set pre-COVID-19.

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Unidentified Company Representative, [22]

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Seelan, the next question comes from Peter Cromberge of MergerMarket. He’s asked, to what extent will the company look at acquisitions? What assets or industries would be of interest?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [23]

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Yes. Thanks, Peter. I think the first part of what we need to do is we need to stabilize and secure our own foundation, which is broadly what I think we’ve been able to do. I think what we need is we need to see a cure and a vaccine around COVID-19, and then we need to have a view of what the uptick would look like. Are we looking at a 2-year, 3-year, 5-year or 10-year horizon? And I guess, it’s the businesses that have the strong balance sheets and have acted and reacted swiftly to change things as we went into COVID that will be in a strong position to look at the opportunities that present themselves by companies that might be battling through the downturn. And I think we will see companies battle through the downturn. So I think my focus and the management team’s focus right now is to secure and fortress our balance sheet and our cash position to ensure that we get through COVID-19 and go into it and through it strongly, and that will present opportunities for us in the future.

I think at this point, considering doing anything in terms of an acquisition or something that’s complementary into our value chain, it would depend on generating the required return for our shareholders. It would have to be something that’s core to what we do and part of the value chain that enhances the value to our customers. I think right now, we’ve got a lot of work to do and a lot of value that we can generate by just completing the journey we’re on. We will be — if all goes well and we keep delivering on plan, we will find ourselves in, hopefully, a fairly strong position as we come out of the COVID-19 issue. And that will present opportunities that, I guess, the Board and the management can consider at that point.

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Unidentified Company Representative, [24]

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Seelan, it seems as if the last question is from Rajay Ambekar of Excelsia Capital. He’s asked, can you talk about the growth prospects for Oro Agri? What are some of the targets or goals for the next 3 years? And what are plans on geographic expansion?

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [25]

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Thanks for that. I think Oro Agri operates in a fast-growing market. It’s also a market — and let’s call it the AgriBio biostimulant market, it’s also a market that is highly fragmented. So it’s a market that is being continuously disrupted. There’s a lot of new entrants in it. There’s a lot of very large global chemical companies that put hundreds of millions of R&D dollars into that market.

Oro has done really well for us. So you’ll see in our results, in the detail, you’ll see how it’s performed. Oro, I’m not sure how much you know about its operations, but Oro’s got up a plant in Brazil, a plant in California, a plant in Portugal and a plant in Somerset West. And from those 4 areas, we’re able to really distribute product across the world. The product is much smaller. So it’s not a bulk product like 1,000 kgs of NPKs. It’s in little containers, 5-liter, 1-liter. And in some of the smaller countries or some of the smaller farming communities like India where the farms are smaller, the bottle sizes are smaller as well. So you’re able to transport it a lot easier.

Distribution is also fragmented. So in some instances, we do distribution ourselves. In other instances, we do distribution with partners where it makes sense. And we’ve got distribution agreements. The management team of Oro over the last few months have been focusing on increasing the distribution and really getting as much product out as possible. There’s a process to get that distribution done. So you need registrations, you need to cover all of the local regulation and get your products certified and accredited and all of those good things, and then the distribution can start. So there’s a lead time. And I guess what you see is there’s a cost to that. There’s an investment in people that comes with that, and then you see the ramp-up in the sales. So there’s a little bit of patience that’s needed. We’ve entered a number of new markets in the last few months. India being one of them that I spoke about. And we’ve created new distribution agreements, one in the U.S. and a few in Europe with distribution partners.

So I think from an Oro Agri perspective, our plants can produce more. The key to winning is more distribution and more sales, and that can happen in a number of different territories. I guess the thing to watch is that it needs the business, like BME international needs investment. So you will — we need to think carefully about how we balance the investment and the return. It’s important that our shareholders want returns as well. Yes and yes, there is a bit of an investment cycle.

So I think if I were to sort of think about growth in that business, you would probably say that you’d expect that market to be growing between 10% and 15%. You will see potentially a little bit of a slowdown now with the economic downturn. The products are not — the products have huge positive impacts, but they’re not the cheapest products on the market. But you would expect higher growth out of that business than some of the traditional NPK-type fertilizers in SADC or in South Africa. And that’s the nature of that segment and growing faster.

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Unidentified Company Representative, [26]

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Thank you, Seelan. We have no further questions.

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Thanaseelan Gobalsamy, Omnia Holdings Limited – CEO & Executive Director [27]

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Okay. Thank you, everybody, for listening to our webcast. Thanks for joining, and we hope that we will meet all of you or chat to all of you in the coming few weeks and months. Thanks for joining Omnia’s year-end results.

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