Omnia’s litany of woes
INCE CONNECT / 18 JUNE 2019 - 05.00 / STEPHEN GUNNION
On top of already tough economic conditions, the chemicals and fertilizer group has faced drought, impairments and currency issues in Zimbabwe.
Omnia has prepared shareholders for a full-year loss after a number of once-off factors exacerbated an already tough year.
In an updated trading statement, the chemicals and fertilizer group said its 2019 financial year was marked by droughts and late rains, the volatile rand, changes in the local and international mining industry, and overall difficult global trading conditions. Compounding that were a R44 million impairment of a problematic debt in Angola and a R324 million impairment of goodwill at its Protea Chemicals business - on top of R35 million of restructuring costs, which it said would ultimately result in annual cost savings of R75 million.
In Zimbabwe, Fertilizer Zimbabwe and Acol Chemical were impacted by an intentional slowdown in business due to the liquidity constraints in the country. Their financial results have been reduced by about R95 million to approximately one-quarter of their nominal value following the introduction of the RTGS dollar (real-time gross settlement) as an alternative currency.
On top of all of that, Omnia has made an increased provision for non-cash share-based payment charges of R54 million related to its Sakhile 1 empowerment scheme. And it's made a provision for expected losses at its Emerging Farmers programme.
Finally, it is also faced with transaction costs of R28 million for last year's $85 million acquisition of US-based Oro Agri.
The Oro Agri transaction and the R625 million purchase of Umongo Petroleum added to the group's rising debt burden, resulting in a higher interest bill. In its 2018 financial year, net debt rose to R2.7 million from net cash of R91 million in 2017.
The group plans to reduce gearing and restructure its debt book to ensure its long-term sustainability by raising R2 billion in a rights issue following an "ongoing engagement in a collaborative process with its principal debt providers".
It expects to report a basic loss per share of as much as 670c for the year to end-March, while its headline loss per share will be between 59c and 139c, from earnings last year of 991c.
Its shares fell 0.4% to R38.01 on Friday. Its results are due for release on 25 June.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER