Chemicals, explosives and fertiliser group Omnia says as its bid to expand its international footprint gains traction that it is important SA is not perceived to be choosing a side in the Russia and Ukraine conflict as it could be dire for the country, resulting in “unofficial” sanctions against local companies.
“It’s very important that SA is a responsible global citizen, and from an SA perspective we understand the implications of choosing a side with the conflict between Russia and Ukraine,” Omnia CEO Seelan Gobalsamy told Business Day.
“I don’t particularly think the government has chosen a side, however, the perception of choosing a side could be fairly dire for us as a country... if there is a perception created that we’ve chosen a side, you might not have official sanctions, but you might have unofficial sanctions where [groups] don’t want to deal with us across the world,” he said.
Gobalsamy was speaking after delivering a results presentation to shareholders on Monday, just days after President Cyril Ramaphosa entered talks with his Russian counterpart, Vladimir Putin, as part of an African delegation to try to create a pathway towards peace negotiations after the invasion of Ukraine.
The 70-year-old Omnia, which supplies products and services to the mining, chemical and agricultural sectors in 25 countries, remains embroiled in a dispute with the SA Revenue Service (Sars) over tax on transfer pricing from 2014 to 2016. Sars is asking for about R945m in taxes, while Omnia has only paid about R300m.
The CEO said that while Omnia was engaging with Sars it had made provision on its balance sheet for any possible outcome, but it believed that the alternative dispute resolution process was in the interest of the company.
Though Omnia grappled with headwinds including volatile commodity prices, supply chain disruptions, hard and fast rains and a number of suppliers and competitors declaring force majeure in the period, Gobalsamy said Omnia was progressing in expanding its agribio and international mining segments in Canada, Indonesia and Australia.
The businesses had a competitive edge internationally as its BME mining business offered one-of-a-kind detonators and emulsion explosive technologies, while the agricultural business was experiencing high demand and was in talks with various fertiliser groups to use Omnia products in planned joint ventures, he said.
“Enhancing distribution capacity in Brazil and a shift in the sales mix towards higher-margin speciality products has led to growth in our agribio business. We are engaging with potential distributors in the US and are at an advanced stage of registering certain products in the EU,” Gobalsamy said.
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.
Headline earnings per share, a common profit measure in SA that excludes certain items, jumped 10.4% to 742c.
The group generated R1.8bn net cash in the period. It said this coupled with the expectation of sufficient cash generation over the next 12 months that is supported by more normalised net working capital levels, made it confident in seeking shareholder approval for a general share repurchase programme.
The R10.7bn JSE-listed group’s general share repurchase programme targets up to one-tenth of its shares, which the board has approved for an initial amount of R500m.
Omnia’s board said it believed that returning funds to shareholders by way of a general repurchase of shares represented an “optimal use of surplus funds”.
Small Talk Daily analyst Anthony Clark lauded the group, saying the company was debt-free, continued to generate significant amounts of cash and was going into its next season in a much stronger position.
Highlighting that the underlying Omnia share price was undervalued, he said the 10% share buyback would see about 16.1-million shares get bought back at a half-a-billion rand tranche being done initially, which “is going to be a huge support base for the company”.
“The old volatility of Omnia of a decade ago has been completely transformed,” Clark said. “The market continues to believe that the Omnia of 2023 is the Omnia of 10 years ago, it is not. It has evolved, changed, is more resilient and robust, and the margin enhancement that we have seen continues.”
Omnia shares closed 5.34% lower at R60.30 on Monday.
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