Omnia results shine once again

This morning we received full year results from the high flying Omnia. I covered the 6 month numbers in November last year in a piece titled Omnia six month results as expected. The piece explains what the business does as well as looks at some valuations. As you can see from the fundamental analysis, we worked with an estimation of 1200c earnings for the year. Well here are the real numbers.


Profits for the year are up 40% to R880 million. This comes from group revenues of R13.5bn which is up 23.7% from last year. Per share this equates to 1332c which comfortably beat expectations from last year. Of course they had to release a trading statement which I also covered a few weeks ago. This actual number came in just above the middle of the range suggested (between 1310 and 1340). The share trades at R170.25 which puts it on a historic multiple of 12.8 which looks very cheap for a company growing earnings by 40%.


The company consists of three divisions namely Mining, Agriculture and Chemical. Let's look at each division separately.


Mining. The mining division is flying. Revenues increased 43.5% to R4.379bn on the back of strong volume growth (24%) and price increases (20%). Better operating efficiencies resulted in operating profits increasing 54% to R735 million. This division contributes nearly 60% of operating profits to the group. But why is it growing so fast? I can think of 2 things. Firstly, their explosives are mainly used in open cast mining.

Businesses like Kumba have not suffered from the strikes nearly as badly as miners who have to operate predominantly underground. The platinum miners have to hire a rock drill operator to physically dig the holes themselves. It is therefore less labour intensive. Secondly Omnia have clients all over Africa and as a mining destination the continent has massive resources and is growing fast in the industry.


Agriculture. Fertilizers have also grown quickly and the division is really benefiting from lower input costs thanks to the new nitric acid plant that started operating last year. Revenue increased 20.6% while operating profits increased by 37.2% to R443 million. The division contributes 36% to the group's overall operating profit. I have always been excited by this division. Africa has plenty of farmable land but the technologies and use of fertilizers is still in its infancy. Omnia are in the right place at the right time.


Chemicals. As is with Sasol's chemical division, revenues are high but margins are almost non-existent. This industry has been struggling off the back of weaker demand from Europe. Revenues increased 10.2% to R3.7bn but operating profits decreased 35% to R56 million or 4% of the overall groups operating number.


The company is excited about its prospects going forward. Mining and agriculture in Africa are both fast growing industries. Fortunately Omnia do not have to take the operational risk, they can just export the product to whoever needs it. As you can imagine the weaker Rand has been beneficial but I am sure much of this has been mitigated by higher input costs. You would probably find that is why the stock is quite cheap, manufacturing in South Africa has many headwinds at the moment. I am confident that this company will still grow at strong levels and that at current prices, this is a great buying opportunity.