Omnia’s agriculture division posts a surge in profitability

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  • Overall operating profit for the division surged by 60%
  • Agriculture RSA operating profit grew by 18%
  • Agriculture International operating profit grew by 2%
  • In agriculture biological operating profit soared by 98%

Harare – Omnia’s agriculture division comprising agriculture RSA, Agriculture International, agriculture trading and agriculture biological (including Oro Agri) posted a positive performance for the year ended 31 March 2020 compared to the prior year.

In a results publication, the group said, “The Agriculture division’s net revenue increased by 4% to R8 554 million (2019: R8 240 million). Operating profit for the year increased by 60% to R593 million (2019: R370 million) driven by a strong demand for AgriBio products and the effective management of the volatile environment in Zimbabwe.”

During the period under review, agriculture RSA’s net revenue increased by 10% to R4 924 million from R4 487 million registered in 2019 while operating profit surged to R110 million from R93 million.

This was attributed to increased volumes sold due to a good rainfall season and favourable planting conditions and due to various cost savings implemented and higher volumes sold from Sasolburg to the Zambian operations, which doubled year-on-year respectively.

Omnia however said, “The impact of lower production recoveries due to delays in the utilisation of capacity in the new nitrophosphate plant, higher depreciation charges, increased utility costs and stock write-offs impacted operating profit.”

Meanwhile, agriculture International, excluding Omnia’s Zimbabwean operation, experienced mixed trading conditions with net revenue increasing by 10% to R1 988 million (2019: R1 802 million) while operating profit for the year increased by 2% to R165 million (2019: R161 million).

Omnia said this was due to improved production and cost efficiencies as well as higher margins achieved in Zambia, Australia and Brazil. In Zambia, sales exceeded expectations, driven by early contract deliveries.

However, operating performance was impacted by the deterioration in the creditworthiness of key customers. In Mozambique, lower blender throughput following the cyclone in Beira, was largely offset by a reduction in expenses. Demand for K-humate™ remained strong with increased exports contributing to improved performance in Australia.

In the agriculture biological segment operating profit improved to R208 million from R105 million in 2019 on the back of the growth in revenue. Operating expenses in local currencies remained flat contributing to improved operating margins.

In Agriculture International (Zimbabwe), the restructuring of the business is currently well underway, and performance was in line with expectations, despite the economic challenges.

On the outlook, the group said, agriculture business is impacted by lower international agriculture commodity prices, which will continue to put pressure on farmers’ income, in turn leading to pressure on fertilizer margins, and, despite the lower international prices for most agriculture commodities, local prices have recently been boosted by the weak Rand and increased regional demand. Declining oil and energy prices as well as lower international demand are likely to keep nitrogen fertilizer prices suppressed.

Omnia added that, “Fertilizer margins will remain under pressure as international commodity prices are expected to remain flat. In the year ahead, management will seek to further improve production efficiencies, ramp up production in the new nitrophosphate plant and extract further operating cost savings across the division. A strong pipeline of new products in the AgriBio space, several of which have been patented, will enable the business to access new markets and revenue streams.”

Outside South Africa, Omnia said the rationalisation of retail shops in Zimbabwe and Zambia will continue as part of an optimisation and cost-saving programme.

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