SUREN NAIDOO: We are chatting to Omnia CEO Seelan Gobalsamy concerning the JSE-listed diversified chemical substances group’s half-year outcomes for the interval ended September 30, 2022. Omnia reported adjusted headline earnings per share from persevering with operations surging 32% to 401 cents a share. This as income confirmed double-digit progress of 19% to R11.6 billion. However, this excludes the Zimbabwe operation considerably. Seelan, welcome to the present.
SEELAN GOBALSAMY: Thanks, Suren and thanks for having me on the present. Good night to your listeners.
SUREN NAIDOO: Seelan, what’s taking place with the Zimbabwe enterprise? Is it the entire subject round hyper inflation there nonetheless?
SEELAN GOBALSAMY: That’s proper. In essence Zimbabwe remains to be a core marketplace for us. We’ve made a revenue in that enterprise. We’ve been in a position to generate constructive money circulate in that enterprise and extract that money in a foreign country. However, what we see with hyperinflation and unrealised foreign exchange losses distorts the efficiency of your organization fairly considerably. So what we’ve carried out for shareholders this time spherical is we’ve taken the Zimbabwean income, the unrealised foreign exchange losses and the hyperinflation affect, and we’ve excluded that. Excluding that, our enterprise has carried out an working revenue enhance of 44% to R1.1 billion. So sure, it’s the hyperinflation challenges that we’ve seen in that market.
SUREN NAIDOO: I don’t know if it is a truthful query, but when it was not for this subject with the group, outcomes [would] have been even higher. When are you anticipating issues to stabilise there from that hyperinflation perspective – to see a few of that come although?
SEELAN GOBALSAMY: The 47% excludes hyperinflation. I suppose what occurs is hyperinflation is an accounting subject, so it’s unrealised, and because the enterprise continues to commerce in Zimbabwe, it reverses. So what we’re seeing is a really sturdy outcome, excluding hyperinflation.
If there was no hyperinflation, we’d clearly make investments additional within the Zimbabwean market. And sure, our outcomes most likely may have been higher.
SUREN NAIDOO: For Omnia, what sectors of your enterprise contributed most to the sturdy efficiency, since you function in mining, agriculture, and several other subsectors, because it had been?
SEELAN GOBALSAMY: I feel the underpinning of our sturdy efficiency has actually been our provide chain and our manufacturing. So we’ve been in a position to be pretty agile with our sourcing, our feed inventory. Our important feed inventory is ammonia, from which we get nitrogen, and we’ve been in a position to import ammonia from worldwide markets and convey that to our manufacturing facility by way of prepare, and that’s gone properly for us. We’ve additionally seen very sturdy efficiency in our mining enterprise, and a really sturdy efficiency in our chemical substances in our agribio enterprise globally – that’s Brazil and Australia.
SUREN NAIDOO: Turning to load shedding now, the corporate talked about in its outcomes press launch structural points in South Africa amongst different points that face not simply Omnia however I suppose all companies that function right here. I see the group has invested in a photo voltaic plant, for instance, to maybe mitigate a number of the affect of load shedding. But how badly is load shedding affecting Omnia as a enterprise and the way are you tackling this entire subject?
SEELAN GOBALSAMY: I feel load shedding is one thing that impacts not simply your enterprise as in Omnia, however it additionally impacts your suppliers and your prospects. Up entrance let me state that we’re dedicated to working with Eskom and authorities to resolve this subject.
What we’ve carried out as Omnia is we’ve invested in our personal photo voltaic farm, which generates between 5 and 6 megawatts of vitality, and we use that to complement what we get from our utility supplier, Eskom.
We additionally generate steam as a by-product in our nitric acid crops, and we use that steam to generate electrical energy as properly.
So at any time limit, we may self-generate or co-generate round 25% to 35% electrical energy, possibly extra. We will do one other funding of that kind.
We will spend money on one other photo voltaic farm adjoining to the one which we’ve simply constructed, and that can enable us to really get a further 25% to 35% era. Having stated that although, that’s at our important facility in Sasolburg.
We are nonetheless depending on Eskom to offer electrical energy to our suppliers, to our prospects, and to ourselves throughout that facility, and all different amenities throughout the area.
SUREN NAIDOO: What are a number of the different headwinds that the corporate could be dealing with, regardless of its sturdy efficiency?
SEELAN GOBALSAMY: We have confronted headwinds, and I feel what’s so unimaginable about our efficiency is with the numerous commodity worth volatility, the inflationary pressures that we see globally and the huge disruption to the availability chain, prompted not solely by Russia/Ukraine, however brought on by logistics points that the world has confronted – with all of those points, we’ve nonetheless been in a position to carry out extremely strongly at Omnia.
So, wanting ahead … we’d proceed to take a look at the commodity worth cycle, and we might proceed to look rigorously to make sure that our farmers and our mines and our producers have an enough provide of explosives, of fertiliser and chemical substances in these tough occasions.
SUREN NAIDOO: Are you seeing fairly a hike in these chemical substances? Hyperinflation is a scorching subject and it’s fuelling the interest-rate cycle and that form of factor. Is Omnia benefiting considerably from that, or is it a case of a balancing act as a result of you’re a huge participant out there?
SEELAN GOBALSAMY: I feel the place we profit is prospects have seen, and we’ve all learn enterprise books that inform us [about] ‘just in time’: holding your inventory ranges on the lowest place is greatest in your efficiency. We’ve seen that that doesn’t work when there are important disruptions and important provide constraints, like we see now.
So at this level what Omnia is benefiting from is that we’ve received a powerful steadiness sheet to have the ability to take giant inventory positions.
We are in a position to make sure that our prospects have adequate security inventory, we’re in a position to make sure that we will work our working capital and our steadiness sheet tougher for our prospects – and we’ve been in a position to try this efficiently. So that’s the place we profit.
I feel in the long run prospects are recognising that our provide chain and our manufacturing are sturdy, and they’re recognising that we [can be relied on] to ship product and repair throughout these disruptions. And whereas various suppliers have declared power majeure in the previous few months and years, we’ve been in a position to proceed to ship to our prospects throughout these tough occasions.
SUREN NAIDOO: Seelan, I [have] requested you already concerning the funding in photo voltaic, however do you wish to spotlight your capex rollout for the remainder of the 12 months, apart from the funding in photo voltaic? I see there was additionally point out of an osmosis plant.
SEELAN GOBALSAMY: That’s proper. Suren, let me possibly discuss capex general. We’ve said that we’re desirous to develop and develop our mining enterprise in Canada, Indonesia and Australia. We’ve set some capex apart for that, to do a three way partnership in Canada and one in Indonesia, and in addition to develop our enterprise organically and probably organically in Australia. We’ve set capex apart to construct our distribution of agribio and humate merchandise. Those merchandise are produced in Australia and we’ll develop these merchandise out into India, into Vietnam, into Indonesia, the EU, the US and the South American market. We’ll additionally carry these merchandise onto the African continent. And then I suppose lastly, we will even spend money on, as you talked about, photo voltaic, water and logistics that can improve and defend our core enterprise. So on that rating we’ve spoken concerning the photo voltaic plant.
We’ve invested in a reverse-osmosis plant. It value us R30 million and it delivers a R5 million value profit a 12 months. But, extra importantly, it offers us entry to 180 megalitres of water on an annual foundation that may be reused effectively.
It’s good for the atmosphere.
And lastly what we’ve carried out, which is a 3rd funding domestically: we’ve invested extra capital in our personal trains. Omnia has its personal rail wagons that transport ammonia from Richards Bay to Sasolburg, and we’ve enhanced our funding into that logistics functionality.
And we’ve ordered and we shall be constructing extra trains to safeguard our provide chain and manufacturing.
SUREN NAIDOO: Since you talked about that, Seelan, I’ve to ask is every part protected on that line, contemplating all the problems Transnet has confronted with cable theft and that form of factor?
SEELAN GOBALSAMY: Transnet has had a really difficult time over the previous few months and we’re very supportive to assist Transnet and get issues going the place we will. Obviously we personal these wagons, we keep them, however we’re depending on Transnet to offer us with the rails, to offer us with the cables to run them, and to offer us with the locomotives. Where we will we’ll help Transnet to have the ability to do [so] and ship that service to us.
SUREN NAIDOO: Seelan, earlier than you go, what are your expectations for the complete 12 months for Omnia?
SEELAN GOBALSAMY: I feel our outlook by way of agriculture and mining and chemical substances remains to be sturdy. So if we have a look at the agronomic circumstances, we see that the rain has arrived in SADC, so farmers are planting, and the demand for fertiliser is excessive. I suppose what we all know is that nations everywhere in the world which have entry to minerals wish to mine and blast. Whether or not it’s iron ore, whether or not or not it’s gold, whether or not or not it’s diamonds, whether or not or not it’s copper, whether or not or not it’s coal, nations know the affect it has on GDP. So the outlook from a mining perspective can also be constructive.
And we see nice willingness from governments and nations to speculate, develop and develop their agriculture and mining markets.
SUREN NAIDOO: Thank you, Seelan, a lot in your time. We’ll have to depart it there. That was Seelan Gobalsamy, CEO of JSE-listed Omnia.
