Omnia is emerging from the coronavirus pandemic on top after the agricultural and chemicals enterprise flipped from big financial losses and surging debt to better liquidity and with expansion plans on the horizon.
A combination of debt restructuring through a R2 billion rights issue, operational cost cutting and management changes were part of the antidote, Chief Executive Officer Seelan Gobalsamy told Bloomberg News in an interview this past week.
Omnia's agricultural, mining explosives and basic chemicals businesses proved very resilient amid the coronavirus outbreak, he added.
"Getting the rights issue done and restructuring the debt, management action and cutting costs, put us in a strong position. Then you have the ability to win through a storm and pandemic," said Gobalsamy, who had to step in after the previous head left the company in August last year.
"The sooner you take the medicine, the better to get through the storm."
Omnia's share price was trading up 2% at 4.22 p.m. in Johannesburg, valuing the company at R5.1 billion.
Omnia was in deep financial trouble about 18 months ago when it spent R780 million to buy Umongo Petroleum, and paid close to one billion rand to build a new nitro-phosphate plant. Its interest-bearing borrowings almost doubled in the space of a year, after it replaced the cash it used to fund acquisitions with bank debt.
However, the job is not yet done, according to Gobalsamy. The 66-year-old company is still selling off non-core assets such as land, railway tankers and warehouses to strengthen its liquidity base.
"That will likely release another few hundred-million rand," he said.
"We are unlocking capital in our business to assist us with flexibility to do meaningful acquisitions and growth."
Bumper Crops Expected in 2020
Even with South Africa shuttering mines during the first few weeks of one of the world's strictest lockdowns, the company managed to secure a big contract, which added about 20% to 25% to its volumes in this business and offset the impact.
On the agricultural side, where Omnia supplies fertilizer among other products and services, a bumper crop season is expected after the country endured a severe drought just two years ago. After a sharp retraction in economic growth during the months of lockdown, South Africa's agricultural sector could provide a boost for gross domestic product growth, he said.
Further afield, Omnia is considering opportunities in agri-tech, bio-stimulants, and bio-control, as these sectors continue to evolve. The company also received an unsolicited offer for its Oro Agri business that it is considering.
The Johannesburg-based company, which has a footprint in 40 countries opened an Oro Agri office in India earlier in the year. It's also exploring growth prospects in Australia, Brazil and parts of Europe.
"What we are looking at now is opportunities to de-risk some of our supply chain and leverage our growth in the bio-stimulant, bio-control markets, and in the explosives business," Gobalsamy added.
"Internationally we are looking to invest in Indonesia, Australia and Canada in our explosives business."