Omnia Holdings Limited (OMN) Earnings Call Transcript & Summary

Thank you. Good morning to all of our shareholders and stakeholders on the line, and thank you for joining us today at Omnia's half year results. I've got with me Stephan, our Financial Director and a number of our management on the call as well, who will interact with you a little bit later in the Q&A session. Before we start, maybe just a moment thought for all of our people who have been significantly impacted by the pandemic and our hearts go out to lives lost families broken, and folk who have lost jobs due to the pandemic. We pray for those individual families. We play for those who have lost loved ones in our organization and outside, and we ask for peace in these very difficult times. If I kick straight into our results, we're going to talk a little bit about our operating environment. Stephan will take you through our financial results, and I will come back and provide a few thoughts on outlook and closure. Let me open up by saying that it's a very pleasing set of results. It's a proud moment for us at Omnia to share with you what is a half year performance which is probably one of the best that we've put out to the market. Our business overall has performed according to model. It shows really good execution of our strategy. If I move to the next slide, I think the first thing to say is the pandemic has impacted, firstly, human life across the planet. We have seen that initially, the lockdowns have had health, death and psychological impacts in all of the communities, in all of the countries we operate in. There's still uncertainty, there's still lockdowns and our hearts and our focus is on ensuring that our people are safe, that communities are safe, ensuring that we administer vaccines and we focus on getting the world back to normal or to some level of normality as quick as possible. The second impact of the pandemic has been the economic impact, and I'm going to talk quite extensively around the supply chain issues and how that has affected our business and how we have responded to that. And I think overall, what we're seeing is the global uncertainty and global shocks continue. They come in various forms, in various waves, and I will share with you how we've responded to that and how our business has changed what we do on a very agile basis to respond to the economic impacts of the pandemic. At Omnia, we have prioritized protecting our people, protecting our workforce, protecting the communities, protecting our suppliers and our customers. So we continue to roll out vaccines in a number of our facilities, and we continued to embed strict social distancing, strict cleaning protocols around infections. We know that the north of South Africa, [ Gauteng ] is entering the fourth wave, and we continue to provide what we can to our people, communities and families, certainly from a vaccination perspective, when we rolled out vaccines, we've welcomed anybody to come to our facilities to have a vaccine if they so wish. If I move on to the next slide, I think overall, we know that our purpose at Omnia is a very noble and profound purpose. We've been focusing on protecting life, sustaining livelihoods and doing that by creating a better world and I will talk to each one of those things as we go through the presentation. A number of the global shifts that we've seen has really enhanced the focus has really sped up the focus on doing things better, on being more sustainable. And we're proud at Omnia to have a number of initiatives that create a better world. I will speak a little bit later on about our nutriology concept, which is focused on precision, precision use of water, of macro and micronutrients and something that's really embedded in our business, embedded amongst our agronomist, embedded amongst our front-facing folk in our agriculture business. We've also seen the world and the global workforce needing to change. All of us have been working from different environments, working from homes, working remotely. And as an organization, as a world, we've had to help our workforce, help our folks really build on a sustainable way of doing business differently. We see with all the lockdowns that transactions, deals, new contracts, all of those things need to be signed and secured in a very different global environment. Political tensions continue. So a number of the countries we operate in, we've seen unrest disruption. Locally, we've seen a lot of unrest and disruption and our business needs to navigate that and do that on a very agile basis. And you'll see how we've done that. I guess, ultimately, we know that we operate in very, very primary sectors of agriculture, mining, and primary chemicals. And our world needs food. Our world needs food security and our world needs livelihoods. So the big impacts that agriculture and mining have on GDP across the world bodes well for Omnia's future and for the value we can add into the life of many. So there are 3 parts to our purpose, and it's really important as our business grows and as our business moves forward, that we embed this purpose in our business is to protect life, sustain livelihoods and creating a better world. And you'll see through the presentation how we talk about that and the impact we make and how we measure it. The next slide, which is the first part of that is really safety. No business is successful if we don't have a lot of focus on safety, and we can see that our RCRs have been maintained, they've been improved in agriculture and mining, and they've slipped a little bit in chemicals. Great focus from all of our teams. We are focusing on process safety and to enhance our protocols in that space. We're also focusing on rolling out training and driver awareness programs into our contractor and supplier base. Most of the incidents we see is really on roads, and we continue to focus heavily on that. Particularly pleasing is our vaccination program. We've seen, as we started vaccinating our people, our vaccination rates have gone up, and we will continue to administer vaccines across our various plants and businesses that have been registered. And we will do so not only for Omnia staff but for families, for communities, for suppliers, for customers, anyone who has access to our site will enjoy the benefit of getting a vaccine from our facilities. The second part of our care is really our ESG goals, and I think it's a proud moment for me to say that whilst we've delivered really good results, which we'll see just now, we've been able to do that in a very responsible way. Firstly, we've improved our greenhouse gases emissions. We've generated a chunk of carbon credits. We also have continued to derisk our electricity supply in our large Sasolburg complex currently. We're able to provide about 40% of cogeneration in total. So we're able to optimize the use of electricity from our utility provider from internally generated electricity from steam and other applications and also our solar project, which we've invested in is on track to enhance our cogeneration capacity as well. Particularly encouraging as well is our explosives business users used oil in their emulsion, and you will notice that we've won an award for that, and we continue to invest in enhancing the use of this used oil. We continue to look at the amount of used oil we use, and that has also got an impact on the supplier force on small businesses and it's got a downstream impact on our mines and our mining customers who then have reduced emissions by using an explosive that users used oil, it's more stable and better for the environment. We do a number of analysis. Clearly, that helps with our speciality fertilizer. It helps with the Nutriology concept. And just to tell all of our shareholders that thousands and thousands of leaf soil analysis and samples have been done across the world by our labs and by our technology folks. I touched on 2 awards that we've won really proud moment for our BME business, 2 awards that they've won 1 in Indonesia and another in a local award around responsible care for the used oil, and then also an ESG award around our reporting, and we continue to strive to provide more disclosure, more information. Our Sasolburg site also went on an initiative to plant some trees. And in the current period, we've planted over 340 trees on our Sasolburg site. I'm starting to think that folk in Sasolburg want to grow another Amazon jungle. But great for the environment and great to be doing that well done to everybody involved in that. You will also see a fairly -- in one of our annexures at the end of our pack. We show exposure to coal in our BME business. And with the uptake of our new contracts and the mobilizing of that, we have consistently reduced our exposure to coal all the way from 19% down to 13% in the current period. If we move to the next slide, let's talk a little bit about the macros. I think we still see social political tensions. We saw a lot of that in South Africa and [ KZN ] and disruption. And it's great to say that all of our businesses were safe. All of our people were safe. All of our products were saved through that, and our teams responded swiftly to deal with that. Clearly, there's a lot of economic volatility and change from a currency perspective and from a GDP growth perspective, and it's important that we take cognizance of that and take that into account in our supply chain and how we run our business going forward, and we'll talk a little bit about that later. Similarly, we've seen a massive increase in demand for our products and our output that is one being driven by supply chain disruption and shortage, but also prices increasing and changing buying behavior of customers, and we'll talk about that a little bit later. I don't need to talk about the global supply chain, whether it's been the [ Suez canal ], whether it's been the ports, whether it's been the rail lines whether it's just been feedstock shortages of ammonia. I think it's -- we operate in a very, very dynamic environment, and it's particularly great to see how the Omnia supply chain, Omnia manufacturing teams and the Omnia distribution teams in the explosives business and the agriculture business has worked together to optimize the entire chain in our business, and you see that benefit coming through our results as well. Something that we also need to look at carefully is the infrastructure. Wireless, we have our own rail wagons and we're able to import ammonia successfully, and we have imported ammonia successfully in the prior period. We've been forced to import more than what we bought locally. We are dependent on local infrastructure, on ports, on water and electricity supply. And our teams have been agile and had to put in a number of initiatives to ensure that we are sustainable. And actually, we've been more than that. We've been able to help customers who were dependent on global providers. We've been able to help farmers and mines that needed either product or feedstock in these difficult times. Just a thought about commodity prices, and I tried to do a long horizon year, a 10-year horizon. And what we can see is an extreme uptick in commodity prices in the last 2 years. That's driven, one, by supply chain disruption and shortage. And I think we know that mines and farmers cannot afford not to have the fertilizer or explosives available when they need to operate. And we focused hard at Omnia to ensure that we shorten the stock cycles that we actually get the stock in the hands of the farmers as soon as possible. So they're not dependent on last-minute road infrastructure, rail infrastructure or delivery because we've seen so much disruption. And it really reminds us a bit when we all were at business calls and studying, we were told about just in time and low stock levels. However, the pandemic has taught us and the supply chain disruption of the [ Suez Canal ], the ports, the infrastructure has brought us that actually, what you need is to get the supply and the stock at the point of use. So get it to the farm, get it to the mine as quick as possible. And I think overall, what we've seen is that farmers and mines have actually stocked up and manufacturers have actually stocked up a little bit sooner, a little bit faster. Everybody wants to derisk the supply chain right now, it's an interesting phenomenon. We've thought about a global village and global supply chains. But what we do know is the winners now are those who actually have the supply on-site when it's needed. It's the companies like ourselves that have flexibility to buy in South Africa, on the continent but also flexibility to import and manage and and drive that. Obviously, these charts have changed. We're using specific prices, and they've moved on since we've done them. But I think overall what you're seeing is that whilst supply of ammonia is difficult at the moment, we've been able to secure what we need. We've been able to certainly provide the fertilizer and explosives for all of our customers and more and we're well positioned to manage this volatile scenario going forward. we can move forward. Thank you. So if we just take a step back and just talk about the last few years, I think we've been on a very disciplined execution of our strategy. Firstly, to focus on stabilizing our business and sorting out the balance sheet, we then focused on a number of back-to-basics fixes, which has delivered a chunk of value. And now we're firmly industry new and grow phase, and I will talk about that after we go through the results. I think what is great is when we say we're going to do something, we go out and do it. We're seeing great margin recovery that has come through from the fixing. We saw good bottom line growth that has come through from the fixing. And what you're seeing in this set of results is a large chunk of top line growth, which is now coming from the new customers we've secured, the new strategies we've put in place around supply chain, manufacturing, trade sales and actually optimizing the supply chain across our business and optimizing the manufacturing across our business, and we'll talk a little bit further about that. I think what we also said we would do is we will be disciplined around capital allocation. And I guess, in allocation, we also mean disallocation. And in allocation, we also mean how we think about returning money back to shareholders from a dividend perspective. And I think what you've seen after our last reporting cycle is we will stick to our conviction in doing that. What we've demonstrated to you in the last 6 months is a good transaction for our shareholders and ourselves for Umongo and for Azelis in exiting the Umongo business. That transaction will close some time early in the new year. and we'll bring another ZAR 1 billion into our business and further strengthen our balance sheet and further strengthen our ability to allocate capital, whether that mean -- whether that is into organic or inorganic projects or whether that is returning capital back to our shareholders by way of an interim special dividend or share buybacks. I will talk a little bit later about the growth and how we're thinking about that. The next slide -- and it's always good to look back and think about whether what we said we would do, how did we go about doing it. And I'm encouraged when I look at our supply chain and manufacturing. It was a difficult decision 2 years ago to start bringing together the supply chain and the manufacturing facilities. It was a difficult decision to move some of our executives to different roles. And I think looking back and looking at the results today, we can see how the centralizing of the supply chain across agriculture and mining has paid great, great -- and generated great, great value for us in this cycle. And that's actually allowed us to be incredibly agile to deal with some of the macro issues we faced. We also wanted to change our corporate center and create a shared services, which has also been a lot of change in the business. It's impacted and reduced our costs. It's increased focused. And I think overall, the exiting of Oro Agri and the disinvestment now of Umongo actually creates a lot of focus for our management team, and it really ensures that Omnia is focused on agriculture and mining. And for the first time, we see a chunk of value being generated out of our trade sales because we've been able to run our plants harder because we've been able to optimize the use of ammonium nitrate into agriculture and mining. We've been able to supply on a trade sale basis to various customers, and that profit is actually starting to come through quite nicely in our results at the moment. If we move forward then, Omnia has performed really, really well in its challenging times. I think we must not take away from the efforts that our integrated business model, our teams have put into this integrated business model and the value it's generated. You see that our supply chain, our manufacturers and our distributors in the explosives and the agriculture business has optimized the whole. You see it in stock positions. You see it in the fact that we've been able to deliver fertilizer and explosives, whilst the number of global folk and local folk battle to do that. And I think using Omnia's rail tanker fleet really allowed us the flexibility to import ammonia to do that timelessly. It did leave us with a lot of [indiscernible] or balding when our utility provider when Transnet had challenges and there were disruptions. But I think overall, it's really a great, strong place to be in that we've had this flexibility. We also put out a chart a little bit later, and we show you the plant's performances, and you'll see that all of our plants have been optimized. Our plants are running at a higher capacities and something that has been very, very good for our business is to shorten the stock to cash cycle. So you see at half year, we've generated cash, which is unusual if we look back and our teams have been able to do that because they've really shortened the cycle to get the product to the customer as quick as possible. It's in the interest of the customers because we know there's been so much supply chain and logistics disruptions. So customers are happy with that, and that's resulted in us actually banking some of the cash a little bit sooner. We can move to the next slide. So if I get to our highlights, I think the first thing to say is before we talk about the financial highlights, we've been able to do all of the financial delivery, while they're still doing a whole lot of nonfinancial delivery. And I think there's a few proud items on this slide. One is, from a people perspective, we have implemented a broad-based share scheme for all of our staff. All of our staff got 300 shares, which we funded and funded that internally. It makes every single person in our company, a shareholder of Omnia. We also continue to invest in learnerships. We continue to invest in graduate programs, and we continue to administer vaccines across all of our sites that have been accredited. We've also been able to maintain our safety record. From a communities perspective, we continue to invest in learnerships. We continue to teach kids about various maths and science and financial programs and share some of our skills with graduates, universities and others, whether that be engineering, agronomy or others. We've maintained our [ BBEE ] rating. I've spoken already about reducing our greenhouse gases. Protea has also been investing in Hydro Plus, which is a technology used in hydrogen fuel cells. We continue to focus on renewable energy in Sasolburg, and BME continues to enhance the use of used oil in Emulsion. And then finally, in Australia, we've expanded our plant. We expanded our storage capacity. We've commissioned a kelp facility. We've also commissioned a blender in Mozambique, which you will hear about a little bit later. And I guess, having done all of that from a nonfinancial perspective, if you go to the finances now, I think it's really good to see good top line growth. And it's important, I guess, in any business, if you see the top line growth, you want to see the growth all the way through. And our revenue up over 30%. Our profit is up significantly. We've given you a number with hyperinflation -- with and without hyperinflation, and Stephan included a lot of disclosure around hyperinflation as well. But you can see when you strip hyperinflation out from both years, even a better performance from our group. Clearly, we've been managing cash well. So our interest is down. Our profit after tax more than doubled. Earnings per share more than doubled, our EBITDA up and our cash generated in the first 6 months, positive moving from a net debt position of last year. Yet again, working capital, well managed, some nice initiatives coming through there. And our net asset value with a slight decrease due to the ZAR 1 billion dividend paid out at half year. I think overall, a really good interim report card. And I'm very pleased with the way the businesses have performed overall. So let's just get into a little bit of the detail. I think the first big win for us is the working capital and cash flow. And how have we been able to achieve that. We've been able to achieve that with great supply chain, manufacturing and sales and marketing integration. We've reviewed a number of our processes. We've thought about being agile around when we produce and what we produce. So in some instances, we produced more explosives and a little less fertilizer. We've imported some of the fertilizer. We've reduced our stock levels, and actually, our sales and marketing folks delivered from our plants straight to farms on a number of instances. So that reduced the stock to cash cycle, and it actually got the stock to where it was needed to be used. We work hand in glove with our large global mines and with our farmers to reduce the overall supply chain. And that is actually the right thing to do because it reduces the risk for those customers. When our farmers need to plant, they need the fertilizer there. When our mines need to explode, they need the explosives to be on site. They don't need it to be in our facilities and dependent on road, rail and the disruption we've seen. We've also introduced some supply chain finance, and it's great to see as our business strengthens. It's great to see our finance teams and our supply chain folks, leverage our relationships with suppliers, with customers, with banks. And that's also resulted in a lower working capital cycle. And obviously, our cash flow has been supported by strong operational performance. And I think we've put out this chart which Stephan's team has done, which is really showing at half year how much cash we've generated or utilized and that's the bottom chunk of the bar and then how much do we generate in the second half. And what we know is the second half of the year is our large cash generating time. But what you're seeing last year and this year in the first half, our business is generating cash, which is particularly encouraging and pleasing. We also have not got Umongo proceeds in this. And I think you know that the Umongo proceeds will come through in the first half -- or the first quarter of next year, and that's another ZAR 1 billion of cash flow on top of this. If we move to the next slide. Just from a working capital perspective, and you would have seen these slides previously, a really, really good story again to tell you working capital. You can see our stock positions, which are the dark green bars are up on last year and our working capital position improved again by ZAR 0.5 billion. We can talk about the various segments a little bit later. So it's great to see the sales up, the stock levels up and the working capital down. It really shows as our teams are coming together, how much value we've been able to unlock in our business. If we move to the next slide, I think we always promised you that the capital expenditure will be well managed. And I think, yet again, you can see us focusing on generating the value out of previously invested capital and ensuring the capital, the maintenance capital and the expansion capital that we utilize is well managed. We're guiding again to -- initially, we guided to about ZAR 600 million for the current year, but probably somewhere between ZAR 500 million to ZAR 600 million for the current year. So well managed capital as well. If we move to the next slide, I was just talking through the further value that we will deliver in our manufacturing and supply chain and saying that previously, we were able to point to strategies in this space. But now what we can show is the real value, the earnings and the margin enhancement that we've seen from these optimizations. And we've got a chunk of projects that [indiscernible] running going forward that will deliver more value in our manufacturing and agriculture spaces in future periods. And I'm not going to touch on all of them in the interest of time. If I move to the next slide. We attempted here to give you additional disclosure around our plant utilizations, and the key one is really our nitric acid plants. You can see that our nitric acid plants are being run harder, and that is due to, firstly, the additional BME contract that we took on, but also the additional demand for fertilizer. We've been optimizing explosives and fertilizer. We've been importing a little bit of fertilizer, making a little bit more of explosives. And at the end of the day, what we said is we will optimize the margin and the value enhancement and actually produce those in our plants. All of our plants, you can see have trended up. the one plant that's a little bit less at -- this is obviously at half year. The one plant that's a little bit less at half year is a nitrophos plant. However, the benefits out of that plant has been significantly enhanced by various projects that our manufacturing head has put in place in that space. So whilst, I'm actually not concerned about the utilization. What I'm excited about is as the utilization increases, the value we will get out of this plant will far outweigh the original business case. And it just shows when the team comes together, and we changed a few of our processes, how much value we can unlock as a group. If we move to the next slide, we will continue to expand our international businesses. So we've said before that we've expanded our plant in [indiscernible]. We've also commissioning a Kelp plant, that facility, the Humate plant has about 40% spare facility and we're continuing to sell off and distribute into India, into Egypt, Africa, the EU, the U.S., we've just opened an agriculture office there and into Brazil. So there's nice traction, and a lot more value we can generate out of this plant. I'm hoping that we will have James Fremantle, who is our Managing Director of this business on the call a little bit later, and you'll be able to engage with you on some questions or some comments about the plant, a really pleasing outcome of where we are. The second area of growth is really our BME international business. And we continue to invest in a number of countries where there's mining [ spend ], mining exploration. Our joint venture in Canada is going well. We've secured some new business there. And Stephan will talk about that a little bit later. We also continue to invest in Indonesia, and that's taking a nice traction. We continue to look for a partnership in Australia. And obviously, locally, whether that be Zambia or in South Africa, we've made good progress in terms of retaining and securing new customers. These 2 areas will clearly be areas that we will continue to invest people, invest capital and invest resources. And I think what we do know is that both our agriculture business and our explosives business has really, really good value propositions for customers, and it's a good story to tell and a good proposition to take into these new markets and win. It's great to see us winning the new business and taking on the new contracts. Obviously, some of them in this space takes a while to mobilize and takes a little bit of time to get better down. Both areas, both international businesses have been impacted by the lockdowns. Australia, as an example, has been locked down very heavily for large periods of time. So it's been difficult to build new partnerships. It'd be difficult for our folks to travel, and as the world opens up, I think we will see some very nice traction out of these 2 spaces. If we move to the next slide. We -- I'm not going to go into this in too much detail, but really what this demonstrates is our disciplined approach to capital allocation. We told our shareholders that we've got certain noncore assets, assets that are unable to be synergized or leveraged as a group, Umongo was one of those. And we're pleased to have concluded a transaction with Azelis, a transaction that's good for all parties concerned. And where we are now is just ticking through all the [ CPs ]. And hopefully, in the first quarter of next year, we will have the proceeds from that business over -- from that sale over ZAR 1 billion. Obviously, in the current reporting cycle, we see that Umongo has done well and actually being managed well to model. If we move to the next slide. And I'm going to pause here. I'm going to hand over to Stephan who's going to take you through some more detail of the results, and I'll come back at the end with a bit of a conclusion. Thanks, Stephan.

Thank you, Seelan. Just before we jump into the details, I think it's a real good set of results, as Seelan mentioned, that we're all really proud of -- from Omnia perspective. Jumping into some of the details. From a revenue point of view, revenue up to ZAR 9.9 billion, up 31%, mostly driven by our agriculture business that added an additional ZAR 1.5 billion compared to the comparative period. Also our mining business, which added another ZAR 800 million, which led to increase in gross profit, maybe just from a gross profit margin point of view. It was negatively affected by a fixed price contract in Zambia as well as pricing pressure, which we can see throughout the SADC region in the mining industry. Moving down, if you look at the expenses, the expenses was well controlled versus comparative periods. Increase in expenses as a result of repair and maintenance coming through our mining businesses as well as our agriculture businesses. Also, the insurance market hiring up post the Beirut explosion. We can see that coming through our premiums as well as increased rates and taxes on the local front. If you move further down to other operating expenses, it decreased by 26%, mostly driven by the movement in foreign exchange, which leaves at an operating profit of ZAR 679 million, 7% up from the comparative period, which I'll impact in a bit more detail later. Good operating margin of 6.9% versus 5.3% in the prior period. If you look at the finance expense, significant decrease compared to comparative period based on the settlement of the debt and that leaves us to a profit before tax of ZAR 670 million. If you look at the income tax, significantly increased compared to comparative period, and that's basically threefold. Firstly, the reversal of the indemnification asset associated with agriculture, biological. Secondly, the strong performance throughout the year -- throughout the 6 months resulted in [indiscernible] in tax credit positions now being in a taxpaying position, and overall strong performance by the business, leading to operating profit from continuous operations by ZAR 467 million versus ZAR 213 million in the comparative period. If I then move us forward, maybe just to update to our shareholders on the SARS transfer pricing audit. If you cast your mind back to our FY '21 year-end results, we've added an additional disclosure for the additional assessments received on the transfer pricing audit, maybe some of the developments. In July, we submitted an application for suspension of payment. Towards the end of last week, we received a request from SARS to pay 30% and for any future payments to be deferred until the matter has been finally settled. In August, we also submitted the request for extension and objection. And the objection has been launched with SARS also during the course of last week. The next steps going forward, we don't expect to hear any sort of feedback from SARS in this side of the calendar year. We expect to get some traction in quarter one next year. And depending on the outcome and the assessment of the objection, Omnia will pursue the ADR or the MAP procedures. Currently, we remain confident on favorable outcome. Going forward, as we believe our transfer pricing policies is fair and [indiscernible]. Maybe just to delve into some of the detail on the operating profit and maybe specifically regarding Zimbabwe and the impact on Zimbabwe. Maybe [indiscernible] Zimbabwe, we follow a [ risk-based strategy in Zimbabwe ], where we limit the exposure. We don't invest any money into Zimbabwe. We make sure we also do it on a back-to-back basis to make sure we can externalize the cash out of Zimbabwe. Also our commercial transactions is structured in [ hard ] currency, and we also limit the local exposures by reducing our retail footprint from 50 shops down to 5. But maybe if I just look at the Zimbabwean operations before the numbers get hyperinflated, the Zimbabwe operation is a profitable operation. And during the 6 months. It also supports Sasolburg, so we get additional throughput through Sasolburg and the Zimbabwe operation also generated cash. Maybe just to put it in perspection with the broader result, our Zimbabwe revenue is less than 2% of the all over revenue from a group perspective. But as you can see on the slide, the impact on operating profit is a ZAR [ 200 million swing ] compared to the comparative period. So if I maybe just isolate the movement you will see the operating profit has moved from ZAR 239 million at a 3.2% operating margin to ZAR 723 million at a 7.3% operating margin, really strong performance. If I then just move us forward, if we look at our business entities, if I can start off with agriculture, significant increase in operating margin as well as an operating profit. That was driven by our South African business. Also we report into our South African business, our manufacturing facilities, which was well supported by our agile supply chain. We can also see very good agronomic conditions in agriculture as well as the high commodity prices that Seelan already touched on. Moving on to our mining business, also an increase in operating profit which was driven by increased volumes in our SADC region and also the higher ammonia prices uplift resulted in increased earnings, which at an operating margin perspective that was slightly offset by the competitive environment, more specifically in the SADC region. Then if I move us forward to the chemicals business, maybe just one point to highlight in Umongo Petroleum gets reported as a discontinued operations. So the chemicals disclosed is only Protea chemicals. from -- you can see Protea chemicals were fairly stable compared to the comparative period with tentative growth as the business comes out of hard lockdown from a COVID perspective. You can also see the margin reduced from 3.9% to 3.5%, and that was due to operational challenges. Maybe [indiscernible] highlight was the cyber attack that played out in the Durban port as well as the additional shipping costs that we see play out on a global basis. Maybe just jumping into some more details. If you look at our agriculture and as I mentioned, where we report our manufacturing numbers as well, you can see in South Africa, a significant increase in revenue, also a significant increase in operating profit and margin, revenues up 66% and operating profit is up by more than 100%. As I mentioned, by the sufficient supply chain to make sure that we limit any sort of supply chain disruptions to our customers. Also some of our farmers bought some of the stock earlier to mitigate the potential risk of supply chain disruptions. The higher commodity prices drove up revenues, and we can also see the increased volumes coming through our mining business resulted an additional throughput through our manufacturing facilities. If I move over to our international business, excluding Zimbabwe, you can also see a significant increase in revenue by 13%. That was driven throughout the whole region in SADC as well as international, which shows increase in volumes. But you can see the operating profit was down 10%, mostly affected by the fixed price contract in Zambia that negatively affected the margins as well as in Australia due to the hard lockdown resulted in additional shipping costs as well as the movement in currency in the rand strengthening against the Aussie dollar. If I then move us forward to the mining business, you can see revenue up by 56%, mostly driven by growth in volumes, specifically in South Africa, by the transitioning of a large contract, which resulted in additional throughput in our agricultural business from a manufacturing point of view, as I mentioned earlier. You can also see the operating profit increase, but the margins were slightly offset, as I mentioned, the competitive environment, more specifically in SADC. If I move it over to the international business, revenues were up by 13%. Operating profit was up by 30%, and that's on the back of really good sales volumes throughout the whole SADC region, as well as support from Protea mining, chemicals and increased sales of high-performance products. If I then move us forward to our chemicals division, specifically Protea Chemicals. You can see revenue was up by 1%. Operating profit was down by 9%, and that was on the back of tentative growth as the country came out of hard lock down in South Africa. The manufacturing industry still experiencing a lot of difficulties as we could see playing out over the last 10 years. Also negatively affecting the margins were additional operational expenses, specifically in chemicals, as highlighted earlier, as well as a minimal effect, a negative effect by the impact of hyperinflation in our Protea Chemicals business. If I move over to Umongo Petroleum, you can see revenues was up 37%, and operating profit up 9%. Strong performance by the division, and this was on the back of a supply/demand imbalance, resulting in additional prices or increased prices and volumes from a Umongo perspective. Margins slightly decreased compared to the comparative period, and that was due to the movement of unrealized foreign currency gains and losses. If I then move us forward to -- from an EBITDA point of view, again, just highlighting the effect of hyperinflation from Zimbabwe perspective. If I isolate the Zimbabwe division, you can see EBITDA has increased to over ZAR 1 billion compared to ZAR 612 million in the comparative period. Then if I move us from the income statement to the balance sheet, you can see total assets reduced by 5%, and that was mostly due to the disposal of our agriculture biological business which was closed out after the prior period. And you can see that was slightly offset by a slight increase in inventories as well as a really strong cash performance resulting in ZAR [ 1.4 billion ]. If you look at total liabilities that decreased by 7%, and that was mostly due to the settlement of the debt compared to the comparative period, also offset by a slight increase in trade and other payables and initiatives, as we've mentioned earlier, regarding the working capital that Seelan highlighted. Then if I move us down to equity. Equity decreased by 3%, and that was on the back of the ZAR 1 billion dividend distribution that was distributed to shareholders post the FY '21 results. Overall, a strong balance sheet moving from a net debt position to a net cash position and also net working capital reduced by another [ ZAR 700 million ] compared to the comparative period. Then just to close off on the numbers from a cash flow perspective, a strong cash generation from operations by the business and that was mostly as a result of the strong earnings. Compared to the comparative period, there was also a release of working capital. Then if I look at the outflow from investing activities, really good control on the capital expenditure from a group perspective and the outflow from financing activities, the big driver, the dividends that was that was by post the FY '21 financials. Overall, a really strong cash performance by the business. And I'll hand it back to Seelan for the closure.

Thanks, Stephan. And I think we should just acknowledge that we've been able to move our results one day earlier, and that's with the hard work and effort that our finance team have been able to put into this. So to everyone on the call, maybe just moving to a closing position now. Let's just talk about the outlook in the future. I think the first thing to state is that we still expect supply chain disruption and volatility and uncertainty in commodity pricing due to that I think a number of questions are being asked around how we're dealing with that and how we remain relevant. And I think what you can see is if you look at our last 6 months performance in very, very difficult times, we've been able to demonstrate absolute agility and resilience to deal with the supply chain disruptions. We continue to see support in our agriculture, mining and manufacturing business going forward. I think the demand for explosives, the demand for fertilizer is certainly not going to go away. Customers are wanting to derisk their supply chain. They're wanting to create certainty for themselves. And I think overall, whether it's our Australian business distributing into the Indian market via our partnership there with [ Deepak fertilizer ] or whether it's our BME business, providing services to large mines in SADC or in South Africa. These corporates and these distributors are wanting to reduce their supply chain risk, increase their stock holdings on site at the point of use of either the fertilizer, the coatings products or the explosives. I think we need to continue to innovate in terms of ESG. Overall, our business is focusing more and more on greener technologies on safer applications and whether it's in our mining or our agriculture business or our chemicals business, we continue to invest in that space. I think our outlook, we anticipate a strong cash position all things being equal, we've still got the Umongo sale proceeds to come in, and we will consider the distribution to our shareholders at year-end. So what we said is once we've set aside enough for our organic and inorganic growth, we will continue with interim -- sorry, ordinary dividend, special dividend and share buybacks, and we will consider that the Board will consider that at year-end. And I think our shareholders know that at year-end, we did that and we were in a strong position to pay not only a strong ordinary dividend but also a special dividend. And we will look at that again at the end of our financial year. If I move to the next slide, and I know most shareholders ask us a lot of questions about these margin guidance. So Stephan and I were saying, let's go back to what we told you. And let's just see how we're performing and also let's give a sense that we will also relook at this. So firstly, at an overall group level, we're performing nicely in our long-term guidance range. And I think it's fair to say that you can see us looking at our business across agriculture and mining together. So Stephan and I have been focusing our minds a little bit more on the blended margin of those 2 businesses because we can see how intertwined the supply chain and the manufacturing is. But having said that, we also have got very clear KPIs in terms of margins in mining and agriculture. So agriculture, performing nicely in the long-term range as well as the group. And I think mining slightly below the medium-term range. We've got projects in place there, and we'd like to see our mining business into the long-term range during the course of of next year. So it might need a step change into the medium-term range and then into the long-term range 2023 or so. And we've got a number of initiatives on the goal there. Chemicals are a little bit disappointing for us. We would have liked to have been like the other businesses in the medium-term range. And I think we need a little bit of refocusing in that business. And with some of the clutter removed, some of the simplification in the group. I think our group executives and the leadership of that business will now have more focus to get that business into the medium-term range. We hope to be there during the course of calendar year next year. So overall, our margin guidance still holds true. We've got a number of initiatives in place to actually get all of our businesses now, certainly the mining and chemicals into the medium and then into the long-term range. And as we continue unlocking value in our supply chain and our manufacturing, we will start revising the long-term ranges in all these businesses, and we will do so during the course of calendar year FY '22. If we move to the next slide. So where are we going? If we go backwards again, we still believe there's a chunk of value we're going to generate out of our current capital that we've deployed. There's more on the table, more value we're going to generate out of our supply chain, manufacturing and current businesses, and we think that will nicely increase our margins, nicely increase our return on capital. So whilst, we focused on new projects, and I will talk about those new projects just now, I think we still, as a management team, need to deliver some more value out of our current investments that we've made, and we're pointing to those. We're seeing those. We need to invest in some of our bench strength. We need to invest in some of our infrastructure to almost automate some of the great wins we've had and to take those wins to the next level. I've been pleased to see what the finance teams, what some of the new leaders have been doing across our businesses. So there will still be value to come out of our renewal phase. But I think what you can see now is Omnia is firmly delivering growth. And there's a slide at the end of the presentation that we won't have time to go to where we've got volume and revenue growth. And you can see that almost all of our businesses are showing volume growth. So if we take out the impact of the higher commodity prices and we look at the substance of our business, are we growing volumes, we're growing volumes. And that's a great place to be in because you know that this business has got good value propositions to end customers. If we move to the next slide, so where will the growth come from? From a growth perspective, there are 3 areas that we're currently focusing on. The one is the expansion of our plant in Australia, the Humate and the Kelp facility. And James' focus there now distribution to continue our distribution partnerships in India, in Egypt, in Africa, registering in the U.S., the EU and Brazil. And I think we've got a nice capacity that we can still sell off there. We will continue our expansion in Indonesia, and we're quite close to executing on our venture there with [ MNK ], and we've executed on our venture in Canada. We've secured some nice new customers. There's mobilization taking place there. So those are 3 areas where we in-flight. We've set aside the capital that's needed for that. It's in our capital plans already. And hopefully, that will generate value going forward. I think other areas where we will explore, we'll explore AgriBio, we will explore further expansion in BME in other fast-growing or well-established mining markets. And then we will look at selected opportunities in our supply chain, in our agricultural or mining businesses that will enhance the end value to our customers. We will do that on the basis of knowing that it's close to our core skill and strength, and we will do that in a carefully considered manner to ensure that if we do allocate capital, if we do acquire anything, it's done prudently and it's done in a very carefully confident manner. I guess, thereafter, which we keep saying, and it takes us to our next slide is that once we've set aside capital for those initiatives, whether they're the organic or inorganic opportunities, we will then consider the capital distribution, and we've put out some targeted HEPS ranges. And I think what you've seen from our delivery at year-end should these different initiatives not line up in terms of time lines, we will consider ordinary dividends, special dividends and share buybacks to return capital to shareholders. We will not hold capital for lengthy periods in what I'm looking for in a way that is inefficient from a capital structure perspective. We will continue to maintain a strong balance sheet, which you've seen us do in these uncertain economic times. And we have put out some disclosure in terms of our debt facilities. And we've put out some thoughts around our gearing ratio. I mean, clearly, we're in a strong position, a cash position at the moment, and we don't intend being in a net cash position into perpetuity. We will we will relook at that in future periods. I think the story around capital is that we will manage capital robustly, and that speaks to the first point of our investor proposition. We will stay convicted with capital allocation and disallocation. We will stay convicted to ensure that where we've invested money in plants and infrastructure, we will deliver the returns. So we will deliver the returns not only on the capital invested, but also on the future capital we invest. We've still got value to unlock in that space. I think what you're seeing is a very focused business model. You're seeing us as a management team, focus on our core, and you're seeing us deliver on that core. We believe what we're good at is operational excellence. We are a firm of engineers, of chemists, of scientists. We focus on precision, whether that's in agriculture or in mining. And we believe there's still a lot of value to be unlocked there from an operational excellence perspective. You see some of that coming through. One of the things we sit on is a large Gypsum [ power ], and it hasn't been giving us the return we wanted. We've been able to sign a long-term offtake agreement on that and that will deliver a return on that. So any unutilized asset, any unutilized warehouse piece of land or business that's not reaching its operational excellence or return we're focusing on getting that it out of the base. From a competitive perspective, we're winning new customers, and that's always a great lead indicator to know whether we've got good value propositions. We will continue to invest in those value propositions, the nutriology concept in agriculture. Our shareholders know we've got the youngest and largest nitric acid plants. Those plants have been very stable and delivered well in a difficult time where a number of plants were battling in this region. And also, we're pioneers and innovators in a number of technologies in BME, and we can be particularly proud of blast alliance. We can be particularly proud of [ Access ] and our double salt emulsion, which is stable and better in reactive ground and actually better for the environment. And I'm not going to go through all of the issues on this slide, but also to say our business operate in these primary sectors, and we know that agriculture, mining and primary chemicals is a big driver of GDP growth, and that puts us in good stead to be sustainable and grow going forward. So just in closure then, what you're seeing from our team is a very focused and robust strategy execution. What we told you we would do, we've set out and done that in a very robust manner. We've also been very disciplined about capital allocation. Sometimes it's difficult to let a business go that you love and that you're proud of and we all get on well but we've been disciplined about capital allocation, capital management, capital, disallocation. And all of that really will result in focused long-term value creation, and you're seeing a nice uptick in our return on capital. We're not where we want to be. There's still a lot more value to unlock. So we will continue to focus on long-term value creation and continue to focus on increasing our return on capital. And I think most importantly, we will do that by creating a better world. We will do that safely. We will do that -- and look, we will do that while as we look after environment, we look after our people, and we really run a long-term sustainable business. I'm going to stop there and maybe just in closing, say I'd like to thank all of our staff. I'd like to thank all of our suppliers. I'd like to thank all of our customers. I'd like to thank our Board, our shareholders, our communities. In some instances, our communities have safeguarded and looked after our assets during very difficult times. So thank you to all of our stakeholders, our staff, our customers, our suppliers, our communities, our Board was provided an incredible amount of support to see what is a very pleasing result of Omnia at this half year. So I'm going to stop there and open up for questions. And should we start off with the line first?

Thank you, Seelan. I believe that there's no questions from the conference call, so we can go over to the questions from the webcast. The first question is from a private investor, Daniel Broad. He's asked, what is the status on the ZAR 900 million possible tax liability?

Thanks, Louise. Stephan, can you maybe talk through that?

As we've highlighted, Louise, the objection has been submitted through SARS towards the end of last week. Now it's a bit of a process that will play out, and we expect to a year back from them in quarter 1. And from there, we'll handle it via the ADR process or the MAP process. Maybe just to add is that which I've added during the presentation as well, we received a request from SARS for a payment, a 30% payment, which is due in December and the balance or any sort of future payments will be deferred until the matter is finally set up.

We've got Agronomists, engineers and accountants on the line. Could you just give us the full version of those acronyms?

Okay. On ADR is the alternative dispute resolution process and MAP is the mutual agreement procedure.

Thank you, Stephan. Just keeping with the financials. Next question is from Rajay Ambekar of Excelsia Capital. Maintenance capital has averaged around ZAR 100 million over the last 5 years, you have guided for ZAR 200 million for FY 2022. Is that a normal level we can expect over the coming years post 2022?

Yes, I will -- I know that. Thanks, Louise. As guided previously, from a maintenance capital, we expect our maintenance capital to maintain at the ZAR 200 million level. This is group-wide. So that includes our Sasolburg facilities as well as our other manufacturing facilities. And from a total CapEx point of view, as previously guided, we expect a total of ZAR 600 million, which then include the ZAR 200 million maintenance and ZAR 400 million in organic and organic growth capital which for the current year -- the current forecast indicate about ZAR 500 million, and we expect it to maintain at that level going forward.

Thank you, Stephan. Another financial question. also from Raja Ambika. Where do you think you can get net working capital as a percentage of revenue to, what is a sustainable percentage?

Yes. I think what you can see that played out over the last 2 years is rebasing of the working capital. I think our supply chain and our manufacturing facilities has worked really well together to make sure we rebase our working capital together with our marketing teams. As a percentage of revenue, our target is always to keep it below 20% as a net working capital basis. We expect to see a slight increase in working capital as the higher commodity prices will drive up certain quantums going forward. The current target ratio is below 20%, and we expect it to settle between the 15 to 18% level into the future.

Thank you, Stephan. We have another question from Rajay Ambekar. With the strong H1 in Agri SA, do you expect a more muted second half? Or can we expect similar seasonality?

Should I maybe answer that and give Stephan a break. I think what we have seen is a very strong demand in the first half, not only from South Africa but also SADC. We've got a view of volumes and some volumes has moved earlier. Farmers have been concerned about supply chain and have moved volumes earlier. But what we do know is that volumes have grown overall. Our main planting season is what's happening right now. Our main volumes are happening in the second half. So we are still confident that we will see a strong second half if conditions stay the way they are in the agriculture space. It is very, very complex and difficult in the supply chain at the moment. So a lot of the volumes that we supply in the second half of the year are instantaneous volumes. So our sales and marketing director and teams need to bring the volumes in, blend them and send them in terms of specialty chemicals, so specialty fertilizer. So we actually -- we're very, very busy now, and we still believe that the second half of agriculture has got a lot of value to add to the Omnia Group.

Thank you, Seelan. The next Question comes from Mike Townsend of [indiscernible]. I didn't notice any numbers on the Australian portion of your Agri international business. Did this grow in dollars? And what impact did logistical or port issues have on volumes and profitability?

Great. Stephan, maybe you can just guide to the slide where that is. And maybe if I can just answer the bigger picture is I think that our international businesses, whether it's the agri or the explosives businesses have both been impacted by lockdowns and supply chain issues. So both those businesses could have performed better if our people could have traveled, if our people could have got in and out of Australia, and have continued to build distribution relationships and distribute. So I think the current 6 months is really muted in the BME International and agri international space, specifically Australia and Brazil. And I think as the world opens up, the lockdown [indiscernible], we will see some nice growth out of those businesses, specifically the performance. I'll hand over to Stephan for that.

Yes. Thank you, Seelan. Yes, that's specifically slide in the [indiscernible], specifically on the international business. As Seelan highlighted, there was volume growth out of those businesses. But due to the lockdowns, the additional shipping costs and the Australian dollar and the rand movement actually muted the increase in volumes, if you compare it with the comparative period.

Thank you, both. The -- we have a few questions from [indiscernible]. However, some of them were already answered. So the ones that are left. Can you please elaborate on the fixed price contract in Zambia? How much is contract is complete or will go into the second half?

So the fixed price contract, most of our shareholders know, we supply fertilizer via government contract in Zambia. It's to 800,000 small farmers. That was a fixed contract that was written last year some time that went against us. And all of the fertilizers being supplied and [indiscernible]. The contract is being -- it's an annual renewable contracts. So the contracts being renewed again. I think what's important to note is, overall, Omnia gets -- generates certain value from our manufacturing area and then we move -- or we sell on that fertilizer into OGI, into Zambia. So overall, as a business, we haven't lost money on that contract. But certainly, we haven't made the amount of money that we would have liked to. I'm really pleased to have appointed [indiscernible] who was a dedicated managing director will be managing our SADC businesses. And he's been in the chair now for a few months, and he's been to Zambia and he's been in talks and busy negotiating the next contract. Obviously, the next contract is new. It will come through in the following cycle. Stephan, is there anything I'm missing on that deal? What also has happened is that the current year's contract was actually moved forward a little bit. So normally, this contract would have been delivered and paid much later. -- it was now dividend paid much earlier, which also helped our cash position in the current environment.

Maybe, Louis, Just to add the tail end of the question, the bulk of that contract is being baked into the first half base as I think the question was also if there's something that's going to come through in the second half. The [ bulk ] contract base has been built into the first half.

Thank you both. The last question, also from [indiscernible]. How does your current ammonia inventory look compared to previous years?

Sure. Overall, our current stock levels are lower than we'd like it to be. I think -- and I know we -- one of the shareholders asked about working capital. I would say, because we've got such demand, we wouldn't mind having higher stock levels. and I think we can demonstrate the value and the return from that. So from an ammonia perspective, I mean, let me just explain how the ammonia value chain works for a second, if you don't mind, we've still got a minute. So we've got 2 ways of getting ammonia into our Sasolburg facility. The first is through a local provider, which you're probably fully aware of, and that's why our pipeline. And the second is via importing and really bringing that via our rail wagons from Richards Bay through to Sasolburg. We've broadly got about 160 rail wagons, so they can go in 40 block trains and circle the route, and what our supply chain executive does there easy balances what we can get via the pipeline, what we buy from offshore providers when we buy those and some of those are bought 3, 4, 5, 6 months in advance and then to manage the logistics. Because clearly, the storage and the movement of ammonia is quite complex and it needs to be done in a very safe way. So that's what job does in supply chain. Ammonia, as an example, is also difficult to store. So we've got 6 bullets in Sasolburg. We can bring from the pipeline into those bullets or we can bring from the trains into those bullets and we need to optimize the chain. So if you were to say, what is our levels look like? I think we're comfortable with the levels we've got. We've been able to -- and we use ammonia, obviously, in our nitric acid plants and some of our other plants, and we sell some of the ammonia directly. We've also been able to -- we've trade sold some of our ammonia because we were the only company to have ammonia when the country was running out in some of our local -- and the local supply had some very serious headwinds. So I think overall, we're comfortable with our position. We're comfortable with our stock levels and we're comfortable with our ability to manage it. That's more or less as much as I can say. We don't really disclose the actual number or the actual tonnage of ammonia that we store at any point in time.

Thank you, Seelan. There don't appear to be any more questions. I will hold on maybe just for a minute.

Sure. Maybe if we've got a minute, it might be useful for James Freemantle. He's the Managing Director of our Australian business. James, maybe you could just give our shareholders one minute of the value proposition that our business has in terms of Humate coatings and kelp and how we distribute it. It's a great gem that we've got. And if our shareholders don't mind I'll give James a 1-minute opportunity just to talk through that.

Thank you, Seelan. Hi, everybody. Thanks for having me. The humate business in Australia is a very strong position because of its raw material positioning and the ability of us to be able to extract a highly concentrated world-class product, which is the humate [indiscernible]. What we've done to add value to that product is actually develop fertilizer coating technology, where we've added some other things to it like [ kelp ] and some polymers to really sell that humic acid story, which is basically -- it's based on [ nutrient use efficiency ]. So it's taking fertilizer, and it's making it more efficient, it's a greener option. It really makes sure that we are applying fertilizer, whether it's an [indiscernible] urea based product that humic coating is giving that nutrient every chance to be utilized by the plant. So it's a fantastic story. The plant located in Australia is right next to the raw material, which we have exclusive rights to. And that raw material is a world-class asset. So we have got the ability to extract a very, very good product. And that's what we're trying to distribute across the world now through major fertilizer companies, distributors, other biological and biostimulant companies that are looking for a very strong product offering. So in essence, that's what the Australian business does exist is we're developing this unique story. There's very good science and [indiscernible] reviewed data now on the benefits of humic acid as a nutrient use efficiency biostimulant [indiscernible] business is in a really strong position from a manufacturing point of view to make and extract this humic acid and with our capacity upgrades, we think we can have a lot more capacity to be able to sell globally. So our big mission now is to find distribution points in major fertilizer companies across the globe that want to sort of go on the journey with us and use that product offering for a better fertilizer product for their customers. I hope hat answer the questions, Seelan.

Great. Thank you, James. Perfect. Thank you, everybody. Thanks to our shareholders and all of our stakeholders for joining the call. We really appreciate the interest you've shown in our company, and we all committed and working hard to manage our business prudently. We hope to meet you over the coming days. And if you do have any questions, any thoughts, any comments please feel free to e-mail or contact Stephan or myself. Thank you very much.