Omnia has no plans to rest on its laurels, eyes Africa for opportunities

Omnia is one of those companies that you seldom think about day-to-day. Fertilizers and explosives are not the kind of products the average person interacts with every day, and so Omnia just isn’t a top-of-mind kind of business. Nevertheless, over the last few years, Omnia has performed extremely well. Over the years, the company has consistently done a great job of investing in revenue-building capital projects, like the massive nitric acid complex the company built in Sasolburg back in 2012, or its 2010 partnership with US-based Nalco. Today, according to this interview, Omnia is looking north to find opportunities for expansion in sub-Saharan Africa. Now, for all the hype around opportunities in Africa, there are precious few companies doing a good job of it. For my money, however, Omnia is one company thathas the skills, industrial knowledge, and savvy to actually turn African opportunities into cold hard cash. – FD 

ALEC HOGG: Welcome back to Power Lunch. Omnia declared a 12.7 percent rise in full-year profit to an all-time record of just under R1bn. The company Chief Executive Rod Humphris is with us in the studio. Rod, you were opportunistic in a bad time. You made the investments when everybody else was running for their lives. You got a debt equity ratio of six percent. Are you ready to make another swing?

ROD HUMPHRIS: Of course, I think we’re still consolidating our position after the major investment we made two years ago. It has indeed, proved a really worthwhile investment, but you’re right. I think there are many opportunities that we are currently looking at and I guess our next five years will determine how we proceed with that.

ALEC HOGG: Let’s talk about that fat pitch. Two years ago, you had a fat pitch. You swung it out the ballpark and you’ve done fantastically well. The share price has trebled in the last three years. Value investors are now saying ‘you’ve had a good run. What’s Rod and his team going to come up with? Were they a one-trick pony or do they have another few ponies in the bag?’

ROD HUMPHRIS: It’s something we’ve been building for many years and it was indeed a really good investment that we made. We still haven’t ratcheted up the plant to full production yet, so at this stage, the new complex is going at about 75 percent of its capacity so there are quite a lot of operating leverage still to come through from that investment that we made. Yes, I think there are many opportunities going forward, and we are busy studying numerous of these opportunities in all three areas of our business.

ALEC HOGG: But nothing imminent…

ROD HUMPHRIS: Nothing that I can announce at this point in time.

GUGULETHU MFUPHI:  Let’s touch on those opportunities. Where are you looking? We do know that you have quite a positive stance on the African continent. Are you looking to develop further there?

ROD HUMPHRIS: Of course, over probably 25 years. We’re in some 25 or so countries where we have staff, so in fact, we sell to more countries than in Africa and we really understand the landscape of how to do business in particularly mining and agriculture, and to a lesser degree, in chemicals. Perhaps all of the geographies of Africa, except north Africa…I think there’s still lots of opportunity in the African continent as every other company seems to be saying today, except that we’ve been there and we’ve been doing it for quite some time now. I expect that mining will continue to grow, although at the moment, I recognise that there’s a slowdown occurring in mining. Africa is a treasure trove of undiscovered metals and minerals. It is also a place where the world has arable land available to grow food, which is not the case in particularly the eastern countries of the world, for example the Middle East as well where investments will have to come to Africa in order to feed the rapidly growing population of the world.

ALEC HOGG: What’s the game for you? Are you looking at potential investments on the continent? Would you partner with multinationals or would you just do it yourself?

ROD HUMPHRIS: I think any one of those is an opportunity and I guess it depends on the opportunity as to which way one goes with it. We are exploring a number of those types of avenues – some of the bigger ones certainly, we would have no problem in doing the right kind of partnership.

ALEC HOGG: How big is your balance sheet? Your debt equity is very small now. What capacity would you have if an absolute gem were to come across?

ROD HUMPHRIS: Look, I think we would be comfortable in going to at least R1.5bn to R2bn on our current balance sheet, but I think we’ve seen that if the right kind of investment comes along, our shareholders are extremely supportive. They’ve given us wonderful support over the last period. I think we have a really good track record in terms of the way management’ s applied the capital, so I have no doubt that if the right opportunity came along, we would be able to do a lot more.

ALEC HOGG: So you allow yourself to dream. You’re a R15bn market cap company. Marcus Jooste took a bet on virtually half of his market cap. We’re seeing that Woolworths are doing a similar thing now, going into Australia. Would you…R1.5bn relative to R15bn – that’s not dreaming.

ROD HUMPHRIS: No, not at all.

ALEC HOGG: Would you dream? Would you go?

ROD HUMPHRIS: Yes, absolutely. We would. The last time we made a major acquisition was about ten years ago when we bought the Protea Chemicals business. At that stage, that was a really significant portion of our market cap.

GUGULETHU MFUPHI:  Well, we’re certainly looking forward to hearing a lot more from you and hopefully, getting further details on the opportunities that you’ll explore in the future.

ALEC HOGG: I’m sure he’s a good poker player. Don’t you think so?

GUGULETHU MFUPHI:  I think so. Look at that face.

ALEC HOGG: Yes, he keeps the cards close to his chest.

ROD HUMPHRIS: It’s the track record that counts.

GUGULETHU MFUPHI:  Indeed, well that was Rod Humphris. He’s the Chief Executive of Omnia.

That’s all from us here in South Africa, Alec. After the break, our Southern African viewers will cross to international programming, whilst the rest of sub-Saharan Africa can catch Power Lunch West Africa.

ALEC HOGG: Yes indeed, and we look forward to being back in your company again tomorrow.