omnia holdings annual report 2010 omnia holdings annu

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68 OMNIA ANNUAL REPORT 2010 FINANCIAL STATEMENTS continued INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OMNIA HOLDINGS LIMITED We have audited the Group annual financial statements and annual financial statements of Omnia Holdings Limited, which comprise the directors’ report, the consolidated and separate balance sheets as at 31 March 2010, the consolidated and separate income statements, the statements of comprehensive income, changes in equity, and the cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 69 to 126. Directors’ responsibility for the financial statements The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the consolidated and separate financial position of Omnia Holdings Limited as at 31 March 2010, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. Pricewaterhouse Coopers Inc. Director: Eric Mackeown Registered Auditor Johannesburg 29 July 2010
DIRECTORS’ REPORT The directors are pleased to present this report, which forms part of the audited financial statements of the company and the Group for the year ended 31 March 2010. NATURE OF BUSINESS The Group, through its subsidiaries, is a specialist chemical services company providing customised chemical solutions in the chemical, mining and agriculture markets. The subsidiaries of the Group are involved in the manufacture, distribution and trade of chemicals, mining explosives and accessories, fertilizers and speciality fertilizers. FINANCIAL RESULTS The financial results are reported in accordance with International Financial Reporting Standards (IFRS). The financial results and related information is disclosed in the independent auditor’s report. The principal policies used in the preparation of the results for the year ended 31 March 2010 are consistent with those applied for the year ended 31 March 2009, unless otherwise stated. The financial results for the year under review indicate the sensitivity of the Group’s earnings to declining commodity prices and the strengthening of the rand. In the previous financial year, as a consequence of the buying pattern changes which brought abnormally high demand from agriculture in the first six months, the second half of the previous financial year saw significantly reduced sales levels. The Group was thus left holding substantial fertilizer stocks at the March 2009 year end. The decline in commodity prices which started during the latter part of the 2009 financial year continued into the current year and, combined with the effect of further rand strength, necessitated a R350 million write-down in the value of fertilizer inventory by the September interim stage. Commodity prices continued their downward spiral into the second half of the year, when the peak fertilizer season normally occurs, while the rand also continued to strengthen. The combined effect of the decline in commodity prices, rand strength and lower levels of economic activity arising from conditions of global recession, led to all three divisions facing challenges from a combination of softer volumes, pricing pressures and weaker export prices. The inevitable reduction in earnings that came about is amplified by the comparison with the unprecedented buoyant market conditions that prevailed in the previous 2009 financial year. The continuing strong rand remains one of the major contributors to the weaker financial performance of the Group in the short term, impacting negatively on each of the three business divisions – chemicals, mining and agriculture. This rand strength is also having a negative impact on the Group’s customers, particularly those in the Chemicals Division, who find themselves in turn uncompetitive in export markets and having to compete with cheap imported finished goods in the domestic market. Although there has been an improvement in volume sales in the second half of the 2010 financial year, the persistent strength of the rand, the stock write-downs and a share-based payment charge of R41 million relating mainly to the two new share participation plans implemented in January 2010 has resulted in Group earnings for the year reaching only R58 million (2009: R491 million). OMNIA ANNUAL REPORT 2010 69 The prior financial period brought to a close the five-year target set for management by shareholders in 2004. This target was to achieve a 10% real growth in earnings per annum over the five years that ended 31 March 2009. The 2010 financial year marks the beginning of the Group’s fourth five-year target cycle. Revenue for the year fell by 21% to R8,8 billion (2009: R11,1 billion) and, after the initial downward stock adjustment of R350 million and further downward price movements, net profit for the year declined by 88% to R58 million (2009: R491 million). Included in revenue is an amount of R50 million from the sale of the first tranche of 400 000 carbon credits. Net production costs for these carbon credits amounted to R7 million. A loss of profits claim in respect of a plant failure in the prior year amounting to R32 million and a R20 million profit on the transfer of businesses to the Nalco associate are included in the R77 million other operating income. Administrative expenses reduced by 11% to R487 million (2009: R546 million) while distribution expenses increased by 5% to R674 million (2009: R639 million). Finance costs of R217 million (2009: R205 million) comprise interest paid, foreign exchange gains or losses and forward cover costs. A combination of lower interest rates and lower values of working capital needing to be funded resulted in interest charges reducing by 12% to R185 million (2009: R210 million) while exchange rate losses on foreign bank accounts and forward cover costs amounted to R23 million (2009: R5 million gain). Profits were impacted by non-tax deductible items comprising amongst other things, mainly non-cash share-based payments of R41 million, and a further R32 million incurred in net non-tax deductible expenses, including interest from funding the acquisition of shares in Zetachem, which resulted in the effective charge for taxation to be high at 47%. With the strengthening of the rand, the foreign currency translation reserve needed to be adjusted negatively by R228 million, this being the main reason for the reduction in other reserves to R54 million (2009: R286 million) and thus also the main reason for the R166 million reduction in total equity to R1 971 million (2009: R2 137 million). Intangible assets increased by R20 million following the acquisition of Petroleum Fine Products, a producer of basic personal care ingredients, petroleum jelly and technical oil, and the capitalisation of ERP implementation costs. Mainly as a result of entering into an associate with Nalco, a world leader in water treatment activities, as announced on 28 January 2010, investments in associates grew by R44 million to R84 million (2009: R40 million). Resulting from the reduction in commodity prices and the relatively high carryover inventory from the previous year, net working capital reduced by 67% to R514 million (2009: R1 542 million) contributing significantly to the cash generation from operations of R1 045 million (2009: R143 million utilised) as reflected in the cash flow statement. Cash outflow from investing activities increased by 81% to R466 million (2009: R257 million) of which R309 million represents the net investment in property, plant and equipment with the balance being mainly corporate activity from the acquisition of Petroleum Fine Products, Protea Polymers Eastern Africa, and the associate with Nalco.
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OMNIA HOLDINGS ANNUAL REPORT 2010
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OMNIA’S MILESTONES 1976 1974 1972
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FINANCIAL HIGHLIGHTS Audited 31 Mar
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OUR VISION CREATING CUSTOMER WEALTH
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OMNIA ANNUAL REPORT 2010 5 The diff
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Participants were required to inves
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Statistical information 31 March 20
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The world today faces the compoundi
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OMNIA ANNUAL REPORT 2010 13 Omnia
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Rod Humphris (53) Executive directo
Page 21 and 22: OMNIA ANNUAL REPORT 2010 17 Notwith
Page 23 and 24: (2009: 1 107,4 cents), and headline
Page 25 and 26: the best agronomic advice in all as
Page 27 and 28: OMNIA ANNUAL REPORT 2010 23 The sou
Page 29 and 30: Within the Chemicals Division produ
Page 31 and 32: Overview of Chemicals Protea Chemic
Page 33 and 34: MINING DIVISION - REVIEW OPERATIONA
Page 35 and 36: of ore. The risks normally associat
Page 37 and 38: Financial performance As expected,
Page 39 and 40: About this report This sustainabili
Page 41 and 42: highly productive lands are also mo
Page 43 and 44: - Vaal Triangle Priority Area Air M
Page 45 and 46: Challenges and opportunities Our re
Page 47 and 48: Corporate governance This corporate
Page 49 and 50: Board committees While the Board re
Page 51 and 52: The Group has made great strides in
Page 53 and 54: concern assumption at the interim r
Page 55 and 56: implemented to introduce a technolo
Page 57 and 58: There has been a marked improvement
Page 59 and 60: Social performance Recognising our
Page 61 and 62: for new students of a Certificate i
Page 63 and 64: To entrench these commitments throu
Page 65 and 66: At Omnia Fertilizer, all incidents
Page 67 and 68: Water Use Licence Application (IWUL
Page 69 and 70: FINANCIAL STATEMENTS A responsible
Page 71: REPORT OF THE AUDIT COMMITTEE for t
Page 75 and 76: DIRECTORS’ SHAREHOLDING as at 31
Page 77 and 78: GROUP INCOME STATEMENT for the year
Page 79 and 80: GROUP STATEMENT OF CHANGES IN EQUIT
Page 81 and 82: NOTES TO THE GROUP FINANCIAL STATEM
Page 83 and 84: IAS 39, only certain, rather than a
Page 85 and 86: 1.5 Cost of sales When inventories
Page 87 and 88: are presented in the income stateme
Page 89 and 90: fair value of plan assets, together
Page 91 and 92: 1.22 Financial risk management 1.22
Page 93 and 94: 2 PROPERTY, PLANT AND EQUIPMENT Fre
Page 95 and 96: 2 PROPERTY, PLANT AND EQUIPMENT con
Page 97 and 98: 4 AVAILABLE-FOR-SALE FINANCIAL ASSE
Page 99 and 100: 8 STATED CAPITAL continued Number o
Page 101 and 102: 13 INTEREST-BEARING BORROWINGS OMNI
Page 103 and 104: 15 PROVISIONS OMNIA ANNUAL REPORT 2
Page 105 and 106: 19 FINANCE EXPENSES OMNIA ANNUAL RE
Page 107 and 108: 21 EARNINGS PER SHARE AND DIVIDENDS
Page 109 and 110: 28 ACQUISITION OF BUSINESS OMNIA AN
Page 111 and 112: 29 FINANCIAL RISK MANAGEMENT contin
Page 113 and 114: 29 FINANCIAL RISK MANAGEMENT contin
Page 115 and 116: 30 RELATED PARTY TRANSACTIONS conti
Page 117 and 118: 32 RETIREMENT BENEFIT INFORMATION c
Page 119 and 120: OMNIA ANNUAL REPORT 2010 115 33 CON
Page 121 and 122: 36 SHARE INCENTIVE SCHEME continued
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36 SHARE INCENTIVE SCHEME continued
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Country of incorporation Issued cap
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COMPANY INCOME STATEMENT for the ye
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COMPANY CASH FLOW STATEMENT for the
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SUMMARY OF SHAREHOLDER SPREAD at 31
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NOTICE TO SHAREHOLDERS for the year
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FORM OF PROXY For use at the annual
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ADMINISTRATION GROUP COMPANY SECRET
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