The JSE has few turnaround stories as spectacular as that of chemicals group Omnia, which straddles agriculture and mining with niches in fertilisers and explosives in Africa and beyond.
When Seelan Gobalsamy took the helm at Omnia in August 2019, the company was on the brink of collapse.
The share had tumbled from highs of R147 in January 2018 to about R27, with the 72-year-old company on a market capitalisation of just R2bn. Ill-fated acquisitions had loaded the balance sheet with smothering debt of R6.8bn, and demands that Omnia make good on debt repayments were growing more pressing. Shareholders were asked to bail it out in September 2019 through a R2bn rights offer, just five months after they had been assured there was no need to worry about a recapitalisation.
Debt was not the only hitch. “We also had a cyberattack, which reduced morale significantly,” Gobalsamy tells the FM. “As we tried to address this matter, Covid lockdowns hit us, which was unprecedented and made any turnaround efforts difficult. Compounding this was the 2021 Suez Canal blockage, which threatened supply chains. It was the perfect storm.”
Some shareholders were not convinced about Gobalsamy as CEO. He was a newcomer to the sector and an outsider — his appointment broke a tradition at Omnia of appointing executives who had risen through the ranks.
Gobalsamy’s predecessors — Adriaan de Lange and, before him, Rod Humphries — headed Omnia’s fertiliser business units for many years before being appointed as MDs. Both resigned in 2019. Meanwhile, Gobalsamy had a 20-year financial services career — holding senior executive roles at Liberty Holdings, Stanlib and Old Mutual. He took the reins at Omnia just a year after joining the company as a nonexecutive director.
A lot of people said: ‘You’re not of the Omnia cloth.’ A lot of people said I had no chance of successfully turning Omnia around
— Seelan Gobalsamy
“A lot of people said: ‘You’re not of the Omnia cloth. You’re not an engineer. You haven’t been with the company 20 years,’” says Gobalsamy. “A lot of people said I had no chance of successfully turning Omnia around.”
What followed was a ruthless, methodical restructuring. To cut costs, Gobalsamy took shares as remuneration instead of a pay cheque. He asked lenders to give him seven days to draft a turnaround plan. They agreed not to call their loans after Omnia raised R2bn from the rights issue at R20 a share — a 41% discount on the prevailing share price.
Gobalsamy sold Oro Agri (ecological crop protection products and liquid fertilisers) for R2.5bn and Umongo (a Durban-based petroleum business) for more than R1bn. These businesses were the source of Omnia’s problems, as previous management had taken on debt to buy them. There was also a management shake-up, with Gobalsamy hiring new senior managers: an FD, risk officer, treasurer and heads of the explosives and agricultural businesses. Omnia has more chartered accountants today than it has ever had.
Six years later, the turnaround efforts have paid off. Omnia’s share price has more than trebled to about R95, with a market capitalisation of R15.5bn. Shareholders who have been patient and stuck with Omnia through the tempestuous years have been rewarded with ordinary and special dividends, totalling R35 a share in cumulative dividends between 2021 and 2025.
Omnia’s liquidity position has also been shored up, with the company having R1.8bn in cash on hand. It has committed debt facilities worth about R3.2bn, which can be mobilised for growth opportunities and acquisitions. Gobalsamy warns, though, that growth will be cautious — unlike the unfettered dealmaking of the past.
A capital allocation committee was formed, staffed with CAs and former asset managers. This committee now vets every major decision, even for acquisitions.
Under Gobalsamy, Omnia’s growth strategy will be centred on agriculture and mining explosives, eschewing noncore areas such as base oils, pesticides and speciality chemicals.
Growth has come through deliberate, partnered international expansion. Omnia now holds joint ventures in Indonesia and Canada, a 10% stake in a Swedish firm developing green explosives using hydrogen peroxide, and a fertiliser-coating partnership in India producing 800,000t a year. “We’re not going to take on the Indian market alone,” he says. “We go in with partners.”
Gobalsamy is focused on deepening Omnia’s presence in existing major markets such as Brazil, the US and Australia, rather than chasing new ones.
In Africa, Namibia and Zambia offer the clearest opportunities. “Namibia is quietly getting on with it. The country is improving important infrastructure and the ease of doing business, and a lot of the country’s uranium mines are coming back on track. Namibia might surpass South Africa economically.”
Omnia’s trump card
What are the consequences of war in the Middle East for South Africa’s primary industries? Two stand out: first, farmers will likely suffer the twin effects of disrupted supply and inflation more than miners; second, but for the country’s infrastructure, the situation would be a lot worse.
Plumb in the crosshairs is Omnia. It supplies fertilisers to agribusiness and explosives to the mining sector by using substances such as ammonia and urea in the manufacture of nitrates. About 30% of all ammonia is shipped through the contested Strait of Hormuz. Sasol also makes about 400,000t of ammonia annually, but the majority of chemicals are imported.
That’s why Omnia CEO Seelan Gobalsamy has something of a window view on the crisis. “I think explosives are a smaller part of the mining value chain than fertiliser is in the agri-value chain,” he tells the FM. “So, the risk to food inflation is probably higher than the risk in a mining context.”
But in terms of actual storage capacity, the ability to store chemicals is shared over the supply chain on ships, at port and in manufacturing bases. On these grounds, there’s an estimated six to eight weeks of combined storage available, which is not the same as Omnia’s on-site storage. It speaks mightily to infrastructure here. “We haven’t run short of any fertiliser or explosives, and we’ve been able to shore up supply for the coming few months — so even though we do have product stuck in the Middle East, we’ve been able to source alternative product,” he says.
“That speaks to our storage and the redundancy of our supply chain, and all of that has worked very well for us.”
Inevitably, costs will be passed on to customers. “I think there will be costs that we are forced to pass on; we can’t absorb them,” he says. “Ammonia is more than double what it was a few months ago, so we have to pass on that ammonia cost, and similarly urea, which is another form of nitrogen, has gone up by even more than that.”
There will also be an impact on the company. Noncritical capital expenditure will be curbed. “We will still do the growth projects and the projects that enhance our supply chain, but the discretionary projects we will put on ice until the Middle East situation is settled,” he says.
Much, though, depends on how quickly trade resumes through the Strait of Hormuz, and whether a lasting peace can be forged between the US and Iran.
The damage to some infrastructure in the region is so significant that long-term consequences are inevitable, says Gobalsamy. In the short term, however, South Africa’s agribusiness is considered relatively robust. Indications are that a strong crop for maize, South Africa’s largest staple, is expected for the 2025/2026 season which is harvested between April-July, says RMB Morgan Stanley in a recent report.
“But higher diesel and fertiliser prices could now be expected to affect the economics for South Africa’s winter crop, most notably wheat — the country’s second-most important cereal crop — with planting season approaching from mid-April onwards,” the report said. — David McKay
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