Global fertilizer shortage improves South African manufacturer's bottom line

Global shortages of fertilizer, driven largely by increased demand from the biofuels industry, have prompted significantly higher selling prices of fertilizer, South African fertilizer manufacturer Omnia said on November 28.

The increased selling prices ensured that Omnia lifted operating margins in its agriculture division by 8%, with revenue up 20% to R971-million ($140 million) during the interim period, which ended in September.

The company, which also operates in the mining and chemical sectors, said that buoyancy in the agricultural sector meant that this division contributed 40% to the group's overall operating profit. This improvement helped shield the group from the negative impact of declining operating profits of the chemical and mining divisions.

"Agricultural conditions, propelled by biofuels, are excellent. The change in the agricultural landscape, requiring produce not only for food, but for energy too, means that farmers have every incentive to continue planting," Omnia MD Rod Humphris emphasised.

He added that as the oil price continues to rise, it is likely that the biofuels push will intensify, but cautioned that if feedstock prices became too high, some operations might become "sub-economic," and said that the industry would depend on government subsidies.

The South African government is yet to release its biofuels policy, but if the industry were to be pushed locally, there could be significant increases in agricultural volumes produced.

Biofuels analysts have pointed out that, if fertiliser costs continue to increase, there may be a shift in focus for farmers, in Africa particularly, to produce a more robust feedstock, which does not require such significant input costs.

Omnia's agriculture division manufactures and supplies granular, liquid, and speciality fertilisers to farmers, co-operatives, and wholesalers across southern Africa, as well as exporting speciality fertilisers to Australia and New Zealand.

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