OMNI's Earnings Boom Despite Low Construction Activity

  • Buoyed by improvement in direct and finance costs, OMNI Industries Limited (OMNI) profits jumped by 57.5% during Q3 2024. This allowed the company to report earnings of $145.92Mn (+13.1%) for the nine months ended September 30, 2024.
  • During the period, OMNI’s cost of goods sales (COGS) declined by 19.1% to J$795.01Mn, aided by lower demurrage costs[1] and a reduction in financing costs given the company’s proactive debt reduction efforts, which resulted in lower interest expenses for the period.
  • However, the outturn was tempered by higher operating expenses (+32.5%) due to higher professional fees, marketing, and other expenses related to the companies’ initial public offer (IPO) on June 11, 2024.  While most of these were one-off expenses, and should not affect the company in subsequent quarters, the company did face higher haulage, factory, and export‐related costs, which also contributed to the increase in operating expenses.
  • Furthermore, dampened by adverse weather conditions, including Hurricane Beryl, total revenue fell by J$60.19Mn or 3.8% year to date (YTD). Of note, construction supplies remain the primary revenue driver for the company, accounting for 53% of total revenue; as such, the cement shortage on the Island, which affected the construction industry, contributed to depressed top-line growth.
  • That said, the dip in revenues and higher operating expenses were not enough to disrupt the company’s performance.
  • Since the start of the year, OMNI has successfully achieved several key objectives, including listing on the Junior Market of the Jamaica Stock Exchange (JSE); reducing outstanding debt through prepayments, commissioning a Moulding Machine in September 2024 while advancing the acquisition of additional high‐efficiency equipment, and expanding product offerings by leveraging its new equipment capabilities.
  • Looking ahead, these strategic shifts and acquisitions should allow the company to manage financing costs while further augmenting its capabilities to allow greater production, which should fuel topline growth and overall earnings.
  • OMNI’s stock price has risen by 8.0% since listing on the JSE. The stock closed Wednesday’s trading session at $1.08, with a P/E ratio of 16.09x, lower than the Junior Market Distribution Sector average (excluding outliers)[2] of 20.45x.

(Sources: JSE & NCBCM Research)

 

[1] Demurrage is a fee that must be paid when cargo remains at a port or terminal for longer than the agreed free time period specified in a shipping contract

[2] The outliers are Derrimon, RPL, Fosrich, PTL, CAC, and Jetcon,