Hulamin Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1940/013924/06)
Share code: HLM ISIN: ZAE000096210
("Hulamin" or "the company")
Abridged pre-listing
Statement
Abridged pre-listing statement relating to the listing of Hulamin on the JSE
Limited ("JSE") with effect from the commencement of business on 25 June 2007.
This abridged pre-listing statement is not an invitation to subscribe for
shares in Hulamin, but is issued in compliance with the Listings Requirements
of the JSE for the purpose of providing information to the public with regard
to Hulamin.
1. Introduction
All conditions precedent to the listing of the issued ordinary share capital of
Hulamin on the JSE have now been fulfilled. The listing will be followed
immediately by the unbundling of Tongaat-Hulett Group Limited's ("THG") entire
shareholding in Hulamin and the introduction of BEE equity participation in
Hulamin.
Accordingly approximately 216 000 000 Hulamin ordinary shares of 10 cents each
will be listed in the Aluminium subsector of the "Industrial- Metals" sector of
the JSE lists under the name "Hulamin", with effect from the commencement of
business on 25 June 2007 and THG shareholders who are recorded on the register
on 29 June 2007 will receive one Hulamiin share for each THG share held on such
date.
2. Overview of the business of Hulamin
Hulamin is a leading aluminium semi-fabricator, purchasing primary aluminium
and supplying manufacturers of finished products. Hulamin focuses on high
specification, high value products such as thin gauge foils, can end stock,
heat treated plate, brazing sheet and complex extrusions, which require high
tolerance manufacturing processes and sophisticated technology. Hulamin is able
to capitalise on its extensive technology base that has been developed over its
60 year history.
Hulamin's business model focuses on growing its established positions in high
value niche markets. Its largest activity is aluminium rolling which
contributes more than 80% to its revenue, with the balance comprising extruded
products and other downstream products. Although the local market is an
important and growing element of Hulamin's business, a significant portion of
rolled products are exported to Europe, North America, Middle East and Asia.
In 2000, Hulamin commissioned a R2.4 billion expansion programme in order to
grow its rolled products capacity from 50 000 tons to an original estimate of
150 000 tons per annum. This expansion resulted in improved manufacturing
processes from new and improved equipment and has improved quality, service and
cost competitiveness, not only in the local market but also in niche markets
across the globe. The installed equipment has performed above expectations and
estimates of its nominal capacity have increased above the initial level of 150
000 tons to approximately 210 000 tons per annum. In October 2006 a R950
million project was approved to further grow volumes of high value products and
increase capacity to 250 000 tons per annum.
Hulamin has developed and implemented a sales mix optimisation model that seeks
to shift production to increasingly higher margin and more technically
demanding products. In these markets, customers' supply choice and market
flexibility is limited by the decreasing number of suppliers and the dominance
of a few major multinational producers. This has resulted in increased customer
loyalty towards independent rolling mills, particularly those able to supply
high specification, tight tolerance products. Consequently, demand for
Hulamin's products continues to exceed available capacity and Hulamin is well
positioned to sell its full capacity in higher value products, to respond to
attractive market opportunities and to capitalise on many growth opportunities.
3. BEE transaction
Furthering its commitment to meaningful and sustainable transformation, Hulamin
has concluded agreements which will facilitate the acquisition of an effective
15% interest in the company by certain BEE parties in the following manner.
• Broad based BEE groups (through "BEE SPV") will subscribe for a 10%
interest in a wholly owned subsidiary of Hulamin, Hulamin Operations
(Proprietary) Limited and will subscribe for 25 million A ordinary shares
which will initially entitle BEE SPV to 10% of the voting rights in Hulamin;
• Hulamin will also implement the Hulamin Employee Share ownership plan
and the Hulamin Management Share ownership plan in respect of a combined 5%
of the issued capital of Hulamin.
The broad based BEE groups who have accepted Hulamin's invitation to
participate in the BEE transaction and are subscribing for shares are:
• Imbewu Consortium SPV, who will subscribe for 60% of BEE SPV, and who
will be one of the BEE anchor partners and also represent broad based
beneficiaries;
• Makana Investment Consortium who will subscribe for 40% of BEE SPV as
one of the BEE anchor partners; and
• various broad-based groupings involved in education, healthcare and
social upliftment.
The BEE partners are expected to play an important role in building the Hulamin
business. They have been carefully selected to ensure that the long- term
objectives of sustainable and meaningful transformation are achieved and will
play a leading role in driving shareholder value and realising the growth
ambitions of the company.
Full details of the BEE transaction and the BEE groups participating in the
transaction are set out in the Hulamin pre-listing statement. Copies of the
pre-listing statement can be obtained from the locations set out in paragraph
6. below.
4. Prospects of Hulamin
Hulamin's expansion in recent years provides the platform for a continued
growth phase ahead.
Approximately 1.4 million tons of primary aluminium is produced annually in the
South African region of which approximately 0.3 million tons per annum is
beneficiated locally and the balance is exported in unbeneficiated form.
Hulamin has grown the annual volumes of locally beneficiated aluminium by
approximately 140 000 tons over the last five years and has the opportunity and
the ability to maintain this momentum well into the future.
The rolled products business currently exports 70% of its output and is
focusing increasingly on the production of high value complex products where
there are high barriers to entry, both in terms of technological and capital
requirements. There are relatively few producers of these products globally and
these market sectors are dominated by a few major multi-national producers. The
international customer base is accordingly receptive towards smaller
independent producers such as Hulamin. The global demand for rolled products is
growing at approximately 5% per annum and Hulamin has less than 2% of the
market. With a proven track record established, Hulamin has the market
opportunity to more than double its sales within the next ten years.
Hulamin has a competitive cost position and is at the lower end of the global
cost curve. The business operates in a low cost region and its unit costs also
benefit from the high level of capacity utilisation that the company is able to
achieve. Hulamin operates at more than 90% of its capacity whereas the global
average has been slightly above 70% in recent years. Hulamin's profitability
therefore compares well with industry levels and should still improve further
as the business continues to grow its volumes, improve its mix and drive its
costs down.
The initial market focus after the previous major expansion was on securing
positions in large international markets in order to secure sales for Hulamin's
rapid growth in output and capacity utilisation. Sustained economic growth in
South Africa has now
