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Hulamin continues to focus on improving its underlying operational performance as global market conditions have improved and the start-up of the new assets gains momentum.
Overall demand for Hulamin's products has continued to improve, with improvements in particular in sales of can-end stock, brazing sheet and heat treated plate, although the South African and European markets continue to disappoint. This improvement in demand has seen prices tending firmer for the second half of 2010.
Sales volumes for the first half of 2010 were 94 000 tons, an increase of 32% over the equivalent period last year. The Transnet strike and extended period during which freight has taken to normalise has resulted in delays in the invoicing of approximately 6 000 tons which will be recognised in the second half of the year.
The strength of the Rand, which is at a similar level to the US Dollar as it was in 2003, has negatively impacted on export revenue, while the basket of costs, particularly wages and electricity, continue to rise. This highlights the risk to South African manufacturing as margins reduce due to a strong Rand. The start-up of the new Rolled Products expansion project assets has resulted in higher operating costs being incurred ahead of the equivalent revenue benefits.
Hulamin's after-tax earnings for the six months ended June 2010 were R26 million, a slight improvement of R1 million over the corresponding period.
The shipping delays caused by the Transnet strike have resulted in high levels of finished goods inventories being in transit and this, coupled with an increase in the Rand price of aluminium, has resulted in higher working capital and consequently adverse cash flows.
Hulamin remains engaged with BHP-Billiton and other stakeholders on the future of the supply of rolling slab and extrusion billet by BHP-Billiton beyond June 2011.
The rights offer was fully subscribed and has resulted in a significant reduction in debt. The focus in the business remains on reducing the current high inventory levels, improved cash cycles and restraints on capital expenditure.
Hulamin has submitted applications to ITAC for duties on both rolled and extruded products to be reintroduced. This has become necessary as imports of low priced products have increased, mostly from countries (particularly China) where industry support and protectionist measures are in place.
The outlook for the business remains positive, based on firm market demand and increasing sales of light gauge foil and plate as the utilisation of new project assets improves. Hulamin will remain focused on operational improvements, particularly cash cycles, improving efficiencies and reducing costs.
Recovery in Hulamin Extrusions remains tenuous, in line with the weak local market.
The joint venture with Mazor in Hulamin Building Systems has been concluded and is expected to start yielding benefits from 2011.
Hulamin said farewell to departing CEO Alan Fourie at the end of June, after 25 years on the Hulamin Board. Alan led Hulamin with passion and loyalty on a particularly challenging growth and improvement path, overseeing the start-up of its two major expansion projects.
