HLM
HLM
HLM - Hulamin Limited - Audited results for the year ended 31 December 2011
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
- Rolled Products sales volume increase of 11%, to 208 000 tons
- Headline earnings up 7%, to R80 million
- Headline EPS reduced by 7% on dilution
- Strong cash inflow of R152 million
- Operating profit, before metal price lag, increased by 19%
Richard Jacob (Chief Executive Officer) commented:
"We are pleased that our operating performance continued to improve with
increased sales volumes, better margins per ton and unit costs maintained at
2010 levels, this despite substantial increases in energy prices and
disruptions in the supply of liquid petroleum gas."
Enquiries
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Charles Hughes, CFO 082 745 6173
Hector Molale 083 639 1021
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Turnover in 2011 increased by 20% to R6,96 billion, due to strong
performances in both Hulamin Rolled Products and Hulamin Extrusions.
Given the volatile nature of the LME aluminium price, Hulamin retained its
50% hedge of the US Dollar value of its aluminium inventory pool. This metal
price lag impact of the fall of the aluminium price in the second half on
the current year`s income statement is a loss of R34 million on the value of
Hulamin`s metal inventories (2010: R46 million profit).
Operating profit before the metal price lag effect, increased by 19% to R204
million, in spite of additional liquid petroleum gas (LPG) costs of R13
million and the cost of closing the Cape Town extrusion plant of R7 million.
Operating profit after the metal price lag effect declined by 22% to R170
million.
Interest paid declined by 47% to R62 million due to lower borrowings and
consequently headline earnings improved by 7% to R80 million. The Rand
traded at an average of R7,27 in 2011, close to the R7,32 of 2010.
Hulamin is particularly dependant on the uninterrupted and reliable supply
of LPG. The SAPREF refinery in Durban experienced several supply disruptions
during the second half of 2011, resulting in five days of lost production
time and the inflated cost of procuring replacement LPG supply at short
notice through imports delivered intermittently.
Hulamin Rolled Products performed well despite the operational challenges,
increasing sales by 11% to 208 000 tons.
Margins in US Dollar increased by 3,5%. Unit costs were maintained at
similar levels to 2010 in spite of large increases in electricity prices and
abnormal LPG costs.
Continuing operational performance improvements from the manufacturing
excellence programme resulted in increased production volumes, record
yields, streamlined logistics and improved working capital efficiency.
Hulamin Extrusions also performed well in a depressed market, increasing
sales by 14%. The rightsizing of manufacturing capacity is delivering
reduced operating costs and efficiencies.
Domestic demand for rolled products has remained flat, while extrusion
volumes increased by 14%, the latter driven by the closure of a major
competitor in November 2010.
Imports of low priced products from protected markets continue to disrupt
the domestic market. It is disappointing that import duties remain at 5% on
extruded products and 0% on rolled products.
Demand in international markets outside Europe was stable in 2011, though
still substantially off the pre-2008 highs. Demand in Europe was relatively
strong at the start of 2011 but softened continuously thereafter, as the
sovereign debt crisis affected confidence throughout the Eurozone and
customers consequently reduced inventories. Sales of automotive products
were the most affected.
Hulamin improved sales in all its high value product markets, with can end
and heat treated plate sales growing by 9% and 19% respectively during the
year.
Operating cost pressure is expected to continue, most notably from rising
energy prices and wage inflation, with the consequent impact on profits
exacerbated by the continued relative strength of the Rand.
Hulamin continues to reduce costs and improve efficiencies through the
manufacturing excellence programme started in 2009 and other performance
enhancement initiatives, which delivered annualised savings of R142 million
in 2011.
Rolling slab and extrusion billet supply
Hulamin produces rolling slab and extrusion billet in its own facilities in
Pietermaritzburg. Additional rolling slab is bought from the Bayside
smelter in Richards Bay, on supply contracts which had previously been long
term, and which have, since 2009, been limited to six and twelve months.
Current supply is to December 2012. Discussions to secure sustainable
rolling slab supply are ongoing.
To supplement local supply and internal manufacture, Hulamin imports rolling
slab and extrusion billet from sources in Australia and the Middle East.
Prospects
European markets remain weak, the US economy appears to be strengthening,
while other markets appear likely to continue the improving trend
experienced in 2011.
Consequently, Hulamin`s order book is in good shape going into 2012, with
current orders at US Dollar margins similar to or better than those in 2011.
Hulamin continues to focus on improving its operational performance through
improved efficiencies, cost competitiveness and full capacity utilisation.
The manufacturing excellence programme is expected to continue to deliver
improved operational performance.
ME Mkwanazi RG Jacob
Chairman CEO
16 February 2012
CONDENSED INCOME STATEMENT
2011 2010
Note R`000 R`000
Revenue 6 957 080 5 808 667
Cost of sales (6 398 110) (5 260 954)
Gross profit 558 970 547 713
Other gains and losses 3 33 610 71 744
Selling and marketing expenses (355 282) (312 113)
Administrative and other expenses (67 353) (89 111)
Operating profit 169 945 218 233
Net finance costs (61 910) (116 923)
Share of profits of associates and joint
ventures 1 187 2 654
Profit before tax 109 222 103 964
Taxation 4 (29 546) (30 716)
Net profit for the year 79 676 73 248
Headline earnings
Net profit for the year 79 676 73 248
Loss on disposal of property, plant and
equipment 2 985 2 174
Net reversal of impairments (671) -
Tax effects of adjustments (1 869) (609)
Headline earnings attributable to
shareholders 80 121 74 813
Earnings per share 5
Basic (cents) 25 26
Diluted (cents) 25 26
Headline earnings per share
Basic (cents) 25 27
Diluted (cents) 25 26
Currency conversion
Rand/US Dollar average 7,27 7,32
Rand/US Dollar closing 8,11 6,63
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
2011 2010
R`000 R`000
Net profit for the year 79 676 73 248
Cash flow hedges, net of tax (30 518) 39 362
Total comprehensive income for the year 49 158 112 610
CONDENSED STATEMENT OF CHANGES IN EQUITY
2011 2010
R`000 R`000
Balance at beginning of year 4 609 534 3 744 279
Total comprehensive income for the year 49 158 112 610
Shares issued 1 831 736 275
Consolidated "A" and "B" class shares (3 018) -
Value of employee services 17 125 20 355
Settlement of employee share incentives (4 127) (4 025)
Tax on employee share incentives (878) 40
Total equity 4 669 625 4 609 534
CONDENSED BALANCE SHEET
2011 2010
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 915 087 4 989 646
Intangible assets 47 499 33 346
Investments in associates and joint ventures 40 581 51 887
Retirement benefit asset 37 615 73 819
Deferred tax asset 21 225 22 102
5 062 007 5 170 800
Current assets
Inventories 1 306 702 1 189 929
Trade and other receivables 1 069 739 792 357
Derivative financial assets 60 747 180 247
Cash and cash equivalents 19 900 24 439
2 457 088 2 186 972
Total assets 7 519 095 7 357 772
EQUITY
Share capital and share premium 1 727 643 1 728 830
BEE reserve 174 686 174 686
Employee share-based payment reserve 105 750 91 219
Hedging reserve 8 322 38 840
Retained earnings 2 653 224 2 575 959
Total equity 4 669 625 4 609 534
LIABILITIES
Non-current liabilities
Non-current borrowings 628 284 627 759
Deferred tax liability 940 205 941 260
Retirement benefit obligations 169 740 147 909
1 738 229 1 716 928
Current liabilities
Trade and other payables 816 251 607 917
Current borrowings 200 325 355 077
Derivative financial liabilities 94 360 66 971
Income tax liability 305 1 345
1 111 241 1 031 310
Total liabilities 2 849 470 2 748 238
Total equity and liabilities 7 519 095 7 357 772
Net debt to equity (%) 17,3 20,8
CONDENSED CASH FLOW STATEMENT
2011 2010
R`000 R`000
Cash flows from operating activities
Operating profit 169 945 218 233
Net interest paid (65 933) (136 596)
Loss on disposal of property, plant and
equipment 2 985 2 174
Non-cash items:
Depreciation and amortisation 209 698 192 899
Other non-cash items 178 992 (69 502)
Income tax payment (19 774) (16 408
Changes in working capital (188 839) (244 532)
287 074 (53 732)
Cash flows from investing activities
Additions to property, plant and equipment (134 449) (186 899)
Additions to intangible assets (17 495) (6 005)
Proceeds on disposal of property, plant
and equipment - 3 664
Decrease/(increase) in investment in
joint ventures 16 854 (38 770)
(135 090) (228 010)
Cash flows from financing activities
Borrowings repaid (154 227) (490 482)
Shares issued 1 831 736 275
Settlement of share options net of reversals (4 127) (4 025)
(156 523) 241 768
Net decrease in cash and cash equivalents (4 539) (39 974)
Cash and cash equivalents at beginning
of year 24 439 64 413
Cash and cash equivalents at end of year 19 900 24 439
NOTES
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2011,
from which these condensed financial statements are derived, have been
prepared in accordance with International Financial Reporting Standards,
under the supervision of the Chief Financial Officer, Mr C D Hughes CA(SA).
These condensed financial statements have been prepared in terms of IAS 34 -
Interim Financial Reporting. The accounting policies and methods of
computation adopted are consistent with those used in the preparation of the
previous annual financial statements. Hulamin has not adopted any new or
revised accounting standards in the current year which have impacted the
reported results.
2011 2010
R`000 R`000
2. Operating segment analysis
The group is organised into two major operating
segments, namely Hulamin Rolled Products and
Hulamin Extrusions.
REVENUE
Hulamin Rolled Products 6 217 736 5 191 705
Hulamin Extrusions 739 344 616 962
Group total 6 957 080 5 808 667
OPERATING PROFIT
Hulamin Rolled Products 161 334 226 868
Hulamin Extrusions 8 611 (8 635)
Group total 169 945 218 233
TOTAL ASSETS
Hulamin Rolled Products 7 255 454 7 069 431
Hulamin Extrusions 263 641 288 341
Group total 7 519 095 7 357 772
3. Other gains and losses
The group is exposed to fluctuations in aluminium prices, interest rates and
exchange rates, and hedges these risks with derivative financial
instruments. Other gains and losses reflect the fair value adjustments
arising from these derivative financial instruments and non-derivative
financial instruments classified as fair value through profit and loss in
terms of IAS 39.
2011 2010
R`000 R`000
4. Taxation
The tax charge included within these
condensed financial statements is:
Normal 18 735 25 801
Deferred 10 811 4 915
29 546 30 716
Normal rate of taxation % 28,0 28,0
Adjusted for:
Other (exempt income)/non-allowable items % (0,9) 1,5
% 27,1 29,5
Number of Number of
shares shares
2011 2010
5. Earnings per share
The weighted average number of shares used
in the calculation of basic and diluted
earnings per share are as follows:
Weighted average number of shares used
for basic EPS 316 933 746 281 206 387
Share options 3 679 234 3 498 720
Weighted average number of shares used
for diluted EPS 320 612 980 284 705 107
2011 2010
R`000 R`000
6. Commitments and contingent liabilities
Capital expenditure contracted for but
not yet incurred 26 116 90 381
Operating lease commitments 8 548 9 392
Guarantees and contingent liabilities 23 209 25 962
AUDIT OPINION
The auditors, PricewaterhouseCoopers Inc., have issued their opinion on the
group`s financial statements for the year ended 31 December 2011. The audit
was conducted in accordance with International Standards on Auditing. They
have issued an unmodified audit opinion. A copy of their audit report is
available for inspection at the company`s registered office. These condensed
financial statements have been derived from the group financial statements
and are consistent, in all material respects, with the group financial
statements.
CORPORATE INFORMATION
Business and postal address
Moses Mabhida Road, Pietermaritzburg, 3201
PO Box 74, Pietermaritzburg, 3200
Contact details
Telephone: +27 33 395 6911
Facsimile: +27 33 394 6335
Website: www.hulamin.co.za
E-mail: hulamin@hulamin.co.za
Securities exchange listing
South Africa (Primary), JSE Limited
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Rand Merchant Bank
(A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
PO Box 786273, Sandton, 2146
Directorate
Non-executive directors:
ME Mkwanazi (Chairman), LC Cele, VN Khumalo, TP Leeuw, JB Magwaza,
NNA Matyumza, SP Ngwenya, G Pretorius (with effect from 1 August 2011),
PH Staude, GHM Watson (with effect from 1 August 2011)
Executive directors:
RG Jacob (Chief Executive Officer), CD Hughes, MZ Mkhize
Company Secretary
W Fitchat
www.hulamin.co.za
Date: 20/02/2012 07:08:16 Produced by the JSE SENS Department.
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