- Headline earnings per share up 17% to 56 cents per share
- Operating profit up 11% despite stronger local currency
- Strong Rolled Products volume performance up 8% to 221 000 tons annualised
- Rolled Products unit cost down 8%
Richard Jacob, Hulamin's Chief Executive Officer, commented:
"Hulamin has delivered a strong manufacturing performance and improved financial results, despite difficult market conditions and the Rand being 14% stronger compared to the corresponding period in 2016. Sales volumes increased by 8% and we achieved improved overall and per unit cost performance. There will be a two-week shut on a number of production lines during the second half of the year for routine upgrades, gas conversions and maintenance which will enable continuing high levels of performance."
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Anton Krull, CFO 071 361 0622
Johannes van Niekerk 082 921 9110
Group sales volumes for the six months to 30 June 2017 totalled 119 000 tons. This is 8% higher than the corresponding period and delivers a 12-month sales performance in excess of 220 000 tons from 1 July 2016 in Rolled Products.
Market conditions in South Africa have remained depressed. However, despite the overall manufacturing economy declining, Hulamin increased its local beverage can packaging volumes by 133% albeit from a relatively low base in the corresponding period, with a consequent increase in scrap purchases. Although export markets remain over-traded, Hulamin benefited from actions to enhance the product mix, improved market positioning and concerns among customers in the US that imports from China are likely to be controlled or curtailed. In the US, Hulamin's Heat Treated Plate continues to set quality and performance benchmarks. Over and above Hulamin's niche automotive market in the US, our plate has been specified for two additional high-end applications: an aerospace Wi-Fi component and a high tolerance material handling application.
The US Dollar London Metal Exchange aluminium price rose further to close the period above US$1 900/t, following the lows of below US$1 500/t which prevailed in late 2015 and early 2016. Hulamin accordingly recorded a metal price lag profit of R78 million.
Group turnover increased by 3% to R5.1 billion (2016 H1: R4.9 billion) driven by the higher sales volume and an average US Dollar aluminium price that was 22% higher than the comparative period. The increase in these factors more than compensated for the 14% strengthening of the Rand to average R/US$ 13.22 (2016: R/US$ 15.46).
Manufacturing conversion costs in Rolled Products were 1% lower in aggregate and 8% lower on a per unit cost basis (13% lower after allowing for the effects of inflation), benefiting from lower US Dollar denominated costs, improved cost controls, and increased usage of Compressed Natural Gas ("CNG") that now makes up approximately 25% of Hulamin's total gas consumption.
Earnings before interest and taxation ("EBIT") at R286 million increased by 11% compared to the prior period. Net interest charges decreased by 18% to R39 million, driven by lower levels of debt (borrowings closed at R656 million compared to R952 million in June 2016). Attributable earnings amounted to R178 million for the six months under review, an increase of 17% compared to the prior period.
Hulamin Extrusions performed consistently compared to the prior period despite further weakening of local market conditions. The investments in powder coating and packing are due for start-up in the second half that augurs well for an improved performance from 2018.
Cash flow before financing activities amounted to a R38 million outflow (2016 H1: R33 million inflow), after capital expenditure of R137 million.
Dividends are considered on an annual basis and no interim dividend was declared.
Changes in Directorate
During the interim period, the board of directors announced the appointment of Ms AT Nzimande and Mr RL Larson as non-executive directors to the board, with effect from 1 April 2017. Ms LC Cele resigned from the board of directors with effect from 27 April 2017.
Hulamin expects the momentum that prevailed in the first half of 2017 to continue into the second half. We will compensate for weak local market conditions with further improvements in sales mix, cost controls and operating efficiencies. A number of concurrent shutdown activities are planned for the second half to include routine maintenance and upgrades. Also included is the next phase of conversion of our manufacturing facilities from Liquid Petroleum Gas to CNG that will increase our usage of CNG to around 45% of our total gas consumption. Order books for Rolled Products are healthy for the balance of the year following improvements in our US standard products distribution channel.
M E Mkwanazi R G Jacob
Chairman Chief Executive Officer
27 July 2017
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