Vision, operating environment, risk and strategy
Performance, outcomes and future outlook
Statutory approvals and reports
Group financial statements
Company financial statements
Letter from the Chairman
In years to come we will look back at 2013 as another challenging year for manufacturing in South Africa. Both economic growth and business confidence remained subdued throughout the year.
The manufacturing environment was characterised by some improvement to the automotive and mining equipment markets, deteriorating consumer confidence, strikes and a significant power tussle in organised labour. Confidence in the manufacturing economy was significantly and positively impacted by the sharp weakening of the Rand against the so-called hard currencies, but also negatively impacted by ongoing increases in labour and energy costs.
The US and EU economies, which account for just over 40% of our sales, continued to meander towards improvement and although these currencies and financial markets seemed to improve steadily, this did not flow measurably through into the real economy. China continued on its path of dominating global manufacturing and in the aluminium industry, its ongoing impact is to negatively impact margins.
The company took a number of bold steps during year, including a revision to the strategic direction to include the manufacture and local supply of all-aluminium cans and the consequent growth of aluminium recycling, restructuring its operation and workforce and completing a debt refinancing. This progress led to an in-depth assessment of the carrying value of the company’s assets on its balance sheet and the board taking the decision to correct the gap between the company’s existing net asset value and value-in-use through a once-off impairment of R1,53 billion after tax.
The directors of Hulamin are fully committed to realising ongoing improvements in the area of corporate governance, in particular engaging with integrity, transparency, responsibility, fairness and accountability with all stakeholders. Corporate governance is covered in more depth here.
Hulamin recognises that its sustainable growth depends on building strong and mutually beneficial relationships with many diverse stakeholders, and has as such resolved to be responsive to the needs and expectations of different stakeholders. In 2013 Hulamin continued to strengthen relations, particularly with relevance to the supply of primary aluminium and the ongoing national debates around aluminium and electricity. Stakeholder engagements are covered in more detail in the social and relationship capital section here.
Hulamin remains committed to sustainable growth and prosperity, recognising their interconnectedness. Key areas of focus remain safety, health and environmental risks, the necessity for sustainable customer, supplier, employee, community and other stakeholder relations, long-term primary metal supply and effective asset management.
Hulamin will also increase its efforts to engage constructively with government to build a sustainable and successful aluminium industry, and in particular one that contributes to job and wealth creation, poverty alleviation and the growth of the manufacturing sector in South Africa.
We continue to make good progress in improving the monitoring, recording and reporting of our carbon footprint amongst a range of other sustainable improvements. Sustainability matters are covered in the human, social and relationship and natural capital sections on this report, and extensively in the online sustainability report.
Availability of rolling slab and extrusion billet
Long-term security of local supply of rolling slab and the local availability of extrusion billet remains uncertain. Hulamin has continued to engage with BHP Billiton and other stakeholders to mitigate long-term supply risks, and to rebuild an expanded aluminium industry for the benefit of all South Africans. The current slab supply agreement with BHP Billiton expires at the end of December 2014.
Advancing our strategic aims
During the year the board endorsed management’s strategic plans to reposition the company to attain the following goals:
- Being an excellent aluminium semi-fabricator
- Being globally cost competitive
- Growing the regional market
- Having secure and competitive long-term metal supply
- Having a regulatory environment that is beneficial to all South Africans
As part of this revised strategic thrust, the board also approved an investment in state-of-the-art aluminium scrap recycling equipment.
I would like to thank Charles Hughes for his 37 years of outstanding service to Hulamin, most recently as Chief Financial Officer since 2007, and wish him well on his retirement.
I am delighted to welcome David Austin as our new Chief Financial Officer and Simon Jennings as an independent, non-executive director to the board. Simon brings a wealth of international manufacturing experience, particularly in the beverage can industry.
Hulamin’s financial performance improved measurably in a tough year. The board and I are confident in the strategic direction the business is taking and look forward to continued market recovery and improved manufacturing performance, and resulting benefits for all stakeholders. I would therefore like to thank the board, the executive and employees for their commitment to Hulamin during 2013.