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STRATEGIC OBJECTIVES

   
Hulamin reviewed its strategic objectives and refreshed its business plan in 2013. Hulamin’s strategy centres on five main strategic priorities, which aim to achieve its vision by taking advantage of opportunities, mitigating threats in the medium to long term and reducing risk in the business model of Hulamin.

ACHIEVE BENCHMARK OPERATIONAL PERFORMANCE

  • Deploy and sustain the Integrated
    Manufacturing Approach (IMA)
  • Develop a cost-competitive culture
  • Develop optimised product mix
  • Volume growth
  • Margin improvement
  • Develop and execute a process capability and competency framework
  • Maintain a cost-competitive skilled workforce

ACHIEVE
GLOBAL COST COMPETITIVENESS

  • Reduce gas unit costs
  • Primary metal supply pricing
  • Achieve 25% of metal inputs from scrap
  • Maintain a cost-competitive skilled workforce
  • Logistics and coatings costs

GROW LOCAL AND REGIONAL SALES

  • Aluminium can market
  • New local and regional market development
  • Expand presence in sub-Saharan Africa
  • New product development initiatives

SECURE, COMPETITIVE ALUMINIUM SUPPLY

  • Sustainability and optimisation of BHP Billiton Bayside cast house
  • Sustainability of BHP Billiton Hillside smelter

SUPPORTIVE REGULATORY ENVIRONMENT

  • Import tariffs
  • Local scrap protection
  • Carbon tax
  • Incentives and grants
 
 

In order for Hulamin to remain competitive and sustainable, it must improve operational performance levels to targeted levels based on global benchmarks for similar operations.

This includes optimising the following operational variables:

  • Manufacturing excellence – throughput, quality, recoveries, consumption efficiencies and equipment reliability
  • Customer satisfaction – quality, on-time delivery and long-term reliability
  • Sales mix, margin and volume – maximise profitability whilst simplifying the business where possible

Underpinning the achievement of world-class operational performance is the necessity for skilled and motivated employees.

2013 HIGHLIGHTS

  • Lower yields achieved by Rolled Products, resulting from an unfavourable product mix, planned maintenance in hot rolling and bottleneck in cold rolling
  • Rightsizing of workforce and restructuring of organisation, including the recruitment of manufacturing skills
  • Strong performance from Hulamin Extrusions

Hulamin needs to continue to reduce its input costs in a sustainable manner to remain globally competitive. Hulamin is, accordingly, focusing on its major cost items, primarily the cost of employment, energy and price of aluminium. The following actions are in progress to address cost competitiveness:

  • Conversion of gas supply from LP gas, which is supplied in trucks from various oil refineries, to piped natural or methane-rich gas at a substantial saving
  • Sourcing more than 25% of metal as scrap (at a price below the LME aluminium price), thereby displacing higher cost primary metal supply (growth in local market demand and recycling capacity are prerequisites)
  • Reduction in the cost of processing secondary metal units processed on site (process scrap)
  • Strategic sourcing and commodity management approach to drive reduction in input costs
  • Consumption efficiency improvement initiatives (gas, rolling oils, packaging, paints and lacquer)
  • Logistics optimisation initiatives

2013 HIGHLIGHTS

  • Rightsizing of workforce at a once-off cost of R25,6 million, leading to a reduction in annual cost of employment of around R60 million
  • Three-year wage agreement with hourly-paid employees concluded
  • Approval for R300 million investment in scrap separation, processing and recycling facility
  • Feasibility study commenced into natural or methane-rich gas supply to Hulamin’s operations in Pietermaritzburg

Hulamin has a competitive advantage in the local and regional economy but, to date, this market has been able to support only around 30% to 35% of Hulamin’s sales. With the growth in sub-Saharan Africa and the corresponding increase in per capita income, the consumption of aluminium in the region is set to grow significantly. This will allow Hulamin to focus its product range and will also increase the availability of aluminium scrap in the region, with its attendant benefits.

Hulamin and the established local aluminium supply industry is well-placed to support and promote the growth and investment in local downstream fabrication of a wide variety of product applications, increased supply of which is necessary to meet the burgeoning demand in the region.

2013 HIGHLIGHTS

  • Successful processing of aluminium beverage can body stock products by Hulamin
  • The ramp-up of the conversion of the local and regional beverage can market to all-aluminium cans gathers momentum:
    • Nampak announced acquisition of aluminium can maker in Nigeria, the conversion of the can line at its operations in Angola to aluminium and the installation of a new all-aluminium can line at its local Rosslyn beverage can operation
  • Restructuring and resourcing of Hulamin’s market development team

Hulamin and the local downstream aluminium industry are dependent on primary aluminium supply from the BHP Billiton Hillside smelter in Richards Bay. As the smelter is a large consumer of electricity at a time when this resource is in short supply locally, it has recently been the subject of much public scrutiny.

Hulamin is also dependent on the importation of billet for its extrusions operations and the supply of 100 000 tons of rolling slab from BHP Billiton’s Bayside casthouse, which supplements the 200 000 tons produced by Hulamin’s remelt and casting facility.

The growth in sales of aluminium to the local market, particularly for use in beverage cans (with its high turnaround cycle), creates the opportunity for increasing use of competitively-priced scrap by Hulamin instead of primary aluminium.

2013 HIGHLIGHTS

  • BHP Billiton has announced that its Bayside smelter would be closed during 2014
  • The supply contract for rolling slab from BHP Billiton’s Bayside casthouse has been extended to December 2014 and Hulamin continues to participate in ongoing discussions regarding the longer-term availability of slab from this casthouse
  • Approval obtained for R300 million investment in scrap separation, processing and recycling facility
  • Continued growth in pace of conversion of the regional beverage can market to the all-aluminium can

The aluminium industry presents the local economy with significant opportunities for economic growth, industrial development, job creation, transformation and energy efficiency. Hulamin recognises its leadership role in working with government to realise these opportunities.

Hulamin and the aluminium industry, in turn, require the support of government to assist to manage the unfair competition from low-priced imports, making appropriate infrastructure available at an appropriate cost (e.g. gas pipeline), ensuring the retention and availability of aluminium scrap generated in South Africa, prescribing local content requirements in infrastructure projects, stimulating the attractiveness of the region for foreign direct investment, continued competitiveness investment support and ensuring that the imposition of carbon pricing measures are competitive and non-punitive.

2013 HIGHLIGHTS

  • Scrap export legislation promulgated in August 2013
  • Growth in regional beneficiation of aluminium
  • Approved investment in aluminium recycling facility
 
Key capitals supporting
delivery of strategy