The business overview > Strategic objectives

STRATEGIC OBJECTIVES

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ACHIEVE BENCHMARK OPERATIONAL PERFORMANCE  ACHIEVE GLOBAL COST COMPETITIVENESS  GROW LOCAL AND REGIONAL SALES  SECURE, COMPETITIVE ALUMINIUM SUPPLY  SUPPORTIVE REGULATORY ENVIRONMENT 
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Objective

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 while simplifying the business where possible

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

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 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 
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 40% 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.  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 the 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.  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. 

Strategic risks

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Key Performance Indicator

  • 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 
  • 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 
  • Aluminium can market
  • New local and regional market development
  • Expand presence in sub-Saharan Africa
  • New product development initiatives 
  • Sustainability and optimisation of the Bayside casthouse
  • Sustainability of BHP Billiton Hillside smelter 
  • Import tariffs
  • Local scrap protection
  • Carbon tax
  • Incentives and grants 

2014 Highlights

  • Production yields achieved by Rolled Products below target
  • Reorganising of strategic skills within the workforce to better optimise skill sets to processes in the business
  • Rolled Product sales volume has grown by 3%
  • Strong performance from all companies within the Hulamin group
  • Improved contribution from high margin products 
  • Three-year wage agreement with hourly-paid employees in force
  • Construction of the aluminium recycling plant is on budget and on time to be commissioned in the third quarter of 2015
  • Negotiations near completion in respect of natural gas supply to Hulamin’s operations in Pietermaritzburg 
  • Successful processing of aluminium beverage can body stock products by Hulamin and ramping up with local demand requirements
  • Rejuvenated sales and market development team
  • Niche product mix focus 
  • BHP Billiton has announced the acquisition of the Bayside casthouse by Isizinda Aluminium of which Hulamin is a strategic partner
  • A five-year supply contract for rolling slab from Isizinda Aluminium has been concluded
  • Construction of the aluminium recycling plant is on budget and on time to be commissioned in the third quarter of 2015
  • Continued growth in pace of conversion of the regional beverage can market to the all-aluminium can 
  • Scrap export legislation promulgated in August 2013
  • Growth in regional beneficiation of aluminium
  • Approved investment in aluminium recycling facility
  • Application for import duties and tariffs has been lodged with ITAC 

Key capitals supporting the delivery of our strategy