Reliance and Impact on Key Capitals > Financial capital

FINANCIAL CAPITAL

Financial capital identifies and monitors our performance. This includes how we obtain our funding, through financing or through generating by means of our productivity. It’s the pool of funds generated and that are available to the Hulamin for use in the production of products and includes debt and equity.

2014 areas of focus 

How we fared 

Increase our return to shareholders  Normalised earnings has increased by 76% to R355 million 
Re-invest capital into new strategic projects  The R300 million investment into our aluminium recycling facility is expected to be online in the third quarter of 2015 
Reduce our borrowings levels to more sustainable levels Net borrowings has reduced to R437 million 

2015 and beyond focus areas 

Focus on core competencies and key product streams to increase overall contribution 
Identify measures that will limit the effects of load-shedding on the overall profitability of the business 
Continue to improve on returns to shareholders, including the revival of the dividend policy 

 

Financial performance

The group has reported record earnings for the 2014 financial year that have been bolstered from a growth in Rolled Product sales volumes and a weakening in the South African Rand compared to other major currencies.

Basic headline earnings for the group increased by 96% to R358 million, of which Hulamin Rolled Products contributed R326 million and Hulamin Extrusions contributed R32 million. Note 2 of the group financial statements disclose more information on our operating segment’s contributions.

In order to better monitor underlying performance of the group, management reports results excluding abnormal or non-recurring type gains and losses. The resultant normalised earnings has shown an increase of 76% to 111 cents per share. The calculation of normalised earnings is shown in note 22 of the group financial statements.

CASH FLOW

Hulamin continued to focus on its operating cash flows. With the weakening in the South African Rand against major currencies, our cash generated from operating activities increased to R518 million compared to R283 million in 2013. The increase in cash generated from operating activities has assisted the group to decrease our overall net borrowings to R437 million compared to R612 million reported in 2013 and in turn decreasing our net interest expense.

The group has committed to our investment of R300 million in the construction of our new aluminium recycling facility that is due to be fully operational in the third quarter of 2015. The new 50 000 ton facility will allow us to optimally recycle aluminium scrap generated in the plant and from our customer base. For more information on our new aluminium recycycling facility, refer to Manufactured capital.


WORKING CAPITAL

Inventories rose by R152 million to R1 959 million at December 2014. Rolled Products inventory totalled 56 000 tons, which is below last year’s amount, however above our target level of 55 000 tons. Manufacturing performance fell short of targets and introduced additional variability into the forecasting process which impacted negatively on inventory levels. Inventory at Extrusions was inflated by a large replenishment order that was in transit at year end.

Although trade receivables increased from R827 million to R931 million, they were well managed. All export debtors and around 90% of local debtors were covered by credit insurance. Trade payables remained broadly in line with activity levels of the group.

Dividends

The board has proposed the resumption of Hulamin’s three-times dividend cover payment policy, of which two-thirds will be paid as a final dividend. In accordance with this policy, a final dividend of 25 cents per share has been declared for the 2014 financial year.

FINANCIAL GOVERNANCE

Accounting policies

The group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), IFRIC interpretations, SAICA Financial Reporting guides, the requirements of the Companies Act, No 71 of 2008, as amended, and the Listings Requirements of the JSE Limited.

No new accounting standards issued were adopted in the current year; however, amendments to some standards (as and when they have become effective) have been adopted in the current year of which can be found in note 1 of the group financial statements.

Financial controls and risk management

The internal control systems are designed to provide reasonable assurance against material losses and misstatement of financial results, and are intended to manage all significant risks. The safeguarding and prevention of misuse of assets is an important aspect of internal control. An internal financial control framework has been developed, in line with King III, to improve the identification of financial reporting risks and to provide additional assurance that controls are adequate to address the risk of material misstatements of financial results. During 2014, internal control frameworks were tested by the internal audit function. Areas of non-compliance were reported and discussed with management, following which action plans were implemented to address the risk of material misstatement of financial results. Refer to the corporate governance section for more information

Going-concern assertion

The board has formally considered the going-concern assertion for the group and is of the opinion that it is appropriate for the forthcoming year.