Unpacking the Strategy
Our material matters as described are determined through a proactive monitoring approach and are considered by the Hulamin Executive Committee. Material matters highlighted below have had the most material impact on the outcomes of our strategic objectives in the current financial year and have shaped the development of our strategic objectives for 2018. More details regarding our external environment and an analysis of our risks and opportunities are provided here and here.
- Threat: Rolling margins in key product categories remain under pressure in a competitive global market.
- Threat: Low local economic growth and constrained local market demand for aluminium semi-fabricated products.
- Threat: Competition in South Africa from low cost imports.
- Opportunity: Use of innovative technology to optimise business processes, know-how, customer value and assets.
- Threat: Stronger Rand environment putting pressure on Hulamin’s operating profit.
The Hulamin Executive Committee has implemented an effective risk management process (refer page 40 of this report) to mitigate risk and leverage opportunity relative to the key enablers required to deliver our strategic objectives.
|Availability of capital and incentives||South African economic and political environment|
|Conversion margins and market demand||Global aluminium semi-fabrication market and regional market development|
|Currency, operating environment and input costs||South African economic and political environment|
|Price and availability of aluminium scrap inputs||South African economic and political environment|
|Availability of primary aluminium||South African primary aluminium industry|
|Opportunity||Threat||* Our external environment is described further here.|
OUR STRATEGIC RESPONSE
THE CORE (Short-term)
In order for the group to remain competitive and sustainable, it must improve operational performance levels to targeted levels based on global benchmarks for similar operations. This will be achieved by:
ACHIEVING BENCHMARK OPERATiONAL PERFORMANCE
Benchmark operational performance includes optimising the following operational variables:
- Stabilise operational performance through improved risk management.
- Improve central coordination and strategic analysis capability to drive key decision-making in the business.
- Improve customer on-time delivery by re-engineering the sales and operational planning approach.
ACHIEVING GLOBAL COST COMPETITIVENESS
The group continues to reduce its input costs in a sustainable manner to remain globally competitive. The group continues to aggressively attack costs and develop cost-focused culture to offset inflation.
- Develop and execute a process capability and competency framework.
- Production volume growth.
- Consistent and improving production, safety, environmental and quality performance.
- Cost reduction and improvement.
ROLLING MARGINS (Medium-term)
Increased global competition and subsidisation of Chinese products requires Hulamin to focus on higher value product categories and margins.
GROW LOCAL AND REGIONAL SALES
With the growth in sub-Saharan Africa and the corresponding increase in per capita income, the consumption in the region is set to grow significantly. This will allow the group to focus its product range and will also increase the availability of aluminium scrap in the region.
The group 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.
The group will focus on:
- Growing defendable niche positions.
- Invest in capabilities and technical partnerships to develop new, higher value products.
- Re-engineer route-to-market strategies.
SUPPORTIVE REGULATORY ENVIRONMENT
The aluminium industry presents the local economy with significant opportunities for economic growth, industrial development, job creation, transformation and energy efficiency. The group and aluminium industry, in turn, require the support of Government to assist to manage the unfair competition through low-priced imports, making appropriate infrastructure available, prescribing local content requirements in infrastructure projects and stimulating the attractiveness of direct investment.
- Overall USD/ton conversion margin.
- Percentage high-value sales mix.
- Percentage metal inputs from recycled scrap.
With increasing global competition in aluminium rolled products, for Hulamin to achieve a step change in margin realisation in the future, a significant shift is required in our sales mix to move further up on our value curve. In order to achieve a shift in the value curve Hulamin’s long-term vision includes:
- Investment in new assets and capabilities that will allow the uplifting of product categories;
- Re-configuring the asset base away from low margin products; and
- Supporting the development of upstream business in Richards Bay to enable the local beneficiation of primary aluminium into a range of value added products.
- Growth in local beneficiation of liquid primary aluminium.
- Number of new high value products launched.
- Percentage high value products in sales mix.