Unaudited results for the half-year ended 30 June 2015 and cash dividend declaration
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2015 AND CASH DIVIDEND
- Operating profit down 34% on 16% lower sales
- Bayside casthouse taken over by Isizinda Aluminium (a Hulamin/ Bingelela
consortium) on 1 July 2015
- Cash outflow of R575 million driven by investments and capital expenditure
- Recycling furnace started up on time and on budget in May 2015
Richard Jacob, CEO, commented:
"Lower production volumes impacted by electricity supply curtailments, quality rework and
the planned maintenance shutdown, constrained our sales of rolled products for the six
months under review. The sharp fall in the aluminium price during the reporting period led
to a R55 million metal price lag charge. Corrective measures implemented to date, including
the installation of electricity generator sets, are expected to benefit production and
sales in the second half of the year."
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
David Austin, CFO 082 718 6151
Johannes van Niekerk 082 921 9110
Financial and operating performance
Sales volumes for the six months to 30 June 2015 totalled 93 000 tons, 16% lower than the
corresponding period's 110 000 tons. Electricity supply curtailments, compounded by quality
rework on two product lines, disrupted output of rolled products, which in turn constrained
sales volumes, particularly in the first quarter. A major planned maintenance shutdown was
successfully carried out in May, also impacting on production and sales.
Turnover accordingly decreased to R3.93 billion (2014: R4.06 billion). The Rand weakened by
11% to an average of R11.92/USD (2014: R10.71/USD) supporting Rand revenues and
counteracting the effects of domestic cost inflation.
Locally, the economy has remained soft and low priced products, largely from Asia, are
placing pressure on both sales volumes and prices. Internationally, demand for rolled
products and prices in our key streams and markets remained steady. Asian markets are
extremely competitive at present due to significant overcapacity in the region and we have
reduced our activity there accordingly.
The price of aluminium, as quoted on the London Metal Exchange, has fallen sharply in
recent months due to an oversupplied global market with excess capacity. As a semi-
fabricator and processor of aluminium products, Hulamin does not produce aluminium itself
and purchases its metal requirements from smelters, particularly South 32's Hillside
operation in Richards Bay. The sharp fall in the aluminium price created a R55 million metal
price lag charge in the current period.
Manufacturing costs are 3% lower than the prior year. Operating profit declined to R138
million, or 34% lower compared to the prior year as a result of the lower sales volumes and
the material metal price lag loss mentioned above.
Production improved in the second quarter, in spite of the planned maintenance shutdown
undertaken on key plant and equipment that included a number of upgrades and
improvements. All engineering work was successfully completed.
There was a cash outflow from operations of R129 million (2014: R304 million inflow),
largely as a result of lower profits and increased working capital requirements. Capital
expenditure consumed R265 million and the group's initial investment in Isizinda Aluminium
amounted to R101 million. These elements, together with the payment of dividends
declared in respect of the 2014 financial year of R80 million, resulted in a total cash
outflow of R575 million that was funded by increased borrowings.
The acquisition of the Bayside casthouse by Isizinda Aluminium, the combined Hulamin and
Bingelela consortium, from South 32 has been completed as planned, with operations having
been successfully handed over on 1 July 2015. We expect a seamless transition under new
ownership at the Bayside casthouse with largely the same personnel in place that has
operated the facility for the past few years.
Not only does this strategic transaction secure Hulamin's local supply of rolling slab, but,
under Isizinda Aluminium, the Bayside casthouse is developing into a broad-range aluminium
hub, providing the opportunity to re-introduce the local supply of products such as extrusion
billet and wire rod, which have been imported since 2009, to support industrialisation in
Richards Bay, the growth of the domestic aluminium industry and economic growth
throughout Southern Africa.
New Hulamin B-BBEE transaction and ESOP
Shareholders approved a new B-BBEE transaction, including an employee share ownership
scheme (ESOP), on 23 April 2015. The transaction, which is subject to the fulfilment of the
remaining conditions precedent, is expected to be effective during the third quarter of 2015.
The impact of load curtailment on operations was significantly lower in April following a
particularly disruptive February and March period, despite the frequency having increased.
This is attributed to Hulamin having successfully commissioned a set of 6MW generators
that allows the Pietermaritzburg plant to run close to normal operation during periods of
10% load curtailment (stage one and two), while we have also improved our capacity
Aluminium recycling plant
With the growth in consumption of all-aluminium cans and the attractiveness
of collecting and recycling used beverage cans, Hulamin approved an investment of R300
million in 2013 in scrap recycling capacity. Most of this equipment has been successfully
installed and started up on time and on budget in May 2015. The final phase of the
investment is the installation of scrap cleaning and separation capability that is scheduled
for start-up before the end of 2015. Hulamin procured about 5,000 tons of scrap in the six
months under review.
US export market
Hulamin is a beneficiary of preferential access to markets in the USA via the Africa Growth
and Opportunities Act (AGOA) and Generalized System of Preferences (GSP) legislation.
Hulamin participated in the renewal process that resulted in AGOA being renewed for 10
years from 1 October 2015 and GSP being renewed retrospectively to 2017 on 29 June 2015.
This is a positive development as the US, whose economy continues to strengthen, remains
an important market for Hulamin's products.
In line with the company's dividend policy, the Board has declared a gross interim dividend
of 8.0 cents per ordinary share in respect of the six months ended 30 June 2015 (2014: gross
final dividend of 25.0 cents per ordinary share).
Hulamin expects manufacturing operations in the second half of 2015 to benefit from the
corrective measures implemented to date, with challenging market conditions expected to
continue in both local and international markets.
ME Mkwanazi RG Jacob
Chairman Chief Executive Officer
27 July 2015
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