HLM - Hulamin Limited - Audited results for the year ended 31 December 2010
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
- Improved markets and production performance drive 32% sales growth in Rolled
Products to 187 000 tons
- Headline earnings reduced to 27 cents per share as strong Rand offsets
operational improvements
- Focus on manufacturing excellence leads to improved operational performance
- Metal supply outlook improves
Richard Jacob (Chief Executive Officer) commented:
"Hulamin`s financial results for 2010 were disappointing, largely as a result of
the strong Rand eroding a much improved operational performance. Costs were
negatively affected by the start-up of the expansion project, ahead of the sales
and revenue benefits which will accrue as the plant ramps up to full capacity
and optimum product mix.
However, our focus on operational performance resulted in a broad range of
improvements. These include sales and production volumes, unit costs, the mix of
high value products and US Dollar margins.
We are confident that the momentum for further improvements is well established
and are encouraged by the signing of an extension to the rolling slab supply
agreement to June 2012."

Enquiries

Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Charles Hughes, CFO 082 745 6173
Hector Molale 083 639 1021
CapitalVoice
Johannes van Niekerk 082 921 9110

Commentary

Market conditions and plant performance continued to improve throughout the year, resulting in increased overall sales volumes as well as those of higher margin products, particularly can-end stock, brazing sheet and heat treated plate. These increases resulted in turnover increasing to R5,81 billion from R4,50 billion in the previous year.

Other operational performance improvements were made in the areas of improved working capital utilisation, higher production volumes, improved recoveries and lower unit costs, while margins in US Dollars also improved.

As Hulamin is one of South Africa`s leading beneficiating exporters, the continued strengthening of the Rand against the US Dollar had a severe impact on translating export revenue into Rand. During 2010, the Rand strengthened by 13%, from an average of R8,42 in 2009 to an average of R7,32 in 2010. This eroded most of the operational improvement benefits achieved. Operating profit therefore reduced to R218 million from R244 million in 2009.

Headline earnings for the year reduced to R75 million (27 cents per share) from R92 million (37 cents per share) in 2009.
In addition to the strong Rand, Hulamin faced a number of other challenges, including the termination of billet supply by BHP Billiton to Hulamin Extrusions, weak demand in the South African market and significant inflationary price increases, particularly related to manpower and electricity. The business also faced higher fixed operating costs resulting from the startup of the new Rolled Products expansion project, ahead of the revenue benefits from the new assets.

Notwithstanding these challenges, Hulamin improved its manufacturing performance through increased focus on its manufacturing excellence programme, which resulted in direct annualised benefits of some R200 million.
In June 2010, Hulamin raised R750 million in a fully subscribed rights offer to shareholders. The proceeds from this were used to reduce both short and long- term borrowings. Net borrowings reduced from R1 409 million at December 2009 to R958 million at December 2010.
Given the recent earnings performance and working capital and capital expenditure required for future growth, the Board has decided not to declare a dividend for the current year.

Rolling Slab and Extrusion Billet Supply Hulamin produces both extrusion billet and rolling slab in its own facilities in Pietermaritzburg, and supplements this with imports of extrusion billet and with rolling slab supplied by BHP Billiton. Agreement has been reached with BHP Billiton to extend the existing rolling slab supply agreement until June 2012. Prospects The focus for Hulamin remains on accelerating and then sustaining its improved operational performance. International markets continue their steady improvement, resulting in firmer US Dollar margins being realised for contracts currently being booked. Cost competitiveness, volume growth, mix improvement and working capital controls remain the core objectives as Hulamin continues its growth path to full capacity.

ME Mkwanazi RG Jacob
Chairman Chief Executive

24 February 2011

Audit opinion

The auditors, PriceWaterhouseCoopers Inc., have issued their opinion on the group's financial statements for the year ended 31 December 2010. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. A copy of their audit report is available for inspection at the company's registered office. These condensed financial statements have been derived from the group financial statements and are consistent, in all material respects, with the group financial statements. 

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