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HLM: HULAMIN LIMITED - Provisional Audited Financial Results for the year ended 31 December 2017 and Cash Dividend Declaration
Provisional Audited Financial Results for the year ended 31 December 2017 and Cash Dividend Declaration
Incorporated in the Rebublic of South Africa
Registration number: 1940/013924/06
Share code: HLM
("Hulamin", "the company" or "the group")
Provisional Audited Financial Results for the year ended 31 December and Cash Dividend Declaration 2017
- Record sales of 233 000 tons
- Record production and sales in Hulamin Rolled Products of 215 000 tons
- Improved liquidity following strong cash flow of R296 million
- Comparable earnings up 33%, in constant currency terms, on strong operational performance
- Headline earnings per share lower by 13% due to stronger currency
- Dividend of 15 cents per share maintained
Richard Jacob, CEO, commented:
"We report another year of record sales and improved manufacturing performance following the previous record set in 2016, against a backdrop of continuing tough market conditions and a stronger Rand. This was achieved through an ongoing focus on manufacturing excellence with a specific emphasis on cost reduction and tight capital discipline. This resulted in a second consecutive year of strong cash flows and a further reduction in borrowings."
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Anton Krull, CFO 071 361 0622
Johannes van Niekerk 082 921 9110
Hulamin delivered another year of record sales in Hulamin Rolled Products. Hulamin Extrusions sales were flat. Both businesses faced challenging local market conditions, although improved demand for beverage can products enabled Hulamin Rolled Products to increase its local sales by 22%. Manufacturing output benefitted from a continued and consistent focus on lean manufacturing, while cost reduction initiatives, higher volumes, improved efficiencies and a substantial metal price lag benefit largely compensated for the reduction in Rand rolling margin, driven by the stronger currency. US Dollar rolling margins were in line with 2016.
Market conditions, both in South Africa and in export markets, remained uncertain throughout 2017. Local demand was particularly subdued, driven by the fall-off in fixed capital investment. In the USA, conditions are particularly uncertain following the imposition by the International Trade Commission of actions against the import of aluminium foil, and standard sheet and coil from China.
During the year under review, the London Metal Exchange (LME) aluminium price continued to rise averaging at $1 968 per ton (2016: $1 604) and closing at $2 242 per ton (2016: $1 713). This resulted in a metal price lag benefit of R150 million for the full year (2016: R50 million).
Turnover increased modestly to R10,2 billion (2016: R10,1 billion) driven by the higher sales volume, flat US Dollar rolling margins, and the higher average LME aluminium price. These increases were however countered by the 10% stronger average Rand exchange against the US Dollar to R13,32 recorded during the year (2016: R14,73).
Demand for beverage packaging continued to increase following the upturn in the second half of 2016. This increase facilitated further improvements in aluminium recycling and Hulamin's contribution to entrepreneurial and enterprise development in this segment. Commissioning of the scrap cleaning line was completed in the first half of the 2017 year. This together with efficiency and process improvements allowed for record scrap volumes being processed during 2017 and lays the foundation for further increases in the ramp-up to full design capacity.
Conversion costs in Rolled Products decreased by 5,3% to R2.9 billion, representing a reduction of 10.1% in real terms.
Manufacturing costs per unit contracted by 5,9%(2016: 4.3%).
A further conversion of gas supply to compressed natural gas, reducing waste and rightsizing manpower and outside contracting costs, operating supplies and material costs contributed to the reduced manufacturing cost.
Earnings before interest and taxation (EBIT) declined by 13% to R538 million, and decreased by 16% to R517 million on a comparable basis, after adjusting for a R25 million insurance receipt in 2017.
Comparable operating profit (assuming constant R/USD) was 27% higher at R784 million (comparable earnings, on a constant currency basis, were 33% higher at R507 million. Net interest charges decreased by 10% to R78 million, mainly due to the capitalisation of borrowing costs attributable to capital work in progress. Attributable earnings were 14% lower at R332 million for the year. Headline earnings per share and normalised HEPS declined by 13% to 104 cents.
Cash flow before financing activities amounted to R296 million (2016: R415 million), after R261 million capital expenditure and interest payments of R99 million (including capitalised interest of R21 million).
Operational performance at the Isizinda cast house maintained its high level. This operation forms an important part of Hulamin's metal supply and recycling operations. Initiatives to capitalise on a range of aluminium processing opportunities at Isizinda continue in association with the Richards Bay Industrial Development Zone.
Hulamin Extrusions performance was disappointing in tough trading conditions. During 2016, we approved a capital investment plan for Hulamin Extrusions and the repositioning of the business in the very dynamic local market.
The board has declared a final dividend of 15 cents per share for 2017 (before withholding tax) (2016: 15 cents per share) payable on Monday, 26 March 2018, to shareholders included in the share register on Friday, 23 March 2018.
Last day to trade Monday, 19 March 2018
Shares trade ex dividend Tuesday, 20 March 2018
Record date Friday, 23 March 2018
Payment date Monday, 26 March 2018
Share certificates may not be dematerialised or rematerialised between Tuesday, 20 March 2018 and Friday, 23 March 2018, both days inclusive.
Shareholders are advised of the following information:
- the dividend has been declared out of the 2017 profits;
- the local dividend tax rate is 20%;
- the gross local dividend is 15 cents per share;
- the net dividend amount for local shareholders is 12 cents per share:
- exempt from payment of dividend tax is 15 cents per share;
- liable to pay dividend tax is 12 cents per share;
- the issued share capital of the company is 319 596 836 ordinary shares and 4 721 600 A1 ordinary shares;
- the company's tax number is 9522526715.
Efforts continue to maintain the improved sales and manufacturing performance in 2018. Further initiatives to improve rolling margins through focusing on a higher margin product mix are gaining momentum. The firming Rand will continue to impact financial performance negatively as foreign-denominated selling prices translate to lower Rand rolling margins.
Trade actions between the USA and China are currently creating positive demand momentum for Hulamin products in the USA. Hulamin's strong brand and reputation for good quality products and service, places the company in a good position to capitalise on improving US market conditions.
Hulamin enjoys the benefits of duty free access to the USA as a result of both the Africa Growth and Opportunities Act (AGOA) and General System of Preferences (GSP) legislation.
Hulamin notes with caution the proposed aluminium trade restricting recommendations issued by the US Commerce Secretary on 16 February 2018 that may impose value and/or volume constraints on aluminium imports into the USA. With 20% sales exposure to the USA, these recommendations may impact on Hulamin if and when adopted.
ME Mkwanazi RG Jacob
Chairman Chief Executive Officer
22 February 2018