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HLM - HULAMIN LIMITED - Audited results for the year ended 31 December 2014 and cash dividend declared |
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Audited results for the year ended 31 December 2014 and cash dividend declared
HULAMIN LIMITED
("Hulamin", "the company" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014 AND CASH DIVIDEND DECLARED
HIGHLIGHTS
- Normalised earnings up 76% to R355m
- HEPS increased by 96% to 112 cents per share
- Operating cash flows up 83% to R518m
- Final cash dividend declared of 25 cents per share
- 5-year rolling slab deal signed with Isizinda Aluminium
- New B-BBEE transaction including Employee Share Option Scheme
David Austin (CFO and Acting CEO) commented:
"We achieved record earnings with improved contributions from our key products and a weaker rand.
Our safety record was excellent and we made good progress in manufacturing where we focussed on our
core competencies. Cash flow was strong and even after substantial capital expenditure we were able
to lower our borrowings further. Shareholders will receive a final dividend of 25 cents per share,
the first since 2008."
ENQUIRIES
Hulamin 033 395 6911
David Austin, CFO and Acting CEO 082 718 6151
Hector Molale 083 639 1021
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Normalised earnings at R355 million for the year are substantially higher than the previous best ever achieved
by Hulamin of R240 million in 2008. Our employees are our greatest asset and an outstanding safety performance,
with only two lost time Injuries in the period, is even more rewarding.
The ongoing focus on working capital management saw cash from operating activities increase from R283 million
in 2013 to R518 million in the current year. A substantial increase in both expansion and replacement capex,
boosted by spend on the construction of Hulamin's new aluminium recycling facility, consumed R335 million of
this with the balance of R183 million utilised to reduce net debt to R437 million.
The Board has declared a final cash dividend of 25 cents per share, the first since 2008, following resumption
by the company of its dividend payment policy.
Operational performance
Sales volumes of rolled products increased 3% to 196 000 tons with exports contributing 70% by volume. Sales by
the extrusions business, which are all into the local market, fell 12% as imports continue to gain on locally
manufactured products in tight trading conditions. The Rand US Dollar exchange rate for the period was, on
average, 12% lower than the previous year at R10.85. This provided our products with some relief against those
of competitors from the BRIC economies and other countries, all of whom enjoy some form of local market protection.
Heat treated plate was Hulamin's top performing product in 2014 and we have signed a new contract to supply
this product to Tesla Motors in North America. Our canstock products, can end and tab stock, are the core
contributors to the gross margins of Rolled Products and, whilst manufacturing performance was in line with
the previous year, pricing was generally firmer. We commenced commercial production of can body stock which
we supplied to Nampak for the local manufacture of all-aluminium beverage cans during the year. Currently,
most of the can body stock used in South Africa is imported from Brazil and we will compete aggressively for
this business as we ramp up to full production.
Hulamin is investing R300 million in an aluminium recycling plant that will take used aluminium beverage cans and reprocess
them back to raw metal and ultimately, can body stock. Gas-fired furnaces will provide recycled aluminium to the
local market, whilst using only a fraction of the electricity required to smelt new metal. The R300 million will be
financed, in the main, by a new five-year R270 million loan from Nedbank.
Automotive heat exchanger materials continued to perform well. These products, along with extruded suspension
components are used and exported by the major automotive OEM's. A pre-feasibility study into the local production
of aluminium auto body sheet has shown that the required investment is likely to only be viable if entered into
in partnership with Government and in co-operation with the major OEM's.
The international market for foil products is very competitive and imports drive local market conditions.
Foil manufacturing operations have received a lot of attention but as yet we have been unable to achieve acceptable
returns in this area of the business.
Isizinda "The Hub"
In 2009, BHP Billiton announced that they would close their downstream aluminium casthouse at Bayside and would in
future concentrate on the production of basic melting ingot at their Hillside smelter. This was to be a phased
process with rod casting already having ceased, billet terminated in September 2009 and slab scheduled to halt in
June 2012. Hulamin has, for many years, relied on BHP Billiton for the supply of 100 000 tons of rolling slab,
representing approximately one-third of total requirements.
BHP Billiton did not close Bayside in 2012 but kept producing slab while also seeking an acceptable solution for
key stakeholders. In November 2014, we announced that Hulamin has entered into a strategic partnership with the
Bingelela consortium to form Isizinda Aluminium, a black empowered company that will acquire the Bayside casthouse
from BHP Billiton, subject to Competition Commission approvals. Hulamin will hold a minority stake in Isizinda
Aluminium and Isizinda will supply Hulamin with rolling slab for at least the next five years.
The transaction has tremendous positive implications for the downstream aluminium industry and discussions are already
taking place around the possibility of restarting the casting of both billet and rod.
New B-BBEE transaction and ESOP
When Hulamin listed in 2007 it created an empowerment structure and an employee share ownership plan. However, as the
Hulamin share price fell substantially after listing, neither scheme vested significantly.
In line with our Hulamin values and strategic objective of maintaining a level 4 or better contributor rating under the
recently implemented new BEE Codes, we will ask shareholders to approve a new B-BBEE transaction, including an employee
share ownership scheme (ESOP), at the annual general meeting in April 2015.
Dividend
The Board has proposed a 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, the Board has declared a final dividend, dividend number 5 of
25 cents per share, in respect of the 2014 financial year. Hulamin last paid a dividend, dividend number 4 of 13 cents
per share, a final dividend in respect of the 2008 financial year, in March 2009.
Prospects
We will continue to focus on our core competencies and product streams in 2015. Our efforts to simplify the business and
establish clear accountability will improve manufacturing performance and in particular, production recoveries.
Global markets for beneficiated aluminium products are growing and despite fierce competition, prices in the niches in
which we specialise are stable. Local market prices will be influenced by the level of imports and particularly those
products that are sold into the South African market at prices lower than that in the exporter's home market.
Load shedding will have a fundamental impact on the entire South African economy in 2015. Hulamin is currently cutting
back 10% of its electricity consumption in terms of an agreement with both the Msunduzi Municipality and Eskom. Whilst all
concerned should be commended for the cooperative approach taken, the reality is that Hulamin will lose at least 10% of
production and profits if power disruptions continue.
Richard Jacob has made an excellent recovery following an extended medical leave of absence and will resume his post as
CEO on 1 March 2015.
M E Mkwanazi D A Austin
Chairman CFO and Acting CEO
CONDENSED CONSOLIDATED INCOME STATEMENT
2014 2013
Note R'000 R'000
Revenue 8 038 918 7 560 007
Cost of sales (7 119 966) (6 914 691)
Gross profit 918 952 645 316
Selling, marketing and distribution expenses (403 104) (390 328)
Administrative expenses (88 781) (70 830)
Impairment reversal / (charge) 43 405 (2 122 316)
Other gains and losses 114 661 132 787
Operating profit / (loss) 585 133 (1 805 371)
Interest income 2 453 1 358
Interest expense (48 160) (64 715)
Profit / (loss) before tax 539 426 (1 868 728)
Taxation 3 (154 498) 523 769
Net profit / (loss) for the year 384 928 (1 344 959)
Headline earnings
Net profit / (loss) for the year 384 928 (1 344 959)
Loss / (profit) on disposal of property, plant and equipment 6 498 (143)
Impairment (reversal) / charge (43 405) 2 122 316
Tax effects of adjustments 10 334 (594 209)
Headline earnings 358 355 183 005
Normalised earnings
Headline earnings 358 355 183 005
Transaction costs (net of tax) 7 450 -
Post-retirement medical aid past service cost adjustment (net of tax) (11 272) -
Severance costs (net of tax) - 18 438
Normalised earnings 354 533 201 443
Earnings / (loss) per share (cents) 4
Basic 120 (422)
Diluted 118 (417)
Headline earnings per share (cents) 4
Basic 112 57
Diluted 110 57
Normalised earnings per share (cents) 4
Basic 111 63
Diluted 109 62
Dividends per share (cents) 25 -
Currency conversion
Rand / US dollar average 10.85 9.66
Rand / US dollar closing 11.58 10.56
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014
2014 2013
R'000 R'000
Net profit / (loss) for the year attributable to equity
holders of the company 384 928 (1 344 959)
Other comprehensive income / (loss) for the year 28 037 (4 981)
Items that may be reclassified subsequently to profit or loss 37 919 (22 407)
Cash flow hedges transferred to income statement 43 480 12 359
Cash flow hedges created 9 186 (43 480)
Income tax effect (14 747) 8 714
Items that will not be reclassified to profit or loss (9 882) 17 426
Remeasurement of retirement benefit obligation (12 991) 20 671
Remeasurement of retirement benefit asset (733) 3 531
Income tax effect 3 842 (6 776)
Total comprehensive income / (loss) for the year
attributable to equity holders of the company 412 965 (1 349 940)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2014 2013
R'000 R'000
Balance at beginning of year 3 402 810 4 747 597
Total comprehensive income / (loss) for the year 412 965 (1 349 940)
Ordinary shares issued 34 112
Value of employee services 15 156 9 360
Settlement of employee share incentives (2 796) (4 603)
Tax on employee share incentives 7 044 284
Share-based payment costs in respect of BEE shares redeemed 3 624 -
De-consolidation of structured entity (5 020) -
Total equity 3 833 817 3 402 810
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 December 2014
2014 2013
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 2 697 148 2 515 125
Intangible assets 59 777 38 093
Retirement benefit asset 138 854 161 468
Deferred tax asset 25 450 27 815
2 921 229 2 742 501
Current assets
Inventories 1 958 934 1 806 575
Trade and other receivables 1 037 909 972 619
Derivative financial assets 44 175 13 889
Cash and cash equivalents 249 106 192 800
Income tax asset 2 808 1 488
Asset held for sale 55 217 -
3 348 149 2 987 371
Total assets 6 269 378 5 729 872
EQUITY
Share capital and share premium 1 817 580 1 817 546
BEE reserve - 174 686
Employee share-based payment reserve 41 411 29 720
Hedging reserve 6 614 (31 305)
Retained earnings 1 968 212 1 412 163
Total equity 3 833 817 3 402 810
LIABILITIES
Non-current liabilities
Deferred tax liability 477 702 405 311
Retirement benefit obligations 236 369 225 826
714 071 631 137
Current liabilities
Trade and other payables 964 827 826 086
Current borrowings 686 144 804 482
Derivative financial liabilities 70 519 65 357
1 721 490 1 695 925
Total liabilities 2 435 561 2 327 062
Total equity and liabilities 6 269 378 5 729 872
Net debt to equity % 11.4 18.0
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
2014 2013
R'000 R'000
Cash flows from operating activities
Operating profit /(loss) 585 133 (1 805 371)
Net interest paid (50 626) (64 212)
Loss / (profit) on disposal of property, plant and equipment 6 498 (143)
Non-cash items:
Depreciation, amortisation and impairment of property,
plant and equipment and intangible assets 74 855 2 332 580
Other non-cash items 65 754 59 751
Income tax payment (84 714) (28 400)
Changes in working capital (78 854) (211 247)
518 046 282 958
Cash flows from investing activities
Additions to property, plant and equipment (305 572) (131 165)
Additions to intangible assets (29 992) (16 659)
Proceeds on disposal of property, plant and equipment 206 158
(335 358) (147 666)
Cash flows before financing activities 182 688 135 292
Cash flows from financing activities
Proceeds from borrowings - 804 482
Borrowings repaid (118 338) (772 079)
Redemption of A ordinary shares (3 624) -
Shares issued 34 112
Settlement of share options (2 796) (4 603)
(124 724) 27 912
Net increase in cash and cash equivalents 57 964 163 204
Cash and cash equivalents at beginning of year 192 800 29 596
Deconsolidation of structured entity (1 658) -
Cash and cash equivalents at end of year 249 106 192 800
NOTES
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2014, from which these
condensed consolidated financial statements are derived, have been prepared in accordance with
International Financial Reporting Standards, the Companies Act 71 of 2008 and the JSE Listings
Requirements, under the supervision of the Chief Financial Officer, Mr D A Austin CA(SA). These
condensed consolidated financial statements have been prepared in terms of IAS 34 - Interim
Financial Reporting.
The accounting policies and methods of computation adopted are consistent with those used in the
preparation of the group's 2013 annual financial statements, except for the adoption of the
following new or amended standards and interpretations, as described below:
- Amendments to IAS 32, 'Financial Instruments: Presentation' (effective from 1 January 2014).
The amendments clarify some of the requirements for offsetting financial assets and financial
liabilities on the balance sheet
- IFRIC 21, ‘Levies' (effective from 1 January 2014)
- Amendment to IAS 39 'Financial Instruments: Recognition and Measurement' (effective from 1 January 2015)
on novation of derivatives and hedge accounting
- Amendments to IAS 36, ‘Impairment of assets' (effective from 1 January 2014)
Hulamin believes that normalised earnings more accurately reflects operational performance and this is
arrived at by adjusting headline earnings to take into account non-operational and abnormal gains
and losses.
2014 2013
R'000 R'000
2. Operating Segment Analysis
The group is organised into two major operating segments, namely Hulamin Rolled Products and
Hulamin Extrusions.
REVENUE
Hulamin Rolled Products 7 288 391 6 783 158
Hulamin Extrusions 750 527 776 849
Group total 8 038 918 7 560 007
OPERATING PROFIT / (LOSS)
Hulamin Rolled Products 537 592 (1 846 657)
Hulamin Extrusions 47 541 41 286
Group total 585 133 (1 805 371)
TOTAL ASSETS
Hulamin Rolled Products 5 897 340 5 443 306
Hulamin Extrusions 372 038 286 566
Group total 6 269 378 5 729 872
3. Taxation
The tax charge included within these condensed consolidated financial statements is:
Normal 83 603 25 399
Deferred 70 895 (549 168)
154 498 (523 769)
Normal rate of taxation 28.0% 28.0%
Adjusted for:
Exempt income, non-allowable and other items 0.6% -
Effective rate of taxation 28.6% 28.0%
4. Earnings per share
The weighted average number of shares used in the calculation of basic and diluted earnings per
share, headline earnings per share and normalised earnings per share is as follows:
Number of Number of
shares shares
2014 2013
Weighted average number of shares used for basic EPS 319 515 636 319 007 266
Share options 6 860 351 3 337 019
Weighted average number of shares used for diluted EPS 326 375 987 322 344 285
5. Commitments and contingent liabilities
Capital expenditure contracted for but not yet incurred 226 759 45 425
Operating lease commitments 39 896 41 113
Guarantees and contingent liabilities - 300
AUDIT OPINION
The auditors, PricewaterhouseCoopers Inc., have issued their opinion on the group's financial
statements for the year ended 31 December 2014. The audit was conducted in accordance with
International Standards on Auditing. They have issued an unmodified audit opinion. The auditor's
report does not necessarily report on all the information contained in this announcement.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of
the auditor's engagement, they should obtain a copy of the auditor's report together with the
accompanying financial information from the company's registered office. These condensed consolidated
financial statements, although not audited, have been derived from the group's audited financial
statements and are consistent, in all material respects, with the group's audited financial
statements. The directors take full responsibility for the preparation of this announcement,
including the condensed consolidated financial statements have been correctly extraced from the
underlying annual financial statements.
CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an annual gross cash dividend of twenty
five cents (21,25000 cents net of dividend withholding tax) per ordinary share for the year ended
December 2014.
The dividend has been declared from income reserves and no secondary tax on companies' credits
has been used.
A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt.
The issued share capital at the declaration date is 319 596 836 ordinary shares. The income tax number
of the company is 9522-526-71-5.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Friday, 13 March 2015
Shares commence trading "ex" dividend Monday, 16 March 2015
Record date Friday, 20 March 2015
Payment date Monday, 23 March 2015
Share certificates may not be dematerialised or rematerialised between Monday, 16 March 2015
and Friday, 20 March 2015, both days inclusive.
CORPORATE INFORMATION
HULAMIN LIMITED
("Hulamin", "the company" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
Business and postal address
Moses Mabhida Road, Pietermaritzburg, 3201; PO Box 74, Pietermaritzburg, 3200
Contact details
Telephone: +27 33 395 6911
Facsimile: +27 33 394 6335 Website: www.hulamin.co.za
E-mail: hulamin@hulamin.co.za
Securities exchange listing
South Africa (Primary), JSE Limited
Transfer Secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196, PO Box 786273, Sandton, 2146
Directorate
Non-executive directors: ME Mkwanazi* (Chairman) LC Cele*
SMG Jennings* VN Khumalo TP Leeuw*
JB Magwaza NNA Matyumza* SP Ngwenya
PH Staude* GHM Watson*
*Independent non-executive director
Executive directors:
RG Jacob (Chief Executive Officer)
DA Austin (Chief Financial Officer and acting CEO with effect from 18 July 2014 to 28 February 2015)
MZ Mkhize
Company Secretary
W Fitchat
Date of SENS release: 23 February 2015
Date: 23/02/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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information disseminated through SENS.
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