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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.
Condensed Income Statement
2010 2009
Note R`000 R`000
Revenue 5 808 667 4 499 582
Cost of sales (5 260 954) (3 895 842)
Gross profit 547 713 603 740
Other gains and losses 3 71 744 53 968
Selling and marketing expenses (312 113) (323 438)
Administrative expenses (89 111) (90 296)
Operating profit 218 233 243 974
Net finance costs (116 923) (113 813)
Share of profits of
associates and joint ventures 2 654 383
Profit before tax 103 964 130 544
Taxation 4 (30 716) (40 911)
Net profit for the year
attributable to shareholders 73 248 89 633
Headline earnings
Net profit for the year
attributable to shareholders 73 248 89 633
Loss on disposal of property,
plant and equipment 2 174 2 731
Tax effects of adjustments (609) (765)
Headline earnings attributable to
shareholders 74 813 91 599
Earnings per share (cents) 5
Basic 26 37
Diluted 26 36
Headline earnings per share (cents)
Basic 27 37
Diluted 26 37
Dividends per share (cents) - -
Interim paid - -
Final declared - -
Currency conversion
Rand/US dollar average 7,32 8,42
Rand/US dollar closing 6,63 7,39
Condensed Statement of Comprehensive Income
2010 2009
R`000 R`000
Net profit for the year 73 248 89 633
Cash flow hedges, net of tax 39 362 (102 174)
Total comprehensive income/(loss) for
the year attributable to shareholders 112 610 (12 541)
Condensed Statement of Changes in Equity
2010 2009
R`000 R`000
Shareholders` interest at beginning
of year 3 744 279 3 760 146
Total comprehensive income for the year 112 610 (12 541)
Shares issued 736 275 1 639
Value of employee services 20 355 29 492
Settlement of employee share incentives (4 025) (7 547)
Tax on employee share incentives 40 1 627
Dividends paid - (28 537)
Total equity 4 609 534 3 744 279
Condensed Balance Sheet
2010 2009
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 989 646 4 979 278
Intangible assets 33 346 29 874
Investments in associates and
joint ventures 51 887 10 463
Retirement benefit asset 73 819 -
Deferred tax asset 22 102 13 899
5 170 800 5 033 514
Current assets
Inventories 1 189 929 1 015 029
Trade and other receivables 792 357 695 228
Derivative financial assets 180 247 97 970
Income tax asset - 8 048
Cash and cash equivalents 24 439 64 413
2 186 972 1 880 688
TOTAL ASSETS 7 357 772 6 914 202
EQUITY
Share capital and share premium 1 728 830 992 555
BEE reserve 174 686 174 686
Employee share-based payment reserve 91 219 74 097
Hedging reserve 38 840 (522)
Retained earnings 2 575 959 2 503 463
Total equity 4 609 534 3 744 279
LIABILITIES
Non-current liabilities
Non-current borrowings 627 759 763 496
Deferred tax liability 941 260 912 876
Retirement benefit obligations 147 909 132 946
1 716 928 1 809 318
Current liabilities
Trade and other payables 607 917 580 420
Current borrowings 355 077 709 822
Derivative financial liabilities 66 971 70 363
Income tax liability 1 345 -
1 031 310 1 360 605
Total liabilities 2 748 238 3 169 923
TOTAL EQUITY AND LIABILITIES 7 357 772 6 914 202
Net debt to equity % 20,8 37,6
Condensed Cash Flow Statement
2010 2009
R`000 R`000
Cash flows from operating activities
Operating profit 218 233 243 974
Net interest paid (136 596) (170 409)
Loss on disposal of property, plant
and equipment 2 174 2 731
Non-cash items:
- Depreciation and amortisation 192 899 197 733
- Other non-cash items (69 502) (82 156)
Income tax payment (16 408) (66 949)
Changes in working capital (244 532) 599 333
(53 732) 724 257
Cash flows from investing activities
Additions to property, plant and equipment (186 899) (351 811)
Additions to intangible assets (6 005) (3 554)
Proceeds on disposal of property, plant
and equipment 3 664 3 534
Increase in investment in associates
and joint ventures (38 770) -
(228 010) (351 831)
Cash flows from financing activities
Borrowings repaid (490 482) (339 742)
Shares issued 736 275 1 639
Settlement of share options net of reversals (4 025) (7 547)
Dividends paid - (28 537)
241 768 (374 187)
Net decrease in cash and cash equivalents (39 974) (1 761)
Balance at beginning of year 64 413 66 174
Cash and cash equivalents at end of year 24 439 64 413
Notes
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2010, from
which these condensed financial statements are derived, are prepared in
accordance with International Financial Reporting Standards. These condensed
financial statements are prepared in terms of IAS 34 - Interim Financial
Reporting. The principal accounting policies and methods of computation adopted
are consistent with those of the previous annual financial statements.
2010 2009
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 5 191 705 3 881 393
Hulamin Extrusions 616 962 618 189
Group total 5 808 667 4 499 582
INTER-SEGMENT REVENUE
Hulamin Rolled Products - 9 550
Hulamin Extrusions - 6 959
OPERATING PROFIT
Hulamin Rolled Products 226 868 239 377
Hulamin Extrusions (8 635) 4 597
Group total 218 233 243 974
TOTAL ASSETS
Hulamin Rolled Products 7 069 431 6 554 198
Hulamin Extrusions 288 341 360 004
Group total 7 357 772 6 914 202
3. Other gains and losses
The group is exposed to fluctuations in aluminium prices, interest rates and
exchange rates, and hedges these risks with derivative financial instruments.
Other gains and losses reflect the fair value adjustments arising from these
derivative financial instruments and non-derivative financial instruments
classified as fair value through profit and loss in terms of IAS 39.
2010 2009
R`000 R`000
4. Taxation
The tax charge included within these condensed
financial
statements is:
Normal 25 801 12 382
Deferred 4 915 25 675
STC - 2 854
30 716 40 911
Normal rate of taxation % 28,0 28,0
Adjusted for:
STC % - 2,2
Other non-allowable items % 1,5 1,1
% 29,5 31,3
5. Earnings per share
The weighted average number of shares used in the calculation of basic and
diluted earnings per share are as follows:
Number of Number of
shares shares
2010 2009
Weighted average number of shares
used for basic EPS* 281 206 387 244 338 984
Share options 3 498 720 2 897 707
Weighted average number of shares
used for diluted EPS 284 705 107 247 236 691
*Adjusted for effects of rights
issue concluded in June 2010.
6. Commitments and contingent liabilities
Capital expenditure contracted for but not
yet incurred 90 381 112 557
Operating lease commitments 9 392 21 090
Guarantees and contingent liabilities 25 962 22 594
7. Borrowings
The borrowing facilities of the group comprise long-term facilities of R630
million, which are repayable by 2015, and short-term facilities totalling R550
million. The repayment of borrowings during the year, following the conclusion
of the rights issue in June 2010, improved the group`s debt to equity ratio from
37,6% to 20,8%.
Corporate information
HULAMIN LIMITED
("Hulamin" 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 (Proprietary) Limited
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:
LC Cele, VN Khumalo, TP Leeuw, JB Magwaza, NNA Matyumza
(with effect from 1 March 2010), ME Mkwanazi (Chairman), SP Ngwenya, PH Staude
Executive directors:
RG Jacob (Chief Executive Officer, with effect from 1 July 2010),
A Fourie (retired with effect from 30 June 2010), CD Hughes, MZ Mkhize
Date: 28/02/2011 07:05:03 Supplied by www.sharenet.co.za
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