Wrap Text
Unaudited results for the half-year ended 30 June 2014
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2014
HIGHLIGHTS
- Normalised earnings increase by 42% over corresponding period benefiting from continued Rand weakness
- Headline earnings per share increase by 95% due to impact of restructuring costs on 2013
- Substantially improved safety performance
- Strong cash flow follows improved working capital management and allows substantial reduction in borrowings
- Ongoing focus on operational performance sees 5% growth in Rolled Products sales volumes
- Discussions continue with BHP Billiton around the future of the Bayside casthouse and supply of rolling slab to Hulamin
- Commercial sales of aluminium can body stock to the local market begin
David Austin (Acting CEO) commented:
"Our manufacturing performance showed some improvement with recoveries increasing off a low base. Sales of rolled products
are up by 9% from the second half of last year which, together with a slight improvement in conversion margins, underpinned
our earnings growth, supported by the weaker Rand.
This improved profitability, together with sound working capital management, produced strong cash flows that we used to pay
down borrowings. Our efforts to improve operational performance are ongoing and should contribute to increased volumes and
profitability in the second half."
Enquiries
Hulamin 033 395 6911
David Austin, Acting CEO 082 718 6151
Hector Molale 083 639 1021
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Normalised earnings for the first half of 2014 amounted to R130m, an increase of 42% over the corresponding
period in the previous year and 18% over the R110m achieved in the second half of 2013. Hulamin reports
normalised earnings to provide a more meaningful measure of underlying operating performance.
Headline earnings per share (HEPS) increased by 95% from 21 cents to 41 cents or, on a fully diluted basis,
by 90% to 40 cents. Basic earnings per share growth mirrored that of HEPS. Both basic and headline earnings
were depressed by the R25m charge in 2013 for once off restructuring costs. These costs are excluded from
2013 normalised earnings.
Internationally, economic conditions showed some improvement but excess capacity in flat rolled products (FRP)
ensured the industry remains fiercely competitive and Alcoa have announced the closure of two FRP plants in Australia.
China, Brazil and the Middle East continue to bring new capacity on line and the absence of import duties make South Africa
an attractive destination for their products. Locally, economic conditions are very challenging, exacerbated by the
disruptions caused by ongoing strikes.
The price of aluminium, as quoted on the London Metal Exchange (LME), has moved up from USD 1 720 per ton at
the end of 2013 to USD 1 851 at 30 June 2014 and has now exceeded USD 2 000. Hulamin is a semi-fabricator of
aluminium products and the metal price component is mainly a flow-through although it does impact reported turnover
and reflects, to some extent, overall demand for aluminium products.
The average Rand/USD exchange rate for the period was 16% weaker than in the first six months of 2013 and group
turnover increased by 14% to over R4 billion.
Rolled Products sales volumes for the first six months increased by 5% over the corresponding period last year
to 102 000 tons and by 9% when compared to the lower sales volumes achieved in the second half of last year.
Conversion prices realised were slightly firmer, particularly on exports into North America and Europe. Manufacturing
performance is beginning to show some improvement with recoveries increasing off the low base achieved in the second
half of 2013. Safety performance improved substantially with a 53% reduction in total recordable injury frequency rate
(TRIFR) and an 85% reduction in lost time injury frequency rate (LTIFR).
There was a significant fall in sales volumes of extruded products which are only sold into the local market.
A decline in solar business and a marked increase in imports, placed pressure on sales and profits.
Group operating profit (EBIT) reflected an increase of 71% to R210m. As a percentage of turnover, EBIT was 5.2%
compared to 3.5% in the previous period. Hulamin hedges 50% of the metal price risk arising from holding inventory
and all foreign currency exposures within inventory, receivables and payables. The impact of the uncovered metal price
risk in this period was a loss of R7m, considerably lower than the R29m loss recorded in the corresponding period last year.
Net finance costs fell by 10.6%, despite a general increase in interest rates, due to lower borrowings resulting
from higher profits and improved working capital management. The effective tax rate increased by 1% to 29% and the
assessed losses brought forward from previous years will be fully utilised by the end of the year.
Cash inflow before financing activities, but after capital expenditure of R79m, amounted to R225m compared to an
outflow of R57m in the corresponding period of the previous year. The cash was used to repay borrowings which, on a
net of cash basis, reduced by the R225m from R612m at December 2013 to R387m at June 2014.
ALUMINIUM RECYCLING PLANT
The construction of a new R300m recycling plant in Pietermaritzburg is proceeding according to schedule and is due
to come on line in mid-2015. A R275m term loan is being negotiated in order to provide an appropriate source of medium term finance.
The rate at which the all-aluminium can has found acceptance in South Africa bodes well for the future supply of used beverage
can scrap which is the primary target of the new recycling plant. The recently enacted restrictions on scrap exports were an
important enabler ensuring commercial viability of the investment.
Currently Hulamin supplies only can end stock in the local market. However, qualification trials of body stock material with
can maker Nampak have now been successfully completed and sales will ramp up in the second half of the year in line with a three
year contract.
SUPPLY OF ALUMINIUM FROM BHP BILLITON
Hulamin sources approximately one third of its rolling slab requirements from BHP Billiton’s Bayside casthouse
with the remaining two thirds being produced by Hulamin’s casthouse in Pietermaritzburg.
On 30 June 2014, the Bayside smelter was shut down. However, the Bayside casthouse is continuing to operate
using liquid aluminium transported from the nearby Hillside smelter. BHP Billiton has contracted to continue
to supply Hulamin with rolling slab from Bayside until 31 December 2014. Discussions with Hulamin and other
interested parties are taking place with a view to ensuring the supply of slab from Bayside continues thereafter.
IMPORT TARIFF PROTECTION
Hulamin exported 72% of its Rolled Products output in the six months to June 2014. Destination countries
included Brazil and China where imports of both rolled and extruded products are subject to import duties.
Similar products are in turn exported from Brazil and China to South Africa where no reciprocal tariff protection exists.
An application for reciprocal tariff protection is currently being prepared and will be lodged with ITAC shortly.
The outcome of the ensuing ITAC decision will have a significant impact on the future of the aluminium industry in South Africa.
DIVIDEND
The Board has not declared an interim dividend for 2014.
PROSPECTS
Ongoing actions being taken to improve operational performance at Rolled Products are expected to increase volumes
and profitability in the second half of the year. However, imports remain a threat to local markets.
Hulamin’s profits will continue to be impacted by the relative weakness or strength of the SA Rand against other
currencies and, in particular, its rate of exchange with the US Dollar.
ME Mkwanazi DA Austin
Chairman Acting CEO
CONDENSED CONSOLIDATED INCOME STATEMENT
for the half-year ended 30 June 2014
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
Note R'000 R'000 R'000
Revenue 4 061 434 3 554 146 7 560 007
Cost of sales (3 608 287) (3 233 861) (6 914 691)
Gross profit 453 147 320 285 645 316
Selling, marketing and distribution expenses (211 586) (191 968) (390 328)
Administrative and other expenses (49 686) (40 750) (70 830)
Impairment of property, plant and equipment
and intangible assets – – (2 122 316)
Other gains and losses 18 477 35 183 132 787
Operating profit/(loss) 210 352 122 750 (1 805 371)
Interest income 1 100 569 1 358
Interest expense (28 716) (31 453) (64 715)
Profit/(loss) before tax 182 736 91 866 (1 868 728)
Taxation 3 (52 828) (25 473) 523 769
Net profit/(loss) for the period 129 908 66 393 (1 344 959)
Headline earnings
Net profit/(loss) for the period 129 908 66 393 (1 344 959)
(Profit)/loss on disposal of property, plant
and equipment (118) 15 (143)
Impairment of property, plant and equipment
and intangible assets – – 2 122 316
Tax effects of adjustments 33 (4) (594 209)
Headline earnings attributable to shareholders 129 823 66 404 183 005
Severance costs (net of tax) – 24 860 18 438
Normalised earnings 129 823 91 264 201 443
Earnings per share 4
Basic (cents) 41 21 (422)
Diluted (cents) 40 21 (417)
Headline earnings per share
Basic (cents) 41 21 57
Diluted (cents) 40 21 57
Normalised earnings per share
Basic (cents) 41 29 63
Diluted (cents) 40 28 62
Dividend per share (cents) – – –
Currency conversion
Rand/US dollar average 10,71 9,23 9,66
Rand/US dollar closing 10,60 9,99 10,56
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half-year ended 30 June 2014
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
R'000 R'000 R'000
Net profit/(loss) for the period attributable to equity
holders of the company 129 908 66 393 (1 344 959)
Other comprehensive income/(loss) for the period 13 231 (30 174) (4 981)
Items that may be reclassified subsequently to profit or loss 11 911 (30 174) (22 407)
Cash flow hedges transferred to income statement 43 480 12 359 12 359
Cash flow hedges created (26 936) (54 266) (43 480)
Income tax effect (4 633) 11 733 8 714
Items that will not be reclassified to profit or loss 1 320 – 17 426
Remeasurement of retirement benefit obligation – – 20 671
Remeasurement of retirement benefit asset 1 834 – 3 531
Income tax effect (514) – (6 776)
Total comprehensive income/(loss) for the period
attributable to equity holders of the company 143 139 36 219 (1 349 940)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half-year ended 30 June 2014
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
R'000 R'000 R'000
Balance at beginning of period 3 402 810 4 747 597 4 747 597
Total comprehensive income/(loss) for the period 143 139 36 219 (1 349 940)
Shares issued 43 105 112
Value of employee services 6 982 4 186 9 360
Settlement of employee share incentives – – (4 603)
Tax on employee share incentives – (281) 284
Total equity 3 552 974 4 787 826 3 402 810
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2014
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 2 530 063 4 632 402 2 515 125
Intangible assets 45 189 60 387 38 093
Retirement benefit asset 153 056 160 425 161 468
Deferred tax asset 27 128 28 538 27 815
2 755 436 4 881 752 2 742 501
Current assets
Inventories 1 651 881 1 798 252 1 806 575
Trade and other receivables 1 050 161 1 024 293 972 619
Derivative financial assets 20 905 34 287 13 889
Cash and cash equivalents 39 984 11 837 192 800
Income tax asset 9 203 384 1 488
2 772 134 2 869 053 2 987 371
Total assets 5 527 570 7 750 805 5 729 872
EQUITY
Share capital and share premium 1 817 589 1 817 539 1 817 546
BEE reserve 174 686 174 686 174 686
Employee share-based payment reserve 36 702 105 285 29 720
Hedging reserve (19 394) (39 072) (31 305)
Retained earnings 1 543 391 2 729 388 1 412 163
Total equity 3 552 974 4 787 826 3 402 810
LIABILITIES
Non-current liabilities
Non-current borrowings – 520 867 –
Deferred tax liability 448 601 963 224 405 311
Retirement benefit obligations 232 708 239 965 225 826
681 309 1 724 056 631 137
Current liabilities
Trade and other payables 849 412 801 105 826 086
Current borrowings 427 004 290 195 804 482
Derivative financial liabilities 16 871 147 623 65 357
1 293 287 1 238 923 1 695 925
Total liabilities 1 974 596 2 962 979 2 327 062
Total equity and liabilities 5 527 570 7 750 805 5 729 872
Net debt to equity (%) 10,9 16,7 18,0
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half-year ended 30 June 2014
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
R'000 R'000 R'000
Cash flows from operating activities
Operating profit 210 352 122 750 (1 805 371)
Net interest paid (28 608) (31 145) (64 212)
(Profit)/loss on disposal of property, plant and equipment (118) 15 (143)
Non-cash items:
Depreciation, amortisation and impairment of property,
plant and equipment 58 230 110 202 2 332 580
Other non-cash items (14 849) 96 642 59 751
Income tax payment (21 712) (10 121) (28 400)
Changes in working capital 100 478 (279 579) (211 247)
303 773 8 764 282 958
Cash flows from investing activities
Additions to property, plant and equipment (68 543) (60 342) (131 165)
Additions to intangible assets (10 736) (5 269) (16 659)
Proceeds on disposal of property, plant and equipment 125 – 158
(79 154) (65 611) (147 666)
Cash flows before financing activities 224 619 (56 847) 135 292
Cash flows from financing activities
(Decrease)/increase in borrowings (377 478) 38 983 32 403
Shares issued 43 105 112
Settlement of share options – – (4 603)
(377 435) 39 088 27 912
Net (decrease)/increase in cash and cash equivalents (152 816) (17 759) 163 204
Cash and cash equivalents at beginning of period 192 800 29 596 29 596
Cash and cash equivalents at end of period 39 984 11 837 192 800
NOTES
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial information of the group for the half-year
ended 30 June 2014 has been prepared in accordance with IAS 34 – Interim Financial Reporting and the
Companies Act 71 of 2008, under the supervision of the Chief Financial Officer, Mr DA Austin CA(SA),
and should be read in conjunction with the group's 2013 annual financial statements, which have been
prepared in accordance with International Financial Reporting Standards.
Hulamin believes normalised earnings to more accurately reflect operational performance and is
arrived at by adjusting headline earnings to take into account non-operational and abnormal gains and
losses.
The accounting policies and methods of computation adopted are consistent with those used in the
preparation of the group's 2013 annual financial statements.
Hulamin has not adopted any new or revised accounting standards in the current period which have had
a material impact on reported results.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2014 2013 2013
R'000 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 3 716 884 3 172 139 6 783 158
Hulamin Extrusions 344 550 382 007 776 849
Group total 4 061 434 3 554 146 7 560 007
Operating profit/(loss)
Hulamin Rolled Products 198 065 105 813 (1 846 657)
Hulamin Extrusions 12 287 16 937 41 286
Group total 210 352 122 750 (1 805 371)
Total assets
Hulamin Rolled Products 5 206 966 7 457 428 5 443 306
Hulamin Extrusions 320 604 293 377 286 566
Group total 5 527 570 7 750 805 5 729 872
3. TAXATION
The taxation charge included within these
condensed interim financial statements is:
Normal 13 997 8 224 25 399
Deferred 38 831 17 249 (549 168)
52 828 25 473 (523 769)
Normal rate of taxation (%) 28,0 28,0 28,0
Adjusted for:
Exempt income, non-allowable and other items (%) 0,9 (0,3) –
Effective rate of taxation (%) 28,9 27,7 28,0
4. EARNINGS PER SHARE (EPS)
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 are as follows:
Weighted average number of shares used
for basic EPS (shares) 319 432 181 318 776 685 319 007 266
Share options (shares) 5 650 784 3 623 362 3 337 019
Weighted average number of shares used
for diluted EPS (shares) 325 082 965 322 400 047 322 344 285
5. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditure contracted for but not
yet incurred 234 457 32 311 45 425
Operating lease commitments 35 012 1 761 41 113
Guarantees and contingent liabilities 300 300 300
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 (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)
MZ Mkhize
Company Secretary
W Fitchat
Any forecast information included in this announcement has not been reviewed and reported on by the company's external auditors.
Date of SENS release: 28 July 2014
www.hulamin.co.za
Date: 28/07/2014 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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