Wrap Text
Unaudited results for the half-year ended 30 June 2015 and cash dividend declaration
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 2015 AND CASH DIVIDEND
DECLARATION
- Operating profit down 34% on 16% lower sales
- Bayside casthouse taken over by Isizinda Aluminium (a Hulamin/ Bingelela
consortium) on 1 July 2015
- Cash outflow of R575 million driven by investments and capital expenditure
- Recycling furnace started up on time and on budget in May 2015
Richard Jacob, CEO, commented:
"Lower production volumes impacted by electricity supply curtailments, quality rework and
the planned maintenance shutdown, constrained our sales of rolled products for the six
months under review. The sharp fall in the aluminium price during the reporting period led
to a R55 million metal price lag charge. Corrective measures implemented to date, including
the installation of electricity generator sets, are expected to benefit production and
sales in the second half of the year."
ENQUIRIES
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
David Austin, CFO 082 718 6151
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Financial and operating performance
Sales volumes for the six months to 30 June 2015 totalled 93 000 tons, 16% lower than the
corresponding period's 110 000 tons. Electricity supply curtailments, compounded by quality
rework on two product lines, disrupted output of rolled products, which in turn constrained
sales volumes, particularly in the first quarter. A major planned maintenance shutdown was
successfully carried out in May, also impacting on production and sales.
Turnover accordingly decreased to R3.93 billion (2014: R4.06 billion). The Rand weakened by
11% to an average of R11.92/USD (2014: R10.71/USD) supporting Rand revenues and
counteracting the effects of domestic cost inflation.
Locally, the economy has remained soft and low priced products, largely from Asia, are
placing pressure on both sales volumes and prices. Internationally, demand for rolled
products and prices in our key streams and markets remained steady. Asian markets are
extremely competitive at present due to significant overcapacity in the region and we have
reduced our activity there accordingly.
The price of aluminium, as quoted on the London Metal Exchange, has fallen sharply in
recent months due to an oversupplied global market with excess capacity. As a semi-
fabricator and processor of aluminium products, Hulamin does not produce aluminium itself
and purchases its metal requirements from smelters, particularly South 32's Hillside
operation in Richards Bay. The sharp fall in the aluminium price created a R55 million metal
price lag charge in the current period.
Manufacturing costs are 3% lower than the prior year. Operating profit declined to R138
million, or 34% lower compared to the prior year as a result of the lower sales volumes and
the material metal price lag loss mentioned above.
Production improved in the second quarter, in spite of the planned maintenance shutdown
undertaken on key plant and equipment that included a number of upgrades and
improvements. All engineering work was successfully completed.
There was a cash outflow from operations of R129 million (2014: R304 million inflow),
largely as a result of lower profits and increased working capital requirements. Capital
expenditure consumed R265 million and the group's initial investment in Isizinda Aluminium
amounted to R101 million. These elements, together with the payment of dividends
declared in respect of the 2014 financial year of R80 million, resulted in a total cash
outflow of R575 million that was funded by increased borrowings.
Isizinda Aluminium
The acquisition of the Bayside casthouse by Isizinda Aluminium, the combined Hulamin and
Bingelela consortium, from South 32 has been completed as planned, with operations having
been successfully handed over on 1 July 2015. We expect a seamless transition under new
ownership at the Bayside casthouse with largely the same personnel in place that has
operated the facility for the past few years.
Not only does this strategic transaction secure Hulamin's local supply of rolling slab, but,
under Isizinda Aluminium, the Bayside casthouse is developing into a broad-range aluminium
hub, providing the opportunity to re-introduce the local supply of products such as extrusion
billet and wire rod, which have been imported since 2009, to support industrialisation in
Richards Bay, the growth of the domestic aluminium industry and economic growth
throughout Southern Africa.
New Hulamin B-BBEE transaction and ESOP
Shareholders approved a new B-BBEE transaction, including an employee share ownership
scheme (ESOP), on 23 April 2015. The transaction, which is subject to the fulfilment of the
remaining conditions precedent, is expected to be effective during the third quarter of 2015.
Electricity shortages
The impact of load curtailment on operations was significantly lower in April following a
particularly disruptive February and March period, despite the frequency having increased.
This is attributed to Hulamin having successfully commissioned a set of 6MW generators
that allows the Pietermaritzburg plant to run close to normal operation during periods of
10% load curtailment (stage one and two), while we have also improved our capacity
planning capability.
Aluminium recycling plant
With the growth in consumption of all-aluminium cans and the attractiveness
of collecting and recycling used beverage cans, Hulamin approved an investment of R300
million in 2013 in scrap recycling capacity. Most of this equipment has been successfully
installed and started up on time and on budget in May 2015. The final phase of the
investment is the installation of scrap cleaning and separation capability that is scheduled
for start-up before the end of 2015. Hulamin procured about 5,000 tons of scrap in the six
months under review.
US export market
Hulamin is a beneficiary of preferential access to markets in the USA via the Africa Growth
and Opportunities Act (AGOA) and Generalized System of Preferences (GSP) legislation.
Hulamin participated in the renewal process that resulted in AGOA being renewed for 10
years from 1 October 2015 and GSP being renewed retrospectively to 2017 on 29 June 2015.
This is a positive development as the US, whose economy continues to strengthen, remains
an important market for Hulamin's products.
Dividend
In line with the company's dividend policy, the Board has declared a gross interim dividend
of 8.0 cents per ordinary share in respect of the six months ended 30 June 2015 (2014: gross
final dividend of 25.0 cents per ordinary share).
Prospects
Hulamin expects manufacturing operations in the second half of 2015 to benefit from the
corrective measures implemented to date, with challenging market conditions expected to
continue in both local and international markets.
ME Mkwanazi RG Jacob
Chairman Chief Executive Officer
Pietermaritzburg
27 July 2015
Condensed Consolidated Income Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
Note R'000 R'000 R'000
Revenue 3 930 015 4 061 434 8 038 918
Cost of sales (3 641 777) (3 608 287) (7 119 966)
Gross profit 288 238 453 147 918 952
Selling, marketing and distribution expenses (171 421) (211 586) (403 104)
Administrative and other expenses (55 194) (49 686) (88 781)
Impairment (charge)/reversal (4 345) - 43 405
Other gains and losses 81 220 18 477 114 661
Operating profit 138 498 210 352 585 133
Interest income 1 023 1 100 2 453
Interest expense (31 326) (28 716) (48 160)
Profit before tax 108 195 182 736 539 426
Taxation 4 (32 458) (52 828) (154 498)
Net profit for the period 75 737 129 908 384 928
Headline and normalised earnings
Net profit for the period 75 737 129 908 384 928
(Profit)/loss on disposal of property, plant and equipment (72) (118) 6 498
Impairment charge/(reversal) of property, plant and
equipment and intangible assets 4 345 - (43 405)
Tax effects of adjustments (1 196) 33 10 334
Headline earnings 78 814 129 823 358 355
Transaction costs 2 727 - 7 450
Past service costs credit adjustment - - (11 272)
Normalised earnings 81 541 129 823 354 533
Earnings per share (cents) 5
Basic 24 41 120
Diluted 23 40 118
Headline earnings per share (cents)
Basic 25 41 112
Diluted 24 40 110
Normalised earnings per share (cents)
Basic 26 41 111
Diluted 25 40 109
Dividend per share (cents) 8 - 25
Currency conversion
Rand/US dollar average 11.92 10.71 10.85
Rand/US dollar closing 12.27 10.60 11.58
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
R'000 R'000 R'000
Net profit for the period 75 737 129 908 384 928
Other comprehensive income for the period 5 932 13 231 28 037
Items that may be reclassified subsequently to profit or loss 5 831 11 911 37 919
Cash flow hedges transferred to income statement (9 186) 43 480 43 480
Cash flow hedges created 17 285 (26 936) 9 186
Income tax effect (2 268) (4 633) (14 747)
Items that will not be reclassified to profit or loss 101 1 320 (9 882)
Remeasurement of retirement benefit obligation - - (12 991)
Remeasurement of retirement benefit asset 140 1834 (733)
Income tax effect (39) (514) 3 842
Total comprehensive income for the period 81 669 143 139 412 965
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
R'000 R'000 R'000
Balance at beginning of period 3 833 817 3 402 810 3 402 810
Total comprehensive income for the period 81 669 143 139 412 965
Shares issued - 43 34
Value of employee services 7 883 6 982 15 156
Settlement of employee share incentives - - (2 796)
Tax on employee share incentives - - 7 044
De-consolidation of structured entity - - (1 396)
Dividends paid (79 892) - -
Total equity 3 843 477 3 552 974 3 833 817
Condensed Consolidated Balance Sheet
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
Note R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 2 909 499 2 530 063 2 697 148
Intangible assets 55 592 45 189 59 777
Retirement benefit asset 140 529 153 056 138 854
Investments 6 100 672 - -
Deferred tax asset 23 749 27 128 25 450
3 230 041 2 755 436 2 921 229
Current assets
Inventories 1 996 270 1 651 881 1 958 934
Trade and other receivables 1 122 926 1 050 161 1 037 909
Derivative financial assets 53 248 20 905 44 175
Cash and cash equivalents 54 951 39 984 249 106
Income tax asset 26 370 9 203 2 808
Asset held for sale 50 872 - 55 217
3 304 637 2 772 134 3 348 149
TOTAL ASSETS 6 534 678 5 527 570 6 269 378
EQUITY
Share capital and share premium 1 817 580 1 817 589 1 817 580
BEE reserve - 174 686 -
Employee share-based payment reserve 49 294 36 702 41 411
Hedging reserve 12 445 (19 394) 6 614
Retained earnings 1 964 158 1 543 391 1 968 212
Total equity 3 843 477 3 552 974 3 833 817
LIABILITIES
Non-current liabilities
Non-current borrowings 48 059 - -
Deferred tax liability 497 154 448 601 477 702
Retirement benefit obligations 239 476 232 708 236 369
784 689 681 309 714 071
Current liabilities
Trade and other payables 836 018 849 412 964 827
Current borrowings 1 019 102 427 004 686 144
Derivative financial liabilities 51 392 16 871 70 519
1 906 512 1 293 287 1 721 490
Total liabilities 2 691 201 1 974 596 2 435 561
TOTAL EQUITY AND LIABILITIES 6 534 678 5 527 570 6 269 378
Net debt to equity 26% 11% 11%
Condensed Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
R'000 R'000 R'000
Cash flows from operating activities
Operating profit 138 498 210 352 585 133
Net interest paid (39 068) (28 608) (50 626)
(Profit)/loss on disposal of property, plant and equipment (72) (118) 6 498
Non-cash items:
Depreciation and amortisation of property, plant and equipment 65 961 58 230 118 260
Impairment charge/(reversal) 4 345 - (43 405)
Other non-cash items (10 646) (14 849) 65 754
Income tax payment (37 172) (21 712) (84 714)
Changes in working capital (251 162) 100 478 (78 854)
(129 316) 303 773 518 046
Cash flows from investing activities
Additions to property, plant and equipment (262 631) (68 543) (305 572)
Additions to intangible assets (2 739) (10 736) (29 992)
Proceeds on disposal of property, plant and equipment 79 125 206
Investments (100 672) - -
(365 963) (79 154) (335 358)
Cash flows before financing activities (495 279) 224 619 182 688
Cash flows from financing activities
Increase/(decrease) in borrowings 381 017 (377 478) (118 338)
Shares issued - 43 34
Redemption of A ordinary shares - - (3 624)
Settlement of share options - - (2 796)
Dividends paid (79 893) - -
301 124 (377 435) (124 724)
Net (decrease)/increase in cash and cash equivalents (194 155) (152 816) 57 964
Cash and cash equivalents at beginning of period 249 106 192 800 192 800
De-consolidation of structured entity - - (1 658)
Cash and cash equivalents at end of period 54 951 39 984 249 106
Notes
1. Basis of preparation
The unaudited condensed consolidated interim financial information of the group for the half-year ended 30 June 2015 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 D A Austin CA(SA), and should be read in conjunction with the group's 2014
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 2014 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.
2. Operating segment analysis
The group is organised into two major operating segments, namely Hulamin Rolled Products and Hulamin Extrusions.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
R'000 R'000 R'000
REVENUE
Hulamin Rolled Products 3 537 321 3 716 884 7 288 391
Hulamin Extrusions 392 694 344 550 750 527
Group total 3 930 015 4 061 434 8 038 918
OPERATING PROFIT
Hulamin Rolled Products 132 846 198 065 537 592
Hulamin Extrusions 5 652 12 287 47 541
Group total 138 498 210 352 585 133
TOTAL ASSETS
Hulamin Rolled Products 6 178 141 5 206 966 5 897 340
Hulamin Extrusions 356 537 320 604 372 038
Group total 6 534 678 5 527 570 6 269 378
3. Foreign exchange and commodity price risk
The group is exposed to fluctuations in aluminium prices and exchange rates, and hedges these risks with derivative
financial instruments. The group applies hedge accounting to gains and losses arising from certain derivative financial
instruments. Hedges of forecast sales transactions are accounted for as cash flow hedges, whereas the hedges of
committed, fixed price sales are accounted for as fair value hedges.
Other gains and losses reflect the fair value adjustments arising from fair value hedges, non hedge accounted derivative
financial instruments and non-derivative financial instruments.
The effective portion of cash flow hedge gains and losses are recorded in revenue when the sale occurs.
The lag between the price at which aluminium is purchased and subsequently resold gives rise to a gain or loss. Hulamin
hedges 50% of this net exposure in terms of its hedging strategy. Included in cost of sales is a pre-tax metal price lag loss
of R55 million (June 2014: R7 million loss, December 2014: R53 million gain) in respect of the unhedged portion of this
exposure.
4. Taxation
The taxation charge included within these condensed interim financial statements is:
Normal 13 610 13 997 83 603
Deferred 18 848 38 831 70 895
32 458 52 828 154 498
Normal rate of taxation 28.0% 28.0% 28.0%
Adjusted for:
Exempt income, non-allowable and other items 2.0% 0.9% 0.6%
Effective rate of taxation 30.0% 28.9% 28.6%
5. 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:
Number of Number of Number of
shares shares shares
June 2015 June 2014 December 2014
Weighted average number of shares used for basic EPS 319 596 836 319 432 181 319 515 636
Share options 8 592 876 5 650 784 6 860 351
Weighted average number of shares used for diluted EPS 328 189 712 325 082 965 326 375 987
6. Investments
Effective 30 June 2015, Isizinda Aluminium, a strategic partnership between Hulamin (40%) and the Bingelela consortium
(60%), acquired the business and assets of the Bayside casthouse from South32. The investment of R100.7 million
represents Hulamin's initial equity and loan funding contribution to Isizinda Aluminium. The treatment of this investment in
Hulamin's consolidated financials will be finalised by 31 December 2015.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2015 2014 2014
R'000 R'000 R'000
7. Commitments and contingent liabilities
Capital expenditure contracted for but not yet incurred 164 269 234 457 226 759
Operating lease commitments 44 698 35 012 39 896
Guarantees and contingent liabilities - 300 -
CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an interim gross cash dividend of 8.0
cents (6.80000 cents net of dividend withholding tax) per ordinary share for the six months
ended 30 June 2015.
The dividend has been declared from income reserves. 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, 14 August 2015
Shares commence trading "ex" dividend Monday, 17 August 2015
Record date Friday, 21 August 2015
Payment date Monday, 24 August 2015
Share certificates may not be dematerialised or rematerialised between Monday, 17 August
2015 and Friday, 21 August 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
Email: 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:
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)
MZ Mkhize
Company Secretary
W Fitchat
Date of SENS release: 27 July 2015
Date: 27/07/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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