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Chairman’s statement
Hulamin Limited
(Incorporated in the Republic of South Africa)
Registration number: 1940/013924/06
ISIN: ZAE000096210
Share Code: HLM
(“the company”)
CHAIRMAN’S STATEMENT
Following the start to 2015 that was disrupted by a number of
external and internal factors that included energy supply, planned
maintenance and process improvements, these disturbances have not
recurred in the first quarter of 2016.
In addition, quality and process improvements and upgraded
maintenance programmes have resulted in improved efficiencies.
Operational performance in Hulamin Rolled Products has thus
improved, providing a solid platform for ongoing improvements this
year. Particular improvement has been recorded in production
volumes of can end and tab stock products, laying a platform for
increased sales during the year ahead.
The first phase of conversion from LP Gas to Compressed Natural
Gas on certain assets is now operational. Orders have been placed
for the next two phases to be completed in July and August 2016,
respectively, as risks to continuity in the supply of LP gas
remain.
Local packaging and engineering markets remains subdued, and sales
of can body stock in particular have been lower than forecast for
the first quarter, while automotive sales have been steady. To
compensate for this, and to capitalise on available capacity and
can scrap, we have secured additional can body stock export sales
for the balance of the year.
In Hulamin’s international markets, rolling margins continue to be
under pressure from increased supply out of China, following the
slowdown of their large economy. It is thus pleasing to note that
the US and Chinese governments have reached a memorandum of
understanding to terminate export subsidies China has provided
through the Demonstration Bases-Common Service Platform for
industries that include the advanced materials and metals sector,
including steel, aluminium, and titanium. We expect that this will
contribute to fairer competition in the aluminium rolling
industry. Despite these soft international market conditions, we
have managed to fully sell our available capacity through the
third quarter of this year, albeit at softer US Dollar rolling
margins. Both European and US markets are showing steady demand
albeit at the lower rolling margins.
It is disappointing and difficult to understand why the
International Trade Administration Commission of South Africa
(ITAC) has not supported Hulamin’s application for the imposition
of an import tariff on rolled aluminium products. This would have
had the effect of levelling the competitive landscape between
South Africa and competing nations that host aluminium rolling
mills worldwide, all of which have import duties that protect
their domestic industry. The failure to impose duties will
significantly hamper our effort to increase the recycling of
aluminium in South Africa and reduce the viability of possible
further investments in high technology capacity for the automotive
industry. We await news on our application for import duty on
extruded aluminium products.
The London Metals Exchange (LME) price of aluminium has remained
weak and in a band between USD1450 and USD1550 per ton since the
third quarter of 2015. This means that the metal price lag that
had a significantly negative impact on Hulamin’s financial
performance in the prior year, has not had a major impact on
financial performance thus far in 2016.
A number of Hulamin directors will reach the end of their tenure
or retire in the coming months. In particular and on behalf of the
Board, I would specifically like to thank Mr. JB Magwaza who
retires today from the Hulamin board, not only for his nine years
of service on the board, but also the many years that he has
served the company both directly and indirectly prior to the
listing in 2007. The board thanks David Austin for his loyal
service during the three years he has been with Hulamin as Chief
Financial Officer as he leaves at the end of April and wishes him
well for the future. We look forward to welcoming Anton Krull as
David’s replacement from 3 May 2016.
The Board has started a succession review and looks forward to
making at least two new appointments by the third quarter of 2016
and additional appointments in 2017 as part of a structured plan
to introduce new independent non-executive directors as existing
directors reach the end of their tenure. It has appointed a board
composition expert to assist in mapping the skills and experience
necessary to meet needs of stakeholders, shareholders, the board
and its committees. This process will also be completed by the
third quarter of 2016.
We look forward to continuing the steady and consistent
performance from the first quarter through the balance of 2016.
Pietermaritzburg
21 April 2016
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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