Wrap Text
Unaudited interim results for the half-year ended 30 June 2016
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2016
- Operating profit up 86% in soft market conditions
- Revenue increase 25% to R4.9 billion
- Group sales tons up 19% (Rolled Products up 21%)
- Improved risk mitigation resulting in consistent manufacturing output
Richard Jacob, CEO, commented:
"Improved manufacturing performance in Hulamin Rolled Products underpins this pleasing
set of results. This, together with a weaker Rand on average against the US Dollar during the
six months under review, mitigated the effects of continued weak global and local market
conditions, local inflation and softer rolling margins. Efforts to address cost reduction opportunities and
operational efficiency improvements achieved further gains in unit costs, product yields,
overall sales volumes and product mix. For the balance of 2016 we expect can body stock
volumes to increase in both local and export markets allowing us to source more scrap metal
units locally. Efforts continue towards further improving our cost and rolling margin
performance, albeit in market conditions that we forecast to remain challenging."
ENQUIRIES
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Anton Krull, CFO 071 361 0622
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Group sales volumes for the six months to 30 June 2016 totalled 110 649 tons that are 19%
higher than the corresponding period and include a 21% improvement in Rolled Products
sales to 205 000 tons annualised. This improvement was achieved through consistent
manufacturing output and improved product yields.
Market conditions, both in South Africa and in major export markets, remained subdued and
over-supplied in the first six months of 2016, resulting in selling prices (rolling margins)
remaining under ongoing pressure that commenced in the second half of 2015. The London
Metal Exchange aluminium price rose marginally from the lows of late 2015, resulting in a
slight metal price lag profit of R5 million.
Turnover increased to R4.9 billion (2015 H1 R3.9 billion) driven by the higher sales volume,
a Rand LME price that increased by 19% and the weakening of the Rand against the US Dollar
by 30% to R/US$ 15.46 (2015: R/US$ 11.92).
Locally, the economy remained weak during the first six months of 2016 and trended weaker
as the period progressed. Demand for beverage can stock products in the local market failed
to meet forecast demand resulting in lower procurement of used beverage can scrap metal
units. Although local sales demand is forecast to improve in the second half of 2016, we have
secured additional sales of export can stock to mitigate this market risk. Sales of export can
end and tab stock increased by 51%.
Manufacturing conversion costs in Rolled Products were 4% lower on a per unit cost basis in spite
of higher US Dollar denominated costs, particularly imported LP gas, increased electricity prices
and the consolidation of costs in Isizinda. The metal price lag improved by R60 million
from a loss of R55 million in the corresponding period to a profit of R5 million in the current
period. Earnings before interest and taxation (EBIT) at R257 million was thus 86% higher
compared to the prior year and operating profit before metal price lag was 31% higher at
R252 million. Net interest charges increased by 55% to R47 million, driven by higher levels of
debt. Attributable earnings were R152 million for the six months under review, an increase of
101% on the prior period.
Hulamin Extrusions performance improved measurably compared to the prior period with
improved margins, stable volumes and the non-recurrence of metal price lag losses.
Cash inflow before financing activities amounted to R33 million (June 2015: R495 million
outflow), and included capital expenditure of R136 million.
Changes to the directorate during the six month period ended June 2016:
As previously announced on SENS, and with effect from 1 May 2016:
- David Austin who was the Chief Financial Officer of the company resigned from the board;
- Anton Krull was appointed as Chief Financial Officer;
- Johannes Magwaza resigned as a non-executive director and as a committee member of the
Remuneration and Nomination Committee and of the Transformation, Social and Ethics Committee; and
- Gcina Zondi was appointed as an alternative director to Peter-Paul Ngwenya.
The board thanks David and Johannes for their invaluable input over their tenure and wishes them
well in the future.
Dividend
The Board is committed to the company’s dividend policy of three-times cover in the context of
appropriate financial and market conditions. In this regard, the Board deemed it prudent not to
declare an interim dividend for 2016 before evaluating conditions for the full year. The Board has
further resolved to, in the future, determine the declaration of dividends on an annual basis.
Prospects
Hulamin expects the momentum gained from improved manufacturing performance in the
first half of 2016 to continue in the second half, though weak market conditions are expected
to persist both locally and internationally. There are early signs that the sales mix and
operating margins may be better in the second half. The risk of energy disruption is expected
to be lower due to further conversion from LPG to Compressed Natural Gas that is planned to
accelerate in the second half. Order books for Rolled Products are full for the third quarter
and we expect to fully sell all remaining capacity in the final quarter.
M E Mkwanazi R G Jacob
Chairman Chief Executive Officer
Pietermaritzburg
25 July 2016
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
Note R'000 R'000 R'000
Revenue 4 927 689 3 930 015 8 394 986
Cost of sales (4 393 268) (3 641 777) (7 855 025)
Gross profit 534 421 288 238 539 961
Selling, marketing and distribution expenses (229 608) (171 421) (382 204)
Administrative and other expenses (64 783) (55 194) (111 050)
Impairment charge – (4 345) –
Other gains and losses 17 141 81 220 248 773
Operating profit 257 171 138 498 295 480
Interest income 462 1 023 2 085
Interest expense (47 444) (31 326) (68 577)
Profit before tax 210 189 108 195 228 988
Taxation 4 (58 002) (32 458) (65 274)
Net profit for the period 152 187 75 737 163 714
Headline and normalised earnings
Net profit for the period 152 187 75 737 163 714
(Profit)/loss on disposal of property, plant and equipment – (72) 10 538
Impairment charge on property, plant and equipment and intangible assets – 4 345 –
Bargain purchase gain - - (51 868)
Tax effects of adjustments – (1 196) (3 123)
Headline earnings 152 187 78 814 119 261
Transaction costs – 2 727 5 455
Past service costs credit adjustment – – 4 857
Share-based payment costs on 2015 BEE transactions – – 20 000
Equity-settled share-based payment: Isizinda 411 – 27 224
Normalised earnings 152 598 81 541 176 797
Earnings per share 5
Basic (cents) 48 24 51
Diluted (cents) 44 23 50
Headline earnings per share
Basic (cents) 48 25 37
Diluted (cents) 44 24 36
Normalised earnings per share
Basic (cents) 48 26 55
Diluted (cents) 44 25 54
Dividend per share (cents) – 8 8
Currency conversion
Rand/US dollar average 15,46 11,92 12,77
Rand/US dollar closing 14,86 12,27 15,56
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
Net profit for the period 152 187 75 737 163 714
Other comprehensive income for the period 89 628 5 932 (78 063)
Items that may be reclassified subsequently to profit or loss 90 788 5 831 (98 736)
Cash flow hedges transferred to income statement 127 947 (9 186) (9 186)
Cash flow hedges created (1 853) 17 285 (127 947)
Income tax effect (35 306) (2 268) 38 397
Items that will not be reclassified to profit or loss (1 160) 101 20 673
Remeasurement of retirement benefit obligation 439 – 25 134
Remeasurement of retirement benefit asset (2 050) 140 3 578
Income tax effect 451 (39) (8 039)
Total comprehensive income for the period 241 815 81 669 85 651
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
Balance at beginning of period 3 854 517 3 833 817 3 833 817
Total comprehensive income for the period 241 815 81 669 85 651
Value of employee services 16 830 7 883 16 777
Settlement of employee share incentives (9 196) – (24 397)
Tax on employee share incentives – – (3 096)
Equity settled share-based payment 655 – 31 224
Share-based payment costs on 2015 BEE transaction – – 20 000
Dividends paid – (79 892) (105 459)
Total equity 4 104 621 3 843 477 3 854 517
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2016
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 3 163 999 2 909 499 3 166 800
Intangible assets 63 539 55 592 66 917
Retirement benefit asset 134 500 140 529 142 292
Investments 6 – 100 672 –
Deferred tax asset 19 808 23 749 20 260
3 381 846 3 230 041 3 396 269
Current assets
Inventories 1 795 481 1 996 270 1 784 805
Trade and other receivables 1 633 076 1 122 926 1 384 390
Derivative financial assets 97 410 53 248 8 457
Cash and cash equivalents 69 689 54 951 70 158
Income tax asset 6 832 26 370 12 461
Asset held for sale 1 588 50 872 –
3 604 076 3 304 637 3 260 271
Total assets 6 985 922 6 534 678 6 656 540
EQUITY
Share capital and share premium 1 817 580 1 817 580 1 817 580
BEE reserve 51 879 – 51 224
Employee share-based payment reserve 55 093 49 294 45 707
Hedging reserve (1 334) 12 445 (92 122)
Retained earnings 2 181 403 1 964 158 2 032 128
Total equity 4 104 621 3 843 477 3 854 517
LIABILITIES
Non-current liabilities
Non-current borrowings 189 000 48 059 216 000
Deferred tax liability 540 595 497 154 486 765
Retirement benefit obligations 236 035 239 476 227 997
965 630 784 689 930 762
Current liabilities
Trade and other payables 1 039 786 836 018 806 210
Current borrowings 832 747 1 019 102 829 401
Derivative financial liabilities 43 138 51 392 235 650
1 915 671 1 906 512 1 871 261
Total liabilities 2 881 301 2 691 201 2 802 023
Total equity and liabilities 6 985 922 6 534 678 6 656 540
Net debt to equity (%) 23 26 25
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
Cash flows from operating activities
Operating profit 257 171 138 498 295 480
Net interest paid (55 702) (39 068) (86 943)
(Profit)/loss on disposal of property, plant and equipment - (72) 10 538
Non-cash items:
Depreciation and amortisation of property, plant and equipment 92 418 65 961 148 661
Impairment charge – 4 345 –
Movement in derivatives (155 371) ( 20 101) 63 717
Other non-cash items 32 762 9 455 21 828
Income tax payment (32 947) (37 172) (49 735)
Changes in working capital (25 786) (251 162) (279 771)
112 545 (129 316) 123 775
Cash flows from investing activities
Additions to property, plant and equipment (132 772) (262 631) (472 358)
Acquisition of business – (100 672) (100 170)
Additions to intangible assets (3 381) (2 739) (15 480)
Proceeds on disposal of property, plant and equipment – 79 44 679
MCEP grant receipt 57 046 – –
(79 107) (365 963) (543 329)
Cash flows before financing activities 33 438 (495 279) (419 554)
Cash flows from financing activities
(Decrease)/increase in borrowings (23 654) 381 017 359 257
Settlement of share options (9 196) – (24 397)
Proceeds to settle equity option – – 4 000
Dividends paid – (79 893) (105 459)
(32 850) 301 124 233 401
Net increase decrease in cash and cash equivalents 588 (194 155) (186 153)
Cash and cash equivalents at beginning of period 70 158 249 106 249 106
Effects of exchange rate changes on cash and cash equivalents (1 057) – 7 205
Cash and cash equivalents at end of period 69 689 54 951 70 158
NOTES
FOR THE HALF-YEAR ENDED 30 JUNE 2016
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial information of the group for the half-year ended 30 June 2016 has been
prepared in accordance with IAS 34 – Interim Financial Reporting and the Companies Act, No 71 of 2008, under the supervision of the
Chief Financial Officer, Mr A P Krull CA(SA), and should be read in conjunction with the group's 2015 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 2015
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
2016 2015 2015
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 4 503 912 3 537 321 7 554 622
Hulamin Extrusions 423 777 392 694 840 364
Group total 4 927 689 3 930 015 8 394 986
Operating profit
Hulamin Rolled Products 242 828 132 846 282 908
Hulamin Extrusions 14 343 5 652 12 572
Group total 257 171 138 498 295 480
Total assets
Hulamin Rolled Products 6 649 841 6 178 141 6 335 986
Hulamin Extrusions 336 081 356 537 320 554
Group total 6 985 922 6 534 678 6 656 540
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, non-derivative financial instruments and forward point gains.
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 gain of R5 million
(June 2015: R55 million loss, December 2015: R161 million loss) in respect of the unhedged portion of this exposure.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
4. TAXATION
The tax charge included within these condensed consolidated financial statements is:
Normal 38 576 13 610 40 082
Deferred 19 426 18 848 25 192
58 002 32 458 65 274
Normal rate of taxation (%) 28,0 28,0 28,0
Adjusted for:
Exempt income, non-allowable and other items (%) (0,4) 2,0 0,5
Effective rate of taxation (%) 27,6 30,0 28,5
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 Number Number
of shares of shares of shares
June June December
2016 2015 2015
Weighted average number of shares used for basic EPS 319 596 836 319 596 836 319 596 836
Share options 29 487 803 8 592 876 7 666 904
Weighted average number of shares used for diluted EPS 349 084 639 328 189 712 327 263 740
6. INVESTMENTS
The investment of R100,7 million at 30 June 2015 represents Hulamin's initial equity and loan funding contribution to Isizinda Aluminium,
a strategic partnership between Hulamin (40%) and the Bingelela Consortium (60%), which acquired the business and assets of the
Bayside Casthouse from South 32. From 1 July 2015, Isizinda Aluminium has been consolidated into the group accounts.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2016 2015 2015
R'000 R'000 R'000
7. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditure contracted for but not yet incurred 194 888 164 269 202 632
Operating lease commitments 36 343 44 698 41 034
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*, VN Khumalo, TP Leeuw*, NNA Matyumza*,
SP Ngwenya, PH Staude*, GHM Watson*, GC Zondi(#)
*Independent non-executive director
(#) Alternate non-executive director
Executive directors:
RG Jacob (Chief Executive Officer)
AK Krull (Chief Financial Officer)
MZ Mkhize
Company Secretary
W Fitchat
Date of SENS release: 25 July 2016
www.hulamin.co.za
Date: 25/07/2016 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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