Wrap Text
Unaudited Interim Results for the Half-Year Ended 30 June 2017
HULAMIN LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
("Hulamin" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2017
- Headline earnings per share up 17% to 56 cents per share
- Operating profit up 11% despite stronger local currency
- Strong Rolled Products volume performance up 8% to 221 000 tons annualised
- Rolled Products unit cost down 8%
Richard Jacob, Hulamin's Chief Executive Officer, commented:
"Hulamin has delivered a strong manufacturing performance and improved financial results, despite difficult market
conditions and the Rand being 14% stronger compared to the corresponding period in 2016. Sales volumes increased
by 8% and we achieved improved overall and per unit cost performance. There will be a two-week shut on a number of
production lines during the second half of the year for routine upgrades, gas conversions and maintenance which will
enable continuing high levels of performance."
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 2017 totalled 119 000 tons. This is 8% higher than the corresponding
period and delivers a 12-month sales performance in excess of 220 000 tons from 1 July 2016 in Rolled Products.
Market conditions in South Africa have remained depressed. However, despite the overall manufacturing economy declining,
Hulamin increased its local beverage can packaging volumes by 133% albeit from a relatively low base in the
corresponding period, with a consequent increase in scrap purchases. Although export markets remain over-traded, Hulamin
benefited from actions to enhance the product mix, improved market positioning and concerns among customers in the US
that imports from China are likely to be controlled or curtailed.
In the US, Hulamin's Heat Treated Plate continues to set quality and performance benchmarks. Over and above Hulamin's
niche automotive market in the US, our plate has been specified for two additional high-end applications: an aerospace
Wi-Fi component and a high tolerance material handling application.
The US Dollar London Metal Exchange aluminium price rose further to close the period above US$1 900/t, following the
lows of below US$1 500/t which prevailed in late 2015 and early 2016. Hulamin accordingly recorded a metal price lag
profit of R78 million.
Group turnover increased by 3% to R5.1 billion (2016 H1: R4.9 billion) driven by the higher sales volume and an average
US Dollar aluminium price that was 22% higher than the comparative period. The increase in these factors more than
compensated for the 14% strengthening of the Rand to average R/US$ 13.22 (2016: R/US$ 15.46).
Manufacturing conversion costs in Rolled Products were 1% lower in aggregate and 8% lower on a per unit cost basis
(13% lower after allowing for the effects of inflation), benefiting from lower US Dollar denominated costs, improved cost
controls, and increased usage of Compressed Natural Gas ("CNG") that now makes up approximately 25% of Hulamin's total
gas consumption.
Earnings before interest and taxation ("EBIT") at R286 million increased by 11% compared to the prior period. Net
interest charges decreased by 18% to R39 million, driven by lower levels of debt (borrowings closed at R656 million
compared to R952 million in June 2016). Attributable earnings amounted to R178 million for the six months under review,
an increase of 17% compared to the prior period.
Hulamin Extrusions performed consistently compared to the prior period despite further weakening of local market
conditions. The investments in powder coating and packing are due for start-up in the second half that augurs well for
an improved performance from 2018.
Cash flow before financing activities amounted to a R38 million outflow (2016 H1: R33 million inflow), after capital
expenditure of R137 million.
Dividends are considered on an annual basis and no interim dividend was declared.
Changes in Directorate
During the interim period, the board of directors announced the appointment of Ms AT Nzimande and Mr RL Larson as
non-executive directors to the board, with effect from 1 April 2017. Ms LC Cele resigned from the board of directors
with effect from 27 April 2017.
Prospects
Hulamin expects the momentum that prevailed in the first half of 2017 to continue into the second half. We will
compensate for weak local market conditions with further improvements in sales mix, cost controls and operating
efficiencies. A number of concurrent shutdown activities are planned for the second half to include routine maintenance
and upgrades. Also included is the next phase of conversion of our manufacturing facilities from Liquid Petroleum Gas to
CNG that will increase our usage of CNG to around 45% of our total gas consumption. Order books for Rolled Products are
healthy for the balance of the year following improvements in our US standard products distribution channel.
M E Mkwanazi R G Jacob
Chairman Chief Executive Officer
Pietermaritzburg
27 July 2017
Condensed consolidated income statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
Notes R'000 R'000 R'000
Revenue 5 095 326 4 927 689 10 099 349
Cost of sales (4 561 208) (4 393 268) (8 957 621)
Gross profit 534 118 534 421 1 141 728
Selling, marketing and distribution expenses (220 570) (229 608) (443 881)
Administrative and other expenses (74 726) (64 783) (144 892)
Other gains and losses 47 611 17 141 68 559
Operating profit 286 433 257 171 621 514
Interest income 840 462 1 309
Interest expense (39 381) (47 444) (88 005)
Profit before tax 247 892 210 189 534 818
Taxation 4 (70 010) (58 002) (149 885)
Net profit for the period 177 882 152 187 384 933
Headline and normalised earnings
Net profit for the period 177 882 152 187 384 933
Profit on disposal of property, plant and equipment - - (6 093)
Tax effect of adjustments - - 897
Headline earnings 177 882 152 187 379 737
Equity-settled share-based payment: Isizinda - 411 552
Normalised earnings 177 882 152 598 380 289
Earnings per share (cents) 5
Basic 56 48 120
Diluted 54 44 117
Headline earnings per share (cents)
Basic 56 48 119
Diluted 54 44 116
Normalised earnings per share (cents)
Basic 56 48 119
Diluted 54 44 116
Dividend per share (cents) - - 15
Currency conversion
Rand/US dollar average 13.22 15.46 14.71
Rand/US dollar closing 13.03 14.86 13.61
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
Net profit for the period 177 882 152 187 384 933
Other comprehensive income for the period (9 963) 89 628 93 851
Items that may be reclassified subsequently to profit or loss (9 984) 90 788 107 628
Cash flow hedges transferred to income statement (21 536) 127 947 127 947
Cash flow hedges created 7 669 (1 853) 21 536
Income tax effect 3 883 (35 306) (41 855)
Items that will not be reclassified to profit or loss 21 (1 160) (13 777)
Remeasurement of retirement benefit obligation 518 439 (14 032)
Remeasurement of retirement benefit asset (489) (2 050) (5 103)
Income tax effect (8) 451 5 358
Total comprehensive income for the period 167 919 241 815 478 784
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
Balance at beginning of period 4 346 688 3 854 517 3 854 517
Total comprehensive income for the period 167 919 241 815 478 784
Value of employee services 7 914 16 830 26 998
Settlement of employee share incentives (17 620) (9 196) (12 436)
Tax on employee share incentives (1 003) - (1 727)
Equity-settled share-based payment - 655 552
Dividends paid (48 501) - -
Total equity 4 455 397 4 104 621 4 346 688
Condensed consolidated balance sheet
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 3 303 262 3 163 999 3 263 500
Intangible assets 68 171 63 539 69 086
Retirement benefit asset 118 373 134 500 117 397
Deferred tax asset 25 463 19 808 25 463
3 515 269 3 381 846 3 475 446
Current assets
Inventories 1 860 010 1 795 481 1 825 221
Trade and other receivables 1 650 004 1 633 076 1 513 096
Derivative financial assets 52 872 97 410 64 445
Cash and cash equivalents 233 544 69 689 75 627
Income tax asset - 6 832 2 603
Asset held for sale - 1 588 -
3 796 430 3 604 076 3 480 992
TOTAL ASSETS 7 311 699 6 985 922 6 956 438
EQUITY
Share capital and share premium 1 817 580 1 817 580 1 817 580
BEE reserve 51 776 51 879 51 776
Employee share-based payment reserve 42 562 55 093 55 852
Hedging reserve 5 522 (1 334) 15 506
Retained earnings 2 537 957 2 181 403 2 405 974
Total equity 4 455 397 4 104 621 4 346 688
LIABILITIES
Non-current liabilities
Non-current borrowings 135 000 189 000 162 000
Deferred tax liability 524 565 540 595 516 533
Retirement benefit obligations 268 609 236 035 258 879
928 174 965 630 937 412
Current liabilities
Trade and other payables 1 151 989 1 039 786 1 141 011
Current borrowings 754 558 832 747 490 444
Derivative financial liabilities 12 053 43 138 15 168
Income tax liability 9 528 - 25 715
1 928 128 1 915 671 1 672 338
Total liabilities 2 856 302 2 881 301 2 609 750
TOTAL EQUITY AND LIABILITIES 7 311 698 6 985 922 6 956 438
Net debt to equity(%) 15 23 13
Condensed consolidated cash flow statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
Cash flows from operating activities
Operating profit 286 433 257 171 621 514
Net interest paid (52 413) (55 702) (101 792)
Profit on disposal of property, plant and equipment - - (6 093)
Non-cash items:
Depreciation and amortisation of property, plant and equipment 106 017 92 418 186 000
Movement in derivatives (5 410) (155 371) (126 987)
Other non-cash items (2 545) 32 762 68 679
Income tax payment (71 868) (32 947) (127 972)
Changes in working capital (160 718) (25 786) 165 679
99 496 112 545 679 028
Cash flows from investing activities
Additions to property, plant and equipment (131 355) (132 772) (314 856)
Additions to intangible assets (5 901) (3 381) (13 551)
Proceeds on disposal of property, plant and equipment - - 7 681
MCEP grant receipt - 57 046 57 047
(137 256) (79 107) (263 679)
Cash flows before financing activities (37 760) 33 438 415 349
Cash flows from financing activities
Increase/(decrease) in borrowings 237 114 (23 654) (392 957)
Settlement of share options (17 620) (9 196) (12 436)
Dividends paid (48 501) - -
170 993 (32 850) (405 393)
Net increase in cash and cash equivalents 133 233 588 9 956
Cash and cash equivalents at beginning of period 75 627 70 158 70 158
Effects of exchange rate changes on cash and cash equivalents 24 684 (1 057) (4 487)
Cash and cash equivalents at end of period 233 544 69 689 75 627
Notes
1. Basis of preparation
The unaudited condensed consolidated interim financial information of the group for the half-year ended 30 June 2017 has
been prepared in accordance with IAS 34 - Interim Financial Reporting, and the Companies Act, 71 of 2008, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by
the Financial Reporting Standards Council, under the supervision of the Chief Financial Officer, Mr A P Krull CA(SA),
and should be read in conjunction with the group's 2016 annual financial statements, which have been prepared in
accordance with International Financial Reporting Standards. These interim financial results have not been audited or
reviewed by the company's auditors.
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 in terms of IFRS and are consistent with those used in
the preparation of the group's 2016 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
2017 2016 2016
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 4 661 677 4 503 912 9 237 127
Hulamin Extrusions 433 649 423 777 862 222
Group total 5 095 326 4 927 689 10 099 349
OPERATING PROFIT
Hulamin Rolled Products 272 877 242 828 587 318
Hulamin Extrusions 13 556 14 343 34 196
Group total 286 433 257 171 621 514
TOTAL ASSETS
Hulamin Rolled Products 6 926 537 6 649 841 6 663 575
Hulamin Extrusions 385 162 336 081 292 863
Group total 7 311 699 6 985 922 6 956 438
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 US Dollar 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 R78 million (June 2016: R6 million gain, December 2016: R50 million gain) in respect of the
unhedged portion of this exposure.
4. Taxation
The taxation charge included within these condensed interim financial statements is:
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
Normal 59 012 38 576 163 518
Deferred 10 998 19 426 (13 633)
70 010 58 002 149 885
Normal rate of taxation(%) 28.0 28.0 28.0
Adjusted for:
Exempt income, non-allowable deductions and other items(%) 0.2 (0.4) -
Effective rate of taxation(%) 28.2 27.6 28.0
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 shares Number of shares Number of shares
June 2017 June 2016 December 2016
Weighted average number of shares used for basic EPS 319 596 836 319 596 836 319 596 836
Share options 11 689 653 29 487 803 9 064 508
Weighted average number of shares used for diluted EPS 331 286 489 349 084 639 328 661 344
6. Financial assets and liabilities
Financial assets and liabilities are initially measured at fair value adjusted for transaction costs. However,
transaction costs in respect of financial assets and liabilities classified as fair value through profit or loss are
expensed.
Financial assets and liabilities classified as fair value through profit or loss are measured at fair value with gains
or losses being recognised in profit or loss. Fair value, for this purpose, is market value if listed or a value arrived
at by using appropriate valuation models if unlisted.
Loans and receivables, which include trade receivables, are measured at amortised cost less impairment losses, which are
recognised in the income statement.
Financial assets carried at amortised cost are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. In particular, the trade receivables provision is established
where there is objective evidence that the group will not collect all amounts due according to the original terms of
receivables. Evidence of impairment may include indications that the debtors are experiencing significant financial
difficulty.
Financial liabilities (excluding liabilities designated in a hedging relationship) that are not designated on initial
recognition as financial liabilities at fair value through profit or loss are measured at amortised cost. These consist
of trade and other payables and interest-bearing borrowings.
The fair values of derivative assets and liabilities are calculated as the difference between the contracted value and
the value to maturity at the balance sheet date. The value to maturity of forward foreign exchange contracts is
determined using quoted forward exchange rates at the balance sheet date. The value to maturity of commodity futures is
determined by reference to quoted prices at the balance sheet date.
IFRS 13 requires disclosure of fair value measurements by level using the following fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
All fair values disclosed in these financial statements are recurring in nature and all derivative financial assets and
liabilities are level 2 in the valuation hierarchy (consistent with December 2016 and June 2016).
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2017 2016 2016
R'000 R'000 R'000
7. Commitments and contingent liabilities
Capital expenditure contracted for but not yet incurred 86 221 194 888 109 734
Operating lease commitments 23 685 36 343 30 782
8. Events after the reporting period
No material events have occurred subsequent to the end of the reporting period which may have an impact on the group's
reported financial position at that date.
Corporate information
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
("Hulamin", "the company" or "the group")
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: http://www.hulamin.co.za
Email: hulamin@hulamin.co.za
SECURITIES EXCHANGE LISTING
South Africa (Primary), JSE Limited
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196; PO Box 61051, Marshalltown, 2107
SPONSOR
Questco Proprietary Limited
First Floor Yellowwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, Johannesburg; 2055 PO Box 98956,
Sloane Park, 2152
DIRECTORATE
NON-EXECUTIVE DIRECTORS:
ME Mkwanazi* (Chairman)
CA Boles*
VN Khumalo
RL Larson*
TP Leeuw*
N Maharajh*
NNA Matyumza*
Dr B Mehlomakulu*
SP Ngwenya
AT Nzimande*
PH Staude*
GHM Watson*
GC Zondi#
EXECUTIVE DIRECTORS:
RG Jacob (Chief Executive Officer)
AK Krull (Chief Financial Officer)
MZ Mkhize
*Independent non-executive director
# Alternate non-executive director
COMPANY SECRETARY
W Fitchat
Date of SENS release : 31 July 2017
http://www.hulamin.co.za
Date: 31/07/2017 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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