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Provisional Audited Financial Results for the year ended 31 December 2017 and Cash Dividend Declaration
HULAMIN LIMITED
Incorporated in the Rebublic of South Africa
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
("Hulamin", "the company" or "the group")
Provisional Audited Financial Results
for the year ended 31 December
and Cash Dividend Declaration
2017
HIGHLIGHTS
- Record sales of 233 000 tons
- Record production and sales in Hulamin Rolled Products of 215 000 tons
- Improved liquidity following strong cash flow of R296 million
- Comparable earnings up 33%, in constant currency terms, on strong operational performance
- Headline earnings per share lower by 13% due to stronger currency
- Dividend of 15 cents per share maintained
Richard Jacob, CEO, commented:
"We report another year of record sales and improved manufacturing performance
following the previous record set in 2016, against a backdrop of continuing tough
market conditions and a stronger Rand. This was achieved through an ongoing focus on
manufacturing excellence with a specific emphasis on cost reduction and tight capital
discipline. This resulted in a second consecutive year of strong cash flows and a further
reduction in borrowings."
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
Hulamin delivered another year of record sales in Hulamin Rolled
Products. Hulamin Extrusions sales were flat. Both businesses
faced challenging local market conditions, although improved
demand for beverage can products enabled Hulamin Rolled
Products to increase its local sales by 22%.
Manufacturing output benefitted from a continued and consistent
focus on lean manufacturing, while cost reduction initiatives,
higher volumes, improved efficiencies and a substantial metal
price lag benefit largely compensated for the reduction in Rand
rolling margin, driven by the stronger currency. US Dollar rolling
margins were in line with 2016.
Market conditions, both in South Africa and in export markets,
remained uncertain throughout 2017. Local demand was
particularly subdued, driven by the fall-off in fixed capital
investment. In the USA, conditions are particularly uncertain
following the imposition by the International Trade Commission of
actions against the import of aluminium foil, and standard sheet
and coil from China.
During the year under review, the London Metal Exchange (LME)
aluminium price continued to rise averaging at $1 968 per ton
(2016: $1 604) and closing at $2 242 per ton (2016: $1 713). This
resulted in a metal price lag benefit of R150 million for the full year
(2016: R50 million).
Turnover increased modestly to R10,2 billion (2016: R10,1 billion)
driven by the higher sales volume, flat US Dollar rolling margins,
and the higher average LME aluminium price. These increases
were however countered by the 10% stronger average Rand
exchange against the US Dollar to R13,32 recorded during the year
(2016: R14,73).
Demand for beverage packaging continued to increase following
the upturn in the second half of 2016. This increase facilitated
further improvements in aluminium recycling and Hulamin's
contribution to entrepreneurial and enterprise development in
this segment. Commissioning of the scrap cleaning line was
completed in the first half of the 2017 year. This together with
efficiency and process improvements allowed for record scrap
volumes being processed during 2017 and lays the foundation for
further increases in the ramp-up to full design capacity.
Conversion costs in Rolled Products decreased by 5,3% to
R2.9 billion, representing a reduction of 10.1% in real terms.
Manufacturing costs per unit contracted by 5,9%(2016: 4.3%).
A further conversion of gas supply to compressed natural gas,
reducing waste and rightsizing manpower and outside contracting
costs, operating supplies and material costs contributed to the
reduced manufacturing cost.
Earnings before interest and taxation (EBIT) declined by 13% to
R538 million, and decreased by 16% to R517 million on a comparable
basis, after adjusting for a R25 million insurance receipt in 2017.
Comparable operating profit (assuming constant R/USD) was 27% higher
at R784 million (comparable earnings, on a constant currency basis,
were 33% higher at R507 million. Net interest charges decreased by 10%
to R78 million, mainly due to the capitalisation of borrowing costs
attributable to capital work in progress. Attributable earnings were
14% lower at R332 million for the year. Headline earnings per share
and normalised HEPS declined by 13% to 104 cents.
Cash flow before financing activities amounted to R296 million
(2016: R415 million), after R261 million capital expenditure and
interest payments of R99 million (including capitalised interest of
R21 million).
Operational performance at the Isizinda cast house maintained its
high level. This operation forms an important part of Hulamin's
metal supply and recycling operations. Initiatives to capitalise on a
range of aluminium processing opportunities at Isizinda continue
in association with the Richards Bay Industrial Development Zone.
Hulamin Extrusions performance was disappointing in tough
trading conditions. During 2016, we approved a capital investment
plan for Hulamin Extrusions and the repositioning of the business
in the very dynamic local market.
DIVIDEND
The board has declared a final dividend of 15 cents per share for
2017 (before withholding tax) (2016: 15 cents per share) payable on
Monday, 26 March 2018, to shareholders included in the share register
on Friday, 23 March 2018.
Last day to trade Monday, 19 March 2018
Shares trade ex dividend Tuesday, 20 March 2018
Record date Friday, 23 March 2018
Payment date Monday, 26 March 2018
Share certificates may not be dematerialised or rematerialised
between Tuesday, 20 March 2018 and Friday, 23 March 2018, both
days inclusive.
Shareholders are advised of the following information:
- the dividend has been declared out of the 2017 profits;
- the local dividend tax rate is 20%;
- the gross local dividend is 15 cents per share;
- the net dividend amount for local shareholders is 12 cents
per share:
- exempt from payment of dividend tax is 15 cents per share;
- liable to pay dividend tax is 12 cents per share;
- the issued share capital of the company is 319 596 836 ordinary
shares and 4 721 600 A1 ordinary shares;
- the company's tax number is 9522526715.
PROSPECTS
Efforts continue to maintain the improved sales and manufacturing
performance in 2018. Further initiatives to improve
rolling margins through focusing on a higher margin product mix are
gaining momentum. The firming Rand will continue to impact
financial performance negatively as foreign-denominated selling
prices translate to lower Rand rolling margins.
Trade actions between the USA and China are currently creating
positive demand momentum for Hulamin products in the USA. Hulamin's
strong brand and reputation for good quality products and service,
places the company in a good position to capitalise on improving
US market conditions.
Hulamin enjoys the benefits of duty free access to the
USA as a result of both the Africa Growth and Opportunities Act
(AGOA) and General System of Preferences (GSP) legislation.
Hulamin notes with caution the proposed aluminium trade
restricting recommendations issued by the US Commerce
Secretary on 16 February 2018 that may impose value and/or
volume constraints on aluminium imports into the USA. With 20%
sales exposure to the USA, these recommendations may impact on
Hulamin if and when adopted.
ME Mkwanazi RG Jacob
Chairman Chief Executive Officer
Pietermaritzburg
22 February 2018
SUMMARISED CONSOLIDATED
STATEMENT OF PROFIT AND LOSS
for the year ended 31 December 2017
2017 2016
Note R'000 R'000
Revenue 10 159 698 10 099 349
Cost of sales (9 115 128) (8 957 621)
Gross profit 1 044 570 1 141 728
Selling, marketing and distribution expenses (450 277) (443 881)
Administrative and other expenses (148 653) (144 892)
Other gains and losses 92 326 68 559
Operating profit 537 966 621 514
Interest income 3 079 1 309
Interest expense (80 704) (88 005)
Profit before tax 460 341 534 818
Taxation 3 (128 109) (149 885)
Net profit for the year attributable to equity holders of the company 332 232 384 933
Headline earnings
Net profit for the year attributable to equity holders of the company 332 232 384 933
Loss/(profit) on disposal of property, plant and equipment 10 188 (6 093)
Reversal of impairment (6 529) -
Tax effects of adjustments (2 852) 897
Headline earnings attributable to equity holders of the company 333 039 379 737
Normalised earnings
Headline earnings attributable to equity holders of the company 333 039 379 737
Equity-settled share-based payment: Isizinda - 552
Normalised earnings 333 039 380 289
Earnings per share 4
Basic (cents) 104 120
Diluted (cents) 100 117
Headline earnings per share 4
Basic (cents) 104 119
Diluted (cents) 101 116
Normalised earnings per share 4
Basic (cents) 104 119
Diluted (cents) 101 116
Dividends per share 5
Final (cents) 15 15
Currency conversion
Rand/US dollar average 13,32 14,73
Rand/US dollar closing 12,38 13,61
SUMMARISED CONSOLIDATED STATEMENT
OF OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2017
2017 2016
R'000 R'000
Net profit for the year attributable to equity holders of the company 332 232 384 933
Other comprehensive income for the year 3 635 93 851
Items that may be reclassified subsequently to profit or loss (3 976) 107 628
Cash flow hedges transferred to income statement (21 536) 127 947
Cash flow hedges created 16 014 21 536
Income tax effect 1 546 (41 855)
Items that will not be reclassified to profit or loss 7 611 (13 777)
Remeasurement of retirement benefit obligation 8 782 (14 032)
Remeasurement of retirement benefit asset 1 753 (5 103)
Income tax effect (2 924) 5 358
Total comprehensive income for the year attributable to equity holders of the company 335 867 478 784
SUMMARISED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Stated Employee
capital share-
and based
consolidated Hedging payment BEE Retained Total
shares reserve reserve reserve earnings equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 December 2015 1 817 580 (92 122) 45 707 51 224 2 032 128 3 854 517
Net profit for the year 384 933 384 933
Other comprehensive income net of tax 107 628 (13 777) 93 851
Equity-settled share-based
payment schemes 10 145 2 690 12 835
Equity-settled share-based
payment: Isizinda 552 552
Balance at 31 December 2016 1 817 580 15 506 55 852 51 776 2 405 974 4 346 688
Net profit for the year 332 232 332 232
Other comprehensive income net of tax (3 976) 7 611 3 635
Equity-settled share-based
payment schemes 15 349 (720) 14 629
Dividend paid (48 507) (48 507)
Balance at 31 December 2017 1 817 580 11 530 71 201 51 776 2 696 590 4 648 677
SUMMARISED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
as at 31 December 2017
2017 2016
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 3 324 593 3 263 500
Intangible assets 64 144 69 086
Retirement benefit asset 127 054 117 397
Deferred tax asset 21 152 25 463
3 536 943 3 475 446
Current assets
Inventories 2 150 061 1 825 221
Trade and other receivables 1 241 963 1 513 096
Derivative financial assets 143 767 64 445
Cash and cash equivalents 111 472 75 627
Income tax asset 39 331 2 603
3 686 594 3 480 992
Non-current assets held for sale 6 529 -
Total assets 7 230 066 6 956 438
EQUITY
Share capital and share premium 1 817 580 1 817 580
BEE reserve 51 776 51 776
Employee share-based payment reserve 71 201 55 852
Hedging reserve 11 530 15 506
Retained earnings 2 696 590 2 405 974
Total equity 4 648 677 4 346 688
LIABILITIES
Non-current liabilities
Non-current borrowings 108 000 162 000
Deferred tax liability 578 568 516 533
Retirement benefit obligations 266 767 258 879
953 335 937 412
Current liabilities
Trade and other payables 1 262 967 1 141 011
Current borrowings 320 699 490 444
Derivative financial liabilities 43 267 15 168
Income tax liability 1 121 25 715
1 628 054 1 672 338
Total liabilities 2 581 389 2 609 750
Total equity and liabilities 7 230 066 6 956 438
Net debt to equity % 6,8 13,3
SUMMARISED CONSOLIDATED
CASH FLOW STATEMENT
for the year ended 31 December 2017
2017 2016
R'000 R'000
Cash flows from operating activities
Operating profit 537 966 621 514
Net interest paid (99 113) (101 792)
Loss/(profit) on disposal of property, plant and equipment 10 188 (6 093)
Non-cash items:
Depreciation, amortisation and impairment of property, plant and equipment and intangible assets 216 374 186 000
Other non-cash items (48 830) (58 308)
Income tax payment (127 669) (127 972)
Changes in working capital 68 250 165 679
557 166 679 028
Cash flows from investing activities
Additions to property, plant and equipment (256 427) (314 856)
Government grant - 57 047
Additions to intangible assets (4 607) (13 551)
Proceeds on disposal of property, plant and equipment - 7 681
(261 034) (263 679)
Cash flows before financing activities 296 132 415 349
Cash flows from financing activities
Proceeds from non-current borrowings (54 000) (54 000)
Repayment of current borrowings (169 745) (338 957)
Settlement of employee share incentives (15 153) (12 436)
Dividends paid (48 507) -
(287 405) (405 393)
Net increase in cash and cash equivalents 8 727 9 956
Cash and cash equivalents at beginning of year 75 627 70 158
Effects of exchange rate changes on cash and cash equivalents 27 118 (4 487)
Cash and cash equivalents at end of year 111 472 75 627
NOTES
for the year ended 31 December 2017
1. BASIS OF PREPARATION
These summarised financial statements, although not audited, have been derived from the group's audited financial statements and
are consistent, in all material respects, with the group's audited financial statements. The directors take full responsibility for the
preparation of this announcement, including ensuring that the summarised consolidated financial statements are correctly extracted
from the underlying audited financial statements.
These summarised consolidated financial statements have been prepared in accordance with the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards
Council, the framework concepts and the measurement and recognition requirements of the International Financial Reporting
Standards (IFRS), the Companies Act 71 of 2008 and the JSE Listings Requirements, under the supervision of the Chief Financial
Officer, Mr AP Krull CA(SA).
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 financial statements.
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.
2017 2016
R'000 R'000
2. OPERATING SEGMENT ANALYSIS
The group is organised into two major operating segments, namely Hulamin Rolled Products
and Hulamin Extrusions. The reporting segments are consistent with those reported in the
group's 2016 financial statements.
REVENUE
Hulamin Rolled Products 9 284 845 9 237 127
Hulamin Extrusions 874 853 862 222
Group total 10 159 698 10 099 349
OPERATING PROFIT
Hulamin Rolled Products 522 544 587 318
Hulamin Extrusions 15 422 34 196
Group total 537 966 621 514
Interest income 3 079 1 309
Interest expense (80 704) (88 005)
Profit before tax 460 341 534 818
TOTAL ASSETS
Hulamin Rolled Products 6 870 355 6 663 575
Hulamin Extrusions 359 711 292 863
Group total 7 230 066 6 956 438
3. TAXATION
The tax charge included within these condensed consolidated financial statements is:
2017 2016
R'000 R'000
Normal 66 347 163 518
Deferred 61 762 (13 633)
128 109 149 885
Normal rate of taxation % 28,0 28,0
Adjusted for:
Exempt income, non-allowable deductions and other items % (0,2) 0,0
Effective rate of taxation % 27,8 28,0
NOTES
for the year ended 31 December 2017
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:
Number Number of
of shares shares
2017 2016
Weighted average number of shares used for basic EPS 319 596 836 319 596 836
Share options 11 471 925 9 064 508
Weighted average number of shares used for diluted EPS 331 068 761 328 661 344
Headline earnings per share is calculated using the weighted average number of ordinary
shares in issue during the year and is based on the earnings attributable to ordinary
shareholders, after excluding those items as required by Circular 2/2015 issued by the
South African Institute of Chartered Accountants (SAICA).
Headline earnings
Net profit for the year 332 232 384 933
Adjustments 807 (5 196)
- Reversal of impairment on associate (6 529) -
- Loss/(profit) on disposal of property, plant and equipment 10 188 (6 093)
- Tax effect (2 852) 897
Headline earnings 333 039 379 737
2017 2016
R'000 R'000
5. DIVIDENDS PER SHARE
Dividends per share declared:
Final dividend: 15 cents on 319 596 836 ordinary shares (2016: 15 cents on 319 596 836) 47 940 47 940
Final dividend: 15 cents on 4 721 600 A1 ordinary shares
(2016: 15 cents on 4 721 600 A1 ordinary shares) 708 708
Total 48 648 48 648
The final dividend was declared subsequent to year end and therefore has not been provided for in the group financial statements.
2017 2016
R'000 R'000
6. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditure contracted for but not yet incurred 42 527 109 734
Operating lease commitments 53 573 30 782
CORPORATE INFORMATION
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
SPONSOR
Questco Corporate Advisory Proprietary Limited
1st Floor, Yellowwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, 2191
DIRECTORATE
Non-executive directors
ME Mkwanazi* (Chairman),
CA Boles*
RL Larson*
VN Khumalo
TP Leeuw*
N Maharajh*
NNA Matyumza*
Dr B Mehlomakulu*
SP Ngwenya
AT Nzimande*
PH Staude*
GHM Watson*
GC Zondi#
* Independent non-executive directors
# Alternate non-executive director
Executive directors
RG Jacob, Chief Executive Officer
AP Krull, Chief Financial Officer
MZ Mkhize
COMPANY SECRETARY
W Fitchat
Date: 26/02/2018 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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