HULAMIN LIMITED - Unaudited Results for the half-year ended 30 June 2018

Release Date: 30/07/2018 07:05
Code(s): HLM
 
Wrap Text
Unaudited Results for the half-year ended 30 June 2018

HULAMIN LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
("Hulamin" or "the Company")

UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2018

HIGHLIGHTS

 -   Headline earnings per share down 77% to 13 cents per share
 -   Rand 7% stronger versus US dollar at R12.30 (2017: R13.22)
 -   Underlying earnings(1) in constant currency(2) up 23%
 -   Free cash flow(3) generated of R75 million, further strengthening the balance sheet
 -   Steady rolled product sales of 214 000 tons annualised after record in Q2 2018
 -   Further cost savings realised

Richard Jacob, Hulamin's Chief Executive Officer, commented:

"Hulamin remained on course during a challenging period, experiencing difficult trading conditions locally and
internationally. Market conditions, including both currency and the LME aluminium price proved particularly volatile
during this period under review. Total Hulamin sales volumes were down 4%, driven by lower extrusions volumes and a soft
quarter one in Hulamin Rolled Products. Uncertainty around vacillating US trade actions affected our products directly.
As a result of the duties now in place, imports into the USA have been significantly curtailed, particularly from China.
This has resulted in a supply shortage and has allowed us to raise prices in the USA. We can also report ongoing cost
savings in Hulamin Rolled Products and a very strong safety performance during the period."

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

While Hulamin's external environment experienced higher levels of volatility in early 2018 than in the recent past,
Hulamin Rolled Products performed well across the board, with advances in unit costs, efficiencies and working capital
management. Furthermore, US Dollar rolling margins / conversion prices improved by 6% compared to the corresponding period.

Financial results were however severely impacted by the 7% average strengthening of the Rand against the US Dollar to
average R12.30 in the first half of 2018 in comparison to R13.22 in the corresponding period.

Volatility in Hulamin's markets were largely driven by socio-political changes in South Africa and by US government intervention in
global metal markets globally. While Hulamin is not a producer of primary aluminium, short term movements in the price of aluminium
affect profits through a flow-through effect known as the metal price lag (MPL).

Following a period of tightening global aluminium supply through 2016 and early 2017, driving the LME aluminium price higher, this
trend reversed through the first four months of 2018. The LME declined consistently through this period to a low point of around
$1950 per ton in early April, a fall of some $300 per ton. This decline was suddenly reversed on the announcement of US sanctions
targeted at Russia, which placed pressure on primary aluminium supply from Rusal. As a result, the aluminium price rose quickly and
suddenly by approximately $650 per ton within two weeks. The price has since retreated to levels of around $2100 per ton. The net
impact of this volatility was a MPL loss of R25 million for the period, compared to a R78 million gain in the comparative period.

The imposition of US tariffs on aluminium in March 2018 had a major disruptive effect on imports into the US, which
eventually turned net-positive for the pricing of Hulamin's general rolled products as supply out of China contracted,
while demand remained stable. In the majority of cases, Hulamin delivers its product to the port of entry into the USA,
and our customers are paying the newly imposed import duties. Hulamin supplies foil, heat treated plate, as well as
standard coils and flat sheet into the USA market, representing approximately 22% of Hulamin sales.

Group turnover increased by 3% to R5.3 billion (2017 H1: R5.1 billion), in spite of the stronger Rand. Manufacturing conversion costs
in Rolled Products were nominally 2% lower in aggregate and 6% lower after allowing for the effects of inflation, as a result of
ongoing "cost out" efforts. Unit costs were up 2% (2% lower in real terms).

Earnings before interest and taxation ("EBIT") at R99 million decreased by 66%. This decline was driven by a sharply stronger
Rand and metal price lag reversal of R103 million compared to the prior period. EBIT before metal price lag decreased by 41% to
R124 million. Net interest charges decreased by 5% to R37 million, on the back of consistently declining borrowings that closed
at R297 million compared to R656 million in June 2017. Attributable earnings amounted to R42 million for the six months under review.

Free cash flow(3) of R75 million was generated in the period (2017 H1: R38 million outflow).

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 resignation of Mr. M E Mkwanazi as Board chairman and the appointment
of Mr. TP Leeuw as the new Chairman. Mr. Mkwanazi was appointed Board chairman on the listing of Hulamin in 2007. Ms. AT Nzimande,
resigned with effect from 30 June 2017. The board thanks both Mr. Mkwanazi and Ms. Nzimande for their contributions and Mr. Mkwanazi
in particular for his outstanding leadership over the past 11 years.

Prospects

Hulamin expects the positive operational momentum from the first two quarters of 2018 to continue into the second half. Order books for
Rolled Products are firm for the balance of the year. In the United States, market conditions remain volatile, although currently at
stronger rolling margins. The Rand has weakened again since the highs of R11.50 in the first quarter that reduced profits through the
first quarter. Should these weaker levels persist, we expect improved results in the second half.

TP Leeuw                     RG Jacob
Chairman                     Chief Executive Officer

Pietermaritzburg
26 July 2018

(1) Underlying earnings represents headline earnings before metal price lag adjusted for abnormal items.
(2) Constant currency results are calculated by applying prior period exchange rates to the current period's results.
(3) Free cash flow represents cash flow before debt/equity raising or repayment, as measured by "cash flow before
    financing activities" in the cash flow statement.

Condensed Consolidated Statement of Profit or Loss

                                                                                                        Unaudited      Unaudited     Unaudited
                                                                                                                       Restated*     Restated*
                                                                                                         Half-year     Half-year    Year ended
                                                                                                           30 June       30 June   31 December
                                                                                                              2018          2017          2017
                                                                                               Notes         R'000         R'000         R'000
Revenue from contracts with customers*                                                                   5 262 882     5 096 650    10 162 295
Cost of sale of goods                                                                                  (4 869 643)   (4 532 570)   (9 061 294)
Cost of providing services*                                                                               (32 542)      (29 962)      (56 431)
Gross profit                                                                                               360 697       534 118     1 044 570
Selling, marketing and distribution expenses                                                             (221 279)     (220 570)     (450 277)
Administrative and other expenses                                                                         (89 346)      (74 726)     (148 152)
Net impairment reversal/(losses) on financial assets**                                                          19             -         (501)
Other gains and losses                                                                                      48 423        47 611        92 326
Operating profit                                                                                            98 514       286 433       537 966
Interest income                                                                                                941           840         3 079
Interest expense                                                                                          (37 642)      (39 381)      (80 704)
Profit before tax                                                                                           61 813       247 892       460 341
Taxation                                                                                         4        (20 252)      (70 010)     (128 109)
Net profit for the period attributable to ordinary shareholders of the company                              41 561       177 882       332 232
Earnings per share attributable to the ordinary equity holders of the company (cents)            6
Basic                                                                                                           13            56           104
Diluted                                                                                                         13            54           100
Headline earnings per share attributable to the ordinary equity holders of the company (cents)
Basic                                                                                                           13            56           104
Diluted                                                                                                         13            54           101
Dividend declared (cents per share)                                                                              -             -            15
Currency conversion
Rand/US dollar average                                                                                       12.30          13.22        13.32
Rand/US dollar closing                                                                                       13.71          13.03        12.38

* Financial information has been restated in accordance with note 10 due to the implementation of new accounting standards.
** New disclosure requirements by International Accounting Standard 1 Presentation of Financial Statements to separately disclose
   on the face of the statement of profit or loss, the impairment losses on financial assets, including reversals of impairment losses.

Condensed Consolidated Statement of Comprehensive Income

                                                                                                        Unaudited         Unaudited         Audited
                                                                                                        Half-year         Half-year      Year ended
                                                                                                          30 June           30 June     31 December
                                                                                                             2018              2017            2017
                                                                                                            R'000             R'000           R'000
Net profit for the period attributable to ordinary shareholders of the company                             41 561           177 882         332 232
Other comprehensive income for the period                                                                (48 596)           (9 963)           3 635
Items that may be reclassified subsequently to profit or loss:                                           (47 125)           (9 984)         (3 976)
Cash flow hedges transferred to statement of profit or loss                                              (16 014)          (21 536)        (21 536)
Cash flow hedges created                                                                                 (49 438)             7 669          16 014
Income tax effect of the above                                                                             18 327             3 883           1 546
Items that will not be reclassified to profit or loss:                                                    (1 471)                21           7 611
Remeasurement of retirement benefit obligation                                                                933               518           8 782
Remeasurement of retirement benefit asset                                                                 (2 976)             (489)           1 753
Income tax effect of the above                                                                                572               (8)         (2 924)
Total comprehensive income for the period attributable to ordinary shareholders of the company            (7 035)           167 919         335 867

Condensed Consolidated Statement of Financial Position

                                                                                                     Unaudited          Unaudited         Unaudited
                                                                                                     Half-year          Half-year        Year ended
                                                                                                       30 June            30 June       31 December
                                                                                                          2018               2017              2017
                                                                                                         R'000              R'000             R'000
ASSETS
Non-current assets
Property, plant and equipment                                                                        3 311 540          3 303 262         3 324 593
Intangible assets                                                                                       55 111             68 171            64 144
Retirement benefit asset                                                                               129 717            118 373           127 054
Deferred tax asset                                                                                      46 676             25 463            21 152
                                                                                                     3 543 044          3 515 269         3 536 943
Current assets
Inventories                                                                                          2 219 908          1 860 010         2 150 061
Trade and other receivables                                                                          1 312 996          1 650 004         1 241 963
Derivative financial assets                                                                             34 546             52 872           143 767
Cash and cash equivalents                                                                               75 843            233 544           111 472
Income tax asset                                                                                        40 075                  -            39 331
                                                                                                     3 683 368          3 796 430         3 686 594
Non-current asset held for sale                                                                          6 529                  -             6 529
Total assets                                                                                         7 232 941          7 311 699         7 230 066
EQUITY
Stated capital and consolidation shares                                                              1 817 580          1 817 580         1 817 580
BEE reserve                                                                                             51 776             51 776            51 776
Employee share-based payment reserve                                                                    59 707             42 562            71 201
Hedging reserve                                                                                       (35 595)              5 522            11 530
Retained earnings                                                                                    2 698 827          2 537 957         2 696 590
Total equity                                                                                         4 592 295          4 455 397         4 648 677
LIABILITIES
Non-current liabilities
Non-current borrowings                                                                                  81 000            135 000           108 000
Deferred tax liability                                                                                 593 714            524 565           578 568
Retirement benefit obligations                                                                         276 149            268 609           266 767
                                                                                                       950 863            928 174           953 335
Current liabilities
Trade and other payables                                                                             1 260 383          1 151 989         1 262 967
Current borrowings                                                                                     292 253            754 558           320 699
Derivative financial liabilities                                                                       135 323             12 053            43 267
Income tax liability                                                                                     1 824              9 528             1 121
                                                                                                     1 689 783          1 928 128         1 628 054
Total liabilities                                                                                    2 640 646          2 856 302         2 581 389
Total equity and liabilities                                                                         7 232 941          7 311 699         7 230 066
Net debt to equity (%)                                                                                       6                 15                 7

Condensed Consolidated Statement of Changes in Equity

                                                         Stated                  Employee
                                                    capital and               share-based
                                                  consolidation     Hedging       payment         BEE        Retained         Total
                                                         shares     reserve       reserve     reserve        earnings        equity
                                                          R'000       R'000         R'000       R'000           R'000         R'000
                                 Note                         A           B             C           D               E
Balance at 1 January 2017                             1 817 580      15 506        55 852      51 776       2 405 974     4 346 688
Net profit for the period                                     –           –             –           –         177 882       177 882
Other comprehensive income –
net of tax                                                    –     (9 984)             –           –              21       (9 963)
Equity-settled share-based
payment scheme                                                –           –      (13 290)           –           2 581      (10 709)
Dividends paid                                                –           –             –           –        (48 501)      (48 501)
Balance at 30 June 2017                               1 817 580       5 522        42 562      51 776       2 537 957     4 455 397
Net profit for the period                                     –           –             –           –         154 350       154 350
Other comprehensive income –
net of tax                                                    –       6 008             –           –           7 590        13 598
Equity-settled share-based
payment scheme                                                –           –        28 639           –         (3 301)        25 338
Dividends paid                                                –           –             –           –             (6)           (6)
Balance at 31 December 2017                           1 817 580      11 530        71 201      51 776       2 696 590     4 648 677
Change in accounting policy*       10                         –           –             –           –             196           196
Balance at 1 January 2018                             1 817 580      11 530        71 201      51 776       2 696 786     4 648 873
Net profit for the period                                     –           –             –           –          41 561        41 561
Other comprehensive income –
net of tax                                                    –    (47 125)             –           –          (1 471)     (48 596)
Equity-settled share-based
payment scheme                                                 –          –      (11 494)           –           10 453      (1 041)
Dividends paid                                                 –          –             –           –         (48 502)     (48 502)
Balance at 30 June 2018                                1 817 580   (35 595)        59 707      51 776        2 698 827    4 592 295

NOTES

A: Stated capital and consolidation shares

Stated capital represents the group's issued share capital held by outside shareholders. Consolidation shares represent
shares held under various BEE transactions.

B: Hedging reserve

The hedging reserve is used to record gains or losses on derivatives that are considered to be effective in terms of
IFRS. Amounts are reclassified to profit or loss when the associated hedge items affects profit or loss.

C: Employee share-based payments reserve

The share-based payments reserve is used to recognise the grant date fair value of options issued to employees. On
settlement the value of the reserve is transferred to retained earnings.

D: BEE reserve

The BEE reserve is used to recognise the grant date fair value of options issued to identified BEE participants and
Isizinda BEE participants.

E: Retained earnings

The retained earnings represents the cumulative historic profit and loss reinvested in the group. No restrictions exist
on the use of the retained income.

* Financial information has been adjusted in accordance with note 10 due to the implementation of new accounting standards.

Condensed Consolidated Cash Flow Statement

                                                                                                     Unaudited     Unaudited       Audited
                                                                                                     Half-year     Half-year    Year ended
                                                                                                       30 June       30 June   31 December
                                                                                                          2018          2017          2017
                                                                                            Notes        R'000         R'000         R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations                                                                   A     227 985       223 777       783 948
Net interest paid                                                                                     (39 502)      (52 413)      (99 113)
Income tax payment                                                                                    (14 962)      (71 868)     (127 669)
                                                                                                       173 521        99 496       557 166
Cash flows from investing activities
Additions to property, plant and equipment                                                            (98 951)     (131 355)     (256 427)
Additions to intangible assets                                                                               -       (5 901)       (4 607)
                                                                                                      (98 951)     (137 256)     (261 034)
Cash flows before financing activities                                                                  74 570      (37 760)       296 132
Cash flows from financing activities
Repayment of current portion of non-current borrowings                                                (27 000)      (27 000)      (54 000)
Net (repayment of)/proceeds from current borrowings*                                                  (28 446)       264 114     (169 745)
Settlement of share options                                                                            (9 231)      (17 620)      (15 153)
Dividends paid                                                                                        (48 502)      (48 501)      (48 507)
                                                                                                     (113 179)       170 993     (287 405)
Net (decrease)/increase in cash and cash equivalents                                                  (38 609)       133 233         8 727
Cash and cash equivalents at beginning of period                                                       111 472        75 627        75 627
Effects of exchange rate changes on cash and cash equivalents                                            2 980        24 684        27 118
Cash and cash equivalents at end of period                                                              75 843       233 544       111 472
A: CASH GENERATED FROM OPERATIONS
   Profit before tax                                                                                    61 813       247 892       460 341
   Net interest cost                                                                                    36 701        38 541        77 625
   Operating profit                                                                                     98 514       286 433       537 966
   Adjust for non-cash flow items:
   Depreciation                                                                                        114 804        99 129       200 598
   Amortisation of intangible assets                                                                     9 033         6 888        15 776
   Loss on disposal of property, plant and equipment                                                         -             -        10 188
   Net movement in retirement benefit asset and obligations                                              4 676         8 754         8 798
   Value of employee services received under share schemes                                              11 567      (10 711)        32 991
   Movements in derivatives                                                                            135 825       (5 410)      (56 745)
   Foreign exchange gains on cash and cash equivalents                                                 (2 980)             -      (27 118)
   Gain on impairment reversal of investment in associate                                                    -             -       (6 529)
   Other non-cash items                                                                                     11         (588)         (227)
   Cash generated before working capital changes                                                       371 450       384 495       715 698
   Changes in working capital                                                                    B   (143 465)     (160 718)        68 250
   Cash generated from operations                                                                      227 985       223 777       783 948
B: CHANGES IN WORKING CAPITAL
   Increase in inventories                                                                            (69 847)      (34 789)     (324 840)
   (Increase)/decrease in trade and other receivables                                                 (71 033)     (136 908)       271 133
   (Decrease)/increase in trade and other payables                                                     (2 585)        10 979       121 957
                                                                                                     (143 465)     (160 718)        68 250

* Movement in the current borrowings represents the net movement on the Nedbank facility which is drawn down or settled on a daily basis.

Notes to the condensed financial statements

1.   Basis of preparation of half year-end report

     The unaudited condensed consolidated interim financial information of the group for the half-year ended 30 June 2018 has
     been prepared in accordance with IAS 34 Interim Financial Reporting, 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 AP Krull CA(SA). The
     interim report does not include all the notes of the type normally included in an annual financial report. Accordingly,
     this report is to be read in conjunction with the group's 2017 annual financial statements, which have been prepared in
     accordance with International Financial Reporting Standards, and any public announcements made by the group during the
     interim reporting period. These interim financial results have not been audited nor reviewed by the company's auditors.

     The accounting policies adopted are in terms of International Financial Reporting Standards and are consistent with
     those of the previous financial year and corresponding interim reporting period, except for the adoption of new and
     amended standards as set out below.

     (a) New and amended standards adopted by the group

     A number of new or amended standards became applicable for the current reporting period and the group had to change its
     accounting policies and make retrospective adjustments as a result of adopting the following standards:

     - IFRS 9 Financial Instruments; and

     - IFRS 15 Revenue from Contracts with Customers.
     The impact of the adoption of these standards and the new accounting policies are disclosed in note 10 below. The other
     standards did not have any impact on the group's accounting policies and did not require retrospective adjustments.

     (b) Impact of standards issued but not yet effective

     (i) IFRS 16 Leases

     IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the statement of financial
     position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the
     right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are
     short-term and low-value leases.

     The standard will affect primarily the accounting for the group's operating leases. As at the reporting date, the
     group has non-cancellable operating lease commitments of R43.8 million. However, the group has not yet determined
     to what extent these commitments will result in the recognition of an asset and a liability for future payments
     and how this will affect the group's profit and classification of cash flows. Some of the commitments may be covered
     by the exception for short-term and low-value leases.

     The standard is mandatory for first interim periods within annual reporting periods beginning on or after 1 January 2019.
     The group does not intend to adopt the standard before its effective date.

2.   Operating Segment Analysis

     The group's reportable segments, which have been determined in accordance with how the Hulamin Executive Committee,
     which is the group's most senior operating decision-making body, allocates resources and evaluates performance and is
     predominantly based on business segments which is representative of the internal reporting used for management purposes.
     The group is organised into two major operating divisions, namely Hulamin Rolled Products and Hulamin Extrusions. The
     Hulamin Rolled Products segments, which comprises the Hulamin Rolled Products and Hulamin Containers businesses,
     manufactures and supplies fabricated and rolled semi-finished aluminium products. The Hulamin Extrusions segment
     manufactures and supplies extruded aluminium products. Isizinda Aluminium (Pty) Ltd supplies slab to Hulamin Rolled
     Products. The activities of Isizinda Aluminium are integrated into the Hulamin Rolled Products segment. Reportable
     segments are based and managed in South Africa.

                                                                                                   Unaudited     Unaudited         Unaudited
                                                                                                   Half-year     Half-year        Year ended
                                                                                                     30 June       30 June       31 December
                                                                                                        2018          2017              2017
                                                                                                       R'000         R'000             R'000
     REVENUE FROM CONTRACTS WITH CUSTOMERS: EXTERNAL
     Hulamin Rolled Products                                                                       4 834 283     4 663 001         9 287 442
     Hulamin Extrusions                                                                              428 599       433 649           874 853
     Group total revenue from contracts with customers                                             5 262 882     5 096 650        10 162 295
     Timing of revenue recognition:
     At a point in time                                                                            5 230 340     5 066 688        10 105 864
     Over time                                                                                        32 542        29 962            56 431
     OPERATING PROFIT
     Hulamin Rolled Products                                                                         112 788       272 877           522 544
     Hulamin Extrusions                                                                             (14 274)        13 556            15 422
     Group total operating profit                                                                     98 514       286 433           537 966
     Interest income                                                                                     941           840             3 079
     Interest expense                                                                               (37 642)      (39 381)          (80 704)
     Profit before tax                                                                                61 813       247 892           460 341
     Taxation                                                                                       (20 252)      (70 010)         (128 109)
     Net profit for the year                                                                          41 561       177 882           332 232
     TOTAL ASSETS
     Hulamin Rolled Products                                                                       6 805 535     6 926 537         6 870 355
     Hulamin Extrusions                                                                              427 406       385 162           359 711
     Group total                                                                                   7 232 941     7 311 699         7 230 066

     Sales between segments are carried out at arm's length and are eliminated on consolidation. The amounts provided to the
     Hulamin Executive Committee with respect to segment revenue and segment assets are measured in a manner consistent with
     that of the financial statements.

     Management continues to assess the level of disaggregation to provide with regards to revenue as is required by IFRS 15
     Revenue from Contracts with Customers. Full disaggregated revenue disclosure will be provided in the annual financial
     statements for the 12 months ended 31 December 2018.

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 from contracts with customers 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 gross profit is a pre-tax
     metal price lag loss of R25.0 million (June 2017: R78 million gain, December 2017: R150 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
                                                                                                           2018         2017            2017
                                                                                                          R'000        R'000           R'000
     Normal                                                                                              14 657       59 012          66 347
     Deferred                                                                                             5 595       10 998          61 762
                                                                                                         20 252       70 010         128 109
     Normal rate of taxation                                                                              28.0%        28.0%           28.0%
     Adjusted for:
     Exempt income, non-allowable deductions and other items                                               4.8%         0.2%          (0.2%)
     Effective rate of taxation                                                                           32.8%        28.2%           27.8%

5.   Related party transactions and balances

     Balances and transactions between the company and its subsidiaries, which are related parties of the company, have been
     eliminated on consolidation and are not disclosed in this note. Details of transactions between the group and the pension
     fund are disclosed below:
                                                                                                 Unaudited     Unaudited             Audited
                                                                                                 Half-year     Half-year          Year ended
                                                                                                   30 June       30 June         31 December
                                                                                                      2018          2017                2017
                                                                                                     R'000         R'000               R'000
     Loan from pension fund                                                                         76 109        77 267              72 736
     Interest cost incured                                                                           3 372         3 640               7 111
     from pension fund

6.   Earnings per share (EPS)

     Headline and normalised earnings attributable to the ordinary equity holders of the company:

                                                                                                          Unaudited   Unaudited        Audited
                                                                                                          Half-year   Half-year     Year ended
                                                                                                            30 June     30 June    31 December
                                                                                                               2018        2017           2017
                                                                                                              R'000       R'000          R'000
     Net profit for the period                                                                               41 561     177 882        332 232
     Reversal of impairment on associate                                                                          -           -        (6 529)
     Profit on disposal of property, plant and equipment                                                          -           -         10 188
     Tax effect of adjustments                                                                                    -           -        (2 852)
     Headline earnings                                                                                       41 561     177 882        333 039

     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 2018          June 2017        December 2017
     Weighted average number of shares used for basic EPS                                  319 596 836        319 596 836          319 596 836
     Share options                                                                           7 093 154         11 689 653           11 471 925
     Weighted average number of shares used for diluted EPS                                326 689 990        331 286 489          331 068 761

7.   Commitments and contingent liabilities

                                                                                                         Unaudited    Unaudited       Audited
                                                                                                         Half-year    Half-year    Year ended
                                                                                                           30 June      30 June   31 December
                                                                                                              2018         2017          2017
                                                                                                             R'000        R'000         R'000
     Capital expenditure contracted for but not yet incurred                                                89 125       86 221        42 527
     Operating lease commitments                                                                            43 883       23 685        53 573

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.

9.   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 statement of profit or loss.

     The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at
     amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit
     risk. For trade receivables, the group applies the simplified approach permitted by IFRS 9, which requires expected
     lifetime losses to be recognised from initial recognition of the receivables.

     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 statement of financial position date. The value to maturity of forward foreign exchange
     contracts is determined using quoted forward exchange rates at the statement of financial position date. The value to
     maturity of commodity futures is determined by reference to quoted prices at the statement of financial position 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 2017 and June 2017). Key inputs used in the
     determination of the fair value relate to London Metal Exchange aluminium prices and currency exchange rates.

10.  Changes in accounting policies

     This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with
     Customers on the group's financial statements and also discloses the new accounting policies that have been applied from
     1 January 2018, where they are different to those applied in prior periods.

     (a) Impact on the financial statements

     As a result of the changes in the company's accounting policies, prior year financial statements had to be restated. As
     explained in note 10(b) below, IFRS 9 was generally adopted without restating comparative information in accordance with
     the transitional provisions. A retrospective adjustment is made in opening retained earnings on 1 Janaury 2018. The
     reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the restated
     statement of financial position as at 31 December 2017, but are recognised in the opening statement of financial
     position on 1 January 2018.

     The following tables show the adjustments recognised for each individual line item. The line items that were not
     affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated
     from the numbers provided. The adjustments are explained in more detail by standard below.

                                                                                     31 December 2017
     Statement of financial position (extract) (R'000)                        as originally presented   IFRS 9 adjustment    1 January 2018
     ASSETS
     Non-current assets
     Deferred tax asset                                                                        21 152                (76)            21 076
                                                                                            3 536 943                (76)         3 536 867
     Current assets
     Trade and other receivables                                                            1 241 963                 272         1 242 235
                                                                                            3 693 123                 272         3 693 395
     Total assets                                                                           7 230 066                 196         7 230 262
     EQUITY
     Retained earnings                                                                      2 696 590                 196         2 696 786
     Total equity                                                                           4 648 677                 196         4 648 873
     LIABILITIES
     Total liabilities                                                                      2 581 389                   -         2 581 389
     Total equity and liabilities                                                           7 230 066                 196         7 230 262

     Statement of profit or loss and other comprehensive income (extract)
     - six months to June 2017 (R'000)                                      As previously presented     IFRS 15 adjustment    Restated June 2017
     Revenue from contracts with customers                                                5 095 326                  1 324             5 096 650
     Cost of sales of goods                                                             (4 561 208)                 28 638           (4 532 570)
     Cost of providing services                                                                   -               (29 962)              (29 962)
     Gross profit                                                                           534 118                      -               534 118

     Statement of profit or loss and other comprehensive income (extract)     Audited results as
     - 12 months to December 2017 (R'000)                                   previously presented     IFRS 15 adjustment   Restated December 2017
     Revenue from contracts with customers                                            10 159 698                  2 597               10 162 295
     Cost of sales of goods                                                          (9 115 128)                 53 834              (9 061 294)
     Cost of providing services                                                                -               (56 431)                 (56 431)
     Gross profit                                                                      1 044 570                      -                1 044 570

     (b) IFRS 9 Financial Instruments - Impact of adoption

     IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial
     assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge
     accounting.

     The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes in accounting policies and
     adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in note 10(c)
     below. In accordance with the transitional provisions in IFRS 9(7.2.15) and (7.2.26), comparative figures have not been
     restated.

     Management has elected to defer the implementation of the hedging component of IFRS 9 Financial Instruments and will
     continue to account for hedges utilising IAS 39's hedging guidance until management has finalised its revised hedging
     strategy and related documentation.

     The total impact on the group's retained earnings as at 1 January 2018 is as follows:

                                                                                                                                             R'000
     Retained earnings 31 December - IAS 39                                                                                              2 696 590
     Decrease in provision for trade receivables and contract assets - net of tax                                                  (i)         196
     Opening retained earnings 1 January - IFRS 9 (before restatement for IFRS 15)                                                       2 696 786

     (i) Impairment of financial assets

     The group has trade receivables for sales of inventory and from the provision of transport services that is subject to
     IFRS 9's new expected credit loss model. The group was required to revise its impairment methodology under IFRS 9. The
     impact of the change in impairment methodology on the group's retained earnings is disclosed in the table in note 10(b)
     above.

     While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment
     loss was immaterial.

     The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
     allowance method for all trade receivables. To measure the expected credit losses, trade receivables have been grouped
     based on shared credit risk characteristics and the days past due. The group also covers all trade receivables through
     the Credit Guarantee Insurance Company (CGIC) and cover is subject to an excess and first loss aggregate. The CGIC cover
     is taken out at the inception of the sale and is integral to the enactment of the sale. Therefore the CGIC cover is
     included in the calculation of the loss allowance.

     The loss allowances for trade receivables as at 31 December 2017 reconcile to the opening loss allowances on 1 January
     2018 as follows:

     R'000                                                                                                     Allowance on trade receivables
     At 31 December 2017 - calculated under IAS 39                                                                                      1 507
     Amounts restated through opening retained earnings                                                                                 (272)
     Opening loss allowance as at 1 January 2018 - calculated under IFRS 9                                                              1 235

     The loss allowance increased by a further R2.6 million to R3.8 million during the six months to 30 June 2018. The
     increase would have been R2.2 million lower had the incurred loss model of IAS 39 been applied.

     Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no
     reasonable expectation of recovery include, among others, the failure of a debtor to engage in a repayment plan with the
     group, and failure to make contractual payments for a period of greater than 120 days past due.

     (c) IFRS 9 Financial Instruments - Accounting policies applied from 1 January 2018

     Classification

     From 1 Janaury 2018, the group classifies its financial assets in the following measurement categories:

     - Those to be measured subsequently at fair value (derivative instruments not designated in a hedging relationship).

     - Those to be measured at amortised cost (trade and other receivables, cash and cash equivalents, trade and other payables
       and borrowings).

     - Those instruments used for the purposes of hedging.

     The classification depends on the entity's business model for managing the financial assets and the contractual terms of
     the cash flows.

     For assets measured at fair value, gains and losses will be recorded in profit or loss. The group reclassifies debt
     investments when and only when its business model for managing assets changes.

     Measurement

     At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset
     not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of
     the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

     Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
     are solely payment of principal and interest.

     Subsequent measurement of debt instruments depends on the group's business model for managing the asset and the cash
     flow characteristics of the asset. There are two measurement categories into which the group classifies its debt
     instruments:

     - Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely
       payments of principal and interest are measured at amortised cost. Interest income from these financial assets is
       included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is
       recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and
       losses. Impairment losses are presented as a separate line in the statement of profit or loss.

     - FVPL: Assets that do not meet the criteria for amortised cost are measured at FVPL. A gain or loss on a debt investment
       that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in
       the period in which it arises.

     Impairment

     From 1 January 2018, the group assesses on a forward-looking basis the expected credit losses associated with its debt
     instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a
     significant increase in credit risk.

     For trade receivables, the group applies the simplified approach permitted by IFRS 9, which requires expected lifetime
     losses to be recognised from initial recognition of the receivables.

     (d) IFRS 15 Revenue from Contracts with Customers - Impact of adoption

     The group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes in
     accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the
     transition provisions in IFRS 15, the group has adopted the new rules retrospectively and has restated comparatives for
     the 2017 financial year. The adoption of IFRS 15 Revenue from Contracts with Customers requires the group to identify
     individual performance obligations. The group has determined that for certain export sales terms the group has two
     performance obligations, the sale of goods and the provision of transportation services. The group does not charge a
     margin on transportation services and therefore no impact on previously reported earnings before interest and tax is
     noted. In summary, the following adjustments were made to the amounts recognised in the statement of profit or loss at
     the date of initial application (1 January 2018):

                                                                                                                     Cut-off         IFRS 15
     Statement of profit or loss and other comprehensive                                         Reclassi-   adjustments for        carrying
     income (extract)                                                                  IAS 18     fication   transport still    amount as at
     – Six months to 30 June 2017 (R'000)                                      reported value   adjustment       in progress    30 June 2017
     Revenue from contracts with customers                                          5 095 326            -             1 324       5 096 650
     Cost of sales of goods                                                       (4 561 208)       28 638                 -     (4 532 570)
     Cost of providing services                                                             -     (28 638)           (1 324)        (29 962)
     Gross profit                                                                     534 118            -                 -         534 118

                                                                                                                                     IFRS 15
                                                                                                                     Cut-off        carrying
     Statement of profit or loss and other comprehensive                                         Reclassi-   adjustments for    amount as at
     income (extract)                                                             IAS 18          fication   transport still     31 December
     – 12 months to 31 December 2017 (R'000)                              reported value        adjustment       in progress            2017
     Revenue from contracts with customers                                    10 159 698                 -             2 597      10 162 295
     Cost of sales of goods                                                  (9 115 128)            53 834                 -     (9 061 294)
     Cost of providing services                                                        -          (53 834)           (2 597)        (56 431)
     Gross profit                                                              1 044 570                 -                 -       1 044 570

     (e) IFRS 15 Revenue from Contracts with Customers - Accounting policies

     (i) Sale of goods

     Revenue from contracts with customers of the group comprises revenue from the sale of fabricated and semi-fabricated
     aluminium products.

     Sales are recognised when control of the products has transferred to the buyer. The delivery of products and the
     transfer of risks are determined by the terms of sale, and specifically by the International Chamber of Commerce Terms
     of Trade, where applicable.

     Products are often sold with retrospective volume discounts, rebates and early-settlement terms. Revenue from these
     sales is recognised based on the price specified in the contract, net of the estimated volume discounts, rebates and
     early settlement discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected
     value method, and revenue is only recognised to the extent that it is probable that a significant reversal will not
     occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable to
     customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as
     the sales are not made on extended credit terms.
   
     A receivable is recognised when control passes as this is the point in time that the consideration is unconditional
     because only the passage of time is required before the payment is due.

     (ii) Transportation services

     Certain International Chamber of Commerce Terms of Trade used include multiple deliverables such as the sale of goods
     and the provision of transportation services. For some of these specific terms control of the goods sold passes before
     the transportation service has been provided. The revenue is recognised based on the actual service provided to the end
     of the reporting period as a proportion of the total service to be provided, because the customer receives and uses the
     benefit simultaneously. This is determined based on the actual shipping days incurred relative to the standard time to
     ship to the specified destination. Where revenue is earned on multiple performance obligations the transaction price is
     allocated to each performance obligation based on the stand-alone selling prices.

     (iii) Time value of money

     The group does not expect to have any contracts where the period between the transfer of the promised goods or services
     to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the
     transaction prices for the time value of money.

CORPORATE INFORMATION

HULAMIN LIMITED
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 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:
TP Leeuw* (Chairman), CA Boles*, VN Khumalo, RL Larson*, N Maharajh*, NNA Matyumza*, Dr B Mehlomakulu*, SP Ngwenya,
PH Staude*, GHM Watson*, GC Zondi(#)

* Independent non-executive director
(#) Alternate non-executive director
Executive directors:
RG Jacob (Chief Executive Officer)
AP Krull (Chief Financial Officer)
MZ Mkhize

Company Secretary:
W Fitchat

Date of SENS release: 30 July 2018

Date: 30/07/2018 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
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 information disseminated through SENS.

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