HLM
HLM - Hulamin - Unaudited interim results for the half-year ended 30
June 2010
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
("Hulamin" or "the group")
UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2010
* Sales volumes recover, increasing by 32%
* Rand strength offsets recovery in demand and mix improvement
* Headline earnings per share of 11 cents in line with previous year
* High inventories and reduced sales due to port delays
Richard Jacob (Chief Executive Officer) commented:
`We have made progress in the six months to June in growing our
production and sales volumes and improving the mix of high value
products to the extent possible in markets that remain uncertain
These improvements were however offset by the significant strengthening
of the Rand to the US Dollar and the Transnet strike in May and
subsequent port congestion that constrained exports. Upward cost
pressures also persist, particularly in energy, labour and the start-up
costs of our new plant capacity.
The outlook for the business remains positive, based on firm market
demand and increasing sales of high value niche products as the
utilisation of new plant capacity improves. Benefiting from the fully
subscribed rights issue, Hulamin will remain focused on continuing
operational improvements, particularly cash cycles, improving
efficiencies and reducing costs to meet profitability targets in the
medium term.'
Enquiries
Hulamin 033 395 6911
Richard Jacob, CEO 082 806 4068
Charles Hughes, CFO 082 745 6173
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Hulamin continues to focus on improving its underlying operational
performance as global market conditions have improved and the start-up
of the new assets gains momentum.
Overall demand for Hulamin's products has continued to improve, with
improvements in particular in sales of can-end stock, brazing sheet and
heat treated plate, although the South African and European markets
continue to disappoint. This improvement in demand has seen prices
tending firmer for the second half of 2010.
Sales volumes for the first half of 2010 were 94 000 tons, an increase
of 32% over the equivalent period last year.
The Transnet strike and extended period during which freight has taken
to normalise has resulted in delays in the invoicing of approximately 6
000 tons which will be recognised in the second half of the year.
The strength of the Rand, which is at a similar level to the US Dollar
as it was in 2003, has negatively impacted on export revenue, while the
basket of costs, particularly wages and electricity, continue to rise.
This highlights the risk to South African manufacturing as margins
reduce due to a strong Rand. The start-up of the new Rolled Products
expansion project assets has resulted in higher operating costs being
incurred ahead of the equivalent revenue benefits.
Hulamin's after-tax earnings for the six months ended June 2010 were R26
million, a slight improvement of R1 million over the corresponding
period.
The shipping delays caused by the Transnet strike have resulted in high
levels of finished goods inventories being in transit and this, coupled
with an increase in the Rand price of aluminium, has resulted in higher
working capital and consequently adverse cash flows.
Hulamin remains engaged with BHP-Billiton and other stakeholders on the
future of the supply of rolling slab and extrusion billet by BHP-
Billiton beyond June 2011.
The rights offer was fully subscribed and has resulted in a significant
reduction in debt. The focus in the business remains on reducing the
current high inventory levels, improved cash cycles and restraints on
capital expenditure.
Hulamin has submitted applications to ITAC for duties on both rolled and
extruded products to be reintroduced. This has become necessary as
imports of low priced products have increased, mostly from countries
(particularly China) where industry support and protectionist measures
are in place.
The outlook for the business remains positive, based on firm market
demand and increasing sales of light gauge foil and plate as the
utilisation of new project assets improves. Hulamin will remain focused
on operational improvements, particularly cash cycles, improving
efficiencies and reducing costs.
Recovery in Hulamin Extrusions remains tenuous, in line with the weak
local market. The joint venture with Mazor in Hulamin Building Systems
has been concluded and is expected to start yielding benefits from 2011.
Hulamin said farewell to departing CEO Alan Fourie at the end of June,
after 25 years on the Hulamin Board. Alan led Hulamin with passion and
loyalty on a particularly challenging growth and improvement path,
overseeing the start-up of its two major expansion projects.
M E Mkwanazi R G Jacob
Chairman Chief Executive Officer
22 July 2010
Condensed Income Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
Note R'000 R'000 R'000
Revenue 2 704 645 2 115 453 4 499 582
Cost of
sales (2 518 140) (1 871 515) (3 895 842)
Gross
profit 186 505 243 938 603 740
Other
gains
and
losses 3 111 225 96 577 53 968
Selling and
marketing
expenses (153 262) (162 556) (323 438)
Administrative
expenses (42 671) (63 634) (90 296)
Operating
profit 101 797 114 325 243 974
Net finance
costs (69 188) (74 093) (113 813)
Share of
(losses)/
profits of
associates
and joint
ventures (191) 203 383
Profit before
tax 32 418 40 435 130 544
Taxation 4 (6 255) (15 653) (40 911)
Net profit
for the period 26 163 24 782 89 633
Headline earnings
Net profit
for the
period 26 163 24 782 89 633
Loss on
disposal of
property,
plant
and
equipment 492 674 2 731
Tax effects
of
adjustments (138) (189) (765)
Headline
earnings
attributable
to shareholders 26 517 25 267 91 599
Earnings
per share
(cents) 5
Basic 11 10 37
Diluted 11 10 36
Headline
earnings
per share(cents)
Basic 11 10 37
Diluted 11 10 37
Dividend
per share(cents) - - -
Currency
conversion
Rand/US
Dollar
average 7,54 9,23 8,42
Rand/US
Dollar
closing 7,64 7,74 7,39
Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
R'000 R'000 R'000
Net profit for
the period 26 163 24 782 89 633
Cash flow
hedges, net of
tax (3 854) (79 643) (102 174)
Total
comprehensive
income/(loss)for
the period 22 309 (54 861) (12 541)
Condensed Statement of Changes in Equity
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
R'000 R'000 R'000
Balance at
beginning of
period 3 744 279 3 760 146 3 760 146
Share of total
comprehensive
income/(loss) 22 309 (54 861) (12 541)
for the period
Shares issued -
share capital 9 421 20 45
Shares issued -
share premium 727 481 1 010 1 594
Value of
employee
services 3 792 14 837 29 492
Settlement of
employee share
incentives (1 084) - (7 547)
Tax on employee
share
incentives 535 1 622 1 627
Dividends paid - (28 537) (28 537)
Total equity 4 506 733 3 694 237 3 744 279
Condensed Balance Sheet
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
R'000 R'000 R'000
ASSETS
Non-current
assets
Property, plant
and equipment 4 992 544 4 908 875 4 979 278
Intangible
assets 28 963 30 942 29 874
Investments in
associates and
joint
ventures 42 889 10 283 10 463
Deferred tax
asset 16 026 12 553 13 899
5 080 422 4 962 653 5 033 514
Current assets
Inventories 1 352 022 848 727 1 015 029
Trade and other
receivables 862 764 645 319 695 228
Derivative
financial
assets 43 734 179 629 97 970
Income tax asset 10 085 8 048
Cash and cash
equivalents 30 193 53 002 64 413
Assets of
disposal group
held for sale - 15 266 -
2 298 798 1 741 943 1 880 688
TOTAL ASSETS 7 379 220 6 704 596 6 914 202
EQUITY
Share capital
and share
premium 1 729 457 991 946 992 555
BEE reserve 174 686 174 686 174 686
Employee
share-based
payment reserve 77 565 63 770 74 097
Hedging reserve (4 376) 22 009 (522)
Retained
earnings 2 529 401 2 441 826 2 503 463
Total equity 4 506 733 3 694 237 3 744 279
LIABILITIES
Non-current
liabilities
Non-current
borrowings 628 220 852 376 763 496
Deferred income
tax liabilities 909 861 890 936 912 876
Retirement
benefit
obligations 141 754 129 273 132 946
1 679 835 1 872 585 1 809 318
Current
liabilities
Trade and other
payables 721 469 488 926 580 420
Current
borrowings 424 089 573 505 709 822
Derivative
financial
liabilities 47 094 60 277 70 363
Income tax
liability - 15 066 -
1 192 652 1 137 774 1 360 605
Total
liabilities 2 872 487 3 010 359 3 169 923
TOTAL EQUITY
AND LIABILITIES 7 379 220 6 704 596 6 914 202
Net debt to
equity (%) 22,7 37,2 37,6
Condensed Cash Flow Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
R'000 R'000 R'000
Cash flows from
operating
activities
Operating profit 101 797 114 325 243 974
Net interest
paid (80 558) (99 865) (170 409)
Loss on
disposal of
property, plant
and
equipment 492 674 2 731
Non-cash items:
Depreciation
and
amortisation 92 739 100 172 197 733
Other non-cash
items 38 213 (160 936) (82 156)
Income tax
payment (11 399) (48 044) (66 949)
Changes in
working capital (363 480) 716 042 599 333
(222 196) 622 368 724 257
Cash flows from
investing
activities
Additions to
property, plant
and equipment (94 332) (220 087) (351 811)
Additions to
intangible
assets - (3 024) (3 554)
Proceeds on
disposal of
property, plant
and equipment 116 2 257 3 534
Increase in
investment in
associates and
joint ventures (32 617) - -
(126 833) (220 854) (351 831)
Cash flows from
financing
activities
Borrowings
repaid (421 009) (387 179) (339 742)
Shares issued 736 902 1 030 1 639
Settlement of
share options (1 084) - (7 547)
Dividends paid - (28 537) (28 537)
314 809 (414 686) (374 187)
Net decrease in
cash and cash
equivalents (34 220) (13 172) (1 761)
Balance at
beginning of
period 64 413 66 174 66 174
Cash and cash
equivalents at
end of period 30 193 53 002 64 413
Notes
1. Basis of preparation
The condensed consolidated interim financial information of the group
for the half-year ended 30 June 2010 has been prepared in accordance
with IAS 34 - Interim Financial Reporting and should be read in
conjunction with the group's 2009 annual financial statements, which
have been prepared in accordance with International Financial Reporting
Standards. The accounting policies and methods of computation adopted
are consistent with those used in the preparation of the group's 2009
annual financial statements.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2010 2009 2009
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 2 382 366 1 830 492 3 881 393
Hulamin
Extrusions 322 279 284 961 618 189
Group total 2 704 645 2 115 453 4 499 582
INTER-SEGMENT
REVENUE
Hulamin Rolled
Products - 6 766 9 550
Hulamin
Extrusions - 7 041 6 959
OPERATING PROFIT
Hulamin Rolled
Products 103 733 126 388 239 377
Hulamin
Extrusions (1 936) (12 063) 4 597
Group total 101 797 114 325 243 974
TOTAL ASSETS
Hulamin Rolled
Products 7 072 257 6 392 750 6 554 198
Hulamin
Extrusions 306 963 311 846 360 004
Group total 7 379 220 6 704 596 6 914 202
3. Other gains and losses
The group is exposed to fluctuations in aluminium prices, interest rates
and exchange rates, and hedges these risks with derivative financial
instruments.
Other gains and losses reflect the fair value adjustments arising from
these derivative financial instruments and non-derivative financial
instruments classified as fair value through profit and loss in terms of
IAS 39.
4. Taxation
The tax charge/(relief) included within these interim financial
statements is:
Normal 9 361 16 590 12 382
Deferred (3 106) (3 791) 25 675
STC - 2 854 2 854
6 255 15 653 40 911
Normal rate of
taxation (%) 28,0 28,0 28,0
Adjusted for:
STC (%) - 7,1 2,2
Other
non-allowable
items (%) (8,8) 3,6 1,1
Total (%) 19,2 38,7 31,3
5. Earnings per share
The weighted average number of shares used in the calculation of basic
and diluted earnings per share are as follows:
Number of Number of Number of
shares shares shares
June June December
2010 2009 2009
Weighted
average
number of
shares
used for
basic EPS 245 185 429 244 163 303 244 338 984
Share
options 3 575 815 2 362 966 2 897 707
Weighted
average
number of
shares
used for
diluted EPS 248 761 244 246 526 269 247 236 691
The weighted average number of shares used in the calculation of basic
and diluted earnings per share for both the current and comparative
periods have been restated to take into account the impact of the rights
issue in line with IAS 33.
6. Commitments and contingent liabilities
Capital
expenditure
contracted
for but
not yet
incurred 151 998 354 812 112 557
Operating
lease
commitments 11 225 25 940 21 090
Guarantees
and
contingent
liabilities 25 840 22 471 22 594
Corporate information
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
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place,
corner Fredman Drive and Rivonia Road,
Sandton, 2196
PO Box 786273, Sandton, 2146
Directorate
Non-executive directors:
L C Cele, V N Khumalo, T P Leeuw, J B Magwaza, N N A Matyumza (with
effect from 1 March 2010), M E Mkwanazi (Chairman), S P Ngwenya, P H
Staude
Executive directors:
R G Jacob (Chief Executive Officer, with effect from 1 July 2010), A
Fourie (retired with effect from 30 June 2010), C D Hughes, M Z Mkhize
Date: 26/07/2010 07:05:02 Produced by the JSE SENS Department.
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