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HLM: HULAMIN LIMITED - Unaudited interim results for the half-year ended 30 June 2016
HLM: HULAMIN LIMITED - Unaudited interim results for the half-year ended 30 June 2016
Unaudited interim results for the half-year ended 30 June 2016
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2016
- Operating profit up 86% in soft market conditions
- Revenue increase 25% to R4.9 billion
- Group sales tons up 19% (Rolled Products up 21%)
- Improved risk mitigation resulting in consistent manufacturing output
Richard Jacob, CEO, commented:
"Improved manufacturing performance in Hulamin Rolled Products underpins this pleasing
set of results. This, together with a weaker Rand on average against the US Dollar during the
six months under review, mitigated the effects of continued weak global and local market
conditions, local inflation and softer rolling margins. Efforts to address cost reduction opportunities and
operational efficiency improvements achieved further gains in unit costs, product yields,
overall sales volumes and product mix. For the balance of 2016 we expect can body stock
volumes to increase in both local and export markets allowing us to source more scrap metal
units locally. Efforts continue towards further improving our cost and rolling margin
performance, albeit in market conditions that we forecast to remain challenging."
ENQUIRIES
Hulamin
033 395 6911
Richard Jacob, CEO
082 806 4068
Anton Krull, CFO
071 361 0622
CapitalVoice
Johannes van Niekerk
082 921 9110
COMMENTARY
Group sales volumes for the six months to 30 June 2016 totalled 110 649 tons that are 19%
higher than the corresponding period and include a 21% improvement in Rolled Products
sales to 205 000 tons annualised. This improvement was achieved through consistent
manufacturing output and improved product yields.
Market conditions, both in South Africa and in major export markets, remained subdued and
over-supplied in the first six months of 2016, resulting in selling prices (rolling margins)
remaining under ongoing pressure that commenced in the second half of 2015. The London
Metal Exchange aluminium price rose marginally from the lows of late 2015, resulting in a
slight metal price lag profit of R5 million.
Turnover increased to R4.9 billion (2015 H1 R3.9 billion) driven by the higher sales volume,
a Rand LME price that increased by 19% and the weakening of the Rand against the US Dollar
by 30% to R/US$ 15.46 (2015: R/US$ 11.92).
Locally, the economy remained weak during the first six months of 2016 and trended weaker
as the period progressed. Demand for beverage can stock products in the local market failed
to meet forecast demand resulting in lower procurement of used beverage can scrap metal
units. Although local sales demand is forecast to improve in the second half of 2016, we have
secured additional sales of export can stock to mitigate this market risk. Sales of export can
end and tab stock increased by 51%.
Manufacturing conversion costs in Rolled Products were 4% lower on a per unit cost basis in spite
of higher US Dollar denominated costs, particularly imported LP gas, increased electricity prices
and the consolidation of costs in Isizinda. The metal price lag improved by R60 million
from a loss of R55 million in the corresponding period to a profit of R5 million in the current
period. Earnings before interest and taxation (EBIT) at R257 million was thus 86% higher
compared to the prior year and operating profit before metal price lag was 31% higher at
R252 million. Net interest charges increased by 55% to R47 million, driven by higher levels of
debt. Attributable earnings were R152 million for the six months under review, an increase of
101% on the prior period.
Hulamin Extrusions performance improved measurably compared to the prior period with
improved margins, stable volumes and the non-recurrence of metal price lag losses.
Cash inflow before financing activities amounted to R33 million (June 2015: R495 million
outflow), and included capital expenditure of R136 million.
Changes to the directorate during the six month period ended June 2016:
As previously announced on SENS, and with effect from 1 May 2016:
- David Austin who was the Chief Financial Officer of the company resigned from the board;
- Anton Krull was appointed as Chief Financial Officer;
- Johannes Magwaza resigned as a non-executive director and as a committee member of the
Remuneration and Nomination Committee and of the Transformation, Social and Ethics Committee; and
- Gcina Zondi was appointed as an alternative director to Peter-Paul Ngwenya.
The board thanks David and Johannes for their invaluable input over their tenure and wishes them
well in the future.
Dividend
The Board is committed to the company´s dividend policy of three-times cover in the context of
appropriate financial and market conditions. In this regard, the Board deemed it prudent not to
declare an interim dividend for 2016 before evaluating conditions for the full year. The Board has
further resolved to, in the future, determine the declaration of dividends on an annual basis.
Prospects
Hulamin expects the momentum gained from improved manufacturing performance in the
first half of 2016 to continue in the second half, though weak market conditions are expected
to persist both locally and internationally. There are early signs that the sales mix and
operating margins may be better in the second half. The risk of energy disruption is expected
to be lower due to further conversion from LPG to Compressed Natural Gas that is planned to
accelerate in the second half. Order books for Rolled Products are full for the third quarter
and we expect to fully sell all remaining capacity in the final quarter.
M E Mkwanazi
R G Jacob
Chairman
Chief Executive Officer
Pietermaritzburg
25 July 2016
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Unaudited
Unaudited
Half-year
Half-year
30 June
30 June
2016
2015
Note
R'000
R'000
Revenue
4 927 689
3 930 015
Cost of sales
(4 393 268)
(3 641 777)
Gross profit
534 421
288 238
Selling, marketing and distribution expenses
(229 608)
(171 421)
Administrative and other expenses
(64 783)
(55 194)
Impairment charge
(4 345)
Other gains and losses
17 141
81 220
Operating profit
257 171
138 498
Interest income
462
1 023
Interest expense
(47 444)
(31 326)
Profit before tax
210 189
108 195
Taxation
4
(58 002)
(32 458)
Net profit for the period
152 187
75 737
Headline and normalised earnings
Net profit for the period
152 187
75 737
(Profit)/loss on disposal of property, plant and equipment
(72)
Impairment charge on property, plant and equipment and intangible assets
4 345
Bargain purchase gain
Tax effects of adjustments
(1 196)
Headline earnings
152 187
78 814
Transaction costs
2 727
Past service costs credit adjustment
Share-based payment costs on 2015 BEE transactions
-
Audited
Year ended
31 December
2015
R'000
8 394 986
(7 855 025)
539 961
(382 204)
(111 050)
248 773
295 480
2 085
(68 577)
228 988
(65 274)
163 714
163 714
10 538
(51 868)
(3 123)
119 261
5 455
4 857
20 000
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Equity-settled share-based payment: Isizinda
Normalised earnings
Earnings per share
Basic
Diluted
Headline earnings per share
Basic
Diluted
Normalised earnings per share
Basic
Diluted
Dividend per share
Currency conversion
Rand/US dollar average
Rand/US dollar closing
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 30 JUNE 2016
411
152 598
81 541
27 224
176 797
(cents)
(cents)
48
44
24
23
51
50
(cents)
(cents)
48
44
25
24
37
36
(cents)
(cents)
(cents)
48
44
-
26
25
8
55
54
8
15,46
14,86
11,92
12,27
12,77
15,56
5
Net profit for the period
Other comprehensive income for the period
Items that may be reclassified subsequently to profit or loss
Cash flow hedges transferred to income statement
Cash flow hedges created
Income tax effect
Items that will not be reclassified to profit or loss
Remeasurement of retirement benefit obligation
Remeasurement of retirement benefit asset
Income tax effect
Total comprehensive income for the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Balance at beginning of period
Total comprehensive income for the period
Value of employee services
Settlement of employee share incentives
Tax on employee share incentives
Equity settled share-based payment
Share-based payment costs on 2015 BEE transaction
Dividends paid
Total equity
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2016
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Retirement benefit asset
Investments
Deferred tax asset
6
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Income tax asset
Asset held for sale
Total assets
EQUITY
Share capital and share premium
BEE reserve
Employee share-based payment reserve
Hedging reserve
Retained earnings
Total equity
LIABILITIES
Non-current liabilities
Non-current borrowings
Deferred tax liability
Retirement benefit obligations
Current liabilities
Trade and other payables
Current borrowings
Derivative financial liabilities
Total liabilities
Total equity and liabilities
Net debt to equity
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2016
Cash flows from operating activities
Operating profit
Net interest paid
(Profit)/loss on disposal of property, plant and equipment
Non-cash items:
Depreciation and amortisation of property, plant and equipment
Impairment charge
Movement in derivatives
Other non-cash items
Income tax payment
Changes in working capital
Cash flows from investing activities
Additions to property, plant and equipment
Acquisition of business
Additions to intangible assets
Proceeds on disposal of property, plant and equipment
(%)
Unaudited
Half-year
30 June
2016
R'000
152 187
89 628
90 788
127 947
(1 853)
(35 306)
(1 160)
439
(2 050)
451
241 815
Unaudited
Half-year
30 June
2015
R'000
75 737
5 932
5 831
(9 186)
17 285
(2 268)
101
140
(39)
81 669
Audited
Year ended
31 December
2015
R'000
163 714
(78 063)
(98 736)
(9 186)
(127 947)
38 397
20 673
25 134
3 578
(8 039)
85 651
Unaudited
Half-year
30 June
2016
R'000
3 854 517
241 815
16 830
(9 196)
655
4 104 621
Unaudited
Half-year
30 June
2015
R'000
3 833 817
81 669
7 883
(79 892)
3 843 477
Audited
Year ended
31 December
2015
R'000
3 833 817
85 651
16 777
(24 397)
(3 096)
31 224
20 000
(105 459)
3 854 517
Unaudited
Half-year
30 June
2016
R'000
Unaudited
Half-year
30 June
2015
R'000
Audited
Year ended
31 December
2015
R'000
3 163 999
63 539
134 500
19 808
3 381 846
2 909
55
140
100
23
3 230
499
592
529
672
749
041
3 166 800
66 917
142 292
20 260
3 396 269
1 795 481
1 633 076
97 410
69 689
6 832
1 588
3 604 076
6 985 922
1 996 270
1 122 926
53 248
54 951
26 370
50 872
3 304 637
6 534 678
1 784 805
1 384 390
8 457
70 158
12 461
3 260 271
6 656 540
1 817 580
51 879
55 093
(1 334)
2 181 403
4 104 621
1 817 580
49 294
12 445
1 964 158
3 843 477
1 817 580
51 224
45 707
(92 122)
2 032 128
3 854 517
189
540
236
965
000
595
035
630
48
497
239
784
059
154
476
689
216
486
227
930
000
765
997
762
1 039
832
43
1 915
2 881
6 985
786
747
138
671
301
922
23
836
1 019
51
1 906
2 691
6 534
018
102
392
512
201
678
26
806
829
235
1 871
2 802
6 656
210
401
650
261
023
540
25
Unaudited
Half-year
30 June
2016
R'000
Unaudited
Half-year
30 June
2015
R'000
Audited
Year ended
31 December
2015
R'000
257 171
(55 702)
-
138 498
(39 068)
(72)
295 480
(86 943)
10 538
92 418
(155 371)
32 762
(32 947)
(25 786)
112 545
65 961
4 345
( 20 101)
9 455
(37 172)
(251 162)
(129 316)
148 661
63 717
21 828
(49 735)
(279 771)
123 775
(132 772)
(3 381)
-
(262 631)
(100 672)
(2 739)
79
(472 358)
(100 170)
(15 480)
44 679
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HLM: HULAMIN LIMITED - Unaudited interim results for the half-year ended 30 Ju... Page 3 of 4
MCEP grant receipt
Cash flows before financing activities
Cash flows from financing activities
(Decrease)/increase in borrowings
Settlement of share options
Proceeds to settle equity option
Dividends paid
57 046
(79 107)
33 438
(365 963)
(495 279)
(543 329)
(419 554)
(23 654)
(9 196)
(32 850)
588
70 158
(1 057)
69 689
381 017
(79 893)
301 124
(194 155)
249 106
54 951
359 257
(24 397)
4 000
(105 459)
233 401
(186 153)
249 106
7 205
70 158
Net increase decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period
NOTES
FOR THE HALF-YEAR ENDED 30 JUNE 2016
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial information of the group for the half-year ended 30 June 2016 has been
prepared in accordance with IAS 34 - Interim Financial Reporting and the Companies Act, No 71 of 2008, under the supervision of the
Chief Financial Officer, Mr A P Krull CA(SA), and should be read in conjunction with the group's 2015 annual financial statements, which
have been prepared in accordance with International Financial Reporting Standards.
Hulamin believes normalised earnings to more accurately reflect operational performance and is arrived at by adjusting headline
earnings to take into account non-operational and abnormal gains and losses.
The accounting policies and methods of computation adopted are consistent with those used in the preparation of the group's 2015
annual financial statements.
Hulamin has not adopted any new or revised accounting standards in the current period which have had a material impact on reported results.
Unaudited
Unaudited
Audited
Half-year
Half-year
Year ended
30 June
30 June
31 December
2016
2015
2015
R'000
R'000
R'000
2. OPERATING SEGMENT ANALYSIS
The group is organised into two major operating segments, namely Hulamin Rolled
Products and Hulamin Extrusions.
Revenue
Hulamin Rolled Products
4 503 912
3 537 321
7 554 622
Hulamin Extrusions
423 777
392 694
840 364
Group total
4 927 689
3 930 015
8 394 986
Operating profit
Hulamin Rolled Products
242 828
132 846
282 908
Hulamin Extrusions
14 343
5 652
12 572
Group total
257 171
138 498
295 480
Total assets
Hulamin Rolled Products
6 649 841
6 178 141
6 335 986
Hulamin Extrusions
336 081
356 537
320 554
Group total
6 985 922
6 534 678
6 656 540
3. FOREIGN EXCHANGE AND COMMODITY PRICE RISK
The group is exposed to fluctuations in aluminium prices and exchange rates, and hedges these risks with derivative financial instruments.
The group applies hedge accounting to gains and losses arising from certain derivative financial instruments. Hedges of forecast sales
transactions are accounted for as cash flow hedges, whereas the hedges of committed, fixed price sales are accounted for as fair value hedges.
Other gains and losses reflect the fair value adjustments arising from fair value hedges, non-hedge accounted derivative financial
instruments, non-derivative financial instruments and forward point gains.
The effective portion of cash flow hedge gains and losses are recorded in revenue when the sale occurs.
The lag between the price at which aluminium is purchased and subsequently resold gives rise to a gain or loss. Hulamin hedges 50%
of this net exposure in terms of its hedging strategy. Included in cost of sales is a pre-tax metal price lag gain of R5 million
(June 2015: R55 million loss, December 2015: R161 million loss) in respect of the unhedged portion of this exposure.
Unaudited
Unaudited
Audited
Half-year
Half-year
Year ended
30 June
30 June
31 December
2016
2015
2015
R'000
R'000
R'000
4. TAXATION
The tax charge included within these condensed consolidated financial statements is:
Normal
38 576
13 610
40 082
Deferred
19 426
18 848
25 192
58 002
32 458
65 274
Normal rate of taxation
(%)
28,0
28,0
28,0
Adjusted for:
Exempt income, non-allowable and other items
(%)
(0,4)
2,0
0,5
Effective rate of taxation
(%)
27,6
30,0
28,5
5. EARNINGS PER SHARE (EPS)
The weighted average number of shares used in the calculation of basic and diluted earnings per share, headline earnings per share and
normalised earnings per share are as follows:
Number
Number
Number
of shares
of shares
of shares
June
June
December
2016
2015
2015
Weighted average number of shares used for basic EPS
319 596 836
319 596 836
319 596 836
Share options
29 487 803
8 592 876
7 666 904
Weighted average number of shares used for diluted EPS
349 084 639
328 189 712
327 263 740
6. INVESTMENTS
The investment of R100,7 million at 30 June 2015 represents Hulamin's initial equity and loan funding contribution to Isizinda Aluminium,
a strategic partnership between Hulamin (40%) and the Bingelela Consortium (60%), which acquired the business and assets of the
Bayside Casthouse from South 32. From 1 July 2015, Isizinda Aluminium has been consolidated into the group accounts.
Unaudited
Unaudited
Audited
Half-year
Half-year
Year ended
30 June
30 June
31 December
2016
2015
2015
R'000
R'000
R'000
7. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditure contracted for but not yet incurred
194 888
164 269
202 632
Operating lease commitments
36 343
44 698
41 034
CORPORATE INFORMATION
HULAMIN LIMITED
("Hulamin", "the company" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN: ZAE000096210
Business and postal address
Moses Mabhida Road, Pietermaritzburg, 3201; PO Box 74, Pietermaritzburg, 3200
Contact details
Telephone: +27 33 395 6911
Facsimile: +27 33 394 6335
Website: www.hulamin.co.za
E-mail: [email protected]
Securities exchange listing
South Africa (Primary), JSE Limited
Transfer Secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196, PO Box 786273,
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HLM: HULAMIN LIMITED - Unaudited interim results for the half-year ended 30 Ju... Page 4 of 4
Sandton, 2146
Directorate
Non-executive directors:
ME Mkwanazi* (Chairman), LC Cele*, VN Khumalo, TP Leeuw*, NNA Matyumza*,
SP Ngwenya, PH Staude*, GHM Watson*, GC Zondi(#)
*Independent non-executive director
(#) Alternate non-executive director
Executive directors:
RG Jacob (Chief Executive Officer)
AK Krull (Chief Financial Officer)
MZ Mkhize
Company Secretary
W Fitchat
Date of SENS release: 25 July 2016
www.hulamin.co.za
Date: 25/07/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limit
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
JSE News Service (SENS)
HULAMIN
All JSE data delayed by 15 min.
KEY:
O=OPEN | C=CLOSE
B=BID | A=ASK
H=HIGH* | L=LOW*
YH=YEAR HIGH* | YL=YEAR LOW*
VOL=VOLUME
P/E=PRICE/EARNINGS* | YLD=YIELD*
DY=DIVIDEND YIELD*
*Calculated by INET BFA
07:00:00 07/25/2016
600
N/A
O N/A
C 600
B 580
A 600
H N/A
L N/A
YH 724
YL 420
VOL N/A
P/E 16.67 YLD 6.00
DY 1.33
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