High output lifts Hulamin earnings

HULAMIN saw record results in the year to December as normalised earnings rocketed 76% and headline earnings per share skyrocketed 96%, with operating cash flows soaring 83% to R518m.

This saw the maker of aluminium products declare its first cash dividend since financial 2008 as it resumed its dividend payment policy of three-times dividend cover.

The stellar result came as higher aluminium production boosted revenue. This was further fuelled by a 12% fall in the rand-dollar exchange rate.

Meanwhile, working costs were contained by the group.

"We achieved record earnings with improved contributions from our key products and a weaker rand," David Austin, chief financial officer and acting CEO, said on Monday. He said the Pietermaritzburg-based group had focused on its core competencies. "Cash flow was strong and even after substantial capital expenditure we were able to lower our borrowings further."

Hulamin said in a revised trading statement in December that it would see "significantly higher" headline earnings a share in the year. The group reported a loss per share of 422c last year after a net impairment charge of R1.5bn.

This came after the carrying value of plant and equipment was impaired by R2.1bn in the year as required by international accounting standards.

But a corresponding deferred tax adjustment reduced the net effect of the charge to R1.5bn. This year, normalised earnings of R355m were substantially higher than the R240m previous best results seen in 2008.

The ongoing focus on working capital management saw cash from operating activities rise from R283m in 2013 to R518m this year.

Hulamin said that a substantial increase in both expansion and replacement capex, boosted by spend on the construction of its new aluminium recycling plant, consumed R335m of this amount, with the balance used to reduce net debt to R437m.

Sales volumes of rolled products rose 3% to 196,000 tonnes with exports contributing 70% of volume. But sales of extrusions — all of which are into the domestic market — fell 12% as imports continued to gain on locally made products in tight trading conditions.

However, Hulamin said a weaker exchange rate had provided it with some relief against competitors from Brazil, Russia, India and China — and other countries — all of which "enjoy some form of local market protection".

Stephen Meintjes, head of research at Imara SP Reid, said on Monday that Hulamin’s increase in production translated into more revenue, helped by the big fall in the rand-dollar exchange rate.

Mr Meintjes also said expenses had been contained, and that improved safety and ongoing working capital control helped the result.

Hulamin said heat-treated plate was its top performing product. The company had renewed the contract to supply this to Tesla Motors in North America, a maker of electric cars.

The group also said that beverage can stock and can end and tab stock were core contributors to the gross margins of its rolled products. It had begun commercial production of can body stock supplied to Nampak for the manufacture in SA of all-aluminium beverage cans.

CEO Richard Jacob is expected to resume his post on March 1 following an extended medical leave of absence.