Hulamin faces loss due to mill failure

HULAMIN , a maker of rolled and extruded aluminium products, reported a "normalised" headline earnings loss of R8m for the six months to the end of June, from a R45m profit over the same period last year.

This came after one of SA’s largest beneficiated metals producers lost about 25000 tons of rolled-product production over 46 days at its Camps Drift hot mill in KwaZulu-Natal, when the main motor seized in May.

Sales of rolled products, which made up 90% of production, fell 9% to an annualised 189000 tons in the first half of the year as group revenue fell 7%. This compared with 208000 tons annualised in the same period last year.

"We’re disappointed that after achieving record production volumes of 219000 tons annualised in the first four months, the downtime during the repair of the (hot mill) caused lost production of some 25000 tons," CEO Richard Jacob said yesterday.

"We have recommissioned the mill and efforts to recover the backlog are progressing apace."

The group aimed to ramp up overall production capacity to 250000 tons a year by 2014.

However, a general weakening in global demand meant an uncertain outlook for margins. Hulamin said sales volumes were at the same level as last year, but competition from imports put margins under pressure.

Normalised headline earnings for the period excluded R16m in profit from the sale of a property in Cape Town, an after-tax pension fund allocation of R69m, and a pending insurance claim for its lost production.

That means although Hulamin made a R127m operating profit, headline earnings were down under International Financial Reporting Standards.

"Hulamin released a weak set of results as the challenging short-term market conditions placed a strain on the company’s financial performance," Rubin Renecke, an analyst at Kagiso Asset Management, said yesterday.

He said these conditions were expected to continue over the next six months. "However, the company has done well operationally, and we expect this to continue if they focus on increasing production in line with their targets."

For now, though, Hulamin said domestic demand remained subdued, and that imports negatively affected prices.

Demand for its products in the US and Asian markets remained stable in the six months. The European market weakened towards the end of the first quarter, but had steadied since then.