‘Load-shed’ dents Hulamin profits

2008-07-22 00:00

Pietermaritzburg’s JSE-listed aluminium processor, Hulamin, which expects full-year results to increase by at least 20% year on year in 2008, has grown underlying operating profit by an average of 39% a year since 2003, creating 400 permanent local jobs in the past four years.

The group grew operating profit for the first half of 2008 by 58% to R270 million, while headline earnings per share — a key profit measure for South African companies — grew by 110% to 84 cents per share.

Speaking to The Witness after the release of Hulamin’s half-year results yesterday, CEO Alan Fourie noted, however, that the electricity crisis impacted negatively on sales during the first half of 2008.

He said the company lost 10% of sales in April alone due to intense load-shedding during that month.

Overall, Hulamin lost between two and three percent of sales during the first half of this year due to load-shedding, added Fourie.

Although the group meets 80% of its core energy needs through gas, 20% remains driven by electricity.

Fourie said the company was “load-shed” for two hours a day during April 2008.

Sales revenue in the first half of 2008 increased by eight percent to R3,6 billion when compared with the corresponding period in 2007.

The rand price of aluminium — which increased 37% from R16 814 per ton in the fourth quarter of 2007 to R23 060 per ton in the second quarter of 2008 — presents a challenge as it has a huge impact on working capital, which increased by R549 million, Fourie added.

Fourie warned that the softening local economic climate is likely to have an impact on local sales in the second half of 2008, adding that inflationary pressures will remain a challenge during this period.

However, he expects export sales to remain healthy, driven by strong demand in the Middle East, China, India and in Europe.

Overall, costs grew 16% due to a 58% increase in gas prices, driven mainly by surges in oil prices.

However, Fourie said, the company has kept other costs under control.

It is remarkable that the exporter — which prefers a weaker rand — grew underlying operating profit by an average of 39% a year since 2003 during a period in which the local currency remained relatively strong.

Hulamin’s staff size in Pietermaritzburg has grown from about 1 400 in 2004 to 1 800 this year.

Fourie said 700 people are employed on its R950 million expansion project, adding that more than 80% of the project costs have been committed.

About R510 million has been spent on the expansion.

kavith@witness.co.za

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