A tale of two halves for Hulamin

2009-02-10 00:00

Hulamin, the Pietermaritzburg-based manufacturer of aluminium products, experienced a year of two distinctly different halves in 2008, with the second half characterised by significantly softer sales as the global meltdown and the local economic slowdown began to hit home.

The JSE-listed company expects sales volumes to deteriorate further this year, following a six percent reduction in sales volumes in 2008.

Hulamin yesterday reported an increase in headline earnings per share (HEPS) of 16% for the year ended December 31, 2008, in the face of waning local and international demand and a challenging trading environment during the second half of the year.

Operating profit grew by 22% to R465 million, while revenue grew by eight percent to R7,1 billion.

CEO Alan Fourie told The Witness that increased interest costs accounted for the difference between the 22% operating profit growth and the 16% HEPS growth.

Hulamin is nearing completion on its R950 million rolled products expansion project and this has resulted in borrowings increasing sharply.

Fourie is particularly concerned about the prospects for the global economy in 2009, although he believes that various stimulus packages being implemented abroad will stabilise the world’s major economies.

The second half of 2008 was particularly challenging for Hulamin.

Fourie said raw aluminium prices essentially halved during the second half of 2008, plummeting at an average of $260 a month.

Businesses have deferred purchasing as much as possible and their credit lines are coming under pressure.

International customers’ inventories are down, Fourie said. “People are ordering on very short lead times.”

However, rolling margins remained firm in 2008, higher aluminium prices were experienced for much of the year on the back of the commodities boom, cost-control measures were implemented and a weakening in the rand/dollar exchange rate contributed to the increase in turnover.

Although manufacturing costs (particularly gas and allowing costs) rose by 25% in 2008, cost pressures have already begun to ease.

“We remain confident of our longer-term growth outlook and will shortly complete the rolled products expansion … although the initial ramp-up of capacity is likely to be slower due to the weaker market conditions.”

The extrusion business experienced flat sales volumes and Hulamin Extrusion’s operating profit (before corporate structuring) decreased from R22 million to R12 million.

“The benefits of an improving product mix, cost reduction projects and a weaker exchange rate will continue to underpin future earnings,” added Fourie.

The board declared a final dividend of 13 cents per share. The total dividend for the year was 41cents, seven cents down on last year’s.


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