Hulamin plagued by strong rand

2011-07-26 00:00

ALUMINIUM semi-fabricator Hulamin yesterday reported an improvement in headline earnings in its interim results for the half-year ended June 30, 2011, but said it remained plagued by a strong rand and vulnerable overseas markets.

Chief executive Richard Jacob told The Witness yesterday that although rolled product volumes grew to a record high of 208 000 tons on an annualised basis, the strong rand eroded much of the gains.

The JSE-listed company, which is based in Pietermaritzburg, spent almost R1 billion in increasing its rolled products capacity in late 2009. It aims to achieve volumes of 250 000 tons by 2014.

The local currency averaged R6,91 to the U.S. dollar during the first half of the year, compared with R7,54 during the first half of 2010. This translated into a R75 impact on Hulamin for the first half of the year.

While headline earnings grew 176% to R71 million off a low base set last year, the figure was boosted by a R26 million insurance settlement following a breakdown of the Camps Drift hot mill in 2009.

Headline earnings per share for the half-year ended June 30, 2011, doubled to 22 cents from 11 cents last year. Revenue grew 24% to almost R3,4 billion.

The company’s rolled products division supplies a range of sectors, including packaging, automotive, construction and engineering.

Jacob said operational improvements were ramped up, particularly with regard to volumes, unit costs, yields and margins.

Hulamin boasts a full order book, despite indications of tentative and weaker markets in the U.S. and Europe.

Jacob said he expects pressure on prices and margins to dominate the second half of the year.

Rolling slab capacity in Pietermaritzburg was increased with the completion of a R75 million project in the second quarter of 2011. Jacob said it is intended that this project, coupled with existing capacity and BHP Billiton’s 90 000 tons supply line, would meet Hulamin’s maximum requirements of 250 000 tons a year.

He added that they will resume formal talks with BHP Billiton in August regarding an extension of their existing supply contract, which ends in June 2012.

Although a recently conducted benchmarking exercise on various cost indicators revealed that Hulamin’s staff count is higher than the average, Jacob said, the company has no plans to retrench staff in the near term.

He said that 2 250 people are employed across the company, including 1 900 in Pietermaritzburg.

The company-wide figure is about 300 lower year on year, mainly as a result of Hulamin not renewing temporary jobs, as well as natural attrition.

“Our business plan is different to other companies. We must look at working smarter rather than letting our people bear the brunt [of job cuts].”

Recent shortages of liquefied petroleum gas (LP gas) have affected Hulamin’s operations.

Jacob said Hulamin is one of the biggest consumers of LP gas in South Africa and that although supply had been normalised in part through imports, the LP gas has come at a higher price.

Hulamin said that it plans to close its Cape Town extrusion plant at the end of September. The closure is due to a number of factors, including excess supply in relation to market demand and the negative impact of imports from China.

Jacob said Hulamin plans to relocate employees from the Cape Town plant to another facility in Cape Town, as well as Midrand and Pietermaritzburg.

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