Rand erodes gains

2011-03-01 00:00

DESPITE widespread efforts to improve efficiency in its business, Pietermaritzburg-based aluminium semi-fabricator Hulamin delivered “disappointing” results for the year ended December 31, 2010, mainly due to the strength of the rand.

CEO Richard Jacob told The Witness yesterday that although market conditions and volumes improved to the tune of a 32% growth in the sale of rolled products last year, the rand’s 13% improvement against the U.S. dollar last year (averaging R7,32 to the dollar in 2010) eroded gains made by the company.

Headline earnings came in at 27 cents per share in 2010 from 37 cents per share in 2009.

Jacob said the company was forced to reduce its indirect employment numbers through a reduction in temporary employees.

Although Jacob expects a five to eight percent depreciation of the rand going forward, he said the company’s focus will be on “sweating the assets” and extending the progress made on volume-growth.

He said he is pleased with significant operational improvements made last year, which resulted in annualised savings of about R200 million.

In real terms, Hulamin’s unit costs have decreased by 16% year-on-year as a result of savings and an increase in volumes.

“We took the view as management last year that we could not simply wait around for the external environment to suit us. We had to improve our operational performance,” Jacob said.

“These savings have gone some way toward countering the rand’s strength.

“However, it is a general rule that a R1 movement in the rand-dollar exchange rate affects us by R200 million operationally.”

He said the growth of rolled products was fuelled by a pick-up in the packaging industry, with can and foil volumes rising along with automotive-related products.

The South African market continues to disappoint, he added.

Jacob said an agreement was reached with BHP Billiton to extend the existing rolling slab supply agreement until June 2012, adding that they will discuss a further one-year extension later this year.

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