| Tue 12 Feb 2008, 7:05 | | HLM - Hulamin Limited - Audited Results And Final Cash Dividend Declaration |
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HLM
HLM
HLM - Hulamin Limited - Audited Results And Final Cash Dividend Declaration
For The Year Ended 31 December 2007
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE000096210
AUDITED RESULTS AND FINAL CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 31
DECEMBER 2007
HIGHLIGHTS
- Revenue growth of 20% to R6.6 billion
- Operating profit before structuring cost of R380 million
- Underlying operating profit improvement of 43%
- Listing and BEE structuring costs of R168 million
- Headline earnings of R40 million (18 CPS)
- Annual dividend of R105 million (48 CPS)
Alan Fourie CEO commented: "Rolled Products continued to deliver a strong
operational performance in the second half of the year supported by an increase
in export sales, mix enhancement and positive exchange rate movement for the
year.
Our expansion programme is on track and we expect further reductions in unit
costs as the increased capacity comes on stream and cost reduction measures
take effect.
We are well placed to maintain sustained growth in earnings in 2008 and beyond
from our continued increase in sales volumes and conversion margins."
Enquiries
Hulamin 033 395 6911
Alan Fourie, CEO 083 626 9444
Charles Hughes, CFO 082 745 6173
Richard Jacob 082 806 4068
Commentary
Hulamin achieved a 5% increase in sales volumes largely arising from increased
sales in Rolled Products. This growth, together with the effects of better
margins, higher aluminium prices and a 4% weakening in the average exchange
rate for the year resulted in revenue growing by 20% from R5,5 billion to R6,6
billion.
Following the unbundling of Hulamin from Tongaat Hulett and the listing of the
company on the main board of the JSE Limited in June 2007, Hulamin concluded a
number of transactions which led to 15% of the company`s equity being held by
broad-based Black Economic Empowerment (BEE) participants, including
employees. The costs associated with the restructuring and listing of the
company, together with charges relating to the BEE transactions, amounted to
R168 million and are reflected in the income statement as corporate structuring
costs.
A significant factor in Hulamin`s 2006 results and which has not recurred in
the 2007 results, was the unusually large metal price lag benefit of R183
million. This arose as a consequence of the sharp increase in aluminium prices
in 2006. The subsequent hedging of this item, which has been introduced in
order to reduce the volatility in earnings, has protected the company against
reductions in the aluminium price and resulted in a benefit of R22 million in
2007. Had this hedge not been implemented, a metal price lag loss would have
occurred in 2007 and thus the objective of reducing earnings volatility has
been met.
The comparison of earnings in 2007 with those in 2006 is influenced by the high
metal price lag benefit in 2006 and the structuring costs in 2007, and this has
resulted in the operating profit for the year reducing from R422 million to
R212 million. The underlying operating profit after adjusting for these two
items reflects an increase of 43% over 2006, resulting in a compound annual
growth of 37% over the last three years.
In December 2006 a convertible loan of R580 million was converted into equity
with the result that the average level of borrowings in 2007 was lower than in
2006. As a consequence the financing costs for the year at R85 million reflect
a significant reduction from R222 million in 2006.
As the majority of the structuring costs are not deductible from taxable
income, the effective rate of taxation for 2007 was 71%, which is a significant
change from the positive income tax benefit attributable to the company in
2006. This situation arose as a consequence of a corporate structure that had
been implemented in 1996 to enable Hulamin to undertake its major expansion and
was terminated in 2006.
Earnings per share for the year, after taking into account all the above items,
amounted to 19 cents. After adding back the non-recurring structuring costs,
earnings per share would amount to 95 cents.
The company achieved a positive cash flow of R209 million before dividends and
expansion project payments. This was partly due to the fact that the majority
of the normal tax liability of R111 million for the year will be paid in 2008.
The company incurred capital expenditure payments of R273 million on the Rolled
Products expansion project which, together with dividend payments of R39
million, resulted in a net cash outflow before financing activities for the
year of R103 million.
The balance sheet remains sound with net borrowings amounting to R829 million,
which is 24% of equity. Cumulative expenditure on the Rolled Products expansion
project including capitalised interest, amounts to R331 million and the
remaining expenditure will be funded out of established borrowing facilities
and operating cash flows.
Rolled Products
Rolled Products increased its sales volumes from 183 000 tons to 193 000 tons.
Growth in local demand for rolled products, having increased by approximately
50% over the previous three years, slowed significantly and finished slightly
below 2006 levels. This slowdown was largely a consequence of tightening
economic conditions and the negative impact of Rand strength through increasing
imports of finished products. In spite of this slowdown, a number of market
development activities are progressing well, particularly in automotive and
transport applications, and these are expected to result in local market demand
again increasing in 2008.
Export volumes increased by 8% (10 000) tons and continue to reflect an
increase in the proportion of high value niche products which Hulamin is
targeting. The improved sales mix contributed to an increase of 17% in
Hulamin`s export margins expressed in US dollars.
Manufacturing costs increased by 12% and were particularly affected by
increases in the price of gas (28% increase) and packaging materials (35%
increase). It is expected that there will be continuing reductions in unit
costs as the business continues to grow its output.
The R950 million Rolled Products expansion project is progressing according to
schedule and within budget. More than 70% of the project costs have been
committed. The project will provide opportunities to further improve the
product mix and to grow the volumes to levels exceeding 250 000 tons per annum.
Extrusions and Commercial Products
After a difficult first half, Hulamin Extrusions showed an encouraging recovery
in the second half. The business continues to expand its product range, invest
in new product development, and extend its distribution infrastructure which
will yield sustained benefits.
The smaller business units, which were previously collectively reported as
Commercial Products, have been restructured and aligned more closely with the
Rolled Products and Extrusions operations. Their results are therefore included
as part of those two entities and the comparable 2006 segmental analysis has
been restated accordingly.
Future prospects
Hulamin`s outlook continues to be influenced by international economic
conditions and exchange rate movements, as a result of the high proportion
(70%) of export sales. The company`s exposure to electricity supply
constraints, at the currently required demand reduction of 10%, is not
expected to have a material effect on production or sales. Increased
volumes and improved conversion margins are expected to result in
sustained growth in earnings in 2008 and beyond. This prospect is
strengthened by the benefits flowing from the current major expansion
project which will come on stream during 2009.
Audited results
The group financial statements for the year ended 31 December 2007 have been
audited by PricewaterhouseCoopers Inc. Their unmodified audit opinion is
available for inspection at the registered office of the company.
Trading Statement for the 6 Months to June 2008
Hulamin`s results for 2007 were heavily impacted by the non-recurring charges
of R168m arising from the introduction of BEE equity investors and the
unbundling and listing of the company (corporate structuring costs). The group
thus reported the following earnings:
Period Earnings
6 Months to June 2007 Loss of R70 million (33 cps)
Year to December 2007 Earnings of R41 million (19 cps)
Period Headline earnings
6 Months to June 2007 Loss of R70 million (33 cps)
Year to December 2007 Headline earnings of R40 million (18 cps)
The group`s results for the 6 months to June 2008 are expected to show an
improvement of at least 20% from those reported for the 6 months to June 2007,
due to the non-recurrence of the above mentioned corporate structuring costs,
and thus in terms of section 3.4 (b) of the JSE Listing Requirements the group
is required to issue a trading statement. However, as it is quite early in the
reporting period and Hulamin cannot, with reasonable certainty, quantify the
extent of its results for the 6 months to June 2008 within the 20% range
required by the JSE Listing Requirements, it is expected that a trading
statement for the 6 months to June 2008 will be issued later in the reporting
period, which should be in June or July of 2008.
DIVIDEND DECLARATION
Notice is hereby given that the board has declared a final dividend (no. 2) of
30 cents per share for the year ended 31 December 2007 to shareholders recorded
in the register at the close of business on Friday, 7 March 2008.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last date to trade ordinary shares "cum" dividend Friday, 29 February 2008
Ordinary shares commence trading "ex" dividend Monday, 3 March 2008
Record date Friday, 7 March 2008
Payment of dividend Monday, 10 March 2008
Share certificates may not be dematerialised or
rematerialised between Monday, 3 March 2008 and Friday, 7 March 2008, both days
inclusive.
On Monday, 10 March 2008, dividends due to holders of share certificates will
either be transferred electronically to shareholders` bank accounts or, in the
absence of suitable mandates, dividend cheques will be posted to such
shareholders. Shareholders who have not yet mandated electronic payments are
encouraged to do so for all future dividends.
Dividends in respect of dematerialised shareholders will be credited to the
shareholders` relevant CSDP or broker account.
The dividend is declared in the currency of the Republic of South Africa.
Dividends paid by the United Kingdom paying agent will be paid in British
currency at the ruling exchange rate at the close of business on Wednesday, 5
March 2008.
For and on behalf of the board.
Willem Fitchat Moses Mabhida Road
Company Secretary Pietermaritzburg, KwaZulu-Natal
11 February 2008
Income Statement
2007 2006
Note R`000 R`000
Revenue 6 568 371 5 476 140
Cost of sales (5 837 665) (4 867 571)
Gross profit 730 706 608 569
Other operating income 7 630 341
Selling and marketing expenses (271 571) (260 891)
Administrative expenses (108 848) (98 374)
Underlying operating profit 357 917 249 645
Metal price lag 22 119 182 782
Operating profit before corporate
structuring costs 380 036 432 427
Corporate structuring costs 6 (168 389) (10 000)
Operating profit 211 647 422 427
Share of associate company`s
profit/(loss) 216 (310)
Finance costs (85 262) (222 119)
Profit before tax 126 601 199 998
Tax 3 (89 131) 11 379
Net profit 37 470 211 377
Attributable to:
Shareholders 40 761 204 072
Minority interest (3 291) 7 305
37 470 211 377
Headline earnings
Profit attributable to shareholders 40 761 204 072
(Profit)/loss after tax on disposal of
plant and equipment (886) 70
Headline earnings attributable to
shareholders 39 875 204 142
Earnings per share (cents)
Basic 19 100
Diluted 19 99
Headline earnings per share (cents)
Basic 18 100
Diluted 18 99
Dividend per share (cents) 48 -
Interim paid 18 -
Final declared 30 -
Currency conversion
Rand/US dollar average 7.05 6.77
Rand/US dollar closing 6.84 7.00
Cash Flow Statement
2007 2006
R`000 R`000
Cash flows from operating activities
Operating profit 211 647 422 427
Interest paid (100 373) (224 117)
(Profit)/loss on disposal of plant and equipment (886) 70
Non-cash items:
Depreciation 179 908 172 501
Other non-cash items 205 347 1 521
Tax payments (13 359) (1 448)
Change in working capital (142 388) (260 389)
339 896 110 565
Cash flows from investing activities
Expenditure on property, plant and equipment: (392 529) (231 323)
Expenditure on intangible assets (5 067) (3 881)
Proceeds on disposal of property, plant and
equipment 886 46
Increase in investments (6 336) (2 074)
(403 046) (237 232)
Cash flows from financing activities
Borrowings repaid (362 529) (422 371)
Capital contribution 436 605 580 000
Settlement of share options net of reversals (12 316) -
Dividends paid (39 498)
22 262 157 629
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts (40 888) 30 962
Balance at beginning of period 41 559 10 597
Cash, cash equivalents and bank overdrafts at end
of period 671 41 559
Balance Sheet
2007 2006
Note R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 166 987 3 939 255
Intangible assets 26 162 23 212
Investments in associates 3 784 1 765
Deferred tax asset 16 373 -
4 213 306 3 964 232
Current assets
Inventories 964 145 988 978
Trade and other receivables 1 013 603 1 050 353
Cash and cash equivalents 92 146 63 526
Derivative financial assets 47 005 67 980
2 116 899 2 170 837
Total assets 6 330 205 6 135 069
EQUITY
Share capital and share premium 989 492 592 887
BEE reserve 174 686 -
Employee share-based payment reserve 21 085 -
Hedging reserve 988 7 749
Retained income 2 307 900 2 311 682
Equity holders` interest 3 494 151 2 912 318
Minority interest 35 142 38 433
Total equity 3 529 293 2 950 751
LIABILITIES
Non-current liabilities
Borrowings 7 663 611 2 829
Deferred income tax liabilities 894 203 899 815
Retirement benefit obligations 107 505 98 632
1 665 319 1 001 276
Current liabilities
Trade and other payables 734 665 932 278
Borrowings 7 257 042 814 525
Hulamin Joint Venture 7 - 396 320
Derivative financial liabilities 47 626 34 549
Income tax liability 96 260 5 370
1 135 593 2 183 042
Total liabilities 2 800 912 3 184 318
TOTAL EQUITY AND LIABILITIES 6 330 205 6 135 069
Net debt to equity 23.7% 39.5%
Statement of Changes in Equity
2007 2006
R`000 R`000
Balance at beginning of period 2 912 318 2 518 877
Net profit for year 40 761 204 072
Share premium 474 292 578 900
Share capital issued 14 096 1 100
Consolidated "A" and "B" class shares (91 783) -
Share-based payment reserve:
- BEE investor`s share capital contribution 40 000 -
- charge on introduction of BEE investors 134 686 -
- value of employee services 21 087 4 830
- share-based payment settled net of reversals (12 319) (4 830)
Tax on share options 7 272
Cash flow hedges transferred to income statement (7 749) (14 020)
Cash flow hedges created 988 7 749
Dividends paid (39 498) -
Partners capital account transferred to current
liability - (396 320)
Deferred tax on common control transaction - 11 960
Shareholders` interest 3 494 151 2 912 318
Minority interest in subsidiary 35 142 38 433
Balance at beginning of period 38 433 31 128
Share of (loss)/profit (3 291) 7 305
Equity 3 529 293 2 950 751
Notes
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2007 have
been prepared in accordance with the group`s accounting policies which fully
comply with International Financial Reporting Standards including IAS 34:
Interim Financial Reporting. The accounting policies applied are consistent
with those used in the previous year except for the adoption of AC 503:
Accounting for Black Empowerment Transactions (an interpretation of IFRIC 8),
the impact of which is set out in note 6, and IFRS 7: Financial Instrument
Disclosure.
Operating profit
before corporate
structuring Operating
Revenue costs profit
R`000 R`000 R`000
2. Segmental Analysis
2007
Hulamin Rolled Products 5 837 946 358 257 207 042
Hulamin Extrusions 798 404 21 779 4 605
Inter-segmental (67 979)
Group total 6 568 371 380 036 211 647
2006
Hulamin Rolled Products 4 853 780 388 366 378 366
Hulamin Extrusions 707 256 44 061 44 061
Inter-segmental (84 896)
Group total 5 476 140 432 427 422 427
Total assets Total liabilities
R`000 R`000
2. Segmental Analysis
2007
Hulamin Rolled Products 5 965 256 2 544 430
Hulamin Extrusions 364 949 256 482
Inter-segmental
Group total 6 330 205 2 800 912
2006
Hulamin Rolled Products 5 768 533 2 953 212
Hulamin Extrusions 366 536 231 106
Inter-segmental
Group total 6 135 069 3 184 318
Inter-segmental revenue amounted to R46 489 000 (2006: R65 582 000) in Hulamin
Rolled Products and R21 490 000 (2006: R19 314 000) in Hulamin Extrusions.
2007 2006
R`000 R`000
3. Tax
The tax (charge)/relief included
within these financial statements is:
Normal (111 103) (6 821)
Deferred 27 078 18 200
STC (5 106) -
(89 131) 11 379
Normal rate of taxation 29.0% 29.0%
Adjusted for:
Listing costs 4.3% -
Share-based payment costs related to
the introduction of broad-based BEE investors 31.3% -
STC 4.1% -
Other non-allowable items 1.8% 1.7%
Joint venture income not taxed - (36.4%)
70.5% (5.7%)
The 2006 financial statements do not reflect any charge or liability for
taxation on the results of The Hulamin Joint Venture, as this income tax was
borne by the partners in the joint venture.
4. Earnings per share
Basic earnings per share is calculated using the weighted average number of
ordinary shares in issue during the year. For purposes of diluted earnings per
share, the weighted average number of shares in issue is adjusted for the
dilutive effect of employee share options.
The weighted average number of shares in issue at 31 December 2006 has been
retrospectively adjusted to account for the subdivision of the R1 shares into
10 shares of 10 cents each and the capitalisation award of 104 577 344 shares
prior to the listing of the company on the main board of the JSE Limited in
June 2007.
Reconciliation of denominators used for basic and diluted earnings per share
December December
2007 2006
Number of Number of
shares shares
Basic EPS - weighted average
number of shares 215 589 370 204 637 618
Share options 2 763 896 1 746 176
Diluted EPS - weighted average
number of shares 218 353 266 206 383 794
R`000 R`000
5. Commitments and contingent liabilities
Capital expenditure commitments
Contracted 486 568 95 152
Approved but not contracted 395 843 984 668
882 411 1 079 820
Operating lease commitments 22 610 16 464
Guarantees and contingent liabilities 22 225 21 980
6. Corporate structuring costs
The group has completed a number of
transactions to facilitate the unbundling
and listing of Hulamin Limited,
and the introduction of broad-based BEE
investors. The costs relating to these
transactions are as follows:
The legal, tax, accounting and other costs
related to the unbundling, listing, BEE and
funding transactions, and renaming of
the group 19 026 10 000
Costs in respect of partial early vesting of
Share incentives 8 932 -
Share-based payment costs related to the MSOP
and ESOP schemes # 5 745 -
Share-based payment costs related to the
introduction of
broad-based BEE investors 134 686 -
168 389 10 000
# The total share-based payment cost relating to the MSOP and ESOP schemes is
R86 186 531 and this will be expensed over the 5-year vesting period of the
schemes.
7. Funding
The amount owed to The Hulamin Joint Venture partners of R396 320 006 was
repaid on 30 March 2007. The partners simultaneously subscribed for 100 R1 par
value shares in Hulamin Limited with a share premium of R396 319 906.
As part of the process of unbundling and listing of Hulamin Limited, the loan
from The Tongaat-Hulett Group was repaid on 30 June 2007 and replaced with
secured long and short-term facilities from a number of financial
institutions.
Corporate information
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE 000096210
Business and postal address
Moses Mabhida Road, Pietermaritzburg, 3201
PO Box 74, Pietermaritzburg, 3200
Contact numbers
Telephone: +27 33 395 6911
Facsimile: +27 33 394 6335
Website: www.hulamin.co.za
E -mail: hulamin@hulamin.co.za
Securities exchange listings
South Africa (Primary), JSE Limited
Transfer Secretaries
Computershare Investor Services 2004
(Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and
Rivonia Road, Sandton, 2196
PO Box 786273, Sandton, 2146
Directorate
Following the unbundling of the company from the Tongaat Hulett group, the
Hulamin board comprises of the following directors:
Non-executive directors:
P M Baum, I Botha (resigned with effect from
30 September 2007), L C Cele, V N Khumalo,
T P Leeuw, J B Magwaza, M E Mkwanazi (Chairman), P H Staude, J G Williams
(appointed with effect from 30 September 2007)
Alternate:
S P Ngwenya
Executive directors:
A Fourie (Chief Executive Officer), C D Hughes,
M Z Mkhize
The following Hulamin board members resigned with effect from the unbundling
record date (29 June 2007)
Non-executive directors:
L W J Matlhape, M H Munro, C M L Savage,
S J Saunders (alt), M P Zambane
Executive directors (alternates):
F B Bradford, R G Jacob, C J Little, T K Mshengu,
D F Timmerman
11 February 2008
Date: 12/02/2008 07:05:03 Produced by the JSE SENS Department.
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