| Tue 10 Feb 2009, 7:05 | | HLM - Hulamin Limited - Audited Results And Final Dividend Declaration For The |
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HLM
HLM
HLM - Hulamin Limited - Audited Results And Final Dividend Declaration For The
Year Ended 31 December 2008
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE000096210
AUDITED RESULTS AND FINAL DIVIDEND DECLARATION FOR THE YEAR ENDED
31 DECEMBER 2008
* Operating profit (before corporate structuring costs) up 22% to R465
million (2007: R380 million)
* Normalised headline earnings per share increased by 16%
* Volumes reduced by 7% in Rolled Products
* Improved sales mix and margins in Rolled Products
* Final dividend of 13 cents per share
Alan Fourie (Chief Executive) commented:
"After the business had performed strongly in the first half of the
year, second half trading conditions were adversely affected by the
sharp slowdown in economic activity both locally and abroad. Despite
these difficulties, firmer rolling margins from the continued
improvement in our sales mix and a focus on controlling costs helped
us to grow operating profit by a pleasing 22% to R465 million and
earnings by 16% to R238 million on a comparable basis.
Sales of standard distributor type products did however contract and
contributed to a drop in sales volumes compared to 2007. We do expect
lower sales volumes in 2009 as customers continue to maintain lower
inventory levels, particularly during the first quarter.
We remain confident of our longer term growth outlook and will
shortly complete the Rolled Products expansion as planned, although
the initial ramp up of capacity is likely to be slower due to the
weaker market conditions.
The benefits of an improving product mix, cost reduction projects and
a weaker exchange rate will continue to underpin future earnings."
Enquiries
Hulamin 033 395 6911
Alan Fourie, CEO 083 626 9444
Charles Hughes, CFO 082 745 6173
Richard Jacob 082 806 4068
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Frederic Cornet 083 307 8286
Commentary
Hulamin experienced a reduction of 6% in sales volumes compared with the
previous year. The reduction arose in both the Rolled Products and Extrusion
operations and was particularly pronounced in the second half of the year as
the global recession took effect. The combination of firmer rolling margins,
higher LME aluminium prices for much of 2008, and a weakening in the
Rand/Dollar exchange rate did however result in turnover increasing by 8% from
R6,6 billion to R7,1 billion.
In 2007 Hulamin incurred once-off costs of R168 million in respect of a Black
Economic Empowerment shareholding structuring arrangement and the listing on
the Johannesburg Stock Exchange. Ignoring the effect of those costs, the
operating profit for 2008 reflects an increase of 22% over 2007 and represents
a compound increase of 33% per annum over the last four years.
Borrowings increased sharply as a result of expenditure on the Rolled Products
expansion project and an increase in working capital which was exacerbated by
the higher aluminium prices. This higher level of borrowings caused finance
costs to increase from R85 million to R118 million.
The 2008 attributable earnings include a benefit of R31 million which arose as
a consequence of a reduction in the deferred tax liability, following the
reduction of 1% in the national corporate tax rate. By contrast the
attributable earnings in 2007 were abnormally low due to the abovementioned
structuring costs which were also largely not deductible from taxable income.
These abnormal occurrences had a significant impact on the increase in
attributable earnings from R41 million in 2007 to R268 million in 2008.
Attributable earnings, excluding these abnormal factors, increased by 16%.
The company experienced a cash outflow from operations, after normal capital
expenditure, of R93 million. Expenditure on the expansion project of R580
million (including capitalised interest and start-up costs), plus interest
expensed of R118 million and dividends of R127 million, led to a net cash
outflow of R918 million.
Net borrowings accordingly increased to R1,747 million, which is 47% of equity.
Taking into account the increase in borrowings during the last year, and the
current economic climate, the board believes that it is prudent to increase the
extent of the dividend cover. The board therefore recommends that a final
dividend of 13 cents per share be paid.
This will result in a total dividend for the year of 41 cents which is covered
3 times by earnings of 124 cents per share.
Rolled Products
Rolled Products sales slowed in the second half of the year and sales volumes
for 2008 were accordingly 13 000 tons below the 2007 level. Operating profit
(before 2007 structuring costs) improved from R358 million to R453 million
driven by improvements in the sales mix and more favourable exchange rates.
Total sales into Hulamin`s preferred niche sectors were similar to prior years
and thus the 13 000 tons reduction in sales volumes arose mainly from standard
distributor type products.
Sales in the local market grew strongly in the first half of the year but
reduced again in the second half on the back of weaker demand from the
automotive sector and destocking in the distributor sector. Local sales for
the full year were similar to the 2007 levels.
Manufacturing costs increased by 25%. Significant increases were experienced in
energy and alloying costs, which rose by 57% and 204% respectively, as a result
of increases in the price of gas, electricity and magnesium and other hardeners
while all other costs increased by 10%. A number of cost reduction projects are
in progress which will further strengthen the company`s competitive cost
position. Structural cost improvements exceeding R50 million per annum have
been achieved in 2008 and further improvements are expected in 2009.
Rolled Products expansion project
Work on the expansion project has progressed well. Several elements of the
project have already been completed on schedule. It is expected that the
remaining elements will also be completed on schedule although sharp cost
increases have been experienced in some areas and are likely to cause the final
project cost to exceed the original budget cost by approximately 2%. In spite
of this, the final installed cost will be considerably below current
replacement cost.
The number of people employed on the project has reduced from a peak of 746 to
320 at the end of 2008. The safety performance by the project team has
continued to be exceptional. Only a single lost time injury has been
experienced during the 1 672 033 hours worked on the project since inception,
resulting in a lost-time injury frequency rate of 0,12.
The expansion project is being completed at a time when market conditions are
weak and thus the initial ramp up of capacity will be slower than originally
planned. The commissioning of this additional capacity will be managed in line
with prevailing market conditions. In addition to creating additional capacity,
the project also creates opportunities to achieve an improved sales mix and
operating unit cost reductions.
Extrusions
Sales volumes in 2008 were similar to the previous year as local demand for
extrusions was impacted by the continued weakening in residential construction
while some segments of the industrial market were impacted by the import of
end-products from China. Operating profit (before corporate structuring costs)
decreased from R22 million to R12 million due to metal price movements and
continuing market development costs.
Hulamin has repurchased the 30% shareholding in Hulamin Extrusions that was
acquired by Hydro Aluminium in 1997. The effective date of the repurchase was
1 December 2008.
Future prospects
The aluminium industry has considerable exposure to several of the industries
that have been most severely affected by the global downturn in business
activity. These include, inter alia, the automotive, transport, building and
construction industries. The global recession is therefore having severe
consequences throughout the industry, resulting in significant capacity
curtailments by both primary and semi-fabricated producers.
Hulamin is responding to the sharply weaker market conditions by reducing
output in a manner which will maintain its growth capability. This has entailed
extending the plant closure over the Christmas period, eliminating overtime
work in areas affected by declining sales volumes, and reducing manufacturing
activities to a five-day week where appropriate. Recruitment has been frozen
and contract positions have largely been eliminated.
Hulamin has a robust business model, which generates returns that are above the
industry average and which are expected to improve further as the business
progresses towards its full potential. This rate of progress will be affected
by the global recession which also introduces considerable uncertainty into
business forecasting. The company expects lower sales volumes for 2009,
particularly during the first quarter while customers across all regions and
market sectors continue to reduce their inventory levels. It is however
expected that the benefits of an improving product mix, cost reduction projects
and a weaker exchange rate will continue to underpin future earnings.
M E Mkwanazi A Fourie
Chairman Chief Executive
9 February 2009
Audit opinion
The auditors, PriceWaterhouseCoopers Inc., have issued their opinion on the
group`s financial statements for the year ended 31 December 2008. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is available
for inspection at the company`s registered office. These condensed financial
statements have been derived from the group financial statements and are
consistent, in all material respects, with the group financial statements.
Dividend declaration
Notice is hereby provided that the board has declared a final dividend (number
04) of 13 cents per share for the year ended 31 December 2008 to shareholders
registered at the close of business on Friday, 6 March 2009.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last day to trade ordinary shares "cum" dividend Friday, 27 February 2009
Ordinary shares commence trading "ex" dividend Monday, 2 March 2009
Record date Friday, 6 March 2009
Payment date Monday, 9 March 2009
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday, 2 March 2009 and Friday,
6 March 2009, both days inclusive.
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,
4 March 2009.
For and on behalf of the board
Willem Fitchat Pietermaritzburg, KwaZulu-Natal
Company Secretary 9 February
Condensed Income Statement
2008 2007
Note R`000 R`000
Revenue 7 119 973 6 568 371
Cost of sales (6 235 460) (5 815 546)
Gross profit 884 513 752 825
Other operating income 60 312 7 630
Selling and marketing expenses (355 859) (271 571)
Administrative expenses (123 515) (108 848)
Operating profit before corporate
structuring costs 465 451 380 036
Corporate structuring costs 7 (168 389)
Operating profit 465 451 211 647
Share of joint venture`s and associate
company`s profit 1 111 216
Finance costs (118 253) (85 262)
Profit before tax 348 309 126 601
Tax 4 (79 527) (89 131)
Net profit 268 782 37 470
Attributable to:
Ordinary shareholders 268 172 40 761
Minority interest 610 (3 291)
268 782 37 470
Headline earnings
Net profit for the year attributable
to ordinary shareholders 268 172 40 761
Profit on sale of property, plant and
equipment (703) (886)
Tax effects of adjustments 197
Headline earnings attributable to
shareholders 267 666 39 875
Earnings per share (cents) 8
Basic 124 19
Diluted 123 19
Headline earnings per share (cents)
Basic 124 18
Diluted 123 18
Dividend per share (cents) 41 48
Interim paid 28 18
Final declared 13 30
Currency conversion
Rand/US dollar average 8,27 7,05
Rand/US dollar closing 9,41 6,84
Condensed Cash Flow Statement
2008 2007
R`000 R`000
Cash flows from operating activities
Operating profit 465 451 211 647
Interest paid (189 088) (100 373)
Profit on disposal of property, plant and equipment (703) (886)
Non-cash items:
Depreciation and amortisation 176 354 182 025
Other non-cash items 41 676 169 178
Tax payments (136 661) (13 359)
Movements in derivatives 94 738 34 052
Change in working capital (486 088) (142 388)
(34 321) 339 896
Cash flows from investing activities
Expenditure on property, plant and equipment (707 870) (392 529)
Expenditure on intangible assets (6 193) (5 067)
Proceeds on disposal of property, plant and
equipment 1 207 886
Investments (5 185) (6 336)
Acquisition of minority interest in subsidiary (35 000)
(753 041) (403 046)
Cash flows from financing activities
Borrowings raised/(repaid) 914 439 (362 529)
Capital contribution 1 424 436 605
Settlement of share options net of reversals (5 174) (12 316)
Dividends paid (127 267) (39 498)
783 422 22 262
Net decrease in cash, cash equivalents
and bank overdrafts (3 940) (40 888)
Balance at beginning of period 671 41 559
Cash, cash equivalents and bank overdrafts
at end of period (3 269) 671
Condensed Balance Sheet
2008 2007
Note R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 763 295 4 166 987
Intangible assets 29 515 26 162
Investments in associates and joint
ventures 10 080 3 784
Deferred tax asset 11 697 16 373
4 814 587 4 213 306
Current assets
Inventories 1 325 284 964 145
Trade and other receivables 1 060 013 1 013 603
Derivative financial assets 360 022 47 005
Cash and cash equivalents 66 174 92 146
2 811 493 2 116 899
Assets of disposal group held for sale 6 44 432
2 855 925 2 116 899
Total assets 7 670 512 6 330 205
EQUITY
Share capital and share premium 990 916 989 492
BEE reserve 174 686 174 686
Employee share-based payment reserve 48 933 21 085
Hedging reserve 101 652 988
Retained income 2 443 959 2 307 900
Equity holders` interest 3 760 146 3 494 151
Minority interest 0 35 142
Total equity 3 760 146 3 529 293
LIABILITIES
Non-current liabilities
Non-current borrowings 9 898 595 663 611
Deferred income tax liabilities 926 359 894 203
Retirement benefit obligations 119 512 107 505
1 944 466 1 665 319
Current liabilities
Trade and other payables 692 180 734 665
Current borrowings 9 914 465 257 042
Derivative financial liabilities 315 589 47 626
Income tax liability 43 666 96 260
1 965 900 1 135 593
Total liabilities 3 910 366 2 800 912
TOTAL EQUITY AND LIABILITIES 7 670 512 6 330 205
Net debt to equity 46,5% 23,5%
Condensed Statement of Changes in Equity
2008 2007
R`000 R`000
Balance at beginning of period 3 494 151 2 912 318
Net profit 268 172 40 761
Share premium 1 411 474 292
Share capital issued 13 14 096
Consolidated "A" and "B" class shares (91 783)
Share-based payment reserve:
BEE investor`s share capital contribution 40 000
IFRS 2 charge on introduction of BEE investors 134 686
value of employee services 29 670 21 087
share-based payment settled net of reversals (5 174) (12 319)
Cash flow hedges transferred to income statement (988) (7 749)
Cash flow hedges 101 652 988
Tax on share options (2 246) 7 272
Dividends paid (127 267) (39 498)
Purchase of minority interest 752
Deferred tax on prior year common control
transaction reversed (11 960)
Normal tax on prior year common control transaction 11 960
Shareholders` interest 3 760 146 3 494 151
Minority interest in subsidiary 35 142
Balance at beginning of period 35 142 38 433
Share of profit/(loss) 610 (3 291)
Purchase of minority interest (35 752)
Equity 3 760 146 3 529 293
Notes
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2008,
from which these condensed financial statements are derived, are prepared in
accordance with International Financial Reporting Standards. The principal
accounting policies and methods of computation adopted are consistent with
those of the previous year, except for the adoption of IFRIC 14 in the current
year which did not have a material impact on the financial statements.
These condensed financial statements are prepared in terms of IAS 34 Interim
financial reporting.
2. Comparative figures
In the current year, metal price lag figures have been included in cost of
sales to provide enhanced functional presentation. In prior years metal price
lag figures were shown in a separate line in the income statement, and these
have been restated in line with the current classification. Accordingly the
2007 comparative cost of sales figure has reduced by R22,1 million.
Operating Total
Revenue profit assets
R`000 R`000 R`000
3. Segmental analysis
2008
Hulamin Rolled Products 6 288 157 453 510 7 296 674
Hulamin Extrusions 831 816 11 941 373 838
Group total 7 119 973 465 451 7 670 512
Inter-segmental revenue amounted to
R59 301 000 in Hulamin Rolled
Products and R16 255 000 in
Hulamin Extrusions.
2007
Hulamin Rolled Products 5 791 457 207 042 5 965 256
Hulamin Extrusions 776 914 4 605 364 949
Group total 6 568 371 211 647 6 330 205
Inter-segmental revenue amounted to R46 489 000 in Hulamin Rolled Products and
R21 493 000 in Hulamin Extrusions.
2008 2007
R`000 R`000
4. Tax
The tax charge/(relief) included within these
financial statements is:
Normal 76 255 111 103
Deferred 21 101 (27 078)
Deferred rate change adjustment (30 506)
STC 12 677 5 106
79 527 89 131
Normal rate of taxation 28,0% 29,0%
Adjusted for:
BEE and IFRS 2 costs 0,1% 31,3%
Other non-allowable items 6,1%
Deferred rate change adjustment (8,9%)
STC 3,7% 4,1%
22,9% 70,5%
2008 2007
R`000 R`000
5. Commitments and contingent liabilities
Capital expenditure commitments
Contracted 302 273 486 568
Approved but not contracted 186 247 395 843
488 520 882 411
Operating lease commitments 36 052 22 610
Contingent liabilities 22 471 22 225
6. Assets of disposal group classified as held for sale
The following assets of Hulamin Engineering Systems
have been presented as held for sale following the
approval of the group`s board to sell the business,
which forms part of the Hulamin Rolled Products
business segment. It is management`s expectation that
this business will be disposed of within the next
12 months.
Property, plant and equipment 8 377
Inventory 36 055
44 432
7. Corporate structuring costs
The group completed a number of transactions in 2007 to
facilitate the unbundling and listing of Hulamin
Limited, and the introduction of broad-based
BEE investors. The once-off costs relating to these
transactions were as follows:
Legal, tax, accounting and other costs related to
the unbundling, listing and renaming of the group 19 026
Costs in respect of partial early vesting of share
incentives 8 932
Share-based payment costs related to the introduction of
broad-based BEE investors 134 686
Share-based payment costs related to the MSOP and ESOP
schemes 5 745
168 389
8. 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.
Reconciliation of denominators used for basic and diluted earnings per share:
Number of Number of
shares shares
2008 2007
Weighted average number of shares used for
basic EPS 215 668 708 215 589 370
Options 2 248 287 2 763 896
Weighted average number of shares used for
diluted EPS 217 916 995 218 353 266
9. Borrowings
The group increased borrowings in order to fund capital expenditure on the
Rolled Products expansion project and an increase in working capital.
The effect of the increased borrowings was a decrease in earnings per share and
headline earnings per share of 13 cents.
2009
Corporate Information
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE000096210
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 (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
Non-executive directors
P M Baum, L C Cele, V N Khumalo, T P Leeuw, J B Magwaza,
M E Mkwanazi (Chairman), P H Staude, J G Williams
Alternate
S P Ngwenya
Executive directors
A Fourie (Chief Executive Officer), C D Hughes, M Z Mkhize
Date: 10/02/2009 07:05:02 Produced by the JSE SENS Department.
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