| Wed 22 Jul 2009, 7:05 | | HLM - Hulamin Limited - Unaudited Interim Results for the Half-Year Ended 30 |
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HLM
HLM
HLM - Hulamin Limited - Unaudited Interim Results for the Half-Year Ended 30
June 2009
HULAMIN LIMITED
("Hulamin" or "the group")
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE000096210
UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2009
Order intake recovering after sharp reduction
Operating profit reduced from R270 million to R114 million
HEPS reduced from 84 cents to 12 cents per share
Positive cash flow of R374 million
Rolled Products margins maintained in difficult market conditions
"The first six months of 2009 were the most difficult for some years" said
Alan Fourie, Chief Executive of Hulamin Limited. "Despite the sharp drop in
demand, the business has recovered strongly, has generated substantial cash
inflows and is looking forward to the second half with a strong order book".
Income Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
Note R`000 R`000 R`000
Revenue 2 115 453 3 571 627 7 119 973
Cost of sales (1 871 515) (3 082 006) (6 235 460)
Gross profit 243 938 489 621 884 513
Other operating income 3 96 577 14 055 60 312
Selling and marketing
expenses (162 556) (162 358) (355 859)
Administrative expenses (63 634) (70 920) (123 515)
Operating profit 114 325 270 398 465 451
Share of joint
venture`s profit 203 117 1 111
Finance costs (74 093) (43 674) (118 253)
Profit before tax 40 435 226 841 348 309
Taxation 4 (15 653) (41 191) (79 527)
Net profit 24 782 185 650 268 782
Attributable to:
Shareholders 24 782 181 442 268 172
Minority interest 4 208 610
24 782 185 650 268 782
Headline earnings
Net profit attributable
to shareholders 24 782 181 442 268 172
Loss/(profit) on sale
of property, plant
and equipment, net of tax 485 (506)
Headline earnings
attributable to shareholders 25 267 181 442 267 666
Earnings per share
(cents) 5
Basic 11 84 124
Diluted 11 83 123
Headline earnings per
share (cents)
Basic 12 84 124
Diluted 12 83 123
Dividend per share (cents) 28 41
Currency conversion
Rand/US dollar average 9,23 7,65 8,26
Rand/US dollar closing 7,74 7,83 9,41
Statement of Comprehensive Income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Net profit 24 782 185 650 268 782
Cash flow hedges, net of tax (79 643) 34 136 100 664
Total comprehensive income for the
period (54 861) 219 786 369 446
Total comprehensive income
attributable to:
Shareholders (54 861) 215 578 368 836
Minority interest 4 208 610
(54 861) 219 786 369 446
Statement of Changes in Equity
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Balance at beginning of period 3 760 146 3 494 151 3 494 151
Total comprehensive income for the
period (54 861) 215 578 368 836
Shares issued - share capital 20 5 13
Shares issued - share premium 1 010 498 1 411
Value of employee services 14 837 13 293 29 670
Settlement of employee share
incentives (5 174)
Tax on share options 1 622 (2 246)
Dividends paid (28 537) (65 790) (127 267)
Purchase of minority interest 752
Shareholders` interest 3 694 237 3 657 735 3 760 146
Minority interest in subsidiary - 39 350 -
Balance at beginning of period 35 142 35 142
Share of total comprehensive income
for the period 4 208 610
Purchase of minority interest (35 752)
Equity 3 694 237 3 697 085 3 760 146
Balance Sheet
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 908 875 4 380 558 4 763 295
Intangible assets 30 942 26 623 29 515
Investment in joint venture 10 283 4 620 10 080
Deferred tax asset 12 553 15 976 11 697
4 962 653 4 427 777 4 814 587
Current assets
Inventories 848 727 1 374 570 1 325 284
Trade and other receivables 645 319 1 364 940 1 060 013
Derivative financial assets 179 629 65 258 360 022
Cash and cash equivalents 53 002 92 058 66 174
1 726 677 2 896 826 2 811 493
Assets of disposal group classified
as held for sale 15 266 44 432
1 741 943 2 896 826 2 855 925
Total assets 6 704 596 7 324 603 7 670 512
EQUITY
Share capital and share premium 991 946 989 995 990 916
BEE reserve 174 686 174 686 174 686
Employee share-based payment reserve 63 770 34 378 48 933
Hedging reserve 22 009 35 124 101 652
Retained income 2 441 826 2 423 552 2 443 959
Equity holders` interest 3 694 237 3 657 735 3 760 146
Minority interest 39 350
Total equity 3 694 237 3 697 085 3 760 146
LIABILITIES
Non-current liabilities
Non-current borrowings 852 376 898 285 898 595
Deferred income tax liabilities 890 936 883 026 926 359
Retirement benefit obligations 129 273 115 716 119 512
1 872 585 1 897 027 1 944 466
Current liabilities
Trade and other payables 488 926 914 114 692 180
Current borrowings 573 505 699 654 914 465
Derivative financial liabilities 60 277 50 035 315 589
Income tax liability 15 066 66 688 43 666
1 137 774 1 730 491 1 965 900
Total liabilities 3 010 359 3 627 518 3 910 366
TOTAL EQUITY AND LIABILITIES 6 704 596 7 324 603 7 670 512
Net debt to equity 37,2% 40,7% 46,5%
Cash Flow Statement
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Cash flows from operating activities
Operating profit 114 325 270 398 465 451
Interest paid (99 865) (69 501) (189 088)
Loss/(profit) on disposal of
property, plant and equipment 674 (703)
Non-cash items:
Depreciation and amortisation 100 172 94 792 176 354
Other non-cash items (160 936) 21 505 136 414
Tax payments (48 044) (96 019) (136 661)
Changes in working capital 716 042 (549 430) (486 088)
622 368 (328 255) (34 321)
Cash flows from investing activities
Expenditure on property, plant and
equipment (220 087) (280 669) (707 870)
Expenditure on intangible assets (3 024) (2 327) (6 193)
Proceeds on disposal of property,
plant and equipment 2 257 1 207
Investments (836) (5 185)
Acquisition of minority interest in
subsidiary (35 000)
(220 854) (283 832) (753 041)
Cash flows from financing activities
Borrowings (repaid)/raised (387 179) 677 286 892 407
Shares issued 1 030 503 1 424
Settlement of share options net of
reversals (5 174)
Dividends paid (28 537) (65 790) (127 267)
(414 686) 611 999 761 390
Net decrease in cash and cash
equivalents (13 172) (88) (25 972)
Balance at beginning of period 66 174 92 146 92 146
Cash and cash equivalents at end of
period 53 002 92 058 66 174
Notes
1. Basis of preparation and accounting policies
The condensed consolidated interim financial statements of the group for the
half-year ended 30 June 2009 have been prepared in accordance with IAS 34,
`Interim Financial Reporting`. The accounting policies comply with
International Financial Reporting Standards and are consistent with those used
in the preparation of the group`s 2008 annual financial statements.
The following new standards and amendments to standards, that are applicable to
the group, were adopted during the current financial year:
IAS 1 (revised), `Presentation of financial statements`. This standard requires
non-owner changes in equity to be presented separately from owner changes in
equity in a separate performance statement. In terms of this standard, entities
can choose whether to present one performance statement (the statement of
comprehensive income) or two statements (the income statement and statement of
comprehensive income). The group has elected to present two performance
statements.
IFRS 8, `Operating segments`. IFRS 8 replaces IAS 14, `Segment reporting`. It
requires a `management approach` under which segment information is presented
on the same basis as that used for internal reporting purposes.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
2. Segmental analysis
The group is organised into two
major operating segments namely
Hulamin Rolled Products and
Hulamin Extrusions.
REVENUE
Hulamin Rolled Products 1 830 492 3 124 421 6 288 157
Hulamin Extrusions 284 961 447 206 831 816
Group total 2 115 453 3 571 627 7 119 973
INTER-SEGMENTAL REVENUE
Hulamin Rolled Products 6 766 32 240 59 301
Hulamin Extrusions 7 041 15 109 16 255
OPERATING PROFIT
Hulamin Rolled Products 126 388 240 733 453 510
Hulamin Extrusions (12 063) 29 665 11 941
Group total 114 325 270 398 465 451
TOTAL ASSETS
Hulamin Rolled Products 6 392 750 6 894 559 7 296 674
Hulamin Extrusions 311 846 430 044 373 838
Group total 6 704 596 7 324 603 7 670 512
3. Other operating income
The group is exposed to fluctuations in aluminium prices, interest rates and
exchange rates, and hedges these risks with derivative financial instruments.
Other operating income reflects the fair value adjustments arising from these
derivative financial instruments and non-derivative financial instruments
classified as fair value through profit and loss in terms of IAS 39.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
4. Taxation
The tax charge/(relief) included
within these interim financial
statements is:
Normal 16 590 60 032 76 255
Deferred (3 791) 5 252 21 102
Deferred - rate change adjustment (30 507) (30 507)
STC 2 854 6 414 12 677
15 653 41 191 79 527
Normal rate of taxation 28,0% 28,0% 28,0%
Adjusted for:
Deferred - rate change adjustment (13,5%) (8,9%)
STC 7,1% 2,8% 3,7%
Other non-allowable items 3,6% 0,8% 0,1%
38,7% 18,1% 22,9%
5. Earnings per share
The weighted average number of shares used in the calculation of basic and
diluted earnings per share are as follows:
Number Number Number
of shares of shares of shares
June June December
2009 2008 2008
Weighted average number of
shares used for basic EPS 215 775 785 215 634 092 215 668 708
Options 2 362 966 2 238 976 2 248 287
Weighted average number of
shares used for diluted EPS 218 138 751 217 873 068 217 916 995
6. Commitments and contingent
liabilities
Capital expenditure commitments
Contracted 228 158 452 615 302 273
Approved but not contracted 126 654 350 925 186 247
354 812 803 540 488 520
Operating lease commitments 25 940 40 516 36 052
Guarantees and contingent
liabilities 22 471 22 348 22 471
7. Defined benefit pension scheme
Hulamin continues to account for the fund on a defined contribution basis,
pending agreement between the parties to the fund on the basis for allocating
the obligation, plan assets and costs to the individual employers participating
in the fund. Included in the current period results is R37,6 million, being
Hulamin`s share of the allocation by the Trustees of the fund to the Employer
Surplus Account, following the December 2007 statutory valuation of the fund.
Commentary
The global recession has had a severe impact on the demand for Hulamin`s
products, particularly in the automotive, construction, general engineering and
transport sectors. This reduced level of demand was most notable during the
first four months of the year and impacted negatively on operating
efficiencies. The company has implemented a number of actions in its markets,
has seen demand for its products improve and expects to fully re-establish its
growth momentum in the near term.
Sales volumes in the first half of 2009 amounted to 71 000 tons which was 34%
lower than the first half of 2008, with similar reductions in both local and
export markets.
Although significant cost reductions have been achieved, the business has a
relatively high proportion of fixed costs and it was not possible to implement
cost reductions that fully offset the effects of the sharp reduction in sales
volumes. The business did, however, benefit from the weaker exchange rate which
averaged R9,23/US$ compared with R7,65/US$ in the comparable period. Operating
profit reduced from R270 million to R114 million.
Operating profit was shielded from the effects of the sharp reduction in the
aluminium price on aluminium inventories by the metal price hedge that was
implemented in 2007. The hedge has now been partially discontinued in order to
protect the business against the cash flow consequences of a recovery in the
aluminium price.
Finance costs increased as a consequence of the expenditure on the Rolled
Products Expansion Project. The effective tax rate in 2008 was reduced by the
once-off impact of the R31 million deferred tax benefit arising from the change
in the corporate tax rate, and was therefore lower than the current year`s tax
rate. These factors resulted in a disproportionate reduction in headline
earnings to R25 million (12 cents per share) compared to the R181 million
(84 cents per share) earned in the first half of 2008.
The reduction in the price of aluminium together with actions to reduce working
capital and reduced capital spending have resulted in a positive cash flow
during the period of R374 million. Net borrowings accordingly reduced from
R1 747 million to R1 373 million.
In view of the limited earnings in the first half of 2009, and in order to
preserve the company`s funding position, the board has decided not to declare
an interim dividend. A final dividend for the 2009 year will be considered in
the context of the performance of the business and the outlook at the end of
the year.
Rolled Products
Rolled Products sales volumes at 63 000 tons were 34% below the comparable
period. Following a sharp fall in sales orders towards the end of 2008 and
the beginning of 2009, the business has recently improved its order intake
to levels approaching those achieved in 2008. This improved order intake has
resulted in higher monthly sales volumes which will continue into the second
half of the year.
As part of its improved service package, an increasing proportion of export
sales are being concluded on a delivered to customer basis. This delays the
time of revenue recognition and is therefore inflating inventory levels,
although this is matched by a corresponding reduction in receivables. In spite
of this increase in finished goods, total physical inventories reduced by 16%
in the first half of 2009 as raw materials and work in process inventories have
been reduced.
The reduction in sales of some of the higher value products sold into the
automotive and general engineering industries was particularly severe, where
the reduction in both sectors exceeded 60%. By contrast, sales into the
packaging sector have reduced by approximately 15%.
Contrary to market trends, Hulamin has increased the margins earned on many of
its products. However, the weaker product mix has resulted in the average
US dollar margin per ton being similar to the previous year. The weaker product
mix has impacted sharply on earnings, and the restoration of a more attractive
product mix is a high priority.
A number of short-term cost reduction measures were implemented in response to
the reduction in sales volumes. The business also continues to implement
sustainable long-term cost reduction measures. Manufacturing costs reduced by
12% mainly as a consequence of reductions in directly variable costs together
with the effects of a lower gas price which is linked to international oil
prices.
The R970 million expansion project is approaching completion and all elements
will be operational by September 2009 in accordance with the original project
schedule. These new facilities will enable the business to grow its sales to
250 000 tons per annum with an improved product mix within four years.
Expenditure on the project during this period amounted to R117 million leaving
an amount of R67 million still to be spent.
Extrusions
Extrusion volumes reduced by 35% with the downturn being experienced in all
market sectors. After a particularly difficult start to the year, the business
returned to profitable operation in the second quarter. The sustained focus on
market development initiatives and increased market penetration is showing
positive results and further improvement is expected in the second half of the
year.
Rolling Slab and Extrusion Billet Supply
Hulamin produces approximately 70% of its rolling slab and 50% of its extrusion
billet from its own facilities, sourcing the balance of its requirements from
BHP Billiton`s Bayside operation in Richards Bay. BHP Billiton has notified
Hulamin that it intends to discontinue the supply of rolling slab from the end
of 2010 and extrusion billet from the end of September 2009. The supply of
melting ingot will not be affected. Hulamin is evaluating a range of
alternatives to replace the rolling slab and extrusion billet supplied by BHP
Billiton, in order that the supply of these raw materials will not constrain
its growth objectives.
Outlook
Global markets have been severely depressed and significant losses are being
incurred in aluminium semi-fabrication operations across the world, which is
relieving some of the downward pressure on margins. With the benefit of a
stronger order intake in place and improved global market conditions, Hulamin`s
focus is now on restoring a more attractive product mix and bringing the
additional capacity from the expansion project into operation.
The relative strength of the Rand, particularly in relation to the US Dollar,
will however continue to impact on the company`s earnings.
Trading Statement for the 2009 Financial Year
In spite of the improved order book, the poor demand for Hulamin`s products in
the first four months of the year is expected to result in earnings (and
headline earnings) for the financial year ended December 2009 that will be more
than 20% lower than those for the financial year ended 31 December 2008.
However, due to the volatility of exchange rates it is not yet possible with
reasonable certainty, to quantify earnings (and headline earnings) for the year
to December 2009 within the 20% range required by the JSE Limited Listing
Requirements. It is expected that a trading statement for the year to
December 2009 will be issued later in the reporting period, which should be in
November or December of 2009.
The forecast financial information on which this trading statement is based has
not been reviewed and reported on by Hulamin`s auditors.
M E Mkwanazi A Fourie
Chairman Chief Executive
20 July 2009
Corporate Information
HULAMIN LIMITED
("Hulamin" or "the group")
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: 22/07/2009 07:05:02 Produced by the JSE SENS Department.
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