| Mon 15 Feb 2010, 7:05 | | HLM - Hulamin Limited - Audited results for the year ended 31 December 2009 |
|
HLM
HLM
HLM - Hulamin Limited - Audited results for the year ended 31 December 2009
HULAMIN LIMITED
Registration number: 1940/013924/06
Share code: HLM
ISIN number: ZAE000096210
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
- Fourth quarter sales volumes rebound
- Operating profit reduced from R465 million to R244 million
- HEPS reduced from 124 cents to 42 cents
- Rolled Products expansion completed on schedule
- Focus on mix improvement
Alan Fourie (Chief Executive) commented:
`Our sales slowed during the sharp contraction in the global economy and our
sales mix changed towards more standard distributor type products which
weakened our rolling margin.
Sales have however improved towards the end of the year in some key markets
which contributed to increased annualised sales volumes, though local demand
and the global plate and brazing sheet markets remain weak.
We are proceeding with measures which will increase our rolling slab production
to enable the business to achieve its medium-term growth targets.
Hulamin is well positioned to further grow its sales volumes, improve its
product mix and achieve further cost improvements to achieve an attractive
return on capital.`
Enquiries
Hulamin 033 395 6911
Alan Fourie, CEO 083 626 9444
Charles Hughes, CFO 082 745 6173
Richard Jacob 082 806 4068
CapitalVoice
Johannes van Niekerk 082 921 9110
COMMENTARY
Market conditions for Hulamin`s products were challenging in all market sectors
during the year, although some improvement was noted in international markets
towards the end of the year. Annualised sales volumes are returning to
pre-contraction levels, notwithstanding the unscheduled interruption to
production at the Camps Drift hot mill in July due to the premature failure of
a critical component.
Local demand and the global plate and brazing sheet markets remained weak
throughout 2009 which led to the overall product mix shifting away from the
niche, high value products towards more standard distributor type products.
Poor demand in the first half of the year, together with the hot mill break
Down resulted in sales volumes for the year reducing by 20% to 159 000 tons.
This, together with the effect of a lower average Rand aluminium price,
resulted in turnover reducing from R7,1 billion to R4,5 billion.
Operating profit reduced from R465 million to R244 million. Earnings in the
second half of the year showed some improvement over the first half despite the
pronounced strengthening of the Rand against the US dollar. Attributable
earnings for the year reduced from R268 million to R90 million and headline
earnings per share reduced from 124 cents to 42 cents.
Operating cash flow (before interest and tax) of R962 million benefited from a
R599 million reduction in working capital. Inventories were reduced by 15 days
(20%) and export debtors by 9 days (15%).
The net cash flow after dividends and capital expenditure, following the
completion of the Rolled Products expansion, amounted to R338 million. Net
borrowings reduced from R1 747 million to R1 409 million, which amounts to 38%
of equity.
Hulamin is assessing a number of alternatives to optimise its capital
structure. This may include raising equity capital as more appropriate longer
term funding to support the continuing growth in rolled products sales.
Consequently, the board has decided not to declare a dividend for the
2009 financial year.
Rolled Products
After a stronger second half, Rolled Products sales volumes, at 142 000 tons
for the year, were 38 000 tons lower than 2008 and 51 000 tons below 2007. The
interruption to the operation of the hot mill affected sales by approximately
10 000 tons.
Demand in all regions and sectors remained subdued in 2009 with sales in some
sectors down by more than 50% from 2008 levels. Demand in the packaging sector
is recovering well. The high value plate and brazing sheet markets are also
starting to show some improvement but are not expected to recover fully during
2010. Domestic demand remains weak and local sales in 2009 were 22% below the
comparative levels.
In response to these weak market conditions, Hulamin increased its sales of
standard products in the USA and Europe and production capacity is fully
committed for several months into the new financial year.
Manufacturing costs reduced by 7% as a result of cost reduction measures, lower
production volumes and a reduction in gas prices. The structured implementation
of sustainable cost reduction and efficiency improvement projects is
progressing well and cumulative annualised benefits are approaching R80
million. Significant further progress is expected in the current year.
The R970 million expansion project has been successfully completed. This
project has increased the rolled products capacity by approximately 20% and
will also enable the business to improve its sales mix as market conditions
improve.
The operating performance of the newly commissioned assets is encouraging,
providing confidence that the project will deliver the expected financial
returns as the capacity utilisation and product mix improves.
Extruded Products
The local demand for extruded products weakened sharply and Extrusion sales
volumes were 17% below the previous year, despite an improvement in market
share. The business continues to strengthen its market position in the
architectural sector and achieved markedly higher sales in the second half of
the year. Several market development and streamlining projects are in place
which are expected to yield further improvements in 2010.
Rolling Slab and Extrusion Billet Supply
Hulamin sources sufficient locally-produced primary aluminium which it uses
to produce the majority of its rolling slab and extrusion billet
requirements. It has thus far also sourced some of its rolling slab and
extrusion billet requirements from BHP Billiton.
During the year, BHP Billiton discontinued the supply of extrusion billet from
the Bayside smelter to the South African extrusion industry. Hulamin has
secured import supply of extrusion billet as replacement and produces the
balance of its requirements in its own facilities.
BHP Billiton has also notified Hulamin that it intends to discontinue the
supply of rolling slab from the end of 2010. Hulamin is proceeding with
measures which will address its rolling slab requirements and will enable the
business to achieve its medium-term growth targets. These include investment
projects to increase Hulamin`s own slab manufacturing capacity, the
recommissioning of unused slab casting facilities, and limited quantities of
imports. The latter two initiatives are not optimal long-term solutions and
efforts to achieve a more attractive outcome to improve the beneficiation
of aluminium produced in the region are continuing.
Prospects
Following the completion of the Rolled Products expansion project, Hulamin is
now well positioned to further grow its sales volumes, improve its product mix
and achieve further cost improvements in pursuit of its drive to achieve an
attractive return on capital employed. The rate of growth in sales and earnings
will be impacted by the strength of the global economic recovery, the final
resolution of the rolling slab supply issues, and the relative value of the
Rand against the major currencies.
M E Mkwanazi A Fourie
Chairman Chief Executive
11 February 2010
Audit opinion
The auditors, PriceWaterhouseCoopers Inc., have issued their opinion on the
group`s financial statements for the year ended 31 December 2009. 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.
Condensed Income Statement
2009 2008
Note R`000 R`000
Revenue 4 499 582 7 119 973
Cost of sales (3 895 842) (6 235 460)
Gross profit 603 740 884 513
Other gains and losses 53 968 60 312
Selling and marketing expenses (323 438) (355 859)
Administrative expenses (90 296) (123 515)
Operating profit 243 974 465 451
Net finance costs (113 813) (118 253)
Share of profits of associates and
joint ventures 383 1 111
Profit before tax 130 544 348 309
Taxation 4 (40 911) (79 527)
Net profit for the year 89 633 268 782
Attributable to:
Equity holders of the company 89 633 268 172
Non-controlling interests - 610
89 633 268 782
Headline earnings
Net profit for the year attributable
to shareholders 89 633 268 172
Loss/(profit) on sale of property,
plant and equipment 2 731 (703)
Tax effects of adjustments (765) 197
Headline earnings attributable to
shareholders 91 599 267 666
Earnings per share (cents) 5
Basic 42 124
Diluted 41 123
Headline earnings per share (cents)
Basic 42 124
Diluted 42 123
Dividends per share (cents) - 41
Interim paid - 28
Final declared - 13
Currency conversion
Rand/US dollar average 8,42 8,27
Rand/US dollar closing 7,39 9,41
Condensed Statement of Comprehensive Income
2009 2008
R`000 R`000
Net profit for the year 89 633 268 782
Cash flow hedges, net of tax (102 174) 100 664
Total comprehensive (loss)/income for the year (12 541) 369 446
Attributable to:
Equity holders of the company (12 541) 368 836
Non-controlling interests - 610
(12 541) 369 446
Condensed Statement of Changes in Equity
2009 2008
R`000 R`000
Shareholders` interest 3 744 279 3 760 146
Balance at beginning of year 3 760 146 3 494 151
Share of total comprehensive (loss)/income
for the year (12 541) 368 836
Shares issued 1 639 1 424
Value of employee services 29 492 29 670
Settlement of employee share incentives (7 547) (5 174)
Tax on employee share incentives 1 627 (2 246)
Dividends paid (28 537) (127 267)
Purchase of non-controlling interest - 752
Non-controlling interests - -
Balance at beginning of period - 35 142
Share of total comprehensive income for the year - 610
Purchase of non-controlling interest - (35 752)
Total equity 3 744 279 3 760 146
Condensed Balance Sheet
2009 2008
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 4 979 278 4 763 295
Intangible assets 29 874 29 515
Investments in associates and joint ventures 10 463 10 080
Deferred tax asset 13 899 11 697
5 033 514 4 814 587
Current assets
Inventories 1 015 029 1 325 284
Trade and other receivables 695 228 1 060 013
Derivative financial assets 97 970 360 022
Income tax asset 8 048 -
Cash and cash equivalents 64 413 66 174
Assets of disposal group held for sale - 44 432
1 880 688 2 855 925
Total assets 6 914 202 7 670 512
EQUITY
Share capital and share premium 992 555 990 916
BEE reserve 174 686 174 686
Employee share-based payment reserve 74 097 48 933
Hedging reserve (522) 101 652
Retained earnings 2 503 463 2 443 959
Total equity 3 744 279 3 760 146
LIABILITIES
Non-current liabilities
Non-current borrowings 763 496 898 595
Deferred tax liability 912 876 926 359
Retirement benefit obligations 132 946 119 512
1 809 318 1 944 466
Current liabilities
Trade and other payables 580 420 692 180
Current borrowings 709 822 914 465
Derivative financial liabilities 70 363 315 589
Income tax liability - 43 666
1 360 605 1 965 900
Total liabilities 3 169 923 3 910 366
Total equity and liabilities 6 914 202 7 670 512
Net debt to equity (%) 37,6 46,5
Condensed Cash Flow Statement
2009 2008
R`000 R`000
Cash flows from operating activities
Operating profit 243 974 465 451
Net interest paid (170 409) (189 088)
Loss/(profit) on disposal of property,
plant and equipment 2 731 (703)
Non-cash items:
Depreciation and amortisation 197 733 176 354
Other non-cash items (82 156) 136 414
Income tax payment (66 949) (136 661)
Changes in working capital 599 333 (486 088)
724 257 (34 321)
Cash flows from investing activities
Additions to property, plant and equipment (351 811) (707 870)
Additions to intangible assets (3 554) (6 193)
Proceeds on disposal of property,
plant and equipment 3 534 1 207
Increase in investment in associates
and joint ventures - (5 185)
Acquisition of non-controlling interest in subsidiary - (35 000)
(351 831) (753 041)
Cash flows from financing activities
Borrowings (repaid)/raised (339 742) 892 407
Shares issued 1 639 1 424
Settlement of share options net of reversals (7 547) (5 174)
Dividends paid (28 537) (127 267)
(374 187) 761 390
Net decrease in cash and cash equivalents (1 761) (25 972)
Balance at beginning of year 66 174 92 146
Cash and cash equivalents at end of year 64 413 66 174
Notes
1. Basis of preparation
The audited group financial statements for the year ended 31 December 2009,
from which these condensed financial statements are derived, are prepared in
accordance with International Financial Reporting Standards. These condensed
financial statements are prepared in terms of IAS 34 - Interim Financial
Reporting. The principal accounting policies and methods of computation adopted
are consistent with those of the previous annual financial statements, except
for the adoption of the following new and revised standards during the current
financial year which are applicable to the group:
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. This
new standard requires the adoption of a `management approach` according to
which segment information is presented on the same basis as that used for
internal reporting purposes.
Amendments to IFRS 7 - Financial Instruments: Disclosures. These amendments
require enhanced disclosures of fair value measurement and liquidity risk.
2. Operating segment analysis
The group is organised into two major operating segments, namely Hulamin Rolled
Products and Hulamin Extrusions.
2009 2008
R`000 R`000
Revenue
Hulamin Rolled Products 3 881 393 6 288 157
Hulamin Extrusions 618 189 831 816
Group total 4 499 582 7 119 973
Inter-segment revenue
Hulamin Rolled Products 9 550 59 301
Hulamin Extrusions 6 959 16 255
Operating profit
Hulamin Rolled Products 239 377 453 510
Hulamin Extrusions 4 597 11 941
Group total 243 974 465 451
Total assets
Hulamin Rolled Products 6 554 198 7 296 674
Hulamin Extrusions 360 004 373 838
Group total 6 914 202 7 670 512
3. Other gains and losses
The group is exposed to fluctuations in aluminium prices, interest rates and
exchange rates, and hedges these risks with derivative financial instruments.
Other gains and losses reflect 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.
4. Taxation
The tax charge/(relief) included within these condensed financial statements
is:
2009 2008
R`000 R`000
Normal 12 382 76 255
Deferred 25 675 21 101
Deferred - rate change adjustment - (30 506)
STC 2 854 12 677
40 911 79 527
Normal rate of taxation (%) 28,0 28,0
Adjusted for:
Deferred - rate change adjustment (%) 0,0 (8,9)
STC (%) 2,2 3,7
Other non-allowable items (%) 1,1 0,1
(%) 31,3 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
of shares of shares
2009 2008
Weighted average number of shares used for
basic EPS 215 931 041 215 668 708
Share options 2 897 707 2 248 287
Weighted average number of shares used for
diluted EPS 218 828 748 217 916 995
6. Commitments and contingent liabilities
Capital expenditure contracted for but not yet
incurred 112 557 302 273
Operating lease commitments 21 090 36 052
Guarantees and contingent liabilities 22 594 22 471
7. Borrowings
The borrowing facilities of the group comprise long-term facilities of R855
million, which are repayable by 2014, and short-term facilities totalling R750
million, which will reduce by R200 million on 1 January 2011. The repayment of
borrowings during the year improved the group`s debt to equity ratio from 46,5%
to 37,6%.
The board is evaluating the group`s funding structure, including the raising of
additional equity and the restructuring of the long term facilities.
Corporate information
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 details
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:
L C Cele, V N Khumalo, T P Leeuw
J B Magwaza, N N A Matyumza (with effect from 1 March 2010)
M E Mkwanazi (Chairman)
S P Ngwenya, P H Staude
Executive directors:
A Fourie (Chief Executive Officer)
C D Hughes, M Z Mkhize
Date: 15/02/2010 07:05:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
