Weakened demand from China, paired with the ongoing electricity challenges in South Africa, have led to JSE-listed Hulamin’s headline earnings a share falling to 25c a share for the six months to June 30, compared with 40c in the first half of last year.

Further, the company’s earnings before interest, taxes, depreciation and amortisation fell by 5.3% to R209-million, from R269-million in the prior comparable period.

While production improved to just under 200 000 t in the second quarter, despite a planned maintenance shutdown undertaken on key plant and equipment, sales volumes for the six months totalled 93 000 t, 16% lower than the corresponding period's 110 000 t.

Speaking at a presentation of the company’s results in Rosebank, CEO Richard Jacob said production volumes were impacted by electricity supply curtailments and quality rework, which constrained sales of rolled products for the six months under review.

“The sharp fall in the aluminium price during the reporting period led to a R55-million metal price lag charge. Corrective measures implemented, to date, including the installation of electricity generator sets, are expected to benefit production and sales in the second half of the year,” he noted.

CFO David Austin pointed out that aluminium was in oversupply globally, resulting in too much unused capacity and creating a challenging outlook for the aluminium price for the year ahead.

He added that the company expected demand for rolled products to increase in Asia, but said Europe and North America would experience more muted growth.

Hulamin exported 70% of its products and, as such, could not “ignore the global markets”, as that had an impact on the South African market.

Further, Jacob noted that the company would continue to focus on local market growth, with local demand driven by beverage can stock and automotive body sheet opportunities. “With this massive storm that seems to be hurting all manufacturers around the world – and its name is China – our domestic market is becoming increasingly important to us.”

Keeping the all-aluminium can, as well as the attractiveness of collecting and recycling used beverage cans in mind, Hulamin, in May, started up its R300-million scrap recycling facility.

The final phase of the investment was the installation of scrap cleaning and separation capability, which would be operational before year-end.

In the six months under review, the company produced 5 000 t of scrap.
Meanwhile, the acquisition of the Bayside casthouse by Isizinda Aluminium – a Hulamin and Bingelela consortium – from South32 was completed as planned, with operations having been successfully handed over on July 1.

“Not only does this strategic transaction secure Hulamin's local supply of rolling slab but, under Isizinda Aluminium, the Bayside casthouse is developing into a broad-range aluminium hub, providing the opportunity to re-introduce the local supply of products such as extrusion billet and wire rod, which have been imported since 2009, to support industrialisation in Richards Bay, the growth of the domestic aluminium industry and economic growth throughout Southern Africa,” the company said in a statement.

ELECTRICITY CHALLENGES
Besides rising electricity costs, Hulamin was also facing a sharp rise in the cost of liquid petroleum gas. Jacob noted that the company was still on track to convert to compressed natural gas, which would be completed in the fourth quarter.

To mitigate the load curtailments imposed by State-owned entity Eskom, the company commissioned a set of 6 MW generators that allowed its Pietermaritzburg plant to run close to normal operations during periods of 10% load curtailment.

The impact of load curtailment on operations was significantly lower in April following a particularly disruptive February and March period, despite the frequency having increased, the company said.