Feb 20, 2012
Hulamin headline earnings up 7%, sales volumes riseBack
© Reuse this
Operating profit, before the metal price lag effect, increased by 19% to R204-million, despite additional liquid petroleum gas (LPG) costs of R13-million and the cost of closing the Cape Town extrusion plant of R7-million. The operating profit after the metal price lag effect declined by 22% to R170-million.
The company’s improved performance was owing to the strong performances in both Hulamin Rolled Products and Hulamin Extrusions, with the rolled products sales volume increasing by 11%, to 208 000 t.
"We are pleased that our operating performance continued to improve with increased sales volumes, better margins per ton and unit costs maintained at 2010 levels. This was achieved despite substantial increases in energy prices and disruptions in the supply of LPG,” CEO Richard Jacob said in a statement.
LPG supply disruptions, as a result of problems at the Sapref refinery in Durban, resulted in five days of lost production in the second half of the year, while procuring replacement LPG supply at short notice through imports increased costs.
Margins improved by 3.5%, while unit costs were maintained at similar levels to 2010.
Operational performance improvements from the manufacturing excellence programme resulted in increased production volumes, record yields, streamlined logistics, improved working capital efficiency and savings in the year of R142-million.
Given the volatile nature of the London Metals Exchange aluminium price, Hulamin retained its 50% hedge of the dollar value of its aluminium inventory pool. The impact of the fall of the aluminium price in the second half of the year resulted in a loss of R34-million on the value of the company’s metal inventories, compared with a profit of R46-million in 2010.
Hulamin Extrusions also performed well in a depressed market, increasing sales by 14%. The rightsizing of manufacturing capacity was reported to be delivering reduced operating costs and improved efficiencies.
Meanwhile, imports of low-priced aluminium products from protected markets continued to disrupt the domestic market, with domestic demand for rolled products remaining flat, while extrusion volumes increased by 14%, the latter driven by the closure of a significant competitor in November 2010.
“It is disappointing that import duties remain at 5% on extruded products and 0% on rolled products. Demand in international markets outside Europe was stable in the year, although still substantially off the pre-2008 highs. Demand in Europe was relatively strong at the start of 2011, but softened continuously thereafter, as the sovereign debt crisis affected confidence throughout the eurozone and customers consequently reduced inventories,” the company said.
Sales of automotive products were the most affected by this.
Hulamin said it had improved sales in all its high-value product markets, with can end and heat-treated plate sales growing by 9% and 19% respectively during the year. Operating cost pressure is expected to continue, most notably from rising energy prices and wage inflation, with the consequent impact on profits exacerbated by the continued relative strength of the rand.
Further, the company produces rolling slab and extrusion billet in its own facilities in Pietermaritzburg. Additional rolling slab is bought from the Bayside smelter in Richards Bay, on supply contracts, which had previously been long term, and which have, since 2009, been limited to six and twelve months.
The current supply agreement is secured to December 2012, while discussions to secure a sustainable rolling slab supply are ongoing. To supplement local supply and internal manufacture, Hulamin imports rolling slab and extrusion billet from sources in Australia and the Middle East.
European markets are expected to remain weak, while the US economy appears to be strengthening, and other markets appear likely to continue the improving trend experienced in 2011.
“As a result, Hulamin’s order book is in good shape, with current orders at similar, or better margins than those in 2011.
“Hulamin continues to focus on improving its operational performance through improved efficiencies, cost competitiveness and full-capacity use. The manufacturing excellence programme is expected to continue to deliver improved operational performance,” Jacob said.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Aluminium News
The local metals and engineering sector cannot grow as a result of South Africa’s unreliable energy supply and the fact that, on average, energy costs in the sector account for about 8% of intermediary input costs, Steel and Engineering Industries Federation of...
Article contains comments
Economic data released during the first quarter of the year show alarming trends in the metals and engineering sector, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) said on Tuesday. The data also confirmed the organisation’s forecasts...
Top aluminium producer United Company Rusal will start producing metal at its Boguchansk project, in Russia, by June and will ramp up output over the following year depending on demand, the company's chief executive said on Monday. Weak aluminium prices are forcing...
Updated 1 hour 3 minutes ago Power utility Eskom said it would extend power cuts to 2 000 MW of electricity from 12:00 to 22:00 on Friday due to a shortage of generating capacity. The cash-strapped State utility, which has been forced to reduce electricity supply in Africa's most advanced...
Updated 1 hour 6 minutes ago The Department of Telecommunications and Postal Services (DTPS) has set aside R200-million of its R1.4-billion budget this year to kickstart the first phase of South Africa (SA) Connect national broadband strategy. Over the next three years, the department aimed to...
Updated 2 hours 7 minutes ago The Department of Trade and Industry (DTI), which last year committed to the initial creation of more than 100 black industrialists within three years, has developed a draft policy framework to guide the introduction of financial and nonfinancial support mechanisms...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...