The underlying performance and a more “balanced” order book during the six months ended June 30, has sparked encouragement that JSE-listed Hulamin would see more positive gains after a “tough few years”.

The aluminium products producer on Monday posted a 32% decline in headline earnings a share (Heps) for the period under review; however, normalised Heps showed a 17% rise on the prior period.

After implementing a required reinstatement following the implementation of the revised accounting standard, IAS 19r, in 2012, Hulamin recorded Heps and basic earnings a share of 21c, compared with the restated 31c and 36c in the prior corresponding period.

Headline earnings fell from R98.2-million in the six months to June 2012, to R66.4-million during the first half of 2013, while normalised earnings jumped to R91.2-million in the interim period, from a R11.3-million loss in the corresponding period the year before.

“Hulamin produced a substantial improvement in normalised earnings during the six months to June, drawing from ongoing cost management and production efficiency drives, the weaker rand that benefited exports and the fundamental turnaround at Hulamin Extrusions,” said CEO Richard Jacob.

Group revenue rose by 13.1% to R3.6-billion during the six-month period, up from the R3.1-billion reported during the six months to June 2012, with higher sales volumes offset by a lower aluminium price.

Hulamin’s Rolled Products division generated revenue of R3.2-billion during the six months, while the Extrusions unit recorded increased revenue to R382-million.

Underlying operating profit – before exceptional items and metal price lag – rose to its highest level since 2006, reaching R187-million in the interim period, compared with a loss of R1-million during the first half of 2012.

Operating profit following the reinstatement fell to R122-million, from the R183-million achieved in the six months to June 2012.

Net profit reached R66.3-million, down from the restated R113.8-million recorded in the corresponding period the year before.

As an “organisational rightsizing” was concluded, an ongoing efficiency drive had progressed and a more balanced order book put in place, Hulamin aimed to regain momentum with improved sales volumes and better yields in the second half of the year.

“The ongoing positive momentum from our manufacturing excellence initiatives led to improved plant performance,” Jacob said, citing the conclusion of a comprehensive review of equipment risk and completed preventive maintenance and plant upgrade work.

“The [equipment risk] study identified key asset upgrade and critical component strategic spares requirements. Hulamin has commenced the process of allocating capital expenditure accordingly,” the group commented.

Hulamin was also expected to incur one-off severance costs, accounted for in the first-half results, of R35-million, as it shed 140 jobs. About 70 people had already left the company, as Hulamin moved to a more optimal human resource level.

Meanwhile, the company has secured a “full and balanced” order book, despite subdued local demand.

Jacob pointed out that poor market conditions in the first quarter of 2013 led to an imbalance in the plant product mix load, but this was corrected during the second quarter of the year.

The group decided not to declare an interim dividend for the six months.

ALUMINIUM BEVERAGE CANS
Jacobs commented that Hulamin was preparing to deliver the first of its aluminium can body stock to Nampak’s Bevcan division during August.

Hulamin had been contracted to supply 28 000 t of the aluminium sheeting from 2013 to 2015, as Bevcan starts replacing its tin-plated beverage cans with aluminium-bodied beverage cans later this year.

The company said it had made good progress in developing the product, which is new to Hulamin’s portfolio, to international quality specifications and had commercially trialled it successfully in Europe over the past year.

The group was optimistic about the opportunities that awaited following the establishment - in line with global trends - of an aluminium-bodied can, as the new product would provide significant recycling opportunities, in addition to boosting Hulamin’s local sales.

The group was currently expanding its existing recycling facilities to allow for potentially higher volumes of this successfully recycled packaging product.

Aluminium cans have a higher value than tin-plated steel cans, which could also push recycling volumes higher.

Hulamin aims to buy back the used, empty aluminium cans from scrap dealers to process and recycle for reuse.