Softer global markets and business simplification resulted in JSE-listed Hulamin’s volumes decreasing by 15% year-on-year to 169 149 t for the year ended December 31, 2023.
Hulamin undertook strategic plant shuts to reduce its production capacity in line with constrained demand owing to global economic challenges impacting on aluminium markets, with cold rolling volumes down 10%, CEO Mark Gounder said on March 4.
Hulamin did, however, improve and optimise its mix through simplification, with local sales, at 51%, accounting for up to 86 252 t. Can stock accounted for 60% of total local sales.
Extrusions saw a strong recovery last year, with sales volumes 6% higher at 11 000 t owing to recovery of automotive volumes and stable general market demand.
The positive impact of growth in volumes was, however, tempered by a two-week strike in July and operational challenges in the second half of the year having impacted on costs and profitability.
This year’s outlook for extrusions was said to be positive, with a strong order book.
In this area, Hulamin will focus on improving operational performance and stabilising metal supply with new onshore billet supply.
Cash flow from operations increased by 503% to R363-million.
Free cash flow generated was reinvested in plant reliability, Gounder said, with Hulamin reinvesting cash in reliable plant performance, capacity- and capability-enhancing strategic capital projects.
Total can stock at 51% increased by 3% from the prior period.
Normalised earnings before interest, taxes, depreciation and amortisation decreased by 7% to R620-million.
Hulamin spent R311-million in capital expenditure (capex), a 35% increase from the prior period. Planned capex for this year is about R450-million, Gounder informed.
The net profit attributable to shareholders of the group for the period was R272-million, a decrease on the net profit of R300-million in 2022.
Earnings a share decreased to 88c from 97c and headline earnings a share to 88c from 99c.
A metal price lag profit of R47-million was recorded in the year, compared with a loss of R26-million in 2022.
Hulamin’s net borrowings ended the year at R804-million and net debt at R867.7-million. This represents a net debt to equity ratio of 25%.
No dividends were declared for the period.
The directors believe the group has adequate resources to continue as a going concern for the foreseeable future.
Hulamin’s recordable and lost-time injury frequency rate was down by 33% owing to interventions. There was, however, a disabling injury to one person in February that led to a review of strategies, Gounder informed.
“The group experienced challenging trading conditions with softer global markets impacting demand resulting in pricing pressure for common alloys, export can and plate products. Our simplification strategy proved effective as it enabled an agile response to changing markets.
“We were able to substantially protect full-year profitability and free cash flow by improving the product mix to focus on higher-margin products, undertaking planned plant shuts to reduce production capacity in line with constrained demand, reducing fixed costs and reducing metal purchases to manage working capital. These actions, together with the benefit of a weaker average exchange rate, assisted profitability and cash flow in a challenging macro environment,” Gounder said.
He informed that this year had started with similar trends, with export markets under continued short-term pressure while customer demand locally was proving resilient.
Macroeconomic and geopolitical uncertainty are expected to impact on short-term demand; however, markets should remain unconstrained in the long term.
Hulamin will focus on sustainable earnings and cash flow through stable plant performance, simplified mix, cost management and improved scrap use.
Phase one of market-driven capital investment to match the width capability of imports is set to be completed soon.
Hulamin will also continue to focus on unlocking cold rolling capacity and capability through continuous improvement.
It will also continue with simplification efforts and the consolidation of strategic assets.