Hulamin’s share price fell more than 9% yesterday morning after it signalled softer trading conditions in the second half and did not declare an interim dividend, despite a strong first half.
The share for the producer of semi-fabricated and other aluminium products such as cans fell 9.15% to R2.88 yesterday morning, well down on the price five years ago of R4.80. It last declared a dividend in 2019.
The fall in share price was in spite of a 94% rise in normalised headline earnings per share to 70 cents for the six months to June 30. Earnings before interest and tax increased 112% to R473 million, despite volumes being down 7% at 95 588 tons.
Local sales increased 47% in the second half, making up 42 607 tons, with can stock at 58% of local sales. Total can stock at 49%, was up 6% from the prior period
The group is focusing on higher value products such as cans and reducing its exposure to hot rolled commodity type products traditionally exported, interim CEO Geoff Watson said in an online presentation yesterday.
Capital expenditure increased 57% from the prior period to R141m, after investments on plant reliability, including generators, and on capacity and capability improvements, including plans to increase can production capacity by 50%.
The group was on target to increase capital expenditure to a targeted R300m by the end of the 2023 financial year, said Watson.
He said the first half saw improved trading results that had followed through from the 2022 financial year.
Hulamin Extrusions posted a recovery with volumes up 10%, largely influenced by the automotive sector recovery and growth in renewable energy sector sales, offset by lower LME pricing. The average LME aluminium price fell 24% in the period. A review of the extrusions operations was underway, he said.
A two week strike would impact sales during the second half of the 2023 year. The group, however, expected to benefit from a more stable plant performance, a weaker exchange rate than the second half of 2022 and an improved product focus.
Debt reduction, cash generation and management would remain a priority, said Watson.
He said they had continued to focus on the simplification strategy in the first half, with four products exited, which was the major reason for the decline in hot rolled product sales.
Normalised earnings continued in the first half, having benefited from the attractive market conditions through a re-prioritised mix with a focus on cold rolled products as opposed to hot rolled products, the weaker average exchange rate and a more stable cost base.
Watson said their markets were expected to improve in the fourth quarter, as local can makers had excess stock, while European can makers were adjusting stock levels after the surge in demand post the Covid-19 pandemic.
BUSINESS REPORT