Hulamin has blamed softer global markets and its business simplification for the yearly 7% dip in normalised earnings before interest, tax, depreciation and amortisation (Ebitda) after volumes for the full year to end-December fell 15%.
Normalised Ebitda for the period amounted to R620 million, a 7%, fall on the year earlier period, although cash flow from operations was up 503% at R363m.
This came on the back of a 35% firming in the company’s expenditure which saw increased spend on expansion projects.
Mark Gounder, Hulamin CEO, said yesterday: “The Group experienced challenging trading conditions with softer global markets impacting demand resulting in pricing pressure for common alloys, export can and plate products.”
He added that Hulamin’s “simplification strategy proved effective as it enabled an agile response” to changing markets.
Hulamin had managed to “substantially protect full year profitability and free cash flow by improving the product mix to focus on higher-margin products” after undertaking planned plant shutdowns to reduce production capacity in line with constrained demand and 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,” said Gounder.
However, the 2024 operating year had started with similar challenging trends and conditions such as pressured export markets, although customer demand locally was proving to be resilient.
Hulamin is focusing on a stable plant performance, simplification and investment into future capacity primarily in its South African cane stream.
Volumes for the full year to December were 15% lower at 169 149 tons against the backdrop of improved product mix, with local sales accounting for 51% of total sales amounting to 86 252 tons.
Revenue for the period fell 13% to R13.8 billion while the operating profit for the period was 1% firmer at R532m against a 14% sagging in the normalised operating profit of R485.6m.
With basic headline earnings for the full year softening by 11% to 88 cents, shares in Hulamin closed 6.54% lower at R3 on the JSE yesterday.
In the 2024 outlook, Hulamin expects domestic market demand for aluminium rolled products to remain strong for most product categories, except common alloy where demand is directly linked to South Africa’s gross domestic product performance.
In the international market, Hulamin’s export sales include canstock, heat‐treated plate for general engineering applications, and a substantial volume of distributor products referred to as common alloy.
Global demand for aluminium rolled products stabilised during the course of 2023 and forecasts for the current year suggest an improvement in demand in the second half of the year.
As at the end of the reporting period, Hulamin had banking facilities of R2.1bn comprised of a committed working capital facility of R1.5bn and a general banking facility of R600m.
Net borrowings closed the period at R804m compared to R836m previously, while net debt amounted to R867.7m against R897.6m a year earlier, representing a net debt-to-equity ratio of 25%.
Use of the working capital facility may be restricted by the underlying eligible inventory and receivables. “Hulamin closed 2023 with a strong balance sheet,” the company said.
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