Aluminium coils in a Hulamin factory. Photo: Supplied
Hulamin saw its shares surge on the JSE yesterday by more than six percent after announcing its normalised annual headline earnings per share and revenue had increased and that 2023 “commenced with solid customer demand”.
The shares increased by 6.4% to R2.82 at 1.30pm, despite the Pietermaritzburg-based aluminium product manufacturer not declaring a dividend.
The shares have decreased by 8.62% in the past six months.
In its results for the year ended December 31, 2022, normalised headline earnings per share increased by 28% to 105 cents per share.
Revenue increased to R15.93 billion despite sales volumes declining 4.6% to 211 328 tons.
The group said the principal difference between headline earnings per share and normalised headline earnings per share was the metal price lag, which is the profit or loss arising from the timing difference between the purchase and selling price of metal.
Metal price lag can be volatile, but over time largely balances out. The metal price lag in 2022 was a loss of R26 million. The large swing in the metal price lag resulted in headline earnings per share decreasing 46% to 99 cents per share compared to 2021's 182c per share. The metal price lag contributed to a 147 cents per share change in the headline earnings per share, it said.
Hulamin interim chief executive Geoff Watson said the improved trading results experienced in the first half of 2022 continued into the second half (H2). The focus in H2 had been to improve the product sales mix and capitalise on the continued structural growth in demand for aluminium beverage cans.
This saw local sales volumes increase by 7% to 94 651 tons. Pricing was increased to offset commodity pricing and inflation. This, together with a weaker exchange rate and a stable cost base, saw normalised headline earnings per share increase by 28% to 105c per share.
"The 2023 year has commenced with solid customer demand, particularly in the local and export beverage can markets, stable product margins, and a weaker exchange rate. Hulamin is also benefiting from a more stable plant performance. 2023 has accordingly started positively," he said.
Group turnover grew by 22% to R16bn on group sales volumes of 211 328 tons.
Local beverage can sales grew 7 045 tons (14%) as aluminium packaging continues to grow its share of the total beverage packaging market.
"Contracted prices for can stock firmed as can makers globally looked to secure raw material supply. This resulted in higher sales volumes from the sale of beverage can material and improved margins over the comparable period," it said.
Hulamin said these product streams also support increased scrap consumption with consequential benefits for margins.
"Tight cost management has dampened the impact of commodity and energy inflation resulting in a stable cost base. The exchange rate weakened by 11%, and this aided performance. The outcome was that normalised Ebit improved to R565m, compared to 2021's R66m.
The Hulamin Rolled Products were affected by the higher LME Aluminium price in the first six months of the year, as well as by load shedding, Transnet and the Ukraine war.
"The global impact of the war in Ukraine on shipping rates, commodity prices and general inflation on Hulamin’s production costs, Hulamin has managed to mitigate these by optimising on product sales mix and negotiating pricing to mitigate these cost increases to maintain margins as evidenced by improved normalised earnings performance," Hulamin said.
The group experienced heavy load shedding in 2022, with resultant power interruptions requiring a higher number of plant load reductions.
"Increased load shedding is expected to continue into 2023. The group has adopted risk mitigation through investment in diesel-operated generators to help reduce plant downtime.
"In the last quarter of 2022, Transnet Port terminals declared force majeure in the wake of protest action, which impacted export sales. This risk was however mitigated by the existing local demand for can stock," it said.
The group said Hulamin Extrusions had a strong market performance from 2021, which carried into 2022.
"However, by mid-year, there was downward pressure on volumes as a result of the KZN floods in April, and the reduction in customer volumes as a result of the end of their automotive sector contracts.
"These customers are expected to return to 'normal' volumes in 2023 as a result of alternative contracts being concluded in the automotive sector to the benefit of those customers," Hulamin said.
The group said it was in the interviewing stage for a new chief executive officer.
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