JSE-listed aluminium supplier and exporter Hulamin CEO Richard Jacob on Friday assured shareholders that the underlying business remained strong, despite the “painful period” the company was currently experiencing.

He told Engineering News Online that this was evidenced by the company’s net debt to equity ratio of 16%.

He further pointed out that the company, which was undergoing a necessary turnaround, continued to invest in technology and developments in electric vehicles and modern sophisticated products.

He further noted that there were elements of Hulamin’s business that did perform well, such as the beverage business, which grew by over 60% in South Africa during the period.

The company’s unaudited results for the six months ended June 30 showed a 1% year-on-year decrease in revenue to R5.25-billion.

Hulamin reported a headline loss of R63-million for the period, a 174% year-on-year decrease, as a result of losses incurred by Hulamin Extrusions, restructuring costs and a negative metal price lag.

Hulamin Extrusions suffered a first-half loss, which included a provision for restructuring costs. Sales volumes were also lower as a result of an equipment malfunction and the consequent disruption to production.

Jacob said imports into South Africa of cheaper Chinese products had put pressure on Hulamin’s selling prices and, therefore, forced the company to cut costs.  

The company has decided to close its Olifantsfontein plant and increasing volumes at its Pietermaritzburg plant. Some of the Olifantsfontein employees will be transferred, but 200 jobs will be lost.

Jacob noted that the turnaround of Hulamin Extrusions was 75% complete and that it would be concluded in November.

On the rolled products side, he noted that the challenges were more complicated in that the underlying market conditions in the automotive sector had been soft, particularly in South Africa.

Moreover, in South Africa, a number of sales did not materialise, largely owing to blockages in the distribution channel.

This resulted in Hulamin having bought more metals than it sold, and stocks rose. This, however, was a “fairly short-term and surprising blockage”, noted Jacob, adding that Hulamin had already started turning the rolled products business around.

The company has stopped buying metal and the working capital problem is largely out of the way.

Moreover, it has engaged a number of other customers in the US, and orders are beginning to materialise from this, noted Jacob.   

Hulamin has also started a cost cutting programme in the rolling business. This is about 50% completed. 

“We are making good progress in rightsizing the business to achieve a lower unit cost base, turning the losses around and releasing cash,” said Jacob.

He also expected conditions to improve, to some extent, in the second half of the year, but warned that normal business activity would only resume in 2020.

“We will continue to make improvements and implement turnaround actions in the second half of the year, such that 2020 is a much better year.”

Parallel to this, Hulamin will continue to protect its balance sheet and secure cash.