Aluminium products manufacturer Hulamin says export pricing pressure and market challenges have eroded some of its earnings in the six months ended June 30.

The group’s normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased by 19% year-on-year to R343-million, with rolled product sales having been down 3% year-on-year, at 87 340 t.

Operating profit decreased by 8% year-on-year to R433-million, while basic normalised earnings a share decreased by 38% year-on-year to 43c.

Hulamin defines normalised headline earnings per share (HEPS) as headline earnings excluding metal price lag and non-trading expense or income items which, owing to their irregular occurrence, are removed to more closely present earnings attributable to the ongoing activities of the group.

The normalised headline earnings in the six months under review include an adjustment for metal price lag and restructuring costs.

The company recorded strong growth of 8% in local demand, which helped to offset weaker export market demand. Particularly, cans comprised 67% of local sales in the period under review.

CEO Mark Gounder says the company will continue experiencing pressure on its volumes in export markets such as the EU.

Hulamin spent R302-million in capital investments in the period under review as this remains a core strategic focus for the group. The company did not declare a dividend for the reporting period.

The company is also in the process of simplifying its product range, increasing the use of scrap material, reducing costs and positioning the business to take advantage of structural growth markets.

Gounder comments that while the first half of the financial year’s overall performance was weaker than that of the first half of last year, it was substantially better than the second half of the 2023 financial year.

CFO Pravashni Nirghin explains that the group’s normalised HEPS increased from 7c in the second half of the 2023 financial year to 43c in the reporting period, while normalised Ebitda grew from R195-million to R343-million over these periods.

Meanwhile, the group’s hot rolled products division contributed R264-million to headline earnings for the period, while the extrusions business recorded a R19-million loss in the six months under review.

The extrusion volumes were down 15% in the first half of the year owing to lower automotive volumes and market challenges, as well as operational challenges.

Gounder says market challenges continue to impact the extrusions segment, but the group’s simplification strategy is yielding positive results by releasing rolling capacity for higher-margin products.

“The recovery in our export market segment has had a temporary setback following a fire outbreak in the coil coating line, which impacted the export can end and tab markets. Management’s focus is on optimising the available plant capacity towards higher margin products and a comprehensive focus on cost curtailment in line with reduction in volumes.

“Progress on the repair work to the coating line is on schedule with resumed production expected by mid-September,” he adds.

CONTINUED STRATEGY

Hulamin launched a simplified product range strategy two years ago, which Gounder says will enable continued agility for the group going into the second half of the financial year.

Gounder says it is essential for Hulamin’s market-driven capital investment to align with consumption of local consumers. Current South African can consumption is growing by 5% yearly.

Hulamin supplies 60% of can-body stock, but it aims to supply more wide width can bodies. Currently, 23 000 t of wide can-body product is being imported every year, which Hulamin has determined as a vital market opportunity.

The group plans to add a 15 000 t widebody can line in South Africa, with seven out of nine can lines in the country now being designed to use wide-width can-body coils to maximise efficiencies.

Ultimately, the wide can-body plant expansion is spread across three phases, with the first phase having been completed in June, the next phase due to be completed later in the year and the last phase late next year.

The increased use of recycled beverage cans will also help to reduce costs for the group. Gounder says using recycled material bodes well for the group in terms of enterprise development, green product development and value creation.

He adds that the group is focused on net debt reduction, stable plant performance and effective working capital management.