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HULAMIN LIMITED - Chairmans Statement at the Annual General Meeting of Shareholders

Release Date: 15/05/2019 17:32
Code(s): HLM     PDF:  
 
Wrap Text
Chairman’s Statement at the Annual General Meeting of Shareholders

HULAMIN LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1940/013924/06
JSE Code: HLM
ISIN: ZAE000096210
(“Hulamin” or “the Company”)

Chairman’s Statement at the Annual General Meeting of Shareholders

Having sat on the Hulamin board since listing and following last year’s Annual
General Meeting, I am pleased to present my first statement as Chairman of
Hulamin Limited. Our efforts to improve the health and sustainability of the
business are delivering. Operational performance has improved markedly, debt has
been paid down, cash return to shareholders has resumed and our safety
performance has exceeded benchmark levels.

In 2018, my fellow directors and I approved a revision to the strategic direction of
the business. Although Hulamin remains focused on its core aluminium rolling
operation, we have introduced a number of initiatives to accelerate margin and
earnings growth. These all capitalize on Hulamin’s solid market reputation and the
core strengths of the business.

Of these, two initiatives in particular are gaining traction. Firstly, a significant
margin enhancing and simplification opportunity through an automotive finishing
line investment is being evaluated. The initial feasibility study has been
interrogated by the board and a detailed feasibility study is underway. This is
expected to be concluded later this year.

The second growth initiative being pursued follows a Memorandum of
Understanding that Hulamin signed with Chalco Ruimin, a large and growing,
international aluminium rolling operation based in China. This agreement forms
the basis for a can stock distribution arrangement where Hulamin capitalises on its
commercial, technical, customer and logistics expertise to distribute and sell Chalco
Ruimin products in Africa and beyond. Customer support resides with Hulamin. This
arrangement is in its commercialization phase with volumes and customer demand
growing to expectation.

In 2018 Hulamin extrusions reported a first loss in its recent history. Further to
this, a major component in one of its four extrusion presses failed earlier this year.
Although now repaired and back in operation, this has resulted in a loss of sales, a
build-up of working capital and a loss of customer confidence. As a result of these
specific challenges, as well as rising costs and a markedly deteriorating local
market, we have conducted a strategic review of the business. Decisive actions
are being taken to curtail these losses.

Although Hulamin Rolled Products experienced a strong second half in 2018, I
became Chairman at a challenging time for the company as trade conditions have
turned particularly turbulent in recent months.

Hulamin trades in more than 50 countries worldwide; our largest markets after
South Africa being the United States of America and the EU. Volatility in these core
markets has made it difficult to maintain a balance in our profile of orders to suit
Hulamin’s specific and available product manufacturing capacity. This, together
with the inconvenience of inconsistent electricity supply have resulted in Hulamin’s
productivity declining to levels last seen in 2016 and 2017.

Prices for Hulamin products have softened in the USA in recent weeks, most notable
in heat treated plate. Automotive demand, both locally and internationally, has also
softened. In contrast, demand for can stock products is firming.

The net result, is a lower US Dollar rolling margin realisation. This is expected to
impact negatively on profits in the first half of the current year. Furthermore, the
lower metal throughput is expected to have a negative impact on working capital
efficiency and therefore cash flow generation. Management are taking appropriate
remedial action including cost reduction and pursuing higher margin product
opportunities.

The prevailing Rand-US Dollar exchange rate weakened in the current year and is
expected to impact positively on Hulamin. US Dollar volatility in turn has been
impacted by uncertainty in unfolding trade relations between the USA and China.
This may also affect market conditions for our products in future; efforts are being
directed to achieve a positive outcome for Hulamin.

Any forward-looking information contained in this announcement has not been
reviewed or reported on by the Company’s external auditors.


Pietermaritzburg
15 May 2019

Sponsor
Questco Corporate Advisory Proprietary Limited

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