Hulamin Limited · JSE:HLM
Hulamin — H1 2009 Earnings Presentation
31 slides from Hulamin's earnings presentation, Jun 30, 2009
Slide 1: Hulamin Limited Interim Results Presentation
Hulamin Limited Interim Results Presentation For the half-year ended 30 June 2009
Slide 2: Abnormal Market Conditions
Abnormal Market Conditions • Sharpest fall in global consumption of aluminium since 1975 oil shock • Rolled products and extrusions in USA and EU – Automotive ↓20 - 30% – Transport ↓40 - 55% – Building and Construction ↓15 - 40% • Short lead times and support for domestic producers • Aluminium price
Slide 3: Salient Features
Salient Features • Order intake recovering after sharp reduction • Operating profit reduced from R270 million to R114 million • HEPS reduced from 84 cents to 12 cents per share • Positive cash flow of R374 million • Rolled Products margins improved in difficult market conditions • No interim dividen
Slide 4: Income Statement
Income Statement 30 June 30 June R'million Half year ended: 2009 2008 Average exchange rate 9.23 7.65 Revenue 2 115 3 572 Operating profit 114 270 Finance costs (74) (43) Profit before tax 40 227 Tax (15) (41) Net profit 25 186 Basic headline earnings per share (cents) 12 84 Normalized headline earn
Slide 5: Operating Profit
Operating Profit 500 400 R millions 300 200 100 0 2003 2004 2005 2006 2007 2008 2009 H1 Annualised 2003 2004 2005 2006 2007 2008 2009 Ave R/$ 7.56 6.45 6.37 6.77 7.05 8.26 9.23 5
Slide 6: Balance Sheet
Balance Sheet R'million 30 June 2009 30 June 2008 Non-current assets 4 963 4 428 Current assets 1 628 2 755 Inventories 849 1 375 Trade and other receivables 645 1 365 Net derivatives and held for sale 134 15 TOTAL ASSETS (excl cash) 6 591 7 183 Total Equity 3 694 3 697 Total net borrowings 1 373 1
Slide 7: Cash Flow
Cash Flow R'million Half year ended: 30 June 2009 30 June 2008 EBITDA 215 365 Changes in working capital 716 (549) Inventories 504 (410) Debtors 415 (370) Creditors (203) 231 Changes in derivatives (75) - Tax payments (48) (96) Non-cash and other items (82) 21 Cash flow from operations 726 (259) Cap
Slide 8: Borrowings history
Borrowings history 2 000 1 800 1 600 1 400 Expansion project R millions 1 200 borrowings 1 000 800 600 Normal borrowings 400 200 0 Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- 07 07 07 07 08 08 08 08 08 08 09 09 09 8
Slide 9: Changes in Borrowings since December 2008
Changes in Borrowings since December 2008 June 09 Dec 08 Net borrowings (Rm) 1 373 1 747 Average daily borrowings (Rm) 1 322 1 830 Debt/ Equity % 37,2 46,5 Monthly interest cost (Rm) 12,0 22,7 Borrowings/ Annualized EBITDA 3,2 2,7 Six month interest cover 2,2 2,3 9
Slide 10: Borrowing Facilities
Borrowing Facilities • R550m 360 day notice period • R900m Repayable R90m per annum 2010 to 2014 R450m final payment July 2014 • R550m Reducing to zero by January 2010 Covenants 9Debt service cover ratio 9Interest cover ratio 10
Slide 11: Rolled Products Sales Volumes
Rolled Products Sales Volumes • Sales of 63 000 tons vs. 95 000 tons in H1 08 (34% down) • Local and export sales equally affected • Automotive, construction, transport and general engineering sectors most affected • Impact of destocking and geographic penalty North American Order Intake 130 120 110
Slide 12: Market Actions Produce Results
Market Actions Produce Results • Progress by USA and EU sales teams • Depot stock for multi-user specifications • Delivery and service performance strategies • Effect of increased Delivered Duty Paid (DDP) shipments • Order intake trends 12
Slide 13: Order Intake Rate
Order Intake Rate 300 000 250 000 >200 000 tons Annualised Tons 200 000 >180 000 tons 150 000 100 000 >155 000 tons <80 000 tons 50 000 0 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 13
Slide 14: Mix and Margins
Mix and Margins 70 140 65 130 60 Percentage 120 Index 55 110 50 100 45 40 90 2003 2004 2005 2006 2007 2008 2009 H1 High value products in mix Index of $ rolling margin per ton 14
Slide 15: Hulamin Improves Margins
Hulamin Improves Margins • Some pressure on global margins • Impact of Hulamin market initiatives – Direct route to market – Other service and delivery initiatives USA Selling Price Comparisons 180 150 140 160 130 140 120 Index 100 Index 100 110 120 100 100 90 80 80 70 60 60 Sep-08 Oct-08 Nov-08 Dec
Slide 16: High Value Products
High Value Products Heat Brazing Sheet Treated Plate Can End Stock Foil Current • Sharp decline in • End use • Underlying firm • Underlying firm Market automotive applications and demand demand Conditions sector markets severely affected Outlook • New • Global capacity • Strong • Ramp up curve oppor
Slide 17: Manufacturing Costs
Manufacturing Costs • Manufacturing costs reduced by 12% – Melt loss benefit from lower LME price – Energy cost benefit from lower oil/gas prices • Unit costs increased by 14% as result of volume impact • Effect of Eskom/municipal increases • Incremental costs from new facilities • Sustainable cost
Slide 18: Direct Manufacturing Cost Comparison
Direct Manufacturing Cost Comparison 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 H1 Manpower Consumables Energy Maintenance Other 18
Slide 19: LME Prices
LME Prices 26 000 3 600 24 000 3 200 22 000 2 800 20 000 USD per m/ton ZAR per m/ton 18 000 2 400 16 000 2 000 14 000 1 600 12 000 1 200 10 000 8 000 800 6 000 400 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 ZAR USD 19
Slide 20: Working Capital
Working Capital • R716 million reduction in six months • Aluminium price reduced from R18,100/ton in Q4 2008 to R12,600/ton in Q2 2009 • Increased DDP shipments causing increase in inventories, matched by reduction in debtors • Physical inventory reduced by 16% (22% excluding Delivered Duty Paid (DD
Slide 21: Changes in Inventory Profile
Changes in Inventory Profile 100% 80% 60% 40% 20% 0% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Finished Goods Other Inventory Rolling Slab 21
Slide 22: Expansion Project
Expansion Project • Completion expected in accordance with schedule and 2% over budget • R903 million spent to date. R67 million outstanding • Initial output from foil mills and twin roll casters in Q3 • Ramp-up curve integrated with business objective of 250 000 tons annualised sales in 2013 • Attr
Slide 23: Foil Mill FM8
Foil Mill FM8 Le Bean A AMSA A lL lala \eee =
Slide 24: Twin Roll Caster
Twin Roll Caster 24
Slide 25: Hulamin Extrusions
Hulamin Extrusions • Wholly owned since December 2008 • Two entities trading as Hulamin Extrusions and Hulamin Building Systems • Operations in Pietermaritzburg, Midrand and Cape Town • Fifty percent shareholding in Richards & Barlow 25
Slide 26: Hulamin Extrusions
Hulamin Extrusions • Sales volumes down 35% compared to H1 2008 • Metal price impact on Q1 earnings • Positive earnings in Q2 in spite of reduced volumes • Market share and competitive landscape 26
Slide 27: Billet and Slab Supply Issues
Billet and Slab Supply Issues 600 000 tons melting ingot export sales Hillside 100 000 tons slab Bayside 100 000 tons melting ingot 200 000 tons slab Rolling Slab HLM Sales 300 000 tons Rolling Mill 200 000 tons 100 000 tons scrap HLM Remelt 27
Slide 28: Billet and Slab Supply Issues
Billet and Slab Supply Issues • 800 000 tons of Al produced in Richards Bay • Approx. 50% of global smelter output is extrusion billet and rolling slab • Hulamin produces approximately 70% of its slab and 50% of its billet requirements • 250 000 tons rolled products sales requires 355 000 tons slab
Slide 29: Billet and Slab Supply Issues (Cont)
Billet and Slab Supply Issues (Cont) • Options for additional slab include: – Incremental expansion of in-house facilities – Greenfield establishment of casthouse facility close to smelters or in Pietermaritzburg – Interim import/ tolling arrangements • Extrusion billet can be imported more readily
Slide 30: 2009 Key Areas of Focus
2009 Key Areas of Focus • Rebuild optimum sales mix • Restore manufacturing efficiencies • Enhance sales mix and service levels in USA and EU • Ensure smooth start-up and integration of casters and foil mills • Entrench sustainable cost and efficiency improvements • Conclude slab supply options • Co
Slide 31: 2010 and Beyond
2010 and Beyond • Achieve Rolled Products growth target of 250 000 tons by 2013 • Grow sales of the four high value product groups by 80 000 tons above the 2009 levels by 2013 • Achieve sustainable cost/efficiency improvements exceeding R100 million per annum • Address slab and billet supply require