Aluminium group Hulamin says it has ditched unprofitable hot-rolled products in favour of their lucrative cold-rolled counterparts for the in-demand can market, as its simplification strategy gains traction.
The JSE-listed company is also brewing an expansion plan at one of its plants which will see it increase its domestic cold-rolled volumes amid a ramp-up of its can offering.
For the six months to the end of June, Hulamin reported profit surged to R294.3m even though revenue fell 7% and volumes were down as the cost of goods sold fell 12.5%.
The group attributed the momentum to its reprioritised product mix with a focus on can products, weaker average exchange rate and stable cost base which contributed positively to half-year normalised earnings.
Operating profit, generated from core operations, more than doubled to R473.5m, while normalised headline earnings per share (Heps), a common profit measure in SA that excludes certain items, almost doubled to 70c. Hulamin excludes the metal price lag from its normalised numbers.
Speaking to Business Day on the release of the results, acting CEO Geoff Watson said Hulamin was making headway in extracting results from its 2022 simplification strategy, having begun its exits from pricey products.
“We’ve reduced our exposure to hot-rolled products to virtually nothing now from anything that could have been 20,000 tonnes in the past because it just wasn’t profitable and adding value,” Watson said. “Where you really add value is in cold rolling and finishing, which is important as that delivers profit and cash.”
Characterised generally by a shiny and smooth surface that allows it to be used in household appliances, furniture, lockers, and filing cabinets, cold-rolled steel can also be slightly more expensive.
Hulamin was able to increase production from the first half of last year to the first half of this year by about 10,000 tonnes of cold-rolled product through capital spend and continued operational improvement, Watson said. Can products accounted for 49% of the portfolio, compared to about 43% a year ago, he said.
According to data from Mordor Intelligence, quoted by Hulamin on Monday, the global beverage can market is forecast to grow at a compound rate of 4% a year from $55.62bn this year to $66.23bn in 2028.
The company said the growth rate in SA is forecast to be higher than this, making it a priority growth point.
Watson said Hulamin is eyeing an increased share of the lucrative domestic market and is working on a plan with investors to ramp up production.
“We would like to be able to increase our share of domestic supply of can sheet, by widening one of our mills over the next two years so we can supply the entire market. We are doing the engineering now and this part will be completed in about November.”
No dividend was declared.
Hulamin’s share price fell 7.89% to R2.92 on Monday, giving the company a market cap of about R947m.
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