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Hulamin shows jump in headline earnings per share

Cape Town - Hulamin [JSE:HLM] announced on Monday that according to its audited results for the year ended 31 December 2016 headline earnings per share (Heps) was up 222% to 119 cents per share (cps).

During the period it had record sales of 232 000 tonnes, a strong cash flow of R415m and the best ever safety performance.

According to CEO Richard Jacob this record set of results is based on a much improved and more consistent manufacturing performance, tighter capital discipline and a weaker rand against the dollar.

"In spite of a stronger currency environment in the second half, Hulamin performed particularly well in this period, improving HEPS from 48cps in the first half of 2016 to 71cps in the second, and improving cash flow from R33m to R382m over the same period," said Jacob.

Group sales volumes for 2016 increased 17% to 232 000 tonnes. Hulamin Rolled Products was the major contributor to this performance, improving sales volumes by 19% to 214 000 tonnes. Manufacturing output was consistent throughout the period, while improved product yields, lower unit costs and a higher level of value added products made significant contributions to the improved profitability.

The market conditions in which Hulamin trades, both in South Africa and around the globe, remained tentative throughout 2016. Selling prices (rolling margins) in dollars in the second half improved on levels achieved in the first half. For the full year, however, margins were softer than in 2015.

The London Metal Exchange aluminium price continued to rise through the second half of 2016 to close at $1 713 per tonne. This resulted in a metal price lag profit of R50m for the full year. Turnover increased to R10.1bn driven by the higher sales volume. Local demand for beverage can stock products started the year under pressure and recovered somewhat in the second half to end the year at a similar level to 2015.

Total manufacturing costs (excluding metal price lag) rose by 14% to R3.1bn. Aside from the increased variable costs such as packaging, material costs, alloying elements and certain components of energy cost, which are also sensitive to currency and commodity prices, the company maintained tight controls over employment, maintenance and energy costs.

Earnings before interest and taxation (EBIT) rose by 110% to R622m. Comparative operating profit (before metal price lag) was 20% higher at R567m. Net interest charges increased by 30% to R87m, as a result of higher average levels of debt.

Following the conclusion of the Black Economic Empowerment ownership transaction in 2015, Hulamin has made further progress in 2016 in the areas of management control and employment equity. As a result, 81% of line management are now black (62% of whom are African and 23% are African women).

"We continue to build a world-class management team that is well placed to lead Hulamin into the future. Prospects Hulamin expects to maintain the improved sales and manufacturing performance achieved in 2016, into 2017. Should the rand continue to firm against the dollar, however, this is likely to put pressure on financial performance," the company said.

"We expect healthy demand for our products throughout 2017 in market conditions that we expect to remain uncertain."

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