UPDATE 2-SAfrica's Hulamin H1 profit flat, sees improved H2

In line with expectations, aluminium semifabricator Hulamin on Monday reported headline earnings of R26,5-million for the six months ended June 30, 2010, up marginally on the R25,3-million earned in the first half of 2009.

The group, now led by CEO Richard Jacob, reported a 32% increase in sales volumes to 94 000 t during the six months, as overall demand for Hulamin’s products continued to improve.

However, a two-week strike by freight logistics group Transnet, rising electricity and labour costs and a strong rand had negatively impacted on the group’s earnings.

As a result of the Transnet strike, the invoicing of about 6 000 t of product has been delayed to the second half of the year.

Further, the shipping delays caused by the strike had also resulted in high levels of finished goods inventories being in transit, which combined with the strength of the rand during the six months, had led to higher working capital for Hulamin.

The group highlighted that the rand/dollar exchange rate for the six months had been at a similar rate than it had been in 2003, negatively impacting on Hulamin’s export revenue.

“This highlights the risk to South African manufacturing as margins reduce due to a strong rand,” stated the group.

Last week, President Jacob Zuma said that government would, in the near term, meet with business to discuss the issue of possibly devaluating the rand.

The business community and unions have been calling on government to weaken the local currency to increase export volumes and also create more jobs.

The Organisation for Economic Cooperation and Development last week also released a survey, which indicated that the rand was overvalued by around 15%-plus and that this could be to blame for the country’s low export levels.

Meanwhile, Hulamin reported that it had submitted applications to the International Trade and Administration Commission for duties on rolled and extruded products to be reintroduced.

“This has become necessary, as imports of low-priced products have increased, mostly from countries (particularly China) where industry support and protectionist measures are in place,” stated Hulamin.

In March, Newswire Reuters quoted Trade and Industry Minister Rob Davies as saying that the country would consider reinstating import duties for aluminium on economic grounds, but that the industry would have to formally apply for this measure.

EXTRUSION BILLET SUPPLY

Hulamin also on Monday said that it continued to negotiate with BHP Billiton and other stakeholders on the supply of rolling slab and extrusion billet by BHP beyond June next year.

The aluminium semifabricator was planning to expand its rolling slab casting facilities to offset the product that BHP Billiton would no longer supply.

Hulamin produced the majority of its own rolling slab, but did source some product from BHP Billiton, which announced last year that it would stop supplying rolling slab from its Bayside operation to Hulamin by the end of this year.

In April, former Hulamin CEO Alan Fourie said that the manufacturer had approved the investment of an initial R75-million on boosting its own rolling slab production capacity to replace the 90 000 t of slab it currently sourced from BHP Billiton.

However, at the time, he said that there were a number of other options, which were still at a conceptual stage, that the company was considering to further expand its rolling slab capacity.