Reliance and Impact on Key Capitals
Governance and Leadership
Statutory approvals and reports
Group financial statements
Company financial statements
As we present this report, which is an account of Hulamin’s performance in 2015, we look back at 2015 as yet another tough year for manufacturing in South Africa. Business confidence in the manufacturing sector remained mostly weak during the year.
The manufacturing environment was characterised by energy supply disruptions, especially in electricity and Liquefied Petroleum Gas (LPG). Hulamin production processes require energy to perform and process stability cannot be maintained with regular disruptions to supply.
Although management had moved to mitigate the negative impacts of this energy crunch by sourcing imported gas and acquiring diesel generators, these costs were unplanned and impacted the bottom line. The cost associated to the production of electricity from diesel generators was up to four times that of Eskom electricity supply. Sourcing imported LPG came with its own challenges as the only infrastructure close to Hulamin is in Port Elizabeth and vessels were sometimes delayed due to bad weather at sea. These experiences, with dire financial implications on companies, underscore a need for an urgent programme to address South Africa’s infrastructure and energy supply especially in enabling stability of manufacturing and restoring industry competitiveness. Whilst we commend efforts to stabilise electricity generation, more action is required from government with respect to production of gas, especially of LPG, which is in the hands of the private sector.
Externally the US and EU economies, which account for just over 40% of our sales, were rattled by an oversupply of aluminium especially out of China and a consequent collapse of prices.
The directors of Hulamin are fully committed to the principles of sound corporate governance, in particular engaging with integrity, transparency, responsibility, fairness and accountability with all stakeholders. Corporate governance is covered in more depth here in this report.
Hulamin recognises that its sustainable growth depends on building strong and mutually beneficial relationships with many diverse stakeholders, and has as such resolved to be responsive to the needs and expectations of different stakeholders. In 2015 Hulamin continued to strengthen relations with all relevant stakeholders. Hulamin actively supported government efforts for the renewal of The African Growth Opportunity Act (AGOA) and was one of the companies that participated in the Trade and Industry Ministerial delegation to Washington DC during April 2015. Stakeholder engagements are covered in more detail in the sustainability section here.
Hulamin remains committed to sustainable growth and prosperity recognising the interconnectedness of both. Therefore, maintaining and strengthening good relations with all stakeholders, who include government, the communities we operate in, capital providers and employees remain top priorities. We continue to make good progress in improving our carbon footprint monitoring, recording and reporting amongst a range of other sustainable improvements. Sustainability is covered extensively here in this report.
Availability of rolling slab and extrusion billet
Long-term security of the local supply of rolling slab has stabilised with Isizinda Aluminium taking ownership of the Bayside casthouse in July 2015. The partnership between Bingelela Capital and Hulamin in Isizinda Aluminium is working very well and investigations are underway around localisation of other value-added products from this facility.
Import duty protection
Just like in many countries worldwide, the South African metal industry is not immune to the ravages of cheap, and sometimes subsidised, imports. It is against that background that Hulamin applied to the International Trade Administration Commission (ITAC) for protection in aluminium rolled and extruded products. Hulamin defended its applications in front of the ITAC commission and a ruling is expected sometime in March 2016.
The board wishes to thank Simon Jennings, an independent director, who resigned from the board at the end of the third quarter.
Hulamin’s financial performance in 2015 signalled a tough year especially on the manufacturing front. It is clear that the headwinds have not abated externally. However, I and the board are confident in the strategic direction of the business and look forward to market recovery and improved manufacturing performance and resulting benefits to all stakeholders. I would therefore like to thank the board, the Executive and employees for their commitment to Hulamin’s performance.