Hulamin ordinary shares listed on the JSE with the commencement of business on 25 June 2007, subject to the fulfilment of conditions precedent.
2.
What were the outstanding conditions precedent to approve the listing of Hulamin on the JSE?
The main outstanding condition precedent was approved by The Tongaat-Hulett Group shareholders at a meeting on 11 June 2007 of the resolutions necessary to implement the transactions. Further details of the conditions precedent are available in the 3rd of May 2007 Terms Announcement available on the The Tongaat-Hulett Group web site.
3.
In what sector is Hulamin listed?
In the Aluminium sub-sector of the Industrial Metals sector under the name Hulamin.
4.
Why did Hulamin list on the JSE?
The Board of Directors of Hulamin recognised that Hulamin had developed into a successful, focused, independent niche producer of aluminium semi-fabricated products and given the stage of its growth cycle, the directors were of the opinion that Hulamin had the requisite critical mass and growth prospects to prosper as a separately listed business, independent from the Tongaat-Hulett Group.
5.
What is the history of Hulamin?
The origin of Hulamin dates back to 1935 when Aluminium Limited of Canada opened a sales office in South Africa. In 1940 the Aluminium Company of South Africa (Proprietary) Limited was registered. During and after World War 2, demand for aluminium semi-fabricated products had grown to the point where a small aluminium rolling mill was opened in 1949, on the current Pietermaritzburg site. The company experienced rapid growth and also expanded its operations to cover a full range of semi-fabricated aluminium products. It was subsequently listed on the JSE as Alcan Aluminium of South Africa Limited (“Alcan”) in 1969.
In 1974 the Huletts Corporation acquired a controlling interest in the company from Alcan, and the company name was changed to Huletts Aluminium Limited. The company was delisted in 1981 although its debentures were traded on the JSE until 1997. The Huletts Corporation merged with The Tongaat Group in 1981 to form the Tongaat-Hulett Group (THG) and in 1982 the name of the company was changed to Hulett Aluminium Limited. Alcan subsequently sold its remaining 26% holding to THG in 1986 and Hulamin became a wholly owned subsidiary of THG. It was later converted to a private company, namely Hulett Aluminium (Proprietary) Limited in 1991.
1n 1996, the boards of Hulett Aluminium and Tongaat-Hulett approved a R2.4 billion expansion programme in the rolled products business. The THG board agreed to introduce two additional shareholders into Hulamin, namely Anglo South Africa Capital (20% shareholding) and the Industrial Development Corporation (IDC) (30% shareholding) which resulted in the THG shareholding in Hulamin being reduced to the 50% it held prior to unbundling.
Hulamin Limited was listed on the JSE on 25 June 2007.
6.
What is the nature of Hulamin’s business?
Hulamin is a leading, focused, mid-stream aluminium semi-fabricator.
It purchases primary aluminium and supplies its range of high value, niche rolled products and complex extrusions to manufacturers of finished products in South Africa and over 50 countries around the world.
Hulamin’s largest activity is aluminium rolling which contributes more than 80% to its revenue, with the balance comprising extruded products and other downstream products. Although the South African market is an important and growing element of Hulamin’s business, a significant portion of rolled products are exported to regions such as Europe, North America, Middle East and Asia.
Approximately 70% of the rolled products output is exported. Accordingly, Hulamin is recognised as one of the most successful export-based rolled products businesses in the world.
7.
How is Hulamin different to a resources company?
Hulamin doesn’t manufacture aluminium. It purchases primary aluminium and manufactures rolled and extruded products for fabricators of finished products. That means it is not a fabricator but rather a semi-fabricator of aluminium products.
8.
What does semi-fabricator mean?
Semi-fabrication of aluminium consists of several manufacturing processes that transform the primary aluminium into a range of beneficiated inputs for further manufacturing and include rolling, extrusion and casting.
9.
What impact do London Metals Exchange (LME) quoted prices have on your business?
In most cases movements in the price of aluminium have little impact on the business.
Aluminium rolled products are almost exclusively sold on the basis of current LME aluminium price plus a rolling margin. As aluminium purchases are also based on current aluminium prices the business has a natural hedge against movements in aluminium prices.
However there is a timing lag between the purchase and sale of the metal, while it is being processed by the company and is held in stock. This metal price lag effect could influence results if aluminium prices move substantially, and Hulamin therefore has a hedging programme to reduce this risk.
In some cases, a large and steep rise in aluminium prices can result in rolling margins being temporarily squeezed as customers resist rapidly increasing end prices. However, if aluminium prices are sustained at high levels, rolling margins will tend to be restored to normal levels.
10.
What products does Hulamin produce?
Hulamin produces rolled and extruded products and a limited range of finished products such as foil containers and building components. Rolled products sales comprise approximately 80% of total sales.
11.
What is the size of Hulamin’s operations?
In 2000, Hulamin commissioned the R2.4 billion expansion programme, which grew its rolled products capacity from 50 000 tons to 210 000 tons per annum.
This expansion resulted in expanded manufacturing processes from new and upgraded equipment and has improved capability, quality, and cost competitiveness, not only in the local market but also in niche markets across the globe.
In October 2006, a R950 million project was approved to further grow volumes of high value products and increase capacity to 250 000 tons by 2011.
Hulamin also operates three manufacturing sites for aluminium extrusions in South Africa and is a leading producer for the South African market, particularly for transport and automotive sections.
12.
How does Hulamin differentiate its business to its customers?
Hulamin focuses on high specification, high value niche products such as thin gauge foils, can end stock, heat treated plate, brazing sheet and complex extrusions, which require high tolerance manufacturing processes and sophisticated technology.
In these markets, customers’ supply choice and market flexibility is limited by the decreasing number of suppliers and the dominance, of a few major multinational producers.
This has resulted in increased customer loyalty towards independent rolling mills. Customers recognise Hulamin’s flexibility and responsiveness to their design requirements, often placing Hulamin ahead of its competitors.
Consequently, demand for Hulamin’s products continues to exceed available capacity and Hulamin is well positioned to sell its full capacity in higher value products, to respond to attractive market opportunities and to capitalise on many growth opportunities.
13.
What rolled products do you manufacture and in which industries are they used?
In the packaging industry aluminium products include foil containers, household foil, thin gauge foil (less than 0.02 mm), can end and tab stock. Foil is also used for electrical applications, building insulation and in the printing industry.
The building industry also uses significant volumes of rolled aluminium. Sheets with thickness between 0.2mm and 1.5 mm are widely used in the construction industry including aluminium siding and roofing, gutters and cladding.
Applications for plate (thickness in excess of 6mm) include airframes, military vehicles, machining of dies and vacuum chambers and marine applications.
Applications in the automotive industry include heat transfer products such as charge air coolers and radiators, heat shields, frames as well as many other applications.
14.
Where are your rolled product operations situated?
The rolled products plant located in Pietermaritzburg constitutes the major activity and includes hot and cold rolling mills together with foil mills, remelt facilities, coating lines and other precision finishing equipment.
15.
What is the nature of Hulamin’s Extrusions business?
The business operates out of three plants in Johannesburg, Pietermaritzburg and Cape Town and produces approximately 20 000 tons per annum. It also has a joint interest with the Zimbabwean Industrial Development Corporation in an extrusion operation in Zimbabwe. The Company has 40 years’ experience in developing and servicing the South African market and exporting to customers around the world.
Hulamin Extrusions mission is to become sub-Saharan Africa's leading extruder with a strategy to further develop the local market for aluminium extrusions and to service local and export customers with quality extrusions to encourage their further growth.
16.
What is the focus of Hulamin’s Commercial Products businesses?
These are a number of strategically positioned downstream operations involved in the distribution of aluminium products and the manufacture and distribution of a diverse range of products which include rigid foil containers and a range of rolled and extruded building components.
17.
Who are Hulamin’s suppliers of aluminium?
Hulamin sources primary aluminium from the Hillside and Bayside smelters in Richards Bay.
18.
Who are Hulamin’s peer group?
Hulamin competes with a number of major multi-national rolling businesses that include Novelis, Aleris, Alcan and Alcoa. In the South African extrusions market, its major competitor is Wispeco.
19.
Who are the principal shareholders in Hulamin?
Prior to the listing of Hulamin, Tongaat-Hulett Group (THG) owned 50%, South Africa’s Industrial Development Corporation (IDC) 30% and Anglo American plc through its subsidiary Anglo South Africa Capital (Anglo) 20%.
Following the listing of Hulamin on the Johannesburg Stock Exchange Limited (JSE) on 25 June 2007:
Tongaat-Hulett Group unbundled its holding in Hulamin to THG shareholders registered on 29 June 2007, in a 1:1 ratio; and
Hulamin’s BEE partners, management and staff acquired an effective 15% interest in Hulamin; which reduced the effective holding of Anglo to 38.5% and the IDC to 25.7%.
20.
What is Hulamin’s Black Economic Empowerment (BEE) status?
Hulamin recognises that BEE is a social and commercial imperative to the long-term development and sustainability of the South African economy and the Hulamin business.
To date, Hulamin has focused its efforts on human resource development, preferential procurement, skills development, enterprise development and corporate social investment.
This is evidenced by Hulamin’ s enviable track record, with examples such as its employment equity profile, where 52% of senior managers are black with combined average experience of 15 years in the business.
Furthering its commitment to meaningful and sustainable transformation, Hulamin has concluded agreements which has facilitated the acquisition of an effective 15% interest in Hulamin by its BEE partners.
Hulamin intends to achieve a BEE rating, which is in line with the guidelines issued by the DTI in the BEE Codes.
Hulamin’s BEE partners are introduced in the Investor Relations section of the Hulamin website.
21.
Are you exposed to input cost and exchange rate volatility? How do you mitigate the impact?
Hulamin exports a significant proportion of its rolled products output, with the majority of these exports priced in US Dollars. As Hulamin’s purchases of aluminium are also priced in US Dollars, this forms a natural currency hedge of the metal portion of export sales. The rolling margins on export sales are not hedged and as the majority of manufacturing costs are denominated in Rand, the company has a significant exposure to movements in the exchange rates between US Dollars and South African Rand. This exposure is considered to be a fundamental consequence of the company’s export programme, and it is not hedged.
However, in order to prevent income statement volatility that could arise from sharp movements in exchange rates at reporting period ends, Hulamin does hedge this exposure from the date of invoice to the date of receipt of the export proceeds.
22.
How variable are manufacturing costs in relation to sales volumes?
As the rolled products plant is kept fully loaded, and as additional capacity has in recent years been gained by producing more from the existing equipment, manufacturing costs have been largely fixed, which has led to a steady reduction in unit costs.
The current expansion project to raise output to 250 000 tons will result in some additional manufacturing costs being added from the second half of 2009 onwards, although at a fairly low cost per unit of additional production.
Moses Mabhida Road, Pietermaritzburg, South Africa | +27 (0)33 395 6911
