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AUDITED RESULTSFOR THE YEAR ENDED 31 DECEMBER 2016
2
Audited results for the year ended 31 December 2016
AGENDA
1 Opening remarks / market update
2 Financial results
3 Operational review
4 Strategy update
5 Outlook
OPENING REMARKS / MARKET UPDATE
1 2 3 4 5
4
Audited results for the year ended 31 December 2016
KEY POINTS
• Record sales of 232 000 tons (2015: 198 000 tons)
- Rolled Products sales of 214 000 tons (2015: 180 000 tons)
• Best ever safety performance: Total Recordable Case Frequency Rate – 0.27
- Equivalent to global benchmark
• Much improved second half earnings: HEPS 48 cps in H1 versus 71cps in H2
• Net cash inflow R415 million for the year, after R33 million in H1
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Audited results for the year ended 31 December 2016
MARKET OVERVIEW
LME aluminium price rising
• China reportedly closing capacity
• Supply versus demand imbalance in the West
• LME closed at $1 713/t (2015: $1 508/t)
• Geographic premiums have remained stable
Automotive demand for aluminium continues to grow
Local economy stubbornly soft, however
• Demand for beverage cans improving
• Automotive demand improved in 2016
• Building and construction and general engineering soft
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Audited results for the year ended 31 December 2016
ALL-IN ALUMINIUM PRICE (USD/TON)
1 500
1 700
1 900
2 100
2 300
2 500
2 700
Jan-1
2
Mar-
12
May-1
2
Jul-
12
Sep-1
2
Nov-1
2
Jan-1
3
Mar-
13
May-1
3
Jul-
13
Sep-1
3
Nov-1
3
Jan-1
4
Mar-
14
May-1
4
Jul-
14
Sep-1
4
Nov-1
4
Jan-1
5
Mar-
15
May-1
5
Jul-
15
Sep-1
5
Nov-1
5
Jan-1
6
Mar-
16
May-1
6
Jul-
16
Sep-1
6
Nov-1
6
Jan-1
7
LME + Midwest SHFE
Source: Metal Bulletin
FINANCIAL RESULTS
1 2 3 4 5
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Audited results for the year ended 31 December 2016
FINANCIAL HIGHLIGHTS
• Group EBIT up 110% to a record R622 million
• HEPS and normalised EPS improved to 119 cps (up 222% / 116%)
• Strong cash generation reduced borrowings to R577m (2015: R975m)
• Dividend of 15 cps declared (2015: 8 cps)
9
Audited results for the year ended 31 December 2016
OPERATING PROFIT
2016Rm
2015 Rm
Change%
Operating profit 622 295 110
(Profit) / loss on disposal of property, plant and equipment (6) 11
Bargain purchase gain: Isizinda - (52)
Headline EBIT 616 254 143
Share-based payment costs on 2015 BEE transaction - 20
Transaction costs - 5
Post retirement medical aid past service costs adjustment - 5
Equity-settled share-based payment: Isizinda 1 27
Normalised EBIT 617 311 98
Metal price lag (gain) / loss (50) 161
Comparable EBIT 567 472 20
10
Audited results for the year ended 31 December 2016
COMPARABLE EBITDA BEFORE METAL PRICE LAG
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
R m
illion
11
Audited results for the year ended 31 December 2016
FOCUSING ON THE KEY VALUE DRIVERS
Sales volume Up 19% • Driven by strong manufacturing performance in Rolled Products
Currency 15% weaker • Resulting in improved US Dollar cost competitiveness
$ Aluminium price 7% stronger • Resulting in metal price lag benefit, after 50% hedging
$ Rolling margins 16% weaker • Weaker mix, regional premiums, Euro weakness, Chinese metal arbitrage
ZAR Conversion costs / unit Down 4% • Volume / currency adjusted costs in line with price / commodity inflation
• High fixed cost base
Working capital Inventory days down
26%
• Debtor and creditor days sales in line
• Significant improvements in inventory efficiencies
SIB Capital expenditure Down > R100m • Normalisation of stay in business capex and improved capital discipline
12
Audited results for the year ended 31 December 2016
FY 2015 V FY 2016 EBITDA BRIDGE
0
200
400
600
800
1 000
1 200
1 400
444 341 (102) 210 332 (209) 19 (251) 24 808
2015 Group
EBITDA
Currency Regional premiums
Metal price lag
Volume Margin / Mix
Recycling benefit
Conversion costs
Other business
units
2016 Group
EBITDA
R m
illion
External drivers Operational performance
893
13
Audited results for the year ended 31 December 2016
H1 2016 V H2 2016 EBITDA BRIDGE
0
100
200
300
400
500
600
700
350 (113) (17) 38 195 92 37 (131) 7 458
H1 2016GroupEBITDA
Currency Regionalpremiums
Metal price lag
Volume Margin / Mix
Recyclingbenefit
Conversioncosts
Otherbusiness
units
H2 2016GroupEBITDA
R m
illion
External drivers Operational performance
258
14
Audited results for the year ended 31 December 2016
STRENGTHENING THE BALANCE SHEET
Focus areas Delivered
Improve liquidity • New 3-year working capital facility • Covenant light• R400m additional headroom
Drive operating performance
• EBITDA before metal price lag up 25%, driven by strong manufacturing fundamentals
Working capital • Significant improvements in inventory efficiencies
Capital discipline • Optimising SIB capex
15
Audited results for the year ended 31 December 2016
FY 2016 CASH FLOW
0
200
400
600
800
1 000
1 200
975 (743) (166) 102 128 264 17 577
2015 Net
borrowings
Cash generated
before working
capital changes
Changes in
working capital
Net interest
paid
Income tax
paid
Capital
expenditure
Other 2016 Net
borrowings
R m
illion
16
Audited results for the year ended 31 December 2016
DRIVING WORKING CAPITAL EFFICIENCIES
119
103
115
85
0
20
40
60
80
100
120
140
2013 2014 2015 2016
Days s
ale
s
Average inventory days
17
Audited results for the year ended 31 December 2016
CAPITAL EXPENDITURE
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Forecast
R m
illion
SIB capex * Improvement capex and investments * Depreciation
* Excludes capitalised borrowing costs
18
Audited results for the year ended 31 December 2016
LIQUIDITY AND CAPITAL STRUCTURE
0
500
1 000
1 500
2 000
2009 2010 2011 2012 2013 2014 2015 2016
R m
illion
Net borrowings and headroom
Net borrowings Headroom
0
10
20
30
40
2009 2010 2011 2012 2013 2014 2015 2016
%
Net debt to equity
19
Audited results for the year ended 31 December 2016
FOCUS ON VALUE IMPROVEMENT
Drive free cash flow generation
• Maintain volume gains
• Drive mix / margin improvement
• Focused cost reduction
• Improved metal input mix
• Maintain working capital gains
• Prudent stay in business capex
De-risk the balance sheet
• Reduce borrowings and maintain sufficient facility headroom
Invest in growth opportunities
• Grow return on capital employed
OPERATIONAL REVIEW
1 2 3 4 5
21
Audited results for the year ended 31 December 2016
ROLLED PRODUCTS – KEY FEATURES
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016
Tons (
000's
)
Rolled Products sales volume
Local sales Export sales
0
20
40
60
80
100
120
2010 2011 2012 2013 2014 2015 2016
US$ margin index
0.00
0.50
1.00
1.50
2.00
2010 2011 2012 2013 2014 2015 2016
Safety performance
TRCFR LTIFR
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016
Group local sales mix
Packaging Automotive Extrusions Other
22
Audited results for the year ended 31 December 2016
ROLLED PRODUCTS OPERATING MARGIN IN RAND
40
60
80
100
120
140
160
180
2010 2011 2012 2013 2014 2015 2016
Indexed
Margin in Rand / ton Unit cost in Rand / ton
23
Audited results for the year ended 31 December 2016
A HULAMIN EBITDA MODEL
Sales volume Rolling margin Rand/$ Revenue
Manpower
Energy
Maintenance
Material
Consumables
Other Metal price lag
Other e.g. Extrusions; scrap
EBITDA Result
24
Audited results for the year ended 31 December 2016
HALF ON HALF SALES AND PRODUCT MIX
0
20
40
60
80
100
120
140
160
180
2015 H1 2015 H2 2016 H1 2016 H2
RP sales and product volume index
RP sales volume Can end stock HT Plate Common alloy exports Local sales
25
Audited results for the year ended 31 December 2016
FACTORS AFFECTING SALES VOLUME
Internal issues
• Improved plant performance including
- Lean manufacturing performance – Kaizan
- Product yield
- Rolling productivity
- Improved reliability
• Slab supply from Isizinda
• Manpower stability
External issues
• Supply of services
- Energy
- Logistics
- Other infrastructure e.g. water
26
Audited results for the year ended 31 December 2016
ROLLED PRODUCTS PRODUCTION (ANNUALISED)
50
100
150
200
250
Jan 2
015
Feb 2
015
Mar
2015
Q1 2
015
Apr
2015
May 2
015
Jun 2
015
Q2 2
015
Jul 2015
Aug 2
015
Sep 2
015
Q3 2
015
Oct
2015
Nov 2
015
Dec 2
015
Q4 2
015
Jan 2
016
Feb 2
016
Mar
2016
Q1 2
016
Apr
2016
May 2
016
Jun 2
016
Q2 2
016
Jul 2016
Aug 2
016
Sep 2
016
Q3 2
016
Oct
2016
Nov 2
016
Dec 2
016
Q4 2
016
Tons (
000’s
)
27
Audited results for the year ended 31 December 2016
ROLLED PRODUCTS YIELD INDEX
80%
85%
90%
95%
100%
105%
110%
2010 2011 2012 2013 2014 2015 2016 H1 2016 H2 2016
Target
28
Audited results for the year ended 31 December 2016
A HULAMIN EBITDA MODEL
Sales volume Rolling margin Rand/$ Revenue
Manpower
Energy
Maintenance
Material
Consumables
Other Metal price lag
Other e.g. Extrusions; scrap
EBITDA Result
29
Audited results for the year ended 31 December 2016
ROLLING MARGIN IN US DOLLARS INDEX
0
20
40
60
80
100
120
2010 2011 2012 2013 2014 2015 2016 H1 2016 H2 2016
30
Audited results for the year ended 31 December 2016
ROLLING MARGINS IN 2016
Strong sales and production of
• Can stock products
• Automotive
• Heat Treated Plate
Market conditions remain uncertain
• Over-supply remains
• Political uncertainty in UK and USA
Year-on-year mix % changes 2016 vs. 2015
• Low volume in 2015 with high value mix
Improvement in H2 2016
• Approx. $50 / ton
Weaker Euro vs. US Dollar
Aluminium price translation into rolling margins
• Massive fall in geographic premiums – now stable since Q2 2015
• Low SHFE vs. LME aluminium in 2015
31
Audited results for the year ended 31 December 2016
HALF ON HALF PRODUCT MIX
0
20
40
60
80
100
120
140
160
180
2015 H1 2015 H2 2016 H1 2016 H2
RP sales and product volume index
RP sales volume Can end stock HT Plate Common alloy exports Local sales
32
Audited results for the year ended 31 December 2016
A HULAMIN EBITDA MODEL
Sales volume Rolling margin Rand/$ Revenue
Manpower
Energy
Maintenance
Material
Consumables
Other Metal price lag
Other e.g. Extrusions; scrap
EBITDA Result
33
Audited results for the year ended 31 December 2016
RAND VS. US DOLLAR 2014 TO 2016
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
Jan/14 Jun/14 Nov/14 Apr/15 Sep/15 Feb/16 Jul/16 Dec/16
34
Audited results for the year ended 31 December 2016
A HULAMIN EBITDA MODEL
Sales volume Rolling margin Rand/$ Revenue
Manpower
Energy
Maintenance
Material
Consumables
Other Metal price lag
Other e.g. Extrusions; scrap
EBITDA Result
35
Audited results for the year ended 31 December 2016
RP MANUFACTURING COSTS EXCL. METAL
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016H1
2016H1
2016
Materials Energy Manpower (excl maintenance) Consumables Maintenance (incl manpower) Other
H2
36
Audited results for the year ended 31 December 2016
A HULAMIN EBITDA MODEL
Sales volume Rolling margin Rand/$ Revenue
Manpower
Energy
Maintenance
Material
Consumables
Other Metal price lag
Other e.g. Extrusions; scrap
EBITDA Result
37
Audited results for the year ended 31 December 2016
SCRAP
Purchases include
• Used beverage cans
• Can makers scrap
• Other customer’s scrap
• Other scrap available in market
Sales include
• Light (thin) scrap
• Alloy contaminated scrap
2016 scrap purchases
• >16 000 tons (11 000 in H2)
• Limited by sales of can body stock
38
Audited results for the year ended 31 December 2016
HULAMIN EXTRUSIONS
• R30 million capital investment approved
- Value added products (architectural)
- Cost reduction
• Go-To-Market strategy upgrade
• Operating profit improvement 133% off low base
• Low priced imports continue to erode local manufacturing
• Low GDP growth (demand) undermining sales volume growth
STRATEGY UPDATE
1 2 3 4 5
40
Audited results for the year ended 31 December 2016
BRIDGING THE GAP
2016EBIT: R622mROCE: 7.8%FX: R14.73EPS: R1.19 / shareCash flow: R407m
• Above WACC (~12%) returns
• Strong and consistent cash generation
• Consistent dividend payments
• Strong P:E ratio
• BEE Scorecard Level 3
Capital discipline
Inventory
Sales volume increase to > 220kt
Mix / margins to improve by 10%
External scrap increase to > 25%
Cost reduction incl. CNG by 10%
41
Audited results for the year ended 31 December 2016
UPDATED STRATEGIC PILLARS
Strengthen the core to compete today
Improve rolling margins to grow
Build assets of tomorrow to win
Benchmark operational performance
Cost competitiveness
Grow local and regional sales
Secure, competitive aluminium supply
Supportive regulatory environment
OUTLOOK
1 2 3 4 5
43
Audited results for the year ended 31 December 2016
OUTLOOK
• Continue focus on operational performance
• Strong demand for Hulamin products in subdued market conditions
• Scrap sourcing and optimisation
• Resources deployed on rolling margin and mix improvement
• Impact of Rand / US Dollar
APPENDIX
45
Audited results for the year ended 31 December 2016
SALIENT FEATURES
2016 2015 % Change
Key parameters and activities
Average LME US$ 1 604 1 494 7
Average exchange rate R/US$ 14.73 12.76 15
Group sales volume tons 232 000 198 000 17
Rolled Products sales volume tons 214 000 180 000 19
Group turnover Rm 10 099 8 395 20
Profitability
Group EBIT Rm 622 295 110
Group EBITDA Rm 808 444 82
EBITDA / turnover % 8.0 5.3 51
ROE % 9.3 3.1 200
HEPS cps 119 37 222
Normalised EPS cps 119 55 116
46
Audited results for the year ended 31 December 2016
SALIENT FEATURES (CONTINUED)
2016 2015 % Change
Financial, cash flow and borrowings
Capital expenditure Rm 328 488 (33)
Cash flow before financing activities Rm 415 (420)
Net borrowings Rm 577 975 (41)
Debt equity ratio % 13 25 (48)
NAV per share cps 1 360 1 206 13
Share price (VWAP) cps 545 656
47
Audited results for the year ended 31 December 2016
CONDENSED INCOME STATEMENT
2016 Rm
2015 Rm
Revenue 10 099 8 395
Cost of sales (8 958) (7 855)
Gross profit 1 141 540
Selling, marketing, distribution and administrative expenses (588) (494)
Impairment charge - -
Other gains and losses 69 249
Operating profit 622 295
Net interest expense (87) (66)
Profit before tax 535 229
Taxation (150) (65)
Net profit for the period 385 164
EBITDA (excluding impairment) 808 444
EBITDA / Sales (%) 8.0 5.3
48
Audited results for the year ended 31 December 2016
GROUP EXPENSES BY NATURE
2016Rm
2015 Rm
Aluminium and other material costs 6 627 5 667
Utilities and other direct manufacturing costs 774 657
Employment costs 1 048 930
Depreciation and amortisation 186 149
Repairs and maintenance 258 255
Freight and commissions 365 309
Other operating income and expenditure 288 381
9 546 8 348
Classified as
Cost of sales 8 958 7 855
Selling, marketing and distribution expenses 444 382
Administrative and other expenses 144 111
9 546 8 348
49
Audited results for the year ended 31 December 2016
CONDENSED BALANCE SHEET
2016Rm
2015 Rm
Capital employed
Equity 4 347 3 855
Net borrowings 577 975
4 924 4 830
Employment of capital
Property, plant and equipment and intangibles 3 333 3 234
Retirement benefit asset 117 142
Net working capital (incl. derivatives) 2 224 2 149
Net deferred tax liability (491) (467)
Retirement benefit obligations (259) (228)
4 924 4 830
50
Audited results for the year ended 31 December 2016
CONDENSED CASH FLOW STATEMENT
2016Rm
2015Rm
Cash flows from operating activities
Operating profit 622 295
Net interest paid (102) (87)
Impairment charge - -
Depreciation and other non-cash items 121 246
Income tax payment (128) (50)
Changes in working capital 166 (280)
679 124
Cash flows from investing activities
Net additions to property, plant and equipment and intangibles and investments (264) (543)
Cash flows before financing activities 415 (419)
Cash flows – equity, dividend and other transactions (17) (119)
Cash flows for the period 398 (538)
Net borrowings – beginning of period (975) (437)
Net borrowings – end of period (577) (975)