UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2011

Transcription

1 UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2011

2 Agenda Introduction Financial Review Operational Review Strategic Review and Objectives Prospects 2

3 Introduction - Operating Environment External factors Hulamin Response Improving international margins, uncertain markets rolled products sales - growth 22% High value mix improved to 65% of sales Improved rolling margins Continued focus on cost reductions: Further Rand strength and rising imports - R249 million cost improvements - Real unit costs 9.2% lower (4.3% nominal) - Yield improved 2.4% since Q Cape Town plant closure No change in metal supply outlook Discussions to extend slab supply to start in Q4 New slab capacity ramp-up underway 3

4 4 FINANCIAL REVIEW

5 Key indicators 2011 H H1 % change Revenue R billion % Total Hulamin sales volumes Ton 000 s % Operating profit R million % Headline earnings R million % Rand/ US Dollar ZAR/USD % HEPS cents/share % Weighted average shares in issue millions % Working capital increase R million Capital expenditure R million % Cash flow before financing activities R million Dividends R million - - Borrowings (net) R million % Rights issue R million 736 Normalised for insurance settlement and reversal of share incentive costs Operating profit R million % HEPS cents/share % 5

6 cents Rm Rm R/USD Rm Financial Highlights H EBITDA vs Rand/USD BEE H2 H (200) (400) (600) (800) Cash Flow H HEPS 2000 Borrowings H2 H1 H H

7 Year on year EBIT comparison H1 USD Margins Mix ROE on Margins Volume Costs Other 2011 H1 7

8 Rm Cash flow (200) (400) (600) (800) H H H Funds generated from operations Working capital & investments Capital expenditure Return to capital providers Cash flow before dividends 8

9 Balance Sheet Optimisation Covenants met at end June 2011 Debt and funding structure discussions on-going - Objective: Through-the-cycle stability - Review of bank facility structure underway - Secured finance alternatives being evaluated - Customer primary metal financing i.e. tolling Covenants remain - Debt service cover - Interest cover - Debt/ EBITDA 9

10 Rm Capital Expenditure Estimate Normal Capital Expenditure* Project Capital Expenditure* Depreciation * Excludes capitalised borrowing costs 10

11 11 OPERATIONAL REVIEW

12 Key Themes 1. Continued focus on manufacturing improvement 2. Are we delivering on our promises? 1. Costs savings 2. Yield improvements 3. Throughput 12

13 Tons (000 s) Rolled Products - Operational Highlights 250 Sales Volumes 130 Unit Cost Index in 2007 Rands H1 H Local sales Export sales H H H H $ Margin Index 70 % High Value Products H H H H H H

14 Tons 000 s Rolled Products Sales Volumes RP expansion start-up growth Second expansion optimisation Global financial crisis H Export sales Local sales H H

15 Indexed Rolled Products Operating margin in Rand Margin in Rands/ton Unit cost in Rands/ton Margin increase driven by mix improvements and US Dollar inflation Unit cost improvements driven by controlling fixed costs at 2011 levels, ongoing cost reduction programme and volume increase H H H Margin Unit cost 15

16 Are we delivering on cost and process improvement promises? Cumulative Annualised Benefits Projects December 2010 June

17 Continued Focus on Cost Reduction Specific opportunities - Further payroll rationalisation - R20-25 million p.a. - Additional capacity rationalisation - R20-30 million p.a. - Logistics projects underway R12m p.a. Efficiency and cost reduction projects (Lean/ Six Sigma projects) - Target R50m p.a. Launching cost management module of manufacturing excellence programme Cost governance Systems, procurement and commodity management teams (gas, electricity, packaging, logistics, etc.) 17

18 Rolled Products - Yield Improvement Q Q Q Q Q Q Target Yield improvement initiatives continue from 2010 Focus on Process control and Equipment reliability methodologies - Part of manufacturing excellence programme Targeted Lean/Six Sigma projects 18

19 Mix improvement 2011 H1 vs H1 2011H1 vs. 2007H1 Can end stock +22% +30% Brazing sheet +15% +46% Light gauge foil +20% +17% Heat treated plate +45% +8% Focus in 2011 on light gauge foil improvements - Little volume progress in H vs. H Qualifications progressing - Major hurdle overcome - Contracts for 2012 being booked 19

20 Days indexed Cash Cycle H Rolling slab Other inventory Finished goods Trade debtors 20

21 Hulamin Extrusions SA market at 2010 levels - Building industry remains depressed - Automotive segment showing growth Sales volumes in Hulamin Extrusions up 9.7% on H Closure of AGI s Profal extrusion operations in late Growth in major automotive contracts - ITAC outcome 5% duty on imported extrusions» Insufficient protection against subsidised Chinese imports Focus on cost reduction - Benchmarking project completed - Agreement on the closure of the Cape Town plant and relocation of production to the plants in Midrand and Pietermaritzburg in Q3 21

22 Hulamin Extrusions Outlook Projected building industry recovery in First signs are now apparent Solar energy market showing potential for growth - Remains REFIT tariff dependent Partnership with Mazor Ltd in Hulamin Building Systems - Business trading profitably - New systems being rolled out - Energy efficient (building) envelope solutions are a key focus 22

23 STRATEGIC REVIEW and OBJECTIVES 23

24 Aluminium Industry Demand can double by 2020 Aluminium demand can double to 80 million tons - Remarkable physical properties:» Recycling» Heat and electricity conductivity» Strength to weight ratio - Copper replacement - 12% growth expected in 2011 Strong growth in traditional markets - Automotive growth driven by CAFÉ, CO 2, recycling - Can stock sold out globally - 20% growth in developing markets - 10% growth in vehicle manufacture predicted in Strong aircraft growth - globalisation New markets emerging - Solar - Consumer electronics (growing at >30% p.a.) 24

25 Industry Optimism Returns Novelis announces capacity expansions - Brazil can stock capacity - Brazil recycling facilities - USA automotive sheet capacity - Korea capacity expansion ( tons by 2016) Alcoa sees 12% industry growth in Record profits in rolled products Oman continuous cast rolling plant tons p.a. announced Import/ anti-dumping duties on Chinese extrusions in USA >40% 25

26 Current Status of Slab and Billet Supply Rolling slab supply ex-bhp Billiton previously extended to June 2012 Negotiations for supply beyond June 2012 to start Q To coincide with Hulamin s 12-month contracts Pietermaritzburg Slab Casting capacity expansion in operation - R75 million expansion of in-house facilities tons p.a. additional slab casting capacity ( tons p.a. sales) - Mix improvement benefits Billet imports on-going 26

27 Remaining performance gaps Sell More - Increasing sales from tons to tons annualised Make For Less Reduce unit costs by $150 per ton by Double Whammy» Volume impact on unit costs» Reducing (fixed) costs below inflation and improving efficiencies - Manufacturing excellence programme meeting international benchmarks - Further plant rationalisations - Product mix rationalisation opportunities Sell For More Increase rolling margins by $110 per ton by High value products at full capacity foil, can end, heat treated plate, etc. - New products and technologies - Additional casting capacity for high value products 27

28 28 PROSPECTS

29 Prospects Building blocks in place: Gathering momentum of operational improvements - Q2 Production tons annualised - Costs increasingly under control - Manufacturing performance improving Foil capacity coming on stream Local market may have bottomed out New market opportunities tempered by second half 2011 uncertainties: European and U.S. markets are slowing Local supply and delivery disruptions Wage negotiations 29

30 30 APPENDICES

31 Manufacturing cost breakdown 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% H Manpower (excl maintenance) Consumables Energy Maintenance (incl manpower) Other 31

32 Jan-1980 Jan-1981 Jan-1982 Jan-1983 Jan-1984 Jan-1985 Jan-1986 Jan-1987 Jan-1988 Jan-1989 Jan-1990 Jan-1991 Jan-1992 Jan-1993 Jan-1994 Jan-1995 Jan-1996 Jan-1997 Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002 Jan-2003 Jan-2004 Jan-2005 Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 ZAR: USD Exposure to Rand / US Dollar

33 Jan-1980 Jan-1981 Jan-1982 Jan-1983 Jan-1984 Jan-1985 Jan-1986 Jan-1987 Jan-1988 Jan-1989 Jan-1990 Jan-1991 Jan-1992 Jan-1993 Jan-1994 Jan-1995 Jan-1996 Jan-1997 Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002 Jan-2003 Jan-2004 Jan-2005 Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 USD per ton Exposure to LME Aluminium Price 3,250 2,750 2,250 1,750 1,

34 Jan-1980 Jan-1981 Jan-1982 Jan-1983 Jan-1984 Jan-1985 Jan-1986 Jan-1987 Jan-1988 Jan-1989 Jan-1990 Jan-1991 Jan-1992 Jan-1993 Jan-1994 Jan-1995 Jan-1996 Jan-1997 Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002 Jan-2003 Jan-2004 Jan-2005 Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 Rand per ton Exposure to Rand Aluminium price 25,000 20,000 15,000 10,000 5,

35 tons melting ingot Current metal supply Hillside tons melting ingot export sales tons slab Bayside tons slab Rolling Slab tons Hulamin Rolling Mill Sales tons Hulamin Remelt tons scrap 35

36 tons melting ingot Full capacity with Bayside supply Hillside tons melting ingot export sales tons slab CDR Line 3 starts Q Bayside tons slab Rolling Slab tons Hulamin Rolling Mill tons tons Twin Roll Casters Sales tons Hulamin Remelt tons scrap 36