UNAUDITED INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2011
Agenda Introduction Financial Review Operational Review Strategic Review and Objectives Prospects 2
Introduction - Operating Environment External factors Hulamin Response Improving international margins, uncertain markets 208 000 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 Q1 2010 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 FINANCIAL REVIEW
Key indicators 2011 H1 2010 H1 % change Revenue R billion 3.4 2.7 24% Total Hulamin sales volumes Ton 000 s 229 189 20% Operating profit R million 132 102 29% Headline earnings R million 71 27 167% Rand/ US Dollar ZAR/USD 6.91 7.54-8% HEPS cents/share 22 11 100% Weighted average shares in issue millions 317 245 29% Working capital increase R million 184 363 Capital expenditure R million 99 94 5% Cash flow before financing activities R million 10-349 Dividends R million - - Borrowings (net) R million 946 1022-7% Rights issue R million 736 Normalised for insurance settlement and reversal of share incentive costs Operating profit R million 96 88 9% HEPS cents/share 14 5 180% 5
cents Rm Rm R/USD Rm Financial Highlights H1 2011 700 600 500 400 300 200 100 0 EBITDA vs Rand/USD BEE H2 H1 2007 2008 2009 2010 2011 8.50 8.25 8.00 7.75 7.50 7.25 7.00 6.75 6.50 400 200 0 (200) (400) (600) (800) Cash Flow 2007 2008 2009 2010 H1 2011 120 HEPS 2000 Borrowings 100 80 1500 60 1000 40 20 0 H2 H1 H1 500 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 H1 2011 6
Year on year EBIT comparison 300 250 200 150 100 50 0 2010 H1 USD Margins Mix ROE on Margins Volume Costs Other 2011 H1 7
Rm Cash flow 800 600 400 200 0 (200) (400) (600) (800) 2008 2009 H1 2010 H2 2010 H1 2011 Funds generated from operations Working capital & investments Capital expenditure Return to capital providers Cash flow before dividends 8
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
Rm Capital Expenditure 800 700 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 Estimate Normal Capital Expenditure* Project Capital Expenditure* Depreciation * Excludes capitalised borrowing costs 10
11 OPERATIONAL REVIEW
Key Themes 1. Continued focus on manufacturing improvement 2. Are we delivering on our promises? 1. Costs savings 2. Yield improvements 3. Throughput 12
Tons (000 s) Rolled Products - Operational Highlights 250 Sales Volumes 130 Unit Cost Index in 2007 Rands 200 150 100 50 120 110 100 0 2007 2008 2009 2010 H1 H2 2010 2010 Local sales Export sales H1 2011 90 2007 2008 2009 H1 2010 H2 2010 H1 2011 145 $ Margin Index 70 % High Value Products 140 135 130 125 65 60 55 120 50 2007 2008 2009 H1 2010 H2 2010 H1 2011 2007 2008 2009 H1 2010 H2 2010 H1 2011 13
Tons 000 s Rolled Products Sales Volumes 250 200 RP expansion start-up growth Second expansion optimisation Global financial crisis 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 H1 2010 Export sales Local sales H2 2010 H1 2011 2014 14
Indexed Rolled Products Operating margin in Rand 130 120 110 100 90 80 70 60 50 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 40 2007 2008 2009 H1 2010 H2 2010 H1 2011 2014 Margin Unit cost 15
Are we delivering on cost and process improvement promises? Cumulative Annualised Benefits Projects December 2010 June 2011 16
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
Rolled Products - Yield Improvement 110 108 106 104 102 100 98 96 94 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 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
Mix improvement 2011 H1 vs. 2010 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 H1 2011 vs. H2 2010 - Qualifications progressing - Major hurdle overcome - Contracts for 2012 being booked 19
Days indexed Cash Cycle 140 120 100 80 60 40 20 0 2007 2008 2009 2010 H1 2011 Rolling slab Other inventory Finished goods Trade debtors 20
Hulamin Extrusions SA market at 2010 levels - Building industry remains depressed - Automotive segment showing growth Sales volumes in Hulamin Extrusions up 9.7% on H1 2010 - Closure of AGI s Profal extrusion operations in late 2010 - 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
Hulamin Extrusions Outlook Projected building industry recovery in 2011 - 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
STRATEGIC REVIEW and OBJECTIVES 23
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 2011 - Strong aircraft growth - globalisation New markets emerging - Solar - Consumer electronics (growing at >30% p.a.) 24
Industry Optimism Returns Novelis announces capacity expansions - Brazil can stock capacity - Brazil recycling facilities - USA automotive sheet capacity - Korea capacity expansion (400 000 tons by 2016) Alcoa sees 12% industry growth in 2011 - Record profits in rolled products Oman continuous cast rolling plant 160 000 tons p.a. announced Import/ anti-dumping duties on Chinese extrusions in USA >40% 25
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 Q4 2011 - To coincide with Hulamin s 12-month contracts Pietermaritzburg Slab Casting capacity expansion in operation - R75 million expansion of in-house facilities - 50 000 tons p.a. additional slab casting capacity (35 000 tons p.a. sales) - Mix improvement benefits Billet imports on-going 26
Remaining performance gaps Sell More - Increasing sales from 208 000 tons to 250 000 tons annualised Make For Less Reduce unit costs by $150 per ton by 2014 - 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 2014 - 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 PROSPECTS
Prospects Building blocks in place: Gathering momentum of operational improvements - Q2 Production 223 000 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 APPENDICES
Manufacturing cost breakdown 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 H1 2011 Manpower (excl maintenance) Consumables Energy Maintenance (incl manpower) Other 31
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 12 10 8 6 4 2 0 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 USD per ton Exposure to LME Aluminium Price 3,250 2,750 2,250 1,750 1,250 750 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 Rand per ton Exposure to Rand Aluminium price 25,000 20,000 15,000 10,000 5,000 0 34
110 000 tons melting ingot Current metal supply Hillside 600 000 tons melting ingot export sales 210 000 tons slab Bayside 90 000 tons slab Rolling Slab 300 000 tons Hulamin Rolling Mill Sales 200 000 tons Hulamin Remelt 100 000 tons scrap 35
160 000 tons melting ingot Full capacity with Bayside supply Hillside 550 000 tons melting ingot export sales 255 000 tons slab CDR Line 3 starts Q2 2011 Bayside 90 000 tons slab Rolling Slab 345 000 tons Hulamin Rolling Mill 30 000 tons 30 000 tons Twin Roll Casters Sales 250 000 tons Hulamin Remelt 125 000 tons scrap 36