Hulamin reports interim loss
Aluminium-supplier Hulamin, whose customers include Tesla, says it slipped to a headline loss in the six months to endJune partly because of the US-China trade dispute.
Aluminium-supplier Hulamin, whose customers include Tesla, says it slipped to a headline loss in the six months to end-June 2019 partly because of the USChina trade dispute.
The company said it would probably report a headline loss per share for the half-year of at least 13c, from headline earnings per share of 13c the prior year.
Normalised earnings per share, which adjust for restructuring costs and other one-offs, would fall by at least a quarter.
The group said earnings in Hulamin Rolled Products were dented by a “sharp decline” in demand from the US common alloy market, which was previously overstocked, and lower demand for heat-treated plates.
“It has become apparent that the imposition of duties on Chinese common alloy in 2018 prompted unusually strong buying in the US market, which has resulted in extensive import overstocking, exacerbated by increased availability from US rolling mills,” Hulamin said.
“De-stocking in this market, with attendant lower prices, is expected to continue through the second half of the 2019 financial year.”
Hulamin said profit has also been affected by a global downturn in automotive production, which resulted in a 30% reduction in sales volumes to automotive component customers.
“In addition, the slowdown in European manufacturing, which has also seen an increasing influx of Chinese aluminium imports, and tough economic conditions in the domestic economy, constrained Hulamin from selling additional production into these markets.”
But the company said demand for can stock, which represents about 45% of the sales volumes of Hulamin Rolled Products, remained “robust”.
“The de-stocking in the US, weak automotive demand and the general slowdown in the local and global economic and manufacturing cycles is expected to continue to impact the business in the second half,” Hulamin said.
The company said that it was responding by “aggressively addressing manpowerrelated costs, including contractors, consultant and employment costs”.
Business Day reported in May that the group’s Hulamin Extrusions division had sent out retrenchment notifications to staff. The company was said to be considering laying off as many as 200 employees.
Hulamin said on Friday that the division recorded “a large operating loss in the first half”.
It also said it was reducing other costs, including energy, metal and other commodityrelated expenses.
At the same time, it was pursuing opportunities to increase sales “and improve product mix and rolling margins”, and working to reduce working capital, saying that “these actions are expected to positively impact Hulamin’s financial performance, mainly in the 2020 financial year”.
The company’s share price was 4.5% down at R2.53 on Friday afternoon.