Deal has Hulamin back on road
Aluminium group Hulamin says that with a full order book including a new agreement to supply an electric car manufacturer in the US, the worst of the pandemic is behind it.
In an interview after releasing results for the year ended December 31 2020, CEO Richard Jacob said the electric car contract will kick in during the third quarter of the 2021 financial year and entails supplying aluminium for body panels in vehicles.
He said the rest of the group’s order book is full.
Jacob could not name the car manufacturer because of confidentiality clauses in the contract.
Previously Hulamin has provided aluminium for battery base plates in cars including Elon Musk’s Tesla.
Explaining the attraction of aluminium for the electric car industry, Jacob said aluminium’s light weight helps to extend the range vehicles can travel between charges.
“The heavier the vehicle the more energy it needs to move, and therefore the heavier the vehicle the more often you have to recharge it.”
Jacob said in the US, which is Hulamin’s second-biggest market, the group was helped by the 8.9% anti-dumping duty it was slapped with in that country last year, as it was relatively low compared to that imposed on manufacturers in other countries. Seven countries had lower duties than SA and 23 countries received much higher duties — in some cases as much as 100%.
“The fact that we are very low down on the tariff scale means that we are able to carry on supplying profitably into that market.”
Overall, the group last year was hit hard by global Covid-19 restrictions and three liquor bans in SA, which resulted in group sales volumes falling 24% to 166,000t. It reported a headline loss of R211m, which was “impacted by restructuring costs”, among other items. In 2019 the group cut its staff to about 1,750 from 2,050 previously.
The group reported a 49% drop in beverage can sales in SA. Jacob said the “alcohol ban was probably about 70% of the problem” but there was also a sharp drop in demand for single-serving soft drink cans as people stayed home to work and construction sites and factories were temporarily closed.
But the outlook for the group is better, with Jacob saying Hulamin is being approached by more customers now that the government has hit aluminium imports into SA with 15% duties. He said it is too soon to determine how much of a difference this has made, but the effect has been “significant”.
Jacob said he believes that, though it was “very difficult” in 2020 to balance promises and actual delivery in terms of production, “the worst is behind us”.
However, Chris Logan, MD of Opportune Investments, a minority shareholder in Hulamin, expressed doubt about the group being able to make the most of a strong aluminium market.
“There should be a big turnaround coming, but this company has been reactive, they’ve let their costs go and only when there is a crisis do they go and make painful cuts,” said Logan.