Hulamin buoyed by the weaker rand

Aluminium supplier eyes growth prospects in vehicles market, especially electric vehicles

THE recent weakening of the rand compared to the US dollar is set to boost aluminium supplier Hulamin’s earnings prospects as the group heads into 2019.

The rand has weakened to around R13.90 to the dollar and the Pietermaritzburg-based company is set to benefit as it exports more than 60 percent of its sales.

Chief executive Richard Jacob said Hulamin could replace weakness in local demand with sales to export markets.

“Hulamin is performing well in the second half of 2018 compared to the first half as a result of a weaker rand/dollar exchange and very strong operational performance from the factory in Pietermaritzburg. A weaker rand is, therefore, better for Hulamin than a stronger rand,” Jacob said.

In the six months to end June results, Hulamin was negatively affected by a strong rand, which was R12.30 compared to the dollar.

As a result of the stronger rand during the period, revenue only increased by three percent to R5.3 billion, while earnings before interest and taxation (Ebit) declined by 66 percent to R98.5 million. The group said the decline was driven by a sharply stronger rand and metal price lag (MPL) reversal of R103m.

Ebit before MPL decreased by 41 percent to R124m while the rand was seven percent stronger compared to the US dollar at R12.30, compared to last year’s R13.22.

However, the rand has since weakened to about R13.90.

“In the second half, we expect the rand to be closer to R14, which is better for Hulamin. We export more than 60 percent of our sales which are denominated in dollars. The company converts its dollar export proceeds into rand when it receives money from customers. The weaker the rand, the more rand it receives for every US dollar it converts,” Jacob added.

However, the group is not only relying on the weakness of the rand to boost its earnings. Jacob said Hulamin has numerous growth opportunities.

“There is a growing market throughout Africa for beverage cans, which is one of Hulamin’s core products and also the automotive market is demanding more and more aluminium, particularly in electric vehicles, which are growing very strongly around the world, largely for environmental reasons,” he said.