Hulamin looks to build R400m plant

Hulamin could spend as much as R400 million to replace up to 115 000 tons of aluminium supply by building a facility in Richards Bay or Pietermaritzburg to turn aluminium metal into higher valued products, chief executive Alan Fourie said yesterday. BHP Billiton notified Hulamin that it intended to stop the supply of 100 000 tons of rolling slab a year from the end of next year and up to 15 000 tons a year of extrusion billet from the end of September. Rolling slab is turned into aluminium rolls and extrusion billet is used to shape aluminium into products for engineering, transportation, automotive and architectural applications. Fourie said Hulamin had put in short-term measures that would cover the company's aluminium supply until 2012 and a decision on the long-term solution would need to be made in the next six to nine months. The other options Hulamin is looking at include incremental expansion of its in-house facilities and interim import or tolling arrangements. "Extrusion billet can be imported more readily and the optimum solution could be linked to slab capacity," it said. In another development, Anglo yesterday sold a 30 percent stake in Hulamin to Coronation Asset Management for R732m. The sale was concluded at R12 a share, which was a 20 percent premium. Turning to the market conditions, Fourie said the recent fall in the global consumption of aluminium had been the sharpest since the 1975 oil shock. "The first six months of 2009 were the most difficult for some years," he added. US and EU demand for aluminium products and extrusions fell as much as 30 percent in the automotive sector, 55 percent in the transport sector and 40 percent in the building and construction sector. As a result, Hulamin's net profit fell 87 percent to R24.8m in the half year to June. The company's operating profit was shielded from the effects of the sharp reduction in the aluminium price by a metal price hedge that was implemented in 2007. Revenue during the six months fell 40 percent to R2.1 billion. Hulamin's cash balance fell to R53m at the end of last month from R92m at the end of June last year. Fourie said 150 temporary and contract jobs were lost from February through to April, but no permanent jobs had been lost. As a result of the fall in profit, Hulamin's board did not declare an interim dividend for the first time since the group listed on the JSE in June 2007. The group's shares fell 7 percent yesterday to R10, which was the share's lowest level since April, before recovering to close 0.9 percent up at R10.90.