Firmly based in Southern Africa, Hulett Aluminium is successfully challenging the aluminium industry paradigm that manufacturing enterprises need to be located close to end-users in high-cost regions of the world.
The success of its strategy is underpinned by investment in state-of-the-art equipment and technology, together with a dynamic business methodology that is driven by an uncompromising focus on customer requirements.
Appealing to a large and diverse market, much of Hulett Aluminium's strength resides in its independence in an industry which is dominated by a few large integrated multinational producers.
To this end, we supply products with specifications and service levels that are compatible with the manufacturing requirements of customers, rather than viewing rolling and extrusion as mere conversion processes.
Having built a formidable reputation as a globally competitive semi-fabricator of aluminium products, Hulett Aluminium is rolling out an ambitious growth strategy that is driven by the exacting needs of customers, the imperatives of developing downstream capacity, and the promotion of industrial growth in Southern Africa.
A progressive employment equity strategy plays a critical role in
organisational culture and Hulett Aluminium's leadership increasingly
reflects the demographic profile of the region with 46 percent of middle
and senior management levels being black.
Growth in sales volumes was achieved in both local and export markets, including increased sales of more profitable products. Rolled Products sales volumes in the last quarter improved significantly and were 23 percent ahead of the average sales in the first nine months of the year.
Results in the first half of the year were positively influenced by the weakness of the Rand. Sales volumes grew strongly in the second half and the resultant financial benefits were off-set by continued pressure on international rolling margins and the sharp strengthening of the Rand. As a result, operating earnings grew by two percent to R272 million.
Export rolling margins, when converted into Rand, benefited in the first half and were lower in the second half of the year.
There was also a negative impact in respect of the conversion of the export debtor book into Rand as well as the valuation at year end of forward exchange contracts associated with foreign loans. Strong working capital control contributed to a positive cash flow after capital expenditure, before interest, of R321 million for the year.
Growing our Market Positions
Hulett Aluminium has significantly grown its market presence over the past four years and is now supplying customers in 55 countries. Soundly managed market entry strategies are complemented by the supply of consistently high quality products. As a consequence of the protracted global manufacturing weakness and the international market slowdown, certain sectors have seen low demand and reduced rolling margins. Despite these tough conditions, Hulett Aluminium has grown its position in high margin and more technically demanding products, including M61 and M82 heat treated plate of which volumes have grown by 36 percent in the last year. While can end stock sales have been adversely effected by reduced demand in South America, the current order book indicates a recovery. Hulett Aluminium has now qualified as a supplier at 12 can plants worldwide and expects significant growth in the year ahead for these high value products.
At present there are numerous growth initiatives at various stages of
the development cycle. These include selected painted products, precision
non heat treated plate, closure sheet and clad products for the automotive
markets. The ability to rapidly progress these products from conception to
commercial production lies in the unique product development process
developed by Hulett Aluminium.
Sweating our Assets
A key factor in maximising profitability is to harness our maximum plant capacity, in tandem with meeting the increasingly demanding product specifications and quality requirements. Fully exploiting the installed capabilities of the facilities enables us to develop products that are higher up the product profitability curve. A tailor-made approach to sweating our assets has been developed for all manufacturing areas in conjunction with a product quality plan. Similarly, sustained improvements in the control of process variables within statistically calculated limits and benchmarks are ensuring that aspects such as surface quality are becoming differentiating factors for our customers to select our products. These initiatives contributed towards the increased output in recent months and provide a platform for further growth in 2003.
Growth in our Other Operations
While much of the recent focus has been on the expansion of the Rolled Products business, Hulett Aluminium's other operations are also well positioned to capitalise on a number of exciting growth opportunities.
Hulett-Hydro Extrusions has a major share of the architectural market sector in sub-Saharan Africa. In collaboration with the Rolled Products business, Hulett-Hydro Extrusions provides complete aluminium solutions to customers in other industries, particularly in the burgeoning transport sector and has evolved into an important supplier into the American and European road freight markets.
The Commercial Products businesses include the distribution of rolled and extruded aluminium, while other downstream operations supply products as diverse as rigid foil containers, composite panels for cladding, and high pressure gas cylinders. Particularly pleasing is the growth in exports of these products.
All operations in Hulett Aluminium have strong order books and sales
are expected to increase significantly in 2003. Margins are expected to
remain under pressure for at least the first half of 2003. Earnings will
also be influenced by the effect of movements in the exchange rate on
export proceeds and on the valuation of working capital.