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Hulamin is targeting strong growth in the domestic market as it works to supply larger cans, in response to an energy drink boom in South Africa.
“There’s been a boom and an explosion on the energy drink market,” Hulamin CEO Mark Gounder told News24. “If you look at the aisles filled up at every supermarket right now, actually all of it is in cans. And most of it is actually, like, half a litre.”
Material for these wide cans has had to be imported by can makers, but Hulamin – an aluminium supplier and exporter – is hard at work to change that, investing substantially in the manufacture of material for wider cans in response to customers’ needs.
Plant pressure
Hulamin’s can body product is for a narrow can of up to 1 720mm in width. “But nine out of the 10 plants that have been established in South Africa require [a] wide can body – [that is] coils greater than 1 720mm. And using the wide can body, they are actually able to make more cans from the same coil,” Gounder said.
Hulamin, which used to count Tesla among its customers, expects promising growth in the local cans business will help grow the local sales contribution to the business to about 60%, up from 54% currently. In previous years, it hovered around 30%.
“With our close relationship with our customers, already we’ve managed to secure 60% of that [the can body] market. Because they know we are serious about investing in the wide capacity,” said Gounder, noting that Hulamin had completed phase one of this three-phase investment in June this year. The aim is for Hulamin to eventually secure 85% of the wide can body market.
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As Hulamin grows its can body business, it is able to use more scrap, also known as used beverage cans. “You not only lower your cost base, but you definitely tick the boxes on reducing your carbon footprint,” Gounder said, noting this would benefit customers who themselves are seeking to improve their environmental and social footprint.
Dropping outlook
Hulamin on Monday reported a 6% drop in interim turnover to R7 billion, and a 19% drop in normalised earnings before interest, taxes, depreciation and amortisation to R343 million as a result of lower export price. No dividend was declared, as has been the case for several years.
Overall group volumes declined 4% to 92 150 tonnes due to some displaced low-margin hotband and market challenges impacting its extrusions business segment.
Hulamin benefitted from a metal price lag that contributed R152 million profit in the first half of the year. Gounder said the group had opted to stop hedging against the metal price lag several years ago.
“How we manage it right now, is we’ve improved our turnaround time from when we purchase, process, and then ultimately sell our product,” Gounder said, noting Hulamin makes product to order and not to stock. As such, the group continues to drive efficiencies in a bid to increase inventory turnover and minimise the impact of the price lag.
The recovery in the group’s export market segment suffered a setback following the fire outbreak in the coil coating line, impacting mainly the export can end and tab markets. Hulamin said progress on the repair work to the coating line is on schedule, with resumed production expected by mid-September.
Simplification
The company said a simplification strategy continued to yield positive results by releasing rolling capacity for higher-margin products. Capital investments increased 114% to R302 million.
Hulamin said it remained resolute in its strategic focus on “simplifying the product range, increasing scrap utilisation, reducing costs and delivering its market-driven capital expenditure to position the business to take advantage of structural growth markets”.
