Hulamin’s story is complicated. On the one hand, the Pietermaritzburg-based aluminium semi-fabricator has just completed a three-year expansion programme, an investment that effectively doubles cold-rolling capacity and underpins a 200,000t annualised run rate. With the final phase now commissioned, the group is at last positioned to capture both resilient local demand and improving export opportunities.
Crucially, this also draws a line under a capital-intensive investment cycle. Sustaining capex is expected to normalise to around R250-300m a year, a meaningful step down from recent years. At the same time, management points to roughly R87m in recurring cost savings already realised in 2025, with a further R150m targeted for 2026 as the cost base is brought closer in line with international benchmarks.
However, the balance sheet and cash flow paint a more strained picture in the near term. Hulamin’s net debt jumped about 24% in financial 2025 to roughly R1.65bn as the expansion was funded with borrowings. Cash from operations jumped more than 100% to R275m last year but was offset by roughly R217m of final capex and a big R195m interest bill.
The group has about R1.65bn of its R2.25bn short‐term facility drawn, implying R600m of headroom still available to bridge any hiccups. Nonetheless, funding costs are higher and the company’s gearing is elevated. A debt‐to‐equity ratio of 54% vs a 60% covenant and a current ratio near 2.7 times show some cushion, but it’s tight.
Part of the cash stress comes from operational teething problems. Having run its first integrated shutdown late in the year and restarted the full mill, Hulamin suffered unplanned downtime. Combined with some instability in hot rolling, this cut financial 2025 output well below the 180,000t target to roughly 169,000t. The bright side is that management says performance stabilised in the fourth quarter of 2025 and it expects the plant to reach nameplate output by the end of the first quarter of the 2026 financial year. The risk, of course, is if any further glitches delay the recovery.
The macro environment adds a mixed tailwind. On the one hand, aluminium prices have surged, with Middle East tensions pushing London Metal Exchange (LME) prices above $3,600 per ton in a matter of weeks, levels last seen in 2022. For an unhedged player such as Hulamin, that creates a near-term squeeze. While the group ultimately passes the dollar LME price through to customers and benefits from metal price lag gains on sales, it must first absorb higher input costs as inventory is rebuilt at elevated prices. In effect, stronger aluminium prices are positive for revenue but come with a short-term working capital and cash flow burden.
Hulamin is using strategic shifts to mitigate global pressures. One big push is on energy and carbon cost reduction. The company has implemented a wheeling power arrangement, meaning it can source cheaper renewable or off‐peak power while capturing credits, helping address the EU’s carbon border adjustment mechanism. In practice, wheeling reduces both its carbon footprint and its unit energy costs, increasing global competitiveness. Another focus is foreign markets. In the US, Hulamin is actively shifting its product mix to reduce exposure to section 232 tariffs, where import duties on aluminium range between 25% and 50%.
In South Africa, demand for aluminium cans is surging, with the company allocating about 54% of its new capacity to local can markets. Hulamin’s wide can body mill upgrade was expressly intended to capture this opportunity. One benefit is that more internal scrap can be recycled; scrap usage climbed to 24.5% of metal input in 2025, up from 22.6%, and the plan is to push this above 27% in 2026. This not only reduces costs and carbon but also provides a partial buffer if imported aluminium remains expensive.
Hulamin’s guidance suggests a meaningful step up in efficiency. For 2026, management is targeting a 10% uplift in volumes from the expanded asset base and R150m in cost savings. It will seek to improve margins by raising capacity utilisation above 85%, focusing on the higher‐margin can segment, and aligning its cost base to global benchmarks. Given the volatility in aluminium prices, tight working capital management will be essential, although the secured three-year funding facilities provide a useful liquidity buffer.
From a valuation perspective, Hulamin screens as exceptionally cheap. At roughly 190c, the stock is trading on a price/book of just 0.18. This reflects the near-term earnings hit and balance sheet risks, but seems low given the expanded asset base. The key caveat is operational execution.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.