Hulamin, the aluminium extraction specialist, has disappointed shareholders before …plenty of times. There is a frustrating pattern. Just when the going looks good, the group has a habit of hitting a snag that derails growth momentum.
The release of the 2025 full-year results this week seems a particularly bitter setback. Even though the interim results could not be considered scintillating, the subsequent investor presentations by Hulamin in September and October last year provided fodder for medium-term optimism.
I don’t think too many punters expected the group to slip into the red at financial year-end. Clearly things went more than a little awry in the second half. Interim operating profit of R164m was reduced to R119m at the full-year close. That’s a worrying second-half operating loss. It plunged Hulamin nastily into the red after accounting for the full-year interest expense of R197m.
In short, Hulamin’s heavy investment in strategic capacity (mainly the production of beverage can bodies) did not start delivering the expected bottom-line benefits. As is typical in large capital projects, there were hitches. Quality glitches, to be exact, which compromised the robustness of the can bodies.
I understand that by the start of this month things were almost back on track, production-wise. But the market was suitably unimpressed. Hulamin’s share price now sits close to a five-year low. The group holds a market capitalisation of less than R600m — which seems crazy for a business that turns over more than R13bn and, as recently as financial 2021, recorded operating profits of more than R500m. This is a brutish assessment of short-term prospects.
Still, it might be instructive, and potentially rewarding, to have a gander at the group’s integrated annual report. The long-term executive incentive scheme makes for interesting reading. It indicates that these awards are based on an average return on capital employed of 15.33% between the 2026 and 2028 financial years, as well as normalised headline earnings set at an average of 180c a share over the same period. That’s a far cry from where Hulamin is now, but this is a business that posted basic headline earnings of 192c a share in financial 2021. This is a big “if” for a group with such an inconsistent profit profile — but if demand for can bodies continues (and large client Nampak certainly thinks it should), and this aligns with Hulamin’s rigorous cost-cutting efforts and increased scrap utilisation, then the bottom line could fire again. Cynics will justifiably argue that Hulamin, in its current form, is just too slow to make the rapid changes needed to capitalise on improved market demand.
But I hear there have been key management changes, including the appointment of two key expert consultants. I’d be even more encouraged if Hulamin took the step of appointing a COO of the ilk of a Chris Schutte (ex-Astral Foods) or Friedel Sass of Bowler Metcalf, the kind of executive who obsesses 24/7 over every aspect of the operations.
It’s also probably worth noting that Hulamin chair Paul Baloyi, in his annual review, reiterated that the board is “actively pursuing the introduction of a strategic partner”. He says this initiative aims to enhance product diversity and quality, improve competitiveness within the EU market, and provide access to technology that will enable greater production capacity.
So that means a deep-pocketed equity partner and one that would need a proper stake in the business to be persuaded to commit large funding. Does this mean the Industrial Development Corp, Hulamin’s largest shareholder, might bow out? Hmmm.
In any event, Baloyi remains upbeat, noting that the group expects to provide positive updates in the near future. He adds, for good measure, that “the challenges experienced during the year are largely short-term and entirely curable”.
With metal man Volker Schütte as well as top asset manager John Biccard holding 8.35% and 5.11% of the group’s issued shares respectively, any absence of positive updates could be interesting. Schutte is a long-time Hulamin critic but a determined backer, and Biccard is the doyen of local value investing.
At current prices, I would not be surprised to see either of these well-versed shareholders bolstering their positions. At the bombed-out share price I can’t imagine a complete shortage of interested strategic equity partners either.
Speaking of price collapses, low-voltage electrical cablemaker South Ocean Holdings (SOH) has seen its shares more than halve since July last year. To stop things going completely on the fritz, management has to address issues over which they have little control.
Imports, cheap ones at that, have disrupted the market, forcing SOH to cut margins to retain market share. SOH noted that the landed cost of imported goods reduced by about 10% last year compared to 2024. This is tough for local cable manufacturers who have to contend with increases in the costs of material, labour and electricity, as well as costs associated with meeting the guidelines set down by the South African Bureau of Standards (SABS) and the National Regulator for Compulsory Specifications (NRCS) South Africa.
SOH is part of a lobby to block imports of finished and semi-finished goods, contributing to a “safeguarding application” that has been submitted by the cable association to the International Trade Administration Commission. The group also lobbied the department of trade, industry & competition to stop what the local industry regards as “dumping”.
I wonder what US industrial firm SOLV Holdings, which took a 20.19% stake in SOH in February last year, makes of these developments. SOLV is already down heavily on its initial investment but might well view the current predicament as an opportunity to build a more influential position at SOH. That would presume a serious stanching of cheap imports, which I suspect is unlikely in the short term.
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