Hulamin Limited (HLM) Earnings Call Transcript & Summary

Good morning, everyone, and a very warm welcome to Hulamin's 2021 Annual Results Presentation. I'm going to just kick off very briefly with the agenda for this morning. I'll say a few introductory words, make a few comments about the highlights and then hand over to Mark, who will talk you through the financial results. He will hand back to me to talk about the operational reviews of both Hulamin Rolled Products and Hulamin Extrusions. I'll make some concluding comments, conclusions and talk about the prospects, and then we will open the floor to a couple of questions, after which we'll close out the meeting. Next. So 2021 was a good year for Hulamin. We had a successful turnaround that commenced in 2019. 2020 was a tough year with COVID and a lot disruptions related to the COVID pandemic, but 2021 was a significant step forward from 2020. The 4 key areas where I'd like to talk about, and we'll draw your attention to through this presentation are the overall sales volumes, which were up 35% in Hulamin Rolled Products to 208,000 tons, 17% up in Hulamin Extrusions and 34% up for the group to a total in the group of 222,000 tons. On the local market side, we were quite pleased that the ITAC that imports the agency that reviews duties into South Africa recommended to government, which was -- that recommendation was taken up that import duties and rolled products were applied right the end of 2020 that had a significant impact on domestic volumes. Hulamin Rolled Products volumes grew 65%. Hulamin Extrusions, volumes were up 17%. And overall, a record year for local sales. The rand aluminum price increased quite sharply by well over 100%, as you can see there, resulting in significant growth in working capital pressures and absorption of cash as the LME -- rand LME price on the back of U.S. dollar increase from $2,000 per ton to around $3,200 per ton increased from ZAR 24,000 approximate per ton at the beginning of the year to ZAR 54,000 tons at year-end. That definitely placed a lot of pressure on our balance sheet. You will see that the value of working capital increase, as Mark will talk you through the balance sheet a little later. On the pricing side, we also are very pleased to see that rolling margins have started to rise around the world, that we are starting to benefit from that from the second half of 2021 and going into 2022, we're much more upbeat about selling prices as we move forward. Certainly, the global firming of beverage can stock on the back of increased demand has supported those rising rolling margins. Extrusion margins have been stable, but overall, the pricing outlook for the business does look more optimistic going forward. Next. I'm now going to hand over to Mark. Mark will talk you through in a whole lot of detail about the financial performance of 2021. Mark?

Thanks, Richard. Good morning, all. I am really pleased to report Hulamin returning to profitability following 2 years of declining financial performance. Our strong financial performance has been driven by increased volumes due to stronger demand and improved capacity utilization, higher realized prices resulting in improved margins, the positive impact of the rise in the rand LME price and record local sales, resulting in an EBIT improvement of 760%. From a revenue perspective, our revenue increased by 52%, largely driven by increased group sales volumes of 56,000 higher than last year and higher average rand LME price. And from a dollar perspective, more than $900 on average for the year. Our free cash flow improved by 166% and by eliminating the pressures experienced in 2022 on working capital and produced positive free cash flows of ZAR 141 million against our prior year negative free cash flows of ZAR 484 million. With regards to our earnings per share in EPS, the strong improvement has been from our strong manufacturing performance, 109% growth in beverage can sales in Southern South Africa, a positive metal price lag of ZAR 426 million and the recognition of a deferred tax asset of ZAR 115 million. Our net debt improved by 11% to a respective 24.1%, with our balance sheet well protected. And overall, our net asset value improved by 26% to a respective ZAR 9.47 per share. Can we move on to the next slide, please? On the salient feature slide, a key aspect to point out that the average exchange rand-dollar exchange rate was 10% lower than last year, which did have a negative impact on our results, but the strong LME price of, on average, over 55% influenced the EBIT of ZAR 538 million for the year. Moving on to the next slide. I spoke of already our strong free cash flow generation of before financing activities of ZAR 141 million, which is well over 400% increase from last year, with a closing net debt of ZAR 651 million, thereby improving our net debt equity ratio by 11% overall. Please can move to the next slide? On a normalized EBITDA, moving from the left-hand side and just to orientate everyone, blue is actually negative and green is positive in the slide. So starting off with ZAR 0.38 loss EBITDA -- normalized EBITDA for last year, we moved from what I call external factors, a negative ZAR 0.125 impact itself, largely driven from currency, a stronger rand inflation being over 1.5% higher than last year on average and slightly mitigated by a positive impact on the rising LME price itself on our cost of scrap and metal loss itself, resulting in EBITDA after external factors of ZAR 0.163. Moving on to our controllable factors. Our sales volumes itself increase of ZAR 0.152 impact on our normalized EBITDA as a result of our strong performance on our sales side, largely driven by a strong manufacturing performance itself, coupled with the increase in pricing that resulted in ZAR 0.34 improvement in our EBITDA. Overall, our cost base itself we've been successful in mitigating the effects of inflation through strong cost efficiencies and pricing improvements, realizing a minimum impact on our cost base itself even with the increased volumes. Extrusion -- the extrusion business delivered a strong performance last year, resulting in a positive impact of ZAR 0.14 per share to our overall EBITDA per share. Day after, with the recognition of our deferred tax asset, largely impacting the ZAR 0.78, our normalized headline earnings for the year is ZAR 0.82. Moving on to the next slide, please. On a divisional performance point of view, the strong performance in rolled products itself has resulted in our revenue increasing from ZAR 8 billion last year to a respective ZAR 12.3 billion this year. Rolled products recorded an EBITDA of ZAR 540 million, an improvement of closer to 400% over the prior year's loss of ZAR 14 million, driven by improved sales, coupled with higher dollar LME pricing. On a normalized basis, EBITDA was ZAR 109 million, an improvement of 193% over the prior year's normalized EBITDA loss of ZAR 116 million. Rolled products grew its local sales by 65% on the back of increasing its can sales by 109%, other rolled sheet and plate products by 30% and local foil by 35%. Rolled products improved in the second sales volume from 96 tons in the first -- in H1 of 2021 to 112,000 tons in the second period, an increase of 17% itself. With regards to our extrusion business, our extrusions earned EBITDA of ZAR 85 million, an improvement of well over 1,600% over prior year's profit of ZAR 5 million. On a normalized basis, EBITDA was ZAR 44 million, an improvement of 338% over prior year's normalized EBITDA of ZAR 18 million. Currently EBITDA includes profit realized from the sale of the Olifantsfontein plant of ZAR 41 million. 2021 was a year of 2 contrasting halves for extrusions. The strong demand evidence in the latter part of 2020 continued into the first half of 2021, resulting in an additional ZAR 17 million to normalized EBITDA. Although there were still some minor disruptions due to ongoing COVID-19 waves, the business was able to take advantage of the strong order book and translate this into strong financial performance. Can I move on to the next slide, please? On a net asset basis, rolled products as a division, net asset value improved by 22% compared to last year and extrusions by 147% compared to last year. The return on equity for rolled products improved by 28%, while rolled products improved by 86%. Let me on to the next slide, please. Looking at the currency trend and as everyone is well aware with regards to the movement on commodity pricing itself, the dollar LME has moved -- has increased by January, well over $1,000 compared to where it was last year January, where -- but the rand dollar exchange rate at more or less stayed similar to around about the 15. Now both these key factors have huge impact on our financial performance of the business and also puts pressure on our liquidity with regards to our working capital. And I'll share with you in the next slide with regards to how we've managed the higher LME pricing, but at the same time, delivered a strong financial performance. Can we please move on to the next slide? Now just to orientate everyone on this slide is blue on this is a cash inflow, and green is a cash outflow. Starting off with a closing debt of ZAR 751 million last year, with our strong financial performance, we've enjoyed a positive free cash flow coming in of ZAR 625 million from our business before working capital. However, with the rise in the dollar LME pricing, we've actually invest into our working capital closer to ZAR 300 million last year, in order to be able to deliver our strong performance. At the same time, the higher borrowings or higher average borrowings throughout the year resulted in ZAR 65 million of finance costs moving through the business. And a key part is we've continued our commitment with regards to investing in the business by our capital program and that resulted in an outflow of ZAR 154 million for the year. Overall, we finished strong with a positive net cash flow of ZAR 100 million ending with a net debt of ZAR 651 million. Moving to the next slide, please. Our liquidity and our headroom -- management of headroom. The focus on it continues on a daily basis. Our headroom improved from last year to this year quite considerably. But at the same time, we've managed to enjoy additional facilities -- of increasing our additional facilities from ZAR 1.2 billion to respect to ZAR 1.5 billion as of December '21. Our net debt or gearing improved down to -- or decreased down to a respective 24.1%, with our all our covenant ratios enjoying a positive movement on all our covenant ratios at the same time. Moving on to the next slide, please. With our revenue increasing largely or increasing to well over ZAR 13 billion in support of our strong performance in the factory, we had to invest definitely into our inventory and thereby maintaining a strong order book and a strong debtors book, we've -- there's been well over ZAR 300 million increase in our working capital, largely driven by the rise in the dollar -- rand dollar LME itself, which has impacted our inventory and our creditors at the same time. Moving to the capital expenditure for the year. Hulamin has continued to invest in our plant and to make sure that we've got a sustainable business going into the future. There's been a small investment in improving CapEx for this year. And there is a strong commitment from us to continue investing in our plant going into the future as we manage our liquidity and create headrooms continuously to be able to invest going into the future. At this point, Richard, can I hand over back to you, please?

Of course. Let's move on. And the next one, please. Next slide. Right. Just looking at the operational performance of the business, I'm going to start off with Hulamin Rolled Products. This is a bit of a time line taking us back a few years to look at what priorities and what themes management [ loved to work ] since 2019. 2019 was a very difficult year for the business. Both the rolling and extrusion businesses had a significant disruption to volumes for various reasons, being heavily fixed cost businesses, we really needed to focus initially on getting the volume back through the business. I'm quite pleased to say that I think our record speaks for itself since 2019. As a result of the volume pressure on the business and the losses incurred in 2019, cost reduction became a key focus of which a headcount reduction or Section 189 of the Relations Act process was the biggest single contributor to that -- those cost reductions. Also at that time, we embarked on a significant restructure and consolidation of the extrusion business, as well as making sure that we protected our cash, which was the benefit of hindsight now going into 2020 was a really sound and prudent approach because of the unpredicted or not predicted impact of the 2020 COVID-19 crisis. Moving on to 2020, from turnaround, we moved into survival as the world economy kind of shut down to some extent in -- from the sort of end of the first quarter of 2020, we continued to have a reasonable demand for products through 2020. And it was really all about keeping the plant going during that very difficult disruptions, the lockdowns, the working from home impacts and keeping employees healthy and safe was a real challenge in 2020. We continued to protect our liquidity and also take whatever measures we could to reduce costs in the time of very constrained volume throughput during that period. Flexibility, making sure that we were able to respond to customer demand and short-term changes in our order book and in the plant and being able to respond to changes in customer orders and various employees getting infected, having teams that were isolated, people getting sick required a whole lot of flexibility during the course of 2020. 2021 was really a rebuilding recovery phase. We can look back now and say, it's a reasonable degree of certainty that 2020 was the low point in the COVID experience. Order book certainly was a significant improvement on 2021 over 2020. The import duty on rolled products into the local market certainly impacted local demand, in line too with the significant impact of the loss in -- or the moving away of the beverage industry away from plastics and glass to recyclable aluminum. We focused quite extensively in 2021 on consuming market scrap and recycling. Employee morale was a real challenge during that period, particularly I think virtually no employees were unaffected by family and friends and the loss of loved ones and the loss of family income from the economic problems and the emotional problems and the mental health problems related to COVID. At the same time, we continue to experience the second, the third and the fourth waves in 2021, and that resulted in significant employees -- numbers of employees being unable to work on site. That put a lot of pressure on employees who were able to come to work, who remained healthy. And so there was a lot of difficulty in maintaining manufacturing continuity. We also undertook a very important 12-day maintenance shut, a shutdown to where we do planned maintenance on our key machine centers, upgrades, technology upgrades, improvements and so on in the business definitely since the end of quarter 1 beginning of quarter 2 when we did that to shut down the operation, the plant has performed better. We did definitely see prices and margins improving and increasing during the course of 2021 and particularly in light of the fact that our exposure to the -- particularly the United States, automotive industry increased as we pushed more and more volume of higher-value products into that export market. In 2022, our focus remains on getting back up to our full volume potential. We certainly have started to capitalize on a number of pricing opportunities where there are opportunities for us to capital -- use our flexibility to shift volumes into more profitable markets. At the same time, there is excess demand for beverage can material and we are able to capitalize on that. We certainly started to focus on improving our efficiencies and throughput rates so that we can maximize the volume of beverage can material that we're able to make. Automotive sheet will continue to be an important focus for the business while at the same time, keeping a very tight eye on cash flows bearing in mind that the rand value of aluminum has continued to rise. We're now at record levels of -- in the dollar price of aluminum and likewise at record levels of the rand aluminum price, which puts significant pressure on the absorption of cash into working capital, both our receivables, our inventory and our payables are swelling up quite significantly or have done so over the last 12 to 18 months. Thanks. Can we move on to the next slide? So the operational highlights in 2021, as we've alluded to a couple of times already in this presentation, significantly higher volumes, 35% higher than full year 2020. But still a few disruptions in the business. COVID-19 continued to play havoc with continuity at a micro level, at team level, we continue to have teams coming on and off-site as a result of being having to be isolated and quarantine due to COVID-19. The social unrest, we do believe that Pietermaritzburg was kind of eye of the storm in the COVID -- in the social unrest that hit South Africa in July of 2021. We were also impacted by quite a significant cyber attack on the Portnet Durban Harbor, where we -- for about a week, we weren't able to ship material through the port that has an impact of pushing that disruption back up the flow of materials all the way into our plants. When we can't ship metal out of the plant into the harbor, the physical space starts to constrain operations in the plant. And likewise, a weak disruption on cash flows has quite a significant impact on the business. I've also mentioned already the planned maintenance shutdown conducted successfully in the first half of 2021. We also are very pleased to say that in the second half, after just below 200,000 tons in the first half of 2021, we got very a lot closer to 230,000 tons annualized, which is still a little bit short of our record of 2018, but the second half of 2021 was a very good volume period. Our safety record, we maintained, although a slight uptick in the numbers and the frequency rate of injuries, we're still pleased with the overall level of our -- and the safety with which our employees experience when they come to work. As I said, demand continued to strengthen throughout 2021 and particularly in the local market with the imposition of import duties where imports of competitive products became much more difficult during the course of 2021. We're also quite pleased with the progress that we've made on our high-end, high-value products into the United States, still very small volume, but going forward, we'll be much more meaningful. If we can go on to the next slide, please. This is a slide that I've shown consistently over the years. Just to summarize the operation in Hulamin Rolled Products, the top left graph, you can see the return to volume, what's not immediately noticeable because of the size of the graph is the ratio of the light blue local sales volumes to the export sales volumes getting much closer to 50-50, we're expecting to see that -- get even closer to 50-50 during the 2022 and 2023 years. You can see the uptick in our sales -- in our safety performance. Unfortunately, a higher frequency after the very low levels of 2018 and '19. The U.S. dollar rolling margins, as I said earlier, we have started to see an uptick. Unfortunately, this graph doesn't yet show it because the first half of the year were still a bit pressure, but we're definitely feeling the impact of increased rolling margins, selling prices, conversion fees going forward. And I think we're in a much better place than we have been in the immediate past. Looking at the sales mix, you can see the light blue bottom part of the bottom right graph, which is largely beverage can material, a small amount of foil in there that's also a packaging product. But I think you can see, even though the graph is still quite small, you can see the growth in the light blue proportion of sales as opposed to the reduction in the proportions of extrusions, automotive and other. Moving on, please. This is our monthly performance in sales. As you can see, the middle of 2022 was the most difficult period. You can see the volumes coming off from the end of 2019 to a real low of below 100,000 tons in April 2020. But in line with what we've shown in recent years, our volume does tend to pick up quite significantly in the second half. There's no particular reason for that other than when we do present a lower volume in the first half, we do tend to ratchet up the pressure on the teams to perform better in the second half. So you can see a number of tall buildings particularly in December, we had an excellent December 2021, but still chasing after the really record volumes in the second half of 2018. Moving on. This shows the product mix over the last 3 to 4 years. You can see -- I just wanted to draw your attention to a couple of important ones, particularly the dark blue line next to the rolled product sales volume. This is indexed. So don't get confused between the height of the overall rolled product sales volume and the can stock. It's just that they've been indexed back to 100 back in, I think it was about 2016 or so. So the can stock, as you can see, has grown quite significantly in -- it was quite high in 2018 and high again in 2021. You can see very high navy blue next to the light blue line. The heat-treated plate and common alloy in local sales. The black bar on the far right is also the local sales, and you can see that as being quite a high proportion particularly in 2021 compared to the years in this graph. Thanks, Luke, moving on. This is a very important graph that I've shown over the years. This is the unit cost and unit margins in rands. So effectively, what we do here is we take the total revenue per ton, which is the gray shaded, that's divided by the total volume, which is the navy blue, and you can see the loss-making years where the volumes were under significant pressure in 2020, but quite pleasing to see the gap opening up as the prices started to improve and also the volumes provided a much stronger denominated to the cost equation to show that much significant drop in unit costs in the second half of 2021. So on average for 2021, which is the final point in that graph, you can see in line with 2018 and 2017. And that, I think, is probably the reason why we're quite a lot more optimistic that at these kind of levels, we're not expecting any significant shifts through the 2022 year unless there are disruptions which you're not yet aware of. But as we start moving into a more consistent period, we are looking to -- for the business to perform more in line with the second half of 2021 as we move forward. Thanks, Luke, moving on. Just a few comments on extrusions as we move forward. Similar trajectory to rolled products other than to say it's a very different business. Just to recap, in leading up to 2019, extrusions had a dual site -- is a dual site operation. We had 2 presses in our -- a site in Olifantsfontein, Midrand and Gauteng and 2 extrusion presses in Pietermaritzburg. We closed the Midrand plant midway through 2019. That resulted in significant cost reduction as a result of unfortunately, having to let go a lot of the employees, some employees did move down to Pietermaritzburg but unfortunately, many of them had to move -- had to be let go in that period. We did sell the plant. We only realized the proceeds of that right at the beginning of 2021. So the transfer was slightly delayed there. So the profits in 2021 are a little bit in excess of the actual performance, that's obviously been taken out in the normalizing effect. But over and above that, during 2019, there was quite a lot of work required to transfer existing customer work from Olifantsfontein plant to Pietermaritzburg. 2020 as per rolled products was a disruptive year for Hulamin Extrusions. In parallel with that, we were rebuilding the -- or uplifting the Pietermaritzburg operations as a single site, making sure that none of our customers suffered too much as a result of supply disruptions where the dyes that were previously in Gauteng were transferred down to Pietermaritzburg. We did experience significant improvements in our cost base, and at the same time, a better focus on improving prices and the mix of high-value products. In 2021, we further consolidated the benefits of the single site operation, the focus of management with hands on focus on its market position. It's got a number of improvement projects that we are starting to access, and we will continue to develop new markets, new exposure, new products as we move forward. Thanks, Luke. The next slide. So not wanting to say again what I've already said. For the highlights of 2021 for Hulamin extrusions was definitely a significantly lower cost base, lower overhead costs. We continue to experience a few costs related to maintaining the Midrand site and invoices that only came through from 2020 once we were closing our books on the sale of that property. There were quite a lot of security and other issues. But we did definitely show improved manpower productivity in Pietermaritzburg as the efforts of management consolidated performance and throughput efficiencies in the Pietermaritzburg 2 presses. The business has definitely taken a back-to-basics approach, focusing on cash flows. In other words, making sure that the flows between payables, inventory and receivables has much tighter controls than in the recent past. There are -- there is a significant shift in the ability to extract better pricing in the markets definitely in the past year or 2, the supply and demand dynamics in the South African market as the imported extrusion products have become less competitive has allowed us to capitalize on a number of pricing opportunities and to bring more volume to the -- through the existing presses. Costs will always be a significant focus for any manufacturing business in South Africa, and Hulamin Extrusions, is definitely no exception to that. Thanks, Luke. Moving on. Getting to the end of the presentation and looking at the prospects going forward. In Hulamin Rolled Products, we'll continue to focus on capacity utilization. We're definitely looking to getting above 210,000 tons for the full year. We've put out there that we're looking to get above 212,000 tons for this year. Order book is quite healthy. And as we've seen in the recent past, our ability to achieve these higher levels of volume is largely determined by our performance in the factory, which is a good position to be in, particularly considering that market prices have risen and continue to be at the firmer levels than we've seen in the 2015 to 2020 period. Local sales are particularly buoyant. We're seeing significant demand. And I would expect that most of our audience today would have seen the greater presence of beverage cans, both in supermarkets, soft drinks as well as liquor outlets in terms of beer packaging. Extrusions. We will continue to consolidate the improved performance. And certainly, we are expecting good cash flows and profits out of that business in line with what we've seen since 2020. In terms of the group, I think as we -- Mark and I have both mentioned already in this presentation, the pressure of the rise in the commodity -- the rand commodity price, the rand aluminum price definitely has sharpened our focus. We really have to be extremely vigilant in terms of our liquidity, our focus on moving inventory through the business quickly, our ability to secure optimum payment terms from our suppliers and the shortest possible payment terms from our customers. In terms of prospects and the profitability for the year, we are a little bit more optimistic than we were this time last year, having seen prices and the contracts that we've already concluded for the year ahead are looking a little bit better. But as I always say in these presentations, subject to the currency playing ball. As you saw in the last year, the rand strengthened by about ZAR 1.50. If the rand strengthens by another ZAR 1.50 from the ZAR 14.70 average of 2020 -- sorry, 2021, we will -- that will erode most of this optimism we're feeling on dollar pricing. There remains a risk in the business, thanks to the rand LME prices as we've spoken about quite a lot already and that does have the risk of constraining volumes should our balance sheet get a bit more stretched than it is right now. But with that, I think I'd like to conclude this presentation. Thank you, everybody, for joining us for this morning, and we'll move across to the questions that you have already submitted, but I'd like to invite anybody to submit any additional questions should they so wish. So I'm just going to take a bit of a breath and then I'm going to read out the question. Either I will answer it or I'll hand it over to Mark to talk a little bit more if the questions are a little bit financially focused for a poor old engineer like me.

The first question from Vasanth Maharaj. Please, can you discuss how higher aluminum prices affect the various parts of your business, particularly working capital margins and profits after tax? On the whole, is a higher aluminum price and net positive for the business? I'll start this question. It is a fair financial component to it. So I'll make a few comments and then hand over to Mark. Vasanth, I think the thing to understand here is that at a fundamental level, Hulamin buys aluminum at market prices. We process that aluminum over a period of, say, 8 to 12 weeks, and we sell it again roughly 3 months later, let's say, 12 weeks later. Again, at market prices, so if -- as an example, if the aluminum price is $3,000 a ton. We would buy it at $3,000 a ton on day 1, on day 70 or day 80 will sell it again. If the LME -- if the aluminum price has risen, we will sell it at the higher price, plus our conversion fee for processing that metal -- the opposite happens if the metal goes down in price. So what that means, that's what the impact of the change in just the aluminum price is what we call the metal price lag. So when the LME is rising, or the rand LME price is rising, we show a profit. And when the LME falls, we show a metal price lag loss. So the equal and opposite sparing in mind on the cash side, when the LME is rising, we realize higher cash from the customer, but we have to reinvest that cash in buying more expensive metal again to sell to the next customer. So just from a working capital point of view, a rising LME puts a drain on our receivables and inventory, as well as we currently in the 2021 year, had a cap on our payables. So that definitely put quite a lot of pressure as we've mentioned on working capital. On margins, our conversion fee is unrelated to the LME level. So what I've been talking about in -- particularly in the rolled products presentation about rising conversion fees and rolling margins, it's more coincidental than anything else. It's not directly related to the rise in the commodity LME price. However, global demand for aluminum tends to flow into global demand for rolled, extruded and cast products. So there is a bit of a link between conversion fees or rolling margins, whatever you want to call them and the LME level. So it does tend to follow to some extent -- margins tend to follow higher LME levels. Profit after tax definitely is impacted by the LME level, as I've spoken about in terms of the metal price lag. I'm going to hand over to Mark just to finish that question.

Thanks, Richard. I agree 100%, and I think the key part from a financial point of view, and maybe I'll explain it like the rise in LME increase in liquidity risk but definitely also has a positive impact on profit after tax. So definitely increase in liquidity risk, but also I definitely see it as an opportunity in improved profit after tax at the same time. Thanks, Richard.

Thanks. Mark, I'll close on Vasanth's question and move on to a question from [indiscernible]. Well done on a great set of results. Can you please elaborate a bit on the pricing environment for Hulamin? And how are the customer contract negotiations going? Any insight would be appreciated. Secondly, what is the CapEx outlook for 2022 and 2023, split into maintenance and expansion CapEx? I'll ask -- I'll answer the first part of that question on pricing, then I'll hand over to Mark to talk about the CapEx. I think as I mentioned, [indiscernible], pricing across our major business, which is rolled products, prices have tended to firm. We are quite exposed, as you may know, to the U.S.A. The U.S. is a bit more complex and volatile market particularly because they have a very broad range of import duties. There's a Section 232, which affects all aluminum products, and then there are also antidumping duties that are going on against rolled products in the particular product groupings that exclude can stock. So overall, I would say the trajectory on rolled products, conversion fees and margins is rising, we certainly have managed to secure a number of contracts. Most of our business is contracted. We still have a very small proportion of our business on short term, either spot or 3-month contracts. But overall, we -- our order book is full for 2022, and we are already contracting business for 2023 and beyond at measurably higher prices. Mark, comments on CapEx, the split between maintenance and expansion CapEx and so on, the outlook for 2022 and 2023.

Thanks, Richard. Our commitment to our CapEx budget for this year is well over ZAR 100 million more than what we've outlayed this last year. Our budget for this coming year is ZAR 280 million, with approximately ZAR 25 million of that in expansion and the rest is our normal maintenance as such. So there is a strong commitment with regards to the business in reinvesting in our operations, largely due to the strong demand that we see there and us pushing volume -- sales volumes north of 212,000 this coming year. Thanks, Richard.

Thanks, Mark. The third question is from Tinashe Hove from Laurium. Congratulations on a strong set of results. Can you please guide on the continuity of the strong demand for beverage can stock? Looking through to the beverage can manufacturers, how much of this product ends up in the local market versus the export market? Thanks, Tinashe. I think as I've said, the -- there are a couple of dynamics globally. Certainly, single-use plastics is on a rapid decline globally. That largely affects the carbonated soft drink market. So as you're probably aware, very little beer products, alcoholic products have ever been packaged in plastic. And globally, for obvious environmental reasons, carbonated soft drinks are moving very strongly out of plastic products and into recyclable aluminum cans. There's also been a very significant growth in energy drinks, both in the local and global markets, which tend to be packaged in aluminum cans. Maybe just to take a little step back on beverage can. When we talk about beverage cans stock, we talk about 3 products. There is the body of a can, which we call body stock. That's a different alloy and thickness and temper compared to the end of a can. So you get the can body stock, you get can end stock, which is the lid that goes on to the top of the can. That is a much stronger, much harder alloy that tears more evenly when you score it along the opening to open the can. And then the third component of a can is the tab stock or the tab and the tab, obviously, is the thing that you push up to open the can. That is a third product. In terms of the volume in any 1 particular can, more than 3/4 of a can's weight is in the body. And the balance is the end and tab. Obviously, the tab is a very small proportion of the -- the overall can. For Hulamin, we tend to only sell body stock into the local market. Body stock is a high-volume, fairly commoditized product. The reason why we sell body stock only into the local market is because that is where most of the recycling. We buy scrap, used cans as well as the skeletons from our customers and the closed loop recycling of can scrap goes back into can body and not so much end and tab. And that's a pretty much a global trend that's body stock tends to be supplied to can makers from local or from rolling mills that are close by. In terms of our balance between local and export, in terms of all of those 3 products, it's roughly 60-40 or just maybe 55-45, 55% of our total can stock is exported and 45% crudely local market. However, we are 1 of the bigger players globally of end and tab stock. So all our exports tend to be end and tab stock and not body stock, which end and tab stock a much higher value products. Finally, we have a question from [ Werner Venault ]. Who's asking some questions about the cautionary. Unfortunately, [ Werner ], I'm not in a position where I can even say a single word about the cautionary. So I'm afraid you're going to have to hold on to that until we go public on what's behind the cautionary. Another question from Peter Nash. Given the increase in local sales, does this mean that the rand-dollar exchange rate impact is more limited than it was in prior years? So the short answer is no. We -- although we sell in the local markets in rands, the rands are typically as the contracts are all in dollars paid in the rands of the day. So when we negotiate a contract, we typically negotiate in dollars in the rolling business. And we convert that dollar LME price and dollar conversion fee or rolling margin into rands of the day for the purpose of the invoice. So we typically would use, for example, the average of the month prior, average of 2 months prior, average of the quarter, whatever we happen to negotiate with the customer. So although there is a bit of a lag in the exchange rate sensitivity, the impact is still the same as we see this shift into the local market. What I would say is better for Hulamin, the cash cycle is quite a lot better in the local market. We get paid the difference between local and an export sale is the 2, 3, 4, 5 weeks of freight time. And so we get our money a lot quicker from our customers in the local market. There is 1 more question from Abdul Bappu. How does the electricity price impact the profit margins? What arrangement has been made to secure favorable outcomes? So Abdul, our exposure to energy and particularly the electricity price is a little unrelated to our selling prices. Unfortunately, we are unable to pass on our electricity price to our customers, although typically, energy prices globally have risen quite sharply over the last couple of years and definitely does explain, to some extent, the rise in conversion fees or profit margins, rolling margins, whatever terminology you wanted to call it. So really, it's below the gross profit line impact, electricity fee -- electricity prices are typically made up of demand and maximum demand charge as well as a kilowatt hour, megawatt hour charge. And those tend to be fairly fixed costs which, unfortunately, we're not able to pass on to our customers directly. That seems to be the end of the questions. If there are no more questions, I think we'll call it an end to the presentation. I'd just like to thank everybody for attending, and wish you all the best for the year ahead.