Hulamin Limited (HLM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual General Meeting of The shareholders of Hulamin Limited. I am Thabo Leeuw, the Chairperson of the Board of Directors of Hulamin Limited. The AGM is being conducted in full electronic format in accordance with Section 63(2)(a) of the Companies Act of 2008, as amended, and the company's memorandum of incorporation. Accordingly, the proceedings of this meeting are being recorded and broadcast via live webcast. With me physically in attendance is the entire Board of Directors of Hulamin and the Company Secretary. Our external auditors, EY, and the Transfer Secretaries, Computershare are also in attendance. The notice convening this Annual General Meeting, along with the 2024 integrated annual report and the 2024 annual financial statements were issued on 17 March 2025. Should any shareholder have questions on these documents and the resolutions tabled at this meeting, please send these -- please send your messages through the comments section of the virtual platform. I will endeavor to respond or direct the questions to the appropriate person. We will try to group the questions according to themes and respond to them collectively. I propose that the notice, which contains details of the ordinary and special resolutions to be considered be taken as read. Is this agreed? Okay. In terms of the company's MOI, the quorum for an Annual General Meeting of shareholders is 25% of the total voting rights entitled to be exercised in respect of at least one matter to be decided at the meeting and at least three voting members present at the meeting. Company Secretary, please confirm we have a quorum -- whether we have a quorum?

Yes.

I therefore declare the Annual General Meeting duly constituted. Voting will be by way of a poll. In terms of clause 30.2 of the company's MOI, unless otherwise resolved, voting at this meeting shall proceed by way of a poll. Shareholders were encouraged to submit votes by proxy in advance of the AGM. I would like to thank the shareholders who have submitted their proxies, which have been duly received and recorded. Shareholders who wish to vote at this meeting may do so on their voting paper. Those who are attending online, please e-mail your voting papers to Computershare at [email protected]. In order to expedite the proceedings of this meeting, I propose that you complete the voting paper after each resolution is put to the meeting. The voting paper will be collated and counted after all the resolutions have been voted upon. Whereupon, I will then announce the results of all the resolutions put to the meeting. We now deal with item 1, which deals with the presentation of the annual financial statements. The company's audited annual financial statements for the financial year 31 December 2024, were distributed to shareholders and made accessible on the company's website since 17 March 2025. The audited financial statements -- annual financial statements incorporate the reports of the Audit Committee, the directors and external auditors. They are hereby presented at this meeting in accordance with the provisions of the company's act and are available for inspection. If there are no questions regarding the annual financial statements, I shall move on. Let's deal with item #2. Presentation of the Social Ethics and Transformation Committee report. As required in terms of Regulation 43(5)(c) of the Companies Regulations 2021 and Section 12 of the Companies Act -- the Companies Amendment Act of 2024, the Social, Ethics and Sustainability Committee report for the annual financial year ended 31 December 2024, is presented to shareholders. The report was issued as part of the integrated report on 17 March 2025 and is accessible on the company's website, which is www.hulamin.co.za. If there are no questions regarding the report of the Social, Ethics and Sustainability Committee, I will move on. We'll get into the resolutions, starting with the ordinary resolutions relating to the reelection of nonexecutive directors. Ordinary resolutions 1.1 to 1.5 relates to the election of nonexecutive directors of the company who retire by rotation in accordance with paragraph 33-11 of the company's MOI, and who are eligible and are available and have offered themselves for election. In terms of the MOI, 1/3 of the directors of the company must retire at each AGM. The directors that are retiring at this meeting were appointed to the Board during the course of 2024 as part of our renewed succession planning. Their profiles were included in the governance report contained in the integrated report made available to shareholders on Hulamin's website on 17 March 2024. I would like to propose the approval of the following resolutions. Resolution -- Ordinary resolution 1.1, the election of Pravashni Nirghin as a director; then the 1.2, election of Zanele Monnakgotla as an independent Non-Executive Director; 1.3, election of Andreas Tostmann as an Independent Non-Executive Director; 1.4, election of Linda Yanta as an Independent Non-Executive Director; and 1.5, election of Paul Baloyi as an Independent Non-Executive Director. I then move on to Ordinary resolution #2, which has to do with the election of the Audit Committee members. Ordinary resolutions 2.1 to 2.3 relates to the election of members of the Audit Committee of the company, who are eligible and available and have offered themselves for election. I would like to propose the election of the following -- the approval of the following resolutions. 2.1, the election of Linda Yanta as a member of the Audit Committee; 2.2, election of Charles Boles as a member of the Audit Committee; 2.3, election of Dr Boni Mehlomakulu as a member of the Audit Committee. I then move on to Ordinary resolution #3, which has to do with the election of Social, Ethics and Sustainability members. Ordinary resolutions 3.1 to 3.4 relates to the election of members of the Social, Ethics and Sustainability Committee of the company, who are eligible and available and have offered themselves for election. I would like to propose the approval of the following resolutions. 3.1, election of Vusi Khumalo as a member of the Social, ethics and Sustainability Committee; 3.2, election of Peter-Paul Ngwenya as a member of the Social, Ethics and Sustainability Committee; 3.3, election of Dr. Boni Mehlomakulu as a member of the Social, Ethics and Sustainability Committee; and 3.4, election of Zanele Monnakgotla as a member of Social, Ethics and Sustainability Committee. Let's then move on to Ordinary resolution #4, which deals with the appointment of external auditors. I propose Ordinary resolution #4, the reappointment of Ernst & Young Inc. as an independent auditor of the company for the ensuing year and until the conclusion of the next AGM. The designated auditor being Mr. Farouk Ebrahim. Let's move on to nonbinding resolutions 5 and 6. They all relate to the approval of the remuneration policy. Nonbinding Ordinary resolutions 5 and 6 relates to the company's remuneration policy and remuneration implementation report as set out in the remuneration report contained in the integrated annual report. I would like to propose the following resolutions. Resolution #5 -- Ordinary resolution #5, approval of the remuneration policy; and Ordinary resolution #6, approval of the implementation report. Then we move on to Ordinary resolution #7, the approval of authorization to sign documents. Approval of authorization for any one director or the Company Secretary to sign documents to give effect to these resolutions. And then the special resolutions are the ones that will now follow. Special resolution #1 is the approval of Non-Executive Directors' remuneration. Special resolution 1 is to consider and if deemed appropriate, grant the company authority to remunerate its Non-Executive Directors for their services as directors and/pay any fees related thereto on the basis outlined in the notice of AGM and for this authority to be valid and immediate -- and valid and with immediate effect until the next AGM in 2026. I propose Special resolution, the approval of Non-Executive Directors' remuneration. And the Special resolution #2, approval of financial assistance to subsidiaries and interrelated entities. Special resolution 2 is to consider and if deemed appropriate, grant the company authority to provide financial assistance to its subsidiaries and other related and interrelated entities as contemplated in Section 45 of the Companies Act and on the terms contemplated in Special resolution 2 contained in the notice of AGM. I propose Special resolution 2, approval of financial assistance. Then dealing with Special resolution #3, the approval of the general authority to repurchase the company's shares. Special resolution 3 is to consider and if deemed appropriate, grant the Board of Directors the authority to approve and implement the acquisition by the company or by a subsidiary of the company in terms of Section 48(2)(b) of the Companies Act of ordinary shares issued by the company by way of general authority, which shall only be valid until the company's next AGM or 15 months from the date of the passing of this special resolution, whichever period is the shorter and subject to the Companies Act, the MOI and the JSE's listing requirements. I propose Special resolution 3, the approval of the general authority to repurchase the company's shares. As all the voting of the resolutions put before the meeting is complete, I will pause to allow scrutineers -- our scrutineers, Computershare to collect and count all the votes. While the scrutineers count the votes, does any shareholder or shareholder representative have questions on these documents and the resolutions table. Again, I will endeavor to respond or direct the questions to the appropriate director.

Chair, we've received a number of questions. We received pre-questions from a shareholder, and we've got a number of questions that have come through on the platform. May I propose that we first deal with the questions that have come through the platform and then close off with the questions that have come through prior to the AGM. If I may, Chair, I will read the questions and then pause after each question for the appropriate response. The first question comes from Mr. Brown. And it says, what CapEx do you forecast in 2025, 2026?

CEO?

Chair, with regards to at the AGM, we normally don't look forward or provide any update on forecast. We would have addressed it in our roadshow and our display. So I would like to defer back to our results presentation format that we did for the 31st of March 2024.

Is that results presentation available on your website?

Yes.

Okay. Then we suggest to the shareholder or shareholder representative asking that question. Let us please direct that shareholder to our company website for the results presentation, and that detail should be found there.

The next one is from the same shareholder, Mr. Brown. What is the strategy restaff reduction, given that your staff numbers are too high by global standards? Further, what headroom versus borrowing covenants do you expect at the end of June and December 2025? The third question from the same -- Stock levels, in terms of stock levels in 2024 rose worryingly from 3.1 billion to 3.8 billion. How do you see stock levels at the end of June and at the end of 2025?

Can I give you an opportunity to speak the obvious.

I'll say again, AGM is not our purpose with regards to declaring forecast. But again, I'll refer the shareholder back to our presentation. And there is key drivers that we're looking to be able to execute to be able to increase the value ultimately for Hulamin.

Is it not fair to also state that as a matter of practice, the issue of making sure that we operate within our covenants is one that we have a laser focus on, on a continuous basis.

Most definitely, Chair.

I'll move on to Mr. Sililus from All Weather Capital, [indiscernible] Can the executive team give a brief update on the Wide Canbody project, and if this is on track as per expectation?

CEO?

Chair, as per the plan, we went out to the market post our March results. I can inform the shareholders that we are on track with regards to our plan that we articulated at that point in time.

Okay. This is from Mr. [ Sean Van beek ] In light of the recent retrenchments at containers, and potential cost pressures and the core business, does the Board believe Hulamin can continue to sustain what is effectively a shadow workforce, externalized via vendors, but operating -- but operationally embedded while letting go of permanent employees?

How many questions relating to containers?

At this platform, if you would give me containers, that's the only one in this platform that relates to containers.

And they all come from Mr. Van beek?

Chair, yes, this one is specifically from Mr. Van beek.

I'm going to make one comment. And I hope it is extensive enough to address all of these Hulamin containers related questions. Hulamin containers is a business that has challenged us as a company for a considerable amount of time. The Board 2 or 3 years ago, took a decision that it no longer fitted in the portfolio of businesses we sought to focus our attention in. We took a decision that we needed to sell the business. Management went out and embarked on a very, very extensive and open process to try and find an acquirer for that business. And where we are now in as far as Hulamin containers is we are fairly advanced with a potential buyer. And we are quite convinced that things are on the right track, and we should be able to inform shareholders sometime soon about the outcome of that process. We are of the view that we have exercised our minds extensively around Hulamin containers and the decision that the board has taken is the right one.

The next one, Chair, comes from Mr. Faulker and is directed at the CEO. And I will read it for [indiscernible]. I believe we all agree -- Mark, I believe we all agreed that Hulamin has been underperforming for the last years, achieving a profit before tax of ZAR 371 million, providing a margin of 2.7% is much too low, taking into account the total capital employed, the investments done over the past 10 to 15 years into the plant. The monopolistic market position Hulamin has in the local market and the unlimited opportunity it had and still has available in the export market. Exactly 10 years ago in 2014, Hulamin achieved a cost -- a profit before tax with a margin of close to 7%, which seems more in line for a factory of such size and opportunities and could be seen as a minimum level to be achieved. If we take the margin of 7% at a benchmark, which Hulamin had achieved before, the profit before tax should be now close to ZAR 1.1 billion -- ZAR 1 billion. Such level of profitability would allow Hulamin to continue to invest, but also to return paying dividend again after 6 years of not doing it. Mark, if we take this at first target line for Hulamin to achieve in the next 1 to 2 years, which would be from your point of view, the areas your team will need to focus on to return to such level of profitability and what level would be the realistic time lines be?

Thanks, Mr. Faulker. Based on our results presentation, again, we've included a clear path to return to the profitability ranges that Mr. Faulker talks about, to a stage again that we highlighted clear drivers that our business and my management team will execute within the next 3 years to be able to get to a return of equity greater than our average weighted cost of capital. So I share the same thoughts together with the board and Mr. Faulker that Hulamin has got huge opportunity to get back and deliver the return that in the ranges that we've articulated in our March reporting.

I'll move on to Mr. Brown. How will you finance this year's CapEx, bearing in mind last year's huge ZAR 500 million negative cash flow?

Again, as highlighted by Chair, with regards to our governance around liquidity, cash generation from the business is definitely where we're looking to improve our profitability there by creating the cash to pay down debt by allowing us to spend the capital, but at the same time, give back the return. If you look at the last 3 years, this year is -- during the year, we will be completing the last phase of Phase 3 of the Wide project with the intention to be in commercial by earlier next year and start giving back the return that is expected from the capital spend, thereby allowing us to be able to fund. And not only fund the capital that's required for the business, but also to get dividends back to the shareholders as we go through the following years.

Can I add to that? And please call me to order if I'm misleading. I think there is an intention to invite shareholders to the plant later in the year when the Wide project is complete.

100%, Chair. Provisionally, we're looking at round about October, that is the period. But we will be definitely in communication with our shareholders and send out invites well in advance so that we can have a good meeting and be able to share with them the capital that we've invested by even including a plant tour.

yes. So Mr. Brown should look out for that invitation.

I move on to the next question. Again, I've got 2 questions from Mr. Faulker. One for the CEO and the other for the CFO. Market was advised by management that a decision on the extrusion division would be made by end of June 2024. We are now years later and additional losses of ZAR 30 million plus in the division have been incurred. Now a decision on this business unit has been promised to end of June 2025. My questions are, knowing the lack of -- lack on keeping the timeline set by your management itself, can you confirm that in 5 weeks' time, a definite overdue decision will be taken on this division, which has lost more than ZAR 250 million in the last couple of years and recently lost its biggest -- and lost its biggest client. Looking down the road -- the second question, looking down the road, what tonnage do you see Hulamin will produce in total of rolled products in 2026, I think the question meant and in 2027? And how will this tonnage be split between the local and the export market? How much of the total tonnage will be for the local and overseas market? And it stops there for the CEO.

Can I assist with the tonnages for 2026 and 2027. As already previously stated in the responses to Mr. Van beek's question, we are unable to provide forward-looking numbers. We are not allowed. We are not permitted. Not that we are unable to, but we are definitely not permitted to be providing forward-looking numbers, unfortunately. And then I'll hand over to you deal with that.

Thanks, Chair. I can confirm that we will be able to provide feedback in line with the timeline that we articulated of -- in June and with regards to our extrusion business, as we would have completed our strategic review by that time. Thanks, Chair.

To the CFO, looking at your very high stock levels at the end of December, at ZAR 3.8 billion, can you advise us what the planned total stock level will be as at interim and at year-end of 2025? Second question sent as well to the CFO. What are the next capital investment project plans for the rest of 2025 or 2026 and the months to be invested.

CFO?

Thank you, Faulker. I think Chair already indicated that we won't be giving any forward-looking indications. However, I think in the March presentation, which you'll find on our website, there's a lot of information that will be beneficial to the questions that you are asking.

The next question comes from [ Ms. Swenda ] from All Weather Capital. Hulamin has not implemented a minimum shareholding requirement policy for its executives, particularly the CEO and the CFO. Furthermore, an analysis of actual ownership specifically vested shares as disclosed under interest of directors reveals that both executives hold minimal equity relative to their guaranteed pay, the CEO at 13% and the CFO at 0%. This indicates a weak alignment of interest between management and shareholders. Has the Board given this any thoughts? And are there plans to implement an MSR policy going forward?

Can I ask my Chair of Remco to address this question on the minimum shareholder requirement -- shareholding requirement.

Thanks, Chair, and thanks for the question. The comment that Hulamin hasn't implemented a minimum shareholding requirement to date is correct. And the shareholdings of the executives are both low. So those comments are both correct. We are in the process of doing a review of all the incentives for ExCo. And one of the issues that's under consideration is a minimum shareholding requirement for executives, and we'll finalize that consideration and deliberation in the next month or 2. We are sympathetic and support the view that alignment of interest is important and that will be strongly taken into account in making a decision whether to element the policy. And that decision will have been made and implemented if required by the end of the year. Thanks, Chair.

Thank you.

We have a follow on from Mr. Brown in relation to the questions you asked earlier and responses provided by Hulamin. Mr. Gounder, with due respect, you seem to be confused as to the purpose of the AGM. It is the opportunity of the year for all shareholders to ask management serious questions regarding strategies, prospects, current trading, et cetera. In 42 years of attending AGMs, I have never been fobbed off with such evasive answers and just told to look at some previous presentation to find answers, some of which will not be in that presentation. I am -- Chair, as it stands further other than the last comment of -- from Mr. Brown, if you can give us a few seconds, I think there's another question coming in.

So I mean one comment I would make is we definitely note Mr. Brown's comment. I don't think the responses that the CEO provided are intended to fob anyone off. And I would really encourage Mr. Brown to reach out to the CEO, and I'm sure he'll derive a higher level of satisfaction out of one-on-one conversation. I'm not suggesting. I'm not committing the CEO to be providing forward-looking numbers. But I think an engagement, a one-on-one engagement would probably be fruitful.

Definitely, Chair.

We've got a follow-up comment as well. I'm not quite sure if it will come up with questions, but let's see. From Mr. Faulker, the comment states, allow me to say that you have around 80 shareholders participating in this AGM. These stakeholders are not receiving any dividend for 6 years and now in this AGM receive, and I wait for the loading of the question. Mr. Faulker, if you could be patient while the system loads the rest of your question. I will read it again. Perhaps if Chair may pause, I think Mr. Faulker is still writing his question.

I'm assuming we are about to wrap up on the questions, right.

Perhaps if -- I understand Mr. Faulker is online. Mark?

Do you want me -- can I read it out?

Yes.

From [indiscernible] allow me to say that you have around 80 shareholders participating in this AGM. The shareholders are not receiving any dividends for past 6 years. And now in this AGM received pretty much no information, highly disappointing AGM as stated by Mr. Brown earlier.

Okay. All right.

If I may, this -- yes, here's to be one further question. No, I think it was just the remainder of Mr. Faulker's comment coming through.

We note Mr. Faulker's comment. What I will say is that we are committed to a continuous engagement with our shareholders, including Mr. Faulker, and we look forward to engaging him further on all matters relating to the business. We are equally concerned about the absence of a dividend for such a long period of time. And this is something that the board is intending to have addressed as soon as conditions permit. Thank you. I think that is all the questions. That is all the time we had for questions. If we were unable to respond to your question, and I know I'm repeating myself here, or you feel we did not deal respond adequately to your question, I invite you to get in touch with the company through the Company Secretary. We will ensure we respond to all questions posed by shareholders. I will ask the Company Secretary to read the results of the polling.

Chair, if I may, the results I will read will be there for the full, and I'll start. For the Ordinary resolution 1, election of the CFO, for 99.7 -- 99.8%, the resolution has passed. The election of Ms. Monnakgotla has also passed with 99.8%. The election of Dr. Tostmann has also passed at 99.8%. The election of Mr. Yanta has also passed at 99.8%. Ordinary resolution #5, appointment of Mr. Baloyi has also passed at 99.7%. Moving on to the Audit Committee, the resolution, the appointment of Mr. Yanta as the Audit Committee member passed at 99.7%. The appointment of Mr. Boles also passed by 99.8% as well as Dr. Mehlomakulu has also passed by 99.8%. The election of the Social and Ethic members, Mr. Khumalo has passed by 99.7%, of Mr. Ngwenya 99.6%, of Dr. Mehlomakulu 99.7%, and Ms. Monnakgotla 99.7%. The election of the external auditors, Ernest & Young has passed by 99.7%. The nonbinding advisory vote for the remuneration policy has passed by 80.3%. The implementation of the remuneration report, the non-bindering advisory vote has also passed by 80.2%. The resolution for authorization to sign the documents relating to these resolutions has passed by 99.8%. In respect to your special resolution to approve the remuneration payable to nonexecutive directors has passed by 86.2%. To approve the granting of financial assistance to subsidiaries and related entities has passed by 88.2%. The last special resolution and resolution, the approval of the general authority to repurchase the company's shares has passed by 88.2%. We will be releasing, Chair, these results on SENS by tomorrow afternoon, and we'll also have them on Hulamin's website form. And in there, we will have the full visibility of results.

Thank you, Company Secretary. Unless any shareholder wishes to raise any other matter in accordance with Section 61(8)(d) of the Companies Act, I will declare the meeting closed. Other business on the agenda or otherwise raised in terms of Section 61(8)(d) of the Companies Act, I declare the meeting closed, and thank you for your attendance.