Good morning, everyone. I am Mark Gounder, CEO of Hulamin. Welcome to our 2025 annual results presentation, where Pravashni, our CFO, and I will take you through our operational performance and financial outcomes for 2025, and share an update on our execution against our strategic objectives. We will then close with an outlook on our business for 2026. We've also included additional information for your reference. At this point, I invite you to type in your questions as we progress through the presentation.
Starting off with safety. In a year of critical expansion, safety remained paramount with a heightened focus on people and machine interaction. Our continued focus on leading indicators has continued to yield positive results as our safety incident trends improve against benchmark. This reinforces our commitment to people, discipline, and high-risk management.
This has been a pivotal year, one in which we completed our three-year strategic capital program, strengthened our strategic foundation, and navigated significant short-term challenges. We commenced the year with a clear and disciplined strategic focus centered around the delivery of the market-driven wide can body capital project, the exit of non-core operations, and the stabilization of plant performance following a 25-day planned integrated shutdown. Other key priorities included improving plant reliability, reestablishing our European export market strategy, and conclusion of the power purchase agreement. Twenty twenty-five was a year of delivery on strategic objectives to support the long-term profitability and sustainability of the business, which was clouded by the temporary operational setbacks post-commissioning our plant following the integrated shutdown. This has placed short-term pressure on profitability and liquidity, which Pravashni will cover later in the presentation.
Some notable items were the completion and successful commissioning of the final phase of our major capital investment program. While we remain on track for commercialization of wide canbody with our customers by end of quarter one, our drive to decrease our cost base has been enhanced by delivery of ZAR 80 million sustainable cost reductions, increase in our scrap utilization capacity, and conclusion of the power purchase agreement. On the other hand, several operational setbacks temporarily impacted capacity and output performance, and in turn, overall financial performance. These included a delayed restart of the plant post the shutdown, instability in parts of the plant that reduced efficiencies and impacted recoveries, failure of the liquid metal filtration system.
Following these operational setbacks at the end of quarter three, we immediately established a comprehensive remedial plan, which included contracting technical and industry expertise to complement the management team in the investigations and execution of actions to address these challenges. Activation of an alternate casting line with liquid metal filtration capability was done immediately. Restabilized plant performance by the end of quarter four and all required product recalls were successfully reproduced, supporting the continuation of operations at customer plants.
A review of operations model capabilities and structure has been completed. Our remedial actions remain on track for completion by the end of the first quarter of 2026, after which production is expected to ramp up to normal levels across core product streams. Despite the short-term non-recurring operational challenges, which impacted available core capacity up to 7%, the business is on track to extract value from strategic capital investment.
I will now hand over to Pravashni to take us through the financial outcomes from the opportunities and challenges experienced in 2025.
Financial year 2025 was a year of strategic completion, but was also impacted by temporary operational disruption. Despite these challenges, we maintained strong liquidity discipline, complied with all debt covenants, and successfully completed our three-year capital investment program. The financial results we are presenting today relate to continuing operations following the group's decision to exit the Extrusions segment, which has accordingly been classified as discontinued.
Our financial performance from continuing operations can be summarized as follows. Despite a 2% decrease in volumes, revenue increased by 2% to ZAR 13.1 billion. This was supported by higher LME pricing and improved geo-market premiums. Domestic demands remained strong, with 54% of our capacity allocated to local markets. Normalized EBIT declined by 77%, primarily due to the strengthening exchange rate and operational challenges, both of which place pressure on the margins during 2025.
We will unpack these factors in more detail later in the presentation. Despite the weaker earnings performance, the group sustained positive cash EBITDA and operating cash flows. Notably, cash generated from operating activities increased by more than 100%, driven by improved working capital conversion. Following a period of elevated CapEx , net debt increased by a further 24% to ZAR 1.6 billion. However, it is important to note that all group covenants were fully complied with throughout the year. Overall, while profitability was impacted, the business demonstrated resilience through strong cash generation and disciplined financial management. Hulamin remains exposed to commodity pricing cycles, which have had an adverse impact on our overall financial performance in the current year.
The continued strengthening of the rand has had a direct impact on margins, primarily due to our conversion pricing being linked to U.S. dollar-based pricing while our cost base remains largely rand-denominated. As a result, the ZAR 0.44 strengthening in the rand-dollar exchange rate eroded margins despite an increase in LME pricing. While higher LME pricing supported revenue, it also resulted in increased working capital absorption. This was partially offset by metal price lag gains. Metal price lag is the timing difference between purchase and selling price of metal. In total, the combined impact of currency strength and LME volatility reduced EBIT by ZAR 102 million with a further ZAR 130 million impact on working capital. Overall, these external factors created significant pressure on both margins and cash flow during the year.
To understand our weaker financial performance in the current year, it is important to first recap the capacity we entered 2025 year with and how this was subsequently constrained by operational challenges following the 25-day planned strategic integrated shut. Our available plant capacity for 2025 was initially constrained to 180,000 tons due to the integrated shut. This capacity had already been fully committed and to be sold into the market. While we successfully completed the wide canbody expansion project, which enhanced both capacity and capability, commissioning delays resulted in a further five days of lost production. This reduced available capacity by an additional 3,000 tons. Importantly, this is not expected to impact capacity or volumes in 2026.
Following start up in the third quarter, we experienced challenges in stabilizing mill performance, particularly in terms of metal efficiency, recoveries, and quality. These issues impacted our core cold rolling streams and reduced capacity by a further 12,000 tons. In addition, outside of the integrated shut and mill instability, we experienced a failure in our liquid metal filtration system. This affected our high-margin canbody streams, resulting in approximately 1,000 tons being recalled from customers and a further 3,000 tons in production being scrapped. Casting performance was stabilized by fourth quarter of 2025.
As a result of these factors, our cold rolling and plate systems were constrained to approximately 160,000 tons. However, with our hot mill performing above expectations and generating excess capacity, the business diverted available capacity towards hot bands. Significant progress has been made in stabilizing plant performance, with production expected to ramp up to main plate capacity by the end of first quarter of 2026.
Overall, these operational challenges had a combined adverse impact of ZAR 166 million on the current- year savings. Which we will unpack further on the next slide. It is important to emphasize the demand for our product mix continues to remain strong. The decline in volume performance was driven by operational constraints rather than the deterioration in market conditions. If we summarize our earnings performance for the current year. Starting with prior- year normalized EBITDA of ZAR 555 million, which included a ZAR 70 million business interruption claim from the coil coating line fire. Adjusted earnings for the base period was ZAR 486 million. These earnings were impacted by inflationary pressures on our cost base, including above inflation increases in energy costs, with electricity and gas rising by approximately 8%.
However, both this inflationary impact and the effect of currency movements were offset by improved sales mix, inflationary price adjustments, and the benefit of our cost reduction initiatives, which resulted in controllable earnings before non-recurring items of ZAR 452 million for the year. We remain highly aware of our currency exposure, particularly given the continued strengthening of the rand to below ZAR 16 against the U.S. dollar. In response, we have refined our hedging strategy for 2026, incorporating greater use of currency options to reduce conversion risks. At this stage, we do not expect currency to materially impact the earnings in 2026.
Non-recurring losses were primarily driven by operational challenges, which reduced volumes on our core streams by more than 7% and impacted earnings by ZAR 166 million. In addition, Hulamin Containers ceased operations in June 2025, with associated losses classified as non-recurring as they were largely related to unwinding activities. As a result, these non-recurring impacts reduced normalized EBITDA for 2025 to ZAR 261 million, while still enabling the business to sustain positive operating cash flows. Below EBITDA, depreciation increased largely due to the completion and capitalization of recent capital projects. At the same time, interest costs rose as a result of higher intra-month net debt levels experienced during the year. Consequently, this resulted in the normalized headline loss of ZAR 85 million for the year.
Looking ahead, our continued focus on reducing net debt into 2026, which we will address in the next slides, is expected to lower interest costs and support an improvement in headline earnings. Net borrowings increased by ZAR 320 million year-on-year, primarily driven by the completion of the final phase of our strategic capital program, which focused on enhancing wide canbody capability and capacity. This investment positions the business to capitalize on the growing local can market, which is currently expanding at approximately 4% per annum. In addition, it lays the foundation for increased scrap utilization and supports a higher rolling output run rate, targeting 200,000 annualized tons of our core volume mix.
As expected, the capital program over the past three years has resulted in a rising trend in net debt levels, which has in turn increased our interest burden. Importantly, despite the weaker financial performance during the year, the business demonstrated strong cash discipline. We were able to sustain operations and minimize cash burn through effective working capital management, particularly through improved inventory management and enhanced cash conversions. Historically, net debt levels have increased as the business focused on executing its strategic capital program. However, these levels are expected to reduce to more acceptable levels from 2026, supported by fundamental and structural improvements made to the balance sheet. A key milestone has been the successful securing of borrowing facilities totaling ZAR 2.25 billion over the next three years.
Notably, ZAR 1.6 billion of this is repayable over the three-year period, providing improved funding certainty. Importantly, we have now passed the peak of our CapEx cycle. In addition, the exit from non-core operations, specifically extrusions and containers, is expected to release working capital and reduce ongoing cash burn. Despite the elevated debt levels during the year, the group remained comfortably within all covenant limits, reflecting continued financial discipline and stability. As part of our debt reduction strategy, the group has no intention of pursuing a rights issue.
Thanks, Pravashni. Hulamin remains market unconstrained despite geopolitical landscape changes and challenges. However, these developments have promoted a review and responses to our business model and overall strategy in order to remain well-positioned to capitalize on a global demand. Our strategy is to seize emerging opportunities in both local and export market by improved operational efficiencies, plant reliability and global cost competitiveness. Notable on export market, our focus is on high- margin and niche product streams and segments, which we aim to achieve through revised route to markets and distribution networks to widen our product reach, particularly in the European market for can and our plate streams.
Despite the challenges, we have made meaningful progress against our strategic priorities. Successful completion and commissioning of our wide canbody capacity and capability plant upgrades has positioned the business to displace imports. Scrap utilization capacity has been enhanced. We've exited non-core operations, advancing Hulamin's transition into a focused rolled products business. We concluded our winding arrangement supporting our CBAM resilience strategy, improved working capital conversion cycle. Moving into 2026, our focus is on realizing returns from strategic capital investments undertaken in the previous three years. Our areas to extract value include improved operational performance and efficiency. This is going to be driven by a simplified operating management structure with focus on operations and maintenance, which has already been implemented.
Together with that, support will be enhanced technical manufacturing support, plant reliability, and efficiencies and quality with the core focus areas. Our continued work on aligning our cost base will continue into 2026, with reduction of non-production overheads and increased utilization of third-party scrap closer to the 50,000 tons capability. On the commercial strategic focus, full qualification of the wide canbody with all can makers, qualification of chrome-free lacquers with major export customers, and embed a new plate distribution channel in Europe.
On the outlook, with the capital program now complete, our focus shifts decisively to performance, and by performance I mean extracting value from capital investments, improving throughput and expanding margins. In 2026, we commit to unlock margins and start delivering shareholder value by increased production capacity utilization by more than 10%, which will be a step change towards our targeted run rate of 200,000 tons annualized. Lift scrap utilization above 27% by partnering with other local aluminum recycling companies while maximizing internal capacity. Deliver an additional ZAR 150 million in sustainable cost reduction from our established program. Normalize our CapEx to sustainable levels, covering business continuity.
We have laid the structural foundation for a more resilient, more competitive Hulamin. The next phase is about unlocking the full earnings potential of this business. We thank you for joining our results and outlook presentation. We'll now open the floor for any questions.
Good morning, everyone. I'm Ayanda Mngadi, and thank you very much for dialing in to our Hulamin results. We are now opening up the opportunity for questions to Mark and Pravashni. We have one question so far. It is from Tinashe Hove from Laurium Capital, and it says: "Good morning. You mentioned that you do not expect to do a rights issue despite the debt burden. Can you give a high-level explanation of the combination of revenue margins and cash conversion that gives you that level of comfort that you can generate enough cash to pay down debt without a rights issue?"
Let me repeat that. "Good morning. You mentioned that you do not expect to do a rights issue despite the debt burden. Can you give a high-level explanation of the combination of revenue, margins, and cash conversions that give you that level of comfort that you can generate enough cash to pay down debt without a rights issue." Over to you.
Thank you, Tinashe. In terms of what Hulamin is focusing on is a balance sheet restructure. Currently, we have a long-term debt of ZAR 200 million. We're also focusing on the reduction of CapEx. You would have noticed in the presentation that we are now over our capital peak. There will be a reduction at least between ZAR 300 million and ZAR 400 million. In terms of working capital, we are focusing on our inventory terms as well as our debtors. On the production side, w e are working on our production rates to exceed 180,000 tons, and we are focusing on our core streams, and these core streams include our canbody stock, after our recent wide canbody capital project, our can end stock, and plate, which are our profitable margins. Thank you.
Our next question is from Rowan Goeller from Chronux Research, and the question reads as follows: Has the wide canbody stock been accepted by all your can-making customers in South Africa? Over to you, Mark.
Thanks, Ayanda, and thanks for the question, Rowan. I'm pleased to report that we are fully qualified with two of our customers currently, and we're in the last phase with the last customer. We remain on track to be fully qualified with our customers by quarter one. The answer is yes.
All right. Our next question is from Volker Schutte, and it reads as follows: "Can you please advise the exact tonnage of post-consumer scrap used in 2025, in particular UBC scrap?"
Thanks, Volker, for the question. In total, due to the lower production also, due to the temporary setbacks that we had, operational challenges, the total post-consumer scrap itself was totaled up to just over 40,000 tons, with UBCs close to 10,000 tons. That is still below our capacity level of 5,000 tons, and we ramp up our production for 2026, we would be able to utilize the full 15,000 tons, and actually going for a target of post-consumer scrap as a whole of close to 50,000 tons for 2026, which also incorporates working together with other recycling companies in South Africa to be able to consume what we call recycled secondary ingot.
The next question is from Volker Schutte again, and it reads as follows: How is your current free headroom now in March?
Thank you, Volker. It is approximately between ZAR 300 million and ZAR 400 million.
We will give maybe the next five minutes to more questions to come in. We don't have a new question at the moment.
Hello, it's Ayanda again. Just reporting that we don't have any new questions still. We will give it another minute or two, and then wrap it up. With nothing further, may I request to hand over back to the CEO to just close us off. Thank you.
Thank you everyone again for joining us. Our apologies for the delay in the statement going out. We had some government matters to address. Again, thank you very much and all the best for today.