Good morning, all. Thank you to shareholders and other stakeholders for attending the Hulamin 2023 full year results presentation. I am both honored and excited to address you as the new CEO of Hulamin. I'm appreciative to the Hulamin Board of Directors for entrusting me with this role and to our former Interim CEO, Jeff Watson, who has left the business with a solid foundation for us to build into the future.
Today, I will first cover the 2023 highlights, and my colleague, Pravashni, our Interim CFO, will take over the financial results, and I will return to cover both the operational review and outlook. I encourage you to submit your questions as we cover the presentation, and we will address the questions thereafter. We continue to focus on improving our safety performance with both total recordable and lost time being down 33% from previous year.
Unfortunately, we had a disabling injury to one of our employees in February 2023. This led to a review of our safety programs as we moved from minimizing risk to eliminating risk and the over 30% improvement of our annual injury rates. On our highlights, 2023 was a year of two distinct halves.
As presented during our interim results, 2023 had started off on a positive note. As anticipated going into H2, aluminum global markets became short-term constrained, impacting our core export streams, primary can stock, plate, and cold roll standards, while foil on the other end remained resilient. As a result, our H2 volumes were down 12% from H1.
However, our simplification and mix rationalization strategy, which focused on high value add products of can and plate, along with strategic plant shuts in H2, enabled us to match demand with production and inventory and dampen the volume impact. As a result, normalized dollar EBITDA per ton was stable at $187, which was only down 3% and enabled protection of full year profitability and cash flow.
Net free cash flow was ZAR 363 million, which was a 503% improvement from 2022. This enabled us to reinvest ZAR 311 million in reliable plant performance and the start of engineering to deliver wide can body currently provided by imports. At this point, I will hand over to my colleague, Pravashni, to take you through the full year financial results.
Thank you, Mark. Good morning. Despite the downturn of global aluminum markets resulting in raw product sales volume down by 16% and turnover being down by 13%, full year profitability and cash was protected by our simplification and agile strategy, with normalized EBITDA only down by 7%, while cash flows from operating activities was up by 503%.
With our continued focus on metal flow, working capital remained flat, resulting in a stable balance sheet with our gearing being below 25%. The performance that has been highlighted already translated to EBIT being 1% up, which was positively impacted by metal price lag of ZAR 47 million. Metal price lag is a timing difference between the purchase and selling price of metal.
Proactive cost management, 2% improvement in scrap utilization, 13% weaker rand-dollar exchange rate dampened the impact of higher incremental interest costs, resulting in HEPS down 9%. Our balance sheet remained resilient, with the business being able to generate positive net cash flows from operating activities at ZAR 363 million, which resulted in net debt being down 4% at ZAR 804 million. We have included an EBITDA bridge per share for reference. I will cover the rand value earnings per share bridge. The bridge highlights a 7% decrease of normalized EBITDA from last year, despite turnover being down 13%.
Beginning from the left of the graph, we reconcile normalized EBITDA from 2022 of ZAR 666 million to ZAR 620 million in 2023, and thereafter reconciling to our normalized headline earnings of ZAR 238 million. On the external factors, inflation and commodity pricing combining negatively impacted the business by ZAR 227 million, while the 13% weaker exchange rate resulted in a positive impact of ZAR 257 million.
Despite 15% lower group volumes, controllable EBITDA was down 11% on the back of rationalized mix, which included limited hot band geared towards more can stock at 51%, improved 2% scrap utilization, proactive reduction in fixed conversion costs by operating the plant for 11 months to match demand.
Non-production expenses was higher than last year, primarily impacted by the alignment of short-term incentive schemes from executives to shop floor, the revised business strategy, continued corporate, social, and upskilling initiatives for both our community and employees, and safety baseline risk reset costs.
This brought our normalized EBITDA to ZAR 620 million, which was then consumed by higher incremental interest costs and depreciation, resulting in our normalized headline earnings being ZAR 238 million. In 2023, the focus remained on effective working capital management by maintaining an appropriate mix across categories to minimize the impact on cash flows. Net working capital remained consistent year-on-year, with a net positive cash flow of ZAR 2 million.
Overall, the group generated positive free cash flow of ZAR 33 million after investing in capital expenditure of ZAR 311 million in plant reliability and capability. Our financial position remains stable with adequate headroom of just over ZAR 1 billion. All covenant ratios were met and with sufficient headroom.
As part of our strategic focus to invest in market-driven capital, our expenditure included ZAR 103 million of improvement CapEx, focusing on unlocking the cold roll capacity, capability, and UBC absorption. Stay-in-business CapEx included ZAR 30 million for alternative power generation in efforts to reduce impact on load curtailment and to ensure plant reliability. I will now hand over back to Mark to take you through the operational performance for.
Thank you, Pravashni. Raw products operational highlights. Overall volume were down 16% to 169,000 tons. The volume decline was attributable to group's simplification strategy as the group consciously reduced hot band. Hot band is a low value add product which attracts low margins. The reduction in hot band sales enabled the group to use the plant capacity towards more processed products which attract better margins.
Displaced hot band contributed 44% of the total decline in volumes, with the remainder of the volume decline attributable to softer export demand in all product categories. Mix improved from 47% to 51% local sales on the back of simplified and rationalized mix as the business continues to strategically focus on can stock, both local and export. The improved mix enabled a 17% scrap utilization rate being 2% higher from last year.
This contributed positively to our stable group profitability. In our extrusions business, there was strong recovery in 2023, with sales volumes being 6% higher to 11,000 tons due to re-recovery of automotive volumes and stable general market demand. The positive impact of growth in volumes, however, was tempered down by a two-week July strike and operational challenges in H2, which had severe impacts on our costs and profitability of the business. 2024 outlook is positive with again a strong order book .
But the needs to be clear focus on improving our operational performance and stabilizing metal supply with new onshore billet supply. Going to the outlook for 2024. 2024 has commenced with similar trends with export markets under continued short-term pressure, while customer demand locally is proving resilient. Macroeconomic and geopolitical uncertainty challenges short-term demand visibility and prediction. However, markets remain long-term unconstrained.
Our target is to improve UBC scrap utilization to 12,000 tons this year, while completing phase one of our market-driven capital investment to match the width capabilities of our can-body stock of imports to be completed at the end of this year. Continued focus on unlocking cold rolling capacity and capability to our well-established continuous improvement program remains in place.
Lastly, consolidation of strategic assets. The acquisition of Richards Bay property containing our cast house facilities was completed by the end of February. The objective being to optimize strategic assets and explore other growth-enabling projects on the strategic side. I thank you for your attendance today, and now we'll move to questions. Noma, do we have any questions?
We have one question from Andre. It reads, "Interest expense went up from ZAR 102 million to ZAR 160 million, although net borrowings reduced. Please elaborate on this increase in interest expenses."
Thank you, Noma. Thank you for the question, Andre. Pravashni, can I hand that over to you to be able to explain the interest movement?
Perfect. Hi, Andre. Thank you for your question. The interest expense did go up throughout the year. During the year, our average net debt was a bit higher than at year-end, resulting in an increase in our interest expense.
As we move on to the next question from David Fraser. The question is, "Please explain the intangible spend of ZAR 58 million."
Okay. Thanks, Noma. Going through the intangible spend of ZAR 58 million, it basically covered our spend on IT that we've got in-house software that we developed. It's actually our capital investment in our IT technology, which is an in-house software that we maintain. Thanks, Noma.
Thank you, Mark. The next question is from Ray. It reads, "What is the planned CapEx for 2024?"
Our planned CapEx for 2024 is in the region of ZAR 450 million, which covers Phase 1 of our wide strategic investment, which is made up of close on to about ZAR 160 million. The remainder of the amount is investment in reliable, stable plant performance.
Thank you, Mark. The next question is from Kobus. It reads, "Can you please elaborate on the scrap utilization rates planned for used beverage cans in 2024?"
Thanks, Noma. As I alluded to in my operational, our target is to increase our scrap utilization from UBCs as we have an increase in offtake or supply or demand, should I say, in can-body stock. This last year, we finished off with close on to 8,000 tons. With the amount of money that we spent on our cleaning line in part of 2023, we are targeting to increase the utilization of UBCs to 12,000 tons in 2024. That has a significant impact with regards to lowering our cost of raw material and hence the increase in scrap utilization.
Thank you, Mark. The next question is from Volker. It reads, "If I understand your figures right, you have made very little money in the second half of 2023. Can you give us a bit more insight into the second half of 2023?"
Thanks, Noma. Thanks, Volker, for the question. As alluded to in my highlights, the global export market for aluminum as a whole, we were impacted with regards to exports, but while our local market remained resilient. What we did there is we aligned our production to match the demand for the second six months, thereby protecting our full-year profitability by reducing our costs.
By literally running the plant for 11 months for the full year instead of 12, we managed to take out, or reduce fixed costs, thereby protecting our profitability and cash flow. We continuously focus on or watch out into the horizon with regards to the export, but now our key area in 2023 was focused on our controllables instead of the uncontrollable. Hence, protection of our profitability, where we were still manageable to hold our EBIT, even though our turnover reduced by 13%.
Thank you, Mark. The next question is again from David. It reads, "Please give an outlook of export markets between Europe and the U.S. Any green shoots?"
Thanks, David. In quarter one, we definitely have seen green shoots in the U.S. market, particularly in our plate. On the common alloy, particularly in Europe, there are definitely green shoots going into quarter two that we see coming into the horizon. Unfortunately, the can stock side remains, I'll say slightly depressed going into H1 as a whole.
Thank you, Mark. The next question is from Sandile. It reads, "Is the company considering buying back some shares in the open market as the share appears to be harshly undervalued by the market?"
Thanks, Noma. Sandile, I couldn't agree with you more that our share is undervalued in the open market. A key part for me is, in the last three years, we had to create reliable performance profitability, and I believe we've done that. This year, even with the harsh conditions, we've managed to generate positive free cash flow, net free cash flow after reinvesting ZAR 311 million. I'm sure our credibility is improving day- by- day as we're going through there and as we settle down with our simplification strategy, it will definitely improve going into the future.
Thank you. Mark. We have a question from Jeff Carter. It reads, "Causes of strike in July 2023. Has acquisition payment for ZAR 8.4 billion being paid for, and how do you see this acquisition being of strategic importance to Hulamin?"
Thanks, Noma. Good question, Jeff. Firstly, just to orientate you all, the Isizinda property that we've acquired is where our cast house are. It's a strategic asset. We get access to hot metal directly from South32. There's potential to grow our slab business and expand our slab business by owning the asset now.
We currently have got a capacity of just over 100,000 ton slab production at that site. With the vacant land and access to metal and gas, there's cheaper energy costs. There's huge opportunity to expand our production of slab and lower our cost of production, ultimately. Hence, it's a strategic asset.
Okay. Thank you, Mark. We have a question again from David. It reads, " Please talk about the wide can-body project. When will this be commissioned? Is there a local demand that you will satisfy? Estimated project's returns."
Thanks, David, for the question. Leading from our investor presentation that we did last year, the entire wide investment is actually a market-driven strategic capital spend that we're embarking on. The idea is to be able to substitute current wide can-body stock that's been imported. The favorable nature of this project is that it is market-driven and ultimately will increase our production on local can stock as a whole.
Phase 1 will be completed this year, with the entire project forecasted to be commissioned by the end of quarter three in 2025. This project will allow us to be able to supply 85% of the local market, which also will increase our scrap utilization. We're looking at post that, together with investment in the UBC line, to be able to increase our UBC consumption to close over 20,000 tons by the end of 2026.
Thank you, Mark. The next question is again from David. It says, "Are you happy with the current stock levels? Are they in line with the current demand levels?"
Okay. The key part about the stock levels right now is part of our simplification strategy that we embarked about two years ago is follow the metal and eliminate processes that actually bog down the metal flow to be able to have an efficient inventory turnover rate. We're definitely happy with our inventory control right now because we match our demand, particularly looking into at least four to six months ahead. As long as we focus on and continue with our simplification strategy, it'll allow us to supply the market and adjust our production and net debt together with our working capital to have a stable performance going into the future.
Thank you, Mark. There's a question from Kobus. It reads, "What are the planned shutdowns in 2024, and which specific product lines would be the most impacted?"
We've got two planned shuts for this year. The first one in H1 would be around our Phase 1 of our wide can-body coils investment in our capital plant that will impact our can-body stock, our can stream. The way we've planned accordingly, we will ensure that we have sufficient finished goods to be able to supply the market during the shut.
Our second plant shut is scheduled towards the latter part of H2. Again, this is completion of Phase 1 focus on phase one of our investment in wide and some other major work that we have on reliable plant performance. In the whole time, our strategy will be to be able to supply all our customers and deliver on time first principle of well over 90% to the market.
Thank you, Mark. The next question is, " Your annualized production volume in the second half of 2023 is just 140 tons. This is a record low over the last 15 years. What tonnage are you planning to do in the first half of 2024?"
Okay. As I said earlier, the key part with regards to protection of profitability and cash flow for H2 was our business being able to be agile enough to react to the softening in the global markets itself. Hence, the record low of $140. We need to take into account that the plant only operated for five months due to the lower demand. Looking into 2024, continuing with our supply mix, we do see some green shoots with regards to demand recovery. Right now I'm looking at possible H1 being very similar to last year's H1. Thanks, Noma.
Thank you, Mark. There's one question from Jeff Carter. No, sorry, that one was answered by Mark. Sorry about that. There seems to be no further questions.
No. There's two more.
There seems to be. Okay, there's more coming through f rom Mr. Schekter, "It reads, "Hulamin is currently protected in the local market by 15% import duty. ITAC has been investigating the issue of this import duty on aluminum with no findings published so far. Do you believe you will continue enjoying this protection of the local market?"
All right. Thanks, Mr. Schekter. As you alluded to, we await just like you with regards to feedback from ITAC's review process. We've positively engaged with ITAC and provided all information. As soon as they are ready to provide that information, we'll be sharing to everyone at the same time.
There's a question from Andre. It reads, "How much production capacity will phase one add? Does the demand exist for this additional capacity?"
Good question, Andre. I keep on harping that we've got a market-driven capital spend. I'm proud to say with regards to the initial contracting that we've done for this year, we've managed to already secure 85% of the local market in line with demand for this year. Even though we're not able to supply the wide, we're able to supply the narrow with a discounted rate.
Right now we've already established the market well over 80%, and we're on track to be able to deliver the capital and commission it in quarter three with the market already pulling on demand. We definitely have the potential to be able to supply. Next year it'll kick into the exact product that the market is looking for which will also drive efficiencies with the canners itself.
There's another question from Jeff Carter. He feels that his question was not answered, regarding the causes of the strike in July 2023.
Okay. At that point with regards to the strike that happened in 2023, at that point in time it was in discussions with regards to our union. It wasn't related to anything regarded to annual increases, but related to medical aid and pension, pensionable items that's been outstanding for a while. Further to that, post that, we've had proper engagement with the unions and currently we've got in place a three-year deal that we've managed to negotiate with our union and our workforce to create a stable forum for us to be able to deliver on our market-driven capital spend over the next two to three years.
We're just gonna give it a couple of seconds to see if anybody could still be typing.
The questions you're welcome to send to our corporate affairs, communication, representative, and we'll definitely between Pravashni and myself, provide you further feedback down the track. Thank you very much for.