Good morning, I'm Geoff Watson, the Interim CEO at Hulamin, and I have Mark Gounder, the Hulamin CFO, with me here this morning. We'd like to thank shareholders and other stakeholders for attending the H1 results announcement this morning. I think we had some very pleasing operating and financial results to present. Before I go there, I would like to cover safety where we have not performed to our standard. Let's go to the next slide. This is our safety performance in 2023. You'll see in the graph a significant increase in lost time injuries and total recordable injuries, which were a total of lost time plus medical treatment.
While we still level with our peers, which is the red line, we had four lost time injuries in the first quarter, which is unacceptable and has triggered an in-depth review of safety management with a globally recognized advisor. Interventions have followed, and as an example, we had a particular focus on mobile equipment and have started to fit cameras and sensors to all of our fork trucks. Let's move on to this one. I spoke to you last year about the opportunities to accelerate improvement in business results and the normalized EBIT of ZAR 364 million, which was 107% better than H1 2022 and 10% better than the H2 2022 EBIT, really shows the capability of the business. What were the drivers for H1?
Firstly, we continued to simplify our product mix with exits from four products underway. This includes hot rolled products, which is the reason for the reduction of sales by 8% to 90,000 tons. This product is a commodity that is hot rolled, packed and shipped with no value added cold rolling or finishing, which is downstream and was not profitable. In addition, specifications or SKUs have been reduced significantly in common alloy, painted and foil products. Canned product sales were 49% of the mix, compared to 43% a year ago. Canned products are our priority stream in volume and profitability. Demand for beverage crowns is growing at 5%, and this is a structural change that favors aluminum at the expense of plastic.
Secondly, metal cost reduced with scrap utilization increasing 6% with a run rate established in the second half of 2022 continuing into 2023. To understand the impact of this, remember that to produce rolled products, we can either use virgin aluminum from a smelter like South32, or we can buy scrap material. We can do that from our customers such as Bevcan, or we can buy it from recyclers and reprocess this material. For us, scrap is lower cost than pure metal or commodity remelt ingot. Thirdly, continuous improvement added 8,000 tons to capacity headroom in the first half, which adds to the 18,000 tons added last year. Capital expenditure rose ZAR 75 million to ZAR 141 million as we continue to invest in reliable, capable capacity.
We did see some softening of markets towards the end of H1, and I'll return to this in my remarks on the outlook for the second half. I'll now hand over to Mark Gounder to cover the financial details of the result.
Thank you, Geoff. Good morning, everyone. Moving to our financial highlights for our interim reporting. I am pleased to report that the improved trading results experienced last year has continued into H1 2023. We continue to focus on our simplification strategy and capitalizing on attractive market conditions through a reprioritized mix with a focus on canned products. Can sales were 49% of the mix, up 6% from prior period and being the biggest contributor to our richer mix. 6% improvement in scrap utilization contributed positively to our cost base. The quality of mix, improved scrap utilization, a stable cost base, and 18% favorable exchange rate translated to 107% growth in normalized EBIT to ZAR 364 million. While working capital as a percentage of revenue reduced by 1% and net asset value improved by 15%.
Although our cash generation ability from operating and investing activities was negative, it had improved from prior period by 73%, resulting in our net debt to equity decreasing by 10%. Under salient features, I cover the key drivers for our business. Average dollar aluminum pricing was 24% lower, and average rand dollar exchange rate was 18% weaker. Group revenue declined 7% to ZAR 7.4 billion, mainly due to the average rand aluminum price being 11% lower and group volumes lower by 7%. Our revenue benefited from improved profit margins from our reprioritized mix and weaker exchange rate. It should be remembered that Hulamin purchases aluminum and then adds value to the product. The aluminum LME price is accordingly largely a pass-through cost to our business.
While turnover will be impacted by the rand LME price, this is not the key driver of profitability, which is driven by the value-added margin, which is our conversion margin. EBIT and normalized EBIT improved by 112% and 107% respectively. The difference between EBIT and normalized EBIT is metal price lag, which is a timing difference between the buying of aluminum and selling the value-added product. Over time, gains and losses on metal price lag tend to largely offset. I will cover the improvement in EBITDA of 95% in detail later in this presentation. Both earnings per share and headline earnings per share improved by 102%. Normalized headline earnings per share improved by 94% on the back of a richer mix, stable cost base, and favorable exchange rates.
Capital expenditure grew by 57% as we continue reinvesting in reliable plant performance, capacity, and capability to better service our can stream products. Net free cash flow improved on the back of lower average rand LME and improved profitability. We have included in the slide deck a normalized EBIT bridge by earnings per share. For this presentation, I'm going to go through the absolute value bridge. On the EBITDA waterfall, using the bridge, I will cover the details explaining the 95% improvement in normalized EBITDA from ZAR 218 million on the far left of the bridge to ZAR 425 million in 2023, and thereafter reconciling to our headline earnings of ZAR 215 million.
On the external factors, the 18% weaker exchange rate resulted in a positive impact of ZAR 303 million, while inflation and commodity price combinedly negatively impacted the business by ZAR 179 million. Impact of 8% lower volumes due to reprioritized mix was ZAR 165 million, while the positive impact of pricing and improved mix of ZAR 269 million as a result of the total sales to the can industry, both export and local, contributing 49% to sales volume in our Rolled Products division, compared to 43% in the prior period. These product streams also supported increased scrap consumption with consequential benefits for margins. Tight cost management has dampened the impact of commodity and energy inflation, resulting in a stable cost base.
Our conversion costs were marginally higher due to higher cost of production for improved mix, operational breakdown, and offset by improved scrap consumption. Admin and other costs included ZAR 20 million loss on sale of excess internally generated problematic scrap, ZAR 10 million short-term incentive to our employees in line with improved business performance, an increase in share option valuations by ZAR 4 million. ZAR 24 million was received from insurers for the 2022 July unrest business interruption claim. While extrusions was impacted by softening extrusion markets, largely as a result of load shedding and lower LME pricing, resulting in an unfavorable movement of ZAR 7 million from prior period. That takes us to a normalized earnings of ZAR 425 million EBITDA.
Depreciation increases from prior period due to higher capital investment, while net interest charge increased by 75% to ZAR 70 million due to higher market interest rates and increased average debt levels. The tax charge increased due to deferred tax assets being fully utilized in 2022. The result is that normalized headline earnings of ZAR 215 million. On the analysis of our net working capital, change in inventory was our biggest impact to working capital. Available plant capacity was utilized to build up finished goods for H2 sales. Total tons inventory has increased by 6,000 tons, with finished goods accounting for 8,000 tons. Inventory has returned to planned levels at 47,000 tons as we speak. Trade debtors and trade creditors were impacted by change in product mix and weaker rand-dollar exchange rates.
On the analysis of cash flow, capital expenditure, finance costs, and tax payments were partially off-funded by cash generated by operating activities, resulting in our net debt increasing by ZAR 163 million. A key focus in H2 will be to generate positive free cash flow by tighter cost control and completion of working capital initiatives. Liquidity in our capital structure, Hulamin has sufficient headroom and debt facilities in place, and I can confirm all covenants ratios were met. On our capital expenditure, we continue to reinvest in reliable plant performance, capacity, and capability, which saw an increase from ZAR 66 million to ZAR 141 million. Just a point to note, on the ZAR 35 million, some of the projects, improvement projects were backup generators to mitigate against rising load curtailment and investment in our can stream, as mentioned by Geoff earlier. Thank you.
At this point, I would like to hand over back to Geoff to take us through an operational review.
Thanks, Mark. We'll start with raw products. You will see in the top left-hand graph, total sales were down 8% or 8,000 tons. This was due to the reduction in non-profitable commodity hot band products that I spoke about previously. You'll see that in the yellow, the 17,000 tons down to 9,000 tons. The top right-hand graph shows our priority can stream products. As a percentage of mix grew from 43% to 49%, which pulls scrap utilization, which was up 6%, lowering metal cost. The bottom left-hand graph is really important because it really shows what we have the capability to produce at Hulamin.
It shows the value-add cold rolled plate and finished production grew 16% or 12,000 tons as we started to exit hot rolled products. It is the value-add production that we're in that is the most profitable, which is a cold rolled and plate, and hot band wasn't, so that's a very encouraging number. Let's turn to the extrusion business. The extrusion business volume was up 9%, but EBITDA reduced by ZAR 7 million. Mark has covered some of the reasons for that as he spoke to you. Anyway, that has triggered a review of the business, and we will update you on progress at the 2023 announcement. Let's take a look at the second half.
I've said that simplification is the key to Hulamin reducing cost and enabling agility to react to disruption, while at the same time also opportunity. Simplification includes exiting products, as we have done, but also reducing SKUs within products. With our customers, we are working on this, and with two products we have reduced SKUs by over 50%. At the same time, continuous improvement or lean manufacturing with multidisciplinary teams, including operators, is adding significantly to our capacity headroom, with over 20,000 tons added in preferred products since the start of 2022. However, as with other industries, we started to see market softening in Q2. While we do not know how long this will last, we do not expect it to impact trading beyond year-end.
These conditions are not normal for Hulamin, as we are normally production constrained, and except for the COVID years, not market constrained. We export can-end products to Europe and demand, while growing at 5% CAGR, is overstocked due to drop in demand from the highs of COVID. The stock adjustment should be achieved during Q4. Domestic can products demand also continues to grow at about 5% CAGR, but the can makers are running down excess imported stock, which will be achieved during Q4. Demand for our plate products has not been affected by the downturn in industrial products globally, due to Hulamin's plate quality being a global benchmark and release of a new plate product. As a result of the market softening, however, we are reducing cost and inventory for Q3.
We shut Rolled Products for a week in early July to adjust inventory down. The two-week strike one week later, while disruptive, did affect some customers, but we were able to recover quickly. Looking at the longer term, as I said to you in March, our capital spend for 2023 would grow to over ZAR 300 million, and we will meet this target by year-end. Engineering for the increase in capacity and capability of can-body is underway and will be operationally complete during 2025. This will enable a sales opportunity to increase sales by 50% to 60,000 tons of can-body from about 40,000 tons this year.
At the same time, expansion to increased used beverage can melt capacity is underway, and the capacity will be available in 2025, which will increase capacity from 10,000 tons to 28,000 tons. We are investing in our core priority products, and these investments will enable us to meet our customers' growing demand and increasing recycling of used beverage cans enable us to do this at a lower cost. While we have short-term market constraints, Hulamin is now delivering consistently and improved financial results. We've delivered significant increases in production capacity and have a capital plan to invest in the trend growth in canned products with customer negotiations underway to deliver the market. We look forward to coming back to you with the 2023 results and review of progress.
However, I wanna leave you in no doubt that a significant amount of our focus for the second half will be on debt reduction and in the second half, delivering free cash flow, where we already have showed a 73% improvement from where we were at this time last year. Finally, an update on our search for a permanent CEO. This has been a difficult process, as Hulamin, with over 2,000 people, is at the technical forefront of aluminum semi-fabrication and the only aluminum rolling mill in Africa. Half of sales are exports to the U.S., Europe and Asia, with currency and commodity risks and multinational customers. The board is focused on making the right long-term appointment, is making progress, and will be able to announce an appointment soon. Thank you, and we're open for questions.
Thank you, Geoff. Valued investors and other stakeholders, good morning. My name is [Norma]. We have one question from Cobus Cilliers of All Weather Capital. It reads: Well done on a good set of results. Can you please elaborate on the working capital cycle expectations for the next two years? More specifically, how cash will be absorbed and released over this period once the plant performance is at your refocused levels. Thank you, Mark.
Thanks, [Norma]. Thanks, Cobus, for your question. A key focus, as Geoff alluded to in our business, is to deliver on positive free cash flow. Now that we have settled into what I call an ideal mix of inventory to support our key streams, going forward, our focus will be on to improve our inventory turnover ratio from the time period of purchasing the metal to invoicing to our customers. Together with our simplification process, it's allowed our business also to be a lot more agile, which will contribute positively in managing our inventory turnover. Also, we have various initiatives in play with our customers and suppliers that we're working on, which are going to be beneficial both for Hulamin and our partners to improve our working capital.
This will contribute positively to our focus on generating positive free cash flow into the future.
Thank you, Mark. Our next question is from Peter [Cronberg] of Major Markets. The question reads: The company's focus on debt reduction in the second half. Can you outline Hulamin's debt maturity profile in the near mid-term? How will these maturities be handled? Thank you.
Thanks, [Norma], and thanks, Peter. Just to explain, Hulamin's debt facilities right now. Last year, we entered into a three-year contract supported by our major banker, Nedbank, with three other bankers for a total merged facility of ZAR 1.9 billion. Debt comes up for renewal in two years time. Just to be very clear, our entire debt right now is to fund our working capital and what I call ongoing capital investment.
Our next question is from [Volcas Goete]. It reads: I am surprised by your increased tonnage and value of stock. What is the reason for this increase?
[audio distortion]
He's asked two questions. The second one is, what exact tonnage of scrap have you been processing in the first half of 2023?
Okay. Let me answer the second one first, 'cause I can't quite see the first one. The exact tonnage of scrap that we've been processing in the first half, that's an interesting question to answer because there's two types of scrap that we process. The first is what we call run-around scrap. That is the skeleton scrap that comes back from the processing of the metal. That is dependent on the volume that goes through the plant. It's almost an exact percentage. It's about 35% that comes around as returning scrap. We then purchase scrap from the market, which in turn means skeleton scrap from can makers, and there's other types of scrap that we buy on the market.
The exact number of that, my recollection was 14,000 tons. Mark, was that the correct number for. [crosstalk] 15,000 tons for the first half of this year. How does that compare to the second half of last year? It's around about the same as I recollect as it was. In other words, we had the same running rate as we had in the second half of last year, but the mix has changed. Can-end, for instance, takes less absorption of scrap than can-body. There's some complications in how you understand that number. What was the second question?
I'm surprised by the increased tonnage and value of stock. What is the reason for this increase?
I can answer that.
Okay, go ahead.
As in my slides, if you look at the makeup of our tonnage closing stock as a whole, you'll see that we did go up, but the key place that we did go up was finished goods. That was in place for H2 sales, where we used the increased capacity that Geoff speaks about from our simplification strategy to be able to produce can stream products for H2 sales.
The first question is from Chris Logan from Opportune. It reads: Directors and prescribed officers only held 0.249 million shares at the 2022 year-end. Why so little alignment?
That's a good question. It's not something that I've looked at in detail. I'm personally not an offender. I have a reasonable holding.
The next question is from Nick [Krige]. It reads: Hulamin's market cap is less than the liquidation value of working capital. In other words, it is worth more dead than alive. While the results for this half year were excellent, all the cash ended up in working capital and there was no free cash flow. Do you think Hulamin will ever be able to generate free cash flow, which can be used to pay a dividend?
Look, thanks very much for that question. We understand the frustration of shareholders. It is certainly our intention for the second half to deliver free cash flow, excuse me, on top of a fairly vigorous capital spend during that period. As we look out to our five-year plan, that is most certainly our objective that we will deliver capital expenditure out of cash, out of free cash flow, and also dividends.
These are all the questions we have for today. Thank you very much. I'll hand back to Geoff.
Thank you very much for the questions and thanks very much for listening to our announcement. We look forward to talking to you in the early part of next year.