Aluminium products. Picture: Woohae Cho/Bloomberg via Getty Images
Aluminium products. Picture: Woohae Cho/Bloomberg via Getty Images

Hulamin Extrusions, a division of aluminium group Hulamin Ltd, on Tuesday sent out retrenchment notifications to a number of its workforce, a source familiar with the process said.

The subsidiary, which provides aluminium extrusion products, operates out of two plants in Olifantsfontein in Gauteng and Pietermaritzburg, in KwaZulu-Natal and employs about 400 people, which equates to about 20% of total group employment.

In a letter to affected employees, Hulamin Extrusions said it was considering closing the Olifantsfontein facility and restructuring the Pietermaritzburg plant and support services operations.

The source, who declined to be named, said the company could lay off as many as 200 employees. This could not be verified with Hulamin as attempts to get comment from the firm were not successful.

According to one of the letters issued to the employees, a copy of which Business Day has seen, the consultation over the retrenchments is set to commence on Wednesday and will be finalised by July 31.

In the letter, Hulamin Extrusions said since 2015, the company had consistently underperformed “within an extrusions market that has conversely continued to grow”.

“The Company’s competitors have consequently taken up a substantial portion of the local market share and at the same time expanded successfully into new and emerging markets,” it said.

It said local customers had “incrementally” substituted local supply with imports. Imports are estimated to constitute about 50% of the  South African extrusions market. “As a direct result of this, South African extruders and associated downstream activities have been impacted by the pressure on margins that has been brought to bear by cheaper imports.”

On May 22, Hulamin said since the last quarter of 2015, Hulamin Extrusions profits had fallen, and cash outflows have mounted.

“Markets have softened and demand has declined. From January 2018, this situation has become increasingly serious and intolerable, to the point when a strategic review of the business was undertaken,” the company said.

In the letter, the company also cited rising overhead costs for the decision. The escalating costs had constrained its ability to spend on capital investment.

“If the proposal to close the Olifantsfontein operations is implemented, this will enable the company to free up the property and assets which could then be sold to realise essential cash that could be injected into its operations at Pietermaritzburg and particularly used for critical maintenance and asset replacement,” the company said.

Hulamin Extrusions said it would take a final decision on the possible retrenchments only after “full and proper” consultation with the employees.

njobenis@businesslive.co.za