KAP still strongly on growth path – KAP’s share tumbled in November owing to its link to Steinhoff, but has since mostly recovered -KAP highdensity polyethylene HDPE polypropylene PP polyethylene terephthalate PET

KAP highdensity polyethylene HDPE polypropylene PP polyethylene terephthalate PET

Gary Chaplin. Picture: JEREMY GLYN

KAP, a broad-based industrial group, continued its growth trajectory in the interim period to December, enhancing margin growth and cash conversion.

Revenue from continuing operations leapt 29% to R11.5bn and operating profit from continuing operations 25% to R1.4bn. Meanwhile, cash generated from operations before working capital was also up 25%, at R2bn as headline earnings per share from continuing operations rose 11%.

“We are really pleased with the results,” KAP CEO Gary Chaplin said on Monday. He said the group had taken a slow and methodical approach to growth through the sale of nondiscretionary consumer items.

The company has forestry and timber manufacturing operations, makes vehicle accessories and components, and produces bedding products.

It also has a diversified chemicals business making high-density polyethylene (HDPE), polypropylene (PP) and polyethylene terephthalate (PET), and also industrial resins.

The group also operates specialised supply chain and logistics services and passenger transport routes. Revenue, profit and assets are split fairly evenly among these segments.

In recent years, KAP made acquisitions in automotive accessories, upgraded its Piet Retief particle-board plant in Mpumalanga and installed a new medium-density fibreboard line in Boksburg.

Meanwhile, the R4bn buyout of Safripol in the second half of 2016 made KAP a bigger player in plastic bottles.

The group was also doubling capacity at its Hosaf virgin PET resin plant in Durban. But the performance of Hosaf was disappointing in the interim period as a result of delays in commissioning the expanded plant. However demand for PET remained strong, Chaplin said, which would enable operating the plant at full capacity

Chaplin said Safripol performed ahead of expectations for the period. Operations continued to run at capacity, with strong demand for both HDPE and PP.

Meanwhile, the Woodchem unit continued to operate at capacity with stable demand for its formaldehyde, resin and impregnated paper products. “Strong market positions in logistics and manufacturing, together with improved efficiencies and small bolt on acquisitions, contributed to a healthy result,” said Avior Capital Markets analysts Mark Hodgson.

Safripol had made a big positive difference to group earnings. Group net working capital more than doubled to R2.14bn, largely as a result of the acquisition of Safripol, said KAP.

Meanwhile, acquisitions and major expansionary capital projects were concluded during the 2017 calendar year. The R650m PG Bison phase one particle-board upgrade in Mpumalanga, new vehicle model introductions in the automotive components division, and new technology investments in the integrated bedding division were major drivers of growth going forward, along with the Hosaf expansion.

Recent contract renewals and the pending conclusion of an empowerment transaction in the logistics division provided a solid platform for continued growth, the group said.

Steinhoff ties

KAP includes the industrial assets of Steinhoff, acquired in 2012. This gives Steinhoff a majority stake in KAP of 43%.

KAP’s association with Steinhoff saw its share price tumble from R8.82 at the end of November to R7.65 on December 11, from which it recovered to the R8.48 it was trading at on Monday at 1pm.

Former Steinhoff CEO Markus Jooste and chief financial officer Ben la Grange resigned from KAP’s board in September, three months before Steinhoff’s accounting scandal became public.

On December 6, after Steinhoff announced Jooste had resigned and the company was postponing the release of its results indefinitely due to accounting irregularities, KAP issued a statement saying “that while Steinhoff is a major shareholder in KAP, Steinhoff is not a controlling shareholder in KAP. In addition, KAP is independently managed, controlled and funded and as a result should be unaffected by these recent announcements.”

allixm@bdfm.co.za

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