KAP Industrial Holdings’s headline earnings surged in the six months to December 31 after its two largest businesses PG Bison and Safripol benefited from strong demand for decorative wood panels and polymer products, respectively.
The group has over the past three years been inwardly focused through growing its businesses and driving efficiencies and technology improvements, but it was entering a more outward-looking phase that would likely include value-added acquisitions, chief executive Gary Chaplin said in a telephone interview yesterday.
KAP’s share price increased 3.97 percent to R4.97 yesterday afternoon - the price has increased over 17 percent over a year.
KAP grew revenue by 13 percent to R13.6 billion in the six months and improved operating profit before capital items by 41 percent to R1.6bn. Headline earnings a share improved 62 percent to 37.2 cents. Some R1.3bn cash was generated from operations.
Chaplin said Covid-19 had continued to influence consumer demand, supply chains, commodity prices and inflation through the six months, while civil unrest in July also contributed to the uncertainty.
As a result, cash generated from operations was down from last year due to a decision to invest in inventory to mitigate the global supply chain risks and ensure business continuity.
The diversified business model proved resilient, he said.
The automotive components business Feltex was severely affected by lower vehicle assembly volumes due to global semiconductor chip shortages and the civil unrest.
However, this business was likely to improve in the second half due to restocking and supply chain improvements made through the longer shutdown periods of the vehicle assemblers in December. “We started the year in a much better position than we ended it,” he said.
Restonic, the sleep products business, also saw lower volume demand due to customer retail operations being disrupted from the civil unrest.
However, trading was back to normal seasonal patterns, and likely to pick up again towards year-end in line with previous years, he said.
Unitrans, the logistics and passenger transport business across 10 African countries, grew revenue 8 percent, but operating profit fell 6 percent due mainly to cross-border challenges and civil unrest in South Africa and Eswatini.
Growth momentum had continued at Unitrans into the second half however, and improved financial results were anticipated from it.
Chaplin said although market conditions were expected to remain challenging, it was an exciting time for KAP, as its strategy had been refined to provide “great growth plans” for the group and very clear focus for management.
This was supported by a strong balance sheet, good cash generation and competent operational management teams, he said.
PG Bison recently announced a R1.9bn investment in a medium-density fibreboard manufacturing plant in eMkhondo. KAP invested R751m in the growth of its operations over the period, which included the recent acquisition of DriveRisk, a technology-enabled risk management business focused on accident prevention across various industry sectors.
BUSINESS REPORT ONLINE