KAP posts good growth in competitive environment

19th August 2015

By: Schalk Burger

Creamer Media Senior Deputy Editor

  

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Industrial and logistics company KAP on Wednesday posted robust results for the 2015 financial year, ended June 30, including reducing its debt-to-equity ratio from 40% to 27%, in a tough and competitive environment.

The board and management were “comfortable” with the streamlined structure and performance of the business, said CEO Gary Chaplin.

Revenue grew by 8% to R15.66-billion and headline earnings by 21% to R969-million. KAP further declared a dividend of 15c a share, up from 12c a share in the prior financial year, while the net asset value a share increased 12% to 320c.

“From a strategic perspective, we have completed most of the corporate restructuring and are comfortable with the business, the divisions, how they are performing and their growth prospects,” said Chaplin.

KAP’s strategy was to pursue sustainable growth of the group, its businesses and the markets they operate in by ensuring sustainable earnings through diversity in the business, sustainable margins through specialisation and operating in high-barrier-to-entry markets, as well as leveraging its Southern and East African base for further growth in the rest of Africa.

Specifically, Chaplin noted that KAP’s Diversified Logistics division would provide a broader range of services in the countries where the division was already present, namely Zambia, Mozambique, Botswana, Malawi, Tanzania and Namibia.

The Diversified Logistics division’s specialised warehousing and food and agricultural logistics services were predominantly Africa-focused currently, and Chaplin foresaw potential to expand the company’s passenger transport services within these countries.

“In Zambia, we are already providing fuel, mining and food logistics services, and there are opportunities for passenger transport in the country. The structure and strategy of the company enables it to leverage its existing footprint to grow the business.”

Further, Chaplin highlighted the success of its Mozambique personnel transport contract, and mentioned that the new business exceeded expectations and had already signed a second contract.

The company’s revenue exposure within Africa was 30%, and KAP aimed to grow this, but Chaplin noted that the company had no undue revenue concentration risks, owing to its diversification.

All the company’s businesses performed well and the company announced expansion projects for some of its industrial businesses on the back of its highly successful technology upgrade of its medium-density fibreboard (MDF) plant, in Boksburg, Ekurhuleni. The upgrades and expansion of this plant resulted in 17% reduced raw materials costs and 40% lower overhead costs, owing to capacity increases.

The board approved a gloss line to be added to the MDF plant, which would be commissioned next year. The company would also expand and upgrade its Piet Retief particle plant in phases, similar to its expansion and upgrade of its MDF plant. Management was excited about the latest continuous press technology, which would enable similar raw materials and efficiency benefits as those realised in the MDF plant.

The board also approved a R700-million expansion at the company’s polyethylene terephthalate (PET) producer Hosaf, which would raise capacity from 128 000 t/y to 240 000 t/y. Hosaf, the only producer of virgin PET in South Africa, supplied 73% of the local market. The expansion would be implemented during 2017.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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