JSE-listed industrial group KAP Industrial Holdings delivered robust interim results, owing to the active restructuring of its divisions, cost-savings measures, improved efficiencies and the implementation of new technologies in its industrial division.
The group also reduced its gearing ratio from 54% to 48%, increased its revenue by 9%, its operating profit by 8% and its headline earnings per share by 14% for the interim period to December 31, 2014, notes KAP CEO Gary Chaplin.
The restructuring of USCS enabled cost savings and efficiencies, which helped to protect its margins. USCS also produced good results in the mining and agriculture sectors, mainly as a result of improved efficiencies.
In the diversified industrial division, the timber and manufacturing businesses were combined to align skills and extract efficiencies, while the entire division increased revenue and profit margins.
“Several restructuring initiatives continue to provide benefits, including the restructuring of timber subsidiary PG Bison and logistics arm Unitrans Supply Chain Solutions (USCS).”
KAP has restructured its subsidiaries into two broad cate- gories, namely diversified logistics and diversified industrial, determined by similar management philosophies. This was done to achieve efficient cost and reporting structures and enable improved marketing opportunities in emerging markets in Africa, Chaplin says.
The restructuring also included the rationalisation of underperforming and unprofitable contracts and the sale of noncore assets such as its food and footwear divisions.
Further, KAP continues to pursue technology renewal and upgrades of its industrial plants, including opening a new medium-density fibreboard line for PG Bison. This and other strategic investments drove an increase in revenue of 11% in its diversified industrial division, while increasing profits by 6%.
However, the diversified industrial division remained under pressure and the margin of the division shrunk to 8.7%, with the furniture division particularly affected, owing to its exposure to the furniture retail sector.
“We aim to increase the ratio of value-added products that the companies in the diversified industrial division are producing and the introduction of new technologies, cost saving and efficiency initiatives have had a positive impact.”
The second phase of technology upgrade to its timber plant, which was completed last month, increased its throughput by 25%, Chaplin adds.
Further, KAP has identified potential efficiency and procurement projects for its chemicals business, which will help KAP to add value to the business in future. The contribution from the production of polyethylene terephthalate is growing in line with the market and the wood-chemicals part of the business is showing strong growth as it gains market share.
“The chemicals business secured an important contract, which is strategically significant for the business, and also enabled capital expansions and the establishment of a new division.
“With regard to new opportunities, we have spent the past three years focused on fixing in-house reporting and management structures and optimising assets, and we will continue with this. “There is also an exciting project of in-house investment in new technologies to increase volumes and improve cost savings.
”