KAP advances acquisition strategy; reports good FY17 results

14th August 2017 By: Schalk Burger - Creamer Media Senior Contributing Editor

Diversified industrial group KAP Industrial Holdings’ acquisition of high-density polyethylene and polypropylene manufacturer Safripol, logistics firm Lucerne Transport and a 51.4% interest in logistics firm Xinergistix during the 2017 financial year, provides the company with further opportunities for growth in the chemicals and logistics markets, said KAP CEO Gary Chaplin.

Citing its “disciplined execution of its ongoing strategy to acquire complementary businesses”, the company on Monday announced that its revenue for the year ended June 30, had increased by 23% year-on-year to R20-billion, while operating profit was up 25% to R2.5-billion.

Its operating profit margin increased to 12.6% from 12.4% driven mainly by divisional integration efficiencies, continued operational streamlining and recent capital investments and acquisitions.

Headline earnings a share from continuing operations improved by 15.4% to 55.6c, while R3-billion in cash was generated from operations and the dividend a share increased by 17%.

It declared a gross dividend of 21c a share for the 2017 financial year, compared with 18c a share in the prior financial year.

Meanwhile, Safripol’s operations are very similar to KAP’s other chemical operations Hosaf and Woodchem, prompting KAP to form a new diversified chemical segment, which also realigned the group’s business operations into three segments – industrial, chemical and logistics – to increase the group’s focus on the chemical industry.

“Our new chemical segment gives us increased scale and broader exposure to new markets and opportunities. We are also significantly increasing the production capacity of Hosaf’s polyethylene terephthalate (PET) operations, which will result in further revenue and operating profit growth for the chemical division,” said Chaplin.

A new paper impregnation plant at the Woodchem operation resulted in good revenue growth and margin improvement during the year under review, while resin volumes remained stable for the period.

The integrated timber division also performed well. Recent technology and equipment investments, continued focus on the segment’s value-add strategy and further improvement in this division’s forestry, sawmilling and pole operations drove strong performance overall for this segment, delivering growth in revenues and improvements in margins.

The group’s automotive components division performed well as a result of stable vehicle assembly volumes and the successful introduction of new models, together with the successful integration of Autovest, which was acquired in the prior year.

Meanwhile, KAP’s integrated bedding division focused on raw material integration and streamlining of corporate and operational structures during the period.

Further, the roll-out of a decentralised model for mattress assembly further contributed to strong operating margin improvements arising from a stable revenue base.

KAP invested R2.2-billion in capital expenditure during the year under review, with the funds mainly directed towards continued progress on the replacement of the PG Bison Piet Retief particleboard plant, expansion of the Hosaf PET plant, construction of a new integrated bedding facility and investment in logistics and passenger transport vehicles, said Chaplin.

Chaplin noted that economic conditions in South Africa remain challenging but that the diverse nature of KAP’s operations with varied exposure to different territories, sectors and business models continues to buoy the group through this tough economic cycle.

“We are optimistic that our continuing focus on optimising and expanding existing operations within the group and on growing our market share in all areas of our operations will continue to provide ongoing growth for our business – KAP’s balance sheet strength, coupled with the diverse nature of our operations will continue to provide strong momentum for our business in the year ahead,” he added.