Consolidation plan pays off for KAPComment on this story
The consolidation of operations, including disposing of non-core assets and restructuring some divisions, had finally paid off, logistic and manufacturing firm KAP Industrial said yesterday.
In the past six months, the firm, which operates logistics and manufacturing divisions for Steinhoff, said it had made progress in investing in a new manufacturing facility and disposed of various assets that were generating low returns, such as the Bull Brand and Brenner Mills brands.
“We made our strategy clear in that we want to operate in businesses where we are either number one or number two,” chief executive Jo Grové said. ”Towards the end of last year, we disposed of our food interests and concentrated on reinvesting in our primary business – the Unitrans and timber operations.”
He said KAP had completed the PG Bison restructuring and installed a new medium density fibreboard line in Boksburg. “All of this should add towards our results going forward.”
For the six months to December, KAP increased revenue from continuing operations by 9 percent to R7.8 billion.
Operating profit from continuing operations rose 9.2 percent to R710 million. .
“High return investments remain core to the group and we will continue to investigate future options for growth. We are now a well-established, diversified emerging market industrial group and we will continue our journey to be market leader in the industries we serve,” Grové said.
KAP’s logistics business, which includes Unitrans Supply Chain Solutions (USCS) and Unitrans Passenger, increased its operating profit to R392m from R354m in the previous corresponding period on the back of an 11 percent growth in revenue.
The company said this division maintained its focus on growth in developing African markets. Grove said KAP already had a presence in countries such as Botswana, Namibia, Zambia and Malawi, among others. “We want to grow our presence in these countries,” he added.
KAP said it had largely completed the restructuring of USCS, which had resulted in the division now comprising two divisions instead of three.
Grové said the tourism market was showing signs of recovery, which, in part, was due to the weakening of the rand. The Gautrain feeder and distribution services of Unitrans Passenger division delivered good returns and cash flow despite increases in the fuel price.
The integrated timber operations improved operating profit by 12 percent from R154m to R172m due to cost-saving measures resulting from the recent restructure and an increase in margin of 1 percentage point. The timber division also benefited from the commissioning of PG Bison’s new medium density fibreboard plant in Boksburg.
PG Bison includes forestry plantations and various manufacturing and distribution facilities for sawn timber, poles, wood-based panel products, decorative laminates and solid surfacing materials.
KAP’s manufacturing unit, which produces technical products such vehicle components, footwear and products for the furniture and bedding markets, among others, lifted operating profit to R146m from R142m.
“Our furniture and bedding division showed a strong turnaround but the smaller divisions continue to struggle as a result of the difficult trading environment, particularly in the household goods industry,” Grové said.
He said the company’s outlook for the next six months remained positive as the recent three-year wage agreement achieved in the automotive sector was expected to have an encouraging effect in the manufacturing sector.
KAP shares gained 3.91 percent to close at R3.72 yesterday.