Local efficiency and growth in rest of Africa keep KAP’s profit rolling in

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Nompumelelo Magwaza

AMID trying times in the local economy, countries elsewhere in Africa continued to be the source of growth for KAP Industrial Holdings, group chief executive Jo Grove said yesterday.

The firm, which operates logistics and manufacturing divisions for Steinhoff, said that in the year to June its African partnerships were a big focus.

“We generate about 20 percent of our logistics revenue in Africa and about 32 percent of our profit comes from that revenue,” Grove said.

The group’s local growth has been assisted by a consolidation of operations, including the disposal of non-core assets such as food and footwear businesses in the manufacturing division. KAP disposed of its footwear business to Bolton Footwear, a transaction that will realise about R290 million in cash, pending approval by the Competition Commission.

For the 12 months to June, KAP increased revenue by 9 percent to R14.7 billion. Operating profit before capital items rose 12 percent to R1.5bn.

“Given the prevailing subdued economic conditions in South Africa, considerable progress was made by the business to realign its cost base and operations. These initiatives, coupled with the growth experienced in other African countries, resulted in increased revenue and profits,” Grove said.

Headline earnings from continuing operations improved 21 percent to 34.1c a share, with the gearing ratio improving to 40 percent from 50 percent.

Revenue from KAP’s logistics business, which includes Unitrans Supply Chain Solutions and Unitrans Passenger, increased 10 percent to R7.7bn, while operating profit showed a 11 percent expansion to R762m.

KAP said this division showed a strong commitment to growth in Africa, which was well aligned with the existing customer base.

However, Unitrans Passenger experienced difficult trading conditions, especially in the business sectors where rising fuel prices influenced direct margins. “As the tourism market starts to show gradual signs of recovery, [rand weakness] has probably assisted volumes even further,” Grove said.

The integrated timber business increased operating profit from R347m to R412m, benefiting from a new medium-density fibreboard plant.

“The strategic review and restructuring plans which took place during 2012 and 2013 have continued to yield cost saving benefits during this financial year,” Grove said.

The manufacturing unit, whose products include vehicle components, furniture and bedding products, lifted operating profit to R298m from R276m in the previous year on a 9 percent revenue rise.

The unit benefited from the disposal of two segments: the footwear and food manufacturing divisions.

“We are now focusing on the our Hosaf and Feltex divisions, which we believe are our core units,” Grove said.

During the year, KAP was able to issue R1bn of listed domestic medium-term notes with three-year and five-year maturities, as well as further term debt with maturity between two and seven years.

“We will continue to apply our strategy to focus on core industrial assets in emerging markets. In addition, while the South African economy continues to be challenging, we will continue to focus on efficiency and the cost benefit programme to drive KAP’s growth in the year ahead,” Grove said.

KAP shares gained 3.58 percent to close at R4.05 on the JSE yesterday.


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