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Operational Update And Trading Statement
KAP INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1978/000181/06)
Share code: KAP
ISIN: ZAE000171963
(“KAP” or “the Company”)
OPERATIONAL UPDATE AND TRADING STATEMENT
The Company’s executive directors will be attending an investor conference on
19 November 2021 and in anticipation of this, the following operational update provides
guidance to the Company’s operational performance for the first four months of the 2022
financial year to 31 October 2021 (‘period’).
OPERATIONAL UPDATE
The Company’s overall performance over the period has been pleasing. The divisional
performances have been mixed, primarily due to the challenges presented by the social unrest
in July 2021, global supply chain disruptions and increases in certain raw material prices.
PG Bison (Integrated Timber) performed well throughout the period with strong demand for its
full range of products, which enabled all production facilities to operate at full capacity.
The division was successful in implementing a price increase and has a full order book through
31 December 2021. The eMkhondo (Piet Retief) particleboard plant expansion is progressing
well and will be commissioned in February 2022. The expansion will add an additional 18%
particleboard production capacity.
Restonic (Integrated Bedding) has experienced softer retail demand during the period
following the social unrest that occurred in KZN and Gauteng in July 2021. These events
severely disrupted retail supply chains which further hampered sales. The division
experienced abnormal increases in key raw material prices, which have negatively impacted
margins, since the increases could not be passed onto customers timeously. The division has
a healthy order book up to 31 December 2021 and is well prepared to take advantage of the
upcoming Black Friday and Christmas trading peaks.
Feltex (Automotive Components) experienced significant volume-related volatility and
generally reduced volumes during the period, due to the impact of the global shortage of
semiconductor chips and the social unrest, both of which have affected the entire automotive
industry. The division also encountered technical challenges with the start-up of its component
production for the new Mercedes C-Class, which resulted in additional costs being incurred.
These challenges have since been largely resolved.
Safripol (Polymers) performed well for the period with strong demand for all three polymers
and healthy margins. The disruption in global supply chains continued to support local
production and sales. All three plants operated at full available capacity.
PET HDPE PP
Period Period Period Period Period Period
FY21 FY20 FY21 FY20 FY21 FY20
Sales volumes (tonnes) 73 378 60 698 47 812 60 864 41 926 39 684
Production volumes (tonnes) 64 467 43 075 47 244 55 775 41 632 42 280
Average R/USD exchange 14.68 16.79 14.68 16.79 14.68 16.79
PET – Polyethylene terephthalate | HDPE – High density polyethylene | PP – Polypropylene
Period refers to four months from 1 July to 31 October.
PET market share was gained during the period, which supported increased sales volumes.
PET margins remained at healthy levels. HDPE production volumes were unfortunately
impacted by a temporary constraint in a key raw material supply. HDPE sales demand
remained strong and margins improved following the renegotiation of key terms of raw material
supply. PP sales demand remained strong and margins continued to show healthy
improvement.
Raw material Raw material
margin variance margin variance
Period FY22 vs Period FY22 vs
Period FY21# 2H21*
PET 9% (7%)
HDPE 25% 29%
PP 45% 24%
# - Four months ended 31 October 2021 compared to the four months ended 31 October 2020.
* - Four months ended 31 October 2021 compared to the six months ended 30 June 2021.
Unitrans (Contractual Logistics)
The South African division has performed well in most sectors, except for general freight and
cement, where operations remain subdued. The division’s continued focus on operational
efficiencies and asset utilisation during the period has supported margins and facilitated
continued contract renewals and new contract wins. The Rest-of-Africa division encountered
challenging trading conditions with lower sugar volumes, leading to an early close of their
agriculture season, and ongoing political unrest in Eswatini. Road-freight operations started to
show improvement post the relaxation of the state of emergency in Botswana. Mining operations
continued to perform well. The Passenger Transport division produced a disappointing performance
for the period due to rate and capacity disputes on two major contracts. The remaining operations
remained stable.
Balance Sheet
The Company’s balance sheet remains healthy. Debt serviceability ratios remain well within
financial covenants and the Company successfully refinanced maturing debt at improved
margins.
TRADING STATEMENT
In terms of the JSE Limited Listings Requirements, a listed company is required to publish a
trading statement once it is satisfied that a reasonable degree of certainty exists that financial
results for the next period to be reported on will differ by at least 20% from the financial results
for the previous corresponding period.
Even though there are two months remaining to report on before half-year end at
31 December 2021 (‘1H22’), a reasonable degree of certainty exists that the Company’s
earnings will increase by more than 20% compared to the previous corresponding period.
Headline earnings per share (‘HEPS’) is expected to increase by a minimum of 4.1 cents to at
least 24.7 cents (1H21: 20.6 cents) and Earnings per share (‘EPS’) is expected to increase by
a minimum of 4.4 cents to at least 26.5 cents (1H21: 22.1 cents).
A further trading statement will be issued in terms of the JSE Listings Requirements when a
reasonable degree of certainty exists as to the likely range of the expected increase in EPS
and HEPS compared to the previous corresponding period.
Shareholders are advised that the information in this announcement has not been audited,
reviewed or otherwise reported on by the Company’s external auditors.
By order of the Board
KAP Secretarial Services Proprietary Limited
Stellenbosch
19 November 2021
Sponsor
PSG Capital
Date: 19-11-2021 08:00:00
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