The market on Thursday welcomed the interim results of KAP, the South African industrial, chemical, and logistics group, even as a R2.5 billion capital expenditure push to drive future growth exerted pressure on its performance for the six months ended December 31, 2024.
The shares soared 9.6% to R2.74 by midday on the JSE on Thursday.
CEO Gary Chaplin, presenting the results, framed the period as a pivotal moment for the group.
“Looking at the results in context, we've completed a major capex cycle, R2.5 billion over and above our normal capex. There were no material delays or overspends in this, and all those projects are fully operational within the six months,” he said
“The balance sheet is intact. We are ramping up the sales, and there's an obvious impact on our results. I'm satisfied with the results for this six-month period.”
Headline earnings per share fell 21% to 17.2 cents and operating profit before capital items declined 8% to R1.2bn. However, revenue edged up 2% to R15.4bn.
The capex was headlined by PG Bison’s R2bn new medium-density fibreboard (MDF) line at the Mkhondo facility, which increased in total capacity by 33%.
Chaplin said the rationale was to consolidate PG Bison as the leading producer of wood-based decorative panels in Africa as well as to service a growing demand for MDF both domestic and Africa and export opportunities.
“We have given ourselves four years to sell at full capacity,” he said.
Chaplin said the capex spend on MDF has positioned KAP for long-term growth, but he ramp-up phase has squeezed near-term profitability, with Ebitda down 4% to R1.9bn and cash from operations falling 18% to R649 million.
Net interest-bearing debt remained stable at R9.3bn, supported by a 71% cut in expansion capex to R314m, while net working capital rose 8% to R4.2bn KAP said with the major capital projects now complete, it is targeting a R1bn reduction in net debt from the second half of 2025 into 2026.
No interim dividend was declared, reflecting a cautious stance amid deleveraging priorities and an uncertain macro outlook.
Chaplin was more optimistic of South Africa’s prospects under the Government of National Unity, citing easing inflation, interest rates, and the end of loadshedding as tailwinds yet to fully translate into trading gains.
“It’s not yet filtering through to trading activity, but we believe it will come,” he added, though he noted the operating environment remained “depressed” for now.
The capex impact was most evident at PG Bison, where revenue rose 5% on a 68% surge in MDF sales volumes, yet operating profit fell 28% due to ramp-up costs and suboptimal utilisation.
Safripol, however, shone with a 10% revenue increase and 58% profit growth, driven by a R402m HDPE project.
Unitrans, post-redesign, lifted operating profit 22% despite a 2% revenue dip, while Sleep Group (formerly Restonic) posted a 3% revenue rise and 12% profit gain.
Feltex lagged, with profits down 69% amid a 19% drop in vehicle assembly volumes.
Frans Olivier, the chief financial officer, underscored balance sheet resilience, with net debt to equity easing to 72% from 77% and net asset value per share up 8% to 518 cents.
“We expect the cash conversion ratio to normalise towards year-end, targeting above 90%,” he said, flagging a planned R1bn debt reduction in 2025.
Looking ahead, Chaplin said: “We’re well-positioned to grow market share over the medium term at a time when many competitors haven’t been investing.”
With the capex cycle done, KAP said its focus is on value extraction, fixing underperformers like Unitrans, and deleveraging.
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