Industrial, chemicals and logistics group KAP has flagged lower profits in its next annual results with two months left to go in its financial year, following lower sales as load-shedding dampened demand for its products.
“Against this demanding backdrop, the group delivered a performance that was below our expectations as both the detrimental impact of load-shedding on customers’ operations and the softening of domestic consumer demand were greater than anticipated, particularly towards the end of the period,” the company, valued at R7.1bn on the JSE, said in an update for the 10 months to end-April.
As a result, the group which manufactures products such as automotive components, mattresses, chemicals, polymers and timber items, now expects headline earnings per share (a common profit measure for local companies) for continuing operations to decrease 30% to 52.1c and earnings per share from continuing operations by a similar margin to 49.2c.
Rising interest rates, high inflation and lower consumer confidence also weighed on the performance of the group, which owns wood panels manufacturer PG Bison, mattress manufacturer Restonic, trucking group Unitrans; car seat manufacturer Feltex and plastic and polymers maker Safripol.
Apart from the disruption caused by power cuts, they also resulted in extra wear and tear and damage to equipment as the group contended with increased raw-material costs and selling prices.
To offset its reliance on the domestic market, KAP is exploring new export markets for its products in Europe, increasing selling prices, reducing costs and improving operational efficiency and cutting non-essential capital expenditure.
CEO Gary Chaplin told Business Day in February that new export markets “can allow us to continue to run our production and export products” as it sees opportunities open in some European markets.
To mitigate the effect of the energy crisis at Eskom, the group built a 10MW photovoltaic (PV) plant at its Safripol Sasolburg site in November, has started with the construction of a 5MW PV plant at its PG Bison Boksburg site and an 11MW PV plant at Mkhondo, to address its energy consumption of about 90MW.
The company’s annual results are expected to be published on August 30.
With Michelle Gumede
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