Industrial group KAP has grown revenue mainly through increased production capacity and market share gains, but its performance was negatively affected by several items.
Among these, most of which were anticipated, were increased operating costs related to the start-up and ramp-up of PG Bison’s new medium-density fibreboard (MDF) line and increased finance costs which were capitalised during the construction phase of the group's major capital projects, including the MDF line.
It was also affected by lower vehicle production by two major original equipment manufacturers (OEMs), which resulted in a weaker performance by Feltex, it said in an operational update for the five months through November.
“We expect the impact of the above items to ease from the second half of the financial year as utilisation of the MDF line improves and vehicle production recovers,” KAP said.
While KAP continued to experience a generally subdued operating environment, the positive sentiment after the formation of the government of national unity and the anticipated benefits pertaining to the two-pot retirement system, reduced load-shedding, lower inflation and easing of interest rates was encouraging. However these factors were yet to filter through to the group's trading, it said.
PG Bison successfully started and ramped up its new R2bn MDF line in Mkhondo to test its full rated capacity, effectively completing the project. Due to the stop-start nature of the ramp-up, utilisation of the line was only about 60% over the period.
“While the line can be operated at its rated capacity, we anticipate that it will take approximately four years to sell the full capacity through a combination of domestic and export sales. The division is making progress in this regard and the prospects for the line and division remain positive,” KAP said.
Safripol delivered an increase in revenue and operating profit, largely because of higher production and sales volumes, while Unitrans showed an improvement in operating profit and returns, off lower revenue and a smaller fleet size.
The division completed an organisational redesign in November, which KAP expects will enhance the improvements and cost savings delivered during its restructuring in financial year 2023/24.
Restonic improved revenue and operating profit in a subdued bedding and furniture market, mainly due to growth in sales of bedding units as the division continues to gain market share, improved production efficiencies and good cost control. Optix remained focused on growing its subscriber base and product and infrastructure development to scale the business, which contributed to higher revenue but lower operating profit, KAP said.
KAP said it expected to release its interim results on February 27.
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