Industrial group KAP expects to report lower full-year earnings as trading conditions remained challenging.
The group said in an operational update on Tuesday that headline earnings per share (HEPS) for the year to end-June were expected to decrease by more than 30% from a year ago. The group reported HEPS of 45.3c a year ago.
At the interim stage the group flagged increased operating costs related to the launch and ramp-up of PG Bison’s new medium-density fibreboard (MDF) line, higher finance costs and lower vehicle production by two major original equipment manufacturers, which resulted in a weaker performance from Feltex.
While the effects of these issues eased in the second half as utilisation of the MDF line improved and vehicle production strengthened, trading conditions had remained challenging, the group said.
It cited the delay in approving the national budget, the resultant instability of the government of national unity (GNU), the potential negative effects of the US’s tariff war and April being a particularly weak month due to the limited trading days as issues that affected performance.
“In this context, the group delivered a modest growth in revenue, a reduction in ebitda [earnings before interest, taxes, depreciation and amortisation], a decline in operating profit and meaningfully lower earnings during the period,” the group said. referring to the 11 months to end-May.
The group said while net debt reduction remained a key focus, progress against its net debt reduction target was below expectation, mainly due to lower-than-expected ebitda.
The company successfully raised R1.6bn at favourable rates to refinance maturing debt and expected to remain within financial covenants, it said.
KAP will release its annual results at the end of August.
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