KAP awaits empowerment nod

• Competition Tribunal set to approve BEE stake deal in Unitrans division

Diversified industrial group KAP Industrial hopes to implement its BEE transaction at the beginning of September after the Competition Commission recommended its approval, CEO Gary Chaplin said on Tuesday.

In terms of the empowerment deal, Sakhumzi Foundation Empowerment Trust and the FWG Pieters Trust will each buy a stake of 22% and 23% respectively in KAP subsidiary Unitrans Supply Chain Solutions, for a total of R1.2bn.

Unitrans houses KAP’s SA contractual logistics and supply chain operations. Unitrans services the petroleum, chemical, mining, cement, food and general freight sectors.

Speaking after the release of the company’s results for the year ended June 30, Chaplin said the commission had recommended that the Competition Tribunal approve the deal. The tribunal is set to consider the transaction next week, he said.

“We do not anticipate any problems. Hopefully, we will implement the deal on September 1,” he said.

This comes as the group looks to improve the fortunes of its logistics business in the new financial year.

Despite the company reporting a 16% increase in revenue from continuing operations at full-year, Chaplin said KAP’s logistics business had struggled. The second half of the year was particularly challenging, he said.

The group’s operating profit before capital items from continuing operations was up 15% to R2.9bn, while cash generated from operations increased 12% to R3.3bn.

“It has been a particularly challenging year. However, we have remained focused on the execution of our strategy, the outcome of which is reflected in our financial and operational results. The cash generation of the business was particularly pleasing,” Chaplin said.

He said during the course of the year, the company completed several major projects, which positioned it well for future growth. These included the R1.3bn expansion to its polyethylene terephthalate facility in Durban, following the R4bn acquisition of Safripol, the manufacturer of polypropylene and high-density polyethylene.

Avior Capital Markets analyst Mark Hodgson said there were no major surprises in the results. “It was pretty much expected. Chemicals and industrials looked good. There was a weak performance from the logistics business though.”

Meanwhile, KAP Industrial does not know how long Steinhoff International is going to hold on to the 26% interest in the diversified industrial group, Chaplin said.

Since news of Steinhoff’s fraud scandal in December 2017, KAP, a supplier of industrial products such as timber, chemicals and car parts, has been creating distance between itself and its biggest shareholder. As its financial woes mounted, in March, Steinhoff raised almost R3.7bn through an accelerated bookbuild of up to 450 million ordinary shares in KAP at a price of R8.15 a share, reducing its stake in KAP to 26% from 43%. This was a bid to shore up its balance sheet and to settle debt.

Chaplin said further reduction in the stake depended on Steinhoff. “We have asked that question and we do not know. We asked about their plans because that is what we get asked as well.”

He downplayed the effect of Steinhoff’s troubles on the company. While Steinhoff remained a major shareholder, KAP was an independently managed, controlled and funded entity, Chaplin said.

KAP’s shares closed 3.68% higher at R7.33.