Poised for growth

Finweek English Edition - - Kap international -

THE LATEST 12-MONTH re­view of KAP In­ter­na­tional Hold­ings’ fi­nan­cial re­sults to end-De­cem­ber 2006 paints a pic­ture of a group that has truly hit its stride. Op­er­a­tional prof­its moved up 12% to R255,8m for the pe­riod, on the back of a 15% rise in rev­enue to R3,42bn, re­flect­ing im­proved trad­ing con­di­tions and strong or­ganic growth.

Paul Schouten, group CEO, says that he an­tic­i­pates sus­tained growth over the next three to four years. “Our busi­nesses have ex­cel­lent or­ganic growth prospects for the next 18 months, as they sup­ply strongly grow­ing lo­cal mar­kets such as the au­to­mo­bile, plas­tic, con­struc­tion and re­tail sec­tors. Strate­gic ex­pan­sion ini­tia­tives are un­der way for both the lo­cal and ex­port mar­kets.”

On top of this, Schouten adds, the group is still on the look-out for pru­dent ac­qui­si­tions that will have syn­er­gies with and add value to KAP’s ex­ist­ing op­er­a­tions.

KAP’s bal­ance sheet also tells a heart­en­ing story, with the debt-to-eq­uity ra­tio mov­ing to 20,5% from 22,1% in 2005, and op­er­at­ing cash flow ris­ing 67% to R184,5m. Mean­while, cap­i­tal ex­pen­di­ture for the 12 months amounted to R126,7m, of which R80,2m was spent to gear up to sup­ply the new Toy­ota Corolla and Mercedes Benz C-Class cars.

Dur­ing the year, the group ac­quired loose-lay car­pet man­u­fac­turer Car­avelle Car­pets for R23m, for which KAP plans to pur­sue ag­gres­sive ex­port ini­tia­tives in con­junc­tion with Fel­tex Au­to­mo­tive. At the same time, the R22,5m Fel­tex joint ven­ture with Aus­tralian car­pet pro­ducer Fu­turis places Fel­tex strongly to sup­ply crit­i­cal prod­ucts to orig­i­nal equip­ment man­u­fac­tur­ers across the au­to­mo­tive sec­tor.

KAP also re­cently an­nounced – sub­ject to Com­pe­ti­tion Com­mis­sion ap­proval and the suc­cess­ful com­ple­tion of a due dili­gence – the pur­chase of a 60% stake in Bren­ner Mills (Pty) Ltd for R18m. The milling busi­ness will sup­ply feed to Bull Brand and also has good syn­er­gies with its dis­tri­bu­tion chan­nels.

The leather busi­ness was the only KAP op­er­a­tion that didn’t meet its tar­gets, which Schouten at­tributes largely to a rise in hide prices. “We’ve a cor­rec­tive ac­tion plan in place and we ex­pect the busi­ness to per­form sub­stan­tially bet­ter in 2007.” The in­dus­trial footwear busi­nesses of Wayne Plas­tics and United Fram posted good re­sults for the 12 months as a re­sult of strong brand per­for­mance and in­creased ac­tiv­ity in their tar­get mar­kets. “The se­cu­rity, min­ing and con­struc­tion in­dus­tries are all grow­ing very quickly. Wayne Plas­tics, which makes gum­boots, can’t keep up with or­ders, they’re com­ing in so quickly. We will be in­creas­ing ca­pac­ity at Wayne, which should make it one of the world’s largest PVC gum­boot man­u­fac­tur­ers.”

Hosaf Fi­bres, which man­u­fac­tures and dis­trib­utes poly­eth­yl­ene tereph­tha­late (PET) resin for the bot­tle and pack­ag­ing mar­kets, also pro­duced firm re­sults, with rev­enue ris­ing 16,8% to R828m on the back of higher com­mod­ity prices and im­proved plant through­put, which saw ca­pac­ity ex­pand by 10%.

“The de­mand for PET in SA has been grow­ing at 10% an­nu­ally and we see no signs of a slow­down,” notes Schouten. “This means a dou­bling of the mar­ket over the next decade, and we’re well po­si­tioned to ex­pand ca­pac­ity to meet this de­mand.”

In its con­sumer di­vi­sion, Bull Brand Foods, pro­ducer of pop­u­lar canned meat brands in­clud­ing Sams, Apex, Speke­nam and Gants, pro­duced a sat­is­fac­tory per­for­mance as rev­enue grew 21,3% to R881m. Schouten says the re­sults were boosted by very high meat prices dur­ing most of the pe­riod as well as bet­ter ef­fi­cien­cies in feed lots,

Footwear man­u­fac­turer and im­porter Jor­dan & Co also recorded com­mend­able re­sults af­ter ex­pand­ing its ranges over the pe­riod, par­tic­u­larly with its own-man­u­fac­tured brands Jor­dan, Bronx and Olympic, and the ex­pan­sion of its op­er­a­tions into women’s footwear and house-brand leather prod­ucts.

Fi­nally, Glo­d­ina reached the R200m turnover mark for the first time on the back of strong con­sumer de­mand. The tow­elling man­u­fac­turer also in­creased its mar­gins from al­ready-high lev­els through its on­go­ing drive to re­duce costs. “Glo­d­ina is look­ing at fur­ther growth op­por­tu­ni­ties in the hos­pi­tal­ity sec­tor, as well as ex­pand­ing its fac­tory out­lets,” says Schouten. “Fu­ture growth should also be spurred by the con­tin­ued store ex­pan­sion of the coun­try’s ma­jor re­tail­ers.”


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