Strong product demand helps KAP amid Covid uncertainty

KAP INDUSTRIAL Holdings said yesterday it continued to see strong market demand for its products, despite the uncertainty created by the Covid-19 outbreak, and it remained confident that it would continue to perform well into 2021.

KAP operates a number of divisions in its portfolio, which include integrated timber, automotive components, integrated bedding, polymers, contractual logistics in South Africa and Africa, and passenger transport.

The group said in an operational update for the 11 months to the end of May that while Covid-19 would continue to evolve and present unprecedented social and economic challenges and uncertainty, their employees and business model had proved to be agile and resilient during the period.

“We are focused on a number of strategic initiatives in order to provide revenue growth, margin improvement and improved returns beyond 2021,” the group said.

In the integrated timber division, the group said it had continued to perform well, with strong demand for its products, supported by increased home-related consumer spend, particularly in the value-added product category of decorative panels, which supported revenue and margin growth.

“We operated all of our production facilities at full available capacity throughout the period. The scheduled annual maintenance shutdowns at our Boksburg medium-density fibreboard and Ugie particleboard plants will be completed during June 2021 as planned.”

KAP was able to fulfil their order book from inventory and maintain its market share in the division during the shutdowns.

“Our forward order book remains strong. The particleboard expansion project at our eMkhondo production facility is progressing well and remains on schedule for commissioning during January 2022, thereby increasing our total production capacity,” the group said.

In the automotive components division,

KAP continued to experience an improvement in activity levels during the second half of the year, although it was still below pre-Covid-19 levels.

Its new vehicle assembly volumes increased by 8 percent, while new vehicle sales, passenger and light commercial vehicles, in South Africa decreased by 1 percent compared to the previous period.

The group said the division was restructured during the period in line with lower industry activity, which has contributed to improved margins. “We are well prepared for a significant new model introduction and related increased activity levels due to commence in July 2021,” the group said.

The contractual logistics South Africa division performed well during the period, even though general economic activity levels remained subdued in the country, but the group said it had shown improvement in most sectors in which it operated.

The contractual logistics Africa division reported sufficient growth in some markets in the continent, but it was offset by the continued poor performance of its fuel distribution activities in Botswana.

“Botswana still remains in a state of emergency due to Covid-19 and, as a result, these fuel distribution activities are being restructured within a broader road freight strategy, which will better utilise available resources in future,” KAP said.

KAP’s shares closed 3.74 percent higher at R4.16 on the JSE yesterday.