A dynamic conglomerate is taking shape is Stellenbosch as KAP Industrial’s operational cogs begin to spin cash. KAP was initially the brain-child of Western Cape-based German investor Claas Daun, but has since fallen under the influence of his good friend Markus Jooste via Steinhoff International (which now controls KAP.)

There has been some operational tinkering under Steinhoff – which introduced logistics, transport and timber to KAP’s existing mix of chemicals (mainly resins used for plastic bottling,) automotive component engineering and furniture component manufacturing. KAP has also cut away its more marginal businesses, selling off its footwear operations and its food manufacturing interests (Bull Brand being sold to Rhodes Food Group, which features elsewhere in this edition.)

This means – as new CEO Gary Chaplin – pointed out – that KAP is backing established businesses that provide high barriers to entry and generate good quality earnings off solid margins and strong cash generation.

In the half-year to end December KAP generated over R8bn in turnover, which suggests the group will comfortably surpass the R16bn revenue mark for the full financial year. More impressive, though, was that the 8% gain in revenue was translated into a resounding 19% increase in earnings to R444m. It seems KAP fired on all cylinders in the interim trading period. Chaplin reported that the Diversified Logistics Division increased revenue by 6% to

R4,2bn in a competitive market within a subdued economic environment. He said the restructure of Unitrans Supply Chain Solutions (USCS) resulted in cost savings and efficiencies that protected margins. But he noted the reduction in fuel prices had little effect on the contractual logistics business as these reductions are contractually passed on to customers. But Chaplin indicated that the Passenger Division benefited from the reduction in fuel price in the intercity and tourism markets.

He noted that in the Freight and Logistics Division there were improved volumes in the Foods, Industrial and Freight Forwarding operations, which offset a poor performance in the furniture sector. Chaplin highlighted an improved performance was produced by the Fresh Freight operation.

In the diversified industrial hub, Chaplin pointed out that the timber and manufacturing businesses were combined into a single focused industrial business in order to better align skills and extract group efficiencies. He said there was solid growth in revenue and margins across this segment – but this was offset by poor results in the furniture components business. Chaplin said the Integrated Timber Division (PG Bison) delivered solid revenue and operating profit growth.

He said KAP’s Chemical Division (Hosaf and Woodchem) delivered strong growth in revenue and operating profit.

“Woodchem volumes increased over the comparative period due to market share gains, while Hosaf increased its sales volumes in line with market growth.”

Feltex Automotive delivered strong growth in revenue and operating profit, with vehicle build volumes increasing. Chaplin said automation initiatives and efficiency improvement programs continued during the period.

While the furniture components division came under operational pressure, it does seem that KAP remains enamoured with this market niche.

Chaplin disclosed that KAP had concluded the acquisition of Restonic, giving KAP a chance to create a fully integrated bedding business in Africa.

It seems KAP – despite plenty organic growth potential on hand – will also be on the look out for new opportunities to add to its heady operational mix. Chaplin confirmed the company was keen for bolt-on acquisition opportunities.