Our opinion on the current state of KAPKAP International Holdings (KAP) is a diversified industrial company that produces and markets timber, chemicals (PET and related chemicals), bedding, and car parts. It also has a logistics division.
The acquisitions of Safripol and Hosaf were integrated into a polymers business under the Safripol name. The bedding division showed strong growth with new investment in infrastructure and manufacturing capability. Growth in the automotive parts division was muted.
This company was 43% owned by Steinhoff, which has now divested completely. The renewal of the government's Automotive Production and Development Programme (APDP) until 2035 will be a boost for KAP's parts manufacturing business.
The timber division is ramping up after the lockdown, and demand for its products has remained buoyant. The automotive components division was severely impacted, and the post-lockdown recommencement has been slow. The bedding division was able to operate through the lockdown with strong demand for medical and agricultural needs. Polymers also operated throughout the lockdown.
In a report on 20th April 2022 into the flooding in Natal, the company said, "The Company’s operations in the region have experienced some temporary operational and supply chain disruptions, which are in the process of being resolved."
In its results for the year to 30th June 2024, the company reported revenue down 2% and headline earnings per share (HEPS) down 4%. The company's net asset value (NAV) increased by 7% to 500c per share.
The company said, "...operating profit before depreciation, amortisation and capital items (‘EBITDA’) decreased by 8% to R3 694 million (2023: R4 020 million), while operating profit before capital items decreased by 11% to R2 250 million (2023: R2 523 million) for the year, with the decline mostly attributable to Safripol."
In an operational update on the five months to 30th November 2024, the company reported increased operating costs and finance costs.
The company said, "Revenue improved due to a c. 50% combined increase in MDF domestic and export sales volumes, primarily attributable to the higher MDF production."
In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 19% and 23%.
Technically, the share has been falling since September 2024, and we recommend waiting for it to break up through its downward trendline before investigating further.
Obviously, the logistics problems at Transnet have been having an impact. We think it may represent good value at current levels, but it is volatile.
