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Operational and liquidity update
KAP INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1978/000181/06)
JSE alpha code: KAP
(“KAP” or “the Company”)
OPERATIONAL AND LIQUIDITY UPDATE
The operational update, as set out below, provides high level insight into the Company’s
operational performance for the first two months of the FY21 financial year to 31 August 2020.
DIVISIONAL OPERATIONAL REVIEW
The Integrated Timber division has performed well since the start of the financial year with
all facilities running at full capacity. Demand for all products remains robust and the new
products that were launched on a virtual platform during the last quarter of FY20 have been
well received by the market. The division has a firm order book until December 2020 and is
therefore expected to continue to trade well.
The Automotive Components division’s volumes remained subdued due to lower new
vehicle assembly demand for both domestic sales and export volumes. The division has
embarked on extensive restructuring activities in order to right-size its operations for lower
anticipated future automotive assembly and retail sales volumes, which will be completed in
the first quarter of FY21. The cost of this restructure was fully provided for in the FY20 results.
The Integrated Bedding division has performed well since the start of the financial year with
robust demand for its products, allowing its facilities to run at full capacity. The division has a
strong forward order book and is expected to continue to trade well.
The Polymers division has performed well since the start of the financial year with strong
demand for all three polymers produced. Both PET (polyethylene terephthalate) and PP
(polypropylene) margins have shown year on year improvement for the first two months of the
financial year as well as an improvement on the second half FY20 margins. HDPE (high
density polyethylene) margins are weaker than the comparative prior financial year’s first two
months but have shown improvement compared to the second half of FY20. The planned 28
day statutory maintenance shut at the Durban PET facility, together with the planned
debottlenecking process, is progressing according to plan with the plant scheduled to re-
commence operations on 20 September and ramp up to normal capacity by 24 September
2020. Planned inventory levels of PET are sufficient to satisfy current demand during this
period. The division has a strong order book and is expected to continue to trade well.
The Contractual Logistics – South Africa division has performed satisfactorily since the
start of the financial year. Demand and activity levels in the food, mining and chemical sectors
have been good while in the petroleum and general freight sectors demand and activity levels
have been inconsistent. It is expected that demand and associated activity levels will steadily
improve in these sectors as Covid-19 restrictions are further eased.
The Contractual Logistics – Africa division has performed well since the start of the financial
year across all the regions with the exception of Botswana where Covid-19 restrictions and
related border delays are still negatively impacting asset utilisation and efficiency levels. The
performance of this operation will improve as Covid-19 restrictions are further relaxed. The
recent contract renewals and new contracts secured have been fully implemented and are
operating well.
The Passenger Transport division has performed satisfactorily since the start of the financial
year. The commuter, personnel, Gautrain and Mozambique operations, all of which are
contractual in nature, have remained stable. However, the intercity and tourism sectors remain
severely impacted by the Covid-19 restrictions. A disposal process has been re-initiated in
relation to the division’s intercity and tourism operations.
FINANCIAL AND LIQUIDITY REVIEW
The Company’s financial and cash-flow forecasts continue to indicate that it will remain within
its existing banking facilities and relevant financial covenant ratios, with net debt forecasted to
decrease year on year by approximately R1 billion at 30 June 2021. These forecasts are after
taking into account R1.4 – R1.7 billion expected to be spent on replacement and organic
expansion capital projects.
The Company settled a R500 million listed corporate bond, KAP010, on maturity on
15 September 2020 from existing banking facilities as planned.
OUTLOOK
Although the current situation remains uncertain, management are cautiously optimistic of a
continued economic recovery.
By order of the Board
KAP Secretarial Services Proprietary Limited
Stellenbosch
15 September 2020
Debt Sponsor
Nedbank Corporate and Investment Banking
Date: 15-09-2020 05:05:00
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