Buses lined up from Mega Express, a Unitrans company. Picture: Dumisani Dube / Independent Newspapers
KAP continued to experience a subdued operating environment in the first five months of its financial year to November 30, the group with industrial, chemical and logistics divisions said in an operational update yesterday.
“While positive sentiment following the formation of the Government of National Unity and the anticipated benefits of the Two-Pot retirement system, reduced levels of load shedding, lower inflation, and easing of interest rates is encouraging, it is yet to filter through to the group’s trading,” the group said.
Group revenue grew over the five-month period, mainly through increased production capacity and market share gains, the group directors said.
Performance was negatively affected by increased operating costs on the start-up of PG Bison’s new medium-density fibreboard (MDF) line.
There were also increased finance costs, which were capitalised in the construction phase of major capital projects. Lower vehicle production by two major original equipment manufacturers also resulted in a weaker performance by Feltex.
“We expect the impact of the above items to ease from the second half as utilisation of the MDF line improves and vehicle production recovers,” the directors said.
PG Bison successfully started its new R2 billion MDF line in Mkhondo, completing the project. Due to the stop-start nature of the ramp-up, utilisation of the line was only 60% over the period.
“We anticipate it will take about four years to sell the full capacity through a combination of domestic and export sales. The division is making progress in this regard, and the prospects for the line and division remain positive,” KAP’s directors said.
Revenue improved due to a 50% combined increase in MDF domestic and export sales volumes, primarily attributable to the higher MDF production. The increased revenue resulted in higher net working capital.
Operating profit fell as the depreciation and running costs of the new line were absorbed, with utilisation not yet optimal due to the ramp-up, and the increased MDF exports were at lower margins.
Safripol increased revenue and operating profit, largely because of higher production and sales volumes, with prior period volumes affected by production constraints at the Sasolburg plants, including a transformer failure and electricity supply disruptions, and a five-week commercial shutdown at the Durban plant.
Indexed polymer raw material margins were stable but remained low due to global industry overcapacity and subdued global demand.
Unitrans lifted operating profit and returns, off lower revenue and a smaller fleet. The division completed an organisational redesign in November, which was expected to enhance the improvements and cost savings delivered during its restructuring in the 2023/24 financial year.
Feltex encountered a challenging trading due to “meaningfully lower” vehicle production by two major Original Equipment Manufacturers (OEM) customers, which KAP believed to be temporary.
One OEM went through a key model changeover, and another faced technical-related production disruptions. The division’s revenue was therefore lower, and as a result, operating profit notably declined.
Restonic improved revenue and operating profit in a subdued bedding and furniture market, primarily from growth in sales of bedding units as the division continues to gain market share, improved production efficiencies, and good cost control.
Optix remained focused on growing its subscriber base and product and infrastructure development to scale the business, which contributed to higher revenue but lower operating profit.
At Unitrans, with the conclusion of restructuring and organisational redesign, a R300 million improvement in operating profit was targeted for the division. The interim results were expected to be published on February 27 next year.
BUSINESS REPORT