Our opinion on the current state of KAP

KAP International Holdings (KAP) is a diversified industrial company which 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 has been 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 2023 the company reported revenue up 6% and headline earnings per share (HEPS) down 43%. The company said, "These factors affected the group’s performance during the year: • lower domestic sales volumes, as the frequency of loadshedding beyond Stage 4 contributed to lower customer and consumer demand; • increased export sales at lower margins required to normalise inventories; • equipment damage due to unplanned infrastructure disruptions; and • increased finance costs.". In a trading statement for the six months to 31st December 2023 the company forecasts that HEPS will fall by between 6,2c and 24,8c per share which is more than 20%. Technically, the share made a low of 127c in March 2020 and was trending up until April 2022. Since then it has been falling. Obviously, the increased loadshedding is having an impact. We think it may represent good value at current levels.