Industrial and logistics company KAP posted robust results for the 2015 financial year, ended June 30, including reducing its debt-to- equity ratio from 40% to 27%, in a tough and competitive environment.

The board and management are “comfortable” with the streamlined structure and performance of the business, says KAP CEO Gary Chaplin.

Revenue grew by 8% to R15.66-billion and headline earnings by 21% to R969-million. KAP further declared a dividend of 15c a share, up from 12c a share in the prior financial year, while the net asset value a share increased 12% to 320c.

“From a strategic perspective, we have completed most of the corporate restructuring and are comfortable with the business, the divisions, how they are performing and their growth prospects,” says Chaplin.

KAP’s strategy is to pursue the sustainable growth of the group, its businesses and the markets they operate in by ensuring sustainable earnings through diversity in the business, sustainable margins through specialisation and operating in high-barrier-to-entry markets, as well as leveraging its Southern and East African base for further growth in the rest of Africa.

Chaplin notes that KAP’s Diversified Logistics division will provide a broader range of services in the countries where the division is already present, namely Zambia, Mozambique, Botswana, Malawi, Tanzania and Namibia.

The Diversified Logistics division’s specialised warehousing and food and agricultural logistics services are predominantly Africa-focused currently, and Chaplin foresees potential to expand the company’s passenger transport services within these countries.

“In Zambia, we are already providing fuel, mining and food logistics services, and there are opportunities for passenger transport in the country. The structure and strategy of the company enable it to leverage its existing footprint to grow the business.”

Further, Chaplin highlights the success of its Mozambique personnel transport contract, saying that the new business exceeded expectations and had already signed a second contract.

The company’s revenue exposure within Africa is 30%, and KAP aims to grow this, but Chaplin notes that the company has no undue revenue concentration risks, owing to its diversification.

All the company’s businesses performed well and the company announced expansion projects for some of its industrial businesses on the back of the highly successful technology upgrade of its medium-density fibreboard (MDF) plant in Boksburg, Ekurhuleni. The upgrades and expansion of this plant resulted in 17% reduced raw materials costs and 40% lower overhead costs, owing to capacity increases.

The board approved a gloss line to be added to the MDF plant, which will be commissioned next year. The company will also expand and upgrade its Piet Retief particle plant in phases, similar to the expansion and upgrade of its MDF plant. Management is excited about the latest continuous press technology, which will lead to raw materials and efficiency benefits similar to those realised in the MDF plant.

Also approved was a R700-million expansion at the company’s polyethylene terephthalate producer, Hosaf, which would raise capacity from 128 000 t/y to 240 000 t/y.