KAP (KAP) H2 2024 earnings summary

Executive summary

• Five of six divisions delivered improved results despite challenging macroeconomic conditions, but overall results for the year ended June 2024 were below board expectations due to Safripol's weak performance.

• Major capital projects totaling up to ZAR 2.5 billion were completed on time and within budget, positioning the group for future growth and improved cash flow.

• A ZAR 3 billion revolving credit facility was raised at favorable rates and fully utilized to refinance maturing debt.

• The group managed elevated debt levels and is set to begin reducing debt from FY 2025.

• Safripol's performance was negatively impacted by a cyclical downturn in the global polymers industry.

Financial highlights

• Revenue was ZAR 29.1 billion, down 2% year-over-year, mainly due to Safripol's decline.

• EBITDA was ZAR 3.7 billion, down 8%; operating profit was ZAR 2.3 billion, down 11%.

• Headline EPS was 45.3 cents, down 4%; EPS was 43.8 cents, up 106% due to prior year impairments.

• Free cash flow was nearly flat at -ZAR 79 million after funding all capital expansions from operations.

• No dividend was declared for the year.

Outlook and guidance

• Trading environment expected to remain challenging in the near term, with focus on extracting value from new projects and cautious optimism for the medium term.

• PG Bison's new MDF plant adds 33% capacity, with a four-year ramp-up to full sales.

• Unitrans restructuring aims for a ZAR 300 million operating profit increase and ZAR 700 million EBIT, achievable over FY 2025-2026.

• Safripol expected to remain in a cyclical low through 2026-2027; focus on cost and durable applications.

• Debt reduction targeted for H2 2025 as projects contribute to cash flow, with a target of ZAR 1 billion reduction in FY25.