Kap Limited · JSE:KAP
Kap — FY2024 Earnings Presentation
38 slides from Kap's earnings presentation, September 2024
Slide 1: Audited Results for the Year Ended 30 June 2024
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 2: Agenda
AGENDA INTRODUCTION Patrick Quarmby OPERATIONAL REVIEW Gary Chaplin FINANCIAL REVIEW Frans Olivier GROUP OUTLOOK Gary Chaplin Q&A Gary Chaplin/Frans Olivier 2 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 3: Introduction
INTRODUCTION PATRICK QUARMBY INDEPENDENT NON-EXECUTIVE CHAIRPERSON AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 4: Operational Review
OPERATIONAL REVIEW GARY CHAPLIN CHIEF EXECUTIVE OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 5: Key Takeaways from the FY24 Results
KEY TAKEAWAYS FROM THE FY24 RESULTS Operating environment • Domestic macroeconomic and operating environment remained challenging • Elevated inflation and interest rates negatively affected consumer demand • Infrastructure disruptions increased operational complexity Highlights • Five of six div
Slide 6: Group Revenue Analysis
GROUP REVENUE ANALYSIS 2 500 (Rm) 8% (10%) 2 000 29 628 1 500 14% 29 062 8% (4%) 14% 1 000 500 0 FY23 PG Bison Safripol Unitrans Feltex Restonic Optix FY24 Percentages stated represent the divisional growth in revenue 6 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 7: Group Operating Profit Analysis
GROUP OPERATING PROFIT ANALYSIS 1 050 (Rm) 7% (62%) 2 523 700 89% 100% 2 250 17% 32% 350 0 FY23* PG Bison Safripol Unitrans Feltex Restonic Optix FY24 * Restated Percentages stated represent the divisional growth in operating profit 7 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 8: Segmental Analysis
SEGMENTAL ANALYSIS Revenue^ PG Bison – 19% PG Bison – 18% Safripol – 31% Safripol – 34% Unitrans – 33% Unitrans – 33% FY24 FY23# Feltex – 9% Feltex – 8% Restonic – 6% Restonic – 5% Optix – 2% Optix – 2% Operating profit PG Bison – 43% PG Bison – 37% Safripol – 16% Safripol – 36% Unitrans – 23% Unitr
Slide 9: PG Bison
PG BISON Good performance supported by increased value-add sales • Sales volumes relatively stable despite subdued economic environment • Good domestic demand for value-add particleboard and medium-density fibreboard (‘MDF’), Revenue with MDF demand outstripping available supply R5 758 million • Val
Slide 10: PG Bison MDF Project
PG BISON MDF PROJECT Completion of a major milestone presents meaningful future growth opportunities Project scope • 274 000 m3 new MDF line at Mkhondo facility (33% increase in total capacity) • R2 billion investment, construction commenced in April 2021, concluded June 2024 Rationale • Consoli
Slide 11: Safripol
SAFRIPOL Disappointing result, with performance affected by cyclical low in global polymers industry • Sales volumes 8% lower; stable domestic sales volumes and lower exports • Exports reduced because of weak export PET raw material margins and constrained Revenue HDPE and PP production, largely aff
Slide 12: Unitrans
UNITRANS Good momentum gained with restructuring Process to improve Unitrans’ performance Progress with the restructuring • Consolidate South Africa, Africa and Passenger • FY23 businesses, restructure and rightsize operations: ▪ Ceased activities with losses of R107 million ▪ Cease low-return a
Slide 13: Unitrans
UNITRANS Improved result as turnaround gains traction • Revenue lower mainly due to exit of low-margin and low-return activities, including rail and general freight Revenue • Increase in operating profit supported by the benefits realised from the restructuring: R9 689 million ▪ Improved performance
Slide 14: Feltex
FELTEX Good performance supported by higher vehicle assembly volumes • Revenue increased largely due to improvement in South African vehicle assembly volumes and price adjustments related to cost escalations and contractual volume shortfalls Revenue • South African vehicle industry performance mixed
Slide 15: Restonic
RESTONIC Pleasing performance as momentum continues following restructuring • Revenue increased due to higher sales volumes and price increases to recover cost escalations • Consumer demand affected by: Revenue ▪ Impact of higher interest rates and inflation R1 720 million 8% ▪ Retail trade disrup
Slide 16: Financial Review
FINANCIAL REVIEW FRANS OLIVIER CHIEF FINANCIAL OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 17: Salient Features of the FY24 Results
SALIENT FEATURES OF THE FY24 RESULTS Revenue EBITDA Operating profit R29.1 billion R3.7 billion R2.3 billion 2% 8% 11% Operating margin Headline earnings per share Earnings per share 7.7% 45.3 cents 43.8 cents 80 bps 4% 106% Cash generated from operations Net working capital Expansion ca
Slide 18: Restatement of Prior Year Error
RESTATEMENT OF PRIOR YEAR ERROR Extract of restatement Reported Restated FY23 Restatement FY23 Rm Rm Rm Income statement Overcharge on raw Operating profit before capital items 2 367 156 2 523 material purchases for 1 February 2022 Operating margin (%) 8.0 8.5 to 30 September 2023 Profit for the yea
Slide 19: Financial Analysis: Income Statement
FINANCIAL ANALYSIS Income statement FY24 FY23* Variance Rm Rm % Revenue 29 062 29 628 (2) Safripol’s performance affected by a cyclical low EBITDA 3 694 4 020 (8) in the global polymers Depreciation and amortisation (1 444) (1 497) (4) industry Operating profit 2 250 2 523 (11) Foreign exchange loss
Slide 20: Financial Analysis: Tax Rate Reconciliation
FINANCIAL ANALYSIS Tax rate reconciliation FY24 * FY23 * % % Statutory tax rate 27.0 27.0 Government incentives include PG Bison section 12l Government incentives (15.7) – tax allowance of R790 million Impairments 0.1 5.1 In the prior year: Withholding taxes 2.0 2.2 ▪ Impairments include Other 1.6 2
Slide 21: Financial Analysis: Adjusted Headline Earnings per Share
FINANCIAL ANALYSIS ‘Adjusted’ headline earnings per share FY24 FY23* Variance Cents Cents % Reported 45.3 47.3 (4) MDF project completed and commissioned in PG Bison section 12l tax allowance (8.6) – June 2024 Adjusted 36.7 47.3 (22) Section 12l tax allowance of R790 million or R213 million benefit
Slide 22: Financial Analysis: Balance Sheet
FINANCIAL ANALYSIS Balance sheet 30 Jun 24 * 30 Jun 23 * Rm Rm Property, plant and equipment 16 043 15 094 Significant investment Right-of-use assets 300 390 in operating assets Intangible assets 1 790 1 728 Net working capital increase mainly due Goodwill 659 662 to additional inventory Biological
Slide 23: Financial Analysis: Property, Plant and Equipment
FINANCIAL ANALYSIS Property, plant and equipment 6 950 (Rm) Significant investment of R1.8 billion, 5 950 758 (365) related to major capital projects (1 281) 173 R1.3 billion of expansion capex 4 950 1 759 attributable to MDF project (148) Borrowing costs capitalised of 16 043 3 950 343 R173 million
Slide 24: Financial Analysis: Net Working Capital Breakdown
FINANCIAL ANALYSIS Net working capital breakdown (Rm) 950 82 (183) Increase of R239 million from 30 June 2023 340 Inventory increased mainly due to: 2 883 ▪ additional raw materials acquired to mitigate supply risk 750 ▪ engineering spares relating to completion of major capital projects Significant
Slide 25: Financial Analysis: Cash Flow
FINANCIAL ANALYSIS Cash flow FY24 FY23* Rm Rm EBITDA 3 694 4 020 EBITDA decreased Net revaluation of biological assets (49) (24) by 8% Other non-cash adjustments 49 37 Cash generated from Cash generated from trading 3 694 4 033 operations down 10% Working capital changes (203) (144) Net finance cost
Slide 26: Financial Analysis: Cash Flow (continued)
FINANCIAL ANALYSIS Cash flow (continued) FY24 FY23 Rm Rm Cash flow from operating activities 2 178 2 606 Capital expenditure Investing activities (2 257) (2 298) related to completion of major projects Expansion capex^ (1 759) (1 326) Replacement capex# (423) (871) Bolt-on acquisition in Feltex of R
Slide 27: Investment to Drive Growth and Efficiency Benefits
FINANCIAL ANALYSIS Investment to drive growth and efficiency benefits Manufacturing capital expenditure Material and strategic items^ (Rm) 2 000 PG Bison PG Bison 1 843 1 800 MDF project Photovoltaic (10 MW PV) projects 1 501 of R1 979 million of R125 million 1 600 1 532 FY22: R152 million FY23: R
Slide 28: Investment to Drive Growth and Efficiency Benefits (continued)
FINANCIAL ANALYSIS Investment to drive growth and efficiency benefits (continued) Non-manufacturing capital expenditure Items to highlight (Rm) 1 400 1 338 Unitrans 532 Proceeds of Replacement of Expansion of Total 1 200 1 098 R319 million R400 million R172 million R253 million 486 961 (FY23: R296
Slide 29: Treasury Activity: Movement in Net Debt
TREASURY ACTIVITY Movement in net interest-bearing debt 4 450 (Rm) 2 000 (800) Increase of R299 million from 30 June 2023 3 950 Decrease in net interest-bearing debt 3 450 (268) of R886 million since 31 December 2023 (94) 2 950 (17) (25) 55 8 326 Target to reduce net debt by R1 billion in FY25, enab
Slide 30: Treasury Activity: Debt Funding
TREASURY ACTIVITY Significant debt funding activities for the year R3 billion new syndicated revolving credit facility (‘RCF’) to refinance existing RCF and upcoming term loans and bonds Structure of the RCF Maturities • Replaces previous R750 million RCF Amount • R2 billion in three-year and R1
Slide 31: Treasury Activity: Other Funding
TREASURY ACTIVITY Other funding activities for the year Corporate bonds issued with three-year tenures • KAP030 – Listed: R500 million Corporate bonds settled at maturity • KAP017 – Listed: R527 million • KAP018 – Listed: R525 million RCF • R750 million drawn and settled, replaced with new RCF
Slide 32: Treasury Activity: Debt Serviceability Ratios
TREASURY ACTIVITY Debt serviceability ratios Bank covenant FY24 30 Jun 24 30 Jun 23 * Gross interest-bearing debt (Rm) 9 724 9 480 Net debt: EBITDA Net interest-bearing debt (Rm) 8 326 8 027 internal target < 2.5 times Equity excluding non-controlling interest (Rm) 12 475 11 542 Gearing (net debt:eq
Slide 33: Treasury Activity: Debt Maturity
TREASURY ACTIVITY Net interest-bearing debt maturity as at 30 June 2024 (Rm) 5 000 4 531 4 000 New RCF utilised to refinance 2 133 July 2024 maturities of R1 billion 3 000 Refinance 1H25 maturities to allow major 2 000 1 000 capital projects to generate sufficient cash flow to support a reduction in
Slide 34: Group Outlook
GROUP OUTLOOK GARY CHAPLIN CHIEF EXECUTIVE OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 35: Group Outlook
GROUP OUTLOOK • Challenging macroeconomic and operating environment expected to persist; however, cautiously optimistic about South Africa’s medium-term outlook following GNU • Material items that provide compelling prospects for the group over the near to medium term: ▪ Value-realisation from our m
Slide 36: Q&A
Q&A AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 37: Appendix
APPENDIX AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024
Slide 38: Group Margin Analysis
GROUP MARGIN ANALYSIS^ KAP operating margin decreased 80 bps to 7.7% Group FY24 7.7% FY23* 8.5% FY22 10.5% FY21 8.8% FY20 6.6% PG Bison Safripol Unitrans FY24 17.4% FY24 3.8% FY24 5.2% FY23 17.4% FY23* 8.9% FY23 3.8% FY22 17.0% FY22 13.8% FY22 5.9% FY21 14.7% FY21 5.7% FY21 7.4% FY20 10.1% FY20 2.2%