Wrap Text
Operational Update, Initial Trading Statement and Pre-Close Meeting
KAP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1978/000181/06)
Share code: KAP
ISIN: ZAE000171963
Company alpha code: KAP
LEI code: 3789001F51BC0045FD42
('KAP' or 'the company' or 'the group')
OPERATIONAL UPDATE, INITIAL TRADING STATEMENT AND PRE-CLOSE MEETING
The following update provides guidance on the group's operational performance for the five months of the 2026
financial year up to 30 November 2025 ('the period'), compared with the five months of the 2025 financial year
up to 30 November 2024 ('the prior period').
OVERVIEW
Shareholders and investors are referred to the financial results for the year ended 30 June 2025 ('FY25'), which
were released on 28 August 2025. We indicated in those results that the group's performance was negatively
affected by primarily the following three issues:
• increased operating costs related to the start-up and ramp-up of PG Bison's new medium-density
fibreboard ('MDF') line;
• higher finance costs, which were capitalised during the construction phase of the group's major capital
projects completed during the year ended 30 June 2024 ('FY24'), including the new MDF line; and
• lower vehicle production by two major original equipment manufacturers ('OEMs'), which mostly resulted
in a weaker performance by Feltex.
As expected, the effects of these issues have since eased and the group delivered an increase in EBITDA,
operating profit and earnings during the period. This was largely due to the following factors:
• increased panel production and sales volumes, including full utilisation of the new MDF line;
• improved domestic new vehicle assembly volumes;
• an improvement in underperforming businesses; and
• lower net finance costs.
The group's performance should be viewed in the context of a difficult trading environment, marked by subdued
consumer demand, global oversupply of certain products, sustained intense competition, and heightened
uncertainty related to the United States' tariff war.
DIVISIONAL OPERATIONAL PERFORMANCE
PG Bison delivered increased panel production and sales volumes, supported by demand creation and
customer enablement activities, and the development of new markets. Revenue and operating profit were
consequently meaningfully higher compared with the prior period. Prior period performance was constrained by
the start-up and ramp-up of the new MDF line, with utilisation not yet optimal while costs increased. Although at
lower margins, sales to new export markets enabled the new MDF line to be operated at capacity during the
period.
Safripol remains in a cyclical low in the polymers industry due to global overcapacity, with both polymer demand
and pricing subdued. Of the division's three polymers, polyethylene terephthalate ('PET') continues to be the
most affected. A five-week commercial shutdown was taken at the PET plant in Durban to draw down elevated
inventory levels and to balance production with demand. Revenue and operating profit were therefore
meaningfully lower compared with the prior period.
Unitrans' performance was largely supported by increased volumes in the agriculture operations and a recovery
in the petrochemical operations, which were restructured in FY25. This offset a lower result from the passenger
operations due to the closure of operations in Mozambique, and the disposal of a commuter contract in FY25.
The division continued to focus on the cessation of low-margin, low-return activities. As a result, operating profit
increased marginally despite a decline in revenue.
Feltex benefited from increased domestic new vehicle assembly volumes. The prior period was largely affected
by temporary operational constraints at two OEM plants and costs related to a major model changeover, which
have since mostly been resolved. The performance improvement reported during the second half of FY25
continued into the current period, and revenue and operating profit were therefore meaningfully higher.
Sleep Group grew bedding unit sales through the introduction of new products and promotional activity, despite
muted customer demand. The turnaround of the division's foam operations progressed well during the period.
While revenue increased, supported by the higher bedding unit sales, operating profit was in line with the prior
period.
Optix delivered lower revenue, primarily due to slow sales pipeline conversion. During FY25, the division
invested in executive, sales and operational capacity to accelerate sales pipeline conversion, which contributed
to increased costs. Operating profit declined from the prior period. The division is focused on leveraging its
investments through increased sales, mainly in international markets.
BALANCE SHEET
Following the major investment cycle concluded in FY24, the only remaining major capital commitments relate
to increasing upgrading capacity of PG Bison and improving the average fleet age of Unitrans' vehicles. This
catch-up capital expenditure will be phased over three to five years. We therefore do not expect it to have a
major impact in any single year. During the period, capital expenditure was largely in line with depreciation.
The company has successfully early amended and extended its three-year revolving credit facility of R2 billion
by two years, maturing on 7 December 2028. With the expected improvement in performance and reduction of
net finance costs, we expect to remain within financial covenants at 31 December 2025.
STRATEGY EXECUTION
We continue to make progress with the execution of our strategy, delivering on the following key objectives,
which we expect will underpin performance over the medium term:
• Value realisation from the major capital projects: We invested in future growth, of which PG Bison's new
MDF line is the largest and most recent investment. The line resulted in a c. 33% increase in the
division's total production capacity and offers compelling growth opportunities for the group. To extract
further value from existing capacity, the division will install an additional upgrading press during the
second half of FY27.
• Addressing underperformance: We are focused on addressing areas of underperformance, the most
material of which relates to Unitrans, where we are targeting an annual operating profit of R700 million
over the medium term.
• Reducing net debt: We are targeting a net debt reduction of R500 million in FY26, with a further reduction
planned for FY27. We expect the reduction to be supported by lower capital expenditure following the
completion of recent investments, cash flow contribution from these investments, and an improved
performance from Unitrans. We anticipate that the lower net debt levels, combined with an expected
cycle of interest rate reduction, will increase balance sheet flexibility and enhance earnings.
In line with the board's succession planning, Frans Olivier was appointed as the new CEO, effective 1 November
2025, following the resignation of Gary Chaplin. Dries Ferreira was appointed as the new CFO, effective
1 February 2026.
INITIAL TRADING STATEMENT
In terms of the JSE Limited ('JSE') Listings Requirements, a listed company is required to publish a trading
statement once it is satisfied that a reasonable degree of certainty exists that the financial results for the next
period to be reported on will differ by at least 20% from the financial results for the prior corresponding period.
While one month remains of the six-month trading period ending 31 December 2025 ('1H26'), a reasonable
degree of certainty exists, following the period covered by this operational update that, if current trading
conditions persist:
• earnings per share ('EPS') is expected to increase by more than 20% for 1H26, which is an increase of
at least 3.2 cents per share, when compared to the EPS of 16.2 cents for the six months ended
31 December 2024 ('1H25); and
• headline earnings per share ('HEPS') is expected to increase by more than 20% for 1H26, which is an
increase of at least 3.4 cents per share, when compared to the HEPS of 17.2 cents for 1H25.
A further trading statement will be issued in terms of the JSE Listings Requirements when a reasonable degree
of certainty exists about the likely range of the expected increase in EPS and HEPS.
Shareholders are advised that the information and guidance set out above, and the financial information on
which this operational update and trading statement are based, have not been audited, reviewed or otherwise
reported on by the company's external auditor.
PRE-CLOSE MEETING
Management will host a virtual meeting at 10h00 (SAST) today to discuss the guidance in this update. Please
email investors@kap.co.za for further details.
1H26 INTERIM RESULTS
The results for the six months ending 31 December 2025 are expected to be released on or about
26 February 2026.
Stellenbosch
10 December 2025
Equity and Debt Sponsor
PSG Capital
Date: 10-12-2025 08:00:00
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