Kap Limited · JSE:KAP
Kap — H1 2024 Earnings Presentation
38 slides from Kap's earnings presentation, Feb 28, 2024
Slide 1: Unaudited Results for the Six Months Ended 31 December 2023
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023 UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 2: Agenda
INTRODUCTION Patrick Quarmby RESULTS OVERVIEW AND OPERATIONAL REVIEW Gary Chaplin FINANCIAL REVIEW Frans Olivier GROUP OUTLOOK Gary Chaplin Q&A Gary Chaplin/Frans Olivier 2 UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 3: Introduction
INTRODUCTION PATRICK QUARMBY INDEPENDENT NON-EXECUTIVE CHAIRPERSON UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 4: Results Overview and Operational Review
RESULTS OVERVIEW AND OPERATIONAL REVIEW GARY CHAPLIN CHIEF EXECUTIVE OFFICER UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 5: Key Takeaways from the 1H24 Results
KEY TAKEAWAYS FROM THE 1H24 RESULTS Lowlights Highlights • Challenging macroeconomic and operating environment • Domestic market share gains and entry into new influenced our performance export markets supported revenue growth for some divisions ›› Weakness in the global chemical sector • Sales pric
Slide 6: Group Revenue Analysis
GROUP REVENUE ANALYSIS 2 500 (Rm) 9% (8%) 15 265 2 000 (7%) 8% (1%) 15 028 24% 1 500 1 000 500 0 1H23 PG Bison Safripol Unitrans Feltex Restonic Optix 1H24 Percentages stated represent the divisional growth in revenue 6 UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 7: Group Operating Profit Analysis
GROUP OPERATING PROFIT ANALYSIS 2 500 (Rm) 18% (67%) 1 515 2 000 (21%) > 100% (100%) 1 252 31% 1 500 1 000 500 0 1H23* PG Bison Safripol Unitrans Feltex Restonic Optix 1H24 * Restated Percentages stated represent the divisional growth in operating profit 7 UNAUDITED RESULTS FOR THE SIX MONTHS ENDED
Slide 8: Segmental Analysis
SEGMENTAL ANALYSIS Revenue^ PG Bison – 19% PG Bison – 17% Safripol – 31% Safripol – 33% Unitrans – 33% Unitrans – 35% 1H24 1H23 Feltex – 9% Feltex – 7% Restonic – 6% Restonic – 6% Optix – 2% Optix – 2% Operating profit PG Bison – 46% PG Bison – 32% Safripol – 14% Safripol – 36% Unitrans – 21% Unitra
Slide 9: PG Bison
PG BISON Good performance supported by increased value-add sales and higher exports Revenue Operating profit Operating margin R2 896 million R575 million 19.9% up 9% up 18% from 18.4% • Stable domestic demand for particleboard; softened towards the end of the period • Domestic demand for medium-dens
Slide 10: Safripol
SAFRIPOL Disappointing performance due to weaker polymer margins Revenue Operating profit Operating margin R4 744 million R178 million 3.8% down 8% down 67% from 10.6% • Sales volumes stable, with 6% higher domestic sales offsetting lower exports • Exports reduced from 14% to 9% of sales volumes due
Slide 11: Unitrans
UNITRANS Performance affected by a subdued market and non-recurring items Revenue Operating profit Operating margin R5 072 million R264 million 5.2% down 7% down 21% from 6.2% • Subdued operating environment, elevated inventory across various sectors • Good progress with initial phase of restructuri
Slide 12: Unitrans: Restructuring for Improved Performance
UNITRANS Restructuring for improved performance • Context to Unitrans’ historical underperformance ›› Major subsidiary of KAP, c. R10 billion revenue and c. R6 billion net assets ›› Historical performance unsatisfactory, margins and ROCE below target of 8% to 10% and > 16% respectively ›› Structural
Slide 13: Unitrans: Restructuring for Improved Performance continued
UNITRANS Restructuring for improved performance continued • Progress with the restructuring to date, which will largely conclude in 2H24 ›› In FY23 • Closed activities that incurred R107 million losses, with non-recurring restructure costs of R27 million • Sold underutilised assets for R296 million
Slide 14: Feltex
FELTEX Solid performance supported by automotive sector recovery Revenue Operating profit Operating margin R1 370 million R136 million 9.9% up 24% up 31% from 9.4% • Revenue increase largely due to recovery in South African vehicle assembly volumes and price adjustments related to cost escalations a
Slide 15: Restonic
RESTONIC Continued benefits from restructuring of operations realised Revenue Operating profit Operating margin R975 million R99 million 10.2% up 8% up > 100% from 3.8% • Revenue increased due to higher sales volumes and price increases to recover cost escalations • Consumer demand weaker than prior
Slide 16: Financial Review
FINANCIAL REVIEW FRANS OLIVIER CHIEF FINANCIAL OFFICER UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 17: Salient Features of the 1H24 Results
SALIENT FEATURES OF THE 1H24 RESULTS Revenue EBITDA Operating profit down 2% to R15.0 billion down 13% to R2.0 billion down 17% to R1.3 billion Operating profit margin Headline earnings per share Earnings per share down 160 bps to 8.3% down 36% to 21.8 cents down 37% to 21.2 cents Cash generated fro
Slide 18: Restatement of Prior Period
RESTATEMENT OF PRIOR PERIOD Extract of restatement 1H23 FY23 Restate- Restate- Reported ment Restated Reported ment Restated Overcharge on raw Rm Rm Rm Rm Rm Rm material purchases Income statement for 1 February 2022 to 30 September 2023 Operating profit before capital items 1 421 94 1 515 2 367 156
Slide 19: Financial Analysis: Income Statement
FINANCIAL ANALYSIS Income statement 1H24 1H23* Variance Material decline in Rm Rm % Safripol’s performance Revenue 15 028 15 265 (2%) due to weaker global polymer raw material EBITDA 1 982 2 275 (13%) margins Depreciation and amortisation (730) (760) (4%) Foreign exchange loss Operating profit befor
Slide 20: Financial Analysis: Balance Sheet
FINANCIAL ANALYSIS Balance sheet 31 Dec 23 30 Jun 23 * 31 Dec 22 * Significant investment Rm Rm Rm in operating assets Property, plant and equipment 15 556 15 094 14 483 Working capital Right-of-use assets 363 390 423 contained at normalised Intangible assets 1 722 1 728 2 381 seasonal levels Goodwi
Slide 21: Financial Analysis: Property, Plant and Equipment
FINANCIAL ANALYSIS Property, plant and equipment Significant investment of R1.1 billion, 2 950 (Rm) with completion of major capital projects 82 R885 million of expansion capex related 2 450 286 (273) to PG Bison MDF project (653) 1 090 Interest capitalised of R82 million 1 950 (1H23: R21 million) C
Slide 22: Financial Analysis: Working Capital Breakdown
FINANCIAL ANALYSIS Working capital breakdown Decrease of R914 million from 31 December 2022 (Rm) 4 775 (206) Significant focus on working capital management 950 Aligning production and inventory levels with demand (202) (PET five-week commercial shutdown) 750 Inventory levels are more aligned with t
Slide 23: Financial Analysis: Cash Flow
FINANCIAL ANALYSIS Cash flow 1H24 1H23* EBITDA decreased Rm Rm by 13% EBITDA 1 982 2 275 Cash generated from Net revaluation of biological assets (28) 10 operations exceeded Other non-cash adjustments 51 63 prior period by R739 million Cash generated from trading 2 005 2 348 Working capital changes
Slide 24: Financial Analysis: Cash Flow continued
FINANCIAL ANALYSIS Cash flow continued 1H24 1H23 Capital expenditure Rm Rm focused on completion Cash flow from operating activities 91 (575) of major projects Investing activities (1 112) (1 050) Free cash outflow (before dividends paid) Expansion capex^ (1 090) (524) improved by Replacement capex#
Slide 25: Investment to Drive Growth and Efficiency Benefits
FINANCIAL ANALYSIS Investment to drive growth and efficiency benefits Manufacturing capital expenditure* Material and strategic items^ (Rm) PG Bison PG Bison 2 000 MDF expansion Photovoltaic (10 MW PV) projects of R1 875 million of R128 million FY22: R152 million FY23: R71 million 1 532 FY23: R509 m
Slide 26: 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) Unitrans 1 200 1 091 Proceeds of Replacement of Expansion of Total 990 R249 million R120 million R50 million R79 million inflow 532 1 000 (FY23: R296 million
Slide 27: Treasury Activity: Movement in Net Interest-Bearing Debt
TREASURY ACTIVITY Movement in net interest-bearing debt Increase of R1.2 billion 2 450 (Rm) from 30 June 2023 772 9 212 Investment in working capital of R1.2 billion since 30 June 2023 1 950 due to seasonality 700 (222) Decrease in net interest-bearing (26) (4) (8) debt of R708 million since 1 450 3
Slide 28: Significant Debt Funding Activities for the Period
TREASURY ACTIVITY Significant debt funding activities for the period 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 b
Slide 29: Other Funding Activities for the Period
TREASURY ACTIVITY Other funding activities for the period Corporate bonds issued with three-year tenures • KAP030 – Listed: R500 million Corporate bonds settled at maturity • KAP017 – Listed: R527 million RCF • R750 million drawn and settled, replaced with new RCF • R700 drawn (new RCF) Global Credi
Slide 30: Debt Serviceability Ratios
TREASURY ACTIVITY Debt serviceability ratios Net debt: EBITDA 31 Dec 23 30 Jun 23 * 31 Dec 22 * internal target Gross interest-bearing debt (Rm) 10 330 9 480 11 005 < 2.5 times Net interest-bearing debt (Rm) 9 212 8 027 9 920 EBITDA: interest cover internal target Equity excluding non-controlling in
Slide 31: Net Interest-Bearing Debt Maturity
TREASURY ACTIVITY Net interest-bearing debt maturity as at 31 December 2023 New RCF to refinance upcoming (Rm) term loans and bonds 5 000 4 756 Available facilities – uncommitted 4 000 1 775 Available facilities – committed 3 000 Cash and cash equivalents, net of overdrafts Debt repayments 2 000 2 3
Slide 32: Group Outlook
GROUP OUTLOOK GARY CHAPLIN CHIEF EXECUTIVE OFFICER UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 33: Group Outlook
GROUP OUTLOOK • Challenging macroeconomic and operating environment expected to persist • Our divisions will continue to focus on the following initiatives and activities: ›› Domestic market share gains and further growth in export markets, at favourable margins ›› Price adjustments to recover cost
Slide 34: Group Outlook continued
GROUP OUTLOOK CONTINUED • No major capital expenditure committed beyond FY24 • Cash flow generation and a degearing in our balance sheet from FY25 to be supported by: ›› Commissioning of major capital projects ›› Lower capital expenditure ›› Execution of aforementioned initiatives and activities 34
Slide 35: Media Speculation Regarding Unitrans
MEDIA SPECULATION REGARDING UNITRANS • Major restructuring process ongoing to materially improve performance • Interest received in Unitrans over time and being explored in a structured manner • Nothing that requires formal communication and no certainty a transaction may materialise • Remains an in
Slide 36: Q&A
Q&A UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 37: Appendix
APPENDIX UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Slide 38: Group Margin Analysis
GROUP MARGIN ANALYSIS^ KAP operating profit margin decreased 160 bps to 8.3% Group 1H24 8.3% 1H23* 9.9% 1H22 11.4% 1H21 9.1% 1H20 9.6% PG Bison Safripol Unitrans 1H24 19.9% 1H24 3.8% 1H24 5.2% 1H23 18.4% 1H23* 10.6% 1H23 6.2% 1H22 20.4% 1H22 12.7% 1H22 7.1% 1H21 14.7% 1H21 4.7% 1H21 8.2% 1H20 19.4%