KAP, with R5bn in its wallet, on prowl for industrial assets
The group has invested R7.8bn in the past two years to deepen its production capacity
Cash-generating KAP Industrial is shopping around for acquisitions of up to R5bn, CEO Gary Chaplin told Business Times this week.
The group, which manufactures products such as automotive components, mattresses, chemicals, polymers and timber items, has invested R7.8bn in the past two years to deepen its production capacity.
Cash generated from operations rose 83% to R877m in the half year till end December as the expansion projects started feeding into earnings. The steady cash flow gives KAP the ability to fund acquisitions, said Chaplin.
"If you look at our cash generation, we can fund an acquisition of R4bn to R5bn quite comfortably," he said, adding that when buying new businesses, the company will stick to Southern Africa, where it currently operates. KAP has a market capitalisation of about R22bn.
"We like big infrastructure businesses with big assets and that have a large share of the market," Chaplin said.
And KAP is "fairly open-minded" about the sector in which it plans to acquire new businesses, he said, but stressed that the targets would be "industrial in nature" and that KAP is not interested in businesses such as retail or banking. He declined to give further details of possible targets.
The company reported a 6% drop in operating profit for the six months to end-December and a 19% decline in headline earnings per share. Chaplin said KAP's results were complicated by a BEE deal in its Unitrans logistics division.
The company financed the sale of 45% of this unit, which was a one-off and non-cash occurrence.
Excluding the effect of the BEE deal, operating profit rose 7%. But it was no easy ride...