Operational update for the period from July 1, 2021 to May 31, 2022 – SENS

                            

Operational update for the period 1 July 2021 to 31 May 2022

KAP INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1978/000181/06)
JSE alpha code: KAP
LEI code: 3789001F51BC0045FD42
(“KAP” or “the Company”)

OPERATIONAL UPDATE FOR THE PERIOD 1 JULY 2021 TO 31 MAY 2022

The Company’s executive directors will be conducting a Capital Markets Day for investors and analysts
tomorrow, 28 June 2022, where certain strategic and operational information regarding the Company
will be presented and discussed. This presentation will be made available on the Company’s website
www.kap.co.za at 09h00 tomorrow. The following operational update provides guidance in respect of
the Company’s operational performance for the first eleven months of the 2022 financial year up to
31 May 2022 (“period”) and will also be discussed at the Capital Markets Day. This operational update
should be read in conjunction with the operational update and trading statement released by the
Company on SENS on 29 March 2022.

The Company’s performance over the period has been pleasing, despite the challenges presented by
the civil unrest in July 2021, the war in Ukraine, flooding in KZN, global supply chain disruptions and
commodity price volatility.

PG Bison performed well for the period, supported by robust demand for its products which enabled
all production facilities to operate at full available capacity. The eMkhondo (Piet Retief) particleboard
plant expansion was successfully commissioned in February/March 2022, which has added
approximately 14% to PG Bison’s total capacity. The annual maintenance shutdowns at all three plants
were conducted during the second half of the financial year (“2H22”), which impacted on the division’s
performance in 2H22 compared to the performance during the first half of the financial year (“1H22”).

Restonic experienced very challenging trading conditions throughout the period due to subdued retail
demand and supply chain disruptions following the civil unrest in July 2021, and significant increases
in commodity driven key raw material costs which could not be timeously passed on to customers.
Following a disappointing 1H22 performance, the division’s performance weakened further into 2H22,
in line with traditional seasonal patterns.

Feltex showed an improved performance moving into 2H22, compared to its disappointing performance
in 1H22. The lower volumes and volatility in OEM demand due to the impact of the global shortage of
semiconductor chips, and the technical challenges with the start-up of its component production for a
new vehicle model, were largely resolved. Towards the end of the period however, a key customer’s
operations were severely disrupted by floods, which is expected to affect Feltex’s volumes for the last
quarter of the 2022 financial year.

Safripol performed exceptionally well during the period due to strong demand for all three polymers,
higher selling prices and improved margins. This performance continued to be supported by global
factors of supply and demand, supply chain disruptions and commodity pricing, which favoured local
manufacture and supply.

PET production volumes increased year-on-year and supported market share gains during the period.
The comparable period included a scheduled five-year maintenance shut. HDPE production volumes
were impacted by a temporary constraint in a key raw material supply during 1H22.

PET HDPE PP
Period Period Period Period Period Period
FY22 FY21 FY22 FY21 FY22 FY21
Sales volumes (tonnes) 187 800 164 915 133 322 144 863 108 342 98 827
Production volumes (tonnes) 175 855 150 865 137 922 141 702 112 526 104 001
Average R/USD exchange 15.15 15.53 15.15 15.53 15.15 15.53

PET – Polyethylene terephthalate | HDPE – High density polyethylene | PP – Polypropylene
Period refers to eleven months from 1 July to 31 May.

During the period, Safripol was successful in concluding the renegotiation of the key terms of its
ethylene raw material supply contract and made good progress in increasing the value-added HDPE
and PP sales mix. Raw material margins improved for all three polymers over the period.

Raw material margin variance Raw material margin variance
Period FY22 vs Period FY22 vs
Period FY21# 1H22*
PET 49% 67%
HDPE 24% 30%
PP 49% 16%

# – Eleven months ended 31 May 2022 compared to the eleven months ended 31 May 2021.
* – Five months ended 31 May 2022 compared to the six months ended 31 December 2021.

Note: The raw material margin analysis has been adjusted to account for the R91 million ethylene price adjustment
in 2H21.

Unitrans
The South African division performed well in the food, petrochemical and mining sectors, with improved
margins and asset utilisation. The general freight and cement sectors, however, remained subdued.
The Rest-of-Africa division continued to encounter challenging trading conditions. Agriculture volumes
were negatively affected by lower-than-expected crop yields and mill performances, civil unrest and
exceptional weather conditions. While fuel volumes in Botswana improved post the relaxation of the
state of emergency, demand remained subdued. Mining operations performed satisfactorily. The
Passenger division’s performance remained stable.

DriveRisk was successfully acquired, effective 1 December 2021, and integrated into the KAP group.
This business has exciting growth prospects and performed in line with expectation for the period.

Balance Sheet

The Company’s balance sheet remains healthy. Debt serviceability ratios remain well within financial
covenants and the Company successfully refinanced maturing debt at improved margins.

The Company is scheduled to release its full year results on 24 August 2022.

By order of the Board
KAP Secretarial Services Proprietary Limited

Stellenbosch
27 June 2022

Debt Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Date: 27-06-2022 05:00:00
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