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KAP Industrial is finally seeing an end to the damage from its association with scandal-plagued Steinhoff International.
The South African supplier of timber, chemicals, car parts and other industrial products saw its shares slump 6.8% when Steinhoff’s financial wrongdoing was uncovered in December. While KAP, 26% owned by Steinhoff, has since recovered some ground, the stock is still down 13% in the past year. That compares with a 1.9% gain on the broader FTSE/JSE Africa All Shares Index.
To distance itself from the crisis, KAP ended an agreement with Steinhoff to share corporate services, including legal and investor relations, and cancelled an arrangement to co-rent office space earlier this year.
"The pressure on the management team from funders, analysts, press, suppliers, customers was immense," KAP Deputy Chairman Jo Grove said at the Stellenbosch-based company’s annual results presentation in Johannesburg Wednesday. "It’s been KAP’s annus horribilis."
Steinhoff, which owns Conforama in France and Mattress Firm in the US, conducted an initial asset sale of almost R3.7bn of KAP shares in March to shore up its balance sheet. Steinhoff’s stock has crashed 95% and the company faces an uphill battle to ensure its survival.
Going bust?
Grove said he received a phone call in late December from a German supplier who said the company wasn’t going to sell to KAP anymore because it was "part of Steinhoff which is going to go bust". Grove referred the caller to Chief Executive Officer Gary Chaplin, who managed to placate him. This was just one example of the "number of queries and questions the management was inundated with trying to manage this fallout," Grove said.
Steinhoff "was sterilised in terms of support and we had the immediate loss of corporate service functionality," Chaplin said at the presentation. "You can imagine what happens when that funding disappears overnight; you’re left feeling fairly exposed."
Compounding the Steinhoff woes, fires in the southern Cape burnt 10% of KAP’s planted forests, an explosion significantly affected its car-parts unit, while storms around city of Durban damaged its chemical and car-parts division. On top of that was a "staggering" project overspend and an 81% profit cut at its producer of PET resin - used in clothing fibres - in South Africa.
KAP shares rose 2% to R7.25 in Johannesburg on Thursday, valuing the company at R19bn.
The industrial supplier is not the only South African company looking for separation from the troubled retailer. Steinhoff Africa Retail, majority-owned by Steinhoff, this week changed its name to Pepkor Holdings Ltd.
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