Revving up: A VW Polo is inspected at the car maker’s plant in Uitenhage. Picture: BLOOMBERG
Revving up: A VW Polo is inspected at the car maker’s plant in Uitenhage. Picture: BLOOMBERG

Government’s extension of the motor industry support programme to 2035 is set to boost diversified industrial group KAP Industrial’s automotive components business, says the Stellenbosch-based company.

 Last year, the government extended the Automotive Production and Development Programme (APDP), initially introduced in 2013, to 2035 to instil certainty and investor confidence in the local automotive industry.

The programme creates an environment for registered light motor vehicle manufacturers to grow production and component manufacturers to grow value addition by offering incentives.

“The extension of the APDP to 2035 provides much needed clarity and stability to the automotive sector, which management believes will lead to growth opportunities for the (automotive components) division,” KAP said.

KAP’s automotive business manufactures a range of vehicle retail accessories under the Maxe, Auto Armor and Rhino Linings brands as well as components used in the assembly of new vehicles including seats, carpets, boot packages, arm rests and headrests.

The initial motor industry support programme comes to an end in 2020. Before the government decided to extend the policy, there was concern about the local automotive industry. “Original equipment manufacturers invest billions of rands in new models. These investments happen in seven-year intervals,” KAP CEO Gary Chaplin said on Tuesday.

Chaplin said investment by vehicle manufacturers would lead to significant opportunities. “This is going to benefit the entire sector. As components manufacturers we have our own suppliers who are also going to benefit.”

He was speaking after the release of Kap’s results for the six months to December, in which the owner of brands such as PG Bison, Greyhound, Citiliner and Restonic increased revenue 16% to R13.3bn.

The company’s interim results reflected a noncash cost of R194m in relation to its recent empowerment transaction. In September  2018, the group concluded the sale of a 45% stake in its SA logistics operation, Unitrans Supply Chain Solutions, to a broad-based empowerment trust, Sakhumzi Foundation Empowerment Trust, and the Pieters Trust.

The empowerment deal’s cost affected KAP’s headline earnings per share. It slumped 19%, but without the empowerment deal’s cost, the company’s headline earnings per share rose 6% to 30.1c.

KAP’s operating profit increased 7%, excluding the impact of the black empowerment  deal, while cash generated from operations soared 83%. Chaplin said KAP funded the deal.

The KAP share price was  2.06% down at R8.08  on Tuesday. 

Njobenis@businesslive.co.za