Integrated Bedding

Manufacture of foam, fabrics, springs, bases and branded mattresses

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KAP’s Integrated Bedding division manufactures flexible polyurethane foam, rebonded foam, expanded polyethylene (‘EPE’), polyester fibre, knitted and woven fabrics, non-woven textiles, springs, bed bases, plastic injection moulded components and branded mattresses.

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KAP’s Integrated Bedding division manufactures flexible polyurethane foam, rebonded foam, expanded polyethylene (‘EPE’), polyester fibre, knitted and woven fabrics, non-woven textiles, springs, bed bases, plastic injection moulded components and branded mattresses.

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1 711
EMPLOYEES
8.3 million
LINEAR METRES OF FABRIC
PRODUCED PER ANNUM
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10 500+
TONNES OF FOAM
PRODUCED PER ANNUM
431 000+
MATTRESSES PRODUCED
PER ANNUM
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“Our aim is to be the leading manufacturer of bedding-related products and brands in southern Africa by utilising world-class technology and expertise.”

– Michael Metz

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Business environment

The Integrated Bedding division’s strategy is to manufacture key raw materials centrally through state-of-the-art technology, providing economy of scale benefits. Adding to this strategy, the division produces innerspring and foam mattresses, as well as bed bases in key regional locations to facilitate cost-effective distribution and access to the market. This enables the division to supply national brands in regional locations on a competitive basis.

Within the global furniture retail sector, the bedding category has proved to be resilient through economic cycles. It has also remained relatively stable in the South African furniture retail sector despite volatile and subdued performances in other product categories. A trend has developed toward speciality bedding retail outlets, which has added further support to
the sector.

Mattresses and bed bases are expensive products to transport due to their light weight and bulky size. As a result, the mattress industry is highly fragmented with numerous regional retail and manufacturing operators.

Commentary

The Integrated Bedding division performed well for the year despite a depressed retail environment, showing 10% revenue growth to R1 551 million from R1 414 million in the prior year. The division continued to implement its strategy of technology investments to reduce the manufacturing costs of its primary raw materials, as well as to develop its brands and to grow market share.

The division remains the only fully integrated bedding manufacturer in South Africa. Following the acquisition of Support-a-Paedic during the previous financial year, the division continued to grow volumes. These increased production and sales volumes led to a 23% increase in intra-divisional revenue, which supported margins.

The unexpectedly high sales volumes brought on by retail ‘Black Friday’ promotions impacted negatively on the division during the first half of the year. Excess volumes in this regard proved beneficial during the second half of the year, which is traditionally a low-demand period.

The division’s operating profit increased by 7% as a result of volume growth.

Outlook

A bed remains the leading furniture item for first-time furniture consumers. In view of the relatively young demographic profile of South African consumers, it is expected that the retail focus on bedding products will continue and will provide a sound platform for the continued growth of the Integrated Bedding division. Volume demand is expected to remain buoyant on lower-margin products. The continued volatility of raw material pricing could impact margins negatively.

The mattress manufacturing and process automation investments associated with the R250 million Integrated Bedding plant in Johannesburg will be completed before the 2019 peak trading period. This will facilitate production efficiencies at higher production volumes.

The division will continue to focus on creating value and aligning its business model to support increased retail promotional activities.

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