Stability enhances Art’s recovery prospects

04 Jun, 2021 - 00:06 0 Views
Stability enhances Art’s recovery prospects Dr Thomas Utete Wushe

eBusiness Weekly

Business Writer

Zimbabwe Stock Exchange listed entity, Art Corporation (Art), says Government’s thrust to contain inflation and reduce currency volatility has enhanced recovery prospects across all its business segments.

In a statement accompanying the Group’s results for the half year ended 31 March 2021, chairman Dr Thomas Utete Wushe, said the continued stability of the local currency and the decline in inflation enabled the Group to register moderate volume growth over the comparative period.

He said despite the challenging operating environment, “the business remains confident that it has significantly improved its ability to anticipate and respond to challenges and opportunities.”

He added that the Group will continue to seek “opportunities to balance growth and broader representation in terms of products, markets and energy storage technologies”.

During the six months to March 2021, the Group expanded its operating capacity and shareholdings at some of its business units.

Some of the business units under Art Corporation include Chloride, Exide Battery, Eversharp and Softex.

At its Chloride Factory, the company successfully commissioned additional injection moulding machinery, which improved efficiencies and significantly reduced imports.

According to Dr Wushe, the progressive improvement of the manufacturing equipment will enable the battery business to respond, participate and gain from market developments and the attendant opportunities.

The Group also spent US$800,000 in acquiring another 50 percent shareholding in Softex, a business it jointly owned with Nampak.

Following the acquisition, management believes it can now consolidate and capitalise this paper business.

Meanwhile, the Group registered volume growth across the board for the period under review.

Overall volumes for the half year to March 31 2021 increased by 15 percent. Exports grew by 13 percent although “competitiveness faces risks associated with policy inconsistencies, volatile exchange rates and supply interruptions”.

In terms of business units, the battery business registered a strong performance with volumes increasing by 22 percent.

Dr Wushe said the sales volume growth in the battery business was due to consistent product availability and improved efficiencies following the commissioning of additional plastic injection machinery.

The paper business registered a 14 percent increase in sales volumes although the business faced significant under recoveries as activity declined especially during the Covid-19 induced lockdowns.

Notwithstanding management’s cost containment initiatives, the paper divisions struggled to contain the rising input costs and recorded losses of $52 million in inflation adjusted terms.

Softex tissue volumes declined by 14percent compared to the prior year as demand weakened and competition from imports increased.

In terms of financials, the  Group posted revenues of $1.764 billion in inflation adjusted terms an increase of 14 percent compared to the same period last year.

Gross margins declined from 50 percent to 39 percent “as prices could not be aligned to input cost increases in the short-term”.

Operational expenditure increased by 67 percent compared to the prior year.

As a result, the Group’s operating profit decreased by just 8 percent to $219 million in inflation adjusted terms compared to last year.

Commenting on the financials, Dr Wushe said despite the impact of the pandemic and reduced earnings, the company’s financial position remained strong as working capital management was tightened to preserve cash and ensure the solvency of the Group.

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