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Zambia, Malawi markets spur ART regional drive

Business expansion

ZIMBABWE Stock Exchange (ZSE)-listed manufacturing group Art Corporation (ART) says the group’s regional drive continues to be anchored on strong performances in Zambia and Malawi.

However, foreign currency shortages persisted in Malawi while growth in Mozambique remained slow as competition from imported batteries increased during the year to September 30, 2022.

In a statement accompanying the financial results for the year, the group said gross margins were recovered during the period on the back of timeous price adjustments and cost containment measures.

Demand for batteries, paper and stationery recovered although significant downtime in the tissue business due to machine breakdowns and power cuts affected output, consequently impacting sales particularly on the export market.

“The group’s regional drive continues to be anchored on the strong performance of batteries in Zambia and Malawi. Foreign currency shortages persisted in Malawi while growth in Mozambique remains slow as competition from imported batteries increased,” ART said.

“The group recorded significant exchange losses amounting to US$3,6 billion as the local currency depreciated by 607% during the period. Fair value adjustments on investment property and biological assets amounted to US$4,9 billion. The group managed to deliver a profit after tax of US$1,46 billion compared to a loss of US$2,5 billion in the prior year. The performance was overshadowed by an increase in finance costs especially towards the end of the year following the hiking of interest rates.”

The battery business performance during the period was affected by supply chain disruptions and availability of power in the first half of the year while demand on the export market was strong and volumes grew by 12%.

The group said liquidity constraints on the local market and foreign currency shortages in Malawi necessitated changes in trading terms in order to manage credit risk with a resultant impact on volumes.

The capitalisation and restructuring of the paper business progressed well during the year despite economic challenges with the group saying installations were completed at the end of September with full commercial production expected to start after optimisation in December 2022.

“Volumes overall for paper decreased by 15%. Paper export volumes increased by 5%. Power supply and lack of sufficient local waste paper remain major challenges for the business. Partnerships concluded during the year with waste paper suppliers in Botswana and South Africa helped to sustain production,” the group said.

During the period, Eversharp volumes increased by 39% compared to prior year as volumes continued to recover from last year following the easing of COVID-19 restrictions while export volumes increased by 177%.

“Opportunities on the market could not be maximised due to the foreign currency auction allocation backlog. Foreign currency sales in the informal sector enabled the division to improve raw material and spare parts availability in the second half of the year. Stationery trading resumed and contributed 10% of total sales,” the group said.

Timber volumes were at the same level as prior year but demand remained firm.

However, the group said the environment necessitated changes in trading terms in order to preserve value and reduce credit risk.

Going forward, the group said the elimination of the expensive local currency debt after year-end brought significant relief as the group embarked on a journey of stabilisation and recovery with focus on cash generation, sustaining working capital improvement and optimally managing gearing levels.

“The group is encouraged by the fruitful engagement that it has had with government and resulting mitigatory measures put in place to support completion of its expansionary capital investment programme,” ART said.

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