Business - Featured - Local - Regional - Top Stories - December 9, 2021

ART takes strides to restructure the paper business

Zimbabwe Stock Exchange (ZSE) listed industrial group, Art Holdings Limited (ART) has made investments in the paper business to mitigate the long term consequences of delaying critical capital expenditure and mark a pivotal moment in ART’s Paper business restoration initiatives, BusinessMail has learnt.

According to the group’s chairman Mr Thomas Wushe, ART took significant strides in the restructuring of the Paper business with the acquisition of Nampak’s 50% shareholding in Softex and the purchase of a Toscotec Tissue Machine from Twinsaver (South Africa) Group during the year.

“These investments are a result of the difficult trade off decisions taken to mitigate the long term consequences of delaying critical capital expenditure and mark a pivotal moment in ART’s Paper business restoration initiatives,” he said.

ART is involved in the manufacturing and retailing of Lead-acid batteries, Pens, Stationery, Tissues, Hygiene products and Forestry Resource Management. These products are manufactured and distributed through our world class manufacturing and distribution operations in Zimbabwe and Zambia.

The Group’s units include Chloride Zimbabwe, Chloride Zambia, Exide Express, Eversharp, Kadoma Paper Mills, National Waste Collection, Softex Zimbabwe and Mutare Estates. ART products are also distributed in Malawi, Mozambique, South Africa, Zambia as well as other African countries.

Wushe added that the installation of the Tissue machine in Kadoma is progressing well and is expected to be completed in the second half of the financial year.

“The Group’s financiers supported and enabled these key strategic projects which will enhance competitiveness and create holistic value across the paper chain,” he said.

During the first half of the year, the Group’s financial performance was impacted by COVID-19 induced restrictions and the economic after effects. However, the batteries segment remained resilient and helped to offset the under whelming performance of the paper divisions.

The strategic investments to increase capacity and expand the distribution network in the batteries business were vindicated as the automotive battery demand remained strong.

“The performance was ahead of recovery expectations, as volumes increased by 39% despite supply chain disruptions. Export volumes were driven by the recovery in Zambia. Capital expenditure was limited to essential spend as the efforts to preserve liquidity continued,” reads the update.

Sales volumes recovered across all the divisions had an overall increase of 30% compared to the prior year. Revenue increased by 27% in inflation adjusted terms as demand recovered.

The sharp inflation-induced input costs increases could not be aligned to pricing, resulting in a significant decrease of gross margins to 39% from 52% in the prior year.
Operating expenses increased by 66% due to general inflationary increases in costs and the initiatives taken to stimulate demand and cushion employees. Significant fair value losses on biological assets and investment properties amounting to ZWL$191m and ZWL54m respectively were recorded.

On the other hand, Eversharp volumes increased by 35% as restrictions were eased and school calendar disruptions reduced. The momentum of the division in the second half of the year has been remarkable despite the increased presence of competing imported products.

Productivity and quality was not significantly affected by the delays in obtaining spares and raw material during the period.

ART Holdings is conscious of its role in managing economic, environmental, social and governance to deliver positive impacts while creating enterprise value.

“We continue to strengthen how we manage our sustainability impacts by setting goals, targets, and policies across the whole group. During the period, managing the negative impacts of the COVID-19 pandemic and climate change proved critical,” Wushe said.

The successful completion and settlement of Nampak’s shareholding in Softex as well as the completion of key factory upgrades in Chloride will create much needed liquidity headroom to enable the Group to complete the capitalisation of the Paper business.

“The Group will continue to ensure employee safety and maintain the proactive adjustments made to business priorities to support customers during the pandemic,” he added.

 

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