Another tough financial year for ART

financial numbers are anticipated to be below expectations.
Management said the company had recorded improved performance in the first half of the year but was dragged down by poor performance in the remaining part of the year.

The firm’s poor showing comes after it successfully raised US$4,4 million and carried out a restructuring exercise that was e xpected to usher the company back to profitability.
ART attributed the expected loss to the discontinued Fleximail division – all costs relating to the discontinuance of the operation were brought to account in the year including retrenchments and impairment of losses.

It seems like the company also got into the new financial year still carrying on its previous debt, which could have been partially cleared by the rights offer proceeds.
For this period last year ART made a loss of US$6,3 million and of this US$2,4 million was attributed to discontinued operations which included a retrenchment provision of US$1,4 million in the Mutare

Operation. The loss after tax from continuing operations was US$3,9 million.
The loss included the impairments of the assets of the paper and stationery division of US$3,8 million, which was then a reflection of the decline in value in use as a result of low capacity utilisation.
Overall profitability was affected by the high interest costs of US$1,4 million and high operation costs relative to the turnover.

Operational costs are dragging down most companies, as the cost of production and services in Zimbabwe remains exceptionally high.
The cost of funding has remained on the high side and it is making it difficult for companies to break even.
Given last year’s loss it means ART’S loss for 2011 would be lower than US$6 million. The reasons would also be the same compared to last year, losses from discontinued operations and operational costs.

ART managed to raise US$4 million through a rights offer of which US$3,9 million of the proceeds were applied to debt and US$500 000 to replacing the Chloride smelter.
After experiencing the most difficult year in 2010, against the background of a successful rights offer and a restructuring exercise the group was hoping for a better 2011.
The closure of non-profitable operations was supposed to offer a platform for a smaller and more focused group.

At the financial period ended December, the group said it would realign its operating costs to the turnover levels and focus more on its batteries business, paper and stationery.
Given all these strategies it seems something went wrong including the discontinuation of Fleximail during the year – in this case it paints a picture that it was more costly to maintain Fleximail.
Despite struggling since dollarisation, going forward, ART still has underlying profitable business, Chloride, Battery Express Zimbabwe, Chloride Zambia, Kadoma Tissue, Softex and Eversharp.

On a similar note TSL Limited also issued a profit warning statement advising shareholders that profitability for the year ended October 31 2011 is below expectation.
This is due to a tough second half caused by, among other things, less tobacco intake following the downward revision in tobacco output and tougher trading environment.
The worst affected included the agro- chemicals division and a book loss following the disposal of Premier Milling by subsidiary Chemco.
TSL owns 39 percent of Chemco.

The Tobacco Industry and Marketing Board had projected between 170 and 200 million kilogrammes from 120 million kilogrammes last year.
But deliveries totalled about 132,3 million kilogrammes by year-end of the selling season this year.

TSL, which last year controlled about 44 percent of the tobacco sales market also suffered due to the increase of buyers on the market.
The group’s subsidiaries include Hunyani, Reliant Computers, Luxaflor Roses, Cut Rag Processors, Bak Logistics and Avis.