Online Reporter
Tapiwanashe Mangwiro [email protected]
ART Corporation’s operating performance improved in the nine months to June despite lower sales volumes, as restructuring, tighter cost controls and a better product mix helped the group navigate working-capital constraints and intense competition.
Group turnover for the nine months remained broadly flat at US$21,34 million, compared with US$21,32 million in the corresponding period last year.
However, quarterly turnover declined 9 percent to US$7,06 million from US$7,79 million, reflecting weaker battery sales, working capital limitations and supply chain disruptions.
Overall group sales volumes fell 15 percent during the third quarter, leaving nine-month volumes 3 percent below the prior year.
The group said its operating results nonetheless improved from the comparable period, although margins continued to face pressure from low plant utilisation, competitive pricing and higher input costs.
Working capital remained the major constraint on production and asset utilisation, with management expecting the continued settlement of legacy obligations to free up cash and management capacity for core operations.
Energy Storage, one of the group’s key businesses, returned to operating profitability during the period, although it continued to operate below its capacity and market potential.
Battery volume in Zimbabwe fell 26 percent during the quarter and 9 percent over the nine months, while Zambia recorded a 16 percent quarterly decline and a 9 percent drop for the nine months.
Production was affected by working capital constraints, lower scrap collections and supply chain disruptions, resulting in average capacity utilisation of about 62 percent during the quarter.
The business also tightened credit controls in higher-risk distribution channels to protect cash collections, while lower-priced imported batteries gained market share across the region.
In the stationery and tissue business, Eversharp volume rose by 13 percent year on year, supported by improved product availability and continued acceptance of its product range.
However, raw material availability and limited working capital constrained further growth. Management said it was seeking to expand the brand’s market presence while improving margins through cost reductions, product mix and better supply-chain execution.
Softex continued operating on a leaner model following the group’s exit from integrated paper manufacturing.
New compact tissue mills supplying locally produced jumbo reels are expected to support its conversion-focused model by shortening supply chains, reducing reliance on imported tissue and lowering working-capital requirements.
Mutare Estates remained the group’s strongest performer, with sales volumes 24 percent above the prior year for the nine months.
Firm structural timber demand, improved milling efficiencies, disciplined pricing and cost control supported the division, which continued to provide an important source of cash and stability.
The group also advanced its strategic reset, with its principal operating divisions being established as separate subsidiaries. Banking and tax registrations have been completed, while the proposed
Group Scheme of Reorganisation is under consideration by tax and regulatory authorities.
ART chief executive officer Mr Milton Macheka said the restructuring was intended to create a stronger platform for the businesses.
“The new structure will give each business clearer accountability and a more suitable platform to access working capital, equipment finance, and strategic partners,” he said.
The group expects the reorganisation to be completed by the end of the financial year, subject to regulatory approval. Its priorities include settling legacy obligations and redirecting capital towards working capital and essential plant investment.
Looking ahead, management expects the final quarter to remain competitive, with liquidity constraints, higher input costs and import competition continuing to weigh on the market.
Priorities include restoring battery volumes, increasing plant utilisation, strengthening working capital, improving supply chain reliability and reducing costs.
The trading environment during the quarter was relatively stable. In Zimbabwe, low inflation, exchange-rate stability and lower policy interest rates improved business planning, while increased policy support for local manufacturing was encouraging.
However, demand remained subdued, with the seasonal increase in replacement battery sales weaker than expected. Consumer and business liquidity remained tight, while low-priced imports exerted further pressure on local manufacturers.
Operating costs also increased, particularly for packaging, fuel and battery raw materials, while a stronger South African rand raised the US dollar cost of some regional inputs. Global trade and geopolitical tensions extended supply lead times, although improved grid power availability reduced reliance on more expensive alternative power.
