adminArt Holdings turnover in the four months to January was down 7 percent over the comparable year ago period in tandem with the “not so great” trading conditions.
Chief executive Mr Richard Zirobwa told the annual general meeting on Friday that the current liquidity constraints in the economy are forecast to persist for the remainder of the year. The group is budgeting turnover of US$37 million for the full year but will make a loss at half year and break even at the end of the year.
He said as a result of the volume decline, operating profit was lower than last year. “We do however expect to recover in the second half. We are looking at a business which will build up stock going forward” Mr Zirobwa said in the four-month period, volumes were down across all strategic business units save for pens, which registered a 6 percent increase in sales volumes and a growth in capacity utilisation to 95 percent.
Tissue manufacture sales volumes were down 13 percent leaving capacity at 50 percent. Tissue converted was down 3 percent at 37 percent capacity. Batteries were 16 percent lower with capacity utilisation at 45 percent, Battery Express dropped 18 percent and Chloride Zambia volumes were down 8 percent.
Mr Zirobwa said margins were down to 29 percent from 31 percent but this was in line with budgets as the group had anticipated a knock as competition within the industry is stiff.
Cashflows within the group were marginally positive while debt had remained constant since September 2013 at US$8,137 million from US$8,103 million. The average cost of the debt was at 18 percent against 20 percent at the last full year.
Gearing was now at 78 percent from 71 percent. Mr Zirobwa said it was prudent to look at debtors book, trying to manage the credit risk.
He said the group was not in panic but recovery will be based upon recapitalisation. Funding initiatives had been put in place and technology partners had been identified.
In an announcement to shareholders on Friday, Art said Taesung Chemical Company, had availed an US$18 million facility. About US$3 million of that amount would go towards working capital while US$15 million would be used for capital expenditure.
Mr Zirobwa said the money would not be drawn all at once. “Just to deal with inefficiencies at the factory, we will require US$900 000, this will see a reduction in production costs and in turn our selling costs to match regional competitors who are currently an odd US$7 below us.”
He added: “We must be able to produce competitive batteries.” On the Pens, Mr Zirobwa said they require in total US$900 000 but only US$500 000 will automate the production process, eliminating 70 people who operate the line but reducing the cost of the pen to US4c from US6c.
The Paper and Tissue business required US$5,4 million in the next two years. Mr Zirobwa said in the short term the group requires US$500 000 to improve the quality of the waste paper.
However to improve the scale of operations the group would need additional capital for a 30 tonne mill. The group uses a 15 tonne mill currently.
Plans were being made to covert US$4 million short term to long term debt while the group was also working on a US$3 million working capital facility.
He said overall, uplift in numbers is expected in 2015 going forward.- FinX.
Online Reporter