Chronicle Editor
Michael Makuza, Business Reporter
ZIMBABWE Stock Exchange (ZSE)-listed manufacturing group, Amalgamated Regional Trading (ART) Holdings, says crippling power cuts experienced in the quarter that ended 31 December 2022 disrupted its operations resulting in a three percent drop in volumes and a cut in exports.
The diversified group is a manufacturer of batteries and stationery, operates paper mills, and national waste collections as well as running some estates in Mutare.
While commending Government’s efforts to contain inflation and curb further devaluation of the local currency, ART Holdings says power cuts were the biggest hindrance.
“The gains from the relative stability of exchange rates and the easing of inflation in the last quarter of the 2022 financial year were reversed as electricity supply challenges worsened and seriously affected operations,” group secretary, Mr Abisai Chingwecha, said in a trading update for the period.
As a result, Mr Chingwecha said overall volumes for the period declined by three percent compared to 2021 while profitability was also affected by reduced plant availability resulting in significant under-recoveries, particularly at the mill.
“Export volumes fell by 17 percent as orders could not be met in December. Revenue increased by 39 percent in inflation-adjusted terms from the prior year driven by the increased local battery and pen sales despite the intermittent supply gaps arising from outages in power and water supplies,” he said.
However, Mr Chingwecha said margins remain strong as costs have generally been recovered from customers with the increasing hard currency sales continuing to provide a border to limit the impact of the foreign currency movements.
“Foreign currency transactions continued to increase across the economy despite the narrowing of the exchange rates on the official and the alternative market. The resulting liquidity constraints affected demand,” he said.
“The commercialization of the new tissue mill was affected by the unprecedented power challenges during the period with the delay necessitating additional support from lenders to ease the strain on the group.”
Meanwhile, on a divisional level, Mr Chingwecha said the overall batteries volume was one percent lower than the prior year whilst export volumes also declined by 13 percent on account of product shortages.
He said the division was cushioned by the greater inventory holding levels, which had been put in place in response to the global supply chain disruptions.
On one hand, paper volumes decreased by 10 percent compared to last year as the anticipated efficiency improvements from the recapitalization program were delayed as the mill continues to rely on imported waste paper while the recovery of local collections remains slow.
The group recorded an increase of five percent in volumes at Eversharp compared to the previous year.
Mr Chingwecha said opportunities to meet increased local demand were lost due to delays in receiving imported raw materials in December hence export orders could not be met.
“The retooling of the division, which had been held back, was completed in December. The increased pen production capacity will ensure that product supply shortages are averted particularly during the peak back-to-school periods,” he said.
The group’s Mutare estates recorded a decline of 29 percent in timber volumes during the period as their focus remained on sustainability. Value addition and seedling projects enabled the division to maintain its revenues and profitability.
On their outlook, Mr Chingwecha said that improved power supply will enable the optimization of the paper projects.
“The group remains resilient and will be better placed to take advantage of emerging opportunities on completion of the ongoing capital expenditure projects,” he said.
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