ART Holdings half year volumes lower

Art Holdings Limited (ART) says overall sales volumes for the interim period to March 31, 2024 declined by 10 percent from prior year largely as a result of challenges in the trading environment severely impacting the business.

The company in a trading update said pricing distortions induced by exchange rates disparities in the market affected trading and the business had to implement measures to adapt which included curtailing paper exports.

“Exports were 4 percent below the prior year due to the deliberate decision to stem losses and reduce exposure as forex currency shortages persisted in Zambia and Malawi,” group chairman Dr Thomas Wushe said.

The group revenue for the half year increased by 8 percent to $500 billion in inflation adjusted terms compared to prior year reflecting movements in pricing in line with inflation and currency movements.

Wushe said gross margins increased to 51 percent as input cost increases were recovered through pricing.

During the half year period, ART said efficiencies were affected by reduced plant availability due to power outages and delays in receiving imported raw materials.

The chairman said performance overall for the period was weighed down by the losses in the paper segment and an estimated loss of US$112,000 was recorded for the period.

“The group faced significant cash constraints as it sought to realign its operations following the difficult decision to temporarily shut the mill and stop paper exports,” Wushe said.

He said tight working capital management and the successful disposal of the underutilised stands in Mutare for US$1,2 million helped to ease the cashflow challenges.

In terms of divisional performance, batteries volumes declined by 11 percent overall for the local market and 16 percent in Zambia compared to the prior year.

Wushe said market demand was generally subdued, however, there was increased competition in the large battery and maintenance free market segments where imported products gained ground.

“The defensive pricing strategy was softened at the end of the quarter as availability of foreign currency improved in Zambia. The order book for industrial batteries was firm with increasing mining and industrial corporate clients opting for our customised battery energy storage solutions,” he said.

In the paper division, the group temporarily shut down the tissue machine, PM1 in Kadoma which it has operated for over 40 years.

Wushe said the mill management and employees have put enormous effort over the years to make the machine competitive, however, the worsening operating conditions necessitated the shut and resultant staff redundancy.

“The new mill, PM2 has been successfully tested with both recycled and virgin pulp, however, it still requires further work on the effluent and energy management systems before being commercialised.

“The relocation of the converting plant was completed at the end of the period and full-scale production is expected by end of June,” said Wushe.

During the half year period, Wushe said National Waste Collections was scaled down in line with the reduced exports and mill demand for wastepaper.

“Paper volumes although not directly comparable to prior years declined by 62 percent,” he said.

At eversharp, volumes were 6 percent ahead of prior year as at half year despite power outages and logistical delays that impacted raw material imports in the second quarter.

Wushe said demand was firm during the back-to-school period with the newly introduced EV Pen Pal and EV Pen Mate products performing well in both scholastic and non-scholastic market segments.

“The division’s brand awareness campaigns were well received and appreciated given the increased imports and counterfeit products on the market,” he said.

The Mutare Estates timber volumes were 26 percent ahead of the prior year as demand remained firm across all the market segments.

Wushe said gum pole volumes recovered as off takers were developed in the informal market.-ebusinessweekly