ART battles currency, liquidity turmoil amid Zim’s economic strain
STAFF WRITER
Amalgamated Regional Trading (ART) Corporation faced a turbulent first quarter to December 31, 2024, as a severe liquidity crunch, currency depreciation, and inflationary pressures weighed heavily on its performance.
The company reported declines in both sales volumes and revenue, reflecting the broader economic instability affecting Zimbabwe’s business landscape.
The quarter coincided with the Reserve Bank of Zimbabwe’s (RBZ) 43% devaluation of the newly introduced Zimbabwe Gold (ZiG), which eroded nearly 30% of corporate balance sheets. This sharp depreciation was followed by a liquidity squeeze, creating a tough operating environment for businesses struggling to balance cash flow and supply chain disruptions.
In a trading update, ART CEO, Milton Macheka, highlighted the complexities faced during this time: “The first quarter was marked by constrained liquidity with moderate movements in exchange rates and inflation. The authorities remain seized with efforts to level the playing field and bring more predictability to the operating environment. The complexity of the informal markets in providing a sustainable channel was evident during the period under review as trade volumes were susceptible to changes in the policy framework.”
ART’s overall sales volumes experienced a 13% decline compared to the previous year, resulting in an 11% decrease in revenue as the company endeavored to adapt to the evolving operating environment. The tissue and stationery divisions were particularly affected by liquidity challenges within the formal sector, exacerbating working capital difficulties.
Despite maintaining its presence in export markets, ART faced constrained margins due to an unfavorable policy framework. Capital allocation during the quarter prioritized debt servicing, payables, cost optimization initiatives, and sustaining capital expenditures in the energy, stationery, and timber sectors.
The battery division saw a 12% reduction in volumes from the prior year, attributed to supply chain issues and power disruptions. While product availability improved towards the end of the quarter, pricing disparities and liquidity constraints continued to impact sales volumes. The company is actively reviewing its distribution model to align with the changing operating environment.
Paper milling operations remained suspended due to unfavorable conditions. However, tissue trading initiatives launched in the previous year showed promise and are slated for expansion. Additionally, opportunities in the hygiene sector are being explored to diversify and enhance segment contributions.
Eversharp, ART’s stationery division, reported a 17% decline in volumes compared to the prior year, influenced by pricing disparities in the formal sector and the influx of low-quality counterfeit imports disrupting the market. Logistical delays in traded products posed challenges, though improvements have been noted with the adoption of multiple sourcing strategies.
Conversely, the Mutare Estates division experienced a 16% increase in volume growth over the previous year. Strong demand for structural timber allowed the business to maintain robust margins during the quarter. Despite a delayed rainy season affecting planting schedules, significant recovery was observed in January 2025. Investments in additional equipment are underway to address extraction challenges associated with the extensive gum resource.
Support from financiers and the anticipated disposal of underutilized assets are expected to enable the business to meet its obligations and fund key sustaining capital expenditures and trading initiatives. Looking ahead, ART anticipates the economic environment to remain complex and challenging with constrained liquidity. The group is optimistic that proposed regulatory interventions will improve trading in the formal sector. Measures taken to reduce risk and enhance cash generation are expected to help the group navigate the difficulties associated with scaling back and restructuring operations.
