ART reels under subdued trading

SAMANTHA MADE

Publicly traded diversified conglomerate, Amalgamated Regional Trading Holdings Limited (ART), is battling a difficult trading environment, with subdued performance weighing heavily on sales, turnover, and overall profitability.

The group, which operates in paper, stationery, battery, and timber manufacturing, has long been considered a bellwether of local industrial activity.

However, the latest trading update for the third quarter ended June 2025 paints a sobering picture of a business grappling with structural and macroeconomic headwinds.

Chief Executive Officer Milton Macheka disclosed that the group’s sales volumes declined by 7% during the quarter, attributing the slump to weak trading conditions.

“The Group’s overall sales volumes declined by 7% during the quarter as trading remained subdued,” Macheka said.

The pressure on ART’s revenue base was compounded by a dramatic fall in export volumes and persistent power shortages that disrupted production. Turnover for the quarter dropped to US$7.8m, marking a steep 23% decline compared to the same period last year.

“Turnover for the quarter was US$7.8m, a decline of 23% compared to the prior year, largely due to reduced export volumes and power-induced product shortages. Export volumes fell by 32% with margins further eroded by the reduction in the foreign currency retention threshold,” Macheka explained.

Export earnings, once a crucial buffer for ART, have been squeezed by Zimbabwe’s foreign currency policies.

Authorities recently adjusted the export retention threshold, compelling exporters to surrender a greater portion of their foreign currency receipts to the central bank in exchange for volatile local currency.

For exporters like ART, this means thinner margins and tighter cash flows at a time when global competition is intensifying.

Industry analysts say the group’s export decline is symptomatic of broader challenges facing Zimbabwean manufacturers, many of whom are struggling to remain competitive in regional markets. Rising input costs, unstable electricity supply, and constrained access to foreign exchange have eroded their ability to meet demand consistently and price competitively.

ART’s woes have also been deepened by the mothballing of its paper mill, which has saddled the group with significant closure costs and ongoing obligations. Macheka confirmed that this decision had placed additional strain on the group’s already subdued performance.

“The mothballing of operations at the mill has resulted in material closure costs and related obligations, significantly weighing on the Group’s financial performance. Environmental and market conditions have not improved sufficiently to support the viability of the operation, necessitating consideration of discontinuation,” he said.

The closure of the mill represents more than just an internal restructuring. It signals the harsh reality confronting Zimbabwe’s paper and packaging sector, which has been in decline for years due to outdated machinery, competition from cheaper imports, and high production costs.

The shutdown has ripple effects across the value chain, from timber suppliers to stationery retailers, undermining industrial linkages and employment.

Despite these challenges, Macheka stressed that ART is not without lifelines. Demand in the battery and timber divisions has remained firm, providing the group with a foundation on which to rebuild.

“Notwithstanding these challenges, the Group remains fully focused on safeguarding liquidity and restoring profitability, underpinned by firm demand in batteries and timber, operational improvements, and disciplined cost management,” he noted.

The battery division, in particular, has benefited from Zimbabwe’s energy crisis, which has spurred demand for alternative power solutions such as inverters, solar batteries, and backup systems. Timber, meanwhile, has continued to find ready markets both locally and regionally, supported by construction and furniture industries.

However, both segments face their own hurdles.

The timber business is vulnerable to environmental sustainability issues, while battery manufacturing depends heavily on imported raw materials, making it susceptible to foreign currency shortages and global price swings.

Looking ahead, ART’s leadership is pinning its hopes on partnerships and stakeholder engagements to reposition the group for recovery. According to Macheka, negotiations are ongoing with potential partners to inject fresh impetus into the business.

“Management anticipates that ongoing discussions with potential partners and key stakeholders will be concluded by year-end,” he said.

Partnerships could provide not only capital but also technology, market access, and operational efficiencies that ART desperately needs to regain competitiveness.

Such alliances have become increasingly common in Zimbabwe’s manufacturing sector, as firms seek to survive through joint ventures and strategic collaborations.

ART’s subdued performance mirrors the broader industrial malaise in Zimbabwe, where companies continue to operate in a high-cost, low-demand environment.

Power shortages remain a chronic problem, with the national grid unable to provide consistent electricity.

Many companies resort to expensive diesel generators, pushing up production costs and eating into already thin margins.

The policy environment has also been a source of instability. Frequent changes in foreign exchange retention rules and monetary policy have created uncertainty for exporters, discouraging investment in capacity expansion.

For companies like ART that rely on both local and regional markets, this policy inconsistency undermines long-term planning.

Moreover, subdued consumer spending in the domestic market has further strained manufacturers. With inflationary pressures eroding disposable incomes, demand for non-essential goods such as stationery and paper products has declined sharply.