ART restructures to enhance performance

STAFF WRITER

ART Corporation is placing significant emphasis on its ongoing restructuring efforts to enhance performance and agility, enabling the company to better seize opportunities across its business units.

Board chairman, Dr. Thomas Utete Wushe, highlighted in a statement accompanying the group’s financial statement for the year ending September 30, 2024, that the company was optimistic about its financial performance, despite challenges brought on by the broader economic environment. He noted that the restructuring efforts had been impacted by unfavorable conditions in the market.

Dr. Ushe explained that the company’s decision to reduce investment in its paper division led to substantial losses, particularly when factoring in one-time restructuring costs and unrecouped expenses.

On the other hand, the energy storage, timber, and stationery sectors showed resilience, though power shortages affected product availability during peak demand periods.

The company’s revenue for the year fell 11% to ZWG33.3m from ZWG$38.2m in the previous year, primarily due to product availability issues and the intentional reduction in paper production. Export volumes decreased by 15%, and the persistent foreign currency shortages in the region led to significant delays in payments from Zambia and Malawi.

However, gross profit margins improved by 2 percentage points to 44%, thanks to a shift in the sales mix as paper production slowed down.

 Dr. Wushe also pointed out that operating expenses increased as service providers shifted to using hard currency to hedge against currency devaluation.

Despite these challenges, Dr. Wushe emphasized the company’s focus on restructuring and repositioning itself for future growth. The company significantly reduced short-term bank debt by using proceeds from property sales to pay off loans.

In the energy storage division, battery volumes decreased by 8%, as the business faced a tough economic climate, power disruptions, and supply chain issues.

However, demand remained strong, particularly in the mining, energy, and telecommunications sectors. The division invested in new technology, including maintenance-free batteries and expanded “battery clinics” to combat the sale of counterfeit products.

The stationery division saw a 10% drop in volumes, partly due to power shortages and the influx of low-cost imported pens, especially during the back-to-school season. However, the launch of new Eversharp pens performed well and contributed 10% of total revenue. The division also experienced positive developments, such as improved raw material supply and the resolution of quality issues.

In the paper division, Dr. Wushe noted that the scaling back of production to optimize new equipment and restructure the business would extend into 2025, given ongoing power supply and market challenges.

Despite these difficulties, the company remains confident in its long-term prospects and plans to continue investing in innovation and technology to strengthen its capabilities.

The company’s timber division also saw growth, with sales volumes up by 3% from the previous year. However, the sector faced challenges such as illegal mining activities and extraction bottlenecks. Despite these obstacles, gross margins improved due to better recovery rates and harvesting practices.

Dr. Wushe reiterated that while the company faced several external challenges, it was taking the necessary steps to overcome them and position itself for sustained growth in the future.

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