LIVINGSTONE MARUFU
Diversified manufacturing giant, ART Holdings has swung into loss of ZWL$696.5m during the full year ended September 30 2021 from a profit of ZWL$821.4m during the prior period last year due to Covid-19 which affected supply chains and inflation.
In a statement accompanying 2021 full year results, ART chairman Thomas Wushe said the delays in the disbursement of foreign currency allocated on the auction market affected market confidence resulting in the widening of the gap between the auction market exchange rate and the alternative market.
“The group’s financial performance was impacted by Covid-19 induced restrictions and the economic after effects. The batteries segment remained resilient and helped to offset the under whelming performance of the paper divisions,” Wushe said.
He said there was an upturn in inflation in the second half of the year.
The sharp inflation-induced input costs increases could not be aligned to pricing, resulting in a significant decrease of gross margins to 39% from 52% in the prior year.
ART operating expenses increased by 66% due to general inflationary increases in costs and the initiatives taken to stimulate demand and cushion employees.
The Covid-19 pandemic continued to disrupt businesses across the globe and materially impacted the group’s performance during the reporting period, the company said.
Sales volumes recovered across all the divisions with an overall increase of 30% compared to the prior year.
Revenue increased by 27% in inflation adjusted terms as demand recovered.The group took significant strides in the restructuring of the Paper business with the acquisition of Nampak’s 50% shareholding in Softex and the purchase of a Toscotec Tissue Machine from Twinsaver (South Africa) Group during the year.
These investments are a result of the difficult trade off decisions taken to mitigate the long term consequences of delaying critical capital expenditure and mark a pivotal moment in ART’s Paper business restoration initiatives, the company said.
“The installation of the Tissue machine in Kadoma is progressing well and is expected to be completed in the second half of the financial year. The group’s financiers supported and enabled these key strategic projects which will enhance competitiveness and create holistic value across the paper chain,” Wushe said.
He said the strategic investments to increase capacity and expand the distribution network in the batteries business were vindicated as the automotive battery demand remained strong, the company said.
“The performance was ahead of recovery expectations, as volumes increased by 39% despite supply chain disruptions. Export volumes were driven by the recovery in Zambia. Capital expenditure was limited to essential spend as the efforts to preserve liquidity continued,” Wushe said.
Sales volumes for Kadoma Paper Mills and National Waste Collections increased by 27% and 13% respectively albeit from a low base.
Softex volumes reduced by 9%, affected by the intermittent supply of raw materials and spares.
Eversharp volumes increased by 35% as restrictions were eased and school calendar disruptions reduced.
The Mutare business remained unaffected by the pandemic and capitalised on the firm timber market demand.
The saw milling capacity was increased during the year and has enabled the division to increase its milling partnerships, the company said.
In the outlook, ART is bullish saying the underlying demand for core products remains robust and its focus on the changing consumer preferences and emerging technologies will be key in sustaining the group’s strong performance in the market.
