Art turnover down 7%

Published: 03 March 2014

Art reported a nominal decrease of 7% in its turnover to $10.6 million in the first 4 months of its current financial year, CE Richard Zirobwa told the AGM earlier today.

"Our trading hasn't been too great for the first 4 months with turnover to date down some 7% compared with similar period last year.

"This was driven mainly by the fact that our volumes in the main business units, batteries for instance are actually down from prior year," he said.

The full year budget for the group's turnover is $37 million.

Zirobwa indicated that batteries sales volumes dropped by 16% to 45 601 while tissue manufacture dropped 13% to 1 005 tonnes.

Sales volumes for Battery Express, Chloride Zambia and Tissue Converted also went down 18%, 8% and 3% each to 23 486 units, 24 865 units and 714 tonnes respectively.

"The only business that has done extremely well in terms of volumes is Eversharp which is up on prior year by 6%. And as a result of challenges in the market related to demand our capital utilisation for the first time since dollarisation in the main factories has also gone backwards," noted Zirobwa.

Under capacity utilisation, he noted that tissue manufacture went down 28% to 50%, tissue converted 12% down to 37%, batteries 10% down to 45% and pens 8% up to 95%.

He said the key issue to note in the market is that they can "cheerfully be adding turnover but the major challenge is the collectability of those revenues."

"So rather than chase those revenues, I think it's very prudent for management to be looking at our debtors' book quite critically and try to manage the credit risk in the current environment," he added.

Zirobwa told the meeting that the group's margins dropped to 29% in the period under review from 31% last year.

He said the group will probably record a loss in the HY although they expect to recover from the loss position "because normally the second half is better driven by the winter periods were volumes recover."

Going forward he said they are looking at building stocks as they prepare for the winter period so very soon the group's stock levels will begin to pick up and will start to see a bit of profitability in both the paper and battery businesses.

"The cash flows are marginally positive. I think we're in a situation where a lot of pressure in the business is coming from the need to retire our outstanding debt.

"As at September our debt was standing $8.103 million ($8.137 million:2014). We're still very much in the same position but when you look at the overall picture our gearing has moved from 72% to 78%," said Zirobwa.

Furthermore, he noted that the strategic issues they have been focusing on as a business are the Taesung facility, debt resolution and cost rationalisation.

Commenting on the facility, he said; "We did have a change in strategic shareholding in the business sometime in August with a shareholder coming in at about 34%. As a result of that shareholding change there is support in terms of funding that was offered by the shareholder on two fronts. One from the working capital side and the other is on the capital expenditure side."

He indicated that the working capital side is up to a limit of $3 million and the capital expenditure side is up to a maximum of $15 million.

Zirobwa said this is not to be all at once and the target of these funds on the Capex side is to bring in $700 000 worth of equipment that will enable the firm to manufacture batteries at a slightly lower cost and of better quality.

On the Eversharp side, the firm is also looking at automating the factory in order to bring the overall cost of the pen down.

Moving on to paper he said they are looking at improving the quality of the raw material they are producing in Kadoma and they're putting in about $1 million.

"We don't expect most of the gains related to the Capex to be realised in the current year but we do expect an uplift in the coming year," he added.
- zfn

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