- ART reports 9% volumes decline in 1Q24
- Batteries, the major revenue contributor records volume decline for the 5th quarter
- Group to pursue better funding options to reduce short term borrowings
Amalgamated Regional Trading Holdings Limited (ART), recorded an overall volumes slump of 9% due to worsening economic headwinds which impacted raw material availability, higher operating costs and liquidity challenges for the first quarter ending 31 Dec 2023.
ART is involved in the manufacturing and retailing of Lead-acid batteries, Pens, Stationery, Tissues, Hygiene products and Forestry Resource Management. These products are manufactured and distributed through its world class manufacturing and distribution operations in Zimbabwe and Zambia.
The group's revenue for the quarter increased to ZWL$58.9 billion, 67% ahead of prior year. The revenue gain denominated in Zimdollar doesn't mean much for a currency which has lost around 90% of its value against the US dollar in 2023. It makes more sense to gauge the group's performance by looking at how volumes fared across its various divisions namely; Batteries, Paper Volumes, Eversharp and Mutare Estates.
Batteries saw volumes declining by 14% from the prior year volumes of 91 226 units due to depressed demand and pricing challenges in the market. Export demand remained strong with sales volumes being affected by foreign currency allocation delays in both Malawi and Zambia as measures to mitigate credit risk were maintained. Batteries contribute around 90% to the group's top line and the fact that its volumes have been declining for the fifth straight quarter now is a serious cause for concern.
Paper volumes were seriously affected by a 2-month shut down which was necessitated by the need to relocate the tissue converting unit to Kadoma. The temporary shutdown coincided with increased imports in the informal market. The company is confident that the business will be in a position to compete significantly in the coming quarters. As a result, sales were predominantly from stock and were 53% below the prior year at 622 tonnes during the period.
Eversharp, the pens and stationery unit of the business saw volumes increasing by 19% to 15 188 000 units during the quarter on the back of improved product availability. Demand was firm and budgeted volumes could not be met due to the delayed delivery of raw materials. Exports contributed 5% of the volumes whilst trading stationery lines continued to perform well contributing 6% of total revenues. Under Mutare Estates, timber volumes at 2,583 cubic meters increased by 16% from the prior year as demand remained firm and sawmill efficiencies improved. Operating costs were contained during the period but the unit faced a challenge in recovering occupancy costs in full from tenants at its Mutare Mill. Volume growths at both Eversharp and Mutare Estates were not significant enough to overturn the company's overall performance due to their low weights.
Looking ahead, management guidance is pointing to a complex and unstable economic environment. The group will continue to implement difficult short-term measures to safeguard profitability and liquidity to enable the business to withstand an extended period of uncertainty. ART expects that by half year the paper business will be a customer focused single unit with a much lower cost base following the site rationalisation.
The group continues its drive to reduce short term borrowings whilst exploring appropriate funding options for its growth initiatives for the core energy storage business. Plans to dispose underutilized land in Mutare are ongoing while management is hopeful that ongoing engagements with the authorities on the implementation of policies that resolve the pricing challenges in the local market as well as measures that support exports will bear fruits.
