ART Holdings volumes reducing by 18% on average across the business units

ART Holdings Limited (ARTD.zw) HY2019 Interim Report

We have extracted the Chairman’s statement from the 2019 Half report  for ART Holdings Limited, listed on the  Zimbabwe Stock Exchange:

OVERVIEW

The country’s economic challenges continued during the year ended 30 September 2019. Currency reforms embarked on by the fiscal and monetary authorities culminated in the introduction of the Zimbabwe dollar in June 2019. Foreign currency shortages continued with the local currency depreciating from the fixed exchange rate of 1:1 to the United States Dollar to 1:15 at the close of the period. The Group remained resilient and maintained a positive performance across all its business units.

REPORTING CURRENCY AND COMPLIANCE WITH IFRS

There was a change in the transactional and functional currency following the reintroduction of the local currency. The Group’s financial statements are presented in Zimbabwe Dollars (ZWL) for the current year. The 2018 comparative numbers were converted into Zimbabwe Dollars (ZWL) at a rate of 1:1 in compliance with Statutory Instrument 33 of 2019 and then adjusted for inflation. The requirement to comply with the legislation presented challenges in terms of compliance with International Financial Reporting Standards due to the inconsistencies of Statutory Instrument 33 of 2019 withAS 21 “The effects of changes in Foreign Exchange Rates”. The Group’s Consolidated Financial Statements have not in all material respects been prepared in compliance with the requirements of IAS21. The reporting period was characterized by multiple exchange rates and therefore the Board advises users to exercise caution in the interpretation of these financial statements.

FINANCIAL REVIEW

The continued shortage of foreign currency and the persisting liquidity constraints affected the Group’s trading, resulting in overall volumes reducing by 18% on average across the business units. Revenue increased to $267 million due to price increases effected in response to the increased cost of production.

Export volumes for batteries and paper increased by 4% and 7% respectively on the back of consistent product availability and increased selling effort in Zambia and  Malawi. Volumes for solar and industrial batteries increased by 12% from prior year as opportunities in the local market could not be fully exploited due to product supply gaps. The Softex drive to expand its product range yielded positive results as hygiene volumes increased by 8% from prior year. Included in income is ZWL$157 million relating to the revaluation of assets in an attempt by the Group to fairly present the Statement of Financial position. The Group’s foreign currency exposure reduced significantly from US$4 million as at half year to US$2 million as at 30 September 2019. Net Borrowings at ZWL$23.767 million were contained as increased cash sales and concerted collection effort on receivables enabled the Group to minimize pressure on cash resources. Capital expenditure for the year was restrained to ZWL$8.2 million with focus being on critical projects and improvements.

SUSTAINABILITY REPORTING

ART Holdings Limited is pleased to present the first annual report covering our sustainability performance. The Group has taken a bold step to align operations against the rising expectations by regulators and other strategic stakeholders to operate sustainably. We understand the limitations of our planet and how our operations if not managed can threaten our ability to operate in the long term. This understanding has led us to adopt sustainability as a strategic tool to manage the stakeholder issues that affect our capacity to create value. We have adopted the Global Reporting Initiative (GRI)Standards to help us identify opportunities and manage our environmental social andeconomic impacts.

DIVIDEND

The Group is not in a position to declare a dividend as the Board in light of the prevailing liquidity constraints is focusing on clearing foreign creditors and key capital projects.

DIRECTORATE

There were no changes to the Board during the period.

OUTLOOK

The challenges in the economic environment are expected to persist in the short term as inflation and foreign currency volatility will constrain trading. The Group will continue to defend its market share whilst exploiting new export markets and opportunities existing in the hygiene, solar and industrial battery segments. Operational efficiencies will be enhanced to ensure that costs are contained and our customers continue to receive quality products and superior service.

APPRECIATION

I would like to express my sincere gratitude to our customers, suppliers, bankers and other key stakeholders my fellow directors management and the entire team at ART for the continued contribution and support during the period under review.

T U Wushe
CHAIRMAN

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