ART Holdings Limited (ARTD.zw) HY2022 Interim Report
It is my pleasure to present the abridged reviewed financial statements for ART Holdings Limited for the Half Year ended 31 March 2022.
The macro-economic environment remained challenging and uncertain as continued shortages of foreign currency, depreciation of the local currency and the inflationary upcycle dampened market improvements which followed the easing of COVID 19 restrictions.
The Group remained resilient despite the challenges and registered moderate volume growth across its business units. The demand for batteries in the region remained strong and the favourable trading conditions in the Zambian market anchored the strong export performance. The Group continued to engage the monetary authorities on the unfavourable export proceeds retention threshold which poses a significant risk to the viability of exports.
The Group posted revenues of ZWL$3,609billion in inflation adjusted terms, an increase of 18% compared to the prior year. Overall volumes for the period grew by 9%, with strong performance from the battery export market and volume recovery in all the paper units. The historical turnover achieved of ZWL$2,957 billion represents an increase of 100% from the prior year reflecting the impact of increased foreign currency sales recorded at the prevailing official market exchange rates. The Directors would like to advise users to continue to exercise caution in their use of the Group’s Abridged Financial Results due to the distortions brought about by the continued existence of multiple exchange rates.
Gross margins declined by 5 percentage points to 34% reflecting the impact of increased export volumes and the general increases of input costs. Overall, margins remained strong as stringent cost control was maintained across the divisions.
The battery business performance in the local market was subdued during the period due to the cumulative impact of the pandemic which exacerbated already high levels of pressure on consumers from inflation and currency instability. Total battery volumes increased by 6% compared to prior year.
The paper business segment volumes recovered as the foreign currency auction market induced pricing distortions reduced in the second quarter. The relentless focus on supply chain improvements and cost efficiencies yielded positive results. Paper volumes increased by 1% compared to prior year.
Eversharp performed well on the back of strong demand driven by the year end national examinations and back to school preparations. Volumes increased by 39% compared to the prior year.
Mutare timber volumes increased by 10% compared to the prior year. Harvesting was affected in the second quarter by incessant rains. Timber demand remained firm.
UPDATE ON PROJECTS
The installation of the Tissue Mill and the new tissue converting line in Kadoma is progressing well and is expected to be complete by year end. The Board is fully aware of the challenges that lie ahead to secure raw materials and sustain production given the prevailing environment. The Group believes that this investment puts it at a critical inflection point and will approach the challenges and the new realities of doing business with a positive and proactive mindset.
The Group continues to deepen its commitment to sustainability practices especially with focus on its role in recycling paper and batteries. Lead is a substance with serious negative health and environmental impacts. The significant improvements in systems and efficiencies at the Chloride factory underpin our commitment to our sustainability strategy.
The Company is not in a position to declare a dividend.
Dr Oliver Mtasa retired from the Board on the 11th of March 2022. We thank him immensely for the valuable contribution over the years and wish him well in his future endeavours.
IMPACT OF COVID
The Group continues to observe the Covid protocols and business continuity strategies instituted in response to the pandemic. The reduced Covid cases globally and the successful vaccination program has seen the significant reduction of the risk and impact on the Group.
The Directors have satisfied themselves that the Group is in a sound financial position and has adequate resources to continue in operational existence for the foreseeable future.
We have confidence in the Group’s resilience and ability to work with strategic stakeholders to mitigate risks and unlock opportunities in our markets. The focus on cost containment and cash preservation should enable the business to sustain its positive trajectory.
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 support and contribution during the period under review.
Dr T U Wushe
31 May 2022