ART engaged in negotiations with potential suitors

Published: 21 November 2013

ZSE-listed Amalgamated Regional Trading Limited (ART) is engaged in negotiations with potential suitors for funding to pay off its costly short-term debt.

The talks come after initiatives to rope in a South African investor to take up equity in a battery-making subsidiary collapsed recently under unclear circumstances.

The group's core business is stationery, plantations, tissue converting and battery manufacturing and sales.

Company secretary, Fanklin Mukarakate, refused to disclose the identity of the potential suitors but told the Financial Gazette's Companies & Markets last week that the company was in talks with a potential investor to help it deal with a $8 million debt.

"What is important for this company is to move forward in a debt free situation," said Mukarakate.

"Currently, we have a debt of about $8 million which is our biggest problem but we are negotiating with potential funders, whom I cannot name now, with a view to pay off this costly debt."

"However, we are always looking for options and if there is anyone that you know who is interested out there, they are welcome," he said.

The group's current liabilities exceeded current assets by $2,58 million during the half year to March 31, 2013, largely due to short-term borrowings.

During the period under review, ART's profit after tax from continuing operations rose to $309 000 from $244 000.

The company incurred a loss of $23 000 from discontinued operations. It recorded $16,9 million turnover which was at the same level as prior year.

Its margins declined by one percent due to increased competitive pressure in the environment. A profit after tax of US286 000 was recorded with cash generated from operations of $1,27 million.

Chloride Zimbabwe achieved a turnover of $5,6 million during the period under review, which was nine percent above prior year.

This was due to increased vehicle population. Gross margins of 27 percent were below last year's levels of 30 percent as the effective selling price per battery was lower in line with the price reduction in th first quarter to improve volumes.

Battery Express and Chloride Zambia were profitable in the first half of the year although volumes in both businesses were slightly behind prior year.

The paper business recorded a disappointing performance during the first half of the year with a loss before tax of $186 000 against a prior profit of $72 000.

Increased competition in the tissue business is said to have resulted in reduction in volumes and margins of 14 percent and five percent.

The plantations division's turnover increased by nine percent over prior year with the business achieving a profit before tax of $277 000.

Overall profit was lower than prior year due to a loss of $99 000 incurred from a fire incident which occurred in the first quarter damaging 105 hectares of timber.

In supplementary information accompanying financial results, the board said operationally, the group had benefitted from discontinuance of loss-making operations, resulting in improved margins and reduced operating costs.

ART is the holding company of a manufacturing group of businesses in Zimbabwe with distributions in Malawi, Zambia, Zimbabwe and South Africa.

The group was incorporated as Beachmont Trading Limited in the British Virgin Islands in 1997 and changed its name to ART in 2001 by a way of a special resolution of shareholders.

The same year it acquired TZI's interests in its wholly owned subsidiaries Art Investments (Mauritius) Limited and Chloride Central Africa.

ART was one of the largest industrial companies in Zimbabwe involved in paper manufacturing, paper converting and distribution, pen manufacturing and lead- acid battery manufacturing and distribution.

It employed over 1800 people prior to dollarisation.

It closed its Mutare Board & Paper Mill two years ago after it became costly to operate due to antiquated machinery as well as huge electricity costs.

The profitability of the unit had been affected by the fact that newsprint prices were controlled by government during the crisis decade to 2008.

A substantial amount of ART's products are distributed to Zambia, Malawi and South Africa through its regional businesses of Regional Stationery and Battery Express.

The group has established trade links with Mozambique, Namibia and Botswana and is making in-roads in Angola, the Democratic Republic of Congo and Kenya.
- fingaz

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