Art Corporation release muted results

Published: 19 December 2013

ART Corporation reported a muted operating performance characterised by increased competition and decline in sales volumes for financial year ended 2013. Although capacity utilisation increased by one percentage point to 65%, sales volumes declined across all units with an average volume decline of 2% in batteries and tissue operations.

Gross profit margins were maintained at 33% while operating margins declined from 6.9% to 5.3% negatively impacted by increased promotional activity and increased competition.

The battery manufacturing and distribution division remained the flagship of the group and posted a PBT of $1.3m while the paper and stationary division reported a loss of $0.7m. Eversharp was the only unit from the paper and stationary division to post a decent performance as it didn't lose money. The plantations remained profitable although operating margins declined to 27.6% from 39.0%. Mutare Board and Paper Mills (classified as an asset available for sale) achieved a rental yield of approximately 9%.

The group's bulging debt remains a worry. Management said it plans to reduce the cost of borrowing from the current 18%. In addition it also plans to recapitalise the business at a total cost of approximately $15.0m over the next three to five years. The recapitalisation includes working capital, capex and debt restructuring. Management reported that it received board approval and that negotiations are at an advanced stage as the group now await regulatory and shareholder approvals. Management guided for a turnover of $37.0m for FY 14 with the group likely to break even at best for the interim period to 30 March 2014.
- businessdaily