25 May 2014

Zimbabwe: Liquidity Crunch Takes Toll On ART Corporation

Diversified group, ART Corporation says it expects to record a higher loss than had been projected in its half-year results this year as the liquidity crunch and economic downturn continue to take their toll on many companies.

The group blames liquidity challenges and declining consumer spending for the negative impact on overall aggregate demand for its products.

ART Corporation is into paper manufacturing, stationery, tissue converting and battery sales.

Battery volumes are behind by 10% compared to last year while paper volumes also trail the comparative period by 13%.

"The group's overall profitability in the current year is premised on a recovery in the second half of the year," said group company secretary, Franklin Mukarakate.

A substantial number of companies in Zimbabwe continue to record a decline in consumer spending owing to low disposable incomes and poor economic performance.

"Total revenue is down 8% on prior year. The half year results will be lower than expected," said Mukarakate in the company's trading update.

As at the end of 2013, the group registered another decline in revenue to US$33,7 million from US$34,1 million in the previous year.

Last year the group announced that its products were constrained by the liquidity crunch in the economy, as well as competition emanating from the influx of cheaper imports.

Mukarakate said progress had been made on the recapitalisation front with commitments of US$1,8 million having been made.

The group last year reportedly got a South Korean shareholder who was expected to inject US$15 million into the firm to improve its working capital position.

Recapitalisation was reportedly expected to be channelled towards working capital, capital expenditure as well as debt restructuring.

In 2012, the group decided to discontinue selected operations while some properties were disposed of in order to raise capital for businesses with sustainable prospects.

Mukarakate added that "arrangements" on restructuring the balance sheet and bank loans were in progress.

The company also anticipates increased battery demand in winter expected to result in improved trading during this period.

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