Art Corp Profits Down 8%, Bemoans Policy Inconsistencies

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By Alois Vinga

ZIMBABWE Stock Exchange (ZSE)-listed diversified industrial group, Art Corporation has seen operating profit going down by 8% amid concerns of policy inconsistencies choking the smooth flow of exports.

Presenting the firm’s performance for the half-year ended March 31, 2021, the board chairperson, Thomas Wushe said operating profit registered a significant decline.

“The group’s operating profit decreased by 8% to $219 million in inflation-adjusted terms compared to last year. The paper business faced significant under-recoveries as activity declined especially during the Covid-19 induced lockdowns,” he said.

Wushe blamed the losses to export competitiveness risks associated with policy inconsistencies, volatile exchange rates, and supply interruptions.

This is despite the company registering increases in export volumes by 13% compared to the same period last year.

Gross margins declined from 50% to 39% as prices could not be aligned to input cost increases in the short term.

During the period under review, operational expenditure increased by 67% compared to the prior year.

However, the group managed to post revenues of $1.7 billion in inflation-adjusted terms being an increase of 14% compared to the same period last year.

Volumes for the half-year to 31 March 2021 increased by 15% with the battery business registering a strong performance which saw volumes increasing by 22% due to consistent product availability and improved efficiencies following the commissioning of additional plastic injection machinery.

The paper business faced significant under-recoveries as activity declined especially during the Covid-19 induced lockdowns. Notwithstanding management’s cost containment initiatives, the paper divisions struggled to contain the rising input costs and recorded losses of $52 million in inflation-adjusted terms.

Softex Tissue volumes declined by 14% compared to the prior year as demand weakened and competition from imports increased.

However, the stationery division, Eversharp was able to remain profitable as retailers started to stock up in preparation for the reopening of schools after months of closure due to the coronavirus pandemic.

“The group continues to exercise caution with respect to its foreign currency exposure and whilst sufficient short-term facilities were established, the interest rates remain punitive. The deliberate stocking of raw materials to cushion logistical delays was sustained during the period.

“Cash-flows remained strained and limiting capital expenditure to essential spend remained a priority,” Wushe added.