Paper division weighs down ART Q1 volumes
DIVERSIFIED listed group, Amalgamated Regional Trading (ART) volumes for the first quarter to December 31, 2023 went down 9 percent compared to the same period in the prior year, weighed by the paper division’s temporary plant shutdown.
According to the group, there was a significant reduction in paper where the tissue converting unit was shut down for two months to allow for its relocation to Kadoma.
Total export volumes for the period declined by 7 percent compared to the same period in the prior year. Chief executive officer Mr Milton Machena said this came as paper exports were curtailed, to minimise the impact of the foreign currency surrender requirements given the prevailing unfavourable market rates.
The period under review remained challenging for the group.
“The operating environment worsened during the quarter with the local currency instability and the significant disparity between the interbank exchange rate and prevailing market rates leading to pricing challenges and margin erosion on exports,” said Mr Macheka in a trading update for the quarter under review.
“The export proceeds surrender requirement poses a threat to the viability of exports under the prevailing economic conditions.
“Market demand was subdued as local currency liquidity tightened and divergent exchange rates impacted pricing,” he said.
Total revenue for the quarter jumped 67 percent $58,9 billion.
In terms of divisional operations, the battery volumes declined by 14 percent from the prior year's volume of 91 226 units due to depressed demand and pricing challenges in the market.
However, export demand remained strong although sales volumes were affected by foreign currency allocation delays in both Malawi and Zambia as measures to mitigate credit risk were maintained.
As for the paper division, it is expected to recover in volumes following the commissioning of the new plant, which was however affected by adverse exchange rate volatility and shortages of raw materials.
“The temporary shutdown coincided with increased imports in the informal market which the leaner and more focused business will be in a position to compete with following the first quarter hiatus,” said Mr Macheka.
Sales were predominantly from stock and were 53 percent below the prior year at 622 tonnes during the period. Exports were limited to longterm supply commitments in Zambia.
At Eversharp, volumes rose 19 percent to 15 188 000 units during the quarter on the back of improved product availability. Demand was firm and budgeted volumes could not be met due to the delayed delivery of raw materials. During the period, exports contributed 5 percent of the volumes whilst trading stationery lines continued to perform well contributing 6 percent of total revenues. Timber volumes under Mutare Estates at 2,583 cubic meters increased by 16 percent from the prior year as demand remained firm and sawmill efficiencies improved.
To cushion itself from the difficult operating environment, ART is looking at implementing tough shortterm measures to safeguard profitability and liquidity to enable the business to withstand an extended period of uncertainty.