DIVERSIFIED manufacturer Amalgamated Regional Trading Holdings Limited (Art) will sell underutilised assets to meet its obligations and fund capital expenditure (capex), the company has said.
The economy is experiencing a liquidity crunch on the back of tight monetary and fiscal policies thrust meant to shore up the 10-month-old Zimbabwe Gold currency.
“The support extended by our financiers and the expected disposal of underutilised assets will enable the business to meet its obligations and fund key sustaining capex and trading initiatives,” Art said.
The company said the economic environment was expected to remain complex and challenging with constrained liquidity.
“The proposed regulatory interventions are expected to improve trading in the formal sector,” Art said in a trading update for the firm’s first quarter ended December 31, 2024,.
“The measures taken to reduce risk and improve cash generation will see the group through the difficulties that have come with scaling back and restructuring of operations.”
In its financial year ended September 30 2024, Art recorded a 38,41% drop in profit after tax to US$1,39 million, due to a 11% decline in revenue. The drop in revenue was attributed to product availability challenges, the deliberate scaling down of paper production and a decline in exports.
Arts operates in three segments — stationery and paper, energy storage and timber.
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“The first quarter was marked by constrained liquidity with moderate movements in exchange rates and inflation. The authorities remain seized with efforts to level the playing field and bring more predictability to the operating environment,” Art said.
“The complexity of the informal markets in providing a sustainable channel was evident during the period under review as trade volumes were susceptible to changes in the policy framework.”
Art said capital allocation during the period prioritised servicing of debt, payables, cost optimisation initiatives and sustaining capex in the energy, stationery and timber businesses.
“The group’s overall sales volumes declined by 13% compared to the prior year. Revenue was 11% below the prior year as the business sought to adapt to the changing operating environment,” the company said.
“The relative exchange rate stability and improved power availability towards the end of the period enabled stocking and improvement in product availability in the battery segment.”
Art said the tissue and stationery businesses were affected by liquidity challenges in the formal sector, compounding the difficult working capital situation.
“Export market presence was maintained though margins remain constrained and the policy framework remains unfavourable,” Art said.
During the first quarter, battery volumes were 12% below the prior year as the division faced supply chain and power disruptions, while the paper milling operations remained mothballed as conditions were unfavourable, it said.
However, Art’s Mutare Estates division continued to trade favourably, with a volume growth of 16% against the prior year.
