Home » Industry » Art Corporation Draws Down U.S.$18 Million Facility

Art Corporation has started drawing down the $18 million facility offered by Taesung Chemical Company Limited which has enabled the company to purchase new equipment and machinery.The new equipment, some of which has already been received, is scheduled to be commissioned in January next year at Eversharp, Chloride and Kadoma paper mill.

Art Corporation chief executive Mr Richard Zirobwa told analysts yesterday that the company is on a drive to purchase new equipment to improve economies of scale.

He said the board had approved facilities offered by Taesung Chemical of up to $3 million to finance raw material purchases and up to $15 million to finance capital expenditure over a period of five years.

“I am pleased to aise that having fulfilled the terms of the facility, the group has now commenced drawing down on these facilities.

“The group is currently trading in a considerably difficult operating environment characterised by tight liquidity conditions and poor market demand hence need for the company to be innovative,” said Mr Zirobwa.

Revenue for the group for the half year to September 30 was $28,7 million down 5 percent on last year’s figure. It archived a softer margin of 33 percent compared to 35 percent last year.

Overall capacity utilisation for the group declined to 59 percent from 65 percent recorded the previous year and sales revenues were lower across most of the business units with an average volume decline of 11 percent in batteries and 17 percent in tissue operations while Eversharp volumes grew by 5 percent.

Although the group incurred a loss of $1,1 million it ended the year better with the second half posting earnings of $91 000 compared to a first half loss of $1,2 million .

Cash of $3,1 million was generated from operations down on last year by 5 percent. This was utilised to reduce debt and finance interest burden amounting to $2,3 million.

Consequently interest expense declined by $296 000 from last year.

Mr Zirobwa said production was constrained across all divisions in line with depressed demand.

“However, our brands remained dominant in the local market as well as in Zambia despite reduced activity in their markets,” said Mr Zirobwa.

Eversharp for the period under review performed well with capacity utilisation up 4 percent to 82 percent, revenue going up 10 percent to $4,6 million and net earnings before tax up 3000 percent from $7 000 in 2013 to $217 000.

Mr Zirobwa said the division is expected to increase its contribution to group earnings on a sustainable basis with the commissioning of the ball pen auto assembly machine scheduled for January 2015.

He said the commissioning of the new machine will see a significant reduction in cost of production which should improve margins and profitability further in the coming year.

The battery division for the period posted a profit of $578 000. Volumes traded lower than last year by 11 percent due to reduced market activity.

He said the lower volume performance resulted in under recovery of both factory and operating costs.

“The new automotive battery manufacturing equipment was shipped and is expected in Zimbabwe this month. The commissioning of the equipment will introduce new product lines, improve efficiency through automation and lower cost of production.

“This investment is expected to improve the performance of the batteries division in the coming year,” said Mr Zirobwa.

The consolidated paper division posted a loss of $1,1 million and the quality issues that have affected the division in recent years is set to be overcome by the new equipment which has already been received in the country and expected to be commissioned this month.

Plantations incurred a loss of $109 000 as a result of reduced volumes and softer margins caused by stiff competition from larger timber plantations which offloaded their export sales in the local market.

Included in this loss is a once-off expenditure of $128 000 being cost of gold exploration on the mining claims registered on the plantations.

Source : The Herald