In results for the year ended March 31 2012, ART chairman, Passmore Matupire, said the successful conclusion of debt initiatives being pursued should result in more stable business.
“Currently the bulk of the debt is of a short-term nature and costs an average of 22% per annum, a situation which is not sustainable,” said Matupire.The group last year announced at an analysts briefing that it would convert part of its short-term debt into long-term debt and dispose of subsidiary Mutare Board & Paper Mills and Zambia Building as part of strategies to retire the debt burden.
Short-term borrowings surged to US$7,4 million as at the end of March 2012 against the US$3,5 million recorded as at September 2011.“The planned asset disposals are still being pursued while negotiations with financiers on alternative funding instruments are in progress,” he said.A number of companies in Zimbabwe have experienced major operational challenges owing to expensive short-term bank loans, which have weighed in on profitability and restricted growth.
Casualties of the liquidity crunch have been forced to mothball operations. Matupire said while capacity utilisation in ART’s operations grew to 61% for the period to March from 57% as at September last year, additional growth prospects were restricted by liquidity constraints in the economy as well as the attendant high cost of borrowing.
Although turnover grew by 19% to US$16 million from US$14 million, borrowing increased marginally by US$659 000 due to investment in working capital to support increased turnover.
He said operating cash of US$1,4 million was generated before investment in working capital of US$1,6 million and net interest cost of US$1 million.“The working capital challenge was further compounded by the current liquidity constraints in the market and this affected the debtor performance,” he said.
The company’s improved performance was underpinned by the recovery of the Chloride factory and containment of losses from discontinued operations, in particular Fleximail.
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Fleximail was once a leading manufacturer of paper-based stationery in Zimbabwe, specialising in bond paper distribution, commercial printing and publications.
Chloride moved to a profit of US$100 000 during the period under review from a full year loss of US$1,5 million in 2011, driven by improved market volumes in the distribution units for the subsidiary.
