AMALGAMATED Regional Trading (ART) Corporation says export volumes declined by 7% for the quarter ended December 2023 as the diversified group seeks to minimise the impact of the foreign currency surrender requirements.
Local exporters are required by law to surrender part of their export proceeds to the central bank in exchange for the local currency.
In a trading update for the quarter ended December 31, 2023, ART group chief executive officer Milton Macheka said paper exports were curtailed to minimise losses emanating from the central bank’s retention policy.
“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,” Macheka said.
“The export proceeds surrender requirement poses a threat to the viability of exports under the prevailing economic conditions. Volumes overall were down by 9% with significant reduction in paper where the tissue converting unit was shut down for two months to allow for its relocation to Kadoma.
“Export volumes declined by 7% as paper exports were curtailed in order to minimise the impact of the foreign currency surrender requirements given the prevailing unfavourable market rates.
“The group faced worsening economic headwinds which impacted raw material availability, operating costs and liquidity. Power availability improved during the period.”
Macheka said the authorities made attempts during the period to resolve the policy dichotomy on formal and informal market operations with regards to exchange rates, pricing and taxation.
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He said market demand was subdued as local currency liquidity tightened and divergent exchange rates impacted pricing. In Zambia, inflation increased due to the depreciation of the Kwacha, increased energy prices and commodity supply constraints.
Revenue for the quarter increased to ZWL$58,9 billion, 67% up from the prior year.
In the batteries division volumes declined by 14% from prior year volumes of 91 226 units due to depressed demand and pricing challenges on the market.
Export demand remained strong with sales volumes being affected by foreign currency allocation delays in both Malawi and Zambia as measures to mitigate credit risk were maintained.
He said the expected recovery of the paper volumes following the commissioning of the new plant was unfortunately affected by exchange rate volatility and shortages of raw materials.
The temporary shutdown of the paper plant coincided with increased imports on the informal market.
Sales were predominantly from stock and were 53% below prior year at 622 tonnes during the period. Exports were limited to long-term supply commitments in Zambia.
Eversharp volumes increased by 19% to 15 million units 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.
Exports contributed 5% of volumes, while trading stationery lines continued to perform well contributing 6% of total revenues.
At the Mutare Estates unit, timber volumes at 2 583 cubic metres increased by 16% from prior year as demand remained firm and sawmill efficiencies improved.
Macheka said operating costs were contained, however, recovering occupancy costs in full from tenants at the Mutare Mill remained a challenge.
In the outlook, Macheka said the economic environment was expected to remain complex and unstable. The group will continue to implement difficult short-term measures to safeguard profitability and liquidity to enable the business to withstand an extended period of uncertainty.
