Art, FNB deal pending

HARARE - Embattled Art Corporation (Art) says it expects to conclude negotiations with a new investor, reportedly South Africa (SA)-based First National Battery, before year end.

The group’s chairperson Passmore Matupire said the deal, aimed at increasing the company’s battery-making subsidiaries Chloride Zimbabwe (Chloride) and Battery Express (BE)’s capacity and has been the subject of cautionary statements issued over the past few months, is likely to be sealed by the third quarter.

“Capital raised from this transaction should result in significant relief in the overall cost and level of debt in the business thereby improving the profitability of the group,” he said.

This comes as the Zimbabwe Stock Exchange-listed Art has been allegedly courting potential investors from China, SA and India to help bring in new and modern battery-making technology.

The preferred investor is also expected to inject $4 million plus fresh capital to boost Chloride’s capacity and viability.

In February, there was speculation that FNB would initially put in $2,5 million capital to facilitate plans to double production by 2015.

The capital injection would see FNB acquiring a 60 percent shareholding in Chloride and BE in exchange for paying off the two subsidiaries’ debts.

Meanwhile, Art’s turnover remained unchanged at $16,9 million in the half year to March 2013 while margins went down one percent due to increased competition.

Profit after tax stood at $286 000 during the period under review from $244 000 registered in prior comparable period with cash generated from operations at $1,3 million.

Basic earnings per share marginally increased $0,06 from $0,05. Art — which has been battling a $6 million debt — last year took a decision to discontinue certain operations while it also sold some properties to raise capital for its businesses with viable prospects.

“During the half year to March, the group reduced debt by $1,04 million with proceeds generated from disposal of the Zambia property,” said Matupire, adding that the batteries division operated well.

“Chloride Zimbabwe achieved a turnover of $5,6 million during the period under review which was nine percent above the prior period due to increased vehicle population,” he said.

Chloride is understood to be in the process of importing maintenance-free battery equipment from partners in SA and solar inverting machinery from India.

Matupire said that the paper business performed poorly because market liquidity constraints coupled with intense competition affected the paper and stationery division significantly.
 
He added that increased competition in the tissue business resulted in the reduction in volumes.

“The paper business recorded a disappointing performance during the first half of the year with a loss before tax of $186 000 against a prior year profit of $72 000,” he said.

Art is the holding company of a manufacturing group of businesses in Zimbabwe with distribution operations in Malawi, Zambia, Zimbabwe and SA. - Business Writer

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