Art's investment deal with FNB flops

HARARE - Art Holdings Limited (Art)’s negotiations over a new investment in its battery venture with JSE-listed First National Battery (FNB) have flopped.

“…negotiations which have been subject of cautionary statements in recent months have been discontinued,” the group’s secretary Frank Mukarakate said in a statement on Friday.

“Accordingly, shareholders should exercise caution when dealing in the company’s shares,” he warned.
In the past months, Art issued a series of cautionaries advising shareholders of a deal underway — with potential impact on the group’s shareholding and stock price.

Recently, Art’s chairperson Passmore Matupire advised the market that they expected to conclude the transaction by year end.

“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 in the group’s financials for the half year to March 2013.

Matupire said the deal was aimed at boosting capacity of Art’s battery-making subsidiaries — Chloride Zimbabwe (Chloride) and Battery Express (BE).

In February, there was speculation that Art and FNB were in talks, with the South African battery maker expected to 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.

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

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

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 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,” Matupire said. - Eric Chiriga, Business Editor

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