LISTED diversified group ART Corporation (ART) shareholders this week approved a resolution to double the company’s borrowing limit to US$20 million in line with an ongoing recapitilisation initiative that will see the company commission US$1,9 million worth of equipment by year-end.
After the group’s extraordinary general meeting held in Harare this week, ART CEO Richard Zirobwa said under the first phase of the recapitalisation process, US$400 000 worth of equipment would be installed at the group’s stationery producer, Eversharp, while two sets of equipment worth US$750 000 each would be commissioned at the company’s battery manufacturing unit, Chloride and Kadoma Paper Mills respectively.
He said the new equipment would improve the company’s competitiveness in terms of production costs and product quality.
“That is the first phase of the recapitalization process and this equipment is expected to be commissioned by the October or November, the last quarter of the year,” said Zirobwa.
“The overall thrust of our recapitalisation programme is that at Kadoma (Paper Mills), for instance, we are targeting to improve the quality of the product coming.”
Zirobwa said the company’s focus is to automate the production process at Chloride and Eversharp in order to lower production costs.
“In essence what is necessary to most manufacturing businesses is to be able to target your manufacturing cost to be lower than import parity, and the automation process will enable us to move in that direction,” he said.
Zirobwa said the group specifically wants to improve on quality at Kadoma Paper Mills and lowering the unit production cost at Chloride.
According to the EGM notice, the group is currently raising funding for capital expenditure in order to improve manufacturing efficiency in its factories and resultantly improve its product quality which would also reduce product manufacturing costs.
“This will have an effect of increasing the company’s debt to equity ratio. Some of the capital equipment has been ordered and is expected to be installed on arrival in September 2014. The Board is seeking shareholders’ approval to accommodate any anticipated increase in borrowings by way of the resolutions …” read part of the notice.
Shareholders effectively approved a special resolution to double the amount of the issued and paid up share capital for the time being in the company so as to increase its borrowing limit to twice the equity cover.
In the absence of the resolution, Zirobhwa said: “It would have been very difficult because then we would be running a company outside the articles of association because we already have equipment coming in and the articles have to be in line before the equipment comes in.”
The recapitalisation process is in line with ART’s 2012 resolution to double production by end of 2015 through various initiatives which include production of maintenance free batteries.
In April this year, ART investors indicated plans to expand their business portfolio to include manufacturing of industrial products after completion of plant refurbishments and capital injection to the tune of US$18 million.
Taesung Chemical Co (Taesung) chairman Young Baik said the move is meant to support the country to manufacture industrial supplies locally and drive the economy.
Taesung is a Korean company and the single largest shareholder in ART, accounting for 33, 86% shareholding in the company through two wholly owned vehicles- Cranbal Investments Pvt Ltd and Silvermine Investments.
“ART must go for industrial production, which is good for the nation,” said Baik at the time.
“For example, we have a single company doing transmission cables and government is importing such critical supplies from overseas when they can be manufactured locally. We are also looking at investing into production of agricultural equipment especially irrigation equipment and supplies” added Baik.