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Nqobile Bhebhe, [email protected]

LISTED brick-making firm, Willdale Limited, says strategies are in place to resource the business to meet its working capital requirements to ensure sustainable viability noting that cost containment will be critical going forward to sustain margins as it is faced with increasing competition in the sector.

In a trading update for the quarter ended 30 June, the firm said the general market acceptance of the Zimbabwe Gold currency for transacting will ease pressure to generate US dollars for local transactions.

Since its introduction in April this year, the ZiG has maintained relative stability and promoting the wider use of the local currency is expected to further solidify its position in domestic transactions while contributing to macro-economic stability.

The stability of ZiG, expected to bring benefits that include price and exchange rate stability, is anticipated to anchor sustained economic growth.

The firm said currently, liquidity and solvency ratios are at satisfactory levels. “Stability in the macro-economic environment, underpinned by stable exchange and inflation rates will increase business confidence and unlock several construction projects. Efforts to improve competitiveness through investment in modern plant technology will be intensified in the next quarter.

“Cost containment will be critical going forward to sustain margins, faced with increasing competition,” said the firm’s secretary,Mr Mavuto Munginga.

He said despite a good start to the production season, a combination of factors, such as electricity load shedding and limitations in working capital, resulted in a 16 percent decline in production compared to the prior year. However, production has since been ramped up to within year-to-date targets.

“Sales volumes declined by five percent compared to the prior year, largely due to low availability of stock, liquidity shortages and increased competition. An increase in housing development in most cities and towns subsequently pushed demand up.”

He noted that a surge in housing development projects in urban areas presents opportunities to increase production and revenue in the remainder of the year.

“Competition, however, remains stiff. Efforts to raise funding to acquire a modern and more efficient brick making plant are in progress. Land development initiatives are at various stages of statutory approval and are expected to begin to realise cash flows in the coming financial year,” said Mr Munginga.

The firm noted that the order book improved towards the end of the quarter as construction projects increased.
Mr Munginga said revenue is five percent above budget with product mix remaining within target.

The revenue mix shifted towards the local currency in the quarter under review and focus remains on generating sufficient cash flows and managing costs.

Early this year, the firm said it is converting its land banks into residential developments as part of a capital raise for acquisition of machinery to enhance production at its brick manufacturing plants.

In a circular to shareholders, Willdale indicated it had approximately 165,6 hectares in Mt Hampden, an area that is fast developing, owing to the new Parliament Building and the new city located nearby.

This creates rationale for the company to venture into residential developments, to take advantage of the rising demand in the area. The company said it has excess idle land in Christmas Gift, Gweru, measuring approximately 12,6 hectares, bringing the total land available for development to about 178,2 hectares.

Proceeds from the development will be channelled towards the acquisition of a new plant, making the company’s bricks of higher quality and enabling the company to compete effectively locally and in the region.