- Willdale Limited saw its sales volumes dip by 9% for the first half of the 2023 financial year compared to the prior period
- The firm’s topline grew by 30% in inflation-adjusted terms compared to the same period in the prior year
- Service and raw material suppliers who benchmark their prices on parallel markets put cost pressure on margins
Harare- Willdale Limited, the Zimbabwe Stock Exchange-listed brickmaker, saw its sales volumes dip by 9% for the first half of the 2023 financial year compared to the prior period. The decrease was caused by the poor electricity supply, which disrupted operations, particularly extrusion, and the firing of structure kilns, which in turn reduced output.
Moreover, service and raw material suppliers who benchmark their prices on parallel markets put cost pressure on margins. In this sense, the low throughput puts pressure on both the cost per unit and the availability of the product.
The firm’s topline grew by 30% in inflation-adjusted terms compared to the same period in the prior year. This hinged on an operating environment that was characterized by a steady depreciation in the official exchange rate, which was at Z$893 to the USD as of February 28, 2023, up from Z$629 at September 30, 2022.
The first half of the year will result in reduced profitability for the firm due to lower than expected sales volumes. The firm has pinned its hopes on the improvement of electricity to aid in improving the firm’s profitability in the second half of the year.
"We continue to hope that the electricity supply from ZESA will soon improve, as it is very critical to our production process. Recent news about the synchronization of Hwange Units 7 and 8 is encouraging" according to management.
However, it is pertinent for companies to note that the synchronization exercise being undertaken does not mean that we now have 300 MW on the grid from Hwange Unit 7. According to engineers, further tests are needed to make sure that the unit is running smoothly. They expect the tests to run until at least June. This week we have witnessed signs of improved electricity production at Hwange Power Station, producing more than 500 MW a day, which is a new record this year.
The 300 MW that Unit 7 will add to the grid when the process is done may help improve the power supply. However, it will not be the end of power shortages for businesses facing long hours of load-shedding.
Beta Bricks, another key player, has also been consolidating its operations, triggering fierce competition that could end with significant improvements in pricing and quality.
Willdale and Beta Bricks, together with other clay brick manufacturers, are still in talks with Zimra over the fact that Zimra has concluded that VAT should be charged on brick sales in terms of the VAT Act. Engagements are still ongoing with Zimra and other relevant authorities to get the correct position on the matter.
The demand for bricks for housing development and various infrastructural projects remains high. A sustainable financing model for housing development will result in increased volumes and profitability and will contribute significantly to housing delivery under National Development Strategy 1.
In this regard, at the end of last year, the firm ncreasinginitiated plans to improve the clay crushing capacity to improve quality and throughput. The firm has now managed to install a new section and has upgraded the crushing plant that was commissioned at the beginning of this month. The total cost of the project was S$400 000. The newly improved plant will produce more refined clay, thereby ehancing capacity and quality.
The firm is also currently engaging the ISO certifying authority in an effort for the firm to be ISO certified. Willadale expects to be certified by the end of June 2023.
In a nutshell, the firm is committed to modernizing sections of its production facilities to be more efficient and environmentally friendly, but the electricity woes that have plagued the nation are expected to continue eating into the firm’s bottom line.
Equity Axis News
