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Michael Tome Business Reporter
BRICKMAKER Willdale is optimistic about improved volume uptake in the current financial year, as it banks on high activity in the construction of several infrastructure projects including houses, schools and shopping malls across the country.
Aggregate demand for various types of infrastructure in Zimbabwe has been growing in recent years driven by increased Government spending on key infrastructure such as roads, airports and dams, among others.
In 2020, the Government, through the national budget made a commitment to increase spending on infrastructure projects and there has been an upswing in the construction of roads, schools, clinics and dams for irrigation projects.
This has been further supported by increased issuance of home improvement loans by building societies and banks, which are now significantly servicing the mortgage segment.
The surge in loan disbursements has also spurred growth as far as demand is concerned in the construction sector.
Critically, sustained growth in receipts of diaspora remittances, which significantly finance individual home-building exercises, continues to spur demand in the sector.
According to the Reserve Bank of Zimbabwe (RBZ), in 2022 diaspora remittances grew to US$1, 66 billion from US$1, 43 billion in 2021 which translates to a 16 percent growth.
“The firm demand for bricks remains high for various projects such as housing development, shopping malls and school infrastructure construction presents opportunities, which the company will exploit throughout the year, provided stock availability is not significantly affected by electricity shortages.
“The recent investment in improving the crushing capacity will result in better product quality and improved competitiveness,” said Willdale company secretary, Mavuto Munginga, in a trading update for the quarter to December 2022.
Willdale indicated that several projects have been planned for the foreseeable future and will provide the critical mass for the business.
As such the company said the scheduled plant maintenance programme carried out in the quarter was successfully accomplished and is expected to enhance the company’s efficiencies during the looming peak production season.
However, the brickmaking firm in the period under review posted a two percent decline in sales volumes compared to the prior year attributable to limited product uptake emanating from a liquidity crunch.
This in turn affected the firm’s production levels as the liquidity crunch limited working capital availability.
Revenue performance in the quarter improved 36 percent in inflation-adjusted terms compared to the prior year as selling prices remained steady, sustained by a ” favourable product mix, while management remained focused on cost management.”
Willdale indicated that it expects low stock availability in the subsequent quarter given the difficulty in producing bricks during the rainy season, a position that is likely going to affect profitability in the ensuing quarter.
Going forward Willdale said it had sufficient working capital in the short term but bemoaned the sustained high bank policy rates now at 150 percent which the company alluded was uneconomic to finance the business through borrowings.
Online Reporter