daniel chigunwe
Michael Tome
Business Writer
BRICKMAKING firm, Wildale Limited says low liquidity challenges and inconsistent power supply dragged its first-half performance to March 2024.
This was compounded by a turbulent economic environment characterised by runaway inflation and fast depreciating Zimbabwe dollar leading to uncertainty which negatively affected sales growth. The brickmaker’s operations and performance were also hampered by the introduction of 15 percent VAT on clay bricks in January 2024, which brought shocks to the market as customers resisted the increased prices.
Introduction of VAT took away a chunk of customers as they preferred to buy from cheaper suppliers given their pricing advantage by being exempt or not compliant with the VAT requirements, thereby presenting unfair competition in the market. However, the introduction of ZiG in April 2024 stabilised inflation and exchange rate movements.
Albeit stability which came with ZiG, Willdale’s order book continued to be negatively impacted as clients appeared to adopt a wait-and-see attitude on the new currency.
Just like other industries Willdale operations were affected by load shedding as it resorted to alternative power sources mainly diesel generators.
Load shedding has been a thorn in the flesh for several industry players owing to limited power generation at Kariba due to limited water inflows as rainfall activity in and around the Kariba catchment area during the 2023–2024 rainfall season.
Electricity generation from Lake Kariba took a downturn last year but the country was rescued by the construction of Hwange 7 & 8 thermal power plants which were completed early last year adding a combined 600 megawatts to the national grid.”
Runaway inflation, a fast-depreciating Zimbabwe dollar, low liquidity and electricity shortages also burdened the operating environment.
“The introduction of the ZiG in April 2024, although it stabilised inflation and exchange rate movements, it impacted on order intake post the reporting period as clients appeared to adopt a wait-and-see attitude.” Efficient and low-cost production will be critical going forward to compete effectively.
We will continue to review our operating strategy to ensure growth in both revenue and profitability,” said Willdale Chairman Cleopas Makoni in the half-year financials to March 2024.
Operationally, Willdale sales volumes grew by three percent ahead of the prior year despite challenges in the market.
The increase was attributable to the poor rainy season as it presented the company with an opportunity to restart extrusion earlier than usual resulting in a 145 percent growth in green production in contrast to the prior year.
Revenue grew 91 percent in inflation-adjusted terms to ZWL186 billion compared to ZWL97, 4 billion realised in the same period last year.
However, the firm incurred an operating loss of ZWL113 billion from ZWL19 billion in 2023. According to Willdale profitability was affected by exchange rates and indices used to compute revenue and expenses and unrealised exchange losses emanating from the revaluation of foreign currency-denominated liabilities.
Albeit the production growth, Willdale feels the introduction of the VAT took away its potential volumes’ uptake.
“It is hoped that mechanisms will be put in place to ensure that all manufacturers comply with the VAT requirements going forward,” said Makoni.
However, the firm remains buoyant about future prospects as opportunities lay abundant given the construction sector boom as housing development and other infrastructure continue.
“Production will continue to be ramped up subject to the availability of electricity and working capital to meet growing demand. Efforts are underway to secure funding to acquire the planned all-weather plant.”
Willdale did not declare dividend for the half-year period to March 2024 as the company seeks to preserve cash for working capital going forward.
Bongani Ndlovu