Ashly DhaniTapiwanashe Mangwiro
Willdale Limited, Zimbabwe’s largest brick manufacturer, faced a challenging third quarter ending June 30, 2024, due to working capital constraints.
Despite a stabilised inflationary environment and growing demand from housing developments, the company grappled with production setbacks, increased competition and persistent electricity load shedding.
In the trading update, company secretary, Mavuto Munginga, emphasised the mixed nature of the trading environment.
“Inflation stabilised in the quarter under review with month-on-month rates staying below 1 percent per month as confidence in the ZiG prevailed,” he noted.
However, this macroeconomic stability was met with rising competitive pressures, which forced prices and margins downward.
“Competition increased, forcing prices and margins down,” Munginga added, underscoring the challenges faced in maintaining profitability.
Willdale’s volume performance reflected the difficulties in the operating environment.
Production volumes declined by 16 percent compared to the same period last year, a reduction attributed to multiple operational hurdles.
“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,” Munginga explained.
Despite these challenges, the company has made strides in ramping up production to meet its year-to-date targets.
Sales volumes were similarly impacted, dropping by 5 percent compared to the previous year, largely due to low stock availability, liquidity shortages and heightened competition. Nevertheless, the surge in housing development across Zimbabwean cities and towns has started to drive demand upwards.
“An increase in housing development in most cities and towns subsequently pushed demand up,” Munginga stated, hinting at a possible recovery in the coming quarters.
Financially, Willdale managed to surpass its revenue targets by 5 percent, even as the revenue mix shifted towards local currency.
“Revenue is 5 percent above budget. Product mix remains within target,” Munginga highlighted, adding that the company remains focused on generating sufficient cash flows and managing costs effectively.
The emphasis on cost containment and cash flow generation reflects the company’s strategic priority to maintain solvency and business continuity in a tough market.
Looking ahead, Willdale sees opportunities in the ongoing urban housing boom but remains cautious about the competitive landscape. The company is exploring funding options to acquire a modern, more efficient brick-making plant to bolster its production capacity.
“Efforts to raise funding to acquire a modern and more efficient brick-making plant are in progress,” Munginga confirmed, signaling a strategic pivot towards enhancing operational efficiency.
With stable exchange and inflation rates expected to bolster business confidence, Willdale plans to intensify its investment in modern plant technology and focus on cost containment to sustain margins.
“Stability in the macroeconomic environment will increase business confidence and unlock several construction projects,” Munginga concluded, providing a cautiously optimistic outlook for the company’s future.
Online Reporter