Willdale bullish about meeting growing demand for bricks

Source: Willdale bullish about meeting growing demand for bricks | Herald (Business)

Willdale says shortage of stock affected sales volumes for the 9-month period to June 2022

Business Reporter
Zimbabwe Stock Exchange (ZSE) listed Willdale Limited, the only publicly traded brick-making company in the country, is confident that it will meet the high demand for its bricks on the domestic market due to improved operating efficiencies.

However, the firm contends that weakening disposable incomes and resurgent inflation continue to be a cause of concern. The company said the economic environment remained fluid during the firm’s third quarter trading period to June 2022, characterized by a depreciating Zimbabwe dollar..

“Increasing demand for bricks to meet the high demand for housing will drive revenues in quarter 4,” the company said in a trading update.

Previously, the company budgeted about US$1 million in capital expenditure to refurbish and renew parts of fixed and mobile plants. This formed part of its efforts to enhance efficiency in and quality of production.

“Plant capacity utilisation, which is currently averaging above 80 percent, should provide sufficient stocks to meet targeted sales volumes for the ensuing quarter, provided electricity supply remains reasonable.”

The company said sales volumes for the 9-month period declined by 9 percent compared to the same period in the prior year.

“The decline in sales is attributed to lack of stock which was caused by effects of the late April rains,” it said.

The company said production was currently ahead of target and prior year, which should provide enough stock to cover the sales gap in the fourth quarter.

“Demand remains high, driven by cluster home developments and individual home builders.”

Cumulative revenue declined by 1 percent in hyperinflation terms compared to the prior year but was 91 percent above the prior year in historical terms.

“Although average prices have been affected by exchange rate disparities, product mix remains favorable and this is expected to buttress margins for the full year,” reads the trading update.

Willdale said the recent tightening of lending terms and conditions by the central bank presented challenges in raising working capital. “However, the business model in place is generating sufficient working capital to support the business in the short term.”

In terms of stock market performance, Willdale’s share is currently trading at $2,62.

Competition from foreign firms and low barriers to entry have been identified as key challenges facing local firms in the construction industry, exerting considerable pressure on profit margins.

Improvements in the macroeconomic environment, particularly regarding foreign currency availability and exchange rate developments, will enhance the firm’s prospects.

Most importantly, it will be determined by how aggressively the government implements its infrastructure development goals, if the government follows through on prioritizing local companies and how well positioned Willdale is to exploit the developments.

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