eBusiness Weekly
Fradreck Gorwe
Zimbabwe Stock exchange-listed brick manufacturer and supplier, Willdale Limited, places great prospects for growth and enhanced performances on ongoing Government projects and cluster housing development.
The company performed relatively low in its first quarter to December 31, 2019 due to a combination of factors in the form of electricity expenditures, low incomes and subdued demand for bricks on the back of the rain season.
Inflation adjusted revenue for the quarter was reportedly up 8 percent on the prior. However, this could not be much celebrated as margins succumbed to cost push factors such as demand for higher wages, increases in electricity charges and maintenance spares and raw material prices.
Sales volumes plummeted by 15 percent compared to the same period prior year. This was attributed to shrinkage in demand. To enhance volume performance, the group is ramping up selling as it targets “funded Government projects and cluster housing development while riding on short lead times enabled by high stock levels”.
The rapid drop in inflation from a peak of 38,8 percent in October 2019 to a commendable 17,6 percent month-on-month in November 2019 and more pleasingly to a record 16,6 percent month-on-month for December 2019 provided low hanging fruits in terms of opportunities for enhanced volume performance, more particularly through giving some value to disposable incomes.
The downward trend in inflation during the quarter under review somehow helped in reducing the gap created by the mortgage market which “remained subdued due to low incomes”.
Better performance is expected to come with the end of the rainy season in the second quarter of 2020. Further, efforts by the Government to rebuild areas destroyed by Cyclone Idai in Chimanimani will unlock growth for the brick supplier.
“Reducing inflation presents opportunities for volume increases. We anticipate better business in the second quarter when the construction industry resumes operations after the rainy season. Opportunities are being exploited in the reconstruction of the cyclone ravaged Chimanimani region and other ongoing housing development projects. Profitability is expected to continue into the ensuing quarter, “said company secretary Mavuto Munginga in a statement accompanying the trading update.
Willdale depends much on the success of the construction industry which in the past periods had reportedly been struggling owing to macro-economic challenges. Contracting companies like Masimba Holdings had in recent periods been lamenting hefty prices of building materials, a scenario that led to some projects being either slow or temporarily shelved.
On the other hand, low disposable incomes in recent periods resulted in some among the general public considering building projects as secondary priority. This ultimately impacted on the brick supplying business. Luckily, the Government has provided an egress for the construction sector. Projects have been lined up under the Zimbabwe Infrastructure Investment programme 2020. These include both ongoing and pipeline projects, most of which will provide a ready market for Willdale’s bricks.
The gap in the country’s housing backlog is an opportunity for Willdale. The national housing delivery programme will seek to cover the backlog estimated to be 1,3 million within the context of urban renewal and regeneration. Part of the task will include the modernization of dilapidated superstructures. The target for the decade starting 2020 will be at least 470 000 housing units. This provides Willdale with great cause for optimism in the coming trading periods.
