eBusiness Weekly
Michael Tome
WILLDALE says it experienced low aggregate demand in the nine months to June 2023 on the back of tight monetary measures implemented by authorities to stabilise the economy and power outages.
In the course of the period, the Reserve Bank of Zimbabwe (RBZ) and the Treasury announced policies determined to steer the country’s financial sector towards stability.
The Government introduced two sets of measures which included a commitment to fund 25 percent of export surrender requirements and maintenance of the US$ cash withdrawal tax at 2 percent.
It also liberalised the Dutch Foreign Currency Auction, allowing the market to determine the exchange rates through the Willing Buyer Willing Seller (WBWS) system, an arrangement where banks acquire foreign currency from the RBZ at a wholesale floor price for sales to their customers.
This was coupled with the lifting of import restrictions on basic commodities and the assumption of all external loans by the RBZ.
All these measures were implemented after the Zimbabwe dollar fell victim to inflation mainly in the second quarter of 2023 as the parallel market exchange rate plummeted to $8500 against US$1, while the weighted average foreign exchange rate reached its weakest of $6 926 to the greenback on the auction as at 20 June 2023.
According to Willdale, the tight monetary measures effected to stabilise the economy negatively impacted cash flow generation and operations in general, restraining volume uptake in the process.
The brick-making firm’s Year to date volumes for the nine months took a four percent dip compared to the prior year also attributable to crippling energy challenges experienced towards the end of 2022 and early 2023.
Relentless power outages meant reliance on expensive diesel generators, which pushed up the company’s operating costs, a position that was compounded by exchange rate volatility as the firm forked out more RTGS to acquire USD for working capital.
“The instability in the exchange and inflation rates presented a challenging operating environment characterised by low aggregate demand and high operating costs. The operating environment remains uncertain with the monetary authorities trying their best to stabilise the economy.
“Focus remains on efficient production and cost containment given the prevailing economic environment. Appropriate strategies will be deployed to generate sufficient business given low aggregate demand,” said, Mavuto Munginga, Willdale company secretary, in a trading update for the quarter to June 2023.
Willdale expects the liquidity situation to improve post the 2023 general elections period.
However, in the quarter to June 2023, Willdale saw a 26 percent growth in sales volumes owing to sustained demand from growing construction activity, as operations recovered from a seasonal shutdown which was necessitated by rains.
Albeit the negative impact of exchange rate distortions, Willdale’s year to date revenue grew by 83 percent to $20 billion in inflation adjusted terms compared to the prior year.
The firm noted it had a significant order book which had been built to drive sales for the remainder of the year as the company continues to pursue various opportunities.
“The continued growth in demand for higher margin brick types has helped to improve the product mix and margins.”
Earlier in 2023, Willdale indicated that several projects had been planned for the foreseeable future and would provide the critical mass for the business.
As such the company highlighted that the scheduled plant maintenance programme carried out earlier this year was successfully accomplished and is expected to enhance the company’s efficiencies during the peak production season.
This will be compounded by the recent investment in improving the crushing capacity which is likely going to better product quality and improve competitiveness.
Going forward Willdale also indicated that it will continue to leverage its brand, superior quality, and capacity to dominate the market and sustain margins, subject to a sufficient supply of electricity.
Willdale manufactures and markets a range of clay brick products for the Zimbabwe building and construction sector, including clay brick range comprising face brick, semi-face brick, common brick, and paving bricks.
