Power cuts slash Willdale production

Zimbabwe experienced serious power cuts last year, resulting in companies losing production time and shouldering heavy operational costs.

LISTED brick-making firm, Willdale Limited says production for the quarter ended December 31, 2023, declined by 16% due to severe electricity load shedding.

Zimbabwe experienced serious power cuts last year, resulting in companies losing production time and shouldering heavy operational costs.

However, with Hwange units 7 and 8 coming back online, the situation has significantly improved in the past few weeks.

In a trading update for the quarter under review, the brick maker said load shedding also resulted in sales volumes dropping by 9% compared to prior year.

“Increased load shedding was experienced, affecting throughput and efficiencies. Production declined by 16% because of electricity load shedding,” the company said.

However, Willdale noted that demand for bricks remained high, driven largely by construction of cluster homes in urban areas. 

Revenue for the quarter increased by 130% in hyperinflation terms and by 835% in historical terms compared to prior year.

“Revenue continued to be impacted by exchange rate distortions. The company is considering a change in functional currency to the US dollar in view of the increased ratio of transactions conducted in US dollars,” it said.

“This initiative, which will only be adopted at the beginning of the new financial year, is expected to deal with reporting distortions emanating from multi-currency transacting.”

The company also indicated that building projects have continued to increase into the second quarter with cluster home development, educational infrastructure and shopping centres dominating the list of projects. These should provide the critical mass to meet set targets for the year.

“The ongoing initiative to unlock value from certain assets should provide resources to increase capacity, competitiveness and profitability. The business remains viable, with a model that continuously provides required working capital to support operations,” it said.

“Focus remains on managing costs, margins and cashflows.”

In the outlook, Willdale sees the upsurge in construction projects presenting opportunities for real growth despite increasing competition, especially in the common brick market. As such, the company is crafting strategies to improve the product mix and maximise margins from high value brick varieties.

“We will continue to engage Zesa [Holdings] to improve electricity supply to our operations,” Willdale added.

The firm, however, expressed concern that taxation measures introduced for the year 2024, which include the reclassification of clay bricks as liable to value-added tax (Vat), would impact on business in the short- term.

The impact will especially be felt from price sensitive customers who are not Vat registered and cannot recover input tax.

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