Zimbabwe Stock Exchange-listed brick producer Willdale announced a 10% growth in sales volumes for the first five months of its financial year.
The company said profitability was ahead of the country’s inflation rate largely due to cost containment initiatives.
By year-end, the company expects to beat its production targets in the absence of power, fuel, and foreign currency shortages that are crippling industry, leveraging on its plants that have the capacity to produces 30 000 bricks an hour.
Business Times senior business reporter Taurai Mangudhla (TM) interviewed Willdale chief executive officer Nyasha Matonda (NM) on the sidelines of the company’s AGM last week around the company’s export strategy and how management is dealing with inflation pressures on prices.
Below are the excerpts:
TM: During your trading update, you hinted on an export strategy. Which markets are you looking at for exports and have you done feasibility studies?
NM: Yes, we have done specifically for Zambia and Mozambique, the potential is there. Like I am saying, we need to have awareness so that the market takes clay brick. In Zambia, you find that even at Government level they specify cement bricks on tenders so we need to get to that level they can also specify the clay brick.
TM: Looking at the distance between your plant in Zambia or Mozambique, what is the basis of sticking to exporting without considering setting up a plant in each of these markets?
NM: Zambia is even closer; we are pushing products as far as Hwange, so compared to Zambia it’s close. The beauty about us producing from here is we have got the capacity to produce in mass so we have the capacity, advantage on the volumes which may be required.
Setting up there has some advantages, we are closer to the market, but we need to do a feasibility study to make sure the plant you are putting there will be fully utilised.
We can’t put a plant and end up running it for a short while then the market is satisfied.
You need to justify because these are huge plants.
TM: What would be the cost of setting up a plant in Zambia or Mozambique for instance?
NM: Now because of the different technology, it is difficult.
These are more of the Willdale looks up to Zambia, Moza for exports original plants that we have, but we have got new technologies coming up. In terms of the cost, it depends on the capacity and the source.
If you also check, plants from China are totally different from those from Germany or Italy.
TM: I understand, but if you were to invest in a plant for the export markets, how much would you budget for?
NM: For a complete plant, we are looking at maybe around US$3m.
TM: Moving on, the cost of transporting bricks is quite high with individuals paying about US$200 for 10 000 for deliveries within a 25km radius.
What strategies are in place to deal with the high cost of transportation in order to not only drive sales but to also, cushion the consumer?
NM: Transport has become the biggest cost of the product. You find on some of the distances, the price of the brick is less than the price of the product. You find that the strategy is obviously to say how can we assist the end-user and make transport costs affordable.
What we have been doing is we have been bringing together transporters and agreeing on a price which we believe is good for the market because we have got the product and they have got the transport. It is about seeing what price we are going to push to the buyer, you can’t just let the market decide.
If you just let the market decide then it will be problematic.
As a company, we are also trying to assist and at times we look at volumes. For instance, if we have a big project which has huge volumes then we negotiate with the transporters also to just fix the price.
TM: Business is struggling to price due to inflation and at times the structures eat big into their margins. What has been your experience at Willdale?
NM: It is unfortunate when inflation comes the pressures are all over because you look at your materials.
The way the materials are being costed by suppliers is in US dollars and whatever rate they want that particular day and that puts pressure on our margins.
We have been trying to follow the way the rate is also moving so that we can also cushion ourselves otherwise we would be out of business. TM: Looking at your costs, how much is it in foreign currency and how much in local currency?
NM: Basically, the foreign aspect is mainly on the spares, but our biggest cost is on the local materials and there we have diesel because we do have a lot of movement and coal which comes all the way from Hwange.
That’s the biggest cost. Some of the materials, we buy it locally like plastics to cover the bricks, which are some of the biggest cost drivers.
So it’s basically those materials that keep the plant running which we have to be importing now and again which need foreign currency.
TM: How much diesel and coal do you consume per month?
NM: Depending on the time and season, we consume between 80 000 to 100 000 litres of diesel per month.
Coal fines we do about 4 000 tonnes a month and coal mattes we do about 2 000 tonnes per month, making the coal total 6 000 tonnes per month.