Working capital headache for Willdale

RYAN CHIGOCHE

 

Listed brick manufacturer Willdale Limited says working capital worries will be a major headache for the company due to tight lending conditions by the financial institutions.

The Reserve Bank of Zimbabwe (RBZ) recently increased interest rates to 200% from 80% as part of efforts to deal with speculative borrowing and curb soaring inflation.

Annual inflation rate hit 297% in July from 192% in June.

Willdale company secretary, Mavuto Munginga said the high interest rate would make it difficult for the company to access working capital funding.

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

He said the company hopes the monetary and fiscal policy interventions by the government will bring stability to the exchange rate and inflation and a better operating environment.

High interest rates, Munginga said, will make it difficult for companies to embark on new products or expand, as they will not easily afford to take out credit.

In its trading update for the quarter to June 30, 2022, Munginga said production was depressed owing to late April rains and the adverse impact of the Russia-Ukraine war, which pushed up the prices of fuel.

Resultantly, the company’s cumulative revenue declined by 1% as sales also dropped, as there was a lack of stock caused by the late rains.

Munginga, however, said demand remained high, driven by cluster home developments and individual home builders.

He said production is currently ahead of target and prior year as they look to provide stocks to cover the sales gap heading into the final quarter.

In the outlook, Munginga said the increasing demand for bricks to meet the high demand for housing will drive revenues in the quarter.

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

Meanwhile, Willdale is currently in negotiations for the disposal of certain idle assets with the transaction if successful, set to raise funds for capital expenditure.

 

 

 

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