Home » Business » Willdale Focuses On Refurbishment

Local brick manufacturer, Willdale limited’s capital expenditure of $1,7 million for the year ended September 30 went towards the purchase of critical mobile equipment, refurbishment of plant to enhance economies of scale following a successful subscription of the $3,2 million rights issue.

Willdale said the capital resulted in a significant increase in capacity utilisation to about 60 percent compared to 53 percent of 2013. Consequently, green and burnt production volumes increased by 28 percent and 35 percent respectively over the prior year.

“We will strive to maintain high production volumes in order to minimise unit production costs and improve competitiveness.

“A number of cost cutting measures are underway that aim to reduce fixed costs and align the overall cost to regional benchmarks,” said Willdale limited Chairman Mr Alexander Jongwe in a statement accompanying the company’s financial results.

Mr Jongwe said the major highlight for the company was the successful rights issue of preference shares undertaken in June 2014 that provided critical capital for re-tooling and working capital.

Turnover for the company during the period under review increased by only three percent from the prior year to $ 7million.

Sales volumes for the period were seven percent up on the prior year but average prices declined by four percent due to a product mix that favoured low margin common bricks.

The operating loss was $0,6 million compared to $0,4 million of 2013 after charging $0,7million to depreciation of property, plant and equipment and $0,3 million in non-recurring expenses .

Mr Jongwe said proceeds from the rights issue were received in the third quarter and various initiatives undertaken after the rights issue have resulted in a reduction in the production cost and improved margins.

He said the economy continued to be affected by tight liquidity conditions, rising formal unemployment and lower than anticipated production levels.

Government revised downwards the projected GDP growth rate for 2014 to 3,1 per cent and the economic challenges led to slow growth in demand as most building projects were suspended.

The conversion rate to sales was low due to the liquidity crunch prevailing in the economy and as a result sales volumes only increased by seven percent over the prior year.

“We are pursuing our strategic thrust to become the lowest cost producer which should improve our competitiveness and ensure growth in market share and volumes.

“We will continue to invest resources into improving our quality to world class standards,” said Mr Jongwe.

Production capacity created post recapitalisation should enable high production volumes at low cost.

This, coupled with an increase in orders, should see the company generating sufficient gross margin and achieving a profit position for the coming year.

Mr Jongwe said the pronouncements made by various project developers including government and building societies on planned new housing developments are encouraging.

The board of the company believes that the company will continue to operate as a going concern for the foreseeable future and as a result financial statements for the period under review have been prepared using the going concern basis.

The board’s view is based on the expected successful implementation of its strategic plan, continued support from current financiers and suppliers and other initiatives that the board is undertaking to improve the company’s performance.

Source : The Herald

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