RADAR Holdings Ltd (Radar) plans to increase brick production to 60 million units in the current financial year compared to the previous 40 million units last year and significantly improve profitability, CEO Elias Hwenga said.
Hwenga said the increase in production, expected to be reached by June 2014, would be driven by improved operating efficiencies demand from regional projects as well as major construction ventures at big mining companies and government infrastructure projects.
“This time we are not including new investment. We are using our current capacity and the availability of electricity has improved since we installed a dedicated power line in the current calendar year around January and February,” he said in an interview after the company’s annual general meeting in Harare this week.
“Radar’s current capacity utilisation is between 89 and 92%.”
In a trading update, Hwenga said sales for the first month of the company’s financial year to October remained flat at US$3,1 million due to a slowdown in building activities in Bulawayo since the July 31 general elections.
“We are not yet worried,” Hwenga said. “It’s a bit flat but the product is like that and we normally have a lot of activity between December and January and we have already built a lot of stock.
Hwenga said profitability for the first four months stood at US$389 000 up from US$304 000 in the same period last year.
The increase in production is expected to result in a “significant” increase in income for the year, he added, without being drawn to give specific numbers.
However, the company has water supply problems particularly in Bulawayo, interminent electricity supply and a generally high cost of labour.
“Tight liquidity is an issue, the tenure of debt is short, the cost of money is too high and also the availability of funding itself is very low,” Hwenga said.
Liquidity constraints have crippled industry in general leading to high incidents of retrenchments and company closures after failing to retool and remain competitive after a decade of hyperinflation. The few companies that have managed to remain competitive have either acquired new equity partners or taken loans.
Radar, however, is looking at alternative forms of long-term funding.
“We haven’t looked at the actual equity side of it but we are looking within the parameters of our balance sheet. We are not looking for new debt, we are just looking at refinancing the debt which we already have with cheaper and a bit longer term funding,” said Hwenga.
In the company’s last full financial year, turnover increased 11% to US$9,2 million while the group reported a US$49 241 operating loss.