Willdale CEO Clifford Mushambadzi took unusually long to finish thanking the board of directors, suppliers and executives for being resilient during tough times at the company’s annual and extraordinary general meetings earlier this week.
Whilst this was rather odd given the usual pace of business at an AGM with a trading update barely taking five minutes, Mushambadzi’s excitement was testimony to both management and directors sentiments after getting a US$3,255 million bailout in the form of capital, expected to take the company out of the woods.
Prior to the transaction, Willdale incurred losses of US$1,08 million in 2011, US$1,034 million in 2012 and US$744 485 in 2013.
Current liabilities exceeded current assets by US$2,7 million in 2011, and by US$3,7 million in 2012 and US$4,2 million in 2013.
Already, Willdale management is optimistic of a profitable future after the capital injection.
Mushambadzi said with funding now in place, capacity utilisation should increase to at least 60% from the current average of 30%, resulting in a positive operating profit position for the financial year ending September 30 2014.
He said the full impact of work done to date on funding, procurement of mobile equipment, rehabilitation of idle assets and changes to the way things are done, will be best felt in the year ending September 2015.
“As the demand for quality bricks currently exceeds supply, Willdale is poised to regain its market leadership position, through increased production, supported by a sustainable profitable business model,” he said.
Shareholders, according to chairman Alexander Jongwe, approved a US$3,255 million renounceable rights offer 10% semi-annual dividend redeemable cumulative preference shares at a subscription price of US$1 per share.
Shareholders also passed another special resolution to increase the company’s share capital from US$100 000 divided into 2 billion ordinary shares of US$0,00005 each to US$150 000 divided into 3 billion ordinary shares of US$0,00005 each and by creation of 10% redeemable cumulative preference shares of US$325,50 divided into 3,255 million 10% semi-annual redeemable cumulative preference shares of a nominal value of US$0,0001 of which will be issued.
The EGM also resolved to convert the preference shares into ordinary shares at the fifth anniversary from the issue date of the 10% redeemable cumulative preference shares.
“The conversion price will be the higher of the net asset value per share of the company using the recently published audited accounts of the company or the volume weighted average price of Willdale shares over the previous 60 trading days,” reads part of the EGM notice.
The preference shares will be listed on the Zimbabwe Stock exchange while the unissued authorised shares will be placed under the control of directors.Old Mutual Life Assurance Company Zimbabwe is the underwriter.
In a trading update, Mushambadzi said the first six months of the current financial year, which include four months of wet weather, have witnessed the same production levels as experienced last year, in line with a deliberate strategic decision to reduce green production in the wet season to minimise brick losses.
“The company is, however, better prepared for the coming dry season than in previous seasons. Under the guidance of the board, management is pursuing the following strategic issues to further improve performance of the company,” he said.
Mushambadzi said the company was improving preparedness for the dry peak production period by stock piling clay and key spares and consumables. Willdale will increase production volumes in the dry season sufficient to cover for the wet season sales demand, he said.
After the new investment, the company has acquired new equipment which is expected to improve plant efficiencies throughout the value chain to increase productivity.
He said uptime was 56% during the year to 30 September 2013, adding the target is to push this to 80% in the second half due to the recapitalisation currently underway.
He said the capital raising has resulted in significant reduction in borrowing costs.
“Good progress and success has been made in structuring our existing short term loans and overdraft facilities to a medium term loan,” Mushambadzi said.
“The bridging loan of US$1,5m has improved the company’s operational base. From next week, right up to August 2014, Willdale will be receiving batches of forklifts, until the quantity ordered has been completed. We also plan to acquire our own fleet of Tippers, so that we reduce over-reliance on hired equipment, in our mining operations.”
Willdale properties were revalued in December 2012, resulting in a US$7,9 million increase in shareholder funds.
Going forward, the company plans to secure more clay deposits to increase current levels which have at least 20 years life span at current production levels.
Willdale said the demand for bricks has remained strong with continuous enquiries from individuals, corporate and government institutions for the supply of bricks.
The company said success in converting these enquiries to confirmed orders will be determined by ability to supply a quality product within the shortest possible time.
“Although there is still pressure on margins due to competition, we expect to manage such competition through high volume and low cost production which will give us flexibility in pricing.”