HARARE – Radar Holdings (Radar) plans to boost production at its brick-making arm MacDonald to 60 million units from around 48 million by year end.
The group said it anticipated a surge in bricks demand on the back of increased activity in the construction and mining sector.
Without disclosing how much they intended to invest in capital equipment to boost capacity, chief executive Elias Hwenga told stakeholders at an annual general meeting on Wednesday that they expect local demand to continuously spur consumption of its products.
“This will be underpinned by enhanced capacity utilisation, better equipment and higher labour productivity,” he said.
He added that most of the group’s products have been locally consumed in the residential property development sector and they expect this trend to continue as a result of strong demand for urban housing.
The Zimbabwe Stock Exchange-listed firm reported in its 2013 annual report that the brick-making division’s turnover increased by 11 percent to $9,1 million compared to the previous year following a record production.
McDonald’s year-on-year profitability grew to $1,7 million from $481 797 achieved in 2012.
“The record increase was mainly attributable to a combination of an increase in sales volume as well as a better product mix,” said Hwenga.
Sales volumes increased by 11,5 percent compared to prior year driven by an increase in construction activity particularly in the first half of the year.
“Demand however, slowed down in the last half of the year as some projects that were being supplied were completed,” he noted.
The group however, lamented the unsustainable power outages that have proved costly to production.
Hwenga said that high production could have been achieved had it not been for acute power shortages during the year with both Bulawayo-based Willsgrove and Montgomery plants losing a total of 1 131 hours.
“It is simply not possible to grow a competitive economy on the basis of over one thousand hours of lost time combined the unaffordable cost of generation operation.
“In the end cash required for capital replacement is used in funding operational gaps — a recipe for long term industrial collapse,’ he said.
Overall, the group’s turnover increased by 11 percent from $8,3 million in 2012 to $9,2 million in the period under review.
After tax profitability declined from $736 000 to $2,3 million in 2013.
“This is largely due to an increase in net finance charges from $764 669 to $935 775 a fair value loss of $600 000, impairment of UBM loan balance of $1,2 million and an unbudgeted $652 722 group restructuring expense,” said Hwenga.
Borrowings decreased by 10 percent to $6,5 million and remained short term, affecting current asset ratios.
The group’s property subsidiary, Radar Properties’ rental income declined by $14 percent from $155 991 in 2012 to $134 405 with an operating environment characterised by below market rentals and high debt.
Occupancy ratio dropped from 62 percent in 2012 to 58 percent in 2013.
“The focus continues to be on attracting high quality tenants versus volume tenants,” he said.
Going forward, in the short run the group plans to improve its net value assets by addressing its short term debt through internal cash generation and or disposal of excess assets that are not used in brick production while pursuing a property development strategy in order to actualise the value locked in its existing urban land bank.