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Hwa - Hwange Colliery Company - The Company`s Audited Results For The

Release Date: 22/03/2007 17:48:06      Code(s): HWA
HWA - Hwange Colliery Company - The Company`s Audited Results For The           
                               Financial Year Ended 30 December 2006            
HWANGE COLLIERY COMPANY LIMITED                                                 
(Incorporated in Zimbabwe)                                                      
Code: HWA & ISIN: ZW0009011934                                                  
THE COMPANY`S AUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 30 DECEMBER 2006     
INCOME STATEMENT                                                                
INFLATION ADJUSTED                               
                                                                                
                               2006                 2005                        
                               $                    $                           
Revenue                         30 969 282 532       35 003 050 809             
Cost of sales                   (15 862 347 193)     (25 642 648 993)           
Gross profit                    15 106 935 339       9 360 401 816              
Other operating (loss)/income   (1 357 487 178)      4 336 372 849              
Fair value adjustment on        10 712 915 974        -                         
Investment Property                                                             
Marketing costs                 (311 531 005)        (205 365 200)              
Administrative costs            (9 271 850 754)      (14 802 115 820)           
Gain/(loss) on net monetary     20 448 256 916       (569 684 820)              
position                                                                        
Profit/                         35 327 239 292       (1 880 391 175)            
(loss) from operations                                                          
Net finance income              4 330 330 306        1 461 096 545              
Impairment (loss)/reversal      (305 543 461)        1 773 997 307              
Profit before taxation          39 352 026 137       1 354 702 677              
Taxation                        (914 744 936)        370 125 602                
Profit after taxation           38 437 281 201       1 724 828 279              
                               Cents                Cents                       
Attributable earnings per       21619                975                        
share                                                                           
- basic                                                                         
- diluted                      21619                970                         
Headline  earnings/             21286                2003                       
(loss) per share                                                                
- basic                                                                         
- diluted                      21286                1994                        
                               HISTORICAL COST                                  
                                                                                
2006                 2005                        
                               $                    $                           
Revenue                         13 258 615 530       988 933 644                
Cost of sales                   (6 280 319 545)      (487 433 603)              
Gross profit                    6 978 295 985        501 500 041                
Other operating (loss)/income   (512 479 213)        216 988 869                
Fair value adjustment on        11 599 982 120        -                         
Investment Property                                                             
Marketing costs                 (179 067 423)        (5 831 191)                
Administrative costs            (5 375 134 818)       (441 714 422)             
Gain/(loss) on net monetary      -                    -                         
position                                                                        
Profit/                         12 511 596 651       270 943 297                
(loss) from operations                                                          
Net finance income               1 069 206 315       59 516 369                 
Impairment (loss)/reversal       -                    -                         
Profit before taxation          13 580 802 966       330 459 666                
Taxation                        (3 475 201 955)      (65 947 562)               
Profit after taxation           10 105 601 011       264 512 104                
                               Cents                Cents                       
Attributable earnings per       5684                 149                        
share                                                                           
- basic                                                                         
- diluted                      5684                 149                         
Headline  earnings/             5623                 150                        
(loss) per share                                                                
- basic                                                                         
- diluted                      5623                 149                         
BALANCE SHEET                                                                   
                                                                                
                               INFLATION ADJUSTED                               
                                                                                
2006                 2005                        
                               $                    $                           
ASSETS                                                                          
Non Current Assets                                                              
Property, plant and equipment   38 195 672 376       34 625 734 613             
Investment property             11 600 000 000       887 084 026                
Investments                     15 760               174 045 270                
Loans receivable in more than   -                    -                          
one year                                                                        
                               49 795 688 136       35 686 863 909              
Current Assets                                                                  
Pre-stripped overburden         18 153 982 999       12 892 589 668             
Inventory                       28 702 869 906       4 884 409 445              
Recoverable foreign currency    4 560 072 400        13 805 104 727             
differences                                                                     
Receivables and prepayments     5 009 926 146        6 473 236 749              
Short term loans receivable     22 844               315 502                    
Bank and cash balances          416 939 421          659 487 630                
                               56 843 813 716       38 715 143 721              
Total assets                    106 639 501 852      74 402 007 630             
EQUITY AND LIABILITIES                                                          
Capital and reserves                                                            
Share capital                   50 933 462 941       50 933 462 941             
Capital reserves                25 812 128 110       25 812 128 110             
Retained profit/(loss)          2 283 978 845        (36 153 302 356)           
                               79 029 569 896       40 592 288 695              
Non current liabilities                                                         
PLARP                           51 686 483           1 064 693 352              
Lease liability                 685 825 820          -                          
Deferred taxation               13 221 337 203       12 306 592 267             
                               13 958 849 506       13 371 285 619              
Current liabilities                                                             
Overdrafts                      118 189 933          -                          
Bills and acceptance credits    -                    391 003 993                
Loans payable within one year   4 572 293 882        13 973 897 306             
PLARP                           162 086 699          521 120 446                
Lease liability                 825 273 661          -                          
Payables                        7 971 643 351        5 400 257 476              
Provision for discontinuing     -                    17 470 783                 
operation costs                                                                 
Provision for taxation          1 594 924            134 683 312                
                               13 651 082 450       20 438 433 316              
Total equity and liabilities    106 639 501 852      74 402 007 630             
                               HISTORICAL COST                                  

                               2006                 2005                        
                               $                    $                           
ASSETS                                                                          
Non Current Assets                                                              
Property, plant and equipment   2 409 350 295        106 799 063                
Investment property             11 600 000 000       17 880                     
Investments                     15 760               15 760                     
Loans receivable in more than   -                    -                          
one year                                                                        
                               14 009 366 055       106 832 703                 
Current Assets                                                                  
Pre-stripped overburden         1 986 000 645        172 375 778                
Inventory                       2 382 220 896        156 849 924                
Recoverable foreign currency    4 560 072 400        999 563 300                
differences                                                                     
Receivables and prepayments     5 009 926 146        468 696 907                
Short term loans receivable     22 844               22 844                     
Bank and cash balances          416 939 421          47 750 426                 
                               14 355 182 352       1 845 259 179               
Total assets                    28 364 548 407       1 952 091 882              
EQUITY AND LIABILITIES                                                          
Capital and reserves                                                            
Share capital                   177 795              177 795                    
Capital reserves                5 694 147            5 694 147                  
Retained profit/(loss)          10 422 998 165       317 397 154                
                               10 428 870 107       323 269 096                 
Non current liabilities                                                         
PLARP                           51 686 483           77 089 484                 
Lease liability                 685 825 820          -                          
Deferred taxation               3 547 083 547        71 881 591                 
                               4 284 595 850        148 971 075                 
Current liabilities                                                             
Overdrafts                      118 189 933          -                          
Bills and acceptance credits    -                    28 310 777                 
Loans payable within one year   4 572 293 882        1 011 784 784              
PLARP                           162 086 699          37 731 903                 
Lease liability                 825 273 661          -                          
Payables                        7 971 643 351        391 007 478                
Provision for discontinuing     -                    1 264 978                  
operation costs                                                                 
Provision for taxation          1 594 924            9 751 791                  
                               13 651 082 450       1 479 851 711               
Total equity and liabilities    28 364 548 407       1 952 091 882              
CASH FLOW STATEMENT                                                             
                                                                                
                               INFLATION ADJUSTED                               
                                                                                
2006                 2005                     
                               $                    $                           
CASH FLOWS FROM OPERATING                                                       
ACTIVITIES                                                                      
Profit/(loss) from operations      35 327 239 292       (1 880 391 175)         
Non-cash items                                                                  
- Depreciation                    1 886 029 734        8 442 039 329            
- Deferred expenditure M-Block    (1 264 978)          (111 929 548)            
written-off                                                                     
- Fair value adjustment on        (10 712 915 974)     -                        
investment property                                                             
- Monetary adjustment             (18 472 498 657)     (15 283 149 881)         
Operating cash flow before         8 026 589 417        (8 833 431 275)         
changes in working capital                                                      
(Increase)/decrease in inventory   (29 079 853 793)     (2 690 299 794)         
Decrease/(Increase) in             9 245 032 327        (7 941 166 175)         
recoverable foreign currency                                                    
differences                                                                     
Decrease/(Increase) in             1 463 603 261        3 874 265 454           
receivables                                                                     
Increase/(decrease) in payables    2 553 915 092        (6 481 644 099)         
Cash flow utilised in operations   (7 790 713 696)      (22 072 275 889)        
Interest paid                      (1 971 378 829)      (2 491 653 023)         
Interest received                  6 301 709 135        3 952 749 568           
Income tax paid                    (10 384 360)         (169 052 656)           
Cash flows utilised from           (3 470 767 750)      (20 780 232 000)        
operating activities                                                            
CASH FLOWS FROM INVESTING                                                       
ACTIVITIES                                                                      
Purchase of Property, plant and    (5 761 510 958)      (3 024 678 198)         
equipment                                                                       
Net cash flows from investing      (9 232 278 708)      (23 804 910 198)        
activities                                                                      
CASH FLOWS FROM FINANCING                                                       
ACTIVITIES                                                                      
Shares issued                      -                    91 726 660              
Increase/(decrease) in loans       9 262 544 559        22 836 537 892          
Loans repaid                       -                    (619 583 653)           
Decrease/(increase) in loans       -                    7 466 866               
receivable                                                                      
Net cash flows from financing      9 262 544 559        22 316 147 765          
activities                                                                      
Increase/(decrease) in cash and    30 265 851           (1 488 762 433)         
cash equivalents                                                                
Represented by:                                                                 
Cash and cash equivalents at       268 483 637          1 757 246 070           
beginning of the year                                                           
Cash and cash equivalents at end   298 749 488          268 483 637             
of the year                                                                     
Increase/(decrease) in cash and    30 265 851           (1 488 762 433)         
cash equivalents                                                                
                               HISTORICAL COST                                  

                               2006                 2005                        
                               $                    $                           
CASH FLOWS FROM OPERATING                                                       
ACTIVITIES                                                                      
Profit/(loss) from operations   12 511 596 651       270 943 297                
Non-cash items                                                                  
- Depreciation                 100 447 189          1 333 688                   
- Deferred expenditure M-      (1 264 978)          (101 125)                   
Block written-off                                                               
- Fair value adjustment on     (11 599 982 120)     -                           
investment property                                                             
- Monetary adjustment          -                    -                           
Operating cash flow before      1 010 796 742        272 175 860                
changes in working capital                                                      
(Increase)/decrease in          (4 038 995 839)      (257 023 022)              
inventory                                                                       
Decrease/(Increase) in          (3 560 509 100)      (937 656 575)              
recoverable foreign currency                                                    
differences                                                                     
Decrease/(Increase) in          (4 541 229 239)      (359 456 461)              
receivables                                                                     
Increase/(decrease) in          7 580 635 873        265 568 051                
payables                                                                        
Cash flow utilised in           (3 549 301 563)      (1 016 392 147)            
operations                                                                      
Interest paid                   (852 087 770)        (96 247 296)               
Interest received               1 921 294 085        155 763 665                
Income tax paid                 (8 156 866)          (2 957 054)                
Cash flows utilised from        (2 488 252 114)      (959 832 832)              
operating activities                                                            
CASH FLOWS FROM INVESTING                                                       
ACTIVITIES                                                                      
Purchase of Property, plant     (2 402 998 421)      (79 682 004)               
and equipment                                                                   
Net cash flows from investing   (4 891 250 535)      (1 039 514 836)            
activities                                                                      
CASH FLOWS FROM FINANCING                                                       
ACTIVITIES                                                                      
Shares issued                   -                    3 084 315                  
Increase/(decrease) in loans    5 170 560 374        1 048 756 368              
Loans repaid                    -                    (11 497 085)               
Decrease/(increase) in loans    -                    59 316                     
receivable                                                                      
Net cash flows from financing   5 170 560 374        1 040 402 914              
activities                                                                      
Increase/(decrease) in cash     279 309 839          888 078                    
and cash equivalents                                                            
Represented by:                                                                 
Cash and cash equivalents at    19 439 649           18 551 571                 
beginning of the year                                                           
Cash and cash equivalents at    298 749 488          19 439 649                 
end of the year                                                                 
Increase/(decrease) in cash     279 309 839          888 078                    
and cash equivalents                                                            
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2006              
INFLATION ADJUSTED                                                              
           Share Capital   Capital Reserves Retained           Total            
           $               $                (loss)/profits     $                
                                            $                                   
Balance at  50 933 383 389  25 720 481 001   (37 878 130 635)   38 775 733 755  
1 January                                                                       
2005                                                                            
Profit for  -               -                1 724 828 279      1 724 828 279   
the year                                                                        
Issue of    79 552          91 647 109       -                  91 726 661      
share                                                                           
capital                                                                         
under the                                                                       
employee                                                                        
share                                                                           
option                                                                          
scheme                                                                          
Balance at  50 933 462 941  25 812 128 110   (36 153 302 356)   40 592 288 695  
31                                                                              
December                                                                        
2005                                                                            
Balance at  50 933 462 941  25 812 128 110   (36 153 302 356)   40 592 288 695  
1 January                                                                       
2006                                                                            
Profit for  -               -                38 437 281 201     38 437 281 201  
the year                                                                        
Balance at  50 933 462 941  25 812 128 110   2 283 978 845      79 029 569 896  
31                                                                              
December                                                                        
2006                                                                            
HISTORICAL COST                                                                 
           Share Capital   Capital          Retained           Total            
$               Reserves         Earnings           $                
                           $                $                                   
Balance at  175 998         2 611 629        52 885 050         55 672 677      
1 January                                                                       
2005                                                                            
Profit for  -               -                264 512 104        264 512 104     
the year                                                                        
Issue of    1 797           3 082 518        -                  3 084 315       
share                                                                           
capital                                                                         
under the                                                                       
employee                                                                        
share                                                                           
option                                                                          
scheme                                                                          
Balances    177 795         5 694 147        317 397 154        323 269 096     
at 31                                                                           
December                                                                        
2005                                                                            
Balance at  177 795         5 694 147        317 397 154        323 269 096     
1 January                                                                       
2006                                                                            
Profit for  -               -                10 105 601 011     10 105 601 011  
the year                                                                        
Balance at  177 795         5 694 147        10 422 998 165     10 428 870 107  
31                                                                              
December                                                                        
2006                                                                            
CHAIRMAN`S STATEMENT                                                            
It is my pleasure to present company results for the financial year ended 31    
December 2006.                                                                  
Business Environment                                                            
Generally, the year was characterised by a challenging operating environment and
this manifested itself throughout all the company operations.                   
The year on year inflation increased significantly from 614% at the beginning of
the year to 1281% as at 31 December 2006. Foreign currency availability         
remained a challenge and affected the company`s capitalization and plant and    
equipment maintenance programmes. There was no movement in the foreign exchange 
rate, as expected of a fixed exchange rate system.                              
The pricing of company products continued under a price monitoring system.      
Transportation logistical problems were minimal during the year.                
OPERATIONS                                                                      
The new Chaba Opencast Mine started production in April 2006 and was financed   
from internal resources. This new mine was to augment the existing two mines,   
JKL Opencast Mine and 3 Main Underground Mine.                                  
The company continued with its capitalization initiatives in order to boost     
production capacity. Two state of the art drills were procured from Europe and  
two (2) new shuttle cars were acquired from the Republic of South Africa.       
The company took delivery of the mining equipment from China North Industries   
Corporation of China in October 2006.                                           
TRADING PERFORMANCE                                                             
Total coal and coke sales for the year amounting to 2 070 358 tonnes, were 32%  
below the total tonnage sales achieved the previous year.                       
Individual product performance was as shown below.                              
(i)  HCC/HIC Coal                                                               
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales of 566 976  
tonnes were 32% below the tonnage achieved the previous year.                   
Coal exports amounted to 41 470 tonnes as compared to 39 067 tonnes for the     
previous year, representing a 6% increase. The bulk of the coal exports were    
dispatched to the Zambian and Democratic Republic of Congo markets. The northern
market remained buoyant and with opportunities for growth.                      
(ii) HPS Coal                                                                   
HPS coal delivered to Zimbabwe Power Company (ZPC)`s Hwange Power Station       
amounted to 1 330 553 tonnes and was 34% below the previous year`s deliveries of
2 023 564 tonnes.                                                               
(iii)     Coke (excluding Breeze)                                               
Coke sales of 174 434 tonnes were 11% below the 196 523 tonnes achieved last    
year.                                                                           
Coke sales accounted for 49.6% of annual turnover.                              
Coke exports for the year were 73 831 tonnes as compared to 105 927 tonnes      
achieved in 2005. Despatches were mainly to the northern markets following a    
decreased off take to the South African market. Coke exports accounted for 32%  
of annual coke sales.                                                           
(iv) Coke Oven Gas                                                              
Gas supply to ZPC`s Hwange Power Station was 17 662 576 Nm3 compared to 24 356  
880 Nm3 supplied the previous year.                                             
FINANCIAL RESULTS                                                               
The company complied with the International Accounting Standard (IAS) 29        
(Financial Reporting in Hyper Inflationary Economies). The financial statements 
and corresponding figures for the previous period have been restated to take    
account of changes in the purchasing power of the Zimbabwean dollar.            
(i)  Historical Cost Accounting Results Performance for the year was            
satisfactory despite the challenges faced by the company. Turnover at $ 13.3    
billion was above the previous year`s turnover of $ 989 million.                
There was a fair value adjustment of $11.6 billion as a result of the           
revaluation of investment properties in Harare and Bulawayo. An operating profit
of $ 12.5 billion was realized compared with last year`s operating profit of    
$271 million.                                                                   
The company`s attributable profits were $10.1 billion as compared to the        
previous year`s $264 million. The ncrease in profitability was mainly due to the
revaluation of the investment properties. The attributable profits from         
operations amounted to $1.5 billion.                                            
Non current assets increased from $106 million to $14 billion following the     
acquisitions of plant and equipment for the underground and opencast mines. The 
equipment was commissioned in the second half of the year. The revaluation of   
the investment properties significantly contributed to this increase.           
Current liabilities for the company increased from $1.5 billion to $13.6 billion
(806%) due to short term financing facilities secured on acquisition of the     
opencast equipment from China and Europe. The loans from Commonwealth           
Development Bank (CDC) and West LB accounted for 36% of current liabilities.    
Plans are underway to commence the servicing of the loans during the year 2007. 
The company experienced cash flow problems during the year due to late payments 
by its major customers, Zimbabwe Iron and Steel Company (ZISCO) and ZESA        
Holdings` subsidiary, Zimbabwe Power Company (ZPC). This resulted in trade      
creditors accumulating to $8 billion as at the end of the year compared to $391 
million payable as at end of 2005. The company sought stakeholders`             
interventions for a lasting solution into the future.                           
(ii) Inflation Adjusted Accounting Results.                                     
The company`s revenue slightly decreased from $35 billion in 2005 to $31 billion
in 2006. The company realized an operating profit of $35 billion as compared to 
an operating loss of $1.9 billion for the same period the previous year.        
The company recorded a net profit after tax of $38 billion compared to $1.7     
billion profit realized for the same period the previous year.                  
DIVIDEND                                                                        
The Board has agreed not to consider payment of a dividend in view of the       
ongoing capitalization programme currently being pursued by the company.        
QUALITY, SAFETY, HEALTH AND ENVIRONMENT                                         
The company successfully went through two (2) ISO 9001:2000 Quality Management  
System surveillance audits during the year and continues to be guided by the    
standard throughout all the operations.                                         
The safety prevention programmes were given prominence in order to ensure an    
accident free working environment. The company had no fatality during the year. 
The quality of ground water and surface water in public streams remained good   
throughout the year. Incidents of pollution by company activities were not      
experienced for the period under review.                                        
The HIV and AIDS education campaigns targeted at the workforce and the community
continued to be carried out during the year to raise the level of awareness on  
good, moral and safe behaviour.                                                 
OUTLOOK                                                                         
The refurbishment of the second continuous miner in South Africa would be       
priority. This would enable the opening of the second underground mining section
and will boost coking coal production by 100%.                                  
A major refurbishment programme for the opencast mining plant and equipment is  
being pursued and this would augment the newly acquired equipment and boost     
productivity.                                                                   
The coal fines recovery project is progressing and this would improve coking    
coal availability.                                                              
The demand for both coal and coke is expected to remain firm in both the        
domestic and export markets. The supplies to the domestic market are expected to
meet demand. The bulk of the coal and coke exports would be targeted to the     
Zambia and Democratic Republic of Congo markets.                                
The way forward for 2007 would be to focus all resources on improving production
volumes through the acquisition of additional new equipment and efficient       
utilization of the existing machinery.                                          
Hwange Colliery Company Limited is positive that the initiatives by the Board   
and management will yield a sustainable coal and coke supply scenario that would
optimize the returns on shareholders` investment.                               
DIRECTORATE                                                                     
The Managing Director, Dr G Dzinomwa resigned from the company and Board at the 
end of November 2006. On behalf of the Board, I would like to thank Dr Dzinomwa 
for his valuable contributions to Hwange Colliery Company Limited. Mr A Rhuhwaya
was appointed to act as Chief Executive while the recruitment process is        
underway.                                                                       
There has not been any change on the non Executive members of the Board.        
APPRECIATON                                                                     
I would like to express sincere appreciation to my fellow Directors who         
throughout the year worked selflessly to ensure the company tackles its         
challenges and set Hwange Colliery Company on the growth and prosperity destiny.
The management team and all staff demonstrated commitment consistent with the   
company`s endevour to increase production despite a number of challenges. The   
partnership that exists between the Board, management and staff is fully        
acknowledged. The company also appreciates the support received from all the    
stakeholders.                                                                   
T. Savanhu                                                                      
Chairman                                                                        
15 March 2007                                                                   
BASIC EARNINGS PER SHARE (HISTORICAL COST)                                      
The calculation of basic earnings per share is based on profit after taxation of
$10.1 billion ($264.5 million in 2005) and on 177 795 000 (176 979 000 in 2005) 
weighted average ordinary shares in issue during the year.                      
ANNUAL REPORT AND ACCOUNTS                                                      
The annual report and accounts for the year ended 31 December 2006 will be      
distributed to members on or before 31 May 2007 and the annual general meeting  
will be held on Friday 29 June 2007.                                            
By Order of the Board                                                           
T K Ncube                                                                       
SECRETARY                                                                       
15 March 2007                                                                   
Sponsor                                                                         
Imara Corporate Finance South Africa (Pty) Ltd                                  
22 March 2007                                                                   
Date: 22/03/2007 17:48:05 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  



                                        
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