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Hwa - Hwange Colliery Company Limited - Unaudited Results For The Six Months

Release Date: 17/09/2010 10:01:03      Code(s): HWA
HWA - Hwange Colliery Company Limited - Unaudited Results for the six months    
ended 30 June 2010                                                              
HWANGE COLLIERY COMPANY LIMITED                                                 
(Incorporated in Zimbabwe)                                                      
Code: HWA    ISIN: ZW0009011934                                                 
("Hwange" or "the Company" or "the Group")                                      
Unaudited Results for the six months ended 30 June 2010                         

Sales Performance            6 Months            6 Months      12 Months        
                            30 June 2010        30 June 2009  31 Dec. 2009      
                            Tonnes              Tonnes        Tonnes            
HCC coal                     319 159             103 035       429 213          
HPS coal                     769 340             218 683       1 033 994        
Coal fines and breeze        90 225              79 396        185 726          
Total coal sales             1 178 724           401 114       1 648 933        
Coke                         18 198              15 114        61 018           
Total sales                  1 196 922           416 228       1 709 951        
                                                                                
Abridged Statement of        6 Months            6 Months      12 Months        
Comprehensive Income         30 June 2010        30 June 2009  31 Dec. 2009     
                            USD                 USD           USD               
                                                                                
Sales revenue                45 179 706          23 616 727    66 363 128       
Profit from operations       3 986 541           1 503 739     5 780 288        
Finance costs                (650 256)           (798 381)     (383 975)        
Share of profit/(loss) of    -                   (15 597)      (425 831)        
equity accounted                                                                
investments                                                                     
Profit before taxation       3 336 285           689 761       4 970 483        
Taxation                     1 170 241           969 202       (2 380 962)      
Profit after taxation        4 506 526           1 658 963     2 589 521        
Other comprehensive income:                                                     
Other comprehensive income   -                   -             -                
for the period net of tax                                                       
Total comprehensive income   4 506 526           1 658 963     2 589 521        
for the period                                                                  
                                                                                
Basic earnings per share                                                        
- basic                      0.02                0.01                           
- diluted                    0.02                0.01                           
Headline earnings per share                                                     
- basic                      0.02                0.01                           
- diluted                    0.02                0.01                           
Abridged Statement of         6 Months      6 Months       12 Months            
Financial Position            30 June 2010  30 June 2009   31 Dec. 2009         
as at 30 June 2010           USD           USD            USD                   
                                                                                
Non- current assets                                                             
Property, plant and equipment 72 637 282    72 225 542     71 577 664           
Investment property           3 615 000     3 615 000      3 615 000            
Investments in associates     4 348 946     1 797 827      2 804 298            
Prestripped overburden        1 809 347     -              -                    
                             82 410 575    77 638 369     77 996 962            
                                                                                
Current assets                                                                  
Pre-stripped overburden       5 921 987     1 197 186      4 911 376            
Inventory                     18 927 970    16 102 744     17 665 738           
Trade and other receivables   32 432 218    6 910 311      25 377 186           
Financial assets at fair      2 317         2 851          2 826                
value through profit and loss                                                   
Cash and cash equivalents     1 945 380     698 777        1 249 983            
                             59 229 872    24 911 869     49 207 109            
                                                                                
Total assets                  141 640 447   102 550 238    127 204 071          
                                                                                
Equity and Liabilities                                                          
Share capital                 45 549 963    44,448,750     45 549 963           
Non-distributable reserve     4 358 468     -              4 358 468            
Retained earnings             7 096 047     1 658 963      2 589 521            
                             57 004 478    46 107 713     52 497 952            
                                                                                
Non-current liabilities                                                         
Deferred tax                  14 860 103    10 326 654     16 421 931           
                                                                                
Current liabilities                                                             
Trade and other payables      40 747 742    22 869 242     28 953 286           
Short term borrowings         27 681 242    23 246 629     28 375 606           
Current tax payable           1 346 882     -              955 296              
                             69 775 866    46 115 871     58 284 188            

Total equity and liabilities  141 640 447   102 550 238    127 204 071          
Abridged Statement of Cash    6 Months      6 Months       12 Months            
Flows                         30 June 2010  30 June 2009   31 Dec. 2009         
USD           USD            USD                   
                                                                                
Cash flows from operating activities                                            
Operating profit              3 336 285     1 503 739      4 970 483            
Non - cash items              4 480 488     9 064 371      10 356 624           
Operating cash flow before    7 816 773     10 568 110     15 327 106           
changes in working capital                                                      
Net change in working capital (2 072 019)   (9 219 125)    (11 097 952)         
Finance cost                  (523 251)     (798 381)      (162 471)            
Net cash generated from       5 221 503     550 604        4 066 683            
operating activities                                                            
                                                                                
Cash flows from investing activities                                            
Acquisition of plant and      (4 444 791)   (224 986)      (3 458 302)          
equipment                                                                       
Net cash used in investing    776 712       325 618        608 381              
activities                                                                      
                                                                                
Cash flows from financing activities                                            
Payment of finance lease      (2 180 496)   -              -                    
liabilities                                                                     
Proceeds from short term      2 100 000     -              600 000              
borrowings                                                                      
Net cash used in financing    (80 496)      -              600 000              
activities                                                                      
                                                                                
Net increase in cash, cash    696 216       325 618        1 208 381            
equivalents                                                                     

Cash, cash equivalents at the 1 248 894     204 493        206 485              
beginning of the period                                                         
Effects of exchange rate      -             168 666        (165 972)            
changes on cash and cash                                                        
equivalents                                                                     
                                                                                
Cash, cash equivalents at the 1 945 110     698 777        1 248 894            
end of the period                                                               
Abridged Statement of      6 Months          6 Months     12 Months             
Changes In Equity          30 June 2010      30 June 2009 31 Dec. 2009          
                          USD               USD          USD                    

Share capital              45 549 963        44 448 750   45 549 963            
Non Distributable reserve  4,358,468         -            4 358 468             
Comprehensive income       7,096,047         1,658,963    2 589 521             

Closing balance            57 004 478        46 107 713   52 497 952            
OVERVIEW                                                                        
The period under review was characterised by a challenging operating            
environment. Even though inflation remained relatively stable, the borrowing    
costs were significant and the market experienced persistent liquidity          
challenges. There was also limited availability of foreign lines of credit.     
These factors impacted negatively on the company`s working capital. The         
Company incurred exchange losses attributed to the strengthening of the South   
African Rand against the United States Dollar.                                  
The global financial meltdown resulted in a decrease in the demand for coal     
and coke both on the domestic and export markets. However capacity utilisation  
in the local manufacturing sector was on an increasing trend but still lower    
than anticipated.                                                               
The prices of products were determined by market forces and were comparable to  
regional and international benchmarks. The costs of logistics (both rail and    
road) was high, negatively affecting both domestic and export sales.            
The Company`s sales volume analysis for the first half of the year shows that   
export sales now equal domestic sales.                                          
Competition in the coal mining industry is envisaged to increase following the  
recent awarding of special grants, in the Hwange area, to a number of new       
players.                                                                        
OPERATIONS                                                                      
The recapitalisation initiatives by the Company yielded positive results as     
the period under review recorded a significant increase in coal production and  
sales volumes when compared to the same period last year.                       
Total coal sales for the six (6) month period under review increased by 198%    
from 401 114 tonnes achieved during the same period last year to 1 178 724      
tonnes.                                                                         
HPS coal deliveries to Hwange Power Station for the period were 769 340 tonnes  
compared to 218 683 tonnes for the same period last year, representing a 252%   
increase.                                                                       
HCC/HIC coal sales also increased by 209% from 103 035 tonnes as at 30 June     
2009 to 319 159 tonnes for the period under review.                             
There was a 20% increase in coke sales from 15 114 tonnes for the same period   
in 2009 to 18 198 tonnes. There was no coke production during the comparative   
period since the coke oven battery was undergoing major repairs.                
There were no coke oven gas supplies to the Hwange Power Station because the    
gas pipeline has been out of commission for the past three (3) years.           
FINANCIAL RESULTS                                                               
The financial performance of the company was positive despite the challenges    
in the operating environment.                                                   
The Company`s sales revenue for the six (6) month period under review of USD    
45.2 million was 91% above the revenue recorded during the same period last     
year. The unaudited net profit after taxation was USD 4.5 million and was 172%  
above the                                                                       
USD 1 658 963 recorded during the same period in 2009.                          
The improved financial performance is attributed to the increase in production  
volumes since the prices of products remained relatively static.                
Total fixed assets and investments amounted to USD 82.4 million (US$77.9        
million as at 30 June 2009).                                                    
OUTLOOK                                                                         
The socio, economic and political stability is envisaged to continue into the   
future. The expected increase in capacity utilisation will present additional   
opportunities for business growth. The appetite for lending by local            
institutions, at low interest rates, coupled with prospects of foreign lines    
of credit will give impetus to the Company`s recapitalisation programme.        
The phased recapitalisation of the opencast mine will continue. The long term   
recapitalisation programme will progress when the Company completes the audit   
of its coal resources and reserves.                                             
The improved global economy implies an increase in demand for coal and coke     
products. The domestic market sales will target the growing tobacco industry    
and initiatives for structured coal delivery schemes are being pursued.         
The Company`s coke production and sales will commence in the third quarter of   
2010 following the refurbishment of the coke oven battery. This will enhance    
the positive financial performance of the Company.                              
An exercise to rationalise the Company`s operations currently underway is       
expected to improve operational efficiencies and increase profitability         
margins.                                                                        
Diversification into coal bed methane gas exploration and extraction is a       
priority project that is being vigorously pursued.                              
The Board is confident that the current initiatives being pursued by the        
Company, taking cognisance of the economic environment, would enable the        
Company to achieve the set business plan targets for 2010.                      
DIVIDEND                                                                        
The Board has resolved not to declare any interim dividend given the ongoing    
recapitalisation programmme.                                                    
DIRECTORATE                                                                     
There were no changes to the Board of Directors` composition for the period     
under review.                                                                   
By Order of the Board                                                           
T K NCUBE                                                                       
COMPANY SECRETARY                                                               
27 August 2010                                                                  
Notes To The Unaudited Consolidated Financial Statements                        
For the half year ended 30 June 2010                                            
1. ACCOUNTING POLICIES                                                          
The accounting policies are consistent with those of the annual consolidated    
financial statements for the year ended 31 December 2009.                       
2. BASIS OF PREPARATION                                                         
The abridged interim financial information for the half year ended 30 June has  
been prepared in accordance with IAS 34 `Interim Financial Reporting`. It does  
not include all the information required for full annual financial statements   
and should be read in conjunction with the audited annual financial statements  
for the year ended 31 December 2009, which have been prepared in accordance     
with International Financial Reporting Standards (IFRS).                        
3. COMPARATIVES                                                                 
Comparatives for the financial statements have been published since the use of  
the multi currency applied to the comparative period last year. In preparing    
the figures, the company complied with the Financial Reporting Guidance         
jointly recommended by the Public Accountants and Auditors Board and the        
Zimbabwe Stock Exchange.                                                        
4. SHARE CAPITAL                                                                
The authorised share capital consists of 186 000 000 ordinary shares. On 1      
January 2009, the par value of these shares was denominated in Zimbabwe         
dollars.  Issued share capital was therefore carried at nil values. A           
shareholders` resolution was passed at the Annual General Meeting, held on 26   
June 2009, to convert the new par value of these shares to United States        
Dollars. Subsequent to this resolution, the increase in the norminal value of   
share capital was capitalised from the functional change currency reserve.      
5. NON-DISTRIBUTABLE RESERVE                                                    
This represents the residual interest in the assets of the entity after         
deducting all the liabilities. The company treats this reserve as a non-        
distributable reserve.                                                          
DIRECTORS: T. Savanhu (Chairman), F. Moyo (Managing), F Chasi, Mrs T.T.         
Mlobane, S.I. Mutumbwa, Mrs P. Mupfumira, T. Ndlovu, A.M. Ngapo, J. Nqindi, Ms  
R. Sibanda                                                                      
17 September 2010                                                               
Sponsor                                                                         
Sasfin Capital                                                                  
(a division of Sasfin Bank Limited)                                             
Date: 17/09/2010 10:01:02 Supplied by www.sharenet.co.za                     
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