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Hwa - Hwange Colliery Company Limited - Statement To Shareholders (for The Six

Release Date: 28/09/2011 07:46:02      Code(s): HWA
HWA - Hwange Colliery Company Limited - Statement to shareholders (For the six  
months ended 30 June 2011)                                                      
HWANGE COLLIERY COMPANY LIMITED                                                 
(Incorporated in Zimbabwe)                                                      
Code: HWA    ISIN: ZW0009011934                                                 
STATEMENT TO SHAREHOLDERS (For the six months ended 30 June 2011)               
The Company is pleased to present its unaudited consolidated financial          
performance for the six (6) months ended 30 June 2011.                          
OVERVIEW                                                                        
The period under review was characterised by continued stabilisation of the     
National economy as inflation remained low and stable.  The liquidity crunch    
affecting industry constrained normal trading activity.                         
Export marketing efforts were negatively affected by the world recession that   
depressed demand and prices for fossil fuels in general.  The demand for coke   
products on both the domestic and international markets remained depressed.     
Cost of freight to regional and offshore markets remained competitive against   
firm demand for thermal coal.  Social and employment costs continued to impact  
negatively on the business as the mine continues to carry a municipal           
responsibility over Hwange Town.                                                
During the period under review, there were some strategic coal supply           
discussions with new potential clients such as New Zim Steel (formerly          
Ziscosteel).  The Company`s capitalisation efforts are ongoing and business     
outlook is bright.                                                              
OPERATIONS                                                                      
The continued recapitalisation initiatives by the company yielded some results  
with the commissioning of additional mining equipment through a structured      
funding from a local bank.  A more holistic funding programme remains           
outstanding.  There is need to re-tool the total process flow in order to usher 
in volume growth and process efficiency.                                        
Total coal sales for the six (6) months period under review of 1 161 427 tonnes 
were comparable to 1 178 724 tonnes achieved during the same period last year.  
Hwange Power Station (HPS) coal deliveries to Zimbabwe Power Company (ZPC) for  
the period were 688 263 tonnes compared to 769 340 tonnes for the same period   
last year, representing a marginal decrease of 10%.  Efforts were directed at   
supporting urban thermal power stations as Hwange Power Station held adequate   
strategic stocks on the ground.                                                 
Hwange Coking Coal and Hwange Industrial Coal (HCC/HIC) coal sales increased by 
14% from 319 159 tonnes for the same period last year to 364 688 tonnes achieved
during the period under review.  The sales increase was anchored by urban       
thermal power stations.                                                         
The Company recorded a 5% increase in coke sales from 18 198 tonnes for the     
first half of 2010 to 18 943 tonnes for same period 2011.                       
Export sales of coal to Zambia and Tanzania remained firm although logistics    
challenges continue.                                                            
FINANCIAL RESULTS                                                               
The Company`s sales revenue for the six (6) months period under review was      
USD48.6 million, 8% above the USD45.2 million revenue recorded during the       
same period last year. The Company incurred an unaudited net loss after         
taxation of USD1.5 million and this compared unfavourably to the USD4.5         
million profit recorded for the same period in 2010. This negative financial    
performance is attributed to the increase in overhead costs against stagnant    
production volumes and prices of products.  The cost of short term borrowings,  
increase in fuel prices as well as mining contract costs impacted negatively    
on the Company.                                                                 
A property revaluation surplus of USD39.9 million was realised for the period   
under review. This resulted in a total comprehensive income for the half year   
of USD38.4 million compared to USD 4.5 million for the same period last year.   
Total fixed assets and investments increased to USD153.8 million from           
USD103 80 million as at 31 December 2010.  This was because of the revaluation  
of property and acquisition of new mining equipment.                            
OUTLOOK                                                                         
The economy is envisaged to grow by 9.3% by the end of the year. The Medium     
Term Plan (MTP) presented by the Government of Zimbabwe priorities capacity     
utilisation in the manufacturing sector.  There is expectation for a general    
increase in lending capacity of local financial institutions with competitive   
interest rates.  These factors present some opportunities for business.         
The Company remains focussed on the long term recapitalisation programme that   
should permanently address the perennial problems of the aged and obsolete      
plant and machinery. The prospects of foreign lines of credit from regional     
financial institutions are being pursued and look positive.                     
The second half of the year should see the Company entering new continental     
and overseas markets for coal and coke. Emphasis will also be on consolidating  
the domestic market focussing on power generation, tobacco industry and         
manufacturing.  Focus will also be directed at compliance issues around         
environmental, empowerment and corporate social responsibility programmes.      
Acquisition and development of new coal concessions will be a strategic         
priority.                                                                       
High level strategic dialogue will be enhanced between the Company and ZESA     
Holdings, National Railways of Zimbabwe, and New Zim Steel.                     
Skills and competency training will receive priority in order to support        
recapitalisation efforts.                                                       
The Company is currently rationalising its overhead cost burden borne out of    
its municipality role over Hwange Town.  A strategy to rationalise the          
company`s social programmes is also currently underway and is expected to       
improve efficiencies and profit margins for the Company.                        
The Company is optimistic that the current initiatives being pursued by the     
Board and management coupled with the conducive economic environment will       
result in improved financial performance.                                       
DIVIDEND                                                                        
The Board of Directors has resolved not to consider any interim dividend given  
the Company`s financial performance for the first six (6) months of the year.   
DIRECTORATE                                                                     
The eighty - eighth (88th) Annual General Meeting (AGM) of the Company was      
postponed from 30 June 2011 to 03 August 2011. This was after a motion was      
proposed and adopted to include an agenda on the restructuring of the Company.  
At the AGM of 03 August 2011, Messrs T Ndlovu, A M Ngapo, J Nqindi and Ms R     
Sibanda retired by rotation in terms of the Articles of Association and did     
not seek re-election. A resolution was also passed for the removal from the     
Board of Messrs F Chasi, S I Mutumbwa, T Savanhu, Mrs T T Mlobane and Mrs P     
Mupfumira, notwithstanding their tenure of office.                              
At the same AGM, Messrs S Chibanguza, J Chininga, I C Haruperi, N Jiyane,       
J R Mawere, F Mutamangira, L Nkomo, V Vera and Ms S Mapfuwa, were elected       
Directors of the Company.                                                       
Mr F Mutamangira was elected Chairman at the Board Meeting of 17 August 2011.   
By Order of the Board                                                           
T K NCUBE                                                                       
COMPANY SECRETARY                                                               
02 September 2011                                                               
Registered Office                                                               
7th Floor, Coal House                                                           
17 Nelson Mandela Avenue                                                        
P O Box 2870                                                                    
Harare                                                                          
Zimbabwe                                                                        
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 30 JUNE 2011               
1    ACCOUNTING POLICIES                                                        
    These financial statements have been prepared under the historical cost     
    convention.                                                                 
2    BASIS OF PREPARATION                                                       
This abridged interim financial information for the half year ended         
    30 June 2011 has been prepared in accordance with IAS 34, `Interim          
    financial reporting`.                                                       
    The abridged financial statements have been prepared in United States       
Dollars (USD).                                                              
    These abridged financial statements have been prepared in compliance        
    with the International Financial Reporting Standards (IFRSs).               
    Professional judgment was also used in the preparation of these             
financial results.                                                          
3.   COMPARATIVES                                                               
    Comparatives for the financial statements have also been published.         
    ABRIDGED STATEMENT OF CASH FLOWS                                            
FOR THE SIX MONTHS ENDED 30  JUNE                                           
    2011                                                                        
                                                                                
                                         6 Months     6 Months                  
30-Jun-11    30-Jun-10                 
                                         USD          USD                       
    Cash flows from operating                                                   
    activities                                                                  
Operating profit                     (4 877       3 336 285                 
                                         241)                                   
    Non - cash items                     4 775 185    4 480 488                 
                                                                                
Operating cash flow before                                                  
    investment                                                                  
    in working capital                   (102 056)    7 816 773                 
                                                                                
Net movement in working capital      (7 362       (2 072 019)               
                                         844)                                   
    Finance cost                         (309 283)    (523 251)                 
    Income tax paid                      -            -                         

    Net cash generated from operating    (7 774       5 221 503                 
    activities                           184)                                   
                                                                                
Cash flows from investing                                                   
    activities                                                                  
    Acquisition of plant and             (3 206       (4 444 791)               
    equipment                            300)                                   

    Net cash used in investing           (10 980      776 712                   
    activities                           483)                                   
                                                                                
Cash flows from financing                                                   
    activities                                                                  
    Lease repayments                     -            (2 180 496)               
    Increase in loans                    11 649 202   2 100 000                 

    Net cash used in financing           11 649 202   (80 496)                  
    activities                                                                  
                                                                                

    Net increase in cash, cash           668 718      696 216                   
    equivalents and bank overdrafts                                             
                                                                                
Cash, cash equivalents and bank      647 420      1 248 894                 
    overdrafts at beginning of the                                              
    period/year                                                                 
                                                                                
Effects of exchange rates changes                                           
    on cash and cash equivalents                                                
                                                                                
    Cash, cash equivalents and bank      1 316 138    1 945 110                 
overdrafts at end of period                                                 
                                                                                
                                      6 Months    12 Months    6 Months         
                                      30 June     31 Dec       30 June          
2011        2010         2010             
    SALES TONNAGE                                                               
    HCC coal                          364 688     533 298      319 159          
    HPS coal                          688 263     1 759 095     769 340         
Coal fines and breeze             108 476     177 103      90 225           
    Total coal sales                  1 161       2 469 496    1 178            
                                      427                      724              
    Coke tonnes                       18 943      41 447       18 198           

    Total sales                       1 180       2 510 943    1 196            
                                      370                      922              
                                                                                

    Abridged statement of                                                       
    comprehensive income                                                        
    for the six months ended 30 June                                            
2011                                                                        
                                                                                
                                                  6 Months     6 Months         
                                                  30 June      30 June          
2011         2010             
                                                  USD          USD              
                                                                                
    Sales revenue                                 48 580       45 179           
754          706              
    Loss from operations                          (3 131       3 986 54         
                                                  442)                          
    Finance costs                                 (453 684)    (650             
256)             
    Share of loss from equity                     1 178 285    -                
    accounted investments                                                       
                                                                                
Profit before taxation                        (2 406       3 336            
                                                  841)         285              
    Taxation                                      923 297      1 170            
                                                               241              

    Profit after taxation                         (1 483       4 506            
                                                  544)         526              
                                                                                
Other comprehensive income:                                                 
                                                                                
    Gain on revaluation of land and               39 882       -                
    buildings, net of tax                         274                           

    TOTAL COMPREHENSIVE INCOME FOR                38 398       4 506            
    THE HALF YEAR                                 730          526              
                                                                                
Basic earnings per share                      (0.01)       0.02             
    Headline earnings per share                   (0.01)       0.02             
    ABRIDGED STATEMENT OF                                                       
    FINANCIAL POSITION                                                          
AS AT 30 JUNE 2011                                                          
                                                30 June     31                  
                                                            December            
                                                2011        2010                
ASSETS                                      USD         USD                 
                                                                                
    Non- current assets                                                         
    Property, plant and                         92 229      8 249               
equipment                                   960         605                 
    Investment property                         3 700       3 700               
                                                000         000                 
    Investments accounted for                   12 640      11 835              
using the equity method                     150         967                 
                                                                                
                                                108 570     103 785             
                                                110         572                 

    Current assets                                                              
    Pre-stripped overburden                     7 430       3 809               
                                                654         866                 
Inventory                                   20 850      16 699              
                                                357         214                 
    Trade and other receivables                 50 370      45 289              
                                                359         062                 
Financial assets at fair                    3 413       2 918               
    value through profit and                                                    
    loss                                                                        
    Bank and cash balances                      3 455       1 203               
004         216                 
                                                                                
                                                82 109      67 004              
                                                787         276                 

                                                190 679     170 789             
                                                897         848                 
    EQUITY AND LIABILITIES                                                      

    Capital and reserves                                                        
    Share capital                               45 549      45 549              
                                                963         963                 
Non-distributable reserve                   4 358       4 358               
                                                468         468                 
    Retained earnings                           5 606       8 887               
                                                213         488                 

                                                55 514      58 795              
                                                644         919                 
    Non-current liabilities                                                     
Lease liability                             2 938       2 938               
                                                939         939                 
    Deferred tax                                20 695      20 869              
                                                932         620                 

                                                23 634      23 808              
                                                871         559                 
    Current liabilities                                                         
Trade and other payables                    60 468      57 366              
                                                948         782                 
    Borrowings                                  43 870      26 014              
                                                745         401                 
Provisions                                  6 113       3 848               
                                                591         891                 
    Current tax liability                       1 077       955 296             
                                                098                             

                                                111 530     88 185              
                                                383         370                 
                                                                                

                                                190 679     170 789             
                                                898         848                 
                                                                                

    T. Savanhu                   F. Moyo        T.K. Ncube                      
    Chairman                     Managing       Company Secretary               
                                 Director                                       
28 September 2011                                                               
Sponsor                                                                         
Sasfin Capital (a division of Sasfin Bank Limited)                              
Date: 28/09/2011 07:46:01 Supplied by www.sharenet.co.za                     
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