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Hwa - Hwange Colliery Company Limited - Hwange: Audited Company Results For The

Release Date: 29/03/2012 09:32:02      Code(s): HWA
HWA - Hwange Colliery Company Limited - Hwange: Audited company results for the 
financial year ended 31 December 2011                                           
HWANGE COLLIERY COMPANY LIMITED                                                 
(Incorporated in Zimbabwe)                                                      
Code: HWA    ISIN: ZW0009011934                                                 
HWANGE: AUDITED COMPANY RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011   
INTRODUCTION - CHAIRMAN`S REPORT                                                
It gives me great pleasure to present the audited Company results for the       
financial year ended 31 December 2011. This is my first Statement to            
Shareholders since the new Board of Directors assumed office in August 2011.    
OPERATING ENVIRONMENT                                                           
The developments in the global economy in 2011 had an adverse effect on the     
national economy. Subdued global economic recovery and the eurozone debt crisis 
had the manifold effect of depressing global coal prices.                       
The negative effects of the sovereign debt crisis worsened the availability of  
foreign lines of credit required for the recapitalisation of businesses in      
general, Hwange Colliery Company included.                                      
Price stability has been a major characteristic of the multiple currency system.
Annual inflation remained low and stable in 2011 at levels below 5%. While the  
national economy recorded positive growth, the Company continued to face        
recapitalisation challenges, although registering growth in production volumes  
and revenues.                                                                   
The appreciation of the South African Rand against the US$ in 2011 generated    
adverse inflationary pressures and this affected the cost of imported spares.   
Lending rates remained relatively high, largely sustained by persistent         
liquidity shortages, high credit demand, high associated risks and limited lines
of credit.                                                                      
The demand for Coal products in the domestic market in 2011 registered marginal 
increases. The manufacturing and agricultural sectors operated below capacity   
but showed signs of recovery which will spare demand for coal products going    
forward.                                                                        
Coke exports were affected by a decline in demand in both the regional and      
international markets, however coal exports demand remained firm on the backdrop
of a global coal production deficit.                                            
PERFORMANCE OVERVIEW                                                            
Sales Statistics                                                                
Product             2011                2010                                    
HPS coal            1 450 230           1 759 095                               
HCC/HIC coal        815 538             533 299                                 
Coal Fines          190 975             151 036                                 
Total Coal          2 456 743           2 443 430                               
Coke (Incl breeze)  74 877              67 513                                  
TOTAL               2 531 620           2 510 943                               
The company`s sales volume performance had a marginal increase of 1%. Production
volumes though higher than in the previous year, were affected by delays in the 
recapitalisation of the Company operations which is long overdue. The major     
mining equipment, the dragline had persistent breakdowns during the period under
review.                                                                         
The acquisition of mining equipment, through a short term funding facility,     
initially forecasted for January 2011 only materialized in July 2011. The       
repairs to the coke oven battery were done successfully and the Company was now 
implementing a rolling rebuild.                                                 
Total coal and coke sales for the year at 2 531620 tonnes were comparative to 2 
510 943 tonnes sold in 2010. Export sales increased by 27% to 203 096 tonnes    
against 160 052 tonnes for the previous year.                                   
The Company`s production mix continued to be in favour of HPS coal that is      
supplied to Zimbabwe Power Company (ZPC)`s Hwange Power Station. A total of 1   
450 230 tonnes were supplied to the power station compared to the 1 759 095     
tonnes delivered the previous year. This is attributed to reduced  coal offtake 
by Hwange Power Station.                                                        
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales volume      
amounted to 815 538 tonnes and were 53% above the tonnage of 533 299 tonnes     
achieved the previous year. A total of 190 975 tonnes of coal fines were sold   
during the year to the local and export markets and this was 26% above the 151  
036 tonnes sold the previous year.                                              
Coke sales, including breeze, amounted to 74 877 tonnes and this was 11% above  
the 67 513 tonnes sold the previous year. There were significant movements of   
coke sales ex stockpile to export customers in the region and mainly to South   
Africa.                                                                         
FINANCIAL PERFORMANCE                                                           
In all material respects, the company complied with the International Financial 
Reporting Standard (IFRS) and the disclosure requirements of the Companies Act  
(Chapter 24:03).                                                                
The company achieved a turnover for the year of US$107.9 million and this was 9%
above the US$98.9 million turnover achieved the previous year. Revenue was      
affected by low production volumes, slow movement in coke sales and the stagnant
coal prices and low coke prices both local and export. Exports contributed $13.4
million which was13% of turnover for the year compared to $11.9 million or 12%  
for the previous year.                                                          
The gross profit margin of 32% was slightly lower than the 34% for the          
comparative period last year. This was attributed to the sales mix.             
The company`s operating profit was US$4.1 million compared to US$9.4 million    
achieved in 2010. The share of profit from equity accounted investments amounted
to US$2.2 million compared to a share of profit of US$2.8 million achieved the  
previous year.                                                                  
The attributable profits for the year amounted to US$3.9 million and this was a 
36% reduction from the net profit after tax of US$6.3 million achieved the      
previous year.                                                                  
The gain on the revaluation of property plant and equipment amounting to $42    
million resulted in total comprehensive income for the year of $43.8 million    
compared to last year`s amount of $6.3 million.                                 
The property, plant and equipment increased from US$88.2 million to US$129.4    
million mainly because of the revaluation of the assets and new mining equipment
acquisitions.                                                                   
Current assets were valued at US$62 million and this was comparable to the US$67
million for the previous year.                                                  
The current liabilities remained stagnant at US$88 million and comprised mainly 
of provisions, trade creditors and borrowings. The company continued to finance 
the recapitalization initiatives through short term facilities as there was no  
long term structures in the market.                                             
The Company wrote off the long outstanding Commonwealth Development Corporation 
and West LB gas pipeline loans amounting to $21 million.                        
The cash generated from operating activities of US$1.2 million is after taking  
into account the effect of the right off of the long outstanding gas pipeline   
loans. The company`s cash, cash equivalence and overdrafts at year end stood at 
US$1.2 million and was 86% above last year`s balance of US$0.6 million.         
DIVIDEND                                                                        
The Board has resolved not to consider payment of a dividend in view of the     
current recapitalization initiatives and the need to turnaround the business.   
QUALITY, SAFETY, HEALTH AND ENVIRONMENT                                         
The companysuccessfully went through the ISO 9001:2008 Quality Management System
surveillance audit.                                                             
The company`s safety programmes achieved the objective of an accident free      
working environment. There again was no fatality during the year.               
Provision for the rehabilitation of the mined out areas at the opencast mine has
been increased and expenditure would start in 2012. The company continued with  
its programme to mitigate the challenge of the acid mine drainage from the      
closed old underground mines and reinforced the oils management programme.      
The company`s thrust in health delivery systems and public health programmes is 
self-sustainability. The Company managed to prevent adverse diseases like       
malaria, cholera and typhoid. The awareness campaigns were used to manage the   
HIV and AIDS related diseases.                                                  
CORPORATE SOCIAL RESPONSIBILITY                                                 
In pursuit of its corporate social responsibility policy, the Company continued 
to implement the following programmes centred on the surrounding community,     
education, health and sport;                                                    
- Administered Hwange town`s commercial activities outside the jurisdiction of  
the Hwange Local Board area.                                                    
- Administered the six (6) primary schools and one (1) secondary school.        
- Operated a fully fledged two hundred (200) bed hospital supported by five (5) 
industrial clinics. Also ran a rural clinic outreach programme for Hwange       
District communities.                                                           
- Supported a skills training programme covering 47 skills upgrade trainees, 7  
operatives, 126 apprentices, 32 Cadets, 66 student nurses and  27graduate       
trainees.                                                                       
- Supported various sporting activities in the District as well as other        
National sporting activities.                                                   
STRATEGIC THRUST                                                                
The new Board of Directors has adopted a broad and integrated strategy to       
turnaround the fortunes of the Company. Various initiatives have been undertaken
to stimulate organic growth, ranging from cost containment to optimal equipment 
deployment, while efforts to raise capital continue. In the short term          
structuring equipment seller`s credit remains a key focus. There is anticipated 
improved cash-flow performance driven by exports. The export marketing of coal  
and coke will enhance business growth. Focus will be on overseas markets, the   
SADC region, Asia and Europe.                                                   
OUTLOOK                                                                         
The Zimbabwean economy grew by 8.4% in 2010 and by 9.3% in 2011. Economic       
activity is projected to further grow by 9.4% in 2012, underpinned by strong    
performance in the finance, mining, manufacturing, tourism, and agriculture     
sectors.                                                                        
The recovery in the manufacturing sector is slow because of lack of long term   
finance to recapitalize operations. The expected interventions to boost capacity
utilisation in industry and strong performance by the agricultural sector would 
stimulate the rather subdued domestic demand. The envisaged favourable          
international commodity prices are likely to result in increased demand in 2012.
The Company`s aggressive export marketing strategy opened prospective markets in
the Asian market. The export drive is anchored on access to port space in       
Maputo, Mozambique.                                                             
The company is working on securing additional coal concessions in order to boost
its resource and reserves base.                                                 
The funding initiatives with a regional developmental financial institution did 
not materialize during the year.   Efforts in this regard continue.             
DIRECTORATE                                                                     
At the Annual General Meeting (AGM) of 03 August 2011, Messrs.` T Ndlovu, A M   
Ngapo and 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 passed   
for the removal of Messrs.` F Chasi, S I Mutumbwa, T Savanhu and Mrs T T Mlobane
and Mrs P Mupfumira, notwithstanding their tenure of office.                    
At the same AGM, Messrs.` N. 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.                                                       
At the meeting of the Board of Directors held on 17 August 2011, Mr F           
Mutamangira was unanimously elected Chairman.                                   
Mr J R Mawere resigned from the Board on 25 August  2011.                       
APPRECIATION                                                                    
I would like to thank my fellow Board Members for the commitment demonstrated   
since assuming office in August of 2011. My appreciation also goes to the       
management team and staff for their continued commitment and support rendered   
during the year.                                                                
On behalf of the Board of Directors, I would like to express my sincere         
gratitude to all the stakeholders for their support to Hwange Colliery Company. 
MR. F. MUTAMANGIRA                                                              
CHAIRMAN                                                                        
23 March 2012                                                                   
ANNUAL REPORT AND FINANCIAL STATEMENTS                                          
The annual report and financial statements for the year ended 31 December 2011  
will be distributed to members on or before 31 May 2012 and the annual general  
meeting will be held on Friday 29 June 2012.                                    
By Order of the Board                                                           
T K Ncube                                                                       
COMPANY SECRETARY                                                               
23 March 2012                                                                   
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011           
                                                                                

                                  2011         2010                             
                                  USD          USD                              
                                                                                
Revenue                                   107          98 926                   
                                  895 986      994                              
                                                                                
Cost of sales                      (72 410 017)        (65                      
572 846)                         
Gross profit                              35           33 354                   
                                  485 969      148                              
Other income                       1 074 865           3 218                    
774                              
Other gains and losses                     536                                  
                                  707          (504 462)                        
Marketing costs                    (1 711 550)  (607 962)                       
Administrative costs                                   (26                      
                                  (31 255 191) 058 612)                         
Operating profit                          4 130        9 401                    
                                  800          886                              
Finance cost                       (1 828 594)  (1 552 929)                     
Share of profit from equity        2 192 887    2 830 455                       
accounted investments                                                           
PROFIT BEFORE INCOME TAX           4 495 093    10 679 412                      
Income tax expense                              (4 447 689)                     
                                  ( 592 831)                                    
PROFIT FOR THE YEAR                3 902 262    6 231 723                       
Other comprehensive income:                                                     
Gain on revaluation of land and    41 981 341   -                               
buildings                                                                       
Tax effect of revaluation of       (2 099 067)  -                               
land and buildings                                                              
Share of other comprehensive        -            66 244                         
income of equity accounted                                                      
investments, net of tax                                                         
Other comprehensive income, net    39 882 274   66 244                          
of tax                                                                          
TOTAL COMPREHENSIVE INCOME FOR            43    6 297 967                       
THE YEAR                           784 536                                      
Attributable earnings per share                                                 
- basic                                                                         
                                  0.02         0.03                             
                                                                                
- diluted                                                                       
0.02         0.03                             
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011                          
                                  2011         2010                             
ASSETS                             USD          USD                             
Non Current Assets                                                              
Property, plant and equipment      129 367 047  88 249 605                      
Investment property               3 700 000    3 700 000                        
Investments accounted for using    17 652 946   11 835 967                      
the equity method                                                               
Intangible assets                  2 228 630    -                               
                                  152 948 623  103 785 572                      
Current Assets                                                                  
Pre-stripped overburden            7 274 611    3 809 866                       
Inventory                                 28           16 699                   
                                  996 129      214                              
Trade and other receivables        24 616 869   45 289 062                      
Financial assets at fair value     2 868        2 918                           
through profit or loss                                                          
Bank and cash balances             1 782 574    1 203 216                       
                                  62 673 051   67 004 276                       
Total assets                       215 621 674  170 789 848                     
EQUITY AND LIABILITIES                                                          
Capital and Reserves                                                            
Share capital                      45 549 963   45 549 963                      
Derived equity                     4 358 468    4 358 468                       
Revaluation reserve                39 948 518   39 948 518                      
Retained earnings                  12 723 506   8 887 488                       
                                  102 580 455  58 795 919                       
Non current liabilities                                                         
Lease liability                    1 469 468    2 938 939                       
Deferred income tax                23 561 518   20 869 620                      
                                  25 030 986   23 808 559                       
Current liabilities                                                             
Borrowings                         23 865 057   26 014 401                      
Trade and other payables           56 709 502   57 366 782                      
Provisions                         6 358 577    3 848 891                       
Current income tax liability       1 077 097    955 296                         
                                  88 010 233   88 185 370                       
Total equity and liabilities       215 621 674  170 789 848                     
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011              
Share       Derived    Revalu-     Retained                       
                                     ation                                      
              Capital     equity     Reserve     Earnings   Total               
              USD         USD        USD         USD        USD                 
Balance at 1   45 549 963  4 358 468  -           2 589 521  52 497 952         
January 2010                                                                    
Total          -           -          66 244      6 231 723  6 297 967          
comprehensive                                                                   
income for                                                                      
the year:                                                                       
Profit for      -          -          -            6 231      6 231 723         
the year                                          723                           
Other           -          -           66 244      -          66 244            
comprehensive                                                                   
income for                                                                      
the year                                                                        
Balance at 31   45 549      4 358      66 244      8 821      58 795            
December 2010  963         468                    244        919                
Balance at 1   45 549 963  4 358 468  66 244      8 821 244  58 795 919         
January 2011                                                                    
Total          -           -          39 882 274  3 902 262  43 784 536         
comprehensive                                                                   
income for                                                                      
the year:                                                                       
Profit for     -           -          -           3 902 262  3 902 262          
the year                                                                        
Other           -          -           39 882      -          39 882            
comprehensive                         274                    274                
income for                                                                      
the year                                                                        
Balance at 31                         39 948 518  12 723     102 580            
December 2011  45 549 963  4 358 468              506        455                
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011                     
                                                                                
                                                                                
                                  2011           2010                           
USD            USD                            
CASH GENERATED FROM OPERATIONS                                                  
Profit before income tax           4 495 093      10 679 412                    
Adjustment for non-cash items:                                                  
Profit from disposal of            -              (7 117)                       
property, plant and equipment                                                   
Unrealised exchange (gain)/loss    (536 757)      589 554                       
Share of profit from equity        (2 192 887)    (2 830 455)                   
accounted investments                                                           
Finance cost                       1 828 594      1 552 929                     
Depreciation and impairment        11 829 395     7 638 342                     
losses                                                                          
Fair value adjustment on           -              (85 000)                      
investment property                                                             
Fair value adjustment on           50             ( 92)                         
financial assets                                                                
Operating cash flow before         15 423 488     17 537 573                    
changes in working capital                                                      
Changes in working capital:                                                     
Increase in inventory              (15 921 007)   (5 168 446)                   
(Increase)/Decrease in pre-        (3 464 745)    1 101 510                     
stripped overburden                                                             
Increase in trade and other        (1 263 583)    (19 311 876)                  
receivables                                                                     
Increase in provisions             2 631 487      1 336 585                     
Increase in trade and other        1 441 787      18 603 686                    
payables                                                                        
Cash generated from operating      (1 152 573)    14 099 032                    
activities                                                                      
Finance cost                       (1 581 407)    (1 389 557)                   
Net cash generated from            (2 733 980)    12 709 475                    
operating activities                                                            
CASH FLOWS FROM INVESTING                                                       
ACTIVITIES                                                                      
Acquisition of property, plant     (10 965 496)   (11 768 917)                  
and equipment                                                                   
Acquisition of mining rights       (200 000)      -                             
Acquisition of ERP, other          (2 028 630)    -                             
software and development cost                                                   
Proceeds from the disposal of      -              12 342                        
motor vehicles                                                                  
Net cash flows from investing      (13 194 126)   (11 756 575)                  
activities                                                                      
CASH FLOWS FROM FINANCING                                                       
ACTIVITIES                                                                      
Repayment of borrowings            (8 278 187)                                  
                                                 (10 973 913)                   
Proceeds from loans raised         24 765 016     9 419 686                     
Net cash flows from financing      16 486 829     (1 554 227)                   
activities                                                                      
Net decrease in cash, cash         558 723        (601 327)                     
equivalents and bank overdrafts                                                 
Cash, cash equivalents and bank    647 420        1 248 894                     
overdrafts at beginning of the                                                  
year                                                                            
Exchange loss on bank balances     (145)          ( 147)                        
Cash, cash equivalents and bank    1 205 998      647 420                       
overdrafts at end of year                                                       
Johannesburg                                                                    
29 March 2012                                                                   
Sponsor                                                                         
Sasfin Capital (a division of Sasfin Bank Limited)                              
Date: 29/03/2012 09:32:01 Supplied by www.sharenet.co.za                     
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