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Hwange Colliery Company Limited - Unaudited Results For The Six (6) Months Ended 30 June 2012

Release Date: 21/09/2012 13:18:00      Code(s): HWA     
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe)
Code: HWA    ISIN: ZW0009011934
(?Hwange?)

Unaudited results for the six (6) months ended 30 June 2012
CHAIRMAN?S STATEMENT TO SHAREHOLDERS                                                                                                           Statement of financial position
                                                                                                                                               as at 30 June 2012                                                                        30 June          30 June       31 December
The Company is pleased to present its unaudited consolidated financial performance for the six (6) months ended 30 June 2012.                                                                                                               2012             2011              2011
                                                                                                                                                                                                                                            USD              USD               USD
OVERVIEW
The operating environment remained stable and favourable as characterised by the low inflation rate. The economy continued to grow             ASSETS
especially the mining and agriculture sectors.                                                                                                 Non- current assets
                                                                                                                                               Property, plant and equipment                                                          125 750 063      134 728 882       129 367 047
Interest rates were high because of the market liquidity challenges and the unavailability of foreign lines of credit.
                                                                                                                                               Investment property                                                                      3 700 000        3 700 000         3 700 000
                                                                                                                                               Investments accounted for using the equity method                                       17 628 099       15 384 716        17 652 946
The demand for coal and coke both on the domestic and export market was firm. The coal industry is now competitive both locally and in
neighbouring countries.                                                                                                                        Intangible assets                                                                        2 122 199                -         2 228 630
                                                                                                                                                                                                                                      149 200 361      153 813 598       152 948 623
FINANCIAL RESULTS
The Company?s sales revenue for the six (6) months under review increased by 7% to US$51.8 million compared to the US$48.6 million             Current assets
revenue recorded during the same period last year. The Company?s unaudited net profit after taxation of US$512 006 compares favourably         Pre-stripped overburden                                                                  5 286 853        7 430 654         7 274 611
to the US$1.5 million loss recorded for the same period in 2011. This improved financial performance is attributed to a favourable sales mix   Inventory                                                                               36 053 333       20 850 358        28 996 129
and aggressive cost management decisions adopted by the Company.                                                                               Trade and other receivables                                                             33 396 729       47 939 303        24 616 869
                                                                                                                                               Financial assets at fair value through profit and loss                                       2 868            3 413             2 868
Finance costs increased from $453 684 to $899 309 because of the high cost of borrowing on the short term working capital secured from         Bank and cash balances                                                                   2 823 125        3 455 004         1 782 574
local financial institutions and applied towards the acquisition of mining equipment.
                                                                                                                                                                                                                                       77 562 908       79 678 732        62 673 051
Total fixed assets and investments amounted to US$149.2 million compared to US$153.8 million as at 30 June 2011. Capital and reserves
increased from $97.2 million as at 30 June 2011 to $103.1 million for the period under review.                                                                                                                                        226 763 269      233 492 330       215 621 674

PERFORMANCE                                                                                                                                    EQUITY AND LIABILITIES
Total coal sales for the six (6) months period under review amounted to 918 491 tonnes and were 22% lower than the 1 180 370 tonnes            Capital and reserves
achieved during the same period last year.                                                                                                     Share capital                                                                           45 549 963       45 549 963        45 549 963
                                                                                                                                               Derived equity                                                                           4 358 468        4 358 468         4 358 468
HPS coal deliveries to Hwange Power Station for the period were 373 126 tonnes compared to 688 263 tonnes for the same period last             Revaluation reserve                                                                     39 948 518       39 948 518        39 948 518
year. During the first half of the year, Zimbabwe Power Company significantly reduced coal offtake at its Hwange Power Station because of      Retained earnings                                                                       13 235 512        7 337 700        12 723 506
a stockpile that had accumulated to levels in excess of five (5) months cover. The reduction was from the contractual 180 000 tonnes per
                                                                                                                                                                                                                                      103 092 461       97 194 649       102 580 455
month to as low as 40 000 tonnes per month.
                                                                                                                                               Non-current liabilities
Hwange Coking Coal/Hwange Industrial Coal (HCC/HIC) sales also decreased from 364 688 tonnes to 270 276 tonnes for the comparative
periods. There was a significant improvement in the coal fines and breeze sales from 108 476 tonnes to 206 753 tonnes, representing a 91%      Deferred tax                                                                            23 141 991       22 045 389        23 561 518
increase. This was attributed to increased demand for coke products in the regional markets during the first half of the year.                 Lease liability                                                                                  -        8 578 659         1 469 468
                                                                                                                                                                                                                                       23 141 991       30 624 048        25 030 986
The Company recorded a 261% increase in coke sales from 18 943 tonnes for the first half of 2011 to 68 336 tonnes for the period under
review. Demand for coke products firmed up in the regional export markets.                                                                     Current liabilities
                                                                                                                                               Trade and other payables                                                      16        61 362 556       60 251 920        56 709 502
OUTLOOK                                                                                                                                        Borrowings                                                                    17        29 736 841       38 231 025        23 865 057
The Company?s recapitalisation programme currently being pursued will result in improved production performance. Commissioning of              Provisions                                                                    18         7 746 616        6 113 591         6 358 577
equipment worth $6.35 million procured under a pre purchase financing structure with a major customer is underway. The awarding of             Current tax liability                                                                    1 682 804        1 077 097         1 077 097
tenders for the supply of mining equipment worth $40 million is also currently in progress and is expected to be concluded in the fourth
(4th) quarter of 2012. The company will continue to meet some of its recapitalisation requirements organically, while actively pursuing                                                                                               100 528 817      105 673 633        88 010 233
negotiations for working capital facilities with financial institutions.
                                                                                                                                                                                                                                      226 763 269      233 492 330       215 621 674
The Company?s products will continue to be marketed into the regional markets offering high returns. An international marketing strategy to
penetrate new continental and overseas markets for coal and coke is currently being pursued. On the domestic market, the thrust will be to
intensify customer service and consolidate market leadership focussing on power generation, the tobacco industry and the manufacturing
industry.

The Enterprise Resource Planning system implemented by the Company as from May 2012 resulted in redundancy of over two hundred
(200) jobs. A retrenchment exercise is currently underway and this is expected to result in the reduction of overheads.

The Board and management are confident that the current initiatives being pursued by the Company will turn around the fortunes of the          Statement of changes in equity
Company and should see an improved financial performance in the second half of the year.                                                       for the six (6) months ended 30 June 2012                     Share          Derived      Revaluation       Retained
                                                                                                                                                                                                            capital          equity         reserve        earnings            Total
DIVIDEND
                                                                                                                                                                                                              USD              USD             USD             USD             USD
The Board of Directors has resolved not to declare any interim dividend given the Company?s financial performance for the first six (6)
months of the year and the need to recapitalise the business.
                                                                                                                                               Balance at 1 January 2012                                 45 549 963     4 358 468         39 948 518      12 723 506     102 580 455
APPRECIATION                                                                                                                                   Total comprehensive income for the period/year                     -             -                  -         512 006         512 006
I would like to express my gratitude to my fellow Directors for the collective effort and dedication to the business of Hwange Colliery
Comapny. I also would like to appreciate the support we continue to receive from all our stakeholders, our management and our staff.           Balance at 30 June 2012                                   45 549 963     4 358 468         39 948 518      13 235 512     103 092 461

                                                                                                                                               Balance at 1 January 2011                                 45 549 963     4 358 468             66 244       8 821 244      58 795 919
                                                                                                                                               Total comprehensive income for the period/year                     -             -         39 882 274      (1 483 544)     38 398 730

F Mutamangira                                                                                                                                  Balances at 30 June 2011                                  45 549 963     4 358 468         39 948 518       7 337 700      97 194 649
CHAIRMAN
                                                                                                                                               Balance at 1 January 2011                                 45 549 963     4 358 468             66 244       8 821 244      58 795 919
07September 2012                                                                                                                               Total comprehensive income for the period/year                     -             -         39 882 274       3 902 262      43 784 536

Registered Office                                                                                                                              Balances at 31 December 2011                              45 549 963     4 358 468         39 948 518      12 723 506     102 580 455
7th Floor, Coal House
17 Nelson Mandela Avenue
P O Box 2870, Harare, Zimbabwe


The company?s unaudited results for the six (6) months ended 30 June 2012 are as follows:

                                                                                            6 Months          6 Months        12 Months        Abridged statement of cash flows
                                                                                        30 June 2012      30 June 2011       31 Dec 2011       for the six (6) months ended 30 June 2012
                                                                                                                                                                                                                                         30 June          30 June       31 December
SALES TONNAGE                                                                                                                                                                                                                               2012             2011              2011
Coal sales                                                                                                                                                                                                                                  USD              USD               USD
HCC/HIC                                                                                       270 276           364 688           815 538
HPS coal                                                                                      373 126           688 263         1 450 230      Cash flows from operating activities
Coal fines and breeze                                                                         206 753           108 476           190 975      Profit/(loss) before tax                                                                  698 187        (2 406 841)        4 495 093
                                                                                                                                               Non - cash items
Total coal sales                                                                              850 155         1 161 427         2 456 743      Depreciation of property, plant and equipment                                            6 238 309        4 993 676        11 829 395
                                                                                                                                               Amortisation of intangible assets                                                          106 431                -                 -
Coke tonnes                                                                                    68 336             18 943           74 877      Share of profit/losses of equity accounted investments                                      24 847       (1 178 285)       (2 192 887)
                                                                                                                                               Allowances for credit losses                                                                 77 988                -                50
Total sales                                                                                   918 491         1 180 370         2 531 620
                                                                                                                                               Operating cash flow before changes in working capital                                    7 145 762        1 408 550        14 131 651

Statement of comprehensive income                                                                                                              Net movement in working capital                                                         (5 654 070)      (7 848 312)       (3 251 640)
for the six (6) months ended 30 June 2012                                                                                                      Finance cost paid                                                                         (834 057)        (309 283)       (1 581 407)
                                                                                           6 Months           6 Months           Year to
                                                                                       30 June 2012       30 June 2011       31 Dec 2011       Net cash (utilised)/generated from operating activities                                   657 635        (6 749 045)       (4 833 047)
                                                                                                USD                USD               USD
                                                                                                                                               Cash flows from investing activities
Revenue                                                                                   51 819 059         48 580 754      107 895 986       Acquisition of property, plant and equipment                                              (716 537)      (3 206 300)      (10 965 496)
                                                                                                                                               Acquisition of other assets                                                                      -                -        (2 228 630)
Cost of sales                                                                            (38 608 667)       (35 543 241)     (72 410 017)
Gross profit                                                                              13 210 392         13 037 513       35 485 969       Net cash utilised in investing activities                                                 (716 537)      (3 206 300)      (13 194 126)
Other income                                                                                 269 992            538 409         1 074 865
Other gains and losses                                                                      (203 329)                 -           536 707      Cash flows from financing activities
                                                                                                                                               Increase in borrowings                                                                   1 734 526       11 649 202        26 864 083
Marketing costs                                                                             (682 606)          (689 295)       (1 711 550)
                                                                                                                                               Loans paid                                                                                (935 575)               -        (8 278 187)
Administrative costs                                                                     (10 972 106)       (16 018 069)     (31 255 191)
Profit/(loss) from operations                                                              1 622 343         (3 131 442)        4 130 800      Net cash generated/repayments in financing activities                                     798 951        11 649 202        18 585 896
Finance costs                                                                               (899 309)          (453 684)      (1 828 594)
                                                                                                                                               Net/increase in cash and cash equivalents                                                  740 049        1 693 857          558 723
Share from equity accounted investments                                                      (24 847)         1 178 285         2 192 887
                                                                                                                                               Exchange loss on bank balances                                                                   -                -             (145)
Profit/(loss) before taxation                                                                698 187         (2 406 841)        4 495 093      Cash, cash equivalents and bank overdrafts at beginning of the period/year               1 205 998          647 420           647 420
Taxation                                                                                    (186 181)           923 297          (592 831)
Profit/(loss) after taxation                                                                 512 006         (1 483 544)        3 902 262      Cash, cash equivalents and bank overdrafts at end of period 12                           1 946 047        2 341 277         1 205 998
Other comprehensive income:
Gain on revaluation of land and buildings                                                          -         41 981 341       41 981 341
Tax effect of revaluation of land and buildings                                                    -         (2 099 067)      (2 099 067)
Other comprehensive income for the period, net tax                                                 -         39 882 274       39 882 274
TOTAL COMPREHENSIVE INCOME FOR THE HALF YEAR                                                 512 006         38 398 730       43 784 536
Basic earnings per share                                                                       0.003             (0.008)           0.021
Headline earnings per share                                                                    0.003             (0.008)           0.021




                                                                                                                                                                                                                                                                           
Notes to the interim financial statements                                                                                                                                                                                                 30 June            30 June        31 December
for the six (6) months ended 30 June 2012                                                                                                                                                                                                    2012               2011               2011
                                                                                                                                                                                                                                             USD                USD                USD
General information                                                                                                                                    Trade and other receivables
Hwange Colliery Company Limited is a company that extracts, processes and distributes coal and coke products. The company?s                            Trade                                                                           24 426 027         20 383 142           18 725 198
operations are situated at Hwange and markets its products mainly in Zimbabwe, Southern Africa and recently in Asia.                                   Loans receivable                                                                         -         21 721 011                    -
                                                                                                                                                       Other                                                                            8 970 702          5 835 150            5 891 671
The company is a limited liability public company incorporated and domiciled in Zimbabwe. It is listed primarily on the Zimbabwe
Stock Exchange (ZSE), and has secondary listings on the Johannesburg (JSE) and London Stock Exchanges (LSE).                                                                                                                           33 396 729         47 939 303           24 616 869

These interim financial statements were approved for issue by the Board of Directors on Friday 07 September 2012. This abridged                        Financial assets at fair value through profit or loss
financial information has been reviewed, but not audited.                                                                                              Carrying amount 1 January                                                             2 868              2 918                2 918
                                                                                                                                                       Fair value adjustment                                                                     -                495                 (50)
Accounting Policies
The interim financial statements have been prepared in accordance with the accounting policies adopted in the company?s last                           Fair value at the end of the period/year                                              2 868              3 413                2 868
annual financial statements for the year ended 31 December 2011.
                                                                                                                                                       The fair value of all equity securities is based on their current bid prices on the Zimbabwe Stock Exchange.
Basis of preparation of the abridged financial statements
The interim financial statements for the six (6) months ended 30 June 2012 has been prepared in accordance with IAS 34, ?Interim                       Cash and cash equivalents
financial reporting?. They do not include all of the information required for full annual financial statements and should be read                      For the purposes of statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in
in conjuction with the audited annual financial statements for the year ended 31 December 2011, which have been prepared in                            money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the half year as shown in
accordance with International Financial Reporting Standards.                                                                                           the statement of cash flows can be reconciled to the related items in the statement of financial position as follows:

Estimates                                                                                                                                              Bank and cash balances                                                            2 823 125          3 455 004            1 782 574
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect                          Bank overdraft                                                                     (877 078)        (1 113 727)            (576 576)
the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may
differ from these estimates.                                                                                                                                                                                                              1 946 047         2 341 277             1 205 998

In preparing the interim financial statements, the significant judgements made by management in applying the company?s accounting                      Share capital
policies and the key sources of estimation uncertainty were the same as those that applied to the audited annual financial statements                  Authorised
as at and for the year ended 31 December 2011.
                                                                                                                                                       204 000 000 ordinary shares of USD0.25 each                                     51 000 000         46 500 000           51 000 000

                                                                                          30 June           30 June         31 December                Issued and fully paid
                                                                                             2012              2011                2011
                                                                                             USD               USD                 USD                 110 237 432 Ordinary shares of USD0.25 each                                     27 559 358         27 559 358           27 559 358
Taxation                                                                                                                                                 4 404 850 Ordinary shares issued under share option scheme                     1 101 213          1 101 213            1 101 213
Current tax on profit for the year                                                         605 707                 -              592 831
Deferred tax                                                                             (419 526)          (923 297)                   -              114 642 282 Ordinary shares of USD0.25 each                                     28 660 571         28 660 571           28 660 571

                                                                                          186 181           (923 297)             592 831              67 557 568 ??A?? Ordinary shares of USD0.25 each                                16 889 392         16 889 392           16 889 392

Earns per share                                                                                                                                                                                                                        45 549 963         45 549 963           45 549 963
Basic
Profit attributable to shareholders                                                       512 006        (1 483 544)            3 902 262              Trade and other payables
Weighted average number of ordinary shares in issue                                   182 199 850       182 199 850           182 199 850              Trade payables                                                                  41 848 736         30 230 382           38 257 620
                                                                                                                                                       Other payables                                                                  19 513 820         30 021 538           18 451 882
                                                                                            0.003            (0.008)                0.021
                                                                                                                                                                                                                                       61 362 556         60 251 920           56 709 502
Basic earnings per share is calculated by dividing the profit attributable to shareholders by weighted average number of ordinary
shares in issue during the year, excluding the average number of ordinary shares purchased by the Company and held as treasury                         Borrowings
shares. Under the control of the Directors.
                                                                                                                                                       Current
Headline earnings per share                                                                                                                            Bank overdraft                                                                     877 078          1 113 727              576 576
Profit attributable to shareholders                                                       512 006        (1 483 544)            3 902 262              Loans payable within one year                                                   11 599 134         23 721 011            9 700 053
Weighted average number of ordinary share in issue                                    182 199 850       182 199 850           182 199 850              Finance lease liabilities                                                       17 260 629         13 396 287           13 588 428

Headline earnings per share excludes all items of a capital nature and represents an after tax amount. It is calculated by dividing the                Total loans                                                                     29 736 841         38 231 025           23 865 057 
headline earnings shown below by the number of shares in issue during the year
                                                                                                                                                       Non current
                                                                                             0.003            (0.008)                0.021             Finance lease liabilities due after one year                                               -        8 578 659             1 469 468

Property, plant and equipment                                                                                                                          Provisions
Carrying amount at the beginning of the period                                        129 367 047         88 249 605            88 249 605
Additions                                                                               2 621 325          9 491 612            10 965 496             Provision for rehabilitation
Revaluation gain                                                                                -         41 981 341            41 981 341             At 1 January                                                                      1 893 360           393 360               393 360
Depreciation charge for the period/year                                                (6 238 309)        (4 993 676)          (11 829 395)            Charged to the statement of comprehensive income:
                                                                                                                                                       Additional provisions made during the period/year                                 1 000 000         1 500 000             1 500 000
Carrying amount at the end of the period                                               125 750 063       134 728 882            129 367 047
                                                                                                                                                                                                                                         2 893 360         1 893 360             1 893 360
Investment property
Fair value                                                                               3 700 000          3 700 000            3 700 000             Other provisions
                                                                                                                                                       Leave pay and other provisions                                                    4 853 256         4 220 231             4 465 217
Investment property comprises of:
Land situated at Lot 7 of Stand 2185, Salisbury Township Harare with an administration building thereon.                                               Grand total                                                                       7 746 616         6 113 591             6 358 577
Land situated at Stand 555, Bulawayo Township Bulawayo with an administration building thereon.
                                                                                                                                                       Financial risk management objectives and policies
The fair values of investment properties were last reassessed on 31 December 2011 at fair value by Messrs CB Richard Ellis, an                         The Company?s principal financial liabilities comprise finance lease liabilities, loans payable, bank overdrafts and trade payables.
independent, professionally qualified valuer. The fair value was determined based on current prices in an active market for similar                    The main purpose of these financial liabilities is to raise finance for the Company?s operations. The Company has various financial
property in the same location and condition.                                                                                                           assets such as trade receivables and cash and short term deposits, which arise directly from its operations. Exposure to credit,
                                                                                                                                                       interest rate and currency risk arises in the normal course of Company?s business and these are main risks arising from the
The following amount has been recognised in the statement of comprehensive income:                                                                     Company`s financial instruments.

Rental income                                                                              75 978           106 066              275 269               Credit risk
                                                                                                                                                       Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Company assumes
Investments accounted for using the equity method                                                                                                      foreign credit risk only on customers approved by the Board and follows credit review procedures for local credit customers.
Investments in associates (note 9.1)                                                    1 148 024          1 265 956            1 172 871
Investments in joint venture (note 9.2)                                                16 480 075         14 118 760           16 480 075              Investments are allowed only in liquid securities and only with approved financial institutions. At the reporting date there were
                                                                                                                                                       no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amounts of each
                                                                                       17 628 099         15 384 716           17 652 946              financial asset in the statement of financial position.

Investments in associates                                                                                                                              Interest rate risk
Carrying amount as at 1 January                                                         1 172 871          1 312 189            1 312 188              The Company?s exposure to the risk of changes in market interest rates relates primarily to the Company?s long and short term debt
Share of profit / (loss)                                                                  (24 847)           (46 233)            (139 317)             obligations and bank overdrafts. The Company?s policy is to manage its interest cost using a mix of fixed and variable rate debts.

Carrying amount at the end of the period/year                                           1 148 024          1 265 956            1 172 871              Currency risk
                                                                                                                                                       The Company is exposed to foreign currency risk on transactions that are denominated in a currency other than the United States
The Company holds a 49% voting and equity interest in Clay Products (Private) Limited. Hwange Colliery Company Limited also                            Dollar. The currency giving rise to this risk is primarily the South African Rand.
holds a 44% voting and equity interest in Zimchem Refineries (Private) Limited. The investments are accounted for using the equity
method.                                                                                                                                                In respect of all monetary assets and liabilities held in currencies other than the United States Dollar, the Company ensures that the
                                                                                                                                                       net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-
Investment in joint venture                                                                                                                            term imbalances.
Carrying amount as at 1 January                                                        16 480 075         10 523 778           10 523 779
Additional investment                                                                           -          2 370 464            3 624 092              The Company?s exposure to foreign currency changes for all the other currencies is not significant.
Share of profits                                                                                -          1 224 518            2 332 204

Carrying amount at the end of the period/year                                          16 480 075         14 118 760           16 480 075              By Order of the Board

Hwange Coal Gasification Company (Private) Limited is the only jointly controlled entity and the ultimate ownership interest is 25%.
The investment in the joint venture has been accounted for using the equity method. The company did not recognise its share of
profits in the joint venture six months ended 30 June 2012.
                                                                                                                                                       T.K. Ncube
                                                                                                                                                       COMPANY SECRETARY
Pre-stripped overburden
Carrying amount at 1 January                                                             7 274 611         3 809 866            3 809 866
Pre-stripping costs                                                                              -         3 620 788           18 473 670
Damaged stocks written off                                                                       -                 -           (1 229 874)
Costs charged to cost of sales                                                          (1 987 758)                -          (13 779 051)

                                                                                         5 286 853         7 430 654            7 274 611
Inventory 
Raw materials                                                                            5 246 209          5 346 806            4 394 279
Consumables                                                                                      -            188 192                    -
Finished goods
Coal                                                                                    11 836 051          1 706 996            2 778 071
Coke                                                                                     9 098 433          7 708 364           11 951 139
Coal fines                                                                               9 872 640          5 900 000            9 872 640

                                                                                       36 053 333         20 850 358           28 996 129
Johannesburg
21 September 2012

Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)



                                                                                                                                                                                                                                                                                  

Date: 21/09/2012 01:18:00 Supplied by www.sharenet.co.za                     
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