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Hwange Colliery Company Limited - Unaudited Interim Results For The Six Month Period Ended 30 June 2013

Release Date: 07/10/2013 15:40:00      Code(s): HWA     
                                                                                                                                    
                                                                                                                                                                                                                                                                           Unaudited Condensed Interim
                                                                                                                                      
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe)
Code: HWA    ISIN: ZW0009011934
(?Hwange?)
                                                                                                                                     
UNAUDITED CONDENSED INTERIMS FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2013

CHAIRMAN?S STATEMENT TO SHAREHOLDERS                                                                                                               UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
                                                                                                                                                   as at 30 June 2013
The Company?s Board of Directors is pleased to present the unaudited condensed interim financial results for the six (6) months ended                                                                                                              30 June         30 June        31 December
30 June 2013.                                                                                                                                                                                                                                         2013            2012               2012
                                                                                                                                                                                                                                   Note               USD             USD                USD
OPERATING ENVIRONMENT                                                                                                                              ASSETS

                                                                                                                                                   Non- current assets
The macroeconomic environment was characterised by liquidity challenges even though the inflation rate remained low. The sluggish
                                                                                                                                                   Property, plant and equipment                                                    7          124 379 416     125 750 063          127 346 098
economic growth at around 3% implied reduced economic activity and general low capacity utilisation across industries.                             Investment property                                                               8           3 700 000       3 700 000            3 700 000
                                                                                                                                                   Investments accounted for using the equity method                                 9          18 586 177      17 628 099           18 633 455
The liquidity situation had a negative effect on availability of lines of credit against a huge working capital deficit in the business.           Intangible assets                                                                10           1 909 339       2 122 199            2 015 767

Notwithstanding the firm demand for coal and coke both on the domestic and export markets, customers? consumption behaviour was                                                                                                                148 574 932     149 200 361         151 695 320
affected by the liquidity situation. There was a general decline in the coal and coke commodity prices on the local, regional and global
markets.                                                                                                                                           Current assets
                                                                                                                                                   Stripping activity asset                                                         11           6 067 038       5 286 853            4 522 518
FINANCIAL RESULTS                                                                                                                                  Inventory                                                                        12          51 075 013      36 053 333           50 861 626
                                                                                                                                                   Trade and other receivables                                                      13          43 180 195      33 396 729           47 594 961
                                                                                                                                                   Financial assets at fair value through profit and loss                           14               2 868           2 868                2 868
The sales revenue for the six (6) months under review was US$40.4 million compared to the US$51.8 million revenue recorded during the                                                                                               15
                                                                                                                                                   Cash and cash equivalents                                                                     1 107 047       2 823 125            1 467 190
same period last year. The operating loss was US$4.5 million compared to an operating profit of US$1.6 million for the first six (6) months
of last year. The Company incurred an unaudited loss after taxation of US$3.2 million and compares unfavourably to the US$0.5 million                                                                                                          101 432 161      77 562 908          104 449 163
profit recorded for the same period in 2012. The financial performance is attributed to the poor cash flow position of the Company. This
was exarcerbated by legacy debts in excess of US$140 million dating back to 2008 and antiquated equipment. Overall, this negatively
impacted on production volumes.                                                                                                                    Total assets                                                                                250 007 093     226 763 269         256 144 483

Finance costs increased from US$0.9 million to US$1.1 million because of the penalty rates applied on overdue borrowings.                          EQUITY AND LIABILITIES

                                                                                                                                                   Capital and reserves
Total assets and investments amounted to US$250 million compared to US$226.7 million as at 30 June 2012. Capital and reserves
                                                                                                                                                   Share capital                                                                    16          45 962 789      45 549 963           45 928 393
amounted to US$103.6 million and compares to US$103.1 million for the same period last year.
                                                                                                                                                   Non-distributable reserve                                                                     4 358 468       4 358 468            4 358 468
                                                                                                                                                   Share premium                                                                                   577 956                -             529 802
PERFORMANCE                                                                                                                                        Revaluation reserve                                                                          39 948 518      39 948 518           39 948 518
                                                                                                                                                   Retained earnings                                                                            12 719 212      13 235 512           15 854 722
Total coal sales for the six (6) months period under review amounted to 913 440 tonnes and was comparable to the 918 491 tonnes
achieved during the same period last year.                                                                                                                                                                                                     103 566 943     103 092 461          106 619 903

HPS coal deliveries to Hwange Power Station for the period under review at 580 818 tonnes were 56% above the 373 126 tonnes for the                Non-current liabilities
same period last year. This resulted in Zimbabwe Power Company continuously holding adequate stock levels for uninterrupted power                  Deferred tax                                                                     17          19 671 104      23 141 991           24 340 137
generation.                                                                                                                                        Lease liability                                                                                       -         741 475                    -

                                                                                                                                                                                                                                                19 671 104      23 883 466           24 340 137
HCC/HIC coal sales decreased from 270 276 tonnes for the first six (6) months of 2013 to 207 142 tonnes for the period under review.               Current liabilities
Sales of coal fines and breeze decreased from 206 753 tonnes to 99 641 tonnes for the comparative periods.                                         Trade and other payables                                                         18          91 144 867      61 362 556           85 448 326
                                                                                                                                                   Borrowings                                                                       19          26 076 025      28 995 366           31 576 915
Coke sales volumes decreased from 68 336 tonnes for the first half of 2013 to 25 839 tonnes for the period under review.                           Provisions                                                                       20           8 471 057       7 746 616            7 082 105
                                                                                                                                                   Current tax                                                                                   1 077 097       1 682 804            1 077 097
OUTLOOK
                                                                                                                                                                                                                                               126 769 046      99 787 342         125 184 443
The Company has taken delivery of the mining equipment worth US$11 million from Sany Heavy Equipment Company Limited of China
and the commissioning was expected to be completed by 30 September 2013. This equipment will augment the mining machinery worth
                                                                                                                                                   Total equity and liabilities                                                                250 007 093     226 763 269         256 144 483
US$7 million procured in October 2012. Another initiative to procure drilling equipment from South Africa is at an advanced stage and
should be concluded in time for delivery of the drills in the fourth quarter of 2013. There is no doubt that these recapitalisation initiatives
currently being implemented organically will result in improved production performance.

The Company?s coal and coke products will remain targeted at the local and regional markets. The commodity prices are forecast to
                                                                                                                                                   UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
stabilise before end of the third quarter and start to increase in the fourth quarter.                                                             for the six (6) months ended 30 June 2013
                                                                                                                                                                                                                                       Non-
The Company will intensify its cost containment thrust through rationalisation of its operations and aligning the business model to                                                                          Share       Share distributable   Revaluation         Retained
international benchmarks.                                                                                                                                                                                   capital   premium        reserve       reserve         earnings               Total
                                                                                                                                                                                                              USD         USD           USD           USD              USD                USD
The Board and management has confidence in the current recapitalisation initiatives being implemented that will result in immediate                Balance at 1 January 2013                         45 928 393        529 802     4 358 468     39 948 518      15 854 722        106 619 903
increase in coal and coke production. Positive financial performance is projected for the year end.
                                                                                                                                                   Share option scheme                                  34 396           48 154             -               -                  -         82 550
DIRECTORATE
                                                                                                                                                   Total comprehensive loss for the period                        -           -            -               -      (3 135 510)       (3 135 510)
Ms. S Mapfuwa resigned from the Board on 28 June 2013 and on behalf of the Company, the Board of Directors would like to thank her
                                                                                                                                                   Balance at 30 June 2013                           45 962 789        577 956     4 358 468     39 948 518      12 719 212        103 566 943
for the invaluable contribution to the business.

Mr. Jemister Chininga was appointed Acting Managing Director as from 01 August 2013. The Board is still in the process of recruiting a             Balance at 1 January 2012                         45 549 963              -    4 358 468     39 948 518       12 723 506        102 580 455
substantive Managing Director.
                                                                                                                                                   Total comprehensive income for the period                      -           -            -               -        512 006            512 006
APPRECIATION
                                                                                                                                                   Balances at 30 June 2012                          45 549 963              -    4 358 468     39 948 518       13 235 512        103 092 461
I would like to express my gratitude to my fellow Directors, Management and Staff for their collective efforts and dedication to the cause
of Hwange Colliery Company despite the challenges faced for the period under period review. I also appreciate the support we continue
                                                                                                                                                   Balance at 1 January 2012                         45 549 963              -    4 358 468     39 948 518       12 723 506        102 580 455
to receive from all our stakeholders.
                                                                                                                                                   Share option scheme                                  378 430        529 802             -               -                  -        908 232

                                                                                                                                                   Total comprehensive income for the year                        -           -            -               -      3 131 216          3 131 216

                                                                                                                                                   Balances at 31 December 2012                      45 928 393        529 802    4 358 468     39 948 518       15 854 722        106 619 903

F. MUTAMANGIRA
CHAIRMAN
                                                                                                                                                   UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
20 September 2013                                                                                                                                  for the six (6) months ended 30 June 2013
                                                                                                                                                                                                                                               6 months to     6 months to              Year to
Registered Office                                                                                                                                                                                                                                 30 June         30 June         31 December
7th Floor, Coal House, 17 Nelson Mandela Avenue, P O Box 2870, Harare, Zimbabwe                                                                                                                                                                      2013            2012                 2012
                                                                                                                                                                                                                                   Note              USD             USD                  USD
                                                                                                                                                   CASH FLOWS FROM OPERATING ACTIVITIES
                                                                                                                                                   (Loss) / profit before tax                                                                   (5 705 475)        698 187           3 909 835
                                                                                                                                                   Non - cash items
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME                                                                                              Other gains and losses                                                                          279 213                -            356 269
for the six (6) months ended 30 June 2013                                                                                                          Depreciation and amortisation expense                                                         5 851 708       6 344 740          12 824 202
                                                                                                                                                   Finance costs                                                                                 1 111 298        834 057            4 187 327
                                                                                           6 months to         6 months to             Year to
                                                                                              30 June             30 June        31 December       Share of profit/losses of equity accounted investments                                           47 278          24 847           (980 509)
                                                                                                 2013                2012                2012      Allowances for credit losses                                                                  1 517 723          77 988                   -
                                                                             Note                USD                 USD                 USD
                                                                                                                                                   Operating cash flow before changes in working capital                                          3 101 745      7 979 819          20 297 124
Revenue                                                                        4            40 408 139           51 819 059        104 277 375
                                                                                                                                                   Net movement in working capital                                                                6 634 354     (6 488 127)        (12 629 143)
(Loss)/profit from operations                                                               (4 546 899)           1 622 343           7 116 653    Interest paid                                                                                 (1 111 298)      (834 057)         (4 187 327)

Finance costs                                                                                (1 111 298)           (899 309)         (4 187 327)   Net cash generated from operating activities                                                  8 624 801         657 635           3 480 654

Share of (loss)/profit from equity accounted investments                                        (47 278)            (24 847)          (980 509)    CASH FLOWS FROM INVESTING ACTIVITIES
                                                                                                                                                   Acquisition of property, plant and equipment                                                 (2 778 598)      (716 537)          (3 696 017)
(Loss)/profit before taxation                                                               (5 705 475)             698 187           3 909 835
                                                                                                                                                   Cash flows from financing activities
Taxation                                                                       5              2 569 965            (186 181)          (778 619)    Proceeds from/(repayments of) borrowings                                                                -     1 734 526           (5 423 874)
                                                                                                                                                   (Loan repayments)/proceeds from loans raised                                                  (5 528 117)     (935 575)            5 046 371
(Loss)/profit after taxation                                                                (3 135 510)             512 006           3 131 216
                                                                                                                                                   Net cash (utilised) in/generated from financing activities                                   (5 528 117)        798 951            (377 503)
Other comprehensive income for the period/year, net of tax                                             -                    -                  -

TOTAL COMPREHENSIVE (LOSS)/ INCOME FOR THE PERIOD/ YEAR                                     (3 135 510)             512 006           3 131 216    Net increase/(decrease) in cash and cash equivalents                                            318 086         740 049            (592 866)
                                                                                                                                                   Cash and cash equivalents at beginning of the period/year                                       613 132       1 205 998           1 205 998

Basic (loss) / earnings per share                                             6.1                 (0.02)               0.003               0.02
                                                                                                                                                   Cash, cash equivalents at end of period/year                                     15             931 218       1 946 047             613 132
Headline (loss) /earnings per share                                           6.2                 (0.02)               0.003               0.02


                                                                            www.Interim
                                                                                                                                

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the six (6) months ended 30 June 2013
1. General information
   Hwange Colliery Company Limited is a company that extracts, processes and distributes coal and coke products. The company                                                                                                        6 months to    6 months to           Year to
   operates a coal mine situated at Hwange and sells mainly within Zimbabwe and elsewhere in the Sub Saharan Africa.                                                                                                                   30 June        30 June      31 December
                                                                                                                                                                                                                                          2013           2012              2012
   This condensed interim financial information has been reviewed, not audited.                                                                                                                                                           USD            USD               USD

2. Basis of preparation of the condensed financial statements                                                                                 12. Inventory
   The condensed interim unaudited financial statements for the six (6) months ended 30 June 2013 have been prepared in accordance                Raw materials                                                                       8 004 104      5 246 209         6 306 706
   with IAS 34, ?Interim financial reporting?. They do not include all of the information required for full annual financial statements and       Consumables                                                                                  -              -           53 956
   should be read in conjuction with the audited annual financial statements for the year ended 31 December 2012, which have been                 Finished goods
   prepared in accordance with International Financial Reporting Standards (IFRSs).                                                                    - Coal                                                                         8 033 328     11 836 051        8 306 006
3. Estimates                                                                                                                                           - Coke                                                                         5 337 581      9 098 433        6 494 958
                                                                                                                                                       - Coal fines                                                                  29 700 000      9 872 640       29 700 000
   The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect
   the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.                                                                                                                   51 075 013     36 053 333       50 861 626

                                                                                       6 months to         6 months to            Year to
                                                                                                                                              13. Trade and other receivables
                                                                                          30 June             30 June       31 December
                                                                                             2013                2012               2012          Trade                                                                              24 080 617     24 426 027       25 450 763
                                                                                             USD                 USD                USD           Other                                                                              19 099 578      8 970 702       22 144 198

4. Revenue                                                                                                                                                                                                                           43 180 195     33 396 729       47 594 961

   Coal sales                                                                                                                                 14. Financial assets at fair value through profit or loss
   HCC/HIC                                                                                  207 142            270 276            546 264
   HPS coal                                                                                 580 818            373 126            901 480
   Coal fines and breeze                                                                     99 641            206 753            353 246         Carrying amount at beginning of period/year                                             2 868          2 868             2 868
                                                                                                                                                  Fair value adjustments                                                                       -              -                 -
   Total coal sales                                                                         887 601            850 155          1 800 990
                                                                                                                                                                                                                                          2 868          2 868             2 868
   Coke tonnes                                                                               25 839              68 336           108 407
                                                                                                                                                  The fair value of all equity securities is based on their current bid prices on
   Total sales - Tonnes                                                                     913 440            918 491          1 909 397         the Zimbabwe Stock Exchange.
   Total sales - USD                                                                     40 408 139          51 819 059       104 277 375
                                                                                                                                              15. Cash and cash equivalents
5. Taxation                                                                                                                                       For the purposes of statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in
                                                                                                                                                  money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the half year as shown in
   Current tax on profit for the period/year                                                       -            605 707                 -         the statement of cash flows can be reconciled to the related items in the statement of financial position as follows:
   Deferred tax movement                                                                 (2 569 965)           (419 526)          778 619
                                                                                         (2 569 965)            186 181           778 619         Bank and cash balances                                                              1 107 047      2 823 125         1 467 190
                                                                                                                                                  Bank overdraft                                                                      (175 829)      (877 078)         (854 058)
6. Earnings per share
                                                                                                                                                                                                                                        931 218      1 946 047           613 132
   6.1 Basic
   Profit attributable to shareholders                                                   (3 135 510)           512 006          3 131 216     16. Share capital
   Weighted average number of ordinary shares in issue                                  183 851 154        182 199 850        183 713 570

   Basic (loss)/earnings per share                                                            (0.02)              0.003               0.02        Authorised

   6.2 Headline                                                                                                                                   186 000 000 ordinary shares of USD0.25 each                                        46 500 000     46 500 000       46 500 000
   Reconciliation between headline earnings and basic earnings:
                                                                                                                                                  Issued and fully paid
   Basic earnings                                                                        (3 135 510)           512 006          3 131 216
                                                                                                                                                  110 237 432 Ordinary shares of USD0.25 each                                        27 559 358     27 559 358       27 559 358
   Non-recurring items:                                                                                                                           4 542 434 Ordinary shares issued under share option scheme                          1 514 039      1 101 213        1 479 643
   Proceeds on sale of scrap                                                                        -                  -          (44 812)

   Headline earnings                                                                     (3 135 510)           512 006          3 086 404         114 779 866 Ordinary shares of USD0.25 each                                        29 073 397     28 660 571        29 039 001

   Weighted average number of ordinary shares in issue                                  183 851 154        182 199 850        183 713 570         67 557 568 ''A'' Ordinary shares of USD0.25 each                                   16 889 392     16 889 392        16 889 392

   Headline (loss)/earnings per share                                                         (0.02)              0.003               0.02                                                                                           45 962 789     45 549 963       45 928 393

                                                                                                                                              17. Deferred tax
7. Property, plant and equipment
                                                                                                                                                  Deferred tax assets:
   Carrying amount at the beginning of the period/year                                 127 346 098         129 367 047        129 364 842
   Additions                                                                             2 778 598            2 621 325         10 805 458        Deferred tax asset to be recovered after more than 12 months                       (6 055 433)    (6 055 433)      (6 055 433)
   Depreciation charge for the period/year                                              (5 745 280)         (6 238 309)       (12 824 202)        Deferred tax asset to be recovered within 12 months                                (4 669 033)      (419 526)                -

   Carrying amount at the end of the period                                            124 379 416         125 750 063       127 346 098                                                                                            (10 724 466)    (6 474 959)      (6 055 433)

                                                                                                                                                  Deferred tax liabilities:
8. Investment property                                                                                                                            Deferred tax liability to be recovered after more than 12 months                   30 395 570     29 616 950       30 395 570
                                                                                                                                                  Deferred tax liability to be recovered within 12 months                                      -             -                 -
   Fair value                                                                             3 700 000          3 700 000          3 700 000
                                                                                                                                                                                                                                     30 395 570     29 616 950       30 395 570
   The following amount has been recognised in the statement of
   comprehensive income:                                                                                                                          Deferred tax liabilities (net)                                                     19 671 104     23 141 991       24 340 137
   Rental income                                                                            117 006              75 978           230 299
                                                                                                                                              18. Trade and other payables
9. Investments accounted for using the equity method
                                                                                                                                                  Trade payables                                                                     47 786 029     41 848 736       46 104 858
   Investments in associates (note 9.1)                                                   1 000 466          1 148 024          1 062 468         Other payables                                                                     43 358 838     19 513 820       39 343 468
   Investments in joint venture (note 9.2)                                               17 585 711         16 480 075         17 570 987
                                                                                                                                                                                                                                     91 144 867     61 362 556       85 448 326
                                                                                         18 586 177         17 628 099         18 633 455
                                                                                                                                              19. Borrowings
   9.1 Investments in associates
   Carrying amount at beginning of period/year                                            1 062 468           1 172 871          1 172 871        Bank overdraft                                                                        175 829      4 489 623           854 058
   Share of (loss)/profit                                                                   (62 002)            (24 847)          (110 403)       Loans payable within one year                                                       7 233 295     16 128 960        14 662 885
   Share of other comprehensive income                                                             -                   -                  -       Finance lease liabilities                                                          18 666 901      8 376 783        16 059 972
   Carrying amount at the end of the period/year                                          1 000 466          1 148 024           1 062 468                                                                                           26 076 025     28 995 366        31 576 915
   The Company holds a 49% voting and equity interest in Clay Products (Private) Limited. Hwange Colliery Company Limited also
   holds a 44% voting and equity interest in Zimchem Refineries (Private) Limited. The investments are accounted for using the equity
   method.                                                                                                                                    20. Provisions
   9.2 Investments in joint venture                                                                                                               20.1 Provision for rehabilitation
   Carrying amount at beginning of period/year                                           17 570 987         16 480 075         16 480 075
   Share of profits                                                                          14 724                   -         1 090 912         At beginning of period/year                                                         2 893 360      1 893 360         1 893 360
                                                                                                                                                  Charged to the statement of comprehensive income:
   Carrying amount at the end of the period/year                                         17 585 711         16 480 075         17 570 987         Additional provisions made during the period/year                                     500 000      1 000 000         1 000 000

   Hwange Coal Gasification Company (Private) Limited is a jointly controlled entity and the ultimate ownership interest is 25%. Hwange                                                                                               3 393 360      2 893 360         2 893 360
   Colliery Company Limited?s investment in the joint venture is being acquired on a piecemeal basis and by 30 June 2013, the Company
   had acquired 20.04% of its total investment. The investment in the joint venture has been accounted for using the equity method.               20.2 Other provisions

                                                                                                                                                  Leave pay and other provisions                                                      5 077 697      4 853 256         4 188 745
10. Intangible assets
                                                                                                                                                  Grand total                                                                         8 471 057      7 746 616         7 082 105
   Opening carrying amount                                                                2 015 767          2 228 630          2 228 630
   Amortisation charge                                                                    (106 428)           (106 431)          (212 863)

   Closing carrying amount                                                                1 909 339           2 122 199         2 015 767


11. Stripping activity asset
                                                                                                                                              T. K. NCUBE
   Carrying amount at beginning of period/year                                            4 522 518           7 274 611          7 274 611    COMPANY SECRETARY
   Pre-stripping costs                                                                    1 671 770                   -            179 075
   Costs charged to cost of sales                                                          (127 250)        (1 987 758)        (2 931 168)    20 September 2013

                                                                                          6 067 038          5 286 853          4 522 518




F Mutamangira (Chairman), N.S. Chibanguza, J. Chininga (Acting Managing Director), I.C. Haruperi, N. Jiyane, J. Muskwe (Mrs), L. Nkomo, V. Vera.
www.hwangecolliery.net

7 October 2013
Johannesburg

sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 07/10/2013 03:40:00 Supplied by www.sharenet.co.za                     
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