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Unaudited results for the six (6) months ended 30 June 2012
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 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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