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HWA
HWHWA
HWA - Hwange Colliery Company Limited - Chairman`s Statement to Shareholders
HWANGE COLLIERY COMPANY LIMITED
(Previously Wankie Colliery Company Limited)
(Incorporated in Zimbabwe)
Code: HWA ZW0009011934
Audited Financial Statements for the year ended 31 December 2010
CHAIRMAN`S STATEMENT TO SHAREHOLDERS
INTRODUCTION
It is my pleasure to present the audited Company results for the financial year
ended 31 December 2010.
OPERATING ENVIRONMENT
The past year was characterized by the stabilization of the national economy
following the introduction of the multi currency system in the previous year.
While the national economy recorded positive growth, companies continued to face
challenges on the liquidity and working capital fronts. Despite interest and
inflation rates stabilizing, the unavailability of foreign lines of credit
persisted.
The volatility between the United States dollar and the South African rand
continued to affect the cost of imported spares.
The Coal and Coke prices dropped in the latter part of year thereby eroding the
Company`s incomes.
The demand for Coal products in the domestic market was generally firm driven
mostly by the power generation industry. The other sectors operated below
capacity.
However coal and coke exports were affected by a decline in demand in both the
regional and international markets.
PERFORMANCE OVERVIEW
Sales Statistics
Product 2010 2009
HPS coal 1 759 095 1 033 968
HCC/HIC coal 533 299 429 213
Coal Fines 151 036 185 726
Total Coal 2 443 430 1 648 933
Coke (Incl breeze) 67 513 61 018
TOTAL 2 510 943 1 709 951
It is pleasing to note that despite the challenges in the macroeconomic
environment, the company`s production and sales volume performance increased by
47%.
The company secured short term funding and procured mining equipment that
boosted production performance at the three (3) mines; JKL, Chaba, and 3 Main
Underground mines. Further similar funding structure is planned for the ensuing
year.
Total coal and coke sales for the year at 2 510 943 tonnes were significantly
above 1 709 951 tonnes sold in 2009. Export sales stood at 160 052 tonnes
against 158 062 tonnes for the previous year.
HPS coal supplies to Zimbabwe Power Company (ZPC)`s Hwange Power Station
amounted to 1 759 095 tonnes and were 70% above the
1 033 994 tonnes delivered in 2009.
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales amounted to
533 299 tonnes and were 24% above the tonnage of 429 213 tonnes achieved the
previous year. A total of 151 036 tonnes of coal fines were sold during the year
to the local and export markets and this was 23% below the 185 726 tonnes sold
the previous year.
Coke sales, including breeze, amounted to 67 513 tonnes and this was comparable
to the 61 018 tonnes sold the previous year. The coke oven battery underwent
major repairs and only started production in September 2010. However, some
repairs to the coke oven battery are still ongoing.
FINANCIAL RESULTS
The company complied with the International Financial Reporting Standard (IFRS)
in all material respects.
The company achieved a turnover for the year of US$98.9 million and this was 49%
above the figure of US$66.4 million achieved the previous year. Exports
contributed 12% of turnover. The gross profit margin of 34% was slightly lower
than the 35% for the comparative period last year.
The company recorded an operating profit of US$9.4 million compared to US$6
million achieved in 2009. The share of profit from equity accounted investments
amounted to US$2.8 million compared to a share of loss of US$0.4 million
incurred last year.
The attributable profits for the year amounted to US$ 6.3 million and this was
142% above the net profit after tax of US$2.6 million achieved the previous
year.
The property, plant and equipment increased from US$71.6 million to US$88.2
million because of new capital acquisitions.
Current assets amounted to US$67 million and this was above the US$49 million
for the same period last year.
The current liabilities also increased from US$58.3 million to US$88.2 million
and comprised mainly of trade creditors and borrowings. The company was also
financing the recapitalization initiatives through short term facilities as
there was no long term structures in the market.
DIVIDEND
The Board has resolved not to consider payment of a dividend in view of the need
to recapitalize the business.
QUALITY, SAFETY, HEALTH AND ENVIRONMENT
The company successfully went through the ISO 9001:2008 Quality Management
System surveillance audit.
The company`s safety programmes achieved the objective of an accident free
working environment. There was no fatality during the year.
Provisions have been made to commence the rehabilitation of the mined out areas
at the opencast. The company continued to face the challenge of the acid mine
drainage from the closed old underground mines and measures to manage the risk
were undertaken. A permanent solution is being pursued in liaison with the
Environmental Management Authority.
The company`s health programmes effectively managed the prevalent diseases like
malaria. The awareness campaigns were used to manage the HIV and AIDS related
diseases.
OUTLOOK
The country`s economy is projected to continue to grow in 2011. The envisaged
increased capacity utilisation in industry, coupled with the prospect of a good
agricultural season would revitalize domestic demand. The growth in exports will
hinge on the company focusing on new regional and overseas markets.
The company secured a medium term financing facility for the acquisition of
additional mining equipment and delivery will be between March and June 2011.
This development is expected to further boost productivity.
The company is working on securing additional coal concessions in order to boost
its resource and reserves base. The company is optimistic that its current
funding initiatives will materialize during the year and that product demand
will firm in the second half of the year.
DIRECTORATE
There have been no other changes to the company`s Board of Directors for the
period under review.
APPRECIATION
I would like to thank my fellow Board Members, management and staff for their
continued commitment and support rendered during the year.
I would also like to express my sincere gratitude to all the stakeholders for
their support.
MR. T. SAVANHU
CHAIRMAN
25 March 2011
Annual Report and Financial Statements
The annual report and financial statements for the year ended 31 December 2010
will be distributed to members on or before 31 May 2011 and the annual general
meeting will be held on Thursday 30 June 2011.
By Order of the Board
T K Ncube
SECRETARY
25 March 2011
Statement of comprehensive income
for the year ended 31 December 2010
2010 2009
USD USD
Revenue 98 926 994 66 363 128
- -
Cost of sales (65 572 (43 047
846) 784)
Gross profit 33 354 148 23 315 344
Other income 3 218 774 258 389
Other gains and losses (net) ( 504 462) 269 007
Marketing costs ( 607 962) (654 340)
Administrative costs (26 058 (17 408
612) 112)
Operating profit 9 401 886 5 780 288
Finance cost (1 552 929) (383 975)
Share of profit / (loss) 2 830 455 (425 830)
from equity accounted
investments
PROFIT BEFORE INCOME TAX 10 679 412 4 970 483
Income tax expense (4 447 689) (2 380 962)
PROFIT FOR THE YEAR 6 231 723 2 589 521
Other comprehensive income,
net of tax
Share of other comprehensive
income of equity accounted
investments, net of tax
66 244 -
TOTAL COMPREHENSIVE INCOME 6 297 967 2 589 521
FOR THE YEAR
Attributable earnings per - basic 0.03 0.01
share
- diluted 0.03 0.01
Statement of financial position
as at 31 December 2010
2010 2009 1Jan 2009
ASSETS USD USD USD
Non Current Assets
Property, plant and 88 249 605 71 577 664 74 190 966
equipment
Investment property 3 700 000 3 615 000 3 615 000
Investments accounted
for using the equity
method
11 835 967 2 804 298 1 797 827
Intangible assets - - -
103 785 572 77 996 962 79 603 793
Current Assets
Pre-stripped 3 809 866 4 911 376 4 911 376
overburden
Inventory 16 699 214 17 665 738 15 476 387
Trade and other 45 289 062 25 377 186 7 802 272
receivables
Financial assets at
fair value through
profit or loss
2 918 2 826 1 124
Bank and cash balances 1 203 216 1 249 983 206 485
67 004 276 49 207 109 28 397 644
Total assets 170 789 848 127 204 071 108 001 437
EQUITY AND LIABILITIES
Capital and Reserves
Share capital 45 549 963 45 549 963 -
Derived equity 4 358 468 4 358 468 49 908 431
Retained earnings 8 887 488 2 589 521 -
58 795 919 52 497 952 49 908 431
Non-current
liabilities
Lease liability 2 938 939 - -
Deferred income tax 20 869 620 16 421 931 14 996 265
23 808 559 16 421 931 14 996 265
Borrowings 26 014 401 28 375 606 22 247 200
Trade and other 57 366 782 26 440 980 20 849 541
payables
Provisions 3 848 891 2 512 306 -
Current income tax 955 296 955 296 -
liability
88 185 370 58 284 188 43 096 741
Total equity and 170 789 848 127 204 071 108 001 437
liabilities
Statement of changes in equity
for the year ended 31 December 2010
Derived Retained Total
Share equity Earnings
Capital
USD USD USD USD
Change in functional - 49 908 431 - 49 908 431
currency
Redenomination of 45 549 963 (45 549 - -
share capital 963)
Total comprehensive - - 2 589 521 2 589 521
income for the year
Balance at 31 45 549 963 4 358 468 2 589 521 52 497 952
December 2009
Balance at January 45 549 963 4 358 468 2 589 521 52 497 952
2010
Total comprehensive - - 6 297 967 6 297 967
income for the year
Balance at 31 45 549 963 4 358 468 8 887 488 58 795 919
December 2010
Statement of cash flows
for the year ended 31 December 2010
2010 2009
USD USD
CASH GENERATED FROM OPERATIONS
Profit before income tax 10 679 412 4 970 483
Adjustment for non-cash items:
(7 117) (41 134)
589 554 (267 305)
(2 830 455) 425 831
1 552 929 383 975
7 638 342 9 628 100
(85 000) -
(92) (1 702)
Operating cash flow before changes in 17 537 574 15 098 248
working capital
2010 2009
USD USD
Changes in working capital :
(5 168 446) (13 022
211)
1 101 510 (4 911 376)
(19 311 2 149 410
876)
1 336 585 1 247 172
18 603 686 3 667 912
Cash generated from operating 14 099 032 4 229 154
activities
Finance cost (1 389 557) (162 471)
Income tax paid - -
Net cash generated from operating 12 709 475 4 066 683
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and (11 768 (3 499 436)
equipment 917)
Proceeds from the disposal of motor 12 342 41 134
vehicles
Net cash flows from investing (11 756 (3 458 302)
activities 575)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (10 973 600 000
913)
Proceeds from loans raised 9 419 686 -
Net cash flows from financing (1 554 227) 600 000
activities
Net increase in cash, cash (601 327) 1 208 381
equivalents and bank overdrafts
Cash, cash equivalents and bank 1 248 894 206 485
overdrafts at beginning of the year
Exchange loss on bank balances (147) (165 972)
Cash, cash equivalents and bank 647 420 1 248 894
overdrafts at end of year
31 March 2011
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 31/03/2011 15:21:03 Produced by the JSE SENS Department.
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