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Wankie Colliery Company Limited - Financial Results for the year ended 31
December 2002
Wankie Colliery Company Limited
(Incorporated in Zimbabwe)
The audited results for the year ended 31 December 2002 with the comparative
figures for the previous period are as follows:
Year ended Year ended
31/12/2002 31/12/2001
Sales
WCC coal tonnes 1,241,511 1,432,619
HPS coal tonnes 2,207,089 2,318,799
Total coal sales 3,448,600 3,751,418
Coke tonnes 224,111 245,822
Coke oven gas Nm3 24,260,240 27,075,060
INFLATION ADJUSTED HISTORICAL COST
Year ended Year ended Year ended Year ended
INCOME STATEMENT 31/12/2002 31/12/2001 31/12/2002 31/12/2001
$000 $000 $000 $000
Turnover 15,879,232 20,690,433 8,434,407 4,777,885
Operating (loss)profit (6,407,958) (5,790,394) 33,809 244,469
from continuing
operations
Monetary adjustment (1,576,422) (2,102,867) - -
Operating (loss) (7,984,380) (7,893,261) 33,809 244,469
/profit
Finance cost 740,685 365,366 434,129 139,670
(Loss)/profit before (7,243,695) (7,527,895) 467,938 384,139
taxation
Taxation 1,600,126 2,022,878 (144,438) (99,508)
(Loss)/profit after (5,643,569) (5,505,017 323,500 284,631
taxation
(Loss)/earnings per
share (cents) - basic (3,326) (3,247) 191 168
- headline (3,325) (3,247) 191 168
- diluted (3,280) (3,202) 188 166
Inflation indices 11,692,90 3,911,60 - -
Year ended Year ended Year ended Year ended
31/12/2002 31/12/2001 31/12/2002 31/12/2001
BALANCE SHEET $000 $000 $000 $000
Capital employed:
Share capital 169,823 169,553 169,823 169,553
Reserves and retained 25,617,241 31,259,458 1,832,503 1,508,342
profits
Shareholder equity 25,787,064 31,429,012 2,002,326 1,677,895
Deferred taxation 8,016,121 9,725,643 554,369 519,329
Long term loans 124,000 361,672 124,000 120,989
33,927,185 41,516,326 2,680,695 2,318,213
Represented by:
Fixed assets and 30,357,836 36,965,689 1,784,744 1,739,071
investments
Recoverable foreign 54,207 647,049 54,207 216,456
currency differences
Current assets 7,774,607 12,537,831 5,101,208 3,251,080
Stocks and stores 4,492,692 6,844,511 1,819,293 1,346,505
Debtors 2,998,958 5,297,419 2,998,958 1,772,135
Bank balances and cash 282,957 395,901 282,957 132,440
Current liabilities 4,259,465 8,634,243 4,259,464 2,888,394
Short term borrowings 1,801,799 2,727,645 1,801,799 912,473
Creditors 2,457,666 5,906,598 2,457,665 1,975,921
Net current assets 3,515,142 3,903,588 841,744 362,686
33,927,185 41,516,326 2,680,695 2,318,213
Cash Flow Statement
Year ended Year ended Year ended Year ended
31/12/2002 31/12/2001 31/12/2002 31/12/2001
$000 $000 $000 $000
Cash flows from
operating activities
Operating cashflow (7,984,380) (7,893,261) 33,809 244,469
Depreciation and other 6,970,177 8,300,545 225,692 210,438
non- cash items
Operating cashflow (1,014,203) 407,284 259,501 454,907
before investment in
working capital
Net movement in working 1,832,740 2,088,738 (1,107,720) (296,297)
capital
Net financing costs 740,685 365,366 434,129 139,670
paid
Dividend paid - - - -
Taxes paid (155,156) - (54,646) -
1,404,066 2,861,388 (468,736) 298,280
Cash flows from
investigating
activities
Net cash flow from (371,842) (324,404) (329,191) (367,588)
fixed assets &
investments
Net cash flow before 1,032,224 2,536,984 (707,927) (69,308)
financing activities
Cash flows financing
activities
Net loans raised and (586,823) (2,300,541) 441,070 (82,639)
other
Net cash inflow 445,401 236,443 (266,857) (151,947)
Overdraft and
acceptances less bank
cash balances
31 December 2001 (1,070,306) (1,306,749) (358,047) (206,100)
31 December 2002 (624,905) 91,070,306) (624,904) (358,047)
445,401 236,443 (266,857) (151,947)
Supplementary
Information
Year ended Year ended Year ended Year ended
31/12/2002 31/12/2001 31/12/2002 31/12/2001
$000 $000 $000 $000
1. Depreciation of 6,014,322 7,185,708 226,711 210,438
fixed assets charged to
operating income
2. Capital expenditure (386,490) (834,864) 230,010 367,588
on fixed assets
3. Commitments for 678,780 343,464 678,780 254,081
capital expenditure:
Authorised and 37,086 251,490 37,086 107,195
contracted
Authorised but not 641,694 91,974 641,694 146,886
contracted
STATEMENT OF CHANGES IN
EQUITY - CURRENT COST
For the year ended 31
December 2002
Share Capital General Retained Total
capital reserves reserve profit
$000 $000 $000 $000 $000
Balances at 33,061,621 16,284,468 27,267,665 (39,681,065) 36,932,689
1 January
2001
Net loss (5,505,017) (5,505,016)
for the
year
Transfer to 212,712 (212,712) -
capital
reserves
Transfer to 636,718 (636,718) 0
general
reserve
Issue of 690 649 - - 1,399
shares
under share
option
scheme
Balance at 33,062,311 16,497,829 27,904,383 (46,035,511) 31,429,011
31 December
2001
Net loss (5,643,569) (5,643,569)
for the
year
Transfer to 80,875 (80,875) 0
capital
reserves
Transfer to 242,000 (242,000) 0
general
reserve
Issue of 509 509
shares
under share
option
scheme
1,112 1,112
Balance at
31 December
2002 33,062,820 16,570,816 28,146,383 (52,001,955) 25,787,064
Statement of changes in Equity
- Historical cost
For the year ended 31 December 2002
Share Capital General Retained Total
capital reserves reserve profit
$000 $000 $000 $000 $000
Balance at 169,378 580,167 637,000 6,388 1,392,933
1 January
2001
Net profit - - 284,631 284,631
for the
year
Transfer to 71,158 - (71,158) -
capital
reserves
Transfer to - 213,000 (213,000) -
general
reserve
Issue of 175 156 - 331
share
capital
under the
share
option
scheme
Balance at 169,553 651,481 850,000 6,861 1,677,895
31 December
2001
Net profit - 323,500 323,500
for the
year
Transfer to 80,875 (80,875) 0
capital
reserves
Transfer to - 242,000 (242,000) 0
general
reserve
Issue of 270 661 - - 931
share
capital
under the
share
option
scheme
Balance at 169,823 733,017 1,092,000 7,486 2,002,326
31 December
2002
Earnings per share
The calculation of earnings per share is based on loss after taxation of $5
643 569 000 (2001 -$5 505 017 000) and on 169 687 965 ordinary shares in
issue during the year
Annual report and accounts
The annual report and accounts for the year ended 31 December 2002 will be
posted to members on or about 1 June 2003 and the annual general meeting will
be held on 27 June 2003.
By order of the Board
G. Fari
Acting Secretary Harare
21 March 2003
CHAIRMAN"S STATEMENT
INTRODUCTION
The year 2002 was full of major business challenges characterised by severe
foreign currency shortages, unprecedented high inflation, price controls,
transport constraints and loss of critical skills. The impact of these
challenges reflect on the company"s results for the financial year ending 31
December 2002.
TRADING PERFORMANCE
Demand for coal and coke remained firm throughout the year in both the
domestic and export markets. However the company failed to meet demand
because of the major challenges mentioned above.
Coal sales for the year at 3 448 600 tonnes, were 302 818 tonnes or 8% lower
than the 3 751 418 tonnes achieved in the previous year.
WCC Coal
WCC coal sales of 1241 511 tonnes were 13% below performance of the previous
year. Coal Mining delays were experienced at the opencast mine particularly
in the second half due to plant and machinery breakdowns resulting from
shortages of foreign currency required to import maintenance spares. In
addition inadequate supply of empty wagons by the National Railways of
Zimbabwe (NRZ) adversely affected the supply of WCC coal to the market. Under
normal circumstances NRZ should supply 150 railway wagons per day. However a
daily average of 66 wagons was supplied, which is only 44% of normal
requirements. Consequently, customers continued to use road transport
resulting in 45% of WCC coal being moved by this mode of transport.
HPS Coal
HPS coal sales to the Zimbabwe Power Company (ZPC) were 5% lower than the
previous year. Offtake levels were hampered by operational problems emanating
from foreign currency shortages and cashflow constraints caused by the below
cost price received for HPS coal.
Coke
Coke sales of 224 111 were 9% lower than the previous year. The company could
not utilize the excess coke oven capacity available at the Zimbabwe Iron and
Steel Company (ZISCO) as a result of transport constraints experienced in
moving coking coal.
Coke Oven Gas
Coke oven gas delivered to ZPC declined by 10% from the previous year"s 27
075060 normal cubic metres (Nm3) to 24 260 240 Nm3. The operations of coke
oven gas plant were adversely affected by lack of imported spares from the
United Kingdom due to foreign currency shortages.
FINANCIAL RESULTS
The company has complied with the International Accounting Standard (IAS) 29
(Financial Reporting in Hyper-Inflationary Economies). The financial
statements and corresponding figures for the previous period have therefore
been restated to take account of changes in the purchasing power of the
Zimbabwe dollar. Consequently, the financial results are stated in terms of
the measuring unit current as at the balance sheet date.
The following comments on the financial results relate to the current cost
(hyper-inflated) figures.
Turnover for the year at $15 879 232 000 declined by $4 811 201 000 or 23%
when compared to $20 690 433 000 recorded for 2001. This is a reflection of a
combination of reduction in volume of coal and coke sales and price levels
lagging behind. The company experienced problems in resolving the price of
HPS coal sold to ZPC. Negotiations with ZPC for increase in price of HPS coal
started early in the year and parties remained deadlocked until June 2002.
The minister of Mines and Energy intervened and awarded a price of $1 300 per
tonne of HPS coal effective from 1 June 2002. Regrettably this price was
below the cost of producing a tonne of HPS coal. The HPS coal price remained
below cost throughout the year. HPS coal sales account for 64% of volume
sales achieved but only contribute 38% to turnover.
Operating loss amounting to $7 984 380 000 was marginally higher when
compared to $7 893 261 000 recorded in the previous year. The input costs
were adversely affected by inflation which remained high throughout the year,
peaking at 198,9% by end of the year. The operating loss recorded would have
been significantly higher had the maintenance programme, which was curtailed
by shortages of foreign currency and cash constraints, been strictly adhered
to. HPS coal price which was not set at the right level as indicated above
adversely impacted on operating cashflow.
The Company continued to benefit from the relatively low interest rate regime
which prevailed in the economy during the year. In addition interest
receivable from debtors outstanding accounts exceeded interest payable.
Included in the debtors amount of $2 991 356 000 is $1 342 012 000
outstanding in respect of two major customers, which has since been paid.
ZISCO paid an amount of $1 500 000 000 in October 2002 against the long
outstanding debt leaving a balance of $1 777 782 000 at the end of the year.
This debt continued to impact negatively on the company"s cashflow. ZISCO has
put in place a payment plan whereby coking coal off take is paid for in
advance with effect from 1 January 2003. This has the effect of parking the
debt as at 31 December 2002 except for the interest portion. To date this
arrangement has been working well.
An amount of $593 938 000 in respect of the Commonwealth Development
Corporation and WestLb loans is included in short-term borrowings. These
offshore loans were schedule to be fully paid in March 2003. The Loans have
been rescheduled in light of foreign currency shortage and will hopefully be
fully paid by December 2003.
The company"s long outstanding account with NRZ was fully settled in October
2002.
SAFETY, HEALTH AND ENVIRONMENT
There were no fatalities during the year. The number of accidents declined by
31 % from the previous year. This marked a very significant reduction in the
total number of accident when compared to a 4%reduction in the previous
period. The new zero tolerance safety programme was launched during the year.
An environmental impact assessment was conducted at the site for the proposed
3 Main underground mine. The quality of surface water in public streams
remained good throughout the year and there was no incidence of severe water
pollution.
The HIV and AIDS pandemic continues to adversely affect our workforce and
operations. Education campaigns targeted at the workforce and the community
were carried out during the year to raise the level of awareness on good,
moral and safe behaviour.
HUMAN RESOURCES
Loss of critical human resources skills continued to be a major problem
through out the year particularly in the engineering and medical disciplines.
The company has however been able to fill most of the vacant positions.
Further critical and senior staff losses have been experienced in the new
year. Steps are taken to replace them.
DIVIDEND
Your board is unable to consider payment of a dividend under the current
economic environment.
PROJECTS
The board has approved the development of 3 Main, a new underground mine the
building of a new coke oven battery. The 3 Main underground mine is intended
to secure WCC raw coal mining capacity to levels consistent with established
demand. In addition the new mine will produce low phosphorous coal as a
premium product for which a ready and undersupplied export market exists.
The low phosphorus coal will also be utilised for low phosphorus coke
production in the existing and new coke oven batteries to meet the need of
the local and export customers.
OUTLOOK
Coal and coke products were placed under price control by Government
statutory instrument with effective from 15 November 2002. The company
submitted an application for a price increase to the Ministry of Industry and
International Trade at the beginning of 2003 and is still waiting for the
response. The delays in implementing the price increase will adversely impact
on the Company"s cashflow. The National Employment Council for the mining
industry settled on a 120% increase in salaries and wages with effect from 1
January 2003. This is beyond the company"s expectations and will impact
negatively on the cost of producing coal and coke. Government"s price control
policy appears not to have taken into account the inevitable increase in
input costs.
A foreign currency facility amounting to US$5,3 million has been secured from
African Export- Import Bank through the Commercial Bank of Zimbabwe Limited.
The funding will be utilized to carry out the essential repairs and services
to production equipment so as to bring production back to normal capacity.
The Reserve Bank of Zimbabwe has granted the company a concession to retain
100% of its export proceeds. This arrangement was overtaken by the
introduction of new Exchange Control Regulations effected after 14 November
2002. The company has since resubmitted an application to the Reserve Bank of
Zimbabwe for it to be allowed to retain 100% of its export proceeds. This
will enhance the company"s ability to purchase imported spares.
Road transport, which was intended to complement efforts by the NRZ has
become the main means of transport for our products. This trend is expected
to continue in the short and medium term. The board has approved a capital
expenditure vote to install a lorry loading facility during 2003. This will
improve the turnaround time and increase the number of lorries loaded per
day.
DIRECTORATE
Mr. N D Kitikiti who joined the board on 1 April 2001 resigned at the end of
the year. I would like to record our appreciation for his contributions to
the affairs of your company. I welcome Mr. T E N Chigudu, who joined the
board on 1 January 2003.
The Managing Director, Mr. O K Bwerinofa has agreed to stay beyond 31
December 2002 to allow the company to finalise the recruitment f his
successor.
CONCLUSION
On behalf of the board, I wish to thank the Managing Director, his team and
all employees their hard work, loyalty and dedication to duty during an
extremely difficult year.
I also wish to thank my colleagues on the board for their continued support
and contribution to the activities of the company.
N Kudenga Chairman Harare
21 March 2003
Harare
Directors: N Kudenga (Chairman), O K Bwerinofa (Managing), R Bottomley, G A
Chigora, T E N Chigudu, S P Chimbodza, C Chipato, Dr S Z Gata, D J Kwidini, E
W Sansole
