| Thu 1 Apr 2004, 8:50 | | RESULTS FOR THE YEAR ENDED 31DECEMBER 2003 |
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Wankie Colliery Company Limited - FINANCIAL RESULTS FOR THE YEAR ENDED 31
DECEMBER 2003
Wankie Colliery Company Limited
Code: WAN ISIN: ZW0009011702
FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
The company"s audited results for the year ended 31 December 2003
with the appropriate comparisons for the previous periods were as follows:-
INCOME STATEMENT
CURRENT COST HISTORICAL COST
Year Year Year Year
ended ended ended ended
31.12.03 31.12.02 31.12.03 31.12.02
SALES
WCC coal tones 854,605 1,197,760
HPS coal tonnes 1,694,394 2,207,089
Total coal sales 2,548,999 3,404,849
Coke tonnes 228,389 224,111
Coke oven gas Nm3 3,030,190 24,260,240
INCOME STATEMENT $000 $000 $000 $000
Sales Revenue 102,669,274 110,955,340 54,310,740 8,434,407
(Loss)/Profit before
interest
& monetary adjustment -39,370,723 -37,794,234 4,577,751 33,810
Monetary adjustment 8,636,360 -11,015,170 0 0
-30,734,363 -48,809,404 4,577,751 33,810
Net interest -3,826,866 5,175,499 -1,691,609 434,128
Assets Impairment adjustment 25,410,394 -6,981,051
(Loss)/Profit before taxation -9,150,835 -50,614,956 2,886,142 467,938
Taxation 3,222,728 11,180,800 -1,007,171 -144,438
(Loss)/Profit after taxation -5,928,107 -39,434,156 1,878,971 323,500
Ordinary dividend 0 0 0 0
-5,928,107 -39,434,156 1,878,971 323,500
Cents Cents Cents Cents
(Loss)/Earnings per share
- basic -3,484 -23,239 1,104 191
- headline -13,233 -20,189 1,691 191
- diluted -3,442 -22,919 1,091 188
SUMMARISED BALANCE SHEET
$000 $000 $000 $000
Capital employed:
Share capital 231,026,906 231,024,649 170,681 169,823
Reserves and
retained profits -56,759,698 -50,838,954 3,714,314 1,832,503
Shareholders equity 174,267,208 180,185,695 3,884,995 2,002,326
Deferred taxation 51,227,938 56,012,208 0 554,369
Long term loans & provision 0 866,444 0 124,000
225,495,146 237,064,347 3,884,995 2,680,695
Represented by:
Fixed assets and
investments 201,209,346 212,123,721 4,962,580 1,784,744
Recoverable foreign
currency differencies 1,117,043 378,768 1,117,043 54,207
Current assets 59,571,692 54,324,630 34,208,307 5,101,208
Stocks and stores 33,159,170 31,392,427 7,795,785 1,819,293
Debtors 18,971,163 20,955,056 18,971,163 2,998,958
Bank balances and cash 7,441,359 1,977,147 7,441,359 282,957
Current liabilities 36,402,935 29,762,772 36,402,935 4,259,464
Short term borrowings 18,627,660 12,589,972 18,627,660 1,801,799
Creditors 17,775,275 17,172,800 17,775,275 2,457,665
Net current assets/
(liabilities) 23,168,757 24,561,858 -2,194,628 841,744
225,495,146 237,064,347 3,884,995 2,680,695
Abridged Cash Flow Statement
Year Year Year Year
ended ended ended ended
31.12.03 31.12.02 31.12.03 31.12.02
$000 $000 $000 $000
Cash flows from
operating activities
Operating cash flow -30,734,363 -48,809,404 4,577,751 33,810
Depreciation and other
non - cash items 45,335,135 29,206,242 9,465,019 225,692
Operating cashflow
before investment
in working capital 14,600,772 -19,603,162 14,042,770 259,502
Net movement in working
capital -1,056,545 12,806,171 -9,092,061 -1,107,719
Net financing costs paid -3,826,867 5,175,499 -1,691,609 434,128
Dividends paid - - - -
Taxes paid -220,824 -696,495 -105,274 -54,649
9,496,537 -2,317,987 3,153,827 -468,738
Cash flows from investing activities
Net cashflow from fixed assets
and investments -5,984,480 -2,892,949 -3,507,119 -239,191
Net cash flow before
financing activities 3,512,057 -5,210,936 -353,292 -707,929
Cash flows from financing activities
Net loans raised and other 4,376,580 8,323,159 4,500,351 441,072
Net cash inflow/(outflow) 7,888,637 3,112,223 4,147,059 -266,857
Overdraft and acceptances
less bank balances and cash
31 December 2002 -4,366,482 -7,478,705 -624,904 -358,047
31 December 2003 3,522,155 -4,366,482 3,522,155 -624,904
7,888,637 3,112,223 4,147,059 -266,857
Supplementary information
1. Depreciation on fixed assets charged to
operating income 41,976,697 42,024,748 233,848 226,711
2. Capital expenditure on
fixed assets 4,349,840 2,720,621 2,892,593 207,375
3. Commitments for capital
expenditure: 30,069,501 4,742,938 30,069,501 678,780
Authorised and contracted 12,265,809 259,136 12,265,809 37,086
Authorised but not yet
contracted 17,803,692 4,483,802 17,803,692 641,694
Statement of changes in equity
for the year ended 31 December 2003
Retained
Profit Total
$000 $000
Balance as at
1st January 2002 :
Historic Cost 6,861 1,677,895
Net profit for the year 323,500 323,500
Transfer to retained profit 242,000 -242,000 0
Transfer to Capital Reserve -80,875 0
Issue of Share
Capital under
Option Scheme 931
Balance as at
1st January 2003 :
Historic Cost 7,486 2,002,326
Net profit for the year 1,878,971 1,878,971
Transfer to retained profit -1,092,000 1,092,000 0
Issue of Share Capital under
Option Scheme 3,698
Balance as at
31 December 2003 :
Historic Cost 2,978,457 3,884,995
Balance as at
1st January 2002 :
Current Cost 321 670 599 219,608,523
Net loss for the year -39,434,156 -39,434,156
Transfer to retained profit -1,690,962 0
Transfer to Capital Reserve -565,110 0
Issue of Share Capital under
Option Scheme 11,328
Balance as at
1st January 2003 :
Current Cost -363,360,827 180,185,695
Net loss for the year -5,928,107 -5,928,107
Transfer to retained profit 196,671,321 0
Issue of Share Capital under
Option Scheme 9,620
Balance as at
31 December 2003 :
Current Cost -172,617,613
174,267,208
Statement of changes in equity
for the year ended 31 December 2003
Share Capital General
Capital Reserves Reserves
$000 $000 $000
Balance as at
1st January 2002 :
Historic Cost 169,553 651,481 850,000
Net profit for the year
Transfer to retained profit
Transfer to Capital Reserve 0 80,875 0
Issue of Share
Capital under
Option Scheme 270 661
Balance as at
1st January 2003 :
Historic Cost 169,823 733,017 1,092,000
Net profit for the year
Transfer to retained profit -1,092,000
Issue of Share Capital under
Option Scheme 858 2,840
Balance as at
31 December 2003 :
Historic Cost 170,681 735,857 0
Balance as at
1st January 2002 :
Current Cost 231,021,091 115,277,672 194,980,359
Net loss for the year
Transfer to retained profit 1,690,962
Transfer to Capital Reserve 565,110
Issue of Share Capital under
Option Scheme 3,558 7,770
Balance as at
1st January 2003 :
Current Cost 231,024,649 115,850,552 196,671,321
Net loss for the year
Transfer to retained profit -196,671,321
Issue of Share Capital under
Option Scheme 2,257 7,363
Balance as at
31 December 2003 :
Current Cost 231,026,906 115,857,915 0
Earnings Per Share
The calculation of earnings per share is based on profit after taxation of $1
878 971 000 ( $323 500 000 in 2002) on 170 172 040 weighted average ordinary
shares in issue during the year.
Annual Report and Accounts
The annual report and accounts for the year ended 31 December 2003 will be
distributed to members on or before 31 May 2004 and the annual general meeting
will be held on Friday 25 June 2004.
By Order of the Board
T K Ncube
16 March 2004
SECRETARY HARARE
CHAIRMAN"S STATEMENT
INTRODUCTION
It is my pleasure to present company results for the financial year ended 31
December 2003, for the first time as Chairman of Wankie Colliery Company
Limited. The current Board was appointed end of June 2003, at a time when the
company was facing serious internal and external operating environmental
challenges. The year 2003 was indeed a difficult year for the company.
The year on year inflation reached an all time high in the year closing at
598.7%. Severe foreign currency shortages persisted throughout the year. The
first half-year experienced price controls on company products and this was
replaced by a price monitoring regime. Transportation problems and loss of
critical skills continued to compound further challenges to the company.
When the new Board came into office, the company"s production capacity had gone
down to an all time low of 30%. The first hallenge for the Board was to arrest
the declining production trend.
TRADING PERFORMANCE
Financial Highlights (historical cost basis)
* Turnover increased by 544% to $54 billion from $8 billion in 2 002.
* Gross profit margin increased from 20% to 34% in 2003.
* Profit after tax rose by 481% to $1.88 billion from $324 million in 2002.
* Earnings per share increased by 478% to 1 104 cents from 191 cents in 2002.
* Assets increased by 178% to $4.96 billion.
* Total Shareholders" funds increased by 94% from $2.0billion in 2002 to $3.88
billion.
* Return on Shareholders" equity increased from16% in 2002 to 48% in 2003.
Total coal and coke sales for the year at 2 777 388 tonnes, were 851 572 tonnes
or 24% lower than the total tonnage sales of 3 628 960 achieved last year.
Individual product performance was as below.
WCC Coal
WCC Coal sales of 854 605 tonnes were 29% below the comparative performance of
the previous year. This was mainly due to the low production capacity. The bulk
of the mining and handling plant and machinery experienced constant breakdowns.
The shortage of imported spares, due to foreign currency constraints, resulted
in low availabilities of the equipment especially during the first half of the
year. However, the situation was arrested in September 2003. A short term
turnaround plan was crafted and the US$5.3million loan secured from Africa
Export Import Bank was utilised to import the spares to rehabilitate the
equipment. As a result, production capacity improved from the 30% in June 2003
to 75% in December 2003. Coal transportation exacerbated the product shortage in
the market.
Customers however, had to use the alternative transportation mode, road freight,
resulting in 49% of WCC coal being moved by this mode as compared to the 21% for
the same period last year. Coal exports amounted to
91 437 tonnes or 4% of annual coal sales. The Zambian market demand continued to
grow.
HPS Coal
HPS coal delivered to Zimbabwe Power Company (ZPC)"s Hwange Power Station
amounted to 1 694 394 tonnes and was 23% below the previous year"s deliveries of
2 207 089 tonnes. This was attributed to the low
production capacity. Deliveries to the Hwange Power Station improved during the
last quarter of the year following the refurbishment of equipment using the
US$5.3 million facility. Further improvements are expected
following the adoption of outsourced mining.
Coke
Coke sales of 228 389 tonnes were 2% above the 224 111 tonnes achieved last
year. Overall performance was satisfactory, 95% of coke sales were ex-Wankie and
only 5% ex-Zisco whereas in 2002, it was 89% and 11% respectively.
Coke exports for the year were 127 806 tonnes and accounted for 56% of annual
coke sales. This value added product continues to be in high demand in the
ferrochrome industry in South Africa. Increased capacity and coal deliveries are
expected when 3 Main Underground mine comes on stream mid year. This would
enable the company to meet local demand and increase exports.
Coke Oven Gas
3 3
Gas supply to ZPC"s Hwange Power Station decreased by 88% from the previous
year"s 24 260 240 Nm to 3 030 190 Nm . During the year, there were insufficient
deliveries of gas to ZPC because the company was replacing the 4km long gas
pipeline which had many leaks. Gas normally contributes about 3% of turnover
hence the impact on turnover was relatively moderate. During the year gas
constituted 0.03% of turnover because of a combination of low volumes and a very
low price.
FINANCIAL RESULTS
The company continued to comply 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 Zimbabwean
dollar.
Historical Cost Accounting Results
Performance for the year was satisfactory despite the difficulties the company
faced. Turnover at $54 310 740 000 was 544% above the previous year"s turnover
of $8 434 407 000. This was a result of price increases effected between May and
December 2003 coupled with the devaluation of the Zimbabwean dollar in March
2003. These enabled the company to cope with inflation hence keeping the company
viable. The second half of the year posted better results than the first six
months because of the efforts by the Board and management.
An operating profit of $4 577 751 000 was realised during the year and this
represented an increase of 13 770% when compared with last year"s operating
profit of $33 810 000. The gross profit percentage achieved during the year at
34% was the highest in five years and was largely attributable to cost control
and price adjustments. The operating profit would have been significantly higher
had the company not written off $8 billion on gas loans and incurred gas
penalties of $5.4 billion to the Zimbabwe Power Company (ZPC). Gas was sold at a
loss because of the unviable low gas price. The company is now in the process of
concluding negotiations with
ZPC to review the gas supply contract.
For the greater part of the year, the company benefited from the relatively low
interest rate regime but these soared to unprecedented levels of above 800%
towards the end of the year. This inflated the cost of borrowing against
shrinking interest received from outstanding debtors resulting in an overall
charge for finance costs for the year of $1 691 609 000 as compared to last
year"s positive net interest of $434 128 000. The interest charged on debtors
has been reviewed to always be in line with the cost of borrowing.
Provision for Zimbabwe corporate tax payable was $1 007 171 000. The company"s
net profit after tax of $1 878 971 000 represented a 481% increase compared with
last year"s profit of $323 500 000.00.
Fixed assets and investments increased by 61% from last year"s $1 784 744 000 to
$4 962 580 000. The increase is due to additions of $2 892 593 000 during the
year which included the $976 000 000 for the primary coal breaker and $207 000
000 for conveyor belting.
The company secured a US$5.3 million facility from African Export Import Bank
for opencast equipment rehabilitation. The Commonwealth Development Corporation
and West LB offshore l oans were revalued following the devaluation of local
currency and converted at a rate of GBP 1. 00 = Z$1 509. 27. An exchange loss of
$8billion was recorded.
Inflation Adjusted Accounting Results.
Historical cost figures were re-stated using the consumer price index to reflect
the changes in the general purchasing power of the Zimbabwean dollar.
Organisations such as Wankie Colliery Company Limited, which have a large asset
base and have been operating for a very long time, unfortunately have to effect
large inflation adjusted depreciation charges. A $8 636 360 net monetary gain
was made as compared to the net monetary loss of $11 015 170 000 for last year.
Therefore in current cost terms, the company realised a loss before taxation of
$9 150 835 000 as compared to a loss of $50 614 957 000 for the same period the
previous year.
The company recorded a net loss after tax of $5 928 107 000 compared to the loss
of $39 434 155 000 realised for the same period the previous year.
DIVIDEND
In light of the current operating environment, your Board has felt it prudent
not to consider payment of a dividend. The Board recognises that shareholders
have not received dividends for the past 5 years. Efforts are in place to put
this to an end and afford the shareholders a fair return on their investment.
The current major focus will be to recapitalise the company and upgrade
production capacity and efficiences which should result in increased
profitability.
SAFETY HEALTH AND ENVIRONMENT
There were no fatalities during the year. The number of accidents increased by
11% from the previous year. This marked a very significant increase in the total
number of accidents when compared to a 31% reduction in the previous period. The
zero tolerance safety programme which was launched during the previous year
continued to be emphasised. The company invested in environmental monitoring
equipment to assist timely collection and analysis of air and water samples. The
quality of surface water in public streams and ground water quality in boreholes
remained good throughout the year and there was no incident of severe water
pollution.
The HIV and AIDS pandemic continued to adversely affect our workforce and
operations. Education campaigns targeted at the workforce and the community
continued to be carried out during the year to raise level of awareness on good,
moral and safe behavior.
OUTLOOK
When the new Board assumed office, a turnaround plan was put in place with the
objective of restoring production capacity. Further to this short term plan, the
Board, management and the workers" representatives met and came up with a
strategic plan. The vision, mission and values were redefined. Key strategic
objectives agreed on were: rationalisation of the organisational structure and
manpower levels, re-orientation of the organisational culture, increase in
production volumes to design capacity, reduction of costs and safety, health and
environmental awareness.
Consequent to the above, a restructuring exercise was commenced in order to
align the organisation with the new strategies. This is already showing positive
results.
The strategic orientation to revitalise the company will focus on increased
production volumes and consolidation of core coal and coke products, stringent
cost management, rationalisation of organisational structure, culture
transformation and creation of a safe and environmentally sensitive workplace. A
drive towards efficiency has been launched.
The production of quality coal and coke to both domestic and export markets will
be enhanced in 2004. The company has taken interest in final product prices to
the end consumers to guard against overpricing in the value chain. This is
important in light of the mushrooming competition.
Transportation of coal should be relatively eased following the different
arrangements which some major customers entered into with National Railways of
Zimbabwe, to refurbish wagons and hire locomotives from South Africa. Road
freight would continue to be the alternative mode of transport. The company has
now actively engaged coal merchants, transport service providers and other
stakeholders in an effort to give value to the customers. This has already
showed positive results including an improvement in company image.
The feasibility studies for the new 3 Main Underground Mine project and for the
Coke Oven Expansion project were done. Mining operations at the new mine would
commence in the second half of 2004 using the available facilities. The bulk of
the project scope of work will be executed concurrently with mining. Offshore
funding for the two projects is expected to be secured though not at initially
forecast levels. The company will this year focus on increasing the percentage
of exports in order to increase its capacity to meet significant amounts of
foreign currency requirements.
The Monetary Policy announced by the Reserve Bank Governor on 18 December 2003
presents the company with opportunities to access the requisite foreign currency
through the auction system. The productive sector facility presents an
opportunity to source low cost resources to boost production capacity and this
is being pursued. The export incentive schemes prescribed would augment the
company"s effort to increase foreign currency generation. Furthermore, the
company intends to seek Reserve Bank approval to bill, in foreign currency, some
of the customers who export their products.
The year 2004 should see the company achieve its strategic objectives and
meeting all stakeholder expectations.
APPRECIATION
The Managing Director, Mr Obadiah Kudzaishe Bwerinofa passed away in October
2003. On behalf of the Board, management and staff I would once again express
our heartfelt condolences to the Bwerinofa family. His valuable contributions
over the many years are greatly appreciated. Dr Godfrey Dzinomwa was
subsequently recruited to the position of Managing Director to commence work on
01 January 2004. We welcome him on board and have the full confidence he will
drive the company"s turnaround programmes.
I would like to express sincere appreciation to my fellow Directors whose
demonstrated hard work and commitment since joining the Board, enabled the
company to meet its challenges and position itself for future prosperity. On
behalf of WCCL, we would sincerely thank our predecessors, Mr Kudenga and his
Board for their valuable services to the company over the years.
Lastly, I wish to thank management and all employees for the demonstrated
hardwork, loyalty and commitment during trying periods. The Board relies on this
smart partnership for the success of the company. I would also want to record my
appreciation of the support we have received from our shareholders especially
the Government, and from our customers, suppliers and the general public.
Eng. M. T. A. Mutezo 16 MARCH 2004
CHAIRMAN HARARE
DIRECTORS: M.T. A MUTEZO (CHAIRMAN), DR. G. DZINOMWA (MANAGING), F. CHASI, J.
GOROMONZI, S. GULA-NDEBELE, T. KWASHIRAI, G.S MLILO, DR M. NCUBE, J. NQINDI
Date: 01/04/2004 07:55:12 AM Produced by the JSE SENS Department
