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HWA
HWHWA
HWA - Hwange Colliery Company - The Company`s Audited Results For The
Financial Year Ended 30 December 2006
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe)
Code: HWA & ISIN: ZW0009011934
THE COMPANY`S AUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 30 DECEMBER 2006
INCOME STATEMENT
INFLATION ADJUSTED
2006 2005
$ $
Revenue 30 969 282 532 35 003 050 809
Cost of sales (15 862 347 193) (25 642 648 993)
Gross profit 15 106 935 339 9 360 401 816
Other operating (loss)/income (1 357 487 178) 4 336 372 849
Fair value adjustment on 10 712 915 974 -
Investment Property
Marketing costs (311 531 005) (205 365 200)
Administrative costs (9 271 850 754) (14 802 115 820)
Gain/(loss) on net monetary 20 448 256 916 (569 684 820)
position
Profit/ 35 327 239 292 (1 880 391 175)
(loss) from operations
Net finance income 4 330 330 306 1 461 096 545
Impairment (loss)/reversal (305 543 461) 1 773 997 307
Profit before taxation 39 352 026 137 1 354 702 677
Taxation (914 744 936) 370 125 602
Profit after taxation 38 437 281 201 1 724 828 279
Cents Cents
Attributable earnings per 21619 975
share
- basic
- diluted 21619 970
Headline earnings/ 21286 2003
(loss) per share
- basic
- diluted 21286 1994
HISTORICAL COST
2006 2005
$ $
Revenue 13 258 615 530 988 933 644
Cost of sales (6 280 319 545) (487 433 603)
Gross profit 6 978 295 985 501 500 041
Other operating (loss)/income (512 479 213) 216 988 869
Fair value adjustment on 11 599 982 120 -
Investment Property
Marketing costs (179 067 423) (5 831 191)
Administrative costs (5 375 134 818) (441 714 422)
Gain/(loss) on net monetary - -
position
Profit/ 12 511 596 651 270 943 297
(loss) from operations
Net finance income 1 069 206 315 59 516 369
Impairment (loss)/reversal - -
Profit before taxation 13 580 802 966 330 459 666
Taxation (3 475 201 955) (65 947 562)
Profit after taxation 10 105 601 011 264 512 104
Cents Cents
Attributable earnings per 5684 149
share
- basic
- diluted 5684 149
Headline earnings/ 5623 150
(loss) per share
- basic
- diluted 5623 149
BALANCE SHEET
INFLATION ADJUSTED
2006 2005
$ $
ASSETS
Non Current Assets
Property, plant and equipment 38 195 672 376 34 625 734 613
Investment property 11 600 000 000 887 084 026
Investments 15 760 174 045 270
Loans receivable in more than - -
one year
49 795 688 136 35 686 863 909
Current Assets
Pre-stripped overburden 18 153 982 999 12 892 589 668
Inventory 28 702 869 906 4 884 409 445
Recoverable foreign currency 4 560 072 400 13 805 104 727
differences
Receivables and prepayments 5 009 926 146 6 473 236 749
Short term loans receivable 22 844 315 502
Bank and cash balances 416 939 421 659 487 630
56 843 813 716 38 715 143 721
Total assets 106 639 501 852 74 402 007 630
EQUITY AND LIABILITIES
Capital and reserves
Share capital 50 933 462 941 50 933 462 941
Capital reserves 25 812 128 110 25 812 128 110
Retained profit/(loss) 2 283 978 845 (36 153 302 356)
79 029 569 896 40 592 288 695
Non current liabilities
PLARP 51 686 483 1 064 693 352
Lease liability 685 825 820 -
Deferred taxation 13 221 337 203 12 306 592 267
13 958 849 506 13 371 285 619
Current liabilities
Overdrafts 118 189 933 -
Bills and acceptance credits - 391 003 993
Loans payable within one year 4 572 293 882 13 973 897 306
PLARP 162 086 699 521 120 446
Lease liability 825 273 661 -
Payables 7 971 643 351 5 400 257 476
Provision for discontinuing - 17 470 783
operation costs
Provision for taxation 1 594 924 134 683 312
13 651 082 450 20 438 433 316
Total equity and liabilities 106 639 501 852 74 402 007 630
HISTORICAL COST
2006 2005
$ $
ASSETS
Non Current Assets
Property, plant and equipment 2 409 350 295 106 799 063
Investment property 11 600 000 000 17 880
Investments 15 760 15 760
Loans receivable in more than - -
one year
14 009 366 055 106 832 703
Current Assets
Pre-stripped overburden 1 986 000 645 172 375 778
Inventory 2 382 220 896 156 849 924
Recoverable foreign currency 4 560 072 400 999 563 300
differences
Receivables and prepayments 5 009 926 146 468 696 907
Short term loans receivable 22 844 22 844
Bank and cash balances 416 939 421 47 750 426
14 355 182 352 1 845 259 179
Total assets 28 364 548 407 1 952 091 882
EQUITY AND LIABILITIES
Capital and reserves
Share capital 177 795 177 795
Capital reserves 5 694 147 5 694 147
Retained profit/(loss) 10 422 998 165 317 397 154
10 428 870 107 323 269 096
Non current liabilities
PLARP 51 686 483 77 089 484
Lease liability 685 825 820 -
Deferred taxation 3 547 083 547 71 881 591
4 284 595 850 148 971 075
Current liabilities
Overdrafts 118 189 933 -
Bills and acceptance credits - 28 310 777
Loans payable within one year 4 572 293 882 1 011 784 784
PLARP 162 086 699 37 731 903
Lease liability 825 273 661 -
Payables 7 971 643 351 391 007 478
Provision for discontinuing - 1 264 978
operation costs
Provision for taxation 1 594 924 9 751 791
13 651 082 450 1 479 851 711
Total equity and liabilities 28 364 548 407 1 952 091 882
CASH FLOW STATEMENT
INFLATION ADJUSTED
2006 2005
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit/(loss) from operations 35 327 239 292 (1 880 391 175)
Non-cash items
- Depreciation 1 886 029 734 8 442 039 329
- Deferred expenditure M-Block (1 264 978) (111 929 548)
written-off
- Fair value adjustment on (10 712 915 974) -
investment property
- Monetary adjustment (18 472 498 657) (15 283 149 881)
Operating cash flow before 8 026 589 417 (8 833 431 275)
changes in working capital
(Increase)/decrease in inventory (29 079 853 793) (2 690 299 794)
Decrease/(Increase) in 9 245 032 327 (7 941 166 175)
recoverable foreign currency
differences
Decrease/(Increase) in 1 463 603 261 3 874 265 454
receivables
Increase/(decrease) in payables 2 553 915 092 (6 481 644 099)
Cash flow utilised in operations (7 790 713 696) (22 072 275 889)
Interest paid (1 971 378 829) (2 491 653 023)
Interest received 6 301 709 135 3 952 749 568
Income tax paid (10 384 360) (169 052 656)
Cash flows utilised from (3 470 767 750) (20 780 232 000)
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of Property, plant and (5 761 510 958) (3 024 678 198)
equipment
Net cash flows from investing (9 232 278 708) (23 804 910 198)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Shares issued - 91 726 660
Increase/(decrease) in loans 9 262 544 559 22 836 537 892
Loans repaid - (619 583 653)
Decrease/(increase) in loans - 7 466 866
receivable
Net cash flows from financing 9 262 544 559 22 316 147 765
activities
Increase/(decrease) in cash and 30 265 851 (1 488 762 433)
cash equivalents
Represented by:
Cash and cash equivalents at 268 483 637 1 757 246 070
beginning of the year
Cash and cash equivalents at end 298 749 488 268 483 637
of the year
Increase/(decrease) in cash and 30 265 851 (1 488 762 433)
cash equivalents
HISTORICAL COST
2006 2005
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit/(loss) from operations 12 511 596 651 270 943 297
Non-cash items
- Depreciation 100 447 189 1 333 688
- Deferred expenditure M- (1 264 978) (101 125)
Block written-off
- Fair value adjustment on (11 599 982 120) -
investment property
- Monetary adjustment - -
Operating cash flow before 1 010 796 742 272 175 860
changes in working capital
(Increase)/decrease in (4 038 995 839) (257 023 022)
inventory
Decrease/(Increase) in (3 560 509 100) (937 656 575)
recoverable foreign currency
differences
Decrease/(Increase) in (4 541 229 239) (359 456 461)
receivables
Increase/(decrease) in 7 580 635 873 265 568 051
payables
Cash flow utilised in (3 549 301 563) (1 016 392 147)
operations
Interest paid (852 087 770) (96 247 296)
Interest received 1 921 294 085 155 763 665
Income tax paid (8 156 866) (2 957 054)
Cash flows utilised from (2 488 252 114) (959 832 832)
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of Property, plant (2 402 998 421) (79 682 004)
and equipment
Net cash flows from investing (4 891 250 535) (1 039 514 836)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Shares issued - 3 084 315
Increase/(decrease) in loans 5 170 560 374 1 048 756 368
Loans repaid - (11 497 085)
Decrease/(increase) in loans - 59 316
receivable
Net cash flows from financing 5 170 560 374 1 040 402 914
activities
Increase/(decrease) in cash 279 309 839 888 078
and cash equivalents
Represented by:
Cash and cash equivalents at 19 439 649 18 551 571
beginning of the year
Cash and cash equivalents at 298 749 488 19 439 649
end of the year
Increase/(decrease) in cash 279 309 839 888 078
and cash equivalents
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2006
INFLATION ADJUSTED
Share Capital Capital Reserves Retained Total
$ $ (loss)/profits $
$
Balance at 50 933 383 389 25 720 481 001 (37 878 130 635) 38 775 733 755
1 January
2005
Profit for - - 1 724 828 279 1 724 828 279
the year
Issue of 79 552 91 647 109 - 91 726 661
share
capital
under the
employee
share
option
scheme
Balance at 50 933 462 941 25 812 128 110 (36 153 302 356) 40 592 288 695
31
December
2005
Balance at 50 933 462 941 25 812 128 110 (36 153 302 356) 40 592 288 695
1 January
2006
Profit for - - 38 437 281 201 38 437 281 201
the year
Balance at 50 933 462 941 25 812 128 110 2 283 978 845 79 029 569 896
31
December
2006
HISTORICAL COST
Share Capital Capital Retained Total
$ Reserves Earnings $
$ $
Balance at 175 998 2 611 629 52 885 050 55 672 677
1 January
2005
Profit for - - 264 512 104 264 512 104
the year
Issue of 1 797 3 082 518 - 3 084 315
share
capital
under the
employee
share
option
scheme
Balances 177 795 5 694 147 317 397 154 323 269 096
at 31
December
2005
Balance at 177 795 5 694 147 317 397 154 323 269 096
1 January
2006
Profit for - - 10 105 601 011 10 105 601 011
the year
Balance at 177 795 5 694 147 10 422 998 165 10 428 870 107
31
December
2006
CHAIRMAN`S STATEMENT
It is my pleasure to present company results for the financial year ended 31
December 2006.
Business Environment
Generally, the year was characterised by a challenging operating environment and
this manifested itself throughout all the company operations.
The year on year inflation increased significantly from 614% at the beginning of
the year to 1281% as at 31 December 2006. Foreign currency availability
remained a challenge and affected the company`s capitalization and plant and
equipment maintenance programmes. There was no movement in the foreign exchange
rate, as expected of a fixed exchange rate system.
The pricing of company products continued under a price monitoring system.
Transportation logistical problems were minimal during the year.
OPERATIONS
The new Chaba Opencast Mine started production in April 2006 and was financed
from internal resources. This new mine was to augment the existing two mines,
JKL Opencast Mine and 3 Main Underground Mine.
The company continued with its capitalization initiatives in order to boost
production capacity. Two state of the art drills were procured from Europe and
two (2) new shuttle cars were acquired from the Republic of South Africa.
The company took delivery of the mining equipment from China North Industries
Corporation of China in October 2006.
TRADING PERFORMANCE
Total coal and coke sales for the year amounting to 2 070 358 tonnes, were 32%
below the total tonnage sales achieved the previous year.
Individual product performance was as shown below.
(i) HCC/HIC Coal
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales of 566 976
tonnes were 32% below the tonnage achieved the previous year.
Coal exports amounted to 41 470 tonnes as compared to 39 067 tonnes for the
previous year, representing a 6% increase. The bulk of the coal exports were
dispatched to the Zambian and Democratic Republic of Congo markets. The northern
market remained buoyant and with opportunities for growth.
(ii) HPS Coal
HPS coal delivered to Zimbabwe Power Company (ZPC)`s Hwange Power Station
amounted to 1 330 553 tonnes and was 34% below the previous year`s deliveries of
2 023 564 tonnes.
(iii) Coke (excluding Breeze)
Coke sales of 174 434 tonnes were 11% below the 196 523 tonnes achieved last
year.
Coke sales accounted for 49.6% of annual turnover.
Coke exports for the year were 73 831 tonnes as compared to 105 927 tonnes
achieved in 2005. Despatches were mainly to the northern markets following a
decreased off take to the South African market. Coke exports accounted for 32%
of annual coke sales.
(iv) Coke Oven Gas
Gas supply to ZPC`s Hwange Power Station was 17 662 576 Nm3 compared to 24 356
880 Nm3 supplied the previous year.
FINANCIAL RESULTS
The company 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 been restated to take
account of changes in the purchasing power of the Zimbabwean dollar.
(i) Historical Cost Accounting Results Performance for the year was
satisfactory despite the challenges faced by the company. Turnover at $ 13.3
billion was above the previous year`s turnover of $ 989 million.
There was a fair value adjustment of $11.6 billion as a result of the
revaluation of investment properties in Harare and Bulawayo. An operating profit
of $ 12.5 billion was realized compared with last year`s operating profit of
$271 million.
The company`s attributable profits were $10.1 billion as compared to the
previous year`s $264 million. The ncrease in profitability was mainly due to the
revaluation of the investment properties. The attributable profits from
operations amounted to $1.5 billion.
Non current assets increased from $106 million to $14 billion following the
acquisitions of plant and equipment for the underground and opencast mines. The
equipment was commissioned in the second half of the year. The revaluation of
the investment properties significantly contributed to this increase.
Current liabilities for the company increased from $1.5 billion to $13.6 billion
(806%) due to short term financing facilities secured on acquisition of the
opencast equipment from China and Europe. The loans from Commonwealth
Development Bank (CDC) and West LB accounted for 36% of current liabilities.
Plans are underway to commence the servicing of the loans during the year 2007.
The company experienced cash flow problems during the year due to late payments
by its major customers, Zimbabwe Iron and Steel Company (ZISCO) and ZESA
Holdings` subsidiary, Zimbabwe Power Company (ZPC). This resulted in trade
creditors accumulating to $8 billion as at the end of the year compared to $391
million payable as at end of 2005. The company sought stakeholders`
interventions for a lasting solution into the future.
(ii) Inflation Adjusted Accounting Results.
The company`s revenue slightly decreased from $35 billion in 2005 to $31 billion
in 2006. The company realized an operating profit of $35 billion as compared to
an operating loss of $1.9 billion for the same period the previous year.
The company recorded a net profit after tax of $38 billion compared to $1.7
billion profit realized for the same period the previous year.
DIVIDEND
The Board has agreed not to consider payment of a dividend in view of the
ongoing capitalization programme currently being pursued by the company.
QUALITY, SAFETY, HEALTH AND ENVIRONMENT
The company successfully went through two (2) ISO 9001:2000 Quality Management
System surveillance audits during the year and continues to be guided by the
standard throughout all the operations.
The safety prevention programmes were given prominence in order to ensure an
accident free working environment. The company had no fatality during the year.
The quality of ground water and surface water in public streams remained good
throughout the year. Incidents of pollution by company activities were not
experienced for the period under review.
The HIV and AIDS education campaigns targeted at the workforce and the community
continued to be carried out during the year to raise the level of awareness on
good, moral and safe behaviour.
OUTLOOK
The refurbishment of the second continuous miner in South Africa would be
priority. This would enable the opening of the second underground mining section
and will boost coking coal production by 100%.
A major refurbishment programme for the opencast mining plant and equipment is
being pursued and this would augment the newly acquired equipment and boost
productivity.
The coal fines recovery project is progressing and this would improve coking
coal availability.
The demand for both coal and coke is expected to remain firm in both the
domestic and export markets. The supplies to the domestic market are expected to
meet demand. The bulk of the coal and coke exports would be targeted to the
Zambia and Democratic Republic of Congo markets.
The way forward for 2007 would be to focus all resources on improving production
volumes through the acquisition of additional new equipment and efficient
utilization of the existing machinery.
Hwange Colliery Company Limited is positive that the initiatives by the Board
and management will yield a sustainable coal and coke supply scenario that would
optimize the returns on shareholders` investment.
DIRECTORATE
The Managing Director, Dr G Dzinomwa resigned from the company and Board at the
end of November 2006. On behalf of the Board, I would like to thank Dr Dzinomwa
for his valuable contributions to Hwange Colliery Company Limited. Mr A Rhuhwaya
was appointed to act as Chief Executive while the recruitment process is
underway.
There has not been any change on the non Executive members of the Board.
APPRECIATON
I would like to express sincere appreciation to my fellow Directors who
throughout the year worked selflessly to ensure the company tackles its
challenges and set Hwange Colliery Company on the growth and prosperity destiny.
The management team and all staff demonstrated commitment consistent with the
company`s endevour to increase production despite a number of challenges. The
partnership that exists between the Board, management and staff is fully
acknowledged. The company also appreciates the support received from all the
stakeholders.
T. Savanhu
Chairman
15 March 2007
BASIC EARNINGS PER SHARE (HISTORICAL COST)
The calculation of basic earnings per share is based on profit after taxation of
$10.1 billion ($264.5 million in 2005) and on 177 795 000 (176 979 000 in 2005)
weighted average ordinary shares in issue during the year.
ANNUAL REPORT AND ACCOUNTS
The annual report and accounts for the year ended 31 December 2006 will be
distributed to members on or before 31 May 2007 and the annual general meeting
will be held on Friday 29 June 2007.
By Order of the Board
T K Ncube
SECRETARY
15 March 2007
Sponsor
Imara Corporate Finance South Africa (Pty) Ltd
22 March 2007
Date: 22/03/2007 17:48:05 Produced by the JSE SENS Department.
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