Hwange Colliery revenue down 30pc

Struggling coal miner Hwange Colliery Company Limited’s revenue for the six months to June 2016 fell 30 percent to $24,5 million on low production and sales volumes.

However, Hwange narrowed its loss after tax for the period under review at $22,7 million compared to the $44,1 million loss reported during the same period in the prior year.

The loss was partly a result of challenges experienced with new equipment commissioned in July 2015 which resulted in an increase in the depreciation of assets without corresponding increase in output.

Although the group reduced administrative costs in the period on the back of cost commitment measures, chairman Mr Winston Chitando revealed that Hwange faced capital constraints resulting in its performance falling short of budgetary targets.

Monthly average production was 113 862 tonnes against budgeted monthly production of 340 000 tonnes.

“Consequently, the company could not meet the market demand occasioned by product stock-outs,” said Mr Chitando in a statement accompanying financials.

“The burden of servicing debts continued to strain the company’s cash flows thereby presenting working capital challenges to the company.”

Total sales tonnage for the period was 585 689 against a budget of 1,771 million and an actual of 842 871 for the period.

Coal sales for the period were 35 percent weaker to 211 858 tonnes from 326 075 tonnes sold in the same period last year.

Sales of coal fines and breeze fell 40 percent to 64 413 tonnes while coke sales volumes also weakened 86 percent to 1 040 tonnes.

As at June 30, 2016, Hwange’s total liabilities exceeded total assets resulting in a negative equity position of $106 million from $6,8 million due to recurring losses.

In addition to this, the coal miner was battling litigation cases brought against it during the period under review.

It is anticipated Hwange will turn around its fortunes from a loss position to net profit in financial year 2017 on improved operations and cost reduction initiatives.

Currently, the company is only producing thermal and industrial coal.

Management is upbeat the company will resume underground operations early next year which is expected to result in higher margins from coking coal as well as avail coal for coke production. This achieves the highest margins, according to management.

The resuscitation of this operation requires an estimated $6,3 million for refurbishments of the continuous miner and supply of new equipment. The continuous miner broke down in 2015.

The company is also banking on operations expansion of the Hwange Power Station under stage three which will result in increased demand for coal.

It is envisaged Hwange will supply an additional 200 000 tonnes of coal per month for the power generation purposes.

Meanwhile, Hwange is expected to hold an extra ordinary general meeting within the next two months to seek shareholder approval for conversion of some debts into long term financial instruments.

“The starting point of the turnaround strategy is the implementation of the scheme of arrangement which is at an advanced stage,” said Mr Chitando. The Herald