Hwange Colliery Company (HCC), under administration due to debt, has reported the challenging economic environment in Zimbabwe, particularly the weakening Zimbabwean dollar (ZWL) against the US dollar.
The company announced its mixed results for the quarter ended September 30th, 2023.
The company said despite regulations allowing businesses to charge a 10% premium on ZWL prices, Hwange uses a hybrid pricing model with at least 50% in US dollars. This seemingly reflects the lack of confidence in the local currency.
“Despite the Reserve Bank of Zimbabwe (RBZ) exchange regulations allowing economic agents to charge a 10% margin above the interbank rates when settling ZWL prices, many formal businesses are still benchmarking their local prices above parallel rates.
“However, in response to this the company’s sales prices are a hybrid of the United States Dollar and the Zimbabwean Dollars with the United States Dollars comprising of at least 50% of the selling price,” the company said.
The HCC achieved a pre-tax profit of US$10.2 million, exceeding previous years, it faced a slight drop in coal selling prices. This, combined with constant input costs, squeezed profit margins.
A positive aspect lies in increased production and sales compared to the previous year. This is attributed to machinery acquired earlier in 2023.
Hwange produced 989,503 tonnes and sold 911,245 tonnes of coal in the quarter, nearly double the figures from the same period last year.
Hwange, however, plans to halt underground mining for the next six months due to stockpiles exceeding sales.
This highlights the difficulty in selling coal despite increased production. The company believes existing stock is sufficient to meet operational needs during the stoppage.
The report also reveals a shift in the company’s revenue streams. The mining division, recently mechanized, now contributes 96% of revenue, up from 91% last year. This comes at the expense of the estates and medical divisions, whose contributions have shrunk.
Hwange Colliery’s report reflects the company’s fight to navigate a challenging economic environment in Zimbabwe.
While the company shows signs of progress through increased production and profitability, currency fluctuations and stagnant sales force them to consider a temporary halt in underground mining.
Zimbabwe’s economic woes continue, with American economist and professor of applied economics at the Johns Hopkins University in Baltimore, Maryland, Steve Hanke, this week reporting annual inflation reaching a staggering 1,521%.
The news comes as a heavy blow to a nation already burdened by a fragile economy.