Home » Business » Hwange Slumps to Heavy Loss

HWANGE Colliery Company Ltd has posted a steep loss in 2013 but says it will overturn the position in the short term given the g operational base attributable to recapitalisation and contractor capacity. After recapitalising the business to the tune of $35 million, a new forecast of $70 million has been set for the short term,” chairman Mr Farai Mutamangira said in a statement accompanying financials for 2013.

This is in addition to a $50 million shareholder loan being pursued which could materialise by the end of second quarter.

Monthly additional capacity of 200 000 tonnes will also be derived from Mota Engil which was given a portion to mine.

“The company’s current initiatives will no doubt overturn the loss position, and return to profitability in the short term,” said Mr Mutamangira.

The country’s largest coal miner reported a full year net loss of $30,8 million from a $3,1 million profit in 2012, after revenue plunged due to low production while cost of sales jumped.

Net sales were down to $71,5 million from $104,2 million reported a year earlier. Sales volumes declined 176 percent to 1,60 million tonnes from two million tonnes, led by a steep decline in coal and coking coal output.

Also impacting on revenue was a 57 percent decline in coke and breeze exports after its customers in the Democratic Republic of Congo stopped operations, this was compounded by influx of cheaper imports from China.

Cost of sales increased to $90 million from $65 million a year earlier. Borrowings declined to $19,4 million from $31 million because of the limited debt serving of some loans. Trade payables increased due to reliance on creditors to finance operations.

“Some of the creditors have litigated against the company and agreements were negotiated and are currently being implemented. This risk has been managed effectively such that the impact on the company’s ability to continue as going concern is minimal,” he said.

Hwange said 2013 had been a challenging year, as coke and coal prices decline by an average 19 percent due to the prevailing liquidity constraints and difficulties in securing lines and credit to recapitalise.

Coal supplied to Zimbabwe Power Company rose by 3 percent to 894 659 tonnes. This coal grade contributed about 57 percent to overall sales volumes but its contribution to total revenue was 35 percent.

Coal sales volumes was down from 546 264 tonnes from 393 498 tonnes due to decline in demand as the fall in capacity utilisation of

the productive sectors that consumes the product declined from 44 percent to 39 percent.

Coal fines sales volumes decreased to 201 610 tonnes from 233 453 tonnes. The low off take of coke, local and exported resulted coke sales, including breeze declined from 228 201 tonnes from 82 510 tonnes.

Apart from recapitalisation and additional capacity from the contractor, profitability will be influenced by anticipated increase in demand on both local and export markets, which is expected to firm in the second half and the ability of the management to rationalise operations and the overheads.

“The product mix will be configured in favour of high contributions of coal and coke grades,” said Mr Mutamangira.

Hwange also expects to be allocated new concessions to boost the life of the mine and attract new investment. The company said it has completed recruitment process of a substantive managing director, following the departure of Mr Fred Moyo, now Mines and Mining Development deputy minister in 2012.

It now awaits Government formalities and a non executive, Mr Jemister Chininga is the acting managing director.

Source : The Herald