Is Hwange Colliery on recovery path?

10 May, 2020 - 00:05 0 Views
Is Hwange Colliery on recovery path?

The Sunday Mail

Tawanda Musarurwa
Senior Business Reporter

Notwithstanding protracted boardroom wrangles at Hwange Colliery Company Limited (HCCL), the coal producer appears to be on a slow path to recovery, if its 2019 year-end financials are anything to go by.

HCCL was placed under the administration of Bekithemba Moyo of DBF Capital Partners in October 2018 following a string of losses and default on a Scheme of Arrangement to pay off creditors.

However, the company’s board, whose term had been terminated by operation of law after the issuance of the Reconstruction Order by Government, challenged the decision, and in February this year the High Court ruled in their favour.

Government has since appealed the ruling.

But life goes on for the miner.

HCCL appears to have turned a corner from a loss-making position in 2018 as revenues doubled last year.

Group revenue jumped 105 percent from $429 million in 2018 to $881 million last year on an inflation-adjusted basis.

On historical basis, it increased by 511 percent from $69,1 million in 2018 to $422,2 million in 2019.

“This was largely due to a combination of an increase in high-value coking coal sales, as well as frequent adjustments to product prices in line with changes to the interbank rates, which were introduced in February 2019,” said HCCL administrator Moyo in a statement accompanying the company’s 2019 financials.

The improved revenues had a direct impact on the company’s bottom line.

On a historic cost basis, HCCL’s performance improved from a gross loss of $3,3 million in 2018 to a gross profit of $182 million for the year under review.

But the net loss position rose from $78 million to $91 million due to an exchange loss of $322 million on legacy foreign creditors.

On an inflation-adjusted basis, the performance improved from a gross loss of $21 million and a net loss of $487 million to a gross profit of $422 million and after tax profit of $1,5 billion.

Added the administrator: “Financial performance improved in 2019 against comparable period in 2018 despite decreased production and sales volumes.

“This was largely due to a change in the sales mix, which saw high-value coking coal production and sales going up by 20 percent as well as improved product pricing.

“Production and sales were adversely affected by the shortage of diesel coupled with unavailability of wagons. There was a production gap of 64 percent in total coal mined of 1 013 932 tonnes, compared to sales potential of 2 819 298 tonnes.

“The market remains with a high appetite for our product as evidenced by our 2019 order book.”

In terms of operations, total coal mined by opencast operations totalled 756 279 tonnes, a 52 percent decline in production from the previous year.

Total coal from HCCL pits was 449 454 tonnes, a 22 percent increase in production from 2018, while the contractor Mota Engil mined a total of 306 825 tonnes, which was a 75 percent decline in production.

The coal producer’s underground operation at 3 Main mine produced 268 603 tonnes in 2019, an increase of 37 percent from 2018 production of 196 060 tonnes.

Management attributed the gain to improved operational funding support and the credit facility availed by equipment manufacturer Komatsu SA.

Although the signs from the latest financials show subdued gains, a similar trend was noticeable even before the company was placed under Reconstruction.

For the year ended 2017, HCCL narrowed its losses position by 51 percent to $43,8 million compared to $89,9 million in 2016, driven by lower costs of sales and increased revenues.

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