Legacy debts weigh on Hwange Colliery profits

19 May, 2022 - 00:05 0 Views
Legacy debts weigh on Hwange Colliery profits

eBusiness Weekly

Tapiwanashe Mangwiro

The country’s largest coal miner and Zimbabwe Stock Exchange listed Hwange Colliery Company (Hwange), says legacy debts weighed on its profitability due to exchange rate related issues, the firm said this in a statement accompanying 2021 full year financial results.

The company, which is still under administration, said legacy debts contributed $904 million of unrealised losses as it went on to post a net profit of $28.6 million.

“Gross profit increased by 26 percent from $1.6 billion prior year to $2.1 billion in inflation adjusted terms this year. The company posted a net profit of $28.6 million during the year from $2.7 billion (in the same period last year) and the decrease was mostly attributed to exchange rate impact on legacy debts,” the administrator said.

In the period under review, revenue was up 31 percent to $9.4 billion from $7.2 billion in 2020, with 3 percent coming from sales to the Southern Africa region. Hwange attributed the rise in revenue to a combination of an increase in sales of high value coking coal and regular product price adjustments done during the year in line with market value.

In 2021, total coal mined by open cast operations was 1 804 663 tonnes, a 53 percent increase in production from the previous year. In the same period, a total of 733,102 tonnes of coal was delivered to Hwange Power Station during the course of the year, which was an increase of 11 percent from previous year.

Deliveries into the power station were, however, negatively affected by plant challenges in the power station and limited stock holding space.

In 2021, Hwange had its focus on increasing production and sales of high value coking coal as it has a great export value.

The company said; “Raw coking coal and clean coking coal sales increased by 226 percent from 63 294 tonnes in 2020 to 206 564 tonnes in 2021. The coking coal sales volumes were, however, limited by washing capacity constraints and the company redressed it by recommissioning a washing plant during the period under review.”

As a result of targeting increased revenue, the coal miner has decided to operate the once closed beehive coke ovens as they have seen opportunity to restart exports in the current financial year.

“The company has engaged a contractor to resuscitate beehive coke ovens to produce high value foundry coke with high demand in the export market. The production is targeted to commence during the first quarter of 2022, and will generate about US$3,4 million in 2022,” the company said in the statement.

In the year, operations were negatively affected by the prevalence of Covid-19 pandemic, depressed cash-flows to import spares and consumables as well as the depressed market for NPD (nuts, peas and duff) and Duff products.

Going forward, Hwange said it is targeting to increase coking coal production and sales, which will in turn increase capacity to discharge obligations to creditors as well as create a positive balance sheet in the medium term.

According to the company the operating economic environment for the year under review was fairly stable, with some price discovery challenges affecting the company’s input costs and profitability. However, despite these challenges, the market was buoyed by a strong demand for both thermal and coking coal that positively pushed sales.

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