Hwange widens after-tax loss by 80%

BY MISHMA CHAKANYUKA

STRUGGLING coal miner, Hwange, widened its after-tax loss by 80% to US$78,4 million in the year ended December 31, 2018, down from US$43,8 million in the previous year as the company failed to meet market demand and contain rising input costs.

The company was placed under reconstruction last year.

In a statement accompanying the firm’s financial results, company administrator Bekitemba Moyo said the cost of sales increased by 36% due to increased input cost which was driven by the parallel market exchange rate that was being used by most suppliers to charge their products in Real Time Gross Settlement (RTGS).

The company’s administrative costs increased to US$32,3 million from a comparative 2017 of US$25,1 million, while marketing costs decreased from US$1,2 million in 2017 to US$584 800 in 2018.

Revenue for the period was up 27% from US$54,5 million in 2017 to US$69,1 million in 2018 due to an increase in sales volumes from the 1,2 million tonnes recorded in 2017 to 1,5 million tonnes in 2018.

Total sales tonnage was 1,5 million tonnes against a budget of 3,5 million tonnes, compared to 1,3 million tonnes and 3,6 million tonnes respectively recorded in 2017.

Production increased to 1,79 million tonnes in 2018 from 1,2 million tonnes recorded in the prior year.

The company’s monthly production average was 150 000 tonnes compared to the budgeted monthly production of 300 000 tonnes and as a result, the group failed to meet its market demand.

The group’s open cast operation contributed 366 950 tonnes in 2018 representing 20% of the total year-end production while contractor operations contributed 1,2 million tonnes, representing 68% of the total year-end production.

Moyo said the company continued to optimise underground mine operations and managed to do over 35 000 tonnes for the best month, and it is aiming on increasing production to 50 000 tonnes per month.

He said the group was still pursuing its Hwange Coal Gasification Company (HCGC) takeover project.

“The company is still pursuing takeover project of the HCGC coke oven battery pursuant to a BOOT Agreement with its Chinese partners. Engagements remain in place to ensure that this is achieved without placing risk on the company. The company has placed more emphasis and attention on the building of its own coke oven battery, going forward,” Moyo said.

The company is aiming at increasing the volume of high value and high margin coking coal, as well as export sales in 2019.

“Given the deliberate focus on increasing the mix of high value and margin coking coal and coke, the company will grow its market share in the neighbouring countries. Hwange Colliery’s coking coal and coke meet exacting quality specifications in the ferro-chrome industries and smelters,” Moyo said.

“In collaboration with the National Railways of Zimbabwe, the company will develop dedicated solutions for the delivery of coking coal and coke products to customers in the region and within the country.”

Government is the main shareholder, with a 37,1% stake in the company, while British tycoon Nicholas Van Hoogstraten controls about 22% through his investment vehicles Messina Investments, and Hamilton and Hamilton Trustees.

Other major shareholders in Hwange are State-run pension fund, the National Social Security Authority, (6,23%) and Mittal Steel of South Africa (9,68%).

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