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Hwange reported a depressed set of financials showing a 37% decline in attributable  earnings to $3.9 million. The poor performance can be attributed to the increase in overhead costs against stagnant production volumes coupled with static prices of products as well as frequent breakdowns of aged equipment.

Total coal sales improved slightly, up 1% to 2,531,620 tonnes. HCC coal sales increased 53% to 815,538 tonnes driven by supplies to urban thermal stations while HPS coal sale declined by 18% to 1,759,095 tonnes as Hwange Power Station had adequate strategic stocks. Revenues thus grew 9% to $107.9 million.  GP margins eased 200 bps to 32% negatively impacted by the change in the sales mix. EBITDA margins declined to 15% from 17% as opex spiked.
 
Cashflows were strained on higher working capital requirements and cash generated from operations turned negative. Net gearing improved to 23% from 47% enhanced by significant (+75%) increase in shareholder funds on revaluation of PPE. The company had a weak current ratio of 0.7x and remains hugely under capitalised.

Local demand is expected to increase as the economy continues to recover. The reopening of New Zim Steel (formerly Ziscosteel) can potentially increase local demand by approximately 30,000 tonnes a month.

A feasibility plan for the coal bed methane gas exploration and extraction project is being worked on and a potential JV partner for the project has been engaged.




The full cost of development is estimated at between $100 million and $500 million.

Hwange has an estimated installed production capacity of 5.0m tonnes p.a. The anticipated regional shortage of power in the next years, as well as growing local demand should see strong demand for coal and related output escalating.


Hwange Financials
Source: Byo24News

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