Hwange Colliery Company Limited FY2012 results

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Hwange Colliery Company Limited FY2012 results

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Hwange Colliery Company Limited FY2012 results

  1. 1. Audited Results for the Year Ended 31 December 2012 INTRODUCTION On behalf of the Board of Directors, it gives me pleasure great to present the audited financial results for Hwange Colliery Company Limited for the year ended 31 December 2012. I note that this is my first performance review for a calendar year following inauguration of the current Board of Directors in August 2011 which on assuming office, set itself the following broad goals; • To recapitalize the Company so as to improve production, and • Improve Company profitability through rationalising of operations. OPERATING ENVIRONMENT The operating environment continued to pose challenges and some opportunities to the Company. The continued stagnation of the global economy had an adverse effect on the national economy. The commodity prices, for coal and coke significantly declined and was affected by demand in ferroalloys and steel products. The liquidity crunch prevailing on the local and global economies militated on the short term plans that the Company had to recapitalise its operations. Foreign lines of credit continued to be elusive and the local banks remained illiquid and thus unable to avail any meaningful credit. Consequently borrowings costs remained high and all facilities remained short term and not compatible with the Company’s operating model. The annual inflation for 2012 at 2.91% was lower than the 4.9% in 2011 implying stability in prices of inputs. The national economy registered a 4.4% growth. This had the positive effect on demand for coal which firmed up during the period under review. The South African rand declined against the United States dollar in 2012 presenting opportunities for costs reduction on imported spares and consumables. Coal demand on the domestic market remained the anchor of the business driven by improvements in the manufacturing and agricultural sectors. Coke export sales to SouthAfrican and Northern markets, in the first half of the year were much higher than the second half. After July 2012, the market saw a reduction in off take by the major metallurgical customers citing huge stockpiles. Recapitalisation The Company managed to conclude and structure mining equipment supplier facilities worth USD 32.0 million from original equipment manufacturers. This was after the Company flighted local and international tenders. The Company has already paid some substantial deposits for new equipment, the delivery of which is expected by the end of June 2013. All payments for equipment have been funded from internally generated resources. PERFORMANCE RESULTS Sales statistics Product 2012 (METRIC TONNES) 2011 (METRIC TONNES) HPS coal 901 480 1 450 230 HCC/HIC coal 546 264 815 538 Coal Fines 233 453 190 974 Total Coal 1 681 197 2 456 743 Coke (Incl breeze) 228 201 74 877 TOTAL 1 909 398 2 531 620 The company’s sales volumes decreased by 25%, owing largely to the unprecedented reduced off-take of coal by Zimbabwe Power Company (ZPC) in the first half of the year by over 70% between February 2012 and June 2012 .Total coal and coke sales for the year at 1 909 398 tonnes were consequently lower than the 2 531 620 tonnes sold in 2011. The production continued to be affected by the major mining equipment currently operating beyond economic life and often breaking down and attracting substantial maintenance costs. The Company acquired mining equipment valued at USD 6.35 million from South Africa, through a short term funding facility structured with a major customer. The equipment was fully commissioned in December 2012 and has significantly improved production at the Chaba pit where it was deployed. Export sales increased by 28% to 260 803 tonnes against 203 096 tonnes for the previous year. HPS coal supplied to ZPC’s Hwange Power Station accounted for 54% of coal sold in 2012. The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales were the major contributors to revenue for the year. The 546 264 tonnes sold were lower than the tonnage achieved the previous year. Coal fines sold at 233 453 tonnes were 22% above the 190 974 tonnes sold the previous year. Coke sales, including breeze, amounted to 228 201 tonnes and this was 205% above the tonnes sold in the previous year. The bulk of the coke sales were to South Africa and Zambia FINANCIAL PERFORMANCE The turnover for the year was USD 104.2 million as compared to the USD 107.9 million achieved in the previous year. Export revenue of USD 26.1 million accounted for 25% of turnover for the year compared to USD 13.4 million (12% of turnover) for the previous year. The export revenue is expected to continue to grow given the anticipated increase in production volumes as the Company takes delivery of new equipment. Gross profit percentage increased to 39% compared to the 33% for the same period last year. This was attributed to successful cost cutting measures implemented by the Board coupled with the rationalisation of all contractor activities to optimise on efficiencies and the re-pricing of contractor charges. Profit from operations increased by 73% from USD 4.1 million in 2011 to USD 7.1 million in 2012. The net profit for the year ended 31 December 2012 was USD 3.1 million compared to USD 3.9 million achieved during the same period in 2011. Total additions to property, plant and equipment amounted to USD 10.8 million as compared to USD 11.0 million for 2011. This was mainly a result of the acquisition of mining equipment. DEBT REDEMPTION Borrowings amounted to USD 31.6 million. The loans have been rescheduled to periods of up to twenty four (24) months and currently being serviced through ring fencing of specific customers. Borrowings with amounts of USD 1 million and below were currently being liquidated on the basis of arrangements with lenders. The permanent remedy to the debt situation will yield automatically when production volumes increase to achieve the targeted design capacity. The incremental revenue is expected to retire most of the overdue trade creditors. In the absence of medium to long term financing structures in the market, the company had been financing some of its recapitalisation through working capital. Going forward, there will be focus on project finance with a view to unlocking any working capital to service current liabilities. 1 of 2 INDIGENISATION The Company is compliant with Indigenisation and Economic Empowerment (Regulations) 2010. The Company also participated in the Hwange District Community Share Ownership Scheme launched in October 2012 by His Excellency the President of the Republic of Zimbabwe. DIVIDEND In light of the recapitalisation and retooling exercise, the Board has resolved not to consider declaration of a dividend in order to channel available resources to the acquisition of new equipment. QUALITY, SAFETY, HEALTH AND ENVIRONMENT The company successfully went through another ISO 9001:2008 Quality Management System re-certification audit by the Standards Association of Zimbabwe (SAZ). The company’s safety programmes are sound and enable the Company achieve an accident free working environment. There has been no fatality for the past six (6) years. Rehabilitation of the mined out areas at the opencast mines is still in abeyance but adequate provisions for costs have been recognised in the financial statements. The company had no new incident of acid mine drainage pollution into the environment. The project undertaken to mitigate acid mine drainage was dealing with the issue proactively. The company has diversified health delivery system and public health programmes to prevent adverse diseases like malaria, cholera and typhoid. The opportunistic infections programme and awareness campaigns were used to manage the HIV and AIDS pandemic. CORPORATE SOCIAL RESPONSIBILITY The Company has a corporate social responsibility policy administered by a Corporate Responsibility Trust. During the year under review the Company built classroom blocks for a secondary school in the community, refurbished one of the nearby rural clinics, funded the provincial educational merit awards and was involved in a number of sporting and recreational activities within the District, Province and at National level. The Company also continued with its programmes centred on the provision of housing and community amenities, administration of six (6) primary schools and one (1) secondary school, running a fully fledged two hundred (200) bed hospital supported by five (5) industrial clinics and undertake weekly rural clinics for Hwange District communities. The apprenticeship, nurses training and graduate learnership programmes remained. STRATEGIC THRUST The Board of Directors’ strategy is to turnaround the fortunes of the Company through a concerted recapitalisation programme blending debt financing and internal resource mobilisation. The Board is reviewing the business model to align the organisation with the operating environment. Rationalisation of operations and overheads will continue. Engagement of credible mining contractors on a short term basis will bridge the gap while awaiting the delivery and commissioning of new equipment. The Company will leverage on its current inventories of coke and coal fines to augment the recapitalisation efforts and also discharge some of the legacy debts. The aggressive marketing of coal and coke into the local and export markets is one of the major strategic objectives for 2013. The company remains troubled by legacy debts accumulated over the past five (5) years. These debts have been subjected to a forensic audit and when verified, a comprehensive plan to discharge the liabilities will be put in place. In the short term aggressive cost cutting has improved the margins of the company creating the capacity currently being utilised to purchase equipment unassisted by borrowings. In the medium term, the sustainability of the company’s operations lies in increased revenue. In the medium to long term, the company has set its sights on acquiring new coal concessions and the development of new mines in conjunction with strategic investment partners. OUTLOOK The Zimbabwean economy is expected to remain on a growth trajectory with increased activity in power generation, mining, manufacturing and agriculture. The demand for coal is expected to remain firm as evidenced by the order book for both domestic and export markets. The Company has engaged a financial advisory group to spearhead long term finance capital raising to recapitalise operations. The international commodity prices are likely to recover in the second half of 2013. The Company’s prospective overseas markets in Asia and Eastern Europe are hinged on improved offers in terms of FOB or CIF prices. The Company is pursuing additional coal concessions in order to boost its resource and reserves base. DIRECTORATE The Managing Director, Mr. Fred Moyo left the Company on 30 September 2012. Mr Stanford Ndlovu, the General Manager (Finance and Administration) was appointed acting Managing Director while the recruitment process is underway. There were no other changes to the Directorate of the Company. APPRECIATION I would like to thank my fellow Board Members for their commitment and dedication to the affairs of the Company. My appreciation also goes to the management team and staff for their continued commitment and support during the year. On behalf of the Board of Directors, I would like to express my profound gratitude to all the stakeholders for their continued support to the Company. MR. F. MUTAMANGIRA CHAIRMAN 25 March 2013 AUDITORS’ STATEMENT The summary financial statements derived from the audited financial statements of Hwange Colliery Company Limited for the year ended 31 December 2012 are, in all material respects, consistent with those financial statements prepared on the basis described in note 2 to these summary financial statements. The audit opinion on the financial statements is unqualified. There is an emphasis of matter regarding the ability of the company to settle short term obligations. These summary financial statements should be read in conjunction with the complete set of financial statements for the year ended 31 December 2012. The auditors’ report on the financial statements is available for inspection at the company’s registered office. The audited financial statements include unaudited results for the Hwange Coal Gasification Company (Private) Limited (HCGC) for the year ended 31 December 2012 as disclosed in note 15 to these summary financial statements. Grant Thornton Camelsa Chartered Accountants (Zimbabwe) Registered Public Auditors HARARE 26 March 2013 Chairman’s Statement Abridged Statement of Comprehensive Income for the year ended 31 December 2012 2012 2011 Notes USD USD Revenue 104 277 375 107 895 986 Cost of sales (64 036 892) (72 410 017) Gross profit 40 240 483 35 485 969 Other income 835 800 1 074 865 Other gains and losses (356 269) 536 707 Marketing costs (6 018 245) (1 711 550) Administrative costs (27 585 116) (31 255 191) Operating profit 7 116 653 4 130 800 Finance cost (4 187 327) (1 828 594) Share of profit from equity accounted investments 980 509 2 192 887 Profit before income tax 3 909 835 4 495 093 Income tax expense 11 (778 619) (592 831) PROFIT FOR THE YEAR 3 131 216 3 902 262 Other comprehensive income: Gain on revaluation of land and buildings - 41 981 341 Tax effect of revaluation of land and buildings - (2 099 067) Share of other comprehensive income of equity accounted investments, net of tax - - Other comprehensive income for the year, net of tax - 39 882 274 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3 131 216 43 784 536 Attributable earnings per share - Basic 12.1 0.02 0.02 - Diluted 12.2 0.02 0.02 Headline earnings per share - Basic 12.3.1 0.02 0.03 - Diluted 12.3.2 0.02 0.03 Abridged Statement of Financial Position as at 31 December 2012 2012 2011 Notes USD USD ASSETS Non current assets Property, plant and equipment 13 127 346 098 129 367 047 Investment property 14 3 700 000 3 700 000 Investments accounted for using the equity method 15 18 633 455 17 652 946 Intangible assets 2 015 767 2 228 630 151 695 320 152 948 623 Current assets Stripping activity asset 16 4 522 518 7 274 611 Inventories 17 50 861 626 28 996 129 Trade and other receivables 18 47 594 961 24 616 869 Financial assets at fair value through profit or loss 19 2 868 2 868 Cash and cash equivalents 20 1 467 190 1 782 574 104 449 163 62 673 051 Total assets 256 144 483 215 621 674 EQUITY AND LIABILITIES Capital and reserves Share capital 21 45 928 393 45 549 963 Share premium 529 802 - Derived equity 4 358 468 4 358 468 Revaluation reserve 39 948 518 39 948 518 Retained earnings 15 854 722 12 723 506 106 619 903 102 580 455 Non current liabilities Lease liability 22 - 1 469 468 Deferred income tax 24 340 136 23 561 518 24 340 136 25 030 986 Current liabilities Borrowings 23 31 576 915 23 865 057 Trade and other payables 24 85 448 327 56 709 502 Provisions 25 7 082 105 6 358 577 Current income tax liability 1 077 097 1 077 097 125 184 444 88 010 233 Total equity and liabilities 256 144 483 215 621 674 Abridged Statement of Changes in Equity for the year ended 31 December 2012 Share Share Derived Revaluation Retained capital premium equity reserve earnings Total USD USD USD USD USD USD Balance at 1 January 2011 45 549 963 - 4 358 468 66 244 8 821 244 58 795 919 Total comprehensive income for the year - - - 39 882 274 3 902 262 43 784 536 Profit for the year - - - - 3 902 262 3 902 262 Other comprehensive income for the year - - - 39 882 274 - 39 882 274 Balance at 31 December 2011 45 549 963 - 4 358 468 39 948 518 12 723 506 102 580 455 Balance at 1 January 2012 45 549 963 - 4 358 468 39 948 518 12 723 506 102 580 455 Total comprehensive income for the year 378 430 529 802 - - 3 131 216 4 039 448 Profit for the year - - - - 3 131 216 3 131 216 Share option scheme 378 430 529 802 - - - 908 232 Other comprehensive income for the year - - - - - - Balance at 31 December 2012 45 928 393 529 802 4 358 468 39 948 518 15 854 722 106 619 903 Directors: F. Mutamangira (Chairman), N. S. Chibanguza, J. Chininga, I. C. Haruperi, N. Jiyane, S. Mapfuwa (Ms), L. Nkomo, V. Vera
  2. 2. Audited Results for the Year Ended 31 December 2012 2 of 2 Abridged Statement of Cash Flows for the year ended 31 December 2012 2012 2011 Notes USD USD CASH GENERATED FROM OPERATIONS Profit before tax 3 909 835 4 495 093 Adjustment for non-cash items 16 387 289 10 928 395 Operating cash flow before changes in working capital 20 297 124 15 423 488 Changes in working capital (12 629 143) (18 675 128) Cash generated from operating activities 7 667 981 (3 251 640) Finance cost (4 187 327) (1 581 407) Net cash generated from operating activities 3 480 654 (4 833 047) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (3 696 017) (10 965 496) Acquisition of mining rights - (200 000) Acquisition of ERP, other software and development cost - (2 028 630) Net cash flows from investing activities (3 696 017) (13 194 126) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (5 423 874) (8 278 187) Proceeds from loans raised 5 046 371 26 864 083 Net cash flows from financing activities (377 503) 18 585 896 Net decrease in cash and cash equivalents (592 866) 558 723 Cash and cash equivalents at beginning of the year 1 205 998 647 420 Exchange loss on bank balances - (145) Cash and cash equivalents at end of year 20 613 132 1 205 998 Notes to the Abridged Financial Statements for the year ended 31 December 2012 1 General information Hwange Colliery Company Limited is a company that extracts, processes and distributes coal and coke products. The company’s operations are situated at Hwange and markets its products mainly in Zimbabwe, Southern Africa and recently in Asia. The company is a limited liability public company incorporated and domiciled in Zimbabwe. It is listed primarily on the Zimbabwe Stock Exchange (ZSE), and has secondary listings on the Johannesburg (JSE) and London Stock Exchanges (LSE). These summary financial statements were approved for issue by the Board of Directors on Monday 25 March 2013. 2 Basis of preparation of the abridged financial statements The summary financial statements for the year ended 31 December 2012 have been prepared in accordance with IAS 34, ‘Interim Financial Reporting’, and in terms of the Zimbabwe Stock Exchange (ZSE) listing rules and the CompaniesAct (Chapter 24:03). They do not include all of the information required for full annual financial statements and should be read in conjunction with the audited annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards. 3 Statement of compliance In the current year, the Company has adopted amendments to the following International Accounting Standards: (i) Presentation of Items of Other Comprehensive Income (ii) IAS 24 Related Party Transactions (iii) IAS 32 Financial Instruments Presentation (iv) IFRIC 14 Prepayments of a Minimum Funding Requirement (v) IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (vi) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (vii) IFRS 11 Joint Arrangements (IFRS 11) (viii) IFRS 12 Disclosure of Interests in Other Entities (IFRS 12) (ix) IAS 1 Presentation of Financial Statements (IAS 1 Amendments) 4 Accounting policies The financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The accounting policies are consistent with those adopted in the Company’s last annual financial statements. 5 Revenue recognition Revenue comprises revenue from the sale of goods and the rendering of services. Revenue is measured by reference to the fair value of consideration received or receivable by the Company for goods supplied and services provided, excluding sales taxes, rebates, and trade discounts. 6 Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. 7 Property, plant and equipment Freehold land and buildings and plant and machinery are shown at fair value, based on periodic, but at least annual, valuations by external independent valuers’, less subsequent depreciation for buildings. All other property, plant and equipment is stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 8 Depreciation Land, capital work in progress and the stripping activity asset are not depreciated. All other property, plant and equipment are depreciated on a straight line basis or amortised at rates estimated to write-off the cost or valuation of such assets over their expected useful lives. 9 Intangible assets Intangible assets include acquired mining rights and acquired and internally developed software used in production or administration that qualify for recognition as an intangible assets. They are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing. The following useful lives are applied: Mining rights - amortised over the estimated life of coal reserves ERP and other softwares - 3-5 years 10 Stripping activity asset Stripping activity asset represents the cost of overburden removed to expose coal and is capitalised during the course of development. The portion relating to reserves expected to be mined in the next twelve months is transferred to current assets and is charged to cost of production as the coal is mined. 11 Taxation 2012 2011 USD USD 11.1 Income tax expense: Current tax - - Deferred tax 778 619 592 831 778 619 592 831 12 Earnings per share 12.1 Basic Profit attributable to shareholders 3 131 216 3 902 262 Weighted average number of ordinary shares in issue 183 713 570 182 199 850 Basic earnings per share (US cents) 0.02 0.02 Profit used to determine diluted earnings per share 3 131 216 3 902 262 The weighted average number of ordinary shares for the purpose of diluted earnings per share, reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares in issues 182 199 850 182 199 850 Adjustments for share options 1 513 720 - Weighted average number of ordinary shares for diluted earnings per share 183 713 570 182 199 850 12.2 Diluted For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares being share options granted to employees. Basic diluted earnings per share (US cents) 0.02 0.03 12.3 Headline earnings per share Headline earnings per share excludes all items of a capital nature and represents an after tax amount. It is calculated by dividing the headline earnings by the number of shares in issue during the year. There were no items of a capital nature that affected the headline earnings for the year. 12.3.1 Basic headline earnings per share (US cents) 0.02 0.03 12.3.2 Diluted headline earnings per share (US cents) 0.02 0.03 13 Property, plant and equipment Carrying amount at the beginning of the year 129 367 047 88 249 605 Additions 10 803 253 10 965 496 Revaluation gain - 41 981 341 Depreciation charge for the year (12 824 202) (11 829 395) Carrying amount at the end of the year 127 346 098 129 367 047 14 Investment property Valuation at 1 January 3 700 000 3 700 000 Fair value gains (included in other gains and losses) - - At 31 December 3 700 000 3 700 000 15 Investments accounted for using the equity method Investments in associates 1 062 468 1 172 871 Investments in joint venture 17 570 987 16 480 075 18 633 455 17 652 946 Investments in associates Carrying amount as at 1 January 1 172 871 1 312 188 Share of profit / (loss) (110 403) (139 317) Carrying amount as at 31 December 1 062 468 1 172 871 Investment in joint venture Carrying amount as at 1 January 16 480 075 10 523 779 Additional investment - 3 624 092 Share of profit / (loss) 1 090 912 2 332 204 Carrying amount as at 31 December 17 570 987 16 480 075 Hwange Coal Gasification Company (Private) Limited (HCGC) is the only jointly controlled entity. The investment in the joint venture has been accounted for using the equity method. The Company’s share of profit in HCGC for the year ended 31 December 2012 amounting to USD 1 090 912 is unaudited. 16 Stripping activity asset Balance at beginning of year 7 274 611 3 809 866 Current year pre-stripping costs 179 075 18 473 670 Damaged stocks written off - (1 229 874) Costs charged to cost of sales (2 931 168) (13 779 051) Balance at end of year 4 522 518 7 274 611 17 Inventory Raw materials 6 306 706 4 251 796 Consumables 53 956 142 483 Finished goods - Coal 38 006 006 12 650 711 - Coke 6 494 958 11 951 139 50 861 626 28 996 129 18 Trade and other receivables Trade receivables 28 200 541 19 193 142 Allowance for credit losses (2 749 778) ( 467 944) Trade receivables 25 450 763 18 725 198 Other receivables 22 144 198 5 891 671 47 594 961 24 616 869 2012 2011 19 Financial assets at fair value through profit or loss USD USD Listed equity securities - held for trading - Zimbabwe - Fair value as at 1 January 2 868 2 918 - fair value adjustment - (50) Fair value 2 868 2 868 20 Cash and cash equivalents For the purposes of statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows can be reconciled to the related items in the statement of financial position as follows: Bank and cash balances 1 467 190 1 782 574 Bank overdrafts (note 23) (854 058) (576 576) 613 132 1 205 998 21 Share capital Authorised 51 000 000 51 000 000 Issued and fully paid 45 928 393 45 549 963 22 Finance lease liability Finance lease liability 16 059 972 15 057 896 Less: Short term portion (16 059 972) (13 588 428) Long term portion - 1 469 468 23 Borrowings Current Bank overdrafts (note 20) 854 058 576 576 Loans payable within one year 14 662 885 9 700 053 Finance lease liability 16 059 972 13 588 428 Total borrowings 31 576 915 23 865 057 24 Trade and other payables Trade payables 46 104 858 38 257 620 Other payables 39 343 469 18 451 882 85 448 327 56 709 502 25 Provisions Provision for rehabilitation At 1 January 1 893 360 393 360 Charge to the statement of comprehensive income - - Additional provisions made during the year 1 000 000 1 500 000 2 893 360 1 893 360 Other provisions Leave pay provisions 4 188 745 4 465 217 Total provisions 7 082 105 6 358 577 26 Financial risk management objectives and policies The Company’s principal financial liabilities comprise finance lease liabilities, loans payable, bank overdrafts and trade payables. The main purpose of these financial liabilities is to raise finance for the Company’s operations. The Company has various financial assets such as trade receivables and cash and short term deposits, which arise directly from its operations. Exposure to credit, interest rate and currency risk arises in the normal course of Company’s business and these are main risks arising from the Company`s financial instruments. 27 Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Company assumes foreign credit risk only on customers approved by the Board and follows credit review procedures for local credit customers. Investments are allowed only in liquid securities and only with approved financial institutions. At the reporting date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amounts of each financial asset in the statement of financial position. 28 Interest rate risk The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long and short term debt obligations and bank overdrafts. The Company’s policy is to manage its interest cost using a mix of fixed and variable rate debts. 29 Currency risk The Company is exposed to foreign currency risk on transactions that are denominated in a currency other than the United States Dollar. The currency giving rise to this risk is primarily the South African Rand. 30 Liquidity risk Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long- term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. In respect of all monetary assets and liabilities held in currencies other than the United States Dollar, the Company ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. The Company’s exposure to foreign currency changes for all the other currencies is not significant. Annual Report and Financial Statements The annual report and the audited financial statements for the year ended 31 December 2012 will be distributed to members on or before 31 May 2013 and the annual general meeting will be held on Friday 28 June 2013. By Order of the Board T K Ncube SECRETARY 25 March 2013

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