Hwange plots turnaround strategies to address poor performance


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By Byron Mutingwende


Coal-miners, Hwange Colliery Company Limited is implementing a raft of measures meant to turnaround its 2016 poor performance. In a statement Thursday, the miner noted with concern its recently released 2016 annual financial results statement on the organisation’s performance published on March 31, 2017.


The low production levels led to decreased sales volumes, negative profit after tax and negative gross profit in the period under review. To that end, the management with the support of the Board was aware of the unsustainability of any further decline and were focused on plans to turnaround the company.


“Measures to effectively turnaround the company are currently in progress. While our last year’s figures project a gloomy outlook, the company wishes to advise that no effort is being spared to address operational constraints and working capital limitations,” Hwange said in a statement.


The coal miners said that the primary critical anchor for the much needed turnaround was the creditors’ scheme of arrangement. To allow for an operating space to implement the holistic and inclusive turnaround plan, the company will be entering into structured payment plans with its creditors after approval at a creditors’ meeting. Then the scheme of arrangement will be submitted to the High Court of Zimbabwe for approval and registration.


The scheme will enable the company to access working capital from financial institutions who have cited the need to address the company’s balance sheet by converting current liabilities (1 year) to medium and long term. Government support is a welcome development through the issuance of treasury bills to essentially support the scheme of arrangement. The scheduled meeting with creditors will take place on 26 April 2017, paving a roadmap for the second anchor, which is increased production.


Hwange Colliery Company is planning to increase production in the open pit operations. Management interventions are underway to make the mining equipment more reliable and available for operations so that production will increase to 100 000 tons a month in mid-year 2017.


In addition, resuscitation of underground mining will contribute high value coking coal to the production mix by mid-year this year. The continuous miner equipment that had a major break down in August 2015 is undergoing major refurbishment commencing this month. The exercise is expected to take about three months to complete.


The managing director, Thomas Makore said that the mining contractor Mota-Engil has resumed mining operations and expected to reach 200 000 tons a month in production output by mid-year 2017. On negative gross profit, Makore added, “We also had to look at our cost structure, we started in 2016 by reducing our management structure by 30 per cent. In addition, in October last year up to early April 2017 the mine embarked on a two weeks staff rotation programme to contain costs and align them to current activities.”


The costs of employment and human resources policies and benefits have been benchmarked with companies across the mining sector. This will result in cost saving and a competitive cost per ton taking into consideration that the company is no longer a monopoly in the coal mining business in Zimbabwe.


“As we ramp up production it is important that we align our initiatives with those of transport operators such as National Railways of Zimbabwe and road transport carriers for coal products to move to customers on time. As part of our turnaround plan, we also have a thrust to increase export volumes of coking coal from underground operations and industrial coal to Zambia, and later on to South Africa and Democratic Republic of Congo.”


Beyond rhetoric, these are part of the cocktail of actions and measures being taken to turnaround Hwange Colliery Company Limited and to ensure the permanent and sustainable turnaround is premised on increased production, productivity and cost reduction.