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Mernat Mafirakurewa Business Editor
Hwange Colliery Company Limited (HCCL) plans to retrench at least half of its more than 3,200 workers in the second half of the year and hopes to conclude two loan facilities worth $33,5 million at the end of the month to recapitalise its operations.In June 2012 the company retrenched 304 employees.
In an update to shareholders yesterday, HCCL board chairperson Farai Mutamangira said the company would implement a raft of measures aimed at turning around the fortunes of the beleaguered giant.
As part of efforts to make it profitable, the company will be unbundled into six Strategic Business Units (SBU’s) – Hwange Colliery Holdings, Hwange Coal Mining, Hwange Plant and Equipment, Hwange Coal Processing and Cokeworks, Hwange Hospital and Hwange Properties & Estates.
HCCL also plans to resize senior management positions and appoint a chief operating officer. A consultant has already been engaged to rationalise costs.
“. . . Staff rationalisation aimed at reducing staff complement by 50 percent of current and also reducing the wage bill by 50 percent. The retrenchment packages will be amortised against non-core assets and deferred financial instruments,” said Mutamangira.
“The objective is to ensure that these divisions/SBU’s are profitable as units and further seeking that they raise capital on the basis for their own balance sheets.
“Low current ratio balance sheet restructuring will be carried out to convert $100 million of short-term debt to long-term debt and enable the company to meet its current obligations.”
Hwange Colliery is one of the key companies in the economy as coal is a vital source of energy.
The company recently turned down a $50 million loan offer from businessman Nicholas Van Hoogstraten through his investment vehicle – Willoughby – meant to recapitalise the business.
Willoughby’s wanted exclusive management control for an initial five years.
“At the end of May 2014, the company is looking forward to closing additional recapitalisation transactions to the sum of $33,5 million as follows: $15 million BEML/Eximbank of India facility and $18,5 million BELAZ/PTA bank facility,” said Mutamangira.
The new loan facilities come after negotiations for a $100 million loan facility from the Development Bank of Southern Africa spanning over a four-year period failed to materialise.
Operations of HCCL, Mutamangira said, remained constrained with the company producing 200,000 tonnes of coal against an envisaged 500,000 tonnes.
“The target for HCCL is to produce 450,000 to 500,000 tonnes of coal per month. This will assure HCCL of a monthly turnover of not less than $18 million.
“At this level, and assuming costs are contained below $9 million a month, HCCL will have sufficient turnover and gross margin to not only grow the business but also service its legacy debt which currently stands at about $150 million,” added Mutamangira. He said going forward the company’s long-term recapitalisation strategy would be anchored on securing significant debt and/or equity injection in the estimated sum of $150 million, to bring about a complete turnaround of operations.
As at December 2013 the company’s debt stood at $172 million.
Online Reporter