FOLLOWING the pronouncement by the board chairman of the Hwange Colliery Company Limited (HCCL), Mr Winston Chitando last month that the board had managed to “stop the bleeding of the company” and is gearing to achieve a break-even result in 2017 while forecasting profitability from 2018, skeptics have been questioning whether the board is not daydreaming. In this interview with The Sunday Mail Business (Q), Mr Chitando (A)maintains, using figures, that indeed HCCL is out of the woods and projects exciting times ahead.
Q: In its recent statement, the Hwange Board through you as the chairman, reported that it had managed to stop the company from bleeding with projections of achieving a break-even position in 2017 and returning to profitability in 2018. Some people have been skeptical about these projections. Can you tell us why you are so confident of meeting those seet targets?
A: We have very concrete plans with milestones for the turnaround of HCCL. Just to give you a feel of where we are right now, for the financial; year ended December 2017, HCCL produced 969 153 tonnes of coal, giving an average of 80 000 tonnes of coal per month. For the month of May 2017, we are targeting to achieve over 200 000 tonnes of industrial and thermal coal which is more than double the average of last year. This should increase to over 300 000 tonnes by July which will be at least a 275 percent increase from the average of 2016. In addition, the whole of last year HCCL did not produce any coking coal and coke, which are high margin products.
We are advanced in our milestones to commence underground production in July at an installed capacity of 50 000 tonnes per month. Further, we target to commence coke production in July as well at a rate of 5 000 tonnes per month initially ramping up to 10 000 tonnes per month by end of year. Coke is the high value product after the coking process/ value addition to coking coal from underground mining. The confidence comes from a set of action plans with milestones which have been rolled out to achieve the production targets which l have highlighted.
Q: Hwange has been posting losses over a long period of time and to some people, your projections sound over-ambitious. What is your comment to these people who are doubting your projections?
A: I am not sure what can be done to convenience those doubting our projections. Results will speak for themselves and let’s talk after December 2017 as we give our update on the performance of the company for the 2017 financial year and at the same giving an update on our turnaround plan. The Board is determined to turnaround the company and the turnaround strategy is in full swing.
Q: Over the years, we have witnessed several court actions by various creditors including employees to have the asserts of the company attached. There have also been court actions to have the company placed under judicial management and in some cases to have the company liquidated. Tell us how you have stopped these actions?
A: Results of the Scheme of Arrangement were published on May 4, 2017. Through this Scheme, all creditors will now be paid in a coordinated manner.
Q: What is your message to those people who have been calling on the company to be put under judicial management and to be liquidated?
A: Following the Scheme of Arrangement which is part of the turnaround strategy being rolled out there is no basis of talking about judicial management or liquidation.
Q: Can you briefly tell us of the strategic importance of Hwange Colliery to the country’s efforts to turnaround the economy?
A: HCCL is the economic engine of Hwange town and one of the largest mining set ups in the country. It supplies thermal coal for electricity generation and is at the centre of expansion at the Hwange Power Station and the establishment of a Power Station by PER Lusulu in Milibizi. There are a large number of customers for industrial coal which include the tobacco sector. A number of customers have had to import coking coal and coke during the time HCCL has been unable to provide product straining the country’s foreign currency situation. From July HCCL will start supplying coking coal and coke. Once the coke oven battery is rebuilt, the gas generated will be used as a substitute for diesel used at Hwange Power Station. In addition, by-products such as benzole and tar will provide the much needed ingredients to Zimchem Refineries in Kwekwe to produce paint products and bitumen. We are looking at signing an MOU with a partner to explore the possibility of generating fuel from coal. The potential impact of HCCL on the economy is absolutely immense.
Q: For the board to stop the bleeding, to project a break-even point in 2017 and returning to profitability in 2018, it needs the support of other stakeholders. Can you briefly tell us of the support you have been having from different stakeholders in implementing your turnaround strategy?
A: Firstly I would like to acknowledge the tremendous support we have received from the Government which is also a major Shareholder as well as from the RBZ. Secondly the support from the community, our creditors and the workforce which is the most important resource. The Hwange management has worked very hard in the process of coming up with a turnaround strategy and together with the “Scheme team”, in managing the whole process of coming up with the Scheme of Arrangement and getting the necessary approvals.
Q: In implementing your turnaround strategy, you obviously had to make tough and painful decisions that affected quite a number of people, especially the workers. Tell us about these decisions and how you manage to keep the workforce motivated under the circumstances?
A: There are three major decisions the Board had to make affecting the workforce. The first was the reduction by 30 percent in the number of managerial employees. The second was a review of human resource policies to ensure that the cost of employment is affordable and comparable to other mining companies. Thirdly, HCCL is currently going through a voluntary retrenchment exercise. All these decisions, whilst painful, were meant to ensure that the company is viable thus enabling it to play its role in the economy as outlined earlier, for the benefit of all stakeholders. Close interactions will continue with the workforce to ensure that “Team Hwange” continues to work together for the achievement of the turnaround strategy.
Q: There have been accusations that politics has over the years stalled the performance of Hwange Colliery. Tell us how you have managed to circumvent this challenge?
A: There is no way I can say that we “have managed to circumvent this challenge” because certainly since I joined the Board last year, we haven’t met this challenge. If anything, what we have achieved so far would not have been possible were it not for the support we have received from the Government.
Q: Many stakeholders are following developments at Hwange with keen interest, what is your promise to these stakeholders going into the future?
A: My promise is that the Board of HCCL is determined to implement the turnaround plan and achieve profitability in 2018. I do not for see anything which will derail the success of the turnaround strategy. I also wish to point out that one of the issues which has negatively affected HCCL financially has been the responsibility of running the town which includes the provision of housing, water and other associated amenities. The strategic plan entails that this should be a business unit which has to provide these services at profit. Though not at optimum levels, the period January to April 2017 has already seen this estates business unit providing these services at a profit due to a number of interventions.