By Dumisani Nsingo
Coal-mining giant, Hwange Colliery Company Limited (HCCL) will this week introduce a short working programme where workers will work two weeks per month in all departments, effectively slashing their earnings by half as the company battles to contain costs.
The company has been weighing a number of options to deal with its worrisome balance sheet among them retrenchments, being placed on judicial management, complete privatisation and salary cuts.
HCCL managing director Engineer Thomas Makore said management has settled to reduce the working days per month for each employee to guard against workers losing their jobs.
“We will be implementing a two weeks in two weeks out programme from next week in all departments in order to cut costs and to align our cost structure to our current business activity. Already management took a 50 percent salary cut with effect from April this year,” Eng Makore said last week. The company’s persistent losses have chewed shareholder value, as reflected by a decline in total equity since 2013.
Total equity dropped from $106,62 million recorded in 2012 to a negative $77,83 million in 2015, previous reports indicate.
Shareholders’ equity as reported is now negative at $106 million. Shareholder value as in the reported balance has been wiped out.
The company’s liabilities at $310 million outweigh the $61,4 million assets value by 408 percent, which shows the company is technically insolvent, a state of inability to pay one’s debts. HCCL is saddled with a huge debt overhang of close to $300 million to different creditors who include its workers and suppliers.
In January the Government issued a directive to HCCL to effect a 50 percent salary and allowance cut on its management.
The company’s lowest paid executive had a perk of $6 000 with the top hierarchy getting an additional $600 per day when on out of the country trips.
Makore said the company was unlikely to retrench its workforce stating that the introduction of short-time working periods was likely to go a long way towards reducing costs.
Around 1 500 workers were set to be retrenched in May as part of the company’s restructuring exercise which was meant to cut the annual wage bill by $15 million.
“The issue of down-sizing of the workforce is a matter that needs to be looked at as a last resort. The two weeks in two weeks out programme is one of the measures we are taking as we consider options to reduce our cost base,” said Eng Makore.
Last week the company also reported that it has started to see the effects of cost cutting measures as administrative costs during the half year to June went down by 79 percent to $7,5 million driven by cost containment measures.
It added that it has narrowed its loss by 36 percent to $28 million in the six months to June, from $44 million in the comparable period last year.
However, revenue was down 30 percent to $24,5 million as total sales registered a 15 percent decline to 585 689 tonnes due to working capital constraints. The company chairman, Mr Winston Chitando, said the struggling mine is working on a scheme of arrangement to liquidate amounts owed to creditors and possibly return to profitability. Sunday News