Hardboard manufacturer, Evowood (formerly Masonite), has unfortunately had to dismiss 434 workers at its Estcourt mill in the wake of protracted strike action.
Louis Marais, the chief executive of Evowood, confirmed that the Labour Court issued an interim court order preventing employees from continuing an illegal strike on Monday 27 February 2017. On Friday 10 March 2017, the court issued the final order.
He explains that the company has acted on the findings of an independent commissioner and on 15 March 2017 issued a notice to dismiss 434 workers following a disciplinary process related to the illegal strike that brought production to a halt three weeks ago.
Despite the disruption at the mill, Evowood’s head office, regional branches, and distribution centres remain fully operational and contingency plans are in place to minimise the impact of the production stoppage on valued customers and suppliers.
The present production stoppage is costing the company more than R2-million per day and the accrued costs may prove a major setback in the implementation of a wide-ranging business turnaround strategy aimed at returning the company to profitability.
At present, shareholders are negotiating with all affected stakeholders and examining all possible options to resume production at the mill as soon as possible.
Marais explains that the Masonite mill was on the brink of closure in December 2015 when a Black Empowerment consortium comprising Black Bird Capital and Jacobs Capital bought it. The shareholders, who brought the company out of business rescue and took control in August 2016, conducted an extensive due diligence investigation to put in place a comprehensive business plan that would not only turn around the business but also create a sustainable long term future for it.
This strategic plan entails upgrading the equipment, rebranding the company as Evowood and controlling spiralling costs at the mill.
“Our turnaround plan included injecting capital into the business in the short-term and a long-term capital investment programme to enable the company to reach its full potential through improving processes, products and service. However, we always recognised that no plan would be viable if all stakeholders did not come to the table to help us to rebuild the company,” explains Nkosinathi Nhlangulela, a director of majority shareholder, Black Bird Capital.
Because the overall cost structure of the mill was not aligned with the long-term viability of the business, cutting costs, and improving efficiencies formed a key part of the turnaround plan for the business.
After a lengthy negotiation process, the workforce signed an agreement on 29 November 2016. This stipulated a reduction of 12 percent of the basic salary of every employee to be implemented from 1 February 2017.
The formal agreement, signed by all stakeholders, ensured that there would be no retrenchments at the mill. It was concluded to ensure that the shareholders could save all 733 jobs at the company.
The agreement also provided for a minimum seven percent wage increase as per the existing bargaining council agreement. This increase would have been implemented from July 1, 2017.
Considering the entire workforce’s commitment to turning around Evowood, Black Bird Capital and Jacobs Capital invested over R50-million in rebranding the business and upgrading the plant at the mill during December.
However, a faction within the workforce reneged on this agreement, leading to the illegal strike.
With costs building up and now jeopardising the viability of this rescue plan, the company’s shareholders are now investigating longer term options which could include scaling down production at the Estcourt operation and in-sourcing some materials to ensure consistency of supply.
The Evowood mill is one of only 25 large hardboard manufacturing operations and is amongst the top three in the southern hemisphere. It is also South Africa’s only hardboard production facility.
Nhlangulela says the shareholders understand and are concerned that the loss of an operation such as this would be a serious blow to government’s endeavours to boost economic development through the beneficiation of raw materials and the promotion of manufacturing and re-industrialisation.
“We are not taking any decisions lightly as we are aware of the potential negative impact on the local economy. We remain committed to building sustainable businesses and to economic growth in KwaZulu-Natal. Because of this, we are open to continued communication with key stakeholders who can work with us to develop a viable plan,” comments Nhlangulela.
Wessel Jacobs, the chief executive of Jacobs Capital, says the shareholders are weighing up their options to ensure that the customers’ supplies are maintained in the short -erm and to find long term alternatives.
“Our business is to grow ‘built to last’ companies. We invested extensively in this business in December in good faith and have put in place significant operational resources and employed outside consultants to ensure the best outcome for Evowood,” he explains.
Confirming that, without the support of labour, it is impossible to take the process forward, Jacobs says the shareholders remain committed to resolving the impasse.