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2015 Annual Report

Published Date: 31st March 2015


I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCM-IH) as a company, and that of its investee companies during the financial year ended 31 March 2015. The performance of ZCCM-IH for the financial year ended 31 March 2015 was underpinned by the development and significant milestones achieved in the 2013/14 financial year, in particular the restructuring of the balance sheet through a Claw-Back rights offer resulting in a strengthened financial position.

The strengthened financial position enabled the company to declare its first dividend from the time of its business transformation in 2000. The dividend was declared in line with the dividend policy that was developed and approved during the 2014/2015 financial year.

Global economy

The January 2016 IMF World Economic Outlook estimated global growth for 2015 to have remained modest at 3.1% at the end of December 2015 (2014: 3.4%). The decline in global growth was attributed to the slowdown and transition in the Chinese economic activity from investment and manufacturing toward consumption and services, lower energy and commodities prices, and the gradual tightening in monetary policy in the United States. Additionally, economic growth in emerging and developing economies declined from 4.6% in 2014 to 4.0% in 2015 while developed economies grew from 1.8% in 2014 to 1.9% in 2015.

The global economic growth was forecasted at 3.4% in 2016, a downward revision from 3.6% forecasted in October 2015, but higher by 0.3% than that achieved in 2015. The increase will be driven by a gradual pickup in growth in emerging and developing economies from 4.0% in 2015 to 4.3% in 2016, and growth in developed economies from 1.9% in 2015 to 2.1% in 2016. The key risks to the forecast is the potential further appreciation of the United States Dollar, further deterioration in the commodities prices and sharper than expected slowdown in China.

The annual GDP growth in Sub-Saharan African declined to 3.5% in 2015 from 5.0% in 2014. For 2016, Sub-Saharan Africa economic growth is estimated at 4.0%. This was a downward revision from 4.3% forecasted in October 2015 due to continued adjustments to lower commodity prices and higher borrowing costs on the continent’s commodity exporters.

Global annual copper production increased by 2.2% at the end of December 2015 to 18.7 million tonnes (2014:8% to 18.3 million). LME copper prices declined by 25.3%, from US$6,289.5 per tonne at the end of December 2014 to US$4,701 per tonne at the end of December 2015.

Domestic Economy

The Zambian economy recorded annual growth of 3.6% in 2015 compared to 4.9% recorded in 2014. The decrease in economic activity was driven by adverse weather conditions; which led to a decline in output in the agriculture sector and power generation and affected productivity in key sectors of the economy. In addition, the increase in fuel prices and the sharp depreciation of the Zambian Kwacha raised input costs, production costs and transportation cost.

Copper production in Zambia was estimated to have risen marginally by 0.5% at 711,515 tonnes (2014: 708,000 tonnes). This was despite the power challenges and falling copper prices on the international market. The increase in copper production was attributed to commencement of production at Kalumbila Mine, owned by First Quantum Minerals, in February 2015.

Financial performance

The Group recorded turnover of K242 million (2014: K1, 001 million) and operating loss of K2,179 million (2014: K871 million profit).

The Group reported a loss before tax of K1,329 million (2014: K362 million profit). The Group recorded a loss after tax of K987 million (2014: K277 million profit). The Group’s share of profit of equity accounted investees’ was K281 million (2014: K537 million loss).

The Group’s retained earnings as at 31 March 2015 were positive at K3,058 million (2014: K4,295 million).The Company’s retained earnings decreased to K512 million (2014: K1,403 million).

Strategic and new investments

Recapitalisation of Ndola Lime Company (NLC)

The recapitalisation project at NLC continued. ZCCM-IH provided an additional shareholder loan of K125 million ( US$16.5 million) for the Ndola Lime Recapitalisation Project. The commissioning of the second Vertical Kiln (“VK-2”) has been delayed and is now targeted for the end of March 2016. Once commissioned, VK-2 is expected to increase production by 500 tonnes per day, which is predominantly expected to substitute the less efficient Rotary Kiln’s capacity of 400 tonnes per day. The use of coal in the VK-2 as opposed to Heavy Fuel Oil (HFO) will greatly enhance the prospects of reducing operating costs and thus make the products competitive.

Nkana Alloy Smelting Company Limited

ZCCM-IH owns 10% of Nkana Alloy Smelting Company Limited (Nkana Alloy), a company that was formed for purposes of processing the slag material from the Nkana Slag Dump situated in Kitwe, Copperbelt province of Zambia. As at 31 March 2015 operations at the company had not commenced due to an injunction served on Nkana Alloy, restraining it from interfering with activities on the slag dump. The plaintiffs who obtained the injunction were to be handed the property for purposes of commencing prospecting works at the site as per mineral processing licence until determination of the matter.

Mawe Exploration and Technical Services Limited

Shareholders will recall that, ZCCM-IH incorporated Mawe Exploration and Technical Services Limited (Mawe), a wholly owned subsidiary in April 2013. Mawe was intended to play a catalytic role in exploration of base metals and other minerals, oil and gas, the development of local content and beneficiation capabilities, small scale mining development, as well as the provision of attendant quality mining services.

Following a review of the structure and operations of Mawe, ZCCM-IH reversed this decision and will now retain the functions that were to be performed by Mawe in the Technical Directorate within ZCCM-IH. This decision is aimed at making cost effective operations in this regard.

Nkandabwe Coal Mine Limited

Following the granting to ZCCM-IH of the mining licences previously held by Collum Coal Mining Industries Limited situated in Southern province of Zambia, ZCCM-IH incorporated Nkandabwe Coal Mines Limited, a 100% wholly owned subsidiary to operate the mine. During the year under review, ZCCM-IH applied to convert the small-scale coal licences into a large scale prospecting licence and was issued with one following approval by the Ministry of Mines, Energy and Water Development. However, in March 2015, ZCCM-IH was informed that the licence was cancelled and re-issued to the previous owners, Collum Coal Mining Industries Limited.

Real Estate and Agriculture

The Company recently included investment into the real estate and agriculture in its 2016 Strategic Plan. This is part of the on-going initiatives for diversification and one of the approaches to reduce its investment concentration in the mining sector.

GRZ Sell down

In his Budget Speech in October 2014, the Minister of Finance announced that the Government of the Republic of Zambia (GRZ) would reduce its shareholding in ZCCM-IH from 87% to 60% via the sale of its shares proportionate to the required reduction. The reduction in GRZ’s shareholding will also lead to ZCCM-IH complying with the listing requirement that the company must have at least 25% of each class of equity securities held by the public.

Subsequent to this announcement, ZCCM-IH was mandated to initiate processes to achieve the GRZ sell down.

Dividend Policy

During the year under review, the ZCCM-IH Board approved a dividend policy which is underpinned on the following general principles:

a) The company may pay at least 20% of the realized profits for a particular financial year;

b) The company may pay a dividend in a financial year when conditions for declaring a dividend are met; and

c) All dividend declarations will take into account the company’s free cash flow and investment needs.

The Company paid a dividend of K1.56 per share to its shareholders in November 2014 in line with this dividend policy

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange closed the year at K40 (2014: K27). The market capitalisation as at 31 March 2015 was K6,431 million (2014: K4,341 million).The continued growth in the company’s share price is indicative of the growing confidence from the market.


According to the World Bank’s “Zambia Economic Brief - December 2015”, the Zambian economy in 2016 is expected to grow between 3% to 3.5% in 2016 and 2017, and will return to robust growth rates of 5% to 6% in 2018 as copper prices stabilize and domestic pressure ease. The main challenges to the Zambian economy in 2016 will include the reduction of expenditure, double digit inflation and the growing deficit. Fiscal policy will be the key factor in shifting the country back onto a sustainable fiscal path.

However, the outlook is subject to external and domestic downside risks. Externally, a further slowdown in China’s economy would weigh-in on the demand for Zambia’s exports by further reducing copper prices, and would severely affect Zambia’s prospects. Furthermore, strengthening of the US dollar in the event of the Federal Reserve increasing interest rates would lead to added volatility of the kwacha. Three domestic risks were identified. Firstly, that the power crisis would worsen if there are delays in new generation coming on board or if there is further reduction in generation capacity in the main hydro power plants. Secondly, a deterioration of confidence in the economy, leading to further weakening of the currency and increased levels of inflation. Thirdly, a bad harvest that serves to increase food prices and reduce rural and agricultural incomes, with the greatest impact falling on the poorest households.

Since the majority of ZCCM-IH’s investments remain in the mining industry, the Company is confident that the copper prices will improve and the increase in the number of power projects will address the issue of power shortages.

ZCCM-IH will continue to pursue diversification programmes intended to create additional value for its shareholders


During the year, the following were changes to the Directorate:

Mr John M D Patterson Retired Non-Executive Director

Mr Paul M Chanda Appointed Non-Executive Director


I express sincere gratitude to my fellow Board members, the Management and Staff of ZCCM-IH for their dedication, commitment and good performance during the past financial year. I again extend my gratitude to the investee companies for their efforts and contributions during the year.

Cosmas Mwananshiku