2019 Annual Report

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2019 Annual Report

Published Date: 16th December 2019 File Size: 0.00 KB

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors of ZCCM-IH, I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCMIH)as a Company and that of its investee companies for the financial year ended 31 March 2019.The relative stability in copper prices reported in 2017 continued in 2018. Furthermore, the coming on board of new mining projects improved production during the year under review. In addition, the ramp up in production at Kalumbila, improved plant availability and utilization at the Tailings Leach Plant at Konkola Copper Mines Plc (KCM) coupled with higher grades and commissioning of the Synclinorium Shaft at Mopani Copper Mines Plc (Mopani) leading to increased volume of ore being hoisted resulted in a marginal increase in copper production by around 8% to about 862,000 tonnes at the end of 2018 (2017: 799,000 tonnes). The prospects in the mining sector continue to be bright and ZCCM-IH will continue to focus on mining and mining related investments to maximise shareholder value.

ZCCM-IH’s performance was negatively affected by the loss-making subsidiaries, namely, Ndola Lime Company Limited (NLC) and Investrust Bank Plc (Investrust). The Group profit after tax declined by 47% to ZMW448 million. The Group’s share of profit of equity accounted investees increased by 41% to ZMW973 million owing to an improvement in the profitability of some investee companies in the mining sector.

Global Economy

Global growth in 2018 remained sustained in the region of around 3.7% since 2017. This growth was 0.2% lower than projected. The stagnation of growth was influenced mainly by uncertainties emanating from trade policy shifts and simmering trade disputes particularly between the United States of America and China, some of the world’s strongest economies. World copper demand remained undersupplied in 2018 and increased demand is expected to continue influenced by the positive developments and demand for electric cars and power industry mainly in Europe and some parts of Asia. China will remain the major market for copper and estimated to account for over 50% of global demand by 2023.

Zambian Economy

While the Zambian economy continued on a recovery path, growth was clouded by severe droughts in many parts of the country. This scenario resulted in low water levels which affected key sectors including the mining, energy and agricultural sectors with ripple effects on the overall growth. The GDP growth for 2018 dropped to around 4% from the expected growth of 5%.

Financial Performance

The Group reported a profit before tax of ZMW 399 million (2018: ZMW 603 million) and a share of profit of equity accounted investees for the year of ZMW973 million (2018: ZMW689 million).
The decline in profitability is primarily driven by the Group’s loss-making subsidiaries, namely, Ndola Lime Company Limited and Investrust Bank Plc coupled with the fall in fair value of other investments such as Mopani Copper Mines Plc and NFCA Africa Mining Plc. The Group’s share of profit of equity accounted investees was ZMW973 million (2018: profit of ZMW689 million).

The Group’s retained earnings as at 31 March 2019 were positive at ZMW1,855 million (2018: ZMW 1,779 million). The increase in retained earnings is attributed to recorded Group profit of ZMW448million (2018: ZMW843 million). The Company’s retained earnings decreased by 29 percent to ZMW825 million (2018: ZMW1,166 million) on account of loss recorded at company level and payment of dividends during the year amounting to ZMW 233 million.

Fundamental Strategic Change and Strides

ZCCM-IH has continued to refocus its activities in line with its 2018-2023 Strategic Plan. Exploration works continued for base metals in various licence areas across the country. Following a successful exploration for manganese in the Kabundi licence area in Serenje District, Central Province of Zambia, mine developments had advanced to commercialisation. Subsquent to the year end,
ZCCM-IH incorporated Kabundi Resources Limited (KRL) a wholly owned subsidiary and a mining operating company whose main activities include mining, processing and marketing of manganese and other non-ferrous metals.
Subsequent to the year end, ZCCM-IH increased its stake by acquiring a further 50% shares in Kariba Minerals Limited (KML) an amethyst mining company. ZCCM-IH has started implementing strategic activities aimed at improving the production and marketing of amethyst at KML.

Energy Sector

Operations at Maamba Collieries Limited (MCL) Thermal Power Plant (TPP), continued to improve with the company recording an increase in profits of 272% to ZMW 554.21 million as a result of increased revenues. Though profitable, MCL’s liquidity challenges remained unresolved due to delayed payments for power from its main offtaker.

Manufacturing Sector

ZCCM-IH increased its stake in Central African Cement Company Limited (CAC) from the initial 35% to 49%. The construction of the cement plant has delayed on account of the necessary regulatory and financing approvals.

Investment in the Financial Services Sector

Following ZCCM-IH’s increased shareholding in Investrust Bank Plc to 71.4%, the Company undertook recapitalisation efforts aimed at improving the bank’s liquidity and competitiveness. Going forward, ZCCM-IH will continue to pursue strategies that will transform the bank.

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange declined by 25% to close the year at ZMW 28.49 (2018: ZMW 38). Consequently, the market capitalisation as at 31 March 2019 dropped to ZMW 4, 581 million (2018: ZMW 6, 110 million). The reduction in the price and sustained stagnation
of the share price is indicative of low liquidity of the shares.

Outlook

As demand for copper continues to increase, ZCCM-IH will continue to invest in the mining sector and will diversify into other base metals as a way of maximising its returns.

Appreciation

I express sincere gratitude to my fellow Board members and Management and Staff of ZCCMIH for their dedication and commitment during the past year. I again extend my gratitude to the shareholders and investee companies for their efforts, cooperation and contributions during the year.

Mr Eric S Silwamba, SC.

Board Chairperson