News & Media

CHAIRMAN’S STATEMENT

On behalf of the Board of Directors, 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 2016.

As ZCCM-IH’s investment is largely in the mining sector, the Company experienced low to static growth owing to the challenges faced by the mining sector in general. The mining sector was faced with a significant energy deficit which affected production negatively and consequently led to a reduction in revenues. The situation was further compounded by low commodity prices particularly copper due to increased supply on the market and reduced demand mainly in high copper consumer countries such as China. As a result of the foregoing, investment in the mining sector was reduced and mainly concentrated on consolidation of already existing operations.

The lower than expected performance in the mining sector resulted in reduced revenues and impairment of the value of certain investee companies for the Company and consequently a loss at Group level.

Global economy

The International Monetary Fund (IMF) World Economic Outlook estimated global economic growth to slow to 3.1% in 2016, reflecting a more subdued growth in advanced economies due to geopolitical reasons mainly in Europe and weaker than expected growth economic activity in the United States of America. It is further projected that the global economy will marginally increase to around 3.4% in 2017.

Regarding the prospects of Sub-Saharan Africa, the IMF projected a sharp slowdown in growth generally due to a reduction in demand for commodities on which the Sub-Saharan African economies rely. Growth for the region as a whole fell to 3.5 percent in 2015 and remained within the same range as at 31 March 2016. This figure has been the lowest level in some 15 years, and may remain unchanged in 2017.

Global annual copper production remained constant at around 18.7 million tonnes as at December 2015. LME copper prices declined by 26%, from US$ 6,359 per tonne at the end of December 2014 to US$4,710 per tonne at the end of December 2015.

The decline in copper prices as well as the challenges in the energy sector resulted in a lower than expected growth in the Zambian economy of just above 3 percent in 2016 (growth was projected to be around 5 percent). Other sectors such as agriculture could not provide the needed buffer as severe weather conditions impacted negatively on the sector resulting in reduced production of commercial crops. The manufacturing sector was equally negatively affected by the energy deficit and unstable exchange rates (depreciation of the kwacha) which increased the cost of production and consequently reduced demand for locally manufactured goods

Financial performance

The Group reported a loss before tax of K 2,865 million (2015: K 1,329 million). The Group recorded a loss after tax of K 2,912 million (2015: K 987 million). The Group’s share of loss of equity accounted investees’ was K 2,210 million (2015: Profit of K 281 million).The Group recorded turnover of K 199 million (2015: K242 million) and operating loss of K 858 million (2015: K2, 179 million). The Group’s retained earnings as at 31 March 2016 were positive at K 147 million (2015: K 3,058 million). The reduction in retained earnings is attributed to an increase in the share of losses as a result of operating losses reported by the investee companies mainly: Kansanshi Mining Plc, Konkola Copper Mines Plc and Copperbelt Energy Corporation Plc. The Company’s retained earnings were K87 million (2015: K 512 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 K28.7 million (US$ 2.82 million) for the Ndola Lime Recapitalisation Project. The Second Vertical Kiln (“VK-2”) is still undergoing hot commissioning. Furthermore, there are plans to restructure the operations of NLC to improve its performance in response to the changing market environment.

Real Estate

As part of its diversification program, ZCCM-IH has acquired the Trinity Park offices located along Alick Nkhata road. The premises consist of three identical buildings suitable for up-market office accommodation. ZCCM-IH offices will move to one of the buildings while two-thirds of the buildings have been leased out to other tenants. ZCCM-IH will continue to seek for opportunities in this sector as it has huge and varied potential.

GRZ Share Sell Down and Transfer of Shares

During the presentation of the 2015 National Budget, the Minister of Finance directed the Securities and Exchange Commission (SEC) to ensure that all listed Companies on the Lusaka Stock Exchange (LuSE) complied with the LuSE minimum free (public) float requirements of 25% of the shares. In this regard, the Finance Minister announced GRZ’s intention to reduce its shareholding in ZCCM-IH from 87.5% to 60.3% by selling some of its shares. Subsequently, GRZ transferred its 60.3% to the Industrial Development Corporation (IDC) while the 27.2% were offered to the public through a Preferential Secondary Market Offer.

The objectives of the Preferential Secondary Market Offer were as follows:

i) to increase economic participation of Zambian citizens in economic development through a Preferential Secondary Market Offer of shares to Zambian citizens;

ii) to ensure a broad distribution of shares in order to increase the liquidity and trading of ZCCM-IH shares on the LuSE;

iii) to comply with LuSE Listings Requirements with regard to the minimum percentage of shareholding available to the public;

iv) implement GRZ’s initial intention of the second phase of privatisation, specifically the sale of part of its shares in ZCCM-IH; and

v) to raise revenue for the Treasury through the sale of GRZ’s shares in ZCCM-IH.

The results of the share sell down was an under-subscription due to low liquidity in the market. Generally, the stock market experienced low growth as evidenced from the share price index on the LuSE.

Amidst the challenges of the past, ZCCM-IH is confident that with improved prospects in the mining sector, there will be an increased appetite for investment in the sector through the purchase of shares on the stock exchange.

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange closed the year at K40 (2015: K40). The market capitalisation as at 31 March 2016 remained unchanged at K6, 431 million (2015: K6, 431 million). The static share price is indicative of the general stock market performance, which has experienced low liquidity and hence low share transactions.

Outlook

Beyond these current challenges, the underlying drivers of growth in Sub-Saharan Africa that have been in play domestically in the region over the past decade most importantly, the much improved business environment generally continue to be in place, and favorable demographics are poised to support these drivers over the coming decades. These will anchor medium-term growth prospects.

The Zambian economy is expected to continue on a recovery path and maintain a steady growth of around 3.4 percent in 2017. This growth is hinged on key sector policy interventions in agriculture, tourism, industrialisation and mining within a diversification framework. The move to more cost reflective tariffs is expected to improve investment in the energy sector which will help drive growth in the key sectors of the economy.

As the majority of ZCCM-IH’s investment remains in the mining industry, the Company is confident that the industry will perform better in the coming years premised on the recent improvements in the copper prices as a result of anticipated demand in the United States of America, China and Europe.

The commissioning of the 150 MW power plant by Maamba Collieries Limited (MCL) is a success story for ZCCM-IH and its partners who have worked tirelessly to ensure the project was completed. Once the plant is fully operational, it will provide the much needed dependable and sustainable base load power, which is crucial for the country’s economic growth and energy security.

In response to the challenges faced by the Company and in order to increase shareholder value, ZCCM-IH will implement a robust strategy aimed at taking advantage of the opportunities that exist in various sectors of the economy including mining, energy, agriculture and real estate. ZCCM-IH is better placed to leverage its position and expand its operations in sectors of the economy that offer opportunities.

Directorate

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

Mr Cosmas Mwananshiku Retired Non-Executive Director

Dr Bwalya Ng’andu Retired Non-Executive Director

Mrs Pamela C Kabamba Retired Non-Executive Director

Ms Sophie Mutemba Retired Non-Executive Director

Mr Paul Chanda Retired and reappointed Non-Executive Director

Mr Fredson Yamba Appointed Non-Executive Director

Mr Mateyo Kaluba Appointed Non-Executive Director

Mr Yollard Kachinda Appointed Non-Executive Director

Dr Pius C Kasolo Appointed Executive Director

Appreciation

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

Director

CHAIRMAN’S STATEMENT

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.

Outlook

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

Directorate

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

Appreciation

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

Director

CHAIRMAN’S STATEMENT

The financial year ended 31 March 2014 was an exciting year for ZCCM Investments Holdings Plc (ZCCM-IH). Significant milestones such as the restructuring of the balance sheet through a Claw-Back rights offer were successfully completed. This development saw the Company’s balance sheet being strengthened in a significant way thereby placing the Company in a position to leverage this strength to continue with its growth strategy.

Global economy

The global economy grew by 2.9% at the end of December 2013 (2012: 3.2%). Global GDP was lower than 2012 reflecting an economic slowdown in the leading emerging economies of Brazil, Russia, India, and China. Growth in 2013 was a mix of modest improvements in economic conditions in mature economies of the United States and the Eurozone area and a stabilization of the slower growth rates in major emerging markets. During the first quarter ended 31 March 2014 global GDP rose to 3.4% (2013:3.25%). However, growth in sub Saharan Africa was relatively stronger with GDP estimated at 5 % at the end of December 2013 (2012:5.3%). Sub Sahara Africa GDP for the first quarter ended 31 March 2014 was 2.5% (2013:3.1%).

Global copper production increased by 3.2% as at the end of December 2013 (2012: 4.5%). Copper prices declined by 11.6%, from US$7,540 per tonne at the beginning of the financial year to US $ 6,667 per tonne at the close of the financial year.

Despite the scenario above, the Zambian economy recorded growth of 6.7% at the end of December 2013 (2012: 7.2%), 0.2% lower than forecast. Growth was mainly driven by favourable performance in the mining, construction, manufacturing, transport and communication sectors. However, growth was lower than the previous year due to lower than budgeted performance in the mining sector and the weaker global economy.

Financial performance

The Group recorded turnover of K1, 001 million (2013: K520 million) and operating profit of K871 million (2013: K376 million).

The Group reported a profit before tax of K362 million (2013: K654 million). The Group recorded a profit after tax of K277 million (2013: K762 million). The Group’s share of loss of equity accounted investees’ was K537 million (2013: K222 million (profit)).

The Group’s retained earnings as at 31 March 2014 were positive at K4,295 million (2013: K4, 018 million).The Company’s retained earnings increased to K1, 403 million (2013: K511 million).

Strategic and new investments

Recapitalisation of Ndola Lime Company (NLC)

The recapitalisation project at NLC continued. The Company obtained an additional shareholder loan of US$3.5 million from ZCCM-IH towards funding for the Ndola Lime Recapitalisation Project. Subsequent to the year end, ZCCM-IH extended a further US$5million loan to NLC. The commissioning of the second Vertical Kiln (“VK-2”) is targeted for the end of October 2014 and 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

The restructuring of Chambishi Metals Plc resulted in the formation of Nkana Alloy Smelting Company Limited (Nkana Alloy). In April 2013, ZCCM-IH retained a 10% shareholding in Nkana Alloy. Nkana Alloy is a company formed jointly by ENRC (BVI) Limited who own 90% of the total shareholding and ZCCM-IH. The company was formed for purposes of processing the slag material from the Nkana Slag Dump situated in Kitwe, Copperbelt province of Zambia. The slag material will be processed into a copper/cobalt alloy. The Slag Dump was previously part of Chambishi Metals Plc in which ZCCM-IH has a 10% stake. As at 31 March 2014 operations at the company had not yet commenced.

Mawe Exploration and Technical Services Limited

On 12th April 2013 ZCCM-IH incorporated Mawe Exploration and Technical Services Limited, a wholly owned subsidiary. The company will 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.

Nkandabwe Coal Mine Limited

Following the granting to ZCCM-IH of the mining licenses previously held by Collum Coal Mining Industries Limited situated in Southern province of Zambia, on 3rd May 2013, ZCCM-IH incorporated Nkandabwe Coal Mines Limited, a 100% wholly owned subsidiary to operate the mine. ZCCM-IH is considering options for creating value for its shareholders using this asset.

Albidon Limited

The Group disposed of its investment in Albidon Limited. This was because on 15th May 2013 the shareholders of Albidon approved the acquisition by Jin Tuo Investments limited (a wholly owned subsidiary of Jinchuan Group Resources Holdings Limited which itself is a majority shareholder of Albidon Limited) of 100% of the company at a cash price per share of US$0.0025. The proposal was made to all the shareholders other than Jinchuan Group via a statutory merger pursuant to the British Virgin Islands (BVI) Business Companies Act 2004 (as amended).As a result, ZCCM-IH disposed of its 3,389,831 shares and received cash consideration of US$8,474.57.

Copperbelt Energy Corporation Plc (CEC) Rights offer

During the year, CEC Plc conducted a 5 for 8 Rights Offer to raise K387.5 million to undertake various expansion projects ZCCM-IH followed through its entitlement and acquired 125,000 shares.

Recapitalisation of ZCCM-IH

At the Extra Ordinary General Meeting of the members of the Company held on 24 February 2014, the shareholders unanimously resolved to recapitalize ZCCM-IH via a Claw-Back rights offer transaction. On 25 March 2014, ZCCM-IH announced that it had concluded the restructuring of its balance sheet. This achievement was the result of the efforts of the Government of the Republic of Zambia (GRZ), in its capacity and role as the majority shareholder, to strengthen ZCCM-IH’s balance sheet in order to reposition and attract new investment into the Company. As part of the balance sheet restructuring, GRZ converted the debt owed to it by ZCCM-IH into equity through a rights issue.

Through a Debt Settlement Agreement between the GRZ and ZCCM-IH signed on 25 March 2014, ZCCM-IH’s net indebtedness of ZMW 1,829,298,173.06 to GRZ was converted into equity, thereby satisfying the issuance and subscription for 87.52% of the new shares by GRZ.

Simultaneously, ZCCM –IH raised fresh capital on the 12.48 % portion of the rights offer amounting to K260, 759,573 which was underwritten by the National Pension Scheme Authority (NAPSA) on a Claw-Back basis. The Claw-Back arrangement allows the minority shareholders of ZCCM-IH who before the rights offer held 12.48% shareholding in the Company to also fully participate in the share rights offer at the same price as GRZ.

Following the Rights Offer, GRZ owns 87.52 % of ZCCM-IH while the remaining 12.48 % is held by the minority shareholders.

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange closed the year at K27 (2013: K12.5). The market capitalisation as at 31 March 2014 was K4,341 million (2013: K1,116 million).The growth in the company’s share price is indicative of the growing confidence from the market.

Outlook

While global activity has generally strengthened and is expected to continue in 2014–15 on the back of growth coming from mature economies, emerging economies have seen increased financial volatility as well as increases in the cost of capital. These factors may dampen investment and growth.

ZCCM-IH remains confident about the fundamentals of the mining industry in general and those of copper in particular.

Zambia’s growth prospects still remain positive relative to most of the economies in Sub-Saharan Africa premised on increased execution of development projects, investment in transport infrastructure, private investment in existing and new mining operations, and power projects.

ZCCM-IH capacity to create value for its shareholders has grown.

Directorate

During the year, ZCCM-IH announced the loss of Mr Wila D Mung’omba, Executive Chairman, who passed away on 17 February 2014. There were changes to the Directorate as follows:

Mr Wila D Mung’omba Deceased Executive Chairman

Dr Victor Mutambo Retired Non-Executive Director

Mr Philippe Taussac Appointed Non-Executive Director

Appreciation

I extend my gratitude to my fellow Board members, the Management and Staff of ZCCM-IH for their commitment and hard work during the past financial year. I further extend my gratitude to the investee companies for their efforts and contributions during the year.

Cosmas Mwananshiku

Director