News & Media

CHAIRMAN’S STATEMENT

I am delighted to have been appointed Chairman of the ZCCM-IH Board from 6 March 2018. I am particularly happy to serve on the ZCCM-IH Board which comprises very qualified and dedicated professionals whose contribution to the Company is highly valued.

I am delighted to be of service to ZCCM-IH in my capacity as Chairman. ZCCM-IH has a rich history particularly in the development of the mining sector in Zambia and I am glad to be part of those who will contribute to the transformation of the Company for the benefit of our Shareholders and all key stakeholders.

On behalf of the Board of Directors of ZCCM-IH, 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 2018.

The year saw an improvement and stability in copper prices which in turn resulted in improved performance in some of our mining investee companies. The increase in demand for copper on the global market has resulted in positive developments in the mining sector in general. The sustained growth in copper demand is expected to continue as copper remains essential in many economic activities more so in the wake of modern technology which requires increased usage of copper.

Zambia is poised to benefit from the global upswing in demand for copper and other minerals. ZCCM-IH is now more than ever before strategically positioned to extract maximum value from its investments in mining for the benefit of its shareholders and all stakeholders. While profitability for the Company has dropped due to low turnover from the Ndola Lime Company Limited’s (Ndola Lime) operation, the Group’s share of profit of equity accounted investees has increased to 465% from a loss of K 189 million in 2017 to a profit of K 689 million in 2018. This movement signifies improvements in the mining operations following increases in copper prices and production.

Global economy

According to the International Monetary Fund (IMF) Report for 2018, global economic activity continued to firm up as was predicted. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016. Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent. The key factors contributing to the growth include increased economic activity in most industrialised countries and stabilisation of oil prices resulting in predictability in production costs. The copper price recovery that emerged from mid-2016 has started to encourage project development. The demand is mainly boosted by high consumption in China and other major copper consumers. The high demand has in turn resulted in mine developments and expansion programs in copper producing countries including Zambia and the Democratic Republic of Congo (DRC). Global annual copper production increased marginally by about 2% to around 19.7 million tonnes as at December 2017. London Metal Exchange – 3-month copper prices increased by about 20%, from US$ 5,676 per tonne at the end of December 2016 to US$6,839 per tonne at the end of December 2017.

Zambian economy

The Zambian economy continued on a recovery path following improvements in the energy supply to key sectors of the economy as well as copper prices. The improvements in copper prices resulted in positive growth in the mining sector with the GDP expected to rise to 5% at the end of 2018 from 3.4% recorded in 2017.

Financial Performance

The Group recorded turnover of K61 million (2017: K95 million) and operating profit of K47 million (2017: profit: K848 million). The low turnover is attributed to low sales at Ndola Lime Company Limited due to increased competition in the lime market as well as technical challenges which negatively affected the production and sale of lime and related products. A 95 percent decline in operating profit is owing to decrease in copper price participation income from K719 million in the preceding year to K360 million for the year. Further, the continuous loss making position of Ndola Lime Company Limited and the impairment of investment in Konkola Copper Mines Plc amounting to K167 million and K42 million respectively contributed to the decrease in operating profit.

Subsequent to the year end, two (2) former employees of Ndola Lime Company Limited (NLC) instituted proceedings to the High Court of Zambia to place NLC under supervision pursuant to the Corporate Insolvency Act No. 9 of 2017. By order of the Court dated 5th October 2018, the Official Receiver was appointed as Interim Business Administrator of NLC. The application for the Business Rescue Proceedings will be heard in January 2019 at which all affected persons (including ZCCM-IH) will be heard. However, ZCCM-IH remains committed to the affairs of NLC and will continue to pursue all activities that better the Company and ZCCM-IH’s investments.

The Group reported a profit before tax of K603 million (2017: K 1,244 million) and a profit for the year of K843 million (2017: K729 million). The improvement in the profitability is largely attributed to improved performance in investee companies due to continued upsurge in copper prices during the year. The Group’s share of profit of equity accounted investees was K689 million (2017: loss of K189 million).

The Group’s retained earnings as at 31 March 2018 were positive at K1,779 million (2017: K 891 million). The increase in retained earnings is attributed to profit recorded at Group level of K843 million (2017:K729 million). The Company’s retained earnings increased by 60 percent to K1,166 million (2016: K731 million) on account of profit recorded at company level.

Fundamental Strategic Change

ZCCM-IH has undertaken a strategic evolution as a response to the ever changing and competitive operating environment, and has developed a new Strategic Plan (SP) for the period 2018-2023 themed ‘Taking Giant Steps’. In it is a transformational agenda which permeates through all operational landmarks with a view to sustain growth and value extraction for the benefit of its shareholders.

We have chosen to transition the Company away from the traditional dependence on dividend income and have identified more forward-looking strategies which will improve revenue generation with predictability. These strategies will not only improve the Company’s cash position but will also facilitate organic growth as the Company will be better able to finance its investment projects.

Energy Sector

Following the achievement of the commercial operating date in August 2017 of the first phase of the Maamba Collieries Limited (MCL) Thermal Power Plant (TPP), MCL has recorded positive growth with an impressive performance resulting in increased revenue and a profit after tax of K148.87 million following its ability to achieve a commercial operating date within a year of commissioning.

Manufacturing Sector

As part of ZCCM-IH’s strategy to diversify its portfolio, the Company entered into a Joint Venture partnership with Sinoconst for purposes of setting up a cement manufacturing company. Subsequently, Central African Cement Company Limited (CAC) was incorporated. ZCCM-IH owns 49% of CAC while Sinoconst owns the remaining 51%. CACs operations will be located in Masaiti district in the Copperbelt Province of Zambia.

The planned production capacity of the Plant will be 5000 tonnes per day of Clinker with a two (2) by twenty five (25) MW Thermal Power Plant. It is expected that the Plant will take 3 years to construct and employ over 1000 people during construction. Once completed, the plant is expected to employ about 400 people.

Investment in the Financial Services Sector

Subsquent to the financial year end and following closure of the mandatory offer on 30 April 2018, ZCCM-IH now holds 71.4 % shares in Investrust Bank Plc from 45.4%. ZCCM-IH will implement a robust recapitalisation plan and identify equity partners to make the bank more competitive.

Capital market

The ZCCM-IH share price on the Lusaka Securities Exchange closed the year at K38 (2017: K38). The market capitalisation as at 31 March 2018 remained unchanged at K6, 110 million (2017: K6, 110 million). The stagnation of the share price is indicative of low liquidity of the shares.

Outlook

Copper prices have moved to attractive levels which in turn will improve investment in the mining sector. With improvements in the supply of power to mining companies, there has been stability in the production. As a result of these factors, it is estimated that production will increase hitting an all-time high of 1 million tonnes from around 755,000 metric tonnes recorded in 2017.

ZCCM-IH will take advantage of these favourable performance indicators of the mining sector and strive to achieve its objectives by realigning its operations and improve its income streams through an equitable participation in top-line revenues.

Appreciation

I express sincere gratitude to my fellow Board members, Management and Staff of ZCCM-IH for their dedication and commitment during the past year. I further 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

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 (ZCCM-IH) as a Company and that of its investee companies during the financial year ended 31 March 2017.

Mining will continue to be Zambia’s main economic driver for the foreseeable future and, as such, ZCCM-IH will continue to leverage its unique position as a key player in the mining sector to create value for its shareholders. In recent years however, the mining industry by and large saw a dip in growth as a result of sustained low copper prices due to low demand by high copper consumer countries. Furthermore, the first half of 2016 saw a continued deficit in energy, which resulted in low production and productivity hence reduced revenues for most mining companies. The lower than expected performance in the mining sector resulted in reduced revenues for the Company and Group.

The last quarter of 2016 and the first quarter of 2017 saw an improvement in copper production for most major mining companies due to stability in energy supply and an improvement in copper prices on the world market.

Growth in the mining sector is expected to continue as major economies mainly the United States of America and China embark on expansion programs in the manufacturing and infrastructure development sectors. ZCCM-IH is poised to take advantage of the expected buoyance of the mining and related sectors to increase shareholder value.

Global economy

According to the International Monetary Fund (IMF) Report for 2016, the global economy grew by 3.1% reflecting a more subdued growth in advanced economies due to geopolitical reasons mainly in Europe and weaker than expected growth in economic activity in the United States of America. The IMF predicted a recovery of the global economy on the strength of the long awaited recovery in manufacturing and trade with growth estimated to increase marginally to 3.5% at the end of 2017. This growth will further be seen in emerging and developing economies as a result of a gradual improvement in commodity prices. Furthermore, growth is expected to remain strong in China and many other commodity importers.

Growth in Sub-Saharan Africa remained fragile in 2016 owing to lower than expected demand for commodity prices globally. Following the rebound of some commodity prices particularly copper and other minerals, growth is expected to improve marginally to between 5 and 7.5%.

Global annual copper production increased marginally by about 4% to 19.4 million tonnes as at December 2016. London Metal Exchange (LME copper prices increased by 17%, from US$ 4,710 per tonne at the end of December 2015 to US$5,500 per tonne at the end of December 2016. The prices have continued to increase steadily since December 2016.

Zambian Economy

The Zambian economy continued to be affected by two major factors, namely declining copper prices and the energy deficit due to low water levels. Other factors, such as high inflation, negatively impacted the growth of the economy. While copper production was up by around 8.2% to 575,780 metric tonnes in the first nine months of 2016, the mining sector did not fully realise its potential owing to low copper prices and high cost of production as a result of energy deficits. By the end of 2016, the economy had grown to 3% against a target of 5%. As a consequence of these factors, the economy is expected to grow marginally to 3.4% in 2017.

Financial Performance

The Group recorded turnover of K 95 million (2016: K199 million) and operating profit of K848 million (2016:loss of K 858 million). The low turnover is attributed to low sales recorded for lime and lime products at Ndola Lime Company Limited. The Group reported a profit before tax of K1,244 million (2016: loss of K 2,865 million). The Group recorded a profit after tax of K 729 million (2016: loss of K 2,912 million). The Group’s share of loss of equity accounted investees’ losses was K 189 million (2016: loss of K 2,210 million). The Group’s retained earnings as at 31 March 2017 were positive at K891 million (2016: K 147 million). The increase in retained earnings is attributed to profit recorded at group level of K 729 million (2016: loss of K 2,912 million). The Company’s retained earnings increased by 740 % to K 731 million (2016: K 87 million) owing to profit recorded at Company level.

Strategic and New Investments

Recapitalisation of Ndola Lime Company Limited (NLC)

Further to the hot commissioning phase of the Recapitalisation Project which commenced in prior the year, NLC continued to optimise the performance of the Vertical Kiln (VK2). The project was met with a series of technical hurdles which affected the performance the company.

The Board is undertaking a review of the entire operation of the company to determine an appropriate option that will result in improving the operations of NLC as well the performance of the Group.

Energy Sector

ZCCM-IH has continued to explore opportunities in the energy sector. With the commissioning of the first phase of the Maamba Collieries Limited (MCL) Thermal Power Plant (TPP), plans are underway to explore investment in the second phase of the TPP.

Manufacturing Sector

As part of its diversified program, ZCCM-IH is looking at value addition options for the limestone deposit in Ndola by developing a cement manufacturing plant. ZCCM-IH will develop the cement plant with the support of strategic and equity partners.

Capital Market

The ZCCM-IH share price on the Lusaka Securities Exchange closed the year at K38 (2016: K40). The market capitalisation as at 31 March 2017 reduced to K6,110 million (2016: K6,431 million). The marginal reduction in the share price is indicative of the general stock market performance, which has experienced low liquidity and hence low share transactions.

Outlook

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.

Copper prices are expected to increase steadily premised on increased demand from high copper consumer countries. ZCCM-IH’s performance is expected to improve as a result of the improvement in copper prices which drive the performance of the mining portfolio. Furthermore, as a result of good rains experienced during the 2016/17 season, the generation capacity of hydroelectricity is expected to improve, thereby stabilising energy supply.

The recovery in copper prices as well as stability in energy supply will contribute to the growth in copper production, which in turn will lead to growth in copper exports. The expected growth is further confirmed by additional investments of over $ 2 billion over the next several years announced by major multinational investors in the mining sector of Zambia.

In response to the positive outlook, ZCCM-IH will implement a new Strategic Plan hinged on expansion of its investment footprint in various sectors of the economy including mining with a focus on industrialisation, energy, agriculture, manufacturing, real estate and financial services.

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 shareholders and investee companies for their efforts and contributions during the year.

Mr. E S Silwamba, SC

Chairman