Zccm Investments Holdings Plc Regulatory News (ZCC)

ZCCM Investments Holdings Plc

Statement to the Media on ZCCM-IH's Financial Performance for 2014/15

ZCCM Investments Holdings Plc (ZCCM-IH) group reported a loss after tax, of K987 million for the year ended 31 March 2015.

However, during the previous year ended 31 march 2014, the group recorded a profit of K277 million.

At Company level the loss was K639 million in 2015 versus a profit of K893 million in 2014.

As a result of the good performance in 2014, ZCCM-IH declared and paid a dividend of K1.56 per share, totaling K256 million, equivalent to about USD 40million.

This was a record dividend in the history of ZCCM-IH, as it had never paid any dividend since its inception.

In 2015 however, a number of factors impacted the performance of the group.

Copper prices continued to decline falling from USD6,289 in 2014 to USD 4,701 in 2015.

As a result, dividend income was only K45 million in 2015 compared to K803 million in 2014, amid declined revenues and production, in most of ZCCM-IH's investee companies.

ZCCM-IH reported a Group operating loss of K2.2 billion in 2015 compared to an operating profit of K871 million in 2014.

The operating loss in 2015, was mainly as a result of an impairment loss of K2.1 billion, recognized in respect of amounts receivable from KONKOLA COPPER MINES (KCM), of K719 million (USD94.9million) and LUBAMBE COPPER MINES of K705 million (USD93 million).

A further impairment of K513.8 million was recorded, as a result of a decline in the fair value of the investment in KCM, in view of continued challenges at the mine.

LUBAMBE COPPER MINE (LCM)

Lubambe Copper Mine (LCM) Limited reported revenue for the financial year ended 31st march 2015, at K1, 071 million or USD164.7 million as compared to K1,483 million or USD237 million, in

2014. It also reported a loss for the same period of USD78 million, compared to USD39 million in 2014.

The main challenge that LCM faced during the financial year under review was the dilution of concentrates. Following an extensive ore body stoping design review conducted by SRK consulting, Lubambe evaluated various slot development methods and equipment requirements, with the recommended solution being inverse raise, using 3x SANDVIK dl411-15 long hole drill rigs.

Due to the above financial and operational challenges, LCM was unable to make repayments on the K705 million (USD93 million) shareholder loan, and this loan was thus fully impaired as at 31st march 2015.

The way forward is to pursue the rights of ZCCM-IH PLC under the shareholder loan agreement.

KONKOLA COPPER MINES

For KCM, it reported a net loss of USD178.5 million for the financial year ended 31st March 2015, compared to USD89.2 million loss in 2014.

Revenue reported for the year, was USD1, 077.1 million, down 15.0% (2014: USD1, 271.4 million) due to a decline in the sale of copper and copper related products.

Further, copper sales declined by 15.9% and sale of precious metals in slimes declined by 33.9%. Total finished copper production during the year was 168,923 MT compared to 177,018 MT in 2014.

During the year under review, KCM faced acute operational and financial challenges including cash flow constraints that resulted in KCM purchasing third party concentrates in smaller quantities than what was sought. KCM is currently focusing on increasing production volumes, and addressing productivity across all of its operations.

To this end, KCM has been implementing various interventions, to improve the overall operating performance and drive higher equipment availability and utilization.

BRIEF OUTLOOK

ZCCM - IH core assets lie in the mining sector, and this makes about 80% to 90% of our portfolio. Since privitisation, ZCCM-IH has relied on dividend pay-outs largely from mining firms. Copper prices have continued to be depressed in the recent past, and recovery is slow. The copper price has recently shown some recovery, however, it is expected that the impact on revenue will be slow.

Hence, in order to move from relying on passive income and being dependent on mining, we have embarked on diversifying our investment portfolio, by actively looking for investment opportunities beyond mining, into other sectors such as energy, agriculture and real estate, so that the company can create and maximize shareholder value.

For instance, in energy, the Maamba Project is expected to be completed in June this year. ZCCM-IH owns 35% of Maamba Collieries Limited. ZCCM-IH and its partner have invested close to USD 850 million at Maamba Collieries Ltd, into this thermal power plant which will be producing 300MW of power.

Further, the recapitalization of Ndola Lime Company Limited has advanced, with the project undergoing hot commissioning. ZCCM-IH is reviewing the operations of Ndola Lime with a view to streamlining its operations and make it competitive and efficient.

As part of diversification into real estate, ZCCM-IH recently acquired an investment property that will be leased out to generate passive income. ZCCM-IH has also been identifying a number of strategic legacy properties, with a view of bringing them to use and turn them into income generation projects.

Further, ZCCM-IH is currently looking for strategic partners to invest in agricultural projects.

These are some of the efforts aimed at reducing dependence on revenue from the copper industry, and mitigating the impact from its cyclical nature.

Lusaka, 8 April 2016