Annual Financial Report

ZCCM Invs.Hldgs PLC

29 June 2023

 

SENS ANNOUCEMENT

(the "Announcement")

ISSUER

ZCCM INVESTMENTS HOLDINGS PLC ("ZCCM-IH") Incorporated in the Republic of Zambia Company registration number: 119540000771 Share Code: ZCCM-IH ISIN:  ZM0000000037

BROKER

Pangaea Securities Limited

[a member of the Lusaka Securities Exchange]

Regulated and Licensed by the Securities and Exchange Commission Zambia

Telephone Number:    [phone]   |       Website:    www.pangaea.co.zm 

AUTHORISATION

Approval for this Announcement has been granted by:

·    The Lusaka Securities Exchange ("LuSE")

·    The Securities and Exchange Commission Zambia ("SEC")

·    ZCCM-IH

DISCLAIMER AND RISK WARNING

The announcement contained herein contains information that may be of a price sensitive nature.

Investors are advised to seek the advice of their investment advisor, stockbroker, or any professional duly licensed by the Securities and Exchange Commission of Zambia to provide securities advice.

ISSUED ON: 29 June 2023

ZCCM INVESTMENTS HOLDINGS PLC

(Incorporated in the Republic of Zambia)

PROVISIONAL ABRIDGED UNAUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022

INTRODUCTION

In compliance with the requirements of the Securities Act No. 41 of 2016, ZCCM Investments Holdings PLC ("ZCCM-IH PLC" or "the Company") announces the provisional financial statements results of the Company and its subsidiaries (Collectively referred to as the ''the Group'') for the year ended 31 December 2022.

STRUCTURE OF THE ZCCM-IH GROUP

The ZCCM-IH Group consists of the following Nine (9) companies: Name Shareholding Mopani Copper Mine PLC 100.00% Ndola Lime Company Limited (In Liquidation) 100.00% Kariba Minerals Limited 100.00% Misenge Environmental and Technical Services Limited 100.00% Mushe Milling Limited 100.00% Kabundi Resources Limited 100.00% Limestone Resources Limited 100.00% Investrust Bank PLC 71.40% Zambia Gold Company Limited 51.00% The Company also has other interests in the undernoted companies: Name Shareholding Rembrandt Properties 49.00% Central African Cement Limited 49.00% Maamba Collieries Limited 35.00% Konkola Copper Mines PLC 20.60% Kansanshi Mining PLC 20.00% Copperbelt Energy Corporation PLC 24.10% CNMC Luanshya Copper Mines PLC 20.00% Lubambe Copper Mines PLC 20.00% NFCA Africa Mining PLC 15.00% Chibuluma Mines PLC 15.00% Chambishi Metals PLC 15.00% Copper Tree Mineral Limited 15.58% Oranto Oil Block 10.00% Nkana Alloy Smelting Company Limited 10.00% PROVISIONAL ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Revenue		11,959,354		14,395,493
Gross (loss)/profit		(2,749,760)		164,460
Operating loss		(3,354,959)		(13,313,773)
Net finance cost		(1,813,846)		(866,045)
Share of profit of equity accounted investees		1,603,143		3,004,542
Loss before tax		(3,565,662)		(11,175,276)
Income tax (expense)/credit		(249,504)		66,476
Loss for the year		(3,815,166)		(11,108,800)
Earnings per share (ZMW)		(23.73)		(69.08)
Basic and diluted earnings per share (ZMW)		(23.73)		(69.08)

---

PROVISIONAL ABRIDGED COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Unaudited Unaudited 31 Dec 2022 31 Dec 2021 ZMW'000 ZMW'000 Investment income 4,916,309 968,137 Revenue from contracts with customers  778  79,837 Operating profit 4,054,286 1,841,747 Net finance income/(cost)   440,763   (251,987) Profit before tax  4,495,049  1,589,760 Income tax (expense)/credit       (236,321)       86,158 Profit for the year 4,258,728 1,675,918 Earnings per share (ZMW)         26.48         10.42 Basic and diluted earnings per share (ZMW)         26.48         10.42

PROVISIONAL ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Assets
Non-current Assets
Property, plant, and equipment		12,484,907		12,857,452
Exploration and evaluation asset		51,437		38,989
Intangible assets		4,582,654		4,676,296
Investment property		200,751		192,227
Investments in associates		15,174,862		17,067,159
Financial assets at fair value through profit or loss		1,252,400		1,458,000
Trade and other receivables		2,931,539		1,330,438
Environmental Protection Fund		94,433		87,130
Deferred tax assets		122,852		340,848
Current Assets
Inventories		4,921,366		4,651,886
Trade and other receivables		762,831		3,264,975
Assets held for sale		2,103,761		1,478,611
Term deposits		5,340,202		653,742
Cash and cash equivalents		329,173		184,625
Total assets		50,353,168		48,282,378
Equity and liabilities
Capital and reserves		9,343,136		14,272,867
Non-current Liabilities
Borrowings		27,476,859		24,546,001
Retirement benefits		182,940		96,287
Provisions for environmental rehabilitation		1,221,068		1,198,814
Borrowings		864,411		797,566
Current Liabilities
Overdraft		688,120		70,449
Trade and other payables		7,451,177		4,796,508
Provisions		487,689		378,746
Current income tax liabilities		190,143		202,563
Retirement benefits		139,131		244,001
Liabilities associated with assets classified as held for sale		2,308,494		1,678,576
Total equity and liabilities		50,353,168		48,282,378

PROVISIONAL ABRIDGED COMPANY STATEMENT OF FINANCIAL POSITION
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Assets
Non-current Assets
Property, plant, and equipment		90,471		78,439
Intangible assets		3,377		2,537
Investment property		200,751		192,227
Investment in subsidiaries		405,051		327,939
Investments in associates		16,256,411		20,603,089
Financial assets at fair value through profit or loss		1,252,400		1,458,000
Trade and other receivables		958,162		676,478
Deferred tax assets		258,966		468,109
Current Assets Inventories		16,427		22,034
Trade and other receivables		173,829		197,844
Term deposits		5,340,202		632,992
Cash and cash equivalents		45,586		81,498
Assets held for sale		145,700		430,977
Total assets		25,147,333		25,172,163
Equity
Capital and reserves		24,679,852		24,732,194
Non-Current Liabilities
Retirement Benefit Obligations		9,275		10,256
Provisions for environmental rehabilitation		39,357		79,931
Borrowings		-		1,135
Current Liabilities
Trade and other payables		121,005		116,883
Provisions		108,686		29,528
Current income tax liabilities		189,158		202,236
Total equity and liabilities		25,147,333		25,172,163

PROVISIONAL ABRIDGED GROUP STATEMENT OF CASH FLOWS
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Net cash flow generated from operating activities		1,188,449		416,970
Net cash flow used from investing activities		(906,777)		(103,180)
Net cash outflow from financing activities		(698,833)		(402,694)
Decrease in cash and cash equivalents		(417,161)		(88,904)
Cash and cash equivalents at the beginning of the year		336,101		425,005
Cash and cash equivalents at the end of the period		(81,060)		336,101
Included in the statement of financial position		(358,947)		114,176
Included in assets held for sale		277,887		221,925
		(81,060)		336,101
PROVISIONAL ABRIDGED COMPANY STATEMENT OF CASH FLOWS
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Net cash flows from operating activities		4,726,479		524,906
Net cash flows used in investing activities		(4,761,256)		(439,590)
Net cash flows used in financing activities		(1,135)		(124,457)
Decreased in cash and cash equivalents		(35,912)		(39,141)
Cash and cash equivalents at the beginning of the year		81,498		120,639
Cash and cash equivalents at the end of the period		45,586		81,498

PROVISIONAL ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY

		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		ZMW'000		ZMW'000
Balance at 1 Jan		14,272,867		21,004,417
Loss for the year		(3,815,166)		(11,108,800)
Other comprehensive income		(1,029,340)		4,430,326
Dividend paid		(85,225)		(53,076)
Balance at 31 Dec		9,343,136		14,272,867

PROVISIONAL ABRIDGED COMPANY STATEMENT OF CHANGES IN EQUITY

			Unaudited		Unaudited
			31 Dec 2022		31 Dec 2021
			ZMW'000		ZMW'000
Balance at 1 Jan			23,732,194		23,164,958
Profit for the year			4,258,728		1,675,918
Other comprehensive income			(3,225,845)		(55,606)
Dividend paid			(85,225)		(53,076)
Balance at 31 Dec			24,679,852		24,732,194

1.   FINANCIAL PERFORMANCE

(I)   Group Performance

Performance at Group level was impacted by the performance of Mopani Copper Mines Plc ("Mopani") resulting in a loss of ZMW 3.82 billion (US$ 223.76 million) recorded in 2022 compared to a loss of ZMW11.08 billion (US$ 564.57 million) recorded in 2021. The loss at Group level was on account of :

§ Declined average copper price from US$9,315 per ton in 2021 to US$8,815 per ton in 2022;

§ Lower copper production level experienced at Mopani due to the smelter shutdown; and

§ No significant impairment of goodwill was recognised during the year (2021: ZMW 13.3 billion( US$ 678.73 million)). 

The Group recorded an increase in total assets from ZMW48.3 billion recorded in 2021 to ZMW 50.4 billion in 2022 largely on account of exchange differences from foreign currency denominated assets as well as improvement in the performance of some investee companies.

The Group's total liabilities increased from ZMW34 billion in 2021 to ZMW41 billion in 2022 on account of the Glencore long-term loan facility advanced to Mopani of US$1.5 billion.

The Group's retained earnings as of 31 December 2022 were negative at ZMW10.50 billion (2021: ZMW6.84 billion). The movement in retained earnings is attributable to the recorded Group loss of ZMW3.82 billion recorded in 2022 (2021: ZMW11.08 billion loss).

(II)  Company Performance

Company performance improved with a profit for the year of ZMW 4.26 billion in 2022  from ZMW1.68 billion recorded in 2021. The improved performance was due to a special dividend received from Kansanshi Copper Mining PLC of ZMW3.3 billion (US$ 195 million).

2.   KEY OPERATIONS AND STRATEGIC DEVELOPMENTS

(I)    Mopani Copper Mines PLC ("Mopani")

Below is a summary of Mopani's financial performance which has been incorporated in the Group's Financial Statements:

Statement of Profit and Loss and Other Comprehensive - Mopani Copper Mine PLC
	2022	Audited 2021
	ZMW'000	ZMW'000
Revenue	11,854,038	14,116,217
Gross (loss)/profit	(14,565,499)	146,365
Operating loss	(2,844,097)	(1,192,992)
Net finance cost	(2,238,476)	(604,157)
Loss before tax	(5,082,573)	(1,459,935)
Loss for the year	(5,082,573)	(1,459,935)

Statement of Financial Position - Mopani Copper Mine PLC
	2022	Audited 2021
Assets	ZMW'000	ZMW'000
Property, plant, and equipment	16,818,826	17,327,597
Inventories	4,836,680	4,564,852
Trade and other receivables	2,616,620	3,595,239
Environmental Protection Fund	94,433	87,130
Cash and cash equivalents	159,584	78,469
Total assets	24,526,143	25,653,287
Equity and liabilities
Capital and reserves	(13,547,663)	(6,054,075)
Borrowings	28,341,270	25,342,432
Trade and other payables	7,245,750	4,606,104
Bank overdraft	678,900	65,743
Retirement benefits	312,796	330,032
Provisions	376,431	347,321
Provisions for environmental rehabilitation	1,118,659	1,015,730
Total equity and liabilities	24,526,143	23,653,287

In 2022, Mopani recorded a loss of ZMW5.08 billion (US$ 298.1 million)compared to ZMW 1.46 billion (US$ 74.2 million). The recorded results were due to reduced copper production levels from 72,694 tonnes in 2022 from 87,618 tonnes in 2021. The lower production levels recorded in 2022 was on account of the smelter shutdown for  45-days from August to September 2022. This shutdown was necessitated by maintenance, refurbishment of critical components, and replacement of refractory bricks.

Mopani's future growth prospects hinges on its planned completion and commissioning of expansion capital projects. The Company has planned for a ramped-up production profile as these projects are expected to be commissioned to full capacity by 2027. In addition to spending on its expansion projects, the Company has continued to ensure that sustaining capital is secured and utilised in the best possible way given the current funding limitations. During the year, Mopani has spent US$77.4 million mostly on mining development and the smelter maintenance and refurbishment (2021: US$39 million). The Group  remains optimistic with the enormous task ahead to secure funds for Mopani of more than US$300 million  to complete the expansion projects over the next three years, as well as an additional US$150 million for sustaining capital over the same period.

Considering the above , and as per the Market Announcement dated 15 June 2022, ZCCM-IH engaged a globally renowned investment bank, Rothschild & Co., South Africa (Pty) Ltd ("Rothschild & Co") to assist ZCCM-IH with the strategic review of Mopani to ensure its sustainability and continued development. Mopani's  future will be realised as the expansion projects are progressively completed to be able to produce over 200,000 tonnes of finished copper cathode from 2027 onwards.  Therefore, the review is being undertaken to provide strategic options that will ensure Mopani is operating optimally and is expected to be complement by December 2023.

(II)   Kansanshi Royalty Transaction with FQM

After the year end on 31 March 2023, the shareholders of ZCCM-IH approved an agreement for a royalty transaction between ZCCM-IH and First Quantum Minerals Limited. The transaction involved ZCCM-IH conversion of its 20% equity interest in Kansanshi Mining PLC into a 3.1% life of mine royalty.

This transaction is in line with the key objective of the ZCCM-IH strategic plan of maximising value extraction from investments.

The implemented Kansanshi Royalty transaction will ensure the following benefits to ZCCM-IH;

·      Guaranteed revenue: ZCCM-IH expected to record consistent and predictable revenue over the entire mine life and will therefore benefit throughout the existence of the KMP mine if it is in operation.

·      Greater revenue: Royalty produces greater total revenue over time compared to the dividend model.

·      Access to financing: Greater capital accumulation will lead to improved access to financing; and

·      Drive portfolio growth: Improved cashflow will allow increased investment into greenfield and brownfield projects.

(III)  Delayed Publication of 2021 and 2022 Financial Statements

In 2021, ZCCM Investments Holdings PLC ("ZCCM-IH" or "the Company") acquired 90% shareholding in Mopani Copper Mines PLC bringing its shareholding to 100%. As a result of this acquisition, an independent valuation of Mopani's assets and liabilities at acquisition was required as per the provisions of the International Financial Reporting Standard 3 (IFRS 3). This process took longer than expected and resulted in delays in finalising the 2021 and subsequently the 2022 Financial Statements. This valuation exercise has now been completed and undergoing further audit reviews.

Considering the above, the 2022 comparative amounts in the statement of profit or loss and other comprehensive , statements of financial position, statement of changes in equity have been updated to reflect the draft valuation results of the fair valuation of assets and liabilities related to the acquisition of 90% shares of Mopani as of 31 March 2021. The key changes made to the 2022 comparative amounts include:  

·      Accounting for goodwill totalling ZMW 13.3 billion which was recognised at acquisition and impaired in 2021. The accounting treatment of goodwill is in accordance with the International Financial Reporting Standards; and

·      Certain comparative (2021) amounts in the statement of profit or loss and other comprehensive income have been re-presented such as revenue, cost of sales, other administration expenses , to ensure consistency.

The Company expects to publish its audited Financial Statements by 31July 2023.  In the interim, ZCCM-IH is issuing to the shareholders and the market the unaudited Financial Results for the year ended 31 December 2022. The unaudited financial results for the year ended 2021 were issued in 2022.

3.   OUTLOOK

ZCCM-IH continues to position itself to pursue more opportunities in the mining sector. As per ZCCM-IH strategy, which is focused on mining and mining related investments, the Company will seek mutually beneficial investments. ZCCM-IH is pursuing specific projects in gold, manganese, copper, cobalt as way of maximising value extraction and improving shareholder value.

     ZCCM-IH's focus going forward continues to be:

·       Raising both short-term as well long-term capital to support mining and mining related investments within the group. Critical to this is the raising of adequate capital for Mopani to enable the growth and sustainability of the mine ;

·       Implementation of more predictable alternative income streams such as royalty model;

·       Continued research and development to support investments in viable mining and mineral value Addition projects;

·       Continued implementation of the turnaround plans for loss making investee companies; and

·       Divestment from non-viable and non-mining related investments.

By Order of the Board

Charles Mjumphi

Company Secretary

Issued on 29 June 2023

APPENDICES

US DOLLAR ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		US$'000		US$'000
Gross (loss)/profit		(161,277)		8,358
Operating (loss)/profit		(196,773)		(676,634)
Net finance income		(106,384)		(44,014)
Share of profit of equity accounted investees		94,026		152,697
(Loss) before tax		(209,131)		(567,951)
Income tax (expense) /credit		(14,634)		3,378
(Loss)/profit for the year		(223,765)		(564,573)
Earnings per share (US$)		(1.39)		(3.51)
Basic and diluted earnings per share (US$)		(1.39)		(3.51)

US DOLLAR ABRIDGED COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
		Unaudited		Unaudited
		31 Dec 2021		31 Dec 2020
		US$'000		US$'000
Investment income		288,347		49,203
Revenue from contracts with customers		46		4,057
Operating profit		237,788		93,601
Net finance income		25,851		(12,807)
Profit before tax		263,639		80,794
Income tax credit/(expense)		(13,860)		4,379
Profit for the year		249,779		85,173
Earnings per share (US$)		1.55		0.53
Basic and diluted earnings per share (US$)		1.55		0.53

US DOLLAR ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		US$'000		US$'000
Assets
Property, plant, and equipment		756,962		777,599
Exploration and evaluation asset		2,767		2,077
Intangible assets		275,657		280,844
Investment property		11,120		11,541
Investments in associates		840,596		1,024,655
Financial assets at fair value through profit or loss		69,375		87,533
Trade and other receivables		162,390		79,875
Environmental Protection Fund		5,231		5,231
Deferred tax assets		6,805		20,463
Inventories		295,855		280,927
Trade and other receivables		42,256		196,018
Term deposits		295,815		39,248
Cash and cash equivalents		18,234		11,084
Assets held for sale		116,536		88,771
Total assets		2,899,599		2,905,866
Equity and liabilities
Capital and reserves		627,889		864,049
Borrowings		1,522,053		1,473,659
Retirement benefits		10,134		5,781
Provisions for environmental rehabilitation		67,640		71,973
Bank overdraft		38,118		4,230
Borrowings		47,883		47,883
Trade and other payables		412,750		287,966
Provisions		27,015		22,739
Current tax liabilities		10,533		12,161
Retirement benefits		7,707		14,649
Liabilities directly associated with assets classified as held for sale		127,877		100,776
Total equity and liabilities		2,899,599		2,905,866

US DOLLAR ABRIDGED COMPANY STATEMENT OF FINANCIAL POSITION
		Unaudited		Unaudited
		31 Dec 2022		31 Dec 2021
		US$'000		US$'000
Assets
Property, plant, and equipment		7,408		6,702
Intangible assets		198		149
Investment property		11,120		11,541
Investments in subsidiaries		22,437		19,688
Investments in associates		900,507		1,236,940
Financial assets at fair value through profit or loss		69,375		87,533
Trade and other receivables		53,076		40,613
Deferred tax assets		14,345		28,104
Inventory		830		1,159
Trade and other receivables		9,629		11,878
Term deposits		295,815		38,003
Cash and cash equivalents		2,525		4,893
Assets held for sale		8,071		25,874
Total assets		1,395,336		1,513,077
Equity and liabilities
Capital and reserves		1,369,440		1,486,662
Borrowings		-		-
Retirement benefits		514		616
Provisions for environmental rehabilitation		2,180		4,799
Borrowings		-		68
Trade and other payables		6,703		7,017
Provisions		6,021		1,773
Current tax liabilities		10,478		12,142
Total equity and liabilities		1,395,336		1,513,077

 

END