Earnings for Lusaka Securities Exchange listed Zambia Consolidated Copper Mines Investment Holdings Plc – ZCCM-IH (ISIN: ZM0000000037) rallied 33% to K975 million (versus K729 million a year ago) in the 2018 financial year. This was confirmed by the investment vehicles abridged financial statements for the year ended March 2018 published on the LuSE website.
The bullish performance was attributed to improved performance by its investee company’s in light higher copper output and healthier red metal prices on the London Metal Exchange – LME. The stronger performance by investee company’s reflected in IHs 13% asset growth to K10.9 billion.
ZCCM-IH had a significant positive share of profitability from investee company’s totaling K689 million, a turnaround from a loss position of K189 million. However these gains were partly offset by impairments on the loss making position of one of its investee Ndola Lime Company (NLC) and on its investment in Vedanta’s Resources subsidiary Konkola Copper Mines (KCM).
On the asset side IH had an 8% uptick in investments (held to maturity) to K535 million and an 11% rise in trade receivables to K1.02 billion.
INVESTRUST ‘BIG BROTHER’ TAKE OVER: ZCCM-IH bought into an ailing bank with the aim of recapitalizing to transform its loss making operations. IH has 71% stake which rose from 45% through a rights issue which was under-subscribed and the investment vehicles stepped in to plug the deficit. However this move has been received with opposition with critics siting that the mining investment vehicle should focus on mining related investments and not banking which is highly competitive. The return of investment is yet to be seen.
NDOLA LIME COMPANY: ZCCM -IH is seeking legal redress to be heard in January 2019, were two employees of Ndola Lime Company have applied to the High Court for compulsory liquidation of NLC citing financial distress. IH has invested over K1 billion to assist recapitalize its investee company over a decade.
25% DIP IN MARKET CAPITALIZATION: This week market capitalization for ZM: ISIN0000000037 shaved 25% in value when its stock price fell to K28 from K38.5 following sell off pressure.
AMETHYST MINE ACQUISITION: ZCCM-IH bought 50% of the Kariba Minerals Amethyst mine for a consideration of $2.5 million.
Risks to ZCCM-IH earnings
With a proposal in the mining tax regime from VAT to Sales Tax and the increases in mineral royalty as announced in the 2019 budget by Zambia’s MinFin, copper output could be at threat in addition to lay offs in 2019 which could impact performance of its investee company’s. Other factors could include global slow down in economic growth as the US – China trade war effects trickle to the commodity markets to wane copper and metal prices on the London Metal Exchange. If these actualize IH’s earnings could plummet significantly.
