Metal Fabricators of Zambia PLC Directors’ Report and ...€¦ · the New York Stock Exchange with Chile’s Antofagasta giving up a similar percentage while Rio Tinto and BHP Billiton

Metal Fabricators of Zambia PLC

Directors’ Report and Financial Statements

For the year ended 31 December 2015

Metal Fabricators of Zambia Plc(Incorporated in Zambia)

Directors’ Report and Financial StatementsFor the year ended 31 December 2015

Table of contents

Financial highlights 1

General Company information 2-3

Directors’ report 4-10

Directors’ statement of responsibility for annual Statements 11

Independent auditor’s report 12

Financial statements:

Statement of profit or loss and other comprehensive income 13

Statement of financial position 14

Statement of changes in equity 15

Statement of cash flows 16

Notes to the financial statements 17 -47

Notice of the Annual General Meeting 48

Form of Proxy 49-50

1

Financial Performance

2015 2014

Turnover 1,009,198 1,075,672

Operating profit for the year 32,487 27,973

Net loss for the year (82,251) (4,801)

Loss per share (3.04) (0.18)

Net cash generated from operating activities 45,830 86,951

Capital expenditure 9,651 20,094

Financial PositionCash and bank balances 32,495 58,282

Total assets 532,020 639,468Long term loanShort term borrowings and bank overdrafts

-189,775

63,886145,760

Shareholders’ equity 71,846 157,889

Issued ordinary shares 27,090 27,090

Metal Fabricators of Zambia Plc

Financial highlightsFor the year ended 31 December 2015(In thousands of Zambian Kwacha except for the loss per share)

2

Directorate

The Directors who held office during the year and to the date of this report were:

A.B. Munyama - ChairmanL.A. Corte - Executive Director G.K. Chibuye - Non-Executive DirectorR.M. Chabala (Mrs) - Executive DirectorJ. Duplessis - Executive DirectorR. D. Kenny - Executive Director (Appointed January 2015)K.J. Zimmer - Executive Director (Resigned January 2015) Director G.K. Chibuye declared material interest in a transportation company namely Hercules Equipment which had a copper haulage contract with Zamefa during the year under review. Senior Management

R.M. Chabala (Mrs) - Managing DirectorJ. Duplessis - Chief Commercial OfficerS. Sikombe - Human Resources ManagerG. Bracho - Plant Manager (Appointed January 2015)D. Marshall - Plant Manager (Resigned January, 2015) E. Mangoni - Financial Controller (Appointed February 2015)E. De Kock - Financial Controller (Resigned February 2015) Business address and registered office

Metal Fabricators of Zambia Plc is incorporated in the Republic of Zambia under the Zambian Companies Act as a public limited liability company and is domiciled in Zambia. The address of its registered office and the principal place of business is:

Plot 1400H. Figov RoadPO Box 90295LuanshyaRepublic of Zambia

Telephone: +260-212-591010/591114Facsimile: +260-212-510023

Bankers

Standard Chartered Bank Zambia PLCBarclays Bank of Zambia PLCCitibank Zambia LimitedStandard Bank of South Africa LimitedStanbic Bank Zambia Limited

Transfer Secretaries

Sharetrack Zambia

Auditors

Deloitte & Touche


General Company information

3

Company Profile

Metal Fabricators of Zambia (ZAMEFA) Plc was incorporated in 1968 and was privatized in 1996. The Company became listed on the Lusaka Stock Exchange (LuSE) in September 2004.

The ultimate parent company for ZAMEFA is General Cable Corporation, a company incorporated in the United States of America and listed on the New York Stock Exchange.

The principal shareholder of ZAMEFA is Phelps Dodge Africa Cable Corporation (PDACC), a wholly owned subsidiary of General Cable Corporation (General Cable). PDACC owns 75.4% of the total issued shares of ZAMEFA and the remainder is held by a broad portfolio of investors comprising local, foreign institutions and individuals, including employees of the Company.

General Cable Corporation is a global leader in the development, design, manufacture, marketing and distribution of copper, aluminium and fibre optic wire and cable products for the energy, industrial and communications markets. It is a company with a very broad product range and global reach in the wire and cable industry. General Cable and its affiliates have served various wire and cable markets for over 150 years.

The Company continues to hold full certifications for ISO 9001 (for quality management systems), ISO 14001 (for environmental management systems) and OHSAS 18001 (for occupational health and safety management systems). Additionally the Company continues to hold the South African Bureau of Standards (SABS) permit for its range of low voltage power distribution cables.

Exports continue to be the main source of revenues for the Company. During the year under review, exports accounted for 71% of the total sales revenues with South Africa still being the dominant market.


General Company information (continued)

4

The Directors present their report together with the audited financial statements of the Company for the year ended 31 December 2015.

Principal activities

The principal activities of the Company continue to be the manufacture of copper rod and copper and aluminium electrical conductors for sale to customers in the domestic and foreign markets. The Company also continues to manufacture and sell telecommunication cables.

In the opinion of the Directors, all the activities of the Company substantially fall within the manufacturing sector.

Share capital

There were no changes in the issued share capital of the Company during the year.

Results and dividends

2015 2014K ‘000’ K ‘000’

Net sales 1,009,198 1,075,672

Operating profit for the year 32,487 27,973

Net loss for the year (82,251) (4,801)

The loss for the year has been adjusted to retained earnings. The Directors recommend the declaration of a dividend payment for the year ended 31 December 2015 of K0.14 per share (2014: K0.14) per share.

Review of operations

(i) Financial performance:

The Company recorded an operating profit for the year of K32,487,000 compared to K27,973,000 during the prior year.

Net loss for the year amounted to K82,251,000 compared a loss of K4,801,000 in 2014. This was mainly due to high foreign exchange losses attributed to the depreciation of the Zambian Kwacha against major foreign currencies.

(ii) Commercial Report

Copper price is currently at a six year record low, drastically affecting Zambia’s economy. Copper price resumed its downside spiral in the fourth quarter after remaining relatively strong earlier in the year. On November 26, the London Metal Exchange (LME) three-month copper price closed at $4,650 per metric ton. Three month LME copper price has fallen substantially and joined the ranks of other metals—including steel, iron ore, and aluminium - hitting new 2015 lows.

Chinese copper demand has been the key driver of copper prices for more than a decade. China’s slowdown has been the major factor driving copper prices to levels unseen since the global financial crisis of 2008–2009.


Directors’ report For the year ended 31 December 2015

5

Review of operations (continued)

(ii) Commercial Report (continued)

In addition, commodity prices tend to have an inverse correlation with the US dollar. When the Dollar gains, commodities tend to fall, and vice versa. Since most commodities are priced in the US Dollar, a strong Dollar makes commodities more expensive in other currencies.

In November 2015 the IMF issued a statement raising concerns over the Zambian economy. Shortly after, Zambia’s president, His Excellency Edgar Chagwa Lungu, ordered spending cuts in several sectors. Electricity tariffs were raised sharply in early December as the government sought to reduce its subsidy bill. The price increase will help to spur investment in the power sector but will also boost inflationary pressures.

Year-on-year inflation increased to 19.5% in November, driven by sharp currency depreciation.


Directors’ report For the year ended 31 December 2015 (continued)

Despite this, ZAMEFA’s Lusaka Sales and Distribution Centre, based in Makeni, managed to secure record sales, peaking in Quarter 1 and Quarter 4. In addition ZAMEFA secured numerous supply contracts with utility ZESCO. While the majority of contracted items were supplied in 2015, a substantial amount will overflow to 2016. This will compliment sales for the first two quarters, ensuring a good start to 2016.

Konkola Copper Mines Plc, a subsidiary of UK-headquartered Vedanta Resources, announced in November 2015 that it was placing the Nchanga copper mine under care and maintenance because of low copper prices. While Mopani Copper Mines Plc, a subsidiary of Glencor of Switzerland, announced 50% cut in production that will result in numerous retrenchments. To date at least 7,000 people have lost their jobs as a result of cutbacks by mining companies, which are struggling with low copper prices.

As a result, ZAMEFA’s mining sector 2015 actual sales drastically fell below forecasted sales. While almost all Zambian based mines introduced major cutbacks, some operations in the Democratic Republic of Congo completely pulled back production, pending improved LME.

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(ii) Commercial Report (continued)

Furthermore, lower metal prices resulted in drop of share prices of mining companies such as Anglo America, whose share price fell by 9.5% there lowest level since listing on the London Stock Exchange in 1999. Concerns about Swiss based commodity trader, Glencore debt level resulted in further fall of stock price on the London Stock Exchange.

Other copper mines also pulled back with US based Freeport McMoran losing 4.6% of its share price on the New York Stock Exchange with Chile’s Antofagasta giving up a similar percentage while Rio Tinto and BHP Billiton both lost over 2.3%.

It is forecasted that Zambia's Real GDP growth will remain below 4% in 2016 given high inflation and tight monetary policy. It might quicken in 2017-18, helped by an improved power supply and rising copper output, before slowing to around 5% in 2019-20.

While growing concerns in South Africa’s economic growth and political instability limits ZAMEFA's export sales, East Africa growing export trading offset most marginal income shortfall from South Africa. Recent Oil and Gas discoveries will lead to greater economic growth in years to come.

Despite numerous challenges such as declining commodity prices, depreciating currencies, complex market conditions and increasing costs, ZAMEFA managed to exceed 2015 overall budgeted marginal income.

(iii) Manufacturing/Operational.

In order to maintain global manufacturing excellence, the Company has sustained and continued to reinforce the Lean Enterprise System in order to achieve repeatability and consistency in the processes, eliminating waste, reducing variations and breaking constraints on a daily basis. During the year under review, Metal Fabricators of Zambia Plc Lean Technicians, trained by General Cable Corporation, launched several projects aimed at reducing waste and improving processes in order to reduce operational costs.



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(iii) Manufacturing/Operational (continued)

During 2015, some new equipment such as a Rod Breakdown Machine and a Drum Twister arrived and were commissioned. Also, three hundred square meters of production area were added to the Wire and Cable plant to allow new equipment installation. The investment was aimed at improving capacity and quality and replacing old equipment which had become expensive to maintain, so that the company can remain competitive.

Zamefa equally retained its SABS certification for low voltage power cables and ACSR aluminium products, and for its Integrated Management System that covers ISO9001, ISO14001 and OSHA18001 following a successful audit conducted by the South African Bureau of Standards (SABS) during 2015.

(iv) Human resources.

During the year the Company employed a monthly average of 324 people.

The Company has remained focused on the technical skills training and development of its employee base focused on key business imperatives. In FY2015 the focus of the Company is aligned to strengthening the shop floor with the multi-skill training program for machine operators and technicians tailored to meet the new challenges and the dynamics in modern equipment implementation in the plant. Further the Company will invest in enhancement of the Lean Manufacturing training at all levels of the entire workforce through the effective adherence to work routines and procedure compliance as per Zamefa Management System (ZMS).

During the year under review the Company continued the implementation of its Work Cultural Model, “Wired As One” concept focused on the 6 core values of

1. People 2. Respect 3. Responsibility 4. Integrity 5. Responsiveness 6. Safety.

The Pay-for-Performance initiatives such as the Performance Based Bonus scheme were revised and paid out on a monthly basis reliant on the achievements against set targets, while the variable pay for sales and marketing personnel continued to be promoted in order to achieve the Key Performance Indicators accomplishments on both the strategic and generic growth of the business.

Outlook for the Future

The Company expects competition from both old and new players in the market. However, the Board of Directors and management are optimistic that with the current investments in Human Resource, equipment modernization and increased productivity, the Company will remain competitive and be able to deliver value for all stakeholders.



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(iv) Human resources (continued)

Average number and remuneration of employees

The total remuneration paid to employees during the year amounted to K32,125,000 (2014: K30,275,000) and the average number of employees was as follows:

Month Number Month NumberJanuary 330 July 323February 325 August 324March 322 September 325April 325 October 324May 324 November 324June 324 December 324

Safety, health and environment

The Company continues to hold full certifications for ISO 14001:2004 (Environmental Management System) and OHSAS 18001:2007 (Occupational Health and Safety Assessment Series) and continuously improves these systems as part of the integrated Zamefa Management System, reviewing and deploying appropriate Safety, Health and Environmental policies and procedures across the organization. Regarding Safety, no lost time injury was recorded from January to December 2015. This has been achieved by programs put in place by management. The programs include Behaviour Based Safety (BBS) whereby the employees on a daily basis observe each other on safety, health and environmental aspects pertaining to their work with the sole objective of ensuring that good work behaviours/culture become a norm both at the workplace and at home in line with the policy “Zero and Beyond”. Other programs include Hazard Evaluation Risk Analysis (HERA), Lock Out Tag Out and Try Out (LOTOTO), Human Factor Analysis Classification System (HFACS), Potential Risk Detection (PRD), Face to Face Safety Dialogue, People Caring about People and Practical Safety Demonstrations conducted weekly every Wednesday and leading excellence regarding Safety, Health and Environment. Housekeeping has been re–enforced through housekeeping audits by respective heads of departments and Job Safety Analysis implementation and revisions to suit specific tasks.

The Company continued to manifest environmental stewardship and pursue proactive Safety, Health and Environmental programs that have been deployed across the group through the parent company, General Cable Corporation. The Company planted 400 trees in the community which include schools and churches. Notwithstanding this, the Company had some minor non-conformances which were closed out, when a Factory inspector conducted an audit during the year. The Company has continued to have a comprehensive Malaria Prevention Program that includes in-door residual spraying in associates houses and factory, above all issuing out of mosquito nets to all associates and control of breeding sites in and around the plant. The malaria awareness was also extended to the spouses of the associates.

The Company continues to operate an on-site clinic with a full-time doctor and nurse. The Company has a workplace HIV/AIDS and malaria policy and programs for prevention of common diseases. The clinic provides HIV/AIDS counselling as well as VCT services. The Company also registers all its employees on a medical scheme with Luanshya Mine Hospital for referral cases.



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(iv) Human resource (continued)

Furthermore the Company has engaged all associates families in respective programs e.g. alcohol abuse, HIV and Aids, fire prevention and first aid management. The Company rolled out an intensive alcohol screening exercise to all associates and contractors in order to have an alcohol-free work environment.

Corporate governance

The Company recognises its responsibility for fostering a strong ethical environment so that its affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility is characterised and reflected in the Code of Business Ethics and Policies, which is distributed throughout the Company and has been subscribed by all employees.

The Board composition is balanced so that no one individual can dominate decision making. The depth of experience and diversity of the Board ensures robust deliberations on all issues of material importance to the Company.

The roles of Chairman and Managing Director are separate. The Chairman is an independent non-executive Director appointed by the Board.

Corporate social responsibility

The Company remains committed to the principles of good corporate citizenship and has continued in its quest to invest in structured social programs to address specific needs of its surrounding communities in which it conducts business. Working in partnership with local government authorities the Company considers various social projects on the basis of sustainability and ability to benefit the majority of residents in the community.

In line with the above-mentioned framework the Company undertook and supported the following community based projects:

� As part of world women’s day commemoration donated various food stuffs and personal effects to vulnerable women and children.

� Contributed to the National Tree Planting initiation by partnering with Green Initiative (Zambia) by purchasing and planting 400 trees in strategic locations such as Government Schools, Health Centers and Recreation Facilities within Luanshya district.

� Material and logistical/financial support to the National HIV/AIDS counseling and testing programs in the community.

� Logistical and material support to the Ministry of Health to combat epidemics such as Typhoid, dysentery and Rabies.

� Conducted the annual residual anti-malaria spray program.

Gifts and donations

The Company recognises its responsibility to the community where it operates and provides assistance in various forms to a variety of non-political institutions and organisations in the community. During the year the Company made donations to charitable causes in an aggregate sum of K91, 000 (2014: K370, 000).



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Exports

The Company exported goods amounting to K715,807,000 (2014: K813,363,000) from Zambia during the year.

Property, plant and equipment

Additions to property, plant and equipment during the year amounted to K9,651,000 (2014: K20,094,000). Research and development

The Company uses and relies on Technical Development and Research Centres of General Cable Corporation where it derives benefits on Research and Development aspects.

General Cable Corporation Divesture announcement

On October 29, 2014, General Cable Corporation announced their intent to divest all of their manufacturing operations in Asia Pacific and Africa in order to simplify their geographic manufacturing footprint and reduce organizational complexity.

Auditors

The Company’s auditors, Messrs Deloitte & Touche, have indicated their willingness to continue in office. Therefore, in accordance with the Companies Act, a resolution for their reappointment will be proposed at the Annual General Meeting.

By order of the Board

Jonathan AmbaliCompany Secretary 7 March 2016 Lusaka



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Section 164 (6) of the Companies Act, 1994 requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the profit or loss for that period. The Directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information. The independent external auditors, Messrs Deloitte & Touche, have audited the annual financial statements and their report appears on page 12. The Directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain accountability for assets, and to prevent and detect material misstatements. The systems are implemented and monitored by suitably trained personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems have occurred during the period under review.

The annual financial statements are prepared on a going concern basis. Nothing has come to the attention of the Directors to indicate that the Company will not remain a going concern in the foreseeable future. The Directors confirm that the following statement is in accordance with a resolution of the Directors.

In the opinion of the Directors: (a) the statement of profit or loss and other comprehensive income is drawn up so as to give a true and

fair view of the loss of the Company for the financial year ended 31 December 2015;

(b) the statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2015;

(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due; and

(d) the financial statements have been prepared in accordance with International Financial Reporting Standards and the Companies Act, 1994 (as amended).

Signed on behalf of the Board by:

_______________________ _______________________ Director Director

March 2016


Directors’ statement of responsibility for annual financial statementsFor the year ended 31 December 2015

12

INDEPENDENT AUDITOR’S REPORT

To the members of


Report on the financial statements

We have audited the accompanying financial statements of Metal Fabricators of Zambia Plc set out on pages 13 to 47 which comprise the statement of financial position as at 31 December 2015, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statements

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the Companies Act, 1994 (as amended), and for such internal controls as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Metal Fabricators of Zambia Plc as at 31 December 2015 and its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the Companies Act, 1994 (as amended).

Report on other legal requirements

The Companies Act, 1994 (as amended) requires that in carrying out an audit, we consider and report to you on the following matter:

We confirm that the accounting and other records and registers required by the Act have been properly kept in accordance with the Act.

Emphasis of matter

We draw attention to Note 28 in the financial statements which describes management’s plans regarding the ability to continue as a going concern, as well as considerations related to a signed purchase agreement for all of the assets and liabilities of the Company. Our opinion is not qualified in respect of this matter.

DELOITTE & TOUCHE

F. M. NCHIMUNYA (M/PC 0000181)PARTNER

P.O. Box 20416 Deloitte & ToucheKitwe Fookes House Zambia Zambia Tel: +260 212 22 966/362/818 Fax +260 212 227 140

13

Statement of profit or loss and other comprehensive income

Notes 2015 2014

K ‘000 K ‘000

Revenue 6 1,009,198 1,075,672

Cost of sales (919,530) (1,001,743)

Gross profit 89,668 73,929

Other income - 2,275

Distribution costs (26,288) (21,811)

Administrative expenses (30,893) (26,420)

Operating profit 7 32,487 27,973

Finance costs

Interest income

9

9

(14,625)

3

(11,875)

4,631

Net foreign exchange losses (113,924) (27,427)

Loss before income tax (96,059) (6,698)

Income tax credit 10 13,808 1,897

Loss for the year (82,251) (4,801)

Other comprehensive income

Items that will not be reclassified subsequently to the profit or loss

Revaluation surplus on property, plant and equipment - 30,636

Deferred tax on revaluation surplus on property, plant and equipment

Other comprehensive income for the year

21 -

-

(6,127)

24,509

Total comprehensive (Loss) income for the year (82,251) 19,708

Loss per share

-Basic and diluted (Kwacha per share) 11

(3.04)

(0.18)

Dividends:

Proposed final dividend for the year 12 3,792 3,792


Financial statementsFor the year ended 31 December 2015

14

Statement of financial position

Notes 2015 2014K ‘000 K ‘000

AssetsNon-current assetsProperty, plant and equipment 13 129,133 127,580Deferred tax assets 22 10,925 -

140,058 127,580Current assets

Inventories 15 79,661 99,544Trade and other receivables 16 279,806 349,547Other financial assets 25 - 4,515Cash and bank balances 17 32,495 58,282

Total current assets 391,962 511,888

Total assets 532,020 639,468

Equity and liabilitiesCapital and reservesShare capital 20 271 271Revaluation surplus 21 52,880 52,880Proposed dividend 14 3,792 -Retained earnings 14,903 104,738

Total equity 71,846 157,889

Non-current liabilitiesLong term loan - 63,886Deferred tax liabilities 22 - 7,797Retirement benefit obligations 23 4,171 2,503

Total non current liabilities 4,171 74,186Current liabilitiesBank overdrafts 19 189,775 84,362Short term borrowing 19 - 61,398Trade and other payables 18 263,706 258,617Current income tax liabilities 10 2,522 3,016

Total current liabilities 456,003 407,393

Total liabilities 460,174 481,579

Total equity and liabilities 532,020 639,468

The financial statements on pages 13 to 47 were approved for issue by the Board of Directors on 7 March 2016 and signed on its behalf by:

___________________ ___________________Director Director



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Statement of changes in equity

NotesShare

capitalRevaluation

reserve Retained

earnings Proposed dividend Total

K ‘000 K ‘000 K ‘000 K ‘000 K ‘000

Year ended 31 December 2014

At start of the year 271 29,758 107,805 3,251 141,085

Loss for the year - - (4,801) - (4,801)

Other comprehensive income net of tax - 24,509 - - 24,509

Realised on disposal of property, plant andequipment Dividend:

- (1,387) 1,734 - 347

- Final for 2013 – paid - - - (3,251) (3,251)

At end of the year 271 52,880 104,738 - 157,889

Year ended 31 December 2015

At start of the year 271 52,880 104,738 - 157,889

Loss for the year - - (82,251) - (82,251)

Dividend:

- Final for 2014 - paid - - (3,792) - (3,792)

- Proposed for 2015 - - (3,792) 3,792 -

At end of the year 271 52,880 14,903 3,792 71,846



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Statement of cash flowsNotes 2015 2014

K ‘000 K ‘000Cash flows from operating activities

Cash generated from operations 24 65,860 95,935Interest received 9 3 4,631Interest paid 9 (14,625) (11,875)Income tax paid 10 (5,408) (1,740)

Net cash generated from (used in) operating activities 45,830 86,951

Cash flows from investing activities

Purchase of property, plant and equipment 13 (9,651) (20,094)Proceeds from disposal of property, plant and equipment 24 3,887

Net cash used in investing activities (9,627) (16,207)

Cash flows from financing activities

(Repayment of ) proceeds from long term loan (Decrease) increase in short term borrowings

1919

(102,213) (61,398)

39,329 16,266

Dividends paid 12 (3,792) (3,251)

Net cash (used in) generated from financing activities (167,403) 52,344

Net (decrease) increase in cash and cash equivalents (131,200) 123,088

Movement in cash and cash equivalents

At start of the year (26,080) (149,168)(Decrease) increase in cash and cash equivalents (131,200) 123,088

At end of the year 17 (157,280) (26,080)

Comprising of:

Cash and bank balances 32,495 58,282Bank overdraft (189,775) (84,362)

Net cash and cash equivalents 17 (157,280) (26,080)



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Notes to the financial statements

1. General information

Metal Fabricators of Zambia Plc (ZAMEFA) is a Public Company incorporated in the Republic of Zambia. The address of its registered office and principal place of business is disclosed on page 2. The principal activities of the Company are disclosed in the report of the Directors on page 4.

2. Adoption of new and revised International Financial Reporting Standards

2.1 Amendments to IFRSs that are mandatorily effective for the current year

In the current year, the Company has applied the following amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for accounting periods that begin on or after 1 January 2015:

Annual Improvements to IFRSs 2010 - 2012 Cycle and 2011 – 2013 Cycle

The adoption of these amendments has had no impact on the disclosures or amounts recognised in the Company’s financial statements.

2.2 Standards and Interpretations in issue, not yet effective

At the date of authorisation of these financial statements, the following relevant Standards and Interpretations were in issue but not yet effective:

Effective date Standard, Amendment or interpretation

1 January 2018 IFRS 9: Financial Instruments

IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments.

1 January 2016 Amendments to IAS 1: Disclosure Initiative

The amendments to IAS 1 give some guidance on how to apply the concept of materiality in practice. � An entity should not reduce the understandability of its financial statements by obscuring

material information with immaterial information or by aggregating material items that have different natures or functions.

� An entity need not provide a specific disclosure required by an IFRS if the information resulting from that disclosure is not material.

� In the other comprehensive income section of a statement of profit or loss and other comprehensive income, the amendments require separate disclosures for the share of other comprehensive income of associates and joint ventures accounted for using the equity method that will not be reclassified subsequently to profit or loss and those that will be reclassified subsequently to profit or loss.



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1 January 2016 Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and AmortisationThe amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted in the following two limited circumstances:

a) when the intangible asset is expressed as a measure of revenue; or

b) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

1 January 2016 Annual Improvements to IFRSs 2012-2014 Cycle

The Annual Improvements to IFRSs 2012-2014 Cycle include a number of amendments to various IFRSs, which are summarised below: The amendments to IFRS 5 introduce specific guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments clarify that such a change should be considered as a continuation of the original plan of disposal and hence requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments also clarifies the guidance for when held-for-distribution accounting is discontinued.

The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.The amendments to IAS 19 clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high qualify corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead.

The Directors anticipate that the adoption of these standards in future periods will have no significant impact on the financial statements of the Company.

3 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out

below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Statement of compliance The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS).

(b) Basis of preparation

The financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.



Notes to the financial statements (continued)

2. Adoption of new and revised International Financial Reporting Standards

2.2 Standards and Interpretations in issue, not yet effective (continued)

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3 Summary of significant accounting policies (continued)

(b) Basis of preparation (continued)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for the measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

� Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

� Level 2 inputs are inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly ; and

� Level 3 inputs are unobservable inputs for the asset or liability.

The financial statements are presented in Zambian Kwacha (K), rounded to the nearest thousand.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements are disclosed in note 5.

(c) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and value added tax during the year.

Sale of goods

Revenue from the sale of goods is recognised when goods are delivered to customers and title has passed, at which time all the following conditions are satisfied:

� The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;� The Company retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold;� The amount of revenue can be measured reliably � It is probable that economic benefits associated with the transaction will flow to the Company; and � The costs incurred or to be incurred in respect of the transaction can be measured reliably.



20



(c) Revenue recognition (continued) Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset’s net carrying amount on initial recognition.

(d) Foreign currencies

In preparing financial statements, transactions in currencies other than the Zambian Kwacha are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for:

� exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

� exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

� exchange differences on monetary items receivable from or payable to foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

(e) Property, plant and equipment

Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed at least every five years such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period.

Any revaluation increase arising on the revaluation of such buildings is recognized in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognized in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.



21



(e) Property, plant and equipment (continued)

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees that are capitalized in accordance with Company’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for intended use.

Depreciation on revalued buildings is recognized in the profit and loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Freehold land is not depreciated.

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognized so as to write off the cost of valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method as follows:

� Buildings 50 years � Plant and machinery 10 years � Furniture, fixtures and fittings 4 - 10 years� Motor vehicles 4 years

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. On disposal of revalued assets, amounts in the revaluation surplus relating to that asset are transferred to retained earnings.

Impairment of tangible and intangible assets At each reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to

determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the

estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.



22



(e) Property, plant and equipment (continued)

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal on impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average

method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

(g) Financial instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual

provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i) Financial assets Financial assets are classified into the following specified categories: financial assets at a fair value through

profit or loss (FVTPL), ‘held-to-maturity investments’, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and it is determined at the time of initial recognition. The Company’s principal financial assets are receivables and bank and cash balances.

Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating

interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.



23


3 Summary of significant accounting policies (continued) (g) Financial instruments (continued)

(i) Financial assets (continued)

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash, and amounts due from related parties) are measured at amortised cost using the effective interest method, less any impairment.

Impairment of financial assets Financial assets other than those at “fair value through profit and loss” (FVTPL), are assessed for indicators of

impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the

asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amounts and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment

loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed

through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.



24



(i) Financial assets (continued)

Derecognition of financial assets

The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of the ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for the amount it may have to pay. If the Company retains substantially all the risks and rewards of ownership of the transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to

repurchase part of a transferred asset), the Company allocates previous carrying amounts of the financial asset between the part it continues to recognise under continuing involvement and the party it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

(ii) Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.



25



(ii) Financial liabilities and equity instruments (continued)

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’. The Company’s principal financial liabilities are trade and other payables and borrowings.

Other financial liabilities Other financial liabilities (including borrowings and trade and other payables) are subsequently measured

at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and

of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Derivative financial instruments The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate

risks. Derivatives are initially measured at fair value at the date the derivative contracts are entered into and

subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(h) Employee benefits Retirement benefit costs and termination benefits The Company and all its employees contribute to the National Pension Scheme Authority (NAPSA), which

is a defined contribution scheme. The Company’s contributions to the defined contribution schemes are charged to the profit or loss in the year to which they relate. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.



26


3 Summary of significant accounting policies (continued) (h) Employee benefits (continued)

The Company also operates a staff gratuity scheme for its employees which are of the nature of a defined benefit scheme. Under the defined benefit scheme, the employees are entitled to gratuity payment based on the number of years worked and their terminal salaries at retirement. The liability recognised in the statement of financial position in respect of the gratuity scheme is the past service cost that the Company would have incurred at the reporting date.

(i) Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’

as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities

in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised on surpluses arising from the revaluation of property, plant and

equipment. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in

which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from

the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against current tax liabilities levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.



27


3 Summary of significant accounting policies (continued) (i) Income tax (continued)

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(j) Provisions Provisions are recognised when the Company has a present legal and constructive obligation as a result of past

events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

The amount recognised as a provision is the best estimate of the consideration required to settle the present

obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(k) Share capital

Ordinary shares are classified as equity. (l) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,

which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (m) Dividends Dividends payable to the Company’s shareholders are charged to equity in the period in which they are

declared. Proposed dividends are shown as a separate component of equity until declared.



28



(n) Revaluation reserve The surplus arising on revaluation of property, plant and equipment is recognised in other comprehensive

income. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred directly to retained earnings. No transfer is made from the revaluation to retained earnings except when an asset is derecognised.

(o) Comparatives

Where necessary, comparatives figures have been adjusted to conform to changes in presentation in the current year.

4 Financial risk management The Company’s activities expose it to a variety of financial risks, including credit risk, foreign currency

exchange rates and interest rates. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance.

Risk management is carried out by the management under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investing excess liquidity.

Market risk

(i) Foreign exchange risk

The Company operates internationally and is exposed to foreign exchange risks arising from various currency exposures especially with respect to the United States Dollar and the South African Rand.

Liabilities Assets2015

K’ 0002014

K’ 0002015

K’ 0002014

K’000

United States Dollar 406,945 453,358 230,362 180,692

South African Rand 9,064 8,644 19,052 111,336

416,009 462,002 249,414 292,028 The Company manages foreign exchange risk arising from certain future commercial transactions and

recognised assets and liabilities using forward contracts, but has not designated any derivative instruments as hedging instruments.

At 31 December 2015, if the Kwacha had weakened/strengthened by 5% against the US Dollar with all other variables held constant, post tax loss for the year would have been K7,063,320 higher/lower (2014: K13,633,304 lower/higher), mainly as a result of US Dollar payables, receivables, bank balances and borrowings.



29


4 Financial risk management (continued) Market risk (continued)

At 31 December 2015 if the Kwacha had weakened/strengthened by 5% against the South African Rand with all other variables held constant, post tax loss for the year would have been K399,302 lower/higher (2014: K5,134,587 higher/lower), mainly as a result of Rand denominated trade payables, receivables and bank balances.

(ii) Interest rate risk management

The Company’s only interest bearing assets are short term bank deposits. The Company has borrowings at floating rates and certain payables for copper cathode purchases also attract interest at floating rates. At 31 December 2015, an increase/decrease of 50 basis points would have resulted in an increase/decrease in post-tax profit of K1,583,265 (2014: K1,800,000 decrease/increase).

Credit risk

Credit risk arises mainly from trade and other receivables. The credit risk on liquid funds is limited because counter parties are banks with high credit rating. Exposure to credit risk is managed through trading with customers with an appropriate credit history, regular review of credit limits and debtors recoverability. The Board of Directors is involved in the review of debtors’ position.

The Company’s maximum exposure to credit risk at 31 December 2015 is as follows:

2015 2014K' 000 K' 000

Trade receivables 231,541 280,014Cash and bank balances 32,495 58,282Sundry receivables 314 3,573

264,350 341,869

No collateral is held for any of the above assets.

None of the above assets are impaired except as noted below:

2015 2014K’000 K’000

Past due receivables but not impaired: - by 31 to 60 days 42,137 64,782 - by 61 to 90 days 17,695 33,317 - over 90 days 48,410 105,002

Total past due but not impaired 108,242 203,101

Impaired receivables (16,651) (6,211)

Receivables are reviewed for impairment every reporting date on an account by account basis and provisions made when it is probable that economic benefits in relation to particular receivables will not flow to the Company.



30


4 Financial risk management (continued)

Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding from an adequate amount of committed credit facilities.

Management monitors rolling forecasts of the Company’s liquidity reserve on the basis of expected cash flow.

The table below analyses the Company’s financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date.

1-12 months K ‘000

1-5 YearsK ‘000

At 31 December 2015: - Trade and other payables 261,795 -

- Borrowings 189,775 -

451,570 -

At 31 December 2014: - Trade and other payables 257,327 -

- Borrowings 145,760 63,886 403,087 63,886

The table below analyses the Company’s financial assets that are receivable on a net basis into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date.

1 – 3 months

2015K’000

2014K’000

Receivables and cash and cash equivalents 264,350 341,869



31



Capital risk management

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue new capital.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by equity. Net debt is calculated as total borrowings less cash and cash equivalents. Equity comprises of issued share capital, revaluation reserves and retained earnings.

2015 2014The gearing ratio at year end was as follows: K’000 K’000

Net cash and cash equivalents (note 17) 157,280 26,080Short term borrowings - 61,398Long term loan - 63,886

157,280 151,364

Equity 71,846 157,889

Gearing ratio 219% 96%

Categories of financial instruments

Financial assetsLoans and receivables: Receivables and cash and cash equivalents 264,350 341,869 Derivative financial instruments at fair value - 4,515

Financial liabilities 264,350 346,384At amortized cost:

Payables and borrowings 451,570 466,973



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Fair value measurements

This note provides information about how the Company determines fair value of various financial assets and financial liabilities

Fair value of the Company’s financial assets that are measured at fair value on a recurring basis

Some of the Company’s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique and inputs)

Financial assets Fair values Fair value

hierarchy Valuation technique and key inputs

2015 2014

Foreign currency forward contracts

K’000

-

K’000

4,515 Level 2

Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

There were no transfers between level 1 and level 2 in the period.

Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair values disclosures are required).

Except as detailed in the table below, the directors consider that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate fair values.

2015K’000

2014K’000

Carrying amount Fair value

Carrying amount Fair value

Financial assetsLoans and receivables:Trade and other receivables 231,855 231,855 283,587 283,587

Financial liabilitiesFinancial liabilities held at amortised cost:

Bank loans and overdrafts 189,775 189,775 145,760 145,760

Loans from related parties - - 63,886 63,886

Trade and other payables

Total

261,795

451,570

261,795

451,570

257,327

466,973

257,327

466,973



33



Fair value measurements (continued)

Fair value hierarchy at 31 December 2015

Level 1 Level 2 Level 3 TotalK'000 K'000 K'000 K'000

Financial assets

Loans and receivables:

Trade and other receivables - - 231,855 231,855


Financial liabilities held at amortised cost:

Bank loans and overdrafts - - 189,775 189,775Trade and other payables - - 261,795 261,795

Total - - 451,570 451,570

Fair value hierarchy at 31 December 2014Level 1 Level 2 Level 3 Total

K'000 K'000 K'000 K'000

Financial assets

Loans and receivables:Trade and other receivables - - 283,587 283,587Derivative financial instruments:Hedges - 4,515 - 4,515

Total - 4,515 283,587 288,102


Financial liabilities held at amortised cost:

Bank loans and overdrafts - - 145,760 145,760Loans from related parties - - 63,886 63,886Trade and other payables - - 257,327 257,327

Total - - 466,973 466,973



34


5 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors,

including expectation of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions are as follows: (i) Income taxes The Company is subject to income taxes in Zambia. There are many transactions and calculations for which

the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact on the income tax and deferred tax provisions in the period in which such determination is made.

(ii) Impairment losses on trade receivables Impairment losses are based upon historical patterns of losses. In determining whether an impairment

loss should be recorded in the statement of comprehensive income, the Company makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of trade receivables before a decrease can be identified with an individual trade receivable in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of trade receivables in their group, or local economic conditions that correlate with defaults on assets in that group.

(iii) Estimate of assets lives, residual values and depreciation methods Property, plant and equipment are depreciated over their useful life taking into account residual values.

Useful lives and residual values are assessed annually. Useful lives are affected by technology innovations, maintenance programmes and future productivity. Future market conditions determine the residual values. Depreciation is calculated on a straight line basis which may not represent the actual usage of the asset.

2015 2014

6 Analysis of sales by category K’000 K’000

Copper rods 497,064 486,510Wires and cables 512,134 589,162

1,009,198 1,075,672

7 Operating profit

The following items have been charged in arriving at operating profit: Inventories expensed 861,740 945,122Employee benefits expense (Note 8) 32,125 30,275Provision for Doubtful debtsDepreciation on property, plant and equipment (Note 13)

10,9138,068

3,8767,134

Directors’ remuneration - as Managers 6,133 3,955 - as Directors 292 208

Auditors’ remuneration and expenses 600 418Gifts and donations 91 370Loss on disposal of property, plant & equipment 6 -After crediting:Gain on disposal of property, plant and equipment - (1,970)



35

Notes to the financial statements (continued) 8 Employee benefits expense 2015 2014

K’000 K’000The following items are included within employee benefits expense:

Salaries and wages 27,292 26,976Retirement benefits costs:- Terminal benefits and long service gratuities (Note 23) 3,341 2,348- National Pension Scheme Authority 1,492 941- Defined contribution scheme - 10

32,125 30,275

The number of persons employed by the Company at the year-end was 324 (2014: 333)

9 Net finance costsInterest on bank overdrafts (7,616) (7,960)Interest on loans from related parties (1,774) (1,869)Other interest expense (5,235) (2,046)Finance costsInterest income

(14,625) 3

(11,875) 4,631

Net finance costs (14,622) (7,244)

10 Income tax credit

Current income tax charge (4,914) (4,410)Deferred income tax credit (note 22) 18,722 6,307

13,808 1,897

Included under current liabilities

Payable in respect of the current year 4,914 4,410Payable in respect of prior years 3,016 346Paid during the year (5,408) (1,740)

At end of the year 2,522 3,016

Reconciliation of the tax charge


Tax at 35% and 15% (19,364) (1,340)Tax effect of expenses not deductible for tax purposes:Tax rate difference on domestic & export income 2,783 (940)Other 2,773 383

Income tax credit (13,808) (1,897)

Income tax assessments have been agreed with the Zambia Revenue Authority (ZRA) up to and including the year ended 31 December 2008. Self-assessment tax returns have been filed with ZRA for the subsequent year ends. During the year, the Company made a tax loss of K 106,980,000 (2014:K37,789,000) which is available for carry forward up to a maximum period of five years for set off against future profits from the same source.



36


10 Income tax credit (continued)

The tax losses will expire as follows: K ‘000

2015 losses to expire in 2020 106,980 2014 losses to expire in 2019 37,789

144,769

11 Loss per share K ‘000 K ‘000

Net loss (82,251) (4,801)

Weighted average number of ordinary shares in issue ( thousands) 27,090 27,090

Basic and diluted loss per share (Kwacha) (3.04) (0.18) 12 Dividends

At the Annual General Meeting to be held on 30 March 2016, the Directors will propose a dividend payment of K0.14 per share in respect of the year ended 31 December 2015. A dividend amounting to K0.14 per share in respect of the year ended 31 December 2014 was paid during the year under review.



37


13 Property, plant and equipment

Buildings Plant and

machineryMotor

vehicles

Furniture,fixtures &

equipment

Capitalwork in

progressTotal

K’000 K’000 K’000 K’000 K’000 K’000

COST OR VALUATION

Balance at 1 January 2014 46,608 60,187 2,482 3,236 16,154 128,667

AdditionsRevaluation increaseReclassifications

-26,645

944

--

5,580

--

408

--

1,178

20,094

(8,110)

20,09426,645

-

Disposals (1,750) - (408) - - (2,158)

Balance at 31 December 2014 72,447 65,767 2,482 4,414 28,138 173,248

Additions - - - - 9,651 9,651Reclassifications - 16,897 355 317 (17,569) -Disposals - (2,474) (551) - - (3,025)

Balance at 31 December 2015 72,447 80,190 2,286 4,731 20,220 179,874

DEPRECIATION

Balance at 1 January 2014 3,391 34,843 1,634 2,898 - 42,766

Charge for the yearEliminated on disposalsEliminated on revaluation

1,014(172)

(3,991)

5,508--

362(69)

-

250--

---

7,134(241)

(3,991)

Balance at 31 December 2014 242 40,351 1,927 3,148 - 45,668

Charge for the year 1,448 5,845 320 455 - 8,068Eliminated on disposal - (2,444) (551) - - (2,995)

Balance at 31 December 2015 1,690 43,752 1,696 3,603 - 50,741

CARRYING AMOUNT

At 31 December 2015 70,757 36,438 590 1,128 20,220 129,133

At 31 December 2014 72,205 25,416 555 1,266 28,138 127,580

In accordance with Section 193 of the Companies Act, 1994 (Amended) the Register of Land and Buildings is available for inspection by members and their duly authorised agents at the registered office of the Company.

The property, plant and equipment have been pladged to secure borrowings of the Company. (see note 19)



38


13 Property, plant and equipment (continued)

The Company’s freehold land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The revaluation of the Company’s freehold land and buildings was performed by Messrs RM Fumbeshi and Company on 27 October 2014, independent valuers not related to the Company. Messrs RM Fumbeshi and Company are members of the Royal Institute of Chartered Surveyors, and they have appropriate qualifications and recent experience in the fair value measurement of properties in the relevant locations.

The fair value of the freehold land was determined based on the market comparable approach that reflects recent transaction prices for similar properties.

Details of the Company's land and buildings and information about their fair value hierarchy as at 31 December 2014 and 2015 were as follows:

Buildings

Level 2

K’000

-

Level 3

K’000

70,757

Fair Value as at 31/12/2015

K’000

70,757

Buildings

Level 2

K’000

-

Level 3

K’000

72,205

Fair Value as at 31/12/2014

K’000

72,205

In the opinion of the Directors, the amounts at which the property, plant and equipment are stated are not in excess of those recoverable from their future use. If the buildings were stated on the historical cost basis, the amounts would be as follows:

2015K’000

2014K’000

Cost 13,780 13,780Accumulated depreciation (1,221) (945)

Carrying amount 12,559 12,835

14 Capital commitments

Authorised but not contracted for 6,050 5,539

Capital commitments will be financed by internally generated funds and borrowings.



39


15 Inventories 2015 2014K'000 K'000

Finished goods Engineering stores and indirect materialsWork in progress

23,60322,83517,422

40,74716,80317,809

Raw materials 14,572 22,196Goods in transit 1,229 1,989

79,661 99,544

16 Trade and other receivables 2015 2014K'000 K'000

Third party trade receivables 169,582 118,086 Amounts due from related companies (Note 26) 78,610 168,139Provision for doubtful debts (16,651) (6,211)

231,541 280,014VAT recoverable 31,671 45,934Duty rebate 11,548 17,793Prepayments 4,732 2,233Sundry receivables 314 3,573

279,806 349,547

2015K’000

2014K’000

Movements on the provision for doubtful debts are as follows:

At start of the year 6,211 4,330Provision for the year 10,913 3,876Bad debts written off (473) (1,995)


The average credit period on sale of goods is 45 days. No interest is charged on overdue trade receivables. 34 % of trade receivables over 120 days have been provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience.

Included in the Company’s trade receivable balance are debtors with a carrying amount of K108,242,000 (2014: K203,101,000) which are past due at reporting date for which the Company has not provided for as the amounts are still considered recoverable. The Company does not hold collateral over these balances.

Receivables are reviewed for impairment every reporting date on an account by account basis and provisions made when it is probable that economic benefits in relation to particular receivables will not flow to the Company. There is concentration of credit risk as 26% of the debtors’ balance is receivable from one customer, Zambia Electricity Supply Corporation (ZESCO). The Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.



40


17 Cash and bank balances2015

K’0002014

K’000

Bank balances 32,268 58,132

Cash in hand 227 150

32,495 58,282

Bank overdraft (Note 19) (189,775) (84,362)

Cash and cash equivalents (157,280) (26,080)

For the purposes of the cash flow statement, cash and cash equivalents comprise cash and bank balances net of bank overdrafts as above.

Bank balances are held in United States Dollar, South African Rand and Zambian Kwacha current accounts and do not earn interest.

18 Trade and other payables 2015K’000

2014K’000

Third party trade payables 226,276 219,845Amounts due to related companies (Note 27) 27,283 30,104Accrued expenses and other payables 10,092 6,509Dividend payable 55 2,159

263,706 258,617

The carrying amount of the payables and accrued expenses approximate to their fair values.

19 Borrowings

Secured - at amortised cost

(i) Bank overdraft (note 17) 189,775 84,362

(ii) Short term borrowings - 61,398

Unsecured – at amortised cost

(iii) General Cable Corporation (Note 27)

Balance at the beginning of the year 63,886 16,596Received during the year - 39,329Paid during the year (102,213) -Exchange losses 38,327 7,961

Balance at end of the year - 63,886



41


19 Borrowings (continued)

The Company has overdraft facilities with Standard Chartered Bank Zambia Plc, Barclays Bank Zambia Plc and Stanbic Bank Zambia Plc of US$3.8 million, US$3.5 million and US$30 million respectively. All the overdraft facilities are secured against the Company’s assets and guarantee from General Cable Corporation. The overdraft facility for Standard Chartered Bank Zambia Plc carries interest at 1 month LIBOR plus 1.5% per anum while the one for Barclays Bank Zambia Plc is at 2.75% plus 3 months Libor per annum whereas that for Stanbic Bank Zambia Plc carries interest at 2 months LIBOR plus 3% per annum.

The short term borrowings related to a revolving Invoice Financing Facility with Standard Chartered Bank Zambia Plc of US$9.5 million with a maximum tenure of 120 days. The facility is secured against the Company’s assets and parent company guarantee. Interest is payable at Libor plus 2.5% per annum.

The unsecured loan was due to General Cable Corporation. Interest was payable at 3 month Libor plus 3% per annum.

20 Share capital

Authorised:2015

K’0002014

K’000

27,200,000 ordinary shares of K0.01 each 272 272

Issued and fully paid

27,090,000 ordinary shares of K0.01 each 271 271

21 Revaluation surplus

The revaluation surplus represents the surplus on the revaluation of buildings net of deferred income tax and is non-distributable.

2015K’000

2014K’000

At the beginning of the yearIncrease arising on revaluation of propertiesDeferred tax arising on revaluation Reversal of deferred tax liability on revaluation

52,880---

29,75830,636(6,127)

347Transfers to retained earnings in connection with disposals - (1,734)

52,880 52,880



42

22 Deferred income tax

Deferred income tax is calculated using the enacted income tax rates of 35% and 15%.

The following are the major deferred tax liabilities and assets recognised by the Company and the movement thereon, during the current and prior reporting periods:

Year ended 2015At 01.01.2015

Recognisedin profit or

loss At 31.12.2015K’000 K’000 K’000

Deferred income tax liabilitiesProperty, plant and equipment: - on historical cost basis 5,338 504 5,842 - on revaluation surpluses 11,370 362 11,732

16,708 866 17,574

Deferred income tax assets Provisions (627) (363) (990)Unrealised exchange (losses) gains (726) 2,171 1,445Tax losses (7,558) (21,396) (28,954)

8,911 (19,588) (28,499)

Net deferred income tax liability (asset) 7,797 (18,722) (10,925)

Year ended 2014 At 1.1.2014

K’000

Recognisedin profit or

lossK’000

Recognisedin other

comprehensiveK’000

At 31.12.2014

K’000

Deferred income tax liabilitiesProperty, plant and equipment: - on historical cost basis 5,478 (140) - 5,338 - on revaluation surpluses 5,590 - 5,780 11,370

11,068 (140) 5,780 11,068

Deferred income tax assets Provisions (171) (456) - (627)Unrealised exchange losses Tax losses

(2,573)-

1,847 (7,558)

- -

(726)(7,558)

(2744) (6,167) - (8,911)

Net deferred income tax liability 8,324 (6,307) 5,780 7,797




43

23 Retirement benefit obligations 2015K’000

2014K’000

At start of the year 2,503 1,743Charged to profit or loss (Note 8) 3,341 2,348Payments during the year (1,673) (1,588)


24 Cash generated from operations

Reconciliation of profit before income tax to cash generated from operations:2015 2014

K’000 K’000


Adjustments for:Interest income (Note 9) (3) (4,631)Interest expense (Note 9) 14,625 11,875Depreciation (Note 13) 8,068 7,134Increase in provision for doubtful debts (Note 16) 10,913 3,876Loss/(gain) on disposal of property, plant and equipment 6 (1,970)Increase in retirement benefit obligations 1,668 760Exchange loss on long term loan 38,327 7,961

Changes in working capital - trade and other receivables 58,828 9,479 - Other financial assets 4,515 (1,034) - inventories 19,883 8,293 - trade and other payables 5,089 60,890

Cash generated (used in) from operations 65,860 95,935

25 Other financial assets2015

K’0002014

K’000

Derivatives designated as hedging instruments carried at fair value

Foreign currency forward contracts - 4,515

- 4,515

26 Contingent liabilities

The Company had pending legal proceedings at 31 December 2015. The Directors believe that there will be no material losses arising from the pending legal proceedings against the Company.




44


27 Related party transactionsThe Company is a subsidiary of Phelps Dodge Africa Cable Corporation (PDACC), a company incorporated in the United States of America. The ultimate parent of the Company is General Cable Corporation.

The Company has transacted with the following related Group companies:

Name of related party Country of registration Relationship

Phelps Dodge International Corporation (PDIC)

General Cable Industries

United States of America

United States of America

Holding Company

Holding Company

National Cables (Pty) Limited

General Cable Phoenix South Africa (Pty) Ltd (GCPSA)

Phelps Dodge International Thailand (PDTL)

Zamefa RSA

South Africa

South Africa

Thailand

South Africa

Fellow subsidiary

Fellow subsidiary

Fellow subsidiary

Fellow subsidiary

The following transactions were carried out with related parties:

(i) Purchase of goods and services 2015K’000

2014K’000

GCPSA – Purchase of raw material and finished goods 50,909 33,529National Cables (Pty) Limited– Purchase of finished goods 17,137 16,321Phelps Dodge International Thailand– Purchase of raw material 6,549 15,477PDIC – Purchase of raw materials, spares and others 31 4,843PDIC – Technical assistance fees 2,159 1,536

76,785 71,706

(ii) Sale of goods and equipment

National Cables (Pty) LtdGeneral Cable Phoenix South Africa (Pty) Ltd Zamefa R.S.A

199,42479,538

26,906

265,865 101,466

14,563

305,868 381,894



45

(iii) Directors' interests in the Company As at 31 December 2015, the interests of Directors in the Company, as recorded on the Lusaka Stock Exchange, were as follows:

2015 2014

Total Ordinary issued shares of the Company 27,090,000 27,090,000

George Chibuye 2,003 2,003

(iv) Directors' remuneration and Key Management personnel compensationA list of members of the Board of Directors is shown on page 2 of the Financial Statements under General Company infomation.

2015K’000

2014K’000

Salaries 5,739 3,895

Directors' fees and expenses 292 208

Terminal benefits 394 60

6,425 4,163

Non Executive Directors remuneration Analysis is as follows: Directors fees

Bruce Munyama (Chairman) 159 113

George Chibuye 133 95

292 208

Executive Directors' annual remuneration Analysis is as follows: Luis Corte Basic Salary 1,628 1,353

Other allowances 1,543 823

Total 3,171 2,176

Johann Duplessis Basic Salary 963 644

Other allowances 483 189

Terminal benefits 208 60

Total 1,654 893

Roseta Chabala Basic Salary 640 632

Other allowances 482 254

Terminal benefits 186 -

Total 1,308 885




46


27 Related party transactions (continued)

v) Outstanding balances arising from purchases of goods/services

goods/services/Interest on Loans

Payables to General Cable Phoenix South Africa (pty) Limited 19,288 16,656Payables to National Cables (Pty) Limited 4,648 6,175Payables to Phelps Dodge International Corporation 2,858 3,001Payables to General Cable Corporation 550 2,536Payables to Phelps Dodge International Thailand - 1,736

27,284 30,104

vi) Outstanding loans from related parties

Loan from General Cable Corporation - 63,886

vi) Outstanding balances arising from sale of goods/services

Receivables from General Cable Phoenix South Africa (Pty) Ltd 29,762 111,752Receivables from National Cables (Pty) Limited 44,036 54,416

Receivables from Zamefa RSA 4,812 1,971

78,610 168,139

28 2016 business plan and events after reporting date

Business plan

Management has performed its annual Business Plan for 2016 and is forecasting to increase sales volumes and improve profitability. Management has also identified potential further sales opportunities, and margin improvements, based on market conditions in Sub-Saharan Africa primarily related to increased copper rod sales but also various product groupings. Management is also implementing cost reduction activities to further improve profitability The Company had an operating profit of K32.5 million in 2015 with a loss for the year of K82.3 million. The primary driver for the net loss in 2015 was foreign currency losses driven by the devaluation of the Kwacha against the United States Dollar impacting balances denominated in United States Dollar. Management focused on mitigating foreign currency exposure by increasing sales based in US Dollar for both domestic and foreign transactions to match copper purchases transactions denominated in United States Dollar. This plan, along with the repayment of an intercompany loan denominated in United States Dollar to the parent company in 2015, reduced the net open United States Dollar exposure to $16 million as of December 31, 2015 compared to $42 million as of December 31, 2014. In the 4th quarter of 2015, the reduction of the US Dollar exposure, and the appreciation of the Kwacha against the US Dollar, resulted in a foreign currency gain of K6.3 million. In 2016, Management will continue measures to mitigate foreign currency exposure and evaluate derivative instruments offered by banking institutions to effectively limit exposure to currency fluctuations in the most cost effective way.



47



Events after reporting date In February 2016, the ultimate holding company, General Cable Corporation intered into a Share Purchase Agreement based on the going concern basis to divest all of its shares of the Company held by Phelps Dodge Cable Africa. The transaction closing is subject to certain conditions, including applicable regulatory approvals. For further information, we reference the cautionary update issued on February 16, 2016 based on the listing requirements of the Lusaka Stock Exchange


28 2016 business plan and events after reporting date (continued)

48

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of the members of Metal Fabricators of Zambia PLC in respect of the year ended 31 December 2015 will be held at the Radisson Blu Hotel, Lusaka, Zambia on Wednesday, 30 March 2016 at 10:00 hours to transact the following business:-

1. Minutes of the previous Annual General Meeting

To consider and adopt the minutes of the Annual General Meeting held on 27 March 2015.

2. Directors’ Report and Financial Statements

To receive and adopt the Directors’ report and the audited financial statements for the year ended 31December 2015 together with the report thereon of the auditors.

3. Dividend

To ratify the Board of Directors proposed dividend.

4. Election of Directors

To elect and re-elect Directors of the Company in accordance with the Companies Act and the Articles of Association of the Company.

5. Appointment of Auditors

To appoint the auditors of the Company for the 2016 financial year and to authorize the Directors to set their remuneration.

6. Other Business

To transact such other business as may properly be transacted at an Annual General Meeting of members.

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, speak and vote in his/her stead. The proxy need not be a member of the Company. Proxy forms should be forwarded to reach the Company’s registered office or the Transfer Secretaries not less than 48 hours before the time appointed for holding the meeting.

By order of the Board

Jonathan AmbaliCompany Secretary Lusaka


Notice to shareholders

49

For the 2016 Annual General Meeting

Wednesday 30 March 2016 at 10:00Radisson Blu Hotel,

2015


Form of Proxy

50

For the 2016 Annual General Meeting (Continued)


Form of Proxy

----------------------------oooOooo--------------------------------

Documents

Metal Fabricators of Zambia PLC Directors’ Report and ...€¦ · the New York Stock Exchange with Chile’s Antofagasta giving up a similar percentage while Rio Tinto and BHP Billiton