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-DECEMBER-

29th December 2000

Farmers House PLC Interim Results. Farmers House Plc just released their unaudited interim results for the six months ended 30 September 2000. The results are tabulated below:

K' Million	6 Months to 30/09/00	% Change	6 Months to 30/09/99	Year to 31/03/00
Turnover	852	28.3	664	1564
Profit before exceptional items (Attributable to shareholders)	450	36.4	330	712
Exceptional items	1,981
Taxation	0		71	147
Profit/Loss after tax	(1,531)	(691.1)	259	564
DPS	0			22
EPS	(156.23)	(691.0)	57.55	36.59

The results above have been derived from the company's management accounts and have been approved by the Directors. The company's turnover has improved significantly, an increase of over 28% compared to the same period last year. This increase is in part, a result of the devaluation of the Kwacha; Farmers House rentals are denominated in US Dollars and as a result increase accordingly as the Kwacha devalues. The increase is expected to be even greater in the coming year, as much of the company's rental income decreased due to the vacancies caused by the existing rehabilitation work on the Cairo Road property. Phase 1of the Cairo road development is near complete and almost fully let. The revenue streams generated from this rehabilitation will be realized in the second half results.

The exceptional item of Kw 1,981 million constitutes the expenses incurred as a result of the refurbishment of the Cairo Road property. A portion of these costs relate to items of a capital nature, which have been capitalized to the balance sheet. Those costs that relate to the maintenance of the property, which the company had intentionally not incurred in the previous years, have been charged to the profit and loss account and are shown above as a one-off exceptional item. Going forward, the company will benefit from this loss in the form of tax losses.

With the success of its Bond Issue in September 2000, the company has raised sufficient capital to embark on the second phase of its development on the Cairo Road property. Once fully completed, the Farmers House site in downtown Lusaka will be the most modern office / retail space available in Lusaka. The development will also significantly increase the company's balance sheet, and in turn, possibly improving the liquidity of the company's shares on the LuSE. We continue with our BUY recommendation for FH.

1st December 2000

Zambian Breweries Results

Zambian Breweries Plc has just released consolidated unaudited accounts for the six months ended 30 September 2000. As will be evident below, the company has performed relatively well compared to the first six months (through 30 June 1999) of the prior year--note that the company had a 15 month year through 31 March 2000.

 

K' Millions	6 months to 30 September 2000	6 Months to  30 June 1999
Gross turnover (including excise)	72,273	53,437
Net turnover	31,878	23,102
Profit before taxation	3,298	1,284
Taxation	189	334
Profit after taxation	3,109	951
Number of shares in Issue	182,000,000	130,000,000
*Earnings per share (Kwacha)	17.08	11.99
*Dividends per share (Kwacha)	14.00	4.00

* Based on interim results only

Much to our expectations, the improved performance is due to management having addressed the areas of loss which were being incurred by its subsidiary, Northern Breweries (1995) Plc, at the time of its acquisition in February 1999. Significant focus on working capital management has reduced working capital and financing costs. The company has considerably reduced the production inefficiencies that resulted from the take over of Northern Breweries and the results of the downsizing of the workforce in 1999 is finally showing results. Over the past 18 months, the company has retrenched almost 70% of the Northern Breweries workforce.

Although sales in the Copperbelt have risen marginally, management has indicated that despite the increased investment in the Copperbelt over the past few months, current economic conditions continue to make profitable trading difficult. Management has been able to realize further cost savings in both the Lusaka and Ndola operations through attention to material usages, fixed cost control and treasury management, thus enabling it to contain beer price increases at well below inflation. The only price increase, at 14%, was implemented in March.

The company estimates that the current Zambian beer market is at 530,000 hectoliters. This, compared to annual demand of over 900,000 hl in the early 90s, only goes to show that the Zambian beer market has considerable upside potential. At present, annual per capita consumption is five litres. This is extremely low when compared to other regional markets--in Botswana, for example, this figure is 23 litres). Also, the company has enough capacity to increase production when the market rebounds. The Lusaka plant has a capacity of 700,000 hl and the Ndola plant has a capacity of 150,000 hl. Should any further increase be necessary, management has indicated that it would indeed be cheaper to rehab the Northern Breweries plant, than to add capacity in Lusaka, especially since much of the anticipated growth is in the Copperbelt with the increasing levels of investment taking place in that region of the country.

The company continues to make frequent representations to Government for a reduction in the punitive excise tax imposed on its products. The excise tax, combined with the VAT, constitutes 59% of the selling price of the beer. This has obviously had an adverse impact on demand. A reduction in excise tax will allow the consumer to benefit from the reduced selling prices and the company to benefit from increased sales. Management has indicated that for every 10% drop in selling price, sales volumes will increase by an estimated 15%. For a high fixed cost business such as Zambian Breweries, any increases in volumes would translate directly to bottom line earnings. The company has worked diligently over the past two years to strip out costs and now boasts to be the lowest cost producer in Africa! Costs today are significantly lower than in 1997, a year in which the company performed relatively well.

The Board has approved n interim dividend of Kw 14.00 payable to shareholders registered on the books of the company on close of business on 15 December 2000. Dividends will be remitted towards the end of December.

Clearly, beer consumption has to rise for Zambian Breweries to reach higher levels of profitability. Any improvement in the living standards and disposable incomes of consumers should bode well for the company. In light of the expected recovery of the Zambian economy and the efficient operations of the company we upgrade our recommendation for Zambian Breweries Plc to a BUY.

 

-NOVEMBER-

24th November 2000

Zambia Sugar Announces Yearend Results. Zambia Sugar recently announced its yearend results through 30 September 2000. For comparison purposes, we have included the six month results for each of the six month periods through September 1999, March 2000 and September 2000 in addition to the company's annual half-year results for the twelve months ended 30th September 2000.

K' Millions	6 Months September 2000	6 Months March 2000	6 Months September 1999	12 Months September 2000	12 Months September 1999
Turnover	96,803	68,501	95,543	165,305	158,008
Operating profit/(loss) before ex. losses	24,105	(420)	23,773	23,685	33,970
Exchange losses	5,301	2,883	891	8,184	3,606
Profit/(loss) before interest	18,804	(3,303)	22,882	15,501	30,364
Interest	5,834	4,984	5,806	10,818	9,486
Profit/(loss) before exceptional items	12,970	(8,287)	17,076	4,683	20,878
Exceptional items	2,069	0	0	2,069	0
Profit/(loss) before taxation	10,901	(8,287)	17,076	2,614	20,878
Tax	397	0	1,592	397	2,276
Profit after tax	10,504	(8,287)	15,484	2,217	18,602
Dividends
-Interim	0	0	0	0	1,845
- Final	1,303	0	3,582	1,303	3,582
Transfer to reserves	9,201	(8,287)	11,902	914	13,175
Earning per share (K)	1.94	(1.53)	2.85	0.41	3.43
Dividends / Share
-Interim	0	0	0	0	0.34
- Final	0.24	0	0.66	0.24	0.66

Our expected improvements in the company's performance for the period ending 30^th September 2000 have come through as second half profits have offset the losses from the first six months.

The company's operations have improved significantly. Production for the year jumped to 205,000 tonnes (almost 100% of the company's capacity) from last year's 174,000 tonnes. In a high fixed cost business such as that of Zambia Sugar, any marginal increase in production amounts to a disproportionately larger impact in reducing the unit production costs and increasing gross margins. Unfortunately, for the reasons outlined below, these improvements were not translated into increasing profits.

While turnover for the year increased by 4.6% over last year's, operating profit for the year decreased by over 30%. There were several reasons for this performance. First is the cost of fuel which nearly doubled over the year--a combination of fuel price increases by the producing nations and the Kwacha devaluation--and fuel accounts for almost 10% of production costs. In addition, with the Kwacha devaluation, this pushed up the cost of dollarised inputs in general which constitute 65% of total input costs. The devaluation also contributed to the 126% increase in exchange losses. Once again, the burden of servicing a dollar facility is seriously diluting the company's earnings. The exceptional item of Kw 2,069 million reflects the cost of a retrenchment exercise completed in April 2000. We are not certain if this brings to end the ongoing rehabilitation and retrenchment exercises, or if some costs of the exercise will be carried forward into this year's accounts.

The company's business environment continues to remain difficult. The company has seen some marginal increases in demand from the Copperbelt (as a result of the mines sale) over the past few months. This is a good sign margins on local sales are significantly higher than on exports. The company continues to have a strong hold on the local market and does not foresee too much loss in market share as a result of the recently enacted COMESA FTA initiative.

Management believes that the financial performance is largely dependant on how quickly the local economy responds to the privatization of the mines. We have started to see improvements in other sectors of the economy and hope that the same will stand true for Zambia Sugar Plc. Management will continue to focus on cost reduction through improved technical performance. ZSUG is already one of the lowest cost producers in the world and, in terms of global standings, the company is rated as one of the top five sugar manufacturers. Unfortunately, two of the other top five are Zimbabwe and Malawi!

The Board of ZSUG is recommending a dividend of Kw 0.24 per ordinary share for the year ended 30^th September 2000. The dividend will be paid to all registered shareholders on the company's register at close of business on 5^th December 2000 and payment will be made on or before 29^th January 2001. The dividend, as a ratio, does not compare to that of other listed companies on the LuSE, but then, those companies do not have to carry the burden of a US$ 10 million loan on their balance sheets. We continue to recommend ZSUG as a HOLD.

10th November 2000

Standard Chartered Bank Reports Record Q3 Earnings. It always gives us great pleasure in reporting Standard Chartered Bank Zambia Plc (SCZ) results; our predictions so far have landed on the mark!! The bank released its 3^rd quarter results this week and, as anticipated, the bank has once again turned in a record performance. Below, we have summarized the results.

Profit and Loss Account 2000

K'Million	3rd Quarter	Year to Date	1999
Net Interest Income	13,034	41,919	43,155
Provision for Loan Losses	(11)	(897)	(775)
Net Income After Loan Losses Provision	13,023	41,022	42,380
Non Interest Income	10,730	27,760	30,958
Non Interest Expenses	(10,700)	(29,945)	(31,243)
Income Before Taxation	13,053	38,837	42,095
Taxation	(3,916)	(11,651)	(11,751)
Net Income After Taxation	9,137	27,186	30,344
EPS	2.23*	6.63*	7

* based on 3^rd quarter results only

Through the third quarter of the year, SCZ has turned in an after tax profit of Kw 27,186 million, which constitutes over 89% of the full year 1999 profit after tax. As expected, the bank has once again increased shareholder value; the bank's balance sheet has grown by almost 37% since 30 June 2000. The lion's share of the growth in the balance sheet comes from a 30%+ increase in the deposit base during the third quarter. This has increased the balances held in financial institutions abroad, local financial institutions and with the Bank of Zambia. No doubt, many of these deposits are USDollar denominated and, with the devaluation of the Kwacha against the USDollar, this has contributed to the increase in the balance sheet value.

The bank has historically never paid an interim dividend. Assuming the bank ends the year at Kw 38,000 million PAT and continues its policy of paying out 70% of its earnings as dividends, an SCZ investment (at current market price) would achieve a dividend yield in the region of 8%. Such a dividend, coupled with the capital gains, could easily make Standard Chartered the top performer on the LuSE, yielding a combined return of over 65% for investors who bought at the start of the year. In real terms, however, the return will drop to approximately 25%, still healthy by any standards.

The bank is expected to perform well through the balance of the year. Standard Chartered stands to benefit from its relationship with the mining community. It is one of the key banks that transacts with and on behalf of both Konkola Copper Mines and Mopani Copper Mines, which at present, are two of the largest sources of hard currency in the Zambian market. The Bank's branch in Livingstone is now fully operational. The Livingstone area is now exhibiting signs of economic recovery as a result of the Sun International investment. Several smaller businesses in Livingstone (mostly tourist related such as car hires and restaurants) have now started up and the economy is beginning to rebound.

We are confident that the bank will perform well through yearend. Given the run-up in the share price over the course of the year, however, we have changed our STRONG BUY recommendation to a BUY. Thus those of you out there who did not buy the shares earlier, still have not entirely missed the opportunity to gain from this investment. While the share price has appreciated since the start of the year, we do believe that there is still some upside to the stock's price and room for substantial returns from the dividend. As indicated above, the Bank does not pay an interim dividend and hence the investors who purchase shares between now and yearend will get the benefit of the full final dividend.

 

-OCTOBER-

20 October 2000

Company Updates. We had an opportunity this week, to visit two of the LuSE's listed companies. We met with executive management of Zambia Sugar and Chilanga Cement. Below, we have provided a brief update on management's view of the short term future of these companies.

Zambia Sugar Plc. Zambia Sugar Plc (ZSUG) has for the past two years, performed below investor expectations. The company has fundamentally had two major problems; the first being the poor production levels and efficiencies achieved during the past two years and the second, being the US$10 million loan acquired from Tate & Lyle last year.

This week's meeting with the company's Managing Director, Mr. Tim Lodge and the Finance Director, Mr. Fidelis Banda, has reveled significant improvements on the operational side of the company's business.

ZSUG now purchases its cane based on the sucrose content of the cane as opposed to the bulk weight of the cane, which historically was the practice. In so doing, the company's poor production cycle has been broken and recoveries from cane have improved significantly. Unlike last year, where production was delayed by 5 weeks, the company has this year started harvesting and processing on time, thus ensuring that the cane is delivering its optimal levels of recoveries. The company expects to produce over 200,000 tonnes of sugar for the period (annualized), this compared to 174,000 tonnes produced last year. For an operation whose fixed costs constitute 90% of total costs, an increase of 15% in production goes a long way towards spreading and lower the unit cost for the company. The company's cost of production is now down to under 10 cents/lb, making it one of the lower cost producers in the region, second only to Illovo sugar company in Malawi.

The company's exports have increased marginally and while that is a good sign in terms of hedging against the company's dollar liabilities, margins on export sales are almost half of that on domestic sales. The company's annual interest burden on the Tate & Lyle loan is in the region of US$ 800,000 not to mention the repayment of principal. While the loan itself may be affordable, the company has to incur huge exchange losses due to continued slide of the Zambian Kwacha.

No doubt, it is apparent that ZSUG has improved its operations and we believe that the six month results to 30 September 2000 will reflect this improvement. However, until the company does not find some resolve to the Tate & Lyle loan, we believe the company's earnings may not improve significantly. We continue our HOLD recommendation for ZSUG

Chilanga Cement Plc. Our meeting with Chilanga Cement Plc (CHIL) has solidified our expected improvement in the company's performance.

The company has managed to increase market prices and maintain its market share, despite imports that are now coming from Zimbabwe. The company currently enjoys between 90-95% of the domestic market and management expects that this will continue, despite the COMESA Free Trade Accord, which comes into effect in November.

Not surprisingly, Chilanga's sales in the Copperbelt have increased since April. Management did indicate that the increase is not even the demand from the mines. The initiation of the KDMP project is expected to increase demand substantially, but this is not expected until early 2002.

CHIL has budgeted for an annual production of 336,000 tonnes for the year. Management expects to produce approximately 375,000 tonnes, up from 355,000 last year. Chilanga has a capacity of 500,000 tonnes. The Company is therefore in a position to increase production with the increased demand from the Copperbelt. However, the company will have to plan an expansion to cater for the KDMP demand.

Management is expects a profit after tax in the region of US$ 4 - 4.5 million. CHIL continues to be a BUY recommendation.

13 October 2000

Farmers House Plc Bond Issue. The Farmers House plc Bond Issue, Zambia's first ever, has just ended its second week into the offer. Next week is the final week for applications, with an additional week for postal acceptances. So far, we at Pangaea/EMI Securities have been pleasantly surprised with the response received from the public. Several institutions, which at first did not appear interested, were suddenly stimulated once the offer commenced. The interest from the retail sector has also been quite strong.

The Market. In recent weeks, the market has seen an upturn. Most stocks have started to rebound, the most successful of which is Standard Chartered Bank Zambia Plc (SCZ). Exactly a year ago, SCZ was trading at a price of Kw 19. It closed the week at Kw 80; an annualised increase in real terms of over 200%. Not surprisingly, the bank has been performing extremely well and judging from its interim results, we believe FY00 will be another record year.

All other stocks, which had performed poorly since the start of the year, such as Chilanga Cement, Zambian Breweries and Rothmans of Pall Mall have now started inching upwards. With the release of some interim results in the coming days, particularly those of Zambian Breweries and Zambia Sugar, we expect certain prices to continue rising through the balance of the year.

6 October 2000

IMF team to visit Zambia. Zambia's efforts to secure some debt relief from the IMF and the World Bank are finally starting to see results. Mr. Katele Kalumba, Zambia's Minister of Finance, announced this week that a team from the IMF is scheduled to visit Zambia this month. The team will assess the situation on the ground and confirm that Zambia is indeed meeting its required benchmarks.

Zambia is part of the Highly Indebted Poor Countries (HIPC) initiative to have a portion of its US$ 6.5 billion debt written off.

Mr. Kalumba indicated that while Zambia had not met some of the benchmarks, he was hopeful that the IMF team would give credit for the achievements made so far. He said Zambia's performance should be gauged in a creative, visionary and intelligent manner. At the recent World Bank / IMF meeting in Prague, the Minister reiterated Zambia's commitment to adhere to this year's goals of achieving a growth target of four percent and reduction of inflation to 19%. That may be somewhat ambitious given the Zambian Kwacha has devalued by an approximate 35% since the start of the year. Inflation is currently in the region of 30%.

A debt relief programme would go a long way to improving Zambia's liquidity. For starters, the country's obligations to the IMF and World Bank - approximately US$ 480 million budgeted for interest and principal payments for this year, continues to be a burden on the national treasury. Some relief would ease that burden and immediately provide assistance in reducing pressure on the Kwacha. In an import oriented economy such as that in Zambia, decreased devaluation would positively impact inflation and

possibly allow the country to meet the bi-lateral donor benchmarks sooner. Zambia has played a lead role in the HIPC initiative and analysts believe that some good will come out of the efforts to date.

Farmers House Plc Bonds Issue now underway. The Farmers House Plc (FH) Bond Issue is now underway. The offer opened on Monday 2^nd October 2000 and closes on Friday 20^th October 2000 (postal acceptances - Friday 27^th October 2000). The company is issue 2000 bonds totaling US$ 1,000,000 to finance the second phase of its redevelopment of its flagship site in downtown Lusaka.

The response so far has been overwhelming; several local institutions have expressed keen interest in the issue and we have little doubt that the offer will be a success. The issue is partly underwritten, with subscription commitments from several institutions.

To recap, the company is issuing two types of bonds; the Series 1-00 bond has a maturity period of four years and the Series 2-00 bond has a maturity of three and four years. Both bonds will carry a coupon rate of the US treasury Certificate rate plus 200 basis points. Interest will be paid quarterly in arrears. Upon maturity, bond holders will have the option of converting the principal amount into equity of the company based on a pre-determined formula.

Should readers have any interest in this Zambia's first ever corporate bond issue, please contact Pangaea for a prospectus.

 

-SEPTEMBER-

29 September 2000

Record transaction on the LuSE. CDC Capital Partners (formerly Commonwealth Development Corporation), have refined their business strategy in order to extract greater value from their portfolio of investments. As part of this process, CDC has been looking closely at those investments it owns and manages, including those in the cement industry--specifically, the 50.1% shareholding in Chilanga Cement Plc (Zambia), the 75.2% holding in Portland Cement (Malawi), and the 51% holding in Mbeya Cement (Tanzania).

CDC has decided to transfer its shareholding interests in each of these three companies to its wholly owned subsidiary, Pan African Cement Limited, a company incorporated in and having its registered office in Mauritius. Through this re-organization, CDC will be:

• able to manage the three businesses more effectively and efficiently;
• in a stronger position to implement industry technologies/e-commerce innovations which can be scaled across a wider user group in order to generate significant economies of scale;
• able to consolidate the holdings to provide a regional presence; and
• in a stronger position, as a single regional entity, to negotiate supply and other related contracts.

In that regard, this week CDC transferred its shareholding (100,219,992 shares) in Chilanga Cement Plc to Pan African Cement Limited. The Kw 17.8 billion transaction had an effect over the LuSE, making: it was the largest single transaction on the LuSE so far this year. Pangaea/EMI Securities served as advisors and brokers to CDC in this transaction.

All of these benefits will pass through to the other shareholders of the three cement companies in the form of more efficient production and management, lower costs, and improved profitability. CDC remains the beneficial shareholder of the Pan African Cement Limited shares as well as manager of Chilanga Cement Plc.

22 September 2000

Zambian Mining Sector Coming Back to Life.  In a meeting today with an Executive Director of Konkola Copper Mines (KCM), it was disclosed that the company has made considerable headway in stabilising operations since its takeover of some of the more significant subsidiaries of the former ZCCM.

Mr. Ronnie Peiris, Executive Director of KCM and Managing Director of Anglo American, Zambia, indicated that KCM is scheduled to reach break-even by December 2000. The company has been successful in sealing efficiency leaks in its operation, a carry over from the pre-privatisation days. The company is in the process of finalizing its five year business plan and judging from this morning's discussion, the company's forecasting appears to be achievable.

To-date KCM has achieved a total output of 135,000 tonnes. While this is below the 150,000 tonnes budgeted for the period, the company is confident that operations have turned around and that next year, the output should rise to a conservative budget of over 240,000 tonnes.

We do know that the Copperbelt, which for the past three years has been in a state of depressed limbo, is now humming with life. As some indication, we understand that property values have increased considerably to the extent that housing space is now scarce in Chingola and Chililabombwe, where KCM's main operations are currently located. Kitwe, the closest major city to the action, is soon to enjoy a state-of-the-art shopping mall, similar to the Manda Hill shopping complex in Lusaka.

We are pleased to see that the benefits of the privatization are now beginning to take effect and it is merely a matter of time before they spill over into Lusaka. The optimism certainly has!!

15 September 2000

Rothmans of Pall Mall Zambia Plc - Interim Results. Rothmans of Pall Mall Zambia Plc just released their unaudited interim results. The results are summarised below.

Currency Kw' 000s	6 Months to  30 June 00	6 Months to 30 June 99	Year to 31 December 99
Consolidated Income Statement
Gross Turnover	27,241,156	22,858,138	49,666,783
Net Turnover	10,494,382	8,633,820	18,714,540
Profit Before Taxation	4,938,665	2,204,111	7,462,516
Taxation	1,942,583	1,372,335	2,869,049
Profit After Taxation	2,996,082	831,776	4,593,467
Profit Attributable to Minority Interest	498,392	225,052	459,108
Profit Attributable to Shareholders	2,497,690	1,056,828	4,134,359
Transfer from Revaluation Reserves	246,269	125,611	261,814
Proposed Dividend (Gross)	1,248,307	1,137,024	2,362,752
Retained profit	1,495,652	45,415	2,033,421
Earnings per share (Kwacha)	15.49	6.55	25.63
Consolidated Balance Sheet
Fixed Assets and Investments	7,396,972	8,228,065	7,675,375
Bank Balances and Cash	18,913,645	14,143,395	17,668,022
Other Current Assets	7,122,462	8,148,923	7,695,035
Total Assets	33,433,079	30,520,383	33,038,432
Dividend Payable	1,475,552	1,556,352	1,590,082
Other Current Liabilities	5,436,041	5,296,907	6,444,280
Total net assets	26,521,486	23,668,124	25,004,070
Total shareholder funds	18,479,428	15,640,813	17,230,895
Minority interests	4,649,661	4,162,352	4,666,534
Deferred liabilities	1,721,736	2,191,622	1,670,662
Deferred taxation	1,670,661	1,673,337	1,435,979
Total capital employed	26,521,486	23,668,124	25,004,070

Rothmans has certainly performed well over the first half of FY00. Although the company's turnover over the period increased by 19%, corresponding profit after tax increased by over 136% -- a sign that 1999's rehabilitation and retrenchments are paying off. The company benefitted from an exchange gain of Kw 1,199 million over the period. The company's balance sheet grew by 6% since the end of FY99. Part of that was a 7% increase in bank balances and cash. The company, once again, has prudently managed its cash.

The interim results do not indicate what portion of the income comes from of operations. In the past, a large part of the company's profits (55-60%) have been the result of effective treasury management. We know that cigarette sales have not yet picked up. The company is hopeful that with the recovery of the Zambian economy (as a result of the sale of ZCCM), and the rise of disposable income, cigarette sales will increase.

Management expects profit margins to be squeezed over the balance of the year. The devaluing Kwacha continues to cause pressure on imported materials. Current prospects point to a marginal drop in unit sales. Excise duties are currently being reviewed by the government and there are some signs that they will be decreased, but nothing has yet been agreed. Any such decrease will have an obvious positive impact on volume growth over the longer term. The company is operating well below capacity and any increases in demand will be more than sufficiently met.

The directors of the company have declared an interim dividend of Kw 7.74 payable to shareholders registered on the books of the company on 28 September 2000. This represents an almost 10% increase to last year's interim dividend. While the increased dividend is pleasing, the company has yet to respond to certain shareholder demands for a payout of a portion of the massive cash balances that the company is currently managing. The dividend is to be posted on or about 30 October 2000. In the absence of a detailed break down of the increased income, we continue with our HOLD recommendation for Rothmans.

Chilanga Cement cracks regional markets. Chilanga Cement has made considerable inroads into the regional export market with substantial orders from Burundi, Zimbabwe, Malawi and the DRC - this in addition to having dominated the domestic market. The export orders are a welcomed sign as they will allow the company to hedge against the constantly devaluing Kwacha.

The company this year has returned to profitability and in the first six months of 2000 has doubled its profit compared to all of FY99. The company's Total Production Management (TPM) programme, initiated in early 2000, appears to be effective. The TPM is a programme under which the workforce is encouraged to solve ongoing operational problems with minimal supervision. The company has secured lucrative contracts and the balance of the year certainly looks promising. We continue with our BUY recommendation for Chilanga.

8 September 2000

CEC to embark on another major expansion programme. Having just completed the construction of a state-of-the-art substation to cater to the additional needs of Chambeshi Metals' new venture, the Copperbelt Energy Corporation (CEC) is now embarking on a much larger project to supply power to the Konkola Deep Mining Project (KDMP). CEC has indicated that the new project will be substantially bigger than the US$ 12 million, 86 Mw substation recently installed at the Chambeshi Metals site.

The above mentioned development is a promising sign; the KDMP is one of the most vital projects regarding the prosperity of Zambia's economy. The KDMP will be managed by Konkola Copper Mines (majority owned by Anglo American) and, once operational, is hailed to be the driving force behind Zambia's copper mining industry.

CEC also has other expansion plans such as the building of another interconnectivity link between Zambia and the DRC to increase the power transfer from 250 Mw to 500 Mw. The company also intends on upgrading its supply station at the Chibuluma Mine to cater to the increased demand from Chibuluma's south mine shaft.

Copperbelt Energy Corporation is majority owned jointly by Cinergy of Netherlands and National Grid of the UK. It is safe to assume from CEC's plans that Zambia's copper mining industry is coming back to life. The recovery in global copper prices, coupled with improved efficiencies from the various producing units in Zambia, should spark off a rapid recovery for the economy.

Chilanga Cement bags another lucrative contract. Chilanga Cement PLC (CHIL) has just bagged another small, but lucrative, sales account. The company was recently awarded a contract to supply cement for the rehabilitation of a major highway in Zambia.

Most readers will recall that Chilanga turned in a relatively impressive first half performance. The company is slightly ahead of its budget for the second half. With an efficient cost structure now in place (as a result of the re-structuring and retrenchments last year), the new contract should reflect directly on the company's bottom line earnings.

Chilanga's General Manager, Mr. David Trangmar credited the company's ISO 9002 status to the new contract. The company's products are known to be of superior quality. The company should therefore be able to maintain its hold on the market despite the SADC Free Trade Area that comes into effect later this year. While retail sales, we believe, may be affected marginally once the SADC initiative is implemented, the company should do well in its efforts to supply to larger corporate entities such as the mining industry.

We do not foresee any difficulties for the company in achieving its benchmarks for the balance of the year. The company has demonstrated a dramatic turn around from last year and we expect that to carry through the balance of the year. We continue with our BUY recommendation for Chilanga Cement.

 

-AUGUST-

25 August 2000

Metorex Mines increases output. The Chibuluma Mine, majority owned by Metorex of South Africa, has increased production in recent months. The company recently commissioned a new shaft at its Chibuluma West mine. Monthly production as a result has increased to 766 metric tons per month.

The new shaft, which extracts at the 620 meter level, has increased production by nearly 10%. The company did indicate its further plans to penetrate the 690 meter level and confirm that the logistics are currently being set for the expansion. Metorex invested approximately US$ 1.5 million to extend the life of the Chibuluma West Mine. The increased production now allows Chibuluma to operate viably; the mine was losing approximately US$ 150,000 per month prior to the expansion. The company will soon embark on its expansion of the Chibuluma South mine.

Chibuluma is a quoted, but not listed, stock on the Lusaka Stock Exchange.

Bata Shoe Company embarks on a five year expansion plan. Bata, also a quoted company on the LuSE, has set aside Kw 2.0 billion (approximately US$ 600,000) for an expansion programme that should take place over the course of the next five years. The company is now beginning to experience an increase in its export orders. The expansion has been divided into three phases of which the company has already spent K 300 million (US$ 90,000) on the first phase.

While Bata last year turned in a profit of Kw 1.4 billion (about US$ 420,000), its share price has languished over the past five years as the company has not been actively trying to promote the stock. This expansion is an example of what Pangaea has been saying for some time: the privatisation of the mines will cause a large number of businesses throughout the economy to make investments - here we have a shoe company doing just that.

Johannesburg Stock Exchange (JSE) to "De-Mutualize". At the third quarterly meeting of the SADC Regional Stock Exchanges Committee, representatives from the JSE confirmed that plans to de-mutualize the exchange and convert it into a for-profit public limited company have now been approved by its members. The target for completing the de-mutualization is the end of 2001.

18 August 2000

Chilanga Cement Plc announces interim results. Chilanga Cement just released their unaudited six-month accounts to 30^th June 2000. Based on the accounts, the company appears to be back on track. The results are outlined below:

K' Million	6 Months to 30.06.00	6 Months to 30.06.99	Year to 31.12.99
Net Turnover	37,351.00	24,294.00	63,724.00
Profit Before Tax	5,429.00	(3,521.00)	2,483.00
Taxation	1,750.00	0.00	836.00
Profit After Tax Attributed to Shareholders	3,679.00	(3,521.00)	1,647.00
Dividends on shares
-interim	3,001.00	Nil	Nil
-final			919.00
Transfer to reserves	678.00	(3,521.00)	728.00
-interim	15.00	Nil	Nil
-final			4.60
Total Dividends per Share (K)			4.60
Earnings per Ordinary Share (K)	18.30	(17.50)	8.23

Sales volumes for the first half of the year increased by 19% compared to the same period last year. Costs for the period were considerably lower due to the re-structuring exercise carried out towards the end of last year.

Much to our expectations, Chilanga Cement has turned around its performance in H1 FY00. While it is difficult to compare this period's ratios to those of the previous similar period, turnover increased by 53.7%. The company registered a PBT of Kw 5.4 billion, this compared to loss of Kw 3.5 billion in the first half of FY99. At Kw 15.00 per share, the company is paying out over 81% in the form of dividends to ordinary shareholders as at the record date of 23^rd August 2000. Management is confident that a final dividend will also be paid this year.

Chilanga's recovery from the poor performance is no doubt a sign of an improving economy. The company is poised to do well for the balance of the year; historically, only 35% of annual PAT is generated in the first half. If that holds true this year, the company should end the year at a PAT in the region of Kw 9.5 billion. At that level of profitability, earnings per share will rise from last year's dismal Kw 8.23 to Kw 47.25. Chilanga Cement may be the first company to prove us right -- we indicated earlier in the year that 2000 could very easily turn out to be a 1997 (at least in terms of the company performances, if not so much in terms of the market performance). We continue to recommend Chilanga as a BUY.

11 August 2000

Lusaka Stock Exchange. In nominal terms, the market has performed relatively well in the first half of 2000. The Index, which began the year at 181.43, closed today at 220.98. This represents a 21.8% increase in the value of the market as a whole. That said, given the approximate 20% devaluation of the Kwacha that has occurred over this same period, real growth has been limited. Over the balance of the year, we expect the stock market to rise moderately. As a result of the depressed economy over the past two years, most companies have streamlined their operations and squeezed out costs. Now, with the anticipated economic turnaround brought about by the sale of ZCCM's mining assets and the very generous donor support announced at the end of the last CG meeting, we believe increases in revenues will translate to larger than proportional bottom line earnings for most of the companies. Many investors strongly believe that things have bottomed out and that now the market has considerable upside, but of course, the various companies have to perform well for investors to realize their returns. This brings us to the likely future performances of the various companies. Below, we have outlined our views of the expected performance of select companies and their share prices.

Zambia Sugar Plc. Zambia Sugar turned in a half-year loss through 31 March of Kw 8.28 billion. This compared to a Kw 3.8 billion after tax profit for the same period the previous year, and represented a major disappointment to shareholders. It is obvious from the results that the company has had a rough six months. While revenues increased by 4%, it was largely the result of price adjustments as total sales volumes actually declined by 11%. The reduced sales volumes were largely in the domestic market.

The loss may be attributed to several factors. The company took an exceptional charge of Kw 5,011 million related to the non-recurring cost of the sales production at the end of the last crop as well as the deferred impact of the discovery of the shortfall in production process reconciliation (as reported to shareholders at the Annual General Meeting in December 1999). Effectively, this related to the need to write-off the value of inventories that had been mis-represented in earlier periods. As from October 1999, the company has changed its accounting policy on factory off-crop expenses in order to conform to the policies of Tate & Lyle. The new policy matches costs to revenues more accurately. In addition, there were exchange losses related to its servicing of a US$ 10 million loan that it acquired from Tate & Lyle in late 1998. Finally, at a time when the Kwacha was continuing to devalue, the company suffered due to a relatively large percentage of imported inputs. Combined, these factors were a rather dramatic burden on the company's profit and loss statement.

Management has indicated that harvesting for the new crop has commenced and that production is ahead of plan. Stringent measures to restore profitability through cost reductions have been instituted. The primary form of cost reduction will be through retrenchments, obviously also at a cost. Management is confident that with signs of improvement in the domestic economy and a strong export order book, the losses of the first six months are expected to reverse and prospects should improve over the forthcoming six month period.

Clearly, the company's results have been disappointing. Unless it can truly do something about pumping up export sales in order to offset the heavy foreign exchange burdens represented by the costs of imported inputs and its USDollar-denominated debt, we do not see a major recovery in the short term. While the recent increase in world sugar prices combined with a drop-off in supply due to problems in Brazil has provided some prospects for future improvements, we do not see these occurring in the short term. We have downgraded our recommendation on ZSUG to a HOLD

Chilanga Cement Plc. Chilanga Cement turned in a rather disappointing performance during 1999. The company's profitability declined by over 200% and earnings per share dropped by over 82%. This was largely the result of the depressed state of the economy combined with erratic export markets and the dumping of product into Zambia by South African producers.

That said, the company did manage to turn a Kw 3.5 billion loss for the first half into a Kw 1.6 billion profit after tax for the year as a whole, meaning profit after tax in the second half of the year of over Kw 5.0 billion.

As we understand it, most exceptional charges, such as some rehabilitation work and all retrenchment costs were charged to the 1999 accounts which permitted the company to begin 2000 with a relatively efficient cost structure. While first half results have not yet been announced, we do believe the company is poised to do well this year and will return to historic levels of profitability. Chilanga stands to benefit significantly from the privatization of the mines, and the recovery of the Zambian construction industry. We upgrade our recommendation for Chilanga to a BUY.

Standard Chartered Bank Plc. Shareholders are bound to be pleased with the Bank's first half results. Profit after tax for the six months ended 30^th June 2000 was 35% higher than that of the same period last year and, at just over Kw 18.0 billion were about 60% of last year's total after tax earnings. The Bank's deposits went up significantly, contributing to an expansion of about 27% in the size of the balance sheet and a total loan portfolio of Kw 121.7 billion, a 20% increase over the 1999 yearend portfolio. The bank continues to maintain very conservative lending practices and has only provided for approximately 0.7% of the portfolio.

Judging from the interim results, and the fact that the Bank normally generates a higher percentage of its profits in the second half (i.e. about 55% historically) we can expect the bank to finish the year at an after tax profit level in the region of Kw 36-38 billion. That would result in an earnings per share in the region of Kw 8.8-9.3. Over the past seven months, the market has clearly responded to the Bank's excellent performance over the past two years and has jumped from Kw 27 per share to over Kw 65 per share, a 140% increase in just over seven months! This price would yield a P/E on forward earnings in the 7.0-7.3 range, which is still low for a prime banking stock such as SCZ. We expect the bank to continue its excellent performance through the balance of the year and continue with our STRONG BUY recommendation.

Rothmans of Pall Mall Zambia Plc. Rothmans is the only manufacturer of cigarettes in Zambia and, as such, is a monopoly that has very little competition from imported brands. During 1998, Rothmans PLC was acquired by British American Tobacco (BAT). The full effect of the acquisition is yet to be felt in Zambia, but we do anticipate some corporate re-structuring that should bring added benefits to shareholders.

In part due to the squeeze on disposable incomes as a result of the depressed economy, cigarette sale volumes have been declining over the past three years, and the company is only operating at about 29% of its capacity. The good news is that any volume increases should generate an immediate improvement in bottom line earnings. At present, however, a significant percentage (just under 65%) of the company's profits are generated from its treasury management function as opposed to operations. The company has a staggering Kw 17.6 billion effectively in cash reserves (as at the date of the most recent audited accounts--31 December 1999) which it has obviously invested quite wisely. At today's market price of Kw 85 per share, an investor is buying approximately Kw 109 per share in cash deposits alone!

Clearly, with interest rates now declining, it is unlikely that the treasury management function will be able to continue to generate the kinds of returns it has in the past. That said, with an improving economy, disposable incomes should begin to increase which could have a positive impact on volume sales. In the short term, we do not anticipate major changes in profitability. We have recommended the stock as a HOLD.

Zambian Breweries Plc. In the fifteen months to 31^st March 2000, Zambian Breweries turned in an after tax profit of Kw 4.1 billion. This is compared to an after tax profit of Kw 5.2 billion in the twelve month period ending 31^st December 1998. (The company changed its financial yearend from December to March to align it with that of its majority shareholder, South African Breweries.) The results incorporate the performance of Northern Breweries, which was acquired in February 1999.

While not as exciting as one may have hoped, given the difficult conditions of the Zambian economy combined with the costs associated with the acquisition of Northern Breweries, we believe them to be reasonable. In this regard, it is instructive to note that the company realized an after tax loss of Kw 660 million in the January-March 1999 period, largely as a result of the acquisition and costs associated with it. The subsequent twelve month period realized an after tax profit of Kw 4.8 billion which is quite respectable given the continuing difficulties at Northern Breweries and the continuing depressed economy. Now that the economy is exhibiting some signs of recovery and many of the costs associated with the acquisition and re-structuring of Northern Breweries are in the past, we expect that the company should perform well in the coming year. Beer consumption is slowly inching upwards.

The company has declared a final dividend of Kw 11.80, which when added to the interim dividend of Kw 4.00, amounts to a total of Kw 15.80. We currently recommend Zambian Breweries as a BUY.

4th August 2000

Standard Chartered Bank releases Q2 results. Second Quarter results for Standard Chartered Bank were released early this week. Not surprisingly, the Bank has yet again displayed its consistent ability to please its shareholders. The results are tabulated below.

K'Millions	30-06-00 (6 months)	% Change	30-06-99 (6 months)	31-12-99 (FY)
Net Interest Income	28,561	49	19,159	42,162
Provision for Loan Losses	886	85	477	(218)
Net Income after Loan Loss Provision	27,675	48	18,682	42,380
Non Interest Income	17,030	15	14,756	30,958
Non Interest Expenses	18,921	33	14,275	31,243
Income before Taxation	25,784	35	19,163	42,095
Taxation	7,735	35	5,749	11,751
Income after Taxation	18,049	35	13,414	30,344
Earnings per Share	4.41*	35	3.27*	7.41

* Based on first half results only

Ratios	Percentage
Liquid assets/Total liabilities	42.07
Total liquid assets/Total liabilities	72.44
Demand liabilities/Total deposits	35.87
Quick assets/Total deposits	34.19
Quick assets/Total assets	26.36

Shareholders must be pleased with the above results. The bank has once again pulled in a record performance. Profit after tax for the six months ended 30^th June 2000 was 35% higher than that of the same period last year. The Bank's deposits went up significantly. Not surprisingly, we hear that many corporates and business that have been paid off by the new mines, are holding their dollar deposits in the banks (this has contributed to the devaluation in the Kwacha). In addition to that the bank is heavily tied into government bonds that are still yielding in the region of 40%. Based on the provision for loan losses, it is obvious that the bank continues to maintain very conservative lending practices. On a total loan portfolio of over K 121 billion, the bank has only provided for approximately 7% of the portfolio. The Bank's balance sheet also grew by some 26.8% in nominal terms, when compared to 31^st December 1999. No doubt, devaluation must have played a large role in this increase.

The Bank's earnings per share also increased by 35%. Judging from the interim results, we can expect the bank to finish the year at a PAT in the region of K35 billion. That would result in an earnings per share in the region of K 8.5. At today's market price that would be a PE of 6.47, which is quite low for a prime banking stock such as SCZ. We expect the bank to continue this brilliant performance through out the balance of the year and certainly see moderate upside in its share price. We continue with our BUY recommendation.

Donor pledges appear to be materializing... The International Monetary Fund (IMF) early this week reported to have approved a US$600 million facility to support Zambia's economic and structural reform programme. This positive development immediately raises hopes for timely donor cash inflows.

Mr. Stanley Fischer, deputy managing director of the IMF, on a four day visit to Zambia, upon arrival confirmed the IMF's commitment to over US$600 million in the form of debt relief to Zambia. He acknowledged the IMF's approval of Zambia's strides towards the successful implementation of the Poverty Reduction and Economic Growth programme. The IMF 's approval of Zambia's programme was one of the prominent hurdles towards unlocking the US$ 1.2 billion support pledge made by the donor agencies at the Consultative Group (CG) meeting held in Lusaka in mid July.

We have for some time partly attributed the 20%+ devaluation of the Kwacha in the first seven months of the year to the delays in realizing donor support. Judging from the momentum created after the CG meeting and now the IMF's approval, we are more hopeful that Zambia will benefit from speedy support this time around.

-JULY-