THE Copperbelt Energy Corporation Plc says it remains hopeful its 2021 net profits could almost double that achieved in the half-year period ending June 30 on account of a continued strong financial performance.
Since announcing its half-year results in September this year, where the utility earned a huge profit of around US $25.5 million in the period ending June 30, 2021, coming from a loss of $32.5 million in the prior period, CEC’s share price jumped from K1.40 per share in early September to K1.80 in trading sessions on the Lusaka Securities Exchange (LuSE) by the end of that same month.
Analysis from data made available on the company’s share chart shows that its share price peaked to an all-time high of K2.65 per share this month since going public on the local bourse back in
January, 2008, opening at K0.45 per share.
Market data availed by the LuSE revealed that the power utility’s share price has soared to K2.65 per share as at December 28, 2021, compared to just K0.96 per share 12 months ago. Commenting
on the strong share price performance posted by the utility this year, CEC chief financial officer Mutale Mukuka expressed confidence that the company’s performance on the local bourse would
continue in view of major developments that have occurred this year, such as the shift in segmentation of its biggest customer Konkola Copper Mines Plc, triggering significantly reduced
receivable impairment losses.
“I think that the share price or investors are essentially looking at the value that the business has posted to date. Secondly, they are also valuing the business and looking at the outlook. We are
coming from a situation where the business was posting impairment losses as a result of the KCM non-payment and to a larger extent, that was then tied to the SI Common Carrier status that the
business was given,” Mukuka said in an interview. “Now, with a change in segmentation from supplying power to transmission, use of system provision to that mine, that meant that we are not
taking the full credit risk for KCM and from a numbers point of view, it significantly reduced the level of impairment. So, with those levels of impairment coming off and reducing significantly to numbers below US $10 million, it meant that the business was back to being profitable just from an earnings perspective. So, moving from a loss position to being profitable once again. We hope that as we are getting to year-end, we could get to a number that probably is very close to double what we had at half-year. If you look at it from that perspective, then you are essentially looking at a very profitable business.”
He added that CEC’s consistent rewarding of dividends to its shareholders positively impacted investor sentiment in the company.
CEC declared a dividend to its shareholders amounting to 2.1 US cents per share for the 2020 financial year following an improved performance during the second-half of last year.
This was followed-up with an interim dividend of 2.3 US cents per ordinary share this year, which translated to K0.3727 per share following its half-year profits.
“The second issue is that the business itself is a dollar business. Most of the businesses that we see around have a kwacha exposure. If you look at it from a dollar perspective, their income is not
dollar-based. Now, in this instance, the income itself is dollar-based, which means that when you are valuing this business, it’s a business that is valued in dollars, then you apply the exchange rate.
So, to some extent, the valuation that investors are applying also have some assumptions around the effects; what sort of exchange rate are they applying?” Mukuka said. “The third issue when you
look at it from a performance perspective is the fact that this is a business that has consistently rewarded its shareholders with a return in form of dividend. And if you look at the dividend payments over the years, it’s something that has been growing over the years, and the growth has been reasonably okay if you compare to what other investment options that investors are looking at. So, just based on that, I think these are the sort of drivers that have impacted on the share price.”
And Mukuka explained that Zambia’s mining sector, which now has a positive policy direction and outlook, also influenced the company’s share price performance.
“…The business is largely linked to mining in Zambia. If you look at the policy direction of the mines that the government has put up, it is an ambitious plan to get to three million tonnes (of copper) in the next decade. If that is growing, it means that most of the suppliers to the mines, CEC included, they have to grow with that ambitious plan. So, if you are looking from outside, you are essentially looking at all these factors: the current things that have happened and then, going forward, what are the things that will happen that will impact positively on the business,” he said. “I think for most of the businesses, not just CEC alone, the environment is right, and the policy direction is that we need to push and grow the economy. Now, as the economy is growing, which sectors are contributing to the growth? My expectation is that if mining is growing, then all the suppliers are growing, CEC will grow. So there is quite a lot of optimism in that area.”
Meanwhile, Mukuka welcomed the recent appointment of renowned energy expert and proprietor of Petrotech Oil Corporation Limited, Reynolds Bowa, as the Energy Regulation Board (ERB) board chairperson.
Bowa, up until last year, was a non-executive director on the board of Copperbelt Energy Corporation Plc, representing ZCCM-IH.
“Mr Bowa was our vice-chair. He has a lot of expertise in the energy sector having been part of the Oil Marketing Companies (OMCs). Subsequently, he owned his own. And his expertise where he worked with CEC and others, I have no doubt that he’s got what it takes to be part of the team that regulates this sector. So, we can only wish him well and look forward to them pushing the sector forward. Overall, it’s a very good competent team, which we look forward to working with,” said Mukuka.