Ndola Lime not sold but restructured | ZCCM-IH

ZCCM-IH has denied reports that it has sold off Ndola Lime Company.

In March 2020, ZCCM IH announced the appointment of a Business Rescue Administrator (BRA) who would oversee the much need turnaround of Ndola Lime. The BRA had commenced the process of restructuring the operations of NLC with a view to creating a business that will take over the running of the limestone operations sustainably.

With over K1 billion kwacha already sunk into the lime company over the last 10 years, the entity continued making losses from operations. According to year on year annual reports from ZCCM IH in the last 5 years, indications of the causes of the challenges the entity was facing emanated from its core asset (Vertical Kiln).

In the 2012 AR, ZCCM IH reported that it had recapitalized Ndola Lime Company through a shareholder loan of K28.7 million (US2.82 million) for the NLC Recapitalization Project. At the time of publishing the 2016 AR, the Second Vertical Kiln (VK-2) was still undergoing hot commissioning.

Fast forward to the 2017 AR, it appears that the hot commissioning phase of the Recapitalization Project was met with a series of technical hurdles that affected the performance of the company. Small wonder why in the 2017 AR this particular update appeared under the “Strategic New Investments” section of the report? We asked the question because according to the 2017 AR, the Board was undertaking a review of the entire operation of the Ndola Lime to determine an appropriate option that will result in improving operations of NLC as well as the performance of the Group. This marked the first strong single that it was only a matter of time that the management team at ZCCM IH would make the strategic decision of bringing on board the BRA to turnaround this operation.

In a statement, ZCCM-IH Spokesperson Loisa Mbatha clarified and said that Ndola Lime Company has ceased to exist due to huge debts and a new company known as Limestone Resources Limited has been created.

“Over the past 8 years Ndola Lime Company Limited (NLC) accumulated an insurmountable amount of debt, in excess of K1 billion, owed to various statutory bodies as well as private creditors, which led to the Company being technically insolvent,” Ms. Kakoma said.

“In September 2018, two (2) former employees instituted business rescue proceedings in the Lusaka High Court pursuant to the Corporate Insolvency Act No. 9 of 2017,” she said.

“By order of the Court dated 5th October 2018, the Official Receiver was appointed as Interim Business Administrator of NLC. Without the prospect of recapitalization, the Business Rescue Administration (BRA) process would effectively result in the closure of NLC’s business and loss of jobs.”

“As such, ZCCM Investments Holdings Plc (ZCCM-IH) requested and was granted an Order to convene a meeting of creditors to consider and approve a proposed Scheme of Arrangement.”

“The restructuring proposals in the Scheme of Arrangement were to:
i. Create a New Company (NewCo);
ii. Restructure the liabilities of NLC;
iii. Transfer the assets and business of Ndola Lime to the NewCo;
iv. Retrench, pay and transfer the employees of NLC to the NewCo; and,
v. Dissolve NLC with or without winding up.”

Ms. Kakoma said the main objectives of the restructuring plan are for NLC’s successor company, LRL, to commence operations on a clean slate, debt free, recruit a new management to spearhead the re-orientation of strategy and operations without any legacy problems associated with NLC.

“The achievement of the objectives above would enable effective recapitalization of the business. In order to preserve jobs, a recruitment exercise for LRL will commence beginning August 2020.”

“The proposed restructuring plan ensures the continuation of NLC’s business, albeit under a different entity name – Limestone Resources Limited (LRL). This new approach and plan ensures that employee welfare is prioritized, NLC’s debt is resolved, and that NLC’s core assets are secured,” she said.

“ZCCM-IH is currently in the process of obtaining statutory and other approvals to facilitate the transition of NLC to LRL. The processes of approvals, transfer, recruitment and recapitalization will take approximately six months from August 2020.”

She said ZCCM-IH remains committed to revamp the operations at NLC, under a new entity and brand, and the proposed restructuring plan provides practical solution to the key challenges currently faced at NLC.

The new company is a vehicle that is being used as part of the road map to financial health. The management team is well aware that there was need to start life anew for this segment of their portfolio and hence why the NewCo has been incorporated and is known as Limestone Resources Limited (LRL) 100% owned by ZCCM-IH.

According to their published statement, “at a Final Creditors Meeting held on the 10th June 2020, the creditors passed a special resolution to approve the Restructuring Proposals as contained in the Scheme of Arrangement and the main objectives of the restructuring plan are for NLC’s successor company, LRL, to commence operations on a clean slate, debt-free, recruit a new management to spearhead the re-orientation of strategy and operations without any legacy problems associated with NLC”.

Limestone Resources Limited begins life anew and will address the challenges that were faced in Ndola Lime’s resources and capabilities. Without the institutional memory that Ndola Lime held, the management team at LRL can choose to cut the losses of Ndola lime and attract fresh capital to revamp the business. Furthermore, LRL can adopt its own business strategy that can relook at the manufacturing of quicklime (calcium oxide), slaked lime (calcium hydroxide), cement, and mortar which are typical limestone business segments and carve out the best option going forward that can create value for ZCCM IH. Furthermore, LRL can also decide to partner up with other successful entities in the same sector so that mistakes of the past are avoided.

Investors will be pleased with this move as a way forward for the investment group’s Achilles heel has been found.