2012 ANNUAL REPORT - Lafarge · 2012 | LAFARGE CEMENT ZAMBIA Plc ANNUAL REPORT | PAGE 2 being the...

CEMENT

2012ANNUAL REPORTLafarge Cement Zambia Plc

LAFARGE AT A GLANCE

Development& Growthin 2012

At Lafarge Cement Zambia the learning and development of our people, our plants and our communities is our core focus. Sometimes the results of these developments are quick to see, and sometimes it takes years of continuous dedication to appreciate the total impact of our involvement. But it is always considered a privilege to create and establish – and to grow.

In fact, our commitment to development stands central to the significant growth that we have shown over the past few years. We’re proud of our growth. And we’re hoping that everyone who connects with our brand will benefit from this growth – whether it is because their houses were built with the strongest cement on the market, because they’ve learnt to read in one of the libraries we’ve built or simply enjoy the shade under one of the trees we’ve planted.

A Global PresenceLafarge is a world-leading manufacturer of building materials, enabling millions of people across the globe to build their future with complete confidence in the quality of the materials they use.

68,000 employees continue to develop and grow the best solutions for our customers across 64 countries, with an annual Research and Development budget of €150million. No wonder we’re the world’s preferred cement brand.

Partnerships that continue to grow

Habitat for Humanity

When families have a place to call home, their fate is forever changed. This is why we helped to build 30 houses for homeless families in 2012.

Room to Read

15 Libraries built at various schools in 2012. More than 210,000 children reached with the gift of literacy.

Everyday InvolvementThroughout 2012 Lafarge Cement Zambia empowered various worthy causes with significant donations, in particular those projects/causes that improved:

• Infrastructure

• EmployeeLearningandDevelopment

• Arts&Culture

• Health

Health & Safety: Our Number 1 Priority

Lafarge Cement Zambia Plc continued to remain a member of this prestigious club for the third year running.

DuringthepastcoupleofyearswehavedevelopedanumberofHealth&Safety Initiatives to ensure our employees and surrounding communities are safe&healthy….andnowwe’restayingthedistancebymakingsureourcontribution to each development remains significant.

HIV/AIDS Awareness & Prevention Campaign

• Growingknowledge,savinglives

• PeerEducatororganizedsensitizationworkshopspresented at work and in neighbouring communities.

Malaria Prevention

We continue fumigating homes of employees in Ndola and Chilanga.

Lafarge Mobile Health Clinic

• Freemedicalassistance,especially for childcare and maternity related cased

• Freegeneralmedicinesdispensedtopatients

•7,680patientstreatedin2012.

The products we’ve developed to grow a nationWe have a non-stop commitment to deliver the best products for the best applications, whether it be a family house, a national stadium or the roads that connect our people across the country. No wonder everyone loves Lafarge quality and strength!

When our People Grow, our Company Grows……Whichiswhythecontinuousdevelopmentofouremployees’skillsremainsakey priority at Lafarge Cement Zambia. Training days have once again increased in2012to1,771days,andincludedtrainingbothlocallyandabroad.

2009 2010 2011 2012

Training Days

1,1801,360

1,462

1,771

LAFARGE AT A GLANCE

CONTENTS

BUSINESS REVIEW

01. Chairman’s Review

A PERSPECTIVE ON LAFARGE

05. TheGlobalLafargeGroup

06. Lafarge Cement Zambia

DEVELOPMENT & GROWTH IN 2012

09. Development&Growth:OurProducts

10. Development&Growth:OurPeople

SUSTAINABILITY REPORT

13. Development&Growth:Health&Safety

15. Development&Growth:CommunityInvolvement

19. Development&Growth:TheEnvironment

FINANCIAL INFORMATION

23. Notice of the 21stAnnualGeneralMeeting

24. DirectorsandExecutiveCommittee

28. FinancialInformation

61. Performance Profile

66. FormofProxy

CEMENT

Sales Tonnages (‘000 Tonnes)

Performance ProfileWe continuously commit to increasing our overall performance to meeting the requirements of all our stakeholders.

Exports by Country - Cement 2012

Democratic Republic of Congo (DRC) 66%

Burundi 16%

Malawi 7%

Zimbabwe 6%

Tanzania 4%

Mozambique 1%

Other 1%

Chilanga II Plant, Lusaka Chilanga II Plant, Lusaka

Cover: The New Lusaka Stadium

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SECTION 1:

BUSINESS REVIEW

PAGE 1 | LAFARGE CEMENT ZAMBIA Plc ANNUAL REPORT | 2012

BUSINESS REVIEW

Health and Safety

The Company continued to implement various Health and Safety programmes with particular focus on improving road transport safety. The Company maintained programmes for the prevention of malaria, HIV/AIDS awareness, and support for employees and their families, and neighbouring communities. The compliance of contractors, transporters and visitors with Lafarge safety standards continued to receive utmost focusinorderfortheCompanytoensurethatthetargetofzeroincidentsis achieved.

Significant investment in emission control equipment was made to ensure that the Company operations do not inconvenience the communities around our operations.

Economic EnvironmentThere was strong economic activity especially during the second half of the year. The Government demonstrated strong commitment toinfrastructure development and this contributed to higher spending on public infrastructure projects. The increase in public infrastructure projects, strong mining activity and increase in individual house construction, were the main drivers of cement consumption. It is expected that there will be more infrastructure development projectactivitiesin2013giventhatthe2013GovernmentBudgethasallocatedsubstantial resources to new projects and that strong mining activities areexpectedtocontinue.

Regional activity increased, though regional over-supply conditions placed pressure on prices especially in the first half of the year.

Cement Market

The cement domestic market grew by 13.2% in 2012 when compared to 20.4% in 2011 with strong growth in the second half of the year. Demand from the Democratic Republic of Congo (DRC) was lower than previous year especially in the first half of the year but recovered during the second half. Other regional markets increased substantially, particularly during the second half of the year.

AtChilangaIIPlant,performancewasoptimizedthroughmoreefficientuse of resources and the continued implementation of the Lafarge best practices. Power interruptions continued to affect the plants. Major maintenance was carried out at both plants during the period. Maintenance works in Ndola focused on the rehabilitation of the emissions control equipment. Some units at the Chilanga I Plant operated for specific cement products only and the opportunity to consolidate all operations at Chilanga II Plant is under review.

2012saw thesuccessful launchof theExtraMileProgramme,whichaims at introducing new products and services in an attempt to better serve our customers while increasing our profitability.

Cement availability was increased in the Southern and Copperbelt regions throughoptimizationofthedepotfacilities.TheCompanyalsoimprovedits customer service by increasing its delivered service to the customers.

Capitalexpenditurewasrestrictedtoprojectsthatimprovedproductivityand enhanced product portfolio. The major capital spend was on the Aggregates Crusher equipment which will enable the Company to maximizetheuseofquarrymaterialandsupplyqualityaggregatestotheconstruction market and further enhance profitability.

Financial PerformanceThe Company demonstrated strong financial performance during the year despite challenging industrial performance particularly in the first half of the year. Turnover increased by 16% over the previous year. Profitability was stronger than that achieved during the previous year drivenbyincreaseddomesticdemand,pricingactions,optimizedsalesmixandproactivecostreductioninitiatives.

Operating costs, although contained, were high due to high input costs and power quality related costs.

The Company’s strong operating income and working capital improvement initiatives have enabled the Company to remain cash positive.TheCompanyhasnoexternaldebt.Operatingmarginimprovedfromthepreviousyeardrivenbystrongsalesvolumes,optimizedsalesmixandcostcontrolmeasuresdespitehighcostrelatedtotherestartofthe Ndola Plant.

The Company’s solid financial position provides confidence to pursue market opportunities and grow the product portfolio, offering innovative solutions and superior customer service. The Company is well positioned intheregionandopportunitiesforfurthergrowtharebeingexplored.In2013, the Company will launch its Aggregates business for the benefit of the construction sector and enhancing profitability.

Capital Market The Company’s closing share price for the year was ZMK8,000, an increase of ZMK400 from the price at the beginning of the year. The Company’s market capitalization at 31 December 2012 wasZMK1,600,319 million.

InvestmentThere was no change to the investment portfolio with the only investment

Chairman’s Review

2012 | LAFARGE CEMENT ZAMBIA Plc ANNUAL REPORT | PAGE 2

being the 14% shareholding in the equity of Mbeya Cement Company Limited, a company registeredandoperating inTanzania.Adividendwas received from this investment for the fifth consecutive year.

Corporate CitizenshipGood corporate citizenship, transparency and good corporategovernance remain key values of the Company. The Company partners with all stakeholders to create and sustain economic development and deliveracceptablereturnstoourshareholders,andrecognizesthatco-existenceandco-operationwithall stakeholders isessential tobothsurvival and growth.

The Company is committed to the development of all employees and to the preservation of the environment in accordance with the Lafarge Grouppoliciesandpractices.

Support continued to be given to health, educational, environmental and road infrastructure projects through partnerships with the communities andotherorganizationsinordertoobtainmaximumleverageandbenefit.

TheCompanyextendeditspartnershipwith“RoomtoRead”andfundedthe construction of more libraries and classrooms, and aided in the provision of books and bursaries. Some support is given towards tertiary education; however, the emphasis is primarily on literacy and primary education, particularly for young ladies. The mobile clinic continued to be deployed in the Ndola and Chilanga areas and the use of this facility by the local community has increased significantly.

The Company further promoted cultural activities during the period by supporting the cultural and traditional ceremonies with a view to preserve the country’s cultural heritage.

The emphasis is on partnering with the community and making a difference to the most vulnerable members of society.

OutlookThe Company is well positioned to benefit from the improvements in the domestic and regional economies. The Company has a strong base of values and principles which have served it well over the years and will maintainitsfocusonimprovedcustomerservice,industrialexcellence,sustaincostcontrolgoodandcorporatecitizenship.

TheCompanyrecognizesthecompetitiveenvironmentitisoperatinginand continues to implement appropriate strategies to enhance its growth and profitability. The company also recognizes that it is vital to havetalent to match its growth ambition and therefore will continue to focus on people development to equip itself with appropriate talent, skills and

capabilities. The Aggregates business will be launched in the ensuing year to satisfy the growing sophistication in the construction sector.

The Company will leverage on the ongoing commercial initiatives to drive sales, grow its market share, improve industrial productivity to meet customerexpectationsandsustainthecashgenerationinitiatives.

Demand for cement is expected to increase given the plannedinvestments in infrastructure projects, power generation and mining expansioninZambia,whilethecontinuedpaceofdevelopmentintheregionalmarketsshouldsupportgrowthinexportactivity.

DirectorateMr. John Stull resigned from the Board with effect from 10 May 2012 following his re-assignment to take up another role within the Lafarge Group.IwishtothankMr.Stullforhissupportandcontributionandwishhim success in his future role.

I wish to thank my fellow Board members for their support, encouragement andwisecounsel,andexpressmyappreciationtotheManagementandStaff for theircommitmentanddiligence.Finally, Iwishtoexpressourgratitude to our suppliers and customers for their loyalty and support and to the shareholders for their continued confidence in Lafarge Cement Zambia Plc.

Muna HantubaChairman

Chilanga II Plant

SECTION 2:




Behind the impressive figures lies a company that is committed to being the preferred supplier, employer, partner and neighbour in all the countriesinwhichitoperates.Thisvisioncrystallizesinanextraordinaryfocus on the responsibilities that come with being such a trusted brand: fromtheextensiveresearchactivitiesandglobalbestpracticesthatareapplied to the benefit of local markets, to the commitment towards the upliftment of local communities.

Lafarge truly is a global brand with global impact, and is proud to continuously operate at the forefront of innovation and customer partnerships.

The Global Lafarge GroupThe Lafarge Group, employing 68,000 employees in 64 countries, is the world leader in the supply of building materials holding top ranking positions in its businesses: Cement, Aggregates and Concrete. In 2012 the group posted sales of € 15,816 million.

Efficient Customer Service Research and Development Forming strong partnerships with architects and prescribers


Our roots were laid down in 1949 when the company, then known as

ChilangaCement,wasestablishedbytheNorthernRhodesianGovernment

and the Colonial Development Corporation, now the Commonwealth

Development Corporation (CDC). In 1969 the Chilanga Plant was

commissionedandduring1956and1957twomorekilnswereadded.

With its continued growth, in 1969 the Ndola Plant kiln was commissioned

andin1974asecondkilnwasadded.TheCompanywasprivatisedin

October 1994 under the government privatisation programme aimed at

enhancing the efficiency of state-owned companies. The Company was

alsothefirstcompanytobelistedontheLusakaStockExchange(LuSE),

with CDC as the majority shareholder.

Earlyin2001CDCreorganiseditscementoperationsinSouthernAfrica

to form Pan African Cement (PAC), which became the holding company

Lafarge Cement Zambia

ofChilangaCementinZambia,MbeyaCementinTanzaniaandPortlandCement in Malawi. In May 2001 Lafarge acquired PAC from CDC as well as a further 34% of Chilanga Cement through a compulsory offer to minorities. The minority shareholders are well dispersed with over 3,000 shareholders.

In 2007 Chilanga Cement changed its name to Lafarge CementZambia Plc, thereby fully aligning the Company with the international LafargeGroup.Sincethen,theCompanyhascontinuedtogrowastheleader in the local construction industry as well as in the region. The inauguration of the plant at Chilanga in 2008, has enabled the Company to significantly increase cement capacity to 1,230,000 tonnes of cement per annum. This capacity makes it possible to serve the vibrant local market without delay, whilst also being able to supply cement to the ever-growing construction demands of the regional markets.

Lafarge Cement Zambia Plc has a rich history that is forever interwoven with Zambia’s greatest construction projects. From the Kariba dam to modern day structures such as the New Lusaka Stadium, shopping malls and hospitals, our cement remains the preferred choice when it comes to building our beautiful country.

Entrance to Chilanga II Plant, south of Lusaka City

Growth in residential housing construction projects

SECTION 3:


Development: The progression from a simpler or lower to a more advanced, mature, or complex form or stage.

Growth: An increase: as in size, number, value, or strength; an extension or expansion.

Much like the relationship between cause and effect, the relationship between Development and Growth are inseparable. That is why we continue to boldly invest in various development objectives for our people, our products, our communities and our partnerships. As we do this, we foster growth. And growth is the key to a better life for all our stakeholders.

The growth results yielded by our continuous development investments in our plant, our products and our people, is evident from the financial figures presented in this report.



During 2012 we were privileged to see significant growth as a result of

years of development efforts, both in our business and our communities.

Our newly launched product, SupaSet, has had a profound effect on the

market in 2012, as more and more consumers came to appreciate the

benefits associated with the product. It became the cement of choice for

block makers and concrete product manufacturers that require reliable

Development & Growth: Our Products

and absolute strength. The Lafarge brand continues to be the preferred choice for construction jobs including various government projects.

The launch of the Lafarge Extra Mile programme aims at furtherdeveloping new products and services in an effort to better serve our customers, grow and develop our market and increase benefits for all stakeholders.

Construction of the New Lusaka Stadium, Lusaka Apartments at Ibex Hill, Lusaka Ilunda Business Park at Long Acres, Lusaka


Development & Growth: Our PeopleThe year also saw a continuous focus on people development within the Company, in particular the skills and talents of our employees, ensuring that we will have growth to speak of for years to come.

During2012atotalof367employees(123femaleand244male)receivedadditional training, conducted locally as well as in various other countries includingFrance,USA,UAE,Kenya,Egypt,Zimbabwe,Poland,Romania,SwitzerlandandSouthAfrica.Criteriaforselectionoftrainingprogrammes

revolves around several factors including: Individual Development Plans, NewEquipmentInstallationandGeneralSkillEnhancement.

Furthermore,allnewstafftothecementindustryweresensitizedtonewstandards and policies ensuring that they are aligned with new technologies entering into the market and with new requirements of the law. In total, 1,771trainingdayswerededicatedtolearninganddevelopmentin2012,at a total cost of ZMK4,008 million.

Chentwana Chisuse Ngawa Ndhlovu Friday Nyimbili

Children at Chilanga Basic School

At Lafarge we believe in a fundamental truth, which is true in both life and business:

When you open your hand to give, that same hand is also open to receive. Sometimes

even beyond your wildest expectations.

SECTION 4:




Development & Growth: Health & SafetyDeveloping and implementing systems and processes that keep our people safe and alive, is a key priority at Lafarge Cement Zambia. The impact of these measures is significant in terms of the success of our business. The Company focuses on employee health and ensures that employees are

Health InitiativesLafarge Cement Zambia developed and continues to support a number of healthcare initiatives as part of our commitment to the health of our employees and local communities.

HIV/AIDS Awareness & PreventionOurPeer Educator programmecontinues to educate both employeesand local communities on the prevention and treatment of HIV/AIDS. This programme’s success relies on the involvement and efforts of our PeerEducators(PEs),allofwhomperformtheirdutiesonavoluntarybasis.NewPEsare trainedatLafarge,andexistingPEsare invitedtorefresher courses on a regular basis.

ThePEsalso fulfill acritical support roleamongstour youth. During2012 they presented several HIV/AIDS sensitisation workshops at various schools in the country. These sessions also included education relating to risk enhancing behaviour, such as alcohol and drug abuse.

cared for in the hope that they go about their daily tasks with confidence and commitment. In addition, the presence of safety systems and safety training of our employees means the Company does not lose production time due to accidents on site. It’s a win-win for all parties involved.

Malaria PreventionLafarge Cement Zambia distributes mosquito nets every two years to its employees. In addition, we also fumigate the homes of our employees in Ndola and Chilanga, as an additional preventative measure.

Lafarge Mobile Health ClinicEversincethe2008launchoftheLafargeMobileClinic,whichisruninassociation with Doctor’s Outreach Care International, its contribution to the health of local communities has become invaluable and has gone a long way in addressing the immediate health needs of our communities.

The Lafarge mobile clinic places particular focus on the provision of medical assistance to all maternal and child care cases, and patients aretreatedfreeofcharge.Generalmedicinesarealsodispensedwithoutchargetothepatients.7,680patientsvisitedtheclinicforconsultationand treatment during 2012.

Peer Educators conduct tool box talks,Chilanga

Provision of medical services for staff, Musamba Clinic

Provision of free medical services for the community, Lafarge Mobile Clinic


Lafarge H&S Excellence ClubTheLafargeGroup’sHealth&SafetyExcellenceClubrecognizesexceptional safety performance on a global level. With zerofatalities,zerolosttimeincidentsandanunwaveringcommitmentto safety, Lafarge Zambia continued to remain a member of this prestigious club for the third year running.

Safety InitiativesAt Lafarge, safety is considered a way of life. Years of continuous safety induction programmes and teachings have resulted in a workforce that is committed to staying safe.

Furthermore, our requirements for the maintenance of world-classsafetystandardsextend to thepracticesofoursuppliersaswell.TheLafarge Contractor Safety Management (CSM) programme ensures that all contractors subscribe to Lafarge safety standards, and includes specific requirements to ensure that the employees and contractors are treated fairly and with safety in mind.

The stringent subscription to these measures continues to be a critical requirementintheawardingofcontractstoexternaloperators.Aspartof our safety drive we also presented several safety programmes to our stakeholders, including ‘Transporter Safety’ and ‘Road Safety’ among others.

Personal Protective Equipment (PPE) Full body harness Seat belt buckle


Development & Growth: Community Involvement

When our communities start to prosper because of our involvement, and the Lafarge name becomes synonymous with constant, unwavering commitment, thenweareonourway to realizingoneofourgreatestgrowth objectives: building a better Zambia.


Room to Read

From a business point of view, growth is mostly measured in financial terms. However, at Lafarge Cement Zambia we like to measure growth in another increment: upliftment.

In 2012, we continued to invest in development programmes assisting our local communities. At the same time we also had the privilege of seeing the results of years of effort and development, culminating in significant changes in the way things are done.

“Literacy is a bridge from misery to hope. It is a tool for daily life in modern society. It is a bulwark against poverty, and a building block of development, an essential complement to investments in roads, dams, clinics and factories. Literacy is a platform for democratization, and a vehicle for the promotion of cultural and national identity. Especially for girls and women, it is an agent of family health and nutrition. For everyone, everywhere, literacy is, along with education in general, a basic human right.... Literacy is, finally, the road to human progress and the means through which every man, woman and child can realize his or her full potential.” - Kofi Annan.

Lafarge Cement Zambia’s partnership with Room to Read is changing the faceofeducationforgoodacrossourbeautifulcountry.Forseveralyearsnow, we have been building libraries at schools across the country, in a bid to improve literacy. To date, Lafarge Cement Zambia has contributed to the building and equipping of 58 libraries, 15 of which were built in 2012. With over 210,000 children having been reached thus far, the growth in literacy levels have made our investments in this project one of our most prominent and rewarding efforts.

Children at Twitti Community School


Room to Read is an international non-profit organization,focusing on improving literacy and gender equality. Designing and implementing innovative educational programmes, they transform the lives of children, focusing on literacy and gender equality in education. They promote the habit of reading by establishing child friendly libraries, training teacher-librarians, co-publishing local language children’s books and supporting teachers to enhance literacy instruction methods. Very importantly, Room to Read also sponsors girls to complete their school education and run a Life Skills course to increase their capacity to take key life decisions.



A house is a refuge for the people who live in it. It provides physical safety and security, as well as shelter against the cold. It is also a place where families can come together and children feel secure. A place that they can call home. A house fosters pride and confidence in its

Foundedin1976,HabitatforHumanityisanon-profit,ecumenical

Christian housing ministry that has helped to build or repair over

600,000 decent, affordable houses, serving more than 3 million

people worldwide. Their vision is to build a world where everyone

has a decent place to live.

Through volunteer labour and donations of money and materials,

Habitat builds and rehabilitates simple, decent houses. In

addition to a down payment and monthly mortgage payments,

homeowners invest hundreds of hours of their own labour into

building their Habitat house and the houses of others.

Habitat houses are sold to partner families at no profit and

financed with affordable loans. The home owners’ monthly

mortgage payments are used to build more Habitat houses.

Habitat for Humanityownersbyrestoringdignity.ForallthesereasonsLafargehaspartneredwith Habitat for Humanity since 2004, building houses for those less fortunate and uplifting our communities. During 2012 Lafarge donated cement to help Habitat build houses for 30 families in Zambia.

Residential buildings under construction, Lusaka


OtherOther contributions went to various institutions including:

• ZMK116millioncontributiontoMotherofMercyHospiceinChilangaforcontinuedoperationsofthehospice.

• MundaWangaAnimalSanctuaryandBotanicalpark.

• TheKukulaBusinessIdeaCompetition,aimedatencouraginganentrepreneurialspiritamongtheyouth.

• TheChejezhiAfrica-ZambiachickenshelterandpiggeryprojectsofNorthWesternProvince. • LilayiElephantSanctuaryoperatedbyGameRangersInternational,abranchoftheDavidShephardWildlifeFoundation.

Lafarge Cement Zambia has committed a set of resources to local communities to assist with various smaller, yet equally important projects. Besides financial assistance, Lafarge made cement donations to various worthy causes in 2012:

InfrastructureVarious donations were made to improve the quality of infrastructure in our local communities, including donations to Kanini ward of Ndola and rehabilitation of community roadsinFreedomandMusambaCompounds.

Education & TrainingVarious schools have benefitted from either cash or cement donations in order to build additional classrooms, including Mount Makulu Basic School, Twitti Community School, Open Arms Community School, Sosco Community School, Chiwala Secondary School and Dola Hill Basic School.

Arts & CultureA significant contribution was made to various organisations promoting Arts and Culture. Donations were mostly cash, and beneficiaries included the KazangaKabomboCulturalAssociation,Cuunda Cultural Association, Sunchild Productions, Chakwela Makumbi Traditional Ceremony and the Music Camp coordinated by the American International School of Lusaka.

Everyday involvement



Lafarge is fully committed to the preservation of our environment’s natural resources. Finding ways to operate in such a manner that we reduce our carbon footprint requires continuous, innovative developments, to deliver long-term results for the benefit of current and future generations.

Development & Growth: The Environment

The relationship between the Lafarge Group and the World WildlifeFund(WWF)isoneweareexceptionallyproudof.Sincewesignedanagreement with them in 2000, it has been the driving force behind our commitment to drastically reduce our CO2 emissions. Reaching the objectivesoftheagreementoneyearinadvance,theGroupreaffirmeditscommitmenttotheiragreementwithWWFbysetting2nd generation commitments. According to these, three new targets have been set for 2015and2020 respectively, and they are everybit as extensive andcomprehensive as those set in 2000. More than just regulating CO2

production at Lafarge plants across the globe, these new regulations will influence the entire construction chain.

Aether®,anewgenerationclinkertobelaunchedin2014,isanexcellentexpressionofthesecommitments.Aether® is a new chemical composition for clinker which should allow a 25% to 30% reduction in CO2 emissions,

Lafarge and WWFthankstoreducedlimestonecontentintherawmix,alowertemperature(~1300°C) during the burning process and easier grinding, using less energy. Aether® cement offers similar properties to ordinary Portland Cement and can be produced in traditional cement plants after minor process adjustments, for a lower overall environmental footprint.

As part of the Group’s CO2 reduction and dust emissions control commitments, Lafarge Cement Zambia drew up a detailed maintenance scheduleofallfiltersandtheElectroStaticPrecipitator(ESP)towhichwerigidly adhere.

It is calculated that a single tree will consume 1,134kg of CO2 in a year. Therefore,inconjunctionwiththeGovernmentForestryDepartmentweare continuing with our commitment to plant trees throughout Chilanga and Masaiti Districts.

Providing a sanctuary for orphaned elephants Educational centre for schools at the elephant orphanage Preparing feeding formula for orphaned elephants

Elephant Sanctuary at Lilayi supported by Lafarge and David Shepherd Wildlife Foundation

SECTION 5:




1. To approve the minutes of the 20thAnnualGeneralMeetingheldon30 March 2012.

2. To receive and consider the Annual Report and the FinancialStatements for the year ended 31 December 2012, including the Chairman’s Review, Directors’ Report and Report of the Auditor.

3. To consider, and if thought fit, declare a dividend.

4. To determine the remuneration of the Directors.

5. To approve the remuneration of the Auditor for the year ended 31 December 2012 and appoint an Auditor for the ensuing year.

6. To elect Directors.

7. Toconsider,andifdeemedfit,approveaspecialresolutionfor thealteration of Share Capital to comply with the currency rebasing regulation.

8. To transact other competent business of which due notice has been given.

A member entitled to attend and vote at the meeting is entitled to appoint any person or persons (whether a member of the Company or not) to attendand,onapoll,voteinhis/herstead.Proxyformsmustbelodgedat the registered office of the Company at least 48 hours before the meeting.

By order of the Board

H. KapekeleCompany Secretary

Lafarge Cement Zambia Plc Head OfficeFarmno.1880Kafue RoadChilangaPOBox32639Lusaka

19February2013

Notice of the 21st

Annual General MeetingNotice is hereby given that the 21st Annual General Meeting of the members of Lafarge Cement Zambia Plc will be held at the Intercontinental Hotel, Lusaka, Zambia on Wednesday 27 March 2013 at 9:00hrs to transact the following business:


Directors

M. Hantuba - Chairman

F.Esan -ChiefExecutiveOfficer

M. Chibesakunda

C. Moloseni

D. Mulwila

S.M. O’Donnell

Company Secretary

H. Kapekele

Registered Office

Farmno.1880

Kafue Road, Chilanga

POBox32639,Lusaka,Zambia

Tel:+260211367400/367600

E-mail:[email protected]

Transfer Secretaries

Sharetrack Zambia

FarmersHouse,CentralPark

1 FloorMainBuilding(SouthWing)

P.O.Box37283,Lusaka

Zambia

Tel:+260211236783

Fax:+260211236785

E-mail:[email protected]

Auditor

Ernst&Young

Chartered Accountants

Cnr of Cha Cha Cha Road / Katondo Street

Development House

P.O.Box32385Lusaka,Zambia

Office Tel: +260 211 236 120

Principal Bankers

Citibank Zambia Limited

Indo Zambia Bank Limited

Standard Chartered Bank Zambia Plc

Directors andExecutive Committee



Board of Directors

Muna Hantuba

Chrissie Moloseni

Fola Esan

Mark O’Donnell

Mwelwa Chibesakunda

Dorothy Mulwila


Executive Committee

Phoebe MusondaSupply Chain

Kaziwe KaululeMarketing

Beatrice MutamboHuman Resources

Roy ChikumbiHealth and Safety

Fola EsanChief Executive Officer

Eugene ChunguCorporate Affairs and Communications

Harriet KapekeleCompany Secretary and Legal Counsel

Tshepiso DumasiCommercial

Chris HeugasAggregates

Mwewa KapepulaIndustrial

Chrissie MoloseniFinance

Focusing on Quality Control



Contents Pages

Report of The Directors 29

StatementonCorporateGovernance 31

StatementofResponsibilityforAnnualFinancialStatements 32

Independent Auditor’s Report 33

Statement of Comprehensive Income 34

StatementofFinancialPosition 35

StatementofChangesInEquity 36

StatementofCashFlows 37

NotestotheFinancialStatements 38

FiveYearPerformanceRecord 60

Financial Information



Report of The Directors

Mr M. Hantuba* - Chairman

Mr.F.Esan

Mr. M. Chibesakunda*

Mrs. C. Moloseni

Mrs. D. Mulwila*

Mr. S.M. O’Donnell*

*NonexecutiveDirectors

Ordinary shares of ZMK0.50 each 240,000,000

Non-cumulative redeemable preference shares of ZMK1.00 each 3,000,000

2012 2011

Mr. M. Chibesakunda 1,500 1,500

Mr. M. Hantuba 2,000 2,000

Mrs. D. Mulwila 18,500 18,500

The Directors are pleased to present their report and the audited financialstatementsofLafargeCementZambiaPlc ( the“Company”)for the year ended 31 December 2012.

ACTIVITIES The business of the Company is the manufacture and sale of cement. There was no significant change in the activities of the Company during the year. FINANCIAL RESULTS Turnover for the year was ZMK992,354 million (2011:ZMK879,162million). Sales revenue and profitability levels were higher than last year due to higher volumes and improved cost control in 2012.

Net finance income was ZMK13,409 million (2011: ZMK6,409 million net cost) from interest earned on the investment of cash balances, offset bybankcharges.Exchangegainsarisingmainly fromthe translationinto Kwacha of customer prepayments and cash balances denominated inUSDollarsamounted toZMK1,221 million for the year (2011: ZMK3,771millionloss)duetotheappreciationoftheKwachaduringthethe year. ProfitbeforetaxfortheyearwasZMK437,210 million (2011: ZMK324,052 million).Afterproviding fora taxationchargeofZMK141,456 million (2011:ZMK97,071million),profitafter taxwasZMK295,754 million (2011: ZMK226,981 million).

The Company had no obligations to financial institutions as at 31 December 2012. OPERATIONS There were no lost time incidents during 2012. Health and safety continued to be key priorities and world class standards were maintained. ThecompanyhasremainedamemberoftheLafargeGroupHealthandSafetyExcellenceClub.

The Company continued to provide HIV/AIDS support and awareness programmes as a proactive means to manage the health of all employees. DIRECTORS The Directors who held office during the year were:

DIRECTORS’ INTERESTSNone of the Directors had a material interest in any significant contracts concluded during the year.

On3December2012,theworkpermit for theChiefExecutiveOfficerwasrevoked.AformalappealwasfiledbytheCompanyon17December2012 to the Minister of Home Affairs as guided by section 35 of the Immigrations and Deportation Act.

The number of shares held by the Directors of the Company as at 31 December:

DIVIDENDS

An interim dividend of ZMK275 per share (2011: ZMK275) wasproposedandpaidduringtheyear.AtthenextAnnualGeneralMeetingthe Directors will propose that a final dividend of ZMK760 per share (2011: ZMK410) per share be declared and paid in respect of the financial year ended 31 December 2012.

PROPERTY, PLANT AND EQUIPMENT

The principal changes to property, plant and equipment related to the following additions:

ZMK’ Millions

2012 2011

Capital work in progress 18,464 22,969

Plant and machinery 1,807 1,924

Vehicles,leasehold, furniture and fittings 1,850 341

22,122 25,234

During the year assets with a value of ZMK16,521 million (2011: ZMK 15,378million)previously incapitalwork inprogresswerecompletedand commissioned. The assets were transferred to the relevant class of assets.

EQUITY INVESTMENTSThe Company owns 14% of the issued ordinary equity capital of Mbeya CementCompanyLimited, incorporatedandoperating inTanzania.Anet dividend of ZMK2,035 million (2011: ZMK936 million) was received afterdeductionofwithholdingtax.

SHARE CAPITALThe authorised share capital of the Company is ZMK123,000,000 consisting of:


2012 2011

Cost of sales 61,131 59,205

Otherexpense 21,749 31,627

82,880 90,832

2012 2011

January 573 604

February 569 601

March 567 598

April 567 596

May 565 594

June 564 592

July 564 589

August 563 586

September 562 584

October 561 583

November 559 582

December 559 580

Number ofshares

% of totalequity

Pan African Cement Limited 100,219,992 50.10

FinanciereLafarge 67,910,056 33.95

LuSECentralShareDepositoryLimited 23,853,418 11.92

Public (institutions and individuals) 8,056,438 4.03

200,039,904 100.00

The issued capital comprises 200,039,904 ordinary shares with a par value of ZMK100,019,952 held as follows:

EXPORTS The value of goods exported by the Company during the year wasZMK251,636 million(2011:ZMK282,781million).

DONATIONS The Company supports various charitable organisations in Zambia. During the year the Company donated an amount of ZMK1,838 million (2011: ZMK1,160 million) comprised of cash donations of ZMK826 million and marketing donations of ZMK1,012 million. No donation was of a political nature. HEALTH AND SAFETYThe Company has a formal health and safety policy that has been approved by the Board and is designed to ensure a safe working environment. The policy is implemented through Safety Committees and through a joint participative effort between management and the workforce. Health and safety standards are regularly reviewed and updated to ensure that improvements conform with Lafarge Group policies andworldwide best practice.

ENVIRONMENT The Company has a formal environmental policy, approved by the Board, which prescribes the procedures and practices to be followed to achieve minimum environmental impact. The Company is licensed by the Zambia Environmental Management Agency (ZEMA) whichmonitors and regulates its performance. Lafarge Cement Zambia Plc, as amemberoftheLafargeGroup,alsocomplieswiththeLafargeGroupcharter on environmental policy.

DEVELOPMENTS IN THE INDUSTRY AND MARKETThe Company operated at optimal capacity during the year due to increased demand mainly in the domestic market.

LEGISLATIVE COMPLIANCETo the best of their knowledge the Directors confirm that the Company has complied with the regulatory requirements including but not limited to the Occupational Health and Safety Act 2010, the Mines and Minerals DevelopmentAct2008,andtheFactoriesandPublicHealthAct.

AUDITORS MessrsErnst&Young’stermofofficeceasesatthenextAnnualGeneralMeeting. A resolution proposing their re-appointment as auditors and authorising the Directors to determine their remuneration will be proposedatthenextAnnualGeneralMeeting.

By order of the Board.

The Lusaka Stock Exchange Central Share Depository Limited holdssharesinitscapacityasnomineeforapproximately3,042 shareholders. Other than the shareholdings listed above, the Directors are not aware of anyindividualshareholdingthatexceeds3%oftheissuedsharecapital.

Under the Articles of Association the unissued share capital of theCompany is controlled by the Directors.

EMPLOYEESThe average number of employees during each month of the year was:

The total remuneration paid to employees during the year was ZMK82,880 million (2011: ZMK90,832 million) and has been charged to profit or loss as follows:

H. KapekeleCompany SecretaryLusaka, Zambia

Date:19February2013



Statement on Corporate Governance

LafargeCement ZambiaPlc (the “Company” or “LafargeZambia”) iscommitted to the principles of openness, integrity and accountability. The Directors and employees of Lafarge Zambia strive to ensure that the Company is managed in an efficient, accountable, responsible and moral manner. The Board of Directors endorses the Lusaka Stock Exchange (LuSE) Corporate Governance Code for listed and quotedcompanies(the“Code”)andbelievesthat,inallmaterialrespects,theCompany complied with the principles of the Code throughout the year under review.

Board of Directors

The Board currently comprises six (6) Directors, including four (4)independent, non-executive Directors. The Board composition isbalanced with the majority of the members being independent and non executive. The depth of experience and diversity of the Boardensures that robust and forthright debate occurs on all issues of material importance to the Company.

TherolesofChairmanandChiefExecutiveOfficer(“CEO”)areseparateand no individual has dominant control over decision-making. The Chairmanisan independent,non-executiveDirectorappointedbytheBoard. The Board is responsible to shareholders for strategy and direction, monitoring of operational performance and management, risk management processes and policies, setting of authority levels and the selection of new Directors. The Board is also responsible for the integrity and quality of communication with stakeholders, including employees, regulators and shareholders. The Board follows a risk management framework and is responsible for the review of risk management processes in the Company and ensures that Board policies and decisions on risk are properly implemented.

The Lafarge Zambia Board meets formally at least three times annually. Fourmeetingswereconvenedin2012. Board Committees The Board is assisted in the discharge of its responsibilities by a sub-committee. This committee is accountable to the Board, with the exceptionof theManagementCommitteewhichreports to theChiefExecutiveOfficer.Minutesofsub-committeemeetingsareavailabletoBoard members. Senior Management staff are invited to attend meetings where appropriate. Audit Committee The Audit Committee is chaired by Mr Mark O’Donnell, an independent, nonexecutiveDirector.TheAuditCommitteeassists theBoard in thedischarge of its duties relating to financial reporting to all stakeholders, compliance, risk management and the effectiveness of accounting and

managementinformationsystems.ForpracticalreasonstheBoardhasdecided that the members of the Audit Committee will also discharge the functions of the Board Risk Committee, as opposed to having a separate Board Risk Committee.

Meetings are held regularly throughout the year and are attended by Senior Management where necessary. There were three formal meetings during 2012. Issues addressed include the review of accounting policies, internalandexternalauditfunctions,ITrisks,businesscontinuityplans,financial reporting, operational risks, risk management, compliance and the adequacy of management information.

Organisational Ethics and Business Integrity The issue of good governance and ethical conduct is critical to counterparty and investor perceptions of a listed company. Lafarge Zambia strives to ensure that the Company’s integrity and professional conduct is beyond reproach at all times. While it is probably impossible to achieve a perfect result, the Company attempts to limit the cost of unethical behaviour to the Company’s stakeholders.

TheCompanyhasadoptedcodesofconductformulatedbytheGroupand LuSE. Lafarge Zambia has a firm approach in dealing with anyinappropriate or fraudulent behaviour of management or staff, suppliers or customers. Executive Committee of Management TheExecutiveCommitteeofManagementisempoweredandresponsiblefor implementing the strategies and policies determined by the Board, managing the business and affairs of the Company, prioritising the allocation of technical and human resources, and establishing best management practices. Management reporting The Company has established management reporting procedures which include the preparation of annual strategic plans and budgets. Actual results are reported monthly against approved budgets and revised forecasts and compared to the prior year. Internal control The control systems are designed to safeguard the Company’s assets, maintain proper accounting records and ensure the reliability of management and financial information produced by the Company. Control systems are based on best practices and established Lafarge Group policies and procedures and are implemented by trainedpersonnel with an appropriate segregation of duties.

The Company’s ultimate holding company, Lafarge SA, is a foreign entity which is listed on the Paris Bourse. Lafarge is required to comply with the requirements of the 2004 French Securities Act. This legislationrequires management of listed entities to certify that they have evaluated effectivenessofinternalcontrolswithintheGroup.


Statement of Responsibility for Annual Financial Statements

Section 164 (6) of the Companies Act, 1994 (as amended) requires that the Directors 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 financialstatementsandrelatedinformation.Theindependentexternalauditors,MessrsErnstandYoung,haveaudited theannualfinancialstatements and their report is shown on page 33.

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 has occurred during the year 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.

In the opinion of the Directors: • thestatementofcomprehensiveincomeisdrawnupsoastogivea

true and fair view of the profit of the Company for the financial year ended 31 December 2012;

• thestatementoffinancialposition isdrawnupsoastogivea trueand fair view of the state of affairs of the Company as at 31 December 2012;

• therearereasonablegroundstobelievethattheCompanywillbeableto pay its debts as and when they fall due; and

• the financial statements have been prepared in accordance withInternational Financial Reporting Standards and in the mannerrequired by the Companies Act, 1994 (as amended).

Signed on behalf of the Board by:

M. Hantuba

F. Esan

DirectorsDate:19February2013



Independent Auditor’s ReportTo the members of Lafarge Cement Zambia Plc

Report on the financial statementsWe have audited the accompanying financial statements of Lafarge Cement Zambia Plc which comprise the statement of financial position as at 31 December 2012, statement of 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 explanatoryinformationsetoutoutonpages38to59.

Directors’ responsibility for the financial statementsThe Company’s Directors are responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancialReportingStandardsandtherequirementoftheCompanies Act, 1994 (as amended) and for such internal control 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 responsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbased 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 appropriateinthecircumstances,butnotforthepurposeofexpressingan 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 give a true and fair view of the financial position of Lafarge Cement Zambia Plc as at 31 December 2012, and of its financial performance and cash flows for the year then endedinaccordancewithInternationalFinancialReportingStandardsand in the manner required by the Companies Act, 1994 (as amended).

Report on other legal matters

The Companies Act,1994 (as amended) requires that in carrying out our audit we consider and report to you on the following matter: we confirm that in our opinion, the accounting and other records and registers required by the Act have been properly kept in accordance with the Act.

Auditor

Henry C NondoCountry Leader

Date:19February2013


Statement of Comprehensive Incomefor the year ended 31 December 2012

Kwacha millions Notes 2012 2011

Revenue 5 992,355 879,162

Cost of sales (379,615) (360,329)

GROSS PROFIT 612,740 518,833

Net other gains 7 381 3,898

Distributionexpenses (77,045) (82,295)

Marketingexpenses (5,359) (11,044)

Administrationexpenses (108,951) (112,685)

Operating profit 421,765 316,706

Investment income 6 16,680 8,299

Financecosts 8 (1,236) (954)

Profit before tax 9 437,210 324,052

Incometaxexpense 10 (141,456) (97,071)

Profit for the year 295,754 226,981

Total comprehensive income 295,754 226,981

Total comprehensive income attributable to:

Owners of the Company 248,581 190,777

Non-controlling interests 47,173 36,203

295,754 226,981

Basic and diluted earnings per share (Kwacha) 21 1,478 1,135



Statement of Financial Positionas at 31 December 2012

F. Esan - DirectorM. Hantuba - Director

The responsibilities of the Company’s Directors with regard to the preparation of the financial statements are set out on page 32. The financial statementsonpages34to59wereapprovedbytheBoardofDirectorsandauthorisedforissueon19February2013andweresignedonitsbehalfby:


ASSETS

Non-current assets

Property, plant and equipment 11 645,353 654,962

Equityinvestmentinrelatedcompany 14 5,910 5,910

Total non-current assets 651,263 660,872

Current assets

Inventories 15 116,646 112,925

Trade receivables 16 12,394 7,388

Other receivables 17 11,490 11,238

Amounts due from related companies 18 25,149 49,352

Cash and cash equivalents 19 575,001 357,571

Total current assets 740,680 538,474

TOTAL ASSETS 1,391,943 1,199,346

EQUITY AND LIABILITIES

Capital and reserves

Issued capital 20 84 84

Revaluation reserve 4,445 6,125

Retained earnings 763,996 650,762

EquityattributabletoownersoftheCompany 768,525 656,971

Non-controlling interest 193,672 146,500

Total equity 962,197 803,471

Non current liabilities

Provision for environmental liabilities 22 23,252 12,503

Retirement benefit plans 23 1,573 1,854

Deferredtaxliabilities 24 167,949 164,987

Total non-current liabilities 192,773 179,344

Current liabilities

Trade payables 25 25,872 28,012

Other payables 25 138,559 126,176

Amounts due to related companies 18 18,313 10,959

Currenttaxliability 10 54,228 51,384

Total current liabilities 236,973 216,531

Total liabilities 429,746 395,875

TOTAL EQUITY AND LIABILITIES 1,391,943 1,199,346


Statement of Changes in Equityfor the year ended 31 December 2012

Kwacha millions

Share capital

Property revaluation

reserve

Dividend reserve

Retained earnings

Attributableto owners of the parent

Non-controlling

interest Total

Balance at 1 January 2011 84 7,805 60,012 513,316 581,217 110,296 691,513

Profit for the year - - - 190,777 190,777 36,203 226,981

Dividend paid in respect of previous year - - (60,012) - (60,012) - (60,012)

Ordinary dividend proposed and declared - - 55,011 (55,011) - - -

Dividend paid in respect of current year - - (55,011) - (55,011) - (55,011)

Transfer to retained earnings - (1,680) - 1,680 - - -

Balance at 31 December 2011 84 6,125 - 650,762 656,971 146,500 803,471

Total Comprehensive Income - - - 248,581 248,581 47,173 295,754

Ordinary dividend proposed and declared - - 137,027 (137,027) - - -

Dividend paid in respect of current year - - (137,027) - (137,027) - (137,027)

Transfer to retained earnings - (1,680) - 1,680 - - -

Balance as at 31 December 2012 84 4,445 - 763,996 768,525 193,672 962,197



Statement of Cash Flowsfor the year ended 31 December 2012


CASH FLOWS FROM OPERATING ACTIVITIES

Profitbeforeincometax 437,210 324,052

Adjustments for:

Gain/(loss)ondisposalofproperty,plantandequipment 7 840 (127)

Interestexpense 8 1,236 954

Dividends received 6 (2,035) (936)

Interest income 6 (14,645) (7,363)

Provision for retirement benefit plans 23 3,493 7,400

Provision for environmental liabilities 10,749 3,090

Depreciation and amortisation of non-current assets 11 30,892 32,152

Net cash flows from operating activities before movements in working capital 467,739 359,222

Movements in working capital:

(Increase)/decrease in inventories (3,721) 7,977

Increase in trade receivables (5,006) (1,269)

Increase in other receivables (252) (2,934)

Decrease/(increase) in amounts due from related companies 24,203 (9,692)

Decrease in trade payables (2,140) (7,908)

Increase in other payables 12,383 31,013

Increase in amounts due to related companies 7,354 3,390

Cash flows from operating activities 500,560 379,798

Financecost 8 (1,236) (954)

Incometaxespaid 10 (135,650) (45,747)

Retirement benefits paid 23 (3,774) (7,522)

Net cash flows from operating activities 359,899 325,575

CASH FLOWS FROM INVESTING ACTIVITIES

Investment Income 6 16,680 8,299

Purchase of property, plant and equipment 11 (22,122) (25,234)

Proceeds from disposal of property, plant and equipment - 215

Net cash used in investing activities (5,442) (16,720)

Cash flows from financing activities

Dividend paid to owners of the company (137,027) (115,023)

Net cash used in financing activities (137,027) (115,023)

Net increase in cash and cash equivalents 217,430 193,832

Cash and cash equivalents at beginning of the year 357,571 163,739

Cash and cash equivalents at end of the year 575,001 357,571

Represented by:

Bank and cash balance 19 575,001 357,571


Notes to the Financial Statementsfor the year ended 31 December 2012

1. GENERAL INFORMATION

Lafarge Cement Zambia Plc (the “Company”) is a Companyincorporated in the Republic of Zambia and is listed on the Lusaka Stock Exchange. The principal activity of the Company is themanufacture and sale of cement.

The address of its registered office and principal place of business aredisclosedintheDirectorsandExecutiveCommitteeIntroductoryreport on page 29.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

2.1 New standards and interpretations effective in 2012

A number of new standards, amendments to standards and interpretations are mandatory for the year ended 31 December 2012, and have been adopted by the Company where relevant to the Company’s operations.

IFRS 1 Severe hyperinflation and removal of fixed dates for first-time adopters – amendment to IFRS 1 This IFRS amendment provides guidance on how an entityshouldresumepresentingIFRSfinancialstatementswhen itsfunctional currency ceases to be subject to severe hyperinflation. This amendment is effective for annual periods beginning on or after 1 July 2011.

There is no impact on the 2012 financial statements

IFRS 7 Transfers of financial assets – amendment to IFRS 7

Before the Standard was revised entities had the option to capitalize or expense borrowing costs relating to qualifyingassets. This option is no longer available.

TheamendmenttoIFRS7requiresadditionalquantitativeandqualitative disclosures relating to transfers of financial assets under certain scenarios. This amendment is effective for annual periods beginning on or after 1 July 2011.


IAS 12 Deferred taxes: Recovery of underlying assets – amendment to IAS 12.

The amendment introduces a rebuttable presumption that deferredtaxoninvestmentpropertiesmeasuredatfairvalueberecognised on a sale basis.

The presumption can be rebutted if the entity applies a business model that would indicate that substantially all of the investment property will be consumed in the business, in which case an own-use basis must be adopted. This amendment is effective for annual periods beginning on or after 1 January 2012.


2.2 New relevant standard issued not yet effective

The following Standards have been issued or revised and will become effective for December 2013 year end annual financial year.

IFRS 10 Consolidated financial statements.

IFRS10createsanew,broaderdefinitionofcontrolthanunder

currentIAS27andhasresultedinSIC12beingwithdrawn.

IFRS 10 does not change the consolidation process; rather

it changes whether an entity is consolidated by revising the

definition of control.

The revised definition of control will require consideration of

aspects such as de-facto control, substantive vs. protective

rights, agency relationships, silo accounting and structured

entities when evaluating whether or not an entity is controlled

by the investor.

This amendment is effective for periods beginning on or after 1 January 2013.

No expected impact on the Company’s financial statements once adopted.

IFRS 11 Joint arrangements

IFRS11replacesIAS31andSIC 13andrefers to IFRS10’s

revised definition of ‘control’ when referring to ‘joint control’.

UnderIFRS11ajointarrangement(previouslya‘jointventure’under IAS 31) is accounted for as either a:

• joint operation – by showing the investor’s interest/ relative interestintheassets,liabilities,revenuesandexpensesofthe joint arrangement; or

• joint venture – by applying the equity accounting method. Proportionate consolidation is no longer permitted.

UnderIFRS11thestructureofthejointarrangementisnottheonly factor considered.



IFRS 12 Disclosure of interests in other entities The new standard applies to entities that have in interest in subsidiaries, joint arrangements, associates and/ or structured entities. This amendment is effective for periods beginning on or after 1 January 2013.

There is no expected impact on the Company’s financial statements once adopted.

IFRS 13 Fair value measurement IFRS13describeshowtomeasurefairvaluewherefairvalueisrequired or permitted to be used as a measurement basis under IFRS(withcertainstandardsbeingexcludedfromthescopeofIFRS13.UnderIFRS13fairvalueispresumedtobean‘exitprice’. New disclosures related to fair value measurements are also introduced.

This amendment is effective for periods beginning on or after

1 January 2013.


IAS 1 Presentation of items of other Comprehensive income (amendment to IAS 1) The amendment to IAS 1 requires that items presented within



Notes to the Financial Statementsfor the year ended 31 December 2012 (continued)

other comprehensive income be grouped separately into those items that will be recycled into profit or loss at a future point in time, and those items that will never be recycled.

This amendment is effective for periods beginning on or after 1 July 2012.


IAS 19 Employee benefits (revised) The ‘corridor approach’ (which is a materiality rule that requires disclosure of a pension actuarial gain or loss) currently allowed as an alternative basis in IAS 19 for the recognition of actuarial gains and losses on defined benefit plans has been removed. Actuarial gains and losses in respect of defined benefit plans are now recognised in other comprehensive income when they occur.

Fordefinedbenefitplans,theamountsrecordedinprofitorlossare limited to current and past service costs, gains and losses onsettlementsand interest income/expense.Thedistinctionbetween short-term and other long term benefits will be based ontheexpectedtimingofsettlementratherthantheemployee’sentitlementtothebenefits.Inmanyinstancesthisisexpectedto have a significant impact on the manner in which leave pay and similar liabilities are currently classified.This amendment is effective for periods beginning on or after 1 January 2013.


IAS 27 Separate financial statements (consequential revision due to the issue of IFRS 10) IAS27,asrevised,islimitedtotheaccountingforinvestmentsin subsidiaries, joint ventures and associates in the separate financial statements of the investor.



IAS 28 Investments in associates and joint ventures (consequential revision due to the issue of IFRS 10 and 11) The revised standard caters for joint ventures (now accounted for by applying the equity accounting method) in addition to prescribing the accounting for Investments in associates.



IFRS 7 Provides additional disclosures (Similar to current US GAAPrequirements)



IFRS 9 Financial instruments – Classification and measurement This, the first phase of the IASB’s project to replace IAS 39 in its entirety, addresses the classification and measurement of financial instruments. Amendments published in October 2010 incorporate the existing derecognition principles of IAS39directlyintoIFRS9.

Financial assets

All financial assets are initially measured at fair value. Subsequent measurement of debt instruments is only at amortised cost if the instrument meets the requirements of the ‘business model test’ and the ‘characteristics of financial asset test’. All other debt instruments are subsequently measured at fair value.

All equity investments are subsequently measured at fair value either through other comprehensive income or profit and loss.

Embeddedderivativescontainedinnon-derivativehostcontractsare not separately recognised. Unless the hybrid contractqualifies for amortised cost accounting, the entire instrument is subsequently recognised at fair value through profit and loss.

Financial liabilities

Forliabilitiesmeasuredatfairvaluethroughprofitandloss,thechange in the fair value of the liability attributable to changes in credit risk is presented in other comprehensive income. The remainder of the change in fair value is presented in profit and loss.

All other classification and measurement requirements in IAS 39havebeencarriedforwardintoIFRS9.

This standard is effective for periods beginning on or after 1 January 2013.


IAS 32 Offsetting financial assets and financial liabilities (amendments to IAS 32)

The amendment clarifies the meaning of the entity currently having a legally enforceable right to set off financial assets and financial liabilities as well as the application of IAS 32 offsetting criteria to settlement systems (such as clearing houses).

This standard is effective for periods beginning on or after 1 January 2014.


IFRS 7, IFRS 9 Mandatory effective date and transition disclosures (amendments to IFRS 9 and IFRS 7).

Mandatory effective date for IFRS 9 is 1 January 2015.Amendments to IFRS7depend onwhen IFRS9 is adoptedandaffecttheextentofcomparativeinformationrequiredtobedisclosed. This standard is effective for periods beginning on or after 1 January 2015.




3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Statement of compliance The financial statements have been prepared in accordance withInternationalFinancialReportingStandards.

3.2 Basis of preparation

The financial statements have been prepared on the historical costbasisexcept forcertainnon-currentassetsandfinancialinstruments that are measured at revalued amounts or fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Thefinancialstatements are presented in Kwacha and all values are rounded tothenearestmillionexceptwhenotherwiseindicated.

The principal accounting policies are set out below:

3.3 Revenue recognition

Sale of goods 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, netofdiscountsandvalueaddedtax,duringtheyear.

Revenue from the sale of goods is recognised to the extentthat it is probable that the economic benefits will flow to the Company when all the following conditions are satisfied:

• theCompanyhastransferredtothebuyerthesignificantrisks and rewards of ownership of the goods;

• theCompanyretainsneithercontinuingmanagerialinvolvement to the degree usually associated with ownership nor effective control over the goods sold;

• theamountofrevenuecanbemeasuredreliably;

• itisprobablethattheeconomicbenefitsassociatedwiththe transaction will flow to the entity; and

• thecostsincurredortobeincurredinrespectofthetransaction can be measured reliably.

Specifically, revenue from sale of goods is recognised when goods are delivered and legal title is passed.

Dividend income Dividend income from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be reliably measured). This is generally when shareholders of the investee company approve the dividend.

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 revenue 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 thatexactlydiscountsestimated

futurecashreceipts throughtheexpected lifeof thefinancialasset to that asset’s net carrying amount on initial recognition.

3.4 Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Company as lessee Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expensesand reduction of the lease obligation so as to achieve a constant rateofinterestontheremainingbalanceoftheliability.Financeexpensesare recognised immediately inprofitor loss,unlessthey are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognised as expensesintheperiodsinwhichtheyareincurred.

Operatingleasepaymentsarerecognisedasanexpenseonastraight-line basis over the lease term, exceptwhere anothersystematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised asanexpenseintheperiodinwhichtheyareincurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction ofrentalexpenseonastraight-linebasis,exceptwhereanothersystematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

3.5 Foreign currencies The financial statements of the Company are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The results and financial position of the Company are expressed in ZambianKwacha (‘ZMK’), which is the functional currency of the Company and the presentation currency for the financial statements.

In preparing the financial statements of the Company transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At theend 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




3.8.1 Current tax Thetaxcurrentlypayableisbasedontaxableprofitforthe year. Taxableprofit differs fromprofit as reportedin the statement of comprehensive income because of items of income or expense that are taxable ordeductible in other years and items that are never taxable or deductible. The Company’s liability forcurrenttaxiscalculatedusingtaxratesthathavebeenenacted or substantively enacted by the end of the reporting period.

3.8.2 Deferred tax

Deferred tax is recognised on temporary differencesbetween 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 recognised for alltaxable temporary differences. Deferred tax assetsare generally recognised for all deductible temporary differencestotheextentthatitisprobablethattaxableprofits will be available against which those deductible temporary differences can be utilised.

Thecarryingamountofdeferredtaxassetsisreviewedateachreportingperiodandreducedtotheextentthatit is no longer probable that sufficient taxable profitswill be available to allow all or part of the asset to be recovered.

Deferredtaxassetsandliabilitiesaremeasuredatthetax rates that are expected to apply in the period inwhich the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enactedor substantively enacted by the end of the reporting period.Themeasurementofdeferredtaxliabilitiesandassetsreflectsthetaxconsequencesthatwouldfollowfrom the manner in which the Company expects, atthe end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainst current tax liabilities and when they relate toincometaxesleviedbythesametaxationauthorityandtheCompanyintendstosettleitscurrenttaxassetsandliabilities on a net basis.

3.8.3 Current and deferred tax for the year Currentanddeferredtaxarerecognisedasanexpenseor incomeinprofitor loss,exceptwhentheyrelatetoitems that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in whichcasethetaxisalsorecognisedoutsideprofitorloss.

3.9 Property and equipment

Leasehold land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are

prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in theperiodinwhichtheyariseexceptfor: • exchangedifferencesonforeigncurrencyborrowings

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 finance costs on those foreign currency borrowings;

• exchangedifferencesontransactionsenteredintoinorderto hedge certain foreign currency risks; and

• exchangedifferencesonmonetaryitemsreceivablefromor payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

3.6 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 theborrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the year in which they are incurred.

3.7 Retirement benefit costs

The Company’s employees are members of a separately administered defined contribution pension scheme. The payments to the defined contribution retirement benefit plan arerecognisedasanexpensewhenemployeeshaverenderedservice entitling them to the contributions. The Company’s contributions are charged to the profit or loss as they become payable in accordance with the rules of the scheme.

Forfixedtermcontractemployeesagratuityispayableattheend of the contract period. Contract periods range from one to two years.

The Company contributes to The National Pension Scheme Authority (NAPSA) for its eligible employees as provided for by Law.Membership,withtheexceptionofexpatriateemployees,is compulsory and monthly contributions by both employer and employees are made. The employer’s contribution is charged to the profit or loss in the year in which it arises.

3.8 Taxation

Income tax expense represents the sum of the tax currentlypayableanddeferredtax.



The rates of depreciation used are based on the useful lives:

Useful life in Years

Freeholdbuilding 33 years

Building materials 5-10 years

Leasehold, land and buildings

Plant and machinery Period to end of lease

Silo storage tanks material 10-20 years

Vehicles and transport 5-20 years

Fixturesandequipment

Off equipment and IT 3-5 years

3.10 Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

3.11 Impairment of tangible and intangible assets

At the end of each reporting period the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Ifanysuch indicationexists therecoverableamount of the asset is estimated in order to determine the extentoftheimpairmentloss(ifany).Whereitisnotpossibleto estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cashflowsarediscountedtotheirpresentvalueusingapre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in 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.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increasedcarryingamountdoesnotexceedthecarryingamount

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

with sufficient regularity such that the carrying amounts do not

differ materially from those that would be determined using fair

values at the end of the reporting period.

Any revaluation increase arising on the revaluation of such land

and buildings is recognised in other comprehensive income,

excepttotheextentthatitreversesarevaluationdecreasefor

the same asset previously recognised in profit or loss, in which

case the increase iscredited toprofitor loss to theextentof

thedecreasepreviouslyexpensed.Adecreaseinthecarrying

amount arising on the revaluation of such land and buildings

is recognised 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.

Depreciation on revalued buildings is recognised in profit

or 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.

Properties in the course of construction for production, supply

or administrative purposes, or for purposes not yet determined,

are carried at cost less any recognised impairment loss. Cost

includes professional fees and, for qualifying assets, borrowing

costs capitalised in accordance with the Company’s accounting

policy. Depreciation of these assets, on the same basis as other

property assets, commences when the assets are ready for their

intended use.

Fixtures and equipment are stated at cost less accumulated

depreciation and accumulated impairment losses.

Depreciation is recognised so as to write off the cost or valuation

of assets (other than properties under construction) less their

residual values over their useful lives, using the straight-

line method. The estimated useful lives, residual values and

depreciation method are reviewed at each year end, with the

effect of any changes in estimate accounted for on a prospective

basis.

Assets held under finance leases are depreciated over their

expecteduseful lives on the samebasis as ownedassets or,

where shorter, the term of the relevant lease.

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

recognised in profit or loss.




to which it relates. The unwinding of the discount is shown as a financing cost in the profit and loss.

Costs for restoration of subsequent site damage which is caused on an ongoing basis during production are provided for at their net values and charged to the profit or loss as extraction progresses.Where the costs of site restoration arenotaniticipatedtobematerialtheyareexpensedasincurred.

3.15 Financial assets All financial assets are recognised and derecognised on the trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned. Financial assets are initially measured at fairvalue,plustransactioncosts,exceptforthosefinancialassetsclassifiedasatfairvaluethroughprofitorloss(“FVTPL”),whichare initially measured at fair value.

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value.

3.15.1 Classification of financial assets

For the purposes of classifying financial assets aninstrument is an ‘equity instrument’ if it is a non-derivative and meets the definition of ‘equity’ for the issuer except for certain non-derivative puttableinstruments presented as equity by the issuer. All other non-derivative financial assets are ‘debt’ instruments.

3.15.2 Financial assets at amortised cost and the effective interest method Debt instruments are measured at amortised cost if both of the following conditions are met: • theassetisheldwithinabusinessmodelwhose

objective is to hold assets in order to collect contractual cash flows; and

• thecontractualtermsoftheinstrumentgiveriseon specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt instruments meeting these criteria are measured initiallyatfairvalueplustransactioncosts(exceptiftheyare designated as at FVTPL). They are subsequentlymeasured at amortised cost using the effective interest method less any impairment.

Subsequent to initial recognition the Company is required to reclassify debt instruments from amortised cost to FVTPL if the objective of the businessmodelchanges so that the amortised cost criteria are no longer met.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The

that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in 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.

3.12 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method and includes direct material cost and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price for inventories less all estimated costs necessary to make the sale.

3.13 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of each reporting period, taking into account the risks and uncertainties surrounding the obligation. Where 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 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.

3.14 Restoration, rehabilitation and environmental costs

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a mine. Costs arising fom the installation of plant and other site preparation work, discounted to net present value, are provided for, and a corresponding amount is capitalised at the start of each project as soon as the obligation to incur such costs arises. These costs are charged to the profit or loss over the life of the operation through the depreciation of the asset and the unwinding of the discount on the provision. The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the costs estimates or life of operations. The cost of the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, changes to lives of operations, new disturbances and revisions to discount rates. The adjusted cost of the asset is depreciated prospectively over the life of the asset



observable changes in national or local economic conditions that correlate with defaults of receivables.

The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, reflecting the impact of collateral and guarantees, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with theexceptionoftradereceivables,wherethecarryingamount is reduced through the use of an allowance account. When a trade receivable is considered 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 profit or loss.

3.15.5 Derecognition of financial assets

The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset andsubstantially all the risks and rewards of 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 amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

3.16 Financial liabilities and equity instruments issued by the Company

3.16.1 Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

3.16.2 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 theCompany are recognised at the proceeds received, net of direct issue costs.

3.16.3 Financial liabilities

Financial liabilities are classified as ‘other financialliabilities’.

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

effective interest rate is the rate that exactlydiscountsthe estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiumsordiscounts)throughtheexpectedlifeofthedebt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

The Company may irrevocably elect at initial recognition to classify a debt instrument that meets the amortised cost criteria above as FVTPL if that designationeliminates or significantly reduces an accounting mismatch had the financial asset been measured at amortised cost.

3.15.3 Foreign exchange gains and losses

The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.Theforeignexchangecomponentformspartofitsfairvaluegainorloss.Forfinancialassetsclassifiedas at FVTPL, the foreign exchange component isrecognised in profit or loss.

For foreign currency denominated debt instrumentsclassifiedatamortisedcost,theforeignexchangegainsand losses are determined based on the amortised cost of the asset and are recognised in ‘other gains and losses’ in the statement of comprehensive income.

3.15.4 Impairment of financial assets at amortised costFinancialassets thataremeasuredatamortisedcost,including finance lease receivables, are assessed for indicators of impairment at the end of each reporting period.Financialassetsareconsideredtobeimpairedwhen 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 financial asset have been affected.

Objective evidence of impairment could include:

• significantfinancialdifficultyoftheissuerorcounterparty; or

• defaultordelinquencyininterestorprincipalpayments; or

• itbecomingprobablethattheborrowerwillenterbankruptcy or financial re-organisation.

Forcertaincategoriesoffinancialasset,suchastradereceivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s pastexperiencewithcollectingpayments,anincreasein the number of delayed payments in the portfolio past the average credit period of 30 days, as well as




Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interestexpenserecognisedonaneffectiveyieldbasis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocatinginterestexpenseovertherelevantperiod.Theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashpaymentsthroughtheexpectedlife of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

3.16.4 Foreign exchange gains and losses

The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period.Theforeignexchangecomponentformspartofits fair value gain or loss.

For foreign currency denominated debt instrumentsclassifiedatamortisedcost,theforeignexchangegainsand losses are determined based on the amortised cost of the liability and are recognised in the ‘other gains and losses’ in the statement of comprehensive income.

3.16.5 Derecognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelledortheyexpire.

3.16.6 Income taxes

The Company is subject to income taxes in theRepublic of Zambia. There are many transactions and calculationsforwhichtheultimatetaxdeterminationisuncertain during the ordinary course of business. The Companyrecognisesliabilitiesforanticipatedtaxbasedon estimates ofwhether additional taxeswill be due.Wherethefinaltaxoutcomeofthesemattersisdifferentfrom the amounts that were initially recorded, such differenceswillimpactontheincometaxanddeferredtaxprovisionsintheperiodinwhichsuchdeterminationis made.

3.16.7 Impairment of receivables The Company’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the statement of financial position are net of allowances for doubtful receivables, estimated by the Company’s Managementbasedonpriorexperienceandthecurrenteconomic environment. Provision for doubtful debts of the Company was based on specific identified doubtful debtors. The Directors believe that the provision is appropriateandnotexcessive.TheCompanyhasnosignificantconcentrationofcredit risk,withexposurespread over a large number of counterparties and customers. The Company performs ongoing credit valuations of the financial condition of customers.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

4.1 Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations below, that the Directors have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.

In the application of the Company’s accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions arebasedonhistorical experienceandother factors that areconsidered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

4.2 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilitieswithinthenextfinancialyear.

4.2.1 Estimates of asset lives, residual values and depreciation methods. Property and equipment are depreciated over their useful life taking into account residual values.Usefullivesandresidualvaluesareassessedannually.Usefullives are affected by maintenance programmes and futureproductivity.Futuremarketconditionsdeterminethe residual values. Depreciation is calculated on a straight-line basis which may not represent the actual usage of the asset.

4.2.2 Fixed assets impairment review

Impairment tests on property, plant and equipment are only done if there is an impairment indicator. Futurecash flows are based on Management’s estimate of future market conditions. These cash flows are then discounted and compared to the current carrying value, and, if lower, the assets are impaired to the present value of the cash flows. Impairment tests are based on information available at the time of testing. These conditions may change after year-end.

4.2.3 Receivables provision

Management has made a provision for bad and doubtful receivables based on the ageing of the trade receivables and believes that the provision is adequate to absorb the current irrecoverable debtors.



Kwacha millions 2012 2011

5. BUSINESS SEGMENTS

FormanagementpurposestheCompanyhastwooperatingfacilities,ChilangaPlantnearLusaka and Ndola Plant in Ndola. The primary segment data reported by the Company are markets,beingdomesticandexport.

Revenue

Turnover by primary business segment:

Local sales 740,719 596,381

Exportsales 251,636 282,781

992,355 879,162

6. INVESTMENT INCOME

Dividends 2,035 936

Interest income 14,645 7,363

16,680 8,299

7. OTHER GAINS AND LOSSES

Other gains and losses comprise the following:

(Loss)/gain on disposal of property, plant and equipment (840) 127

Exchangegains 14,616 9,101

Exchangelosses (13,395) (5,330)

Net other gains 381 3,898

The Kwacha remained relatively stable in the year

ThetablebelowshowsthemovementsintheUSDollarexchangeratesduringtheyear:

Mid-marketexchangerateasat1January 5,110 4,785

Mid-marketexchangerateasat31December 5,181 5,090

Average depreciation 1% 6%

8. FINANCE COSTS

Interestexpense (1,236) (954)

Net finance costs (1,236) (954)

Interestexpensefortheperiodincludesbankcharges.

9. PROFIT BEFORE TAX

Profitbeforetaxisstatedaftercrediting:

Dividend received 2,035 936

(Loss)/gain on disposal of property, plant and equipment (840) 127

Investment Income 16,680 8,299





9. PROFIT BEFORE TAX (Continued)

and charging:

Depreciation 30,892 32,152

Managementandtechnicalservicesexpenses 25,180 17,032

Pension schemes - Company contributions 3,493 7,400

Donations 1,838 1,160

Directors’remunerationandexpenses 274 270

Financecosts (1,236) (954)

10. INCOME TAX EXPENSE

Currenttax 138,495 97,701

Deferredtax(note24) 2,962 (630)

141,456 97,071

Incometaxiscalculatedat35%ondomesticincomeand15%onexportincomefortheestimated assessable profit for the year.

Themovementsduringtheyearontheincometaxaccountareasfollows:

Payable in respect of year 138,495 97,701

Payable in respect of previous years 51,384 (571)

189,878 97,130

Taxpaidduringtheyear (135,650) (45,747)

Balance at end of the year included in current liabilities 54,228 51,384

The total charge for the year can be reconciled to the accounting profit as follows:

Profitbeforetax 437,210 324,052

Taxonaccountingprofitat35% 153,023 113,418

Permanent differences 12,670 1,736

Benefitoflowerrateoftaxontaxationofexportincome (22,655) (17,402)

Effectsofpropertyrevaluation (1,583) (681)

Taxexpensefortheyear 141,456 97,071



Kwacha millions

11. PROPERTY, PLANT AND EQUIPMENT

Leasehold properties

Plant and machinery

Vehicles, furniture

and fittings

Capital work in progress

Total

COST OR VALUATION

At 1 January 2011 60,820 640,805 32,248 39,475 773,348

Additions - 1,924 341 22,969 25,234

Projects completed 1,919 11,991 1,468 (15,378) -

Disposals - (264) (1,024) - (1,288)

At 1 January 2012 62,739 654,456 33,034 47,066 797,294

Additions 1,450 1,807 400 18,464 22,122

Projects completed 937 14,903 681 (16,521) -

Disposals - (969) - - (969)

At 31 December 2012 65,126 670,197 34,114 49,009 818,447

Cost or valuation at 31 December 2012 is represented by:

Valuation 239 69,055 - - 69,294

Cost 64,887 601,142 34,114 49,009 749,153

65,126 670,197 34,114 49,009 818,447

DEPRECIATION

At 1 January 2011 7,500 73,731 30,150 - 111,381

Depreciationexpense 3,664 26,379 2,109 - 32,152

Eliminatedondisposal - (217) (985) - (1,201)

At 1 January 2012 11,164 99,893 31,275 - 142,331

Depreciationexpense 3,932 23,829 3,131 - 30,892

Eliminatedondisposal - (130) - - (129)

Reclassification - 3,821 (3,821) - -

At 31 December 2012 15,096 127,414 30,584 - 173,094

CARRYING VALUE

At 31 December 2012 50,030 542,783 3,530 49,009 645,353

At 31 December 2011 51,575 554,563 1,759 47,066 654,962





11. PROPERTY, PLANT AND EQUIPMENT (Continued)

Leaseholdproperties,plantandrelatedmachinerywererevaluedbytheLafargeGroupTechnical Centre in November 2006 using a fair value model and methodology developed byLafargeSAandutilisedworldwidebytheGroup.Theusefuleconomicliveswerereviewed in December 2010 and 2011

The revaluation reserve arises on the revaluation of property, plant and equipment. Where revalued property, plant and equipment are sold, the portion of the revaluation reserve that relates to that asset and is effectively realised is transferred directly to retained profits. The amortisation of revaluation reserve relates to the depreciation on the revalued amount.

Had the Company’s property and equipment been measured on an historical cost basis, their carrying amounts would have been as follows:

Plant and machinery 502,396 510,354

Leasehold properties 49,779 51,324

Vehicles, furniture and fittings 3,530 1,759

555,705 563,437

The Directors consider that the fair value of the leasehold properties as at 31 December 2012 is at least equal to their carrying values as reflected in the statement of financial position.

In accordance with Section 193 of the Companies Act, 1994 (as 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.

12. COMMITMENTS FOR EXPENDITURE

Authorised and contracted for 6,017 721

The increase in 2012 was due to LCs committed to procure capital equipment for Aggregates project. No assets are encumbered or have been pledged as security.

13. INTANGIBLE ASSETS

The intangible assets relate to mining licences purchased by the Company for the explorationandextractionoflimestone.Thelicencesaremeasuredinitiallyatoriginalpurchase cost and amortised on a straight line basis, from the year of purchase by the Company, over their beneficial lives.

Cost

Balance at beginning of the year 943 943

Acquisitions during the year - -

Balance at end of the year 943 943

Accumulated amortisation and impairment

Balance at beginning of the year 202 164

Amortisationexpense 38 38

Balance at end of the year 240 202

Carrying value at end of the year 703 741

Theamortisationexpensehasbeenincludedinthelineitemdepreciationinthestatementof comprehensive income.




14. EQUITY INVESTMENT IN RELATED COMPANY

The Company owns 14% of the issued ordinary equity capital of Mbeya Cement Company Limited,arelatedcompanyincorporatedandoperatinginTanzania.

Unquotedsharesatcost 5,910 5,910

In the opinion of the Directors, as the investment does not have a quoted market price in an active market and a fair value cannot be reliably estimated, it is carried at cost. In a forcedsalesituationtheminimumrealisablevaluethattheDirectorswouldexpectiscostand hence, in the considered view of the Directors, cost in this case represents the carrying value at which the investment should be reflected in the Company’s books.

15. INVENTORIES

Stores and spares 61,061 58,784

Provision for obsolete spares (6,018) (3,343)

55,043 55,441

Raw materials and consumables 39,449 38,711

Cement 7,567 5,715

Process stocks 6,413 9,077

Goodsintransit 8,175 3,980

116,646 112,925

Duringtheyear,inventoryexpensedamountedtoZMK99,173 million(2011:ZMK73,384million).

16. TRADE RECEIVABLES

Trade receivables principally comprise amounts receivable in respect of the sale of cement and clinker.

The balance comprises :

Grosstradereceivables 16,653 10,983

Allowance for doubtful debts (4,260) (3,595)

At 31 December 2012 12,394 7,388

The average credit period on sales of cement is 30 days. The Company has provided fully for all receivables over 90 days as per Company policy. Credit limits attributed to customers are reviewed monthly.

Included in trade receivables are debtors with a carrying value of ZMK71 million (2011: ZMK232 million) which are past due at reporting date for which no provision has been made as there has not been a significant change in credit quality and the amounts are still considered recoverable.

Ageing of past due but not impaired debts is as analysed below:

60-90 days 71 120

90-120 days - 112

Total 71 232





16. TRADE RECEIVABLES (Continued)

The movement in the allowance for bad debts is as follows:

Balance at beginning of the year (3,595) (3,170)

Additional provisions during the year (664) (425)

(4,260) (3,595)

In determining the recoverability of the trade receivables the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of the credit risk is limited due to the customer base being large and unrelated. Accordingly, Management believes that no further credit provisionisrequiredinexcessoftheallowancefordoubtfuldebts.Thecreditqualityhasbeen good, though some customers defaulted. The company now has a strict credit vetting process that includes bank guarantees and due diligence check to avoid bad debts

Ageing of impaired trade receivables is shown below:

90 - 120 days - -

120 -180 days - -

Over 180 days (4,260) (3,595)

Total (4,260) (3,595)

17. OTHER RECEIVABLES

Prepaidexpenses 7,247 5,620

Sundry receivables 3,131 3,099

Employeeloans 1,112 2,519

11,490 11,238

18. RELATED PARTY TRANSACTIONS

LafargeS.A.,acompanyregisteredinFrance,owns84.05%oftheissuedsharecapitalofLafarge Cement Zambia Plc through its owned subsidiaries, Pan African Cement Limited andFinanciereLafarge.

The Company has balances with, and has transacted with, the following related Lafarge Groupcompanies:

Country of incorporation Relationship

Lafarge S.A. France Holding company

Ashaka Cement Plc Nigeria Fellowsubsidiary

Bamburi Cement Limited Kenya Fellowsubsidiary

Hima Cement Limited Uganda Fellowsubsidiary

Mbeya Cement Company Limited Tanzania Fellowsubsidiary

LafargeBuildingMaterialsMEA Egypt Fellowsubsidiary

Lafarge Cement Malawi Limited Malawi Fellowsubsidiary

Lafarge Cement Wapco Nigeria Plc Nigeria Fellowsubsidiary

Lafarge Cement Zimbabwe Limited Zimbabwe Fellowsubsidiary

Lafarge Industries South Africa (Proprietary) Limited South Africa Fellowsubsidiary




18. RELATED PARTY TRANSACTIONS (Continued)

The following balances were outstanding at the end of the reporting period:

Amounts due from related companies:

Lafarge Cement Malawi Limited 23,659 47,181

Lafarge Cement Zimbabwe Limited 656 1,449

Lafarge Cement Malawi Limited (sundry) - 680

Lafarge Cement Wapco Nigeria Plc 667 29

Bamburi Cement Limited 166 -

Mbeya Cement Company Limited - 13

25,149 49,352

Amounts due to related companies:

Lafarge S.A. 14,504 6,325

LafargeTCEAFrance 168 -

Bamburi Cement Limited - 892

Lafarge Industries South Africa (Proprietary) Limited 295 2,239

LafargebuildingMaterialsMEA 3,001 1,503

Lafarge Cement Malawi Limited (sundry) 263 -

Mbeya Cement Company Limited 82 -

18,313 10,959

The financial effects of transactions with the related parties were as follows:

Sale of goods:

Lafarge Cement Malawi Limited 27,549 41,192

Lafarge Cement Zimbabwe Limited 8,133 6,129

Mbeya Cement Company Limited 6,844 1,376

42,526 48,697

Management and technical services expenses:

Lafarge S.A. 25,180 17,032

Compensation of key Management personnel

The remuneration of Directors and key Management personnel during the year was as follows:

Short term benefits 12,188 16,128

Post-employment benefits 3,112 1,617

15,300 17,745

The remuneration of Directors and key Management personnel is determined having regard to the individuals’ performance and market trends.





19. BANK AND CASH BALANCES

Fixedtermbankdeposit 389,553 285,950

Bank and cash balances 185,448 71,621

575,001 357,571

Thefixedtermdepositrelatesto90dayfixedbankdepositswithBarclaysBankZambiaPlc, Citibank Plc and Standard Chartered Bank Zambia Plc.

Forthepurposesofthestatementofcashflows,cashandcashequivalentsincludescashon hand and in banks and investments in money market instruments.

20. ISSUED CAPITAL

Authorised

240,000,000 ordinary shares of ZMK0.50 each 120 120

3,000,0007%non-cumulativeredeemable

preference shares of ZMK1.00 each 3 3

123 123

Issued and fully paid

200,039,904 ordinary shares of ZMK0.50 each 100 100

Issued capital attributable to:

Owners of the company 84 84

Non- controlling interests 16 16

21. EARNINGS PER SHARE

Basic and diluted earnings per share (Kwacha) 1,478 1,135

EarningspershareisbasedonearningsaftertaxationofZMK295,754 million, (2011 : ZMK226,981 million), divided by the weighted number of ordinary shares outstanding during the year of 200,039,904 (2011 : 200,039,904). There were no diluting transactions during the year

22. PROVISION FOR DECOMISSIONING, RESTORATION, REHABILITATION AND ENVIRONMENTAL LIABILITIES

At beginning of the year 12,503 9,413

Additional provisions during the year 11,299 3,587

Payments (550) (497)

At end of the year 23,252 12,503

The balances will be payable after more than one year.

Decomissioning, restoration, rehabilitation and environmental liabilities

The restoration, rehabilitation and environmental provision represents the best estimate of theexpenditurerequiredtosettletheobligationtorehabilitateenvironmentaldisturbancescaused by operations. Transfers to the provision have been spread equally over a period offiveyearsatwhichtimeitwillbeassessedforadequacy.Thesecostsareexpectedtobeincurredovertheusefullivesoftheassets.TheCompanyisexpectedtomakecontributionstotheEnvironmentalProtectionFund,controlledbythedepartmentofMinesandMineral Development, over a period of five years after which the fund will be assessed for adequacy. The first contribution was made in March 2009.




23. RETIREMENT BENEFIT PLANS


Provisions during the year 3,493 7,400

Paid during the year (3,774) (7,522)


The total costs charged to the statement of comprehensive income of ZMK3,493 million (2011:ZMK7,400million)representprovisionsmadeforgratuitiesrelatedtocertainnonunionised staff.

The Company operates a defined contribution pension scheme for certain of its employees. The scheme is funded by contributions from both the Company and its employees, and is managedbyAfricanLifeFinancialServices.Thisdefinedcontributionplanisfundedbya specified percentage contribution from payroll costs charged to the income statement.There were no outstanding contributions as at 31 December 2012 (2011:nil).

The assets of the scheme are held separately from those of the Company in funds under the control of the trustees.

Inaddition,allpermanentemployees,withtheexceptionofexpatriates,aremembersoftheNational Pension Scheme Authority (NAPSA) in accordance with the requirements of the Law.

24. DEFERRED TAX

Excessofcapitalallowancesoverdepreciation 181,109 175,739

Other (16,497) (15,672)

164,611 160,067

Property revaluations 3,337 4,920


Thefollowingarethemajordeferredtaxliabilities/(assets)recognisedby the Company and their movements during the year:

Accelerated tax depreciation

Asset revaluations Other Total

At 1 January 2011 161,764 5,601 (1,748) 165,617

Arising in the year 13,975 (681) (13,924) (630)

At 31 December 2011 175,739 4,920 (15,672) 164,987

Arising in the year 5,370 (1,583) (825) 2,962

At 31 December 2012 181,109 3,337 (16,497) 167,949





25. TRADE AND OTHER PAYABLES

Trade payables 25,872 28,012

Trade and other payables principally comprise amounts outstanding in respect of trade purchases and ongoing costs, as well as amounts accrued in respect of operating costs.

TheDirectorsconsiderthatthecarryingamountoftradepayablesapproximatestheirfairvalue.

The average credit period for purchases is 30 days. No interest is charged on the trade payables. The Company has risk management policies in place to ensure that all payables are paid within the credit time frame.

Other payables

Other payables comprise:

Sundry provisions and accruals 40,913 48,847

Sundry payables 44,220 43,618

Employeerelatedliabilities 12,979 15,358

Advances from Cement customers 20,987 14,284

Dividend payable 19,460 4,070

Interest payable - -

138,559 126,176

Included in employee related liabilities is a provision for leave pay:


Additional provisions/(payments) during in the year 821 (2,143)


26. CONTINGENT LIABILITIES AND ASSETS

There are no known material contingencies at 31 December 2012 (2011 : nil).

A default judgement against the Company in terms of a claim lodged by a third party is being challenged by the Company in the High Court. The Company continues to be compliant with the Mines and Minerals Development Act 2008.

27. OPERATING LEASE ARRANGEMENTS

In Zambia, the title of ownership for all leasehold land is held by the state. The Company therefore makes use of the land on a 99 year non-cancellable lease.

Not longer than 1 year 650 650

Longer than 1 year and not longer than 5 years 2,600 2,600

Longer than 5 years 33,582 34,232

36,832 37,482

28. EVENTS AFTER THE REPORTING DATE

Followingthelocalcurrencyrebasingregulationthelocalcurrencywasrebasedon1

January 2013 and has no impact on these financial statements.




29. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICES

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern and maintains healthy capital ratios in order to support its business,whilemaximisingthereturntostakeholdersthroughtheoptimisationof its equity. The Company’s overall strategy remains unchanged from 2011. Thecompanyisnotexposedtoanyexternallyimposedcapitalrequirementwiththeexceptionofmaintenanceofamineremediativereserve.

The capital structure of the Company consists primarily of equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed on page 36.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria forrecognition,thebasisofmeasurementandthebasisonwhichincomeandexpensesare recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the accounting policies to the financial statements.

Categories of financial instruments

Financialassets

Bank and cash balances 575,001 357,571

Trade receivables 12,394 7,388

Other receivables 10,187 10,200

Amounts due from related parties 25,149 49,352

622,732 424,511

Financialliabilities

Trade payables 25,872 28,012

Other payables 138,545 125,214

Amounts due to related parties 18,313 10,959

Retirement benefits 1,573 1,854

184,303 166,039

Financial risk management objectives

The Company’s finance department coordinates access to domestic markets, monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.





29. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICES (Continued)

Gearing ratio

The Company’s finance department reviews the capital structure on a regular basis. As part of this review the cost of capital and the risks associated with each class of capital are considered. The company is wholly funded by equity:

Debt (i) - -

Less: cash and cash equivalents (575,001) (357,571)

(575,001) (357,571)

Equity(ii) 962,197 914,799

Net debt to equity ratio - -

(i) Debt refers to long and short-term borrowing .

(ii)EquityincludesallcapitalandreservesoftheCompany.

Market risk

TheCompany’sactivitiesexposeitprimarilytothefinancialrisksofchangesinforeigncurrencyexchangeratesandinterestrates.TheCompanynegotiateswithcommercialbankstotransactatfavourableratestomanageitsexposuretointerestrateandforeigncurrency risk.

TherehasbeennochangetotheCompany’sexposuretomarketrisksorthemannerinwhich it manages and measures the risk.

Foreign currency risk management

The Company undertakes certain transactions denominated in foreign currencies. Hence exposurestoexchangeratefluctuationsarise.Exchangerateexposuresaremanagedwithin approved policy parameters as approved by the Board of Directors.

TheCompanyisexposedtoforeignexchangeriskwhicharisesprimarilywithrespecttotradereceivablesandbankandcashbalanceswhicharedenominatedinUSDollars.ForeignexchangeriskalsoarisesfromsupplierpaymentsdenominatedinUSDollars,SouthAfricanRandandEuros.

At 31 December 2012, if the Dollar had appreciated or depreciated by 5% against the Kwacha with all other variables held constant, the increase or decrease in the profit or loss for the year would be ZMK4,755 million (2011: ZMK2,932 million) higher or lower, mainly as a result of foreign denominated revenue and foreign currency denominated bank accounts. The assumed 5% movement for the foreign currency rate sensitivity analysis is based on current market trend

There is no significant impact on equity





ZMK equivalent

Assets 97,604 84,554

Liabilities 2,509 25,908

Assets comprise Cash and cash equivalent trade receivables in foreign currency as at 31 December 2012

Liabilities are foreign demoninated trade payables as at 31 December 2012

TheCompany’smaximumexposuretocreditriskisanalysedbelow:

Trade receivables 12,394 7,388

Other receivables 10,187 10,200

Amounts due from related parties 25,149 49,352

47,730 66,940

Liquidity risk management

The Company manages liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profile of financial assets and liabilities.

Interest rate risk management

TheCompanyisnotdirectlyexposedtointerestrateriskastherearenoborrowings.

Credit risk management

Credit risk management refers to the risk that a counterparty will default on its contractual obligationsresultinginfinanciallosstotheCompany.TheCompanyisexposedtocreditrisk in respect of trade and other receivables.

The following table details the Company’s remaining contractual maturity for its non-derivate financial assets and liabilities. The table is based on the undiscounted contractual maturities of the financial assets and liabilities.




Kwacha millions


Year ended 31 December 2012

1 - 3 Months

3 months to 1 year

1 - 5 Years Total

Financial Liabilities

Trade payables 25,872 - - 25,872

Other payables 138,545 - - 138,545

Retirement benefit plans - - 1,573 1,573

Amounts due to related parties 18,313 - - 18,313

182,730 - 1,573 184,303

Financial Assets

Trade receivables 12,394 - - 12,394

Other receivables 11,490 - - 11,490

Amounts due from related parties 25,149 - - 25,149

Bank and cash balances 575,001 - - 575,001

624,034 - - 624,034

Year ended 31 December 2011

Financial liabilities

Trade payables 25,872 - - 25,872

Other payables 138,545 - - 138,545

Provision for environmental liabilities - - 12,503 12,503

Retirement benefit plans - - 1,854 1,854

Amounts due to related parties 18,313 - - 18,313

182,730 - 14,357 197,087

Financial Assets

Trade receivables 7,388 - - 7,388

Other receivables 11,238 - - 11,238

Amounts due from related parties 49,352 - - 49,352

Bank and cash balances 357,571 - - 357,571

425,549 - - 425,549


Five Year Performance Record

2012 2011 2010 2009 2008

(‘000 tonnes)

Cement production 1,074 987 787 827 578

Cement sold

Domestic 808 684 502 676 494

Export 260 303 274 147 83

Clinkerexports 32 57 150 43 -

1,099 1,043 926 866 577

Kwacha Millions

Statement of comprehensive income

Turnover 992,355 879,162 733,900 737,479 430,133

Profitbeforetax 437,210 324,052 197,010 255,471 125,494

Incometaxexpense (141,456) (97,071) (55,242) (82,835) (51,477)

Profit for the year 295,754 226,981 141,768 172,636 74,017

Earningspershare-ZMK 1,478 1,135 709 863 370

Statement of financial position

Net assets employed

Property, plant and equipment 645,353 654,962 661,967 674,189 601,446

Equityinvestmentinrelatedcompany 5,910 5,910 5,910 5,910 5,910

Net current assets 503,708 321,943 200,642 123,560 53,190

1,154,971 982,815 868,519 803,659 660,546

Liabilities due after one year

Long term borrowings - - - 94,253 202,355

Provision for environmental liabilities 23,252 12,503 9,413 6,888 3,506

Retirement benefits 1,573 1,854 1,976 2,888 2,962

Deferredtaxliabilities 167,949 164,987 165,617 128,360 47,088

962,197 803,471 691,513 571,270 404,635

Financedby

Share capital 100 100 100 100 100

Reserves 962,113 803,371 691,413 571,170 404,535

962,213 803,471 691,513 571,270 404,635



Performance Profile

Sales Tonnages (‘000 Tonnes)

1200

1100

1000

900

800

700

600

500

400

300

200

100

02005 2006 2007 2008 2009 2010 2011 2012

577

578

552

536

926

866

1,04

3 1,09

9Year

1100

1000

900

800

700

600

500

400

300

200

100

02005 2006 2007 2008 2009 2010 2011 2012

299,

943

282,

332

324,

596 430,

133

737,

479

733,

900

879,

162

Turnover (ZMK millions)

992,

355

Year


Earnings Per Share (ZMK)

1600

1500

1400

1300

1200

1100

1000

900

800

700

600

500

400

300

200

100

02005 2006 2007 2008 2009 2010 2011 2012

370

317

271

254

863

709

1.13

5

Year

1,47

8

Profit After Tax (ZMK millions)

400

300

200

100

02005 2006 2007 2008 2009 2010 2011 2012

74,0

17

63,3

19

54,1

27

50,7

83

172,

636

141,

768

226,

981 29

5,75

4

Year



Exports by Country - Cement 2012

Democratic Republic of Congo (DRC) 66%

Burundi 16%

Malawi 7%

Zimbabwe 6%

Tanzania 4%

Mozambique 1%

Other 1%

Exports by Country - Clinker 2012

Malawi 100%

Customer oriented employees

Committed to long term stakeholder relationships

Focusing on quality customer care


H. KapekeleCompany SecretaryLafarge Cement Zambia Plc

Head OfficeFarmno.1880,KafueRoad,ChilangaPOBox32639,Lusaka,Zambia

Lafarge Cement Zambia PlcForm of Proxy

I/We

of

being a member of Lafarge Cement Zambia Plc hereby appoint

of

or failing him/her THE CHAIRMANOF THEMEETING asmy/our proxy and/or representative, to vote at his/herdiscretion for me/us and on my/our behalf at the 21stAnnualGeneralMeetingofthemembersoftheCompany,tobeheldattheIntercontinentalHotel,Lusaka,Zambiaon27March2013at9:00hrsandateveryadjournmentthereof.

ASWITNESSmy/ourhand(s)this day of 2013.

Signature Number of shares held

Witness

Note: A member entitled to attend and vote at this meeting may appoint another person (whether a member of the Companyornot)toattend,speakandvoteinhis/herstead.Thisformofproxyshouldbesignedandreturnedsoasto reach the Company Secretary at the registered office at least 48 hours before the meeting.

Proxy form:for the year ended 31 December 2012

AffixStamp

Cut

her

e

Fold here

Staple here

Cut

her

e

Fold here

H. KapekeleCompany SecretaryLafarge Cement Zambia Plc

Head OfficeFarmno.1880,KafueRoad,ChilangaPOBox32639,Lusaka,Zambia

Staple here

Head Office

Farm No.1880, Kafue Rd PO Box 32639, Chilanga Lusaka, Zambia

Tel: +260 211 279 029 / 40 +260 211 367 400 +260 211 367 600

Fax: +260 211 278 134

E-mail: cement.enquiries@ lafarge-zm.lafarge.com

www.lafarge.com

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