Академический Документы
Профессиональный Документы
Культура Документы
Contents
page 20
page 32
page 42
page 112
page 138
Commentary
Chairmans report Chief executive officers report Chief financial officers report
This icon refers to supplementary information that can be found online www.ppc.co.za
Administration
PPC in the stock market Corporate information Notice of annual general meeting Form of proxy Glossary of definitions and acronyms
Forward-looking statements
This report including, without limitation, those statements concerning the demand outlook, PPCs expansion projects and its capital resources and expenditure, contain certain forward-looking views. By their nature, forward-looking statements involve risk and uncertainty and although PPC believes the expectations reflected in such statements are reasonable, no assurance can be given that these expectations will prove correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment, other government action and business and operational risk management. While PPC takes reasonable care to ensure the accuracy of information presented, we accept no responsibility for any damages be they consequential, indirect, special or incidental, whether foreseeable or unforeseeable based on claims arising out of misrepresentation or negligence in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and some information in this document may be unaudited.
partnering in africa
Scope and boundary of report
This integrated annual report covers PPCs financial andnon-financial performance between 1 October 2011 and 30September 2012. It follows the integrated annual report published for the 2011 financial year. Details for obtaining copies of the integrated report from the PPC group company secretary appear on page 137. For further details on sustainability matters, please contact: Ms Tshilidzi Dlamini, PPC group manager, sustainability and environment, tel +27(11) 386 9122, fax+27(11) 386 9117, email Tshilidzi.Dlamini@ppc.co.za. The scope of this report covers all PPCs manufacturing facilities (cement and lime), aggregate quarries and depots in South Africa, Botswana, Zimbabwe and Mozambique. Our annual financial statements were prepared in accordance with international financial reporting standards (IFRS), requirements of the South African Companies Act, regulations of JSE Limited (JSE) and recommendations of King III. In compiling this report, PPC has considered the latest Global Reporting Initiative sustainability reporting guidelines, known as GRI G3.1, as well as guidelines on corporate governance in South Africa set out in King III and the Listings Requirements of the JSE. The GRI classification for our report is application level C+, which is self-declared and requires the group to report on at least ten GRI indicators across economic, social and environmental performance. Certain indicators have been externally assured by Deloitte & Touche, whose report appears on page 109. The indicators published in this report reflect the extent to which we meet GRI reporting requirements. We have also included areas we believe will enhance understanding of our processes, achievements, challenges and progress for the year. Online version available
Reporting approach
This is our third integrated annual report a style of reporting that allows us to emphasise the fundamental link between our financial and non-financial performance (environmental, economic, social and governance issues), contextualise the risks and opportunities the group faces, and how these influence our business strategy. The JSE requires listed companies to produce integrated annual reports, in line with the recommendations of KingIII. What, precisely, constitutes integrated reporting remains the subject of international debate, although we have noted the discussion papers from the International Integrated Reporting Committee. We have also been guided by accepted best practice in annual reporting and GRI G3.1 reporting guidelines. This integrated annual report focuses on the most material sustainability issues that drive business strategy. These were identified after analysing stakeholder concerns, business risks and global trends, and how they impact our long-term business sustainability.
GROUP OVERVIEW
Our profile
In 2012, PPC celebrated its 120th year a formidable 12 decades of innovation as a leading cement producer in southern Africa. This milestone comes two years after PPC celebrated its 100th year listing on the JSE in 2010, becoming part of an extremely small and elite group of listed centenarians, not only in South Africa but worldwide. Established as De Eerste Cement Fabrieken Beperkt in 1892, PPC has tracked the growth and development of South Africa, producing the cement used in many of the countrys iconic landmarks and construction projects, including the Union Buildings, Gariep Dam, Van Stadens River Bridge, Gautrain, Medupi Power Station, the new Cape Town Stadium in Green Point and much of southern Africas infrastructure. Since unbundling from Barloworld in 2007, PPC concluded R3,9 billion broad-based black economic empowerment transactions in 2008 and 2012, commissioned a R1,4 billion clinker plant in Dwaalboom and completed the R700 million mining facility at its Hercules plant. The group is the leading supplier of cement in southern Africa through eight cement manufacturing facilities and three milling depots in South Africa, Botswana and Zimbabwe that can produce around eight million tonnes of cement products each year. PPC also produces aggregates, metallurgical-grade lime, burnt dolomite and limestone. Our Mooiplaas aggregates quarry in Gauteng has the largest production capacity in South Africa. Our focus extends beyond our group to the broader industry. As a leader in this industry, PPC has actively invested in technology to reduce air emissions, minimise waste production, recycle and recover raw materials, enhance energy efficiency and conserve natural resources while producing a reliable and affordable supply of building materials to support the economies of countries where we operate. PPC is a truly African success story a focused business that reflects the strengths of its people, products and services. As we expand into the rest of Africa, we will deploy our sustainable business model one built to last and the brand of choice in our chosen marketplaces.
Our vision
To grow PPC into a leading emergingmarket business.
PPC currently operates in emerging markets, where 70% of the worlds cement is produced. These markets present higher growth in populations, GDP and cement demand, new opportunities, and deliver higher returns for producers of cement and related products.
Investment proposition
Cash generative Excellent dividend yield and history eading producer in L southern Africa with best geographic spread New capacity available Strong financial position inancial strength to explore F expansion opportunities Experienced management team
PPC Ltd
11%
People
12%
Social
16%
Team PPC delivered a good result by improving efficiencies and increasing normalised earnings by 11% despite another tough year. The company finalised a number of key strategic issues including conversion of mining rights in South Africa and our first new investment into sub-Saharan Africa.
skills development.
Environmental
Successful completion of the environmental
authorisation process for new Riebeeck plant. As part of our five-year energy-saving plan, integrated demand management projects realise energy savings of R2,8 million.
reporting acknowledged.
Governance aligned with new
CompaniesAct.
Financials (R million) Revenue Operating profit* Property, plant and equipment Total assets Cash generated from operations Ordinary share analysis Headline earnings per share (cents)* Earnings per share (cents)* Dividends per share (cents) Number of employees
* Excludes BBBEE IFRS 2 charges.
2012 7 346 1 866 4 483 6 907 2 284 185 185 146 3 085
2011 6 826 1 710 4 287 6 419 2 102 167 166 130 3 087
2010 6 807 2 115 4 175 6 112 2 442 219 213 175 3 257
PPC has operations and strong brands in South Africa, Botswana, Zimbabwe and Mozambique. In addition to serving southern African markets, we export cement and lime to other African countries.
Ethiopia
19
Addis Ababa
1. Jupiter 2. Hercules 3. Slurry 4. Dwaalboom 5. Riebeeck 6. De Hoek 7. Port Elizabeth 8. Colleen Bawn 9. Bulawayo 10. Lime Acres 11. Laezonia quarry 12. Mooiplaas quarry 13. Kgale quarry 14. Gaborone 15. Saldanha 16. Quarries of Botswana 17. George 18. Maputo 19. Habesha
13 Gaborone 14 16
Mozambique
Zimbabwe Botswana
9 Bulawayo 8 16 16
Mafikeng
Durban
Cement plant Milling depot Aggregate quarry Lime plant Sales depots Project
Port Elizabeth
South Africa
Rm Revenue Employees 2012 5 786 2 292 2011 5 633 2 394 2010 5 605 2 558
Rest of Africa
Rm Revenue Employees 2012 1 560 793 2011 1 193 693 2010 1 202 699
PPC Ltd
Cement
Overview
PPC Cement not only has a proud and successful track record spanning 120 years, but can also lay claim to being the leading supplier of cement in South Africa, Botswana and Zimbabwe. Our unique combination of quality products and good geographic footprint allows us to meet most customer requirements in parts of these countries.
Lime
Overview
PPC Lime has grown from small operations in 1907 producing lime for the burgeoning gold mining industry into one of the largest lime producers in the southern hemisphere and the leading supplier of metallurgical-grade lime, burnt dolomite and related products in southern Africa.
Lime products
Unslaked lime, hydrated lime and limestone and burnt dolomite.
Aggregates
Overview
PPC Aggregates supplies quality construction aggregates to the civil construction sector and products for the chemical, metallurgical and agricultural industries. PPC has aggregate quarries in Gauteng (Mooiplaas and Laezonia) and in Botswana (Kgale, Selebi Phikwe and Francistown).
Aggregate products
Concrete stone, road stone, crusher sand, river sand, building sand, plaster sand, Magalies silica, natural base, sub-base, fill material, dolomite and agricultural lime.
Leadership Board
PPC understands that diversity, empowerment and development at every level can only be achieved through effective, transparent and accountable leadership.
Bheki was appointed independent non-executive director and chairman of the PPC board in November 2008. He holds an MBA degree from the University of Western Michigan (USA) and is a founding chief executive ofBusiness Unity South Africa, the most authoritative voice of business in South Africa. He has worked in a number of South African blue-chip companies including Ford Motor Company (human resources), SA Breweries (procurement, logistics and human resources), Tongaat Hulett Sugar (director: human resources), Transnet (director: human resources) and is currently chief executive of the Chamber of Mines. Bheki has also served in a number of significant national policy-formulating structures, such as the national anti-corruption forum, Presidents working group with business and the national Africa peer review mechanism council.
Sello Godfrey Helepi (41) Executive director Organisational performance and transformation
Sello joined PPC in 2007 as group corporate social transformation manager and was appointed executive: transformation in 2008. He holds a BEd (Hons) from Avondale College and a BEd Studs (Hons) from the University of Newcastle, Australia. Over a ten-year career with Gold Fields, Sello held positions in human resources, corporate communications and was appointed group transformation manager prior to joining PPC.
Peter Esterhuysen (56) Executive director Business development and international expansion
Peter was a divisional director of PPCs cement division from 1996 to 2001 and group financial director of the Barloworld Coatings group prior to rejoining PPC as chief financial officer in 2003. A chartered accountant by profession, he also holds BCom and BAcc degrees, and has extensive experience in all aspects of manufacturing, corporate finance and taxation. He now heads up the business development team responsible for furthering PPCs African growth strategies.
PPC Ltd
Peter Esterhuysen (56) Executive director, business development and international expansion
See page 6
Sello Godfrey Helepi (41) Executive director, organisational performance and transformation
See page 6
PPC Ltd
Awards in 2012
Nkonki/Financial Mail award for integrated reporting
During the year, PPC was recognised at a number of levels from its integrated reporting to its progress with transformation reflecting a group concentrating on every aspect of its role in society and its responsibility to stakeholders. PPC won the industrial category and was ranked second overall for its 2011 integrated report out of over 100 listed companies. Importantly, the companys overall score improved, placing it among very few top-rated companies for the quality of its integrated reporting. Fifth consecutive award for PPC Cement in this benchmark survey, and first for PPC Botswana. PMRs annual national survey evaluates and measures customer service and satisfaction. Nolwandle Mantashe, PPCs executive for transformation and government relations, was named BBQs transformation champion of the year. PPC was rated supplier of the year for the first time, and won the category: hardware building materials for the second year.
PPC understands that managing a sustainable business requires the balanced integration of performance, corporate governance, social, economic and environmental factors into the strategy and operation of the business. Equally, we understand that this is dynamic and requires an ongoing review process.
To formulate our strategy and identify our material issues, PPC uses a wide range of criteria, processes and stakeholder engagements, summarised below:
Internal factors
External factors
Groups vision, mission, key values, policies, strategies, operational management systems, objectives and targets.
Challenges and emerging issues for the cement sector, for example global industry consolidation.
Expectations and concerns of stakeholders, including employees, customers, shareholders, governments, suppliers and communities.
Relevant laws, regulations and changes to legislation that affect PPC and its stakeholders Companies Act, skills development, employment equity, waste management, air quality, and local by-laws.
Changes involving sustainability issues, impacts, risks or opportunities (eg climate change, energy efficiency) identified through published global research and development.
Innovation, including product development and the manner in which PPC could potentially influence suppliers and customers in terms of sustainable development.
Advice received through external experts in the business strategy, risk and sustainability fields.
10
PPC Ltd
Stakeholder engagement
Employees
Trade unions
Academic institutions and professional organisations Banks, funders and insurance companies shareholders and investment community Industry associations
Media
Suppliers
Customers
In terms of PPCs inclusive process, we engage with all stakeholder groups. While interacting with such diverse groups is challenging, we know that without their input we cannot run a truly sustainable business. PPC uses many avenues to facilitate this engagement as listed below. One of the most successful means has been through formal stakeholder forums at both corporate and operational level.
11
Stakeholder
Employees
Type of engagement
In-house publications, intranet, roadshows, factory Invocoms and key leader meetings, individual perception monitor, performance and one-on-one meetings, factory safety and environmental meetings. All PPC leaders drive various forums, from the CEO down
Issues raised
Employee benefits including salaries Company performance Safe working environment Understanding transformation strategy and plans Individual performance and development Succession planning Organisational climate Environmental awareness Cost-of-living salary adjustments and other employee benefits
Action taken
Through the Kambuku philosophy, PPC has ongoing dialogue with all employees to address issues raised. The response is often via the same engagement process through which the issue was raised.
Trade unions
Regular meetings as per respective recognition agreements, key leader meetings with all employee representatives at each operation Meetings, conferences, site forums
Industry associations
Meetings Conferences Working groups Meetings, conferences, working groups, factory inspections
PPC provides environmental inputs on projects and legislation in various industry associations and other forums. Financial provisions are made for factory decommissioning and quarry rehabilitation (see annual financial statements). Applications for licences have been submitted. Social and labour plans already implemented. Frequent government interaction during the current environmental impact assessment process. All health and safety elements reviewed and complied with.
Air quality and waste management Financial provisioning for rehabilitation Integrated water use licences and water quality Social and labour plan implementation Western Cape expansion plan Mining charter scorecard Environmental authorisation applications
12
PPC Ltd
Stakeholder
Customers
Type of engagement
Customer visits Factory visits Industry conferences Industry associations Hospitality events Independent customer satisfaction surveys In-store visits and promotions Technical support and education Advertising Site visits (including suppliers suppliers) Meetings Supplier audits Tender briefing sessions
Issues raised
Price, service, product range, quality Managing cement waste (used bags and spillage) Empowerment status
Action taken
PPC communicates price increases in writing in advance. A technical marketing function evaluates quality and product range feedback. Empowerment status certificate available to all stakeholders. Appointed key account managers.
Suppliers
Product development Alignment to customer strategy Environmental status of supply chain Health and safety for contractors
Increased focus and capital approved for material handling where necessary. Standard practice is for all contractors entering a site to receive safety induction training. PPC has a specific engagement plan and specific media interactions were held during the year.
Media
Industry outlook Financial results Carbon footprint Products People Cement demand and pricing outlook Financial performance Implementation of strategy Competitor activity Carbon footprint CEO succession
Annual and interim results Website Integrated annual reports Investor roadshows Meetings Conferences
New CEO appointed. See social and environmental reports. Where possible employees are sourced from the communities in which we operate. Trustees approve funding allocations and community projects for implementation.
Public forums Meetings Internet PPC Community Trust (community engagement forum meetings)
Operational environmental performance Employment Projects to support community upliftment submitted to trustees from beneficiary communities
13
Material issues
Based on our approach to managing a sustainable business (page 10), stakeholder engagement and comprehensive risk assessments, we have identified the material issues our stakeholders need to consider. For convenience, each issue is identified by an icon and a number. Where a material issued is addressed in this report, it is cross referenced. In 2012, PPC has successfully dealt with three material issues from the 2011 integrated annual report, namely meeting requirements for conversion of mineral rights, indigenisation of our Zimbabwe operations and CEO succession. These have thus been removed as material issues but are discussed elsewhere in the report.
Material issues
1 High exposure to South African economy
Response strategy
Increase revenue generated in other countries by expanding PPCs footprint into developing/ emerging market economies. Initial focus is in sub-Saharan Africa to grow revenue earned outside South Africa to at least 40% by 2016.
Status
27% stake secured in Habesha Cement, Ethiopia. Operations under construction; expected to come on stream in 2014. PPC is currently engaged in four more projects which, if all successful, would add some three million tonnes of capacity or 35% to revenue by 2016. Older less-efficient equipment remains on care and maintenance, pending changes in market demand. Continue to ensure most efficient allocation of resources and strong customer focus. Improvements at Transnets rail service have allowed us to maximise use of our most efficient kilns in Dwaalboom. Upgrade of De Hoek kiln 6 completed in July 2012, ensuring that our largest production unit in the Western Cape now operates at competitive efficiency levels. Continuous focus on efficiency, quality and customer service. Engaging with relevant industry bodies and supporting legal action to ensure fair application of quality standards has been unsuccessful. Customer education on disadvantages of using imported product has had limited success.
In 2012, 79% of PPCs revenue was generated from its South African operations.
Markets
Existing overcapacity in South Africa, Namibia and Botswana puts pressure on selling prices in competitive markets.
Rationalise production capacity to improve utilisation and efficiency across all PPC sites. Contain manufacturing costs. Increased focus on customer needs, marketing and product enhancement. Continue to evaluate and exploit all export opportunities.
3 Imported cement into South Africa and Mozambique Cement imports have steadily risen to around 6% of South African demand, despite fluctuations in the exchange rate. Imports into Mozambique have dampened prices.
Ensure PPC is competitive in cost, quality and customer service. Lobbying industry bodies, government departments and customers to understand the threat of unstable supply, quality breaches and local manufacturing job losses.
14
PPC Ltd
Material issues
4 Increasingly onerous regulatory environment in South Africa
Response strategy
Ensure an effective and appropriately skilled compliance function in place. Allocate capital to ensure compliance. Lobby industry and state bodies to ensure regulatory environment congruent with a competitive manufacturing industry.
Status
PPC has a compliance function in place and group-wide compliance to legislation is monitored. Western Cape modernisation programme progressing satisfactorily. Appropriate budgets in place to cater for upgrades at other sites. Engaging with relevant industry and state bodies on: Developing an appropriate carbon tax strategy Waste handling legislation Air emission legislation. Dedicated business development team under leadership of an experienced director in place. A board deal committee assesses each opportunity. Appropriate risk assessments per opportunity.
Regulatory
Strategic
Investments into the rest of Africa carry sovereign and operational risks.
Thoroughly assess each investment opportunity by ensuring the appropriate resources are in place, including industry and country experts, to ensure compliance with PPCs risk appetite. Consult with relevant government authorities. Promote equity participation by local partners. Use funding opportunities from development funding institutions as these projects have broad development implications and therefore fall within their mandates. Apply lessons learnt from deals concluded. Improve relationships with government to better understand policy direction. Lobby government through industry bodies.
Political
Clarity required to understand governments stated intent of nationalising strategic assets. Implications of fluid empowerment criteria.
7 Political or civil instability in Zimbabwe due to 2013 national elections
The DMR has approved PPCs current empowerment status. The company will remain engaged with government to keep abreast of any policy developments.
Abide by all regulations of the government of the day and mitigate potential impact by implementing contingency plans.
Any instability due to these elections will affect cement demand and may hamper production at PPC Zimbabwe.
15
Material issues
8 Lack of critical skills
Response strategy
PPC continues to practise its Kambuku* people philosophy to empower, motivate and develop employees. Fixed and performance-based remuneration and retention schemes to be market-related. Develop existing employees at the accredited PPC Academies. Maintain current succession planning.
Status
Employee turnover has declined for 2012 to 14% in South Africa but risen to 10,7% in Botswana while it is 12,4% in Zimbabwe. Internal individual perception monitor has increased to 87%. PPC Academies continue to develop team members in leadership, sales and marketing, vocational training and bridging programmes.
In all countries where PPC operates, there is competition for skills to operate a sustainable manufacturing business. This not only has the potential to affect business performance, but causes costs to spiral to keep remuneration and retention schemes market-related, especially with new entrants to the industry.
9 Safety
Human capital
Safety remains the top priority for PPC. We continually strive to improve safety standards, develop a healthy work environment and a safety-aware workforce.
The groups LTIFR reduced from 0,34 to 0,23 in 2012. PPC Alive! project has added momentum to our safety efforts, resulting in fewer lost-time injuries. Group-wide compliance to legislation is monitored. PPC is a member of the ACMP, Manufacturing Circle and EIUG. These industry bodies actively engage authorities and affected parties. Efficiency and environmental performance upgrade at De Hoek factory concluded in July 2012. Environmental impact assessment for new Riebeeck plant in Western Cape approved. PPC/Inowind Wind Farm project in Port Elizabeth granted preferred-bidder status. Burning waste materials to replace coal remains delayed by authorities.
Additional regulatory and compliance requirements increase the cost of doing business. The level of administered energy prices and labour costs make our products uncompetitive relative to Asian counterparts.
16
PPC Ltd
Operational
Ensure compliance with all applicable legislation. Engage government on implications of current and proposed legislation and propose more efficient solutions. Operate as efficiently as possible. Improve electrical and thermal efficiency. Evaluate alternative forms of energy supply.
Material issues
11 Labour unrest in South Africa
Response strategy
Respond to the dynamic economic environment in an agile and efficient manner. Current business interruption plans in place. Increased emphasis on the PPC Kambuku people philosophy. Maintain PPC employees freedom of association with labour unions and ensure relevant agreements are in place between the company and recognised unions.
Status
Contingency plans partially mitigated the impact of September transport strike. Only one strike in the group of 12days atourlime operations inNovember 2011. Fundamental pillars of Kambuku: fast, open communication between management and employees and a better life for all remain in place throughout the group.
Intense labour unrest in a number of industries in the latter half of 2012 has: Reduced economic outlook for SA Interrupted business execution Brought uncertainty to existing legal wage agreements Potential to spill into PPCs workforce.
Operational
12 Carbon footprint
Environmental
Due to the chemistry and energy requirements of the cement manufacturing process, significant quantities of carbon dioxide (CO2) are generated. The potential implementation of a carbon tax will have financial implications for the cement and lime industry.
PPC has committed to reducing CO2 emissions, with significant progress over the past decade. PPC will continue to improve energy and process efficiencies to reduce its CO2 emissions and carbon footprint.
Continued focus on energy management and implementation of a wide spectrum of energy efficient projects. PPC is an active member of a number of industry and business technical and lobby groups regarding CO2 targets and potential legislation. As part of the 2012 budget speech, national treasury released a price guideline for carbon tax that could impact PPCs bottom line. PPC is actively engaging to mitigate the potential impact through climate change committees.
PPC also actively participates in industry/government consultative processes to ensure decision makers have a clear perspective on: feasible CO2 reduction targets how these should be implemented implications of any proposed CO2tax
17
Our strategy
Our aim is to grow into a leading emerging-market business, starting in sub-Saharan Africa. As we expand into the rest of Africa, it is crucial that we do not lose focus on the companys performance and image in its historical markets. As such, two key strategies support our vision: Enhance our industry-leadership position in southern Africa Expand our operational footprint into other parts of sub-Saharan Africa Enhance our industry-leadership position in southern Africa Internally we refer to this as keeping the home fires burning. The successful execution of this strategy requires that we improve our sales, marketing, customer focus and overall value offering while retaining our focus on operational and logistical efficiencies and good corporate governance. Renewing or upgrading equipment, especially relating to environment or efficiency, is also an integral part of the business. Acquiring businesses with a good strategic fit complements this leg of our strategy.
Expand our operational footprint into other parts of sub-Saharan Africa In this strategy, internally referred to as our rest of Africa strategy, we have set ourselves an initial target to grow the revenue earned outside of South Africa from the current 20% to over 40%. We will target countries with high potential for infrastructure development, low per-capita cement consumption and experiencing current cement shortages. We will avoid areas, especially on the east coast, which are susceptible to imports. As sub-Saharan Africa is a sizeable terrain, we have a plan to tackle this strategy in stages as shown on the next page.
Status
Remain focused on core business manufacture and supply of cement, lime and aggregate products in our current operating areas. Expand geographic footprint
Exploit growth opportunities in other emerging markets that will enhance shareholder value by diversifying the geographic footprint of the groups income. Generate sustainable cash flow returns
Ensure cash flow returns that allow for sustainable investment in current and new markets. Achieve global competitiveness
Ensure operating efficiencies, overhead costs and environmental performance are in line with regional and international benchmarks. Develop globally competitive people
People are a key sustainable competitive advantage and PPC will continually prioritise the development of its people. Practise sound corporate, social and environmental governance
We are committed to applying best practices in corporate governance and caring for the communities and environment in which we operate.
Achieving In progress
18
PPC Ltd
Tunisia Morocco Western Sahara Mauritania Senegal Gambia Guinea Burkina Faso Ghana Nigeria Cameroon E Guinea Congo DRC Central AR South Sudan Ethiopia Somalia Mali Niger Chad Sudan
Algeria
Libya
Egypt
Eritrea Djibouti
Angola Zambia Namibia Cement 20111 million tonnes Current operating areas Current focus areas Future focus areas Total 13 20 32 65 Cement 20163 million tonnes 164 305 625 108 Malawi Madagascar
Zimbabwe Botswana
Mozambique Swaziland
South Africa
Lesotho
1. PPC research, Cemnet 2. Real GDP growth 2011 2016 IMF, PPC calculations 3. PPC estimates 4. Cement growth = 1 x GDP 5. Cement growth = 2 x GDP
19
empowered to deliver
Case study
As part of Womens Day celebrations, PPChosted its first annual Womens Forum conference in August 2012 under the theme First me, then we, then the
world.
20
PPC Ltd
Commentary
Keynote speakers at the conference included Dr Mamphela Ramphele, founder of Citizens Movement for Social Change and chairperson of the Industrial Development Corporation, Monhla Hlahla. Each presenter shared a wealth of knowledge and expertise in their respective fields with topics ranging from self-leadership to self-awareness and financial wellness. The aim of PPCs Womens Forum is to provide a platform for women in the workplace to voice issues that directly affect them, share ideas, inspire and learn. Supported by the PPC board of directors and championed by the chief financial officer, Tryphosa Ramano, the forum was launched in 2011 and is currently being piloted at the groups head office in Sandton. As part of PPCs business strategy, the forum aims to be a change agent in PPC in attracting, nurturing and advancing female talent to effectively lead the company and encourage creativity and innovation. The career path for women at PPC has expanded and, over the last decade, the company has recorded a 67% increase in its female staff ratio and fourfold increase of women in
management roles. At present, PPC employs over 400 women and aims to achieve a 26% female demographic by 2016. The difference between a good company and a great one is its people. At PPC, we recognise the importance of attracting the best in the country to maintain our position as the leading cement manufacturer in southern Africa. We believe that by providing the opportunities, resources and means, we enrich our female staff and assist them in reaching their full potential.
21
chairmans report
Team PPC must be congratulated for achievements in a number of areas this past year, including a strong operating performance and the finalisation of important strategic issues.
Performance
The group increased normalised earnings by 11% and remains financially sound with a healthy balance sheet, strong cash generation and sufficient capacity for expansion. During the year the board declared total dividends of 146 cents per share (2011: 130 cents), translating to a dividend cover of 1,26 times, well within our stated dividend policy. PPCs revenue growth was achieved despite volumes coming under pressure in most divisions. The exception was in Zimbabwe, which showed strong sales volume growth for the fourth successive year. Revenue from countries outside South Africa rose to 21%, mainly on significant improvements in Zimbabwe.
21%
Economic environment
During 2012, the South African economy struggled to gain momentum, with reduced growth in the third quarter of the calendar year. A further slowdown is expected in the fourth quarter due to a combination of a slowing global economy as well as labour disruptions in the mining and adjacent industries. The South African construction industry continues to wait in readiness for our governments announced R845billion infrastructure programme. The national ratio of gross fixed capital formation to gross domestic product is currently at some 19%, whereas it should be above 25% to begin addressing some of our socio-economic and infrastructure backlogs. The residential building market remains under pressure, largely due to the ratio of household debt to disposable income which is still elevated at levels above 70%. This high level of indebtedness has meant that despite the South African Reserve Banks efforts to lower interest rates to record lows, extension of new mortgage loans remains subdued. We are closely watching developments in the unsecured lending market, as evidence suggests that around one quarter of all loans extended to date are being used for building and renovations. The growth of these loans is likely to be unsustainable. The company is also concerned about the violent labour unrest that has gripped our nation. A lasting resolution must be found where labour, government and the private sector can enjoy mutually beneficial relations.
11 2
Team PPCs achievements and strong operating performance in challenging markets reflect the group-wide commitment to realising strategic goals.
22
PPC Ltd
Commentary
Given the rather subdued outlook for the South African economy in the short to medium term, we remain excited about prospects elsewhere in sub-Saharan Africa. Most countries, including Ethiopia where we have made our investment into Habesha Cement Company, continue to record strong economic growth rates. PPC is well placed to assist these countries to achieve their infrastructural development ambitions.
improved risk management. In the year ahead we will create a separate South African entity as well as separate international operating entities. We also used this opportunity to rename the holding company from Pretoria Portland Cement Company Limited to PPC Ltd. We believe PPC is a strong brand in our country as well as across the African continent and that the name change will allow us to further harness the power of this admirable brand. PPC has received an indigenisation certificate for itsoperations in Zimbabwe. The certificate acknowledges our compliance with both the spirit and letter of the Zimbabwean Indigenisation and Economic Empowerment Act.
Board
Several new appointments and changes in responsibility were made to the board and its committees during theyear. Mr Jerry Vilakazis three-year term as a representative of the PPC consortium of strategic black partners ended on 1 March 2012. Mr Vilakazi made a valuable contribution to the board and company during his term. Mr Sydney Mhlarhi was appointed as a non-executive director, representing the PPC consortium of strategic black partners on 1 March 2012. Mr Mhlarhi is a chartered accountant with over 14 years experience in investment banking. He was also appointed as a member of the deal committee and remuneration committee of the board. Ms Bridgette Modise, who was appointed to the board and audit committee in December 2010, was appointed to the risk and compliance committee from 1 March 2012. Her 15 years auditing experience has further strengthened this committee.
Prospects
We continue to anticipate an investment-led economic growth path for South Africa, propelled by governments planned infrastructure programme. Stabilisation of the euro-zone nations is also critical to boost local economic growth, given the strong trade linkages that exist. Our trading environment will remain tough and competitive, however, PPCs strategies in the home territories and the rest of Africa position this formidable business well for thefuture. It is a great pleasure to introduce Ketso Gordhan as the incoming chief executive officer of PPC Ltd. Ketso joined us on 1 November 2012 as CEO designate and will take over as CEO from 1 January 2013. I am confident he willguide PPC to even greater heights as we continue on our ambitious journey to become a leading emergingmarket business. I also extend my sincerest thanks to retiring CEO Paul Stuiver, who has headed PPC since May 2009 and took over at a challenging time; steering the organisation through the Competition Commission investigation and during tough, recessionary economic conditions. Paul hands over a strong, well-capitalised PPC on which Ketso can build to realise the companys vision. I would like to extend my sincere gratitude to my fellow board members as well as Team PPC for their combined efforts and commitment during this financial year. I also express my appreciation to our customers, shareholders and other stakeholders for their continued support.
Corporate governance
To elevate the boards corporate governance structures to be in line with global best practice, PPC appointed Phuti Semenya as chief audit executive in May 2012. Phuti is a chartered accountant with extensive experience in external, internal and forensic auditing. The leniency agreement between PPC and the Competition Commission concluded during 2009 remains intact and we continue to cooperate fully with the commission.
Transformation
I am pleased to announce that PPCs second-phase broadbased black economic empowerment transaction of R1,1 billion was approved, ensuring that the company meets the Mineral and Petroleum Resources Development Acts requirements and facilitating conversion of our oldorder mining rights to new-order mining rights. Twothirds of the shares were allocated to employees of PPCs South African businesses, ensuring that our staff are well aligned with shareholders. This transaction has also given the company the opportunity to align its corporate structure with our rest of Africa strategy, allowing for increased efficiencies and
23
12%
2/10
The highlight of our 2012 results was the good operating performance. This translated into group revenue increasing by 8% to R7,35 billion, EBITDA rising by 8% to R2,33 billion, normalised earnings increasing by 11%.
11
24
PPC Ltd
Commentary
On a more positive note, we again enjoyed strong growth in cement demand in Zimbabwe and for our lime products in Zambia and Democratic Republic of Congo (DRC).
increase in the very competitive South African cement market. Selling price increases in Zimbabwe were also in line with local inflation. The first phase of our Western Cape modernisation, a R280 million upgrade at the De Hoek factory, was completed within budget and has exceeded our expectations since being recommissioned in July 2012. We did not start the second phase of our Western Cape modernisation, the replacement of two ageing cement kilns at our Riebeeck factory, as environmental authorisation for this phase was only received towards the end of our financial year. The environmental authorisation includes some new requirements that will be incorporated into a redesign to be completed during 2013. I am particularly pleased that the additional focus and awareness generated by our PPC Alive! safety campaign resulted in a 26% reduction of on-duty injuries and in our injury frequency rate improving from 1,7 to 1,2 lost-time injuries per million hours worked.
10
10
With regard to environmental emissions, the upgrade at the De Hoek factory has resulted in a lower carbon footprint and dust emissions. We also facilitated a project to erect a 60MW wind farm on one of our properties. As part of this project, PPC will in future source some 10% of its electric power requirements from renewable energy. The PPC Womens Forum that was established in 2011 continued to further our ambition to attract, nurture and advance female talent at PPC. Although we still have room to improve, considerable progress has been made with the racial and gender profile of PPC employees and the PPC board. Finally, and with regard to keeping our home fires burning, it was significant that the main beneficiaries of our second black economic empowerment transaction were our South African employees who will share in 68% or R730million of the total transaction value of R1,1billion. Added to our first BEE transaction in 2008, our employees now make up a significant shareholder component by collectively owning more than 7% of the company.
12
Some key drivers in cost containment were improved rail services from Transnet which allowed us to produce more from our most efficient factory, Dwaalboom, the reduction in employee numbers during 2011 and reconfiguring our Port Elizabeth factory into a single-product facility. We continued with many customer-focused initiatives including further product enhancements and customised solutions targeted at specific market segments. These contributed to PPC retaining its premium quality/price position and achieving an average 5% selling price
25
The Habesha factory is being built in a way that will allow a relatively quick doubling of capacity to 2,8 million tonnes per annum in subsequent years. This would further increase Habeshas contribution to PPCs non-South African revenue. In addition, our involvement with Habesha will also provide opportunities to increase our shareholding in the company and to establish aggregate and ready-mix operations in Ethiopia in due course. In addition to the Habesha project, we have announced that we are currently pursuing four other projects in subSaharan Africa. Much of the time-consuming work involved with understanding regional opportunities and markets, confirming limestone reserves and identifying suitable local partners has been completed during the past two years and, therefore, we are confident we willmake considerable progress on these projects in the year ahead.
Sub-Saharan Africa currently consumes some 70 million tonnes of cement per annum or an average of 90kg cement per person each year. This is below the global average, even for emerging markets, with Brazil consuming 300kg per person per annum, South Africa 200kg and India 180kg. Economies in sub-Saharan Africa are projected to grow over 5% per annum, which implies that cement demand in the region will grow by as much as 40 million tonnes per annum during the next five years. Although PPC, with a total current capacity of around 8million tonnes of cement per annum, does not have the capacity or resources to erect all 40 million tonnes of new capacity required in sub-Saharan Africa during the next five years, it is realistic to target our involvement in projects totalling 3 to 4 million tonnes during the next five years. If achieved, this would result in significant growth for PPC and increase revenue generated outside South Africa from the current 21% to around 40% of total revenue. Unfortunately we were not successful in our bid for CINAT in the DRC, highlighted in last years report. Our 27% investment in Habesha Cement of Ethiopia announced during the year has the potential to increase PPCs non-South African revenue by around 5% from 2015. Phase 1 of the Habesha project involves establishing a new 1,4 million tonne per annum cement factory near Addis Ababa, which should be completed towards the end of 2014.
26
PPC Ltd
Commentary
Outlook
11,12
South African industry cement sales volumes to June 2012 showed cement demand growing by 6,9% compared to 2011. However, given the impact of labour unrest in the mining and transport sectors, it is likely that much lower numbers will be reported for the rest of 2012. Other local developments and continued weakness in the global economy suggest that economic growth will remain subdued into 2013. We expect cement demand in Zimbabwe to continue growing and cement demand in Botswana to improve as that government has now released some projects that will begin in 2013. We continue to monitor activities by new entrants to the South African cement market. If their activities progress according to their own announcements, they will not impact during our 2013 financial year. This presents further opportunity to enhance our leadership position in the region. Finally, we look forward to reporting on significant progress with our rest of Africa strategy in 2013, which will ensure significant growth over the next four to fiveyears.
considerably to the PPC team and I am very confident that he will lead PPC to greater heights. I thank my PPC colleagues and our many stakeholders, including customers, suppliers and investors, for their contributions and support during my time as CEO. With their continued commitment and support, PPC is ready for whatever the future holds.
27
16%
Revenue
PPCs overall cement volumes declined 3% from 2011 after lower sales in Botswana and reduced exports, partly offset by growing demand in Gauteng, Port Elizabeth andZimbabwe. The impact of the transport strike and heavy rains in the last quarter affected our South African cement sales volumes, which ended 1% below last years levels while cement selling prices rose 5% with slightly lower price increases realised in Botswana. In Zimbabwe, improved selling prices and a weakening rand against the US dollar, together with volume growth, enabled revenue to increase by double digits in rand terms. Following intense competition in our neighbouring countries, our cement exports into these countries have declined from the previous year. Competition in these markets derives from both local producers and imports from Asia.
1,2
Team PPC delivered a good financial performance, despite another year of tough economic conditions.
Revenue from the rest of Africa increased to 21% of total revenue following the double digit growth achieved in Zimbabwe partly offset by the lower volumes in Botswana.
Financial overview
Change % Revenue EBITDA* Operating profit* Earnings per share* Total dividend EBITDA margin (%)* Operating margin*
*Before impact of BEE IFRS 2 charges.
8 8 9 11 12
28
PPC Ltd
Commentary
EBITDA
The group recorded an EBITDA of R2 327 million, 8% above 2011, with an EBITDA margin of 31,7% (2011:31,4%). EBITDA for the cement division rose 7% to R2087 million (2011: R1 942 million) and the EBITDA margin was maintained at 33,4%, with Zimbabwe compensating for the impact of lower volumes in Botswana and export markets. Our lime operations EBITDA increased by 22% to R188 million (2011: R154 million), with the EBITDA margin strengthening to 22,5% (2011: 19,9%) on good cost control and a contractual pricing formula. Following lower volumes in Botswana, increased pricing pressures and the costs of integrating the newly acquired quarries in Botswana, our aggregates operations EBITDA was in line with 2011 at R56 million, but at a reduced margin of 18,7% (2011: 20,7%).
The group continues to focus on cost containment and operational efficiencies, with the combined effort from our operational teams restricting cost of sales growth to only 7% on the back of double-digit increases in certain input costs. South African cement costs increased by only 3% on a rand/tonne basis. All major cost component increases were kept to low to mid single-digit increases, except electricity, which rose 22% on a rand/tonne basis. Benefits of the restructuring programme finalised in 2011 were evident with salaries only increasing 4%. Zimbabwe cost of sales per tonne grew 4% in dollar terms following high cost increases, with diesel and electricity rising by some 40% and 25% respectively. Production problems in the beginning of the year resulted in a sixweek interruption which required importing clinker from South Africa at higher transport costs. Lime cost of sales increased by 5% due to real price increases in power and outbound logistics, partly offset by savings in coal costs and operational efficiencies. Aggregates cost of sales increased marginally above volume growth. Administration and other operating expenses were 9% above 2011 at R671 million (2011: R616 million). The main drivers for the year-on-year increase were the higher IFRS 2 charge on the groups long-term incentive schemes following the 25% appreciation in PPCs share price over the year and the new forfeitable share plan awards made in the current year (in part, a catch-up for 2011 when no awards were made), R15 million transaction costs incurred to implement the second phase of our BBBEE transaction, combined with increased marketing spend and the full costs of running our Mozambique operations which were in effect for one month in 2011. In 2011, PPC finalised a voluntary restructuring programme to reduce overheads. We believe the company has realised benefit from this programme, and if once-off items from 2012 are excluded, current-year overheads would be in line with costs recorded last year.
Taxation
The effective taxation rate for 2012 was 39,7% (2011: 37,6%). The increase can be ascribed to the BEE IFRS 2 charges not being tax deductible and increased withholding taxes incurred on dividends received from Zimbabwe (2012: R31 million; 2011: R7 million), partly offset by no STC being recorded on the companys interim dividend after the implementation of dividend tax from 1April 2012. Our long-term guidance on an effective group taxation rate is between 32% and 33%. This may change depending on potential acquisitions and the applicable ruling taxation rate in the various jurisdictions.
Earnings
Earnings per share, before BEE IFRS 2 charges, were 185 cents (2011: 166 cents), reflecting an 11% improvement. Non-South African operations contributed 30 cents per share (2011: 32 cents per share) or 16% of group earnings.
29
Non-current assets
During the year, the group invested R609 million in property, plant and equipment (PPE) with the most significant item being the De Hoek kiln 6 upgrade project at R159 million. Depreciation charges were R439 million (2011: R417 million). With the acquisition of the quarries in Botswana, R26 million of the purchase consideration was attributable to PPE. Translation adjustments amounted to R12 million (2011: R81 million) after the rand weakened against both the US dollar and Botswana pula. Capital expenditure on property, plant and equipment for 2013 is estimated to be between R550 million and R650million. Following the acquisition of the quarries in Botswana, and in terms of IFRS 3 Business Combinations, R22 million was recorded under intangible assets for mining rights and reserves, while R6 million was reflected as goodwill. The group invested R31 million (2011: R34 million) on ERP systems and software.
changes were R2137 million, a 9% improvement on the R2127 million in 2011. Net cash flow from operating activities was 69% higher than last year at R945 million (2011: R559 million) as a result of increased operating cash flows and lower dividend payments, partly offset by increased investment in working capital. The company was able to fund its normal operating cash flow requirements, capital investments and acquisitions as is evident from the graph shown below.
Capital structure
Net debt at year end was R3 337 million (2011: R3286million), translating into a net debt to EBITDA ratio of 1,4 times (2011: 1,5 times), and EBITDA interest cover of 6,2 times (2011: 5,9 times). No covenants were breached during the year underreview. Debt remains within the stated target range and the group had borrowing facilities of R4 221 million of which it had used 55% at year end. We continue to explore opportunities to optimally fund the current business and future acquisitions.
The groups net working capital at year end was R807 million (2011: R794 million). Inventory levels have increased, with year-on-year growth coming from lower September sales resulting in increased raw material and in-process stock, combined with the impact of the devaluation of the rand against the US dollar and Botswana pula for stock held at our foreign operations. Accounts receivable were R820 million (2011: R901million) after lower sales in September 2012 which had three fewer selling days than the prior September, combined with the impact of the transport strike atmonth end and declining sales in the latter part of September. Management continues workingcapital. to focus on reducing
Dividends
After taking capital requirements, the current and forecast trading position, cash flows and potential acquisitions into consideration, a full-year dividend of 146 cents per share has been declared, 12% above 2011. The 2012 dividend cover was 1,3 times, which is in line with 2011 and remains within the groups target dividend cover range. The dividend yield at year end remains healthy at 5,0% (2011: 5,6%). The total dividend paid during the year was R706 million (2011: R876 million). The group does not anticipate changing the targeted dividend cover range of 1,2 to 1,5 times cover.
Cash flow
The group continues to generate strong cash flows and its cash conversion ratio remains high at 98% of EBITDA (2011: 98%). Operating cash flows before working capital Cash ow
R2 317m
(R33m)
(R90m)
(R706) 500 0 Operating cash ows Working capital Stated capital FSP scheme Subsidiaries and associates Net nance costs Taxation paid Net capex spend Dividends paid
30
PPC Ltd
Commentary
Acquisitions
The acquisition of three quarries in Botswana for a total of R52 million was finalised in October 2011. This makes PPC the leading supplier of aggregates in the Botswana market and extends our footprint throughout the country. Due to the slowdown in the Botswana economy before and post the acquisition of the quarries, this new business posted an operating loss of R4 million. We remain confident about the long-term potential of the business. In June 2012, PPC concluded the first phase of its acquisition of Pronto Holdings (Pty) Limited, where 25% of the equity was purchased for R70 million and funded from internal cash generation. A further 25% of the equity will be purchased in May 2013 and the remaining 50% in 2014. The total consideration payable for the full 100% should not exceed R400 million. For the period under review, PPCs share of Prontos earnings was R7million. Further to PPCs strategy of expanding into Africa, the group concluded a 27% equity investment in Habesha Cement Share Company in Ethiopia for R102 million. Habesha is building a US$130 million cement plant with annual capacity of 1,4 million tonnes and plans to commission the plant in 2014. The group is currently pursuing four further opportunities in other African countries. These are at different stages of investigation, with one opportunity at final duediligence stage.
The transaction, which will be facilitated by PPC through a notional vendor funding (NVF) mechanism, comprises three main components (the BEE vehicles) as noted below. The BEE vehicles will be restricted from disposing or encumbering their shares during the seven-year NVFperiod. Percentage of PPC held post BEE transaction Strategic black partners Employee share trust Broad-based black womens trust 1,76% 4,42% 0,32%
During the NVF period, the participants of the scheme will be entitled to 20% of the ordinary dividend declared by PPC, with the balance of 80% going towards the NVF structure. At the end of the NVF period, participants will be allocated the remaining shares after the NVF balance has been settled, and will become entitled to 100% of the dividends. We estimate the transaction will have a 1,3% dilution impact on earnings during the transaction period. The total IFRS 2 charge on the transaction was calculated at R351 million, of which R112 million has been recognised in the 2012 financial year, with the balance being amortised over the NVF period. PPC also cancelled 20 million treasury shares prior to implementing this phase of the BBBEE transaction. These shares were initially purchased by PPC to mitigate the potential dilution to shareholders during the first phase of our BEE transactions. In addition, the transaction will allow PPC to streamline its corporate structure by creating separate South African and international operating entities, aligning the companys structure with its strategy to expand its footprint on the African continent. At the same time the holding company, Pretoria Portland Cement Company Limited, has been renamed PPC Ltd with effect from October 2012.
BEE transaction
The second phase of the companys BEE transaction, valued at R1,1 billion, was approved by shareholders in September and meets the requirements of the mining charters 2014 equity ownership requirements. This will result in a further 6,5% black ownership in the group post the issue of 39,3 million new PPC shares, which were listed on JSE Limited on 1 October 2012.
31
innovation
Case study
PCC Cement has long been committed to developing the highest quality and standards in the construction and related industries.
South Africas total road network spans some 154 000km of paved roads and 454 000km of gravel roads1. South African National Roads Agency Limited (Sanral) is responsible for the design, construction, management and maintenance of the countrys road network of over 16 000km, which is expected to grow to 35 000km2. SureRoad Government boosted transport infrastructure spending to R66 billion in the 2011/12 financial year and is expected to increase this to R80 billion by 2013/14. The investment is spread across the country, with urban and rural parts expected to benefit from development, and direct and indirect job creation3. Historical underinvestment in South Africas roads is reflected in the age of the national road network; some 78% is older than the original 20-year design life. The huge backlog in road maintenance and rehabilitation is a major challenge and will increase the market for road-stabilisation cement products.
32
PPC Ltd
The chemical stabilisation of soil with cement and lime has been widely used for over 40 years as a costeffective option of improving materials to produce durable roads. A limited-scope research project was undertaken in 2004 by the CSIR (Council for Scientific and Industrial Research) to update the technical recommendations for highways (draft 13 of 1986). This report recommended using cement in the 32.5MPa strength class to stabilise road layers. At the end of the review period, PPC launched its purpose-designed SureRoad product to meet CSIR recommendations for road construction after an extensive testing programme. SureRoad, a CEM II product, is manufactured by adding an extender or blend of extenders (fly ash, blast-furnace slag or limestone). The CEM II Portland-composite cements are ideal for constructing cement-stabilised substrate layers for roads. Our performance testing has shown excellent results with a range of soil types and different road classes.
Road construction with concrete Historically, the cost of using concrete instead of conventional material like asphalt in road construction was prohibitive. Concrete is, however, far more durable, delivering roads with an expected lifespan of up to 40years, compared to 25 years for conventional roads. With increasing oil and bitumen prices, concrete has also become a more competitive roadbuilding material. The development of specialised, ultra-thin concrete technology is ideally suited for labour-based construction4. A recent article in Concrete Trends concluded Concrete is the ideal choice for environmentally sensitive and economically sustainable highways with excellent durability and design life. This long-term performance reduces frequent resurfacing and rehabilitation, and the consumption of valuable resources5.
33
Section
Progress
Dividends declared in 2012 represent cover of 1,26 times. Actual capital expenditure increased to R609 million
Target 2013
1,2 to 1,5 times dividend cover.
Financial
Capital expenditure estimated tobe between R550 and R650million. Gross debt: EBITDA <3.
Sustainability reporting
Ongoing improvement with further assurance on nonfinancial indicators. Ongoing improvement in scope, particularly Botswana and Zimbabwe, as systems are integrated.
One additional indicator assured this year and another underwent a readiness assessment. 2012 reported includes some additional information on Zimbabwe and Mozambique.
To expand the scope of some existing assured indicators to other countries in which we operate. Continue to improve disclosure on Zimbabwe.
Stakeholder engagement
Continue to improve stakeholder engagement using surveys, forums and database management tools and incorporate pertinent feedback into future strategies and initiatives. Effective PPC environmental stakeholder forums functioning at all PPC cement, lime and aggregate sites, with at least quarterly stakeholder meetings.
Ensure further progress on formal stakeholder engagement systems cover all key stakeholders.
Stakeholder engagements continue to support site-specific programmes. Frequency of these forums optimised to at least bi-annually. A group-wide stakeholder survey was used as another tool to reach our stakeholders. The quality of engagement with our government stakeholders is improving as a result of improved knowledge on cement production as well as our approach to communicating transparently. Rolled out across the organisation.
Risk
34
PPC Ltd
Section
Progress
Implementation requirements of Companies Act were completed and included adoption of a new memorandum of incorporation and conversion of par value to no-par value shares. Compulsory, annual refresher training. The first five-year social and labour plans have been finalised and all mining charter requirements fulfilled. Readiness verification process by independent auditors completed this year on social and labour plans (page 109). Training increases to 5,7% of total payroll spend (leviable payroll). All PPC academies continued to function in 2012. Successful appointment of new CEO. 5% overall increase in employment equity. Female representation increased to 20% of workforce. PPC spent over R7,4 million on various creative projects which changed peoples lives and generated income. In Botswana, we have engaged government to identify possible initiatives. In Zimbabwe, work has begun on classrooms for a new secondary school at Fairbridge Umguza Rural Council and construction will continue into 2013.
Target 2013
In 2013 our target is better compliance reports from unit compliance officers and to improve web-based support on compliance issues.
Compliance
Ongoing training on Competition Act. Continue reducing the gap between target and actual achievement. Independently verified annual reports on implementation of social and labour plans submitted to DMR. People development: maintain steady progress against mining charter targets. Organisational and succession plan: further appointments in line with the three-year senior management plan formulated in 2009. Over R9 million in corporate social investment planned for 2012. Continue projects in South Africa, Zimbabwe and Botswana.
Mining charter
New five-year social and labour plan engagements being submitted to DMR due by June 2013. Full external assurance planned.
Our people
Increase black females and people with disabilities in employment. Increase black females in management and technical positions. Continue to ensure that all PPCs CSI spend is in line with our REAL philosophy. Continue projects in South Africa, Zimbabwe and Botswana.
Communities
35
Section
Socio-economic development
Progress
Good progress made on two projects while an additional project in Dwaalboom is in the development phase; see page 62. PPC Ntsika Fund has now invested R59 million in six black-owned businesses. PPCachieved 100% for enterprise development on DTIs BBBEE scorecard. 88% or R3,5 billion (2011: R3,2 billion), up from 79% in 2011. For 2012, we met mining charter targets, except for contributions by multinationals.
Target 2013
Five-year social and labour plans for all ten PPC sites will be submitted to DMR by June 2013 and new projects identified. Continue developing and mentoring viable blackowned businesses that have benefited from PPC Ntsika Funds investment.
Enterprise development
Preferential procurement
Ensure all targets are met in terms of DTI and DMR preferential procurement. Project team established to improve contributions by multinationals we do business with. Zero fatalities, LTIFR = 0 (long-term target). LTIFR = <0,18. Roll out PPC Alive! throughout organisation. Maintain ASPASA and OHSAS certifications. Continue to encourage employees to know their status. Maintain convenient and free access to confidential counselling and testing. Sites to remain SANS 16001 certified.
Zero fatalities, LTIFR = 0 (long-term target). LTIFR = <0,25 (2012). Implement rejuvenated safety interventions. Maintain ASPASA and OHSAS certifications. Aim to have 100% of PPC employees know their HIV status.
Zero fatalities. 2012 LTIFR = 0,23. Engagement and road map for PPC Alive! completed. Maintained.
36
PPC Ltd
Section
Progress
A new supplier checklist has been adopted for collection of relevant information.
Target 2013
Revise green procurement policy and strategy. Improve supplier awareness through third-party audit programme. Finalise group contract for waste management and fuel supply. Energy management systems to be rolled out to all PPC cement and lime operations by December 2013.
Environment
Focus on group contracts to improve environmental performance throughout value chain. Implementation of efficiency programmes that contribute to planned savings. Energy management systems are being implemented across the group. Investigate carbon emission inventory systems to manage data and reporting.
Targeted specific service providers, eg waste management services and fuel suppliers. De Hoek was selected as apilot operation and successfully implemented in2012.
Significant improvements made to our data collection and reporting systems. Initiated investigations into commercial systems to manage environmental data. See sustainability reporting.
Continue with assurance on scope 1 and 2 CO2 emissions. Implement IT virtualisation project at Montague Gardens. Group water reduction targets to be established.
Continue to improve.
Montague Gardens and Mooiplaas implementations completed. Although we were unable to establish site-specific water targets, significant savings have been realised through improved monitoring systems. Refer to section on upgrade projects.
Operations continue to improve water monitoring systems by improving the accuracy and resolution of consumption data. Support and monitor implementation of improvement projects to deliver environmental benefits for South African and international projects and operations.
37
Notes Revenue Paid to suppliers for materials and services Value added BBBEE IFRS 2 charges Exceptional items Income from investments^ Total wealth created Wealth distribution: Salaries, wages and other benefits Providers of capital Finance costs Dividends Ordinary dividends Dividends paid to external BBBEE trusts by consolidated SPVs Government Reinvested in the group to maintain and develop operations Depreciation and amortisation Retained profit/(loss) Deferred taxation 1, 4
2011 Rm 6826 (3696) 3130 (11) (4) 43 3158 972 1229 353 876 871 5 382 575 436 (6) 145 3158 3087 2211 1016
2011 Rm
2010 Rm 6807 (3396) 3411 (10) (32) 47 3416 916 1447 385 1062 1056 6 518 535 368 56 111 3416 3257 2086 1028
2010 Rm
4.
^ ~ @
ncludes interest received, dividend income and share of associate's retained profit. I In respect of pension funds, retirement annuities, provident funds, medical aid and insurance. Includes restructuring costs of Rnil (2011: R31 million; 2010: Rnil).
38
PPC Ltd
Measure
Documentary proof of receipt from DMR
Progress
Employment equity and social and labour plans submitted
Reporting
Ownership
26%
26%
Second phase of PPCs BBBEE transaction increases black ownership of South African operations to effective 26% inline with mining charter requirements. R23,2 million in dividends paid under 2008 BBBEE transaction Company housing is provided at most remote locations. PPC also promotes home ownership by facilitating opportunities for employees to secure housing loans Only Lime Acres has a hostel, which is currently planned for upgrading
Conversion and upgrading of hostels to attain occupancy rate of one person per room
100%
100%
Procurement spend from BEE entity Capital goods Services Consumable goods Multinational suppliers contribution to social fund Annual spend on procurement from multinational suppliers 40% 70% 50% 0,5% of procurement value
In 2012, 88% (R3,5 billion) of PPCs discretionary spending was directed to BEE companies: 23% 61% 43% For 2012, we met mining charter targets, except for contributions by multinationals. A project team has been established to implement this 60% 25% 53% 71% 85%
Employment equity
Top management (board) Senior management (exco) Middle management Junior management Core skills
* Due to the nature of cement manufacture, PPCs empowerment credentials are measured against both the Mining Charter scorecard andthe DTIs codes of good practice. PPC reports on both of these in this section.
39
Discription
Develop requisite skills, including support for South Africa-based R&D initiatives intended to develop solutions in exploration, mining, processing, technology efficiency (energy and water use in mining), beneficiation, environmental conservation and rehabilitation Conduct ethnographic community consultative and collaborative processes to delineate community-needs analysis
Measure
HRD expenditure as percentage of total annual payroll (*excl mandatory skills development levy)
Progress
4,9%* spent on skills development 100% of R&D expenditure directed at South Africa-based businesses
28 projects in 12 communities in six provinces at various stages of implementation 14 handed over to communities. To date, R38 million of planned R60million spent on approved projects All plants have approved EMPs
Improvement of industrys environmental management Improvement of industrys mine health and safety performance
Implementation of approved EMPs Implementation of tripartite action plan on health and safety
100%
100%
At September 2012, five sites had completed training for safety representatives. All others are on track to complete this by December 2012 100% of samples are processed in South African facilities
Use of South Africabased research facilities for analysing samples across mining value chain Contribution towards beneficiation (effective from 2012)
100%
Beneficiation
Added production volume contributory to local value addition beyond the baseline
No detail on how to measure butraw limestone is beneficiated into cement and lime products in South Africa Aggregates are fully beneficiated in South Africa
40
PPC Ltd
PPCs broad-based black economic empowerment status as at September 2012 was audited and verified by rating agency Empowerlogic in November 2012. In terms of the DTI codes of good practice, PPC is a level 2 BBBEE contributor with a procurement recognition level 2 (this enables our customers to claim back 156% of their spending with our group for their own preferential procurement points).
* Due to the nature of cement manufacture, PPCs empowerment credentials are measured against both the Mining Charter scorecard andthe DTIs codes of good practice. PPC reports on both of these in this section.
Human resource development Reporting template Year: 2012 Description Develop requisite skills, including support for South Africa-based R&D initiatives intended to develop solutions in mining, processing and exploration technology efficiency (energy and water use in mining), beneficiation, environmental conservation and rehabilitation Measures HRD expenditure as percentage of total annual payroll (excluding mandatory skills development levy) Category Learnerships and bursaries (of core and critical skills) Artisans ABET training (levelI, II, III, IV andNQF1) Other training initiatives (school support and post-matric programmes) Support for SA-based R&D initiatives A M 31 6 16 F 4 10 6 C M 26 2 10 I F 1 0 3 M 2 0 0 F 1 0 0 W M 25 0 7 F 2 0 0 Total 92 18 42
241
25
15
296
41
enterprise development
the South African economy depends on building small businesses
Case study
The community of Soweto now has access to quality cement on its doorstep after the launch of the PPC Cement Express Outlet pilot project to ten local entrepreneurs. The project, in partnership with Mobile Payment Corporation (MPC) and First National Bank (FNB), aims to empower entrepreneurs by offering them the opportunity to start their own cement outlets. These express outlets are mobile business solutions for small, micro and medium enterprises (SMMEs) that are cost effective and secure. In terms of PPCs corporate social investment (CSI) model, each beneficiary received a start-up package of a PPC-branded container; a pallet of 40 bags of Surebuild cement; a training programme on PPC cement products, training on supply chain management processes, and methods to sustain their businesses; as well as a toll-free number to ensure ordering and dispatch efficiencies. All ten beneficiaries liaise directly with PPC with no intermediary, which becomes a cost benefit to them.
42
PPC Ltd
After PPC identified a gap in the retail sector where emerging SMMEs were struggling to expand their businesses, we opted to empower people and address long-term social needs by starting cement supply outlets, giving emerging entrepreneurs the opportunity to participate in the formal economy. Playing an active role in contributing towards job creation and infrastructure development is core to the way we conduct business. The business owners went through an intense screening process and were selected on several criteria: they needed to have an existing operating business, business acumen in operating an SMME, location and space. The partners are enthusiastic about this initiative as it supports the sustainable empowerment required in South Africa, at a time when unemployment is at its highest. We believe this initiative will provide the emerging market with first-world banking facilities and infrastructure to operate a small business optimally, in turn leading to job creation. FNB will open a bank account in the name of the entrepreneur, which will be used to order and pay for stock via a mobile phone. The solution integrates directly into PPC systems and
provides the entrepreneur with an acknowledgement of the order and payment being made. Since the launch of the first container units, there has been positive feedback from the pilot group and significant interest from potential PPC Express partners. By year end, the roll-out of PPC Express outlets had been extended to other areas of Gauteng and PPC is currently looking at launching outlets in the Western Cape and KwaZulu-Natal.
43
operations review
Cement
2012 Revenue (Rm) EBITDA (Rm) EBITDA margin (%) Operating profit (Rm) Operating margin (%) Assets (Rm) 6 246 2 087 33,4 1 682 26,9 6 153 2011 5 814 1 942 33,4 1 551 26,7 5 768 % 7 7 8 6,6 in the Western Cape. The final quarter of our financial year proved particularly challenging as labour unrest and heavy rains reduced sales. For the full financial year, our South African cement sales were down 1% (2011: -4%). The first encouraging signs of demand improving in the Western Cape were evident in the last quarter of the review period. Imported cement, which is not subject to import duties and is excluded from national statistics, accounted for an estimated 6% of national demand. The bulk of imports continues to originate from Pakistan and enters through the port of Durban. Inland markets remain protected by virtue of transport distances and associated logistics costs. In the 2012 national budget speech, the finance minister highlighted that over the medium-term expenditure period, R845 billion was approved and budgeted for infrastructure plans. Despite this, gross fixed capital formation as a proportion of GDP at 19% is still off the 23% reached in 2008 and well below the benchmark 25% level widely believed to accelerate per-capita incomes in developing nations. Although the deceleration in investments into residential buildings is slowing, household debt to disposable income remains high. It is therefore unlikely that the mortgage market will revive dramatically, given that record low interest rates have failed to materially boost demand for residential buildings. Research indicates that growing demand in the retail sector is being driven by informal residential building. While South African households may well be wary of accessing new mortgages, an emerging trend highlights
3
South Africa
2
Demand As illustrated below, we are experiencing the typical cyclical nature of the cement industry. Demand for locally manufactured cement for the nine months* from October 2011 to June 2012 has grown 6,9%. The primary driver for this increase has been buoyant demand through the retail channel which has offset disappointing demand from infrastructure projects and new middle to highincome residential housing. However our view is that, for our 2012 financial year, local cement demand will probably have grown by low single digits due to a slowing local economy in the final quarter of the financial year. This weakness in the economy reflects deceleration in the global economy coupled with strike action in the latter part of the year. Heavy rains in September and October 2012 in a number of provinces would also have reduced demand for cement. PPCs South African cement sales declined by 1% for the financial year. Positive performances in Port Elizabeth, Gauteng and inland provinces was offset by weak demand SA cement demand and GDP (45-year history)
400 350 300 250 200 150 100 50 0 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GDP SA cement sales * Due to Competition Commission requirements issued in March 2012, all South African cement sales statistics can only be disseminated as a national, quarterly figure delayed by three months.
44
PPC Ltd
the use of unsecured lending for building and renovations purposes. Since 2008, new issues of unsecured loans have grown at a sizeable 35% per annum. At June 2012, the National Credit Regulator stated that R25,8 billion was extended to households as unsecured credit in that quarter alone. Around a quarter of this is said to be used for building and renovations purposes. It is, however, unlikely that growth in unsecured lending will continue at these elevated levels. In South Africa, over 15 million people are social grant beneficiaries. Beyond consumptive expenditure and education costs, grant recipients spend a sizeable portion of their funds on upgrading their dwellings, primarily in rural and peri-urban areas. The February 2011 national budget reveals that over the medium term to 2014/15, expenditure on social grants will grow at 8%, which should outpace inflation and provide real growth. This growth in excess of inflation is likely to continue to support cement sales.
11
Despite this, our strategy to remain focused on premium products launched in 2011 allowed PPC to achieve a weighted average increase of 5% in selling prices. Customers Retailers remain the countrys largest customer segment, drawing more than 60% of all cement sold. Other customer segments include cement blenders, concrete product manufacturers, ready-mix concrete suppliers and construction companies. We have continued to focus on improving our customer service, building on last years initiatives. One of our key successes in this area has been the introduction of key account managers for our major retail customers. Products Our decision to move both OPC and Surebuild up a strength class to 52.5 and 42.5MPa respectively has been successful as it allowed the PPC brand to stay out of the highly competitive 32.5MPa class (which has over 20competing brands in Gauteng alone), while allowing our cement to be represented in this class through blenders and a retail private label. Using PPCs enhanced products, customers benefit from using 15% less cement to make concrete of the same strength. At the end of the review period, PPC launched a new product, SureRoad, specifically for road construction. SureRoad, a CEM II product, is manufactured by adding an extender or blend of extenders (fly ash, blast-furnace slag, limestone). The CEM II Portland-composite cements are ideal for constructing cement-stabilised substrate layers for roads. Our performance testing has shown excellent results with a range of soil types and different road classes.
Given the unprotected strikes and labour unrest that affected the South African economy in the last few months of the review period, the outlook for economic growth has dimmed. This suggests demand for cement in 2013 is likely to be modest. Selling prices Selling prices in the South African market remained under pressure for the review period. This is primarily due to the low utilisation (around 75%) of local manufacturing capacity and, in KwaZulu-Natal, the impact of imported cement.
Customer segment Retailers Blenders Concrete product manufacturers Ready-mix concrete suppliers Contractors
Description Hardware stores, general dealers, building material suppliers Produces a general-purpose product mainly for the retail market by adding fly ash and/or slag to pure cement Manufacturers of roof tiles, concrete bricks, lintels, garden ornaments, etc Concrete manufactured to meet a specific strength and delivered to site by truck Civil or building contractors who buy cement directly from PPC. Usually medium and large contractors
Key product Surebuild, Botcem, Unicem, Obras, PMC OPC OPC OPC Surebuild, OPC (concrete), SureRoad
45
10
Operations Despite escalating input prices, we have contained the rand per ton increase in cost of production to 3% for our cement operations in South Africa and Botswana. The year-on-year increase includes real price increases in electricity and fuel, partly offset by savings in maintenance, refractories and salaries. Key drivers in this cost containment included reconfiguring Port Elizabeth into a single-product facility in September 2011, and improved rail service from Transnet. The latter allowed us to produce more clinker with our efficient Dwaalboom kilns and transfer it for grinding at Hercules and Jupiter.
Retail demand remains the biggest cement market segment in Zimbabwe as consumers construct and expand their private households. The construction market is showing signs of increased activity with the construction of Tokwe Mukorsi dam and a road from Plumtree to Mutare. The dam will be second only to Kariba Dam in Zimbabwe while the Plumtree/Mutare road project consists of rehabilitating 820km and erecting nine new toll gates. Operations In the first half of the year, production was interrupted for six weeks after the failure of a transformer. This resulted in PPC Zimbabwe importing clinker from the South African operations, incurring high unplanned costs. Better performance was recorded in the second half, with only minor disruptions. A number of upgrades are under way to ensure that the Bulawayo and Colleen Bawn factories can operate at maximum capacity in anticipation of continued growth in demand for cement. Key risks to the upside scenario include any unrest ahead of elections in 2013 and the risk of foreign investment into the country slowing or reversing due to the implementation of the governments indigenisation programme.
7
11
The recommissioning of De Hoek kiln 6 in July 2012 after a R280 million upgrade will further improve efficiencies and reduce costs at our Western Cape operations. Plans to modernise the Riebeeck operation progressed during the year with PPC being awarded a positive record of decision for the environmental impact assessment.
Botswana market
2
Cement demand in Botswana has been disappointing, with industry volumes declining by an estimated 10% due mainly to the slowdown in government infrastructure projects. For the review period, PPCs operations in Botswana recorded a decline in cement sales, due to declines in the construction sector marked by the end of several major infrastructure projects, including Jwaneng Cut 8, Moropule B and Dikgatlhong dam and aggressive competitor pricing in the retail market. The retail sector, however, remains the most dominant market segment in Botswana. The Botswana government has released some sizeable projects which should start in the 2013 financial year these include road and water infrastructure as well as housing projects.
Mozambique
After a ten-year product presence, PPC has made great progress in establishing a trading operation inMozambique. The local sales office and warehouse in Maputo is now fully functional and resourced. The trading environment in Mozambique has proved challenging due to aggressive competitor pricing, resulting in lower cement sales for the period. The influx of imported product has resulted in prices falling by over 30% over the last 18 months. Again, an improved performance from Transnet in South Africa has reduced the cost of supplying product into Mozambique. Together with the introduction of a PPCbranded 32.5MPa cement, Obras, this has allowed us to maintain a successful presence. At this stage, most of our sales are destined for the retail segment, primarily in southern Mozambique. We anticipate that sales to the construction sector will improve in the new financial year after the start of a number of major construction projects in the country.
3
Zimbabwe
Market A third consecutive year of growth in cement demand was recorded by the industry. Sales volumes from our Zimbabwean operations continued their positive momentum into the 2012 financial year. Volume growth and achieved price increases lifted revenues by 20%, leading to enhanced operating and EBITDA margins. However, energy costs continue to rise; on a per-unit basis, diesel costs were up by 40% while electricity costs rose 25%.
46
PPC Ltd
Lime
2012 Revenue (Rm) EBITDA (Rm) EBITDA margin (%) Operating profit (Rm) Operating margin (%) Assets (Rm) 838 188 22,5 151 18,1 467 2011 772 154 19,9 122 15,8 440 % 8,8 22,7 24,8 6,1 PPC Limes performance improved markedly from the previous financial year. Although revenues grew by a similar amount, 8,8% versus 8,6% in 2011, operating profit showed strong growth of 24,8% after declining by 23,4% in the previous financial year. The EBITDA margin improved to 22,5% (2011: 19,9%) and the operating profit margin increased to 17,9% (2011: 15,8%). Despite volumes coming under pressure, PPC Limes solid performance reflects an improved customer mix, contractual price increases, greater efficiencies and a reduction achieved with the contractual coal price. Both PPC Limes mining and plant operations performed well during the year, with kiln heat consumption improving by 4%. Volumes are unlikely to improve significantly in the new financial year as the steel industry is battling with operational issues as well as decreased demand locally and internationally for iron and steel. Labour unrest in this industry is a major concern; disruptions weaken an industry that is already grappling with subdued demand. PPC Lime continues to export burnt product to Zambia and the Democratic Republic of the Congo, where it is used in the copper-processing industry. This region now accounts for about 10% of burnt product sales, with good growth potential.
PPC Limes products are used in a number of key local industries such as steel and alloys, food manufacturing, gold, uranium and copper mining as well as water purification. The greatest use of lime is in steel manufacturing, where it serves as a flux to remove impurities. Lime used in the steel industry must meet exacting physical and chemical properties, which PPC Lime is able to manufacture. Lime is also essential in producing non-ferrous metals. For example, lime is used to beneficiate copper ore, to make alumina and magnesia for use in aluminium and magnesium manufacture, to extract uranium, and to recover gold and silver.
Aggregates
2012 Revenue (Rm) EBITDA (Rm) EBITDA margin (%) Operating profit (Rm) Operating margin (%) Assets (Rm) 299 56 18,7 37 12,3 285 2011 271 56 20,7 43 15,9 210 % 10,3 0 (14,0) 1,0 projects planned within a competitive radius of our operations. Our aggregates division in Botswana had a challenging year. Sales volumes at our Kgale quarry were 30% below the prior period due to lower demand and operational disruptions. Lower sales also reflect the completion of a number of road projects (Tlokweng, Molepolole and Boatle), major construction projects (Debswana Cut 8) and private developments in the city centre. Plant utilisation was hampered by two serious breakdowns of the Kgale tertiary crusher, limiting the availability of concrete stone and sand products. The integration of Quarries of Botswana is continuing smoothly. Sales of 232 000 tonnes were achieved; this was below our expectations and largely due to subdued government and private infrastructure investment, particularly in the Selebi Phikwe and Francistown regions.
Sales volumes for our South African operations rose as market conditions improved. Road construction projects and improved agricultural lime sales contributed to higher demand. Some key projects that we supplied include the R55 road construction work in the Centurion/Pretoria area and waste water works in the same vicinity. Although selling prices remained highly competitive, increased production assisted in diluting fixed costs and improving margins. Variable costs per tonne were well controlled, ending only 3,8% up for the year. Laezonia has improved plant efficiency after issues affecting the primary crusher were resolved during the period. For 2013, volumes may come under pressure as there are only a few known infrastructure
47
People review
Lowlights
14 LTIs in review period
PPC Alive! initiative launched to entrench zeroharm culture in PPC Significant reduction in group LTIFR and LTIs with 10 sites recording LTI-free year
Occupational safety
PPC recorded no fatalities in the review period (2011: one fatality). The group lost-time injury frequency rate (LTIFR) decreased from 0,34 in 2011 to 0,23 at 30 September 2012; its lowest level in several years. We recorded 14 lost-time injuries compared to 19in the previous year. Our operations in Mozambique and the newly acquired Quarries of Botswana are now included in our reporting.
6 5 4
LTIs
3 0,2 2 1 0
Oct 08 Sept 09 Oct 09 Sept 10 Months Oct 10 Sept 11 Oct 11 Sept 12
0,1 0
LTIs LTIFR
48
PPC Ltd
LTIFR
During the period, PPC joined the Chamber of Mines with the dual purpose of obtaining information and adding value towards compliance with various elements of the mining charter. As a chamber member, PPC is now a signatory to the tripartite agreement between government, labour and the mining companies to significantly improve safety performance. The key objective of this agreement is that Every mine worker returns home unharmed every day. To achieve this milestone, several critical elements have been identified. Strengthening the industrys culture of health and safety by implementing the culture transformation framework Enhancing awareness among our people by training health and safety representatives Lessons from pockets of excellence and research adopting leading practices from the mining occupational safety and health (MOSH) learning hub and research findings from the Mine Health and Safety Council. Four adoption teams are driving these processes and, where applicable, PPC has representatives on these teams: Falls of ground Transportation and machinery Noise Dust. All sites completed their mining charter scorecards and these were submitted to regional Department of Mineral Resources offices before the required date at end May2012. Service providers have been sourced to train safety representatives on our operating sites to the standard required (MQA accredited, minimum two weeks) by the tripartite agreement. In terms of the mining charter scorecard, PPC must train 4% or 112 team members by the end of December 2012. At financial year end, five sites had completed their training and all others are on track to complete this by December 2012. We initiated a thorough review of our safety performance at the end of 2011 (see page 48), and the first phase of
this journey has been completed. The review process involved numerous activities including: Enlisting and educating company leadership at various levels completed April 2012 Assessing the PPC culture against the principles and conditions of organisations that sustainably have high reliability safety performance completed April 2012 Developing an enduring safety culture improvement strategy PPC Alive! road map finalised Engaging all relevant stakeholders and implementing culture-based safety projects each PPC site has its own site road map and training is under way. While the findings of this review identified areas for improvement, which are being addressed, it also highlighted a strong culture of community and caring that drives a genuine concern for peoples safety in PPC. Notably, the mining charter now includes specific milestones that require organisations to review their culture transformation and establish relevant leading practices PPC was recognised by the Chamber of Mines for proactively addressing our safety culture. Our journey towards a zero-harm culture has been named PPC Alive! Based on the findings of the assessment process, we have established four critical drivers that need to be addressed to sustainably achieve zero harm in the next four years: Mindful leadership Enhanced strategic foresight in safety Effective safety structures and governance Improved individual and organisational competence insafety. Another significant aspect of our PPC Alive! journey towards zero harm was recognising that each site has its own characteristics and that a blanket approach could not resolve site issues. Accordingly, every PPC site has had site-specific feedback on its safety culture and has developed a site-specific road map to address local customs and behaviours. Key personnel at each site are undergoing training to assist with finalising these plans.
Fatality frequency reduced to zero in August 2012. Target derived from individual site targets based on hours worked and specific performance criteria. 3 LTIFR includes one for Mozambique. Mozambique was not included in target setting as operation was only set up subsequent to the process. * A moving window of hours worked and lost-time injuries occurring.
49
Commendably, several sites and departments recorded zero LTIs in the review period: Montague Gardens, George, DeHoek, Riebeeck, Port Elizabeth, Jupiter, Sandton (including Group Laboratory Services), Sales and Marketing, Botswana andBulawayo. PPC group days off due to lost-time injuries October 2011 to September 2012 South Africa Botswana Mozambique Zimbabwe Group totals Males 486 32 4 31 553 Females 0 0 0 0 0 Total per region 486 32 4 31 553
All manufacturing sites continued to be certified according to the OHSAS 18001 standard.
initiatives are conducted by the state and treatment is also supplied by state clinics. Various sites are involved with community initiatives on HIV and Aids. At Lime Acres, clinic sisters assist with ongoing training for home-based care givers and awareness programmes for truck drivers visiting the site. They have also helped set up vegetable gardens for healthy nutrition. In May 2012, PPC provided Aids education for children at the uMephi Daleview Foster Care Home in Despatch. All sites continue to train peer educators who work successfully in the factories and communities. Some employees at Group Laboratory Services and Jupiter continued the health and wellness peer educator training that started in 2010 to prepare them for obtaining competence certificates in unit standard: 11449. All these initiatives are part of the ongoing management of HIV/Aids in PPC factories and communities. Medical surveillance PPCs workforce undergoes annual medical examinations; including audiometric screening, lung function and vision testing, and primary healthcare examinations. No cases of silicosis were reported during the year. Reporting requirements for noise-induced hearing loss (NIHL) have changed: If the hearing loss is between 5% and 10%, it is reported to the Department of Mineral Resources (DMR) If hearing loss is greater than 10%, it must be reported to the DMR and Workmans Compensation Commissioner (WCC) Six team members across our operations, with previously identified NIHL had this confirmed during their medical examinations and were reported to the applicableauthorities.
Occupational health
Under the mining charter scorecard, PPC reports on HIV/Aids and tuberculosis programmes, which are run by clinics at group factories. Tuberculosis (TB) Although TB is not common at PPC sites, it is treated as required according to national protocols for the disease. Two cases were diagnosed at Riebeeck and reported to the authorities during the year. One case at Lime Acres was investigated and reported to the DMR. HIV and Aids HIV and Aids are well managed in the group in accordance with SANS 16001:2007. We maintained our focus on access to antiretroviral medicines and other assistance to ensure continued employee wellness. HIV/Aids awareness and treatment programmes are well established and prevalence levels are low in South Africa but higher at operations in Botswana (where the government provides treatment) and Zimbabwe (PPC provides counselling and antiretroviral drugs). Clinics provide voluntary counselling and testing (VCT) as part of annual medical examinations if employees elect. Some sites arranged for VCT days as part of ongoing management of the disease. Slurry has engaged the services of an NGO to conduct VCT monthly. Generally, at all sites, current uptake is low as most PPC team members have undergone VCT a number of times in recent years; they know their status and therefore some do not attend further testing initiatives. Treatment support structures are in place for those living with HIV/Aids. In Botswana, these
50
PPC Ltd
All factory clinics have been audited. Results from the external audit at these clinics confirmed that occupational health infrastructure and the competency of occupational health personnel were of extremely high standard. Absenteeism rate per region (%)* Region Botswana South Africa Total Female Male Total 2012 2011 2012 2011 2012 2011 1,2 2,5 2,4 2,0 1,8 1,8 1,1 2,4 2,3 1,5 1,9 1,9 1,1 2,4 2,3 1,6 1,9 1,9
Section 54 notices These notices require a mine to halt operations in the identified section or activity, and to formulate a plan of action acceptable to the regional chief inspector before operations may resume. December 2011 Lime Acres: inspection of haul trucks and explosives-issuing procedure February 2012 Dwaalboom: occupational hygienists certificate unavailable at time of visit September 2012 Beestekraal: expired first aiders certificates and first aid boxes not checked September 2012 Lime Acres: no written procedure in place for making a quarry workplace safe after examination; no written procedure in place in the event of lightning being detected. Section 55 notices Three notices were received. These require a mine to formulate a plan of action acceptable to the regional chief inspector to comply with an identified deviation. These findings were cleared without significant interruption to operations and lessons were distributed throughout the business.
Compliance
For the review period, PPC received seven notices (2011: six) from the DMR on health and safety issues. Encouragingly, there has been a notable decrease in notices issued at our sites since February 2012. This reflects both the benefits of our proactive safety initiatives and an improvement in the relationship between PPC mines and the authorities. While there have been many visits, they have been more of an advisory nature.
51
Workforce
Highlights
8
Employees participate in the bulk of the second BBBEE ownership transaction (R730million) The 2012 PPC workplace skills plan approved by the Mining Qualifications Authority and all available grants recovered PPCs Womens Forum consolidated on its launch in the previous year Representation of women in the workforce improved from 18,5% in 2011 to 20% in 2012 Improvement suggestions generated by our peopleresulted in cost savings of over R16 million for the year
Lowlights
A strike at Lime Acres as a result of a wage dispute in November 2011
During PPCs long history of success there has always been a hard-working, committed and dedicated team of employees. The review period was no different as our peoples determination continued to drive the companys progress in creating a better life for all.
ownership of PPCs South African operations. This transaction will place a further 4,4% of the companys ownership in the hands of South African employees. A part of this transaction, the PPC Masakhane Employee Share Trust was created to allow all eligible employees to become shareholders of PPC.
Empowering people
To ensure sustainable business performance in a challenging environment, the Kambuku value-creation model is continually reviewed and strengthened. Our Kambuku philosophy aims to establish a strong foundation to continuously grow and empower employees in support of PPCs REAL (relevant, empowered, actualised and lasting) transformation philosophy. As part of this transformation philosophy and approach, PPC proudly announced its second-phase BBBEE transaction that will result in an effective 26% black
52
PPC Ltd
Inspiring climate Fairness, order, rules of the game Communication, information, influence Management style Recognition Code of conduct Effective HR administration Safety and environment Transformation
Learning for growth Career development Skills development Succession planning NQF alignment
CREATE ENERGY
STRUCTURE/HARNESS ENERGY
DIRECT/FOCUS ENERGY
RELEASE ENERGY/REWARD
Invocoms: structured, team-based discussions takeplace daily for teams at shop-floor level, weekly at sectional supervisory level, and monthly at departmental level. There are some 365 active and effective Invocoms operating across all levels and all functions of PPC. Importantly, the group average for Invocom team forums has been maintained at a globally competitive 4,5 out of a standard of 5,0 and organisational benchmark standards at 3,3 out of 4,0. Through these discussions, we communicate elements of PPCs vision and objectives, evaluate team performance, analyse obstacles affecting performance, develop appropriate action plans, and ensure targets are achieved. Behavioural safety, educational topics and development are also discussed in Invocoms. Plant- and site-level Invocoms are designed to spread communication both upwards and downwards through the company to: Facilitate transparent problem resolution and employee participation Regularly encourage teams to stretch outputs and targets by reviewing and assessing team performance Capture innovations and suggestions to enhance cost savings, process improvement, efficiency and safety Communicate positive recognition Capture best practices on a centralised database Manage the PPC climate through the adherence of team members to the company code of conduct.
Performance improvement Organisational/individual Role and function clarity Accountability scorecards, targets and action plans Performance measurement Performance review: Recognition Action plans for underperformance
53
aligned to current and future business strategies and needs. The aim is to build leadership and a pipeline of specialist strengths and to anticipate rapidly changing market conditions. Leadership conversations form an integral part of the data collection and feedback process. A summary of high-potential individuals is presented at talent management review sessions to top, senior and middle management. Succession planning forms an integral part of the talent management strategy by ensuring competent people are continuously available to assume key positions in the company. In line with this, succession-planning discussions are held biannually at group and site levels, and development plans include mentorship and coaching. The strategy is closely aligned to PPCs employment equity targets, and places specific emphasis on key technical skills an industry-wide challenge.
Recognition
A critical part of our Kambuku process is recognising PPC team members who go beyond the call of duty. The pinnacle of our recognition programme is the annual PPC CEO Achiever Awards a gala event for our identified top performers, PPCs executive team and senior managers.
Delisa literally thinks and lives the cheaper, better, faster method even with new machinery like the recently commissioned clinker grate cooler where he saved the company a considerable amount by reducing the number of unplanned and costly stops from a massive 45 per month to only one.
Top management (CEO) Senior management Professional Skilled workers Semi-skilled Learners Total permanent Learners Fixed-term contracts Total fixed-term contracts Grand total
Male 0 1 17 10 1 0 29 0 0
Male 1 0 3 8 0 0 12 0 1
16 218
42 995
58 1 213
8 100
22 394
30 494
1 24
0 29
1 53
0 129
8 388
8 517
25 471
72 1 806
97 2 277
0 2
1 13
98 2 292
54
PPC Ltd
Balanced workforce
PPCs total workforce for 2012 is 3 085 compared to 3 087 in 2011. Workforce numbers for South Africa reduced by 102 due to the moratorium on employment and voluntary retrenchment process at our PE plant. Workforce numbers for Botswana increased by 85 mainly due to the acquisition of Quarries of Botswana. Workforce numbers for Zimbabwe increased by eight after including attachment students who were not reported in the past. We also now have seven employees in Mozambique. Workforce analysis: Botswana BW nationals Professional Skilled workers Semi-skilled Total permanent Fixed-term contractors Total FTC Grand total Female 1 20 12 33 2 2 35 Male 7 69 91 167 0 0 167 SA nationals Male 3 0 0 3 0 0 3 Total 11 89 103 203 2 2 205
Workforce analysis: Zimbabwe Senior management Professional Skilled workers Semi-skilled Unskilled Learners Total Fixed-term contractors Grand total Female 0 5 30 4 4 6 49 5 54 Male 1 37 111 210 122 37 518 9 527 Total 1 42 141 214 126 43 567 14 581
Workforce demographics PPCs workforce represents a well-balanced combination of generations. Young and upcoming talent represents over 20% of the workforce whereas the age group normally associated with greater career stability represents 56%. The risk of losing intellectual capital and institutional experience is also manageable with only 21% of our employees aged 50 and above. Employees for South Africa and Botswana per gender, age group and race Female African Coloured Indian % % % 49,8 5,5 44,7 57,0 6,0 37,0 62,5 4,2 33,3 Male African Coloured Indian % % % 54,0 26,0 20,0 65,0 10,2 24,9 87,1 3,2 9,7 Grand total % 56,1 21,8 22,1
Age groups 30 to 50 years old Over 50 years old Under 30 years old
As indicated in previous reports, PPC is systematically increasing the range of data being externally assured in terms of GRI. PPC has not yet included Zimbabwe or Mozambique in its scope of externally assured data. Workforce turnover The annual turnover rate* for 2012 is 14% in South Africa, 10,7% in Botswana and 12,4% in Zimbabwe. The average length of service in PPC in South Africa is around 12 years with a number of employees holding 25, 30 and even 40-year awards. We have recorded a pleasing decline in the labour turnover rate in South Africa compared to 2011. This reflects a number of factors such as the slowdown in the economy and its effect on labour supply and demand, the improvement in our value contribution to employees in the areas of learning and development, the implementation of a talent management review process and the announcement of our second BBBEE transaction. Due to operational requirements 46 employees took voluntary separation packages. This is included in the South African turnover number.
*Annual turnover rate calculated as per the GRI. Integrated annual report 2012
55
Total turnover (1 October to 30 September against total workforce at year end) Region Botswana South Africa Age group 30 50 years Over 50 years Under 30 years Total Female % 9,5 14,3 0,0 8,6 Male % 11,1 6,8 22,2 11,2 Total % 10,9 7,8 16,0 10,7 Female % 10,6 12,2 18,3 13,5 Male % 11,3 16,7 19,0 14,1 Total % 11,2 16,2 18,8 14,0
Total 2012 % 11,1 15,4 18,7 13,7 2011 % 12,1 17,5 24,4 16,1
Permanent employee turnover (1 October to 30 September against permanent workforce at year end) Region Botswana South Africa Total Age group 30 to 50 years Over 50 years Under 30 years Total Female % 0,0 0,0 0,0 0,0 Male % 7,6 7,1 0,0 6,7 Total % 7,6 6,1 0,0 5,6 Female % 9,9 8,2 6,2 8,5 Male % 9,4 13,4 13,4 11,1 Total % 9,6 12,9 11,0 10,6 2012 % 9,2 12,2 10,5 10,2 2011 % 9,2 13.3 11,6 10,5
The turnover of permanent employees is less than total workforce turnover as the influence of fixed-term contractors isremoved. Due to operational requirements 46 employees took voluntary separation packages. The South African turnover number excluding this is 8,4%. New employee turnover (1 October to 30 September against total workforce at year end)* Region Botswana South Africa Age group 30 to 50 years Over 50 years Under 30 years Total Female % 4,8 14,3 0,0 5,7 Male % 5,6 2,3 5,6 4,7 Total % 5,4 3,9 4,0 4,9 Female % 0,0 2,0 6,5 2,5 Male % 0,8 1,4 3,0 1,4 Total % 0,6 1,4 4,2 1,6
Total 2012 % 1,1 1,7 4,2 1,9 2011 % 2,0 2,6 10,4 4,1
Labour relations The percentage of employees recognised as members of a trade union is 31% in South Africa, 64% in Botswana and 74% in Zimbabwe. PPC supports freedom of association and relevant agreements are in place between the company and various unions.
In November 2011 there was a strike at our Lime Acres operation, following a deadlock in the annual wage negotiation process. The strike lasted for 12 days and was called off when a wage agreement was reached between the company and the employees unions. PPC Limes contingency plans were effective and there was no disruption to customers.
56
PPC Ltd
People development
The principle of learning for growth and our Kambuku philosophy underpins the sustainability of PPC. We believe in enriching our team members by ensuring they have the right skills, knowledge and competencies to reach their full potential. Training programmes are designed to produce substantial benefits for both PPC and its employees. Average hours of training per category On average, a PPC employee in South Africa spends 112,5hours or 14 working days on training per annum. Average training hours* Top management (CEO)** Senior management Professional Skilled worker Semi-skilled Learner*** Grand total 0,0 17,6 58,2 87,4 76,7 1 548,6 112,6
* Excludes average hours of training conducted via study assistance as per GRI reporting. ** Current CEO was due for retirement in May 2012 therefore no training identified or scheduled for 2012. *** Includes eight permanent employees and 42 previously unemployed individuals on learnership contracts.
Investment in training (RSA only) (Rm) African Indian Male 14,7 Female 4,4 Male 1,2 Female 0,7
White
Total
11,7
42,3
In 2012, PPC spent R42,3 million or 5,7% of its payroll (ie leviable amount) on skills development for employees (2011:R34,5million or 5,0%). Around 76% of this was spent on previously disadvantaged employees. Through the PPC academies, we are sustaining skills and remaining globally competitive. PPC sales and marketing academy The PPC sales and marketing academy was launched in 2007. Since then, 28 students have joined the academy, and 18have graduated with NQF level 4 qualifications in customer management. There are currently five students on the third level of this programme, who are expected to graduate in 2012. PPC operations academy The PPC operations academy has turned out many successful graduates since its inception in 2007. We have a total of 40learners currently in the programme. The operations academy offers the further education and training certificate in carbonate materials manufacturing process on NQF level 4. PPC is the only cement manufacturing company offering this programme, which is accredited by the Mining Qualifications Authority (MQA) and registered with the South African Qualifications Authority (SAQA). PPC mining academy To date 41 learners have joined the PPC mining academy, and we currently have 25 learners at various stages of completing the NQF level 3 qualification of rock-breaking: opencast quarrying qualification which is aligned with new explosives regulations. Ten qualified in the review period. PPC bridging programme The accredited bridging skills programme was launched to help learners to obtain the relevant entry requirements for the academies programmes. To date, 155 learners have joined the programme. PPC leadership academy The PPC leadership academys second highly successful intake of 22 senior managers finished their final block in October2012. The aim of this academy is to develop the ideal balance of leadership and management skills to produce globally competitive leaders who can meet our business requirements.
Integrated annual report 2012
57
PPC academies African Programme Sales and marketing Operations Mining Bridging skill programme Leadership M 10 37 16 56 5 F 2 3 1 2 2 M 2 0 0 0 4 Indian F 0 0 0 0 3 Coloured M 4 26 12 71 4 F 1 0 1 1 0 M 4 22 11 21 18 White F 5 0 0 4 2 Total Current Graduated 28 88 41 155 38 5 40 25 29 22 18 30 10 114 13
Any discrepancies between the sum of current and graduated and total column reflect a change of role or employees who have left the company.
PPC technical skills academy (TSA) The PPC technical skills academy provides training and trade tests as a decentralised trade test centre and is fully accredited by Merseta (sector education and training authority for manufacturing, engineering and related services). TSA again retained its MQA accreditation and ISO 9001:2008 certification during the review period, and recently upgraded its facilities in various workshops to accommodate new requirements in training and trade testing learners. Since 2002, TSA has successfully trained 174 engineering learners. African Indian Programme Electrical Fitter and turner Plater welder Diesel mechanic Total M 5 4 3 4 16 F 4 1 1 0 6 M 0 0 0 0 0 F 0 0 0 0 0
Coloured M 1 3 4 2 10 F 1 0 0 1 2 M 2 4 0 1 7
Graduate development programme As the PPC graduate development programme enters its fifth year, it has taken in 30 graduates and 12 have been successfully integrated into the business. In 2013, nine new graduates will enter the programme, eight of whom are African women in the chemical and mining engineering fields. This is in line with PPCs focus on women in mining. Significantly, in 2012, all the candidates enrolled were drawn from our Dinaledi programme further proof that our development programmes are making a difference. African Indian Coloured White M Graduate development programme 12 F 12 M 0 F 0 M 2 F 1 M 2 F 2 Total Current Graduated 30 11 12
Any discrepancies between the sum of current and graduated and total column reflect a change of role or employees who have left the company.
Dinaledi bursary programme future engineers At a cost of R1,7 million, PPC is currently supporting 18 students completing various engineering disciplines from five universities (Johannesburg, Wits, Pretoria, Cape Town and Stellenbosch). Six students (all African females) will join the graduate development programme in 2013. Entrenching customer service During the year, PPC launched a major customer service training initiative, known as PPC School of Magic building people, delivering customer value and creating magic. The intention is to develop people with relevant skills, build custodians of the PPC brand, and develop a culture across PPC that is customer focused. We understand that customer service depends on our people, so delivering customer value implicitly supports PPCs sustainability and a better life for all our stakeholders.
58
PPC Ltd
Activities for the year included: Five two-day customer relationship management programmes for middle and senior management spanning South Africa, Botswana and Zimbabwe A strategy programme focused on developing a value proposition for key customers in retail, concrete product manufacturers (wet and dry), blenders and ready-mix. In the year ahead, activities will focus on expanding customer relationship management programmes to our sites to embed the group strategy across the PPC team, and identifying additional skills development opportunities for our sales and marketing teams.
59
Social review
Empowered ownership
Highlights
Second phase of PPCs BBBEE transaction increases black ownership of South African operations to effective 26% in line with mining charter requirements R9 million approved for PPC trust projects since inception R23,2 million in dividends paid under 2008 BBBEE transaction P64 500 paid to Botswana share scheme members PPCs level 2 BBBEE rating maintained PPC is firmly committed to advancing black economic empowerment in South Africa, given the importance of meaningful mainstream economic participation by black people to meet the countrys socio-economic objectives. After our R2,7 billion initial BBBEE transaction four years ago, we introduced the R1,1 billion second phase in the review period (see case study). Around 3,5million black beneficiaries in broad-based shareholder groupings, including employees and communities, now hold an effective 26% of PPCs South African operations. The group now meets the mining charter requirements for black ownership. See page 52 for further details.
During the period, we continued to engage with national and provincial government departments to align our broad-based socio-economic transformation objectives with those of government. Progress is guided by our REAL (relevant, empowering, actualised and lasting) transformation philosophy, the heart of all our social performance initiatives.
60
PPC Ltd
PPC Construction Industry Associations Trust (Reg No IT 1040/08) Launched in January 2009, this trusts long-term objective is to deliver strategic projects that contribute to the socioeconomic upliftment of disadvantaged individuals and communities across South Africa. In 2012, the trustees approved an additional R2 million (2011: R3,7 million) to seven beneficiary construction associations. At year end, R1 million had been spent on various projects aimed at capacitating the development of association members. Since 2009, over 2500 members from different beneficiary associations have participated in accredited training programmes. Grant in FY12 R400000
Association Khuthaza
Activities 143 trained in practical building skills 65 trained in construction management 202 trained on personal and professional development 40 trained on an enterprise development programme 50 trained on a supplier development programme 45 trained on solar installation and maintenance 5 trained on business portfolio management
R400 000
South African Women in Construction Mellon Housing Habitat for Humanity Johannesburg Construction Forum Ikhwezi Welfare Organisation
R300 000 R300 000 R250 000 R250 000 R600 000
15 trained on costing and tendering skills Practical skills training and enterprise development Leadership training, coaching and mentoring 65 trained in project finance and financial management Training and new pottery machines Renovations and replacement of wheelchairs PPC Botswana share scheme PPC Botswana has contributed to our success for many years as an integral part of the PPC group. In keeping with the PPC Kambuku philosophy of Creating a better life for all and the Botswana operations Its up to us slogan, we introduced a staff scheme (the Sesigo scheme) for permanent team members of PPC Botswana and Kgale Quarries in the prior year. The Sesigo scheme allows team members to share in the profits and growth of PPC by receiving the same dividends as PPC shares listed on the JSE in South Africa. As Botswanas requirements for localisation (or BEE) have not yet been defined, we could not award employees in Botswana shares in PPC Botswana (Pty) Limited in their own names. Until this legislation is finalised, Botswana employees will enjoy the same financial benefits as their South African colleagues. To date 106 employee beneficiaries on the scheme have received P64 500 in cash payments.
61
Socio-economic development
Highlights
R38 million of a planned R60 million (over five years) spent on local economic development projects approved by the Department of Mineral Resources 88% of total procurement representing R3,5 billion spent with BBBEE suppliers After applications to convert PPCs old-order mineral rights were submitted to the Department of Mineral Resources (DMR) in 2008, five-year social and labour plans were submitted for approval early in 2009. These plans embody PPCs commitment to accelerating its broad-based socio-economic transformation process. While mining licences move through the process of being converted, PPC continues to engage with the department and to implement SLPs. In September 2012, following the second phase of our empowerment transaction (page 52), PPC received an approved report from DMR recommending that outstanding applications due to empowerment issues be finalised. Six of our ten mining rights have been converted. All sites requiring social and labour plans in terms of the mining charter have current DMR approved plans in place. In our ten social and labour plans submitted to the DMR, we committed to investing R60million over five years on local economic development (LED) projects in our communities. This involves 28 projects in 12communities, partnering with municipalities in six provinces across the country. To date, PPC has spent over R38 million of the planned total, with 14 projects completed and handed over to communities. These social and labour plan projects are in addition to the groups own corporate social investment (CSI) projects. PPC continues to engage with all its communities in identifying and implementing sustainable projects. PPCs current community investment areas are focused on infrastructure development, poverty alleviation and jobcreation projects. The social and labour plan projects implemented during the year are summarised:
62
PPC Ltd
Enterprise development
The PPC Ntsika Fund (Pty) Limited was established in 2008 as a formal vehicle for financial support and active mentorship to black-owned enterprises. To date the Ntsika board has invested R59 million in seven black-owned businesses. Given the entrepreneurial nature of these initiatives, and the current economic environment, it is not unexpected that some of these initiatives are struggling. PPC is, however, focused on ensuring long-term success where possible through financial support and mentorship. The investment portfolio comprises: Afripack (Pty) Limited Afripack manufactures and supplies flexible packaging solutions to the industrial and fast-moving consumer goods (FMCG) markets. To date, Ntsika has invested R41,8 million to expand the business base. The Ntsika board initially invested R2,1 million for the purchase and development of 23 plots into residential housing units in Soweto. Due to a number of legal and operational difficulties, only six stands were developed and only four were sold. Consequently, the Ntsika loan has been impaired by R1,3 million. Rhulanani is a ready-mix concrete business operating in Lephalale, Limpopo. Ntsika has invested R5,9 million to supplement the owners investment of R3,9 million. Due to a number of operational challenges, this project is under review by Ntsika. Ntsika invested R5,75 million into this business. Olegra collects used oil from surrounding mining operations and operates a filling station, fitment centre and guest house in Lime Acres village. Used oil is sold to PPC Lime as environmentally friendly fuel for its kilns. Loan repayments of R2,7 million have been made and the project is in line to repay its loan in full. First Gas is currently distributing liquid petroleum (LP) gas, diesel and paraffin from a site in Edenvale, Gauteng. Ntsika has invested R2,9 million in this business. In 2011, First Gas was awarded a contract to distribute welding consumables in Gauteng but this was subsequently cancelled, affecting the companys profitability. Ntsika has invested R1,4 million in Modise which supplies cut-to-size laminated chipboard and accessories to the residential housing market in Soshanguve. The company is currently trading profitably and loan repayments were made in the review period. Loerie acquired the property of a rehabilitated lime quarry in Port Elizabeth, previously operated by PPC, and converted the buildings into a 100-bed residential facility. Ntsika has invested R2,4 million in this project to date.
Preferential procurement
The total measured spend for the year was R3,97 billion of which 88% or R3,5 billion (2011: R3,2 billion) was BEErecognised spend in terms of the DTI Codes of Good Practice. This is a considerable improvement on last years performance and we are meeting the DTI target of 70%. In terms of preferential spend against the mining charter, we met all targets, except for multinational contributions. Mining charter target 2014 % 40 70 50
2013 target % 30 60 40
2012 target % 20 50 25
2012 actual % 23 61 43
2011 actual % 24 47 58
63
The two small businesses baking and sewing continue to make enough income to be self-supporting. Two ladies have opened their own mini bakeries; one in the inner city and the other in Fine Town. The sewing team continues to grow its customer base. They made pyjamas and linen for the Mafikeng paediatric ward in support of the Thandi Modise Trust, and PPC contributed R50 000 towards equipment for the ward. The six best performers from the sewing class each received a second-hand sewing machine as an incentive from the centre. The Love of Christ Ministries (TLC) TLC is a home for abandoned babies that needed to become financially independent to ensure its survival. PPCs investment in TLCs poultry farming initiatives over the past three years is now producing good results. The combination of an anchor customer and competitive prices has resulted in this small business selling around 500 chickens each month. This provides revenue to cover some of TLCs operating costs. The plan is to upgrade the facility in the next financial year, enabling TLC to double production and, thus, its annual income. Forest Town School Rise Bakery At this Johannesburg school for young people with special educational needs, the bakery continues to prosper with plans to expand by a further six training stations. Rise Bakery is currently supplying the Johannesburg Zoo with fresh goods each week. PPC continues to support: Khulumakahle FTHK national deaf educational tour Twilight Theatre Organisation an upcoming theatre production house in Alexandra Field Band Foundation (Cullinan, Danielskuil, Kimberley and Grahamstown) Thandulwazi Maths and Science Academy Habitat for Humanity Youth Build in Orange Farm in partnership with the University of Johannesburg Alexander Clinic invested in a customer care office Uvuyo Trading climate change diaries Khula Community Development Project vehicle for the Eastern Cape initiative against trafficking and exploitation Afrika Tikkun contribution of over 2 300 bags of cement De Hoek continues its programme on portable skills development for the community Lime Acres again invested in Rally to Read and supported schools in the area Childrens Eco Training School 1000 bags of cement towards construction of a school hall QuadPara Association bursary fund and wheelchair fund for quadriplegics and paraplegics Hospice.
Job creation 4,4% 51,4% Education Community training 7,0% 12,4% Infrastructure 4,4% Welfare Arts and culture 12,9% Other (HIV/AIDS, 7,5% drug rehabilitation, sport)
Projects we have supported for at least three years are beginning to bear fruit, a true reflection of the PPC REAL (relevant, empowering, actualised and lasting) philosophy. We highlight some of these long-running projects as well as new initiatives. 100% of PPC sites are covered by a formal social plan. Time for Change Time for Change beneficiaries are primarily young people from the streets and former sex workers who have been trained in baking and sewing skills to secure employment.
64
PPC Ltd
New projects Career initiatives for grades 9 to 12 44000 students sponsored to attend My Future, My Career programme PPC Career day PPC staff hosted a career day for over 500 students from Mamelodi Breadbin interactive technology for Forest Town School children with disabilities now have an innovative digital platform for use as a knowledge repository Brick-making project PPC provided a container and 500 bags of cement to support rural women of Gombani village in Mutale (Vhembe district municipality), Limpopo. This gave birth to the PPC cement express outlets (see case study below). Grassroots soccer This project focuses on educating, inspiring and mobilising the youth and communities to stop the spread of HIV/Aids using soccer as a tool. Following the success of the PPC Zimbabwe grassroots soccer initiative, PPC South Africa is piloting a similar project at a school in Alexandra, Gauteng.
PPC Botswana PPC Botswanas cement and aggregates divisions partnered with the Lady Khama Charity Trust to raise funds for NGOs supported by the trust. PPC Botswana has also been involved with the King of the Hill Race and sponsors the PPC Botswana Youth Choir which toured the USA in 2012. The Botswana Sports Council has recognised PPC Botswana for its support in sporting activities. PPC Zimbabwe Zimbabwe continued work on the Lady Rodwell maternity home in 2012, completing the water reticulation system, installing sanitaryware and a new geyser. The group also upgraded toilets for the primary school. Some $50 000 was invested in constructing classrooms in a new secondary school at Fairbridge Umguza Rural District. Other initiatives included investing in: Brick-making project at Ekuphumuleni Geriatric Nursing Home Cricket skills development for children aged 6 to 12 The City Mayors Christmas Cheer Fund for the underprivileged National TB Day commemoration Computers for the National Museum Matabeleland education improvement project
65
Environmental review
Highlights
Integrated demand management projects at Dwaalboom and Slurry were successfully implemented with a total saving of R2,8 million from March to September The Grassridge wind farm project was granted preferred-bidder status in round two of the Department of Energys renewable energy procurement programme. This project is linked with a 21MW private wind farm for PPC The Western Cape Department of Environmental Affairs and Development Planning issued PPC a positive environmental authorisation for the proposed upgrade of the Riebeeck facility Successful upgrade of the De Hoek facility, resulting in significant improvements to dust emission Environmental authorisation granted to Hercules for Sonex milling circuit in August 2012
11
14
Lowlights
12
PPC Riebeeck faced challenges in meeting permitted sulphur dioxide limits due to its plant technology and composition of the orebody. PPC completed extensive investigations and has approached the authorities to request an interim relaxation of limits pending the upgrade of this facility As Slurry kiln 7 dust emissions remain a challenge, we are discussing options with the authorities; an impact study was requested to determine the impact to sensitive receptors A number of environment and water use-related applications submitted to government are still not approved. We continue to engage with officials to ensure successful outcomes PPC Zimbabwe operations received fines for environmental non-compliances Delays and legal battles between the South African Tyre Recycling Process Company and Recycling and Development Initiative of South Africa on management plans for the waste tyre industry have delayed our plans to implement tyre co-processing
Accordingly, we are focusing on the following initiatives: Group-wide energy management systems Grassridge wind farm Alternative fuels programmes Technology upgrades to our production processes. Commitment to certified environmental management systems: systems approach All our South African cement operations are certified ISO 14001 and our aggregates operations are accredited by the Aggregate and Sand Producer Association of South Africa (ASPASA). These systems are used to continually improve our process and set targets to ensure compliance to legislations and other requirements to which we subscribe. No major non-conformances were recorded for the year. Our aggregates operations systems are maintained through ASPASA About Face RSA 2012 with scores for 2012 as follows: PPC Mooiplaas 97,9% PPC Laezonia 95,9% Kgale 95,9% To track and maintain environmental compliance, we have developed environmental legal registers that are linked to the environmental management system. These are audited every two years.
66
PPC Ltd
Issue
Challenging and changing environmental framework
Response strategy
PPC is committed to environmental legal compliance and ensures that all proposed legislation promotes sustainable business practices.
Status
Mature environmental management systems at all sites. All cement operations in South Africa are ISO14001 certified. Actively shape environmental legislation through industry lobbying and engagement between dedicated PPC experts and competent authorities. PPC continues to engage extensively on legislation with the potential to affect the business. Current engagements have focused on air quality legislation at national and local level, declared priority areas, contaminated land issues, waste issues including definitions and the national waste management strategy,etc. PPC is replacing old technology at its Riebeeck plant in the Western Cape with modern energy-efficient and environmentally compliant equipment. The environmental impact assessment process has been completed with a positive record of decision issued by the provincial Department of Environmental Affairs and Development Planning in September 2012. The Grassridge project was granted preferred-bidder status in round two of the renewable energy procurement programme. This is PPCs private wind farm, a project where 60MW will be generated into the renewable energy programme of the DoE and 21MW will be generated for the private use of PPC.
Compliance Energy (electricity, coal, diesel) The cement industry requires significant thermal and electrical energy. The price, quality, sustainable supply and optimal use of both energy types are key to successful operation.
Operational
PPC has an energy committee directing projects to improve electrical and thermal efficiency and to evaluate alternative forms of thermal and electrical energy supply. These include burning waste materials instead of coal and purchasing wind-generated electricity.
67
Issue
Carbon footprint Due to the chemistry and energy requirements of the cement manufacturing process, significant quantities of carbon dioxide (CO2) are generated. The potential implementation of a carbon tax will have financial implications for the cement and lime industry.
Response strategy
PPC has committed to reducing CO2 emissions, with significant progress over the past decade. PPC will continue to improve energy and process efficiencies to reduce its CO2 emissions and carbon footprint.
Status
Continued focus on energy management and implementation of a wide spectrum of energy efficient projects. PPC is an active member of a number of industry and business technical and lobby groups regarding CO2 targets and potential taxation. As part of the 2012 budget speech, national treasury released a price guideline for carbon tax that could impact PPCs bottom line. PPC is actively engaging to mitigate the potential impact through various climate change committees.
Environment
PPC will also actively participate in industry/government consultative processes to ensure decision makers have a clear perspective on: feasible CO2 reduction targets how these should be implemented implications of any proposed CO2tax Implementing comprehensive water management programmes aligned to integrated water use licence commitments.
Water-use optimisation projects implemented at each site. A water management strategy is being developed to cover all operations as well as site-specific risks and opportunities. PPC participates in the Industry Water Task Team.
Partner with industries and academics on joint solutions to water management. Cleaner production Drive cleaner production opportunities in our cement, lime and aggregate businesses Substituting fossil fuel and natural resources with products from other industries, for example fly ash from the power sector.
The Association of Cementitious Material Producers (ACMP) is representing the cement industry in further negotiations with related parties, with particular focus on the removal of regulatory barriers. Following a presentation by the ACMP to the parliamentary portfolio committee, the DEA is reviewing international legislative frameworks.
68
PPC Ltd
in PPC. Although there have been delays with the completion of the sub-metering, due to IT integration requirements, this project will be completed during the 2013 financial year. PPC is now rolling this out to four more operations and plans to have energy management systems at all operations by the end of September 2013. Alternative fuels and resources Recent developments around competing tyre industry waste management plans have resulted in more disappointing delays to our planned co-processing of tyres at Hercules, Dwaalboom and De Hoek. The South African Tyre Recycling Project (SATRP) had been driving this initiative until now, but suffered various delays due to legislative problems and poor governance. In the past two years, a new initiative from REDISA (Recycling and Development Initiative of South Africa) gained prominence and was recently approved by the Department of Environmental Affairs. Litigation between the parties has delayed implementation of these plans. At present, PPC does not expect to implement co-processing of tyres in the next financial year as the REDISA plan will require a significantly longer period to gain momentum. The positive environmental and economic effect of the processing of the industrial waste, carbonaceous spent pot liner, at our Dwaalboom plant will be increased as the Department of Economic Development, Environment and Tourism has now approved the processing of this in Kiln 2. Direct and indirect energy (SA operations) Total direct energy consumption for 2012 is 20 572 terajoules compared to 22331 terajoules in 2011, some 8% lower. Total indirect energy (electricity) consumption increased 2% from 2 174 terajoules in 2011 to 2 216 terajoules in 2012. The reduction in direct energy consumption is a result of prioritising the running of our most efficient plant, however the effects of our change in product strategy can be seen in the increase in specific indirect energy consumption. Change in specific direct energy consumption for SA cement operations 2012 % % change GJ/ton (per ton clinker) % change GJ/ton (per ton cement) (5,93) (3,28) 2011 % (1,31) 0,71 2010
Base Base
69
Change in specific indirect energy consumption for SAcement operations 2012 % % change GJ/ton (clinker) % change GJ/ton (cement) 10,85 13,97 2011 % 3,22 5,33 2010 Base Base
consumption was decreased by optimising production planning, the impact of our product strategy is evident in an overall increase in carbon footprint per tonne of product. Total scope 1 and scope 2 emissions for clinker, lime and dolomite for FY12 were 1167kg CO2/tonne. This is flat on 2011 emission levels and 1,7% up on 2010 levels. PPCs carbon footprint for cement decreased by 0,7% to 886kgCO2/tonne of cement produced. This decrease is significant in view of the higher clinker content in our products, however, our cement footprint remains 1,9% up on 2010 levels. Total Cement, lime and dolomite Aggregates Botswana Zimbabwe 5 031 440 22 896 2 865 498 494 Direct 4 437 330 4 789 44 424 445 Indirect 594 110 18 107 2 821 74 049
Carbon footprint PPC uses the World Business Council for Sustainable Development, Cement Sustainability Initiatives CO2 emissions inventory protocol (version 2) to calculate our carbon footprint. PPCs carbon footprint is based on both scope 1 (direct) and scope 2 (indirect) emissions. PPCs carbon footprint per tonne of cement, lime and dolomite has increased by 0,4%, reflecting an increase in indirect energy consumption. Although direct energy
Total CO2 emitted (in absolute tonnes) 2012 for PPC including aggregates, Zimbabwe and Botswana South Africa Cement, lime and dolomite Aggregates Total CO2e (tonne) 5 031 440 19 881 Botswana Cement 2 865 Aggregates 3 524 Zimbabwe Cement 498 494
PPC has again participated in the Carbon Disclosure Project (CDP). This project collects climate data from top-performing organisations worldwide and makes this information available to investors to support responsible investment practices.
Carbon footprint: PPC SA cement operations
1 250 1 200 1 150 1 100 1 050 1 000 950 900 850 800 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
70
PPC Ltd
1 150 1 100 1 050 1 000 950 900 850 800 750 700 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
49,5%
50,2%
36,3%
2011
2012
* Calcination is the process where very high temperatures are used during the clinker manufacturing process to dissociate CO2 from the limestone (Calcium Carbonate).
Prioritisation of the use of kiln 2 at PPC Riebeeck and increased production and dust suppression requirements at PPC Dwaalboom have contributed around 88000m3 to annual municipal consumption volumes.
71
Water management strategy We continue to improve water monitoring systems through the accuracy and resolution of consumption data. Significant progress has been made throughout the South African operations, but we were unable to establish site-specific water targets. However, we believe improved understanding of these complex systems, established through improved monitoring systems, has resulted in significant savings at selected sites. The focus for the new financial year is to consolidate the efforts of the South African operations into a group-wide strategy where we can focus on optimisation as well as savings based on site-specific risks and opportunities. Stormwater management
Point source emission levels in 2012 Dust Tonnes emitted pa Cement 2012 922 2011 583 2010 435 2012 9 589 NOx 2011 8 434 2010 7 685 2012 891 SO2 2011 871 2010 692
72
PPC Ltd
Waste management
PPC received waste licences for all its operations, but due to a significant number of administrative errors in the issued licences, we have been unable to fully implement the licences at a number of our operations. We are working closely with the Department of Environmental Affairs to resolve remaining issues and hope to obtain amended licences in the first half of the new financial year. Implementation of the licences has been supported by our robust and mature ISO 14001 systems. Although the cement industry is not unduly waste intensive, PPC continues to focus on programmes that apply the waste hierarchy and reduce the amount of waste disposed to both municipal and onsite landfills. Asignificant portion of general waste generated by PPCs SA operations, approximately one third, has been recycled or reused (see pie chart General waste). At PPC De Hoek, separation-at-source programmes have been implemented in the staff village with great success, prolonging the life of the existing De Hoek landfill.
General waste
Hazardous waste
Mine rehabilitation
PPC recognises its responsibility for proactive land and resource stewardship. Most PPC mines are in environments ranging from wheat and game farming to peri-urban areas. The company owns surface rights to all areas where deposits are being mined and land not required for current operations is leased to farmers for agriculture. Rehabilitation is done concurrently with mining operations and rehabilitated land is leased in exchange for farming land required for ongoing mining.
PPCs concurrent rehabilitation reconciliation as at September 2011* Rehabilitation at September 2011 Beestekraal Dwaalboom Grassridge % % % 80 86 100 Slurry % 99 Riebeeck % 99 De Hoek % 94 Laezonia % 92 Mooiplaas % 88 PPC % 96
*As the annual mining survey is conducted aerially at year end, rehabilitation data always lags by one year.
73
The project has delivered major environmental benefits, including: Reduced dust emissions from the grate clinker cooler electrostatic precipitator, raw mill/kiln bag filter and coal mill bag filter. All stacks are sampled to verify dust emission levels, with results showing all stacks are well below new kiln minimum emission standards for 30mg/Nm3, as prescribed by the Department of Environmental Affairs Reduced noise levels for the grate clinker cooler compared to the previous satellite coolers Improved thermal efficiency from the indirect firing system. The project was implemented at a cost of R280million. Slurry rail and road offloading tippler PPC Slurry recently commissioned the upgrade of its rail and road offloading tippler to reduce generation of fugitive dust when a rail wagon is tipped upside down to offload its contents or a road truck is discharging cargo by tipping. The upgrade included partial enclosure of the tippler facility while allowing for direct tipping of road vehicles into the tippler facility. The facility was equipped with an atomising water dust suppression system to prevent fugitive dust emission and fall-out dust in the rail siding area. The upgrade cost R5,4 million and has significantly reduced dust emission. The project has also produced a number of improvements in operational efficiencies.
Upgrade projects
The final Riebeeck kiln 3 application was submitted to the Western Cape Department of Environmental Affairs and Development Planning, with PPC receiving a positive environmental authorisation. De Hoek kiln 6 The DHK6 upgrade project has been successfully completed. This entailed installing a grate cooler and indirect firing system for kiln 6, coupled with an ESP-tobag house conversion for the main stack.
74
PPC Ltd
Slurry finishing mill 4 PPC initiated the upgrade of Slurrys finishing mill 4 in June 2011, which will have numerous environmental benefits. The project scope includes the following upgrades: Energy efficient motors (IE2) Two high-efficiency separators (energy efficiency) Replacing the existing electrostatic precipitator (ESP) with a state-of-the-art bag filter with emission guarantees of below 30mg/Nm3. The project will address both environmental improvements and plant reliability, at a cost of around R100million and is scheduled for completion by end-March 2013. Hercules road delivery of raw materials The PPC Hercules raw material stores were upgraded to allow for delivery by road and tipping of raw materials, including coal, slag and synthetic gypsum, directly into the store. The positive impacts associated with the project are: Improved materials handling Reduced risk of stormwater and soil contamination Reduced fugitive dust as a result of materials handling. The project was implemented at a cost of R12,5million. Hercules Sonex filter PPC obtained an environmental authorisation to replace the Hercules Sonex finishing mill ESP with a bag filter. The project will be implemented by mid-December 2012 and guarantee dust emissions of less than 30mg/Nm3 at a cost of R9million. Lime Acres LK6 The PPC Lime Acres kiln 6 main filter is scheduled for upgrade mid-2013. The upgrade will be undertaken at a cost of R31million and will guarantee emissions of below minimum emission standards of 30mg/Nm3.
Stakeholder engagement PPC continues to empower communities in which we operate with environmental management knowledge. Supported by regular environmental stakeholder meetings at all sites, our continued commitment to transparent and effective communication and awareness is showing definite benefits, for example: PPC Hercules has received considerable support from the community due to our response to issues raised during stakeholder forum meetings. At Jupiter, the environmental stakeholder forum has developed into a forum for all industries in the Heriotdale industrial area, creating a platform to collaborate on local environmental challenges. Engagement with the authorities has been extended by opening internal technology courses to representatives directly involved with PPC operations. This enhanced knowledge has assisted significantly during engagement. Legal compliance The Zimbabwe operations paid environmental fines equivalent to R34600 for: Unlined landfill in contravention of statutes and polluting beyond allowed limits. PPC Zimbabwe has submitted a report with recommendations to the Environmental Management Agency (EMA) for approval. Budgeting has started for a project to address non-compliance in the next financial year Non-permitted emission points at PPC Zimbabwe. An application has been submitted to EMA to address these emission points. Further investigations are under way to address stack designs. PPC Lime Acres was recently audited by the Green Scorpions, who recommended that PPC Lime Acres apply for a variation of its waste licence to ensure that all conditions are appropriate for the operation. A variation application has subsequently been submitted to authorities.
75
In this section of the report, we explain what PPC has achieved in implementing best practices and acknowledge that we are continually moving towards better governance practices. Our corporate governance report focuses on the following key governance aspects: Ethical leadership: characterised by the values of responsibility, accountability, fairness and transparency and based on moral duties that find expression in the concept of ubuntu. Responsible leaders direct company strategies and operations to achieve sustainable economic, social and environmental performance. Sustainability: the primary moral and economic imperative of the modern business. It is the most important source of both opportunity and risk for businesses. Nature, society and business are interconnected in complex ways that should be understood by decision-makers. Most importantly, current incremental changes towards sustainability are not sufficient we need a fundamental shift in the way companies and directors act and organise themselves.
Creating a better life for all stakeholders Everyones contribution creates value. All stakeholders share in the value and success that we create Customer focused Our customers are the reason for our existence and all our efforts are focused on building good relationships, understanding and meeting their needs. Phuti Semenya, the chief audit executive, is responsible for reporting on the companys ethics performance to the social and ethics committee of the board. The company has provided an independent, confidential and safe system by which employees or other parties can report unethical or risky behaviour via PPC ethics lines, detailed below: PPC Ethics Lines South Africa Deloitte & Touche Tip-Offs Anonymous Telephone 0800 00 67 05 Free fax 0800 00 77 88 Address PPC Ethics Line Free post c/o Tip-Offs Anonymous Free Post DN298 Umhlanga Rocks 4320 South Africa Email ppc@ethics-line.com International +27 31 508 6493 Botswana Deloitte & Touche Telephone 0800 60 06 44 Facsimile 0800 00 77 88 Email ppc@ethics-line.com Zimbabwe Deloitte & Touche Telephone 0800 4100 Facsimile +263 91 8240 921 Address The Call Centre Free post PO Box HG 883 Highlands Harare Zimbabwe Email reportszw@tip-offs.com
Ethical leadership
The following values are central to the way we do business at PPC and they form the basis on which site-specific codes of conduct have been developed: Integrity is non-negotiable: We meet our commitments We do what we say We are honest and obey the law Great place to work: We work in teams. Everyone has an important role and we want to create a non-discriminatory, safe and healthy work environment We respect the dignity of every individual we engage with Excellence in all we do: We are professional and do things properly We at PPC set the standard. We lead. We set challenging goals and are performance-driven We are flexible and agile and we seek to continuously improve. Yesterdays stretch becomes todays standard Legitimacy We are seen by our stakeholders as caring and adding value. We are seen as long-term contributors and not short-term takers We care for the environment and the communities in which we operate We comply with OECD guidelines in the fight against corruption. We will not make facilitation payments to individuals or parties related to them but we care for and contribute to the communities in which we operate
76
PPC Ltd
Board of directors
The PPC board is the focal point and custodian of corporate governance in the group. More detail on members of the board appears on pages 6 and 7. Board members are expected to act in the best interest of the company and the group company secretary maintains a register of directors interests as required by law. In line with its annual meeting plan, the board meets at least six times a year and has adopted a board charter that includes a statement of governance principles that guide the activities of the board. This charter also details the roles of the chairman of the board and chief executive officer (CEO). According to the charter, the roles and responsibilities of the board are to: Act as the focal point and custodian of corporate governance by conducting its relationship with management, shareholders and other stakeholders of the company according to sound corporate governance principles Appreciate that strategy, risk, performance and sustainability are inseparable and give effect to this by: Contributing to and approving the strategy Satisfying itself that the strategy and business plans do not give rise to risks that have not been thoroughly assessed by management
Identifying key performance and risk areas Ensuring the strategy will result in sustainable outcomes Considering sustainability as a business opportunity that guides strategy formulation Provide effective leadership on an ethical foundation Ensure the company is, and is seen to be, a responsible corporate citizen by considering the financial aspects of its business and the impact business operations have on the environment and society in which it operates Ensure the companys ethics are managed effectively Ensure the company has an effective and independent audit committee Be accountable for the governance of risk Monitor information technology governance Ensure the company complies with applicable laws and considers adherence to non-binding rules and standards Ensure there is an effective risk-based internal audit Appreciate that stakeholders perceptions affect the companys reputation Ensure the integrity of the companys integrated report Act in the best interests of the company by ensuring that individual directors: Adhere to legal standards of conduct Are permitted to take independent advice related to their duties following an agreed procedure Disclose real or perceived conflicts to the board and deal with them accordingly Deal in securities only in accordance with the policy adopted by the board Initiate business-rescue proceedings as soon as the company is financially distressed Elect a chairman of the board who is an independent non-executive director Appoint and evaluate the performance of the CEO.
In fulfilling its duty, the full board annually selects a chairman at its meeting in February. The board also appoints the CEO from time to time. The current chairman of the board is Bheki Sibiya. At its meeting in October 2012, the nominations committee confirmed his status as an independent non-executive director. The role of the chairman has been formalised in the board charter and requires that he should: Lead the board, not the company Safeguard the integrity of corporate governance processes and actions as determined collectively by the board Be the link between the board and management, particularly theCEO Be the main link between the board, shareholders and the public at large.
77
The duties of the chairman are viewed in the broadest terms. All the tasks of the chairman fall into one of the categories above. Other core functions of the chairman include: Actively participating in selecting board members and overseeing a formal succession plan for the board and executive directors Ensuring new directors are properly inducted and that board evaluations and director appraisals are carried out Formulating, in conjunction with the board, an annual work plan for the board against agreed objectives and goals Ensuring all directors play a full and constructive role in the affairs of the company and taking a lead role in removing non-performing or unsuitable directors from the board Ensuring all relevant information and facts are timeously placed before the board to enable the directors to reach an informed decision. In line with best practice, the chairmans ability to add value and his performance against what is expected of his role and function were assessed in the second half of this financial year. The CEO and chief financial officer (CFO) are ex officio members of theboard. Ketso Gordhan has been appointed as the new CEO and will take on this responsibility from 1 January 2013. In the board charter, the board and the chairman recognise that the CEO leads the company and the management team, is responsible for day-to-day operations and is the principal spokesperson for the company, while the chairman leads the board. The framework for delegating authority is reviewed annually. The CEO provides regular reports during board meetings on progress in executing strategy against the formalised company scorecard. The performance of the CEO and his management team is evaluated annually by the remuneration committee and the outcome of this evaluation is the basis for salary increases, bonus payments and participation in share incentive schemes. The current CFO is Tryphosa Ramano and her experience and expertise are annually evaluated by the audit committee with the outcome reported to the board. The ultimate authority and responsibility for the company resides collectively in the full board of directors and not any one individual.
A copy of the board charter can be obtained from the company secretary.
Board composition
The nominations committee annually evaluates whether its size, diversity and demographics make the board effective. At year end, the board comprises a nonexecutive chairman, eight non-executive directors and five executive directors. At its meeting in October 2012, the nominations committee evaluated the independence of non-executive directors and concluded that the following directors are independent as defined in the King III code and the JSE Listings Requirements: Zibu Kganyago Andr Lamprecht Ntombi Langa-Royds Bridgette Modise Tim Ross Joe Shibambo Bheki Sibiya
Board composition
78
PPC Ltd
Non-executives
Women
10 8
3
6 4 2 0 07 08 09 10 11
12
0 07 08 09 10 11
12
The board has made notable progress on transformation and compliance with the code as reflected in the following graphs:
Black directors
10 8 6 4 2 0 07 08 09 10 11
12
Black executives White executives 60% 40%
79
Andr Lamprecht has been a member of the board since November 1997, but after rigorous review of his independence and performance by the nominations committee, it was concluded that he has maintained his independence. Directors are appointed through a formal process and the nominations committee assists in identifying suitable candidates to be proposed to shareholders. This process is detailed in the companys selection and appointment policy. The primary objective of the selection and appointment policy of the company is to provide a transparent framework and set standards for the selection and appointment of high calibre executive directors and non-executive directors with the capacity and ability to lead the company towards achieving sustainable value creation and long-term growth. The nominations committee has oversight over this policy.
A formal induction programme is established for new directors, and inexperienced directors are developed through training programmes. For continuing development, the company encourages directors to attend the professional development programmes of the Institute of Directors of South Africa. While no limitations are imposed by the board charter, or otherwise, on the number of other appointments directors can have, approval must be obtained from the chairman prior to accepting additional commitments that may affect the time directors can devote to the group. The board succession plan was reviewed by the nominations committee at its meeting on 15 October 2012. At the annual general meeting in January 2013, at least one-third of non-executive directors will retire by rotation. We refer to the notice of the AGM on page 142.
Attendance at scheduled meetings between 9 November 2011 and 12 November 2012 Risk and Social compli- Attendand ance ance ethics Nomco Remco 4/4 4/4 3/3 4/4 2/4 3/3 1/2 3/3 3/3 2/2 2/2 4/4 2/2 2/2 9/9 12/12 16/16 12/12 18/19 8/8 7/10 12/12 3/5 6/6
Non-executives ZJ Kganyago AJ Lamprecht NB Langa-Royds TDA Ross J Shibambo BL Sibiya MP Malungani Bridget Modise SJ Vilakazi* SK Mhlarhi** Executive members P Stuiver S Abdul Kader T Ramano P Esterhuysen S Helepi Independent Independent Independent Independent Independent Independent Independent
Board 5/5 5/5 5/5 5/5 4/5 5/5 4/5 5/5 1/2 3/3
AGM 1/1 1/1 1/1 1/1 1/1 1/1 1/1 1/1 1/1
Audit 3/3
1/2
3/4
1/1
* Retired from the board in March 2012. ** Joined the board in March 2012. Mr Helepi was not invited to all the remuneration committee meetings.
where appropriate, owners of securities in the company are properly administered in accordance with pertinent laws. Details on his qualifications and experience appear on page 8 of this report. The board has considered and satisfied itself on the competency, qualifications and experience of the company secretary.
80
PPC Ltd
He is responsible for compliance with the rules and listings requirements of the JSE Limited and the Zimbabwe Stock Exchange on which the companys securities are listed and administers the statutory requirements of the company and its subsidiaries in South Africa. The board has evaluated the company secretarys performance as part of the annual board evaluation. More details on the results appear below but the results indicated that whilst the board was satisfied with the meeting administration, the role of the board in strategy should be given more focus. To align with best practice and with the Listings Requirements regarding the armslength relationship between the company and the company secretary, his reporting line has been changed during the year and he now reports directly to the CEO. The company secretary is satisfied that he is able to effectively perform the role as the gatekeeper of good governance in the company and to carry out this role and responsibilities as company secretary.
The chief audit executive has submitted a report to the board on the effectiveness of controls and risk management, concluding that both were satisfactory. This report was tabled at the audit committee and board meetings in November 2012. He further confirmed that nothing has come to his attention to cause him to believe that PPCs system of internal control is not generally effective to sufficiently mitigate key risks; also that he was not aware of anything that would cause him to believe that the controls over financial processes do not provide a sound basis for preparing reliable financial statements.
Delegation
The board delegates certain functions to committees and management, without abdicating its own responsibilities. Delegation is formal and involves: Approved and documented terms of reference for each committee of the board Terms of reference are reviewed once a year Committees are appropriately constituted with due regard to the skills required The board has a framework for delegating authority to management.
Strategic planning
As a key performance area of the board, group strategy is mapped by the board in consultation with the executive committee of the company (Exco). The board appreciates the fact that strategy, risk, performance and sustainability are inseparable and annually reviews the strategy at its meeting in August/September.
Internal control
Reporting in the company is structured so that key issues are escalated through the management team ultimately to the board if appropriate.
Integrated annual report 2012
81
Board committees
The board has five standing committees through which it operates. Committees play an important role in enhancing good corporate governance, improving internal controls and therefore the sustainable performance of the company. The current board committees and their chairpersons are: Audit committee Tim Ross Risk and compliance committee Joe Shibambo Nominations committee Bheki Sibiya Remuneration committee Ntombi Langa-Royds Social and ethics committee Ntombi Langa-Royds. The chairpersons of these committees are independent non-executive directors. The demographic breakdown is shown below: Racial participation
The ad hoc deal committee established by the board has been appointed to assist in executing the companys expansion strategy with Peter Malungani as the chairperson. Although Peter is not an independent director, the board has appointed him based on his experience and skills and the fact that the committee would be convened on an ad hoc basis only. In the interest of free information flow and good oversight, full or summary minutes of all board committee meetings are included in document packs for board meetings. In addition, the chairpersons of the committees are required to present an annual report on their activities at the board meeting in November. Based on these reports and the minutes of the committees, their performance and conformance to terms of reference are annually evaluated by the board. At its meeting in November 2012, the board concluded that all committees had executed their responsibilities within the scope of their respective terms of reference in the 2012 financial year. Audit committee The current members of the audit committee are: Tim Ross (chairperson), Zibu Kganyago and Bridgette Modise. All members are independent non-executive directors in accordance with provisions of the code, the JSE listings requirements and the Companies Act 2008. The committee may obtain, at the companys expense, independent professional advice on any matters covered by its terms of reference. The committee was in place throughout the current financial year, and the external auditors and head of internal audit have direct access to its chairperson. Tim Ross has been chairperson of the committee since 2009. He was a partner with Deloitte for 36 years and retired in May 2008. Tim is a member of the South African Institute of Chartered Accountants. Members of the executive team, including the CFO and CEO, attend committee meetings by invitation. Similarly, external and internal auditors attend committee meetings by invitation and have no voting rights. The chairperson reports to the board on the activities and recommendations made by the committee. The head of internal audit reports to the chairperson of the audit committee and to the CFO on day-to-day matters.
Black White
72% 28%
Chairpersons by race
Black White
80% 20%
Chairpersons by gender
Male Female
60% 40%
Terms of reference The audit committee has adopted formal terms of reference that have been approved by the board of directors, and has executed its duties over the past financial year in accordance with these terms of reference. Among other issues, the committees terms of reference include the following responsibilities:
82
PPC Ltd
Financial statements The committee reviews the annual financial statements, interim and preliminary announcements, accompanying reports to shareholders and any other announcements on the companys results or other financial information to be made public, prior to submission and approval by the board. Integrated reporting The committee oversees integrated reporting, and in particular: Considers all factors and risks that may impact on the integrity of the integrated report, including factors that may predispose management to present a misleading picture, significant judgements and reporting decisions made, monitoring or enforcement actions by a regulatory body, any evidence that brings into question previously published information, forward-looking statements or information Reviews the annual financial statements and summarised integrated information Reviews the disclosure of sustainability issues in the integrated report to ensure this is reliable and does not conflict with the financial information Recommends to the board whether or not to engage an external assurance provider on material sustainability issues Recommends the integrated report for approval by the board Considers the frequency for issuing interim results Considers whether the external auditor should perform assurance procedures on the interim results Reviews the content of the summarised information to ensure it provides a balanced view Engages the external auditors to provide assurance on the summarised financial information Prepares a report, to be included in the annual financial statements for that financial year Describing how the audit committee carried out its functions Stating whether the committee is satisfied that the auditor was independent of the company Commenting in any way it considers appropriate on the financial statements, accounting practices and the internal financial control of the company. Internal audit The committee is responsible for overseeing internal audit, in particular: The appointment, performance assessment and/or dismissal of the chief audit executive Reviewing the internal audit charter The appointment, performance assessment and/or dismissal of the outsourced/companys internal audit service provider Approving the internal audit plan and any significant changes and satisfying itself that the audit plan effectively addresses critical risk areas of the business
Ensuring the internal audit function is subject to an independent quality review, as the committee determines appropriate Reviewing internal audits compliance with its charter as approved by the audit committee and considering whether the internal audit function has the necessary resources, budget and standing within PPC to enable it to discharge its functions. Risk management The committee is an integral component of the risk management process and, specifically, must oversee: Financial reporting risks Internal financial controls Fraud risks as these relate to financial reporting IT governance and risks as these relate to financial reporting. External audit The committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process. In this regard, the committee must: Nominate an independent external auditor for appointment by shareholders Determine fees to be paid and terms of engagement of the auditor Ensure the appointment of the auditor complies with the Companies Act and other relevant legislation Monitor and report on the independence of the external auditor in the annual financial statements Define a policy for non-audit services provided by the external auditor Pre-approve contracts for non-audit services to be rendered by the external auditor Ensure there is a process for the committee to be informed of any reportable irregularities (as identified in the Auditing Profession Act, 2005) identified and reported by the external auditor Review the quality and effectiveness of the external audit process. Financial director In addition, the audit committee must annually consider and satisfy itself of the appropriateness of the expertise and experience of the financial director and must confirm to shareholders in its annual report that it has executed this responsibility. Financial function The committee reviews the expertise, resources and experience of the companys finance function, and discloses the results in its report to shareholders. See report on page 84.
83
Report to shareholders on the activities of the audit committee for the year ended 30September 2012
The audit committee is a committee of the board of directors and, in addition to specific statutory responsibilities to shareholders in terms of the Companies Act, it assists the board through advising and making submissions on financial reporting, oversight of the risk management process and internal financial controls, external and internal audit functions and statutory and regulatory compliance of the company. Terms of reference The audit committee has adopted formal terms of reference that were updated during the year and approved by the board. It has executed its duties during the past financial year in accordance with these terms of reference. Composition The committee consists of three independent non-executive directors as required by law. At 30 September 2012, its members were: Name ZJ Kganyago TDA Ross B Modise Qualifications BCom CA(SA) CA(SA) Period served 4 years 4 years 2 years
The chief executive officer, finance director, chief audit executive, senior financial executives of the group and representatives from the external and internal auditors attend the committee meetings. The internal and external auditors have unrestricted access to the audit committee. Meetings The audit committee held three scheduled meetings during the year, with attendance shown below: Director ZJ Kganyago TDA Ross B Modise May 2012 October 2012 November 2012
An additional meeting was scheduled in November to review the integrated report and attended by all members. Statutory duties In executing its statutory duties during the 2012 financial year, the audit committee: Nominated Mr B Nyembe, from the audit firm Deloitte & Touche, for appointment. In the opinion of the committee, Mr Nyembe was independent of the company Determined Deloittes terms of engagement Believes that the appointment of Deloitte complies with the relevant provisions of the Companies Act, JSE Listings Requirements and King III Developed and implemented a policy setting out the extent of any non-audit services the external auditors may or may not provide to the company Pre-approved all non-audit service contracts with Deloitte Received no complaints on the accounting practices and internal audit of the company, content or auditing of its financial statements, internal financial controls of the company, and any other related matters. Delegated duties In executing its delegated duties (as reflected in its terms of reference), the audit committee fulfilled all its obligations including: Financial statements The committee reviewed the annual financial statements, interim and preliminary announcements, accompanying reports to shareholders and other announcements on the companys 2012 results to the public. Integrated reporting Recommended that the board engage an external assurance provider on material sustainability issues Reviewed the disclosure of sustainability issues in the integrated report to ensure it is reliable and does not conflict with the financial information Recommended the integrated report for approval by the board.
84
PPC Ltd
Report to shareholders on the activities of the audit committee continued for the year ended 30September 2012
Internal audit Took responsibility for the appointment and performance assessment of Mr Semenya, the chief audit executive Was responsible for the appointment and performance assessment of the outsourced internal audit service provider Approved the internal audit plan and changes to the plan and satisfied itself that the audit plan effectively addresses the critical risk areas of the business Reviewed internal audits compliance with its charter (which was updated during the year and approved by the committee) and considered whether the internal audit function has the necessary resources, budget and standing within PPC to enable it to discharge its functions. Received written report on the effectiveness of controls and risk management. Risk management The committee is an integral component of the risk management process and specifically reviewed: Financial reporting risks Internal financial controls Fraud risks as these relate to financial reporting IT governance. External audit Evaluated and reported on the independence of the external auditor Reviewed the quality and effectiveness of the external audit process Based on our satisfaction with the results of activities outlined above, we have recommended to the board that Deloitte should be reappointed for 2013. Mr Nyembe from Deloitte was nominated as the registered auditor Determined the fees to be paid and terms of engagement of the auditor Ensured that the appointment of the auditor complies with the Companies Act and other relevant legislation. Financial director The committee has satisfied itself of the appropriateness of the expertise and experience of Ms Ramano, the financial director, and confirms this to shareholders. Financial function The committee has reviewed the expertise, resources and experience of the companys finance function, and confirms its satisfaction to shareholders In making these assessments, we have obtained feedback from both external and internal audit Based on the processes and assurances obtained, we believe the accounting function is effective. Oversight of risk management The committee has: Received assurance that the process and procedures followed by the risk management and compliance committee are adequate to ensure that financial risks are identified and monitored. Internal financial controls Reviewed the effectiveness of the companys system of internal financial controls, including receiving assurance from management and internal audit Reviewed material issues raised by the internal and external audit process Based on the processes and assurances obtained, we believe significant internal financial controls are effective. Regulatory compliance The audit committee has complied with all its responsibilities. Integrated report Based on processes and assurances obtained, we have recommended the integrated report to the board for approval. On behalf of the audit committee Tim Ross Chairman
85
Risk and compliance committee The members of the risk and compliance committee are: Joe Shibambo (chairperson), Peter Esterhuysen, Tim Ross and Bridgette Modise who was appointed as the fourth member to the committee with effect from March 2012 and replaced Jerry Vilakazi. Bridgette is also a member of the audit committee and her membership of the riskcommittee contributes to her understanding of wider risk in the group. Peter, an executive director, was appointed to the committee to align it with the best-practice recommendations of the code. All other members of the committee are non-executive directors. The committee may obtain, at the companys expense, independent professional advice on any matters covered by its terms of reference. Members of the executive team responsible for risk and compliance management, including the CEO, attend committee meetings by invitation. Similarly, external and internal auditors attend committee meetings by invitation but have no voting rights. The chairperson of the committee reports to the board on the activities and recommendations made by the committee and the latest minutes of committee meetings are included in board packs. The committee has its own terms of reference approved by the board, to assist its members to understand their roles and enable them to add value in discharging their duties. The committees terms of reference are reviewed annually. Terms of reference The committees terms of reference include the responsibility to: Oversee the development and annual review of a policy and plan for risk management to recommend for approval to the board Monitor implementation of the policy and plan for risk management taking place by means of risk management systems and processes Make recommendations to the board on the levels of risk tolerance and appetite, and monitor that risks are managed within these levels as approved by the board Approve the companys compliance policy and oversee that the policy is disseminated through the company Oversee that the risk management plan is disseminated throughout the company and integrated in its day-today activities Ensure risk assessments are performed continuously Ensure compliance management assessments are continuously performed Ensure frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks Ensure management considers and implements appropriate risk responses Ensure continuous risk monitoring by management takes place
Liaise closely with the audit committee and other board committees to exchange information relevant to risk Express a formal opinion to the board on the effectiveness of the system and process of risk management Review reporting on risk management and compliance being included in the integrated report in terms of being timely, comprehensive and relevant. A more detailed review on risk appears on page 89 while the report on compliance is on page 88. Compliance with terms of reference The committee reported on its activities for the review period at the board meeting in November 2012. At this meeting, the board confirmed the committee had complied with its terms of reference. Nominations committee The members of the nominations committee are: Bheki Sibiya (chairperson), Ntombi Langa-Royds, Andr Lamprecht and Joe Shibambo. The committee was in place throughout the 2012 financial year. All members are independent non-executive directors as defined in the code. The committee may obtain, at the companys expense, independent professional advice on any matters covered by its terms of reference. The committee normally asks the CEO to attend its meetings, but he has no voting rights. The committee has its own terms of reference, approved by the board and reviewed annually. The chairperson reports tothe board on the activities and recommendations made by the committee and the latest minutes of committee meetings are included in board packs. Terms of reference The committee performs all the functions necessary to fulfil its role as stated in its terms of reference including: Ensuring the establishment of a formal process for appointing directors, including: Identifying suitable members of the board Performing reference and background checks of candidates prior to nomination Formalising the appointment of directors through an agreement between the company and the director Overseeing the development of a formal induction programme for new directors Ensuring inexperienced directors are developed through a mentorship programme Overseeing the development and implementation of continuing professional development programmes for directors Ensuring directors receive regular briefings on changes in risks, laws and environment in which the company operates
86
PPC Ltd
Considering the performance of directors and taking steps to remove directors who do not make an appropriate contribution Finding and recommending to the board a replacement for the CEO when that becomes necessary Ensuring formal succession plans for the board, CEO and senior management appointments are developed and implemented Providing input on senior management appointments as proposed by the CEO Approve a policy for the appointment of directors, and background and reference checks are performed before appointing directors. Compliance with terms of reference The committee reported on its activities for the review period at the board meeting in November 2012. At this meeting, the board confirmed the committee had complied with its terms of reference. Remuneration committee The members of the remuneration committee are: Ntombi Langa-Royds (chairperson), Joe Shibambo and Sydney Mhlarhi. Sydney replaced Jerry Vilakazi as a member of the committee when Jerry retired from the board on 1March 2012. All members are non-executive directors. PwC, appointed by the company, acted as remuneration advisors to the committee and provided detailed information on market trends and the competitive positioning of remuneration. The committee normally asks the CEO to attend its meetings but he has no voting rights. He does not participate in discussions on his own remuneration, which is set by the committee. Terms of reference The committee performs all functions necessary to fulfil the role stated in its terms of reference, including: Overseeing the establishment of a remuneration policy that will promote achieving strategic objectives and encourage individual performance Ensuring the remuneration policy is put to a nonbinding advisory vote at the general meeting of shareholders once every year Reviewing the outcomes of implementing the remuneration policy against set objectives Ensuring the mix of fixed and variable pay, in cash, shares and other elements, meets the companys needs and strategic objectives Satisfying itself on the accuracy of recorded performance measures that govern the vesting of incentives
Ensuring all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued Considering the results of the performance evaluation of the CEO and other executive directors, both as directors and as executives, in determining remuneration Selecting an appropriate comparative group when comparing remuneration levels Regularly reviewing incentive and retention schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules Considering the appropriateness of early vesting of share-based schemes at the end of employment Advising on the remuneration of non-executive directors Overseeing the preparation of the remuneration report to be included in the integrated report and recommendation to the board. In this regard the remuneration committee needs to determine whether the remuneration report: is accurate, complete and transparent provides a clear explanation of how the remuneration policy has been implemented provides sufficient forward-looking information for the shareholders to pass a special resolution in terms of section 66(9) of the Companies Act, 2008. The remuneration report of the company appears on page 92 and shareholders will be requested to pass a nonbinding advisory vote to indicate support for this policy at the annual general meeting. Compliance with terms of reference The committee reported on its activities for the review period at the board meeting in November 2012. At this meeting the board confirmed the committee had complied with its terms of reference. Social and ethics committee The members of the social and ethics committee are: Ntombi Langa-Royds (chairperson), Joe Shibambo, Andr Lamprecht and Peter Malungani. All members are nonexecutive directors. The committee has its own terms of reference approved by the board and reviewed annually. The chairperson reports to the board on the activities and recommendations made by the committee and the latest minutes of committee meetings are included in boardpacks.
87
Terms of reference In line with its terms of reference, the committees objectives are to assist the board to monitor the companys activities, considering any relevant legislation, other legal requirements or prevailing codes of best practice, on matters relating to: Social and economic development Good corporate citizenship The environment Health and public safety Consumer relationships Labour and employment. Compliance with terms of reference The committee reported on its activities for the review period at the board meeting in November 2012. At this meeting, the board confirmed the committee had complied with its terms of reference.
Deal committee The members of the deal committee are: Peter Malungani (chairperson), Peter Esterhuysen, Andr Lamprecht, Bheki Sibiya, Zibu Kganyago, Sydney Mhlarhi, Tryphosa Ramano and Paul Stuiver. The committee is an ad hoc body and its terms of reference are to: Consider strategic options and recommendations presented by management on expansion opportunities Provide guidance, support and explore options that will facilitate progress in periods between board meetings. Committee meetings are scheduled when required by progress on transactions.
88
PPC Ltd
Risk review
PPC understands that the identification and management of risk is key to a sustainable business and the protection of all our stakeholders. This enables us to mitigate potential risks, and use the input of our stakeholders in developing opportunities for the company and implementing our strategies.
While the board remains accountable for the companys risk profile, it has delegated oversight of risk management to the risk and compliance committee. The process of risk management in PPC is guided by our risk management policy, which is reviewed annually to ensure appropriateness. The updated policy approved by the CEO in October 2012 is shown below.
89
PPC is committed to implementing and incorporating risk management throughout the organisation. This commitment includes ensuring that sound and effective systems of internal control and operations risk management are developed, implemented and periodically reviewed across the group. The purpose of this commitment is to: Preserve and enhance the management of assets and earnings potential Proactively anticipate and respond to changes in our business environment Protect and promote the health, safety and well-being of our people and the communities in which we operate Develop positive relationships with all stakeholders so that their needs and concerns are appropriately addressed. This is supported by an enterprise-wide risk management (EWRM) framework that details the approach to address and improve risk management in PPC. The EWRM framework adopted by PPC is based on the ISO 31000:2009 standard for risk management. It consists of two cycles: a strategic process and a tactical process. The strategic process defines the iterative risk management process adopted by PPC and outlines the methodology to
identify, analyse, evaluate, treat and aggregate risk exposures and opportunities across the enterprise. The tactical process follows a plan, do, check, act cycle as recommended by ISO 31000. This process will drive risk management according to governance requirements, particularly King III.
Risk appetite
Political instability generally Entering countries where civil war is prevalent Risk to the continued safety of employees and advisers Nationalisation risk Potential loss of assets Loss of licence to operate Facilitation payments are an absolute requirement Financial return from investments Investment participation level Product quality Limited appetite. Zero appetite when safety of employees is at risk Zero appetite Zero appetite Limited appetite. Zero appetite when valued at +50% (probability) Limited appetite. Zero appetite when valued at +50% (probability) Limited appetite. Zero appetite when valued at +50% (probability) Zero appetite Minimum of a real weighted average cost of capital + 3% as an acceptable internal rate of return Limited appetite for investments smaller than 20% Zero appetite for products of substandard quality
90
PPC Ltd
Risk assessment
PPC recognises the role of high-level business risk assessments in managing risk. These assessments were conducted for the group, cement, lime, aggregates, Zimbabwe and Botswana divisions. In addition, strategic business risk assessments were conducted for different new business development projects. The top risks identified in these assessments are included in the material issues from page 14 to 17.
Each factory site schedules disaster recovery exercises for their local IT environment biannually at Sandton in a controlled and supervised environment.
Insurance
The following risk management surveys were undertaken by PPCs insurance brokers and underwriters during theyear: Updated maximum probable loss calculations and surveys were conducted at Dwaalboom and Slurry Underwriting surveys were carried out at all PPC operations Machinery breakdown surveys were conducted at most manufacturing and mining sites in South Africa and Botswana. PPCs insurance cover and associated premiums were reviewed in July 2012.
91
Remuneration review
Dear shareholder
We are pleased to submit this remuneration review which summarises the role and activities of the remuneration committee, the remuneration philosophy and policy of the company and provide an overview of executive directors and non-executive directors remuneration. As in the past, the company has worked with its independent advisers to ensure that responsible and appropriate remuneration principles are adopted and implemented. During the past year, when meeting with some of our largest shareholders, we raised the issue of executive remuneration. Taking into account their views and current best practices, the following remuneration areas were specifically noted for review: The introduction of a second financial performance condition for the short-term incentive scheme for2013 Benchmarking executive and non-executive directors remuneration against an appropriate peer group The overall improvement of this remuneration report from a corporate governance and disclosure perspective. The past financial year presented many challenges. Retaining and motivating employees, while balancing the interests of shareholders, remains a difficult task. The company had a good financial year and while we did not reach the internal financial target, significant progress was made on a number of non-financial strategic objectives that will ensure the long-term sustainability of the company. The remuneration committee is satisfied that the overall principles laid down by the King code of governance for South Africa (King III) and the Companies Act, 2008 (the Act) have been adhered to, unless specifically stated. The current state of the global economy and recent events in South Africa all indicate another challenging year ahead. Team PPC will again have to pay special attention to how it balances the companys need for financial performance with achieving its long-term strategic objectives. Our remuneration policy will have to take cognisance of this and will evolve to ensure we retain and attract the correct talent to ensure a sustainable company while keeping within bestpractice guidelines and shareholders expectations.
92
PPC Ltd
Overview of remuneration
The table below summarises the elements of the total remuneration package paid to executives in the 2012 financial year, as well as proposed changes for the 2013 financial year:
Element
TCTC (includes salary, car allowance retirement, life insurance and medical aid contributions) Short-term incentive (STI)
Fixed/ variable
Fixed
Policy
The company generally pays TCTC in the upper quartile of the market and is targeted to be competitive for comparable roles in companies of similar complexity and size, taking cognisance of theindividual
Variable
Short-term incentive payments aim to create a pay-for-performance culture by considering personal and company performance targets over a one-year period. The short term incentive scheme (STIS) is used to determine annual payments
Changes will be made to the: Weighting between financial and personal performance Maximum earnings potential to be aligned to TCTC Addition of a second financial metric. The addition of a second financial metric to be considered
Variable
To create direct alignment between the interests of shareholders and participants, and to act as a retention tool over a three-year period. There are two existing legacy incentive plans (LTIP and RSS) and one current plan (FSP) reported on in this review
93
Remuneration structure
The company uses the Peromnes grading system as follows: Grade 1: CEO Grade 2: Executive directors Grade 3: Prescribed officers and divisional executives Grade 4: General managers Grades 5 to 7: Heads of departments, professionals, specialists TCTC package/basic pay Grade 1 to 7 employees are remunerated on a TCTC package structure. Other employees are remunerated on a basic-plus-benefits structure. The TCTC package is targeted to be competitive for comparable roles in companies of similar complexity and size. The company uses professional advisers such as PwC Remchannel to supply benchmark information to guide decisions on salary adjustments. Salaries are adjusted around the benchmarks depending on individual performance and experience, and are reviewed each year. The review considers changes in scope of roles performed by individuals, changes required to meet the principles of the remuneration policy and market competitiveness of salaries and benefits. Attention is paid to consistent job evaluation and grading of roles throughout the group, to ensure equity of reward, to facilitate transformation objectives and ensure mobility within the company. % increase from 2011 to 2012 Executive directors S Abdul Kader P Esterhuysen SG Helepi MMT Ramano* P Stuiver Prescribed officers Prescribed officer 1 Prescribed officer 2 ** Prescribed officer 3 Prescribed officer 4 *** 4,8 5,0 6,4 5,0 15 9
For 2013, in aggregate, TCTC remuneration for the group increased by between 6,5% and 7%. In determining TCTC increases for executive directors, the remuneration committee considered average increases to the general staff population and conducted a benchmarking exercise. In selecting a comparator group, companies listed on the JSE were sized according to sector, EBITDA, total assets, turnover and number of employees. Companies that were close to PPC based on these factors and were of a similar market capitalisation were selected. Certain larger companies that are considered direct comparators were also added to this list. As a result of this exercise, salary increases for executive directors are expected to be 5,5% for Mr Stuiver, the outgoing CEO (as contractually agreed), and 6,5% for most other executive directors. Salary and benefit adjustments for executive directors are reviewed and approved by the remuneration committee, while adjustments for all other employees are approved by the CEO.
Benefits
The table below details benefits provided to employees and executive directors (as part of TCTC or over and above basic pay):
Benefit
Retirement fund
Detail
Participation in the PPC Retirement Fund is compulsory for all permanent employees. The fund is an in-house defined contribution fund. The fund supplies risk cover for death and disability. All employees are required to belong to either a choice of company-sponsored external medical aids or to be a member of a spouses/life partners medical aid. All employees (permanent and fixed-term) are covered 24/7 for death, medical and disability expenses as a result of an accident.
Medical aid
*J oined PPC in August 2011 and did not receive an increase in October 2011 ** Resigned 31 January 2012 *** Appointed as prescribed officer on 1 August 2012
The average increase in TCTC packages for executive directors was 5,2% for 2012, and average 12% for prescribed officers. This compared to 6,5% paid to all employees for 2012. rescribed officers increase was above average as they P were appointed to the role in late 2011 and reflects the greater responsibility and liability associated with the role in terms of the Companies Act.
Car allowance
Employees who need to use their motor vehicle during the course of their duties can elect to allocate a portion of their TCTC as a car allowance.
94
PPC Ltd
Linear vesting is applied between the threshold and stretch targets. The EBITDA threshold and stretch targets for the 2012 financial year represented 10% and 20% improvements on the actual EBITDA achieved for the 2011 financial year respectively. EBITDA is considered appropriate as it is the best proxy to align employees with shareholders interest, namely share price and earnings. 2012 personal performance measure The personal performance component depends on the executives performance against a balanced scorecard. Personal performance below 70% of the balanced scorecard will result in no bonus for this component. The companys scorecard contained the following:
EBITDA target for 2012 Stretch target Threshold target R2 580 million R2 365 million
95
Performance pillar
People
Detail
Health and safety; zero fatalities and reduce the Lost Time Injury Frequency Rate (LTIFR) from 0,34 to less than 0,25 Attraction of new talent and specific initiatives to develop and retain existing talent Improve employee satisfaction and morale as measured by the annual PPC employee survey Achieve employment equity and gender diversity targets Achieve CSI objectives and targets Successful bedding down of product and pricing strategies launched during August 2011 Achieve market share targets for inland region, Zimbabwe and the retail sector Implement improved customer relationship processes Develop and trial new offering for informal markets Significantly improved market intelligence Increase EBITDA in line with financial performance targets on page 95 Rest of Africa strategy: six projects taken to conclusion and at least two new projects introduced Excellent corporate governance including zero adverse audit findings and full legal compliance Improved operational efficiency of kilns at Dwaalboom in South Africa and Colleen Bawn in Zimbabwe Successful upgrade of De Hoek kiln 6, within budget Complete EIA process for new Riebeeck kiln Go/no-go decision on at least one alternate energy project Improved engagement with key government departments
Weighting %
25
Customers
30
Shareholders
25
Internal processes
20
This scorecard is cascaded through the organisation. The level of detail and weightings for each performance area is adjusted, to align with managers and employees specific areas of responsibility. 2012 STIS bonuses for executive directors PPCs actual EBITDA was R2 327 million, which is below the threshold target of R2 365 million and, as a result, executive directors will not receive a bonus payment for the financial component of the bonus formula. Each executive director received a performance rating on their personal scorecard. For completeness, executive directors bonuses linked to financial and personal performance for the 2012 financial year were calculated using the following inputs: Executive directors
Base# salary R000 Financial Financial component achievement % % 2012 STIS Personal Personal Actual STIS compared to component achievement payment 2011 STIS % % R000 %
Maximum %
60 60 60 60 60
0 0 0 0 0
40 40 40 40 40
87 87 90 92 57
14 14 20 14
* Calculated on TCTC basis. # For 2012 remuneration was based on TCTC, but the STIS rules remained a multiple of base salary. A factor of 75% of TCTC was applied to get to base salary.
96
PPC Ltd
Prescribed officers
Base# salary R000 Financial Financial component achievement % % 2012 STIS Personal Personal Actual STIS compared to component achievement payment 2011 STIS % % R000 %
Name* Prescribed officer 1 Prescribed officer 3 Prescribed officer 4 (appointed to Exco on 1August 2012)
Maximum %
60 60 60
0 0 0
40 40 40
90 83 88
29 15
* Prescribed officer 2 resigned 31 January 2012. # For 2012 remuneration was based on TCTC, but the STIS rules remained a multiple of base salary. A factor of 70% of TCTC was applied to get to base salary.
Amendments to STIS for 2013 Following a review of the STIS by the remuneration committee in conjunction with external service providers, management and shareholders, the following main changes will be implemented to the STIS in the 2013 financial year: The maximum earnings potential will be revised to 100% of TCTC for all executive directors and 120% of TCTC for the CEO. These changes are proposed to align the CEOs stretch earnings potential to the market To further encourage the pay-for-performance culture, a heavier weighting will be placed on financial performance. This weighting will be increased from 60% to 70% and 30% will be weighted towards personal performance After engaging with shareholders, we decided to introduce an additional financial performance metric to the existing EBITDA measure. This will be headline earnings per share (HEPS) and it will be equally weighted with EBITDA.
Until 2011, the company operated a cash-settled share appreciation right scheme, also known as the long-term incentive plan (LTIP) and a cash-settled restricted share scheme (RSS). During 2011, the company introduced a new long-term incentive plan, namely the forfeitable share plan (FSP) for employees other than executive directors and prescribed officers. The same plan was approved for executive directors and prescribed officers at the annual general meeting held in January 2012. The LTIP and RSS were discontinued at the same time. Legacy plans (LTIP and RSS) With the exception of MMT Ramano, who continues to participate in the RSS in terms of her employment contract, no new awards have been made under the LTIP and RSS since 2011. All prior awards granted under the LTIP and RSS will continue until fruition. A portion of RSS awards to executive directors were forfeited as the companys financial performance did not meet the RSS performance criteria. See pages 103 to 105 for specific detail.
Long-term incentive
The major design principles of the companys long-term incentive are to: Attract, motivate and retain participants as part of a market-competitive package Reward participants for medium- to longer-term company performance Align participants with shareholders interests.
97
To align employees with shareholders over the long term by making performance awards while acting as a retention tool by making retention awards. An FSP award is a free transfer of shares to a participant on the award date. However, the shares are subject to risk of forfeiture where company performance conditions are not met over a pre-determined performance period (typically over three financial years); and/or a participant ceases employment prior to the vesting date. Prior to the vesting date, the participant has all shareholder rights in respect of the forfeitable shares, including dividend rights and voting rights. As the company is faced with skills shortages and the risk of losing employees, a portion of each award will be subject to continued employment only (retention awards) and the remainder will be subject to continued employment and performance conditions (performance awards).
Eligibility
Peromnes grades 1 to 5 are eligible for FSP awards, subject to approval by the remuneration committee. Selected employees in grade 6 will be considered for participation in the FSP by the CEO. Currently, due to contractual arrangements, the CEO is excluded from participation in the FSP. The level of seniority determines the mix between performance awards and retention awards as follows: Position CEO Executive directors and prescribed officers Executives General manager Head of department Professional staff Grade 1 2 3 4 5 6 Performance award (%) 75 75 50 40 30 20 Retention award (%) 25 25 50 60 70 80
Performance conditions are measured over a three-year performance period. Currently, the performance condition used to determine the extent to which the performance award vests is growth in headline earnings per share (HEPS). Performance condition targets for the 2012 award are: Target Threshold On-target Stretch Vesting percentage 33,33 66,67 100 Growth CPI + 3% CPI + 6% CPI + 9%
In line with King III, linear vesting will occur between these targets. The remuneration committee believes the performance condition is stretching, given the current economic environment.
98
PPC Ltd
Vesting period
Three years The FSP is not dilutive to shareholders as no shares can be issued under the FSP. The FSP can only be settled by a market purchase of shares. Despite the fact that the FSP will not result in any shareholder dilution and that the LTIP and RSS are cash-settled plans, the company has adopted quasi dilution limits to ensure overall affordability to the company on the one hand and reasonable, but attractive, benefits to executives on the other. The aggregate maximum number of awards that may be made under the FSP, RSS and LTIP is restricted to 5% of issued shares as at 1 September 2011, totalling 29 308 518 shares (or quasi shares in the case of the LTIP and RSS).
Dilution
Individual limit
The maximum number of unvested FSP, LTIP and RSS awards to be held by an individual may not exceed 0,5% of the issued share capital as at 1 September 2011, totalling 8792555 shares (or quasi shares in the case of the LTIP and RSS). The rules of the FSP distinguish between so-called good leavers (death, retrenchment, as determined in accordance with the employer companys policy, retirement, ill health, injury or disability, as determined to the satisfaction of the committee) and bad leavers (resignations or dismissals). Bad leavers will forfeit all unvested awards. Good leavers will receive a proportion of their unvested awards, pro-rated for service and performance to the date of termination of employment. Subject to discretion of the remuneration committee, the FSP is used for annual long-term incentive awards. The annual FSP awards are based on multiples of the TCTC of the employee. The committee reviews these multiples regularly to ensure they are in line with market trends, and remain fair and motivating as longer-term rewards.
Early termination
Award policy
BEE schemes
In terms of the companys first BBBEE transaction, the following directors were granted shares, which are subject to vesting conditions and have restrictions on transferability. The transferability of shares granted to the executive directors lapses on 31 December 2016, while the transferability of shares granted to non-executive directors lapses on 31 December 2014. All shares vest in thirds after the fourth, fifth and sixth anniversary of the grant date. 2012 Executive directors S Abdul Kader SG Helepi MMT Ramano* Non-executive directors ZJ Kganyago NB Langa-Royds J Shibambo Prescribed officer Prescribed officer 2 (resigned 31 January 2012) 184389 83983 335249 95787 95787 95787 890982
* Awarded in terms of the trust deed of the PPC Black Managers Trust.
555733
99
During the year all participants, including executive directors, of the Black Managers Trust were allocated additional shares, on an equal basis, as a result of there being unallocated shares in the Future PPC Team Trust. The additional shares allocated to executive directors are: 2012 S Abdul Kader SG Helepi MMT Ramano 2541 2541 2541 7623 The shares vest with the participants in December 2015 and are not subject to forfeiture if the participant leaves the employment of the company before the vesting date.
Gains on Restricted Share Scheme Incentive (RSS) bonus 929 1011 752 1251 1336 5278 629 718 1259 2606
n terms of the retention agreement entered into with Mr Esterhuysen in 2011, the amount owing to him for the 2012 financial year I has been accrued in terms of the agreement, and has been escalated at the prime lending.
100
PPC Ltd
In terms of the South African Companies Act, three employees are deemed to be prescribed officers as their attendance at group executive meetings comprised regular participation to a material degree in the exercise of general executive control over and management of the whole, or a significant portion of the business and activities of the company. Prescribed officers Fixed component of remuneration (TCTC) Retirement and medical contriCar butions allowances Salary 1749 447 258 146 104 92 Variable annual (STI) Variable long term (LTI) Dividends received on FSP awards 14
R000 Prescribed officer 1 Prescribed officer 2 (resigned 31 January 2012) Prescribed officer 3 Prescribed officer 4 (appointed on 1 August 2012)
1287 1673
203 388
216 261
462 710
1082 4163
11 20
2 2
3263 7217
5156
^Includes leave payout on resignation.
995
673
1813
7252
45
12
16 086
Total emoluments to executive directors and prescribed officers for the year ended 30 September 2011 was as follows: Executive directors Retirement and medical contributions 348 96 374 310 138 838 2104
R000 S Abdul Kader RH Dent (retired 31December2010) P Esterhuysen SG Helepi MMT Ramano (appointed 1August 2011) P Stuiver
*I ncludes a contractual settlement on retirement and a restraint-of-trade payment, which runs for 24 months from date of retirement, ending 31 December 2012. #D uring 2011, Mr Esterhuysen entered into a three-year retention agreement, ending 2013, to retain his services to the company. An amount of R2 500 000 was paid to him on signing the agreement and a further amount of R2 735 000 accrued to him at the end of September 2011, which was subsequently paid in October 2011. Mr Esterhuysen will no longer participate in the restricted share scheme (refer to the remuneration report for further details on the scheme). The amounts payable to him during this retention period are estimated to reflect the amount he would have received if awards had been made in terms of the restricted share scheme. ^ In lieu of an incentive bonus for 2011 and a salary increase for the 2011/12 financial year, a sign-on bonus of R1 250 000 was paid in the first month of employment. This amount is earned proportionately during the first 12 months of employment with the company.
101
Prescribed officers Retirement and medical contributions 259 244 186 689
R000 Prescribed officer 1 Prescribed officer 2 (joined 1February 2011) Prescribed officer 3
^ Includes a R500 000 sign-on bonus, which was paid in the first month of employment but is earned proportionately during the first 12months of employment with the company.
Total emoluments to executive directors for the year ended 30 September 2010 were as follows: Executive directors Retirement and medical Salary contributions 1984 1993 2224 1195 2839 10235 351 351 361 224 660 1947 Car allowances 300 300 300 250 300 1450 Incentive bonus 756 784 849 512 1037 3938 Other benefits 13 25 2 3 5 48
Gains on equity-settled share options exercised/ceded by directors R000 RH Dent (retired 31 December 2010) P Esterhuysen O Fenn (resigned 5 August 2009) JE Gomersall (resigned 30 June 2009) P Stuiver 2012 2011 1057 1057 2010 179 272 256 1035 104 1846
102
PPC Ltd
142000
21600 80900
21300
78100
29,53
629
160000
160 000
162000
24300
89100
48600
29,53
718
88000
88000
18000 18000
26,22 29,53
551 709
16600
16600
62500
62500
103
Award date MMT Ramano Restricted share scheme (RSS) 2011/08/01 2012/09/28
Number Number Number exercised/ Number allocated allocated vested in forfeited in prior in current current in current years year year year
Closing number
Grant price
FSP with performance conditions 2012/09/20 Prescribed officers: Prescribed officer 1 Share appreciation rights (LTIP) 2007/08/08 2008/09/17 2009/09/25
96800
96800
70000 70000
26,22 29,53
944 1063
FSP no performance conditions 2012/02/16 FSP with performance conditions 2012/03/20 Prescribed officer 2 Share appreciation rights (LTIP) 2007/08/08 2008/09/17 2009/09/25
19000
19000
23700
23700
25000
25000
26,22 29,53
551 532
15427
15427
19573
19573
104
PPC Ltd
Award date Prescribed officer 4 Share appreciation rights (LTIP) 2007/08/08 2008/09/17 2009/09/25
Number Number Number exercised/ Number allocated allocated vested in forfeited in prior in current current in current years year year year
Closing number
Grant price
85000 85000
26,22 29,53
1180 2983
FSP no performance conditions 2012/02/16 FSP with performance conditions 2012/03/20 Retired directors: RH Dent (retired 31 December 2010) Share appreciation rights (LTIP) 2007/08/08 2008/09/17 2009/09/25
25400
25400
37600
37600
143000
143000
350000
350000
43,00
* In line with his employment contract, the CEO did not receive any FSP awards. ** As participation in the FSP by executive directors and prescribed officers was only approved by shareholders in January 2012, no awards were made to executive directors in 2011. To compensate for this fact, executive directors received an additional award in March2012. *** Mr Esterhuysen was party to a retention agreement concluded in 2010. Accordingly, the remuneration committee has determined that Mr Esterhuysen should not receive a retention award under the FSP. **** According to Ms Ramanos employment contract, an RSS award for the 2012 financial year was made and accordingly the remuneration committee also determined that Ms Ramano should not receive a retention award under the FSP.
105
Non-executive directors
As part of its mandate, the remuneration committee also advises the board on non-executive director fees. In this regard, the committee relies on benchmark studies done by its independent advisers based on a similar comparator group used for executive directors remuneration. As suggested by King III, board fees comprise both a base fee and an attendance fee which, in the view of the committee, is sufficient to attract board members with the appropriate level of skill and expertise. Non-executive director fees as approved by the special general meeting of shareholders on 1 September 2011, valid for two years from the date of the special resolution, were as follows: Non-executive directors fees were benchmarked in the current year against the same peer group as used for the executive directors benchmarks. Similar to executive directors, it is proposed that non-executive directors will receive an increase of 6,5% for the 2013 financial year. Total emoluments to non-executive directors for the year ending 30 September 2012 was as follows: Non-executive directors Committee Risk management and comRemuAudit pliance neration 67 83 166 316 34 62 126 31 253 137 36 114 26 313
R000 ZJ Kganyago NB Langa-Royds AJ Lamprecht MP Malungani SK Mhlarhi (appointed 1March 2012) B Modise TDA Ross J Shibambo BL Sibiya JS Vilakazi (resigned 29February 2012)
Board Chairman Nominafees fees tions 194 194 194 194 97 194 194 194 88 1543 705 705 69 69 53 106 297
Social and Special ethics meetings 152 74 72 74 372 48 191 111 95 80 80 80 95 286 32 1098
Deal 32 95 32 159
Total 309 743 480 456 245 391 502 656 1097 177 5056
Non-executive directors fees are benchmarked against similar-sized companies listed on the JSE Limited. The level of complexity of the underlying business is also taken into consideration when performing the benchmarking exercise. No non-executive directors fees exceeded this benchmark.
106
PPC Ltd
Total emoluments to non-executive directors for the year ending 30 September 2011 was as follows: Non-executive directors Committee Risk management and comRemuAudit pliance neration 75 66 180 26 347 70 135 58 263 152 79 79 310
R000 ZJ Kganyago NB Langa-Royds AJ Lamprecht MP Malungani B Modise (appointed 1December 2010) TDA Ross J Shibambo BL Sibiya JS Vilakazi
Board Chairman Nominafees fees tions 188 188 188 188 154 188 188 188 1470 685 685 80 40 43 80 160 403
Deal 30 30 15 75
Total 323 585 304 324 220 511 623 950 340 4180
Total emoluments to non-executive directors for the year ending 30 September 2010 was as follows: Non-executive directors Committee Risk management BEE and Special and board comRemu- transforAudit pliance neration mation meetings 78 151 78 307 49 127 49 225 129 69 20 59 277 97 49 49 49 244 15 15 15 15 15 15 15 15 120
R000 ZJ Kganyago NB Langa-Royds AJ Lamprecht MP Malungani TDA Ross J Shibambo BL Sibiya JS Vilakazi
Board Chairman Nominafees fees tions 162 162 162 162 162 162 162 1134 605 605 69 49 10 79 117 324
Deal 40 20 40 40 140
Total 295 472 295 266 387 579 797 285 3376
107
A register detailing directors and officers interest in the company is available for inspection at the companys registeredoffice.
Directors loans
Directors have loans with the company, granted in terms of the Barloworld share option scheme in place prior to unbundling PPC from Barloworld. Balances outstanding at year end are: P Esterhuysen 2012: Rnil (2011: R0,1 million; 2010: R0,1 million) The loans bear interest at a fixed rate, calculated using the ruling prescribed rate applicable when the loan is granted to the director, and have no predetermined terms of repayment.
108
PPC Ltd
Assurance statement
Assurance statement
Independent assurance statement by Deloitte & Touche to PPC Ltd on their sustainability indicator disclosure and their self-declared Global Reporting Initiative G3.1 application level in their Integrated Report 2012 (the Report)
PPC Ltd engaged us to perform limited assurance procedures for the year ended 30 September 2012 on: Selected performance indicators to be published in the Report for the year ended 30 September 2012 The self-declared Global Reporting Initiative G3.1Guidelines (GRI G3.1) C+ application level. The selected performance indicators are as follows: Direct energy consumption by primary energy source Indirect energy consumptions by primary source Total direct and indirect greenhouse gas emissions byweight (including Botswana) Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations (including Botswana and Zimbabwe) Total workforce by employee type, employment contract and region, broken down by gender (including Botswana) Total number and rate of new employee hires and employee turnover by age group, gender and region (including Botswana) Percentage of employees covered by collective bargaining agreements (including Botswana and Zimbabwe) Rates of injury, occupational diseases, lost days, absenteeism and total number of work-related fatalities, by region and by gender (including Botswana and Zimbabwe) Average hours of training per year per employee by gender and by employee category Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership and other indicators of diversity Percentage of operations with implemented local community engagement, impact assessments and development programmes (including Botswana and Zimbabwe) Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations (including Botswana and Zimbabwe) Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments (including Botswana and Zimbabwe). Assurance process and standard We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements 3000, applicable to Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE 3000). This standard requires that we plan and perform the procedures to obtain limited assurance that the selected performance indicators and the GRI G3.1 application level are presented fairly in accordance with the criteria set out in the Report. This provides less assurance and is substantially less in scope than a reasonable assurance engagement.
Key procedures Considering the risk of material error, our multi-disciplinary team of sustainability assurance specialists planned and performed our work to obtain all the information and explanations we considered necessary to provide sufficient appropriate evidence on which we base our conclusion. Our work was planned to mirror PPC Limiteds own group level compilation processes, tracing how data for each indicator within our assurance scope was collected, collated and validated by corporate head office and included in the Report. Our conclusion Based on our review conducted over the South African operations of PPC Limited, nothing has come to our attention that causes us to believe that the selected performance indicators listed above are not fairly presented. Based on our review, including consideration of the Report, nothing has come to our attention that causes us to believe that managements assertion that their sustainability reporting meets the requirements of the C+ application level of the Global Reporting Initiative G3.1Guidelines is not fairly presented. Responsibilities of directors and independent assurance provider The directors are responsible for the preparation of the Integrated Report 2011, including the implementation and execution of systems to collect required sustainability data. Deloittes responsibility is to express our limited assurance conclusion on the selected performance data and the GRI G3.1 application level for the year ended 30September 2012. This report is made solely to PPC Ltd in accordance with our engagement letter. Our work has been undertaken so that we might state to the company those matters we are required to state to them in a limited assurance report and for no other purpose. Thus, we do not accept or assume responsibility to anyone other than PPC Limited for our work, for this report, or for the conclusions we have formed.
Deloitte & Touche Registered Auditors Per: Nina le Riche, Director Cape Town, South Africa 7 December 2012
1st Floor, The Square, Cape Quarter, 27 Somerset Road, Greenpoint, Cape Town, 8005 National Executive: LL Bam Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Risk Advisory, NB Kader Tax, TP Pillay Consulting, K Black Clients & Industries, JK Mazzocco Talent & Transformation, CR Beukman Finance, MJordan Strategy, S Gwala Special Projects, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board, Regional Leader: BGCFannin. A full list of partners is available on request.
109
PPC Ltd discloses performance voluntarily using guidelines from the Global Reporting Initiative (GRI). We have a self-declared C+ rating, which means we report fully on at least 10 indicators, spread across our economic, environment, human rights, labour, society, and product responsibility performance.
C+
B+
A+
G3 profile disclosures
Report on all criteria listed for level C plus: 1.2 3.9, 3.13 4.5-4.13, 4.16-4.17
OUTPUT
Not required
Report on a minimum of 10 performance indicators, including at least one from each of: economic, social and environmental
Report on a minimum of 20 performance indicators at least one from each of: economic, environmental, human rights, labour, society, product responsibility
Report on each core G3 and sector supplement* indicator with due regard to the materiality principle by either: (a) reporting on the indicator or (b) explaining the reason for its omission
OUTPUT
GRI G3 element
Reference in report
Page
2. Organisational profile 2.1 2.9 2.10 3. Report parameters 3.1 3.4 3.5 3.11 3.12 3.13 1 1 110 109 General organisational details 2, 10, 76 9
*The full GRI G3.1 index is included in the online version of the report.
110
PPC Ltd
Standard disclosures
OUTPUT
GRI G3 element
Reference in report
Page
Performance indicators
Economic performance EC1 4 EC2 4 Economic value generated and distributed Implications of climate change, defined benefit plan obligations, assistance from government Value added statement Material issues, environmental review 38 17, 68, note 33 of group financial statements 39, 63, 55, 92 62 to 65 62 to 65 48, 50 48 to 51 55, 56 57 52, 53 76 56, 76
EC5 7
Market presence including wage ratios, spending on locally-based suppliers, and local hiring Infrastructure investments for public benefit Indirect economic impacts Rates of injury, occupational disease Health programmes Workforce breakdown, turnover, labour relations Training and education Diversity and equal opportunity Human rights and non-discrimination Freedom of association, security practices, indigenous rights Community programmes and practices Corruption Public policy and anti-competitive behaviour Customer health and safety Materials use Energy Energy Energy Water Biodiversity Emissions, effluents and waste Products and services Compliance Transport
Remuneration and people review, mining charter scorecard Social review Social review Safety and health review Safety and health review People review People review People review Corporate governance review People review and corporate governance review Social review Corporate governance review Corporate governance review Corporate governance review Direct consumption by primary source Indirect consumption by primary source Environmental review Environmental review Environmental review Environmental review Environmental review
EC8 EC9 LA6 7 LA8 9 LA1 5 LA10 12 LA13 14 HR1 4 HR5 9 Society SO1 SO2 4 SO5 8 PR1 9 EN1 2 EN3 EN4 EN5 7 EN8 10 EN11 15 EN16 25 EN26 27 EN28 EN29 30
Social performance
60 76 76 86 69 70 68, 71 74 73 73 67, 75
Integrated annual report 2012
Environmental performance
111
Financial statements
economic empowerment
a solid foundation enables continuous growth
Case study
In July 2012, PPC initiated the R1,1 billion second phase of its broad-based black economic empowerment (BBBEE) transaction by placing an additional 39,3 million ordinary shares or 6,5% of its increased share capital under black ownership. In addition to the firstphase BBBEE transaction for 15,3% in 2008, direct black ownership of the PPC group has increased to 20,8%. Given the 80:20 revenue split between the groups South African and international businesses, the transaction results in an effective 26% black ownership of PPCs South African operations, meeting the mining rights conversion requirements set out by the Department of Mineral Resources in terms of the mining charter. Demonstrating our ongoing commitment to transformation and broad-based empowerment in the spirit of the mining charter in structuring this transaction, we focused on stakeholders closest to our business:
112
PPC Ltd
Financial statements
employees of our South African businesses, who will now own around 7% of the PPC group. An employee trust has been established to hold these shares, and all permanent employees in South Africa will participate. Shares have been set aside for new employees joining the company over the next three years
27% of these shares will be issued to existing strategic
During the seven-year term of the scheme, all participants will receive 20% of ordinary dividends, with the balance going towards the notional vendor facilitation structure. After seven years, participants will be entitled to full dividends and be able to trade their shares. However, participants will be entitled to exercise their voting rights over the new shares from the outset.
black partners that also participated in the first-phase BBBEE initiative in 2008: Peu, Nozala, Portland Consortium and Palama Cement Consortium (formerly Capital Edge). These partners have contributed to the company on a number of fronts during the past four years
5% of these shares will be issued to a new trust, Bafati
Investment Trust, to hold shares for black women groups near our operations, with a board of trustees comprising a majority of women.
113
directors rePort
for the year ended 30 September 2012
The directors have pleasure in presenting their report on the annual financial statements of the company and of the group for the year ended 30 September 2012.
BUSINESS ACTIVITIES
PPC Ltd, its subsidiaries and associates, operate in Africa as manufacturers of cementitious, aggregate products and readymix, lime and limestone. The principal activities of the company and its subsidiaries remain unchanged from the previous year. A comprehensive review of operations is detailed in the attached integrated annual report.
Habesha Cement Share Company (Habesha) In July 2012, the group acquired a 27% equity stake in an Ethiopian public share company Habesha Cement Share Company (Habesha) for a purchase consideration of R102 million and the transaction is a significant step in PPCs African expansion strategy. Habeshas initial project is to build a US$130 million cement plant with an annual capacity of approximately 1,4 million tonnes. The project will be funded by a combination of equity and US$86 million debt funding from the Development Bank of Ethiopia. Habesha raised an initial 53% of the project cost through equity investments by more than 16 000 local shareholders. This acquisition fulfils one of PPCs key requirements which is to partner with local shareholders when investing in a new country.
FINANCIAL RESULTS
Profit attributable to shareholders, before the impact of the IFRS 2 charges on the BEE transactions, of R969million was 11% higher than 2011, with normalised earnings per share increasing by 11% from 166 cents per share recorded in 2011 to 185 cents per share. Cash earnings per share increased by 16% year-on-year. For further information on the financial results, refer to the group annual financial statements.
STATED CAPITAL
During the year the company, following special resolution approval from shareholders, increased its authorised share capital from 600 000 000 ordinary shares of 10cents each to 700 000 000 ordinary shares of no par value and transferred the ordinary share capital and premium accounts to a stated capital account. On 30 September 2012, the issued shares of the company were 566 029 971 of no par value (2011: 586 170 372 shares of 10 cents each; 2010: 586 170 372 shares of 10cents each). The stated capital balance at 30 September 2012 was R1 181 million debit (share capital and premium 2011: R1 091 million debit; 2010: R1 091 million debit). Details of shares authorised, issued and unissued at 30 September 2012 are given in note 9 to the group financial statements. SHARE REPURCHASE The treasury shares owned by PPC Cement (Pty) Limited were repurchased by the company in September 2012 for R589 million and subsequently cancelled. The resultant securities transfer tax of R1,4 million has been debited against stated capital.
114
PPC Ltd
Financial statements
FORFEITABLE SHARE PLAN (FSP) In terms of the newly implemented long-term employee incentive scheme, 3 079 853 shares were purchased on the JSE Limited. The shares purchased for settlement to employees are treated as treasury shares on a group level while vesting conditions are in place. For further details of the scheme, refer to the remuneration review. BEE 2 TRANSACTION In terms of the companys second BEE transaction, approved by shareholders in September 2012, 39,3million new PPC shares were issued to participants of the transaction in October 2012 and facilitated through a Notional Vendor Funding (NVF) mechanism. The participants of the transaction are the PPC Employees Share Trust, established for the benefit of all South African permanent employees, Strategic Black Partners and the Bafati Investment Trust. In terms of IFRS, the shares issued to the participants will be treated as treasury shares during the NVF period, and these shareholders will be entitled to 20% of the dividend declared by PPC with the balance being utilised to reduce the NVF.
ACQUISITION BY THE COMPANY OF ISSUED SHARES Except for the share buy-back as discussed under Share repurchase above, the company did not exercise its authority to buy back shares in the current financial year. SPECIAL RESOLUTIONS The following special resolutions for PPC Ltd were passed during the year under review: A special resolution granting authority for the company to provide at any time and from time to time during the period of two years commencing on 30 January 2012, direct or indirect financial assistance as contemplated in section 44 of the Companies Act to executive directors or prescribed officers participating in the companys forfeitable share plan, was passed at the annual general meeting on 30 January 2012: At a special general meeting held on 18 September 2012 the following special resolutions were passed: Permit the company to repurchase treasury shares held by PPC Cement (Pty) Limited Approve the conversion of par value shares to no par value shares and that the whole of the amounts of the ordinary share capital account and the share premium account of the company be transferred to the stated capital account of the company Approve the increase of the authorised ordinary shares from 600 000 000 to 700 000 000 shares Permit the company name change from Pretoria Portland Cement Company Limited to PPC Ltd Approve the adoption of the new memorandum of incorporation Permit the company to provide financial assistance to the Employee Share Trust and directors or prescribed officers of the company or of a related or inter-related company, that are or will be beneficiaries of the Employee Share Trust, for the purpose of enabling the trust to subscribe for the initial employee shares Permit the company to provide financial assistance in relation to the BEE transaction, to the SBP vehicle, the PPC Bafati Investment Trust and persons referred to in terms of section 42(2) of the Companies Act In line with the BEE transaction, permit the company to repurchase the Employee Share Trust, SBP vehicle and the PPC Bafati Investment Trust repurchase shares at the enddate.
REGISTER OF MEMBERS
The register of members of the company is open for inspection to members and the public, during normal office hours, at the offices of the companys transfer secretaries, Link Market Services South Africa (Pty) Limited, or at Corpserve (Private) Limited (Zimbabwe).
PASSED
BY
115
DIVIDENDS
Cents per share No 218 217 Description Final Interim Declaration date Record date Payment date 14 January 2013 11 June 2012 2012 108 38 2011 95 35 2010 130 45
GOING CONCERN
The directors consider that the company has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the goingconcern basis in preparing the companys financial statements. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements.
DIRECTORS
The directors in office at the date of this report appear on pages 6 and 7. At the annual general meeting held on 30 January 2012, J Shibambo, S Abdul Kader, ZJ Kganyago and NBLangaRoyds, were re-elected as directors of the company, and Ms MMT Ramano was elected as a director of the company. The following directors are required to retire by rotation in terms of the memorandum of incorporation but, being eligible, offered themselves for re-election at that meeting and thenominations committee has recommended their re-election: BL Sibiya (Independent non-executive director) MP Malungani (Independent non-executive director) TDA Ross (Independent non-executive director)
BORROWINGS
The companys borrowing powers are unlimited. At 30 September 2012, borrowings amounted to R3 585 million (2011: R3 510 million; 2010: R3 521 million), and remain within the boards stated target debt levels. Excluding the consolidated debt of the BEE funding transaction, group debt is R2 345 million (2011: R2 327 million; 2010: R2378 million). Further details can be found in note 11 to the group financial statements. The borrowing powers of Portland Holdings Limited, a wholly-owned subsidiary company, incorporated in Zimbabwe, are limited by its articles of association to twice the amount of shareholders interest. At 30 September 2012 Portland Holdings Limited did not have any borrowings.
116
PPC Ltd
Financial statements
Following Messrs SK Mhlarhi and K Gordhans appointment as directors by the board during 2012, and in terms of the companys memorandum of incorporation, the JSE listings requirements and the Companies Act, Messrs Mhlarhi and Gordhan are required to retire as directors, and both have offered themselves for re-election and the nominations committee has recommended their elections.
AUDIT COMMITTEE
The directors confirm that the audit committee has addressed specific responsibilities required in terms of section 94(7) of the South African Companies Act. Further details are contained within the audit committee report.
COMPETITION COMMISSION
In terms of the conditional leniency agreement with the Competition Commission, PPC continues to cooperate with their investigation and from our perspective there have been no significant new developments.
AUDITORS
Deloitte & Touche were reappointed as auditors to the company at the annual general meeting held on 30January 2012.
117
The accompanying summarised annual financial statements, which comprise the consolidated statement of financial position as at 30 September 2012, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows; the directors emoluments (included in the remuneration report) for the year then ended, and summarised notes, are derived from the audited group annual financial statements of PPC Ltd for the year ended 30 September 2012. We expressed an unmodified audit opinion on those group annual financial statements in our report dated 13 November 2012. Those group annual financial statements, and the summarised annual financial statements, do not reflect the effects of events that occurred subsequent to the date of our report on those financial statements. The summarised annual financial statements do not contain all the disclosures required by International Financial Reporting Standards (IFRS). Reading the summarised annual financial statements; therefore, is not a substitute for reading the audited group annual financial statements of PPC Ltd. Directors responsibility for the summarised annual financial statements The directors are responsible for the preparation of the summarised annual financial statements in accordance with the framework concepts and the measurement and recognition requirements of IFRS, the AC 500 standards as issued by the Accounting Practices Board, the information as required by International Accounting Standard (IAS) 34 Interim Financial Reporting and the requirements of the Companies Act of South Africa. Auditors responsibility Our responsibility is to express an opinion on the summarised annual financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810 Engagements to Report on Summary Financial Statements. Opinion In our opinion, the summarised financial statements derived from the audited financial statements of PPC Ltd for the year ended 30 September 2012 are consistent, in all material respects, with those financial statements, in accordance with the framework concepts and the measurement and recognition requirements of IFRS, the AC 500 standards as issued by the Accounting Practices Board, the information as required by IAS 34: Interim Financial Reporting and the requirements of the Companies Act of South Africa.
Other reports required by the Companies Act As part of our audit of the financial statements for the year ended 30 September 2012, we have read the directors report, the certificate by the company secretary, the remuneration report, the audit committee report and for the purpose of identifying whether there are material inconsistencies between those reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.
Deloitte & Touche Per B Nyembe Partner 13 November 2012 Buildings 1 and 2, Deloitte Place The Woodlands Office Park Woodlands Drive Sandton National Executive: LL Bam (Chief Executive), AE Swiegers (Chief Operating Officer), GM Pinnock (Audit), DL Kennedy (Risk Advisory), NB Kader (Tax), TPillay (Consulting & Clients & Industries) , JK Mazzocco (Talent & Transformation), CR Beukman (Finance), MJordan (Strategy), S Gwala (Special Projects) TJ Brown (Chairman of the Board), M J Comber (Deputy Chairman of the Board) A full list of partners and directors is available on request B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code Member of Deloitte Touche Tohmatsu Limited
118
PPC Ltd
Financial statements
2012 Rm
ASSETS
Non-current assets Property, plant and equipment Goodwill Intangible assets Non-current financial assets Long-term receivable Investments in associates Deferred taxation asset Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets 4998 4483 6 133 106 267 3 1909 841 820 248 6907
119
2012 Rm Revenue Cost of sales Gross profit Administrative and other operating expenditure Operating profit before item listed below BEE IFRS 2 charges Operating profit Fair value (losses)/gains on financial instruments Finance costs Investment income Profit before exceptional items Exceptional items Share of associates profit Profit before taxation Taxation Net profit Attributable to: Ordinary shareholders Other shareholders 7346 4809 2537 671 1866 123 1743 (3) 374 30 1396 7 1403 557 846 768 78 846 Earnings per share (cents) basic diluted 161 159
2011 Rm 6826 4500 2326 616 1710 11 1699 9 362 28 1374 (4) 15 1385 520 865 785 80 865 164 163
2010 Rm 6807 4067 2740 625 2115 10 2105 (20) 366 39 1758 (32) 8 1734 622 1112 1010 102 1112 211 210
120
PPC Ltd
Financial statements
Unrealised surplus on reclassification of plant Rm 2012 Net profit Other comprehensive income, net of taxation Exchange rate differences on translation of foreign operations Revaluation of investments Deferred taxation on revaluation Cash flow hedge recognised directly through equity Transfer to retained profit Total comprehensive income 2011 Net profit Other comprehensive income, net of taxation Exchange rate differences on translation of foreign operations Revaluation of investments Deferred taxation on revaluation Cash flow hedge recognised directly through equity Transfer to retained profit Total comprehensive income 2010 Net profit Other comprehensive loss, net oftaxation Exchange rate differences on translation of foreign operations Revaluation of investments Deferred taxation on revaluation Cash flow hedge recognised directly through equity Transfer to retained profit Total comprehensive income (4) (4) (4) (4) (4) (4) (4) (4) (4)
Hedging reserves Rm
Retained profit Rm
17 17 17
14 14 14
846 4 4 850
95 95 95
3 4 (1) 3
865 4 4 869
1112 4 4 1116
121
Other reserves Unrealised Availablesurplus foron Foreign sale reclassifi- currency trans- financial Hedging cation assets reserves lation of plant Rm Rm Rm Rm Total equity attributable to equity holders of parent Rm
Stated capital Rm 2012 Opening balance at beginning of the year Movement for the year BEE IFRS 2 charges FSP IFRS 2 charges Transfer to retained profit Total comprehensive income Treasury shares held in terms of the FSP share scheme Securities transfer tax on cancellation of treasury shares Dividends declared by funding SPVs to non-consolidated trusts Dividends declared to PPC shareholders Balance at 30 September 2012 2011 Opening balance at beginning of the year Movement for the year BEE IFRS 2 charges Transfer to retained profit Total comprehensive income Dividends declared by funding SPVs to non-consolidated trusts Dividends declared to PPC shareholders Balance at 30 September 2011 2010 Opening balance at beginning of the year Movement for the year BEE IFRS 2 charges Treasury shares held by Porthold Trust (Private) Limited Transfer to retained profit Total comprehensive income Dividends declared by funding SPVs to non-consolidated trusts Dividends declared to PPC shareholders Balance at 30 September 2010 (1088) (3) (3) (1091) (1091) (1091)
9 (4) (4) 5
28 17 17 45
27 (2) (2) 25
(57) 14 14 (43)
13 (4) (4) 9
(67) 95 95 28
24 3 3 27
17 (4) (4) 13
34 (10) (10) 24
122
PPC Ltd
Financial statements
2012 Rm
2011 Rm 1374 417 19 (1) 11 (8) (20) 362 1 (28) 2127 (79) (74) 128 2102 (254) 8 20 (441) 1435 (876) 559 (483) (391) (92) (34) 4 (2) 11 (504) 55 (14) 13 (70) (71) (16) 240 224 272
2010 Rm 1758 359 9 (3) 10 (7) (32) 366 10 16 2486 (69) (8) 33 2442 (261) 7 32 (531) 1689 (1062) 627 (613) (382) (231) (45) 8 (18) (3) 8 (663) (36) (14) (70) 112 28 (8) 248 240 321
123
SEGMENTAL INFORMATION
for the year ended 30 September 2012
The group discloses its operating segments according to the business units which are regularly reviewed by the group executive committee. These comprise cement, lime, aggregates and other. Group Cement* 2012 Rm Revenue South Africa Other Africa 5 823 1 560 7383 Inter-segment revenue Total revenue Operating profit before item listed below BEE IFRS 2 charges Operating profit Fair value (losses)/gains on financial instruments Finance costs Investment income Profit before exceptional items Exceptional items Share of associates profit Profit before taxation Taxation Net profit Depreciation and amortisation EBITDA~ Operating margin~ (%) EBITDA margin (%) Assets Total assets Non-current assets Current assets Additions to property, plant and equipment Capital commitments Liabilities Total liabilities Non-current liabilities Current liabilities (37) 7346 1866 123 1743 (3) 374 30 1396 7 1403 557 846 461 2327 25,4 31,7 2011 Rm 5664 1193 6857 (31) 6826 1710 11 1699 9 362 28 1374 (4) 15 1385 520 865 436 2146 25,1 31,4 2010 Rm 5611 1202 6813 (6) 6807 2115 10 2105 (20) 366 39 1758 (32) 8 1734 622 1112 368 2483 31,1 36,5 1682 122 1560 (1) 232 26 1353 7 1360 499 861 405 2087 26,9 33,4 1551 10 1541 9 241 24 1333 (4) 15 1344 470 874 391 1942 26,7 33,4 1902 9 1893 (20) 250 35 1658 (32) 8 1634 556 1078 325 2226 32,8 38,3 2012 Rm 4 867 1 379 6246 2011 Rm 4692 1122 5814 2010 Rm 4677 1129 5806
^ Other comprises BEE trusts and trust funding SPVs. ~ Excluding BEE IFRS 2 charges. * Including head office activities. In 2012, the value of lime exports into other countries has been separately disclosed. The values for the prior years amount to 2011:R81million and 2010: R59million.
124
PPC Ltd
Financial statements
Lime 2012 Rm 727 111 838 2011 Rm 772 772 2010 Rm 711 711 2012 Rm 229 70 299
43 43 1 2 44 44 10 34 13 56 15,9 20,7
61 61 1 3 63 63 15 48 13 74 20,6 24,9
210 125 85 12 87 17 70
2 2 1361 1305 56
1 1 1279 1257 22
2 2 1212 1161 51
125
1.
Basis of preparation
These summarised annual financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, the AC 500 standards as issued by the Accounting Practices Board, the information as required by IAS34: Interim Financial Reporting, the JSE Limiteds listing requirements and the requirements of the South African Companies Act, and was compiled under the supervision of the chief financial officer, MMT Ramano CA(SA). The accounting policies and methods of computation used are consistent with those used in the preparation of the annual financial statements for the year ended 30 September 2012, and are the same as those used in the prior year except for revised accounting standards and interpretations that were adopted which did not have a material impact on the reported results. For a better understanding of the groups financial position, the results of its operations and cash flows for the year, these summarised financial statements should be read in conjunction with the groups annual financial statements, from which these summarised financial statements were derived. A copy of the group annual financial statements can be found on the groups website www.ppc.co.za. The group annual financial statements were approved by the board on 12 November 2012.
2.
3.
126
PPC Ltd
Financial statements
4. Stated capital
During the year the company, following special resolution approval from its shareholders, increased its authorised share capital from 600 000 000 ordinary shares of 10 cents each to 700 000 000 ordinary shares of no par value and transferred the ordinary share capital account and share premium account to a stated capital account. The treasury shares owned by PPC Cement (Pty) Limited were purchased by the company in September 2012 and subsequently cancelled. The resultant securities transfer tax of R1 million has been debited against stated capital. In terms of the newly implemented long-term employee share incentive scheme, 3.1 million shares were purchased on the JSE Limited. The shares purchased for settlement to employees are treated as treasury shares on a group level while vesting conditions are in place. In terms of the companys second BEE transaction, approved by shareholders in September 2012, 39.3 million new PPC shares will be issued to participants of the transaction in October 2012 and facilitated through a Notional Vendor Funding (NVF) mechanism. See note 6. In terms of IFRS, the shares issued to the participants will be treated as treasury shares during the NVF period, and these shareholders will be entitled to 20% of the dividend declared by PPC with the balance being utilised to reduce the NVF.
5. Commitments
Capital and operating lease commitments amounted to R336 million (2011: R656 million; 2010:R518million) for the group as at the reporting date. The second 25% tranche on acquisition of Pronto Holdings (Pty) Limited is payable over the next year with the remaining 50% payable in 2014. The total acquisition cost is not expected to exceed R400 million. The company received environmental approval for the second phase of its Western Cape upgrade strategy. Detailed design continues and will incorporate the conditions included in the environmental authorisations.
6.
127
2012 Rm
2011 Rm
2010 Rm
2009 Rm
2008 Rm
2007 Rm
2006 Rm
(1 181) 2 357 1 176 4 008 859 2 716 433 1 723 869 42 812 6 907
(1 091) 2 046 955 3 837 740 2 699 398 1 627 811 10 806 6 419
(1 091) 1 949 858 3 591 568 2 645 378 1 663 876 76 711 6 112
(1 088) 2 003 915 3 366 469 2 628 269 1 538 764 96 678 5 819
115 1 598 1 713 511 299 55 157 2 310 1 619 61 629 1 4 534
868 1 481 2 349 340 156 68 116 2 193 1 366 236 579 12 4 882
868 1 335 2 203 364 174 83 107 1 788 983 212 472 112 9 4 355
128
PPC Ltd
Financial statements
2012 Rm
2011 Rm
2010 Rm
2009 Rm
2008 Rm
2007 Rm
2006 Rm
129
STATISTICS
Share performance Weighted average number of ordinary shares in issue during the year (000) Earnings per share (cents) Time weighted number of ordinary shares in issue during the year Net profit attributable to ordinary shareholders of PPC Ltd Weighted average number of ordinary shares in issue during the year Earnings per share before exceptional items, BEE IFRS 2 charges and take-on gain arising on consolidation of PPC Zimbabwe (cents) Net profit attributable to ordinary shareholders of PPC Ltd adjusted for exceptional items net of taxation* Weighted average number of ordinary shares in issue during the year Headline earnings per share (cents) Net profit attributable to ordinary shareholders of PPC Ltd adjusted for exceptional items net of taxation, amortisation of goodwill and capital profits or losses net of taxation Weighted average number of ordinary shares in issue during the year Headline earnings per share, before BEE IFRS 2 charges (cents) Net profit attributable to ordinary shareholders of PPC Ltd adjusted for exceptional items, amortisation of goodwill and capital profits or losses net of taxation and excluding BEE IFRS 2 charges Weighted average number of ordinary shares in issue during the year Ordinary dividends per share (cents) Special dividend per share (cents) Dividend cover (times) (excluding special dividends) Interim dividend per share paid and final dividend per share declared A non-recurring dividend that is exceptional in terms of either size or date declared Earnings per share before exceptional items* Ordinary dividends per share Net asset value per share (cents) Total equity, including investments at market value Total number of shares in issue at year end
* Also excludes the impact of BEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
130
PPC Ltd
Financial statements
2012
2011
2010
2009
2008
2007
2006
476009 161
185
166
213
257
283
263
226
162
165
217
170
283
263
226
185
167
219
257
283
263
226
146 1,3
130 1,3
175 1,3
200 1,3
225 1,3
205 61 1,3
143 77 1,6
224
182
163
174
331
437
410
131
STATISTICS continued
Profitability and asset management Operating margin (%) Operating profit (excluding BEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe) Revenue EBITDA (Rm) Profit from continuing operations before exceptional items, adjusted for BEE IFRS 2 charges, take-on gain arising from consolidation of PPC Zimbabwe, investment income, finance costs, fair value adjustments, depreciation and amortisation EBITDA Revenue Net asset turn (times) Revenue Average net assets Return on net assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill* Average of net assets Return on total assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill* Average total assets Return on total equity (%) Net profit attributable to shareholders of PPC Ltd Average interest of shareholders of PPC Ltd Return on total equity (excluding exceptional items) (%) Net profit attributable to shareholders of PPC Ltd less exceptional items net of taxation Average interest of shareholders of PPC Ltd Effective rate of taxation (%) Taxation (excluding prior year taxation, secondary taxation on companies and taxation on exceptional items Profit before taxation, excluding dividend income and exceptional items*
* Excludes the impact of BEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
132
PPC Ltd
Financial statements
2012
2011
2010
2009
2008
2007
2006
25,4
25,1
31,1
35,6
37,2
39,1
39,7
2327 31,7
2146 31,4
2 483 36,5
2 733 40,3
2 541 40,7
2 370 42,6
2 030 43,3
1,3
1,3
1,4
1,6
1,6
1,4
1,4
34,3
33,7
42,8
57,6
61,1
57,0
59,6
28,5
28,1
35,9
48,0
51,4
49,0
50,7
79,4
95,5
125,4
77,9
73,8
62,8
57,7
79,4
95,9
117,5
77,9
73,7
62,2
57,7
33,3
30,7
29,8
29,3
28,0
28,3
28,9
133
STATISTICS continued
Liquidity and leverage Total liabilities to total equity (%) Current and long-term liabilities, excluding deferred taxation Interest of shareholders of PPC Ltd Total borrowings to total equity (%) Short-term and long-term borrowings Interest of shareholders of PPC Ltd Current ratio (times) Current assets Current liabilities Quick ratio (times) Current assets, excluding inventories Current liabilities Interest cover (times) Profit before exceptional items, excluding finance costs* Finance costs, including finance costs capitalised EBITDA interest cover (times) EBITDA Finance costs, including finance costs capitalised Net debt to EBITDA ratio (times) Short-term and long-term borrowings, less cash and cash equivalents EBITDA Number of years to repay interest-bearing borrowings Total borrowings Cash available from operations Cash generated from operations (Rm) Cash flow from operations to total liabilities (times) Cash generated from operations Cash available from operations Total liabilities Value added Number of employees Number of persons employed full-time, part-time or on another basis during each of the pay periods of the preceding 12 months Revenue Average number of employees Wealth created per employee (R000)~ Wealth created Average number of employees ~ Includes employees of PPC Zimbabwe 2012, 2011, 2010 and 2009.
* Excludes the impact of BEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
134
PPC Ltd
Financial statements
2012
2011
2010
2009
2008
2007
2006
414
495
546
485
147
101
90
305
368
410
371
98
61
48
1,1
1,1
1,0
1,1
0,6
1,1
1,4
0,6
0,7
0,6
0,7
0,4
0,9
1,3
5,1
4,8
5,6
6,6
12,0
24,6
37,4
6,2
5,9
6,6
7,3
12,6
25,9
39,5
1,4
1,5
1,3
1,2
0,6
0,1
(0,2)
2 2284 0,3
2 2102 0,3
2 2 442 0,4
2 2 602 0,4
1 2 546 0,7
1 2 191 0,6
1 2 023 0,7
3 085
3 087
3 257
3 234
3 164
3 097
3 025
2 381
2 211
2 086
2 560
2 461
2 262
1 955
1 084
1 016
1 028
1 259
1 310
1 288
1 074
135
SHARE PERFORMANCE
JSE Limited Number of shares in issue (millions)~ Volume of shares traded (millions) Market price (cents) High Low At year end Value of shares traded (Rm) Volume of shares traded as a percentage of total issued shares (%) Number of transactions FTSE/JSE All Share Industrial index Zimbabwe Stock Exchange Number of shares in issue (millions) Number of authorised shares that are sold to and held by the shareholders of PPC Ltd on the Zimbabwe Stock Exchange Prevailing price at which share was sold on 30 September Number of shares in issue listed on the JSE Limited times market price per share at year end Number of shares in issue listed on the Zimbabwe Stock Exchange times market price per share at year end Earnings per share excluding exceptional items for the most recent 12 months* Market price per share at year end# Dividend yield (%) Price-earnings ratio Total dividends paid out of current years earnings Market price per share at year end# Market value per share at year end# Earnings per share excluding exceptional items for the most recent 12 months*
~ Includes treasury shares. * Excludes the impact of BEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe. ^ As data and exchange rates are not deemed meaningful, prior years information has not been disclosed for shares listed on the Zimbabwe Stock Exchange.
#
Number of authorised shares that are sold to and held bythe shareholders of PPC Ltd on the JSE Limited Number of shares transacted during the year Highest prevailing price at which share was sold Lowest prevailing price at which share was sold Prevailing price at which share was sold on 30September Number of shares transacted during the year times prevailing price Number of shares transacted during the year Number of shares in issue Number of exchanges of PPC Ltd shares between a buyer and a seller Average prices of a selected number of shares listed on the JSE Limited
Market price at year end (cents) Market capitalisation at 30 September (Rm) JSE Limited Zimbabwe Stock Exchange
Calculated using weighted market price of PPC shares listed on the JSE Limited and the Zimbabwe Stock Exchange.
136
PPC Ltd
Financial statements
2012
2011
2010
2009
2008^
2007^
2006^
47 543 22 375
15 1 947
15 2557
15 2236
25 1549
15 938
24 392
17 756
15,7
14,0
16,3
12,9
11,0
18,0
15,4
137
continual modernisation
ensuring technical excellence is maintained
Case study
A R280 million project to upgrade kiln number 6 at De Hoek was successfully completed in 2012, setting a new benchmark in the group. This collective effort by PPC Projects, group risk, subcontractors and De Hoeks own team has delivered a world-class upgrade that puts De Hoek at the forefront of cement technology. Modern kiln technology The retrofit upgrade involved four main areas: the coal-milling circuit, clinker cooler and kiln/raw mill bag filter. Each of these now has the latest technology to deliver significant benefits for De Hoek and PPC: Reduced energy consumption, through modern equipment and better efficiencies. The clinker grate cooler and indirect firing system combination mean greater thermal efficiency, and reduced coal consumption Lower emissions now well below the new standard. Reduced dust emissions from the clinker cooler filter, raw mill/kiln bag filter and coal mill bag filter mean a cleaner environment
138
PPC Ltd
Administration
Reduced noise levels new grate cooler will reduce noise levels compared to the previous satellite coolers Improved reliability the new equipment has higher reliability and utilisation, resulting in reduced downtime for unplanned stops Improved output the new equipment will increase efficiencies and therefore clinker production. The upgrade will extend the upgraded kiln line life by about 30 years to match the limestone reserve. In addition to the technical and engineering expertise that went into the project, the teamwork involved was a major contributor to the success of the upgrade. The willingness to support colleagues was evident in interdepartmental cooperation, and excellent interaction between various PPC sites, including Colleen Bawn in Zimbabwe and Dwaalboom in Limpopo. Within the team at De Hoek, every department played a part to make sure the project ran well and customer service continued seamlessly.
Ultimately, installing modern-generation equipment enables PPC to produce higher-quality cement to meet our customer service targets.
139
Register date: 28 September 2012 Issued share capital: 566 029 971 shares* No of shareholders 9347 7486 1371 269 68 18541
SHAREHOLDER SPREAD 1 1 000 shares 1 001 10 000 shares 10 001 100 000 shares 100 001 1 000 000 shares 1 000 001 shares and over Total DISTRIBUTION OF SHAREHOLDERS Banks Brokers Close corporations Endowment funds Individuals Insurance companies Investment companies Medical aid schemes Mutual funds Nominees and trusts Other corporations Pension funds Private companies Public companies Total PUBLIC/NON-PUBLIC SHAREHOLDERS Non-public shareholders Directors' holdings Broad-based black ownership Strategic holdings (10% or more) Public shareholders Total
176 45 170 113 13998 46 46 11 249 2963 122 233 342 27 18541
0,9 0,2 0,9 0,6 75,5 0,2 0,2 0,1 1,3 16,0 0,7 1,3 1,8 0,2 100,0
161797462 7840497 722813 2233260 39590965 27057114 7181498 417698 80995436 30323155 531052 112076812 94193444 1068765 566029971
28,6 1,4 0,1 0,4 7,0 4,8 1,3 0,1 14,3 5,4 0,1 19,8 16,6 0,2 100,0
15 2 12 1 18526 18541
BENEFICIAL SHAREHOLDERS HOLDING 3% OR MORE Government Employees Pension Fund PPC SBP Consortium Fundings SPV Pty Ltd
On 30 September 2011 issued share capital was 586170372. In terms of the second BEE deal 20140401 shares were cancelled.
140
PPC Ltd
corporate information
Administration
PPC Ltd (Incorporated in the Republic of South Africa) Company registration number: 1892/000667/06 JSE code: PPC ZSE code: PPC Auditors Deloitte & Touche Deloitte Place The Woodlands Woodlands Drive Woodmead, Sandton Private Bag X6 Gallo Manor, 2052, South Africa Telephone +27 11 806 5000 Telefax +27 11 806 5111 Secretary and registered office JHDLR Snyman 180 Katherine Street, Sandton PO Box 787416 Sandton, 2146, South Africa Telephone +27 11 386 9000 Telefax +27 11 386 9001 Email jaco.snyman@ppc.co.za Sponsor: South Africa Merrill Lynch SA (Pty) Limited 138 West Street Sandown, Sandton PO Box 651987 Benmore, 2010, South Africa Telephone +27 11 305 5555 Telefax +27 11 305 5600 JSE ISIN code: ZAE000170049 Transfer secretaries: South Africa Link Market Services (Pty) Limited 11 Diagonal Street Johannesburg, South Africa PO Box 4844 Johannesburg, 2000, South Africa Telephone +27 11 630 0815 Telefax +27 866 743260 Email info@linkmarketservices.co.za Transfer secretaries: Zimbabwe Corpserve (Private) Limited 2nd Floor, ZB Centre Corner First Street and Kwame Nkrumah Avenue Harare, Zimbabwe PO Box 2208 Harare, Zimbabwe Telephone +263 4 758 193/751 559 Telefax +263 4 752 629 Sponsor: Zimbabwe Imara Edwards Securities (Private) Limited Block 2, Tendeseka Office Park Samora Machel Avenue Harare, Zimbabwe PO Box 1475 Harare, Zimbabwe Telephone +263 4 790 090 Telefax +263 4 791 345
financial calendar
Financial year end Annual general meeting Reports Interim results for half-year to March Preliminary announcement of annual results Annual financial statements Dividends Interim Final Declared Paid Declared Paid May June November January
Integrated annual report 2012
141
PPC Ltd
Incorporated in the Republic of South Africa (Registration number: 1892/000667/06) JSE share code: PPC ZSE share code: PPC ISIN code: ZAE000170049 (PPC) or (the company) NOTICE IS HEREBY GIVEN to shareholders as at 28December 2012, being the record date to receive the notice of annual general meeting (AGM), that the 119th AGM of the company will be held in the JSE 1 Room at the Radisson Blu Hotel in Sandton, cnr Rivonia Road and Daisy Street, on Monday, 28 January 2013 at 12:00 to consider the following business and, if deemed fit, to approve, with or without modification, the ordinary and special resolutions set out below.
RECORD DATE
The board of directors of the company (board) has, in terms of section 59(1)(a) of the Companies Act, No 71 of 2008 (Act), set the record date for the purposes of determining which shareholders of the company are entitled to receive notice of AGM, as 18 January 2013, and has, in terms of section 59(1)(b) of the Act, set the record date, for purposes of determining which shareholders of the company are entitled to participate in and vote at AGM, as 18 January 2013. Accordingly, only shareholders who are registered in the register of members of the company on 14 December 2012 will be entitled to receive notice of AGM and only shareholders who are registered in the register of members of the company on 18 January 2013 will be entitled to participate in and vote at the AGM, therefore thelast date to trade to be eligible to participate and vote at the AGM is 11 January 2013. The last date for lodging forms of proxy is 25 January 2013, by no later than 12:00. Shareholders are reminded that: A shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy (or more than one proxy) to attend, participate in and vote at the AGM in place of the shareholder, and shareholders are referred to the proxy form attached to this notice in this regard A proxy need not also be a shareholder of the company In terms of section 63(1) of the Act, any person attending or participating in a meeting of shareholders must present reasonably satisfactory identification and the person presiding at the shareholder meeting must be reasonably satisfied that the right of any person to participate in and vote (whether as shareholder or as proxy for a shareholder) has been reasonably verified. Acceptable forms of verification include a green bar-coded identification document issued by the South African Department of Home Affairs, a drivers licence or a valid passport This notice of meeting includes the attached proxy form
ORDINARY BUSINESS
Election of directors Mr K Gordhan was appointed to the board as a director with effect from 1 November 2012 and in the office of chief executive officer (CEO) of the company with effect from 1 January 2013. In terms of the JSE listings requirements, article 25.8.1 of the memorandum of incorporation (MOI) and section 68(1) read with section 70(3)(b)(i) of the Act, Mr K Gordhans election as director must be confirmed at this AGM by a new election. A brief curriculum vitae for Mr Gordhan appears on page 6. Ordinary resolution number 1: Resolved that in terms of the JSE listings requirements, article 25.8.1 of the MOI and section 68(1) read with section 70(3)(b)(i) of the Act, Mr K Gordhan be and is hereby elected to the board as director, in the position of CEO, with immediate effect. The percentage of voting rights required for ordinary resolution number 1 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Ordinary resolution number 2: Mr S Mhlarhi was appointed to the board as a nonexecutive director of the company with effect from 1 March 2012. In terms of the JSE listings requirements, article 25.8.1 of the MOI and section 68(1) read with section 70(3)(b)(i) of the Act, Mr S Mhlarhis election must be confirmed at this AGM by a new election. A brief curriculum vitae for Mr S Mhlarhi appears on page 7.
142
PPC Ltd
Administration
Resolved that, in terms of the JSE listings requirements, article 25.8.1 of the MOI and section 68(1) read with section 70(3)(b)(i) of the Act, Mr S Mhlarhi be and is hereby elected to the board as non-executive director with immediate effect. The percentage of voting rights required for ordinary resolution number 2 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Re-election of directors retiring by rotation In terms of article 25.6.1 of the MOI, one-third of the companys non-executive directors are required to retire at every AGM. Mr BL Sibiya, Mr NP Malungani and Mr TDA Ross are accordingly required to retire by rotation at this AGM. A retiring director is however entitled to offer him/herself for re-election and each of Mr BL Sibiya, Mr NP Malungani and Mr TDA Ross have offered themselves for re-election. The board, through the nominations committee, has recommended the re-election of each of Mr BL Sibiya, Mr NP Malungani and Mr TDA Ross. A brief curriculum vitae of each of the directors standing for reelection appear on pages 6 and 7. Ordinary resolution number 3: Resolved that Mr NP Malungani who is required to retire as a director of the company at this AGM in terms of article 25.6.1 of the MOI and who, being eligible, offers himself for re-election be and is hereby elected, in terms of section 68(1) of the Act and article 25.2 of the MOI, as a director of the company with immediate effect. The percentage of voting rights required for ordinary resolution number 3 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Ordinary resolution number 4: Resolved that Mr TDA Ross, who is required to retire as a director of the company at this AGM in terms of article 25.6.1 of the MOI and who, being eligible, offers himself for re-election, be and is hereby elected, in terms of section 68(1) of the Act and article 25.2 of the MOI as a director of the company with immediate effect. The percentage of voting rights required for ordinary resolution number 4 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Ordinary resolution number 5: Resolved that Mr BL Sibiya, who is required to retire as a director of the company at this AGM in terms of article 25.6.1 of the MOI and who, being eligible, offers himself
for re-election, be and is hereby elected, in terms of section 68(1) of the Act and article 25.2 of the MOI, as a director of the company with immediate effect. The percentage of voting rights required for ordinary resolution number 5 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Reappointment of external auditors In terms of section 90(1) of the Act, the auditor of the company must be appointed at the AGM each year. To be appointed as auditor, the auditor must satisfy the requirements of section 90(2) of the Act and section 22 of the JSE listings requirements. The audit committee and the board (based on the findings of the audit committee) are satisfied that Deloitte & Touche Incorporated (Deloitte & Touche) meets the requirements of section 90(2) of the Act and section 22 of the JSE listings requirements. Accordingly, the audit committee and the board have proposed the reappointment of Deloitte & Touche as independent auditors of the company for the year ending 30 September 2013 to hold office until the conclusion of the next AGM. Ordinary resolution number 6: Resolved that Deloitte & Touche (on recommendation by the audit committee and the board) be and are hereby appointed as external independent auditors of the company to hold office until the conclusion of the next AGM of the company. Mr Nyembe (IRBA no 841323) from Deloitte & Touche will undertake the audit for the financial year ending 30 September 2012. The percentage of voting rights required for ordinary resolution number 6 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Authorisation for auditors remuneration The directors propose to fix the remuneration payable to the external auditors for the audit conducted for the year ended 30 September 2012. Ordinary resolution number 7: Resolved that the directors be and are hereby authorised to fix the remuneration of the external auditors, Deloitte & Touche, for the audit conducted for the year ended 30 September 2012. The percentage of voting rights required for ordinary resolution number 7 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
143
Appointment of members of the audit committee In terms of section 94(2) of the Act, at each AGM, the company is required to elect an audit committee comprising at least three members, each of whom mustsatisfy the requirements set out in section 94(4) of the Act. Mr TDA Ross, Ms ZJ Kganyago and Ms B Modise are the incumbent members of the audit committee and their term of office ends at the conclusion of this AGM. The nominations committee and the board are satisfied that each member meets the requirements of section 94(4) of the Act and that each member meets the minimum qualification requirements for a member of an audit committee and that they, together, have adequate relevant knowledge and experience to equip the audit committee to perform its functions. Each of Mr TDA Ross, Ms ZJ Kganyago and Ms B Modise are eligible for re-election and they have each agreed to stand for reelection. A brief curriculum vitae of each member appears on page 7. Ordinary resolution number 8: Resolved that, subject to his election in terms of ordinary resolution number 4, Mr TDA Ross, who is an independent non-executive director of the company, be and is hereby elected as a member of the audit committee with immediate effect to hold office until the next AGM. The percentage of voting rights required for ordinary resolution number 8 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Ordinary resolution number 9: Resolved that Ms ZJ Kganyago, who is an independent non-executive director of the company, be and is hereby elected as a member of the audit committee with immediate effect to hold office until the next AGM. The percentage of voting rights required for ordinary resolution number 9 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution. Ordinary resolution number 10: Resolved that Ms B Modise, who is an independent non-executive director of the company, be and is hereby elected as a member of the audit committee with immediate effect to hold office until the next AGM. The percentage of voting rights required for ordinary resolution number 10 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
Non-binding approval of the remuneration policy King III requires the board (with the assistance of the remuneration committee) to put forward a policy of remuneration to the shareholders. The companys remuneration policy (remuneration policy) is set out on pages 92 to 108 of the integrated annual report of which this notice forms part. In accordance with the recommendations of King III, the company should give the shareholders the right to express their views on the remuneration policy by casting an advisory vote in the manner set out below. Resolution number 11: Resolved that the companys remuneration policy, be and is hereby approved, through a non-binding advisory vote, in accordance with the recommendations of King III. The percentage of voting rights required for ordinary resolution number 11 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
SPECIAL BUSINESS
Special resolution number 1 to authorise inter company loans Background in respect of special resolution number 1 In terms of the Companies Act, No 61 of 1973, shareholders were not required to approve the advance of financial assistance (which includes the giving of a loan, guaranteeing of a loan or obligation and/or securing any debt or obligation) to a related or inter-related company (which includes a group company). In terms of section 45 of the Act, however, a company is now required to approve the giving of any financial assistance to a related or inter-related company by passing a special resolution in terms of section 45 of the Act and only after the board has applied the solvency and liquidity test. The reason for special resolution number 1 is that the company does advance loans to subsidiaries and other related companies within the group. Given that these loans constitute financial assistance for purposes of the Act, the shareholders are required to pass special resolution number 1 to approve the company advancing such financial assistance. The effect of special resolution number 1 is that the company will be authorised to advance loans and provide security to companies within the group, subject to the company meeting the solvency and liquidity tests and subject further to the financial assistance falling within the category of assistance mentioned in sub-paragraph (c) of special resolution number 1 below. Resolved that, as a special resolution, in terms of section 45(3)(a)(ii) of the Act, the shareholders of the company hereby approve of the company providing,
144
PPC Ltd
Administration
at any time and from time to time during the period of2(two) years commencing on the date of the passing of this special resolution, any direct or indirect financial assistance as contemplated in section 45 of the Act to any company within the PPC group of companies, provided that (a) the recipient or recipients of such financial assistance, the form, nature and extent of such financial assistance and the terms and conditions under which such financial assistance is to be provided, are determined by the board from time to time; (b) the board may not authorise the company to provide any financial assistance pursuant to this special resolution unless the board satisfies all the requirements of section 45 of the Act which it is required to meet in order to authorise the company to provide such financial assistance; and (c) such financial assistance to a recipient thereof is, in the opinion of the board, required for the purpose of (i) meeting all or any of such recipients operating expenses (including capital expenditure), and/or (ii) funding the growth, expansion, reorganisation or restructuring of the businesses or operations of such recipient, and/or (iii) funding such recipient for any other purpose which in the opinion of the board is directly or indirectly in the interests of the company. Percentage of voting rights required for special resolution number 1 to be adopted: at least 75% (seventy five percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
Shareholders are referred to the notice to shareholders in terms of section 45(5) of the Companies Act set out in annexure 1 hereto Special resolution number 2 pre-approval of remuneration of the non-executive directors Background in respect of special resolution number 2 In terms of section 66(8) read with section 66(9) of the Act, except to the extent that the Act provides otherwise, the company may pay remuneration to its directors for their service as directors and any such remuneration must be approved by special resolution of the shareholders within in the previous two years. The remuneration committee has determined the remuneration for nonexecutive directors and the board has accepted the recommendations of the remuneration committee. The reason for special resolution number 2 is to authorise the company to pay remuneration to its non-executive directors. Resolved, as a special resolution, that, in terms of sections 66(8) read with 66(9) of the Act, the company be and is hereby authorised to pay remuneration to non-executive directors for their services as non-executive directors for the period from the date of the passing of this special resolution to the conclusion of the next AGM, as follows:
Base fee/ Attendance fee 2012 Board Chair Each non-executive director Chair Each non-executive director Chair Each non-executive director Chair Each non-executive director Chair Each non-executive director Chair Each non-executive director 769 560 212 000 199 492 99 958 151 792 74 200 151 792 74 200 151 792 74 200 106 000 53 000
Additional meetings 2012 31 800 15 900 31 800 15 900 31 800 15 900 31 800 15 900 31 800 15 900 31 800 15 900
Base fee/ Attendance fee 2013 819 581 225 780 212 459 106 455 161 658 79 023 161 658 79 023 161 658 79 023 112 890 56 445
Additional meetings 2013 33 867 16 934 33 867 16 934 33 867 16 934 33 867 16 934 33 867 16 934 33 867 16 934
Audit committee
Remuneration committee
Nominations committee
Percentage of voting rights required for special resolution number 2 to be adopted: at least 75% (seventy five percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
Integrated annual report 2012
145
Special resolution number 3 general authority to repurchase ordinary shares Background in respect of special resolution number 3 It terms of the JSE listings requirements, the MOI and section 48 of the Act, a company may repurchase some of its own shares and a subsidiary company may acquire shares in its holding company (both of which are referred to as a repurchase). The reason for special resolution number 3 is to grant the company or any of its subsidiaries a general authority in terms of the Act and the JSE listings requirements to implement a repurchase. This authority will be valid until the earlier of the next AGM of the company or the variation or revocation of such general authority by special resolution by any subsequent meeting of the shareholders, provided that the general authority does not extend beyond 15 (fifteen) months from the date of the passing of this special resolution number 3. The passing of this special resolution will have the effect of authorising the company to undertake a repurchase. Resolved that, as a special resolution that, the board is hereby authorised by way of a renewable general authority, in terms of the provisions of the JSE listings requirements, the Act and otherwise as permitted in the MOI, to approve a repurchase by the company and any of its subsidiaries, upon such terms and conditions and in such amounts as the board may from time to time determine, but subject to the MOI, the provisions of the Act and the JSE listings requirements, when applicable, and provided that: Any such repurchase of ordinary shares will be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the company and/or any of its subsidiaries and the counterparty This general authority will only be valid until the companys next AGM provided that it will not extend beyond 15 (fifteen) months from the date of passing this special resolution A press announcement will be published in accordance with, and giving such details as is required in terms of the JSE listings requirements, where the company or its subsidiaries has/have repurchased ordinary shares constituting, on a cumulative basis, 3% (three percent) of the initial number of shares (the number of that class of ordinary shares in issue at the time that the general authority from shareholders is granted) and in respect of every 3% (three percent) in the aggregate of the initial number of shares thereafter. This announcement will contain full details of such repurchases
The general repurchase by the company and/or any subsidiary of the company of ordinary shares in the aggregate in any one financial year does not exceed 10% of the companys issued ordinary share capital as at the beginning of the financial year, provided that the acquisition of shares as treasury stock by a subsidiary of the company will not be effected to the extent that in aggregate more than 10% of the number of issued shares in the company are held by or for the benefit of all the subsidiaries of the company taken together General repurchases by the company and/or any subsidiary of the company in terms of this authority may not be made at a price greater than 10% above the weighted average of the market value at which such ordinary shares are traded on the JSE, as determined over the 5 (five) business days immediately preceding the date of the repurchase of such ordinary shares by the company and/or any subsidiary of the company A resolution has been passed by the board of the company and/or any subsidiary of the company confirming that the board has authorised the repurchase, and that the company and/or its subsidiary/ies have satisfied the solvency and liquidity test contemplated in section 4 of the Act, and that since the application of the liquidity and solvency test there have been no material changes to the financial position of the company and its subsidiaries (group) The company may at any point only appoint one agent to effect any repurchase(s) on its behalf The company and/or any of its subsidiaries may not repurchase securities during a prohibited period, as defined in paragraph 3.67 of the JSE listings requirements, unless the company and/or any of its subsidiaries has a repurchase programme in place where the dates and quantities of securities to be traded during the relevant period are fixed (and not subject to any variation) and full details of the programme have been disclosed in an announcement over SENS (the Securities Exchange News Service) prior to the commencement of the prohibited period. The percentage of voting rights required for special resolution number 3 to be adopted: at least 75% (seventy five percent) of the voting rights exercised on the resolution by shareholders present at the AGM or represented by proxy and entitled to exercise voting rights on the resolution.
146
PPC Ltd
Administration
Additional information in respect of special resolution number 3 The information required by the JSE listings requirements regarding this general authority appears in the integrated annual report, of which this notice of AGM forms part, as indicated below: Directors and management of the company: pages 6 to 8 Major shareholders: page 136 Details of stated capital are included in the directors report in the annual financial statements Directors interest in stated capital: page 102 Directors responsibility statement The directors, whose names are given on pages 6 and 7 of the integrated annual report, collectively and individually accept full responsibility for the accuracy of the information given, in respect of this special resolution number 3, and certify that to the best of their knowledge and belief there are no facts that have been omitted that would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the annual report and notice of AGM contains all information required by the Act and the JSE listings requirements. Material changes There has been no material change in the financial or trading position of the company or any of its subsidiaries since 30 September 2012. Litigation statement There are no legal or arbitration proceedings (including any pending or threatened legal or arbitration proceedings) against the company or its subsidiaries, of which the directors are aware, which may have, or have had in the last 12 months, a material effect on the financial position of the company or its subsidiaries. In terms of the JSE listings requirements, the directors of the company hereby state that: The intention of the company and/or any of its subsidiaries is to utilise this authority only if at some future date the cash resources of the company exceed its requirements. In this regard, the directors will take into account, inter alia, an appropriate capitalisation structure for the company, the long-term cash needs of the company, and will ensure that any such utilisation is in the interest of shareholders The method by which the company and/or any of its subsidiaries intends to repurchase securities and the date on which such repurchase will take place, has not yet been determined After considering the effect of a maximum permitted repurchase of securities, the company and its subsidiaries are, as at the date of this notice convening the AGM of the company, able to fully comply with the JSE listings requirements. Nevertheless, at the time the contemplated repurchase is to take place, the directors of the company will ensure that:
The company and the group will be able in the ordinary course of business to pay its debts for a period of 12 (twelve) months after the date of the notice of the AGM The assets of the company and the group will exceed the liabilities of the company and the group for a period of 12 (twelve) months after the date of the notice of the AGM. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements The stated capital and reserves of the company and the group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the notice of the AGM The working capital of the company and the group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the notice of the AGM The board of directors has authorised the repurchase, the company and its subsidiary/ies have passed the solvency and liquidity test, and since the solvency and liquidity test was last performed, there have been no material changes to the financial position of the group The company will provide its sponsor and the JSE with all documentation as required in schedule 25 of the JSE listings requirements, and will not initiate any repurchase programme until the sponsor has signed off on the adequacy of its working capital, advised the JSE accordingly and the JSE has approved the documentation
TO TRANSACT SUCH OTHER BUSINESS AS MAY BE TRANSACTED AT AN AGM PROXY AND VOTING PROCEDURE
On a show of hands, every shareholder present in person or by proxy, and if a member is a body corporate, its representatives, will have one vote and, on a poll, every shareholder present in person or by proxy and, if the person is a body corporate, its representative, will have one vote for every share held or represented by him/her. Shareholders holding dematerialised shares, but not in their own name, must furnish their central securities depositary participant (CSDP) or broker with their instructions for voting at the AGM. If your CSDP or broker, as the case may be, does not obtain instructions from you, it will be obliged to act in accordance with your mandate furnished to it, or if the mandate is silent in this regard, complete the form of proxy enclosed. Unless you advise your CSDP or broker, in terms of the agreement between you and your CSDP or broker, by the cut-off time stipulated therein, that you wish to attend the AGM or send a proxy to represent you at this AGM, your CSDP or broker will assume that you do not wish to attend the AGM or send a proxy.
Integrated annual report 2012
147
If you wish to attend the AGM or send a proxy, you must request your CSDP or broker to issue the necessary letter of authority to you. Shareholders holding dematerialised shares, and who are unable to attend the AGM and wish to be represented at that AGM, must complete the form of proxy enclosed in accordance with the instructions and lodge it with or mail it to the transfer secretaries. Forms of proxy (enclosed) must be dated and signed by the shareholder appointing a proxy and should be forwarded to reach the transfer secretaries, Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) and for Zimbabwean PPC shareholders, Corpserve (Private) Limited, 2nd Floor, ZB Centre, corner First Street and Kwame Nkrumah Avenue, Harare, Zimbabwe (POBox2208, Harare, Zimbabwe), by no later than 12:00 on 25 January 2013. Before a proxy exercises any rights of a shareholder at the AGM, such form of proxy must be so delivered. In compliance with the provisions of section 58(8)(b)(i) of the Act, a summary of the rights of a shareholder to be represented by proxy is set out below. An ordinary shareholder entitled to attend and vote at the AGM may appoint any individual (or two or more individuals) as a proxy or proxies to attend, participate in and vote at the AGM in the place of the shareholder. A proxy need not be a shareholder of the company. A proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy, and, subject to the rights of a shareholder to revoke such appointment (as set out below), remains valid only until the end of theAGM. A proxy may delegate the proxys authority to act on behalf of a shareholder to another person, subject to any restrictions set out in the instrument appointing the proxy. Irrespective of the form of instrument used to appoint the proxy, the appointment of a proxy is suspended at any time and to the extent that the shareholder who appointed such proxy chooses to act directly and in person in the exercise of any rights as a shareholder. Unless the proxy appointment expressly provides otherwise, the appointment of a proxy is revocable by the shareholder in question cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the company. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxys authority to act on behalf of the shareholder as of the later of (a) the date stated in the revocation instrument, if any; and (b) the date on which a copy of the revocation instrument is delivered to the company as required in the first sentence of this paragraph.
If the instrument appointing the proxy or proxies has been delivered to the company, as long as that appointment remains in effect, any notice that is required by the Act or the MOI to be delivered by the company to the shareholder, must be delivered by the company to (a) the shareholder, or (b) the proxy or proxies, if the shareholder has (i)directed the company to do so in writing; and (ii) paid any reasonable fee charged by the company for doing so. Attention is also drawn to the explanatory notes regarding the proxy on the form of proxy. The completion of a form of proxy does not preclude any shareholder attending the AGM. Any shareholder having difficulties or queries on the above may contact the company secretary on +27 11 386 9000.
148
PPC Ltd
FORM OF PROXY
Administration
PPC Ltd
Incorporated in the Republic of South Africa (Registration number: 1892/000667/06) JSE share code: PPC ZSE share code: PPC ISIN code: ZAE000170049 (PPC) or (the company) Only for use by registered holders of certificated ordinary shares in the company and the holders of dematerialised ordinary shares in the capital of the company in own-name form, at the annual general meeting (AGM) to be held at 12:00 on Monday, 28 January 2013, in the JSE 1 Room at the Radisson Blu Hotel in Sandton, cnr Rivonia Road and Daisy Street. Holders of ordinary shares in the company (whether certificated or dematerialised) through a nominee must not complete this form of proxy but should timeously inform that nominee, or, if applicable, their participant or stockbroker of their intention to attend the AGM and request such nominee, participant or stockbroker to issue them with the necessary letter of representation to attend or provide such nominee, participant or stockbroker with their voting instructions should they not wish to attend the AGM in person but wish to be represented by proxy at the meeting. Such ordinary shareholders must not return this form of proxy to the transfer secretaries. I/We (Name and address in block letters) being a member/s of the above company and holding therein, hereby appoint of or, failing him, the ordinary shares of
chairman of the meeting as my/our proxy to attend, speak and vote for me/us and on my/our behalf or to abstain from voting at the AGM of the company to be held in the JSE 1 Room at the Radisson Blu Hotel in Sandton, cnr Rivonia Road and Daisy Street, on Monday, 28 January 2013, and at any postponement or adjournment of that meeting as follows: In favour of Ordinary resolutions 1 Election of K Gordhan as director, in the position of CEO, to the board 2 Election of S Mhlarhi as a director to the board 3 Re-election of P Malungani as a director to the board 4 Re-election of T Ross as a director to the board 5 Re-election of B Sibiya as a director to the board 6 Appointment of Deloitte & Touche as external auditors of the company 7 Authorise directors to fix remuneration of external auditors 8 Appointment to audit committee T Ross 9 Appointment to audit committee Z Kganyago 10 Appointment to audit committee B Modise 11 Advisory vote on companys remuneration policy Special resolutions 1 To authorise the provision of financial assistance 2 To approve the board fees 3 Repurchase of own shares or acquisition of the companys shares by a subsidiary Insert an X in the relevant spaces above according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of ordinary shares than you own in the company, insert the number of ordinary shares held in respect of which you desire to vote (see note 2). Signed at Signature/s Assisted by (where applicable) Each member is entitled to appoint a proxy (who need not be a member of the company) to attend, speak and vote in place of that member at the AGM. Please read the notes to form of proxy below.
Integrated annual report 2012
Against
Abstain
on
20
149
1. The form of proxy must only be used by shareholders who hold shares in certificated form or who are recorded on the sub-register in electronic form in own name. 2. All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the AGM must provide the CSDP or broker with their voting instructions in terms of the relevant agreement entered into between them and the CSDP or broker. 3. A shareholder entitled to attend and vote at the AGM may insert the name of a proxy or the names of two or more alternate proxies of the shareholders choice in the space provided, with or without deleting the chairperson of the AGM. The person whose name stands first on the form of proxy and who is present at the AGM will be entitled to act as proxy to the exclusion of such proxy(ies) whose names follow. 4. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholders instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate space provided. If an X has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the shares held by the shareholder concerned. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the AGM as he/she deems fit in respect of all the shareholders exercisable votes. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy. 5. A vote given in terms of an instrument of proxy will be valid in relation to the AGM despite the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the shares in respect of which the proxy is given, unless notice on any of the noted matters has been received by the transfer secretaries not less than 48hours before the start of the AGM. 6. If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the AGM be proposed, such proxy shall be entitled to vote as he/she thinks fit.
7. The chairperson of the AGM may reject or accept any form of proxy which is completed and/or received other than in compliance with Act, the MOI and these notes. 8. A shareholders authorisation to the proxy including the chairperson of the AGM, to vote on such shareholders behalf, will be deemed to include the authority to vote on procedural matters at the AGM. 9. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the AGM and speaking and voting in person to the exclusion of any proxy appointed in terms hereof. 10. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the companys transfer secretaries or is waived by the chairperson of the AGM. 11. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the transfer secretaries of the company. 12. Where there are joint holders of shares: Any one holder may sign the form of proxy The vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear in the companys register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s) 13. Forms of proxy should be lodged with or mailed to transfer secretaries, Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) and for Zimbabwean PPC shareholders, Corpserve (Private) Limited, 2nd Floor, ZB Centre, corner First Street and Kwame Nkrumah Avenue, Harare, Zimbabwe (PO Box 2208, Harare, Zimbabwe) to be received by no later than 12:00 on 25 January 2013 (or 48 (forty-eight) hours before any adjournment of the AGM which date, if necessary, will be notified on SENS). 14. A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.
150
PPC Ltd
ANNEXURE 1
Administration
NOTICE TO SHAREHOLDERS IN TERMS OF SECTION 45(5) OF THE COMPANIES ACT IN RESPECT OF SPECIAL RESOLUTION NUMBER 1
Notice is hereby given to shareholders of the company in terms of section 45(5) of the Companies Act of a resolution adopted by the board of directors of the company (board) authorising the company to provide such direct or indirect financial assistance as specified in special resolution number 1 on the basis that: (a) by the time that the notice of annual general meeting is delivered to shareholders of the company, the board of directors of the company will have adopted a resolution (section 45 board resolution) authorising the company to provide, at any time and from time to time during the period of 2 (two) years commencing on the date on which the special resolution number 1 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act to any one or more related or inter-related companies or corporations of the company and/or to any one or more members of any such related or inter-related company or corporation and/or to any one or more persons related to any such company or corporation; (b) the section 45 board resolution will be effective only if and to the extent that the special resolution number 1 is adopted by the shareholders of the company, and the provision of any such direct or indirect financial assistance by the company, pursuant to such resolution, will always be subject to the board being satisfied that (i) immediately after providing such financial assistance, the company will satisfy the solvency and liquidity test as referred to in section 45(3)(b)(i) of the Companies Act, and that (ii) the terms under which such financial assistance is to be given are fair and reasonable to the company as referred to in section 45(3)(b)(ii); (c) in as much as the section 45 board resolution contemplates that such financial assistance will in the aggregate exceed one-tenth of one percent of the companys net worth at the date of adoption of such resolution, the company hereby provides notice of the section 45 board resolution to shareholders of the company. Such notice will also be provided to any trade union representing any employees of the company.
151
Glossary
ABET ACMP ASPASA BBBEE or BEE CDP CGT CSI DEA DMR DoE DTI EBITDA EIA EIUG EMP FSP GRI HDSA IFRS 2 ISO King III LED LTIFR MOI MPRDA MQA NQF OHSAS OPC PMC SANS SLP SMME STC STIS TCTC VCT
Adult basic education and training Association of Cementitious Material Producers Aggregate and Sand Producers Association of South Africa Broad-based black economic empowerment Carbon Disclosure Project Corporate gains tax Corporate social investment Department of Environmental Affairs (South Africa) Department of Mineral Resources (South Africa) Department of Energy (South Africa) Department of Trade and Industry (South Africa) Earnings before interest, tax, depreciation and amortisation Environmental impact assessment Energy-intensive users group Environmental management plan Forfeitable share plan Global Reporting Initiative Historically disadvantaged South African International Financial Reporting Standards for share-based payment transactions International Standards Organisation King Report on Governance for South Africa Local economic development (South Africa) Lost-time injury frequency rate Memorandum of incorporation Mineral and Petroleum Resources Development Act (South Africa) Mining Qualifications Authority National Qualifications Framework Occupational health and safety assessment series Ordinary Portland cement (CEM I) Portland Masonry cement South African National Standards Social and labour plan (South Africa) Small, medium and micro enterprise Secondary tax on companies (South Africa) Short-term incentive scheme Total cost to company Voluntary counselling and testing
152
PPC Ltd
BASTION GRAPHICS
www.ppc.co.za