The Vault oCuse about this report INTEGRATED ANNUAL REPORT 2011 FOCUSED Cover image: In 2011, PPC...
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PRETO
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FOCUSEDINTEGRATED ANNUAL REPORT 2011
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Focusedabout this report
I N T E G R AT E D A N N U A L R E P O R T 2 0 1 1
FO C U S E D
Cover image: In 2011, PPC focused on a number of priorities both locally and in sub-Saharan African countries. The cover combines our innovative print and television advertising campaign with our focus on Africa.
A number of acronyms and abbreviations are used in this report. For easy reference a glossary is included on the bookmark or inside the back cover on the A5 book.
We need your feedback to ensure we report on specifics that matter to you – our stakeholders. Please go to the weblink:
Scope and boundary of report
This integrated annual report covers PPC’s financial and non-financial performance between 1 October 2010 and 30 September 2011. It follows the integrated annual report published for the 2010 financial year. Details for obtaining copies of the integrated report from the PPC group company secretary appear on page 201. For further details on sustainability matters, please contact: Dr Urishanie Govender, PPC group manager, sustainability and environment, tel +27(11) 386-9122, fax +27(11) 386-9117, email [email protected].
The scope of this report covers all PPC’s manufacturing facilities (cement and lime), aggregate quarries and depots in South Africa, Botswana and Zimbabwe.
Our annual financial statements were prepared according to international financial reporting standards (IFRS), requirements of the South African Companies Act, regulations of the 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 the new 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. Where readers will benefit from a fuller explanation, they are referred to a website by an icon and URL address. The online version of this report is at
http://www.ppc.co.za
Reporting approachThis is our second 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 King III. What, precisely, constitutes integrated reporting remains the subject of international debate, although we have noted the first discussion paper from the International Integrated Reporting Committee. We have also been guided by accepted best practice in annual reporting and the 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.
Forward looking statementsThis report including, without limitation, those statements concerning the demand outlook, PPC’s 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 that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been 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 it 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.
Report navigation
Links to supplementary information
Indicates material issues discussed
www.ppc.co.za
www.ppc.co.za/pages/contact_feedback.cfm
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our profile...
In 2010, PPC celebrated its centenary as a JSE-listed
company, joining an extremely small and elite group of listed
centenarians, not only in South Africa but worldwide. In 2012,
PPC will celebrate its 120th year – a formidable 12 decades of
innovation and market leadership.
Today, PPC is focused on its core businesses. 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
eight million tonnes of cement products each year. PPC also
produces millions of tonnes of aggregates, metallurgical-
grade lime, burnt dolomite and limestone.
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 Africa, we will deploy our sustainable business
model – one built to last and the brand of choice in our chosen
marketplaces.
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our strategic priorities
Strategic priorities
Focus on core business
• Remain focused on core business, the 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 group’s 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 performances 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.
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Integrated annual report 20111
Our vision
About the reportScope and boundary of report IFC
Reporting approach IFC
Group overviewOur profile IFC
Our strategic priorities IFC
Our vision 1
Investment proposition 1
Operations and geography 2
Salient features 2011 4
Integrated strategy processApproach to a sustainable business 5
Stakeholder engagement 6
Material issues 9
CommentaryChairman’s report 12
Chief executive officer’s report 14
Chief financial officer’s report 18
Group performanceSummary 24
Value-add statement 28
Operations reviewCement 32
Lime 35
Aggregates 35
People reviewSafety and health 38
Workforce 42
People development 44
Social reviewEmpowered ownership 50
Socio-economic development 52
Corporate social responsibility 56
Environmental reviewEnvironmental vision and policy 62
Environmental performance 63
Key environmental issues 66
Governance reviewCorporate governance review 74
Risk review 85
Leadership 88
Remuneration report 90
AssuranceCombined assurance 104
Empowerment status 105
Mining charter scorecard 2011 106
Assurance statement 109
GRI index 110
Financial statementsCertificate by company secretary 116
Approval of annual financial statements 117
Independent auditor’s report 118
Directors’ report 119
Seven-year review of the group’s results 122
Share performance 130
Glossary of accounting terminology 132
Accounting policies 137
Judgements made by management 145
Group annual financial statements 146
Segmental information 152
Notes to the group annual financial statements 154
AdministrationPPC in the stock market 200
Corporate information 201
Notice of annual general meeting 202
Form of proxy 211
Glossary of definitions and acronyms Bookmark
To grow PPC into a leading emerging-market business.
PPC currently operates in emerging markets, and all our adjoining
territories are in emerging markets. Importantly, 70% of the
world’s cement is produced in emerging markets.
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• Leading producer in southern Africa with best geographic spread
• New capacity available• Strong financial position• Financial strength to explore expansion opportunities• Experienced management team
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Pretoria Portland Cement Company Limited2
cementOPERATIONS AND GEOGRAPHY
AGGReGAteSlime
OverviewSince being established as De Eerste Cement Fabrieken Beperkt in 1892, PPC has been the acknowledged market leader in southern Africa. Over almost 12 decades, PPC has tracked the growth and development of South Africa, producing the cement used in many of the country’s iconic landmarks and construction projects, from the Union Buildings, Gariep Dam and Van Staden’s River Bridge, to the new Greenpoint Stadium, Gautrain and much of the rest of southern Africa’s infrastructure.
PPC has operations and strong brands in South Africa, Botswana, Zimbabwe and Mozambique. In addition to serving southern African markets, we export cement to other African countries.
OverviewPPC Aggregates supplies quality construction aggregates to the civil construction sector and products for the chemical, metallurgical and agricultural industries.
Its quarries, Mooiplaas, Laezonia and Kgale (Botswana), are ISO 9001:2000 certified and members of the Aggregate and Sand Producers Association of Southern Africa (ASPASA).
The newly acquired quarries in eastern Botswana will allow PPC Aggregates to improve its offering to customers in Selebi Phikwe and Francistown.
Aggregate productsConcrete stone, road stone, crusher sand, river sand, building sand, plaster sand, Magalies silica, natural base, sub-base, fill material, dolomite and agricultural lime.
OverviewEstablished in 1907, PPC Lime has grown from small operations 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.
PPC Lime holds ISO 9001, 14001 and OHSAS 18001 (safety management) certifications. Coupled with its SANS 1841 and five-star Dekra rating, customers are assured of superior quality products.
Lime productsUnslaked lime, hydrated lime and limestone and burnt dolomite.
Cement product rangeSouth AfricaPPC’s new product range boasts an enhanced 42.5N Surebuild and the improved premier specialist brand OPC in the 52.5N strength category.
ZimbabweOPC, PMC and Unicem, a trusted multipurpose cement, are distributed from the Bulawayo factory.
BotswanaThe new 32.5R Botcem product is proving a popular ash-blended cement manufactured at the Gaborone milling depot.
MozambiquePPC’s new 42.5N Surebuild is distributed as the Força brand.
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Integrated annual report 20113
Other AfricaRm 2011 2010
Revenue 1 193 1 202EBITDA 249 182Employees 693 699
South AfricaRm 2011 2010
Revenue 5 633 5 605EBITDA 1 897 2 301Employees 2 394 2 558
Areas of expansion*
Population 350 millionAnnual cement consumption per capita 55kg**
Annual cement demand 20 millionAnnual cement production capacity 16 million * All figures are estimates for 2011** 220kg in South Africa in 2011
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 (newly acquired)
Existing operating areas
● Cement plant ● Milling depot ● Aggregate quarry ● Lime plant
Zimbabwe
Botswana
South Africa
• Richards Bay
Bulawayo •
Gaborone •
Mafikeng •
• Port Elizabeth
Saldanha •
Kimberley •
• Johannesburg
Cape Town •
• Durban
Mozambique
Tanzania
Zambia
UgandaKenya
Democratic Republic of Congo
Target areas for expansion
Ethiopia
South Sudan
Malawi
14
9
15 56
10
7
24
1
16
16
16
3
13
8
1211
Grou
p ove
rview
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Pretoria Portland Cement Company Limited4
SALIENT FEATuRES FOR 2011
Salient features
Corporate governance and risk Social
• Implementing best practices according to King III initiative.
• Robust compliance function in place.
• 14 projects handed over to communities• 84% of total procurement (R2,8 billion) spent
with BBBEE suppliers.
People Environmental
• Retained OHSAS 18001 health and safety certifications.
• 350 employees have benefited from various PPC academy offerings since 2007.
• PPC energy policy approved with defined targets for reducing energy and carbon footprint.
• Implementation of five-year energy plan under way.
FOcUSeD On DeliVeRY
Results improved in the second half of our financial year and we maintained good cash generation and respectable margins. We also reduced overheads while delivering on a number of strategic projects to underpin our sustainability.
Financials (R million) 2011 2010 2009
Revenue 6 826 6 807 6 783
Operating profit* 1 710 2 115 2 418
Property, plant and equipment 4 287 4 175 3 941
Total assets 6 419 6 112 5 819
Cash generated from operations 2 102 2 442 2 602
Ordinary share analysis
Headline earnings per share (cents)* 166,8 218,7 256,8
Earnings per share (cents)* 166,3 212,9 257,3
Dividends per share (cents) 130,0 175,0 200,0
Number of employees# 3 087 3 257 3 234
* Excluding BBBEE IFRS 2 charges and take-on gain on consolidation of PPC Zimbabwe.
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Integrated annual report 20115
We believe the cornerstone of sustainability lies in the balanced integration of performance, corporate governance, social, economic and environmental factors into the planning, decision-making and implementation stages of our business. Accordingly, we exercise due diligence in all areas of operation and promote sustainable development in our business, among our employees, and in the communities and environment in which we operate.
The new Companies Act in South Africa places more emphasis on a balanced sustainable approach to business and this, together with the comprehensive guidelines in King III, will guide the company in formalising its processes and reporting on how we do business.
MaterialityTo identify our material issues (page 9), PPC uses a wide range of criteria, processes and stakeholder engagements, as detailed below:
Internal factors External factors
• Group’s 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, suppliers and communities.
• Relevant laws, regulations and changes to legislation that impact on PPC and its stakeholders, for example Companies Act, Skills Development, Employment Equity, National Waste Management Act, National Air Quality Act, and local air quality by-laws.
• underlying risks to PPC as defined by internal integrated risk methodologies.
• Changes involving sustainability issues, impacts, risks or opportunities (eg climate change, energy efficiency) identified through published global research and development.
• 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.
FOcUSeD On tHe FUtUReAPPROACH TO A SuSTAINABLE BuSINESS
Integrated
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Pretoria Portland Cement Company Limited6
PPC uses an all-inclusive stakeholder engagement process. While engaging with such diverse stakeholder 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.
Objectives of stakeholder forums Membership is open to representatives from
• Facilitate discussion on environmental and social initiatives.
• All government departments.
• Build capacity in the community for environmental and social management.
• Applicable labour union representatives.
• Disseminate relevant information to stakeholders.
• PPC employees.
• Establish the stakeholder map for PPC. • Landowners, tenants and neighbours on surrounding properties.
• Establish and maintain a database of issues raised and management response.
• Representatives from non-governmental organisations (NGOs).
• Transparently manage community expectations.
• Strengthen the relationship between PPC and the communities in which we operate.
APPROACH TO A SuSTAINABLE BuSINESS CONTINuED
FOcUSeD On RelAtiOnSHipS
Employees
Non-governmental andcommunity organisations Trade unions
Shareholders and investment community
Banks, funders and insurance companies
Customers
Media
Suppliers
National, provincialand local government
Industry associations
Academic institutions and professional organisations
Stakeholder engagement
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Integrated annual report 20117
Stakeholder Type of engagement Issues raised Action taken
Employees 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.
Environmental awareness.
Employee benefits including wages.
Operational and financial performance.
Safe working environment.
understanding transformation strategy and plans.
Individual performance and development.
Succession planning.
Organisational climate.
Financial performance.
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.
Cost-of-living salary adjustments and other benefit issues.
Agreed annual salary adjustments.
Academic institutions and professional organisations
Meetings, conferences, site forums.
Stack emissions and dust fallout.
Emission levels recorded in the integrated annual report.
Industry associations
• Cement and Concrete Institute.
• ACMP1–aspasa1 .• Chamber of Mines• ITTCC1, EIuG1.• South African Coal Ash Association.
Meetings, conferences, working groups.
Publication of cement statistics.
Proposed CO2 tax.
Support and cooperation with ACMP’s engagement with the Competition Commission.
Financial support for authoritative CO2 study and recommendation.
PPC provides environmental inputs on projects and legislation.
National, provincial and local government
Departments of:• Environmental Affairs.• Mineral Resources.• Water Affairs.• Basic Education• Health.• Labour.• Rural Development and Land Reform.
• Agriculture, Forestry and Fisheries.
• International Relations and Cooperation.
• Human Settlements.• Transport.• Water.• Women, Children and People with disabilities.
Municipalities.SARS.
Meetings, conferences, working groups, factory inspections.
Air quality and waste management.
Financial provisioning and rehabilitation.
Integrated water use licences and water quality.
Social and labour plan implementation.
Western Cape expansion plan.
PPC has been identified as a key resource to coordinate and lead cooperative governance arrangements with the national government project on alternative environmental impact assessment tools.
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.
1 See bookmark for glossary.
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Pretoria Portland Cement Company Limited8
Stakeholder Type of engagement Issue raised Action taken
Customers Customer visits, factory visits, industry conferences and associations.
hospitality.
Independent customer satisfaction surveys.
In-store visits and promotions.
Technical support and education.
Advertising.
Price, service, product range, quality.
Managing cement waste (used bags and spillage).
Empowerment status.
PPC communicates price increases in writing to contractors, 60 days in advance.
A formal customer complaint process is in place.
Comprehensive response through media.
Customers supplied on request with empowerment status certificate and annual report for progress and targets.
Suppliers Site visits (including suppliers’ suppliers).
Meetings.
Supplier audits.
Tender briefing sessions.
Rail-wagon offloading times.
supply.
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.
Green procurement forum in place.
Standard practice is for all contractors entering a site to receive safety induction training.
Media
• Print, radio, television.• National, local, trade.
press releases.
Interviews.
Meetings.
Press conferences.
Industry outlook.
Financial results.
Carbon footprint.
Products.
PPC developed a specific engagement plan and specific media interactions were held during the year.
Shareholders and investment community
Annual and interim results, website, annual report, roadshows, meetings, conferences.
Cement demand outlook and pricing.
Operating costs and capital expenditure.
Competitor activity.
Carbon tax.
used to guide reporting information and responses given at the various engagements.
Banks, funders and insurance companies
Annual and interim results, meetings.
None raised.
Non-governmental and community organisations
Public forums, meetings, internet.
Dust and gas emissions.
Noise.
Co-processing alternate fuels.
Employment.
See detail in environmental report.
Where possible employees are sourced from the communities in which we operate.
1 See bookmark for glossary
APPROACH TO A SuSTAINABLE BuSINESS CONTINuED
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Integrated annual report 20119
Material issuesDuring the year PPC has considered a number of issues using our approach to sustainability, our measure of materiality, stakeholder input and our business risk assessment process (page 5) to identify, monitor and respond to material issues.
Material issue Response strategy Status
Mar
kets
1 High exposure to South African economy
For 2011 financial year, 18% of PPC’s revenue was from outside South Africa (20% of EPS).
• Increase revenue generated in other countries to 40% – 50% by 2016 by expanding PPC’s footprint into other developing/emerging market economies in sub-Saharan africa.
• Dedicated and experienced business development team in place.
• Eight opportunities in targeted African countries have been carefully assessed for value enhancement. Four of these have been terminated and four are still under way.
2 Weak demand and overcapacity
Existing overcapacity in South Africa, Namibia and Botswana could be exaggerated by the possibility of new capacity from existing competitors and new entrants after 2014.
• Rationalise production capacity to improve utilisation and efficiency.
• Contain manufacturing costs.
• Increased focus on customer needs, marketing and product enhancement.
• Export opportunities continually evaluated and exploited.
• Older less-efficient equipment has been placed on care and maintenance, pending changes in market demand.
• Realignment of resources has been completed at overhead and operational levels.
• Marketing activities increased, including television advertising, competitions and in-store promotions.
• Value offering to customers improved, including enhanced products and services.
Reg
ula
tory
3 Conversion of mineral rights
The Mineral and Petroleum Resources Development Act (MRPDA) in conjunction with the mining charter require the conversion of all the group’s old-order mineral rights to new-order mineral rights.
To implement the requirements of the MRPDA and mining charter in a way that ensures the:
• Spirit of empowerment is embraced
• Target for 2014 is met
• Resultant business structure is efficient and value creating for all stakeholders.
• Having met the 2009 criteria, PPC continues to engage the Department of Mineral Resources to complete this process and ensure it meets the 2014 requirements.
4 Indigenisation legislation in Zimbabwe
• Maintain a constructive relationship with the Zimbabwean authorities, highlighting our existing level of indigenisation through local ownership and local social development initiatives.
• The company continues to engage with the Zimbabwean authorities to obtain clarity on the future requirement and measurement of indigenisation.
FOcUSeD On RiSK AnD OppORtUnitY
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Pretoria Portland Cement Company Limited10
APPROACH TO A SuSTAINABLE BuSINESS CONTINuED
Material issues continued
Material issue Response strategy Status
Stra
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ic
5 Risks associated with acquisition, partnership and/or investment in a new country
• Ensure correct and sufficient resources in place, including industry and country experts, to properly assess each opportunity in line with the group’s risk appetite.
• Consult with relevant government authorities.
• Promote equity participation by local partners.
• use opportunities from development funding institutions as the projects have broad development implications and are therefore within their mandate.
• Dedicated business development team under leadership of an experienced director in place.
• A board deal committee assesses each opportunity.
• Appropriate risk assessments per opportunity.
Hu
man
cap
ital
6 Talent management
A sustainable business is only possible through the attraction, development and retention of appropriate people and skills. This includes CEO succession (the current CEO’s term expires end May 2012).
• PPC continues to practise its Kambuku people philosophy to empower, motivate and develop employees.
• Succession planning is an integral part of Kambuku.
• Director succession is the responsibility of the nominations committee of the board of directors.
• Benchmarked and above-average employee practices, remuneration and benefits.
• Annual, anonymous internal employee perception monitor increased from 91% to 92% during 2011.
• PPC academies covering leadership, sales and marketing, vocational training and bridging programmes continued.
• Nominations committee has started the process for CEO succession.
7 Safety
The number of lost-time injuries remains unacceptable.
• Safety remains a top priority for PPC. We continually strive to improve safety standards, develop a safe and healthy work environment and a safety-conscious workforce.
• The group’s LTIFR reduced from 0,40 in 2010 to 0,34 in 2011, but unfortunately one fatal accident did occur.
• A programme to re-energise safety awareness in PPC is under way.
• High-level team mandated to research industry best practices and develop a new approach to safety.
• Joined the Chamber of Mines committee on safety during 2011.
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Integrated annual report 201111
Material issue Response strategy Status
Op
erat
ion
al
8 Energy (electricity, coal, diesel)
The cement industry requires significant thermal, liquid and electrical energy. The price, quality and sustainable supply of all energy types are key to successful operation.
• PPC’s energy committee is directing projects to improve electrical and thermal efficiency and to evaluate alternative forms of thermal and electrical energy supply. These include continuous equipment upgrades, burning waste materials instead of coal, waste heat co-generation and wind-generated electricity.
• Inbound logistics (liquid fuel) optimised by the procurement department, while outbound logistics is optimised by operations and sales personnel in conjunction with logistics service providers.
• PPC has a project to replace old capacity at its De Hoek and Riebeeck plants in the Western Cape. Construction on the De Hoek plant is under way and the design and environmental impact assessment for the Riebeeck plant should be completed by mid-2012. The new plant will be both more electrically and thermally energy efficient.
• A number of smaller upgrades to existing equipment are under way.
• In 2011 two wind-generation projects and two co-generation projects were pursued. Negotiations are in progress to secure power from at least one of these projects.
• Burning waste materials to replace coal remains delayed by inadequate legislation and environmental authorisations.
9 Rail logistics infrastructure constraint
Transnet Freight Rail (TFR) is unable to transport all rail-appropriate tonnages required by PPC.
• Rail is the most efficient method of moving bulk materials across land and is an integral part of PPC’s operational requirement. PPC will continue to seek ways to improve the service received from TFR.
• Continuous engagement with TFR at all levels to ensure good relationships and understanding.
• The risk associated with rail logistics is incorporated in all new raw material supply plans, new distribution networks and expansion plans.
Envi
ron
men
tal
10 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 CO2 tax will have financial implications for the South African cement industry as a whole.
• PPC has committed to reducing CO2 emissions, with significant progress over the past decade. PPC will continue to improve energy and process efficiencies to continually reduce its CO2 emissions and carbon footprint.
• PPC will also actively participate in industry/ government consultative processes to ensure decision-makers have a clear perspective on:
– What CO2 reduction targets are feasible.
– How CO2 targets should be implemented.
– The implications of any proposed CO2 tax.
• 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 related to CO2 targets and potential CO2 taxation.
• See updated PPC energy policy on page 60.
Integrated
st
rate
gy
proc
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CHAIRMAN’S REPORT
FOcUSeD teAm
Earnings from outside South Africa rose to almost 20%. We are capitalising on the economic growth potential in sub-Saharan Africa to grow and diversify our business while the South African economy recovers.
I am pleased to report that, despite a difficult trading environment, Team PPC remained focused on key business parameters. A combination of prudence and diligence allowed the group to perform in line with the given economic circumstances.
Following recognition for our first integrated annual report in 2010, we realise that integrated reporting is a process of continuous improvement. This report is another step in articulating how we run a sustainable, long-term business.
Economic environment1 Outlook for the South African economy remained
mixed and uncertain during our financial year to 30 September 2011. The indebtedness of South African consumers remained historically high and lending organisations cautious on home-loan
Bheki SibiyaChairman
advances. This is delaying recovery in the residential building market which previously has accounted for some 50% of cement demand.
Towards the end of the period, we noted modest growth in government’s investment in fixed capital formation. This is encouraging after more than two years of contraction.
1 Some countries in sub-Saharan Africa have been outpacing local economic growth. These countries’ infrastructure development plans and current cement shortages present an opportunity to grow and diversify our business while the South African economy recovers.
PerformanceThe group remains financially sound with a healthy balance sheet, strong cash generation and sufficient capacity for expansion. The board declared total dividends of 130 cents per share (2010: 175 cents) which is a dividend cover of 1,26, well within our stated dividend policy.
Except for our cement operations in Zimbabwe, all divisions recorded lower sales volumes in line with difficult business conditions faced by customers. Earnings from countries outside South Africa rose to almost 20%, mainly on significant improvements in Zimbabwe.
People7 Safety remains a priority and, despite a marginal
improvement in our injury frequency rate, our performance was still not satisfactory. We will continue to focus on improving employee safety and health, towards a target of zero injuries.
6 Despite difficult decisions to reduce our employee numbers during the year, this was achieved solely through voluntary separation packages and natural attrition. Our Kambuku people philosophy was maintained and morale remained high. With new industry entrants on the horizon, our competitive advantage lies in the skill and passion of our people and I am pleased to report that we continued to make significant progress on employee development (pages 44 to 47.
12
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Integrated annual report 201113
Board changes and successionSeveral new appointments and changes in responsibility were made to the board and its committees during the year.
On 1 December 2010, Ms Bridgette Modise was appointed as an independent non-executive director and member of the audit committee. Her 15 years’ auditing experience is a valuable addition to the board.
On 1 August 2011, Ms Tryphosa Ramano joined the board as executive director and chief financial officer (CFO) of the group. Ms Ramano has an impressive track record in senior management and I look forward to her expert contribution.
On 1 August 2011, Mr Peter Esterhuysen, who headed PPC’s business development activities in addition to his role as CFO, relinquished the latter responsibility and remained on the board as executive director business development. His primary responsibilities are to pursue strategic opportunities and execute our expansion plans into other parts of Africa.
In line with King III and following the 2010 external board performance evaluation, an internal board evaluation was completed during 2011 with a positive result.
In terms of the new Companies Act, a social and ethics committee of the board was constituted during 2011. The committee embraced its terms of reference and is playing a leading role in the business.
6 At the time of writing, the nominations committee is identifying a successor for Mr Paul Stuiver, the incumbent CEO whose contract concludes in May 2012. A timeous and smooth succession is anticipated.
Corporate governancePPC has made good progress on implementing both the new Companies Act and the King III code (pages 74 to 84).
From our perspective, the company’s status with the Competition Commission’s investigation into the local cement industry is unchanged. The conditional leniency agreement between PPC and the commission is intact and we continue to cooperate with the commission.
4 We continue to monitor and engage with authorities on indigenisation requirements for Zimbabwean companies to ensure a mutually successful resolution.
TransformationTransformation remains a key board priority and the fact that PPC has a level 2 empowerment rating is testimony to this.
Despite difficult trading conditions, PPC continued to support selected charities, developmental initiatives and to improve the lives of communities where we operate in South Africa, Botswana and Zimbabwe. R20 million was spent on these activities which, in addition to their direct impact, foster significant goodwill among our current and future employees, customers, suppliers and investors (pages 52 and 56).
There has been some concern that our share price has not performed as projected when the R2,7 billion empowerment transaction was announced in 2008. Although the share price has lagged projections as a result of the economic downturn, we have completed only three years of an eight-year transaction timeframe. To date, all debt has been serviced and all debt covenants met. The board does not intend repricing the transaction.
3 A material issue for PPC remains the conversion of old-order to new-order mineral rights. Our empowerment transaction in 2008, and subsequent application for conversion of mineral rights in 2009, met the initial requirements of the Mineral and Petroleum Resources Development Act. We now need to finalise these conversions by proactively meeting the act’s 2014 requirements.
ProspectsWith global and regional business climates so uncertain, it is impossible to predict economic trends with any accuracy. However, we are encouraged that after almost four years of continuing decline, some leading indicators for cement demand, namely GDP and fixed capital formation are now positive.
During these difficult times PPC has become leaner and more customer-focused in its home territories while developing significant opportunities to extend our footprint in the rest of Africa.
AppreciationI express my sincere appreciation to my fellow board members and all other members of Team PPC for their unwavering support and commitment. Finally, thank you to our customers, shareholders and other stakeholders for their continued support.
Bheki SibiyaChairman 7 November 2011
Commen
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CHIEF ExECuTIVE OFFICER’S REPORT
14
A cUStOmeR-FOcUSeD AppROAcH
During the year, we completed our work to better understand and differentiate customer needs, realigned our organisational structures and executive responsibilities, enhanced our distribution network, customised products and packaging and introduced product quality enhancements.
Our performance in 2011 should be seen in the context of a difficult trading environment. The graph opposite highlights the cyclicality of the South African cement industry as well as the steep decline in demand since 2007. Although the rate of decline has been slowing, demand was still negative for most of our financial year. Low demand and excess production capacity made for competitive cement pricing. Regulated price increases on key inputs such as electricity and fuel made it challenging to contain our costs.
Despite the many challenges in our business during these tough times, I have been heartened by the tenacity and resilience of the PPC Team and the progress made on strategic initiatives.
Paul StuiverChief executive officer
What’s next?
In the year ahead we aim to:
• Further enhance our customer offerings.
• Complete phase 1 of the De Hoek factory upgrade.
• Start construction of new kiln at Riebeeck plant.
• Make further progress in growing the business in line with our rest of Africa strategy.
1,2 Although South African industry sales were similar to the prior year, PPC’s cement sales declined 3%. The difference was mainly due to our exposure in the Eastern and Western Cape provinces which again declined more than the country average. A strong rand for most of the year also attracted more cement imports in coastal regions and reduced our exports.
Following a 4% average price increase, revenue was broadly similar at R6 826 million. With input costs rising more than selling prices, EBITDA declined 14% to R2 146 million and our group EBITDA margin declined to 31,4% (2010: 36,5%).
After accounting for increased depreciation from completed projects, such as the R700 million cement mill in our Hercules plant in 2010, operating profit declined 19% to R1 699 million. This includes R31 million in restructuring charges that will produce savings in future.
Although lower, cash generated from operations remained strong at R2 102 million.
Sales and marketing activitiesRefer to page 32 for more detail on regional markets for cement, lime and aggregates.
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Integrated annual report 201115
In last year’s report, I noted our drive to increase customer focus and marketing activities. During the year, we completed research, surveys and workshops to better understand and differentiate customer needs, enhanced our distribution network, customised products and packaging and implemented a number of product quality enhancements.
We are particularly proud of our new and enhanced product range launched in South Africa in July 2011. The new products are in higher-strength categories more aligned to today’s market requirements (as detailed on page 34 or at
www.ppc.co.za/pages/products_cement_what.cfm
Our increased marketing activities cost around 30 cents more per 50kg cement pocket equivalent or some 0,4% of revenue. We maintain our view that spending on enhancing our image and brand is much more valuable and sustainable than, for instance, cutting the price of our products by 30 cents per pocket.
Our marketing campaigns included competitions, billboards, radio advertisements and product launches in South Africa, Botswana and Zimbabwe and, on TV,
our icon elephant morphing into various concrete structures to improve the life of communities – go to
www.youtube.com/watch?v=7Sry-jFcK7g
Cement operationsDetailed operational reports are on pages 32 – 35.
8, 9 It is concerning that cost of sales increased by 14% on a cost-per-tonne basis from the prior year. After accounting for higher depreciation and once-off restructuring costs, increases still exceeded 10%, mainly due to electricity prices rising by 25%, petrol and diesel prices by 26% and more road transportation to compensate for a lack of rail capacity. The future capacity and performance of South Africa’s rail transport network remains a serious concern.
In addition, we suffered an unexpected structural failure on one our large cement mills. This resulted in having to run older, less-efficient mills and more than normal inter-factory transport, raising electricity consumption and distribution costs further for some three months during the financial year.
2 To counter the ongoing decline in coastal markets, we reconfigured the Port Elizabeth plant to
Source: CNCI data, PPC calculations
PPC2011
�nancialyear
Jan
98
Jan
99
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Jan
09
Jan
10
Jan
11
%
South African cement demand 1998 – 2011: year-on-year movement (12-month moving average)
20
15
10
5
0
-5
-10
-15
Commen
tary
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CHIEF ExECuTIVE OFFICER’S REPORT CONTINuED
Pretoria Portland Cement Company Limited16
a single-product facility. While this did cause job losses, I am happy to report that employee reductions were achieved through natural attrition and voluntary packages, without any forced retrenchments.
Following last year’s equipment upgrades, performance at our Colleen Bawn cement factory in Zimbabwe improved considerably. In addition, two cement mills at our Bulawayo grinding depot that had been mothballed for 15 years were recommissioned to meet increased demand in Zimbabwe.
Cement projectsOur Western Cape modernisation project is on schedule and within budget with construction on phase 1, the R280 million upgrade of kiln 6 at our De Hoek factory, on track for recommissioning in mid-2012.
Phase 2 will replace two ageing cement kilns at our Riebeeck plant (average age 48 years) with a five-stage preheater kiln for R1 300 million. While the environmental impact assessment is under way, we have been refining the design and short-listing potential suppliers. Environmental approvals and subsequent start of construction are expected in the second half of 2012.
LimeSales volumes declined 4% mainly due to operational problems and extended shutdowns suffered by customers in the South African steel and alloys industries. This was to some extent countered by increased exports to other African regions.
While pricing was stable and contractual price increases were realised, margins were under pressure from rising operating costs. Higher electricity and coal prices, combined with extraordinary maintenance costs in the plant at Lime Acres, were the largest cost contributors for the lime division.
AggregatesOverall aggregate volumes declined 5% after improving significantly in the second half of the year. The improvement was due to medium-sized projects starting near our Gauteng quarries in South Africa. However, the aggregate market remained very competitive with pressure on sales prices.
Aggregate volumes in Botswana also had a slow start to the year due to reduced road construction, but this has since picked up and should flow through into the new financial year. Our improved geographical
presence in Botswana after the acquisition of Quarries of Botswana will boost the division’s performance.
People
7 The health and safety of Team PPC and our contractors remain a top priority and we were deeply saddened by a fatal accident at our Jupiter factory in August 2011. The board and employees again extend our sincere condolences to the family and friends of our deceased colleague.
Despite intensive efforts this year, which saw a modest reduction in the frequency of on-duty injuries, we did not make sufficient progress towards our ultimate goal of ‘zero harm’ and we need to continue to improve our procedures and awareness (see page 38).
2 Given continued low demand and low utilisation in many areas of our business, we reviewed staffing levels at our head office in Johannesburg. Taking into account likely future requirements, 34 employees in Sandton head office elected voluntary separation packages. Across the group, contractor agreements involving 61 individuals were not renewed. These actions, and the restructuring of our Port Elizabeth factory, reduced our staff complement by 6% during the year.
The cost of voluntary separation packages across the group was R31 million. However, we expect that resultant savings in remuneration as well as other cost-cutting initiatives will amount to at least R80 million per annum in future.
Environment
10 The essence of cement manufacturing is a chemical process at high temperature and has been identified as a significant emitter of carbon dioxide (CO2) worldwide. After PPC achieved a 15% reduction in CO2 emissions over the last 20 years, we have committed to further targets and a concomitant reduction in CO2 through an updated energy policy (page 60).
PPC has responded to the South African government’s draft papers on carbon tax, both directly and through active participation in industry panels and reputable lobby groups. PPC supports a gradual, predictable and transparent reduction in South Africa’s CO2 emissions, understanding the need to remain internationally competitive and accelerate local development. Making future carbon costs simple and
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Integrated annual report 201117
transparent will improve predictability and facilitate investments to reduce emissions.
StrategyLast year I indicated we had launched a new vision plus strategies to actualise this vision. This vision is To grow PPC into a leading, emerging-market business and our strategy is two-pronged:
Firstly, to enhance our position as industry leader in southern Africa. We refer to this internally as keeping the home fires burning. It requires that we become more customer-focused while retaining our historical focus on operations and logistics efficiencies and good corporate governance.
1 Secondly, expanding our operational footprint further into sub-Saharan Africa, our rest of Africa strategy. Our aim is to grow revenue generated outside South Africa to 40% – 50% of the group’s revenue by 2016.
We have selected target regions (page 3) using specific criteria such as high potential for infrastructure development, low per-capita cement consumption and current cement shortages. Other criteria are to ensure suitable local partners, secure 30-year limestone reserves, to be within 250km of major population centres and to avoid locations close to ports.
5 Our business development team has in the past year explored eight significant expansion opportunities in the target region. Four were abandoned for a lack of value creation, unacceptable levels of risk or a combination of both.
Of the remaining prospects, one resulted in a US$44 million conditional offer for a 58% stake in Cimenterie Nationale (CINAT), a government-owned cement producer in Democratic Republic of the Congo. At time of writing, we await the outcome of our bid. The other three prospects are still being pursued and we expect further opportunities will arise in due course.
Regarding our “home fires”, we will consider local business acquisitions that support the drive to enhance our local leadership. In the past year, Quarries of Botswana and Pronto Holdings were
identified as value-adding strategic opportunities. Pronto Holdings includes a prominent ready-mix and fly ash supplier in Gauteng, South Africa, where ready-mix is a growing market segment. Regulatory approval for Quarries of Botswana has been obtained but approval for Pronto Holdings is pending.
OutlookRecent improvements in sales trends and leading indicators for the South African cement industry are encouraging. Following price increases late in the 2011 financial year, we should enjoy good selling pricing momentum into 2012.
2 Referring to the graph on page 15 and based on historical trends and cycles, a long-term recovery in South African cement demand is due – but unfortunately still uncertain given the global economic turmoil.
We expect cement demand in Zimbabwe to continue growing, albeit slower than 2011, but demand in Botswana to remain subdued on trimmed government spending.
We continue to monitor announcements by new entrants. If their activities progress according to their own announcements, they will not impact significantly before our 2014 financial year. This provides further opportunity to enhance our leading position.
We look forward to reporting significant progress on our outstanding projects in the “rest of Africa” in 2012.
Finally, I thank my PPC colleagues and our many stakeholders, including customers, suppliers and investors, for their contributions over the past year. Through their continued commitment and support, PPC is prepared and well-placed for whatever the future holds.
Paul StuiverChief executive officer7 November 2011
Commen
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ny Limited18
CHIEF FINANCIAL OFFICER’S REPORT
A StRUctUReD FOcUS
In line with the group’s dividend policy, PPC continued to return cash to shareholders, with R876 million distributed in dividends for the year under review.
Tryphosa RamanoChief financial officer
This is my first report as chief financial officer of PPC.
I am excited at the opportunity to become part of
Team PPC and look forward to contributing to the
future of this long-established and successful business.
The past three years have been a difficult trading
period for the cement industry: 2011 was no different
despite South African cement volumes showing that
the cycle may be turning.
OverviewRevenue was flat year on year, reflecting a 3%
reduction in cement sales volume but an average price
increase of 4%. Due to a price increase late in the
review period, at the time of writing actual prices were
7% higher than last year.
Financial overview
RmChange
% 2011 2010 2009
Revenue 6 826 6 807 6 783
EBITDA (14) 2 146 2 483 2 733
Operating profit (19) 1 699 2 105 2 141
Earnings per share (cents) (22) 164,4 211,1 210,1
Total dividend (cents per share) (26) 130 175 200
EBITDA margin (%) 31,4 36,5 40,3
Operating margin (%) 24,9 30,9 31,6
What’s next?
In the year ahead we aim to:
• Investigate structuring options to achieve DMR’s 2014 empowerment requirements.
• Funding for rest of Africa expansion to be explored on a transaction-by-transaction basis.
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Integrated annual report 201119
Our cement business contributed around 90% of
revenue with the balance coming from the lime and
aggregates divisions.
Included in group revenue was an 18% contribution
from Botswana, Zimbabwe and other countries.
RevenueCementLower cement volumes reflected lower demand in the
Western and Eastern Cape, Botswana and reduced
exports to neighbouring countries with stronger
volumes in the Zimbabwe market partly offsetting the
decline. Selling price increases, of varying extents,
were realised across all regions and are poised to
benefit the group in the 2012 financial year.
Zimbabwe performed exceptionally well with revenue
rising by over 50% on 34% volume growth and a 9%
price increase in US dollar terms. The weakening of the
rand against the US dollar also had a positive impact in
terms of consolidation.
Lime and aggregatesLime volumes were impacted by reduced offtake from
the steel and alloys industries in South Africa, but this
was partly mitigated by increased exports into other
African countries. Selling prices rose as weighted
average cost increases were recovered via contractual
price agreements. Aggregates revenue was affected
by lower demand in Gauteng and limited ability to
implement price increases in a competitive market.
Expenses
8, 9 Cost of sales rose 11% year on year. The
weighted average cost increase per tonne however
rose by more than 14% due to non-controllable
expense items. These relate mainly to utility costs
which increased by over 30%, distribution costs that
rose by more than 20%, following the 26% diesel
price increase, and transporting clinker and cement by
road due to constraints on rail capacity. The once-off
restructuring costs of R31 million were included in
expenses items.
The group continues to investigate energy-efficient
solutions to minimise the impact of rising energy costs.
After commissioning certain large capital projects in
the prior financial year, the depreciation charge rose by
over 15% as the full-year impact of these projects was
realised. Maintenance costs increased above our initial
expectations, and will be a key focus for 2012.
Salary costs, coal and packaging costs were well-
controlled and the team kept annual increases below
inflation.
Administration and other operating expenditure were
also well controlled. This focus has resulted in an
annual cost decline of 1% in overheads despite
additional expenditure on sales and marketing to
further enhance our brand awareness, the launch of
our new product range in South Africa and Botswana,
and strengthening our customer service.
EBITDA margin
2, 8 As a result of production cost increases not
being fully recovered in higher selling prices and lower
volumes across the businesses, the group’s EBITDA
margin declined to 31,4% (2010: 36,5%; 2009:
40,3%).
Finance costsNet finance costs of R325 million (2010: R347 million;
2009: R298 million) were 6% lower as the group
benefited from lower interest rates on borrowings
linked to variable interest rates. No interest was
capitalised to property, plant and equipment during
the year compared to R13 million capitalised in 2010.
TaxationThe effective taxation rate was 37,5% (2010: 35,9%;
2009: 39,0%) and includes an STC charge of
R93 million (2010: R113 million; 2009: R127 million).
In 2010 the Zimbabwe taxation rate was lowered,
resulting in a R19 million once-off credit to the income
statement. Changes were made to Botswana taxation
legislation during the year in which the use of
additional company taxation (ACT) has been phased
out. The group will no longer be permitted to offset
ACT against withholding taxation on dividends
declared by its Botswana subsidiary companies and
additional withholding taxation will now be incurred
by the group. This impact is not deemed material.
EarningsEarnings per share were 22% lower at 164,4 cents
(2010: 211,1 cents; 2009: 210,1 cents). Non-South
African operations contributed 32 cents per share
(2010: 27 cents; 2009: 22 cents) to approximate 20%
of group earnings.
Commen
tary
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Pretoria Portland Cement Company Limited20
CHIEF FINANCIAL OFFICER’S REPORT CONTINuED
Property, plant and equipmentProperty, plant and equipment ended higher than 2010 following capital expenditure on projects being partly offset by increasing depreciation charges of R417 million (2010: R359 million; 2009: R309 million). After the recent weakening of the local currency against the US dollar and the Botswana pula, translation adjustments of R81 million further increased our foreign property, plant and equipment in rand terms. Capital expenditure is discussed below.
Net working capitalAccounts receivable increased year on year as our 2011 September sales were higher than the corresponding period last year. Tougher trading conditions in the construction environment have seen some of our customers paying later than their agreed credit terms and, as a result, debtors days have increased by three days over the previous financial year. The group credit team has again managed our credit exposure extremely well in this difficult trading environment and the group’s provision for doubtful debts is 1,55% (2010: 1,44%; 2009: 0,55%) of the total book.
Our inventory levels have risen year on year as Zimbabwe continues to recapitalise its maintenance stock, and the group has deliberately built cement stock levels ahead of plant shutdowns planned for the upcoming lower sales months. A reclassification of maintenance spares took place during the year, with
R38 million of maintenance stock now classified as inventory.
The increase in accounts payable somewhat mitigated the increase in accounts receivable and inventories, with the result that the group has only invested R25 million in net working capital during the year.
Cash generationThe group’s cash-generation ability remains strong and the cash conversion ratio to EBITDA of 98% (2010: 98%; 2009: 95%) was in line with last year.
Capital expenditureAs a result of the current operating environment, the group’s capital plan was reviewed and reduced accordingly. This plan considers operational and expansionary capital requirements without jeopardising the long-term sustainability of our factories.
Capital forecasts for 2012 include R210 million for our Western Cape modernisation projects and R100 million for plant refurbishment and customer-orientated projects at our Zimbabwe operations. Ongoing operational capital spend remains in the R300 million to R400 million range. Forecast capital spend excludes any capital from potential business acquisitions.
8 The first phase of the Western Cape modernisation project is expected to be commissioned mid-2012, while construction on the second phase is anticipated to begin in the second half of 2012.
Statement of financial position
RmChange
% 2011 2010 2009
Property, plant and equipment 3 4 287 4 175 3 941
Net debt 3 286 3 281 3 144
Cash generated from operating activities (14) 2 102 2 442 2 602
Net investment in working capital (43) 25 44 133
Capital investment (21) 483 613 883
Rm 2011 2012e
Western Cape modernisation project – phase 1 70 150
Western Cape modernisation project – phase 2 30 60
Hercules mill (Ntšhafatso) project 23 –
PPC Zimbabwe 56 100
Other strategic projects – 100
Ongoing operational capital spend 304 300 – 400
Total capital spend 483 700 – 800
e – estimated.
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Integrated annual report 201121
Capital structureNet debt at year end was R3 286 million (2010: R3 281 million; 2009: R3 144 million), providing a net debt to EBITDA cover of 1,5 times (2010: 1,4 times; 2009: 1,3 times). These debt levels are within the group’s borrowing targets, which are unchanged at two to three times EBITDA cover. Borrowing facilities available to the group, excluding consolidated BBBEE debt, is R3 691 million.
DividendsIn line with the group’s stated dividend policy, PPC continues to return cash to shareholders within the target range of 1,2 to 1,5 times cover. For the review period, the company declared a dividend of 130 cents per share (2010: 175 cents; 2009: 200 cents), resulting in a dividend cover of 1,26 times (2010: 1,25; 2009: 1,29). The dividend yield at year end remains strong at 5,6% (2010: 6,3%; 2009: 6,0%).
In determining the dividend payable, the group’s capital requirements, current and forecast trading position, cash flow and strategic growth opportunities are considered.
For the year under review, the group distributed R876 million (2010: R1 062 million; 2009: R1 195 million) to shareholders.
BBBEE transaction
3 The BBBEE empowerment transaction, initiated in December 2008, was concluded at a ruling share price of R31,32 for a transaction value of some R2,7 billion. This achieved 15,3% BEE ownership in PPC.
The share price is currently below initial expectations of R39,77 at 30 September 2011 and forecasts of R66,84 in December 2016. It is important to note that the transaction is only in the third year of an eight-year timeframe. To date, all debt has been serviced, debt covenant levels have not been breached and some R510 million has been paid to participants in the transaction. If the share price does not reach projected targets by 2016, we do not intend to reprice the transaction.
The group remains committed to achieving the DMR’s ownership requirements by 2014. Accordingly, various structuring options are being explored to achieve required empowerment levels at the lowest cost to shareholders.
AcquisitionsIn line with the group’s vision to grow PPC into a leading emerging-market business, the business development team has explored various opportunities during the year, as detailed in the chief executive officer’s report.
The acquisition of the assets held by Quarries of Botswana was concluded with effect from October 2011 after all conditions precedent were met. The transaction value is R52 million (BWP47,5 million) and will be funded from internal cash generation. The purchase price will be paid over a two-year period with BWP37,5 million paid in October 2011, and the remainder payable equally on the first and second anniversaries of the transaction.
The Pronto Holdings acquisition, valued at R280 million less debt, will be a phased acquisition with 25% of the equity being purchased initially, and 25% and 50% being purchased on the first and second anniversaries of the transaction respectively. The transaction is still subject to competition authority approval. This purchase will also be funded from internal cash resources.
1, 5 For larger acquisitions, the projects are unlikely to be wholly owned by PPC and may include local partners. Funding for these projects will be explored on a transaction-by-transaction basis, but we anticipate that the financial structure will be 40% equity and 60% debt.
As previously communicated, our strategy is to grow the ‘rest of Africa’ revenue contribution to between 40% and 50% over the next five years. The current contribution from ‘rest of Africa’ is some 20%. To achieve this revenue contribution target, we forecast that the group will require equity investments of some US$180 million on the basis of 75% ownership and the previously stated equity/debt ratio.
Tryphosa Ramano Chief financial officer7 November 2011
Commen
tary
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Pretoria Portland Cement Company Limited22
PPC’s performance throughout the unprecedented economic events of recent years is testimony to a company focused on its core operations and preparing for the next growth phase.
GROuP PERFORMANCE
During the year, PPC was recognised at a number of levels – from its integrated reporting to support for the arts – reflecting a group focused on every aspect of its role in society and its responsibility to stakeholders.
Recognition is not one of our objectives – but it is an encouraging indicator that we are moving in the right direction.
Our first integrated annual report received the highest ranking at the inaugural Nkonki Financial Mail Integrated Reporting Awards in 2011. Companies in this year’s survey were recognised for their pioneering spirit in producing integrated annual reports a year before becoming mandatory.
PPC has maintained its level 2 status for broad-based black economic empowerment. This ranking is independently verified each year and is an important reflection of our focus on transformation and empowerment.
Diamond award for excellence in the cement and concrete/readymix suppliers category of the Professional Management Review (PMR) Africa annual survey. This is the fourth time PPC has won the prestigious Diamond award in this benchmark survey.
BASA award for Increasing Access to the Arts, for our contribution to Hip Kulumakahle (FTHK) theatre company, and its education programme that aims to empower deaf performing artists in South Africa. Through the Tales from the Trash Tour, FTHK completed a tour of Western Cape, KwaZulu-Natal, Limpopo and Gauteng provinces, presenting theatre workshops or performances at identified schools to increase access to the arts.
Recognised for performance
FOcUSeD On cOntinUOUS impROVement
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Integrated annual report 201123
Case study – New products offer 15% more value
When PPC announced a range of enhanced products in 2011, it was the result of intense work by many disciplines within the group and the first major innovation in the local cement industry in well over a decade.
Through its research and development, and operations divisions, PPC has developed a range of new cement that is classified with a higher specification, offering customers 15% more concrete yield per bag of cement.
PPC Cement’s OPC (CEM I) product is now a 52.5N classification (previously 42.5N) and Surebuild has been upgraded from 32.5R cement to 42.5N. Apart from reducing the concrete material cost per cubic metre, these new products also offer other benefits to builders and contractors, such as quicker strength development and removal of formwork, faster floating and finishing of concrete floors, resulting in optimised cost control and labour efficiency.
In practice, a project using 100 bags of normal general-purpose cement (32.5N) to cast a typical floor slab in a residential dwelling would yield 70m2 while PPC’s new Surebuild (42.5) would yield an additional 10,5m2 on the same project.
PPC launched the new products throughout the country to an overwhelmingly positive response from the marketplace and requests from retailers for specialised presentations to their customers.
PPC has been involved in major landmark projects that have shaped South Africa in the 119 years it has been producing cement, including the Union Buildings, Gariep Dam, Van Staden’s River Bridge, Gautrain infrastructure and Africa’s biggest stadium, Soccer City.
PPC’s new products are now available countrywide, including Swaziland and Lesotho, and reflect our commitment to continuous improvement, so that our customers get the best value for money.
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GROuP PERFORMANCE CONTINuED
Section In 2010 we said we would Progress Target 2012
Financial Dividend cover of 1,2 to 1,5 times.
Capital expenditure = R600 million.
Maintain strong cash generation.
Gross debt: EBITDA <3.
Dividends declared in 2011 represent cover of 1,26 times.
Actual capital expenditure reduced to R483 million due to low utilisation rates in SA.
Cash generation strong at R2 102 million.
Gross debt: EBITDA = 1,5.
See seven-year review on page 122.
1,2 to 1,5 times dividend cover.
Capital expenditure estimated to be between R700 and R800 million.
Gross debt: EBITDA <3.
Sustainability reporting
Improve on our first integrated group report as per King III, external assurance on selected indicators for GRI C+ application level.
External assurance expanded from nine at a limited level to 13 indicators. Two are readiness assessments.
Ongoing improvement with further assurance on non-financial indicators.
Expanded reporting on Botswana and Zimbabwe as systems are integrated.
Some indicators for Botswana assured.
Ongoing improvement in scope.
Stakeholder engagement
Continue to improve stakeholder engagement using surveys, forums and database management tools and incorporate pertinent feedback into future strategies and initiatives.
Surveys were more comprehensive in 2011.
Additional specific engagement plans developed and rolled out.
Ongoing process.
Risk Implement approved operational risk management framework.
Implemented (page 85). Ongoing.
Compliance Focus on new legislation (Consumer Protection Act, Companies Act, protection of personal information bill).
Implementation and training for specific business units on the Companies Act, Consumer Protection Act, Competition Act, JSE listings requirements (page 83).
Further training and implementation on Companies Act. Ongoing training on Competition Act (page 83).
Mining charter
Gap analysis of revised charter – meet relevant milestones, where practical.
Progress in various areas in 2011. See mining charter scorecard page 106.
Continue reducing the gap between target and actual achievement.
Independently verified annual reports on implementation of social and labour plans will be submitted to DMR.
unaudited progress reports submitted to DMR.
Ongoing.
Our people People development: maintain steady progress against PPC and mining charter targets.
5% of payroll on training.
See scorecard page 106.
Ongoing.
Organisational and succession plan: further appointments in line with the three-year senior management plan formulated in 2009.
One additional executive director appointment (page 13).
successful Ceo succession (page 13).
Pretoria Portland Cement Company Limited24
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Integrated annual report 201125
Section In 2010 we said we would Progress Target 2012
Communities Corporate social investment: R8,5 million for South Africa.
R9,0 million invested. Over R9 million planned for 2012.
Extend formal CSI initiatives to Botswana and Zimbabwe.
Five projects in Zimbabwe and Botswana completed.
Continue projects in South Africa, Zimbabwe and Botswana.
Socio-economic development
Continue implementing the ten identified and DMR-approved social and labour plan projects.
Six of these projects planned to commence in 2011.
Three of six projects completed, while development work started on others.
Four major projects planned to start in 2012.
Enterprise development
Continue to develop the seven black-owned businesses that have benefited from PPC Ntsika fund’s total investment of R56 million.
Continued support (page 55).
Ongoing development and mentoring of successful projects.
Preferential procurement
Meet mining charter targets and DTI codes of good practice.
79% (R2,3 billion) – up from 65% in 2010 and above PPC’s 2011 target of 50%.
Meet mining charter targets and DTI codes of good practice.
Safety Zero fatalities.
Long-term target: zero injuries.
2011 target: LTIFR <0,40.
One fatality, but improved LTIFR to 0,34.
Zero fatalities, LTIFR = 0 (long term target). LTIFR = <0,25 (2012).
Back to Basics safety campaign continued.
Campaign continues. Further safety interventions developed.
Implement rejuvenated safety interventions.
Maintain certifications. PPC discontinued its Dekra certification programme.
Aggregates operations achieved integrated safety, health and environment status (ASPASA).
All relevant operations maintained OHSAS certification.
Maintain ASPASA and OHSAS certifications.
Health Aim to have 100% of PPC employees know their HIV status – over 80% achieved in 2009 and 2010 VCT campaigns.
Ongoing management and testing offered to all new employees.
Ongoing.
Sites to remain SANS 16001 certified.
All sites retained certification.
Ongoing.
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GROuP PERFORMANCE CONTINuED
Section In 2010 we said we would Progress Target 2012
Environment Engage more suppliers in terms of our group-wide green supply chain policy.
Engaged specific service providers (page 63).
Continue to engage more suppliers.
Continue to improve and develop environmental best practices.
Focused on integrating environmental best practices with those of health and safety.
Ongoing process.
Obtain integrated water use licences for factories.
Licence received for Riebeeck (page 68).
Further receipt of outstanding licences (page 68).
Finalise water balances and establish water-savings targets.
Water-use optimisation projects implemented at each site.
Group water-reduction targets to be established.
Ongoing progress on areas of non-compliance.
Ongoing.
Fines paid in Zimbabwe (page 64).
Ongoing process.
Through project CLEAR, develop stack emission profile for cement and lime kilns chain.
Ongoing (page 69). Ongoing.
Roll out environmental and sustainability training modules for all levels.
Ongoing (page 63). Ongoing.
Roll out successful De Hoek emissions inventory pilot to other sites.
Project on hold. No action planned.
Manage PPC carbon footprint proactively by implementing energy strategy.
Energy policy with specific targets published.
Implement energy policy to meet targets.
Complete energy baseline audits at all factories.
Not completed at all factories.
Complete energy baseline audits at remaining factories.
Complete implementation of IT virtualisation project at remaining two sites.
Feasibility reviewed and implementation plan amended (page 64).
Implement on one further site.
undertake revised EIA for new Riebeeck kiln.
EIA progressed according to plan.
Process to be completed by mid-2012.
Pretoria Portland Cement Company Limited26
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Integrated annual report 201127
COMMITMENTS TO ExTERNAL INITIATIVES
PPC provides inputs to develop appropriate legislation and proactively engages authorities and other external organisations as shown below:
Sector Organisation/initiative PPC involvement
Government Department of Water and Environmental Affairs – national.
Chair of working groups for air emissions standard-setting workshops.
Department of Energy and National Business Initiative’s energy-efficiency accord.
PPC is a signatory.
Non-government organisations
WWF (Worldwide Fund for Nature). Senior corporate member.
International World Business Council for Sustainable Development cement sustainability initiative (WBCSD-CSI).
PPC is a member and participates in the CDP.
united Nations Global Compact (uNGC).
PPC subscribes to the principles of the Global Compact.
National aspasa. Member and chair of environmental committee.
International Standards Organisation (ISO 14001, ISO 9001), OHSAS.
All PPC sites are ISO or OHSAS certified (page 38, 66).
NAPCoF (North West Air Pollution Control Forum).
Member of executive committee.
Concrete and Cement Institute (C&CI). Member of executive committee of various sub-committees.
ACMP-SA Cement Association body. Member of executive committee and chair of sustainability committee.
Rose Foundation. Licensed waste oil processor.
Carbon Disclosure Project. PPC voluntarily participated in the 2010 CDP and received a rating of 73%.
JSE Socially Responsible Investment Index.
PPC has participated since 2004. For the second consecutive year PPC has maintained its best-performer category in 2011.
Industry task team on climate change. Active member.
Energy intensive users group. Active member.
CEOs’ forum. Active member.
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Pretoria Portland Cement Company Limited28
for the year ended 30 September 2011
VALuE ADDED STATEMENT
A measure of the wealth created by the group is the amount of value added to the cost of raw materials, products and services purchased. This statement shows the total wealth created and how it was distributed.
Notes2011
Rm2010
Rm2009
Rm
Revenue 6 826 6 807 6 783
Paid to suppliers for materials and services 1, 4 (3 696) (3 396) (3 270)
Value added 3 130 3 411 3 513
BBBEE IFRS 2 charges (11) (10) (490)
Take-on gain arising from consolidation of PPC Zimbabwe – – 213
Exceptional items (4) (32) –
Income from investments^ 43 47 72
Total wealth created 3 158 3 416 3 308
Wealth distribution:
Salaries, wages and other benefits 2 972 916 764
Providers of capital 1 229 1 447 1 558
Finance costs 353 385 363
Dividends 876 1 062 1 195
Ordinary dividends 871 1 056 1 188
Dividends paid to external BBBEE trusts by consolidated SPVs 5 6 7
Government 3 382 518 689
Reinvested in the group to maintain and develop operations 575 535 297
Depreciation and amortisation 436 368 315
Retained (loss)/profit (6) 56 (60)
Deferred taxation 145 111 42
3 158 3 416 3 308
Value added ratios
Number of employees (30 September) 3 087 3 257 3 234
Revenue per employee (R000) 2 211 2 086 2 560
Wealth created per employee (R000) 1 016 1 028 1 259
^ Includes interest received, dividend income and share of associate’s retained profit.
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Integrated annual report 201129
2011Rm
2010Rm
2009Rm
NOTES1. Paid to suppliers for materials and services
Transnet Freight Rail and Barloworld Logistics are the only suppliers of services exceeding 10% of total amounts paid.
All contracts are paid in accordance with agreed terms.
2. Salaries, wages and other benefits
Salaries, wages, overtime payments, commissions, bonuses and allowances* 839 794 666
Employer contributions~ 133 122 98
972 916 764
3. Government
Taxation – normal, CGT and STC 375 511 680
Rates and taxes paid to local authorities 2 4 3
Customs duties, import surcharges and excise taxes 2 1 4
Skills development levy 7 7 6
Cash grants and subsidies received from the government (4) (5) (4)
382 518 689
4. Included in “Paid to suppliers for materials and services” is:
Donations and social labour plan expenditure 19 15 16
Dividends paid to BBBEE transaction beneficiaries 5 6 7
24 21 23 ~ In respect of pension funds, retirement annuities, provident funds, medical aid and insurance .* Includes restructuring costs of R31 million.
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Pretoria Portland Cement Company Limited30
In current markets, cement companies need to differentiate themselves. PPC is successfully doing so by building stronger, strategic relationships with its customers, backed by service and product innovation.
OPERATIONS REVIEW
FOcUSeD On cUStOmeRS
Contributing to national initiatives
PPC participated in the 2011 South African Housing Foundation’s (SAHF) international housing and construction conference and exhibition. Titled Cement and Concrete in Sustainable Housing, PPC’s presentation contributed to the affordable social housing debate that saw various stakeholders convene in September.
Social housing is defined as a rental or cooperative housing option delivered at scale, for the lower and middle-income community, which requires institutional management provided by accredited social housing institutions.
PPC’s input to the dialogue was pertinent as South Africa currently has a backlog in rolling out affordable housing, which translates into a need for about 220 000 houses every year for the next few years to meet demand. New and innovative ways of addressing the affordable housing shortage therefore needed to be considered. Around the world, governments and the private sector are increasingly establishing partnerships to address these challenges.
We will continue to provide insight from our perspective on how we can contribute to this dialogue, believing that collaboration between industry stakeholders will ultimately lead to creative and innovative solutions to address the challenges we face in this sector.
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Integrated annual report 201131
PPC, MBSA unite industry to explore path to growth
In September 2011, the Master Builders of South Africa (MBSA), supported by PPC, brought the building and construction industry together for its 106th annual MBSA Congress in Cape Town. The congress focused on issues affecting the industry in a bid to put the economy back on a sustainable growth trajectory. While South Africa has recorded growth since the economic recession, current growth is lukewarm at best. As an emerging market, the country has yet to achieve the extent of development evident among its BRIC peers and we need to consider our options. We believe the building and construction industry can play a vital role in stimulating economic growth by spurring fixed capital formation, infrastructure development and job creation.
This annual conference allows industry heavyweights to engage with peers and other stakeholders to address issues facing the industry. Prominent speakers, such as renowned scenario planner Clem Sunter and IDC chief economist Lumkile Mondi presented insights and perspective on the state of the South African economy and the impact on the building and construction sector.
The first day of the conference addressed external factors influencing the industry, such as the state of the economy, government policy, the workforce and logjams in the industry. The second day explored future scenarios, energy efficiency, sustainable building materials and skills development.
PPC has supported MBSA for five consecutive years in uniting all stakeholders to work together in promoting the building and construction industry and exploring alternative routes to growth and job creation.
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Cement2011 2010 %
Revenue (Rm) 5 814 5 806 –
EBITDA (Rm) 1 942 2 226 (12,8)
EBITDA margin (%) 33,4 38,3
Operating profit (Rm) 1 541 1 893 (18,6)
Operating margin (%) 26,7 32,8
Assets (Rm) 5 768 5 450 5,8
South Africa, Botswana and exportsMarkets
1,2 In South Africa, the continued decline in the Eastern and Western Cape provinces reduced PPC sales by 4% (2010: –13%) during the financial year, while the industry was flat for the same period. The rate of decline in industry volumes therefore slowed in 2011 after declining 11% and 7% in 2009 and 2010 respectively. The sluggish demand numbers reflect lower construction activity and continued low demand from the private residential sector.
While some large projects such as the Medupi and Kusile power stations and De Hoop dam continued, these could not compensate for the general lack of infrastructure projects since the Soccer World Cup in 2010.
Pretoria Portland Cement Company Limited32
OPERATIONS REVIEW CONTINuED
Demand from private residential activity, which
peaked in 2007 at an estimated 50% of overall
cement demand, continued at much lower levels as
slow lending by banks and high levels of consumer
indebtedness continued. Many government projects
continued to be frustrated by delays and cancellations.
However, during the latter part of the financial year,
gross fixed capital formation (GFCF) by government
started to show an encouraging trend, with real
growth recorded in the second quarter of 2011. Total
GFCF in that quarter rose marginally to 18,9% of
GDP, still below the critical level of 20% required for
infrastructure maintenance and well below the 25%
benchmark for developing countries.
While industry statistics in recent months have been
promising, the current forecast for GDP and other
key economic indicators suggests that growth in
cement demand in 2012 is likely to be modest.
Our research indicates that imports increased from
around 2% of total South African demand during our
2010 financial year to 4% in 2011. The bulk of
imports originated from Pakistan and entered
through the port of Durban. Markets in coastal
regions around Durban, Port Elizabeth and Cape
Town were most affected by imports, while inland
■ Domestic cement demand (SA only)
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Regional cement demand■
* South Africa, Botswana, Namibia, Lesotho and Swaziland (Statistics discontinued in 2009)Source: CNCI data
mill
ions
of
tonn
es p
er a
nnum
Industry cement demand*
20
16
12
8
4
0
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Integrated annual report 201133
Customers
2 Given the current supply/demand scenario, PPC has further improved its customer focus. The largest customer segment in all countries where our products compete is the retail sector. In South Africa, this segment accounts for just over 50% of sales and the proportion is higher in Zimbabwe, Botswana and other African countries.
Customer segment Description Key product
Retailers Hardware stores, general dealers, building material suppliers.
Surebuild, Botcem, unicem.
Blenders Buy pure cement (CEM I) and add fly ash or slag to create an extended cement mainly for the retail market.
opC
Concrete product manufacturers Manufacturers of roof tiles, concrete bricks, lintels, garden ornaments, etc.
opC
Ready-mix concrete suppliers Concrete manufactured to meet a specific strength and delivered to site by truck.
opC
Contractors Civil or building contractors who buy cement directly from PPC. usually medium and large contractors.
opC
markets were protected by virtue of transport distances and associated logistics costs.
Most imports occurred at an exchange rate around R7 to the US dollar when the imported product enjoyed a 10% – 15% price advantage. At recent exchange rates of over R8 to the US dollar, it is doubtful importers will be able to maintain or grow their activities.
Botswana sales volumes declined from last year. The construction segment continued to slow on fewer tenders for new projects, given the Botswana government’s budget constraints. A drop in retail cement sales volumes was mainly due to reduced consumer spending amid high levels of personal debt
and below-inflationary salary increases for government employees.
Exports from South Africa were primarily to Mozambique where PPC has had a presence for over ten years. Export volumes reduced by 35% due to the strong rand, rail logistics challenges and competitive imports into Mozambique from Asia. Economic growth in Mozambique bodes well for future cement demand and PPC has recently consolidated its presence in this market by registering a company in Mozambique, establishing a local sales office, support staff and warehousing/distribution facilities in Maputo. Similar facilities will be rolled out in Tete, Beira and Nacala in due course.
Ope
ratio
nsreview
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OPERATIONS REVIEW CONTINuED
Pretoria Portland Cement Company Limited34
To improve customer focus, we commissioned two comprehensive surveys in the past 18 months. The first focused on customers who would buy mainly OPC, while the second canvassed information from retailers. The results of these surveys, along with our in-house research and development, have allowed us to refine our market offerings (page 73). A number of initiatives have already started, while others will be rolled out in 2012.
ProductsDrawing on the survey results, new technical research and our excess milling capacity, PPC launched a revised product range. This has aligned PPC more closely with customer needs, and allows us to be even more competitive in all three major cement-strength categories.
Both OPC and Surebuild have moved up a strength class to 52.5 and 42.5MPa respectively. Along with this new 28-day strength improvement comes higher earlier strengths. This produces quicker concrete-setting times, giving the customer improved throughput. The key advantage of the new OPC and Surebuild ranges is that 15% less cement is required to make concrete of the same strength.
10 Cements that are more extended and fall into the CEM III to CEM V range typically have a lower carbon footprint compared to CEM I and II. However, it is not the carbon footprint of the cement in the bag that should be considered, but the carbon footprint of the final product – the concrete being produced. Most cement is used to produce concrete and a significant proportion of concrete contains some form of extender, which can be introduced pre-mixed in the purchased cement or by adding extenders at the point of mixing. Therefore, although the carbon footprint of the cements being used might differ significantly, the carbon footprint of the concrete that is ultimately produced tends to be similar.
The new products have been rolled out in South Africa, Botswana and Mozambique, while Zimbabwe will start manufacturing the new Surebuild in 2012.
OperationsCement revenue was almost flat at R4 692 million (2010: R4 677 million) with improved selling prices compensating for lower sales volumes.
2 Overcapacity in the South African cement industry continued to drive competitive market dynamics and pressure on cement selling prices. A weighted average increase of 4% in selling prices during the year was insufficient to recover rising input costs.
Similar to 2010, the company mothballed kilns across the country to match demand and supply. The continued decline in demand in the coastal regions required further alignment of production capacity at our Port Elizabeth factory. The factory has been restructured to a single-product facility which resulted in significant staff reductions. These were all voluntary and the process was completed with no interruption of service to customers.
Zimbabwe marketSales in Zimbabwe continued to surprise on the upside, increasing more than 50% against the prior year. This was due to a combination of organic growth in the local market, particularly in the Harare and broader Mashonaland areas, and production problems experienced by our Zimbabwean competitors.
This volume growth, combined with a price increase in January 2011, significantly enhanced revenue and increased the Zimbawean contribution to the group’s earnings per share by 45%.
The key driver for organic growth in Zimbabwe was retail demand for the construction and expansion of private housing. More recently there has been increased activity in mining and road projects which appear to have been the other key influencer of demand.
Given the need to supply rising local demand in Zimbabwe, our exports to neighbouring countries were curtailed.
Our competitors will probably resolve their operational problems and we expect that our sales in Zimbabwe will continue growing in 2012, but at a lower rate than in 2011.
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Integrated annual report 201135
Lime
2011 2010 %
Revenue (Rm) 772 711 8,6EBITDA (Rm) 154 190 (18,9)EBITDA margin (%) 19,9 26,7Operating profit (Rm) 121 158 (23,4)Operating margin (%) 15,8 22,4Assets (Rm) 440 452 (2,7)
MarketsPPC Lime’s 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.
During the 2011 financial year, lime volumes were down 4% due to lower demand from the steel industry, PPC Lime’s key market. This was primarily due to operational problems and extended shutdowns suffered by customers in that industry. Demand will remain affected in the first half of 2012 as a result of these operational issues.
The use of lime in the copper-processing industry has created an opportunity for PPC Lime to participate in the boom in this industry in Zambia and the Democratic Republic of the Congo. PPC Lime has expanded its participation in this industry in recent years, with exports to the Copperbelt in these regions accounting for more than 10% of lime product.
OperationsRevenues benefited from contractual price increases and increased export sales, while margins were affected by higher costs. The lower volume, extraordinary expenditure on plant maintenance, and high coal costs resulted in operating profit declining by 23,4%.
Aggregates
2011 2010 %
Revenue (Rm) 271 296 (8,4)EBITDA (Rm) 56 74 (24,3)EBITDA margin (%) 20,7 24,9Operating profit (Rm) 43 61 (29,5)Operating margin (%) 15,9 20,6Assets (Rm) 210 208 1,0
MarketsLower volumes and competitive selling prices resulted in an 8% decline in revenues for the division. The strengthening of the South African rand against the Botswana pula in the early part of the financial year also contributed to the decline.
Aggregates are low-value products, with typical ex-works prices of R85 per tonne versus cement at R1 000 per tonne. Aggregates therefore have a more limited distribution range as the cost of transport over longer distances becomes disproportionately large compared to the ex-works price. As such, aggregate quarries typically depend on projects within a 30km radius. A lack of projects in the vicinity of our Gauteng quarries in South Africa resulted in lower volumes during the year. However, there was some improvement in the second half of the year, reflecting the start of various medium-sized construction projects in the West Rand and Centurion areas and our sales teams exploring new customer segments. The outlook for aggregates quarries in Gauteng will probably remain subdued, as it mainly depends on construction activity.
Lower demand from our Kgale quarry in Botswana this year reflected the slow start to major road-building projects. Demand in 2012 should improve as major road projects that started later in the financial year continue and the benefits of the division’s expanded footprint, through the recent acquisition of Quarries of Botswana, unfold.
OperationsOperating profit was affected by lower volumes and unfavourable product mix. Variable costs per tonne were well controlled, ending only 3% up for the year. The current pressure on margins is expected to remain in the short term as the competitive environment restricts cost recovery through selling price increases.
The acquisition of Quarries of Botswana for BWP48 million will increase aggregate capacity from 3 million to 4 million tonnes per annum through three additional quarries. These quarries are in Gaborone, Francistown and Selebi-Phikwe and will consolidate PPC’s presence in the key nodes of construction growth in the future.
Initial integration of the Quarries of Botswana employees into Team PPC has progressed smoothly with our approach to employees, policies and procedures well received by the new team members.
Ope
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Pretoria Portland Cement Company Limited36
The health and safety of our people, and their focused development, continue to drive PPC as we target zero harm and invest in our talent.
PEOPLE REVIEW
FOCUSED ON OUR PEOPLE
Nardus Laubscher graduated from the University of Stellenbosch in 2009 with excellent results in his BSc (chemical engineering). During his university years, he conducted vacation work at our PPC De Hoek operation, focusing on database development, heat exchanger design and emergency systems for emptying coal bins.
After a successful interview, Nardus was appointed in January 2010 as a graduate process engineer at PPC Group Process Services, based at PPC Jupiter. After a thorough induction both there and at Group Laboratory Services, where he spent time in the chemical and physical testing laboratories, he has completed most modules in the graduate development programme (between January 2010 and June 2011), covering all aspects of the cement-manufacturing process, as well as three case studies. With submissions always of the highest standard, he has effectively set the benchmark for all future process engineer candidates.
Nardus’s ability was again recognised in the middle of this year when, after only 18 months with PPC, he became process engineer at PPC Dwaalboom, our largest and most modern operation, where he is responsible for the pyro processing (kiln) sections of the plant. We are confident he will gain invaluable knowledge and experience at Dwaalboom, and become a significant asset to the company.
A critical part of our Kambuku process is the ongoing commitment to recognise 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, PPC’s executive team and senior managers.
Jacobus van der Westhuizen, an electrician at our De Hoek factory, was the PPC Top Achiever for 2011 because of his dedication, and understanding of how contributing to the bottom line helps every member of Team PPC.
Jacobus again implemented a number of productivity improvements during the year, adding to his 17-year record of service and achievements. He was also recognised for his work ethic and enthusiastic mentoring of junior artisans who are considered indispensable to the electrical section and the engineering division as a whole.
Case study – From vacation work to process engineer
Case-study – Our own 2011 X-factor
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Integrated annual report 201137
Case study – From ABET to university degree
After much hard work, Bongani Zwane achieved ABET level 4+ (NQF1). This determined young man could now see his future, and it was vastly different. He went on to complete a national diploma in production management in 2009, and then enrolled at the PPC operation academy where he completed his NQF4 qualification in carbonated materials manufacturing processes. His personal highlight of this experience was that he was the only one in his class who passed financial management on the first attempt and his budgeting assignment is currently being used as a benchmark for future learners.
In 2010, Bongani was awarded his BTech degree from Unisa.
His advice to others: “Don’t give up, keep putting in hard work and if you fail, try again, PERSEVERE. Take responsibility for your career. Don’t wait for someone to come along and do it for you – take action. Embrace change, it’s the only constant in life.”
For PPC, Bongani Zwane is living proof of the Kambuku principle of learning for growth.
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Pretoria Portland Cement Company Limited38
PEOPLE REVIEW COnTInuEd
Safety and health
Highlights Lowlights
• Slight improvement in group LTIFR.• Eight sites and our projects department. recorded a zero LTIFR for the year.
• Retained OHSAS 18001 certifications.
• One fatality recorded.• Two section 54 notices to stop certain
operations.• Four section 55 notices to comply with
legislation.
Occupational safety
7 For the year, the group lost-time injury frequency rate (LTIFR) decreased from 0,40 to 0,34. Although this was a positive trend, we believe the safety performance of the team can improve even further.
Tragically, one fatality was recorded this year when a contractor, Mr Samuel Nawa, died in an incident involving cleaning operations inside a cement silo. A full investigation, with the Department of Labour, to identify all root causes and remedial action is under way.
All relevant operations have maintained their OHSAS 18001:2007 certifications as audited by the South African Bureau of Standards (SABS). This ensures PPC complies with international standards for health and safety in the workplace.
Our aggregates operations received an integrated safety, health and environment (ISHE) commendation by the Aggregate and Sand Producers Association of Southern Africa (ASPASA) and a further environment-specific commendation by About Face.
Key performance indicators (PPC group)
Actual2011
Actual2010
Actual2009
Number of fatalities* 1 0 2
Fatality frequency rate per 200 000 hours worked* 0,02 0 0,03
Number of LTIs* 19 24 19
LTIFR per 200 000 hours worked* 0,34 0,40 0,36
Days lost due to lost-time injuries* 898 1 000 –
Number of significant administrative fines issued by authorities 0 0 0
* Not externally verified for 2009, verified by Deloitte & Touche in 2010 and 2011.
Lost-time injuries
South Africa Botswana Zimbabwe Total
M F M F M F
Lost-time injuries 16 0 1 0 1 1 19
Days lost 530 0 98 0 256 14 898
Occupational diseases* 0 0 0 0 0 0 0
* Confirmed cases of occupational disease in the financial year.
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Integrated annual report 201139
0,0
1,0
2,0
3,0
4,0
LTIs
Group LTIs Group LTIFR
Oct
09
Nov
09
Dec
09
Jan
10Fe
b 10
Mar
10
Apr
10
May
10
Jun
10Ju
l 10
Aug
10
Sep
10O
ct 1
0N
ov 1
0D
ec 1
0Ja
n 11
Feb
11M
ar 1
1A
pr 1
1M
ay 1
1Ju
n 11
Jul 1
1A
ug 1
1Se
p 11
PPC group LTIFR and LTI
LTIF
R
0,20
0,25
0,30
0,35
0,40
0,45
0,50
Several operations recorded more than 500 000 lost-
time injury-free hours at the end of the financial year,
as shown below.
Site
Hours since last lost-time
injury
Projects 2 919 488
Sandton and Group Laboratory Services (excluding motor vehicles) 1 745 963
De Hoek 1 006 359
Bulawayo 946 333
Aggregates 929 925
Riebeeck 851 833
Slurry 688 719
Colleen Bawn 638 760
Back 2 Basics project
The improved lost-time injury frequency rate for the
year partly reflects the success of PPC’s Back 2 Basics
project, implemented in 2010, which includes the
following safety initiatives:
• Health and safety newsletter – Blue Sky – four times
during the year
• Implementing minimum safety behaviour
requirements – the non-negotiable nine
• Additional risk assessment training
• Improved sharing of lessons learned across the
group
• Retraining employees in basic health and safety
principles is under way
• The development of health and safety-specific
measurement standards and associated scorecards
was completed. This will be included in balanced
scorecards for 2012.
Behaviour-based safety
PPC’s behaviour-based safety programme was
revitalised during the year. The previous theme, which
was based on the 2010 World Cup, was changed to
MY SAFETY. This is based on the concept that all team
members are responsible for their own safety and that
of their co-workers. This campaign reaffirms the four
basic tenets of the behaviour-based safety programme:
• Culture – the philosophy of what safety means in
PPC is defined
• Communicate – this is communicated to every
team member
• Commit – every team member commits to working
in a way that supports the agreed culture definition
• Coach – at-risk behaviour is identified and the team
member coached in the correct approach to the
work. This includes the use of risk assessment
techniques to identify hazards and risks and controls
required for mitigation.
While this approach has gone some way to changing
behaviour in PPC in a positive way, we realise that
more should be done to reach our goal of zero harm.
Therefore, during the new financial year, we will
implement a system of identifying exactly what is
expected of every team member to provide a leadership
role in safety, together with the relevant performance
measures. The process will engage team members at
all levels, and the aim is to improve proactive
management of safety performance, aiming for a
reliable and sustainable culture of zero harm.
Occupational health
The entire operational workforce undergoes medical
examinations annually. These include audiometric
screening, lung function and vision testing, as well as
primary healthcare medical examinations.
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PEOPLE REVIEW COnTInuEd
Pretoria Portland Cement Company Limited40
No cases of silicosis or new noise-induced hearing loss
were reported during the year. Two new team
members at Lime Acres were identified during their
entry medical examinations as suffering from noise-
induced hearing loss, but both developed the condition
during prior employment unrelated to PPC operations.
Four of our factory clinics have been audited, with the
balance to be completed by calendar year end. Results
from the external audit at these clinics confirmed that
occupational health infrastructure and the competency
of occupational health personnel were of an extremely
high standard. One clinic is still to upgrade its lung-
function testing service to comply fully with
SANS 451:2008.
As part of optimising certain audits, Dekra shield
audits were not conducted during the year. This meant
that SANS 16001:2007 certification surveillance audits
were not conducted at the South African cement
operations in 2010 to 2011. The lime operations
maintained their certification. However, all sites
continue to manage HIV/AIDS according to the
standard.
Absenteeism rate per region and gender
Region Female Male Total
Botswana 2,0% 1,5% 1,6%
South Africa 1,8% 1,9% 1,9%
Total 0,3% 1,6% 1,9%
HIV and AIdS
HIV and AIDS are well managed in the group with a
focus on access to antiretroviral medicines and other
assistance to ensure continued employee wellness.
A number of sites conducted voluntary counselling
and testing (VCT) during the year. As most PPC team
members have been through VCT testing a number of
times in recent years, they know their status and
therefore some do not attend further testing initiatives.
Clinics conduct VCT during annual occupational
medical examinations. Support structures are in place
for treatment of those living with HIV/AIDS. In
Botswana, these 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 training home-based care givers and awareness
programmes for truck drivers visiting the site. They
have also assisted in setting up vegetable gardens for
healthy eating. Riebeeck sponsored a youth centre
which was opened in Riebeeck West and facilitates
awareness programmes about HIV and AIDS. Colleen
Bawn in Zimbabwe assists with treatment for workers’
spouses and has set up vegetable gardens to improve
the diet of the community. All sites have trained peer
educators who work successfully in the factories and
communities.
Compliance
1,2 During the year, the group received six notices
from the DMR relating to health and safety issues.
Section 54 notices
These notices require a mine to cease operations in the
identified section or activity and to formulate a plan of
action acceptable to the regional chief inspector
before operations may resume.
• March 2011 – Lime Acres: decontamination of
clothes
• July 2011 – Dwaalboom: trackless mobile machinery
licence procedure and disposal of explosives
procedure
Section 55 notices
These notices require a mine to formulate an action
plan acceptable to the regional chief inspector to
comply with an identified deviation.
• October 2010 – Beestekraal: code of practice for
rail-bound equipment, conveyor safety devices and
guards
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Integrated annual report 201141
• March 2011 – Mooiplaas: conveyors and
emergency preparedness planning
• May 2011 – Slurry: decontamination of
clothing
• August 2011 – Slurry: trackless mobile
machinery prestart checklists and DMR 2013
milestone information to employees
All of these findings were cleared without
significantly interrupting operations. A washing
service for the personal protective equipment of
all team members is now provided at two sites.
department of Labour
In August 2011, Jupiter silo-cleaning operations
were stopped after the fatality on site. This was
cleared once the risk assessment had been
reviewed and required documentation provided
to the department.
PPC Lime steps up from HIV/AIds prevention
PPC Lime’s HIV/AIds awareness, prevention and management programme is considered one of the best in south Africa by the dekra 16001 audit team.
Over the past decade, the Lime team has been at the forefront of tackling HIV/AIds within the business and in the broader community. This has earned PPC Lime gold status for dekra IsO 9001, IsO 14001, IsO 16001 and IsO 18001 certifications, including corporate governance and sustainability.
A key aspect of maintaining this high standard is regular and effective communication. To manage AIds properly, the professionals running the programme believe a sustained, multi-pronged approach is required. This includes accessible information, voluntary counselling and testing, and providing antiretrovirals. At the same time, proper systems and processes need to be in place to manage each person’s profile and particular need.
The team recently created an AIds wall as a symbol of the need to prevent the spread of the disease. Positioned near the training centre, the colourful wall with its individual handprints reminds all of the prevalence of AIds in our lives and that every person must play a part in its prevention.
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PEOPLE REVIEW COnTInuEd
Pretoria Portland Cement Company Limited42
Workforce
Highlights Lowlights
• Improvement suggestions generated by our people account for cost savings of over R10 million.
• 86% positive employee satisfaction rating achieved across PPC despite challenging conditions.
• To date, 350 employees have or are participating in various PPC academy offerings.
• Voluntary retrenchment of 46 employees at PPC’s Port Elizabeth facility (completed in full compliance with labour legislation).
• Reduction of head office workforce by 34 through a voluntary separation process.
PPC has long been characterised by a hardworking, committed and dedicated team of employees. Our 119th year was no different as the determination of our people continued to drive our progress in creating a better life for all.
6 PPC’s Kambuku way of life continues to ensure that our most important strategic assets are developed in a healthy and rewarding work environment. For more on our approach see
www.ppc.co.za/pages/social performance_Kambuku.cfm
or the PPC 2010 integrated annual report.
To ensure Kambuku continues to add value, we monitor and measure key aspects, including:
Employee participation and engagement through communication• Key leader summits: regular team meetings at
plant or site level involve all appointed, elected and informal leaders. The aim is to inform employees about plant or site performance, strategic initiatives, challenges and opportunities. Union discussions are also held in this forum. The result is robust and constructive communication in an environment of mutual trust and cooperation. The outcomes of each summit are communicated promptly down to shop-floor level. Through this process, we maintain a clear purpose and common vision and direction throughout the company.
• Invocoms: structured, team-based discussions take place 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 4,2 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 PPC’s vision and objectives, evaluate team performance, analyse obstacles affecting performance and develop appropriate action plans, and ensure targets are achieved. Behavioural safety, educational topics and development are also discussed in Invocoms.
Saving costs through employee innovations and suggestionsDuring the review period, some 3 000 value-adding suggestions were generated via Invocom structures. Of these, more than 70% were accepted for implementation, saving PPC over an estimated R10 million in 2011, taking the four-year cost saving to some R69 million.
Individual Perception Monitor – listening to our peopleFor 11 years, PPC’s annual Individual Perception Monitor survey has given our people the opportunity to express their views and rate the company on critical processes. This includes understanding PPC’s vision, employee benefits, leadership behaviour, remuneration, training, coaching and communication. Participation is both voluntary and confidential. Results are analysed by site and at group level to identify and address areas of concern and reinforce positive trends. Despite the challenging economic climate, and the reduction in staff numbers through voluntary processes we have maintained a healthy 86% satisfaction rating across PPC in 2011. Our target is to exceed 85%.
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Integrated annual report 201143
Succession planningEnsuring that competent people are continuously available to assume key positions in the company is integral to our succession strategy. 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 PPC’s EE targets and plans, and places specific emphasis on key technical skills – an industry-wide challenge.
Balanced workforcePPC’s total workforce for 2011 is 3 087 compared to 3 257 in 2010. In South Africa and Zimbabwe,
workforce numbers decreased by 164 and 17 respectively, reflecting the effects of voluntary separations and the moratorium on employment to ensure we remain competitive. Workforce numbers for Botswana grew by 11, mainly due to filling critical positions and meeting demand.
Where appropriate, PPC strives to recruit diverse talent in line with the demographic requirements of its operating regions. In South Africa, demographically representative recruitment has risen encouragingly to 85% (2010 and 2009: 76%).
Workforce analysis: South Africa*
African Coloured Indian White Total
Female Male Female Male Female Male Female Male
Top management 1 1
Senior management 2 2 1 2 2 11 20
Professional 12 17 1 19 6 19 20 100 194
Skilled workers 89 308 69 188 17 14 116 295 1 096
Semi-skilled 85 749 22 194 1 9 23 1 083
Grand total 188 1 076 92 402 25 36 145 430 2 394
* Data includes learners and fixed-term contractors at 30 September 2011.
Workforce analysis: Botswana*
Botswana nationals
SA nationals Total
F M M
Professional 0 4 3 7
Skilled 14 44 0 58
Semi-skilled 4 41 0 45
Total 18 89 3 110
Fixed-term contracts 1 8 1 10
Total 1 8 1 10
Grand total 19 97 4 120
* 30 September 2011.
Workforce analysis: Zimbabwe*
F M Total
Senior management 0 1 1
Professional 7 38 45
Skilled 29 103 132
Semi-skilled 7 207 214
Unskilled 4 43 47
Learners 5 126 131
Total 52 518 570
Fixed-term contracts 0 3 3
Total 0 3 3
Grand total 52 521 573
* 30 September 2011.
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PEOPLE REVIEW COnTInuEd
Pretoria Portland Cement Company Limited44
Workforce turnover
Rate of employees leaving for period 1 October 2010 to 30 September 2011 against total workforce as at 30 September 2011.
Age group
Botswana South Africa Grand total
%Female
%Male
%Total
%Female
%Male
%Total
%
30-50 years old 8,3 4,3 4,9 16,7 11,6 12,5 12,1
Over 50 years old 0,0 6,3 5,3 21,7 17,5 17,9 17,5
Under 30 years old 0,0 6,7 5,3 16,4 28,2 25,1 24,4
Grand total 5,3 5,0 5,0 17,1 16,6 16,7 16,1
Rate of new employees leaving for period 1 October 2010 to 30 September 2011 against total workforce as at 30 September 2011.
Age group
Botswana South Africa Grand total
%Female
%Male
%Total
%Female
%Male
%Total
%
30-50 years old 0,0 0,0 0,0 4,0 1,6 2,1 2,0
Over 50 years old 0,0 0,0 0,0 0,0 2,9 2,7 2,6
Under 30 years old 0,0 6,7 5,3 5,3 12,4 10,5 10,4
Grand total 0,0 1,0 0,8 4,0 4,3 4,2 4,1
Workforce demographics
Employees for South Africa and Botswana per gender, age group and race.
Age group
Female Male Grand total
%African
%Coloured
%Indian
%White
%African
%Coloured
%Indian
%White
%
30-50 years old 49,8 60,9 68,0 60,7 52,1 61,9 75,0 53,0 54,9
Over 50 years old 3,9 5,4 4,0 24,1 25,6 10,9 11,1 33,9 21,6
Under 30 years old 46,4 33,7 28,0 15,2 22,3 27,1 13,9 13,1 23,4
Labour relationsThe percentage of employees recognised as members of a trade union is 33% in South Africa, 59% in Botswana and 68% in Zimbabwe. In line with our commitment to freedom of association, there are relevant agreements between the company and various unions.
People development
6 The success of PPC is founded on the ‘learning for growth’ principle of our Kambuku way of life management system – using the right people, with the right skills to do the right things. By providing the opportunities, resources and means, we enrich our employees and assist them in reaching their full potential.
Our diverse selection of training programmes is designed to produce substantial benefits for both
PPC and its employees, and our ‘learning for growth’ principle has been entrenched throughout the group.
Average hours of training per categoryOn average, a PPC employee in South Africa spends 134 hours or almost 15 days on training per annum.
Employee levelsAverage training
hours
Top management 4,5
Senior management 12,9
Professional 21,7
Skilled employees 110,4
Semi-skilled employees 165,0
Overall average 127,1
Excludes average hours of training conducted via study assistance as per GRI reporting.
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Integrated annual report 201145
Investment in training (RSA only)
African Indian Coloured White
TotalMale Female Male Female Male Female
R14,7m R1,9m R6,6m R0,8m R2,3m R1,3m R6,9m R34,5m
Includes training costs conducted via study assistance as per BBBEE reporting.
During the year, PPC spent R34,5 million or 5,0% of its payroll (ie leviable amount) on skills development for employees; 80% of this was spent on previously disadvantaged employees at a total investment of R27,6 million.
AcademiesPPC continues to focus on building sustainable competence to remain globally competitive. Our academies were specifically developed to support this need. Where appropriate, PPC aims to align its development initiatives to nationally recognised qualifications.
There are five PPC academies:• Sales and marketing• Operations (cement manufacturing)• Mining (opencast quarrying)• Technical skills• Leadership and management
PPC sales and marketing academySince the start of the sales and marketing academy in 2007, 17 students have graduated with a level 4 qualification in customer management accredited by the NQF (National Qualifications Framework) and recognised by the European Marketing Federation. Currently there are six students in the programme who are due to graduate in 2012.
Programme
African Indian Coloured White
Total Current GraduatedM F M F M F M F
Sales and marketing 10 2 1 0 5 1 3 6 28 6 17
PPC operations academy (cement manufacturing)Since the start of the academy in 2007, we have had 70 learners in the programme. To date, 30 have graduated and a further 32 are expected to graduate by 2012.
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).
Programme
African Indian Coloured White
Total Current GraduatedM F M F M F M F
Operations academy 25 2 0 0 20 0 23 0 70 32 30
PPC mining academyThe PPC mining academy offers the rock-breaking: opencast quarrying qualification which is aligned with new explosives regulations. Since its launch in 2008, we have had 41 learners at various stages of completing this NQF level 3 qualification.
Programme
African Indian Coloured White
Total Current GraduatedM F M F M F M F
Mining academy 16 1 0 0 15 1 8 0 41 37 0
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PEOPLE REVIEW COnTInuEd
Pretoria Portland Cement Company Limited46
PPC technical skills academyIn another successful year, the technical skills academy (TSA) operated above capacity for most of the time. During the period, TSA maintained its MQA accreditation, its ISO 9001:2008 certification. TSA is now fully accredited by Merseta (the sector education and training authority for manufacturing, engineering and related services) to provide training and conduct trade tests as a decentralised trade test centre.
This year was also a challenging time, given numerous changes in the training environment. The introduction of the Quality Council for Trades and Occupations (QCTO), changes at SAQA and the Setas led to a change in how learners are trained and the introduction of the new national trade test. TSA is currently upgrading training facilities in the various workshops to accommodate new requirements in training and trade testing of learners.
In addition to PPC’s learners in the various trades, there are seven PPC Education Trust learners undergoing their training at Slurry and another four learners are in the process of being appointed at Lime Acres. Of the seven initial learners, the first five Education Trust learners will be trade tested in the first quarter of 2012.
By year end, 29 current learners had successfully completed their trade tests.
Programme
African Indian Coloured White
TotalM F M F M F M F
Electrical learnership 10 6 – – 2 1 3 – 22
Fitter and turner 12 5 – – 6 – 3 – 26
Plater welder 13 – – – 4 – – – 17
Diesel mechanic 11 – – – 2 – 2 – 15
Total 46 11 – – 14 1 8 – 80
PPC leadership academyLaunched in 2009, 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. There were 13 graduates from the senior leadership programme in May, with the second intake planned for November 2011. Graduates agreed that the course had significantly enhanced their managerial and leadership skills and contributed to the solid foundation PPC has built at senior levels over the years. Their feedback will be instrumental in refining the courses for future participants.
The academy’s learning material includes case studies from the group, therefore PPC specific and customised for our business. Participants also benefit from the combination of PPC subject-matter experts and best-of-breed facilitators and lecturers, while group work enhances cross-functional learning across the value chain.
Programme
African Indian Coloured White
TotalLeft the
programme GraduatedM F M F M F M F
Leadership and management 2 – 2 2 1 – 8 1 16 3* 13
* 1 promoted to director, 2 resignations.
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Integrated annual report 201147
PPC bridging programmeThis accredited skills programme in business fundamentals was launched to help learners obtain the relevant entry requirements for the academies’ programmes. To date, 131 learners have joined this programme, with a completion rate of 78%.
Programme
African Indian Coloured White
Total Current GraduatedM F M F M F M F
Bridging skills programme 39 3 0 0 65 3 17 4 131 28 102
Graduate development programmeThe graduate development programme has been a great success since its inception in 2008. It has taken in 23 graduates, with ten already integrated into the business. Around 30% are women and, with its focus on women in mining, the programme will receive eight new graduates in January 2012, of whom 63% are African females in the chemical and mining engineering fields.
Our feeder into the PPC graduate development programme is the Dinaledi bursary scheme, with most candidates coming from previously disadvantaged communities and communities where we operate, and again with the focus on women in mining.
Significantly, in 2011, six of the candidates enrolled were drawn from our Dinaledi programme – further proof that our development programmes are making a difference.
Programme
African Indian Coloured White
Total CurrentM F M F M F M F Graduated*
Graduate development programme 11 4 0 0 3 1 2 2 23 11 10
* 1 candidate deceased and 1 left the group.
dinaledi bursary programme – future engineersThe programme has been running for the last five years. Six graduates – four men and two women – are currently on the PPC graduate development programme. The first PPC Dinaledi bursar to graduate completed our development programme and is now a process engineer at PPC Hercules. Eight students – five females and three males – are joining the 2012 graduate development programme.
Vacation work is a requirement by the Engineering Council of South Africa (ECSA) to qualify for related degrees. PPC accommodates students during vacation periods, aiming for a spread of work experience. Students were asked to comment on the benefits of the Dinaledi programme with specific reference to vacation work. They agreed that universities offer mostly the theoretical part, while the PPC vacation work programme offered holistic development towards the engineering profession, including academic, professional and personal growth. One student commented that “each vacation work task comes with its own challenges, requiring different aspects of engineering knowledge. One is required to research and learn from experienced engineers. In this way, one begins to appreciate the spirit of giving and receiving through mentoring and coaching”.
Adult basic education and trainingGlobal data estimates that 860 million of the world’s adults do not know how to read or write (women make up nearly two-thirds of this number) and that over 100 million children lack access to education. PPC is contributing by providing adult basic education and training or ABET to its workforce to minimise illiteracy throughout South Africa. Our aim is to get people to level 4 in literacy and numeracy. For 2011 financial year, there were 297 learners enrolled for ABET from level 1 to level 4: 157 learners completed level 4. The catalyst for this success is a combination of determination, effort, good use of resources and evaluation strategies in reaching the desired goals.
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Pretoria Portland Cement Company Limited48
SOCIAL REVIEW
FOCUSED ON TRANSFORMATION, EMPOWERMENT AND OUR COMMUNITIES
Case study – PPC launches Women’s Forum
Early in the new financial year, we launched the PPC Women’s Forum, which is being piloted at our Sandton offices to address workplace issues women face daily. Around the world studies have shown that, in the business world, these issues cut across race, class and ability/disability. They are, in fact, common across the board.
Driven from the CEO’s office and championed by the chief financial officer, the forum aims to provide a platform in the workplace for women to voice issues that directly affect them.
• Raiseawarenessaboutissuesaffectingwomeninworkplace Networking forum – embrace diversity, change, support Bridge the gap and build relationship and diversity in the organisation Provide professional advice and workshops through interaction with other women leaders in
business
• Mentorship Advance opportunities for women in PPC through mentoring MentoryoungwomenenteringthePPCworkenvironment Mentor/menteeobtainvaluableinsights,sharetheirsuccessesinpersonalandcareerdevelopment Ability to learn, devote time, identify and stretch goals, and map way forward for development
• Coaching MiddlemanagementandexecutivewomeninPPC.
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Integrated annual report 201149
Over R7 million allocated to external projects
To date, trustees of our three external trusts – PPC Community Trust, PPC Construction Industry Associations Trust and PPC Education Trust – have approved more than R7 million for various projects. Initiatives range from providing Wonderbags and Digital Doorway computers to designated communities, to training in practical building skills, computer skills and project management to industry-related associations.
These trusts have already had a profound impact on the lives of their beneficiaries. As funding grows and loans are repaid to the bank, we expect this impact to become increasingly more significant.
PPC Community Trust
This trust is aimed at building thriving and sustainable host communities (currently ten) beyond the life of PPC’s mining operations. Projects under way include:
• InJuly,renovationstoahealthandadviceofficeinDanielskuil(NorthernCape)began,whilearuralyouth leadership training programme was completed in Riebeeck (Western Cape). In addition, two sewing machines were purchased for a Wonderbag project aimed at families in Riebeeck. These bags are used for cooking food without requiring much electricity or other sources of energy.
• InAugust,R20000wasspentoneducationalmaterialsforEphphathaearlychildhooddevelopmentcentre at Slurry near Mafikeng. The long-awaited Digital Doorway computer was delivered to the DiepslootYouthCentre inGautengandthetrusteesapprovedR180000forphases1and2ofthefood garden project in Holfontein, where most of Dwaalboom’s labour force lives. The trustees also approvedthemanufactureof600WonderbagsfortheRiebeeckcommunity.
PPC Construction Industry Associations Trust
This trust is focused on empowering construction and industry-related associations and their members to deliver strategic socio-economic projects across South Africa.
• In June, over R3,7millionwas approved for various construction-related training programmes forbeneficiaries, most of which were implemented by August.
PPC Education Trust
This trust concentrates on the education and training of black beneficiaries in the cement manufacturing, mining and construction industries across South Africa.
• InJune,almostR1,6millionwasapprovedforfournewfemalelearnersintheNorthernCape.TheywererecruitedinJulyandwilldoon-the-jobtrainingatLimeAcresandskillstrainingatthetechnicalskills academy in Slurry.
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SOCIAL REVIEW COnTInuEd
Pretoria Portland Cement Company Limited50
Empowered ownership
Highlights
• Further R7 million approved for PPC trust projects.
• Additional 127 new employees become shareholders.
• R81 million in dividends paid in terms of 2008 BBBEE transaction.
• An employee share scheme valued at R1,2 million implemented in Botswana.
Black economic empowerment in South Africa remains a firm commitment for PPC, given the importance of meaningful participation in the mainstream economy by black people in meeting the country’s socio-economic objectives.
3 After our R2,7 billion BBBEE transaction three years ago, PPC’s shareholding includes around 3,5 million black beneficiaries in broad-based shareholder groupings. These include employees and communities. This transaction transferred over 15% of PPC’s equity into black hands through various trusts, a consortium of strategic business partners, and community service groups (page 51). Our aim is to provide the maximum benefit to participants through funding structures that release dividends as soon as possible.
During the period, we again engaged 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.
Since the launch of the PPC external trusts, trustees have implemented various projects across the different vehicles, summarised below.
PPC external broad-based and internal staff trustsOver the past four years, we have made good progress in implementing the aims of the external broad-based and internal staff trusts linked to our empowerment transaction.
Around half (8%) of the 15,29% equity stake, totalling R1,4 billion, relates to these trusts. With focus and
commitment from all stakeholders, the individual trusts – each with a specific focus – were registered and successfully launched at various stages as detailed below.
The PPC Construction Industry Associations Trust (CIA) (Reg No IT 1040/08)Launched in January 2009, this trust’s long-term objective is to deliver strategic projects that contribute to the socio-economic upliftment of disadvantaged individuals and communities across South Africa.
In March 2011, the trustees approved an additional R3,7 million (2010: R1,9 million) to five beneficiary construction associations (detailed below). At year end, R3,2 million had been spent on various projects aimed at capacitating the development of association members.
Since 2009, over 1 900 members from different beneficiary associations have participated in accredited training programmes.
• Khuthaza Development Solutions In 2010/11, 238 members were trained in practical
building skills at the Tjeka Training Centre in Chamdor, Mogale City. These included stormwater drainage, guardrails and road signs, bricklaying, painting, plumbing, plastering, road marking, foundations and pothole repairs. A further 119 contractors attended training programmes in project management and construction management, while 306 contractors attended training programmes on leadership and professional development. The total cost of training was R800 000, and 453 building and construction contractors in total benefited, with some contractors attending more than one training programme.
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Integrated annual report 201151
• National African Federation for the Building Industry (NAFBI)
In 2011, NAFBI spent its allocation of R800 000 on training 36 bricklayers and recognition of prior learning (RPL) assessments for 96 apprentices/artisans, while 37 members were trained in supervisory skills and 28 in cost estimation for building projects. A further 24 members received project management training and 36 members were trained in site management. In a partnership with Mellon Housing Initiative (below), 30 members were trained in tendering, costing and pricing. In total, 287 NAFBI members benefited from training programmes.
• South African Women in Construction (SAWiC) In 2011, SAWiC used its R800 000 allocation on
practical skills training for 60 members in building programmes, including bricklaying, foundations, road maintenance, pothole repairs and road marking. A further 45 SAWiC members attended computer training courses, while 40 members attended financial management training and 18 executive committee members received training in leadership and strategic planning. In total, 163 SAWiC members have benefited from training programmes.
• Mellon Housing Initiative Mellon spent its 2011 allocation of R800 000 on life
skills training for 190 contractors. Other training included practical building skills in blockmaking, bricklaying, plastering and plumbing for 49 contractors. Surveying techniques, tendering/costing/pricing training and health and safety training were conducted for 70 contractors. In total, 209 Mellon contractors and sub-contractors benefited from these programmes.
• Habitat for Humanity Habitat for Humanity became a beneficiary of the
trust in November 2010, with over R502 000 approved by the trustees for its programmes in 2011.
Habitat for Humanity is currently installing a customer relationship management system. It also implemented a management coaching session, project management training and a people management workshop for eight staff members. A computer skills training course was held for ten staff members in Durban. In total, 18 staff members have benefited from training.
PPC Education Trust (Reg No IT 1041/08)Launched in August 2009, the purpose of the PPC Education Trust is to contribute to education and development in the cement manufacturing, mining, construction and related industries. The aim is to provide funding to education organisations or individuals for sectoral development, learnerships and education. There are currently seven black learners undergoing apprenticeship training at PPC’s technical skills academy near Mafikeng. Four new learners from the Northern Cape will undergo on-the-job training at PPC Lime Acres and theory and skills training at the academy.
PPC Community Trust (Reg No IT 1035/08)The trust was launched in April 2010, with over R558 000 approved by the trustees for six projects in designated PPC communities. These include support for an early childhood development centre and food garden for the community in Mafikeng; a Digital Doorway computer for Diepsloot in Gauteng; a health and advice office for the community of Danielskuil in the Northern Cape; and a rural youth leadership training programme and Wonderbag energy project for communities in the Western Cape.
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SOCIAL REVIEW COnTInuEd
The PPC Team Benefit Trust (Reg No IT 1036/08)Launched in June 2009, the initial focus of this trust was financial literacy among shop-floor employees, in response to a needs analysis survey across the business. Over 3 000 participants attended the programme in 2009 and 2010. In 2011, the trust has focused on estate planning and the importance of having a will. Group workshops across the business are currently being rolled out and further workshops are planned for 2012.
PPC staff trustsSince launching our internal staff trusts, some 2 827 existing staff beneficiaries have collectively received R19,1 million in dividends. The Future PPC Team Trust, which deals with new staff members, is currently 51% allocated, with 381 284 shares passed on to beneficiaries. Since inception, 796 beneficiaries have joined this trust. The Black Managers Trust is currently 61% allocated, with 6,3 million shares passed on to beneficiaries. Dividends of R62 million were paid to the trust’s loan funders on behalf of beneficiaries, and 159 beneficiaries have joined this trust since its inception.
Botswana share schemeAs an integral part of the PPC group, PPC Botswana has contributed to our success for many years. In keeping with the PPC Kambuku philosophy of Creating a better life for all and the Botswana operations’ It’s up to us slogan, we have introduced a staff scheme for permanent team members of PPC Botswana and Kgale Quarries.
As Botswana’s requirements for localisation (or BEE) have not yet been defined, we could not award employees in Botswana shares in their name in their local company, PPC Botswana (Pty) Limited. While we wait for this legislation to be finalised, Botswana employees will enjoy the same financial benefits as their South African colleagues. The new staff scheme will allow team members to share in the profits and growth of PPC by receiving the same dividend amounts and performance as PPC shares listed on the JSE in South Africa. While dividend amounts will be paid out as they occur, the Botswana units will only be converted to local company shares in employees’ names once legislation on localisation has been finalised.
Pretoria Portland Cement Company Limited52
Socio-economic development
Highlights
• R28 million of a planned R60 million (over five years) spent on local economic development projects approved by the Department of Mineral Resources.
• 79% of total procurement representing R2,4 billion spent with BBBEE suppliers.
• Corporate social investment spending rises to over R9 million with formal initiatives extending to Botswana and Zimbabwe.
Applications to convert PPC’s old-order mineral rights were submitted to the Department of Mineral Resources (DMR) in 2008. Social and labour five-year plans were submitted for approval early in 2009. These plans embody PPC’s 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 its ten social and labour plans submitted to the DMR, PPC committed to investing R60 million over five years on local economic development (LED) projects in its communities. This involves 28 projects in 12 communities, partnering with municipalities in six provinces across the country.
To date, PPC has spent almost half (over R28 million) of the planned total implementing projects approved by the department and agreed with municipalities, with 14 projects now completed and handed over to communities. The social and labour plan projects are in addition to the group’s own corporate social investment (CSI) projects. PPC continues to engage with all its communities in identifying and implementing sustainable projects.
PPC’s current community investment areas span infrastructure development, poverty alleviation and job-creation projects. The social and labour plan projects implemented during the year are summarised on the following pages:
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Integrated annual report 201153
Region: North West, PPC SlurryProject name: Construction of Maruping ClinicBeneficiaries: Community of Ottoshoop and nearby villages Launched: August 2011As part of its social commitment to invest in the communities in which it operates, PPC has invested R2,8 million in a region that was only being serviced by a monthly mobile clinic. The new clinic will service the entire Maruping community with its population of 14 000 and surrounding areas.
The sustainability of the project is strengthened by a tripartite partnership between Mafikeng local municipality’s integrated development plan, DMR, North West department of health and PPC Slurry’s social and labour plan.
The project is the first of its kind for the provincial department of health, becoming a pilot study in using a modular design for a five-day clinic facility. The focus on primary healthcare is guided by the pressure on the public healthcare system given high levels of poverty in the area and the severity of HIV/AIDS infections.
The facility will also be used to raise health awareness in the community through screening technology such as blood-pressure testing, cholesterol and diabetes, with a strong focus on HIV/AIDS. This health-screening technology will assist community members in detecting conditions early to improve their prognosis.
Region: North West, PPC BeestekraalProject name: Ramokoka Primary School phase IIBeneficiaries: Children from Ramokoka VillageLaunched: September 2011A century-old rural school 80km north of Rustenburg has been relocated and totally rebuilt. Phase 1 of the project involved relocating the school to a site closer to the village community by establishing an entirely new, modern school building to accommodate 230 learners.
The second phase involved constructing additional classrooms, a library and administration block (see case study).
Ramokoka Primary School
Ramokokastad village is 80km north of Rustenburg, with almost one-third of PPC Beestekraal’s employees coming from this village and surrounding areas.
Over the years, the village developed away from the now-dilapidated school, and some children were walking 14km each way to school.
Given that learners at Ramokoka are some of our future leaders and employees, we assisted the community in relocating Ramokoka Primary School towards the growth node of the village.
The process of engaging with the community started in 2006. With the help of Adopt-a-School Foundation, labour for the construction was sourced locally, comprising mainly unemployed parents of learners, who were paid a stipend. Construction took place in phases over five years to ensure everyone had an opportunity to participate in the project. To date, 65 temporary jobs have been created, with a total investment of almost R4 million. The school now caters for grades R to 6.
The beautiful new Ramokoka Primary School is a fitting legacy created by the partnership between stakeholders including PPC Beestekraal’s local economic development team, the Tribal Authority office, Moses Kotane municipality, departments of education, mineral resources and public works, the school governing body, community members – especially the parents – and our implementor, Adopt-a-School Foundation.
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SOCIAL REVIEW COnTInuEd
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Region: Western Cape, PPC RiebeeckProject name: Swartland Youth CentreBeneficiaries: Youth and women in the surrounding areas of RiebeeckLaunched: June 2011PPC and its partners – the Goedgedacht Trust, DMR and Swartland municipality – officially opened the new centre as part of PPC Riebeeck’s local economic development (LED) programme. PPC has invested R3,5 million in this project.
The Youth/Path out of Poverty Centre (known by all as the POP Youth Centre) was built to help break the cycles of rural poverty, thus turning Riebeeck West into an economically sustainable community. The centre will house a gym, an after-school project, educational facilities such as a library, a computer technology centre and a trauma room that will be used in a partnership with the Valley Empowerment Project and local SAPS to provide counselling to victims of crime. Courses provided will include life skills, youth leadership programmes, health and fitness, cultural exchange programmes, drama, choir and music. Operating seven days a week, the centre will serve the Riebeeck West and surrounding communities, and will also be used for meetings and functions as required.
Region: Western Cape, PPC de HoekProject name: Wittewater water works infrastructure development phase IIBeneficiaries: Community of WittewaterLaunched: July 2010PPC and the Bergriver municipality addressed the challenge of potable water availability as part of the integrated development plan.
The first phase of upgrading existing water treatment and supply facilities was completed in July 2010 and handed over by the Department of Water Affairs, Forestry, Fisheries and Agriculture to the community. Phase II comprised upgrading the existing water distribution network and was completed in July 2011.
PPC invested R2,4 million in the two project phases and now 1 500 community members benefit from clean water throughout the year.
Region: Western Cape, PPC de HoekProject name: Poverty alleviation – invader tree eradicationBeneficiaries: De Hoek communityLaunched: May 2010To comply with legislation, PPC De Hoek needed to eradicate alien vegetation. Management decided to reach this target by enabling an SMME (small, medium and micro enterprise) to create employment for disadvantaged individuals from the local community.
This project began in May 2010 and, to date, 382 hectares of land have been cleared of alien vegetation and erosion control conducted on affected areas. PPC’s total investment was R906 203, creating employment for 19 previously disadvantaged individuals.
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Integrated annual report 201155
Projects planned to start in 2012• Atteridgeville incubator skills centre, Tshwane
municipality, Gauteng• Wastebuyback centre, City of Joburg, Region A,
Gauteng• SMME hive in Motherwell, Nelson Mandela Metro,
Eastern Cape• Clinic at Madibeng, Madibeng municipality, North
West
Enterprise development In 2008, we established the PPC Ntsika Fund (Pty) Limited (Ntsika) as a formal vehicle for financial support and active mentorship to black-owned enterprises. To date the Ntsika board has invested R56 million in seven black-owned businesses. Given the entrepreneurial nature of these initiatives, some are more successful than others. Through financial support and mentorship, PPC is focused on ensuring long-term success where possible. During the year PPC appointed Ms Neo Dongwane as the independent chairperson of the Ntsika Fund.
The investment portfolio consists of:• 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 R39,3 million to expand the business base.
• MetlakgolaConstruction&Development(Pty)Limited
Ntsika has invested R2,1 million to purchase and develop 23 plots into residential housing units in Soweto.
• RhulananiConcreteMixers(Pty)Limited 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.
• OlegraOil(Pty)Limited 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 fuel for its kilns in an environmentally friendly manner. Loan repayments of R1,5 million have been made and 14 employees are starting to benefit from dividend payments.
• FirstGas(Pty)Limited First Gas is currently distributing liquid petroleum
(LP) gas, diesel and paraffin from a site in Edenvale, Gauteng. Ntsika has invested R2,5 million in this business. First Gas has recently been awarded a contract to distribute welding consumables in Gauteng.
• ModiseWoodworksandProjectsCC 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 of R100 000 were made in the review period.
• LoerieCommunityTrading(Pty)Limited 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 R2,2 million in this project to date.
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SOCIAL REVIEW COnTInuEd
Pretoria Portland Cement Company Limited56
Preferential procurementTotal discretionary procurement spend for the year was some R3,3 billion of which 84% or R2,8 billion (FY10: 65% or R2,3 billion) was preferential procurement from BBBEE companies. This is a considerable improvement on the comparable level of 45% in 2009 and exceeded the group target of 50% for the review period.
11
10
09
08
2 302
2 806
1 476
1 372
Preferential procurement spend* (Rm)
* De�ned by DTI codes of good practice
Corporate social responsibilityIn 2011, PPC reconfirmed its commitment to social upliftment and developing communities in which we have a footprint by investing in arts, education, food security and infrastructure development.
PPC’s social performance embraces the principles of corporate social responsibility and corporate social investment (CSI). National (BEE Act, codes of good practice and mining charter) and international (United Nations Millennium Development Goals) targets act as guidelines for social development in the PPC group. We strive to go beyond these targets by boosting grassroots innovation and social upliftment.
To ensure long-term sustainability, we believe in partnering with beneficiaries for three to five years. Being a good corporate citizen is not just about giving money; it is important that beneficiaries are assisted in achieving financial independence and becoming productive members of society and this takes time. Job creation and skills development are vital in the context of high national unemployment and a number of our initiatives seek to address this issue (see chart).
During the year, PPC spent over R9 million (FY10:
R8,5 million) on various socio-economic development
projects in South Africa, Botswana and Zimbabwe.
Preferential procurement as a % of total procurement in categories prescribed by the mining charter
Mining charter target 2014 2011 target 2011 actual 2010 actual
Capital goods 40% 10% 24% 5%
Services 70% 40% 47% 61%
Consumable goods 50% 15% 58% 20%
• Job creation – poverty alleviation
• Education• Community training• Infrastructure• Welfare donations• Arts and culture• HIV/AIDS• Other
11%
5%7,5%
0,5% 2%
44%7%
23%
South Africa
Through our CSI initiatives, we are making a
significant contribution to the lives of thousands of
needy South Africans, particularly children. Apart
from projects featured below, PPC is involved in
numerous other initiatives.
www.ppc.co.za
Time for Change
Time for Change (TFC) beneficiaries are excellent
testimony to PPC’s slogan of Invest to Empower. Early
this year, TFC was featured on CNBC Africa’s
Entrepreneurial Programme as an NGO working
towards true sustainability. PPC’s investment in
bakery and sewing equipment has seen a number of
young people from the streets and former commercial
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Integrated annual report 201157
sex workers being trained in these skills, and then
securing employment. TFC’s Siziwe mini bakery and
Time Sewing initiatives have brought dignity and self-
worth to marginalised people.
Most of the women trained under Time Sewing are
self-employed and are now members of a new co-
operative being managed with assistance from the
Department of Social Services. Time Sewing
completed a number of orders from other NGOs,
including track suits for the Field Band Foundation,
uniforms for the Gift of Givers, curtains and cricket
shirts for the French Institute. In the last three years,
the Department of Social Services registered Time
Sewing as one of the suppliers of school uniforms for
the Bana Pele programme.
Importantly, individuals from TFC are living
advertisements of the project’s potential, and
representatives of an alternative life choice to their
peers.
The Love of Christ Ministries (TLC)
In the last two years, PPC has invested around
R500 000 in the implementation of poultry farming
at TLC, a home for abandoned babies. During the
year, the chickens produced enough eggs for use by
the home, with excess supplies sold to the public,
including PPC staff. Birds not laying are sold to a
nearby butchery.
Field Band Foundation
PPC has long supported the field band concept as it
allows steady development in a holistic approach that
considers physical and emotional needs. Field bands
are about ‘music for life’ where youth from
marginalised areas are trained in musical instruments,
movement and dance, and also receive HIV and AIDS
peer education, general education in social
development and specific life skills training,
competitiveness, teamwork, discipline and
timekeeping.
PPC, in partnership with De Beers, supports three
field bands:
• Cullinan Field Band, with participants from
Refilwe, Cullinan and Mamelodi East in Pretoria,
performed at the Human Rights Day celebration at
the Union Buildings in Pretoria, playing in front of
the president of South Africa, his cabinet, local
and international VIPs and the public.
• Kimberley Field Band serves the youth of
Greenpoint and Galeshewe. The band
coordinator was selected to lead a team of ten
choral adjudicators during a mass participation
programme of South African Schools Choral
Eisteddfod in the Northern Cape; with a mandate
to select the best choirs in all voice parts, small
ensembles and sextets.
• Danielskuil Field Band (serving Danielskuil,
Kluisville and Thlakalatlou) – this band has made a
huge impact in Danielskuil, a small town in the
Northern Cape where most band members come
from poor families that are poverty stricken.
Alcohol consumption in these communities is a
particular problem, and the band is providing vital
extramural activities.
All three bands took part in the 2011 national
championships – an event fully supported by the
Department of Arts and Culture. Kimberley and
Cullinan came second and third respectively in the
Premier category.
CSI beyond South African borders
The true intent of corporate citizenship is to uplift
communities through involvement in socio-economic
and local economic development projects, starting
with communities hosting our factories and our
labour-sourcing areas. This intent guides PPC’s
investments in CSI initiatives in Botswana and
Zimbabwe as well.
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SOCIAL REVIEW COnTInuEd
Pretoria Portland Cement Company Limited58
Botswana
A dream come true for Kanye Village
PPC constructed a new building in Kanye village,
some 90km north of Gaborone, which the Pan-
African Christian Women’s Alliance (PACWA), a
group of retired professional women, are using it as a
bakery. Equipment was installed in May and the
bakery is now fully operational.
Six project coordinators were trained in bread-
making, and they will in turn train more marginalised
people from the community, focusing on the youth
to equip them with bread-making skills.
The bakery will become an income-generating
initiative for marginalised people and youth of the
streets from Kanye village under the guidance of
PACWA. The project is scheduled to be launched in
February 2012. Further training in confectionery is
scheduled for early 2012.
Gabaresepe day Care Centre
Worn-out fitted carpets in the classroom at this day-
care centre in Old Naledi in Gaborone were replaced
with rough ceramic floors which are easy to clean,
not slippery and child friendly. The classrooms were
repartitioned into three rooms to allow children to be
grouped by age. Other improvements included
refurbishing the children’s furniture, extending the
kitchen by incorporating unused veranda space and
providing a dining room for the children and reception
area.
Zimbabwe
Refurbishment of Lady Rodewell Maternity
Hospital – Bulawayo
According to the Ministry of Health and Child Welfare
in Zimbabwe (2007), maternal mortality ratios are
estimated at 725 deaths per 100 000 live births.
Through the African Union’s Campaign on
Accelerated Reduction of Maternal Mortality in Africa
(CARMMA), and in response to the Millennium
Development Goals of reducing child mortality and
improving maternal health, PPC embarked on a
refurbishment programme at the seriously dilapidated
Lady Rodewell maternity clinic.
Bulawayo Cement School
PPC invested in Grassroot Soccer at Bulawayo Cement
School. This programme uses the power of soccer to
educate, inspire and mobilise communities to stop
the spread of HIV. Given that soccer is almost a
universal language in many African communities,
Grassroot Soccer aims to reach large numbers of
young people with HIV education. About 150 learners
enrolled on the Grassroot Soccer programme in
2011. The plan is to expand the initiative to Colleen
Bawn and Gwanda surrounding schools.
Phelandaba Stadium
PPC assisted in revamping the Phelandaba Stadium,
the venue that hosted the 9th national youth games
in Matebeleland, South Province of Zimbabwe. PPC
provided gravel, quarry stone, whitewash, billboards
and technical expertise.
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Integrated annual report 201159
Two decades of creating careers for young artists
The annual PPC Cement Young Concrete Sculptor Awards Competition, also known as the YCSA, is a partnership between our company and the Association of Arts Pretoria. Over the past 19 years, YCSA has enabled several award winners to launch successful careers in the art world.
The competition was initiated as one of PPC’s centenary celebrations in 1992. This year, to commemorate its 20th anniversary, an exclusive exhibition of the current works of previous winners was held in May – a truly remarkable collection of talented South African sculptors and their artworks. The event also gave aspiring artists entering the 2011 competition the perfect opportunity to see what can be achieved with cement. One of the early winners noted that techniques today were almost unthinkable 20 years ago, “in 1993, we were just casting in the same old way… today people are actually using concrete.”
Angus Taylor, 1994 winner, has his own foundry in Pretoria – working mainly in bronze, stainless steel and concrete – where he also teaches and nurtures the talent of young developing artists. One of these artists is Phanuel Mabaso from Limpopo (runner-up in 2005 and overall winner in 2007) whose style is easily recognised in the sculpture of his Grandfather which he submitted for this exhibition.
Sonja Geyer, overall winner in 1993, is another example of the exceptionally high calibre of work this competition has inspired and attracted.
Another previous winner of the YCSA who has gained huge recognition for her exceptional talent is Marieke Prinsloo. Her Little Swimmer Girl is part of an 18 sculpture narrative Walking the Road that is currently on display on the Sea Point Promenade in Cape Town.
The YCSA is a truly unique competition and the country’s only major competition exclusively devoted to the art of sculpture – and undoubtedly one of the most successful projects initiated to celebrate PPC’s centenary year.
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Pretoria Portland Cement Company Limited60
understanding that PPC has an environmental impact, we are focused on reducing and mitigating this impact through a range of initiatives.
ENVIRONMENTAL REVIEW
FOCUSED ON MINIMISING OUR IMPACT
PPC is an energy-intensive business and recognises the relationship between its energy consumption and carbon footprint.
We commit to continuous improvement of our energy efficiencies and to reducing the use of non-renewable energy sources, to enhance our long-term sustainability and the prosperity of our stakeholders by:• Continuously benchmarking, monitoring and improving our energy efficiency.• Continuously improving our teams’ understanding of the relationship between energy consumption,
operational efficiency and our carbon footprint.• Implementing management systems that will enable our team members to benchmark, measure and
optimise energy consumption for activities under their control.• Using a life-cycle approach to energy use and carbon footprint in the design and modification of
equipment, processes and procuring goods and services.• Developing alternative energy sources as key to thermal and electrical energy supply strategies.• To surpass minimum legal requirements where appropriate.
As part of the Kyoto protocol, leading nations committed to reducing their carbon footprint by 5 to 10% between 1990 and 2012.
Reflecting its support, PPC achieved a 16% reduction per unit of cement produced from 1990 to 2010.
PPC’s plans include targets for further improving electrical efficiency by 10% and thermal efficiency by 5%, resulting in a further 5% reduction of our carbon footprint by 2017.
In addition, PPC aims to source – either through partnerships or its own development – up to 10% of its electrical; energy requirements from renewable and/or alternative sources by the end of 2017.
PPC energy policy – October 2011
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Integrated annual report 201161
PPC Slurry rehabilitates coal-storage areas
Historically, the area surrounding the railway tracks at PPC Slurry was used for stockpiling coal due to storage area and handling constraints. However, management recognised the environmental risks from stormwater and potential downstream impacts to the soil system, as well as the potential for fugitive dust emissions to affect air quality in the area.
PPC Slurry responded by setting a target, as part of its management system, to rehabilitate 100% of the storage area and restore it to environmentally acceptable conditions. A covered storage facility was identified for all future coal storage.
The coal area rehabilitation project was initiated in May 2011. A front-end loader was used to displace the coal, residual assessments were undertaken and the rehabilitated area was compacted to stabilise and prevent wind-blown dust. The total project cost was R1,3 million and was successfully completed within four months.
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ENVIRONMENTAL REVIEW COnTInuEd
Environmental vision and policy We are committed to minimising the impact of our environmental footprint. We will achieve this by providing energy- and resource-efficient products from an organisation driven by sustainable development.
To reinforce this commitment and integrate green elements into our business plan, PPC embarked on a comprehensive environmental policy management review, fully supported by top management.
www.ppc.co.za/pages/environmental_policy.cfm
Long-term focus on environmental issuesThe strategic steps we have taken in reducing our environmental footprint will allow us as a company to create more positive outcomes in the long term. We acknowledge and accept the impacts of climate
change, management of water resources and energy security as some of our greatest challenges and we have prioritised these responses.
A high-level team led by the chief executive officer collaborated on formulating a group-wide response to challenges and opportunities in the field of energy efficiency and managing the company’s carbon footprint.
Based on strategic interventions and long-term planning, quantifiable targets were developed for energy efficiency and sourcing renewable energy. In addition to the 16% improvement already achieved, a further target reduction of 5% in the company’s carbon footprint over the next five years will be achieved through product and process innovation as well as efficiencies. This has culminated in a fact-based, structured group energy policy. See page 60.
Pretoria Portland Cement Company Limited62
Highlights Lowlights
• Developed and approved PPC group energy policy with defined targets for reducing energy and carbon footprint.
• Integrating green elements into business plan – through enhanced commitment to environmental management in PPC’s 2011 group environmental policy.
• Expanding government’s knowledge of the cement industry through participation in PPC’s technology course.
• Improved stakeholder participation at PPC Riebeeck by establishing site-specific environmental stakeholder forum.
• PPC Zimbabwe received further environmental fines and non-monetary sanctions.
• Delayed decision from authorities to classify certain materials as input products has delayed cleaner production initiatives at PPC.
• Industry tyre waste management plan has not been gazetted, causing uncertainly and a delay in implementing the process of burning tyres to replace fossil fuels.
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Integrated annual report 201163
Environmental performance
Our issuesWhat we said we would do in 2011 Our progress Outlook for 2012
Green procurement
update green supply chain policy as required.
no changes to policy required. Monitor and maintain.
Continue to work with suppliers to improve environmental management.
Partnered with PPC Group Supply to target specific service providers, eg waste management services and fuel suppliers.
Focus on group contracts to improve environmental performance throughout the value chain.
Best practices
Identify more areas where best practices are required and action.
Focused on developing integrated safety, health, environment and quality (SHEQ) management systems and standardising best practice and minimum requirements across the group. Selected best practices are operationalised through the PPC scheduling system. The project is managed using internal resources and is expected to take over three years for complete development and roll-out.
Implement a communication plan and secure group-wide support for the project.
Climate change
Complete review of carbon and energy strategies, with defined carbon, renewable and energy-efficiency targets.
PPC has developed an energy policy with quantifiable climate change targets.
PPC is involved in COP 17 as part of the industry body representation.
Implement efficiency programmes that contribute to planned savings.
Continue with external assurance on scope 1 and scope 2 CO2 emissions.
PPC has calculated its total carbon footprint (scope 1, 2 and 3) for the 2011 financial year using internal resources.
Investigate carbon emission inventory systems to manage data and reporting.
Concentrate on developing systems to track and calculate scope 3 emissions.
External assurance has been undertaken on scope 1 and 2 emissions only using the method suggested by the World Business Council for Sustainable development.
Entrench practice of reporting and assurance of Scope 1 and 2 emissions.
Complete remaining energy audits and implement energy action plans.
Full energy baselines at all operations, and establishment of targets, will be done in the next financial year.
Complete baseline energy audits. Implement actions to meet energy targets.
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ENVIRONMENTAL REVIEW COnTInuEd
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Environmental performance
Our issuesWhat we said we would do in 2011 Our progress Outlook for 2012
Climate change continued
Roll-out of IT virtualisation project (a process of placing more than one operating system or ‘guest’ on a single server) to two remaining PPC sites.
A feasibility study was conducted on the remaining sites due to lower hardware requirements and a new solution proposed.
• A plan is in place to have Montague Gardens’ IT virtualised by end of november 2011.
• Mooiplaas management was presented with a capex but asked to postpone this to the next financial year. This will be the last site to be virtualised.
On completion, estimated savings for PPC of 520MWh per year and 626 tonnes of CO2 .
Implement IT virtualisation project at Montague Gardens.
Feasibility study on rolling out project to smaller PPC sites.
No further work undertaken in this area.
no action planned.
Compliance Improved system for central reporting of all environmental legal transgressions.
no fines or directives received for our South African and Botswana operations.
Zimbabwe operations received two insignificant monetary fines and one non-monetary sanction.
Resources for environmental management for Zimbabwe to be investigated.
Environmental legal training recommended for all senior team members.
GRI Continue to improve reporting against GRI requirements.
2011 integrated annual report includes an external readiness assurance for reporting on Zimbabwe environmental data.
Increase number of environmental indicators to be assured.
Stakeholders Effective environmental stakeholder forums functioning at all PPC cement, lime and aggregate sites; meetings at least quarterly.
Sites continue to engage with stakeholders via site-specific stakeholder environmental forums. The PPC internet site www.ppc.co.za also has a section dedicated to environment and sustainability.
Monitor and maintain forums.
Upgrades Reduced impacts of PPC raw material handling systems.
Rehabilitation work completed at PPC Slurry; implementing upgrades to ensure improved coal handling systems are in place.
Hercules raw materials handling project initiated to ensure high-risk materials have best-practice handling systems to reduce potential environmental impacts.
Work completed on Dwaalboom coal stockpile stormwater management system, including containment and settling facilities.
Support and monitor implementation of improvement projects to deliver environmental benefits.
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Integrated annual report 201165
Beach clean-up
In February 2011, PPC Port Elizabeth teamed up with SAMREC (the country’s marine conservation and education body) and 72 pupils from a primary school in Motherwell to take part in a beach clean-up at the Cape Recife nature Reserve beach.
The main purpose was to remove litter from the beach and educate pupils on the impact of litter on marine life. The outing was in response to South Africa’s national effort to increase awareness and get industry involved in caring for the environment.
Notable environmental achievementsEnergy management• At PPC’s successful energy conference in
June, our energy strategy was unveiled to senior and middle management. In the spirit of the initiative, the entire conference was web-based, resulting in considerable cost and energy savings.
• Formal energy-efficiency improvement targets were approved by PPC’s chief executive for each major operation, and for the company. These targets include improving the company’s specific carbon emissions.
• Energy management systems are being implemented at De Hoek and Lime Acres as pilot sites, with assistance from the National Cleaner Production Centre. PPC is taking the lead nationally in this effort, with seven other companies, through the national energy efficiency improvement programme.
Environmental indicators• Carbon footprint – PPC continues to monitor
and report on its carbon footprint.• External assurance on key environmental
performance indicators – Deloitte & Touche was appointed to externally assure the following key performance indicators:
– Total direct and indirect greenhouse emissions by weight
– Environmental fines received by the company.
Technology upgrades resulting in environmental improvements Slurry kiln 7Further work on the electrostatic precipitator (ESP) was undertaken to improve dust-emission levels. Outstanding optimisation issues are being addressed.
Status of concurrent mine rehabilitation
PPC concurrent rehabilitation reconciliation as at October 2010*
Beestekraaldwaal-boom
Grass-ridge Slurry Riebeeck de Hoek Laezonia
Mooi-plaas PPC
79% 80% 97% 96% 92% 97% 92% 87% 94%
* As the annual mining survey is conducted aerially at year end, rehabilitation data always lags by one year.
PPC De Hoek DK6 upgrade projectThe De Hoek kiln 6 was commissioned in 1980 and required certain upgrades to align it with PPC’s current requirements and standards.
Anticipated benefits include: • Reduced dust emission levels to below legal requirements
set for 2015 of 50mg/Nm3. • Improved kiln thermal efficiency, operating stability and
output as a result of a new grate-type clinker cooler.• The new multi-channel burner will reduce refractory costs
and allow for burning alternative fuels such as waste.
Interactions with communitiesWe remain committed to empowering communities where we operate with environmental management knowledge. Community engagements include:• PPC Hercules community Arbor Day event• PPC Slurry community Heritage Day celebrations• PPC PE community beach clean-up• Riebeeck marathon greening initiative
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ENVIRONMENTAL REVIEW COnTInuEd
Pretoria Portland Cement Company Limited66
Key environmental issues
Our approach to identifying material environmental issues
Based on stakeholder engagement, internal and external factors affecting the company as well as legal obligations, PPC has identified its key environmental issues for 2011 as follows:
Material key environmental issues Response strategy Status
Compliance Challenging and changing environmental framework
PPC is committed to environmental legal compliance and ensures that all proposed legislation promotes sustainable business practices.
Mature environmental management systems at all sites with 100% ISO 14001 certified cement operations in South Africa.
Actively shape environmental legislation through industry lobbying and engagement with competent authorities by dedicated PPC experts.
Operational8 Energy
(electricity, coal, diesel)
See material issues page 11 for more detail.
Environment10 Carbon
footprintSee material issues page 11 for more detail.
Water management
Efficient and responsible use of scarce water resources.
Implementing comprehensive water management programmes aligned to integrated water use licence commitments.
Partner with industries and academics on joint solutions to water management.
Water-use optimisation projects implemented at each site. Site-level water-efficiency targets will be investigated to ultimately determine a group water-reduction target for 2012.
PPC anticipates that the industry water users task team will address joint solutions to current challenges in the water sector.
Cleaner production
drive cleaner production opportunities in the cement, lime and aggregate businesses to promote resource and energy efficiency.
Substitute fossil fuel and natural resources with products from other industries, for example fly ash from the power sector.
developed a comprehensive cleaner production implementation framework. Continue to lobby government on defining materials from other industries as products instead of waste.
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Integrated annual report 201167
Carbon footprintPPC collects climate change data according to the CO2 protocol developed by the cement sustainability initiative of the World Business Council for Sustainable Development. PPC’s carbon footprint is based on both scope 1 (direct) and scope 2 (indirect) emissions.
PPC has increased its carbon footprint per tonne of cement, lime and dolomite by 3,6% from 2010 (Figure 1). The bulk of the increase reflects a change in product strategy during the reporting period which requires higher electricity consumption per tonne of cement produced and an increase in the clinker ratio. This strategy facilitates a significant downstream reduction in the carbon footprint in final concrete application (page 34).
Year-to-date emissions, including scope 1 and scope 2 emissions for clinker, lime and dolomite, were 1 167kg CO
2/tonne – a 1,8% increase on 2010.
PPC’s carbon footprint for cement indicates that for the financial year, we are at 892kg CO2/tonne of cement. This is an increase of 2,6% on the 2010 cement footprint of 869kg CO2/tonne of cement.
Total direct Indirect
Cement, lime and dolomite 5 311 112 4 728 271 582 841
Aggregates 20 129 4 106 16 023
Botswana 5 534 48 5 486
Zimbabwe 457 519 416 348 41 170
■ Cement, dolomite, lime Clinker, dolomite, lime ■
kg C
O2/
tonn
e
PPC’s CO2 emissions (kg/tonne product)
1 250
1 200
1 150
1 100
1 050
1 000
950
800
850
800
Total CO2 emitted (in absolute tonnes) 2011 for PPC including aggregates, Zimbabwe and Botswana.
South Africa Botswana Zimbabwe
Cement, lime and dolomite Aggregates Cement Aggregates Cement
Total CO2e (tonne) 5 311 112 16 036 5 534 4 093 457 519
PPC has also participated in the Carbon Disclosure Project (CDP) since the launch of the South African project in 2007. This project aims to collect climate-change data from listed companies around the world, on request from investors. More information on the project is available on:
www.cdproject.net
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ENVIRONMENTAL REVIEW COnTInuEd
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direct and indirect energyPPC’s total energy consumption for 2011 was 0,5% below 2010 levels. Total direct energy consumption for 2011 was 22 331 (2010: 22 527) terajoules, while total indirect energy consumption was 2 174 (2010: 2 113) terajoules. This was primarily due to a decrease in the volume of product produced.
In the following financial year, further decreases are expected through:• Optimising production planning to ensure the most
efficient kilns in the group are used at all times• Full implementation of an electrical energy
management system• Optimising the production processes associated
with the new product strategy• Renewed operational focus on thermal energy
efficiency.
Water managementWhile the cement-manufacture process is not unduly water intensive, South Africa is a water-scarce country and therefore PPC is committed to responsible water management.
Water management strategies are entrenched operationally across all operations. These strategies are informed by annual updates of water balances and site-specific conservation projects.
ProgressThe water use licensing process is complex, onerous and slow. To date PPC has only received one integrated water use licence for the Riebeeck operation. The remaining operations still await approval of their licence applications. In the interim, water use at group operations continues under water use registrations and commitments in the integrated water use licence.
The total volume of municipal water consumed by our South African operations during the year was 623 994m3 (2010: 630 119m3). Prior-year consumption has been restated due to a calculation error.
We continue to optimise our use of municipal water through continual and rigorous water management and awareness programmes.
Recognising that the scale of many water challenges is too great for individual companies to effectively address alone, PPC has partnered with key stakeholders to develop a clear and shared understanding of priority needs and interests; of issues that create risk for companies, governments and communities; and of company and stakeholder actions that should result in mutual benefit. The
specific body in which PPC is active is known as the industry water users task team.
PPC has focused on raising awareness about stormwater management. Through appropriate training, Team PPC is made aware that the stormwater system is a direct link between activities on site and water resources, such as wetlands, rivers and oceans.
One of the key outcomes from these training sessions is that we commit to ensuring stormwater is free of pollution. Using the slogan ‘only rain goes down the drain’ ensures healthy rivers for enjoyment by the community, for the fishing industry and for aquatic life.
Cleaner productionCement and lime processes are extremely resource-intensive, particularly fossil fuels and non-renewable resources. To address this area of vulnerability, sustainable cleaner production options are being investigated.
The concept of cleaner production involves continuously applying an integrated, preventative environmental strategy to processes, products and services to increase overall efficiency and reduce risks to humans and the environment.
Cleaner production opportunities prevent and minimise waste and are the preferred option in the waste hierarchy. This comprises proactive environmental strategies that focus on preventing waste generation, and include:• Good housekeeping• Input substitution• Better process control• Equipment modification• Technology change• On-site recovery/reuse• Producing a useful by-product• Product modification.
Waste hierarchy and cleaner production
disposal
Energy recovery
Recycling
Reuse
Mini-misation
PreventionCLEANER
PROdUCTION
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Cleaner production allows us to target material issues specific to the cement industry including:• Decreased dependence on non-renewable resources• Improved product quality and performance• Reduced carbon footprint• Reduced energy cost and dependence on traditional
energy sources• Reduced lifecycle environmental footprints.
PPC has generally concentrated on site-boundary initiatives, with the main focus being the efficiency of production against established metrics available for a specific facility. The effective implementation of management systems and requirement to demonstrate continual improvement has led to incremental contributions to overall plant performance.
We acknowledge the potential for significant improvements by implementing life-cycle boundary initiatives. These initiatives often require the cooperation of multiple stakeholders, with benefits for all parties involved.
Opportunities to replace or supplement raw material inputs into the cement process are driven primarily by a requirement to deliver high-quality cements that meet the needs of the customer and improve efficiency of the production process.
PPC applies a cleaner production development pipeline with structured implementation programmes in existing environmental, health, safety and quality systems and customer product offerings.
Results from cleaner production interventions include the successful replacement of iron ore with a suitable alternative, such as furnace dust granules, and replacing natural shale with boiler ash products from power stations. Further opportunities will be realised through active engagement with other industries and government.
Systems approach: Commitment to certified environmental management systemsPPC’s commitment to complying with legislative and other requirements is amply demonstrated by the fact that all cement and lime operations have ISO 14001 certification, and have retained this over the years.
Audit scores for our aggregates operations were as follows:• Laezonia 96,31% (Showplace) ISHE and About Face• Mooiplaas 95,67% (Showplace) ISHE and About Face• Kgale 90,2% (5 shield) and 97,4% for About Face
(Showplace).
PPC sales and marketing (Sandton and Botswana) maintained its ISO 14001:2004 umbrella listing certification.
Environmental management systems audits are undertaken annually to check compliance with standards.
We are committed to retaining certification in all operations by implementing control measures. Continuous improvement has been made an integral part of PPC’s operations, with benefits that include running resource-efficient operations. Internal non-conformances are logged on the database and actioned as per PPC ISO 14001/ASPASA procedures. The requirements of the standard are entrenched in PPC’s culture and supported by senior management.
Air emissionsPoint-source emissions from stacks and vents as per air quality management legislation.
At PPC, point-source emissions are calculated using Project CLEAR (Concise Library of Emission to Air Reports).
PPC monitors dust, sulphur dioxide (SO2) and nitrogen
oxides (NOx) emission levels from cement kiln stacks. SO2 is generated from sulphur compounds in raw materials and combusted fuels, and amounts vary from plant to plant. Fuel combustion in rotary cement kilns generates NOx from the nitrogen in the fuel and incoming air. The amount emitted depends on several factors, including fuel type, nitrogen content and combustion temperature.
Through Project CLEAR, PPC collates process and quality information on the cement and lime process each month, with 2010 becoming the baseline year.
Fugitive emissionsEmissions (air pollutants) released to air other than those from stacks or vents.
Potential fugitive emission sources from the cement process include:• Mining – Opencast mine in which limestone is
blasted and transported on haul roads• Crushing – Limestone is crushed and screened in
primary and secondary crushers. Crushed limestone is transported and blended on material stockpiles
• Raw material handling – Raw materials received by road are stockpiled with limestone
• Raw material grinding – All raw materials are proportionally extracted and mixed. Mixed raw materials are ground and stored in silos
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ENVIRONMENTAL REVIEW COnTInuEd
Pretoria Portland Cement Company Limited70
• Burning – Ground raw material is burned in kilns (thermal) to produce clinker
• Clinker grinding – Clinker is ground in finish mills (cement mills) to produce different types of cements
• Packaging and dispatch – Final products are transported, packed, stored and loaded for dispatch
• Due to the complexity of measuring fugitive particulate emissions in the process, emission levels are estimated by applying emission factors (US EPA AP42 and Australian NPI).
A fugitive emission plan aims to continuously reduce emissions from these sources. The scope of the plan includes:• Identifying all fugitive dust emission sources• Quantifying emission rates from fugitive sources• Verifying existing controls to reduce and minimise
emissions• Monitoring and measurement• Continuous improvement.
In calculating emission rates, existing controls to reduce or minimise emissions are considered. Examples of fugitive emission reduction and minimisation controls include:• Wet suppression systems• Extraction and fabric filters• Enclosures, eg roof covering on belt conveyors and
undercover storage• Controls, eg scrapers and brushes, on belt
conveyors.
Apart from engineering controls, PPC also has a computerised maintenance management system. Training and operating procedures are part of the environmental management system (ISO 14001).
The effectiveness of the fugitive dust emission management plan is evaluated by conducting inspections, audits and monitoring fall-out dust. Trends from fall-out dust levels are compared with activities and related improvement plans. If trends indicate that emission levels are rising, further actions and controls are implemented. If required, improvement plans are included in the environmental management system (ISO 14001) objectives and targets, and capital provisions made.
Other environmental initiativesHercules• Tippler – reducing fugitive dust and filter
• Sonex filter replacement – reducing dust emissions
• Road handling of raw materials – reducing fugitive
dust, water run-off.
Slurry• Coal handling – minimising groundwater/water
run-off and fugitive dust
• Gas conditioning tower – lower dust emissions.
Dwaalboom• Coal bund wall – reducing water run-off and
developing settling pond.
De Hoek• DHK6 upgrade – reducing dust emissions (new
filter).
PPC Western Cape modernisation projectWith the change in global economic conditions and
subsequent decline in cement demand in South
Africa, particularly in the Western Cape, PPC
withdrew the Se Kïka expansion environmental
impact assessment (EIA) application in August 2010.
PPC has been forced to undertake a more cost-
effective capital expansion in this province, resulting
in the Western Cape expansion strategy which aims
to align production capacity with anticipated market
demand.
The upgrade of PPC Riebeeck would align the plant‘s
functioning and operations with emission
requirements now and in the foreseeable future. A
benefit of this upgrade is that new and more efficient
technology would allow for a concomitant increase
in production capacity.
Update on project feasibility studies• Slurryfinishingmill4 Project capital expenditure has been approved to
instal two new high-efficiency third-generation
Emission levels in 2011
dust NOx SO2
Tonnes emitted pa 2011 2010 2011 2010 2011 2010
Cement 583 435 8 434 7 685 871 692
2010 figures calculated based on mg/Nm3.2011 figures calculated based on mg/Nm3 standardised to 10% 02; dry.
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Supporting wildlife conservation
Hoedspruit Endangered Species Centre is a facility dedicated to ensuring the survival of rare, vulnerable and endangered species in South Africa. The facility also offers individuals between the ages of 18 and 35 an opportunity to participate in a three-week hands-on student programme.
PPC Hercules donated cement for building infrastructures to house the animals. These structures also improved the work performance to secure the survival of a few rare animal species like wild dogs, cheetahs, lions, vultures and others as the building is now more accessible and it is now easier to transport the wild animals in and out.
Growing smart organics
The vermiculture project is a new community-based initiative in Wittewater, Western Cape. It manufactures vermicompost and vermicompost tea from shredded cement bags, cow manure and organic food scraps.
The compost tea, a liquid extract of compost, is brewed from high-quality vermicompost and nutrients and sold to farmers as part of their soil fertilisation programmes.
The project will comply with the strict SGS (Austrian and European) organic certification standards. At its full production cycle, the project will create jobs for 16 people.
PPC De Hoek invested in start-up funds that covered buying the capital equipment, earth wormery, company and product registration.
separators in the milling circuit, and to upgrade the existing mill ESP to a bag filter, resulting in greater energy efficiency and reduced dust emission to comply with the strict emission limit of 30mg/Nm3
• Hercules rail tippler and Jupiter fly ash project feasibility studies are under way.
Waste managementThe cement process is not waste-intensive. PPC generates hazardous and general waste through maintenance, administration and packaging activities which are either recycled or disposed of (as a last option) at licensed landfills.
The quantities of hazardous and general waste generated during the review period will be calculated for final reporting and a year-on-year comparison will be compiled.
Goals for 2012• Improve the integrated safety, health,
environmental and quality (SHEQ) management systems to create value and drive continuous improvement
• Continue to work with suppliers and customers to enhance our environmental extended producer responsibility
• Continue to work with the industry and relevant government departments to sustainably drive cleaner production in the organisation
• Roll out the energy projects to deliver on the self-regulated energy efficiency and carbon footprint management targets
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Pretoria Portland Cement Company Limited72
PPC governance practices are robust. We are committed to world-class principles and made important progress on our journey towards this goal in 2011. Entrenching sustainability and ethical leadership were key focus areas during the year.
GOVERNANCE REVIEW
focusED on BEsT PRAcTIcE
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Integrated annual report 201173
Our values
Our values are central to the way we do business at PPC and the basis on which site-specific codes of conduct have been developed:
• Integrityisnon-negotiable – We meet our commitments. – We do what we say. – We are honest and obey the law.
• Greatplacetowork – We work in teams. Everyone has an important role to play and we want to create a non-
discriminatory, safe and healthy work environment. – We respect the dignity of every individual we engage with.
• Excellenceinallwedo – 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. Yesterday’s stretch becomes today’s
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 the 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.
• Creatingabetterlifeforallstakeholders – Everyone’s contribution creates value. All stakeholders share in the value and success that we
create.
• Customerfocused – Our customers are the reason for our existence and all our efforts will be focused on good
relationships, understanding and meeting their needs.
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CORPORAtE GOVERNANCE REVIEW
In the South African context, the King committee and its interpretation of corporate governance best practice has become the established standard and the release of King III (the code) in September 2009 cemented South Africa’s commitment to world-class principles and guidelines on corporate governance.
In this section, we explain what PPC has achieved in implementing best practices recommended by the code. We regard our efforts as a journey, however, and acknowledge that we are continually moving towards better governance practices.
This year, our corporate governance report focuses on the following key governance aspects:
Ethical leadership: Such leadership is characterised by the ethical 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: Sustainability must be 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.
Ethical leadershipThe following values are central to the way we do business at PPC and they are 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 to play 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. Yesterday’s stretch becomes today’s 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 the 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.
• Creating a better life for all stakeholders – Everyone’s 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 will be focused on good relationships, understanding and meeting their needs.
Jaco Snyman, the company secretary, takes responsibility for reporting on the company’s ethics performance to the social and ethics committee.
The ethics risk report was tabled at the meeting of the social and ethics committee on 24 October 2011. Employees who participated in the anonymous survey were generally positive about how well top management create an environment that encourages open discussion of issues and how well they respond to issues when they arise. The results suggest that participants understand what is expected of them and how ethical behaviour relates to their job and the company’s business goals.
The results of the annual ethics risk assessment did not indicate any notable ethics risks. The vast majority of respondents indicated that they support the values of the business and that they would report any unethical behaviour.
The company has provided an independent, confidential and safe system by which employees or other parties can report unethical or risky behaviour. Such reports can be submitted to the PPC Ethics Line.
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PPC Ethics Lines South AfricaDeloitte & Touche Tip-Offs AnonymousTelephone 0800 00 67 05Free fax 0800 00 77 88Address PPC Ethics LineFree post c/o Tip-Offs Anonymous Free Post DN298 Umhlanga Rocks 4320 South AfricaEmail [email protected] +27 31 508 6493
BotswanaDeloitte & ToucheTelephone 0800 60 06 44Facsimile 0800 00 77 88Email [email protected]
ZimbabweDeloitte & ToucheTelephone 0800 4100Facsimile +263 91 8240 921Address The Call Centre Free post PO Box HG 883 Highlands Harare ZimbabweEmail [email protected]
The board’s responsibility for ethics and good corporate citizenship is confirmed in its charter.
Sustainability and integrated reportingThe PPC board accepts that the future of the company is tied to three interdependent sub-systems – the natural environment, the social and political system, and the global economy. With sustainability issues, the board is assisted by the social and ethics committee. We refer to page 83 for a report on the activities of the committee.
The board also accepts responsibility for the integrity of the company’s integrated annual report. As proposed in the code, the board has delegated the responsibility to oversee sustainability reporting to the audit committee. At its meeting on 8 November 2010, the board, based on the recommendation of the audit committee, confirmed the appointment of Deloitte & Touche as the external assurance provider for the sustainability report. We refer to page 109 for their audit report on sustainability.
The Global Reporting Index (GRI) G3.1 has been used as the basis for reporting and nine indicators for assurance were identified through the standard risk review process as material risks to PPC. For more detail refer to page 5.
The preliminary external assurance report of Deloitte & Touche was tabled at the audit committee meeting in November and referred to the board for consideration at its November meeting.
The board’s statement on the company’s status as a going concern is on page 117.
Board of directorsThe PPC board is the focal point and custodian of corporate governance in the group. More detail on members of the board appears on page 88. 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 to 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 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 a responsible corporate
citizen by considering not only the financial aspects of its business but also the impact operations have on the environment and society
• Ensure the company’s ethics are managed effectively• Ensure the company has an effective and
independent audit committee
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CORPORAtE GOVERNANCE REVIEW CONtINuEd
• 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
company’s reputation• Ensure the integrity of the company’s 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 November, 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 the CEO
• Be the main link between the board, shareholders and the public at large.
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 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 chairman’s 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 (see annual board evaluation report, page 78).
The CEO and chief financial officer (CFO) are ex officio members of the board.
The current CEO is Paul Stuiver. In the board charter, the board and the chairman recognise that the CEO is the leader of the company and of the management team, is responsible for day-to-day operations and is the principal spokesperson for the company, while the chairman is the leader of the board. The framework for delegating authority is reviewed annually in September. The CEO provides regular reports during board meetings on progress in executing strategy against the formalised company scorecard.
The current contract of Paul Stuiver will end in 2012 and the nominations committee, headed by the chairman, has taken full responsibility for the CEO succession plan. This plan provides for sufficient hand-over time and for responsibilities to pass from the current to the new CEO.
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 and 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 compositionThe nominations committee annually evaluates whether its size, diversity and demographics make the board effective. At year end, the board comprised a
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non-executive chairman, five executive and nine non-executive directors. At its meeting in October, the nominations committee evaluated the independence of non-executive directors and concluded that the following directors are independent as defined in the code and the JSE listings requirements:• Zibu Kganyago• André Lamprecht• Ntombi Langa-Royds• Bridgette Modise• Tim Ross• Joe Shibambo• Bheki Sibiya.
André Lamprecht has been a member of the board since November 1997, but after rigorous review of his independence and performance by the board, it was concluded that he has maintained his independence.
The board has made notable progress with transformation and compliance with the code as reflected in the following graphs:
Directors are appointed through a formal process and the nominations committee assists in identifying suitable candidates to be proposed to shareholders.
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 in October 2011, taking into account the results of the annual board evaluation. For more information on the CEO succession plan, refer to page 82.
At the annual general meeting in January 2012, at least one-third of non-executive directors will retire by rotation. All these directors are available for re-election and their re-election to the board is supported by the nominations committee after considering their performance and attendance.
11
10
09
08
07
410
84
47
6
755
Black and white directors
Black directors
White directors
11
10
09
08
07
8
9
8
7
5
Non-executive directors
11
10
09
08
07
4
5
4
5
5
Executive directors
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CORPORAtE GOVERNANCE REVIEW CONtINuEd
The group company secretaryThe group company secretary is Jaco Snyman and he provides the board as a whole and directors individually with guidance on discharging their responsibilities. He is a central source of information and advice to the board and within the company on matters of ethics and good governance. He also ensures the proceedings and affairs of the board, its committees, the company itself and, where appropriate, owners of securities in the company are properly administered in accordance with pertinent laws. He is responsible for compliance with the rules and Listings Requirements of the JSE Limited and the Zimbabwe Stock Exchange on which the company’s securities are listed and administers the statutory requirements of the company and its subsidiaries in South Africa.
Annual board evaluationThe code requires annual board performance evaluations by the chairman or an independent service provider and that the results of these evaluations should identify areas for improvement.
Overview of the evaluation processIn 2010, an independent provider was appointed to assist the chairman with the annual board performance evaluation. In 2011, the nominations committee has proposed that the internal evaluation process should be followed. The internal evaluation process is a self-evaluation that covers key issues of board structure and board processes, key board performance issues, board committee performance and the performance of the chairman and the company secretary.
Results of the evaluationThe result of the board evaluation showed an improvement on results achieved in 2009 using the same questionnaire. The average performance rating has improved from 76% to 80%, indicating that the board strongly agrees that the board and its committees have generally performed well.
Board members were also satisfied with the performance of the chairman and company secretary.
Areas for improvement and action stepsA number of board members have expressed the view that board meetings were unnecessarily long. This concern will be addressed through strict management of the agenda and control over discussions at the meetings.
The appropriateness of the knowledge and skill mix of the board was also raised by some board members and this will be addressed by the nominations committee in 2012.
Board members raised some concerns about the structure of the PPC group and management has made some proposals in this regard which will be implemented in 2012.
No specific training needs were identified by the evaluation.
Strategic planningAs a key performance area of the board, group strategy is mapped by the board in consultation with the
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Board and committee meeting attendance between 9 November 2010 and 8 November 2011.
Board AGM Audit
Social and
ethicsNomina-
tionsRemu-
neration
Special general meeting
(Sep)
Riskand
compli-ance Absent
Board members ZJ Kganyago 6/6 1/1 1/3 0/1 3AJ Lamprecht 5/6 1/1 3/4 1/2 0/1 4NB Langa-Royds 6/6 1/1 4/4 2/2 5/5 1/1 0MP Malungani 5/6 1/1 3/4 1/1 2B Modise 6/6 1/1 3/3 1/1 0TDA Ross 6/6 1/1 3/3 1/1 3/3 0J Shibambo 6/6 1/1 4/4 2/2 5/5 1/1 3/3 0BL Sibiya 6/6 1/1 2/2 1/1 0SJ Vilakazi 5/6 1/1 5/5 1/1 2/3 2ManagementS Abdul Kader 6/6 1/1 1/1P Esterhuysen 6/6 1/1 1/1 3/3SG Helepi 5/6 1/1 1/1 1T Ramano* 2/2 1/1P Stuiver 6/6 1/1 1/1*only appointed 1 August 2011
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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. During the review period, two board meetings were devoted to strategy development. In these meetings, exco members presented the group and individual business units’ strategies to the board. The board has ensured that the strategy is aligned with the purpose of the company, value drivers of the group and legitimate interests and expectations of its stakeholders. In addition, the board has satisfied itself that the strategy and business plans are not encumbered by risks that have not been thoroughly examined by management. The board-approved strategy has been incorporated into the company scorecard against which the performance of management is measured annually.
Internal controlReporting in the company is structured so that key issues are escalated through the management team ultimately to the board if appropriate.
The board has delegated to the audit committee responsibility for reviewing the effectiveness of the company’s system of internal controls. After completing these reviews, the committee reports to the board on its findings so that the board as a whole can take a view on this matter. This has been subject to regular review over a number of years, resulting in a number of refinements.
DelegationThe board delegates certain functions to committees and management, but 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• The committees are appropriately constituted with
due regard to the skills required • The board has a framework for delegating authority
to management.
Board committeesDuring the review period, the board had five standing committees through which it operated. Committees play an important role in enhancing good corporate governance, improving internal controls and therefore the sustainable performance of the company. For 2011, the board committees and their chairpersons were:• Audit committee – Tim Ross• Risk management 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 ad hoc deal committee, established by the board to assist in executing the company’s expansion strategy, continued to function in 2011 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 the document packs for board meetings. In addition, the chairpersons of the committees are required to present an annual report on the activities of their committees at the board’s 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, the board concluded that all committees had executed their responsibilities within the scope of their respective terms of reference in the 2011 financial year.
Audit committeeIn the review period, members of the audit committee were: Tim Ross (chairperson), Zibu Kganyago and Bridgette Modise. All members were independent in line with provisions of the King III code and the Companies Act 2008. The committee may obtain, at the company’s expense, independent professional advice on any matters covered by its terms of reference. The committee was in place throughout the 2011 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 & Touche for 36 years and retired in May 2008. Tim is a member of the South African Institute of Chartered Accountants. The chairperson of the committee will be available for re-election as chairperson at the board meeting in February 2012.
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. The latest minutes of committee meetings are included in board packs.
The audit committee has its own terms of reference approved by the board, to assist members to
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CORPORAtE GOVERNANCE REVIEW CONtINuEd
understand their roles and enable them to add value in discharging their duties. The audit committee’s terms of reference are reviewed annually.
The committee’s terms of reference and principal activities in the review period are set out in its report below.
Audit committee report for the year ended 30 September 2011The audit committee is a committee of the board of directors and, in addition to having specific statutory responsibilities to shareholders in terms of the Companies Act, it assists the board by advising and making submissions on financial reporting, oversight of the risk management process and internal financial controls, external and internal audit functions, and statutory compliance of the company.
Terms of referenceThe audit committee has adopted formal terms of reference that have been approved by the board of directors, and has executed its duties during the past financial year in accordance with these terms of reference.
CompositionThe committee consists of three independent non-executive directors as required by law.
Audit committee members as at 30 September 2011
Name Qualifications Period served
ZJ Kganyago BCom 3 years
TDA Ross CA(SA) 3 years
B Modise CA(SA)Appointed in Dec 2010
The CEO, the CFO, senior financial executives of the group and representatives from the external and internal auditors attend committee meetings. The internal and external auditors have unrestricted access to the audit committee.
MeetingsThe audit committee held three meetings during the year.
Statutory dutiesIn executing its statutory duties during the 2011 financial year, the audit committee:• Nominated Mr Michael Jarvis from Deloitte as the
registered auditor for 2011. In the opinion of the committee, Mr Jarvis is independent of the company
• Determined the fees to be paid to Deloitte as disclosed below
• Determined Deloitte’s terms of engagement• Believes 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 & Touche
• 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 dutiesIn 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 group’s 2011 results to the public.
Integrated reporting• Recommended the board engage an external
assurance provider on material sustainability issues• Reviewed the disclosure of sustainability issues in
the integrated report to ensure that it is reliable and does not conflict with the financial information
• Recommended the integrated report for approval by the board.
Internal audit• Took responsibility for the appointment and
performance assessment of the chief audit executive• Took responsibility 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 makes provision for effectively addressing the critical risk areas of the business
• Reviewed internal audit’s compliance with its charter as approved by the audit committee and considered 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 reviewed: – Financial reporting risks – Internal financial controls – Fraud risks as they relate to financial reporting – IT risks as it relates to financial reporting.
External audit• Evaluated and reported on the independence of the
external auditor• Reviewed the quality and effectiveness of the
external audit process
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• Based on our satisfaction with the results of the activities outlined above, we have recommended to the board that Deloitte & Touche should be reappointed for 2012. Mr Bongisipho Nyembe from Deloitte & Touche was nominated as the registered auditor
• Determined fees to be paid and the terms of engagement of the auditor
• Ensured 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 group’s finance function, and confirms this 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 practices are effective.
Oversight of risk managementThe committee has:• Received assurance that the process and procedures
followed by the risk management committee are adequate to ensure that financial risks are identified and monitored.
Internal financial controls• Reviewed the effectiveness of the group’s system
of internal financial controls including receiving assurance from management, internal audit and external audit
• Reviewed 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 complianceBoth external and internal audit have given feedback that the audit committee has complied with all applicable legal and regulatory responsibilities. Based on the processes and assurances obtained, we believe the accounting practices are effective.
Integrated annual reportBased on processes and assurances obtained, we have recommended the integrated annual report to the board for approval.
On behalf of the audit committeeMr tim Ross (chairman)7 November 2011
Please refer to page 202, notice of annual general meeting, on the appointment of the external auditor and members of the committee.
Risk and compliance committeeThe members of the risk and compliance committee were: Joe Shibambo (chairperson), Peter Esterhuysen, Tim Ross and Jerry Vilakazi. Peter, an executive director, was appointed to the committee to align it with best-practice recommendations of the code. All other members are non-executive directors. The committee may obtain, at the company’s 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 committee’s terms of reference are reviewed annually.
Terms of reference Among other issues, the committee’s terms of reference include 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 company’s 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-to-day 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
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CORPORAtE GOVERNANCE REVIEW CONtINuEd
• 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.
Compliance with terms of referenceThe committee reported on its activities for the review period at the board meeting on 7 November 2011. At this meeting, the board confirmed it had complied with its terms of reference.
For a more detailed review on risk, refer to page 86 of this report. The report on compliance appears on page 83.
The internal auditors have completed a report to the board on the effectiveness of controls and risk management, and this report was tabled at the board meeting in November 2011.
Board statement of effectiveness of controlsBased on the results of the formal documented review of the company’s system of internal controls and risk management, including the design, implementation and effectiveness of the internal financial controls conducted by Ernst & Young, the company’s internal auditors during the 2011 year and considering information and explanations given by management and discussions with external auditor on the results of the audit, assessed by the audit committee, nothing has come to the attention of the board that caused it to believe that the company’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements. The board’s opinion is supported by the audit committee.
Nominations committeeThe members of the nominations committee were: Bheki Sibiya (chairperson), Ntombi Langa-Royds, André Lamprecht and Joe Shibambo. The committee was in place throughout the 2011 financial year. All members are independent non-executive directors as defined in the code. The committee may obtain, at the company’s 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, which are reviewed annually. The chairperson reports to the main 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 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
• 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.
Compliance with terms of referenceThe board has approved a policy for the appointment of directors, and background and reference checks are performed before appointing directors.
The committee reported on its activities for the review period at the board meeting on 7 November 2011. At this meeting, the board confirmed that the committee has complied with its terms of reference.
Remuneration committeeThe members of the remuneration committee were: Ntombi Langa-Royds (chairperson), Joe Shibambo and Jerry Vilakazi. All members are non-executive directors. PwC, appointed by the company, acted as remuneration advisers 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.
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For a more detailed report on remuneration, refer to page 90. The remuneration policy of the company appears on page 90 and shareholders will be requested to pass a non-binding advisory to indicate support for this policy at the annual general meeting.
Social and ethics committeeThe members of the social and ethics committee were: Ntombi Langa-Royds (chairperson), Joe Shibambo, André Lamprecht and Peter Malungani. All members are non-executive 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 board packs.
Terms of reference In line with its terms of reference, the committee’s objectives are to assist the board to monitor the company’s 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 referenceThe committee reported on its activities for the review period at the board meeting on 7 November 2011. At this meeting, the board confirmed the committee has complied with its terms of reference.
For a detailed report on:• Social and economic development, refer to page 52• Corporate citizenship, refer to page 56• The environment, refer to page 62• Health and safety, refer to page 38• Consumer relationships, refer to page 33• Labour and employment, refer to page 42.
Deal committeeThe members of the deal committee are: Peter Malungani (chairperson), Peter Esterhuysen, Zibu Kganyago, André Lamprecht, Bheki Sibiya, Paul, Stuiver, and Tryphosa Ramano. As noted, Peter Malungani is not an independent director but the majority of members are non-executive directors, and most are independent.
The committee is an ad hoc body and its terms of reference are to:• Consider strategic options and recommendations
presented by management on international expansion
• 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.
Compliance report 2011A compliance function has been established in the group’s legal services department. It is responsible for advising and assisting the board and management with awareness and assessing compliance with the regulatory environment. A comprehensive compliance report is submitted to the risk and compliance committee twice a year.
The compliance function’s structure and approach enable it to support management at all levels by leveraging off specialised technical skills and business knowledge. Compliance is structured into centralised and decentralised functions. The former is responsible for group-wide monitoring and forms the centre of expertise on legislation and regulatory impact on the group. The latter comprises compliance champions and unit compliance officers who are deployed into the various business units. They are responsible for business-specific monitoring, training and advice.
The two key areas of responsibility are:• Identifying and advising the group on existing and
new legislation applicable to its business• Facilitating compliance with relevant legislation and
assigning responsibility for areas of compliance.
Once new legislation is identified, management appoints a task team to conduct an impact assessment. After that, project plans and timelines covering implementation and training are agreed and implemented.
Focus areas in review periodDuring the 2011 financial year, group compliance’s key focus areas included:• Companies Act 2008 and associated regulations• JSE Listings Requirements• Consumer Protection Act 2008• Competition Act.
The Companies Act 2008 programmeThe new Companies Act was signed by the president on 8 April 2009 and gazetted in Gazette No 32121 (Notice No 421). This act is called the Companies Act, No 71 of 2008. The effective date was gazetted in the Government Gazette No 34239 as 1 May 2011.
The Minister of Trade and Industry has in terms of section 223 and Item 14 of schedule 5 of the Companies Act published the companies regulations. The regulations came into effect on 1 May 2011, at the same time that the Companies Act, No 71 of 2008, came into effect.
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CORPORAtE GOVERNANCE REVIEW CONtINuEd
To manage the compliance requirements of the act and regulations, the firm Cliff Dekker was appointed and a phased approach was implemented:
Phase 1Phase 1 was limited to PPC itself and did not include any subsidiary. This phase entailed the following:• Customised training for specific teams in PPC, eg
the acquisitions team• Identifying issues arising from the new act that
require immediate attention by PPC prior to the new act coming into effect
• A detailed analysis of PPC’s constitutional documents to identify gaps between the constitutional documents and the new act
• Advice on amendments (if any are necessary after gaps have been identified) to PPC’s constitutional documents for purposes of compliance
• A summary of ‘hot issues’ arising from the new act for PPC to consider in relation to compliance and which may not necessarily be covered by PPC’s constitutional documents.
Phase 2Phase 2 will entail:• A detailed analysis of the constitutional documents
of all subsidiaries of PPC to identify gaps between their constitutional documents and the new act
• Advice on amendments (if any are necessary after gaps have been identified) to the constitutional documents of all subsidiaries of PPC for purposes of compliance.
JSE listings requirementsAs a result of the Companies Act (No 71 of 2008) the JSE has issued amendments to some provisions of the listings requirements on 7 January 2011. Finalised amendments were published in March 2011.
The company’s sponsors conducted training on these amendments for executives, the company secretarial function and the investor relations department.
Consumer Protection Act 2008The Consumer Protection Act (No 68 of 2008) was signed into law on 24 April 2009. This act constitutes an overarching framework for consumer protection, and all other laws that provide for consumer protection (usually in a particular sector).
The Consumer Protection Act, 2008 came into effect on 1 April 2011. The Minister of Trade and Industry has by notice in the Government Gazette No 34181, dated 1 April 2011, determined the monetary threshold to the size of the juristic person at R2 million. The Consumer Protection Act therefore does not apply to a transaction where the consumer is a juristic person
whose asset value or annual turnover, at the time of the transaction, equals or exceeds the threshold value of R2 million.
To manage the compliance requirements of the act and regulations, the firm Fluxmans was appointed and a phased approach implemented. Phase 1 was limited to PPC itself and did not include any subsidiary of PPC. This phase entailed small group training of all employees in sales and marketing business units throughout South Africa. Phase 2 has also been completed and entailed the review of all relevant legal documents.
Competition ActThe investigation by the Competition Commission on alleged transgressions of the act in the cement industry is ongoing.
PPC has committed to assure compliance with this act and all relevant employees have been requested to complete training on the requirements of the act.
Carbon taxThe company is following developments on the proposed legislation of carbon tax with great interest and this issue is being addressed at strategic level in the company.
Key regulatorsPPC is regulated by several stakeholders including the JSE, Department of Trade and Industry, Department of Water and Environmental Affairs, Department of Mineral Resources and SARS. The group seeks to maintain relationships of trust and transparency with all regulators.
The compliance function is available to guide business units before and during submissions to and meetings with regulators. It also maintains a log of all interactions with regulators and reports to the risk and compliance committee on the outcomes of these interactions.
ProsecutionsThere are no significant prosecutions currently to report on.
FinesThere were no significant monetary fines and one non-monetary sanction received by the group during the period under review. The non-monetary sanction was an environmental non-compliance in Zimbabwe. PPC Zimbabwe also received five fines during the period, three of an administrative nature and two of an environmental nature. These fines are deemed to be insignificant.
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RISK REVIEW
PPC’s risk management framework has been aligned to the requirements of King III and incorporates best governance and risk practices. This is supported by an operational risk management plan that details the approach to address and improve risk management in PPC to achieve set objectives. This risk management plan was authorised by the risk and compliance committee in September 2010 and rolled out across the organisation in the review period.
Risk tolerance and risk appetiteManaging risk and setting the risk appetite is the board’s responsibility, which it discharges through its risk and compliance committee.
The concepts of risk tolerance and risk appetite received much attention during the year, with in-depth discussions held to determine the most appropriate definitions for PPC. • Risk tolerance – The following definition was
accepted by the risk and compliance committee: Any occurrence or potential occurrence which has,
in management’s view, a greater than 50% chance of causing an annual negative impact on cash of more than 5% of profit after tax (R50 million: 2011) or any occurrence which caused or may cause a fatality.
• Risk appetite: This definition will be developed further. The concept is growing in importance for PPC as we embark on an expansion strategy especially into Africa and into other markets in southern Africa.
The group values the importance of stakeholder engagement and has therefore attempted to identify its stakeholders and their reporting needs. To ensure transparency in our systems, risk information affecting these stakeholders will continue to be shared without compromising commercially privileged information.
The risk management policy was reviewed during the year to include issues specific to PPC’s expansion strategy and authorised by the chief executive officer in October 2011.
Commitment and mandate• Enterprise-wide risk
management policy• Risk tolerance and limits/
risk appetite• Risk management
vocabulary• Risk management
information system• Risk management plans• Risk management
guidelines
Communicate and train• Communication and
reporting plan• Training plan• Risk management network
Allocate and organise
Governance structures• Board• Risk and compliance
committee• Audit committee• Internal and external
auditors• Group risk, group finance,
group compliance• Employees
Monitor and review• Combined assurance
model – Risk management plan
progress – Benchmarking – Maturity evaluation – Control assurance
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Strategic process
Strategic process
tactical process
Risk treatment
Risk identification
Risk analysis
Risk evaluation
Risk documentation
Context setting
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Mo
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Risk management process
Risk assessment
PPC’s operations risk management framework
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Reviewed risk management policy
Risk is inherent in most business activities. PPC will evaluate and manage risk through a structured and
integrated risk management process that considers the interests of all stakeholders.
Risk management comprises the identification and evaluation of existing and potential risk associated
with the company’s operations and strategy, followed by appropriate management responses such
as tolerance (acceptance), mitigation, transfer, avoidance or termination or a combination of such
responses.
the board is accountable to shareholders for the governance of risk and should ensure that the
company’s strategic and business plans have properly considered and evaluated the associated risks. In
fulfilling this obligation, the board approves and annually evaluates the implementation of this policy
and the risk management plan of the company.
the board has delegated responsibility to evaluate the risk management progress, effectiveness of risk
management activities, key risks facing the company and appropriate responses to address key risks,
to the risk and compliance committee of the board.
the board has delegated the responsibility to design, implement and monitor the risk management
plan to management. Risk management is, however, a team effort and every employee will be
responsible for managing risk in his/her working environment and should assist in identifying risk at all
levels and in all functions of the business as required by the integrated risk management plan. Regular
and formal risk analysis will provide the basis for risk identification and evaluation, and appropriate
risk responses and treatment.
Management will ensure effective management of risk through continuous and regular measurement
and reporting of the company’s risk management performance to the risk and compliance committee.
Control assurance will focus on continuously improving the underlying quality and sustainability of
the company’s business activities.
the risk management process will cover the spectrum of the company’s activities including: commercial,
financial, human resources, technical, legal, regulatory, contractual, political, information, competitive,
social, strategic, environmental, tax exposure and reputational risks.
Risk assessmentPPC recognises the role of high-level business risk assessments in the long-term sustainability of the company and the role of project-related, activity-related and task-related risk assessments in preventing injuries and health effects on our employees and contractors.
High-level risk assessments were conducted for the PPC group, as well as for the lime, aggregates, Zimbabwe and Botswana divisions. In addition, strategic business risk assessments were conducted for different new business development projects.
Health and safety risk assessments related to the various ongoing projects have also been conducted.
Additional training of the entire team on activity- and task-related risk assessments was launched during the year. PPC believes empowered and passionate team members play a very significant role in the drive towards eliminating injuries on site.
The material issues identified in these assessments appear on page 9.
Business continuity managementPPC has aligned the management of business continuity with the internationally recognised British Standard 25999. The group is continuously reviewing divisional and site plans to create a more robust business continuity management system. Business continuity plans have been developed and
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implemented for all sites in South Africa. These will be reviewed in 2012. The Zimbabwe operations will be trained on the business continuity standard and group risk will facilitate the development of comprehensive continuity and recovery plans.
By year end, development of specific information technology (IT) policies, procedures, governance framework and charter to satisfy King III’s basic requirement for IT had been reviewed by PPC’s IT management committee. These will be presented to the board for approval. During this project, we identified that certain information security policies and procedures were outdated and required streamlining. This will be addressed in the coming year.
During the year, routine disaster recovery exercises were successfully performed for the Sandton site. PPC Zimbabwe’s infrastructure has been upgraded to the latest technology, and future disaster recovery exercises will be remotely conducted from Sandton.
Aligning to corporate governance and ITIL (the Information Technology Infrastructure Library, a set of best practices for IT), IT disaster recovery is a key component of our business continuity management process, ensuring all critical IT services can be recovered in the event of a major business disruption within agreed time scales. During the year, phase 2 of the ITIL process began, with specific focus on service asserts and configuring hardware and software inventory.
The current Sandton (central IT facility in PPC) documented disaster recovery plan caters for both the Windows and SAP environments. Tests take place at the disaster recovery sites three times a year to ensure continuity of critical operations in the event of a disaster. To ensure business continuity across the group, disaster recovery network links, supplied by Telkom, are also in place.
Each factory site schedules disaster recovery exercises
for their local IT environment biannually at Sandton in
a controlled and supervised environment.
Information security managementPPC has reviewed information security controls
following a 2010 independent audit that revealed
some areas for improvement. The goal is to upgrade
current information security processes and their
controls using ISO 27000:2005 as reference.
InsuranceThe following risk management surveys were
undertaken by PPC’s insurance brokers and
underwriters during the year:
• Updated maximum probable loss calculations and
surveys were conducted at Dwaalboom and Slurry.
As part of the ongoing commitment to risk
management, underwriting surveys are being
carried out at all PPC operations
• Machinery breakdown surveys were conducted at
Saldanha, Montague Gardens, Port Elizabeth,
Mooiplaas, Laezonia, Kgale Quarries, Jupiter and
Gaborone.
These surveys continue to elicit positive feedback on
risk management and maintenance programmes in
the PPC group which has had a positive impact on
maximum probable-loss machinery breakdown
calculations and therefore claims experienced.
Although PPC continues to have machinery
breakdown claims, these have been relatively minor.
The current lower capacity utilisation across the group
has also contributed to lower-valued claims. This
could change when the economic situation improves.
Following the fire protection survey conducted in
Zimbabwe in the prior year, we have implemented the
required protection in cable tunnels and server rooms.
PPC’s insurance cover and associated premium were
reviewed in May 2011.
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Pretoria Portland Cement Company Limited88
LEAdERSHIP
ExPERIEncE AnD ExPERTIsE
1. Bheki holds a BAdmin degree (University of Zululand), MBA (Western Michigan University, USA), and has completed several management development programmes. In addition to senior positions with public and private-sector entities, Bheki was president of the Black Management Forum and founding chief executive of Business Unity South Africa. He is CEO of the Chamber of Mines, deputy chairman of Tiger Brands, and a non-executive director of other listed and unlisted companies.
2. Paul an engineer by profession (BEng, University of Pretoria), Paul’s early career was spent in the steel industry. After joining PPC he spent 18 years in PPC’s lime, packaging and logistics divisions and was a member of the PPC board from 1995 to 2001. He joined Barloworld in 2001 as CEO of its logistics division where he was involved with international expansion and served on boards in South Africa, Spain, the UAE, UK and USA. Paul rejoined PPC as CEO in 2009.
3. Salim holds BSc, BB&A (hons) and MBA (cum laude) degrees from the University of Stellenbosch and joined PPC in 2004. He was executive director responsible for organisational performance and transformation until 2009 when he was appointed managing director of the local cement operations. In 2010 he also assumed executive responsibility for the Botswana cement operations and PPC’s lime business in South Africa. Prior to joining PPC, he was a senior executive in the Tiger Brands group, responsible for human resources development after developing experience in technical and operations.
4. Peter was a divisional director of PPC’s 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
PPC understands that diversity, empowerment and development at every level can only be achieved through effective, transparent and accountable leadership.
the business development team responsible for furthering PPC’s African growth strategies.
5. 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.
6. Zibu holds a BCom degree (University of Natal) and a post-graduate diploma in property planning, development and management. She has completed management development programmes at the Wharton School of Business and University of Nevada, Reno. With 17 years’ property experience, Zibu has served as non-executive director of the Johannesburg Property Company and member of the Land Affairs Board. Currently, she is executive director of developments for Tsogo Sun Gaming.
7. André who holds BCom, LLB and PED-IMD degrees, was chief executive of listed Freeworld Coatings until 2011. He spent 28 years with Barloworld before retiring from this board in 2007, and served on numerous public bodies, including Business South Africa. He is a non-executive director of the National Business Initiative, trustee of the Business Trust, and a member of the retirement funds advisory committee of the Minister of Finance.
8. Ntombi has BA (law) and LLB degrees from National University of Lesotho and owns Nthake Consulting, a human resources consultancy specialising in human resources management and allied services. She has 25 years’ experience in the HR environment, serving as director of human resources at Independent Newspapers Holdings Limited, SABC and the Bevcan division of
Bheki Sibiya (54)
Chairman. Appointed to the board in 2008
Paul Stuiver (54)
Chief executive officer. Reappointed to the board in 2009
Salim Abdul Kader (41)
Executive director: Cement and Lime (South Africa). Appointed to the board in 2005
Peter Esterhuysen (55)
Business development director. Appointed to the board in 2003
Sello Helepi (40)
Executive director: organisational performance and transformation. Appointed to the board in 2009
Zibu Kganyago (45)
Independent non-executive director. Appointed to the board in 2007
André Lamprecht (59)
Independent non-executive director. Appointed to the board in 1997
Pictured from left
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Integrated annual report 201189
98
Nampak Limited. Ntombi is a non-executive director of African Bank Limited, MPact and Respiratory Care Africa Limited.
9. Peter is executive chairman and founder of the Peu Group. After an early accounting career with Philips (SA), he started his own business management consultancy in 1984 and investment group Peu in 1996. Peter has a BCom degree (Unisa) and completed management programmes at Wits Business School and Wharton University (USA). He is chairman of Phumelela Gaming and Leisure, a director of Investec Limited, Investec plc, Transnet Limited and certain Peu subsidiaries. Peter has also held advisory positions in government and directorships in state-owned enterprises.
10. Bridgette holds a BCompt (hons) CTA degree, CA(SA) and CIMA certification and has completed several management development programmes. She was an audit partner at KPMG for ten years to 2008 and held positions at Absa and KMMT. She is the founder and CEO of investment holding company Kutira Capital and a non-executive director of Sun International Limited, Unisa School of Business Leadership, Kanhym Estates and others. She sits on the audit committees of various companies.
11. Tryphosa was appointed CFO in 2011. A qualified chartered accountant, she was previously with Wiphold and prior to that executive vice president of SAA and has acted as president of SAA. She previously headed the asset and liability division of National Treasury where her focus was on restructuring state-owned assets, ensuring legislative compliance by public entities and monitoring contingent liabilities of government. Tryphosa was instrumental in the listing of Telkom on the JSE and NYSE and enforcing the payment of R10 billion in dividends by public entities to government. Before joining government, Tryphosa was a portfolio manager and head of the institute of excellence at RMB Asset Management.
12. Tim CA(SA), was a partner with Deloitte & Touche for 36 years, retiring in May 2008. He led the Johannesburg audit practice and served on the executive as client service director as well as the board and remuneration committees. Tim was the lead/advisory partner for a number of multinational clients and headed the Deloitte & Touche World Cup 2010 initiative. He is a director of Liberty Group, Eqstra Holdings, Adcorp and Mpact, chairing the audit and actuarial committee of Liberty and the audit committees of Eqstra, Adcorp and Mpact. He is also a member of the risk committees of Liberty, Eqstra and Mpact.
13. Joe (Dip Bus Econ, Dip Bus Admin, Dip Estate Agency) is managing director of Hlamalane Projects (Pty) Limited and has been in the construction industry for over 30 years. He has extensive knowledge and experience of construction management, project management, property development, rail construction and maintenance. Through his organisation, he assists new entrants (especially Africans) to acquire basic management principles for the construction industry. Joe was one of the first independent residential developers to start a greenfield township and the first independent contractor to build a shopping centre, both in Soweto.
14. Jerry is executive chairman and co-founder of the Palama Group. He holds a teaching diploma, BA (Unisa), master’s degrees (Thames Valley University, University of London) and MBA. He is chairman of Netcare Limited, Mpumulanga Gambling Board, Trubok (Pty) Limited and ExecuPrime Holdings. He holds directorships in Blue Label Telecommunications, Goliath Gold Mining Limited, General Health Group (UK), Tower Group (Pty) Limited, Kazzi Corporate Wear and the Black Management Forum Investments Company Limited. He was recently appointed to the national planning commission and the BBBEE advisory council.
Ntombi Langa-Royds (49)
Independent non-executive director. Appointed to the board in 2007
Peter Malungani (53)
Non-executive director. Appointed to the board in 2009
Bridgette Modise (44)
Independent non-executive director. Appointed to the board in 2010
Tryphosa Ramano (40)
Chief financial officer. Appointed to the board in 2011
Tim Ross (67)
Independent non-executive director. Appointed to the board in 2008
Joe Shibambo (63)
Independent non-executive director. Appointed to the board in 2005
Jerry Vilakazi (50)
Non-executive director. Appointed to the board in 2009
Pictured from left
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REMuNERAtION REPORt
The remuneration committee and its roleThe remuneration committee (the committee) assists the board in setting the PPC group remuneration policy and directors’ remuneration. The mandate of the committee is described in the terms of reference of the committee and is the following:• Oversee the establishment of a remuneration policy
that will promote the achievement of strategic objectives and encourage individual performance and support the company’s long-term interest
• Ensure that the remuneration policy is put to a non-binding advisory vote at the general meeting of shareholders once every year
• Review the outcomes of the implementation of the remuneration policy for whether the set objectives are being achieved
• Monitor the overall cost of remuneration structures within the company, including approving the cost of annual general salary increases, mandates for negotiation with trade unions or other bodies, benefits, short-term incentive payments made and the value of long-term incentive awards granted
• Ensure that the mix of fixed and variable pay, in cash, shares and other elements, meets the company’s needs and strategic objectives
• Satisfy itself as to the accuracy of recorded performance measures that govern the vesting of incentives
• Ensure that all benefits, including retirement benefits and other financial arrangements, are justified and correctly valued
• Consider the results of the evaluation of the performance of the CEO and other executive directors, both as directors and as executives in determining remuneration
• Consider the need to adopt a specific remuneration policy to retain key employees and approve such a policy, where appropriate
• Determine the policy for and scope of contracts of employment of executive directors and other senior executives (including termination payments, restraint of trade provisions and remuneration) and regularly review those contracts of employment with a view to ensuring that their terms are appropriate given the role being performed and that they are compliant with relevant legislation and good practice principles
• Select an appropriate comparative group when comparing remuneration levels
• Regularly review incentive and retention schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules
• Consider the appropriateness of early vesting of share-based schemes at the end of employment
• Advise on the remuneration of non-executive directors
• Oversee the preparation and recommending to the board the remuneration report, to be included in the integrated report, for whether it:
– 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.
For a report on the activities of the remuneration committee during the year we refer you to page 82 of the integrated annual report.
The remuneration policy (the policy) is intended to support key business strategies, create a performance-orientated culture and to attract, motivate and retain talented employees.
Key principles of the remuneration policy• The policy is designed to support key business
strategies and create a strong, performance-orientated environment. At the same time, the policy must aim to attract, motivate and retain talented employees
• In setting remuneration levels for the executive directors, the committee takes account of the remuneration policies and practices of comparable companies of a similar size
• Executive directors and senior management have the opportunity to earn enhanced total remuneration by meeting annual performance targets set by the committee
• Components of remuneration for executive directors and senior management comprise:
– Annual basic pay and benefits which are reviewed annually during September
– A performance-related annual cash incentive bonus reviewed annually during October
– Longer-term incentives that comprise an element of retention and performance, aligned to the company’s share price and are reviewed annually during October
• The policy adopted by the committee ensures that a significant proportion of the remuneration of executive directors and senior management is aligned with corporate performance, generating strong alignment with the interest of shareholders
• Non-executive directors do not receive remuneration or incentive awards related to share price or corporate performance and non-executive director fees are approved by shareholders in advance.
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Integrated annual report 201191
Service contracts with directors and senior management and the incentive scheme rules are consistent with these key principles and the committee is confident that these will continue to contribute towards PPC’s short-term goals and longer-term objectives.
The remuneration frameworkThe following are the components of the remuneration framework within the company:• Monthly pay and benefits such as salary and
company contributions to retirement funding and medical aid
• The short-term incentive scheme (STIS). A performance-related cash award is reviewed annually
• Long-term incentives as follows: – a new long-term incentive, namely the Forfeitable
Share Plan (FSP) was introduced for employees other than executive directors and prescribed officers. Each award of forfeitable shares comprise retention shares (the vesting of which is subject to tenure only) and performance shares (the vesting of which is subject to the achievement of performance conditions over a predetermined period)
– it is envisaged that, subject to shareholder approval, the FSP will be extended to executive directors and prescribed officers, however, until such time the long-term incentives in operation for executive directors and prescribed officers entails a Share Appreciation Right Scheme and a Restricted Share Scheme (RSS). The share appreciation right scheme is cash-settled which has a share strike price and a three-year vesting period. The RSS is also a cash-settled scheme with a zero strike price and three-year vesting period aimed specifically at retention of key employees.
Monthly pay and benefits• The company has converted to a total cost to
company pay structure for all staff• Monthly pay and benefits are targeted to be above
average for comparable roles in companies of similar complexity and size. Market data is used to benchmark salary and benefits and to inform decisions on salary adjustments. Salaries are adjusted around the benchmarks depending on the individual’s performance and experience and are reviewed each year. The review takes into account changes in scope of the roles performed by individuals, changes required to meet the principles of the remuneration policy and the market competitiveness of salaries and benefits
• The following benefits are offered to executive directors and senior employees: retirement and medial contribution, and car allowances
• Professional advisers to supply benchmark information are appointed by the committee
• Salary and benefit adjustments for executive directors and prescribed officers are reviewed and approved by the committee
• Salary and benefit adjustments for all other employees are approved by the CEO
• Attention is paid to consistent job evaluation and grading of roles throughout the group, to ensure equity of reward and facilitate equity and mobility within the company.
Short-term incentive scheme (STIS)Design principles for the STIS include:• Alignment – The incentive bonus for each participant
is expressed as a percentage of annual salary and scored with reference to the overall financial performance of the company, measured as earnings before interest, tax, depreciation and amortisation or EBITDA and the score on personal objectives for the participant
• Performance culture – The incentives are significantly geared to individual, team and/or organisational performance, with no payments made for performance related to doing the basic job as laid down in the job model or unacceptable levels of performance. Exceptional payments are made only in the case of genuinely stretching achievements
• Retention – Participants must still be employed at the end of the financial year to qualify for STIS participation. Incentive bonuses for participants who join, transfer or retire during the course of the financial year are prorated according to the time spent in a specific role
• Good governance – Targets and parameters are set in advance of the applicable financial year by the committee. Disclosure of targets, achievements against those targets and payments are disclosed to the appropriate governance bodies – the committee, the board, executive committees and management as required by disclosure best practice.
Calculation of the STISOn an annual basis the committee determines the following components of the STIS:• A maximum bonus percentage per employee
category – for the 2011 financial year, the bonus is capped at 125% of annual basic salary
• A financial driver for the year – as in the past, the financial driver for the 2011 financial year was EBITDA growth based. Achievement of the EBITDA financial driver determines the bonus percentage and is then moderated for the achievement of personal objectives.
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REMuNERAtION REPORt CONtINuEd
• Personal objectives and the threshold thereof – a personal score of less than 70% will result in no STIS bonus payment.
The threshold and target of the financial driver for this year have not been achieved.
Long-term incentives The design principles of long-term incentives are to:• Attract, motivate and retain participants as part of a
market competitive package • Reward participants for medium- to longer-term
company performance• Align with shareholder interests.
Previously, the company operated a cash-settled share appreciation right scheme, also known as the LTIP and a Restricted Share Scheme (RSS). Provided that the FSP is approved for executive directors and prescribed officers, from 2011 no new awards will be made under either of the LTIP and RSS plans.
During 2011 and with the approval of shareholders, the company introduced a new long-term incentive plan, namely the Forfeitable Share Plan (FSP) for employees other than executive directors and prescribed officers.
No vesting of benefits in terms of the LTIP is expected in 2011.
The forfeitable share plan (FSP)• The allocation of forfeitable shares are governed by
the FSP rules as approved by the committee on 13 September 2011 and amended from time to time. These rules are regularly reviewed by the committee
• Shareholders have approved the FSP for employees other than executive directors and prescribed officers at a special general meeting on 1 September 2011. Subject to approval by the shareholders, it is envisaged that the FSP will be extended to executive directors
• It is the intention to make FSP awards in February of each year
• Currently, with the exception of executive directors and prescribed officers, selected participants in Peromnes grades 0 to 6 are eligible for FSP awards
• The FSP award is a free transfer of shares to a participant on the date of grant. However, the shares are subject to a risk of forfeiture in the case where:
– a participant ceases employment prior to the vesting date (typically three years after date of grant); and/or
– if company performance vesting conditions are not met over a pre-determined performance period
• Prior to the vesting date the participant has all shareholder rights in respect of the forfeitable shares, including dividend rights and voting rights. The shares are held by an escrow agent on behalf of the participant during the vesting period
• The primary intent is to provide employees with the opportunity to receive shares in the company and participate in dividends and shareholders’ rights from the date of grant
• The company is faced with skill shortages and the risk of losing employees. A portion of each award will be subject to performance conditions and continued employment (performance awards) and the remainder will be subject to continued employment only in order to address retention issues (retention awards). This will provide direct alignment with shareholders. The level of seniority will determine the mix between performance awards and retention awards
• The following mix will be used:
Position Grade
Perform-ance award
Reten-tion award
CEO 1 75% 25%
Executive directors 2 75% 25%
Executives 3 50% 50%
General manager 4 40% 60%
Head of department 5 30% 70%
Professional staff 6 20% 80%
• Should participation in the FSP by executive directors and prescribed officers be approved by shareholders, performance awards will be weighted commensurately higher for executive directors and the CEO
• The vesting date for retention awards will be three years after the date of award, subject to continued employment only
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Integrated annual report 201193
• The vesting date for performance awards will be the later of:
– three years after the date of award – the date on which the performance conditions
have been satisfied• The performance condition used to determine the
extent to which the performance award vests will be headline earnings per share (HEPS) plus 3% per annum and will be reviewed and set by the committee in advance of each award. The committee is of the view that the performance condition is stretching given the current economic environment
• The performance conditions will be tested over a performance period and graduated vesting will apply between a set threshold and target
• The FSP is not dilutive to shareholders and no new shares will be issued. The only settlement method that can be used is a market purchase of shares. The maximum number of awards which may be made under the FSP, RSS and LTIP is 5% of the issued shares as at 1 September 2011, totalling 29 308 518 shares. The maximum number of unvested FSP, LTIP and RSS awards to be held by an individual shall not exceed 0,5% of the issued share capital as at 1 September 2011, totalling 8 792 555 shares
• The rules of the FSP distinguishes between so-called ‘good leavers’ (death; or retrenchment, as determined in accordance with the employer company’s policy; or retirement; or ill health, injury or disability, as determined to the satisfaction of the committee) and bad leavers (resignations, dismissals)
• Bad leavers will forfeit all unvested awards• Good leavers will receive a proportion of their
unvested awards, pro-rated for service and performance up to the date of termination of employment
• Subject to the discretion of the committee, the FSP is used for annual long-term incentive awards. The annual FSP awards are based on multiples of the total cost to company of the employee. The committee reviews these multiples regularly to ensure that they are in line with market trends, and remain fair and motivating as longer-term rewards.
The long-term incentive plan (LTIP)(It is envisaged that no new awards will be made but existing awards will come to fruition)• The allocating of share appreciation rights is
governed by the LTIP rules as approved by the committee on 8 August 2007 and amended from time to time. These rules are regularly reviewed by the committee
• Share appreciation rights are similar to share options in that the participant is awarded a conditional right to the appreciation (or increase) in the market value of a number of PPC ordinary shares, from grant date to exercise date, which is settled in cash. The payment is subject to normal income tax in the hands of the participant. The price at the date of grant is determined by the volume weighted average price immediately preceding the grant date of the share appreciation rights
• A performance condition is required for executive directors and senior management participants’ share appreciation rights to vest (Peromnes grades 0 to 3)
• The share appreciation rights may be exercised after vesting dates and if the applicable performance conditions have been met. One-third of the rights vests three years after the grant date, a further third after four years, and all the rights are exercisable from five years to ten years after the grant date, provided that the performance conditions, if applicable, have been met
• If the participant resigns or is dismissed for disciplinary reasons, then all vested and unvested rights shall lapse. In the case of a participant’s retirement, he/she shall be entitled to the same rights and be subject to the same conditions under this scheme as if he/she had continued to be an employee
• In the case of a participant’s death, the executor has one year to exercise all vested rights
• In the case of retrenchment, ill health, disability or any other circumstances which the committee may consider appropriate, the participant must exercise vested rights within three months. The committee may in its absolute discretion, permit a portion of the unvested rights to vest – the portion will be proportional to the time served of applicable vesting periods and the extent to which any applicable performance conditions have been met
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REMuNERAtION REPORt CONtINuEd
• The annual share appreciation right grants are based on multiples of basic salary. The committee reviews these multiples regularly to ensure that they are in line with market trends, and remain fair and motivating as longer-term rewards.
The restricted share scheme (RSS)(It is envisaged that no new awards will be made but existing awards will come to fruition)The restricted share scheme is specifically aimed at retaining key employees.• Restricted share units are rights to the cash value of
company shares granted to an individual subject to their remaining in the employ of the company until a specified date, usually three to five years from the grant date
• The right is automatically settled in cash after the specified vesting date. The participant will forfeit the rights if he/she resigns or is dismissed for disciplinary reasons before the vesting date.
Eligibility for restricted share units• Selected individuals in Peromnes job grades 0 to 6
were eligible for restricted share unit awards• A performance condition is required for executive
directors and senior management participants’ restricted share units to vest (Peromnes grades 0 to 3)
• Exceptional awards of restricted share units were made to qualifying individuals over and above their normal remuneration package. The awards were made after appraisal of the market for talented individuals in each year and the performance and potential of the participants at that time. They were not intended as regular annual awards
• The list of those eligible for awards was reviewed annually by the committee to include only those key individuals with significant value to the company
• The value of restricted share unit awards was linked to benchmark values provided by external advisers
• Mentoring, development, succession and career planning and all other non-financial aspects of retention programmes were pursued vigorously together with awards of restricted share units to optimise the effectiveness of the scheme.
Policy on employment contractsIn relation to contracts with executive directors, the committee, subject to circumstances, will maintain the following policy:• Fixed-term contracts should not exceed three years
but may provide for extension• All agreements should contain a restraint of trade
clause with a term of not less than a year• Contracts should not commit the company to pay
on termination arising from the director’s failure• Balloon payments on termination are not seen as
fair remuneration policy• If a director is dismissed because of a disciplinary
procedure, a shorter notice period should apply without entitlement for compensation for the shorter notice period
• Contracts should not compensate directors for severance because of change of control.
Both executive and non-executive directors are subject to election by shareholders at the first annual general meeting following their appointment and thereafter are required to submit to retire in accordance with the board rotation plan.
The appointment of a non-executive director may be terminated without compensation if that director is not re-elected by shareholders or otherwise in accordance with the company’s memorandum of incorporation.
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Integrated annual report 201195
Board feesAs part of its mandate, the committee also gives advice to the board on non-executive director fees. In this regard the committee relies on benchmark studies done by its independent advisers. Based on a benchmark study, the following board fees for 2012 had been approved at the special general meeting of shareholders on 1 September 2011:
Base fee/attendance
fee 2011
Additional meeting
2011
Base fee/attendance
fee 2012
Additional meetings
2012
Board Chairman 685 000 30 000 769 560 31 800
Each non-executivedirector 188 000 15 000 212 000 15 900
Audit committee Chairman 180 000 30 000 199 492 31 800
Each non-executivedirector 90 000 15 000 99 958 15 900
Remuneration committee Chairman 135 000 30 000 151 792 31 800
Each non-executivedirector 70 000 15 000 74 200 15 900
Risk and compliance committee Chairman 135 000 30 000 151 792 31 800
Each non-executivedirector 70 000 15 000 74 200 15 900
Social and ethics committee Chairman 135 000 30 000 151 792 31 800
Each non-executivedirector 70 000 15 000 74 200 15 900
Nominations committee Chairman 100 000 30 000 106 000 31 800
Each non-executivedirector 50 000 15 000 53 000 15 900
As suggested by the King code of Governance for South Africa, the board fees comprise both a base fee and an attendance fee and in the view of the committee is sufficient to attract board members with the appropriate level of skill and expertise to the board.
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REMuNERAtION REPORt CONtINuEd
Directors’ remuneration and interestThe directors’ remuneration for the year ended 30 September 2011 was as follows:
Executive directors
NameSalary
R000
Incentive bonus
R000
Retire-ment and
medical contri-butions
R000
Car allow-ancesR000
Other benefits
R000TotalR000
S Abdul Kader 2 105 814 348 401 13 3 671
RH Dent (retired 31 December 2010) 970 – 96 81 6 300* 7 447
P Esterhuysen 2 406 885 374 324 5 237# 9 226
SG Helepi 1 619 628 310 242 38 2 837
MMT Ramano (appointed 1 August 2011) 406 – 138 39 1 250^ 1 833
P Stuiver 2 966 1 170 838 300 2 5 276
10 472 3 497 2 104 1 387 12 826 30 290
* Includes a contractual settlement on retirement and a restraint of trade payment. The restraint of trade payment runs for 24 months from date of retirement, ending 31 December 2012.
# During 2011, Mr Esterhuysen entered into a three-year retention agreement, ending 2013, in order 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 current 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. If Ms Ramano resigns during her first year of employment, the amount paid is to be repaid pro rata.
Non-executive directors
Name
Board fees
R000
Chairman fees
R000
Nomi-nations
committeeR000
Audit committee
R000
Risk manage-
ment and
compliance committee
R000
Remuner-ation
committeeR000
Social and
ethics committee
R000
Special board
meetingsR000
Deal committee
R000TotalR000
ZJ Kganyago 188 – – 75 – – – 30 30 323
AJ Lamprecht 188 – 40 – – – 61 15 – 304
NB Langa-Royds 188 – 80 – – 152 135 30 – 585
MP Malungani 188 – – – – – 61 45 30 324
B Modise (appointed 1 December 2010) 154 – – 66 – – – – – 220
TDA Ross 188 – 43 180 70 – – 30 – 511
J Shibambo 188 – 80 26 135 79 70 45 – 623
BL Sibiya – 685 160 – – – – 90 15 950
JS Vilakazi 188 – – – 58 79 – 15 – 340
1 470 685 403 347 263 310 327 300 75 4 180
Total directors’ remuneration – 2011 34 470
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.
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Integrated annual report 201197
In terms of the South African Companies Act, three employees are deemed to be prescribed officers as their attendance at exco 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 group.
NameSalary
R000
Incentive bonus
R000
Retirementand
medical contri-butions
R000
Car allowances
R000
Other benefits
R000TotalR000
Prescribed officer 1 1 384 495 259 137 61 2 336
Prescribed officer 2 (joined 1 February 2011) 830 366 244 184 501^ 2 125
Prescribed officer 3 1 321 403 186 51 110 2 071
3 535 1 264 689 372 672 6 532
^ Includes a R500 000 sign-on bonus, which was paid in the first month of employment but is earned proportionately during the first 12 months of employment. If the prescribed officer resigns during the first year of employment, the sign-on bonus is to be repaid pro rata.
The directors’ remuneration for the year ended 30 September 2010 was as follows:
Executive directors
NameSalary
R000
Incentive bonus
R000
Retirement and
medical contri-butions
R000
Car allowances
R000
Other benefits
R000TotalR000
S Abdul Kader 1 984 756 351 300 13 3 404
RH Dent 1 993 784 351 300 25 3 453
P Esterhuysen 2 224 849 361 300 2 3 736
SG Helepi (appointed 1 December 2009) 1 195 512 224 250 3 2 184
P Stuiver 2 839 1 037 660 300 5 4 841
10 235 3 938 1 947 1 450 48 17 618
Non-executive directors
Name
Board fees
R000
Chairman fees
R000
Nomi-nations
committeeR000
Audit committee
R000
Risk manage-
ment and
compliance committee
R000
Remuner-ation
committeeR000
BEE and trans-
formation committee
R000
Special board
meetingsR000
Deal committee
R000TotalR000
ZJ Kganyago 162 – – 78 – – – 15 40 295
AJ Lamprecht 162 – 49 – – – 49 15 20 295
NB Langa-Royds 162 – 69 – – 129 97 15 – 472
MP Malungani 162 – – – – – 49 15 40 266
TDA Ross 162 – 10 151 49 – – 15 – 387
J Shibambo 162 – 79 78 127 69 49 15 – 579
BL Sibiya – 605 117 – – 20 – 15 40 797
JS Vilakazi 162 – – – 49 59 – 15 – 285
1 134 605 324 307 225 277 244 120 140 3 376
Total directors’ remuneration – 2010 20 994
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REMuNERAtION REPORt CONtINuEd
The directors’ remuneration for the year ended 30 September 2009 was as follows:
Executive directors
NameSalary
R000
Incentive bonus
R000
Retirement and
medical contri-butions
R000
Car allow-ancesR000
Other benefits
R000TotalR000
S Abdul Kader 1 674 734 297 279 3 2 987
RH Dent 1 733 763 287 279 9 3 071
P Esterhuysen 1 907 825 316 279 14 3 341
O Fenn (resigned 5 August 2009) 2 272 967 381 301 31 3 952
JE Gomersall (retired 30 June 2009) 2 508 – 635 – 1 342* 4 485
P Stuiver (appointed 1 June 2009) 953 381 213 100 7 1 654
11 047 3 670 2 129 1 238 1 406 19 490
*Includes a contractual settlement on retirement.
Non-executive directors
Name
Board fees
R000
Chairman fees
R000
Nomi-nations
committeeR000
Audit committee
R000
Risk manage-ment and
compliance committee
R000
Remuner-ation
committeeR000
BEE and trans-
formation committee
R000
Special board
meetingsR000
TotalR000
ZJ Kganyago 125 – 40 73 – – – 45 283
AJ Lamprecht 150 – 100 – – – 45 70 365
NB Langa-Royds 150 – 115 – – 110 68 90 533
MP Malungani (appointed 27 February 2009) 87 – 10 – – – 26 30 153
TDA Ross 150 – 60 140 45 – – 45 440
J Shibambo 150 – 115 73 90 55 34 30 547
BL Sibiya (appointed 10 November 2008) – 560 144 – – – – 125 829
JS Vilakazi (appointed 27 February 2009) 62 – 10 – 26 23 – 45 166
874 560 594 286 161 188 173 480 3 316
Total directors’ remuneration – 2009 22 806
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Integrated annual report 201199
Gains on equity-settled share options exercised/ceded by directors
2011R000
2010R000
2009R000
RH Dent (retired 31 December 2010) – 179 –
P Esterhuysen – 272 –
O Fenn (resigned 5 August 2009) – 256 297
JE Gomersall (resigned 30 June 2009) 1 057 1 035 –
P Stuiver (appointed 1 June 2009) – 104 –
1 057 1 846 297
Interest of directors and prescribed officers in share capitalThe aggregate beneficial holdings of the directors and prescribed officers of the company and their immediate families (none of which has a holding in excess of 1%) in the issued ordinary shares of the company are detailed below. There have been no material changes in these shareholdings since that date.
2011 2010 2009
Direct Indirect Direct Indirect Direct Indirect
Executive directors
RH Dent (retired 31 December 2010) 395 169 – 388 983 –
P Esterhuysen 5 730 – 5 730 – 11 461 –
P Stuiver 34 930 – 34 930 – 27 508 –
Non-executive director
AJ Lamprecht – – – – 5 158 –
Prescribed officer
Prescribed officer 1 9 170 –
49 830 – 435 829 – 433 110 –
A register detailing directors’ and officers’ interest in the company is available for inspection at the company’s registered office.
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REMuNERAtION REPORt CONtINuEd
BBBEE transactionIn terms of the BBBEE transaction, the following directors and prescribed officers 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.
2011 2010 2009
Executive directors
S Abdul Kader 184 389 184 389 184 389
SG Helepi 83 983 83 983 –
Non-executive directors
ZJ Kganyago 95 787 95 787 95 787
NB Langa-Royds 95 787 95 787 95 787
J Shibambo 95 787 95 787 95 787
Prescribed officer
Prescribed officer 2 (appointed 1 February 2011) 192 935 – –
748 668 555 733 471 750
In terms of the trust deed of the PPC Black Managers Trust, Ms Ramano is entitled to an allocation of shares on her commencement of employment with the company once the number of shares have been approved by the allocation committee. The allocation committee has not met since her date of employment and, as a result, this allocation has not been finalised.
Directors’ loansDirectors have loans with the company, granted in terms of the Barloworld share option scheme that was in place prior to the unbundling of PPC from Barloworld. The balances outstanding at year end are: P Esterhuysen – 2011: R0,1 million (2010: R0,1 million; 2009: R0,4 million)O Fenn (resigned 5 August 2009) – (2010: Rnil; 2009: R0,8 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.
Interest of directors in contractsThe directors have certified that they had no material interest in any transaction of any significance with the company or any of its subsidiaries.
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Integrated annual report 2011101
Barloworld Share Option SchemeThe interests of the executive and non-executive directors of Pretoria Portland Cement Company Limited in terms of the Barloworld Share Option Scheme (refer note 35), provided in the form of equity-settled share options, are shown in the table below. The executive directors participated in the Barloworld Share Option Scheme before the unbundling of Pretoria Portland Cement Company Limited from Barloworld Limited on 16 July 2007, and the right to Pretoria Portland Cement Company Limited options relate to the unbundling. Pretoria Portland Cement Company Limited has no equity-settled share option scheme in existence for executive directors and prescribed officers of the company.
2011
First exercisable date
Number of
options as at
30 Sept 2009
Number of
options as at
30 Sept 2010
Options exercised/
ceded
Number of options
as at 30 Sept
2011
Option strike
price on date
exercised/30 Sept
2011
Market price on
date exercised Expiry date
Barloworld share options
RH Dent (retired 31 December 2010)
26/05/07 3 334 – – – 25,48 48,70 26/05/2010
Total 3 334 – – –
P Esterhuysen
26/05/07 3 334 – – – 25,48 45,61 26/05/2010
Total 3 334 – – –
Resigned or retired during the previous years:
JE Gomersall (retired 30 June 2009)
01/04/06 11 700 11 700 11 700 – 14,59 64,50 01/04/2013
26/05/07 23 400 – – – 25,48 43,81 26/05/2010
Total 35 100 11 700 11 700 –
Total Barloworld share options 41 768 11 700 11 700 –
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REMuNERAtION REPORt CONtINuEd
2011
First exercisable date
Number of
options as at
30 Sept 2009
Number of
options as at
30 Sept 2010
Options exercised/
ceded
Number of options
as at 30 Sept
2011
Option strike
price on date
exercised/30 Sept
2011
Market price on
date exercised Expiry date
PPC share options
RH Dent (retired 31 December 2010)
26/05/07 6 186 – – – 16,95 33,40 26/05/2010
Total 6 186 – – –
P Esterhuysen
26/05/07 12 371 – – – 16,95 33,54 26/05/2010
Total 12 371 – – –
P Stuiver
26/05/07 7 422 – – – 16,95 31,02 26/05/2010
Total 7 422 – – –
Resigned or retired during the previous years:
O Fenn (resigned 5 August 2009)
26/05/07 18 741 – – – 16,95 30,62 26/05/2010
Total 18 741 – – –
JE Gomersall (retired 30 June 2009)
01/04/06 21 709 21 709 21 709 – 11,88 33,69 01/04/2013
26/05/07 43 419 – – – 16,95 30,92 26/05/2010
Total 65 128 21 709 21 709 –
Total PPC share options 109 848 21 709 21 709 –
Long-term incentive planThe interests of the prescribed officers in cash-settled share appreciation rights is reflected in the table below:
Share appreciation rights
Date of grant
At beginning of the year
Awarded during
the year
Forfeited during
the yearAt end
of the year Grant price
Prescribed officer 1
08/08/2007 70 000 – – 70 000 43,00
17/09/2008 50 000 – – 50 000 31,80
17/09/2008 36 000 – – 36 000 –
25/09/2009 54 000 – – 54 000 35,35
25/09/2009 36 000 – – 36 000 –
246 000 – – 246 000
Prescribed officer 3
26/11/2007 25 000 – – 25 000 47,36
17/09/2008 27 000 – – 27 000 31,80
17/09/2008 21 000 – – 21 000 –
25/09/2009 23 000 – – 23 000 35,35
25/09/2009 18 000 – – 18 000 –
114 000 – – 114 000
Total 360 000 – – 360 000
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Integrated annual report 2011103
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Long-term incentive plan continuedThe interest of the executive directors in cash-settled share appreciation rights in terms of PPC’s long-term incentives plans is reflected in the table below:
Share appreciation rights
Date of grant
At beginning of the year
Awarded during
the year
Forfeited during
the yearAt end
of the year Grant price
S Abdul Kader
08/08/2007 150 000 – – 150 000 43,00
17/09/2008 90 000 – – 90 000 31,80
25/09/2009 120 000 – – 120 000 35,35
25/09/2009 142 000 – – 142 000 –
502 000 – – 502 000
P Esterhuysen
08/08/2007 160 000 – – 160 000 43,00
17/09/2008 105 000 – – 105 000 31,80
25/09/2009 120 000 – – 120 000 35,35
25/09/2009 162 000 – – 162 000 –
547 000 – – 547 000
SG Helepi
08/08/2007 18 000 – – 18 000 43,00
17/09/2008 35 000 – – 35 000 31,80
25/09/2009 36 000 – – 36 000 35,35
25/09/2009 24 000 – – 24 000 –
113 000 – – 113 000
MMT Ramano
01/08/2011 – 150 000 – 150 000 –
– 150 000 – 150 000
Directors who have retired:
RH Dent (retired 31 December 2010)
08/08/2007 143 000 – – 143 000 43,00
17/09/2008 90 000 – – 90 000 31,80
25/09/2009 120 000 – – 120 000 35,35
353 000 – – 353 000
JE Gomersall (retired 30 June 2009)
08/08/2007 350 000 – – 350 000 43,00
350 000 – – 350 000
Total 1 865 000 150 000 – 2 015 000
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Pretoria Portland Cement Company Limited104
ASSuRANCE
Combined assuranceThis table summarises key business processes/measures and their associated assurance provider:
Business process Output from assurance Status Provider
FinancialFinancial reporting Zero audit findings. Audited. deloitte & touche
Environmental
direct consumption by primary energy source. Verified consumption. Assured. deloitte & touche
Indirect consumption by primary source. Verified consumption. Assured. deloitte & touche
total direct and indirect greenhouse gas emissions.
Confirmed GHG emissions. Assured. deloitte & touche
Significant fines, sanctions for non-compliance with environmental laws and regulations. Statement. Assured. deloitte & touche
Environmental management systems.
ISO 14001 – 10 operations. Certified. dekra
People Workforce analysis. Verified. Assured deloitte & touche
HIV/Aids. National standards. All SA cement and lime operations certified.
SANS 16000:2007
Lung function testing. All operations’ clinics now comply. Compliant. SANS 451:2008
Workplace safety systems. OHSAS 18001:2007 – 9 operations.
All relevant operations certified. SABS
Lost-time injury frequency rate (LtIFR). Verified LtIFR statistics. All operations audited. deloitte & touche
Integrated safety, health and environment standards.
All aggregates operations. Compliant.
ASPASA-ISHE, About Face.
Rail safety. Rail regulator safety permit issued to PPC. Compliant.
National Railway Safety Regulator.
Quality Quality assurance. ISO 9001 – 12 operations. Certified. SABS/dekra
Cement strength testNational audit of SANS 50196-1.
Zero-findings audit for PPC Group Laboratory Services.
Cement and Concrete Institute (C&CI).
RiskBusiness continuity Standardise business
continuity management across group (BS 25999).
under way. Ernst & Young
Information security ISO 27000:2005 Reviewing processes and controls.
Ernst & Young
Risk management External surveys. Willis
Black economic empowerment Improved level of BBBEE contribution.
Level 3. Empowerlogic
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Integrated annual report 2011105
Sites Aggregates
De Hoek
Dwaa
lboom
Group Lab
orato
ry
Services
and San
dto
n
Hercu
les/Bee
stek
raal
Jupiter
Lime Acres
Port Eliz
abeth
PPC Projects
Riebee
ck
Saldan
ha an
d M
ontague
Garden
s
Sales an
d m
arke
ting
Slurry
Colle
en Baw
n
Bulaway
o
Certifications
ISO 9001 X X X X X X X X X X X X X
ISO 14001 X X X X X X X X X X
OHSAS 18001 X X X X X X X X X
SANS 16001 X X X X X X X X X
SANS 1841 (packing) X X X X X X X X
ISO 17025 (laboratory) X
C&CI laboratory audits conducted X X X X X X X X X X
ASPASA About Face X
ASPASA ISHE X
Recognitions
> 500 000 hours accident free X X X X
Zero lost-time injuries X X X X
Empowerment statusPPC’s broad-based black economic empowerment status as at September 2011 was audited and verified by rating agency Empowerlogic in November 2011. 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).
BBBEE status – verified level 2
Element levels Equity ownership – level 2.
Management composition – level 1.
Employment equity – level 6.
Skills development – level 4.
Preferential procurement – level 2.
Enterprise development – level 1.
Socio-economic development – level 1.
Black ownership 28,74% (9,63% black women ownership).
Value-adding vendor
Yes
BEE procurement recognition
156%
www.thedti.gov.za/bee/beecodes
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Pretoria Portland Cement Company Limited106
ASSuRANCE CONtINuEd
Mining charter scorecard 2011In September 2010, amendments to South Africa’s broad-based socio-economic charter for the mining industry (mining charter) were promulgated by the Department of Mineral Resources. This followed a comprehensive review of progress in transforming the industry against the objectives of the original mining charter (2002).
Building on its steady progress against targets in the 2002 mining charter, PPC is committed to meeting those targets in the revised charter where it does not already comply.
Element MeasureCompliance target 2014 Progress
Reporting Reporting level of compliance with charter for calendar year.
documentary proof of receipt from dMR.
Annual Employment equity and social and labour plans submitted.
Ownership Minimum target for effective HdSA ownership.
Meaningful economic participation.
Full share-holder rights.
26%
26%
15% of PPC equity held by some 3,5 million black share owners with full rights. to date, 2 800 employees have received dividends totalling R27,9 million.
Housing and living conditions
Conversion and upgrading of hostels to attain occupancy rate of one person per room.
100% Company housing is provided at most remote locations. PPC also promotes home ownership by facilitating opportunities for employees to secure housing loans.
Conversion and upgrading of hostels into family units.
100% Only Lime Acres has a hostel, which is currently in the planning process for upgrading.
Procurement and enterprise development
Procurement spend from BEE entity.
Capital goods.
Services.
Consumable goods.
40%
70%
50%
In 2011, 79% (R3,04 billion) of PPC’s discretionary spending was directed to BEE companies:
24%
47%
60%
Multinational suppliers’ contribution to social fund.
Annual spend on procurement from multinational suppliers.
0,5% of procure-ment value.
Lack of data makes this challenging.
Employment equity (see detailed table on page 108)
diversification of workplace to reflect the country’s demographics to attain competitiveness.
top management (board).
Senior management (exco).
Middle management.
Junior management
Core skills.
40%
40%
40%
40%
40%
62%
33%
56%
61%
80%
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Integrated annual report 2011107
Element MeasureCompliance target 2014 Progress
Human resources development (see detailed table on page 108)
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.
HRd expenditure as % of total annual payroll (excl mandatory skills development levy).
5% 5,0% spent on skills development.
100% of R&d expenditure directed at South Africa-based businesses.
Mine community development
Conduct ethnographic community consultative and collaborative processes to delineate community-needs analysis.
Implement approved community projects.
up-to-date project implemen- tation.
28 projects in 12 communities in six provinces at various stages of implementation – 14 handed over to communities. to date, R28 million of planned R60 million spent on approved projects.
Sustainable development and growth
Improvement of industry’s environmental management.
Implemen-tation of approved EMPs.
100% All plants have approved EMPs.
Improvement of industry’s mine health and safety performance.
Implemen-tation of tripartite action plan on health and safety.
100% Awaiting clarification from dMR, but health and safety officers in place.
use of South Africa-based research facilities for analysing samples across mining value chain.
% of samples in SA facilities.
100% 100% of samples are processed in SA facilities.
Beneficiation Contribution towards beneficiation (effective from 2012).
Added production volume contributory to local value addition beyond the baseline.
Section 26 of MRPdA percentage above baseline) Beneficiation strategy and modalities of implementa-tion outline beneficiation requirements per commodity extracted in South Africa.
No detail on how to measure but cement made from raw limestone.
Assu
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Pretoria Portland Cement Company Limited108
Human resources development
Description Measures Category
Reporting template
Year: 2011
African Coloured Indian White
TotalM F M F M F M F
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.
HRd expenditure as % of total annual payroll (excluding mandatory skills development levy).
Learnerships and bursaries (of core and critical skills).
155 learners are currently on various learnerships offered by PPC.
Artisans 53 10 11 1 0 0 7 0 82
ABEt training (level I, II, III, IV and NQF 1).
297 learners currently on Level 1-4.
Other training initiatives (school support and post-matric programmes).
• 28 on PPC bridging programme.• 11 post-graduate students on graduate
development programme.
Support for SA-based R&d initiatives.
100% of R&d expenditure directed at SA-based companies.
Employment equity
A C I W SA national Foreign Total EE %
Measures F M F M F M F M F M F M
top management
0 0 0 0 0 0 0 0 0 0 0 1 1 0
Senior management
2 2 0 1 2 2 0 11 4 16 0 0 20 45
Professional 11 16 1 19 6 17 20 96 38 148 1 2 189 48
Skilled workers
85 291 67 186 17 14 111 290 280 781 1 11 1 073 72
Semi-skilled 67 677 20 180 0 1 9 14 96 872 0 0 968 99
Learners 2 11 1 0 0 0 0 1 3 12 0 0 15 93
total permanent
167 997 89 386 25 34 140 412 421 1 829 21 14 2 266 81
A – African, C – coloured, I – Indian, W – white, EE – employment equity
ASSuRANCE CONtINuEd
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Integrated annual report 2011109
Assurance statementIndependent assurance statement by Deloitte & Touche to Pretoria Portland Cement Company Limited on their sustainability indicator disclosure and their self-declared Global Reporting Initiative G3.1 application level in their Integrated Report 2011 (“the Report”)
Scope of our workPretoria Portland Cement Company Limited engaged us to perform limited assurance procedures for the year ended 30 September 2011 on:• Selected performance indicators to be published in the
Report for the year ended 30 September 2011; and• The self-declared Global Reporting Initiative G3.1
Guidelines (“GRI G3.1”) C+ application level.
The selected performance indicators are as follows:Environmental:• Direct energy consumption by primary energy source• Indirect energy consumptions by primary source• Total direct and indirect greenhouse gas emissions• Monetary value of significant fines and total number
of non-monetary sanctions for noncompliance with environmental laws and regulations.
Labour practices and decent work:• Total workforce by employee type, employment
contract, and region, broken down by gender• Total number and rate of new employee hires and
employee turnover by age group, gender, and region• Percentage of employees covered by collective
bargaining agreements• Rates of injury, occupational diseases, lost days,
absenteeism, and number of work related fatalities by region and gender
• Average hours of training per year per employee by gender, and by employee category
• Composition of governance bodies and breakdown employees per employee category according to gender, age, minority group membership, and other indicators of diversity.
Society:• Monetary value of significant fines and total number
of non-monetary sanctions for noncompliance with laws and regulations.
Economic:• 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.
Assurance process and standardWe conducted our limited assurance engagement in accordance with the International Standard on Assurance 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. The procedures conducted do not provide all the evidence that would be required in a reasonable assurance engagement and, accordingly, we do not express a reasonable assurance opinion.
Key proceduresConsidering 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
Pretoria Portland Cement Company Limited’s 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.
Key procedures we conducted included:• Gaining an understanding of Pretoria Portland Cement
Company Limited’s systems through interview with management responsible for reporting systems at corporate head office and site level; and
• Reviewing the systems and procedures to capture, collate, aggregate, validate and process source data for the assured performance data included in the Report.
Our conclusionWe noted deviations relating to the accuracy and completeness of average hours of training per year per employee by employee category.
With the exception of the matter noted above, based on our review conducted over the South African operations of Pretoria Portland Cement Company 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 Management’s assertion that their sustainability reporting meets the requirements of the C+ application level of the Global Reporting Initiative G3.1 Guidelines is not fairly stated.
Responsibilities of directors and independent assurance providerResponsibilities of directorsThe directors are responsible for the preparation of the Integrated Report 2011, including the implementation and execution of systems to collect required sustainability data.
Deloitte’s responsibilitiesOur responsibility is to express our limited assurance conclusion on the selected performance data and the GRI G3.1 application level for the year ended 30 September 2011.
This report is made solely to Pretoria Portland Cement Company Limited 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 Pretoria Portland Cement Company Limited for our work, for this report, or for the conclusions we have formed.
Nina le Riche, Director, Deloitte & Touche Cape Town, South Africa 06 December 2011
1st Floor, The Square, Cape Quarter, 27 Somerset Road, Greenpoint, Cape Town, 8005
National Executive: GG Gelink Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Risk Advisory and Legal Services, NB Kader Tax, L Geeringh Consulting, L Bam Corporate Finance, JK Mazzocco Human Resources, CR Beukman Finance, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board
A full list of partners is available on request
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This index is based on the 2007 GRI guidelines (G3.1) and 2009 mining and minerals sector supplement.
GRI element Topic Page
Strategy and analysis1.1 Statement from CEO. 5, 12, 14
1.2 Key impacts, risks and opportunities. 9
Organisational profile
2.1 Name. Cover
2.2 Primary products. 2, 33
2.3 Operational structure. 2, 3
2.4 Location of head office. 16
2.5 Countries of operation. 2, 3
2.6 Nature of ownership. 203
2.7 Markets served. 2, 33
2.8 Scale of organisation. 3
2.9 Significant changes to organisation. 124
2.10 Awards. 22, 24
Report parameters3.1 Reporting period. IFC
3.2 Date of previous report. IFC
3.3 Reporting cycle. IFC
3.4 Contact points. IFC
3.5 Process for defining report content. IFC, 5
3.6 Boundary of report. IFC
3.7 Limitations. IFC
3.8 Basis for reporting on joint ventures, etc.
3.9 Data measurement techniques and assumptions.
3.10 Explanation of restatements.
3.11 Significant changes to scope, boundary or methods. IFC
3.12 GRI index. 92
3.13 Policy and practice on external assurance. IFC, 91
Governance, commitments and engagement4.1 Governance structure. 75
4.2 Status of chairperson. 76
4.3 Independent non-executive directors. 76
4.4 Mechanisms for stakeholders to interact with board. 74
4.5 Link between compensation and performance.
4.6 Process for avoiding conflict of interest. 75
4.7 Expertise of board. 78
4.8 Policies on economic, environmental and social performance. 1, 60, 74, 83, 98
4.9 Procedures for board oversight of economic, environmental and social performance. 74 – 85
4.10 Board performance. 78
4.11 Precautionary approach. –
4.12 External principles endorsed. IFC, 27, 78, 87, 88
4.13 Membership of industry associations and advocacy groups. 26
Pretoria Portland Cement Company Limited110
INdEX tO GLOBAL REPORtING INItIAtIVE INdICAtORS
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Integrated annual report 2011111
GRI element Topic Page
Governance, commitments and engagement continued
4.14 Stakeholder groups. 64.15 Basis for identification. 54.16 Approach to stakeholder engagement. 64.17 Topics and concerns raised, response. 7 – 8
Economic EC1 Economic value generated and distributed. 28EC2 Financial implications, risks and opportunities due to climate change. 11, 67EC3 Coverage of defined benefit plan obligations. 137, 144, 188EC4 Significant financial assistance from government. n/aEC5 Standard entry-level wage compared to local minimum wage. –EC6 Policy, practices, and spending on local suppliers 56, 88EC7 Procedures for local hiring, proportion of senior management and workforce
hired from local community. 43EC8 Development and impact of infrastructure investments and services for public
benefit. 50 – 59EC9 Significant indirect economic impacts. 52, 56
EnvironmentalMaterials
EN1 Materials used by weight or volume. n/mEN2 Percentage recycled input materials. n/mEnergy
EN3 Direct consumption by primary energy source. 60, 68EN4 Indirect consumption by primary source. 60, 68EN5 Energy saved from conservation and efficiency improvements. 11, 68, 71EN6 Reductions from energy-efficient or renewable energy-based products and
services. 11, 69EN7 Initiatives to reduce indirect energy consumption, reductions achieved. 11Water
EN8 Total water withdrawal by source. 26, 66, 68EN9 Sources significantly affected by withdrawal. n/mEN10 Percentage and volume recycled and re-used. n/mBiodiversity
EN11 Location and size of land owned, leased, managed or adjacent to protected areas, areas of high biodiversity value. 65
EN12 Description of significant impacts of activities. –MMI Amount of land (owned or leased, managed for production activities or
extractive use) disturbed or rehabilitated. 65EN13 Habitats protected or restored. 65EN14 Strategies, actions and plans for managing impacts on biodiversity. 65MM2 The number and percentage of total sites identified as requiring biodiversity
management plans according to stated criteria, and the number (percentage) of those sites with plans in place.
EN15 IUCN Red List species and national conservation list species in areas affected by operations. –
EN16 Total direct and indirect greenhouse gas emissions. 67EN17 Other relevant indirect greenhouse gas emissions. n/aEN18 Initiatives to reduce greenhouse gas emissions, reductions achieved. 11, 26, 34, 60, 62,
63, 68
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n/a = not applicable. n/m = not measured.
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GRI element Topic Page
Environmental continued
Emissions, effluents and waste
EN19 Emissions of ozone-depleting substances. n/aEN20 NOX, SOX and other significant air emissions by type and weight. 69, 70EN21 Total water discharge by quality and destination. n/mEN22 Total weight of waste by type and disposal method. 71MM3 Total amounts of overburden, rock, tailings and sludges and their associated
risks.
EN23 Total number and volume of significant spills. n/mEN24 Waste transported under terms of Basel Convention (Annex I, II, III, VIII). n/aEN25 Identity, size, protected status, and biodiversity value of water bodies and
related habitats significantly affected by discharges of water and runoff. n/aProducts and services
EN26 Initiatives to mitigate environmental impacts of products, extent of mitigation 77EN27 Percentage of products sold and packaging materials reclaimed by category. n/mCompliance
EN28 Significant fines, sanctions for non-compliance with environmental laws and regulations. 26, 62
Transport
EN29 Significant impacts of transporting products, and members of workforce. –EN30 Total environmental protection expenditures and investments by type. 140
Social performance: labour practices and decent workEmployment
LA1 Workforce by employment type, employment contract, gender and region. 43LA2 Number and rate of new employee hires and employee turnover by age
group, gender and region. 44LA3 Benefits for full-time employees not provided to temporary/part-time
employees. –Labour/management relations
LA4 Percentage of employees covered by collective bargaining agreements. 44LA5 Minimum notice period on significant changes, including specified in
collective agreements. –MM4 Number of strikes and lock-outs exceeding one week’s duration, by country. –Occupational health and safety
LA6 Percentage of workforce represented in formal joint health and safety committees to monitor and advise on programmes. –
LA7 Rates of injury, occupational diseases, lost days, absenteeism, work-related fatalities by region and gender. 38 – 40
LA8 Education, training, counselling, prevention and risk-control programmes to assist workforce members, their families or community members with serious diseases. 39
LA9 Health and safety topics covered in formal agreements with trade unions. –LA10 Average hours of training per year per employee by gender and employee
category. 44LA11 Programmes for skills management and lifelong learning that support
continued employability. 45 – 47LA12 Percentage of employees receiving regular performance and career
development reviews by gender. –
Pretoria Portland Cement Company Limited112
INdEX tO GLOBAL REPORtING INItIAtIVE INdICAtORS CONtINuEd
n/a = not applicable. n/m = not measured.
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Integrated annual report 2011113
GRI element Topic Page
Social performance: labour practices and decent work continued
Diversity and equal opportunity
LA13 Composition of governance bodies and breakdown of employees per category: gender, age group, minority group membership and other indicators of diversity. 77
LA14 Ratio of basic salary of men to women by employee category. –LA15 Return to work and retention rates after parental leave, by gender. –
Social performance: human rightsInvestment and procurement practices
HR1 Percentage and number of significant investment agreements and contracts with human rights clauses or human rights screening. –
HR2 Percentage of significant suppliers and contractors screened on human rights and actions taken. –
HR3 Total hours and percentage of employee training on aspects of human rights relevant to operations. –
Non-discrimination
HR4 Total number of incidents of discrimination and actions taken. –Freedom of association and collective bargaining
HR5 Operations and significant suppliers where right to freedom of association and collective bargaining may be at significant risk, actions taken to support rights. –
HR6 Operations and significant suppliers with significant risk for incidents of child labour, measures to eliminate. –
HR7 Operations and significant suppliers with significant risk of forced or compulsory labour, measures to eliminate. –
Security practices
HR8 Percentage of security personnel trained in policies/procedures on human rights relevant to operations.
MM5 Total number of operations in or adjacent to indigenous peoples’ territories, and number and percentage of operations or sites with formal agreements with indigenous peoples’ communities.
Indigenous rights
HR9 Number of violations involving rights of indigenous people and actions taken. –HR10 Percentage and total number of operations that have been subject to human
rights reviews and/or impact assessments. (GRI3.1). –HR11 Number of grievances related to human rights filed, addressed and resolved
through formal grievance mechanisms (GRI3.1). –
Social performance: societyCommunity
SO1 Percentage of programmes with implemented local community engagement, impact assessments and development programmes. 52 – 59
MM6 Number and description of significant disputes relating to land use, customary rights of local communities and indigenous peoples. –
MM7 The extent to which grievance mechanisms were used to resolve disputes relating to land use, customary rights of local communities and indigenous peoples, and the outcomes. –
MM8 Number (and percentage) of operating sites where artisanal and small-scale mining (ASM) takes place on, or adjacent to, the site; associated risks and actions taken to manage and mitigate these risks. –
MM9 Sites where resettlements took place, number of households resettled in each, and how their livelihoods were affected in the process. –
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GRI element Topic Page
Social performance: society continued
Community continued
MM10 Number and percentage of operations with closure plans. 167 – 168Corruption
SO2 Percentage and number of business units analysed for risks related to corruption. –
SO3 Percentage of employees trained in anti-corruption policies and procedures 85SO4 Actions taken in response to incidents of corruption. –Public policy
SO5 Public policy positions and participation in public policy development and lobbying. –
SO6 Total value of financial and in-kind contributions to political parties, politicians and related institutions. Zero
Anti-competitive behaviour
SO7 Legal actions for anti-competitive behaviour, anti-trust and monopoly practices, outcomes.
Compliance
SO8 Significant fines, sanctions for non-compliance with laws and regulations. Summary of judgments made against company in terms of health and safety and labour laws. 38, 84
SO9 Operations with significant potential or actual negative impacts on local communities. –
S10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities. –
Social performance: product responsibil ityCustomer health and safety
MM11 Programmes and progress relating to materials stewardship. –PR1 Lifecycle stages in which impacts of products and services are assessed for
improvement, percentage of significant products and services categories subject to such procedures. –
PR2 Number of non-compliances with regulations and voluntary codes on health and safety impacts of products and services during lifecycle, by types of outcomes. Zero
Products and service labelling
PR3 Type of information required, percentage of significant products concerned.
PR4 Incidents of non-compliance with regulations and voluntary codes on labelling.
PR5 Practices related to customer satisfaction.
Marketing communications
PR6 Programmes for adherence to laws, standards and voluntary codes.
PR7 Incidents of non-compliance.
Customer privacy
PR8 Substantiated complaints on breaches of customer privacy and losses of customer data. n/a
Compliance
PR9 Significant fines for non-compliance with laws and regulations concerning provision and use of products and services.
Pretoria Portland Cement Company Limited114
INdEX tO GLOBAL REPORtING INItIAtIVE INdICAtORS CONtINuEd
n/a = not applicable.
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Integrated annual report 2011115
PPC’s cash generation remains strong, positioning the group to achieve its strategic objectives and ultimately its vision.
FINANCIAL StAtEMENtS
focusED on VALuE
Financial statements
Certificate by company secretary 116
Approval of annual financial statements 117
Independent auditors report 118
Directors’ report 119
Seven-year review of the Group’s results 122
Share performance 130
Glossary of accounting terminology 132
Accounting policies 137
Judgements made by management 145
Group annual financial statements 146
Segmental information 152
Notes to the group annual financial statements 154
Administration
PPC in the stock market 200
Corporate information 201
Notice of annual general meeting 202
Form of proxy 211
Glossary of definitions and acronyms Foldout
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Pretoria Portland Cement Company Limited116
In terms of section 88(2)(e) of the Companies Act, No 71 of 2008, as amended, I certify that Pretoria Portland Cement Company Limited has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of this Act and that such returns are true, correct and up to date.
JHDLR SnymanCompany secretary
7 November 2011
CERTIFICATE BY COMPANY SECRETARYfor the year ended 30 September 2011
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Integrated annual report 2011117
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The directors of the company are responsible for the integrity and objectivity of the annual financial statements and other information contained in this integrated annual report, which have been prepared in accordance with International Financial Reporting Standards and in the manner required by the South African Companies Act. In discharging this responsibility, the group maintains suitable internal control systems designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with group policies.
The directors, supported by the audit committee, are satisfied that such controls, systems and procedures are in place to minimise the possibility of material loss or misstatement.
The directors believe that the group has adequate resources to continue in operation for the foreseeable future and the financial statements appearing on pages 90 to 103, 119 to 121 and 137 to 199 have, therefore, been prepared on a going-concern basis.
The annual financial statements have been audited by the independent accounting firm, Deloitte & Touche, who have been given unrestricted access to all financial records and other related data, including minutes of all meetings of the board of directors, committees of the board and executives. The directors believe that all representations made to the independent auditors during the audit were valid and appropriate. Deloitte & Touche’s unmodified report is presented on page 118 of this integrated annual report.
The annual financial statements were prepared under the supervision of the chief financial officer, MMT Ramano CA(SA), and approved by the board of directors on 7 November 2011 and are signed on its behalf by:
BL Sibiya P StuiverChairman Chief executive officer
7 November 2011 Sandton
APPROVAL OF ANNUAL FINANCIAL STATEMENTSfor the year ended 30 September 2011
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Pretoria Portland Cement Company Limited118
To THe SHaReHoLDeRS of PReToRia PoRTLanD cemenT comPany LimiTeD
We have audited the group annual financial statements of Pretoria Portland Cement Company Limited, which comprise the consolidated statement of financial position as at 30 September 2011, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the directors’ report, as set out on pages 90 to 103, 119 to 121 and 137 to 199.
Directors’ responsibility for the annual financial statementsThe directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error.
auditor’s responsibilityOur responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
opinionIn our opinion, these financial statements presents fairly, in all material respects, the consolidated financial position of Pretoria Portland Cement Company Limited as at 30 September 2011, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.
Deloitte & ToucheRegistered auditors
Per mJ JarvisPartner
7 November 2011
Deloitte PlaceThe WoodlandsWoodlands DriveWoodmeadSandton
National Executive: GG Gelink Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Risk Advisory and Legal Services, NB Kader Tax, L Geeringh Consulting, L Bam Corporate Finance, JK Mazzocco Human Resources, CR Beukman Finance, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board
A full list of partners is available on request
INdEPENdENT AUdITOR’S REPORTfor the year ended 30 September 2011
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Integrated annual report 2011119
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for the year ended 30 September 2011
office hours, at the offices of the company’s transfer secretaries, Link Market Services South Africa (Pty) Limited, or at Corpserve (Private) Limited (Zimbabwe).
DiRecToRS’ inTeReST in SHaRe caPiTaLDetails of the beneficial holdings of directors of the company and their families in the ordinary shares of the company are provided in the remuneration report on page 90.
Certain executive and non-executive directors and prescribed officers have an indirect shareholding in the company, subject to vesting conditions, following the completion of the broad-based black economic empowerment transaction. Details are provided in the remuneration report on page 90.
There has been no change in the directors’ interest in share capital since year end.
HoLDinG anD SUBSiDiaRy comPanieSDetails relating to the beneficial shareholders owning more than 5% of the issued share capital of the company appear in the “PPC in the stock market” section on page 130.
During the year under review, a new wholly owned subsidiary company, PPC International Holdings, was incorporated in Mauritius. This company was formed in order to facilitate PPC’s expansion into emerging markets and is anticipated to hold PPC’s non-South African investments in future.
In addition, PPC International Holdings incorporated two wholly owned subsidiary companies, PPC Mozambique Holdings and PPC Aggregate Quarries Botswana (Pty) Limited, which were incorporated in Mauritius and Botswana respectively. PPC Aggregate Quarries Botswana (Pty) Limited will house the group’s acquisition of the aggregate quarries in Botswana (discussed further in this report under events after reporting date on page 121).
PPC Mozambique Holdings incorporated a wholly owned subsidiary company in Mozambique, PPC Mozambique SA, which commenced trading during September 2011.
The directors have pleasure in presenting their report on the annual financial statements of the group for the year ended 30 September 2011.
BUSineSS acTiViTieSPretoria Portland Cement Company Limited, its subsidiaries and associates, operate in southern Africa as manufacturers of cementitious and aggregate products, lime and limestone.
The principal activities of the group remain unchanged from the previous year.
ReVieW of oPeRaTionSA comprehensive review of operations is detailed on pages 30 to 35.
SHaRe caPiTaL anD PRemiUmThe authorised share capital is 600 000 000 ordinary shares of 10 cents each. On 30 September 2011 the issued share capital of the company was 586 170 372 shares of 10 cents each (2010: 586 170 372; 2009: 586 170 372).
The share premium balance at 30 September 2011 remains unchanged from last year at R1 144 million debit (2010: R1 144 million debit; 2009: R1 141 million debit).
No new shares were issued during the 2011 financial year.
The group’s share buy-back programme commenced during the 2008 financial year. At 30 September 2011, 20 140 401 ordinary shares were held by a wholly owned subsidiary company, PPC Cement (Pty) Limited. These shares, representing 3,44% of the company’s issued share capital, are treated as treasury shares on consolidation.
Details of shares authorised, issued and unissued at 30 September 2011 are provided in note 10 on page 163.
ReGiSTeR of memBeRSThe register of members of the company is open for inspection to members and the public, during normal
dIRECTORS’ REPORT
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Pretoria Portland Cement Company Limited120
for the year ended 30 September 2011
dIRECTORS’ REPORT CONTINUEd
acQUiSiTion By THe comPany of iSSUeD SHaReSThe company did not exercise its authority to buy back shares in the current financial year.
SPeciaL ReSoLUTionSA special resolution authorising the directors to acquire issued shares in the ordinary share capital of the company was passed at the annual general meeting held on 31 January 2011 and registered on 1 February 2011.
At a special general meeting held on 1 September 2011 the following special resolutions were passed:• Permit the company, at any time and from time to
time during the period of two years commencing on 1 September 2011, to provide any direct or indirect financial assistance as defined in section 45 of the Companies Act to one or more related or inter-related companies.
• Approve the company providing, at any time and from time to time during the period of two years commencing on 1 September 2011, direct or indirect financial assistance as contemplated in section 44 of the Companies Act to employees, who are not executive directors or prescribed officers, participating in the company’s forfeitable share plan.
• To pre-approve the payment of remuneration to directors for their services as directors for the 2012 financial year in terms of section 66(9) of the Companies Act.
At the same meeting, a special resolution to provide, at any time and from time to time during the period of two years commencing on 1 September 2011, direct and indirect financial assistance as contemplated in section 44 of the Companies Act to executive directors or prescribed officers participating in the company’s forfeitable share plan did not receive the required majority approval.
SPeciaL ReSoLUTionS PaSSeD By SUBSiDiaRy comPanieSNo special resolutions were passed by subsidiaries of the company.
PRoPeRTy, PLanT anD eQUiPmenTCertain of the company’s properties are the subject of land claims. The company is in the process of discussion with the Land Claims Commissioner and awaiting the outcome of claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company’s operations. Furthermore, some of the company’s properties have been illegally invaded and the company is following legal processes to resolve the invasion.
In terms of the Constitution of Zimbabwe, land with a value of R25 million (2010: R22 million; 2009: R23 million) is exposed to the risk of expropriation by the Zimbabwean government without compensation.
At 30 September 2011 the group’s net investment in property, plant and equipment amounted to R4 287 million (2010: R4 175 million; 2009: R3 941 million), details of which are set out in note 1 to the group annual financial statements. Capital commitments at the year end amounted to R639 million (2010: R493 million; 2009: R439 million). There has been no change in the nature of the property, plant and equipment or to the policy relating to the use thereof during the year.
BoRRoWinGSThe company’s borrowing powers are unlimited. At 30 September 2011 borrowings amounted to R3 510 million (2010: R3 521 million; 2009: R3 392 million), and remain within the board’s stated target debt levels. Excluding the consolidated debt of the BBBEE funding transaction, group debt is R2 327 million (2010: R2 378 million; 2009: R2 289 million). Further details can be found in note 12 to the group annual financial statements.
The borrowing powers of Portland Holdings Limited, a wholly owned subsidiary company, are limited by its articles of association to twice the amount of shareholders’ interest. At 30 September 2011 Portland Holdings Limited did not have any borrowings.
DiViDenDScents per share
no Description Declaration date Record date Payment date 2011 2010 2009
216 Final 7 November 2011 13 January 2012 16 January 2012 95 130 155
215 Interim 17 May 2011 10 June 2011 13 June 2011 35 45 45
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eVenTS afTeR RePoRTinG DaTeThere are no events that occurred after the reporting date that may have an impact on the group’s reported financial position at 30 September 2011.
Subsequent to 30 September 2011, and in terms of PPC’s expansion strategy, PPC acquired three aggregate quarries in Botswana in a transaction valued at R52 million. The financial results will only be consolidated into the group results in the 2012 financial year.
The company has entered into a memorandum of understanding to purchase an initial 25% in Pronto Holdings, a prominent Gauteng based readymix and fly ash supplier. The remaining shareholding will be purchased on a phased approach, with a further 25% being purchased on the first anniversary of the initial transaction and the remaining 50% shareholding is to be purchased on the second anniversary. The total transaction is valued at R280 million less debt. The deal is still subject to Competition Commission approvals.
During October 2011, a US$44 million conditional offer for a 58% stake in Cimenterie Nationale, a cement producer in the Democratic Republic of Congo was made. At the date of this report, the group had not been informed whether its bid had been successful.
DiRecToRS The directors in office at the date of this report appear on pages 88 and 89.
At the annual general meeting held on 31 January 2011, Messrs P Esterhuysen, BL Sibiya, TDA Ross and AJ Lamprecht were re-elected as directors of the company, and Ms B Modise was elected as a director of the company.
Following Ms MMT Ramano’s appointment as a director by the board during 2011, and in terms of the company’s articles of association, she is required to retire as a director. Ms Ramano has offered herself for re-election and the nominations committee has recommended her election.
The following directors are required to retire by rotation in terms of the articles of association but, being eligible, offer themselves for re-election at that meeting, and the nominations committee has recommended their re-election:• J Shibambo (Independent non-executive director)• S Abdul Kader (Executive director)• ZJ Kganyago (Independent non-executive director)• NB Langa-Royds (Independent non-executive
director)
GRoUP comPany SecReTaRyThe group company secretary of PPC Company Limited is Mr JHDLR Snyman. His business and postal address appear in the administration section on page 201.
aUDiT commiTTeeThe directors confirm that the audit committee has addressed specific responsibilities required in terms of section 94(7) of the Companies Act, No 71 of 2008, as amended. Further details are contained within the audit committee report on page 80.
comPeTiTion commiSSionIn 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.
aUDiToRSDeloitte & Touche were reappointed as auditors to the group at the annual general meeting held on 31 January 2011.
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Pretoria Portland Cement Company Limited122
for the year ended 30 September
2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
conSoLiDaTeD STaTemenTS of financiaL PoSiTion
assets
non-current assets 4 585 4 449 4 195 3 196 2 546 1 817 1 794
Property, plant and equipment 4 287 4 175 3 941 2 813 2 178 1 414 1 247
Intangible assets 94 78 53 19 20 14 14
Investment in non-consolidated subsidiary – – – 260 260 290 295
Other non-current financial assets and investment in associates 204 196 201 104 88 99 214
Deferred taxation assets – – – – – – 24
current assets 1 834 1 663 1 624 1 338 2 336 2 538 1 462
Inventories 709 596 557 363 337 223 223
Trade and other receivables 901 827 819 751 696 605 500
Short-term investment – – – – 2 98 147
Assets classified as held-for-sale – – – – – 130 –
Cash and cash equivalents 224 240 248 224 1 301 1 482 592
Total assets 6 419 6 112 5 819 4 534 4 882 4 355 3 256
equity and liabilities
capital and reserves
Share capital and premium (1 091) (1 091) (1 088) 115 868 868 868
Reserves and retained profit 2 046 1 949 2 003 1 598 1 481 1 335 1 138
Equity attributable to equity holders of the parent 955 858 915 1 713 2 349 2 203 2 006
Outside shareholders’ interest – – – – – – 21
Total equity 955 858 915 1 713 2 349 2 203 2 027
non-current liabilities 3 837 3 591 3 366 511 340 364 483
Deferred taxation liabilities 740 568 469 299 156 174 182
Long-term borrowings 2 699 2 645 2 628 55 68 83 198
Other non-current liabilities 398 378 269 157 116 107 103
current liabilities 1 627 1 663 1 538 2 310 2 193 1 788 746
Short-term borrowings 811 876 764 1 619 1 366 983 160
Taxation payable 10 76 96 61 236 212 160
Trade and other payables 806 711 678 629 579 472 415
Liabilities directly associated with assets classified as held-for-sale – – – – – 112 –
Provisions – – – 1 12 9 11
Total equity and liabilities 6 419 6 112 5 819 4 534 4 882 4 355 3 256
SEVEN-YEAR REVIEw OF ThE gROUP’S RESULTS
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Integrated annual report 2011123
Fina
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2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
conSoLiDaTeD income STaTemenTSRevenue 6 826 6 807 6 783 6 248 5 566 4 686 3 974 Cost of sales 4 500 4 067 3 897 3 547 3 069 2 520 2 175 Administrative and operating expenditure 616 625 468 378 323 305 290
operating profit before items listed below 1 710 2 115 2 418 2 323 2 174 1 861 1 509 BBBEE IFRS 2 charges 11 10 490 – – – – Take-on gain arising from consolidation of PPC Zimbabwe – – 213 – – – –
operating profit 1 699 2 105 2 141 2 323 2 174 1 861 1 509 Fair value gains/(losses) on financial instruments 9 (20) (6) 4 1 – (7)Finance costs 362 366 357 157 84 52 64 Investment income 28 39 65 84 82 67 84
Profit before exceptional items 1 374 1 758 1 843 2 254 2 173 1 876 1 522 Exceptional items (4) (32) – 2 14 – 13 Share of associates’ retained profit 15 8 7 10 7 – 1
Profit before taxation 1 385 1 734 1 850 2 266 2 194 1 876 1 536
Taxation 520 622 722 767 765 670 582
net profit from continuing operations 865 1 112 1 128 1 499 1 429 1 206 954
Discontinued operationsNet profit from discontinued operations – – – – – 8 –
net profit 865 1 112 1 128 1 499 1 429 1 214 954
attributable to:Equity holders of parent 865 1 112 1 128 1 499 1 429 1 214 941
Ordinary shareholders 785 1 010 1 024 1 499 1 429 1 214 941 Other shareholders 80 102 104 – – – – Outside shareholders’ interest – – – – – – 13
865 1 112 1 128 1 499 1 429 1 214 954
attributable net profit excluding exceptional items 869 1 144 1 128 1 497 1 415 1 214 941
conDenSeD conSoLiDaTeDSTaTemenT of caSH fLoWSCash available from operations 1 435 1 689 1 728 1 644 1 460 1 437 1 095 Dividends paid (876) (1 062) (1 195) (1 401) (1 207) (1 059) (1 269)Equity-settled share incentive scheme refund/(payment) – – – 2 (30) – –
net cash inflow/(outflow) from operating activities 559 627 533 245 223 378 (174)Net cash outflow from investing activities (504) (663) (2 208) (1 562) (772) (242) (128)Net cash (outflow)/inflow from financing activities (71) 28 1 656 240 368 761 (65)
net (decrease)/increase in cash and cash equivalents (16) (8) (19) (1 077) (181) 897 (367)
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Pretoria Portland Cement Company Limited124
for the year ended 30 September
2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
STaTiSTicS
Share performance
Weighted average number of ordinary shares in issue during the year (000)
Time weighted number of ordinary shares in issue during the year (refer note 23.1)
478 196 478 222 487 287 529 050 537 612 537 612 537 607
Earnings per share (cents) – basic Net profit attributable to ordinary shareholders of PPC Company Limited
164 211 210 283 266 226 175
Weighted average number of ordinary shares in issue during the year
Earnings per share before exceptional items, BBBEE IFRS 2 charges and take-on gain arising on consolidation of PPC Zimbabwe (cents) – basic
Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items net of taxation*
166 213 257 283 263 226 173
Weighted average number of ordinary shares in issue during the year
Headline earnings per share (cents) – basic Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items net of taxation, amortisation of goodwill and capital profits or losses net of taxation
165 217 170 283 263 226 172
Weighted average number of ordinary shares in issue during the year
Headline earnings per share, before BBBEE IFRS 2 charges (cents) – basic
Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items, amortisation of goodwill and capital profits or losses net of taxation and excluding the BBBEE IFRS 2 charges
167 219 257 283 263 226 172
Weighted average number of ordinary shares in issue during the year
Ordinary dividends per share (cents) Interim dividend per share paid and final dividend per share declared
130 175 200 225 205 143 110
Special dividend per share (cents) A non-recurring dividend that is exceptional in terms of either size or date declared
– – – – 61 77 80
Dividend cover (times) (excluding special dividend) Earnings per share before exceptional items* 1,3 1,3 1,3 1,3 1,3 1,6 1,6
Ordinary dividends per share
Net asset value per share (cents) Total equity, including investments at market value 182 163 174 331 437 410 373
Total number of shares in issue
* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
SEVEN-YEAR REVIEw OF ThE gROUP’S RESULTS CONTINUEd
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Integrated annual report 2011125
Fina
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2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
STaTiSTicS
Share performance
Weighted average number of ordinary shares in issue during the year (000)
Time weighted number of ordinary shares in issue during the year (refer note 23.1)
478 196 478 222 487 287 529 050 537 612 537 612 537 607
Earnings per share (cents) – basic Net profit attributable to ordinary shareholders of PPC Company Limited
164 211 210 283 266 226 175
Weighted average number of ordinary shares in issue during the year
Earnings per share before exceptional items, BBBEE IFRS 2 charges and take-on gain arising on consolidation of PPC Zimbabwe (cents) – basic
Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items net of taxation*
166 213 257 283 263 226 173
Weighted average number of ordinary shares in issue during the year
Headline earnings per share (cents) – basic Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items net of taxation, amortisation of goodwill and capital profits or losses net of taxation
165 217 170 283 263 226 172
Weighted average number of ordinary shares in issue during the year
Headline earnings per share, before BBBEE IFRS 2 charges (cents) – basic
Net profit attributable to ordinary shareholders of PPC Company Limited adjusted for the exceptional items, amortisation of goodwill and capital profits or losses net of taxation and excluding the BBBEE IFRS 2 charges
167 219 257 283 263 226 172
Weighted average number of ordinary shares in issue during the year
Ordinary dividends per share (cents) Interim dividend per share paid and final dividend per share declared
130 175 200 225 205 143 110
Special dividend per share (cents) A non-recurring dividend that is exceptional in terms of either size or date declared
– – – – 61 77 80
Dividend cover (times) (excluding special dividend) Earnings per share before exceptional items* 1,3 1,3 1,3 1,3 1,3 1,6 1,6
Ordinary dividends per share
Net asset value per share (cents) Total equity, including investments at market value 182 163 174 331 437 410 373
Total number of shares in issue
* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
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Pretoria Portland Cement Company Limited126
for the year ended 30 September
2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
Profitability and asset management
Operating margin (%) Operating profit (excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe)
25,1 31,1 35,6 37,2 39,1 39,7 38,0
Revenue
EBITDA (Rm) Profit from continuing operations before exceptional items, adjusted for BBBEE IFRS 2 charges, take-on gain arising from consolidation of PPC Zimbabwe, investment income, finance costs, fair value adjustments, depreciation and amortisation
2 146 2 483 2 733 2 541 2 370 2 030 1 668
EBITDA margin (%) EBITDA 31,4 36,5 40,3 40,7 42,6 43,3 42,0
Revenue
Net asset turn (times) Revenue 1,3 1,4 1,6 1,6 1,4 1,4 1,4
Average net assets
Return on net assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill*
33,7 42,8 57,6 61,1 57,0 59,6 55,0
Average of net assets
Return on total assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill
28,1 35,9 48,0 51,4 49,0 50,7 46,7
Average total assets
Return on shareholders’ interest (%) Net profit attributable to shareholders of PPC Company Limited
86,6 125,4 77,9 73,8 62,8 57,7 43,4
Average interest of shareholders of PPC Company Limited
Return on shareholders’ interest (excluding exceptional items) (%)
Net profit attributable to shareholders of PPC Company Limited less exceptional items net of taxation
87,1 117,5 77,9 73,7 62,2 57,7 42,8
Average interest of shareholders of PPC Company Limited
Effective rate of taxation (%) Taxation (excluding prior year taxation, secondary taxation on companies and taxation on exceptional items)*
30,7 29,8 29,3 28,0 28,3 28,9 29,1
Profit before taxation, excluding dividend income and exceptional items
* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
SEVEN-YEAR REVIEw OF ThE gROUP’S RESULTS CONTINUEd
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Integrated annual report 2011127
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2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
Profitability and asset management
Operating margin (%) Operating profit (excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe)
25,1 31,1 35,6 37,2 39,1 39,7 38,0
Revenue
EBITDA (Rm) Profit from continuing operations before exceptional items, adjusted for BBBEE IFRS 2 charges, take-on gain arising from consolidation of PPC Zimbabwe, investment income, finance costs, fair value adjustments, depreciation and amortisation
2 146 2 483 2 733 2 541 2 370 2 030 1 668
EBITDA margin (%) EBITDA 31,4 36,5 40,3 40,7 42,6 43,3 42,0
Revenue
Net asset turn (times) Revenue 1,3 1,4 1,6 1,6 1,4 1,4 1,4
Average net assets
Return on net assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill*
33,7 42,8 57,6 61,1 57,0 59,6 55,0
Average of net assets
Return on total assets (%) Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill
28,1 35,9 48,0 51,4 49,0 50,7 46,7
Average total assets
Return on shareholders’ interest (%) Net profit attributable to shareholders of PPC Company Limited
86,6 125,4 77,9 73,8 62,8 57,7 43,4
Average interest of shareholders of PPC Company Limited
Return on shareholders’ interest (excluding exceptional items) (%)
Net profit attributable to shareholders of PPC Company Limited less exceptional items net of taxation
87,1 117,5 77,9 73,7 62,2 57,7 42,8
Average interest of shareholders of PPC Company Limited
Effective rate of taxation (%) Taxation (excluding prior year taxation, secondary taxation on companies and taxation on exceptional items)*
30,7 29,8 29,3 28,0 28,3 28,9 29,1
Profit before taxation, excluding dividend income and exceptional items
* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
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Pretoria Portland Cement Company Limited128
for the year ended 30 September
2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
Liquidity and leverage
Total liabilities to shareholders’ interest (%) Current and long-term liabilities, excluding deferred taxation
495 546 485 147 101 90 52
Interest of ordinary shareholders of PPC Company Limited
Total borrowings to shareholders’ interest (%) Short-term and long-term borrowings 368 410 371 98 61 48 18
Interest of ordinary shareholders of PPC Company Limited
Current ratio (times) Current assets 1,1 1,0 1,1 0,6 1,1 1,4 2,0
Current liabilities
Quick ratio (times) Current assets, excluding inventories 0,7 0,6 0,7 0,4 0,9 1,3 1,7
Current liabilities
Interest cover (times) Profit before exceptional items, excluding finance costs 4,8 5,6 6,6 12,0 24,6 37,4 24,9
Finance costs, including finance costs capitalised
EBITDA interest cover (times) EBITDA 5,9 6,6 7,3 12,6 25,9 39,5 26,2
Finance costs, including finance costs capitalised
Number of years to repay interest-bearing borrowings Total borrowings 2 2 2 1 1 1 –
Cash available from operations
Cash generated from operations (Rm) Cash derived from normal operating activities 2 102 2 442 2 602 2 546 2 191 2 023 1 668
Cash flow from operations to total liabilities (times) Cash available from operations 0,3 0,4 0,4 0,7 0,6 0,7 1,0
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
3 087 3 257 3 234 3 164 3 097 3 025 3 010
Revenue per employee (R000)~ Revenue for the year 2 211 2 086 2 560 2 461 2 262 1 955 1 681
Average number of employees
Wealth created per employee (R000)~ Wealth created during the year 1 016 1 028 1 259 1 310 1 288 1 074 951
Average number of employees~ Includes employees of PPC Zimbabwe for 2011, 2010 and 2009 and employees of Afripack for 2005.
SEVEN-YEAR REVIEw OF ThE gROUP’S RESULTS CONTINUEd
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Integrated annual report 2011129
Fina
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2011Rm
2010Rm
2009Rm
2008Rm
2007Rm
2006Rm
2005Rm
Liquidity and leverage
Total liabilities to shareholders’ interest (%) Current and long-term liabilities, excluding deferred taxation
495 546 485 147 101 90 52
Interest of ordinary shareholders of PPC Company Limited
Total borrowings to shareholders’ interest (%) Short-term and long-term borrowings 368 410 371 98 61 48 18
Interest of ordinary shareholders of PPC Company Limited
Current ratio (times) Current assets 1,1 1,0 1,1 0,6 1,1 1,4 2,0
Current liabilities
Quick ratio (times) Current assets, excluding inventories 0,7 0,6 0,7 0,4 0,9 1,3 1,7
Current liabilities
Interest cover (times) Profit before exceptional items, excluding finance costs 4,8 5,6 6,6 12,0 24,6 37,4 24,9
Finance costs, including finance costs capitalised
EBITDA interest cover (times) EBITDA 5,9 6,6 7,3 12,6 25,9 39,5 26,2
Finance costs, including finance costs capitalised
Number of years to repay interest-bearing borrowings Total borrowings 2 2 2 1 1 1 –
Cash available from operations
Cash generated from operations (Rm) Cash derived from normal operating activities 2 102 2 442 2 602 2 546 2 191 2 023 1 668
Cash flow from operations to total liabilities (times) Cash available from operations 0,3 0,4 0,4 0,7 0,6 0,7 1,0
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
3 087 3 257 3 234 3 164 3 097 3 025 3 010
Revenue per employee (R000)~ Revenue for the year 2 211 2 086 2 560 2 461 2 262 1 955 1 681
Average number of employees
Wealth created per employee (R000)~ Wealth created during the year 1 016 1 028 1 259 1 310 1 288 1 074 951
Average number of employees~ Includes employees of PPC Zimbabwe for 2011, 2010 and 2009 and employees of Afripack for 2005.
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Pretoria Portland Cement Company Limited130
for the year ended 30 September
2011Rm
2010Rm
2009Rm
2008^Rm
2007^Rm
2006^Rm
2005^Rm
JSe Limited
Number of shares in issue (millions)~ Number of authorised shares that are sold to and held by the shareholders of PPC Company Limited on the JSE Limited
571 571 561 510 510 510 510
Volume of shares traded (millions) Number of shares transacted during the year 305 498 560 606 302 127 147
Market price (cents)
High Highest prevailing price at which share was sold 3 510 3 560 3 650 5 199 5 300 4 498 2 943
Low Lowest prevailing price at which share was sold 2 302 2 878 2 313 2 590 3 360 2 770 1 716
At year end Prevailing price at which share was sold on 30 September 2 325 3 172 3 390 3 125 4 780 3 479 2 910
Value of shares traded (Rm) Number of shares transacted during the year times prevailing share price
8 568 16 186 16 872 22 577 14 448 4 516 3 367
Volume of shares traded as a percentage of total issued shares (%)
Number of shares transacted during the year 53,4 87,2 99,9 118,8 59,2 24,9 28,8
Number of shares in issue
Number of transactions Number of exchanges of PPC Company Limited shares between a buyer and a seller
183 178 178 142 251 222 216 815 108 130 47 543 25 789
FTSE/JSE All Share Industrial index Average prices of a selected number of shares listed on the JSE Limited
26 541 28 153 25 283 24 966 29 959 22 375 16 876
Zimbabwe Stock exchange
Number of shares in issue (millions) Number of authorised shares that are sold to and held by the shareholders of PPC Company Limited on the Zimbabwe Stock Exchange
15 15 25
Market price at year end (cents) Prevailing price at which share was sold on 30 September 2 557 2 236 1 549
market capitalisation at 30 September (Rm)
JSE Limited Number of shares in issue listed on JSE Limited times market price per share at year end
13 276 18 111 19 013 15 938 24 392 17 756 14 853
Zimbabwe Stock Exchange Number of shares in issue listed on the Zimbabwe Stock Exchange times market price per share at year end
389 340 392
13 665 18 451 19 405 15 938 24 392 17 756 14 853
Earnings yield (%) Earnings per share excluding exceptional items for the most recent 12 months*
7,2 6,5 7,8 9,1 5,6 6,5 6,0
Market price per share at year end#
Dividend yield (%) Total dividends paid out of current year's earnings 5,6 6,3 6,0 7,2 5,6 6,3 6,5
Market price per share at year end#
Price-earnings ratio Market value per share at year end# 14,0 16,3 12,9 11,0 18,0 15,4 16,9
Earnings per share excluding exceptional items for the most recent 12 months*
~ Includes treasury shares.* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.^ As data and exchange rates were not deemed meaningful, prior year's information has not been disclosed for shares listed on
the Zimbabwe Stock Exchange.# Calculated using weighted market price of JSE Limited and the Zimbabwe Stock Exchange.
ShARE PERFORMANCE
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Integrated annual report 2011131
Fina
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ents
2011Rm
2010Rm
2009Rm
2008^Rm
2007^Rm
2006^Rm
2005^Rm
JSe Limited
Number of shares in issue (millions)~ Number of authorised shares that are sold to and held by the shareholders of PPC Company Limited on the JSE Limited
571 571 561 510 510 510 510
Volume of shares traded (millions) Number of shares transacted during the year 305 498 560 606 302 127 147
Market price (cents)
High Highest prevailing price at which share was sold 3 510 3 560 3 650 5 199 5 300 4 498 2 943
Low Lowest prevailing price at which share was sold 2 302 2 878 2 313 2 590 3 360 2 770 1 716
At year end Prevailing price at which share was sold on 30 September 2 325 3 172 3 390 3 125 4 780 3 479 2 910
Value of shares traded (Rm) Number of shares transacted during the year times prevailing share price
8 568 16 186 16 872 22 577 14 448 4 516 3 367
Volume of shares traded as a percentage of total issued shares (%)
Number of shares transacted during the year 53,4 87,2 99,9 118,8 59,2 24,9 28,8
Number of shares in issue
Number of transactions Number of exchanges of PPC Company Limited shares between a buyer and a seller
183 178 178 142 251 222 216 815 108 130 47 543 25 789
FTSE/JSE All Share Industrial index Average prices of a selected number of shares listed on the JSE Limited
26 541 28 153 25 283 24 966 29 959 22 375 16 876
Zimbabwe Stock exchange
Number of shares in issue (millions) Number of authorised shares that are sold to and held by the shareholders of PPC Company Limited on the Zimbabwe Stock Exchange
15 15 25
Market price at year end (cents) Prevailing price at which share was sold on 30 September 2 557 2 236 1 549
market capitalisation at 30 September (Rm)
JSE Limited Number of shares in issue listed on JSE Limited times market price per share at year end
13 276 18 111 19 013 15 938 24 392 17 756 14 853
Zimbabwe Stock Exchange Number of shares in issue listed on the Zimbabwe Stock Exchange times market price per share at year end
389 340 392
13 665 18 451 19 405 15 938 24 392 17 756 14 853
Earnings yield (%) Earnings per share excluding exceptional items for the most recent 12 months*
7,2 6,5 7,8 9,1 5,6 6,5 6,0
Market price per share at year end#
Dividend yield (%) Total dividends paid out of current year's earnings 5,6 6,3 6,0 7,2 5,6 6,3 6,5
Market price per share at year end#
Price-earnings ratio Market value per share at year end# 14,0 16,3 12,9 11,0 18,0 15,4 16,9
Earnings per share excluding exceptional items for the most recent 12 months*
~ Includes treasury shares.* Excludes the impact of BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.^ As data and exchange rates were not deemed meaningful, prior year's information has not been disclosed for shares listed on
the Zimbabwe Stock Exchange.# Calculated using weighted market price of JSE Limited and the Zimbabwe Stock Exchange.
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Pretoria Portland Cement Company Limited132
for the year ended 30 September 2011
gLOSSARY OF ACCOUNTINg TERMINOLOgY
accounting policiesThe specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements.
accrual accountingThe effects of transactions and other events are recognised when they occur rather than when the cash is received or paid.
acquisition dateThe date on which control in subsidiaries, special-purpose vehicles, joint control in joint ventures and significant influence in associates commences.
actuarial gains and lossesThe effect of differences between the previous actuarial assumptions and what has actually occurred as well as the effect of changes in actuarial assumptions.
amortised costThe amount at which a financial asset or financial liability is measured at initial recognition, adjusted for principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and minus any reduction for impairment or uncollectibility.
assetA resource controlled by the entity as a result of a past event from which future economic benefits are expected to flow.
associateAn entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. available-for-sale financial assetsNon-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
Borrowing costsFinance and other costs incurred in connection with the borrowing of funds. Business combinationA transaction or other event in which an acquirer obtains control of one or more businesses.
carrying amountThe amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses.
cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. They are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
cash flow hedgeA hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset or liability, or a highly probable forecast transaction that could affect profit or loss.
cash-generating unitThe smallest identifiable group of assets that generates cash inflows and is largely independent of the cash inflows from other assets or groups of assets. change in accounting estimate An adjustment to an asset or a liability as a result of new information or developments.
consolidated financial statementsThe financial statements of a group presented as those of a single economic entity.
constructive obligationAn obligation that derives from an established pattern of past practice, published policies or a sufficiently specific current statement such that it created a valid expectation on the part of other parties that the obligation will be met.
contingent assetA possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. contingent liabilityA possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
controlThe power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
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employee benefitsAll forms of consideration given in exchange for services rendered by employees.
equity instrumentA contract that evidences a residual interest in the total assets after deducting total liabilities.
equity methodA method in which the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the share of net assets of the investee. Profit or loss includes the share of the investee’s profit or loss.
expensesThe decreases in economic benefits in the form of outflows or depletion of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
fair valueThe amount for which an asset could be exchanged between knowledgeable and willing parties in an arm’s length transaction.
fair value hedgeA hedge of exposure to changes in fair value of a recognised asset, liability or firm commitment.
finance leaseA lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.
financial assetCash or cash equivalents, a contractual right to receive cash, an equity instrument or a contractual right to exchange financial instruments under favourable conditions.
financial asset or liability at fair value through profit or loss A financial asset or financial liability that is classified as held-for-trading, or is designated as such on initial recognition, other than investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured.
financial guaranteeA contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of the debt instrument.
costs to sellThe incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income taxation expense.
Date of transactionThe date on which the transaction first qualifies for recognition in accordance with International Financial Reporting Standards.
Depreciation (or amortisation)The systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset less its residual value.
DerecognitionThe removal of a previously recognised asset or liability from the statement of financial position.
DerivativeA financial instrument whose value changes in response to an underlying contract, requires no initial or minimal net investment in relation to other types of contracts that would be expected to have a similar response to changes in market factors and is settled at a future date.
DevelopmentThe application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before starting commercial production or use.
Discontinued operationA component that has either been disposed of or is classified as held-for-sale and represents a separate major line of business or geographical operational area or a subsidiary acquired exclusively with a view to resell.
Discount rateThe rate used for purposes of determining discounted cash flows defined as the yield on relevant South African government bonds that have maturity dates approximating the term of the related cash flows. The pre-taxation interest rate reflects the current market assessment of the time value of money. In determining cash flows, the risks specific to the asset or liability are taken into account in determining those cash flows and are not included in calculating the discount rate.
effective interest rateThe derived rate that discounts the expected future cash flows to the current carrying amount of the financial asset or financial liability.
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Pretoria Portland Cement Company Limited134
for the year ended 30 September 2011
there is evidence of a recent actual pattern of short-term profit-taking or a derivative (except for a derivative that is a designated and effective hedging instrument).
Held-to-maturity investmentA non-derivative financial asset with fixed or determinable payments and fixed maturity where there is a positive intention and ability to hold it to maturity.
immaterialIf individually or collectively it would not influence the economic decisions of the users.
impairment lossThe amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.
impracticableWhen, after making every reasonable effort to do so, the requirement cannot be applied.
incomeIncrease in economic benefits in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
Joint controlThe contractually agreed sharing of control over an economic activity.
Joint ventureA contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Legal obligationAn obligation that derives from a contract, legislation or other operation of law.
LiabilityA present obligation arising from a past event, the settlement of which is expected to result in an outflow of resources embodying economic benefits.
Loans and receivablesNon-derivative financial asset, with fixed or determinable repayments that are not quoted in an active market.
financial instrumentA contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
financial liabilityA contractual obligation to pay cash or transfer other benefits or a contractual obligation to exchange a financial instrument under unfavourable conditions.
firm commitmentA binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates.
forecast transactionAn uncommitted but anticipated future transaction.
functional currencyThe currency of primary economic environment in which an entity operates.
Going-concern basisThe assumption that the entity will continue in operation for the foreseeable future.
Gross investment in leaseThe aggregate of the minimum lease payments receivable by the lessor under a finance lease and any unguaranteed residual value accruing to the lessor.
GroupThe group comprises Pretoria Portland Cement Company Limited, its subsidiaries and associates.
Hedged itemAn asset, liability, firm commitment, highly probable forecast transaction or net investment in a foreign operation that exposes the entity to risk of changes in fair value or future cash flows and is designated as being hedged.
Hedging instrumentA designated derivative or non-derivative financial asset or non-derivative financial liability whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item.
Held-for-trading financial asset or financial liabilityOne that is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or as part of a portfolio of identified financial instruments that are managed together and for which
gLOSSARY OF ACCOUNTINg TERMINOLOgY CONTINUEd
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Past service costThe increase or decrease in the present value of the defined benefit obligation for employee service in prior periods resulting from the introduction of, or changes to post-employment benefits or other long-term employee benefits.
Point-of-sale costsCommissions to brokers and dealers, levies by regulatory agencies and commodity exchanges and transfer taxes and duties, excluding transport and other costs necessary to get the assets to the market.
Post-employment benefitsEmployee benefits (other than termination benefits) that are payable after the completion of employment.
Post-employment benefit plansFormal or informal arrangements under which an entity provides post-employment benefits to employees.
Defined contribution benefit plans are where there are no legal or constructive obligations for the employer to pay further contributions if the retirement/provident fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.
Defined benefit plans are post-employment benefit plans other than defined contribution plans.
Presentation currencyThe currency in which the financial statements are presented.
Prior period errorAn omission from or misstatement in the financial statements for one or more prior periods arising from a failure to use, or the misuse of, reliable information that was available when financial statements for those periods were authorised for issue and could reasonably be expected to have been obtained and taken into account in the preparation of those financial statements.
Proportionate consolidationA method where the venturer’s share of each of the assets, liabilities, income and expenses of a jointly controlled entity is combined line by line with similar items in the venturer’s financial statements or reported as separate line items in the venturer’s financial statements.
minimum lease paymentsPayments over the lease term that the lessee is or can be required to make, excluding contingent rent, costs for services and taxes to be paid by and reimbursed to the lessor, together with any amounts guaranteed by the lessee or by a party related to the lessee or in the case of a lessor, any residual value guaranteed to the lessor by the lessee, a party related to the lessee or a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee.
monetary assetAn asset which will be settled in a fixed or determinable amount of money.
monetary liabilityA liability which will be settled in a fixed or determinable amount of money.
net investment in the leaseThe gross investment in the lease discounted at the interest rate implicit in the lease.
onerous contractA contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
operating leaseA lease other than a finance lease.
other comprehensive incomeComprises items of income and expense (including reclassification adjustments) that are not recognised in the income statement and includes the effect of translation of foreign operations, cash flow hedges, available-for-sale financial assets and changes in revaluation reserves.
other shareholdersThese shareholders relate to the Strategic Black Partners and Community Service Groups who have taken up PPC shares at par value. PPC has a call option at the end of eight years to acquire the shares issued to the two groups. Profit attributable to other shareholders is determined in proportion to their shareholding.
owner-occupied propertyProperty held by the owner or by the lessee under a finance lease for use in the production or supply of goods or services or for administrative purposes.
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Pretoria Portland Cement Company Limited136
for the year ended 30 September 2011
Significant influenceSignificant influence is the power to participate in the financial and operating policy decisions of the associate, which is not control or joint control over those policies. Special-purpose vehicleAn entity established to accomplish a narrow and well-defined objective, including the facilitation of the group’s broad-based black economic empowerment transaction.
SubsidiaryAn entity that is controlled by the parent.
Tax baseThe tax base of an asset is the amount that is deductible for taxation purposes if the economic benefits from the asset are taxable, or is the carrying amount of the asset if the economic benefits are not taxable.
The tax base of a liability is the carrying amount of the liability less the amount deductible in respect of that liability in future periods.
The tax base of revenue received in advance is the carrying amount less any amount of the revenue that will not be taxed in future periods.
Temporary differencesThe differences between the carrying amount of an asset or liability and its taxation base.
Transaction costsIncremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability.
Unearned finance incomeThe difference between the gross investment in the lease and the net investment in the lease.
Useful lifeThe period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset.
Value-in-useThe present value of the future cash flows expected to be derived from an asset or cash-generating unit.
Prospective applicationApplying a new accounting policy to transactions, other events and conditions occurring after the date the policy changed, or recognising the effect of the accounting policy change in the current and future periods.
Recoverable amountThe higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use.
Regular way purchase or saleA purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established by regulation or convention in the marketplace concerned.
Related partyParties are considered to be related if one party directly or indirectly has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or is a member of the key management of the entity.
ResearchThe original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
Residual valueThe estimated amount that an entity would currently obtain from the disposal of an asset, after deducting the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life.
Retrospective applicationApplying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.
Retrospective restatementCorrecting the recognition, measurement and disclosure of amounts as if a prior period error had never occurred.
Share-based paymentA transaction in which the entity issues shares or share options to employees in exchange for services rendered.
gLOSSARY OF ACCOUNTINg TERMINOLOgY CONTINUEd
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for the year ended 30 September 2011
Changes in accounting estimates are recognised in profit or loss.
Preparing financial statements in conformity with IFRS requires estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from these estimates. For further information refer to “Judgements made by management” on page 145 of this report.
Recognition of assets and liabilitiesAssets are only recognised if they meet the definition of an asset, it is probable that future economic benefits associated with the asset will flow to the group and the cost or fair value can be measured reliably.
Liabilities are only recognised if they meet the definition of a liability, it is probable that future economic benefits associated with the liability will flow from the group and the cost or fair value can be reliably measured.
Financial instruments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities, as a result of firm commitments, are only recognised when one of the parties has performed under the contract.
Derecognition of assets and liabilitiesFinancial assets are derecognised when the contractual rights to receive cash flows have been transferred or have expired or when substantially all the risks and rewards of ownership have passed.
All other assets are derecognised on disposal or when no future economic benefits are expected from their use or on disposal.
Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or has expired.
Property, plant and equipment Property, plant and equipment represents tangible items and intangible items that are integrated with tangible items that are held-for-use in the production or supply of goods and are expected to be used during more than one period.
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes expenditures on materials, direct labour and an allocated portion of project overheads. Cost also includes the estimated cost of dismantling and removing the assets and site rehabilitation costs to the extent that they relate to the construction of the asset. Gains and losses on qualifying cash flow hedges attributable to that asset are also included in the cost.
BaSiS of PRePaRaTionaccounting frameworkThe financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations of those standards using the historical cost convention except for certain financial instruments that are stated at fair value.
The basis of preparation is consistent with the prior year except where the group has adopted new or revised accounting standards and interpretations of those standards. The following amendments and interpretations, which did not have a material impact on reported results, were adopted in the current year: • Conceptual Framework for Financial Reporting
2010• IFRS 2 (amendment): Share-based Payments (Group
cash-settled share-based payment transactions)• IFRS 3 (amendment): Business Combinations
(Measurement of non-controlling interests, Transition requirements for contigent consideration from a business combination that occurred before the effective date of the revised IFRS, Un-replaced and voluntarily replaced share-based payment awards)
• IAS 27 (amendment): Consolidated and separate financial statements (Transition requirements for amendments made as a result of IAS 27 (as amended in 2008))
• IAS 32 (amendment): Financial Instruments: Presentation (Classification of rights issues)
• IFRIC19 Extinguishing Financial Liabilities with Equity Instruments
• IASB IFRS 2009 Improvements
Underlying conceptsThe financial statements are prepared on the going-concern basis using accrual accounting.
Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard.
Financial assets and financial liabilities are offset and the net amount reported only when a legally enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, then they are applied retrospectively, unless it is impracticable to do so, in which case they are applied prospectively.
Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively.
ACCOUNTINg POLICIES
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Pretoria Portland Cement Company Limited138
for the year ended 30 September 2011
An environmental rehabilitation trust fund was created in South Africa and in accordance with statutory requirements. Annual contributions are made to this fund where applicable.
intangible assetsAn intangible asset is an identifiable non-monetary asset without physical substance, which is not integrated with a tangible asset. It includes patents, trademarks, capitalised development costs and certain costs of purchase and installation of major information systems (including packaged software).
Intangible assets are initially recognised at cost if acquired separately or internally generated or at fair value if acquired as part of a business combination. If assessed as having an indefinite useful life, it is not amortised but tested for impairment annually and impaired if necessary. If assessed as having a finite useful life, it is amortised over its useful life (generally three to seven years) using a straight-line basis and tested for impairment if there is an indication that it may be impaired.
Research costs are recognised in profit or loss when they are incurred.
Development costs are capitalised only when and if they meet the criteria for capitalisation. Otherwise they are recognised in profit or loss.
Patents and trademarks are measured initially at cost and amortised on a straight-line basis over their estimated useful lives.
GoodwillGoodwill represents the future economic benefits arising from assets that are not capable of being individually identified and separately recognised in a business combination.
The excess of the consideration transferred (the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree) over the fair value of the identifiable net assets acquired is recorded as goodwill.
Goodwill arising on the acquisition of a business, subsidiary, associate or joint venture is recognised as an asset and is stated at cost less impairment losses. Goodwill is not amortised. Goodwill of associates is included in the carrying amount of the associate.
On acquisition date, fair values are attributed to the identifiable assets, liabilities and contingent liabilities. A non-controlling interest at acquisition date is determined as the non-controlling shareholders’
Owner-occupied properties in the course of construction are carried at cost, less any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying value.
Depreciation is charged so as to write off the depreciable amount of the assets, other than land, over their estimated useful lives, using a method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Where significant parts of an item have different useful lives to the item itself, these parts are depreciated over their estimated useful lives. The methods of depreciation and useful lives are reviewed annually. The following methods and rates were used during the year:
Buildings Straight line 30 years
Plant Straight line 5 to 30 years
Vehicles Straight line 5 to 10 years
Furniture and equipment Straight line 3 to 6 years
Mineral rights Straight line Estimated life of reserve
Assets held under finance leases are depreciated over their expected useful lives or the term of the relevant lease, where shorter.
The gain or loss arising on the disposal or scrapping of property, plant and equipment is recognised in profit or loss.
factory decommissioning and quarry rehabilitationGroup companies are generally required to restore mine and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities and consistent with the group’s environmental policies.
The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided and capitalised at the beginning of each project. The capitalised cost is depreciated over the expected life of the asset, and the increase in the net present value of the provision for the expected cost is included with finance costs (unwinding of discount).
Changes in the measurement of an existing decommissioning or restoration liability that result from changes in the estimated timing or amount of expected costs, or a change in the discount rate, are accounted for in the respective asset or recognised in profit or loss as appropriate.
ACCOUNTINg POLICIES CONTINUEd
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is increased to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in profit or loss.
Goodwill and intangible assets with indefinite useful lives and cash-generating units to which these assets have been allocated are tested for impairment annually even if there is no indication of impairment. Impaired goodwill and intangible assets with indefinite lives are only reversed when the associated business is sold.
At each reporting date the carrying amount of financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment. For financial assets carried at amortised cost, the amount of impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets except for trade receivables, where the carrying amount is reduced through the use of an allowance account.
Subsidiaries, associates and joint venturesInvestments in subsidiaries, associates and joint ventures in the separate financial statements presented by the company, are recognised at cost less any accumulated impairment losses.
interests in subsidiariesThe consolidated financial statements incorporate the assets, liabilities, income, expenses and cash flows of the company and its subsidiaries as if they were a single economic entity.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal.
Inter-company transactions and balances between group entities are eliminated on consolidation.
On acquisition of a subsidiary, the non-controlling interest is measured at the proportion of the pre-acquisition fair values of the identifiable assets and liabilities acquired.
The results of special-purpose vehicles, that in substance are controlled by the group, are consolidated.
proportionate share of the fair value of the net identifiable assets of the entity acquired.
When an acquisition is achieved in stages (step acquisition), the identifiable assets and liabilities are recognised at their full fair value when control is obtained, and any adjustment to fair values related to these assets and liabilities previously held as an equity interest is recognised in profit or loss.
When there is a change in the interest in a subsidiary after control is obtained, that does not result in a loss in control, the difference between the fair value of the consideration transferred and the amount by which the non-controlling interest is adjusted is recognised directly in the statement of changes in equity.
If, on a business combination, the fair value of the group’s interest in the identifiable assets, liabilities and contingent liabilities exceeds the cost of acquisition, this excess is recognised in profit or loss immediately.
On disposal of a subsidiary, associate, joint venture or business unit to which goodwill was allocated on acquisition, the amount attributable to such goodwill is included in the determination of the profit or loss on disposal.
impairment of assetsAt each reporting date the carrying amount of the tangible and intangible assets are assessed to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value-in-use is estimated taking into account future cash flows, forecast market conditions and the expected lives of the assets.
If the recoverable amount of an asset, or cash-generating unit, is estimated to be less than the carrying amount, its carrying amount is reduced to the higher of the recoverable amount or zero. Impairment losses are recognised in profit or loss. The loss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the cash-generating unit. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life.
If an impairment loss subsequently reverses, the carrying amount of the asset, or cash-generating unit,
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Pretoria Portland Cement Company Limited140
for the year ended 30 September 2011
Loans and receivablesTrade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables and are measured at amortised cost using the effective interest rate method less provision for doubtful debts. Write-downs of these assets are expensed in profit or loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Available-for-sale financial assetsInvestments in unlisted shares are classified as available-for-sale financial assets. These investments are carried at fair value with any gains or losses being recognised directly in other comprehensive income. Fair value, for this purpose, is a value arrived at by using appropriate valuation models. An investment intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, is classified as non-current available-for-sale financial assets. Where the investment is disposed of or determined to be impaired, the cumulative gain or loss previously recognised in other reserves is included in profit or loss for the period.
financial liabilitiesFinancial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost.
Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss are measured at fair value with any resultant gain or loss recognised in profit or loss.
Financial liabilities measured at amortised costFinancial liabilities measured at amortised cost are initially measured at fair value, net of transaction costs. These financial liabilities are subsequently measured at amortised cost using the effective interest rate method.
Derivative financial instrumentsDerivatives that are assets are measured at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges.
Derivatives that are liabilities are measured at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges.
To the extent that a derivative instrument has a maturity period of longer than one year, the fair value of these instruments will be reflected as a non-current asset or liability.
Special-purpose vehicles The financial results of special-purpose vehicles (SPVs) are consolidated into the group’s results from the date that the group controls the SPV until the date that control ceases. Control is based on an evaluation of the substance of the SPV’s relationship with the group and the SPV’s risks and rewards.
interests in associatesThe consolidated financial statements incorporate the assets, liabilities, income and expenses of associates using the equity method of accounting, applying the group’s accounting policies, from the acquisition date to the disposal date, except when the investment is classified as held-for-sale, in which case it is accounted for as non-current assets held-for-sale.
The investment is carried at cost and adjusted for post- acquisition changes in the group’s share of net assets of the associate, less any impairment in value in the individual investment. The long-term debt interests, which in substance form part of the group’s net investment, are also included in total carrying value of investment in associate. Losses of an associate in excess of the group’s interest in that associate are not recognised, unless the group has incurred legal or constructive obligation or made payments on behalf of the associate.
Where a group entity transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group’s interest in the relevant associate.
financial assetsFinancial assets are initially measured at fair value plus transaction costs. However, transaction costs in respect of financial assets classified at “fair value through profit or loss” are expensed.
Financial assets are classified into the following categories:
Held-to-maturity investmentsInvestments classified as held-to-maturity financial assets are measured at amortised cost using the effective interest rate method less any impairment losses recognised to reflect irrecoverable amounts.
Financial assets at fair value through profit or lossFinancial assets are classified as fair value through profit or loss where the financial asset is either held-for-trading or is designated as at fair value through profit or loss. Financial assets at fair value through profit or loss are carried at fair value with any gains or losses being recognised in profit or loss. Fair value, for this purpose, is market value if listed or a value arrived at by using appropriate valuation models if unlisted.
ACCOUNTINg POLICIES CONTINUEd
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interest rates applicable to the lease on the remaining balance of the obligations.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease or another basis if more representative of the time pattern of the user’s benefit.
In the capacity of a lessorRental income from operating leases is recognised on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Share-based paymentsCash-settled The cost of cash-settled transactions is measured initially at fair value at the grant date using the binomial option pricing model, taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the vesting period with a corresponding charge to liabilities. The liability is remeasured at each reporting period, up to and including the settlement date, with changes in fair value recognised in profit or loss over the vesting period.
Equity-settledThe fair value of the share options is recognised and charged against profit or loss together with a corresponding movement in equity. Fair value adjustments are calculated over the vesting period, ending on the date on which the performance conditions are fulfilled and the employees become fully entitled to exercise their options. The cumulative expense recognised for share options granted at each reporting date, until the vesting date, reflects the extent to which the vesting period has expired and the number of share option grants that will ultimately vest, on management’s best estimate, at that date. This is based on the best available estimate of the number of share options that will ultimately vest.
Fair value is measured using the binomial option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations such as volatility, dividend yield and the vesting period.
Broad-based black economic empowerment (BBBee)To the extent that an entity grants shares or share options in a BBBEE transaction and the fair value of the cash and other assets received is less than the fair
Hedge accounting If a fair value hedge meets the conditions for hedge accounting, any gain or loss on the hedged item attributable to the hedged risk is included in the carrying amount of the hedged item and recognised in profit or loss.
If a cash flow hedge meets the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly as other comprehensive income and the ineffective portion is recognised in profit or loss.
If an effective hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses recognised in equity are transferred to income in the same period in which the asset or liability affects profit or loss.
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated gains or losses recognised as other comprehensive income are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.
Hedge accounting is discontinued on a prospective basis when:• the hedge no longer meets the hedge accounting
criteria (including when it becomes ineffective); • the hedge instrument is sold, terminated or
exercised; • for cash flow hedges, the forecast transaction is no
longer expected to occur; or • the hedge designation is revoked.
Any cumulative gain or loss on the hedging instrument for a forecast transaction is retained in other comprehensive income until the transaction occurs, unless the transaction is no longer expected to occur, in which case it is transferred to profit or loss for the period.
LeasingClassificationLeases are classified as finance leases or operating leases at the inception of the lease.
In the capacity of a lesseeFinance leases are recognised as assets and liabilities at the lower of the fair value of the asset and the present value of the minimum lease payments at the date of acquisition. Finance costs represent the difference between the total leasing commitments and the fair value of the assets acquired. Finance costs are charged to profit or loss over the term of the lease and at
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Pretoria Portland Cement Company Limited142
for the year ended 30 September 2011
sale. Proportionate consolidation ceases from the date a joint venture is classified as held-for-sale.
Immediately prior to being classified as held-for-sale, the carrying amount of the item is measured in accordance with the applicable accounting standard. After classification as held-for-sale, it is measured at the lower of the carrying amount and fair value less costs to sell. An impairment loss is recognised in profit or loss for any initial and subsequent write-down of the asset and disposal group to fair value less costs to sell. A gain for any subsequent increase in fair value less costs to sell is recognised in profit or loss to the extent that it is not in excess of the cumulative impairment loss previously recognised.
Non-current assets or disposal groups that are classified as held-for-sale are not depreciated.
cash and cash equivalentsCash and cash equivalents are measured at fair value, with changes in fair value being included in profit or loss.
Deferred taxation liabilityA deferred taxation liability represents the amount of income taxes payable in future periods in respect of taxable temporary differences.
A deferred taxation liability is recognised for taxable temporary differences, unless specifically exempt, at the taxation rates that have been enacted or substantially enacted at the reporting date.
Deferred taxation arising on investments in subsidiaries, associates and joint ventures is recognised except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Defined contribution retirement plansPayments to defined contribution retirement plans are charged to profit or loss as incurred.
Defined benefit post-employment healthcare benefitsThe cost of providing defined healthcare benefits is determined using the projected unit credit method. Valuations are conducted every three years and interim adjustments to those valuations are made annually.
ProvisionsProvisions represent liabilities of uncertain timing or amount.
Provisions are recognised when the group has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the
value of the shares or share options granted, such difference is charged to the profit or loss in the period in which the transaction becomes effective. Where the BBBEE transaction includes service conditions, the difference is charged to the profit or loss over the period of these service conditions.
A restriction on the transfer of the shares or share options is taken into account in determining the fair value of the share or share option.
Deferred taxation assetsA deferred taxation asset represents the amount of income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused taxation losses and the carry forward of unused taxation credits, including unused credits for secondary taxation on companies.
A deferred taxation asset is only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised and is accounted for using the balance sheet liability method. It is measured at the taxation rates that have been enacted or substantially enacted at reporting date.
inventoriesInventories are assets held-for-sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process.
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, net of discount and rebates received. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion, distribution and selling.
The weighted average method is used to arrive at the cost of items that are interchangeable.
non-current assets held-for-saleNon-current assets held-for-sale or disposal groups are classified as held-for-sale if the carrying amount will be recovered principally through sale rather than through continuing use. This condition is regarded as being met only when the sale is highly probable and the asset held-for-sale or disposal groups are available for immediate sale in their present condition.
Where a disposal group held-for-sale will result in the loss of control or joint control of a subsidiary or joint venture, all the assets and liabilities of that subsidiary or joint venture are classified as held-for-sale, regardless of whether a non-controlling interest in the former subsidiary or joint venture is to be retained after the
ACCOUNTINg POLICIES CONTINUEd
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inventories or reversals of previous write-downs or losses are recognised in cost of sales in the period the write-down, loss or reversal occurs.
employee benefit costsThe cost of providing employee benefits is accounted for in the period in which the benefits are earned by employees.
The cost of short-term employee benefits is recognised in the period in which the service is rendered and is not discounted. The expected cost of short-term accumulating compensated absences is recognised as an expense as the employees render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur.
The expected cost of profit-sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.
Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are expensed in the period in which they are incurred.
investment incomeInterest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable.
Dividend income from investments is recognised when the shareholders’ right to receive payment has been established.
exceptional itemsExceptional items cover those amounts, which are not considered to be of an operating nature, and generally include profit and loss on disposal of property, investments and businesses, other non-current assets, and impairments of capital items and goodwill.
TaxationThe charge for current taxation is based on the results for the year as adjusted for income that is exempt and expenses that are not deductible using taxation rates that are applicable to the taxable income.
Secondary taxation on companies (STC) is recognised as part of the current taxation charge when the related dividend is declared. A deferred taxation asset is recognised if dividends received in the current period can be offset against future dividend payments to the extent of the reduction of future STC.
obligation, and a reliable estimate can be made for the amount of the obligation. Provisions for onerous contracts are established after taking into consideration the recognition of impairment losses that have occurred on assets dedicated to those specific contracts.
Provisions are measured at the expenditure required to settle the present obligation. Where the effect of discounting is material, provisions are measured at their present value using a pre-taxation discount rate that reflects the current market assessment of the time value of money and the risks for which future cash flow estimates have not been adjusted.
Treasury sharesShares in the company held by group subsidiary companies and by SPVs that require consolidation are classified as treasury shares. The consideration paid, inclusive of directly attributable costs, is disclosed as a deduction against equity. The issued and weighted average number of shares is reduced by the treasury shares, weighted for the period they have been held by the subsidiary company or SPVs, for the purpose of determining earnings and headline earnings per share calculations. Dividends received on treasury shares are eliminated on consolidation.
DividendsDividends to equity holders are only recognised as a liability when declared and are included in the statement of changes in equity. Secondary taxation on companies in respect of such dividends is recognised as a liability when the dividends are recognised as a liability and are included in the taxation charge in profit or loss.
RevenueRevenue represents the gross inflow of economic benefits during the period arising in the course of the ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from equity participants.
Revenue is measured at the amount received or receivable net of cash and settlement discounts, rebates, VAT and other indirect taxes.
Revenue from the sale of goods is recognised when:• the significant risks and rewards of ownership have
been transferred;• delivery has been made and title has passed;• the amount of the revenue and the related costs can
be reliably measured; and• it is probable that the customer will pay for the
goods.
cost of sales When inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable value and all losses of
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Pretoria Portland Cement Company Limited144
for the year ended 30 September 2011
Furthermore, where there is a subdivision of ordinary shares during the current period, the comparatives figures are restated.
operating segment informationReporting segmentsThe group has four main reporting segments that comprise the structure used by the group executive (GE) to make key operating decisions and assess performance. The group’s reportable segments are operating segments that are differentiated by the activities that each undertakes and the products they manufacture and market.
The group evaluates the performance of its reportable segments based on EBITDA and operating profit. The group accounts for inter-segment sales and transfers as if the sales and transfers were entered into under the same terms and conditions as would have been entered into in a market-related transaction.
The financial information of the group’s reportable segments is reported to the GE for purposes of making decisions about allocating resources to the segment and assessing its performance.
The group’s reporting segments comprise the following segments:
cementThe cement division’s activities include the mining of limestone for the manufacture and supply of cementitious products.
LimeThe lime division’s activities include the mining of limestone, and the manufacture and supply of metallurgical grade limestone, burnt lime and burnt dolomite.
aggregatesThe aggregate division’s activities include the mining and supply of aggregates and metallurgical grade dolomitic limestone.
otherOther comprises the various consolidated trusts and trust funding SPVs relating to the broad-based black economic empowerment transaction.
Deferred taxation is recognised in profit or loss, except when it relates to items credited or charged directly to equity, in which case it is also recognised in equity, for all temporary differences, unless specifically exempt at the taxation rates that have been enacted or substantially enacted at the reporting date.
Discontinued operationsThe results of discontinued operations are presented separately in the profit or loss and the assets associated with these operations are included with non-current assets held-for-sale in the statement of financial position.
foreign currenciesThe functional currency of each entity within the group is determined based on the currency of the primary economic environment in which that entity operates. Transactions in currencies other than the entity’s functional currency, are recognised at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates ruling at the reporting date.
Gains and losses arising on exchange differences are recognised in profit or loss.
The financial statements of entities within the group, whose functional currencies are different to the group’s presentation currency, are translated as follows:• Assets, including goodwill, and liabilities at exchange
rates ruling on the reporting date.• Income, expense items and cash flows at the
average exchange rates for the period. • Equity items at the exchange rate ruling when they
arose.
Resulting exchange differences are classified as a foreign currency translation reserve and recognised directly in equity. On disposal of such a business unit, this reserve is recognised in profit or loss before they are translated into the group’s presentation currency.
events after reporting dateRecognised amounts in the financial statements are adjusted to reflect events arising after the reporting date that provide evidence of conditions that existed at the reporting date. Events that are indicative of conditions that arose after the reporting date are dealt with by way of a note.
comparative figuresComparative figures are restated in the event of a change in accounting policy or prior period errors.
ACCOUNTINg POLICIES CONTINUEd
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for the year ended 30 September 2011
Preparing financial statements in conformity with International Financial Reporting Standards requires estimates and assumptions that affect reported amounts and related disclosures, and therefore actual results could differ from these estimates.
Judgements made by management in applying the accounting policies, other than those dealt with previously, that could have a significant effect on the amounts recognised in the financial statements are:
aSSeT LiVeS anD ReSiDUaL VaLUeSProperty, plant and equipment (PPE) are depreciated over their useful lives. The actual lives of the assets are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product lifecycles and maintenance programmes are taken into account. The residual value of all PPE of the group is regarded to be zero, as PPE items are intended to be used for their entire useful life and at that stage the residual value is deemed to be of minimal value.
imPaiRmenT of aSSeTSGoodwill is considered for impairment annually. PPE and intangible assets are considered for impairment if there is a reason to believe that impairment may be necessary. Factors taken into consideration in reaching such a decision include the economic viability of the asset itself and where it is a component of a larger economic unit, the viability of that unit itself.
The future cash flows expected to be generated by the assets are projected, taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows, determined using an appropriate discount rate, is compared to the current net asset value and, if lower, the assets are impaired to the present value.
conSoLiDaTion of SPeciaL-PURPoSe VeHicLeSSpecial-purpose vehicles established in the broad-based black economic empowerment transaction have been consolidated in the group results in terms of IAS 27 (Consolidated Financial Statements) and SIC Interpretation 12 (Consolidation – Special-purpose Entities (SPVs)). As a result, the PPC shares owned by the SPVs have been treated as treasury shares and the corresponding borrowings have been included in group borrowings on consolidation (refer notes 10 and 12).
The Porthold Trust (Private) Limited has been consolidated in accordance with the requirements of SIC Interpretation 12. This company holds 1 284 556 PPC shares listed on the Zimbabwe Stock Exchange, for the sole benefit of existing PPC Zimbabwe employees. These shares have been carried as treasury shares on consolidation.
VaLUaTion of financiaL inSTRUmenTSThe valuation of derivative financial instruments is based on the market situation at the reporting date. The value of derivative instruments fluctuates on a daily basis and the actual amounts realised may differ materially from their value at the reporting date.
PRoViSion foR DoUBTfUL DeBTSThe provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due in accordance with the original terms of credit given and includes an assessment of recoverability based on historical trend analysis and events that exist at the reporting date.
DefeRReD TaXaTion aSSeTSDeferred taxation assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Future tax profits are estimated based on business plans which include estimates and assumptions regarding economic growth, interest, inflation and taxation rates and competitive forces. Deferred taxation assets are also recognised on STC credits to the extent it is probable that future dividends will utilise these credits.
faiR VaLUe of SHaRe-BaSeD PaymenTSFair value used in calculating the amount to be expensed as a share-based payment is subject to a level of uncertainty. The group is required to calculate the fair value of the cash-settled instruments granted to employees in terms of the share option scheme implemented, and the share-based payment charge relating to the broad-based black economic empowerment transaction. These fair values are calculated by applying a valuation model which is in itself judgemental and takes into account certain inherently uncertain assumptions (refer note 35 for details on the share option scheme).
facToRy DecommiSSioninG anD ReHaBiLiTaTion oBLiGaTionSEstimating the future costs of these obligations is complex as most of the obligations will be fulfilled in the future. Furthermore, the resulting provisions are influenced by changing technologies, political, environmental, safety, business and statutory considerations.
PoST-emPLoymenT HeaLTHcaRe BenefiT VaLUaTionSActuarial valuations of employee benefit obligations under the now closed defined healthcare benefit plans are based on assumptions which include employee turnover, mortality rates, inflation rates, discount rates, medical inflation, the expected long-term return on plan assets and the rate of compensation increases.
PPc ZimBaBWe – TaXaTionThe taxation bases of PPC Zimbabwe are still tentative following the 2009 change of functional currencies from Zimbabwe dollars to US dollars. No established basis exists for the determination of allowances previously granted and as a result no deferred taxation asset has been raised.
SoURceS of eSTimaTion UnceRTainTyThere are no significant assumptions made concerning the future or other sources of estimation uncertainty that have been identified as giving rise to a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
JUdgEMENTS MAdE BY MANAgEMENT
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Pretoria Portland Cement Company Limited146
Notes2011
Rm2010
Rm2009
Rm
aSSeTS
non-current assets 4 585 4 449 4 195
Property, plant and equipment 1 4 287 4 175 3 941
Intangible assets 2 94 78 53
Non-current financial assets 4 106 100 107
Long-term receivable 5 9 20 28
Investments in associates 6 89 76 66
current assets 1 834 1 663 1 624
Inventories 7 709 596 557
Trade and other receivables 8 901 827 819
Cash and cash equivalents 9 224 240 248
Total assets 6 419 6 112 5 819
eQUiTy anD LiaBiLiTieS
capital and reserves
Share capital and premium 10 (1 091) (1 091) (1 088)
Other reserves 125 32 150
Retained profit 1 921 1 917 1 853
Total equity 955 858 915
non-current liabilities 3 837 3 591 3 366
Deferred taxation liabilities 11 740 568 469
Long-term borrowings 12 2 699 2 645 2 628
Provisions 13 297 270 250
Other non-current liabilities 14 101 108 19
current liabilities 1 627 1 663 1 538
Short-term borrowings 15 811 876 764
Taxation payable 10 76 96
Trade and other payables 16 806 711 678
Total equity and liabilities 6 419 6 112 5 819
at 30 September 2011
CONSOLIdATEd STATEMENT OF FINANCIAL POSITION
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CONSOLIdATEd INCOME STATEMENT
Notes2011
Rm2010
Rm2009
Rm
Revenue 6 826 6 807 6 783
Cost of sales 4 500 4 067 3 897
Gross profit 2 326 2 740 2 886
Administrative and other operating expenditure 616 625 468
operating profit before items listed below 1 710 2 115 2 418
BBBEE IFRS 2 charges 11 10 490
Take-on gain arising from consolidation of PPC Zimbabwe – – 213
operating profit 17 1 699 2 105 2 141
Fair value gains/(losses) on financial instruments 18 9 (20) (6)
Finance costs 19 362 366 357
Investment income 20 28 39 65
Profit before exceptional items 1 374 1 758 1 843
Exceptional items 21 (4) (32) –
Share of associates’ retained profit 6 15 8 7
Profit before taxation 1 385 1 734 1 850
Taxation 22 520 622 722
net profit 865 1 112 1 128
attributable to:
Ordinary shareholders 785 1 010 1 024
Other shareholders^ 80 102 104
865 1 112 1 128
earnings per share (cents) 23.3
Basic 164,4 211,1 210,1
Diluted 163,3 209,8 209,1^ For details on other shareholders refer note 10.
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Pretoria Portland Cement Company Limited148
for the year ended 30 September 2011
CONSOLIdATEd STATEMENT OF COMPREhENSIVE INCOME
Unrealised surplus onreclassifi-
cationof plant
Rm
foreigncurrency
translationRm
available-for-sale
financialassets
Rm
Hedgingreserves
Rm
Retainedprofit
Rm
Totalcompre-hensiveincome
Rm
2009
net profit for the year – – – – 1 128 1 128
other comprehensive loss, net of taxation (3) (14) 2 (6) 3 (18)
Exchange rate differences on translation of foreign operations – (14) – – – (14)
Revaluation of investments – – 2 – – 2
Cash flow hedge recognised directly through equity – – – (7) – (7)
Revaluation of investment in non-consolidated subsidiary (refer note 3) – – 213 – – 213
Take-on gain arising from consolidation of PPC Zimbabwe – – (213) – – (213)
Deferred taxation on hedging movements – 1 – 1
Transfer to retained profit (3) – – – 3 –
Total comprehensive income (3) (14) 2 (6) 1 131 1 110
2010
net profit for the year – – – – 1 112 1 112
other comprehensive loss, net of taxation (4) (48) (10) (56) 4 (114)
Exchange rate differences on translation of foreign operations – (48) 1 – – (47)
Revaluation of investments – (12) – (12)
Deferred taxation on revaluation – – 1 – – 1
Cash flow hedge recognised directly through equity – – – (56) – (56)
Transfer to retained profit (4) – – – 4
Total comprehensive income (4) (48) (10) (56) 1 116 998
2011
net profit for the year – – – – 865 865
other comprehensive income, net of taxation (4) 95 3 (1) 4 97
Exchange rate differences on translation of foreign operations – 95 – – – 95
Revaluation of investments – – 4 – – 4
Deferred taxation on revaluation – – (1) – – (1)
Cash flow hedge recognised directly through equity – – – (1) – (1)
Transfer to retained profit (4) – – – 4 –
Total comprehensive income (4) 95 3 (1) 869 962
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Integrated annual report 2011149
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for the year ended 30 September 2011
CONSOLIdATEd STATEMENT OF ChANgES IN EqUITY
other reserves
Sharecapital
Rm
Sharepremium
Rm
Un-realisedsurplus
onreclassifi-
cationof plant
Rm
foreigncurrency
trans-lation
Rm
available-for-sale
financialassets
Rm
Hedgingreserves
Rm
equitycompen-
sationreserves
Rm
Retainedprofit
Rm
Total equity
attribut-able toequity
holders of
parentRm
Balance at 1 october 2008 52 63 20 (5) 32 6 4 1 541 1 713
movement for the year 1 (1 204) (3) (14) 2 (6) 114 312 (798)
BBBEE IFRS 2 charges – – – – – – 490 – 490
Treasury shares held by the BBBEE trusts and funding SPVs (4) (1 186) – – – – – – (1 190)
Treasury shares held by Porthold Trust (Private) Limited – (18) – – – – – – (18)
Shares issued to the BBBEE CSG and SBP funding SPVs 5 – – – – – – – 5
Transfer to retained profit – – – – – – (376) 376 –
Total comprehensive income – – (3) (14) 2 (6) – 1 131 1 110
Dividends declared by funding SPVs to non-consolidated trusts – – – – – – – (7) (7)
Dividends declared to PPC shareholders – – – – – – – (1 188) (1 188)
Balance at 30 September 2009 53 (1 141) 17 (19) 34 – 118 1 853 915
movement for the year – (3) (4) (48) (10) (56) – 64 (57)
BBBEE IFRS 2 charges – – – – – – 10 – 10
Treasury shares held by Porthold Trust (Private) Limited – (3) – – – – – – (3)
Transfer to retained profit – – – – – – (10) 10 –
Total comprehensive income – – (4) (48) (10) (56) – 1 116 998
Dividends declared by funding SPVs to non-consolidated trusts – – – – – – – (6) (6)
Dividends declared to PPC shareholders – – – – – – – (1 056) (1 056)
Balance at 30 September 2010 53 (1 144) 13 (67) 24 (56) 118 1 917 858
movement for the year – – (4) 95 3 (1) – 4 97
BBBEE IFRS 2 charges – – – – – – 11 – 11
Transfer to retained profit – – – – – – (11) 11 –
Total comprehensive income – – (4) 95 3 (1) – 869 962
Dividends declared by funding SPVs to non-consolidated trusts – – – – – – – (5) (5)
Dividends declared to PPC shareholders – – – – – – – (871) (871)
Balance at 30 September 2011 53 (1 144) 9 28 27 (57) 118 1 921 955
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Pretoria Portland Cement Company Limited150
for the year ended 30 September 2011
CONSOLIdATEd STATEMENT OF CASh FLOwS
Notes2011
Rm2010
Rm2009
Rm
caSH fLoWS fRom oPeRaTinG acTiViTieS
Profit before exceptional items 1 374 1 758 1 843
adjustments for
Depreciation 417 359 309
Amortisation of intangible assets 19 9 6
Profit on disposal of plant and equipment (1) (3) (4)
BBBEE IFRS 2 charges 11 10 490
Take-on gain arising from consolidation of PPC Zimbabwe 29 – – (213)
Dividends received (8) (7) (9)
Interest received (20) (32) (56)
Finance costs 362 366 357
Loss on derivatives (cash-settled share-based payment hedge) 1 10 4
Other non-cash flow items (28) 16 8
operating cash flows before movements in working capital 2 127 2 486 2 735
Increase in inventories (79) (69) (107)
Increase in trade and other receivables (74) (8) (31)
Increase in trade and other payables and provisions 128 33 5
cash generated from operations 2 102 2 442 2 602
Finance costs paid 26 (254) (261) (297)
Dividends received from investments and associate 8 7 12
Interest received 20 32 56
Taxation paid 27 (441) (531) (645)
cash available from operations 1 435 1 689 1 728
Dividends paid 28 (876) (1 062) (1 195)
net cash inflow from operating activities 559 627 533
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Integrated annual report 2011151
Fina
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Notes2011
Rm2010
Rm2009
Rm
caSH fLoWS fRom inVeSTinG acTiViTieS
Acquisition of property, plant and equipment 30 (483) (613) (883)
To enhance existing operations (391) (382) (341)
To expand operations (92) (231) (542)
Acquisition of intangible assets (34) (45) (38)
Net proceeds received on disposal of property, plant and equipment 4 8 10
Movements in investments and loans 31 (2) (18) (118)
Acquisition of treasury shares held by consolidated subsidiary company – (3) –
Treasury shares held by the BBBEE trusts and funding SPVs – – (1 190)
Receipt of instalment on long-term loan 31 11 8 11
net cash outflow from investing activities (504) (663) (2 208)
net cash inflow/(outflow) before financing activities 55 (36) (1 675)
caSH fLoWS fRom financinG acTiViTieS
Issue of shares – – 5
Long-term borrowings (repaid)/raised (14) (14) 1 645
BBBEE funding transaction 13 (70) 868
Net short-term borrowings (repaid)/raised (70) 112 (862)
net cash (outflow)/inflow from financing activities (71) 28 1 656
net decrease in cash and cash equivalents (16) (8) (19)
cash and cash equivalents at beginning of the year 240 248 224
Cash acquired on consolidation of PPC Zimbabwe 29 – – 43
cash and cash equivalents at end of the year 224 240 248
cash earnings per share (cents) 23.6 272,3 320,6 328,6
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Pretoria Portland Cement Company Limited152
for the year ended 30 September 2011
SEgMENTAL INFORMATION
The group discloses its operating segments according to the business units which are managed by the group executive. These comprise cement, lime, aggregates and other.
Group cement Lime aggregates other^
2011Rm
2010Rm
2009*Rm
2011Rm
2010Rm
2009*Rm
2011Rm
2010Rm
2009Rm
2011Rm
2010Rm
2009Rm
2011Rm
2010Rm
2009Rm
Revenue
South Africa 5 664 5 611 6 253 4 692 4 677 5 483 772 711 544 200 223 226 – – –
Other Africa 1 193 1 202 535 1 122 1 129 465 – – – 71 73 70 – – –
6 857 6 813 6 788 5 814 5 806 5 948 772 711 544 271 296 296 – – –
Inter-segment revenue (31) (6) (5)
Total revenue 6 826 6 807 6 783
operating profit before items listed below 1 710 2 115 2 418 1 551 1 902 2 263 122 159 91 43 61 72 (6) (7) (8)
BBBEE IFRS 2 charges (11) (10) (490) (10) (9) (475) (1) (1) (13) – – (2) – – –
Take-on gain arising from consolidation of PPC Zimbabwe – – 213 – – 213 – – – – – – – – –
operating profit 1 699 2 105 2 141 1 541 1 893 2 001 121 158 78 43 61 70 (6) (7) (8)
Fair value gains/(losses) on financial instruments 9 (20) (6) 9 (20) (1) – – – – – – – – (5)
Finance costs 362 366 357 241 250 256 3 3 7 1 1 3 117 112 91
Investment income 28 39 65 24 35 53 2 1 3 2 3 7 – – 2
Profit before exceptional items 1 374 1 758 1 843 1 333 1 658 1 797 120 156 74 44 63 74 (123) (119) (102)
Exceptional items (4) (32) – (4) (32) – – – – – – – – – –
Share of associates’ retained profit 15 8 7 15 8 7 – – – – – – – – –
Profit before taxation 1 385 1 734 1 850 1 344 1 634 1 804 120 156 74 44 63 74 (123) (119) (102)
Taxation 520 622 722 470 556 679 40 51 24 10 15 18 – – 1
net profit 865 1 112 1 128 874 1 078 1 125 80 105 50 34 48 56 (123) (119) (103)
Depreciation and amortisation 436 368 315 391 325 273 32 30 30 13 13 12 – – –
EBITDA~ 2 146 2 483 2 733 1 942 2 226 2 536 154 190 121 56 74 84 (6) (7) (8)
Operating margin~ (%) 25,1 31,1 35,6 26,7 32,8 38,0 15,8 22,4 16,7 15,9 20,6 24,3 – – –
EBITDA margin (%) 31,4 36,5 40,3 33,4 38,3 42,6 19,9 26,7 22,3 20,7 24,9 28,4 – – –
assets
Total assets 6 419 6 112 5 819 5 768 5 450 5 227 440 452 392 210 208 196 1 2 4
Non-current assets 4 585 4 449 4 195 4 185 4 058 3 820 275 265 261 125 126 114 – – –
Current assets 1 834 1 663 1 624 1 583 1 392 1 407 165 187 131 85 82 82 1 2 4
Additions to property, plant and equipment (refer note 1) 485 626 937 431 570 877 42 31 42 12 25 18 – – –
Capital commitments (refer note 32) 639 493 439 636 475 423 3 3 3 – 15 13 – – –
Liabilities
Total liabilities 5 464 5 254 4 904 3 958 3 771 3 573 140 171 145 87 100 78 1 279 1 212 1 108
Non-current liabilities 3 837 3 591 3 366 2 475 2 327 2 198 88 86 82 17 17 16 1 257 1 161 1 070
Current liabilities 1 627 1 663 1 538 1 483 1 444 1 375 52 85 63 70 83 62 22 51 38
^ “Other” comprises BBBEE trusts and trust funding SPVs.* Includes PPC Zimbabwe with effect from 30 September 2009 (refer note 29).~ Excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
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Integrated annual report 2011153
Fina
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The group discloses its operating segments according to the business units which are managed by the group executive. These comprise cement, lime, aggregates and other.
Group cement Lime aggregates other^
2011Rm
2010Rm
2009*Rm
2011Rm
2010Rm
2009*Rm
2011Rm
2010Rm
2009Rm
2011Rm
2010Rm
2009Rm
2011Rm
2010Rm
2009Rm
Revenue
South Africa 5 664 5 611 6 253 4 692 4 677 5 483 772 711 544 200 223 226 – – –
Other Africa 1 193 1 202 535 1 122 1 129 465 – – – 71 73 70 – – –
6 857 6 813 6 788 5 814 5 806 5 948 772 711 544 271 296 296 – – –
Inter-segment revenue (31) (6) (5)
Total revenue 6 826 6 807 6 783
operating profit before items listed below 1 710 2 115 2 418 1 551 1 902 2 263 122 159 91 43 61 72 (6) (7) (8)
BBBEE IFRS 2 charges (11) (10) (490) (10) (9) (475) (1) (1) (13) – – (2) – – –
Take-on gain arising from consolidation of PPC Zimbabwe – – 213 – – 213 – – – – – – – – –
operating profit 1 699 2 105 2 141 1 541 1 893 2 001 121 158 78 43 61 70 (6) (7) (8)
Fair value gains/(losses) on financial instruments 9 (20) (6) 9 (20) (1) – – – – – – – – (5)
Finance costs 362 366 357 241 250 256 3 3 7 1 1 3 117 112 91
Investment income 28 39 65 24 35 53 2 1 3 2 3 7 – – 2
Profit before exceptional items 1 374 1 758 1 843 1 333 1 658 1 797 120 156 74 44 63 74 (123) (119) (102)
Exceptional items (4) (32) – (4) (32) – – – – – – – – – –
Share of associates’ retained profit 15 8 7 15 8 7 – – – – – – – – –
Profit before taxation 1 385 1 734 1 850 1 344 1 634 1 804 120 156 74 44 63 74 (123) (119) (102)
Taxation 520 622 722 470 556 679 40 51 24 10 15 18 – – 1
net profit 865 1 112 1 128 874 1 078 1 125 80 105 50 34 48 56 (123) (119) (103)
Depreciation and amortisation 436 368 315 391 325 273 32 30 30 13 13 12 – – –
EBITDA~ 2 146 2 483 2 733 1 942 2 226 2 536 154 190 121 56 74 84 (6) (7) (8)
Operating margin~ (%) 25,1 31,1 35,6 26,7 32,8 38,0 15,8 22,4 16,7 15,9 20,6 24,3 – – –
EBITDA margin (%) 31,4 36,5 40,3 33,4 38,3 42,6 19,9 26,7 22,3 20,7 24,9 28,4 – – –
assets
Total assets 6 419 6 112 5 819 5 768 5 450 5 227 440 452 392 210 208 196 1 2 4
Non-current assets 4 585 4 449 4 195 4 185 4 058 3 820 275 265 261 125 126 114 – – –
Current assets 1 834 1 663 1 624 1 583 1 392 1 407 165 187 131 85 82 82 1 2 4
Additions to property, plant and equipment (refer note 1) 485 626 937 431 570 877 42 31 42 12 25 18 – – –
Capital commitments (refer note 32) 639 493 439 636 475 423 3 3 3 – 15 13 – – –
Liabilities
Total liabilities 5 464 5 254 4 904 3 958 3 771 3 573 140 171 145 87 100 78 1 279 1 212 1 108
Non-current liabilities 3 837 3 591 3 366 2 475 2 327 2 198 88 86 82 17 17 16 1 257 1 161 1 070
Current liabilities 1 627 1 663 1 538 1 483 1 444 1 375 52 85 63 70 83 62 22 51 38
^ “Other” comprises BBBEE trusts and trust funding SPVs.* Includes PPC Zimbabwe with effect from 30 September 2009 (refer note 29).~ Excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe.
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Pretoria Portland Cement Company Limited154
for the year ended 30 September 2011
NOTES TO THE grOuP ANNuAL FINANCIAL STATEMENTS
Freehold and
leasehold land,
buildings and
mineral rights
Rm
Factorydecom-
missioningand quarry
rehabili-tation assets
Rm
Plant, vehicles,furniture
andequipment
Rm
Capitalisedleasedplant
RmTotal
Rm
1. PROPERTY, PLANT AND EQUIPMENT
2011
Cost 740 134 6 106 160 7 140
Accumulated depreciation and impairments 244 26 2 440 143 2 853
Net carrying value 496 108 3 666 17 4 287
2010
Cost 676 121 5 681 160 6 638
Accumulated depreciation and impairments 221 23 2 087 132 2 463
Net carrying value 455 98 3 594 28 4 175
2009
Cost 616 125 5 181 160 6 082
Accumulated depreciation and impairments 202 19 1 799 121 2 141
Net carrying value 414 106 3 382 39 3 941
Plant and equipment with a net carrying value of R17 million (2010: R28 million; 2009: R39 million) are encumbered as disclosed in note 12.
The insured value of the group’s property, plant and equipment at 30 September 2011 amounted to R36 803 million (2010: R35 517 million; 2009: R31 296 million), which is based on the cost of replacement of such assets, except for motor vehicles which are included at estimated retail value.
The cost of land included above amounts to R151 million (2010: R113 million; 2009: R66 million).
Included in freehold land, buildings and mineral rights is land amounting to R25 million (2010: R22 million; 2009: R23 million), which is exposed to the risk of expropriation by the Zimbabwean government without compensation in terms of the Constitution of Zimbabwe (refer note 29).
Certain of the group’s properties are the subject of land claims. The group is in the process of discussion with the Land Claims Commissioner and is awaiting the outcome of the claims referred to the Land Claims Court. The claims are not expected to have a material impact on the group’s operations.
Some of the group’s properties have been illegally invaded and the group is following legal processes to resolve the illegal invasion.
The registers of land and buildings are open for inspection at the registered offices of the company and its subsidiaries.
During 2010, PPC announced a change in scope of its Western Cape expansion project. The scope change reduced the projected initial capital outlay from R4 billion to a revised cost of R3 billion and also extended the phasing of the capital outflows. As a result, a portion of the original design and scoping costs, capitalised under plant and equipment, was impaired to the amount of Rnil (2010: R31 million; 2009: Rnil).
Included in plant, vehicles, furniture and equipment is capital work-in-progress of R285 million (2010: R55 million; 2009: R866 million).
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Integrated annual report 2011155
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Freehold and
leasehold land,
buildings and
mineral rights
Rm
Factorydecom-
missioningand quarry
rehabili-tation assets
Rm
Plant, vehicles,furniture
andequipment
Rm
Capitalisedleasedplant
RmTotal
Rm
1. PROPERTY, PLANT AND EQUIPMENT continued
Movement of property, plant and equipment
2011
Net carrying value at beginning of the year 455 98 3 594 28 4 175
Additions 44 2 439 – 485
To enhance existing operations 12 2 379 – 393
To expand operations 32 – 60 – 92
Disposals (1) – (2) – (3)
Depreciation (22) (3) (381) (11) (417)
Other movements – 4 – – 4
Reallocation to inventory – – (38) – (38)
Translation differences^ 20 7 54 – 81
Net carrying value at end of the year 496 108 3 666 17 4 287
^ Translation differences comprise
Cost 91
Accumulated depreciation (10)
81
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Pretoria Portland Cement Company Limited156
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
Freehold and
leasehold land,
buildings and
mineral rights
Rm
Factorydecom-
missioningand quarry
rehabili-tation assets
Rm
Plant, vehicles,furniture
andequipment
Rm
Capitalisedleasedplant
RmTotal
Rm
1. PROPERTY, PLANT AND EQUIPMENT continuedMovement of property, plant and equipment2010Net carrying value at beginning of the year 414 106 3 382 39 3 941 Additions 74 – 552 – 626
To enhance existing operations 14 – 368 – 382 To expand operations 60 – 184 – 244
Disposals (1) – (3) – (4)Depreciation (21) (4) (323) (11) (359)Impairment loss – – (31) – (31)Reallocation from intangible assets – – 11 – 11 Reallocation from inventory – – 30 – 30
Translation differences^ (11) (4) (24) – (39)
Net carrying value at end of the year 455 98 3 594 28 4 175
^ Translation differences comprise
Cost (42)
Accumulated depreciation 3
(39)
2009Net carrying value at beginning of the year 271 22 2 413 107 2 813Acquired on consolidation of PPC Zimbabwe (refer note 29) 138 49 321 – 508Transfers between categories – – 57 (57) – Additions 24 37 876 – 937
To enhance existing operations 17 37 324 – 378To expand operations 7 – 552 – 559
Disposals – – (6) – (6)Depreciation (18) (2) (278) (11) (309)
Translation differences^ (1) – (1) – (2)
Net carrying value at end of the year 414 106 3 382 39 3 941
^ Translation differences comprise
Cost (4)
Accumulated depreciation 2
(2)
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Integrated annual report 2011157
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Right of use of
mineralasset
Rm
ERPdevelop-
ment and other software
RmTotal
Rm
2. INTANGIBLE ASSETS
2011
Cost 9 156 165
Accumulated amortisation and impairments 4 67 71
Net carrying value 5 89 94
2010
Cost 10 122 132
Accumulated amortisation and impairments 4 50 54
Net carrying value 6 72 78
2009
Cost 10 88 98
Accumulated amortisation and impairments 3 42 45
Net carrying value 7 46 53
Movement of intangible assets
2011
Net carrying value at beginning of the year 6 72 78
Additions – 34 34
Amortisation (1) (18) (19)
Translation differences – 1 1
Net carrying value at end of the year 5 89 94
2010
Net carrying value at beginning of the year 7 46 53
Additions – 45 45
Amortisation (1) (8) (9)
Transfers and other movements – (11) (11)
Net carrying value at end of the year 6 72 78
2009
Net carrying value at beginning of the year 6 13 19
Additions – 38 38
Amortisation (1) (5) (6)
Acquired on consolidation of PPC Zimbabwe (refer note 29) 2 – 2
Net carrying value at end of the year 7 46 53
Included in ERP development and other software is software work-in-progress of R11 million (2010: Rnil; 2009: R36 million) which relates to costs incurred on the group’s SAP ERP system. During the current year Rnil (2010: R11 million; 2009: Rnil) relating to hardware in respect of the ERP development was transferred to property, plant and equipment.
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Pretoria Portland Cement Company Limited158
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
3. INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY
Carrying value at beginning of the year – – 260
Take-on gain arising on consolidation of PPC Zimbabwe – – 213
Consolidation of PPC Zimbabwe – – (473)
Carrying value at end of the year – – –
The results of PPC Zimbabwe were consolidated with effect from 30 September 2009. Prior to 30 September 2009, the PPC board concluded that management did not have the ability to exercise effective control over the business, and the results of PPC Zimbabwe were excluded from the group results (refer note 29).
4. NON-CURRENT FINANCIAL ASSETS
Unlisted investments at fair value 30 25 38
Derivative financial instrument (fair value hedge)^ – 1 11
Unlisted collective investment* 72 70 56
102 96 105
Loans advanced~ 4 4 2
106 100 107
Directors’ valuation of unlisted investments 106 100 107
^Derivative financial instruments Fair value of the premium paid to hedge cash-settled
share-based payments (refer notes 35 and 37).
Marked-to-market adjustments of R1 million (2010: R10 million; 2009: R4 million) have been charged against fair value adjustments in the income statement.
*Unlisted collective investment Comprises an investment by the PPC Environmental Trust
in Old Mutual Capital Builder unit trusts. Put options are also held over the value of the assets in order to protect the capital of the portfolio. At 30 September 2011, the value of the put options were not material.
~Loans advanced These loans have been advanced to fund enterprise
development companies, bear interest at rates between prime less 2% and prime less 5% and are secured by bonds over land and moveable assets. The capital and interest are repayable by 30 April 2018.
5. LONG-TERM RECEIVABLE
Long-term loan 9 20 28
This loan is repayable in annual capital instalments on 30 June each year, with the last payment on 30 April 2013 and bears interest at an effective interest rate of 13,5% per annum.
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Integrated annual report 2011159
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2011Rm
2010Rm
2009Rm
6. INVESTMENTS IN ASSOCIATES
Investments at cost 7 7 7
Share of retained profit: 34 19 11
Retained profit at beginning of the year 19 11 7
Current year movement
Share of current year’s retained profit 15 8 7
Dividends received – – (3)
41 26 18
Loans advanced to associates^ 48 50 48
Balance at beginning of the year 50 48 –
Loans advanced 1 4 48
Interest capitalised 2 2 –
Impairment~ (4) (2) –
Repayment (1) (2) –
89 76 66
Valuation of interest in associatesFair value of unlisted associates, including loans advanced, as determined by the directors 164 168 66
^Loans advanced to associates Of the loans advanced to associates, R20 million bears
interest at the prime lending rate, while the remaining balance is interest free. Where appropriate, bonds are registered over land and movable assets as security. The capital and interest are repayable by 8 August 2017.
~Impairment During 2011, an impairment of R4 million (2010:
R2 million; 2009: Rnil) was recorded on the loans advanced, following continued weaker conditions in the building industry.
Key financial information of associates*
Assets 687 504 460
Liabilities 510 388 367
Net working capital 148 109 90
Revenue 1 046 913 531
Profit after taxation 60 31 28
Cash flow from operations 85 74 21
*The financial information provided represents the full results of the associates.
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Pretoria Portland Cement Company Limited160
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
6. INVESTMENTS IN ASSOCIATES continued
NameNature of business Interest
Financial year end
Carrying value, including loans advanced
Afripack Limited Packaging 25% 30 September 80 63 54
Shaleje Services Trust Admin services 15% 31 May – – –
Metlakgola Construction & Development (Pty) Limited Construction 40% 28 February
1 2 2
Rhulanani Concrete Mixers (Pty) Limited Readymix concrete 40% 28 February 3 6 5
Olegra Oil (Pty) Limited
Used oil collection and filling station 49% 28 February 4 5 5
First Gas (Pty) Limited
LP gas and liquid fuels distribution 40% 28 February 1 – –
89 76 66
7. INVENTORIES
Raw materials 138 145 95
Work-in-progress 101 86 72
Finished goods 128 90 96
Maintenance stores 342 275 294
709 596 557
Amount of inventories recognised as an expense during the year 3 367 2 951 3 165
Inventory obsolescence
Balance at beginning of the year 88 84 38
Raised during the year 30 14 47
Released during the year (15) (9) (1)
Translation differences 6 – –
Balance at end of the year 109 88 84
Inventories to revenue (%) 10,39 8,76 8,21
Inventories to cost of sales (%) 15,76 14,65 14,29
Obsolescence provision to inventories (%) 15,37 14,76 15,08
Inventories are determined on the weighted average formula bases.
During the year an amount of R38 million (2010: (R30 million); 2009: Rnil), for critical spares, was reclassified from/(to) property, plant and equipment.
No inventories have been pledged as security.
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Integrated annual report 2011161
Fina
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2011Rm
2010Rm
2009Rm
8. TRADE AND OTHER RECEIVABLES
Trade receivables 838 766 725
Less: Impairment of trade receivables (13) (11) (4)
Originated loans and receivables 825 755 721
Derivative financial instruments (held-for-trading financial assets) – – 2
Other financial receivables 38 37 45
Trade and other financial receivables 863 792 768
Prepayments 38 32 47
Other non-financial receivables – 3 4
901 827 819
Trade receivables to revenue (%) 12,08 11,09 10,63
Originated loans and receivables comprise: 825 755 721
Trade receivables that are neither past due nor impaired 676 687 658
Trade receivables that would otherwise be impaired whose terms have been renegotiated 11 14 8
Trade receivables that are past due but not impaired 138 54 55
No receivables have been pledged as security.
No individual customer represents more than 10% of the group’s revenue.
Amounts due to the group should be settled within the normal credit terms of 30 to 60 days.
CementRm
LimeRm
Aggregates Rm
TotalRm
Trade receivables that are neither past due nor impaired
2011 584 66 26 676
2010 609 60 18 687
2009 571 57 30 658
There is no history of default relating to trade receivables in this category.
Trade receivables that are past due but not impaired
2011
Age analysis 123,3 5,5 9,0 137,8
1 – 30 days 122,3 4,5 4,8 131,6
31 – 60 days – 1,0 2,5 3,5
61 – 90 days 1,0 – 1,0 2,0
91 – 120 days – – 0,7 0,7
Fair value of collateral held 70,2 – – 70,2
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Pretoria Portland Cement Company Limited162
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
CementRm
LimeRm
Aggregates Rm
TotalRm
8. TRADE AND OTHER RECEIVABLES continued
Trade receivables that are past due but not impaired continued
2010
Age analysis 32,2 15,5 6,0 53,7
1 – 30 days 18,4 13,5 4,3 36,2
31 – 60 days 13,8 1,0 1,7 16,5
91 – 120 days – 1,0 – 1,0
Fair value of collateral held 28,4 – – 28,4
2009
Age analysis 47,5 0,5 6,9 54,9
1 – 30 days 43,5 0,2 6,3 50,0
31 – 60 days 4,0 0,3 0,6 4,9
Fair value of collateral held 17,1 – – 17,1
The majority of collateral held consists of bank guarantees, with the balance comprising suretyships, mortgage bonds, notarial bonds and cessions.
Impairment of trade receivables
2011
Balance at beginning of the year 9 – 2 11
Allowance raised through profit or loss 1 – 1 2
Balance at end of the year 10 – 3 13
Impairment to trade receivables (%) 1,38 – 7,67 1,58
2010
Balance at beginning of the year 3 – 1 4
Allowance raised through profit or loss 6 – 1 7
Balance at end of the year 9 – 2 11
Impairment to trade receivables (%) 1,37 – 8,33 1,46
2009
Balance at beginning of the year 4 – 1 5
Acquired on consolidation of PPC Zimbabwe 1 – – 1
Utilisation of allowance (2) – – (2)
Balance at end of the year 3 – 1 4
Impairment to trade receivables (%) 0,53 – 3,33 0,61
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Integrated annual report 2011163
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2010Rm
2009Rm
9. CASH AND CASH EQUIVALENTS
Cash on hand and on deposit 224 240 248
Currency analysis
South African rand 26 143 105
Botswana pula 51 35 100
United States dollar 147 62 43
224 240 248
Cash restricted for use relating to
PPC Environmental Trust 24 23 30
Consolidated BBBEE entities 1 3 2
25 26 32
Included in cash and cash equivalents are foreign currency denominated cash and cash equivalents of R7 million (2010: R6 million; 2009: R7 million) which have been impaired in full. These funds were subject to surrender in Zimbabwe and it is unlikely that the funds will be recovered from the Reserve Bank of Zimbabwe (refer note 29).
2011Shares
2010Shares
2009Shares
10. SHARE CAPITAL AND SHARE PREMIUM
Authorised shares 600 000 000 600 000 000 600 000 000
Issued shares
Ordinary shares
Shares in issue at beginning of the year 478 196 229 478 331 529 517 471 989
Treasury shares held by consolidated BBBEE trusts and trust funding SPVs^ – – (37 991 204)
Treasury shares held by consolidated Porthold Trust (Private) Limited~ – (135 300) (1 149 256)
Total ordinary shares in issue at end of the year 478 196 229 478 196 229 478 331 529
Other shares
In issue at beginning of the year 48 557 982 48 557 982 –
Shares issued to the BBBEE CSG and SBP funding SPVs* – – 48 557 982
Total shares in issue at end of the year 526 754 211 526 754 211 526 889 511
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Pretoria Portland Cement Company Limited164
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
10. SHARE CAPITAL AND SHARE PREMIUM continuedAuthorised share capitalOrdinary shares of 10 cents each 60 60 60 Issued share capital Ordinary sharesOrdinary shares in issue at beginning of the year 48 48 52 Treasury shares held by consolidated BBBEE trusts and trust funding SPVs^ – – (4)Total ordinary shares in issue at end of the year 48 48 48 Other sharesOther shares in issue at beginning of the year 5 5 – Other shares issued to the BBBEE CSG and SBP funding SPVs* – – 5 Total shares in issue at end of the year 53 53 53 Share premiumBalance at beginning of the year (1 144) (1 141) 63 Treasury shares held by consolidated BBBEE trusts and trust funding SPVs^ – – (1 186)Treasury shares held by consolidated Porthold Trust (Private) Limited~ – (3) (18)Balance at end of the year (1 144) (1 144) (1 141)Total issued share capital and premium (1 091) (1 091) (1 088)
^ In terms of SIC Interpretation 12 (Consolidation – Special-purpose Entities), The PPC Black Managers Trust, The Current PPC Team Trust, The Future PPC Team Trust, The PPC Black Independent Non-executive Directors Trust and the trust funding SPVs are consolidated and, as a result, shares owned by these entities are carried as treasury shares on consolidation.
~ Following PPC gaining effective control of PPC Zimbabwe with effect from 30 September 2009, the 1 284 556 (2010: 1 284 556; 2009: 1 149 256) PPC shares owned by Porthold Trust (Private) Limited have been carried as treasury shares on consolidation.
* In terms of the BBBEE transaction that was effected 15 December 2008, the Strategic Black Partners (SBPs) and Community Service Groups (CSGs) subscribed for 48 557 982 newly issued shares in PPC at par value. The shares carry full economic and voting rights, have restrictions on transferability, and are subject to a call option by PPC to acquire these shares at par by 15 December 2016. In terms of a compulsory subscription agreement, the SBPs and CSGs are required to subscribe for 48 557 982 new shares in PPC at a forward price of R66,84, which was calculated at the effective date of the transaction, by 31 December 2017 subject to their ability to raise sufficient funding.
The shares issued to the SBPs and CSGs have been pledged as security for their funding obligations and as a result are treated as a separate class of equity.
Unissued shares (shares) 13 829 628 13 829 628 13 829 628
The unissued shares of the company are placed under the control and authority of the directors of the company. The directors of the company are authorised and empowered to allot, issue and otherwise dispose of such shares to such person or persons on such terms and conditions and at such times as they deem fit, subject to the provisions of the South African Companies Act, as amended, the memorandum of incorporation of the company and the listing requirements of the JSE Limited, when applicable.
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Integrated annual report 2011165
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2010Rm
2009Rm
11. DEFERRED TAXATION LIABILITIES
Net liability at beginning of the year 568 469 299
Income statement charge, including changes in taxation rates 145 111 42
Acquired on consolidation of PPC Zimbabwe – – 130
Charged directly in equity 1 (1) (1)
Other 26 (11) (1)
Net liability at end of the year 740 568 469
Opening balance
Rm
Charged to the
income statement
Rm
Charged directly
to equityRm
Changes in
taxation rates
Rm
Acquired on consol-
idation of PPC
ZimbabweRm
OtherRm
Closing balance
Rm
2011
Property, plant and equipment 609 106 – – – 16 731
Other non-current assets 20 4 1 – – – 25
Current assets 1 (2) – – – – (1)
Non-current liabilities (61) (5) – – – – (66)
Current liabilities (21) – – – – – (21)
Reserves 20 42 – – – 10 72
568 145 1 – – 26 740
2010
Property, plant and equipment 510 127 – (19) – (9) 609
Other non-current assets 21 – (1) – – – 20
Current assets 3 (2) – – – – 1
Non-current liabilities (47) (14) – – – – (61)
Current liabilities (18) (2) – – – (1) (21)
Reserves – 21 – – – (1) 20
469 130 (1) (19) – (11) 568
2009
Property, plant and equipment 336 45 – – 129 – 510
Other non-current assets 20 (1) – – 1 1 21
Current assets (5) 8 (1) – – 1 3
Non-current liabilities (39) (8) – – – – (47)
Current liabilities (16) (2) – – – – (18)
Reserves 3 – – – – (3) –
299 42 (1) – 130 (1) 469
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Pretoria Portland Cement Company Limited166
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
12. LONG-TERM BORROWINGSBorrowings Terms Security Interest rateLong-term loan~
Interest is payable semi-annually with a bullet capital repayment on 15 December 2016.
Unsecured Fixed 10,86% 1 517 1 517 1 517
Finance lease liability
Interest and capital are repayable annually with the last payment due in 2013.
Secured through encumbered assets (refer note 1)
Fixed 13,10% 27 41 55
BBBEE funding transaction
1 185 1 143 1 103
Preference shares^
Dividends are payable semi-annually with capital redeemable from surplus cash. Compulsory annual redemptions are effective from 31 January 2012 to 15 December 2016.
Secured by guarantee from PPC
Variable rates linked to prime and fixed rates between 8,93% and 9,37%
137 144 152
Preference shares*
Dividends are payable semi-annually with capital redeemable from surplus cash. Compulsory annual redemptions are effective from 31 January 2012 to 15 December 2016.
Secured by PPC shares held by the SPVs
Variable rates linked to prime and a fixed rate of 9,54%
186 203 224
Preference shares*
Both capital and dividends are payable on 15 December 2013.
Secured by guarantee from PPC
Variable rates linked to prime swapped for a fixed rate of 9,17%
314 293 270
Long-term loans
Both capital and interest are payable on 15 December 2013.
Secured by guarantee from PPC
Variable rates linked to JIBAR swapped for a fixed rate of 11,36%
548 503 457
Long-term borrowings 2 729 2 701 2 675
Less: Short-term portion of long-term borrowings (refer note 15) (30) (56) (47) 2 699 2 645 2 628
~ In terms of the BBBEE transaction, PPC obtained funding from the Strategic Black Partners Funding SPV and the Community Service Groups Funding SPV. This long-term funding was used to settle existing short-term funding at the effective date of the transaction.
^ Relates to PPC Black Managers Trust Funding SPV (Pty) Limited, a subsidiary company of Pretoria Portland Cement Company Limited (refer note 10).
* Relates to PPC Community Trust Funding SPV (Pty) Limited, PPC Construction Industry Associations Trust Funding SPV (Pty) Limited, PPC Education Trust Funding SPV (Pty) Limited and PPC Team Benefit Trust Funding SPV (Pty) Limited (refer note 10).
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Integrated annual report 2011167
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2009Rm
12. LONG-TERM BORROWINGS continued
Maturity analysis of obligationsOne year 30 56 47 Two years 62 56 49 Three years 917 49 58 Four years 67 843 69 Five and more years 1 653 1 697 2 452
2 729 2 701 2 675
Assets encumbered are as follows:Plant and equipment (refer note 1) 17 28 39
The group is in compliance with its debt covenants, none of which are expected to represent material restrictions on funding or investment policies in the foreseeable future.
Further details of maturity analysis and interest rates on financial risk management are disclosed in note 37.
2011Rm
2010Rm
2009Rm
13. PROVISIONSNon-current 297 270 250
Factorydecom-
missioningand quarry
rehabil-itation
Rm
Post-retirementhealthcare
benefitsRm
TotalRm
Movement of provisions2011Balance at beginning of the year 250 20 270 Amounts added 8 1 9 Unwinding of discount 18 – 18 Balance at end of the year 276 21 297 To be incurred:
Between two to five years 23 – 23 More than five years 253 21 274
276 21 297
2010Balance at beginning of the year 231 19 250 Amounts added 1 1 2 Unwinding of discount 18 – 18 Balance at end of the year 250 20 270 To be incurred:
Between two to five years 8 – 8 More than five years 242 20 262
250 20 270
2009Balance at beginning of the year 137 15 152 Acquired on consolidation of PPC Zimbabwe 49 2 51 Amounts added 39 2 41 Amounts reversed (5) – (5)Unwinding of discount 11 – 11 Balance at end of the year 231 19 250
To be incurred:Between two to five years 8 – 8 More than five years 223 19 242
231 19 250
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Pretoria Portland Cement Company Limited168
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
13. PROVISIONS continued
Factory decommissioning and quarry rehabilitationThe group is required to restore mining and processing sites at the end of their productive lives to an acceptable condition consistent with the group’s environmental policies. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided for at the beginning of each project. PPC has set up an environmental trust in South Africa to administer the local funding requirements of its rehabilitation obligations. To date R66 million has been contributed to the PPC Environmental Trust. This trust is consolidated into PPC’s group results.
Post-retirement healthcare benefitsIncluded in the provision are the following:
Cement and Concrete Institute employeesThe provision relates to PPC’s proportionate share of the post-retirement healthcare liability for employees of the Cement and Concrete Institute and amounted to R6 million (2010: R6 million; 2009: R6 million). This liability was last actuarially valued during February 2011. The liability has been determined using the projected unit credit method.
Corner House Pension Fund and Lime Acres continuation membersThe provision relates to post-employment healthcare benefits in respect of certain Corner House Pension Fund and Lime Acres continuation members and amounted to R12 million (2010: R12 million; 2009: R11 million). This liability was last actuarially valued during September 2008. The liability has been determined using the projected unit credit method.
Porthold Post-retirement Medical FundThe provision relates to healthcare benefits for both active and retired employees who joined the medical aid scheme on or after 1 October 2001 and amounted to R3 million (2010: R2 million; 2009: R2 million). This liability was last actuarially valued during August 2009. The liability has been determined using the projected unit credit method.
Benefits under these schemes were granted to employees under historical employment contracts and the schemes are closed to new members.
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Integrated annual report 2011169
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2010Rm
2009Rm
14. OTHER NON-CURRENT LIABILITIES
Cash-settled share-based payment liability 52 47 19
Derivative financial instruments (cash flow hedge)^ 90 61 –
142 108 19
Less: Short-term portion of cash-settled share-based payment liability 41 – –
101 108 19
Further details of the cash-settled share-based payment liability are disclosed in note 35.^ The derivative financial instrument relates to the long-term portion fair value of the interest rate swap agreements entered into in order to fix the future interest payments on the preference shares and long-term loans obtained to finance the BBBEE transaction.
15. SHORT-TERM BORROWINGS
Short-term loans and bank overdraft 781 820 717
Short-term portion of long-term borrowings (refer note 12) 30 56 47
811 876 764
Details of maturity analysis and interest rates on financial risk management are disclosed in notes 12 and 37.
16. TRADE AND OTHER PAYABLES
Trade payables and accruals 476 461 438
Other financial payables 33 34 34
Derivative financial instruments (cash flow hedge)^ 5 8 –
Derivative financial instruments (held-for-trading) 1 1 5
Cash-settled share-based payment liability (short-term portion) 41 – –
Trade and other financial payables 556 504 477
Payroll accruals 194 176 171
VAT payable 41 26 23
Other non-financial payables 15 5 7
806 711 678
Trade payables and accruals to cost of sales (%) 10,60 11,34 11,24
Trade and other payables are payable within a 30 to 60-day period.^ The derivative financial instrument relates to the short-term portion fair value of the interest rate swap agreements entered into in order to fix the future interest payments on the preference shares and long-term loans obtained to finance the BBBEE transaction.
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Pretoria Portland Cement Company Limited170
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
17. OPERATING PROFIT
Operating profit includes:
Amortisation of intangible assets (refer note 2) 19 9 6
Auditors’ remuneration
Fees 8 7 6
Other – 1 –
8 8 6
Consultation fees in respect of BBBEE initiative – – 9
Dividends paid to BBBEE trusts treated as an expense on consolidation 5 6 7
Depreciation (refer note 1)
Cost of sales 398 339 295
Operating costs 19 20 14
417 359 309
Distribution costs included in cost of sales 886 808 802
Exploration and research costs 2 5 1
Operating lease charges – land and buildings 9 8 8
Profit on disposal of plant and equipment (1) (3) (4)
Staff costs*
South Africa 872 833 744
Other Africa 100 83 20
972 916 764
Comprising
Cash-settled share incentive scheme charge (refer note 35) 5 27 14
Directors’ remuneration 34 21 23
Employees’ remuneration 834 803 685
Restructuring costs paid to employees 31 – –
Retirement benefit contributions (refer note 34) 70 73 53
974 924 775
Less: Costs capitalised to plant and equipment and intangibles (2) (8) (11)
972 916 764
*PPC Zimbabwe consolidated with effect from 30 September 2009.
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Integrated annual report 2011171
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2010Rm
2009Rm
18. FAIR VALUE GAINS/(LOSSES) ON FINANCIAL INSTRUMENTS
Losses on derivatives designated as economic hedging instruments – – (6)
Losses on derivatives – cash-settled share-based payment hedge (refer note 4) (1) (10) (4)
Gains/(losses) on translation of foreign currency monetary items 10 (10) 4
9 (20) (6)
19. FINANCE COSTS
Bank and other borrowings 55 75 133
Long-term loan 166 166 131
BBBEE funding transaction 118 113 91
Dividends on redeemable preference shares^ 12 13 12
Dividends on redeemable preference shares* 45 45 39
Long-term loans 61 55 40
Finance lease liability 5 7 8
Unwinding of discount on decommissioning and rehabilitation provisions 18 18 11
362 379 374
Capitalised to plant and equipment and intangibles – (13) (17)
362 366 357 ^ Relates to PPC Black Managers Trust Funding SPV (Pty) Limited, a subsidiary company of Pretoria Portland
Cement Company Limited.* Relates to PPC Community Trust Funding SPV (Pty) Limited, PPC Construction Industry Associations Trust
Funding SPV (Pty) Limited, PPC Education Trust Funding SPV (Pty) Limited and PPC Team Benefit Trust Funding SPV (Pty) Limited.
For details on borrowings refer note 12 and note 15.
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Pretoria Portland Cement Company Limited172
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
20. INVESTMENT INCOME
Dividends
Unlisted investments 8 7 9
Interest received
Deposits 14 24 48
Non-current assets 6 8 8
28 39 65
21. EXCEPTIONAL ITEMS
Profit on disposal of properties – 1 –
Impairment of feasibility costs incurred on plant expansion project (refer note 1) – (31) –
Impairment of loans advanced to associates (refer note 6) (4) (2) –
Gross exceptional items (4) (32) –
Taxation – current – – –
Net exceptional items (4) (32) –
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Integrated annual report 2011173
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2010Rm
2009Rm
22. TAXATION
South African normal taxation
Current year 298 387 528
Prior year (23) – 6
275 387 534
Foreign taxation
Current year 7 11 18
Prior year – – 1
7 11 19
Deferred taxation
Current year 122 130 49
Prior year 23 – (7)
Rate change – (19) –
145 111 42
Secondary taxation on companies
Current year 93 113 127
Taxation attributable to the company and its subsidiaries 520 622 722
% % %
Reconciliation of taxation rate
Taxation as a percentage of profit before taxation
(excluding prior year taxation) 37,5 35,9 39,0
Adjustment due to the inclusion of dividend income 0,2 0,1 0,1
Effective rate of taxation 37,7 36,0 39,1
Reduction in rate of taxation 0,7 2,1 4,3
Permanent differences 0,2 0,4 0,4
Take-on gain on consolidation of PPC Zimbabwe – – 3,3
Rate change adjustment – 1,1 –
Foreign taxation differential 0,5 0,6 0,6
Increase in rate of taxation (10,4) (10,1) (15,4)
Disallowable charges and permanent differences (3,5) (2,7) (1,5)
Impairment loss on plant and equipment and financial assets – (0,7) –
BBBEE IFRS 2 charges (0,1) (0,1) (7,0)
Secondary taxation on companies (6,8) (6,6) (6,9)
South African normal taxation rate 28,0 28,0 28,0
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Pretoria Portland Cement Company Limited174
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Shares
2010Shares
2009Shares
23. EARNINGS AND HEADLINE EARNINGS PER SHARE
23.1 FULLY WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
Weighted average number of shares in issue prior to the share buy-back and BBBEE transaction 537 612 390 537 612 390 537 612 390
Less: weighted average impact of share buy-back completed in 2008 (20 140 401) (20 140 401) (20 140 401)
Less: weighted average number of shares held by consolidated BBBEE trusts and trust funding SPVs^ (37 991 204) (37 991 204) (30 184 792)
Less: weighted average number of shares held by consolidated Porthold Trust (Private) Limited~ (1 284 556) (1 258 678) –
Add: weighted average number of shares issued to the BBBEE CSG and SBP funding SPVs^ 48 557 982 48 557 982 38 580 314
Weighted average number of shares used for cash earnings per share calculation 526 754 211 526 780 089 525 867 511
Less: weighted average number of shares issued to the BBBEE CSG and SBP funding SPVs* (48 557 982) (48 557 982) (38 580 314)
Weighted average number of shares used for basic earnings per share calculation 478 196 229 478 222 107 487 287 197
Add: dilutive adjustment for potential ordinary shares# 3 072 892 3 007 057 2 341 581
Weighted average number of shares used for dilutive earnings per share calculation 481 269 121 481 229 164 489 628 778 ^ For additional information refer notes 10 and 12.* Treated as a separate class of shares for earnings per share calculations (refer note 10).~ Following PPC gaining effective control of PPC Zimbabwe with effect from 30 September 2009, the
1 284 256 (2010: 1 284 256; 2009: 1 149 256) PPC shares owned by Porthold Trust (Private) Limited have been carried as treasury shares on consolidation.
# To the extent that the share-based payment grants have been made in terms of BBBEE trusts and trust funding SPVs, and the trust and trust funding SPVs have settled their funding obligations, the transaction will ultimately result in PPC shares vesting with the trust, trust funding SPVs and beneficiaries respectively. Consequently, these share-based payment grants are potential ordinary shares and are being treated in a manner similar to that of an option for the purposes of calculating diluted earnings per share and diluted headline earnings per share.
Shares are weighted for the period in which they are entitled to participate in the net profit of the group.
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Integrated annual report 2011175
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2010Shares
2009Shares
23. EARNINGS AND HEADLINE EARNINGS PER SHARE continued
23.2 BASIC EARNINGS (Rm)
Net profit 865 1 112 1 128
Attributable to:
Ordinary shareholders 785 1 010 1 024
Other shareholders 80 102 104
865 1 112 1 128
Net profit for the year is apportioned between ordinary and other shareholders based on the number of shares held by each category of shareholders as a ratio of total shares in issue.
Net profit 865 1 112 1 128
Adjusted for:
BBBEE IFRS 2 charges (net of taxation) 10 10 466
Take-on gain arising from consolidation of PPC Zimbabwe – – (213)
Net profit (excluding BBBEE IFRS 2 charge and take-on gain arising from consolidation of PPC Zimbabwe) 875 1 122 1 381
Attributable to:
Ordinary shareholders 795 1 019 1 254
Other shareholders 80 103 127
875 1 122 1 381
23.3 EARNINGS PER SHARE (CENTS)
Basic 164,4 211,1 210,1
Diluted 163,3 209,8 209,1
Basic (excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe) 166,3 212,9 257,3
Diluted (excluding BBBEE IFRS 2 charges and take-on gain arising from consolidation of PPC Zimbabwe) 165,2 211,6 256,1
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Pretoria Portland Cement Company Limited176
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Shares
2010Shares
2009Shares
23. EARNINGS AND HEADLINE EARNINGS PER SHARE continued
23.4 HEADLINE EARNINGS (Rm)
Headline earnings is calculated as follows:
Net profit 865 1 112 1 128
Attributable to:
Profit on disposal of property, plant and equipment, and intangible assets (1) (4) (4)
Taxation on profit on disposal of property, plant and equipment and intangible assets – 1 1
Impairment of plant and equipment and financial assets 4 33 –
Take-on gain arising from consolidation of PPC Zimbabwe – – (213)
Headline earnings 868 1 142 912
Attributable to:
Ordinary shareholders 788 1 037 828
Other shareholders 80 105 84
868 1 142 912
Headline earnings 868 1 142 912
Adjusted for:
BBBEE IFRS 2 charges (net of taxation) 10 10 466
Headline earnings (excluding BBBEE IFRS 2 charges) 878 1 152 1 378
Attributable to:
Ordinary shareholders 797 1 046 1 251
Other shareholders 81 106 127
878 1 152 1 378
23.5 HEADLINE EARNINGS PER SHARE (CENTS)
Basic 164,8 216,9 169,9
Diluted 163,8 215,6 169,1
Basic (excluding BBBEE IFRS 2 charges) 166,8 218,7 256,8
Diluted (excluding BBBEE IFRS 2 charges) 165,7 217,4 255,6
23.6 CASH EARNINGS PER SHARE (CENTS) 272,3 320,6 328,6
Calculated on cash available from operations (Rm) 1 435 1 689 1 728
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Integrated annual report 2011177
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2009Rm
24. DIVIDENDS
Final No 214 – 130 cents per share (2010: 155 cents; 2009: 180 cents) 686 818 951
Interim No 215 – 35 cents per share (2010: 45 cents; 2009: 45 cents) 185 238 237
871 1 056 1 188
On 7 November 2011 the directors declared dividend No 216 (final) of 95 cents per share. This dividend will be paid to shareholders on Monday, 16 January 2012, and has not been included as a liability in these financial statements as the declaration date is after the date of this report.
In compliance with the requirements of the JSE Limited, the following dates are applicable:
Last day to trade cum dividend Friday, 6 January 2012
Shares trade ex dividend Monday, 9 January 2012
Record date Friday, 13 January 2012
Payment date Monday, 16 January 2012
The important dates pertaining to this dividend for shareholders trading on the Zimbabwe Stock Exchange are as follows:
Shares trade ex dividend Monday, 9 January 2012
Last day to register to receive the dividend Friday, 13 January 2012
Payment date Monday, 16 January 2012
The register of members in Zimbabwe will be closed from Monday, 9 January 2012 to Friday, 13 January 2012, both days inclusive, for the purpose of determining those shareholders to whom the dividend will be paid.
The dividend payable to shareholders registered in Zimbabwe will be paid in SA rand.
Share certificates may not be dematerialised or rematerialised between Monday, 9 January 2012 and Friday, 13 January 2012, both days inclusive.
Dividends per share (cents)
Interim No 215 – declared 17 May 2011 35 45 45
Final No 216 – declared 7 November 2011 95 130 155
130 175 200
Secondary taxation on companies is payable at a rate of 10% and the charge on the 2011 final dividend should approximate R57 million.
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Pretoria Portland Cement Company Limited178
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
25. ATTRIBUTABLE INTEREST IN SUBSIDIARIES
Attributable interest in the aggregate amount of profits and losses of subsidiaries, after taxation and outside shareholders’ interest:
Profits 270 274 293
Losses (4) (6) –
26. FINANCE COSTS PAID
Finance costs as per income statement charge 362 366 357
Unwinding of discount on decommissioning and rehabilitation provisions (18) (18) (11)
Interest capitalised to plant and equipment – 13 17
BBBEE funding transaction (refer note 12) (90) (100) (66)
Redeemable preference shares dividends capitalised (28) (45) (26)
Interest capitalised on long-term borrowings (62) (55) (40)
254 261 297
27. TAXATION PAID
Net amounts outstanding at beginning of the year 76 96 61
Charge per income statement (excluding deferred taxation) 375 511 680
Net amounts outstanding at end of the year (10) (76) (96)
441 531 645
28. DIVIDENDS PAID
Dividends declared to PPC shareholders (refer note 24) 871 1 056 1 188
Dividends declared by funding SPVs to non-consolidated trusts 5 6 7
876 1 062 1 195
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Integrated annual report 2011179
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2011Rm
2010Rm
2009Rm
29. CONSOLIDATION OF PPC ZIMBABWEProperty, plant and equipment – – 508 Intangible assets – – 2 Investment in PPC shares listed on the Zimbabwe Stock Exchange^ – – 18 Inventories – – 87 Trade and other receivables – – 35 Cash and cash equivalents – – 43 Deferred taxation – – (130)Long-term provisions – – (51)Trade and other payables – – (39)
– – 473 Carrying value before consolidation – – 260 Take-on gain arising from consolidation of PPC Zimbabwe – – 213
On 28 September 2001 PPC acquired 100% of the ordinary shares of PPC Zimbabwe. Due to lack of effective control, the results of PPC Zimbabwe had not been consolidated for the period from 1 October 2003 to 29 September 2009. The directors of PPC were of the opinion that effective control over PPC Zimbabwe was obtained in terms of the definition and requirements of IAS 27 (Consolidated and Separate Financial Statements), and accordingly required the consolidation of PPC Zimbabwe from 30 September 2009 (the “effective date”).
The table above summarises the fair value of assets and liabilities recognised on the consolidation of PPC Zimbabwe. Assets and liabilities raised were valued at fair market value, and an economic obsolescence factor applied where appropriate.
The R473 million fair value of PPC Zimbabwe was determined by using a discounted cash flow valuation and market prices where applicable. The capital asset pricing model was used to determine a real discount rate, with appropriate adjustments to reflect country-specific risk.
Land amounting to R23 million included in the R508 million fair value of property, plant and equipment is exposed to the risk of expropriation by the Zimbabwean government without compensation in terms of the Constitution of Zimbabwe (refer note 1).
The fair value of the intangible assets of R2 million relates to trademarks, and was determined by external valuation using an income approach valuation method (refer note 2).
Included in the trade and other receivables is a provision for doubtful debts of R1 million (refer note 8).
Cash and cash equivalents includes foreign currency denominated cash and cash equivalents of R7 million which have been impaired in full, as it is considered unlikely that PPC Zimbabwe will be able to recover the funds from the Reserve Bank of Zimbabwe (RBZ). These assets were subject to surrender to the RBZ prior to the establishment of the Zimbabwe Government of National Unity under legislation effective at that time. No interest had been accrued on these balances.
PPC Zimbabwe adopted the US dollar as its functional currency with effect from 1 December 2008. The conversion of PPC Zimbabwe’s financial statements to US dollar at the official rate of exchange, as required by IFRS, rendered historical accounting and determination of accurate transaction values impracticable.
The taxation bases of PPC Zimbabwe are still tentative as the Zimbabwean revenue authority has not yet provided clear unequivocal guidance on the procedures required arising from the change of Zimbabwe dollar balances to the new US dollar functional currency. No established basis exists for the determination of allowances previously granted.
PPC Zimbabwe is unable to assess with any degree of certainty the value of its assessed loss. Accordingly, no deferred taxation asset has been raised.^These shares have been treated as treasury shares on consolidation (refer note 10).
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Pretoria Portland Cement Company Limited180
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
30. ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT
Freehold and leasehold land, buildings and mineral rights 44 74 24
Plant, vehicles, furniture and equipment 439 552 876
483 626 900
Interest capitalised – (13) (17)
483 613 883
31. MOVEMENT IN INVESTMENTS AND LOANS
Net movement 5 (12) (105)
Revaluation of available-for-sale financial assets directly in equity 5 12 2
Loss on derivatives (cash-settled share-based payment hedge) (1) (10) (4)
9 (10) (107)
Comprise:
Movements in investments and loans (2) (18) (118)
Receipt of instalment on long-term loan 11 8 11
9 (10) (107)
32. COMMITMENTS
Capital commitments
Contracted 275 176 189
Approved 364 317 250
639 493 439
Commitments for capital expenditure are stated in current values which, together with expected price escalations, will be financed from surplus cash generated from operations and borrowing facilities available to the group.
The majority of the commitments are to be incurred during the 2012 financial year.
The group has foreign letters of credit unexpired at year end amounting to €0,7 million and US$0,6 million (R12 million), and foreign exchange contracts are in place to limit exposure to foreign currency movements.
The company’s capacity upgrades in the Western Cape, as announced during the 2010 financial year, are expected to approximate R3 billion and expenditure will be phased over a six-year period. The project is still in the feasibility phase and yet to be formally approved by the board.
2014Rm
2013Rm
2012Rm
Total2011
Rm
Total2010
Rm
Total2009
Rm
Operating lease commitments
Land and buildings 2 6 6 14 21 27
Other – 1 2 3 4 2
17 25 29
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Integrated annual report 2011181
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33. CONTINGENT LIABILITIES
Litigation, current or pending, is not considered likely to have a material adverse effect on the group.
34. RETIREMENT BENEFIT AND POST-RETIREMENT INFORMATION
It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end, the group’s permanent employees are usually required to be members of either a pension or provident fund, depending on local legal requirements.
All current permanent employees belong to one of nine defined contribution retirement funds. Group employment is a prerequisite for membership of these funds. The South African funds are subject to the provisions of the Pension Funds Act of 1956. The list of retirement funds at 30 September 2011 is as follows:
Pretoria Portland Cement Defined Contribution Pension FundPretoria Portland Cement Defined Contribution Provident FundPPC Negotiated Provident FundPPC Lime Employees’ Provident FundBANP Provident FundPPC Eastern Cape Provident FundPPC Western Cape Provident FundBarloworld Botswana Retirement FundUnicem Pension Fund
Historically, qualifying employees were granted certain post-retirement healthcare benefits. The obligation for the employer to pay medical aid contributions after retirement is no longer part of the conditions of employment for new employees. A number of pensioners remain entitled to this benefit, the cost of which has been fully provided and disclosed in note 13.
Defined contribution plansThe total cost charged to the income statement of R70 million (2010: R73 million; 2009: R53 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes. At 30 September 2011, all contributions due in respect of the current reporting period had been paid over to the schemes.
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Pretoria Portland Cement Company Limited182
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
35. SHARE-BASED PAYMENTS
35.1 CASH-SETTLED
Executive directors and certain senior employees have been granted cash-settled share appreciation rights in terms of PPC’s Long-Term Incentive Plan. The scheme was implemented during the 2007 year, in recognition of services rendered, to encourage long-term shareholder value creation, and as an incentive for current and prospective employees to benefit from growth in the value of PPC in the medium and long term. All grants are approved by the remuneration committee.
Share appreciation rights granted:
Total 2011 2009 2009 2009 2008 2007
Date of grant 01/08/2011 25/09/2009 25/09/2009 17/11/2008 17/09/2008 08/08/2007
Grant price (based on five-day volume weighted average price or zero) (rand) – 35,35 – – 31,80 43,00
Number of rights granted 10 652 968 164 968 2 166 000 1 346 000 1 224 000 2 212 000 3 540 000
Directors (with performance conditions) 2 427 000 150 000 360 000 451 000 – 435 000 1 031 000
Executives (with performance conditions) 1 390 000 – 458 000 – – 456 000 476 000
Senior management 6 835 968 14 968 1 348 000 895 000 1 224 000 1 321 000 2 033 000
Exercised/lapsed/forfeited due to leaving employment (1 601 500) – (137 000) (187 000) (126 000) (383 500) (768 000)
Exercised 2007 – 2010 – – – – – – –
Lapsed 2007 – 2010 – – – – – – –
Forfeited 2007 (679 000) – – – – – (679 000)
Forfeited 2008 (276 000) – – – – (276 000) –
Forfeited 2009 (36 000) – – – (36 000) – –
Forfeited 2010 (232 000) – (72 000) (27 000) (12 000) (37 000) (84 000)
Forfeited 2011 (378 500) – (65 000) (160 000) (78 000) (70 500) (5 000)
Unexercised at 30 September 2011 9 051 468 164 968 2 029 000 1 159 000 1 098 000 1 828 500 2 772 000
Directors (with performance conditions) 1 847 000 150 000 360 000 304 000 – 230 000 803 000
Senior management (with performance conditions) 1 188 000 – 417 000 – – 445 000 326 000
Senior management 6 016 468 14 968 1 252 000 855 000 1 098 000 1 153 500 1 643 000
Vesting in thirds after the third, fourth and fifth anniversary of the grant date Yes Yes Yes
Automatically exercised on the third anniversary of the grant date Yes Yes Yes
Expiry date (lapse if not exercised) 01/08/2014 25/09/2019 24/09/2012 16/11/2011 17/09/2018 08/08/2017
Share appreciation rights were valued using binomial option pricing, taking into account the following inputs:
Market price of PPC shares at end of the year (rand) 23,25 23,25 23,25 23,25 23,25 23,25
Expected volatility of stock over remaining life of the option (%) 29,50 33,00 29,50 30,00 33,00 33,00
Risk-free rate (%) 5,53 8,19 5,69 5,53 7,98 7,69
Expected volatility is based on the historical share price over the past year.
Vesting of the rights granted to the directors and certain senior executives is subject to PPC group HEPS growth performance conditions.
Vesting of the rights granted to directors on 25 September 2009 and having a zero grant price is subject to individual performance conditions related to the directors’ areas of responsibility.
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Integrated annual report 2011183
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35. SHARE-BASED PAYMENTS
35.1 CASH-SETTLED
Executive directors and certain senior employees have been granted cash-settled share appreciation rights in terms of PPC’s Long-Term Incentive Plan. The scheme was implemented during the 2007 year, in recognition of services rendered, to encourage long-term shareholder value creation, and as an incentive for current and prospective employees to benefit from growth in the value of PPC in the medium and long term. All grants are approved by the remuneration committee.
Share appreciation rights granted:
Total 2011 2009 2009 2009 2008 2007
Date of grant 01/08/2011 25/09/2009 25/09/2009 17/11/2008 17/09/2008 08/08/2007
Grant price (based on five-day volume weighted average price or zero) (rand) – 35,35 – – 31,80 43,00
Number of rights granted 10 652 968 164 968 2 166 000 1 346 000 1 224 000 2 212 000 3 540 000
Directors (with performance conditions) 2 427 000 150 000 360 000 451 000 – 435 000 1 031 000
Executives (with performance conditions) 1 390 000 – 458 000 – – 456 000 476 000
Senior management 6 835 968 14 968 1 348 000 895 000 1 224 000 1 321 000 2 033 000
Exercised/lapsed/forfeited due to leaving employment (1 601 500) – (137 000) (187 000) (126 000) (383 500) (768 000)
Exercised 2007 – 2010 – – – – – – –
Lapsed 2007 – 2010 – – – – – – –
Forfeited 2007 (679 000) – – – – – (679 000)
Forfeited 2008 (276 000) – – – – (276 000) –
Forfeited 2009 (36 000) – – – (36 000) – –
Forfeited 2010 (232 000) – (72 000) (27 000) (12 000) (37 000) (84 000)
Forfeited 2011 (378 500) – (65 000) (160 000) (78 000) (70 500) (5 000)
Unexercised at 30 September 2011 9 051 468 164 968 2 029 000 1 159 000 1 098 000 1 828 500 2 772 000
Directors (with performance conditions) 1 847 000 150 000 360 000 304 000 – 230 000 803 000
Senior management (with performance conditions) 1 188 000 – 417 000 – – 445 000 326 000
Senior management 6 016 468 14 968 1 252 000 855 000 1 098 000 1 153 500 1 643 000
Vesting in thirds after the third, fourth and fifth anniversary of the grant date Yes Yes Yes
Automatically exercised on the third anniversary of the grant date Yes Yes Yes
Expiry date (lapse if not exercised) 01/08/2014 25/09/2019 24/09/2012 16/11/2011 17/09/2018 08/08/2017
Share appreciation rights were valued using binomial option pricing, taking into account the following inputs:
Market price of PPC shares at end of the year (rand) 23,25 23,25 23,25 23,25 23,25 23,25
Expected volatility of stock over remaining life of the option (%) 29,50 33,00 29,50 30,00 33,00 33,00
Risk-free rate (%) 5,53 8,19 5,69 5,53 7,98 7,69
Expected volatility is based on the historical share price over the past year.
Vesting of the rights granted to the directors and certain senior executives is subject to PPC group HEPS growth performance conditions.
Vesting of the rights granted to directors on 25 September 2009 and having a zero grant price is subject to individual performance conditions related to the directors’ areas of responsibility.
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Pretoria Portland Cement Company Limited184
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
2011Rm
2010Rm
2009Rm
35. SHARE-BASED PAYMENTS continued
35.1 CASH-SETTLED continued
Expense recognised in the current year (refer note 17) 5 28 13
The carrying amount of the liability relating to cash-settled share appreciation rights as at 30 September (refer note 14) 52 47 19
The group has partially hedged its exposure to fluctuations in the cash settlement amount in respect of the 2007 share appreciation rights granted, by acquiring derivative financial instruments in the form of extended European cash-settled call options from a financial institution. This derivative financial instrument is classified as held-for-trading at fair value through profit or loss (refer note 37).
35.2 EQUITY-SETTLEDPrior to the unbundling of PPC from Barloworld in the 2007 year, executive directors and senior executives were granted equity-settled share options in the ordinary share capital of Barloworld Limited. The salient features of this scheme are that all rights vest in thirds after the third, fourth and fifth anniversary of the grant date.
During the 2007 year, PPC paid Barloworld R30 million in respect of the then market value of the equity-settled incentive scheme liability relating to the number of unexercised Barloworld share options held by PPC executive directors and senior executives. This payment was charged against equity compensation reserves.
A total of Rnil (2010: Rnil; 2009: R4 million) of the total reimbursement was transferred to distributable reserves during the year, and was based on the vesting period of the equity-settled share options.
35.3 FORFEITABLE SHARE PLANDuring the current financial year, PPC introduced a Forfeitable Share Plan (FSP) as a long-term incentive for selected employees, excluding executive directors and prescribed officers. Its purpose is to provide both an incentive to deliver the group’s strategy over the long term and to be a retention mechanism. Participants will receive forfeitable shares for no consideration and will participate in dividends and shareholder rights from the date of grant, but may only dispose of the shares after the vesting date. Vesting of the retention awards is subject to employment for a period of 2,5 years, and vesting of the performance awards is additionally subject to satisfaction of certain performance conditions, failing which the employee will forfeit the shares and they may be sold by PPC and the net proceeds retained by the group. The performance conditions relate to growth in headline earnings per share measured over a three-year period. The shorter vesting period of 2,5 years recognises that no long-term awards were made during 2010.
Shares were purchased directly by PPC on the JSE Limited over a number of days following the grant date and the subsequent closed period. The shares will be held by an agent on behalf of the participants until the vesting date.
In terms of IFRS 2, the fair value of each share awarded, which will be expensed over the vesting period in return for services rendered, is based on the average market price of acquiring the share and is not re-measured subsequently. The service and performance conditions are taken into account in the number instruments that are expected to vest. Subsequent revisions are made for changes in estimated attrition and probability of satisfaction of performance conditions.
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Retention awards
Performance awards
35. SHARE-BASED PAYMENTS continued
35.3 FORFEITABLE SHARE PLAN continued
Date of grant: 30 September 2011
Number of shares granted 761 000 775 600
Average purchase price of shares acquired (R) 26,38 26,38
Estimated fair value per share at grant date (R) 26,38 8,79
36. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board, the JSE Listings Requirements and the South African Companies Act, 2008, as amended. The financial statements have been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 30 September 2010, except for the following revised accounting standards and amendments, which did not have a material impact on the report results:
New or revised statements, interpretations and circulars adopted during the year
The following amendments to statements have no financial impact on the group results:
Effective date reporting period on or after
Conceptual Framework for Financial Reporting 2010 28 September 2010
IFRS 2 Share-based Payments: (Amendments relating to group cash-settled share-based payment transactions) 1 January 2010
IFRS 3 (amendment) Business Combinations (Measurement of non-controlling interests, Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS, Unreplaced and voluntarily replaced share-based payment awards) 1 July 2010
IAS 27 (amendment) Consolidated and Separate Financial Statements (Transition requirements for amendments made as a result of IAS 27 (as amended in 2008)) 1 July 2010
IAS 32 (amendment) Financial Instruments: Presentation (Classification of rights issues) 1 February 2010
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010
IASB Improvements to IFRS 2009 1 January 2010
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Pretoria Portland Cement Company Limited186
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
36. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES continuedThe following amendments to published accounting standards are in issue but not yet effective. These revised standards and interpretations will be adopted by PPC in the future:
In assessing the implication on PPC, the current group financial position has been used to determine the future impact.
Revised statements in issue not yet effective
Effective date reporting period on or after Implication on PPC
IFRS 7 Financial Instruments: Disclosures (Clarification of disclosures) 1 January 2011 Disclosure impact
IFRS 7 (amendment) Financial Instruments: Disclosures about transfers of financial assets 1 July 2011 No impact
IFRS 9 Financial Instruments: Classification and Measurement 1 January 2013 Yes
IFRS 10 Consolidated Financial Statements 1 January 2013 No impact
IFRS 11 Joint Arrangements 1 January 2013 No impact
IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 Disclosure impact
IFRS 13 Fair Value Measurement 1 January 2013 No impact
IAS 1 Presentation of Financial Statements (Clarification of statement of changes in equity) 1 January 2011 No impact
IAS 1 (amendment) Presentation of Items of Other Comprehensive Income 1 July 2012 Disclosure impact
IAS 12 Deferred Tax (Recovery of underlying assets) 1 January 2012 No impact
IAS 19 (amendment) Employee Benefits 1 January 2013 No impact
IAS 24 Related Parties Disclosures (Revised definition of related parties) 1 January 2011 No impact
IAS 27 Separate Financial Statements 1 January 2013 No impact
IAS 28 Investments in Associates and Joint Ventures 1 January 2013 No impact
IAS 34 (amendment) Interim Financial Reporting (Significant events and transactions) 1 January 2011 Disclosure impact
IFRIC 13 (amendment) Customer Loyalty Programmes (Fair value of award credit) 1 January 2011 No impact
IFRIC 14 (amendment) The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 1 January 2011 No impact
IASB Improvements to IFRS 2010 1 January 2011 Disclosure impact
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37. FINANCIAL RISK MANAGEMENT
The group’s financial instruments consist mainly of borrowings from financial institutions, deposits with banks, local money market instruments, accounts receivable and payable, and leases.
Forward exchange contracts are used by the group for hedging purposes. The group does not speculate in the trading of derivative instruments.
Capital risk managementThe group manages its capital to ensure that entities in the group will continue as going concerns, while maximising the return to stakeholders through the optimisation of debt and equity balances.
The capital structure of the group consists of debt, which includes the borrowings disclosed in notes 12 and 15, cash and cash equivalents as disclosed in note 9, and equity attributable to equity holders, comprising issued capital, reserves and retained profit as disclosed in note 10.
PPC’s senior executives review the capital structure on a semi-annual basis. As part of this review, the cost of capital and the risks associated with each class of capital are considered. Based on recommendations of the committee, PPC will balance its overall capital structure through the payment of dividends, new share issues and buy-backs as well as the issue of new debt or the redemption of existing debt.
Treasury risk managementSenior executives meet on a regular basis to analyse currency and interest rate exposure and to re-evaluate treasury management strategies against revised economic forecasts. The group’s treasury operation provides the group with access to local money markets and provides group subsidiaries with the benefit of bulk financing and depositing.
Foreign currency managementTrade and capital commitmentsThe group is exposed to exchange rate fluctuations as it undertakes certain transactions denominated in foreign currencies. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts. The group’s policy is to cover forward all material foreign currency commitments.
Forward exchange contracts are carried at fair value with the resultant profit or loss included in income. The only exception relates to the effective portion of cash flow hedges, where profits or losses are recognised as other comprehensive income and are either included in the initial acquisition cost of the hedged assets, or are transferred to income when the hedged transaction affects income where appropriate. Fair value of the forward exchange contracts at reporting date is R24 million.
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Pretoria Portland Cement Company Limited188
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
37. FINANCIAL RISK MANAGEMENT continued
The amounts below represent forward exchange contract commitments to sell and purchase foreign currencies:
<1 yearRm
1 – 3 yearsRm
Total Rm
2011 24 – 24
2010 21 34 55
2009 4 – 4
Total forward exchange contracts comprise the following:
2011 2010 2009
Euros (€m) – 5 2
Average rate R/€ – 10,00 11,02
Dollar (US$m) – – 2
Average rate R/US$ – – 7,56
The average rates shown above include the cost of forward cover.
Interest rate managementThe group is exposed to interest rate risk arising from fluctuations in financing costs on loans which are at variable interest rates. As part of the process of managing the group’s fixed and variable rate borrowings mix, the interest rate characteristics of new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest rates. The group has entered into interest rate swap agreements to hedge fluctuations in its variable interest rates. The interest rate profile of total borrowings is as follows:
DescriptionYears of
repayment2011
Rm2010
Rm2009
Rm
Secured
BBBEE funding transaction 2012 – 2016 1 185 1 143 1 103
Finance lease liability 2012 – 2013 27 41 55
1 212 1 184 1 158
Unsecured
Long-term loan 2016 1 517 1 517 1 517
Short-term loans and bank overdraft 2012 781 820 717
2 298 2 337 2 234
The group has entered into interest rates swap agreements for which variable rates have been swapped for fixed rates ranging from 8,93% to 11,36% (refer note 12).
Unsecured, short-term loans bear interest at rates varying between 5,70% to 10,50% per annum for the year under review.
The company had borrowing facilities of R3 691 million and had utilised 61% of these facilities at 30 September 2011. At year end R1 456 million of borrowing facilities remain unutilised. These numbers exclude debt consolidated as a result of guarantees relating to BBBEE funding.
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37. FINANCIAL RISK MANAGEMENT continued
Hedge accounting applied in respect of interest rate riskAs at September 2011, arising from the consolidated debt of the BBBEE trusts and trust funding SPVs, the following designated cash flow hedge interest rate swap contracts were held:
Fair value of liability
Related underlying liability Currency
Notionalamount
Rm
Fixed interest
rate (nacs)%
Maturity date
Rm2011
Rm2010
Rm2009
Rm
A preference shares (linked to prime) ZAR 169 8,93 – 9,54 2013 – 2016 5 8 –
B preference shares (linked to prime) ZAR 253 9,17 2013 24 19 –
Long-term loans (linked to JIBAR) ZAR 420 11,36 2013 66 42 –
Total 95 69 –
The interest swap contracts have been acquired to hedge the underlying interest rate risk arising from interest cash flows linked to variable rates.
Losses on cash flow hedges amounting to R1 million were recognised in other comprehensive income during the year.
Sensitivity analysisInterest rate riskAt 30 September 2011, if all interest rates on interest-bearing loan payables and receivables, short-term cash investments, short-term loans payable and bank overdrafts at that date had been 100 basis points higher, with all other variables held constant, attributable earnings would have been R5 million (earnings per share: 1,09 cents) lower. Conversely, at 30 September 2011, if all interest rates at that date had been 100 basis points lower, with all other variables held constant, the attributable earnings would have been R5 million (earnings per share: 1,09 cents) higher.
Equity price risk – cash-settled share appreciation rightsAt 30 September 2011, if the share price of PPC had been R3,14 higher, with all other variables held constant, attributable earnings would have been R3 million (earnings per share: 0,35 cents) lower. Conversely, at 30 September 2011, if the share price of PPC had been R3,14 lower, with all other variables held constant, attributable earnings would have been R3 million (earnings per share: 0,35 cents) higher.
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Pretoria Portland Cement Company Limited190
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilitiesThe carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values.
The estimated fair values have been determined using available market information and approximate valuation methodologies.
Cement Lime Aggregates Other Total
Notes
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
2011
Financial assets
Available-for-sale 30 30 – – – – – – 30 30
Unlisted investments at fair value 4 30 30 – – – – – – 30 30
Loans and receivables 1 019 1 019 80 80 48 48 1 1 1 148 1 148
Long-term loans 5 9 9 – – – – – – 9 9
Loans to associate companies 6 48 48 – – – – – – 48 48
Loans advanced 4 4 4 – – – – – – 4 4
Trade and other financial receivables 8 755 755 72 72 36 36 – – 863 863
Cash and cash equivalents 9 203 203 8 8 12 12 1 1 224 224
At fair value through profit or loss – held-for-trading 72 72 – – – – – – 72 72
Unlisted collective investment 4 72 72 – – – – – – 72 72
Financial liabilities 2 801 2 933 59 59 23 23 1 284 1 284 4 167 4 299
Long-term borrowings 12 1 532 1 664 – – – – 1 167 1 167 2 699 2 831
Derivative instruments – current (held-for-trading) 14 41 41 – – – – – – 41 41
Derivative instruments – current (cash flow hedge) 16 – – – – – – 5 5 5 5
Other short-term borrowings 15 795 795 – – – – 16 16 811 811
Trade and other financial payables 16 422 422 59 59 23 23 6 6 510 510
Derivative instruments – non-current (held-for-trading) 14 11 11 – – – – – – 11 11
Derivative instruments – non-current (cash flow hedge) 14 – – – – – – 90 90 90 90
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37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilitiesThe carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values.
The estimated fair values have been determined using available market information and approximate valuation methodologies.
Cement Lime Aggregates Other Total
Notes
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
Carrying amount
Rm
Fair value
Rm
2011
Financial assets
Available-for-sale 30 30 – – – – – – 30 30
Unlisted investments at fair value 4 30 30 – – – – – – 30 30
Loans and receivables 1 019 1 019 80 80 48 48 1 1 1 148 1 148
Long-term loans 5 9 9 – – – – – – 9 9
Loans to associate companies 6 48 48 – – – – – – 48 48
Loans advanced 4 4 4 – – – – – – 4 4
Trade and other financial receivables 8 755 755 72 72 36 36 – – 863 863
Cash and cash equivalents 9 203 203 8 8 12 12 1 1 224 224
At fair value through profit or loss – held-for-trading 72 72 – – – – – – 72 72
Unlisted collective investment 4 72 72 – – – – – – 72 72
Financial liabilities 2 801 2 933 59 59 23 23 1 284 1 284 4 167 4 299
Long-term borrowings 12 1 532 1 664 – – – – 1 167 1 167 2 699 2 831
Derivative instruments – current (held-for-trading) 14 41 41 – – – – – – 41 41
Derivative instruments – current (cash flow hedge) 16 – – – – – – 5 5 5 5
Other short-term borrowings 15 795 795 – – – – 16 16 811 811
Trade and other financial payables 16 422 422 59 59 23 23 6 6 510 510
Derivative instruments – non-current (held-for-trading) 14 11 11 – – – – – – 11 11
Derivative instruments – non-current (cash flow hedge) 14 – – – – – – 90 90 90 90
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Pretoria Portland Cement Company Limited192
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
Cement Lime Aggregates Other Total
Notes
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilities continued
2010
Financial assets
Available-for-sale 25 25 – – – – – – 25 25
Unlisted investments at fair value 4 25 25 – – – – – – 25 25
Loans and receivables 982 982 90 90 31 31 3 3 1 106 1 106
Long-term loans 5 20 20 – – – – – – 20 20
Loans to associate companies 6 50 50 – – – – – – 50 50
Loans advanced 4 4 4 – – – – – – 4 4
Trade and other financial receivables 8 690 690 78 78 24 24 – – 792 792
Cash and cash equivalents 9 218 218 12 12 7 7 3 3 240 240
At fair value through profit or loss – held-for-trading 71 71 – – – – – – 71 71
Derivative financial instrument 4 1 1 – – – – – – 1 1
Unlisted collective investment 4 70 70 – – – – – – 70 70
Financial liabilities 2 842 2 986 72 72 4 4 1 213 1 213 4 131 4 275
Long-term borrowings 12 1 545 1 689 – – – – 1 100 1 100 2 645 2 789
Derivative instruments – current (cash flow hedge) 16 – – – – – – 8 8 8 8
Other short-term borrowings 15 833 833 – – – – 43 43 876 876
Trade and other financial payables 16 417 417 72 72 4 4 1 1 494 494
Derivative instruments – non-current (held-for-trading) 14 47 47 – – – – – – 47 47
Derivative instruments – non-current (cash flow hedge) 14 – – – – – – 61 61 61 61
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Cement Lime Aggregates Other Total
Notes
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilities continued
2010
Financial assets
Available-for-sale 25 25 – – – – – – 25 25
Unlisted investments at fair value 4 25 25 – – – – – – 25 25
Loans and receivables 982 982 90 90 31 31 3 3 1 106 1 106
Long-term loans 5 20 20 – – – – – – 20 20
Loans to associate companies 6 50 50 – – – – – – 50 50
Loans advanced 4 4 4 – – – – – – 4 4
Trade and other financial receivables 8 690 690 78 78 24 24 – – 792 792
Cash and cash equivalents 9 218 218 12 12 7 7 3 3 240 240
At fair value through profit or loss – held-for-trading 71 71 – – – – – – 71 71
Derivative financial instrument 4 1 1 – – – – – – 1 1
Unlisted collective investment 4 70 70 – – – – – – 70 70
Financial liabilities 2 842 2 986 72 72 4 4 1 213 1 213 4 131 4 275
Long-term borrowings 12 1 545 1 689 – – – – 1 100 1 100 2 645 2 789
Derivative instruments – current (cash flow hedge) 16 – – – – – – 8 8 8 8
Other short-term borrowings 15 833 833 – – – – 43 43 876 876
Trade and other financial payables 16 417 417 72 72 4 4 1 1 494 494
Derivative instruments – non-current (held-for-trading) 14 47 47 – – – – – – 47 47
Derivative instruments – non-current (cash flow hedge) 14 – – – – – – 61 61 61 61
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Pretoria Portland Cement Company Limited194
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
Cement Lime Aggregates Other Total
Notes
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilities continued
2009
Financial assets
Available-for-sale 38 38 – – – – – – 38 38
Unlisted investments at fair value 4 38 38 – – – – – – 38 38
Loans and receivables 967 975 61 61 59 59 5 5 1 092 1 100
Long-term loans 5 28 36 – – – – – – 28 36
Loans to associate companies 6 48 48 – – – – – – 48 48
Loans advanced 4 2 2 – – – – – – 2 2
Trade and other financial receivables 8 667 667 59 59 37 37 3 3 766 766
Cash and cash equivalents 9 222 222 2 2 22 22 2 2 248 248
At fair value through profit or loss – held-for-trading 69 69 – – – – – – 69 69
Derivative financial instrument 4 11 11 – – – – – – 11 11
Unlisted collective investment 4 56 56 – – – – – – 56 56
Mark-to-market – fair value hedge 8 2 2 – – – – – – 2 2
Financial liabilities 2 703 2 639 40 40 19 19 1 107 1 069 3 869 3 767
Long-term borrowings 12 1 559 1 495 – – – – 1 069 1 032 2 628 2 527
Other short-term borrowings 15 730 730 – – – – 34 33 764 763
Trade and other financial payables 16 414 414 40 40 19 19 4 4 477 477
Methods and assumptions used by the group in determining fair values:The estimated fair value of financial instruments is determined, at discrete points in time, by reference to the mid-price in an active market wherever possible. Where no such active market exists for the particular asset or liability, the group uses a valuation technique to arrive at the fair value, including the use of prices obtained in recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.
The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined with reference to valuations performed by third-party financial institutions at reporting date, using an actuarial binomial pricing model. The inputs into the model are shown in note 35.
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Cement Lime Aggregates Other Total
Notes
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
Carrying amount
RmFair value
Rm
37. FINANCIAL RISK MANAGEMENT continued
Fair values of financial assets and liabilities continued
2009
Financial assets
Available-for-sale 38 38 – – – – – – 38 38
Unlisted investments at fair value 4 38 38 – – – – – – 38 38
Loans and receivables 967 975 61 61 59 59 5 5 1 092 1 100
Long-term loans 5 28 36 – – – – – – 28 36
Loans to associate companies 6 48 48 – – – – – – 48 48
Loans advanced 4 2 2 – – – – – – 2 2
Trade and other financial receivables 8 667 667 59 59 37 37 3 3 766 766
Cash and cash equivalents 9 222 222 2 2 22 22 2 2 248 248
At fair value through profit or loss – held-for-trading 69 69 – – – – – – 69 69
Derivative financial instrument 4 11 11 – – – – – – 11 11
Unlisted collective investment 4 56 56 – – – – – – 56 56
Mark-to-market – fair value hedge 8 2 2 – – – – – – 2 2
Financial liabilities 2 703 2 639 40 40 19 19 1 107 1 069 3 869 3 767
Long-term borrowings 12 1 559 1 495 – – – – 1 069 1 032 2 628 2 527
Other short-term borrowings 15 730 730 – – – – 34 33 764 763
Trade and other financial payables 16 414 414 40 40 19 19 4 4 477 477
Methods and assumptions used by the group in determining fair values:The estimated fair value of financial instruments is determined, at discrete points in time, by reference to the mid-price in an active market wherever possible. Where no such active market exists for the particular asset or liability, the group uses a valuation technique to arrive at the fair value, including the use of prices obtained in recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.
The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined with reference to valuations performed by third-party financial institutions at reporting date, using an actuarial binomial pricing model. The inputs into the model are shown in note 35.
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Pretoria Portland Cement Company Limited196
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
37. FINANCIAL RISK MANAGEMENT continued
Credit risk managementThe potential exposure to credit risk is represented by the carrying amounts of trade receivables, short-term cash investments and derivative assets in the statement of financial position. Trade receivables comprise a large, widespread customer base and credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk, the granting of credit is controlled by application and account limits, and the group only deals with creditworthy customers supported by appropriate collateral. The group periodically re-evaluates counterparty limits and the financial reliability of its customers. Provision is made for specific doubtful debts, and as at 30 September 2011, where appropriate, management did not consider there to be any material credit risk exposure that was not already covered by security or a doubtful debt provision.
The group only deposits short-term cash surpluses with financial institutions of high-quality credit standing.
The following table highlights the split of maximum credit exposure:
CementRm
LimeRm
Aggre-gates
Rm Other
RmTotal
Rm
Maximum credit risk exposure
2011 1 011 80 48 1 1 140
2010 982 90 31 3 1 106
2009 969 61 59 5 1 094
Liquidity risk managementLiquidity risk is the risk of the group being unable to meet its payment obligations when they fall due and being unable to replace funds if facilities are withdrawn. The group manages liquidity risk centrally by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities to meet its liquidity requirements at all times, and by continuously monitoring forecast and actual cash flows.
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37. FINANCIAL RISK MANAGEMENT continued
Liquidity risk management continued
The following table details the group’s remaining contractual maturity for its financial liabilities. The table has been prepared based on undiscounted cash flows at the earliest date on which the group can be required to pay. The amounts include both interest and capital. The maturity analysis of financial liabilities is summarised as follows:
Nominal value of liability
Rm< 1 year
Rm
2 – 3 years
Rm> 3 years
RmTotal
Rm
2011
Long-term borrowings 2 729 30 979 1 720 2 729
Short-term borrowings 781 781 – – 781
Trade and other payables 806 806 – – 806
2010
Long-term borrowings 2 701 56 105 2 540 2 701
Short-term borrowings 820 820 – – 820
Trade and other payables 711 711 – – 711
2009
Long-term borrowings 2 675 47 107 2 521 2 675
Short-term borrowings 717 717 – – 717
Trade and other payables 678 678 – – 678
The company’s borrowing powers are not restricted.
The group does not have any other material financial instruments that are not based in the currency in which the entity operates.
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Pretoria Portland Cement Company Limited198
NOTES TO THE grOup ANNuAL FINANCIAL STATEMENTS CONTINuEd
for the year ended 30 September 2011
38. RELATED PARTY TRANSACTIONS
Parent company
of reporting entity
Rm
Subsidiary of reporting
entityRm
2011
Interest received
Afripack Limited – (2)
Goods and services purchased
Afripack Limited 91 –
Amounts due (to)/from as at end of the year*
Afripack Limited (10) 40
Metlakgola Construction & Development (Pty) Limited – 1
Rhulanani Concrete Mixers (Pty) Limited – 3
Olegra Oil (Pty) Limited – 4
First Gas (Pty) Limited – 1
*Balances calculated after taking into account the impairment losses.
Group companies, in the ordinary course of business, entered into purchase transactions with associates and subsidiaries. The terms and conditions of these transactions are determined on an arm’s length basis.
In addition to the above related party transactions, dividends of R66 million (2010: R80 million; 2009: R90 million) were paid to the PPC SBP Consortium Fundings SPV (Pty) Limited. This company owns 39 988 926 shares in PPC, and JS Vilakazi and MP Malungani are common directors of both PPC and the PPC SBP Consortium Funding SPV (Pty) Limited.
2010
Interest received
Afripack Limited – (2)
Goods and services purchased
Afripack Limited 80 –
Amounts due (to)/from as at end of the year
Afripack Limited (2) 38
Metlakgola Construction & Development (Pty) Limited – 1
Rhulanani Concrete Mixers (Pty) Limited – 5
Olegra Oil (Pty) Limited – 5
First Gas (Pty) Limited – 1
2009
Goods and services sold
Portland Holdings Limited (25) –
Interest received
Afripack Limited – (1)
Dividends received
Afripack Limited (3) –
Goods and services purchased
Afripack Limited 124 –
Amounts due (to)/from as at end of the year
First Gas (Pty) Limited (5) 35
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39. ADDITIONAL DISCLOSURE
Directors, prescribed officers and key managementThe executive directors and prescribed officers of PPC are regarded as key management personnel. Details regarding directors’ and prescribed officers’ remuneration and interest are disclosed in the remuneration report.
ShareholdersThe principal shareholders of the company are disclosed on page 200.
40. EVENTS AFTER REPORTING DATE
There are no events that occurred after reporting date that may have an impact on the group’s reported financial position at 30 September 2011.
Subsequent to 30 September 2011, and in terms of PPC’s expansion strategy, PPC acquired three aggregate quarries in Botswana in a transaction valued at R52 million. The financial results will only be consolidated into the group results in the 2012 financial year.
The company has entered into a memorandum of understanding to purchase an initial 25% in Pronto Holdings, a prominent Gauteng based readymix and fly ash supplier. The remaining shareholding will be purchased on a phased approach, over a two year period. The total transaction is valued at R280 million less debt. The deal is still subject to competition authority approval.
During October 2011, the company made a US$44 million conditional offer for a 58% stake in Cimenterie Nationale, a cement producer in the Democratic Republic of Congo. At the date of this report, the company awaits the outcome of the bid.
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Pretoria Portland Cement Company Limited200
SHAREHOLDER SPREADNo of
shareholders % No of shares %
1 000 001 shares and over 65 0,3 433 194 267 73,9
100 001 – 1 000 000 shares 260 1,2 80 348 974 13,7
10 001 – 100 000 shares 1 442 6,8 39 993 261 6,8
1 001 – 10 000 shares 8 620 40,6 27 728 319 4,7
1 – 1 000 shares 10 864 51,1 4 905 551 0,9
Total 21 251 100,0 586 170 372 100,0
DISTRIBUTION OF SHAREHOLDERS
Banks 156 0,7 140 165 863 23,9
Pension funds 255 1,2 129 632 489 22,1
Private companies 411 1,9 96 843 734 16,5
Mutual funds 241 1,1 68 540 998 11,7
Individuals 15 847 74,7 39 103 464 6,8
Insurance companies 50 0,2 37 647 375 6,4
Nominees and trusts 3 673 17,3 33 847 134 5,8
Own holdings 1 0,0 20 140 401 3,4
Brokers 46 0,2 7 629 715 1,3
Investment companies 41 0,2 5 783 633 1,0
Public companies 46 0,2 2 840 247 0,5
Endowment funds 152 0,7 2 486 594 0,4
Close corporations 194 0,9 734 098 0,1
Medical aid schemes 14 0,1 584 736 0,1
Other corporations 124 0,6 189 891 0,0
Total 21 251 100,0 586 170 372 100,0
PUBLIC/NON-PUBLIC SHAREHOLDERS
Non-public shareholders 14 0,1 193 891 646 33,1
Directors’ holdings 2 0,0 40 660 0,0
Company-owned holdings 1 0,0 20 140 401 3,4
Broad-based black ownership 10 0,1 86 549 186 14,8
Strategic holdings (10% or more) 1 0,0 87 161 399 14,9
Public shareholders 21 237 99,9 392 278 726 66,9
Total 21 251 100,0 586 170 372 100,0
BENEFICIAL SHAREHOLDERS HOLDINg 3% OR mORE No of shares %
Government Employees Pension Fund 87 161 399 14,9
PPC SBP Consortium Fundings SPV Pty Limited 39 988 926 6,8
Lazard Emerging Markets Equity Portfolio 33 715 933 5,8
PPC Cement (Pty) Limited* 20 140 401 3,4
* Held as treasury shares on consolidation.
at 30 September 2011
PPC in the stoCk market
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PRETORIA PORTLAND CEmENT COmPANy LImITED(Incorporated in the Republic of South Africa)Company registration number: 1892/000667/06
JSE code: PPCZSE code: PPC
JSE ISIN code: ZAE000125886ZSE ISIN code: ZWE000096475
AuditorsDeloitte & ToucheDeloitte PlaceThe WoodlandsWoodlands DriveWoodmead, SandtonPrivate Bag X6Gallo Manor, 2052, South AfricaTelephone +27 11 806 5000Telefax +27 11 806 5111
Transfer secretaries: South AfricaLink Market Services (Pty) Limited11 Diagonal StreetJohannesburg, South AfricaPO Box 4844Johannesburg, 2000, South AfricaTelephone +27 11 630 0815Telefax +27 866 743260Email [email protected]
Secretary and registered officeJHDLR Snyman180 Katherine Street, SandtonPO Box 787416Sandton, 2146, South AfricaTelephone +27 11 386 9000Telefax +27 11 386 9001Email [email protected]
Transfer secretaries: ZimbabweCorpserve (Private) Limited2nd Floor, ZB CentreCorner First Street and Kwame Nkrumah AvenueHarare, ZimbabwePO Box 2208Harare, ZimbabweTelephone +263 4 758 193/751 559Telefax +263 4 752 629
Sponsor: South AfricaMerrill Lynch SA (Pty) Limited138 West StreetSandown, SandtonPO Box 651987Benmore, 2010, South AfricaTelephone +27 11 305 5555Telefax +27 11 305 5600
Sponsor: ZimbabweImara Edwards Securities (Private) LimitedBlock 2, Tendeseka Office ParkSamora Machel Avenue Harare, ZimbabwePO Box 1475Harare, ZimbabweTelephone +263 4 790 090Telefax +263 4 791 345
Financial year end 30 September
Annual general meeting 30 January 2012
Reports
Interim results for half-year to March Published May
Preliminary announcement of annual results Published November
Annual financial statements Published December
Dividends
Interim Declared May
Paid June
Final Declared November
Paid January
administration
finanCiaL CaLendar
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Pretoria Portland Cement Company Limited202
notiCe of annuaL generaL meetingfor the year ended 30 September 2011
identification and the person presiding at the
general 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
ELECTRONIC PARTICIPATION IN THE ANNUAL
gENERAL mEETINg
Shareholders or their proxies may participate in the
meeting by way of a teleconference call provided
that, if they wish to do so:
• They must contact the company secretary (by email
at the address [email protected] by no later
than 12:00 on 27 January 2012 to obtain a pin
number and dial-in details for that conference call
• They will be required to provide reasonably
satisfactory identification
• They will be billed separately by their own
telephone service providers for their telephone call
to participate in the meeting
This notice of meeting includes the attached form of
proxy.
memorandum of incorporation
The memorandum of incorporation of the company
(memorandum of incorporation or MOI) comprised
its memorandum of association and its articles of
association. On the date that the Companies Act
came into effect, being 1 May 2011, the memorandum
of association and articles of association of the
company automatically converted into the company’s
memorandum of incorporation. Accordingly, for
consistency of reference in this notice of AGM, the
term MOI is used throughout to refer to the company’s
memorandum of incorporation (which previously
comprised the company’s memorandum of
association and its articles of association, as
aforesaid).
Presentation of annual financial statements
The consolidated audited annual financial statements
of the company and its subsidiaries, incorporating
the reports of the auditors, audit committee and
directors for the year ended 30 September 2011 as
approved by the board on 7 November 2011, will be
PRETORIA PORTLAND CEmENT COmPANy
LImITED
Incorporated in the Republic of South Africa
(Registration No: 1892/000667/06)
JSE share code: PPC
ZSE share code: PPC
ISIN code: ZAE000125886
(PPC) or (the company)
NOTICE IS HEREBy gIVEN to shareholders as at
23 December 2011, being the record date to receive
the notice of annual general meeting (AGM), that the
117th 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, 30
January 2012 at 12:00 to consider and, if deemed fit,
approve 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 purpose
of determining which shareholders of the company
are entitled to receive notice of the AGM as 23
December 2011, 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 the AGM, as 26
January 2012. Accordingly, only shareholders who
are registered in the register of members of the
company on 26 January 2012 will be entitled to
participate in and vote at the AGM.
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 form of proxy 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 general meeting of
shareholders must present reasonably satisfactory
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herself for re-election, be and is hereby reappointed
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.
Ordinary resolution number 4:
“resolved that Ms N Langa-Royds, who is required
to retire as a director of the company at this AGM in
terms of the MOI and who, being eligible, offers
herself for re-election, be and is hereby reappointed
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.
Ordinary resolution number 5:
“resolved that Mr J Shibambo, who is required to
retire as a director of the company at this AGM in
terms of the MOI and who, being eligible, offers
himself for re-election, be and is hereby reappointed
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.
Reappointment of external auditors
The audit committee and the board has nominated
for reappointment Deloitte & Touche as independent
auditors for the year ending 30 September 2012.
Ordinary resolution number 6:
“resolved that Deloitte & Touche (as recommended
by the audit committee and the board) be and are
hereby reappointed as external auditors of the
company to hold office for the ensuing period
terminating on the conclusion of the next AGM of
the company. It is noted that Mr Bongisipho Nyembe
(IRBA no 841323) from Deloitte & Touche will
presented to shareholders as required in terms of
section 30(3)(d) of the Act.
ORDINARy BUSINESSAppointment of chief financial officerOrdinary resolution number 1:
“resolved that Ms T Ramano, who was appointed
to the board as the chief financial officer (CFO) of the
company with effect from 1 August 2011, whose
period of office terminates in accordance with the
company’s memorandum of incorporation (MOI) on
the date of this AGM and who is eligible for re-
election, be and is hereby elected as an executive
director of the company in the position of CFO. A
brief curriculum vitae for Ms Ramano appears on
page 88 of this report.”
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.
Re-election of directors retiring by rotationThe memorandum of incorporation (MOI) provides
that one-third of the company’s directors will retire at
every AGM. Mr S Abdul Kader, Ms Z Kganyago,
Ms N Langa-Royds and Mr J Shibambo, who are
required to retire by rotation, have offered themselves
for re-election and are recommended for re-election
by the nominations committee. Brief résumés of each
of the directors standing for re-election appear on
pages 88 and 89 of this report.
Ordinary resolution number 2:
“resolved that Mr S Abdul Kader, who is required to
retire as a director of the company at this AGM in
terms of the MOI and who, being eligible, offers
himself for re-election be and is hereby reappointed
as a director of the company 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.
Ordinary resolution number 3:
“resolved that Ms Z Kganyago, who is required to
retire as a director of the company at this AGM in
terms of the MOI and who, being eligible, offers
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Pretoria Portland Cement Company Limited204
for the year ended 30 September 2011
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.
Ordinary resolution number 10:
“resolved that Ms B Modise, who is an independent
non-executive director of the company, be and is hereby
re-elected as a member of the audit committee.”
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.
Non-binding approval of the remuneration
policy
Ordinary resolution number 11:
“resolved that the company’s remuneration policy,
as set out in the remuneration report on page 90 of
the annual report of which this notice forms part, 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.
SPECIAL BUSINESS
Authorise financial assistance to executive
directors and prescribed officers for
participation in the forfeitable share plan
Special resolution number 1:
“resolved that, as a special resolution, in terms of
Section 45 of the Act, the shareholders of the
company hereby approve of the company providing,
at any time during the period of 2 (two) years
commencing on the date of this special resolution,
any direct or indirect financial assistance, as
contemplated in section 45 of the Act, to executive
directors and prescribed officers of the company
solely for the purpose of such persons participating in
the forfeitable share plan (FSP) provided that:
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.
Authorisation for auditors’ remuneration
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 past year’s audit.”
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.
Appointment of members of the audit
committee
The nominations committee and the board has
recommended that Mr T Ross, Ms Z Kganyago and
Ms B Modise, whose term of office as audit committee
members expires on the date of this AGM and who
are standing for re-election, are independent in
accordance with the requirements of the Act and
possess the required qualifications and experiences.
Brief résumés of these directors appear on page 88 of
this report.
Ordinary resolution number 8:
“resolved that Mr T Ross, who is an independent
non-executive director of the company, be and is
hereby re-elected as a member of the audit
committee.”
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.
Ordinary resolution number 9:
“resolved that Ms Z Kganyago, who is an
independent non-executive director of the company,
be and is hereby re-elected as a member of the audit
committee.”
notiCe of annuaL generaL meeting Continued
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integrated annual report 2011205
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performance vesting conditions governing the
vesting of a significant majority of the awards.
Further, through the delivery of real shares,
participants will be shareholders in the company
from the award date.
(2) On approval of the FSP no further awards will be
made to participants under any of the company’s
existing share plans, namely the long-term
incentive plan (a cash-settled share appreciation
right scheme, used for annual allocations) and
the restricted share scheme (a cash-settled
conditional share scheme, used on an ad hoc
basis). The FSP will replace both the long-term
incentive plan and the restricted share scheme
and, in line with King III, the company intends to
make regular annual awards under the FSP. The
indicative accounting cost of FSP awards will be
similar to what it would have been, had the
company made a regular annual award under the
long-term incentive plan on the same date.
(3) Notwithstanding the fact that the FSP will not
result in any shareholder dilution, the company
has adopted quasi dilution limits to ensure that
the FSP, together with outstanding awards under
the long-term incentive plan and restricted share
scheme, remain affordable. The maximum
aggregate number of shares which may at any
one time be allocated under the proposed FSP
and the FSP approved for employees other than
executive directors and prescribed officers, shall
not exceed 5% of the number of issued shares as
at 1 September 2011, either alone or when
aggregated with the Long-Term Incentive Plan
and Restricted Share Scheme, in each case as
determined pursuant to the provisions applicable
to the relevant existing share plans.
(4) Participants will receive forfeitable shares and will
have all shareholder rights in respect of the
shares, including dividend and voting rights. The
shares cannot be disposed by the participant
prior to the vesting date and will be subject to
forfeiture restrictions.
(5) The award of forfeitable shares will comprise
retention awards and performance awards. The
vesting of retention awards will be subject to
• The recipient/s of such financial assistance, and the
form, nature and extent of such financial assistance,
and the terms and conditions under which such
financial assistance is provided, are determined by
the rules of the FSP as approved by the board, from
time to time
• The board may not authorise the company to
provide any financial assistance pursuant to this
special resolution unless the board meets all those
requirements of Section 45 of the Act which it is
required to meet to authorise the company to
provide such financial assistance”
The 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.
additional information in respect of special
resolution number 1
Participation in the Forfeitable Share Plan (FSP) for
employees other than executive directors and
prescribed officers was approved by shareholders at
an extraordinary general meeting held on 1
September 2011. Certain shareholders had
reservations regarding the terms of participation by
executive directors and prescribed officers in the FSP
and participation by these employees were not
approved. The remuneration committee has
evaluated the concerns, taking into account the
company’s business requirements, market practice
and sound corporate governance standards and the
revised salient terms of the FSP for executive directors
and prescribed officers are described below.
Salient features of the FSP relating to executive
directors and prescribed officers
(1) In line with local best practice and following the
adoption of a FSP for employees other than
executive directors and prescribed officers on
1 September 2011, the company intends to
adopt an FSP for executive directors and
prescribed officers (participants). The rationale
behind the introduction of the FSP is to align
participants closely with shareholders, with
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Pretoria Portland Cement Company Limited206
for the year ended 30 September 2011
The remuneration committee will set applicable
performance conditions for each annual award,
taking into account the business environment at
the time of making the awards.
(8) The company has considered the proposal by
certain shareholders of staggered vesting
between three and five years. However, due to
various reasons, including alignment with the
performance and vesting periods of the existing
share plans and alignment with King III and the
market, the company has concluded that the
performance condition of the first award will be
measured over a performance period of three
financial years. The vesting condition will be
measured over a period of three years from the
date of award. As the company will be making
annual awards instead of once-off or irregular
awards, vesting in smaller tranches will occur on
an annual rolling basis from year three, which will
have the same effect as staggered vesting.
(9) Good leavers will receive a proportion of their
unvested awards, pro-rated for services and the
extent to which the performance conditions have
been met at the date of termination of
employment. Bad leavers will forfeit all their
unvested awards.
general authority to repurchase ordinary shares
Special resolution number 2 – general authority
to repurchase shares
“resolved that the board is hereby authorised by
way of a renewable general authority, in terms of the
JSE listings requirements, the Act and as permitted in
the MOI, to approve the purchase of its own ordinary
shares by the company, and the purchase of ordinary
shares in the company by 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
continued employment for the duration of a
three-year vesting period (vesting condition). The
vesting of performance awards will be subject to
a vesting condition and the satisfaction of
company performance conditions (performance
conditions) over a three-year period (performance
period). The weighting between retention shares
and performance shares for the chief executive
officer and executive directors has been revised
from the previously proposed weighting of 70:30
and 60:40 respectively to the following:
Position grade
Perform-ance
awardRetention
award
Chief executive officer* 1 75% 25%
Executive directors 2 75% 25%
Executives ** 3 50% 50%
* The incumbent chief executive officer will be
excluded from any awards under the FSP due to the
termination of his service contract at the end of May
2012.
** The prescribed officers fall within Grade 3, and
shareholders have approved the above mentioned
performance and retention award mix for Grade 3
employees on 1 September 2011.
(6) The shares will be settled by way of a market
purchase of shares. No shares shall be issued, nor
will treasury shares be used for settlement under
the FSP. As such, the FSP will not result in any
dilution to shareholders.
(7) A performance condition will be used to
determine the extent to which the performance
award will vest. The company has considered
many alternatives in this regard, but have
concluded that a headline earnings per share
(HEPS) related performance condition remains
the most appropriate measure. The HEPS
performance condition will be related the growth
in HEPS, which should be equal to the growth in
the consumer price Index plus 3% per annum,
over a three-year performance period. In line
with King III, vesting will occur on a sliding scale.
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confirming that the board has authorised the
repurchase, and that the company has 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 the JSE Listing Requirements, unless the
company 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 2 to be adopted: at least 75%
(seventy five percent) of the voting rights exercised
on the resolution.
Additional information in respect of special
resolution number 2
The reason for special resolution number 2 is to grant
the company or any of its subsidiaries a general
authority in terms of the Act for the repurchase by
the company or any of its subsidiaries of shares issued
by the company. 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 general meeting
of the company, provided that the general authority
does not extend beyond 15 (fifteen) months from the
date of this AGM. The passing and registration of this
special resolution will have the effect of authorising
the company or any of its subsidiaries to acquire
shares issued by the company.
understanding or arrangement between the
company and/or any of its subsidiaries and the
counterparty
• This general authority will only be valid until the
company’s 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, giving
such details as required in terms of the JSE listings
requirements, as soon as the company or its
subsidiaries has/have repurchased ordinary shares
constituting, on a cumulative basis, 3% (three
percent) of the number of ordinary shares in issue,
prior to the repurchase pursuant to which the 3%
(three percent) threshold is reached, and in respect
of every 3% (three percent) 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 company’s 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
• Any such general repurchases are subject to
exchange control regulations and approvals at that
point in time, where relevant
• A resolution has been passed by the board of the
company and/or any subsidiary of the company
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Pretoria Portland Cement Company Limited208
for the year ended 30 September 2011
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 its 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 months after the date
of the notice of AGM. For this purpose, the
assets and liabilities will be recognised and
measured in accordance with the accounting
policies used in these audited annual group
financial statements
– The share 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 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 this documentation
The additional information required by the JSE listings
requirements regarding this general authority appears
in the annual report, of which this notice of AGM
forms part, as indicated below:
• Directors and management of the company:
pages 88
• Major shareholders: page 200
• Share capital: page 119
• Directors’ interest in share capital: page 119.
Directors’ responsibility statement
The directors, whose names are given on pages 88 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 2, and certify that, to the best of
their knowledge, 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
integrated annual report and notice of AGM contain
all information required by the JSE listings
requirements.
material changes
Other than the facts and developments detailed in
this report, there has been no material change in the
financial or trading position of the company or any of
its subsidiaries since 30 September 2011.
Legal statement
There are no legal or arbitration proceedings, either
pending or threatened, 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 the authority only if at some
future date the cash resources of the company
exceed its requirements. In this regard, the directors
notiCe of annuaL generaL meeting Continued
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integrated annual report 2011209
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and Kwame Nkrumah Avenue, Harare, Zimbabwe
(PO Box 2208, Harare, Zimbabwe), by no later than
12:00 on 27 January 2012. 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 the AGM.
A proxy may delegate the proxy’s authority to act on
behalf of a shareholder to another person, subject to
any restrictions set out in the instrument appointing
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.
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 proxy’s 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 the revocation instrument is delivered
to the company as required in the first sentence of
this paragraph.
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.
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
meeting, must complete the form of proxy enclosed
in accordance with the instructions and lodge it with
or mail 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
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Pretoria Portland Cement Company Limited210
for the year ended 30 September 2011
PROOF OF IDENTIFICATION REQUIRED
The Act requires that any person (shareholder or
proxy) who wishes to attend or participate in a
shareholders’ meeting must present reasonably
satisfactory identification at the meeting. A green
bar-coded identification document issued by the
South African Department of Home Affairs, a driver’s
licence or a valid passport will be accepted as
sufficient identification.
By order of the board
JHDLR Snyman
Company secretary
7 November 2011
Sandton
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 company’s memorandum
of incorporation 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.
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integrated annual report 2011211
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PRETORIA PORTLAND CEmENT COmPANy LImITED Incorporated in the Republic of South Africa(Registration No: 1892/000667/06)JSE share code: PPCZSE share code: PPCISIN code: ZAE000125886(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, 30 January 2012, 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 at the meeting. Such ordinary shareholders must not return this form of proxy to the transfer secretaries.
I/We of
(name and address in block letters)
being a member/s of the above company and holding ordinary shares
therein, hereby appoint
of or, failing him/her,
the 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, corner Rivonia Road and Daisy Street, on Monday, 30 January 2012, and at any adjournment of that meeting as follows:
In favour of Against Abstain
Ordinary
1 To confirm the appointment of T Ramano as CFO
2 Re-election of S Abdul Kader
3 Re-election of Z Kganyago
4 Re-election of N Langa-Royds
5 Re-election of J Shibambo
6 Reappoint 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 company’s remuneration policy
Special resolution
1 Financial assistance for director participation in the FSP in terms of section 45 of the Act
2 Repurchase of own shares
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 4).
Signed at on 20
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 overleaf
form of ProXY
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Pretoria Portland Cement Company Limited212
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 these notes.
8. A shareholder’s authorisation to the proxy, including the chairperson of the AGM, to vote on such shareholder’s 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 company’s 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 company’s 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 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 (PO Box 2208, Harare, Zimbabwe) to be received by no later than 12:00 on 27 January 2012 (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.
EXPLANATORy NOTES REgARDINg PROXy1. 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 alternate proxies of the shareholder’s 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 shareholder’s 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 shareholder’s 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 48 hours 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.
eXPLanatorY notes regarding ProXY
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The front section of this document is printed on Magno Matt paper. This paper only uses wood from sustainable forests, is manufactured from TCF (totally chlorine free) pulp and is acid free.
The financial section of this document is printed on Cartridge. A minimum of 30% fibre used in making this paper comes from well-managed forests independently certified according to the rules of the Forest Stewardship Council.
BASTION GRAPHICS
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FOCUSEDINTEGRATED ANNUAL REPORT 2011
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www.ppc.co.za