Pretoria Portland Cement Company Limited. Annual Report 2002

Transcription

1 Pretoria Portland Cement Company Limited Annual Report 2002

2 PPC is the leading supplier of cement and lime in southern Africa Vision To become a significant international supplier of cement, lime and related products by Mission Through their dedication and efforts for more than a century, the people of PPC have built the leading cement and lime company in Africa. It is a proud achievement. The group s products have also played a vital part in the development of southern Africa. PPC is committed to excellence in satisfying customers needs, and strives for total quality in everything it does. Contents 2 An introduction to GRI 3 Financial highlights 4 Chairman s review 8 The Kambuku process 10 CEO s report 14 Organisational profile 16 Governance structure and management systems 24 Board of directors 26 Management 28 Environmental performance indicators 34 Social performance indicators 36 Certificate by secretaries 37 Approval of annual financial statements 37 Report of the independent auditors 38 Report of the directors 41 Value added statement 42 Operational review: Cement 44 Operational review: Lime 45 Operational review: Packaging 46 Seven-year review 49 Definitions 50 Accounting policies 54 Financial results 92 Share performance 97 Administration 97 Financial calendar 98 Award winners 100 GRI content index Our PPC Achievers Award programme recognises those employees who add value through superior performance and innovation. Every employee is entitled to be nominated. In 2002, 13 finalists were acknowledged for their extraordinary contributions. Overall winner, Sguntsu Stemela, (picture 12) proposed an elegant engineering solution saving the company a million rand per annum. His contribution was further recognised when he went on to win the prestigious Barloworld CEO s Award competing against Barloworld employees from 32 countries across the world. For more information on our company and our products, contact Pretoria Portland Cement Company Limited. Telephone , Fax , [email protected], Web

3 1 2 3 Kambuku promotes formal and informal recognition of performance excellence and innovation. 4 Advancing people to take up the challenge

4 An introduction to GRI This report has been prepared with reference to the Global Reporting Initiative (GRI) Value based management is the framework for our approach to creating an enduring company. GRI is an international framework for providing comprehensive information to stakeholders of a company on its economic, social and environmental performance the triple bottom line. The Initiative was founded in 1997 and is endorsed by the United Nations. Its goal is to enhance the quality, rigour and utility of sustainability reporting. For further information on GRI refer to 2

5 Financial highlights % * change Revenue (Rm) (continuing operations) 2 570, ,9 26 Operating profit (Rm) (continuing operations) 612,2 441,1 39 Operating profit from continuing operations including income from associate companies (Rm) 645,8 464,7 39 Net profit (Rm) before exceptional items 441,5 356,0 24 after exceptional items 600,3 413,2 45 Earnings per share before exceptional items (cents) 824,5 711,8 16 Headline earnings per share (cents) 829,5 709,7 17 Dividends per ordinary share (cents) ordinary special Net asset value per share including investments at market value (cents) 4 299, ,9 2 Total assets (Rm) 3 713, ,6 22 * Restated Revenue per employee (R 000) Operating margin (%) Return on total assets (%) 778,5 684,5 597,4 547,7 485,6 17,4 14,8 18,4 23,0 25,1 16,8 13,3 15,2 19,7 21,

6 Chairman s review Our people are the key to PPC s future success Challenging global best practices, applying VBM and achieving success in all our businesses Chairman: Warren Clewlow (first picture left) Parktown Award Winners (refer page 98) Another pleasing year for PPC Revenue rose by 26% to R2 570,2 million (2001: R2 047,9 million), and operating profits including income from associate companies rose by 39% to R645,8 million (2001: R464,7 million). These results include Portland Holdings Limited of Zimbabwe (Porthold) which is being consolidated for the first time. They reflect the continued improvement made by all our business units, the successful application of VBM and the benefits of embracing and challenging global best practices. This is in spite of selling price controls, hyperinflationary input costs and inadequate operating margins in Zimbabwe. Domestic cement sales volumes rose by 5% reflecting a small increase in our local market share. South African based exports increased 39% with improved tonnages to the rapidly growing markets of West Africa, Mozambique and the Indian Ocean islands. In Zimbabwe, our cement sales volumes rose by 12% and exports to neighbouring territories rose by 18%. The lime division experienced a decline of 3% in lime and burnt dolomite sales following the planned Corex plant shutdown at Saldanha Steel. Notably, volumes have since come back strongly following a very successful start up at Saldanha. Progress was made in addressing lime prices which are currently still 40% below international levels. The packaging division continued to show improvement. 4

7 Net profit per share (cents) Return on shareholders interest (%) Share price on 30 September (cents) , ,7 13,2 15,5 22, Capital expenditure remained at low levels and continued below the annual depreciation charge as it has done for the last few years. At the same time, operational cash flows have increased in line with operating profits with the result that operational cash flows rose by 26% to R792,2 million (2001: R628,8 million). These cash flows were further bolstered by proceeds from the sale of PPC Logistics (Pty) Limited, Natal Portland Cement Company (Pty) Limited (NPC) and Ash Resources (Pty) Limited (Ash Resources) which amounted to R504,3 million in total. The acquisition cost of Porthold amounting to R435,7 million comprised net cash payments amounting to R185,2 million and the issue of PPC shares amounting to R250,5 million. No major capital projects were undertaken in the year. Dividends paid during the year amounted to R523,9 million (2001: R172,5 million) which included the special dividend of R5,00 per share declared last November. At the same time, and as a direct result of these higher dividends, the taxation charge by way of secondary tax on companies increased to R55,6 million (2001: R16,6 million). The continuing strong cash flow from operations, and the proceeds from the sale of NPC and Ash Resources, has built the group s cash resources. As this cash can currently be more efficiently invested by our shareholders, the directors have declared a final cash dividend of 400 cents and a special dividend of 600 cents per share bringing total dividends declared for the year to 1135 cents, an 18% increase over last year. International economies are a concern While the recession experienced in the United States and the downturn experienced by other global economies have ended, these economies remain vulnerable. At the same time, the continued fall in international equity markets is indicative of the high level of uncertainty that currently prevails in international markets and could delay any real economic growth. 5

8 Chairman s review continued Locally economic growth is showing promise but a number of concerning fundamentals are returning The anticipated improvement in gross fixed capital formation (GFCF) began to materialise in 2002 with real GFCF rising by 7,5% in the second quarter of Pleasingly, private business, public corporations and general government all increased their levels of infrastructural spend. After 13 quarters of almost uninterrupted decline, expenditure by public corporations increased by a seasonally adjusted rate of 6,5%. The positive impact of the Coega harbour project and industrial development zone near Port Elizabeth is still to be felt. Government expenditure also grew by over 6% largely as a result of the spending related to improving the road network, urban renewal and on improving the infrastructure ahead of the World Summit on Sustainable Development. Expenditure by the private sector grew at between 7% and 9% with strong growth in platinum mining infrastructure and in developments aimed at the growing tourist market. Pleasingly there was a significant increase in expenditure on much needed residential housing. We welcome these developments as expenditure on long-term infrastructure projects creates jobs, reflects confidence to the international investor community and ultimately provides the country with competitive logistical and societal support services. The capability of government to provide both the finance and organisational capability to deliberate, prioritise and deliver on important infrastructure projects has improved significantly. It is also an important element of the New Partnership for Africa s Development (NEPAD) initiative in that it signals confidence in the region. The levels of service from the rail infrastructure has systematically declined in recent years. There is an enormous shortage in the availability of railway rolling stock and consequently manufacturing companies and exporters have missed scheduled deliveries and shipments to local and export customers. This has resulted in South African companies increasingly being regarded as unreliable suppliers, which is not conducive to building up long-term relationships with local and export customers. I am pleased to say that it appears likely that the backlog in replenishing railway rolling stock is being addressed and that we expect to see an improved situation in the next few years. Disappointingly, the better performance of the economy over the last three years has done little to reverse the downward trend in formal sector employment or to relieve poverty. The recent increases in interest rates, driven by the relatively weak rand and rapid rise in consumer and producer prices are placing strains on the economy. The weaker rand has driven up inflation in 2002 and, while it is possible that interest rates might increase further in the short term, we expect that interest rates and inflation will turn favourably in 2003 and that the economy will once again move towards targeted levels. Appeal Court ruling in favour of PPC The company has always maintained that the search and seizure operation conducted by the Competition Commission on the premises of PPC and Slagment (Pty) Limited (Slagment) in August 2000 was unwarranted. The company was co-operating with the Commission at the time with regard to a pricing complaint against Ash Resources. The three major South African cement companies (including PPC) had been shareholders in Slagment and Ash Resources for many years and PPC had management responsibility for Slagment. While the company maintains a cooperative stance towards the resolution of such matters, the circumstances in this instance were such that it had no option but to also vigorously defend its corporate integrity and longstanding reputation. Whereas the High Court initially ruled in favour of the Competition Commission in September 2000, I am pleased to advise that the Supreme Court of Appeal unanimously ruled in favour of PPC and Slagment in May 2002 and so vindicated the company s position. Minerals and Petroleum Resources Development Bill PPC strongly supports the vision of a globally competitive mining industry that draws on the human and financial resources of all South Africa s people and offers real benefits to all South Africans. The company is already well advanced with regard to a number of the requirements of the new Bill and its related charter including procurement, community and human resources development, details of which are set out later in this report. Board changes I am pleased to announce that John Blackbeard was appointed as chief operating officer of PPC with effect from 1 August His contribution to the success of PPC Cement over six years is clearly evident and his experience and expertise will be of great value to the wider group in this new role. At the same time I would like to thank Paul Stuiver who resigned as a director 6

9 with effect from 1 August 2002 following his appointment as chief executive officer of Barloworld Logistics earlier in the year. His valuable contribution to PPC over 19 years is sincerely appreciated. Prospects It remains difficult to predict our southern African markets with any confidence. Recent increases in interest rates and inflation are of major concern to PPC and our customers. At the same time, the economy is enjoying the benefits of export orientated growth supported by a weaker rand which is not necessarily sustainable in the medium to long term as the economy reverts to targeted levels of inflation and interest rates. Also, the threat of a US/Iraq war is causing a rise in fuel prices and inhibiting global economies. Notably, increasing trends in GFCF are evident in all sectors of the South African economy and consequently the company is expecting continued growth in cement sales in the year ahead. Lime and burnt dolomite sales should also reflect similar growth, bearing in mind that the Corex plant at Saldanha Steel was shut down for nine weeks in 2002 for refurbishment. Our packaging business will benefit from increased sales and higher capacity utilisation. In Zimbabwe, Porthold is unlikely to meaningfully contribute to earnings in 2003 as hyperinflation, price controls and the shortage of foreign currency are expected to continue for some time. In the medium term, this business remains well positioned to benefit from any economic improvement in Zimbabwe and from exports. The share of associate companies profits will fall in 2003 following the sale of NPC and Ash Resources. Operating costs will be negatively affected as the full impact of the weaker rand and higher producer inflation comes through. Notwithstanding these developments, improved operating profits are expected in all our businesses and the group remains well poised to benefit from any market conditions and opportunities that may arise. The strong cash flows should continue and no major capital expenditure is envisaged in Appreciation PPC has enjoyed another outstanding year and I would like to take this opportunity of thanking John Gomersall, the PPC executive team and all our employees for their continued contribution and dedication. Their embracing of VBM through the Kambuku project, and their hard work and loyalty has been and remains the key to PPC s future success. Warren Clewlow Chairman 6 November Gross fixed capital formation by type of asset (R 000) 98/3 98/4 99/1 99/2 99/3 99/4 00/1 00/2 00/3 00/4 01/1 01/2 01/3 01/4 02/1 02/2 Year/Quarter Residential buildings Non-residential buildings Construction works Source: SARB Quarterly Bulletin September

10 The Kambuku process Challenging employees at every level in the organisation, developing internal talent The Kambuku process, now in its third year of implementation, has embedded the principles and processes of organisational performance management deeply into the everyday routines and behaviours of the organisation. Daily, our employees meet, pool their strength and pursue the goal of improving performance and exceeding targets. By their own reports, they thrive on the challenge. The implementation of this integrated set of systems to coach, enhance and encourage superior employee performance has delivered measurable and lasting benefits. At the same time, our pool of internal talent is being developed into a highly participative, committed and globally competitive team. These internal skills represent the future of the company. The winner of this year s PPC Achievers Award is a man with only five years formal education. He was, nevertheless, sufficiently motivated and supported to propose an eloquent engineering solution to an unsolved production problem. His assistance will result in savings of a million rand per annum. This example, and there are many more, confirms that if we continue to apply the formula for the creation of a fertile environment, employees at every level of the organisation will rise to the challenge of adding value. Our employee perception monitor reveals that more than 90% of our employees report a clear understanding of the targets of the organisation, the operation and their own team. The same number of employees report that workplace communication methods are effective in assisting them to achieve their targets, and are satisfied with a whole range of issues pertaining to climate in the organisation. These results do not surprise us. They are the result of three years of deliberate daily effort and coaching at each operation. These efforts have now become the PPC way of doing business and, most importantly, this is one of our ways of creating sustainable competitive advantage. We see no end in sight and are delighted with the returns on this investment. Our employees have added value for all stakeholders, and as a result have been rewarded by the company gainshare scheme for their contribution to performance improvement. The Department of Trade and Industry s Competitiveness Fund has also endorsed the Kambuku process and granted it financial support. We enter the new financial year confident of the solid foundation we have built, and keenly focused on achieving new heights as we strive to be southern Africa s nation-building company. 1 Kambuku is rewarding employees through a gainshare programme for their contribution to performance improvement

11 1 Kambuku delivers measurable and lasting benefits in both value and customer service Targeting global competitiveness and achieving better

12 CEO s report Market capitalisation (Rm) Cash generated from operations (Rm) Wealth created (Rm) , , ,5 415,4 405, Challenging our strategies to ensure business sustainability and growth Executive directors (from left to right) John Blackbeard, Harley Dent, Peter Nelson, John Gomersall, Rod Burn (refer page 24) The company s strategies can be summarised as follows: Focus on core businesses Generate superior cash flow returns Achieve global competitiveness Practice sound corporate, environmental and social governance Build on our strengths through synergistic growth Focus on core businesses The historical structure of the cement industry in place over many decades, resulted in PPC being invested in minority stakes in several businesses such as Natal Portland Cement, Ash Resources and Slagment. Since the demise of the cement cartel in 1996, these investments could no longer be regarded as core investments and we had planned to exit them as they played no role in our future strategy and absorbed too much of management s time and attention. During the year we were finally successful in realising acceptable value in disposing of our stakes in Natal Portland Cement and Ash Resources. Our stake in Slagment is currently also under consideration. Apart from unlocking value for our shareholders, this will allow management to search for future growth opportunities where we have a direct involvement in value creation. Generate superior cash flow returns on investment (CFROI) All three divisions made further progress in improving their CFROI this year. Both 10

13 The human intellect is the only sustainable competitive advantage Cement s and Afripack s CFROI exceeded the cost of capital and Lime is expected to do so in the year ahead. Maintaining returns above the cost of capital will become more difficult, as the impact of the weaker rand and the high level of producer inflation will have a somewhat delayed impact on our operating costs and the replacement cost of plant and equipment. Approximately 40% of the cost of a new production line is directly or indirectly linked to the exchange rate. The company will need to start replacing and rationalising cement production lines within a few years and it is imperative that acceptable returns are generated in the interim to convince our shareholders that the business is sustainable and to encourage their support for the re-investment required. This issue is not unique to PPC but is a problem that faces many of the capital intensive industries in the country. Approximately 40 45% of our delivered cement cost is similarly either directly or indirectly tied to the fortunes of the rand. Delivery costs of cement over the vast distances of our country account for almost 25% of total cost. The deterioration in the competitiveness of our harbour and rail infrastructure is a matter for grave concern. The inability of Spoornet to provide a competitive and reliable service has resulted in increasing volumes having to be transported by road at greater cost and a burden to our road infrastructure. During this past year the company had to cancel some export contracts and was not able to take up other opportunities due to railage capacity constraints. While much debate has recently taken place in the media over the rising prices of locally produced commodities, many observers fail to recognise that the economy is more open to international influences than ever before. The weaker currency, high international fuel prices and sharply rising costs of other imported inputs continue to impact on operating costs. In spite of this, South African cement prices in US dollar terms have declined and are now lower than in 1998 and are still in the lowest quartile globally. The impact of increased transport costs, imported inputs and replacement capital equipment costs, will necessitate real price increases in future to generate appropriate returns. 11

14 CEO s report continued Achieve global competitiveness Progress achieved during the year in our global competitiveness programme, which commenced six years ago, has helped alleviate some of the cost increase pressures referred to above. Our activities and successes can be summarised into the following areas: Equipment operating efficiencies and benchmarking Reduction in operating costs Reduction in overheads and optimisation of information systems Reduction of energy costs through safe recycling of waste materials Optimisation of logistics costs Creating globally competitive people and implementing best operating practices The implementation of our VBM and Kambuku programme continues as it is the cornerstone of creating globally competitive people. In the modern rapidly changing world, the human intellect is the only sustainable competitive advantage. Attracting the best people, motivating and retaining them, developing them, releasing their energy and intellect to outcompete your competitors, is the real key to success. This is particularly true in South Africa where sadly so many of our people start this race for global competitiveness with historical disadvantages. Kambuku is therefore focused on developing and releasing the human intellect of all our people to continuously enhance their value creation for the benefit of our customers and shareholders, while creating value for themselves, their families and their communities, thereby improving their quality of life. At the same time, the programme addresses our requirements for future staffing and our employment equity and black economic empowerment plans in an integrated and natural way. Practice sound corporate, environmental and social governance For many years the company has been at the forefront of sound practices which are increasingly being demanded in terms of good corporate and social governance. Policies and control systems for managing risk, our environment, business ethics, black economic empowerment, affirmative procurement, occupational safety, health and hygiene, HIV/Aids, product quality and many others are firmly entrenched as a way of daily operational life in the company. Where relevant international standards exist, the company has been certificated to those standards. In all cases the company s value of caring for the communities and the environment in which we operate is paramount. Where our moral responsibilities indicate that merely satisfying legislation or standards is inadequate, we will go beyond those parameters and act according to what we believe is right. In line with this philosophy, the company has taken the first step toward reporting in terms of the Global Reporting Initiative s Sustainability Reporting Guidelines on economic, environmental and social performance. This structured approach will incorporate annual reporting on the management of these issues. Many of the company s strategies have to be extremely long term in nature, and consequently our environmental and social practices have become a natural part of our everyday business life. We believe they are part of our corporate and social responsibility and are important to long-term business sustainability and success. This is perhaps one of the reasons that the company achieved its 110th anniversary this year. Build on our strengths through synergistic growth Your company has not only prospered and grown for more than a century, but importantly has demonstrated in the last few years that it can hold its own in an extremely competitive industry competing against major international players. Future growth in the domestic economy and an economic recovery in Zimbabwe will present the opportunity for organic growth for which the company is well positioned. We believe that the company has developed an international competitive ability through its processes and people that can be judiciously expanded internationally to generate further growth. We continue to look for opportunities that will enhance value creation, expand our geographic footprint and meet our criteria for affordability, risk profile, potential competitiveness and sustainability. John Gomersall Chief executive officer 6 November

15 Developing human intellect and sharing knowledge 7 Kambuku develops and releases the human intellect of all our people to enhance value creation

16 Organisational profile Pretoria Portland Cement Company Limited was established in 1892 as De Eerste Cement Fabrieken Beperkt and listed on the Johannesburg Stock Exchange in At year-end it was a 66,2%-owned subsidiary of Barloworld Limited. PPC Cement (100% owned) is the leading supplier of cement in southern Africa. Its eight manufacturing facilities in South Africa, Zimbabwe and Botswana have capacity to produce 6,4 million tons of cementitious products per annum. The company s distribution network supplies quality branded cements to the building and construction industry, concrete product manufacturers and retail outlets such as builders, merchants, hardware stores and DIY centres. Related products include aggregates from the company s quarries in Botswana and Suremix dry mortar mixes and application systems. Slagment (33,3% owned) processes and sells slag by-products from steelmaking operations in Gauteng, South Africa. Kgale Quarries (50% owned) in Gaborone supplies aggregate to PPC Readymix and the construction industry in Botswana. The company s cementitious brands include the market-leading Surebuild brand in South Africa and Unicem in Zimbabwe. In addition to serving the southern African domestic markets, cement is exported to other African countries and the Indian Ocean islands. PPC Lime (100% owned) is the leading supplier of metallurgical grade lime, burnt dolomite, limestone and related products in southern Africa. It operates one of the largest lime plants in the world at Lime Acres in the Northern Cape province of South Africa. Lime is one of the world s most widely used chemicals. Its major applications include its use as a flux in pyrometallurgical industries (eg steelmaking) and as a neutraliser, coagulant or chemical catalyst in gold extraction, water purification, effluent treatment, sugar refining and the manufacture of industrial chemicals. Hydrated lime is used primarily for water purification and soil stabilisation. Graded and crushed limestone products are sold to the water treatment and metallurgical industries. Dolomite products are sold primarily to the metallurgical industries. PPC Saldanha (100% owned) is a specialised bulk materials handling facility. It handles raw materials and waste products as an outsourced service to Saldanha Steel in the Western Cape province, South Africa, and is a world first. Afripack (100% owned) manufactures paper sacks for the cement industry; paper bags for the manufacturing and food sectors as well as laminated wrapping materials at its factory in Durban, South Africa. It has been a major supplier of flexible paper packaging products to the South African and export markets since 1933 and has the most modern plant of its kind in South Africa. Cement plants Limestone quarries Aggregate quarries Lime quarries Lime plant Gypsum quarry Head office Hercules 2. Jupiter 3. Slurry 4. Dwaalboom 5. De Hoek 6. Riebeeck 7. Port Elizabeth 8. Colleen Bawn 9. Bulawayo 10. Beestekraal quarry 11. Dwaalboom quarry 12. Slurry quarry 13. Zoutkloof quarry 14. Riebeeck quarry 15. Grassridge quarry 16. Colleen Bawn quarry 17. Lime Acres 18. Lime Acres quarry 19. Mount Stewart quarry 20. Laezonia quarry 21. Mooiplaas quarry 22. Kgale quarry

17 Barloworld PPC 66,2% 100% 100% PPC Cement * PPC Lime Afripack 100% Mooiplaas Dolomite 33,3% Slagment 100% Porthold^ 100% PPC Botswana ~ 50% Kgale Quarries ~ 100% PPC Saldanha 100% PPC Slag * PPC Cement is a division of PPC ^ Registered in Zimbabwe ~ Registered in Botswana pics to be placed Kambuku is developing our internal resources in a natural way

18 1 2 Our code of ethics These simple phrases will guide the way we behave both inside and outside our organisation: 3 Obey the law Be fair Be honest Respect others Protect the environment 4 Governance structure and management systems Corporate governance The company is listed on the JSE Securities Exchange South Africa (JSE) and has a secondary listing on the Zimbabwe Stock Exchange. By virtue of its JSE listing, the company currently complies with the Code of Corporate Practices and Conduct forming part of the King Report on Corporate Governance issued in In respect of its financial year ending 30 September 2003 and thereafter, the company will, under the rules of the JSE be obliged to comply with the Code of Corporate Practices and Conduct contained in the King Report on Corporate Governance in South Africa published in March 2002 (King II Report). In terms of non-financial aspects, the company will complement these expanded reporting requirements by adopting the Global Reporting Initiative s Sustainability Reporting Guidelines on economic, environmental and social performance. Disclosures in this report relate to the: adoption of business principles and codes of practice, verified by board minutes, established policies, standards and other documentation; implementation of these principles through review of procedures and practices that evaluate adherence to these principles, evidenced by actions of the executive directors, designated policies and directives and supported by appropriate monitoring systems. 16

19 The company has raised corporate accountability to a level of compliance this year that will enable the company to achieve full compliance with the King II Report by 30 September A philosophy of balancing disclosures to achieve the most meaningful overall understanding of the company s corporate governance structures, as well as economic (including financial), environmental and social performance has been adopted. Observance of the law in all of the countries in which the company operates is a minimum requirement. Board accountability and delegated functions As a unitary body, the board of directors of PPC seeks equilibrium between enterprise and governance constraints. In addition, the directors believe that the governance principles and practices adopted are appropriate to the company s operations for the benefit of shareowners and are also in the interests of relevant stakeholders. Specifically, the board has reserved to itself the following responsibilities: approval of the strategic plan and rolling forecasts of the group, the setting of objectives and review of key risks and performance areas, especially in respect of technology and systems; appointment of the chief executive officer and maintenance of a succession plan; determination of overall policies and processes to ensure the integrity of the company s management of risk and internal control; and against a background of economic, environmental and social issues relevant to the company, monitoring the implementation of board plans and strategies, as well as the mitigation of risks by management. While retaining overall accountability and subject to matters reserved to it, the board has delegated to the chief executive officer and other executive directors authority to run day-to-day affairs of the company. The board has also created audit, compliance and remuneration committees to enable it to properly discharge its duties and responsibilities and to effectively fulfil its decision-making process. Each committee acts within written terms of reference, whereby certain functions of the board are delegated with clearly defined purposes, membership requirements, duties and reporting procedures. Board committees may take independent professional advice at the company s expense when necessary. The committees are subject to regular evaluation by the board in regard to performance and effectiveness. Chairmen of the board committees are required to attend annual general meetings to answer any questions raised by shareowners. Board of directors Five executive and seven non-executive directors, of whom the majority are independent, collectively determine major strategies and policies. Of the non-executive directors, Messrs W A M Clewlow and R K J Chambers having retired from executive service to Barloworld Limited in 1999, are regarded by the company as independent directors, as are Messrs M J Shaw and E P Theron. Effective control is exercised through the executive directors. They are held accountable through regular reports to the board and are measured against agreed performance criteria and objectives appropriate to the current stage of the business cycle and the prospects in each business unit. The non-executive directors are considered to have the skill and experience to bring unrestrained judgement to bear on issues of strategy, resources, transformation, diversity and employment equity, standards of conduct and evaluation of results. In a rapidly changing world, the mix of experience and ability of the directorate is still believed to meet the present and future requirements of the company. The agenda and supporting papers are distributed to all directors prior to each board meeting. Explanations and motivations for items of business requiring decision are given in the meeting by the appropriate executive director. This ensures that relevant facts and circumstances are brought to the attention of directors who, in any event, have unrestricted access to all company property, information and records. Four board meetings were held during the financial year. All of the directors attended these meetings except as indicated in the table below: Date Apologies tendered W A M Clewlow R K J Chambers R J Burn, R H Dent, EPTheron W A M Clewlow The company arranges an induction programme for new directors. This includes visits to the main operations and discussions with management in order to facilitate an understanding of the group. Directors are appraised, whenever relevant, of any new legislation and changing commercial risks that may affect the affairs of the company. In certain circumstances it may become necessary for a non-executive director to obtain independent professional advice in order to act in the best interests of the company. Such a director has unhindered access to the chairman, executive directors and the group secretary. Where a non-executive director takes reasonable action and costs are incurred, these are borne by the company. Each director is elected by members in a general meeting and must retire by rotation every three years. Executive directors retire from the board at 63 years of age whilst nonexecutive directors retire at the next annual general meeting following the director s 70th birthday. Fees 17

20 Governance structure and management systems continued payable to non-executive directors are recommended by the board and fixed by the shareowners in general meeting. The curriculum vitae of each director of PPC is published on pages 24 and 25. There are no contracts of service between any directors and the company or any of its subsidiaries that are terminable at periods of notice exceeding one year and requiring payment of compensation. Details of remuneration, fees or other benefits earned by directors in the past year are given on pages 87 and 88. Ten meetings of the executive directors and senior executives were also held during the year in order to assist the chief executive officer to guide and control the overall direction of the business of the group, monitor business performance and to act as a medium of communication and co-ordination between business units, group companies and the board. Chairman and chief executive officer A key aspect of the company s governance philosophy is that no one individual has unfettered powers of decision. Accordingly, responsibility for running the board and executive responsibility for conduct of the business are differentiated. The roles of the chairman of the board and of the chief executive officer are separate. The chairman is regarded by the company as an independent non-executive director, having retired from executive service to Barloworld Limited in The group secretary The group secretary provides the board as a whole and directors individually with detailed guidance as to how their responsibilities should be properly discharged in the best interests of the company. He is also a central source of guidance and advice to the board and within the company on matters of ethics and good governance. Appointment and removal of the group secretary are matters for the board as a whole. The group secretary is responsible for ensuring that the proceedings and affairs of the directorate, its subcommittees and, where appropriate, members of the company are properly administered. The group secretary also administers the statutory requirements of the company and its subsidiaries in South Africa. Directors have direct access to the group secretary at all times. Dealings in shares of the company by directors and officers are advised to him and a report is tabled at each board meeting. Insider trading No employee may deal either directly or indirectly in the company s shares without the permission of the chief executive officer or on the basis of unpublished price-sensitive information regarding its business or affairs. No director or officer of the company may trade in the company s shares during the embargo period determined by the board in terms of a formal policy implemented by the group secretary. A list of persons regarded as officers for this purpose has been approved by the board and is revised from time to time. Periods of embargo are from the end of the interim and annual reporting periods to the announcement of financial and operating results for the respective periods. A register of directors and officers is available for inspection at the company s registered office in Sandton, South Africa. Accounting and reporting The board places strong emphasis on achieving the highest level of financial management, accounting and reporting to shareowners. Successful harmonisation with International Financial Reporting Standards has been achieved, whilst maintaining full compliance with South African Generally Accepted Accounting Practice. PPC s annual report for 2001 earned a second consecutive award from Ernst & Young for Excellence in Financial Reporting. Audit committee D C Arnold (Chairman), W A M Clewlow, R K J Chambers, M J Shaw, A J Phillips The audit committee comprises a majority of independent non-executive directors. The quorum for a meeting is two independent directors. The head of internal audit and the senior audit partner in charge of the external audit attend all meetings. They have unrestricted access to the chairman and other members of the audit committee. The financial director and any other executives may, at the discretion of the chairman of the audit committee, be invited to attend and be heard. No attendee has voting rights. The audit committee assists the board in discharging its duties relating to the safeguarding of assets, the identification of and exposure to significant risks, the operation of adequate systems and internal control processes and the presentation of accurate and balanced financial statements and reports. It ensures that these comply with all relevant corporate governance disclosure requirements and accounting standards. The board places strong emphasis on maintaining appropriate systems of internal control. An Internal Control Scoreboard is reported to the audit committee for each business operation annually. All defalcations above R1 000 are also reported. During the year under review two meetings were held. In particular, the group risk assessment process was considered and assurance obtained from both the internal and external auditors that adequate internal controls and accounting records are being maintained. Parameters of the audit and of internal controls are discussed between the audit committee and the external auditors as part of the process of each audit. The company requires the external auditors to carry out their audit with due regard for the findings and work of the internal audit function. To this end the 18

21 Building world-class teams the Kambuku way Kambuku is ensuring that all employees have aclear understanding of performance targets

22 Governance structure and management systems continued audit committee encourages consultation between the external and internal auditors and ensures that meetings are held periodically to discuss matters of mutual interest and that working papers, management letters and reports are exchanged so that there is a common understanding of audit techniques, methods and terminology. The audit committee requires that the interim and final results are subjected to an independent review by the external auditors. The chairman of the audit committee presents a report on the interim and final results at the board meeting held to adopt those results. If an independent review is not conducted the audit committee would table the reasons at the board meeting. The committee also considers the assessment, at the previous year-end, of the company s ability to continue as a going concern and determine whether or not any of the significant factors in the assessment have changed to such an extent that the appropriateness of the going concern assumption has been affected. The audit committee, with the auditors present, reviews the audited preliminary profit statement and the annual financial statements before they are submitted to the board. The facts and assumptions used in the assessment of the going-concern status of the company are presented to the board at the meeting approving the annual financial statements and are minuted accordingly. The audit committee draws up a recommendation to the board on an annual basis for submission to the shareowners at the annual general meeting for consideration and acceptance of the reappointment of the external auditors. It is a function of the audit committee to ensure that the external auditors observe the highest level of business and professional ethics and, in particular, that their independence is not impaired in any way. The audit committee has set principles for the use of the external audit firm for non-audit services and approves the relevant fees above certain materiality limits. Fees paid to the external audit firm for non-audit services are disclosed in the notes to the annual financial statements and the nature thereof is described. All members attended the committee meetings during the year under review except Mr W A M Clewlow who was unable to attend the meeting on 7 November 2001 and tendered his apologies accordingly. The board has determined that the audit committee has satisfied its responsibilities for the year under review in compliance with its terms of reference. Compliance committee R K J Chambers (Chairman), D C Arnold, P J Blackbeard, J E Gomersall, P Stuiver (resigned with effect from 1 August 2002), G T Heyns (appointed with effect from 1 August 2002). The primary function of the compliance committee is to assist the audit committee and the board in assessing risk, legal compliance and their related management and audit processes in order to ensure that these are being adequately identified, evaluated and addressed at the appropriate organisational level. It primarily addresses health and safety, human capital development, employment equity, black economic empowerment, environment, mining, production and engineering issues. During 2002 this committee reviewed the proposed new Minerals and Petroleum Resources Bill and a range of legislation applicable to PPC including commercial property, labour, financial and transportation legislation. The compliance committee is a subcommittee of the audit committee. The terms of reference are governed by a compliance committee charter approved by the board and the audit committee. The chairman is an independent non-executive director. Other than for external audit, the group has merged its auditing activities under one umbrella referred to as the Joint Audit Process (JAP) with the objective of: fostering audit methodologies and recommendations and avoiding duplication; developing a holistic view of the business and its related risks; involving internal and external line specialists, thereby sharing knowledge across the group; and encouraging continuous improvement and adherence to group policies. All of the committee members attended the meetings during the year under review. The board and the audit committee have determined that the compliance committee has satisfied its responsibilities for the year under review in accordance with its terms of reference. Nominations committee Previously the board as a whole considered any new appointment of a director. In November 2002 a nominations committee, consisting of Messrs R K J Chambers, WAMClewlow, M J Shaw, and E P Theron was constituted in line with the recommendations of the King II Report. Remuneration committee A J Phillips (Chairman), R K J Chambers, W A M Clewlow Composed entirely of non-executive directors, this committee makes recommendations to the board, within agreed terms of reference, regarding the remuneration of executive directors and senior executives as well as fees proposed to be paid to each non-executive director. Proposed fees, adopted by the board, are submitted to the shareowners in general meeting for approval prior to implementation and payment. The company s philosophy is to set remuneration at realistic levels in order to attract and retain the directors and executives needed to run the company 20

23 successfully. A proportion of executive directors remuneration is structured so as to link corporate and individual performance. In keeping with modern corporate governance practices, the chief executive officer, Mr J E Gomersall, has resigned from the remuneration committee. He attends meetings but is not entitled to vote. The chief executive officer does not participate in discussions regarding his remuneration. The board has determined that the remuneration committee has satisfied its responsibilities for the year under review in compliance with its terms of reference. Strategic and business risks and internal audit An internal audit charter defining the function, responsibility and authority of the group internal audit activity has been adopted by the audit committee. Internal audit is an appraisal function established within the group to independently and objectively examine and evaluate the activities of the group as a service to the board in particular and to management in general. The board requires that the internal audit process takes account of significant strategic and business risks thus ensuring that internal audit plans are appropriately risk focused. Group internal audit is responsible for: appraising the procedures and management controls of business units throughout the group; assisting the board and management in the monitoring of the risk management process; reviewing systems and operations to assess the extent to which organisational objectives are achieved and the adequacy of controls over activities leading to such achievement; evaluating the reliability and integrity of management and financial information; appraising the utilisation of resources with regard to economy, efficiency and effectiveness; assessing the means of safeguarding assets and verifying their existence; ascertaining the extent of compliance with established policies, procedures and instructions; recommending improvements in procedures and systems to prevent waste and fraud; advising on appropriate systems of controls and accounting and operational matters; drawing appropriate attention to any failure to take remedial action; carrying out any other appraisals, inspections, investigations, examinations or reviews required by the board or management; and co-ordinating with the external auditors and the risk management and compliance functions to ensure that the audit programmes are complementary. The group internal auditor coordinates the internal audit function throughout the PPC group. His duties include, inter alia, liaison with the relevant businesses and their external auditors in order to monitor the performance and recommend improvement of internal audit. He reports to the main audit committee on the effectiveness of internal audit. He has unrestricted access to the audit committee and its chairman. Subordinate internal audit reports are submitted to the audit committees of the respective business units. Any major issues arising are referred to the main audit committee. Audit plans are drawn up annually and take account of changing business needs. Follow-up audits are planned in areas where weaknesses are found. Internal audit plans are based on risk assessment as well as on issues highlighted by the audit committee and management and are of an ongoing nature so as to identify not only residual or existing, but also emerging risks. The audit committee approves the internal audit plan. Risk management In terms of a written risk management philosophy statement issued by the chief executive officer and endorsed by the board, the company is committed to managing its risks and opportunities in the interests of all stakeholders. Every employee has a responsibility to act in this manner. An ongoing systematic, multi-tiered and enterprise-wide risk assessment process supports the group s risk management philosophy. The process ensures that risks and opportunities are identified and evaluated in terms of materiality and probability, whereafter these are managed at the appropriate level in the organisation. Risk registers are maintained as part of this process. As the company expands into new markets and territories, it is faced with increasingly complex and changing environments. By applying the PPC risk management processes, and the principles of VBM, the risk-return tradeoff is optimised by focusing on identified risks and ensuring that these risks are systematically managed. Divisional boards and senior managers have carried out an annual selfassessment of risk. This process has identified the critical business, operational, financial and compliance exposures facing the group and the adequacy and effectiveness of control factors at all levels. Verification of the process is undertaken in alternate years by the risk management department at Barloworld Limited corporate office in Sandton and by the outside consultancy firm, Marsh Inc. The audit and compliance committees have reviewed the risks and risk management processes and advised the board accordingly. Third party management No part of the company s business was managed during the year by any third party in which any director had an interest. Minerals and Petroleum Resources Bill The charter for the SA mining industry sets guidelines for empowerment and 21

24 Governance structure and management systems continued upliftment within the context of the new Minerals and Petroleum Resources Bill. A target of 26% involvement of historically disadvantaged South Africans in ten years time has been set. The overall objective is the expansion of opportunities for historically disadvantaged persons to enter the mining and minerals industry or benefit from the exploitation of the nation s mineral resources. At the same time, it is government s stated policy that it will allow the market to play a key role in achieving this end. The processing of licences will in future be facilitated by a score card approach which takes into account the applicants progress with regard to level of ownership, management diversity, employment equity, human resource development, procurement and beneficiation. While PPC is already well progressed (refer page 34) with regard to a number of these requirements, the full implications and measurement requirements of the Bill and its associate charter were still under review at the time of this report. Employee participation Encouragement of employee participation is a high priority. The company s diverse nature, allied to its philosophy of operational decentralisation, makes it desirable that each business unit executes this in a manner best suited to its own circumstances. A process of improved communication throughout the Barloworld and PPC group has increased employee awareness of the group s worldwide business activities and improved personal networking with local and international counterparts. Good progress has been made with the Kambuku project introduced during the 2000 financial year, further details of which are set on page 8. Communication The company subscribes to the principles of objective, honest, timeous, balanced, relevant and understandable communication, of both its financial and nonfinancial matters, focused on substance not form and communicates sensitively and systematically with stakeholders having a legitimate interest in the company s affairs. The company regularly enters into dialogue with institutional investors having due regard for statutory, regulatory and other directives prohibiting the dissemination of unpublished price-sensitive information by the company and its directors and officers. In October 2001, PPC commenced non-certificated dealings under the Share Transactions Totally Electronic programme on the JSE. In line with our vision to constantly improve our service to all our stakeholders, all shareowners were assisted with the implementation processes of the new system. Code of ethics A Corporate Code of Ethics, which outlines the ethical and professional management practices that the group upholds, was adopted in March Individuals and entities dealing with the group are expected to demonstrate the same level of commitment to organisational integrity. The integrity of new appointees to the group is assessed in the group s selection and promotion procedures. Due care is exercised in delegating discretionary authority to individuals in the group. All employees are advised regarding the group s values, standards and compliance procedures. The group has provided a safe system by which employees can report unethical or risky behaviour. Such reports can be submitted to: South Africa KPMG Ethics Line Telephone: Fax: Address: KPMG Ethics Line Free post: PO Box Sinoville 0129 South Africa [email protected] or Zimbabwe Deloitte & Touche Tip-offs Anonymous Telephone: Fax: Address: The Call Centre Freepost: PO Box HG 883 Highlands Harare Zimbabwe [email protected] Ethics Line is an independent body within the KPMG South Africa organisation. Tip-offs Anonymous is an independent body within the Deloitte & Touche Zimbabwe organisation. Contact with either of these organisations provides an opportunity to anyone to report unethical activities, fraudulent or dishonest behaviour affecting the PPC group and at the same time to preserve total anonymity. The group enforces the code with appropriate discipline on a consistent basis and responds to offences to prevent a re-occurrence. 22

25 Kambuku has become the PPC way of doing business and is one of our ways of creating sustainable competitive advantage Uncompromising ethical and environmental standards

26 Board of directors Executive directors J E Gomersall (56) (British) Chief executive officer CA(SA) John Gomersall was appointed to the PPC board in He joined Barloworld Limited in 1971 and has completed 30 years in capital intensive commodity businesses. He started his career in the stainless steel and ferrochrome industry ultimately being appointed group managing director of Middelburg Steel & Alloys (Pty) Limited in He joined the Barloworld Limited board in 1989 and moved into the cement and lime business segment as group managing director in In 1990 he led the business team that created the Middelburg Peace Forum, which was the role model for the National Peace Accord in South Africa. He is a past deputy president of the International Chrome Development Association which is headquartered in Paris as well as past chairman of the South African Cement and Concrete Institute. P J Blackbeard (45) Chief operating officer BSc (Mech) Eng (Hons), Dip Bus Man John Blackbeard was appointed to the PPC board in 1996 and as chief operating officer in August He was previously a senior general manager at Eskom and joined PPC in 1996 as group technical director. He is also a member of the South African Institute of Mechanical Engineers, a member of the Professional Engineers Association and a director of the South African Cement and Concrete Institute. R J Burn (48) Director, Organisational Performance BProc, BA (Hons) Psych Rod Burn was appointed to the PPC board in 2000 as director, Organisational Performance. He previously worked for John & Kernick Attorneys, specialising in trademark law before accepting a position as industrial relations manager at Eskom. He also held a number of industrial relations positions within the Barloworld group including that of group human resources director of Barloworld Motor Investments (Pty) Limited. R H Dent (51) Director, Strategic Projects BSc (Hons), BCom, Dip Datametrics Harley Dent was appointed to the PPC board in 1993 as director, Strategic Projects. He joined Cape Portland Cement Company Limited, a subsidiary of PPC, in 1978 and has been with the group for 24 years. He is a fellow of the South African Chemical Institute, the South African Institute of Mining and Metallurgy and the Institute of Quarrying of Southern Africa. He is a director and past chairman of the Institute of Quarrying of Southern Africa and is currently chairman of the Aggregate & Sand Producers Association of South Africa. P G Nelson (48) Director, Finance and Administration BCom, BCompt (Hons), CA(SA) Peter Nelson was appointed to the PPC board in 2000 as director, Finance and Administration, having joined PPC that year. Prior to joining PPC he held senior executive positions and directorships in a number of large international companies including BMW (South Africa) (Pty) Limited, Mondi Limited and several of the Barloworld Limited subsidiaries including Middelburg Steel & Alloys (Pty) Limited and Imperial Cold Storage Limited. He has over 13 years collective service with the Barloworld group and extensive experience in international capital intensive industries. Non-executive directors D C Arnold (62) CA(SA), FCMA, AMP (Wharton) Des Arnold was appointed a director of PPC in He joined Barloworld Limited in 1967 and held a number of senior financial positions within the company culminating in his appointment to the Barloworld Limited board in He has been a leading light in the accountancy profession in South Africa for many years, is a past president of the South African Institute of Chartered Accountants (SAICA), and has been awarded honorary life membership in recognition of his services to the profession. Internationally, he has represented SAICA on the Financial and Management Accounting Committee of the International Federation of Accountants and is past president of the East, Central and Southern African Federation of Accountants. A J Lamprecht (50) BCom, LLB, PED-IMD André Lamprecht was appointed to the PPC board in He practised as an advocate of the High Court of South Africa prior to being invited to join the Barlow group in From 1983, he played a leading role in steering the group through a turbulent decade of political transition into a post-apartheid South Africa. He was appointed to the Barloworld Limited board in 1993, assuming responsibility for the company s interests in Namibia and Botswana in addition to human resources, social investment and other responsibilities. He has served on behalf of Barloworld on numerous public bodies and is a past chairman of Business South Africa, immediate past president of the AHI, a member of the Standing Committee on Economic Policy and chairman of the AHI 24

27 Board of Trustees and Standing Committee on Corporate and Public Governance. He is also a director of the National Business Initiative (NBI), trustee of the Business Trust and business convenor of the Trade and Industry Chamber of the National Economic Development and Labour Advisory Council (NEDLAC), member of its executive council and a member of the Retirement Funds Advisory Committee of the Minister of Finance. He is also a longstanding senior member of the Standards Committee of the International Labour Organisation (ILO). A J Phillips (56) (British) BSc (Eng) Tony Phillips was appointed a director of PPC in He joined Barloworld Limited in 1968 and has spent most of his career in the capital equipment business, initially in Africa and then in Spain. He was appointed to the Barloworld Limited board in 1995 and became chief executive officer on 1 August He is a trustee of the Jane Goodall Institute (South Africa), the Bright Kid Foundation (Edutainers), Business Against Crime, a member of the Advisory Council of the University of the Witwatersrand School of Civil Engineering and is a director of NOAH (Nurturing Orphans of AIDS for Humanity). Independent non-executive directors W A M Clewlow (66) Chairman OMSG, CA(SA), DEcon (hc) Warren Clewlow was appointed to the PPC board in 1983 and as chairman in He is chairman of Barloworld Limited and Iscor Limited, deputy chairman of Old Mutual Life Assurance Company (South Africa) Limited and is also a director of Comparex Holdings Limited, Old Mutual plc, Sasol Limited and Nedcor Limited. He joined Barloworld Limited in 1963 and was appointed to the board in He was appointed chief executive officer in 1983, deputy chairman in 1985 and chairman in He retired as an executive director in July He is a past chairman of the State President s Economic Advisory Council, chairman of the Carl and Emily Fuchs Foundation, honorary treasurer for the African Children s Feeding Scheme and a member of the Nelson Mandela Children s Fund. He is a fellow of the Duke of Edinburgh s Award World Fellowship and chairman of the Duke of Edinburgh s South African Foundation. R K J Chambers (63) FCIS Russell Chambers was appointed to the PPC board in He joined Barloworld Limited in 1957 and was appointed managing director of Imperial Cold Storage Limited in He was appointed an executive director of Barloworld Limited in 1989 with responsibility for group administration, human resources, public affairs and social investments. He was chief operations director from 1994 until his retirement as an executive director in M J Shaw (64) CA(SA) Martin Shaw was appointed to the PPC board in He is the global chairman of Deloitte Consulting, previously having served as managing partner, chief executive and chairman of Deloitte & Touche in South Africa until his retirement from the firm in He served as president of the Natal Society of Chartered Accountants from 1977 to 1978 and president of the South African Institute of Chartered Accountants from 1982 to He is also a director of Illovo Sugar Limited, JD Group Limited, Reunert Limited and Liberty Group Limited. E P Theron (61) BCom, LLB, FIBSA Eddie Theron was appointed to the PPC board in Formerly group chief executive of Standard Bank Investment Corporation Limited he remains a director of that company. He is also on the board of The Standard Bank of South Africa Limited, Mutual & Federal Insurance Company Limited and Barloworld Limited. Audit committee D C Arnold (Chairman) RKJChambers WAMClewlow AJPhillips MJShaw Compliance committee R K J Chambers (Chairman) DCArnold PJBlackbeard JEGomersall GTHeyns Remuneration committee A J Phillips (Chairman) RKJChambers WAMClewlow Nominations committee WAMClewlow (Chairman) RKJChambers MJShaw EPTheron 25

28 Management Divisional executive team: Cement John Blackbeard (45) Managing director BSc (Mech) Eng (Hons), Dip Bus Man Divisional executive team: Lime Deon Heyns (46) Managing director BEng (Mech) Divisional executive team: Packaging Arnold Vermaak (43) Managing director BCom (Mark), MBL Rod Burn (48) Director, Organisational performance BProc, BA (Hons) Psych Schalk Marais (43) General manager PPC Saldanha BA (Hons) Patrick Doekes (33) Financial director CA(SA), ACMA Orrie Fenn (48) Operations director BSc (Hons) Eng, MPhil Eng, Dr Eng (Appointed sales and marketing director effective 1 November 2002) Brian Graumann (39) Financial director BCom (Law), BAcc, CA(SA) Colin Jones (49) Sales and marketing director BSc (Hons), BCom (Appointed managing director of Portland Holdings Limited effective 1 November 2002) Hannes Meyer (43) General manager Lime Acres BSc (Hons), MSc (Chem), HED Jacques van Jaarsveld (36) Financial manager BAcc, BCom (Hons), AGA (SA) Simon Willmott (44) General manager marketing MSc (Met), MBA Eben Kloppers (43) Operations director NHD Ind Eng, CPIM Mthokozisi Mchunu (40) Manager, Operational performance and risk BSc (Hons) Pepe Meijer (42) Operations director BEng (Mech), MBA (Appointed with effect from 1 November 2002) Tony Parry (42) Chief information officer BA (Hons), MBA Dave Scott (60) Technical director BSc, MBA, Diploma Labour Relations 26

29 1 2 3 Kambuku has been endorsed by the Department of Trade and Industry. 4 5 Encouraging superior performance and delivering benefits

30 Environmental performance indicators PPC s impact report for the year ended 30 September 2002 Mining itself cannot be sustainable, but the mining industry can and should become more engaged in sustainable development in the areas where it operates and where its products are consumed. Sustainable development is about ensuring a better quality of life for everyone, now, and for generations to come. PPC has committed itself to greater sustainability by the implementation of an integrated proactive systems approach to environmental management. As the company proceeds further down the environmental management continuum, it increasingly broadens the scope of its efforts to include social as well as environmental and economic considerations. PPC is in the process of building a culture of sustainability to improve competitiveness, increase internal efficiencies, gain regulatory advantage and enhance stakeholder relationships, and, of course, build a better life for all. PPC s business does not only focus on economic prosperity. Our contribution to the other two legs of sustainable development the environment and society is also essential. After all, sustainable business is good business. PPC considers it imperative to reduce the negative impacts of its business activities on employees, the environment and society at large. 28

31 Sustainable use of nonrenewable resources Mining can make a contribution to, but not deliver sustainable development. PPC constantly strives to create wealth from mining and processing of minerals whilst minimising the environmental footprint along the entire value chain. By adopting a responsible materials management approach, including avoiding waste and finding ways of recycling, we strive to preserve the ability of future generations to also meet their needs. Various objectives set in have been met, including: The Environmental Management Programme Report (EMPR) amendments for mining extensions at Riebeeck and Dwaalboom have been approved by the Department of Minerals and Energy (DME). EMPRs are constantly reviewed, amended and all such amendments are approved by the DME, with a view to better meeting closure rehabilitation commitments and end-use objectives. The closure rehabilitation commitments and end-use objectives for the Pienaars River operation have been met. This included making safe and rehabilitating the mining areas, demolition of mining infrastructure, upgrading the residential infrastructure and application for the proclamation of the village. A closure certificate has been issued to PPC in terms of section 12 of the Minerals Act. An extensive re-design and upgrade of the fresh water dam wall and spillway at Laezonia was done to ensure dam safety and to protect an asset for the community after the life of the mine. Closure and decommissioning of the Loerie operation is progressing well. Closure rehabilitation is 90% complete. This includes demolition of the mining infrastructure, combating invasive vegetation, site rehabilitation, drainage and runoff control, riverbank protection, an extensive re-vegetation programme and maintenance of buildings and infrastructure required in terms of the end-use plan. End uses for the land are continually being assessed and monitored. Financial and environmental consultants have been commissioned to formulate a sustainable end-use and business plan for the site after closure. Application for closure is envisaged for June Loerie has been nominated for an Excellence in Mining Environmental Management Award (EMEM) in the category of mines in the decommissioning and closure phase. Energy efficiencies and recycling Energy efficiency is essentially using less energy for the same production volumes. Improvements in energy efficiency produce direct and indirect environmental benefits. The use of secondary materials from other industries has enabled PPC to considerably reduce its reliance on mining to reach its production targets. For instance: During PPC utilised some tons of secondary materials, which would have been landfilled as waste, to fuel kilns at various locations. This resulted in removal of these waste streams from the environment, and a reduction in the coal consumption at the operations. The environmental benefits included CO 2 emission reductions. Alternative raw materials and extenders have continued to be introduced into the manufacturing process to reduce the quantity of limestone used to produce the required tons of finished product. Some tons of alternative raw materials have been used to replace limestone as a raw material in the manufacturing process. The use of extenders such as fly ash and slag continue to add value whilst contributing to extending the life of the mines and absorbing industrial wastes from the environment. With the introduction of each secondary material, extensive trials are conducted to ascertain the nature of the environmental impacts and to ensure the quality of products is not negatively affected. Authorisations for the use of secondary materials are obtained after significant input from stakeholders. Health and safety in the workplace PPC s facilities operate in the framework of either the Mine Health and Safety Act or the Occupational Health and Safety Act. The minimum standard of performance for all operations is legal compliance, associated regulations and standards, and company operating requirements. An in-house Joint Audit Process (JAP), carried out annually, ensures this compliance. Baseline health and safety risk assessments have been conducted and are reviewed annually. Health and safety agreements are in place with representative labour bodies. All health and safety programmes in PPC Cement are based on the National Occupational Safety Association (NOSA) management system. PPC Lime Acres has been accredited with Occupational Health and Safety Assessment Series (OHSAS) 18001, and it is planned to implement the OHSAS standard for health and safety management throughout the company within the next four years. All programmes encourage employee participation at all levels. Employees receive regular training on their legal responsibilities by accredited service providers. In addition: Regular occupational health surveys are conducted to identify the health risks to which employees may be exposed. These include surveys for noise, heat stress, ventilation and illumination levels. Identified risks are engineered out where possible, as the first choice. Should this not be possible, management controls are implemented and the use of personal 29

32 Environmental performance indicators continued protective equipment becomes mandatory. Clinics at all the operations have trained occupational health practitioners and occupational medical practitioners in attendance. These clinics provide occupational health care, but also have primary health care programmes in place for the local communities. Employees undergo annual medical examinations to ensure their health is not adversely affected by their working conditions. Exit medical examinations are also conducted should an employee resign or retire from service. Contractors working for the company are also able to make use of the clinic facilities. Employees belong to medical aid schemes, with a few exceptions. In these cases PPC contributes to their medical care. PPC has implemented an Employee Assistance Programme for employees and members of their direct family. There have been no fatalities in the workforce during this reporting period. Injury frequency rates are low. The fight to beat HIV/Aids PPC has for many years implemented initiatives that are aimed at minimising the social, economic and developmental consequences of HIV/Aids to its businesses and its employees and, where practical, to the communities where we operate. Initiatives and performance to date include: Anonymous prevalence studies have been conducted at a number of sites with trade union support. Prevalence rates range from 6 11%. These rates are lower than that expected for the regions. Nearly 50 peer educators were trained during the past two years and disseminate information both to employees and the local community. A number of our occupational health nurses are also actively involved in local communities. 75% of our employees in South Africa are members of medical aid schemes that provide antiretroviral medication. Condoms are distributed free of charge. Awareness initiatives include talks by people living with Aids and experts in the field. Annual medical examinations include optional voluntary HIV/Aids testing. Accountability for environmental performance Much of our effort during the past two years centred on the development and implementation of environmental management systems, which could be certified to International Standards Organisation (ISO) All the cement manufacturing operations and both PPC Lime operations have acquired ISO certification, thus achieving our objective. Once we received ISO certification, we did not relax our efforts towards improvement. For instance: With the introduction of low and ultralow sulphur diesel during 2002 and the pending de-regulation of the fuel industry in 2003, PPC has forged further ahead in its strategic relationships with its fuel and lubricant suppliers Engen, Sasol and Shell. In particular, PPC has embarked on a programme together with Sasol and Engen to systematically introduce ultra-low sulphur diesel into cement distribution transport (in conjunction with Barloworld Logistics) and at its northern operations quarrying activities. Furthermore, PPC is planning, together with its fuel and lubricant suppliers, to further expand its empowerment procurement of fuels and lubricants. Primary considerations for introducing ultra-low sulphur diesel into PPC are as follows: Environmental gains from a reduced level of harmful exhaust emissions. Ultra-low sulphur diesel contains 0,05% sulphur content (by mass) compared to the 0,3% sulphur content of standard low-sulphur diesel, which is itself a positive step forward from the previous national standard of 0,55% sulphur content. Improved performance resulting from cleaner and more efficient combustion. Ultra-low sulphur diesel has a typical cetane number of between 47 and 50, in comparison with normal (0,03%) diesel cetane number of 45. Longer engine life through reduced wear. Longer intervals between oil drainage made possible by reduced soot formation and lubricant-oil breakdown. PPC s Mooiplaas quarry operation became the first fully functional ultralow sulphur diesel operation utilising Sasol s TurboDiesel TM, and is being followed shortly by other PPC quarrying operations. PPC Hercules set itself a target for stack emissions in excess of its permit requirements viz to not exceed 120 mg/nm 3 for more than 4% of its operating time. In order to achieve this stringent target in a plant with old technology many engineering changes were implemented. The emission monitoring results of 0,69% for 120 mg/nm 3 for the past three months has demonstrated the effectiveness of this initiative. PPC Slurry experienced problems with the de-dusting of a clinker bin. The drop of the clinker from a conveyor into the bin caused the rapid displacement of large quantities of air, which caused dust to be released from all openings. By fitting dust collectors to the openings on top of the clinker bin, the dust is captured inside the bin and cleaner air can now escape. PPC De Hoek has set the example to the rest of the operations by importing maintenance information from the BaaN TM maintenance management programme into the environmental management system. In this way scheduled maintenance activities, as 30

33 Supporting the advancement of our people Kambuku is building ahighly participative, committed and globally competitive team

34 well as maintenance non-conformances, can be monitored as part of environmental performance. All operations regularly set improvement objectives and initiate new projects to continually improve efficiencies and environmental performance to demonstrate their commitment to the corporate environmental policy. Measuring and monitoring Formal measuring and monitoring management processes are an essential element of any successful environmental programme and in this regard: Consumption of resources is monitored and reported to management monthly. Raw materials, coal and water consumption have all shown a downward trend for the current reporting period. Continuous monitoring of dust emissions takes place from kiln stacks throughout the group. The CODEL TM monitors are calibrated at regular intervals to ensure their efficient and accurate operation. Emission data reveals that all operations in the cement division have complied with and even exceeded their permit conditions. Phased concurrent rehabilitation targets were set to complete previously neglected rehabilitation by The last aerial survey showed that every mine has exceeded the targets set for as well as completing the rehabilitation required for current mining activities. In this way PPC has been able to reduce its environmental footprint. With the introduction of each secondary material into the manufacturing process extensive baseline assessments of releases to the environment, prior to the introduction of secondary materials, are completed for the relevant operation. Independent external consultants are used to determine the nature and extent of health, safety, quality and environmental impacts by introducing secondary materials, during a permitted trial period. Once these results have been reviewed by government authorities in all spheres of government, application is made for their continued use and for amendments to operating permits of the various plants. Even after the use of secondary materials has been permitted by government, the performance of the operation continues to be carefully measured and monitored. 32

35 All the management systems at all operations are externally assessed at least annually during surveillance audits. PPC is proud of its record from surveillance audits. It is clear that the management systems, which have been developed and implemented throughout the organisation, are effective and sustainable. Environmental awareness continues to be the cornerstone for improved performance. Awareness audits are carried out both internally and during JAP audits, the results of which are used to influence future training programmes. PPC endeavours to build environmental awareness not only amongst employees but also in the communities in which we operate. Stakeholder forums ensure constant feedback on performance and awareness of the company s drive to improve the quality of life and to provide lasting benefits for our communities. Preserving biodiversity PPC, with the exception of Loerie, Grassridge and Riebeeck, does not have operations in ecologically sensitive areas. Where the biodiversity of the area on mining ground has been identified as sensitive or threatened, PPC has preserved this biodiversity as evidenced by: The Renosterveld biome in the Western Cape occupies less than 8% of its original area. Some of this renosterveld is found at the Riebeeck factory. The mine plan for Riebeeck has been modified, and the overburden dump positions shifted, in order to preserve the two hectares of renosterveld found on site. PPC Riebeeck has been nominated for an EMEM award in the category for large open-cast mines. PPC Grassridge quarry was opened in the Bonteveld biome of the Eastern Cape. A demanding environmental management programme at Grassridge ensures that anthills, threatened succulents, bonteveld bush clumps, tortoises and even the rare Albany adders are preserved. Mining activities involve the removal of sensitive vegetation from areas to be mined to nurseries and their translocation to rehabilitated areas afterwards. Fences have been erected to prevent electrocution of tortoises venturing towards the secured crushing plant area. Anthills are relocated to ensure the biodiversity of invertebrate species, which are dependent on the anthills for their survival, remains intact. The Albany adder, which was last sited some 60 years ago, has been sited three times in the past year. It is envisaged that a breeding programme be established on the Grassridge property, where sited specimens would be tracked and monitored using microchips. The Grassridge quarry has been nominated for an EMEM award in the small mining category. At Loerie the fynbos vegetation, which remained undisturbed during mining activities, formed an integral part of the end-use objectives for the mine. The PPC Lime Acres facilities have been successfully recertified to ISO in This is a clear demonstration of commitment to the policy of continual improvement. Plans are being developed to replace the electrostatic precipitator on Kiln 7 with a bag filter with the objective of bringing the stack emission levels within or even better than legal requirements. Contact person The contact person on environmental matters within PPC is: Naomi Williams Group risk and environmental manager Pretoria Portland Cement Company Limited PO Box 3811 Johannesburg 2000 Tel: [email protected] 2002 water consumption 35% 21% 44% Water from water courses Water from boreholes Water from utilities Tons coal/ton product as % of MWh electricity/ton product as % of The rise in electricity consumption can be attributed to finer grinding of materials in the mills to meet quality requirements and customer expectations. CO2 emissions from coal/ton product as % of

36 Social performance indicators Empowerment procurement initiatives Affirmative procurement policy PPC s commitment to procurement from small, medium and micro enterprises (SMMEs) and black economic empowerment (BEE) businesses is reflected in the continued growth achieved during this past year. PPC s commitment to SMMEs and BEEs is supported by values which include, inter alia, respect for the individual, non-discriminatory practices and care for the communities in which PPC operates. PPC further encourages business relationships with SMMEs and BEEs that support its drive to satisfy customer needs by supplying quality products and reliable services. PPC is determined to promote, develop, and source from SMMEs and BEEs in a manner that adds lasting value to the partnership, as underlined by its affirmative procurement policies. Monitoring is ongoing with the group commercial services manager responsible for reporting to the PPC executive every six months in this respect. Empowerment procurement spend PPC continues to expand its empowerment procurement base and expenditure through the committed efforts of all its operations. PPC procures services and commodities ranging from the traditional outsourcing of cleaning and security services to engineering spares and services, production goods, health care, information technology and printing. Total empowerment procurement expenditure has increased by 28% from R62 million to R80 million, a pleasing result considering that the empowerment procurement contribution of PPC Logistics is no longer included, following the sale of that business to Barloworld Limited. At the same time, the supplier base has shown a corresponding increase of 158% with an emphasis on SMME and BEE organisations best capable of meeting PPC s exacting quality standards, service and financial requirements. Some notable achievements in the area of empowerment procurement management include the following: The appointment in May 2001 of Polipak as PPC s sole provider of woven polypropylene cement sacks. The appointment in June 2001 of Seekers-Lesedi as sole service provider for PPC s travel management portfolio. The appointment in May 2002 of Sasol s empowerment partner, Exel, to provide ultra-low sulphur TurboDiesel TM. The appointment in July 2002 of Ilanga Printing to provide all of PPC s corporate stationery. Developing the broader SMME community PPC remains an active board member of the Corporate SMME Development Forum (CSDF) which is supported by many blue-chip South African corporate companies. The purpose of the forum is to procure goods and services from historically disadvantaged small businesses and to bring them into the mainstream of the economy. Business transactions between the corporate members of the forum and SMMEs is expected to run into several hundreds of million rand for the current year. All the above initiatives are supported by focused policies on corporate social investment and development, affirmative empowerment and SMME development. Benchmarking and business linkages initiative PPC is one of a number of high-profile corporates currently participating in a benchmarking and business linkages project sponsored by the Africa Project Development Facility (APDF), GTZ, Ntsika Enterprise Promotion Agency (NEPA) and Umsobomvu Youth Fund (UYF), with project facilitation undertaken by Gestalt Corporate Engineers. The main aims of this project are to benchmark empowerment procurement practices and policies and to strengthen programmes aimed at providing financing and capacity building for SMME supply side linkages. The project is also aimed at identifying ways in which the role of facilitating and brokering business linkages can be established on a sustainable basis. Contributing to upliftment PPC remains committed to government s programme of transformation and has continued to implement its nationbuilding and affirmative empowerment policies in many ways during the course of the year. PPC regards the empowering of employees to be homeowners as a business imperative. Where practical, the ownership of PPC villages and residences has been transferred to employees who previously occupied these homes. To date over 200 homes have been transferred to employees in this fashion. At Riebeeck the village is now effectively part of the Riebeeck West council. The Pienaars River village was upgraded in so far as utilities and services, whereafter it was transferred to the Bella Bella municipality in terms of an end-use plan approved by the DME. The Lime Acres village was transferred to the employees who were given the opportunity to purchase homes. A Homeowners Association is now well established and several small businesses have been established in activities such as maintenance and garden services. Following the cessation of mining activities at Loerie in the Eastern Cape, it is proposed that the end-use will include a business and social plan in terms of which the infrastructure ownership will be transferred to the community. 34

37 Support to emerging contractors PPC facilitated and sponsored training in contractor development for 36 members of South African Women in Construction (SAWIC). The training was conducted by an empowerment training company Milcorp Construction Management and covered topics such as contract documentation, tendering, costing, pricing, managing materials and using cement in construction. In co-operation with the government agency, NEPA, PPC co-sponsored the training of 63 emerging building contractors from the North West province in contractor entrepreneurial skills. These business and life skills will assist these building entrepreneurs to successfully tender and manage building projects in the future. Participants were awarded Construction Development Programme certificates which are accredited by the Construction Education and Training Authority (CETA). Sponsored workshops for Women for Housing PPC joined forces with the Women for Housing organisation to facilitate a series of 12 workshops covering topics related to the building and construction industry. These workshops provided women contractors with valuable information about developing construction businesses within the housing sector and provided newcomers with an opportunity to develop an idea of what is entailed in the sector. Business opportunities for emerging entrepreneurs PPC continues to grow the role of affirmable cement retailers to supply cement to projects at every opportunity. As an example, we successfully implemented this approach with the Luvuvhu Dam in the Limpopo province utilising the services of a black company, Mangoedi Products & Project Managers, owned by Ms Mangoedi Kgathi. Since our previous report, cement sales through SMMEs and historically disadvantaged South Africans increased by 18% to R220 million per annum. Human resources At PPC we regard human intellect, as the most critical success factor in growing competitive advantage in all our businesses, more particularly our ability to sustain this by: attracting, motivating and retaining the very best people; capturing our unique know-how and culture and transferring these to new employees; developing the full potential of all our employees; guiding the organisation to future success. Each of the above require a healthily functioning set of organisational systems. Policies, training systems, study assistance schemes, bursary schemes, recruitment drives, succession planning, employment equity plans, work place skills plans and mentorship programs are only some of the vital elements which play a part in building for the future. PPC has in the past two years invested in the development of competency models, which allow for the assessment of nearly every job in the organisation. These models underpin our training and development initiatives. In support of this programme 172 assessors and five moderators have been trained. Succession plans and employment equity plans are given regular consideration. Approximately half the individuals on the succession plan are from the designated groups. The company has appointed responsible managers in respect of employment equity, and has submitted the required plans to the Department of Manpower. Progress towards target is encouraging at the lower levels, but slower at the more senior levels, where labour turnover is much lower and skill and experience requirements far greater. The group has retained its technical training school, although it is fashionable in other industries to outsource this function. From 1972 to 2002, 471 artisans have been trained by PPC, many of which are still employed. The services of this facility are being extended to a limited number of non-employees. PPC has invested extensively in the implementation and coaching of a model which improves climate, workplace communication and performance. The model is designed to coach the organisation towards improved understanding of work processes and to foster greater empowerment at all levels of the organisation. The number of implemented suggestions made by employees is evidence that the process is resulting in continuous improvement. A significant investment has been made in management and supervisory training and development, and mentorship programs for more senior managers. Remuneration is regularly researched in relation to market benchmarks as PPC attempts to develop its employees into top quartile performers. PPC maintains an appropriate balance between fixed remuneration and performance based incentives which is measured against specific scorecards and objectives. Top performers are rewarded with top quartile pay. PPC constantly reviews the benefits it provides relative to industry and market place. Both the range of benefits and the degree of company subsidisation of these benefits are considered competitive by any standard. Considerable attention is paid to educating and assisting employees in respect of medical aid funds and retirement funds as their futures are affected by both. 35

38 Contents 36 Certificate by secretaries 37 Approval of annual financial statements 37 Report of the independent auditors 38 Report of the directors 41 Value added statement 42 Operational review: Cement 44 Operational review: Lime 45 Operational review: Packaging 46 Seven-year review 49 Definitions 50 Accounting policies 54 Balance sheets 55 Income statements 56 Statements of changes in shareholders interest 58 Cash flow statements 59 Notes to the cash flow statements 61 Notes to the financial statements 90 Annexure 1 (Interest in subsidiary and unlisted associate companies) 92 Share performance 93 Notice of annual general meeting 95 Form of proxy Certificate by secretaries In terms of section 268G(d) of the Companies Act, 1973, as amended (the Act), we certify that Pretoria Portland Cement Company Limited has lodged with the Registrar of Companies all such returns as are required of a public company in terms of the Act. Further, that such returns are true, correct and up to date. Barloworld Trust Company Limited Secretaries Per A R Holt 36 PPC Annual Report 2002

39 Approval of annual financial statements The directors of the company are responsible for the integrity and objectivity of the annual financial statements and other information contained in this annual report, which have been prepared in accordance with International Financial Reporting Standards and South African Statements of Generally Accepted Accounting Practice. 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 group s external auditors concur with this statement. The directors believe that the group has adequate resources to continue in operation for the foreseeable future and the financial statements appearing on pages 38 to 40 and 50 to 91 have, therefore, been prepared on a going-concern basis. The group s external auditors concur with this statement. The annual financial statements were approved by the board of directors on 6 November 2002 and are signed on its behalf by: W A M Clewlow Chairman J E Gomersall Chief executive officer Report of the independent auditors To the members of Pretoria Portland Cement Company Limited We have audited the annual financial statements and group annual financial statements of Pretoria Portland Cement Company Limited set out on pages 38 to 40 and 50 to 91 for the year ended 30 September These financial statements are the responsibility of the company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. Scope We conducted our audit in accordance with statements of South African Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Audit opinion In our opinion, the financial statements fairly present, in all material respects, the financial position of the company and of the group at 30 September 2002 and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards and South African Statements of Generally Accepted Accounting Practice, and in the manner required by the Companies Act in South Africa. Deloitte & Touche Registered Accountants and Auditors Chartered Accountants (SA) Johannesburg 6 November 2002 PPC Annual Report

40 Report of the directors The directors have pleasure in presenting their report on the annual financial statements of the company and of the group for the year ended 30 September BUSINESS ACTIVITIES Pretoria Portland Cement Company Limited, its subsidiaries and associate companies, operate in southern Africa as manufacturers of cementitious products, lime and limestone. Afripack Limited manufactures paper sacks and bags as well as printed and laminated wrapping materials. As previously reported, the company has reviewed its strategy with regard to associate companies in South Africa, and disposed of its: 32,8% interest in Natal Portland Cement Company (Pty) Limited to Cimpor-Cimentos de Portugal SPGS, S.A. for R328,0 million; and 25% interest in Ash Resources (Pty) Limited to Lafarge South Africa for R7,6 million. Both of these disposals became effective from 31 August 2002 once the respective conditions precedent had been met. Except for the above disposals, the principal activities of the company and its subsidiaries remained unchanged from the previous year. GENERAL REVIEW OF OPERATIONS Consolidated net profit attributable to shareholders increased by 45% to R600,3 million (2001: R413,2 million). The results of Portland Holdings Limited of Zimbabwe are consolidated for the first time. Net profit per share was 1 121,1 cents (2001: 826,2 cents) on a fully diluted basis. Headline earnings per share were 829,5 cents (2001: 709,7 cents). These results are comprehensively covered in the reviews of the chairman, chief executive officer and operational executives. Exceptional items of R158,9 million includes: The profit on sale of Natal Portland Cement Company (Pty) Limited and Ash Resources (Pty) Limited amounting to R262,7 million and R0,6 million respectively; The impairment of R101,9 million goodwill relating to Portland Holdings Limited of Zimbabwe. Despite significant savings in variable production costs and strong levels of domestic and export sales from Zimbabwe, Porthold has struggled to break even since the regulation of cement prices in November The position has been exacerbated by hyperinflationary (143%) cost pressures. Under difficult circumstances Porthold reported an operating loss of R8,7 million. While Porthold generated positive cash flows, these were lower than anticipated and accordingly PPC has revised the carrying value of Porthold by impairing the remaining goodwill of R101,9 million. Notwithstanding these extraordinary circumstances, the expansion of our market presence continues to have significant medium to long-term value for PPC; and The impairment of R12,9 million relating to the Laezonia quarry which is unlikely to report profits until such time as there is an improvement in our sales of aggregate. Full details of exceptional items are set out in note 18 to the financial statements. ACCOUNTING POLICIES A subsidiary company, Portland Holdings Limited of Zimbabwe, applies International Accounting Standard 29 (Financial Reporting in Hyperinflationary Economies). Where appropriate, the inflated value of property, plant and equipment is adjusted so as not to exceed its fair market value. Whereas the loan from the PPC group to Saldanha Steel (Pty) Limited, and the capitalised lease liability relating to the PPC Saldanha material handling facility were previously netted off, these are reported separately in The financial statements for 2001 have been restated accordingly. Notably this has no effect on net profit or earnings per share. The changes are in accordance with International Financial Reporting Standards and improve the level of disclosure to shareholders. SHARE CAPITAL AND PREMIUM The authorised share capital remains unchanged at ordinary shares of R1 each. On 30 September 2002 the issued share capital of the company was (2001: ) shares of R1 each and the share premium stood at R812,1 million (2001: R564,9 million). Details of shares authorised, issued, unissued and shares under option at 30 September 2002 are given in note 8 to the financial statements. 38 PPC Annual Report 2002

41 ACQUISITION BY THE COMPANY OF ISSUED SHARES The company did not exercise its authority to buy back shares from its issued share capital. PLACEMENT OF SHARES FOR CASH The ordinary resolution proposed at the annual general meeting held on 25 January 2002, authorising the directors to issue shares in the capital of the company for cash was withdrawn at the request of the directors. POST-BALANCE SHEET EVENTS There are no post-balance sheet events. DIRECTORS INTEREST IN SHARE CAPITAL At 30 September 2002 the beneficial holdings of directors of the company and their families in the ordinary shares of the company were as follows: R H Dent (2001: ) shares There has been no change in the directors interest in share capital since year-end. REGISTER OF MEMBERS The register of members of the company is open for inspection to members and the public, during normal office hours, at the offices of the company s transfer secretaries, Computershare Investor Services Limited (South Africa) or at Corpserve (Private) Limited (Zimbabwe). BORROWINGS The company s borrowing powers are unlimited. At 30 September 2002 borrowings and guarantees amounted to R410,9 million (2001: R404,6 million). The borrowing powers of its subsidiary, Portland Holdings Limited of Zimbabwe, is limited by its articles of association to twice the amount of shareholders equity. At 30 September 2002 the level of borrowings did not exceed the limit. PROPERTY, PLANT AND EQUIPMENT At 30 September 2002 the group investment in property, plant and equipment amounted to R1 811,4 million (2001: R1 390,0 million) details of which are set out in note 1 to the financial statements. Capital commitments at the year-end amounted to R86,1 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. MANAGEMENT BY A THIRD PARTY None of the business of the company or that of any of its subsidiaries was managed under contract by any third party during the year. DIVIDENDS Cents per share Number Description Declaration date Record date Payment date Special 6 November January January Final 6 November January January Interim 30 April July July PPC Annual Report

42 Report of the directors HOLDING AND SUBSIDIARY COMPANIES Pretoria Portland Cement Company Limited is a subsidiary company of Barloworld Limited, which held 66,2% of the issued share capital at 30 September With the exception of two nominee holdings, there are no other recorded members in the company s share register holding in excess of 5% of the total issued share capital of the company. The names and country of registration, as well as the amount of their share capital, percentage holding and interest held by PPC in each of its principal subsidiary companies are set out in Annexure 1 on page 90 of the report. All subsidiary companies share the same financial year-end as PPC. SPECIAL RESOLUTIONS A 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 25 January No special resolutions were passed by the company s subsidiary companies during the year under review. DIRECTORS AND SECRETARIES The directors in office at the date of this report appear on pages 24 and 25. Details relating to the secretaries to the company, including their business and postal addresses, appear in the administration section on page 97. At the annual general meeting held on 25 January 2002, Messrs D C Arnold, P J Blackbeard, W A M Clewlow, A J Phillips, M J Shaw and P Stuiver were re-elected directors of the company. Changes to the directorate since the last annual general meeting were: Mr P Stuiver resigned with effect from 1 August Mr P J Blackbeard was appointed chief operating officer of PPC with effect from 1 August 2002, and retains the position of managing director of PPC Cement (Pty) Limited. In terms of the company s articles of association Messrs R H Dent, J E Gomersall and P G Nelson retire by rotation at the forthcoming annual general meeting. All are eligible and have offered themselves for re-election. AUDITORS Deloitte & Touche, the worldwide auditors of Barloworld Limited, were appointed as auditors to the company at the annual general meeting held on 25 January 2002, in place of KPMG who did not stand for re-appointment. 40 PPC Annual Report 2002

43 Value added statement for the year ended 30 September 2002 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. Revenue 2 570, ,2 Paid to suppliers for materials and services 1 (1 344,5) (1 085,3) Value added 1 225,7 985,9 Exceptional items 158,9 57,7 Income from investments 119,0 103,9 Total wealth created 1 503, ,5 Wealth distribution: Salaries, wages and other benefits 2 418,2 358,3 Providers of capital 581,3 239,8 Finance costs 57,4 67,3 Dividends 523,9 172,5 Ordinary dividends 255,2 172,5 Special dividends 268,7 Government 3 255,1 147,1 Reinvested in the group to maintain and develop operations 249,0 402,3 Depreciation 188,1 165,0 Retained profit 76,4 240,7 Deferred tax release (15,5) (3,4) 1 503, ,5 Value added ratios Number of employees (30 September) Revenue per employee (R 000) 788,8 689,5 Wealth created per employee (R 000) 455,6 382,0 NOTES 1. Paid to suppliers for materials and services Spoornet is the only supplier of services exceeding 10% of total amount paid. All contracts are paid in accordance with agreed terms. 2. Salaries, wages and other benefits Salaries, wages, overtime payments, commissions, bonuses and allowances 363,7 310,4 Employer contributions 54,5 47,9 418,2 358,3 3. Government Central and local government: Tax SA normal, foreign and STC 244,7 138,0 Regional services council levies 4,7 4,3 Rates and taxes paid to local authorities 3,0 3,1 Customs duties, import surcharges and excise taxes 0,2 0,5 Skills development levy 2,5 1,2 Gross contribution to central and local government 255,1 147,1 * Restated Includes interest received, dividend income and share of associate companies retained profit In respect of pension funds, retirement annuities, provident funds, medical aid and insurance * Notes Rm Rm PPC Annual Report

44 Operational review: Cement Challenging structures and best operating practices, achieving record value creation MARKET CONDITIONS South Africa Local cement sales improved strongly in the second half of the year. PPC volumes increased by 5% whereas industry sales were 4,3% up. The main areas of growth have been in Botswana, Namibia and the North West and Gauteng provinces. Volumes in the Western Cape improved for the first time in three years. The southern Cape is buoyant on the back of residential and tourism growth and the Eastern Cape is showing signs of improvement now that the Coega project has finally been launched. Suremix, the dry mortar mix launched last year, showed steady growth. Export cement sales were boosted by strong growth in PPC s existing markets and the penetration into new markets. The weaker rand/dollar in the early part of the year increased export competitiveness. Zimbabwe Despite the serious economic decline in Zimbabwe, local sales increased by 10% and exports to neighbouring territories enjoyed a resurgence following the rapid decline in the local currency and a drive by companies to increase foreign currency revenues. Portland Holdings Limited maintained the major share of the domestic and export market despite the entry into the market by a slag-blending competitor in the form of Midlands Portland Cement. OPERATIONS The VBM and Kambuku way of life has been adopted at all levels throughout the organisation. It continues to yield impressive improvements in customer service, environmental performance, efficiencies and cost savings. A logistics optimisation project has been introduced in the Western and Eastern Cape markets and is already showing benefits in customer service and cost reductions. This will be rolled out to the remainder of the PPC market by March Certain kilns at De Hoek, Hercules and Dwaalboom set new production records during the year. Many of the facilities in the group are capable of performing above their design specifications (refer graphs on page 43). Engineering and maintenance programmes introduced to optimise running efficiencies and reduce costs are beginning to deliver results and offer significant further savings. The company continues to apply innovative waste utilisation solutions with a view to reducing energy costs per ton and maximising other environmental benefits. All South African production facilities are accredited to ISO for environmental performance. The De Hoek quarry won an Excellence in Mining Environmental Management Silver Award during the year, the first such award for a cement quarry. The Riebeeck and De Hoek operations were both awarded the newly launched NOSA 5 Star Platinum safety grading. All South African factories have been restructured to a world-class blueprint which has yielded both quality and cost benefits. An extensive programme in documenting and inculcating best operating practices has added further to efficiency and effectiveness. Central technical services have also re-defined their role to offer selected and better services at lower cost. Spoornet s service levels have unfortunately deteriorated to the point where additional costs are being incurred and domestic and export sales are being negatively impacted. Potential solutions are being explored with Spoornet; however, no significant improvement is expected in the short term. FINANCIAL RESULTS The programme to improve the quality of the customer base and grow new revenue streams continued into Overall turnover grew by 30% to R2 064,9 million boosted by a 39% growth in South African exports and the inclusion of Portland Holdings Limited for the first time. The ongoing programmes, to add value by improving operating efficiencies and reducing costs, continue to deliver results. Despite the fact that Portland Holdings Limited returned an operating loss of R8,7 million for the year, PPC Cement produced an excellent result, increasing operating profit (including income from associate companies) by 39% to R561,4 million. 42 PPC Annual Report 2002

45 Profitability in Zimbabwe was severely constrained by the imposition in November 2001 of regulated prices at both factory and retail level. Prices were set at a 30% discount to the then ruling market price. Since then only one price increase of 50% has been granted in April 2002, whereas inflation in Zimbabwe has been running at over 143%. Notwithstanding these inflationary pressures, Portland Holdings Limited has mitigated its losses by focused attention on cost management and the implementation of PPC s best operating practices. PROSPECTS The clear indications of increased government spending on gross fixed capital formation and the launch of the long-awaited Coega project bode well for an increase in RSA demand. The situation in Zimbabwe is likely to remain difficult for some time. Kambuku is expected to yield further cost reductions, as will the roll-out of the programmes referred to above such as logistics management, engineering and maintenance, and waste utilisation * % Rm Rm change Revenue # 2 064, ,8 30 Operating profit 561,4 404,0 39 Operating margin (%) 27,2 25,3 Net operating assets 1 407, ,9 17 Number of employees Cement capacity (tons 000) * Restated # Prior to elimination of inter-segment revenue Including income from associate companies Kilns Despatch plant Quarries 96,8 96,9 96,8 96,4 98,5 101,1 81,6 87,3 81,2 90,4 84,8 74,3 74,6 75,5 77,5 79,9 78,2 75,7 Averages FY 2000 Averages FY 2001 Averages FY 2002 Averages FY 2000 Averages FY 2001 Averages FY 2002 Averages FY 2000 Averages FY 2001 Averages FY 2002 Reliability Performance index Reliability Performance index Reliability Performance index PPC Annual Report

46 Operational review: Lime Challenging our energy consumption and CO 2 emissions, burning more waste in our plants MARKET CONDITIONS While the steel sector, which is the largest user of lime in South Africa, experienced a strengthening in steel output, this did not flow through to PPC. This was due to a combination of the planned Corex plant shutdown at Saldanha Steel and lower consumption by customers who either experienced production problems or improved efficiencies. OPERATIONS AND FINANCIAL RESULTS The significantly improved financial performance in 2002 is the result of a strong VBM focus on revenues and cost efficiencies. The bulk of our business continues to be conducted under long-term agreements and a number of these were re-negotiated at improved prices during the year. The launch of our 2002 Kambuku project has aligned objectives and targets in the workplace. Arising from this, we are experiencing new levels of energy, participation and commitment from all our employees. Their continued focus on energy consumption, productivitydriven initiatives and overhead costs has contributed strongly to improving operating margins in the year. At our Lime Acres factory in the Northern Cape, we achieved the lowest ever level of annual energy consumption through the burning of waste and the improved utilisation of energy efficient kilns. This reduced both energy costs and CO 2 emissions. The rationalisation of our mining operation and the introduction of 24-hour mining, which commenced during the previous year, improved asset utilisation and successfully reduced our capital investment in mining assets. Following extensive repair work at the Corex plant at Saldanha Steel, output from the steel plant reached design levels during the latter part of the year, consequently the PPC Saldanha material handling facility is now operating at similar levels. Our value proposition to our customers is Our reliability is our strength. Poor service and unreliability from Spoornet have impacted negatively on our ability to deliver on our promise. While this has resulted in increased costs, it has also resulted in both customers, and PPC Lime, operating at critically low stock levels for extended periods of time. In the drive to improve cost competitiveness and returns, excess capacity was reduced through the permanent retirement of an older and less efficient rotary kiln at Lime Acres, reducing the lime production capacity from 1,8 to 1,5 million tons per annum. The Lime Acres factory is also the first division in PPC to be awarded the OHSAS certification. PROSPECTS The South African steel and metallurgical industries remain the main consumers of our lime products. Whilst speculation regarding the future structure of the South African steel industry continues, expectations are that we will not see any major negative impact on the medium term demand for our lime products. Indications are that all major customers are planning to operate at full capacity for the foreseeable future. Efforts to improve the profitability of the business will continue in a number of areas. We expect to incorporate all the elements of a performing organisation into our business through the Kambuku initiative. In order for the business to achieve the required cost of capital returns, further reductions in excess capacity may be effected through the retirement of another rotary kiln at Lime Acres. Environmental applications for lime in the areas of waste treatment are being pursued, as it is likely that these will increase the South African lime demand in the medium term. Revenue # 389,4 368,2 6 Operating profit 66,8 49,9 34 Operating margin (%) 17,2 13,6 Net operating assets 434,7 448,2 (3) Number of employees Lime capacity (tons 000) * Restated # Prior to elimination of inter-segment revenue * % Rm Rm change 44 PPC Annual Report 2002

47 Operational review: Packaging Challenging the status quo, seeking further market diversification Afripack (100% owned) has been a leading player in the South African flexible packaging market since From its Durban factory, it produces paper sacks for the cement industry; paper bags for the manufacturing and food sectors as well as printed and laminated wrapping materials. Afripack has a diversified market presence with PPC Cement currently comprising approximately 25% of revenues. Despite a relatively flat market, volume and revenue rose strongly in Notably, business conditions improved markedly during the second half of the financial year. The weaker rand improved our export competitiveness contributing to a doubling of export revenues. The company continued to expand its presence in the market for self-opening bags and build on its strategy to improve customer and product mix. It increasingly offers supply chain solutions to customers and seeks to differentiate itself based on service, quality and flexibility. In line with its strategy, the company is steadily reducing its reliance on PPC Cement and growing market share in other markets. A continued focus on VBM and key value drivers has resulted in further significant improvements in productivity and quality. These, together with continued waste and overhead cost reduction, improved maintenance practices and tight working capital management, contributed to strongly improved operating margins in The Kambuku VBM project has aligned all objectives and targets within the company and it has created a climate of continuous improvement to challenge the organisation. Further improvements are targeted in the year ahead. In addition, Afripack intends embarking on a R40 million modernisation programme aimed at further market diversification, improving product quality, customer flexibility and on further improving operating efficiencies and reducing wastage. These additional benefits are only likely to arise towards the end of Revenue # 189,9 161,6 18 Operating profit 17,6 10,8 63 Operating margin (%) 9,3 6,7 Net operating assets 39,8 31,6 26 Number of employees * Restated # Prior to elimination of inter-segment revenue * % Rm Rm change PPC Annual Report

48 Seven-year review * 2000* 1999* 1998* Rm Rm Rm Rm Rm Rm Rm CONSOLIDATED BALANCE SHEETS Assets Non-current assets Property, plant and equipment Goodwill and intangible assets Negative goodwill (1) Other non-current assets and investments in associate companies Deferred tax assets Current assets Inventories and receivables Cash and cash equivalents Total assets Equity and liabilities Capital and reserves Share capital and premium Reserves and retained profit Shareholders interest Non-current liabilities Deferred tax liabilities Other non-current liabilities Current liabilities Total equity and liabilities * Restated Figures from 1996 to 1999 have not been restated for IAS effects 46 PPC Annual Report 2002

49 * 2000* 1999* 1998* Rm Rm Rm Rm Rm Rm Rm CONSOLIDATED INCOME STATEMENTS Revenue Operating profit Finance costs Income from investments Goodwill amortisation 3 Profit before exceptional items Exceptional items (13) 18 (9) Profit before tax Tax Net profit after tax Share of associate companies retained profit Net profit attributable to shareholders Attributable net profit excluding exceptional items CONSOLIDATED CASH FLOW STATEMENTS Cash available from operations Dividends paid (524) (173) (138) (43) (59) (39) (37) Net cash inflow from operating activities Net cash inflow/(outflow) from investing activities 252 (92) (188) (294) (515) (393) (208) Net cash (outflow)/inflow from financing activities (7) (18) (25) Net increase/(decrease) in cash and cash equivalents (74) (46) (109) * Restated Figures from 1996 to 1999 have not been restated for IAS effects PPC Annual Report

50 Seven-year review * 2000* 1999* 1998* STATISTICS Ordinary share performance Weighted average number of ordinary shares in issue during the year (000) Net profit per share (cents) Earnings per share before exceptional items (cents) Headline earnings per share (cents) Cash equivalent earnings per share (cents) Attributable cash flow per share (cents) Dividends per share (cents) Dividend cover (times) 1,5 1,5 1,5 1,5 1,6 1,6 1,6 Net asset value per share (cents) Profitability and asset management EBITDA (Rm) EBITDA to revenue (%) 31,2 29,9 26,0 22,1 22,3 21,9 22,2 Operating margin (%) 25,1 23,0 18,4 14,8 17,4 17,9 18,8 Net operating asset turn (times) 1,5 1,3 1,0 1,0 1,0 1,3 1,6 Return on net operating assets (%) 35,4 27,8 18,1 14,6 21,9 26,2 32,6 Return on total assets (%) 21,6 19,7 15,2 13,3 16,8 19,4 19,7 Return on shareholders interest (%) 28,3 22,8 15,5 13,2 19,7 21,6 21,8 Replacement capex to depreciation (%) 58,4 48,8 90,0 69,3 66,1 103,3 107,4 Effective rate of tax (%) 29,9 28,6 31,7 9,3 27,8 33,1 32,7 Liquidity and leverage Total liabilities to shareholders interest (%) Total borrowings to shareholders interest (%) Current ratio 2,7:1 3,1:1 2,4:1 2,1:1 1,5:1 1,5:1 1,4:1 Quick ratio 2,3:1 2,6:1 1,7:1 1,3:1 0,9:1 1,0:1 1,0:1 Interest cover (times) Number of years to repay interest-bearing debt gross Productivity Number of employees Revenue per employee (R 000) 778,8 689,5 597,4 547,4 485,6 419,6 352,9 Wealth created per employee (R 000) 455,6 382,0 296,9 237,6 209,0 184,2 165,3 * Restated Figures from 1996 to 1999 have not been restated for IAS effects 48 PPC Annual Report 2002

51 Definitions NET ASSET VALUE PER SHARE Shareholders interest divided by the total number of ordinary shares. OPERATING MARGIN Operating profit including income from associate companies expressed as a percentage of revenue. TOTAL ASSETS Property, plant and equipment, intangible assets, non-current assets and current assets. RETURN ON TOTAL ASSETS Profit before finance costs and tax (including income from investments and income from associate companies) expressed as a percentage of average total assets. RETURN ON SHAREHOLDERS INTEREST Net profit attributable to shareholders expressed as a percentage of average shareholders interest. EFFECTIVE RATE OF TAX Tax (excluding prior year tax) expressed as a percentage of profit before tax, excluding dividend income. TOTAL LIABILITIES Current liabilities and non-current liabilities. Deferred tax liabilities are excluded. TOTAL BORROWINGS Total liabilities less non-interest-bearing liabilities, trade and other payables, provisions and shareholders for dividends. INTEREST COVER Profit before finance costs and tax divided by finance costs including interest capitalised. Profit includes income from investments, but excludes share of associate companies retained profit. DIVIDEND COVER Earnings per share excluding exceptional items divided by dividends per share. CURRENT RATIO Current assets divided by current liabilities. NET OPERATING ASSET TURN Revenue divided by average net operating assets. NET OPERATING ASSETS Total assets (excluding investments and loans, deferred tax assets and cash) less deferred tax liabilities, non-interest-bearing liabilities, trade and other payables, provisions and shareholders for dividends. RETURN ON NET OPERATING ASSETS Profit before finance costs and tax expressed as a percentage of average net operating assets. CASH EQUIVALENT EARNINGS PER SHARE Net profit attributable to shareholders adjusted for non-cash flow items in attributable earnings and equity accounted retained profits, divided by the weighted average number of ordinary shares in issue during the year. ATTRIBUTABLE CASH FLOW PER SHARE Attributable cash flow from operations divided by the weighted average number of shares in issue during the year. PPC Annual Report

52 Accounting policies ACCOUNTING POLICIES AND BASIS OF PRESENTATION The financial statements are prepared under the historical cost convention modified by the restatement of financial instruments to fair value and the restatement to current cost for those subsidiaries operating in hyperinflationary economies. The financial statements are prepared in accordance with International Financial Reporting Standards and with South African Statements of Generally Accepted Accounting Practice on a basis consistent with previous financial statements, except for the adoption of IAS 39 (Financial Instruments: Recognition and Measurement) applied for the first time during the year under review. The principal accounting policies adopted are set out below. PRINCIPAL ACCOUNTING POLICIES Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and enterprises controlled by the company up to 30 September each year. Control is achieved where the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant intercompany transactions and balances between group enterprises are eliminated on consolidation. On acquisition of a subsidiary, minorities interest is measured at the proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities. Borrowing costs Borrowing 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 or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are dealt with in the income statement in the period in which they are incurred. Comparative figures When an accounting policy is altered, comparative figures are restated in accordance with the new policy where material. Decommissioning and quarry rehabilitation costs Group 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 life of the asset and the increase or decrease in the net present value of the provision for the expected cost is included with finance costs. The cost of ongoing programmes to prevent and control pollution and to rehabilitate the environment is charged to the income statement as incurred. Annual contributions are made to the group s Environmental Rehabilitation Trust Fund, created in accordance with statutory requirements, to provide for the estimated cost of pollution control, decommissioning and rehabilitation during and to the end of the life of the related asset. Discontinuing operations Discontinuing operations are significant, distinguishable components of an enterprise that have been sold, abandoned or are the subject of formal plans for disposal or discontinuance. Once an operation has been identified as discontinuing, or is reclassified as continuing, the comparative information is restated. Equity compensation plans Executive directors and senior executives have been granted share options in terms of the Barloworld Share Option Scheme. After the date on which the options are exercisable and before the expiry date they can either be: purchased for cash or through a loan from the Barloworld Share Purchase Trust; or ceded to an approved financial institution. Exceptional items Exceptional items cover those amounts, which are not considered to be typical of the ongoing business, and generally include profit and loss on disposal of property, investments, other non-current assets, and impairment losses. Financial instruments Measurement Financial instruments are recognised at the date the group becomes party to the contractual arrangements and are initially measured at cost, which includes transaction costs. Subsequent to initial recognition these instruments are measured as set out below. Investments Investments in securities are recognised on a trade-date basis. 50 PPC Annual Report 2002

53 Investments are classified as either held for trading or available-for-sale. Investments are shown at fair value which is determined by using appropriate valuation models. Trade and other receivables Trade and other receivables originated by the group are stated at cost less provision for doubtful debts. Cash and cash equivalents Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at balance sheet date. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Derivative instruments Derivative instruments are measured at fair value. Gains and losses on subsequent measurements Unrealised gains and losses on available-for-sale investments are recognised directly in equity until the disposal or impairment of the relevant investment, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. Other gains and losses from a change in the fair value of financial instruments that are not part of a hedging relationship are included in net profit or loss in the period in which the change arises. For the purposes of hedge accounting, hedges are classified into two categories: (a) fair value hedges which hedge the exposure to changes in fair value of a recognised asset or liability; and (b) cash flow hedges, which hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. In relation to cash flow hedges which meet 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 in shareholders equity and the ineffective portion is recognised against income. For cash flow hedges affecting future transactions, the gains or losses which are recognised in shareholders equity are transferred to income in the same period in which the hedge transaction affects income. Where the hedge transaction results in the recognition of an asset or liability, the associated gains or losses that had previously been recognised in shareholders equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability. Foreign currencies Transactions in currencies other than South African rand are recorded at the rates of exchange applicable on the transaction date. Monetary assets and liabilities denominated in such currencies are retranslated at the rates applicable on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement. In the case of foreign entities the financial statements of the group s non-south African operations are translated as follows on consolidation: assets and liabilities, at exchange rates applicable on the balance sheet date, income and expense items at the average exchange rates for the period and goodwill arising on acquisition at exchange rates applicable on the dates of the transactions. Exchange differences arising, if any, are classified as equity and transferred to the group s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. The financial statements of the foreign entity, Portland Holdings Limited, that reports in the currency of a hyperinflationary economy are restated in terms of Zimbabwe dollars at the balance sheet date before they are translated into South African rand. Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the group s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate company at the date of acquisition. Goodwill is recognised as an asset and amortised on a systematic basis over its estimated useful life subject to a maximum of 20 years. Any negative goodwill that arises where the fair value of the group s interest in the identifiable assets and liabilities of the subsidiary exceeds the cost of acquisition is taken to profit immediately: where there is no expectation of future losses; in respect of non-monetary assets to the extent whereby the negative goodwill exceeds the fair value of acquired identifiable assets; in respect of monetary assets. To the extent that negative goodwill relates to depreciable assets, it is recognised as profit over the useful life of those assets. Goodwill arising on the acquisition of subsidiaries and associate companies is presented separately in the balance sheet. On disposal of a subsidiary or associate company, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal. Government grants Government grants towards staff re-training costs are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Income is not recognised until there is reasonable assurance that the grants will be received. PPC Annual Report

54 Accounting policies Impairment At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets 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 (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, its carrying amount is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately and are treated as exceptional items. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed 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 as income immediately and treated as an exceptional item. Intangible assets Intangible assets are measured initially at cost and amortised on a straight-line basis over their estimated useful lives. Internally generated intangible assets exploration and research expenditure Exploration and research costs are expensed in the year in which they are incurred. Inventories Inventories are stated at the lower of cost and net realisable value. Finished goods and process materials are valued at average cost, which includes overheads directly related to production. Maintenance stores are valued at cost determined on the weighted average basis after making full allowance for obsolete and slowmoving items. Packaging inventories are valued at cost determined on the first-in first-out basis. Contracts in progress are valued at the cost of materials and appropriate overheads. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. Investments Investments, which exclude those that are accounted for as subsidiaries and associate companies, are stated at fair value. Income from investments is brought to account only to the extent of dividends received or declared. Interest income is recognised on an accrual basis. Investments in associate companies An associate company is an enterprise over which the group is in a position to exercise significant influence, through participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associate companies, taken from the most recent unaudited management accounts, are incorporated in these financial statements using the equity method of accounting. The carrying amount of such investments is reduced to recognise any decline, other than a temporary decline, in the value of individual investments. Where a group enterprise transacts with an associate company of the group, unrealised profits and losses are eliminated to the extent of the group s interest in the relevant associate company. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the group s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group s net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. The group as lessee Assets held under finance leases are recognised as assets of the group at their fair value at the date of acquisition. The corresponding liability to the lessor is disclosed as a finance lease obligation. Finance costs represent the difference between the total leasing commitments and the fair value of the assets acquired. They are charged to the income statement over the term of the relevant lease and at interest rates applicable to the lease on the remaining balance of the obligations for each accounting period. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation. 52 PPC Annual Report 2002

55 Depreciation is charged so as to write off the depreciable value of the assets, other than land, over their estimated useful lives, using the straight-line method, on the following basis: Buildings 30 years Plant 5 to 35 years Vehicles 5 to 10 years Furniture and equipment 3 to 6 years Certain costs of development and installation of major information systems (including packaged software) are capitalised and amortised over their expected useful lives. 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 an asset is recognised in the income statement. Provisions 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 obligation, and a reliable estimate can be made for the amount of the obligation. Where the effect of discounting to present value is material, provisions are adjusted to reflect the time value of money. Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to industrymanaged retirement benefit schemes are dealt with as defined contribution plans where the group s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit plan. For defined benefit plans the cost of providing the benefits is determined using the projected unit credit method. Actuarial valuations are conducted on a triennial basis with interim valuations performed on an annual basis on a date which does not coincide with the balance sheet date. Consideration is given to any event that could impact the funds up to balance sheet date. Actuarial gains and losses which exceed 10% of the greater of the present value of the group s pension obligations and the fair value of plan assets are amortised over the expected average remaining working lives of the participating employees. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the amended benefits become vested. The amount recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and reduced by the fair value of plan assets. Any asset is limited to unrecognised actuarial losses, plus the present value of available refunds and reductions in future contributions to the plan. To the extent that there is uncertainty as to the entitlement to the surplus, no asset is recorded. Revenue recognition Included in revenue are net invoiced sales to customers for goods and services. Sales of goods are recognised when goods are delivered and title has passed. Revenue arising from services, royalties and rebates is recognised on the accrual basis in accordance with the substance of the relevant agreements. Revenue excludes indirect taxes. Interest 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 rights to receive payment have been established. Segmental reporting Segment accounting policies are consistent with those adopted for the preparation of the financial statements of the consolidated group. The primary basis for reporting segment information is business segments and the secondary basis is by significant geographical region, which is based on the location of assets. The basis is consistent with internal reporting for management purposes as well as the source and nature of business risks and returns. Segment result represents operating profit plus any other items that can be allocated to segments including fair value adjustments on financial instruments of specific segments. Interest costs are excluded due to the centralised nature of the group s treasury operations. Tax The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill, negative goodwill nor from the acquisition of an asset, which does not affect either taxable or accounting income. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associate companies, 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. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. PPC Annual Report

56 Balance sheets at 30 September 2002 GROUP COMPANY * * Notes Rm Rm Rm Rm ASSETS Non-current assets 2 224, , , ,0 Property, plant and equipment , ,0 807,3 837,3 Goodwill and intangible assets 2 1,1 2,2 Negative goodwill 2 (1,2) Other non-current assets 3 378,9 381,3 523,8 196,6 Investment in associate companies 4 22,2 74,7 6,5 33,1 Deferred tax assets 9 12,1 12,3 Current assets 1 489, , ,9 945,6 Inventories 5 230,2 194,0 149,6 150,2 Trade and other receivables 6 387,6 484,9 254,0 386,9 Cash and cash equivalents 7 871,6 507,2 734,3 408,5 Total assets 3 713, , , ,6 EQUITY AND LIABILITIES Capital and reserves Share capital and premium 8 865,8 614,9 865,8 614,9 Non-distributable reserves 109,8 69,4 11,8 16,7 Retained profit 1 335, , ,7 921,8 Interest of shareholders of PPC 2 310, , , ,4 Minority interest 0,1 Interest of all shareholders 2 310, , , ,4 Non-current liabilities 859,6 727,8 199,8 204,0 Deferred tax liabilities 9 352,7 208,2 111,0 111,7 Interest-bearing ,5 399,5 Non-interest-bearing ,4 120,1 88,8 92,3 Current liabilities 543,5 379,6 375,4 255,2 Short-term borrowings 11 14,2 Tax 163,3 96,9 128,5 64,4 Trade and other payables ,7 278,9 241,9 187,3 Provisions 13 5,3 3,8 5,0 3,5 Total equity and liabilities 3 713, , , ,6 * Restated 54 PPC Annual Report 2002

57 Income statements for the year ended 30 September 2002 Revenue , , , ,7 continuing operations 2 570, , , ,7 discontinued operation 23,3 Operating profit ,2 453,6 602,3 359,0 continuing operations 612,2 441,1 602,3 359,0 discontinued operation 12,5 Finance costs 16 57,4 67,3 35,9 47,5 Income from investments 17 92,2 85,3 52,7 39,3 Goodwill amortisation 2 3,1 0,1 Profit before exceptional items 643,9 471,5 619,1 350,8 Exceptional items ,9 57,7 203,8 95,3 Profit before tax 802,8 529,2 822,9 446,1 Tax ,2 134,6 198,1 95,2 Net profit after tax 573,6 394,6 624,8 350,9 Share of associate companies retained profit 4 26,8 18,6 Minority interest 0,1 Net profit attributable to shareholders 600,3 413,2 624,8 350,9 Net profit per share (cents) basic ,1 826,3 fully diluted ,1 826,2 Earnings per share before exceptional items (cents) basic ,5 711,8 fully diluted ,5 711,8 Headline earnings per share (cents) basic ,5 709,7 fully diluted ,5 709,6 Dividends per share (cents) * Restated GROUP COMPANY * * Notes Rm Rm Rm Rm PPC Annual Report

58 Statements of changes in shareholders interest for the year ended 30 September 2002 GROUP Balance at 1 October ,0 564,8 0,8 50,2 3, , ,7 Increase in share capital and premium 0,1 0,1 Exchange gains on translation of financial statements of foreign operations 5,0 5,0 Movement in derivative hedging position 16,7 16,7 Other reserve movements (7,0) 7,0 Net profit attributable to shareholders 413,2 413,2 Dividends (172,5) (172,5) Balance at 30 September 2001* 50,0 564,9 0,8 43,2 8,7 16, , ,2 Opening adjustment for revaluation of investment 9,1 9,1 Increase in share capital and premium 3,7 247,2 250,9 Exchange gains on translation of financial statements of foreign operations 49,1 49,1 Movement in cash flow hedge 4,2 4,2 Amount recognised in cost of acquisition (20,9) (20,9) Revaluation of investment 3,1 3,1 Deferred tax on revaluation (0,4) (0,4) Other reserve movements (3,8) 3,8 Net profit attributable to shareholders 600,3 600,3 Dividends (523,9) (523,9) Balance at 30 September ,7 812,1 0,8 39,4 57,8 11, , ,7 * Restated Non-distributable reserves Capital Unrealised re- surplus on Foreign Availabledemption reclassifi- currency for-sale Share Share reserve cation trans- financial Hedging Retained capital premium fund of plant lation assets reserves profit Total Rm Rm Rm Rm Rm Rm Rm Rm Rm 56 PPC Annual Report 2002

59 COMPANY Balance at 1 October ,0 564,8 743, ,2 Increase in share capital and premium 0,1 0,1 Movement in derivative hedging position 16,7 16,7 Net profit attributable to shareholders 350,9 350,9 Dividends (172,5) (172,5) Balance at 30 September 2001* 50,0 564,9 16,7 921, ,4 Opening adjustment for revaluation of investment 9,1 9,1 Increase in share capital and premium 3,7 247,2 250,9 Movement in cash flow hedge 4,2 4,2 Amount recognised in cost of acquisition (20,9) (20,9) Revaluation of investment 3,1 3,1 Deferred tax on revaluation (0,4) (0,4) Net profit attributable to shareholders 624,8 624,8 Dividends (523,9) (523,9) Balance at 30 September ,7 812,1 11, , ,3 * Restated Non-distributable reserves Availablefor-sale Share Share Hedging financial Retained capital premium reserves assets profit Total Rm Rm Rm Rm Rm Rm PPC Annual Report

60 Cash flow statements for the year ended 30 September 2002 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations 1 792,2 628,8 555,5 382,8 Finance costs paid (67,2) (73,0) (45,7) (47,5) Dividends received 35,1 35,7 22,9 15,8 Interest received 57,1 49,6 29,8 23,5 Income from subsidiary companies 163,3 81,7 Tax (paid)/refunded 2 (179,2) (9,2) (135,1) 9,7 Cash available from operations 638,0 631,9 590,7 466,0 Dividends paid (523,9) (172,5) (523,9) (172,5) Net cash inflow from operating activities 114,1 459,4 66,8 293,5 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiary 3 (183,1) (24,1) (191,1) Acquisition of property, plant and equipment (109,8) (90,6) (72,5) (43,9) Replacement capital expenditure (109,8) (80,6) (72,5) (42,4) Expansion capital expenditure (10,0) (1,5) Acquisition of investments (1,2) Total proceeds (net) 513,3 (6,9) 512,0 6,8 Proceeds from the disposal of associate companies (net) 4 324,4 324,4 Proceeds received/(cash surrendered) on disposal of subsidiary 5 168,7 (23,7) 168,7 Proceeds from the disposal of property, plant and equipment 20,2 16,8 18,9 6,8 Movements in investments and loans 17,0 21,7 0,7 7,3 Decrease/(increase) in net amounts owing by subsidiary and associate companies 4,0 (2,4) 9,5 71,1 Receipt of instalment on long-term loan 10,2 10,2 Net cash inflow/(outflow) from investing activities 251,6 (92,1) 258,6 40,1 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 0,4 0,1 0,4 0,1 Long-term borrowings raised 0,5 Long-term borrowings repaid (3,8) Short-term borrowings repaid (3,9) (18,7) (3,6) Net cash (outflow)/inflow from financing activities (6,8) (18,6) 0,4 (3,5) Net increase in cash and cash equivalents 358,9 348,7 325,8 330,1 Cash and cash equivalents at beginning of year 507,2 157,1 408,5 78,4 Effects of exchange rates on cash 5,5 1,4 Cash and cash equivalents at end of year 871,6 507,2 734,3 408,5 * Restated GROUP COMPANY * * Notes Rm Rm Rm Rm 58 PPC Annual Report 2002

61 Notes to the cash flow statements for the year ended 30 September Cash generated from operations is calculated as follows: Profit before exceptional items 643,9 471,5 619,1 350,8 Adjustments for: Depreciation 188,1 165,0 94,3 96,0 Amortisation of goodwill and intangible assets 3,6 0,5 (Profit)/loss on disposal of plant and equipment (0,8) (2,2) (0,9) 0,3 Dividends received (35,1) (35,7) (22,9) (15,8) Income from subsidiary companies (163,3) (81,7) Interest received (57,1) (49,6) (29,8) (23,5) Finance costs 57,4 67,3 35,9 47,5 Other non-cash flow items 3,4 17,6 5,3 9,9 Operating cash flows before movements in working capital 803,4 634,4 537,7 383,5 (Increase)/decrease in inventories (20,8) (4,3) 0,6 (4,2) Increase in receivables (61,6) (46,0) (46,4) (23,3) Increase in payables 71,2 44,7 63,6 26,8 Cash generated from operations 792,2 628,8 555,5 382,8 2. Tax paid/(refunded) is reconciled to amounts disclosed in the income statements as follows: Net amounts outstanding/(prepaid) at beginning of year 96,9 (30,3) 64,4 (43,5) Charge per income statement (excluding deferred tax) 244,7 138,0 199,2 98,2 Adjustment in respect of subsidiaries acquired and sold including translation differences 0,9 (1,6) Net amounts outstanding at end of year (163,3) (96,9) (128,5) (64,4) Cash amounts paid/(refunded) 179,2 9,2 135,1 (9,7) 3. Acquisition of subsidiary Property, plant and equipment and non-current assets 466,0 38,0 Goodwill 105,3 Inventories 15,3 1,2 Receivables 18,0 10,5 Payables, tax and deferred tax (175,4) (25,6) Cash and cash equivalents 8,0 0,9 Pre-acquisition dividend (1,5) Net asset value of subsidiary acquired 435,7 25,0 GROUP COMPANY * * Rm Rm Rm Rm Total consideration 435,7 25,0 435,7 Shares issued (250,5) (250,5) 185,2 25,0 185,2 Foreign exchange gain 5,9 5,9 Cash and cash equivalents of subsidiary acquired (8,0) (0,9) Net cash outflow on acquisition of subsidiary 183,1 24,1 191,1 * Restated PPC Annual Report

62 Notes to the cash flow statements for the year ended 30 September Disposal of associate companies Cost of investments 25,1 25,1 Equity accounted retained profit to date of disposal 36,0 Profit on disposal of associate companies 263,3 299,3 Proceeds from disposal of associate companies (net) 324,4 324,4 Being: Total consideration 335,6 335,6 Disposal costs (11,2) (11,2) 5. Disposal of subsidiary Property, plant and equipment and non-current assets 104,0 Inventories 0,7 Receivables 19,9 Payables, tax and deferred tax (36,3) Cash and cash equivalents 23,7 324,4 324,4 Net asset value 112,0 Investment in subsidiary and disposal costs 0,3 73,6 Profit on disposal 56,4 95,1 Disposal consideration 168,7 168,7 Cash and cash equivalents (23,7) 145,0 168,7 Less: Proceeds received/(receivable) at year-end (note 24) 168,7 (168,7) 168,7 (168,7) Proceeds received/(cash surrendered) on disposal of subsidiary 168,7 (23,7) 168,7 * Restated GROUP COMPANY * * Rm Rm Rm Rm 60 PPC Annual Report 2002

63 Notes to the financial statements for the year ended 30 September * Accumulated Net book Accumulated Net book Cost depreciation value Cost depreciation value Rm Rm Rm Rm Rm Rm 1. PROPERTY, PLANT AND EQUIPMENT GROUP Freehold and leasehold land and buildings and mineral rights 383,0 118,2 264,8 369,8 107,5 262,3 Decommissioning and quarry rehabilitation assets 39,6 14,7 24,9 40,1 13,9 26,2 Plant, vehicles, furniture and equipment 2 247,8 947, , ,3 837,9 860,4 Capitalised leased plant 302,2 81,1 221,1 302,2 61,1 241, , , , , , ,0 COMPANY Freehold and leasehold land and buildings and mineral rights 298,4 98,6 199,8 298,7 90,6 208,1 Decommissioning and quarry rehabilitation assets 34,9 13,0 21,9 34,9 11,8 23,1 Plant, vehicles, furniture and equipment 1 094,2 614,2 480, ,1 568,9 492,2 Capitalised leased plant 149,6 44,0 105,6 149,6 35,7 113, ,1 769,8 807, ,3 707,0 837,3 Plant and equipment with a net book value of R221,1 million (2001: R241,1 million) are encumbered as reflected in note 10. The registers of land and buildings are open for inspection at the registered offices of the company and its subsidiaries. The insurable value of the group s property, plant and equipment as at 30 September 2002 amounted to R million (2001: R8 995 million). This is based on the cost of replacement of such assets, except for motor vehicles and certain selected assets which are included at estimated retail value. * Restated PPC Annual Report

64 Notes to the financial statements for the year ended 30 September PROPERTY, PLANT AND EQUIPMENT (continued) GROUP Movement of property, plant and equipment 2002 Net book value at beginning of year 262,3 26,2 860,4 241, ,0 Acquisition of subsidiary 17,4 0,7 447,9 466,0 Additions 10,2 99,6 109,8 Translation differences (net)^ 4,0 (0,7) 52,4 55,7 293,9 26, ,3 241, ,5 Disposals (1,8) (7,3) (9,1) Impairment (12,9) (12,9) Depreciation (14,4) (1,3) (152,4) (20,0) (188,1) 264,8 24, ,6 221, ,4 ^ The translation differences are made up as follows: Cost 69,9 Accumulated depreciation (14,2) GROUP Movement of property, plant and equipment 2001* Net book value at beginning of year 267,6 27,5 986,5 260, ,9 Acquisition of subsidiary 0,5 35,2 35,7 Additions 7,0 83,6 90,6 Translation differences (net)^ 1,0 2,5 3,5 276,1 27, ,8 260, ,7 Disposal of subsidiary (1,2) (102,3) (103,5) Disposals (0,2) (12,6) (12,8) Impairment (0,4) (0,4) Depreciation (12,0) (1,3) (132,5) (19,2) (165,0) 55,7 262,3 26,2 860,4 241, ,0 ^ The translation differences are made up as follows: Cost 4,4 Accumulated depreciation (0,9) * Restated Freehold and Decomleasehold missioning land and and Plant, buildings quarry vehicles, Capitalised and mineral rehabilitation furniture and leased rights assets equipment plant Total Rm Rm Rm Rm Rm 3,5 62 PPC Annual Report 2002

65 Freehold and Decomleasehold missioning land and and Plant, buildings quarry vehicles, Capitalised and mineral rehabilitation furniture and leased rights assets equipment plant Total Rm Rm Rm Rm Rm 1. PROPERTY, PLANT AND EQUIPMENT (continued) COMPANY Movement of property, plant and equipment 2002 Net book value at beginning of year 208,1 23,1 492,2 113,9 837,3 Additions 4,5 68,0 72,5 212,6 23,1 560,2 113,9 909,8 Disposals (1,4) (6,8) (8,2) Depreciation (11,4) (1,2) (73,4) (8,3) (94,3) 199,8 21,9 480,0 105,6 807,3 COMPANY Movement of property, plant and equipment 2001* Net book value at beginning of year 214,0 24,3 536,0 122,0 896,3 Additions 4,3 39,6 43,9 218,3 24,3 575,6 122,0 940,2 Disposals (0,1) (6,8) (6,9) Depreciation (10,1) (1,2) (76,6) (8,1) (96,0) * Restated 208,1 23,1 492,2 113,9 837,3 PPC Annual Report

66 Notes to the financial statements for the year ended 30 September GOODWILL AND INTANGIBLE ASSETS 2002 Cost At 1 October ,8 2,4 3,2 Subsequent change in value of prior year acquisition (0,8) (0,8) (1,5) Acquisition of subsidiary 105,3 105,3 Translation differences 0,2 0,2 Impairment (105,3) (105,3) At 30 September ,6 2,6 (1,5) Accumulated amortisation At 1 October ,1 0,9 1,0 Amortisation 3,4 0,5 3,9 (0,3) Subsequent change in value of prior year acquisition (0,1) (0,1) Translation differences 0,1 0,1 Impairment (3,4) (3,4) At 30 September ,5 1,5 (0,3) Carrying amount At 30 September ,1 1,1 (1,2) 2001* Cost At 1 October ,2 2,2 Additions 0,8 0,8 Translation differences 0,2 0,2 At 30 September ,8 2,4 3,2 Accumulated amortisation At 1 October ,4 0,4 Amortisation 0,1 0,4 0,5 Translation differences 0,1 0,1 At 30 September ,1 0,9 1,0 Carrying amount At 30 September ,7 1,5 2,2 * Restated GROUP Restraint Negative Goodwill of trade Total goodwill Rm Rm Rm Rm 64 PPC Annual Report 2002

67 GROUP COMPANY * * Rm Rm Rm Rm 3. OTHER NON-CURRENT ASSETS Financial assets Interest in subsidiaries 483,8 168,0 Unlisted investments 259,1 247,0 21,9 8,5 Unlisted investments (2002: fair value; 2001: cost) 12,2 0,1 12,1 0,1 Unlisted preference shares at cost^ 246,9 246,9 Contributions to PPC Environmental Trust 9,8 8,4 Guaranteed loan in respect of railway line 16,0 17,7 16,0 17,7 Other non-current loans and deposits 1,9 4,2 1,9 1,9 PPC 1988 Share Purchase Trust # 0,2 0,5 0,2 0,5 Long-term loan to Saldanha Steel (Pty) Limited 0 101,7 111,9 378,9 381,3 523,8 196,6 Interest in subsidiaries (Annexure 1) Shares at cost 507,5 71,8 Less: Amounts written off 106,3 1,0 401,2 70,8 Add: Amounts owing by subsidiaries 146,6 144,7 547,8 215,5 Less: Amounts owing to subsidiaries 64,0 47,5 483,8 168,0 Unlisted investments Available-for-sale Unlisted investments at cost less amounts written off 0,1 0,1 0,1 0,1 Additions 0,1 Fair value adjustment 12,0 12,0 12,2 0,1 12,1 0,1 Directors valuation of unlisted investments 259,1 256,0 21,9 17,6 Classification of financial assets Available-for-sale 12,2 0,1 12,1 0,1 Originated loans and receivables 366,7 381,2 18,1 20,1 Scope exclusions from IAS ,6 176,4 ^ The unlisted preference shares earn dividends at an average rate of 10,5% per annum (2001: 11,7% per annum) and are redeemable at the option of the company as follows: 3 November ,9 30 September ,7 1 October ,2 82,2 30 September ,1 49,1 31 March ,9 30 September ,0 35,0 1 October ,7 * Restated 378,9 381,3 523,8 196,6 246,9 246,9 PPC Annual Report

68 Notes to the financial statements for the year ended 30 September OTHER NON-CURRENT ASSETS (continued) 0 The long-term loan is repayable in annual capital instalments of R10,2 million payable on 30 June each year, ending 30 June 2013 and bears interest at 16% per annum (2001: 16% per annum). # PPC 1988 Share Purchase Trust Included are loans to executive directors for the purchase of shares amounting to R0,2 million (2001: R0,3 million). The loans are secured by pledge of the shares and are repayable within ten years of granting of the options or within nine months of death or immediately on ceasing to be an employee, except in the case of retirement. Interest rates vary in accordance with the terms and provisions of the trust deed and range from 7,5% to 8,03% (2001: 7,5% to 8,03%). GROUP COMPANY * * Rm Rm Rm Rm 4. INVESTMENT IN ASSOCIATE COMPANIES (ANNEXURE 1) Unlisted shares at cost 12,9 38,0 3,8 28,9 Less: Amounts written off 3,8 3,8 12,9 38,0 25,1 Share of retained profit^ 2,8 28,7 Amount owing 6,5 8,0 6,5 8,0 Carrying value including amount owing 22,2 74,7 6,5 33,1 Made up as follows: Investments in associate companies at carrying value Kgale Quarries (Pty) Limited 11,8 11,7 Slagment (Pty) Limited 3,9 Ash Resources (Pty) Limited 6,1 2,1 Natal Portland Cement Co (Pty) Limited 48,9 23,0 Amount owing Slagment (Pty) Limited 6,5 8,0 6,5 8,0 ^Share of retained profit Beginning of the year 28,7 21,1 Increase for the year 26,8 18,6 Profit for the year 33,6 23,6 Dividends received (6,8) (5,0) Other movements (8,9) (11,0) Disposals (43,8) 22,2 74,7 6,5 33,1 2,8 28,7 Valuation of interest in associate companies Directors valuation of unlisted associate companies including amount owing 22,2 227,2 * Restated 66 PPC Annual Report 2002

69 GROUP COMPANY * * Rm Rm Rm Rm 5. INVENTORIES Raw materials 62,1 37,6 32,1 24,8 Work in progress 25,7 37,1 24,2 37,1 Finished goods 43,6 38,5 28,1 27,4 Maintenance stores 98,8 80,8 65,2 60,9 230,2 194,0 149,6 150,2 The value of inventories has been determined on the following cost formula bases: First-in first-out 24,9 8,8 Average 205,3 185,2 149,6 150,2 No finished goods inventories were required to be written down to net realisable value. 230,2 194,0 149,6 150,2 6. TRADE AND OTHER RECEIVABLES Trade receivables 344,3 295,4 237,2 210,8 Less: Provision for doubtful debts (16,0) (32,3) (8,6) (26,8) Other receivables and prepayments 57,4 42,8 25,4 23,9 Dividends receivable 1,7 Derivative financial instruments at fair value 0,2 10,3 10,3 Proceeds receivable discontinued operation 168,7 168,7 387,6 484,9 254,0 386,9 7. CASH AND CASH EQUIVALENTS Cash on deposit 871,6 505,7 734,3 408,5 Short-dated liquid instruments 1,5 * Restated Treated as an originated loans and receivables financial asset Treated as a held for trading financial asset 871,6 507,2 734,3 408,5 PPC Annual Report

70 Notes to the financial statements for the year ended 30 September 2002 GROUP AND COMPANY * Rm Rm 8. SHARE CAPITAL AND PREMIUM Authorised share capital ordinary shares of R1 each 60,0 60,0 Issued share capital (2001: ) ordinary shares of R1 each 53,7 50,0 Share premium 812,1 564,9 Balance at beginning of year 564,9 564,8 Premium on shares issued 247,2 0,1 Total issued share capital and premium 865,8 614,9 In terms of the PPC 1985 Share Option Scheme, new shares were allotted and issued during the year. In terms of the acquisition of Portland Holdings Limited, incorporated in Zimbabwe, shares were issued to its former shareholders. In terms of the JSE Securities Exchange South Africa listing requirements, Pretoria Portland Cement Company Limited had a public shareholder spread as defined in the regulations of 33,4% at year-end. Unissued shares Unissued share capital comprises (2001: ) shares of R1 each. Of these (2001: ) shares are reserved to meet the requirements of the PPC 1985 Share Option Scheme and the PPC 1988 Share Purchase Trust. PPC 1985 Share Option Scheme At 30 September 2002 the following options granted to directors and executives were unexercised: Date Number of shares Option price from which Expiry Directors Executives R exercisable date ,00 2 December December 2004 GROUP AND COMPANY * Rm Rm Movement for the year Options at the beginning of the year Less: Options exercised Options unexercised at year-end The scheme is now closed and no further options will be granted. The existing uncancelled options will continue until their expiry dates. * Restated 68 PPC Annual Report 2002

71 GROUP COMPANY * * Rm Rm Rm Rm 9. DEFERRED TAX Movement of deferred tax liabilities Balance at beginning of year 208,2 219,7 111,7 114,7 Acquisition of subsidiary 143,6 8,6 Disposal of subsidiary (16,1) Reduction in the rate of foreign tax (2,3) Subsequent change in value of prior year acquisition 1,0 Charged directly in equity 0,4 0,4 Income statement credit (15,7) (2,0) (1,1) (3,0) Translation differences 15,2 0,3 352,7 208,2 111,0 111,7 Analysis of deferred tax liabilities Capital allowances 386,0 251,2 142,7 145,6 Provisions (37,6) (44,7) (33,2) (34,9) Prepayments 2,4 1,7 1,1 1,0 Capital gains tax 0,4 0,4 Other temporary differences 1,5 Movement of deferred tax assets Balance at beginning of year 12,3 13,2 Transferred this year (0,2) (0,9) 352,7 208,2 111,0 111,7 12,1 12,3 Analysis of deferred tax assets Capital allowances 10,5 12,3 Provisions 1,6 12,1 12,3 10. NON-CURRENT LIABILITIES Interest-bearing 401,1 399,5 Less: Current portion repayable within one year (note 11) 13,6 387,5 399,5 Non-interest-bearing 119,4 120,1 88,8 92,3 Non-current provisions (note 13) 117,6 120,1 88,8 92,3 Other payables 1,8 Deferred tax liabilities (note 9) 352,7 208,2 111,0 111,7 Total non-current liabilities 859,6 727,8 199,8 204,0 * Restated Treated as a non-trading financial liability PPC Annual Report

72 Notes to the financial statements for the year ended 30 September 2002 GROUP COMPANY * * Rm Rm Rm Rm 10. NON-CURRENT LIABILITIES (continued) Debt secured Net book value of plant and equipment encumbered 221,1 241,1 Secured debts Liabilities under capitalised finance leases 387,5 399,5 Interest-bearing debt is repayable as follows: During the years ending 30 September , ,7 13, ,8 13, ,9 13, and onwards 346,1 346,8 387,5 399,5 Current portion repayable within one year 13,6 Details of interest rates are set out in note ,1 399,5 11. SHORT-TERM BORROWINGS Short-term loans 0,6 Current portion of long-term borrowings (note 10) 13,6 14,2 12. TRADE AND OTHER PAYABLES Trade and other payables 349,0 278,9 230,2 187,3 Liability on acquisition of Porthold 11,7 11,7 The group has a foreign currency denominated liability of US$1,1 million to former shareholders of Portland Holdings Limited being claims outstanding in respect of the scheme of arrangement. 360,7 278,9 241,9 187,3 13. PROVISIONS Non-current (note 10) 117,6 120,1 88,8 92,3 Current 5,3 3,8 5,0 3,5 * Restated Treated as a non-trading financial liability 122,9 123,9 93,8 95,8 70 PPC Annual Report 2002

73 Decom- Retirement missioning and postand quarry retirement Total rehabilitation benefits Rm Rm Rm 13. PROVISIONS (continued) GROUP Movement of provisions 2002 Balance at beginning of year 123,9 95,4 28,5 Acquisition of subsidiary 4,8 3,6 1,2 Amounts added 19,9 9,7 10,2 Amounts utilised (16,4) (16,4) Amounts reversed unutilised (2,6) (2,6) Other movements (7,2) (5,7) (1,5) Translation differences 0,5 0,4 0,1 Balance at 30 September ,9 103,4 19,5 Incurred: Within one year 5,3 2,1 3,2 Between two to five years 7,6 6,6 1,0 More than five years 110,0 94,7 15,3 122,9 103,4 19,5 Movement of provisions 2001* Balance at beginning of year 107,4 81,7 25,7 Acquisition of subsidiary 5,2 4,5 0,7 Amounts added 12,3 9,2 3,1 Amounts utilised (0,3) (0,3) Amounts reversed unutilised (0,3) (0,3) Disposal of subsidiary (0,4) (0,4) Balance at 30 September ,9 95,4 28,5 * Restated PPC Annual Report

74 Notes to the financial statements for the year ended 30 September PROVISIONS (continued) COMPANY Movement of provisions 2002 Balance at beginning of year 95,8 74,1 21,7 Amounts added 13,1 4,8 8,3 Amounts utilised (14,1) (14,1) Amounts reversed unutilised (1,0) (1,0) Balance at 30 September ,8 78,9 14,9 Incurred: Within one year 5,0 2,1 2,9 Between two to five years 6,6 6,6 More than five years 82,2 70,2 12,0 93,8 78,9 14,9 Movement of provisions 2001* Balance at beginning of year 85,6 66,5 19,1 Amounts added 10,2 7,6 2,6 Balance at 30 September ,8 74,1 21,7 Decommissioning and quarry rehabilitation Provision is raised for decommissioning and quarry rehabilitation costs where a legal or constructive obligation exists as a result of a past event. Retirement and post-retirement benefits The group has recognised a liability in respect of post-retirement medical benefits and benefits payable on retirement. * Restated Decom- Retirement missioning and postand quarry retirement Total rehabilitation benefits Rm Rm Rm 72 PPC Annual Report 2002

75 14. BUSINESS AND GEOGRAPHICAL SEGMENTS The primary segments have been determined on the basis by which the directors manage the business. The secondary segments have been determined by the geographical location of the businesses. Consolidated Cement Lime Packaging * * * * GROUP (Rm) Revenue South Africa 2 299, , , ,8 389,4 368,2 189,9 161,6 Other Africa 344,6 164,0 344,6 164,0 Revenue from continuing operations 2 644, , , ,8 389,4 368,2 189,9 161,6 Revenue from discontinued operation 23,3 Inter-segment revenue (74,0) (75,7) Total revenue 2 570, ,2 Segment result South Africa 569,3 403,4 484,9 342,7 66,8 49,9 17,6 10,8 Other Africa 42,9 37,7 42,9 37,7 Operating profit from continuing operations 612,2 441,1 527,8 380,4 66,8 49,9 17,6 10,8 Dividends from associate companies 6,8 5,0 6,8 5,0 Share of associate companies retained profit 26,8 18,6 26,8 18,6 Continuing operations 645,8 464,7 561,4 404,0 66,8 49,9 17,6 10,8 Operating profit from discontinued operation 12,5 Total operating profit including income from associate companies 645,8 477,2 Finance costs 57,4 67,3 Income from other investments 85,4 80,3 Goodwill amortisation 3,1 0,1 Exceptional items 158,9 57,7 829,6 547,8 Tax 229,2 134,6 Minority interest 0,1 Net profit attributable to shareholders 600,3 413,2 * Restated PPC Annual Report

76 Notes to the financial statements for the year ended 30 September BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Consolidated Cement Lime Packaging * * * * GROUP (Rm) Operating margin continuing operations (%) 25,1 # 22,7 # 27,2 25,3 17,2 13,6 9,3 6,7 Non-cash expenses per segment Depreciation South Africa 148,8 147,5 106,3 106,1 37,8 35,5 4,7 5,9 Other Africa 39,3 4,1 39,3 4,1 Depreciation continuing operations 188,1 151,6 145,6 110,2 37,8 35,5 4,7 5,9 Depreciation discontinued operation 13,4 Total depreciation 188,1 165,0 Amortisation of goodwill and intangible assets 3,6 0,5 3,6 0,5 Capital additions South Africa 106,3 59,8 74,2 43,8 27,3 14,9 4,8 1,1 Other Africa 3,5 0,4 3,5 0,4 Capital additions continuing operations 109,8 60,2 77,7 44,2 27,3 14,9 4,8 1,1 Capital additions discontinued operation 30,4 Total capital additions 109,8 90,6 Total assets Operating assets 2 530, , , ,4 526,8 538,4 90,2 63,6 South Africa 1 949, , , ,9 ~ 526,8 538,4 90,2 63,6 Other Africa 581,6 61,5 581,6 61,5 Non-operating assets 1 183,0 861, ,2 819,4 34,3 39,9 4,5 1,9 South Africa 1 089,4 805, ,6 763,4 34,3 39,9 4,5 1,9 Other Africa 93,6 56,0 93,6 56,0 Total assets 3 713, , , ,8 561,1 578,3 94,7 65,5 Total liabilities Operating liabilities 648,7 499,7 506,2 377,5 92,1 90,2 50,4 32,0 South Africa 596,0 473,2 453,5 351,0 92,1 90,2 50,4 32,0 Other Africa 52,7 26,5 52,7 26,5 Non-operating liabilities 754,4 607,7 602,3 455,3 145,7 145,2 6,4 7,2 South Africa 599,8 604,0 447,7 451,6 145,7 145,2 6,4 7,2 Other Africa 154,6 3,7 154,6 3,7 Total liabilities 1 403, , ,5 832,8 237,8 235,4 56,8 39,2 * Restated # Net of inter-segment revenue ~ Includes proceeds receivable discontinued operation R168,7 million 74 PPC Annual Report 2002

77 GROUP COMPANY * * Rm Rm Rm Rm 15. OPERATING PROFIT Operating profit is arrived at after taking into account the items detailed below: Cost of sales 1 717, , , ,5 Income from subsidiary companies Fees 17,4 23,7 Interest 0,5 1,0 Dividends 145,4 57,0 163,3 81,7 Amortisation goodwill and intangible assets (note 2) 3,9 0,5 negative goodwill (note 2) (0,3) Depreciation (note 1): Cost of sales 170,4 132,3 78,3 79,4 Operating costs 17,7 32,7 16,0 16,6 188,1 165,0 94,3 96,0 Distribution costs: Cost of sales 281,9 115,1 252,6 222,8 Operating costs 5,6 3,5 287,5 118,6 252,6 222,8 Operating lease charges: Land and buildings 2,3 2,9 2,3 2,1 Plant, vehicles and equipment 1,5 2,0 1,4 1,4 3,8 4,9 3,7 3,5 Exploration and research costs 1,6 1,0 1,6 1,0 Administration and management fees paid 1,8 5,4 1,4 5,0 Fees paid to holding company 9,4 5,1 6,4 4,7 Technical fees paid 4,3 5,7 4,0 5,5 Auditors remuneration: Audit fees 2,4 2,0 1,3 1,3 Fees for other services 0,3 0,2 2,7 2,0 1,5 1,3 Staff costs South Africa 379,2 384,2 272,7 282,0 Other Africa 22,1 9,2 401,3 393,4 272,7 282,0 Retirement benefit contributions 25,0 8,3 19,1 4,8 (Profit)/loss on disposal of plant and equipment (0,8) (2,2) (0,9) 0,3 Operating expenses by function Administrative costs 18,2 18,2 13,3 16,5 Operating costs 223,1 250,9 183,0 184,0 Other operating income (0,6) (0,6) (163,9) (82,3) * Restated 240,7 268,5 32,4 118,2 PPC Annual Report

78 Notes to the financial statements for the year ended 30 September 2002 COMPANY * Rm Rm 15. OPERATING PROFIT (continued) Directors emoluments (note 31) Executive directors Salary 4,0 4,7 Benefits 1,7 2,1 Bonuses 2,9 3,3 Share option gains in Barloworld Limited (see below) 1,7 2,7 10,3 12,8 Non-executive directors Fees 0,3 0,2 Total directors emoluments 10,6 13,0 Benefits include company vehicles, housing and share purchase trust loans, company contributions to retirement funds and medical aid. Bonuses are performance-related. Share option gains in Barloworld Limited Options Option price Gain excercised/ceded R Rm Executive directors ,25 0, ,00 0, ,00 0, ,76 0, ,7 GROUP COMPANY * * Rm Rm Rm Rm 16. FINANCE COSTS Bank and other borrowings 6,7 2,3 1,8 1,9 Finance lease interest 57,0 61,8 34,6 40,2 Subsidiary companies 8,3 3,8 Monetary loss on hyperinflation 4,4 Unwinding of discount on provisions 10,0 8,9 6,8 7,3 78,1 73,0 51,5 53,2 Gains on forward exchange contracts (15,7) (5,7) (15,6) (5,7) Gains on translation of foreign currency monetary items (5,0) * Restated 57,4 67,3 35,9 47,5 76 PPC Annual Report 2002

79 GROUP COMPANY * * Rm Rm Rm Rm 17. INCOME FROM INVESTMENTS Dividends: Unlisted investments 28,3 30,7 2,4 1,9 Associate companies 6,8 5,0 20,5 13,9 Interest received 57,1 49,6 29,8 23,5 92,2 85,3 52,7 39,3 18. EXCEPTIONAL ITEMS Impairment in the value of property (12,9) (0,4) Impairment of goodwill (101,9) Impairment of investment in subsidiary company (105,3) Profit on disposal of associate companies 263,3 299,3 Profit on disposal of property 10,4 1,7 9,8 0,2 Profit on disposal of logistics division (note 24) 56,4 95,1 158,9 57,7 203,8 95,3 Tax current (0,2) (0,5) deferred 0,1 158,8 57,2 203,8 95,3 19. TAX South African normal tax current year 176,3 113,0 139,5 83,2 prior year 0,5 0,2 0,5 176,8 113,2 140,0 83,2 Foreign tax current year 13,0 8,3 5,7 (0,2) prior year (0,7) (0,1) 12,3 8,2 5,7 (0,2) Deferred tax current year (15,5) 5,0 (1,1) 4,1 prior year (6,1) (7,1) attributable to a reduction in the rate of foreign tax (2,3) (15,5) (3,4) (1,1) (3,0) Secondary tax on companies 55,6 16,6 53,5 15,2 Tax attributable to the company and its subsidiaries 229,2 134,6 198,1 95,2 Incurred: South Africa 226,9 128,3 198,1 95,2 Other Africa 2,3 6,3 * Restated 229,2 134,6 198,1 95,2 PPC Annual Report

80 Notes to the financial statements for the year ended 30 September 2002 GROUP COMPANY * * % % % % 19. TAX (continued) Reconciliation of rate of tax Tax as a percentage of profit before tax (excluding prior year tax) 28,6 26,6 24,0 22,9 Adjustment due to the inclusion of dividend income 1,3 2,0 6,1 4,9 Effective rate of tax 29,9 28,6 30,1 27,8 Reduction in rate of tax 7,6 5,1 7,5 6,5 Permanent differences 6,9 4,0 7,5 6,4 Reduction in rate of foreign tax 0,4 Withholding taxes recovered 0,1 0,1 Foreign tax differential 0,7 0,6 Increase in rate of tax (7,5) (3,7) (7,6) (4,3) Disallowable charges (0,2) (0,6) (0,9) Withholding taxes (0,7) Secondary tax on companies (6,9) (3,1) (6,5) (3,4) Tax on foreign dividend received (0,4) (0,4) South African normal tax rate 30,0 30,0 30,0 30,0 As at 30 September 2002, the group had unutilised credits in respect of secondary tax on companies of R4,4 million (2001: R1,8 million), which have not been recognised as deferred tax assets. A subsidiary, PPC Slag (Pty) Limited, qualifies for a tax holiday in terms of section 37H of the Income Tax Act, until 30 September GROUP * 20. NET PROFIT, EARNINGS AND CASH FLOW PER SHARE 20.1 Net profit per share (basic) Net profit attributable to shareholders (Rm) 600,3 413,2 Weighted average number of ordinary shares Net profit per share (basic) (cents) 1 121,1 826,3 Account is taken of the number of shares in issue for the period in which they are entitled to participate in the net profit of the group Net profit per share (fully diluted) Net profit attributable to shareholders (Rm) 600,3 413,2 Fully converted weighted average number of ordinary shares Net profit per share (fully diluted) (cents) 1 121,1 826,2 The number of shares in issue for this calculation has been increased by the number of unexercised options. * Restated 78 PPC Annual Report 2002

81 GROUP * 20. NET PROFIT, EARNINGS AND CASH FLOW PER SHARE (continued) 20.3 Earnings per share before exceptional items (basic) Net profit attributable to shareholders (Rm) 600,3 413,2 Adjusted for: Exceptional items net of tax (158,8) (57,2) Earnings before exceptional items 441,5 356,0 Weighted average number of ordinary shares Earnings per share before exceptional items (cents) 824,5 711, Earnings per share before exceptional items (fully diluted) Earnings as calculated in 20.3 above (Rm) 441,5 356,0 Fully converted weighted average number of ordinary shares Earnings per share before exceptional items (fully diluted) (cents) 824,5 711, Headline earnings per share (basic) Earnings as calculated in 20.3 above (Rm) 441,5 356,0 Adjusted for: Goodwill amortisation 3,1 Profit on disposal of plant and equipment net of tax (0,4) (1,1) Headline earnings 444,2 354,9 Weighted average number of ordinary shares Headline earnings per share (cents) 829,5 709, Headline earnings per share (fully diluted) Earnings as calculated in 20.5 above (Rm) 444,2 354,9 Fully converted weighted average number of ordinary shares Headline earnings per share (fully diluted) (cents) 829,5 709, Cash equivalent earnings per share Net profit attributable to shareholders (Rm) 600,3 413,2 Adjusted for: Amortisation and depreciation 191,7 165,5 Deferred tax (15,5) (3,4) Other non-cash items 3,4 17,6 Cash equivalent earnings 779,9 592,9 Weighted average number of ordinary shares Cash equivalent earnings per share (cents) 1 456, ,5 * Restated PPC Annual Report

82 Notes to the financial statements for the year ended 30 September 2002 GROUP * 20. NET PROFIT, EARNINGS AND CASH FLOW PER SHARE (continued) 20.8 Attributable cash flow per share Cash available from operations (Rm) 638,0 631,9 Weighted average number of ordinary shares Attributable cash flow per share (cents) 1 191, ,5 21. DIVIDENDS Ordinary shares Final No cents per share (2001: 225 cents) 182,7 112,5 Special No cents per share 268,7 Interim No cents per share (2001: 120 cents) 72,5 60,0 523,9 172,5 Dividends per share (cents) Interim No 191 declared 30 April Final No 192 declared 6 November Special No 193 declared 6 November ATTRIBUTABLE INTEREST IN SUBSIDIARIES Attributable interest in the aggregate amount of profits and losses of subsidiaries, after tax, including associate companies: Profits 129,4 150,9 Losses 12,3 23. ACQUISITION OF SUBSIDIARY On 18 October 2001, PPC acquired Portland Holdings Limited. The cost of the acquisition was determined as follows: Cash payment to shareholders (US$21,75 million at US$1 = R9,25) 201,2 Shares issued to Portland Holdings Limited shareholders ( at R67,35 per share) 250,5 Direct costs of acquisition 6,4 Amounts credited to cost of equity (20,9) Pre-acquisition dividend received (1,5) Due to the above acquisition, forward exchange contracts were entered into to hedge the foreign exchange risk on the purchase price. These forward exchange contracts were treated as cash flow hedges in accordance with IAS 39 (Financial Instruments: Recognition and Measurement), and exchange gains were deferred in equity. When the underlying transaction was recognised the exchange gains were released to the cost of the acquisition. * Restated GROUP * Rm Rm 435,7 80 PPC Annual Report 2002

83 GROUP Rm Rm 24. DISCONTINUED OPERATION On 7 August 2001, the group decided to exit the logistics segment. PPC Logistics (Pty) Limited was sold on 30 September 2001 and was reported as a discontinued operation in the prior year. The revenue, results and net cash flows of the logistics division for the period to date of disposal were as follows: Revenue 135,4 Operating profit 12,5 Finance costs 0,2 Income from investments 2,2 Profit before exceptional items 14,5 Exceptional items (0,4) Profit before tax 14,1 Tax 4,7 Net profit after tax 9,4 Operating cash flows 28,7 Investing cash flows (22,4) Financing cash flows (11,9) Net cash utilised (5,6) The assets and liabilities of the logistics division disposed of were as follows: Property, plant and equipment 103,5 Non-current assets 0,5 Current assets 44,3 Total assets 148,3 Total liabilities (excluding equity loan) 36,3 Net assets 112,0 Disposal consideration 168,7 Shares at cost (0,1) Net assets (112,0) Costs (0,2) Profit on disposal 56,4 PPC Annual Report

84 Notes to the financial statements for the year ended 30 September 2002 GROUP Rm Rm 25. COMMITMENTS Capital expenditure commitments to be incurred: Contracted 48,7 11,9 Approved 37,4 0,2 Acquisition of Portland Holdings Limited 432,4 86,1 444, and Total Total thereafter Rm Rm Rm Rm Rm Rm Rm Operating lease commitments Land and buildings 0,1 0,1 4,4 Motor vehicles 0,2 0,2 0,4 1,7 1,8 4,3 5,1 Other 0,3 0,4 0,7 0,9 2,9 5,2 5,5 0,5 0,6 1,1 2,6 4,8 9,6 15,0 Finance lease commitments Plant 346,1 13,9 13,8 13,7 12,0 399,5 399,5 GROUP COMPANY Rm Rm Rm Rm 26. CONTINGENT LIABILITIES Guarantees for loans, banking facilities and other obligations to third parties 9,2 5,1 9,2 5,1 Secondary tax on companies is payable on dividends declared at a rate of 12,5%. Litigation, current or pending, is not considered likely to have a material adverse effect on the group. 27. RETIREMENT BENEFIT 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 employees belong to one of 12 defined contribution retirement funds, with the exception of 11 active members of the defined benefit section of the PPC Retirement Fund. Group employment is a prerequisite for membership of these funds. All of the local funds are subject to the provisions of the Pension Funds Act of The defined benefit section of the PPC Retirement Fund is valued at intervals of not more than three years. This section was last valued by an independent consulting actuary as at 28 February 2001 and was certified to be in a sound financial condition. On 1 May 2002 the PPC Retirement Fund purchased non-gn18 Platinum annuities from the Old Mutual Life Assurance Company (South Africa) Limited for existing pensioners of the defined benefit section of the PPC Retirement Fund. Historically, qualifying employees were granted certain post-retirement medical benefits. The obligation for the employer to pay medical aid contributions after retirement is not part of the conditions of employment for new employees. A number of pensioners and employees in the group remain entitled to this benefit, the cost of which has been fully provided. Defined contribution plan The total cost charge to the income statement of R25,0 million (2001: R8,3 million after taking into account a contribution holiday of R13,7 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes. At 30 September 2002, all contributions due in respect of the current reporting period had been paid over to the schemes. 82 PPC Annual Report 2002

85 GROUP RETIREMENT BENEFIT INFORMATION (continued) Defined benefit plan Number of members: Active Pensioners % % Key assumptions used: Discount rate 11,5 12,5 Expected return on plan assets 10,5 11,5 Rate of increase in future compensation levels 8,0 9,0 Funded status The funded status of the defined benefit fund at 28 February 2002 was as follows: GROUP Estimated Certified Rm Rm Fair value of plan assets 117,9 119,8 Present value of funded obligation (101,5) (99,9) 16,4 19,9 Unrecognised actuarial losses (7,8) (7,8) Pension surplus 8,6 12,1 Less: Portion not recognised (8,6) (12,1) Amounts recognised in respect of these schemes are as follows: Current service cost 18,6 18,3 Interest costs 11,0 12,0 Expected return on plan assets (11,9) (14,2) 17,7 16,1 Less: Portion not recognised (17,7) (16,1) 28. PRIOR YEAR RESTATEMENT The financial statements have been restated to reflect the long-term loan made by the PPC group to Saldanha Steel (Pty) Limited separately from the capitalised lease liability relating to leased facilities at Saldanha. Previously the loan and the liability were subject to set-off with only the net liability being disclosed. The effect of the 2001 restatement resulted in an increase in noncurrent assets of R111,9 million and a corresponding increase in non-current liabilities. Interest paid and interest received have been restated accordingly. The restatement achieves a higher level of reporting and is consistent with International Financial Reporting Standards. There is no impact on earnings per share. 29. HYPERINFLATIONARY REPORTING The financial statements of Portland Holdings Limited, a wholly owned Zimbabwean subsidiary, have been restated for the decrease in the general purchasing power of the Zimbabwe dollar, using the current cost approach in accordance with IAS 29 (Financial Reporting in Hyperinflation Economies). The change in the producer price index in the year has been 143%. PPC Annual Report

86 Notes to the financial statements for the year ended 30 September FINANCIAL RISK MANAGEMENT The group s financial instruments consist mainly of deposits with banks, local money market instruments, accounts receivable and payable, loans to and from subsidiaries and associate companies and leases. In respect of all financial instruments mentioned above, book value approximates fair value. Derivative instruments are used by the group for hedging purposes. Such instruments used by the group are forward exchange contracts and fixed-interest rate agreements. The group does not speculate in the trading of derivative instruments. Treasury risk management A treasury committee consisting of senior executives of the Barloworld and PPC group, meets on a regular basis to analyse currency and interest rate exposure and to re-evaluate treasury management strategies against revised economic forecasts. The Barloworld group s various treasury operations provide the group with access to local money markets and provide group subsidiaries with the benefit of bulk financing and depositing. Foreign currency management Loans In terms of group policy, all material foreign loans are covered under forward exchange contracts (except where a natural hedge against underlying assets exists). Trade exposure The group s policy is to cover forward all trade commitments. Each division manages its own trade exposure. All forward currency exchange contracts and options are valued at fair value with the resultant gain or loss (with the exception of effective cash flow hedges) included in finance costs for the year. The gains or losses on effective cash flow hedges are recorded directly in equity and transferred to income when the hedged transaction affects income or included in the initial measurement of the acquisition cost of the hedged assets or liabilities. The amounts below represent the net rand equivalents of commitments to purchase and sell foreign currencies. The contracts will be utilised during the next twelve months. Accordingly, the average rates shown include the cost of forward cover for periods up to twelve months. Details of these contracts are as follows: Foreign amount Rand amount million Average rate million FOREIGN CURRENCY Trade Sold: Danish krone 0,1 1,0600 0,1 Euro 0,2 0,1 10,2470 8,0919 1,7 1,0 Pound sterling 0,0 16,6216 0,1 Swedish krona 0,1 0,8511 0,1 US dollars 0,2 10,3765 1,7 Bought: Danish krone 0,2 1,4219 0,3 Euro 0,7 0,0 10,5873 8,2998 7,0 0,4 French francs 0,8 0,8890 0,7 Irish pounds 0,0 10,5530 0,1 Pound sterling 0,0 13,2501 0,1 US dollars 0,0 11,8500 0,4 FOREIGN CURRENCY Non-trade Bought: US dollars 1,3 20,0 10,9048 8, ,7 163,4 84 PPC Annual Report 2002

87 30. FINANCIAL RISK MANAGEMENT (continued) Interest rate management As part of the process of managing the group s fixed and floating 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 interest rate profile of total borrowings is as follows: Year of * Description repayment Rm Rm Liabilities in foreign currencies Unsecured loans Zimbabwe dollar ,2 SA rand liabilities Liabilities under capitalised finance leases ,5 399,5 All of the above loans are at fixed rates of interest. The Zimbabwe unsecured loan bears interest at 30% per annum. 401,7 399,5 The South African finance leases bear interest at rates varying between 10,16% and 16% per annum. The weighted average interest rate paid for the 2002 financial year was 15,12% (2001: 15,93%). Maturity profile of financial instruments The maturity profile of the financial instruments are summarised as follows: < > 4 year years years Total Rm Rm Rm Rm Financial assets Cash and cash equivalents 871,6 871,6 Trade and other receivables 387,6 387,6 Long-term loan 10,2 30,6 60,9 101,7 Financial liabilities Interest-bearing liabilities 14,2 41,4 346,1 401,7 Trade and other payables 360,7 360,7 Fair value of financial assets and liabilities Certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair value. The estimated fair values have been determined using available market information and approximate valuation methodologies, as detailed below. Book value Fair value Rm Rm Financial assets Cash and cash equivalents 871,6 871,6 Trade and other receivables 387,6 387,6 Long-term loan 101,7 104,1 Financial liabilities Interest-bearing 401,7 404,6 Trade and other payables 360,7 360,7 * Restated PPC Annual Report

88 Notes to the financial statements for the year ended 30 September FINANCIAL RISK MANAGEMENT (continued) The following methods and assumptions were used by the group in determining fair values: Financial assets The book value of cash and cash equivalents, trade and other receivables approximates the fair value. Unlisted investments are carried at fair value determined on a dividend yield basis. In the current year a yield of five times dividend was applied. Financial liabilities The book value of short-term borrowings and trade and other payables approximates the fair value. The carrying value of non-current borrowings is calculated by discounting cash flow analyses using the applicable yield curve for the duration of the borrowings. Credit risk management Potential areas of credit risk consist of trade accounts receivable and short-term cash investments. Trade accounts receivable consist mainly of a large, widespread customer base. Group companies monitor the financial position of their customers on an ongoing basis. Where considered appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by application and account limits. Provision is made for both specific and general bad debts, and at the yearend management did not consider there to be any material credit risk exposure that was not already covered by credit guarantee or a bad debt provision. It is group policy to deposit short-term cash investments with its holding company and major banks. The following table highlights the split of credit exposure: GROUP % % Per industry Wholesale/retail Construction Concrete product manufacturers Steel and alloys Readymix 5 Other industries with less than 5% exposure Per geographical segment South Africa Other Africa Liquidity risk management The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. The company s borrowing powers are unlimited. The group does not have any other material financial instruments that are not based in the currency in which the entity operates. 86 PPC Annual Report 2002

89 31. DIRECTORS REMUNERATION AND INTEREST The directors remuneration for the year ended 30 September 2002 was as follows: Barloworld share Retirement options Incentive and medical exercised/ Other Salary bonus contributions ceded benefits Total Name R 000 R 000 R 000 R 000 R 000 R 000 Executive directors J E Gomersall P J Blackbeard R J Burn R H Dent P G Nelson Remune- Audit Compliance ration Fees committee committee committee Total R 000 R 000 R 000 R 000 R 000 Non-executive directors W A M Clewlow D C Arnold R K J Chambers A J Lamprecht A J Phillips M J Shaw E P Theron Total PPC Annual Report

90 Notes to the financial statements for the year ended 30 September DIRECTORS REMUNERATION AND INTEREST (continued) The directors remuneration for the year ended 30 September 2001 was as follows: Barloworld share Retirement options Incentive and medical exercised/ Other Salary bonus contributions ceded benefits Total Name R 000 R 000 R 000 R 000 R 000 R 000 Executive directors J E Gomersall P J Blackbeard R J Burn R H Dent P G Nelson PStuiver RSTennant (resigned 31 December 2000) Remune- Audit Compliance ration Fees committee committee committee Total R 000 R 000 R 000 R 000 R 000 Non-executive directors W A M Clewlow D C Arnold R K J Chambers A J Lamprecht A J Phillips MJShaw 8 8 E P Theron Total Interest of directors in contracts The directors have certified that they were not materially interested in any transaction of any significance with the company or any of its subsidiaries. Accordingly, a conflict of interest with regard to directors interest in contracts does not exist. Interest of directors of the company in share capital The aggregate beneficial holdings as at 30 September 2002 of the directors 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. 88 PPC Annual Report 2002

91 31. DIRECTORS REMUNERATION AND INTEREST (continued) Executive director R H Dent A register detailing directors and officers interests in the company is available for inspection at the company s registered office. Refer to note 8 for information regarding the unexercised options granted to directors and executives. 32. RELATED PARTY TRANSACTIONS During the year fees paid to Barloworld Limited amounted to R9,4 million (2001: R5,1 million). During the year the group, in the ordinary course of business, entered into various sale and purchase transactions with fellow Barloworld subsidiary companies. These transactions are no more or less favourable than those arranged with third parties. During the year the company and its subsidiary companies, in the ordinary course of business, entered into various sale and purchase transactions with associate companies. These transactions are no more or less favourable than those arranged with third parties. Associate companies Details of investments in associate companies are disclosed in note 4 and Annexure 1. Dividend income is disclosed in note 17. Fee income from associate companies amounted to R0,6 million (2001: R0,6 million). The group purchased goods to the value of R2,5 million (2001: R4,1 million) from, and sold goods to the value of R nil (2001: R9,5 million) to associate companies. The outstanding balances at year-end are as follows: Included in accounts receivable (note 6) R nil (2001: R1,2 million) Included in accounts payable (note 12) R0,2 million (2001: R0,4 million) Included as investments in associate companies (note 4) R6,5 million (2001: R8,0 million) Direct Indirect Direct Indirect PPC Annual Report

92 Annexure 1 Interest in subsidiary and unlisted associate companies 30 September 2002 SUBSIDIARY COMPANIES Issued Percentage Indebtedness share held Shares (due to)/due by capital Name of company R % % Rm Rm Rm Rm Afripack Limited A ,3 25,3 (3,4) (19,3) B ,8 0,8 Cape Portland Cement Co Limited ,6 1,6 (5,4) (5,4) Cooper & Cooper Holdings (Pty) Limited ,8 0,8 3,8 3,8 Eastern Province Cement Co Limited ,3 1,3 (1,5) (1,5) Mooiplaas Dolomite (Pty) Limited ,2 20,4 PPC Botswana (Pty) Limited A # ,0 12,0 (2,0) 1, B # Portland Holdings Limited ^ ,7 0,7 PPC Lime Limited ,7 17,7 (33,0) (9,4) PPC Saldanha (Pty) Limited ,6 119,9 Property Cats (Pty) Limited ,0 12,0 1,1 1,1 Other minor subsidiary companies 0,3 0,3 (11,9) (11,6) 507,5 71,8 84,2 99,0 Less: Provision for loss 106,3 1,0 1,6 1,8 ASSOCIATE COMPANIES 401,2 70,8 82,6 97,2 Issued Percentage Indebtedness share held Shares due by capital Name of company Principal activity R % % Rm Rm Rm Rm Amanzi Lime Services (Pty) Limited Lime supply Ash Resources (Pty) Limited Ash distribution 25 2,1 Kgale Quarries (Pty) Limited Aggregate mining # ,1 9,1 Natal Portland Cement Co Cement (Pty) Limited manufacturing 32,8 23,0 Slagment (Pty) Limited Slag milling ,3 33,3 3,8 3,8 6,5 10,5 12,9 38,0 6,5 10,5 Less: Provision for loss 3,8 3,8 2,5 9,1 34,2 6,5 8,0 All subsidiary and associate companies are incorporated in the Republic of South Africa, except as indicated. A full list of subsidiary and unlisted associate companies is available for inspection at the registered office of the company. Registered in Botswana # Botswana pula Registered in Zimbabwe ^ Zimbabwe dollar 90 PPC Annual Report 2002

93 Interest in associate companies 30 September 2002 Included below is PPC s portion of its associate companies assets, liabilities, results and cash flows: GROUP Rm Rm BALANCE SHEET Property, plant and equipment 13,2 85,7 Current assets 17,2 46,3 Total assets 30,4 132,0 Less: Non-current liabilities 6,4 13,1 Deferred tax 8,0 14,6 Current liabilities 0,3 40,1 Interest in associate companies 15,7 64,2 Amount written off against loan 2,5 15,7 66,7 INCOME STATEMENT Revenue 185,4 168,7 Operating profit 47,7 36,2 Finance costs 1,4 1,6 Income from investments 0,2 0,5 Profit before tax 46,5 35,1 Tax 12,9 11,5 Net profit after tax 33,6 23,6 CASH FLOW STATEMENT Cash flows from operating activities: Cash receipts from customers 184,1 165,9 Cash paid to suppliers and employees (126,7) (129,9) Cash generated from operations 57,4 36,0 Finance costs (1,4) (1,6) Dividends paid (21,1) (15,4) Tax paid (18,3) (9,8) Net cash inflow from operating activities 16,6 9,2 Cash flows from investing activities: Replacement of capital expenditure (6,3) (4,4) Other cash flows 1,2 5,8 Net cash (outflow)/inflow from investing activities (5,1) 1,4 Cash flows from financing activities: Net loans repaid (10,0) (8,8) Net cash outflow from financing activities (10,0) (8,8) Net increase in cash and cash equivalents 1,5 1,8 Cash and cash equivalents at beginning of year 2,9 1,1 Cash and cash equivalents at end of year 4,4 2,9 The financial year-end of Kgale Quarries (Pty) Limited and Amanzi Lime Services (Pty) Limited is 30 June and 30 September respectively. The financial year-end of all other companies is 31 December. The financial information above has been obtained from the latest available unaudited management accounts. PPC Annual Report

94 Share performance SHARE STATISTICS Performance on the JSE Securities Exchange South Africa Number of shares in issue (millions) 53,7 50,0 50,0 50,0 47,1 Volume of shares traded (millions) 5,9 7,2 7,9 8,5 7,5 Market price (cents) high low at year-end Value of shares traded (Rm) 410,9 453,4 392,9 328,1 401,3 Volume of shares traded as a percentage of total issued shares (%) 11,0 14,4 15,8 17,1 16,0 Number of transactions Earnings yield (%) 10,6 11,5 9,6 9,9 15,3 Dividend yield (%) 14,6 15,5 6,2 6,5 9,6 Price-earnings ratio 9,5 8,7 10,5 10,1 6,5 JSE actuaries industrial index at 30 September Market capitalisation at 30 September (Rm) 4 192, , , , ,2 SHARE OWNERSHIP Number of % of issued Number of shareholders Category shares held capital , , , , , , ,58 10 over , ,00 Barloworld group ,16 Institutional investors ,32 Nominee companies^ ,04 Pension/provident funds ,62 Individuals and others ,86 ^ The majority of the shares held by the nominee companies are on behalf of institutional investors ,00 PPC share price performance 1 October 2001 to 30 September Oct 01 Nov 01 Dec 01 Jan 02 Feb 02 Mar 02 Apr 02 May 02 Jun 02 Jul 02 Aug 02 Sep 02 PPC FTSE/JSE Construction and Building Materials Index FTSE/JSE All Share Index 92 PPC Annual Report 2002

95 Notice of annual general meeting The one hundred and seventh annual general meeting of Pretoria Portland Cement Company Limited will be held in The Auditorium, Ground Floor, 11 Sherborne Road, Parktown, Johannesburg, on Monday, 27 January 2003, at 12:30 for the following business: 1. To receive and adopt the annual financial statements for the year ended 30 September To elect directors in accordance with the provisions of the company s articles of association. 3. To consider and, if deemed fit, to pass, with or without modification, the following ordinary resolution: That with effect from 1 October 2002 and in terms of article 12.5 of the company s articles of association, the fees payable to: (a) non-executive directors (other than the chairman) for their services be increased by R per person per annum from R to R50 000; (b) non-executive members of the audit committee be increased by R6 500 per person per annum from R8 500 to R15 000; (c) non-executive members of the compliance committee be increased by R6 500 per person per annum from R8 500 to R15 000; (d) non-executive members of the remuneration committee be increased by R500 per person per annum from R3 500 to R4 000; (e) non-executive members of the nominations committee be set at R4 000 per person per annum; and (f) the chairman for services rendered be increased by R per annum from R to R To consider and, if deemed fit, to pass, with or without modification, the following special resolution: That: (a) The directors of the company be authorised from time to time to acquire issued shares in the ordinary share capital of the company on the JSE Securities Exchange South Africa open market at a price no greater than 10% above the weighted average of the market value for the securities for the five previous business days immediately preceding the date on which the transaction was agreed or at a bid price no greater than the current trading price of the share; and the purchase by any of the company s subsidiaries of shares in the company in the manner contemplated by and in accordance with the provisions of section 89 of the Companies Act, 1973, and other provisions which may be applicable. (b) The authorisation granted in terms of (a) above shall remain in force from the date of registration of these special resolutions by the Registrar of Companies until the conclusion of the next annual general meeting of the company and, in any event, no later than 15 months from the date on which they were passed. (c) The repurchase by the company or by any one of the company s subsidiaries of its own securities in terms of (a) above may not exceed 10% of the company s issued ordinary share capital in the aggregate in any one financial year. (d) The company s intention regarding the utilisation of the authority, which is sought in terms of (a) above, is to utilise surplus cash available from time to time to repurchase shares in the company with the aim of increasing shareholder value. (e) In the event that the directors are granted general authority to buy back a maximum of 10% of the issued share capital of PPC, in the aggregate, it is the opinion of the directors that following such maximum repurchase of shares: the company and the group will be able in the ordinary course of business to pay its debts for a period of 12 months after the date of notice issued in respect of the annual general meeting; the assets of the company and the group will be in excess of the liabilities of the company and the group for a period of 12 months after the date of notice issued in respect of the annual general meeting. For this purpose, the assets and liabilities will be recognised and measured in accordance with the accounting policies used in the latest audited group annual financial statements; the ordinary capital and reserves of the company and the group will be adequate for a period of 12 months after the date of notice issued in respect of the annual general meeting; and the working capital of the company and the group will be adequate for a period of 12 months after the date of notice issued in respect of the annual general meeting. PPC Annual Report

96 Notice of annual general meeting The reason for proposing the special resolution is to permit and authorise PPC to acquire its own shares. The effect will be to authorise the directors to purchase shares in PPC. 5. To consider and, if deemed fit, to pass, with or without modification, the following ordinary resolution: That unissued ordinary shares of R1 each reserved to meet the requirements of the PPC 1985 Share Option Scheme and the PPC Share Purchase Scheme ( the schemes ) be and are hereby released from that restriction and returned to the balance of unissued ordinary shares. The two schemes are now closed and only options granted to directors and executives remain unexercised and after the transfer of the reserved ordinary shares back to the balance of unissued shares only will remain reserved to meet the requirements of the schemes. 6. To transact such other business as may be transacted at an annual general meeting including the appointment of auditors. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies (who need not be a member of the company) to attend and speak and, on a poll, to vote in his/her stead. Should members who have already dematerialised their PPC shares wish to attend the meeting in person, then they will need to request their CSDP or broker to provide them with the necessary authority in terms of the custody agreement entered into between the dematerialised shareholder and the CSDP or broker. A form of proxy is enclosed for the use of members who wish to be represented at the meeting or may be obtained on application to the secretaries at the company s registered address or telephone The attention of members is drawn to the fact that if it is to be effective, the completed form of proxy must reach the company s transfer secretaries or the registered office of the company by no later than 12:30 on 23 January A form of proxy is only to be completed by the shareholders that are holding shares in certified form or recorded on sub-register electronic form in own name. By order of the board Barloworld Trust Company Limited Secretaries Per A R Holt 6 November PPC Annual Report 2002

97 Form of proxy PRETORIA PORTLAND CEMENT COMPANY LIMITED (Incorporated in the Republic of South Africa) Company registration number 1892/000667/06 ( the company ) Only for the use of registered holders of certificated ordinary shares in the company and the holders of dematerialised ordinary shares in their own name in the capital of the company, at the annual general meeting to be held at 12:30 on Monday, 27 January 2003, in The Auditorium, Ground Floor, 11 Sherborne Road, Parktown, Johannesburg. Holders of ordinary shares in the company (whether certificated or dematerialised) through a nominee must not complete this from of proxy but should timeously inform that nominee, or, if applicable, their Central Securities Depository Participant (CSDP) or stockbroker of their intention to attend the annual general meeting and request such nominee, CSDP or stockbroker to issue them with the necessary authorisation to attend or provide such nominee, CSDP or stockbroker with their voting instructions should they not wish to attend the annual general meeting in person. 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, hereby appoint of or, alternatively, the chairman of the meeting as my/our proxy to attend and speak and, on a poll, vote for me/us and on my/our behalf or to abstain from voting at the annual general meeting of the company to be held in The Auditorium, Ground Floor, 11 Sherborne Road, Parktown, Johannesburg, on Monday, 27 January 2003, and at any adjournment of that meeting as follows: 1. Adoption of annual financial statements 2. Election of directors R H Dent J E Gomersall P G Nelson 3. Remuneration of non-executive directors/committee members and chairman 4. Acquisition of own shares 5. Release of reserved unissued shares In favour of Against Abstain Insert an X in the relevant spaces above according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of ordinary shares than you own in the company, insert the number of ordinary shares held in respect of which you desire to vote (see note 2). Signed at on 200 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 annual general meeting. Please read the notes on the reverse side of this form of proxy PPC Annual Report

98 Notes 1. An ordinary shareholder may insert the name of a proxy of the ordinary shareholder s choice in the space provided, with or without deleting the chairman of the meeting, but any such deletion must be initialled by the ordinary shareholder. The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. 2. Please insert an X in the relevant space 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 wish to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the ordinary shareholder s votes exercisable at the annual general meeting. An ordinary shareholder or his/her proxy is not obliged to use all the votes exercisable by the ordinary shareholder or by his/her proxy, but the total of the votes cast in respect of which abstention is recorded may not exceed the total number of the votes exercisable by the ordinary shareholder or by his/her proxy. 3. To be valid, the completed form of proxy must reach the offices of the company s transfer secretaries (South Africa: Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, South Africa, PO Box 61051, Marshalltown 2107, South Africa; Zimbabwe: Corpserve (Private) Limited, 4th Floor, Intermarket Centre, corner 1st Street/Kwame Nkruma Avenue, Harare, Zimbabwe, PO Box 2208, Harare, Zimbabwe) or the company s registered office (180 Katherine Street, Sandton, South Africa, PO Box , Sandton 2146, South Africa) by no later than 12:30 on 23 January Where there are joint holders of any ordinary shares, only that holder whose name appears first in the register in respect of such ordinary shares need sign this form of election. 5. The completion and lodging of this form of proxy will not preclude the relevant ordinary shareholder from attending the annual general meeting and speaking and voting in person at the annual general meeting to the exclusion of any proxy appointed in terms of this proxy form. 6. Any alteration to this form of election must be signed in full and not initialled. 7. If this form of proxy is signed under a power of attorney, then such power of attorney or a notarially certified copy thereof must be sent with this form of proxy for noting (unless it has already been noted by the transfer secretaries). 8. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries. 9. The chairman of the annual general meeting may accept any form of proxy which is completed other than in accordance with these notes if he is satisfied as to the manner in which the ordinary shareholder wishes to vote. 96 PPC Annual Report 2002

99 Administration PRETORIA PORTLAND CEMENT COMPANY LIMITED (Incorporated in the Republic of South Africa) Company registration number 1892/000667/06 Auditors Transfer secretaries Deloitte & Touche Computershare Investor Services Limited Deloitte & Touche Place 70 Marshall Street The Woodlands Johannesburg, South Africa Woodlands Drive PO Box 61051, Marshalltown 2107 Woodmead, Sandton, South Africa South Africa Private Bag X6 Telephone Gallo Manor 2052, South Africa Telefax Telephone Telefax Secretaries and registered office Transfer secretaries Zimbabwe Barloworld Trust Company Limited Corpserve (Private) Limited 180 Katherine Street, Sandton, South Africa 4th Floor, Intermarket Centre PO Box Corner 1st Street/Kwame Nkruma Avenue Sandton 2146, South Africa Harare, Zimbabwe Telephone PO Box 2208 Telefax Harare, Zimbabwe Telephone / Telefax Sponsoring brokers Sponsoring brokers Zimbabwe Cazenove South Africa (Pty) Limited Sagit Stockbrokers (Private) Limited 1st Floor, Moorgate, Dunkeld Park 14th Floor, Intermarket Life Towers 6 North Road 77 Jason Moyo Avenue Dunkeld West, South Africa Harare, Zimbabwe PO Box PO Box 21 Craighall 2024, South Africa Harare, Zimbabwe Telephone Telephone Telefax Telefax Financial calendar Financial year-end 30 September Annual general meeting 27 January 2003 Reports Interim results for half-year to March Published May Preliminary announcement of annual results Published November Annual financial statements Published November Dividends Interim Declared May Paid July Final Declared November Paid January PPC Annual Report

100 Award winners PAGE 1 PPC Achievers Award 1 Johan Claassen, Dwaalboom 2 Giel Visser, Parktown 3 Johnny Carolus, Riebeeck West 4 Brian Booys, De Hoek 5 Jan Riekert, Hercules 6 Reuben Thomane, Employee of the Year, Slurry 7 Bruce Lange, Parktown 8 Piet Booysen, Riebeeck West 9 Awie Theart, Saldanha 10 Jan Jansen, Lime Acres 11 Neville Frewin, Parktown 12 Sguntsu Stemela, PE 13 Manny Da Silva, Jupiter PAGE 4 Warren Clewlow (Chairman) Arthur Shirley, Naomi Williams, Shadrack Njobeni, Keshnee Harilal, Pagel Futha, Thank You Awards, Parktown PAGE 8 1 GUS Team Alfred Kubang, Samuel Mayete, Benjamin Gouws, Johannes Mabokwane, Wessel Victor, Team of the Year, Lime Acres 2 George Bendini, Departmental Award Quarry, De Hoek 3 Niru Govender, Bheki Mthembu, William Burtone, Thank You Award, Jupiter PAGE 9 1 Corrie Vos, Dirk Lubbe, Victor Jaabosigo, Customer Service Employee of the Year, Dwaalboom 2 Yobert Mathonsi, Excellence Award Innovation, Hercules 3 Deon Jansen, Thank You Award, Nelspruit 4 Godfrey Jaabosigo, Development Employee of the Year, Dwaalboom 5 George Miyambo, Christian Mhana, Fabian Stuart, Joseph Mkhwebane, Joy Foster, Thank You Awards, Jupiter 6 Jannie Brenkman, Employee of the Year Award, Dwaalboom 7 Marius Bornman, Janine Carmichael, Trevor Sawyer, Thank You Awards, Jupiter 8 Percy Malebye, Sandra Swart, Development Employee of the Year, Dwaalboom PAGE 13 1 Johannes Motsosi, Quarry Team Member of the Year, Slurry 2 Mike Motsusi, Production Team Member of the Year, Slurry 3 Karen Joubert, Positive Attitude and Enthusiasm Award, Saldanha 4 Willie Prins, Engineering Team Member of the Year, Slurry 5 William Leotoane, Thomas Matlhola, Bushy Motshwarateu, Despatch Team of the Year, Slurry 6 Rudi van Dyk, Best Suggestion of the Year, Slurry 7 Jonny Niewenhuizen, Petrus Khoboko, Departmental Employee of the Year, Lime Acres 8 Fitter workshop, InvoCom of the Year, Slurry PAGE 15 1 Michiel Maarman, Departmental Award Production, De Hoek 2 Sydney Pieterson, Departmental Award Services Department, De Hoek 3 Pieter van den Heever, Kambuku Spirit Award Engineering, De Hoek PAGE 16 1 Nhlanhla Mekoa, Thank You Award, Jupiter 2 James Maleke, Health and Safety Employee of the Year, Slurry 3 Karen Joubert, Sampie van Rooyen, Riaan Loubscher, Allan Beerwinkle, Team of the Year Award, Saldanha 4 Des Arnold and Russell Chambers PAGE 19 1 LAB Team Themba Nkayi, Ivan Jansen, Departmental Service Award Quality Assurance, PE 2 Riaan Coetzer, Excellence Award External Customer Service, Hercules 3 Phineas Phadu, Excellence Award Self Development, Hercules 4 Elaine Kemp, Lime Employee of the Year, Lime Acres 5 Zacharia Pheelwane, Excellence Award Maintenance Assistant, Hercules 6 Johan Struwig, Continuous Improvement Award and Management Representative Award, Saldanha 7 Lydia Mokoena, Excellence Award Kambuku, Hercules 8 De Wet Snyders, Best InvoCom Award, Riebeeck West 9 Loerie Rehab Team Patrick Laufs, Johnson Mange, Hermans Grootboom, George Petse, Departmental Service Award Quarry, PE 10 Tienie Schoeman, General Manager s Award, Hercules PAGE 23 1 Gerda Botha, Excellence Award Kambuku, Hercules 2 Jeffery Pietersen, Risk/Admin/OP Excellence Award, Riebeeck West 3 Frikkie van Zyl, General Managers Award, Riebeeck West 4 Derek Galvin, Thank You Award, Montague Gardens 5 Norma Addinall, Bonnie Clementson, Thank You Awards, Montague Gardens 6 Isak Afrika, Quarry Excellence Award, Riebeeck West 7 Pannie Solomon, Production Excellence Award, Riebeeck West 8 Sophia Steynberg, Employee of the Year Award, Saldanha 9 Alpheus Kwenane, Health and Safety Employee of the Year Award, Dwaalboom 98 PPC Annual Report 2002

101 10 LAB Team Humphrey Tyala, Lindi Malatsi, Departmental Service Award Quality Assurance, PE 11 Theo Simpson, Departmental Service Award Maintenance, PE PAGE 27 1 Sugnee van der Vyver, HR/Admin/Risk Departmental Service Award, PE 2 Cindy Boumeester, Kambuku Spirit Award Services Department, De Hoek 3 Deon Bronner, Excellence Award Internal Customer Service, Hercules 4 Emnick Booise, Departmental Award Customer Services, De Hoek 5 Dawid Fortuin, Kambuku Spirit Award Customer Services, De Hoek 6 Zolile Ompi, LAB Team Departmental Service Award Quality Assurance, PE 7 Harrington Masinda, Development Award, PE 8 Sanita Lochner, Departmental Award Services Departments, De Hoek 9 Mac Naidoo, Employee for Period 1, Afripack 10 Claude Alexander, Best Health and Safety Representative Award, Riebeeck West 11 Njabulo Gumbo and William Phiri, Innovative Idea Award, Porthold 12 Elford Ngxangashe, Customer Services Excellence Award, Riebeeck West PAGE 28 1 Removal of invasive species, Montague Gardens 2 Rehab of the screening dump, Loerie 3 Chicken farming, Loerie 4 Hercules Gardens 5 Dust collector, De Hoek 6 ISO Certification Kerneels Grundling (GM) and Daniel Prinsloo (RCM), PE 7 Vegetable farming, Loerie PAGE 31 1 Herman Guestyn, Innovation Award, Riebeeck West 2 Lesley Smith, Toolbox Competition, Lime Acres 3 Anil Singh, Employee of the Year, Afripack 4 Basil Makhata, Safety Representative of the Year, Lime Acres 5 Brian Booys, GM s Award Winner, De Hoek 6 Sarel Pedro, Kambuku Spirit Award Quarry, De Hoek 7 Nols Viljoen, Anton Moller, Schalk Victor, Manager s Award, Lime Acres 8 Lucas Booys, Kambuku Spirit Award Production, De Hoek 9 Colin Barker, Apprentice of the Year, Lime Acres PAGE 32 1 Petrus Bareetseng, Quality Team Member of the Year, Slurry 2 Tommy Phelwane, Admin/HR/Risk Team Member of the Year, Slurry 3 Les Prinsloo, Employee for Period 3, Afripack 4 William Marima, Excellence Award Production Assistant, Hercules 5 Despatch Team Mbuyiseli Richard Mpambani, Xola David Mtsatse, Kelem Manyonga, Thembinkosi Lloyd, Mpumelelo Ngadlela, Butini Peter Mene, Lucas Maswana, InvoCom of the Year, PE INSIDE BACK COVER 1 Maria Carreira, Thank You Award, Parktown 2 Donovan Floris, Engineering Excellence Award, Riebeeck West 3 Willem Willems, Departmental Award Engineering, De Hoek 4 Louis Fouché, Thank You Award, Parktown 5 Lab Team Mlamli Nozwane, Hermanus Potgieter, Rayman Vuma, Nelson Guga, Xolile Ompi, Departmental Service Award Quality Assurance, PE 6 Tessa Mutrie, Thank You Award, Jupiter 7 Frikkie Thiart, Best Housekeeping Section Award, Riebeeck West 8 LAB Team Vusani Ntombana, Rose Chellew, Departmental Service Award Quality Assurance, PE 9 Marius Joubert, Thank You Award, Rustenberg 10 Sharon Butler, Linda Gxara, Jessica Quinn, Melanie Koning, Thank You Awards, Montague Gardens OTHER AWARD WINNERS Freddie Pos, Best Suggestion Award, Lime Acres Bongani Mdingi, Managers Award, Lime Acres Corlia Mulder, Managers Award, Lime Acres Llewellyn Manzana, Departmental Employee of the Year, Lime Acres Heather de Bruyn, Thank You Award, Pietersburg PPC Annual Report

102 GRI content index This page provides a cross-reference between this report and the guidelines set out in Section C of the Global Reporting Initiative s (GRI) Sustainability Reporting Guidelines. Where there is no page reference we have not addressed the guideline in this report. VISION AND STRATEGY Page 1.1 IFC PROFILE Page , 34, 35, IFC, GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS Page , 18, , , , , 18, 20, 21, IFC, , , 21, PPC Annual Report 2002 ECONOMIC PERFORMANCE INDICATORS Core Non-core Customers EC1 Pg 73 EC2 Pg 73 Suppliers EC3 Pg 41 EC4 Pg 41 EC11 Pg 41 Employees EC5 Pg 41, 75 Providers of capital EC6 Pg 41 EC7 Pg 41, 56 Public sector EC8 Pg 41, 77 EC9 EC10 EC12 Indirect economic impacts EC13 ENVIRONMENTAL PERFORMANCE INDICATORS Core Non-core Materials EN1 Pg 33 EN2 Pg 29 Energy EN3 Pg 33 EN4 Pg 33 EN17 Pg 29 EN18 EN19 Water EN5 EN20 Pg 33 EN21 EN22 Biodiversity EN6 Pg 33 EN7 Pg 33 EN23 EN24 EN25 Pg 33 EN26 Pg 33 EN27 Pg 33 EN28 EN29 Pg 33 Emissions, effluent and waste EN8 Pg 30 EN9 EN10 EN11 EN12 EN13 EN30 Pg 29, 33 EN31 EN32 Suppliers EN33 Products and services EN14 EN15 Compliance EN16 Transport EN34 Pg 30 Overall EN35 SOCIAL PERFORMANCE INDICATORS Core Non-core Employment LA1 Pg 43, 44, 45 LA2 LA12 Labour/management relations LA3 LA4 LA13 Health and safety LA5 Pg 30 LA6 LA7 Pg 30 LA8 Pg 30 LA14 LA15 Training and education LA9 LA16 Pg 35 LA17 Pg 35 Diversity and opportunity LA10 Pg 35 LA11 Strategy and management HR1 HR2 Pg 34 HR3 Pg 34 HR8 Pg 8 Non-discrimination HR4 Pg 34 Freedom of association and collective bargaining HR5 Child labour HR6 Forced and compulsory labour HR7 Disciplinary practices HR9 HR10 Security practices HR11 Indigenous rights HR12 HR13 HR14 Community SO1 Pg 32 SO4 Pg 18, 29, 30 Bribery and corruption SO2 Pg 22 Political contributions SO3 SO5 Competition and pricing SO6 Pg 6 SO7 Customer health and safety PR1 PR4 PR5 PR6 Products and services PR2 PR7 PR8 Advertising PR9 PR10 Respect for privacy PR3 PR11

103 Creating and sharing increased levels of wealth Kambuku has a long journey ahead as there is no end to the programme of value creation GRAPHICOR 28059

104 Pretoria Portland Cement Company Limited 2002 Annual Report