Annual financial statements 2014

Transcription

1 Annual financial statements

2 Contents Annual financial statements Approval of annual financial statements 1 Certificate by company secretary 2 Preparer of the annual financial statements 2 Independent auditors report 3 Report to shareholders on the activities of the audit committee 4 Directors report 6 Chief financial officer s report 9 Accounting policies 12 Judgements made by management 23 Consolidated statement of financial position 26 Consolidated income statement 27 Consolidated statement of comprehensive income 28 Consolidated statement of changes in equity 29 Consolidated statement of cash flows 31 Segmental information 32 Notes to the group financial statements 34 Annexure 1 Subsidiaries and non-controlling interest 74 Company statement of financial position 77 Company income statement 78 Company statement of comprehensive income 79 Company statement of changes in equity 80 Company statement of cash flows 81 Notes to the company financial statements 82 Abridged remuneration report 98 PPC shareholder analysis 107 Corporate information 108 Financial calendar 108 A profile of our business IBC Vision To grow PPC into a leading emergingmarket business. PPC operates in emerging markets, where 70% of the world s cement is produced and consumed. These markets are largely characterised by higher growth in populations, GDP and cement demand. Collectively, they offer new opportunities and deliver higher returns for producers of cement and related products. Excellence in all we do PPC values Customer-focused We are professional and do things properly. We at PPC set the standard. We lead. We set challenging goals and are performance-driven. We are flexible and agile and we seek to continuously improve. Yesterday s stretch becomes today s standard. EXCELLENCE CUSTOMERS Our customers are the reason for our existence and all our efforts are focused on good relationships, understanding and meeting their needs consistently. Great place to work We work in teams. Everyone has an important role to play and we want to maintain a non-discriminatory, safe and healthy work environment. We respect the dignity of every individual we engage with. We embrace transformation and diversity. EMPLOYEE SATISFACTION LEGITIMACY INTEGRITY STAKEHOLDER VALUE Creating a better life for all stakeholders Everyone s contribution creates the value. All stakeholders share in the value and success we create. Legitimacy We are seen by our stakeholders as caring and adding value. We are seen as long-term contributors and not short-term takers. We care for the environment and the communities in which we operate. Integrity is non-negotiable We meet our commitments. We do what we say. We are honest and obey the law.

3 Approval of annual financial statements for the year ended 30 September 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 in the manner required by the Companies Act of South Africa. 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, noting that internal control systems only provide reasonable, but not absolute assurance against material loss or misstatement. The directors, supported by the audit committee, are satisfied that such controls, systems and procedures are in place to minimise the possibility of material loss or misstatement. The directors are satisfied that such control systems have been maintained during the year. Following operational and cash forecast reviews, the directors believe that the group has adequate resources to continue in operation for the foreseeable future and the annual financial statements appearing on pages 12 to 97 have, therefore, been prepared on a going-concern basis. The annual financial statements have been audited by the external auditing firm, Deloitte & Touche, who have been given unrestricted access to all financial records and other related data, including minutes of all meetings of the board of directors, committees of the board and executives. The directors believe that all representations made to the independent auditors during the audit were valid and appropriate. Deloitte & Touche s unmodified report is presented on page 3 of this annual report. The annual financial statements were approved by the board of directors on 17 November and are signed on its behalf by: BL Sibiya MMT Ramano TDA Ross Executive chairman Chief financial officer Lead independent director 17 November Sandton PPC Ltd Annual financial statements 1

4 Certificate by company secretary for the year ended 30 September In terms of section 88(2)(e) of the Companies Act 71 of 2008, as amended, I certify that PPC Ltd has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of this Act and that such returns are true, correct and up to date. JHDLR Snyman Group company secretary 17 November Preparer of the annual financial statements for the year ended 30 September These annual financial statements have been prepared under the supervision of the chief financial officer, MMT Ramano CA(SA). MMT Ramano Chief financial officer 17 November 2 PPC Ltd Annual financial statements

5 Independent auditors report for the year ended 30 September To the shareholders of PPC We have audited the consolidated and separate annual financial statements of PPC Ltd set out on pages 12 to 97, which comprise the statements of financial position as at 30 September, and the income statements, statements of other comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. Directors responsibility for the annual financial statements The company s directors are responsible for the preparation and fair presentation of these consolidated and separate annual financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate annual financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these consolidated and separate annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the annual financial statements. Opinion In our opinion, the consolidated and separate annual financial statements present fairly, in all material respects, the consolidated and separate financial position of PPC Ltd as at 30 September, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Other reports required by the Companies Act As part of our audit of the consolidated and separate annual financial statements for the year ended 30 September, we have read the directors report, the audit committee s report, the remuneration report and the company secretary s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited annual financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate annual financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Deloitte & Touche Registered auditors Per: B Nyembe Partner 17 November We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PPC Ltd Annual financial statements 3

6 Report to shareholders on the activities of the audit committee for the year ended 30 September The audit committee is a committee of the board of directors and in addition to having specific statutory responsibilities to shareholders in terms of the Companies Act, it assists the board by advising and making submissions on financial reporting, oversight of the risk management process and internal financial controls, external and internal audit functions and statutory and regulatory compliance of the company. Terms of reference The audit committee has adopted formal terms of reference that have been updated during the year and approved by the board of directors, and has executed its duties during the past financial year in accordance with these terms of reference. Composition The committee consists of four independent non-executive directors: Name Qualifications Period served ZJ Kganyago BCom 6 years TDA Ross CA(SA) 6 years B Modise CA(SA) 3 years DJ Castle BSc, BCom, MBA, CFA 0 years The CEO, CFO, chief audit executive, senior financial executives of the group and representatives from the external and internal auditors attend the committee meetings. The internal and external auditors have unrestricted access to the audit committee. Meetings The audit committee held four scheduled meetings during the year, with attendance shown below: Director April May September November ZJ Kganyago TDA Ross B Modise DJ Castle* *DJ Castle only joined the committee in October. An additional meeting was held in November to review the integrated report. Statutory duties In execution of its statutory duties during the financial year, the audit committee: Nominated Mr Nyembe, from the audit firm Deloitte & Touche (Deloitte), for appointment. In the opinion of the committee, Mr Nyembe was independent of the company Determined Deloitte s terms of engagement Believes that the appointment of Deloitte complies with the relevant provisions of the Companies Act, JSE Listings Requirements and King III Developed and implemented a policy setting out the extent of any non-audit services that the external auditors may provide to the company or that the external auditors may not provide Pre-approved all non-audit service contracts with Deloitte Received no complaints on the accounting practices and internal audit of the company, the content or auditing of its financial statements, the internal financial controls, or other related matters. Delegated duties In executing its delegated duties and making its assessments (as reflected in its terms of reference), the audit committee obtained feedback from external and internal audit, and based on the processes and assurances obtained, believes the accounting practices are effective. Accordingly, the committee fulfilled all its obligations including: Combined assurance During the year, the board has approved the group combined assurance model which will be implemented in Financial statements The committee reviewed the annual financial statements, summarised annual financial statements, interim and preliminary announcements, accompanying reports to shareholders and other announcements on the company s results to the public. Integrated reporting Recommended to the board to engage an external assurance provider on material sustainability issues Reviewed the disclosure of sustainability issues in the integrated report to ensure that it is reliable and does not conflict with the financial information Recommended the integrated report for approval by the board. Internal audit Took responsibility for the performance assessment of Mr Semenya, the chief audit executive Approved the internal audit plan and changes to the plan and satisfied itself that the audit plan makes provision for effectively addressing the critical risk areas of the business Reviewed internal audit s compliance with its charter (which has been updated during the year and was approved by the audit committee) and considered whether the internal audit function has the necessary resources, budget and standing within PPC to enable it to discharge its functions. 4 PPC Ltd Annual financial statements

7 Risk management The committee is an integral component of the risk management process and specifically reviewed: financial risks financial reporting risks internal financial controls fraud risks as it relates to financial reporting IT governance. External audit Evaluated and reported on the independence of the external auditor Reviewed the quality and effectiveness of the external audit process Based on our satisfaction with the results of the activities outlined above, recommended to the board that Deloitte should be reappointed for 2015, with Mr Nyembe nominated as the registered auditor Determined the fees to be paid and the terms of engagement of the auditor Ensured that the appointment of the auditor complies with the Companies Act and other relevant legislation. Financial director The committee has satisfied itself of the appropriateness of the expertise and experience of Ms Ramano, the financial director, and wishes to confirm this to shareholders. Financial function The committee has reviewed the expertise, resources and experience of the company s finance function, and wishes to confirm this to shareholders In making these assessments, we have obtained feedback from both external and internal audit Based on the processes and assurances obtained, we believe that the accounting practices are effective. Oversight of risk management The committee engages with the risk and compliance committee to ensure adequate understanding of risk management processes. Internal financial controls Reviewed the effectiveness of the company s system of internal financial controls, including receiving assurance from management and internal audit Reviewed material issues raised by the internal and external audit process Based on the processes and assurances obtained, we believe that significant internal financial controls are effective. Regulatory compliance The audit committee has complied with all applicable legal and regulatory responsibilities. Integrated report Based on processes and assurances obtained, we have recommended the integrated report to the board for approval. On behalf of the audit committee Tim Ross Chairman 17 November PPC Ltd Annual financial statements 5

8 Directors report for the year ended 30 September The directors have pleasure in presenting their report on the annual financial statements of the company and group for the year ended 30 September. Business activities PPC Ltd, its subsidiaries, joint ventures and associates, operate in Africa as manufacturers of cementitious, aggregates products and readymix, lime and limestone, fly ash and packaging materials. The principal activities of the company remain unchanged from the previous year. With the exception of Pronto Holdings Pty Limited (Pronto) becoming a wholly owned subsidiary during the year, all other subsidiaries and their principal activities remain unchanged. Pronto is a prominent Gauteng-based readymix and fly ash supplier. Review of operations A comprehensive review of operations is detailed in the attached group financial statements. Stated capital On 30 September the issued shares of the company were of no par value (: of no par value). In terms of the group s long-term employee incentive scheme, the forfeitable share plan, R53 million (: R56 million) of shares were purchased on the open market and are treated as treasury shares during the vesting period of the award. Forfeitable share incentive awards amounting to R16 million ( shares) vested during the year and are no longer treated as treasury shares. In December, a portion of shares from PPC s first broad-based black economic empowerment (BBBEE) transaction to the value of R100 million ( shares) vested to the respective beneficiaries and are no longer treated as treasury shares. At year end, the stated capital balance amounted to debit R1 173 million (: debit R1 236 million). During the year, shareholders approved the creation of preference shares in terms of the restructuring of the company s first BBBEE transaction. None of the preference shares have been issued. Details of shares authorised, issued and unissued at 30 September are disclosed in note 9 to the group financial statements. The company did not purchase any of its own shares during the year under review. Shareholders The shareholders register of the company is open for inspection to shareholders and the public, during normal office hours, at the offices of the company s transfer secretaries, Link Market Services South Africa (Pty) Limited, or at Corpserve Pvt Limited (Zimbabwe). Details of the transfer secretaries can be found in the corporate information section on page 108. Details relating to the beneficial shareholders owning more than 3% of the issued share capital of the company appear in the PPC shareholder analysis section on page 107. Directors interest in the issued shares of the group Details of the beneficial holdings of directors of the company and their families in the ordinary shares of the company are given in the remuneration report included in the annual financial statements. Certain directors and non-executive directors have indirect shareholding in the company following the completion of the BBBEE transactions. Details thereof are also provided in the remuneration report. There has been no change in the directors interest since year end. Subsidiary companies In December, PPC acquired a 69,3% equity stake in Safika Cement Holdings Pty Limited, a cement blending company with five blending facilities and a milling operation, for a purchase consideration of R377 million. Further details of the fair value assets and liabilities acquired can be found in note 28 to the group financial statements. The remaining 50% equity stake in Pronto was purchased in July for R280 million, resulting in Pronto becoming a wholly owned subsidiary. PPC s investment in Pronto was previously accounted for as an equity-accounted investment. Further details of the fair value assets and liabilities acquired can be found in note 28 to the group financial statements. Equity-accounted investments In February, PPC acquired an additional equity stake in Habesha Cement Share Company (Habesha), incorporated in Ethiopia, for a consideration of R3 million, marginally increasing PPC s shareholding in the company to 31,6%. The investment continues to be equity accounted. Subsequent to year end, PPC advised that it has entered into a transaction that will see it increase its stake in Habesha to 51%. Further details of the proposed transaction can be found in note 32 to the group financial statements. Special resolutions At the annual general meeting held on 27 January the following special resolutions were approved: Granting approval for the company to enter into inter-company loans with subsidiaries and other related entities within the group The pre-approval of the remuneration of non-executive directors General authority to repurchase own shares or acquisition of the company s shares by a subsidiary company. At the general meeting of shareholders held on 18 March, the following special resolutions were approved: The increase in stated capital by the creation of preference shares Various amendments to the memorandum of incorporation 6 PPC Ltd Annual financial statements

9 Placing the preference shares under the control of the directors, subject to certain conditions relating to the restructuring of the company s first BBBEE transaction Placing the remaining preference shares, not issued for the restructure of the first BBBEE transaction, under the control of the directors Authority to repurchase the PPC shares owned by the PPC Black Managers Trust Authority to repurchase the PPC shares owned by the PPC Community Trust Funding SPV Authority to repurchase the PPC shares owned by the PPC Construction Industry Associations Trust Funding SPV Authority to repurchase the PPC shares owned by the PPC Education Trust Funding SPV Authority to repurchase the PPC shares owned by the PPC Team Benefit Trust Funding SPV Specific authority to provide financial assistance in respect of the settlement of obligations associated with the first BBBEE transaction Specific authority to provide financial assistance to PPC Phakamani Trust Specific authority to repurchase PPC Phakamani Trust repurchase shares. For further details on the special resolutions and proposed transaction to restructure a portion of the company s first BBBEE transaction, refer to the circular, dated 11 February, which can be found on Dividends Number Description Declaration date Record date Payment date Cents per share 222 Final 17 November 9 January January Interim 19 May 13 June 17 June Given the company s expansion strategy, the board has resolved to increase the company s dividend range from 1,2 to 1,5 to a new range of 1,8 to 2,5 times. Property, plant and equipment At 30 September, the group s net investment in property, plant and equipment amounted to R7 223 million (: R5 522 million), details of which are set out in note 1 to the group financial statements. Significant investments have been made in the rest of Africa amounting to R1 139 million during the year. There has been no change in the nature of the property, plant and equipment or to the policies relating to the use thereof during the year. Certain of the company s properties remain the subject of land claims. The company continues discussions with the Land Claims Commissioner and awaiting the outcome of claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company s operations. Details of commitments of the group can be found in note 31. Borrowings During the financial year, the company issued three bonds totalling R1 750 million, at competitive rates, with all issuances being oversubscribed. This brings the total bond issuance to R2 400 million, with R3 600 million still available under the company s R6 billion domestic medium-term note programme. There has been no change in PPC s credit rating by Standard & Poor s. The group s capital expansion projects are being funded mainly using project funding, with limited recourses to PPC Ltd once the respective plants have been commissioned. At 30 September, total borrowings amounted to R6 091 million (: R4 046 million), and remain within the group s stated target debt levels. Events after reporting date There are no events that occurred after the reporting date that may have a material impact on the group s reported financial position at 30 September. Going concern The directors consider that the company has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the going-concern basis in preparing the company s financial statements. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. Directors The directors in office at the date of this report appear on page 108. At the annual general meeting held on 27 January, Mr T Moyo was elected as a director of the company while Ms B Modise and Mr J Shibambo were re-elected as directors. During the year, Mr AJ Lamprecht informed the board he was not available for re-election and resigned after serving on the board since Mr KM Gordhan resigned as CEO and director of the company during September. PPC Ltd Annual financial statements 7

10 Directors report continued for the year ended 30 September The following directors will retire in accordance with the SENS announcement made by the company on 3 December : DJ Castle NB Langa-Royds MMT Ramano* J Shibambo * The newly elected board will consider the appointment of executive directors to the board. This includes the appointment of Ms Ramano. Group company secretary The group company secretary of PPC Ltd is Mr JHDLR Snyman. His business and postal address appear in the corporate information section on page 108. Audit committee The directors confirm that the audit committee has addressed specific responsibilities required in terms of section 94(7) of the Companies Act 71 of 2008, as amended. Further details are contained within the audit committee report on pages 4 to 5 of this report. Competition Commission In terms of the conditional leniency agreement with the Competition Commission, PPC continues to cooperate with their investigation and from our perspective there have been no significant new developments. Auditors In terms of section 90 of the Companies Act, Deloitte & Touche were reappointed as auditors to the company at the annual general meeting held on 27 January. 8 PPC Ltd Annual financial statements

11 Chief financial officer s report Overview Despite the lower level of profitability reported this financial year, we are proud of our strategic achievements in the period. Notably, we concluded two acquisitions at a combined transaction value of R657 million in South Africa and finalised funding for the DRC and Zimbabwean expansion projects. We also issued three corporate bonds totalling R1 750 million at competitive rates with all issuances oversubscribed. These achievements are expected to bode well for the long-term profitability and sustainability of the group. The lower level of economic growth in the regions in which we operate has curtailed cement volume growth, with declines recorded in both South Africa and Botswana, but somewhat supported by increased exports. Our lime business also recorded burnt product volume declines following a moderated offtake from the steel and alloys industries, while the aggregates division performed well with increased demand in its optimal operating environment. Income statement Revenue () Revenue earned from the rest of Africa (%) EBITDA () Headline earnings per share (cents) Dividend cover (times) 1,5 1,4 Revenue was 9% higher than last year at R9 039 million (: R8 316 million). The favourable impact of businesses acquired during the year, of around R500 million, was unfortunately offset by lower revenue recorded by the South African cement business due to year-on-year volume declines and pricing pressures. Good revenue growth was recorded by our Zimbabwean operations, with revenue increasing as a result of improved export pricing and the benefit from a devaluing rand over the period. On a like-for-like basis, revenue would have been 3% above last year. Revenue () Lime Aggregates International (230) Cement Before acquisitions 116 CIMERWA 136 Pronto Safika Cement Revenue earned from the rest of Africa contributed 27% (: 24%) and showed growth on last year, even after taking the newly acquired South African business units into consideration. If the impact of Pronto and Safika Cement are excluded, the rest of Africa would have contributed 28% to overall revenue. Cost of sales exceeded revenue growth to end the year 13% higher than last year at R6 266 million (: R5 546 million). South African cement delivered cost of sales on a rand per tonne basis, increased by 8% reflecting higher outbound logistical, electricity and timing of maintenance costs, partly offset by savings in coal and salaries. The lower volumes have limited our ability to fully absorb fixed costs, affecting gross margins. Cost of sales would have approximated R5 875 million on a like-for-like basis with. Administration and other operating expenditure increased by 21% to R1 030 million (: R853 million). New businesses, including amortisation charges of R30 million on fair value adjustments recognised on business combinations, accounted for most of the increase. Excluding the impact of acquired overheads, group overheads would have reflected modest growth of 6%. The unfavourable impact of currency devaluations on foreign Tryphosa Ramano Chief financial officer PPC Ltd Annual financial statements 9

12 Chief financial officer s report continued currency denominated overheads was offset by a lower shortterm incentive provision, and partial reversal of IFRS 2 charges on the performance element of the forfeitable share programme incentive awards vesting in February The lower level of profitability in the South African cement business was not fully offset by the consolidation of Safika Cement and Pronto, albeit at lower margins, with EBITDA ending 3% below last year at R2 358 million (: R2 440 million). On a like-for-like basis, EBITDA would have been 8% lower than. An EBITDA margin of 26,1% (: 29,3%) was achieved. The strategy of securing a channel to market is proving successful with R112 million added to EBITDA from the South African businesses acquired this year. EBITDA earned in foreign-denominated currencies was favourably impacted by currency movements in rand terms, calculated at 2% of last year s EBITDA. EBITDA () (before empowerment and restructuring costs) *Includes head office activities. International Aggregates (15) Lime (336) Cement* Before acquisitions 29 Pronto 83 (8) Safika Cement Finance costs of R505 million (: R404 million) were 25% above last year on increased net borrowing levels following drawdowns on facilities for plant expansions. Interest of R36 million (: R4 million) was capitalised to property, plant and equipment on the CIMERWA expansion, with time value of money adjustments on the environmental provisions and put option liabilities amounting to R47 million (: R21 million). Impairments and other exceptional items charged to the income statement of R110 million follows an impairment of goodwill and plant and equipment of R94 million at our CIMERWA business and further impairment of R17 million relating to plant and equipment at the aggregates business in Botswana on the back of continued low-volume profitability in that country. The total taxation charge for the year was R356 million (: R507 million), with an effective rate of taxation of 30,1% (: 35,8%), including an overprovision of current taxation of R70 million. The company has always adopted a prudent approach when providing for current taxation and provides for taxation concessions only once assessed by the respective tax authorities. The group s tax department has therefore been expanded to support the growing business and complexities in which we now operate. Headline earnings per share of 179 cents were in line with. CIMERWA Statement of financial position Property, plant and equipment () Goodwill and other intangible assets () Total borrowings () Net debt to EBITDA (%) 2,4 1,2 Investments of R2 182 million (: R970 million) in property, plant and equipment (PPE), together with acquisition-related capex of R225 million, increased PPE to R7 223 million (: R5 522 million). Most of the capital expenditure occurred outside South Africa, with R695 million and R445 million incurred on the Rwanda and DRC projects respectively. Zimbabwe continues to upgrade its operations, with R275 million disbursed, and the balance incurred in South Africa mainly on maintenance and environmental capex. Capital commitments at year end were R3 896 million (: R1 088 million), mostly linked to the DRC and Zimbabwean expansion projects with R2 246 million and R1 572 million expected to be spent in the 2015 and 2016 financial years respectively. Project funding has been secured for new projects in the DRC and Zimbabwe of US$168 million and US$75 million respectively, with limited recourse to PPC Ltd s statement of financial position only until performance targets are achieved on the DRC project. In Zimbabwe and Rwanda, projects are fully supported by the respective business units in those countries. For many years, the group s intangible assets were immaterial and comprised mainly computer-related software. After recent acquisitions, goodwill and other intangibles, such as brands and non-contractual customer relationships, have contributed to significant growth in this account. During the year, R227 million and R428 million was added to goodwill and other intangibles respectively following the Safika Cement and Pronto acquisitions. Equity-accounted investments decreased by R187 million following the acquisition of the remaining shareholding in Pronto for R280 million and the business being reclassified as a wholly owned subsidiary. The group continues to increase its stake in Habesha Cement Share Company, Ethiopia, to bring our shareholding to 32%. Other non-current assets increased as advance payments were made to suppliers of plant and equipment for the DRC project. Net working capital, excluding put option liabilities and retentions, of R852 million (: R766 million) was impacted by payment of the derivative liability on interest rate swaps of R113 million and restructuring accruals of R64 million. Inventory has been well controlled and ended below levels, while trade receivables remain tightly managed with impairments to gross debtors at only 2%, in line with last year. We have experienced certain customers applying for business rescue and debtors days increasing marginally, in line with tough trading conditions. 10 PPC Ltd Annual financial statements

13 Following the significant growth in PPE, borrowings reflect a corresponding increase, ending the year at R6 091 million (: R4 046 million), with net debt to EBITDA of 2,4 (: 1,2) remaining below our internal levels of maximum 3,0 times cover. We continue to explore optimal ways of restructuring the funding on our first BBBEE transaction. Cash flow Cash generated from operations before working capital movements () Net working capital movement () Cash conversion ratio 1,1 1,1 Cash generated from operations before working capital movements of R2 472 million (: R2 486 million) was marginally below last year. The group continues to focus on working capital management and again reduced net working capital year on year from a cash flow perspective, noting that had some anomalies, particularly interest rates swaps and restructuring accruals. Net movements in cash and cash equivalents () (110) (157) (288) (399) Dividends A final dividend of 76 cents per share has been declared, bringing the full-year dividend to 114 cents per share (: 156 cents per share), with a divided cover of 1,5 times (: 1,4 times). This remained within our current dividend range of 1,2 to 1,5 times but, as indicated in last year s report, the company was reviewing its dividend cover. Given the company s expansion strategy, the board has resolved to increase the dividend cover range from 1,2 to 1,5 times to a new range of 1,8 to 2,5 times. Focus areas For the 2015 financial year, we remain cautious about the level of economic growth in South Africa, but look forward to positive contributions from CIMERWA after commissioning the new plant and the full-year financial contribution from Safika Cement and Pronto. As previously communicated in the circular to approve our second BBBEE transaction, the group structure will be simplified to align to our expansion and keeping the home fires burning strategies. This restructure is expected to be finalised in the first half of The integration of all new businesses, both greenfields and brownfields, will be a priority to maximise synergies and align governance processes to support the businesses and allow the flexibility of entrepreneurship. To support integrations and optimisations, renewed focus has been given to the use of information technologies in the group and we have a strong pipeline of projects to further enhance our business processes. In concluding, I thank the group s finance teams for their continued support and dedication to PPC during the year Net borrowings raised Other movements Dividends paid Finance costs Working capital Acquisitions (1 212) Capex (111) The group s cash conversion ratio, being cash generated from operations over EBITDA, declined marginally below levels after repaying the derivative liability on the interest rate swaps and restructuring accruals. MMT Ramano Chief financial officer 17 November PPC Ltd Annual financial statements 11

14 Accounting policies for the year ended 30 September Basis of preparation The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board (IASB) in issue and effective for the group at 30 September and the SAICA financial reporting guides, as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act of South Africa. The basis of preparation is consistent in all material respects with those applied in the prior year except where the group has adopted new or revised accounting standards and interpretations of those standards. The following amendments and interpretations, which did not have a material impact on reported results, were adopted in the current year: IAS 19 (amendment) Employee Benefits The amendments to IAS 19 require the following: The recognition of changes in the net defined liability/(asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of re-measurements in other comprehensive income, plan amendments, curtailments and settlements. Introduction of enhanced disclosures about defined benefit plans. Modification of accounting for termination benefits, including distinguishing benefits provided in exchange for services and benefits provided in exchange for the termination of employment. Clarification of various miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administrative costs and risk sharing and conditional indexation features. Incorporation of other matters submitted to the IFRS Interpretations Committee. The standard has no impact on the group financial position as the group already recognises costs in line with the standard and disaggregates the employee benefit cost into components. IFRS 11 Joint Arrangements The standard replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC 13 Jointly Controlled Entities Non-Monetary Contributions by Venturers. It establishes principles that are applicable to the accounting for all joint arrangements and requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations in accordance with that type of joint arrangement. The group already differentiates between the types of its joint arrangements, namely interests in joint ventures, and assessed its accounting for joint ventures in terms of IFRS 11 and concluded that the application had no material impact. IAS 28 (amendment) Investments in Associates and Joint Ventures The standard prescribes the accounting for investment in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The group already uses the equity method to account for investments in associates and joint ventures. IAS 27 Separate Financial Statements The standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost or in accordance with IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement. The recognition of dividends, certain group reorganisations and a number of disclosure requirements are also dealt with by the standard. The group already prepares separate financial statements in line with the requirements of the standard. IFRS 10 Consolidated Financial Statements The standard replaces parts of IAS 27 Consolidated and Separate Financial Statement and SIC 12 Consolidation Special Purpose Entities. IFRS 10 identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements. The group assessed the impact of IFRS 10 on its subsidiaries and there were no material changes to entities consolidated into the PPC group. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine The interpretation clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognised as an asset, how the asset is initially recognised, and subsequent measurement. An exercise to determine the impact of IFRIC 20 within the group was performed, and based on the results, it has been concluded that there is no material impact on the prior year or current year financial statements. As the group does not have material prior year stripping assets (prior to the effective date), the transitional adjustments of IFRIC 20 are not applicable. Annual improvements to IFRS cycle The annual improvements have made a number of amendments to IFRS: IFRS 1 Permit the repeated application of IFRS 1, borrowing costs on certain qualifying assets IAS 1 Clarification of the requirements for comparative information 12 PPC Ltd Annual financial statements

15 IAS 16 Classification of servicing equipment IAS 32 Clarify that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 12 Income Taxes IAS 34 Clarify interim reporting of segment information for total assets in order to enhance consistency with the requirements in IFRS 8 Operating Segments. The following amendments and interpretations, which have a disclosure impact on reported results, were adopted in the current year: IFRS 7 (amendment) Offsetting of Financial Assets and Financial Liabilities The amendment requires information about all recognised financial instruments that are set off. It also requires disclosure of information about recognised financial instruments which are subject to enforceable master netting arrangements and similar agreements, even if they are not set off under IAS 32 Financial Instruments: Presentation. In the prior year, the group offset its financial assets and financial liabilities, in respect of interest rate swaps. The group has applied retrospectively the disclosure requirements of IFRS 7 amendment by disclosing the gross amount of the financial assets and liabilities (refer note 13). IFRS 12 Disclosure of Interests in Other Entities This standard requires extensive disclosure of information that enables users of the financial statements to evaluate the nature of and risks associated with interests in other entities. The effects of those interests on the financial position, financial performance and cash flows are also required to be disclosed. There is a disclosure impact on the group, and as a result more extensive disclosures relating to subsidiaries have been made (refer Annexure 1 subsidiaries and non-controlling interest on pages 74 to 76 of this report). IFRS 13 Fair Value Measurement This standard applies when another IFRS requires or permits fair value measurements or disclosures regarding fair value measurements. With some exceptions, the standard requires entities to classify these measurements into a fair value hierarchy based on the nature of the inputs. If the inputs used to measure fair value are categorised into different levels of the fair value hierarchy, the fair value measurement is categorised in its entirety in the level of the lowest level input that is significant to the entire measurement. There is a disclosure impact on the group, with more extensive disclosure made in the current year (refer note 35). IFRS 13 requires prospective application from 1 January therefore the group has not made any new disclosures for comparative period. Other than additional disclosures, the application of IFRS 13 has not had any material impact on the amounts recognised in the consolidated financial statements. The group has not applied the following new and revised standards and interpretations that have been issued but are not yet effective: Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities Amendments to IAS 36 Recoverable Amount Disclosures for Non- Financial Assets Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting Annual improvements cycle Annual improvements 2011 cycle IFRIC 21 Levies IFRS 9 Financial Instruments The group does not anticipate that the amendments will have a material impact on the consolidated financial results (refer note 35). Basis of consolidation The group consolidates all of its subsidiaries. Accounting policies are applied consistently in all group companies, except for CIMERWA that revalues their property, plant and equipment and in the Democratic Republic of the Congo where local accounting standards are not in line with IFRS. Where a subsidiary of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to that subsidiary s financial statements in preparing the consolidated financial statements to ensure consistency with the group s accounting policies. The results of subsidiaries are included from the effective date of acquisition up to the effective date of disposal. All subsidiaries, with the exception of Pronto Holdings Pty Limited (Pronto) and the DRC incorporated subsidiaries, have the same financial year end as the company. Pronto s results from the effective date of acquisition are consolidated into the group and have been audited. Due to the completion of the transaction, in the last quarter of PPC s financial year, and timing of regulatory approvals, Pronto s financial year was not adjusted. The financial year end of Pronto will be amended in the next reporting period to align with the PPC Ltd. The financial year end of the respective DRC incorporated entities is December and is prescribed by local legislation. Total comprehensive income of subsidiaries is attributed to shareholders of PPC and non-controlling interests even if this results in a debit to non-controlling interests. The group s interests in joint ventures and associates are accounted for using the equity method of accounting. All intragroup balances, transactions, income and expenses and profit or losses resulting from intragroup transactions between the parent and/or subsidiaries of the parent and other fellow subsidiaries are eliminated in full. PPC Ltd Annual financial statements 13

16 Accounting policies continued for the year ended 30 September Underlying concepts The consolidated financial statements are prepared on the goingconcern basis using accrual accounting. Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when a legally enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously. The gross amount of the financial assets and liabilities is disclosed in notes to the annual financial statements. Changes in accounting policies are accounted for in accordance with the transitional provisions noted in the applicable standard. If no such guidance is given, then changes are applied retrospectively, unless it is impracticable to do so, in which case they are applied prospectively. Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively. Changes in accounting estimates are recognised in profit or loss, and are prospectively applied. Preparing financial statements in conformity with IFRS requires estimates and assumptions that may affect reported amounts and related disclosures. Actual results could differ from these estimates. For further information refer to Judgements made by management on pages 23 to 25 of these financial statements. Recognition of assets and liabilities Assets are only recognised if they meet the definition of an asset, it is probable that future economic benefits associated with the asset will flow to the group and the cost or fair value can be reliably measured. Liabilities are only recognised if they meet the definition of a liability, it is probable that future economic benefits associated with the liability will flow from the group and the cost or fair value can be reliably measured. Financial instruments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities, as a result of firm commitments, are only recognised when one of the parties has performed under the contract. Derecognition of assets and liabilities Financial assets are derecognised when the contractual rights to receive cash flows have been transferred or have expired or when substantially all the risks and rewards of ownership have passed. All other assets are derecognised on disposal or when no future economic benefits are expected from their use. Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or has expired. Property, plant and equipment Property, plant and equipment (PPE) represents tangible items and intangible items that are integrated with tangible items that are held for use in the production or supply of goods and are expected to be used for more than one reporting period. Day-to-day servicing costs, such as labour and consumables, are expensed in profit and loss. Items of PPE are initially recognised at cost, which includes any costs directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, including waste stripping costs. Waste stripping costs are the costs incurred when overburden or waste material is removed to obtain access to an orebody. The stripping activity is accounted for as an addition to, or as an enhancement of, an existing asset and classified according to the nature of the existing asset of which it forms part. The costs of stripping activity are accounted for in accordance with the inventories accounting policy to the extent that the benefit from the stripping activity is realised in the form of inventory produced. The costs of stripping activity which provide a benefit in the form of improved access to ore are recognised as a non-current stripping activity asset. When the costs of the stripping activity asset and the inventory produced are not separately identifiable, production stripping costs are allocated between inventory produced and stripping activity asset based on the volume of waste extracted compared with the expected volume, for a given volume of ore production. The cost of self-constructed assets includes expenditures on materials, direct labour and an allocated portion of project overheads. Cost also includes the estimated cost of dismantling and removing the assets and site rehabilitation costs to the extent that they relate to the construction of the asset and are required by local legislation. Gains and losses on qualifying cash flow hedges attributable to that asset are also included in the cost, where applicable. Subsequent to initial recognition, items of property, plant and equipment are measured at cost less accumulated depreciation and impairments. Owner-occupied properties in the course of construction are carried at cost, less any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying value. 14 PPC Ltd Annual financial statements

17 Depreciation is charged so as to write off the depreciable amount of the assets, other than land, over their estimated useful lives, using a method that reflects the pattern in which the asset s future economic benefits are expected to be consumed by the entity. Where significant parts of an asset have different useful lives to the asset itself, these parts are depreciated over their estimated useful lives. The methods of depreciation and useful lives are reviewed annually. The following methods and rates were generally used during the year: Land Not depreciated Buildings Straight line up to 30 years Plant Straight line up to 35 years Vehicles Straight line up to 10 years Furniture and equipment Straight line up to 6 years Mineral rights Straight line Estimated life of reserve Leasehold improvements Straight line Written off over the lease period or shorter period if appropriate Assets held under finance leases are depreciated over their expected useful lives or the term of the relevant lease, whichever is the shorter. Stripping activity assets are depreciated over the expected useful life of the identified component of the orebody. depreciated over the expected life of the asset, and the increase in the net present value of the provision for the expected cost is included under finance costs (time value of money adjustments). Changes in the measurement of an existing decommissioning or restoration liability that result from changes in the estimated timing or amount of expected costs, or a change in the discount rate, are adjusted firstly to the respective asset or recognised in profit or loss if no asset has been recorded. In South Africa, payments are made to a rehabilitation trust fund in accordance with statutory requirements. Currently, there are no such regulations in the other jurisdictions in which the group operates for the creation of a rehabilitation trust fund. The investments in the trust fund are carried at fair value through profit or loss. The trust is consolidated as the group is the sole contributor to the fund and exercises full control over the trust. Cash and cash equivalents held by the fund are reflected as restrictive cash. Investments made into the trust fund by the respective companies are carried at cost. Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance, which is not integrated with a tangible asset. It includes brands, customer relationships, mineral reserves, patents, trademarks, capitalised development costs and certain costs of purchasing and installation of major information systems (including packaged software). The gain or loss arising on the disposal or scrapping of PPE is recognised in profit or loss. Advance payments denominated in foreign currency for significant items of property, plant and equipment Project advance payments denominated in foreign currency are initially recorded at the ruling exchange rate on the date of the payment. The advance payment is treated as a non-monetary asset as there is no expected repayment in units of currency and is thus not translated at each reporting date. On the portion of any invoice for PPE that is offset by the advance payment, the amounts capitalised to PPE are recorded at the historical carrying amount of the advance payment. Factory decommissioning and quarry rehabilitation Group companies restore mine and processing sites at the end of their productive lives to conditions acceptable and prescribed by local regulations and in line with existing technologies. Intangible assets are initially recognised at cost if acquired separately or internally generated or at fair value if acquired as part of a business combination. After initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment losses, where applicable. If assessed as having an indefinite useful life, intangible assets are not amortised but tested for impairment annually and impaired if necessary. If assessed as having a finite useful life, intangible assets are amortised over their useful lives using the straight-line basis or volume basis, for mineral reserves, and tested for impairment if there are indications that it may be impaired. The useful life of an intangible asset with a finite life is reviewed annually to determine whether the finite life assessment continues to be supportable. If a finite life is no longer deemed appropriate, the change in the useful life assessment is made prospectively. Research costs are recognised in profit or loss when they are incurred. Decommissioning provision is the estimated cost to dismantle all structures and rehabilitate the land on which the plant is located, while rehabilitation is the estimated cost of restoring the quarries following the ongoing mining operations. 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 Development costs are capitalised only when and if they meet the criteria for capitalisation. Otherwise they are recognised in profit or loss. Patents and trademarks are measured initially at cost and amortised on a straight-line basis over their estimated useful lives. The gain or loss arising on the disposal of an intangible asset is recognised in profit or loss. PPC Ltd Annual financial statements 15

18 Accounting policies continued for the year ended 30 September Goodwill The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill represents the future economic benefits arising from assets that are not capable of being individually identified and separately recognised in a business combination. Goodwill arising on the acquisition of a subsidiary is recognised separately as an intangible asset and is stated at cost less impairments. Goodwill is not amortised but tested annually for impairment or more frequently if events or changes in circumstances indicate that the carrying amount should be impaired. Goodwill arising on acquisition of equity-accounted associates and joint ventures is included in the carrying amount of the respective investment. On disposal of a subsidiary, associate, joint venture or business unit to which goodwill was allocated on acquisition, the amount attributable to such goodwill is included in the determination of the profit or loss on the respective disposal. Business combinations On acquisition date, fair values are attributed to the identifiable assets, liabilities and contingent liabilities. Non-controlling interest at acquisition date is determined as the non-controlling shareholders proportionate share of the fair value of the net identifiable assets of the entity acquired. When an acquisition is achieved in stages (step acquisition), the identifiable assets and liabilities are recognised at their full fair value when control is obtained, and any adjustment to fair values related to these assets and liabilities previously held as an equity interest is recognised in profit or loss. When there is a change in the interest in a subsidiary after control is obtained, that does not result in a loss in control, the difference between the fair value of the consideration transferred and the amount by which the non-controlling interest is adjusted is recognised directly in equity. If, on a business combination, the fair value of the group s interest in the identifiable assets, liabilities and contingent liabilities exceeds the consideration transferred, this excess is recognised in profit or loss immediately. Acquisition-related costs to effect a business combination are expensed in the period they are incurred. Impairment of assets At each reporting date the carrying amount of the tangible and intangible assets are assessed to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value in use is estimated taking into account future cash flows, forecast market conditions and the expected remaining lives of the assets. If the recoverable amount of an asset, or cash-generating unit, is estimated to be less than the carrying amount, the carrying amount is reduced to the higher of the recoverable amount or zero. Impairment losses are recognised in profit or loss. The loss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the cash-generating unit. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for the asset is adjusted to allocate its remaining carrying value over the asset s remaining useful life. If 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 but limited to the carrying amount that would have been determined had no impairment loss been recognised. A reversal of an impairment loss is recognised in profit or loss. Goodwill acquired in a business combination and intangible assets with indefinite useful lives and cash-generating units to which these assets have been allocated are tested for impairment annually irrespective of whether there is any indication of impairment. Impairment losses recognised for goodwill are not subsequently reversed. For financial assets carried at amortised cost, the amount of impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets except for trade receivables, where the carrying amount is reduced through the use of an allowance account. Subsidiaries, associates and joint ventures Investments in subsidiaries, associates and joint ventures in the separate financial statements presented by the company, are recognised at cost less any accumulated impairment losses. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities, income, expenses and cash flows of the company and its subsidiaries as if they were a single economic entity. The results of special purpose vehicles and companies that in substance are controlled by the group are consolidated. 16 PPC Ltd Annual financial statements

19 Special purpose vehicles and employee trusts The group operates broad-based black economic empowerment and indigenisation schemes through SPV companies and trusts. These entities are operated for the purposes of incentivising staff to promote the continued growth of the group and to promote black economic empowerment or localisation. The group generally retains the residual risks and/or benefits associated with the trusts, thus they are controlled by PPC. In terms of IFRS, the appropriate accounting treatment for these entities is to consolidate their results until the date that effective control ceases. Interests in associates The consolidated financial statements incorporate the assets, liabilities, income and expenses of associates using the equity method of accounting, applying the group s accounting policies, from the acquisition date to disposal date, except when the investment is classified as held for sale, in which case it is accounted for as non-current assets held for sale. The investment in the associate is carried at cost and adjusted for post-acquisition changes in the group s share of net assets of the associate, less any impairment in value. Any long-term debt interests, which in substance form part of the group s net investment in the associate, are also included in the total carrying value of the associate. Losses of an associate in excess of the group s interest in that associate are not recognised, unless the group has incurred legal or constructive obligations or made payments on behalf of the associate. Where a group entity transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group s interest in the relevant associate. Interests in joint ventures Joint ventures are entities in which the group holds an interest on a long-term basis and which are jointly controlled by the group and other ventures under a contractual agreement. The group s interest in the joint venture is accounted for using the equity accounting method, as described under interest in associates above. Financial assets Financial assets are initially measured at fair value plus transaction costs. Transaction costs in respect of financial assets classified at fair value through profit or loss are, however, expensed. Financial assets are classified into the following categories: Held-to-maturity investments Investments classified as held-to-maturity financial assets are measured at amortised cost using the effective interest rate method less any impairment losses recognised to reflect irrecoverable amounts. Financial assets at fair value through profit or loss Financial assets are classified as fair value through profit or loss where the financial asset is either held for trading or is designated at fair value through profit or loss. Financial assets at fair value through profit or loss are carried at fair value with any gains or losses being recognised in profit or loss. Fair value, for this purpose, is market value if listed or a value arrived at by using appropriate valuation models if unlisted. Loans and receivables Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables and are measured at amortised cost using the effective interest rate method less allowances for doubtful debts. Write-downs of these assets are expensed in profit or loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Available-for-sale financial assets Investments in unlisted shares are classified as available-for-sale financial assets. These investments are carried at fair value with any gains or losses being recognised directly in other comprehensive income. Fair value, for this purpose, is a value arrived at by using appropriate valuation models. An investment intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, is classified as noncurrent available-for-sale financial assets. Where the investment is disposed of or determined to be impaired, the cumulative or a portion of the gain or loss previously recognised in equity is included in profit or loss for the period. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss are measured at fair value with any resultant gain or loss recognised in profit or loss. Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost are initially measured at fair value, net of transaction costs. These financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Derivative financial instruments The group enters into a variety of derivative financial instruments, such as forward exchange contracts and interest rate swaps, to manage its exposure to interest rate and foreign exchange rate movements. PPC Ltd Annual financial statements 17

20 Accounting policies continued Share-based payments For share-based payment transactions among group entities, in the underlying separate financial statements, the entity receiving the goods or services measures the goods or services received as an equity-settled share-based payment transaction when the awards granted are its own equity instruments, or the entity has no obligation to settle the share-based payment transaction. In all other circumstances, the entity receiving the goods or services shall measure the goods or services as a cash-settled share-based payment transaction. The entity settling a share-based payment transaction when another entity in the group receives the goods or services, shall recognise the transaction as an equity-settled sharefor the year ended 30 September Derivatives that are assets or liabilities are measured at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges. To the extent that a derivative instrument has a maturity period of longer than one year, the fair value of these instruments will be reflected as a non-current asset or liability. Put options Put options granted to non-controlling shareholders of PPC subsidiaries entitle the non-controlling shareholders to sell their interest in the subsidiary at contracted dates to PPC. In such case, PPC consolidates the subsidiary s results and recognises the fair value of the put options, being the present value of the estimated future purchase price, as a financial liability. Where the options are expected to be exercised in a period exceeding one year, the fair value is reflected as non-current. In raising this liability, noncontrolling interest is reduced by the initial present value recorded and is not adjusted until the settlement of the put options. Time value of money adjustments are recorded in respect of the liability within finance costs. The estimated future purchase price is fair valued at each reporting date and any changes in the value of the liability as a result of changes in the assumptions used to estimate the future purchase price are recorded in profit or loss. Hedge accounting If a fair value hedge meets the conditions for hedge accounting, any gain or loss on the hedged item attributable to the hedged risk is included in the carrying amount of the hedged item and recognised in profit or loss. If a cash flow hedge meets the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly as other comprehensive income and the ineffective portion, if any, is recognised in profit or loss. If an effective hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses recognised in equity are transferred to income in the same period in which the asset or liability affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated gains or losses recognised as other comprehensive income are included in the initial measurement of the acquisition cost of the asset or liability. Hedge accounting is discontinued on a prospective basis when: the hedge no longer meets the hedge accounting criteria (including when it becomes ineffective); the hedge instrument is sold, terminated or exercised; for cash flow hedges, the forecast transaction is no longer expected to occur; or the hedge designation is revoked. Any cumulative gain or loss on the hedging instrument for a forecast transaction is retained in other comprehensive income until the transaction occurs, unless the transaction is no longer expected to occur, in which case the gain or loss is transferred to profit or loss. Leasing Leases are classified as finance leases or operating leases at the inception of the lease. In the capacity of a lessee Finance leases are recognised as assets and liabilities at the lower of the fair value of the asset and the present value of the minimum lease payments at the acquisition date. Finance costs represent the difference between the total leasing commitments and the fair value of the assets acquired, and are charged to profit or loss over the term of the lease and at interest rates applicable to the lease on the remaining balance of the obligations. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease or another basis if more representative of the time pattern of the lessee s benefit. Leasehold improvements Leasehold improvements are capitalised, initially measured at cost and subsequent to initial measurement, they are measured at cost less accumulated depreciation and impairment losses. Leasehold improvements are depreciated over the lease term or useful life, whichever is the shorter. In the capacity of a lessor Rental income from operating leases is recognised on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straightline basis over the lease term. 18 PPC Ltd Annual financial statements

21 based payment transaction only if it is settled in the entity s own equity instruments. Otherwise, the transaction shall be recognised as a cash-settled share-based payment transaction. Cash settled The cost of cash-settled transactions is measured initially at fair value at the grant date using the binomial option pricing model, which takes into account the terms and conditions upon which the instruments were granted. The expected life used in the model is adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations such as volatility, dividend yield, staff turnover and vesting period. This fair value is expensed over the vesting period with a corresponding charge to liabilities. The liability is remeasured at each reporting period, up to and including the settlement date, with changes in fair value recognised in profit or loss. Equity settled Equity-settled share-based payments are measured at the fair value of the equity instruments at grant date. The fair value of the share options at grant date is recognised and charged against profit or loss together with a corresponding movement in equity over the vesting period. Any fair value adjustments are calculated over the vesting period, ending on the date on which the performance conditions are fulfilled and the employees become fully entitled to exercise their options. The cumulative expense recognised for share options granted at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the number of share option grants that will ultimately vest, on management s best estimate, at that date. Where an equity-settled award is cancelled by the group, it is accounted for as an acceleration of the vesting of the awards and is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award. Empowerment and management incentive transactions To the extent that an entity grants shares or share options in a BBBEE, indigenisation (empowerment) or management incentive transaction and the fair value of the cash and other assets received is less than the fair value of the shares or share options granted, such difference is charged to profit or loss in the period in which the transaction becomes effective. Where the empowerment or management incentive transaction includes service conditions, the difference is charged to profit or loss over the period of these service conditions. The issuance of fully vested shares, or rights to shares, is presumed to relate to past service, requiring the full amount of the grant date fair value to be expensed immediately. A restriction on the transfer of the shares or share options is taken into account in determining the fair value of the shares or share options. Deferred tax assets A deferred tax asset represents the amount of income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits. Deferred tax assets are reviewed at each reporting date and only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised and is accounted for using the balance sheet liability method. It is measured at tax rates that have been enacted or substantially enacted at the reporting date. Inventories Inventories are assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process. Inventories are initially recognised at cost, determined using a weighted average cost formula. Subsequent to initial recognition, inventories are stated at the lower of cost and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, net of discounts and rebates received. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion, distribution and selling. Non-current assets held for sale Non-current assets held for sale or disposal groups are classified as held for sale if the carrying amount will be recovered principally through sale rather than through continuing use. This condition is regarded as being met only when the sale is highly probable and the asset held for sale or disposal groups are available for immediate sale in their present condition. Where a disposal group held for sale will result in the loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale, regardless of whether a non-controlling interest in the former subsidiary is to be retained after the sale. Immediately prior to being classified as held for sale, the carrying amount of the item is measured in accordance with the applicable IFRS. After classification as held for sale, it is measured at the lower of the carrying amount or fair value less costs to sell. An impairment loss is recognised in profit or loss for any initial and subsequent write-down of the asset and disposal group to fair value less costs to sell. A gain for any subsequent increase in fair value less costs to sell is recognised in profit or loss to the extent that it is not in excess of the cumulative impairment loss previously recognised. Non-current assets or disposal groups that are classified as held for sale are not depreciated. PPC Ltd Annual financial statements 19

22 Accounting policies continued for the year ended 30 September Cash and cash equivalents Cash and cash equivalents are measured at fair value, with changes in fair value being included in profit or loss. Cash and cash equivalents that are subject to restrictions on use are included under cash and cash equivalents but reflected at restricted. Deferred tax liability A deferred tax liability represents the amount of income taxes payable in future periods in respect of taxable temporary differences and is recognised for taxable temporary differences, unless specifically exempt, at the tax rates that have been enacted or substantially enacted at the reporting date. Deferred tax arising on investments in subsidiaries, associates and joint ventures is recognised except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Defined contribution retirement plans Payments to defined contribution retirement plans are charged to profit or loss as incurred. Defined post-employment healthcare benefits The cost of providing defined healthcare benefits is determined using the projected unit credit method. Valuations are conducted every three years by independent actuaries and interim adjustments to those valuations are made annually. Actuarial gains and losses are recognised in other comprehensive income. Gains or losses on the curtailment or settlement of a defined benefit plan are recognised in profit or loss when the group is demonstrably committed to the curtailment or settlement. The amount recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and the unrecognised past service costs. Provisions Provisions represent liabilities of uncertain timing or amount. Provisions are recognised when the entity 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. Provisions for onerous contracts are established after taking into consideration the recognition of impairment losses that have occurred on assets dedicated to those specific contracts. Provisions are measured at the amount required to settle the present obligation. Where the effect of discounting is material, provisions are measured at their present value using an appropriate discount rate that reflects the current market assessment of time value of money and risks for which future cash flow estimates have not been adjusted. Treasury shares Shares in the company held by group subsidiary companies, SPVs and employee trusts that require consolidation are classified as treasury shares. The consideration paid, inclusive of directly attributable costs, is disclosed as a deduction against equity. The issued and weighted average number of shares are reduced by the treasury shares, weighted for the period they have been held by the subsidiary company, SPVs or employee trusts, for the purpose of determining earnings and headline earnings per share calculations. Dividends received on treasury shares are eliminated on consolidation. Shares repurchased by the company and subsequently cancelled are shown as adjustments against equity. Dividends Dividends to equity holders are only recognised as a liability when declared and are included in the statement of changes in equity. Dividends paid to employees in terms of the various empowerment schemes and in terms of forfeitable share incentive scheme, are recognised directly in equity if the awards are expected to vest and for awards that are not expected to vest, the dividend is recognised as an expense. Revenue Revenue represents the gross inflow of economic benefits during the period arising in the course of ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Revenue is measured at the amount received or receivable net of cash and settlement discounts, rebates, and other indirect taxes. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred, delivery has been made and title has passed, the amount of the revenue and the related costs can be reliably measured and it is probable that the customer will pay for the goods. 20 PPC Ltd Annual financial statements

23 Cost of sales When inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable value and all losses of inventories or reversals of previous writedowns or losses are also recognised in cost of sales in the period the write-down, loss or reversal occurs. Cost of sales also includes the cost of delivering products to the customers. Employee benefit costs The cost of providing employee benefits is accounted for in the period in which the benefits are earned by employees. The cost of short-term employee benefits is recognised in the period in which the service is rendered and is not discounted. The expected cost of short-term accumulating leave is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absences occur. The expected cost of profit-sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their use as intended by management. All other borrowing costs are expensed in the period in which they are incurred. Transaction costs Transaction costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability are included or deducted from the fair value of the financial asset or financial liability respectively, while transaction costs of an equity transaction are deducted from equity. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Investment income 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 right to receive payment has been established. Exceptional items Exceptional items cover those amounts, which are not considered to be of an operating nature, and generally include profit and loss on disposal of property, investments and businesses, other non-current assets, impairments of capital items and goodwill and other items identified by management as warranting separate disclosure. Tax Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Current tax The charge for current tax is based on the results for the year as adjusted for income that is exempt, and expenses that are not deductible, and applicable allowances, using tax rates that are applicable to the taxable income. Deferred tax Deferred tax is recognised in profit or loss for all temporary differences, unless specifically exempt, at the tax rates that have been enacted or substantially enacted at the reporting date, except when it relates to items credited or charged directly to equity, in which case the tax is recognised in equity. Discontinued operations The results of discontinued operations are presented separately in profit or loss and the assets associated with these operations are included with non-current assets held for sale in the statement of financial position. Foreign currency translations The group and company annual financial statements are presented in South African rand, being the company s functional currency. The functional currency of each entity within the group is determined based on the currency of the primary economic environment in which that entity operates. Transactions in currencies other than the entity s functional currency are recognised at the rates of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates ruling at the reporting date. Non-monetary items that are retranslated at the rates prevailing at the date when the fair value was determined and non-monetary items that are measured in terms on historical cost in a foreign currency are not translated. Gains and losses arising on exchange rate differences are recognised in profit or loss. The financial statements of entities within the group, whose functional currencies are different to the group s presentation currency, are translated as follows: Assets, including goodwill, and liabilities at exchange rates ruling on the reporting date Income, expense items and cash flows at the average exchange rates for the period Equity items, at the exchange rate ruling when they arose. PPC Ltd Annual financial statements 21

24 Accounting policies continued for the year ended 30 September Resulting exchange rate differences are classified as a foreign currency translation reserve and recognised directly in the statement of comprehensive income. On disposal of such a business unit, the applicable portion of this reserve is recognised in profit or loss before being translated into the group s presentation currency. Events after reporting date Recognised amounts in the financial statements are adjusted to reflect events arising after the reporting date that provide evidence of conditions that existed at the reporting date. Events that are indicative of conditions that arose after the reporting date are dealt with by way of an explanatory note. Comparative figures Comparative figures are restated in the event of a change in accounting policy or prior period errors. Furthermore, where there is a subdivision of ordinary shares during the current period, the comparatives figures are restated. Operating segment information Reporting segments The group has four main reporting segments that comprise the structure used by the group executive committee (GEC) to make key operating decisions and assess performance. The group s reportable segments are operating segments that are differentiated by the activities that each undertakes and the products they manufacture and market in which products are sold. The group evaluates the performance of its reportable segments based on revenue and EBITDA. The group accounts for intersegment sales and transfers as if the sales and transfers were entered into under the same terms and conditions as would have been entered into in market-related transactions. The financial information of the group s reportable segments is reported to the GEC for purposes of making decisions about allocating resources to the segment and assessing its performance. The group s reporting segments comprise the following segments: Cement The cement division s activities include the mining of limestone for the manufacture and supply of cementitious products and head office activities. Lime The lime division s activities include the mining of limestone, and the manufacture and supply of metallurgical grade limestone, burnt lime and burnt dolomite. Aggregates and readymix The aggregate and readymix division s activities include the mining and supply of aggregates and metallurgical grade dolomitic limestone and the supply of readymix concrete, dry mortars and fly ash. Readymix is included in from the effective date of consolidation of Pronto. Other Other comprises the various consolidated trusts and trust funding SPVs relating to the broad-based black economic empowerment transaction. 22 PPC Ltd Annual financial statements

25 Judgements made by management for the year ended 30 September The preparation of financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make estimates, assumptions and judgements that affect reported amounts and related disclosures, and therefore actual results, when realised in future, could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and subsequent periods if the revision affects both. Judgements made by management in applying the accounting policies that could have a significant effect on the amounts recognised in the financial statements are: Asset lives and residual values Property, plant and equipment (PPE) are depreciated over their estimated useful lives. The actual lives of the assets are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product lifecycles, life-of-mine and maintenance programmes are taken into account. The residual value of all PPE of the group is regarded to be zero as PPE items are intended to be used for their entire useful life and at that stage the residual value is deemed to be of minimal value. Business combinations On the acquisition of a business or group of assets defined as a business, a determination of the fair value and useful life of tangible and intangible assets acquired is performed in terms of IFRS 3 Business Combinations. The determination of the fair values, measurement of the non-controlling interest and resultant goodwill, requires judgement in terms of the valuation methodology to be applied and the various inputs used in the underlying models. The allocation of the purchase price affects the results of the group as intangible assets with finite lives are amortised over their estimated useful lives, while indefinite lived intangible assets, including goodwill, are not amortised, which could therefore result in differing amortisation charges. Future events could cause the assumptions used initially to change, thereby potentially having an impact on the results and net position of the group. Goodwill and intangible assets with indefinite useful lives Goodwill and intangible assets with indefinite useful lives are considered for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill or intangible asset is allocated. The recoverable amount is generally calculated by applying the discounted cash flow methodology using forecasts approved by management. Determining the expected cash flows is judgemental in nature and involves the use of significant estimates and assumptions. Impairment of assets PPE and intangible assets are considered for impairment when there are events or changes in circumstances which indicate that the carrying amount of the assets may be impaired. Factors taken into consideration in reaching such decisions include the economic viability of the asset itself and where it is a component of a larger economic unit, the viability of that unit. The future cash flows expected to be generated by the assets are forecast, taking into account market conditions and the expected useful lives of the assets which require judgement. The present value of these cash flows, determined using an appropriate discount rate, is compared to the current net asset value and, if lower, the assets are written down to the present value calculated. If it is not possible to estimate the recoverable amount of the individual asset, an entity shall determine the recoverable amount of the cash-generating unit to which the asset belongs. Deferred tax assets Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Future tax profits are estimated based on business plans which include estimates and assumptions regarding economic growth, interest, inflation and tax rates and the competitive environment. Valuation of financial instruments The valuation of derivative financial instruments is based on the market position at the reporting date and other assumptions such as volatility, intrinsic value, time value and interest rates. The value of the derivative instruments fluctuates and the actual amounts realised may differ materially from their value at the reporting date. PPC Ltd Annual financial statements 23

26 Judgements made by management continued for the year ended 30 September Provision for net realisable value of inventory The provision for net realisable value of inventory represents management s best estimate, based on historic sales trends, assessment on quality and volume and ruling selling prices, of the extent to which the stock on hand at the reporting date will be sold below cost. Impairment of doubtful debts The provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due in accordance with the original terms of credit given and includes an assessment of recoverability based on historical trend analysis and circumstances that exist at the reporting date. Consolidation of special purpose vehicles Special purpose vehicles (SPVs) established in terms of the various empowerment transactions and management retention schemes have been consolidated in the group results where there is evidence of control over the various SPVs in terms of IFRS 10 Consolidated Financial Statements. The PPC shares owned by the SPVs and consolidated trusts have therefore been treated as treasury shares and the related borrowings, where applicable, have been included in group borrowings on consolidation (refer to notes 9 and 11). Weighted average number of shares Using the weighted average number of shares during the period reflects the possibility that the amount of shareholders capital varied during the period as a result of a larger or smaller number of shares being outstanding at any time. Judgement is required to determine the number of shares and the timing when shares are issued, also considering the assessment of consolidation or deconsolidation of various SPVs during the period. The calculation of the weighted average number of shares impacts the calculation of basic and diluted earnings per share. Fair value of share-based payments Fair value used in calculating the amount to be expensed as a sharebased payment is subject to a level of uncertainty. The group is required to calculate the fair value of the cash-settled and equitysettled instruments granted to employees in terms of the share option schemes, forfeitable share incentive schemes and sharebased payment charges relating to empowerment transactions. These fair values are calculated by applying a valuation model, which is in itself judgemental, and takes into account certain inherently uncertain assumptions such as dividend yield, performance conditions and staff turnover. Factory decommissioning and rehabilitation obligations Estimating the future costs of these obligations is complex as most of the obligations will only be fulfilled in the foreseeable future. Furthermore, the resulting provisions are influenced by changing technologies, life-of-mine, political, environmental, safety, business and statutory considerations through the various jurisdictions in which PPC operates. Post-employment healthcare benefit valuations Actuarial valuations of employee benefit obligations under the now closed defined healthcare benefit plans are based on assumptions which include employee turnover, mortality rates, discount rates, medical inflation, the expected long-term return on plan assets, the rate of compensation increases and current market conditions. Put options Put options were granted to the remaining non-controlling shareholders of Safika Cement Holdings Pty Limited (Safika Cement) at the time of PPC s acquisition of a controlling stake in the business, entitling them to sell their interests in Safika Cement to PPC at future contracted dates. PPC has recognised the fair value of the non-controlling interests, being the present value of the future estimated option price, as a financial liability in the statement of financial position with a corresponding entry reducing noncontrolling interests. The present value and timing of the expected redemptions and amounts need to be determined at each reporting date. Judgement is used in calculating the expected future redemption values and timing as to when the various non-controlling shareholders will exercise their options. Retentions In terms of plant construction contracts, a portion of the cost of the plant is retained by the group until certain performance and operating targets are achieved. Judgement is required to determine the timing of when the retentions will be paid over to the contractor. Any portion deemed to be only payable after 12 months is classified as a non-current liability. Provision for restructuring costs The group estimates the level of provision required for restructuring costs based on historical experience as well as other specific relevant factors. Contingent liabilities A possible obligation depending on whether some uncertain future event occurs, or a present obligation but payment is not probable or the amount cannot be measured reliably. A contingent liability is disclosed but not accrued. Disclosure is, however, not required if payment is remote. Contingent liabilities assumed in a business combination are recognised to the extent that there is a present obligation that arose from past events and its fair value can be measured reliably. Waste-stripping costs The allocation of stripping costs between inventory produced and non-current assets is based on the volume of waste extracted compared to the expected stripping ratio of the respective mine and mineral body. Any change in management s estimates could impact the stripping costs capitalised and depreciation of the related asset. 24 PPC Ltd Annual financial statements

27 Exceptional items Exceptional items are expense or income items recorded in a period which have been determined by management as being material by their size or incidence and are presented separately within the results of the group. The determination of which items are disclosed as exceptional items may affect the presentation of profit measures including EBITDA and normalised earnings per share, and requires a degree of judgement. Income taxes The group is subject to tax in several jurisdictions and judgement is therefore required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises provisions for tax based on estimates of the taxes that are likely to become due. Where the final tax outcome is different from the amounts that were initially recorded, such differences impact the current income tax and deferred tax provisions in the period in which such determination is made. Average translation rates Income and expenditure transactions are translated using the average rate of exchange for the period. Management considers the average rate to approximate the actual rates prevailing on the dates on which these transactions occur. Sources of estimation uncertainty There are no significant assumptions made concerning the future or other sources of estimation uncertainty that have been identified as giving rise to a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Going concern Management considers key financial information and loan covenant compliance in its approved medium-term budgets, together with its existing term facilities, to conclude that the going-concern assumption used in the compilation of its annual financial statements is appropriate. PPC Ltd Annual financial statements 25

28 Consolidated statement of financial position as at 30 September Notes ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Equity accounted investments Other non-current assets Deferred taxation assets 10 9 Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Stated capital 9 (1 173) (1 236) Other reserves Retained profit Equity attributable to shareholders of PPC Ltd Non-controlling interests Total equity Non-current liabilities Deferred taxation liabilities Long-term borrowings Provisions Other non-current liabilities Current liabilities Short-term borrowings Trade and other payables and short-term provisions Total equity and liabilities PPC Ltd Annual financial statements

29 Consolidated income statement for the year ended 30 September Revenue Cost of sales Gross profit Administration and other operating expenditure Operating profit before items listed below: BBBEE IFRS 2 charges Zimbabwe indigenisation costs 1 93 Operating profit Fair value adjustments on financial instruments Finance costs Investment income Profit before equity accounted earnings and exceptional items Earnings from equity accounted investments Impairments 20 (111) (13) Other exceptional adjustments Profit before taxation Taxation Profit for the year Attributable to: Shareholders of PPC Ltd Non-controlling interests Earnings per share (cents) 22 Basic Diluted Notes PPC Ltd Annual financial statements 27

30 Consolidated statement of comprehensive income for the year ended 30 September Unrealised surplus on reclassification of plant Foreign currency translation reserve Availablefor-sale financial assets Hedging reserves Retained profit Total comprehensive income Profit for the year Items that will not be reclassified to profit or loss Revaluation of available-for-sale financial investments Taxation on revaluation of availablefor-sale financial investments (11) (11) Items that will be reclassified to profit or loss upon derecognition Effect of cash flow hedges 7 7 Effect of translation of foreign operations Other comprehensive income net of taxation Total comprehensive income Profit for the year Items that will not be reclassified to profit or loss (4) Revaluation of available-for-sale financial investments Taxation on revaluation of availablefor-sale financial investments (2) (2) Transfer to retained profit (4) 4 Items that will be reclassified to profit or loss upon derecognition Effect of cash flow hedges Effect of translation of foreign operations Other comprehensive income net of taxation (4) Total comprehensive income (4) PPC Ltd Annual financial statements

31 Consolidated statement of changes in equity for the year ended 30 September Stated capital Unrealised surplus on reclassification of plant Foreign currency translation reserves Other reserves Availablefor-sale financial assets Hedging reserves Equity compensation reserves Retained profit Equity attributable to shareholders of PPC Ltd Noncontrolling interests Opening balance at the beginning of the year (1 236) (7) Movements for the year 63 (1) (73) (2) Acquisitions of subsidiary companies (refer to note 28) Dividends declared (refer to note 23) (848) (848) (32) (880) IFRS 2 charges Non-controlling interests share of foreign currency translation reserve Put option liabilities recognised with acquisition of subsidiary company (refer to note 13) (137) (137) Total comprehensive income Transfer to retained profit (1) (5) 6 Treasury shares held in terms of the FSP share incentive scheme (53) (53) (53) Vesting of certain BBBEE 1 entities 100 (100) Vesting of certain FSP share incentive scheme awards 16 (16) Balance at 30 September (1 173) Total equity PPC Ltd Annual financial statements 29

32 Consolidated statement of changes in equity continued for the year ended 30 September Stated capital Unrealised surplus on reclassification of plant Foreign currency translation reserves Other reserves Availablefor-sale financial assets Hedging reserves Equity compensation reserves Retained profit Equity attributable to shareholders of PPC Ltd Noncontrolling interests Opening balance at the beginning of the year (1 181) (43) Movements for the year (55) (4) Acquisitions of subsidiary companies (refer to note 28) Dividends declared (refer to note 23) (770) (770) (770) Contribution from participants of the Zimbabwe indigenisation transaction 3 3 IFRS 2 charges Non-controlling interests share of foreign currency translation reserve 5 5 Reclassification movements 3 (3) Sale of shares by consolidated BBBEE entity (refer to note 9) 1 (1) Total comprehensive income (4) Transfer to retained profit (17) 17 Treasury shares held in terms of the FSP share incentive scheme (56) (56) (56) Zimbabwe IFRS 2 charges transferred to non-controlling interests (62) (62) 62 Balance at 30 September (1 236) (7) Total equity 30 PPC Ltd Annual financial statements

33 Consolidated statement of cash flows for the year ended 30 September Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and equity accounted earnings Adjustments for: Amortisation of intangible assets BBBEE IFRS 2 charges Depreciation Dividends received 19 (18) (4) Finance costs Gross impairments and other exceptional adjustments Interest received 19 (35) (18) Other non-cash flow items Profit on sale of non-current assets 20 (12) Zimbabwe indigenisation costs 1 93 Operating cash flows before movements in working capital Movements in inventories 101 (12) Movements in trade and other receivables Movements in trade and other payables and provisions (133) 348 Cash generated from operations Finance costs paid 25 (426) (269) Dividends received 18 4 Interest received Taxation paid 26 (499) (525) Cash available from operations Dividends paid 27 (880) (770) Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of equity accounted investments 4 (3) (126) Acquisitions of subsidiary companies 28 (662) (140) Investments in intangible assets 3 (63) (6) Investments in property, plant and equipment 29 (2 119) (964) Movements in financial assets Proceeds on disposal of property, plant and equipment 4 15 Net cash outflow from investing activities (2 840) (1 219) Net cash (outflow)/inflow before financing activities (2 009) 124 CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings raised/(repaid) 590 (102) Net short-term borrowings repaid (389) (398) Proceeds raised from bond issuance Purchase of shares in terms of FSP share incentive scheme (53) (56) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (111) 218 Cash and cash equivalents at the beginning of the year Cash and cash equivalents acquired on acquisitions of subsidiary companies Impact of foreign exchange rate movements on opening cash and cash equivalents Cash and cash equivalents at the end of the year Cash earnings per share (cents) PPC Ltd Annual financial statements 31

34 Segmental information for the year ended 30 September The group discloses its operating segments according to the business units which are regularly reviewed by the group executive committee which comprise cement, lime, aggregates and readymix and other. For details on the operating segments refer to the accounting policies. Group Cement * Revenue South Africa Rest of Africa Inter-segment revenue (64) (36) Total revenue Operating profit before items listed below BBBEE IFRS 2 charges Restructuring costs Zimbabwe indigenisation costs Operating profit South Africa Rest of Africa Fair value adjustments on financial instruments Finance costs Investment income Profit before earnings from equity accounted investments and exceptional items Earnings from equity accounted investments Impairments and other exceptional adjustments (110) (1) (81) 10 Profit before taxation Taxation Net profit Depreciation and amortisation EBITDA ~ South Africa Rest of Africa EBITDA margin (%) 26,3 30,1 27,7 32,0 Assets Non-current assets Current assets Total assets South Africa Rest of Africa Investments in property, plant and equipment (refer to note 29) Capital commitments (refer to note 31) Liabilities Non-current liabilities Current liabilities Total liabilities South Africa Rest of Africa Revenue is split between South Africa and the rest of Africa based on where the underlying goods are anticipated to be consumed or used by the customer. No individual customer comprises more than 10% of group revenue. * Includes head office activities. # Includes readymix in from the effective date of consolidation of Pronto. ^ Other comprises BBBEE trusts and trust funding SPVs. ~ Excluding BBBEE IFRS 2 charges, Zimbabwe indigenisation costs and restructuring costs. 32 PPC Ltd Annual financial statements

35 Lime Aggregates and readymix # Other^ (16) (16) (16) (5) (8) 1 1 (5) (6) (108) (148) (29) (11) (108) (148) (5) (108) (148) (16) (16) 5 18,0 20,4 15,6 13, PPC Ltd Annual financial statements 33

36 Notes to the group financial statements for the year ended 30 September Freehold and leasehold land, buildings and mineral rights Factory decommissioning assets Plant, vehicles, furniture and equipment Capitalised leased plant Total 1. PROPERTY, PLANT AND EQUIPMENT Cost Accumulated depreciation and impairments Net carrying value at the end of the year Cost Accumulated depreciation and impairments Net carrying value at the end of the year Property, plant and equipment with a net carrying value of R1 502 million (: R87 million) are encumbered as disclosed in note 11. These assets are used as security for the borrowings at CIMERWA. Included in plant, vehicles, furniture and equipment is capital work in progress of R1 248 million (: R211 million), with R307 million and R964 million relating to the DRC and Rwanda expansions respectively. The cost of land included above amounts to R248 million (: R215 million). During the year property, plant and equipment of R46 million (: R6 million) was impaired. The impairments relate to aggregate quarries of Botswana and CIMERWA. The cash-generating units were assessed for potential impairment which indicated that CIMERWA freehold land and aggregate quarries of Botswana plant and equipment are impaired. Certain of the group s properties in South Africa are the subject of land claims. Discussions with the Land Claims Commissioner continue and the outcome of the claims referred to the Land Claims Court are still due. The claims are not expected to have a material impact on the group s operations. For details on capital commitments at year end, refer to note PPC Ltd Annual financial statements

37 Freehold and leasehold land, buildings and mineral rights Factory decommissioning assets Plant, vehicles, furniture and equipment Capitalised leased plant Total 1. PROPERTY, PLANT AND EQUIPMENT continued Movement of property, plant and equipment Net carrying value at the beginning of the year Acquisitions of subsidiary companies (refer to note 28) Additions To enhance existing operations To expand operations Depreciation (34) (4) (501) (4) (543) Disposals (4) (4) Other movements 1 (4) 4 1 Impairments (refer to note 20) (29) (17) (46) Reallocation to inventory (16) (16) Translation differences^ Net carrying value at the end of the year ^ The translation differences comprise: Cost 213 Accumulated depreciation (37) 176 Net carrying value at the beginning of the year Acquisitions of subsidiary companies (refer to note 28) Additions To enhance existing operations To expand operations Depreciation (29) (4) (451) (4) (488) Disposals (2) (2) (4) Impairments (refer to note 20) (6) (6) Other movements (11) 2 (9) Reallocation to inventory (4) (4) Other transfers 5 5 Translation differences^ Net carrying value at the end of the year ^ The translation differences comprise: Cost 177 Accumulated depreciation (29) 148 PPC Ltd Annual financial statements 35

38 Notes to the group financial statements continued for the year ended 30 September 2. GOODWILL Cost Accumulated impairment loss 68 6 Net carrying value at the end of the year Movement of goodwill Net carrying value at the beginning of the year Acquisitions of subsidiary companies (refer to note 28) Impairments (refer to note 20)^ (65) (6) Translation differences 5 1 Net carrying value at the end of the year Goodwill is allocated to the following subsidiary companies: CIMERWA Limited Safika Cement Holdings Pty Limited* 78 Pronto Holdings Pty Limited* ^ Impairments Included in impairments are the following: Aggregate quarries of Botswana During the goodwill acquired on the aggregate quarry acquisition in Botswana was assessed for potential impairment at a cashgenerating unit level, being each of the three respective quarries. This review indicated an impairment relating to the Selebi Phikwe quarry and as a result the full goodwill recognised on acquisition of R6 million was impaired. The valuation was performed using discounted cash flow methodology and applying growth and discount rates applicable to the Botswana environment. CIMERWA Limited The recoverable amount of this cash-generating unit was determined based on a value-in-use calculation, using cash flow projections based on financial forecasts approved by management and covering an initial seven-year period. The discount rate used in the valuation was based on an appropriate hurdle rate for Rwanda and adjusted for specific company and business-related risk factors. Cash flow projections during the forecast period are based on improved margins and profitability following the planned commissioning of the new plant early in the 2015 calendar year, taking cognisance of an appropriate ramp-up period. Selling prices and cost of sales were forecast to increase at applicable inflation rates. The cash flow post the forecast period has been extrapolated using in-country specific growth rates, with the forecast period limited to the life of mine, currently estimated at around 15 years. Post the end of mine, alternative sources of raw materials have been factored into the projections. Following the impairment review, the calculated value was deemed to be lower than the current carrying value, resulting in an impairment of R65 million being charged against profit and loss, under impairments. * Safika Cement Holdings Pty Limited and Pronto Holdings Pty Limited The recoverable amounts of these cash-generating units are determined based on value-in-use calculations, using cash flow projections based on financial forecasts approved by management and covering an initial seven-year period. The discount rate used in the valuations were based on PPC s weighted average cost of capital, adjusted for specific company and business-related risk factors. Cash flow projections during the forecast period are based on similar pricing and margins to those currently being achieved by the businesses. Selling prices and cost of sales are forecast to increase at rates linked to local inflation projections. The cash flows post the forecast period have been extrapolated using local GDP growth rates. No impairments were deemed necessary during the year under review. 36 PPC Ltd Annual financial statements

39 Right of use of mineral asset ERP development and other software Brand, trademarks and customer relationships Total 3. OTHER INTANGIBLE ASSETS Cost Accumulated amortisation and impairments Net carrying value at the end of the year Cost Accumulated amortisation and impairments Net carrying value at the end of the year Movement of intangible assets Net carrying value at the beginning of the year Acquisitions of subsidiary companies (refer to note 28) Additions Amortisation (1) (33) (38) (72) Transfers and other movements Translation differences Net carrying value at the end of the year Net carrying value at the beginning of the year Acquisitions of subsidiary companies (refer to note 28) Additions Amortisation (1) (29) (4) (34) Translation differences Net carrying value at the end of the year Intangible assets were recognised on the acquisitions of Pronto, Safika Cement and CIMERWA (refer to note 28). Included in brand, trademarks and customer relationships are brand and trademarks of R359 million (: R96 million), contracted and non-contracted customer relationships of R132 million (: Rnil) and favourable lease terms of R4 million (: Rnil). Brands and trademarks are amortised over a period not exceeding 15 years, while customer relationships are amortised over a five-year period. Favourable lease terms are amortised over the remaining period of the lease, not exceeding three years. The group does not have any indefinite life intangible assets, other than goodwill. PPC Ltd Annual financial statements 37

40 Notes to the group financial statements continued for the year ended 30 September 4. EQUITY ACCOUNTED INVESTMENTS Investments at cost at the beginning of the year Investments made during the year* Acquired through the acquisition of subsidiary companies (refer to note 28) 1 Investments at cost at the end of the year Share of retained profit Retained profit at the beginning of the year Share of current year s profit Transferred to subsidiaries s (215) Loans advanced^ Balance at the beginning of the year Interest capitalised 2 2 Impairments (refer to note 20) ~ (1) Repayments (2) (4) Valuation of interest in equity accounted investments Fair value of unlisted equity accounted investments, including loans advanced, as determined by the directors Fair value of equity accounted investments was determined by using the discounted cash flow methodology. A discount rate relevant to each country and adjusted for specific project and business risks was used. The increase in fair value can be ascribed to the change in valuation methodology applied in calculating the fair value of Habesha. In previous years, the fair value of PPC s share was considered to approximate the carrying value as the business was still in early phases of project commencement. * Investments made during the year Habesha Cement Share Company (Habesha) During the year, PPC acquired a further equity stake in Habesha, for a purchase consideration of R3 million (: R16 million) marginally increasing PPC s shareholding in the company to 31,6% (: 30,7%). Post-year end, PPC entered into an agreement to purchase a further 20% shareholding in Habesha, subject to certain regulatory approvals. Refer to note 32. S Transferred to subsidiaries PPC obtained control over Pronto following the acquisition of the remaining 50% in the company during the year for R280 million, making it a wholly owned subsidiary. In, PPC acquired a further 25% for R110 million, which brought the shareholding to 50% at the time. Refer to note 28. ^ Loans advanced to associates Of the loans advanced to associates, R3 million bears interest at the prime lending rate, while the remaining balance is interest-free. Where appropriate, bonds are registered over land and movable assets as security. The capital and interest are repayable by August ~ Impairments During the year, an impairment of Rnil (: R1 million) was recorded on the loans advanced, to adjust the loans to the expected recoverable amount, net of securities. 38 PPC Ltd Annual financial statements

41 4. EQUITY ACCOUNTED INVESTMENTS continued Key financial information of associates $ Non-current assets Current assets Total assets Total equity Non-current liabilities Current liabilities Revenue Operating profit Profit after taxation Comprehensive income Interest Carrying value, including loans advanced Name Nature of business % % year end Incorporated in South Africa Afripack Limited Packaging September First Gas (Pty) Limited LP gas and February liquid fuels distribution Metlakgola Construction & Construction February 1 1 Development (Pty) Limited Olegra Oil (Pty) Limited Used oil February 2 3 collection and filling station Pronto Holdings Pty Limited Readymix concrete and fly ash 50 February 203 Rhulanani Concrete Mixers (Pty) Limited Hoekplaats Dolomite (Pty) Limited Incorporated in Ethiopia Habesha Cement Share Company Readymix February 2 2 concrete Quarrying 49 February 1 Cement manufacturer 31,6 30,7 July Afripack is considered a material equity accounted investment as it comprises the majority of the equity accounted earnings for the year, noting that Pronto is now a wholly owned subsidiary. Habesha is also deemed to be a material equity accounted investment as its carrying value is more than half of the total value of the group s equity accounted investments and will have a material impact when fully operational. $ The financial information provided represents the full results of equity accounted Management accounts together with the financial statements are used to align earnings in equity accounting investments with PPC year end. PPC Ltd Annual financial statements 39

42 Notes to the group financial statements continued for the year ended 30 September 5. OTHER NON-CURRENT ASSETS Unlisted investment at fair Unlisted collective investment* Loans advanced ~ 3 4 Advance payments for plant and equipment^ Directors valuation of unlisted investments including loans advanced 212 Unlisted investment at fair value PPC Ltd holds a 6,75% (: 6,75%) shareholding in Ciments du Bourbon, incorporated in Reunion. The fair value of the investment has been calculated using a dividend yield valuation methodology, using comparable company dividend yields. The movement in fair value of R58 million (: R9 million) has been credited against other comprehensive income. The basis of determining the fair value of the investment has changed from an earnings multiple approach, as used in previous years, to the dividend yield methodology used in the current year, which aligns with the group s influence and investment returns. * Unlisted collective investment Comprises an investment by the PPC Environmental Trust. Put options are also held over the value of the assets in order to protect the capital of the portfolio. At 30 September, the value of the put options were not material. During the year, a further R4 million was reinvested in the unit trusts. These funds are held to fund PPC s South African environmental obligations. ~ Loans advanced These loans have been advanced to fund enterprise development companies and bear interest at rates between prime less 2% and prime less 5%, and are secured by bonds over land and moveable assets. Interest received on the loans is Rnil (: R2 million). The capital and interest are repayable until ^ Advance payments In terms of the construction agreements with the suppliers of the new cement plants in Rwanda and the DRC, a portion of the full contract price is required to be paid in advance of the project commencing. The advance payments are secured by advance payment bonds issued by Citibank, and will be recycled to property, plant and equipment as the plants are constructed. 6. INVENTORIES Raw materials Work in progress Finished goods Maintenance stores Inventory obsolescence (179) (146) Inventory obsolescence Balance at the beginning of the year Raised during the year Utilised during the year (4) Released during the year (2) (1) Translation differences 6 8 Balance at the end of the year Inventories are determined on the weighted average formula basis. During the year, an amount of R16 million (: R4 million), for critical spares, was reclassified between property, plant and equipment and inventory. The cost of inventories recognised as an expense during the year was R4 872 million (: R4 324 million). No inventories have been pledged as security. 40 PPC Ltd Annual financial statements

43 7. TRADE AND OTHER RECEIVABLES Trade receivables Less: Impairment of trade receivables (30) (19) Net trade receivables Other financial receivables Trade and other financial receivables Prepayments Taxation prepaid Net trade receivables comprise: Trade receivables that are neither past due nor impaired Trade receivables that would otherwise be impaired whose terms have been renegotiated 2 9 Trade receivables that are past due but not impaired Trade receivables have increased following the consolidation of Safika Cement and Pronto during the year. Refer to note 28. No receivables have been pledged as security. No individual customer represents more than 10% of the group s revenue and exposure at year end of more than 10% of net trade receivables. Where credit is given, normal credit terms are 30 to 60 days. Impairment is generally determined by the ageing on an account, financial position of the customer and security held. When a customer applies for business rescue or liquidates, the amount due is immediately provided for, if not already provided for. The credit quality of a customer is assessed with reference to credit bureau reports, financial statements analysis, trade references, bank codes and securities. Accounts are reviewed annually with high risk customers monitored more frequently. Collateral held comprises bank guarantees, cession of book debt, deed of surety, cross company guarantees and notarial bonds. Cement Lime Aggregates and readymix Total Trade receivables that are neither past due nor impaired There is no history of material default relating to trade receivables in this category. Trade receivables that are past due but not impaired Ageing beyond normal terms days days days days Greater than 180 days 3 3 Fair value of collateral held Ageing beyond normal terms days days days days Greater than 180 days 8 8 Fair value of collateral held PPC Ltd Annual financial statements 41

44 Notes to the group financial statements continued for the year ended 30 September Cement Lime Aggregates and readymix Total 7. TRADE AND OTHER RECEIVABLES continued Impairment of trade receivables Balance at the beginning of the year Allowance raised through profit or loss Utilisation of allowance (2) (2) Balance at the end of the year Balance at the beginning of the year Allowance raised through profit or loss 5 5 Utilisation of allowance (6) (6) Balance at the end of the year CASH AND CASH EQUIVALENTS Cash and cash equivalents Currency analysis: Botswana pula Mozambican metical Rwandan franc South African rand United States dollar Amounts denominated in foreign currencies have been translated at ruling exchange rates at year end. Refer to note 41 for exchange rates used. Cash restricted for use relating to: PPC Environmental Trust 6 6 Consolidated BBBEE entities Cash and cash equivalents include cash on hand and cash on deposit, net of outstanding bank overdrafts, where there is a right of set off. The majority of the funds denominated in Rwandan franc and US dollar are to be used specifically for the expansions in Rwanda and the DRC respectively. 42 PPC Ltd Annual financial statements

45 Shares Shares 9. STATED CAPITAL Authorised shares Issued ordinary shares Total shares in issue at the beginning of the year Shares issued in terms of second BBBEE transaction & Total shares in issue at the end of the year Less: Shares held by consolidated participants of the second BBBEE transaction treated as treasury shares & ( ) ( ) Less: Shares held by consolidated BBBEE trusts and trust funding SPVs treated as treasury shares^ ( ) ( ) Less: Shares held by consolidated Porthold Trust Pvt Limited treated as treasury shares ~ ( ) ( ) Less: Shares purchased in terms of the FSP incentive scheme treated as treasury shares # ( ) ( ) Total shares in issue (net of treasury shares) Authorised preference shares During, shareholders approved the creation of 20 million preference shares, of R1 000 each, in terms of the proposed restructure of a portion of PPC s first BBBEE transaction. No preference shares have been issued post the approval. Stated capital Balance at the beginning of the year (1 236) (1 181) Shares purchased in terms of the FSP share incentive scheme treated as treasury shares # (53) (56) Sale of shares, treated as treasury shares, by consolidated BEE entity* 1 Vesting of shares held by certain BBBEE 1 entities 100 Vesting on a portion of the shares held in terms of the FSP incentive scheme # 16 Balance at the end of the year (1 173) (1 236) Unissued shares (shares) Ordinary shares Preference shares & Shares issued in terms of PPC s second BBBEE transaction which was facilitated by means of notional vendor financing (NVF) mechanism resulting in these shares only participating in 20% of the dividends declared by PPC during the NVF period, ending 30 September With the exception of the Bafati Investment Trust, entities participating in this transaction are consolidated into the PPC group during the transaction term. ^ In terms of IFRS 10 Consolidated Financial Statements, certain of the BBBEE trusts and trust funding SPVs from PPC s first transactions are consolidated, and as a result, shares owned by these entities are carried as treasury shares on consolidation. In December, shares vested to beneficiaries and are no longer treated as treasury shares. ~ Shares owned by a Zimbabwe employee trust company are treated as treasury shares. # In terms of the forfeitable share incentive scheme, shares (: shares) are held for participants of this long-term incentive scheme. The shares are treated as treasury shares during the vesting periods of the awards. In February, shares vested and are no longer treated as treasury shares. * During, the Current Team Trust, a PPC consolidated trust which was consolidated into the group in terms of the first BBBEE transaction, sold a portion of their shareholding in the open market for the benefit of beneficiaries that passed away. Due to IFRS requirements, 13% (: 14%) of the total shares in issue are treated as treasury shares by consolidated subsidiaries in terms of the BBBEE transaction and FSP share incentive scheme. PPC Ltd Annual financial statements 43

46 Notes to the group financial statements continued for the year ended 30 September 10. DEFERRED TAXATION Net liability at the beginning of the year comprises: Deferred taxation asset 3 Deferred taxation liability Acquisitions of subsidiary companies (refer to note 28) Income statement charge 66 Charged directly in equity 11 2 Translation differences Transfer to taxation payable^ (240) Net liability at the end of the year comprises: Deferred taxation asset 9 Deferred taxation liability Opening balance Acquisitions of subsidiary companies Charged to the income statement Charged directly to equity Translation differences Transfer to taxation payable Closing balance Property, plant and equipment Other non-current assets (5) Current assets 15 (4) 1 12 Non-current liabilities (84) (2) (8) (1) (95) Current liabilities (71) 28 (43) Reserves 225 (4) (12) 11 (241) (21) (240) Property, plant and equipment Other non-current assets (4) 2 68 Current assets Non-current liabilities (76) (7) (1) (84) Current liabilities (26) (1) (43) (1) (71) Reserves 124 (5) ^ During the year, the previously assessed loss at Porthold which had been calculated by applying local transition guidelines, following the change in functional currency of Zimbabwe was not approved by the revenue authorities. The deferred taxation that was being recognised on profits made by the company, while engagements were taking place with the revenue authorities to resolve, has been transferred to current taxation. In light of the amounts involved, a payment plan has been agreed that will see the company pay the past taxes, inclusive of interest, by the end of the 2015 financial year. 44 PPC Ltd Annual financial statements

47 11. LONG-TERM BORROWINGS Borrowings Terms Security Interest rate Long-term loan Interest is payable semi-annually with a bullet capital repayment in December 2016 Unsecured Fixed 10,86% Bonds # Various, refer below # Unsecured Refer below # Long-term loan Long-term loan Long-term loan US dollar-denominated, repayable by 2024 Rwandan franc-denominated, repayable by 2024 Rwandan franc-denominated, repayable in Secured by CIMERWA s land and buildings (refer to note 1) Secured by CIMERWA s land and buildings (refer to note 1) Variable at 650 basis points above LIBOR Fixed 16% 246 Unsecured Fixed 16% 23 BBBEE funding transaction Preference shares^ Preference shares* Preference shares* Long-term loans Dividends are payable semiannually, with annual redemptions ending December 2016 Dividends are payable semiannually with capital redeemable from surplus funds. Compulsory annual redemptions until December 2016 Capital and dividends are payable by December 2016, with capital capped at R400 million Capital and interest are payable by December 2016, with capital capped at R700 million Secured by guarantee from PPC Ltd Secured by PPC shares held by the SPVs Secured by guarantee from PPC Ltd Secured by guarantee from PPC Ltd Variable rates at 85% of prime and fixed rates of 9,24% to 9,37% Variable rates at 85% of prime Variable rates at 78% of prime Variable rates at 285 basis points above JIBAR Long-term borrowings Less: Short-term portion of long-term borrowings (refer to note 14) (70) (85) # Comprises four unsecured bonds, issued under the company s R6 billion domestic medium-term note programme, and are recognised net of capitalised transaction costs of R5 million (: R5 million): Number Issue date Value Term Interest rate PPC 001 March R650 million 3 years 3-month JIBAR + 1,26% PPC 002 December R750 million 5 years 3-month JIBAR + 1,50% PPC 003 July R750 million 5 years 3-month JIBAR + 1,48% PPC 004 July R250 million 7 years 9,86% ^ Issued by PPC Black Managers Trust Funding SPV (Pty) Limited, a wholly owned subsidiary company of PPC Ltd, which was incorporated in terms of PPC s first BBBEE transaction. * BBBEE trust owned SPVs formed for the company s first BBBEE transaction, namely PPC Community Trust Funding SPV (Pty) Limited, PPC Construction Industry Associations Trust Funding SPV (Pty) Limited, PPC Education Trust Funding SPV (Pty) Limited and PPC Team Benefit Trust Funding SPV (Pty) Limited. PPC Ltd Annual financial statements 45

48 Notes to the group financial statements continued for the year ended 30 September 11. LONG-TERM BORROWINGS continued Maturity analysis of obligations: One year Two years Three years Four years Five years and more % loans linked to fixed interest rates % loans linked to variable interest rates Assets encumbered are as follows: Plant and equipment (refer to note 1) The group is in compliance with its debt covenants, none of which are expected to represent material restrictions on funding or investment policies in the foreseeable future. Further details of maturity analysis and interest rates are disclosed in note 37 on financial risk management. 12. PROVISIONS Factory decommissioning and quarry rehabilitation Post-retirement healthcare benefits PPC Ltd Annual financial statements

49 Factory decommissioning and quarry rehabilitation Postretirement healthcare benefits Total 12. PROVISIONS continued Movement of provisions Balance at the beginning of the year Amounts added 2 2 Amounts reversed (4) (4) Translation differences 1 1 Time value of money adjustments Balance at the end of the year To be incurred: Between two and five years More than five years Balance at the beginning of the year Amounts added Time value of money adjustments Balance at the end of the year To be incurred: Between two and five years More than five years Factory decommissioning and quarry rehabilitation Group companies in South Africa, Botswana, Rwanda and Zimbabwe are required to restore mining and processing sites at the end of their productive lives to an acceptable condition consistent with local regulations. As the operations in the DRC have not commenced, no provision has been made. PPC has set up an environmental trust in South Africa to administer the local funding requirements of its decommissioning and rehabilitation obligations. To date, R66 million (: R66 million) has been contributed to the PPC Environmental Trust with the current value of the trust assets amounting to R114 million (: R111 million). Post-retirement healthcare benefits Included in the provision are the following: Historically, qualifying employees were granted certain post-retirement healthcare benefits. The obligation for the employer to pay medical aid contributions after retirement is no longer part of the conditions of employment for new employees. A number of pensioners remain entitled to this benefit, the cost of which has been fully provided and disclosed above. Cement and Concrete Institute employees The provision relates to post-employment healthcare benefits in respect of former employees of the Cement and Concrete Institute and amounted to R9 million (: R8 million). This liability is revalued every three years and was last actuarially valued during February. The liability has been determined using the projected unit credit method. Corner House Pension Fund and Lime Acres continuation members The provision relates to post-employment healthcare benefits in respect of certain Corner House Pension Fund and Lime Acres continuation members and amounted to R19 million (: R18 million). This liability is revalued every three years and was last actuarially valued during June The liability has been determined using the projected unit credit method. Porthold Post-retirement Medical Fund The provision relates to healthcare benefits for both active and retired employees who joined the medical aid scheme on or after 1 October 2001 and amounted to R7 million (: R6 million). This liability is revalued every three years and was last actuarially valued during June The liability has been determined using the projected unit credit method. Benefits under these schemes were granted to employees under historical employment contracts and the schemes are closed to new members. PPC Ltd Annual financial statements 47

50 Notes to the group financial statements continued for the year ended 30 September 13. OTHER NON-CURRENT LIABILITIES Cash-settled share-based payment liability Derivative financial instruments^ 2 Loan to CIMERWA from non-controlling shareholder 23 Put option liabilities* Less: Short-term portion of other non-current liabilities (121) (22) ^ The derivative financial instruments relate to the long-term portion fair value of the interest rate swap agreements entered into in order to fix the future interest payments on the preference shares raised to finance the first BBBEE transaction. The derivative liability and interest on swaps is repayable in January 2015, relate to the A preference share amounting to Rnil (: R2 million), refer to note 15. * With the purchase of the 69,3% equity stake in Safika Cement (refer to note 28), PPC granted non-controlling shareholders individual put options, with varying exercise dates, for the sale of their remaining shares in the company to PPC. One of the put options is anticipated to be exercised next year and R105 million has therefore been classified as a current liability. The put option price is based on the company s forecasted EBITDA applying an earnings multiple dependent on the level of EBITDA achieved. The balance of the put options is anticipated to be exercised after the fifth anniversary of the transaction. The present value of the put options were calculated at R145 million and time value of money adjustments of R16 million have been recognised since initial recording of the liability. Forecasted EBITDA is based on financial forecasts approved by management, with pricing and margins similar to those currently being achieved by the business. Selling prices and costs are forecast to increase at local inflation projections and extrapolated using local GDP growth rates. Subsequent to the initial recognition of the liability of R137 million, the value of the put options have been remeasured resulting in the initial liability being reduced by R8 million, mainly due to the lower macro-economic growth projections for the local economy, and recorded under fair value adjustments on financial instruments. Further details of the cash-settled share-based payment liability are disclosed in note PPC Ltd Annual financial statements

51 14. SHORT-TERM BORROWINGS Short-term loans and bank overdrafts Short-term portion of long-term borrowings (refer to note 11) Details of maturity analysis and interest rates are disclosed in note 37 on financial risk management TRADE AND OTHER PAYABLES AND SHORT-TERM PROVISIONS Cash-settled share-based payment liability Derivative financial instruments^ Equity contribution for future non-controlling interest in wholly owned subsidiary $ 115 Other financial payables Put option 105 Retentions held for plant and equipment* Trade payables and accruals Trade and other financial payables Payroll accruals Restructuring costs 6 64 Taxation payable VAT payable Other non-financial payables ^ Included in derivative financial instruments is the net financial liability payable on the interest rate swaps, and has been netted off in accordance with IAS 32 Financial Instruments: Presentation. The financial asset amounts to Rnil (: R325 million), and the financial liability amounts to R1 million (: R429 million). Interest rate swap liabilities of R113 million were settled in December. $ Includes the value of land and mining rights transferred by future non-controlling shareholders for equity in the DRC companies. Certain conditions still need to be met before the shares in PPC Barnet DRC Holdings, the holding company for the DRC group of companies, are issued to the non-controlling shareholders. Post the issuance of these shares and the IFC shares, discussed in note 40, PPC will hold 69% of the shares in PPC Barnet DRC Holdings. A corresponding amount has been recorded in property, plant and equipment (PPE). The company is currently determining the appropriate split between PPE and other intangibles, and any transfers between categories will be recorded in Short-term portion of the put option liabilities (refer to note 13). * Retentions held on the construction of the cement plant in Rwanda. These retentions will be paid over to the contractors once the plant achieves guaranteed performance targets. Trade and other payables are payable within a 30 to 60-day period. Trade payables have increased following the consolidation of Safika Cement and Pronto during the year. Refer to note 28. The restructuring costs were paid during the first quarter of the financial year. PPC Ltd Annual financial statements 49

52 Notes to the group financial statements continued for the year ended 30 September 16. OPERATING PROFIT Operating profit includes: Amortisation of intangible assets (refer to note 3) Auditors remuneration Fees Other 4 3 Consultation fees incurred on empowerment transactions 4 Dividends paid to BBBEE trusts treated as an expense on consolidation 7 14 Depreciation (refer to note 1) Cost of sales Operating costs Distribution costs included in cost of sales Exploration and research costs 1 10 Operating lease charges land and buildings Profit on disposal of property, plant and equipment 11 Staff costs South Africa Rest of Africa Comprising: Cash-settled share incentive scheme charge (refer to note 35) (5) (3) Equity-settled share incentive scheme charge Directors remuneration^ Employees remuneration Restructuring costs Retirement benefit contributions (refer to note 34) Less: Costs capitalised to plant and equipment and intangibles (1) ^ For further details please refer to the abridged remuneration report on pages 98 to PPC Ltd Annual financial statements

53 17. FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS Gain on derivatives designated as economic hedging instruments 1 Gain on ineffective portion of cash flow hedge 2 1 Gain on unlisted collective investments (refer to note 5) 5 5 Gain on remeasurement of put option liabilities (refer to note 13) 8 Gain on translation of foreign currency denominated monetary items FINANCE COSTS Bank and other short-term borrowings Bonds Long-term loans BBBEE funding transaction Dividends on redeemable preference shares Long-term borrowings Finance lease interest 1 Time value of money adjustments on rehabilitation and decommissioning provisions and put option liabilities Total finance costs Capitalised to plant and equipment and intangibles (36) (4) South Africa Rest of Africa 24 6 The total finance costs excluding time value of money adjustments, relate to borrowings held at amortised cost. For details of borrowings refer to notes 11 and INVESTMENT INCOME Dividends Unlisted investments 18 4 Interest received* Cash and cash equivalents Overpayment of taxation 11 Non-current assets * The total interest received relates to assets held at amortised cost. For further details refer to note Impairments and other exceptional adjustments Profit on disposal of properties 11 Gain on remeasurement of equity stake in Pronto (refer note 28) 1 Impairment of goodwill (refer to note 2) (65) (6) Impairment of property, plant and equipment (refer to note 1) (46) (6) Profit on disposal of equity accounted investment 1 Impairment of loans advanced to equity accounted investees (refer to note 4) (1) Gross impairments and other exceptional adjustments (110) (1) Current taxation (2) Deferred taxation 12 Net impairments and other exceptional adjustments (98) (3) PPC Ltd Annual financial statements 51

54 Notes to the group financial statements continued for the year ended 30 September 21. TAXATION Normal taxation Current year Prior year (70) Deferred taxation Current year 66 Other taxation Capital gains taxation 2 Securities transfer taxation 1 Withholding taxation Taxation attributable to the company and its subsidiaries % % Reconciliation of taxation rate Total taxation as a percentage of profit before taxation (excluding earnings from equity accounted investments) 30,1 35,8 Prior year taxation impact^ 5,9 (0,5) Taxation as a percentage of profit before taxation, excluding prior year taxation adjustments 36,0 35,3 Adjustment due to the inclusion of dividend income 0,4 0,1 Effective rate of taxation 36,4 35,4 Reduction in rate of taxation 3,3 2,6 Permanent differences 2,4 1,5 Foreign taxation rate differential 0,9 1,1 Increase in rate of taxation (11,6) (10,0) Capital gains taxation (0,2) Disallowable charges, permanent differences and impairments (6,7) (1,7) Empowerment transactions and IFRS 2 charges not taxation deductible (0,8) (2,8) Finance costs on BBBEE funding transaction not taxation deductible (2,4) (2,6) Taxation on unprovided losses carried forward (1,7) Withholding taxation (1,7) (1,0) South African normal taxation rate ^ Represents a taxation refund relating to prior years of R70 million. 52 PPC Ltd Annual financial statements

55 Share Shares 22. EARNINGS AND HEADLINE EARNINGS PER SHARE 22.1 Number of shares and weighted average number of shares Number of shares Total shares in issue held by consolidated participants at the end of the year Shares issued in terms of second BBBEE transaction treated as treasury shares ( ) ( ) Shares held by consolidated BBBEE trusts and trust funding SPVs treated as treasury shares^ ( ) ( ) Shares held by consolidated Porthold Trust Pvt Limited treated as treasury ( ) ( ) Shares purchased in terms of the FSP incentive scheme treated as treasury ( ) ( ) Vesting of shares held by certain BBBEE1 entities ( ) FSP share incentive scheme weighted average number of shares Weighted average number of shares used for basic earnings per share calculation Dilutive adjustment for shares held in terms of the FSP incentive scheme Dilutive adjustment for potential ordinary shares in terms of first BBBEE transaction FSP incentive scheme weighted average number of shares ( ) Vesting of shares held by certain BBBEE1 entities Weighted average number of shares issued in terms of the second BBBEE transaction Weighted average number of shares used for dilutive earnings per share calculation Weighted average number of shares Used for earnings and headline earnings per share Used for dilutive earnings and headline earnings per share Used for cash earnings per share Shares are weighted for the period in which they are entitled to participate in the net profit of the group Basic earnings Net profit Attributable to: Shareholders of PPC Ltd Non-controlling interests Normalisation adjustments $ Normalised net profit Attributable to: Shareholders of PPC Ltd Non-controlling interests ^ For additional information refer to notes 9 and For additional information refer to note 9. PPC Ltd Annual financial statements 53

56 Notes to the group financial statements continued for the year ended 30 September Cents Cents 22. EARNINGS AND HEADLINE EARNINGS PER SHARE continued 22.3 Earnings per share Basic Diluted Basic (normalised) $ Diluted (normalised) $ Headline earnings Headline earnings is calculated as follows: Net profit Adjusted for: Gain on remeasurement of equity accounted stake in Pronto (1) Impairment losses of property, plant and equipment 46 6 Taxation on impairment of property, plant and equipment (12) Impairment loss of goodwill 65 6 Impairment loss of financial assets 1 Profit on disposal of property, plant and equipment and intangibles (11) Taxation on profit on disposal of property, plant and equipment and intangible assets 2 Headline earnings Attributable to: Shareholders of PPC Ltd Non-controlling interests Normalisation adjustments $ (19) 188 Normalised headline earnings $ Attributable to: Shareholders of PPC Ltd Non-controlling interests Cents Cents 22.5 Headline earnings per share Basic Diluted Basic (normalised) Diluted (normalised) Cash earnings per share Calculated on cash available from operations () $ Normalised earnings adjusts the reported earnings for the effects of BBBEE IFRS 2 charges, Zimbabwe indigenisation costs, restructuring costs, impairments net of taxation and prior year taxation adjustments. The calculation of normalised earnings has been updated since published in SENS on 18 November. 54 PPC Ltd Annual financial statements

57 23. DIVIDENDS Final number cents per share (: 108 cents) Interim number cents per share (: 38 cents) On 17 November, the board approved a final dividend of 76 cents per share, payable to ordinary shareholders in respect of the year ended 30 September and will be paid out of profits as determined by the directors. The local dividends tax rate is 15% and no STC credits have been utilised in this declaration. The dividends tax to be withheld by the company amounts to 11,4 cents per share, giving a net dividend payable to shareholders of 64,6 cents per share where no exemption is applicable. The important dates pertaining to this dividend for shareholder trading on the JSE Limited are as follows: Declaration date Monday, 17 November Last day to trade cum dividend Friday, 2 January 2015 Shares trade ex dividend Monday, 5 January 2015 Record date Friday, 9 January 2015 Payment date Monday, 12 January 2015 Share certificates may not be dematerialised or rematerialised between Monday, 5 January 2015 and Friday, 9 January 2015, both dates inclusive. Transfers between the South African and Zimbabwean registers may not take place between Monday, 5 January 2015 and Friday, 9 January 2015, both dates inclusive. The important dates pertaining to this dividend for shareholders trading on the Zimbabwe Stock Exchange are as follows: Shares trade ex dividend Monday, 5 January 2015 Record date Friday, 9 January 2015 Payment date, on or shortly after Monday, 12 January 2015 The register of members in Zimbabwe will be closed from Monday, 5 January 2015 to Friday, 9 January 2015, both days inclusive, for the purpose of determining those shareholders to whom the dividend will be paid. The dividend payable to shareholders registered in Zimbabwe will be paid in South African rand. Cents Cents Dividends per share (cents) Interim number 221 declared 19 May Final number 222 declared 17 November Attributable interest in subsidiaries Attributable interest in the aggregate amount of profits and losses of subsidiaries, after taxation and non-controlling interest: Profits Losses (168) (71) PPC Ltd Annual financial statements 55

58 Notes to the group financial statements continued for the year ended 30 September 25. FINANCE COSTS PAID Finance costs as per income statement charge Interest capitalised on bonds 6 Time value of money adjustments (42) (21) Interest capitalised to plant and equipment 36 4 Fair value adjustments 15 BBBEE funding transaction (94) (118) Redeemable preference shares dividends capitalised (32) (42) Interest capitalised on long-term borrowings (62) (76) TAXATION PAID Net amounts (receivable)/payable at the beginning of the year (42) 42 Charge per income statement (excluding deferred taxation) Transfer from deferred taxation to normal taxation (refer to note 10) 240 Impact of foreign rate differences and other non-cash flow movements 42 Net amounts (outstanding)/receivable at the end of the year (97) 42 Taxation receivable Taxation payable (125) (1) DIVIDENDS PAID Dividends declared to PPC and BBBEE shareholders Dividends declared by subsidiary to non-controlling interests ACQUISITIONS OF SUBSIDIARY COMPANIES Fair value of assets and liabilities acquired at date of acquisition Property, plant and equipment Goodwill Other intangible assets Financial assets 1 Cash and cash equivalents Other current assets Long-term borrowings (10) (108) Long-term provisions and deferred taxation (150) (75) Short-term borrowings (35) Current liabilities (146) (47) Other (6) Net fair value of assets and liabilities acquired Non-controlling interests (140) (512) Less: Fair value of previously held equity accounted stake (215) Total consideration Consideration payable for new equity in CIMERWA (493) Consideration payable to external entities Goodwill represents growth and synergies expected to accrue from the acquisitions, including security of supply channels to the market. 56 PPC Ltd Annual financial statements

59 28. ACQUISITIONS OF SUBSIDIARY COMPANIES continued Pronto Holdings Pty Limited (Pronto) During July, PPC acquired the remaining 50% equity stake in Pronto for R280 million, making it a wholly owned subsidiary. Pronto is a prominent Gauteng-based readymix and fly ash supplier, with nine readymix batching plants. This acquisition provides PPC additional ways to increase its cement distribution channel while also expanding its range of complementary products available to the building and construction industry. In accordance with the requirements of IFRS on step-acquisitions, the previously held equity accounted investment was revalued resulting in an adjustment gain of R1 million. The fair values presented are provisional and are subject to further review for 12 months post acquisition date. No material changes are anticipated. Pronto was consolidated from 1 July and favourably impacted group revenue by R136 million, after eliminations, and reported EBITDA of R29 million. The impact on both earnings and headline earnings per share was 3 cents per share. Transaction costs of R1 million had been incurred during the year and are recorded under administration and other operating expenditure. Safika Cement Holdings Pty Limited (Safika Cement) During December, all conditions to the transaction were fulfilled and PPC acquired a 69,3% equity stake in Safika Cement for R377 million. This transaction further enhances PPC s South African footprint through Safika Cement s five blending facilities and one milling operation that produce blended cement under three brands: IDM Best Build, Castle and the Spar Build-It house brand. The purchase price allocation has been finalised and there are no material differences from the values reported in the interim results. Safika Cement favourably impacted group revenue by R353 million, after eliminations, and recorded EBITDA of R83 million. The impact on both earnings and headline earnings per share was 7 cents per share. At the acquisition date, PPC granted put options to non-controlling shareholders. For details on the put options, refer to note 13. Transaction costs of R3 million had been incurred during the year and are recorded under administration and other operating expenditure. CIMERWA Limited (CIMERWA) In February, PPC acquired a 51% equity stake in CIMERWA, a Rwandan cement company, for a transaction value of US$69 million (R629 million) with US$15 million (R136 million) being paid to previous shareholders of the company, while a further US$54 million was used to subscribe for shares in CIMERWA of which US$31 million was paid during the financial year and the balance settled during this reporting year. As the company is consolidated, the equity subscription is payable to CIMERWA and therefore only the US$15 million payable external to the PPC group was reflected as a cash flow outside the consolidated PPC group. The fair values of assets acquired and liabilities have now been finalised, with no material changes to the amounts previously disclosed. CIMERWA favourably impacted revenue by R234 million (: R118 million) and reported an EBITDA loss of R1 million (: profit of R7 million). The impact on earnings and headline earnings per share was a reduction of 21 cents per share (: nil) and 5 cents per share (: nil) respectively. For comparability purposes, it should be noted that CIMERWA was only consolidated for eight months in. Quarries of Botswana In October 2011, all conditions precedent with regards to the transaction to acquire three aggregate quarries and related assets in Botswana were met. The transaction value amounted to R52 million and was funded over a two-year period. The final payment of R5 million (: R4 million) was paid in this reporting period. 29. ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT Advance payments to contractors (refer to note 5) 322 Freehold and leasehold land, buildings and mineral rights (refer to note 1) Mining and mineral rights transferred by future non-controlling shareholders (refer to note 15) (115) Plant, vehicles, furniture and equipment (refer to note 1) Retentions paid to contractors (refer to note 15) MOVEMENT IN INVESTMENTS AND LOANS Net movement 201 (10) Acquisitions of equity accounted investments 3 Advance payments (refer to note 5) (322) Other non-cash flow movements (12) Revaluation of available-for-sale financial assets directly in equity (refer to note 5) (58) 12 Share of equity accounted investments profits (24) Transferred to subsidiaries (refer to note 4) PPC Ltd Annual financial statements 57

60 Notes to the group financial statements continued for the year ended 30 September 31. COMMITMENTS Capital commitments: Contracted Approved South Africa Rest of Africa Capital commitments are anticipated to be incurred: Within one year Between one and two years Beyond two years Commitments for capital expenditure are stated in current values which, together with expected price escalations, will be financed from surplus cash generated and borrowing facilities available to the group. The increase in contracted commitments includes the DRC cement plant and Zimbabwe cement mill expansion project. Project funding of US$168 million and US$75 million for the DRC and Zimbabwe projects respectively has been secured and thereafter Total Total Operating lease commitments Land and buildings Other In, the company signed a 10-year lease for its head office and this lease comprises the majority of the operating lease commitments at year end. 58 PPC Ltd Annual financial statements

61 32. REST OF AFRICA EXPANSION The company continues to investigate business opportunities in both South Africa and the rest of Africa in line with its expansion strategy. The following transactions have been communicated to the market and are still subject to final approvals: Ethiopia During November, PPC advised of the conclusion of discussions to acquire the Industrial Development Corporation s 20% stake in Ethiopian-based Habesha Cement Share Company (Habesha) for a purchase consideration of US$13 million. Financial close is expected in December once all conditions have been satisfied. PPC initially acquired 27% shareholding in Habesha in July 2012, and has subsequently increased its shareholding to 31%. This acquisition increases PPC s stake in Habesha to 51% while the balance of the shareholding in Habesha is held by over local shareholders. Habesha has begun the construction of a 1,4 million tonne per annum facility 35km north-west from the bustling city of Addis Ababa. Project costs for this factory are approximately US$135 million and commissioning of the plant is anticipated in Algeria The company signed the memorandum of understanding, valid for 12 months, with Hodna Cement Company in June, for the construction of a new cement plant in Algeria. The project is estimated to cost approximately US$350 million. It is expected that PPC will have 49% shareholding in the project. The feasibility of the project is still under way and will be presented to the board for approval once results are positive. 33. CONTINGENT LIABILITIES Litigation, current or pending, is not considered likely to have a material adverse effect on the group. 34. RETIREMENT BENEFIT AND POST-RETIREMENT INFORMATION It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end, the group s permanent employees are usually required to be members of a pension and/or a provident fund, depending on local requirements. South African-based employees, except for Safrika Cement and Pronto, belong to the PPC retirement fund, which consists of the Pretoria Portland Cement Defined Contribution Pension and Provident Funds. Safika Cement employees belong to the Liberty Provident Fund. Botswana-based employees belong to the Barloworld Botswana Retirement Fund. Rwanda-based employees belong to the Rwanda Social Board. Zimbabwe-based employees belong to the National Social Security Authority Scheme and UNICEM Pension Fund. Defined contribution plans The total cost charged to the income statement of R94 million (: R84 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes. At 30 September, all contributions due in respect of the current reporting period had been paid over to the schemes. PPC Ltd Annual financial statements 59

62 Notes to the group financial statements continued for the year ended 30 September 35. SHARE-BASED PAYMENTS 35.1 Cash settled Executive directors and certain senior employees have been granted cash-settled share appreciation rights in terms of PPC s Long-Term Incentive Plan. The scheme was implemented during 2007, in recognition of services rendered, to encourage long-term shareholder value creation, and as an incentive for current and prospective employees to benefit from growth in the value of PPC in the medium and long term. All grants are approved by the remuneration committee. Share appreciation rights granted Total Date of grant 30/09/ Grant price (based on five-day volume weighted average price or zero) (rand) Number of rights granted Directors (with performance conditions) Executives (with performance conditions) Senior management Movement during the year ( ) Vested directors ( ) Forfeited directors ( ) Forfeited executives ( ) Forfeited senior management ( ) Movement in prior years ( ) 2007 to 2012 ( ) ( ) Unexercised at 30 September * Directors (with performance conditions) Senior management Vesting in thirds after the third, fourth and fifth anniversary of the grant date Automatically exercised on the third anniversary of the grant date Yes Expiry date (lapse if not exercised) 30/09/2016 Share appreciation rights were valued using binomial option pricing, taking into account the following inputs: Market price of PPC shares at the end of the year (rand) 29,56 Expected volatility of stock over remaining life of the option (%) Risk-free rate (%) * Executives hold no unexercised rights. Expected volatility is based on the historical share price over the past year. Vesting of the zero grant price rights granted to directors is subject to individual performance conditions related to the directors areas of responsibility. 60 PPC Ltd Annual financial statements

63 /09/ /08/ /09/ /09/ /11/ /09/ ,35 31,80 43, ( ) ( ) (24 300) (9 000) (98 000) ( ) (16 875) ( ) (7 425) ( ) (26 000) (9 000) (98 000) (14 968) ( ) ( ) ( ) ( ) (14 968) ( ) ( ) ( ) ( ) ( ) (66 900) ( ) (5 000) Yes Yes Yes Yes Yes Yes 28/09/ /08/ 25/09/ /09/ 17/09/ /08/ ,56 29,56 29,56 29,56 23,92 23,81 24,11 7,38 7,27 6,97 PPC Ltd Annual financial statements 61

64 Notes to the group financial statements continued for the year ended 30 September 35. SHARE-BASED PAYMENTS continued 35.1 Cash settled continued Reversal of previous charges recognised in the current year (refer to note 16) (5) (3) The carrying amount of the liability relating to cash-settled share appreciation rights as at 30 September (refer to note 15) Forfeitable share plan The Forfeitable Share Plan (FSP), a long-term incentive, was introduced in 2011 and extended in 2012 to executive directors and prescribed officers, following shareholder approval. Its purpose is to provide both an incentive to deliver the group s strategy over the long term and to be a retention mechanism. Participants will receive forfeitable shares for no consideration and will participate in dividends and shareholder rights from the date of grant, but may only dispose of the shares after the vesting date. Vesting of the retention awards is subject to employment for a period of three years, and vesting of the performance awards is additionally subject to satisfaction of certain performance conditions, failing which the employee will forfeit the shares and they may be sold by PPC and the net proceeds retained by the group. The performance conditions relate to growth in headline earnings per share measured over a three year period. Shares are purchased directly by PPC on the JSE Limited over a number of days following the grant date. The shares are held by an agent on behalf of the participants until the vesting date. In terms of IFRS 2, the fair value of each share awarded, which will be expensed over the vesting period in return for services rendered, is based on the average market price of acquiring the share and is not re-measured subsequently. The service and performance conditions are taken into account in the number of instruments that are expected to vest. Subsequent revisions are made for changes in estimated attrition and probability of satisfaction of performance conditions. Date of grant Total retention awards Total performance awards Retention awards 18/02/ 15/03/ 16/02/2012 Performance awards Retention awards Performance awards Retention awards Performance awards Number of shares granted to directors Number of shares granted to management and prescribed officers Average purchase price of shares acquired (R) 29,17 29,17 32,58 32,58 31,19 31,19 Estimated fair value per share at grant date (R) 29,17 29,17 32,58 32,58 31,19 31,19 62 PPC Ltd Annual financial statements

65 36. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES Refer to the accounting policies on pages 12 to 22 for new and revised accounting standards and interpretation of those standards which have been adopted in the current year. The following amendments to published accounting standards are in issue but not yet effective. These revised standards and interpretations will be adopted by PPC in the future. Revised statements in issue not yet effective Effective date reporting period on or after Possible implication on PPC For adoption during the 2015 financial year Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27) amends IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements to: Provide investment entities (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement Require additional disclosure about why the entity is considered an investment entity, details of the entity s unconsolidated subsidiaries, and the nature of relationship and certain transactions between the investment entity and its subsidiaries Require an investment entity to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements (or to only provide separate financial statements if all subsidiaries are unconsolidated). IAS 32 (amendment) Offsetting Financial Assets and Financial Liabilities: Presentation amendment clarifies certain aspects because of diversity in application of the requirements on offsetting and focuses on four main areas: The meaning of currently has a legally enforceable right of set-off The application of simultaneous realisation and settlement The offsetting of collateral amounts The unit of account for applying the offsetting requirements. IAS 36 (amendment) Recoverable Amount Disclosures for Non-Financial Assets amendment reduces the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarifies the disclosures required, and introduces an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. IAS 39 (amendment) Novation of Derivatives and Continuation of Hedge Accounting amendment makes it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. A novation indicates an event where the original parties to a derivative agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each of the parties. In order to apply the amendments and continue hedge accounting, novation to a central counterparty must happen as a consequence of laws or regulations or the introduction of laws or regulations. IAS 19 (amendment) Defined Benefit Plans: Employee Contribution amendment clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered. 1 January No impact 1 January No impact 1 January Disclosure impact 1 January No impact 1 July No impact PPC Ltd Annual financial statements 63

66 Notes to the group financial statements continued for the year ended 30 September Revised statements in issue not yet effective continued Effective date reporting period on or after Possible implication on PPC 36. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES continued For adoption during the 2015 financial year continued IASB improvements to IFRS makes amendments to the following standards: IFRS 2 amends the definitions of vesting condition and market condition and adds definitions for performance condition and service condition IFRS 3 requires contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date IFRS 8 requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly IFRS 13 clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only) IAS 16 and IAS 38 clarifies that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount IAS 24 clarifies how payments to entities providing management services are to be disclosed IASB improvements to IFRS 2011 makes amendments to the following standards: IFRS 1 clarifies which versions of IFRS can be used on initial adoption (amends basis for conclusions only) IFRS 3 clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself IFRS 13 clarifies the scope of the portfolio exception in paragraph 52 IAS 40 clarifies the inter-relationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property IFRIC 21 Levies provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. The interpretation identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. It provides the following guidance on recognition of a liability to pay levies: The liability is recognised progressively if the obligating event occurs over a period of time If an obligation is triggered on reaching a minimum threshold, the liability is recognised when that minimum threshold is reached. 1 July No impact 1 July No impact 1 January No impact For adoption during the 2016 financial year IFRS 9 Financial Instruments: Classification and measurement 1 January 2015 Assessment still to be finalised For adoption during the 2017 financial year IFRS 14 Regulatory deferral accounts 1 January 2016 No impact IAS 16 and IAS 41 Agriculture: Bearer Plants 1 January 2016 No impact IFRS 11 Accounting for Acquisition of Interests in Joint Operations 1 January 2016 No impact IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its 1 January 2016 No impact Associate or Joint Venture IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 No impact 64 PPC Ltd Annual financial statements

67 37. FINANCIAL RISK MANAGEMENT The group s financial instruments consist mainly of borrowings from financial institutions, deposits with banks, local money market instruments, accounts receivable and payable, and leases. Forward exchange contracts and interest rate swaps are used by the group for hedging purposes. The group does not speculate in the trading of derivative instruments. Capital risk management The group manages its capital to ensure that entities in the group will continue as going concerns, while maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the group consists of debt, which includes the borrowings disclosed in note 11, cash and cash equivalents as disclosed in note 8, and equity attributable to PPC Ltd shareholders, comprising stated capital, reserves and retained profit. A committee including PPC s senior financial executives review the capital structure on a quarterly basis. As part of this review, the cost of capital and the risks associated with each class of capital are considered. Based on recommendations of the committee, PPC balances its overall capital structure through issues of equity instruments, dividend cover reviews, and the issue of new debt or redemption of existing debt. Treasury risk management Senior financial executives meet on a regular basis to analyse currency and interest rate exposures and to re-evaluate treasury management strategies against latest economic forecasts. The group s treasury operation provides South African entities with access to local money markets and provides local subsidiaries with the benefit of bulk financing and depositing. Foreign currency management Trade and capital commitments The group is exposed to exchange rate fluctuations as it undertakes transactions denominated in foreign currencies in the normal course of business. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts. Where possible, entities in the group cover forward all material foreign currency commitments unless there is a natural hedge. Forward exchange contracts are carried at fair value with the resultant profit or loss included in income. The only exception relates to the effective portion of cash flow hedges, where profits or losses are recognised as other comprehensive income and are either included in the initial acquisition cost of the hedged assets, or are transferred to profit and loss when the hedged transaction affects the income statement where appropriate. Fair value gain of the forward exchange contracts at reporting date is R467 million. PPC Ltd Annual financial statements 65

68 Notes to the group financial statements continued for the year ended 30 September 37. FINANCIAL RISK MANAGEMENT continued Foreign currency management continued Trade and capital commitments continued The amounts below represent forward exchange contract commitments to purchase foreign currencies: <1 year 1 to 3 years Total Total forward exchange contracts comprise the following: Euro ( m) 1 2 Average rate R/ 15,72 13,37 US dollar (US$m) 39 2 Average rate (R/US$) 11,92 10,12 The average rates shown above include the cost of forward cover. PPC is exposed to translation risk as its foreign subsidiaries report in different currencies to that of the holding company. This is managed primarily through borrowings denominated in the relevant foreign currencies to the extent that such funding is available on reasonable terms in the local capital markets. Interest rate management The group is exposed to interest rate risk arising from fluctuations in financing costs on loans which are at variable interest rates. As part of the process of maintaining a balance between the group s fixed and variable rate borrowings, the interest rate characteristics of new borrowings and refinancing of existing borrowings are structured according to expected movements in interest rates. The profile of total borrowings is as follows: Description Years of repayment Secured BBBEE funding transaction (refer to note 11) Long-term loans denominated in foreign currencies (refer to note 11) Unsecured Long-term loan (refer to note 11) Short-term loans and bank overdrafts (refer to note 14) Corporate bonds (refer to note 11) Other non-current liabilities (refer to note 11) The group has entered into interest rate swap agreements for which variable rates have been swapped for fixed rates ranging from 9,24% to 9,37%. Unsecured short-term loans bear interest at rates varying between 6,40% and 11,36% per annum for the year under review. 66 PPC Ltd Annual financial statements

69 37. FINANCIAL RISK MANAGEMENT continued Hedge accounting applied in respect of interest rate risk As at September, the following designated cash flow hedge interest rate swap contracts were held in respect of the consolidated debt of the BEE trusts and trust funding SPVs: Fair value of liability Related underlying liability Currency Notional amount Fixed interest rate (nacs) % Maturity date A preference shares (rate linked to prime) ZAR 169 9,24 9, B preference shares (rate linked to prime) ZAR 253 9,17 33 Long-term loans (rate linked to JIBAR) ZAR ,36 79 Total Movements on cash flow hedges amounting to R7 million (: R36 million) were recognised in other comprehensive income during the year. Sensitivity analysis Interest rate risk At 30 September, if all floating interest rates on interest-bearing loan receivables, short-term cash investments, short-term loans payable, bank overdrafts and long-term loans at that date had been 100 basis points higher, with all other variables held constant, attributable earnings would have been R27 million (earnings per share: 5 cents) lower. Conversely, at 30 September, if all floating interest rates at that date had been 100 basis points lower, with all other variables held constant, the attributable earnings would have been R27 million (earnings per share: 5 cents) higher. Equity price risk cash-settled share appreciation rights At 30 September, if the PPC share price had been R5 higher, with all other variables held constant, attributable earnings would have been R7 million (earnings per share: 1 cents) lower. Conversely, at 30 September, if the PPC share price had been R5 lower, with all other variables held constant, attributable earnings would have been R5 million (earnings per share: 1 cents) higher. PPC Ltd Annual financial statements 67

70 Notes to the group financial statements continued for the year ended 30 September 37. FINANCIAL RISK MANAGEMENT continued Fair values of financial assets and liabilities The carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values. The estimated fair value of financial instruments is determined, at discrete points in time, by reference to the quoted bid price or asking price (as appropriate) in an active market wherever possible. These estimates involve uncertainties and cannot be determined with precision. Where no such active market exists for the particular asset or liability, the company uses a valuation technique to arrive at the fair value, including the use of prices obtained in recent arm s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. Cement Notes Carrying amount Fair value Financial assets Available for sale Unlisted investments at fair value Loans and receivables Loans advanced Loans to equity accounted companies Trade and other financial receivables Cash and cash equivalents At fair value through profit and loss Unlisted collective investment (held for trading) Financial liabilities At amortised cost Long-term borrowings Short-term borrowings Trade and other financial payables At fair value through profit and loss Derivative instruments current (held for trading) Put option liabilities Derivatives Derivative instruments non-current (cash flow hedge) 15 Financial assets Available for sale Unlisted investments at fair value Loans and receivables Loans advanced Loans to equity accounted companies Trade and other financial receivables Cash and cash equivalents At fair value through profit or loss Unlisted collective investment (held for trading) Financial liabilities At amortised cost Long-term borrowings Short-term borrowings Trade and other financial payables At fair value through profit or loss Derivative instruments current (held for trading) Derivatives Derivative instruments non-current (cash flow hedge) 13 Derivative instruments current (cash flow hedge) PPC Ltd Annual financial statements

71 Lime Aggregates and readymix Other Total Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value PPC Ltd Annual financial statements 69

72 Notes to the group financial statements continued for the year ended 30 September 37. FINANCIAL RISK MANAGEMENT continued Credit risk management The potential exposure to credit risk is represented by the carrying amounts of trade receivables, short-term cash investments and derivative assets in the statement of financial position. Trade receivables comprise a large, widespread customer base and credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk, the granting of credit is controlled by application and account limits, and the group only deals with creditworthy customers supported by appropriate collateral. The group credit committee, chaired by the group CFO, meets on a quarterly basis to monitor trade receivables and approve granting of account limits. The group annually re-evaluates counterparty limits and the financial reliability of its customers. Provision is made for specific doubtful debts where appropriate, and as at 30 September, management did not consider there to be any material credit risk exposure that was not already covered by security or a doubtful debt provision. The group only deposits short-term cash with financial institutions of high-quality credit standing. The following table highlights the split of maximum credit exposure: Cement Lime Aggregates and readymix Other Total Maximum credit risk exposure Liquidity risk management Liquidity risk is the risk of the group being unable to meet its payment obligations when they fall due. The group manages liquidity risk centrally by maintaining an appropriate balance between long-term and short-term debt, ensuring borrowing facilities are adequate to meet its liquidity requirements at all times, and by monitoring forecast and actual cash flows. The company had borrowing facilities of R2 568 million and had utilised 8% of these facilities at 30 September. At year end, R2 367 million of borrowing facilities remain unutilised. These numbers exclude facilities in respect of debt consolidated as a result of BBBEE funding-related guarantees and project finance in Rwanda, the DRC and Zimbabwe. The company has a R6 billion domestic medium-term note programme of which R2,4 billion has been issued. The following table details the group s remaining contractual maturity for its financial liabilities. The table has been prepared based on undiscounted cash flows at the earliest date on which the group can be required to pay. The amounts include both interest accrued and capital. Nominal value of liability <1 year 2 to 3 years >3 years Total Long-term borrowings Short-term borrowings Trade and other payables Long-term borrowings Short-term borrowings Trade and other payables The company s borrowing powers are not restricted by its memorandum of incorporation. Refer to note 11 for borrowings details 70 PPC Ltd Annual financial statements

73 37. FINANCIAL RISK MANAGEMENT continued Methods and assumptions used by the group in determining fair values The estimated fair value of financial instruments is determined, at discrete points in time, by reference to the mid price in an active market wherever possible. Where no such active market exists for the particular asset or liability, the group uses valuation techniques to arrive at fair value, including the use of prices obtained in recent arm s length transactions, discounted cash flow analysis, dividend yield and other valuation techniques commonly used by market participants. (Refer to the fair value hierarchy.) The fair value of unlisted investments has been calculated using the dividend yield methodology. Further details are disclosed in note 5. Put option liabilities has been calculated using EBITDA forecasts prepared by management and discounting to present value. Further details are disclosed in note 13. The fair values of cash and cash equivalents, trade and other receivables and trade and other payables approximate the respective carrying amounts of these financial instruments because of the short period to maturity. The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined with reference to valuations performed by third-party financial institutions at reporting date, using an actuarial binomial pricing model. The inputs into the model are shown in note 35. Fair value hierarchy disclosures Valuation with reference to prices quoted in an active market Level 1 Valuation based on observable inputs Level 2 Valuation based on unobservable input Level 3 Total fair value Financial assets Available for sale Unlisted investments at fair value Loans and receivables Loans advanced 3 3 Loans to equity accounted companies Trade and other financial receivables Cash and cash equivalents At fair value through profit and loss Unlisted collective investments at fair value (held for trading) Total financial assets Financial liabilities At amortised cost Long-term borrowings^ Short-term borrowings Trade and other financial payables At fair value through profit and loss Derivative instruments current (held for trading) Put option liabilities Derivatives Derivative instruments non-current (cash flow hedge) 1 1 Total financial liabilities ^The fair value of the bonds, included in long-term borrowings, is considered a level 1. PPC Ltd Annual financial statements 71

74 Notes to the group financial statements continued for the year ended 30 September Valuation with reference to prices quoted in an active market Level 1 Valuation based on observable inputs Level 2 Valuation based on unobservable input Level 3 Total fair value 37. FINANCIAL RISK MANAGEMENT continued Financial assets Available for sale Unlisted investments at fair value Loans and receivables Loans advanced 4 4 Loans to equity accounted companies Trade and other financial receivables Cash and cash equivalents At fair value through profit and loss Unlisted collective investments at fair value (held for trading) Total financial assets Financial liabilities At amortised cost Long-term borrowings Short-term borrowings Trade and other financial payables At fair value through profit or loss Cash-settled share-based payment liability Derivatives Derivative instruments non-current (cash flow hedge) 2 2 Derivative instruments current (cash flow hedge) Total financial liabilities Level 1 financial assets and liabilities that are valued accordingly to unadjusted market prices for similar assets and liabilities. Market prices in this instance are readily available and the price represents regularly occurring transactions which have been concluded on an arm s length transaction. Level 2 financial assets and liabilities are valued using observable inputs, other than the market prices noted in the level 1 methodology, and make reference to pricing of similar assets and liabilities in an active market or by utilising observable prices and market-related data. Level 3 financial assets and liabilities that are valued using unobservable data, and requires management judgement in determining the fair value. 72 PPC Ltd Annual financial statements

75 Parent company of reporting entity Subsidiary of reporting entity 38. RELATED-PARTY TRANSACTIONS Interest received Afripack Limited 3 Goods and services purchased/(sold) Afripack Limited 131 Pronto Holdings Pty Limited (until 30 June ) (151) Amounts due (to)/from as at the end of the year Afripack Limited (13) 43 Metlakgola Construction & Development (Pty) Limited 1 Rhulanani Concrete Mixers (Pty) Limited 2 Interest received Afripack Limited (2) Goods and services purchased/(sold) Afripack Limited 61 Pronto Holdings Pty Limited 4 Pronto Holdings Pty Limited (172) Amounts due (to)/from as at the end of the year Afripack Limited (5) 42 Metlakgola Construction & Development (Pty) Limited 1 Olegra Oil (Pty) Limited 1 Pronto Holdings Pty Limited 25 Rhulanani Concrete Mixers (Pty) Limited 2 Group companies, in the ordinary course of business, entered into purchase transactions with joint ventures, associates and subsidiaries. The terms and conditions of these transactions are determined on an arm s length basis. In addition to the above related-party transactions, dividends of R65 million (: R59 million) were paid to the PPC SBP Consortium Funding SPV (Pty) Limited. This company owns shares in PPC, including shares issued in terms of the BBBEE second transaction which participate in only 20% of the dividend declared. SK Mhlarhi and MP Malungani are common directors of both PPC and the PPC SBP Consortium Funding SPV (Pty) Limited. 39. ADDITIONAL DISCLOSURE Directors, prescribed officers and key management The executive directors and prescribed officers of PPC are regarded as key management personnel. Details regarding directors and prescribed officers remuneration and interest are disclosed in the remuneration report. Shareholders The principal shareholders of the company are disclosed on page EVENTS AFTER REPORTING DATE In November, the International Finance Corporation (IFC) signed a subscription agreement to acquire a 10% stake in PPC Barnet DRC Holdings, completing the DRC shareholders requirements and commitment from IFC. Post the issuance of these shares, PPC will hold 69%, Barnet 21% and IFC 10% of the shares in PPC Barnet DRC Holdings. Other than the Habesha transaction and IFC subscription into PPC Barnet DRC Holdings noted above, there are no other events that occurred after the reporting date that may have a material impact on the group s reported financial position at 30 September. 41. CURRENCY CONVERSION GUIDE Approximate value of foreign currencies relative to the rand at 30 September: Botswana pula 1,22 1,15 Euro 14,28 13,60 US dollar 11,31 10,05 Rwandan franc 0,02 0,02 Mozambican metical 0,37 0,34 PPC Ltd Annual financial statements 73

76 Annexure 1 Subsidiaries and non-controlling interest at 30 September The consolidated annual financial statements for the year ended 30 September include the results and statements of financial position of the company and all of its subsidiaries. The group consists of subsidiaries, either directly or indirectly held by the company, and holds the majority of voting rights in all subsidiaries except for the respective BBBEE entities consolidated in terms of IFRS 10 where voting rights are aligned to the proportionate ownership. Non controlling shareholders have significant interests in two of the group s subsidiaries, namely CIMERWA Limited (CIMERWA) and Safika Cement Holdings Pty Limited (Safika Cement). The key trading subsidiaries, their activities and respective holding companies are: Name of subsidiary Portland Holdings Limited^ PPC Botswana (Pty) Limited PPC International Holdings Pty Limited PPC Lime Limited Pretoria Portland Cement International Holdings Pronto Holdings Pty Limited Safika Cement Holdings Pty Limited PPC Aggregate Quarries (Pty) Limited PPC Aggregate Quarries Botswana (Pty) Limited Kgale Quarries (Pty) Limited CIMERWA Limited PPC Barnet DRC Holdings* Principal activity Manufacturer and supplier of both bag and bulk cement for use within Zimbabwe and surrounding countries Manufacturer, wholesaler and distributor of cementitious products, both bag and bulk, within Botswana Holding company for PPC s rest of Africa investments Manufacturer and supplier of highly reactive lump lime, burnt lime and burnt dolomite for use in South Africa and surrounding countries Holding company for PPC s investments in Mozambique and PPC Aggregate Quarries of Botswana Manufacturer and supplier of readymix concrete, fly ash and dry mortar mix in Gauteng Manufacturer and supplier of blended cement within South Africa Manufacturer and supplier of stone, sand, road layer material and special aggregaterelated products in Gauteng Manufacturer and supplier of stone, sand, road layer material and special aggregaterelated products in Gaborone and Francistown Manufacturer and supplier of stone, sand, road layer material and special aggregaterelated products in Gaborone Manufacturer and supplier of both bag and bulk cement for use within Rwanda and surrounding countries Holding company for PPC s expansion into the DRC cement market PPC Barnet DRC Trading SA PPC Barnet DRC Manufacturing SA PPC Barnet DRC Quarrying SA PPC Mozambique SA Supplier of bag cement for use within the DRC and surrounding countries Manufacturer of both bag and bulk cement for use within Rwanda and surrounding countries # Owner of the mineral right in the DRC and responsible for the primary phase of quarrying # Supplier of cement, sourced primarily from Zimbabwe and South Africa, into the Mozambique market, mainly the Maputo and Tete regions ^ During, Portland Holdings Limited finalised their indigenisation transaction, with non-controlling interests purchasing 29,6% of the company through a notional vendor financing (NVF) mechanism. During the NVF period, the non-controlling shareholders only share in a portion of the dividend declared and do not participate in the earnings of the company. * During the financial year, PPC concluded agreements that will see the group enter the DRC cement market together with local partners, the Barnet group, and as a result the various entities were formed during the financial year. The non-controlling shareholders will hold approximately 31% of the company subsequent to the fulfilment of certain conditions. It is anticipated that these conditions will be achieved during the first quarter of PPC s 2015 financial year. To date, the future non-controlling shareholders have transferred land and mining rights to the PPC Barnet group of companies valued at R115 million, which has been reflected as a current liability in the consolidated annual financial statements. Post year end, the IFC signed a subscription agreement to acquire a 10% stake in PPC Barnet DRC Holdings. Refer note 40 in the group annual financial statements. # It is foreseen that the entities will commence with their primary activities during 2016 upon completion of the plant. Other than the normal regulations and exchange controls applicable in the various countries in which the group operates, there are no significant restrictions that could materially impact the ability to access or use assets and settle liabilities in foreign jurisdictions. 74 PPC Ltd Annual financial statements

77 Country of incorporation Proportion of ownership interest and voting power held by the group % % Zimbabwe PPC Ltd Botswana PPC Ltd Holding company South Africa PPC Ltd South Africa PPC Ltd Mauritius PPC Ltd South Africa PPC Ltd South Africa 69 PPC Ltd South Africa PPC Ltd Botswana Pretoria Portland Cement International Holdings Botswana PPC Botswana (Pty) Limited Rwanda PPC International Holdings Pty Limited Mauritius 100 PPC International Holdings Pty Limited Democratic Republic of the Congo 100 PPC Barnet DRC Holdings Democratic Republic of the Congo 100 PPC Barnet DRC Holdings Democratic Republic of the Congo 100 PPC Barnet DRC Holdings Mozambique PPC Mozambique Holdings PPC Ltd Annual financial statements 75

78 Annexure 1 Subsidiaries and non-controlling interest continued for the year ended 30 September The following summarised financial information is presented for CIMERWA and Safika Cement, based on their respective consolidated financial statements which were prepared in accordance with IFRS, modified for fair value adjustments to financial assets and liabilities at the acquisition date. The information is before inter-company eliminations with other group entities. These entities are deemed material due to their respective percentages in the total non-controlling interest as reflected in the group s statements of financial position. CIMERWA Safika Cement Revenue EBITDA (1) 7 83 Net (loss)/profit for the year (26) (6) 38 Net (loss)/profit attributable to non-controlling interests (13) (3) 12 Dividends paid to non-controlling interests 34 Total assets Total liabilities Equity attributable to non-controlling interests CIMERWA was acquired in January, while Safika Cement was acquired with effect from January. Details can be found in note PPC Ltd Annual financial statements

79 Company statement of financial position as at 30 September Notes ASSETS Non-current assets Property, plant and equipment Intangible assets Other non-current assets Equity-accounted investments Current assets Inventories Trade and other receivables Amounts owing by subsidiaries Taxation receivable Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Stated capital 7 (729) (692) Other reserves Retained profit Total equity Non-current liabilities Deferred taxation liabilities Long-term borrowings Provisions Other non-current liabilities Current liabilities Short-term borrowings Trade and other payables Amounts owing to subsidiaries Total equity and liabilities PPC Ltd Annual financial statements 77

80 Company income statement for the year ended 30 September Revenue Cost of sales Gross profit Administrative and other operating expenditure Operating profit before BBBEE IFRS 2 charges BBBEE IFRS 2 charges Operating profit Fair value gains on financial instruments Finance costs Investment income Profit before exceptional items Exceptional items 18 (1) 11 Profit before taxation Taxation Profit for the year Notes 78 PPC Ltd Annual financial statements

81 Company statement of comprehensive income for the year ended 30 September Availablefor-sale financial assets Hedging reserves Retained profit Total comprehensive income Profit for the year Items that will not be reclassified to profit or loss Revaluation of available-for-sale financial assets Taxation on the revaluation of available-for-sale financial assets (11) (11) Items that will be reclassified to profit or loss upon derecognition 7 7 Cash flow hedge recognised directly through equity 7 7 Other comprehensive profit, net of taxation Total comprehensive income Profit for the year Items that will not be reclassified to profit or loss 9 9 Revaluation of available-for-sale financial assets Taxation on the revaluation of available-for-sale financial assets (2) (2) Items that will be reclassified to profit or loss upon derecognition Cash flow hedge recognised directly through equity Other comprehensive profit, net of taxation Total comprehensive income PPC Ltd Annual financial statements 79

82 Company statement of changes in equity for the year ended 30 September Stated capital Availableforsale financial assets Other reserves Equity compensation reserves Hedging reserves Put option Retained profit Opening balance at the beginning of the year (692) (7) Movements for the year (37) (137) (55) (148) Recognised on the acquisition of a subsidiary (refer to notes 11 and 13) (137) (137) BBBEE IFRS 2 charges Dividends declared (879) (879) FSP IFRS 2 charges Purchase of treasury shares in terms of the FSP share incentive scheme^ (53) (53) Total comprehensive income Vesting of FSP share incentive scheme awards 16 (16) Transfer to retained income (5) 5 Balance at 30 September (729) (137) Opening balance at the beginning of the year (636) (43) Movements for the year (56) BBBEE IFRS 2 charges Dividends declared (823) (823) FSP IFRS 2 charges Other reserve movements 2 (2) Purchase of treasury shares in terms of the FSP share incentive scheme^ (56) (56) Total comprehensive income Transfer to retained income (13) 13 Balance at 30 September (692) (7) ^ For further details on the FSP share scheme, refer to note 35 in the group financials. Total 80 PPC Ltd Annual financial statements

83 Company statement of cash flows for the year ended 30 September Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before exceptional items Adjustments for: Amortisation of intangible assets BBBEE IFRS 2 charges Depreciation Dividends received 17 (14) Fair value gains on financial instruments 15 (6) (27) Finance costs Income from subsidiary companies 14 (351) (226) Interest received 17 (27) (9) Other non-cash flow items (19) (24) Operating cash flows before movements in working capital Movement in inventories 38 (18) Movement in trade and other receivables (62) (18) Movement in trade and other payables and provisions (110) 199 Cash generated from operations Dividends received from investments Finance costs paid 20 (337) (289) Income received from subsidiary companies Interest received Taxation paid 21 (202) (440) Cash available from operations Dividends paid (879) (823) Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equity-accounted investments 4 (110) Acquisitions of subsidiary companies 3 (657) Investments in intangible assets 2 (61) (3) Investments in property, plant and equipment 22 (395) (387) Net movement in net amounts owing by subsidiaries 3 (823) (402) Proceeds from disposal of property, plant and equipment 1 15 Net cash outflow from investing activities (1 935) (887) Net cash outflow before financing activities (1 546) (189) CASH FLOWS FROM FINANCING ACTIVITIES BBBEE funding transaction (34) (32) Net short-term borrowings repaid (254) (339) Proceeds raised from bond issuance Purchase of shares in terms of FSP share scheme 7 (53) (56) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (137) 34 Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year PPC Ltd Annual financial statements 81

84 Notes to the company financial statements for the year ended 30 September Freehold and leasehold land, buildings and mineral rights Factory decommissioning assets Plant, vehicles, furniture and equipment Capitalised leased plant Total 1. PROPERTY, PLANT AND EQUIPMENT Cost Accumulated depreciation and impairments Net carrying value at the end of the year Cost Accumulated depreciation and impairments Net carrying value at the end of the year Movement of property, plant and equipment Net carrying value at the beginning of the year Additions Depreciation (17) (1) (362) (4) (384) Disposals (2) (2) Other movements/reallocation 1 (3) 10 8 Net carrying value at the end of the year Net carrying value at the beginning of the year Additions Depreciation (17) (2) (350) (3) (372) Disposals (2) (1) (3) Other movements/reallocation 2 2 Net carrying value at the end of the year Included in plant, vehicles, furniture and equipment is capital work in progress of R121 million (: R94 million). Certain of the company s properties are the subject of land claims. The company is in the process of discussion with the Land Claims Commissioner and is awaiting the outcome of the claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company s operations. During the year, an amount of R15 million (: R4 million) for critical spares was reclassified to inventory. Refer to the group financials for additional disclosures on property, plant and equipment. 82 PPC Ltd Annual financial statements

85 2. INTANGIBLE ASSETS ERP development and other software Cost Accumulated amortisation and impairments Net carrying value at the end of the year Movement of intangible assets Net carrying value at the beginning of the year Additions 61 3 Amortisation (25) (21) Other movements 1 Net carrying value at the end of the year OTHER NON-CURRENT ASSETS Investments in subsidiaries Investments in subsidiaries at the beginning of the year Investment in Safika Cement $ 377 Investment in Pronto 460 Investments in subsidiaries at the end of the year Unlisted investments Unlisted investments at fair value^ Contributions to PPC Environmental Comprising: Other non-current assets Other non-current financial assets Interests in subsidiaries Shares at cost less amounts written off and dividends received at the beginning of the year Add: Investment in new subsidiaries Add: Amounts owing by subsidiaries* Less: Amounts owing to subsidiaries* (120) (103) $ Investment in Safika Cement During December, all conditions to the transaction were fulfilled and PPC acquired a 69,3% equity stake in Safika Cement for R377 million. This transaction further enhances PPC s South African footprint through Safika Cement s five blending facilities and one milling operation that produce blended 32.5N cement under three brands: IDM Best Build, Castle and the Spar Build-It house brand. Investment in Pronto During July, PPC acquired the remaining 50% equity stake in Pronto making it a wholly owned subsidiary for R280 million. Pronto is a prominent Gauteng-based readymix and fly ash supplier, with nine batching plants. This provides PPC additional ways to increase its cement distribution channel to the market while also expanding its range of complementary products available to the building and construction industries. Included in the investment in Pronto is the cost of the previously held 50% equity stake of R180 million. ^ Unlisted investments at fair value PPC Ltd holds a 6,75% (: 6,75%) shareholding in Ciments du Bourbon, incorporated in Reunion. The fair value of the investment has been calculated using a dividend yield valuation methodology, using comparable company dividend yields. The movement in fair value of R58 million (: R9 million) has been credited against other comprehensive income. The basis of determining the fair value of the investment has changed from an earnings multiple approach, as used in previous years, to the dividend yield methodology used in the current year, which aligns with the group s influence and investment Contributions to PPC Environmental Trust These contributions are invested with independent financial institutions in a collective investment scheme and cash investments, and can be utilised on approval from the Department of Mineral Resources and Energy Affairs for rehabilitation costs. The carrying value of the underlying trust s investments is R92 million. * Amounts owing by and to subsidiaries The loans have no fixed terms of repayment, are unsecured and, where appropriate, interest is calculated using ruling market-related interest rates. Refer to note 26 for details of amounts owing by and to subsidiaries at year end. During the current year the company advanced R1 billion (: R437 million) to PPC International Holdings Pty Limited, a wholly owned subsidiary company, for equity contributions to CIMERWA and DRC. PPC Ltd Annual financial statements 83

86 Notes to the company financial statements continued for the year ended 30 September 4. EQUITY-ACCOUNTED INVESTMENTS Investments at cost at the beginning of the year Investments made during the year 110 Transferred as a result of business combination^ (179) Fair value of unlisted equity-accounted investments as determined by the directors Refer to note 5 in the group financials for further information. ^Transferred as a result of business combination In June, PPC acquired the remaining 50% in Pronto making it a wholly owned subsidiary (refer to note 3). In, PPC acquired a further 25% in Pronto for R110 million, with the purchase consideration determined using an EBITDA multiple less net debt. 5. INVENTORIES Raw materials Work in progress Finished goods Maintenance stores Inventory obsolescence (89) (81) Amount of inventories recognised as an expense during the year Inventory obsolescence Balance at the beginning of the year Raised during the year 9 17 Utilised during the year (2) Released during the year (1) (1) Balance at the end of the year Inventories are determined on the weighted average formula bases. During the year, an amount of R15 million (: R4 million) for critical spares was reclassified to property, plant and equipment. No inventories have been pledged as security. 84 PPC Ltd Annual financial statements

87 6. TRADE AND OTHER RECEIVABLES Trade receivables Less: Impairment of trade receivables (7) (9) Net trade receivables Other financial receivables Trade and other financial receivables Prepayments No receivables have been pledged as security. Amounts due to the company should be settled within the normal credit terms of 30 to 60 days. Net trade receivables comprise: Trade receivables that are neither past due nor impaired^ Financial assets that would otherwise be impaired whose terms have been renegotiated 9 Trade receivables that are past due but not impaired ^There is no history of default relating to trade receivables in this category. Trade receivables that are past due but not impaired Ageing beyond normal terms days days days 2 Greater than 180 days 2 6 Fair value of collateral held Collateral held consists of bank guarantees, cession of book debt, deed of surety, crosscompany guarantees and notarial bonds. Impairment of trade receivables Balance at the beginning of the year 9 13 Allowance utilised (2) (4) Balance at the end of the year 7 9 PPC Ltd Annual financial statements 85

88 Notes to the company financial statements continued for the year ended 30 September Shares Shares 7. STATED CAPITAL Authorised shares Issued shares Total shares in issue at the beginning of the year Shares issued in terms of second BBBEE transaction^ Total shares in issue at the end of the year Shares held by consolidated BBBEE trusts and trust funding SPVs treated as treasury shares ~ ( ) ( ) Total shares in issue, net of treasury shares Authorised preference shares During, shareholders approved the creation of 20 million preference shares, of R1 000 each, in terms of the restructure of a portion of PPC s first BBBEE transaction. No preference shares have been issued post the approval. Stated capital Balance at the beginning of the year (692) (636) Shares purchased in terms of the FSP incentive scheme treated as treasury shares # (53) (56) Vesting of FSP incentive scheme awards 16 Balance at the end of the year (729) (692) ^ Shares issued in terms of PPC s second BBBEE transaction which was facilitated by means of notional vendor financing (NVF) mechanism resulting in these shares only participating in 20% of the dividends declared by PPC during the NVF period, ending 30 September With the exception of the Bafati Investment Trust, entities participating in this transaction are consolidated into the PPC group during the transaction term. ~ In terms of the BBBEE transaction that was effected during December 2008, PPC provided guarantees to the holders of the A preference shares issued by the Black Managers Trust Funding SPV, the holders of the B preference shares issued by the respective trust funding SPVs, and all of the long-term loans issued to the Black Managers Trust and the respective trust funding SPVs. The funding raised by the Black Managers Trust and SPV was used to purchase shares in PPC at market value, in terms of a scheme of arrangement. In substance, the shares purchased by the Black Managers Trust and trust funding SPV were indirectly funded by PPC. The shares are accordingly reflected as treasury shares and the corresponding long-term borrowings were raised (refer to note 9). # In terms of the forfeitable share plan shares (: ) were purchased on the JSE, and are treated as treasury shares during the various vesting periods of the awards. Unissued shares (shares) Ordinary shares Preference shares PPC Ltd Annual financial statements

89 8. DEFERRED TAXATION LIABILITIES Balance at the beginning of the year Charged directly to equity 11 2 Charged to the income statement 12 8 Balance at the end of the year Opening balance Charged to the income statement Charged directly to equity Closing balance Property, plant and equipment Other non-current assets 25 (1) Current assets 8 (1) 7 Non-current liabilities (64) (5) (69) Current liabilities (52) 15 (37) Reserves Property, plant and equipment Other non-current assets Current assets 8 8 Non-current liabilities (59) (5) (64) Current liabilities (21) (31) (52) Reserves PPC Ltd Annual financial statements 87

90 Notes to the company financial statements continued for the year ended 30 September 9. LONG-TERM BORROWINGS Borrowings Terms Security Interest rate Long-term loan Interest is payable semi-annually with a bullet capital repayment in December 2016 Unsecured Fixed 10,86% Bonds # Various, see below # Unsecured Refer below # BBBEE funding transaction^ A preference shares Dividends are payable semi-annually with capital redeemable from surplus cash. Compulsory annual redemptions are effective until December 2016 Secured by guarantee from PPC Variable rates at 85% of prime B preference shares Both capital and dividends are payable in December 2016 with capital capped at R400 million Secured by guarantee from PPC Variable rates at 78% of prime Long-term loans Both capital and interest are payable in December 2016 with capital capped at R700 million Secured by guarantee from PPC Variable rates, at 285 basis points above JIBAR Long-term borrowings Less: Short-term portion of long-term borrowings (refer to note 12) (17) (16) Maturity analysis of obligations: One year Two years Three years Four years Five years and more # Comprises four unsecured bonds, issued under the company s R6 billion domestic medium term note programme, and are recognised net of capitalised transaction costs of R5 million (: R5 million), with details below: Number Issue date Value Term Interest rate PPC 001 March R650 million 3 years 3-month JIBAR + 1,26% PPC 002 December R750 million 5 years 3-month JIBAR + 1,50% PPC 003 July R750 million 5 years 3-month JIBAR + 1,48% PPC 004 July R250 million 7 years Fixed at 9,86% ^ PPC provided guarantees to the holders of the A preference shares issued by the Black Managers Trust Funding SPV, the holders of the B preference shares issued by the respective trust funding SPVs, and all of the long-term loans issued by the Black Managers Trust and the respective trust funding SPVs. The company is in compliance with its debt covenants, none of which are expected to represent material restrictions on funding or investment policies in the foreseeable future. 88 PPC Ltd Annual financial statements

91 10. PROVISIONS Factory decommissioning and quarry rehabilitation Post-retirement healthcare benefits Factory decommissioning and quarry rehabilitation Postretirement healthcare benefits Total Movement of provisions Balance at the beginning of the year Amounts added 2 2 Amounts reversed (3) (3) Time value of money adjustments Balance at the end of the year To be incurred: Between two and five years 7 7 More than five years Balance at the beginning of the year Amounts added Time value of money adjustments Balance at the end of the year To be incurred: Between two and five years 7 7 More than five years Factory decommissioning and quarry rehabilitation The company is required to restore mining and processing sites at the end of their productive lives to an acceptable condition consistent with the group s environmental policies and in line with local legislation. PPC has set up an environmental trust to administer the funds required to fund the expected cost of decommissioning or restoration. To date, R44 million (: R44 million) has been contributed to the PPC Environmental Trust (refer to note 3). Retirement and post-retirement benefits Included in the provision are the following: Cement and Concrete Institute employees The provision relates to PPC s proportionate share of the post-retirement healthcare liability for previous employees of the Cement and Concrete Institute and amounted to R9 million (: R8 million). This liability was last actuarially valued during February and was determined using the projected unit credit method. Corner House Pension Fund and Lime Acres continuation members The provision relates to post-employment healthcare benefits in respect of certain Corner House Pension Fund and Lime Acres continuation members, and amounted to R19 million (: R18 million). The liability has been determined using the projected unit credit method and was actuarially valued during June Benefits under these schemes were granted to employees under historical employment contracts and the schemes are closed to new members. PPC Ltd Annual financial statements 89

92 Notes to the company financial statements continued for the year ended 30 September 11. OTHER NON-CURRENT LIABILITIES Cash-settled share-based payment liability Put option liabilities # 145 Derivative financial instruments (cash flow hedge)^ 2 Less: Short-term portion (121) (22) 40 2 For further details on the cash-settled share-based payment liability, refer to note 34 in the group financials. # With the purchase of the 69,3% equity stake in Safika Cement (refer to note 28 in the group financials), PPC granted non-controlling shareholders individual put options, with varying exercise dates, for the sale of their remaining shares in the company to PPC. One of the put options is anticipated to be exercised next year and R105 million has therefore been classified as a current liability. The put option price is based on the company s forecasted EBITDA applying an earnings multiple dependent on the level of EBITDA achieved. The balance of the put options are anticipated to be exercised after the fifth anniversary of the transaction. The present value of the put options were calculated at R145 million and time value of money adjustments of R16 million have been recognised since initial recording of the liability. Forecasted EBITDA is based on financial forecasts approved by management, with pricing and margins similar to those currently being achieved by the business. Selling prices and costs are forecast to increase at local inflation projections and extrapolated using local GDP growth rates. Subsequent to the initial recognition of the liability of R137 million, the value of the put options has been re-measured resulting in the initial liability being reduced by R8 million, mainly due to the lower macro-economic growth projections for the local economy, and recorded under fair value adjustments on financial instruments. ^ The derivative financial instrument relates to the long-term portion fair value of the interest rate swap agreement entered into in order to fix the future interest payments on the preference shares raised to finance the first BBBEE transaction. The derivative liability and interest on swap relates to the A preference share amounting to Rnil (: R2 million) (refer to note 13). 12. SHORT-TERM BORROWINGS Short-term loans and bank overdrafts Short-term portion of long-term borrowings (refer to note 9) TRADE AND OTHER PAYABLES Cash-settled share-based payment liability Derivative financial instruments Put option liability (refer to note 11) 105 Finance costs accrued Other financial payables Trade payables and accruals Trade and other financial payables Payroll accruals Restructuring costs* 15 VAT payable Trade and other payables are payable within the normal trade terms of 30 to 60-day periods. ^ Included in derivative financial instruments is the net financial liability payable on the interest rate swaps, and has been netted off in accordance with IAS 32 Financial Instruments: Presentation. The financial asset amounts to Rnil (: R325 million), and the financial liability amounts to R1 million (: R429 million). Interest rate swaps liabilities of R113 million were settled in December. * During September, PPC approved a voluntary separation programme at the Riebeeck factory, the total provision amounted to R15 million and was paid in. 90 PPC Ltd Annual financial statements

93 14. OPERATING PROFIT Operating profit includes: Amortisation of intangible assets (refer to note 2) Auditors remuneration 7 7 Fees 4 5 Other 3 2 Depreciation (refer to note 1) Cost of sales Operating costs Distribution costs included in cost of sales Exploration and research costs 1 1 Income from subsidiary companies: Fees Dividends Operating lease charges land and buildings Profit on disposal of plant and equipment 1 11 Staff costs Equity-settled share incentive scheme charge Cash-settled share incentive scheme charge 6 4 Directors remuneration Employees remuneration Restructuring costs paid to employees 15 Retirement benefit contributions Less: Costs capitalised to plant and equipment and intangibles (3) FAIR VALUE GAINS ON FINANCIAL INSTRUMENTS Gain on remeasurement of put option liabilities 8 Loss on derivatives designated as economic hedging instruments (5) Losses on translation of foreign-denominated monetary items FINANCE COSTS Bank and other borrowings Bonds Long-term loan BBBEE funding transaction Dividends on redeemable preference shares Long-term borrowings Finance lease interest 1 Subsidiary companies 3 3 Time value of money adjustments PPC Ltd Annual financial statements 91

94 Notes to the company financial statements continued for the year ended 30 September 17. INVESTMENT INCOME Dividends Unlisted investments 14 Interest received On deposits and non-current assets EXCEPTIONAL ITEMS Impairment of loan to subsidiary company (1) Profit on disposal of properties 11 (1) TAXATION Normal taxation Current year Prior year (70) Withholding taxation Current year Deferred taxation Current year 12 8 Other taxation Capital gains taxation 2 Securities transfer taxation 1 3 Taxation attributable to the company % % Reconciliation of rate of taxation Taxation as a percentage of profit before taxation 21,3 28,9 Prior year taxation impact 6,7 Taxation as a percentage of profit before taxation, excluding prior year taxation adjustments 28,0 28,9 Adjustment due to the inclusion of dividend income 7,7 3,6 Effective rate of taxation 35,7 32,5 Reduction in rate of taxation 3,2 1,4 Permanent differences and exempt income 3,2 1,4 Increase in rate of taxation (10,9) (5,9) Disallowable charges (5,4) (1,4) BBBEE IFRS 2 charges (3,5) (3,3) Capital gains taxation (0,2) Withholding taxation (2,0) (1,0) South African normal taxation rate 28,0 28,0 92 PPC Ltd Annual financial statements

95 20. FINANCE COSTS PAID Finance costs as per income statement charge Time value of money adjustments (32) (13) BBBEE funding transaction (99) (78) Redeemable preference share dividends capitalised (43) (46) Interest on long-term borrowings capitalised (56) (32) TAXATION PAID Net amounts (receivable)/outstanding at the beginning of the year (40) 20 Charge per income statement (excluding deferred taxation) Net amounts receivable at the end of the year ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT Freehold and leasehold land, buildings and mineral rights Plant, vehicles, furniture and equipment MOVEMENTS IN INVESTMENTS AND LOANS Net movement (715) (12) Revaluation of available-for-sale financial assets directly in equity Investment in subsidiary companies CONTINGENT LIABILITIES Litigation, current or pending, is not considered likely to have a material adverse effect on the company. PPC Ntsika Fund (Pty) Limited, PPC International Holdings Pty Limited and PPC Black Managers Trust Funding SPV (Pty) Limited, wholly owned subsidiary companies, are technically insolvent. The company has provided guarantees in the way of a subordination agreement relating to the loans that are receivable from these companies. For details on guarantees provided by PPC Ltd in terms of the BBBEE transaction, refer to note 9. PPC Ltd Annual financial statements 93

96 Notes to the company financial statements continued for the year ended 30 September 25. FINANCIAL RISK MANAGEMENT Fair values of financial assets and liabilities The carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values. The estimated fair values have been determined using available market information and approximate valuation methodologies. Notes Carrying amount Fair value Carrying amount Fair value Financial assets Unlisted investment at fair value Trade and other financial receivables Amounts owing by subsidiaries Cash and cash equivalents Financial liabilities Long-term borrowings Short-term borrowings Amounts owing to subsidiaries Trade and other financial payables Put option liabilities Derivative instruments current (cash flow hedge) 11, Derivative instruments non-current (cash flow hedge) 11, Credit risk management Maximum credit risk exposure^ ^ Maximum credit risk exposure includes long-term receivables, trade and other receivables and cash and cash equivalents. 94 PPC Ltd Annual financial statements

97 Valuation with reference to prices quoted in an active market Level 1 Valuation based on observable inputs Level 2 Valuation based on unobservable inputs Level 3 Total 25. FINANCIAL RISK MANAGEMENT continued Fair value hierarchy disclosures: Financial assets Available for sale Unlisted investments at fair value Loans and receivables Amounts owing by subsidiaries Trade and other financial receivables Cash and cash equivalents 3 3 Total financial assets Financial liabilities Amounts owing to subsidiary companies Long-term borrowings Short-term borrowings Safika put option liabilities Trade and other financial payables Derivative instruments current (cash flow hedge) 1 1 Total financial liabilities Financial assets Available for sale Unlisted investments at fair value Loans and receivables Amounts owing by subsidiaries Trade and other financial receivables Cash and cash equivalents Total financial assets Financial liabilities Long-term borrowings Short-term borrowings Trade and other financial payables Derivative instruments current (cash flow hedge) Derivative instruments non-current (cash flow hedge) 2 2 Amounts owing to subsidiaries Total financial liabilities Level 1 financial assets and liabilities that are valued accordingly to unadjusted market prices for similar assets and liabilities. Market prices in this instance are readily available and the price represents regularly occurring transactions which have been concluded on an arm s length transaction. Level 2 financial assets and liabilities are valued using observable inputs, other than the market prices noted in the level 1 methodology, and make reference to pricing of similar assets and liabilities in an active market or by utilising observable prices and market-related data. Level 3 financial assets and liabilities that are valued using unobservable data, and requires management judgement in determining the fair value. PPC Ltd Annual financial statements 95

98 Notes to the company financial statements continued for the year ended 30 September 26. RELATED-PARTY TRANSACTIONS In addition to the related-party transactions disclosed in the group results, the company had the following related-party transactions: Goods sold to PPC Barnet DRC Trading Company SA 55 PPC Botswana (Pty) Limited Portland Holdings Limited PPC Lime Limited 8 7 PPC Mozambique SA Pronto Holdings Pty Limited Safika Cement Holdings Pty Limited 481 Goods purchased from PPC Lime Limited Pronto Holdings Pty Limited 2 4 Technical services provided to PPC Lime Limited PPC Aggregate Quarries (Pty) Limited PPC Botswana (Pty) Limited 1 1 Portland Holdings Limited 9 5 CIMERWA Limited 2 3 Technical services received from PPC Aggregate Quarries (Pty) Limited 3 3 Interest paid to PPC Aggregate Quarries (Pty) Limited 2 2 PPC Ntsika Fund (Pty) Limited 1 1 CSG and SBP PPC Lime Limited 1 Dividends received from PPC Botswana (Pty) Limited 11 PPC Lime Limited PPC Aggregate Quarries (Pty) Limited Portland Holdings Limited Safika Cement Holdings Pty Limited 79 Varsrivier Marmer (Pty) Limited 5 Cape Portland Cement Company Limited 1 Dividends paid Porthold Trust Pvt Limited 2 2 in terms of the first BBBEE transaction The Current PPC Team Trust^ 4 The Future PPC Team Trust^ 1 PPC Black Independent Non-executive Directors Trust 1 1 The PPC Black Managers Trust PPC Team Benefit Trust Funding SPV (Pty) Limited 4 4 PPC Construction Industry Associations Trust Funding SPV (Pty) Limited PPC Education Trust Funding SPV (Pty) Limited 9 8 PPC Community Trust Funding SPV (Pty) Limited 6 6 Community Service Groups and Strategic Black Partners (refer to notes 9, 11 and 16) PPC Mkhulu Trust^ 1 in terms of the second BBBEE transaction PPC Masakhane Trust 8 8 PPC Bafati Trust 1 1 PPC SBP Consortium Funding SPV (Pty) Limited 3 3 ^Shares held by these trusts vested to employees, and as a result these trusts have been deconsolidated and are in process of being unwound. 96 PPC Ltd Annual financial statements

99 26. RELATED-PARTY-TRANSACTIONS continued Trade amounts due from PPC Barnet DRC Trading Company SA 25 PPC Botswana (Pty) Limited Portland Holdings Limited PPC Mozambique SA 4 5 PPC Lime Limited 1 1 Safika Cement Holdings Pty Limited 15 Pronto Holdings Pty Limited 18 Amounts due by/(to) Cape Portland Cement Company Limited (5) PPC Aggregate Quarries (Pty) Limited (50) (44) PPC Lime Limited (81) (42) PPC Ntsika Fund (Pty) Limited Slurrylink (Pty) Limited (4) (4) Varsrivier Marmer (Pty) Limited (1) PPC International Holdings Pty Limited Community Service Groups and Strategic Black Partners (refer to note 9) (1 548) (1 547) Long-term loan (1 520) (1 519) Interest capitalised (28) (28) The terms and conditions of these transactions are determined on an arm s length basis. 27. ADDITIONAL DISCLOSURE Refer to the group financial statements for additional disclosure on the following: Accounting policies Commitments Directors remuneration and interest Events after reporting date Financial risk management Foreign exchange gains and losses Related-party transactions Retirement benefit information Share-based payments PPC Ltd Annual financial statements 97

100 Abridged remuneration report for the year ended 30 September The remuneration philosophy of the group is fully disclosed in the integrated report, which can be found on An extract of the remuneration report, with focus on remuneration, incentives and shareholding of the directors and prescribed officers is included in this annual financial report. Remuneration paid to executive directors and prescribed officers in The executive directors and prescribed officers remuneration for the year ended 30 September was as follows: Salary R000 TGP Retirement and medical contributions R000 Car allowance R000 Incentive bonus R000 Variable pay LTI realised value R000 1 Other R000 Discretionary bonus R000 Executive directors MMT Ramano BL Sibiya 2 Prescribed officers PL Booysen HN Buthelezi JT Claassen AC Lowan KPP Meijer FK Molefe T Sibisi JHDLR Snyman JJ Taljaard RS Tomes A Wadee Past directors P Esterhuysen KM Gordhan Arising from the 2011 RSS award, the 2011 FSP with no performance conditions, the final third of the 2009 RSS award and FSP awards that vested early for participants who terminated their services. 2 Following the resignation of Mr K Gordhan on 22 September, Mr B Sibiya assumed an executive role in the company. No salary has been reflected as remuneration for services as an executive director as the contract starts from 1 October. 3 Other payments included a relocation allowance (R ) and a payment (R ) in lieu of transfer cost, duties and fees. 4 Employed for nine months of the financial year. 5 Employed for nine months of the financial year. 6 Employed for seven months of the financial year. Other payments included annual leave (R ), severance pay (R ), 13th cheque (R28 000) and Masakhane shares (R ). 7 Employed for one month of the financial year. Other payments include severance pay (R ), annual leave (R ) and Masakhane shares (R ). 8 Employed for 12 months of the financial year, but resigned in the last week of September. Total R PPC Ltd Annual financial statements

101 Remuneration paid to executive directors and prescribed officers in TGP Variable pay Salary R000 Retirement and medical contributions R000 Car allowance R000 Incentive bonus R000 LTI realised value* R000 Other R000 Total R000 Executive directors P Esterhuysen KM Gordhan MMT Ramano Prescribed officers PL Booysen JT Claassen AC Lowan KPP Meijer KP Odendaal JHDLR Snyman JJ Taljaard RS Tomes A Wadee Past directors S Abdul Kader SG Helepi P Stuiver The following directors were not eligible for a short-term incentive bonus in as they were not in employment at the date of payment in November : S Abdul Kader, P Esterhuysen, SG Helepi and P Stuiver. * Arising from the last tranche of the 2008 LTIP award, the second third of the 2009 LTIP award, the 2009 RSS award and the 2012 FSP award that vested early for participants who terminated their services. 1 Employed for 10 months of the financial year. 2 Employed for 6 months of the financial year. 3 Employed for 11 months of the financial year. 4 Employed for 3 months of the financial year. 5 Refer page 98. PPC Ltd Annual financial statements 99

102 Abridged remuneration report continued for the year ended 30 September Non-executive directors fees Non-executive directors fees are as approved by the previous AGM and valid from that date until the next AGM. Total emoluments to non-executive directors for the year ended 30 September were: Committee Board fees R000 Chairman fees R000 Nominations R000 Audit R000 Risk and compliance R000 Remuneration R000 Social and ethics R000 Special meetings R000 Deal R000 Other 4 R000 Total R000 ZJ Kganyago NB Langa-Royds AJ Lamprecht MP Malungani SK Mhlarhi B Modise T Moyo TDA Ross J Shibambo BL Sibiya Retired January. 2 Appointed November. 3 Subsequently appointed as executive chairperson on 22 September. 4 Three meetings of the PPC Bafati Investment Trust.. Total emoluments to non-executive directors for the year ended 30 September were: Board fees R000 Chairman fees R000 Nominations R000 Audit R000 Risk and compliance R000 Committee Remuneration R000 Social and ethics R000 Special meetings R000 ZJ Kganyago NB Langa-Royds AJ Lamprecht MP Malungani SK Mhlarhi B Modise TDA Ross J Shibambo BL Sibiya Deal R000 Total R PPC Ltd Annual financial statements

103 Interests of executive directors and prescribed officers in share capital The aggregate direct beneficial holdings of directors and their immediate families (none of whom has a holding of over 1%) in the issued ordinary shares of the company are detailed below. There are no indirect holdings by directors and their immediate families. There have been no material changes in these shareholdings since that date. Name Current directors MMT Ramano SK Mhlarhi Prescribed officers JHDLR Snyman Past directors KM Gordhan P Stuiver Interests of directors and prescribed officers in BBBEE schemes In 2008, in terms of the company s first BBBEE transaction, certain executive directors and prescribed officers were granted participation rights in the loan-funded Black Managers Trust which owns shares that are subject to vesting conditions and a lock-in period restricting transferability which expires on 15 December In addition, during the 2012 financial year, they each received rights to shares in a trust owning donated shares which are subject to a lock-in which expired on 15 December. Certain nonexecutive directors received vested rights in 2008 in a trust owning donated shares which are subject to vesting conditions and a lock-in expiring annually in thirds from 15 December 2012 and expiring on 15 December. During the financial year, following the implementation of the company s second BBBEE transaction, executive directors and prescribed officers were included among the South African employees granted participation rights in a notional loan-funded trust owning shares that are subject to vesting conditions and a lock-in period restricting transferability which expires in September Participation rights BEE1 BEE2 Executive directors MMT Ramano Non-executive directors ZJ Kganyago NB Langa-Royds J Shibambo Prescribed officers PL Booysen HN Buthelezi JT Claassen AC Lowan KPP Meijer FK Molefe T Sibisi JHDLR Snyman JJ Taljaard RS Tomes Past directors P Esterhuysen KM Gordhan SG Helepi PPC Ltd Annual financial statements 101

104 Abridged remuneration report continued for the year ended 30 September Value of long-term incentives The tables below deal with the company s prior and current long-term incentives as at 30 September. Award date Number allocated in prior years Number allocated in current year Number exercised/ vested in current year Number forfeited in current year Closing number Grant price Price on exercise date/ vesting price Exercise/ vesting gain R000 Current unit value R * Value at year end R000 EXECUTIVE DIRECTORS MMT Ramano Share appreciation rights (RSS) 01/08/ , /09/ , /09/ , FSP with performance conditions 28/09/ /03/ , /02/ , Total PRESCRIBED OFFICERS PL Booysen Share appreciation rights (LTIP) 08/08/ ,00 1, /09/ ,80 4, /09/ ,35 3, FSP no performance conditions 30/09/ , /02/ , /03/ , /02/ , FSP with performance conditions 16/02/ /03/ , /02/ , Total HN Buthelezi FSP no performance conditions 18/02/ , FSP with performance conditions 18/02/ , Total PPC Ltd Annual financial statements

105 Award date Number allocated in prior years Number allocated in current year Number exercised/ vested in current year Number forfeited in current year Closing number Grant price Price on exercise date/ vesting price Exercise/ vesting gain R000 Current unit value R * Value at year end R000 PRESCRIBED OFFICERS continued JT Claassen Share appreciation rights (LTIP) 08/08/ ,00 1, /09/ ,80 4, /09/ ,35 3, FSP no performance conditions 30/09/ , /02/ , /03/ , /02/ , FSP with performance conditions 16/02/ _ /03/ , /02/ , Total AC Lowan FSP no performance conditions 15/03/ , /02/ , FSP with performance conditions 15/03/ , /02/ , Total 837 KPP Meijer Share appreciation rights (LTIP) 08/08/ ,00 17/09/ ,80 25/09/ , FSP no performance conditions 30/09/ , /02/ , /03/ , /02/ , FSP with performance conditions 16/02/ /03/ , /02/ , Total PPC Ltd Annual financial statements 103

106 Abridged remuneration report continued for the year ended 30 September Award date Number allocated in prior years Number allocated in current year Number exercised/ vested in current year Number forfeited in current year Closing number Grant price Price on exercise date/ vesting price Exercise/ vesting gain R000 Current unit value R * Value at year end R000 FK Molefe FSP no performance conditions 18/02/ , FSP with performance conditions 18/02/ , Total 773 TR Sibisi FSP no performance conditions 18/02/ , FSP with performance conditions 18/02/ , Total 849 JHDLR Snyman Share appreciation rights (LTIP) 08/08/ ,36 1, /09/ ,80 4, /09/ ,35 3, FSP no performance conditions 16/02/ , /03/ , /02/ , FSP with performance conditions 16/02/ /03/ , /02/ , Total PPC Ltd Annual financial statements

107 Award date Number allocated in prior years Number allocated in current year Number exercised/ vested in current year Number forfeited in current year Closing number Grant price Price on exercise date/ vesting price Exercise/ vesting gain R000 Current unit value R * Value at year end R000 JJ Taljaard Share appreciation rights (LTIP) 08/08/ ,00 17/09/ ,80 25/09/ , FSP no performance conditions 30/09/ , /02/ , /03/ , /02/ , FSP with performance conditions 16/02/ /03/ , /02/ , Total RS Tomes (resigned 23 October ) (Note 1) Share appreciation rights (LTIP) 08/08/ ,00 1, /09/ ,80 25/09/ , FSP no performance conditions 30/09/ , /02/ , /03/ , /02/ , FSP with performance conditions 16/02/ /03/ , /02/ , Total PPC Ltd Annual financial statements 105

108 Abridged remuneration report continued for the year ended 30 September Award date Number allocated in prior years Number allocated in current year Number exercised/ vested in current year Number forfeited in current year Closing number Grant price Price on exercise date/ vesting price Exercise/ vesting gain R000 Current unit value R * Value at year end R000 PAST DIRECTORS RH Dent (retired 31 December 2010) Share appreciation rights (LTIP) 25/09/ ,35 P Esterhuysen (resigned 15 October ) Share appreciation rights (LTIP) 25/09/ ,35 Share appreciation rights (RSS) 25/09/ , FSP with performance conditions 28/09/ , /03/ , Total KM Gordhan (resigned 22 September ) FSP no performance conditions 15/03/ , /02/ , FSP with performance conditions 15/03/ /02/ Total SG Helepi (resigned 14 February ) Share appreciation rights (LTIP) 08/08/ ,00 1, /09/ , Total 25 * Instruments subject to a future performance condition have been reflected as if the performance condition will be fully satisfied, although circumstances may result in a different outcome. 106 PPC Ltd Annual financial statements

109 PPC shareholder analysis Register date: 26 September Issued share capital: SHAREHOLDER SPREAD Number of shareholders % Number of shares % shares , , shares , , shares 929 6, , shares 203 1, , shares and over 69 0, ,13 Total DISTRIBUTION OF SHAREHOLDERS Banks 136 0, ,41 Broad-based black ownership 18 0, ,92 Brokers 80 0, ,73 Close corporations 142 0, ,09 Endowment funds 67 0, ,18 Individuals , ,73 Insurance companies 23 0, ,22 Investment companies 18 0, ,28 Medical aid schemes 6 0, ,03 Mutual funds 224 1, ,09 Nominees and trusts , ,00 Other corporations 77 0, ,09 Pension funds 127 0, ,04 Private companies 256 1, ,94 Public companies 17 0, ,03 Sovereign wealth fund 7 0, ,22 Total PUBLIC/NON-PUBLIC SHAREHOLDERS Non-public shareholders 21 0, ,89 Directors holdings 2 0, ,02 Broad-based black ownership 18 0, ,92 Strategic holdings (10% or more) 1 0, ,95 Public shareholders , ,11 Total BENEFICIAL SHAREHOLDERS HOLDING 3% OR MORE Number of shares % Government Employees Pension Fund ,95 PPC SBP Consortium Funding SPV (Pty) Limited ,61 PPC Masakhane Employee Share Trust ,42 Foord Balanced Fund ,48 PPC Ltd Annual financial statements 107

110 Corporate information PPC Ltd Incorporated in the Republic of South Africa Company registration number 1892/000667/06 JSE code: PPC JSE ISIN code: ZAE ZSE code: PPC Directors BL Sibiya (executive chairman), DJ Castle, ZJ Kganyago, NB Langa-Royds, MP Malungani, S Mhlarhi, B Modise, T Moyo*, MMT Ramano (chief financial officer), TDA Ross (lead independent director), J Shibambo *Zimbabwean Registered office 148 Katherine Street, Sandton, South Africa PO Box , Sandton 2146, South Africa Transfer secretaries Link Market Services SA (Pty) Limited 13th floor, Rennies House 19 Ameshoff Street Braamfontein South Africa PO Box 4844 Johannesburg, South Africa Auditors Deloitte & Touche Deloitte Place The Woodlands Woodlands Drive Woodmead, Sandton Private Bag X6 Gallo Manor, South Africa Sponsor: South Africa Merrill Lynch SA (Pty) Limited 138 West Street Sandown, Sandton PO Box Benmore, South Africa Company secretary JHDLR Snyman 148 Katherine Street Sandton South Africa Transfer secretaries: Zimbabwe Corpserve (Private) Limited 4th floor, Intermarket Centre Corner 1st Street/Kwame Nkrumah Avenue Harare, Zimbabwe PO Box 2208 Harare, Zimbabwe Sponsor: Zimbabwe Imara Edwards Securities (Private) Limited Block 2, Tendeseka Office Park Samora Machel Avenue Harare, Zimbabwe PO Box 1475 Harare, Zimbabwe Financial calendar Financial year end Annual general meeting 30 September 26 January 2015 Reports Interim results for half-year to March Published May Preliminary announcement of annual results Published November Annual financial statements Published December Dividends Interim Declared May Paid June Final Declared November Paid January 108 PPC Ltd Annual financial statements

111 A profile of our business Algeria Ethiopia Investment proposition Cash generative Excellent dividend yield and history Leading producer in southern Africa with best geographic spread Strong financial position Financial strength to explore expansion opportunities Experienced management team Exploiting growth opportunities in Africa Democratic Republic of the Congo Botswana South Africa Zimbabwe Rwanda Current operations Current operations and current project Current project Feasibility study Mozambique BASTION GRAPHICS

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