INTEGRATED REPORT REALISING OUR POTENTIAL

Transcription

1 INTEGRATED REPORT REALISING OUR POTENTIAL

2 INTRODUCING THE NEW BUSINESS MODEL Pioneer Foods has made good progress in establishing a more streamlined and agile business model. The One Pioneer model is enabled by the centralisation of select functional capabilities and restructuring at divisional level. The revitalisation of Pioneer Foods corporate identity is an expression of this renewal journey.

3 PIONEER FOODS :: INTEGRATED REPORT ::

4 ABOUT THIS REPORT Scope and boundary This integrated report covers the South African and international operations of the Pioneer Food Group Ltd ( Pioneer Foods ) or ( the Group ) for the period from 1 October 2013 to 30 September The report addresses both financial and non-financial information to enable stakeholders to assess the Group s ability to create value. The business divisions have been restructured during the course of the 2014 fiscal year, and therefore the reporting framework has been adapted to show financial performance, sustainability progress and information relating to the operating environment according to the following divisions: Continuing operations Essential Foods (formerly Sasko) Groceries (formerly Bokomo Foods and Ceres Beverages) Joint ventures Joint ventures were reported as part of Bokomo Foods or Sasko in previous years. In line with the IFRS changes on joint venture reporting, joint ventures are now equity accounted and comparatives have been restated. Discontinued operation Quantum Foods was unbundled from the Group and listed as a separate entity on the Johannesburg Stock Exchange ( JSE ) on 6 October As in the 2013 integrated report, Quantum Foods is treated as an asset held for sale. The Zambian and Ugandan businesses are reported as part of this division. Pioneer Foods International Exports have been identified as a key growth vector for the Group. Accordingly, one of the objectives of the restructuring was to position Pioneer Foods International ( PFI ) as a separate business and will be reported as such in the new financial year. PFI will be incorporating all exports and operational responsibility for the dried fruit business. The equity accounted joint ventures of Bowman Ingredients SA, Heinz Foods SA, Bokomo Botswana, Bokomo Namibia, as well as the wholly-owned Bokomo Foods UK will also form part of the international business s management responsibility. The report addresses both financial and non-financial information to enable stakeholders to assess the Group s ability to create value. 2 PIONEER FOODS :: INTEGRATED REPORT :: 2014

5 Reporting approach This integrated report follows international and South African reporting guidelines and best practices, including: The revised King Code on Governance Principles for South Africa ( King III ) The JSE Listings Requirements International Financial Reporting Standards ( IFRS ) The Companies Act, Act 71 of 2008, as amended Global Reporting Initiative ( GRI ) G4 Guidelines The summary consolidated financial statements for the year ended 30 September 2014 can be found on page 104. The integrated report, as well as a complete set of annual financial statements, is available on the Group s corporate website at The integrated report can be requested in print format from the company secretary and relevant contact information is provided on page 129. Assurance The financial statements included in this report were independently audited by PricewaterhouseCoopers Inc. This is the first year that the Group has had certain non-financial data externally assured, and an assurance statement from EY is available on the Group s corporate website at financial-results-archive/, along with a full GRI G4 Index. Pioneer Foods B-BBEE status was verified by AQRate. Approval The Board of Pioneer Foods reviewed the 2014 integrated report on 20 November 2014 and is satisfied that it is a fair and accurate representation of the Group s performance and prospects. PIONEER FOODS :: INTEGRATED REPORT ::

6 4 PIONEER FOODS :: INTEGRATED REPORT :: 2014

7 CONTENTS NEW BUSINESS MODEL IFC OPERATIONAL REPORTS p40 IFC: Inside front cover IBC: Inside back cover CEO S REPORT p30 SUSTAINABILITY REPORT p56 Introducing the new business model IFC About this report 2 Year at a glance 6 Group at a glance 8 Business model 14 Investment case 15 Strategy overview 16 Performance review 20 Chairman s report 26 Chief Executive Officer s report 30 Financial review 34 Operational report: Essential Foods 42 Operational report: Groceries 46 Operational report: Quantum Foods 52 Sustainability report 56 Corporate governance report 78 Value added statement 100 Summary consolidated financial statements 101 Corporate information IBC Indicates information crossreferenced to other sections within the report Indicates further information available on the corporate website PIONEER FOODS :: INTEGRATED REPORT ::

8 YEAR AT A GLANCE Financial performance Revenue from continuing operations: +9% R17.7bn 2013: R16.2bn Headline earnings*: +46% R1.24bn 2013: R0.85bn * Adjusted for the impact of the Phase I B-BBEE charge. Operating profit from continuing operations*: +46% R1.68bn 2013: R1.15bn * Adjusted for the impact of the Phase I B-BBEE charge. Total dividend per share: +67% 221 cents 2013: 132 cents 6 PIONEER FOODS :: INTEGRATED REPORT :: 2014

9 Non-financial milestones Increased market share in core categories Shared Service Centre ( SSC ) for centralised group services created and operationalised Restructuring and rightsizing exercise implemented responsibly Information technology and application software outsourcing completed Pioneer Foods received accolades in the Sunday Times Top Brands Survey 2014, Product of the Year 2014 (White Star Quick and Bokomo Cornflakes) and Icon brand recognition for Spekko rice Further centralisation of the procurement function implemented Learning academies initiated for capacity building in key areas Pioneer Foods Logistics Services established ( PFLS ), which will allow for the central and joint management of logistics services Employee recognition programme launched Identification and implementation of energy minimisation opportunities ( EMOs ) with the assistance of external expertise New management office and corporate identity established to underpin the One Pioneer model High performance culture is being embedded PIONEER FOODS :: INTEGRATED REPORT ::

10 GROUP AT A GLANCE Geographic footprint Pioneer Foods operates out of South Africa and exports to 80 countries across the globe. Primary export markets include: UK Germany Switzerland North America China South Korea Philippines Japan Algeria Nigeria Ghana Mozambique Zimbabwe Botswana Namibia Mauritius Democratic Republic of Congo Group operational structure Pioneer Foods is a leader in the food and beverages industries in Southern Africa. The Group has operations in South Africa and two other African countries and sells its products around the world. The Group s core business is the production, distribution, marketing and selling of a diverse range of food, beverages and related products. The Group in its current form (after the merger between Sasko and Bokomo) was established in 1997 and listed on the Johannesburg Stock Exchange ( JSE ) in Pioneer Food Group Ltd (Listed on the Johannesburg Stock Exchange) Pioneer Foods Holdings Ltd Pioneer Foods (Pty) Ltd (Operational holding Company) 100% 100% 8 PIONEER FOODS :: INTEGRATED REPORT :: 2014

11 The Group operates a number of world-class production facilities producing a range of products that are loved in most homes. The Pioneer Foods brand portfolio includes some of the most recognisable and best loved brand names in South Africa, including the seven power brands Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star. Sasko was renamed as Essential Foods, while Bokomo Foods and Ceres Beverages were consolidated into a single management structure as Groceries. The international portfolio is a wellestablished business with an existing presence and long-standing relationships in core export markets. This business was reorganised as a standalone business, Pioneer Foods International (PFI), effective from 1 October The formation of PFI is indicative of the strategic focus to drive growth outside of South Africa. Quantum Foods was unbundled from Pioneer Foods in October 2014 and is listed as a separate entity on the JSE. ESSENTIAL FOODS 2014 GROCERIES QUANTUM FOODS Revenue R10 928m R7 069m R3 591m Operating profit R1 075m R735m R22m Profit margin 9.8% 10.4% 0.6% PIONEER FOODS :: INTEGRATED REPORT ::

12 GROUP AT A GLANCE (CONTINUED) Divisional overview More detail on the operating environment, performance and prospects of each division can be found in the operational reports beginning on page 40. The Pioneer Foods brand portfolio includes some of the most recognisable and best loved brand names in South Africa ESSENTIAL FOODS Profile Essential Foods is a leading manufacturer of essential and value-added foods in South Africa. The division prides itself on being a supplier of quality and nutritious foodstuffs that are trusted by millions of consumers daily. Production footprint 5 wheat mills 3 maize mills 2 rice and legume plants 1 pasta plant 15 bakeries Product categories Wheaten flour Maize flour Rice Bread Pasta Beans and legumes Power brands White Star Sasko Spekko Other leading brands Select Rice Nice Rice Blue Bird Champion Puccini Pasta Pasta Grande Imbo Crossbow Number of employees* PIONEER FOODS :: INTEGRATED REPORT :: 2014

13 GROCERIES QUANTUM FOODS Profile Bokomo Foods manufactures and markets a wide range of branded food products inclusive of some of the most recognisable brands in South Africa. The business s primary operations are in South Africa, where it sells fast-moving consumer goods to the retail market, as well as bulk packed products to the industrial market. Production footprint 18 Bokomo Foods facilities Product categories Breakfast cereals Dried fruit Baking aids and desserts Biscuits Power brands Safari Weet-Bix Other leading brands ProNutro Marmite Wellington s Heinz Bovril Moir s Werda Peck s Anchovette Redro Profile Ceres Beverages produces fruit juices, fruit concentrate mixes, mineral water, ice tea, carbonated soft drinks and fruit-based beverages. The business is one of the largest beverage manufacturers on the African continent. Production footprint 3 Ceres Beverages facilities Product categories Fruit juice Fruit concentrate Carbonated soft drinks Ice tea Power brands Ceres Liqui-Fruit Other leading brands Pepsi 7Up Lipton Ice Tea Wild Island Caribbean Daly s Fruitree Profile Quantum Foods comprises three integrated business units, Nulaid (eggs and commercial laying hens); Tydstroom (broilers and chicken products); and Nova Feeds (animal feed). Quantum Foods products are distributed to facilities in the Western Cape, Eastern Cape and Gauteng to major retail supermarkets, wholesalers and independent customers. The business also has broiler and layer breeding operations in Zambia and a commercial egg business in Zambia. Production footprint 28 Nulaid sites 17 Tydstroom sites 3 Nova Feeds factories Broiler and layer facilities in Zambia and Uganda Commercial egg farm in Zambia Product categories Eggs Broilers Animal feeds Leading brands Nulaid Tydstroom Nova Feeds Number of employees* Number of employees* Following a change in IFRS requirements on joint venture reporting, the joint ventures are not included in this table. Joint ventures are equity-accounted and comparatives have been restated. * Permanently employed by wholly-owned South African operations. PIONEER FOODS :: INTEGRATED REPORT ::

14 GROUP AT A GLANCE (CONTINUED) Segmental results Segmental revenue (R bn) Essential Foods Ceres Beverages Bokomo Foods Quantum Foods Segmental operating profit (R m) 22 (19) Essential Foods Ceres Beverages Bokomo Foods Quantum Foods 12 PIONEER FOODS :: INTEGRATED REPORT :: 2014

15 Global context The global food and beverages industry is characterised by challenges and opportunities consequent to changing consumer behaviour due to globalisation, the environmental crisis, individualisation, the digital effect, demographic change and technical convergence. With local and international agricultural materials as key inputs, the industry is exposed to the interconnected impact of shifts in weather patterns, commodity demand and supply cycles as well as volatile exchange rates. This combination of variables in a subdued global economy creates an environment of intense competition where companies must manage rising input costs and curtail margin compression, while remaining appealing to the consumer. Trends Challenges Opportunities Globalisation Individualisation and demographic change Environmental crisis The digital effect and technical convergence Exchange rate volatility threatening stability in international export and import dynamics Growth in consumer activism around social and environmental impact of companies Product selection based on topical issues, such as genetically modified organisms ( GMOs ), traceability and food labelling Socio-economic and political volatility in certain geographies Rising cost of living Increasing unemployment limiting consumer spending Nutritional value and product information of growing importance to health-conscious consumers Declining availability of resources such as water, fuel and electricity Increased priority to reduce energy usage and carbon footprint Increased frequency of extreme weather patterns Range of variables causing fluctuating and unpredictable commodity prices Increasing digitisation of product channels, communication and marketing Interconnectivity outstripping data protection capability Appropriate and flexible protection structures between countries to find mutually beneficial solutions Stringent cost management to leverage favourable conditions and limit impact of rising costs Lateral collaboration and strategic selection of export growth markets Product innovation, industry collaboration and responsible resourcing across the value chain Stringent cost management to expand margins and restrain price increases Potential to differentiate based on sustainability performance and improving the lives of consumers Management strategies that make environmental and business sense Seeking and implementing commercially viable energy reduction initiatives Reduced costs associated with e-communications and greater platform for reputational traction Investment in IT infrastructure to protect company and customer data PIONEER FOODS :: INTEGRATED REPORT ::

16 BUSINESS MODEL Pioneer Foods creates value from its core business activities of strategic sourcing, production, distribution, marketing and selling of a diverse range of food, beverages and related products in collaboration with a network of producers, business partners and service providers. Prior to 2013, the Group operated on a decentralised basis with each division responsible for its full value chain with access to a limited suite of centralised services. Over the past 18 months, the Group implemented a new business model with the following rationale: Capitalise on the One Pioneer parenting advantage Streamline the business and embed an efficient cost structure Standardise systems and processes Implement best practice Develop category and customer focus Create a common corporate identity The new business model comprises the following enabling features: The Groceries merger of Bokomo Foods and Ceres Beverages The creation of a focused international business Centralisation of procurement Centralisation of finance and administration in a Shared Service Centre ( SSC ) Centralisation of logistics under newly launched Pioneer Foods Logistics Services ( PFLS ) Outsourcing of the operational management of information technology (hardware) and application software (SAP) 14 PIONEER FOODS :: INTEGRATED REPORT :: 2014

17 INVESTMENT CASE Pioneer Foods operates in key categories in mature industries with its revenues well diversified by product mix, geography and urban and rural spread. The implementation of a clear and coherent strategy over the past 18 months has resulted in a more streamlined organisation with improved cost management, operational efficiencies and centralised Group services. The Group is highly cash generative and has sufficient debt capacity to enable Pioneer Foods to invest in growth both organic and acquisitive. A significant number of the Group s brands are either number one or two in their respective market categories, with the further potential to strengthen the equity of the seven power brands. The Group is well positioned to strengthen its participation in the retail private label segment. The conclusion of the capital expenditure programme positions the Group well to take advantage of future market growth opportunities. Part of the Group s strategy has been reevaluating certain underperforming businesses and brands in the portfolio and progress has already been made in this regard. Revenue growth at attractive margins is a strategic imperative and will be further enabled by innovation and expansion into adjacent and new markets. The cost and efficiency drive continues to aid and support the Group strategy. The Group s extensive distribution network, significant capital infrastructure and strong brands in core categories present a high barrier to entry for new competitors. PIONEER FOODS :: INTEGRATED REPORT ::

18 STRATEGY OVERVIEW Vision To be a leading FMCG company in Africa with globally trusted brands Leading means: Number 1 or 2 in select categories: Innovation at the core Consumer and category led Thought leadership with customers where Group holds the number 1 position Africa means: South Africa Southern Africa: Botswana, Namibia, Zambia, Mozambique, Zimbabwe, Mauritius East Africa: Uganda, Kenya, Ethiopia West Africa: Nigeria, Ghana, Algeria, DRC Global best practice within all functions FMCG means: Branded goods Private label products governed by rules of engagement Globally means: Targeted export destinations or viable acquisitive growth Food and beverage products 16 PIONEER FOODS :: INTEGRATED REPORT :: 2014

19 Strategy implementation Pioneer Foods defined five strategic themes to support the twin objectives of strengthening its brand positions and expanding its margins to ensure the organisation s long-term sustainability. The intensive capital investment cycle of recent years bodes well for future growth and cash generation going forward. risks. Going forward, Pioneer Foods is focused on embedding the new business model, thereby enabling the Group to grow to its full potential. The effective implementation of the strategy is an ongoing and dynamic process. The table below is an overview of the Group s progress on the five strategic themes, as well as the associated Strategic themes SHAPE A WINNING CORPORATE PORTFOLIO FOCUS ON POWER BRANDS EMBED STRATEGIC CUSTOMER MANAGEMENT RESET THE COST BASE AND STEP UP PRODUCTIVITY BUILD A HIGH- PERFORMANCE TEAM PIONEER FOODS :: INTEGRATED REPORT ::

20 STRATEGY OVERVIEW (CONTINUED) Strategic themes Initiatives Risks 2014 progress SHAPING A WINNING CORPORATE PORTFOLIO FOCUS ON POWER BRANDS EMBED STRATEGIC CUSTOMER MANAGEMENT Seed Expand into adjacencies Fast-track innovation Acquisitions Weed Divest of marginal assets Stock-keeping unit ( SKU ) rationalisation Feed Step change support levels and strategic direction of power brands Understanding consumer need states Brand portfolio strategy Innovation and revitalisation focus Segmentation modelling Enhanced brand investment Increased focus on marketing competencies Joint business planning Customer-centric organisational design Trade terms optimisation Skills and capacity development Optimise channel and customer mix Economic growth rates: Low GDP Increased competition Few acquisition targets Innovation failure Market share loss: Private label growth Talent retention Increased competition Market share loss and competition: Constrained consumer spending Private label growth Product safety and contamination: Consumer activism Concluded evaluation of underperforming assets with appropriate action identified Stock-keeping unit rationalisation Pioneer Foods International positioned as a growth vector Unbundling of Quantum Foods Bakeries re-engineering is gaining traction Market share increase The bottling contract with PepsiCo International will not be renewed in 2015 by mutual agreement Increased investment in consumer insights Robust category strategies formulated 59 new product offerings White Star Quick and Bokomo Corn Flakes voted Product of the Year 2014 Icon brand status awarded to Spekko rice Several brands recognised in Sunday Times Top 100 Brands Survey Selective joint business planning with retailers Customer-centric organisational structure established Customer-centric training curriculum developed Brand Academy curriculum developed Marketing competency calibration and defined competency framework Pioneer Foods In-Store merchandising partnership enhanced Trade terms structure reviewed 18 PIONEER FOODS :: INTEGRATED REPORT :: 2014

21 Strategic themes Initiatives Risks 2014 progress RESET THE COST BASE AND STEP UP PRODUCTIVITY BUILD A HIGH- PERFORMANCE TEAM Organisational restructuring and streamlining Capitalise on parenting advantage and One Pioneer business model Procurement Finance and admin Logistics Efficiency management focus Pricing Manufacturing Talent calibration Transformation Talent management Skills development Strengthening of employer proposition Efficiency and cost focus: Savings targets not fully realised Deployment of full savings to be competitive Input cost volatility Business interruption Talent and high performance culture: Skills availability Slow cultural evolution Governance and regulatory compliance Technology and innovation Transformation Rightsizing exercise completed for 2014 Consolidation of Bokomo Foods and Ceres Beverages completed Further centralisation of procurement Pioneer Foods Logistics Services ( PFLS ) established Year-on-year total operating costs maintained below inflation Completed IT outsourcing (hardware and applications support) Energy minimisation opportunities ( EMOs ) identified and implemented Talent pool assessment and job grading completed Leadership brand design redevelopment completed Short and long-term incentive schemes ( STI and LTI ) redesigned to align with strategic objectives Improved talent management Enhanced focus on employee engagement completed in progress PIONEER FOODS :: INTEGRATED REPORT ::

22 PERFORMANCE REVIEW Financial performance summary Change Financial results (R m) Revenue for continuing operations % Operating profit, before items of a capital nature for continuing operations: Actual % Adjusted* % Headline earnings: Actual % Adjusted* % Headline earnings for continuing operations* % Net cash profit from operating activities % Net cash generated from operations % Capital and reserves (7%) Performance per share (cents) Headline earnings: Actual % Adjusted* % Headline earnings for continuing operations* % Dividend** % Net asset value (8%) Price at year-end % Core ratios (%) Operating profit margin for continuing operations* Return on average net assets for continuing operations* Return on average shareholders funds* Net debt-to-equity 9 22 * Adjusted for the impact of the Phase I B-BBEE charge. ** The dividend for 2014 excludes the dividend in specie declared with the unbundling of Quantum Foods. Non-financial performance summary Number of employees B-BBEE level 4 4 CSI spend R31 million R34 million Energy consumption (MWh) Water withdrawal (m 3 ) 3.1 million 4.7 million Scope 1 and 2 emissions (tco 2 e) PIONEER FOODS :: INTEGRATED REPORT :: 2014

23 Group five-year financial review 2014 R m 2013 Restated R m 2012* R m 2011* R m 2010* R m Consolidated statement of comprehensive income Revenue Profit before items of a capital nature and income tax Before adjustments Competition Commission penalties (654.2) Broad-based employee share incentive scheme share-based payment charge (187.3) (145.9) 35.6 (45.0) (48.0) Once-off share-based payment charge on B-BBEE equity transaction (160.7) Items of a capital nature (123.0) (220.2) (5.4) (0.8) (10.3) Income tax expense (451.9) (210.6) (311.9) (319.9) (383.9) Profit for the year Attributable to: Owners of the parent Non-controlling interest Operating profit before items of a capital nature Headline earnings for the year Consolidated statement of financial position Property, plant and equipment, intangible assets and biological assets Deferred income tax Loans to joint ventures and investment in associates Non-current trade receivables and available-for-sale financial assets Current assets Total assets Capital and reserves attributable to owners of the parent Non-controlling interest Total equity Non-current borrowings Provisions, non-current derivative financial instruments and share-based payment liability Non-current liability accrual for Competition Commission penalties Deferred income tax Current liabilities, excluding accrual for Competition Commission penalties Current liability accrual for Competition Commission penalties Total equity and liabilities Consolidated statement of cash flows Net cash profit from operating activities Before Competition Commission penalties paid Competition Commission penalties paid (195.7) Working capital changes (266.2) (446.8) 95.1 Accrual for Competition Commission penalties paid (216.7) (216.7) (66.7) Cash effect from hedging activities (7.8) 22.7 (32.2) Income tax paid (386.4) (233.1) (257.7) (261.5) (353.0) Net cash flow from operating activities Net cash flow from investment activities (392.7) ( ) (753.0) (933.4) (805.3) Net cash surplus/(deficit) (91.2) (10.9) (130.9) Net cash flow from financing activities (422.0) (200.2) 44.6 (232.3) (448.6) Net cash and short-term borrowings from business combinations and disposal of subsidiaries (11.3) Net increase/(decrease) in cash, cash equivalents and bank overdrafts (291.4) 22.4 (363.2) Note: * Not restated for the impact of IFRS 11 Joint Arrangements and IAS 19 (revised) Employee Benefits. PIONEER FOODS :: INTEGRATED REPORT ::

24 PERFORMANCE REVIEW (CONTINUED) Group five-year financial review (continued) 2014 R m 2013 Restated R m Profitability (%) Revenue growth (3.4) Operating profit margin (Note 1) Operating profit margin (Note 2) Effective tax rate Return on average net assets (Note 1) Return on average net assets (Note 2) Return on average shareholders funds (Note 1) Return on average shareholders funds (Note 2) * R m 2011* R m 2010* R m Liquidity and solvency Net debt-to-equity ratio (%) Current ratio (times) Acid test ratio (times) Cash profit interest cover (times) Net interest cover (times) Dividend cover (times) Performance per share (cents) Earnings Headline earnings (Note 1) Headline earnings (Note 2) Dividend Net asset value Productivity Revenue to net asset cover (times) Revenue per employee (R 000) Net assets per employee (R 000) Number of permanent employees Notes: 1. Calculated after the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE equity transaction (only 2012) and the annual share-based payment charge on the Phase I B-BBEE equity transaction. 2. Calculated before the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE equity transaction (only 2012) and the annual share-based payment charge on the Phase I B-BBEE equity transaction. * Not restated for the impact of IFRS 11 Joint Arrangements and IAS 19 (revised) Employee Benefits. 22 PIONEER FOODS :: INTEGRATED REPORT :: 2014

25 2014 R m 2013 Restated R m Segments Revenue Essential Foods (formerly Sasko) Quantum Foods Bokomo Foods Ceres Beverages Less: Internal revenue (298.0) (248.5) (298.0) (253.8) (202.9) * R m 2011* R m 2010* R m Operating profit before items of a capital nature Essential Foods (formerly Sasko) Before accrual for Competition Commission penalties Accrual for Competition Commission penalties (654.2) Quantum Foods 21.6 (18.9) (42.3) Bokomo Foods Ceres Beverages Other (115.7) (154.3) (89.5) (118.6) (101.6) Adjusted operating profit before items of a capital nature Once-off share-based payment charge on B-BBEE equity transaction (160.7) Reversal of depreciation charge in Quantum Foods legal entities (asset held for sale) 54.7 Share-based payment charge on Phase I B-BBEE transaction (187.3) (145.9) 35.6 (45.0) (48.0) Operating profit before items of a capital nature Depreciation and amortisation Essential Foods (formerly Sasko) Quantum Foods Bokomo Foods Ceres Beverages Other Note: * Not restated for the impact of IFRS 11 Joint Arrangements and IAS 19 (revised) Employee Benefits. PIONEER FOODS :: INTEGRATED REPORT ::

26 PERFORMANCE REVIEW (CONTINUED) Share price statistics GROUP Restated 2012* 2011* 2010* Share trading statistics Price per share (cents): At year-end High Low Net number of issued shares ( 000): Total number of issued shares Number of treasury shares share incentive trust (1 110) (1 422) (2 545) (3 881) (5 112) Number of treasury shares subsidiary (17 982) (17 982) (17 982) (17 982) (17 982) Number of treasury shares participants to B-BBEE equity transaction (18 092) (18 092) (18 092) Number of treasury shares BEE Trust (10 600) (10 600) (10 600) Market capitalisation (R 000) Dividend yield (%) Headline earnings yield (%) (Note 1) Headline earnings yield (%) (Note 2) Earnings yield (%) Price earnings ratio (times) (Note 1) Price earnings ratio (times) (Note 2) Notes: 1. Calculated after the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE equity transaction (only 2012) and the annual share-based payment charge on the Phase I B-BBEE equity transaction. 2. Calculated before the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE equity transaction (only 2012) and the annual share-based payment charge on the Phase I B-BBEE equity transaction. * Not restated for the impact of IFRS 11 Joint Arrangements and IAS 19 (revised) Employee Benefits. 24 PIONEER FOODS :: INTEGRATED REPORT :: 2014

27 Definitions Operating profit margin Operating profit, before items of a capital nature, as a percentage of revenue. Effective tax rate Income tax expense included in profit or loss as a percentage of profit before income tax. Return on average net assets Operating profit, before items of a capital nature, as a percentage of total assets, excluding any investment in and loans to joint ventures, investments in associates, available-for-sale financial assets, non-current trade and other receivables, cash and cash equivalents, current income tax assets and deferred income tax assets, reduced by trade and other payables, provisions for other liabilities and charges, derivative financial instruments, accruals for Competition Commission penalties and sharebased payment liabilities. The average is based on the carrying values as at the beginning and end of the year. Return on average shareholders funds Headline earnings as a percentage of average capital and reserves attributable to owners of the parent, as determined at the beginning and end of the year. Net debt-to-equity ratio Borrowings, net of cash and cash equivalents, as a percentage of capital and reserves attributable to owners of the parent. Current ratio Ratio of current assets to current liabilities. Acid test ratio Ratio of current assets less inventories and current biological assets to current liabilities. Cash profit interest cover Net cash profit from operating activities plus dividends received, divided by net interest. Net interest cover Operating profit, before items of a capital nature, plus dividends received, divided by net interest. Dividend cover Headline earnings for the year adjusted for the IFRS 2 share-based payment charge on the Phase I B-BBEE transaction, and in 2012 the onceoff IFRS 2 share-based payment charge on the Phase II B-BBEE equity transaction, divided by total dividends declared (including dividends on class A ordinary shares). Net asset value per share Capital and reserves attributable to owners of the parent divided by the total number of issued ordinary shares, excluding treasury shares held by a subsidiary, treasury shares held by the share incentive trust, treasury shares held by the participants to the B-BBEE equity transaction and treasury shares held by the Pioneer Foods Broad-Based BEE Trust. Revenue to net asset cover Revenue divided by net assets. Revenue per employee Revenue divided by permanent employees at year-end. Net assets per employee Capital and reserves attributable to owners of the parent divided by permanent employees at year-end. Market capitalisation Market price per ordinary share at year-end multiplied by the total number of issued ordinary shares. Dividend yield Dividend per ordinary share divided by the market price per ordinary share at year-end. Headline earnings yield Headline earnings per ordinary share divided by the market price per ordinary share at year-end. Earnings yield Earnings per ordinary share divided by the market price per ordinary share at year-end. Price earnings ratio Market price per ordinary share at year-end in relation to headline earnings per ordinary share. Ordinary share/shares For the purposes of all the above definitions ordinary share/shares exclude(s) class A ordinary shares. Impact of Phase I B-BBEE transaction Annual cash-settled IFRS 2 share-based payment charge on class A ordinary shares issued to employees in terms of a broad-based employee share scheme. Impact of Phase II B-BBEE transaction Once-off non-cash flow IFRS 2 share-based payment charge on ordinary shares in terms of a B-BBEE equity transaction. PIONEER FOODS :: INTEGRATED REPORT ::

28 CHAIRMAN'S REPORT ZL Combi Chairman 26 PIONEER FOODS :: INTEGRATED REPORT :: 2014

29 Introduction Pioneer Foods has made a compelling start to its journey of creating the future towards The organisation has undergone significant change in a challenging operating environment that has enhanced the organisation s ability to create value on a sustainable basis. The priority going forward is to maintain this momentum, entrench leading practices and to identify opportunities for growth. It is imperative that the Group continuously considers its social, environmental and economic impact required to operate a sustainable and ethical business. Pioneer Foods continues to invest in various corporate social investment and sustainability initiatives in the communities surrounding its operations. Governance and compliance The Board of Pioneer Foods is committed to the principles of good corporate governance, as articulated in the King Code of Governance for South Africa, 2009 ( King III ). The Board is kept informed on the Group s progress and performance against the approved strategy and plays a definitive role in assessing all corporate activity and investment decisions. Pioneer Foods is a listed company involved in the manufacturing and supplying of food, beverages and related products, and is subject to a comprehensive suite of regulatory compliance requirements. The Group has developed a compliance framework that involves the monitoring of any regulatory changes and assessing the potential impact on the Group, customers and, ultimately, the consumer. This framework is based on the Generally Accepted Compliance Practice ( GACP ), as endorsed by the Compliance Institute of Southern Africa ( CISA ). Business environment Pioneer Foods is directly impacted by the lacklustre market conditions that influence South Africa s current economic, social and political environment. It is critical to the sustainability of the country that South Africa s brand proposition is improved in the eyes of the global investment community to encourage a growth environment. Without industrial growth and significant infrastructural investment, the current social limitations of unemployment, inadequate education and increased labour unrest will continue to inhibit the country s progress. Opportunities remain for businesses to collaborate with government on alleviating the burden of policy uncertainty and investing in real growth. PIONEER FOODS :: INTEGRATED REPORT ::

30 CHAIRMAN'S REPORT (CONTINUED) Milestones Pioneer Foods step-changed its performance in a challenging environment: Executive leadership established a robust and agile business model underpinned by a clear and compelling corporate strategy, thereby enhancing the Group s ability to respond to challenges and opportunities in the market. Restructuring at operational and corporate level resulted in improved focus and efficiencies. The separate positioning of the international business to drive export sales growth and expansion. Quantum Foods was successfully unbundled to existing shareholders and listed on the Johannesburg Stock Exchange on 6 October In terms of human capital, the Group is focused on creating an enabling environment of growth and leadership, and particular emphasis will be placed on driving transformation and equal opportunities within the organisation. Prospects Following a year of intense internal focus that produced tangible results, the focus for the coming year will be bedding down the more streamlined structure and business model to sustain the positive impact of the strategy on the Group s value creation process. The Group s most valued intellectual capital resides in its brands and its people, as both represent the organisation s competitive edge in the market. Pioneer Foods is focused on leveraging the existing potential in each of its brands to increase penetration through marketing and innovation initiatives, thereby unlocking growth. Appreciation I extend my gratitude to all Pioneer Foods stakeholders for their commitment to the Group during this period of internal transformation in a constrained external environment. I would like to thank Phil Roux and the leadership of Pioneer Foods for their tenacity and dedication to the Group strategy which will take this business into the future. ZL Combi Chairman 28 PIONEER FOODS :: INTEGRATED REPORT :: 2014

31 PIONEER FOODS :: INTEGRATED REPORT ::

32 CHIEF EXECUTIVE OFFICER'S REPORT PM Roux Chief Executive Officer PIC TO COME 30 PIONEER FOODS :: INTEGRATED REPORT :: 2014

33 Introduction Pioneer Foods is proactively managing current market challenges by focusing on the twin objectives of strengthening the brands and expanding margins. The Group has come through an intense and challenging year defined by difficult external conditions as well as significant internal change. The good performance is an indication of Pioneer Foods resilience and commitment to the new business model and structure, thereby enabling its future sustainability. The achievements to date show a positive start along this necessary journey, and will be maintained with clearly articulated growth strategies and rigorous cost management. The promising part is that, while much has been achieved, numerous value creation opportunities remain. The implementation of the corporate strategy is progressing well as the Group strives towards its goal of being the reference point for fast-moving consumer goods ( FMCG ) in South Africa. Chapter one, the internal focus of the strategy, is largely complete, and many of the objectives which the Group committed to have been achieved or are in progress. Chapter two relies on sustaining the aforementioned and ingraining a deeper focus on growth in a more granular way. Challenges In a constrained consumer market, competition intensifies. The local market comprises a combination of formal and informal trading platforms, marketing and selling of products to a diverse range of consumers across the socioeconomic spectrum. This requires a dynamic demand management approach. Cost push and consequent margin compression remain the primary challenges for the industry. The pedestrian growth of the South African economy in recent years has not shown any signs of improving in the short term, as unemployment remains cripplingly high and labour demands continue to outstrip productivity improvements. Hence the imperative of bolstering the power brands, optimising efficiencies and pursuing opportunities to grow and diversify is of paramount importance. PIONEER FOODS :: INTEGRATED REPORT ::

34 CHIEF EXECUTIVE OFFICER'S REPORT (CONTINUED) Financial results In the face of a challenging operating environment, Pioneer Foods delivered a pleasing set of results, with revenue from continuing operations (excluding Quantum Foods) increasing by 9% to R17.7 billion. Operating profit for continuing operations, adjusted for the impact of the Phase I B-BBEE charge, increased by 46% to R1.680 billion at a margin of 9.5% compared to 7.1% in Total Group headline earnings (inclusive of Quantum Foods), as adjusted, grew 46% to R1 242 million, representing 678 cents per share. A final dividend of 156 cents per share was declared, which brings the total dividend for the year to 221 cents, an increase of 67%. More information on Pioneer Foods financial performance can be found in the Financial Review on page 34. Strategy implementation Strategy development involved identifying areas with the potential to unlock value with the requisite changes to the business model. This exercise has provided Pioneer Foods with clear direction for a structured journey of continuous improvement into the future. It is imperative that a culture of high performance becomes ingrained within the organisation. Refer to the strategy overview on page 16 for detail on initiatives and implementation progress during the year. Non-financial performance Sustainability imperatives underpin the five themes of the corporate strategy as businesses in the world of today cannot be successful at the expense of society or the environment. The milestones achieved over the past 18 months were accompanied by intensified stakeholder engagement across all channels. The major initiatives associated with the centralisation of Group services and the consolidation of the One Pioneer model required the support of employees and business partners. Reducing energy usage is a priority for all businesses and presents a particular challenge in the production-intensive FMCG industry. The Group has a responsibility to reduce its energy usage and carbon footprint wherever possible, and energy efficiency represents an important component of cost management. This is not only significant in light of the impending carbon taxation, but is part of a global drive to reduce the negative impact of human activity on the environment. Pioneer Foods participated in the Carbon Disclosure Project for the fourth time and publicly disclosed its performance for the first time during the year. The Group recorded an improvement in its overall score, and appropriate benchmarks and goals have been set to reduce energy usage in the short, medium and long term. Pioneer Foods provides support to a range of community initiatives primarily focused on education, environment and food security programmes. Investment in social and economic development is important to the longevity of the Group, as the development of the local population will ultimately ensure a sustainable consumer environment in future. More information on Pioneer Foods sustainability approach, performance and prospects can be found on page 56. In the face of a challenging operating environment, Pioneer Foods delivered a pleasing set of results. 32 PIONEER FOODS :: INTEGRATED REPORT :: 2014

35 Outlook The overarching objective for Pioneer Foods is sustaining growth in a difficult market by consistently and diligently aligning operational performance with the corporate strategy. The Group has bolstered its asset base during the capital expenditure cycle of recent years, with 2014 being marked by the full commercialisation of the Shakaskraal bakery and largely completed consolidation of Malmesbury and Paarl mills. Capital expenditure going forward will mainly be linked to asset care and to optimise productivity. Pioneer Foods is geared for growth. The expansionary focus is not limited to South Africa and opportunities in new geographies will be explored to deleverage the impact of conditions in the local markets. Africa represents opportunities for and challenges to expansionary growth, and the Group is committed to thorough and extensive market research to understand the context of potential markets on the continent. Pioneer Foods International has been positioned as a growth vector to further expand the Group s sizeable existing international platform, both in terms of exports and in-country business partnerships. I would like to thank our committed employees who have again proved their resilience in the face of necessary change. Thanks go to the senior teams for their dedication to the implementation of the strategy, and to the Board for its continued support and guidance. PM Roux Chief Executive Officer PIONEER FOODS :: INTEGRATED REPORT ::

36 FINANCIAL REVIEW The Group performed well for the year under review generating positive leverage of more than five times given a revenue growth of 9% and adjusted operating profit growth of 46%. The following salient features underpinned this performance: Beverage and cereal volume growth Normalisation of maize profitability Traction in bakeries across the value chain Power brands share recovery and gains Robust Africa and international performance Significant benefits from cost and efficiency efforts Quantum Foods turnaround and unbundling The financial performance and reporting for the year has been impacted by the treatment of Quantum Foods as a discontinued operation and non-operational costs related to the Phase I (2006) B-BBEE transaction. Statutory results are therefore adjusted in the table below and throughout this report to provide clarity on comparable operational performance. Unbundling of Quantum Foods and impairments A comprehensive process was followed to ensure the successful unbundling and ultimate listing of Quantum Foods on the JSE on 6 October This was a key component of shaping a winning corporate portfolio given a core focus on building a branded business. As at 30 September 2014, and for the comparative period, Quantum Foods was treated as an asset held for sale and treated as a discontinued operation in the financial results. In terms of IFRS 5, the net assets of Quantum Foods have to be valued at each reporting date and recognised at the lower of carrying amount and fair value less costs to sell. An independent valuation, which reflected the continued macro-challenges of the broiler industry, resulted in a further impairment for the year of R57 million after tax (2013: R208 million). Due to sustained losses, the investment in the Pepsi business was impaired in the reporting period by an after-tax amount of R34 million. The above impairments are included in items of a capital nature. Group summary Change Total earnings (R m) % Earnings per share (cents) % Plus: Items of a capital nature (after tax) (R m) Headline earnings (R m) % Headline earnings per share (cents) % Adjusted for after-tax effect of Phase I B-BBEE transaction % Adjusted headline earnings (R m) % Adjusted HEPS (cents) % Impact of non-operational costs related to the B-BBEE Phase 1 transaction The 2006 Phase 1 B-BBEE transaction, benefiting more than employees at the time, is a cash-settled scheme. The number of participants has declined to as at 30 September 2014 as a result of beneficiaries leaving the Group s employment. The total pre-tax value paid to such beneficiaries amounts to R185 million since inception of the scheme. The outstanding obligation is remeasured to fair value taking into account the Pioneer Foods share price at each reporting date. For the year under review the share price increased by 35% from R87.50 to R118.00, resulting in a charge to profit or loss of R187.3 million. The charge in PIONEER FOODS :: INTEGRATED REPORT :: 2014

37 was exacerbated by the accelerated vesting of the Quantum Foods participants who left the Group s employment early in the new financial year. In the 2013 reporting period the share price increased from R53.00 to R87.50, resulting in a charge to profit or loss in that year of R145.9 million. Statement of comprehensive income Due to the fact that Quantum Foods is being treated as a discontinued operation, its results are excluded from current and comparative numbers. Group summary (Continuing operations) Change Revenue (R m) % Cost of goods sold (R m) (12 321) (11 528) 7% Gross profit (R m) % Gross profit margin (%) Operating profit (R m)* % Operating profit margin (%)* Headline earnings (R m)* % Headline earnings per share (HEPS) (cents)* % Diluted HEPS (cents)* % * Before items of a capital nature and adjusted for the impact of the Phase I B-BBEE transaction Revenue from continuing operations increased by 9% to R17.7 billion for the period under review. This is largely attributable to increased selling prices, exports and sales mix. There was a strong recovery in both maize and bread volume and value market shares in the second half. The operational reports from page 40 to page 55 provide detail on the volume and price performance of all main product categories. Revenue analysis by region 2014 R m 2013 R m Change South Africa % Africa % Rest of World % Continuing operations % Discontinued operations: Quantum Foods Group revenue % Cost of goods sold increased by 7% despite cost push and exchange rate pressures, resulting in gross margin expanding from 29.0% to 30.4%. The increase in direct conversion costs was contained at 5%, with raw material costs increasing by slightly more than 7%. Growth in cash operating expenses was well contained at less than 4%, yielding exceptional operating leverage. Operating profit, before items of a capital nature, and adjusted as described above, increased by 46% to R1 680 million, with operating margin improving to 9.5% (2013: 7.1%). PIONEER FOODS :: INTEGRATED REPORT ::

38 FINANCIAL REVIEW (CONTINUED) Segmental performance Revenue analysis by segment 2014 R m 2013 R m Change Essential Foods % Groceries % Bokomo Foods % Ceres Beverages % Less: Internal revenue (298) (242) Continuing operations % Discontinued operations: Quantum Foods % Group revenue % Operating profit analysis by segment 2014 R m 2013 R m Change Essential Foods % Groceries % Bokomo Foods % Ceres Beverages % Other (131) (174) Continuing Operations* % * Before items of a capital nature and adjusted for the charge in respect of the Phase I B-BBEE transaction Operating margin by segment Essential Foods 9.8% 7.6% Groceries 10.4% 8.8% Bokomo Foods 10.9% 8.9% Ceres Beverages 9.8% 8.7% Group continuing operations 9.5% 7.1% The summarised segmental performance above demonstrates each segment s contribution to the overall results. Essential Foods posted good results in a challenging, low-growth environment. Maize profitability improved to normalised levels through judicious price/volume management in a difficult procurement season. Wheat posted pleasing results while bakeries made exceptional progress on clear value drivers, resulting in significantly improved profitability. Rice benefited from reduced input costs and Pasta continued to contribute positively. Bokomo Foods performance was bolstered by a larger fruit crop and solid performance from the cereals business. Corn Flakes volumes grew significantly given favourable consumer product acceptance. Biscuits achieved targeted volume growth, albeit at lower margins. The beverage business performed well as a result of strong volume growth, both locally and internationally, 36 PIONEER FOODS :: INTEGRATED REPORT :: 2014

39 long-life juice market share gains and improved operational efficiencies. The Groceries merger of Bokomo Foods and Ceres Beverages was successfully concluded and overall costs were particularly well managed throughout the year. Quantum Foods returned to profitability after significant re-engineering efforts. A good performance from the feeds business, price recovery in the egg category, the downscaling of the Western Cape Broiler operations and pleasing performance from Mega Eggs (Zambia) were the main contributors to the business turnaround. For more detailed commentary on the divisional performance, refer to the operational reports on pages 40 to 55. Dividend A gross final dividend of 156 cents per ordinary share has been declared. With an interim dividend of 65 cents per ordinary share, the total dividend for the year amounts to 221 cents per ordinary share, a 67% increase on 2013 (132 cents per share). In total the dividend declared for the year represents a 2.5 times dividend cover on an adjusted basis. Statement of financial position The good financial performance and capital expenditure limited to R486 million (2013: R1 378 million), resulted in much improved return ratios, as summarised below: Return on average net assets Essential Foods Groceries Bokomo Foods Ceres Beverages Continued operations % 2013 % Capital expenditure R m Change Expansion capital (76%) Replacement capital (8%) Total capital (65%) PIONEER FOODS :: INTEGRATED REPORT ::

40 FINANCIAL REVIEW (CONTINUED) The Malmesbury/Paarl mill consolidation project was the main beneficiary of the expansion capital. The balance of R216 million was spent on replacement of capital where needed to ensure prudent and efficient asset care. Debt and financing facilities continuing operations R m Change Third-party debt % Own debt (6%) Total debt (4%) Less: Cash % Net debt (45%) Net debt-to-equity ratio (%) EBITDA % Net debt-to-ebitda ratio (%) Statement of cash flows Cash flow analysis 2014 R m 2013 R m Change Net cash profit from operating activities % Competition Commission penalty (217) Change in working capital Inventory (19) (276) Debtors (334) 30 Creditors Other (36) (40) Cash effect from commodity hedging (8) 23 Cash generated from operations % Cash generated from operations increased by 51% to R2 154 million largely as a result of the growth in operating profit and a R28 million release from net working capital. Inventory increased by R19 million and debtors increased in line with increased trade and export sales in the latter two months of the financial year and a late non-trade related receipt. Improving the Group s cash flow from operations remains a key focus area. Income tax of R386 million (2013: R233 million) was paid during the year. Income tax for the year amounted to R452 million at an effective tax rate of 32%. 38 PIONEER FOODS :: INTEGRATED REPORT :: 2014

41 Net debt for continuing operations decreased by R794 million to R666 million, yielding a net debt-toequity ratio of 11% (2013: 22%). Net debt, excluding the third-party debt of R501 million relating to the 2012 Phase II B-BBEE transaction results in a net debt-to-equity ratio of 3% (2013: 15%). The Group s total net debt to EBITDA ratio of 33% is well within borrowing covenant limits. The Group s total debt facilities amount to R3.5 billion, which is contracted with a syndicate of five financial institutions. This quantum caters sufficiently for the Group s long-term and working capital requirements. The structure of the facility is as follows: R600 million bullet loan repayable in September 2018 R500 million revolving facility, currently undrawn R2 billion in general banking facilities, inclusive of specific raw material facilities to cost-effectively cater for the peak periods in working capital needs in the more active commodity trading months. The Group is comfortable that the healthy cash flows generated from normal operating activities, and the above secured facilities, will be adequate to meet the working capital requirements and expansion plans of the foreseeable future. The table below indicates that the excellent performance for 2014, achieved under challenging circumstances as the new business was embedded, has created a solid base for sustained performance in future. R400 million bullet loan repayable in September 2016 Financial health indicators Key ratios Gross margin* 30.4% 29.0% Operating profit margin* 9.5% 7.1% Dividend cover Return on average net assets* 26% 19% Return on equity 20% 13% Net debt to equity (excluding third-party debt) 3% 15% EBITDA* interest cover 13 times 10 times * Continuing operations adjusted for the Phase I B-BBEE charge PIONEER FOODS :: INTEGRATED REPORT ::

42 PIONEER FOODS :: INTEGRATED REPORT :: 40 SECTION TITLE 2014

43 OPERATIONAL REPORTS MINI CONTENTS P42: ESSENTIAL FOODS P46: GROCERIES P52: QUANTUM FOODS SECTION TITLE PIONEER FOODS :: INTEGRATED REPORT ::

44 OPERATIONAL REPORT ESSENTIAL FOODS Essential Foods is a leading manufacturer of essential and valueadded foods in South Africa and comprises two business units Grains and Bakeries. Business environment Prices of soft commodities remain driven by supply and demand dynamics currently characterised by good global inventory levels. Exchange rate volatility continues to impact local prices. The latter part of the fiscal year witnessed a sharp fall in maize pricing with a concomitant increase in competition. Consumption levels at an industry level were notably suppressed within most essential foods categories. Performance overview Essential Foods delivered satisfactory overall yearon-year operating revenue growth, with particularly strong second-half performance in the bread category. Operating profit increased significantly despite a challenging business environment, with value creation initiatives such as further rationalisation of the bakery footprint, manpower reduction and overall prudent operating cost management contributing to expanded operating margins. The major capital expenditure projects of recent years were completed in The state-of-the-art Shakaskraal bakery in KwaZulu-Natal achieved planned hurdle rates post commissioning and has resulted in improved market penetration. The consolidation of the Malmesbury and Paarl mills will reach completion in the first quarter of the new financial year. New brand campaigns were developed for both Sasko bread and White Star maize meal which are expected to have a positive impact on the market position. FINANCIAL PERFORMANCE Revenue Operating profit Operating profit margin 9.8% Capital spend R323m R10 928m +6% 2013: R10 314m R1 075m +37% 2013: R784m 2013: 7.6% 2013: R690m 42 PIONEER FOODS :: INTEGRATED REPORT :: 2014

45 Category Price change Volume change Performance* Wheaten flour products A large portion of flour produced is transferred to the Group s bread bakeries and pasta plant, and the remainder contributes to a variety of branded and industrial flour products under the Sasko brand. Maize products Maize is manufactured into a variety of staple foods, including maize meal, samp, maize flour and instant porridge, with White Star super maize meal as the flagship brand. Rice The Group imports rice products to South Africa which it markets through its extensive distribution footprint, with Spekko as the flagship brand. Bread The Group supplies fresh bread to the South African market via more than delivery points every day. Pasta A range of wheat-based pasta products are manufactured using local and imported ingredients. The Group produces South Africa s first pasta made from white maize. Beans and legumes The Group is a major supplier of South Africa s branded beans and legumes. +8% -1% +6% -5% +6% +1% +6% +3% +1% +1% +12% +12% Total industry Industry milling volume up by 4.0% Total top-end grocer (TEG) volume declined by 4.9% Increased private label growth Essential Foods Short-term TEG market share gain Total industry Industry milling volume up by 2.8% Total TEG volume up by 3.5% Maize price decrease following exceptional crop Essential Foods Margin precision in procurement and price modelling Enhanced the competitiveness of White Star in TEG sector in the second half Total industry Total TEG volume up by 0.2% Price spreads at origin increased private label competition Essential Foods Improvements in performance with scope for future expansion Continued improvement in Spekko exposure Acceptance of the Select brand across trade channels provided portfolio strength Total industry Total TEG plant bread volume declined by 0.2% Aggressive regional price competition Increased in-store baked bread promotions and participation Essential Foods Operating profit increase of 54% Second-half volume and TEG share turnaround Robust volume gains in traditional markets Marketing, communication and revitalisation of Sasko brand Total industry Total TEG volume up by 3.5% High level of private label participation Essential Foods Marginal share gains on private label Continued pressure from imports limits pricing power Total industry Total TEG volume declined by 3.4% Essential Foods Short-term TEG market share gain * Industry information as of September Source: Aztec and SAGIS PIONEER FOODS :: INTEGRATED REPORT ::

46 OPERATIONAL REPORT (CONTINUED) PRODUCTION FOOTPRINT 5 Wheat mills (as of December 2014) 3 Maize mills 2 Rice and legume plants 1 Pasta plant 15 Bakeries Limpopo North West Gauteng Free State KwaZulu-Natal Eastern Cape Western Cape REVENUE CONTRIBUTION 84% Baking and milling 16% Other grains Eat well feel good 44 PIONEER FOODS :: INTEGRATED REPORT :: 2014

47 SUSTAINABILITY PROGRESS Distribution fleet for bakeries on track to be replaced by more fuel-efficient vehicles by the end of 2016 All product information, including full genetically modified organisms ( GMOs ), responsibly disclosed on product labels Voluntary elimination of legal, but objectionable, substance (ADA) from all bread recipes Product life cycle assessment performed on White Star super maize meal Woodchip boiler at Shakaskraal and Claremont bakeries using sustainable heat energy commissioned More information on Pioneer Foods sustainability approach, performance and prospects can be found on page 56. INNOVATION Revitalising the much loved Sasko bread brand, and accompanying marketing campaign. OUTLOOK The focus for 2015 will be to maintain the levels of operational discipline, cost management and margin precision achieved during the year. The rationalisation of the bakeries manufacturing footprint, value creation plans, added contribution of the consolidated Malmesbury and Paarl mill and closure of Polokwane mill are all expected to have a positive impact on operating efficiency. The Group will continue to invest in supporting power brands to drive performance in search of market share in a low-growth environment. Priority will be given to bedding down the new management structure and maintaining the execution of the Group strategy. PIONEER FOODS :: INTEGRATED REPORT ::

48 OPERATIONAL REPORT (CONTINUED) GROCERIES The Groceries division manufactures, markets and sells a range of food and beverage products, of which cereals and long-life juices are the primary categories, to both local and international markets. Business environment Inflationary increases in raw materials and packaging, exacerbated by reduced spending power of consumers, had an adverse effect on the local market. Rand depreciation was the major contributor to raw and packaging material inflation. Cereals, long-life juice and ice tea achieved strong volume growth in the local market while the rest of the basket remained flat. South Africa is one of a handful of major fruitproducing regions in the world and is well positioned to market a range of fruit-based products to the international retail, industrial and catering sectors. A substantial dried fruit crop on the back of the previous season s bumper crop, coupled with favourable pricing conditions, led to value and volume growth in international markets. The African market was buoyant with very good volume growth, specifically in the juice category. Performance overview The Groceries division delivered overall revenue growth of 15% through healthy volume growth in cereals, fruit and beverage (domestic and international). The Groceries merger of Bokomo Foods and Ceres Beverages resulted in overall synergies, which together with stringent cost management and conversion efficiencies, resulted in operating profit increasing by 36% to R736 million (2013: R543 million). Operating profit margins expanded from 8.8% to 10.4%. FINANCIAL PERFORMANCE: BOKOMO FOODS Revenue Operating profit Operating profit margin 10.9% Capital spend R38m R3 728m +18% 2013: R3 148m R407m +46% 2013: R279m 2013: 8.9% 2013: R84m 46 PIONEER FOODS :: INTEGRATED REPORT :: 2014

49 PRODUCT CATEGORIES: BOKOMO FOODS Category Breakfast cereals The business produces a range of leading cereal brands to South African and international markets, including Weet-Bix, Nature s Source, ProNutro and Bokomo. Dried fruit and nut products Dried fruit products are produced and marketed to retail, industrial and catering sectors. The Safari brand is a leading brand in the South African market while a range of dried fruits and nuts are exported across the globe. Desserts A variety of value-added dessert products, including jelly, instant pudding, cake mixes and baking aids, forms part of the Moir s branded range. Price change South Africa +5% UK -9% Volume change South Africa +5% UK +36% +0% +29% +5% -4% Performance* Total industry Top-end grocer (TEG) volume up by 0.3% Increased competitiveness of smaller brands Bokomo Foods Short-term TEG volume up by 4.1% Significant second-half turnaround with volume growth ahead of the market Strong performances from flagship Weet-Bix and Bokomo Corn Flakes brands Health and wellness consumer trends led to product innovation opportunities Total industry TEG volume down by 2.5% Increased local vine and tree fruit crop supply increased international demand Bokomo Foods TEG volume declined by 3.7%, made up by gains in industrial market Material increase in export volumes Total industry TEG volume down by 2.9% Bokomo Foods TEG volume up by 1.3% Strong first half performance from custard * Industry information as of September Source: Aztec and SAGIS PIONEER FOODS :: INTEGRATED REPORT ::

50 OPERATIONAL REPORT (CONTINUED) FINANCIAL PERFORMANCE: CERES BEVERAGES Revenue Operating profit Operating profit margin Capital spend R3 341m +11% R329m +25% 9.8% R49m 2013: R3 021m 2013: R264m 2013: 8.7% 2013: R56m PRODUCT CATEGORIES: CERES BEVERAGES Category Price change Volume change Performance* Fruit juice The business produces a range of long-life fruit juice products, catering to the still and sparkling markets. Liqui-Fruit and Ceres brands form the bulk of products and Ceres is the major export brand, particularly into African markets. Dilutables South Africa +3% International +14% South Africa +5% International +10% A range of dairy-based and fruitbased concentrate mixes are produced and marketed to the local and international market. -4% +4% Total industry Top-end grocer (TEG) volume down by 3.3% Ceres Beverages TEG volume up by 5% Significant export volume growth Satisfactory local value market share growth Good volume growth in the African markets Total industry TEG volume down by 0.6% Dairy fruit blends declining, while squashes are growing Ceres Beverages TEG volumes down by 0.8% Significant cost saving initiatives implemented Growth of Caribbean economy label provides portfolio strength Carbonated soft drinks The Group has the sole franchise rights in South Africa to bottle, sell and distribute (under licence from PepsiCo International) the well-known international brands Pepsi, Miranda, 7Up and Mountain Dew. Ice tea Lipton Ice Tea is a leader in the international ice tea category and is bottled by Ceres Beverages by agreement with the Pepsi Lipton International joint venture. +1% -7% -1% +18% Total industry TEG volume up by 1.4% Ceres Beverages TEG volume declined by 6.6% Volumes declined as a result of limited pricing power and market penetration Strategic review of business is nearing completion Total industry TEG volume up by 9.6% Ceres Beverages TEG volume up by 17.9% Significant volume and share growth achieved Improved production output and increased trade activations yielding good results * Industry information as of September Source: Aztec and SAGIS 48 PIONEER FOODS :: INTEGRATED REPORT :: 2014

51 PRODUCTION FOOTPRINT 18 Bokomo Foods facilities 3 Ceres Beverages facilities Gauteng Free State KwaZulu-Natal Northern Cape Western Cape REVENUE CONTRIBUTION Bokomo Foods Ceres Beverages 51% Breakfast cereals 22% Dried fruit products 7% Baking aids and desserts 20% Other 40% Domestic juices 28% Export juices 12% Dilutables 14% Carbonated soft drinks 5% Ice tea 1% Other PIONEER FOODS :: INTEGRATED REPORT ::

52 OPERATIONAL REPORT (CONTINUED) SUSTAINABILITY PROGRESS Bokomo Foods Installed systems to reduce electricity consumption. Reduced water consumption by installing water efficiency systems. Ceres Beverages Water recovery pasteurisation systems to reduce water consumption. Upgraded effluent treatment plant. Lightweighting of plastic bottles. Warehouses Installed energy-saving lights with day/night switches to reduce electricity consumption. More information on Pioneer Foods sustainability approach, performance and prospects can be found on page PIONEER FOODS :: INTEGRATED REPORT :: 2014

53 INNOVATION Oat-Bix: Ready-to-eat breakfast biscuits made from oats for the discerning consumer looking for a high-protein, oats-based breakfast cereal. Oat pops: A ready-to-eat oats-based chocolate cereal for children. Protein Oats: South Africa s first whole grain, high-protein oats product, responding to highend consumer preferences for hot breakfasts and protein-rich, high-fibre food. Premiumising of Ceres fruit juices with new sophisticated packaging and the inclusion of fruit cells. OUTLOOK Prospects in the local market remain subdued while export conditions into various geographies continue to offer higher growth opportunities. Domestically, growth and share gains are an imperative while relentlessly targeting cost and efficiency opportunities. Underperforming products are being assessed with the objective of honing the overall Groceries product portfolio. The optimisation of manufacturing plants, as well as the support provided by centralised logistics services, will enable further implementation of the corporate strategy. A new chocolate flavour to expand the popular Bokomo Corn Flakes range. Fruitree Squash: A new orange flavour squash product was introduced to the market. PIONEER FOODS :: INTEGRATED REPORT ::

54 OPERATIONAL REPORT (CONTINUED) QUANTUM FOODS Quantum Foods comprises three integrated business units: Nulaid (eggs and layer livestock); Tydstroom (broilers) and Nova Feeds (animal feed). The business also has broiler, layer breeding and commercial egg operations in Zambia and Uganda. Quantum Foods has, subsequent to year-end, been unbundled to shareholders and listed on the JSE as a separate entity. Business environment The business environment in both the broiler and egg industries suffered from record high feed prices driven by high maize and soybean meal prices, negatively impacting cost push. Broiler prices were negatively impacted by imports and high levels of domestic supply, coupled to muted consumer demand. Performance overview The business returned to profitability this year with operating profit of R22 million. Contribution from the African operations increased 55% year on year as a result of favourable market conditions in those geographies. The newly acquired egg business in Zambia, Mega Eggs, performed very well. A decision was taken to change the business model in the Western Cape in that Quantum Foods has discontinued its abattoir operations and instead has contracted the sale of live broilers to a third party. FINANCIAL PERFORMANCE Revenue Operating profit Operating profit margin Capital spend* R3 591m R22m 0.61% R45m 2013: R3 576m 2013: (R19m) 2013: (0.53%) 2013: R484m * Including business combinations 52 PIONEER FOODS :: INTEGRATED REPORT :: 2014

55 PRODUCT CATEGORIES Category Eggs (Layers) The fully integrated commercial egg business comprises facilities for rearing laying hens, several laying farms and egg packaging and processing facilities. Eggs are distributed nationally in the retail, wholesale and informal markets under the established Nulaid brand. Broilers Price change Volume change +9% -8% The Tydstroom business processes and markets a variety of fresh and frozen chicken meat products. +4% -10% Animal feeds A range of value-added animal feed products is supplied to various agricultural industries. +9% +6% Performance* Total industry Industry supply declined by 4.9% Favourable turn in the local egg pricing cycle Quantum Foods Deliberate volume decrease Continued strong penetration of Nulaid, which remains an icon brand in the local market Total industry Industry supply increased by 0.7% Consolidation trend across the industry in the face of industry challenges Quantum Foods Industry under pressure from price increases led to a volume decline Executed the decision to exit abattoir business in the Western Cape Total industry Industry growth of 3.6% Quantum Foods Effective cost management led to decreased production cost per ton African operations Quantum Foods operates broiler and layer breeder businesses in Zambia and Uganda, as well as a commercial egg business in Zambia. N/A N/A Quantum Foods Positive performance in Zambia and strong full-year contribution from Mega Eggs Good performance in Uganda Ongoing investment in facilities to increase capacity Source: SAPA (September 2014) and AFMA (March 2014) PIONEER FOODS :: INTEGRATED REPORT ::

56 OPERATIONAL REPORT (CONTINUED) PRODUCTION FOOTPRINT 29 Nulaid sites 17 Tydstroom sites 3 Nova Feeds factories North West Gauteng Free State KwaZulu-Natal Eastern Cape Western Cape REVENUE CONTRIBUTION 31% Eggs 35% Broilers 30% Animal feeds 4% African operations 54 PIONEER FOODS :: INTEGRATED REPORT :: 2014

57 SUSTAINABILITY PROGRESS Engagement with the NSPCA over animal treatment concerns at one of the cull depots led to improved systems and the establishment of a regular audit of all Nulaid facilities by the organisation. OUTLOOK The business will focus on entrenching itself as a separate entity following the unbundling from Pioneer Foods and separate listing on the JSE. More information on Pioneer Foods sustainability approach, performance and prospects can be found on page 56. PIONEER FOODS :: INTEGRATED REPORT ::

58 SUSTAINABILITY REPORT 56 PIONEER FOODS :: INTEGRATED REPORT :: 2014

59 Sustainability principles are aligned with the five themes of the corporate strategy. This means that Pioneer Foods considers the social and environmental impact of its daily business activities and is continuously seeking opportunities to share and create stakeholder value. PIONEER FOODS :: INTEGRATED REPORT ::

60 SUSTAINABILITY REPORT Highlights 10 energy minimisation opportunities ( EMOs ) implemented with savings estimated at R2.2 million Provided funding for permaculture gardens at a further 57 schools to the amount of R2 million 4th year participation in the Carbon Disclosure Project ( CDP ) with an improved score of 82 in 2014 (2013: 74) Achieved 72% rating according to CSI project Impact Assessment Study which considered the outcomes realised through the Group s contribution Product life cycle assessments ( LCAs ) performed on apple Liqui-Fruit, Weet-Bix and White Star super maize meal Supported 15 university students through The Pioneer Foods Education and Community Trust ( PFECT ) bursary programme Sustainability approach Pioneer Foods long-term success requires sustainable business practices in three fundamental ways: 1. The Group is reliant on agriculture, therefore environmental issues such as climate change, energy consumption and water management have a direct impact on operations and profitability 2. The Group depends on the current and future availability of human capital and skills 3. The Group produces food for general consumption and therefore has a responsibility to ensure its product offerings are beneficial and nutritious Parallel to these three fundamental business drivers, the Group maintains its commitment to the broader community through several corporate social investment ( CSI ) initiatives. It is in the Group s interest to develop the consumers of tomorrow. Pioneer Foods benefits from a thriving economy. The Group s future success is therefore directly connected with its contribution to socio-economic development. Driving transformation across all levels of the business is a key consideration for the Group. The governance of sustainability The social and ethics committee is responsible for the monitoring of sustainability on behalf of the Board. Its mandate is to oversee the implementation and management of sustainability items by the executive team. Formal reporting to the committee follows quarterly reports to the executive committee. Data is collected on a monthly basis according to defined procedures. The implementation of a formal management reporting mechanism has been put on hold in the medium term. Currently, sustainability champions in each division are accountable for data collection and accuracy according to the sustainability strategies that are in place at a divisional, business unit or site level where accountability lies. 58 PIONEER FOODS :: INTEGRATED REPORT :: 2014

61 THE BOARD OF DIRECTORS Executive team Executive: Corporate Affairs and Sustainability Social and ethics committee Corporate Affairs and Sustainability Team GOVERNANCE COMMUNICATIONS ENVIRONMENT SOCIAL This is the first year that the Group has opted to report the core sustainability indicators in accordance with the new Global Reporting Initiative ( GRI ) G4 Guidelines. The full GRI table is available online at Sustainability assurance EY has been contracted to provide limited assurance on the following key performance indicators ( KPIs ) and these have been denoted with an LA in the report: Lost time injury frequency rate ( LTIFR ) Fatalities Number of permanent employees Permanent employee turnover Scope 1 carbon emissions Scope 2 carbon emissions Water consumption The assurance statement from EY, along with a breakdown of the basis for measurement of each indicator, is available online at Compliance Pioneer Foods licence to operate depends on its ability to produce products for consumption by humans and animals that adhere to the necessary quality, consistency, safety and traceability standards. External audits of Group facilities are conducted regularly to maintain certification and align with best practice. The divisions subscribe to the following health and safety standards: HACCP (Hazard analysis and critical control points) ISO (Environmental management) ISO (Occupational health and safety) ISO 9001 (Quality management) selected elements OSP (Food safety management) Essential Foods NOSA (National Occupational Safety Association) certain sites A formal compliance framework ensures that the impact and applicability of compliance standards requirements are understood and managed within the Group. The Group s formal approach to regulatory compliance is described on page 84. PIONEER FOODS :: INTEGRATED REPORT ::

62 SUSTAINABILITY REPORT (CONTINUED) Strategic alignment Sustainability principles are aligned with the five themes of the corporate strategy. This means that Pioneer Foods considers the social and environmental impact of its daily business activities and is continuously seeking opportunities to share and create stakeholder value. Material issues are regularly reviewed at executive level to identify threats as well as new value creation and innovation opportunities. Material issues constitute those items that have a direct impact on short-term performance or have the potential to develop into directly impactful issues in the medium to long term if left unmitigated. Stakeholder concerns including the perceptions of internal role players inform the process of identifying material issues. Strategic themes Shape a winning corporate portfolio Focus on power brands Sustainability material issues Progress in 2014 More detail B-BBEE: preferential procurement Healthy, affordable products Product and food safety Genetically modified organisms ( GMOs ) Responsible sourcing Supplier engagements continue to improve, with a shift from a cost focus approach to a TVO (total value of ownership) approach, with a special emphasis on value-added transformation. Life cycle assessments ( LCAs ) were conducted on three flagship products to establish environmental impacts of production from source to distribution. Notable events during the year: Sustainable palm oil procurement Animal treatment concern and solution GMO product labelling Voluntary removal of objectionable substance from all bread products Preferential procurement page 67 Operational and product responsibility page 71 Stakeholder engagement Online These required intensified engagement with affected stakeholders. In each case, the Group was provided with an opportunity to improve its approach to operational and product responsibility. Embed strategic customer management Complaints B-BBEE: Socioeconomic development and enterprise development The Group has a formalised complaints management guideline in place to ensure the highest level of service in the handling of complaints. As part of its corporate social responsibility, Pioneer Foods provides support to a range of socio-economic development projects, which are aimed at improving education, the environment and food security. In 2014, almost R11 million was distributed to these projects. The Group also assists in the development of primary agriculture and supported eight commercial farming operations whose beneficiaries are mentored by external commercial farmers as well as by Pioneer Foods employees. As a JSE-listed entity, Pioneer Foods was automatically selected to participate in the 2014 index. Operational and product responsibility page 71 Socioeconomic development page 68 Enterprise development page PIONEER FOODS :: INTEGRATED REPORT :: 2014

63 Strategic themes Reset the cost base and step up productivity Sustainability material issues Progress in 2014 More detail Climate change Energy costs Energy consumption Carbon costs Water management Transport and logistics The Group participated in the Carbon Disclosure Project for the 4th year and published its results for the first time in The Group improved its score from 74 in 2013 to 82 in The year-on-year scope 1 and 2 carbon emissions and energy consumption increased by 3% and 6% respectively. Pioneer Foods corporate offices received a R Eskom rebate for a light replacement project in The Group s partnership with the National Cleaner Production Centre of South Africa ( NCPC-SA ) resulted in the identification of a number of energy minimisation opportunities ( EMOs ). During the year, 10 EMOs were successfully implemented at four facilities. The estimated saving is R2.2 million per year. Energy Partners was appointed as the provider of the Group s energy optimisation solutions. Energy efficiency page 75 Water management page 76 Logistics page 74 Water usage metres were installed at Bokomo Foods plants to improve measurement and management accuracy. The Group is in the process of replacing the entire distribution fleet in the bakeries business unit with smaller and more fuel-efficient vehicles. The targeted completion date is The Group retained its level 4 B-BBEE accreditation. The Group has improved its talent and performance management framework through the establishment of new STIs and LTIs (short and long-term incentives) to recognise performance in areas directly connected with delivery of the corporate strategy. During 2014, the Group launched a curriculum for a new Brand Academy as part of its strategic drive to focus on power brands and build a high-performance team. The Group was able to offer a greater number of bursaries after adapting its policy and reducing the size of bursaries. Pioneer Foods supported 161 employee bursary holders in 2014 (2013: 81). The Group has a responsibility to ensure that the individuals employed at its various manufacturing facilities are safe at work. The LTIFR for the year was 2.47 LA (2013: 0.96). Two LA fatalities were reported during the period. More information on the Group s operational health and safety is available online. Ethics and human rights underpin the Group s approach to corporate governance. Build a highperformance team B-BBEE: transformation Employee relations Organisational development Diversity Skills development Training Occupational health and safety Human rights Ethics Employee engagement page 62 Transformation page 64 Skills development page 65 Occupational health and safety Online Ethics Corporate governance page 88 Human rights Corporate governance page 88 PIONEER FOODS :: INTEGRATED REPORT ::

64 SUSTAINABILITY REPORT (CONTINUED) Employee engagement Strategic alignment: Build a high-performance team Employee engagement plays a pivotal role in the success of the business. The rightsizing exercise of the past 18 months has affected workforce dynamics as the Group sought to achieve optimal human capital investment. Total workforce* Employee statistics Total employee numbers, including permanent employees and contracted employees, reduced by 12% to at 30 September 2014, of whom LA are permanent and 135 contracted employees. Employee turnover of permanent staff increased to 2 130, a rate of 21% LA. The significant decrease in employee numbers and consequent increase in turnover rate are the direct result of the rightsizing exercise in Many of the job losses occurred in the poultry business that underwent considerable downturn. This process was undertaken in an ethical and responsible manner to protect the rights of all Pioneer Foods employees, and the organisation has emerged a leaner, more agile business, better positioned to compete in a volatile and competitive market. Efforts were made to place as many affected employees elsewhere within the Group. Employee turnover LA % LA 15% 13% 11% 10% * Permanently employed by wholly-owned South African operations. 62 PIONEER FOODS :: INTEGRATED REPORT :: 2014

65 Organised labour The Group supports its employees rights to collective bargaining, and employees are free to associate with the labour union of their choice to negotiate their terms of employment. Total union membership for 2014 was approximately 86% (2013: 86%) of the bargaining unit and approximately 58% (2013: 62%) of permanent employees. There were 2 cases of industrial action during the year and these were within the Essential Foods business. Organised labour 58% 62% 53% 53% 53% Organisational development Leadership alignment was prioritised as a key enabler of building high-performance teams and sustaining the organisation s transformation. The executive team embarked on a journey to build leadership coherence and inculcate shared responsibility through a series of facilitated workshops which culminated in the development of a revitalised leadership brand. This blueprint outlines the differentiating capabilities that the organisation seeks to nurture and embed to create a high performance culture. As part of its strategic focus on talent management, the Group took steps to stimulate a renewed sense of pride among employees and launched an integrated reward and recognition scheme in the form of STIs and LTIs (short and long-term incentives). Pioneer Foods employees were invited to nominate colleagues for achievements in areas directly connected with the five strategic themes. A total of 819 nominations were received, indicating a positive response. In memoriam The Group mourns two employees LA who lost their lives in road accidents while on duty. Lindokuhle Eliot Malevu was shot while driving and passed away on 13 November Ralton Alphonso Manuel was involved in a fatal accident on 17 March Pioneer Foods is committed to the safety of all employees and strives towards a zero fatality target PIONEER FOODS :: INTEGRATED REPORT ::

66 SUSTAINABILITY REPORT (CONTINUED) Transformation Strategic alignment: Build a high-performance team Pioneer Foods is focused on building a high-performance team that is diverse and representative of South African demographics. Broad-based black economic empowerment ( B-BBEE ) Improvements in the Group s B-BBEE score in certain categories can be attributed to Pioneer Foods continuous aim to provide previously disadvantaged candidates with opportunities. The Group was rated according to the Agricultural B-BBEE Sector Scorecard ( AgriBEE ) and retained its level 4 B-BBEE accreditation. B-BBEE scorecard B-BBEE element Weighting (AgriBEE codes) Unaudited score (AgriBEE codes) Audited score (AgriBEE codes) Ownership Management control Employment equity Skills development Preferential procurement Enterprise development Socio-economic development Total Level 4 4 Ownership Of the economic interest of the Group 17% (2013: 17%) is held by black people, largely the result of the Phase II B-BBEE transaction in March Management control and employment equity Management control is 36% black (2013: 36%) at the Board level and black females represent 29% (2013: 25%) at top management level. The Group improved its employment equity score at senior and top management levels. This is the outcome of the shift away from multifarious equity planning and delivery processes at the operating level, in favour of fewer, more coherent equity plans at each business unit. This has improved leadership line of sight and accountability for the broad transformation objectives. 64 PIONEER FOODS :: INTEGRATED REPORT :: 2014

67 Designated employees per level* Designated employees per level Junior/unskilled 97% 97% 97% 93% 93% Senior management 40% 35% 34% 33% 32% Top management 50% 38% 40% 40% 36% Mid management 60% 62% 60% 59% 57% * Excludes fixed-term employees and other nationalities Skills development Strategic alignment: Build a high-performance team Skills development is integral to the Group s focus on enhancing its human capital for the future sustainability of Pioneer Foods. This is entrenched by the various capability building initiatives directly related to the five strategic themes. Customer-centric approach To transform the organisation into a customercentric business, skills development initiatives in marketing, innovation and customer management are emphasised. A highlight was the development of the Pioneer Brand Academy curriculum. In addition, a customised Key Account Management course was launched and 14 customer and key account managers were enrolled on the pilot programme. Pioneer Foods Academy of Learning Leadership development forms a key part of the Group s talent retention plan and is offered through two formal programmes the Advanced Leadership Development Programme ( ALDP ) and the Foundational Leadership Development Programme ( FLDP ). A total of 26 employees were enrolled on the two leadership programmes in the Academy in A high percentage of students on the courses are from designated groups and in the FLDP more than 50% are female. PIONEER FOODS :: INTEGRATED REPORT ::

68 SUSTAINABILITY REPORT (CONTINUED) ALDP representation FLDP representation % 70% % 50% % 58% 44% % ALDP designated ALDP female % 69% % 60% % 52% ALDP designated ALDP female Skills pipeline The Group invests in future skills through apprenticeships, graduate programmes (internships and in-service), learnerships and employee bursaries. In 2014, there were 40 apprenticeships (2013: 48), 13 graduate programmes (2013: 22) and 161 employee bursaries (2013: 81) in place. There were also 201 (2013: 341) learnerships provided through the different divisions of the Group. The significant increase in bursaries is the result of lowering the amounts provided, thereby increasing the number of bursaries available. The Group has seen a decline in apprenticeship and graduate programme numbers over the past few years as a result of stricter forecasting being applied to the recruitment of students to ensure there is sufficient capacity to place every individual. Additionally, the reorganisation of the business has focused primarily on building and developing employees internally. The Group will focus on apprenticeships, learnerships and graduate programmes in the coming year, with specific emphasis on engineering fields. Skills pipeline Bursars Graduate programmes Apprenticeships 66 PIONEER FOODS :: INTEGRATED REPORT :: 2014

69 Total skills development spend for the year to September 2014 was R12.3 million (2013: R17.5 million). Of the total spend, R10.3 million (84%) was spent on designated employees. Learnerships (Total 187) The reduced allocation for skills development is the direct result of the organisational restructuring, cost management and rightsizing exercise. As the organisation settles into the new operating model, more focus will be placed on this aspect of the business. Skills development spend (R m) Essential Foods Groceries Quantum Foods % % % % % Percentage spent on designated employees Preferential procurement Strategic alignment: Shape a winning corporate portfolio The Group considers preferential procurement a core aspect of its strategic objective to shape a winning corporate portfolio. In the agricultural sector there is a particular need to support farmers from historically disadvantaged backgrounds by creating markets that will result in economic empowerment in rural areas. Supplier verification Pioneer Foods improved its approach to supplier engagements by shifting to a total value of ownership ( TVO ) approach. This resulted in more emphasis on transformation, leading to a number of high-value contracts being allocated to a vendor base with level 4 or higher B-BBEE credentials. The Group is currently sourcing a partner to assist in enhancing supplier development efforts. PIONEER FOODS :: INTEGRATED REPORT ::

70 SUSTAINABILITY REPORT (CONTINUED) Corporate social investment ( CSI ) Strategic alignment: Shape a winning corporate portfolio Food security remains a major concern in South Africa. The Group channels its corporate social investment towards addressing the key causes of societal underdevelopment that lead to hunger and poverty. Through its partnerships, the Group is involved in a variety of community projects in education, environment and food security. These projects which focus on vulnerable groups such as women and children primarily in rural contexts receive 90% of funds distributed by the Group, while the remaining 10% is allocated to feeding schemes. Pioneer Foods distributed almost R11 million to beneficiaries. Pioneer Foods commissioned an impact assessment in partnership with an external service provider during The aim was to identify areas where the Group s contribution is making a significant impact and where to provide more meaningful development opportunities. The results showed a 72% project impact achievement. Education The Pioneer Foods Education and Community Trust ( PFECT ) In FY2014 the trust activities were mainly in three areas: Provision of bursaries Support to deserving projects Development of Mbekweni Youth Centre Mbekweni Youth Centre The trust decided in the previous financial year to develop a youth centre in Mbekweni township. The trust will refurbish and extend an existing building with a provisional budget of approximately R12 million, comprising capital and operations expenditure, allocated for Building has already commenced. Bursaries The PFECT bursary programme continues to support students in the fields of accounting, engineering and marketing. In 2014 R1.4 million was allocated to 17 students. In 2015, the number of students will increase to approximately 30. For the new cohort, beneficiaries of Pioneer Foods employees were also invited to apply. 68 PIONEER FOODS :: INTEGRATED REPORT :: 2014

71 Environment World Wildlife Fund South Africa ( WWF SA ) An enterprise development and conservation model ( People Working for their Environment ) has been established in the Nelson Mandela Bay Metropole ( NMBM ) in the Eastern Cape, following the success of a three-year pilot programme with the Table Mountain Fund funded in collaboration with the Western Cape government. The project was launched in February This model aims to develop a sustainable small land management business in the peri-urban context of the NMBM, and to provide natural resource management services to key conservation sites. Paardeberg Sustainability Initiative ( PSI ) The Paardeberg Sustainability Initiative (PSI) recognises the threats to the biodiversity and natural resources in the Western Cape Boland area of South Africa. The primary threat is economic pressure facing some farmers and land users of the mountaintops and surrounding areas. The PSI has continued to grow in capacity and now supports land users to protect natural resources through the PSI National Resources Management ( PSI NatReM ) Land Users Incentive Scheme. In this project, the PSI has created 90 sustainable jobs to fulfil its mandate and address economic aspects of sustainability. The sale of woodchips to the Group s relevant bakeries as a coal replacement remains the most promising option to pursue to ensure the jobs created become sustainable. Food security Foodpods Kayamandi Foodpods Kayamandi is a Women s Development Programme in Kayamandi township, in Stellenbosch in the Western Cape, focusing on agriculture, food security and entrepreneurship. Over the past year, the project has transformed an unused, inaccessible and arid piece of land at the Kayamandi High School into a large-scale agricultural hub, with the capacity to produce vegetable bunches every year, making it the largest township-based, containergrown, agricultural hub in South Africa. Foodpods Kayamandi provides full-time employment to a group of horticulturalists and site keepers, as well as a number of female growers from the community. Local and international interns and volunteers also contribute to the project, providing business and management support. By investing in the Foodpods project, Pioneer Foods is helping local women to develop the skills and resources to provide for their own food in a model that can be replicated in underresourced communities across South Africa. Limani: Towards Food Security for Communities Limani, a permaculture food gardening project implemented by Food & Trees for Africa ( FTFA ), was launched at Shikhati Primary School near Tzaneen, Limpopo Province, in June The school has since been developed as a resource centre for other schools in the area. As part of their training, schools are encouraged and equipped to harvest rain water and to use mulch to preserve soil moisture, while garden infrastructure and equipment were also upgraded and donated to the schools. Commercial earthworm farms have been established to produce high-quality compost soil for vegetable gardens. Schools have been equipped with solar cooking kits. All schools are able to supplement their feeding programmes with fresh vegetables and many learners and other community members have started individual gardens following the success of the school gardens. The project received a R6.9 million grant from the European Union in Pioneer Foods has agreed to match the funding needed to implement permaculture food gardens at an additional 57 schools. Feeding schemes The African Children s Feeding Scheme ( ACFS ) ACFS receives co-funding from Pioneer Foods to purchase milk to support 13 feeding centres in Soweto and the surrounding informal settlements. About children benefited from this support during As part of the programme, the parents and guardians of the assisted children are empowered with skills that should eventually make them independent and able to exit the programme. PIONEER FOODS :: INTEGRATED REPORT ::

72 SUSTAINABILITY REPORT (CONTINUED) The following skills were provided to direct beneficiaries during the year: Food gardening for food security (for survival as well as for commercial purposes) Sewing, beadwork, woodwork and baking (to start small businesses and provide employment opportunities) Health education The organisation also runs school holiday programmes that focus on life-skills training and educational games and activities to keep children occupied and away from abusive home environments. Stellenbosch Community Development Programme ( SCDP ) SCDP s focus is on nutrition and health by fighting malnutrition, preventing stunted growth and addressing obesity in Kayamandi, at Stellenbosch, by providing more than children (including 750 crèche children under the age of five) with a meal every school day and most school holidays. Pioneer Foods co-support extends towards the provision of a cup of milk per day for every child who is part of SCDP s programme. Pioneer Foods also sponsors the salary of a Sustainable Livelihoods mentor. Enterprise development Strategic alignment: Shape a winning corporate portfolio Pioneer Foods retained full points for the enterprise development aspect of the B-BBEE scorecard for the third year in a row. The Group encompasses an extensive value chain, which includes farmers and producers across the country, and therefore focuses its enterprise development activities on the development of primary agriculture in South Africa. Primary agriculture The Group provided R1.7 million (2013: R3.5 million) to enterprise development projects in 2014, of which 76% (2013: 74%) was allocated to primary agriculture projects. During the year, Pioneer Foods supported eight commercial farming operations whose beneficiaries are all mentored by external commercial farmers and by internal Pioneer Foods employees. The majority of the Group s production footprint remains biased towards the Western Cape, with 75% (2012: 69%) of spend going towards projects in the province. 70 PIONEER FOODS :: INTEGRATED REPORT :: 2014

73 Operational and product responsibility Strategic alignment: Focus on power brands Embed strategic customer management Pioneer Foods social and legal licences to operate require that it provides products and services of a consistently high quality to a broad range of stakeholders. Product life cycle assessment ( LCA ) The Group concluded life cycle assessments by an external service provider on three flagship products apple Liqui-Fruit, Weet-Bix and White Star maize meal. Undertaking a life cycle assessment allows the Group to consider emissions impacts when deciding on supplier selection, materials sourcing, product design and manufacturing processes. It highlights cost-saving opportunities while demonstrating environmental responsibility leadership. Apple Liqui-Fruit Total product carbon footprint for 1 litre box: grams CO 2 e Farming: 22% total greenhouse gas emissions Apple storage: 17% total greenhouse gas emissions Concentrate processing: 31% greenhouse gas emissions Apple Liqui-Fruit production: 30% greenhouse gas emissions Weet-Bix Total product carbon footprint for 450 gram box: 572 grams CO 2 e Farming: 35% total greenhouse gas emissions Storage and cleaning: 3% total greenhouse gas emissions Weet-Bix production: 62% total greenhouse gas emissions White Star super maize meal Total product carbon footprint for 1 kilogram bag: 176 grams CO 2 e Farming: 69% total greenhouse gas emissions White Star production: 31% total greenhouse gas emissions PIONEER FOODS :: INTEGRATED REPORT ::

74 SUSTAINABILITY REPORT (CONTINUED) Customer service and complaints Pioneer Foods has a robust complaints management system. While some business units outsource this function, responsibility and reputational risk ultimately lie with Pioneer Foods, and formal Group procedures are therefore rigorously implemented. A 15-day turnaround target is in place for the resolution of complaints. Business unit Unit of measurement Number of complaints 2014 Number of complaints 2013 Essential Foods Grains per units sold Essential Foods Bakeries per units sold Groceries Beverages per litres Groceries ex-bokomo per units Groceries ex-bokomo SAD per tonnes Quantum Foods Nova per tonnes Quantum Foods Tydstroom per tonnes Quantum Foods Nulaid per doz Environmental fines No environmental fines were paid in the financial year. Operational and product responsibility key events The table on the next page provides a summary of notable events for the year and how Pioneer Foods is responding. A breakdown of Pioneer Foods overall approach to stakeholder engagement, including stakeholder groups, concerns and Group response, is available online at 72 PIONEER FOODS :: INTEGRATED REPORT :: 2014

75 Key event Stakeholder concerns Pioneer Foods response As a versatile and highly efficient food ingredient, palm oil is in huge global demand, resulting in the deforestation of surrounding rainforests. By procuring palm oil from these plantations, businesses indirectly support this unsustainable practice and are exposed to the associated reputational risk. A regrettable incident occurred at a Nulaid cull depot in Phokeng, Rustenburg, where layer chickens ready for culling were not being treated in line with Nulaid s animal welfare standards. Genetically modified organisms ( GMOs ) are a growing global consumer issue. The debate features advocates of the technology and those who maintain that the environmental and other impacts of GMOs remain unproven. Sustainable palm oil procurement Consumers expect companies to source raw material from sustainable suppliers and increasingly make their product selection based on whether the producer is socially responsible. This is of material concern to retailers trying to mitigate their environmental impact and maintain the patronage of discerning consumers. Animal treatment concern and solution The NSPCA raised concerns about the treatment of chickens at the culling depot, which received attention in the media. A court order was received and, within two days, Nulaid had complied with the directives of the court order. The NSPCA again visited the depot and was satisfied that there were no other animal welfare issues. GMO product labelling Food labelling regulation R146 contains regulatory requirements that all products comprising more than 5% GM ingredients be clearly labelled for the benefit of the consumer. Consumers expect to be able to make an informed choice about their nutrition and trust that the food they buy in stores is thoroughly labelled. Pioneer Foods is a member of the roundtable for sustainable palm oil sourcing and has drawn up a two-year plan whereby only 100% certified suppliers of this product will be considered. Palm oil is an ingredient in raisins and this will be replaced by March Small amounts are found in the mixtures used for biscuits and rusks. Pioneer Foods participated in the Carbon Disclosure Project Forests programme for the first time in Disciplinary action was taken against the responsible employees at Nulaid and awareness training on safe handling was rolled out at other sites. Improved systems and the establishment of a regular audit of all Nulaid facilities by the organisation. All Pioneer Foods products are clearly labelled and GMO data fully disclosed, thereby enabling customers and consumers to make informed choices for themselves. PIONEER FOODS :: INTEGRATED REPORT ::

76 SUSTAINABILITY REPORT (CONTINUED) Key event Stakeholder concerns Pioneer Foods response In the first half of the year, a substance used in commercial baking, namely azodicarbonamide ( ADA ), was removed from all Essential Foods products. This formed part of the Group s bread quality improvement drive to revitalise the Sasko brand and establish Pioneer Foods as a responsible producer. Voluntary removal of objectionable substance from all bread products The ingredient is objectionable to consumer activists for its use in other commercial products not for human consumption. From a regulatory perspective, ADA is approved safe by the Department of Health and other international regulatory authorities applying Codex Alimentarius, the international standard adopted in health regulations across the globe. Prior to the emergence of consumer action, Group leadership launched a project to remove ADA from all products in which it had previously been used, namely white and brown wheaten flour and bread produced in the Eastern and Western Cape. Mainstream retail products such as self-raising and cake flour have never contained ADA and were therefore unaffected. The Group has invested in dedicated research and development involving scanning all Essential Foods products down to micro ingredient level for content with potential negative consumer connotation, irrespective of regulatory allowance and compliance. Logistics Strategic alignment: Reset the cost base and step up productivity Logistics services were centralised as part of the strategic drive towards cost efficiency and streamlining the business. Replacing bakeries fleet The Group is in the process of replacing the entire distribution fleet of the bakeries business unit by the end of The new vehicles will be smaller and more fuel efficient. 74 PIONEER FOODS :: INTEGRATED REPORT :: 2014

77 Energy efficiency Strategic alignment: Reset the cost base and step up productivity Energy management is considered as a priority issue by the Group, due to uncertainty of supply, rising cost of energy and the impending carbon taxation proposed for Scope 1 or direct emissions were tco 2 e LA (tons of CO 2 equivalent) and total scope 2 or indirect emissions were tco 2 e LA, bringing total combined emissions to tco 2 e. In 2014, MWh of energy was consumed (2013: MWh, excluding Quantum Foods). Of this, 62% ( MWh) relates to direct energy and the remainder to indirect or purchased electricity and steam. This is an increase of 3% (direct) and 6% (indirect) of energy consumed over Carbon Disclosure Project ( CDP ) The CDP challenges companies to measure and report their carbon emissions to create transparency between investors and other stakeholders. Pioneer Foods has participated in the CDP for four years and has made it results public for the first time in The Group improved its score from 74 in 2013 to 82 in Score Band Score Band 82/100 D 74/100 D Emission reduction opportunities ( EMOs ) Over the past 18 months, the Group partnered with the National Cleaner Production Centre of South Africa ( NCPC-SA ) in conducting energy efficiency assessments at its production facilities. As a result, 10 identified EMOs are in the process of being implemented. Associated savings are expected to amount to R2.2 million. There are a number of EMOs currently undergoing feasibility studies or are in planning phase. A summary of EMOs identified, planned or in progress per site is available online at PIONEER FOODS :: INTEGRATED REPORT ::

78 SUSTAINABILITY REPORT (CONTINUED) Woodchip boiler At the end of the financial year, Pioneer Foods partnered with an external service provider to install a woodchip boiler at the Claremont bakery in the Western Cape, following the successful installation of the first boiler at the newly commissioned Shakaskraal bakery in KwaZulu-Natal. The wood comes from waste from sawmills, pallet manufacturers and other industrial enterprises and is used as a sustainable heating fuel to generate steam at the bakery. Investigations are under way to integrate the wood sourcing with other projects, for example from the WWF land management clearing sites and the PSI sustainability initiative. Electrical consumption to run the required machinery to generate the woodchips is as low as 6.8 kwh and wood is considered a carbonneutral fuel as the carbon emitted through the chimney stack is reintegrated in the soil by the cultured forests. Water management Strategic alignment: Reset the cost base and step up productivity Water is one of the key resources used in agriculture and production, and is therefore a vital component of Pioneer Foods business. The Group is on a journey to better understand its water usage to successfully implement management strategies that contribute to the sustainable supply of this resource. In the medium term, this is expected to result in suitable long-term adaptation plans for water usage across the Group s value chain. During the year, water usage metres were installed at Bokomo Foods plants to improve the accuracy of consumption data collection and usage management. Usage Water usage and quality is monitored at all business units, as well as the quality of the water used in the production process. On-site water treatment facilities at certain Ceres Beverages and Quantum Foods sites are used to treat water before and after use at the sites. In 2014, 3.1 million m 3,LA of water was withdrawn (2013: 4.7 million 3 ), which is a reduction of 33%. This was a result of the purchase of water meters at one of the Group s largest water-consuming sites. The actual monthly consumption was far less than the amount calculated in the previous year. Year-to-date progress on five-year target (water m 3 /ton of production 000) Year-to-date progress on five-year target Annual usage (m 3 / 000) Percentage reduction in water usage 33% 7% 76 PIONEER FOODS :: INTEGRATED REPORT :: 2014

79 Future sustainability goals B-BBEE 2015 targets The Revised B-BBEE Codes of Practice were gazetted on 11 October 2013 and with the transition period ending in the first part of 2015, Pioneer Foods switched from the Agri-Codes to the revised codes on 1 October Compliance levels have been redefined and the new 40% hurdle rates on the elements (ownership, skills development and enterprise and supplier development) will result in many companies, including Pioneer Foods, dropping a few levels. Focus in 2015 will be on enterprise and supplier development. A women s development flagship programme is already being developed. B-BBEE Scorecard Element Weightings 2015 target Ownership Management control 15 (+4) 11.0 Skills development 20 (+5) 6.0 Enterprise and supplier development ( ESD ) 40 (+4) 14.0 Socio-economic development ( SED ) TOTAL bonus points 45.9 Level 8 Carbon emission targets Direct energy: 10% reduction Indirect energy: 8% reduction Water: 5% reduction Water management Recent studies have demonstrated the interconnection between food, energy and water meaning that one drives the demand of another in this triangular relationship. In the context of climate change, these studies have emphasised the food and water link. Within the Group s upstream value chain, this pressure is increasing. Partnerships with academic institutions and organisations such as WWF are being explored. Waste management Waste management provides further opportunities towards the creation of value, and an extension of the Group s engagement with the NCPC through the Western Cape Industrial Symbiosis Programme (WISP) demands closer investigation. PIONEER FOODS :: INTEGRATED REPORT ::

80 CORPORATE GOVERNANCE 78 PIONEER FOODS :: INTEGRATED REPORT :: 2014

81 Creating value for all stakeholders is a priority for Pioneer Foods. The Group s corporate governance procedures are controlled and executed according to a structured and formal system. This involves creating a balance in the course of doing business among the expectations of all stakeholders, including: those who are affected by the business and/or its operations; those who could potentially influence the business; and those who have an interest in the Group s actions and how these are performed. The board of directors ( the Board ) is the custodian of corporate governance. It is committed to ensuring, collectively and individually, that sound governance principles are fully integrated into all aspects of the business. PIONEER FOODS :: INTEGRATED REPORT ::

82 CORPORATE GOVERNANCE Non-executive directors Executive directors PIONEER FOODS :: INTEGRATED REPORT :: 2014

83 1. ZL (KK) COMBI (62) Diploma in Public Relations Chairperson of the Board, independent non-executive director, member of human capital committee and chairperson of the nomination committee Mr Combi is the executive chairman of Thembeka Capital Ltd. He holds a diploma in public relations and was awarded the EY South African of the Year award in 2000, as well as the World Entrepreneur of the Year in Managing Change award in Mr Combi is a member of the Institute of Directors and serves on various listed and unlisted companies boards, including PSG Group, IQuad Group and the JSE, as well as the Absa Bank Advisory Committee (Western Cape). Director since 29 March NORMAN CELLIERS (41) BEng (Civil) (Stell), MBA (Oxford) Non-executive director, member of social and ethics committee Mr Celliers professional experience includes engineering, management consulting and private equity in South Africa and abroad. Currently he is the CEO of Zeder Investments Ltd. Director since 1 October MM (THYS) DU TOIT (55) BSc, MBA Non-executive director, chairman of human capital committee Mr du Toit has been actively involved in financial and investment markets for 29 years. He was a founding member of Coronation Fund Managers and CEO for 10 years. Mr du Toit currently runs Rootstock Investment Management and is a director of companies, three of which are listed on the JSE. Director since 29 March PROF ASM (MOHAMMAD) KARAAN (46) BSc Agric, BSc Agric (Hons), MSc Agric, PhD Independent non-executive director, chairman of social and ethics committee Prof Karaan joined the Development Bank of Southern Africa as an economist and later returned to Stellenbosch to join the Rural Foundation as Head of Research. In 1997, he joined the University of Stellenbosch as a lecturer in Agricultural Economics. In October 2008, he became Dean of the Faculty of Agri Sciences at Stellenbosch University. He is a member of the National Planning Commission and holds other directorships in the agribusiness sector. Director since 29 March NS (NONHLANHLA) MJOLI-MNCUBE (55) MA (City and Regional Planning), Executive leadership qualifications (Harvard and Wharton, USA), Postgraduate Certificate: Technology Management (Warwick, UK) Independent non-executive director Ms Mjoli-Mncube is a fellow of the Massachusetts Institute of Technology and Aspen Global Leadership Institute, USA. She is the former economic advisor to the Presidency and former deputy chair of the Construction Industry Development Board. Ms Mjoli-Mncube serves on the boards of several listed companies and held executive positions. She is also a recipient of the SABC Businesswoman of the Year Award and currently manages her own construction company. Director since 25 November G (GERRIT) PRETORIUS (66) BSc, BEng, LLB, PMD Lead independent nonexecutive director, member of human capital and nomination committee Mr Pretorius is an electrical engineer by qualification and profession. He was an executive director and CEO of Reunert Ltd until retiring in August 2010 after 37 years of service. Since his retirement, he has been appointed as a non-executive director on the boards of various companies. Director since 17 February AH (ANDILE) SANGQU (48) BCom (Acc) (Rhodes), BCompt (Hons), CTA (WSU), H Dip Tax Law (UJ), MBL (Unisa SBL), Advanced Management Programme (AMP) (INSEAD) Independent non-executive director, chairman of audit and risk committee Drawing on 14 years of financial management experience at some of South Africa s revered corporations, Mr Sangqu has garnered a deep understanding of the commercial market and business landscape. He has completed a High Performance Board (HPB) programme at IMD Lausanne campus in Switzerland in October Mr Sangqu served as deputy directorgeneral (Finance and Corporate Services) of the National Department of Public Works. He currently serves as executive director of Glencore South Africa, having been the former CEO of Prodigy-Coris Asset Management and managing director of Budget Foods (Pty) Ltd. Director since 24 February LP (LAMBERT) RETIEF (61) BCom (Hons), CA(SA), OPM (HBS) Independent non-executive director Mr Retief is a qualified chartered accountant and a former director of Naspers and Zeder Investments. He is the chairperson and former CEO of the Paarl Media Group. Director since 17 February PM (PHIL) ROUX (49) BCom (Hons), MBA Chief Executive Officer Mr Roux joined Pioneer Foods from Tiger Brands where he held the position of business executive: consumer brands as well as serving as an executive director. He has 25 years experience in the fast-moving consumer goods industry in various senior positions, including that of chief operating officer: Africa for Coca Cola SABCO and as a non-executive director of Oceana Group Ltd. Director since 1 April LR (LEON) CRONJÉ (57) BCompt (Hons), CA(SA) Chief Financial Officer Mr Cronjé initially joined Sasko and was the executive: finance before the merger of Sasko and Bokomo in He was appointed in the same role for Pioneer Foods before becoming a director in Director since 28 April PIONEER FOODS :: INTEGRATED REPORT ::

84 CORPORATE GOVERNANCE (CONTINUED) Executive management PIONEER FOODS :: INTEGRATED REPORT :: 2014