Pretoria Portland Cement Company Limited Annual Report 2008

Transcription

1 Pretoria Portland Cement Company Limited Annual Report 2008

2 Front cover: Progress at Green Point stadium.

3 Pretoria Portland Cement Company Limited Annual Report 2008 Financial highlights Revenues up 12% to R6,2 billion HEPS increases 8% to 283 cents Cash generated from operations up 16% to R2,5 billion Ordinary dividend per share up 10% to 225 cents per share OUR STRATEGY The company s strategies remain to: Focus on core businesses; Generate superior cash flow returns; Achieve global competitiveness; Develop globally competitive people; Practise sound corporate, environmental and social governance; and Build on our strengths through synergistic growth. OUR VALUES We believe in satisfying our customers needs We supply quality products and services We respect the individual We provide a non-discriminatory, healthy, safe and challenging work environment We are committed to improving the quality of life for our people We care for the environment and the communities in which we operate We act professionally

4 Pretoria Portland Cement Company Limited Annual Report 2008 page 1 Batsweledi expansion project successfully commissioned within budget Broad-based black economic empowerment transaction completed STRONG INVESTMENT CASE Leading market position Geographical spread Strong infrastructural demand outlook to 2014 Capacity growth Cash generative Strong dividend underpin Strong balance sheet Experienced management team CONTENTS Organisational profile 3 Group companies 6 Performance highlights 8 Financial summary 9 Chairman s report 12 Chief executive officer s report 18 Board of directors 24 Chief financial officer s report 28 Corporate governance structure and management systems 36 Environmental report 50 Social and risk report 74 GRI cross-reference index 98 Certificate by secretary 105 Independent auditors report 106 Directors report 107 Accounting policies 125 Group financial results 136 Company financial results 178 Financial calendar 199 FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW Notice of AGM 200 Form of proxy 203

5 page 3 Pretoria Portland Cement Company Limited Annual Report 2008 Organisational profile Pretoria Portland Cement Company Limited (PPC) established the first cement plant in South Africa in 1892 and listed on the Johannesburg Stock Exchange in PPC is the leading supplier of cement in southern Africa, with eight manufacturing facilities and three milling depots in South Africa, Botswana and Zimbabwe. Together, these facilities are capable of producing more than seven million tons of cementitious products each year. The company has a distribution network that is responsible for supplying quality branded cement to the building and construction industry, concrete product manufacturers, hardware stores and DIY centres. PPC is the market leader in South Africa today, with a product range that encompasses all applications and a technical services team that is on hand to provide industry solutions. PPC is committed to excellence in satisfying customers needs and strives for total quality in everything it does. Related products sold include aggregates from the company s Gauteng quarries at Mooiplaas and Laezonia, and in Botswana. PPC Lime is the leading supplier of metallurgical-grade lime, burnt dolomite, limestone and related products in southern Africa. It operates one of the largest lime plants in the world at Lime Acres in the Northern Cape, South Africa * Hercules... 1 Jupiter... 2 Slurry... 3 Dwaalboom... 4 Riebeeck... 5 De Hoek... 6 Port Elizabeth... 7 Colleen Bawn... 8 Bulawayo... 9 Beestekraal quarry Dwaalboom quarry Slurry quarry Zoutkloof quarry Riebeeck quarry Grassridge quarry Colleen Bawn quarry Lime Acres Lime Acres quarry Mount Stewart quarry Laezonia quarry Mooiplaas quarry Kgale quarry Gaborone Cement Head office (Sandton) Saldanha Cement plants Limestone quarries Aggregate quarries Lime quarries Lime plant Gypsum quarry Head office * Materials handling facility

6 page 4 Pretoria Portland Cement Company Limited Annual Report 2008 New PPC Western Cape cement factory PPC plans a new factory to replace its existing plant at Riebeeck West, which is now approaching 50 years of production. The new plant will not only replace existing capacity, but will extend the cement-manufacturing capacity in the Western Cape. The processing technology utilised in the new Riebeeck plant will be significantly more environmentally friendly and energy efficient than the current plant and will ensure the sustainable supply of cement to meet future demand in the Western Cape. beyond ENVIRONMENTAL Business objectives ECONOMIC Ensure cash flow returns that allow for continued reinvestment in and replacement of cement capacity Continuously explore ways to reduce costs and improve efficiency of operations OPERATIONAL Reduce energy cost by using substitute fuels Increase manufacturing capacity to meet the country s needs Rehabilitate and obtain closure certificates for all worked-out mining areas Meet all legislated emission level requirements and further reduce emissions Reduce non-renewable resource requirements by increasing level of extenders in the final product SOCIAL Assist with the upliftment of disadvantaged communities by using resources from the communities in which PPC operates Skills transfer in disadvantaged communities for sustainable empowerment Continue to progress with BEE equity and board participation as foreseen in the BBBEE and MPRD Acts

7 Pretoria Portland Cement Company Limited Annual Report 2008 page 5 A culture of improving knowledge and skills Recognising that the future growth and success of the company are inextricably linked to its ability to grow and nurture the requisite skills, PPC has introduced a sixth vital element to the vital elements model. Under the mantra Learning for Growth, the company has introduced individual development plans, workplace skills plans, an operations academy, an academy for sales and marketing and other trainingrelated activities and programmes Batsweledi capacity expansion project R1,36 billion investment to increase the company s inland cement capacity in South Africa by more than 1,2 million tons per annum. The additional capacity will supply future demand growth in the South African cement market and the replacement of capacity from older production facilities, which will be retired when market conditions allow.

8 Pretoria Portland Cement Company Limited Annual Report 2008 page 6 Group companies Porthold 100% Registered in Zimbabwe, UNICEM is a cement made at the Bulawayo factory from high-quality raw materials. Clinker is interground with gypsum and an appropriate amount of extender. PPC Botswana 100% The PPC Botswana operation has been open for more than 50 years. Its sales office, along with the cement-blending operation, is situated in Gaborone and supplies cement throughout Botswana. PPC Lime Limited 100% PPC Lime is the leading supplier of metallurgical grade lime, burnt dolomite and related products in southern Africa. Mooiplaas Dolomite 100% Mooiplaas Dolomite is committed to the production of quality aggregates and sands to meet customers requirements in the most costeffective manner. Kgale Quarries 100% Situated at Kgale Hills in Gaborone, this is a granite quarry where granite is processed into quality aggregates and sands. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

9 page 2 Pretoria Portland Cement Company Limited Annual Report 2008

10 Pretoria Portland Cement Company Limited Annual Report 2008 page tons of cement estimated to be supplied to the five new World Cup stadiums FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

11 page 8 Pretoria Portland Cement Company Limited Annual Report 2008 Financial highlights CASH GENERATED FROM OPERATIONS () ORDINARY DIVIDEND PER SHARE (cents) Performance highlights Record levels of local cement production reduces need for imports into South Africa Dwaalboom kiln successfully commissioned Lime division records a new PPC milestone of three million injury-free hours R70 million approved for dust emission reduction capital project at De Hoek factory staff generated improvement suggestions which contribute to savings in excess of R18 million

12 Pretoria Portland Cement Company Limited Annual Report 2008 page HEADLINE EARNINGS PER SHARE (cents) GROUP OVERVIEW FINANCIAL SUMMARY Financial results () Revenue Operating profit Net profit Property, plant and equipment Total assets Cash generated from operations Ordinary share analysis (cents per share) Headline earnings Earnings Ordinary dividend Number of employees Cement capacity (tons 000) SA operations only* *Excludes the Dwaalboom kiln 2 (Batsweledi) capacity commissioned end September FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

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14 Pretoria Portland Cement Company Limited Annual Report 2008 page 11 SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW FINANCIAL REVIEW tons of cement estimated to be used on the Gautrain project

15 page 12 Pretoria Portland Cement Company Limited Annual Report 2008 Chairman s report Martin Shaw The approval of the broad-based black economic empowerment transaction, the commissioning of a kiln, record-breaking cement production and a further improvement in employee safety statistics are a few of this year s achievements.

16 Pretoria Portland Cement Company Limited Annual Report 2008 page 13 The past year has seen the attainment of a number of significant milestones: the shareholder approval of the broad-based black economic empowerment transaction, the commissioning of the first new kiln in PPC in 23 years, record-breaking cement production and, within this busy environment, a further improvement in employee safety statistics. In achieving these milestones the PPC team has again demonstrated their commitment to excellence in all that they do. Group results Group revenue grew by 12% to R6,2 billion (2007: R5,6 billion) in line with inflation. Group operating profits increased by 7% to R2,3 billion and headline earnings grew by 8% to 283 cents per share. The group operating margin declined to 37,2% (2007: 39,1%) due to the impact of unprecedented energy price increases in the second half. Cash flow and dividends Cash flow was again strong with cash generated from operations increasing by 16% to R2,5 billion. A total dividend of 225 cents per share has been declared (2007: 205 cents). No special dividend has been declared after the R753 million acquisition of treasury shares completed this year to minimise the dilutionary effect of the 15% BEE transaction. Economic environment The continuing financial markets crisis has had an negative impact on the global economy, resulting in many of the world s largest financial institutions receiving government assistance. The magnitude of this problem has now raised expectations of recession in many of the major economies. South Africa, like other emerging markets, has experienced a severe weakening in the local stock market and its currency. Higher inflation, high interest rates and substantially higher energy costs have put GDP growth targets under pressure. The sustainable supply of electricity to many industries, especially mining, will also hamper growth plans. Notwithstanding this, we believe the government will continue with its infrastructure and affordable-housing programmes. Construction has started on two new coal-fired power stations, Medupi and Kusile, two pumped-storage schemes, new airports and major road expansions and upgrades, to mention but a few. Cement overview After seven consecutive years of strong growth, the regional industry cement demand has showed, for the first time, a small negative growth of -1,6% year on year. This was due mainly to the continued drop in demand from the formal residential sector, but despite the delays in commencement of many of the aforementioned infrastructure projects, demand from that sector virtually offset the residential market decline. All existing manufacturing units ran at full capacity throughout the year and imports into the Eastern Cape were discontinued from January Significant increases in diesel, coal and electricity prices exceeded the producer price inflation index and exerted pressure on operating margins, particularly in the last quarter of the year. Although crude oil prices have recently shown a sharp decrease in dollar terms, the local price of coal has been much more resilient. Appointment of Bheki Sibiya as the first black chairman of PPC This, combined with the weakening of the rand, will mean continued cost pressure for 2009 despite the benefits from the more efficient new Dwaalboom kiln line. These factors will result in cement price increases in excess of official inflation levels in the year ahead. Cement-expansion projects The Dwaalboom kiln 2 was successfully commissioned in September 2008 and, although later than planned, it was commendably within budget. The project was delayed for various reasons, including shortages of skilled staff experienced by the contractors as the project neared completion and work stoppages when situations arose that would have compromised safety. I am pleased to report that during October 2008 the PPC team, together with equipment supplier FL Smidth, successfully demonstrated the kiln s production capability. This is indeed a remarkable achievement for such a large and complex project and bears testimony to the care taken in both the design and selection of contractors and equipment, and the professionalism of project execution. I would like to acknowledge and thank all who worked so enthusiastically and tirelessly on this project. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

17 page 14 Pretoria Portland Cement Company Limited Annual Report 2008 Chairman s report continued The Ntšhafatso new mill project at Hercules is progressing well and according to plan. The proposed expansion at our Riebeeck factory in the Western Cape has experienced further delays with the environmental impact assessment process. Significant progress has been made this year, with PPC addressing the main issues raised. We hope that conclusion of the process can be achieved by the middle of Lime and aggregates Demand for burnt lime was only marginally up on the previous year because of lengthy maintenance shutdowns at some key customers operations. This, combined with large increases in coal and diesel costs, has resulted in a challenging year for the lime business. Major supply contracts do make allowance for these cost increases to be recovered at the time of the next price review anniversaries, of which the main ones are occurring at the beginning of January Our aggregates business has benefited from increased demand volumes, especially in Botswana, and achieved good growth in operating profit. The R39 million expansion project at Laezonia was completed within budget and successfully commissioned in August Zimbabwe The worsening situation in Zimbabwe continues to put our staff and operations under extreme pressure. Ongoing shortages of key production inputs such as coal and electricity and continued price control on cement have made it impossible to operate with any semblance of normality. But Porthold continues to produce cement, albeit at reduced capacity, and has maintained exports to earn the foreign exchange required for the procurement of imported inputs. Broad-based black economic empowerment I am pleased to report that the empowerment transaction and associated Scheme of Arrangement were approved by the shareholders at the two meetings held on 11 November 2008 and will become effective on 15 December The transaction will result in 15% of the ordinary share capital of PPC being held by our new black shareholders. The scheme comprises two elements, namely equity ownership by employees, community and industry associations through the establishment of trusts and a community services grouping, and a consortium of four strategic black partners. The largest individual stake of 2% was allocated to the establishment of a Construction Industry Associations Trust to benefit members of existing and future black construction industry and related associations. Furthermore, an external trust with a 1% stake has been established, to develop technical and management skills of black individuals in the cement, lime and aggregates manufacturing, mining, construction and related industries. The strategic black partners were chosen because of their experience and involvement in the wider construction and mining arena and their ability to add value to PPC. Some have their own broad-based black components such as black women and youth among their stakeholders. Although the completion of this very broad-based transaction and its funding took almost two years to complete, the result fully embraces BBBEE. We are proud of the fact that more than 3,5 million black South Africans will benefit directly from their stake in PPC. We believe the result is a very sustainable transaction with significant value creation in the future for all the stakeholders. I would like to take this opportunity to acknowledge and thank all those who strived tirelessly to construct this carefully formulated transaction and to welcome our new shareholders and partners to the company. The company is now in the final stages of engaging with the Department of Mineral and Energy Affairs to secure conversion of its old order mining rights in terms of the act. Thereafter, work must start to ensure that the next target of 26% black equity ownership is equally successfully implemented. Safety and environmental commitment Safety of our staff and contractors remains PPC s top priority and we are pleased to report that our good safety record further improved over the past year, in particular on the major project construction sites. PPC remains committed to its sustainability and environmental policies and to this end has initiated a number of projects to improve the environmental performance of our facilities. In August 2008 we announced the R70 million rand project to reduce dust emissions at our De Hoek factory in the Western Cape. This is in addition to the R40 million already spent on other dust-emission reduction projects such as the projects at Lime Acres and Port Elizabeth. Social investment This year PPC continued to build on its efforts to empower communities by ensuring all its initiatives are sustainable and by continuing its emphasis in the areas of education, training and job creation.

18 Pretoria Portland Cement Company Limited Annual Report 2008 page 15 The PPC Academy extended its scope of learnerships with the launch of its Mining Academy in August 2008, and the PPC Graduate Academy commenced in January 2008 to enable new black graduates in the technical field to be fast-tracked into the succession pipeline. Through its Ntsika enterprise development Fund, PPC has this year partnered with three different projects to facilitate the development of entrepreneurs and the creation of employment. Corporate governance A number of important actions were completed during the past year. The first of these was the appointment of Tim Ross to the board as an independent nonexecutive director and as chairman of the audit committee on 17 July In my last report I indicated that I would remain as chairman until the completion of the empowerment transaction and until a black chairman had been appointed. The nominations committee completed a thorough search for black candidates for this important position. The final selection process was conducted by the chairman selection committee, consisting of all the non-executive directors, and culminated in the appointment of Bheki Sibiya as an independent non-executive director on 10 November 2008 and as chairman from 17 November As a result, I stood down as chairman from that date. In addition and in line with JSE Limited requirements, he assumed the chairmanship of the nominations committee from 17 November Ntombi Langa-Royds was appointed chairperson of the BEE and transformation committee and the remuneration committee with effect from 10 November Her appointment to these two positions replaces John Gomersall and myself as the chairmen of the two committees respectively. These appointments now align the board and its committee structures with corporate governance best practice. The nominations committee has commenced the process of identifying potential candidates for the position of CEO to take over from John Gomersall when he retires. The committee believes that an appropriate handover period should be allowed for during the transition of this important position. Reviews of the Board Charter, board committees terms of reference and the amendment or adoption of various policies were conducted during the year. The implementation of a formal programme for the continued training and development of the board and a new board performance evaluation approach, including the additional evaluation of the board chairman, company secretary and board committees, has been implemented. Prospects The current turmoil in global markets and predictions of recession during 2009 and 2010 in many of the major economies must have some impact on the South African economy. We believe this is likely to be less in the infrastructure-intensive sectors of the economy, but it would be foolhardy to expect that there would be no impact. In this environment, it is therefore almost impossible to give any definitive outlook for the year ahead. The company has examined different scenarios for cement demand, ranging from modest to negative growth, and has action plans in place that will be implemented as the actual scenario unfolds. Cement requirements for infrastructural projects will continue and although the most immediate are related to the 2010 Football World Cup, a myriad of other major projects will sustain demand until at least The commissioning of the Dwaalboom kiln 2 will allow PPC to further optimise operations and service to customers and supply export markets previously relinquished or supplied from imports such as Zambia and Mozambique. Appreciation My tenure as chairman has been relatively short, but during this time I have experienced being part of a team that never stops trying to create increasing value for all the company s stake holders. Team PPC continues to prove that at the heart of any great company are its people. My thanks and appreciation goes to the team and to the board for another solid performance during a busy year. I congratulate Bheki Sibiya on his appointment as chairman and wish him well in leading the board over the years ahead. Martin Shaw Chairman

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20 Pretoria Portland Cement Company Limited Annual Report 2008 page 17 GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Affordable housing backlog to be eliminated by 2014

21 page 18 Pretoria Portland Cement Company Limited Annual Report 2008 Chief executive officer s report John Gomersall The key to sustainability in this modern world is focusing, nurturing, developing and empowering the human intellect of the company and using it better than your competitors. It is the most precious of all inputs to any human endeavour.

22 Pretoria Portland Cement Company Limited Annual Report 2008 page 19 The focus on sustainability has increased in recent years and is perhaps even more critical in the current world economic turbulence. PPC has thrived and grown for more than 116 years through many uncertain economic and political times. The company s strong foundations provide the platform for continued success over the next 100 years has been a challenging year but Team PPC has risen to the occasion and is proud to report on another year of outstanding achievements. Among these were record cement production, a further improvement in our safety statistics, the approval of the broad-based black economic empowerment transaction and the commissioning of the new kiln at Dwaalboom. Cement demand Industry regional sales were slightly down on the previous year, with strong growth experienced in the Eastern Cape and Mpumalanga, and the Gauteng and Western Cape markets showed a decline. In the Western Cape, we estimate that approximately 160,000 tons of PPC sales were lost due to the excessively wet winter. The cement industry imported more than 1 million tons of clinker and cement during the year, indicating that usable industry capacity had been overstated. We believe that supply constraints resulted in demand for the year being somewhat understated. accounts for 15% of regional sales and, because this sector is not interest rate sensitive, it is still performing strongly. Cement demand for affordable housing projects should continue or even accelerate as a new government delivers on reducing the backlog of nearly three million housing units. Regional demand stabilised in a range of 1,2% to 1,6% year-on-year decline since March this year and, as we predicted last year, reflects that increased infrastructural sector demand has thus far virtually offset the residential sector decline. Major construction companies are still reporting record order books driven mainly by infrastructure related projects and this pipeline should help to support demand over the next year or two. Cement input costs increased significantly above the producer price index because of the excessive increases in energy costs GROUP OVERVIEW MANAGEMENT REVIEW SUSTAINABILITY REVIEW PPC s regional volumes were flat year on year. Our imports into the Port Elizabeth area were kept to a minimum in the first quarter of the year and we maintained our presence in Mozambique with imported Surebuild cement. Much has been written about the downturn in the formal residential construction sector, but research shows that this decline commenced as far back as the end of Demand in the rural market currently Operations overview: Cement All our production lines ran at high utilisation levels and the optimisation of our Western Cape capacity enabled us to discontinue importing into the Port Elizabeth area from January A total of tons of cement was transported into the inland and Gauteng regions from our Western Cape and Porthold operations. Although additional logistics costs were incurred on these movements, it was more beneficial for PPC to supply its own manufactured product. FINANCIAL REVIEW

23 page 20 Pretoria Portland Cement Company Limited Annual Report 2008 Chief executive officer s report continued Cement input costs increased significantly above the producer price index because of the excessive increases in energy costs as international energy demand drove coal and diesel prices to record levels during the second half of the financial year. The real price increase for electricity approved by NERSA and the increases in rail tariffs have also contributed to these alarming cost increases. Although the current international economic crisis has already had an impact on international prices for crude oil and coal, the local prices have been slow to react and it is expected to be a while before we see any significant reductions. Diesel is a typical case in point, because the reduction in the rand price of crude oil has not filtered through to the diesel price to the same extent that it has in the petrol price. Operations overview: Zimbabwe The situation in Zimbabwe has reached the point where, effectively, major parts of the economy including parastatals are only functioning in foreign currency. Zimbabwe urgently requires a political settlement to facilitate the economic reconstruction that is so desperately needed. Despite this situation, Porthold continues to produce cement, both for the domestic market and for export, to generate critical foreign currency earnings. Manufacturing capacity beyond 2010 The most modern cement kiln (Batsweledi) in southern Africa was completed within budget and commissioned at our Dwaalboom plant in September The kiln ran at warranted output within 30 days of its start-up. These inputs have a high weighting in the cost of manufacturing cement and we shall have to recover them in cement price increases. Hopefully, the local prices of these inputs will reduce and alleviate pressure on cement prices in the future. Operations overview: Lime and Aggregates Lime division also experienced extraordinary increases in coal, diesel and electricity prices, which put margins under pressure in the second half of the year. These increases should be recovered in terms of contract pricing adjustments in the future. In the year ahead, we expect weaker demand due to the production cutbacks announced by steel producers. Gauteng aggregate volumes improved with increased metallurgical dolomite stone demand resulting in good profit growth. Kgale quarry volumes in Botswana increased substantially after the continued investment in infrastructure and commercial development projects in southern Botswana. This is testament to the professional team work that occurred between all players on this project, extending from our own in-house project management, operations and technical teams to the equipment suppliers, especially FL Smidth, as well as engineering consultants and erection contractors. This kiln has the potential to be the most thermally and electrically efficient kiln in southern Africa. It is too soon to give precise figures, but the production to date indicates that the efficiencies will be significantly better than our older units. Coal consumption will be dramatically reduced through the use of an inline pre-calciner and six-stage pre-heater. Electrical energy-efficiency gains are achieved by the use of vertical roller mills and high-efficiency electric motors throughout the plant. On the environmental side, the use of bag filter technology has ensured that emissions are within international limits while requiring less than half the water consumption per ton of cement normally needed.

24 Pretoria Portland Cement Company Limited Annual Report 2008 page 21 The safety record achieved during the 26-month construction period was outstanding. Only seven, mainly minor, lost-time injuries occurred over this period, in which more than five million man-hours were worked, reflecting the enormous effort of all team members to reduce the risk of injury. The Ntšhafatso new mill project at Hercules in Pretoria continues according to plan and the erection of the mill itself is now under way. This is also a latesttechnology vertical roller mill, which will improve electrical consumption per ton of cement produced significantly. The necessary additional electricity supply and electrical infrastructure is already completed. We do not anticipate that this project will add to PPC s capacity in the 2009 financial year. The new technology used in expansion and modernisation projects will enable PPC to reduce its direct and indirect carbon footprint The submission of the environmental impact assessment (EIA) report for the new plant near Riebeeck West was delayed for the completion of important further specialist studies and the granting of additional time to interested parties to submit comments. The EIA submission is expected shortly but it is unlikely that approvals will be forthcoming before mid This has been a thorough process and we are confident that all aspects of the EIA process have been conducted to our usual high standard. More about this process is contained in the environmental section (page 69). Human resources beyond 2010 PPC has always understood that the sustainability of the company and the country is directly dependant on the growth of its people s intellect, skills, attitudes and wellbeing, and so it should be no surprise that during this past year we continued to expand our capabilities to educate, train and uplift our people. We have further extended our PPC Academy to incorporate learnerships in the field of mining and have initiated a Graduate Development Academy. Ten new tertiary education learners were welcomed to PPC as part of the 2008 bursary intake and, in addition, 30% more apprentices were employed this year. Succession planning is one of the key pillars in our Kambuku people programme and I am pleased to report that four of our five new black executives came up through the PPC succession planning route. This is yet another example of how PPC has continued to sustainably transform the company. More detail on this progress is contained in the social section (page 78). Another aspect of ensuring a sustainable workforce is to entrench health and safety as top priorities in daily operations. The behavioural-based safety initiative has in the past two years shown major benefits and I am pleased to report that our lost-time injury frequency rate has reduced by 50% to only 1,5 losttime injuries (LTIs) per million man-hours worked. This number includes all contractors working on our sites for which we take responsibility and demonstrates our ability to share and inculcate our safety culture into their activities. Our ultimate aim remains zero injuries and our target for this year is to reduce our frequency further to less than 1 LTI per million manhours worked. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

25 page 22 Pretoria Portland Cement Company Limited Annual Report 2008 Chief executive officer s report continued Ensuring a better environment beyond 2010 We have maintained a high focus on this area of our business and have continued to make progress during the year. We now have a strong team of highly skilled and knowledgeable experts situated throughout PPC operations to monitor the implementation of the actions plans arising from our baseline environmental audits. To date, a number of projects have been completed or are in progress to reduce dust emissions. The announcement of the R70 million project to reduce emissions at our De Hoek factory is another example of PPC s commitment to improve its environmental performance. Further similar projects are currently under investigation to ensure continual improvement in the company s environmental standards and adherence to ever-tightening legislation. As new production lines come on stream and replace old equipment, we will move to unprecedented low emission levels from the modernised facilities. The proposed multi- billion rand new factory to replace the 50-year-old facility near Riebeeck West in the Western Cape is another example of modern technology making a huge difference to the environment. The new technology used in expansion and modernisation projects will enable PPC to reduce its direct and indirect carbon footprint and bring about a dramatic reduction in dust emission levels. The buy-back of 20,1 million shares at a cost of R753 million was completed during the year to minimise the dilution resulting from the broad-based black economic empowerment transaction. During this first year after the company s unbundling from Barloworld, significant effort has been made in improving investor communications. As at financial year-end, the company s foreign shareholder base had risen to 32%, up from 22% in Broad-based black economic empowerment The recently approved broad-based black economic empowerment transaction was the culmination of a long process that was necessary to ensure the original objectives of the transaction were realised. The first objective was to ensure that it was in accordance with the Mining Charter and the Department of Trade and Industry s codes of good practice. Secondly, to ensure as large a beneficiary base amongst our stakeholders as possible, which was achieved through the establishment of trusts involving employees, communities in which we operate and users of our product. In addition to this, the strategic black partners selected are either involved in construction or mining. Thirdly, to structure the transaction financing to keep funding cost to a minimum to ensure that the transaction was as sustainable as possible for the benefit of both our existing and our new BEE shareholders. Value for shareholders beyond 2010 This year has been another year of good cash flow returns to shareholders with cash generated from operations increasing by 16% to R2,5 billion. The total dividend declared for the year is up 10% to 225 cents per share. Finally, to ensure that the transaction minimised the dilutionary effect on existing shareholders. The resultant transaction structure, together with the share buy-back and scheme of arrangement, limited the dilution to only 5,3%.

26 Pretoria Portland Cement Company Limited Annual Report 2008 page 23 REAL social investment PPC applies the same logic to social investment initiatives as it does throughout its entire transformation philosophy is it REAL? REAL is a simple filter which ensures that all initiatives are Relevant, will Empower, will be Actualised and will Last into the future. This year a number of social investment projects were undertaken with the emphasis on job creation and skills development. Through our Ntsika enterprise development fund, we helped two businesses to improve their potential for sustainability beyond Comprehensive details of all our social investment projects this past year is included in the social section (page 94). Customers beyond 2010 Gross fixed capital formation (GFCF) during the second quarter of 2008 rose to 22% of GDP, the highest level in 20 years. Economists are now predicting it could reach 25%, the level of GFCF required to sustain the infrastructure of a growing economy, sooner than the government s target of This was reinforced in the recent medium-term policy statement that confirmed the R600 billion infrastructural investment over the next three years. Existing infrastructure projects such as Gauteng road projects, the Gautrain and World Cup 2010 facilities are in full swing and a number of new projects are just starting. These include the Medupi and Kusile power stations, two Eskom pumped-storage schemes, the Coega container quay and a number of hotels for the World Cup. Demand for cement could well maintain current levels despite continued weakness in the formal residential housing sector. Demand for cement for the rebuilding of the infrastructure will continue well beyond 2014, despite the negative global outlook for the next year or two. Some observers are already predicting that residential construction may see some modest recovery later in 2009 if interest rates are reduced as anticipated in tandem with trends around the world. We have examined a variety of cement scenarios unfolding over the next year or two and have simulated the actions we will take to optimise shareholder value creation in whatever scenario unfolds. Team PPC is ready to respond quickly to any situation that arises, which is key in uncertain times. Whichever scenario unfolds, PPC will continue to optimise the supply of cement to customers by using its wide geographic footprint and capacity flexibility. We have already revisited traditional export markets and have re-established the logistic channels to serve these markets from our own production again. Appreciation Our thanks go to Martin Shaw for his decisive and inspiring leadership during his tenure as chairman and our warm welcome and congratulations go to our new chairman, Bheki Sibiya. Finally, I would also like to thank Team PPC for the foundations they have laid this past year and for their unwavering commitment to generating value for all stakeholders. John Gomersall Chief executive officer FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

27 page 24 Pretoria Portland Cement Company Limited Annual Report 2008 Board of directors TDA Ross Independent non-executive director MJ Shaw Chairman P Esterhuysen Chief financial officer AJ Lamprecht Independent non-executive director NB Langa-Royds Independent non-executive director BL Sibiya Incoming chairman

28 Pretoria Portland Cement Company Limited Annual Report 2008 page 25 FINANCIAL REVIEW SUSTAINABILITY REVIEW J Shibambo Independent non-executive director RH Dent Director, Lime, Aggregates and strategic projects O Fenn Chief operating officer S Abdul Kader Director, organisational performance and transformation ZB Kganyago Independent non-executive director JE Gomersall Chief executive officer MANAGEMENT REVIEW GROUP OVERVIEW

29 page 26 Pretoria Portland Cement Company Limited Annual Report 2008 Board of directors continued Martin John Shaw (70) Chairman Martin Shaw was appointed to the PPC board in He served as managing partner, chief executive and chairman of Deloitte & Touche in South Africa until his retirement from the firm in He was president of the Natal Society of Chartered Accountants from 1977 to 1978 and president of the South African Institute of Chartered Accountants from 1982 to He is also a director of Illovo Sugar Limited, JD Group Limited, Liberty Group Limited, Liberty Holdings Limited, Murray & Roberts Holdings Limited, Reunert Limited, Standard Bank Group Limited and Standard Bank. Bhekokuhle Lindinkosi Sibiya (51) Incoming chairman Born in the deep rural areas of KwaZulu-Natal, Bheki completed a BAdmin degree at the University of Zululand and received an MBA from Western Michigan University in the US. He has worked in a number of companies and serves as the deputy chairman of Tiger Brands and as chairman of Brait South Africa. He is the past president of the BMF and a founding CEO of Business Unity South Africa. John Edward Gomersall (62) (British) Chief executive officer John Gomersall joined Barloworld in 1971 and has completed in excess of 35 years in capital-intensive commodity businesses. He started his career in the stainless steel and ferrochrome industries, culminating in his appointment as group managing director of Middelburg Steel and Alloys (Pty) Limited in He joined the Barloworld board in 1989 and moved into the cement and lime business segment as group managing director of Pretoria Portland Cement in In 1990 he led the business team that created the Middelburg Peace Forum, which was the role model for the National Peace Accord in South Africa. He is a past deputy president of the International Chrome Development Association, headquartered in Paris, and past chairman of the South African Cement and Concrete Institute. Robert Harley Dent (57) Director, lime, aggregates and strategic projects Harley Dent was appointed to the PPC board in 1993 as director: strategic projects. He joined Cape Portland Cement Company Limited, a subsidiary of PPC, in 1978 and has been with the group for 29 years. He is a fellow of the South African Chemical Institute, the South African Institute of Mining and Metallurgy and the Institute of Quarrying of Southern Africa. He is a past chairman of the Institute of Quarrying of Southern Africa and is currently chairman of the Aggregate and Sand Producers Association of South Africa (Aspasa). Peter Esterhuysen (52) Chief financial officer Peter Esterhuysen was appointed to the PPC board in December He has prior experience in cement, having been a divisional director of the cement division of PPC from 1996 to He was group financial director in the Coatings division of Barloworld until rejoining PPC in Prior to joining PPC in 1996, he held various executive directorship positions in a number of South African manufacturing and retailing companies, including major corporates. He has extensive experience in all aspects of manufacturing, corporate finance and taxation. Orrie Fenn (54) (British) Chief operating officer Orrie Fenn was appointed chief operating officer in May He was appointed to the PPC board in March 2004 as managing director of the cement division. He joined the PPC Group in 1999, initially to lead the global technical benchmarking of the cement division facilities. Later in that year he was appointed operations director of the cement division, with responsibility for the South African cement factories and quarries. In 2002 he was appointed sales and marketing director of the cement division. Prior to joining PPC, he spent seven years at the Chamber of Mines Research Organisation (COMRO) and obtained a doctorate in the field of underground rock boring. He was also projects director of the Murray & Roberts cement, aggregate and readymix division. He is a member of the SA Institute of Mining and Metallurgy, a fellow of the SA Institute of Quarrying and has a government Certificate of Competency (Mines and Works). BOARD RACE BALANCE BOARD GENDER BALANCE White Black Men Women

30 Pretoria Portland Cement Company Limited Annual Report 2008 page 27 Salim Abdul Kader (38) Director: organisational performance and corporate social Salim Abdul Kader was appointed to the PPC board in May 2005 as executive director responsible for organisational performance. During 2007 he also assumed executive responsibility for transformation. He joined the PPC group in 2004 as organisational performance director in the cement division and was thereafter appointed an alternate director on the PPC board in November Prior to joining PPC he was organisational effectiveness executive for the Tiger Brands group responsible for human resources development. Salim started his career with Tiger Food Brands in the technical and operations functions before moving into human resources. Zibusiso Janice Kganyago (42) Independent non-executive director Zibu Kganyago was appointed to the PPC board in October She is executive director of property development at Tsogo Sun Gaming and has been involved with property development and construction management over the past 13 years. She was the executive director responsible for the recently completed R370 million Montecasino lifestyle development. She qualified with a Bachelor of Commerce degree from the University of Natal and has a postgraduate qualification in property planning, development and management. She has been doing a business development programme at the Wharton School of Business in Pennsylvania and an executive development programme at the University of Nevada, Reno. André Jacobus Lamprecht (56) Independent non-executive director André Lamprecht was appointed to the PPC board in He practised as an advocate of the High Court of South Africa before being invited to join the Barloworld group in From 1983 he played a leading role in steering the group through a turbulent decade of political transition into a post-apartheid South Africa. He was appointed to the Barloworld board in 1993, assuming responsibility for the company s interests in Namibia and Botswana in addition to human resources, social investment and other responsibilities. He has served on behalf of Barloworld on numerous public bodies and is a past chairman of Business South Africa, past president of the Afrikaanse BOARD BALANCE Handelsinstituut and past chairman of its board of trustees, and chairman of the standing committee on corporate and public governance. He is also a director of the National Business Initiative (NBI), trustee of the Business Trust and former business convenor of the Trade and Industry Chamber of the National Economic Development and Labour Advisory Council (Nedlac), a member of its executive council, a member of the BUSA and CHAMSA councils and a member of the retirement funds advisory committee of the minister of finance. He is also a long-standing senior member of the standards committee of the International Labour Organisation (ILO). Presently, André is chief executive officer of Freeworld Coatings Limited. Timothy Dacre Aird Ross (64) Independent non-executive director Tim Ross was appointed to the PPC board in July He recently retired from Deloitte & Touche where he served as the lead client service partner to many major South African clients, where he is chairman of both group risk and group audit and actuarial committees. He is also a director of Liberty Group Limited and Eqstra Holdings Limited, where he chairs the audit committee. Nomalizo Beryl Langa-Royds (46) Independent non-executive director Ntombi Langa-Royds was appointed to the PPC board in October She owns Nthake Consulting, a human resources consulting firm specialising in human resources management and allied services. She has 19 years experience in the human resources consulting environment, with previous positions such as director of human resources at Independent Newspapers Holdings Limited, the South African Broadcasting Corporation and Bevcan division of Nampak Limited. Joe Shibambo (60) Independent non-executive director Joe Shibambo was appointed to the PPC board in May He has been involved in the construction industry since 1979, where he gained invaluable knowledge in building construction, construction management, property development and the implementation of BBBEE development programmes. He is the managing director of Hlamalane Projects, a company established in Through his organisation, he helps historically disadvantaged individuals in the basic management principles of starting a business and the effective management thereof. He was the first black residential township developer and independent contractor to build a shopping centre in Soweto. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW Non-executive directors Executive directors

31 page 28 Pretoria Portland Cement Company Limited Annual Report 2008 Chief financial officer s report Peter Esterhuysen Shares to the value of R753 million were repurchased to limit the dilutionary effect of the broad-based black ownership initiative.

32 Pretoria Portland Cement Company Limited Annual Report 2008 page 29 Financial results Group revenue increased 12% to R6,2 billion and operating profit rose 7% to R2,3 billion. Increases in transport costs had a significant impact on cement margins. This arose from increased rates by transporters emanating from higher diesel prices and also the additional distances travelled to source and deliver product to customers. Continued high demand in the inland market meant product could not always be supplied from the nearest factory and cement was often transported long distances from other PPC factories. Other significant increases also arose from coal, electricity and maintenance costs, and future price increases will have to reflect cost recovery from these inflationary pressures. Lime operating profit and margins reduced after a substantial increase in energy input costs during the second half of the financial year. These cost increases are recovered through price increase mechanisms contained in customer supply agreements, albeit delayed, because price adjustments are mostly annual and do not necessarily coincide with supplier cost increases. The aggregate operations continued their good performance with an increase in volume and operating profit and margins, and benefited from the exit of the readymix business in Botswana during the previous financial year. Administrative and other operating expenditure included R20 million of costs pertaining to the broadbased black ownership initiative and a final settlement of R13 million to the Barloworld medical scheme in respect of pensioners of PPC who wished to remain on the Barloworld scheme after the unbundling of PPC from Barloworld. This settlement was only actuarially calculated in the current year once it was established which pensioners would remain on the Barloworld scheme. Borrowings raised to primarily fund the investment on expansion projects increased finance charges to R157 million; net of interest capitalised to projects in progress of R44 million. The reduction in both the corporate taxation and secondary tax on companies rates contributed R62 million to earnings, or 12 cents per share. Headline earnings per share increased by 8% to 283 cents per share, calculated using the weighted number of shares in issue of , adjusted for treasury shares held in terms of the share buy-back. Cash generated from operations increased by 16% to R2,5 billion Consistent with 2007, the results of Porthold, a wholly owned Zimbabwean subsidiary, have not been consolidated into the group results. More details are contained in note 3 on page 183. Cash flow The ability of the group to generate cash remained strong. Cash generated from operations increased by 16% to R2,5 billion (2007: R2,2 billion; 2006: R2,0 billion). Working capital management Strong focus on working capital management continued with the net investment in working capital only increasing R17 million in the current year. The carrying value of trade receivables increased on higher revenues and there was also an improvement in the number of days outstanding. Imported cement, which in the prior year accounted for the sharp increase in working capital, reduced significantly during the current year because cement imports into South Africa were curtailed from January onwards and supplied from local operations, with only the Mozambique market continuing to be supplied from imports. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

33 page 30 Pretoria Portland Cement Company Limited Annual Report 2008 Chief financial officer s report continued Dividends The directors have declared a final dividend of 180 cents per share (2007: 166 cents per share; 2006: 110 cents per share). Total dividends for the year are 225 cents per share (2007: 205 cents per share; 2006: 143 cents per share) and reflect a dividend cover of 1,26 times, which is within the company s stated target range of 1,2 to 1,5 times. Approval by shareholders for the issue of new shares to empowerment partners in terms of the BEE initiative has been obtained and will result in the issue of 48,6 million PPC shares on 15 December These shares will qualify for the final dividend, which will be paid in January Capital expenditure The cash impact of capital expenditure was: 2008 Dwaalboom (Batsweledi) expansion project 328 Hercules (Ntšhafatso) expansion project 143 Other expansion projects 46 Expansion projects 517 Replacement projects 277 Total 794 Projected cash flows for 2009: Dwaalboom (Batsweledi) expansion project 136 Hercules (Ntšhafatso) expansion project 386 Other expansion projects 50 Expected annual replacement capital expenditure Capital expenditure including interest capitalised of R44 million (2007: R8 million, 2006: nil) amounted to R838 million (2007: R962 million; 2006: R395 million) and related mainly to the Batsweledi and Ntšhafatso expansion projects. Capital expenditure to ensure continual improvement in the company s environmental standards and adherence to ever-tightening legislation is included in the expected annual cash flow above. The recent weakening of the rand against the euro is likely to have an impact on the cost of future capital expansion and replacement projects, and the group will continue with its plans to implement appropriate hedging strategies. Dwaalboom (Batsweledi) expansion project The Batsweledi expansion project was successfully commissioned in late September 2008, five months later than previously communicated but within budget. The full depreciation charge will be included from the 2009 financial year. Increased efficiencies, particularly in energy consumption, on the new kiln line is likely to provide for increased output with a lower cash cost of production than other older production lines currently in use. Incentivisation accounting During 2007, PPC introduced a cash-settled long-term incentive scheme to replace the Barloworld equitysettled share option scheme and the company has made a further award during the current financial year. A total of R4 million (2007: R3 million; 2006: R1 million) was expensed in terms of IFRS 2 for the current year. The exposure relating to the 2007 allotment was hedged and, after the movement in the PPC share price by 30 September, an amount of R15 million was expensed as the mark-to-market adjustment on the hedging premium. More details on this scheme are contained in note 35. Share buy-back In terms of a special resolution authorised at the 28 January 2008 annual general meeting, the directors

34 Pretoria Portland Cement Company Limited Annual Report 2008 page 31 have a general authority to buy back up to 10% of the issued share capital of the company. In terms of this authority, PPC Cement (Proprietary) Limited, a wholly owned subsidiary of PPC Company Limited, acquired 14,9 million shares between 15 February and 31 March 2008 at an average price of R39,51 per share, including costs. A further 5,2 million shares were acquired between 5 September and 30 September 2008 at an average price of R31,29 per share, inclusive of costs. The cumulative cost of the repurchase program amounts to R753 million and was funded from surplus cash. The buy-back programme was entered into in anticipation of and to limit the dilutionary effect of the issue of new shares for purposes of the broadbased black ownership initiative. The shares are held as treasury shares with further share buy-backs to be considered on an ongoing basis, where appropriate. Major capital expenditure will continue to be funded from borrowings as appropriate Share trading During the year under review there was a significant increase in the volume of PPC shares traded on the Johannesburg Stock Exchange Limited (JSE), particularly in the last quarter. The current global economic crisis and fears of a world recession have not left South Africa unscathed and most equities listed on the JSE have fallen sharply over the past year, including PPC. Market capitalisation at year-end was R16,8 billion (2007: R25,7 billion) and the percentage of foreign shareholders increased to 32% by the end of September Effect of significant changes in IFRS A number of statements and interpretations became effective for the year under review. The most significant was the adoption of IFRS 7 Financial Instruments: Disclosures. The adoption of these standards did not impact the reported results of the group. Capital structure and debt As communicated in the 2007 annual report, the structuring of the balance sheet remains a key focus, with target debt levels remaining set at between two to three times gross debt to EBITDA and around five times interest cover. The group increased its short-term debt to R1,6 billion, which was utilised to fund capital expansion programmes and the investment in working capital. This represents a 0,7 times gross debt/ebitda cover and 12 times interest cover, which is well within the targeted levels. The group will continue to fund future major capital expenditure through borrowings. In terms of the broad-based black ownership initiative, the group will receive approximately R1,5 billion in long-term debt, which will be used to repay shortterm debt. Finance costs increased by R73 million over the last year; net of interest charges of R44 million capitalised to expansion projects. Increased gearing in the company will continue to have an impact on finance charges going forward. Cash flow 2009 The company should continue to reflect a steady performance with a strong operating cash flow for the year ahead. Although the IFRS 2 charge will mostly be expensed in the 2009 year and will have a significant impact on earnings per share for the year, the payment of dividends will be determined in terms of the company s policy of 1,2 1,5 times cover before this charge. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

35 page 32 Pretoria Portland Cement Company Limited Annual Report 2008 Chief financial officer s report continued Broad-based black ownership initiative The company announced the details of its empowerment initiative in August 2008 and it was approved by shareholders at a general and scheme meeting held early in November The broadbased black ownership initiative incorporates PPC employees, the communities in which PPC operates, construction and related industry associations, education and community service groups, the disabled, and strategic black partners. The initiative, in aggregate, will represent 15,29% of PPC s increased share capital. A circular to shareholders was issued on 16 October 2008 and provided details of the initiative. In summary, the initiative comprises a combination of debt funding, preference share funding and contributions from PPC group companies. In terms of the initiative, PPC will issue 48,6 million new shares and a further 38,0 million shares will be acquired from existing PPC shareholders by means of a scheme of arrangement in terms of section 311 of the Companies Act at a consideration of R31,32 per share, being the 30-trading day volume weighted average price at the close of business on Thursday, 21 August PPC s facilitation of the broad-based black ownership initiative is expected to have an impact of approximately R557,4 million, calculated in accordance with IFRS 2. This equates to 3,24% of PPC s market capitalisation of R17,2 billion based on the PPC share price of R32,00 per share at the close of business on Thursday, 21 August Of this charge R474,0 million will be expensed in the 2009 financial year, and the balance of R83,4 million will be expensed over the respective vesting periods of the shares. The cash cost of the transaction is estimated at R44 million, of which R20 million was expensed in the 2008 financial year, and a further estimated R5 million relating to legal and consulting fees will be expensed in the 2009 financial year. The balance relates to underwriting fees that will be capitalised and amortised over the funding period. The transaction will be effected on 15 December As a result of residual risk pertaining to a number of the trusts, accounting standards require that they be consolidated into the group financial results. This will have the effect of bringing additional debt of approximately R1,1 billion onto the consolidated PPC balance sheet and a corresponding debit against equity. Peter Esterhuysen Chief financial officer

36 Pretoria Portland Cement Company Limited Annual Report 2008 page 33 Transaction structure and overview Source of shares 6,72% into various trusts via section 311 Scheme of Arrangement 8,57% via the issue of new shares Share price applicable R31,32 (30 day VWAP at 21 August 2008) Funding Construction association and PPC education, community, team benefit and the black managers trusts financed through a preference share funding structure General staff and the black non-executive directors will receive a non-refundable contribution from PPC to purchase shares New PPC shares to be issued to CSG funded by a credit sale structure (CSGs contribute nominal R5,4 million in equity) New PPC shares to be issued to SBP consortium funded by a credit sale structure (SBPs contribute R60 million in equity) Vesting and Lock-in Shareholdings have various vesting conditions and sale restriction periods Dividends General staff and black non-executive directors will receive dividends immediately Trickle dividend to external trusts, PPC Team Benefit Trust and CSGs Dividends/earnings dilutionary effect Dilution of 5,3% (8,57% of increased shares in issue reduced by shares bought back and held as treasury shares) Balance sheet PPC will receive approximately R1,5 billion through CSG PPC and SBP PPC interest-bearing loans PPC intends using these long-term interest bearing loans to replace existing short-term interest bearing borrowings raised to fund capital expansion projects and working capital requirements IFRS 2 share-based payment charge Estimated R557,4 million charge equates to 3,24% of market capitalisation of R17,2 billion at close of business on 21 August 2008

37 Pretoria Portland Cement Company Limited Annual Report 2008 page 34 PPC s broad-based black economic empowerment transaction structure EXTERNAL TRUSTS INTERNAL TRUSTS The PPC Community Trust The PPC Construction Industry Associations Trust The PPC Education Trust The PPC Team Benefit Trust The PPC Black Managers Trust The Current PPC Team Trust and The Future PPC Team Trust 100% 100% 100% 100% The PPC Community Trust Funding SPV The PPC Construction Industry Associations Trust Funding SPV The PPC Education Trust Funding SPV The PPC Team Benefit Trust Funding SPV 0,71% R125,8 million 2,02% R357,8 million 1,01% R178,9 million 0,50% R89,5 million 1,85% R327,9 million 0,57% R101,0 million COMMUNITY SERVICE GROUPS STRATEGIC BLACK PARTNERS Shalamuka DEC Peu Nozala Portland Capital Edge 50% 50% 27,15% 25,71% 25,71% 21,43% The CSG Funding SPV The SBP Funding SPV 1,51% R268,4 million 7,06% R1 252,4 million INTERNAL TRUST 15,29% R2 710,7 million The PPC Black Independent Non-Executive Directors Trust Other PPC shareholders 0,05% R9,0 million Key: CSG = Community service group DEC = Disability empowerment concerns SBP = Strategic black partners SPV = Special purpose vehicle

38 Pretoria Portland Cement Company Limited Annual Report 2008 page 35 Broad-based black economic empowerment transaction A broad-based black ownership initiative totalling R2,7 billion It will directly benefit approximately 3,5 million people in South Africa, of whom the majority are black individuals GROUP OVERVIEW This is a historic milestone for the company and the culmination of processes started a number of years ago. This heralds a significant achievement by the company as it reaches a key empowerment objective at the equity level. We set out to ensure that the structure of the deal was as broad-based as possible, benefiting mainly black South African stakeholders. John Gomersall SUSTAINABILITY REVIEW FINANCIAL REVIEW MANAGEMENT REVIEW

39 page 36 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems Good corporate governance should extend further than mere statements of compliance. PPC has a strong ethos of corporate governance, which it has maintained since its formation in This ethos remains an important consideration in the company s day-to-day operations. PPC and its subsidiaries are fully committed to the principles of fairness, discipline, independence, accountability, transparency and social responsibility associated with good corporate governance. The company is incorporated in South Africa under the provisions of the Companies Act, 1973, as amended. It accepts the principles and firm recommendations set out in the Code of Corporate Practices and Conduct in the Report on Corporate Governance for South Africa 2002 (King II), and complies with the additional governance requirements of the JSE Limited and the Public Investment Corporation Limited s (PIC) principles, policies and practical application regarding corporate governance. The instances of non-compliance are noted and reasons are supplied. In terms of non-financial aspects, PPC complements these extended reporting requirements by adopting the Global Reporting Initiative s (GRI) sustainability reporting guidelines on economic, environmental and social performance. The company has also continued to meet the criteria of the JSE Limited s Social Responsibility Investment Index since its inception in The company s systems of corporate governance continue to evolve in pursuit of best practice and as the needs and expectations of stakeholders develop. Achievements during the period under review in pursuit of best practice and meeting these expectations include: A review of the board s charter and board committee s terms of reference to ensure compliance with the Corporate Laws Amendment Act 24, 2006 King II, the JSE Limited s listings requirements and the PIC s principles of corporate governance; The amendment and/or adoption of policies on the selection and appointment of directors and the chairman of the board, the disposal of immovable property, executive and director remuneration, environmental management, group share dealing, directors interests and risk management. The reconstitution of all board committees to ensure that membership comprises only non-executive directors; The appointment of an independent, non-executive director as chairman of the audit committee, and the reconstitution of this committee to comprise only non-executive directors; The appointment of a black independent, nonexecutive director as chairman of the board; The introduction of a formal programme for the continued training and development of the board; and The introduction of a new board performance evaluation approach, which includes additional evaluations of the board chairman, company secretary and board committees. Board accountability and delegated functions The board is responsible to shareholders for creating and sustaining shareholder value through the management of the group s businesses. It is also responsible for ensuring that management maintains an effective system of internal control. The board has formally reserved itself the following functions: Approving and monitoring the implementation of the strategic and annual business plans, setting objectives and reviewing key risks and performance areas, especially in respect of technology and systems, environmental issues and transformation; Appointing the chief executive officer and maintaining a succession plan; Appointing directors; and Determination of overall policies and processes to ensure the integrity of the company s risk management and internal control. While retaining overall accountability and subject to matters reserved for its domain, the board has delegated to the chief executive officer and executive directors the authority to run the day-to-day affairs of the company.

40 Pretoria Portland Cement Company Limited Annual Report 2008 page 37 Specific responsibilities have been delegated to the board s committees, which have access to independent advice at the group s expense. Audit, risk management and compliance, black economic empowerment and transformation, and nominations and remuneration committees assist the board in the discharge of its duties and report to the board on their activities. Each committee acts within its written terms of reference, under which certain functions of the board are delegated with clearly defined purposes and membership requirements. The performance and effectiveness of the committees are evaluated during an annual evaluation by the board, and the committees chairpersons are required to attend annual general meetings to answer shareholders questions. A formal self-evaluation of the board, its chairman, company secretary and its committees performance and effectiveness was carried out during the period under review. This exercise was conducted by means of individual questionnaires completed by each board and committee member. The group company secretary collated the results of all the questionnaires, which were then reported to the board in November Generally, the result of the evaluation was satisfactory and the board concluded that it continues to operate effectively and that the exercise has ensured the board remains efficient and relevant to the company s business objectives. Board of directors At the time of this report, the board comprises five executive and seven non-executive directors. A number of changes were made to the board during the year, including the appointment of Mr TDA Ross and Mr BL Sibiya to the board on 17 July and 10 November 2008 respectively. The aim is to have a board with an appropriate balance of skills and experience to support the company s strategy and meet the requirements to lead it effectively. The nominations committee is responsible for overseeing the process for appointing new directors to the board. (The report on its activities is published on page 42.) The selection and nomination of directors take place according to well-defined procedures and any proposed new appointment of a director is considered by the board, as a whole, on the recommendation of the nominations committee. In line with best practice around the globe, more than half of the board s members are independent, non-executive directors. The board considered the issue of independence at its board meeting in November 2008 and concluded that Ms ZJ Kganyago, Ms NB Langa-Royds, Mr TDA Ross, Mr BL Sibiya, Mr MJ Shaw and Mr J Shibambo are independent, non-executive directors of PPC as defined in subparagraph of King II and paragraph 3.84(f) of the JSE Limited s listings requirements. The PPC board contends that Mr AJ Lamprecht, who is chief executive officer of Freeworld Coatings Limited and was previously a director of a major shareholder of the company, should be considered an independent, non-executive director for the period under review. The curriculum vitae of each director of the company is published on page 26. To ensure the effective functioning of the board, the board agenda and supporting papers are usually distributed to all directors a week prior to each board meeting. Further explanations and motivations for items of business that require decisions are supplied during the meeting by the appropriate executive director. When necessary, decisions are taken by the directors between meetings by written resolution as provided for in the company s articles of association. Directors have unrestricted access to all company property, information and records. During the period under review, the following scheduled board meetings were held: 28 January 2008; 28 February 2008; 6 May 2008; 6 August 2008; and 10 November FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

41 page 38 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems continued Special board meetings were held on 27 August and 2 October Ms ZJ Kganyago could not attend the meetings on 27 August and 10 November and Mr AJ Lamprecht could not attend the meeting on 2 October. All new directors undergo a comprehensive induction process arranged by the company secretary. It includes a detailed information pack, an explanation of their fiduciary duties and responsibilities, meetings with the executives of the company, director development programmes arranged through the Institute of Directors, and visits to the main operations where discussions with management facilitate an understanding of the company s affairs and operations. The company secretary facilitates additional training and updates for directors on particular issues, such as competition and mining legislation, on a continuing basis. In certain circumstances it may become necessary for a non-executive or independent director, acting in the best interests of the company, to obtain independent professional advice. Such a director has unrestricted access to the chairman, executive directors and the group company secretary. If a non-executive or independent director takes reasonable action and incurs costs, these are carried by the company. Conventionally, executive directors retire from the board at 63, while non-executive and independent directors retire at the next annual general meeting after their 70th birthday. Having reached the retirement age, Mr MJ Shaw will retire at the annual general meeting. In terms of the company s articles of association, at every annual general meeting at least one-third of the directors retire from the board. In addition, a director appointed by the board must retire from this office at the next annual general meeting. Directors who retire in this manner may make themselves available for election or re-election, as the case may be, subject to recommendation from the nominations committee. At the forthcoming annual general meeting on 26 January 2009, Mr TDA Ross and Mr BL Sibiya, who were appointed as directors by the board during the year, are required to retire and Mr RH Dent, Mr P Esterhuysen and Mr AJ Lamprecht are required to retire by rotation in terms of the articles of association. They have all made themselves available for election or re-election at that meeting and the nominations committee has recommended this be done. There are no contracts of service between any director and the company or any of its subsidiaries that are terminable at periods of notice exceeding three months and require payment of compensation, with the exception of a fixed-term contract with Mr JE Gomersall that expires on 31 January 2010, after the annual general meeting and four months after his 63rd birthday. Mr JE Gomersall has an option to take early retirement with six months notice. Fees payable to non-executive and independent directors are proposed by the remuneration committee, recommended by the board and fixed by the shareholders at the annual general meeting. The fees proposed for 2009 are published on page 200. Frequent meetings of the executive directors were held during the period under review to assist the chief executive officer and the chief operating officer to guide and control the overall direction of the business of the company, monitor business performance and act as a medium of communication and coordination between business units, group companies and the board. Chairman and chief executive officer No individual board member has unfettered powers of decision-making. The responsibility for running the board and executive responsibility for the conduct of business are differentiated. Accordingly, the roles of the chairman of the board and chief executive officer are separate. The group company secretary The group company secretary provides the board as a whole, and directors individually, with detailed guidance on the discharge of their responsibilities. He is a central source of information and advice to the

42 Pretoria Portland Cement Company Limited Annual Report 2008 page 39 board and within the company on matters of ethics and good governance. He also ensures that the proceedings and affairs of the board, its committees, the company itself and, where appropriate, owners of securities in the company are properly administered in accordance with the pertinent laws. He is responsible for compliance with the rules and listings requirements of the JSE Limited and the Zimbabwe Stock Exchange on which the company s securities are listed, and administers the statutory requirements of the company and its subsidiaries in South Africa. the group company secretary of their intentions prior to the transaction and record in writing immediately after the transaction the particulars thereof and deliver a detailed written record to the group company secretary within 24 hours. A list of persons who are restricted for this purpose has been approved by the board and is revised from time to time. A register of directors and officers is available for inspection at the company s registered office in Sandton, South Africa. GROUP OVERVIEW All directors have direct access to the group company secretary at all times and the directors and officers of the company keep him advised of all their dealings in company securities. Insider trading The Securities Services Act regulates transactions by directors and officers in securities issued by the company, and the company has issued a set of guidelines and rules for its directors, officers and employees. No employee, his/her nominee or members of their immediate family may deal directly or indirectly, at any time, in the securities of the company on the basis of unpublished, price-sensitive information regarding the company s business and affairs. No director or officer of the company may deal in the securities of the company during the closed periods determined by the board in terms of a formal policy controlled by the group company secretary. Closed periods are from the end of the interim and annual reporting periods until 24 hours after the announcement of financial and operating results for the respective period. From time to time, additional periods may be declared closed if circumstances warrant it. Dealing in the securities of the company at any other time is permitted, but approval must be obtained from the chief executive officer in advance of any transaction. When any director or officer wishes to buy, sell or take a position in securities of the company, they must notify The listings requirements of the JSE Limited extend obligations regarding transactions in the securities of the company to be disclosed to the market within 48 hours. These specifically include all group directors and the group company secretary, as well as any associate of the group s directors or group company secretary, or any independent entity or investment managers through which the group directors or group company secretary may derive a present or future beneficial or non-beneficial interest. Accounting and reporting The board places strong emphasis on achieving the highest standards of financial management, accounting and reporting to shareholders. Audit committee Mr TDA Ross (chairman) Ms ZJ Kganyago, Mr J Shibambo During the period under review, Mr JE Gomersall and Mr MJ Shaw retired from the audit committee and Ms ZJ Kganyago and Mr TDA Ross were appointed in their places. The audit committee comprises three independent directors as required by the Companies Act and the PIC s principles, policies and practical application regarding corporate governance. Its chairman, Mr TDA Ross, is an independent, non-executive director. He replaced Mr MJ Shaw, who also acted temporarily as chairman of the board of directors. Internal audit services are provided by Ernst & Young, who have been appointed for this purpose for the 2008 and 2009 financial years. MANAGEMENT REVIEW SUSTAINABILITY REVIEW FINANCIAL REVIEW

43 page 40 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems continued The head of the internal audit team and the designated auditor in charge of the external audit were invited to attend all meetings. They had unrestricted access to the chairman and other members of the audit committee. The chief financial officer and other relevant executives were also invited to attend the meetings of the audit committee. No invited attendee had voting rights. The audit committee met on the following dates and all members attended these meetings: 5 May 2008 to consider reports from the internal and external auditors and the interim report for the half-year ended on 31 March The committee was satisfied that the interim financial information and the interim report were accurate and resolved that the chairman recommend approval by the board on 6 May 2008; and 3 November 2008 to consider reports from the internal and external auditors and the financial statements for the year ended on 30 September The committee was satisfied that the financial statements and preliminary report were accurate and resolved that the chairman recommend approval by the board on 10 November The designated auditor in charge of the external audit and the head of the internal audit team were present. The committee also considered the company s ability to continue as a going concern, exceptional items, outstanding litigation and claims, judgements and sources of estimation and uncertainty, as well as business continuity plans and information security. At the board meeting on 10 November 2008 the chairman of the audit committee reported on how it has carried out its functions: Audit committee report We are pleased to report to you on the audit committee s activities in In fulfilling its oversight responsibilities, the committee reviewed and discussed the audited financial statements and related schedules in the annual report with company management. This included a discussion of both the quality and acceptability of the accounting principles, the reasonableness of significant judgments and the adequacy of disclosures in the financial statements. With the independent audit firm, which is responsible for expressing an opinion on the fair presentation of those audited financial statements and related schedules in accordance with International Financial Reporting Standards, the committee reviewed the group s judgments on the quality and acceptability of the company s accounting principles. In addition, the committee discussed with the audit firm its independence from the company and its management, and considered the impact of non-audit services on the audit firm s independence. The committee discussed with both the company s internal and external auditors the overall scope and plans for their respective audits. The committee also met with both these parties in the presence of management to discuss the results of their examinations, evaluations of the company s internal control including internal control over financial reporting and the overall quality of the company s financial reporting. The committee s responsibilities include monitoring and reviewing the appointment of the external auditors and overseeing their relationship with the company. The annual evaluation of the external auditors was carried out through interviews with senior members of the company s finance function and the results of these were considered at the committee s meeting on 3 November Based on the reviews, discussions and interviews, the committee recommended to the board of directors, and it has subsequently been approved, that the audited financial statements and related schedules, as well as management s assessment of the company s internal control over financial reporting, be included and incorporated by reference in the annual report filed by the company for the year ended on 30 September The committee and the board also recommended the selection of the company s independent audit firm and the specific designated partner, subject to shareholder approval.

44 Pretoria Portland Cement Company Limited Annual Report 2008 page 41 The committee is governed by its terms of reference, which are aligned with relevant legislation. The committee held two meetings during the financial year As required by legislation the committee comprises only independent directors: Mr TDA Ross Audit committee chair Ms ZJ Kganyago Audit committee member Mr J Shibambo Audit committee member 3 November 2008 The board has determined that the audit committee, which has no executive powers, has satisfied its responsibilities for the period under review in compliance with its terms of reference. Risk management and compliance committee Mr J Shibambo (chairman) Mr TDA Ross and Mr MJ Shaw During the period under review, Mr TDA Ross was appointed to the risk management and compliance committee, which acts within written terms of reference approved by the board. The chairman of the committee, Mr J Shibambo, is an independent, nonexecutive director. The primary function of the committee is to assist the board in the assessment and management of risk and legal compliance across the PPC group, to ensure the requisite risk management culture, practices, policies, resources, systems and controls are in place, and to function effectively in providing reasonable assurance that the company is in compliance with the laws and regulations to which it is subject. The committee primarily addresses health, safety, statutory, legal, environmental, mining, production and engineering risks. During 2008 it again reviewed developments in high-level risks and their potential impact on business. The company has merged its internal auditing activities under one umbrella, known as the joint audit process (JAP), with the overall objective of fostering in the group: Common audit methodologies and the avoidance of duplication; A holistic view of the business and its related risks; The involvement of internal and external line specialists; The sharing of operational best practice and knowledge; Encouraging continual improvement; Adherence to company policies; and Compliance with legislation. The head of JAP is invited to attend all meetings and has unrestricted access to the chairman and other members of the risk management and compliance committee. At the discretion of the chairman other executives may also be invited to attend and give input, but no attendee so invited has voting rights. During the period under review, the committee met on 5 May and 3 November All committee members attended these meetings. The board has determined that the risk management and compliance committee, which has no executive powers, has satisfied its responsibilities for the period under review in accordance with its terms of reference. Black economic empowerment (BEE) and transformation committee Ms NB Langa-Royds (chairman) Mr AJ Lamprecht, Mr MJ Shaw, Mr J Shibambo During the period under review Ms NB Langa-Royds was appointed as chairperson of the black economic empowerment and transformation committee to replace Mr JE Gomersall, who retired. This committee is composed of independent nonexecutive directors only and assists the board in adopting an holistic approach to transformation and compliance with all relevant legislation and charters. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

45 page 42 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems continued In accordance with its delegated authority, the committee s objectives are to: Ensure management embraces the principles of transformation across all facets of the group s activities; Develop and implement an appropriate transformation strategy; Ensure that equity ownership of PPC conforms to the requirements of the Mining Charter; Design, implement and regularly review policies, plans and processes aimed at facilitating transformation in the group; Implement integrated annual reporting to stakeholders on aspects of transformation; and Provide an objective forum that is dedicated to policy recommendations to the board and guide significant matters in terms of transformation within the group. During the year under review the focus of the committee has been on the finalisation of the company s broad-based black ownership initiative, as advised to shareholders in a Stock Exchange News Service (SENS) announcement on 28 August PPC s broad-based black ownership initiative has been developed in accordance with the Mining Charter, black-empowerment codes and the Broad-Based Black Economic Empowerment (BBBEE) Act, The Mining Charter requires that at least 15% of the company s share capital be held by black people by the time applications for conversion of mining licences are submitted, which is May 2009 at the latest, to enable PPC to convert its existing old-order mining rights to new-order mining rights. The broad-based black ownership initiative enables PPC to meet this requirement. On 11 November 2008, shareholders approved the proposed transaction and the scheme of arrangement. The board believes the initiative is both sustainable and embraces the principles of BBBEE in terms of ownership by black people. The committee held three scheduled meetings during the period under review to consider funding structures, strategic partner selection and transaction documentation. All committee members attended the scheduled meetings, but Mr MJ Shaw was not able to attend a special meeting held on 21 July The board has determined that the black economic empowerment and transformation committee has satisfied its responsibilities for the period under review in compliance with its terms of reference. Nominations committee Mr BL Sibiya (chairman) Mr MJ Shaw, Ms NB Langa-Royds, Mr J Shibambo, Mr AJ Lamprecht During the period under review Mr BL Sibiya was appointed as chairman of the nominations committee to replace Mr MJ Shaw in accordance with the requirements of the JSE Limited listings requirements. The committee is composed entirely of independent, non-executive directors and makes recommendations to the board on the composition of the board and the balance between executive and non-executive directors. Skill, experience and diversity are considered in this process. The committee must identify and nominate for approval by the board candidates for additional directors, or to fill any board vacancies when they arise, in terms of a policy detailing the procedures for such appointments that requires this process to be formal and transparent. It also advises the board on succession planning, especially in respect of the positions of chairman of the board and chief executive officer. The committee also recommends for re-election, as it considers appropriate, directors who retire in terms of the company s articles of association. During the period under review, the committee met for scheduled meetings on 6 May and 10 November The committee also met for special meetings on 26 June, 6 August, 17 September and 2 October 2008 to discuss and recommend to the board the appointment of Mr TDA Ross and Mr BL Sibiya to the board, respectively as chairman of the audit committee and chairman of the board. The committee also considered the directors who were standing for re-election at the forthcoming annual general meeting. In accordance with the committee s findings, the board recommended to shareholders the election of Mr TDA Ross and Mr BL Sibiya and the re-election of Mr RH Dent, Mr P Esterhuysen and Mr AJ Lamprecht to the board.

46 Pretoria Portland Cement Company Limited Annual Report 2008 page 43 All committee members attended these meetings, except Ms NB Langa-Royds, who recused herself from the meetings on 17 September and 2 October Mr BL Sibiya was appointed in November 2008 and therefore attended the November meeting only. The board has determined that the nominations committee, which has no executive powers, has satisfied its responsibilities for the period under review in compliance with its terms of reference. Remuneration committee Ms NB Langa-Royds (chairman) Mr MJ Shaw, Mr J Shibambo During the period under review Ms NB Langa-Royds was appointed as chairperson of the remuneration committee in anticipation of the retirement of Mr MJ Shaw at the annual general meeting in January This committee is composed entirely of independent, nonexecutive directors. It is mandated, within agreed terms of reference, to deal with the remuneration policy in general and approve the salaries and benefits of the executive directors and senior management. The committee also makes recommendations to the board, for onward recommendation to shareholders at the annual general meeting, on non-executive directors fees and fees for directors who are members of board committees. The company s philosophy is to set remuneration that is appropriate, taking into account levels of responsibility and the need to attract, motivate and retain directors, executives and other individuals of high calibre. 17 September 2008 at R31,80 per PPC share equivalent, which constituted the volume weighted average price of a PPC share for the five trading days prior to that day. One-third of the rights may be exercised after each of the third, fourth and fifth anniversaries of the grant date. For executive directors and executive management, this is subject to the group exceeding 2% real growth per annum in cumulative headline earnings per ordinary share over the two financial years after the financial years starting at the end of September If the performance condition is not met for the two financial years, retesting is subsequently permitted on a cumulative basis for the three, four or five financial years, after which the rights are forfeited if the performance condition has not been met. The remuneration committee may waive, amend or replace the performance conditions if events cause the committee to consider reasonably that a changed performance condition would be a fairer measure of performance and would be no more difficult to satisfy. Rights may not be exercised during a closed period and must be exercised before the tenth anniversary of the grant date, failing which they will lapse. The 2008 grant was based on multiples of basic salary used in companies operating in similar industries. The terms governing future long-term incentive awards are likely to be substantially similar to the 2008 award, with annual grant values set each year in line with market benchmarks for long-term incentives. The remuneration committee may, however, change certain aspects such as the vesting period, the lapse period and performance conditions at its discretion to ensure new awards are in line with market trends and remain fair and motivating long-term rewards. GROUP OVERVIEW MANAGEMENT REVIEW SUSTAINABILITY REVIEW Guaranteed packages are normally reviewed once a year and take into account external market practices and conditions as well as the achievement of individual performance targets. Annual salary increases are not guaranteed. The committee appointed PricewaterhouseCoopers to provide advice and recommendations and assist in meeting the increasingly onerous corporate governance requirements in respect of executive remuneration. All rights immediately lapse if a participant resigns or is dismissed for disciplinary reasons. In the case of retirement, a participant s rights will be subject to the same conditions as if he had continued to be an employee. In the case of retrenchment or termination of employment due to ill health, disability or any other circumstances that the committee may consider appropriate, a participant must exercise vested rights within three months. The committee also has absolute discretion to allow a portion of the unvested rights to vest. FINANCIAL REVIEW Share appreciation rights, as detailed on page 44, were approved by the board on the recommendation of the remuneration committee and granted on In the case of transactions that involve restructuring of the company, variations in share capital, capital distributions and similar events, the committee will

47 page 44 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems continued take action it deems appropriate to protect the interests of participants. In the event of a reconstruction or takeover leading to a change of control, the committee is obliged to deem as vested a portion of the rights of executive participants pro rata to the performance period lapsed if, in their reasonable opinion, they consider the performance conditions to have been met substantially. The company will periodically recommend to the remuneration committee the names of employees to whom it intends awarding incentives in the form of share appreciation rights, the quantum of the awards to be made, vesting dates and the nature of the performance conditions. The committee, after review and due consideration, will recommend such allocations, where appropriate, to the board for approval. Recipients of share appreciation rights 2008 JE Gomersall 0 O Fenn S Abdul Kader RH Dent P Esterhuysen Executive directors (subject to performance conditions) Executive management (subject to performance conditions) Senior management (not subject to performance conditions) The company continues to review the balance between fixed and variable components of remuneration with the aim of increasing the variable component, which is then subject to company and individual performance. The proposed change is motivated by the need to sustain superior performance and increase shareholder value in the long term. increasing level of responsibilities and risks associated with directorships. Executive directors of PPC are not entitled to fees. During the period under review, the committee met five times. All committee members attended these meetings. The chief executive officer, Mr JE Gomersall, attends the committee meetings ex officio. He does not participate in discussions regarding his own remuneration, which is set by the committee. The board has determined that the remuneration committee has satisfied its responsibilities for the period under review in compliance with its terms of reference. In respect of each director, details are provided in note 38 to the group annual financial statements of salary, bonus, retirement and medical aid contributions, gains from PPC or Barloworld share options exercised or ceded, and other benefits. Details of directors shareholdings are also disclosed. Non-executive directors are remunerated for their membership of PPC s board and its committees. These fees are benchmarked annually against companies of similar size and complexity and take into account the Internal audit The board and the audit committee appointed Ernst & Young to fulfil PPC s internal audit requirements until the end of the 2009 financial year. The use of group-wide audit professionals fosters independence, standardisation of audit procedures and sharing of best practices. Internal audit activities principally determine, at each of the business units of the company, whether the PPC network of risk management, control and governance

48 Pretoria Portland Cement Company Limited Annual Report 2008 page 45 processes are adequate and function in a manner to ensure that: Risks are appropriately identified and managed; Interaction with various governance groups within the organisation occurs appropriately; Significant financial, managerial and operating information is accurate, reliable and timely; Employees actions are in compliance with policies, procedures and applicable laws and regulations; Resources are acquired in an economical manner, used efficiently and safeguarded adequately; Company objectives and plans are achieved; Continual improvement in quality of the internal control processes as well as the risk management framework is fostered across the PPC group; and Significant legislative and regulatory issues that have an impact on the group are recognised and addressed appropriately. The internal audit function reports to the audit committee on its findings and has unrestricted access to the committee and its chairman. Audit plans are drawn up annually and take into account changing business needs and risk assessments. Issues highlighted by the audit committee and management are considered and follow-up audits are planned in areas in which weaknesses have been identified. The audit committee approves the internal audit plan. During the period under review, no major breakdowns in internal controls were identified. Risk management In terms of a written risk management philosophy statement issued by the chief executive officer and endorsed by the directorate, the company is committed to manage its risks and opportunities in the interests of all stakeholders. Every business unit and each employee has a responsibility to act proactively in this manner. An ongoing systematic, multi-tiered and enterprisewide risk assessment process supports the company s risk management philosophy. This ensures that risks are adequately identified, evaluated and managed at the appropriate level in the business units, and that their individual and joint impact on the company as a whole is taken into consideration. Risk registers are maintained as part of the risk management process. Where appropriate, internal, external and JAP auditors adapt their audit procedures to include coverage of these risks in their reviews and compliance audits. During the year under review, the risk management process was subject to review by internal audit. Divisional boards and senior managers carry out detailed annual self-assessments of risk. This process identifies the critical business, operational, financial and compliance exposures facing the company, and the adequacy and effectiveness of control factors are reviewed and updated on a six-monthly basis. Facilitation of the process is undertaken in alternate years by external risk advisers Marsh Vikela. Business recovery plans have been compiled for each operation and are subject to regular testing. The audit and risk management and compliance committees regularly review the main risks and risk management processes and advise the board accordingly. Third party management No part of the company s business was managed during the year by any third party in which any director had an interest. Communication The company subscribes to the principles of objective, honest, prompt, balanced, relevant and clear communication of both its financial and nonfinancial matters. The focus is on substance rather than form, and communication with stakeholders with a legitimate interest in the company s affairs is sensitive and systematic. The company regularly meets with institutional investors with due regard for statutory, regulatory and other directives that prohibit the dissemination of unpublished, price-sensitive information by the company and its directors and officers. In accordance with the Promotion of Access to Information Act, 2000, the company has prepared and published the required manual. This is available on the company website ( and explains how information must be requested as well as the nature of available information. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

49 page 46 Pretoria Portland Cement Company Limited Annual Report 2008 Corporate governance structure and management systems continued PPC GROUP MAIN RISKS (in alphabetical order) Key risks Electricity supply Exposure to supply curtailments, interruptions and cost increases Skills retention Ongoing management of skills retention and development challenges Competitor actions The risk of competitors taking individual actions, through pricing or other activities, that will erode the company s competitive position and have a significant impact on the value it creates for shareholders Economic slowdown and exposure to a single region s economy Exposure to a phase of lower South African economic growth Management response Optimise electricity consumption through greater efficiencies Maintain close relationship with Eskom and voluntary load-shifting Investigate co-generation using waste heat Through competency-based assessments, employees regularly reviewed to ensure the appropriate skill sets are available to enable performance at optimum levels Reward and incentives schemes implemented to ensure recognition and retention of high-performing employees. Regular update of succession plan and ensure appropriate investment in the development of people Continually reduce costs by focusing on operational efficiencies and staff training Maintain cost competitiveness and improve products and service Reduce costs by optimising use of the numerous production facilities in the group Pursue exports The board has also approved a disclosure policy with regard to external communications of the financial and operational performance of the company. The policy notes the requirements of the JSE Limited and global best practice for disclosure by public companies. The group s disclosure policy is not only in respect of information disclosed to the investment community and the financial media, but applies to communication with anyone who would not normally be privy to that information, including suppliers, customers and employees within the group. Company results communications Earnings press release Earnings press releases will be released via SENS and posted on the corporate website as soon as possible thereafter, prior to the commencement of any discussions or meetings about the results. Earnings presentation Any earnings presentation will be posted on the PPC website at the time the presentation commences. There may also be a live broadcast on a South African business television channel and the event will be recorded and subsequently posted on PPC s website. These broadcasts assist with fair and timely disclosure to all investors and act as a record of events. Fines and prosecutions Besides the individual fines referred to in the environmental report on page 71, the company has not been fined or prosecuted in terms of any anticompetitive or governance issues. Code of ethics All employees must adhere to the company s code of ethics as well as its published equal-opportunity and anti-discrimination policies. These policies provide

50 Pretoria Portland Cement Company Limited Annual Report 2008 page 47 steps to be taken if an employee feels the policies letter or intent has been breached. No retaliation may be taken against an employee who files a complaint. The integrity of new employees is assessed in the company s selection and promotion procedures. Due care is exercised in delegating discretionary authority to individuals in the company. All new employees are advised, at the time of their induction, about the company s values, standards and compliance procedures. All employees are consulted on, and trained in, policies and practices with regard to human rights in the workplace. Furthermore, contractors to PPC are entitled to the same privileges and treatment as permanent employees. As a company that aims to provide fair and equal employment opportunities, PPC continually strives to subscribe to the legislative frameworks and guidelines that address the needs of indigenous people in the countries in which it operates, and employment practices are aligned accordingly. Freedom of association is another right enshrined and protected by the PPC ethics policy. The company has a long-standing tradition of recognising and dealing with trade unions that represent employees at its business units. The company s procurement policy ensures that outsourced service providers have policies and procedures to protect the human rights of their employees. Contractor services are secured according to legal compliance practices in individual countries. The code of ethics is enforced with appropriate discipline on a consistent basis and action is taken to prevent the recurrence of an offence. The PPC ethics policy prohibits child, compulsory or forced labour and is enforced throughout the company. The hiring of labour is aligned with the relevant legislation and standards of the countries in which PPC operates. The ethics policy outlines the principles for relationships with political parties and no contributions are made to fund political parties, election campaigns or electoral candidates. The company has no affiliations with any political parties. The ethics policy also governs bribery and corruption and PPC applies a zero-tolerance stance on this issue. An employee found guilty of such practices is dismissed. A register of gifts received by employees and permissible guidelines is maintained. The company provides an independent, confidential and safe system by which employees or other parties can report unethical or dishonest behaviour. Such reports can be submitted to the PPC Ethics Line, the details of which are set out below. South Africa PPC Ethics Line Deloitte & Touche Tip-offs Anonymous Telephone Free fax Address PPC Ethics Line Free post c/o Tip-offs Anonymous Free Post KZN 138 Umhlanga Rocks, 4320, South Africa ppc@ethics-line.com International or Zimbabwe Deloitte & Touche Tip-offs Anonymous Telephone Fax Address The Call Centre Freepost PO Box HG 883 Highlands, Harare Zimbabwe reportszw@tip-offs.com Tip-offs Anonymous is an independent body within Deloitte & Touche that provides an opportunity to anyone who wishes to report unethical activities or dishonest behaviour affecting the PPC group. If desired, total anonymity is assured. Each incident reported through the PPC Ethics Line is fully investigated at the highest level and the risk and compliance and audit committees are appraised of the outcome and actions required to address shortcomings, if any. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW

51 page 48 Pretoria Portland Cement Company Limited Annual Report 2008

52 Pretoria Portland Cement Company Limited Annual Report 2008 page 49 GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Environmental section

53 page 50 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report Introduction Approach to reporting The aim of this report is to provide feedback with regard to PPC s sustainability performance. The environmental component of the annual report was guided by the PPC environmental framework document of 2007, which involved a benchmark assessment and stakeholderengagement process as shown in figure 1. Feedback from external stakeholders through surveys, interviews and media reviews, as well as the environmental issues that most affect business strategy, are included in this report. It addresses the areas that matter most to external stakeholders, as well as the issues identified as material during an external workshop held in September Compliance to progress on the material issues are managed as part of PPC s global reporting index system and the World Business Council for Sustainable Development template. Materiality The determination of material issues were undertaken according to G3 methodology, a globally recognised system to provide stakeholders with a universally applicable framework in which to understand disclosed information. The methodology focuses on materiality, stakeholder inclusiveness, sustainability context and completeness. The sustainability context parameters included factors relating to impacts, risks or opportunities in terms of social, economic and environmental issues. The material issues are captured in figure 2 and are used to inform business strategy and the high-level risk assessment process. Figure 1: PPC s approach to sustainability reporting PPC environment framework document Benchmark assessment Stakeholder engagement Stakeholder mapping Key groups of stakeholders identified per site Stakeholder engagement and issues identification Non-material issues reported at local stakeholder meetings External workshop to identify material issues included in the draft report Audit performance Track sustainable development performance against material sustainable development issues, internally report to board and update framework Publish report and distribute to stakeholders via different media sources Internal and external review of draft report

54 Pretoria Portland Cement Company Limited Annual Report 2008 page 51 Figure 2: Material issues identified for 2007/2008 Compliance incidence Climate change Energy efficiency GROUP OVERVIEW Natural resources (limestone) 2007/2008 material issues Suppliers Mining closure and rehabilitation Education and capacity building Process flow and products The cement-manufacturing process is depicted in figure 3 below. Sustainability issues are identified as part of PPC s risk assessment process, which informs Figure 3: Process flow of the cement-manufacturing process Water and waste Air emissions the company s environmental management systems. Table 1 overleaf describes the management of material sustainability issues. Mining limestone Crushing plant Limestone blending Coal stockpile Raw mill Coal mill FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Pre-heater, kiln line and cooler Clinker storage Cement milling and dispatch

55 page 52 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Table 1: Management of sustainability issues Activity Sustainability issues managed Cross cutting sustainability issues for activities Mining of limestone Preventing dust, noise, vibration and water impacts Efficient use of mineral resources Rehabilitation and achievement of mine closure objectives Engaging with communities Implementing duty-of-care responsibilities in terms of the National Environmental Management Act, 2002 Safety as well as elimination of accidents Land disturbance minimisation Crushing and blending Minimising fugitive dust emissions Coal stockpile Minimising dust and water impacts Mills Minimising air emissions and noise impacts Kilns Managing energy efficiency Minimising air emissions Managing energy efficiency Cement storage and despatch Climate change Minimising fugitive dust emissions Scope The strong demand for cement continued in 2008, with most of PPC s operations performing at rated output capacities. PPC investigated and initiated a number of expansion and upgrade projects to meet the growing demand for cement and improve the environmental performance of equipment. This report covers all PPC s manufacturing facilities, aggregate quarries and cement depots in South Africa, Botswana and Zimbabwe. Progress with the expansion and upgrade projects are also highlighted. Logistics associated with the transportation of raw materials and the final product, as well as the Kgale Readymix plant in Botswana that was sold in June 2008, is excluded from the scope. Environmental management Group sustainability policy Sustainability encompasses the balanced integration of social, ethical, economic, environmental, health and safety factors into all the planning, implementation and decision-making of the business. PPC exercises due diligence in all areas of operation to promote the sustainable development of its business, employees, the environment and the communities within which it operates.

56 Pretoria Portland Cement Company Limited Annual Report 2008 page 53 PPC is committed to deliver stakeholder value in all its endeavours: Board accountability PPC directors are accountable for PPC s sustainability performance. Aligning values and principles with sustainable development PPC aligns all decisions pertaining to the company s financial sustainability and the fundamental rights of all its stakeholders (employees, customers, shareholders, suppliers and the communities in which it operates) within an established framework of values and ethical principles. GROUP OVERVIEW Assessing risks and opportunities In identifying and effectively responding to sustainability risks and opportunities, the company continues to enhance long-term shareholder value and simultaneously fulfils its broader economic, social and environmental responsibilities to society. Management systems PPC performs regular audits of its management systems and programmes to ensure the company s sustainability policy is implemented and remains effective. The International Organisation for Standardisation (ISO) and Aggregate and Sand Producer Association of South Africa (Aspasa) systems are externally audited. Performance and quality requirements are internationally recognised by the ISO certification. PPC is committed to the use of systems and programmes that meet or exceed applicable legal and regulatory standards. Performance monitoring and reporting PPC s sustainability performance is reported publicly to stakeholders. The company is committed to monitor its use of natural resources and develop indicators to assess its progress against recognised standards. Engaging stakeholders PPC establishes and maintains constructive, proactive and informed relationships with all stakeholders. Minimising environmental impact PPC is committed to identify, assess and reduce the environmental impact of activities performed by employees, contractors and suppliers. Training and research PPC promotes innovative research, training and technology cooperation in the search for environmentally sensitive solutions to minimise the organisation s environmental impact. The company embraces principles of social justice and fairness to achieve optimal well-being and prosperity for all its stakeholders. Chief operating officer Orrie Fenn 30 September 2008 Environmental vision FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW To minimise the impact of PPC s environmental footprint by providing energy- and resource-efficient products manufactured by a company that is driven by sustainable development.

57 page 54 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Environmental policy Pretoria Portland Cement Company Limited (PPC) is committed to understanding and managing any potential environmental impacts of our activities relating to the sustainable manufacture of cement and lime as well as the mining of aggregates and other minerals. We do this by ensuring that environmental management is an integral part of our operations. We continue to strive to meet the expectations and requirements of all our stakeholders through monitoring and managing environmental performance using an integrated and effective environmental management system. We believe that all PPC employees and everyone associated with the organisation have an important role to play in achieving our environmental objectives and targets. To this end PPC is committed to: Establishing clear accountability for environmental performance; Continual environmental improvement by providing a customised framework for setting and reviewing environmental objectives and targets based on stakeholder engagement and the identification of significant environmental impacts; Comply with environmental legislation and other requirements to which PPC subscribes that enables PPC to identify and implement resource optimisation strategies and technology improvements to achieve a level of environmental performance that meets or surpasses the requirements for regulatory compliance; Implement effective waste and energy management principles and cleaner technology alternatives throughout the organisation; Effective and transparent communication for our stakeholders by establishing environmentalmanagement stakeholder forums and internal communiqués; and Building capacity among our stakeholders to identify, report and act proactively on opportunities to minimise environmental impacts. This policy will be reviewed annually to demonstrate our commitment to ongoing environmental management and will be communicated to all stakeholders throughout our value chain. Martin Shaw Chairman 3 November 2008 Environmental achievements in 2008 Increased commitment to corporate action The board of directors mandated the various operations to identify and investigate the risks and opportunities of environmental legal non-compliance and develop master projects and programmes with detailed resource requirements. Decrease in carbon footprint There has been a 13% reduction in PPC s carbon footprint per ton of cement, lime and dolomite produced against the 2000 baseline, but there was an increase from the 2007 values because of the increased utilisation of older facilities. Decrease in electricity consumption A 10% reduction in electricity consumption (kwh) per ton of cement, lime and dolomite produced against the 2000 baseline was achieved. Engaged proactively in forthcoming legislation PPC has constructively commented on and assisted in the development of proposed national legislation on waste reduction, air quality and changes to the environmental impact assessment regulations. With the support of the Association for Cementitious Material Producers (ACMP), the company has played a significant role in the standard-setting procedure for air quality emission limits for cement and lime processes. The working group to facilitate comments on the proposed air quality standards, SABS TC146 SCA WG2 Air Quality Standard: Source Emissions, is chaired by

58 Pretoria Portland Cement Company Limited Annual Report 2008 page 55 PPC and supported by the members of the ACMP. All PPC s cement and lime operations have proactively submitted air quality amendment applications to the Department of Environmental Affairs and Tourism to align with the proposed requirements. PPC also plays a leading role in the development of a national policy on high-temperature thermal treatment of waste and the co-processing of alternative fuels in cement kilns. This policy will set out the government s position on the incineration and co-processing of waste in South Africa. Improvement in the development and implementation of PPC-specific environmental best practices PPC has developed environmental best practices that are relevant to its operations circumstances and locations, for example, the following best-practice operational controls to manage dust emissions from the kiln stacks were agreed with all operations: Address all incidences of exceeding dust limits within 20 minutes; Any incidences not addressed within 30 minutes will result in the production throughput of the kiln being reduced until dust emission levels stabilise to within permitted levels; and Should the problem not be resolved within six hours (not exceeding 96% abatement equipment availability, i.e. 28 hours per month), the kiln system will be systematically shut down and the problem addressed prior to restarting. The development of best practices will continue and accelerate because of the increased awareness on environmental performance. Air emission control upgrade In excess of R100 million was approved by the PPC board to improve emissions management at the PPC De Hoek and PPC Slurry operations in the Western Cape and North West provinces respectively. Stakeholder engagement In 2007 the PPC Jupiter factory instituted an environmental stakeholder forum as a platform to improve stakeholder communication. The forum selected a management committee, which included staff from PPC and members from the community, nearby industries and the government. The management committee is responsible for responding to the needs of its members and updating the forum s terms of reference. This initiative was successfully extended to the Hercules, Port Elizabeth, Lime Acres and Slurry operations. The De Hoek, Riebeeck, Dwaalboom and aggregate mines will formalise their environmental stakeholder forums in The issues raised by stakeholders are captured in table 2. All suggestions for environmental improvement are considered and each site works actively with the stakeholders to achieve concrete improvement goals and targets. PPC has developed detailed stakeholder maps for each site that defines who the stakeholders are and how PPC establishes and maintains communication flows with them. The maps will be updated quarterly or prior to announcing changes at any of the operations. PPC stakeholders include: Employees; Unions; Suppliers; Customers; Non-governmental and community-based organisations; Academic institutions; Regulatory authorities; Shareholders and investors; National, provincial and local governments; Professional organisations; and Peer companies. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

59 page 56 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Table 2: Issues raised by stakeholders Stakeholders Major issues and concerns raised PPC s response (pages) Environmental stakeholder forums Dust and lack of sufficient public participation 55, 65, 69 Media PPC s carbon footprint and the use of old technology 60, 62 Stakeholder questionnaire Public participation and air quality management 61 Department of Environmental Affairs Stack dust emissions, carbon dioxide (CO 2 ) and Tourism and oxides of nitrogen (NO x) 63, 64 Department of Minerals and Energy Ongoing rehabilitation and the approach to sustainability reporting 67 Eskom Management of electricity consumption 63, 64 Communities in new projects Increased volume of traffic at Riebeeck 69 Technologies used Suppliers Environmental management systems and compliance management 71 Appointment of environment and sustainability managers PPC has appointed environmental experts at group level as well as at all cement, lime and aggregate operations. These experts are empowered with the necessary authority and budget to champion their portfolio of environmental and sustainability management. Mass balance emission estimation project The mass balance emission estimation project has been successfully initiated at Hercules, Jupiter, Lime Acres, De Hoek, Slurry, Riebeeck and Dwaalboom. The remaining operations will start this project in Environmental challenges during 2008 The aim of appointing site-specific environmental experts was to embed the responsibility of environmental management in the governance structures of each site. Generating operational efficiencies Through the reporting and auditing processes, a number of operational efficiencies and cost savings have been realised. These include energy savings through energy audits, switching to energy-efficient lighting, and water conservation through fixing water leaks and replacing old pipes. The audits also highlighted areas in which the cost of waste treatment and disposal could be decreased. The complete roll-out of the mass balance project because of limited knowledge of and experience in process-engineering measurements, as well as vacancies in key positions due to a scarcity of skills in the engineering and environmental field; The implementation of the secondary materials co-processing project, which involves the replacement of coal and virgin input material with alternative waste materials, because of delays in authorisation from the mandated environmental authorities; Increased complexity in complying with environmental laws and standards. However, PPC continues to maintain good relationships

60 Pretoria Portland Cement Company Limited Annual Report 2008 page 57 with national, provincial and local authorities to keep abreast of the changing environmental The continued reduction of PPC s carbon footprint is an ongoing challenge. requirements, and the company has appointed an independent environmental legal firm to prepare and update site-specific legal registers. These registers include best-practice implementation plans to ensure that changing legislation is consistently and comprehensively managed throughout the group; The dependence on limited coal resources and the challenges associated with using alternative materials for energy; and Energy-saving, specifically electricity consumption, Management of environmental commitments PPC s business has the potential to have an impact on the environment and the lives of communities that exist around its operations. Although PPC s environmental framework supports the company s growth objectives by focusing on process efficiencies and resource optimisation, it also considers the importance of the wellbeing and safety of PPC s employees, the communities on which it has an impact and the environment at large (see table 3). to meet industry targets. Table 3: PPC s commitments, performance and targets Commitments from Performance during 2008 Future targets (2009 and beyond) 2007 Optimise the consumption of indirect Energy consumption increased from 2007 to 2008 by 2,8% Decrease energy consumption in line with PPC s energy efficiency accord targets and direct energy Optimise the use of non-renewable resources Completed the baseline assessment on inputs of cement and lime kilns 1% of thermal energy for cement production was supplied from renewable materials Decreased use of quantities of non-renewable minerals (shale and limestone) in 2008 from 2007 levels Track non-renewable inputs of the kilns even more closely Increase the use of renewable materials as a thermal energy source by 5% by 2015, subject to environmental approvals The issue of reporting on consumption of raw materials is not material to PPC and will not be reported in future. Information will be managed as part of PPC s internal global reporting index protocol Reduce greenhouse gas emissions per ton of product produced Carbon dioxide emitted per ton of clinker, lime and dolomite in 2008 was kg/ton Target for carbon dioxide per ton of clinker, lime and dolomite in 2009 is kg/ton Actual emissions for carbon dioxide per ton of cement, lime and dolomite in 2008 was 901 kg/ton Target for carbon dioxide emitted per ton of cement, lime and The total of carbon dioxide emissions from all PPC operations was tons Target for carbon dioxide per ton of cement, lime and dolomite in 2009 is 850 kg/ton dolomite in 2008 was 900 kg/ton cement Manage the impact on land and biodiversity All PPC operations have alien-plant replacement programmes and biodiversity action plans. The plans include measures to monitor, manage and enhance local biodiversity All sites will undergo ecological (flora and fauna) and heritage impact assessments to further inform management efforts GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

61 page 58 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Control, manage and minimise the footprint of overburden waste (materials, for example rock and soil, that lie above the limestone being mined) Optimise water consumption Raise internal awareness of significant direct and indirect impacts Comply with legal and regulatory requirements Improve transparency, understanding and engagement between the company and industry and other stakeholders The in-pit crushing and screening plant at Mooiplaas has been adapted to enable the recovery of clay-rich fines from the overburden dump. It has reduced significantly the volume of waste rock delivered to the overburden dumps. The long-term plan is to recycle the waste rock in the overburden dumps, thereby reducing the height and footprint of these dumps Detailed plans are in place to manage the visual impact of the overburden dumps at De Hoek and Riebeeck. Optimal dump design will be used to accommodate the overburden volumes and enable the cultivation of crops on the rehabilitated dump surface All operations reviewed their water use and made submissions to the relevant water authorities PPC site-specific legal training modules and a field guide have been developed by an independent, highly experienced team comprising an environmental lawyer and environmental engineer. All PPC s environmental experts have completed their training successfully All operations have submitted their applications and correspondence about environmental legal noncompliance issues identified to the relevant authorities 56% of operations have formalised environmental stakeholder forums and management committees PPC is committed to the environmental principles of the Global Compact, a United Nation s initiative to encourage businesses to adopt sustainable and socially responsible policies and report on their implementation: PPC responds to environmental challenges through the development of monitoring and management tools PPC encourages the use of best available technology in all new projects as well as retrofitting projects Target is to have 100% completion of all reasonably possible concurrent rehabilitation Target is to ensure ongoing adherence to the 100% concurrent rehabilitation goal, with particular focus on meeting the specified environmental management plans All plants will have updated water balances and water meters at strategic locations Water-saving targets will be published in the 2009 annual report Training modules will be summarised and delivered to all PPC staff and discussed in all the environmental stakeholder forums Maintain environmental legal compliance by facilitating the required behavioural changes at PPC operations and increasing the level of awareness about environmental matters Zero non-compliance to conditions of all environmental authorisations by 2009 All operations must have formalised these forums and committees Continue to use the Global Compact principles as important criteria for project selection and milestone evaluation Environmental management systems Every PPC plant has environmental management systems to facilitate improved overall environmental performance and efficiency. In South Africa, all PPC s lime and cement operations, with the exception of Jupiter, have achieved full ISO certification since The Jupiter operation was audited in September 2008 by the external body and awaits its certification. The sales and marketing offices and depots have maintained their single ISO umbrella listing for all their operations, and PPC s aggregate quarries were managed using the recognised Aggregate and Sand Producer Association South Africa system. Without exception, the company s operations have maintained their high environmental standards, as evident in the external audit scores for 2008.

62 Pretoria Portland Cement Company Limited Annual Report 2008 page 59 The ISO system requirements The ISO environmental management standards exist to help organisations to minimise how their operations negatively affect the environment (cause adverse changes to air, water or land) and comply with applicable laws and regulations. An annual review by an independent accrediting body verifies the system s implementation. The ISO14001 certification requires PPC to periodically take stock of its environmental performance, commit to effective and reliable processes, address environmental impacts and develop sustainable action plans to deliver on its commitments. This establishes a solid, verified base for the reliable and consistent management of environmental obligations. PPC s environmental management system (EMS) enables the company to monitor and manage environmental performance throughout its business. The EMS is designed to monitor environmental aspects that are both directly within a factory s control and external to its control but within its sphere of influence. PPC strives to continually enhance its system to improve overall environmental performance in line with the company s sustainability policy. Regular EMS audits enable PPC to determine conformance with ISO specifications. All findings identified during the annual audit are addressed by the development and implementation of action plans. Corrective actions needed are implemented to ensure ongoing compliance with all regulatory requirements and facilitate continual environmental performance. Environmental accountability and increase the success of their implementation The environmental accountability and reporting at the coalface. To ensure that all PPC operations structure is shown in figure 4 overleaf. The board performance is aligned with group objectives, regular of directors is ultimately accountable for sustainable joint audit protocol and corporate governance audits environmental management at PPC. The board is kept of all the company s operations are done. Critical abreast of operations environmental compliance and risks and liabilities identified during these audits are high-level environmental risks through regular reports communicated at a senior level and reported to the and presentations. The divisional executive committee board of directors. has been integrally involved in the development of PPC master projects and programmes to facilitate Environment and sustainability departments have been environmental compliance and continual improvement created at each of the cement and lime operations at all PPC sites. in South Africa. Environment managers, who report directly to the general manager of the factory, must In recognition of a globally increasing focus on the implement the master projects and programmes in their environment, requests from nearby communities locations and areas of responsibility. An environment for environmental forums and environment-related manager was appointed in the projects division to demands and requirements from different spheres of manage, lead and drive environmental sustainability in government, PPC has increased its resources in the all the commitments and action plans relating to the group environment and sustainability department. major expansion and technology-replacement projects This department is responsible for identifying areas of at all PPC operations. The aggregate division has created environmental risks and developing high-level controls a dedicated position for an environmental expert on to effectively manage challenges. The department its team to champion and support environmental also develops implementation plans and reporting management at the three aggregate mines: Mooiplaas deadlines to support the effective execution of PPC s and Laezonia in Gauteng, South Africa, and Kgale in master projects and programmes. Best practices and Gaborone, Botswana. These environmental experts minimum environmental standards are developed to report to the group environment and sustainability further entrench responsible environmental practices manager on all technical matters. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

63 page 60 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued PPC employees acknowledge that each of us is responsible for operating in an environmentally sustainable and responsible manner to protect the environment which, inevitably, is affected by our actions. The on-site environmental experts support PPC employees to understand their environmental responsibilities through extensive awareness and training programmes. Figure 4: PPC s environmental accountability and reporting structure Board of directors Divisional executive Projects risk manager/aggregates risk manager Group manager: environment and sustainability General managers: cement and lime Environment and sustainability manager (Projects division 1) (Aggregates division 1) Environment and sustainability manager (Corporate 2) Environment and sustainability manager/specialist (Operations 9) Environment and sustainability (graduate 1) Environmental performance Climate change The PPC carbon footprint PPC s carbon footprint relates to the total amount of carbon dioxide that can be attributed to the actions of all its operations. PPC uses the CO 2 protocol from the World Business Council for Sustainable Development s cement sustainability initiative to calculate the company s carbon footprint. This protocol is used by 80% of the world s cement companies. The protocol supplies the international standard for measuring the direct and indirect CO 2 emissions from the manufacture of cement. PPC s direct emissions are from the high-temperature burning of limestone in the cement kilns and the use of fuels such as coal and diesel. The indirect CO 2 emissions stem from electricity consumption. The carbon footprint of cement production is dominated by the direct emissions created during the manufacturing process. PPC s footprint for the year under review is summarised in table 4. Table 4: PPC s carbon footprint for 2008 Percentage Direct CO 2 emissions contribution Emissions from calcination 51 Emissions from the use of fuels 40 Indirect CO 2 emissions 9 PPC supplies information on the emission of carbon dioxide that arises from the combustion of coal in the manufacture of cement clinker, burnt lime and burnt dolomite. This differentiates PPC from other cement producers because the manufacturing of lime is more CO 2 intensive than that of cement.

64 Pretoria Portland Cement Company Limited Annual Report 2008 page 61 The emission of carbon dioxide varies with production which, in turn, is dependent on economic growth. Therefore, the reporting of absolute tons of carbon dioxide does not necessarily enable the company to measure efficiencies. The absolute tons of carbon Figure 5: PPC s CO 2 emissions dioxide are thus divided by the tons of product (cement, burnt lime and burnt dolomite) to establish a relative efficiency, which can be compared from year to year (figure 5). GROUP OVERVIEW kg CO 2 /ton Year Per ton clinker, lime and dolomite Per ton cement, lime and dolomite In 2008, the target for carbon dioxide per ton of clinker, lime and dolomite was kg/ton, and per ton of cement, lime and dolomite it was 900 kg/ton. It is evident in the graph that PPC did not meet its targets. The carbon dioxide emitted per ton of clinker, lime and dolomite was kg/ton, and the actual emissions of carbon dioxide per ton of cement, lime and dolomite were 901 kg/ton. The major contributor to the increased CO 2 levels for 2008 was the increased use of PPC s older and less energy-efficient kilns. In addition, there was only a marginal increase in extender levels (less than 1%). Extenders are supplementary materials that are used to offset the amount of clinker needed in the manufacturing of cement. However, in 2009 the CO 2 levels are expected to improve with the operation of Dwaalboom s kiln 2. The target for carbon dioxide per ton of clinker, lime and dolomite in 2009 is kg/ton, and per ton of cement, lime and dolomite it is 850 kg/ton. These targets are in line with the climate change strategy of the company. The trend displayed in the CO 2 performance graph (figure 5) is the result of reduced clinker content in the cements produced in the period 1996 to The fact that it levelled in 2005 and 2006 was due to market demand for products that contained more clinker. This was coupled with the recommissioning of old-technology kilns, which necessitated higher coal consumption. The challenges faced by Zimbabwe in terms of the interrupted production and supply of electricity and other resources have resulted in incomplete information for the year under review, and Zimbabwe s contribution to PPC s carbon footprint had to be excluded. The CO 2 emissions from the company s Botswana operations have been included in the calculation, but their contribution to the total CO 2 emissions is insignificant and therefore comparison of the 2007 and 2008 company levels is justifiable. The new-technology kiln at Dwaalboom has been successfully commissioned as per the 2008 deadline and will reduce carbon dioxide from coal consumption by approximately 4% per ton of clinker. Similarly, the planned expansion of clinker capacity in the Western Cape should reduce carbon dioxide from coal combustion by a further 4% in three to five years. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

65 page 62 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued PPC is committed to reducing clinker content in its cements and the reduction will become evident in future reports. But PPC is also committed to supply products that satisfy consumer needs and, typically, this involves increased clinker contents. As such, the company is cognisant of the fine balance between market-demand delivery and environmentally responsible operations. Climate change strategy South Africa s national long-term mitigation scenarios (LTMS), created in October 2007 by the Department of Environmental Affairs and Tourism, highlighted the uniqueness of the country s climate change situation, because the specific CO 2 emissions per capita and per GDP are high compared to the rest of the world, and higher than those of India and China, which are coal-based economies too. PPC s environment framework document of 2007, which came about through an independent stakeholder engagement and benchmarking process, also identified climate change and energy efficiency as important focus areas for monitoring and reporting. PPC has recognised climate change as a strategic priority and developed a climate change strategy that is aimed to address high-level interventions to support PPC s CO 2 reduction targets and reduce the carbon footprint of its operations. The strategy sets a target of reducing CO 2 emissions from the manufacture of cement by 15% per ton by the year 2020, using 2008 as a baseline. Targets The climate change strategy contains a plan of action to reduce PPC s carbon footprint by setting achievable but ambitious targets for carbon emissions. PPC will implement actions to reduce the greenhouse gas (GHG) intensity of the products it produces to 15% per ton below 2008 levels by the year The company also signed the energy efficiency accord of the National Business Initiative, with a commitment to reduce the energy intensity of the company by 15% from 2000 levels by the year Reducing PPC s GHG intensity PPC will reduce its GHG intensity by: Applying thermal and electrical energy efficiency measures; Optimising product composition; Using alternative fuels and raw materials; and Replacing old kilns with modern, energy-efficient cement plants. PPC will increase its investment in projects and initiatives that lower CO 2 emissions through the following initiatives: Clean development mechanism: PPC will evaluate opportunities to use the clean development mechanism to improve the financial return of projects that lower its CO 2 emissions; Inclusion of the carbon footprint in the company s capex evaluation: PPC will evaluate the impact of capital projects on its carbon footprint during the investment decision-making process. A portion of the capital budget will be dedicated to projects that reduce its carbon footprint;

66 Pretoria Portland Cement Company Limited Annual Report 2008 page 63 Research funding: PPC is funding research into the development of technologies that will reduce the carbon emissions from the company s kilns and increase the use of renewable materials in its processes; and Monitoring and reporting: PPC will establish an energy working group to monitor the GHG emissions of the company and track its progress in achieving the targets set in the climate change strategy. PPC will monitor the direct and indirect GHG emissions from all its operations according to the latest measurement protocols of the World Business Council for Sustainable Development. GROUP OVERVIEW Because of the specific nature of PPC s various operations, only direct and indirect emissions that stem from them will be monitored. Emissions derived from administrative functions in the company will be estimated once and then become the reported emissions figure. PPC will include its GHG emissions and, if necessary, plans for their significant improvement, in the annual report. Moreover, the company will continue to participate in the Carbon Disclosure Project, which is an independent notfor-profit organisation that acts as an intermediary between shareholders and corporations on all issues related to climate change. It was extended to South Africa in The clean development mechanism PPC has been actively investigating projects with clean development mechanism (CDM) potential. This mechanism allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol to implement an emission-reduction project in Scheme (ECS) introduced by Eskom, which will be implemented in The ECS rules are still being finalised. PPC is currently evaluating and negotiating the baseline consumption figures that will be used as reference to achieve the monthly savings prescribed by the scheme. developing countries. Such projects can earn saleable certified emission-reduction credits, each equivalent to Energy-efficiency technologies, in areas such as one ton of CO 2 which can be counted towards meeting lighting, variable speed drives, solar geysers Kyoto targets. and mechanical transport systems, are already implemented throughout PPC s various plants. The largest potential for CDM credits in cement production lies in the use of secondary materials in the manufacturing process. At present the development of Preliminary calculations show an average possible saving of 3% to 5%, and further efforts to achieve the required saving of 10% by Eskom continue. CDM projects is restricted because a national policy on the high-temperature treatment of waste and the use of alternative fuels in cement kilns is still in development. This policy will regulate the use of secondary materials and will facilitate the implementation of CDM projects A pilot solar water-heating feasibility study will be undertaken at one of our major production sites and, if economically viable, it will be explored at other appropriate PPC facilities. at PPC. The energy efficiency accord PPC is a signatory to the energy efficiency accord, Energy efficiency and supply Energy efficiency Since the Eskom electricity-supply crisis of early 2008 and the subsequent reduction in the parastatal s reserve margins, all efforts have been focused to reduce power consumption in terms of the Energy Conservation created in May 2005, and actively participates in its activities. The company is committed to the voluntary initiatives to improve energy efficiency that membership requires. PPC appointed a technical committee to champion its responsibilities as signatory to the accord. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

67 page 64 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued During the period under review, the technical committee s main activities centred on the electricity crisis and industry s response to it. Figure 6 depicts the energy consumption per ton of product produced since 2000 using coal, diesel, electricity and secondary materials. There was a marked increase in energy consumption in 2008 from the last upsurge in 2005 because of additional coal consumed by older, less energy-efficient kilns. Figure 6: PPC energy consumption PPC energy consumption vs 2000 base year 105% 100% Relative % 95% 90% 85% Year Diesel consumption Diesel is consumed primarily in the winning of limestone from the quarries. Haul ramp access into the deeper mines is designed at the optimal safe-operating gradient and haul routes are constantly re-evaluated to reduce travel distance to the crusher or the surface overburden-dumping areas. Backfilling of waste material in mined-out areas is implemented in line with the long-term mine plans, which reduces doublehandling of materials during their rehabilitation. Moreover, because the strategic placement of the crusher in mines has been recognised, it is now considered in the initial planning phase and PPC plans the phased relocation of the primary crusher at certain other operations. Primarily, this will reduce the hauling distance reducing diesel consumption by extending the overland conveyor system. Alternative energy (secondary materials) PPC has been studying the increased use of secondary materials by doing five environmental impact assessments on the use of secondary materials at the company s operations. In response to these assessments, the Department of Environmental Affairs and Tourism embarked on the development of a national policy on the high-temperature treatment of waste and its co-processing in cement kilns. This policy is expected to provide the national government s position on the co-processing of waste in cement kilns and guidelines on its regulation. These regulatory developments are expected to accelerate the use of secondary materials at PPC operations, which would reduce further the dependence on natural resources in cement manufacturing. PPC is committed to investigate the use of alternative materials to be utilised as input material. The company uses boiler ash, synthetic gypsum, magnetite and mine sand as input materials to minimise the impact on our natural resources.

68 Pretoria Portland Cement Company Limited Annual Report 2008 page 65 Air emissions control and mitigation lime manufacturing processes. The company is refining Air emissions refer to the gases and particles that are its stack-emission monitoring and reporting systems to released into the atmosphere as part of the cement, improve the overall air quality management of stack lime and aggregate manufacturing process. These emissions at all its factories. Further improvements are emissions are released from stacks (the point source) achieved by increasing the knowledge and awareness or from stockpiles and transfer points (the fugitive of stack performance beyond dust monitoring. PPC is source). Historically, PPC only managed dust emissions committed to implementing a sustainable system to from kilns because of the limited technology available monitor and report emissions with trained personnel for online gas monitoring, but PPC recently invested and qualified service providers. in both online and portable gas analysers to monitor these emissions. The following projects and initiatives were completed successfully in 2008 in PPC s cement and lime The air emissions that concerned stakeholders were dust operations in South Africa to address the concerns or particulate matter, sulphur dioxide (SO 2 ) and oxides around kiln-stack emissions: of nitrogen (NO x), which were released from the kiln 1. Air quality pilot project at PPC Hercules, using the stacks. The SO 2 emissions were caused by the burning mass balance approach; of sulphur-containing coal and the NO x emissions were 2. Roll-out of the pilot project to lime and selected caused by the high-temperature combustion in kilns. cement plants; 3. Performance of a baseline analysis of dust, NO x and PPC s cement and lime plants are authorised in terms SO 2 at all kilns; of the Atmospheric Pollution Prevention Act (APPA) 4. Implementation of a monitoring programme for registration certificates, which allow the emission of regular analysis of dust, NO x and SO 2 at all kilns; dust within a stipulated limit expressed in mg/nm Development of a long-term compliance plan to Generally, there is no limit stipulated for SO 2 and NO x in manage emissions, which included the replacement the APPA registration certificates. of electrostatic precipitators (ESP) with bag filters; and PPC continues to pursue different options to efficiently 6. Development of a training and awareness module and reliably manage air emissions during the cement and for air-quality monitoring and reporting. Case study: Mass balance project To quantify emissions from PPC operations, the company has adopted the mass balance emission estimation approach (mass balance project). The approach adopted in this project measured quality and quantity input streams (coal and feed to kilns) and output streams (clinker and gas). The gas volumes were measured, and so were the gas concentrations in terms of particulate concentration, SO 2 and NO x. It was assumed that the elemental concentration of the particulate matter correlated to dust returned to the kiln. The main reason for this assumption was the difficulty experienced in obtaining a sample of suitable size for analysis. The results of the emissions from the mass balance project undertaken in 2008, using a random sample technique were monitored by an external consultant over a period of one week. All emissions were below the plants APPA registration certificate limits. The mass balance emission estimation approach offers the advantage that people are trained to understand trends in the cement-manufacturing process, both from a cement quality and emissions management perspective. This understanding will support improved air quality management at cement operations in a highly sustainable manner. The lessons learnt from the mass balance project were shared with other organisations at the recent National Association for Clean Air conference in Nelspruit, South Africa. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

69 page 66 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Point-source emissions management PPC uses either electrostatic precipitators or bag filters to manage dust emissions from stacks. The ESPs use electric power to separate dust particles from gases, which enables the plants to operate with very low dust emissions. The ESP is typically 99,5% efficient. Bag filters, on the other hand, are generally more efficient at removing dust from the gas stream and the dust concentration in the cleaned gas seldom exceeds 50 mg/nm 3. in the designated facilities. PPC Jupiter has instituted a rigorous housekeeping schedule to reduce the dust levels. Instructions for the management of stockpiles have also been developed and implemented. The testing of mobile emissions from diesel-driven vehicles on public roads has also been prioritised by PPC. All diesel-driven vehicles owned by the company are tested on an annual basis to ensure compliance with national legislation and local by-laws. Fugitive emissions management Points of fugitive emission at a cement manufacturing facility include: Unpaved and paved roads; Stockpiles; Material-handling areas; and Conveyors. Methods to reduce fugitive dust emissions at sites include: Chemical suppression of roads and stockpiles; Wet suppression of roads; Enclosing of conveyors; and Using water sprays on transfer points in conveyor systems. The biggest source of fugitive dust identified at Jupiter was the result of materials-handling prior to storage To demonstrate its commitment to responsible air quality management, PPC engaged the Department of Environmental Affairs and Tourism to discuss the conditions of the APPA registration certificate (1997) prior to the start-up of the Jupiter kiln in The department amended the APPA certificate with more stringent conditions. PPC invested R20 million in environmental improvements, which included: Upgrading the kiln ESP to ensure compliance with more stringent limits; Replacing the existing raw-mill ESP with a new bag filter; Introducing additional dust control measures on the conveyors; Upgrading the dust collectors; and Overhauling the bag filters. Case study: Innovation for dust-suppression initiative for fugitive emissions at Slurry and Lime Acres At PPC Slurry, members of PPC s engineering and production teams have been collaborating to develop new ways to assist with dust reduction. The team has installed two kiln back-end water injection systems to reduce dust emissions. The systems spray a fine water mist that changes the resistivity of the dust so that the electrostatic filter works more efficiently, which further restricts emissions. Lime Acres has commissioned the use of Benetech dust-suppression systems in the primary crushers as well as the secondary crusher during the third quarter of the 2008 financial year. BT-210W, a wet dust-suppressant product, minimises water usage and provides residual properties for multi-transfer point suppression systems, and BT-515 is a residual dust-suppression chemical that contains a proprietary blend of speciality binders, humectants and surfactants. It controls airborne dust generated during the conveying process and minimises fugitive problems.

70 Pretoria Portland Cement Company Limited Annual Report 2008 page 67 Mining Mine rehabilitation A mining resource or reserve is finite and because of depletion its value decreases over time. PPC has longterm mine plans (strategic, broad-based plans that cover the life of the mine), phase plans (more detailed, medium-term plans) and short-term plans (annual plans to complement the phase plan) for each of its quarries. The long-term plan defines the available in-situ geological resource and evaluates possible scenarios for depletion of the resource. Long-term planning also addresses the major objectives and design requirements for eventual mine closure. Short-term plans are focused on the allocation of resources to meet the objectives of the long-term plan. PPC compiles an annual internal resource and reserve statement, which is based on the South African Mineral Resource Committee s classification guideline but modified to meet the requirements specific to the cement industry. PPC continually conducts prospect drilling to augment the geological information on current mining licence areas and develop new mineral resources. During the Figure 7: PPC s concurrent rehabilitation performance Percent past 12 months, drilling has been conducted in seven different projects across the PPC group. Resource optimisation has also been achieved by optimising the extraction strategy for certain sites, for example, substituting a 50 ton excavator with an 85 ton unit at Grassridge has enabled long-wall mining to advance through areas of hard reserves that would otherwise have required blasting and may not have been mined as a result. PPC conducts an aerial survey of all its South Africabased mines at the end of each financial year. This survey assists in the reconciliation of mined-out reserves, reflects conformance with the company s annual mining plans and enables the annual re-evaluation of finance provision required for mine closure. It is also used to assess progress in terms of concurrent rehabilitation. In September 2007, PPC s concurrent rehabilitation target for cement and aggregate operations stood at 100% for all but two sites, which were allocated a target of 90%. At the time, these sites had concurrently rehabilitated 946 of a possible hectares Year PPC cement actual Concurrent backlog objective GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

71 page 68 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued The photographic imagery that indicates the rehabilitation performance for 2008 is being processed. The management of waste rock in the reduction of PPC s mining footprint has been targeted in recent years. The opportunity for backfilling of the depleted areas of the Beestekraal and Zoutkloof pits with overburden waste has reduced the void area for these mines by almost 10 hectares over a three-year period. The optimal use of waste rock to construct settlement dam perimeter walls at the Laezonia operation has resulted in a lowrisk classification for the mine residue deposit in terms of both mine health and safety and the environment. The concurrent rehabilitation of these settlement dams is on track. The calculation of pecuniary provisions for mine closure has been done in line with the Department of Minerals and Energy s guidelines. The total mine closure cost for all South Africa-based PPC mines is R91,2 million, of which R5 million has been expended on the mine closure rehabilitation of the Loerie quarry. The current provision in PPC s rehabilitation trust is adequate to cover this cost. Resources optimisation To limit the use of natural resources, PPC investigated the substitution of natural materials with synthetic or secondary materials. At the PPC Jupiter factory, natural sand is replaced by sand recovered from old mine dumps, and iron is replaced by magnetite, a by-product of the phosphorous industry. This preserves natural resources, and the use of mine sand also provides a solution for sand removal from a gold-mining operation located in the factory s vicinity. In the year under review, PPC recovered tons of sand for use at Jupiter. The volumes of shale and synthetic gypsum consumed by all PPC operations for the period 2007/08 are not regarded as material and are not contained in this report. Water optimisation and waste management Water usage All PPC plants are engaging with the Department of Water Affairs and Forestry to identify areas in which water usage can be curbed. These include, for example, the use of pit water to irrigate gardens. No water is discharged from the cement-manufacturing process. PPC has prioritised the installation of necessary infrastructure to measure water usage adequately. Waste minimisation PPC is committed to implement the waste hierarchy through increased programmes on recycling and minimise the use of the disposal option. The company does not generate any solid waste from the cement process, and all off-specification material is reworked or reprocessed. Any on-site waste is managed in accordance with the relevant legislation. Case study: PPC supplier Barloworld Logistics (BWL) supports in decreasing cement carbon footprint BWL is contracted by PPC to manage transportation. Striving towards sustainable development and on renewal of its contract with Dwaalboom, BWL replaced the existing fleet of trucks and bulk tankers with a revolutionary interlink trailer combination to deliver optimal payload and minimise fuel consumption and carbon emissions. The use of the Freightliner Argosy truck tractors resulted in a decrease in fuel consumption of more than 10% which, combined with the increased payload capacity, resulted in about 20% reduction in energy used per ton of cement delivered. This equated to a reduction of CO 2 emissions of tons. BWL also ensures that all its vehicles meet the legislated noise and diesel emission limits and has installed tracking devices to mandate the implementation of agreed logistic plans.

72 Pretoria Portland Cement Company Limited Annual Report 2008 page 69 Applications for the storage of waste, in terms of and energy consumption per ton of clinker produced. section 20 of the Environment Conservation Act, An environmental impact assessment is underway 1989 have been submitted to the Department of and has been complemented by an extensive public Environmental Affairs and Tourism for all our plants. participation process, which allows the surrounding PPC has used the decision matrix, developed in communities to raise their concerns and other issues. collaboration with the Association of Cementitious Numerous concerns over increased traffic volumes Material Producers, to support the applications. and the impact on the tourism potential of the valley have been brought to the fore. PPC has committed In line with the waste hierarchy s principles, all PPC to more than 146 mitigation measures, including the operations embark upon projects that promote following: recycling and re-use. Spilled materials at plants are not PPC will cap the heavy-duty vehicle traffic on the discarded but added to raw-material stockpiles to be R311 through Riebeek West and Riebeek Kasteel at used as feed in the kilns. the current levels; Funding to the value of R1,5 million has been To effectively manage waste generated on site, PPC approved for a transport assessment to find Jupiter has contracted a scrap metal recycling company potential solutions to the increasing traffic volumes to remove and recycle its scrap metal. During the year through Riebeek West and Riebeeck Kasteel; under review, 101 tons of scrap metal was recycled at PPC is prepared to enter into a public-private the PPC Jupiter operations alone. Printer cartridges, partnership to fund on a 50:50 basis, to a maximum paper, aluminium cans and glass bottles are examples of of R100 million, an alternative solution that will serve other waste materials that were recycled. both the interests of the community and PPC; PPC will build the factory at the preferred location Progress with expansion and environmental of the interested and affected parties and the improvement projects recommendations of the specialist investigations; The PPC Riebeeck operation is nearing the end of its and economic life. In a bid to continue the guarantee of An amount of R20 million has been committed supply in the region in the long term, PPC is investigating to mutually agreed programmes, aligned with the the establishment of a new 1,2 million ton per annum Swartland Integrated Development Plan, which clinker production facility. The new facility will use are aimed at uplifting local communities. This is in leading international technology and deliver reduced addition to PPC s social and labour plan as required CO 2, NO x and SO 2 emissions, as well as reduced water by the Department of Minerals and Energy. Case study: Waste management improvements PPC Dwaalboom experienced difficulty with waste management, because the nearest registered landfill site is about 90km from the plant and no response was received to an application to register a waste disposal facility on site. There was limited separation at source, limited re-use and no recycling. A management decision was taken to contract the waste management function to an experienced waste management specialist. The benefits of this decision have included increased: Separation at source, achieved through the colour-coding of bins; Collection points at the plants, office, staff village and construction camps; Waste recycling because of final sorting prior to landfilling; General awareness as a result of the increased focus on waste management; Compliance as a result of rigorous checks on waste transporters; and Quantification of all types of waste, compilation of manifests and administration. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

73 page 70 Pretoria Portland Cement Company Limited Annual Report 2008 Environmental report continued Extensive focus has been placed on internalising impacts, while ensuring that a sustainable solution is delivered to meet the needs of PPC and all its stakeholders. The PPC Dwaalboom Batsweledi project has been commissioned in North West. All indications are that the dust collectors will perform to stringent, specified emission guarantee levels of 50 mg/m³. Additional environmental improvement projects currently in the feasibility phase include: PPC Hercules replacement of the Sonex mill electrostatic precipitator (ESP) with a bag filter; PPC Port Elizabeth upgrade of the raw-milling system and replacement of the dust collector unit with bag-house technology that will significantly reduce point-source emissions; De Hoek completing Mill 5 s replacement with a bag filter to improve dust levels; and PPC Lime Acres conversion of the LK6 ESP to baghouse technology. Environmental education and capacity-building PPC believes competence is attained through knowledge and training. As part of this belief, the company has placed strong emphasis on transferring skills to its people. Company employees from the environment and risk sections have attended sessions on legal environmental issues, emissions from kilns and environmental management systems. PPC also acknowledges its responsibility to provide capacity to its stakeholders and the company has held many capacity-building workshops with local municipalities and provincial departments. PPC Slurry invited three local schools to be part of an Environment Day celebration on 5 June Learners from Laerskool Buhrmannsdrift, Onkgopotse Tiro Comprehensive School and Slurry Intermediate School came to the plant to take part in a competition to paint the rubbish bins, using spring as a theme. There was great enthusiasm as the youngsters showed their true colours and made a proud environmental statement in the process. The bins stand prominently around the site and serve as an important reminder to recycle waste wherever possible. All PPC contractors are inducted through a formal training session and all conditions of the authorisations relevant to the scope of the contractors work are shared. An environmental graduate has been recruited at group level and her work is supported by environmental training modules and focused cement-specific workshops. This position was created to support skills training in the environmental engineering field. In addition, PPC Riebeeck has provided an opportunity to an environmental undergraduate to be part of the environmental management team on site. Hercules has supported a team of students from Tshwane University of Technology with their air quality module assignments by providing the data, hands-on experience and expert time needed to complete their assignments. As part of the mass balance approach, PPC has developed methods to analyse trace elements on the inductively coupled plasma spectrometer. It allows PPC to cross-check gas analysis from the in-stream isokinetic stack sampling. It also increases the laboratory analysts exposure to method validation techniques, increasing their skills in this area. In line with its quality philosophy, PPC has implemented advanced raw-mill control software at all its plants and updated the analytical equipment to include a new state-of-the-art X-ray diffractometer at group laboratory services, particle-size analysers in the laboratories and cross-belt analysers that use gammaneutron technology at some of its sites. Environmental compliance The following PPC plants were audited by environmental management inspectors, known as the Green Scorpions, from the government s environmental management unit, which has started to enforce environmental legislation and permits: PPC Hercules; PPC Dwaalboom; PPC Slurry; PPC Port Elizabeth; PPC De Hoek; and PPC Riebeeck. The Green Scorpions report for PPC Riebeeck has been received and contained no major legal findings. Issues of concern in the report included the management of dust impacts and waste management at the PPC Riebeeck landfill.

74 Pretoria Portland Cement Company Limited Annual Report 2008 page 71 On 23 June 2008, PPC Jupiter was issued with a directive in terms of section 31A of the Environment Conservation Act, It was issued as part of an artificial process to ensure that PPC s duty-of-care requirements were met during the plant s start-up. The requirements of the directive included the investigation of options for air quality management and resource optimisation. All the conditions of the directive have been integrated into the plant s environmental management system. PPC has responded to the provincial environment departments requirements for section 24G (postfacto) applications to be submitted for the Slurry and Dwaalboom operations. The Dwaalboom operation has completed its section 24G application for the use of secondary materials in cement kilns and extension of the airstrip, and a sum of R was paid in fines for both operations. PPC has demonstrated that at no point during the post-facto activity was there any potential for detrimental impacts on the environment. PPC has submitted the mining authorisation conversion application to the Department of Minerals and Energy and has drafted social and labour plans in preparation of the relevant mining authorisations in terms of the Mineral and Petroleum Resources Development Act, Two environmental incidents at PPC included fires at the De Hoek main substation and the raw material belt at Dwaalboom crushing facilities. The best-practice document was updated to capture the learnings. Environmentally conscious suppliers PPC wants to support suppliers that conduct their business in an environmentally conscious manner, and ISO certification is encouraged by the procurement department through a supplier accreditation process. PPC has developed a checklist to conduct third-party audits to assess suppliers compliance and levels of commitment in all environmental matters, which enables the company to discern their conformance to environmental standards. Strategic move towards sustainability PPC is committed to create systems to monitor its environmental spending and future reports will include details about the company s actual spending on environmental projects and programmes as well as plant upgrades. The following projects and programmes will be undertaken to drive sustainable development throughout the organisation: Structure a complete stack-emissions profile for all PPC cement and lime kilns; Set quantifiable targets for selected PPC environmental indicators; Continue to develop environmental and sustainability training modules for all levels; and Develop and implement a PPC green procurement strategy. Recognition and awards The cement industry, specifically PPC Slurry, was recognised for its improvement to dust management in the North West region by the province s air pollution control forum and the North West 2008 provincial environment report. During the year under review, PPC s group laboratory services and the factory laboratories participated in the annual Cement and Concrete Institute audits. The factory laboratories all achieved a zero-findings report for the fifth consecutive year, which underscores the company s commitment to quality systems. The aggregate division s quarries, Mooiplaas and Laezonia, have maintained the Aggregate and Sand Producer Association of South Africa s showplace standard, because they have achieved a final audit score of greater than 95%. The way forward PPC will focus on the following priority areas in the next financial year, in line with the recommendations of the environmental framework document: Undertake environmental compliance audits of 20% of its major suppliers and customers; Develop emissions inventories informed by the mass balance and fugitive emission estimation for all PPC operations; Train every environmental specialist and manager in environmental best practices and standards; Create stakeholder maps and formalised environmental forums for each PPC operation; and Entrench the environmental framework objectives and recommendations throughout PPC. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

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76 Pretoria Portland Cement ent Company Limited ited Annual nual Report page e7 73 GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Social and risk report

77 page 74 Pretoria Portland Cement Company Limited Annual Report 2008 Social report People highlights A positive staff satisfaction index rating of more than 90% was achieved in the Individual Perception Monitor and a year-on-year positive climate was recorded; The Kambuku enrichment programme delivered the transfer and improvement of technical skills; Coaching and mentoring became part of the learning offering for internal talent; Communication remained a key priority and a multilevel process known internally as an Invocom scored consistently above benchmark standards; More than improvement suggestions were generated, of which contributed to savings in excess of R18 million; Black management appointments increased to 40% and black divisional executive appointments increased from 0% to 56%; Broad-based black economic empowerment transaction was approved and further empowerment of employees through share ownership is envisaged; R12 million expansion of the Technical Skills Academy successfully completed; PPC academies enrolled 165 students for various cement-related qualifications; and The Adult Basic Education and Training programme achieved positive results. Growth and transformation through an empowered workforce PPC s unceasing people success can be attributed to the passion and unconditional commitment of its employees, which is, in essence, the true spirit of Kambuku. The word is derived from Tsonga and means great tusker, referring to an elephant bull, whose characteristics of tenacity and loyalty are seen to encapsulate PPC s value-based management philosophy. Stakeholder value is created through the continual growth and alignment of people processes with business objectives. The PPC way of life The sustainability of the organisation s success is reliant on its people, who are integral to the maintenance of the Kambuku philosophy. This PPC way of life creates a climate that provides a healthy, rewarding and satisfying working environment in which everyone has opportunities to contribute to the success of the organisation and their own development, and achieve recognition for excellence. A growing workforce The growth experienced in the construction sector and the implementation of the PPC Inland capacity expansion projects have been responsible for a slight increase in the company s staff complement during the 2008 financial year. The company s workforce, including Zimbabwe and Botswana, increased to employees from in The annual average employee turnover in 2008 was 4,1% across South African operations, decreasing from 7,8% in The average employee turnover for the group, including Botswana and Zimbabwe, was 11,4%. This increase from 7,1% in 2007 was due to the restructuring of PPC s business in Botswana. Maintaining open dialogue PPC believes in maintaining open and honest dialogue with its employees and places high importance on engaging and consulting with them. The percentage of employees recognised as members of a trade union is 32% in South Africa, 63% in Botswana and 69% in Zimbabwe. The company acknowledges freedom of association and the agreements that exist between it and the relevant unions. KAMBUKU GOING FOR GOLD Building on a strong foundation The inception of the Kambuku process more than seven years ago has entrenched a high-performance culture across PPC and underpins the way the company does business. It is important to continually provide clear direction and realign the energies of employees to support this culture. For almost eight years, the PPC team has embraced the Kambuku processes and principles to turn the organisation into a world-class operation in all aspects.

78 Pretoria Portland Cement Company Limited Annual Report 2008 page 75 Kambuku: The vital elements of a performing organisation Clear purpose Vision strategy Communication Understood Journey maps Alignment Value drivers Structure Job model Purpose Scorecard Competencies GROUP OVERVIEW Inspiring climate Fairness, order, rules of the game Communication, information, influence Management style Recognition Code of conduct Remuneration and benefits Effective HR administration Create energy Invocom Communication Reviewing progress Stretching targets Solving problems Education Learning for growth Career development Skills development Succession planning NQF alignment Structure/harness energy Building on the foundation that has been created with passion, commitment, innovation and teamwork, the team continued to record significant achievements. These included: The group average for our Invocom teams 4,4 and organisational benchmark standards 3,3 exceeded world-class standards; and More than 85% of our employees participated in the annual PPC Individual Perception Monitor, which gave the company a positive index rating of more than 90%. Performance improvement (Organisational/Individual) Direct focus energy Role and function clarity Accountability Scorecards, targets and action plans Performance measurement Performance review Recognition Action plans under performance As part of the Kambuku process, an organisational performance model was developed, known as The Vital Elements of a Performing Organisation. This model sets the benchmark for the internal standards, systems and processes that facilitate employee engagement and participation. The effectiveness of the individual elements is assessed on an annual basis. Continuous performance improvement Release energy reward FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

79 page 76 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued PPC Individual Perception Monitor ( ) Total % positive results Clear purpose Alignment Clear policies, order, fairness Communication Code of conduct Leadership style Remuneration Benefits Learn for growth Invocoms Performance management Employment practices Workplace safety Transformation Individual Perception Monitor Listening, learning and continually improving For the past seven years, PPC s annual Individual Perception Monitor survey has given all our employees the opportunity to express their views and rate the company on critical processes, including understanding our vision, employee benefits, leadership behaviour, remuneration, training, coaching and communication. Participation in the survey is both voluntary and confidential. Importantly, the results of the survey are analysed by each site and by management on a centralised basis with the purpose of identifying and addressing areas of concern and reinforcing positive trends. A healthy positive index average in excess of 90% has been maintained. Firstly, Kambuku principles and processes must be maintained and entrenched further to ensure their sustainable performance. Secondly, the Kambuku enrichment initiative establishes a strong foundation on which to further empower employees and facilitate their growth. Among others, there are initiatives to advance their mentoring and coaching skills, a greater understanding of PPC s REAL (relevant, empowered, actualised and lasting) transformation philosophy, and the ability of managers to inspire employees in a diverse environment. Lastly, the enrichment process aims to increase the ability and effectiveness of Invocom team members through broad-based skills to ensure their continuous improvement. Kambuku enrichment Enriching Kambuku through empowerment, transformation and learning To ensure that PPC sustains its performance in a challenging and transforming environment, a number of opportunities have been identified to enrich the existing elements of the Kambuku process. Kambuku enrichment is therefore not a new initiative but the strengthening of the existing process through focusing on maintaining present Kambuku processes, embracing transformation and nurturing the skills and ability of PPC employees.

80 Pretoria Portland Cement Company Limited Annual Report 2008 page 77 Details of the Kambuku enrichment initiative PERFORMANCE Kambuku: The vital elements of a performing organisation Inspiring climate Fairness, order, rules of the game Communication, information, influence Management style Recognition Code of conduct Remuneration and benefits Effective HR administration Create energy Clear purpose Vision strategy Communication Understood Journey maps Invocom Communication Reviewing progress Stretching targets Solving problems Education Learning for growth Career development Skills development Succession planning NQF alignment Structure/harness energy Alignment Value drivers Structure Job model Purpose Scorecard Competencies Direct focus energy Operational performance base line Performance improvement (Organisational/Individual) Role and function clarity Accountability Scorecards, targets and action plans Performance measurement Performance review Recognition Action plans under perfomance Continuous performance improvement Release energy reward Coaching and mentoring Empowering tomorrow s leaders today As part of PPC s focused efforts to improve and sustain superior business results, the company has introduced a multi-level coaching and mentoring initiative called the Coaching Advance Performance (CAP) programme. During the year under review, this programme was revised and introduced as a broadbased skill to all the appointed leaders in PPC. As a point of reference, coaching refers to the transfer of operational theory and core skills into practice, and mentoring refers to the transfer of leadership skills, knowledge and attributes. A formal and structured process, the CAP programme is an integral part of PPC s development and Workplace organisation Foundation Problem solving toolbox Improvement toolbox Plant improvement tools Zero defect Conducive climate and culture Climate creation workshop BEE transaction Diversity Coaching Mentoring (Cap) Success indicators Ideal future profile TIME succession framework because it has a direct impact on the success of the company s employment equity and development initiatives. The CAP process lies at the centre of transferring skills and knowledge to the younger generation of primarily black colleagues, and particularly those in critical positions. Engaging employees at all levels across PPC Participative processes and systems Employee engagement One of the fundamental principles of the Kambuku process is that positive results are within easy grasp when employees across all levels are engaged, empowered and held accountable. Accordingly, active involvement and communication takes place frequently and across the entire company through well-established organisational systems and processes. Autonomous maintenance Foundation GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

81 page 78 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued PPC s participation and communication efforts are encapsulated in the Kambuku process, which has various components. Two of these are: Key leader summits: These are regular team meetings held at plant or site level throughout the company, involving all appointed, elected and informal leaders. The purpose of the meetings is to inform employees about plant or site performance, strategic initiatives, challenges and opportunities. In an environment of mutual trust and cooperation, space is created for robust and constructive communication, after which the outcomes of each summit are communicated clearly and promptly down to shop-floor level. This process enhances PPC s efforts to maintain a clear purpose and common vision and direction throughout the company. Invocoms : These are structured, team-based discussions that take place on a daily basis for teams at shop-floor level, on a weekly basis at sectional supervisory level and monthly at departmental level. Invocoms are held throughout PPC at all levels and across all functions of the business. There are approximately 350 effectively functioning Invocoms in operation across PPC. The discussions are designed to communicate elements of PPC s vision and objectives, evaluate team performance, analyse obstacles that affect performance and develop action plans to overcome these obstacles, thereby ensuring the achievement of targets. Initiatives such as behavioural safety, educational topics and development are also discussed in Invocoms. Plant and site-level Invocom structures are designed to spread communication both upwards and downwards through the company. These structures also enable transparent problem resolution and employee participation. Invocoms are also useful to: Encourage teams to regularly stretch outputs and targets by reviewing and assessing team performance; Capture innovations and suggestions that enhance cost savings, process improvement, efficiency and safety; Effectively communicate positive recognition; Capture best practices on a centralised database; and Manage the PPC climate through team members adherence to the company s code of conduct. Innovations and suggestions During the year under review, more than valueadding suggestions were generated through the Invocom structures. Of these, more than were evaluated, accepted by management and implemented. An estimated R18 million has been saved through these suggestions during 2008, compared with R14 million in Succession planning Standing on the shoulders of peers PPC s succession strategy is designed to ensure the continual availability of competent successors for key positions in the company. The strategy entails the following: Succession planning discussions are held twice a year at group and site level; Development plans include mentorship and coaching; Strong alignment with economic empowerment targets and plans; 42% of appointments made in management are succession candidates; 65% of learners in the PPC academies are succession candidates; and 80% of black divisional executive appointments are internal promotions. NUMBER OF VALUE-ADDED SUGGESTIONS IMPLEMENTED PER YEAR 2008 ESTIMATED SAVINGS THROUGH IMPROVEMENT SUGGESTIONS 2008 Number of suggestions

82 Pretoria Portland Cement Company Limited Annual Report 2008 page 79 Growth through learning and development The learning and growth dimension in the annual Internal Performance Monitor survey recorded a significantly improved year-on-year result of 89% in 2008 against 86% in 2007, which exemplified PPC s ongoing commitment to develop globally competitive people. GROUP OVERVIEW Adult Basic Education and Training (ABET) The building blocks to success With 74% of the workforce assessed for ABET training, PPC is well on its way to achieving the stated target of all employees attaining minimum ABET level 4 in communication and numeracy by This target aims to give all employees the opportunity to fasttrack their careers through the PPC academies and represents the company s commitment to life-long learning. Profile of assessed learners To date, employees have been selected for ABET, 623 of whom are currently placed in various ABET level 1 to 4 programmes. These programmes have proven highly successful with an impressive overall pass rate of 95%. PPC Port Elizabeth Ikhwezi ABET programme In an effort to uplift the literacy levels of our temporary employees, PPC Port Elizabeth has opened its Ikhwezi ABET classes to local communities. Learners with matric maths are invited to join the programme on a voluntary basis and PPC covers all tuition and learning material costs. On completion of their assessed ABET levels, graduate learners are considered for fixed-term contract work at the plant. Permanent appointments, when available, are made from this group of employees. Siyabulelo Dlakadla, Msimelelo Baba and Nicholas Qalinge are completing their maths levels in the ABET programme PPC Riebeeck West ABET programme Abraham Johannes Patience Hannes, as he is fondly known at Riebeeck, started his career at PPC Riebeeck in January 1995 as an artisan assistant in the electrical workshop. Hannes had a standard 4 (grade 6) qualification, but could still not read or write. He started ABET in March 2007 on mother tongue level 1 and has since been unstoppable. I have so many stories to tell of how ABET has improved my life, Hannes said. One specific example is that I could never use the ATM before and always sent my daughter or my wife when I needed to draw money. But since starting ABET, I no longer have to send them; I can now go on my own. Like many other ABET learners, Hannes has discovered that literacy and numeracy skills open new doors to freedom, dignity and a better life. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

83 page 80 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Learning for growth investment Skills development: creating value for all stakeholders A total of 243 PPC employees are currently on learnerships or skills programmes. Of these students, 179 (74%) are previously disadvantaged. Economic empowerment profile of students African Indian Coloured White Male Female Male Female Male Female Male Female Total Learnerships The number of PPC learnerships (243) in engineering, sales and marketing and operations, as well as the structured learning and development initiatives at site and group level, contribute significantly to PPC s broadbased black economic empowerment scorecard. Percentage of payroll spent on skills development The development of skills is a passion and commitment that is reflected through the Kambuku philosophy and approach to the empowerment of people. During the year under review, PPC spent 5,7% of its payroll (i.e. leviable amount) on the skills development of employees, and 82% of this amount was spent on previously disadvantaged employees at a total cost of R25,2 million. Total skills development expenditure () R30,8 million Cost of training () (SA only) White male R6 million White female R1,3 million Indian female R0,2 million Indian male R0,3 million Coloured female R0,9 million African male R14,6 million African male African female Coloured male Coloured female Indian male Indian female White male White female Coloured male R6 million African female R1,5 million

84 Pretoria Portland Cement Company Limited Annual Report 2008 page 81 Learnership for performance development practitioners the National Qualifications Framework, which will deliver employee skills that are recognised externally The first education, training and development by the South African cement and mining industry. PPC learnership for practitioners was successfully believes the academy demonstrates a positive completed earlier this year and achieved a laudable 100% pass rate. This qualification enables six of PPC s contribution to truly building an educated and multiskilled nation. learning specialists to facilitate organisational education at a globally competitive level. The talented team is now highly equipped to successfully and competently facilitate skills development, design and develop training programmes, facilitate, assess, moderate and evaluate learning, and support all PPC s various The year under review was a landmark in terms of the launch of the faculties for operations and sales and marketing, both of which experienced an increased intake, and the new faculty for mining. This faculty will aim to produce competent employees that are learners and trainees. A further 15 learning specialists equipped with the much-desired rock-breaking will embark on the practitioners learnership in early (blasting) qualification. December Launch of PPC Academy s bridging programme Participating in industry skills-development forums PPC is a founding member of the Cement, Lime, Aggregates and Sand Committee, which strives to develop qualifications and training standards for the industry. PPC is a member of various training bodies and A vital bridging programme was successfully launched in 2007 as an accredited preparation course to assist employees to obtain the relevant entry requirements for the academy s programmes. It is a registered skills programme, offered as a three-week block release course that takes students four to six months to complete. actively contributes to its sectoral education and training authority, the Mining Qualifications Authority. The total number of people who trained in the bridging programme in 2007 was 46, and 33 people were found competent after external moderation, Building leaders through the PPC Academy which constituted a success rate of 73%. During the past year, the company continued to build on the solid foundations of the PPC Academy that were laid in The three specialist faculties, namely operations, mining and sales and marketing, are now fully operational. The academy aims to align with In 2008, a further 45 students entered the programme. They will be moderated in April 2009 and their results will be tracked and reported in the 2009 annual report. and complement the programmes developed under Growing the PPC Academy Programme African Indian Coloured White Male Female Male Female Male Female Male Female Total Bridging 2007 intake Bridging 2008 intake S&M 2007 intake S&M 2008 intake OPS 2007 intake OPS 2008 intake Mining 2008 intake GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Total

85 page 82 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued In 2007 a first group of 11 PPC learners and 20 from Plascon, a division of New World Coatings, were selected to study for the internationally recognised national certificate in customer management (NQF 4). They completed their studies this year and will graduate in The level 4 certificate is accredited locally through the National Qualifications Framework, but is also recognised internationally by the European Marketing Federation, which gives PPC Academy s qualifications an exportable edge. PPC Academy: mining faculty PPC has been proactively preparing itself for the new explosives regulations that will come into effect in 2009 by offering a unique qualification in rockbreaking, which has been accredited by the Mining Qualifications Authority. PPC Academy s mining faculty started with an intake of 16 learners to study for this brand-new national qualification. In 2008 the second group, comprising 10 students from PPC and 19 from Plascon, began their studies. The group attends the Technical Skills Academy in Slurry and will graduate in The second intake of 19 students for the nationally recognised cement and lime manufacturing qualification for operators The second group of PPC learners at the sales and marketing academy pictured with the accredited service provider The PPC Academy s operations faculty was launched in July 2007 with an intake of 21 learners studying for the further education and training certificate in carbonate materials manufacturing process on NQF level 4. They will qualify for this certificate, which is registered with the Mining Qualifications Authority, in May The second intake of 19 learners began their studies for this qualification in August 2008 and will graduate in PPC also implemented a cement-manufacturing simulator training programme, which is used in both the academy and at the plants. It provides an opportunity for learners to experience real-time plant operations and apply problem-solving and troubleshooting techniques in a safe environment. Graduate development programme PPC s graduate development programme was launched early in 2008 with nine graduates in five key disciplines critical to the business: engineering, production and process services, mining, quality, and environment and sustainability. The programme targeted new graduates from various tertiary institutions across the country with a focus on fast-tracking their development within these functional disciplines. Through the initiative, PPC wants to identify graduates to be considered for permanent appointment once they have successfully completed the two-year programme. The graduates are based on-site and follow a course, developed by PPC specialists, that provides the correct balance between theory and practical, hands-on learning.

86 Pretoria Portland Cement Company Limited Annual Report 2008 page 83 An open and supportive studying environment has been created through regular quality assurance in the form of site visits and individual and focus group interviews. coaching for new and current managers. The annual leadership behaviour 360-degree review has also been implemented at management level, with a 97% response rate from superiors, peers and subordinates. Technician development programme PPC established a technician development programme in response to an identified shortage of technicians in the business and in an effort to attract, retain and develop technicians from within and outside the company. GROUP OVERVIEW The graduates who attended the development programme training in March 2008 Leadership development PPC s significant investment in leadership development in previous years has been cemented during the year under review. Key leadership development initiatives included individual and team leadership development, and emotional intelligence profiling and The programme offers two routes towards technicians development. The first one involves offering external students at universities of technology the opportunity to complete their in-service training with PPC, after which PPC will have the choice of retaining them in the company in a technician development programme. The second route offers PPC employees who are technicians, or those who want to develop in the field, the opportunity to either develop their current technician competencies or follow the technician route by developing their knowledge, skills and experience. Both routes of development will feed into technician succession pipelines. The completed R12 million expansion of the Technical Skills Academy, formerly known as the Group Training Centre FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

87 page 84 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued New training hall equipped with the latest audiovisual equipment that can comfortably accommodate 56 delegates in an auditorium-style seating arrangement The expansion project included 10 housing units. Each unit has four bedrooms with private bathrooms and a lounge The R12 million expansion of the Technical Skills Academy (TSA) was approved last year and completed in September This will enable the TSA to increase its intake of students for artisan training, and the complex will be able to host all PPC Academy s learners. The TSA has maintained its ISO 9001; Mining Qualifications Authority and Merseta accreditation as a certified training provider for engineering learnerships. These accreditations ensure that artisans who qualify at our training centre are of the highest calibre and highly sought-after in South Africa as well as internationally. As part of the expansion project, 11 unemployed workers were trained in building trades such as bricklaying, plastering, tiling and electrical wiring. Lindzia Salimu, an electrical learner from Port Elizabeth, practises the connection of various lamp circuits in the electrical workshop Queen Ramafoto, a learner from Slurry factory, was the first female to pass a trade test as plater/welder at TSA on 30 September 2008

88 Pretoria Portland Cement Company Limited Annual Report 2008 page 85 Workforce analysis South Africa African Coloured Indian White Total Male Female Male Female Male Female Male Female Executive Senior management Middle management/ professional Skilled upper/technical Semi-skilled/apprentices/ trainees Labourers/unskilled Total GROUP OVERVIEW Workforce analysis Botswana and Zimbabwe Male Female Senior management 5 0 Middle management 39 6 Skilled upper Semi-skilled/apprentices Labourers/unskilled Total Recruiting to meet demographics PPC endeavours to recruit, where appropriate, black talent in accordance with the demographic requirements of the regions in which it operates. Recruitment in this aspect has increased to 85% during the year under review from 68% in Transforming beyond highlights Announcement of a 15,29% BBBEE transaction; 57% increase in procurement from historically disadvantaged South Africans; Appointment of five black executives, including PPC s first black female executive; 2% increase in women in management; 5,5% increase in black management staff; Projects agreed with local communities for inclusion in the company s social and labour plans; and Letters of support received from all host municipalities for PPC s application of conversion from old-order to new-order mineral rights. SA RECRUITMENT BY RACE % African 23% 59% Indian Coloured White 3% SA RECRUITMENT BY RACE 2007 African 32% Indian 48% Coloured 16% White 4% Achieving REAL transformation beyond compliance PPC is committed to the national broad-based socioeconomic transformation objectives of South Africa beyond PPC s transformation path continues to be guided by PPC s REAL transformation philosophy, which is at the heart of all its initiatives and refers to transformation that is relevant, empowering, actualised and lasting. During the year under review, PPC consulted and engaged with various national and provincial government departments and municipalities in pursuit of realising its REAL transformation objectives. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

89 page 86 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Transformation must be REAL Lasting Actualise Sustainable, visible and emotional impact Empower Be part of DNA of doing business, a way of life Relevant Must make business sense; add economic value to all stakeholders Must make a difference to many; must bridge socio-economic gap Figure 1: PPC s REAL transformation philosophy. Continuing to implement the transformation philosophy In 2008, the transformation initiative within PPC gained momentum to meet the transformation objectives as depicted here To create future black leaders (skills development, Mining Charter) To develop and create opportunities for black employees (skills development, employment equity) To create business opportunities for black partners (equity and ownership To invest in and develop black business (enterprise development, preferential procurement) To invest in and develop disadvantaged communities (corporate social investment, social and labour plans) Figure 2: Transformation objectives

90 Pretoria Portland Cement Company Limited Annual Report 2008 page 87 Creating business opportunities for black partners beyond 2010 PPC is firmly committed to black economic empowerment in South Africa and recognises that meaningful participation by black people in the mainstream economy is essential to sustain the country s socioeconomic objectives. PPC realigned its shareholding to include broad-based groupings of black shareholders, including employees and communities. This culminated in the announcement of a broad-based black economic empowerment transaction. Achieving a sustainable broad-based ownership The BBBEE transaction created and transferred equity into black hands through various broad-based trusts, a consortium of four strategic business partners and two community services groups. The equity distribution to achieve this sustainable and all-encompassing transaction was as follows: Strategic business partners Community services groups PPC Education Trust Community Trust Current and Future PPC Team Trust PPC Team Benefit Trust Black Non-Executive Directors Trust PPC Construction Industry Associations Trust Black Managers Trust Releasing REAL empowerment value to the beneficiaries beyond compliance The total value of the BBBEE transaction is R2,7 billion 1, which represents 15,29% of the value of PPC. The funding of this transaction has been achieved through innovative funding structures that release the maximum benefit to the broad-based participants at the earliest possible time through the payment of dividends. Investing and developing disadvantaged communities Community Trust Building thriving and sustainable communities The PPC Community Trust was established to give communities that host our operations 0,71% ownership of the company. The vision of the trust is to build thriving and sustainable host communities beyond the life of the mining operations. Community participation The Community Trust will be managed and controlled by trustees who are responsible for the administration and application of the finances on behalf of the 10 host communities across South Africa. The appointment of trustees will be in consultation with community forums established as a mechanism to give beneficiaries direct participation in the trust. Host community beneficiaries, in the form of local public-benefit organisations, community-based organisations and non-governmental organisations will be represented on the community forums and will identify, prioritise and recommend to the trust sustainable community development projects that are aligned with their municipality s integrated development plans. Investment areas The main areas of investment for the trust will be in trustee-approved projects that meet the following criterium: Alignment with the municipality integrated development plans Beneficiaries Beneficiaries who are black will include: Youth; Women; People with disabilities; and The elderly GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW 1 These numbers are based on a PPC share price of R31,32 per share

91 page 88 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Developing and creating opportunities for employees Shares allocated to each beneficiary will vest upon allocation, although the shares will only be delivered to beneficiaries and become tradable after a lockin period of five years from the date of allocation. Beneficiaries will be entitled to all dividends paid and distributions made in respect of the shares that have been allocated to them. Empowering emerging contractors Black Managers Trust The Black Managers Trust was established to empower current and future black South African managers of PPC. The trust is designed to attract, provide incentives to and empower black managers. The trust will assist PPC in achieving black equity ownership by attracting black professionals from outside the group to achieve its transformation commitments. PPC Team Trust Sharing the value, building a better future As part of PPC s process of transformation, the company is introducing an exciting employee shareownership empowerment vehicle, the PPC Team Trust. This trust contains provisions that are required by the BEE codes of good practice. The objective of this arrangement is primarily to empower current and future employees of PPC and to attract and provide incentives to these employees. The Current Team Trust seeks to empower all general employees in the permanent employ of the company at the transaction date. The Future Team Trust seeks to empower all permanent general employees of the company with less than one year service as well as future permanent general employees. PPC will fund the initiative by making a non-refundable donation to the trust, which in turn will subscribe for PPC shares. The Future Team Trust will also assist PPC to attract a diverse pool of talent from outside the group to achieve its business and transformation targets into the future. The trust will terminate after five years, after the last shares have been allocated. Developing and creating opportunities for black emerging contractors The PPC Construction Industry Associations Trust The Construction Industry Associations Trust is intended to empower construction and related industry associations and their members to deliver strategic projects. These projects are intended to contribute to the socioeconomic upliftment of disadvantaged individuals and their communities across South Africa. PPC Education Trust The PPC Education Trust is a broad-based trust in terms of requirements of the BBBEE codes of good practice. The income of the trust is for the education and training of black stakeholders within the cementmanufacturing, mining and construction industries. Educational organisations and institutions that satisfy the trust s criteria will be identified by the board of trustees to participate as service providers to the trust. Special provisions have been built into this trust in the event that it may want to register as a public-benefit organisation in the long term. PPC Team Benefit Trust The Team Benefit Trust was established to facilitate black ownership and benefit a broad base of PPC employees and their dependants. The income received by the trust will be applied towards the following priority focus areas: Education and development; Healthcare and wellness; and Other compassionate needs.

92 Pretoria Portland Cement Company Limited Annual Report 2008 page 89 Black Non-executive Directors Trust The beneficiaries of this trust will be independent black non-executive directors of PPC as selected by the company s board of directors. The trust was established to primarily contribute towards black ownership and to appropriately provide incentives to black non-executive directors. Investing to empower As a committed corporate citizen, PPC embraces the principles of corporate social responsibility and corporate social investment. PPC s CSI policy and community upliftment programmes uphold the socioeconomic tenets of the Mining Charter and the BBBEE scorecard. CSI and social and labour plans address the company s contribution to the communities in which PPC operates and sources its labour force. CSI spend The company has concentrated its CSI efforts on empowering communities through skills development Group CSI expenditure Drug rehabilitation 0,3% HIV/Aids 4,5% Arts & culture 0,8% Welfare 4,5% Infrastructure 16,1% Other Sport 3,8% Community training 3,1% and training to build sustainable projects that achieve a better life for all. Through its CSI initiatives, PPC is making a significant contribution to the lives of many thousands of needy South Africans, particularly children. PPC spent R7 million in support of various projects across the country during the year under review. As in previous years, preference was given to projects and initiatives that promote: Education and training; Health and welfare; Infrastructure development; Poverty alleviation; Sport; and Job creation. Job creation 11,5% Education 55,4% Education Community training Infrastructure Welfare Arts & culture HIV/Aids Drug rehabilitation Other Sport Job creation GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

93 page 90 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Case study Zenzele Counselling Permaculture Project The Zenzele Counselling Permaculture Project is a home-based care organisation that was started by the late Winnie Gertrude Mabaso, popularly known in the Finetown area, south of Johannesburg, as Mama Winnie. The project counsels adults, orphans and vulnerable children infected and affected by HIV and Aids. In the 2007/2008 financial year, PPC, in consultation with Zenzele s management and caregivers, started an initiative to grow organic fruit and vegetables that would allow the centre to provide a consistent and long-term supply of adequate nutrition to the children and the ill. Food and Trees for Africa was identified as the provider to implement the permaculture garden. Aims and objectives In line with the company s corporate social investment motto, Invest to Empower, and PPC s REAL transformation philosophy, the focus and intention were to: Develop a permaculture food garden for the centre; Impart permaculture skills to the caregivers and the community at large; Promote food security among the project members, their families and community members; Improve nutrition of those served by the centre through the increased availability of fresh food; and Generate income through the sale of garden produce. Permaculture food garden development The food garden at Zenzele is well designed, with a variety of fruit trees and vegetables. A number of herbs and medicinal plants, including comfrey, yarrow, calendula, impepho (a traditional African herb) and lavender, are used in the making of healing ointments. Culinary herbs such as rosemary, thyme, marjoram and basil are used for cooking and making herbal salts, which are sold to generate income. The garden has improved the aesthetics of the property and it is also a useful breeding ground and habitat for natural predators such as birds and lizards that help to reduce the number of pests in the food garden. Permaculture skills training Project members have acquired a number of skills, including: The art of mulching, companion planting and the making and application of compost and liquid manure; Crop rotation and water harvesting; The preparation and use of medicinal plants and herbs through workshops provided by volunteer group Khanya Africa. Members were taught to make herbal salts, ointments and cough mixtures; and Sunfire Solutions facilitated a solar cooker workshop, which illustrated how meals can be prepared using solar cookers and pots. This technology will help to reduce energy bills and will also serve as a backup during power cuts. Promoting food security The garden has a large variety of vegetables, herbs and fruit trees and the diversity ensures there is always fresh produce available, contributing to food security for the whole community. The project now supplies vegetables to the patients serviced by the home-based caregivers. The community is encouraged to join the various training projects and workshops to acquire the skills and plant similar gardens at home to support themselves. Improving nutrition All produce from the garden is organic and has maximum nutrient value. Project members have gained knowledge on nutrition and the preparation of healthy, fresh food, which has a positive impact on the health of the orphans, project members and their families, the terminally ill beneficiaries of the home-based care services and the community at large.

94 Pretoria Portland Cement Company Limited Annual Report 2008 page 91 Case study Zenzele Counselling Permaculture Project (continued) Income generation Fresh vegetables are sold to the community; The surplus from the gardens is dried and sold to the community; The herbs are used in making salts that are sold; Some herbs are used in making cough mixtures, ointments and mouth washes, which are sold to the patients and the local community; and Seeds are harvested and kept for the next planting season, which saves money and contributes to the project s sustainability. The project has been a great success and serves as a model that has encouraged PPC to develop similar gardens in other areas. It is a testimony to PPC s REAL transformation philosophy: the food garden is relevant to the Zenzele project because it enables the children to enjoy fresh organic vegetables grown without any pesticides. Furthermore, excess produce is sold to generate much-needed income to support the project. The Finetown community has been empowered and has acquired skills to develop food gardens in their backyards. The project has, therefore, made a difference in the lives of many. PPC will continue to be involved in social upliftment initiatives of this nature, because investing in the upliftment of fellow citizens is part of the business s DNA and is the actual way of life at PPC. The permaculture food garden is sustainable and has a lasting future. Dinaledi bursaries Building the educational capacity of black communities PPC believes that strengthening the educational capacity of historically disadvantaged South African communities is the key to sustainable development. By investing in and supporting a variety of education programmes, the company intends to facilitate the empowerment of young people, which will enable them to participate in mainstream economic activity. In 2008, PPC spent a total of R1,4 million to support 18 Dinaledi bursars selected from disadvantaged communities throughout South Africa to study at various universities in the following disciplines: Study disciplines Male Female Chemical engineering 5 3 Mining engineering 2 3 Mechanical engineering 4 0 Electro-mechanical engineering 1 0 Total 12 6 Figure 3: 2008 Dinaledi bursars study disciplines Sustainability beyond legislative compliance PPC has made significant progress in its effort to meet the government s requirements of the Broad-based Socioeconomic Charter for the Mining Industry and the Minerals and Petroleum Resources Development Act, PPC s old-order mineral rights conversion applications were submitted to the Department of Minerals and Energy for evaluation in The department has formally engaged PPC with feedback on the applications, and amended social and labour plans will be submitted for approval by the end of Through these plans, PPC is committed to accelerate its broad-based socioeconomic transformation process. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

95 page 92 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Mining Charter scorecard Details of PPC s progress in accordance with the scorecard for the broad-based socioeconomic charter for the mining industry are itemised below: Requirements Human resources development Has the company offered every employee the opportunity to be functionally literate and numerate and are employees being trained? Has the company implemented career paths for Historically Disadvantaged South African (HDSA) employees, including skills development plans? Has the company developed systems through which empowerment groups can be mentored? Employment equity Has the company published its employment equity plan and reported on its annual progress in that plan? Has the company established a plan to achieve a target for HDSA participation in management of 40% within five years of implementing its plan? Has the company identified a talent pool and is it fast-tracking this pool? Has the company established a plan to achieve the target for female participation in mining of 10% within five years and is it implementing the plan? Foreign migrant labour Has the company subscribed to the government and industry s agreements to ensure non-discrimination against foreign migrant labour? Achieved Yes, the opportunity to become functionally literate and numerate is offered at all sites. 623 employees were trained in ABET (a 79% increase from 2007) Yes, PPC has appointed skills development facilitators for every site to develop annual workplace skills plans (WSP) and compile annual skills development reports. Workplace skills development plans were formulated and submitted to the relevant Seta in accordance with legislation employees benefited from skills development interventions, 77% of which were HDSAs (a 317% increase from 2007). Individual development plans, linked to career paths, have been formulated and are being implemented in accordance with the WSP. Yes, PPC established the enterprise development unit through which empowerment groups will be developed, supported and mentored. Yes, the employment equity reports for all sites were submitted to the Department of Labour. Progress of the plan is published annually in the annual report and communicated to stakeholders through the employment equity forums in accordance with employment equity legislation. Yes, significant progress has been made towards the 40% in management target across the group it is now 48,2%. Black executive representation currently at 56%. Black female executive representation at 11%. Yes, one-on-one performance reviews, intellectual capital reviews and succession plan processes across all levels are used to identify talent pools to fasttrack development and promotion. Yes, PPC has prioritised the recruitment of women to increase their participation beyond PPC prioritised the recruitment of women, especially black females, into management positions. Women s participation in learnerships, bursaries and development initiatives increased significantly in line with this plan. Currently 18,6% women are employed across PPC against 15,2% in % increase of women in management positions. Yes, PPC subscribes to the government and industry s agreements to ensure non-discrimination against foreign migrant labour. A non-discriminatory recruitment policy is in place and is implemented.

96 Pretoria Portland Cement Company Limited Annual Report 2008 page 93 Requirements Local economic development Has the company cooperated in the formulation of integrated development plans, and is it cooperating with the government in the implementation of these plans for communities in which mining takes place and for major sending areas? Has there been an effort on the side of the company to engage the local mine community and major labour sending-area communities? Housing and living conditions For company-provided housing, has the company, in consultation with stakeholders, established measures for improving the standard of housing, including the upgrading of hostels and conversions of hostels to family units, and promoted homeownership options for mine employees? Companies will be required to indicate what they have done to improve housing and provide a plan to progress the issue over time and show its implementation. Procurement Has the company given HDSA s preferred-supplier status? Has the company identified present levels of procurement from HDSA companies in terms of capital goods, consumables and services? Has the company indicated a commitment to a progression of procurement from HDSA companies over a three to five-year time frame in terms of capital goods and consumables, and to what extent has the commitment been implemented? Ownership and joint venture Has the company achieved HDSA participation in terms of ownership for equity or attributable units of production of 15% in HDSA hands within five years and 26% in 10 years? Beneficiation Has the mining company identified its current levels of beneficiation? Has the mining company established its baseline level of beneficiation and indicated the extent to which this will have to be increased to qualify for an offset? Achieved Yes, all social and labour plans have been aligned with the integrated development plans of local municipalities, and engagement on the identification of projects for implementation has been completed. Yes, arrangements are in place to engage with the development and implementation of host and labour-source municipality integrated development plans. Continuing interaction and engagement takes place in established bilateral forums. PPC sites participate in the mining forums of the host municipalities in which they operate. PPC prioritises the sourcing of labour from host and neighbouring communities. Company housing is provided at most of the remote operations. PPC promotes home ownership by facilitating opportunities for employees to secure housing loans where required. Yes, PPC s procurement policy gives preferredsupplier status to HDSAs. Yes, all PPC sites have completed the required Form T s to identify the present levels of procurement in the sites social and labour plans. Yes, PPC intends to increase HDSA procurement to 50% by At present, the procurement spend on HDSA companies is 39%. Total procurement spend on HDSA companies in 2008 was R1,415 billion. Yes, PPC achieved broad-based HDSA participation in terms of placing ownership of 15% equity in black hands. The Department of Minerals and Energy is engaged in discussions with PPC to verify this ownership element of the scorecard. Guidelines for the industry in which PPC operates are yet to be published. PPC beneficiates all limestone mined into cement or lime. This equates to 30 times that of the mined mineral. PPC beneficiation reached the limit. The final product is cement, which is utilised in the building and construction industry. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

97 page 94 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Requirements Achieved Human resources development Reporting Has the company reported on an annual basis in the annual report its progress towards achieving its commitments? Yes, the progress on the Mining Charter scorecard and the implementation of social and labour plan commitments is a permanent feature of the annual report. Independently verified annual reports on the implementation of social and labour plans will be submitted to the Department of Minerals and Energy in accordance with legislative requirements in Extensive reporting on sustainability and social performance indicators are included in the annual report. Investing in and developing black businesses In terms of BEE codes of good practice and in keeping with PPC s nation-building philosophy, the company established the PPC Ntsika Fund (Pty) Limited to assist enterprises and entrepreneurs to grow their businesses and reach their ultimate goal of operational and financial independence. Ntsika is a Nguni word that means pillar of strength. PPC Ntsika Fund (Pty) Limited Empowering small businesses Empowering small business studies into how the land could best be utilised to benefit the local community, especially rural women. Empowering disadvantaged women PPC s small business enterprise development fund entered into a partnership with a local women s enterprise, known as the Loerie Vrouegroep, in the Eastern Cape. The PPC Ntsika Fund assisted the group, whose members are mostly disadvantaged women, to finance its acquisition of the company s rehabilitated quarry and adjacent pieces of land measuring hectares. The Loerie Vrouegroep plans to utilise the land to develop its hospitality business. The PPC Ntsika Fund provided a loan facility to the Loerie Vrouegroep to purchase the land, part of which was used as a quarry until it was closed down eight years ago. The quarry land has undergone extensive rehabilitation, which was successfully completed in During the process of rehabilitation, the Loerie Vrouegroep was established to conduct feasibility The Ntsika Fund will continue to support the Loerie Vrouegroep to ensure that the ongoing partnership remains solid and will endeavour to assist the group in achieving its operational and financial independence objectives. Empowering gifted artists The model builder Moses Masibi has lived in Mabopane, north of Pretoria, his entire life. He was born with a birth defect that affected both his legs and spine, and was in and out of hospital as a child. It was here that he discovered his passion for the building of models. I was first exposed to model building in hospital when I saw other children building models. I was so desperate to try it that, when I went home for Christmas, I began to build models with Omo and Surf washing powder boxes and masking tape. I was only six or seven at the time, he said.

98 Pretoria Portland Cement Company Limited Annual Report 2008 page 95 As he got older, Mr Masibi s enthusiasm for the art increased. He continued to build his models, but his passion received a new lease of life when he discovered that one could actually make a living from what he considered to be just a hobby. I watched a programme on television and there was a model being used in a presentation for some architects. I was amazed, Mr Masibi said. Spurred on by the thought of making a living from this part-time activity, Mr Masibi combed the newspapers for model-building work and eventually found employment at an architect s firm. But, after working at the firm for seven years, health reasons forced him to leave. I knew model-building was my destiny, though, and so I decided to start my own company, he said. Mr Masibi started by doing a learnership at Desto College in Pretoria. During his studies, he applied for financial assistance from PPC to start his business. I wrote to PPC, explaining to them what I do. I also included photos of my work. I asked them for funds to start up my business. They contacted Desto and came to my business plan presentation at the college. PPC was suitably impressed and decided to assist Mr Masibi through its Ntsika Fund. In addition, the company asked Mr Masibi to build a model of its head office in Sandton. It took me a month to build and I lost a couple of kilograms doing it. I worked flat out, until two or three every morning, he said. Today, his model stands proudly in the foyer of PPC s head office in Sandton. Talent unearthed BBBEE audit and verification PPC conducted its very first BBBEE audit and verification in 2004, followed by annual audits in 2005 and At present, the company has a recognition level of 7 according to the BEE codes of good practice, but this should improve once the 2008 audit and verification is completed. A further improvement is expected once the equity component is taken into account. This higher recognition level will result from the conclusion of PPC s BBBEE transaction and major changes to the company s senior management structure in terms of the appointment of senior black executives. With the exception of enterprise development, all other components of the generic scorecard are expected to score well. Growth and transformation through preferential procurement Preferential procurement has increased significantly over the course of the year. In terms of the codes of good practice, a preferential procurement target of R1,4 billion with BEE suppliers was set for This target was achieved with the spend of R1,415 billion for the year. Customer health and safety Just as the company focuses on employees health and safety, it is equally important to focus on ensuring the health and safety of our customers. Information on the safe use of PPC products is printed on the bags, delivery notes, silos and tankers; providing clear instructions and information to prevent any health or safety related incidents. Detailed product safety data sheets are made available and a toll-free telephone number is published extensively to further assist PPC s customers during their time of need. Quality assurance and technical experts, employees of the company, are available to engage continually with customers as part of PPC s customer service ethos. There were no instances of non-compliance with regulations concerning customer health and safety, nor any penalties or fines imposed for any breach recorded in the past year. Similarly no complaints were upheld by regulatory or official organisations with regard to health and safety in respect of PPC products and services. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

99 page 96 Pretoria Portland Cement Company Limited Annual Report 2008 Social report continued Procedures to deal with product quality nonconformances form part of the integrated SHEQ (safety, health, environment and quality) management systems. Customer focus groups are held regularly enabling the company to address issues relating to product information. There were no instances of noncompliance with any regulations concerning packaging and product information and labelling, nor were any fines or penalties for breaches recorded. The company s strategic approach to marketing-related or company-specific advertising, is in accordance with the guidelines of the National Advertising Standards Authority. Accredited and noteworthy service providers are employed to manage the design and placement of the adverts on behalf of PPC. As such, no breaches of advertising or market regulations were reported in the 2008 financial year. Furthermore, information security policies and procedures have been implemented throughout PPC to ensure the confidentiality and privacy of all customers. Risk report Despite increased activity at all our factories, the trend for the lost-time injury frequency rate continued to decline, ending the year at 0,29. This represents just under 1,5 injuries per 1 million man hours worked. The total number of lost time injuries decreased from 28 to 20 for the year under review. These statistics are analysed and discussed at monthly executive meetings and distributed widely throughout the company. The following sites achieved more than 0,5 million LTI-free hours. Factory Million hours Lime Acres 3,01 Zimbabwe 2,20 Port Elizabeth 1,85 Dwaalboom (excluding projects) 1,08 Aggregates 1,00 PPC Cement Sales and Marketing 0,97 Hercules/Beestekraal 0,59 De Hoek 0,53 All operations in the company are now certified to SANS 16000:2007, a national standard for HIV/Aids management. This standard not only focuses on the implementation of minimum standards, but is also a philosophy of continual improvement towards best practice. All factories have maintained their Occupational Health and Safety Assessment Series certifications, which ensure that PPC complies with the International Labour Organisation s standards for health and safety in the workplace. All sites have been audited by Dekra, an independent European certification body that ensures compliance with recognised standards. All sites achieved five-shield status during 2008.

100 Pretoria Portland Cement Company Limited Annual Report 2008 page 97 The following PPC sites received awards from Dekra: Award Criteria Factory name Silver sustainability shield award Five shield certificates in safety, health, environmental and HIV/Aids management, and quality PPC Lime Acres Silver sustainability shield award Five shield certificates in safety, health, environmental and HIV/Aids management, and quality PPC Hercules GROUP OVERVIEW Silver sustainability shield award Five shield certificates in safety, health, environmental and HIV/Aids management, and quality PPC Port Elizabeth Silver sustainability shield award Bronze shield awards Bronze shield awards Bronze shield awards Bronze shield awards Bronze shield awards Oct 2006 Dec 2006 Feb 2007 Apr 2007 Five shield certificates in safety, health, environmental and HIV/Aids management, and quality Five shield certificates in safety, health and environmental management, and quality Five shield certificates in safety, health and environmental management, and quality Five shield certificates in safety, health and environmental management, and quality Five shield certificates in safety, health and environmental management, and quality Five shield certificates in safety, health and environmental management, and quality Jun 2007 Aug 2007 Group LTIs Oct 2007 Dec 2007 Group LTIFR Feb 2008 Apr 2008 PPC Dwaalboom PPC Slurry PPC Saldanha PPC Riebeeck PPC De Hoek PPC Montague Gardens The protection of employees health and safety and the prevention of incidents have been a major focus for the company. During the 2008 financial year employees were trained in hazard-identification techniques. June 2008 Aug 2008 FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

101 page 98 Pretoria Portland Cement Company Limited Annual Report 2008 GRI cross-reference index VISION AND STRATEGY Page 1.1 Vision and strategy on sustainable development 53, Key elements of report 1 PROFILE Organisational profile 2.1 Name of reporting organisation Every page 2.2 Major products and/or services, including brands Operational structure Major divisions, operating companies, subsidiaries and joint ventures 7, Countries of operation 4, Nature of ownership Markets served 7, Scale of reporting organisation Number of employees 9, 74, 109 Products/services offered 4, 7 Net sales 137 Total capitalisation debt and equity 136 Value added 109 Total assets 136 Sales/revenue by country/region 40 Major products/services 4 Costs by country/region n/a Employees by country/region 2.9 Stakeholders Communities 85, 87, Customers 23 Shareholders and providers of capital 22, 198 Suppliers 95 Trade unions 74 Workforce, direct and indirect 74, 85 Report scope 2.10 Contact person Reporting period Date of most recent previous report 30 Sept Boundaries of report n/a 2.14 Changes in size, structure, ownership of products/services Joint ventures, partially owned subsidiaries, leased facilities, outsourced operations and other 7, Restatements of information in earlier reports Report profile 2.17 Decisions not to apply GRI principles n/a 2.18 Definitions Changes in measurement methods Policies and internal practices to enhance assurance about report 36, Policy on independent assurance for report n/a 2.22 Additional information n/a GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS Structure and governance 3.1 Governance structure Independent non-executive directors 24, 25, 27, Expertise of board members 26 27, Board identification of risks and opportunities 41, Executive compensation and goals 36 47, Organisation structure economic, environmental, social and related policies 7, Principles and policies on economic, environmental and social performance Shareowner recommendations to board n/a Stakeholder engagement 3.9 Identification of stakeholders 41, 53, Stakeholder consultation 53, Information from stakeholder consultations 55, Use of information from stakeholder engagement 53, 55, 56 GRI indicator number n/a not applicable/not available

102 Pretoria Portland Cement Company Limited Annual Report 2008 page 99 GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS Overarching policies and management systems 3.13 Precautionary approach 45, Externally developed principles endorsed 36, 58 59, Industry, business and advocacy organisations Upstream and downstream impacts: Outsourcing and supplier performance 71 Product and service stewardship Indirect impacts of organisation Major changes in location or operations 13 15, Programmes and procedures for social performance, including: Priority and target setting Performance improvement 72 Internal communication and training Performance monitoring 53, 57 58, 63, 78 Internal and external auditing 40, 44, 106 Senior management review Certification of management systems 52, 53, 68 70, 95 GRI CONTENT INDEX 4.1 Location of GRI report content PERFORMANCE INDICATORS Economic performance indicators Customers EC1 Net sales 137 EC2 Geographic breakdown of markets Suppliers EC3 Cost of goods, materials and services purchased 109 EC4 Contracts paid in accordance with agreed terms 109 EC11 Suppliers by organisation and country n/a Employees EC5 Payroll and benefits 109 Providers of capital EC6 Distribution to providers of capital 109 EC7 Increase/decrease in retained earnings Public sector EC8 Taxes by country EC9 Subsidies received by country n/a EC10 Donations to community, civil society and others EC12 Non-core business infrastructure development n/a Indirect economic impacts EC13 Divisions indirect economic impacts Materials EN1 Materials used other than water, by type 64 EN2 Percentage of materials used that are wastes from external sources 58, 64 Energy EN3 Direct energy use 60 EN4 Indirect energy use 60 EN17 Initiatives to use renewable energy sources and increase energy efficiency 56, 57, 63, 64, 68, 69 EN18 Energy consumption footprint of major products 64 EN19 Indirect (upstream or downstream) energy use 60 Water EN5 Water use 58, EN20 Water sources and ecosystems and habitats affected 68 EN21 Withdrawals of ground and surface water 68 EN22 Recycling of water 68 Page GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GRI indicator number n/a not applicable/not available

103 page 100 Pretoria Portland Cement Company Limited Annual Report 2008 GRI cross-reference index continued PERFORMANCE INDICATORS Economic performance indicators Page Biodiversity EN6 Land in biodiversity-rich habitats n/a EN7 Impacts on biodiversity in terrestrial, fresh-water and marine environments 57 EN23 Land for production activities or extractive use n/a EN24 Impermeable surface of land n/a EN25 Impacts on protected and sensitive areas 57 EN26 Changes to natural habitats from activities and habitats protected or restored n/a EN27 Objectives for protecting and restoring ecosystems 57 EN28 Species with habitats in areas of operation 57 EN29 Business units in or around protected or sensitive areas n/a Emissions, effluents and waste EN8 Greenhouse gas emissions 57, 60 63, 68 EN9 Ozone-depleting substances 57, 60 62, EN10 Other significant air emissions by type 56, 61, 65 66, 70 EN11 Waste by type and destination 58, EN12 Discharges to water n/a EN13 Spills of chemicals, oils and fuels n/a EN30 Indirect greenhouse gas emissions n/a EN31 Hazardous waste n/a EN32 Ecosystems/habitats affected by water run-off n/a Suppliers EN33 Performance of suppliers 71 Products and services EN14 Impacts of products and services 61, 65 EN15 Products and reclaimable n/a Compliance EN16 Incidence of fines for environmental non-compliance 71 Transport EN34 Impacts of transportation used for logistical purposes Overall EN35 Total environmental expenditures by type n/a SOCIAL PERFORMANCE INDICATORS: labour practices and decent work Employment LA1 Workforce by region/country, employee/non-employee, full-time/part-time, by contract 85 (indefinite or permanent/fixed term or temporary), temporary agency co-employment LA2 Net employment creation and average turnover segmented by region/country 74, 85 LA12 Employee benefits beyond legal mandate n/a Labour/Management relations LA3 Employees represented by trade unions, bona fide employee representatives or covered by collective 47, 74 bargaining agreements LA4 Information, consultation and negotiation with employees over changes in operations 74 A13 Formal worker representation in decision-making or management, including corporate governance 74 Health and safety LA5 Recording and notification of occupational accidents and diseases 96, 97 LA6 Formal health and safety committees comprising manager and worker representatives 96 LA7 Standard injury, lost day and absentee rates and number of work-related fatalities (including subcontracted workers) 96, 97 LA8 Policies or programmes on HIV/Aids 96, 97 LA14 Compliance with ILO Guidelines for Occupational Health Management Systems 97 LA15 Agreements with trade unions or bona fide employee representatives covering health and safety at work 96 Training and education LA9 Average hours of training per year by category of employee n/a LA16 Programmes to support continued employability of employees and to manage career endings LA17 Programmes for skills management or for lifelong learning GRI indicator number n/a not applicable/not available

104 Pretoria Portland Cement Company Limited Annual Report 2008 page 101 SOCIAL PERFORMANCE INDICATORS: labour practices and decent work Diversity and opportunity LA10 Equal opportunity policies and programmes and monitoring systems 42, 47, LA11 Senior management and corporate governance bodies including female/male ratios and other cultural diversity 85 Strategy and management HR1 Human rights in relation to operations, including monitoring mechanisms and results 47 HR2 Human rights impacts on investment and procurement 47 HR3 Human rights within supply chain, including monitoring systems 47 HR8 Employee training on human rights in operations 47 Non-discrimination HR4 Prevention of discrimination in operations 46 47, 92 Page GROUP OVERVIEW Freedom of association and collective bargaining HR5 Freedom of association policy 47, 72 Child labour HR6 Child labour 47 Forced and compulsory labour HR7 Forced and compulsory labour 47 Disciplinary practices HR9 Appeal practices n/a HR10 Non-retaliation policy 47 Security practices HR11 Human rights training for security personnel 47 Indigenous rights HR12 Needs of indigenous people 47 HR13 Jointly managed community grievance mechanisms n/a HR14 Share of operating revenues redistributed to local communities 89 Society Community SO1 Communities affected by activities 85, 87, SO4 Awards for social, ethical and environmental performance 71, 96 Bribery and corruption SO2 Policy on bribery and corruption 47 Political contributions SO3 Political lobbying and contributions 47, 85 SO5 Money paid to political bodies 47 Competition and pricing SO6 Court decisions on anti-trust and monopoly regulations n/a SO7 Mechanisms to prevent anti-competitive behaviour n/a PRODUCT RESPONSIBILITY Customer health and safety PR1 Customer health and safety during use of products and services 95, 96 PR4 Non-compliance concerning customer health and safety 95 PR5 Number of complaints 95 PR6 Voluntary code compliance Products and services PR2 Product information and labelling 96 PR7 Non-compliance concerning product information and labelling 96 PR8 Customer satisfaction 95, 96 Advertising PR9 Advertising policy 96 PR10 Breaches of advertising and marketing regulations 96 Respect of privacy PR3 Consumer privacy policy 96 PR11 Breaches of consumer privacy n/a FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GRI indicator number n/a not applicable/not available

105 page 102 Pretoria Portland Cement Company Limited Annual Report 2008

106 Pretoria Portland Cement Company Limited Annual Report 2008 page 103 FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW GROUP OVERVIEW tons of cement estimated to be used in the Medupi power station project

107 page 104 Pretoria Portland Cement Company Limited Annual Report 2008 Annual financial statements for the year ended 30 September 2008 Certificate by company secretary 105 Approval of annual financial statements 105 Report of the independent auditors 106 Directors report 107 Value added statement 109 Seven-year review of the group s results 110 Share performance JSE Limited 118 Glossary of accounting terminology 120 Accounting policies 125 Group balance sheets 136 Group income statements 137 Group statements of changes in equity 138 Group cash flow statements 140 Notes to the group annual financial statements 142 Company balance sheets 178 Company income statements 179 Company statements of changes in equity 180 Company cash flow statements 181 Notes to the company annual financial statements 182 Annexure 1 (Interest in subsidiary companies and unlisted associates) 196 PPC in the stock market 198 Administration 199 Notice of annual general meeting 200 Form of proxy 203

108 Pretoria Portland Cement Company Limited Annual Report 2008 page 105 Certificate by company secretary for the year ended 30 September 2008 In terms of section 268G(d) of the Companies Act, 1973, as amended, I certify that Pretoria Portland Cement Company Limited has lodged with the registrar of companies all such returns as are required of a public company in terms of the act. I further certify that such returns are true, correct and up to date. GROUP OVERVIEW JHDLR Snyman Company secretary 10 November 2008 Approval of annual financial statements for the year ended 30 September 2008 The directors of the company are responsible for the integrity and objectivity of the annual financial statements and other information contained in this annual report, which has been prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, South Africa. In discharging this responsibility, the group maintains suitable internal control systems designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with group policies. The directors, supported by the audit committee, are satisfied that such controls, systems and procedures are in place to minimise the possibility of material loss or misstatement. The directors believe that the group has adequate resources to continue in operation for the foreseeable future and the financial statements appearing on pages 107 and 108 and 125 to 197 have, therefore, been prepared on a going-concern basis. The annual financial statements were approved by the board of directors on 10 November 2008 and are signed on its behalf by: MJ Shaw JE Gomersall Chairman Chief executive officer FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW 10 November 2008 Sandton

109 page 106 Pretoria Portland Cement Company Limited Annual Report 2008 Report of the independent auditors for the year ended 30 September 2008 TO THE SHAREHOLDERS OF PRETORIA PORTLAND CEMENT COMPANY LIMITED We have audited the annual financial statements and group annual financial statements of Pretoria Portland Cement Company Limited, which comprise the balance sheets at 30 September 2008 and the income statements, the statements of changes in equity, the cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 107 and 108 and 125 to 197. Directors responsibility for the financial statements The company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with international standards on auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements and group financial statements fairly present, in all material respects, the financial position of the company and the group at 30 September 2008 and of the financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. Deloitte & Touche Registered auditors Per MJ Jarvis Partner 10 November 2008 Buildings 1 and 2, Deloitte Place, The Woodlands Office Park, Woodlands Drive, Sandton. National Executive: GG Gelink Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Tax, Legal and Advisory, L Geeringh Consulting, L Bam Corporate Finance and Strategy, CR Beukman Finance, TJ Brown Clients & Markets, NT Mtoba Chairman of the Board, CR Qually Deputy Chairman of the Board. A full list of partners and directors is available on request.

110 Pretoria Portland Cement Company Limited Annual Report 2008 page 107 Directors report for the year ended 30 September 2008 The directors have pleasure in presenting their report on the annual financial statements of the company and of the group for the year ended 30 September Business activities Pretoria Portland Cement Company Limited, its subsidiaries and associates operate in southern Africa as manufacturers of cementitious and aggregate products, lime and limestone. The principal activities of the company and its subsidiaries remain unchanged from the previous year. Review of operations A comprehensive review of operations is detailed in the attached annual financial statements. Share capital and premium The authorised share capital is ordinary shares of 10 cents each. On 30 September 2008 the issued share capital of the company was shares of 10 cents each (2007: of 10 cents each and 2006: shares of R1 each), and the share premium stood at R63 million (2007: R814 million; 2006: R814 million). Details of shares authorised, issued and unissued at 30 September 2008 are given in note 10 to the group financial statements. Register of members The register of members of the company is open for inspection to members and the public, during normal office hours, at the offices of the company s transfer secretaries, Link Market Services South Africa (Pty) Limited, or at Corpserve (Private) Limited (Zimbabwe). Directors interest in share capital Details of the beneficial holdings of directors of the company and their families in the ordinary shares of the company are given in note 38 to the group financial statements. There has been no change in the directors interest in share capital since year-end. Holding and subsidiary companies Details relating to the beneficial shareholders owning more than 3% of the issued share capital of the company appear in PPC in the stock market section on page 198. The names and country of registration, as well as the amount of their share capital, percentage holding and interest held by PPC in each of its principal subsidiary companies are set out in Annexure 1 on page 196. All subsidiary companies share the same financial year-end as PPC. Non-consolidation of Portland Holdings Limited The results of Portland Holdings Limited have not been consolidated into the group results. There are significant constraints that have an impact on the normal operation of Porthold Holdings Limited and the PPC board concluded that management does not have the ability to exercise effective control over the business. Due to the hyperinflationary losses incurred, dividends received have been set off against the carrying value of the investment. Share buy-back During the current year, in terms of a special resolution, a group subsidiary company bought back ordinary shares in the company. These shares are treated as treasury shares on consolidation. The average purchase consideration, including costs, approximated R37,37 per share, and the company has purchased 3,75% of the issued share capital. As at 30 September 2008, the subsidiary company is technically insolvent following mark-to-market revaluations on the shares purchased. Pretoria Portland Cement Company Limited has provided guarantees in the way of a subordination agreement relating to the loan that is receivable from the subsidiary company. Special resolutions A special resolution authorising the directors to acquire issued shares in the ordinary share capital of the company was passed at the annual general meeting held on 28 January 2008 and registered on 14 February Special resolutions passed by subsidiary companies No special resolutions were passed by subsidiaries of the company. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

111 page 108 Pretoria Portland Cement Company Limited Annual Report 2008 Directors report continued for the year ended 30 September 2008 Dividends No Description Declaration date Record date Payment date Cents per share Special 61,0 77,0 210 Final 10 November January January ,0 166,0 110,0 209 Interim 7 May May June ,0 38,5 33,0 Property, plant and equipment Certain of the company s properties are the subject of land claims. The company is in the process of discussion with the Land Claims Commissioner and is awaiting the outcome of claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company s operations. Directors and company secretary The directors in office at the date of this report appear on pages 24 and 25. Details relating to the company secretary appear in the administration section on page 199. At 30 September 2008 the group s net investment in property, plant and equipment amounted to R2 813 million (2007: R2 178 million; 2006: R1 414 million), details of which are set out in note 1 to the group financial statements. Capital commitments at the yearend amounted to R805 million (2007: R1 303 million; 2006: R1 299 million) and related mainly to the expansion projects currently in progress. There has been no change in the nature of the property, plant and equipment or to the policy relating to the use thereof during the year. Borrowings The company s borrowing powers are unlimited. At 30 September 2008 borrowings amounted to R1 674 million (2007: R1 442 million; 2006: R1 073 million). The borrowing powers of its wholly owned subsidiary company, Portland Holdings Limited, are limited by its articles of association to twice the amount of shareholders interest. At 30 September 2008 the level of borrowings did not exceed the limit. Post-balance sheet events There are no post-balance sheet events that may have an impact on the group s reported financial position at 30 September At the annual general meeting held on 28 January 2008, Messrs S Abdul Kader, MJ Shaw, J Shibambo, Ms NB Langa-Royds and Ms ZJ Kganyago were re-elected as directors of the company. Subsequent to the last annual general meeting, Messrs TDA Ross (with effect from 17 July 2008) and BL Sibiya (with effect from 10 November 2008) were appointed to the board. In terms of the company s articles of association, Messrs TDA Ross and BL Sibiya, having been appointed as directors by the board during the year, are required to retire and Messrs RH Dent, P Esterhuysen and AJ Lamprecht are required to retire by rotation in terms of the articles of association. All have offered themselves for election and re-election respectively at that meeting and the nominations committee has recommended their election and re-election respectively. Auditors Deloitte & Touche were reappointed as auditors to the company at the annual general meeting held on 28 January Broad-based black economic empowerment initiative The company announced the details of its empowerment initiative in August 2008 for approval by shareholders at a general and scheme meeting on 11 November For details of the initiative, refer to the circular issued to shareholders on 16 October 2008.

112 Pretoria Portland Cement Company Limited Annual Report 2008 page 109 Value added statement for the year ended 30 September 2008 A measure of the wealth created by the group is the amount of value added to the cost of raw materials, products and services purchased. This statement shows the total wealth created and how it was distributed. Revenue Paid to suppliers for materials and services 1 (3 021) (2 593) (2 178) Value added Exceptional items 2 14 Income from investments* Total wealth created Wealth distribution: Salaries, wages and other benefits Providers of capital Finance costs Dividends Ordinary dividends Special dividend Government Reinvested in the group to maintain and develop operations Depreciation Retained profit Deferred taxation 142 (3) Value added ratios Number of employees (30 September)^ Revenue per employee (R000)** Wealth created per employee (R000)** NOTES 1. Paid to suppliers for materials and services Transnet Freight Rail and Barloworld Logistics are the only suppliers of services exceeding 10% of total amount paid. All contracts are paid in accordance with agreed terms. 2. Salaries, wages and other benefits Salaries, wages, overtime payments, commissions, bonuses and allowances Employer contributions Government Central and local government: Taxation SA normal, CGT, STC and foreign Regional services council levies 6 Rates and taxes paid to local authorities Customs duties, import surcharges and excise taxes Skills development levy Cash grants and cash subsidies granted by the government (2) (2) Gross contribution to central and local government Notes GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW * Includes interest received, dividend income and share of associate s retained profit ** Excludes employees of Porthold In respect of pension funds, retirement annuities, provident funds, medical aid and insurance ^ Includes employees of Porthold

113 page 110 Pretoria Portland Cement Company Limited Annual Report 2008 Seven-year review of the group s results for the years ended 30 September CONSOLIDATED BALANCE SHEETS Assets Non-current assets Property, plant and equipment Intangible assets Investment in non-consolidated subsidiary Negative goodwill (1) (1) (1) Other non-current financial assets and investment in associate Deferred taxation assets Current assets Inventories and receivables Short-term investment Assets classified as held for sale 130 Cash and cash equivalents Total assets Equity and liabilities Capital and reserves Share capital and premium Reserves and retained profit Equity attributable to equity holders of the parent Outside shareholders interest 21 8 Total equity Non-current liabilities Deferred taxation liabilities Other non-current liabilities Current liabilities Short-term borrowings Taxation payable Trade and other payables Liabilities directly associated with assets classified as held for sale 112 Provisions Total equity and liabilities

114 Pretoria Portland Cement Company Limited Annual Report 2008 page CONSOLIDATED INCOME STATEMENTS Revenue Cost of sales, non-operating income and other costs Operating profit Fair value gains/(losses) on financial instruments 4 1 (7) 7 18 Finance costs Income from investments Profit before exceptional items Exceptional items Share of associate s retained profit Profit before taxation Taxation Net profit from continuing operations Discontinued operation Net profit from discontinued operation 8 Net profit Attributable to: Equity holders of the parent company Outside shareholders interest Attributable net profit excluding exceptional items ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS Cash available from operations Dividends paid (1 401) (1 207) (1 059) (1 269) (737) (601) (524) Equity-settled share incentive scheme refund/(payment) 2 (30) Net cash inflow/(outflow) from operating activities (174) Net cash (outflow)/inflow from investing activities (1 562) (772) (242) (128) (44) (137) 253 Net cash inflow/(outflow) from financing activities (65) 34 (21) (10) Net (decrease)/increase in cash and cash equivalents (1 077) (181) 897 (367) GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

115 page 112 Pretoria Portland Cement Company Limited Annual Report 2008 Seven-year review of the group s results continued for the years ended 30 September STATISTICS Share performance Weighted average number of ordinary shares in issue during the year (000) Earnings per share (cents) Earnings per share before exceptional items (cents) Headline earnings per share (cents) Ordinary dividends per share (cents) Special dividend per share (cents) Dividend cover (times) (excluding special dividend) Net asset value per share (cents) Time weighted number of ordinary shares in issue during the year Net profit attributable to shareholders of PPC Company Limited Weighted average number of shares in issue during the year Net profit attributable to shareholders of PPC Company Limited adjusted for the exceptional items net of taxation Weighted average number of shares in issue during the year Net profit attributable to shareholders of PPC Company Limited adjusted for the exceptional items net of taxation, amortisation of goodwill and capital profits or losses net of taxation Weighted average number of shares in issue during the year Interim dividend per share paid and final dividend per share declared A non-recurring dividend that is exceptional in terms of either size or date declared Earnings per share before exceptional items Ordinary dividends per share Total equity, including investments at market value Total number of shares in issue

116 Pretoria Portland Cement Company Limited Annual Report 2008 page GROUP OVERVIEW ,3 1,3 1,6 1,6 1,6 1,6 1, FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

117 page 114 Pretoria Portland Cement Company Limited Annual Report 2008 Seven-year review of the group s results continued for the years ended 30 September Profitability and asset management Operating margin (%) Operating profit Revenue EBITDA () EBITDA to revenue (%) Net asset turn (times) Return on net assets (%) Return on total assets (%) Return on shareholders interest (%) Return on shareholders interest (excluding exceptional items) (%) Effective rate of taxation (%) Profit from continuing operations before exceptional items, adjusted for investment income, finance costs, fair value adjustments, depreciation and amortisation EBITDA Revenue Revenue Average net assets Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill Average net assets Profit before exceptional items adjusted for finance costs, associate income and amortisation of goodwill Average total assets Net profit attributable to shareholders of PPC Company Limited Average interest of shareholders of PPC Company Limited Net profit attributable to shareholders of PPC Company Limited less exceptional items net of taxation Average interest of shareholders of PPC Company Limited Taxation (excluding prior year taxation, secondary taxation on companies and taxation on exceptional items) Profit before taxation, excluding dividend income and exceptional items

118 Pretoria Portland Cement Company Limited Annual Report 2008 page ,2 39,1 39,7 38,0 34,0 28,6 24, GROUP OVERVIEW 40,7 42,6 43,3 42,0 38,6 34,5 31,4 1,6 1,4 1,4 1,4 1,1 1,0 0, EBITDA () 61,1 57,0 59,6 55,0 42,3 33,8 26,9 51,4 49,0 50,7 46,7 36,5 29,0 23,2 73,8 62,8 57,7 43,4 35,0 29,4 29,8 73,7 62,2 57,7 42,8 35,1 29,2 22,0 28,0 28,3 28,9 29,1 29,7 28,5 28, RETURN ON SHAREHOLDERS INTEREST (%) FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

119 page 116 Pretoria Portland Cement Company Limited Annual Report 2008 Seven-year review of the group s results continued for the years ended 30 September Liquidity and leverage Total liabilities to shareholders interest (%) Total borrowings to shareholders interest (%) Current ratio (times) Quick ratio (times) Interest cover (times) Number of years to repay interest-bearing debt Current and long-term liabilities, excluding deferred taxation Interest of shareholders of PPC Company Limited Short-term and long-term borrowings Interest of shareholders of PPC Company Limited Current assets Current liabilities Current assets, excluding inventories Current liabilities Profit before exceptional items, excluding finance costs Finance costs, including finance costs capitalised Total borrowings Cash available from operations Cash generated from operations () Cash flow from operations to total liabilities (times) Cash derived from normal operating activities Cash available from operations Total liabilities VALUE ADDED Number of employees ** Revenue per employee (R000)* Wealth created per employee (R000)* Number of persons employed full-time, part-time or other basis Revenue for the year Average number of employees Wealth created during the year Average number of employees * Excludes employees of Porthold (Zimbabwe) (2008, 2007, 2006 and 2005) and Afripack (2008, 2007 and 2006) ** Includes employees of Porthold (Zimbabwe)

120 Pretoria Portland Cement Company Limited Annual Report 2008 page GROUP OVERVIEW 0,6 1,1 1,4 2,0 3,1 2,6 2,8 0,4 0,9 1,3 1,7 2,7 2,2 2,3 12,0 24,6 37,4 24,9 21,7 17,8 9, ,7 0,6 0,7 1,0 0,8 0,7 0, FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

121 page 118 Pretoria Portland Cement Company Limited Annual Report 2008 Share performance JSE Limited for the years ended 30 September Number of shares in issue (millions) Volume of shares traded (millions) Number of authorised shares that are sold to and held by the shareholders of PPC Company Limited on the JSE Limited Number of shares transacted during the year Market price (cents) high Highest prevailing price at which share was sold low Lowest prevailing price at which share was sold at year-end Prevailing price at which share was sold on 30 September Value of shares traded () Volume of shares traded as a percentage of total issued shares (%) Number of transactions Earnings yield (%) Dividend yield (%) Price-earnings ratio FTSE/JSE All Share Industrial index Market capitalisation at 30 September () Number of shares transacted during the year times prevailing price Number of shares transacted during the year Number of shares in issue Number of exchanges of PPC Company Limited shares between a buyer and a seller Earnings per share excluding exceptional items Market price per share at year-end Total dividends paid out of current year s earnings Market price per share at year-end Market price per share at year-end Earnings per share excluding exceptional items Average prices of a selected number of shares listed on the JSE Limited Number of shares in issue times market price per share at year-end

122 Pretoria Portland Cement Company Limited Annual Report 2008 page GROUP OVERVIEW ,8 59,2 24,9 28,8 26,1 15,0 11, ,1 5,6 6,5 6,0 8,0 10,2 10,7 7,2 5,6 6,3 6,5 12,8 12,1 14,6 11,0 18,0 15,4 16,9 12,4 9,8 9, VOLUME OF SHARES TRADED (millions) VALUE OF SHARES TRADED () FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

123 page 120 Pretoria Portland Cement Company Limited Annual Report 2008 Glossary of accounting terminology for the year ended 30 September 2008 Accounting policies The specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements. Accrual accounting The effects of transactions and other events are recognised when they occur rather than when the cash is received or paid. Actuarial gains and losses The effect of differences between the previous actuarial assumptions and what has actually occurred as well as the effect of changes in actuarial assumptions. Amortised cost The amount at which a financial asset or financial liability is measured at initial recognition, adjusted for principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and minus any reduction for impairment or uncollectibility. Asset A resource controlled by the entity as a result of a past event from which future economic benefits are expected to flow. Associate An entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Available-for-sale financial assets Non-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Borrowing costs Interest and other costs incurred in connection with the borrowing of funds. Business combination A business combination is the bringing together of separate entities or businesses into one reporting entity. Carrying amount The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. They are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Cash flow hedge A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset or liability, or a highly probable forecast transaction that could affect profit or loss. Cash-generating unit The smallest identifiable group of assets that generates cash inflows and are largely independent of the cash inflows from other assets or groups of assets. Change in accounting estimate An adjustment to an asset or a liability as a result of new information or developments. Constructive obligation An obligation that derives from an established pattern of past practice, published policies or a sufficiently specific current statement such that it created a valid expectation on the part of other parties that the obligation will be met. Consolidated financial statements The financial statements of a group presented as those of a single economic entity. Contingent asset A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent liability A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.

124 Pretoria Portland Cement Company Limited Annual Report 2008 page 121 Control The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Costs to sell The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income taxation expense. Date of transaction The date on which the transaction first qualifies for recognition in accordance with International Financial Reporting Standards. Depreciation (or amortisation) The systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset less its residual value. Derecognition The removal of a previously recognised asset or liability from the balance sheet. Derivative A financial instrument whose value changes in response to an underlying contract, requires no initial or minimal net investment in relation to other types of contracts that would be expected to have a similar response to changes in market factors and is settled at a future date. Development The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before starting commercial production or use. Discontinued operation A component that has either been disposed of or is classified as held for sale and represents a separate major line of business or geographical operational area or a subsidiary acquired exclusively with a view to resale. Discount rate The rate used for purposes of determining discounted cash flows defined as the yield on relevant South African government bonds that have maturity dates approximating the term of the related cash flows. The pre-taxation interest rate reflects the current market assessment of the time value of money. In determining the cash flows, the risks specific to the asset or liability are taken into account and are not included in determining the discount rate. Effective interest rate The derived rate that discounts the expected future cash flows to the current carrying amount of the financial asset or financial liability. Equity instrument A contract that evidences a residual interest in the total assets after deducting the total liabilities. Equity method A method in which the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the share of net assets of the investee. Profit or loss includes the share of the investee s profit or loss. Employee benefits All forms of consideration given in exchange for services rendered by employees. Expenses The decreases in economic benefits in the form of outflows or depletion of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. Fair value The amount for which an asset could be exchanged between knowledgeable and willing parties in an arm s-length transaction. Fair value hedge A hedge of exposure to changes in fair value of a recognised asset, liability or firm commitment. Finance lease A lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

125 page 122 Pretoria Portland Cement Company Limited Annual Report 2008 Glossary of accounting terminology continued for the year ended 30 September 2008 Financial asset Cash or cash equivalents, a contractual right to receive cash, an equity instrument or a contractual right to exchange financial instruments under favourable conditions. Financial liability A contractual obligation to pay cash or transfer other benefits, or a contractual obligation to exchange a financial instrument under unfavourable conditions. Financial instrument A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial asset or liability at fair value through profit or loss A financial asset or financial liability that is classified as held-fortrading or is designated as such on initial recognition other than investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Firm commitment A binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates. Forecast transaction An uncommitted but anticipated future transaction. Functional currency The currency of the primary economic environment in which an entity operates. Going-concern basis The assumption that the entity will continue in operation for the foreseeable future. Gross investment in lease The aggregate of the minimum lease payments receivable by the lessor under a finance lease and any unguaranteed residual value accruing to the lessor. Group The group comprises Pretoria Portland Cement Company Limited, its subsidiaries and associates. Hedged item An asset, liability, firm commitment, highly probable forecast transaction or net investment in a foreign operation that exposes the entity to risk of changes in fair value or future cash flows and is designated as being hedged. Hedging instrument A designated derivative or non-derivative financial asset or nonderivative financial liability whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item. Held-for-trading financial asset or financial liability One that is acquired or incurred principally for the purpose of selling or repurchasing in the near term or as part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of shortterm profit-taking or a derivative (except for a derivative that is a designated and effective hedging instrument). Held-to-maturity investment A non-derivative financial asset with fixed or determinable payments and fixed maturity where there is a positive intention and ability to hold it to maturity. Immaterial If individually or collectively it would not influence the economic decisions of the users. Impairment loss The amount by which the carrying amount of an asset or a cashgenerating unit exceeds its recoverable amount or sales price. Impracticable When, after making every reasonable effort to do so, the requirement cannot be applied. Income Increase in economic benefits in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. Joint control The contractually agreed sharing of control over an economic activity. Joint venture A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

126 Pretoria Portland Cement Company Limited Annual Report 2008 page 123 Legal obligation An obligation that derives from a contract, legislation or other operation of law. Liability A present obligation arising from a past event, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Loans and receivables Non-derivative financial asset with fixed or determinable repayments that are not quoted in an active market. Minimum lease payments Payments over the lease term that the lessee is or can be required to make, excluding contingent rent, costs for services and taxes to be paid by and reimbursed to the lessor, together with any amounts guaranteed by the lessee or by a party related to the lessee or, in the case of a lessor, any residual value guaranteed to the lessor by the lessee, a party related to the lessee or a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee. Monetary asset An asset which will be settled in a fixed or determinable amount of money. Monetary liability A liability which will be settled in a fixed or determinable amount of money. Net investment in the lease The gross investment in the lease discounted at the interest rate implicit in the lease. Operating lease A lease other than a finance lease. Onerous contract A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Owner-occupied property Property held by the owner or by the lessee under a finance lease for use in the production or supply of goods or services or for administrative purposes. Past service cost The increase or decrease in the present value of the defined benefit obligation for employee service in prior periods resulting from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Point-of-sale costs Commissions to brokers and dealers, levies by regulatory agencies and commodity exchanges and transfer taxes and duties, excluding transport and other costs necessary to get the assets to the market. Post-employment benefits Employee benefits (other than termination benefits) that are payable after the completion of employment. Post-employment benefit plans Formal or informal arrangements under which an entity provides post-employment benefits to employees. Defined contribution benefit plans are where there are no legal or constructive obligations for the employer to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Defined benefit plans are post-employment benefit plans other than defined contribution plans. Presentation currency The currency in which the financial statements are presented. Prior period error An omission from or misstatement in the financial statements for one or more prior periods arising from a failure to use, or the misuse of, reliable information that was available when financial statements for those periods were authorised for issue and could reasonably be expected to have been obtained and taken into account in the preparation of those financial statements. Proportionate consolidation A method where the venturer s share of each of the assets, liabilities, income and expenses of a jointly controlled entity is combined line by line with similar items in the venturer s financial statements or reported as separate line items in the venturer s financial statements. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

127 page 124 Pretoria Portland Cement Company Limited Annual Report 2008 Glossary of accounting terminology continued for the year ended 30 September 2008 Prospective application Applying a new accounting policy to transactions, other events and conditions occurring after the date the policy changed, or recognising the effect of the accounting policy change in the current and future periods. Recoverable amount The higher of an asset s or cash-generating unit s fair value less costs to sell and its value-in-use. Regular way purchase or sale A purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established by regulation or convention in the marketplace concerned. Related party Parties are considered to be related if one party directly or indirectly has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or is a member of the key management of the entity. Significant influence Significant influence is the power to participate in the financial and operating policy decisions of the associate, which is not control or joint control over those policies. Subsidiary An entity that is controlled by the parent. Tax base The tax base of an asset is the amount that is deductible for taxation purposes if the economic benefits from the asset are taxable or is the carrying amount of the asset if the economic benefits are not taxable. The tax base of a liability is the carrying amount of the liability less the amount deductible in respect of that liability in future periods. The tax base of revenue received in advance is the carrying amount less any amount of the revenue that will not be taxed in future periods. Research The original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Residual value The estimated amount that an entity would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Retrospective application Applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied. Retrospective restatement Correcting the recognition, measurement and disclosure of amounts as if a prior period error had never occurred. Share-based payment A transaction in which the entity issues shares or share options to employees in exchange for services rendered. Temporary differences The differences between the carrying amount of an asset or liability and its tax base. Transaction costs Incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. Unearned finance income The difference between the gross investment in the lease and the net investment in the lease. Useful life The period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset. Value-in-use The present value of the future cash flows expected to be derived from an asset or cash-generating unit.

128 Pretoria Portland Cement Company Limited Annual Report 2008 page 125 Accounting policies for the year ended 30 September 2008 BASIS OF PREPARATION Accounting framework The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations of those standards using the historical cost convention except for certain financial instruments that are stated at fair value. The basis of preparation is consistent with the prior year, except where the group has adopted new or revised accounting standards and interpretations of those standards. The following accounting standards, interpretations and amendments, which did not have a material impact on reported results, were adopted in the current year: IFRS 7: Financial Instruments: Disclosures IFRS 8: Operating Segments IFRS 2: Share-based Payment (Amendment) (Vesting Conditions and Cancellations) IFRIC 15: Agreements for the Construction of Real Estate IFRIC 16: Hedges of a Net Investment in a Foreign Operation Underlying concepts The financial statements are prepared on the going-concern basis using accrual accounting. Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. Financial assets and financial liabilities are offset and the net amount reported only when a legally enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously. Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, then they are applied retrospectively, unless it is impracticable to do so, in which case they are applied prospectively. Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively. Changes in accounting estimates are recognised in profit or loss. Preparing financial statements in conformity with IFRS requires estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from these estimates. Recognition of assets and liabilities Assets are only recognised if they meet the definition of an asset, if it is probable that future economic benefits associated with the asset will flow to the group and if the cost or fair value can be measured reliably. Liabilities are only recognised if they meet the definition of a liability, if it is probable that future economic benefits associated with the liability will flow from the group and if the cost or fair value can be measured reliably. Financial instruments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities, as a result of firm commitments, are only recognised when one of the parties has performed under the contract. Derecognition of assets and liabilities Financial assets are derecognised when the contractual rights to receive cash flows have been transferred or have expired or when substantially all the risks and rewards of ownership have passed. All other assets are derecognised on disposal or when no future economic benefits are expected from their use or on disposal. Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or has expired. Property, plant and equipment Property, plant and equipment represents tangible items and intangible items that are integrated with tangible items that are held for use in the production or supply of goods and are expected to be used during more than one period. Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

129 page 126 Pretoria Portland Cement Company Limited Annual Report 2008 Accounting policies continued for the year ended 30 September 2008 self-constructed assets includes expenditures on materials, direct labour and an allocated portion of project overheads. Cost also includes the estimated cost of dismantling and removing the assets and site rehabilitation costs to the extent that they relate to the construction of the asset as well as gains and losses on qualifying cash flow hedges attributable to that asset. Owner-occupied properties in the course of construction are carried at cost, less any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying value. Depreciation is charged so as to write off the depreciable amount of the assets, other than land, over their estimated useful lives, using a method that reflects the pattern in which the asset s future economic benefits are expected to be consumed by the entity. Where significant parts of an item have different useful lives to the item itself, these parts are depreciated over their estimated useful lives. The methods of depreciation, useful lives and residual values are reviewed annually. The following methods and rates were used during the year: Buildings Straight-line 30 years Plant Straight-line 5 to 35 years Vehicles Straight-line 5 to 10 years Furniture and equipment Straight-line 3 to 6 years Mineral rights Straight-line Estimated life of reserve Assets held under finance leases are depreciated over their expected useful lives or the term of the relevant lease, where shorter. The gain or loss arising on the disposal or scrapping of property, plant and equipment is recognised in profit or loss. Factory decommissioning and quarry rehabilitation Group companies are generally required to restore mine and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities and consistent with the group s environmental policies. is depreciated over the expected life of the asset and the increase in the net present value of the provision for the expected cost is included with finance costs. Changes in the measurement of an existing decommissioning or restoration liability that result from changes in the estimated timing or amount of expected costs, or a change in the discount rate, are accounted for in the respective asset or recognised in profit or loss as appropriate. An Environmental Rehabilitation Trust Fund was created in accordance with statutory requirements. Annual contributions are made to this fund where applicable. Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance, which is not integrated with a tangible asset. It includes patents, trademarks, capitalised development costs and certain costs of purchase and installation of major information systems (including packaged software). Intangible assets are initially recognised at cost if acquired separately or internally generated, or at fair value if acquired as part of a business combination. If assessed as having an indefinite useful life, it is not amortised but tested for impairment annually and impaired if necessary. If assessed as having a finite useful life, it is amortised over its useful life (generally three to seven years) using a straightline basis and tested for impairment if there is an indication that it may be impaired. Research costs are recognised in profit or loss when they are incurred. Development costs are capitalised only when and if they meet the criteria for capitalisation. Otherwise they are recognised in profit or loss. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided and capitalised at the beginning of each project. The capitalised cost Patents and trademarks are measured initially at cost and amortised on a straight-line basis over their estimated useful lives.

130 Pretoria Portland Cement Company Limited Annual Report 2008 page 127 Goodwill Goodwill represents the future economic benefits arising from assets that are not capable of being individually identified and separately recognised in a business combination. Goodwill arising on the acquisition of a business, subsidiary, associate or joint venture is recognised as an asset and is stated at cost less impairment losses. Goodwill is not amortised. Goodwill of associates is included in the carrying amount of the associate. If, on a business combination, the fair value of the group s interest in the identifiable assets, liabilities and contingent liabilities exceeds the cost of acquisition, this excess is recognised in profit or loss immediately. On disposal of a subsidiary, associate, joint venture or business unit to which goodwill was allocated on acquisition, the amount attributable to such goodwill is included in the determination of the profit or loss on disposal. Impairment of assets At each reporting date, the carrying amount of the tangible and intangible assets are assessed to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value-in-use is estimated taking into account future cash flows, forecast market conditions and the expected lives of the assets. If the recoverable amount of an asset or cash-generating unit is estimated to be less than the carrying amount, its carrying amount is reduced to the higher of the recoverable amount or zero. Impairment losses are recognised in profit or loss. The loss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the cash-generating unit. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life. If an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in profit or loss. Goodwill and intangible assets with indefinite useful lives and cash-generating units to which these assets have been allocated are tested for impairment annually even if there is no indication of impairment. Impaired goodwill and intangible assets with indefinite lives are only reversed when the associated business is sold. At each reporting date the carrying amount of financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment. For financial assets carried at amortised cost, the amount of impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets except for trade receivables, where the carrying amount is reduced through the use of an allowance account. Subsidiaries, associates and joint ventures Investments in subsidiaries, associates and joint ventures in the separate financial statements presented by the company are recognised at cost. Interest in subsidiaries The consolidated financial statements incorporate the assets, liabilities, income, expenses and cash flows of the company and its subsidiaries as if they are a single economic entity. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

131 page 128 Pretoria Portland Cement Company Limited Annual Report 2008 Accounting policies continued for the year ended 30 September 2008 Inter-company transactions and balances between group entities are eliminated on consolidation. On acquisition of a subsidiary, minorities interest is measured at the proportion of the pre-acquisition fair values of the identifiable assets and liabilities acquired. The results of special purpose entities that in substance are controlled by the group are consolidated. Interest in associates The consolidated financial statements incorporate the assets, liabilities, income and expenses of associates using the equity method of accounting, applying the group s accounting policies from the acquisition date to the disposal date, except when the investment is classified as held for sale, in which case it is accounted for as non-current assets held for sale. The investment is carried at cost and adjusted for post-acquisition changes in the group s share of net assets of the associate, less any impairment in value in the individual investment. Losses of an associate in excess of the group s interest in that associate are not recognised, unless the group has incurred a legal or constructive obligation or made payments on behalf of the associate. Where a group entity transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group s interest in the relevant associate. Financial assets Financial assets are initially measured at fair value plus transaction costs. However, transaction costs in respect of financial assets classified at fair value through profit or loss are expensed. Financial assets are classified into the following categories: Financial assets at fair value through profit or loss Financial assets are classified as at fair value through profit or loss where the financial asset is either held-for-trading or is designated as at fair value through profit or loss. Financial assets at fair value through profit or loss are carried at fair value with any gains or losses being recognised in profit or loss. Fair value, for this purpose, is market value if listed, or a value arrived at by using appropriate valuation models if unlisted. Loans and receivables Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables and are measured at amortised cost using the effective interest method less provision for doubtful debts. Write-downs of these assets are expensed in profit or loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Available-for-sale financial assets Investments in unlisted shares are classified as available-for-sale financial assets. These investments are carried at fair value with any gains or losses being recognised directly in equity. Fair value, for this purpose, is a value arrived at by using appropriate valuation models. An investment intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, is classified as non-current availablefor-sale financial assets. Where the investment is disposed of or determined to be impaired, the cumulative gain or loss previously recognised in equity is included in profit or loss for the period. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost. Held-to-maturity investments Investments classified as held-to-maturity financial assets are measured at amortised cost using the effective interest rate method less any impairment losses recognised to reflect irrecoverable amounts. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss are measured at fair value with any resultant gain or loss recognised in profit or loss.

132 Pretoria Portland Cement Company Limited Annual Report 2008 page 129 Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost are initially measured at fair value, net-of-transaction costs. These financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Derivative financial instruments Derivatives that are assets are measured at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges. To the extent that a derivative instrument has a maturity period of longer than one year, the fair value of these instruments will be reflected as a non-current asset or liability. Derivatives that are liabilities are measured at fair value, with changes in fair value being included in profit or loss other than derivatives designated as cash flow hedges. Hedge accounting If a fair value hedge meets the conditions for hedge accounting, any gain or loss on the hedged item attributable to the hedged risk is included in the carrying amount of the hedged item and recognised in profit or loss. If a cash flow hedge meets the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge, is recognised directly in equity and the ineffective portion is recognised in profit or loss. If an effective hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses recognised in equity are transferred to income in the same period in which the asset or liability affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated gains or losses recognised in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability. Hedge accounting is discontinued on a prospective basis when the hedge no longer meets the hedge accounting criteria (including when it becomes ineffective), when the hedge instrument is sold, terminated or exercised, when for cash flow hedges the forecast transaction is no longer expected to occur, or when the hedge designation is revoked. Any cumulative gain or loss on the hedging instrument for a forecast transaction is retained in equity until the transaction occurs, unless the transaction is no longer expected to occur, in which case it is transferred to profit or loss for the period. Leasing Classification Leases are classified as finance leases or operating leases at the inception of the lease. In the capacity of a lessee Finance leases are recognised as assets and liabilities at the lower of the fair value of the asset and the present value of the minimum lease payments at the date of acquisition. Finance costs represent the difference between the total leasing commitments and the fair value of the assets acquired. Finance costs are charged to profit or loss over the term of the lease and at interest rates applicable to the lease on the remaining balance of the obligations. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease or another basis if more representative of the time pattern of the user s benefit. In the capacity of a lessor Rental income from operating leases is recognised on a straightline basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straightline basis over the lease term. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

133 page 130 Pretoria Portland Cement Company Limited Annual Report 2008 Accounting policies continued for the year ended 30 September 2008 Share-based payments Cash-settled The cost of cash-settled transactions is measured initially at fair value at the grant date using the binomial option pricing model, taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the vesting period with a corresponding charge to liabilities. The liability is remeasured at each reporting period, up to and including the settlement date, with changes in fair value recognised in profit or loss over the vesting period. Equity-settled The fair value of the share options is recognised and charged against profit or loss together with a corresponding movement in equity. Fair value adjustments are calculated over the vesting period, ending on the date on which the performance conditions are fulfilled and the employees become fully entitled to exercise their options. The cumulative expense recognised for share options granted at each balance sheet date until the vesting date reflects the extent to which the vesting period has expired and the number of share option grants that will ultimately vest, in management s opinion, at that date. This is based on the best available estimate of the number of share options that will ultimately vest. Fair value is measured using the binomial option pricing model. The expected life used in the model has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations such as volatility, dividend yield and the vesting period. Deferred taxation assets A deferred taxation asset represents the amount of income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits, including unused credits for secondary taxation on companies. A deferred taxation asset is only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised and is accounted for using the balance sheet liability method. It is measured at the taxation rates that have been enacted or substantially enacted at balance sheet date. Inventories Inventories are assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process. Inventories are stated at the lower of cost and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, net of discount and rebates received. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion, distribution and selling. The specific identification basis is used to arrive at the cost of items that are not interchangeable. Otherwise, the first-in, first-out method or weighted average method for certain classes of inventory is used to arrive at the cost of items that are interchangeable. Non-current assets held for sale Non-current assets or disposal groups are classified as held for sale if the carrying amount will be recovered principally through sale rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset held for sale or disposal groups are available for immediate sale in their present condition. Immediately prior to being classified as held for sale, the carrying amount of the item is measured in accordance with the applicable accounting standard. After classification as held for sale, it is measured at the lower of the carrying amount and fair value less costs to sell. An impairment loss is recognised in profit or loss for any initial and subsequent write-down of the asset and disposal group to fair value less costs to sell. A gain for any subsequent increase in fair value less costs to sell is recognised in profit or loss to the extent that it is not in excess of the cumulative impairment loss previously recognised.

134 Pretoria Portland Cement Company Limited Annual Report 2008 page 131 Non-current assets or disposal groups that are classified as held for sale are not depreciated. Cash and cash equivalents Cash and cash equivalents are measured at fair value, with changes in fair value being included in profit or loss. The amount recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and the unrecognised past service costs. Provisions Provisions represent liabilities of uncertain timing or amount. GROUP OVERVIEW Deferred taxation liability A deferred taxation liability represents the amount of income taxes payable in future periods in respect of taxable temporary differences. A deferred taxation liability is recognised for taxable temporary differences, unless specifically exempt, at the taxation rates that have been enacted or substantially enacted at the balance sheet date and is accounted for using the balance sheet liability method. Deferred taxation arising on investments in subsidiaries, associates and joint ventures is recognised except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Defined contribution retirement plans Payments to defined contribution retirement plans are charged to the income statement as incurred. Defined benefit post-employment healthcare benefits The cost of providing defined benefits is determined using the projected unit credit method. Valuations are conducted every three years and interim adjustments to those valuations are made annually. Actuarial gains and losses that exceed 10% of the greater of the present value of the group s pension obligations or the fair value of plan assets are amortised over the expected average remaining working lives of the participating employees. Gains or losses on the curtailment or settlement of a defined benefit plan are recognised in profit or loss when the group is demonstrably committed to the curtailment or settlement. Provisions are recognised when the group has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made for the amount of the obligation. Provision for onerous contracts are established after taking into consideration the recognition of impairment losses that have occurred on assets dedicated to those specific contracts. Provisions are measured at the expenditure required to settle the present obligation. Where the effect of discounting is material, provisions are measured at their present value using a pre-taxation discount rate that reflects the current market assessment of the time value of money and the risks for which future cash flow estimates have not been adjusted. Treasury shares Shares in the company held by group subsidiary companies are classified as treasury shares. The consideration paid, inclusive of directly attributable costs, is disclosed as a deduction from equity. The issued and weighted average number of shares is reduced by the treasury shares, weighted for the period they have been held by the subsidiary company, for the purpose of determining earnings and headline earnings per share calculations. Dividends received on treasury shares are eliminated on consolidation. Dividends Dividends to equity holders are only recognised as a liability when declared and are included in the statement of changes in equity. Secondary taxation on companies in respect of such dividends is recognised as a liability when the dividends are recognised as a liability and are included in the taxation charge in profit or loss. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

135 page 132 Pretoria Portland Cement Company Limited Annual Report 2008 Accounting policies continued for the year ended 30 September 2008 Revenue Revenue represents the gross inflow of economic benefits during the period arising in the course of the ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Revenue is measured at the amount received or receivable net of cash and settlement discounts, rebates, VAT and other indirect taxes. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred, when delivery has been made and title has passed, when the amount of the revenue and the related costs can be reliably measured and when it is probable that the debtor will pay for the goods. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are expensed in the period in which they are incurred. Investment income Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable. Dividend income from investments is recognised when the shareholder s right to receive payment has been established. Cost of sales When inventories are sold, the carrying amount is recognised as part of cost of sales. Any write-down of inventories to net realisable value and all losses of inventories or reversals of previous writedowns or losses are recognised in cost of sales in the period the write-down, loss or reversal occurs. Employee benefit costs The cost of providing employee benefits is accounted for in the period in which the benefits are earned by employees. The cost of short-term employee benefits is recognised in the period in which the service is rendered and is not discounted. The expected cost of short-term accumulating compensated absences is recognised as an expense as the employees render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur. Exceptional items Exceptional items cover those amounts that are not considered to be of an operating nature and generally include profit or loss on disposal of property, investments and businesses, other non-current assets and impairments of capital items and goodwill. Taxation The charge for current taxation is based on the results for the year as adjusted for income that is exempt and expenses that are not deductible using taxation rates that are applicable to the taxable income. Secondary taxation on companies is recognised as part of the current taxation charge when the related dividend is declared. Deferred taxation is recognised if dividends received in the current year can be offset against future dividend payments to the extent of the reduction of future secondary taxation on companies. The expected cost of profit-sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance. Deferred taxation is recognised in profit or loss except when it relates to items credited or charged directly to equity, in which case it is also recognised in equity, for all temporary differences, unless specifically exempt at the taxation rates that have been enacted or substantially enacted at the balance sheet date.

136 Pretoria Portland Cement Company Limited Annual Report 2008 page 133 Discontinued operations The results of discontinued operations are presented separately in the income statement and the assets associated with these operations are included with non-current assets held for sale in the balance sheet. Foreign currencies The functional currency of each entity within the group is determined based on the currency of the primary economic environment in which that entity operates. Transactions in currencies other than the entity s functional currency are recognised at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates ruling at the balance sheet date. Gains and losses arising on exchange differences are recognised in profit or loss. The financial statements of entities within the group, whose functional currencies are different to the group s presentation currency, are translated as follows: Assets, including goodwill, and liabilities at exchange rates ruling on the balance sheet date Income, expense items and cash flows at the average exchange rates for the period Equity items at the exchange rate ruling when they arose Resulting exchange differences are classified as a foreign currency translation reserve and recognised directly in equity. On disposal of such a business unit, this reserve is recognised in profit or loss. Hyperinflationary currencies The financial statements of foreign entities that report in the currency of a hyperinflationary economy are restated for the decrease in general purchasing power of the currency at the balance sheet date before they are translated into the group s presentation currency. Post-balance sheet events Recognised amounts in the financial statements are adjusted to reflect events arising after the balance sheet date that provide evidence of conditions that existed at the balance sheet date. Events after the balance sheet that are indicative of conditions that arose after the balance sheet date are dealt with by way of a note. Comparative figures Comparative figures are restated in the event of a change in accounting policy or prior period errors. Furthermore, where there is a subdivision of ordinary shares during the current year, the comparative figures are restated. Operating segment information Reporting segments The group has three main reporting segments that comprise the structure used by the group executive (GE) to make key operating decisions and assess performance. The group s reportable segments are operating segments that are differentiated by the activities that each undertakes and the products they manufacture and market. The group evaluates the performance of its reportable segments based on operating profit. The group accounts for intersegment sales and transfers as if the sales and transfers were entered into under the same terms and conditions as would have been entered into in a market-related transaction. The financial information of the group s reportable segments is reported to the GE for purposes of making decisions about allocating resources to the segment and assessing its performance. The group s reporting segments comprise the following segments: Cement The cement division s activities include the mining of limestone and the manufacture and supply of cementitious products. Lime The lime division s activities include the mining of limestone and the manufacture and supply of metallurgical grade limestone, burnt lime and burnt dolomite. Aggregates The aggregate division s activities include the mining and supply of aggregates and metallurgical grade dolomitic limestone. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

137 page 134 Pretoria Portland Cement Company Limited Annual Report 2008 Accounting policies continued for the year ended 30 September 2008 Judgments made by management Preparing financial statements in conformity with IFRS requires estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from these estimates. Judgments made by management in applying the accounting policies, other than those dealt with above, that could have a significant effect on the amounts recognised in the financial statements are: Asset lives and residual values Property, plant and equipment is depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product lifecycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Impairment of assets Goodwill is considered for impairment annually. Property, plant and equipment and intangible assets are considered for impairment if there is a reason to believe that impairment may be necessary. Factors taken into consideration in reaching such a decision include the economic viability of the asset itself and, where it is a component of a larger economic unit, the viability of that unit itself. The future cash flows expected to be generated by the assets are projected, taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows, determined using an appropriate discount rate, is compared to the current net asset value and, if lower, the assets are impaired to the present value. Non-consolidation of subsidiary The results of Porthold, a wholly owned Zimbabwean subsidiary, have not been consolidated into the group as at 30 September There are significant constraints that have an impact on the normal operation of Porthold and the PPC board concluded that management does not have the ability to exercise effective control over the business. In view of the circumstances, the results of Porthold have continued to be excluded from the group results in the current year. In terms of IFRS 7, the investment is classified as an available-for-sale financial asset. Consolidation of special purpose entities Special purpose entities established in the Afripack black economic empowerment transactions have in the past been consolidated into the group results in terms of IAS 27 (Consolidated Financial Statements and Accounting for Investments in Subsidiaries). Valuation of financial instruments The valuation of derivative financial instruments is based on the market situation at balance sheet date. The value of the derivative instruments fluctuates on a daily basis and the actual amounts realised may differ materially from their values at the balance sheet date. Provision for doubtful debts The provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due in accordance with the original terms of credit given and includes an assessment of recoverability based on historical trend analysis and events that exist at balance sheet date.

138 Pretoria Portland Cement Company Limited Annual Report 2008 page 135 Deferred taxation assets Deferred taxation assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Future tax profits are estimated based on business plans that include estimates and assumptions regarding economic growth, interest, inflation and taxation rates and competitive forces. Deferred taxation assets are also recognised on secondary taxation on company credits to the extent it is probable that future dividends will utilise these credits. Fair value of share-based payments Fair value used in calculating the amount to be expensed as a share-based payment is subject to a level of uncertainty. The group is required to calculate the fair value of the equity and cash-settled instruments granted to employees in terms of the share option schemes implemented. This fair value is calculated by applying a valuation model, which is in itself judgmental and takes into account certain inherently uncertain assumptions (detailed in note 35). Factory decommissioning and rehabilitation obligations Estimating the future costs of these obligations is complex and requires management to make estimates and judgments because most of the obligations will be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions are further influenced by changing technologies and political, environmental, safety, business and statutory considerations. Post-employment benefit valuations Actuarial valuations of employee benefit obligations under the now closed defined healthcare benefit plans are based on assumptions that include employee turnover, mortality rates, inflation rates, discount rates, medical inflation, the expected long-term return on plan assets and the rate of compensation increases. Sources of estimation uncertainty There are no significant assumptions made concerning the future or other sources of estimation uncertainty that have been identified as giving rise to a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

139 page 136 Pretoria Portland Cement Company Limited Annual Report 2008 Group balance sheets at 30 September 2008 Notes ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in non-consolidated subsidiary Other non-current financial assets Investment in associate Current assets Inventories Trade and other receivables Short-term investment Assets classified as held for sale Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital and premium Other reserves Retained profit Total equity Non-current liabilities Deferred taxation liabilities Long-term borrowings Provisions Other non-current liabilities Current liabilities Short-term borrowings Taxation payable Trade and other payables Liabilities directly associated with assets classified as held for sale Provisions Total equity and liabilities

140 Pretoria Portland Cement Company Limited Annual Report 2008 page 137 Group income statements for the year ended 30 September 2008 Continuing operations Revenue Cost of sales Gross profit Non-operating income 1 1 Administrative and other operating expenditure Operating profit Fair value gains on financial instruments Finance costs Investment income Profit before exceptional items Exceptional items Share of associate s retained profit Profit before taxation Taxation Net profit from continuing operations Discontinued operation Net profit from discontinued operation 8 Net profit Earnings per share (cents) 23.2 From continuing and discontinued operations basic and fully diluted From continuing operations basic and fully diluted REVENUE () Notes OPERATING PROFIT () GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

141 page 138 Pretoria Portland Cement Company Limited Annual Report 2008 Group statements of changes in equity for the year ended 30 September 2008 Share capital Share premium Capital redemption reserve fund Unrealised surplus on reclassification of plant Balance at 1 October Movement for the year Exchange differences on translation of foreign operation Revaluation of investments Cash flow hedge recognised directly through equity Deferred taxation on hedging movement Outside shareholders interest associated with held for sale assets Deregistration of dormant subsidiary companies (1) Equity-settled share incentive scheme charge Other reserve movements (3) Net profit Dividends declared Balance at 30 September Movement for the year Exchange differences on translation of foreign operation Revaluation of investments Deferred taxation on revaluation Cash flow hedge recognised directly through equity Cash flow hedge recognised in cost of plant Deferred taxation on hedging movements Equity-settled share incentive scheme charge Equity-settled share incentive scheme payment Other reserve movements (3) Net profit Dividends declared Balance at 30 September Movement for the year Exchange differences on translation of foreign operation Revaluation of investments Deferred taxation on revaluation Cash flow hedge recognised directly through equity Cash flow hedge recognised in profit or loss Cash flow hedge recognised in cost of plant Deferred taxation on hedging movements Equity-settled share incentive scheme refund Repurchase of shares treated as treasury shares (2) (751) Other reserve movements (3) Deferred taxation on other reserve movements Net profit Dividends declared Balance at 30 September

142 Pretoria Portland Cement Company Limited Annual Report 2008 page 139 Other reserves Foreign currency translation Available-forsale financial assets Hedging reserves Equity compensation reserves Retained profit Attributable to equity holders of parent Outside shareholders interest Total equity (10) GROUP OVERVIEW (1) (1) (1) (14) (14) (14) (21) (21) (1 059) (1 059) (1 059) (4) (6) (6) (6) (4) (4) (4) (14) (14) (14) (33) (33) (33) (30) (30) (30) (1 212) (1 212) (1 212) (10) 23 3 (23) (1) (1) (1) (2) (2) (2) (4) (4) (4) (1) (1) (1) (753) (753) 26 (22) 1 1 (1) (1) (1) (1 401) (1 401) (1 401) (5) FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

143 page 140 Pretoria Portland Cement Company Limited Annual Report 2008 Group cash flow statements for the year ended 30 September 2008 Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before exceptional items Adjustments for: depreciation amortisation of intangible assets (profit)/loss on disposal of plant and equipment and intangibles (2) (3) 1 dividends received (8) (8) (15) interest received (76) (74) (52) finance costs loss on derivative (cash-settled share-based payment hedge) 15 other non-cash flow items 5 2 Operating cash flows before movements in working capital Increase in inventories (26) (116) (18) Increase in trade and other receivables (55) (147) (80) Increase in trade and other payables and provisions Cash generated from operations Finance costs paid 26 (192) (84) (45) Dividends received from investments and associate Interest received Taxation paid 27 (800) (743) (608) Cash available from operations Dividends paid 28 (1 401) (1 207) (1 059) Equity-settled share incentive scheme refund/(payment) 2 (30) Net cash inflow from operating activities

144 Pretoria Portland Cement Company Limited Annual Report 2008 page 141 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment 29 (794) (954) (395) replacement capital expenditure (277) (129) (101) expansion capital expenditure (517) (825) (294) Acquisition of intangible assets (3) (10) (3) Dividends received from non-consolidated subsidiary company 30 5 Net proceeds received on disposal of property, plant and equipment Movement in investments and loans 30 (27) Redemption of preference shares 30 Acquisition of treasury shares (753) Receipt of instalment on long-term loan Net cash outflow from investing activities (1 562) (772) (242) Net cash (outflow)/inflow before financing activities (1 317) (549) 136 CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings repaid (13) (111) (111) Net short-term borrowings raised Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (1 077) (181) 897 Cash and cash equivalents at beginning of the year Effects of exchange rates on cash 1 Deconsolidation of subsidiary company 31 (8) Cash and cash equivalents at end of the year DIVIDENDS PAID () Notes EXPANSION CAPITAL EXPENDITURE () GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

145 page 142 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements for the year ended 30 September 2008 Freehold and leasehold land, buildings and mineral rights Factory decommissioning and quarry rehabilitation assets Plant, vehicles, furniture and equipment Capitalised leased plant Total 1. PROPERTY, PLANT AND EQUIPMENT 2008 Cost Accumulated depreciation and impairments Net carrying value Cost Accumulated depreciation and impairments Net carrying value Cost Accumulated depreciation and impairments Net carrying value Plant and equipment with a net carrying value of R107 million (2007: R135 million; 2006: R154 million) are encumbered as disclosed in note 12. The registers of land and buildings are open for inspection at the registered office of the company and its subsidiaries. The insured value of the group s property, plant and equipment at 30 September 2008 amounted to R million (2007: R million; 2006: R million), which is based on the cost of replacement of such assets, except for motor vehicles, which are included at estimated retail value. The historic value of land included above amounts to R56 million (2007: R56 million; 2006: R59 million). Included in plant, vehicles, furniture and equipment is capital work-in-progress of R330 million (2007: R931 million; 2006: R155 million), which relates mainly to the various expansion projects currently in progress. Certain of the company s properties are the subject of land claims. The company is in the process of discussion with the Land Claims Commissioner and is awaiting outcome of the claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company s operations.

146 Pretoria Portland Cement Company Limited Annual Report 2008 page 143 Freehold and leasehold land, buildings and mineral rights Factory decommissioning and quarry rehabilitation assets Plant, vehicles, furniture and equipment Capitalised leased plant 1. PROPERTY, PLANT AND EQUIPMENT (continued) Movement of property, plant and equipment 2008 Net carrying value at beginning of the year Additions Disposals (3) (3) Depreciation (18) (168) (28) (214) Translation differences* Net carrying value at end of the year *The translation differences comprise: cost 4 accumulated depreciation (2) Net carrying value at beginning of the year Additions Disposals (1) (2) (3) Depreciation (13) (160) (19) (192) Impairment (1) (1) Translation differences* (1) (1) (2) Net carrying value at end of the year *The translation differences comprise: cost (5) accumulated depreciation 3 (2) 2006 Net carrying value at beginning of the year Additions Reclassification (17) Disposals (2) (2) Deconsolidation of subsidiary company (18) (43) (61) Change in estimate for rehabilitation assets (1) (1) Depreciation (13) (125) (27) (165) Translation differences* 1 1 Net carrying value at end of the year *The translation differences comprise: cost 2 accumulated depreciation (1) 1 Total GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

147 page 144 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September 2008 Right of use of mineral right asset Restraint of trade ERP development and other software Total 2. INTANGIBLE ASSETS 2008 Cost Accumulated amortisation and impairments Net carrying value Cost Accumulated amortisation and impairments Net carrying value Cost Accumulated amortisation and impairments Net carrying value Movement of intangible assets 2008 Net carrying value at beginning of the year Additions 3 3 Amortisation (4) (4) Net carrying value at end of the year Net carrying value at beginning of the year Additions Amortisation (1) (3) (4) Net carrying value at end of the year Net carrying value at beginning of the year Additions 3 3 Amortisation (1) (3) (4) Translation differences 1 1 Net carrying value at end of the year

148 Pretoria Portland Cement Company Limited Annual Report 2008 page INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY Carrying value at beginning of the year Less: Dividends received (30) (5) Carrying value at end of the year The results of Porthold, a wholly owned Zimbabwean subsidiary, have not been consolidated into the PPC group as at 30 September There are significant constraints impacting on the normal operation of Porthold and the PPC board concluded that management does not have the ability to exercise effective control over the business. In view of the circumstances, the results of Porthold have continued to be excluded from the group results in the current year. In terms of IFRS 7, the investment is classified as an available-for-sale financial asset. Due to the hyperinflationary losses incurred, dividends received have been set off against the carrying value of the investment. The PPC board has considered the carrying value of the investment in Porthold and determined that no impairment is necessary. Due to the exceptional economic circumstances being experienced in Zimbabwe and the difficulty in determining a reasonable exchange rate, disclosure of the financial results of the company is not meaningful and has therefore not been provided. 4. OTHER NON-CURRENT FINANCIAL ASSETS Unlisted investments at fair value Non-current portion of preference shares* 2 Guaranteed loan in respect of railway line** 3 6 Long-term loan Derivative financial instrument (fair value hedge) *Preference shares The unlisted preference shares earned dividends at an average rate of 9,6% per annum (2007: 9,6% per annum; 2006: 9,6% per annum) and were redeemable at the option of the group as follows: 1 October April October Unlisted preference shares at amortised cost Less: Transferred to current assets (2) (98) Non-current portion of preference shares 2 The company redeemed the remaining portion of the preference shares in 2008 (2007: R98 million; 2006: R147 million). The investment in preference shares was encumbered as per note 12. **Guaranteed loan in respect of railway line Amortised over the period of the loan by way of reduced payment to Transnet Freight Rail for rail transport services, and bears interest at prime less 4%. The <R1 million balance will be fully repaid during the 2009 financial year. Long-term loan This loan is repayable in annual capital instalments of R10 million payable on 30 June each year, with the last payment on 30 April 2013, and bears interest at an effective interest rate of 13,5% per annum. Derivative financial instrument Fair value of the premium paid to hedge cash-settled share-based payments (refer notes 35 and 37) GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

149 page 146 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September INVESTMENT IN ASSOCIATE Investment at cost 7 Cost of associate previously accounted for as an asset held for sale (refer note 8) Share of retained profit: 7 3 Retained profit at beginning of the year 3 Previously accounted for as an asset held for sale 11 Current year movement: share of current year s retained profit 10 7 dividends received (6) (13) Other movements (2) Valuation of interest in associate Fair value of unlisted associate as determined by the directors PPC s portion of its associate s Property, plant and equipment, investments and cash Total borrowings 14 2 Net working capital 3 (1) Revenue Profit after taxation 10 7 Cash flow from operations INVENTORIES Raw materials Work-in-progress Finished goods Maintenance stores The value of inventories has been determined on the following cost formula bases: first-in, first-out weighted average Amount of inventories recognised as an expense during the year Amount of write-down of inventories to net realisable value and losses of inventories No inventories have been pledged as security.

150 Pretoria Portland Cement Company Limited Annual Report 2008 page TRADE AND OTHER RECEIVABLES Trade receivables Less: Impairment of trade receivables (5) (5) (7) Originated loans and receivables Derivative financial instruments (held-for-trading financial assets) Derivative financial instruments (cash flow hedge) Other financial receivables Trade and other financial receivables Prepayments Taxation prepaid 1 Other non-financial receivables The gains on financial instruments relating to the cash flow hedge should materialise within the next financial year. These gains are to be included in the initial measurement of the acquisition of the hedged asset, where appropriate. Originated loans and receivables comprise: Trade receivables that are neither past due nor impaired Trade receivables that are past due but not impaired Cement Lime Aggregates Trade receivables that are neither past due nor impaired* Trade receivables that are past due but not impaired 2008 Age analysis 50,7 5,1 3,0 58, days 47,5 4,7 2,9 55, days 2,6 0,3 0,1 3, days 0,6 0,1 0,7 Fair value of collateral held** 16,7 16, Age analysis 29,2 8,0 2,8 40, days 23,0 7,7 2,5 33, days 4,4 4, days 1,4 1, days 0,4 0,3 0,3 1,0 Fair value of collateral held** 4,8 4,8 * There is no history of default relating to trade receivables in this category. ** The majority of collateral held consists of bank guarantees, with the balance comprising suretyships, mortgage bonds, notarial bonds and cessions Total GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

151 page 148 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September 2008 Cement Lime Aggregates Total 7. TRADE AND OTHER RECEIVABLES (continued) Trade receivables that are past due but not impaired (continued) 2006 Age analysis 27,2 1,7 0,7 29, days 18,5 1,4 0,3 20, days 8,6 0,2 0,3 9, days 0,1 0,1 0, days 0,1 0,1 Fair value of collateral held** 7,4 7,4 ** The majority of collateral held consists of bank guarantees, with the balance comprising suretyships, mortgage bonds, notarial bonds and cessions. Impairment of trade receivables 2008 Balance at beginning of the year Allowance raised through profit or loss Utilisation of allowance (1) (1) (2) Balance at end of the year Balance at beginning of the year Allowance reversed through profit or loss (2) (2) Balance at end of the year Balance at beginning of the year Allowance reversed through profit or loss (1) (1) Balance at end of the year No trade receivables have been pledged as security. No individual customer represents more than 10% of the group s revenue.

152 Pretoria Portland Cement Company Limited Annual Report 2008 page ASSETS CLASSIFIED AS HELD FOR SALE Net carrying value at beginning of the year 18 Movement for the year 18 Transferred to investment in associate (18) Net carrying value at end of the year 18 During the 2004 financial year, PPC sold 75% of its share in Afripack (Pty) Ltd (Afripack) to a black empowerment and management consortium. The purchase price was funded via PPC s subscription to redeemable preference shares and cash proceeds. Afripack continued to be consolidated into PPC s group results, in terms of IAS 27 (Revised) Consolidated and Separate Financial Statements, as PPC management continued to have effective control of Afripack until the preference shares were redeemed in October Following the redemption, Afripack s results were deconsolidated in the 2007 financial year. For the year ended 30 September 2006, Afripack was consolidated in terms of IFRS 5 Non-current assets held for sale and discontinued operations, as an asset classified as held for sale. The results of Afripack as at 30 September 2006 were as follows: Revenue 177 Operating profit 44 Assets: Non-current assets Property, plant and equipment 51 Current assets 79 Inventories 23 Trade and other receivables 28 Cash and cash equivalents 28 Total assets 130 Liabilities: Non-current liabilities 47 Interest-bearing 3 Non-interest-bearing and other non-current liabilities 36 Deferred taxation liabilities 8 Current liabilities 65 Trade and other payables 60 Taxation payable 5 Total liabilities 112 Net carrying value at end of the year GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

153 page 150 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September CASH AND CASH EQUIVALENTS Cash on hand and on deposit Cash and cash equivalents are comprised as follows: South African rand Foreign currency Botswana pula There are restrictions on the ability to utilise R80 million (2007: R31 million; 2006: R28 million) relating to The PPC Environmental Trust. During the current year the group contributed R50 million to The PPC Environmental Trust. 10. SHARE CAPITAL AND PREMIUM Authorised share capital ordinary shares of 10 cents each Issued share capital (2007: ; 2006: ) ordinary shares in issue at beginning of the year (2007: Nil; 2006: Nil) ordinary shares bought back during the year (2) (2007: ; 2006: ) ordinary shares in issue at end of the year Share premium Balance at beginning of the year Utilised for the share buy-back (751) Balance at end of the year Total issued share capital and premium During the current year, in terms of a special resolution authorised at the 28 January 2008 annual general meeting, PPC Cement (Pty) Limited, a group subsidiary company, bought back ordinary shares in the company. These shares are held as treasury shares. The average purchase consideration, including costs, approximated R37,37 per share. As at 30 September 2008, the company had purchased 3,75% of the issued share capital. The buy-back programme was entered into in anticipation of, and to limit the dilutionary effect of the issue of new shares for purposes of the broad-based black ownership initiative. Further share buy-backs will be considered on an ongoing basis, where appropriate. Unissued shares Unissued share capital comprises (2007: ; 2006: ) shares of 10 cents each. This excludes the impact of shares held as treasury shares.

154 Pretoria Portland Cement Company Limited Annual Report 2008 page DEFERRED TAXATION Movement of deferred taxation Balance at beginning of the year: deferred taxation assets 24 deferred taxation liabilities Net liability at beginning of the year Deconsolidation of subsidiary company (7) Charged directly in equity 3 (15) 14 Movement through income statement* 147 (3) 9 Impact of change in taxation rate (5) Other (2) Liability at end of the year Deferred taxation liabilities: Capital allowances Provisions (50) (36) (34) Non-current financial assets/(liabilities) 6 (1) Prepayments and other receivables Other temporary differences (6) (12) * The movement relates primarily to the commissioning of the Dwaalboom (Batsweledi) expansion project that was commissioned during September LONG-TERM BORROWINGS Interest-bearing Less: Current portion repayable within one year (refer note 15) Secured debts Liabilities under capitalised finance lease Repayable during the year ending 30 September Total owing Assets encumbered are made up as follows: Property, plant and equipment (refer note 1) Current investment in preference shares (refer note 4) 2 98 Non-current investment in preference shares (refer note 4) Details of maturity analysis and interest rates on financial risk management are disclosed in note 37. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

155 page 152 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September PROVISIONS Non-current Current Factory decommissioning and quarry rehabilitation Retirement and postretirement benefits Onerous contract Movement of provisions 2008 Balance at beginning of the year Amounts added Unwinding of discount 9 9 Amounts utilised (5) (1) (1) (7) Balance at end of the year Incurred: within one year 1 1 between two to five years more than five years Balance at beginning of the year Amounts added Unwinding of discount 8 8 Amounts utilised (1) (1) Balance at end of the year Incurred: within one year between two to five years more than five years Balance at beginning of the year Unwinding of discount 7 7 Amounts utilised (1) (3) (4) Balance at end of the year Incurred: within one year between two to five years 1 1 more than five years Total

156 Pretoria Portland Cement Company Limited Annual Report 2008 page PROVISIONS (continued) Factory decommissioning and quarry rehabilitation The group is required to restore mine and processing sites at the end of their productive lives to an acceptable condition consistent with the group s environmental policies. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided for at the beginning of each project. PPC has set up an Environmental Trust to administer the funds required to fund the expected cost of decommissioning or restoration. The Environmental Trust is fully consolidated into PPC s group results. Retirement and post-retirement benefits Included in provisions are the following liabilities: GROUP OVERVIEW Cement and Concrete Institute employees The provision relates to PPC s proportionate share of the post-retirement healthcare liability for employees of the Cement and Concrete Institute. This amounted to R5 million (2007: R3 million; 2006: R3 million). This liability was last actuarially valued during February 2006 and is due for valuation by February The liability has been determined using the projected unit credit method. Corner House Pension Fund and Lime Acres continuation members The provision relates to post-employment healthcare benefits in respect of certain Corner House Pension Fund and Lime Acres continuation members. This amounted to R10 million (2007: R11 million; 2006: R10 million). This liability was last actuarially valued during September The liability has been determined using the projected unit credit method. Benefits under these schemes were granted to employees under historical employment contracts and schemes are closed to new members. Onerous contract The provision for onerous contract relates to a property lease agreement in Botswana following the decision to exit the local readymix operation. The provision for onerous contract was a financial liability carried at amortised cost, for which the carrying amount approximates its fair value. 14. OTHER NON-CURRENT LIABILITIES Cash-settled share-based payment liability 6 2 Details of the cash-settled share-based payment liability are disclosed in note SHORT-TERM BORROWINGS Short-term loans and bank overdraft Current portion of long-term interest-bearing liability (note 12) At year-end, the company had borrowing facilities of approximately R2 570 million. In terms of the broad-based black ownership initiative, the company will receive approximately R1,5 billion in long-term debt, which is intended as part repayment of the short-term borrowings. Details of maturity analysis and interest rates on financial risk management are disclosed in note TRADE AND OTHER PAYABLES Trade payables and accruals Other financial payables Derivative financial instruments (held-for-trading financial liabilities) 5 Trade and other financial payables Payroll accruals VAT payable Other non-financial payables FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Trade and other payables are payable within a day period.

157 page 154 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September OPERATING PROFIT Operating profit includes: Administrative and management fees paid Amortisation of intangible assets (refer note 2) Auditors remuneration fees Consultation fees in respect of the broad-based black ownership initiative 20 Depreciation (refer note 1): cost of sales operating costs Directors remuneration (refer note 38) Distribution costs included in cost of sales Exploration and research costs 1 Fees paid to previous holding company Technical fees paid Operating lease charges: land and buildings plant, vehicles and equipment (Profit)/loss on disposal of plant and equipment and intangibles (2) (3) 1 Retirement benefit contributions (refer note 34) Share-based payments (refer note 35): cash-settled share incentive scheme charge 4 2 equity-settled share incentive scheme charge Staff costs: South Africa Other Africa Less: Costs capitalised to plant and equipment (20) (11) (10) FAIR VALUE GAINS ON FINANCIAL INSTRUMENTS Gains/(losses) on derivatives designated as economic hedging instruments 18 4 (1) Loss on derivative (cash-settled share-based payment hedge) (15) Gains/(losses) on translation of foreign currency monetary items 1 (3) FINANCE COSTS Bank and other borrowings Finance lease interest Unwinding of discount on decommissioning and rehabilitation provisions Capitalised to plant and equipment* (44) (8) * Interest capitalised to the Dwaalboom (Batsweledi) expansion project (R36 million), Hercules (Ntšhafatso) expansion project (R7 million) and Western Cape expansion project (R1 million)

158 Pretoria Portland Cement Company Limited Annual Report 2008 page INVESTMENT INCOME Dividends unlisted investments Interest received on deposits non-current assets EXCEPTIONAL ITEMS Profit on disposal of investments 12 Profit on disposal of properties 2 3 Impairment of plant and equipment (1) Gross exceptional items 2 14 Taxation current Net exceptional items TAXATION South African normal taxation current year prior year Foreign taxation current year prior year (1) Deferred taxation current year 147 (2) 4 prior year (1) rate change (5) 142 (3) 4 Secondary taxation on companies current year deferred Taxation attributable to the company and its subsidiaries Incurred South Africa Other Africa GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

159 page 156 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September % 2007 % 2006 % 22. TAXATION (continued) Reconciliation of rate of taxation Taxation as a percentage of profit before taxation (excluding prior year taxation) 33,8 34,8 35,7 Adjustment due to the inclusion of dividend income 0,1 0,1 0,2 Effective rate of taxation 33,9 34,9 35,9 Reduction in rate of taxation 1,1 1,4 0,7 permanent differences 0,1 0,8 0,4 rate change adjustment 0,2 foreign taxation differential 0,8 0,6 0,3 Increase in rate of taxation (7,0) (7,3) (7,6) disallowable charges (0,8) (0,3) (0,3) taxation on unprovided temporary differences (0,2) (0,3) secondary taxation on companies (6,2) (6,8) (7,0) South African normal taxation rate 28,0 29,0 29,0 Group taxation losses and secondary taxation on company credits at end of the year, allowable for taxation: South African unutilised secondary taxation on company credits 4 Less: Utilised to reduce deferred taxation or create deferred taxation assets EARNINGS AND HEADLINE EARNINGS PER SHARE 23.1 FULLY WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES Weighted average number of ordinary shares (excluding impact of share buy-back) Weighted average impact of share buy-back ( ) Fully weighted average number of ordinary shares Account is taken of the number of shares in issue for the period in which they are entitled to participate in the net profit of the group EARNINGS PER SHARE (cents) From continuing and discontinued operations Calculated on net profit of R1 499 million (2007: R1 429 million; 2006: R1 214 million) From continuing operations Calculated on net profit of R1 499 million (2007: R1 429 million; 2006: R1 206 million) Fully weighted average number of ordinary shares HEADLINE EARNINGS PER SHARE (cents) Calculated on headline earnings of R1 495 million (2007: R1 415 million; 2006: R1 214 million) Headline earnings is calculated as follows: Net profit attributable to shareholders () Adjusted for: Profit on disposal of property, plant and equipment, investments and intangibles (4) (15) Impairment of plant, equipment and intangibles Fully weighted average number of ordinary shares

160 Pretoria Portland Cement Company Limited Annual Report 2008 page EARNINGS AND HEADLINE EARNINGS PER SHARE (continued) 23.4 CASH EARNINGS PER SHARE (cents) Calculated on cash available from operations of R1 644 million (2007: R1 460 million; 2006: R1 437 million) Fully weighted average number of ordinary shares DIVIDENDS Ordinary shares Final No cents per share (2007: 110 cents; 2006: 84 cents) Special No cents per share (2007: 77 cents; 2006: 80 cents) Interim No cents per share (2007: 38,5 cents; 2006: 33 cents) Relief on payment to foreign shareholders (5) On 10 November 2008 the directors declared dividend No 210 (final) of 180 cents per share. This dividend will be paid to shareholders on Monday, 12 January This dividend has not been included as a liability in these financial statements. A new ISIN number, ISIN ZAE , will be allocated to PPC with effect from 8 December Therefore, ISIN ZAE shall be applicable to the dividend timetable set out below. In compliance with the requirements of the JSE Limited, the following dates are applicable: Last day to trade CUM dividend Friday, 2 January 2009 Shares trade EX dividend Monday, 5 January 2009 Record date Friday, 9 January 2009 Payment date Monday, 12 January 2009 Share certificates may not be dematerialised or rematerialised between Monday, 5 January 2009 and Friday, 9 January 2009, both days inclusive. Dividends per share (cents) Interim No 209 declared 7 May Final No 210 declared 10 November Special Secondary taxation on companies is payable at a rate of 10% (2007: 10%; 2006: 12,5%) on the net dividend declared. The charge on the 2008 final dividend would approximate R93 million. 25. ATTRIBUTABLE INTEREST IN SUBSIDIARIES Attributable interest in the aggregate amount of profits or losses of subsidiaries after taxation and outside shareholders interest: Profits FINANCE COSTS PAID Finance costs as per income statement charge Unwinding of discount on decommissioning and rehabilitation provisions (9) (8) (7) Interest capitalised to plant and equipment GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

161 page 158 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September TAXATION PAID Net amounts outstanding at beginning of the year Charge per income statement (excluding deferred taxation) Adjustment in respect of translation differences (1) Net amounts outstanding at end of the year (61) (236) (211) DIVIDENDS PAID Dividends declared Relief on payment to foreign shareholders (5) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT Freehold and leasehold land, buildings and mineral rights Plant, vehicles, furniture and equipment Interest capitalised (44) (8) MOVEMENT IN INVESTMENTS AND LOANS Net movement (12) Revaluation of available-for-sale financial assets through reserves 10 (4) (1) Loss on derivative (cash-settled share-based payment hedge) (15) (17) 124 (150) Comprising: Movement in investments and loans (27) Receipt of instalment on long-term loan (17) DECONSOLIDATION OF SUBSIDIARY COMPANY (refer note 8) Property, plant and equipment (62) Non-current assets and loans 40 Inventories (16) Receivables (24) Payables, taxation and deferred taxation 46 Long-term borrowings 3 Outside shareholders interest 21 Net assets deconsolidated 8 Cash and cash equivalents deconsolidated (8)

162 Pretoria Portland Cement Company Limited Annual Report 2008 page COMMITMENTS Capital commitments contracted approved GROUP OVERVIEW Commitments for capital expenditure are stated in current values which, together with expected price escalations, will be financed from surplus cash generated from operations and borrowing facilities available to the group. The majority of the commitments relate to the group s approved expansion projects and are to be incurred during the 2009 financial year. The group has foreign letters of credit guarantees unexpired at year-end amounting to 5,7 million (R66,7 million). These guarantees relate to the Hercules (Ntšhafatso) expansion project and expiry dates of the guarantees are during the 2009 financial year and thereafter Operating lease commitments Land and buildings Other CONTINGENT LIABILITIES Guarantees for loans, banking facilities and other obligations to third parties. 8 7 Litigation, current or pending, is not considered likely to have a material adverse effect on the group. 34. RETIREMENT BENEFIT INFORMATION It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end, the group s permanent employees are usually required to be members of either a pension or provident fund, depending on local legal requirements. All current permanent employees belong to one of eight defined contribution retirement funds. Group employment is a prerequisite for membership of these funds. The local funds are subject to the provisions of the Pension Funds Act of The list of retirement funds at 30 September 2008 is as follows: Pretoria Portland Cement Defined Contribution Pension Fund Pretoria Portland Cement Defined Contribution Provident Fund PPC Negotiated Provident Fund PPC Lime Employees Provident Fund BANP Provident Fund PPC Eastern Cape Provident Fund PPC Western Cape Provident Fund Barloworld Botswana Retirement Fund Historically, qualifying employees were granted certain post-retirement healthcare benefits. The obligation for the employer to pay medical aid contributions after retirement is no longer part of the conditions of employment for new employees. A number of pensioners remain entitled to this benefit, the cost of which has been fully provided and disclosed in note 13. Defined contribution plans The total cost charged to the income statement of R45 million (2007: R38 million; 2006: R35 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes. At 30 September 2008, all contributions due in respect of the current reporting period had been paid over to the schemes Total 2008 Total 2007 Total 2006 FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

163 page 160 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September SHARE-BASED PAYMENTS 35.1 CASH-SETTLED Executive directors and certain senior employees have been granted cash-settled share appreciation rights in terms of PPC s long-term incentive scheme. The scheme was implemented during the 2007 year in recognition of services rendered to encourage long-term shareholder value creation and as an incentive for current and prospective employees to benefit from growth in the value of PPC in the medium and long term. All share appreciation rights are approved by the remuneration committee. Reconciliation of share appreciation rights granted: Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding at beginning of the year ,00 Granted during the year , ,00 Forfeited during the year ( ) 43,00 Outstanding at end of the year , ,00 Exercisable at end of the year Share appreciation rights were priced using binomial option pricing, taking into account the following inputs: Date of grant 17/09/ /08/2007 Grant price of share appreciation rights (based on five day volume weighted average price) (rand) 31,80 43,00 Expiry date 17/09/ /08/2017 Market price of PPC shares at end of the year (rand) 31,25 47,80 Expected volatility of stock over remaining life of the option (%) 37,00 28,40 Risk-free rate (%) 9,38 8,20 Expected volatility is based on the historical share price over the past year. All rights vest in thirds after the third, fourth and fifth anniversary of the grant date. All share appreciation rights will lapse if not exercised within 10 years from grant date. Certain share appreciation rights were forfeited during the year due to senior executives leaving the employment of PPC. Vesting of the rights granted to the directors and certain senior executives is subject to PPC group headline earnings per share growth performance conditions. The expense recognised in the current year amounted to R4 million (2007: R2 million; 2006: not applicable). The carrying amount of the liability relating to cash-settled share appreciation rights as at 30 September 2008 is R6 million (2007: R2 million; 2006: not applicable). The weighted average remaining contractual life for cash-settled share appreciation rights outstanding as at 30 September 2008 is 9 years (2007: 10 years; 2006: not applicable). The group has partially hedged its exposure to fluctuations in the cash settlement amount in respect of the 2007 share appreciation rights granted, by acquiring a derivative financial instrument in the form of extended European cash-settled call options from a financial institution. This derivative financial instrument is classified as held-for-trading at fair value through profit or loss (refer note 37).

164 Pretoria Portland Cement Company Limited Annual Report 2008 page SHARE-BASED PAYMENTS (continued) 35.2 EQUITY-SETTLED Prior to the unbundling of PPC from Barloworld in the 2007 year, executive directors and senior executives were granted equitysettled share options in the ordinary share capital of Barloworld Limited. The salient features of this scheme are that one-third of each allocation becomes exercisable by the participant after three years have lapsed from the date of allocation. A maximum of two-thirds of the original allocation are exercisable after four years, and the full allocation after five years. During the 2007 year, PPC paid Barloworld R30 million in respect of the then market value of the equity-settled incentive scheme liability relating to the number of unexercised Barloworld share options held by PPC executive directors and senior executives. This payment was charged against equity compensation reserves. During the current financial year, a total of R2 million was credited against the equity compensation reserve for refunds due by Barloworld for unexercised share options that lapsed due to PPC senior executives leaving the employment of PPC. A total of R25 million of the total reimbursement was transferred to distributable reserves during 2008, and the balance of R4 million will be transferred in 2009 over the vesting period of the equity-settled share options. The expense recognised in the current year amounted to <R1 million (2007: R1 million; 2006: R1 million). 36. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) on a basis consistent with the prior year, except for the adoption of the following new or revised accounting standards and interpretations, which had no financial impact on PPC. New or revised standards and interpretations adopted during the year Effective date reporting period on or after Early adopted IFRS 7: Financial Instruments: Disclosures 1 January 2007 IFRS 8: Operating Segments 1 January 2009 IFRS 2: Share-based Payment (Amendment) (Vesting Conditions and Cancellations) 1 January 2009 IFRIC 15: Agreements for the Construction of Real Estate 1 January 2009 IFRIC 16: Hedges of a Net Investment in a Foreign Operation 1 October 2009 The following amendments to published accounting standards are in issue but not yet effective. These revised standards will be adopted by PPC in the future. Effective date reporting Financial implication Revised standards in issue not yet effective period on or after on PPC IAS 1 (Revised): Presentation of Financial Statements 1 January 2009 Disclosure impact only IASB improvement project Various standards have been amended as a result of the IASB s improvement project. Management is in the process of considering the relevant amendments to the standards and determining the financial implications on the group. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

165 page 162 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September FINANCIAL RISK MANAGEMENT The group s financial instruments consist mainly of borrowings from financial institutions, deposits with banks, local money market instruments, accounts receivable and payable, and leases. Forward exchange contracts are used by the group for hedging purposes. The group does not speculate in the trading of derivative instruments. Capital risk management The group manages its capital to ensure that entities in the group will continue as going concerns, while maximising the return to stakeholders through the optimisation of the debt and equity balances. The capital structure of the group consists of debt, which includes the borrowings disclosed in notes 12 and 15, cash and cash equivalents and equity attributable to equity holders, comprising issued capital, reserves and retained profit as disclosed in notes 9 and 10 respectively. PPC s senior executives review the capital structure on a semi-annual basis. As part of this review, the cost of capital and the risks associated with each class of capital are considered. Based on recommendations of the committee, PPC will balance its overall capital structure through the payment of dividends, new share issues and buy-backs as well as the issue of new debt or the redemption of existing debt. Treasury risk management Senior executives meet on a regular basis to analyse currency and interest rate exposure and to re-evaluate treasury management strategies against revised economic forecasts. The group s treasury operation provides the group with access to local money markets and provides group subsidiaries with the benefit of bulk financing and depositing. Foreign currency management Trade and capital commitments The group is exposed to exchange rate fluctuations as it undertakes certain transactions denominated in foreign currencies. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts. The group s policy is to cover forward all material foreign currency commitments. Forward exchange contracts are carried at fair value with the resultant profit or loss included in income. The only exception relates to the effective portion of cash flow hedges, where profits or losses are recorded directly in equity and are either included in the initial acquisition cost of the hedged assets, or are transferred to income when the hedged transaction affects income where appropriate. Fair value of the forward exchange contracts at balance sheet date is R150 million. Foreign currency denominated commitments for the capital expansion projects amounting to 5,2 million have been hedged using designated forward exchange contracts to reduce the exposure to volatile cash flows that could result from currency movements. These commitments will be settled in the next 12 months. Fair value adjustments have been recorded directly in equity and <R1 million relating to an ineffective portion was recognised in income. The amounts below represent forward exchange contract commitments to sell and purchase foreign currencies: < 1 year 1 3 years Total forward exchange contracts comprise the following: 13 million at an average rate of R11,51/ (2007: 13 million at an average rate of R9,93/ ; 2006: 27 million at an average rate of R8,12/ ) <$1 million at an average rate of R8,36/$ (2007: $10 million at an average rate of R7,12/$; 2006: $4 million at an average rate of R7,27/$) The average rates shown above include the cost of forward cover. Total

166 Pretoria Portland Cement Company Limited Annual Report 2008 page FINANCIAL RISK MANAGEMENT (continued) Interest rate management The group is exposed to interest rate risk arising from fluctuations in financing costs on loans, which are primarily at floating interest rates. The majority of this exposure is expected to be of a very short-term nature and will diminish with the onset of the broad-based black economic empowerment initiative. As part of the process of managing the group s fixed and floating rate borrowings mix, the interest rate characteristics of new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest rates. The interest rate profile of total borrowings is as follows: Description Year of repayment GROUP OVERVIEW SA rand liabilities Secured The above liabilities bear interest at fixed rates. The South African finance leases bear interest at an effective interest rate of 13,5% per annum. The weighted average interest rate paid for the 2008 financial year was 13,5% (2007: 13,2%; 2006: 12,8%). Unsecured, short-term loans bear interest at rates varying between 10,5% and 13% per annum for the year under review. Sensitivity analysis Interest rate risk At 30 September 2008, if all interest rates on interest-bearing loan receivables, short-term cash investments, short-term loans payable and bank overdrafts at that date had been 100 basis points higher, with all other variables held constant, attributable earnings would have been R9 million (earnings per share: 1,8 cents) lower. Conversely, at 30 September 2008, if all interest rates at that date had been 100 basis points lower, with all other variables held constant, the attributable earnings would have been R9 million (earnings per share: 1,8 cents) higher. Equity price risk Cash-settled share appreciation rights At 30 September 2008, if the share price of PPC Limited had been R16,55 higher, with all other variables held constant, attributable earnings would have been R19 million (earnings per share: 3,5 cents) higher. Conversely, at 30 September 2008, if the share price of PPC Limited had been R10,82 lower, with all other variables held constant, attributable earnings would have been R8 million (earnings per share: 1,5 cents) lower. FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

167 page 164 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September FINANCIAL RISK MANAGEMENT (continued) Fair values of financial assets and liabilities The carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values. The estimated fair values have been determined using available market information and appropriate valuation methodologies. Cement Notes Carrying amount Fair value 2008 Financial assets Available-for-sale Investment in non-consolidated subsidiary Unlisted investments at fair value Loans and receivables Long-term loan Trade and other receivables Cash and cash equivalents Derivative financial instruments (cash flow hedge) At fair value through profit or loss held-for-trading Derivative financial instrument non-current Derivative financial instruments current Financial liabilities Financial liabilities measured at amortised cost Long-term borrowings Short-term borrowings Trade and other payables Financial assets Available-for-sale Investment in non-consolidated subsidiary Unlisted investments at fair value Current portion of preference shares 4 Loans and receivables Long-term loan Guaranteed loan in respect of railway line Trade and other receivables Cash and cash equivalents Derivative financial instruments (cash flow hedge) At fair value through profit or loss held-for-trading 1 1 Derivative financial instruments Financial liabilities Financial liabilities measured at amortised cost Long-term borrowings Short-term borrowings Trade and other payables Provision for onerous contract Financial assets Available-for-sale Investment in non-consolidated subsidiary Unlisted investments at fair value Non-current portion of preference shares 4 Current portion of preference shares 4 Loans and receivables Long-term loan Guaranteed loan in respect of railway line Trade and other receivables Cash and cash equivalents Derivative financial instruments (cash flow hedge) At fair value through profit or loss held-for-trading 2 2 Derivative financial instruments Financial liabilities Financial liabilities measured at amortised cost Short-term borrowings Long-term borrowings Trade and other payables

168 Pretoria Portland Cement Company Limited Annual Report 2008 page 165 Carrying amount Lime Aggregates Other Total Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

169 page 166 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September FINANCIAL RISK MANAGEMENT (continued) Methods and assumptions used by the group in determining fair values: The estimated fair values of financial instruments are determined, at discrete points in time, by reference to the mid-price in an active market wherever possible. Where no such active market exists for the particular asset or liability, the company uses a valuation technique to arrive at the fair value, including the use of prices obtained in recent arm s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined with reference to valuations performed by third party financial institutions at balance sheet date, using an actuarial binomial pricing model. The inputs into the model were as follows: 2008 Weighted average exercise price of derivative financial instruments (rand) 43,00 Weighted average life of initial term of derivative instruments (years) 3 PPC share price at end of the year (rand) 31,25 Expected share price volatility (%) 46,00 Risk-free interest rate (%) 11,25 Credit risk management The potential exposure to credit risk is represented by the carrying amounts of trade receivables, short-term cash investments and derivative assets in the balance sheet. Trade receivables comprise a large, widespread customer base and credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk, the granting of credit is controlled by application and account limits, and the group only deals with creditworthy customers supported by appropriate collateral. The group periodically re-evaluates counterparty limits and the financial reliability of its customers. Provision is made for specific doubtful debts, and as at 30 September 2008, where appropriate, management did not consider there to be any material credit risk exposure that was not already covered by security or a doubtful debt provision. The group only deposits short-term cash surpluses with financial institutions of high-quality credit standing. The following table details the group s maximum credit exposure: Cement Lime Aggregates Maximum credit risk exposure Other Total

170 Pretoria Portland Cement Company Limited Annual Report 2008 page FINANCIAL RISK MANAGEMENT (continued) Liquidity risk management Liquidity risk is the risk of the group being unable to meet its payment obligations when they fall due and being unable to replace funds if facilities are withdrawn. The group manages liquidity risk centrally by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities to meet its liquidity requirements at all times, and by continuously monitoring forecast and actual cash flows. The following table details the group s remaining contractual maturity for its financial liabilities. The table has been prepared based on undiscounted cash flows at the earliest date on which the group can be required to pay. The amounts include both interest and capital. The maturity analysis of financial liabilities is summarised as follows: Nominal value of liability < 1 year 1 3 years > 3 years Note 2008 Capitalised lease liability Short-term borrowings Trade and other payables Capitalised lease liabilities Short-term borrowings Trade and other payables Provision onerous contract Capitalised lease liabilities Short-term borrowings Trade and other payables The company s borrowing powers are not restricted. The group does not have any other material financial instruments that are not based in the currency in which the entity operates. Total GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

171 page 168 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September DIRECTORS REMUNERATION AND INTEREST The directors remuneration for the year ended 30 September 2008 was as follows: Executive directors Incentive bonus R000 Retirement and medical contributions R000 Car allowances R000 Other benefits R000 Name Salary R000 Total R000 JE Gomersall O Fenn S Abdul Kader RH Dent P Esterhuysen The annual bonus is capped at 125% of basic salary for all the executive directors on the achievement of stretch performance targets, which are measured relative to both financial and non-financial measures. Non-executive directors Name Fees R000 Audit committee R000 Risk management and compliance committee R000 Nomination committee R000 Remuneration committee R000 Chairman fees R000 BEE and transformation committee R000 Total R000 AJ Lamprecht MJ Shaw J Shibambo EP Theron (resigned 29 October 2007) Z Kganyago NB Langa-Royds TDA Ross Total

172 Pretoria Portland Cement Company Limited Annual Report 2008 page DIRECTORS REMUNERATION AND INTEREST (continued) The directors remuneration for the year ended 30 September 2007 was as follows: Executive directors Incentive bonus R000 Retirement and medical contributions R000 Car allowances R000 Other benefits R000 Name Salary R000 Total R000 JE Gomersall* O Fenn S Abdul Kader RH Dent P Esterhuysen Non-executive directors Name Fees R000 Audit committee R000 Risk management and compliance committee R000 Nomination committee R000 Remuneration committee R000 Chairman fees R000 BEE and transformation committee R000 WAM Clewlow (resigned 23 January 2007) AJ Lamprecht AJ Phillips (resigned 23 January 2007) MJ Shaw J Shibambo EP Theron CB Thomson (resigned 23 January 2007) DG Wilson (appointed 7 November 2006; resigned 16 July 2007) Total Salary R000 Incentive bonus R000 Retirement and medical contributions R000 Car allowances R000 Other benefits R000 * In addition, the following remuneration was received from the Barloworld group Total R000 Total R000 GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

173 page 170 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September DIRECTORS REMUNERATION AND INTEREST (continued) The directors remuneration for the year ended 30 September 2006 was as follows: Executive directors Name Salary R000 Incentive bonus R000 Retirement and medical contributions R000 Car allowances R000 Other benefits R000 Total R000 JE Gomersall* O Fenn S Abdul Kader RH Dent P Esterhuysen Non-executive directors Audit committee R000 Risk management and compliance committee R000 Nomination committee R000 Remuneration committee R000 Chairman fees R000 Name Fees R000 Total R000 WAM Clewlow AJ Lamprecht AJ Phillips MJ Shaw J Shibambo EP Theron CB Thomson Total Salary R000 Incentive bonus R000 Retirement and medical contributions R000 Car allowances R000 Other benefits R000 * In addition, the following remuneration was received from the Barloworld group Total R000

174 Pretoria Portland Cement Company Limited Annual Report 2008 page DIRECTORS REMUNERATION AND INTEREST (continued) Gains on Barloworld and PPC equity-settled share options exercised/ceded by directors Name 2008 R R R000 JE Gomersall O Fenn RH Dent P Esterhuysen Interest of directors in share capital The aggregate beneficial holdings as at 30 September 2008 of the directors of the company and their immediate families (none of which has a holding in excess of 1%) in the issued ordinary shares of the company are detailed below. There have been no material changes in these shareholdings since that date Name Direct Indirect Direct Indirect Direct Indirect Executive directors JE Gomersall * O Fenn RH Dent P Esterhuysen Non-executive director AJ Lamprecht * Over this period, the 2007 number of shares held was incorrectly advised by the registrars and the correct number of shares is reflected in the 2008 column. A register detailing directors and officers interest in the company is available for inspection at the company s registered office. Directors loans The directors have loans with the company, granted in terms of the Barloworld share option scheme that was in place prior to the unbundling of PPC from Barloworld. The balances outstanding at year-end are: P Esterhuysen 2008: R0,4 million (2007: R0,4 million; 2006: nil) O Fenn 2008: R0,9 million (2007: R1 million; 2006: nil) The loans bear interest at fixed rates, calculated using the ruling prescribed rate applicable when the loans are granted to the directors, and have no predetermined terms of repayment. Interest of directors in contracts The directors have certified that they had no material interest in any transaction of any significance with the company or any of its subsidiaries. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

175 page 172 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September DIRECTORS REMUNERATION AND INTEREST (continued) The interests of the executive and non-executive directors of Pretoria Portland Cement Company Limited in terms of the Barloworld Share Option Scheme (refer note 35.2), provided in the form of equity-settled share options, are shown in the table below. The executive directors participated in the Barloworld Share Option Scheme before the unbundling of Pretoria Portland Cement Company Limited from Barloworld Limited on 16 July 2007, and the right to Pretoria Portland Cement Company Limited options relate to the unbundling. Pretoria Portland Cement Company Limited has no equity-settled share option scheme in existence First exercisable date Number of options as at Sep Number of options as at Sep Options exercised/ ceded Number of options as at Sep Option strike price on date exercised/ Sep Market price on date exercised Expiry date Barloworld share options RH Dent Exercised pre-unbundling 13/06/ ,65 150,00 13/06/ /04/ ,00 150,00 01/04/ /09/ ,25 150,00 01/09/ /05/ ,70 150,00 29/05/ /09/ ,70 150,00 25/09/ /04/ ,50 150,00 01/04/ /04/ ,50 195,37 01/04/ /05/ ,80 197,50 26/05/2010 Exercisable post-unbundling 01/04/ ,59 114,50 01/04/ /05/ ,48 94,75 26/05/2010 Total P Esterhuysen Exercised pre-unbundling 25/09/ ,70 173,88 25/09/ /04/ ,50 173,93 01/04/ /04/ ,50 192,05 01/04/ /05/ ,80 192,05 26/05/2010 Exercisable post-unbundling 01/04/ ,59 110,77 01/04/ /05/ ,48 95,48 26/05/2010 Total O Fenn Exercised pre-unbundling 25/09/ ,70 192,05 25/09/ /04/ ,50 192,05 01/04/ /05/ ,80 192,05 26/05/2010 Exercisable post-unbundling 01/04/ ,59 01/04/ /05/ ,48 26/05/2010 Total

176 Pretoria Portland Cement Company Limited Annual Report 2008 page DIRECTORS REMUNERATION AND INTEREST (continued) First exercisable date Number of options as at Sep Number of options as at Sep Options exercised/ ceded 2008 Number of options as at Sep Option strike price on date exercised/ Sep Market price on date exercised Expiry date Barloworld share options (continued) JE Gomersall Exercised pre-unbundling 01/04/ ,50 195,75 01/04/ /05/ ,80 197,50 26/05/2010 Exercisable post-unbundling 01/04/ ,59 01/04/ /05/ ,48 26/05/2010 Total AJ Lamprecht Exercised pre-unbundling 01/04/ ,50 200,12 01/04/ /05/ ,80 198,55 26/05/2010 Exercisable post-unbundling 01/04/ ,59 111,57 01/04/ /05/ ,48 26/05/2010 Total Total Barloworld share options PPC share options RH Dent 01/04/ ,88 38,00 01/04/ /05/ ,95 33,44 26/05/2010 Total P Esterhuysen 01/04/ ,88 37,89 01/04/ /05/ ,95 26/05/2010 Total O Fenn 01/04/ ,88 27,45 01/04/ /05/ ,95 27,45 26/05/2010 Total JE Gomersall 01/04/ ,88 01/04/ /05/ ,95 26/05/2010 Total AJ Lamprecht 26/05/ ,95 26/05/2010 Total Total PPC share options GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

177 page 174 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September RELATED PARTY TRANSACTIONS Parent company of reporting entity Associates of the group Fellow subsidiaries of reporting entity Subsidiary of reporting entity 2008 Goods and services sold Portland Holdings Limited (3) Goods and services purchased Afripack (Pty) Limited 114 Portland Holdings Limited Amounts due (to)/from as at end of the year Afripack (Pty) Limited (4) Portland Holdings Limited 2 (4) 2 Group companies, in the ordinary course of business, entered into purchase transactions with associates and subsidiaries. The terms and conditions of these transactions are determined on an arm's-length basis Goods and services sold Barloworld Logistics (Pty) Limited 1 Interest received Barloworld Capital (Pty) Limited 8 Goods and services purchased Afripack (Pty) Limited 43 Avis Southern Africa 1 Barloworld Equipment (Pty) Limited 29 Barloworld Limited (franchise fees) 13 Barloworld Limited (internal audit) 2 Barloworld Limited (other) 16 Barloworld Logistics (Pty) Limited 488 Barloworld Motor 1 Portland Holdings Limited Interest paid Barloworld Capital (Pty) Limited 28 Equity-settled share incentive scheme payment Barloworld Limited 30 Amounts due (to)/from as at end of the year Afripack (Pty) Limited (7) Portland Holdings Limited 1 (7) 1 Related party transactions with Barloworld group include amounts in respect of transactions concluded up to 16 July Barloworld is no longer a related party of PPC post the unbundling of PPC from Barloworld.

178 Pretoria Portland Cement Company Limited Annual Report 2008 page RELATED PARTY TRANSACTIONS (continued) Parent company of reporting entity Associates of the group Fellow subsidiaries of reporting entity Subsidiary of reporting entity 2006 Goods and services sold Barloworld Logistics (Pty) Limited 1 Interest received Barloworld Capital (Pty) Limited 1 Goods and services purchased Avis Southern Africa 1 Barloworld Air (Pty) Limited 1 Barloworld Equipment (Pty) Limited 28 Barloworld Farms (Pty) Limited 1 Barloworld Handling 2 Barloworld Limited (franchise fees) 16 Barloworld Limited (information services) 15 Barloworld Limited (internal audit) 3 Barloworld Limited (other) 10 Barloworld Logistics (Pty) Limited 554 Barloworld Motor 7 Barloworld Optimus (Pty) Limited 6 Portland Holdings Limited Interest paid Barloworld Capital (Pty) Limited 16 Amounts due (to)/from as at end of the year Barloworld Limited Current OGA Account, unsecured, payable 25 October 2006 (9) Amount owing from Barloworld Capital (Pty) Limited* 872 Amount owing to Barloworld Capital (Pty) Limited** (872) Barloworld Logistics (Pty) Limited Current Loan (58) Portland Holdings Limited (1) (67) (1) * Unsecured short-term deposit at September 2006 bearing interest at 9% per annum **Unsecured borrowings with no fixed terms of repayment at market related interest rates (8,1% per annum as at 30 September 2006) GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

179 page 176 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the group annual financial statements continued for the year ended 30 September OPERATING SEGMENTS The group discloses its operating segments according to the business units, which are regularly reviewed by the Group Executive. These comprise cement, lime and aggregates. Group Revenue South Africa Other Africa Inter-segment revenue (6) (8) Total revenue Operating profit Fair value adjustments on financial instruments 4 1 Finance costs Investment income Profit before exceptional items Exceptional items 2 14 Share of associate s retained profit 10 7 Profit before taxation Taxation Net profit from continuing operations Discontinued operations 8 Material non-cash items included in segment profit: Depreciation and amortisation Operating margin (%) 37% 39% 40% Assets Total assets Non-current assets Current assets Included in total assets: Additions to property, plant and equipment Liabilities Total liabilities (2 821) (2 533) (2 152) Non-current liabilities (511) (340) (364) Current liabilities (2 310) (2 193) (1 788) OPERATING PROFIT 2008 OPERATING PROFIT 2007 OPERATING PROFIT 2006 Cement 90% Lime 6% Aggregates 4% Cement 90% Lime 7% Aggregates 3% Cement 91% Lime 6% Aggregates 3% 41. ADDITIONAL DISCLOSURE Directors and key management The executive directors of PPC are regarded as key management personnel. Details regarding directors remuneration and interest are disclosed in note 38. Shareholders The principal shareholders of the company are disclosed on page 198.

180 Pretoria Portland Cement Company Limited Annual Report 2008 page 177 Cement Lime Aggregates % 41% 42% 24% 30% 24% 29% 26% 24% (2 595) (2 355) (2 032) (172) (136) (94) (54) (42) (26) (385) (247) (301) (107) (73) (54) (19) (20) (9) (2 210) (2 108) (1 731) (65) (63) (40) (35) (22) (17) TOTAL ASSETS 2008 TOTAL ASSETS 2007 TOTAL ASSETS 2006 Cement 87% Lime 9% Aggregates 4% Cement 90% Lime 7% Aggregates 3% Cement 90% Lime 7% Aggregates 3% GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

181 page 178 Pretoria Portland Cement Company Limited Annual Report 2008 Company balance sheets at 30 September 2008 Notes ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in non-consolidated subsidiary Other non-current assets Investment in associate Current assets Inventories Trade and other receivables Assets classified as held for sale 8 36 Amounts owing by subsidiaries Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital and premium Other reserves Retained profit Total equity Non-current liabilities Deferred taxation liabilities Long-term borrowings Provisions Other non-current liabilities Current liabilities Short-term borrowings Taxation payable Trade and other payables Amounts owing to subsidiaries Provisions Total equity and liabilities

182 Pretoria Portland Cement Company Limited Annual Report 2008 page 179 Company income statements for the year ended 30 September 2008 Revenue Cost of sales Gross profit Non-operating income Administrative and other operating expenditure Operating profit Fair value gains on financial instruments Finance costs Investment income Profit before exceptional items Exceptional items (1) Profit before taxation Taxation Net profit Notes GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

183 page 180 Pretoria Portland Cement Company Limited Annual Report 2008 Company statements of changes in equity for the year ended 30 September 2008 Other reserves Share capital Share premium Availablefor-sale financial assets Hedging reserves Equity compensation reserves Retained profit Total Balance at 1 October Movement for the year Revaluation of investments (1) (1) Cash flow hedge recognised directly through equity Deferred taxation on hedging movements (14) (14) Equity-settled share incentive scheme charge 1 1 Divisionalisation of company Net profit Dividends declared (1 059) (1 059) Balance at 30 September Movement for the year Revaluation of investments (4) (4) Deferred taxation on revaluation 1 1 Cash flow hedge recognised directly through equity (14) (14) Cash flow hedge recognised in cost of plant (33) (33) Deferred taxation on hedging movements Equity-settled share incentive scheme charge 1 1 Equity-settled share incentive scheme payment (30) (30) Net profit Dividends declared (1 212) (1 212) Balance at 30 September (23) Movement for the year Revaluation of investments 9 9 Deferred taxation on revaluation (1) (1) Cash flow hedge recognised directly through equity Cash flow hedge recognised in cost of plant (4) (4) Amount recognised in profit or loss (2) (2) Deferred taxation on hedging movements (1) (1) Equity-settled share incentive scheme refund 2 2 Other reserve movements 26 (26) Deferred taxation on other reserve movements (1) (1) Net profit Dividends declared (1 408) (1 408) Balance at 30 September

184 Pretoria Portland Cement Company Limited Annual Report 2008 page 181 Company cash flow statements for the year ended 30 September 2008 CASH FLOWS FROM OPERATING ACTIVITIES Profit before exceptional items Adjustments for: depreciation amortisation of intangible assets loss/(profit) on disposal of plant and equipment and intangibles 1 (3) (3) dividends received (14) (20) (9) income from subsidiary companies (191) (153) (157) interest received (60) (64) (43) finance costs loss on derivative (cash-settled share-based payment hedge) 15 other non-cash flow items (4) 2 (11) Operating cash flows before movements in working capital Increase in inventories (9) (97) (21) Increase in trade and other receivables (48) (113) (69) Increase in trade and other payables and provisions Cash generated from operations Finance costs paid 22 (195) (89) (48) Dividends received from investments and associate Interest received Income from subsidiary companies Taxation paid 23 (706) (680) (570) Cash available from operations Dividends paid 24 (1 408) (1 207) (1 059) Equity-settled share incentive scheme refund/(payment) 2 (30) Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment 25 (758) (881) (366) replacement capital expenditure (241) (120) (80) expansion capital expenditure (517) (761) (286) Acquisition of intangible assets (4) (9) (3) Dividends received from non-consolidated subsidiary company 30 5 Net proceeds received on disposal of property, plant and equipment Movement in investments and loans 26 (60) 2 (8) Redemption of preference shares 30 (Increase)/decrease in net amounts owing by subsidiary and associate companies (798) Receipt of instalment on long-term loan Net cash outflow from investing activities (1 587) (778) (284) Net cash outflow before financing activities (1 431) (614) (9) CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings repaid (13) (13) (13) Net short-term borrowings raised Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (1 191) (146) 850 Cash and cash equivalents at beginning of the year Cash transferred on divisionalisation of company 27 6 Cash and cash equivalents at end of the year Notes GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

185 page 182 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements for the year ended 30 September 2008 Freehold and leasehold land, buildings and mineral rights Factory decommissioning and quarry rehabilitation assets Plant, vehicles, furniture and equipment Capitalised leased plant Total 1. PROPERTY, PLANT AND EQUIPMENT 2008 Cost Accumulated depreciation and impairments Net carrying value Cost Accumulated depreciation and impairments Net carrying value Cost Accumulated depreciation and impairments Net carrying value Movement of property, plant and equipment 2008 Net carrying value at beginning of the year Additions Depreciation (13) (143) (19) (175) Disposals (20) (20) Net carrying value at end of the year Net carrying value at beginning of the year Additions Depreciation (12) (127) (19) (158) Disposals (2) (2) Net carrying value at end of the year Net carrying value at beginning of the year Divisionalisation of company Additions Depreciation (12) (90) (26) (128) Disposals (1) (1) Net carrying value at end of the year Included in plant, vehicles, furniture and equipment is capital work-in-progress of R285 million (2007: R885 million; 2006: R155 million), which relates mainly to the various expansion projects currently in progress. Certain of the company s properties are the subject of land claims. The company is in the process of discussion with the Land Claims Commissioner and awaiting outcome of the claims referred to the Land Claims Court. The claims are not expected to have a material impact on the company s operations. Refer to the group results for additional disclosures on property, plant and equipment.

186 Pretoria Portland Cement Company Limited Annual Report 2008 page INTANGIBLE ASSETS ERP development and other software Cost Accumulated amortisation and impairments Net carrying value Movement of intangible assets Net carrying value at beginning of the year Additions Divisionalisation of company 2 Disposals (1) Amortisation (3) (2) (3) Net carrying value at end of the year INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY Carrying value at beginning of the year Less: Dividends received (30) (5) Carrying value at end of the year In terms of IFRS 7, the investment is classified as an available-for-sale financial asset. Due to the hyperinflationary losses incurred, dividends received have been set off against the carrying value of the investment. The board of directors has considered the carrying value of the investment in Porthold and determined that no impairment is necessary GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

187 page 184 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September OTHER NON-CURRENT ASSETS Investment in subsidiaries Unlisted investments Unlisted investments at fair value Contributions to The PPC Environmental Trust* Guaranteed loan in respect of railway line** 3 6 Long-term loan Derivative financial instrument (fair value hedge) Comprising: Other non-current assets Other non-current financial assets INTEREST IN SUBSIDIARIES (ANNEXURE 1) Shares at cost (including non-consolidated subsidiary) Less: Amounts written off and dividends received (180) (180) (150) Add: Amounts owing by subsidiaries# Less: Amounts owing to subsidiaries# (45) (64) (41) *Contributions to The PPC Environmental Trust These contributions are invested with independent financial institutions in interestbearing deposits and can be utilised on approval from the Department of Mineral and Energy Affairs for rehabilitation costs. **Guaranteed loan in respect of railway line Amortised over the period of the loan by way of reduced payment to Transnet Freight Rail for rail transport services, and bears interest at prime less 4%. The <R1 million balance will be fully repaid during the 2009 financial year. Long-term loan The long-term loan is repayable in annual capital instalments on 30 June each year, with the last payment on 30 April 2013, and bears interest at an effective rate of 11,8% per annum. Derivative financial instrument Fair value of the premium paid to hedge cash-settled share-based payments (refer notes 35 and 37 in the group results). #Amounts owing by and to subsidiaries The loans have no fixed terms of repayment and, where appropriate, interest is calculated using ruling interest rates. Refer Annexure 1 for amounts owing by and owing to subsidiaries at year-end.

188 Pretoria Portland Cement Company Limited Annual Report 2008 page INVESTMENT IN ASSOCIATE Investment at cost 7 7 Less: Transfer from/(to) assets classified as held for sale 7 (7) 7 7 Refer Annexure 1 6. INVENTORIES Raw materials Work-in-progress Finished goods Maintenance stores The value of inventories has been determined on the following cost formula bases: first-in, first-out 7 5 weighted average Amount of inventories recognised as an expense during the year Amount of write-down of inventory to net realisable value and losses of inventory 4 1 No inventories have been pledged as security. 7. TRADE AND OTHER RECEIVABLES Trade receivables Less: Impairment of trade receivables (4) (3) (5) Originated loans and receivables Derivative financial instruments (held-for-trading financial assets) 5 2 Derivative financial instruments (cash flow hedge) Other financial receivables Trade and other financial receivables Prepayments Other non-financial receivables No trade receivables have been pledged as security. Amounts due to the company should be settled within the normal credit terms of days. The gains on financial instruments relating to the cash flow hedge should materialise within the next financial year. These gains are to be included in the initial measurement of the acquisition of the hedged asset, where appropriate GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

189 page 186 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September TRADE AND OTHER RECEIVABLES (continued) Originated loans and receivables comprise: Trade receivables that are neither past due nor impaired* Trade receivables that are past due but not impaired Trade receivables that are past due but not impaired Age analysis 45,9 25,0 19, days 43,0 19,1 12, days 2,6 4,3 6, days 0,3 1,3 0, days 0,3 Fair value of collateral held** 15,7 4,6 7,2 * There is no history of default relating to trade receivables in this category. ** The majority of collateral held consists of bank guarantees, with the balance comprising suretyships, mortgage bonds, notarial bonds and cessions. Impairment of trade receivables Balance at beginning of the year Allowance raised through profit or loss 2 Allowance utilised (1) Allowance reversed through profit or loss (2) Balance at end of the year ASSETS CLASSIFIED AS HELD FOR SALE Investment in unlisted preference shares at amortised cost # 30 Investment in associate company^ 6 36 # Investment in unlisted preference shares These preference shares earned dividends at a rate of 70% of the current prime lending rate plus 3%, and were redeemed during ^Investment in associate company The investment relates to the company s 25% shareholding in Afripack (Pty) Limited, recorded at cost. The investment was categorised as held for sale during Following the repayment of the preference shares, the investment in Afripack (Pty) Limited has been accounted for as an investment in associate (refer note 5). 9. SHARE CAPITAL AND PREMIUM Authorised share capital ordinary shares of 10 cents each Issued share capital (2007: ; 2006: ) ordinary shares in issue at end of the year Share premium Share premium at end of the year Total issued share capital and premium Unissued shares Unissued share capital comprises (2007: ; 2006: ) shares of 10 cents each.

190 Pretoria Portland Cement Company Limited Annual Report 2008 page DEFERRED TAXATION Liability at beginning of the year Directly accounted for in equity 3 (14) 14 Divisionalisation of company 2 Movement per income statement* 140 (10) 11 Other movements (2) Impact of change in taxation rate (3) Liability at end of the year Deferred taxation liabilities Capital allowances Provisions (45) (30) (28) Non-current financial assets Prepayments and other receivables (5) 11 3 Other temporary differences 3 (13) * The movement relates primarily to the commissioning of the Dwaalboom (Batsweledi) expansion project that was commissioned during September LONG-TERM BORROWINGS Interest-bearing Less: Current portion repayable within one year (refer note 14) Secured debt Liability under capitalised finance lease Repayable during the year ending 30 September Total owing Assets encumbered are made up as follows: Property, plant and equipment GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

191 page 188 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September PROVISIONS Non-current Current Factory decommissioning and quarry rehabilitation Retirement and postretirement benefits Movement of provisions 2008 Balance at beginning of the year Amounts added Amounts utilised (5) (5) Amounts reversed (1) (1) Unwinding of discount 7 7 Balance at end of the year Incurred: within one year 1 1 between two to five years more than five years Balance at beginning of the year Amounts added Unwinding of discount 6 6 Balance at end of the year Incurred: within one year between two to five years more than five years Balance at beginning of the year Amounts added 3 3 Unwinding of discount 5 5 Amounts utilised (1) (1) Balance at end of the year Incurred: within one year between two to five years 1 1 more than five years Total

192 Pretoria Portland Cement Company Limited Annual Report 2008 page PROVISIONS (continued) Factory decommissioning and quarry rehabilitation The group is required to restore mine and processing sites at the end of their productive lives to an acceptable condition consistent with the group s environmental policies. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided at the beginning of each project. PPC has set up The PPC Environmental Trust to administer the funds required to fund the expected cost of decommissioning or restoration. Retirement and post-retirement benefits Included in provisions are the following liabilities: GROUP OVERVIEW Cement and Concrete Institute employees The provision relates to PPC s proportionate share of the post-retirement healthcare liability for employees of the Cement and Concrete Institute. This amounted to R6 million (2007: R4 million; 2006: R4 million). This liability was last actuarially valued during February 2006 and is due for valuation by February The liability has been determined using the projected unit credit method. Corner House Pension Fund and Lime Acres continuation members The provision relates to post-employment healthcare benefits in respect of certain Corner House Pension Fund and Lime Acres continuation members. This amounted to R10 million (2007: R11 million; 2006: R9 million). This liability was last actuarially valued during September The liability has been determined using the projected unit credit method. Benefits under these schemes were granted to employees under historical employment contracts and the schemes are closed to new members. 13. OTHER NON-CURRENT LIABILITIES Cash-settled share-based payment liability 6 2 For further details on the cash-settled share-based payment liability, refer note 35 in the group results. 14. SHORT-TERM BORROWINGS Short-term loans and bank overdraft Current portion of long-term borrowing (refer note 11) In terms of the broad-based black ownership initiative, the company will receive approximately R1,5 billion in long-term debt, which is intended as part repayment of the short-term borrowings. 15. TRADE AND OTHER PAYABLES Trade payables and accruals Other financial payables Derivative financial instruments (held-for-trading financial assets) 5 2 Trade and other financial payables Payroll accruals VAT payable Other non-financial payables Trade and other payables are payable within a day period FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

193 page 190 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September OPERATING PROFIT Operating profit includes: Administrative and management fees paid Amortisation of intangible assets (refer note 2) Auditors remuneration fees Consultation fees in respect of the broad-based black ownership initiative 20 Depreciation (refer note 1): cost of sales operating costs Distribution cost included in cost of sales Exploration and research costs 1 Fees paid to previous holding company Income from subsidiary companies: fees interest 1 1 dividends Operating lease charges: land and buildings plant, vehicles and equipment Loss/(profit) on disposal of plant and equipment and intangibles 1 (3) (3) Retirement benefit contributions Share-based payments: cash-settled share incentive scheme charge 4 2 equity-settled share incentive scheme charge Staff costs Less: Cost capitalised to plant and equipment (20) (11) (10) Technical fees 5 5 4

194 Pretoria Portland Cement Company Limited Annual Report 2008 page FAIR VALUE GAINS ON FINANCIAL INSTRUMENTS Gains/(losses) on derivatives designated as economic hedging instruments 18 4 (1) Loss on derivative (cash-settled share-based payment hedge) (15) (Losses)/gains on translation of foreign currency monetary items (1) FINANCE COSTS Bank and other borrowings Finance lease interest Subsidiary companies Unwinding of discount on decommissioning and rehabilitation provisions Capitalised to plant and equipment (44) (8) INVESTMENT INCOME Dividends unlisted investments associate company 6 13 Interest received on deposits and non-current financial assets EXCEPTIONAL ITEMS Profit on disposal of properties 2 3 Deregistration of dormant subsidiary companies (1) Gross exceptional items 2 3 (1) Taxation deferred Net exceptional items 2 3 (1) GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

195 page 192 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September TAXATION South African normal taxation current year prior year Foreign taxation current year Deferred taxation current year 140 (10) 7 rate change (3) 137 (10) 7 Secondary taxation on companies current year deferred Taxation attributable to the company % 2007 % 2006 % Reconciliation of rate of taxation Taxation as a percentage of profit before taxation (excluding prior year taxation) 32,2 33,7 34,3 Adjustment due to the inclusion of dividend income 2,3 2,0 2,3 34,5 35,7 36,6 Reduction in rate of taxation 0,3 0,9 0,3 permanent differences and exempt income 0,2 0,9 0,3 rate change adjustment 0,1 Increase in rate of taxation (6,8) (7,6) (7,9) disallowable charges (0,4) (0,4) (0,4) secondary taxation on companies (6,1) (6,9) (7,3) taxation on foreign dividend received (0,3) (0,3) (0,2) South African normal taxation rate 28,0 29,0 29,0

196 Pretoria Portland Cement Company Limited Annual Report 2008 page FINANCE COSTS PAID Finance costs as per income statement charge Interest capitalised to plant and equipment 44 8 Unwinding of discount on decommissioning and rehabilitation provisions (7) (6) (5) TAXATION PAID Net amounts outstanding at beginning of the year Charge per income statement (excluding deferred taxation) Adjustment in respect of divisionalisation of company 3 Net amounts outstanding at end of the year (54) (210) (191) DIVIDENDS PAID Dividends declared Relief on payment to foreign shareholders (5) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT Freehold and leasehold land, buildings and mineral rights Plant, vehicles, furniture and equipment Interest capitalised (44) (8) MOVEMENT IN INVESTMENTS AND LOANS Net movement (42) 20 (7) Revaluation of available-for-sale financial assets through reserves 9 (4) (1) Loss on derivative (cash-settled share-based payment hedge) (15) (48) 16 (8) Comprising: Movement in investments and loans (60) 2 (8) Receipt of instalment on long-term loan (48) 16 (8) GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

197 page 194 Pretoria Portland Cement Company Limited Annual Report 2008 Notes to the company annual financial statements continued for the year ended 30 September DIVISIONALISATION OF COMPANY Property, plant and equipment, intangible assets and non-current assets 125 Inventories 4 Trade and other receivables 10 Trade and other payables, taxation and deferred taxation (38) Borrowings net of cash (107) Net assets acquired (6) Cash transferred on divisionalisation CONTINGENT LIABILITIES Guarantees for loans, banking facilities and other obligations to third parties 8 7 Secondary taxation on companies is payable on dividends declared at a rate of 10% (2007: 10%; 2006: 12,5%). Litigation, current or pending, is not considered likely to have a material adverse effect on the company. A wholly owned subsidiary company, PPC Cement (Pty) Limited, is technically insolvent following mark-to-market revaluations on the PPC shares it purchased during the current financial year. The company has provided guarantees in the way of a subordination agreement relating to the loan that is receivable from PPC Cement (Pty) Limited. 29. RELATED PARTY TRANSACTIONS In addition to the related party transactions disclosed in the group results, the company had the following related party transactions: Goods sold to PPC Botswana (Pty) Limited Technical services provided to PPC Lime Limited Mooiplaas Dolomite (Pty) Limited 2 Interest received from PPC Lime Limited 1 Interest paid to Mooiplaas Dolomite (Pty) Limited PPC Lime Limited 2 4 Dividends received from PPC Botswana (Pty) Limited PPC Lime Limited Mooiplaas Dolomite (Pty) Limited PPC Cement (Pty) Limited 7 Trade amounts due from as at end of the year PPC Botswana (Pty) Limited For details on amounts due to and due from related parties, refer Annexure 1. The terms and conditions of these transactions are determined on an arm s length basis.

198 Pretoria Portland Cement Company Limited Annual Report 2008 page FINANCIAL RISK MANAGEMENT Fair values of financial assets and liabilities The carrying values of certain financial assets and liabilities, which are accounted for at historical cost, may differ from their fair values. The estimated fair values have been determined using available market information and approximate valuation methodologies. Disclosed below are the carrying and fair values of financial assets and liabilities which differ from the amounts reflected under group Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Financial assets Loans and receivables Long-term loan (refer note 4) Trade and other receivables (refer note 7) Amounts owing by subsidiaries (refer note 4) Financial liabilities Financial liabilities measured at amortised cost Amounts owing to subsidiaries (refer note 4) Trade and other payables (refer note 15) Credit risk management Maximum credit risk exposure ADDITIONAL DISCLOSURE Refer to the group results for additional disclosure on the following: Accounting policies Commitments Directors remuneration and interest Financial risk management Foreign exchange gains and losses Related party transactions Retirement benefit information Share-based payments GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

199 page 196 Pretoria Portland Cement Company Limited Annual Report 2008 Annexure 1 Interest in subsidiary companies and unlisted associates for the year ended 30 September 2008 SUBSIDIARY COMPANIES Name of company Issued share capital R 2008 % Percentage held 2007 % 2006 % Cape Portland Cement Co Limited Cooper & Cooper Holdings (Pty) Limited Mooiplaas Dolomite (Pty) Limited PPC Botswana (Pty) Limited* A** B** Portland Holdings Limited PPC Lime Limited Property Cats (Pty) Limited Kgale Quarries (Pty) Limited* ** PPC Cement (Pty) Limited Other minor subsidiary companies Less: Amounts written off and dividends received ASSOCIATES Name of entity Principal activity Issued share capital R 2008 % Percentage held 2007 % 2006 % Afripack (Pty) Limited Paper sack manufacturers Shaleje Services Trust Admin Services All subsidiary companies and associates are incorporated in the Republic of South Africa, except as indicated otherwise. A full list of subsidiary companies and unlisted associates is available for inspection at the registered office of the company. The financial year-ends of the associates are as follows: Afripack (Pty) Limited 30 September Shaleje Services Trust 31 May *Registered in Botswana **Botswana pula Registered in Zimbabwe Zimbabwe dollar

200 Pretoria Portland Cement Company Limited Annual Report 2008 page Shares Indebtedness due by/(due to) (5) (5) (5) (36) (55) (33) GROUP OVERVIEW (4) (4) (3) (57) (29) (58) (30) 2008 Shares Indebtedness due by/(due to) FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

201 page 198 Pretoria Portland Cement Company Limited Annual Report 2008 PPC in the stock market SHARE OWNERSHIP Category Number of shareholders Number of shares held % of issued capital , , , ,37 over , ,00 Distribution of shareholders Banks ,34 Broker ,47 Close corporations ,33 Endowment funds ,83 Individuals ,40 Insurance companies ,18 Investment companies ,93 Medical aid schemes ,12 Mutual funds ,73 Nominees and trusts ,01 Other corporations ,57 Own holdings ,75 Pension funds ,58 Private companies ,83 Public companies ,90 Script account , ,00 Public and non-public shareholding Number of shareholders Number of shares held % of issued capital Public ,08 Non-public Directors holdings ,17 Company owned holdings ,75 Total ,00 Beneficial holding The following parties hold beneficial interests of greater than 3% Public Investment Corporation ,34 Lazard Emerging Markets Portfolio ,98 PPC Cement (Pty) Limited ,75 Liberty group ,18 CURRENCY CONVERSION GUIDE Approximate value of foreign currencies relative to the rand at 30 September Botswana pula 0,84 0,87 0,83 US dollar 0,12 0,15 0,13 Euro 0,09 0,10 0,10 Danish krone 0,64 0,77 0,76

202 Pretoria Portland Cement Company Limited Annual Report 2008 page 199 Administration PRETORIA PORTLAND CEMENT COMPANY LIMITED (Incorporated in the Republic of South Africa) Company registration number: 1892/000667/06 JSE code: PPC Auditors Deloitte & Touche Deloitte Place The Woodlands Woodlands Drive Woodmead, Sandton Private Bag X6 Gallo Manor, 2052, South Africa Telephone Telefax Secretary and registered office JHDLR Snyman 180 Katherine Street, Sandton PO Box Sandton, 2146, South Africa Telephone Telefax Sponsor Merrill Lynch 138 West Street Sandown, Sandton PO Box Benmore, 2010, South Africa Telephone Telefax Financial calendar ISIN code: ZAE * Transfer secretaries Link Market Services South Africa (Proprietary) Limited 11 Diagonal Street Johannesburg, South Africa PO Box 4844 Johannesburg, 2000, South Africa Telephone Telefax Transfer secretaries: Zimbabwe Corpserve (Private) Limited 4th Floor, Intermarket Centre Corner First Street, Kwame Nkrumah Avenue Harare, Zimbabwe PO Box 2208 Harare, Zimbabwe Telephone / Telefax Sponsor: Zimbabwe Imara Edwards Securities (Private) Limited Block 2, Tendeseka Office Park Samora Machel Avenue Harare, Zimbabwe PO Box 1475 Harare, Zimbabwe Telephone Telefax Financial year-end 30 September Annual general meeting 26 January 2009 Reports Interim results for half-year to March Published May Preliminary announcement of annual results Published November Annual financial statements Published December Dividends Interim Declared May Paid June Final Declared November Paid January GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW *New ISIN number implemented with effect from 8 December 2008

203 page 200 Pretoria Portland Cement Company Limited Annual Report 2008 Notice of annual general meeting for the year ended 30 September 2008 PRETORIA PORTLAND CEMENT COMPANY LIMITED Incorporated in the Republic of South Africa (Registration No.: 1892/000667/06) ( PPC ) or ( the company ) JSE share code: PPC ZSE share code: PPC ISIN code: ZAE NOTICE IS HEREBY GIVEN THAT the one hundred and thirteenth annual general meeting of Pretoria Portland Cement Company Limited will be held in the auditorium of Deloitte & Touche, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, Sandton, on Monday, 26 January 2009 at 12:00 for the purpose of conducting the following business: 1. To receive, consider and adopt the annual financial statements for the year ended 30 September 2008, including the directors report and the report of the auditors. 2. To confirm the appointment of the following two directors who were appointed between the two annual general meetings: Messrs TDA Ross and BL Sibiya. Brief curriculum vitae of the directors standing for election appear on pages 26 and 27 of this report. 2.1 Resolved that the appointment of TDA Ross as a director of the company on 17 July 2008 is hereby confirmed. 2.2 Resolved that the appointment of BL Sibiya as a director of the company on 10 November 2008 is hereby confirmed. 3. To consider the re-election of Messrs RH Dent, P Esterhuysen and AJ Lamprecht who are required to retire by rotation and having offered themselves for re-election, are hereby recommended for re-election by the nominations committee. Brief curriculum vitae of the directors standing for re-election appear on pages 26 and 27 of this report. 3.1 Resolved that RH Dent who is required to retire as a director of the company at this annual general meeting is hereby reappointed as a director of the company with immediate effect. 3.2 Resolved that P Esterhuysen who is required to retire as a director of the company at this annual general meeting is hereby reappointed as a director of the company with immediate effect. 3.3 Resolved that AJ Lamprecht who is required to retire as a director of the company at this annual general meeting is hereby reappointed as a director of the company with immediate effect. 4. To consider and, if deemed fit, to pass with or without modification, the following ordinary resolution: Resolved that with effect from 1 October 2008 and in terms of article 61 of the company s articles of association, the fees payable to the non-executive directors be set as follows: The chairman, an all inclusive fee of R per annum; A board member, R per annum; The audit committee chairman, R per annum; An audit committee member, R per annum; The remuneration committee chairman, R per annum; A remuneration committee member, R per annum; The risk and compliance committee chairman, R per annum; A risk and compliance committee member, R per annum; Other committee chairman, R per annum; and Other committee member, R per annum. 5. To consider and, if deemed fit, to pass, with or without modification, the following resolution as a special resolution in order to provide the directors with flexibility to repurchase securities in terms of section 85 of the Companies Act as and when suitable situations arise: Resolved that the company or any subsidiary of the company may, subject to the Companies Act, the company s articles of association and the listings requirements of the JSE from time to time (listings requirements) and any other stock exchange upon which the securities in the capital of the company may be quoted or listed from time to time, repurchase securities issued by the company, provided that this authority shall be valid only until the next annual general meeting of the company or for 15 (fifteen) months from the date of the resolution, whichever is the shorter, and may be varied by a special resolution by any general meeting of the company at any time prior to the next annual general meeting.

204 Pretoria Portland Cement Company Limited Annual Report 2008 page 201 It is recorded that the company or any subsidiary of the company may only make a general repurchase of the company s securities if: the repurchase of securities is effected through the order book operated by the JSE trading system and is done without any prior understanding or arrangement between the company or the relevant subsidiary and the counterparty; the company is authorised thereto by its articles of association; the company is authorised thereto by its shareholders in terms of a special resolution of the company in general meeting, which authorisation shall be valid only until the next annual general meeting or for 15 (fifteen) months from the date of the resolution, whichever period is the shorter; repurchases are made at a price not greater than 10% (ten per cent) above the weighted average of the market value for the securities for the 5 (five) business days immediately preceding the date on which the repurchase is effected; at any point in time, the company or the relevant subsidiary may only appoint one agent to effect any repurchases on the company s behalf; the company or the relevant subsidiary only undertake repurchases if, after such repurchase, the company still complies with shareholderspread requirements in terms of the listings requirements; the company or the relevant subsidiary does not repurchase securities during a prohibited period defined in terms of the listings requirements, unless it has a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement on Sens prior to the commencement of the prohibited period; a paid press announcement containing full details of such repurchases is published as soon as the company has repurchased securities constituting, on a cumulative basis, 3% (three per cent) of the number of securities in issue prior to the repurchases and for each 3% (three per cent), on a cumulative basis, thereafter; and the general repurchase is limited to a maximum of 10% (ten per cent) of the company s issued share capital of that class in any one financial year. Any acquisition shall be subject to: the company s Articles of Association the Companies Act, as amended; the listings requirements and any other applicable stock exchange rules, as may be amended from time to time; and the sanction of any other relevant authority whose approval is required by law. The directors of the company undertake that, after having considered the effect of the repurchases, they will not undertake such repurchases unless: the company and the group would be able to repay their debts in the ordinary course of business for the period of 12 (twelve) months after the date of the notice of the annual general meeting; the assets of the company and the group, fairly valued in accordance with International Financial Reporting Standards and the company s accounting policies used in the latest audited group financial statements, will be in excess of the liabilities of the company and the group for the period of 12 (twelve) months after the date of the notice of the annual general meeting; the company and the group will have adequate capital and reserves for ordinary business purposes for the period of 12 (twelve) months after the date of the notice of the annual general meeting; and the working capital of the company and the group will be adequate for ordinary business purposes for the period of 12 (twelve) months after the date of the notice of the annual general meeting. In terms of the listings requirements, the maximum number of shares that can be repurchased amounts to 10% (ten per cent) of the ordinary shares in issue. The reason for passing of the special resolution is to enable the company or any of its subsidiaries, by way of a general authority from shareholders, to repurchase securities issued by the company. The effect of the special resolution, once registered, will be to permit the company or any of its subsidiaries to repurchase such securities in terms of the Companies Act. This authority will only be used if circumstances are appropriate. For the purposes of considering the special resolution and in compliance with paragraph of the listings requirements, certain information is either listed below or has been included elsewhere in this report, in which this notice of annual general meeting is included: Directors and management refer to pages 26 and 27 of this report. Major shareholders refer to page 198 of this report. No material changes in the financial or trading position of the company and its subsidiaries have occurred since 11 November GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW

205 page 202 Pretoria Portland Cement Company Limited Annual Report 2008 Notice of annual general meeting continued for the year ended 30 September 2008 Directors interests in securities refer to page 171 of this report. Share capital of the company refer to page 150 of this report. The directors, whose names are set out on pages 26 and 27 of this report, collectively and individually accept full responsibility for the accuracy of the information contained in this notice and accompanying documents and certify that, to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement false or misleading and that they have made all reasonable enquiries in this regard, and further that this notice contains all information required by law and the listings requirements. There are no legal or arbitration proceedings (including any such proceedings that are pending or threatened of which the company is aware), which may have or have had a material effect on the company s financial position over the past 12 (twelve) months. 6. To confirm the re-appointment of Messrs Deloitte & Touche as external auditors of the company as recommended by the audit committee to hold office from the conclusion of the one hundred and thirteenth annual general meeting until the conclusion of the next annual general meeting of the company. Mr Michael John Jarvis (IRBA no ) from the mentioned firm of auditors will undertake the audit. 7. To authorise the directors to fix the remuneration of the external auditors, Messrs Deloitte & Touche, for the past year s audit. 8. To transact such other business as may be transacted at an annual general meeting. Proxy and voting procedure Members who have not dematerialised their shares or who have dematerialised their shares with own name registration are entitled to attend or vote at the annual general meeting and are entitled to appoint a proxy to attend, speak and vote in their stead. The person so appointed need not be a member of the company. If certificated members or dematerialised members with own name registration are unable to attend the annual general meeting, but wish to be represented thereat, they must complete the proxy form on page 203 of this report. In order to be effective, proxy forms should be delivered to the transfer secretaries, Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) and for Zimbabwean PPC shareholders, Corpserve (Private) Limited, 2nd floor, ZB Centre, corner First Street and Kwame Nkrumah Avenue, Harare, Zimbabwe (PO Box 2208, Harare, Zimbabwe), so as to reach these addresses no later than 12:00 on Thursday, 22 January Members who have dematerialised their shares, other than those members who have dematerialised their shares with own name registration, should contact their participant (previously central securities depository participant) or stockbroker: to furnish their participant or stockbroker with their voting instruction; or in the event that they wish to attend the meeting, to obtain the necessary authority to do so. Any shareholder having difficulties or queries with regard to the above may contact the company secretary on By order of the board JHDLR Snyman Company secretary 10 November 2008 Sandton

206 Pretoria Portland Cement Company Limited Annual Report 2008 page 203 Form of proxy PRETORIA PORTLAND CEMENT COMPANY LIMITED (Incorporated in the Republic of South Africa) Company registration number: 1892/000667/06 ( PPC ) or ( the company ) JSE code: PPC ZSE share code: PPC ISIN code: ZAE Only for the use of registered holders of certificated ordinary shares in the company and the holders of dematerialised ordinary shares in the capital of the company in own name form, at the annual general meeting to be held at 12:00 on Monday, 26 January 2009, in the auditorium of Deloitte & Touche, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, Sandton. Holders of ordinary shares in the company (whether certificated or dematerialised) through a nominee must not complete this form of proxy but should timeously inform that nominee, or, if applicable, their Central Securities Depository Participant (CSDP) or stockbroker of their intention to attend the annual general meeting and request such nominee, CSDP or stockbroker to issue them with the necessary letter of representation to attend or provide such nominee, CSDP or stockbroker with their voting instructions should they not wish to attend the annual general meeting in person but wish to be represented at the meeting. Such ordinary shareholders must not return this form of proxy to the transfer secretaries. I/We (name and address in block letters) being a member/s of the above company and holding of ordinary shares therein, hereby appoint of or, failing him, the chairman of the meeting as my/our proxy to attend, speak and vote for me/us and on my/our behalf or to abstain from voting at the annual general meeting of the company to be held in the auditorium of Deloitte & Touche, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, Sandton, on Monday, 26 January 2009, and at any adjournment of that meeting as follows: 1. Adoption of annual financial statements 2. To confirm the appointment of the following two directors 2.1 TDA Ross 2.2 BL Sibiya 3. To consider the re-election of the following three directors 3.1 RH Dent 3.2 P Esterhuysen 3.3 AJ Lamprecht 4. Remuneration of non-executive directors/committee members and chairman 5. Acquisition of own shares* 6. Re-appoint Messrs Deloitte & Touche as external auditors of the company 7. Authorise directors to fix remuneration of external auditors * Special resolution In favour of Against Abstain Insert an X in the relevant spaces above according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of ordinary shares than you own in the company, insert the number of ordinary shares held in respect of which you desire to vote (see note 2). Signed at on 200 Signature/s Assisted by (where applicable) Each member is entitled to appoint a proxy (who need not be a member of the company) to attend, speak and vote in place of that member at the annual general meeting. GROUP OVERVIEW FINANCIAL REVIEW SUSTAINABILITY REVIEW MANAGEMENT REVIEW Please read the notes on the reverse side of this form of proxy

207 page 204 Pretoria Portland Cement Company Limited Annual Report 2008 Explanatory notes regarding proxies 1. A shareholder may insert the name of a proxy of the shareholder s choice in the space provided, with or without deleting the chairman of the meeting, but any such deletion must be initialled by the shareholder. The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. 2. Please insert an X in the relevant space according to how you wish your votes to be cast. However, if you wish to cast your votes in respect of a lesser number of shares than you own in the company, insert the number of shares held in respect of which you wish to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of the entire shareholder s votes exercisable at the annual general meeting. A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder or by his/her proxy, but the total of the votes cast in respect of which abstention is recorded may not exceed the total number of the votes exercisable by the shareholder or by his/her proxy. 3. In order to be effective, proxy forms should be delivered to the transfer secretaries, Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) and for Zimbabwean PPC shareholders, Corpserve (Private) Limited, 2nd floor, ZB Centre, corner First Street and Kwame Nkrumah Avenue, Harare, Zimbabwe (PO Box 2208, Harare, Zimbabwe), so as to reach these addresses no later than 12:00 on Thursday, 22 January Where there are joint holders of any shares, only that holder whose name appears first in the register in respect of such shares need sign this form of proxy. 5. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person at the annual general meeting to the exclusion of any proxy appointed in terms of this proxy form. 6. Any alteration to this form of proxy must be signed in full and not initialled. 7. If this form of proxy is signed under a power of attorney, then such power of attorney or a notarially certified copy thereof must be sent with this form of proxy for noting (unless it has already been noted by the transfer secretaries). 8. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries. 9. The chairman of the annual general meeting may accept any form of proxy which is completed other than in accordance with these notes if he is satisfied as to the manner in which the shareholder wishes to vote.

208 BASTION GRAPHICS

209 CONTACT US Head Office and Cement Division PPC Building 180 Katherine Street Barlow Park ext. Sandton PO Box Sandton 2146 South Africa Telephone: (0) Fax: (0) Website: and