SAFCOL Group Annual Report – 31 March 2006
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Transcript of SAFCOL Group Annual Report – 31 March 2006
SAFCOL GroupSAFCOL GroupAnnual Report – 31 March 2006Annual Report – 31 March 2006
Portfolio Committee - 20 September 2006 Portfolio Committee - 20 September 2006
1.1. Overview of activitiesOverview of activities
2.2. Privatisation Status Privatisation Status
3.3. The Future The Future
Kobus BreedKobus BreedAzwindini MutshinyaAzwindini Mutshinya
Linda Mossop-RousseauLinda Mossop-RousseauJoe Coetzer Joe Coetzer
Leslie Mudimeli Leslie Mudimeli SAFCOL
SAFCOL Group SAFCOL Group 31 March 2006 31 March 2006
9 Months financial year Privatisation process terminated Acceptable financial results Sound Corporate Governance Future of Komatiland / SAFCOL Ifloma opportunity
SAFCOL
IntroductionIntroduction
SAFCOL Group SAFCOL Group 31 March 2006 31 March 2006
Board of Directors - Members - Remuneration
Board Committees - Risk and Audit - Remuneration Committee
Audit Reports Management Teams Code of EthicsShareholders Compact
Corporate GovernanceCorporate Governance
SAFCOL
• The SAFCOL group has a Code of Ethics that form part of its conditions of employment.
• As of 23 June 2006 SAFCOL is an organisational member of the Ethics Institute of South Africa. The membership is renewable annually and as a member, SAFCOL receives frequent newsletters about topics pertinent to ethics in the organisation.
• SAFCOL is in the process of updating its Code of Ethics, a process that has been undertaken in an effort to align our policies with local and international best practices.
Code of Ethics Code of Ethics
Overview of Operations Overview of Operations
Komatiland Forests (Pty) LtdKomatiland Forests (Pty) Ltd
Continue to focus on maintaining the asset in Continue to focus on maintaining the asset in the condition as presented for sale. the condition as presented for sale. Exceptions were :-Exceptions were :--- Closure of Blyde Sawmill Closure of Blyde Sawmill -- Mothball of Veneer Plant Mothball of Veneer Plant
Replanting of fire damaged areas Replanting of fire damaged areas IflomaIfloma - Rehabilitation of exiting - Rehabilitation of exiting
plantationplantation- Study to determine feasibility of - Study to determine feasibility of wood fibre projectwood fibre project
Overview of Operations Overview of Operations
SAFCOLSAFCOL
Management of areas under delegation Management of areas under delegation St Lucia St Lucia Shannon Plantations Shannon Plantations Second Economy Focus Second Economy Focus Investigating establishment of a Research Investigating establishment of a Research
Centre and Seed Orchard at NyalaziCentre and Seed Orchard at Nyalazi 25% Interest in privatised entities 25% Interest in privatised entities
SAFCOL
Privatisation Status Privatisation Status 25% Shareholdings :-25% Shareholdings :-
-- SiyaQhubeka Forestry (Pty) Ltd SiyaQhubeka Forestry (Pty) Ltd -- Singisi Forests (Pty) LtdSingisi Forests (Pty) Ltd-- MTO Forestry (Pty) Ltd MTO Forestry (Pty) Ltd -- Amathole Forestry Company (PtyAmathole Forestry Company (Pty) Ltd) Ltd
All four companies have five years to All four companies have five years to achieve the undertakings made in the BPUachieve the undertakings made in the BPU
9% to be utilised in the creation of ESOP’s 9% to be utilised in the creation of ESOP’s 10% to NEF 10% to NEF 6% presently retained by SAFCOL, minority 6% presently retained by SAFCOL, minority
share to be disposed of as non-core assets share to be disposed of as non-core assets
Lessons learnt from Lessons learnt from privatisationprivatisation
• Tradability of shares needs to be considered:- • ESOP’s in a non-listed company are difficult to achieve• It is essential to match Black Empowerment partners
with local communities (NEF)• Business Plan Undertakings (BPU’s) need to be tightly
drawn up, with severe penalties if the provisions thereof are not achieved
• There needs to be clearer verification of representations to ensure that fronting does not occur
• Monitoring of all agreements should reside with the entity from which the disposal took place
• The appropriate roles and responsibilities for the different entities should be identified – Process preferably to be driven by SOE with clear guidelines from Government
SAFCOL Quo VadisSAFCOL Quo Vadis
o Uncertainty of privatisation Uncertainty of privatisation o Limited growth – constraining transformation Limited growth – constraining transformation
initiatives initiatives -- Strategic Process Strategic Process -- Internal Internal -- Close cooperation with DPE Close cooperation with DPE
o SAFCOL Board and management are SAFCOL Board and management are committed to give our Shareholder full committed to give our Shareholder full information in establishing the strategy information in establishing the strategy going forwardgoing forward
SAFCOL
The SAFCOL Group is committed to support The SAFCOL Group is committed to support the policies and initiatives of Government in the policies and initiatives of Government in all respects. Due to the focus on all respects. Due to the focus on privatisation expansions, affirmative action privatisation expansions, affirmative action and rural development (CSI) was limited. and rural development (CSI) was limited. Black economic empowerment and the Black economic empowerment and the development of second economy were key development of second economy were key focuses. focuses.
TransformationTransformation
• The disposal of SAFCOL’s subsidiaries and other businesses to third parties consisting of a share of BEE interests in line with Government policy.
• BEE is one of the criteria taken into account in the procurement policy of SAFCOL for services and products, and the sale of raw timber to processors.
• Funding earmarked for corporate social investment is spent on rural development and the upliftment of individuals and communities.
• The involvement of SAFCOL in the development of the BBBEE Forestry Charter.
• The increased impetus to implement employee share option plans in disposed subsidiaries.
Transformation Transformation (cont.)(cont.)
InitiativesInitiatives
Transformation Transformation (cont.)(cont.)
Disabled *
T A T A T A T AMale 6 9 5 2 11 11 0Female 2 1 2 0 4 1 0Male 6 7 5 2 11 9 0
Female 2 1 3 0 5 1 0Male 30 39 18 9 48 48 0
Female 6 4 6 1 12 5 0Male 32 34 36 31 68 65 0
Female 12 11 6 2 18 13 0Male 3 1 35 33 38 34 5 *
Female 32 32 16 14 48 46 0Male 10 3 1700 1334 1710 1337 0
Female 0 0 500 236 500 236 0TOTAL 141 142 2332 1664 2473 1806 2473 1806 5 *
* Already included in total
86
86
2210
16
15
60
12
10
53
PERMANENT EMPLOYEES AS AT 31 JULY 2006
Sub-totalTotal
T = TargetA = Actual
Production Workers
80
1573
Senior Management (Upper D)
Middle Management (Lower D)
Techinical and Administrative Officers (C-Band)
Administrative (B-Band)
78
HDI Subtotal
Group
Note: Target indicate levels that should have been reached at this stage to be able to comply with numerical goals by 2008
Top Management (F & E-Band)
WhiteLevelsMale / Female
Transformation Transformation (cont.)(cont.)
An in-house training centre provide skills training to own employees as well as externally. The training is to the benefit of historical disadvantaged individuals and contractors. Annual training includes in excess of 4 600 people involving more than 12 000 man days.
Auditing, mentoring and assistance are provided for emerging contractors (SMME’s).
Bursaries are granted to employees, dependants and historically disadvantaged individuals to obtain academical qualifications. Current budget amounts to R1,3 million. A total of 35 current bursaries are being sponsored of which 24 are for historically disadvantaged individuals and females.
Capacity BuildingCapacity Building
Bridging classes and experiential training provided for candidates in respect of a variety of disciplines (scarce skills) e.g. :-
Forestry 21 Candidates Artisans 8 Candidates Administrative 9 Candidates Marketing 3 Candidates Wood Technology 2 Candidates
ABET classes in progress at is centres to improve literacy levels. Current attendance is 376 learners. IEB exams (2005/6) Level 4 180 passed
Level 1 – 3 205 passed
Capacity BuildingCapacity Building
Preferential ProcurementPreferential ProcurementThe percentage spent on procurement of forestry and related service contracts in respect of BEE and SMME’s are as follows :-
Table 1 : Black Owned contracts with Equity ownership in excess of 50% Percentage Rand value
Target Actual
Capital intensive Contracts 40% 32%
Labour intensive Contracts 80% 48%
Table 2: Contracts with Equity ownership of between 20% and 50%
Percentage Rand value
Target Actual
Capital intensive Contracts 40% 45%
Labour intensive Contracts 80% 95%
In addition to the above the Group’s main providers of goods and services are Eskom, Telkom and the major fuel companies. They all are BEE Compliant.
Performance Overview Performance Overview SAFCOL
Profitability♦ 13.8% WACC ♦ 15.4% ROCE
Sustainability♦ Yield of 1.7 million m³ ♦ Sales of 1.6 million m³
Internationalisation ♦ Mozambique
investment
■ Privatisation ■ KLF retained, new
mandate being
developed
■ Sawmilling ■ Planned investment:◘ TSM: R60 million earmarked
for upgrades◘ BSM: ±R200 million
earmarked for relocation and re-build
technology
Performance Overview Performance Overview (cont.)(cont.)
Forestry research 1.4% of Timber Sales invested in long-term fundamental research: Improvement of
genetic material Growth & yield studies
Seed orchard in St Lucia area
Performance Overview Performance Overview (cont.)(cont.)
Performance Overview Performance Overview (cont.)(cont.)
Human Resources and Transformation
Corporate Social Investment
Employment equity Liaison forums and
joint committees Organised labour Bursaries In-house training
centre
Commitment Involvement
Education in neighbouring communitiesEducation in neighbouring communities• Assistance to primary and secondary school Assistance to primary and secondary school
learnerslearners• Adult Basic EducationAdult Basic Education
Small business entrepreneurs and projectsSmall business entrepreneurs and projects
Recreational facilitiesRecreational facilities
Prevention of the abuse of women and children Prevention of the abuse of women and children
Commitment
Corporate Social InvestmentCorporate Social Investment
Since inception: R17.5 million
R905 000 in the period under review:60.5% on Infrastructure and land (schools)24.0% on Healthcare7.3% on Education3.3 % on Donations3.2% on Environmental conservation1.7% on Recreation and sport
Involvement (excluding bursaries)
Corporate Social InvestmentCorporate Social Investment
Limpopo, KZN and Limpopo, KZN and MpumalangaMpumalanga
Job creationJob creation Preferential Preferential
procurementprocurement R10 million plus R10 million plus
R1 millionR1 million Development Development
agenciesagencies
ProjectsProjects:: Broomstick and Broomstick and
dowelsdowels By-productsBy-products EcotourismEcotourism Wood preservationWood preservation Lamination plantLamination plant Compost Compost
manufacturing manufacturing
Second Economy ProjectsSecond Economy Projects
NOSA ratings for all operationsNOSA ratings for all operations DIFR less than 2%DIFR less than 2% Training:Training:
599 trainees or 33,2% of labour force599 trainees or 33,2% of labour force 1874 mandays1874 mandays
HIV/AIDSHIV/AIDS Medical surveillanceMedical surveillance
Health and SafetyHealth and Safety
Restated
YEARS ENDED2006 2005 2004 2003 2002
R'000 R'000 R'000 R'000 R'000
Turnover 359,926 640,696 681,958 677,257 692,408
Operating profit before the effect of fair value adjustments to plantations 22,938 (16,720) (10,051) 83,790 44,428
Profit before interest and taxation - PBIT 193,910 312,116 64,787 97,542 44,428
Profit before taxation – PBT 240,935 344,001 79,569 125,680 62,112
Net profit 168,743 232,763 42,944 93,791 32,946
Basic earnings per share (cents) 53.1 73.2 13.5 29.5 10.4
Capital expenditure 11,295 28,234 32,891 25,009 31,562
Financial HighlightsFinancial Highlights
Technology upgrade in TSM
Replacement of BSM Fleet Renewal
2nd Economy
IFLOMA Woodfibre Project
R60m over 3 years
R200 million
R75 million over 3 years
R10 million Capex plus R1 million Opex
R10 million p.a. USD75 million
Proposed InvestmentProposed Investment
Strong balance sheet and adequate cash reserves
No recapitalisation, guarantees, subsidies or transfer payments required
Policy guidance awaited in the following areas: New mandate for the Group Cross-border initiatives
Government SupportGovernment Support
Our base: World-class asset Competent staff Excellent research capabilityOur focus: Strategy review Transformation and HR practices 2nd Economy projects and ASGISA Operational upgrades Cross-border investments
The FutureThe Future
Thank you Thank you