SOUTH AFRICAN FORESTRY COMPANY LIMITED
VISION, MISSION AND CORE VALUES
Vision
A world class, global business engaged in multi-functional
forestry, revolutionising the integration of forests and
communities.
Our mission is driven by an unwavering commitment to facilitate sustainable
economic empowerment of communities and eradication of poverty through:
•
Implementing needs-driven interventions
•
Becoming a partner of choice for land claimants
Mission
We are dedicated to growing our business in the forestry value
chain and maximising stakeholder value, through:
•
Ensuring technical and business excellence by attracting and retaining the best people
•
Enhancing the asset value by continuously pursuing innovative solutions
•
Embracing and leading an all inclusive equitable transformation of the South African forestry sector
•
Commitment to meaningful partnerships with stakeholders
•
Practising transparent and fair marketing
•
Develop the downstream value chain
•
Environmentally responsible
Therefore providing a green heritage, growth and socio-economic justice
•
Core
Values
Passionate about our forests, communities,
customers and people
•
A social and environmental conscience
•
Trust founded on integrity and loyalty
•
Equality, fairness and empowerment
•
Respect for diversity
•
Focus on innovation and excellence
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2
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CONTENTS
6
8
12
36
40
44
46
48
Group Structure
Chairperson’s Statement
Chief Executive Officer’s Report
Board of Directors
Executive Committee
Group Financial Review
Group Value Added Statement
Financial Highlights
ANNUAL FINANCIAL STATEMENTS
50
Responsibility of Directors
52
Report of the Combined Audit and Risk
Management Committee
54
56
60
80
82
84
86
88
Company Secretary’s Certificate
Independent Auditor’s Report
Report of the Directors
Group Income Statement
Group Balance Sheet
Group Statement of Changes in Equity
Group Cash Flow Statement
Notes to the Annual Financial Statements
3
GROUP STRUCTURE
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP STRUCTURE
Kumhlabane
Timber
(Pty)Ltd
OPERATING
SUBSIDIARIES
6
DORMANT
SUBSIDIARIES
SPECIAL
PROJECTS
ASSOCIATES
CHAIRPERSON’S
STATEMENT
7
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHAIRPERSON’S STATEMENT
Our business, like many businesses in South Africa, has not been insulated from the global economic
meltdown. We have lived through a very challenging year. There have been real challenges in our
sector. These include the increase in land claims, limited timber stock availability, and the reduction
of land available for forestry, as other sectors increase their claim on other land uses. These changes
have brought with them tough trading conditions which for some of our peers, has meant closure and
major reduction in staff numbers. The historic and devastating forest fires of 2007 and more recently
Chairperson:
2008, have also had a negative impact on our bottom-line, despite Management’s best efforts to limit
Gugu Moloi
these risks.
However, against the backdrop of these challenges, we are pleased that our commitment to work closer with our people, though
slow, is bearing fruit. We have signed social compacts with some of our community clusters, building the impetus for more
vigorous community liaison and empowerment initiatives in the next financial year. We are also invigorated by the passion and
renewed enthusiasm in government, who see that forestry as a sector can have a profound impact in terms of the country’s rural
development strategy. As we anticipated this, we put on the table certain initiatives that will ensure that our business is positioned
perfectly to support the vision of empowering rural communities through forestry. To this end, during the year under review, the
activities within the Group were dominated by issues related to the re-design of its future and transformation imperative. Although
we have a long way to go in terms of fundamentally transforming SAFCOL to be more responsive to the rural development
challenges at hand, and to work closer with our communities in terms of developing better models for real empowerment, we are
certain that the restructuring process that we began during the year and objectives as set out in our Corporate and Business Plan
will bear fruit in coming years.
Operationally, much effort went into replanting burnt areas after devastating forest fires occupied activities. Our dedicated staff
worked weekends and late hours with some of our suppliers and subcontractors in the salvage operations. A lot of money was
saved in the process.
This year we had to shift gear a few times which, at some level, had a negative impact on the direction of the organisation. But
once a clear message was provided that privatisation was on hold until land claims could be finalised or consensus reached about
their management, Management put their shoulder to the wheel and worked hard to meet Shareholder expectations.
We believe that SAFCOL has a major role to play in terms of the successful resolution of land claims over forestry land. Government
and the SAFCOL Board of Directors (“the Board”) needed to reconsider the conditions of the long-term lease for state land
under plantation forests, and the format of guarantees to be provided to potential buyers. Approximately 61% of the land under
Komatiland Forests management is under claim. It remains critical that we work together with relevant departments in fast-tracking
the resolution of these claims. I am pleased to report that an inter-ministerial committee has been established in order to give
priority to claims for land under SAFCOL.
In May 2008, the then Minister of the Department of Public Enterprises (“DPE”), Minister Alec Erwin, requested the Board and
Management to chart the way forward through the development of a five-year Corporate and Business Plan. This presented us
with an opportunity to revisit SAFCOL’s medium to long-term strategy, and its mission and vision.
The new strategic direction will be focused on ensuring that a significant role is played in the development, integration and
upliftment of local communities where our operations are based. The following are SAFCOL’s main strategic goals in terms of the
new direction as captured in the Corporate and Business Plan, in no particular order:
1.
Position SAFCOL’s operations as an attractive business partner for successful land claimants, investors, and Broad
Based Black Economic Empowerment (“B-BBEE”) business partners. This goal includes the desire to increase
equitable ownership in the forestry sector.
2.
Create economically vibrant forest communities where people desire to live and return to.
8
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHAIRPERSON’S STATEMENT
3.
Fully embrace in all aspects, and rise above, the sector’s transformation charter.
4.
Build, attract and retain skills.
5.
Increase financial value to current and future shareholders.
6.
Practice world-class sustainable forest management.
7.
Increase forestry area under management in South Africa and internationally by partnering with successful land
claimants, landowners, other forestry companies and government departments with forest holdings.
8.
Increase value added services to customers and B-BBEE participation in the industry practices and revolutionising forest
community integration.
9.
Develop solid company brands (SAFCOL, Komatiland Forests and IFLOMA) that are known in local and international
stakeholder circles for leading sustainable multi- functional forestry
10.
Development of and investment in the down-stream processing industry.
Significant milestones have been reached regarding the above goals in the current year, although more still needs to be done to
ensure that these goals are achieved.
The Board and Management continue to build relationships with all our stakeholders, especially the communities adjacent to
our operations. In the year under review, SAFCOL adopted an approach of establishing relationships with these communities
by implementing institutional frameworks that will govern the relationship in the form of social compacts. We also aim to grow
mutual-beneficial partnerships with the communities through formal communication. The focus is on driving real B-BBEE. While
we support the Company’s drive to build other non-core businesses which will lead to sustainable socio-economic developments
and poverty alleviation, as a Board, we are adamant that the Group’s transformation objectives should not be compromised. We
are of the view that even the operations should be subject to stringent B-BBEE targets which we agreed to in terms of the five-year
Corporate and Business Plan.
The forestry sector in South Africa is undergoing transformation. The signing of the Forestry Charter heralded a new dawn in
the transformation of the industry. As a Board, through our Transformation Committee ably led by Mr Peter Derman, we are
very excited about the role that the Group can play in this regard. SAFCOL, as a State Owned Entity, will be at the centre of the
transformation agenda. Tangible transformation imperatives have been achieved in the year under review. These include the
assessment of the current status of compliance to transformation guidelines, and the setting of aggressive targets which will be
monitored by the Board’s Transformation Committee.
In the year under review, two Non-Executive Directors were appointed to the Board. This was done in an effort to ensure that
adequate representation of expertise to the Board is achieved. Ms. Elaine Alexander, a natural scientist and Mr. Seth Radebe, a
Chartered Accountant, were appointed with effect from 1 June 2008. Both of them have brought skills and experience that has
enhanced the Board. During the year under review, the Board held ten meetings to consider all the matters requiring its attention.
All Board sub-committees met prior to the SAFCOL Board meetings. I am pleased that the members of this Board have honoured
their commitment to serve the interests of the Shareholder in the year under review. For this I wish to thank my fellow Board
members, especially the Chairperson’s of the various sub-committees for their commitment, leadership and sheer passion to
position SAFCOL as a company that is delivering on both the profit and socio-economic imperatives of the Shareholder.
SAFCOL has the vision to expand its operations outside South Africa. The investment proposal for the proposed fibre project in
Mozambique is currently with the Shareholder for review. It is the Board’s intention to strategically pursue footprints in Africa and
beyond, specifically within the SADC region. We will do this with caution, given the prevailing economic climate. The existing
IFLOMA operations in Mozambique present an exciting opportunity to expand our business, and this can be realised within the
medium to long-term. Under the Minister’s leadership, we await the outcome of bi-lateral talks between the two governments for
the plan into the future in that country.
9
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHAIRPERSON’S STATEMENT
As already indicated above, SAFCOL has not escaped the current negative global economic conditions which are evident
throughout the forestry industry. The slowed down markets in the building industry have had a negative impact on the sale of saw
logs and the demand for sawn timber. The current downturn in demand for sawn timber, and also the lower prices achieved, had
a major impact on the profitability of the Group. The Group’s operations are not fully vertically integrated, and its activities are to a
large degree limited to a customer base comprising of timber processors, and do not include other operations in the value chain.
There is therefore an opportunity for innovation in this regard.
Based on the commitment and dedication of the Group’s employees, I am convinced that, with the assistance of my colleagues on
the Board, we will overcome the prevailing economic and business conditions to the benefit of our Shareholder, the communities
in the areas where we operate, and the industry at large.
As a way of summary, our key financial achievement in the year under review is a realised profit before taxation and after discontinued
operations of R969.5 million (2008: R868.8 million). Included in the results is an increase to the fair value of biological assets amounting
to R 757.9 million (2008: R528.7 million). It is also pleasing to report that, despite the challenges and volatile economic climate that
the Group is exposed to, our cash position is R295.9 million (2008: R433.0 million) and our balance sheet continues to remain strong,
with a net asset value of R3,385.3 million (2008: R2,695.0 million). During the 2009 financial year, we also achieved a Return on
Equity of 31.9% (2008: 36.6%).
We are excited about SAFCOL’s prospects going forward and believe that the five-year Corporate and Business Plan incorporate
many initiatives that support the objectives of a developmental state.
On behalf of the Board, I would like to thank the former Ministers of Public Enterprises who have led us in the year under
review; Minister Alec Erwin, and Minister Brigette Mabandla. Thank you for your leadership and support. I also wish to extend our
appreciation to the Director General of DPE, Mrs. Portia Molefe, for the passion that she has displayed in ensuring that we keep
to the terms of the Shareholder’s brief. The DPE officials who are responsible for the SAFCOL portfolio have provided us with
guidance during this year and facilitated many processes for us with other government departments – thank you so much for that.
I also wish to extend our gratitude to the Chairperson of the Portfolio Committee on Public Enterprise, Ms. Fatima Chohan and the
members of the committee for their oversight role. You have kept us on our toes! How wonderful it is that we all have the same
objective which is to make a real difference in the lives of our people.
We appreciate the fact that some members of the committee took time out of their busy schedules to visit our operations in the
year under review.
I wish to thank my Board for their support. I know it has not been an easy year but I am convinced that the year ahead is going to
be one of consolidating the work that we have started. Thank you. I thank the Management of SAFCOL. It has been a tough year.
The Board has challenged you and you have risen to the challenges. I hope that we have all learnt enough to realise that we need
each other to drive this ship going forward, in order to make the kind of impact we want to make. My special appreciation goes to
all the staff of the SAFCOL Group. Thank you for your support and the great work that you have done in the course of this year.
In conclusion, let me take this opportunity to welcome our new Minister, Minister Barbara Hogan. We are looking forward to a good
working relationship with you. All our hands are on deck!!!
G Moloi
Chairperson
10
CHIEF EXECUTIVE
OFFICER’S REPORT
11
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Financial Review
Despite the effects of the 2008 fires and the impact of the downturn in the economy,
the Group achieved a profit after discontinued operations and before tax and fair value
adjustment to plantations of R211.5 million during the financial year under review compared to
R340.0 million in 2008. In the interpretation of the results, the R757.9 million increase in the fair value
of the plantations (2008: R528.7 million) must be taken into account.
The total negative impact of the fire salvage operation is estimated to be R203.3 million (2008:
R367.6 million), excluding capital expenditure amounting to R3.5 million (2008: R8.9 million) for the
establishment of wet decks and huts.
CEO: Kobus Breed
The estimated financial impact per category is as follows:
YEAR 2009
YEAR 2008
R’MIL
R’MIL
107,3
235,0
Fire Extinguishing Costs And Other Protection Costs
0,3
4,0
Estimated Site Clearing And Re-establishing Costs (Silviculture)
10,8
54,0
Estimated Additional Harvesting And Transport Cost
72,6
70,0
Estimated Establishment And Operating Costs Of Wet Decks
1,7
1,6
Other Fire Related Costs (Conservation, Overhead)
10,6
3,0
TOTAL
203,3
376,7
DESCRIPTION
Impairment of Carrying Value of Standing Timber
Shareholder’s Compact
It is pleasing to report that in terms of the financial targets set by our Shareholder per the Shareholder’s Compact, SAFCOL Group
remained profitable and exceeded its financial target with respect to Return on Equity (“ROE”) after fair value adjustments and is
0.4% above the 10% target for ROE before fair value adjustments. The main driver for the year in achieving this milestone was
the 9% reduction in operational expenditure.
SHAREHOLDER’S COMPACT: FINANCIAL TARGETS
ACTUAL
TARGET
YEAR 2009
YEAR 2009
%
10.4
10.0
%
23.1
10.0
UNIT
Return On Equity before fair value adjustment
•
(Profit after tax - FV adjustment / Average
Capital and Reserves - FV adjustment)
Return On Equity after fair value adjustment
•
(Profit after tax / Average Capital and Reserves)
12
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Performance Against Target
Actual ROE after the fair value adjustments is 23.1% compared to a target of 10.0%, mainly due to the increase in the fair value
adjustment to the biological assets. Actual ROE before the fair value adjustment is 10.4% compared to a target of 10.0%, mainly
due to an increase in Net Profit after Taxation, excluding fair value adjustments, to R137.3 million against a target of R24.1 million.
Although revenue decreased due to a 6.2% decline in volumes against target, the following had positive impacts on the operating
results:
•
Investment income increased against the back drop of a decrease in cash, due to higher than anticipated interest rates
earned.
•
Accounting for the equity profit in associates. The anticipated disposal of the associates did not materialise in the
financial year.
•
Operating expenditure decreased mainly due to the following:
•
Lower costs in respect of professional fees incurred due to the postponement of the privatisation process.
•
Material management declined due to reduced purchases, the build-up of lumber stock, and the build-up of wet deck
•
Risk management declined as a result of the specific insurance cover related to the privatisation process that was
•
Selling expenses declined due to lower transport costs incurred as a result of lower sales volumes.
stock as a result of reduced market demand, as well as further harvesting of burnt timber due to the 2008 fires.
postponed.
Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”)
EBITDA, excluding fair value adjustment to the biological assets, of R194.7 million was achieved against prior year of
R330.2 million.
YEAR 2009
YEAR 2008
ACTUAL 2009
ACTUAL
ACTUAL
VS ACTUAL 2008
R’MIL
R’MIL
%
(970)
(872)
11%
Adjustments:
775
542
(43%)
Depreciation
(40)
(29)
36%
Amortisation
(1)
(1)
0%
Fair value adjustment of biological assets
758
529
(43%)
Interest paid
(1)
(2)
(61%)
Interest received
46
45
(1%)
Foreign exchange gain
13
0
(100%)
(195)
(330)
(41%)
EBITDA*
Net (profit) before tax
EBITDA
*Excludes discontinued operations
13
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Adjusted Profit
In analysing profit, we believe that it is useful to highlight special items. Special items are those which Management believes
are material by nature or amount in relation to the operating results, and therefore require separate disclosure. Such items
would generally include profit and loss on the disposal of property, plant and equipment, asset impairments, privatisation costs,
termination benefits, retirement fund adjustment, foreign exchange gains or losses, and the price fair value adjustment to the
biological assets and log stocks.
YEAR 2009
YEAR 2008
ACTUAL 2009
ACTUAL
ACTUAL
VS ACTUAL 2008
R’MIL
R’MIL
%
(970)
(872)
11%
Special Items:
778
610
(27%)
Fair value adjustment of biological asset
758
529
(43%)
Fair value adjustment of log stock
15
46
68%
2
0
(100%)
Privatisation costs
(2)
(10)
(76%)
Foreign exchange gain
13
0
(100%)
Retirement Fund adjustment
(4 )
46
109%
Termination Benefits
(4)
(1)
436%
ADJUSTED PROFIT
(192)
(262)
(27%)
ADJUSTED PROFIT*
Net (profit) before tax
Profit and loss on disposal of
Property, plant and equipment
*Excludes discontinued operations
Income Statement Review Against Prior Year
Sales volume declined by 171 227 m³ (11%) in the 2009 financial year as a result of the slowdown in the economy, in particular
the construction market. This has been off-set by higher than expected selling prices achieved. Turnover excluding discontinued
operations increased by R24.9 million (3%) to R857.1 million compared to the 2008 financial year (R832.2 million).
Operating Profit before tax and fair value adjustment to the biological assets declined by R153.4 million (57%) to R114.1 million in
2009 (2008: R267.5 million) mainly due to increased operating expenditure and lower sales volumes.
During the period under review, the following significant movements affected operating results:
•
An increase of R14.9 million (2008: R46.1 million) fair value adjustment to the carrying value of the salvaged logs
stored on the wet decks. 12 402 m³ of burnt timber stored on the wet decks at year-end (2008: 218 351 m³) was
harvested in the period under review.
•
•
Payment of termination benefits amounting to R4.4 million due to the corporate restructuring (2008: R0.8 million).
A R13.0 million foreign exchange gain on the revaluation of the IFLOMA loan (2008: R0.05 million). The loan is US dollar
denominated and therefore influenced by movements in the US Dollar and Rand exchange rates.
CLOSING EXCHANGE RATES AS AT THE END OF MARCH
2009
2008
Rand/US Dollar exchange rate
9,621
8,120
14
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
•
R2.3 million incurred on advisors fees in respect of the privatisation process compared to R9.7 million in 2008.
•
Settlement of R2.5 million (2008: R0 million) was received in respect of a claim for a disputed amount due to the Group
by investment companies.
The following deviation in operating results could be highlighted as compared to 2008:
•
Higher expenditure in respect of employment costs mainly due to the following:
•
Increase in salaries, wages and related costs is mainly due to annual salary increases plus increased headcount
compared to 2008.
•
Increased training costs that included funding for a post graduate chair in forestry at the University of Pretoria.
•
Bonuses include incentive bonus, loyalty bonus and fire-related bonus payments.
•
Increase in retirement benefits due to the utilisation of retirement funds surplus assets that was recognised in 2008.
Breakdown of Employments Costs
ACTUAL 2008
R’MIL
R’MIL
Salaries and wages & related costs
187
151
-24%
Training
12
4
-249%
Bonuses
29
20
-47%
11
-37
130%
239
137
-74%
EMPLOYMENT COSTS
Employer contributions - retirement funds
TOTAL
•
ACTUAL 2009
ACTUAL 2009
VS ACTUAL 2008
%
In the prior year the materials management costs were reduced by the build up of salvaged log stock stored on the wet
deck amounting to R95.9 million (the fair value adjustment included in the amount is R46.1 million). In the current year the
build up of salvaged log stock only amounted to R22.4 million (the fair value adjustment included in the amount is
R14.9 million).
•
Increased expenditure on asset management due to the increase in depreciation and amortisation as a result of
increased capital expenditure.
•
Forestry contractor’s expenditure declined mainly due to lower transport costs and harvesting of burnt timber as a result
of reduced timber salvaging operation activities in the 2009 financial year.
•
Selling costs declined due to lower sales volumes of sawn timber.
Fair Value Adjustment to the Biological Assets
The 2009 financial results include R757.9 million increase in the fair value of the biological assets (2008: R528.7 million).
The increase is driven mainly by price assumptions utilised in the fair value model. The assumption uses the log price as
at 1 April 2009 in the first year of the model, and then factors in future price predictions according to market expectations.
Balance Sheet Overview
Assets
The Group’s non-current assets increased by R852.1 million to R3,763.9 million (2008: R2,911.8 million) mainly due to an increase
in the fair value of biological assets (which represents the greatest portion of the Groups assets).
15
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Current assets decreased by R25.7 million to R691.1 million (2008: R716.8 million) mainly due to the decline in cash and cash
equivalents that is offset by the increase in inventory and receivables.
NET WORKING CAPITAL
Inventories
ACTUAL 2009 VS
ACTUAL 2009
ACTUAL 2008
R’MIL
R’MIL
187.3
126.6
48%
ACTUAL 2008
%
Trade and other receivables
185.8
151.2
23%
Trade and other payables
(75.1)
(105.5)
29%
Net Working Capital
298.0
172.3
73%
Turnover
857.1
832.2
3%
%
%
% Movement
34.77
20.71
14
NET WORKING CAPITAL AS
PERCENTAGE OF TURNOVER
Optimising the levels of working capital remains a key management focus area.
Liabilities
Non-current liabilities increased by R214.8 million in 2009 to R966.2 million (2008: R751.4 million) in 2009 mainly due to an
increase in deferred tax as result of an increase in the fair value of the biological assets.
The decrease in current liabilities by R78.8 million to R103.5 million (2008: R182.3 million) relates mainly to lower expenses
incurred due to reduced production activities in the 2009 financial year. The current income tax liability decreased in the current
year as result of reduced operating profit and larger tax payments.
During the 2009 financial year, the SAFCOL Board of Directors (“the Board”) agreed to repay all floating-interest rate finance
leases in order to minimise the risk of interest rate fluctuations. The current finance lease obligation amounts to R3.0 million (2008:
R17.1 million) which relates to fixed-term interest rate finance leases.
Capital Expenditure
16
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Capital expenditure incurred in the 2009 financial year amounts to R98.6 million (2008: R76.5 million). The increase of
R22.1 million is mainly due to increased spending on motor vehicles, plant and equipment that relate to fire-fighting operations,
road maintenance, and replacements in accordance with the vehicle replacement policy.
Cash Flow Statement Review Against Prior Year
The Group’s cash flow position is under pressure and decreased significantly during the year under review. Cash will continue
to remain under pressure in the months ahead due to decreasing sales, build up of lumber and log inventories, and increase in
receivables as a result of the adverse economic conditions.
As mentioned previously, tighter working capital controls have been implemented and are being monitored continuously.
Taxation paid in the 2009 financial year amounted to R110.3 million compared to R23.5 million paid in the 2008 financial year.
The increase relates mainly to payments in respect of the 2008 financial year and provisional tax payments that were based on a
higher estimated taxable income than actual taxable income. The higher estimated taxable income is due to paragraph 19(3) of
the Fourth Schedule of the Income Tax Act (“the Act”) which allows the South African Revenue Services to increase an estimate
made for provisional tax purposes. The taxable income on which the first provisional payment is made was therefore increased.
Due to changes in legislation in terms of paragraph 20(1) of the Fourth Schedule to the Act, the Group was required at year-end
to make the second provisional tax payment based on an amount not less than 80% of its actual taxable income for that year. The
term ‘basic amount’ has been removed.
Liquidity
LIQUIDITY RATIOS
Current Ratio
•
(Current Assets : Current liabilities)
Acid Test Ratio
•
([Current Assets - Inventory] : Current liabilities)
Cash Ratio
•
(Cash and cash equivalents : Current liabilities)
ACTUAL
ACTUAL
YEAR
YEAR
2009
2008
6.7:1
3.9:1
4.9:1
3.2:1
2.9:1
2.4:1
In respect of the current, cash and acid test ratios, our results have generally shown an improvement in maintaining liquidity
compared to the 2008 financial year, and we are able to meet our short-term obligations. The main contributing factors that pose
a threat to liquidity are the following:
•
Reduced sales due to both the downturn in the economy as well as reduced available volumes due to the recent fires;
•
Extension of accounts receivable days in order to motivate customers to purchase timber; and customer’s experiencing
cash flow problems;
•
Increasing inventory levels due to the downturn in the economy;
•
Possible fires in the 2009 / 2010 financial year;
•
Payment of creditors based on contractual payment terms regardless of the above pressure on cash reserves.
17
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Restructuring / Privatisation
In 2008, Minister Alec Erwin informed the Board that the privatisation process of Komatiland Forests (Pty) Ltd (“KLF”) and the
winding up of SAFCOL, will be postponed to allow time to address issues raised during the transaction design which could
have a major impact on the privatisation of KLF, if not resolved. He further instructed the Board to address issues relating to the
finalisation of the land claims on state forestry land currently being leased by KLF, and the competition concerns before a decision
on the way forward regarding privatisation could be made. As a result, the Board was requested to develop a five-year corporate
strategy with a strong focus on land claimants and communities. SAFCOL also needed to revise the organisational structure, to
align the company with the new vision and mission in order to achieve the objectives of the five-year Corporate and Business
Plan, as per the Shareholder’s request.
Komatiland Forests (Pty) Ltd
Forestry Operations
The devastating fires of 2007 totalling more than 17 000 hectares (“ha”) of plantations, seriously affected six plantations in
Mpumalanga. Unfortunately, during 2008 more disastrous fires occurred in four plantations. 4 911 ha of plantations burnt at Berlin,
Jessievale, Ngome and Roburnia.
In total 574 007 m³ of burnt timber was salvaged. Burnt timber salvaged in excess of contractual commitments totalling
213 503 m³ was stored in four of our own wet decks.
A total of 1 355 706 m³ (including the burnt timber) was harvested during the year. Due to the special focus on the recovery of burnt
timber, the backlog in thinnings could only be partly addressed and it remains a priority for the next financial year.
Silviculture practices were applied consistently in compliance with KLF’s silviculture guidelines and 9 095 ha of the burnt areas
were replanted during the year. At year-end the temporary unplanted area (“TU”) amounted to 6 377 ha (2008: 7 950 ha).
Under-canopy burning, to reduce fuel loads within pine plantations were continued this year after its successful introduction during
2007. Approximately 8 000 ha of compartments received controlled under-canopy burning in the year under review. The Mlilo fire
awareness campaign made use of numerous opportunities to promote fire awareness in communities surrounding KLF plantations.
As part of the campaign thirty eight schools were visited in the Lowveld and Highveld area. The “0860 No Fire” telephone number
together with a new “bokkie” mascot was introduced and marketed through handouts, flyers, posters, stickers and adverts.
Baboon damage as well as mortality in young compartments due to the pitch cancer fungus (Fusarium Circinatum) remained a
concern and different working groups are addressing this issue to find suitable solutions.
18
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Statistics of 2009 Financial Year Fires at KLF Plantations
AMOUNT OF HECTARES DAMAGED
YEAR
YEAR
PLANTATIONS
2009
2008
Bergvliet
Berlin
Blyde
Brooklands
Jessievale
Spitskop
Tweefontein
Witklip
Ngome
Roburnia
0
2,218
0
0
1,783
0
0
0
605
305
4,103
263
1,548
3,465
196
3,508
4,509
115
0
0
TOTAL
4,911
17,707
Volumes salvaged out of the burnt compartments: 574,007 m³ (2008: 951,441 m³).
Total volume sold (including sales to own sawmill): 1,465,715 m³ (2008: 1,661,571 m³).
The total volume of salvaged logs stored in wet decks as at year end (excluding temporary depots): 213,503 m³
(2008: 218,351 m³).
Total volume harvested (own harvesting ops): 1,355,706 m³ (2008: 1,739,304 m³).
Total area planted during this financial year: 9,095 ha (2008: 7,220 ha).
Due to the increased demand for seedlings after the 2007 fires, the Tweefontein Nursery produced more than 10 million seedlings
during this financial year against a previous average of between 7 and 8 million plants per year.
Innovation
The Group revised the drive and focus of innovation within the operations. Operational innovations are focused on the improvement
of current systems and procedures to enhance the value of our assets, especially by embracing productivity and cost savings. These
criteria are used as measurements to determine if proposed innovations from our employees can be implemented effectively.
Environmental Management
The Forest Stewardship Council (“FSC”) certification of KLF remains intact. During the first surveillance audit of the current
certificate cycle conducted from 6 to 10 October 2008, the operations of KLF were evaluated against the requirements of the Qualifor
Programme and its forest certification programme accredited by the Forest Stewardship Council. The auditors recommended the
continued certification of KLF under certificate number SGS-FM/COC-0068.
Several Internal Environmental Impact Assessments (“EMPs”) were conducted in accordance with the Environmental Management
System for operations that posed a significant environmental risk. The environmental section audited the compliance of the
operations in accordance with the prescriptions of the EMPs and issued internal Corrective Action Requests (“CAR”) where
necessary.
The issuing of prospecting and mining authorisations by the Department of Minerals and Energy (“DME”) on State forest land
remains a risk to the sustainability of KLF’s plantation forestry practices. Environmental risks associated with mining operations
pose a liability to the Company in terms of compliance with national environmental legislation and FSC standards. All possible
routes are pursued to limit the impact of mining in our operations.
19
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Following the devastating wildfires in the Sabie / Graskop / Nelspruit areas, KLF initiated several unique erosion control programmes,
especially on steep and erosion prone slopes. The programme involves the overlaying of the erodability of the specific soil types,
the gradient of the slope, and the intensity of the fire in the area. Thereafter, an erosion risk profile is compiled for each plantation
affected. Erosion control programmes that focused on high risk areas were identified and control measures put in place.
A legislative review on the delineation of wetlands and riparian areas was done following reported loss of planted areas through
excision of wetland areas. It was thus concluded that legal obligations with regard to wetland and riparian habitat management,
as embodied in the conditions attached to water use licences issued in terms of the National Water Act, should be complied with,
and land exchange is to be applied for areas lost due to delineation. KLF will implement a structured and auditable delineation
programme.
KLF embarked on a process to replace the Environmental Management System for Forest Operations with a new and Integrated
Management System. The objective was to design an electronic management system that was user friendly, comprehensive and
that would integrate all legal, environmental, safety and health certification and industry standards and requirements into a single
management system. At the time of compiling this report, the first phase of the implementation stage of the project was being
conducted and early indications were that the project would exceed all expectations.
KLF continued to monitor various environmental attributes including grasslands, water quality, Red Data species and High
Conservation Forests on a regular basis. Most of this monitoring was conducted by independent specialists and Management
recommendations from their reports were implemented where feasible. A separate report on the environmental performance of
KLF is published bi-annually and is available for interested stakeholders.
Processing Operations
Timbadola Sawmill
The second half of the financial year was very difficult for the processing industry due to the global economic recession which
saw a decrease in demand for lumber products. Sales for the year were 20 714 m³ lower than budget and finished product stock
increased considerably as a result of lower sales volumes. This created uncertainty regarding the future production policy. Options
were investigated to reduce intake, reduce selling prices, or store the unsold portion of the production volume. It was decided to
continue with full production, storing the additional volume, and re-assessing the market situation at a later date. Because the
market did not improve, an extended shutdown was implemented during December / January. Normal production resumed in
February 2009 although there was no improvement in market conditions.
The following projects were successfully implemented at the sawmill during the financial year:
•
The installation of power generators to allow all operations to continue during power failures, thus reducing downtime.
•
The replacement of old compressors with insufficient capacity and provision for future plant upgrades.
•
Installation of a new ripsaw to improve wet mill recovery.
•
Upgrade of the planning area and installation of a high capacity planer to ensure production of more high-value products.
•
Purchase of a stress grader which was installed in April 2009.
•
Installation of surveillance cameras throughout the sawmill to assist with safety, security and the monitoring of
processes.
The 2008 / 2009 financial year was exceptionally difficult for the sawmill due to prevailing market conditions.
20
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Custom-Cut Operations
Our custom-cut operations continued during the year under review. Despite deteriorating market conditions, the operations
remained profitable. The flexible nature of the custom-cut project enabled KLF to maintain, gain, and protect market share by
adapting quickly to market demands. It further set industry standards by optimising raw material, thereby enhancing resource
value.
Other positive contribution of the operation was to significantly reduce raw material losses caused by plantation fires in the
Lowveld and Highveld areas, by processing fire-damaged logs initially deemed sub-economical.
Marketing
Round Wood Logs
The first half of the 2008 / 2009 financial year saw good demand for round logs, and prices achieved on the open market
improved by significant margins. During the latter part of the year, the demand for lumber decreased. This resulted in the partial
postponement of long-term contract price increases. The gap between long-term contract and open-market prices was finally
closed on 1 January 2009.
Due to a concerted effort in a very demanding year, 95% of budgeted volumes were sold in 2008 / 2009. It is however envisaged
that during the next financial year conditions will be extremely challenging.
KLF timber volumes sold, including internal transfers, since the 2004 / 2005 financial year can be summarised as follows:
FINANCIAL YEAR
‘ 000 m³
2004 / 2005
2005 / 2006 (9 months)
2006 / 2007
2007 / 2008
2008 / 2009
1 826
1 135
1 615
1 648
1 466
All long-term sawlog contracts will terminate on 31 March 2011. The current marketing policy was revised to cater inter alia for
one-year and multi-year contracts. In the case of multi-year contracts, applicants will bid for the right to the contract while the log
price will be determined by the average prices achieved on the short-term (one year and less) bids.
Lumber
Direct lumber sales to customers increased to 86% of total sales, compared to 85% in the previous year. The slowdown in the
market led to a decrease of 37 500 m³ in sales for the period, compared to the previous financial year. Revenue decreased by
R4.7 million.
Marketing expanded its operations in conjunction with Timbadola sawmill by establishing a warehouse to assist with the disposal
of increasing stock volumes from which smaller buyers are targeted.
Credit Management
It is no understatement that the credit industry globally and in South Africa is facing many challenges. The current economic
conditions and the credit crunch had a detrimental effect on KLF’s cash flow position due to customers’ inability to meet their full
obligations within the payment terms. Managing credit requires essential co-operation between the companies involved.
21
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
A decision was made to extend payment terms for certain customers with minimum risk of default. Interest is also charged in these
circumstances. The risk of default was limited by adhering to credit approval processes which included credit checks and insuring
customer debt based on credit ratings with financial institutions. This was a vital step in establishing customer relationships and
restricting the negative effect on sales.
IFLOMA Operations
Good progress was made during the year in managing the concession area of 23 000 hectares as a fully functional plantation
asset. The operational timber warehouse, operating in Maputo, mostly sells to the local building industry. Timber was sourced from
Indùstrias Florestais de Manica, SA (“IFLOMA”) operations as well as from South Africa.
IFLOMA has a staff complement of 678 (2008: 716), including 4 (2007: 4) expatriates. The start-up of the Messica sawmill,
and related harvesting and transport operation were considered, but not approved due to the extensive capital cost required
(R20 million). As an alternative, it was decided to invest in two mobile mills to process logs in-field.
Expanding Operations in Mozambique
With limited opportunities for expansion of commercial plantation forestry operations in South Africa, it is natural to look at
opportunities outside the country, but close to our borders.
The Group is well positioned in this regard and is investigating opportunities for new afforestation in Mozambique. However, these
and other opportunities were limited by the imminent decision on the future of the Group.
A detailed feasibility study was initiated and a final report on a potential afforestation project of approximately 50 000 ha was
forwarded to the Shareholder for approval.
Human Capital Management
General
Over the past years, SAFCOL was committed to developing and maintaining world-class employment practices, which was aimed
at attracting, developing and retaining skilled and competent talent, and the Company strived to achieve these goals.
The Group continued to focus, in particular, on the appointment of talented individuals, especially those from historically
disadvantaged communities. It also resolved to increase the number of women in managerial and core business occupations.
Central to the development of the five-year Corporate and Business Plan, a detailed and business focused human capital strategy
was required that would ensure that the Company goals were realised. In this regard, the Human Resources function was
reviewed and re-organised to become a business partner with a resultant five-year Human Capital strategy.
The strategy will focus on:
•
Talent acquisition and management
•
Leadership capacity building and skills development
•
A high performance culture and effective performance management systems
•
Change management programmes
22
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Employee Relations
SAFCOL remained committed to ensure harmonious relations with employees and in particular organised labour, based on
mutual respect and trust. The existence of the Partnership Forum, a joint structure between Management and the recognised
trade unions, continued to play an integral role in fostering and maintaining this relationship. During the period under review,
no industrial action was experienced and the collective bargaining processes were handled within the agreed framework. This
resulted in parties reaching settlements in relation to wages and other substantive conditions of employment.
A climate survey was conducted and the results showed that the majority of employees are committed and proud to be in the
employment of the Group. However, the survey report also identified areas of concern that need to be addressed. Management
has already communicated to employees the measures put in place to ensure the resolution of the concerns.
Skills Development
The Training Centre continued to serve as the centre of learning excellence through the provision of technical skills training as
well as the facilitation of short skill and management development programmes. About 80% of technical skills training took place
on-field at the operations.
Training opportunities were extended to contractors, communities, as well as municipalities. Below is a photo group of workers
from Thaba Chweu municipality undergoing a Basic Fire Fighting Course at the Platorand Training Centre.
Picture: Fire Fighting training in progress
(Thaba Chweu Municipal workers)
Other Highlights
KLF participated in various career exhibitions where young people were introduced to forestry and encouraged to consider it as
a career.
Our training centre continued to offer the one-year forestry bridging programme that candidates are engaged to attend before
proceeding to universities and colleges. The programme has since been registered as a learnership with the Forest Education
and Training Authority (“FIETA”). Upon successful completion, the learners obtain a National Qualifications Framework (“NQF”)
level 1 qualification.
23
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
As at the end of March 2009, KLF had about 10 female foresters out of a population of 70 (inclusive of plantation managers), which
constituted a 14,2% representation. It is envisaged that in two to three years’ time, the new entrance to forestry will significantly
improve women’s participation in the previously male-dominated industry.
In summary, SAFCOL exceeded the set target to register 100 employees in various forestry-related learnerships accredited by
FIETA.
LEARNERSHIP
NQF*
CURRENT
NEW
TOTAL
General Forestry Programme
Level 1
-
19
19
Harvesting
Level 3
23
25
48
Silviculture
Level 3
-
29
29
Processing
Level 3
-
43
43
23
116
139
TOTAL
*NQF level 3 is equivalent to the National Senior Certificate.
Staff Compliment
At year-end, the combined SAFCOL Group South African’s Operations staff compliment was as follows:
TYPE OF EMPLOYMENT
2008 / 2009
2007 / 2008
Permanent*
1 997
1 897
Fixed-term
258
271
2 255
2 168
TOTAL
*The above figure includes 4 expatriates seconded to IFLOMA as noted on the table following.
The Mozambican subsidiary, IFLOMA, had the following staff complement:
TYPE OF EMPLOYMENT
Local employees**
Expatriates
TOTAL
** Actual number of IFLOMA employees excludes 4 expatriates.
24
2008 / 2009
2007 / 2008
674
712
4
4
678
716
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
A summary of the composition of the Group’s permanent staff per occupational levels was as follows:
SAFCOL/KLF: SUMMARY OF HEADCOUNT - PERMANENT EMPLOYEES - AS AT MARCH 2009
RACE AND GENDER DISTRIBUTION
African
Coloured
White
SUB TOTAL
TOTAL
NUMBERS
Total
Numbers
DISABLED
2008
Indian
GRAND
TOTAL
2008
SUB TOTAL
DISABLED
2009
White
GRAND
TOTAL
2009
Coloured
FEMALE
African
Top management
(Grade E - F)
Senior management
(Grade D4 - DE5)
Middle management
(Grade D1 - D3)
Technical & Admin Officers
(Grade C1 - C5)
Semi-Skilled &
discretionary Decision
making (Grade B1 - B5)
Unskilled & Defined Decision
making (Grade A1 - A3)
TOTAL PERMANENT
MALE
Indian
LEVELS
OCCUPATIONAL
1
3
0
5
9
0
1
0
1
2
11
0
14
0
0
1
0
12
13
1
1
0
1
3
16
0
11
0
0
8
2
33
43
0
4
0
6
10
53
0
54
0
0
57
2
28
87
1
17
5
13
36
123
1
112
0
0
636
1
7
644
2
50
4
23
79
723
6
656
4
0
850
0
0
850
0
221
0
0
221
1071
2
1050
1
1
1555
5
85
1646
4
294
9
44
351
1997
9
1897
5
A summary of the composition of the Group’s fixed-term contract employees per occupational levels was as follows:
SAFCOL/KLF: SUMMARY OF HEADCOUNT - PERMANENT EMPLOYEES - AS AT MARCH 2009
RACE AND GENDER DISTRIBUTION
African
Coloured
White
SUB TOTAL
TOTAL
NUMBERS
Total
Numbers
DISABLED
2008
Indian
GRAND
TOTAL
2008
SUB TOTAL
DISABLED
2009
White
GRAND
TOTAL
2009
Coloured
making (Grade A1 - A3)
TOTAL PERMANENT
FEMALE
African
Top management
(Grade E - F)
Senior management
(Grade D4 - DE5)
Middle management
(Grade D1 - D3)
Technical & Admin Officers
(Grade C1 - C5)
Semi-Skilled &
discretionary Decision
making (Grade B1 - B5)
Unskilled & Defined Decision
MALE
Indian
LEVELS
OCCUPATIONAL
0
0
0
2
2
0
0
0
0
0
2
0
0
0
0
0
0
1
1
0
0
0
2
2
3
0
4
0
0
2
0
5
7
0
2
0
2
4
11
0
8
0
0
0
0
8
8
0
0
0
7
7
15
0
13
0
1
55
0
3
59
0
38
3
12
53
112
0
103
0
0
61
0
0
61
0
54
0
0
54
115
0
143
0
1
118
0
19
138
0
94
3
23
120
258
0
271
0
25
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Employment Equity
SAFCOL is committed to transformation and it has become a business imperative to put measures in place to enable the Group
to achieve and maintain a staff complement that reflects South African diversity.
A summary of the workforce profile (permanent employees) was as follows:
ELEMENT
Race:
Gender: Black
People with disabilities
Appointments
Promotions
MARCH 2009
MARCH 2008
%
%
Black staff at managerial level
51.2
41.9
Black staff at all levels
93.4
92.2
Women at managerial level
25.1
11.5
Women all levels
17.6
16.4
All groups
0.45
0.26
Black staff at managerial level
85.3
90.0
Women at managerial level
38.2
20.7
Black women at managerial level
35.3
17.2
Black staff at managerial level
54.2
61.0
Women at management level
25.0
38.9
Black women at management level
20.0
16.7
A consultation process for compiling an Employment Equity report was improved to be even more inclusive and effective. Active
involvement and participation assisted in ensuring quality reporting and statutory compliance.
Bursaries and Study Assistance
The process followed in allocating study assistance to employees was guided by a strategy, which focused on the development of
individual employees in order to address identified critical skills within the organisation.
Bursaries were specifically aligned with employment equity objectives as well as the upliftment of adjacent communities.
Assistance Provided to Beneficiaries
BURSARIES
STUDY ASSISTANCE
TOTAL
GENDER
African
Male
35
54
1,166,613
Black
Female
23
36
545,576
AMOUNT IN RAND
41
51
335,468
14
18
118,588
Male
0
0
0
0
-
Female
0
0
1
1
-
Male
0
0
1
1
15,300
Female
0
0
1
1
21,000
Male
6
9
276,321
19
24
167,095
Female
1
1
65,448
3
4
36,600
65
100
2,053,958
80
100
694,051
2009
Indian
Coloured
White
TOTALS
26
TOTAL
%
2008/
%
AMOUNT
GROUP
IN RAND
2008/
2009
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Field of Study for Bursary and Study Assistance
FIELD OF STUDY
NON-EMPLOYEES
EMPLOYEES
TOTAL
%
Forestry and related research
45
31
76
52.4
Processing
1
5
6
4.1
Engineering and artisans
5
5
10
6.9
Corporate services
1
6
7
4.8
Environmental management
3
0
3
2.1
Planning
1
1
2
1.4
Human Resources
1
15
16
11.0
Finance and administration
7
12
19
13.1
Marketing
0
4
4
2.8
Other
1
1
2
1.4
TOTAL
65
80
145
100.0
Bursary Allocation to Non-Employees in Relation to Communities
COMMUNITIES
2008 / 2009
2007 / 2008
Adjacent communities
94%
37%
Other black communities (rural)
6%
52%
Urban communities
0%
11%
Training
The following is a summary of an analysis of trainees who attended training courses at the Training Centre:
BLACK
WHITE
INDIAN
COLOURED
TOTAL
M
F
M
F
M
F
M
F
M
F
2008 / 2009
1 310
251
103
66
0
3
11
14
1 424
334
2007 / 2008
1 395
213
172
71
0
2
10
5
1 577
291
Total training man days (excluding Adult Basic Education and Training (“ABET”) is summarised as follows:
2008 / 2009
2007 / 2008
Total Man days
12,735
13,078
Total Trainees
1,758
1,868
27
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
ABET attendance is summarised as follows:
ABET: NUMBER OF TRAINEES
MALE
FEMALE
TOTAL
LEVEL
2009
2008
2009
2008
2009
2008
1
9
14
7
8
16
22
2
15
22
2
11
17
33
3
16
39
11
23
27
62
4
58
66
24
27
82
93
98
141
44
69
142
210
TOTAL
Employee Health and Wellness
Managing the Impact of HIV and Aids
KLF is committed to managing the impact of HIV and Aids through integrated response strategies in order to empower employees
through ongoing knowledge and awareness, and to enhance business sustainability. Emphasis continued to be placed on
prevention, voluntary counselling and testing for HIV and Aids, ongoing counselling and support, and integration with local health
service providers for treatment.
Employee Wellness Programme
KLF rolled out a comprehensive medical and wellness programme. The programme allows production workers access to health
and wellness services which are provided by a contracted service provider. The service includes the following:
WELLNESS SERVICE
Primary healthcare (non-
Employee assistance
medical aid members)
programme
OCCUPATIONAL HEALTH SERVICE
Incapacity management
Medical consulting
The service provider has a network of health service providers spanning to the north (Limpopo), south (Kwa-Zulu Natal) and
central (Mpumalanga). This makes it convenient for workers to access the facilities as close to their area of work as possible.
Clinics and consulting facilities have been set up in the respective plantations and equipped accordingly for rendering the above
services. An internal and qualified employee wellness consultant was appointed to co-ordinate and champions the programme.
Safety
The Group remains committed to providing a safe and healthy working environment. In the year under review, there was a slight
downward trend in external safety audit results. Ten operational units each received a 5-star rating, five received a 4-star rating,
five received a 3-star rating, and one a 2-star rating (2008: thirteen 5-star rating, four 4-star rating and four 3-star rating). It must,
however be noted that the external audit was conducted on a risk based system which takes severity of injuries into account. The
Disabling Injury Frequency rate was 2.0 against a limit of 2.0. The above results must be evaluated in the light of the abnormal
and adverse working conditions during the fire recovery operations.
28
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Management continues to be vigilant and appropriate measures are put in place to ensure standards to maintain safety and
minimise potential injuries. To reduce safety risk under adverse conditions and operational requirements, increased visibility and
emphasis on all aspects of safety management are ensured.
Fatalities
I am pleased to report that in spite of the increased danger of operational activities resulting from the fire recovery projects and
replanting programme, there were no fatalities recorded in the year under review.
Corporate Governance and the Public Finance Management Act, 1999
(“PFMA”)
The SAFCOL Group endorses the Code of Corporate Practices and Conduct contained in the King II Report. The Group upholds
sound accounting principles and internal controls. The required policies, procedures and conditions of employment are in place
to ensure that good corporate governance is maintained. The Group complies with the provisions of the PFMA in all material
respects.
Transformation
The Group embraces all aspects of the Forestry sector’s transformation charter, and aspires to exceed the sector’s transformation
charter targets, demonstrating internal and eternal transformation leadership to the industry. Our goal is to achieve a sustained
level 2 contributor level in the medium to long-term. In the year under review, the Group achieved a level 3 B-BBEE contribution
as evaluated by an independent verification agency.
We believe that partnerships with all role players such as Forestry South Africa, NGO’s, interest groups, media, Government and
the Joint Community Forums remain a critical network in all our operations. We view transformation from the community impact
aspect with a key focus on resource mobilization.
All the B-BBEE Codes of Good Practice are intertwined in terms of our transformation agenda. We believe that sound SocioEconomic Development cannot be achieved unless we have strong pillars of Enterprise and Skills Development. We have invested
time in formalising the social compacts through the process of Community Engagements Forum and that is in the process of
bearing positive and sustainable results.
One contribution to strengthening the economy of the country is through our intervention of ensuring that communities are
encouraged to grow the small and medium enterprise concept to address the reduction of poverty and increase job creation. We
firmly believe we have a leadership role to play in transforming the forestry and sawmilling industry in the future.
From the procurement of goods and services, our objective is to secure supply while balancing the competing objectives of
lowering total cost of ownership and ensuring the quality, timing, and safety of our purchases, while at the same time meeting
operational targets and objectives. This includes B-BBEE targets. In the year under review, we made significant contribution with
regards to support given to black-owned and black women-owned businesses. This is reflected in the forestry sector scorecard
of 12.62% against a target of 15%. We continue to focus particularly on empowering black women-owned and youth-owned
businesses to accelerate their participation in the mainstream economy. A strategic sourcing initiative has since been launched in
support of our objectives of maintaining quality and continuity of supply, and building sustainable supply chain security.
29
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Performance Against B-BBEE Score Card
B-BBE Adjusted Generic Score-card for the SAFCOL Group – excluding ownership, which is not applicable to State Owned Entities.
TARGET SCORE
BASE SCORE
SCORE ACHIEVED
SOE WEIGHT
2008
2009
Management Control
15 + 1 Bonus Point
7
11.25
Employment Equity
15 + 3 Bonus Point
5
6.42
Skills Development
20
10
16
Preferential Procurement
20
14
20
Enterprise Development
15
2
9.57
15 + 3 Bonus Point
15
15
107
52
78.24
6
3
ELEMENT
Socio-economic Development
Total B-BBEE score
CONTRIBUTOR LEVEL
Overview of Performance Against Objectives
POLICY
OBJECTIVE
RESULT
SUSTAINABLE FORESTRY MANAGEMENT
To manage the raw material resource of
•
Continue to manage the forests
the Group in a professional manner to
on a sustainable basis, consistent
ensure sustainability in the long-term.
with the relevant legal requirements
•
FSC was maintained in all 18 plantations
under KLF in the year under review.
and with international independent
environmental certification.
•
Continue to strive to return the harvesting
•
Harvesting schedules are updated regularly.
program, as soon as practical, to a
Annual cut is restricted to sustainable yield
normalised sustainable yield basis.
to achieve yield normality in the shortest
possible time. 9 095 ha of the burnt areas
were replanted during the year. At year-end
the temporary unplanted area (“TU”) for
KLF was reduced to 5,1% (2008: 6,4%).
•
Manage the forests on a sustainable basis,
consistent with Government’s macro–
economic policy of functioning efficient
and transparent markets for goods.
•
An updated marketing policy was
implemented during the current year. Notices
served on sawlog long-tern contracts.
•
Continue to optimise the long-term
•
Fair value of standing timber increased
to R3,2 billion (2008: R2,5 billion).
value of the existing forest assets.
30
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
POLICY
OBJECTIVE
RESULT
RESEARCH AND DEVELOPMENT
• To identify and investigate new initiatives
and material resources which will
contribute to development.
• KLF to identify and investigate the potential
of new initiatives and possible improved
and / or new raw genetic material
resources which will contribute to the
development of the Forestry, Timber,
•
The Permanent Sample Plots “PSP”
were maintained as part of the PSP
programme used for monitoring growth
trends and growth modelling.
Pulp and Paper sector in South Africa.
•
Invested 1.2 % (2008:1.2%) of
timber sales in forest research.
•
There was a focus on new hybrids, e.g.
Pinus patula cross with Pinus tecunnumani
to increase Mean Annual Increment
(“MAI”) and reduce susceptibility to
pitch cancer fungus (fusarium).
•
Strong collaborative ties continued with
Forestry & Agricultural Biotechnology Institute
(“FABI”) at the University of Pretoria and
CAMCORE (International Tree Conservation
and Domestication Co-operative).
•
Plantings resumed at recently
acquired seed orchards for the
main pine species used in KLF.
TRANSFORMATION
•
To support the Government’s transformation
•
initiatives in all its business activities.
To strive to ensure compliance with,
•
Participated with other players in
and to exceed all Forestry Charter
the process leading to the signing
targets as soon as possible.
of the forestry industry charter.
•
Developed and aligned the Employment
Equity targets in line with the codes
of good practice issued by the
Department of Trade and Industry.
•
Procurement
•
To ensure that goods and services are fairly
•
Service providers and suppliers database
and impartially procured from a diverse
established where suppliers are requested
range of service providers; and that the
to supply details of their B-BBEE rating
participation of black people in the provision
in terms of the Balanced Scorecards. It
of those goods and services is maximised.
is preferred that new suppliers added
to the database have a B-BBEE rating
of levels 1-4. The procurement policy
framed in terms of the B-BBEE Codes.
•
Refer to summary Forestry Charter Scorecard
provided.
31
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
POLICY
OBJECTIVE
RESULT
TRANSFORMATION (CONTINUED)
•
Broad-Based Black Economic
•
Empowerment (B-BBEE)
To sustain and reinforce
•
B-BBEE with reference to job creation,
Refer to B-BBEE Score card for scores
achieved in 2009.
rural development, skills, management
training, and economic empowerment
of black people, especially women,
people with disabilities, and youth.
DEVELOPMENTAL OBJECTIVES
•
Accelerated and Shared Growth
•
Initiative for South Africa
Seeking to halve unemployment, reduce
•
Though the skills in the forestry related
poverty, provide the skills required by the
industry are not directly covered under
economy, and achieve an average minimum
the JIPSA scarce skill category, SAFCOL
growth rate of 6% be-tween 2010 and 2014.
continued to put measures e.g. bursaries
and learnership agreements, in place to
encourage young people with a specific
focus to women to follow forestry related
studies as careers. A forestry chair
developed at the University of Pretoria.
This will ensure a re-vitalisation of
interest in the forestry disciplines.
•
Skills Development
•
Develop and sustain a strategy to acquire
•
Forestry bridging programme started at
and retain the appropriate critical skills for
Platorand training centre whereby candidates
sustainable forestry management, as well as
are engaged before proceeding to universities
for the improvement of existing operations.
and colleges. The programme has since been
Particular emphasis must be placed on
registered as a learnership with the Forest
ensuring that black people are involved in
Education and Training Authority (“FIETA”).
skills development pro-grams, which will
Upon successful completion the learners
lead to the achievement of this goal.
obtain an NQF level 1 qualification. As at the
end of March 2009, KLF had about 10 female
foresters registered in the programme.
•
Exceeded the set target to register about
100 employees in various forestry-related
learnerships accredited by FIETA.
The Future
At SAFCOL we believe that business cannot exist in isolation as the external environment plays a critical role in our sustainability.
This was supported by the signing of the Forestry B-BBEE Charter, and the establishment of a forestry charter council which
heralds a new dawn in the transformation of the South African forestry industry. Our vision, mission and Company objectives were
revised to ensure that they remained in line with our Shareholder’s objectives.
32
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
A comprehensive Corporate and Business strategy was developed to address all aspects of business, especially incorporating
affected communities and land claimants as important role players.
We are excited at the prospects of going forward with the new strategic direction. We began with the rollout of the five-year
Corporate and Business Plan which was approved by the Board. Our point of departure was to ensure that we have systems and
people in place in terms of the resources perspective which will enable us to lay a proper foundation during the implementation
phase. Our business processes were then aligned to create more synergies within various parts of the business. That approach
created an appropriate platform for our internal transformation strategy to set the tone for the external environment.
The Corporate and Business Plan positions the Group to not only meet the transformation targets, but also to be a leader within
the forestry sector. Our baseline assessment of the B-BBEE level status in terms of the codes of good practice as evaluated by an
independent verification agency, reflects a B-BBEE level contribution of 3 for the Group. Aggressive targets have been set in the
corporate business plan, which are monitored continuously by the Board. We further focused on our stakeholders’ perspective and
clearly defined the role we needed to play in conjunction with communities, local governments, non-governmental organisations
and other interest groups. The positioning of SAFCOL’s operations in rural communities presents an opportunity for SAFCOL to
play a more active role in the socio-economic development of our communities.
In order to successfully implement the revised strategy, we have reviewed the organisational structure. I am pleased that our
new operational structures are geared to ensure that we have a multi-functional forestry operation that integrates community
initiatives. We now have expertise in senior management that will deal with issues such as enterprise development, socioeconomic programmes, community liaison, and transformation, amongst others. Furthermore, a number of social compacts were
signed with identified communities and stakeholders bordering our operations. A process to identify socio-economic programmes
jointly with them has since resumed.
The resolution of land claims on land managed by the Group is one of the priorities set by the Shareholder. SAFCOL aims to set up
a settlement model that will grow partnerships with the land claimants in such a manner that will accommodate them and benefit
the forestry industry.
The current global economic conditions negatively impacted on the Group’s overall performance and is expected to continue
into the medium-term. The depressed market was preceded by two years of financial losses due to severe fire damages to our
plantations. In spite of the challenges we faced during the year, I am pleased to report that our operations successfully implemented
aggressive re-planting schedules to reduce temporary unplanted areas and introduced innovative fire prevention campaigns and
methods. The “Mlilo” campaign is becoming a household brand name and is well received by communities, municipalities, fire
fighting agencies and other forestry companies. This is one example that shows that working together we can do more to curb
incidence of wild fires and ensure sustainable multi-functional forests for all.
The timber market experienced shortages in the preceding years before the current global recession. The Group’s activities in
the downstream market are limited and further vertical integration to soften the blow of the decelerated markets needs to be
considered going forward. Management is implementing cost cutting measures and also strict cash management practices on top
of a drive to become more innovative in order to survive the current economic conditions. Economic projections indicate that the
next financial year is going to be tough and all efforts will be employed in order to save jobs.
Forestry business requires a long-term view and it is essential that we take the right decisions for the sustainability of the business.
We believe that in the long-term, after the recession has lifted, demand of timber will still exceed the supply. The impact of the
last few years’ fires, the decrease in availability of land for forestry and growing demand will all contribute to the expected timber
shortages that will continue to put pressure on the availability of timber. Water demand and environmental pressures will also
continue to impact on the availability of timber resources.
33
SOUTH AFRICAN FORESTRY COMPANY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 MARCH 2009
Acknowledgements
I would like to thank Koot van der Walt, who resigned in the year under review to explore other career opportunities, for his
contribution to the Group. Koot was the Chief Financial Officer for KLF, and has been an integral part of the management team in
KLF. I would like to wish him all the best in his new career.
It is with great regret that we heard of the death of Mr. David Gevisser. Mr. Gevisser was a member of the SAFCOL Board from
September 1992 up to February 2004. He was appointed as Chairperson of the Board with effect from 1 January 1995. Mr
Gevisser had an intimate knowledge of business, sawmilling and forestry, and he made major contributions to the establishment
positioning of SAFCOL.
I would especially like to recognise the dedication and commitment of our workforce; “You are key to the successes of the
company”.
MJ Breed
Chief Executive Officer
34
BOARD OF DIRECTORS
35
SOUTH AFRICAN FORESTRY COMPANY LIMITED
BOARD OF DIRECTORS
MS
G MOLOI
Date of birth
12 September 1967
Service with SAFCOL
Appointed as Chairperson on15 September 2006
Academic qualifications
• BA (Law)
• Masters degree (Town and Regional Planning)
• Diploma (General Business Management)
Other boards on which the individual serves
• FirstRand Group Ltd
• Iman Africa (Pty) Ltd
• Lopier (Pty) Ltd
• Ithala Ltd
• Futura (Bata) (Pty) Ltd
• DUT: Vice Chairperson of Council
• Forestry Council of South Africa
Last organisation of employment
• Drake & Scull
DR
M DIAHO
Date of birth
9 March 1960
Service with SAFCOL
• Appointed to the SAFCOL Board on 1 April 2005
Academic qualifications
• MB; BS (Australia)
• Diploma in Child Health (DCH)
• Diploma in Tropical Medicine and Hygiene
(DTM&H)
• Diploma in Public Health (DPH)
• MBA
• Programme for Management Development
(PMD)
Professional affiliations
• South African Medical Association
• Health Professions Council of South Africa
• Fellow of the African Leadership Initiative
Last organisation of employment
• Nelson Mandela Foundation
36
MR
MJ BREED
Date of birth
30 July 1959
Service with SAFCOL
• Appointed at SAFCOL as General Manager:
Finance and CFO in April 1993
• Appointed to the SAFCOL Board as Executive
Director and CEO on 6 September 2002
Academic qualifications
• BCom (Hons)
• Chartered Accountant (SA)
Other boards on which the individual serves
• Associate companies
• Subsidiary companies in SAFCOL Group
• Kindling Holdings (Dormant)
• RTP Trading (Dormant)
MR
PJ DERMAN
Date of birth
10 February 1947
Service with SAFCOL
• Appointed to the SAFCOL Board on
15 September 2006
Academic qualifications
• BA
• BA (Hons)
Other boards on which the individual serves
• None
Last organisation of employment
• Director and managing member of CORD
Consulting CC
MR
M BHABHA
Date of birth
29 April 1960
Service with SAFCOL
• Appointed to the SAFCOL Board on
1 April 2005
Academic qualifications
• BProc
Other boards on which the individual serve
• None
Last organisation of employment
• Development Bank of Southern Africa
(“DBSA”)
PROF
R HASSAN
Date of birth
22 February 1953
Service with SAFCOL
• Appointed to the SAFCOL Board on
15 September 2006
Academic qualifications
• MSc,
• PhD, (Economics)
• BSc,
• MSc, (Agric Econ)
Other boards on which the individual serves
• None
Last organisation of employment
• Professor and director, Centre for
Environmental Economics and Policy in
Africa (“CEEPA”), University of Pretoria
SOUTH AFRICAN FORESTRY COMPANY LIMITED
BOARD OF DIRECTORS
MR
DJ BILLS
Date of birth
9 February 1948
Service with SAFCOL
• Appointed to the SAFCOL Board on
1 January 2007
Academic qualifications
• BSc (Forestry)
• Research Fellow, Norwegian Forest Research
Institute
• Diploma (Pulp & Paper Technology)
• Graduate – Senior Executive Programme
(Sloan School of Management)
• Member of Institute of Foresters of Australia
• Fellow Institute of Chartered Foresters UK
Other boards on which the individual serves
• President of Commonwealth Forestry
Association (non-profit)
• Chairman of Goldenbil Investments
(private investment trust)
Last organisation of employment
• Chief Executive of ConFor (part time)
• Technical Advisor and Spokesperson for the
Wood for Good campaign
• Director General and Deputy Chairman,
Forestry Commission of Great Britain
• Leader of a review of Scottish natural Heritage
for the Scottish Executive
MAJ. GEN.
RPM SEDIBE
Date of birth
14 November 1944
Service with SAFCOL
• Appointed to the SAFCOL board on
15 September 2006
Academic qualifications
• Practical project management certificate,
UNISA -2002
Studying towards an Advanced Project
Management qualification, UNISA
Other boards on which the individual serves
• Director – Bayethe Holdings (Pty) Ltd
• Managing Director – Vihuru Truck Centre
• Director – Pitsa Ya Sechaba (Pty) Ltd
• Director – Tshwaranang Promotions
• Director and Representative – Austral-Africa
(South Africa)
• Trustee – Letaba Trust
• Chairperson – Aerosud
• Trustee – Kayile Trust
• Chairperson – Centurion Aerospace
Village (CAV)
• Director – United Manganese of Kgalagadi
(UMK)
• Director – Ditswammong (Pty) Ltd
Last organisation of employment
• South African Defence Force – Retired Major
General
MR
SM RADEBE
Date of birth
17 March 1974
Service with SAFCOL
• Appointed to the SAFCOL board on
1 June 2008
Academic qualifications
• Chartered Accountant
• Post Graduate Diploma in Accountancy
• Bachelor of Commerce
Other boards on which the individual serves
• Chairperson of Mogale City Municipality Audit
Committee
• Member of City of JHB Metro Advisory Panel
to Mayor on Performance
• Member of City of JHB Metro Group Audit
Committee
• Non-Executive Chairman of Arthur Els
Actuarial Consulting
Last organisation of employment
• Rebahale Consulting (Pty) Ltd
MRS
E ALEXANDER
Date of birth
30 September 1957
Service with SAFCOL
• Appointed to the SAFCOL board on
1 June 2008
Academic qualifications
• BSc Chemistry & Management
• BA Laws
• PD Management
• International Agri Biotech Course
Other boards on which the individual serves
• Executive Director of South African Table
Grape Industry
Last organisation of employment
• South African Table Grape Industry
37
EXECUTIVE COMMITTEE
SOUTH AFRICAN FORESTRY COMPANY LIMITED
EXECUTIVE COMMITTEE
MR
MJ BREED
Date of birth
30 July 1959
Service with SAFCOL
• Appointed at SAFCOL as General Manager:
Finance and CFO in April 1993
• Appointed to the SAFCOL Board as Executive
Director and CEO on 6 September 2002
Academic qualifications
• BCom (Hons)
• Chartered Accountant (SA)
Other boards on which the individual serves
• Associate companies
• Subsidiary companies in SAFCOL Group
• Kindling Holdings (Dormant)
• RTP Trading (Dormant)
MS
HM MANYATSA
Date of birth
12 January 1979
Service with SAFCOL
• 1 January 2007 to date
Current position
• Chief Financial Officer
Academic qualifications
• BCom (Hons)
• Chartered Accountant (SA)
Boards on which the employee serves
• Subsidiary companies in SAFCOL Group
• Associate companies in SAFCOL Group
Area of expertise
• Financial management
40
MR
F DE VILLIERS
Date of birth
8 December 1960
Service with KLF
• 1 May 1994 to date
Current position
• Senior Executive: Marketing
Academic qualifications
• BEng. (Electronics)
Other boards on which the employee serves
• Subsidiary companies in SAFCOL Group
• RTP Trading (Dormant)
• Kindling Holdings (Dormant)
Area of expertise
• Marketing and processing
MRS
LC MOSSOPROUSSEAU
Date of birth
7 January 1963
Service with SAFCOL
• 1 August 2006 to date
Current position
• Senior Executive Corporate Services
Academic qualifications
• BA
• BA (Hons) (Geography)
• Higher Diploma in Education
• BIuris
Boards on which the employee serves
• Subsidiary Companies in SAFCOL Group
• African Forestry Forum
• Food and Trees for Africa
Area of expertise
• Spatial planning, legal, land and forestry
matters, management
MRS
I GRICIUS
Date of birth
3 May 1968
Service with SAFCOL
• 12 December 1988 to date
Current position
• Senior Executive Legal Services
Academic qualifications
• BIuris LLB
Other boards on which the employee serves
• None
Area of expertise
• Commercial law
MR
LN MUDIMELI
Date of birth
5 October 1974
Service with KLF
• 1 April 2003 to date
Current position
• Senior Executive Corporate Communication
& Liaison
Academic qualifications
• BSc Natural Sciences
• BSc (Hons) Zoology
• MDP
Boards on which the individual serves
• Subsidiary companies in SAFCOL Group
• Forestry South Africa, Exco Member
Area of expertise
• Environmental Management and Public
Relations
SOUTH AFRICAN FORESTRY COMPANY LIMITED
EXECUTIVE COMMITTEE
DR
GJ WESSELS
Date of birth
6 September 1957
Service with SAFCOL
• 1 June 2006 to date
Current position
• Senior Executive Strategy, Planning and ICT
Academic qualifications
• PhD (Mineral Economics)
• MSc (Applied Mathematics)
• BSc (Hons) Operations Research
• BSc Mathematics and Applied Mathematics
• BCom (Hons) Financial Accounting
• Certificate in the Theory of Accountancy
• Chartered Accountant (SA)
Other boards on which the employee serves
• None
Area of expertise
• Strategic planning and business management,
financial and mathematical modelling
MR
AA MUTSHINYA
Date of birth
31 March 1964
Service with SAFCOL
• 1 September 2006 to date
Current position
• Senior Executive Human Capital Management
Academic qualifications
• BA Admin
• BA (Hons) Industrial Psychology
• Certificate Programme: Organisational
Development Consulting
Boards on which the employee serves
• Subsidiary companies in SAFCOL Group
Associate companies
Area of expertise
• Human Resources and transformation
interventions
MR
JHR VAN
DER SIJDE
Date of birth
15 June 1958
Service with KLF
• 3 January 1976 to date
Current position
• Senior Executive Forests
Academic qualifications
• BSc (Hons) Forestry
• MSc Forestry
• MBA
Boards on which the employee serves
• Subsidiary companies of KLF
Area of expertise
• Forestry and research
MR
P CHETTY
Date of birth
5 December 1969
Service with SAFCOL
• 19 January 2009 to date
Current position
• Senior Executive Enterprise Development
Academic qualifications
• BCom & CIA
Boards on which the employee serves
• Subsidiary companies in SAFCOL Group
Associate Companies
Area of expertise
• Business Management and Enterprise
Development
41
GROUP FINANCIAL
REVIEW
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP FINANCIAL REVIEW
FOR THE YEAR ENDED 31 MARCH 2009
FINANCIAL RESULTS
2009
YEAR
R’000
2008
YEAR
R’000
2007
YEAR
R’000
2006
YEAR
R’000
2005
YEAR
R’000
Turnover
857,118
832,188
653,436
326,654
640,696
Operating profit / (loss) (PBIT) before IAS 41
fair value adjustments to biological assets
114,093
267,489
182,919
40,119
(16,720)
IAS 41 fair value adjustments to biological assets
757,915
528,715
861,354
170,972
328,836
Profit before interest and taxation (PBIT)
872,008
796,204
1,044,273
211,091
312,116
Investment income
45,916
45,387
26,464
25,436
16,110
Finance costs
(958)
(2,432)
(2,041)
(2,389)
(1,956)
Share of profit of associates
52,838
32,630
63,734
23,878
17,731
Profit before taxation (PBT)
969,804
871,790
1,132,430
258,016
344,001
Income tax expense
(267,579)
(230,222)
(303,284)
(72,092)
(111,238)
Net profit
702,225
641,568
829,146
185,924
232,763
(348)
(3,036)
(28,559)
(17,181)
-
-
-
-
(30,000)
(30,000)
Retained income for the year
701,877
638,532
800,587
138,743
202,763
FINANCIAL POSITION
2009
YEAR
R’000
2008
YEAR
R’000
2007
YEAR
R’000
2006
YEAR
R’000
2005
YEAR
R’000
260,878
204,476
156,274
148,823
164,611
4,803
4,667
4,667
4,667
4,667
Loss from discontinued operation
Dividend paid
Assets
Property. plant and equipment
Investment property
Intangible assets
1,289
1,660
2,039
2,421
2,9973
Biological assets
3,218,274
2,460,359
1,930,076
1,068,722
898,111
227,622
178,976
161,346
151,162
129,784
-
6,220
11,813
19,109
2,473
4,857
4,385
3,464
Investments in associates
Loans and receivables
Available-for-sale financial assets
Deferred taxation asset
975
1,506
4,495
1,813
-
Pension and provident fund assets
45,216
49,576
-
-
-
Current assets
691,082
716,837
495,248
278,542
292,970
3,385,342
2,694,987
2,047,372
1,249,633
1,113,123
964,719
738,456
575,075
295,012
219,522
-
-
-
16,409
17,648
1,459
12,574
16,915
7,957
7,886
Equity and Liabilities
Capital and reserves
Deferred taxation liability
Long-term provisions
Borrowings
Pension obligation
-
334
-
-
-
103,478
182,311
130,061
106,248
137,434
Cents
Cents
Cents
Cents
Cents
220,7
200,8
251,7
53,1
73,2
%
%
%
%
%
Return on equity (PBT/ capital and reserves)
31,9
36,6
67,0
20,4
35,9
Return on capital employed
(PBT/ (capital and reserves + non-current liabilities)
31,8
36,4
66,1
20,0
34,8
Net margin (PBT/ turnover)
113,1
102,8
161,1
66,9
53,7
Current liabilities
Basic earnings per share
(net profit/number of shares)
Please note the following:
Profit before tax for the current and comparitive years exclude the results of the discontinued operation which are disclosed separately.
44
GROUP VALUE
ADDED STATEMENT
45
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP VALUE ADDED STATEMENT
FOR THE YEAR ENDED 31 MARCH 2009
The statement below details how the value added is applied to meet certain obligations, reward those responsible for its creation
and the portion that is re-invested in the business for the continued operation and expansion of the Group.
2009
R’000
%
2008
R’000
Turnover
857,148
845,017
Less: Direct cost (excluding labour cost)
Value added by operations
466,487
390,662
408,026
436,991
757,915
1,148,577
528,715
965,706
98,754
78,017
1,247,331
1,043,723
Add: Fair value adjustment to biological assets
Add: Investment income & share of profit of associates
TOTAL VALUE ADDED
%
Distributed as follows:
Employees (remuneration. benefits.
228,049
19.9
137,038
14.2
959
0.1
2,433
0.3
8,040
0.7
4,900
0.5
267,579
23.3
230,222
23.8
SUB TOTAL
504,627
44.0
374,593
38.8
Value reinvested
742,703
64.7
669,130
69.3
40,826
3.6
30,598
3.2
701,877
61.1
638,532
66.1
1,247,331
108.7
1,043,723
108.1
social welfare and training)
Providers of finance
Corporate social investment
Government for taxation
Depreciation and Amortisation
Retained income for the year
TOTAL VALUE DISTRIBUTED
% Allocation Of Group Value Added
2009 VALUE ADDED
Employees
Employees
Providers of Finance
Providers of Finance
Corporate Social
Corporate Social
Investment
Investment
Government Taxation
Government Taxation
Please note the following:
Group value added includes the results of the discontinued operation for both years under review.
46
2008 VALUE ADDED
FINANCIAL HIGHLIGHTS
47
SOUTH AFRICAN FORESTRY COMPANY LIMITED
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED 31 MARCH 2009
2006
2009
2008
2007
YEAR
YEAR
YEAR
R’000
R’000
R’000
857,148
845,017
685,083
359,926
640,696
113,745
264,453
154,360
22,938
(16,720)
Profit before interest and taxation - PBIT
871,660
793,168
1,015,714
193,910
312,116
Profit before taxation - PBT
969,456
868,753
1,103,872
240,835
344,001
Net profit
701,877
638,532
800,587
168,743
232,763
Capital expenditure
98,569
76,533
44,498
11,295
28,234
Turnover
Operating profit / (loss) before the effect of
fair value adjustments to biological assets
2009
2008
2007
2006
Financial Year
2005
900
800
700
600
500
400
300
200
100
120
2009
2008
2007
2006
2005
Financial Year
Please note the following:
Financial highlights include the results of the discontinued operation for both the current and prior years under review.
48
R’000
R’000
Capital Expenditure
Rand (Million)
1,000
900
800
700
600
500
400
300
200
100
YEAR
MONTHS
Net Profit
Rand (Million)
Rand (Million)
Turnover
2005
NINE
100
80
60
40
20
2009
2008
2007
2006
Financial Year
2005
RESPONSIBILITY
OF DIRECTORS
49
SOUTH AFRICAN FORESTRY COMPANY LIMITED
RESPONSIBILITY OF THE DIRECTORS FOR THE
ANNUAL FINANCIAL STATEMENTS
31 MARCH 2009
The Directors are required in terms of the South African Companies Act, 1973, and the Public Finance Management Act, 1999
(“PFMA”), to maintain adequate accounting records and are responsible for the content and integrity of the financial statements
and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present
the state of affairs of the Group and Company as at the end of the financial year and the results of its operations and cash flows for
the period then ended, in conformity with International Financial Reporting Standards (“IFRS”). The external auditors are engaged
to express an independent opinion on the financial statements.
The financial statements are prepared in accordance with IFRS and are based on appropriate accounting policies consistently
applied and supported by reasonable and prudent judgements and estimates.
The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the
Group and place considerable importance on maintaining a strong control environment. To enable the Directors to meet their
responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner.
The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures
and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and
all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner
that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing,
managing and monitoring all known forms of risk across the Group. While operating risk cannot be eliminated fully, the Group
endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and
managed within predetermined procedures and constraints.
The Directors are of the opinion, based on the information and explanations given by management and reports by the internal
auditors on the results of their audits, that the system of internal control provides reasonable assurance that the financial records
may be relied on for preparation of the financial statements. However, any system of internal financial control can only provide
reasonable, and not absolute, assurance against material misstatement or loss.
The Directors believe that assets are adequately protected on a cost-effective basis and used as intended with appropriate
authorisation, and that the Group has access to adequate resources to continue in operational existence in the foreseeable
future.
The annual financial statements for the year ended 31 March 2009, set out on pages 60 to 136, and the reports by the Chairperson
and the Chief Executive Officer set out on pages 8 to 34 were approved by the Board of Directors on 22 July 2009 and are signed
on its behalf by:
GMoloi
MJBreed
Chairperson
Chief Executive Officer
50
REPORT OF THE
COMBINED AUDIT AND RISK
MANAGEMENT COMMITTEE
51
SOUTH AFRICAN FORESTRY COMPANY LIMITED
R
EPORT OF THE COMBINED AUDIT AND RISK
MANAGEMENT COMMITTEE
31 MARCH 2009
We are pleased to present our report for the financial year ended 31 March 2009.
The Combined Audit and Risk Management Committee (“Audit Committee”) reports that it has complied with its responsibilities
arising from the Public Finance Management Act, 1999 (“PFMA”). This report has been prepared according to the Treasury
Regulations for Public Entities issued in terms of the PFMA and published by National Treasury during March 2005. SAFCOL
is listed as a major public entity in Schedule 2 of the PFMA and the responsibilities of the Audit Committee also cover all the
subsidiary companies within the SAFCOL Group.
As at 31 March 2009, the Audit Committee consisted of Mr. S Radebe, Mr. M. Bhabha, Mr. D.J. Bills, Ms. E Alexander and Dr. M.
Diaho. In addition to the above members, other persons attending Audit Committee meetings by standing invitation include the
internal auditors, the Group Internal Auditor, the Chief Executive Officer, the Chief Financial Officer and the representatives of the
external auditors. Where necessary, meetings were held separately with the external and internal auditors. The Audit Committee
is satisfied that the external auditors were independent of the Company and Group. The Audit committee adopted terms and
references as formally set by the Board, and it satisfied its responsibilities for the year under review.
A total of four meetings were held during the year under review and in all meetings requirements of a quorum was fulfilled, and the
committee has satisfied its responsibilities in terms of the PFMA.
The Audit Committee has reviewed the Group annual financial statements and annual financial statements of SAFCOL, the report
of the external auditors and periodic reports submitted to it by the internal auditors. In the context of our understanding, the Audit
Committee is satisfied that the major financial risks of the Group are appropriately managed and that the financial statements
fairly present the state of affairs of the Group and Company as at the end of the financial year and the results of its operations and
cash flows for the period then ended. The management letter of the external auditors does not contain any significant or material
non-compliance with prescribed policies and procedures.
S Radebe
52
COMPANY SECRETARY’S
REPORT
53
SOUTH AFRICAN FORESTRY COMPANY LIMITED
C
HAIRPERSON OF THE COMBINED AUDIT AND RISK
MANAGEMENT COMMITTEE COMPANY SECRETARY’S
CERTIFICATE
31 MARCH 2009
Declaration by the Company Secretary in terms of Section 268G (d) of the Companies Act:
In my capacity as Company Secretary, I hereby confirm, in terms of the Companies Act, 1973, that for the year ended 31 March
2009, the Company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of
this Act and that all such returns are true, correct and up to date.
I Gricius
Group Company Secretary
54
INDEPENDENT AUDITOR’S
REPORT TO THE MINISTER
OF PUBLIC ENTERPRISES
55
SOUTH AFRICAN FORESTRY COMPANY LIMITED
IOFNDEPENDENT
AUDITOR’S REPORT TO THE MINISTER
PUBLIC ENTERPRISES
FOR THE YEAR ENDED 31 MARCH 2009
Report on the Financial Statements
We have audited the Group annual financial statements and annual financial statements of South African Forestry Company
Limited, which comprise the consolidated and separate balance sheets as at 31 March 2009, and the consolidated and separate
income statements, the consolidated and separate statements of changes in equity and consolidated and separate cash flow
statements for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the
Directors’ report, as set out on pages 60 to 136.
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 and the
Public Finance Management Act, 1999 (Act No. 1 of 1999) (“PFMA”). 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.
Auditor’s 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 and General Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May
2008. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance 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 in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by Management, as well as evaluating the overall presentation of the financial statements.
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 present fairly, in all material respects, the financial position of South African Forestry
Company Limited as at 31 March 2009, and its consolidated and separate financial performance and its consolidated and separate
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 and the PFMA.
56
SOUTH AFRICAN FORESTRY COMPANY LIMITED
IOFNDEPENDENT
AUDITOR’S REPORT TO THE MINISTER
PUBLIC ENTERPRISES
FOR THE YEAR ENDED 31 MARCH 2009
Report on Other Legal and Regulatory Requirements
Reporting on Performance Information
We have performed procedures of an audit nature on the performance information set out on pages 30 to 32.
Directors’ Responsibility for the Performance Information
The Company’s Directors have additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the annual
report and audited financial statements fairly present the performance against predetermined objectives of the public entity.
Auditor’s Responsibility
We conducted our engagement in accordance with section 13 of the Public Audit Act, 2004 (Act No. 25 of 2004) read with General
Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008.
In terms of the foregoing our engagement entailed performing procedures of an audit nature to obtain an understanding of the
internal controls relating to performance information, including the related systems, processes and procedures. Our procedures
included conducting limited substantive procedures on the performance information. The procedures selected depend on the
auditor’s judgement.
We believe that the evidence we have obtained provides a basis for reporting material shortcomings in the process, systems
and procedures of reporting against predetermined objectives that may come to our attention during the performance of our
engagement and that may impact on the public interest, in the findings below:
Findings
There are no significant findings.
PricewaterhouseCoopers Inc
Director: HO Zastrau
Registered Auditor
Johannesburg
Date: 22 July 2009
57
REPORT OF THE
DIRECTORS
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The Directors hereby present their report on the activities of the South African Forestry Company Limited (“SAFCOL”) and the
Group for the twelve months ended 31 March 2009.
Shareholding
All the issued shares of the Company are held by the Government of the Republic of South Africa. The Directors have not been
granted any authorisation to issue additional shares.
Nature of Business
The Company and its subsidiaries, incorporated in terms of the Companies Act, 1973, read in conjunction with the provisions
of the Management of State Forests Act, 1992, operate mainly in the forestry and forest products industry. The Group employs
approximately 2 255 (2008: 2 168) people in South Africa and 674 (2008: 712) people in Mozambique (excluding 4 expatriates).
The main aim and object of the Company, as defined in its Memorandum and Articles of Association, is the development, in the
long-term, of the South African Forestry industry and the optimising of its assets according to accepted commercial management
practices and conservation principles.
Core Operations
Being a leader in the forestry industry and managing State-owned commercial plantations, the Group oversees a world-class
asset with a competent personnel corps and excellent research capabilities. The Group consists of operating subsidiaries and
associated companies. The operational subsidiaries are Komatiland Forests (Pty) Ltd (“KLF”), Industrias Florestais de Manica, SA
(“IFLOMA”), Mountains to Oceans Forestry (Pty) Ltd., and Themba Timber (Pty) Ltd.
SAFCOL
SAFCOL continuously endeavours to achieve Government’s objectives in the shareholders compact, which includes opportunities
within the wider Forest, Timber, Pulp and Paper industry.
SAFCOL always strives to be recognised as a preferred employer, to improve innovation and technical excellence, to earn
acceptable returns for its shareholder, to protect the natural environment in which it operates, and to ensure a greener heritage for
all. The Group invests resources to help develop future prospects for historically disadvantaged groups.
KLF
KLF’s main business is the conduct of forestry, timber-harvesting, timber-processing and related activities. Its main source of
revenue is round wood timber and sawn lumber sales. Cash generating assets comprise timber on the plantations and lumber
from the processing operations.
Secondary sources of income can be derived from the nursery, ecotourism, harvesting and transport operations, as well as
property related transactions and other investments.
KLF consists of 18 plantations covering 187 320 ha. The total plantable area is approximately 124 000 ha (2008: 125 000 ha) in
extent which are managed in separate compartments of approximately 12 ha each. The plantation stock consists of approximately
90% pine, 8% eucalyptus and 2% acacia and other species. Pine and eucalyptus are clearfelled mainly for saw logs, and acacia
to a large degree produces bark and fibre.
60
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
KLF is one of the largest producers of high quality saw logs in South Africa. Its customer base includes the Timbadola Sawmill, a
sawmill run by KLF, and other large as well as small sawmillers located in and around its plantations. After thinning and clearfelling,
pine is used to produce veneer, pruned logs, saw logs and pulpwood. Eucalyptus is harvested to produce saw logs, poles, mining
timber or pulpwood. Saw logs are graded in four categories reflecting size. Grade A denotes small diameter saw logs and grade D
the largest diameter. The thinning and clearfelling regime determines the average age, size and quality of the saw logs available
for sale and thereby drives the grade mix of sales. Pruned veneer, Grade C, and Grade D represent the highest quality pine
sawlogs.
KLF has a research centre and nursery that currently manages various trial plots in several plantations across the Limpopo,
Mpumalanga and Kwazulu-Natal provinces. The nursery produces plants for all the plantations operated by KLF. A majority of the
plants are pine, with a minority being eucalyptus. The nursery proved to be an invaluable asset for the supply of plants during the
disaster recovery process following the recent major fires. Management believes that the research centre is critical for the ongoing
effectiveness and sustainability of forestry silviculture within KLF.
IFLOMA
IFLOMA is a public limited liability company registered in Mozambique. The IFLOMA project was originally established by the
Mozambican Government in the 1980’s. The plantations were established on an area of approximately 23 600 ha (2008: 17 000
ha) in extent, providing saw logs to two sawmills. Operations are located in the Manica district, Manica Province in the centre of the
Republic of Mozambique along the Mutare / Beira corridor. This is an ideal location from which to serve markets in Mozambique,
Zimbabwe and South Africa.
Sound and mutually beneficial relationships with neighbouring communities are an essential aspect for the sustainability of the
Company’s operations.
Since 2004, IFLOMA has embarked on various social investment projects to address specific needs identified by surrounding
communities through joint forums. Specific focus areas include the maintenance of infrastructure for public benefit and support to
schools.
Messica Complex0
This complex serves as the administrative hub for the forestry operations, and also includes the Messica Sawmill, a pole
treatment plant, and a particle board facility.
The Messica Plant has not been operational for some years and requires repairs and rehabilitation. An in-depth study is required
regarding available volumes of saw logs, pine chips and fuel wood (for the boilers), before re-commissioning.
Penhalonga Sawmill
This small sawmill is located on the Penhalonga plantation and includes a frame saw and double log edger.
Maputo Warehouse
This is a modern warehouse with office facilities situated in the city of Maputo. The warehouse is located ideally for selling
sawn lumber and other products directly to end-users and agents.
61
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Privatisation, Corporatisation and Restructuring
In order to facilitate the restructuring of the State’s commercial forestry assets, SAFCOL corporatised its core forestry assets into
five wholly owned subsidiaries established solely for privatisation purposes. As at 31 March 2009, the disposal of the majority
shareholding of four of these packages was completed.
Due to the complexity of the land claims on KLF land and competition concerns that were likely to have a material bearing on the
timeframe set for the privation of KLF, the Minister of Public Enterprise and the Board of Directors (“the Board”) resolved that the
privatisation process will be postponed to the foreseeable future. The postponement was to allow both the Department and the
Board to address issues raised above before a decision on the way forward regarding privatisation could be made. The Board was
further requested to develop a five-year corporate strategy with a strong focus on land claimants and communities.
Status of Previous Privatisation Transactions
The status of privatisation transactions can be summarised as follows:
PACKAGE
Eastern Cape North
CURRENT STATUS
Implemented the transaction with Singisi Forest Products (Pty) Ltd
(“SFP”) on 1 August 2001 and to date have sold 84% of the shares
in SFP. The remaining 16% is earmarked for disposal in the future.
KwaZulu-Natal
Implemented the transaction with the SiyaQhubeka
Consortium on 1 October 2001. To date have sold 75% of
the shares in SiyaQhubeka Forests (Pty) Ltd (“SQF”). The
remaining 25% is earmarked for disposal in the future.
Eastern Cape South
To date have sold 84% of the shares in Amathole
Forestry Company (Pty) Ltd (“AFC”). The remaining
16% is earmarked for disposal in the future.
Southern and Western Cape
To date have sold 84% of the shares in MTO Forestry (Pty) Ltd
(“MTO”). The remaining 16% is earmarked for disposal in the future.
Mpumalanga, Limpopo and KwaZulu-Natal,
By the end of March 2007, the Government announced its
including the operations in Mozambique - KLF
intention to privatise KLF by 31 March 2009. At present, the
privatisation deadline has been extended by at least five years.
Interest in Privatised Entities
SAFCOL retains a maximum 25% beneficial interest in one of the privatised forestry packages, SQF; and 16% beneficial
interest in SFP, AFC and MTO. Where SAFCOL retains influence, its role is to ensure, on behalf of Government, that the
majority shareholders of these entities implement the business plan undertakings that were committed to in the
privatisation process. Influence is secured by representation on the Boards of the entities, and supported in the respective
shareholders’ agreements containing extensive minority protection clauses in place for a maximum period of five years after the
implementation of each of the initial privatisation transactions. The extensive minority protection has lapsed in SFP and SQF and
only remains in the shareholders’ agreements in respect of AFC and MTO.
62
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Up to 19% of the Company’s interest in the privatised packages has been earmarked for disposal to the following entities:
ENTITY
PORTION OF INTEREST
A trust established in terms of the National
Empowerment Fund (“NEF”) Act, 105 of 1998
or
10%
A trust established for the benefit of
surrounding local communities.
Government’s policy decision in respect of the disposal of the 10% interest to the NEF or community trusts has not yet been
finalised, but it is expected that the disposals will be transacted at a price that approximates market value. Active efforts to finalise
the disposal of the 10% to the NEF or community trusts are being undertaken. The Department of Public Enterprises (“DPE”)
notified SAFCOL previously that a service provider was appointed to assist the DPE in developing a framework for the transfer of
such interest.
The Board has been mandated by the Shareholder to take full responsibility for the implementation of the various ESOP’s. It
was indicated in the relevant offer documents that the ESOPs would be able to acquire the relevant interest at a discount of
approximately 15%. The SFP, MTO and AFC ESOP transactions have been completed. With regard to SQF, an ‘in principle’
agreement was reached with eligible employees that due to the low number of staff members who were still employed by SQF,
an ESOP would not be viable, and that the employees would receive financial compensation in lieu of an ESOP. This process is
almost complete, with few outstanding payments to be made which are expected to be finalised early in the 2009 / 2010 financial
year.
Land Lease
KLF currently leases the land on which its plantations are situated in terms of an arrangement entered into with the Minister
of Water Affairs and Forestry as part of the establishment of SAFCOL as a State Owned Entity.
Land Claims
Various communities, families and individuals have instituted claims against the State in terms of the Restitution of Land
Rights Act, 1994 (Act 22 of 1994), with respect to portions of State forest land upon which the Group conducts its business.
The multitude of land claims are in different stages of research and resolution by the Land Restitution Commission (“LRC”).
SAFCOL has made active efforts to clarify the status of the various land claims and to discuss the possible resolution of the claims
with the LRC at both national and regional level. A co-operative relationship between the LRC and SAFCOL has been maintained
throughout the year.
SAFCOL has tried to assist where possible, and it is hoped that the investigation into land claims by the relevant Regional Land
Claims Commissioner’s (“RLCC’s”) will progress substantially in the next year, and that resolution can be found for forestry areas
under claims. SAFCOL has met with the relevant LRC, various land claimant communities and other stakeholders to endeavour
to find a way to proceed with claims over the land over which it is operative.
Land claims over land owned by the Group, being both the Shannon plantations in the Barberton district and the Abacus properties
in the Ngome area of KwaZulu-Natal, have been investigated by the relevant RLCC’s and settlement offers for both the land and
the standing timber have been received by SAFCOL. The Board has considered these settlement offers and agreed in principle
thereto and it is hoped that the resolution of the two sets of claims will proceed during 2009 / 2010.
Advisors’ Fees
The total cumulative expenditure on advisors’ fees since the commencement of the restructuring process in 1995 amounts to
R58,1 million as at 31 March 2009, including R2,3 million (2008: R9,7 million) for the year under review.
63
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Non-core Assets
As at 31 March 2009, the so-called non-core assets and operations remaining within SAFCOL included the following:
•
Mountains to Oceans Forestry (Pty) Ltd (“Mountains”) – Financing vehicle for forestry Enterprise Development projects,
promoting SMME’s in the forestry industry.
•
Shannon properties – short rotation hardwood plantation under a long-term lease to a third party until 2019.
•
Harlands Saligna Ltd (dormant company) – deregistered during the 2009 financial year.
•
Valgrace Investments (Pty) Ltd (dormant company) – sold during the 2009 financial year; and
•
Minority interests in the four privatised entities.
Shannon Properties
SAFCOL received an offer from the RLCC for the plantation situated close to Barberton and received approval from the Board to
proceed with the transaction subject to Section 54 approval of the Public Finance Management Act (“PFMA”). The matter now
rests with the RLCC and the Minister of Land Affairs and Agriculture. The plantation is currently under long-term lease to Mondi.
Lebanon Fruit Farm Trust
A deed of sale has been entered into between the Department of Public Works and SAFCOL for the acquisition, and
simultaneously between SAFCOL and the Lebanon Fruit Farm Trust for the disposal of farm land in the Western Cape. All
agreements have been signed and the transferring attorneys are currently busy with the transfer. The planned implementation
date is September 2009.
Seed Orchard
This farm is situated in the Mtubatuba district, it was purchased by SAFCOL for the establishment of a seed orchard, conserving
and relocating genetic material. The Group took ownership of the property on 14 May 2008. The 127 ha farm can accommodate
the seed orchards needed and also has the capacity to ensure that a portion of the land will be set aside for community
enterprise development. To date, land has been cleared and prepared for planting and the first 4 ha of seed orchards are
already planted. A research nursery is in operation and upgrade on infrastructure is in progress.
General Review
The financial results of the Company and of the Group are fully set out in the annual financial statements, which form part of
the annual report. The Company and Group are managed in accordance with commercial business principles and, subject to
restraints placed on them, attempt to compete on an equal basis with the rest of the industry.
The Group has, during the year under review, realised a profit before taxation and after discontinued operations of R969.5 million
(2008: R868.8 million profit) after including an increase in the carrying value of standing timber in the amount of R 757.9 million
(2008: R528.7 million). This increase in the value of standing timber is explained fully in Note 11 to the annual financial statements.
The total negative impact of the fire salvage operations is estimated to be R203.3 million (2008: R367.6 million). As a result of the
fires, a total of 228 458 m³ (2008: 218 351 m³) salvaged logs with a fair value of R118.3 million (2008: R95.9 million) are stored on
wet decks. Also included in the results is a realised adjustment to the retirement fund assets of a decrease of R4.0 million (2008:
R49.2 million increase).
As a result of the corporate restructuring, termination costs amounting to R4.4 million (2008: R0.8 million) are included in the
results. All Labour Relations Act requirements were followed.
64
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The Group financial results, as set out in the annual financial statements, can be summarised as follows:
2009*
2008*
R’000
R’000
Turnover
857, 148
845, 017
Profit before Taxation
969, 456
868, 753
Net Profit
701, 877
638, 532
Capital Expenditure
98, 569
76, 533
%
%
Return on Equity
31.9
36.6
Return on Capital Employed
31.8
36.4
*The figures include discontinuing operations
The total amount of capital expenditure for the year under review was R98.6 million (2008: R76.5 million). Capital expenditure is
R24.1 million (2008: R37 million) behind budget mainly due to the lead times involved in delivering equipment and efforts that are
being made by the Group to source equipment from BEE suppliers, and well-managed capital expenditure.
Subsidiaries
The interest of the Company in the profits / (losses) before taxation and after discontinuing operations of its subsidiaries is:
2009
2008
R
R
899, 915, 845
814, 729, 377
(1, 241)
(1, 263)
Valgrace Investments (Pty) Ltd*
0
0
Harlands Saligna Ltd**
0
0
Komatiland Forests (Pty) Ltd
Mountains to Oceans Forestry (Pty) Ltd
* Dormant; sold during 2009 financial year.
** Dormant; deregistered during 2009 financial year.
Expansion into Mozambique
It is part of the strategic objective of the SAFCOL Group to profitably manage and expand the existing IFLOMA operations.
It is our intention to get the plantation into a sustainable rotation of saw timber, and to establish new Eucalyptus plantations
in the Sofala province of Mozambique. These will involve the expansion of the current nursery and clone bank at Messica
plantation to establish seedling supply and other infrastructural developments. Shareholder’s approval is awaited on this regard.
Plantation Fires and Damages
Not withstanding all the changes to policies and procedures and additional actions introduced by Management, operations were
again affected by fires during the period under review. Fire spread and intensity is mainly influenced by weather conditions like
temperature, moisture, and wind, which is not controllable.
Management remains positive that actions like prescribed burning under trees, the Mlilo fire awareness campaign, and closer
interactions with communities through formal social compacts, will reduce hectares lost due to fires.
65
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
4 911 ha were damaged by fires mainly on Berlin, Jessievale, Ngome and Roburnia plantations. Due to the extent of the
damage, compounded by the disastrous fires of 2007, the impact of the recent fires on Management and budgets continue to be
enormous.
Incremental costs due to the salvage operations and increased planting and tending costs negatively impacted current year
results and will have a material impact on the financial results in the short to medium-term. All salvage operations were completed
without any serious injuries.
The benefits of large operations have once again been proven through the effective and efficient relocations of resources to
harvesting and re-establishment of affected areas.
Property, Plant and Equipment
There has been no major change in the nature or use of property, plant and equipment other than the reclassification of
the Shannon property to investment property in 2008.
Valuation of Biological Assets
The valuations of the standing timber for all the operating entities, including IFLOMA, are performed by an external forestry
economist, using detailed information extracted from the core forestry and financial systems.
Assumptions and estimates are used in recording plantation volumes, cost per cubic metre, and product mix. A major consideration
is the estimation of future growth. The inputs to our growth model are complex and involve estimations, all of which are updated
regularly. The fair value model and the methodology and assumptions utilised have been revised to obtain a more accurate
valuation. This has resulted in a change in estimate in the fair value of plantations at year-end, in order to have a more accurate
model in terms of species, volumes, income, expenses and prices. The change has been applied prospectively and fully disclosed
in the financial statements.
Corporate Governance
Code of Corporate Practices and Conduct (“the Code”)
The Directors endorse the Code as set out in the King II Report and have adopted it as far as possible. By supporting the
Code, the Directors confirm the need to conduct the business with integrity and in accordance with generally accepted corporate
practice. This ethos is further supported by the Group’s Code of Ethics setting out the obligations of Directors and employees
relating to ethical standards applicable within the SAFCOL Group.
Public Finance Management Act, 1999 (“PFMA”)
The PFMA became effective on 1 April 2000 and SAFCOL and its subsidiaries are listed as public entities in terms of Schedule 2
of the Act. As part of the implementation of the PFMA, there is an ongoing process of awareness, education, instruction and
advice to the Board and employees.
SAFCOL complies with the PFMA and Treasury Regulations in all material respects with regard to the provisions applicable to
public entities.
Board Functions
The Board provides strategic direction and leadership and formally delegates duties to Management through various structures,
including responsibility and accountability for operations to the Executive Committee, as well as other structures such as the
Combined Audit and Risk Management Committee, the Remuneration Committee, the Transformation Committee and the
Finance, Investment and Transaction Committee. The members of Board committees are selected according to the skills sets
required so that they are able to fulfill their functions and obligations.
66
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The Board acts as the Accounting Authority of the Company in terms of the PFMA. With the guidance of the Company Secretary,
the Board also has the duty of ensuring that the Company complies with all the relevant laws, regulations and codes of good
business practice. The Board approves the mission, strategy, goals, operating policies and priorities of the Company and monitors
compliance with policies and achievement against objectives.
The Directors comply with their fiduciary duties, which include among others:
•
Exercising the duty of utmost care and skill to ensure reasonable protection of the assets and records of SAFCOL and its
subsidiaries.
•
Managing the financial affairs of SAFCOL with fidelity, honesty, integrity and in the best interests of SAFCOL and its
stakeholders.
It must be noted that since its inception in 1993, SAFCOL has followed a policy of good corporate governance, sound accounting
principles, and internal control. As a result, comprehensive accounting policies, accounting procedures, internal control procedures,
conditions of employment and disciplinary procedures, including a code of conduct, have been prepared and documented and are
well entrenched in the operations of the Group.
Material Losses Recovered or Written Off
The following material losses were recovered or written off in the period under review:
•
The Group received an amount of R2.5 million as full and final settlement of a claim instituted by SAFCOL against
investment companies.
•
Estimated R 1.1 million (2008: R166.4 million) in respect of the 5 702 m³ (2008: 415 722 m³) of fire damaged young timber
as a result of the catastrophic fires. The total impairment of the carrying value of standing timber is R107.3 million
(2008: R235.0 million).
Risk Management
The Board bears the following responsibilities concerning risk management:
•
Identification of significant risks that face SAFCOL;
•
Maintenance and review of an effective system of internal control to manage these risks;
•
Formulating and communicating risk control policies within SAFCOL; and
•
Communicating risk control policies to subsidiaries and associates and assisting them in the implementation of an effective
risk management strategy.
The Board is aided in its task by the Combined Audit and Risk Management Committee. Executive Board members or a designated
Senior Manager also serve on the boards of companies in which SAFCOL owns a controlling or significant interest. In this capacity,
they assist these companies in formulating and maintaining an effective risk management strategy.
Risk Management in the SAFCOL Group is managed according to the Group’s Risk Management Framework based on the
Australian / New Zealand Risk Management Standard AS / NZS4360: 2004, indicating the overall process and responsibilities
applied in the organisation.
Government’s initiative to privatise its shareholding in KLF and the related decision to discontinue with SAFCOL by March 2009
created new risks and challenges that had to be discounted in the risk management process.
The Board is responsible for the total process of risk management in the Group. Operational functionaries manage identified risks,
including risk treatment plans and the mitigation of risks. The Risk Management Section coordinates, guides, monitors, advises
and assists line management with risk related issues. The new approach to risk management in the Group necessitated that risk
mitigation actions had to be developed by operational staff to reduce the impact, probability or frequency of any event posing a
risk. These mitigation actions will be monitored and revisited on a regular basis to ensure that the risk is addressed acceptably.
67
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The top key risks for the Group have been established, based on extensive workshops held throughout the organisation and risk
treatment plans that have been finalised.
Key Risks
•
The core asset and processing capacity of the Group may be threatened by fires, natural disasters, pests, and diseases.
•
The Shareholder’s instructions and policy statements, including privatisation of KLF, may impact on the Group’s growth and
profitability.
•
The future restructuring of the Group may result in smaller but uneconomical units which may negatively influence the
sustainability of the resulting enterprises.
•
There is a risk that the Group may lose its Forestry Stewardship Council and other business enabling certification resulting
from actions on State forest land by external parties.
•
The Group may lose productive land due to land claims, illegal occupation of land by adjacent communities, and actions
emanating from exercising mineral rights.
•
Global warming may cause climate change that adversely affects our business.
Audit
The function of internal audit within the framework of SAFCOL is to:
•
Evaluate the functioning of the risk management process and internal control system.
•
Report to the Board via the Combined Audit and Risk Management Committee on any control inadequacies and suggest
actions to remedy the control deficiencies.
Due to limited internal resources, the internal audit department is assisted by outside firms of internal auditors in the execution
of its duties. The internal audit department functions independently and enjoys the full support of the Board as well as unlimited
access to all records and other sources of information.
The function of the external auditors is to perform an audit according to the principles of International Auditing Standards to provide
reasonable assurance of the fair presentation of the financial statements.
Surplus Cash
The Group’s cash equivalents and short-term deposits are placed with investment grade financial institutions on terms not
exceeding three months.
Remuneration Philosophy
The SAFCOL Group recognises that remuneration is a business issue as it has a direct impact on operational expenditure,
company culture, employee behaviour and ultimately the sustainability of the organisation. As such, the reward strategies are
consistent with the organisations business objectives and strategic value drivers. The philosophy will fit in with the Employee Value
Model as part of a holistic and integrated approach.
The objective of the remuneration strategy is to assist the Group to achieve the following:
•
Compete for talent in an increasingly competitive labour market;
•
Attract and retain competent employees who enhance business performance;
•
Motivate and reward individual and team performance that drives stakeholder value for the business;
•
Manage the total cost of employment;
•
Achieve most effective returns (employee productivity) for total employee cost;
•
Be sensitive to diverse employee needs;
•
Promote Employment Equity; and
•
Ensure both internal and external equity and fairness.
68
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
To achieve this, employees are rewarded in a way that reflects the dynamics of the relevant target markets and the context in
which they operate. All five components of an integrated remuneration strategy (guaranteed pay portion, variable pay, performance
management, learning and personal growth, as well as the work environment), is at all times aligned to the strategic direction,
business objectives, and specific value drivers of the Group. The remuneration strategy is therefore not a stand-alone process, but
integrated into other management processes. In this context, the Group is committed to maintaining the following:
•
A remuneration policy that is aligned to the Group’s business strategy, performance objectives and results;
•
Pay practices that encourage individuals to consistently and effectively apply their skills to enhance business performance;
•
Pay levels, preferably on a Total Guaranteed Package basis linked to incentive payments (referred to as Total Potential
Remuneration), that reflects an individual’s worth to the Group;
•
A performance management system that serves both to differentiate individual and / or team performance, as well as
providing a link to training and development of employees;
•
Incentive (variable pay) systems which consider both the diverse needs of different categories of employees (e.g.
management vs. production employees), as well as ensuring alignment with strategic goals and value drivers as part of a
fully integrated approach;
•
Internal equity that eliminates all forms of unfair discrimination. Differentiation is based on fair and defendable criteria such
as: (a) performance ratings derived from a proper performance management process, (b) critical segment analyses;
•
•
External equity through periodic salary surveys, revision of grading’s, and updating of structures for approval by the Board;
A structured and open communication approach regarding the Group’s reward practices and operational performance that
enables any employee to have an informed opinion, and which equips line management to adequately deal with the vast
majority of remuneration questions and issues arising in the workplace.
Retirement Funds
Closure of Executive Umbrella Provident Fund
Following the closure of the Fund by Investment Solutions on 31 December 2008, the membership of nine employees who
were members of the Fund were transferred to the SAFCOL Provident Fund with effect from I January 2009 under conditions
approved by the SAFCOL Board.
Utilisation of Surplus in the Provident Fund
Approval has been granted by the Board for the extension of the utilisation of the Contribution Holiday from 1 April 2009 to
31 March 2010.
Dividends
Due to the uncertainty of the economic crisis, the worsening of the financial performance of the Group and its impact on surplus
cash available within the Group, no dividends have been proposed by the Board for 2009.
Going Concern
The Directors believe that the Group will be a going concern in the year ahead. For this reason, they continue to adopt the going
concern basis in preparing the Group annual financial statements.
69
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Legal Proceedings
The Londoloza / Paharpur consortium instituted a damages claim against SAFCOL and the Government. The claim is for payment
of approximately R3.2 billion damages based on Government’s decision not to continue with the previous privatisation process. The
matter is being defended and the Directors have been advised by the company’s legal advisers that the chances of successfully
defending the matter are good.
Directors
The following Directors were in office at 31 March 2009:
COMMITTEES
G Moloi
(Chairperson)
F
MJ Breed
(Chief Executive Officer)
None
E Alexander
C, R, T, F
M Bhabha
C,R,T
DJ Bills*
C,F (Chairperson)
PJ Derman
R,T (Chairperson)
M Diaho
C,T,R (Chairperson)
R Hassan
F
S Radebe
R, T, F,C (Chairperson)
RPM Sedibe
R,T
*Australian citizen
F = Finance, Investment and Transaction Committee
R = Remuneration Committee
T = Transformation Committee
C = Combined Audit and Risk Management Committee
With the exception of the Chief Executive Officer, all Board members are Independent Non-Executive Directors. The principle of
appointing a majority of Non-Executive Directors is also applied in the composition of the boards of active subsidiary companies
so as to ensure good corporate governance at all levels within the Group.
Changes to the Board of Directors during the year under review were as follows:
Appointments:
•
DJ Bills took over the role of an Independent Non-Executive Chairperson of the Combined Audit and Risk Management
Committee from TF Zulu in an acting capacity with effect from 1 May 2008. S Radebe took over this role on a permanent
basis with effect from 1 July 2008.
•
E Alexander was appointed on 1 June 2008.
•
S Radebe was appointed on 1 June 2008.
Resignation:
•
JP Coetzer resigned on 30 June 2008.
70
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Board Committees
Board committees assist the Board in discharging its responsibilities. This assistance is rendered in the form of
recommendations and reports submitted to Board meetings, ensuring transparency and full disclosure of Board committees’
activities. Each committee operates within the ambit of its defined terms of reference that sets out the composition, roles,
responsibilities, delegated authority and requirements for convening meetings.
Remuneration Committee
The purpose of the Remuneration Committee is to establish a formal and transparent procedure for developing a policy on
executive remuneration and for fixing the remuneration packages of the executive and senior management within agreed terms
of reference.
The role of the Committee is to work on behalf of the Board and to be responsible for its recommendations and will, within these
terms of reference:
•
Determine, agree and develop the Company’s general policy on executive and senior management remuneration;
•
Determine specific remuneration packages for Executive Directors of the Company, including but not limited to basic salary,
•
Determine any criteria necessary to measure the performance of Executive Directors in discharging their functions and
benefits in kind, any annual bonuses, performance based incentives, share incentives, pensions and other benefits; and
responsibilities.
The Committee aims to give the Executive Directors every encouragement to enhance the Company’s performance and to ensure
that they are fairly, but responsibly rewarded for their individual contributions and performance.
Transformation Committee
The primary objective of the Transformation Programme is to ensure that the Company aligns its operations with the objectives
and goals set out by Government with regard to transformation.
Transformation in SAFCOL is defined as the process of change to what all South Africans aspire to and embracing the human
rights and values as enshrined in the Constitution of the Republic of South Africa. Transformation in SAFCOL addresses the
following areas:
•
Diversity of all stakeholders;
•
The value system of the organisation;
•
Structures; and
•
Policies and Procedures.
The Committee’s secondary objective is to develop strategies that will create an organisational culture, structures and processes
that seek to support Government’s transformation drive, including the development of people and the optimisation of their potential.
The Programme will form part of the business plans of the divisions. The Group Executive: Human Resources, will be responsible
for enforcing, monitoring and auditing development and progress. The exclusion of any person capable of contributing to the
Group’s affairs is not sound business practice and accordingly, a secondary but equal objective is the need to address all existing
inequalities in staff profiles and organisational practice. Members of staff who have been previously disadvantaged are given the
appropriate support and access to opportunities so that they, too, will be equipped for successful careers in the Group.
Finance, Investment and Transaction Committee
The Finance, Investment and Transaction Committee executes its mandate without derogating from the provisions of the PFMA.
The Committee has no decision-making powers, other than the approval of the Quarterly Report to DPE, since its authority is
being limited to a considering and monitoring function. All decisions required are recommended to the Board for approval.
71
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The Sub-Committee is authorised by the Board to mandate the Chief Executive to obtain professional advice and to secure the
attendance of outsiders with relevant experience and expertise with regard to any issues requiring such expertise.
The role of the Finance, Investment and Transaction Committee is to:
•
Consider and recommend to the Board an appropriate Delegation of Authority Framework enabling the Company to operate
efficiently;
•
Procure and review the long-term and short-term funding plans for consideration by the Board;
•
Monitor the current funding plan of the Company;
•
Monitor the financial performance of the Company on a quarterly basis;
•
Consider and recommend the annual capital and operating budget to the Board;
•
Consider and recommend the Treasury Mandate to the Board;
•
Review the capital investment process and monitor total group capital expenditure;
•
Review and recommend to the Board any capital project or the procurement of any capital items, or the commencement of
any capital project, the cost of which exceeds the limit of approval delegated to the Chief Executive from time to time;
•
•
Review and recommend to the Board any sale or disposal of assets not provided for under the CEO delegation;
Review and recommend to the Board, new projects not included in the approved annual budget, as well as the funding
thereof;
•
Review and recommend to the Board increase in estimated total costs of projects included in the approved budget;
•
Consider and recommend to the Board the write-off of bad debt(s) or settlement or abandonment of legal actions not
accommodated within the CEO delegation;
•
Consider and recommend to the Board any write-off resulting from the impairment of assets not within the CEO delegation;
•
Consider and recommend the disposal or closure of any business to the Board;
•
Consider and approve the Quarterly Report to DPE;
•
Consider and recommend any matter to be dealt with in terms of section 54 of the PFMA to the Board;
•
Investigate and make recommendations to the Board on any subject that could have a financial impact on the business of
the Company and requested to do so by the Board or a Board Sub-Committee;
•
Consider all contractual matters relating to the Company’s relationship with the Shareholder and recommend to the Board
for actions; and
•
Where necessary, investigate alternatives regarding the privatisation of KLF and winding up of SAFCOL. Recommend
preferred options and actions to be taken and report back on progress.
Combined Audit and Risk Management Committee
The Combined Audit and Risk Management Committee is an important element of the Board’s system of monitoring and
control.
The responsibilities of the Committee are:
•
To provide the Chief Financial Officer, the external auditor and the head of the internal audit function access to the Chairman
of the Committee or any other member of the Committee as is required in relation to any matter falling within the remit of the
Committee;
•
To ensure co-ordination of internal and external audit activities;
•
To oversee any investigation of activities which are within its terms of reference and act as a court of last resort; and
•
To consider other relevant matters referred to it by the Board.
This Committee considers the Company’s risk management policy and strategy and reviews the integrity of the risk management
process and significant risks facing the Company. It monitors the integrity of the annual and interim statutory accounting reports,
including operating and financial reviews, and corporate governance statements relating to audit and risk management, before
72
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
submission to the Board. Following the Committee’s review, reports are submitted to the Board if the Committee is not satisfied
with any aspect of the proposed financial reporting by the Company.
The Committee monitors compliance with relevant legislation and ensures that an appropriate system of internal control is
maintained to protect the Company’s interests and assets. It reviews the activities and effectiveness of the internal audit function.
It is also responsible for evaluating the independence, objectivity, and effectiveness of the external auditors and for reviewing
accounting and auditing concerns identified by internal and external audit. The head of the internal audit department and external
auditors have unrestricted access to the Chairperson of this committee and Chairperson of the Board.
Company Secretariat and Corporate Governance
During the year under review, the Company engaged the services of KPMG to conduct a corporate governance review
audit in order to ensure that the Company continues to carry its affairs in line with best corporate practices. The review is in
progress.
Mrs. I. Gricius resigned as Company Secretary effectively 31 March 2009. Mr. R Shirinda was appointed with effect from 1 April
2009 as Acting Company Secretary. He was then appointed by the Board on a permanent basis with effect from 15 May 2009.
Board Performance
The following meetings were held and attended by the Board of Directors and its Sub-Committees for the period under review:
Resigned 1/6/08
DJ Bills
Y
Y
Y
N
Y
N/A
N/A
Y
Y
16 May 08
Scheduled
Y
Y
N
Y
N
Y
Y
N/A
N/A
Y
Y
12 June 08
Ad Hoc
Y
Y
Y
Y
Y
N
Y
N
Y
Y
Y
10 July 08
Scheduled
Y
N
N
Y
Y
N
Y
Y
Y
Y
N/A
14 Aug 08
AGM
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
N/A
14 Aug 08
Scheduled
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
N/A
16 Oct 08
Scheduled
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N/A
12 Nov 08
Scheduled
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N/A
12 Feb 08
Scheduled
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
N/A
Scheduled
100%
87.5%
75%
75%
87.5%
37.5%
100%
100%
100%
100%
100%
Ad hoc
100%
100%
100%
100%
100%
0%
100%
0%
100%
100%
100%
Chair
JP Coetzer
M Diaho
Y
MJ Breed
M Bhabha
Y
S Radebe
R Hassan
Scheduled
E Alexander
RPM Sedibe
10 April 08
SAFCOL Board
G Moloi
PJ Derman
Appointed 1/6/08
Executives
Appointed 1/6/08
Non-executives
Attendance
Note: Minister Alec Erwin addressed the Board at an ad hoc meeting held 31 March 09.
73
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
The members’ attendance of Board and relevant Committee meetings can be summarised as follows:
E
Remuneration Committee
M Diaho
RPM
Chair
Sedibe
M Bhabha
PJ Derman
Alexander
Appointed
01/07/08
S Radebe
Appointed
01/07/08
9 April 08
Scheduled
Y
Y
Y
Y
N/A
N/A
15 May 08
Scheduled
Y
Y
N
Y
N/A
N/A
9 July 08
Scheduled
Y
Y
Y
N
N
Y
E
Remuneration Committee
M Diaho
RPM
Chair
Sedibe
M Bhabha
PJ Derman
Alexander
Appointed
01/07/08
S Radebe
Appointed
01/07/08
15 Oct 08
Scheduled
Y
Y
Y
Y
Y
Y
11 Feb 08
Scheduled
N
Y
Y
Y
Y
Y
80%
100%
80%
80%
66.6%
100%
Attendance
The members’ attendance of Board and relevant Committee meetings can be summarised as follows:
E
PJ
Transformation Committee
Derman
M Bhabha
Chair
RPM
M Diaho
Sedibe
Alexander
Appointed
01/07/08
S Radebe
Appointed
01/07/08
9 April 08
Scheduled
Y
Y
Y
Y
N/A
N/A
15 May 08
Scheduled
Y
N
Y
Y
N/A
N/A
9 July 08
Scheduled
N
Y
Y
Y
Y
Y
13Aug 08
Scheduled
Y
Y
Y
N
Y
Y
15 Oct 08
Scheduled
Y
N
Y
Y
N
Y
11 Feb 09
Scheduled
Y
Y
Y
N
Y
Y
83.3%
83.3%
100%
66.6%
75%
100%
Attendance
74
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Finance, Investment and
Transaction Committee
DJ Bills
Chair
R Hassan
G Moloi
E Alexander
S Radebe
Appointed
Appointed
01/07/08
01/07/08
9 April 08
Scheduled
Y
Y
Y
N/A
N/A
16 May 08
Scheduled
Y
Y
Y
N/A
N/A
13 Aug 08
Scheduled
Y
Y
Y
Y
Y
11 Nov 08
Scheduled
Y
Y
Y
Y
Y
11 Feb 09
Scheduled
Y
Y
N
Y
Y
100%
100%
80%
100%
100%
Attendance
TF Zulu
Combined Audit and Risk
Management Committee
S Radebe
Appointed
01/06/07
M Bhabha
M Diaho
Chair
D Bills
E Alexander
Appointed
Chair 01/05/
Appointed
01/07/08
08-30/06/08
01/07/08
01/05/08
Chair
01/07/09
13 May 08
Scheduled
N
Y
Y
Y
N/A
N/A
9 July 08
Scheduled
N/A
Y
Y
Y
Y
Y
15 Oct 08
Scheduled
N/A
N
Y
N
N
Y
11 Feb 09
Scheduled
N/A
Y
N
Y
Y
Y
N/A
75%
75%
75%
66.6%
100%
Attendance
Y – Attended / N – Did not attend / N/A – Not Applicable
75
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
R
R
R
R
R
R
3,021,496
1,819,269
843,858
-
135,688
5,820,311
13,101,418
2,214,728
1,819,269
622,133
-
93,945
4,750,075
7,878,445
806,768
-
221,725
-
41,743
1,070,236
5,222,973
3,003,328
-
-
-
-
-
3,003,328
2,134,007
662,047
-
-
-
-
-
662,047
538,950
275,905
-
-
-
-
-
275,905
-
304,249
-
-
-
-
-
304,249
284,479
423,824
-
-
-
-
-
423,824
335,731
261,314
-
-
-
-
-
261,314
232,298
328,470
-
-
-
-
-
328,470
288,199
189,754
-
-
-
-
-
189,754
206,472
-
-
-
-
-
-
-
30,122
237,094
-
-
-
-
-
237,094
217,756
304,511
-
-
-
-
-
304,511
-
16,160
-
-
-
-
-
16,160
-
-
9,258,232
3,479,267
1,187,867
650,673
355,386
14,931,424
12,421,545
-
690,143
277,278
123,774
-
27,574
1,118,769
912,129
-
1,113,653
470,043
130,167
-
36,871
1,750,735
1,082,419
-
184,657
60,417
26,238
-
-
271,311
-
-
1,395,041
630,630
260,591
213,586
60,266
2,560,114
2,259,014
-
1,124,082
466,200
163,699
-
43,873
1,797,854
1,257,180
-
538,551
316,720
-
-
19,697
874,968
755,190
-
1,095,429
436,194
147,919
209,235
42,017
1,930,794
1,663,175
-
1,076,308
-
107,147
10,434
46,283
1,240,171
1,606,030
-
1,013,326
394,065
70,677
8,539
38,406
1,525,013
1,284,135
-
1,027,041
427,720
157,655
208,880
40,399
1,861,695
1,602,273
3,003,328
12,279,728
5,298,536
2,031,725
650,673
491,074
23,755,063
27,656,970
MJ Breed A
Chief Executive Officer
JP Coetzer A.B.C
Financial Director
Non-executive Directors of SAFCOL
G Moloi
Chairperson of the Board of Directors
E Alexander B
Member of the Board of Directors
M Bhabha
Member of the Board of Directors
DJ Bills G
Member of the Board of Directors
PJ Derman
Member of the Board of Directors
M Diaho
Member of the Board of Directors
R Hassan
Member of the Board of Directors
B Njobe F
Member of the Board of Directors
RPM Sedibe
Member of the Board of Directors
S Radebe B
Member of the Board of Directors
T Zulu B,C
Member of the Board of Directors
Executive Committee
LC Mossop Roussouw
Senior Executive: Corporate Services
HM Manyatsa A
Chief Financial Officer
P Chetty B
Senior Executive: Enterprise Development
GJ Wessels A
Senior Executive: Strategy, Planning and ICT
AA Mutshinya
Senior Executive: Human Capital Management
I Gricius A
Senior Executive: Legal Services
F de Villiers A
Senior Executive: Marketing
JS van der Walt A,B,C
Senior Executive: Enterprise Development
LN Mudimeli
Senior Executive: Corporate
Communication and Liason
JHR van der Sijde A
Senior Executive: Forests
Total
Notes:
A Member of the Board of Directors of one or more SAFCOL subsidiaries
B Remuneration for part of the year
C Resigned / Retired during the year
D Bonus paid relating to fire salvage operations
E Loyalty bonus paid quarterly to all employees as a result of the privatisation. The final bonus was paid in October 2008
F Resigned / Retired in the prior year
G Foreign Director and receives an additional international allowance
76
Loyalty
Bonus E
R
-
Performance
Related
Bonuses
R
Salary
Fire Bonus D
Executive Directors of SAFCOL
Managerial services
Retirement
Fund &
Medical aid
contributions
Fees for services
as Director
Directors and Executive Committee Remuneration
2009
2008
SOUTH AFRICAN FORESTRY COMPANY LIMITED
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MARCH 2009
Secretary
I. Gricius*
PO Box 1771
Silverton
0127
*Mrs. I. Gricius resigned 31 March 2009 and was replaced by Mr. R. Shirinda.
Bankers
ABSA Bank Limited
FirstRand Bank Limited
The Standard Bank of South Africa Limited
Nedbank Limited
Investec Limited
Auditors
External Auditors
•
PricewaterhouseCoopers Inc
Internal Audit Service Providers
•
Tereo Krino Business Assurance Consultants (Pty) Ltd
•
KPMG
Environmental Auditors
•
SGS South Africa (Pty) Ltd
Attorneys
•
Gildenhuys Lessing Malatji Attorneys
•
Hofmeyr Herbstein & Gihwala Inc.
•
Jarvis Pudney Attorneys
•
Jasper van der Westhuizen & Bodenstein Inc.
•
Morajane du Plessis Inc.
•
Roestoff, Venter & Kruse Attorneys
•
Deneys Reitz
•
Werksmans Incorporated
•
Tabacks Corporate Law Advisors
Registered Office and Postal Address
South African Forestry Company Limited
Registration number: 1992/005427/06
HB Forum Building
13 Stamvrug Street
Val de Grace
Pretoria
Tel: +27 12 481-3500
Fax: +27 12 804-3716
77
GROUP INCOME
STATEMENT
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
YEAR
YEAR
YEAR
N
ENDED
ENDED
ENDED
ENDED
O
31 MARCH
31 MARCH
31 MARCH
31 MARCH
T
2009
2008
2009
2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
857,118,337
832,187,724
27,711,792
31,090,196
Cost of sales
(552,928,034)
(514,308,256)
-
-
Gross profit
304,190,303
317,879,468
27,711,792
31,090,196
Other operating income
757,309,474
572,886,600
-
174,845
Administrative expenses
(68,653,275)
(61,902,191)
(25,074,702)
(22,300,741)
Other operating expenses
(120,838,502)
(32,659,645)
(31,034,307)
(25,586,668)
E
S
Continuing Operations
Turnover
3
Operating profit / (loss)
4
872,008,000
796,204,232
(28,397,217)
(16,622,368)
Investment income
5
45,916,216
45,387,326
47,621,876
45,349,766
Finance costs
6
(957,985)
(2,431,639)
(2,102,057)
(8,076,644)
Share of profit of associates
13
52,837,928
32,629,564
-
-
969,804,159
871,789,483
17,122,602
20,650,754
(267,579,137)
(230,221,753)
702,225,022
641,567,730
11,700,991
5,083,963
(347,714)
(3,036,043)
-
-
701,877,308
638,531,687
11,700,991
5,083,963
Profit before tax
Income tax expense
7
Profit for the year from continuing
operations
(5,421,611)
(15,566,791)
Discontinued Operations
Loss for the year from
discontinued operations
Profit For The Year
80
20
GROUP BALANCE SHEET
81
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP BALANCE SHEET
FOR THE YEAR ENDED 31 MARCH 2009
N
As At
As At
As At
As At
31 March 2009
31 March 2008
31 March 2009
31 March 2008
Group
Group
Company
Company
R
R
R
R
3,763,915,357
2,911,825,732
27,738,732
36,849,786
260,878,226
204,336,546
410,010
473,648
O
T
E
S
Assets
Non-current Assets
Property, plant and equipment
9
Investment property
8
4,802,646
4,806,428
4,802,646
4,806,428
Intangible assets
10
1,289,426
1,660,315
-
-
Biological assets - Plantations
11
3,218,274,492
2,460,359,321
-
-
Investments in subsidiaries
12
-
-
320
17,841
Investments in associates
13
227,622,469
178,975,858
15,495,737
19,687,054
Loans and receivables
15
-
6,220,168
-
6,220,168
Available-for-sale financial assets
16
4,856,766
4,384,882
4,606,093
4,134,209
Pension and provident fund assets
32
45,215,999
49,576,000
1,535,504
4,224
Deferred taxation asset
24
975,333
1,506,214
888,422
1,506,214
691,082,264
716,837,036
678,658,783
660,756,400
Inventories
17
187,277,778
126,605,359
65,129
54,878
Trade and other receivables
18
185,826,796
151,237,215
7,670,391
10,689,952
Current income tax assets
7
16,016,396
11,077
7,843,571
672,102
Cash and cash equivalents
19
295,940,590
432,979,030
288,454,667
419,645,348
Loans and receivables
15
6,020,704
5,723,096
6,020,704
5,723,096
Investments in subsidiaries
12
-
-
368,604,321
223,971,024
Assets classified as held for sale
21
-
281,259
-
-
4,454,997,621
3,628,662,768
706,397,515
697,606,186
3,385,342,045
2,694,987,380
692,267,020
680,566,029
318,013,254
318,013,254
318,013,254
318,013,254
Current Assets
Total Assets
Equity And Liabilities
Capital And Reserves
Share capital
22
Non-distributable reserves
23
Retained earnings
Non-current Liabilities
119,879,231
131,401,874
126,821,456
126,821,456
2,947,449,560
2,245,572,252
247,432,310
235,731,319
966,177,146
751,364,370
-
-
Deferred taxation liability
24
964,718,533
738,456,474
-
-
Borrowings
25
1,458,613
12,573,896
-
-
Pension obligation
32
-
334,000
-
-
103,478,430
182,311,018
14,130,495
17,040,157
75,104,812
105,501,323
8,678,751
11,314,747
Current Liabilities
Trade and other payables
26
Current income tax liabilities
7
-
53,270,712
-
-
Provisions
27
26,820,247
19,046,083
5,451,744
5,725,410
Borrowings
25
Total Equity And Liabilities
82
1,553,371
4,492,900
-
-
4,454,997,621
3,628,662,768
706,397,515
697,606,186
GROUP STATEMENT
OF CHANGES EQUITY
83
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2009
Non-distributable Reserves
N
O
Total
Share
Capital
Capital
Profit
Reserve
Retirement
Fund
Reserve
Revaluation
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
R
R
R
R
R
R
R
318,013,254
64,373,511
64,000,000
(603,538)
3,631,901
2,245,572,252
2,694,987,380
-
-
-
-
(11,522,643)
-
(11,522,643)
-
-
-
-
-
701,877,308
701,877,308
318,013,254
64,373,511
64,000,000
(603,538)
(7,890,742)
2,947,449,560
3,385,342,045
318,013,254
64,373,511
64,000,000
(603,538)
(5,452,172)
1,607,040,565
2,047,371,620
-
-
-
-
9,084,073
-
9,084,073
-
-
-
-
-
638,531,687
638,531,687
318,013,254
64,373,511
64,000,000
(603,538)
3,631,901
2,245,572,252
2,694,987,380
318,013,254
64,373,511
64,000,000
(1,552,055)
-
235,731,319
680,566,029
-
-
-
-
-
11,700,991
11,700,991
318,013,254
64,373,511
64,000,000
(1,552,055)
-
247,432,310
692,267,020
318,013,254
64,373,511
64,000,000
(1,552,055)
-
230,647,356
675,482,066
-
-
-
-
-
5,083,963
5,083,963
318,013,254
64,373,511
64,000,000
(1,552,055)
-
235,731,319
680,566,029
T
E
S
Group
2009
Balance at 1
22,
April 2008
23
Foreign currency
translation reserve
Profit for the year
Balance at 31
22,
March 2009
23
2008
Balance at 1
22,
April 2007
23
Foreign currency
translation reserve
Profit for the year
Balance at 31
22,
March 2008
23
Company
2009
Balance at 1
22,
April 2008
23
Profit for the year
Balance at 31
22,
March 2009
23
2008
Balance at 1
22,
April 2007
23
Profit for the year
Balance at 31
22,
March 2008
23
84
GROUP CASH FLOW
STATEMENT
85
SOUTH AFRICAN FORESTRY COMPANY LIMITED
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2009
N
O
T
E
S
Year
Ended
31 March 2009
Year
Ended
31 March 2008
Year
Ended
31 March 2009
Year
Ended
31 March 2008
Group
Group
Company
Company
R
R
R
R
969,456,445
868,753,440
17,122,602
20,650,754
Operating activities
Profit for the year before tax and after loss from discontinued operations
Adjusted for :
Depreciation of property, plant and equipment
4,9
39,632,802
29,552,414
160,267
131,155
Depreciation of investment property
4,8
3,782
3,792
3,782
3,792
Impairment of property, plant, and equipment
4,9
-
476,879
-
-
Amortisation of intangible assets
4,10
1,189,205
1,041,284
-
-
Unrealised foreign exchange (gain) / loss
4
(11,272,720)
5,913,003
-
4,33
(14,924,682)
(45,898,685)
-
-
(Profit) / Loss on disposal of interest in associates
4
-
(254,908)
-
703,359
Share of profit in associates
Increase in fair value adjustment - Agricultural produce
13
(52,837,928)
(32,629,564)
-
-
Investment income - interest income
5
(45,873,111)
(45,347,438)
(47,621,876)
(45,349,766)
Investment income - dividends received
5
(43,105)
(39,888)
-
-
Finance costs
6
959,005
2,432,698
2,102,057
8,076,644
Profit on disposal of property, plant and equipment
4,9
(1,978,005)
(123,464)
-
(174,845)
Surplus on disposal of non-current assets held for sale
21
(254,383)
-
-
-
4,11
(757,915,170)
(528,715,199)
-
-
Increase / (Decrease) in provisions
27
7,774,164
(12,808,635)
(273,666)
(4,896,006)
Reversal of impairment of associate
13
(808,515)
-
(808,513)
-
133,107,784
242,355,729
(29,315,347)
(20,854,913)
7,839,220
Movement in fair value of biological assets
Operating cash flows before movements in working capital
Working capital changes
(110,733,829)
(47,562,643)
373,314
Increase in inventories
33
(45,747,737)
(55,330,602)
(10,251)
(2,271)
(Increase) / decrease in trade and other receivables
33
(34,589,581)
(32,566,116)
3,019,561
8,323,664
(Decrease) / Increase in trade and other payables
33
(30,396,511)
40,334,075
(2,635,996)
(482,173)
22,373,955
194,793,086
(28,942,033)
(13,015,693)
Cash generated from / (utilised in) operations
Investment income - interest received
5
45,873,111
45,347,438
47,621,876
45,349,766
Finance costs
6
(959,005)
(2,432,698)
(2,102,057)
(8,076,644)
Investment income - dividends received
5
43,105
39,888
-
-
Taxation paid
7
(110,307,136)
(23,549,297)
(11,975,289)
(14,871,309)
(42,975,970)
214,198,417
4,602,497
9,386,120
Net cash (outflow) / inflow from operating activities
Investing activities
Purchases of property, plant and equipment
9
(97,753,570)
(75,878,263)
(96,629)
(384,340)
Proceeds from disposal of property, plant and equipment
9
3,051,673
571,728
-
329,826
Proceeds on disposal of non-current assets held for sale
21
528,676
-
-
-
Purchases of biological assets
11
-
-
-
Proceeds on disposal of associates
33
-
254,908
-
254,908
Purchases of intangible assets
10
(815,045)
(655,222)
-
-
Increase in available-for-sale financial assets
16
(471,884)
(920,488)
(471,884)
(920,488)
Decrease in loans and receivables
15
5,922,560
5,589,071
5,922,560
5,589,071
Associate loans repaid
33
4,999,830
15,000,000
4,999,830
15,000,000
(Increase) / Decrease in investments in subsidiaries
12
-
-
(144,615,776)
70,496,042
Decrease / (Increase) in net pension and provident fund assets
32
4,026,001
(49,242,000)
(1,531,280)
-
(80,511,759)
(106,848,504)
(135,793,179)
90,365,019
(14,054,812)
(8,768,349)
-
-
(14,054,812)
(8,768,349)
-
-
Net cash (outflow) / inflow from investing activities
(1,568,238)
Financing activities
Decrease in borrowings
25
Net cash outflow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(137,542,541)
98,581,564
(131,190,681)
99,751,139
19
432,979,030
333,612,832
419,645,348
319,894,209
504,101
784,634
-
-
19
295,940,590
432,979,030
288,454,667
419,645,348
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
86
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS
87
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
1.
General Information
South African Forestry Company Limited (“SAFCOL”), a public company and holding company of the Group, is incorporated and
domiciled in the Republic of South Africa. The Group is a horizontally integrated operation whose main business is the conduct of
forestry, timber harvesting, timber processing, and related activities in Southern Africa.
2.
Significant Accounting Policies
2.1
Basis of Preparation
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These
policies have been applied to all years presented which are consistent with those of the previous year, except for new and revised
standards and interpretation adopted per notes to the financial statements.
The financial statements have been prepared under the historical cost basis as modified by the revaluation of land and buildings,
available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, and incorporate the following
principal accounting policies.
2.2
Statement of compliance
The Annual Financial Statements and Group Annual Financial Statements of SAFCOL are prepared in accordance with International
Financial Reporting Standards (“IFRS”) and the requirements of the South African Companies Act, 1973, as well as the Public
Finance Management Act, 1999.
The Directors are also required to exercise their judgement in the process of applying the Group and Company’s accounting
policies.
In the current year, the Group and Company have adopted all of the new and revised Standards and Interpretations issued by the
International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”)
of the IASB that are relevant to its operations and effective for annual reporting periods commencing on 1 April 2008.
Standards, Amendment and Interpretations Effective in 2009
•
IFRIC 14, ‘The Limit on a Defined Benefit Asset’ (effective from 1 January 2008).
Standards, Amendment and Interpretations Effective in 2009, but not Relevant to the Group and Company’s Operations
•
IFRIC 12,’Service Concession Arrangements’ (effective from 1 January 2008).
Standards, Amendments and Interpretations to Existing Standards that are not yet Effective and have not been Early
Adopted by the Group and Company
•
IAS 1 (Revised), ‘Presentation of financial statements’ (effective from 1 January 2009).
•
IAS 32 (Amendment), ‘Financial instruments: Presentation’, and IAS 1 (Amendment), ‘Presentation of financial statements’–
‘Puttable financial instruments and obligations arising on liquidation’ (effective from 1 January 2009).
•
IFRS 1 (Amendment) ‘First time adoption of IFRS’ and IAS 27 ‘Consolidated and separate financial statements’(effective
•
IAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective from 1 July 2009).
from 1 January 2009).
88
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
•
•
IFRS 3 (Revised), ‘Business combinations’ (effective from 1 July 2009).
IFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’ (and consequential amendment to
IFRS 1, ‘First-time adoption’) (effective from 1 July 2009).
•
IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32, ‘Financial Instruments:
Presentation’ and IFRS 7, ‘Financial instruments: Disclosures’) (effective from 1 January 2009).
•
IAS 36 (Amendment), ‘Impairment of assets’ (effective from 1 January 2009).
•
IAS 38 (Amendment), ‘Intangible assets’ (effective from 1 January 2009).
•
IAS 19 (Amendment), ‘Employee benefits’ (effective from 1 January 2009).
•
IAS 39(Amendment), ‘Financial instruments: Recognition and measurement’ (effective from 1 January 2009).
•
IAS 1 (Amendment), ‘Presentation of financial statements’ (effective from 1 January 2009).
•
There are a number of minor amendments to IFRS 7, ‘Financial instruments: Disclosures’, IAS 8, ‘Accounting policies,
changes in accounting estimates and errors’, IAS 10, ‘Events after the reporting period’, IAS 18, ‘Revenue’, IAS 34, ‘Interim
financial reporting’, IAS 40, ‘Investment property’ and IAS 41, ‘Agriculture’, which are part of the IASB’s annual
improvements project published in May 2008 (not addressed above). These amendments are unlikely to have an impact on
the Group and Company’s accounts and have therefore not been analysed in detail.
•
IFRIC 16, ‘Hedges of a net investment in a foreign operation’ (effective from 1 October 2008).
•
IAS 16 (Amendment), ‘Property, plant and equipment’ (and consequential amendment to IAS 7, ‘Statement of cash flows’)
(effective from 1 January 2009).
•
IAS 40 (Amendment), ‘Investment property’ (and consequential amendments to IAS 16) (effective from 1 January 2009).
•
IAS 41 (Amendment), ‘Agriculture’ (effective from 1 January 2009).
Standards, Amendments and Interpretations issued, but not yet Effective and not Relevant to the Group and Company’s
Operations
•
IFRS 8,’Operating Segments’ (effective from 1 January 2009).
•
IFRIC 13, ‘Customer loyalty programmes’ (effective from 1 July 2008).
•
IAS 29 (Amendment), ‘Financial reporting in hyperinflationary economies’ (effective from 1 January 2009).
•
IAS 31 (Amendment), ‘Interests in joint ventures’ (and consequential amendments to IAS 32 and IFRS 7) (effective from
1 January 2009).
•
IAS 20 (Amendment), ‘Accounting for government grants and disclosure of government assistance’ (effective from 1 January
2009).
•
The minor amendments to IAS 20 ‘Accounting for government grants and disclosure of government assistance’ and IAS 29,
‘Financial reporting in hyperinflationary, which are part of the IASB’s annual improvements project published in May 2008
(not addressed above). These amendments will not have an impact on the Group and Company’s operations as described
above.
•
IFRIC 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009).
•
IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009).
•
IFRS 2 (Amendment), ‘Share-based payment’ (effective from 1 January 2009).
•
IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009).
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on
the financial statements of the Group and Company.
89
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
2.3 Consolidation Principles
Subsidiaries and Basis of Consolidation
The consolidated annual financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries
are those entities over which the Group and Company has power to exercise control over the financial and operating policies. This
is evidenced generally by a shareholding of more than one-half of the voting rights, to obtain benefits from their activities.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether
the Group and Company control another entity.
The operating results of the subsidiaries are included from the effective dates of acquisition and up to the effective dates of
disposal. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the
Group and Company.
Investments in subsidiaries are shown at cost, except when the investment is classified as held for sale, in which case it is
accounted for in accordance with IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group and Company. The cost of
an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred, or assumed at
the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group and Company’s share of the
identifiable net assets acquired are recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of
the subsidiary acquired, the difference is recognised directly in the income statement.
Investments in Associates
An associate is an entity over which the Group and Company are in a position to exercise significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights, and through participation in the financial and
operating policy decisions of the investee. For Investments with a shareholding of less than 20%, SAFCOL considers significant
influence to be established if it is represented on the associates Board of Directors and thereby participates in policy-making
decisions.
The results, assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method
of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS
5 ‘Non-current Assets Held for Sale and Discontinued Operations’. Under the equity method, investments in associates are carried
in the Group balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate,
less any impairment in the value of individual investments. The Group and Company’s investment in associates includes goodwill
(net of any impairment losses) identified on acquisition. When the Group’s share of losses in an associate equals or exceeds its
interest in that associate, including any other unsecured receivables, the Group does not recognise further losses unless it has
incurred obligations or made payments on behalf of the associate. Losses may provide evidence of an impairment of the asset
transferred, in which case appropriate provision is made for impairment.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset
transferred. The accounting policies of the associates are in line with IFRS.
90
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
The Company carries investments in subsidiaries and associates at cost less accumulated impairment losses in its separate
financial statements.
2.4
Property, Plant and Equipment
Land is stated at cost and not depreciated. All other categories of property, plant and equipment are stated at historical cost less
related accumulated depreciation and accumulated impairment losses. Cost also includes site restoration costs that are recognised
as a liability. Subsequent expenditure to property, plant and equipment is capitalised when it is probable that future economic
benefits from the use of the asset will be increased and the cost can be measured reliably. If a replacement part is recognised in
the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is de-recognised.
Depreciation is not provided for on assets in the course of construction. All other property, plant and equipment, with the exception
of land, are depreciated using the straight-line method to allocate their cost or re-valued amounts to their residual values over
the estimated useful lives of the assets. The methods of depreciation, useful lives and residual values are reviewed annually and
adjusted if necessary.
Assets held under finance lease are depreciated over their estimated useful lives on the same basis as owned assets, or where
shorter, the term of the relevant lease.
The cost of renewal and maintenance of assets are expensed as they are incurred. Where the estimated useful life of an asset is
extended, such costs are capitalised and depreciated over the adjusted life of the asset. Where significant parts of an item have
different useful lives, these parts are depreciated over their individual estimated useful lives.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset, and recognised in profit or loss for the period.
Increases in the carrying amount arising on revaluation of land and buildings are credited to Non-Distributable Reserves in
shareholders’ equity. Decreases that offset previous increases of the same asset are charged against other reserves directly in
equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the
re-valued carrying amount of the asset charged to the income statement and depreciation based on the asset’s original cost is
transferred from ‘other reserves’ to ‘retained earnings’.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
Estimated Useful Life per Category is as Follows:
•
Building and utilities
20 – 50 years
•
Motor vehicles
4 – 7 years
•
Plant and equipment
4 – 15 years
•
Computer equipment
3 years
•
Furniture and fittings
5 – 10 years
•
Leasehold improvements – buildings and utilities
25 years
•
Leasehold improvements – telephone lines and fences
10 years
•
Leasehold improvements – roads
25 years
2.5
Investment Property
Investment property, principally comprising land on which plantations are situated, is held for long-term rental yields and is not
occupied by the Group and Company.
91
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are
associated with the investment property will flow to the Group and Company, and the cost of the investment property can be
measured reliably.
Investment property is recognised initially at cost. Transaction costs are included in the initial measurement. Subsequently,
investment property is carried at cost less accumulated depreciation on buildings. Buildings are depreciated over a period of 50
years.
2.6
Intangible Assets
Acquired computer software licenses are capitalised based on the costs incurred to acquire and bring the specific software into
use. Costs associated with maintaining computer software programs are recognised as an expense as incurred. These assets
are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straightline basis over the intangible assets estimated useful life, which is reviewed annually. Acquired computer software licences are
amortised over 5 years, compared to the prior year amortisation of 3 years. This better reflects the rate at which economic benefits
are expected to flow from the use of the assets.
An intangible asset is derecognised:
•
on disposal; or
•
when no future economic benefits are expected from its use or disposal.
The gain or loss arising from the de-recognition of an intangible asset is determined as the difference between the net disposal
proceeds, if any, and the carrying amount of the asset. It is recognised in profit or loss when the asset is de-recognised.
2.7
Dividend Distribution
Dividend distribution to the Company’s shareholder is recognised as a liability in the Group and Company’s financial statements
in the period in which the dividends are approved by the Company’s shareholder.
2.8
Impairment of Assets
The carrying amounts of the Group and Company’s tangible and intangible assets are assessed at each reporting date to
determine whether there is any indication that those assets may have suffered an impairment loss. If such an indication exists, the
recoverable amount of the asset is estimated as the higher of the fair value less costs to sell and value in use of the asset. Value
in use is estimated based on the expected future cash flows, discounted to their present values using a discount rate that reflects
forecast market assessments over the estimated useful life of the asset. 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 calculated. Where
an asset or a cash-generating unit’s recoverable amount has declined below the carrying amount, the decline is recognised as
an expense.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
2.9
Biological Assets
Plantations are stated at fair value less estimated point-of-sale costs. Fair value of plantations is estimated based on the present
value of the net future cash flows from the asset, discounted at a market determined pre-taxation rate. Increases or decreases in
value are recognised in the income statement. All expenses incurred in maintaining and protecting the assets are recognised in
the income statement. All costs incurred in acquiring additional planted areas are capitalised.
92
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
2.10
Financial Assets
The Group and Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. The
Directors determine the classification of its financial assets at initial recognition.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are
classified as non-current assets. Loans and receivables are initially recognised at fair value plus transaction costs and subsequently
carried at amortised cost using the effective interest method.
Available-for-sale Financial Assets
Available-for-sale financial assets are non-derivatives that are either designated in this category, or are not classified in any of the
other category. They are included in non-current assets unless the directors intend to dispose of the investment within 12 months
of the balance sheet date. Available-for-sale financial assets are recognised initially at fair value plus transaction costs, and carried
subsequently at fair value.
After initial recognition, investments that are classified as available-for-sale are measured at fair value. Fair value is the market
value (listed investments) or the market price of a substantially similar investment, or the present value of expected future cash
flows of the net asset base (unlisted investments). Investments in equity instruments that do not have a quoted price in an active
market and whose fair value cannot be measured reliably, are measured at cost. Gains or losses on available-for-sale investments
are recognised as a separate component of the Group and Company’s equity until the investments are sold, collected or otherwise
disposed of, or until the investments are determined to be impaired, at which time the cumulative gain or loss previously reported
in equity is recognised in the income statement. Impairment losses on available-for-sale equity instruments that are recognised in
the income statement are not reversed subsequently.
The Group and Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a
group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged
decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed
from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments
are not reversed through the income statement.
Regular purchases and sales of financial assets are recognised on the trade date - the date on which the company commits to
purchase or sell the asset. Investments are recognised initially at fair value plus transaction costs for all financial assets not carried
at fair value through profit or loss. Financial assets are de-recognised when the right to receive cash flows from the investments
has expired, or has been transferred and the company has transferred substantially all risks and rewards of ownership.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as
part of investment income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of
investment income when the Group and Company’s right to receive payment are established.
If the market for a financial asset is not active (and for unlisted securities), the company establishes fair value by using valuation
techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the
same, discounted cash flow analysis and option pricing models, making use of market inputs and relying as little as possible on
entity-specific inputs.
93
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
2.11
Non-Distributable Reserves
Retirement Fund Reserve
Accelerated lump sum payments to reduce the retirement fund deficit are transferred to a non-distributable reserve being a
retirement fund reserve, as far as cash generated through profits from trading activities is available for this purpose.
Capital Profit Reserve
As per the Memorandum and Articles of Association of SAFCOL, material capital profits are not distributed, but allocated to
Non-Distributable Reserves as and when applicable. Therefore, where profits made on the disposal of assets and the proceeds
from insurance claims are deemed exceptional, these profits are transferred to a non-distributable reserve, being a capital profit
reserve. Adjustments to the opening balance sheet of the Group and Company of a material nature or extent, resulting in an
increase in the net asset value of assets taken over on 1 April 1993, are credited to a non-distributable reserve. A decrease in net
asset value is charged to available non-distributable reserves and if any balance remains thereafter, it is charged to distributable
reserves.
Foreign Currency Translation Reserve
If the functional currency of a subsidiary is different to the presentation currency of the Group, the net effect of translating to the
presentation currency is allocated to the Foreign Currency Translation Reserve. Items are translated at the Group’s financial yearend in accordance with section 2.23 Foreign Currency Transactions.
Revaluation Reserve
The revaluation of Non-current Assets and Equity Instruments are charged to the Non-Distributable Reserve and therefore not
reflected as a gain or loss in the Income Statement.
2.12
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, as well as other short-term highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts
are shown within borrowings in current liabilities on the balance sheet.
2.13
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are stated subsequently at amortised
cost. Any difference between the proceeds (net of transaction costs), and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
2.14
Trade and other Receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. Other receivables constitute sundry debtors. A provision for impairment
of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy, financial re-organisation, and default, or delinquency in payments, are considered indicators that the trade receivable
is impaired.
94
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in income. When a trade receivable is uncollectible, it is written off
against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the
income statement.
2.15
Trade and other Payables
Trade payables are recognised initially at fair value and measured subsequently at amortised cost using the effective interest
method.
2.16
Inventories
Harvested timber is stated at the lower of cost (being the fair value less estimated point-of-sale costs at the date of harvest), and
net realisable value.
Inventories (other than harvested timber) are stated at the lower of cost and net realisable value. Cost is determined on the
following bases:
•
Finished goods and work-in-progress comprises raw material, direct labour, other direct costs and related production
overheads incurred in bringing the inventories to their present location and condition, calculated on the weighted average
basis, based on the normal capacity for the period to eliminate the effect of changes in log distribution. Included in finished
goods and work in progress
inventories are sawn timber or lumber and seedlings.
•
Merchandise and raw materials are valued at landed cost on the weighted average basis.
•
Consumable stores are valued at cost on the weighted average basis.
Net realisable value represents the estimated selling price less all estimated costs of completion and variable costs to be incurred
in marketing, selling and distribution.
2.17
Assets Classified as Held for Sale
Assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and
the asset (or disposal group) is available for immediate sale in its present condition. The Directors must be committed to the
sale, which should be expected to qualify for recognition as a completed sale within one year from date of classification. Assets
classified as held for sale are measured using the applicable IFRS immediately before classification. Once reclassified, the asset
or disposal group is recognised at the lower of the carrying amount and the fair value, less cost to sell at the date when it is initially
classified as held for sale. Depreciation seizes on the asset on this date.
2.18
Leases
Operating
Leases where the lessor retains substantially all the risks and rewards of ownership of the underlying assets are classified as
operating leases. Payments made under operating leases are charged against income on a straight-line basis over the
period of the lease.
Finance
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. Leased assets are capitalised at the lower of fair value and the present value of the minimum
lease payments at inception of the lease and depreciated over the shorter of the useful life of the asset and the lease term.
95
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
The capital element of future obligations under the leases is included as a liability in the balance sheet. Finance charges are
charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
2.19
Provisions
Provisions are recognised in the balance sheet when the Group and Company have a present legal or constructive obligation as
a result of past events, for which it is probable that an outflow of economic benefits will occur and where a reliable estimate can
be made of the amount of the obligation. Provisions are discounted where the effect of discounting is material. The discount rate
used is a pre-taxation rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability. The increase in the provision due to passage of time is recognised as an interest expense.
A provision for restructuring is recognised when the Group and Company have approved a detailed and formal restructuring plan,
and the restructuring either has commenced or has been announced publicly. Costs relating to ongoing activities are not provided
for.
2.20
Employee Benefits
Pension Plans
The group companies operate various pension schemes; namely the SAFCOL Pension Fund, the SAFCOL Pension-Linked
Provident Fund, and the SAFCOL Provident Fund. The schemes are funded generally through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group and Company have
both defined benefit and defined contribution plans. The SAFCOL Pension Fund and the SAFCOL Pension-Linked
Provident Fund are defined benefit schemes; and the SAFCOL Provident Fund is a defined contribution plan.
A defined contribution plan is a pension plan under which the Group and Company pay fixed contributions into a separate entity.
The Group and Company have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee services in the current and prior periods. A defined benefit plan
is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service, and
compensation.
The asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date, less the fair value of plan assets, together with adjustments for unrecognised
past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to
the income statement in the period in which they arise.
Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees
remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a
straight-line basis over the vesting period.
For defined contribution plans, the Group and Company pay contributions to publicly or privately administered pension insurance
plans on a mandatory, contractual or voluntary basis. The Group and Company have no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
96
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
Other Post-Employment Obligations
Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these benefits is
usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period.
The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as
used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the income statement in the period in which they arise. These obligations
are re-valued annually by independent qualified actuaries.
Termination Benefits
Termination benefits are payable when employment is terminated by the Group and Company before the normal retirement
date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group and Company
recognise termination benefits when it is demonstrably committed to either:
•
Terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or
•
Providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more
than 12 months after the balance sheet date are discounted to their present value.
Profit-Sharing and Bonus Plans
The Group and Company recognise a liability and an expense for bonuses and profit-sharing based on a formula that
takes into consideration the profit attributable to the Group and Company’s shareholders after certain adjustments. The
Group and Company recognise a provision where obliged contractually, or where there is a past practice that has created
a constructive obligation.
2.21
Taxation
The income tax expense per the income statement represents the sum of current tax and deferred tax.
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the balance sheet date in
the countries where the Company’s subsidiaries and associates operate and generate taxable income. The Directors periodically
evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
The tax payable currently is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible.
Deferred tax is tax expected to be payable or recoverable on temporary differences arising between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit,
and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised generally for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates,
except where the Group and Company are able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the near future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
97
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
Deferred tax is calculated at the tax rates that have been enacted or substantially enacted by the balance sheet date, and are
expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with
in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and when it relates to income taxes
levied by the same authority and the Group and Company intend to settle their current tax assets and liabilities on a net basis.
2.22
Share Capital
Ordinary shares are classified as equity.
Where any group company purchases the Company’s equity share capital, the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the
shares are cancelled or re-issued. Where such shares are subsequently re-issued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s
equity holders.
2.23
Foreign Currency Transactions
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are
presented in South African Rand (R), which is the Company’s functional and presentation currency.
Transactions and Balances
Transactions in currencies other than South African Rand are recorded at the rates of exchange prevailing on the dates of the
transactions or valuation where items are re-measured. At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Non-monetary assets
and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Gains and losses arising on the settlement of such transactions and on re-translation
are recognised in profit or loss for the period, except for exchange differences arising on non-monetary assets and liabilities
where the changes in fair value are recognised directly in equity.
Group Companies
The results and financial position of all the group entities (none of which has the currency of a hyper- inflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction date, in which case income and
expenses are translated at the rate on the dates of the transactions); and
•
all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings,
are taken to shareholder’s equity. When a foreign operation is partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part of the gain or loss on sale.
98
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
2.24
Revenue Recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary
course of the Group and Company’s activities.
Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group and
Company.
The Group and Company recognise revenue when the amount of revenue can be measured reliably, it is probable that future
economic benefits will flow to the entities, and when specific criteria have been met for each of the Group and Company’s activities
as described below. The amount of revenue is not considered reliably measurable until all contingencies relating to the sale have
been resolved. The Group and Company base their estimates on historical results, taking into consideration the type of customer,
the type of transaction and the specifics of each arrangement.
Sales of Goods
The Group harvests, processes, and sells a range of timber and logs. Sales of goods are recognised when a group entity has
delivered products to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the
products. Sales of logs are recognised when logs are delivered at roadside and title has passed. All other sales of goods are
recognised when goods are delivered and title has passed.
Sales are recorded based on the price specified in the sales contracts. The provision for claims is based on actual returns by
customers and includes volume, quality and price disputes.
Sales of Services
The Company sells management services to its subsidiaries, which are eliminated on consolidation level.
These services are provided as a fixed-price contract, with annual contract terms.
Interest Income
Interest is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the
Group and Company reduce the carrying amount to its recoverable amount, being the estimated future cash flow discounted at
the original effective interest rate of the instrument, and continues unwinding the discount as interest income.
Dividend Income
Dividend income is recognised when the right to receive payment is established.
2.25
Research and Development
Expenditure on research and development is normally charged against operating income as incurred and not deferred.
2.26
Key sources of estimation and uncertainty
The following key sources of estimation and uncertainty at balance sheet date which have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:
Fair Value of Standing Timber
The methods and assumptions used in determining the fair value of the standing timber in the plantations are reviewed every
five years. In the current year, the methodology and assumptions utilised in the fair value model have been revised to
obtain a more accurate valuation in terms of species, volumes, income, expenses and prices. The amendments to the
model represent a change in estimate as the change does not alter the valuation policy and a fair value is still calculated
based on the discounted cash flow method using a pre-tax discount rate. The change relates to new information available
in the current year and better reflects the economic benefits that are expected to flow from the use of the asset. The
changes have been applied prospectively. Refer to note 30 for a detailed description of the changes to the methodology.
99
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
•
Current market prices: The market prices per cubic metre are based on market expectations per log class.
•
Expected yield per log class: The expected yield per log class is calculated with reference to growth models relevant to
the nominal planted area.
•
The growth models are derived from actual trial data that is measured regularly. A merchandising model, using the
modelled tree shape at various ages, is used to split the tree-lengths into pre-defined products or log classes.
•
•
The nominal planted area is derived from the core forestry management systems.
Volume adjustment factor: Due to the nature of plantation forestry and more specifically its susceptibility to the
environment, an adjustment factor is determined to reduce the modelled volumes to approximate marketable volumes. The
percentage volume adjustment is based on factors such as baboon damage, as well as damage due to natural elements
such as wind / rain / hail / drought / fires.
•
Rotation: The Group manages its plantation crop mainly on a 30-year rotation for saw log production.
•
Operating costs: Operating costs are calculated with reference to the maintenance and harvesting activities and the
average annual unit costs per activity.
•
The activities are based on the prescribed silvicultural regimes and volume of timber to be harvested and extracted.
•
The operating costs per activity are based on the annual average unit costs as per the plantation operating statements
and include relevant overheads.
•
Discount rate: The pre-tax real discount rate is based on the Weighted Average Cost of Capital model as calculated by an
independent professional service provider, using the following:
•
•
Risk free rate which is updated with the market rates applicable at the valuation dates.
Market premium which has been adjusted to compensate for increased risk factors such as the insurance that has fallen
away since 2001.
•
Inflation assumptions which have been adjusted to incorporate the market view at the valuation date.
Allowance for Credit Losses
At each balance sheet date, the Group and Company assess whether there is any objective evidence that debtors are
impaired. If evidence of impairment exists, the allowance is calculated as the fair value of the debtor less the present value
of the estimated recoverable amount.
Allowance for Inventory Losses
Allowance for 15% of nursery stock due to non-germination, based on historical information.
Provisions
Provisions are raised in accordance with determinations of the Directors, based on available information.
Income Taxes
The Group and Company are subject to income taxes in South Africa and Mozambique jurisdictions. Significant
judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and Company
recognise liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income
tax and deferred tax provisions in the period in which such determination is made.
Fair Value of Financial Instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques. The Group and Company use their judgement to select a variety of methods and makes assumptions that are
mainly based on market conditions existing at each balance sheet date.
100
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
2.27
Comparative Figures
Comparative figures are re-stated in the event of a change in accounting policy or prior period error.
2.28
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. Depending on materiality, 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.
YEAR
YEAR
YEAR
YEAR
ENDED
ENDED
ENDED
ENDED
31 MARCH 2009
31 MARCH 2008
31 MARCH 2009
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Timber sales
644,156,708
586,889,847
-
-
Sawn timber sales
182,718,484
218,112,562
-
-
3. TURNOVER
Continuing operations
Other
30,243,145
27,185,315
27,711,792
31,090,196
857,118,337
832,187,724
27,711,792
31,090,196
-
12,715,655
-
-
30,182
113,681
-
-
30,182
12,829,336
-
-
857,148,519
845,017,060
27,711,792
31,090,196
-
20,724
-
20,724
-
(254,908)
-
703,359
Discontinued operations (refer to note 20)
Sawn timber sales
Other
TOTAL
4. OPERATING PROFIT / (LOSS)
Operating profit / (loss) is arrived at after taking the following items into account:
Non-recurring items
Continuing operations
Transfer duties paid
(Profit) / Loss on disposal of 9% of shares in Amatole Forest Company (Pty)
Ltd
Termination benefits
Settlement received pursuant to litigation
Siyaqhubeka Forests (Pty) Ltd - payment in lieu of Employee Share Ownership
Plan
TOTAL
4,414,454
823,769
2,194,924
823,769
(2,500,000)
-
(2,500,000)
-
460,514
-
460,514
-
2,374,968
589,585
155,438
1,547,852
Plantation Valuation
Continuing operations
Increase in fair value adjustment - Plantations (refer note 11)
Profit due to fair value adjustment of plantations
(757,915,170)
(528,715,199)
-
-
(757,915,170)
(528,715,199)
-
-
613,392
Auditors’ remuneration
Continuing operations
1,829,400
1,507,400
839,734
Other services
Audit fees
140,360
116,601
-
52,500
Expenses
19,353
22,544
18,085
17,000
Under provision - prior year
TOTAL
429,246
-
22,800
-
2,418,359
1,646,545
880,619
682,892
101
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
4. OPERATING PROFIT / (LOSS) (CONTINUED)
Profit on disposal of property, plant and equipment (refer note 9)
Buildings and utilities
Motor vehicles
15,622
-
-
-
(1,817,947)
(256,447)
-
(127,113)
Plant and equipment
(191,898)
84,151
-
(46,027)
Computer equipment
11,955
12,338
-
2,264
Furniture and fittings
4,263
18,526
-
(6,275)
Leasehold improvements - buildings and utilities
-
17,958
-
2,306
Leasehold improvements – roads
-
10
-
-
(1,978,005)
(123,464)
-
(174,845)
(1,888,098)
(123,784)
-
(174,845)
(89,907)
320
-
-
(1,978,005)
(123,464)
-
(174,845)
Attributable to:
Continuing operations
Discontinued operations (refer note 20)
TOTAL
Depreciation of property, plant and equipment (refer note 9)
Buildings and utilities
4,933,816
4,148,591
-
-
Motor vehicles
8,793,175
6,032,541
39,422
20,953
Plant and equipment
18,205,916
15,408,997
-
237
Computer equipment
3,025,493
1,805,576
61,830
80,732
Furniture and fittings
492,030
565,806
39,992
29,101
3,662,330
1,108,374
19,023
132
Leasehold improvements - telephone lines and fences
66,356
51,859
-
-
Leasehold improvements - roads
453,686
430,670
-
-
39,632,802
29,552,414
160,267
131,155
39,565,716
29,027,034
160,267
131,155
67,086
525,380
-
-
39,632,802
29,552,414
160,267
131,155
3,782
3,792
3,782
3,792
1,189,205
1,041,284
-
-
Buildings and utilities
-
476,826
-
-
Plant and equipment
-
53
-
-
-
476,879
-
-
11,719,477
8,377,289
11,605,386
7,139,023
636,417
637,179
580,161
647,747
19,585,407
23,783,438
6,638,388
10,610,660
31,941,301
32,797,906
18,823,935
18,397,430
31,938,121
32,746,535
18,823,935
18,397,430
3,180
51,371
-
-
31,941,301
32,797,906
18,823,935
18,397,430
Leasehold improvements - buildings and utilities
Attributable to:
Continuing operations
Discontinued operations
TOTAL
Depreciation of investment property (refer note 8)
Continuing operations
Investment Property
Amortisation of intangible assets (refer note 10)
Continuing operations
Computer software
Impairment of property, plant and equipment (refer note 9)
Discontinued operations
Fees for services
Administrative and legal
Managerial
Technical
Attributable to:
Continuing operations
Discontinued operations
TOTAL
102
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
(14,924,682)
(46,128,332)
-
-
-
229,647
-
-
(14,924,682)
(45,898,685)
-
-
(14,924,682)
45,898,685)
-
-
-
-
-
-
(14,924,682)
(45,898,685)
-
-
Salaries and wages
168,266,628
137,241,882
15,407,597
9,816,133
Bonuses
29,201,024
19,868,974
5,433,972
1,847,669
Benefits and other costs
30,581,684
17,023,953
1,219,119
1,489,606
-
(28,451,409)
-
-
10,993,902
(9,081,377)
(154,668)
826,496
4. OPERATING PROFIT / (LOSS) (CONTINUED)
Movements in Inventory (refer to note 33)
Increase in fair value adjustment - Agricultural produce
Write-down of inventories to net realisable value
Attributable to:
Continuing operations
Discontinued operations
TOTAL
Staff costs
Employer contributions - Defined benefit plans
Employer contributions - Defined contribution plans
Employer contributions - Post retirement medical aid
-
436,455
-
7,854
239,043,238
137,038,478
21,906,020
13,987,758
239,043,238
136,139,562
21,906,020
13,987,758
-
898,916
-
-
239,043,238
137,038,478
21,906,020
13,987,758
Attributable to:
Continuing operations
Discontinued operations
TOTAL
Operating lease charges
Land
Buildings and utilities
Motor vehicles
64,063
206,356
-
206,356
3,544,265
2,303,427
1,003,477
923,611
-
12,768
140,565
-
Plant and equipment
300,826
54,723
-
-
Computer equipment
142,296
349,148
-
113,233
Furniture and fittings
766,710
872,694
-
1,234
-
400
-
-
54,912
88,139
-
-
4,873,072
3,887,655
1,144,042
1,244,434
4,873,072
3,887,422
1,144,042
1,244,434
-
233
-
-
4,873,072
3,887,655
1,144,042
1,244,434
(1,736,521)
(5,962,252)
-
-
Leasehold improvements - telephone lines and fences
Loose tools
Attributable to:
Continuing operations
Discontinued operations
TOTAL
Foreign exchange gain
Continuing operations
Realised
Unrealised
TOTAL
(11,272,720)
5,913,003
-
-
(13,009,241)
(49,249)
-
-
8,697,717
6,864,830
-
-
Research costs expensed
Continuing operations
Research expenditure is incurred on applied research performed
mainly on tree improvement and growth and yield research.
Directors’ emoluments
Continuing operations
For services as Directors
3,003,328
2,134,007
3,003,328
2,134,007
Managerial services
5,820,311
8,271,132
5,820,311
6,757,753
8,823,639
10,405,139
8,823,639
8,891,760
TOTAL
The Executive Director has an employment contract with SAFCOL with a notice period not exceeding one year. The Non-Executive Directors are appointed for a fixed-term of 3 years.
103
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
41,698,997
40,574,697
41,706,186
40,574,580
4,174,114
4,772,741
5,915,690
4,775,186
43,105
39,888
-
-
45,916,216
45,387,326
47,621,876
45,349,766
1,636
5. INVESTMENT INCOME
Continuing operations
Interest on call deposits and surplus cash
Other interest received
Dividends received
6. FINANCE COSTS
Interest on:
Bank overdrafts
3,048
1,638
3,048
Finance leases
834,850
2,264,037
-
-
Short-term loans
121,107
167,023
2,099,009
8,075,008
959,005
2,432,698
2,102,057
8,076,644
957,985
2,431,639
2,102,057
8,076,644
1,020
1,059
-
-
959,005
2,432,698
2,102,057
8,076,644
- current period
43,969,306
60,850,630
5,319,920
6,907,816
- prior period adjustment
(2,938,201)
3,707,637
(516,101)
5,688,585
223,679,168
163,531,347
88,758
2,816,025
2,868,864
1,977,774
529,034
-
-
154,365
-
154,365
267,579,137
230,221,753
5,421,611
15,566,791
969,804,159
871,789,483
17,122,602
20,650,754
(347,714)
(3,036,043)
-
-
969,456,445
868,753,440
17,122,602
20,650,754
5,988,719
Attributable to:
Continuing operations
Discontinued operations (refer note 20)
TOTAL
7. INCOME TAX EXPENSE
Continuing operations
Tax expense comprises:
South African normal tax
Deferred taxation (refer note24)
- current period
- prior period adjustment
- rate change
Taxation per income statement
The total charge for the year can be reconciled to accounting profit as follows:
Profit from continuing operations
Loss from discontinued operations
Profit from operations
Income tax expense calculated at 28% (2008: 29%)
271,447,805
251,938,498
4,794,329
(14,794,620)
(9,462,574)
-
-
10,906,532
8,477,043
525,591
3,835,694
-
(26,416,625)
-
53,793
19,420
5,685,411
101,691
5,688,585
267,579,137
230,221,753
5,421,611
15,566,791
South African normal tax
(53,259,635)
(12,250,665)
672,102
(1,602,806)
Adjustment prior period
2,938,201
(3,707,637)
516,100
(5,688,585)
Paid during the period
110,307,136
23,549,297
11,975,289
14,871,309
Taxation for the period per income statement:
(43,969,306)
(60,850,630)
(5,319,920)
(6,907,816)
Effect of share of profit of associates
Effect of expenses that are not deductible in determining taxable profit
Effect of changes in tax rates (from 29% to 28%)
Adjustments recognised in the current period in relation to the current tax
of prior periods
(Payable) / Receivable at the beginning of the period:
Receivable / (Payable) at the end of the period:
16,016,396
(53,259,635)
7,843,571
672,102
TOTAL
South African normal taxation
16,016,396
(53,259,635)
7,843,571
672,102
Current income tax assets
16,016,396
11,077
7,843,571
672,102
-
(53,270,712)
-
-
Current income tax liabilities
104
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Carrying amount at the beginning of the period
4,806,428
4,810,220
4,806,428
4,810,220
Cost
4,856,393
4,856,393
4,856,393
4,856,393
Accumulated Depreciation
(49,965)
(46,173)
(49,965)
(46,173)
Depreciation
(3,782)
(3,792)
(3,782)
(3,792)
Carrying amount at the end of the period
4,802,646
4,806,428
4,802,646
4,806,428
Cost
4,856,393
4,856,393
4,856,393
4,856,393
(53,747)
(49,965)
(53,747)
(49,965)
8. INVESTMENT PROPERTY
Accumulated Depreciation
The fair value of the investment properties as at 31 March 2009 was R84,393,000 (2008: R84,393,000). The valuation was performed by an independent professional valuer in December 2004.
SAFCOL received an offer of R84,393,000 from the Regional Land Claims Commissioner for the plantation situated close to Barberton and has received approval from the Board
to proceed with the transaction subject to Public Finance Management Act approval. The matter now rests with the Land Restitution Commission. It is uncertain when the transaction would
occur.
The gross property rental income earned by the group from its investment properties, all of which are leased out under gross operating leases, amounted to R2,150,724 (2008: R1,968,600).
105
106
(3,051,673)
1,978,005
Proceeds
Profit / (Loss) on disposal (refer note 4)
(29,552,414)
(476,879)
(448,264)
(571,728)
123,464
(281,259)
3,086,226
Depreciation (refer note 4)
Impairment (refer note 4)
Disposals
Proceeds
Profit / (Loss) on disposal (refer note 4)
Transfer from / (to) assets classified as held-for-sale (refer note 21)
Translation of foreign entity
410,010
Carrying amount at the end of the period
384,340
(131,155)
(154,981)
(329,826)
174,845
473,648
Additions
Depreciation (refer note 4)
Disposals
Proceeds
Profit / (Loss) on disposal (refer note 4)
Carrying amount at the end of the period
-
-
-
-
-
-
-
-
-
-
-
4,029,244
-
-
-
-
-
-
-
2,371,000
1,658,244
4,029,244
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,278,056
1,464,022
-
-
-
-
(476,826)
(4,148,591)
2,725,717
38,713,734
39,301,022
758,176
-
(15,622)
-
(15,622)
(4,933,816)
239,290
127,113
(260,165)
(133,052)
(20,953)
246,524
146,771
199,868
(39,422)
-
239,290
37,039,152
674,587
(15)
256,447
(256,462)
(15)
-
(6,032,541)
15,421,602
26,975,534
67,098,764
541,737
193,939
1,817,947
(2,044,154)
(226,207)
(8,793,175)
-
46,027
(52,050)
(6,023)
(237)
-
6,260
-
-
-
-
84,259,862
365,938
(281,244)
(84,151)
(303,655)
(387,806)
(53)
(15,408,997)
37,596,839
62,375,185
102,910,824
246,942
(186,973)
191,898
(1,007,519)
(815,621)
(18,205,916)
37,612,530
84,259,862
6,275
137,416
96,942
(11,391)
(5,116)
(29,101)
123,435
48,198
162,061
(39,992)
64,637
137,416
2,045,728
72,409
-
(18,526)
(11,391)
(29,917)
-
(565,806)
391,152
2,177,890
1,821,178
16,007
-
(4,263)
-
(4,263)
(492,030)
255,736
2,045,728
(2,264)
(6,020)
(8,284)
(80,732)
14,381
171,577
42,912
(61,830)
7,800
96,942
4,740,755
32,415
-
(12,338)
(20)
(12,358)
-
(1,805,576)
3,934,188
2,592,086
6,147,348
18,285
-
(11,955)
-
(11,955)
(3,025,493)
4,425,756
4,740,755
Capitalised leased assets with a net book value of R 3 973 450 (2008: R 16,669,130) are encumbered in terms of finance lease obligations (refer note 25).
A register of land and buildings is available for inspection at the registered office of the Company.
375,444
Carrying amount at the beginning of the period
Company 2008
(160,267)
96,629
Additions
Depreciation (refer note 4)
473,648
Carrying amount at the beginning of the period
Company 2009
Movement reconciliation
204,336,546
75,878,263
Carrying amount at the end of the period
156,130,873
Additions
260,878,226
(512,386)
Carrying amount at the beginning of the period
Group 2008
Carrying amount at the end of the period
Translation of foreign entity
6,966
(1,073,668)
Transfer from / (to) assets classified as held-for-sale (refer note 21)
(39,632,802)
Total
38,343,318
37,039,152
Motor
vehicles
5,214,228
Plant and
equipment
Disposals
Buildings
and utilities
38,278,056
Computer
equipment
-
Furniture
and fittings
Depreciation (refer note 4)
Land
4,029,244
-
(2,306)
(200)
(2,506)
(132)
-
2,638
5,169
(19,023)
24,192
-
18,672,997
-
-
(17,958)
(200)
(18,158)
-
(1,108,374)
10,290,310
9,509,219
20,389,757
-
-
-
-
-
(3,662,330)
5,379,090
18,672,997
Leasehold
improvements
- buildings
and utilities
97,753,570
-
-
-
-
-
-
-
-
-
-
-
380,286
-
-
-
-
-
-
(51,859)
18,200
413,945
559,075
-
-
-
-
-
(66,356)
245,145
380,286
Leasehold
improvements
- telephone
lines and
fences
204,336,546
-
-
-
-
-
-
-
-
-
-
-
9,018,984
-
-
(10)
-
(10)
-
(430,670)
121,012
9,328,652
9,314,741
-
-
-
-
-
(453,686)
749,443
9,018,984
Leasehold
improvements
- roads
Additions
-
-
-
-
-
-
-
-
-
-
-
5,871,482
476,855
-
-
-
-
-
-
3,008,243
2,386,384
9,306,273
(2,093,533)
-
-
-
-
-
5,528,324
5,871,482
Capital work
in progress
Carrying amount at the beginning of the period
Group 2009
Movement reconciliation
9. PROPERTY, PLANT AND EQUIPMENT
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
COST OR
VALUATION
R
ACCUMULATED
DEPRECIATION AND
IMPAIRMENT LOSSES
R
CARRYING
AMOUNT
R
9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Group - 2009
Land
4,029,244
-
4,029,244
Buildings and utilities
77,226,820
(37,925,798)
39,301,022
Motor vehicles
131,192,640
(64,093,876)
67,098,764
Plant and equipment
274,946,343
(172,035,519)
102,910,824
Computer equipment
23,018,356
(16,871,008)
6,147,348
Furniture and fittings
8,942,937
(7,121,759)
1,821,178
Leasehold improvements - buildings and utilities
27,225,728
(6,835,971)
20,389,757
Leasehold improvements - telephone lines and fences
Leasehold improvements - roads
Capital work in progress
TOTAL
792,804
(233,729)
559,075
11,487,376
(2,172,635)
9,314,741
9,306,273
-
9,306,273
568,168,521
(307,290,295)
260,878,226
Group - 2008
Land
4,029,244
-
4,029,244
Buildings and utilities
71,281,937
(33,003,881)
38,278,056
Motor vehicles
94,158,449
(57,119,297)
37,039,152
Plant and equipment
241,156,347
(156,896,485)
84,259,862
Computer equipment
18,728,969
(13,988,214)
4,740,755
Furniture and fittings
8,714,885
(6,669,157)
2,045,728
Leasehold improvements - buildings and utilities
21,846,637
(3,173,640)
18,672,997
Leasehold improvements - telephone lines and fences
Leasehold improvements - roads
Capital work in progress
TOTAL
547,659
(167,373)
380,286
10,737,933
(1,718,949)
9,018,984
5,871,482
-
5,871,482
477,073,542
(272,736,996)
204,336,546
199,868
Company - 2009
Motor vehicles
280,307
(80,439)
Computer equipment
1,005,884
(962,972)
42,912
Furniture and fittings
748,382
(586,321)
162,061
Leasehold improvements - buildings and utilities
TOTAL
24,192
(19,023)
5,169
2,058,765
(1,648,755)
410,010
Company - 2008
Motor vehicles
280,307
(41,017)
239,290
Computer equipment
998,084
(901,142)
96,942
Furniture and fittings
TOTAL
683,745
(546,329)
137,416
1,962,136
(1,488,488)
473,648
107
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
1,660,315
2,039,278
-
-
4,920,721
4,258,400
-
-
(3,260,406)
(2,219,122)
-
-
815,045
655,222
-
-
Amortisation (refer note 4)
(1,189,205)
(1,041,284)
-
-
Translation of foreign entity
3,271
7,099
-
-
1,289,426
1,660,315
-
-
Cost
5,739,037
4,920,721
-
-
Accumulated amortisation
(4,449,611)
(3,260,406)
-
-
2,460,359,321
1,930,075,884
-
-
Physical statistics
(232,842,129)
(144,392,626)
-
-
Prices
1,829,781,723
813,830,000
-
-
10. INTANGIBLE ASSETS
Movement reconciliation
Software
Carrying amount at the beginning of the period
Cost
Accumulated amortisation
Additions
Carrying amount at the end of the period
11. BIOLOGICAL ASSETS - PLANTATIONS
Carrying amount at the beginning of the period
Gain / (Loss) arising from changes in fair value less point of sale costs due to:
Discount rate
Costs
Net increase for the period (refer note 4)
Additions - Seed Orchard
Carrying amount at the end of the period
-
141,620,000
-
-
(839,024,424)
(282,342,175)
-
-
757,915,170
528,715,199
-
-
-
1,568,238
-
-
3,218,274,492
2,460,359,321
-
-
The fair value model and the methodology and assumptions utilised have been revised to obtain a more accurate valuation in terms of species, volumes, income, expenses and prices. The
change has been applied prospectively.
The fair value of the plantations are calculated by using the present value of projected future cash flows after taking into consideration the following assumptions:
•
•
•
•
•
Activity costs in accordance with the operating statements of plantations for the past period.
The market prices per cubic metre are based on market expectations per log class.
Plantation areas of 140,877 ha (2008: 141,047 ha) for the Group and nil ha (2008: nil ha) for the Company.
Physical statistics in accordance with the plantation management system. These statistics are affected by the impact of fires, enumeration updates and product optimisation.
Discount rate is determined based on a pre-tax weighted average cost of capital adjusted for a market risk premium. Rate used: 12.3% (2008:12.3%).
The valuations were performed by an independent external forestry economist.
The plantations are situated on land leased from the South African Government, land managed on concession from the Mozambican Government, and land owned by Kamhlabane Timber
(Pty) Ltd, Palm Ridge Farm. The Shannon plantation in Mpumalanga and a portion of the Ngome plantation in Kwazulu-Natal are on land owned by the Group.
108
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Shares at cost less amounts written-off
-
-
320
17,841
Amounts owing by subsidiaries
-
-
368,604,521
223,988,545
224,006,386
12. INVESTMENTS IN SUBSIDIARIES
SUB TOTAL
-
-
368,604,841
Amounts owing to subsidiaries
-
-
(200)
(17,521)
Net interest in subsidiary companies
-
-
368,604,641
223,988,865
Issued
Share
Capital
Effective
Percentage
Held
Carrying amount of Holding Company Interest
Shares at
Cost
Net Indebtedness
R
R
Unlisted - 2009
Mountains to Oceans Forestry (Pty) Ltd
100
100
200
947,083
Komatiland Forests (Pty) Ltd
120
100
120
367,657,238
320
368,604,321
TOTAL
Unlisted - 2008
Valgrace Investments (Pty) Ltd *
218
100
218
(218)
Mountains to Oceans Forestry (Pty) Ltd
100
100
200
744,351
4,998
100
17,303
(17,303)
120
100
120
223,244,194
17,841
223,971,024
Harlands Saligna Ltd **
Komatiland Forests (Pty) Ltd
TOTAL
* All shares sold on 1 April 2008
** Deregistered on 25 April 2008
All the above companies are wholly-owned by SAFCOL and are incorporated in the Republic of South Africa.
Komatiland Forests (Pty) Ltd (“KLF”): The loan consists of a non-interest bearing establishment loan granted to KLF to the amount of R 294,041,618 (2008: R 294,041,618) and an interest
bearing short-term loan to the amount of R 73,615,620 to KLF (2008: R 70,797,424 from KLF). Both loans are unsecured and no terms of repayment have been set. The establishment loan
bears interest at 0,0% and the short-term loan bears interest at prime rate less 6.5% for both periods under review.
Mountains to Oceans Forestry (Pty) Ltd (“Mountains”): The loan consists of a non-interest bearing establishment loan from Mountains to the amount of R 200 (2008: R 200) and an interest
bearing short-term loan to the amount of R 947,283 to Mountains (2008: R 744,551). Both loans are unsecured and no terms of repayment have been set. The establishment loan bears interest
at 0,0% and the short-term loan bears interest at prime rate for both periods under review.
109
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
YEAR
YEAR
YEAR
ENDED
ENDED
ENDED
ENDED
31 MARCH 2009
31 MARCH 2008
31 MARCH 2009
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
13. INVESTMENTS IN ASSOCIATES
Cost of investment
61,273,652
61,273,652
61,273,652
61,273,652
Repayment of shareholder loan
(30,957,907)
(25,958,077)
(30,957,907)
(25,958,077)
Impairment of investment
(2,356,728)
(3,165,241)
(4,519,702)
(5,328,215)
249,915,317
197,077,389
-
-
(4,201,898)
(4,201,898)
(2,038,924)
(2,038,924)
(46,049,967)
(46,049,967)
(8,261,382)
(8,261,382)
(40,510,112)
(40,510,112)
(40,510,112)
(40,510,112)
(5,539,855)
(5,539,855)
32,248,730
32,248,730
227,622,469
178,975,858
15,495,737
19,687,054
Share of profit since acquisition,
net of dividends received
Movement in loans and impairment
relating to disposal
Disposed
Proceeds
(Loss) / Profit on disposal of associates
2009
Shareholding and voting power
Summarised financial information of associates
Siyaqhubeka
Singisi Forest
Forests (Pty) Ltd
Products (Pty) Ltd
25%
16%
MTO Forestry (Pty) Ltd
16%
Amathole Forestry
Company (Pty) Ltd
TOTAL
16%
R
R
R
R
R
Total assets
566,505,000
870,962,000
579,545,883
43,284,567
2,060,297,450
Total liabilities
151,292,000
455,038,000
249,085,657
24,463,205
879,878,862
Net assets
415,213,000
415,924,000
330,460,226
18,821,362
1,180,418,588
Group’s share of associates’ net assets
226,236,144
103,803,250
66,547,840
52,873,636
3,011,418
Loans
-
-
2,039,805
1,703,248
3,743,053
Impairment attributable to reserves
-
-
-
(2,356,728)
(2,356,728)
103,803,250
66,547,840
54,913,441
2,357,938
227,622,469
Revenue
131,798,904
558,038,000
532,074,390
36,276,900
1,258,188,194
Profit for the period
139,684,000
46,064,000
80,163,190
9,683,904
275,595,094
Group’s share of associates’ profit for the period
35,252,000
3,124,320
12,912,183
1,549,425
52,837,928
Siyaqhubeka
Singisi Forest
Forests (Pty) Ltd
Products (Pty) Ltd
25%
16%
16%
R
R
R
R
R
Total assets
458,390,000
699,470,000
506,881,666
26,876,087
1,691,617,753
Total liabilities
2008
Shareholding and voting power
Summarised financial information of associates
MTO Forestry (Pty) Ltd
Amathole Forestry
Company (Pty) Ltd
TOTAL
16%
184,185,000
303,073,000
257,122,587
17,738,629
762,119,216
Net assets
274,205,000
396,397,000
249,759,079
9,137,458
929,498,537
Group’s share of associates’ net assets
68,551,250
63,423,520
39,961,453
1,461,993
173,398,216
Loans
4,999,830
-
2,039,805
1,703,248
8,742,883
Impairment attributable to reserves
-
-
-
(3,165,241)
(3,165,241)
73,551,080
63,423,520
42,001,258
-
178,975,858
Revenue
167,949,000
495,125,000
368,200,000
28,388,011
1,059,662,011
Profit for the period
40,417,000
39,728,000
103,408,000
2,113,763
185,666,763
Group’s share of associates’ profit for the period
9,667,800
6,350,560
16,611,204
-
32,629,564
SAFCOL exercises significant influence over these companies which is evident in the following ways:
- representation on the Board of Directors;
- participation in policy-making processes, including participation in decisions about dividends or other distributions; or
- provision of essential technical information.
Associates were equity accounted based on the following:
- The draft financial statements as at 31 December 2008 were used in respect of Siyaqhubeka Forests (Pty) Ltd and Singisi Forest Products (Pty) Ltd (Financial year-end: 31 December 2008).
- For Amathole Forestry Company (Pty) Ltd, 31 March 2009 management accounts were used (Financial year-end: 30 September 2008).
- Draft financial statements at 28 February 2009 were used for MTO Forestry (Pty) Ltd (Financial year-end: 28 February 2009).
A reversal of impairment amounting to R 808,515 (2008 : R0) was recognised in the current year as the recoverable amount of the investment in Amathole Forestry Company (Pty) Ltd
exceeded its carrying value. SAFCOL disposed of 9% of the investment in Amatole Forestry Company (Pty) Ltd in 2008, which caused a decrease in the impairment of investment of R 958 077.
No significant transactions occurred between the dates of the associates’ respective financial reporting dates and SAFCOL’s reporting date.
110
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
14. FINANCIAL INSTRUMENTS BY CATEGORY
The accounting policies for financial instruments have been applied to the items below:
Group
Loans and receivables
Available-for-sale
Total
6,020,704
-
6,020,704
-
4,856,766
4,856,766
185,826,796
-
185,826,796
31 March 2009
Assets as per balance sheet
Loans and receivables (note 15)
Available-for-sale financial assets (note 16)
Trade and other receivables (note 18)
Cash and cash equivalents (note 19)
TOTAL
295,940,590
-
295,940,590
487,788,090
4,856,766
492,644,856
Liabilities at fair value
Other financial
through profit and loss
liabilities
-
3,011,984
3,011,984
75,104,812
-
75,104,812
75,104,812
3,011,984
78,116,796
Loans and receivables
Available-for-sale
Total
11,943,264
-
11,943,264
-
4,384,882
4,384,882
Trade and other receivables (note 18)
151,237,215
-
151,237,215
Cash and cash equivalents (note 19)
432,979,030
-
432,979,030
TOTAL
596,159,509
4,384,882
600,544,391
Total
Liabilities as per balance sheet
Borrowings (note 25)
Trade and other payables (note 26)
TOTAL
31 March 2008
Assets as per balance sheet
Loans and receivables (note 15)
Available-for-sale financial assets (note 16)
Liabilities at fair value
Other financial
through profit and loss
liabilities
Total
Liabilities as per balance sheet
Borrowings (note 25)
-
17,066,796
17,066,796
Trade and other payables (note 26)
105,501,323
-
105,501,323
TOTAL
105,501,323
17,066,796
122,568,119
Company
Loans and receivables
Available-for-sale
Total
6,020,704
31 March 2009
Assets as per balance sheet
Loans and receivables (note 15)
6,020,704
-
Available-for-sale financial assets (note 16)
-
4,606,093
4,606,093
Investments in subsidiaries (note 12)
-
368,604,641
368,604,641
Trade and other receivables (note 18)
7,670,391
-
7,670,391
Cash and cash equivalents (note 19)
288,454,667
-
288,454,667
675,356,496
TOTAL
302,145,762
373,210,734
Liabilities at fair value
Other financial
through profit and loss
liabilities
Total
Liabilities as per balance sheet
Trade and other payables (note 26)
8,678,751
-
8,678,751
TOTAL
8,678,751
-
8,678,751
Loans and receivables
Available-for-sale
Total
11,943,264
31 March 2008
Assets as per balance sheet
Loans and receivables (note 15)
11,943,264
-
Available-for-sale financial assets (note 16)
-
4,134,209
4,134,209
Investments in subsidiaries (note 12)
-
223,988,865
223,988,865
Trade and other receivables (note 18)
10,689,952
-
10,689,952
Cash and cash equivalents (note 19)
419,645,348
-
419,645,348
670,401,638
TOTAL
442,278,564
228,123,074
Liabilities at fair value
Other financial
through profit and loss
liabilities
Total
Liabilities as per balance sheet
Trade and other payables (note 26)
11,314,747
-
11,314,747
TOTAL
11,314,747
-
11,314,747
111
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
YEAR
YEAR
YEAR
ENDED
ENDED
ENDED
ENDED
31 MARCH 2009
31 MARCH 2008
31 MARCH 2009
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
12,999,102
15. LOANS AND RECEIVABLES
York Timbers Limited deferred claim settlement
Payments
- within one year
- in the second to fifth years inclusive
Less unearned interest income
- within one year
- in the second to fifth years inclusive
Present value of payments
- within one year
- in the second to fifth years inclusive
Non-current loans and receivables
Current loans and receivables
6,149,695
12,999,102
6,149,695
6,149,695
6,778,934
6,149,695
6,778,934
-
6,220,168
-
6,220,168
(128,991)
(1,055,838)
(128,991)
(1,055,838)
(128,991)
(1,055,838)
(128,991)
(1,055,838)
-
-
-
-
6,020,704
11,943,264
6,020,704
11,943,264
6,020,704
5,723,096
6,020,704
5,723,096
-
6,220,168
-
6,220,168
-
6,220,168
-
6,220,168
6,020,704
5,723,096
6,020,704
5,723,096
6,020,704
11,943,264
6,020,704
11,943,264
Amounts receivable from York Timbers Ltd pertaining to a cancellation action due in three annual payments from 1 July 2007. The deferred claim settlement bears interest at prime rate
less 3.5%.
16. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Beginning of the year
4,384,882
3,464,394
4,134,209
Movement for the year
471,884
920,488
471,884
920,488
4,856,766
4,384,882
4,606,093
4,134,209
End of the year
3,213,721
Less: current portion
-
-
-
-
Non-Current portion
4,856,766
4,384,882
4,606,093
4,134,209
Available-for-sale financial assets include the following:
Unlisted
Timber Workers Co-operative Insurance Brokers
Transvaal Wattle Growers Co-op Agricultural Company Limited
NTE investment
Risk finance policy - Guardian National
4
4
4
4
1,000
1,000
1,000
1,000
250,673
250,673
-
-
4,605,089
4,133,205
4,605,089
4,133,205
4,856,766
4,384,882
4,606,093
4,134,209
58,264,564
29,878,771
65,129
54,878
None of the financial assets is either past due or impaired.
The Directors value all unlisted investments at cost.
17. INVENTORIES
At cost
Raw materials
5,287,100
2,398,439
-
-
Work in progress
3,386,071
2,494,583
-
-
Finished goods
35,118,782
12,760,690
-
-
Consumable stores
14,472,611
12,225,059
65,129
54,878
10,653,678
845,624
-
-
At net realisable value
Finished goods
At fair value
Agricultural produce - saw logs
TOTAL
112
118,359,536
95,880,964
-
-
187,277,778
126,605,359
65,129
54,878
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Trade accounts receivable
179,070,598
145,576,611
2,933,599
6,655,957
Provision for doubtful debt
(7,552,762)
(8,803,115)
-
(3,085,303)
18. TRADE AND OTHER RECEIVABLES
Other receivables
14,308,960
14,463,719
4,736,792
7,119,298
Trade and other receivables
185,826,796
151,237,215
7,670,391
10,689,952
185,826,796
151,237,215
7,670,391
10,689,952
The fair values of trade and other receivables are as follows:
Trade and other receivables
As at 31 March 2009, trade receivables of the Group of R 125,736,303 (2008: R 94,031,850) and of the Company of R 2,933,599 (2008: R 3,553,611) were fully performing. Other
receivables of the Group of R 12,456,693 (2008: R 11,325,315) and of the Company of R 4,736,792 (2008: R 6,081,682) were fully performing.
The average credit period for the Group is 69 (2008: 56) days. Interest is charged on trade receivables that default. The Group and Company have provided for the majority of receivables
over 150 days based on past experience, which indicates that receivables that are past due beyond 150 days are generally not recoverable. Some past due debtors older than 150 days
however have not been provided for due to specific conditions in regards to the payment of the debt. The overall recoverability of the amount owed is not perceived to be in doubt. Trade
receivables between 60 days and 120 days are provided for based on estimated irrecoverable amounts.
Included in the Group and Company’s trade and other receivables are receivables with a carrying amount of R 47,633,800 (2008: R 45,880,050) for the Group and for the Company R 0 (2008:
R 1,054,659) which are past due at the reporting date, but the Group and Company have not provided for them as there has not been a significant change in the credit quality, and the amounts
are still considered recoverable. The ageing of the trade receivables past due but not impaired is as follows:
AGEING OF PAST DUE BUT NOT IMPAIRED
Trade receivables
47,336,672
44,605,704
-
31 - 60 Days
32,912,512
35,233,252
-
17,043
-
60 - 90 Days
12,207,392
2,718,274
-
1,778
90 - 120 Days
461,668
1,625,982
-
120 - 150 Days
(21,104)
3,844,912
-
-
1,776,204
1,183,284
-
15,265
Other receivables
297,128
1,274,346
-
1,037,616
31 - 60 Days
214,969
40,567
-
-
60 - 90 Days
80,764
85,220
-
-
90 - 120 Days
1,851
(3,602)
-
-
120 - 150 Days
8,431
1,224
-
-
150+ Days
150+ Days
TOTAL
(8,887)
1,150,937
-
1,037,616
47,633,800
45,880,050
-
1,054,659
Included in the Group and Company’s trade and other receivables are receivables with a carrying amount of R 7,552,762 (2008: R 8,803,115) and R 0 (2008: R 3,085,303) which are impaired
and provided for. These relate to a number of independent customers which are in difficult economic situations. The ageing of the trade receivables and other receivables that are impaired
are as follows:
AGEING OF IMPAIRED RECEIVABLES
Trade receivables
5,997,623
6,939,057
-
3,085,303
60 - 90 Days
9,448
56,172
-
41,007
90 - 120 Days
85,554
40,206
-
40,206
120 - 150 Days
1,955,851
699,336
-
-
150+ Days
3,946,770
6,143,343
-
3,004,090
Other receivables
-
1,555,139
1,864,058
-
60 - 90 Days
189
1,968
-
-
90 - 120 Days
5,990
3,719
-
-
120 - 150 Days
16,929
14,750
-
-
150+ Days
1,532,031
1,843,621
-
-
TOTAL
7,552,762
8,803,115
-
3,085,303
The credit quality of trade and other receivables that are neither past due nor impaired can be assessed by reference to historical information about the counterparty default rates. Major trade
receivables are insured based on the external credit ratings of the specific counterparties. Internal credit checks are performed for other receivables.
Counterparties without external credit rating
Fully performing trade receivables
Customers with no default history
Customers with default history
TOTAL
125,736,303
83,415,790
2,933,599
-
10,616,060
-
3,553,611
-
125,736,303
94,031,850
2,933,599
3,553,611
113
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
18. TRADE AND OTHER RECEIVABLES (CONTINUED)
Movement In The Allowance For Doubtful Debts
Balance at beginning of the year
8,803,115
5,915,657
3,085,303
2,723,834
Impairment losses recognised on receivables
2,645,125
3,809,712
-
596,844
(235,375)
Amounts written off as uncollectible
(3,400,758)
(762,324)
(3,085,303)
Amounts recovered during the year
(494,720)
(159,930)
-
-
Balance at the end of the year
7,552,762
8,803,115
-
3,085,303
In determining the recoverability of trade and other receivables, the Group and Company consider any change in the credit quality of trade and other receivables from the date the credit was
initially granted up to the reporting date. The concentration of the credit risk is limited due to the customer base being large. Accordingly, the Directors believe that there is no further credit
provision required in excess of the allowance for doubtful debts.
All round wood and lumber receivables are secured by either bank guarantees, credit insurance (80%) or cash prepayments. Small sundry receivables are either secured by credit insurance
or deposits. The carrying value of receivables approximates the fair value. In circumstances where the carrying value is less than the fair value, receivables are accordingly impaired to reflect
that status.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
19. CASH AND CASH EQUIVALENTS
Current account
34,440,590
27,979,030
288,454,667
14,645,348
Short-term deposits
261,500,000
405,000,000
-
405,000,000
TOTAL
295,940,590
432,979,030
288,454,667
419,645,348
20. DISCONTINUED OPERATIONS
A discontinued operation is a component which has been disposed of or is classified as held-for-sale and represents a separate major line of business or geographical area of operations, or
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations.
Blyde Sawmill
On 28 May 2007 the SAFCOL Board of Directors approved the closure by its subsidiary Komatiland Forests (Pty) Ltd of its Blyde sawmill. The sawmill was declared structurally unsafe. The
closure of Blyde sawmill was completed by October 2007, but transactions still ocurred in 2009 financial year.
The results of the discontinued operation included in the Group’s income statement and cash flow statement are set out below.
A consolidated analysis of the results of these discontinued operations, and the result recognised on the re-measurement of assets are as follows:
Income statement
Turnover (refer note 3)
Cost of sales
Net profit / (loss)
30,182
12,829,336
-
-
(14,633,443)
-
-
30,182
(1,804,107)
-
-
Other operating income
89,907
-
-
-
Administrative expenses
(40,925)
(149,226)
-
-
Other operating expenses
(425,858)
(1,081,651)
-
-
Operating loss
(346,694)
(3,034,984)
-
-
Finance costs (refer note 6)
(1,020)
(1,059)
-
-
(347,714)
(3,036,043)
-
-
-
-
-
-
(347,714)
(3,036,043)
-
-
Operating cash flows
(89,903)
(477,199)
-
-
Investing cash flows
89,903
477,199
-
-
-
-
-
-
Loss before tax
Attributable income tax expense
Loss for the year from discontinued operations
Cash flow statement
Total cash flows
114
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
21. ASSETS CLASSIFIED AS HELD FOR SALE
Movement reconciliation:
Assets classified as held for sale
Carrying amount at the beginning of the period
Transferred (from) / to assets classified as held for sale (refer note 9)
-
281,259
-
-
281,259
-
-
-
(6,966)
281,259
-
-
Disposed during the period
(274,293)
-
-
-
Proceeds
(528,676)
-
-
-
254,383
-
-
-
-
281,259
-
-
Surplus on disposal
Carrying amount at the end of the year
Assets held for sale consist of the following:
Property, plant and equipment
Motor vehicles
-
15
-
-
Plant and equipment
-
281,244
-
-
-
281,259
-
-
TOTAL
Assets classified as held for sale relate to assets that were not in use in the current year and will be disposed within the next 12 months.
22. SHARE CAPITAL
Authorised
1 500 000 000 Ordinary shares of R1 each
1,500,000,000
1,500,000,000
1,500,000,000
1,500,000,000
318,013,254
318,013,254
318,013,254
318,013,254
64,373,511
64,373,511
64,373,511
64,373,511
Capital surplus on sawmill insurance claims
37,061,007
37,061,007
37,061,007
37,061,007
Adjustment to fixed asset opening balances
(669,042)
(669,042)
(669,042)
(669,042)
27,981,546
27,981,546
27,981,546
27,981,546
Issued
318 013 254 Ordinary shares of R1 each
23. NON-DISTRIBUTABLE RESERVES
Capital profit reserve
Cancellation of provision for transfer cost on transfer of land
Retirement fund reserve
64,000,000
64,000,000
64,000,000
64,000,000
Lump-sum payment to retirement funds
20,000,000
20,000,000
20,000,000
20,000,000
Pension fund shortfall funded by Government
44,000,000
44,000,000
44,000,000
44,000,000
(603,538)
(603,538)
(1,552,055)
(1,552,055)
(1,552,055)
Revaluation reserve
(603,538)
(603,538)
(1,552,055)
Foreign currency translation reserve
Adjustment to net asset valuation upon corporatisation
(7,890,742)
3,631,901
-
-
TOTAL NON-DISTRIBUTABLE RESERVES
119,879,231
131,401,874
126,821,456
126,821,456
736,950,260
570,579,886
(1,506,214)
(4,476,604)
2,868,864
1,977,774
529,034
-
-
(21,803,122)
-
154,366
24. DEFERRED TAXATION
Reconciliation of opening balance to closing balance of deferred tax liability / (asset):
Opening balance
Reversing differences for prior period adjustments
Income tax rate change (from 29% to 28%)
Originating / (Reversing) differences on assets
8,574,411
8,577,626
436,501
(17,927)
(Reversing) / Originating differences on provisions
(4,483,173)
3,394,760
(133,577)
2,166,022
Reversing / (Originating) differences on allowances
999,740
1,414,950
(214,166)
666,746
Reversing differences on finance leases
86,728
652,869
-
-
Reversing difference on deferred income
-
1,183
-
1,183
-
Originating differences on assessed loss
Originating differences due to fair value adjustments to plantations
Originating differences on pension and provident fund assets
-
38,850
-
217,571,886
158,327,724
-
-
1,174,484
13,787,760
-
(1,506,214)
CLOSING BALANCE
963,743,200
736,950,260
(888,422)
Deferred tax liability
964,718,533
738,456,474
-
-
(975,333)
(1,506,214)
(888,422)
(1,506,214)
Deferred tax asset
115
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Capital allowances
937,781,175
715,669,285
507,269
72,185
Plantations
891,138,685
677,612,967
-
-
Property, plant & equipment
46,644,336
38,064,751
507,269
72,185
24. DEFERRED TAXATION (CONTINUED)
Deferred taxation consists of the following temporary differences:
Minor assets
Provisions
Finance lease liability
Deferred income
(1,846)
(8,433)
-
-
(11,292,981)
(10,132,098)
(1,440,591)
(2,482,188)
(156,777)
(243,504)
-
-
-
1,183
-
1,183
Other allowances
5,139,073
4,951,701
44,900
902,606
Biological assets - agricultural produce: saw logs
17,310,466
12,915,933
-
-
Pension and provident fund assets
14,962,244
13,787,760
-
TOTAL
963,743,200
736,950,260
(888,422)
(1,506,214)
Deferred taxation assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.
25. BORROWINGS
Obligations under finance leases
Minimum lease payments
3,011,984
17,066,796
-
-
within one year
1,553,371
4,492,900
-
-
in the second to fifth years inclusive
1,458,613
12,573,896
-
-
263,831
3,554,329
-
-
198,912
1,547,586
-
-
Finance charges
within one year
in the second to fifth years inclusive
64,919
2,006,743
-
3,275,815
20,621,125
-
-
within one year
1,752,283
6,040,486
-
-
in the second to fifth years inclusive
Total repayments
1,523,532
14,580,639
-
-
Non-current borrowings
1,458,613
12,573,896
-
-
Current borrowings
1,553,371
4,492,900
-
-
3,011,984
17,066,796
-
-
Finance lease obligations are capitalised between 1.5% and 2.75% less than prime rate. The effective interest rates prevailing at year-end ranged between 8.66% and 11.55%
(2008: 8.66% and 11.55%).
The lease terms are 5 years with between 1 and 3 years remaining.
These liabilities are secured by installment lease agreements over assets with a net book value of R3,973,450 (2008: R16,669,130) - refer note 9. Monthly repayments are R146,024 (2008:
R503,374).
26. TRADE AND OTHER PAYABLES
Trade accounts payable
43,506,448
63,989,262
676,876
Accruals
19,350,724
35,698,568
6,895,206
8,007,049
Other payables
12,247,640
5,813,493
1,106,669
1,179,520
TOTAL
75,104,812
105,501,323
8,678,751
11,314,747
116
2,128,178
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
Employee bonus
24,065,862
11,865,323
4,608,804
4,197,051
Balance at the beginning of the period
11,865,323
8,743,200
4,197,051
2,366,000
27. PROVISIONS
Provisions made during the period
24,065,863
12,019,848
4,608,804
4,197,051
Provisions utilised during the period
(10,304,001)
(7,620,657)
(4,197,051)
(2,366,000)
Provisions reversed during the period
(1,561,323)
(1,277,068)
-
-
582,203
1,167,515
-
-
1,167,515
221,103
-
-
2,309,536
1,167,514
-
-
(2,624,209)
(221,102)
-
-
Product claims
Balance at the beginning of the period
Provisions made during the period
Provisions reversed during the period
Provisions utilised during the period
(270,639)
-
-
-
Retrenchment benefits
-
-
-
-
Balance at the beginning of the period
-
5,883,057
-
5,883,057
Provisions made during the period
-
823,769
-
823,769
Provisions utilised during the period
-
(6,706,826)
-
(6,706,826)
Legal costs
-
-
-
-
Rehabilitation of exit areas
-
-
-
-
Provisions reclassified as an accrual
-
4,600,000
-
4,600,000
Provisions utilised during the period
-
(3,600,000)
-
(3,600,000)
Provisions reversed during the period
-
(1,000,000)
-
(1,000,000)
Land lease
2,172,182
2,174,059
842,940
844,819
Balance at the beginning of the period
2,174,059
3,452,606
844,819
2,123,366
Provisions made during the period
Provisions reversed during the period
14,920,848
206,356
14,920,848
206,356
(14,922,725)
(1,484,903)
(14,922,727)
(1,484,903)
Regeneration backlog
-
-
-
-
Balance at the beginning of the period
-
2,588,132
-
-
Provisions reversed during the period
-
(2,588,132)
-
-
Post retirement medical aid
-
3,839,186
-
683,540
3,839,186
10,966,620
683,540
248,993
-
10,563,258
-
612,641
(661,160)
(178,094)
(129,787)
(178,094)
Provisions utilised during the period
(3,178,026)
(17,512,598)
(553,753)
-
Balance at the end of the period
26,820,247
19,046,083
5,451,744
5,725,410
Balance at the beginning of the period
Provisions made during the period
Provisions reversed during the period
Employee bonus
Employee bonus calculations are prescribed in the relevant conditions of employment or performance bonus scheme as approved by the Board of Directors.
Product claims
Provision for product returns based on terms and conditions of sale.
Retrenchment benefits
The Retrenchment benefits provision relates to two Executive Directors’s retention agreements in the prior year. In settlement of this contractual obligations, the amounts due to the
Directors were verified by an independent firm of auditors before payment and paid to them during the last quarter of the prior year.
New employment contracts were entered into with them.
Rehabilitation of exit areas
In the prior year, the short-term portion of the provision for rehabilitation cost was based on estimated rehabilitation costs per hectare clear felled for exit areas in the Western Cape, Eastern
Cape and Kwazulu-Natal. The obligation in respect of the St Lucia exit areas were settled with the new land manager, whereas the obligation in respect of the Western and Eastern Cape
exit areas lapsed on 31 March 2007.
Land lease
Provision of land which SAFCOL leases from the Department of Water Affairs and Forestry (“DWAF”). The payment dates of this provision is uncertain.
Regeneration backlog
Provision for replanting of temporary unplanted areas as per sustainable forestry practices to ensure FSC compliance. The assumptions for this provision are similar to the IAS 41 fair value
model assumptions for planted areas set out in note 11. This provision is revised annually to reflect the movement in unplanted areas.
Post retirement medical aid
Actuarial valuation of future liability pertaining to a 50% company contribution to medical aid of employees retired within SAFCOL’ s employment. Payment date for this provision occurred
during the current year.
117
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
6,728,282
30,990,703
-
-
28. CAPITAL COMMITMENTS
Capital Expenditure
Authorised and contracted
This capital expenditure will be financed from cash flows generated from operations, or external financing if required.
29. RELATED PARTIES
Identity of related parties
SAFCOL is the holding company of the Group and is owned 100% (2008: 100%) by the Government of the Republic of South Africa.
All other State Owned Entities listed in Schedules 2 and 3 of the Public Finance Management Act are related parties of SAFCOL and its subsidiary companies.
The subsidiaries of the Group are identified in note 12 and the associate companies in note 13.
The Directors are listed in the Report of the Directors.
No material transactions were conducted between the Group and any of the Group’s Directors or key personnel.
The Group does not provide any services to related parties for no consideration.
Material related party transactions
Details of the significant transactions with related parties are summarised below, all of which were transacted at arms length:
(A) LOANS TO RELATED PARTIES - NON-INTEREST BEARING
Subsidiaries (note 12)
Beginning of the year
-
-
294,041,618
382,171,749
Loans repaid during the year
-
-
-
(88,130,131)
End of the year
-
-
294,041,618
294,041,618
3,209,720
4,167,797
3,209,720
4,167,797
-
(958,077)
-
(958,077)
3,209,720
3,209,720
3,209,720
3,209,720
Beginning of the year
-
-
744,551
443,169
Loans advanced during the year
-
-
70,809,537
213,322
Interest charged
-
-
3,008,815
88,060
End of the year
-
-
74,562,903
744,551
Associates (note 13)
Beginning of the year
Loans repaid during the year
End of the year
(B) LOANS TO RELATED PARTIES - INTEREST BEARING
Subsidiaries (note 12)
Associates (note 13)
Beginning of the year
Loans repaid during the year
5,533,163
20,533,163
5,533,163
20,533,163
(5,632,429)
(17,298,663)
(5,632,429)
(17,298,663)
Interest charged
632,599
2,298,663
632,599
2,298,663
End of the year
533,333
5,533,163
533,333
5,533,163
Beginning of the year
-
-
(70,797,424)
(88,130,131)
Loans repaid during the year
-
-
72,866,100
25,284,704
Interest charged
-
-
(2,068,676)
(7,951,997)
End of the year
-
-
-
(70,797,424)
Beginning of the year
-
-
(17,721)
(17,721)
Loans repaid during the year
-
-
17,521
-
End of the year
-
-
(200)
(17,721)
(C) LOANS FROM RELATED PARTIES - INTEREST BEARING
Subsidiaries (note 12)
(D) LOANS FROM RELATED PARTIES - NON-INTEREST BEARING
Subsidiaries (note 12)
118
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
(14,400,000)
29. RELATED PARTIES (CONTINUED)
(E) SALES OF GOODS AND SERVICES
Services
Subsidiaries
-
-
(9,600,000)
Associates
-
(143,096)
-
(143,096)
-
(143,096)
(9,600,000)
(14,543,096)
Sale of goods
Associates
Other State Owned Entities
(186,400)
-
-
-
(1,847,027)
(1,908,668)
-
-
(2,033,427)
(1,908,668)
-
-
-
-
(15,428,406)
(14,446,476)
-
-
(15,428,406)
(14,446,476)
Operating lease rentals received
Subsidiaries
Services are rendered and goods sold based on the price lists in force and terms that would be available to third parties.
(F) PURCHASES OF GOODS AND SERVICES
Services
- Associates
- Other State Owned Entities
2,877
-
-
-
7,648,810
8,790,395
-
1,354,905
7,651,687
8,790,395
-
1,354,905
-
-
2,449,099
3,208,392
61,573
Services are received from related parties on normal commercial terms and conditions.
(G) YEAR-END BALANCES ARISING FROM SALES / PURCHASES OF GOODS
Receivables from related parties:
Subsidiaries
Associates
Other State Owned Entities
-
61,573
-
49,433
1,007,540
-
-
49,433
1,069,113
2,449,099
3,269,965
(324,506)
Payables to related parties:
-
-
(213,804)
Associates
Subsidiaries
(91,667)
-
-
-
Other State Owned Entities
(759,918)
(624,929)
-
-
(851,585)
(624,929)
(213,804)
(324,506)
20,751,736
31,499,826
14,194,062
22,895,177
(H) KEY MANAGEMENT COMPENSATION
Salaries and other short-term employee benefits
119
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
-
-
-
-
-
-
-
-
30. PRIOR PERIOD ERRORS AND CHANGES IN ESTIMATES
Prior Period Errors
An error was made in prior years in the classification of Investment Property as Property, plant and equipment.
The effect of the restatement on the financial statements is summarised below.
Income statement:
None
Balance Sheet
Decrease in Property, plant and equipment cost
(189,226)
(4,667,167)
(189,226)
(4,667,167)
Decrease in Property, plant and equipment accumulated depreciation
46,173
-
46,173
-
Increase in Investment Property
143,053
4,667,167
143,053
4,667,167
Changes in accounting estimates for the valuation of Biological Assets
During the year the fair value model, methodology and assumptions utilised have been revised. This was performed to obtain a more accurate valuation in terms of species, volumes,
income, expenses and prices.
The changes to the model are summarised as follow:
- Volume and prices were split per the group working circle (pine saw logs, pine fibre, gum saw logs, gum fibre, gum poles) while in prior years all crops were treated as pine saw logs
in regards to volumes and silviculture operations.
- Overheads split into fixed and variable (only road maintenance) which was not performed in the prior year.
- Research cost were excluded while overheads costs were included.
- The use of a mid-year discount which was not included in the prior year.
The amendments to the model represent a change in estimate as the change does not alter the valuation policy and a fair value is still calculated based on the discounted cash flow method
using a pre-tax discount rate.
The change relates to new information available in the current year and better reflects the economic benefits that are expected to flow from the use of the asset.
If the current year, plantations were valued based on prior year assumptions, this would have resulted in a total fair value of R3,289,212,687 as at 31 March 2009 compared to
R3,218,274,492 per the new methodology (refer note 11). The change has been applied prospectively.
The income statement and balance sheet impact are reflected below:
Loss arising from changes in fair value of Biological Assets:
Decrease in income tax expense (movement in Deferred tax)
(70,938,196)
-
-
-
19,862,695
-
-
-
Decrease in profit
(51,075,501)
-
-
-
Decrease in Biological Asset
(70,938,196)
-
-
-
Decrease in Deferred Tax liability
Decrease in equity
120
19,862,695
-
-
-
(51,075,501)
-
-
-
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
31. Risk Management
Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern. The Group’s overall
strategy remains unchanged from 2008.
The management of financial risks takes place within SAFCOL’s centralised treasury and risk management functions. The objective
is to ensure that the Group is not unduly exposed to financial risks.
The capital structure of the Group consists of debt, which includes short and long-term borrowings included in note 25, and equity
attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 22
and 23.
Risk Management Policies
Risk management policies are formally documented and approved. The accountability for developing and maintaining risk control
rests with the risk management function within the Group under the guidance of the Board of Directors. Compliance with policies
and exposure limits is reviewed by the internal auditors on a continuous basis.
Targets for Capital Structure
There is virtually no gearing and all operational and capital requirements are financed from own operations. This may change
within the next year due to current market conditions and to allow for more efficient use of cash.
No dividends have been declared in the current financial year (2008: R 0).
Gearing Ratio
The Group’s Finance, Investment and Transaction Committee reviews the capital structure quarterly.
The gearing ratio at year-end was as follows:
YEAR
YEAR
YEAR
YEAR
N
ENDED
ENDED
ENDED
ENDED
O
31 MARCH 2009
31 MARCH 2008
31 MARCH 2009
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
25
3,011,984
17,066,796
-
-
22,23
3,385,342,045
2,694,987,380
692,267,020
680,566,029
0.09%
0.63%
0.00%
0.00%
T
E
S
Debt (i)
Equity (ii)
Net debt to equity
(i) Debt is defined as long-term and short-term borrowings, as detailed in note 25.
(ii) Equity includes all capital and reserves of the Group.
121
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
Significant Accounting Policies
Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement,
and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and
equity instruments, are disclosed in note 2 to the annual financial statements.
Classes of Financial Instruments
YEAR
YEAR
YEAR
YEAR
N
ENDED
ENDED
ENDED
ENDED
O
31 MARCH
31 MARCH
31 MARCH
31 MARCH
T
2009
2008
2009
2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
E
S
Financial Assets
Loans and receivables
15
6,020,704
11,943,264
6,020,704
11,943,264
Available-for-sale financial assets
16
4,856,766
4,384,882
4,606,093
4,134,209
Subsidiary companies - Investments
12
-
-
320
17,841
12
-
-
294,041,618
294,041,618
12
-
-
74,562,903
744,551
Trade and other receivables
18
185,826,796
151,237,215
7,670,391
10,689,952
Cash and cash equivalents
19
295,940,590
432,979,030
288,454,667
419,645,348
492,644,856
600,544,391
675,356,696
741,216,783
25
3,011,984
17,066,796
-
-
12
-
-
-
70,797,424
12
-
-
200
17,721
26
75,104,812
105,501,323
8,678,751
11,314,747
78,116,796
122,568,119
8,678,951
82,129,892
Subsidiary companies - Noninterest bearing loans
Subsidiary companies Interest bearing loans
Total Financial Assets
Financial Liabilities
Borrowings
Subsidiary companies Interest bearing loans
Subsidiary companies - Noninterest bearing loans
Trade and other payables
Total Financial Liabilities
At the reporting date there are no significant concentrations of credit risk for loans and receivables. The carrying amount reflected
above represents the Group’s maximum exposure to credit risk for such loans and receivables.
Major Financial Risks
The following major financial risks that the organisation is exposed to have been identified:
•
Forward Exchange Risk – the risk of loss arising from changes in the exchange rate from one currency to another
through higher payments or lower receipts in the local currency.
•
Credit Risk – the risk of default by counterparties.
•
Cash Flow Interest Rate Risk - the risk of loss arising from changes in interest rates through higher interest payments
or lower interest receipts.
122
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
•
Market Risk – the risk of a decrease in the market value of a portfolio of financial instruments caused by an adverse
move in market variables such as currency exchange rates and interest rates as well as implied volatilities on all of the
above.
•
Liquidity Risk – the risk that the Group has insufficient funds or marketable securities available to fulfil its cash flow
obligations on time.
•
Compliance Risk – the risk of non-compliance with any statutory requirement of central or local Government and
includes the South African Reserve Bank, Financial Services Board and various financial exchanges.
•
Operational Risk – the risk resulting from inadequate or failed internal processes, people, and systems, or from external
•
Price Risk – the risk that changes in log price has on the financial performance and cash flows of the Group.
events.
Forward Exchange Risk
The Group enters into forward exchange contracts to buy and sell specified amounts of various foreign currencies in the future at
a predetermined exchange rate. The contracts are entered into in order to manage the Group’s exposure to fluctuations in foreign
currency exchange rates on specific transactions. The contracts are matched with foreign currency commitments and anticipated
future cash flows in foreign currencies consisting primarily of exports. No significant export transactions were concluded during
the year.
Funding for the IFLOMA subsidiary in Mozambique is mainly paid in US Dollars, whilst expenses are mainly denominated in
Metical. This has the effect that the Group is exposed to fluctuations in the Rand, the Dollar, and the Metical. No forward exchange
cover was used during the year, as no hedging instruments are available in the Metical.
Credit Risk
Financial assets, which potentially subject the Group to concentrations of credit risk, consist principally of cash, short-term deposits,
and trade and other receivables. The Group’s cash equivalents and short-term deposits are placed with high credit quality financial
institutions. All external investments held are rated AA or A1, or fully secured. Trade receivables are presented net of the allowance
for doubtful debts. Credit risk with respect to trade receivables is moderate due to the Group’s customer base, which is dispersed
across the forestry industry. Furthermore, a large number of customers have bank guarantees or other securities in place. Credit
insurance is taken out where regarded necessary. At balance sheet date all significant credit risks were provided for (refer note 18).
With respect to the foreign exchange contracts, the Group’s exposure is on the full amount of the foreign currency receivable on
settlement. The Group minimises such risk by limiting the counterparties to a group of major South African banks, and does not
expect to incur any losses because of non-performance by these counterparties. The carrying amounts of the financial assets
included in the consolidated balance sheet represent the Group’s maximum exposure to credit risk in relation to these assets. The
credit exposure of forward exchange contracts is represented by the net market value of the contracts, as disclosed. At year-end,
there were no foreign exchange contracts in place.
The Credit Committee has established a credit policy under which each new customer is analysed individually for creditworthiness
before the Group’s standard payment terms and conditions are offered. The Group’s review includes external ratings, where
available, and in some cases, bank references. Credit limits (purchase limits) established for each customer represent the maximum
open amount without requiring approval from the Credit Committee. These credit limits are reviewed regularly. Customers that fail
to meet the Group’s benchmark credit-worthiness may transact with the Group only on a pre-payment basis.
123
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
Cash Flow Interest Rate Risk
The Group is exposed to interest rate risk as the Group funds working capital short falls and assets, and invests surplus funds from
time to time. The Group utilises limited asset based finance leases to fund assets. These finance leases bear interest at fixed
interest rates. The Group also invests funds in the money market at both fixed and floating interest rates. The underlying interest
rate risk associated with this risk is managed by maintaining an appropriate mix between fixed and floating interest rates.
Shortfalls are funded by the holding company SAFCOL, as and when required. Surplus funds from operations are transferred to
the holding company on a daily basis. These surpluses or shortfalls bear interest on a floating interest inter-company account.
The Group’s exposure to interest rate risk and the effective interest rate on financial instruments at balance sheet date are set out
in the following tables:
GROUP
WEIGHTED
N
O
T
E
AVERAGE
FLOATING
NON-
EFFECTIVE
INTEREST
INTEREST
INTEREST
RATE
BEARING
%
R
R
R
9.50
6,020,704
-
6,020,704
TOTAL
RATE
S
As at 31 March 2009
Assets
Loans and receivables
15
Available-for-sale financial assets
16
4,605,089
251,677
4,856,766
Trade and other receivables
18
-
185,826,796
185,826,796
Cash and cash equivalents
19
295,940,590
-
295,940,590
306,566,383
186,078,473
492,644,856
3,011,984
-
3,011,984
-
75,104,812
75,104,812
3,011,984
75,104,812
78,116,796
303,554,399
110,973,661
414,528,060
9.67
Total Financial Assets
Liabilities
Borrowings
25
Trade and other payables
26
8.99
Total Fnancial Liabilities
Net Financial Assets
As at 31 March 2008
Total Financial Assets
11.00
449,055,499
151,488,892
600,544,391
Total Financial Liabilities
11.05
17,066,796
105,501,323
122,568,119
431,988,703
45,987,569
477,976,272
Net Financial Assets
124
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
The Company’s exposure to interest rate risk and the effective interest rate on financial instruments at balance sheet date are
set out in the following tables:
COMPANY
WEIGHTED
N
O
T
E
S
AVERAGE
FLOATING
NON-
EFFECTIVE
INTEREST
INTEREST
INTEREST
RATE
BEARING
%
R
R
R
9.50
6,020,704
-
6,020,704
TOTAL
RATE
As at 31 March 2009
Assets
Loans and receivables
15
Available-for-sale financial assets
16
4,605,089
1,004
4,606,093
Subsidiary companies - Investments
12
-
320
320
294,041,618
294,041,618
74,562,903
-
74,562,903
-
7,670,391
7,670,391
Subsidiary companies - Noninterest bearing loans
Subsidiary companies Interest bearing loans
12
12
Trade and other receivables
18
Cash and cash equivalents
19
-
6.50
9.67
288,454,667
-
288,454,667
373,643,363
301,713,333
675,356,696
12
-
200
200
26
-
8,678,751
8,678,751
-
8,678,951
8,678,951
373,643,363
293,034,382
666,677,745
Total Financial Assets
Liabilities
Subsidiary companies - Noninterest bearing loans
Trade and other payables
Total Financial Liabilities
Net Financial Assets
As at 31 March 2008
Total Financial Assets
11.01
436,466,368
304,750,415
741,216,783
Total Financial Liabilities
8.00
70,797,424
11,332,468
82,129,892
365,668,944
293,417,947
659,086,891
Net Financial Assets
Sensitivity Analysis for Variable Rate Instruments
The sensitivity has been determined based on the exposure to movement of interest rates on non-derivative floating interest rate
instruments at the balance sheet date. If interest rates had been 200 basis points higher or lower, the increase / (decrease) in the
Group’s profit / (loss) and equity for the year ending 31 March 2009 are set out in the table below. This increase / (decrease) is
attributable to variable interest rate borrowings, cash and cash equivalents and loans and receivables. This analysis assumes that
all other variables, in particular foreign currency rates, remains constant.
125
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
YEAR
YEAR
YEAR
YEAR
ENDED
ENDED
ENDED
ENDED
31 MARCH
31 MARCH
31 MARCH
31 MARCH
2009
2008
2009
2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
6,071,088
8,895,776
7,472,867
7,313,379
-
-
-
-
(6,071,088)
(8,895,776)
(7,472,867)
(7,313,379)
-
-
-
-
Variable Rate Instrument Sensitivity Analysis
Sensitivity if the interest rate increases by 200 basis points
Increase in Profit or Loss
Increase in Equity
Sensitivity if the interest rate decreases by 200 basis points
Decrease in Profit or Loss
Decrease in Equity
Market Risk (Fair Value Estimation)
At 31 March 2009 and 31 March 2008 the carrying amounts of cash and short-term deposits, accounts receivable, accounts
payable, accrued expenses and short-term borrowings, approximated their fair values due to the short-term maturities of these
assets and liabilities.
The fair value of long-term investments is not materially different from the carrying amounts.
The fair value of foreign exchange forward contracts represents the estimated amounts (using rates quoted by the Group’s
bankers), that the Group would receive to terminate the contracts at the reporting date, thereby taking into account the unrealised
gains or losses of open contracts. At year-end, there were no foreign exchange forward contracts.
Liquidity Risk
Liquidity risk arises primarily from variation in revenue flows as well as the Group’s ability to repay principle debt and interest.
The Group’s approach to liquidity management includes:
•
Regular monitoring of liquidity through periodic forecast cash flow management and maintaining an adequate level of
short-term marketable securities;
•
Implementation of long-term and short-term funding and investment strategies; and
•
Diversification of funding and investing activities.
126
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet to the contractual maturity date.
N
O
CARRYING
CONTRACTUAL
LESS THAN
1-5
TOTAL
T
AMOUNT
CASH FLOWS
1 YEAR
YEARS
R
R
R
R
R
E
S
Liquidity Risk Table as at 31 March 2009
Group
Borrowings
Trade and other
payables
25
3,011,984
3,011,984
1,553,371
1,458,613
3,011,984
26
75,104,812
75,104,812
75,104,812
-
75,104,812
78,116,796
78,116,796
76,658,183
1,458,613
78,116,796
8,678,751
8,678,751
8,678,751
-
8,678,751
8,678,751
8,678,751
8,678,751
-
8,678,751
O
CARRYING
CONTRACTUAL
LESS THAN
1-5
TOTAL
T
AMOUNT
CASH FLOWS
1 YEAR
YEARS
R
R
R
R
R
Company
Trade and other
payables
26
N
E
S
Liquidity Risk Table as at 31 March 2008
Group
Borrowings
Trade and other
payables
25
17,066,796
17,066,796
4,492,900
12,573,896
17,066,796
26
105,501,323
105,501,323
105,501,323
-
105,501,323
122,568,119
122,568,119
109,994,223
12,573,896
122,568,119
11,314,747
11,314,747
11,314,747
-
11,314,747
11,314,747
11,314,747
11,314,747
-
11,314,747
Company
Trade and other
payables
26
Compliance Risk
This is minimised through effective monitoring and reporting to ensure compliance with the Public Finance Management Act, the
Occupational Safety & Health Act, Companies Act, Income Tax Act, The Corporate Laws Amendment Act, applicable environmental
legislation and the requirements of statutory and other bodies; including the Competition Authorities, South African Reserve Bank,
Financial Services Board and the Forestry Stewardship Council.
127
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
Operational Risk
The Group’s approach to managing operational risk has led to the establishment of the following practices:
•
Policies and procedures to sustain effective risk management; and
•
The on-going assessment of the effects of changes in the regulatoryenvironment and adaptation of the processes
accordingly.
Price Risk
The devastating fires experienced in 2007 and 2008 had a negative long-term impact on the supply of logs. The impact of the
downturn in the economy has a negative impact on current and future demand and prices. The recent open market process failed
to establish the new sales prices for the forthcoming year. As a result, prices have been adjusted in accordance with market
expectations.
Fair Values
Fair Values versus Carrying Amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
GROUP
N
31 MARCH 2009
O
31 MARCH 2008
T
CARRYING
FAIR
CARRYING
FAIR
E
AMOUNT
VALUE
AMOUNT
VALUE
R
R
R
R
S
Financial Assets
Loans and receivables
15
6,020,704
6,020,704
11,943,264
11,943,264
Available-for-sale financial assets
16
4,856,766
4,856,766
4,384,882
4,384,882
Trade and other receivables
18
185,826,796
185,826,796
151,237,215
151,237,215
Cash and cash equivalents
19
295,940,590
295,940,590
432,979,030
432,979,030
492,644,856
492,644,856
600,544,391
600,544,391
Total Financial Assets
Financial Liabilities
Borrowings
25
3,011,984
3011,984
17,066,796
17,066,796
Trade and other payables
26
75,104,812
75,104,812
105,501,323
105,501,323
78,116,796
78,116,796
122,568,119
122,568,119
Total Financial Liabilities
Unrecognised gain / (loss)
128
-
-
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
COMPANY
N
O
31 MARCH 2009
31 MARCH 2008
T
CARRYING
FAIR
CARRYING
FAIR
E
AMOUNT
VALUE
AMOUNT
VALUE
R
R
R
R
S
Financial Assets
Loans and receivables
15
6,020,704
6,020,704
11,943,264
11,943,264
Available-for-sale financial assets
16
4,606,093
4,606,093
4,134,209
4,134,209
Subsidiary companies - Investments
12
320
320
17,841
17,841
12
294,041,618
294,041,618
294,041,618
294,041,618
Subsidiary companies - Interest bearing loans
12
74,562,903
74,562,903
744,551
744,551
Trade and other receivables
18
7,670,391
7,670,391
10,689,952
10,689,952
Cash and cash equivalents
19
288,454,667
288,454,667
419,645,348
419,645,348
675,356,696
675,356,696
741,216,783
741,216,783
Subsidiary companies - Noninterest bearing loans
Total Financial Assets
Financial Liabilities
Borrowings
25
-
-
-
-
Subsidiary companies - Interest bearing loans
12
-
-
70,797,424
70,797,424
12
200
17,721
17,721
26
8,678,751
8,678,751
11,314,747
11,314,747
8,678,951
8,678,951
82,129,892
82,129,892
Subsidiary companies - Noninterest bearing loans
Trade and other payables
Total Financial Liabilities
Unrecognised gain / (loss)
200
-
-
Basis for Determining Fair Values
The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments
reflected in the table above.
Available-for-sale Financial Assets
The fair value of available-for-sale financial assets is determined by reference to the deemed cost price at the reporting date.
Non-derivative Financial Liabilities
Fair value is calculated based on the present value of future principal and interest cash flows discounted at the market rate
on interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease
agreements.
Trade and Other Receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market
rate of interest at the reporting date. Carrying amount approximates fair value due to the short-term nature of trade and other
receivables.
129
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 31 (CONTINUED)
Interest Rates used for Determining Fair Value
The interest rates used to discount estimated cash flows was as follows:
Borrowings
N
O
T
E
S
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
R
R
25
8.66% - 11.55%
8.66% - 11.55%
32. Employee Benefits
Retirement Funds
During the past two years SAFCOL and its subsidiary, KLF, were involved in a process aimed at the consolidation of the Group’s
retirement fund dispensation. This resulted in the transfer of the membership from three other retirement funds to the SAFCOL
Provident Fund during this period. At year-end, all permanent employees of SAFCOL Group were either members of the SAFCOL
Provident Fund or the Forestry Workers Pension Fund, a retirement fund option for workers in forestry and related industries. Both
of these funds are defined contribution funds.
With effect from 1 December 2007, membership of all SAFCOL and KLF employees who were members of the SAFCOL Pension
Fund or the SAFCOL Pension-Linked Provident Fund (both defined benefit funds) was transferred to the SAFCOL Provident Fund.
The defined benefit funds will be liquidated as soon as the fund interests of the relevant members have been transferred to the
SAFCOL Provident Fund, and individual annuities have been purchased for the pensioners of these funds.
During November 2008, the Group was informed that the Investment Solutions Executive Provident Fund, an umbrella retirement
dispensation for executives, would be closed on 31 December 2008. Group employees who were members of the Investment
Solutions fund became members of the SAFCOL Provident Fund with effect from 1 January 2009.
Old Mutual Employee Benefits is the administrator of the SAFCOL Retirement Funds.
The SAFCOL Provident Fund was 153.3% funded as at 30 June 2004. As at 30 June 2007 the Fund was 108.5% funded (net of
the 30 June 2004 surplus distribution). At year-end, the surplus in the Fund (apportioned to the employer in accordance with the
provisions of the Pension Fund Act, 1956) amounted to R 10.1 million (2008: R18.4 million), after funding had been utilised for
contribution holidays, the enhancement of benefits, and the settlement of the employer’s post-retirement medical aid liability.
According to the results of a statutory valuation of the defined benefit funds as at 30 June 2007, the funding level of the SAFCOL
Pension Fund was 121.9%, resulting in a surplus of R43.4 million. Surplus of R6.5 million in the SAFCOL Pension-Linked
Provident Fund emanated from a funding level of 106.2%. In both instances, the surplus was applied for contribution holidays, the
enhancement of benefits, and the settlement of the employer’s post-retirement medical aid liability.
130
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 32 (CONTINUED)
Following the consideration of the valuations by the Board of Trustees, the employer contribution rates to the defined
contribution funds in terms of the respective rules were as follows:
DEFINED BENEFIT
DEFINED CONTRIBUTION
SAFCOL
FORESTRY
PENSION
WORKERS
GROUP AND
SAFCOL
COMPANY
PENSION
-LINKED
FUND
PROVIDENT
SAFCOL PROVIDENT FUND
PENSION
FUND
FUND
Section A
Section C
Section D
Benefits*
16.00%
_
Contribution rate
28.73%
29.70%
Benefits
16.00%
Benefits
17.50%
Members
7.51%
7.59%
6.00%
7.50%
Employer
21.22%
22.11%
10.00%
10.00%
16.00%
* Non-contributory fund: deemed members’ contributions of 6.0% included as employer contributions.
YEAR
YEAR
YEAR
16.00%
6.00%
10.00%
YEAR
ENDED
ENDED
ENDED
ENDED
31 MARCH 2009
31 MARCH 2008
31 MARCH 2009
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R’000
R’000
R’000
R’000
45,216
49,576
1,536
4
-
334
-
-
Balance Sheet DIisclosure
Non-current balance sheet assets
Pension and provident fund assets
Non-current balance sheet obligations
Pension obligation
334
-
Current balance sheet obligations
Post-employment medical benefits
-
3,839
-
684
Employee incentive bonuses
24,066
11,865
4,609
4,197
Leave pay
10,123
9,555
536
-
-
-
-
-
34,189
25,259
5,145
4,881
-
(967)
-
-
Post retirement benefits - defined benefit
(4,263)
23,257
-
-
Post-employment medical benefits
(3,839)
(7,127)
-
-
Employee incentive bonuses
12,201
3,122
412
1,831
Termination benefits
4,415
824
2,195
824
Termination benefits
Income Statement Disclosure
Post retirement benefits
- defined contribution
Leave pay
(567)
11
536
(779)
7,947
19,120
3,143
1,876
131
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 32 (CONTINUED)
The actuarial valuation in terms of IAS 19 for the SAFCOL Pension Fund and the SAFCOL Pension-Linked Provident fund
produced the following results:
The following information is disclosed for the Group only.
PENSION FUND
PENSION-LINKED
PROVIDEND FUND
2009
2008
2009
2008
21,376
8,152
8,371
3,026
Discount rate
9.00%
9.25%
9.00%
9.25%
Expected return on plan assets
6.00%
10.50%
6.00%
10.50%
Future salary increases
n/a
7.25%
n/a
7.25%
Future pension increases
n/a
4.05%
n/a
4.05%
Inflation rate
n/a
6.25%
n/a
6.25%
Cash
97.56%
5.15%
97.78%
10.22%
Equity
nil
90.54%
nil
80.77%
Bonds
2.44%
4.31%
2.22%
9.01%
Property and other
nil
nil
nil
nil
Total International
nil
nil
nil
nil
100.00%
100.00%
100.00%
100.00%
The actual return on plan assets was
The principal actuarial assumptions used were as
follows:
Mortality rates:
Pre-retirement
- SA 85/90 ultimate
Post-retirement - PA(90) ultimate rated down
1 year with 0.75% improvement per annum
Plan assets are comprised as follows:
132
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 32 (CONTINUED)
PENSION FUND
YEAR
ENDED
31 MARCH 2009
GROUP
R’000
PENSION-LINKED PROVIDENT FUND
YEAR
ENDED
31 MARCH 2008
GROUP
R’000
YEAR
ENDED
31 MARCH 2009
COMPANY
R’000
YEAR
ENDED
31 MARCH 2008
COMPANY
R’000
The amounts recognised in the balance sheet
are determined as follows:
Present value of funded obligations
84,360
82,060
1,032
54,209
Fair value of plan assets
(115,565)
(113,286)
(4,984)
(53,875)
Funded status of the plan (surplus)/deficit
(31,205)
(31,226)
(3,952)
334
-
-
-
-
(Asset)/liability recognised in the balance
sheet
(31,205)
(31,226)
(3,952)
334
Opening balance
(31,226)
-
334
-
5,106
(6,631)
(5,106)
(1,004)
Asset deemed to be irrecoverable
Contributions
Income statement movement
(5,085)
(24,595)
820
1,338
Closing balance
(31,205)
(31,226)
(3,952)
334
82,060
56,292
54,209
39,687
-
1,411
-
952
7,591
5,316
5,014
3,631
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation
Current service costs
Interest cost
Acturial loss
8,702
2,383
4,177
771
Pension surplus apportionment
98,353
65,402
63,400
45,041
Risk premiums
Benefits paid
-
(694)
-
(329)
(13,993)
(1,647)
(62,368)
(1,737)
Outsourced pensioners cost
-
3,129
-
1,911
Past service costs
-
15,097
-
8,853
Member contributions
Closing defined benefit obligation
-
773
-
470
84,360
82,060
1,032
54,209
113,286
100,071
53,875
51,441
Changes in the fair value of plan assets are
as follows:
Fair value of plan assets at the beginning
of the year
Total contributions
(5,106)
7,404
5,106
1,474
Benefit payments
(13,993)
(1,647)
(62,368)
(1,737)
12,181
9,665
5,657
4,821
Risk premiums
-
(694)
-
(329)
Pensioners outsourced
-
-
-
-
9,197
(1,513)
2,714
(1,795)
115,565
113,286
4,984
53,875
Expected return of plan assets
Acturial gain/(loss)
Fair value of plan assets at the end of the year
The amount recognised in the income
statement are determined as follows:
Current service cost
Interest cost
Expected return on plan assets
Past service costs
Curtailment costs
Acturial (gain)/loss unrecognised
-
1,411
-
952
7,591
5,316
5,014
3,631
(12,181)
(9,665)
(5,657)
(4,821)
-
15,097
-
8,853
-
3,129
-
1,911
(495)
9,307
1,463
(11,864)
(5,085)
24,595
820
(1,338)
133
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
NOTE 32 (CONTINUED)
GROUP
2009
2008
R’000
R’000
SAFCOL Pension Fund Asset
31,205
31,226
SAFCOL Provident Fund Asset *
10,059
18,350
SAFCOL Pension -linked Provident Fund Liability
3,952
-
Total asset per the balance sheet
45,216
49,576
SAFCOL Pension -linked Provident Fund Liability
-
334
Total liability per the balance sheet
-
334
*The SAFCOL Provident Fund Asset relates to the initial surplus apportionment exercise. This asset consists of funds held in a
money market and cash portfolio, and is managed separately from the plan assets of the fund. The plan assets of the fund are
held in multi-managed portfolio’s in accordance with the approved investment strategy.
Future Contributions, Income Statement Charges and Income Statement Credits
The expected contributions to post employment benefit plans for the year ending March 2010 approximate R0.0 million
(2008: R1.0 million). The expected income statement credit for the defined schemes is estimated to be approximately R 2.1 million
(2008: R 5.2 million).
Experience Adjustments
2009
2008
GROUP
R’000
R’000
Experience adjustments on plan liabilities
12,879
3,154
Experience adjustments on plan assets
(11,911)
3,308
968
6,462
Summary of the employee benefits assets and obligations as determined actuarially each year:
2009
2008
2007
GROUP
R’000
R’000
R’000
Present value of the obligation
85,392
136,269
95,979
(120,549)
(167,161)
(151,512)
(35,157)
(30,892)
(55,533)
Fair value of plan assets
Post Retirement Medical Aid
In terms of the Group’s policy, the employer accepted responsibility for 50% of the post-retirement medical aid costs for retired
employees. During 2006, the Group embarked on a process to dispose of this liability. This process was finalised prior to yearend when all the employer’s proposals made for the enhancement of retirement benefits, as compensation for the loss of the
employer’s post-retirement medical aid subsidy, was implemented. As set out in note 27, the employer’s accrued liability with
regards to post retirement medical aid amounts to R 0 (2008 : R 3.8 million) as at 31 March 2009.
134
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
YEAR
ENDED
31 MARCH 2009
YEAR
ENDED
31 MARCH 2008
YEAR ENDED
31 MARCH 2009
YEAR ENDED
31 MARCH 2008
GROUP
GROUP
COMPANY
COMPANY
R
R
R
R
(60,672,419)
(102,128,673)
(10,251)
(2,271)
14,924,682
45,898,685
-
-
-
899,386
-
-
(45,747,737)
(55,330,602)
(10,251)
(2,271)
(34,589,581)
(33,781,016)
3,019,561
8,323,664
-
1,214,900
-
-
(34,589,581)
(32,566,116)
3,019,561
8,323,664
(30,396,511)
42,448,362
(2,635,996)
(482,173)
-
(2,114,287)
-
-
(30,396,511)
40,334,075
(2,635,996)
(482,173)
(40,510,112)
(40,255,204)
(40,510,112)
(40,255,204)
(40,510,112)
(40,510,112)
(40,510,112)
(40,510,112)
-
254,908
-
254,908
(25,958,077)
(10,000,000)
(25,958,077)
(10,000,000)
(30,957,907)
(25,958,077)
(30,957,907)
(25,958,077)
4,999,830
15,958,077
4,999,830
15,958,077
-
(958,077)
-
(958,077)
4,999,830
15,000,000
4,999,830
15,000,000
33. CASH FLOW RECONCILIATION
Inventories
Movement per the Balance Sheet (note 17)
Movement in inventory (note 4)
Effects of forex translation
Movement per Cash Flow Statement
Trade and other receivables
Movement per the Balance Sheet (note 18)
Effects of forex translation
Movement per Cash Flow Statement
Trade and other payables
Movement per the Balance Sheet (note 26)
Effects of forex translation
Movement per Cash Flow Statement
Proceeds on disposal of associates
Balance at the beginning
of the year (note 13)
Balance at the end of the year (note 13)
Movement per Cash Flow Statement
Associate loans repaid
Balance at the beginning
of the year (note 13)
Balance at the end of the year (note 13)
Loan repayment relating to sale of share
in associate
135
SOUTH AFRICAN FORESTRY COMPANY LIMITED
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2009
34. Contingent Liabilities
Land Claims
Following the introduction of the Restitution of Land Rights Act, 1994, various communities, families and persons have lodged
land claims on approximately 61% of State forest land entrusted to SAFCOL and its subsidiaries in terms of SAFCOL’s founding
legislation. Notices of these claims have been published in the Gazette. This includes claims on the land on which the Timbadola
Sawmill is situated.
All the claims are currently under investigation by the relevant Land Claims Commissioners. Owing to the value of the Timbadola
Sawmill, the Minister of Land Affairs has agreed that the claimants will be offered financial compensation for the land if their rights
are restored.
To enable the Minister of Water Affairs and Forestry to pay a market-related rental to claimants, communities, and other beneficiaries
in respect of State forests managed by KLF, the Company has agreed to lease the relevant State forests in terms of Section 27 of
the National Forests Act, 1998. Currently, a draft lease agreement is still under discussion with the Department of Water Affairs
and Forestry and it is hoped to have the lease in place during the 2009 / 2010 financial year.
Land claims over both the Shannon plantation in the Barberton district and the Abacus properties in the Ngome area of KwaZuluNatal, have been investigated by the applicable Regional Land Claims Commissioners. A settlement offer for both the land and
the standing timber has been received by SAFCOL. The Board has considered these settlement offers and agreed in principle
thereto and it is hoped that the resolution of the two sets of claims will proceed during 2009 and 2010.
Banking Facilities
There are contingent liabilities in respect of:
•
Bank guarantees in respect of third party liabilities to the amount of R0.3 million (2008: R0.3 million)
•
Cross suretyships between the Company and its wholly owned subsidiary for any indebtedness, which any of them may have,
to specific financial institutions in respect of cash management and financing facilities
Litigation
The Londoloza / Paharpur consortium instituted a damages claim against SAFCOL and the Government. The claim is for payment
of approximately R3.2 billion damages based on Government’s decision not to continue with the previous privatization process. The
matter is being defended and the Directors have been advised by the company’s legal advisers that the chances of successfully
defending the matter are good.
The nature of the Group’s business means that it will be involved in litigation from time to time. Management is however confident
that either all material lawsuits can be defended successfully or such incidents are sufficiently covered under appropriate insurance
policies. In respect of lawsuits not being defended successfully, adequate provision will be made in the accounting records.
136