realising our potential integrated report€¦ · drinks and ice tea in south africa. ceres...

Integrated report2013

REALISING OUR POTENTIAL

Scope and boundary

This report was approved by the Pioneer Foods Board on 21 November 2013.

This integrated report covers Pioneer Foods’ South African and international operations for the period from 1 October 2012 to 30 September 2013. The report includes comparative information for previous years to enable stakeholders to assess the Group’s performance continuously over the medium term.

The report covers the following divisions:

• Sasko• Bokomo Foods• Ceres Beverages• Quantum Foods

The Africa joint ventures of Bokomo Botswana and Bokomo Namibia, as well as the Bowman Ingredients SA joint venture, are reported as part of the Sasko segment and operational report, whereas Bokomo UK and the Heinz Foods SA joint venture are reported as part of the Bokomo Foods segment and operational report. The consolidated report further incorporates the data on all other entities as prescribed by International Financial Reporting Standards (“IFRS”).

Quantum Foods, previously known as the Agri Business, is treated as an asset held for sale as a principal decision was made by the Board to unbundle it from the Group by way of a separate listing on

the Johannesburg Stock Exchange (“JSE”) in the near future. The division is nevertheless reported in a similar way to the remaining divisions to allow comparison with prior years. The Zambia and Uganda businesses are reported on as part of this division.

The report follows the guidelines of the revised King Code on Governance Principles for South Africa (“King III”), the JSE Listings Requirements, IFRS, the Companies Act, Act 71 of 2008, as amended, and the Global Reporting Initiative (“GRI”) Guidelines 3.1.

The financial statements included in the report were independently assured by PricewaterhouseCoopers Inc. Non-financial data was assured by internal reviews, internal audit and various external resources, including verification of Pioneer Foods’ B-BBEE status by AQRate.

The integrated report is available on the Group’s corporate website (www.pioneerfoods.co.za). The integrated report with full financial statements can be requested in print format from the company secretary (see Corporate information on page 222).

Group at a glance 2

Strategic overview 5

Industry features 6

Business model 6

Investment case 7

Business overview 8

Stakeholder engagement 14

Leadership overview 18

Chairman’s report 24

Chief Executive Officer’s report 28

Financial review 31

Sustainability 62

Social sustainability 66

Environmental sustainability 70

Value added statement 95

Financial results 98

Corporate information 222

Operational reportsSasko 36

Bokomo Foods 42

Ceres Beverages 48

Quantum Foods 54

Corporate governance 76

Compliance framework 77

Board of directors 80

Board committees 81

Group internal audit 88

Risk management report 89

IT governance report 93

Remuneration report 93

Contents

...Our strategy

1. Shaping a winning corporate portfolio Seed – weed – feed

2. Focus on power brands Enhance brand strength of winners and fully leverage market positions

3. Embed strategic customer management Collaborate to win in modern and traditional trade

4. Reset the cost base and step up productivity Establish an efficient cost structure and organisation

5. Build a high-performance team Establish a high performance culture and invest in the capabilities

we need to win

... in actionInitiatives Measurements Risk

Seed• Expand into adjacencies• Fast-track innovation• Growth via acquisitionsWeed • Divest of marginal assets• Aggressive stock-keeping unit (“SKU”) rationalisationFeed • Step change support levels and strategic direction

of brands

• Revenue growth (%)• Rate of innovation• SKU productivity• Improved return on assets and return on equity

• Slow economic growth• Increased competition• Acquisition success• Asset turn

• Understanding consumer need states• Brand portfolio strategy• Innovation and renovation focus• Segmentation modelling• Enhanced brand investment• Appointment of a marketing executive

• Market share• Brand equity• Brand profitability• Household penetration• Brand commitment levels• Overall brand health

• Private label• Talent retention• Competition

• Joint business planning• Customer-centric organisational design• Trade terms optimisation• Skills development• Optimise channel and customer mix

• Profitable revenue growth• Improved customer profitability• Enhanced weighted distribution• Management of channel and

customer mix

• Constrained consumer spending• Private label growth• Increased competition

• Rightsize the organisation• Merge Bokomo Foods and Ceres Beverages• Capitalise on “parenting advantage” – “One Pioneer”: – logistics – procurement – finance and admin• Efficiency management: – pricing – manufacturing

• Achieve targeted cost savings• Margin expansion• Overall equipment effectiveness

• Savings targets are not fully realised • Deployment of full savings to be competitive

• Talent calibration• Transformation• Talent management• Skills development• Strengthening of employer proposition

• Learning agility• Employee engagement• Increased diversity• Retention of key skills

• Skills availability• Slow cultural evolution

Financial summary

10%R20.6 billion Revenue

R20.6bn

R18.6bn

R16.9bn

2013

* Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years and re-organisation cost in 2013** Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years, re-organisation cost in 2013 as well as the impact of the recognition of

a deferred income tax asset in 2013

2012

2011

9%R1 271 million

Adjusted operating profit*before items of a capital nature

R1 271m

R1 162m

R1 236m

2013

2012

2011

R826m

13%R826 millionAdjusted headline earnings**

R731m

R771m

2013

2012

2011

132 cents16%

Total dividend per share

132 cents

114 cents

80 cents

2013

2012

2011

Pioneer Food Group Ltd(Listed on the Johannesburg

Stock Exchange)Pioneer Foods Holdings Ltd Pioneer Foods (Pty) Ltd

100% 100%

Group structure

Group ata glance

* Before items of a capital nature as well as adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years and re-organisation cost in 2013

SaskoSee more on page 36

R10 772mRevenue

R825mOperating profit*

7.6%Profit margin

Ceres BeveragesSee more on page 48

R3 021mRevenue


8.7%Profit margin

Quantum FoodsSee more on page 54

R3 576mRevenue

(R19m)Operating profit*

(0.5%)Profit margin

Bokomo FoodsSee more on page 42

R3 527mRevenue


8.1%Profit margin

Integrated Report 2013 Pioneer Foods

2

Sasko manufactures a range of affordable grain-based staple foods. The division produces wheaten, maize and pasta products, trades in rice, beans, lentils and dried vegetables and has one of South Africa’s largest bakery operations, with bakeries and depots located throughout the country. Brands include household names such as Sasko wheaten flour and bread, White Star super maize meal, Spekko rice and Pasta Grande pasta.

Bokomo Foods produces some of South Africa’s best-known breakfast cereals, rusks, biscuits, cake mixes, baking aids, desserts, snacks and treats, spreads and processed salads. A range of familiar brands includes Weet-Bix, Moir’s, ProNutro, Safari, Marmite, Bovril, Peck’s and Redro.

Ceres Beverages is one of the largest producers of natural fruit juices and fruit concentrate mixes and bottlers of carbonated soft drinks and ice tea in South Africa. Ceres Beverages is the market leader in the long-life fruit juice segment in South Africa and has a presence in more than 80 countries worldwide. Brands include Ceres, Liqui-Fruit, Fruitree, Pepsi, Lipton, Wild Island and Daly’s.

During the year, the businesses of Bokomo Foods and Ceres Beverages were merged into a single management structure. This merger will result in a more efficient cost structure and will ensure a more focused approach to brand and customer management. This change is effective from the 2014 financial year.

Pioneer Foods is a leader in the food and beverage industries in Southern Africa.

The group has operations in South Africa and four other African countries and sells

its products in more than 80 countries around the world. The Group’s core business

is the production, distribution, marketing and selling of a diverse range of food,

beverages and related products.

In South Africa, Quantum Foods, formerly known as the Agri Business, produces animal feeds, chickens, eggs, processed egg and processed chicken-based products. The division also has broiler and layer-breeding operations in Zambia and Uganda and during 2013 acquired a commercial egg business in Zambia.

Quantum Foods is being prepared for an unbundling and separate listing on the Johannesburg Stock Exchange. This disposal group is classified as an asset held for sale and as discontinued operations in the financial statements.

Joint ventures include:

• The49.9%stakeinHeinzFoodsSA.Thejointventureisbetween Pioneer Foods and HJ Heinz Company of the USA. This company operates in the condiments and convenient food markets, producing tomato sauces and ketchup, frozen foods, tinned seafood products, tinned food, instant meals and noodles.

• The50%jointventurewithJ.S.Bowman&SonoftheUKin Bowman Ingredients SA. This company supplies food ingredients to South Africa’s large food producers.

Divisional structure and profiles

Segmental revenue (R’m)

2013 20132012 20122011 2011

Sasko Bokomo Foods

Quantum Foods

12

10

8

6

4

2

0

Sasko Bokomo Foods

Quantum Foods

Ceres Beverages

1 200

1 000

800

600

400

200

0

-200

Segmental operating profit (R’m)

Ceres Beverages

10.89.9

9.1

3.5 3.0 3.63.1 2.8 3.12.8 2.6 2.7

825

289 264

(19)

942

264

88(42)

879

223137 116


3

Limpopo

Mpumalanga

Gauteng

North West

Free State

KwaZulu-Natal

Northern Cape

Eastern Cape

Western Cape

South AFRiCA

Sasko

Bokomo Foods

Ceres Beverages

Quantum foods

AFRiCA BuSineSS

Bokomo Botswana Bokomo Namibia Bokomo Uganda Bokomo Zambia

uniteD KingDom

BokomoFoods(UK)

Group at a glance (continued)

Production footprint


4

Strategic

Vision To be a leading FmCg company

in Africa with globally trusted brands

overviewPioneer Foods focuses on fast-moving consumer goods (“FMCG”) and has been

active in this industry in Southern Africa since the 1920s. The Company in its current form (after the merger between Sasko and Bokomo) was established in 1997 and

listed on the Johannesburg Stock Exchange (“JSE”) in 2008.

LeADing mEAns FmCg mEAns

number 1 or 2 brand position in select categories• Innovationatthecore• Consumerandcategoryled• Thoughtleadershipwithcustomers

where the Group holds the number 1 position

• Globalbestpracticewithinallfunctions

• Brandedgoods• Privatelabelproductsgovernedby

“rules of engagement”• Foodandbeverageproducts

AFRiCA mEAns gLoBALLy mEAns

• SouthAfrica• SouthernAfrica:Botswana,Namibia,

Zambia, mozambique• EastAfrica:Uganda,Kenya,Ethiopia• WestAfrica:Nigeria,Ghana

• Exportdestinations


5

Companies that operate in the food and beverage industry face a number of common challenges related to the global economy which is characterised by slow or no market growth, high bargaining power of customers, increased competition, consumer dynamics and environmental challenges.

The industry relies on the local and international agricultural sectors for its key inputs and is therefore exposed to the potential effects of climate change through changing weather patterns, exchange rate volatility, commodity cycles and consumer spending patterns. These macro factors do not only impact food availability but also the cost of food in an environment where consumers are already financially stretched. Where increased input costs cannot be passed on to consumers, compressed margins pose challenges to the industry.

South Africa faces a similar challenge to other developing countries in the decrease of available agricultural land due to urbanisation coupled with a growing population.

Water availability is an issue in large parts of the country and with long-term forecasts highlighting water as a key scarce resource, the cost of water is likely to rise in the medium term. It is therefore critical to proactively encourage efficient water usage in the industry.

Consumers are increasingly concerned about the environmental and social performance of companies and these concerns drive their spending patterns. This trend explicitly links non-financial issues to the financial sustainability of a company. Awareness of topical issues, such as genetically modified food, traceability and food labelling, also has an effect on consumer behaviour.

While many companies target Africa for future expansion due to the favourable demographics and forecasted high growth rates, successful penetration of these countries remains a challenge and an opportunity.

Industryfeatures


6

BusinessPioneer Foods generates income from the sale of products and services through its four divisions. Until 2013 the Group operated on a decentralised basis with each division responsible for its full value chain. Group services were limited to IT, corporate affairs and sustainability, legal, corporate finance, treasury management, insurance and human resources.

To enable its new strategy (see inside front cover), a more centralised model that capitalises on parenting advantage, was adopted. This will enable the organisation to benefit from synergies in the key areas of:

• logistics• procurement• financeandadmin.

modelFrom the 2014 financial year, the continued operations (which exclude Quantum Foods) will be reconstituted into three operating divisions:

• Sasko• ConsumerBrands(previouslyBokomoFoodsandCeres

Beverages)• Internationalbusiness

The business of Quantum Foods has been transferred to a separate wholly owned legal entity as part of the process to prepare it for unbundling and separate listing.

• PioneerFoodsoperatesinkeycategoriesinmatureindustrieswithits revenues well diversified by product mix, geography and urban and rural customer spread.

• TheGroupisstronglycashgenerative,enablingprudentreinvestment to drive growth.

• AsignificantnumberoftheGroup’sbrandsareeithernumberoneor two in their respective market categories, with the opportunity to strengthen the equity of the power brands (see below).

• TheGroupisalsowellpositionedtostrengthenitsparticipationinthe retail private label segment.

• TheGroup’sextensivedistributionnetworkandthesignificantcapital outlay required to replicate its operations forms a high barrier to entry for new competitors.

• Thecapitalexpenditureprogrammerunoverthepastfewyearshas largely been completed and positions the Group well to take advantage of future market growth opportunities.

• TheGroup’sportfolioincludescertainunderperforming businesses and brands that are under scrutiny to be revitalised, rationalised or exited.

• Revenuegrowthatacceptablemarginsispossibleandwillbeenhanced through innovation and expansion into adjacent and new markets.

• ThecostefficiencydrivewillaidandsupporttheGroupstrategy.• PioneerFoodshasatalentedworkforcewhichmustbe

augmented and evolved to represent greater cultural diversity.

Investmentcase


7

Businessoverview

2013 2012 Change%

Financial results (R’m)Revenue 20 551 18 610 10Operatingprofit,beforeitemsofacapitalnature:

Actual 1 057 1 037 2Adjusted* 1 271 1 162 9

Headlineearnings:Actual 705 606 16Adjusted** 826 731 13

Cashprofitfromoperatingactivities 1 623 1 515 7net cash from operations 1 482 1 000 48Capitalandreserves 6 580 6 185 6

Performance per share (cents)Headlineearnings:

Actual 389 337 15Adjusted** 456 407 12

Dividend 132 114 16net asset value 3 598 3 415 5Price at year-end 8 750 5 300 65

Core ratios (%)Operating profit margin* 6.2 6.2Return on average net assets* 16 16Return on average shareholders’ funds** 13 13Debt-to-equity 22 16

* Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years and re-organisation cost in 2013** Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years, re-organisation cost in 2013 as well as the impact of the recognition of

a deferred income tax asset in 2013

Financial performance summary

Non-financial performance summary

2013 2012

number of employees 11 058 11 364B-BBEE Level 4 5ED/sED spend R34 million R76 millionEnergyconsumption(MWh) 814 397 816 942Waterwithdrawal(m3) 5 537 242 5 458 184Scope1and2GHGemissions(tCO2e) 453 495 410 161


8

Group five-year financial review

2013R’m

2012R’m

2011R’m

2010R’m

2009R’m

ConSoLiDAteD StAtement oF ComPRehenSiVe inComeRevenue 20 551.0 18 609.8 16 853.1 15 731.3 16 283.9

Profit before items of a capital nature and income tax 948.4 922.0 1 050.8 629.9 964.6 Before adjustments 1 162.8 1 047.1 1 095.8 1 332.1 1 006.0CompetitionCommissionpenalties – – – (654.2) – Once-off share-based payment charge on B-BBEE equity transaction – (160.7) – – – Broad-based employee share incentive scheme share-based payment (145.9) 35.6 (45.0) (48.0) (41.4)Re-organisation costs (68.5) – – – –

Items of a capital nature (233.1) (5.4) (0.8) (10.3) (68.0)Income tax expense (217.1) (311.9) (319.9) (383.9) (334.9)Profit for the year 498.2 604.7 730.1 235.7 561.7 Attributableto:Owners of the parent

Forcontinuingoperations 697.1 610.6 728.8 234.5 560.5 Fordiscontinued operations (200.4) (7.0) – – –

non-controlling interestForcontinuingoperations 1.5 1.1 1.3 1.2 1.2

498.2 604.7 730.1 235.7 561.7

operating profit before items of a capital nature 1 056.6 1 036.8 1 191.3 753.0 1 160.0 headline earnings for the year 704.8 606.2 726.2 236.4 620.9

ConSoLiDAteD StAtement oF FinAnCiAL PoSitionProperty, plant and equipment, intangible assets and biological assets 6 207.2 5 393.7 4 941.6 4 271.3 3 761.6 Deferred income tax 77.4 2.7 2.6 2.7 2.7 Loans to joint ventures and investment in associates 50.8 56.9 29.9 35.2 38.5 non-current trade receivables and available-for-sale financial assets 79.9 73.2 63.6 56.0 48.6 Currentassets 5 455.3 5 079.6 4 825.3 4 512.1 4 250.1 total assets 11 870.6 10 606.1 9 863.0 8 877.3 8 101.5

Capitalandreservesattributabletoownersoftheparent 6 580.2 6 184.9 5 488.3 4 751.4 4 628.0 non-controlling interest 9.3 8.2 7.5 6.5 5.8 total equity 6 589.5 6 193.1 5 495.8 4 757.9 4 633.8 non-current borrowings 1 484.1 497.7 849.0 946.2 1 096.6 Provisions, non-current derivative financial instruments and share-based payment liability 382.5 227.4 259.3 216.9 165.8 Non-currentliability–accrualforCompetitionCommissionpenalties – – 202.1 391.8 – Deferred income tax 683.2 652.4 580.6 519.1 491.2 CurrentliabilitiesexcludingaccrualforCompetitionCommissionpenalties 2 731.3 2 820.0 2 260.7 1 978.7 1 714.1 Currentliability–accrualforCompetitionCommissionpenalties – 215.5 215.5 66.7 – total equity and liabilities 11 870.6 10 606.1 9 863.0 8 877.3 8 101.5

ConSoLiDAteD StAtement oF CASh FLowSnet cash profit from operating activities 1 623.3 1 514.9 1 563.3 1 609.9 1 509.7

BeforeCompetitionCommissionpenaltiespaid 1 623.3 1 514.9 1 563.3 1 805.6 1 509.7 CompetitionCommissionpenaltiespaid – – – (195.7) –

Workingcapitalchanges 53.1 (266.2) (446.8) 95.1 356.6 AccrualforCompetitionCommissionpenaltiespaid (216.7) (216.7) (66.7) – – Casheffectfromhedgingactivities 22.7 (32.2) 14.2 18.7 21.7 Income tax paid (243.1) (257.7) (261.5) (353.0) (234.4)net cash flow from operating activities 1 239.3 742.1 802.5 1 370.7 1 653.6 net cash flow from investment activities (1 333.0) (753.0) (933.4) (805.3) (465.0)Netcash(deficit)/surplus (93.7) (10.9) (130.9) 565.4 1 188.6 net cash flow from financing activities (204.6) 44.6 (232.3) (448.6) (517.5)net cash and short-term borrowings from business combinations and disposal of subsidiaries – (11.3) – – – net (decrease)/increase in cash, cash equivalents and bank overdrafts (298.3) 22.4 (363.2) 116.8 671.1


9

2013 2012 2011 2010 2009

Profitability (%)

Revenue growth 10.4 10.4 7.1 (3.4) 9.4

Operatingprofitmargin(Note1) 5.1 5.6 7.1 4.8 7.1

Operatingprofitmargin(Note2) 6.2 6.2 7.3 9.3 7.4

Effective tax rate 30.4 34.0 30.5 62.0 37.4

Returnonaveragenetassets(Note1) 13.0 14.3 19.3 13.3 19.7

Returnonaveragenetassets(Note2) 15.6 16.1 20.0 24.8 20.5

Returnonaverageshareholders’funds(Note1) 11.0 10.4 14.2 5.0 14.0

Returnonaverageshareholders’funds(Note2) 12.9 12.5 15.1 18.7 14.9

Liquidity and solvency

Debt-to-equityratio(%) 22.2 16.1 13.8 8.5 14.3

Currentratio(times) 2.0 1.7 1.9 2.2 2.5

Acidtestratio(times) 0.9 0.8 0.9 1.2 1.3

Cashprofitinterestcover(times) 14.6 12.9 11.0 12.9 7.6

Netinterestcover(times) 9.5 8.8 8.4 6.0 5.9

Dividendcover(times) 2.4 2.4 4.5 – 2.5

Performance per share (cents)

Earnings 274.0 335.6 408.4 132.5 320.8

Headlineearnings(Note1) 388.8 337.1 407.0 133.5 355.4

Headlineearnings(Note2) 455.5 406.6 432.3 530.2 379.1

Dividend 132.0 114.0 80.0 – 125.0

net asset value 3 597.5 3 415.3 3 059.7 2 667.9 2 622.9

Productivity

Revenuetonetassetcover(times) 3.1 3.0 3.1 3.3 3.5

Revenueperemployee(R’000)(Note3) 1 675.2 1 494.0 1 349.5 1 255.5 1 363.7

Netassetsperemployee(R’000)(Note3) 536.4 496.5 439.5 379.2 387.6

Numberofpermanentemployees(Note3) 12 268 12 456 12 488 12 530 11 941

Notes:1.Calculated after the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE transaction

(only2012),theannualshare-basedpaymentchargeonthePhaseIB-BBEEtransactionand,for2013only,re-organisationcostsandtherecognitionofadeferredincometax asset.

2.Calculatedbefore theaccrual for theCompetitionCommissionpenalties (only2010), theonce-off share-basedpayment chargeon thePhase IIB-BBEE transaction (only2012),theannualshare-basedpaymentchargeonthePhaseIB-BBEEtransactionand,for2013only,re-organisationcostsandtherecognitionofadeferredincometax asset.

3. The figures for the number of permanent employees for 2012 and 2011 were corrected and the ratios amended accordingly.

Business overview (continued)

Group five-year financial review (continued)


10

2013R’m

2012R’m

2011R’m

2010R’m

2009R’m

SegmentS

Revenue

Sasko(Note1) 10 772.2 9 940.4 9 054.6 8 314.1 8 876.7

QuantumFoods(Note1) 3 575.6 3 097.6 2 714.6 2 453.2 2 599.4

BokomoFoods 3 526.7 3 071.6 2 760.3 2 683.2 2 625.0

CeresBeverages 3 021.2 2 798.2 2 577.4 2 483.7 2 410.1

20 895.7 18 907.8 17 106.9 15 934.2 16 511.2

Less:Internalrevenue (344.7) (298.0) (253.8) (202.9) (227.3)

20 551.0 18 609.8 16 853.1 15 731.3 16 283.9

operating profit before items of a capital nature

Sasko(Note1) 824.7 941.6 879.2 350.9 946.3

BeforeaccrualforCompetitionCommissionpenalties 824.7 941.6 879.2 1 005.1 946.3

AccrualforCompetitionCommissionpenalties – – – (654.2) –

QuantumFoods(Note1) (18.9) (42.3) 116.0 143.7 85.9

BokomoFoods 289.3 263.8 223.2 238.1 202.2

CeresBeverages 263.8 88.3 136.5 169.9 103.4

Other (156.4) (89.5) (118.6) (101.6) (136.4)

Adjusted operating profit before items of a capital nature 1 202.5 1 161.9 1 236.3 801.0 1 201.4

Once-off share-based payment charge on Phase II B-BBEE transaction – (160.7) – – –

share-based payment on Phase I B-BBEE transaction (145.9) 35.6 (45.0) (48.0) (41.4)

operating profit before items of a capital nature 1 056.6 1 036.8 1 191.3 753.0 1 160.0

Depreciation and amortisation

Sasko 146.0 137.3 121.9 124.9 111.0

QuantumFoods 56.1 44.5 34.9 24.3 21.1

BokomoFoods 78.2 70.2 61.6 61.6 54.4

CeresBeverages 62.9 53.6 47.1 60.7 55.0

Other 45.6 39.0 36.0 26.9 27.6

388.8 344.6 301.5 298.4 269.1

Notes:1.Figuresfor2012wererestatedduetotheinclusionofBokomoUganda(Pty)LtdandBokomoZambiaLtdwithinQuantumFoodsin2013.Thesebusinesseswerepreviously

includedintheSaskosegment.2.ThenameoftheAgriBusinesswaschangedtoQuantumFoodsin2013.


11

Share price statistics

gRouP

2013 2012 2011 2010 2009

Share trading statisticsPricepershare(cents):

At year-end 8 750 5 300 5 900 4 760 3 350 High 8 860 6 500 6 350 4 995 3 350 Low 5 250 5 150 4 765 3 202 2 175

Netnumberofissuedshares(’000):Total number of issued shares 231 007 230 314 201 237 201 192 201 184 number of treasury shares – share incentive trust (1 422) (2 545) (3 881) (5 112) (6 758)number of treasury shares – subsidiary (17 982) (17 982) (17 982) (17 982) (17 982)number of treasury shares – participants to B-BBEE equity transaction (18 092) (18 092) – – – Numberoftreasuryshares–PioneerFoodsBroad-BasedBEETrust (10 600) (10 600) – – –

182 911 181 095 179 374 178 098 176 444

Marketcapitalisation(R’000) 20 213 099 12 206 642 11 872 983 9 576 738 6 739 664 Dividendyield(%) 1.5 2.2 1.4 – 3.7 Headlineearningsyield(%)(Note1) 4.4 6.4 6.9 2.8 10.6 Headlineearningsyield(%)(Note2) 5.2 7.7 7.3 11.1 11.3Earningsyield(%) 3.1 6.3 6.9 2.8 9.6 Priceearningsratio(times)(Note1) 22.5 15.7 14.5 35.7 9.4 Priceearningsratio(times)(Note2) 19.2 13.0 13.6 9.0 8.8

Notes:1.Calculated after the accrual for the Competition Commission penalties (only 2010), the once-off share-based payment charge on the Phase II B-BBEE transaction

(only2012),theannualshare-basedpaymentchargeonthePhaseIB-BBEEtransactionand,for2013only,re-organisationcostsandtherecognitionofadeferredincometax asset.

2.Calculatedbefore theaccrual for theCompetitionCommissionpenalties (only2010), theonce-off share-basedpaymentchargeon thePhase IIB-BBEE transaction (only2012),theannualshare-basedpaymentchargeonthePhaseIB-BBEEtransactionand,for2013only,re-organisationcostsandtherecognitionofadeferredincometax asset.

Business overview (continued)


12

Definitions

operating profit margin

Operating profit, before items of a capital nature, as a percentage of revenue.

effective tax rate

Income tax expense included in profit or loss as a percentage of profit before income tax.

Return on average net assets

Operating profit, before items of a capital nature, as a percentage of total assets, excluding any loans to joint ventures, investment in associates, available-for-sale financial assets, non-current trade and other receivables, cash and cash equivalents, current income tax assets and deferred income tax assets, reduced by trade and other payables, provisions for other liabilities and charges, derivative financial instruments, accruals for Competition Commission penalties and share-based payment liabilities. The average is based on the carrying values as at the beginning and end of the year.

Return on average shareholders’ funds

Headline earnings as a percentage of average capital and reserves attributable to owners of the parent, as determined at the beginning and end of the year.

Debt-to-equity ratio

Borrowings, net of cash and cash equivalents, as a percentage of capital and reserves attributable to owners of the parent.

Current ratio

Ratio of current assets to current liabilities.

Acid test ratio

Ratio of current assets less inventories and current biological assets to current liabilities.

Cash profit interest cover

Net cash profit from operating activities plus dividends received, divided by net interest.

net interest cover

Operating profit, before items of a capital nature, plus dividends received, divided by net interest.

Dividend cover

Headline earnings for the year, divided by total dividends declared (excluding dividends on class A ordinary shares).

net asset value per share

Capital and reserves attributable to owners of the parent divided by the total number of issued ordinary shares, excluding treasury shares held by a subsidiary, treasury shares held by the share incentive trust, treasury shares held by the participants to the B-BBEE equity transaction and treasury shares held by the Pioneer Foods Broad-Based BEE Trust.

Revenue to net asset cover

Revenue divided by net assets.

Revenue per employee

Revenue divided by permanent employees at year-end.

net assets per employee

Capital and reserves attributable to owners of the parent divided by permanent employees at year-end.

market capitalisation

Market price per ordinary share at year-end multiplied by the total number of issued ordinary shares.

Dividend yield

Dividend per ordinary share divided by the market price per ordinary share at year-end.

headline earnings yield

Headline earnings per ordinary share divided by the market price per ordinary share at year-end.

earnings yield

Earnings per ordinary share divided by the market price per ordinary share at year-end.

Price earnings ratio

Market price per ordinary share at year-end in relation to headline earnings per ordinary share.

ordinary share/shares

For the purposes of all the above definitions ordinary share/shares exclude(s) class A ordinary shares.

impact of Phase i B-BBee transaction

Annual cash-settled IFRS 2 share-based payment charge on class A ordinary shares issued to employees in terms of a broad-based employee share scheme.

impact of Phase ii B-BBee transaction

Once-off non-cash flow IFRS 2 share-based payment charge on ordinary shares in terms of a B-BBEE equity transaction.


13

Pioneer Foods is committed to the stakeholder inclusive approach recommendedbyKingIII.TheGroup’sapproachisguidedbyastakeholder relations policy, which recognises that social, economic and environmental responsibilities to the Group’s stakeholders are integral to the success of the business.

In the second half of the 2013 financial year, Pioneer Foods’ new Chief Executive Officer met with a broad range of key stakeholders in order to understand their key concerns and to communicate the Group’s new vision and strategy.

Stakeholder engagement

principles

Direct liaison and

consultation

Open and honest

communication

Risk management

Environmental performance

Partnerships with

communities

Compliance with laws and

regulations

Influencing public policy

Resolving consumer complaints

Clear supplier contracts

Stakeholderengagement


14

Details of the Group’s key stakeholders, engagement channels, key concerns and company responses are shown in the table below:

Stakeholder engagement Key concerns Company response

Shareholders and investors Results presentations, one-on-one meetings, investor relations briefings and site visits, annual general meeting

•Effectivenessofstrategy•Returnoninvestment•Performancerelativetopeers

The revised strategy sets stretch targets and a clear roadmap to improve the Group’s financial performance.

employees Employee magazines and newsletters, electronic communication channels, management presentations

•Opportunitiesforadvancement•Training•Jobsecurity

PioneerFoodsofferscompetitiveremuneration as well as opportunitiesforskillsandcareerdevelopment. short and long-term incentive schemes have been competitivelybenchmarked.

Communities Interactions with nGOs and various CSIinitiatives

•Communityupliftment PioneerFoodsactivelysupportscommunities by way of various socio-economic development programmes and the activities of thePioneerFoodsEducationandCommunityTrust(“PFECT”).

government and regulators monitoring programme, legal and compliance department, senior management interactions

Industry bodies

•Regulatorycompliance•Transformation•Environmentalmanagement•Socialinvestment

A monitoring programme is in place and comments on new legislation are continuously submitted.

Suppliers Ongoing interaction in the course of doing business

•Fairandequitabletrading Divisional and operational procurement functions interact with suppliers in a responsible manner.

Customers and consumers Ongoing interaction in the course of doing business

•Retailerconcentrationandbargaining power

•Privatelabelgrowth•Consumptiongrowth

Theorganisationmustensure:

– deep understanding of consumer needs states, and

–workstrategicallyandcollaboratively.


15

Power brand

Weet-Bix– south Africa’s number one BreakfastCereal


16

See page 42 for more info

Visit www.bokomocereals.co.za for additional brand info


17

1. ZL (KK) Combi (61)

Independent non-executive Chairman of the Board, chairman of nomination committee and member of human capital committee

Mr Combi is the executive chairman of Thembeka Capital Ltd. He holds a diploma in public relations and was awarded theErnst&YoungSouthAfricanoftheYearawardin2000,aswellastheWorldEntrepreneuroftheYearinManagingChange award in 2001. Mr Combi is a member of the Institute of Directors and serves on various listed and unlisted companies’ boards, including PSG Group, IQuad Group and JSE Ltd, as well as the Absa Bank Advisory Committee (Western Cape).

Director since 29 March 2010.

Public relations diploma

6. Prof ASM (Mohammad) Karaan (45)

Independent non-executive director, chairman of social and ethics committee

ProfKaraanjoinedtheDevelopmentBank of Southern Africa in Johannesburg as an economist and later returned to Stellenbosch to join the Rural Foundation as Head of Research. In 1997, he joined the University of Stellenbosch as a lecturer in the Agricultural Faculty. In October 2008, he became Dean of the Faculty of Agri Sciences at Stellenbosch University and servesontheboardofKaapAgri,aswellas various other boards.


BScAgric,BScAgric(Hons),MScAgric,PhD(Agric)

2. G (Gerrit) Pretorius (65)

Lead independent non-executive director, member of human capital and nomination committee

Mr Pretorius is an electrical engineer by qualification and profession. He was an executive director and chief executive officer of Reunert Ltd until retiring in August 2010 after 37 years of service. Since his retirement, he has been appointed as a non-executive director on the boards of various companies.

Director since 17 February 2012.

Bsc, BEng, LLB, PmD

Board of directors

3. N (Norman) Celliers (40)

Independent non-executive director, member of social and ethics committee

Mr Celliers holds a BEng (Civil) degree from the University of Stellenbosch and an MBA from the University of Oxford (England). His professional experience includes engineering, management consulting and private equity in South Africa and abroad.

Currently he is the chief executive officer of Zeder Investments Ltd.

Director since 1 October 2012.

BEng(Civil),MBA

7. NS (Nonhlanhla) Mjoli-Mncube (54)

Independent non-executive director, member of audit and risk committee

Ms Mjoli-Mncube is a fellow of the Massachusetts Institute of Technology and Aspen Global Leadership Institute, USA. She is the former economic advisor to the Presidency and former deputy chair of the Construction Industry Development Board. Ms Mjoli-Mncube serves on the boards of several listed companies and held executive positions in construction, housing, finance and policy. She is a winner of the SABC Businesswoman of theYearAwardandmanagesherownconstruction company.

Director since 25 November 2004.

MA(CityandRegionalplanning),Executiveleadershipqualifications(HarvardandWhartonuniversities,USA),postgraduate certificate in technology management (Warwick,UK).

4. MM (Thys) du Toit (54)

Non-executive director, chairman of human capital committee

Mr du Toit has been actively involved in financial and investment markets for 29 years. He was a founding member of Coronation Fund Managers in 1993 and was the CEO for 10 years. Mr du Toit currently runs Rootstock Investment Management and is a director of companies, three of which are listed on the JSE.


Bsc, mBA

8. LP (Lambert) Retief (60)


Mr Retief is a qualified CA(SA) and currently a director of Zeder Investments. He is the chairman and former chief executive officer of the Paarl Media Group.


CA(SA),OPM

Leadership overview

5. AE (Antonie) Jacobs (49)


Mr Jacobs has many years’ experience in an investment management capacity in the agricultural sector. He was the chief executive officer of Zeder Investments Ltd for six years. He is currently the chairman of Agricol Holdings Ltd. In addition, he also served on the boards of various investment holding companies with diversified interests, such as Winecorp Ltd and Spier Holdings. He also previously lectured tax and accountancy at the Stellenbosch University.

Director since 18 October 2010.

CA(SA),MCom(Tax),LLB


18

9. AH (Andile) Sangqu (47)

Independent non-executive director, chairman of audit and risk committee

Drawing on 14 years of financial management experience at some of South Africa’s revered corporations, Mr Sangqu has garnered a deep understanding of the commercial market and business landscape. He has completed an Executive Development Programme (EDP) at Wits University as well a Master’s Degree in Business Leadership at Unisa’s Graduate School of Business Leadership (SBL) in 2001. Mr Sangqu served as deputy director-general (Finance and Corporate Services) of the National Department of Public Works where he managed the transition of the department’s old Exchequer Act to the current Public Finance Management Act dispensation. He currently serves as executive director of Glencore South Africa, having been the former chief executive officer of Prodigy-Coris Asset Management and managing director of Budget Foods (Pty) Ltd.


BCom(Acc),BCompt(Hons),CTA, Higher Dipl Tax, mBL

10. PM (Phil) Roux (48)

Chief Executive Officer

Mr Roux joined Pioneer Foods from Tiger Brands where he held the position of business executive: consumer brands. He has 24 years’ experience in the fast-moving consumer goods (“FMCG”) industry in various senior positions. He has previously served as chief operating officer: Africa for Coca Cola SABCO and as an executive director at Tiger Brands.

Director since 1 April 2013.

BCom(Hons),MBA

11. LR (Leon) Cronjé (56)

Chief Financial Officer

Mr Cronjé joined the Group in 1987 at Sasko and was the executive: finance before the merger. He was appointed in the same role for Pioneer Foods before becoming a director in 1999.

Director since 28 April 1999.

CA(SA)

Executive directors


19

Leadership overview (continued)

Executive management

3. Tertius Carstens (50)

Sasko

Tertius joined the Group in 1994 and fulfilled various managerial and executive positions.

He has been with the Group for 19 years.

BEng(Chem),MBA

4. Mkuseli Dlikilili (49)

Human resources

Mkuseli held various HR roles in the utilities, beverages and chemical sectors before joining the Group in 2001.


BAdmin(Hons),MA

1. PM (Phil) Roux (48)

Chief Executive Officer

Phil joined Pioneer Foods in 2013 from Tiger Brands where he held the position of business executive: consumer brands. He has 24 years’ experience in the FMCG industry in various senior positions. He has previously served as chief operating officer: Africa for Coca Cola SABCO and as an executive director at Tiger Brands.

He has been with the Groups since April 2013.

BCom(Hons),MBA

2. LR (Leon) Cronjé (56)

Chief Financial Officer

Leon joined the Group in 1987 at Sasko and was the executive: finance before the merger. He was appointed in the same role for Pioneer Foods before becoming a director in 1999.


CA(SA)

5. Thushen Govender (37)

International business

Thushen joined the group in 2013. He has served within the FMCG industry for the past 10 years in various senior roles spanning business development, strategy and investor relations. He has concluded numerous FMCG deals across the African continent and more recently focused on business development opportunities within other emerging markets, including Latin America and Asia. He has also gained international experience within the financial services sector as well while working in the United States.

He joined the Group in October 2013.

BCom(Hons),CA(SA),MBA(UK)

6. Pieter Hanekom (49)

Ceres Beverages

Pieter joined the Group from Distillers Corporation in 1993 as financial manager at Bokomo. He has since fulfilled numerous management roles in the packaging and Agri businesses before being appointed the executive responsible for Ceres Beverages in 2000.

He was with the Group for 20 years, and resigned effective 30 September 2013.

CA(SA)

7. Jay-Ann Jacobs (41)

Group legal and company secretary

Jay-Ann practised as a corporate and commercial attorney for 12 years prior to joining Pioneer Foods, four of which were as a director at Cliffe Dekker Hofmeyr Inc. in Cape Town.

She has been with the Group for three years.

BA,LLB,LLMPostgraduateDiploma: Environmental Law

8. Lulu Khumalo (47)

Corporate affairs and sustainability

Lulu started her career as an academic at Rhodes University after which she entered the corporate world in communications and corporate social investment roles and later transformation and corporate affairs roles, mainly in the resources industry.

She has been with the Group for three years.

BA(Hons)HDE


20

9. Felix Lombard (44)

Bokomo Foods

Felix started his career with the Group in 1995 as head of information systems at Bokomo Foods and then Pioneer Foods. He then acted as financial manager for Sasko Maize Mills and in 1999 was promoted to executive: Agri Business and packaging.


MCom(Tax)CA(SA)

10. Hennie Lourens (50)

Quantum Foods

Hennie joined the Group as human resources manager for Bokomo Foods in 1996 from Transnet where he was human resources manager. Before being appointed as executive: Agri Business in 2007, Hennie was general manager for the Sasko grain business of the Group.


BCom(Hons),MCom,BProc

11. Anton van Zyl (44)

Marketing and corporate strategy

Anton joins the business with over 20 years multi-national FMCG experience. He has experience across multiple categories, both locally and internationally, having worked in Africa, the Middle East and Russia with the likes of Unilever and Mars Inc., in a variety of senior marketing and general management positions.

He joined the Group in November 2013.

BEcon


21

Power brand

Liqui-Fruit– south Africa’s number oneLong-LifeFruitJuicebrand


22


Visit www.liquifruit.co.za for additional brand info


23

Chairman’s

ZL COMBI Chairman

report


24

Our strategy aims to position the Group in a way that will deliver.Pioneer Foods is entering a new phase on its growth journey since listing on the JSE in 2008. For the past decade, the Group has focused on upgrading and expanding its production facilities, acquiring brands and diversifying its portfolio through international joint ventures. As the business is “creating the future towards 2018” (the theme of its new strategy) under new leadership, it is essential that it fully leverages past investments, re-hone the portfolio and execute against the strategy that has been articulated.

On this journey, Pioneer Foods remains committed to the highest levels of good corporate governance. Governance structures and processesalignwithbestpracticeguidelines,includingtheKingCodeofGovernanceforSouthAfrica,2009(“KingIII”).

Sustainability is an integral part of the strategy, emphasising its commitment to adopt sustainability best practices throughout the Group. Sustainability processes continue to mature and care is taken to minimise the impact of operations on the environment.

The business remains committed to the Pioneer Foods Education and Community Trust through various corporate social investment initiatives in the communities around its operations.

milestones for 2013

In a challenging external environment characterised by rising input costs, weak consumer demand and increasing competition, Pioneer Foods faced a great deal of internal change. The Group welcomed its new Chief Executive Officer, Phil Roux, in April 2013, to lead the step change in future growth and returns to stakeholders. The executive team under his leadership revisited the Group’s strategy and business model to ensure its appropriateness in meeting the objectives set. The revised strategy is detailed on the inside front cover of this report.

The year also saw the completion of the majority of the Group’s capital expenditure in the current cycle.

Ceres Beverages and Bokomo Foods were merged to streamline processes and benefit from the synergy between the two divisions. In September, the intention to unbundle Quantum Foods and list it separately on the JSE was announced.

While these changes are potentially disruptive, they are an imperative for a step change that will enhance competitiveness and the long-term sustainability of the Group. Pioneer Foods has shown fairly strong historical top-line growth, but has underperformed compared to its local and global peers on several key metrics. The business needs to improve its margins, improve its return on invested capital and increase efficiencies from its assets while entrenching a high-performance culture. These changes will reposition the Group to fully realise the potential of its many tangible and intangible assets.

Prospects

The current challenging economic conditions are anticipated to prevail in the short term. The Group has an impressive portfolio of power brands and an asset base that must be fully leveraged. The focus will be on the five strategic themes as outlined, with the desired outcome of profitable top-line growth, margin expansion and improved return on invested capital.

Appreciation

I would like to thank André Hanekom, who stepped down at the end of March 2013, for his significant contribution to the Group over the past 25 years, of which he was CEO for 19 years.

I would also like to thank our employees for their dedication during a challenging period, both within the organisation and in the environment in which we operate. Phil Roux and the management team deserve special thanks for their energy and focus in realigning the Group to realise its potential and for their commitment in implementing the changes required to achieve our vision.

ZL CombiChairman


25

Power brand

safari – south Africa’s leading DriedFruitand nuts brand


26


Visit www.safaridriedfruit.co.za for additional brand info


27

Chief Executive

PM ROUx Chief Executive Officer

Officer’s report


28

Chief Executive “It is a great privilege to beappointedasChiefExecutive Officer of PioneerFoods”

Since joining the organisation and having met with a broad representation of stakeholders, it is exciting to be part of a group with great scope and potential. Whilst the business demands ‘one eye on the microscope’, more importantly, ‘an eye on the telescope’ is required. To this end the executive team has adopted a vision and strategy that will define our future.

Pioneer Foods’ aim is to build an organisation that performs flawlessly and evolves rapidly, delivering sterling results today while changing fast enough to be relevant tomorrow. The ultimate goal is for Pioneer Foods to be the reference point for fast-moving consumer foods (“FMCG”) in South Africa and in all the markets it serves.

The capital expenditure cycle that the Group is now completing has delivered world-class production assets that include Bokomo’s new cornflake line, Ceres’s Wadeville production facilities, the new bakery recently commissioned in Shakaskraal and the mill consolidation currently under way in Malmesbury. These assets provide a solid base of production capacity and operational efficiencies providing the foundation for profitable future growth.

Pioneer Foods needs to be a consumer-orientated organisation. It owns a range of power brands, such as White Star super maize meal, Liqui-Fruit and Ceres long-life juices, Sasko bread, Safari dried fruit, Spekko rice and Weet-Bix and ProNutro breakfast cereal.

A fresh, innovative and intensified approach to marketing, per se, will be crucial to future revenue growth and profitability.

Business environment

The business environment in which Pioneer Foods operates continues to be extremely challenging. Significant increases in production input costs and exchange rate volatility places enormous pressure on margins.

Concurrently, the South African consumer is experiencing substantial financial challenges on several fronts: consumer confidence is low and disposable income is under severe pressure. Consumers face the same steep increases in energy and transport costs and have become increasingly price sensitive. The medium-term outlook for the South African economy suggests that a significant improvement in either GDP growth or consumer spending is not imminent.

It is therefore essential that the organisation best positions itself to compete effectively in ensuring continuous focus on costs and efficiencies. Sustained and increased investment in the power brands is key to long-term sustainability.


29

Financial results

Despite the various discontinuities that the Group faced, Pioneer Foods managed to deliver a fair set of results. Revenue from the continuing operations (excluding Quantum Foods) increased by 9% to R17.0 billion.

Operating profit from the continuing business, before items of a capital nature and after backing out non-recurring and non-operational costs (refer to the financial review on page 31 for detail), increased by 7% to R1 270 million, an operating profit margin of 7.5%.

Total Group headline earnings (inclusive of Quantum Foods), as adjusted, grew 13% to R826 million, representing 456 cents per share.

The company declared a final dividend of 86 cents per share which brings the total dividend for the year to 132 cents, an increase of 16%.

For further information on financial and divisional performance for the year, refer the reports on pages 31 to 59.

Strategy implementation

The corporate strategy aims to accelerate Group earnings and return on invested capital and to entrench the long-term sustainability of the organisation. This enhanced value creation will benefit all stakeholders over time. While many of these changes are disruptive, it is only through this transformative process that the full potential inherent to the Group can be unlocked.

Progress to date is as follows:

• Strategicreviewoftheportfoliocompleted• QuantumFoodsunbundlinginitiated• Groupmarketingexecutiveappointed• Newexecutiveappointedtodriveinternationalexpansion,

mergers and acquisitions and to focus on joint ventures• Costsavingopportunitiesidentified• Newbusinessmodeladopted• MergerofBokomoandCeresBeveragescompleted• Logisticsmodelreviewed• ITinfrastructuremanagementoutsourced• Embarkedonfinanceandadminconsolidation

non-financial performance

While it is true that the founding intention of a business is to generate a financial return for its funders, good corporate citizenship requires taking a broader view of the impact the business has on people and the environment. This is exemplified in Pioneer Foods’ ethical approach to doing business and its commitment to a stakeholder inclusive approach.

Improving energy efficiency is an important component of the Group’s cost-efficiency drive, which will also reduce the Group’s carbon footprint. This non-financial issue has profound financial consequences through the rising cost of energy and the potential impact of the pending carbon tax.

Social sustainability is another critical consideration, both within the organisation and external to it. Employment equity and transformation are important aspects of the high-performance team that Pioneer Foods is building. Transformation is also important to remain relevant to broader stakeholder groups such as government and customers. The introduction of the new B-BBEE codes is likely to impact the Group’s rating negatively; however, it will be a focus area of management in the coming year.

outlook

“Our view is that the international and local trends currently affecting our business are unlikely to reverse for some time. Whilst it is important to stay aware of macroeconomic developments, we are currently busy with a great deal of fine-tuning within our business.

Thanks to the current capital expenditure cycle now drawing to an end, Pioneer Foods has an enviable asset base installed at favourable exchange rates and in high-growth potential locations. We believe that we have the right people and the right strategy to improve returns from those assets, accelerate cost efficiencies and strengthen capital returns and margins.

I’d like to thank the Board for their support and guidance. I’d also like to recognise the fortitude of the employees of Pioneer Foods during this transitional time and their support of the Group’s vision and strategy. It is through our continued commitment and hard work that our vision will be realised.”

PM RouxChiefExecutiveOfficer

Chief Executive Officer’s report (continued)


30

FinancialreviewFinancial performance for the year under review was substantially impacted by a number of non-recurring or non-operational events. Reporting has further been impacted by the treatment of the Quantum Foods business as a discontinued operation, given a decision to unbundle the business. In order to analyse the results and assess the actual performance of the Group, the statutory reported results are adjusted as per the table below and explained further in this report.

2013 2012 Change

Totalearnings(R’m) 497 604 (18%)

Earnings per share (cents) 274 336 (18%)

Plus:Itemsofacapitalnature (aftertax)(R’m) 208 2

Headlineearnings(R’m) 705 606 16%

Headline earnings per share (cents) 389 337 15%

Plus:After-taxeffectofadjustments: 121 125

Phase I B-BBEE transaction 146 (36)

PhaseIIB-BBEEtransaction(R’m) – 161

Re-organisationcost(R’m) 49 –

Reversalofdeferredtaxasset(R’m) (74) –

Adjustedheadlineearnings(R’m) 826 731 13%

Adjusted HEPS (cents) 456 407 12%

unbundling of Quantum Foods and impairment

In September 2013 the Board took the decision to unbundle the business of Quantum Foods and separately list the business on the JSE in 2014. This principal decision resulted in the Quantum Foods business being treated as an “asset held for sale” and accounted for as a “discontinued operation” in the 2013 financial results. Apart from having a major impact on the financial presentation to comply with IFRS 5, the net assets of Quantum Foods had to be valued at the lower of its carrying amount or fair value less cost to sell. An independent valuation resulted in an impairment of the net asset value of Quantum Foods by R232.0 million, an after-tax result of R208.1 million and which amount is included in items of a capital nature in the table above. This impairment is largely as a result of the continued challenges in the broiler industry.

impact of non-recurring and non-operational once-off costs

The analysis of the results for this year has been substantially impacted by the following as per the table above:

• The2006Phase1B-BBEEtransaction,benefitingmorethan11 000 employees at the time, is a cash-settled scheme. The outstanding obligation is therefore marked to market to the Pioneer Foods share price at each reporting date. For the year under review the share price increased by 65% from R53.00 to R87.50, resulting in a charge to profit and loss of R145.9 million. In the 2012 reporting period the share price declined by 10% from R59.00 to R53.00, resulting in a gain to profit and loss in that year of R35.6 million. Apart from the effect of the substantial change in share price, the calculation was also negatively impacted by adjusted actuarial assumptions for the 2013 calculation to cater for the impact of acceleration in the number of members to exit from the scheme due to the rightsizing of the Group as well as the unbundling of Quantum Foods.

• The2012comparativeresultswerenegativelyimpactedbythePhase 2 B-BBEE transaction concluded in that year. It resulted in a once-off, non-cash flow, share-based payment charge of R160.7 million to earnings.

• Duringtheyearunderreviewsubstantialre-organisationwithinthe Group was initiated. This involved an exercise to ensure the optimum employee complement for each business, as well as the merger of the Bokomo Foods and Ceres Beverages businesses under control of one management team. The merged business will enable an optimal and efficient service to the largely identical customer base. The once-off costs related to this re-organisation amounted to R68.5 million, or after-tax impact of R49.3 million.

• Themergerofthesebusinessesfurthermoreresultedinthe accounting for a deferred tax asset. This resulted in the recognition of a deferred income tax asset of R74.1 million.


31

Statement of comprehensive income

Due to the fact that Quantum Foods is being treated as a discontinued operation, its results are excluded from current and comparative numbers.

group summary(Continuing operations)

2013 2012 Change

Revenue(R’m) 16 992 15 534 9%

Costofgoodssold(R’m) (11 986) (10857) 10%

Grossprofit(R’m) 5 006 4 677 7%

Grossprofitmargin(%) 29.5 30.1

Operatingprofit(R’m)* 1 270* 1 183* 7%

Operatingprofitmargin(%)* 7.5 7.6

Headlineearnings(R’m)** 819* 744* 10%

Headline earnings per share (HEPS) (cents)** 452* 414* 9%

Diluted HEPS (cents)** 445* 401* 11%

* Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years and re-organisation cost in 2013

** Adjusted for the impact of Phase I and Phase II B-BBEE transactions in the relevant years, re-organisation cost in 2013 as well as the impact of the recognition of a deferred income tax asset in 2013

The increase of 9% in revenue was largely the result of increased sales prices as volumes across the Group’s basket only increased by 1%. The operational reports from page 36 to page 59 give detail on the volume and price performance of the main product categories.

Total cost of goods sold increased by 10%, resulting in a 0.6% decline in gross profit margin to 29.5%. The negative ratio between growth in revenue and increase in cost of goods sold limited the gross profit growth to 7%. It was specifically in the wheat and bread product categories that cost recovery was challenging.

Diligent cost management contained the increase of total operating cost to 7%, excluding raw material cost which increased by 11%. Operating profit, before items of a capital nature, and adjusted as described above, increased by 7% to R1 270 million. The negative ratio between revenue growth and cost of goods sold also reflects in the operating margin of 7.5%, down from 7.6% the previous year.

The Group summary table that follows includes the information for Quantum Foods, before adjusting for its treatment as a discontinued operation. The segmental analysis also includes the results from Quantum Foods:

group summary(Inclusive of Quantum Foods )

2013 2012 Change

Revenue(R’m) 20 551 18 610 10%

Costofgoodssold(R’m) 14 897 13 391 11%

Grossprofit(R’m) 5 655 5 219 8%

Grossprofitmargin(%) 27.5 28.0

Adjustedoperatingprofit(R’m)* 1 271 1 162 9%

Operatingprofitmargin(%) 6.2 6.2


Segmental performance

2013 2012 Change

SASKo

Revenue(R’m) 10 772 9 940 8%

Operatingprofit(R’m) 825 942 (12%)


BoKomo FooDS

Revenue(R’m) 3 527 3 072 15%

Operatingprofit(R’m) 289 264 9%


CeReS BeVeRAgeS

Revenue(R’m) 3 021 2 798 8%

Operating profit (R’m) 264 88 200%


QuAntum FooDS

Revenue(R’m) 3 576 3 098 15%

Operatingprofit(R’m) (19) (42) 55%

Operatingprofitmargin(%) (0.5) (1.4)

Across segment revenue (R’m) (345) (298)

Adjusted unallocated costs (R’m)* (156) (90)

Re-organisation costs (R’m) 69 –

gRouP ReSuLtS

Revenue(R’m) 20 551 18 610 10%

Adjustedoperatingprofit(R’m)* 1 271 1 162 9%



Financial review (continued)

integrated Report 2013 Pioneer Foods

32

An analysis of the segmental performance (inclusive of Quantum Foods) above, indicates that the main contributor to the total Group’s improved performance was an exceptional increase in operating profit from Ceres Beverages from R88 million to R264 million. This performance was enabled by much improved realisation in the local fruit juice market and an overall excellent performance in fruit juice exports, specifically into Africa. Bokomo Foods’ improved profit is mainly the result of the much larger raisin crop and resultant increase in export volumes.

Sasko’s operating profit declined by 12% to R825 million, as a result of a combination of declined volumes in wheaten products and bread, as well as a substantial decrease in profitability from the rice business.

Quantum Foods posted a smaller operating loss of R19 million (2012: R42 million loss) for the reporting period. This was largely the result of an improved performance from the Zambian business, benefiting from the Mega Eggs acquisition.

For more detailed commentary on the divisional performance, refer to the operational reports on pages 36 to 59.

Dividend

A final dividend of 86 cents per ordinary share has been declared. With an interim dividend of 46 cents per ordinary share, the total dividend for the year amounts to 132 cents per ordinary share, a 16% increase on 2012 (114 cents per share).

Statement of financial position

Despite the increased adjusted operating profit, return on average net assets remained unchanged at 16%. This is the result of revenue growth largely in line with profit growth and the much increased asset base with the capital expenditure and investments peaking at R1.4 billion in the year under review.

Return on average shareholder funds remained a pedestrian 13% for the same reasons as described above.

Return on average net assets 2013 2012

Sasko 27% 35%

BokomoFoods 13% 14%

CeresBeverages 19% 7%

QuantumFoods (1%) (4%)

Group* 16% 16%

Group–excludingQuantumFoods* 19% 19%


013

Net interest-bearing debt increased by R468 million to R1 462 million, a debt to equity ratio of 22% (2012: 16%). Debt includes R482 million of funding from third-party financiers for the 2012 Phase II B-BBEE transaction being consolidated in terms of IFRS. The debt to equity ratio improves to 15% should this consolidated third-party debt be excluded.

Debt restructure

The Group’s previous syndicated debt facility matured in September 2013. A new debt facility of R3.5 billion was contracted with a syndication of five financial institutions to cater for the Group’s long-term and working capital needs. The structure of the facility is as follows:

• R600millionbulletloanrepayablein5years(September2018)• R400millionbulletloanrepayablein3years(September2016)• R500millionrevolvingfacilityforfutureneeds,butcurrentlyundrawn• R2billiongeneralinbankingfacilities,inclusiveofspecific

raw material facilities to cost-effectively cater for the peak periods in working capital needs in the more active commodity trading months.

Due to the positive interest shown by various financial institutions the Group did not pursue the issue of bonds as initially considered.

Statement of cash flows

Cash generated from operations increased by 48% to R1 482 million, largely as a result of unlocking net working capital of R53 million as opposed to an investment in net working capital of R266 million in the comparative period. Inventory increased by R276 million due to increased raisin stock volumes on the back of a much larger raisin crop. The increased investment in wheat stock volumes was countered by decreased volumes of maize stock at year-end.

Debtors remained flat while creditors increased by R370 million, mainly due to payments after year-end. The increase in inventory was more than offset by these timing differences resulting in the unlocking of working capital

Cash generation benefited from a 7% increase in cash profit to R1 623 million, but was negatively impacted by the final payment of the Competition Commission penalty of R217 million.

Income tax of R243 million was paid (2012: R258 million).

The year under review was earmarked by the completion of the capital expansion programme, with a total amount of R1 085 million incurred, of which R843 million was expansion capital and R242 million was replacement capital. The Shakaskraal bakery, Malmesbury/Paarl mill consolidation and the Quantum Foods abattoir consolidation in Gauteng were the beneficiary projects.

A further amount of R315 million was invested on acquiring businesses to complete the repositioning of the Quantum Foods business. Included in this amount is the R144 million new investment in Mega Eggs in Zambia. Capital expenditure for the new financial year is projected to be less than R600 million, inclusive of the outstanding capital spend on the Shakaskraal and Malmesbury projects. This projection excludes any acquisition opportunities that might be considered in line with the expansion strategy.


33

Power brand

Ceres– FromtheCeresValleytomore than 80 countries worldwide


34


Visit www.ceres.co.za for additional brand info


35

Operational report

See more at www.sasko.co.za and www.pioneerfoods.co.za.


36

SA

SK

o

wheaten flour products

Sasko has been milling wheat into high- quality flour for over 60 years. This forms the core of the division. Between 25% and 30% of flour milled is transferred to the Group’s own bread bakeries and pasta plant – increasing its participation in the value chain. The remainder of the products consist of a variety of branded and industrial wheaten flour products under the Sasko brand.

maize products

Sasko plays a vital role in providing nutrition to South African consumers as the manufacturer of White Star super maize meal, special maize meal, samp, maize flour and instant maize porridge.

Bread

The Group operates 16 bakeries with an urban and rural footprint throughout South Africa, supplying close to 1.3 million fresh loaves via more than 30 000 delivery points daily.

Pasta

Sasko caters for an ever-changing dietary preference through a range of wheat-based pasta products produced from local and imported ingredients. Sasko is the first in South Africa to produce pasta from white maize.

Rice

Sasko is one of the largest suppliers of rice to the South African market and distributes a wide variety of rice variants through its national distribution footprint. Sasko secures the best rice qualities from a selected number of suppliers and origins.

Beans and legumes

Sasko is the major supplier of high-quality dry beans and legumes in the country. Dietary needs are moving towards healthier consumer choices and the business is well positioned to cater for this in its portfolio.

Sasko is a leading manufacturer of essential and value-added foods in South Africa. Sasko prides itself on being a supplier of quality and nutritious foodstuffs that are trusted by millions of consumers daily. The Sasko segment of the business consists of the Sasko division, the Bowman Ingredients SA joint venture as well as the Bokomo Botswana and Bokomo Namibia joint ventures. The Sasko division is the predominant contributor to the segment and comprises two business units, namely Sasko Grains and Sasko Bakeries.

Value add

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37

group strategic themes Divisional initiatives measurements Risk

Shape a winning corporate portfolio

•Focusonkeyperformancecategories:wheat,maize,pasta,rice and bread

•Keyprioritiesareperformanceenhancement of bread and maize

•Consumerdemand remainingweak

Focus on power brands •FocusedmarketinginvestmentonSasko, White Star and Spekko

•Brandhealthmetrics •Consumerdemand remainingweak

embed strategic customer management

•Strategicengagementwithkeycustomers aligned with Group initiatives

•Focusedgrowthinkeyproductcategories – volume/profitability

•Customerbalanceofpower

Reset the cost base and step up productivity

•Resetmanpowerbaseandcost•Bakeries’overallcostand

efficiencies

•Manpoweranddistributionarekeycostitems–specificinitiatives are in place

•Inflation,exchangerate

Build a high-performance team •Manpowerproductivityand cost review

•Talentmanagement

•Totalmanpowercosttoturnoverand to throughput

•Theabilityofemployeestoimplement changes


38

Areas of operation

implementation of strategy

Limpopo

Gauteng

North West

Free State

KwaZulu-Natal

Eastern Cape

Western Cape

Wheat mills (7)

Maize mills (3)

Rice and legume plants (2)

Pasta plant (1)

Bakeries (16)

Operational report (continued)

Revenue operating profit operating profit margin Capital spend

R10 772m+8%

R825m(12%)

7.6% R701m

2012:R9940m 2012:R942m 2012:9.4% 2012:R319m


39

Main product categories

Bakingandmilling76% Other grains24%

Revenue contribution (2013)

Price change

Volume change

wheaten flour +11% -2%

maize meal +5% +5%

Rice +3% +5%

Bread +9% -3%

Pasta +7% +6%


40

Overall volume growth remained muted and price recovery continued to be challenging, especially in the wheat and rice product categories. For the full year industry demand in the wheat category declined, and maize was marginally down. Both categories, however, exhibited accelerated declines in the final quarter of the reporting period.

Maize profitability in the first half of the year disappointed despite sound volume growth. The recovery in the second half of the year was pleasing.

The wheat and bread categories experienced volume declines from weaker demand and price inflation ahead of general inflation. Acceptable volume growth was achieved in the rice category, but profitability remained negatively impacted by the price spread between Thai and Indian origin rice.

The pasta category showed acceptable volume and profit growth.

Sasko maintained market shares in key categories during this difficult trading period.

The new Shakaskraal bakery commenced bread production at the end of September and will provide improved access to the KwaZulu-Natalmarket.TheconsolidationoftheMalmesburyand Paarl wheat mills is progressing as planned and will provide additional capacity for medium-term growth in the Western Cape.

Bokomo Namibia experienced a disappointing year in a challenging trading environment, whereas Bokomo Botswana posted a pleasing overall performance.

Performance summary

innovation

Sasko launched White Star Quick during the year, a par-cooked version of South Africa’s favourite super maize meal that cooks in two minutes.

outlook

Sasko has sizeable market share in most product categories within a mature industry. The division will focus on maintaining its market share by careful management of price points and input costs to support margins.

Demand in the essential food categories is expected to remain weak. The focus in 2014 will remain on stringent cost control, efficient execution and service delivery – all aimed at improving margins.



41


42

See more at www.bokomo.co.za and www.pioneerfoods.co.za.

Bo

Ko

mo

Breakfast cereals

Bokomo is the market leader in cereals in South Africa, with brands such as Weet-Bix, Nature’s Source and ProNutro. Weet-Bix is South Africa’s best-selling breakfast cereal.

Dried fruit products

The Safari dried fruit brand has a significant position within the retail and industrial markets for over 90 years. The consistent adherence to world-class standards has ensured the products’ status in the retail, wholesale industrial and catering sectors in the domestic and export market. Dried fruits and nuts are exported to Australasia, Canada, Europe, USA and the Far East.

Baking aids and desserts

The Moir’s branded range of products includes jelly, instant puddings, cake mixes and baking aids.

Biscuits

The Moir’s range of biscuits showed good growth during the year and is now the clear number two biscuit brand. The range includes classics like Tea Lovers, Marie, Lemon Creams and Munch-a-Lot. Range extensions during the year were Favourites (assorted biscuits), Ginger, Coffee Dreams and Cream Crackers.

Bokomo Foods manufactures and markets a wide range of branded food products inclusive of some of the most recognisable brands in South Africa. The division’s primary operations are in South Africa where it sells fast-moving consumer goods to the retail market, as well as bulk packed products to the industrial market.

Bokomo Foods’ products compete in various categories where it owns the number one or two brands. The Bokomo Foods segment consists of the Bokomo Foods division, the Bokomo Foods UKbusinessandtheHeinzFoodsSAjointventure.

Value add


Foo

DS

43

integrated Report 2013 Pioneer Foods



•Focusongrowingkeycategories,namely:breakfastcereals,snacksandtreats,bakingaids,condiments, desserts, frozen foods, salads and spreads

•Keyprioritiesarerelatedtothegrowth and profitability of biscuits

•Decliningconsumerdemand

Focus on power brands •Increasedbrandinvestment in Weet-Bix, Safari, Bokomo and Moir’s

•Increasefocusoninnovationtokeepthebrandportfoliorelevant

•Increaseinbrandawarenesslevels

•Increasepercentageofturnoverfrom new products

•Weakconsumerdemand


•Strategicengagementwithkeyretail partners aligned with Group initiatives

•Customer-specifickeyaccountingteams

•Growthaheadofcategorywithkeycustomers

•Retailgrowthrates•Competitors


•Manpowercostreduction•Improveoverallequipmenteffectiveness(“OEE”)infactories

•ConsolidationofBokomoandCeresfunctionalandlegalstructures

•Distributioncostreduction

•Manpoweranddistribution costs are the major overhead cost elements

•Inflation•Losingkeyskillsduringthe

transition period•Resilienceofemployeesduring

the transformation period

Build a high-performance team •Developmentofleadership at all levels

•Implementationofagreedinitiatives

•Adaptabilityofemployeesto implement changes in organisation

Areas of operation

Gauteng

KwaZulu-Natal

Northern Cape

Western Cape


Factories (18)



44

Main product categories

Breakfast cereals47% Bakingaids7%

Other28%

Dried fruit products18%

Revenue contribution (2013)

Price change

Volume change

Breakfast cereals +6% +4%

moir's biscuits +3% +46%

Dried fruit products +1% +33%

Baking aids and desserts +6% -1%


R3 527m+15%

R289m+9%

8.1% R96m

2012:R3072m 2012:R264m 2012:8.5% 2012:R183m


45

Bokomo Foods delivered a solid performance during 2013, with pleasing revenue growth and an increased profit performance notwithstanding challenging trading conditions. The major drivers were volume growth in all markets (local, export from South Africa andUKbusiness)aswellastheexceptionallylargeraisincropof2013. The latter resulted in significant additional volumes of raisins available for sale. High double-digit biscuit volume growth was also achieved.

TheUKbusinessfocusedonafastandefficientnewproductdevelopment process and positioned itself as the preferred private label supplier of cereal for some of the major retailers.

Heinz Foods SA (Wellington’s, Heinz, Today and Big Jack brands) delivered good growth. This was partly offset by slower or negative growth on the imported range, mainly as a result of an extensive range rationalisation process. Operating margins came under pressure as a result of the impact of the weaker rand on imported products, product range rationalisation costs and overall commodity cost increases that could not be fully recovered in the market. Other abnormal items that impacted the business during the reporting year included impairments due to the closure of the frozen facility in Gauteng, as well as restructuring costs to re-align the cost base.

Performance summary


46

outlook

The focus for 2014 for the division will be on growing its power brands enabled by increased marketing investment. Continuous improvement in cost efficiency and improved equipment effectiveness will be key drivers to a further reduction in the unit cost of production.

innovation

• Packaging innovations included the launch of Maizena in a 500 g tub.

• ProNutro launched two new flavours in the HIP2B2 range.• Otees introduced Cola and Smurfberry variants.• Four new jelly flavours were launched in the Moir’s range.• Safari launched four new Just Fruit bars and a tropical fruit roll.• Smash instant mashed potato introduced a mustard variant.• Nature’s Source introduced a new range of mueslis.• Werda launched beetroot chakalaka and Mexican bean salads.



47

See more at www.tcbc.co.za and www.pioneerfoods.co.za

BE

VE

RA

GE

S

Fruit juices

Ceres Beverages is renowned for its high-quality and market-leading brands – Liqui-Fruit, Ceres and Fruitree. Products offer consumers a wide range of flavours and exotic fruit juice blends, in a variety of packaging configurations. The portfolio has captured nearly 50% market share of the long-life fruit juice category in South Africa.

Fruit concentrate mixes

The Wild Island brand is one of the market leaders in the category and the benchmark for the dairy blends segment. Daly’s has a significant presence and loyal consumer following in the KwaZulu-Natal market. The popular Ceres brand has also recently been introduced in this category, with a squash and nectar concentrate.

Carbonated soft drinks

Pioneer Foods has the sole franchise rights in South Africa to bottle, sell and distribute (under licence from PepsiCo International), the well-known international brands – Pepsi, Mirinda, 7Up and Mountain Dew.

Ice tea

Lipton Ice Tea is another international brand and leader in the ice tea category and is bottled by Ceres Beverages by arrangement with the Pepsi Lipton International joint venture.

Bottled water

Ceres Spring Water competes in the growing bottled water segment.

Ceres Beverages produces fruit juices, fruit concentrate mixes, mineral water, ice tea, carbonated soft drinks, and fruit-based alcoholic beverages. The division has grown to one of the largest beverage manufacturers on the African continent. The Ceres brand is the flagship export brand which, together with other brands, is exported to more than 80 countries.

Value add

CE

RE

SIntegrated Report 2013 Pioneer Foods

48



49



• Portfolio rationalisation• Portfolio strategy

•Keypriorityisprofitabilityofcarbonatedsoftdrinks

• Declining consumer demand

Focus on power brands • Increased brand investment in Liqui-Fruit

• Increase focus on innovation to keepthebrandportfoliorelevant

• Increase in brand awareness levels

• Increase percentage of turnover from new products

•Weakconsumerdemand


•Strategicengagementwithkeyretail partners aligned with group initiatives

•Customer-specifickeyaccountingteams

• Growth ahead of category with keycustomers

•Overallperformanceofkeycustomers


• manpower cost reduction• Improve overall equipment effectiveness(“OEE”)infactories

•ConsolidationofBokomoandCeresfunctionalandlegalstructures

• Distribution cost reduction

• manpower and distribution are the major overhead costs

• Inflation•Losingkeyskillsduringthe

transition period• Resilience of employees during

the transformation period

Build a high-performance team • Development of leadership at all levels

• Implementation of agreed initiatives

• The adaptability of employees to implement changes in organisation

Areas of operation

Gauteng

Free State

Western Cape


Production (3)



50

Main product categories Revenue contribution (2013)

Price change

Volume change

Domestic juices +12% -6%

export juices +17% +13%

ice tea +1% +8%

Fruit concentrate +2% -5%

Carbonated soft drinks +6% +4%

41% Local juices

25% Export juices

12% Dilutables

16% Carbonated soft drinks

6% Other


R3 021m+8%

R264m+200%

8.7% R56m

2012:R2798m 2012:R88m 2012:3.1% 2012:R112m


51

The division delivered exceptional financial results in a challenging trading environment. The major drivers of the division’s performance were excellent volume and value growth in the international market coupled to a favourable foreign exchange rate. These factors resulted in gross margin expansion which combined with a diligent focus on cost containment and operational efficiency.

The major inhibitors, particularly, were volume and market share losses in the local market. This was mainly the result of a major

increase in selling prices in 2012 on the back of substantial increases in raw material costs, which continued into the first quarter of 2013.

International juice sales and ice tea outperformed expectations in volume, value and profitability. Carbonated soft drinks as a category performed below expectations, mostly due to aggressive competitor pricing and subsequent lower profitability.

Performance summary



52

outlook

The focus will be on regaining lost volumes in the local market and maintaining the trajectory in the international market. Further reduction in the cost base should be realised following the reallocation of production between the Ceres and Wadeville factories.

innovation

Several new flavours and packages were launched across Ceres – Fruitree, Hooch, Liqui-Fruit and Pepsi. Lipton Ice Tea launched a mixed berry flavour and ran a number of highly successful activation and experiential marketing campaigns around the country, including a “tea-mometer” and the world’s first floating vending machine.


53

See more at www.nulaid.co.za, www.tydstroom.co.za, www.novafeeds.co.zaFoo

DS

eggs

Nulaid is South Africa’s largest integrated commercial egg enterprise. It has facilities for rearing laying hens, several laying farms and egg packaging and processing facilities. Eggs are distributed nationally in the retail, wholesale and informal markets under the established Nulaid brand.

Chicken products

Tydstroom is a significant chicken production operation in South Africa. The business unit produces, processes and markets a variety of high-quality fresh and frozen chicken meat products such as whole birds, “braai” packs, frozen mixed portions, bulk cater packs and the value-added barbeque range.

Animal feeds

Nova Feeds is an innovative supplier of feed solutions to the agricultural sector in South

Africa. Nova Feeds supplies feed to the layer, broiler, ostrich, dairy, sheep and pig industries, and provides customised technical solutions specific to customers’ needs.

The business unit monitors and benchmarks the feed manufacturing process against international standards to ensure that products are of the highest quality. New products are released in the market only after extensive research and testing.

African operations

Quantum Foods operates broiler and layer breeder businesses in Zambia and Uganda, using the Cobb and Lohmann genetics. The Zambian business also has a distribution division that primarily distributes Pioneer Foods group products. During the year under review, a commercial egg farm in Chingola, Zambia, was acquired.

Quantum Foods comprises three integrated business units, Nulaid (eggs and commercial laying hens); Tydstroom (chicken products); and Nova Feeds (animal feed). The division was previously known as the Agri Business. Quantum Foods’ products are distributed from facilities in the Western Cape, Eastern Cape and Gauteng to major retail supermarkets, wholesalers and independent customers.

The division also has broiler and layer breeding operations in Zambia and Uganda and acquired a commercial egg business in Zambia during the current year.

In September 2013, the Group announced its intention to unbundle Quantum Foods to Pioneer Foods shareholders and list as a separate entity on the Johannesburg Stock Exchange. The division is accordingly reported as an asset held for sale in the financial statements.

Value add

Qu

An

tu

mOperational report (continued)


54


55



•PositionQuantumFoodsas a stand-alone business

• Independent profitability • Ability to execute plans

Focus on power brands • Invest in Nulaid and Nova brands • Execution of agreed plans • Ability to execute plans


• Engage in joint business planning with selected customers

• Execution of agreed plans • Loss of volume or low prices


• Extract full value from previous year(2013)capex

• ScaleddowntheWesternCapeproduction facility and adjusted employee complement

• Achievement of monthly targets • Ability to execute plans

Build a high-performance team • Identifyingskillsgapsandopportunities for development

• Execution of agreed plans • Ability to execute plans

Areas of operation




56

Gauteng

North West

KwaZulu-Natal

Eastern Cape

Western Cape

Nova Feeds factories (3)

Nulaid pack stations (4)

Nulaid hatcheries (2)

Nulaid farms (grandparent,

parent, rearing and layers) (22)

Tydstroom farms (grandparent,

breeder, broiler and hatchery) (12)

Abattoir (3)

Tydstroom processing plant (2)

Main product categories Revenue contribution (2013)

Price change

Volume change

Animal feeds +15% +3%

eggs +9% +6%

Broilers +8% +2%

27% Animal feeds

26% Eggs

35% Broilers

8% Other

4% Africa


R3 576m+15%

(R19m)+55%

(0.5%) R483m

2012:R3098m 2012:(R42m) 2012:(1.4%) 2012:R188m


57

The division changed its name during the year to Quantum Foods to better align and identify with the integrated management of the business. Revenue increased by 15% in 2013, but margins remained tight and the division reported an operating loss of R19 million.

Quantum Foods faces the same challenges as the local poultry industry, namely historically high maize and soybean meal prices and an inability to recover input costs primarily due to overcapacity and the dumping of imported product. While news of the introduction of import tariffs is welcomed, these are unlikely to address the industry’s challenges in the short term.

Salient features:

• Nulaid achieved Icon status and won an Icon award for the best egg brand in South Africa.

• AcquiredMegaEggsinZambiaforR144million,anacquisition that proved to be immediately earnings enhancing.

• AnabattoirandhatcheryaswellasseveralfarmsintheWestern Cape were closed to ensure that the business continues to supply the correct product mix to the market profitably.

• Efficienciesinallmanufacturingunitscontinuedtoimprove.• TheconsolidationoftheabattoirsinGautengandbuildingof

a freezer room in the Western Cape have been completed and will enhance production efficiency going forward.

Performance summary



58

outlook

Conditions in the industry are expected to remain under pressure, although the egg cycle should start to turn in 2014 due to the expected decline in the supply of eggs.

The focus will be on ensuring a successful unbundling from Pioneer Foods and a supportive aftermarket as a listed company on the Johannesburg Stock Exchange.


59

Power brand

SpekkoRice– Achieved Platinum status in theTGIIconBrandssurvey:these are brands which consumers have identified as theICONbrandsoftomorrow


60


Visit www.spekkorice.co.za for additional brand info


61

Sustainabilityreport


62

PioneerFoodsremainscommitted to the continuous improvement of its governance, transformation and sustainability initiatives.highlights

• A grant of R6.9 million received from the European Union to support the Limani project in Limpopo.

• Sustainability considerations were included in the supplier Requests for Proposal processes.

• The Scope 1 carbon footprint data and ethics management programme were reviewed by internal audit.

• Exceeded lost time injury frequency rate target of < 1.

the importance of sustainability

Pioneer Foods regards sustainability as a means of redefining corporate value and creating equitable value for all stakeholders. The Group’s commitment to sustainability will show benefits in a number of ways. This includes an improved ability to attract capital from socially responsible investors and increased interest from talented employees.

As a business reliant on agriculture, the Group is concerned about changing weather patterns, droughts, floods and the other likely effects of climate change. The Group, therefore, monitors its impact on the environment, including water withdrawal, energy consumption and greenhouse gas emissions.

Pioneer Foods’ ability to deliver on its strategic ambitions will depend on its ability to retain talent. A rightsizing process initiated during 2013 has led to a decrease in headcount. However, the Group will continue to contribute to job creation and attracting and developing key skills will be a critical strategic necessity.

The Group is committed to socio-economic development through various corporate social investment (“CSI”) initiatives. The Group’s CSI strategy aims to identify the most pressing community needs and then partner with non-governmental organisations and communities through sustainable projects that seek to achieve long-term benefits without creating dependencies. Through these initiatives, the Group aims to move closer to achieving the Millennium Development Goals, together with other priority government development initiatives.

Pioneer Foods remains committed to the continuous improvement of its governance, transformation and sustainability initiatives. The Group regards its material issues as not only challenges to overcome but also as opportunities for innovation to unlock value.


63

how the group manages sustainability

The Board is ultimately responsible for integrating sustainability concepts into the business. It delegates this responsibility to the social and ethics committee, which oversees the implementation and management of sustainability by executive management.

The executive for corporate affairs and sustainability, on behalf of executive management, reports to the Board on sustainability performance. This function is supported by the corporate affairs and sustainability team that supports activities in governance, social, economic and environmental areas as well as communications.

The executive committee defines specific sustainability issues and responses and these are implemented by the divisions, business units and sites, according to the particular sustainability context and challenges they face. This is also incorporated into the Group’s performance management system.

Sustainability data is collected monthly according to established reporting guidelines and definitions and signed off by sustainability champions at each division. This information is then collated and reported to the executive committee.

Sustainability strategy and focus

The sustainability strategy is integrated into the new corporate strategy to provide meaningful support for the adoption of sustainability best practices in all that Pioneer Foods does.

The strategy aligns with good corporate governance practices, while adhering to compliance requirements, including those stated inKingIII,theJSEListingsRequirementsandotherglobalsustainability standards.

Strategic theme Sustainability focus

Shape a winning corporate portfolio ImplementarobustcommunicationstrategytobuildthestatureofPioneerFoodsasapreferredbusiness partner and an environmentally and socially responsible industry leader.

Focus on power brands Conductproductlifecycle(environmental)analysisfortopthreeproductstoprovideinsightsintoopportunities to drive innovation within the product value chain.


Adoptarevisedstakeholderengagementblueprintandmatrix.Leverageopportunities–CSIpartnershipsandentrepreneurshipincommunities.


Incorporate sustainability in relevant group policies and procedures.Usesustainabilityasanenablerforunlockinggovernmentfundingopportunitiesanddrivedownenergyusage and costs.

Build a high-performance team EnsurealignmentwithPioneerFoodsEducationandCommunityTrust’sbursaryschemesandotheractivitiestothecompany’sscarceskillsrequirementstosupportthedevelopmenttalentpipeline.Lead the creation of an ethical culture in the organisation, for example through an ethics training programme.

the BoARD oF DiReCtoRS

Social and ethics committee

Corporate affairs and sustainability team

executive teamExecutive: corporate affairs and sustainability

GOVERNANCESOCIAL

ECONOMICENVIRONMENT

COMMUNICATIONS

Sustainability report (continued)


64

update on sustainability

The changes arising from the corporate strategy and new business model had a significant impact on various sustainability initiatives during the year under review. The rightsizing programme negatively affected employment equity levels and certain projects were put on hold, including the new sustainability reporting system.

material sustainability issues

The Group regularly reviews its material issues to ensure alignment with its strategies and the priorities in its action plans. The material issues are identified and ranked based on a number of factors, including:

• The direct short-term financial impact.• The internal, perceived importance of the issue within divisions.• Competitor and peer reviews on the issue.• Stakeholder perception and concerns.

During 2013, three material issues increased in importance:

• Climate change and carbon costs increased from low to high impact due to the pending carbon tax, which has raised the priority within the Group. The business has completed focused energy assessments at various plants to optimise significant energy-using equipment and thereby targeting a reduction in direct fuel usage and lessen the impact on the environment and carbon tax. Refer to page 72 for more information on this initiative.

• Genetically modified organisms (“GMO”) increased from medium to high impact owing to the activism and significant media attention on Monsanto and GM foods. Refer to the company’s website (www.pioneerfoods.co.za) for Pioneer Foods’ position statement on GMO.

• Healthy/affordable products moved from medium to high priority due to the recently legislated sodium reduction regulations. A plan is in place to reduce the sodium content of various products in support of government’s health initiative to cut the daily salt intake of South Africans.

material issues

impact high medium Low

Social •Skillsdevelopment•Organisational development•Employee relations•Diversity•Training•Occupational health and safety• B-BBEE• Human rights• Ethics•Complaints• Healthy/affordable products

• nutritional labelling•HIV/TB•Foodsecurity

• Lifestyle diseases

environment • Energy consumption

• Raw material consumption

•Wastemanagement

•Waterconsumption

• GmO

•Climatechange

•Waterquality–treatmentandeffluent• Recycling• Emissions• sustainable agriculture• Animal welfare

• Environmental incidents• Green buildings• Biodiversity

economic • Energy costs• Product/food safety• Transport/logistic• Regulatory infringements•Carboncosts

• Energy availability/security of supply•Packaging• Responsible sourcing• supplier audits/codes


65

Future sustainability goals

• Design and implement an ethical and responsible supplier programme.

• Conduct product carbon footprint life cycle analysis.• Consideration of potential carbon tax in 2015.• Continue identifying opportunities to unlock government funding

for sustainability projects.• Develop Pioneer Foods Group Safety Policy.• Establish the baseline Safety Culture.• Enhance the workings of the energy optimisation team

and manufacturing forum by incorporating sustainability considerations into decision-making.

• Finalise and implement a sustainability reporting software solution.• Continue embedding Group sustainability reporting in business

operations as a “business-as-usual” item.

Social sustainability

As a leading food producer, Pioneer Foods contributes to the general health and societal well-being, which also relates to the major focus areas of its CSI initiatives – alleviating food insecurity.

From identifying the most pressing community needs and partnerships to deliver sustainable projects that achieve long-term benefits without creating dependency to maximising the impact of Group programmes, the focus remains on the vulnerable – women, youth and children – with a bias towards rural areas. Through its various initiatives, the Group aims to move closer to making a meaningful contribution towards the achievement of the priority government development goals such as the National Development Plan and the New Growth Path.

transformation

Transforming to reflect the composition of the society, it operates in a material and key strategic focus area for Pioneer Foods. It supports an important part of the strategy to build a high-performance team. In 2012, the Group achieved its target of becoming a Level 4 broad-based black economic empowerment (“B-BBEE”) contributor, and it remains committed to contributing towards the country’s strategic goal of equitable involvement by all in the economy.

Ownership

The company currently has 12.51% economic interest in the hands of black people, largely the result of the Phase II B-BBEE transaction in March 2012.

Management control

The Group is committed to the transformation of its workforce at all occupational levels. Within the management control element, top management has 38% black and 20% black female representation.

Employment equity

Employment equity initiatives are overseen by executive management and the human capital committee of the Board. Top management representation declined slightly to 38%, while senior management representation increased to 35%. There are a number of programmes driving improved representation of designated groups in middle management, and representation increased to 62% in 2013. Plans are in place that focus on retaining and further promoting representation of designated employees at senior management level.

To ensure heightened focus and increased accountability for the employment equity drive, there is a preference for having more black management in place as well as a renewed drive to improve diversity and inclusivity throughout the organisation. To enable leadership accountability further, with improved line of sight, the equity planning and delivery process has shifted away from the operating point level to the business management level – the net effect being one equity plan per business unit as opposed to the past practice of multiple equity plans decentralised at the operating units.

B-BBee element weighting

Audited score (generic codes)*

5 February 2013 – 4 February 2014

Ownership 20 12.51

management control 10 4.64

Employment equity 15 5.04

Skillsdevelopment 15 6.39

Preferential procurement 20 18.41

Enterprise development 15 15.00

socio-economic development 5 5.00

total 100 66.99

Level 4

* Asacompanythatbeneficiatesagriculturalproducts,PioneerFoods will be rated according to the Agricultural B-BBEE sector scorecard (“AgriBEESectorScorecard”)foritsnextcertification.

Designated employees per level

93% 93% 97% 97%

2012 201320112010Other levels:

Senior managementTop managementMid management

0

20

40

60

80

100

57%

36%

32%

59%

40%

33%

60%

40%

34%

62%

38%

35%



66

Enrolment decreased slightly for the ALDP in 2013, due to the focus on cost containment, while numbers for the FLDP increased. A total of 76 employees were enrolled in the Leadership Academy in 2013. A high percentage of students on the courses are from designated groups and approximately a third is female.

Eighteen employees received coaching in 2013, of which 44% were black and 33% were female.

Skills pipeline

The Group invests in future skills through apprenticeships, graduate internships, learnerships and bursaries. In 2013, there were 48 apprenticeships (2012: 93), 22 graduate internships (2012: 32) and 81 bursaries (2012: 57). There were also 341 learnerships in the Group.

Skills development

The Group’s human capital strategy emphasises skills development. This is facilitated through skills mapping, skills development frameworks at each division, as well as talent and leadership development programmes, with the aim of developing skills internally and developing capability in critical areas (e.g. marketing and innovation, strategic customer management, etc.) to support the business growth strategy.

Leadership, coaching and mentoring form a key part of the Group’s talent retention strategy. Skills development programmes are offered through Pioneer Foods’ Academy of Learning, which offers training in the 16 leadership competencies identified to ensure leadership agility in response to a changing environment. Two leadership development programmes are offered through the Academy – the Advanced Leadership Development Programme (“ALDP”) and the Foundational Leadership Development Programme (“FLDP”). Coaching and mentoring are also offered in addition to these courses to support development needs.

The total skills development spend to the end of September was R17.5 million compared to R18.8 million in 2012 and R28.3 million in 2011. Of the total spend, 77% was spent on designated employees (2012: 75%).

The decrease in training spend and the reduced numbers participating in the ALDP training had a negative effect on the skills development score throughout the reporting period.

ALDP representation

0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

44%

201320122011ALDP:

ALDP designatedALDP female

31% 31% 33%

2616 24

50%58%

FLDP representation

201320122011FLDP:

FLDP designatedFLDP female

0

10

20

30

40

50

60

0

10

20

30

40

50

60

70

8075%

43%

29%

4424 52

60%

52%

58%

Skills pipeline

0

20

40

60

80

100

120

Apprentice-ships

Graduate internships

Bursars

20

57

30 32

48

10393

22

81

201320122011

Skills development spend

2012 2013201120100

5

10

15

20

25

30

63%

69%75% 77%

17.50102030405060708090100

Percentage spent on designated employees

24.0 28.3 18.8


67

The Group encourage its employees to get involved in social upliftment projects by exposing them to the needs experienced by the surrounding communities and informing them of options for participation.

The Group distributed R7.8 million to beneficiaries as part of its socio-economic development spend in the 2013 financial year, focussing on the following areas:

• Flagship projects: education, environment and food security (90% of spend)

• Support to feeding schemes (10% of spend)

Preferential procurement

With regard to preferential procurement, the Group has improved engagements with its suppliers, starting with each division’s top 20 non-compliant suppliers as well as those below Level 4. Non-compliant suppliers are encouraged to secure verification through an accredited agency. The Group is also in negotiations to provide reduced verification rates for identified suppliers through a designated verification agency. The next step in its supplier engagements will be with those that have not achieved a Level 4 rating in order to obtain their commitment and short-term plans to reach this goal.

Transactions with the South African Futures Exchange (“SAFEx”) affect the Group’s preferential procurement score. Where ownership of commodities is taken by allowing the physical delivery of SAFEx future positions, preferential procurement points are accrued based on the SAFEx or JSE general BEE rating. However, where SAFEx futures are exchanged for mill door deliveries by third parties, these third parties’ BEE ratings are used. These third parties include trading houses, international agencies and farmers directly. The mill door route is used when there is a cost advantage, as it also limits actual stock keeping. The shift from SAFEx to the mill door lowered the score as some suppliers experienced reduced ratings because of the higher benchmarks under the generic codes.

As a result of the revised B-BBEE codes, this element is one of the focus areas of the Group’s strategic review in terms of its approach to B-BBEE.

Enterprise development

The Group again scored full points in the enterprise development category.

Primary agriculture

The main focus remains on providing support to businesses that operate in the same value chain as the Group, with 73.8% or R3.5 million (2012: 88.8% or R4.7 million) of its annual support allocated to projects with operations in primary agriculture. In 2013, the Group supported seven commercial farming operations whose beneficiaries are mentored by external commercial farmers as well as by Pioneer Foods employees.

Socionext Entrepreneurship Challenge

The Group also supported the first South African Socionext Entrepre-neurship Challenge by sponsoring 25 students’ full participation in the Challenge. The Challenge aims to enhance practical business skills and develop leadership abilities in entrepreneurial youths. While engaged in developing skills, project and life goals, the students also receive coaching from professional life coaches.

Socio-economic development

The socio-economic development (“SED”) score achieved full points.

Interacting with communities

Group CSI was coordinated through the Pioneer Foods Education and Community Trust, created through the Phase II B-BBEE transaction, for the first half of the financial year and by an internal committee with senior management representation for the second half of the year. Each division can also choose to support projects in its own communities.

our employees

Salaries, wages and benefits also represent a significant proportion of total costs. Ensuring that the business finds the right balance between employee costs and productivity is essential for its long-term sustainability.

Flagshipprojects:education

•Women’sHopeEducationandTrainingTrust(“WHEAT”)

•ThePioneerFoodsEducationandCommunityTrust(“PFECT”)

Flagshipprojects:environment

•WWFSA•Paardebergsustainabilityinitiative(“PSI”)

Flagshipprojects:food security

•Limani:TowardsFoodSecurityforCommunities•FoodBank

Feedingschemes •TheAfricanChildren’sFeedingScheme(“ACFS”)•StellenboschCommunityDevelopmentProgramme(“SCDP”)

•MonteChristoMinistries(“MCM”)

Building projects •Voor-Paardebergaftercarecentre•PFECTHopeYouthCentre,Mbekweni

Bursaries •15bursariesinengineering,marketingandaccounting

Total workforce (wholly owned South African operations)

11 591 11 479 11 364 11 058

2012 2013201120100

2 000

4 000

6 000

8 000

10 000

12 000



68

0

10

20

30

40

50

60

80

70

Organised labour

2013201220112010

53.0% 52.5% 53.5%

61.9%

Percentage of permanent employees

Rightsizing the business led to significant headcount reductions during the year, with the strategic aim of resetting the cost base and stepping up productivity.

Employee turnover as a result, increased to 14.6% for the current year compared to 12.7% in 2012.

During 2013, 11 058 people were permanently employed by the Group’s wholly owned South African operations.

During the year, there were five incidents of industrial action resulting in a loss of 40 man-days (2012: 1 incident, 234 man-days lost).

Organisation development

Building high-performance teams is one of the key elements of the revised strategy. An integrated talent and performance management system is being rolled out in the business to facilitate this develop-ment. This is supported by the initiation of a reward and recognition programme focusing on creating a sustainable performance culture in which teams and individuals will be recognised for their achievements in identified categories.

Occupational health and safety

The Group has a responsibility to its employees to ensure that the work environment is healthy and safe. Its objective is to ensure that it builds a strong safety culture in the organisation. Pioneer Foods is thus committed to maintaining high occupational health and safety standards in respect of its employees and clients. Occupational health and safety performance is monitored at Group and divisional level, with regular inspections performed at all premises and the results reported to senior management.

Occupational health and safety training

The Group promotes and motivates its employees to attend various safety courses to ensure they are capable and competent to perform their jobs safely in order to protect human, plant, equipment and product and so ensure continuity of service. During 2013, there were 1 504 health and safety-related training interventions at a total cost of R912 000.

training interventionnumber

of employees

Incident and accident investigation 13

Confinedspace 10

Firefighting 325

Firstaid 215

Foodsafety 136

HACCP 289

Handling of hazardous chemicals 19

General health and safety 314

Health and safety representative 165

Workingatheights 14

Environmental management 2

IntegratedSHEQInternalAuditorsCourse 2

total 1 504

Employee turnover

9.8%

10.8%

14.6%

2012 2013201120100

2

4

6

8

10

12

14

16

Employee turnoverNational average

12.7%

Organised labour

Pioneer Foods recognises its employees as key stakeholders in the Group and respect their right to collective bargaining.

The relationship between organised labour, representative unions and management is characterised by open communication, mutual respect and shared responsibility.

Total union membership for 2013 was 86.4% (2012: 73.0%) of the bargaining unit and 61.9% of the permanent employees (2012: 53.5%).

All sites ensure they identify risks and hazards and implement the necessary controls to mitigate those risks. Business units are certified to ensure compliance with various safety certifications, including HACCP, ISO 9001, BRC, SAFSIS, Afri Compliance, AIB, NOSA and SAFEPRO.

The Group is pleased to report that there were no fatalities at any of its operations for the year (2012: 1). It measures safety using the lost time injury frequency ratio (“LTIFR”), which calculates lost time injuries per 200 000 man hours. The business set a Group LTIFR target of < 1.0 and achieved 0.96 for 2013.


69

Risk control programme

Through the wholly owned insurance captive, Sasguard, the Group has undertaken various risk control assessments at its plants. The information sourced will support improved risk management practices.

The basic programme covers the following disciplines:

• Risk control organisational structure• Fire defence • General security• Occupational health and safety• Emergency planning/crisis management• Environmental risk management

2013 2012 2013 2012 2013 2012

Division Fatalities Fatalities number of lost time injuries

number of lost time injuries

LTIFR(per200000hours)

LTIFR(per200000hours)

Sasko – – 191 * 0.73 *

BokomoFoods – – 42 * 1.39 *

CeresBeverages – – 14 * 2.61 *

QuantumFoods – 1 74 * 1.92 *

group total – 1 321 * 0.96 *

* not reported in 2012

unit of measure 2013 2012

SaskoGrain number of complaints per million units sold 6.81 6.90

SaskoBakeries number of complaints per million units sold 5.77 5.63

CeresBeverages number of complaints per 100 000 litres sold 0.37 0.44

Bokomo number of complaints per 1 000 units sold 0.01 0.01

BokomoSAD number of complaints per 1 000 ton 0.01 0.02

QuantumFoods–NovaandTydstroom number of complaints per ton 1.76 1.07

QuantumFoods–Nulaid number of complaints per 1 000 doz 0.02 0.01

Customer service and complaints

The Group prides itself on its customer service and is committed to consistently providing the highest levels of service to its customers and the consumers of its products. The Group treats every complaint in accordance with its complaints management guideline to be resolved with the necessary urgency.

Some divisions outsource complaints management to independent contractors but retain responsibility to ensure that these comply with Group guidelines. The Group’s target is to resolve complaints internally within 15 days of receipt and customers are kept informed of any delays should this not be possible. The complaints management procedures are continually evaluated to ensure their relevance, effectiveness and compliance with legislation. The table below provides a summary.


Environmental sustainability

The food and beverage industry is a significant user of energy and water and has significant potential environmental impact through pollution incidents. The industry also has a strong influence over its supply chains in the agricultural sector and can influence positive behaviour.

Pioneer Foods is dependent on the agricultural sector for key input and is therefore exposed to the indirect impact of climate change through changing weather patterns that may alter crop yields, crop viability and the price of input.

The Group’s approach to managing its environmental impact is laid out in its environmental policy, which has been reviewed and updated. The Board ratified the revised policy at the recommendation of the social and ethics committee in 2013.

JSe SRi index

The JSE launched the Socially Responsible Investment (“SRI”) Index in South Africa in May 2004 to identify those companies listed on the JSE that integrate the principles of the triple bottom line and good governance into their business activities.

As a JSE-listed entity, Pioneer Foods was automatically selected to participate in the 2013 Index. It strives to improve its results as an illustration of the importance of measuring, monitoring and managing its environmental, climate change and social impact as well as applying good corporate governance throughout its business. The Group is currently exploring opportunities to share its activities, stories and initiatives in the public domain. The results were as follows:


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element Result Performance score Performance target

2013 2012 2013 2012

environment not met not met 10outof27(37%) 0outof27(0%) 15 out of 27

Social not met not met 30outof88(34%) 25outof88(28%) 45 out of 88

governance and related sustainability concerns met met 48outof65(74%) 49outof65(75%) 36 out of 65

Climate change met not met 6outof9(67%) 0outof9(0%) 3 out of 9

Carbon Disclosure Project 2013

The Carbon Disclosure Project (“CDP”) challenges companies on behalf of investors and shareholders to measure and report on their carbon emissions. Pioneer Foods participated in the sixth annual CDP and opted not to make its submission public. The submission process nevertheless affords the company an opportunity to reflect on where it is as a business and to consider the risks and opportunities in terms of environmental management.

The Group believes its CDP submission was an improvement in terms of content with the addition of quantitative data. Its performance is tracked through subsequent reports, as a reflection of the work done to manage climate change. While its score remained unchanged and its rank decreased, the Group moved into Band D of the carbon performance rating from Band E in 2011.

Carbon Disclosure Leadership index

Score Rank

2013 2012 2013 2012

74/100 61/100 65/79 74/76

Carbon performance rating*

Band

2013 2012

Band D(21 – 40 points)

Band D(21–40points)

* Preliminary results

Performance indicators

Pioneer Foods collects data on selected sustainability key performance indicators(“KPIs”)toimproveitsunderstandingofitsexposuretoclimate change risks and to provide information to aid decisions that have the potential to influence overall business strategy. It identified fourbroadclassesofGroup-wideenvironmentalKPIs,namely:

• Direct energy (diesel, petrol, coal, etc.)• Indirect energy (electricity and steam)• Water• Waste within the environmental element

DuringtheyearthesustainabilityKPIreportingtemplateswereenhancedto include efficiency ratios (consumption per unit of sales or production)

which highlight changes in efficiency over absolute increases or decreases in usage (refer to page 72 for actual consumption).

Data integrity (i.e. the completeness and accuracy of the information) is critical and the internal audit department has commenced auditing the accuracy of the Scope 1 carbon emissions data for 2013. External assurance of certain other non-financial data will be conducted in 2014.

The 2012 benchmark data was used to set five-year targets for the Group for water, electricity and each division’s largest direct energy usage. The target has been set at a 15% improvement rate (refer to page 72 for progress against the target).

In 2014, more emphasis will be placed on employee education and awareness of environmental management at all levels, and reporting processes will be aligned as such.

Carbon emissions

The total 2013 Scope 1 and 2 carbon emissions for the Group were 453 495 tCO2e (tonnes of CO2 equivalent) compared to 410 161 tCO2e in 2012.

Energy efficiency

The Group identified the uncertainty of supply and rising cost of energy as a material input into its business and recognised the need to respond, especially in the light of the pending carbon tax proposed for January 2015.

In response, the Group partnered with the National Cleaner Production Centre of South Africa (NCPC-SA) through its Industrial Energy Efficiency Improvement Project (IEE Project) to conduct energy-efficiency assessments at seven pilot plants. The government’s draft Carbon Tax Policy Paper has identified the work of the NCPC-SA as one of the priority flagship programmes around energy efficiency.

This engagement focused on assessing plant systems optimisation opportunities that may exist.

The programme also places engineering graduate interns, in particular female graduates, in Group plants to build capability and give them exposure to energy-efficiency programmes.

The Group has also formed an Energy Optimisation Team with the intent of reviewing and driving energy initiatives in a centralised and cohesive manner.

Energy consumption

The Group consumed 814 397 MWh in 2013 (2012: 816 942 MWh). Of these, 60% related to direct energy consumed and 40% to indirect energy (electricity purchased).


71

YTD progress on five-year target – direct energy/revenue

2013 2012

Annual usage (mwh/R’000) 0.024 0.028

Percentage reduction from 2012 15.8% 0%

YTD progress on five-year target – indirect energy/revenue

2013 2012

Annual usage (mwh/R’000) 0.016 0.016

Percentage reduction from 2012 (1.3%) 0%

A number of emission reduction projects are currently in place through-out the Group to reduce carbon emissions, encouraging behaviour change and improving energy efficiency. These include the following projects:

Sasko Grain Mills: Grain milling is an energy-intensive process and in an effort to reduce the energy consumption of its production units, the Group embarked on a four-step process which involved:

• detailed energy audit of the wheat and maize pilot plants; • identification of the major energy users; • quantification and implementation of the energy-efficiency

projects; and • roll out the successful projects to other production units.

The audit revealed that efficiency improvement opportunities existed on the Group’s pneumatic systems. The Group approached the Swiss-based milling experts (Buhler) to assist at its wheat mill in Malmesbury (which turned out to be a first for them as well) and this resulted in a 6% reduction in energy consumption for the plant as a whole which converts to a saving of R500 000 per year. The optimisation of the pneumatic lines has since been rolled out to the wheat mills in Port Elizabeth,Bethlehem,DurbanandKrugersdorp,allwiththesamerange of benefits. The total benefit of this project was that plant efficiency would increase by 5% and a 13% reduction in energy consumption, with a financial payback in less than 12 months.

Ceres Beverages: Replaced high-bay lights with energy-saving lights at all four factories and warehouses. The project was implemented under the Eskom funding scheme where about 250 lights were replaced.

Bokomo Foods – Worcester (SAD): A project was implemented on the cooling rooms during winter, which resulted in energy savings of about R240 000 during the year through applying the following:

• Reducing running times during the day, which in turn reduced the factories’ peak demand (kVA). The result is less strain on the compressors to maintain temperature set points.

• Adjusting the defrost time and monitoring temperature levels closely, which reduced demand (kVA and energy (kWh) usage of the cooling rooms.

• Reducing the number of fans used during winter from 16 to only four, to provide airflow through the room, activating the rest of the fans only when the compressor runs.

• Using the cooling rooms better by optimising storage of product within the rooms, resulting in savings estimated at R50 000 per

month over two months.• Proactively using the factories’ Real-time Energy Management

System called Power Star.

Nova Feeds:

• Launched an awareness campaign to switch off lights and equipment.

• Reduced the output pressure of boilers to reduce HFO consumption.

• Improved the boiler water total dissolved solids management to reduce boiler blowdown and save energy.

• All capital spending has an energy calculation as part of decision-making and design.

• All new installations have energy savings incorporated into the PLC control protocol.

• Feed formulation parameters (minimum total fat) were established to ensure energy-efficient pellet processing.

• Maintenance of power factor correction and steam pipe lagging and air leaks are kept up to standard.

Corporate office – Paarl:

• Reduced hot water cylinder temperature by 15 °C.• Installed timers to shut the geysers down when the office was not

in use. • An energy-efficient lighting retrofit project is planned with an

estimated reduction of 270 000 kWh per annum. • Maintenance personnel do evening rounds to ensure all lights and air

conditioners are switched off when employees have left the office.

Carbon tax

The details of the proposed carbon tax, which will come into effect in January 2015, have now been released and are in draft stage. The Group continues monitoring the possible impact.

Integrating sustainability into the value chain

As part of the Group’s strategy to embed sustainability into its core business processes, it has defined certain sustainability requirements that have been built into its procurement request for proposal (“RFP”) processes. Suppliers interested in doing business with Pioneer Foods need to respond to these questions, which give the Group a better understanding of their base position on sustainability, in addition to measures pertaining to cost, service, quality and B-BBEE.

Waste management

As part of Pioneer Foods’ commitment to minimising its impact on the environment, each division has programmes in place to manage waste disposal responsibly. Operations within the Group recycle where practical and ensure the safe disposal of waste at all times, using reputable waste contractors. During the year, the Group’s head office partnered with the Drakenstein Municipality to recycle and divert waste from its premises. The Group managed to divert 50% of general office waste from landfill and reduced waste management cost in the process.



72

Pioneer Foods is committed to reducing its e-waste footprint. The Group runs a PC hardware refurbishment programme in conjunction with Just Pc’s, which offers a complete e-waste disposal and recycling solution. Just Pc’s is an eWASA (e-Waste Association of South Africa) accredited member and is governed by the code of ethics and guidelines set out by eWASA and the IT Association of South Africa.

For the 2013 financial year, 472 laptops, desktop personal computers (PCs), monitors and printers were sold to Just Pc’s or resold to staff; and 354 laptops, desktop PCs, monitors and printers were disposed of in accordance with guidelines set out by eWASA.

water management

Water consumption is one of four highly material sustainability issues for the Group. As a first step in understanding this issue, the Group is focusing on measuring and tracking water consumption. The Group withdrew 5.5 million m3 in 2013 (2012: 5.4 million m3).

YTD progress on five-year target (water m3/revenue R’000)

2013 2012

Annual usage (m3/R’000) 0.27 0.29

Percentage reduction in water 7% –

Water management will be incorporated into the business strategy as the risks relating to water availability and quality are already included in the Group’s risk management processes. In the medium term (two to three years), the Group intends to examine its value chain’s level of exposure to environmental impact and thereafter propose suitable long-term adaptation plans.

e-Waste – hardware recycle and refurbishment programme

DesktopsNotebooksMonitorsPrinters

71

528

5545

5518

152

92

162

1783

2011 – 2012

Re-used Disposed Re-used Disposed

2012 – 2013

All divisions monitor their water usage, and identification of reduction opportunities is a priority. Quality checks are also conducted depending on the water source and production method.

At some divisions, such as Ceres Beverages and Quantum Foods, on-site water treatment systems are used to treat water before or after use according to the different sources. At the Group’s corporate office in Paarl low-flow devices were fitted to taps.

Regulatory and non-regulatory compliance

The quality, consistency, safety and traceability of the products Pioneer Foods produces for human and animal consumption are of the utmost importance. External audits of Group facilities are conducted regularly to ensure that safety and health standards are in line with national and international standards. The divisions subscribe to relevant standards, including HACCP, ISO 14001, ISO 18001, ISO 9001 and OHS, with some sites being NOSA certified. Certification of these standards also entails external verification.

The Group meets the requirements of the relevant legislative frameworks in terms of safety, health, environment and food safety. It monitors ongoing compliance and the legal and compliance department has developed a compliance framework and universe to ensure that the impact and applicability of compliance standards and requirements are understood and well managed.

Sasko has an integrated management system in place that integrates the following standards:

• ISO 22000 (Food safety management)• ISO 14001 (Environmental management) • OHSAS 18001 (Occupational health and safety)• ISO 9001– selected elements

The standards, best practices and other requirements were integrated on a definition and process basis, with the strictest measure across the disciplines being integrated into the final design.

The generic design has been piloted at selected manufacturing sites and is being rolled out across the remaining sites. The test phase coincided with legal compliance audits conducted at all manufacturing sites, which served as a major input into an integrative risk assessment review.

Environmental fines

There were no material environmental or health and safety fines received by Bokomo Foods, Ceres Beverages or Quantum Foods during 2013. Sasko bakeries paid a section 24G fine to the amount of R192 500 to rectify the unlawful installation of above-ground diesel and ammonia storage tanks. The necessary corrective steps have been taken.


73

Power brand

Sasko– Proudly sharing trusted goodness since 1930.


74


Visit www.sasko.co.za for additional brand info


75

Corporategovernance


76

Creating value for all stakeholders is a priority for Pioneer Foods.

Corporate governance at a glance

Corporate governance refers to the manner in which organisations are directed, controlled and governed to achieve a specific set of objectives. The way in which decision-making powers are exercised by the relevant governing bodies and structures shapes a company’s corporate culture and defines the way in which it conducts its business.

The Group’s corporate governance business practices consist of a system of structure, control and execution. This includes creating a balance between the expectations of its stakeholders, in particular:

• stakeholders who are affected by the business and/or its operations (see page 14 for more information on stakeholders);

• parties who could potentially influence the business; and • those who have an interest in what the Group does or how it does it.

The Board of directors (“the Board”) is the custodian of corporate governance. Therefore, it is committed to ensuring, collectively and individually, that sound governance principles are fully integrated into all aspects of the business. The Board takes ownership of the accountabilities and responsibilities assigned to it in this regard, and it is dedicated to the execution thereof.

Creating value for all stakeholders is a priority for the Group. It acknowledges that this can only be achieved through sustaining a culture that is based on a foundation of sound governance and business ethics, which includes taking cognisance of the present and future needs of those who have an interest in the Group.

Compliance framework

Pioneer Food Group Ltd is a public company duly incorporated in South Africa under the provisions of the Companies Act, Act 71 of 2008, as amended, and the Regulations thereto (“the Companies Act”) and is listed on the Johannesburg Stock Exchange (“JSE”). It is therefore subject to the JSE Listings Requirements.

the King Code of governance Principles for South Africa (“King iii”) and the Companies Act

InthethreeyearssinceKingIIIwaspublished,therehasbeena heightened focus on corporate governance and, in particular, sustainable business practices.

TherecommendationsoutlinedinKingIIIwere,toalargeextent,entrenchedbytheCompaniesAct.KingIIIcontinuestoberegardedasan important milestone for South Africa, which is positioning itself at the forefront of promoting sound corporate governance principles in the international domain.


77

The JSE has provided extensive guidance in the past two years as to the mandatory manner in which listed entities should report on the application of the principles and the Group supports the recommendationsandprinciplesembodiedinKingIII.

The Board can confirm that the Group is substantially applying theprinciplesoutlinedinKingIIIaswellastrackingandmonitoringitsperformance with the assistance of the Institute of Directors of South Africa’s (“IoDSA”) Governance Assessment Instrument (“GAI”). The GAI enables the Group to identify gaps in its application as well as assigning responsibilities to key internal stakeholders to operationalise the execution of the relevant compliance requirements.

Progress is being monitored on a continuous basis and reported to the executive committee, the audit and risk committee as well as the Board.

In addition, a continuous effort was made to ensure compliance with the new Companies Act, by means of developing a compliance matrix as a ‘tracking device’ that illustrates the Group’s commitment towards adherence with the Companies Act.

As per the JSE Listings Requirements, below is a synopsis of the Group’s level of compliance to the mandatory requirements outlined inKingIII.Forexplanatorypurposes,commentaryhasbeenprovidedwhere necessary. Reference is also made throughout the integrated report, to the necessary compliance and disclosure requirements highlightedinKingIII.

A detailed compliance report has been published on the Group website (www.pioneerfoods.co.za)illustratingcompliancewithKingIII,inalignment with the Group’s approach to be transparent in this regard.

Corporate governance (continued)

Compliance summary

Source reference Question Answer

KingIIIPrinciple3.9:Paragraph76 The audit committee approves both the external auditor’s terms of engagement and remuneration.

Yes

KingIIIPrinciple3.8:Paragraph59 ThereisaBoardcommittee(eitherariskcommitteeortheauditcommittee)thatassiststheBoardincarryingoutitsriskresponsibilities.(Furtherquestionswillrefertoariskcommittee,eveniftheauditcommitteecarriesoutthisfunction.)

Yes

KingIIIPrinciple2.23:Paragraph126 The nomination committee’s terms of reference have been approved by the Board and are reviewed every year.

Yes

KingIIIPrinciple2.6

JSEListingsRequirements:Paragraph3.84(d)

TheCompanyhasanauditcommittee. Yes

KingIIIPrinciple2.23:Paragraph130

JSEListingsRequirements:Paragraph3.84(a)


There is a nomination committee consisting of Board members. Yes

KingIIIPrinciple2.19:Paragraph80;


ProceduresforappointmentstotheBoardareallofthefollowing:

–formallysetoutinapolicy;–transparent;and– a matter for the Board as a whole (although the Board may be assisted by the nominationcommittee).

Reportcomment:TheBoardisassistedbythenominationcommittee(NC).TheNC’s mandate is clearly defined in its terms of reference as approved by the Board of directors as a collective. The nomination Policy was adopted during 2012.

Yes



There is a board remuneration committee.

Reportcomment:TheCompanyhasahumancapitalcommitteewhichassessesremunerationatBoard and senior management level.

Yes


JSEListingsRequirements:3.84(j)

The company secretary is empowered by the Board to effectively perform his or her duties.

Reportcomment:During the year under review, the company secretary was effectively empowered by the Board to perform her duties inclusive of arranging requisite training for the directors, conducting Board and committee assessments by independent third parties and resource allocation in her role.

Yes


78

Compliance summary (continued)


Principle2.16:Paragraphs37,38

JSEListingsRequirements:Paragraph3.84(c)

The chairman is an independent non-executive director or, in the alternative, a lead independent director has been appointed.

Reportcomment:During the year of under review, the company secretary conducted an assessment of all the non-executive directors led by a law firm and based on the company’s IndependencePolicy.Thispolicy,togetherwiththeGroup’sBoardCommitteeCharters,aswellastheLeadIndependentDirectorCharter,informedtheindependence review conducted.

Yes


JSEListingsRequirements:3.84(c)

TheBoardappointstheCEO.

Reportcomment:TheBoardappointstheGroupCEO,basedonrecommendationsmadebyboththehuman capital committee and the nomination committee.

Yes

Principle2.16:Paragraph42

JSEListingsRequirements:Paragraph3.84(c)

ThechairmanhasnotbeentheCEOoftheCompanyinthelastthreeyears. True

KingIIIPrinciple2.21:Paragraph96 The Board is entitled to both appoint and remove the company secretary.

Reportcomment:ThesourcedocumentsfortheauthorityareboththeBoard-approvedCharterandtheCompaniesAct.

Yes

KingIIIPrinciple3.9:Paragraph77 The audit committee monitors and reports on the external auditor’s independence. Yes

KingIIIPrinciple2.21:Paragraph95;

CompaniesAct:section85–89

JSEListingsRequirements:3.84(i)

TheCompanycomplieswiththeprovisionsoftheCompaniesAct,2008inrelationtothe appointment and removal of, and the duties allocated to the company secretary.

Yes

KingIIIPrinciple3.9:Paragraph 78

JSEListingsRequirements:Paragraph3.84(g)

The audit committee has defined a policy for non-audit services provided by the external auditor.

Yes

JSEListings Requirements:Paragraph3.84(e) AbriefCVofeachdirectorstandingforelectionorre-electionattheannualgeneralmeeting(AGM)accompaniesthenoticeoftheAGM.

Yes

KingIIIPrinciple2.21:Paragraph99–108 The role and function of the company secretary are clearly formulated in writing. Yes

KingIIIJSEListings Requirements: Paragraph3.84(b)

There is a policy addressing division of responsibilities at Board level to ensure a balance of power and authority, such that no one individual has unfettered powers ofdecision-making.

Reportcomment:The roles and responsibilities of the Board have been recorded in its approved termsofreference.Inaddition,aGroupDecision-MakingFrameworkhasalsobeendevelopedwhichoutlinestherespectivesigninganddecision-makingpowersallocated to the Board, Group Exco and the divisional management teams.

Yes

KingIIIPrinciple2.19:Paragraph88JSEListings Requirements:Paragraph3.84(f)

The integrated report classifies directors as executive, non-executive or independent and provides information about individual directors that shareholders may need to maketheirownassessmentsinregardtoallofthefollowing:

–independence;–education,qualificationandexperience;–lengthofserviceandage;–significantotherdirectorships;–politicalconnections;and– other relevant information.

Reportcomment:Theintegratedreportsetsoutalltherequisiteinformation;however,itdoesnotsetout their political connections.

Yes


79

Board of directors

The Board accepts responsibility and accountability for the Group’s:

• strategic direction;• management of risks;• sustainability;• corporate values and business ethics; and• influence and impact on stakeholder groups, both internally

and externally.

The Board exercises overriding control over all the Group’s subsidiaries. In line with the Board charter which is reviewed on an annual basis, it continues to be responsible for ensuring that the necessary systems and processes are in place to enable the Group to achieve its objectives in a sustainable manner.

The Board provided guidance to management in formulating the new strategy (see the inside front cover for details), setting targets and developing business plans, while being mindful of the long and short-term effect these could have on the triple bottom line, being its stakeholders (people), financial performance (profit) and the environment (planet).

Composition and size

The Board consisted of 11 members at year-end of whom the majority are non-executive members, including the chairman. This number meets the requirements of the Companies Act and the Group’s memorandum of incorporation (“MOI”) of a minimum of eight directors and a maximum of 20. The aforementioned numbers allow the Board to function optimally and to have sufficient members for the statutory Board committees, being the audit and risk committee, and the social and ethics committee.

The executive directors and the company secretary are appointed by the Board. The requirements relevant to the independence of directors have been altered significantly, mainly due to the Companies Act and theprinciplesoutlinedinKingIII.Therefore,theBoardconstantlyreviews and considers the independence of each non-executive director according to a policy that has been adopted to govern this process.

Although the re-appointment of non-executive directors is not automatic but by way of shareholder vote, each non-executive director has been elected for a specific term as outlined in the MOI. Furthermore, there is a balance of power and authority at Board level to ensure that no single director has unfettered powers of decision-making. All appointments to the Board are formal and transparent and are considered as a matter for the Board as a collective. Any new appointments are endorsed by the shareholders at the requisite annual general meeting. As per the recent JSE Listings Requirements’ guidance on corporate governance, the nomination committee has adopted a nomination policy for recommendation and approval by the Board. More information on the directors is included in the overview of the Board on page 18.

Roles and responsibilities

The Board’s terms of reference govern and regulate how the members of the Board, collectively and individually, discharge their duties according to the principles of good governance. Both the Board charter and the lead independent director charter are available on the website – www.pioneerfoods.co.za.

Directors have unrestricted access to company information, receive regular briefings, and have access to information related to changes in risks, laws and the environment. They may also formally request to have access to professional support. The latter supports them in discharging their fiduciary duties to the Group in an effective, informed and competent manner.

Compliance summary (continued)



KingIIIPrinciple2.16:Paragraph45.4


The nomination committee comprises the Board chairman and non-executive directors.

Yes


JSEListingsRequirements:Paragraph3.84(h)

Theauditcommitteedoesbothofthefollowing:

– considers and satisfies itself of the suitability of the expertise and experience of the ChiefFinancialOfficereveryyear;and

– reviews the finance function every year.

Yes

JSEListingsRequirements:Paragraph3.84(h) Both of the following are disclosed in the integrated report regarding each Board committee:

–composition;and– role and mandate.

Yes

JSEListingsRequirements:Paragraph3.84(h) TheCompanydiscloses:

–thenumberofmeetingsheldeachyearbytheBoardandeachBoardcommittee;and–whichmeetingseachdirectorattended(asapplicable).

Yes

JSEListingsRequirements:Paragraph3.84(h) The audit committee recommends to shareholders the appointment, reappointment and removal of the external auditor.

Yes



80

In addition to a formal induction programme for new directors, the members of the Board are at liberty to request access to professional and/or advisory support to assist and guide them with their decision-making responsibilities.

meetings, agendas and structure

As required by the Group’s MOI, the Board held five meetings during 2013 to review the Group’s strategy, its operating and capital budgets, the Group’s sustainability agenda, the material risks that it is exposed to, its marketing plans, as well as expanding its operations into new emerging markets. Other matters relating to the overall Group objectives were also discussed – the latter included effective control measures, risk management, compliance and good corporate governance practices.

Meetings were scheduled in advance and according to an annual plan to ensure that matters set out for consideration were addressed at the relevant meetings.

Special Board meetings, in addition to those scheduled, are held at the request of at least one quarter of the Board members, which is in line with the MOI.

From time to time, members of senior management, assurance providers and professional advisors are invited to attend meetings; however, none of them have voting powers.

the company secretary

The company secretary, Ms Jay-Ann Jacobs, was appointed in August 2011. She executes a number of tasks that include:

• The responsibility for ensuring that the proceedings of all shareholders’ meetings, Board meetings and its subcommittee meetings are properly recorded. This includes circulating the minutes and agendas in a timely manner.

• Assisting the Board in executing the requirements of the Group’s MOI, any of the rules of the Company, the JSE Listings Requirements or the requirements outlined in the Companies Act.

• Overseeing the induction of new directors and responsible for regular briefings and training of directors and prescribed officers regarding applicable laws and regulations.

• Coordinating the process of evaluating the Board and its subcommittees.

• Maintaining the constitutional and company secretarial documents of the entire Group, as well as the appointment and resignations of directors within the Group’s subsidiaries.

All the directors serving on the Board have access to the company secretary at all times, who in turn ensures that the Board procedures and applicable rules and regulations are fully observed and

implemented. The company secretary is also responsible for the administration of shareholders and the direct interface between the transfer secretaries and Strate. In addition, she is the custodian of governance with regard to compliance with the JSE Listings Requirements insofar as they affect the Group’s long-term incentive schemes, and she must be vigilant of insider trading. The company secretary also acts as the compliance officer and the delegated information officer of the Group in terms of its PAIA (Promotion of Access to Information Act) Manual, and is responsible for the execution of all statutory requirements applicable to those responsibilities.

As required by the JSE Listings Requirements, the Board, via an independent service provider, evaluated and satisfied itself of the competence, qualifications and experience of the company secretary at the Board meeting that was held on 21 November 2013.

The Board is satisfied that an arm’s length relationship exits between it and the Company Secretary as she is not a member of the Board, nor involved in day-to-day operations of the Group. Refer to section 3.84(j) of the Listings Requirements in this regard.

Delegation of authority

The Board delegates authority on certain matters to its committees and management. However, it retains the right to attend to matters such as determining the Group’s long-term strategy and that of monitoring executive management’s implementation of approved plans and strategies.

The Board fulfils its duties in terms of a decision-making framework, which is reviewed from time to time, whereas the mandates and functional responsibilities of the Board’s committees are described in the respective charters approved and endorsed by the Board.

Board committees

The Board delegated some of its functional responsibilities during the 2012/2013 financial year to its committees, by means of clearly defined mandates. These committees were:

• the audit and risk committee;• the social and ethics committee;• the human capital committee; and• the nomination committee.

The committees report to the Board on their respective directives and deliverables on a continuous basis in accordance with their respective committee charters .


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Below is a summary of content contained in the committees’ charters.

Audit and risk committee


nomination committee

human capital committee

Chairman AH sangquIndependent non-executive

ProfASMKaraanIndependent non-executive

ZLCombiIndependent non-executive

mm du ToitIndependent non-executive

Composition Fourindependentnon-executive directors

Two non-executive directors and an executive manager (prescribedofficer)

Three independent non-executive directors

Three independent non-executive directors

Frequency of meetings

4 3 3 3

Board-approved charter

Yes Yes Yes Yes

Core responsibilities

• Appoints the external auditors and oversees the relevant annual financial audit process.

• Oversees integrated reporting and ensures the integrity of the report.

• Reviews the annual financial statements, interim reports, preliminary or provisional result announcements, the summarised integrated information, trading statements and similar documents.

• Reviews the disclosure of sustainability issues in the integrated report to ensure reliability and accuracy.

• Ensures that a combined assurance model is applied to provide a coordinated approach to all assurance activities.

• Reviews the expertise, resources and experience oftheCompany’sfinancefunction.

• Oversees the internal audit function.

• Oversees financial reporting risks,internalfinancialcontrols,fraudrisks,astheserelate to financial reporting, aswellasIT-relatedrisks.

• Oversees the development, review and implementation ofariskmanagementpolicyand plan.

• Expresses the committee’s formal opinion to the Board on the effectiveness of the systemandprocessofriskmanagement.

monitors the sustainable development and non-financial performance of the Group, specificallyrelatingto:

•stakeholdermanagement,engagementandreporting;

• health and public safety, including occupational health and safety and the quality of the Group’s productsandservices;

•broad-basedblackeconomicempowerment;

•diversitymanagement;•labourrelationsandworkingconditions;

•trainingandskillsdevelopment;

• management and monitoring of the Group’s environmentalimpact;

•ethicsmanagement;and• corporate social investments

• Ensures that the Board has an appropriate composition.

• Identifies and appoints suitable members to the Board.

• Oversees the development of a formal induction programme for new directors.

• Ensures that formal succession plans for the Board, chief executive officer and executive management are developed and implemented.

•Considerstheperformanceofdirectorsandtakethenecessary steps to remove directorswhodonotmakean appropriate contribution.

•Makesrecommendationsfor the reappointment of directors with regard to retirement due to rotation.

• Oversees the development and implementation of continuing professional development programmes.

• Evaluates the performance of the chairman of the Board, including the Board as a collective as well as the individual directors respectively.

•Considersproposals for the appointment and removal of the company secretary.

• maintains and approves human resource policies.

• Enables and recommends succession planning of the chief executive officer and executive management team.

• monitors the impact and implementation of applicable labour legislation.

• Determines the remunerationpackagesof directors and executive management.

• Ensures that all remunerationpackages arefair,market-related and responsible.

• Enables the Group to attract, engage and retain talent.

• Ensures that directors’ remuneration is accurately, completely and transparently disclosed and reported on.

• Establishes the criteria to evaluate the performance of the executive management team and executive directors.

• Evaluates and approves the Group’s remuneration philosophy, strategy and policy.



82

Audit and risk committee


nomination committee

human capital committee

Core responsibilities (continued)

•Ensuresthatriskmanagement procedures are adequate.

• Ensures that appropriate standards of reporting and compliance are maintained.

• Ensures that the function operates effectively and totally independent.

Permanent invitees • The chief executive officer• The chief financial officer• The company secretary (statutoryinvitee)

• The lead external auditing team

• The group internal audit manager

• The group finance manager• the group compliance

manager

• The chief executive officer• The company secretary (statutoryinvitee)

•Theexecutive:humanresources





other invitees • Relevant members of senior management and/or assurance providers also attend the committee meetings from time to time, i.e. by invitation only, with no voting rights whatsoever.

• Relevant members of senior management and/or assurance providers also attend the committee meetings from time to time, i.e. by invitation only, with no voting rights whatsoever.



Access • The members of the committee have reasonable access to the Group’s records, facilities and any other resources necessary to fulfil its role and/or discharge its duties and responsibilities.

• In addition, all auditors and assurance providers have unlimited access to the members of the auditandriskcommittee,thereby ensuring that their independence is not compromised in any way.

• At every committee meeting, both the internal and external auditors are afforded the opportunity to have a closed session with the members of the committee, i.e. without management being in attendance.

• The members of the committee have reasonable access to the Group’s records, facilities and any other resources necessary to fulfil its role and/or discharge its duties and responsibilities.




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Board and committee meeting attendance during 2013

The table below depicts a snapshot of the attendance of members serving on the Board and its subcommittees, during the year under review.

Board of directors

Board meetings

(scheduled)5

Board meetings (special)

2

Audit and risk

committee meetings

4

Social and ethics

committee meetings

3

human capital

committee meetings

6

nomination committee meetings

3

ZLCombi(Chairman) 5 2 6 3

G Pretorius (Leadindependentdirector)*

5 2 6 3

TACarstens** 5 1

NCelliers 4 2 3

LRCronjé(ChiefFinancialOfficer) 5 2 4

mm du Toit 4 1 6 3

WAHanekom(ChiefExecutiveOfficer)*** 3 2 3 2 3 1

AEJacobs 5 1 4

ProfASMKaraan 5 2 3

ns mjoli-mncube 5 1 4

LP Retief**** 4 1 4

PMRoux(ChiefExecutiveOfficer)***** 2 0 2 1 2 1

AH sangqu 5 2 4

Dates of meetings held

18/10/2012 15/11/2012 21/11/2012 21/11/2012 02/10/2012 17/10/2012

22/11/2013 26/03/2013 13/03/2013 13/03/2013 08/11/2012 14/02/2013

14/02/2013 15/05/2013 01/08/2013 21/11/2013 05/09/2013

16/05/2013 25/07/2013 14/02/2013

01/08/2013 09/05/2013

05/09/2013

* GPretoriuswasappointedasleadindependentdirector,effectiveasfrom17February2012.** TACarstenssteppeddownasamemberoftheBoard,effectiveasfrom15May2013.*** WAHanekomsteppeddownasChiefExecutiveOfficerandmemberoftheBoard,effectiveasfrom1April2013.**** LPRetiefwaselectedasamemberoftheauditandriskcommittee,effectiveasfrom21November2013,andsubsequentlyappointedtothecommitteebythe

shareholdersatthepreviousannualgeneralmeetingthatwasheldon15February2013.***** PMRouxwasappointedasChiefExecutiveOfficerandanexofficiomemberoftheBoard,effectiveasfrom1April2013.



84

Access to information

The Board of directors has unrestricted access to company information. One of the responsibilities of the company secretary is to ensure that the members of the Board receive regular briefings and access to information related to changes in risks, laws and the environment.

The Board is, furthermore, at liberty to formally request the company secretary to have access to professional support to assist them in their decision-making responsibilities. A formal process has been endorsed by the Board, should such requests arise.

Compliance

Approach

The Board of directors is accountable for the governance of risks and compliance as well as ensuring that proper processes are implemented across the Group. The Company’s group compliance policy, which is reviewed by the audit and risk committee and the Board on an annual basis, governs the Pioneer Foods application and response to compliance management.

The Group’s compliance officer, under the authority of the chief executive officer, is responsible for the implementation, ongoing maintenance of, and ultimate adherence to the compliance process.

The key deliverables of the Group’s compliance function are to:

• keep the Board and management abreast of compliance-related developments through regular reports and ongoing communication;

• identify, assess and prioritise, manage, monitor, advise and report on the regulatory compliance risks that the Group is exposed to;

• assist the business in understanding and managing, in particular, regulatory compliance risks;

• assist the Board and management in embedding the required controls in the business’s operations; and

• support the business in identifying and implementing risk and compliance management improvement processes.

At Pioneer Foods, the realisation of effective compliance risk management business practices begins with strategy. Compliance requirements are incorporated in the Group’s revised enterprise risk management framework.

Pioneer Foods operates according to a Group compliance universe that consists of three categories:

• Mandatory compliance requirements, i.e. laws and regulations that influence and/or affect the Group’s business operations

• Voluntary compliance requirements, i.e. a combination of industry and customer requirements, non-binding rules, best practices, codes and standards

• Internal ‘Pioneer Foods-specific’ compliance requirements, i.e. Company policies and procedures, standard operating protocols and business-specific standards

Compliance risk analysis

The Group’s approach is based on the Generally Accepted Compliance Practice (“GACP”), as endorsed by the Compliance Institute of Southern Africa (“CISA”). Business areas were introduced to the GACP process during various consultative workshops that were held during March and April 2013 and were required to complete a regulatory compliance risk profile for their respective areas given their expertise and exposure to the business.

The various stages of the implementation can be summarised as follows:

Focus areas for 2013

In addition to the new legislation such as the Companies Act, the Consumer Protection Act, Act 68 of 2008, that changed the landscape during 2012, the focus during 2013 was on the new labour law amendments, the new BEE Codes and the Protection of Personal Information Bill (“PoPI”). Readiness for PoPI formed part of a project, which included conducting a gap analysis and creating educational awareness among employees of the impact of the legislation.

Non-compliance

The Board can report that during the reporting period, and to the best of its knowledge, the Group was not involved in and/or associated with any material transgression or non-compliance incident that relates to an applicable regulatory requirement.

ethics management

Business ethics

For Pioneer Foods, protecting its integrity by conducting ethical business is not only a governance issue, but is also critical to ensuring long-term sustainability and growth. Not only will it enhance the Group’s reputation, but it will also allow the Group to reduce risk by protecting its reputation, meet or exceed the requirements of the new CompaniesActandtherequirementsofKingIII.

Risk identification

Compliance risk

assessment

Compliance risk

managementCompliance monitoring

Compliance reporting


85

To this end, the Board is ultimately accountable for ethics management within Pioneer Foods. A key responsibility is to provide leadership and holding the business accountable to ensure that the Group as a responsible and accountable corporate citizen:

• employs the necessary structures, resources and processes to ensure that the Group operates ethically and with integrity;

• considers the interest of the communities in which the Group operates; and

• complies with all applicable laws, regulations, rules, standards and codes.

The Board is ultimately accountable for the adherence to best practice principles, the design and adoption of adequate policies and procedures as well as inculcating the required culture to adhere to such policies. They also fulfil an oversight role in the implementation of this set of policies.

Accordingly, the social and ethics committee was established and will, on behalf of the Board, monitor the Group’s ethics management programme.

Executive management remains responsible for the implementation of the policies, strategy, business plans, etc. in an ethical manner that coincides with the Pioneer Foods’ Way.

Code of ethics

Central to managing and enhancing ethics management the Group has undertaken a review of its code of ethics to ensure it remains current, ethics risks are addressed and ethics opportunities are included. In addition, the Group also undertook to align its code with international best practice standards, such as the Harvard Business School’s Codex, including overall business ethics as it relates to the 10 (ten) principles set out in the United Nations Global Compact Principles with regard to human rights, labour, environment and corruption. The reviewed code was endorsed by the Board.

Ethics awareness

During the year, Pioneer Foods undertook to enhance ethics management by creating greater visibility and awareness around the importance of ethics management across the Group. To this end, the business has developed an ethics calendar through which key ethical issues were communicated to the business using various internal communication platforms.

In an effort to raise awareness, the Group will commence the roll-out of an online ethics training module in early 2014, including training interventions to reach factory staff.

Ethics risk assessment

During the year, the Group commenced a process to conduct an ethics risk assessment with the following intent:

• Establish a baseline ethics culture with the aim of improving on this going forward.

• Provide valuable information on the strength and development areas in managing ethics in the Company.

• MeettherequirementsofKingIIIinassessingethicsrisks.

The Group’s score of 69% was slightly above average and there were no red flags identified. Communication and training on ethics was highlighted as the biggest opportunities to support the building of an ethical organisation. The detailed and specific areas of focus covered in the full report will inform the content of the training programme to be rolled out early in 2014.

Tip-offs Anonymous

Pioneer Foods views corruption and bribery as undermining to the Company’s integrity and such practices will have negative consequences if undetected and unreported, and is invariably detrimental to the Group’s reputation and its licence to operate.

The Company’s code of ethics, which has been developed to help mitigate this risk, stipulates that all employees should act with the utmost integrity and honesty at all times. Given the Group’s zero tolerance towards fraud, dishonesty and unethical conduct, in conjunction with the Group’s disciplinary code, the ripple effect of non-compliance with the code of ethics leads to disciplinary action. Should the breach be criminal and depending on the significance of a particular incident, the Company could pursue prosecution of the employee concerned.

The Group’s code of conduct hence places a responsibility on all employees to report any form of breach and/or transgression, for which purpose an anonymous reporting line has been provided for, i.e. Tip-offs Anonymous, an independent reporting facility which is administered by an external service provider 24 hours per day.

Contact details

• Toll-free: 0800 00 59 09 • Landline: +27 31 571 5386• Free fax: 0800 00 77 88• Email: [email protected]• Website: www.tip-offs.com• Free post: PO Box 138 Umhlanga Rocks 4320, RSA

Number of incidents reported

Total reports Valid Invalid Outstanding

20122013

0

5

10

15

20

25

30

35

40

45

34

39

5 4

28

35

1



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The table below provides a high-level overview of the allegations reported during the last five financial years.

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 total

total allegations 42 33 37 39 34 185

Foundedallegations 11 7 7 4 5 34

Unfoundedallegations 31 26 30 35 28 150

In progress 0 0 0 0 1 1

total disciplinary cases 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 total

Acquitted 3 0 1 0 0 4

Dismissed 4 1 1 1 0 7

Finalwarning 3 1 2 2 2 10

Resigned 0 2 1 0 0 3

Verbalwarning 1 3 2 1 3 10

Inprogress(pending) 0 0 0 0 1 1

human rights

During the year under review, the Group raised awareness on the importance of respecting human rights as part of an ethics awareness campaign. Pioneer Foods respects the human rights of its employees, suppliers and everyone else it interacts with.

Human rights requirements have now been included in the code of ethics and all suppliers are expected to ensure they are not implicit in any form of human rights abuse and that they support, respect and protect internationally proclaimed human rights.

In addition, the procurement policy contains a section that covers this important aspect and the behaviour expected of suppliers. The Group is constantly monitoring supplier operations even though the level of risk of human rights abuses is not known, nor have any known violations been reported or experienced.

There were no incidents of human rights violations, child labour, forced or compulsory labour that were brought to the Group’s attention during the period under review.

insider trading

Closed periods for trading in the Group’s shares are maintained to prevent insider trading. These closed periods are effective at least every six months from 15 March or 15 September of each financial year respectively, and until publication of the interim or annual financial results on SENS.

All directors, members of executive management and other affected employees as identified by the Board, are consequently prohibited from trading in the Group’s securities (directly or indirectly) in any price sensitive period. The Group regularly reviews its insider trading policy and updates the content where necessary and as dictated by legislation or the JSE.


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Requests for information

As per section 51 of the Promotion of Access to Information Act, Act 2 of 2000, as amended (“PAIA”), from time to time including the regulations promulgated in terms of the Act, Pioneer Foods compiled and submitted a manual to the Human Rights Commission of South Africa in which it guided interested parties as to how to protect their constitutional right to effectively access Company-related information. The said manual provides a reference to the records that the Company holds and the process that needs to be adopted, to access such records.

The Group can, however, confirm that no requests for Company-related information, has been declined during the year under review.

Business rescue

In the absence of clear and concise legislative requirements pertaining to business rescue proceedings, the Board and management view it as a significant contributor to the Group’s sustainability, i.e. given its impact on the business and, in particular, the potential effect it has on its stakeholders and the broader economy.

AspertherecommendationsoutlinedinKingIII,theGroup’sleadershipis confident that they are fully aware of the practicalities around business rescue. From time to time, the Board would close down some of the Group’s businesses to avoid financial distress depending on the objective and relevant rescue procedures required. This decision will, however, not be executed without the Board and management taking cognisance of the rights and interests of all its stakeholders.

Business continuity and disaster management

Business continuity is a core element of Pioneer Foods’ sustainability agenda. Management has, therefore, partnered with the Group’s external auditors with the objective of developing business continuity capability plans for each division within Pioneer Foods, including the corporate office.

As a result, crisis management simulation exercises were conducted at all the divisions. The approach adopted entailed simulating a disaster within each division and allowing the respective teams to develop a crisis management and recovery strategy respectively. Given the outcome of the simulation exercises, each division developed a recovery capability plan that is based on a credible disaster scenario.

Crisis management teams have also been established that will, in turn, be able to make strategic and/or operational decisions as and when necessary, to ensure that recovery priorities are being actioned as and when necessary.

In addition, a list of disasters that could potentially have a major impact on the business, have also been identified. Going forward, this list will be consolidated for the Group and reviewed on an annual basis to ensure that it remains current and relevant.

going concern

The Board is of the view that, after considering and scrutinising factual and substantiated information, including assumptions, the business will continue as a going concern in the new financial year. The Board, under the auspices and recommendations of the Group’s audit and risk committee, considered this aspect at both the interim reporting stage as well as at the end of September 2013. Reference is made to the statement in this regard, as per the report of the chairperson of the audit and risk committee. The latter is contained in this integrated report as part of the financial statements.

Group internal audit

Pioneer Foods’ internal audit department is an independent appraisal and assurance function, which fulfils a core function within the Group’s governance structures. It aims to provide autonomous and objective assurance to the Group, as well as rendering consulting services that are designed to add value and improve the Company’s operations.

To ensure its independence, Group internal audit reports functionally to the chief executive officer, whereas administratively it reports to the chief financial officer. The head of the department has, in addition, regular and unrestricted access to the chairperson of the audit and risk committee and attends each of the committee meetings as a standard invitee.

Group internal audit, furthermore, strives to assist the business to accomplish its objectives by applying a systematic, disciplined approach in order to evaluate and improve the effectiveness of risk management, integrated systems, internal controls and governance processes across the Group.

The role and responsibilities of Group internal audit are contained in its terms of reference, which is reviewed and approved by the audit and risk committee on an annual basis.

Group internal audit’s mandate can be summarised as follows:

• To review systems and operations to assess the extent to which the Group’s objectives are achieved, including the adequacy of controls over activities leading to such achievement.

• Evaluate the relevance, reliability and integrity of management and financial information.

• Appraise the utilisation of resources with regard to economy, efficiency and effectiveness.

• Assess the means of safeguarding resources and, at the same time, verifying its existence.

• Ascertain the degree of compliance with established Company policies, standards, procedures, instructions and applicable laws and regulations.

• Evaluate and recommend improvements in procedures and systems to prevent waste, extravagance and fraud.

• Advise on appropriate systems of controls and other accounting and operational matters.

• Draw attention to any failure and recommend remedial/corrective actions.

• Perform ad hoc investigations, inspections, appraisals, examinations or reviews as requested by management and/or the audit and risk committee.



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Findings and recommendations of all internal audit processes are reported to management and the audit and risk committee. The assurance services required for specialised information technology and the SAP ERP system environment has, however, been outsourced to the Group’s external auditors, i.e. other than the division that has been appointed to fulfil the external financial auditing function as per the JSE Listings Requirements and the new Companies Act. It is also apparent that Group internal audit liaises on a continuous basis with the Company’s external auditors, to create synergy and, in particular, prevent duplication of auditing and/or assurance services.

Risk management report

The Group is committed to effective risk management and recognises that the management of business risk is an imperative cornerstone and an enabler in achieving the Group’s vision of being a leading fast-moving consumer goods company in Africa with globally

trusted brands. An integrated risk management culture is endorsed by undertaking a structured and comprehensive approach to the effective management of risks at operational and corporate level. Risk categories include strategic, operational, financial and compliance risks. Overarching these is reputational risk.

The risk management model aligns with the strategic objectives and directions, management priorities, material issues, shareholders’ expectations and reputational risk, while assisting critical decision-making processes as well as information management decisions.

The Group contextualised and summarised its risk management as follows:

• Governance and assurance processes• Risk management and reporting processes

goVeRnAnCe AnD ASSuRAnCe PRoCeSSeS

Board of directorsResponsibility: Oversight and governance

Audit and risk committee (ARC)Responsibility: oversight and governance

Assurance will be supplied to the ARC as follows:

• Monitoring and evaluating the governance of risks and effectiveness of the risk management process• Setting the risk appetite of the Group• AligntheriskmanagementprocesseswithKingIII• Align the risk management processes with the strategic objectives, management priorities, material issues, reputational risks and

stakeholders’ expectations

• Review and approve risk management policy and plan• Review and consider the list of strategic, high and critical risks and related systems of mitigation controls• Review and consider the operational and corporate risk, mitigation and incident reports and assess against Board’s established risk appetite• Review business continuity capability, disaster management plans and insurance cover

• Business and the corporate management teams by identifying and mitigating risks daily through the implementation of preventative and detective systems, structures and controls.

• Internal audit team through risk-based internal audits• External assurance providers, regulatory and legislative audits, as well as independent reports• Risk management process and reporting (refer summarised processes and reporting)


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RiSK mAnAgement AnD RePoRting PRoCeSSeS

Alignment of risk management processes with:

the operational and corporate management teams:

Reporting by management to the ARC includes the following:

• Strategic objectives and direction provided by the Board and the executives• Management priorities• Material issues• Stakeholders’ expectations• Reputational risk

• Compile a functional risk register – Defining the risks – Assessing the impact of the risks on the organisation should they happen and assessing the likelihood of the risks happening – Decision to treat, tolerate, terminate or transfer the risk – Classify the risks – Indicate mitigation factors and controls implemented• Manage the risk mitigation and control activities on a daily basis through the implementation of preventative and detective systems,

structures and controls• Monitor and report on the risk management and incident reports

• Risk management processes and policy application• Strategic, high and critical risks and related system of mitigation controls• Risk controls and assurance monitoring• High-risk incidents and decision to treat, tolerate, terminate or transfer the risk• External assurance and internal audit



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The table below reflects the Group’s risk profile linked to our strategy and considering the factors outlined above:

Principal risk Context Specific risks mitigation of risk Link to strategy

1 Lackofgrowthinitiatives and slow extraction from marginal assets, within an environment of poor economic growth and increased competition.

•Currentcorporate portfolio not ideally balanced in respect of high-value power brands and fortheunlockingofAfricangrowth.

• marginal assets and uneconomicalstockkeepingunits(“SKUs”)thatdo not contribute towards the Group’s revenue, growth and margin targets.

•Failingtoparticipateinvalue-adding transactions domestically and in Africa.

• Paying too much to acquire new business.

• slower than expected extraction from marginal assets and uneconomical SKUs.

•Formalisedprocesstopursue value-adding transactions domestically and in Africa.

•Formalplanstodivestfrom marginal assets and uneconomicalSKUs.

•Formalmeasurements and targets.

• shaping a winning portfolio.• Expand into adjacent

countries. • Enable growth via

acquisitions in domestic andAfricanmarket.

• Divest marginal assets.•AggressiveSKU

rationalisation.• step change support levels

and strategic direction of power brands.

2 Underperformancein revenue growth duetonotkeepingpace with competitor activities, consumer shift and changes in preferences.

•Consumersandshoppersare changing their preferences and behaviour due to economic realities, wider range of product offerings and changes in trade dynamics.

• Aggressive competitor activity to contest for relevance impacts revenue growth and profitability.

• Brands and products could lose relevance with consumers, shoppers and customers impacting growth and profitability.

•Competitorsgrowcurrentand new categories faster and more profitably, offering better value and growing their customer and consumer base.

• Evaluate and understand marketandcategorytrends, changes in consumer needs and industry dynamics.

• Ongoing evaluation of brand portfolios in every categoryandmarket,toensure that the brand strategy will target current and future opportunities for profitable growth.

•Understandtheconsumerneed state.

• Grow brand equity by investing in innovation, renovation and relevance.

• Power brand focus.• Brand portfolio and

brand strategy.• Innovation and

renovation focus.• segmentation modelling.•Understandtheconsumer

need state.•Appointmentofmarketing

executive.• Enhanced brand

investment.

3 Changingcompetitive landscape within an environment of increased competition.

• Increased competition within a challenging macroeconomic environment where consumer spending and demand are constrained.

• The national Trade environment is becoming more competitive and sophisticated as retailers andsuppliersseekprofitable growth.

•Failingtoadapttochangesin national trade behaviour and strategy.

•Failingtoidentifyanddevelop new approaches toroutetomarket.

• Ensure sustained relevance to customers through increased brand relevance and support.

• Ensure appropriate overall scaletomakeapositiveimpact.

• service delivery gets measured.

•Jointbusinessplanningprocesses implemented.

• measure channel optimisation and customer profitability.

• strategic customer management.

•Jointbusinessplanning.•Customer-centric

organisational design.• Trade term optimisation.• Profitable expanded

distribution.•Upskilling.• Optimise channel and

customer mix.

4 not fully realise planned savings, improved productivity and margin disciplines to compete successfully.

• The Group is focusing on the rightsizing of the organisation, capitalising on “parenting advantages” and improved productivity.

• The Group is in the process of divesting from marginal assets in the portfolio and rationalisation of product offerings.

•Costofbusinessandinfrastructuretokeepmarginal assets and non-performing product offerings.

• The process of rightsizing could impact the focus of the day-to-day management of the business.

• measure savings against targets.

• Diligent measurement of keyperformanceindicatorsagainst agreed targets and benchmarks.

• Applicable management information.

• Reset the cost base and efficiency focus.

• Rightsizing the organisation.

•MergeBokomoand CeresBeverages.

•Capitaliseon“parentingadvantage” – “One Pioneer Foods”.

• manufacturing efficiencies/price/volume/margin disciplines.

• shaping a winning portfolio.• Build a high-performance

culture.


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Principal risk Context Specific risks mitigation of risk Link to strategy

5 not succeeding in building a high-performance culture andlossofkeytalent.

• The Group believes thatpeoplearekeytotransforming the business into a global competitive organisation.

•Leadershipandkeytalentis a limited resource and shortcomings will impact short-term effectiveness and long-term sustainability of the business.

• The ability of personnel to adapt and align with the actions required towards changing the Group.

•Failingtoidentify,developand retain appropriate talent.

•Theavailabilityofkeyskillsat an appropriate cost is anincreasingrisktotheeffectiveness of the Group.

• not meeting transformation and diversity targets.

• The rightsizing of the business could lead to loss ofkeytalent.

• Learning agility programmes.

•Talentandskillsmanagement initiatives.

• Reward systems including short and long-term incentive schemes.

• Transformation and diversity measurements.

•Changemanagementprogrammes.

• Build a high-performance culture.

• Talent calibration.•Speedtomarketand

innovation.• Transformation.• Talent management.•Skillsdevelopment.• strengthen

employer/employee proposition.

6 Commoditypriceand exchange rate volatility.

• Agricultural products form a significant component of the raw material for the products manufactured by the Group.

• The agricultural sector is subject to a number ofkeyrisksthatmayimpact the supply of raw materials, including water security, cyclical production fluctuations,availabilityandcost of energy and climate change.

• It is recognised that exchange rate volatility will exhibit both negative and positive impact on business performance.

•Thelackoforlowavailability of agricultural commodities that impact the supply chain and result in major raw material price volatility.

• Exchange rate volatility, riskanduncertaintiesassociated with the importation of raw materials and equipment and with the export of products may impact overall competitiveness and profitability.

• Appropriate resource allocation to procurement and exchange rate transaction responsibility with clear financial control and review.

• External input in terms of commodity supply and demand on an international basis.

•Foreignexchangeriskpolicies are applied combined with external inputs on rate management.

• Productivity focus.• Build a high-performance

culture.

7 Regulatory compliance.

• Increased and highly progressive legislation within the product and consumer scope of the business.

• The inability to manage ongoing compliance within a context of ongoing regulatory changes may impact the Group’s reputation.

• Training and awareness is continuously provided on a targeted basis across the business.

•Self-governancebackedby appropriate policies, systems, procedures and reporting.

•Appointmentofskilledtechnical resources to inform and govern this exposure.

• Productivity focus.• Build a high-performance

culture.



92

IT governance report

Pioneer Foods’ IT governance framework and reporting system provides the Board with a clear view of the IT governance arrangements within the business. The framework enables the Board to verify that Pioneer Foods is deriving value through the appropriate use of IT in line with the business strategy and at acceptable levels of risk.

The Pioneer Foods IT charter, which embraces the principles containedinchapter5ofKingIII,assiststheBoardindischarging its IT responsibilities. The Board is responsible for IT governance and has the ultimate responsibility to ensure that information and IT strategies are aligned with the strategies of the business. The audit and risk committee assists the Board in carrying out these responsibilities. The Board has satisfied itself, based on reports received from this committee that an appropriate IT governance framework exists and is functioning effectively.

Pioneer Foods recognises the strategic role that IT plays in conducting business in a highly competitive environment. IT is regarded as a strategic asset and is deeply entrenched in the way the Company conducts its business. At Pioneer Foods, IT is governed by, inter alia, the following principles:

• The business strategy is supported by an adequate IT investment portfolio; the intended benefits are formulated and the realisation thereof is measured.

• IT equipment and software licences are acquired, used and disposed of validly, guided by organisational values and clearly formulated principles.

• IT risks are managed explicitly and actively, using the Company’s enterprise risk management framework.

• Business continuity plans are supported by regularly tested disaster recovery plans and capabilities.

Remuneration report

Remuneration approach

Remuneration strategies aim to attract, motivate and retain competent and committed managers who provide strategic direction and drive sustainable shareholder value. Therefore, it seeks to reward employees at market-related levels according to their contribution to the Company’s operating and financial performance. This covers basic pay and short and long-term incentives which include share incentives – a critical element of executive incentive pay.

Pioneer Foods usually structures packages on a total cost-to-company basis which incorporates base pay, car allowance, medical and retirement benefits. Remuneration packages are reviewed annually according to a formal system that includes job evaluation, performance assessment and market comparisons.

Remuneration policy

The Company’s remuneration philosophy, strategy and policy have been approved by the human capital committee of the Board.

The Company’s remuneration philosophy is anchored in the World at Work total rewards approach. This comprises a combination of career growth opportunities and recognition, culture and values, compensation, benefits and work environment.

The remuneration strategy’s main aim is to enable the Company to develop, motivate, maintain and retain an internal human capital pipeline; and, when necessary, attract the requisite skills from the labour market to enable the business’s growth strategy.

The remuneration policy codifies the remuneration principles, processes, practices and procedures to give effect to the Company’s remuneration philosophy and strategy.

The pay mix may comprise a combination of guaranteed pay (total cost to company) and variable pay (short-term incentives and long-term incentives). This will depend on the level of seniority in the organisational hierarchy.

guaranteed pay

Guaranteed pay is generally referenced to the job family market median.

Short-term incentive

The short-term incentive is essentially a performance bonus that is designed to incentivise management to drive business performance and increase shareholder value. For the year under review a new short-term incentive scheme was approved. The rules for the new scheme are as follows:

Annual performance bonuses will be based on a combination of performance achieved for growth in profit above CPI and growth in economic value added above the Company’s weighted average cost of capital. Depending on seniority, this amount is limited to an amount that varies between 8.33% and 100% of a year’s remuneration package.


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The Board further approved that 2013 be treated as a year of transition and that qualifying participants will be incentivised on the best result between the new and old schemes.

The rules of the old scheme are as follows:

Annual performance bonuses are based on a combination of performance achieved for profit growth and return on average net assets. Depending on seniority, this amount is limited to an amount that varies between 8.33% and 100% of a year’s remuneration package.

Long-term incentive

The purpose of the long-term incentive scheme is to align management and shareholder interests, and to enable attraction and retention of key managers over the long term (at least five years).

The human capital committee determines the allocation to qualifying managers annually for the share appreciation rights (“SARs”) scheme. The number of SARs allocated is based on the multiple of the total remuneration package per year. The cumulative value of the allocations of SARs to qualifying employees varies from 50% to 300% of a year’s remuneration package, depending on seniority. The total value of SARs allocated takes into account the value of share options and SARs allocated in any past five years.

The last general allocation under this scheme was made in February 2013 at R56.81. Share options and SARs that have been accepted may be exercised at 20% per annum within a maximum period of 10 years.

An additional allocation was made to senior black management in February 2012, and exercising of these allocations will be five years after the date of allocation. Depending on seniority, the cumulative value of these additional allocations varies between 75% and 100% of a year’s remuneration package. The last allocation under this scheme was made in February 2013 at R56.81.

The total number of ordinary shares that may be transferred to employees under the share appreciation rights scheme is limited to 14.5 million shares and represented approximately 7.5% of the issued ordinary shares at the date of approval of the scheme by shareholders granted in 2006.



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Value added statementfor the year ended 30 September 2013

gRouP

2013R’000

2012R’000

Revenue 20 551 122 18 609 759

Costofproductionandservices (16 156 569) (14 818 044)

Valueaddedbyoperatingactivities 4 394 553 3 791 715

Interest received 18 227 19 073

Dividends received 1 651 1 431

wealth created 4 414 431 3 812 219

Distributedasfollows:

employees

salaries, wages and employee benefits 2 844 183 2 437 019

Providers of capital 387 152 314 711

Interest paid 129 399 136 629

Dividend to shareholders 257 753 178 082

income tax expense

Income tax paid in respect of profits earned 264 342 255 275

Retained for future investment 918 754 805 214

Depreciation and impairments 632 961 344 630

Retained earnings 285 793 460 584

wealth distributed and retained 4 414 431 3 812 219

Retained for future investment21%Employees64%

Income tax expense7%

Providers of capital8%

Distribution of wealth (2013) Distribution of wealth (2012)

Retained for future investment21%Employees64%

Income tax expense6%

Providers of capital9%


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97


98

Group financial statements

for the year ended 30 September 2013

Contents

Directors’ responsibility 99

Notice in terms of section 29 of the Companies Act, Act 71 of 2008 99

Secretarial certification 99

Report of the audit and risk committee 100

Independent auditor’s report to the shareholders of Pioneer Food Group Ltd 103

Directors’ report 104

Directors’ remuneration report 106

Accounting policy 114

Statement of comprehensive income 130

Statement of financial position 131

Statement of changes in equity 132

Statement of cash flows 136

Notes to the financial statements 137

Pioneer Food Group Limited


99

Directors’ responsibility

In accordance with the requirements of the Companies Act, Act 71 of 2008, the Board of directors (“the Board”) are responsible for the preparation of the annual financial statements and the consolidated annual financial statements of Pioneer Food Group Ltd which conform with International Financial Reporting Standards (“IFRS”) and which fairly present the state of affairs of Pioneer Food Group Ltd and its subsidiaries (“the Group”) at the end of the financial year, and the net profit and cash flows for that period. The Board is also responsible for the information other than those of the annual statutory financial statements that are included in the integrated report for both its accuracy and its consistency with the financial statements.

It is the responsibility of the independent external auditors to report on the fair presentation of the financial statements.

The Board is ultimately responsible for the internal control processes. Management enables the Board to meet its responsibilities in this regard. Standards and systems of internal control are designed and implemented by management to provide reasonable assurance as to the integrity and reliability of financial records and of the financial statements and to adequately safeguard, verify and maintain accountability for the Group’s assets. Appropriate accounting policies, supported by reasonable and prudent judgements and estimates are applied on a consistent and going concern basis. Systems and controls include the proper delegation of responsibilities, effective accounting procedures and adequate segregation of duties.

Based on the information and reasons given by management and the internal auditors, the Board is of the opinion that the accounting controls are sufficient and that the financial records may be relied upon for preparing the financial statements and maintaining accountability for the Group’s assets and liabilities. Nothing has come to the attention of the directors to indicate that any breakdown in the functioning of these controls, resulting in material loss to the Group, has occurred during the year under review and up to the date of this report. The Board has a reasonable expectation that the Group and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis in preparing the financial statements.

The annual financial statements which appear on pages 104 to 221 were approved by the Board on 21 November 2013 and are signed on its behalf by:

ZL Combi PM RouxChairman Chief Executive Officer

Notice in terms of section 29 of the Companies Act, Act 71 of 2008, as amended (“the Act”)

These annual financial statements have been audited in compliance with the Act. These annual financial statements have been prepared under the supervision of LR Cronjé, CA(SA), Group financial director.

Secretarial certification

In accordance with section 88 of the Companies Act, Act 71 of 2008 (“the Act”), for the year ended 30 September 2013, it is hereby certified that the Company and its subsidiaries have lodged with the Companies and Intellectual Property Commission all such returns that are required of a public company in terms of the Act and that such returns are true, correct and up to date.

J JacobsCompany Secretary


100

The audit and risk committee (“the committee”) is pleased to submit this report, as required by section 94(7)(f) of the Companies Act, Act 71 of 2008 (hereafter referred to as “the Companies Act”).

The Board of directors (“the Board”), within its discretion and the provisions of the applicable set of legislative requirements, had delegated certain of its responsibilities to the committee. These responsibilities had been clearly defined and agreed upon between all parties concerned, after which it had been recorded in a Board approved charter. This charter governed the execution of the committee’s mandate relevant to the reporting period. As per the responsibilities assigned by the Board, the committee fulfils an independent role and is accountable to both the Board and the Group’s shareholders. It is an integral part of the Group’s governance structures and the associated risk management protocols. Its continued focus remains on assisting the Board with executing its responsibilities pertaining to risk management and at the same time, embedding best risk management practices across all levels of the organisation.

This report includes both sets of accountabilities relevant to the functional responsibilities of the committee as outlined in the Companies Act and the King Code of Governance Principles for South Africa 2008 (“King III”).

The charter, which outlines the committee’s role and mandate, is referred to in further detail on page 82, and the charter is also available on request.

Audit and risk committee charter

In order to ensure that the committee’s terms of reference remain current and dynamic, the charter is reviewed on an annual basis before presenting it to the Board for approval. In addition, the committee reviewed the annual work plan. The intent was to ensure completeness in respect of executing the committee’s responsibilities within a given period of time. However, the process of review does not exclude pertinent issues that are being tabled by the committee and/or management during the course of a particular reporting period nor those matters that are being addressed by the business on an ongoing basis.

The committee’s role and responsibilities outlined in the charter include both the statutory duties and responsibilities as required by the relevant provisions of the Companies Act as well as those highlighted in King III. Further responsibilities were also assigned to the committee by the Board during the year under review and executed accordingly.

Members of the audit and risk committee

The committee comprises independent non-executive directors, who were elected at the 2012 annual general meeting in terms of section 94(2) of the Companies Act. All members are required to act objectively and independently, as described in the Companies Act and in King III.

The group chief executive officer, the chief financial officer, the head of corporate finance, the head of group internal audit as well as the group compliance manager are permanent invitees. In addition, relevant senior managers also attended meetings from time to time. The company secretary is the statutory secretary of the committee.

The Group’s external auditors, in their capacity as assurance providers also attended all committee meetings.

Only the official members of the committee are allowed to exercise their respective voting rights in decision-making exercises as prescribed in the charter.

Meeting attendance

During the year under review, a minimum of four meetings were held as prescribed by the committee’s approved charter.

The following table illustrates the attendance of committee meetings relevant to the reporting period:

Audit and risk committee meeting attendance

Name of memberNumber of

meetings attended21 November

201213 March

201315 May

201325 July

2013AH Sangqu (Chairman) 4 Present Present Present PresentN Mjoli-Mncube 4 Present Present Present PresentLP Retief* 4 Present Present Present PresentAE Jacobs 3 Present Apology Present Present

Note:* Appointed as a member of the committee at the previous annual general meeting that was held on 15 February 2013

Report of the audit and risk committee (“the report”)


101

Roles and responsibilities of the audit and risk committee

The committee has discharged the functions outlined in its charter and ascribed to it in terms of the Companies Act and King III, as follows:• Reviewedtheinterim,preliminaryandabridgedresultsaswellastheyear-endfinancialstatements,culminatinginarecommendationtotheBoard

for approval. In the course of its review, the committee: – took the necessary steps to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards

(“IFRS”) and the requirements of the Companies Act; – considered and, when appropriate, made recommendations on internal financial controls; – ensured that a process is in place to be informed of any reportable irregularities (as per the Auditing Professions Act, Act 26 of 2005) identified

and reported by the external auditor; and – received and dealt appropriately with any concerns and/or complaints, whether from within or outside the Company, or on its own initiative,

relating to the accounting practices and internal audit of the Group, the content of the financial statements, the internal financial controls of the Company or any related matter. During the financial year under review, no such material concerns and/or complaints were raised.

• ReviewedtheexternalauditreportsontheGroup’sannualfinancialstatements.• Verifiedtheindependenceoftheexternalauditors,PricewaterhouseCoopersInc.(“PwC”),andrecommendedPwCastheauditorsfortheyearunder

review, noting that Mr Richard Jacobs (accredited as such on the JSE List of Auditors and registered in accordance with the Auditing Professions Act, Act 26 of 2005) was appointed as lead auditor.

• Determinedandapprovedtheauditfeesandthetermsofengagementoftheexternalauditors.• Determined,subjecttotheprovisionsoftheCompaniesAct,thenatureandextentofallowablenon-auditservicesandapprovedthecontractterms

for the provision of non-audit services rendered by the external auditors.• Pre-approvedanyproposedagreementwiththeexternalauditorsfortheprovisionofnon-auditservicestotheGroup.• Confirmedandapprovedtheinternalauditcharterandannualinternalaudityearplan.• Oversawtheintegratedreportingprocess.Thecommitteehasasaresult,atitsmeetingheldon20November2013,recommendedtheintegrated

report for approval by the Board. • ThecommitteeconsideredtheGroup’sinformationpertainingtoitsnon-financialperformanceasdisclosedintheintegratedreportandhasassessed

its consistency with operational and other information known to committee members, and for consistency with the annual financial statements. The committee is satisfied that the sustainability information presented, is reliable and consistent with the financial results.

Internal audit

The committee fulfils an oversight role in respect of the Group’s system of internal financial control.

The committee is also responsible for ensuring that the Group’s internal audit function remains independent and has the necessary resources, standing and authority within the organisation to enable it to discharge its duties.

In addition, the committee oversees the cooperation between the internal and external auditors as assurance providers as well as the Board and these respective functions.

Risk management

The committee has discharged its responsibilities in respect of risk management, by ensuring that the Group’s risk management procedures are adequate and appropriate. The committee, furthermore, reviewed the internal audit and risk management reports and, where relevant, made recommendations to the Board concerning the Group’s accounting policies, financial controls, records and reporting. It also evaluated the effectiveness of risk management, controls and the governance processes.

Group compliance

The committee has endorsed the Group’s comprehensive Group Compliance Risk Analysis that was performed during the year under review, as it enabled the Group to identify all applicable laws and regulatory requirements affecting and/or influencing the Group’s business operations. Compliance remained to be a standing item on the committee’s agenda as well as being perceived as a fundamental part of the Group’s approach towards effective risk management business practices.

Confidential meetings

An opportunity was afforded at every meeting for confidential discussion between the committee members and the internal auditors and external auditors.

Independence of external auditors

During the reporting period, the committee reviewed a representation by the external auditors and after conducting its own review, confirmed the independence of the external auditors.

Report of the audit and risk committee (continued)


102

Expertise and experience of financial director and financial function

As required by JSE Listings Requirement 3.84(h), as well as the recommended practice outlined in King III, the committee has satisfied itself that the financial director has the appropriate expertise and experience.

In addition, the committee also considered and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the financial function and experience of the senior members of management responsible for the financial function.

Going concern

The committee has considered and reviewed a documented assessment, including key assumptions, as prepared by management of the going concern status of the Group and has made recommendations to the Board in accordance. The Board’s statement regarding the going concern status of the Group, as supported by the committee, is included in the directors’ responsibility report on page 99.

Combined assurance

The Group attains assurance from management and internal and external auditors regarding internal financial controls as well as those risks that the Group regards as material. The committee fulfilled a pivotal role in ensuring that a balance is achieved between the various assurance providers rendering services to the Group. The committee’s role has been to integrate the Group’s assurance and risk management processes as well as to continuously apply a combined assurance approach to ensure that the appropriate level of assurance is assigned to the right areas by appropriately skilled resources.

During the year under review, adequate assurance was obtained for, among others, pure financial reporting risks, IT risks and governance-related risks.

Internal financial controls

The committee had oversight over a process by which internal audit performed a written assessment of the effectiveness of the Group’s system of internal control and risk management, including internal financial controls. This written assessment conducted by internal audit formed the basis for the committee’s recommendation in this regard to the Board in order for the Board to report thereon.

The Board’s report on the effectiveness of the system of internal controls is included in the directors’ responsibility report on page 99. The committee supports the opinion of the Board in this regard.

AH SangquChairman: Audit and Risk Committee

Paarl 21 November 2013

Report of the audit and risk committee (continued)


103

We have audited the consolidated and separate financial statements of Pioneer Food Group Ltd set out on pages 114 to 221, which comprise the statements of financial position as at 30 September 2013, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statements

The Company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate 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 consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Pioneer Food Group Ltd as at 30 September 2013, 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 the requirements of the Companies Act of South Africa.

Other reports required by the Companies Act

As part of our audit of the consolidated and separate financial statements for the year ended 30 September 2013, we have read the directors’ report, the audit and risk committee’s report and the company secretary’s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

PricewaterhouseCoopers Inc. Director: RJ JacobsRegistered Auditor

Paarl 21 November 2013

to the shareholders of Pioneer Food Group Ltd

Independent auditor’s report


104

Principal activities and business review

Pioneer Food Group Ltd (“the Company”) and its subsidiaries are involved in the manufacturing of food, beverages and related products for human and animal consumption. The various segments are highlighted in the operational review on pages 36 to 61.

Financial results

The annual financial statements on pages 104 to 221 set out fully the financial position at 30 September 2013 and the results of operations and the cash flows for the year ended 30 September 2013. Further information is provided in the financial review on pages 31 to 33.

Share capital

The authorised share capital consists of 400,000,000 (2012: 400,000,000) ordinary shares of 10 cents each and 18,130,000 (2012: 18,130,000) class A ordinary shares of 10 cents each. At year-end 231,006,847 (2012: 230,314,486) ordinary shares and 7,367,360 (2012: 8,198,120) class A ordinary shares are in issue.

The movement in issued share capital is disclosed in note 22 to the annual financial statements. During the year the Company issued the following listed ordinary shares of 10 cents each:• 692,361(2012:385,908)atanaverageofR71.64(2012:R59.20)pershareintermsofthemanagementshareappreciationrightsscheme.• Nil(2012:18,091,661)atRnil(2012:R55.14andR58.04)persharetotheBEEstrategicpartnersandBEEdirectorsintermsoftheB-BBEEequity

transaction.• Nil(2012:10,599,988)tothePioneerFoodsBroad-BasedBEETrustatRnil(2012:R0.10)pershareintermsoftheB-BBEEequitytransaction.

There was no movement (2012: Nil) in the treasury shares held by a subsidiary. This subsidiary held 17,982,056 (2012: 17,982,056) ordinary shares at year-end.

The number of ordinary shares held by the Pioneer Foods management share incentive trust at year-end is 1,422,116 (2012: 2,545,933). A number of 1,123,817 (2012: 1,335,468) ordinary shares were sold by the share incentive trust for R18,662,327 (2012: R18,536,296). No ordinary shares were issued to the trust (2012: Nil).

The Company bought back and cancelled 830,760 (2012: 1,096,410) class A ordinary shares during the year at a premium of R39.31 (2012: R28.14) per share in addition to the par value of R0.10 per share.

Treatment of Quantum Foods as an asset held for sale

Shareholders were advised on SENS on 5 September 2013 of the Board’s intent to restructure the Company’s interest in the Quantum Foods segment, which includes the South African business units and two foreign African subsidiaries, Bokomo Uganda (Pty) Ltd and Bokomo Zambia Ltd, that produce and sell eggs, chicken products, animal feed and commercial laying hens.

It is Pioneer Foods’ intention to unbundle its interests in Quantum Foods to its shareholders and subsequently list Quantum Foods as a separate entity on the JSE subject to market conditions and regulatory requirements, or any other acceptable corporate action, within approximately 12 months.

Accordingly, Quantum Foods has been treated as an “asset held for sale” and as “discontinued operations” in terms of IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations for the year ended 30 September 2013.

Shareholders will be kept informed of developments pertaining to the Quantum Foods restructuring.

Borrowings

The Group’s share of new borrowings obtained by Bokomo Namibia (Pty) Ltd is N$7,500,000.

The Group’s syndicated financing facilities matured in September 2013. New syndicated facilities of R3.5 billion were obtained in September 2013, consisting of bullet loans, revolving loans, overnight loans and general banking facilities. The existing security arrangements are used to provide security to the lenders in the form of bonds over land and buildings of specific sites, special notarial bonds over specific items of plant and equipment and general notarial bonds over all movable assets of specific Group subsidiaries.

These borrowings were obtained to refinance existing borrowings, to fund working capital and to fund expansions at Group legal entities. For further detail of the borrowings obtained refer to note 25 of the annual financial statements. For the carrying amounts of property, plant and equipment, inventories, biological assets and trade and other receivables encumbered refer to notes 12, 18 and 20 to the annual financial statements respectively. For further detail on special resolutions passed by the legal entities involved, refer to the “Special resolutions passed” section of this report.

Dividends

A final gross dividend of 86 cents (2012: 70 cents) per ordinary share was declared. This is in addition to the interim gross dividend of 46 cents (2012: 44 cents) per ordinary share.

The interim dividend for the year amounted to R102,327,653 (2012: R97,565,056) and the final dividend for the year will be approximately R191,373,097 (2012: R155,425,883). The exact amount will be dependent on the number of shares in issue at the record date. These amounts include the dividends paid or payable to the Pioneer Foods Broad-Based BEE Trust.


Directors’ report


105

The 10,599,988 Pioneer Foods shares issued to the Pioneer Foods Broad-Based BEE Trust during April 2012, is entitled to 20% of the gross interim and final dividends per share as indicated above, i.e. 9.2 cents per share (2012: 8.8 cents) and 17.2 cents (2012: 14.0 cents) respectively. This gross interim dividend for the year amounts to R975,199 (2012: R932,799) and the final dividend for the year will amount to R1,823,198 (2012: R1,483,998).

The dividend is payable on 3 February 2014 to shareholders recorded as such in the share register of the Company on 31 January 2014 (the record date). The last date of trading cum dividend will be 24 January 2014.

Directors

The directors of the holding company, Pioneer Food Group Ltd, are responsible for the activities and reports related to the Group. Full details of the directors appear on pages 18 to 19.

Special resolutions passedAnnual general meeting of shareholders (“AGM”)

At the AGM held at Lemoenkloof Guest house, Paarl on Friday, 15 February 2013 at 9:00 the following special resolutions were passed by the Company:

Special resolution one, for the approval of the remuneration payable by the Company to its directors for their services as directors for the period 1 April 2013 to 31 March 2014, was passed.

Special resolution two, for the approval of a general authority to the Board of Directors of the Company for the Company to grant direct and indirect financial assistance to any company forming part of the Company, including in the form of loans or the guaranteeing of their debts, was passed.

Group debt restructure

Ceres Fruit Juices (Pty) Ltd, Continental Beverages (Pty) Ltd, Retail Brands Interafrica (Pty) Ltd and Pioneer Foods Holdings Ltd all passed the following special resolutions to give effect to the stipulations of the Common Terms Agreement (“CTA”) with the consortium of banks with whom the new borrowings were arranged. The special resolutions were passed to give further effect to the security arrangements in favour of the consortium of banks through Tutuni Investments38(Pty)Ltd(“securitySPV”)andconsistedofaGroupguarantee,aguarantorcessionandageneralnotarialbond,apropertymortgagebond,a special notarial bond and a subordination agreement.

In particular, Ceres Fruit Juices (Pty) Ltd and Pioneer Foods (Pty) Ltd had registered general and special notarial bonds over movable and immovable assets infavourofthesecuritySPV,asstipulatedbytheCTA.Thesebondsareintendedassecurityfortheborrowings.TheseobligorshaveissuedasecuritycessioninfavourofthesecuritySPVintermsofwhichtheobligorcedesallitsrights,titleandinterestinandtoallamountsowingtoitbyanythirdpersontothesecuritySPVassecurityforitsobligationsundertheGroupguarantee.

TheobligorsaretoexecuteasubordinationagreementwiththeCompany,thelenders,RMBactingasthefacilityagentandthesecuritySPVintermsofwhich the Company subordinates all its claims against the obligors to all the finance parties claims against the obligors and the Company guarantees the obligors’obligationsunderandintermsofeachfinancedocumentofwhichtheyareapartytoinfavourofthesecuritySPVandtheCompanycedesitsclaimsinfavourofthesecuritySPVassecurityforitsobligationsundertheguarantee.

Each obligor has executed such other agreements, documents, etc as may be required by the finance parties in order to give effect to the transactions as above or in the CTA.

EachobligorhasregisteredthepropertymortgagesapplicabletoitinfavourofthesecuritySPVaswellasthespecialnotarialbondsandgeneralnotarialbonds. The obligations incurred by the obligors under the existing security documents will extend to and secure the obligations of the obligors under the new security documents. The entry into and performance of its obligations under the new security documents constitute the provision of financial assistance by the obligor, as contemplated in sections 44 and 45 of the Companies Act, Act 71 of 2008 (“the Act”). It is resolved by special resolution to approve this financial assistance.

No other special resolutions with a significant impact on the Group were passed by the Company or any of the Group subsidiaries.

Litigation statement

Refer to note 32 (contingent liabilities) to the annual financial statements for detail on the status of the disputes with the egg contract growers and the broiler and breeder farms, the land claims against the land of a Group company and the class action against the Group. No other litigation matters with potential material consequences existed at the reporting date.

Events after the reporting period

Other than the matters raised in note 46 to the annual financial statements, no other events occurred after the reporting date that may have a material effect on the Group.

Auditors

PricewaterhouseCoopers Inc. will continue in office in accordance with section 90(6) of the Act.

for the year ended 30 September 2013 (continued)

Directors’ report


106


Directors’ remuneration report

Information contained in the directors’ remuneration report has been audited by the external auditors, PricewaterhouseCoopers Inc.

Remuneration of directors

GROUP

Basic salary

Travel allowances

Bonuses and

incentives

Compen-sation for

loss of office

Retire-ment fund

contributions

Directors’fees

Fair valueof deemed

options granted: B-BBEE

equity transaction Total

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’00030 September 2013 Executive directors PM Roux (1 April 2013)*@ 2 174 136 1 202 – 440 – – 3 952WA Hanekom (31 March 2013)** 2 047 197 596 11 762 428 – – 15 030LR Cronjé 2 646 152 906 – – – – 3 704TA Carstens (16 May 2013)*** 1 689 99 428 – 330 – – 2 546Total executive directors 8 556 584 3 132 11 762 1 198 – – 25 232

Non-executive directorsZL Combi – – – – – 569 – 569N Celliers (1 October 2012)* – – – – – 230 – 230MM du Toit – – – – – 324 – 324AE Jacobs – – – – – 233 – 233Prof ASM Karaan – – – – – 323 – 323NS Mjoli-Mncube – – – – – 233 – 233G Pretorius – – – – – 281 – 281LP Retief – – – – – 233 – 233AH Sangqu – – – – – 323 – 323Total non-executive directors – – – – – 2 749 – 2 749

Total directors 8 556 584 3 132 11 762 1 198 2 749 – 27 981

Notes:* Appointed during the year.** Retired during the year.*** Stepped down as director during the year.@ Amount for bonus forms part of engagement cost.


107



Remuneration of directors (continued)

GROUP

Basic salary

Travel allowances

Bonuses and

incentives

Compen-sation for

loss of office

Retire-ment fund

contributions

Directors’fees

Fair valueof deemed

options granted: B-BBEE

equity transaction Total

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’00030 September 2012 Executive directors WA Hanekom 3 944 318 234 – 812 – – 5 308LR Cronjé 2 562 152 121 – 33 – – 2 868TA Carstens 2 278 132 135 – 462 – – 3 007Total executive directors 8 784 602 490 – 1 307 – – 11 183

Non-executive directorsZL Combi – – – – – 550 1 828 2 378Dr MI Survé (17 February 2012)* – – – – – 120 914 1 034MM du Toit – – – – – 258 – 258GD Eksteen (17 February 2012)* – – – – – 86 – 86AE Jacobs – – – – – 225 – 225Prof ASM Karaan – – – – – 258 868 1 126NS Mjoli-Mncube – – – – – 225 914 1 139JF Mouton (17 February 2012)* – – – – – 96 – 96G Pretorius (17 February 2012)** – – – – – 125 – 125LP Retief (17 February 2012)** – – – – – 125 – 125AH Sangqu – – – – – 312 868 1 180Total non-executive directors – – – – – 2 380 5 392 7 772

Total directors 8 784 602 490 – 1 307 2 380 5 392*** 18 955

Notes:* Retired during the year.** Appointed during the year.*** The amounts disclosed for deemed options granted in terms of the B-BBEE equity transaction represent the IFRS 2 – Share-based Payment fair values of deemed options

granted. Refer to note 23.4 for further detail.**** Dr FA Sonn and Dr MI Survé, former directors of the Group, participated in the specific issue of ordinary shares in terms of the B-BBEE equity transaction implemented

during the previous year. The number of shares issued to each of them was 86,147. The fair value of the deemed options granted in terms of this transaction to each of them amounted to R913,887.


108



Directors’ interest in shares

GROUP

Number of shares# % of issued ordinary share

capitalDirect Indirect@ TotalThe direct and indirect interests of the directors in the issued share capital of the Company are reflected in the table below:30 September 2013PM Roux (1 April 2013)* – – – –WA Hanekom (31 March 2013)** – – – –LR Cronjé 345 000 55 000 400 000 0.17TA Carstens (16 May 2013)*** – – – –ZL Combi – 172 295 172 295 0.07N Celliers (1 October 2012)* – – – –MM du Toit – – – –AE Jacobs – – – –Prof ASM Karaan – 86 147 86 147 0.04NS Mjoli-Mncube – 86 147 86 147 0.04G Pretorius – 30 000 30 000 0.01LP Retief – – – –AH Sangqu – 86 147 86 147 0.04 345 000 515 736 860 736 0.37

Notes:@ IncludesharesissuedduringpreviousyeartoSPVs,whollyownedbyBEEdirectors,intermsoftheB-BBEEequitytransaction.* Appointed during the year.** Retired during the year.*** Stepped down as director during the year.# There has been no change in the directors’ interest in shares from the end of the financial year to the date of the approval of the annual financial statements.


109



Directors’ interest in shares (continued)

GROUP

Number of shares % of issued ordinary share

capitalDirect Indirect@ Total30 September 2012 WA Hanekom 1 024 999 441 890 1 466 889 0.64LR Cronjé 395 000 55 000 450 000 0.19TA Carstens 417 291 – 417 291 0.18ZL Combi – 172 295 172 295 0.07Dr MI Survé (17 February 2012)** – – – –MM du Toit – – – –GD Eksteen (17 February 2012)** – – – –AE Jacobs – – – –Prof ASM Karaan – 86 147 86 147 0.04NS Mjoli-Mncube – 86 147 86 147 0.04JF Mouton (17 February 2012)** – – – –G Pretorius (17 February 2012)* – 30 000 30 000 0.01LP Retief (17 February 2012)* – – – –AH Sangqu – 86 147 86 147 0.04 1 837 290 957 626 2 794 916 1.21

Notes:@ IncludesharesissuedduringpreviousyeartoSPVs,whollyownedbyBEEdirectors,intermsoftheB-BBEEequitytransaction.* Appointed during the year.** Retired during the year.


110



Directors’ share options and share appreciation rights

GROUP GROUP

Number of options initially

allocatedDate

awardedExercisable

up to date

Strike price

Cents

Fair value per option at

grant date(for currentyear grants)

Cents

Fair value of total options

granted during the year

Rand

Number of options exercised

Number of options redeemed

cumulative

Number of options

redeemed in current year

Shareprice at date

of redemptionCents

Value increase from strike

price to price at redemption

Rand

Change indirectorship:

Number ofoptions

Number of options not

redeemed1. Share options

30 September 2013Executive directors WA Hanekom* 722 500 2004/05/27 2014/05/26 865 – – 722 500 722 500 162 500 6 655 9 408 750 – –

73 550 2004/12/24 2014/12/23 1 405 – – – – – – – (73 550) –78 545 2006/01/25 2016/01/24 2 186 – – – – – – – (78 545) –47 740 2007/02/12 2017/02/11 3 142 – – – – – – – (47 740) –68 122 2008/05/26 2014/05/26 2 500 – – – – – – – (68 122) –

LR Cronjé 43 950 2004/12/24 2014/12/23 1 405 – – 43 950 43 950 43 950 6 685 2 320 560 – –32 716 2006/01/25 2016/01/24 2 186 – – – – – – – – 32 71621 006 2007/02/12 2017/02/11 3 142 – – – – – – – – 21 00628 369 2008/05/26 2014/05/26 2 500 – – 28 369 28 369 28 369 7 430 1 398 592 – –

30 September 2012Executive directors WA Hanekom 722 500 2004/05/27 2014/05/26 865 – – 722 500 560 000 300 000 6 076 15 633 000 – 162 500

73 550 2004/12/24 2014/12/23 1 405 – – – – – – – – 73 55078 545 2006/01/25 2016/01/24 2 186 – – – – – – – – 78 54547 740 2007/02/12 2017/02/11 3 142 – – – – – – – – 47 74068 122 2008/05/26 2014/05/26 2 500 – – – – – – – – 68 122

LR Cronjé 367 900 2004/05/27 2014/05/26 865 – – 367 900 367 900 137 082 5 814 6 784 188 – –43 950 2004/12/24 2014/12/23 1 405 – – – – – – – – 43 95032 716 2006/01/25 2016/01/24 2 186 – – – – – – – – 32 71621 006 2007/02/12 2017/02/11 3 142 – – – – – – – – 21 00628 369 2008/05/26 2014/05/26 2 500 – – – – – – – – 28 369

TA Carstens 22 677 2007/02/12 2017/02/11 3 142 – – 22 677 22 677 22 677 5 750 591 416 – –38 508 2008/05/26 2014/05/26 2 500 – – 38 508 38 508 38 508 5 750 1 251 510 – –

Note:* Retired during the year.


111

Directors’ share options and share appreciation rights

GROUP GROUP

Number of options initially

allocatedDate

awardedExercisable

up to date

Strike price

Cents

Fair value per option at

grant date(for currentyear grants)

Cents

Fair value of total options


Rand

Number of options exercised

Number of options redeemed

cumulative

Number of options


Shareprice at date

of redemptionCents



Rand


Number ofoptions

Number of options not

redeemed1. Share options

30 September 2013Executive directors WA Hanekom* 722 500 2004/05/27 2014/05/26 865 – – 722 500 722 500 162 500 6 655 9 408 750 – –

73 550 2004/12/24 2014/12/23 1 405 – – – – – – – (73 550) –78 545 2006/01/25 2016/01/24 2 186 – – – – – – – (78 545) –47 740 2007/02/12 2017/02/11 3 142 – – – – – – – (47 740) –68 122 2008/05/26 2014/05/26 2 500 – – – – – – – (68 122) –

LR Cronjé 43 950 2004/12/24 2014/12/23 1 405 – – 43 950 43 950 43 950 6 685 2 320 560 – –32 716 2006/01/25 2016/01/24 2 186 – – – – – – – – 32 71621 006 2007/02/12 2017/02/11 3 142 – – – – – – – – 21 00628 369 2008/05/26 2014/05/26 2 500 – – 28 369 28 369 28 369 7 430 1 398 592 – –

30 September 2012Executive directors WA Hanekom 722 500 2004/05/27 2014/05/26 865 – – 722 500 560 000 300 000 6 076 15 633 000 – 162 500

73 550 2004/12/24 2014/12/23 1 405 – – – – – – – – 73 55078 545 2006/01/25 2016/01/24 2 186 – – – – – – – – 78 54547 740 2007/02/12 2017/02/11 3 142 – – – – – – – – 47 74068 122 2008/05/26 2014/05/26 2 500 – – – – – – – – 68 122

LR Cronjé 367 900 2004/05/27 2014/05/26 865 – – 367 900 367 900 137 082 5 814 6 784 188 – –43 950 2004/12/24 2014/12/23 1 405 – – – – – – – – 43 95032 716 2006/01/25 2016/01/24 2 186 – – – – – – – – 32 71621 006 2007/02/12 2017/02/11 3 142 – – – – – – – – 21 00628 369 2008/05/26 2014/05/26 2 500 – – – – – – – – 28 369

TA Carstens 22 677 2007/02/12 2017/02/11 3 142 – – 22 677 22 677 22 677 5 750 591 416 – –38 508 2008/05/26 2014/05/26 2 500 – – 38 508 38 508 38 508 5 750 1 251 510 – –

Note:* Retired during the year.


112



Directors’ share options and share appreciation rights (continued)

GROUP GROUP

Number of SARs

initially allocated

Date awarded

Exercisable up to date

Strike price

Cents

Fair value per SAR at grant date

(for currentyear grants)

Cents

Fair value of total SARs


Rand

Number of SARs

exercised

Number of SARs

redeemed cumulative

Number of SARs


Share price at date

of redemptionCents



Rand


Number ofSARs

Number of SARs not

redeemed2. Share appreciation rights (SARs)

30 September 2013Executive directorsPM Roux* 240 000 2013/04/01 2016/04/01 6 613 1 384 3 321 600 – – – – – – 240 000

249 509 2013/04/01 2023/05/01 6 613 1 994 4 975 209 – – – – – – 249 509WA Hanekom** 61 931 2008/06/09 2018/06/08 2 548 – – 49 545 49 545 49 545 7 375 2 391 537 (12 386) –

52 264 2009/02/27 2019/02/26 2 420 – – 31 358 31 358 31 358 7 375 1 553 789 (20 906) –210 622 2010/02/09 2020/02/08 3 474 – – 126 373 126 373 126 373 7 375 4 929 811 (84 249) –

61 942 2012/02/10 2022/02/09 6 185 – – – – – – – (61 942) –45 492 2013/02/06 2023/02/05 5 681 2 234 1 016 291 – – – – – (45 492) –

LR Cronjé 30 024 2008/06/09 2018/06/08 2 548 – – – – – – – – 30 02425 785 2009/02/27 2019/02/26 2 420 – – – – – – – – 25 785

116 167 2010/02/09 2020/02/08 3 474 – – – – – – – – 116 16730 541 2012/02/10 2022/02/09 6 185 – – – – – – – – 30 54121 450 2013/02/06 2023/02/05 5 681 2 234 479 193 – – – – – – 21 450

TA Carstens*** 31 790 2008/06/09 2018/06/08 2 548 – – 25 432 25 432 25 432 6 700 1 055 937 (6 358) –27 595 2009/02/27 2019/02/26 2 420 – – 16 557 16 557 16 557 6 700 708 640 (11 038) –

119 546 2010/02/09 2020/02/08 3 474 – – 47 818 47 818 47 818 6 700 1 542 609 (71 728) –41 256 2012/02/10 2022/02/09 6 185 – – – – – – – (41 256) –23 503 2013/02/06 2023/02/05 5 681 2 234 525 057 – – – – – (23 503) –

30 September 2012Executive directorsWA Hanekom 61 931 2008/06/09 2018/06/08 2 548 – – – – – – – – 61 931

52 264 2009/02/27 2019/02/26 2 420 – – – – – – – – 52 264210 622 2010/02/09 2020/02/08 3 474 – – – – – – – – 210 622

61 942 2012/02/10 2022/02/09 6 185 1 759 1 089 560 – – – – – – 61 942LR Cronjé 30 024 2008/06/09 2018/06/08 2 548 – – – – – – – – 30 024

25 785 2009/02/27 2019/02/26 2 420 – – – – – – – – 25 785116 167 2010/02/09 2020/02/08 3 474 – – – – – – – – 116 167

30 541 2012/02/10 2022/02/09 6 185 1 759 537 216 – – – – – – 30 541TA Carstens 31 790 2008/06/09 2018/06/08 2 548 – – – – – – – – 31 790

27 595 2009/02/27 2019/02/26 2 420 – – – – – – – – 27 595119 546 2010/02/09 2020/02/08 3 474 – – – – – – – – 119 546

41 256 2012/02/10 2022/02/09 6 185 1 759 725 693 – – – – – – 41 256

Notes:* Appointed during the year. ** Retired during the year. *** Stepped down as director during the year.


113

Directors’ share options and share appreciation rights (continued)

GROUP GROUP

Number of SARs

initially allocated

Date awarded

Exercisable up to date

Strike price

Cents

Fair value per SAR at grant date

(for currentyear grants)

Cents

Fair value of total SARs


Rand

Number of SARs

exercised

Number of SARs

redeemed cumulative

Number of SARs


Share price at date

of redemptionCents



Rand


Number ofSARs

Number of SARs not

redeemed2. Share appreciation rights (SARs)

30 September 2013Executive directorsPM Roux* 240 000 2013/04/01 2016/04/01 6 613 1 384 3 321 600 – – – – – – 240 000

249 509 2013/04/01 2023/05/01 6 613 1 994 4 975 209 – – – – – – 249 509WA Hanekom** 61 931 2008/06/09 2018/06/08 2 548 – – 49 545 49 545 49 545 7 375 2 391 537 (12 386) –

52 264 2009/02/27 2019/02/26 2 420 – – 31 358 31 358 31 358 7 375 1 553 789 (20 906) –210 622 2010/02/09 2020/02/08 3 474 – – 126 373 126 373 126 373 7 375 4 929 811 (84 249) –

61 942 2012/02/10 2022/02/09 6 185 – – – – – – – (61 942) –45 492 2013/02/06 2023/02/05 5 681 2 234 1 016 291 – – – – – (45 492) –

LR Cronjé 30 024 2008/06/09 2018/06/08 2 548 – – – – – – – – 30 02425 785 2009/02/27 2019/02/26 2 420 – – – – – – – – 25 785

116 167 2010/02/09 2020/02/08 3 474 – – – – – – – – 116 16730 541 2012/02/10 2022/02/09 6 185 – – – – – – – – 30 54121 450 2013/02/06 2023/02/05 5 681 2 234 479 193 – – – – – – 21 450

TA Carstens*** 31 790 2008/06/09 2018/06/08 2 548 – – 25 432 25 432 25 432 6 700 1 055 937 (6 358) –27 595 2009/02/27 2019/02/26 2 420 – – 16 557 16 557 16 557 6 700 708 640 (11 038) –

119 546 2010/02/09 2020/02/08 3 474 – – 47 818 47 818 47 818 6 700 1 542 609 (71 728) –41 256 2012/02/10 2022/02/09 6 185 – – – – – – – (41 256) –23 503 2013/02/06 2023/02/05 5 681 2 234 525 057 – – – – – (23 503) –

30 September 2012Executive directorsWA Hanekom 61 931 2008/06/09 2018/06/08 2 548 – – – – – – – – 61 931

52 264 2009/02/27 2019/02/26 2 420 – – – – – – – – 52 264210 622 2010/02/09 2020/02/08 3 474 – – – – – – – – 210 622

61 942 2012/02/10 2022/02/09 6 185 1 759 1 089 560 – – – – – – 61 942LR Cronjé 30 024 2008/06/09 2018/06/08 2 548 – – – – – – – – 30 024

25 785 2009/02/27 2019/02/26 2 420 – – – – – – – – 25 785116 167 2010/02/09 2020/02/08 3 474 – – – – – – – – 116 167

30 541 2012/02/10 2022/02/09 6 185 1 759 537 216 – – – – – – 30 541TA Carstens 31 790 2008/06/09 2018/06/08 2 548 – – – – – – – – 31 790

27 595 2009/02/27 2019/02/26 2 420 – – – – – – – – 27 595119 546 2010/02/09 2020/02/08 3 474 – – – – – – – – 119 546

41 256 2012/02/10 2022/02/09 6 185 1 759 725 693 – – – – – – 41 256

Notes:* Appointed during the year. ** Retired during the year. *** Stepped down as director during the year.


114

Accounting policy


1. Basis of preparationThe principle accounting policies applied in the preparation of these consolidated annual financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The consolidated annual financial statements of the Group have been prepared in accordance with, and comply with, International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations issued and effective at the time of preparing these financial statements, the Listings Requirements of the JSE Ltd and the Companies Act of South Africa, Act 71 of 2008, as amended. These financial statements comply with the requirements of the SAICA Financial Reporting Guides as issued by Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council. The consolidated annual financial statements are prepared on the historic cost convention, as modified by the revaluation of biological assets, available-for-sale financial assets and financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 2 to the consolidated annual financial statements.

1.1 New and amended accounting standards and interpretations effective in 2013The following standards, amendments and interpretations, none of which had a material impact on the operations of the Group, became effective for the current reporting period beginning on 1 October 2012:

Amendments to IAS 1 – Presentation of Financial Statements (effective 1 July 2012)The amendment requires entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future.

Amendments to IAS 12 – Income Taxes (effective 1 January 2012)The IASB has added another exception to the principles in IAS 12: the rebuttable presumption that investment property measured at fair value is recovered entirely by sale. The rebuttable presumption also applies to the deferred income tax liabilities or assets that arise from investment properties acquired in a business combination, if the acquirer subsequently uses the fair value model to measure those investment properties.

1.2 New and amended accounting standards and interpretations that are not yet effective and have not been early adopted by the GroupThe following standards, amendments and interpretations are not yet effective and have not been early adopted by the Group (the effective dates stated below refer to financial reporting periods beginning on or after the stated dates):

Amendments to IFRS 1 – First-Time Adoption of International Financial Reporting Standards (effective 1 January 2013)The amendments effectively add an exception to the retrospective application of IFRSs to require that first-time adopters apply the requirements in IFRS 9 – Financial Instruments and IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs.

Amendment to IFRS 7 – Financial Instruments: Disclosures (effective 1 January 2013)The amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure.

This information will help investors understand the extent to which an entity has applied set-off in its statement of financial position and the effects of rights of set-off on the entity’s rights and obligations.

IFRS 9 – Financial Instruments (effective 1 January 2015)This IFRS is part of the IASB’s project to replace IAS 39 – Financial Instruments: Recognition and Measurement. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value.

Since its first release in 2009 the IASB has updated IFRS 9 to include guidance on financial liabilities and derecognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39, without change, except for financial liabilities that are designated at fair value through profit or loss. The requirement to restate comparatives and the disclosures required on transition have also been modified.

IFRS 10 – Consolidated Financial Statements (effective 1 January 2013)IFRS 10 replaces all of the guidance on control and consolidation in SIC 12 – Consolidation – Special Purpose Entities and IAS 27 – Consolidated and Separate Financial Statements. IAS 27 is renamed “Separate Financial Statements” and it continues to be a standard dealing solely with separate financial statements.

IFRS 10 changes the definition of control so that the same criteria are applied to all entities to determine control. It also provides additional guidance to assist in the determination of control where this is difficult to assess.


115


Accounting policy

1. Basis of preparation (continued)1.2 New and amended accounting standards and interpretations that are not yet effective and have not been early adopted by the

Group (continued) IFRS 11 – Joint arrangements (effective 1 January 2013)

This new standard deals with the accounting for joint arrangements. Changes in the definitions have reduced the “types” of joint arrangements to two: joint operations and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures.

IFRS 12 – Disclosure of interest in other entities (effective 1 January 2013)This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-statement of financial position vehicles.

IFRS 13 – Fair value measurement (effective 1 January 2013)This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.

Amendments to IAS 19 – Employee benefits (effective 1 January 2013) Recognition of actuarial gains and losses

Actuarial gains and losses are renamed ‘remeasurements’ and will be recognised immediately in other comprehensive income. These gains and losses will no longer be deferred using the corridor approach and no longer be recognised in profit or loss.

Recognition of past-service cost and curtailment Past-service costs will be recognised in the period of a plan amendment; unvested benefits will no longer be spread over a future-service period. A curtailment now occurs only when an entity significantly reduces the number of employees. Curtailment gains or losses are accounted for as past-service costs.

Measurement of pension expenses Annual expenses for a funded benefit plan will include net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability. This will replace the finance charge and expected return on plan assets and will increase benefit expenses for most entities.

Presentation in the statement of other comprehensive incomeThere will be less flexibility in the presentation of the statement of other comprehensive income. Benefit costs will be split between (i) the cost of benefits accrued in the current period (service cost) and benefit changes (past-service cost, settlements and curtailments); and (ii) finance expenses or income. This analysis can be presented in the statement of other comprehensive income or in the notes.

Disclosure requirementsAdditional disclosure is required to present the characteristics of benefit plans, the amounts recognised in the financial statements and the risk arising from defined benefit plans and multi-employer plans.

The distinction between ‘short-term’ and ‘other long-term’ benefits The distinction between ‘short-term’ and ‘other long-term’ benefits for measurement purposes is based on when payment is expected, not when payment can be demanded. An obligation measured as a long-term benefit could therefore be presented as a current liability when the entity expects to settle after more than one year, but does not have the unconditional ability to defer settlement for more than one year.

Treatment of expenses and taxes relating to employee benefit plans Taxes related to benefit plans should be included either in the return on assets or the calculation of the benefit obligation, depending on their nature. Investment management costs should be recognised as part of the return on assets and other costs of running a benefit plan should be recognised as period costs when incurred.

Termination benefits Any benefit that has a future-service obligation is not a termination benefit. This will reduce the number of arrangements that meet the definition of termination benefits. A liability for a termination benefit is recognised when the entity can no longer withdraw the offer of the termination benefit or recognises any related restructuring costs.

Risk or cost-sharing featuresThe measurement of obligations should reflect the substance of arrangements where the employer’s exposure is limited or where the employer can use contributions from employees to meet a deficit. This may reduce the defined obligation in some situations.

Revised IAS 27 – Separate financial statements (effective 1 January 2013) IAS 27 has been renamed ‘Separate financial statements’ and it continues to be a standard dealing solely with separate financial statements. The existing guidance for separate financial statements is unchanged.

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1. Basis of preparation (continued)1.2 New and amended accounting standards and interpretations that are not yet effective and have not been early adopted by the

Group (continued) Revised IAS 28 – Investments in Associates and Joint Ventures (effective 1 January 2013)

IAS 28 now includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11 – Joint Arrangements.

Amendments to IAS 32 – Financial Instruments: Presentation (effective 1 January 2014)The amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has applied set-off in its statement of financial position and the effects of rights of set-off on the entity’s rights and obligations.

Improvements to IFRSs 2011 (effective 1 January 2013)This is a collection of amendments to IFRSs. These amendments are the result of conclusions the IASB reached on proposals made in its annual improvements project for 2011. The annual improvements project provides a vehicle for making non-urgent, but necessary amendments to IFRSs. Certain amendments resulted in consequential amendments to other IFRSs.

IFRIC 21 – Levies (effective 1 January 2014)IFRIC 21 sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation could result in recognition of a liability later than today, particularly in connection with levies that are triggered by circumstances on a specific date.

Amendment to IAS 36 – Impairment of Assets (effective 1 January 2014)The IASB has made small changes to the disclosures required by IAS 36 – Impairment of Assets when the recoverable amount is determined based on the fair value less costs of disposal.

IFRS 13 made consequential amendments to the disclosure requirements of IAS 36. One of the amendments was drafted more widely than intended. This limited scope amendment corrects this and introduces additional disclosures about fair value measurements when there has been impairment or a reversal of impairment.

IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013)This Interpretation applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine. It addresses the recognition of production stripping costs as an asset, initial measurement of the stripping activity asset and subsequent measurement of the stripping activity asset.

Impact of the above amendments on the Group’s financial statementsThe Group is in the process of assessing the impact of the above standards and interpretations on the Group’s financial statements.

The Group also determined that the amendments to IAS 19 – Employee benefits in respect of the recognition of actuarial gains and losses on defined benefit plans will also impact the Group’s profit or loss, other comprehensive income and the statement of financial position.

Currently actuarial gains and losses on the post-retirement medical defined benefit plan are accounted for in profit or loss using the corridor approach. In accordance with this method actuarial gains and losses are recognised in profit or loss over the expected remaining working life of the related existing employees, if such gains and losses exceed the closing balance of the prior year provision by more than 10%.

In terms of the amendment these gains and losses will no longer be deferred and will be recognised directly in other comprehensive income.

The Group has determined that IFRS 11 – Joint Arrangements will significantly impact the various line items presented in its consolidated annual financial statements once this standard becomes effective. The Group has significant investments in various joint ventures which are currently proportionately consolidated.

In terms of the proportionate consolidation method, the assets and liabilities of a joint venture are proportionately included, on a line-by-line basis, in the statement of financial position of the Group. The results of a joint venture are also proportionately included, on a line-by-line basis, in the statement of comprehensive income of the Group.

IFRS 11 requires entities to account for joint ventures using the equity method. In terms of the equity method, the assets and liabilities of a joint venture should be disclosed as a single amount under “Investment in joint ventures” in the statement of financial position of the Group. The Group expects no net effect on the statement of financial position from this transition.

In terms of the equity method the results of a joint venture should be disclosed as a single amount under “share of profit/loss of joint ventures” in the statement of comprehensive income of the Group.

Variouskeyratiossuchasthereturnonnetassetswillalsobeaffected.


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1. Basis of preparation (continued)1.3 Use of adjusted measures

The measure explained below (items of a capital nature) is presented as management believes it to be relevant to the understanding of the Group’s financial performance. This measure is used for internal performance analysis and provides additional useful information on underlying trends to equity holders. This measure is not a defined term under IFRS and may therefore not be comparable with similarly titled measures reported by other entities. It is not intended to be a substitute for, or superior to, measures as required by IFRS.

1.4 Items of a capital nature Income or expenditure of a capital nature on the face of the statement of comprehensive income, being all profit or loss items of a capital nature, is excluded in the calculation of headline earnings per share.

The principal items included under this measurement are: profits or losses on disposal and scrapping of property, plant and equipment, intangible assets and assets held-for-sale; impairments or reversal of impairments of property, plant and equipment, intangible assets and available-for-sale financial assets and loans; and any non-trading items such as profits or losses on disposal of available-for-sale financial assets, operations and subsidiaries.

2. Basis of consolidation Subsidiaries

Subsidiaries are all entities (including special purpose vehicles) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power, but is able to govern the financial and operating policies by virtue of de facto control. De facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 – Financial Instruments: Recognition and Measurement either in profit or loss or as a charge to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed.

If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the stand-alone financial statements of the holding company, the investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investments.

Interest-free loans to subsidiaries, with no specific terms of repayment and with a definite intent not to demand repayment, are considered to be capital distributions to the subsidiary and are included in the carrying amount of the investment.

Changes in ownership interests in subsidiaries without change of controlTransactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions, that is, transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.


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2. Basis of consolidation (continued) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in equity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Treasury shares The cost of treasury shares is presented as a deduction from equity. Shares under option already allocated to staff and unallocated shares are considered as treasury shares and are consolidated as such as part of the Group’s results.

Joint ventures The Group’s interest in jointly controlled entities is accounted for by proportionate consolidation. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group financial statements. The Group recognises the portion of gains and losses on the sale of assets by the Group to the joint venture to the extent that it is attributable to other ventures. The Group does not recognise the share of profits or losses from the joint venture that result from the Group’s purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. Accounting policies of joint ventures have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

AssociatesAssociates are all entities over which the Group has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

If the ownership interest in an associate is reduced, but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount as part of the ‘share of profit/(loss) of an associate’ in profit or loss.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s interest in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Dilution gains and losses arising in investments in associates are recognised in profit or loss. Accounting policies of associates have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

Consolidation of special purpose vehiclesThespecialpurposevehicles(“SPVs”)establishedintermsoftheB-BBEEequitytransactionimplementedinMarch2012havebeenconsolidatedin the Group results. The substance of the relationship between the Company and these entities has been assessed and the conclusion was made thattheyarecontrolledentities,mainlyduetothefactthattheGroupretainsresidualorownershiprisksrelatingtotheSPVs.


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3. Property, plant and equipmentLand and buildings mainly comprise factories, depots, warehouses, offices and silos. All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which it is incurred.

Land is not depreciated. Depreciation on buildings, machinery, vehicles, furniture and equipment is calculated on a straight-line basis at rates deemed appropriate to write off the cost of the assets to their residual values over their expected useful lives.

The expected useful lives are as follows:• Buildings 10 – 25 years• Poultryhouses 25years• Plant,machineryandequipment 3–30years• Vehicles 3–20years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

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.

Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with the carrying amounts. These are included within ‘items of a capital nature’ in profit or loss.

4. Intangible assets Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired entity at the date of the acquisition. Goodwill arising from business combinations is included in ‘intangible assets’ whereas goodwill on acquisition of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance.

The excess of the purchase price over the carrying amount of non-controlling interest, when the Group increases its interest in an existing subsidiary, is recognised in equity. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Trademarks and intellectual property Trademarks and intellectual property are shown at historical cost. Subsequently these intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Intellectual property has finite useful lives. The useful lives of trademarks are either finite or indefinite.

Intellectual property and trademarks with finite useful lives are amortised over their useful lives and assessed for impairment when there is an indication that the assets may be impaired. Amortisation is calculated using the straight-line method over these intangible assets’ estimated useful lives of between 5 to 25 years.

Certain trademarks have been assessed to have indefinite useful lives, as presently there is no foreseeable limit to the period over which the assets can be expected to generate cash flows for the Group. Trademarks with indefinite useful lives are not amortised, but tested annually for impairment, either on an individual basis or as part of a cash-generating unit. The useful lives of these intangible assets are reviewed at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for those trademarks.


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4. Intangible assets (continued) Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of between 2 and 5 years.

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets when the following criteria are met:• itistechnicallyfeasibletocompletethesoftwareproductsothatitwillbeavailableforuse;• managementintendstocompletethesoftwareproductanduseorsellit;• thereisanabilitytouseorsellthesoftwareproduct;• itcanbedemonstratedhowthesoftwareproductwillgenerateprobablefutureeconomicbenefits;• adequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorsellthesoftwareproductisavailable;and• theexpenditureattributabletothesoftwareproductduringitsdevelopmentcanbereliablymeasured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditure that do not meet the criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives of between 2 and 5 years.

5. Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that have suffered impairment, are reviewed for possible reversal of the impairment at each reporting date.

6. Financial assets 6.1. Classification

The Group classifies its financial assets in the following categories:• Atfairvaluethroughprofitorloss• Loansandreceivables• Available-for-salefinancialassets

The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held-for-trading unless they are designated as hedges. The Group’s financial instruments at fair value through profit or loss comprise ‘derivative financial instruments’ not earmarked for hedging. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

Loans and receivablesLoans 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 reporting date. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’, ‘loans to joint ventures’ and ‘cash and cash equivalents’ in the statement of financial position.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.


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6. Financial assets (continued)6.2. Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in profit or loss.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest rate method.

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in profit or loss in the period in which they arise.

Gains or losses arising from changes in the fair value of available-for-sale financial assets are presented in other comprehensive income in the period in which they arise. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in profit or loss as ‘items of a capital nature’. Dividend income from available-for-sale equity instruments is recognised in profit or loss as part of ‘investment income’ when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. The Group establishes fair value by using valuation techniques if the market for a financial asset is not active and for unlisted securities. 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 maximum use of market inputs and relying as little as possible on entity-specific inputs.

6.3. Impairment The Group assesses at the end of each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Loans and receivablesFor the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Impairment testing on trade receivables is described in note 11 of the accounting policy.

Available-for-sale financial assetsIn 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 profit or loss. Impairment losses on equity instruments recognised in profit or loss are not reversed through profit or loss.

7. Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

8. Non-current assets (or disposal groups) held for sale or held for distributionNon-current assets (or disposal groups) are classified as assets held for sale or held for distribution when their carrying amount is to be recovered principally through a sales transaction or distribution and a sale or distribution is considered highly probable. They are stated at the lower of the carrying amount and fair value less costs to sell.


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9. Biological assetsBiological assets consist of livestock and vineyards. They are measured on initial recognition and at the end of each reporting period at fair value less costs to sell. Changes in the measurement of fair value less costs to sell are included in profit or loss for the period in which they arise. All costs incurred in maintaining the assets are included in profit or loss for the period in which they arise. Fair values of livestock held for breeding, lay-hens, broilers and hatching eggs are determined with reference to market prices of livestock of similar age, breed and genetic material.

Fair value of vineyards is calculated as the future expected net cash flows from the asset, discounted at a current market-determined rate, over the remaining useful lives of the vineyards.

Agricultural produce is the harvested product of the entity’s biological assets and is measured at its fair value less costs to sell at the point of harvest. Such measurement is the cost at that date when transferring the harvested produce to inventory. Agricultural produce of the Group include eggs from lay-hens, meat from broiler chickens and harvested grapes from vineyards.

10. InventoriesInventories are valued at the lower of cost or net realisable value. Cost in each category is determined as follows:• Rawmaterialatactualcostonaweightedaveragecostbasis.• Ownmanufacturedproductsatdirect rawmaterialand labourcostplusanappropriateportionofproductionoverheads,onaweighted

average cost basis.• Consumableandtradingstockatactualcostonaweightedaveragecostbasis.• Eggspurchasedandpulparevaluedatactualcostonaweightedaveragecostbasis.

The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains or losses on qualifying cash flow hedges relating to purchases of raw materials.

11. Trade receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the normal course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

The amount of the provision for impairment of trade receivables is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in profit or loss within ‘other operating expenses’. The carrying amount of the asset is reduced through the use of an allowance account. When trade receivables are uncollectable, it is written off as ‘other operating expenses’ in profit or loss. Subsequent recoveries of amounts previously written off, are credited against ‘other operating expenses’ in profit or loss.

12. Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

Deposits held at call with banks and other short-term highly liquid investments are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. These deposits are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.

13. Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of income tax, from the proceeds.

Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Group’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to owners of the parent.


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14. BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the year-end reporting date.

Preference shares which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the statement of comprehensive income as ‘finance costs’.

15. ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as ‘finance costs’.

16. Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within 12 months (or in the normal operating cycle of the business, if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

17. Current and deferred income taxThe income tax expense for the period comprises current and deferred income tax. Income tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the income tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Group’s subsidiaries, joint ventures and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting profit or loss nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets relating to unused tax losses are recognised to the extent that it is probable that future taxable profits will be available against which the unused losses can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.


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Accounting policy

18. Dividends withholding tax and secondary tax on companiesDividends withholding tax (“DWT”), a new dividends withholding tax regime, became effective from 1 April 2012. Dividends are taxed at 15% in the hands of certain recipients of the dividends, rather than in the hands of the declarer of the dividend. As such, for dividends declared and paid by the Group after 1 April 2012, the Group does not recognise tax on dividends declared.

Where the Group has incurred DWT on dividends received, the tax is included in the “income tax expense” line in profit or loss.

Secondary tax on companies (“STC”) was provided for at 10% on the net dividends declared less dividends received (unless exempt from STC) by the Group at the same time as the liability to pay the related dividends was recognised. STC credits that arose from dividends received and receivable that exceeded dividends paid were accounted for as a deferred income tax asset. STC was included in the ‘income tax expense’ line in the profit and loss component of the statement of comprehensive income.

19. Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, net of value-added tax, estimated returns, rebates and discounts and after elimination of sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Income is recognised as follows:

Sale of goodsSale of goods is recognised when a Group entity has delivered products to the customer, the customer has accepted the products and the collectability of the related receivables are reasonably assured. No element of financing is deemed present as sales are made within credit terms which are consistent with market practice. The sale of goods is the only income included in ‘revenue’ on the face of the statement of comprehensive income.

Sale of servicesSale of services is recognised in the accounting period in which the services are rendered, by reference to the completion of services provided as a proportion of the total services to be provided. The sale of services is included in ‘other income’ on the face of the statement of comprehensive income.

Interest incomeInterest income is recognised on a time-proportion basis using the effective interest rate method. When loans and receivables are impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables are recognised using the original effective interest rate. Interest income is included in ‘investment income’ in profit or loss.

Dividend incomeDividend income is recognised when the right to receive payment is established. Dividend income is included in ‘investment income’ in profit or loss.

20. Research and developmentResearch expenditure is recognised as an expense as incurred. Development costs that are directly attributable to development projects (relating to the design and testing of new or improved products) controlled by the Group, and that will probably generate economic benefits exceeding costs beyond 1 year, are recognised as intangible assets when the following criteria are met:• itistechnicallyfeasibletocompletetheproductsothatitwillbeavailableforuse;• managementintendstocompletetheproductanduseorsellit;• thereisanabilitytouseorselltheproduct;• itcanbedemonstratedhowtheproductwillgenerateprobablefutureeconomicbenefits;• adequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorselltheproductareavailable;and• theexpenditureattributabletotheproductduringitsdevelopmentcanbereliablymeasured.

Other development expenditure that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised, from the point at which the asset is ready for use, on a straight-line basis over its useful life, not exceeding 5 years.


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Accounting policy

21. Foreign currency translation 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 that entity operates (“the functional currency”). The consolidated financial statements are presented in South African rand, which is the Group’s presentation currency.

Transactions and balancesTransactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the transaction dates or valuation dates where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in profit or loss, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

All other foreign exchange gains and losses are presented in profit or loss within ‘other gains/(losses) – net’.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security.

Translation differences resulting from changes in amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities, such as equities held at fair value through profit or loss, are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in other comprehensive income.

Group entitiesThe results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency of South African rand are translated into South African rand as follows:• Assets and liabilities for each statement of financial position presented (including comparatives) are translated at the closing rate at the

reporting date.• Incomeandexpenditure included inprofitor loss foreachstatementofcomprehensive incomearetranslatedataverageexchangerates

(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenditure are translated at the exchange rates prevailing at the dates of the transactions).

• Allresultingexchangedifferencesarerecognisedasaseparatecomponentofothercomprehensiveincome.

Exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income on consolidation. When a foreign operation is partially disposed of or sold, such exchange differences are recognised in profit or loss as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

22. Accounting for leases: Group company is the lessee Finance leases

Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and the finance charges.

The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Property, plant and equipment acquired under finance lease contracts are depreciated over the shorter of the lease term or the useful life of the assets.

Operating leasesLeases of assets in which a significant portion of the risks and rewards of ownership are effectively retained by the lessor, are classified as operating leases. Payments made under operating leases (net of any incentive received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty, is recognised as an expense in the period in which termination takes place.


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Accounting policy

23. Accounting for leases: Group company is the lessor Operating leases

Operating lease assets are included in property, plant and equipment in the statement of financial position. These assets are depreciated over their expected useful lives on a basis consistent with similar property, plant and equipment. Rental income is recognised on a straight-line basis over the period of the lease.

24. Employee benefits Retirement scheme arrangements

The policy of the Group is to provide retirement benefits for all its employees in the form of a defined contribution plan. A defined contribution plan is a retirement scheme under which the Group pays fixed contributions to a separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the retirement benefits relating to employee service in the current and prior periods.

For defined contribution plans, the Group pays contributions to publicly or privately administered retirement schemes on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an 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.

Post-retirement medical benefitsThe Group provides post-retirement medical benefits to some employees, some employed prior to 31 December 1994 and others prior to 31 March 1997, by way of a percentual contribution to their monthly costs. Such benefits are not available to employees employed after these dates. Provision is made for the total accrued past service cost.

Independent actuaries annually determine the accumulated post-retirement medical aid obligation and the annual cost of these benefits. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in profit or loss over the expected remaining working life of the related existing employees, if such gains and losses exceed the closing balance of the prior year provision by more than 10%. Actuarial gains and losses relating to former employees are recognised immediately in profit or loss. The liability is calculated using the projected unit credit method.

Other long-term employee benefitsThe Group provides for long-service awards that accrue to employees. Independent actuaries calculate the liability recognised in the statement of financial position in respect of long-service awards annually. Actuarial gains and losses arising from experience adjustments, and changes in actuarial assumptions, are recognised immediately in profit or loss.

Termination benefitsTermination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.

The Group recognises 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 twelve months after the year-end reporting date are discounted to present value using the effective interest rate method.

Bonus plansThe Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Group’s shareholders after certain adjustments. The Group recognises a provision when contractually obliged or where there is a past practice that has created a constructive obligation.

Leave payAnnual leave entitlement is provided for over the period that the leave accrues. In terms of the Group’s policy, employees with up to 10 years of service are entitled to accumulate vested leave benefits not taken to a cap of 42 days. Employees with more than 10 years of service are entitled to accumulate vested leave benefits not taken to a cap of 44 days. Any leave days vesting in excess of the cap are forfeited in the vesting month.

Statutory leave may not be converted to cash except at termination of employment. Non-statutory leave may be converted to cash twice a year.


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Accounting policy

25. Share-based payments Share-based compensation

The Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options or share appreciation rights is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or share appreciation rights granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options or share appreciation rights that are expected to become exercisable. At each reporting date, the Group revises its estimates of the number of options or share appreciation rights that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to other comprehensive income.

The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options or share appreciation rights are exercised.

Broad-based employee share schemeThe Group introduced a broad-based employee share scheme for all employees, other than management qualifying for the share-based compensation plan. The share scheme is accounted for as a cash-settled share-based payment. In terms of the scheme, employees received class A ordinary shares with full voting rights and limited dividend rights until such time as a notional debt has been repaid.

Once the notional debt has been repaid, class A ordinary shares will have all the rights similar to ordinary shares.

The cost of cash-settled transactions is measured initially at fair value at the grant date using the Actuarial Binomial Pricing Option Model, taking into account the terms and conditions upon which the instruments were granted. For further detail refer to note 23.2 of the consolidated annual financial statements.

The fair value of the employee services received in exchange for the issue of class A ordinary shares is recognised as an expense over the period until vesting with recognition of a corresponding liability. The liability is remeasured at each reporting date up to and including the settlement date with changes in fair value recognised in profit or loss.

26. B-BBEE equity transactionsBroad-based black economic empowerment (“B-BBEE”) transactions where the Group receives or acquires goods or services as consideration for the issue of equity instruments of the Group, are treated as share-based payment transactions.

B-BBEE transactions where employees are involved are measured and accounted for on the same basis as share-based compensation in note 25 of the accounting policy.

Transactions in which share-based payments are made to parties other than employees, are measured by reference to the fair value of equity instrumentsgrantedifnospecificgoodsorservicesarereceived.Vestingoftheequityinstrumentgrantedoccursimmediatelyandanexpenseand a related increase in equity are recognised on the date that the instrument is granted. No further measurement or adjustments are required as it is presumed that the BEE credentials are received upfront.

27. Derivative financial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either cash flow or fair value hedges.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes and detail on movements in the hedging reserve are disclosed in note 19 to the consolidated annual financial statements. The fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months after the reporting date and as a current asset or liability if the remaining maturity of the hedged item is equal to or less than 12 months from this date. Trading derivatives are classified as current assets or liabilities.


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Accounting policy

27. Derivative financial instruments and hedging activities (continued) Fair value hedges

Fair value hedges cover the exposure to changes in the fair value of a recognised asset or liability, or an unrecognised firm commitment (except for foreign currency risk). Foreign currency risk of an unrecognised firm commitment is accounted for as a cash flow hedge.

The Group only applies fair value hedge accounting to hedge commodity price risk, i.e. changes in the fair value of fixed price commodity purchase commitments, due to changes in the forward price in the market of the related commodity. Financial instruments designated as fair value hedges include commodity futures, option contracts and foreign exchange contracts.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the effective interest rate method is used, is amortised to profit or loss over the period of maturity.

Cash flow hedgesCash flow hedges cover the exposure to variability in cash flows that are attributable to a particular risk associated with:• arecognisedassetorliability;or• ahighlyprobableforecasttransaction;or• theforeigncurrencyriskinanunrecognisedfirmcommitment.

Cash flow hedging instruments are mainly used to manage operational exposure to interest rate, foreign exchange and commodity price risks. Financial instruments designated as cash flow hedges include commodity futures, interest rate swaps and collars and foreign exchange contracts.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within ‘other gains/(losses) – net’.

Amounts accumulated in other comprehensive income are recycled to profit or loss in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged, results in the recognition of a non-financial asset or liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. The deferred amounts are ultimately recognised in cost of goods sold in the case of inventory or in depreciation in the case of property, plant and equipment. The gain or loss relating to the effective portion of interest rate swaps and interest rate collar agreements hedging variable interest rate borrowings is recognised in profit or loss within ‘finance costs’. The gain or loss relating to the ineffective portion is recognised in profit or loss within ‘other gains/(losses) – net’.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised in profit or loss when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to profit or loss within ‘other gains/(losses) – net’.

Embedded derivativesEmbedded derivatives are derivative instruments that are embedded in another contract or host contract. The Group separates an embedded derivative from its host contract and accounts for it separately, when its economic characteristics are not clearly and closely related to those of the host contract. These separated embedded derivatives are classified as trading assets or liabilities and marked to market through profit or loss, provided that the combined contract is not measured at fair value with changes through profit or loss.

Derivatives that do not qualify for hedge accountingCertain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in profit or loss within ‘other gains/(losses) – net’.

28. Government grantsGrants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all the attached conditions.

Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to the purchase of property, plant and equipment are included in current liabilities as deferred government grants and are credited to profit or loss on a straight-line basis over the expected useful lives of the related assets.


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Accounting policy

29. Dividend distributionDividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Board of directors.

30. Segment reportingAn operating segment is a component of the Group that engages in business activities which may earn revenues and incur expenses and whose operating results are regularly reviewed by the Group’s chief operating decision-maker, in order to allocate resources and assess performance and for which distinct financial information is available.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, this being the chief executive officer and financial director of the Group. The operating segments were identified and grouped together based mainly on the nature of their activities and the products offered by them.

31. Borrowing costsBorrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds. These include interest expenses calculated using the effective interest rate method, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings’ interest cost.

Borrowing costs are expensed as incurred, except for borrowing cost directly attributable to the acquisition, construction or production of a qualifying asset in which case it is capitalised as part of the cost of that asset. The Group defines a qualifying asset as an asset that takes more than a year to prepare for its intended use or sale.

Capitalisation of borrowing costs commences when expenditure for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalised up to the date when the project is completed and ready for its intended use.

To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings.

To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditure on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period should not exceed the amount of borrowing cost incurred during that period. Other borrowing costs are recognised as expenses when incurred.

32. Amortised costsFinance costs and investment income are recognised on a time-proportion basis using the effective interest rate method. When determining the amortised cost amount of financial assets and liabilities, the Group reduces the carrying amount to the amount recoverable or payable, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as accretions of discount. These accretions or unwinding of discount on financial assets and liabilities carried at amortised cost is included in ‘finance costs’ or ‘investment income’ in profit or loss.

33. Deferred revenueDeferred revenue represents revenues collected from a counterparty for goods or services which are to be delivered in a later accounting period. When the goods or services are delivered, the related revenue item is recognised and the deferred revenue is reduced.


130


Statement of comprehensive income

GROUP

Notes2013

R’000 2012

R’000 Restated

Continuing operationsRevenue 16 992 253 15 534 523Cost of goods sold (11 985 759) (10 857 487)Gross profit 5 006 494 4 677 036Other income 3 132 427 115 498Other gains/(losses) – net 3 7 119 19 259Sales and distribution costs 4 (2 179 065) (2 068 505)Marketing costs 4 (373 518) (342 590)Administrative expenses 4 (604 081) (556 049)Other operating expenses 4 (934 032) (626 216)Once-off share-based payment charge on B-BBEE equity transaction 23.4 – (160 745)Items of a capital nature 5 (2 249) (10 751)Operating profit 1 053 095 1 046 937Investment income 6 18 255 18 561Finance costs 7 (128 633) (136 109)Share of profit of associated companies 16 976 640Profit before income tax 943 693 930 029Income tax expense 8 (245 151) (318 314)Profit for the year from continuing operations 698 542 611 715Discontinued operationsLoss for the year from discontinued operations (attributable to owners of the parent) 55 (200 385) (6 973)Profit for the year 498 157 604 742Other comprehensive income/(loss) for the yearItems that may subsequently be reclassified to profit or loss:Fair value adjustments to cash flow hedging reserve 17 341 (16 375)

For the year (13 651) 43 767Current income tax effect 4 355 (12 115)Deferred income tax effect (533) (140)

Reclassified to profit or loss 37 737 (66 510)Current income tax effect (10 707) 21 140Deferred income tax effect 140 (2 517)

Fair value adjustments on available-for-sale financial assets 754 5 790For the year 18 793 8 120

Deferred income tax effect (1 702) (1 207)Reclassified to profit or loss (16 337) (1 123)

Movement on foreign currency translation reserve Currency translation differences 62 221 5 071

Total comprehensive income for the year 578 473 599 228

Profit/(loss) for the year attributable to:Owners of the parent

For continuing operations 697 044 610 573For discontinued operations (200 385) (6 973)

Non-controlling interestFor continuing operations 1 498 1 142

498 157 604 742

Total comprehensive income/(loss) for the year attributable to:Owners of the parent

For continuing operations 752 064 605 499For discontinued operations (175 089) (7 413)

Non-controlling interestFor continuing operations 1 498 1 142

578 473 599 228

Earnings per ordinary share (cents)For continuing operations 384.5 339.5For discontinued operations (110.5) (3.9)

9 274.0 335.6

Diluted earnings per ordinary share (cents)For continuing operations 375.2 379.0For discontinued operations (107.9) (48.0)

9 267.3 331.0


131

as at 30 September 2013

Statement of financial position

GROUP

Notes2013

R’000 2012

R’000 ASSETSNon-current assets 5 275 819 5 526 559Property, plant and equipment 12 4 363 125 4 641 535Intangible assets 13 698 476 736 163Biological assets 14 16 017 16 017Loans to joint ventures 15 31 922 39 585Investment in associates 16 12 106 17 315Available-for-sale financial assets 17 59 042 52 759Trade and other receivables 20 20 876 20 444Deferred income tax 26 74 255 2 741Current assets 4 641 473 5 079 658Inventories 18 2 491 207 2 449 959Biological assets 14 8 448 228 700Derivative financial instruments 19 10 978 6 791Trade and other receivables 20 1 730 885 2 014 325Current income tax 1 309 4 237Cash and cash equivalents 21 398 646 375 646Assets of disposal group classified as held for sale 55 1 953 433 –Total assets 11 870 725 10 606 217

EQUITY AND LIABILITIESCapital and reserves attributable to owners of the parent 6 580 175 6 184 902Share capital 22 23 101 23 031Share premium 2 188 588 2 171 791Treasury shares 22 (1 190 852) (1 207 545)Other reserves 24 426 330 350 410Retained earnings 5 133 008 4 847 215Non-controlling interest 9 364 8 236Total equity 6 589 539 6 193 138Non-current liabilities 2 344 171 1 377 536Borrowings

B-BBEE equity transaction third-party finance 25 449 680 449 680Other 25 1 034 383 48 042

Deferred income tax 26 486 860 652 371Share-based payment liability 29 251 424 108 249Provisions for other liabilities and charges 27 121 824 119 194Current liabilities 2 454 998 3 035 543Trade and other payables 30 2 010 313 1 933 006Current income tax 29 400 4 716Borrowings 25 401 338 871 701Loan from joint venture 15 7 370 7 000Derivative financial instruments 19 6 241 3 124Dividends payable 336 515Accrual for Competition Commission penalties 28 – 215 481Liabilities of disposal group classified as held for sale 55 482 017 –Total liabilities 5 281 186 4 413 079

Total equity and liabilities 11 870 725 10 606 217


132


Statement of changes in equity

GROUP GROUP

Sharecapital

ordinary shares R’000

Sharepremium

R’000

Treasury shares R’000

Translation reserve

R’000

Fair value reserve

R’000

Hedging reserve

R’000

Equitycompensation

reserve R’000

Otherreserves:

Total R’000

Retainedearnings

R’000

Non-controlling

interest R’000

Totalequity R’000

Balance as at 1 October 2012 23 031 2 171 791 (1 207 545) 6 516 25 109 (11 637) 330 422 350 410 4 847 215 8 236 6 193 138

Profit for the year – – – – – – – – 496 659 1 498 498 157

Other comprehensive income/(loss) for the year – – – 62 221 754 17 341 – 80 316 – – 80 316

Cash flow hedging

Fair value adjustments to cash flow hedging reserve:

For the year – – – – – (13 651) – (13 651) – – (13 651)

Current income tax effect – – – – – 4 355 – 4 355 – – 4 355

Deferred income tax effect – – – – – (533) – (533) – – (533)

Reclassified to profit or loss – – – – – 37 737 – 37 737 – – 37 737

Current income tax effect – – – – – (10 707) – (10 707) – – (10 707)

Deferred income tax effect – – – – – 140 – 140 – – 140

Fair value adjustments on available-for-sale financial assets:

For the year – – – – 18 793 – – 18 793 – – 18 793

Deferred income tax effect – – – – (1 702) – – (1 702) – – (1 702)

Reclassified to profit or loss – – – – (16 337) – – (16 337) – – (16 337)

Currency translation differences – – – 62 221 – – – 62 221 – – 62 221Employee share scheme – repurchase of class A ordinary shares from leavers – (32 736) – – – – – – – – (32 736)

Disposal of shares of management share incentive scheme – – – – – – – – 1 969 – 1 969

Income tax effect of disposal of shares of management share incentive scheme – – – – – – – – (1 207) – (1 207)

Dividends paid – net – – – – – – – – (211 321) – (211 321)

Dividend paid to non-controlling interest – – – – – – – – – (370) (370)

Employee share scheme – transfer tax on share transactions – – – – – – – – (307) – (307)

Recognition of share-based payments – share appreciation rights – – – – – – 15 208 15 208 – – 15 208

Deferred income tax on share-based payments – – – – – – 29 999 29 999 – – 29 999

Ordinary shares issued – share appreciation rights 70 49 533 – – – – (49 603) (49 603) – – –

Movement of ordinary shares on share incentive trusts – – 16 693 – – – – – – – 16 693

Balance as at 30 September 2013 23 101 2 188 588 (1 190 852) 68 737 25 863 5 704 326 026 426 330 5 133 008 9 364 6 589 539


133

GROUP GROUP

Sharecapital

ordinary shares R’000

Sharepremium

R’000


Translation reserve

R’000

Fair value reserve

R’000

Hedging reserve

R’000

Equitycompensation

reserve R’000

Otherreserves:

Total R’000

Retainedearnings

R’000

Non-controlling

interest R’000

Totalequity R’000

Balance as at 1 October 2012 23 031 2 171 791 (1 207 545) 6 516 25 109 (11 637) 330 422 350 410 4 847 215 8 236 6 193 138

Profit for the year – – – – – – – – 496 659 1 498 498 157

Other comprehensive income/(loss) for the year – – – 62 221 754 17 341 – 80 316 – – 80 316

Cash flow hedging

Fair value adjustments to cash flow hedging reserve:

For the year – – – – – (13 651) – (13 651) – – (13 651)

Current income tax effect – – – – – 4 355 – 4 355 – – 4 355

Deferred income tax effect – – – – – (533) – (533) – – (533)

Reclassified to profit or loss – – – – – 37 737 – 37 737 – – 37 737

Current income tax effect – – – – – (10 707) – (10 707) – – (10 707)

Deferred income tax effect – – – – – 140 – 140 – – 140

Fair value adjustments on available-for-sale financial assets:

For the year – – – – 18 793 – – 18 793 – – 18 793

Deferred income tax effect – – – – (1 702) – – (1 702) – – (1 702)

Reclassified to profit or loss – – – – (16 337) – – (16 337) – – (16 337)

Currency translation differences – – – 62 221 – – – 62 221 – – 62 221Employee share scheme – repurchase of class A ordinary shares from leavers – (32 736) – – – – – – – – (32 736)

Disposal of shares of management share incentive scheme – – – – – – – – 1 969 – 1 969

Income tax effect of disposal of shares of management share incentive scheme – – – – – – – – (1 207) – (1 207)

Dividends paid – net – – – – – – – – (211 321) – (211 321)

Dividend paid to non-controlling interest – – – – – – – – – (370) (370)

Employee share scheme – transfer tax on share transactions – – – – – – – – (307) – (307)

Recognition of share-based payments – share appreciation rights – – – – – – 15 208 15 208 – – 15 208

Deferred income tax on share-based payments – – – – – – 29 999 29 999 – – 29 999

Ordinary shares issued – share appreciation rights 70 49 533 – – – – (49 603) (49 603) – – –

Movement of ordinary shares on share incentive trusts – – 16 693 – – – – – – – 16 693

Balance as at 30 September 2013 23 101 2 188 588 (1 190 852) 68 737 25 863 5 704 326 026 426 330 5 133 008 9 364 6 589 539


134

GROUP GROUP

Sharecapital

ordinaryshares R’000

Sharepremium

R’000


Statutory reserve R’000

Translation reserve R’000

Fair value reserve R’000

Hedging reserve R’000

Equitycompensation

reserve R’000

Otherreserves:

Total R’000

Retainedearnings

R’000

Non-controlling

interest R’000

Totalequity

R’000 Balance as at 1 October 2011 20 124 1 186 565 (220 328) 4 463 1 445 19 319 4 738 85 271 115 236 4 386 631 7 501 5 495 729Profit for the year – – – – – – – – – 603 600 1 142 604 742Other comprehensive income/(loss) for the year – – – – 5 071 5 790 (16 375) – (5 514) – – (5 514)Cash flow hedging Fair value adjustments to cash flow hedging reserve:

For the year – – – – – – 43 767 – 43 767 – – 43 767Current income tax effect – – – – – – (12 115) – (12 115) – – (12 115)Deferred income tax effect – – – – – – (140) – (140) – – (140)

Reclassified to profit or loss – – – – – – (66 510) – (66 510) – – (66 510)Current income tax effect – – – – – – 21 140 – 21 140 – – 21 140Deferred income tax effect – – – – – – (2 517) – (2 517) – – (2 517)

Fair value adjustments on available-for-sale financial assets:For the year – – – – – 8 120 – – 8 120 – – 8 120

Deferred income tax effect – – – – – (1 207) – – (1 207) – – (1 207)Reclassified to profit or loss – – – – – (1 123) – – (1 123) – – (1 123)

Currency translation differences – – – – 5 071 – – – 5 071 – – 5 071Statutory transfer – – – (4 463) – – – – (4 463) 4 463 – –Employee share scheme – repurchase of class A ordinary shares from leavers – (30 967) – – – – – – – – – (30 967)Disposal of shares of management share incentive scheme – – – – – – – – – 5 406 – 5 406Income tax effect of disposal of shares of management share incentive scheme – – – – – – – – – (1 114) – (1 114)Dividends paid – net – – – – – – – – – (151 549) – (151 549)Dividend paid to non-controlling interest – – – – – – – – – – (407) (407)Employee share scheme – transfer tax on share transactions – – – – – – – – – (222) – (222)Recognition of share-based payments – management scheme – – – – – – – 51 51 – – 51Recognition of share-based payments – share appreciation rights – – – – – – – 13 786 13 786 – – 13 786Deferred income tax on share-based payments – – – – – – – (3 015) (3 015) – – (3 015)Cost to issue ordinary shares to participants in B-BBEE equity transaction – (4 093) – – – – – – – – – (4 093)Ordinary shares issued – share appreciation rights 38 22 807 – – – – – (22 845) (22 845) – – –Movement of ordinary shares on share incentive trusts – – 13 131 – – – – – – – – 13 131Ordinary shares issued – B-BBEE equity transaction 2 869 997 479 (1 000 348) – – – – 96 429 96 429 – – 96 429Once-off share-based payment charge on B-BBEE equity transaction – – – – – – – 160 745 160 745 – – 160 745

Balance as at 30 September 2012 23 031 2 171 791 (1 207 545) – 6 516 25 109 (11 637) 330 422 350 410 4 847 215 8 236 6 193 138


Statement of changes in equity


135

GROUP GROUP

Sharecapital

ordinaryshares R’000

Sharepremium

R’000


Statutory reserve R’000

Translation reserve R’000

Fair value reserve R’000

Hedging reserve R’000

Equitycompensation

reserve R’000

Otherreserves:

Total R’000

Retainedearnings

R’000

Non-controlling

interest R’000

Totalequity

R’000 Balance as at 1 October 2011 20 124 1 186 565 (220 328) 4 463 1 445 19 319 4 738 85 271 115 236 4 386 631 7 501 5 495 729Profit for the year – – – – – – – – – 603 600 1 142 604 742Other comprehensive income/(loss) for the year – – – – 5 071 5 790 (16 375) – (5 514) – – (5 514)Cash flow hedging Fair value adjustments to cash flow hedging reserve:

For the year – – – – – – 43 767 – 43 767 – – 43 767Current income tax effect – – – – – – (12 115) – (12 115) – – (12 115)Deferred income tax effect – – – – – – (140) – (140) – – (140)

Reclassified to profit or loss – – – – – – (66 510) – (66 510) – – (66 510)Current income tax effect – – – – – – 21 140 – 21 140 – – 21 140Deferred income tax effect – – – – – – (2 517) – (2 517) – – (2 517)

Fair value adjustments on available-for-sale financial assets:For the year – – – – – 8 120 – – 8 120 – – 8 120

Deferred income tax effect – – – – – (1 207) – – (1 207) – – (1 207)Reclassified to profit or loss – – – – – (1 123) – – (1 123) – – (1 123)

Currency translation differences – – – – 5 071 – – – 5 071 – – 5 071Statutory transfer – – – (4 463) – – – – (4 463) 4 463 – –Employee share scheme – repurchase of class A ordinary shares from leavers – (30 967) – – – – – – – – – (30 967)Disposal of shares of management share incentive scheme – – – – – – – – – 5 406 – 5 406Income tax effect of disposal of shares of management share incentive scheme – – – – – – – – – (1 114) – (1 114)Dividends paid – net – – – – – – – – – (151 549) – (151 549)Dividend paid to non-controlling interest – – – – – – – – – – (407) (407)Employee share scheme – transfer tax on share transactions – – – – – – – – – (222) – (222)Recognition of share-based payments – management scheme – – – – – – – 51 51 – – 51Recognition of share-based payments – share appreciation rights – – – – – – – 13 786 13 786 – – 13 786Deferred income tax on share-based payments – – – – – – – (3 015) (3 015) – – (3 015)Cost to issue ordinary shares to participants in B-BBEE equity transaction – (4 093) – – – – – – – – – (4 093)Ordinary shares issued – share appreciation rights 38 22 807 – – – – – (22 845) (22 845) – – –Movement of ordinary shares on share incentive trusts – – 13 131 – – – – – – – – 13 131Ordinary shares issued – B-BBEE equity transaction 2 869 997 479 (1 000 348) – – – – 96 429 96 429 – – 96 429Once-off share-based payment charge on B-BBEE equity transaction – – – – – – – 160 745 160 745 – – 160 745

Balance as at 30 September 2012 23 031 2 171 791 (1 207 545) – 6 516 25 109 (11 637) 330 422 350 410 4 847 215 8 236 6 193 138


136


Statement of cash flows

GROUP

Notes2013

R’000 2012

R’000 NET CASH FLOW FROM OPERATING ACTIVITIESNet cash profit from operating activities 37 1 623 338 1 514 900Working capital changes 38 52 880 (266 154)Cash effect from hedging activities 22 684 (32 234)Accrual for Competition Commission penalties paid (216 667) (216 667)Net cash generated from operations 1 482 235 999 845Income tax paid 40 (243 078) (257 751)

1 239 157 742 094NET CASH FLOW FROM INVESTMENT ACTIVITIES (1 332 993) (753 049)Additions to property, plant and equipment (799 912) (536 241)Replacements of property, plant and equipment (242 497) (174 051)Additions to intangible assets (42 654) (23 625)Proceeds on disposal of property, plant and equipment and intangible assets 41 28 417 14 043Proceeds on disposal of available-for-sale financial assets 42 20 514 4 552Business combinations 44 (315 009) (25 460)Loans repaid by/(granted to) joint ventures 8 033 (15 341)Investment in available-for-sale financial assets and associates (8 685) (16 748)Loans granted to other parties (1 392) (682)Interest received 18 227 19 073Dividends received 1 651 1 431Dividends received from associates 314 –

NET CASH FLOW FROM FINANCING ACTIVITIES (204 539) 44 627Proceeds from new syndicated borrowings 1 870 000 –Proceeds from borrowings – third-party finance of B-BBEE equity transaction – 449 680Repayments of other borrowings (1 699 979) (211 354)Proceeds from issue of ordinary shares – 96 429Cost to issue ordinary shares to participants in B-BBEE equity transaction – (4 093)Treasury shares – share incentive trusts 18 662 18 537Employee share scheme – transfer tax on share transactions (307) (222)Employee share scheme – repurchase of class A ordinary shares from leavers (32 736) (30 967)Interest paid (145 966) (119 759)Dividends paid to Group ordinary shareholders 39 (211 500) (151 447)Dividends paid to class A ordinary shareholders 29 (2 713) (2 177)Net cash, cash equivalents and bank overdrafts from business combinations – (11 258)Net (decrease)/increase in cash, cash equivalents and bank overdrafts (298 375) 22 414Net cash, cash equivalents and bank overdrafts at beginning of year 368 140 345 726Net cash, cash equivalents and bank overdrafts at end of year 21 69 765 368 140

Net cash, cash equivalents and bank overdrafts at end of yearFrom continuing operations 45 183 356 057From discontinued operations 55 24 582 12 083

69 765 368 140


137

Notes to the financial statements


GROUP

2013 R’000

2012 R’000

1. Accounting policiesThe principal accounting policies incorporated in the preparation of these financial statements are set out on page 114 to 129.

2. Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that 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.

Key assumptions and critical judgementsGoodwillThe Group annually tests whether goodwill has suffered any impairment, in accordance with the accounting policy for goodwill. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Refer to note 13 for key assumptions used.

Provisions for post-retirement medical benefits and long-service awardsThese provisions are determined by annual actuarial calculations. Refer to note 27 for estimates used in these calculations.

Property, plant and equipmentThese items are depreciated over their useful lives, taking into account the residual value at the end of the item’s useful life. Residual values and useful lives are based on industry knowledge and past experience with similar assets.

Intangible assets with finite useful livesThese items are amortised over their useful lives that are based on industry knowledge and past experience with similar assets.

Intangible assets with indefinite useful livesThe Group has classified a number of its trademarks as trademarks with indefinite useful lives, as indicated in note 13. In arriving at the conclusion that a trademark has an indefinite life, management considers that the Group is a brands-based business with a diversified and expanding portfolio of premium household brands across all market segments of the Living Standards Measurement categories. The Group expects to acquire, hold and support these trademarks for an indefinite period. The Group supports its trademarks through consumer marketing spend and through significant investment in promotional support.

Indefinite life trademarks are assessed as such, as management believes there is no foreseeable limit over which the Group will continue to generate revenues from their continued use. Supporting this assumption is the fact that the brands held are established, well known, and can reasonably be expected to generate revenues beyond the Group’s strategic planning horizon. In addition, the Group can continue to renew legal rights attached to such trademarks, without significant costs, and intends to do so beyond the foreseeable future.

Fair value of once-off share-based payment charge: B-BBEE equity transactionIn calculating the amount to be expensed as a share-based payment in terms of the Group’s B-BBEE equity transaction during the previous financial year, the Group was required to calculate the fair value by applying a valuation model which is in itself judgemental and takes into account certain inherently uncertain assumptions (detailed in note 23.4). Had different assumptions been applied, this could have impacted the expense recognised.


138



GROUP

2013 R’000

2012 R’000

2. Critical accounting estimates and judgements (continued)Key assumptions and critical judgements (continued)Share-based payments The fair value of employee services received in exchange for the grant of options or class A ordinary shares is determined by reference to the fair value of the options granted and the shares issued. Refer to note 23 for assumptions used in these calculations.

Assessment of control over contract growers The Group assesses whether it exercises control over contract growers based on an analysis of the activities of these entities, the Group’s decision-making powers, its ability to obtain benefits from these entities and the residual risks regarding these entities that are retained by the Group. Based on this analysis the Group concluded that it does not control the activities of any contract grower.

Contingent liabilities – litigationBased on legal opinion obtained, the Group determined that these disputes, as described in note 32, are contingent liabilities and no provision was raised. The Group considers the guidance in IAS 37 – Provisions, Contingent Liabilities and Contingent Assets to distinguish between provisions and contingent liabilities.

3. Other income and other gains/(losses) – net3.1 Other income

Administration fees received 3 197Government grant amortisation 2 642 566Rental income 82 923 74 670Sundry income and commissions 46 859 40 065

132 427 115 498


139



GROUP

2013 R’000

2012 R’000

3. Other income and other gains/(losses) – net (continued)3.2 Other gains/(losses) – net

Net gains Foreign exchange differences 17 284 4 021Financial assets at fair value through profit or loss

Fair value adjustments on foreign exchange contracts – 4 480Fair value adjustments on embedded derivatives 315 –

Cash flow hedging ineffective gainsFair value adjustments on futures 563 6 666

Fair value hedgingFair value adjustments on futures 59 –Fair value adjustments on firm commitments – 354

Agricultural produce fair value adjustment 8 493 7 513 Total net gains 26 714 23 034

Net losses Biological assets fair value adjustment (1 138) (2 104)

Unrealised – reflected in carrying amount of biological assets (517) (1 931)Realised – reflected in cost of goods sold (621) (173)

Foreign exchange differences (4 141) –Financial assets at fair value through profit or loss

Fair value adjustments on foreign exchange contracts (14 258) –Fair value adjustments on embedded derivatives – (1 321)

Fair value hedgingFair value adjustments on futures – (350)Fair value adjustments on firm commitments (58) –

Total net losses (19 595) (3 775)

Other gains/(losses) – net 7 119 19 259 Biological assets fair value adjustment The adjustment of biological assets from cost to fair value includes a realised and unrealised component. The unrealised portion is reflected in the carrying amount of biological assets in the statement of financial position and the realised portion is reflected in cost of goods sold.


140



GROUP

2013 R’000

2012 R’000

4. Sales and distribution costs, marketing costs, administrative expenses and other operating expensesThe following expenditure by nature is included in the line items as indicated above as well as within cost of goods sold.

Staff costs 2 469 135 2 088 674Wages and salaries 2 016 036 1 872 637Termination benefits 46 635 9 032Other personnel costs 107 185 98 672Pension costs 138 183 132 191

Share-based payments 161 096 (23 858)Technical services from non-employees 40 879 31 821Auditors’ remuneration 15 558 12 804

Audit – current year 10 676 10 005Audit – (over)/under provision previous year (15) 86Tax-related services 1 173 1 330Other consultation services 3 724 1 383

Machine rental 23 766 21 510Rental of vehicles 7 675 6 710Rental of premises 49 029 49 254Depreciation and amortisation (refer to note 12 and 13) 332 723 300 113

Own assets 301 752 275 011Intangible assets 30 971 25 102

Inventory written off 112 712 97 514Change in provision for impairment of trade receivables – loss/(gain) 7 967 (1 101)Change in allowance for outstanding credit notes – gain (6 166) (8 352)Research and development costs 26 923 23 761Administration fees paid 1 217 1 346

Post-retirement medical benefits (refer to note 27) 2 288 (1 120) Actuarial loss/(gain) 2 087 (1 310) Service costs 201 190 Long-service awards (refer to note 27) 9 957 8 623 Actuarial loss 3 102 1 316 Service costs 6 855 7 307 Share-based payments 161 096 (23 858) Broad-based employee share incentive scheme 145 888 (35 587) Management share options – 42 Management share appreciation rights 15 208 11 687

Transaction costs – business combinations – 35


141



GROUP

2013 R’000

2012 R’000

5. Items of a capital nature Net loss on disposal of property, plant and equipment and intangible assets (3 577) (9 462)

Gross (5 608) (11 874)Tax effect 2 031 2 412

Net profit on disposal of available-for-sale financial assets 14 530 910Gross 16 336 1 123Tax effect (1 806) (213)

Impairment of property, plant and equipment (refer to note 12) (7 528) –Gross (10 213) –Tax effect 2 685 –

Impairment of goodwill (refer to note 13) (1 950) –Gross (1 950) –Tax effect – –

Impairment of loan (814) –Gross (814) –Tax effect – –

Utilisation of net capital loss to reduce capital gains effect (1 513) –Gross – –Tax effect (1 513) –

Total (852) (8 552)Gross (2 249) (10 751)Tax effect 1 397 2 199

6. Investment income Interest income on financial assets: loans and receivables 16 604 17 130 Joint ventures 4 997 3 243 Accretions of discount 82 780 Call accounts and other 11 525 13 107 Dividend income on available-for-sale financial assets 1 651 1 431 Listed shares 1 411 1 297 Unlisted shares 240 134

18 255 18 561


142



GROUP

2013 R’000

2012 R’000

7. Finance costs Interest cost on financial liabilities measured at amortised cost

Joint ventures 416 633Borrowings 51 629 69 378Accretions of discount 146 228Competition Commission penalties: unwinding of discount 1 186 14 526Provisions: unwinding of discount 9 688 8 883Call loans and bank overdrafts 54 975 21 822Redeemable preference shares B-BBEE equity transaction 38 179 17 989

Fair value loss on financial liabilities measured at fair value through profit or lossInterest rate collars: transfers from equity – 9 098

Borrowing costs capitalised (27 586) (6 448) 128 633 136 109

8. Income tax expenseCurrent income tax 281 962 263 448

Current year 281 942 262 861 Under provision previous years 20 587 Deferred income tax (37 499) 45 183 Current year (37 473) 45 183 Over provision previous years (26) – Secondary taxation on companies – 9 683 Current year – 9 683

Dividend withholding tax 688 –Current year 688 –

245 151 318 314

The income tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the statutory rate of 28% (2012: 28%) as follows:

% % Standard rate for companies 28.0 28.0 Increase/(decrease) in rate: Exempt income (0.1) (0.1) Effect of assessed losses (6.9) 0.6 Secondary taxation on companies – 1.0 Non-deductible expenditure 6.2 1.5 Other non-taxable income – (1.2) Effect of capital gains tax (0.3) 0.2 Effect of once-off share-based payment charge on B-BBEE equity transaction – 4.8 Other differences (0.9) (0.6) Effective rate 26.0 34.2 R’000 R’000

Gross calculated tax losses of certain subsidiaries at the end of the financial year available for utilisation against future taxable income of those companies 413 148 402 887

Less: Utilised in reduction of deferred income tax (413 148) (169 443) Net calculated tax losses carried forward – 233 444 Tax relief at current tax rates – 65 356

Utilisation of tax losses is dependent on sufficient taxable income being earned in the future by the subsidiaries concerned.


143



GROUP

2013R

2012R

9. Earnings per ordinary shareBasic

The calculation of basic earnings per ordinary share is based on earnings attributable to owners of the parent:

From continuing operations 697 044 038 610 571 714From discontinued operations (200 384 518) (6 971 465)

Total 496 659 520 603 600 249

Divided by the weighted average ordinary shares in issue during the year of 181,287,972 (2012: 179,857,917).

Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary

shares outstanding to assume conversion of all dilutive potential ordinary shares. Share options and appreciation rights issued in terms of share incentive schemes have a dilutive effect on earnings per ordinary share. A calculation is made to determine the number of shares that could have been acquired at fair value (determined at the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options as well as share appreciation rights.

The calculation of diluted earnings per ordinary share is based on:

Earnings attributable to owners of the parent: From continuing operations 697 044 038 610 571 714From discontinued operations (200 384 518) (6 971 465)

Total 496 659 520 603 600 249

Divided by the diluted weighted average ordinary shares in issue during the year of 185,794,318 (2012: 182,331,102).

Headline earnings (“HE”) is calculated based on Circular 2/2013 issued by the South African Institute of Chartered Accountants. Adjusted HE is defined as HE adjusted for material once-off occurrences. In the prior year HE has been adjusted accordingly for the effect of the once-off share-based payment charge recognised in terms of the B-BBEE equity transaction.

Number Number

Reconciliation of weighted average ordinary shares in issue during the year Weighted average number of ordinary shares 181 287 972 179 857 917 Adjusted for share options and appreciation rights 1 309 134 2 182 361

Adjusted for B-BBEE equity transaction deemed options 3 197 212 290 824 Weighted average number of ordinary shares for diluted earnings 185 794 318 182 331 102


144



GROUP

2013R’000

2012R’000

9. Earnings per ordinary share (continued) Reconciliation between earnings and headline earnings Earnings attributable to owners of the parent 496 659 603 600

From continuing operations 697 044 610 573From discontinued operations (200 385) (6 973)

Remeasurement of items of a capital nature (refer to note 5) 208 103 2 613 Gross – total 233 191 5 354 From continuing operations 2 249 10 751

From discontinued operations 230 942 (5 397)Tax effect – total (25 088) (2 741)

From continuing operations (1 397) (2 199)From discontinued operations (23 691) (542)

Headline earnings 704 762 606 213From continuing operations 697 896 619 125From discontinued operations 6 866 (12 912)

Adjusted for once-off share-based payment charge on B-BBEE equity transaction – 160 745Adjusted headline earnings 704 762 766 958

From continuing operations 697 896 779 870From discontinued operations 6 866 (12 912)

Cents CentsHeadline earnings per ordinary share (cents) 388.8 337.1

Attributable to continuing operations 385.0 344.2Attributable to discontinued operations 3.8 (7.1)

Adjusted headline earnings per ordinary share (cents) 388.8 426.4Attributable to continuing operations 385.0 433.5Attributable to discontinued operations 3.8 (7.1)

Diluted earnings per ordinary share (cents) 267.3 331.0Attributable to continuing operations 375.2 334.9Attributable to discontinued operations (107.9) (3.9)

Diluted headline earnings per ordinary share (cents) 379.3 332.4Attributable to continuing operations 375.6 339.5Attributable to discontinued operations 3.7 (7.1)

Diluted adjusted headline earnings per ordinary share (cents) 379.3 420.6Attributable to continuing operations 375.6 427.7Attributable to discontinued operations 3.7 (7.1)


145



GROUP

2013 R’000

2012 R’000

10. Dividend per ordinary shareInterim

9.2 cents (2012: 8.8 cents) per ordinary share of Pioneer Foods Broad-Based BEE Trust 975 93346.0 cents (2012: 44.0 cents) per ordinary share of other shareholders 101 352 96 632

Final 17.2 cents (2012: 14.0 cents) per ordinary share of Pioneer Foods Broad-Based BEE Trust 1 823 1 484

86.0 cents (2012: 70.0 cents) per ordinary share of other shareholders 189 550 153 942 293 700 252 991

Dividends payable are not accounted for until they have been declared by the Board of directors (“the Board”). The statement of changes in equity does not reflect the final dividend payable. The final dividend for the year will be accounted for as an appropriation of retained earnings in the following year. Secondary taxation on companies was applicable to all dividends paid up to 31 March 2012 at a rate of 10.0%. Dividends withholding tax, a new dividends withholding tax regime, became effective from 1 April 2012 at a rate of 15%.

The total rand value of the final dividend is an approximate amount. The exact amount is dependent on the number of shares in issue at the record date. The final dividend of the prior year was restated to the actual amount paid.

The 10,599,988 Pioneer Foods ordinary shares issued to the Pioneer Foods Broad-Based BEE Trust during April 2012 are only entitled to 20% of the dividend.

11. Directors’ remunerationNon-executive directors

Fees 2 749 2 380Deemed options granted: B-BBEE equity transaction* – 5 392

Executive directors 25 232 11 183 Salaries 9 140 9 386 Retirement benefits 1 198 1 307 Bonuses and incentives 3 132 490

Compensation for loss of office 11 762 –

Annual remuneration 27 981 18 955Deemed options granted: B-BBEE equity transaction* – (5 392)

Paid by subsidiaries (25 232) (11 183) Paid by the Company 2 749 2 380

* The deemed options granted to non-executive directors is a once-off, non-cash flow item and represents the IFRS 2 – Share-based Payment value of the options. Refer to note 23.4 for further detail on the deemed options granted.

Refer to the directors’ remuneration report for further detail. Number Number ’000 ’000 Executive directors’ share incentive scheme At beginning of year 1 367 1 731

Change in directorship (647) – Redeemed (532) (498) New offer at R56.81 per share (share appreciation rights) 89 134

New offer at R66.13 per share (share appreciation rights) 240 –New offer at R66.13 per share (share appreciation rights) 250 –

At end of year 767 1 367

At R8.65 per share, exercisable up to 26 May 2014 (share options) – 162 At R14.05 per share, exercisable up to 23 December 2014 (share options) – 118 At R21.86 per share, exercisable up to 24 January 2016 (share options) – 112 At R31.42 per share, exercisable up to 11 February 2017 (share options) 33 69

At R25.00 per share, payable by 26 May 2014 (originating from rights offer) 21 96 At R25.48 per share, exercisable up to 8 June 2018 (share appreciation rights) 30 124 At R24.20 per share, exercisable up to 26 February 2019 (share appreciation rights) 26 106 At R34.74 per share, exercisable up to 8 February 2020 (share appreciation rights) 116 446 At R61.85 per share, exercisable up to 9 February 2022 (share appreciation rights) 30 134 At R56.81 per share, exercisable up to 5 February 2023 (share appreciation rights) 21 –

At R66.13 per share, exercisable up to 1 April 2016 (share appreciation rights) 240 –At R66.13 per share, exercisable up to 1 May 2023 (share appreciation rights) 250 –Shares under option and share appreciation rights 767 1 367

Refer to the directors’ remuneration report for further detail.


146



GROUP

2013 R’000

2012 R’000

12. Property, plant and equipment12.1 Property, plant and equipment – summary

Land and buildings 1 523 772 1 554 322Plant, machinery and equipment 2 551 780 2 796 378

Vehicles 287 573 290 835 Net book value 4 363 125 4 641 535 Property, plant and equipment include items leased by the Group to third parties under operating

leases with the following carrying amounts: Cost As at beginning of year 90 798 82 921 Additions and transfers 13 000 11 402 Disposals (1 751) (3 525) 102 047 90 798 Accumulated depreciation As at beginning of year 40 493 34 870 Charge for the year 4 782 4 206 Additions and transfers 1 286 2 908 Disposals (973) (1 491) 45 588 40 493

Net book value 56 459 50 305 Refer to note 12.2 for further detail. Property, plant and equipment in the course of construction amounts to R363,763,531

(2012: R345,955,708).

Land and buildings amounting to R6,162,000 (2012: R24,300,000) were in the process of being

transferred in the name of the Group.

A register with full detail of property, plant and equipment is available at the Company’s registered

office.

Refer to note 25 for detail of property, plant and equipment encumbered as security for borrowings from financial institutions.

No major change in the nature of property, plant and equipment or change in the policy regarding the use thereof took place during the financial year.

During the current financial year borrowing costs of R27,585,538 (2012: R6,767,197) were

capitalised against qualifying items of property, plant and equipment. The capitalisation rate used varied between 6.1% and 6.5% (2012: 6.8% and 7.3%).


147



GROUP

2013 R’000

2012 R’000

12. Property, plant and equipment (continued)12.1 Property, plant and equipment – summary (continued) Impairment losses on property, plant and equipment where impairment indicators exist Impairment losses dealt with under this subheading are impairment losses other than those

resulting from the impairment of goodwill or intangible assets with indefinite useful lives assigned to a cash-generating unit (“CGU”) and tested annually for impairment.

The Group continuously considers the existence of impairment indicators relating to items of

property, plant and equipment and CGUs. For assets or CGUs where such impairment indicators exist the Group performs impairment tests by comparing the asset’s or CGU’s carrying amount to its respective recoverable amount. An impairment loss is only recognised if the asset’s or CGU’s carrying amount exceeds its respective recoverable amount. The recoverable amount of an asset or CGU is the higher of its value-in-use or fair value less costs to sell.

Impairment indicators identified resulted in the following impairment losses being recognised:

During the reporting period Heinz Foods SA (Pty) Ltd, a joint venture of the Group, closed its Spartan factory. As a result of this closure the carrying values of property, plant and equipment and of goodwill were impaired to its fair value less costs to sell. The recoverable amount of a cash-generating unit is the higher of its fair value less costs to sell and value-in-use. The Group’s share in the pre-tax impairment loss of property, plant and equipment amounts to R9,606,798.

A rotary drier at Bowman Ingredients (SA) Pty Ltd was replaced. The old one became idle and there is no prospect of use thereof within a reasonable time. Consequently, the carrying amount of this asset was impaired and the Group’s share in this pre-tax impairment loss amounts to R606,374.

The impairment losses for both these businesses were calculated by comparing the carrying amounts of these CGUs to the fair value less costs to sell of these CGUs. These amounts for fair value less costs to sell are management’s best estimate of the amount that can be obtained in an arm’s length transaction.

No impairment losses were recognised during 2012.

Fair value less costs to sell is the amount obtainable from the sale of an asset or CGU in an arm’slengthtransactionbetweenknowledgeable,willingparties,lessthecostofdisposal.Value-in-use calculations are pre-tax cash flow projections based on financial budgets approved by management, covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.

Impairment losses on property, plant and equipment due to the impairment of intangible assetsIn terms of IFRS an entity is required to test all CGUs to which goodwill or intangible assets with indefinite useful lives are assigned to for impairment annually.

For the current as well as the previous financial year impairment tests performed on CGUs, to which goodwill or intangible assets with indefinite lives are assigned to, did not result in any impairment losses on property, plant and equipment being recognised.

Refer to note 13 for further detail on the key assumptions, estimates, growth rates and discount rates used in the calculation of these CGUs’ recoverable amounts.

Impairment losses on property, plant and equipment can be ascribed to the following operating segments:

Sasko 606 –Bokomo Foods 9 607 – 10 213 –


148



GROUP

2013 R’000

2012 R’000

12. Property, plant and equipment (continued)12.1 Property, plant and equipment – summary (continued)

Impairment losses due to the treatment of Quantum Foods as an asset held for sale Shareholders were advised on SENS on 5 September 2013 of the Board’s intent to restructure the

Company’s interest in the Quantum Foods segment, which includes the South African business units and two foreign African subsidiaries (Bokomo Uganda (Pty) Ltd and Bokomo Zambia Ltd) that produce and sell eggs, chicken products, animal feed and commercial laying hens.

It is Pioneer Foods’ intention to unbundle its interests in Quantum Foods to its shareholders and

subsequently list Quantum Foods as a separate legal entity on the JSE subject to market conditions and regulatory requirements, or any other acceptable corporate action, within approximately 12 months.

Accordingly, Quantum Foods has been treated as an "asset held for sale" and as "discontinued

operations" in terms of IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations for the year ended 30 September 2013.

In terms of IFRS 5 an entity shall measure a non-current disposal group classified as held for sale at the lower of its carrying amount and fair value less costs to sell. The fair value less costs to sell was determined using the average results of an income valuation approach and different scenarios for a market valuation approach.

In terms of the income approach the discounted cash flow method is used to determine the present value of projected future cash flows for a cash-generating unit (“CGU”) using a rate of return that is commensurate with the risk associated with the business and the time value of money. This approach requires assumptions about revenue growth rates, operating margins, tax rates and discount rates. The assumptions regarding growth are based on the CGU’s internal forecasts for revenue, operating margins and cash flows for a period of five years and by application of a perpetual long-term growth rate thereafter. Past experience, economic trends as well as market and industry trends were taken into consideration. The discount rate used to arrive at the present value of future cash flows represents the weighted average cost of capital (“WACC”) for comparable companies operating in similar industries as the applicable CGU, based on publicly available information. The WACC is an estimate of the overall required rate of return on an investment for both debt and equity owners. Its determination requires separate analysis of the cost of equity and debt and considers a risk premium based on an assessment of risks related to the projected cash flows of the CGU.

The South African businesses are deemed a single CGU. Bokomo Uganda (Pty) Ltd and Bokomo Zambia Ltd are two separate CGUs. The market approach assumes that companies operating in the same industry will share similar characteristics and that company values will correlate to these characteristics. The publicly available financial information of similar listed entities have been used to estimate two scenarios of fair value based on EBITDA multiples of these benchmark entities.

The key assumptions used in performing the impairment test, by CGU, were as follows:Discount rate:South Africa 17.6%Uganda 28.6%Zambia 23.1%

Perpetual growth rate:South Africa 5.5%Uganda 5.5%Zambia 6.5%


149



GROUP

2013 R’000

2012 R’000

12. Property, plant and equipment (continued)12.1 Property, plant and equipment – summary (continued)

Impairment losses due to the treatment of Quantum Foods as an asset held for sale (continued)Income tax rate:South Africa 28.0%Uganda 30.0%Zambia 12.5%

The fair value for each CGU other than the Quantum Foods division of Pioneer Foods (Pty) Ltd was in excess of its carrying value.

The carrying values of property, plant and equipment and goodwill of Quantum Foods were impaired as follows:Goodwill 76 944 –Property, plant and equipment 155 056 –Total impairment 232 000 –

Change in estimatesDuring the current financial year, the Group reassessed the useful lives and residual values of items of property, plant and equipment in line with the accounting policy and IAS 16 – Property, Plant and Equipment.

The useful lives are estimated by management based on historic analysis, benchmarking and other available information. The residual values are based on the assessment of useful lives and other available information.

Based on the latest available and reliable information there was a change in the estimated useful lives and residual values of certain items of property, plant and equipment. The effect of these changes on the depreciation expense in the current year is an increase of R4,908,438 (2012: increase of R2,201,367).


150



GROUP

Land and buildings

R’000

Plant, machinery and

equipmentR’000

VehiclesR’000

12. Property, plant and equipment (continued)12.2 Property, plant and equipment – detail 30 September 2013 Cost At 1 October 2012 1 854 623 4 724 983 546 731 Additions 350 623 629 634 62 152 Transfers (18 047) 16 515 308 Business combinations 90 934 197 462 5 044

Borrowing costs capitalised 10 017 17 569 – Foreign exchange adjustment 20 225 36 807 1 583 Disposals (6 375) (76 667) (31 907)

Transferred to disposal group classified as held for sale (484 969) (1 095 893) (42 485) At 30 September 2013 1 817 031 4 450 410 541 426

Accumulated depreciationAt 1 October 2012 300 301 1 928 605 255 896Charge for the year 38 543 283 065 35 847Impairments 64 565 99 746 958Transfers (1 001) 992 9Foreign exchange adjustment 3 563 15 682 657Depreciation on disposals (1 249) (63 506) (23 213)Transferred to disposal group classified as held for sale (111 463) (365 954) (16 301)At 30 September 2013 293 259 1 898 630 253 853

Net book value at 30 September 2013 1 523 772 2 551 780 287 573

Total property, plant and equipment – 2013 4 363 125

30 September 2012Cost

At 1 October 2011 1 691 756 4 192 942 513 991 Additions 176 347 483 062 50 883 Transfers (36 261) 36 233 28 Business combinations 25 556 51 547 647

Borrowing costs capitalised 2 420 4 347 – Foreign exchange adjustment 2 378 5 433 (115) Disposals (7 573) (48 581) (18 703) At 30 September 2012 1 854 623 4 724 983 546 731

Accumulated depreciationAt 1 October 2011 265 342 1 707 196 233 795Charge for the year 35 268 249 965 33 962Transfers (3) (2) 5Business combinations 1 762 5 373 341Foreign exchange adjustment 440 3 149 (15)Depreciation on disposals (2 508) (37 076) (12 192)At 30 September 2012 300 301 1 928 605 255 896


Total property, plant and equipment – 2012 4 641 535


151



GROUP

2013 R’000

2012 R’000

13. Intangible assets 13.1 Intangible assets – summary

Trademarks 358 647 360 071Goodwill 227 680 271 916Intellectual property 22 639 24 259Computer software 89 510 79 917Net book value 698 476 736 163 Refer to note 13.2 for further detail. The carrying values of the trademarks below are included in the following CGUs (in bold): Ceres Fruit Juices

Ceres 121 654 121 654Fruit Concentrate Mixtures

Wild Island 17 144 17 144W Daly and W Daly & Sons – 16 years (2012: 17 years) 6 577 6 976

SpreadsMarmite 33 288 33 288Bovril 33 886 33 886Pecks 19 245 19 245Redro 14 239 14 239

Baking AidsMoir’s 55 741 55 741Smash 21 506 21 506Tower 2 116 2 116

MaizenaMaizena 18 820 18 820

ProNutroProNutro 3 450 3 450

Nature’s SourceNature’s Source 2 650 2 650

Other – Nil to 13 years (2012: Nil to 14 years) 8 331 9 356 358 647 360 071 All of the abovementioned trademarks have indefinite remaining useful lives unless specifically indicated otherwise.


152



GROUP

2013 R’000

2012 R’000

13. Intangible assets (continued) 13.1 Intangible assets – summary (continued)

Impairment test for goodwill and intangible assets Goodwill arising from a business combination is allocated, at acquisition, to the Group’s CGUs that are expected to benefit from the business combination.

The CGUs to which a significant amount of goodwill have been allocated to, are indicated separately below under each operating segment (in bold):Sasko 3 866 3 843Quantum FoodsPurchased and impaired goodwill – 46 911

Tydstroom Gauteng (ex Tonko Chicks) 30 000 30 000Mynsar Eggs 11 279 11 279Hartebeespoort Rearing and Hatchery 5 632 5 632Impaired (46 911) –

Goodwill arising due to deferred income tax liability raised on acquisition date and impaired – –Darling Fresh Chickens 25 931 –Lemoenkloof Layer Farm 4 102 –Impaired (30 033) –

Bokomo Foods 167 419 164 767SAD 69 293 69 293Spreads 50 905 50 905Maizena 6 033 6 033Bokomo Foods (UK) 28 635 24 033Other 14 503 14 503Impaired – other (Heinz Foods) (1 950) –

Ceres Beverages 56 395 56 395Fruit Concentrate Mixtures 31 540 31 540Ceres Fruit Juices 24 855 24 855

227 680 271 916

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management, covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.

Impairment losses due to the treatment of Quantum Foods as an asset held for saleGoodwill amounting to R76,943,743 of the South African businesses of Quantum Foods was impaired due to the treatment of Quantum Foods as an asset held for sale. Refer to note 12.1 for further detail.

Impairment losses due to the closure of the Heinz Foods’ Spartan plantGoodwill amounting to R1,950,368 of the Heinz Foods business was impaired due to the closure of the Spartan plant. Refer to note 12.1 for further detail.

Impairment losses on intangible assets can be ascribed to the following operating segments:Quantum Foods 76 944 –Bokomo Foods 1 950 –

78 894 –The Group tests a large number of CGUs for impairment due to a significant number of indefinite life trademarks as well as a significant number of CGUs to which goodwill have been allocated. These CGUs for which impairment tests were performed, operate in various industries, geographical areas, tax jurisdictions and countries (such as the United Kingdom and African countries) with varying degrees of entry barriers and risk profiles of industries. For this reason growth and discount rates used may vary.


153



GROUP

2013 R’000

2012 R’000

13. Intangible assets (continued) 13.1 Intangible assets – summary (continued)

Impairment test for goodwill and intangible assets (continued)Key assumptions used for value-in-use calculations:Bokomo Foods (UK) CGUGrowth rate of 2.0% (2012: 2.3%)Discount rate of 16.1% (2012: 20.0%)

Other CGUsGrowth rates of 5.0% (2012: 5.0% to 5.7%)Discount rates from 14.8% to 27.4% (2012: 15.5% to 24.3%)

These assumptions have been used for the analysis of each CGU within the business segment. Management determined the budgeted gross margins based on past performance and its expectations for market development. The growth rates used represent the long-term growth rate based on a medium-term outlook on forecasted inflation rates. The discount rates represent a pre-tax rate based on the weighted average cost of capital.


154



GROUP

TrademarksR’000

GoodwillR’000

Intellectual property

R’000

Computer software

R’00013. Intangible assets (continued)13.2 Intangible assets – detail

30 September 2013CostAt 1 October 2012 470 900 332 600 36 985 220 808Additions – – – 42 654Transfers – – – 1 224Business combinations – 30 033 – –Foreign exchange adjustment 101 4 629 – 143Disposals (23) – – (19 734)Transferred to disposal group classified as held for sale (23 000) (78 307) – (1 253)At 30 September 2013 447 978 288 955 36 985 243 842

Accumulated depreciationAt 1 October 2012 110 829 60 684 12 726 140 891Charge for the year 1 450 – 1 620 28 273Impairments – 78 894 – – Foreign exchange adjustment 54 4 – 132Depreciation on disposals (2) – – (13 770)Transferred to disposal group classified as held for sale (23 000) (78 307) – (1 194)At 30 September 2013 89 331 61 275 14 346 154 332


Total intangible assets – 2013 698 476

30 September 2012CostAt 1 October 2011 470 853 325 803 36 985 198 720Additions 20 – – 23 605Business combinations – 5 632 – –Foreign exchange adjustment 27 1 165 – (1)Disposals – – – (1 516)At 30 September 2012 470 900 332 600 36 985 220 808

Accumulated depreciationAt 1 October 2011 109 283 60 685 11 106 118 798Charge for the year 1 534 – 1 620 22 281Foreign exchange adjustment 12 (1) – (4)Depreciation on disposals – – – (184)At 30 September 2012 110 829 60 684 12 726 140 891


Total intangible assets – 2012 736 163


155



GROUP

2013 R’000

2012 R’000

14. Biological assets Vineyards 16 017 16 017

Livestock – poultry 8 448 228 700 24 465 244 717 For the purposes of the statement of financial position, biological assets are presented as follows: Non-current assets 16 017 16 017 Current assets 8 448 228 700 24 465 244 717 The Group is engaged in dried fruit and poultry production for supply to various customers. Poultry

includes point-of-lay hens, day-old chicks, broilers and eggs.

The fair value of vineyards is calculated as the future expected net cash flows from the asset, discounted at a current market-determined rate, over the remaining useful lives of the vineyards. A discount rate of 12.5% (2012: 10.4%) was used.

The Group is exposed to financial risks that may arise from disease affecting its poultry flock. Stringent bio-security measures, vaccination programs and flock health monitoring procedures are in place to limit the financial effect of this risk.

Fair values of livestock held for breeding, lay-hens, broilers and hatching eggs are determined with

reference to market prices of livestock of similar age, breed and genetic material.

Number Number At 30 September, the Group held the following biological assets: Chickens – laying 125 694 5 297 516 Chickens – broilers 116 118 4 975 393 Chickens – grand parents – 206 681 Hatching eggs – 7 133 323 Game – 274 Land (vineyards) – hectares 118 118 Cattle – 214 The following is the agricultural produce of the Group for the year ended 30 September: Dozens of eggs 3 110 074 73 886 364 Number of day-old chicks – 61 228 065 Kilograms of meat 1 737 195 70 943 867 Number of point-of-lay hens 56 371 5 954 260 Number of culls 63 157 3 126 785 Kilograms of fresh grapes produced 1 962 181 1 871 712


156



GROUP

2013 R’000

2012 R’000

15. Loans to/(from) joint ventures Non-current assets 31 922 39 585 Current liabilities (7 370) (7 000) Net loans to/(from) joint ventures 24 552 32 585 Unsecured loans 24 552 32 585

24 552 32 585 Proportionately consolidated amounts of joint ventures included in the financial

statements:

Property, plant and equipment and intangible assets 247 111 250 557Investment in associates 10 491 10 491

Non-current trade and other receivables 146 165 Deferred income tax assets 112 4 Non-current borrowings (26 833) (19 878) Deferred income tax liabilities (15 748) (18 143) Current assets 264 068 247 354 Current liabilities (142 517) (150 312) Net assets 336 830 320 238 Revenue 973 314 851 987 Expenses (949 872) (815 339) Profit for the year 23 442 36 648 Refer to note 48 for further detail.


157



GROUP

2013 R’000

2012 R’000

16. Investment in associates Unlisted shares at cost 16 201 16 201 Transferred to disposal group classified as held for sale (5 710) –

Interest in retained earnings and reserves 1 615 1 114Balance beginning of year 1 114 (895)Share of profit of associated companies 1 225 1 331Deferred unrealised profit on disposal of property, plant and equipment recognised 678 678Dividends paid (314) –Transferred to disposal group classified as held for sale (1 088) –

12 106 17 315

Refer to note 49 for further detail.

17. Available-for-sale financial assetsShares in other companies Listed

At cost 26 986 23 154Fair value balance at end of year 31 432 20 626Fair value balance at beginning of year 20 626 12 682Fair value adjustment for year 13 606 9 067Fair value adjustment reclassified to profit or loss (2 800) (1 123)

58 418 43 780Unlisted

At cost 467 470 Fair value balance at end of year 159 8 509 Fair value balance at beginning of year 8 509 9 456 Fair value adjustment for year 5 187 (947) Fair value adjustment reclassified to profit or loss (13 537) –

Transferred to disposal group classified as held for sale (2) – 624 8 979

Available-for-sale financial assets at fair value 59 042 52 759 A detailed register is available at the Company’s registered office. Available-for-sale financial assets are denominated in the Group’s functional currency and no

significant risk concentrations exist outside South Africa. The fair values of listed shares are based on their current bid prices in an active market. The fair values of unlisted shares are based on quoted prices in an “over-the-counter” market for these shares.

Fair value adjustments reclassified to profit or loss arise from the disposal of shares.


158



GROUP

2013 R’000

2012 R’000

18. InventoriesRaw materials 1 280 986 1 294 409Manufactured products 948 270 904 434Packaging and consumables 261 951 251 116 2 491 207 2 449 959 Inventory carried at net realisable value amounts to R6,252,898 (2012: R18,020,462). Inventories and biological assets, with carrying values of R2,797,191,922 (2012: R2,501,038,204) (including assets held for sale), of certain Group companies are pledged as security for general and revolving banking facilities of some of the Group’s subsidiaries. Refer to note 25 for further detail.

19. Derivative financial instruments19.1 Derivative financial instruments – summary

Embedded derivatives 315 (1 186)Foreign exchange contracts – not earmarked for hedging 2 577 3 998Foreign exchange contracts – cash flow hedges 1 903 501Futures – fair value hedges (58) 354

4 737 3 667 For the purposes of the statement of financial position derivative financial instruments are presented as follows: Current assets 10 978 6 791Current liabilities (6 241) (3 124) 4 737 3 667 Trading derivatives are classified as a current asset or liability. The fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability if the maturity of the hedged item is equal to or less than 12 months. The carrying values of derivative financial instruments represent their fair values at the reporting date.

Refer to note 19.2 for further detail.


159



GROUP

2013 2013 2013 2012 2012 2012Foreign

amountRand

amountFair

valueForeign

amountRand

amountFair

value’000 R’000 R’000 ’000 R’000 R’000

19. Derivative financial instruments (continued)19.2 Derivative financial instruments – detail19.2.1 Derivative instruments earmarked for hedging

(cash flow hedges)19.2.1.1 Commodity instruments

Futures (refer to note 1 below) 6 024 (16 660)19.2.1.2 Currency forward contracts

Purchases of foreign exchange contractsUS dollar 10 000 101 439 1 903 7 200 60 377 501

Hedging reserve (before income tax) 7 927 (16 159)

19.2.2 Derivative instruments earmarked for hedging (fair value hedges)

19.2.2.1 Commodity instrumentsFutures (58) 354

19.2.3 Other derivative instruments 19.2.3.1 Currency forward contracts

Purchases of foreign exchange contracts 5 421 3 097US dollar 46 225 465 830 4 352 30 089 250 671 2 377British pound 540 8 893 326 1 306 17 666 265Swiss franc 40 452 9 140 1 247 1Euro 2 076 28 363 734 3 240 35 011 423New Zealand dollar – – – 79 542 31

Sales of foreign exchange contracts (2 844) 901US dollar 22 335 225 347 (2 853) 11 355 94 878 907Singapore dollar – – – 60 407 (1)Euro 498 6 792 9 575 6 157 (5)

19.2.3.2 Embedded derivative financial instrumentsOptions – supplier purchase contracts 315 (1 186)

Note 1: Disclosed as part of cash and cash equivalents.


160



GROUP

2013 R’000

2012 R’000

20. Trade and other receivablesTrade receivables 1 653 749 1 917 214Allowance for outstanding credit notes (30 676) (39 775)Provision for impairment (15 663) (8 447)Net trade receivables 1 607 410 1 868 992Staff 967 1 874Prepayments 24 244 28 111Receivables from related parties (refer to note 36) 33 855 54 822Value-addedtax 30 480 56 969Loans 20 876 20 444Other 33 929 3 557

1 751 761 2 034 769

For the purposes of the statement of financial position trade and other receivables are presented as follows:Non-current assets 20 876 20 444Current assets 1 730 885 2 014 325

1 751 761 2 034 769

The carrying value of trade and other receivables approximates their fair value at the reporting date.

An allowance for outstanding credit notes is accounted for based on past experience.

At year-end trade receivables with a carrying value of R1,666,587,877 (2012: R1,616,436,218) (including assets held for sale) of certain Group companies were pledged as security for general and revolving banking facilities of some of the Group’s subsidiaries. Refer to note 25 for further detail.

Financial assets that are neither past due nor impaired are considered to be fully performing. The carrying amounts of fully performing financial assets included in trade and other receivables at year-end are:National customers 720 295 740 122Other customers 922 420 1 121 065

1 642 715 1 861 187

The credit quality of fully performing financial assets included in trade and other receivables is supported by the high proportion of the carrying value that can be ascribed to national customers, especially in the formal retail sector. The credit quality of the customer base is considered to be good based on historical default rates.


161



GROUP

2013 R’000

2012 R’000

20. Trade and other receivables (continued)Financial assets included in trade and other receivables that are outside their normal payment terms are considered to be past due. The following represents an analysis of the past due number of days of financial assets that are past due but not impaired:

National customersUp to 30 days 2 195 8 65231 to 60 days 2 515 4 55961 to 90 days 739 1 21791 to 120 days 196 664More than 120 days 462 2 582

6 107 17 674

Other customersUp to 30 days 32 811 31 05331 to 60 days 12 494 11 11561 to 90 days 1 321 4 39391 to 120 days 299 1 194More than 120 days 1 290 23 032

48 215 70 787

Staff 31 to 60 days – 361 to 90 days – 3More than 120 days – 32

– 38

Loans to other partiesWithin 12 months – 3

– 3

Total 54 322 88 502

Individually impaired receivables where indicators of impairment are present, comprise of a number of non-material customers. The following trade receivables were impaired at year-end:National customers – –Other customers 15 663 8 447Total 15 663 8 447

Interest charged on impaired trade receivables amounts to Rnil (2012: R78,689).


162



GROUP

2013 R’000

2012 R’000

20. Trade and other receivables (continued)Movements on the Group’s provision for impairment of trade receivables are as follows:At 1 October 8 447 11 037Provision for impairment of receivables raised 20 155 3 241Provision for impairment utilised during the year (5 078) (2 827)Unused amounts reversed (1 277) (3 004)Transferred to disposal group classified as held for sale (6 584) –At 30 September 15 663 8 447

The Group holds a number of categories of collateral as security for trade receivable balances. These collateral categories include mortgage bonds and notarial bonds, cession of trade receivables, various guarantees and letters of credit.

Fair value of collateral held against trade receivables at year-end (limited to the individual trade receivable balance):National customers 86 2 967Other customers 197 771 179 471

197 857 182 438

The carrying amount of the Group’s trade receivables is denominated in the following currencies:Covered by means of foreign exchange contracts: 113 953 74 795Euro 6 792 6 110US dollar 107 161 68 280Other currencies – 405

Uncovered: 1 539 796 1 842 419Euro 5 876 5 122British pound 92 356 71 648Botswana pula 40 560 30 668US dollar 24 167 18 123SA rand 1 367 046 1 687 593Other currencies 9 791 29 265

Total 1 653 749 1 917 214

The following balances, included in the summary above, are denominated in the functional currencies of the relevant entities:British pound 83 864 64 935Botswana pula 40 560 30 668

124 424 95 603

Other receivables are largely denominated in the Group’s functional currency and no significant risk concentrations exist outside South Africa.


163



GROUP

2013 R’000

2012 R’000

21. Cash and cash equivalents Cash at bank and on hand 300 115 158 762 Short-term bank deposits 98 531 216 884 398 646 375 646

The effective interest rate at reporting date on short-term bank deposits was between 3.0% and 5.5% (2012: 3.8% and 5.9%).

For the purposes of the statement of cash flows, the year-end cash, cash equivalents and bank overdrafts comprised of the following:

Cash and short-term deposits 398 646 375 646 Short-term borrowings (353 463) (7 506) Bank overdrafts (15 463) (7 506) Call loans (338 000) –

45 183 368 140

The Group’s cash equivalents and short-term deposits are placed with creditable financial institutions with appropriate credit ratings.

The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:

Euro 1 183 191 British pound 10 559 8 761 Botswana pula 64 151 US dollar 679 1 537 SA rand 383 705 357 715 Other currencies 2 456 7 291 Total 398 646 375 646

The following balances, included in the summary above, are denominated in the functional currencies of the relevant entities:

British pound 10 097 8 484Botswana pula 64 151 10 161 8 635 The majority of the Group’s cash and cash equivalents is denominated in the Group’s functional currency and no significant risk concentrations exist outside South Africa.

The carrying amounts of cash and cash equivalents approximate their fair values at the reporting date.

Restricted balances

Cash and cash equivalents include restricted balances of R15.8 million (2012: R16.7 million). Restricted cash balances consist of initial margin balances with the JSE Ltd which serve as collateral for derivative positions held at year-end. This cash will only be accessible by the subsidiary company when the related derivative positions are closed.


164



GROUP

2013 R’000

2012 R’000

22. Share capital Authorised – ordinary shares of 10 cents each 400,000,000 (2012: 400,000,000) ordinary shares 40 000 40 000 Authorised – class A ordinary shares of 10 cents each 18,130,000 (2012: 18,130,000) class A ordinary shares of 10 cents each 1 813 1 813 Total issued and fully paid – ordinary shares of 10 cents each At beginning of year: 230,314,486 (2012: 201,236,929) ordinary shares 23 031 20 124

Issued to participants of the B-BBEE equity transaction: Nil (2012: 18,091,661) ordinary shares – 1 809Issued to the Pioneer Foods Broad-Based BEE Trust: Nil (2012: 10,599,988) ordinary shares – 1 060

Issued to management in terms of share appreciation rights scheme: 692,361 (2012: 385,908) ordinary shares 70 38

At end of year: 231,006,847 (2012: 230,314,486) ordinary shares 23 101 23 031 Shares issued in terms of share appreciation rights scheme

During the year the Company issued 692,361 (2012: 385,908) ordinary shares of 10 cents each at an average of R71.64 (2012: R59.20) per share in terms of the share appreciation rights scheme.

Shares issued in terms of the B-BBEE equity transactionDuring the previous year the Company issued 28,691,649 shares to the value of R1,000,347,998 to specialpurposevehicles(“SPVs”)thatwereformedintermsofaB-BBEEequitytransaction.Intermsof the transaction 17,488,631 ordinary shares were issued to strategic BEE partners at a subscription price of R55.14 per share and 603,030 ordinary shares to current and former black directors of the Company at a subscription price of R58.04 per share. A further 10,599,988 shares were issued to the Pioneer Foods Broad-Based BEE Trust at a subscription price of R0.10 per share.

TheseSPVsareconsolidatedaswhollyownedsubsidiariesintermsofIFRSandtheseissuedshares of the Company are consequently treated as treasury shares of the Group. The B-BBEE equity transaction was in accordance with the Company’s memorandum of incorporation and the Companies Act, Act 71 of 2008, as amended.

Treasury shares of 10 cents each – nominal valueTreasury shares held by management share incentive trust

At beginning of year: 2,545,933 (2012: 3,881,401) ordinary shares 255 388Net treasury shares sold: 1,123,817 (2012: 1,335,468) ordinary shares (113) (133)At end of year: 1,422,116 (2012: 2,545,933) ordinary shares 142 255

Treasury shares held by B-BBEE equity transaction participantsAt beginning of year: 18,091,661 (2012: Nil) ordinary shares of 10 cents each 1 809 –Nil (2012: 18,091,661) ordinary shares issued to participants to the B-BBEE equity transaction – 1 809At end of year: 18,091,661 (2012: 18,091,661) ordinary shares 1 809 1 809

Treasury shares held by Pioneer Foods Broad-Based BEE TrustAt beginning of year: 10,599,988 (2012: Nil) ordinary shares 1 060 –Nil (2012: 10,599,988) ordinary shares issued in terms of the B-BBEE equity transaction – 1 060At end of year: 10,599,988 (2012: 10,599,988) ordinary shares 1 060 1 060


165



GROUP

2013 R’000

2012 R’000

22. Share capital (continued)Treasury shares of 10 cents each – nominal value (continued)Treasury shares held by subsidiary

At beginning and at end of year: 17,982,056 (2012: 17,982,056) ordinary shares 1 798 1 798

Total treasury shares – nominal valueAt beginning of year 4 922 2 186Ordinary shares issued to participants of the B-BBEE equity transaction (at subscription price) – 1 809Ordinary shares issued to Pioneer Foods Broad-Based BEE Trust (at subscription price) – 1 060Ordinary shares sold by management share incentive trust (at strike price) (113) (133)At end of year 4 809 4 922

Net listed ordinary share capital – nominal valueTotal issued and fully paid ordinary shares 23 101 23 031Treasury shares held by management share incentive trust (142) (255)Treasury shares held by B-BBEE equity transaction participants (1 809) (1 809)Treasury shares held by Pioneer Foods Broad-Based BEE Trust (1 060) (1 060)Treasury shares held by subsidiary (1 798) (1 798)

18 292 18 10920,000,000 (2012: 20,000,000) unissued ordinary shares are under control of the directors until the next annual general meeting.

Treasury shares – carrying amountConsist of:

Treasury shares held by management share incentive trust 27 391 44 084 Treasury shares held by B-BBEE equity transaction participants 999 288 999 288 Treasury shares held by Pioneer Foods Broad-Based BEE Trust 1 060 1 060 Treasury shares held by subsidiary 163 113 163 113 1 190 852 1 207 545

Issued and fully paid – unlisted class A ordinary shares of 10 cents each held by employee share scheme trust

At beginning of year: 8,198,120 (2012: 9,294,530) class A ordinary shares 820 929Bought back and cancelled: 830,760 (2012: 1,096,410) class A ordinary shares (83) (109)At end of year: 7,367,360 (2012: 8,198,120) class A ordinary shares held by employee share scheme trust 737 820

During the year the Company issued Nil (2012: Nil) class A ordinary shares.

Class A ordinary shares are not listed on the JSE Ltd. These shares have full voting rights, similar to those of ordinary shares.


166



GROUP

2013 Number

’000

2012 Number

’000 23. Share-based payments23.1 Management share incentive scheme (equity-settled) Number of shares made available Unallocated under control of directors 612 612 Shares under option in terms of option scheme: Number at end of year 810 1 934 Number at beginning of year 1 934 3 269 Redeemed (1 124) (1 335)

1 422 2 546

Number of options At R8.65 per share, exercisable up to 26 May 2014 73 472 At R14.05 per share, exercisable up to 23 December 2014 305 547 At R21.86 per share, exercisable up to 24 January 2016 227 465 At R31.42 per share, exercisable up to 11 February 2017 162 236

At R25.00 per share, payable by 26 May 2014 43 214 810 1 934 The weighted average share price at the exercise date, for share options exercised during the year, was R72.34 (2012: R59.12).

The fair values were calculated using the Actuarial Binomial Option Pricing Model. The principal

assumptions for the last grant (during 2007) were as follows: Number Number Weighted average share price at grant date (cents per share) 1 269 1 269 Weighted average exercise price (cents per share) 1 214 1 214 Expected volatility 20.0% to 33.8% 20.0% to 33.8% Expected life (years) 4 to 6 4 to 6 Risk free rate 7.2% to 9.7% 7.2% to 9.7% Expected dividend yield 2.7% to 4.4% 2.7% to 4.4% Expected volatility was determined by calculating the historical volatility of the share price of

a similar JSE-listed entity in the food sector. The cost accounted for during the current year amounts to Rnil (2012: R51,000).


167



GROUP

2013 Number

2012 Number

23. Share-based payments (continued)23.2 Broad-based employee share scheme (cash-settled) During 2006 the Group introduced a broad-based employee share scheme for all employees, other

than management qualifying for the share-based compensation scheme. In terms of the scheme, employees received class A ordinary shares with full voting rights and dividend rights equal to 30% of that of ordinary shares. Once the notional threshold debt has been repaid, class A ordinary shares will convert into ordinary shares.

In case of termination of employment prior to the final date the resultant actions depend on whether the employee is considered to be a “good leaver” or an “other leaver”.

An employee is considered to be a “good leaver” if employment is terminated because of: – Death – Permanent disability – Retirement – Retrenchment – Sale of business

– Termination for a reason that in the discretion of the Board has the effect of qualifying the employee as a “good leaver”

– Any other reason after the lapse of a period of five years

An employee is considered to be an “other leaver” in the event that termination takes place within a period of five years for any reason other than that constituting a “good leaver”, or an employee fails to adhere to the provisions of the scheme. The period of five years ended 31 January 2011, therefore subsequent to this date every leaver will be regarded as a “good leaver”.

The class A ordinary shares of “good leavers” will be purchased by the Company at a price equal to the market value of an ordinary share, less the notional threshold debt. The purchase price will, at the option of the Company, either be settled in cash, or be utilised on behalf of the “good leaver” to subscribe for ordinary shares at the market value of ordinary shares.

The class A ordinary shares of “other leavers”, purchased prior to 31 January 2011, were purchased

by the Company at R0.01. Reconciliation of number of class A ordinary shares Balance at beginning of year 8 198 120 9 294 530 Good leavers – purchased by the Company (830 760) (1 096 410) Balance at end of year 7 367 360 8 198 120

The estimated fair value of a class A ordinary share on 30 September 2013 was R55.21 (2012: R24.31). The fair value per class A ordinary share was used to calculate the total cost of the scheme in terms of IFRS 2 – Share-based Payment. The cost accounted for during the current year amounts to a debit of R145,888,398 (2012: credit of R35,586,617).

These fair values were calculated using the Actuarial Binomial Option Pricing Model. The principal assumptions were as follows:Ordinary share price at 30 September (cents per share) 8 750 5 300Notional loan amount at 30 September (cents per share) 3 213 3 096Prime rate at 30 September 8.5% 8.5%Expected volatility 20.1% to 25.5% 18.2% to 26.8%Expected duration to repay notional debt (years) Note 2 Note 1Expected dividend yield 3.0% 3.0%Risk-free rate 4.8% to 8.7% 4.8% to 7.9%Expected volatility was determined by calculating the volatility of a share price of a similar JSE-listed entity in the food industry.


168



GROUP

2013 Number

2012 Number

23. Share-based payments (continued)23.2 Broad-based employee share scheme (cash-settled) (continued) The principal assumptions used to calculate the expected number of shares that will vest, are as

follows: Expected rate of “leavers” (including “other leavers”) (per annum) Note 2 Note 1

Note 1: All employees to have left the scheme by 2026 with an equal number leaving each year.Note 2: All employees to have left the scheme by 2026 with an equal number leaving each year with a specific adjustment for Quantum Foods personnel to exit the scheme in 2014.

23.3 Management share appreciation rights scheme (equity-settled) The Group adopted a share appreciation rights scheme for qualifying management during the year

ended 30 September 2008. The exercise of vested share appreciation rights entitles the employee to ordinary shares in Pioneer

Food Group Ltd. This number of ordinary shares is calculated by dividing the amount by which the share price, relating to the exercised share appreciation rights, appreciated from grant date to exercise date, by the share price at the exercise date.

Number

’000Number

’000

Number of share appreciation rights made available Number at beginning of year 4 925 4 653 Expired/forfeited (157) (88) Redeemed (1 266) (775) New allocation at R49.96 per share – 16

New allocation at R61.85 per share – 1 119New allocation at R56.81 per share 568 –New allocation at R66.13 per share 490 –New allocation at R74.48 per share 310 –New allocation at R81.18 per share 27 –

New allocation at R76.23 per share 21 – Number at end of year 4 918 4 925 Number of share appreciation rights At R25.48 per share, exercisable up to 8 June 2018 426 816 At R24.20 per share, exercisable up to 26 February 2019 394 584 At R34.74 per share, exercisable up to 8 February 2020 1 441 2 115

At R49.96 per share, exercisable up to 7 February 2021 250 318At R61.85 per share, exercisable up to 9 February 2022 609 675At R61.85 per share, exercisable up to 16 February 2022 (BEE special grant) 384 417At R56.81 per share, exercisable up to 5 February 2023 502 –At R56.81 per share, exercisable up to 5 February 2023 (BEE special grant) 64 –At R66.13 per share, exercisable up to 1 April 2016 240 –At R66.13 per share, exercisable up to 1 May 2023 250 –At R74.48 per share, exercisable up to 31 May 2018 310 –At R81.18 per share, exercisable up to 17 June 2023 27 –

At R76.23 per share, exercisable up to 30 June 2023 21 – 4 918 4 925


169



GROUP

2013 Number

2012 Number

23. Share-based payments (continued)23.3 Management share appreciation rights scheme (equity-settled) (continued) Shareappreciationrightsweregrantedon6February2013atastrikepriceofR56.81.Vesting

takes place over a five-year period with the first 20% vesting on 6 February 2014.

Shareappreciationrightsweregrantedon6February2013atastrikepriceofR56.81.Vestingtakes place after five years with 100% vesting on 6 February 2018.

Shareappreciationrightsweregrantedon1April2013atastrikepriceofR66.13.Vestingtakesplace after three years with 100% vesting on 1 April 2016.

Shareappreciationrightsweregrantedon1April2013atastrikepriceofR66.13.Vestingtakesplace over a five-year period with the first 20% vesting on 1 April 2014.

Shareappreciationrightsweregrantedon1June2013atastrikepriceofR74.48.Vestingtakesplace after five years with 100% vesting on 31 May 2018.

Shareappreciationrightsweregrantedon18June2013atastrikepriceofR81.18.Vestingtakesplace over a five-year period with the first 33.3% vesting after three years on 18 June 2016.

Shareappreciationrightsweregrantedon1July2013atastrikepriceofR76.23.Vestingtakesplace over a five-year period with the first 33.3% vesting after three years on 1 July 2016.

In 2012, share appreciation rights were granted on 10 February 2012 and 17 February 2012 at a strike price of R61.85. The first allotment vests over a five-year period with the first 20% of the share appreciation rights vesting on 10 February 2013 and the second allotment vests 100% after five years on 17 February 2017. Share appreciation rights granted prior to 2012 vest at 20% per year over a five-year period.

The net estimated weighted average fair value at grant date per share appreciation right for share appreciation rights outstanding at 30 September 2013 is R13.36 (2012: R12.08). The fair value per share appreciation right was used to calculate the total cost of the scheme in terms of IFRS 2 – Share-based Payment. The cost accounted for in the current year amounts to R15,207,701 (2012: R13,785,900).

These fair values were calculated using the Actuarial Binomial Option Pricing Model. The principal assumptions were as follows: Weighted average share price at grant date (cents per share) 4 637 3 988 Expected volatility 18.5% to 30.9% 22.0% to 30.9% Expected dividend yield 2.0% to 4.1% 2.0% to 4.1% Risk-free rate 5.4% to 8.9% 6.8% to 8.9% Expected life (years) 1 to 6 1 to 6

Expected volatility was determined by calculating the volatility of the share price of a similar JSE-listed entity in the food industry.

The Board initially approved a maximum number of 14,500,000 ordinary shares that may be issued in terms of the management share appreciation rights scheme. At 30 September 2013, 13,328,468 ordinary shares (2012: 14,020,829) were still available for issue.

23.4 B-BBEE equity transaction once-off share-based payment charge (equity-settled)During 2012 the Group implemented a B-BBEE equity transaction by means of a specific issue of ordinary shares to strategic BEE partners, current and former black directors (collectively “BEE Investors”) and the perpetual Pioneer Foods Broad-Based BEE Trust founded by the Group.

The equity risk attached to the Pioneer Foods shares have not passed to the BEE Investors, therefore Pioneer Foods has effectively provided the BEE Investors with a share option. The B-BBEE equity transaction is deemed to be a call option provided to the BEE Investors, as the BEE Investors’ risk is limited to their own equity contribution of the “premium” paid by them with no further downside and unlimited upside potential.

The fair value of the deemed option granted was determined by applying an option pricing model. This resulted in a once-off non-cash flow share-based payment charge amounting to R160,744,990 being credited to the Equity Compensation Reserve. The transaction has no significant impact on earnings other than the once-off non-cash flow share-based payment charge recognised in profit or loss; however, refer to note 9 for the dilutive effect of the B-BBEE equity transaction on earnings per share.


170



GROUP

2013 Number

2012 Number

23. Share-based payments (continued)23.4 B-BBEE equity transaction once-off share-based payment charge (equity-settled)

(continued)The fair value of the deemed option was calculated using the Monte Carlo Simulation Model. The principal assumptions were as follows:Weighted average ordinary share price at effective date (cents per share) 5 804 5 804Subscription price (cents per share) 5 514 and 5 804 5 514 and 5 804Expected volatility 26.7% 26.7%Duration of the option (years) 7 7Expected dividend yield 3.5% to 4.0% 3.5% to 4.0%Risk-free rate 5.6% to 7.5% 5.6% to 7.5%

The weighted average share price represents the 30-day volume weighted average share price of Pioneer Foods at the date at which the transaction was effected.

In terms of the agreement, ordinary shares were issued to strategic BEE partners and current and former black directors of the Group at a subscription price of R55.14 and R58.04 cents per share respectively. The expected exercise price was calculated “inside the model” based on an initial outstanding debt (the respective subscription prices) increased by the interest accrued on this outstanding debt according to the agreed funding rates and projected prime interest rates, less any payments by way of dividends declared by Pioneer Foods which was based on the expected dividend assumptions as noted below.

Volatilityismeasuredastheannualisedstandarddeviationofthedailypricechangesintheunderlyingshare price under the assumption that the share price is log-normally distributed. Expected volatility was mainly determined with reference to the Group’s historical volatility and the historical volatility of a share price of a similar JSE-listed entity in the food industry. The share price of the Group was furthermore adjusted for dividends paid during the measurement period.

Shares issued in terms of the transaction are subject to a lock-in period of seven years, i.e participants are not allowed to sell or encumber the shares until 16 March 2019 (the end date). The duration of the option was assumed to be seven years, being equal to the lock-in period.

The dividend yield was projected based on the historical share price and projected dividend share cover supplied by management.

The risk free rate was determined by using the forward swap curve and the respective points thereon as at the effective date.

Other features of the option incorporated into the measurement of the fair value include the strategic BEE partners’ contribution of 10% of the subscription price. The current and former black directors of the Company did not contribute to the subscription price.

Refer to note 22 for further details on the B-BBEE equity transaction.

R’000 R’000 24. Other reserves Fair value reserve 25 863 25 109 Foreign currency translation reserve 68 737 6 516 Hedging reserve 5 704 (11 637) Equity compensation reserve 326 026 330 422

426 330 350 410 The fair value reserve relates to the difference between the fair value and cost price of investments in

listed and unlisted shares, classified as available-for-sale financial assets. The foreign currency translation reserve relates to exchange differences arising from translation of

foreign subsidiaries’ and joint ventures’ statements of comprehensive income at average exchange rates for the year and their statements of financial position at the ruling exchange rates at the reporting date if the functional currency differs.


171



GROUP

2013 R’000

2012 R’000

24. Other reserves (continued)The hedging reserve relates to the change in fair value of derivative financial instruments. These derivative financial instruments include futures, forward exchange contracts and interest rate derivatives. Refer to note 19 for further detail.

The fair value of share options and share appreciation rights issued to qualifying management are accounted for in the equity compensation reserve over the respective vesting periods. The reserve is adjusted at each reporting date when the entity revises its estimates of the number of share options and share appreciation rights that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to this reserve in equity for equity-settled plans.

The B-BBEE equity transaction implemented during the previous financial year resulted in a once-off

non-cash flow share-based payment charge amounting to R160,744,990. In terms of the agreement, the strategic BEE partners contributed a total of R96,428,820 of the subscription price. These two amounts were recognised in the equity compensation reserve in terms of IFRS 2 – Share-based Payment. Refer to note 23.4 for further detail.

25. Borrowings25.1 Borrowings – summary Non-current Secured financing Syndicated 1 000 000 –

B-BBEE equity transaction: redeemable preference shares 449 680 449 680Other 18 585 32 605

Unsecured financing 15 798 15 437 Total non-current 1 484 063 497 722 Current Secured financing Syndicated 3 727 767 652

B-BBEE equity transaction: redeemable preference shares 32 451 14 405Other 9 197 71 678Call loans 338 000 –

Unsecured financing 2 500 10 460 Bank overdrafts 15 463 7 506 Total current 401 338 871 701

Total borrowings 1 885 401 1 369 423 Refer to note 25.2 for further detail. The level of borrowings is within the limits prescribed by the memorandum of incorporation of the

Company and its subsidiaries.

Security provided for syndicated and call loans The Group’s syndicated facilities matured in September 2013. These were replaced by new

syndicated financing of R3.5 billion in the form of bullet, revolving and overnight loans and general banking facilities. These loans are secured by mortgages over certain immovable properties with carrying values of R882,509,672 (2012: R599,448,533) at year-end, special notarial bonds over certain items of plant and equipment with carrying values of R489,203,755 (2012: R634,948,171) at year-end and general notarial bonds over all movable assets of Pioneer Foods (Pty) Ltd, Ceres Fruit Juices (Pty) Ltd, Continental Beverages (Pty) Ltd and Retail Brands Interafrica (Pty) Ltd.


172



GROUP

2013 R’000

2012 R’000

25. Borrowings (continued)25.1 Borrowings – summary (continued)

Security provided for syndicated and call loans (continued) The syndicated and call loans are secured by pledges over certain Group companies’ inventories,

biological assets and trade receivables. At year-end inventories (including biological assets) and trade receivables pledged as security for this purpose amounted to R2,797,191,922 (2012: R2,494,559,964) and R1,656,587,877 (2012: R1,594,958,018) respectively. These amounts include those of the disposal group classified as held for sale.

Pioneer Food Group Ltd subordinated all its claims against the obligors (Pioneer Foods Holdings Ltd, Pioneer Foods (Pty) Ltd, Ceres Fruit Juices (Pty) Ltd, Retail Brands Interafrica (Pty) Ltd and Continental Beverages (Pty) Ltd) to all the lenders’ claims arising from the new debt structure. It also guarantees the repayment of all the loan obligations of the obligors and ceded its subordinated claims againsttheobligorstothesecuritySPVandundertakestoremainaninvestmentcompanywithitsonly assets being its investment in Pioneer Foods Holdings Ltd and its overall intercompany claims.

B-BBEE equity transactionDuring the previous year the Company issued 28,691,649 shares to the value of R1,000,347,998 to strategic BEE partners, former and current black directors of the Company (hereafter collectively referred to as “BEE Investors”) and the Pioneer Foods Broad-Based BEE Trust in terms of a B-BBEE equity transaction. The subscription price for these share issues was mainly financed by Pioneer Foods’ wholly owned subsidiary, Pioneer Foods (Pty) Ltd, and by third-party funding from Rand Merchant Bank Ltd, a division of FirstRand Bank Ltd (“RMB”). The strategic BEE partners contributed 10% of the subscription price. The current and former black directors of the Company and the BEE Trust did not contribute to the subscription price.

Inordertogiveeffecttothefinancialassistanceprovided,theBEEInvestors’SPVsissuedvariablerate cumulative A preference shares to RMB at a dividend rate of 82.5% of the prime interest rate and B preference shares to Pioneer Foods at a dividend rate of 99% of the prime interest rate. During the current financial year certain issuers of the A preference shares have elected to fix, from 1 April 2013, the A preference share dividend rate at 9.5% per annum for the remainder of the financing period. The total capital value of the issued A preference shares is R449,679,606, of which R418,878,828 is now at a fixed dividend rate of 9.5%.

The preference shares do not have voting rights, except in respect of certain resolutions such as those affecting the rights of preference shares. Preference shares are treated as borrowings and the related dividends as interest in terms of IFRS accounting principles.

Security provided for B-BBEE equity transactionIn terms of the B-BBEE equity transaction RMB provided BEE Investors with finance in the form of cumulative redeemable preference shares. Pioneer Foods (Pty) Ltd provided RMB with a guarantee amounting to R100 million for this financial assistance. Refer to the directors’ report for further detail.

Security provided for other borrowingsFor further detail on security provided for other loans refer to note 25.2.

As at year-end, short-term facilities in terms of the syndicated financing of R513,314,447 (2012: R188,311,733) were utilised. These facilities are also secured by the same security provided for in terms of the syndicated and call loans.


The carrying values of borrowings approximate their fair values at the reporting date and are denominated in the following currencies:

Euro 2 096 174 British pound 15 443 18 891 Botswana pula 12 865 7 221 US dollar 1 966 3 289 SA rand 1 842 511 1 336 904

Other currencies 10 520 2 944 Total 1 885 401 1 369 423 The following balances, included in the summary above, are denominated in the functional currencies

of the relevant entities: British pound 15 165 18 891 Botswana pula 12 865 7 221 28 030 26 112


173



GROUP

Year of redemption

Interest rateat year-end

%2013

R’000 2012

R’000 25. Borrowings (continued)25.2 Borrowings – detail25.2.1 Secured financing 1 513 640 1 336 020

Syndicated loans:Quarterly payments (amortising loans) – – – 165 297Instalments Rnil (2012: from R6,133,448 to R15,297,070).

Quarterly payments (bullet loans) – – – 602 355Instalments (interest only) Rnil (2012: from R2,552,363 to R5,082,288). Secured by mortgages over immovable property, special notarial bonds over specific items of property, plant and equipment and general notarial bonds over all movable assets of specific Group subsidiaries. Refer to note 25.1 for further detail.

Quarterly payments (bullet loan) 2016 6.3 200 726 –Instalments (interest only) of R3,147,852 (2012: Rnil).Quarterly payments (bullet loan) 2016 6.5 200 746 –Instalments (interest only) of R3,232,619 (2012: Rnil).Quarterly payments (bullet loan) 2018 6.5 602 255 –Instalments (interest only) of R9,772,652 (2012: Rnil).

Secured by mortgages over immovable property, special notarial bonds over specific items of property, plant and equipment and general notarial bonds over all movable assets of specific Group subsidiaries. Refer to note 25.1 for further detail.

Redeemable preference shares: 2019 7.0 and 9.5 482 131 464 085Accumulated dividends and capital are repaid as dividend income from investments are received.Secured by a guarantee of R100 million from a Group subsidiary.

Other loans:Monthly payments 2024 7.8 8 058 1 087Instalment of R91,151 (2012: R79,942).Secured by mortgages over land and buildings of Plot 10, Brakwater which had a carrying value of R29 million at year-end.

Monthly payments – – – 16 979Instalment of Rnil (2012: R205,282).Secured by a charge over specific assets of the subsidiary company.

Monthly payments – – – 60Instalment of Rnil (2012: R1,513).Secured by a charge over specific assets of the subsidiary company.

Monthly payments 2017 7.5 4 559 5 079Instalment of R116,527 (2012: R71,719).Secured by a first mortgage bond over portion 1 of the Kees farm No 5 Mr, Tuli Block.

Monthly payments 2016 3.0 11 489 12 539Instalment of R328,207 (2012: R253,727).Secured by a charge over specific assets of the subsidiary company.

Quarterly payments – – – 62 187Instalment of Rnil (2012: R16,151,758).

Secured by special notarial bonds over specific items of property, plant and equipment and general notarial bonds over all movable assets of specific Group subsidiaries. Refer to note 25.1 for further detail.

Quarterly payments 2014 2.5 3 676 6 352Instalment of R2,042,325 (2012: R1,671,575).Secured by a charge over specific freehold assets of the subsidiary company.


174



GROUP

Interest rateat year-end

%2013

R’000 2012

R’000 25. Borrowings (continued)25.2 Borrowings – detail (continued)25.2.2 Unsecured financing 18 298 25 897

Loans 8.5 4 438 4 077Variableinterestrateswithnofixedtermsofrepayment.Loans 11 360 11 360Interest-free loans with no fixed terms of repayment. Quarterly payments (bullet loans) 7.5 2 500 10 460Instalments interest only.

Total amount owing 1 531 938 1 361 917

Portion of liabilities payable within one year included in current liabilities (47 875) (864 195)Secured financing

Syndicated and other (12 924) (839 330)Redeemable preference shares (32 451) (14 405)

Unsecured financing Loans (2 500) (10 460)

1 484 063 497 722


175



GROUP

2013 R’000

2012 R’000

26. Deferred income tax Balance at beginning of year 649 630 577 974 Charge in profit or loss (47 344) 56 626 Foreign exchange translation adjustment 1 352 (418) Deferred income tax on foreign exchange contracts charged to equity 393 140 Deferred income tax on swaps and collars charged to equity – 2 517 Deferred income tax on share-based payment of share appreciation rights (29 999) 3 015

Deferred income tax on fair value adjustments of available-for-sale financial assets charged to equity 1 702 1 207 Business combinations 30 033 8 569 Transferred to disposal group classified as held for sale (193 162) – 412 605 649 630

Due to the following temporary differences: Capital allowances, including trademarks 692 850 762 255 Inventories (3 818) 6 731 Biological assets 2 859 53 707 Provision for post-retirement medical benefits and long-service awards (34 111) (33 374) Leave accrual (32 471) (35 974)

Bonus accrual (26 867) – Prepaid expenses 3 955 7 636 Provision for impairment of trade receivables (2 204) (1 576) Rebates, growth incentives and settlement discount accruals (18 006) (20 275) Assessed losses (116 010) (52 388) Reinsurance commission received in advance (665) (642) Fair value adjustments on available-for-sale financial assets 5 724 4 022 Allowance for credit notes (8 644) (11 170) Deferred income (5 827) (5 979) Derivative financial instruments (146) 581

Share-based payments (40 528) (20 159)Accruals – personnel costs (6 283) –

Other 2 797 (3 765) 412 605 649 630 For the purpose of the statement of financial position deferred income tax is presented as follows:

Non-current assets 74 255 2 741Non-current liabilities (486 860) (652 371)

(412 605) (649 630)

During the year deferred income tax assets of R74,849,965 (2012: R2,737,173) have been recognised of which the utilisation thereof depends on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences.

The assets relate to assessed losses of entities that suffered losses in the current and/or preceding years.

The losses suffered in the current and/or previous period arose from identifiable causes that are unlikely to recur. These entities have a strong earnings potential and future profitability is expected against which unrecognised tax losses can be utilised.


176



GROUP

2013 R’000

2012 R’000

27. Provisions for other liabilities and charges27.1 Post-retirement medical benefits Balance at beginning of year 58 033 58 439 Interest cost 4 675 4 432 Actuarial loss/(gain) 2 087 (1 310) Service cost 201 190 Payments (2 902) (3 718) 62 094 58 033 The amount recognised in the statement of financial position was determined as follows:

Present value of unfunded obligations 60 528 57 048Unrecognised actuarial gain 1 566 985

62 094 58 033

The historical present values for the three years prior to the comparative period of the unfunded obligation were as follows:

2011 – R58,439,000 2010 – R59,826,000 2009 – R57,142,000

The Group expects to pay R4,838,000 (2012: R4,374,000) in terms of the post-retirement medical benefit plan within the next 12 months.

Existing provisions are based on the following important assumptions: Medical inflation rate: 7.6% (2012: 7.8%) p.a.

Discount rate: 8.0% (2012: 8.2%) p.a. The date of the most recent actuarial valuation is 1 October 2013. The effect of a 1% increase in the assumed health cost trend is as follows: Increase in the defined benefit obligation 6 411 6 086 Increase in the aggregate of current service and interest cost 551 542 The effect of a 1% decrease in the assumed health cost trend is as follows: Decrease in the defined benefit obligation 5 520 5 251 Decrease in the aggregate of current service and interest cost 472 463


177



GROUP

2013 R’000

2012 R’000

27. Provisions for other liabilities and charges (continued)27.2 Long-service awards Balance at beginning of year 61 161 54 873 Interest cost 5 013 4 451 Actuarial loss 2 948 1 316 Service cost 8 009 7 307 Payments (8 107) (6 786)

Transferred to disposal group classified as held for sale (9 294) – 59 730 61 161

The amount recognised in the statement of financial position was determined as follows: Present value of unfunded obligations 59 730 61 161 Existing provisions are based on the following important assumptions: Discount rate: 7.5% (2012: 8.2%) p.a. Salary increases: 7.9% (2012: 7.8%) p.a. Normal retirement age: 60 (2012: 60) years The date of the most recent actuarial valuation is 1 October 2013. 27.3 Total provision for other liabilities and charges Consists of: Post-retirement medical benefits 62 094 58 033 Long-service awards 59 730 61 161 121 824 119 194 For the purpose of the statement of financial position the total provision for other liabilities and

charges is presented as follows: Non-current liabilities 121 824 119 194 Current liabilities – –

121 824 119 194


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GROUP

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28. Accrual for Competition Commission penalties Balance at beginning of year 215 481 417 622 Amounts paid during the year (216 667) (216 667) Unwinding of discount 1 186 14 526 – 215 481 For the purpose of the statement of financial position the accrual for Competition Commission

penalties is presented as follows: Non-current liabilities – – Current liabilities – 215 481 – 215 481

Pioneer Foods and the Competition Commission ("the Commission") agreed on 2 November 2010 to a full and final settlement on the bread, milling and other investigations conducted by the Commission.

The salient provisions of the settlement agreement, which was approved by the Competition Tribunal (“the Tribunal”) on 30 November 2010, are as follows:

1. Pioneer Foods will pay administrative penalties of R500 million to the Commission. The

Commission will pay this sum to the National Revenue fund. 2. Pioneer Foods has furthermore committed to a reduction in its gross profit, amounting to

R160 million when benchmarked against an agreed base period, in respect of a selection of defined wheaten flour and bread products.

3. These figures exclude the administrative penalty of R195,718,614 imposed by the Tribunal in the

bread matter which was paid by Pioneer Foods in April 2010. 4. The settlement amount in paragraph 1 was provided for in the 2010 financial year and became

payable as follows: R66,666,667 within five days of confirmation of the settlement agreement as an order of the

Tribunal (“the first payment date”), R216,666,667 on the first anniversary of the first payment date and R216,666,667 on the second anniversary of the first payment date. Payments have been discounted at a rate of 6.6%.

5. Pioneer Foods furthermore undertook not to reduce its committed cumulative capital expenditure

from 2010 to 2013 as a result of the settlement agreement, and committed to increase the capital expenditure by R150 million over the same period.


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GROUP

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29. Share-based payment liability Balance at beginning of year 108 249 146 013 Share-based payment 145 888 (35 587) Dividends paid on class A ordinary shares (2 713) (2 177) 251 424 108 249


30. Trade and other payables Trade payables 1 605 942 1 519 535 Accrued expenses 113 353 89 572 Related parties (refer to note 36) 1 133 4 787 Deferred revenue 10 462 27 536 Government grants 22 048 10 728 Value-addedtax 1 245 598 Accrual for leave 117 972 130 979 Accrual for 13th cheque 65 338 70 991 Other 72 820 78 280

2 010 313 1 933 006

The carrying amounts of the Group’s trade payables are denominated in the following currencies: Covered by means of foreign exchange contracts: 398 423 10 313 Euro 3 060 2 130 US dollar 395 363 8 183 Uncovered: 1 207 519 1 509 222 Euro 8 487 2 981 British pound 65 178 57 365 Botswana pula 7 806 9 249 US dollar 8 176 56 010 SA rand 1 117 872 1 381 168 Other currencies – 2 449

Total 1 605 942 1 519 535

The following balances, included in the summary above, are denominated in the functional currencies of the relevant entities:British pound 63 632 54 174Botswana pula 7 806 9 249

71 438 63 423 Other payables are mostly denominated in the Group’s functional currency and no significant risk concentrations exist outside South Africa.


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GROUP

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31. Financial risk management31.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including interest rate

risk, foreign exchange risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

The Board approved an overall decision-making framework in terms of which financial risks are

evaluated, managed and hedged by executive management. (a) Market risk (i) Interest rate risk The Group’s interest rate risk arises from both financial assets and financial liabilities. Financial liabilities exposed to interest rate risk include interest-bearing short- and long-term

borrowings, bank overdrafts and call loans. The Group borrows at both fixed and variable interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest rates.

The interest rate profile as at 30 September is summarised as follows: Variablerate 1 436 170 1 369 423 Fixed rate 449 231 –

Total loans 1 885 401 1 369 423 Percentage of total loans: % %Variablerate 76 100Fixed rate 24 –

Total loans 100 100 Refer to note 25 for detail regarding interest rates. Based on various scenarios the Group manages its interest rate risk by entering into floating-to-fixed

interest rate swaps, zero-cost interest rate collar contracts or any other applicable hedging instruments from time to time. The portion of interest-bearing borrowings to be hedged is determined based on a future view of macro-economic factors as informed by independent financial advisors. The level of debt to be hedged is reviewed by management on a regular basis. The main purpose of the Group’s hedging strategy is to hedge the Group against a possible increase in interest rates; however, the Group also contracts for sharing in the up-side of a possible decrease in interest rates. Where such instruments qualify for hedge accounting, hedge accounting principles are applied in accounting for these hedging instruments.

At 30 September 2013 none of the Group’s interest-bearing borrowings were hedged.


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31. Financial risk management (continued)31.1 Financial risk factors (continued) (a) Market risk (continued) (i) Interest rate risk (continued) Interest rate swaps have the economic effect of converting a portion of borrowings from floating

rates to fixed rates. Under the interest rate swap agreements, the Group agrees with other parties to exchange, at specified intervals (primarily quarterly), the difference between contracted fixed interest rates and floating interest rates calculated by reference to agreed notional amounts.

A zero-cost interest rate collar contract is an instrument which combines the purchase of a cap and

the sale of a floor to specify a range in which an interest rate will fluctuate. The instrument insulates the buyer against the risk of a significant rise in a floating rate, but limits the benefits of a drop in that floating rate. Financing costs are effectively "collared" between these upper and lower limits. Cash flows are only settled, at specified intervals, if the benchmark rate was exceeded. Settlement amounts are calculated by reference to the agreed notional amounts.

Financial assets exposed to interest rate risk include cash, short-term bank deposits and loans to

associates and joint ventures. The Group’s cash and cash equivalents are placed with creditable financial institutions.

Cash and short-term bank deposits are invested at variable rates. At year-end R98,531,308

(2012: R216,884,022) was invested at rates that varied from 3.0% to 5.5% (2012: 3.8% to 5.9%). At year-end loans to joint ventures were granted interest free or at variable rates from 5.0% to 7.5%

(2012: 5.0% to 9.5%). (ii) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various

currency exposures, primarily with respect to the euro, US dollar and British pound. Foreign exchange risk arises from future commercial transactions denominated in foreign currencies, recognised assets and liabilities denominated in foreign currencies and derivative financial instruments. Apart from the Group’s exposure to trade receivables and payables denominated in foreign currencies, no other financial assets or liabilities expose the Group to significant foreign currency risk.

The Group manages short-term foreign exchange exposure relating to trade imports and exports,

in terms of formal foreign exchange policies with prescribed limits. Foreign exchange risk arising from capital imports is hedged in total by means of foreign exchange contracts or other appropriate hedging instruments. On a case-by-case basis, depending on potential profit or loss volatility caused by the fair value movement of the derivative, management decides whether or not to apply hedge accounting.

The Group has certain investments in foreign operations, whose net assets are exposed to foreign

currency translation risk. However, the Group’s exposure to this risk is insignificant as the Group’s investments in foreign operations are not material.

Refer to note 19 for further detail of foreign exchange contracts at year-end.


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31. Financial risk management (continued)31.1 Financial risk factors (continued) (a) Market risk (continued) (iii) Price risk The Group is exposed to price risk of equity securities due to investments held by the Group that are

classified on the consolidated statement of financial position as ‘available-for-sale financial assets’. To manage its price risk arising from investments in equity securities, the portfolio is managed by three major professional fund managers and investments are spread over a variety of industries in the market. The Group’s investment in equity securities is not material.

The Group is further exposed to commodity price risk. The risk arises from the Group’s need to

buy specific quantities and qualities of raw materials to meet its milling requirements. These raw materials include wheat, maize, soya beans, sorghum, barley and oats.

The Group uses exchange-for-physical contracts, options and futures to hedge itself against the

price risk of these commodities. These contracts hedge the future purchase price of raw materials. Settlement of the physical contracts and local futures are effected by physical delivery. To the extent that commodity forward contracts and futures qualify for hedge accounting under IAS 39 – Financial Instruments: Recognition and Measurement, the effective portion of the movement in fair values of these derivatives are accounted for as either cash flow hedges or fair value hedges.

Commodities are hedged in terms of a formal procurement policy which includes a raw material

procurement hedging policy, pricing options and exposure limits, approved by the Board. The policy is regularly reviewed by the procurement committee under chairmanship of the chief executive officer. The policy is sufficiently flexible to allow management to rapidly adjust hedges following possible changes in raw material requirements.

Refer to note 19 for detail of commodity instruments at year-end. (iv) Sensitivity analysis The table below summarises the impact on post-tax profit and equity of changes in market risks

relating to the Group’s financial instruments exposed to foreign currency risk, interest rate risk and price risk.

The rates used are those used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates.

The reasonable possible changes in the relevant risk variables are based on management’s economic outlook for the next 12 months. Changes to these risk variables are due to a revised economic outlook.

Change in foreign currency Derivative financial instruments affected by changes in exchange rates include foreign exchange

contracts. The summary below reflects the results of an expected change in US dollar of 1.0% (2012: 3.0%), British pound of 0.5% (2012: 4.0%), Botswana pula of 0.5% (2012: 2.0%) and euro of 1.0% (2012: 4.0%), with all other variables held constant.

Rand depreciates against foreign currencies – Increase/(decrease) in profit after income tax

Trade receivables 937 4 908 Trade payables (3 562) (3 494) Cash and cash equivalents 17 319 Derivative financial instruments not earmarked for hedging 2 383 (4 283) Borrowings (33) (787)

– Increase in equity after income taxDerivative financial instruments earmarked for hedging 730 1 304

472 (2 033)

If the South African rand appreciates against these currencies it will have an opposite effect on reserves of the same amount.


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31. Financial risk management (continued)31.1 Financial risk factors (continued) (a) Market risk (continued) (iv) Sensitivity analysis (continued) Change in interest rate The summary below reflects the results of an expected change in the prime interest rate of 0.25%

(2012: 0.5%) with all other variables held constant. Interest rate increases – Increase/(decrease) in profit after income tax Short-term bank deposits 173 781 Interest-bearing borrowings (2 604) (3 199) (2 431) (2 418) If the prime interest rate decreases it will have an opposite effect on profit after income tax of the

same amount for financial instruments other than interest rate swaps and collars. Change in commodity prices Derivative financial instruments affected by changes in the commodity prices relate to futures and

options. The summary below reflects the results of an expected change in the wheat price of 1.0% (2012: 10.0%) and an expected change in the maize price of 5.0% (2012: 10.0%), with all other variables held constant.

Commodity prices increase – Increase in profit after income tax Derivative financial instruments not earmarked for hedging 394 837 – Increase in equity after income tax Derivative financial instruments earmarked for hedging 7 798 22 374 8 192 23 211 If these prices would decrease it will result in a decrease in profit after income tax or reserves of the

same amount.


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GROUP

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31. Financial risk management (continued)31.1 Financial risk factors (continued) (a) Market risk (continued) (iv) Sensitivity analysis (continued) Change in security prices Available-for-sale financial assets relate to investments in securities. The summary below reflects the

results of an expected change in the security prices of 9.0% (2012: 13.0%), with all other variables held constant.

Security prices increase – Increase in equity after income tax Available-for-sale financial instruments 4 310 4 661 If these prices would decrease it will result in a decrease in reserves of the same amount. (b) Credit risk Financial assets that potentially subject the Group to a concentration of credit risk consist principally

of cash and cash equivalents, derivative financial instruments and deposits with financial institutions, as well as credit exposure to trade receivables, including outstanding receivables and committed transactions.

The Group’s credit risk exposure relating to cash and cash equivalents, derivative financial

instruments and deposits with financial institutions is managed on a Group level. Cash equivalents and short-term deposits are placed with a limited group of creditable financial institutions, all of which have Moody’s P-2 or equivalent short-term credit ratings. A short-term rating of P-2 indicates that the issuer has a strong ability to repay short-term debt obligations.

The Group’s credit risk exposure relating to trade receivables is managed on a decentralised basis.

Trade receivables are subject to credit limits, credit control and credit approval procedures. The credit quality of customers is assessed, taking into account its financial position, past experience with the customer and other factors when approving new customers and determining or revising individual credit limits. The utilisation of credit limits is regularly monitored.

Credit risk with respect to trade receivables is limited due to the large number of customers

comprising the Group’s customer base and their dispersion across different industries and geographical areas.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position as well as financial guarantees of R46,824,864 (2012: R47,643,078) issued.


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31. Financial risk management (continued)31.1 Financial risk factors (continued) (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the

availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

The Group manages its liquidity risk by using reasonable and retrospectively assessed assumptions

to forecast the future cash-generating capabilities and working capital requirements of the businesses it operates and by maintaining sufficient reserves, committed borrowing facilities and other credit lines as appropriate. The Group’s policy has been to maintain substantial unutilised banking facilities and reserve borrowing capacity as well as significant liquid resources.

Surplus cash held by Group treasury over and above the balance required for working capital management is invested in interest-bearing money market deposits with sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. At the reporting date, the Group held short-term bank deposits of R98,531,308 (2012: R216,884,022).

At year-end the Group has borrowing facilities in the form of committed borrowings as well as

overnight facilities at the four major South African banks. Sufficient collateral in the form of inventory, biological assets, trade receivables and property, plant and equipment are provided as security for the debt. The Group also has the option to repay long-term debt as excess cash flow is available.

The Group tends to have significant fluctuations in short-term borrowings due to seasonal factors.

Consequently, Group policy requires that sufficient borrowing facilities are available to exceed projected peak borrowings.

The Group’s unutilised borrowing facilities are as follows: Total borrowing facilities 4 017 738 4 410 633 Net interest-bearing liabilities (1 486 755) (993 777) 2 530 983 3 416 856 Refer to note 50 for a maturity analysis that analyses the Group’s non-derivative financial liabilities into

relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows.

31.2 Capital risk management For capital management purposes the current level of capital in the Group is defined as the difference

between the total assets and total liabilities of the Group. The capital employed is managed on a basis that enables the Group to continue operating as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt

divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings and bank overdrafts as disclosed in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as capital and reserves attributable to owners of the parent as shown in the consolidated statement of financial position.

The main focus of the Group’s capital management is to ensure liquidity, in the form of short-term

borrowing facilities, in order to have sufficient available funding for the Group’s working capital requirements.


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31. Financial risk management (continued)31.3 Fair values All financial instruments measured at fair value are classified using a three-tiered fair value hierarchy

that reflects the significance of the inputs used in determining the measurement. The hierarchy is as follows:

• Level 1 – Fair value measurements derived from quoted prices (unadjusted) in active markets for

identical assets or liabilities. • Level 2 – Fair value measurements derived from inputs other than quoted prices included within

level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 – Fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of financial instruments traded in active markets (such as publicly traded derivatives

and available-for-sale securities) are based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price. These instruments are included in level 1. Instruments included in level 1 comprise primarily JSE-listed equity investments classified as available-for-sale.

The fair values of financial instruments that are not traded in an active market (for example, over-

the-counter securities) are determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

The Group uses a variety of methods that makes assumptions that are based on market conditions

existing at the reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments. Other techniques, such as estimated discounted cash flows, are used to determine the fair value for the remaining financial instruments. The fair values of interest rate swaps and collars are calculated as the present value of the estimated future cash flows. The fair value of foreign exchange contracts is determined using quoted forward exchange rates at the reporting date.

The carrying amounts of cash, trade and other receivables less provision for impairment, trade and

other payables and short-term borrowings are assumed to approximate their fair values due to the short term until maturity of these assets and liabilities.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair values of long-term investments and long-term borrowings are not materially different from the carrying amounts.

Refer to note 52 for detail on fair value measurements by level of fair value measurement hierarchy.


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32. Contingent liabilitiesGuarantees in terms of loans by third parties to contracted service providers 46 825 47 643Other guarantees 250 250Share of items of joint ventures 374 281Third-party claims 1 054 1 169Other – 652

48 503 49 995

LitigationLand claims – discontinued operationsRegional Land Claim Commissioners acknowledged claims against two farms (three portions) of a Group company, in terms of the provisions of sections 2 and 11 of the Restitution of Land Rights Act of 1994 (as amended), during 2007.

During the current reporting period, sale agreements were concluded for these two farms of which the total value was R5,250,000.

It is not anticipated that any material transactions will arise from these land claims.

Dispute with egg contract producers – discontinued operationsAs previously reported, the claims from four contract egg producers are still unresolved.

Pioneer Foods is defending contractual claims from its privatised egg contract producers and the matters were set down for arbitration during 2012. Since the hearings commenced in 2012, settlements were negotiated with the two egg contract producers that had the largest claims. These settlements had no adverse financial impact on Pioneer Foods. The claims from the remaining four contract egg producers are still unresolved.

Pioneer Foods filed pleas to all these claims and in two of these claims counterclaims have been filed to recover damages suffered by Pioneer Foods as a result of breach of contract by the contract producers.

Management is of the view, based on legal advice regarding the merits of the claims against the Group, that the Group will not incur any material liability in respect of this matter.

Dispute with broiler farms and breeder farms – discontinued operationsSeveral breeder farms and broiler farms (four in total) also filed claims against Pioneer Foods for the alleged breach of the terms of their supply agreements with Pioneer Foods.

Only letters of demand have been received thus far and these claims should eventually be finalised by means of arbitration. No date has been set for the arbitration proceedings.

A further breeder farm has filed a claim against Pioneer Foods for the alleged breach of the terms of a shareholder agreement. A preliminary hearing on the matter was held in March 2013 and the court case had been postponed until August 2013 for hearing. Final argument by counsel was heard on 14 November 2013 and it is anticipated that judgement may be handed down early in 2014.

Based on legal advice regarding the merits of these claims management is of the view that the Group will not incur any material liability in respect of these matters.

Class action – continuing operationsStemming from the Competition Commission investigation into collusion amongst the bread producers in 2006, Pioneer Foods, Tiger Brands and Premier Foods (“the Producers”) were sued by the consumers (members of the public who consumed bread during that period) and the independent distributors that had been contracted by the Producers. They claimed that the Competition Act, Act 89 of 1998, paved the way for class actions against the Producers if they could each have their classes certified. After judgement was handed down by Judge van Zyl in the Cape High Court on 29 August 2011, dismissing the consumers and distributors applications for leave to appeal, both parties have since decided to petition the Supreme Court of Appeal (“SCA”). The consumers’ petition papers were served on Pioneer Foods on 22 September 2011 and those of the distributors were served on 28 September 2011.


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GROUP

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32. Contingent liabilities (continued)Class action – continuing operations (continued)The SCA held hearings on 6 November 2012 on the distributor matter and on 7 November 2012 on the consumer matter. These proceedings are a result of the appeals launched by the distributors and the consumers in their applications for class certification. The certification applications are a preliminary means for instituting class actions for damages against Pioneer Foods (Pty) Ltd, Tiger Brands Ltd and Premier Foods (Pty) Ltd relating to previous conduct of these firms in relation to bread, in contravention of the Competition Act, Act 89 of 1998.

Pioneer Foods successfully defended the class actions by the consumers and distributors during November 2012 resulting in a judgement where the distributors’ appeal was dismissed by the SCA. The appeal by the consumers for a “national class” certification was also dismissed by the SCA. The only remaining issue that was remitted back to the Western Cape High Court was whether the consumers would be able to argue for a “Western Cape Class”, however, the papers before the SCA did not support such a finding. They were given an opportunity to supplement their papers, which they have done and the quantum of their claim is R2,000,000 as against the (and to be shared by) the 3 respondents.

At the time of reporting, the latter matter was still pending before the Western Cape High Court for the consumers. The distributors subsequently filed an appeal with the Constitutional Court against the SCA’s judgement that had dismissed their claim. At the time of reporting, there was no quantum to their claim.

The distributors’ Constitutional Court matter was heard in May 2013 and judgement handed down in June 2013. The distributors’ appeal was upheld by the Constitutional Court and their matter remitted back to the Western Cape High Court in a similar manner as those of the consumers. They have 2 months to supplement their papers in the interim, to which Pioneer Foods (together with Tiger Brands and Premier Foods) will have to reply. As at the date of this disclosure, no papers had yet been filed by them.

Based on legal advice, no provision has been raised for potential damages in these matters as management is of the view that no material liability will arise from these claims.

33. Commitments33.1 Operating lease commitments Not later than 1 year 54 871 53 655 Later than 1 year, but not later than 5 years 123 925 93 490 Later than 5 years 23 179 19 482 201 975 166 627 The Group leases various retail outlets, offices and warehouses under non-cancellable operating

lease agreements. The lease terms are between 5 and 25 years, and the majority of lease agreements are renewable at the end of the lease period at market rates.

The Group also leases various items of plant and machinery under cancellable operating lease

agreements. The Group is usually required to give a six-month notice for the termination of these agreements. The lease expenditure charged to profit or loss during the year is disclosed in note 4.

33.2 Operating lease receivables The future aggregate minimum lease payments receivable under non-cancellable operating leases

are as follows: Not later than 1 year 198 741 Later than 1 year, but not later than 5 years 87 132 285 873 33.3 Future capital commitments Contractually committed 264 989 818 353 Approved by the Board, but not yet contractually committed 242 388 471 001 – for next financial year 242 388 423 001 – for year following next financial year – 48 000 Share of items of joint ventures 25 894 45 329 533 271 1 334 683 Allocated as follows: Property, plant and equipment 533 271 1 334 683

533 271 1 334 683 The expenditure will be financed from operating income and borrowed funds, in accordance with

a budget approved by the Board.


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34. Retirement benefits The Group contributes to retirement and provident funds for all its employees which are administered

by several service providers. These retirement and provident funds are defined contribution plans which are arranged and governed by the Pension Fund Act of 1956.

35. Government grants Cumulative amounts received 28 384 16 661 Cumulative amounts amortised (6 336) (5 933) Receipts deferred 22 048 10 728 The Group obtained and deferred as income a government grant of R13,962,774 (2012: R9,000,000).

The Group benefits from such assistance for capital expenditure.

36. Related-party transactions36.1 Parent

Pioneer Food Group Ltd is the ultimate holding company of the Pioneer Foods group of companies.

36.2 SubsidiariesDetails of effective interests in subsidiaries are disclosed in note 47.

36.3 Associates and joint venturesDetails of effective interests in associates are disclosed in note 49. Details of effective interests in and loans to joint ventures are disclosed in note 48.

36.4 Key management personnelKey management personnel include the members of the Board, members of the Group’s executive committee, divisional general managers as well as the immediate subordinates of such managers. Non-executive directors are included in the definition of key management personnel as well as any close family members of such persons and any entity over which key management exercise control, joint control or significant influence.

Close family members are those family members who may be expected to influence, or be influenced, by that person in their dealings with Pioneer Foods. They include the person’s domestic partner and children, the children of the person’s domestic partner, and dependants of the person or the person’s domestic partner.

36.5 Transactions and balances During the financial year the Company and its subsidiaries conducted the following transactions with

joint ventures, associates, parties exercising significant influence and key management personnel: Sale of goods Joint ventures 282 984 243 970 Parties exercising significant influence – 1 480 Rendering of services Joint ventures 1 812 1 090 Purchase of goods Key management personnel 629 28 Joint ventures 14 128 13 920 Associates 6 361 2 848 Parties exercising significant influence – 30 433 Services bought Joint ventures 3 337 5 648

Parties exercising significant influence – 164


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36. Related-party transactions (continued)36.5 Transactions and balances (continued) Net interest received Joint ventures 4 581 2 610 Key management personnel compensation Salaries and other short-term employee benefits 117 817 112 846

Termination benefits 18 015 4 303 Post-employment benefits 11 969 11 173 Other long-term benefits – 65 Share-based payments 90 377 2 623 238 178 131 010

Receivables from related parties arise mainly from sales transactions and are due at the end of the month following the date of the transaction. These receivables are unsecured in nature and bear no interest. No provision for impairment was made against receivables from related parties (2012: Rnil).

Payables to related parties arise mainly from purchase transactions and are due 30 days after the statement date. These payables bear no interest.

Year-end balances arising from sales/purchases of goods/services Receivable from related parties

Joint ventures 33 855 49 850Associates – 4 972

33 855 54 822

Payable to related partiesJoint ventures 515 1 592Associates 618 3 195

1 133 4 787

Loans to/(from) related partiesLoans to/(from) joint venturesBeginning of year 32 585 17 244Loans advanced during the year 108 996 124 429Loan repayments received (121 692) (112 478)Interest charged 4 997 3 243Interest received (416) (633)Fair value adjustment 82 780End of year 24 552 32 585

No provision for impairment was made against loans made to joint ventures (2012: Rnil).


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GROUP

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37. Net cash profit from operating activities Profit before income tax 715 155 916 643 Adjusted for: Depreciation 388 798 344 630 Impairment of property, plant and equipment and intangible assets 244 163 – Impairment of loan 814 – Net loss on disposal of property, plant and equipment and intangible assets 4 549 10 370 Remeasurement profit on previously held interest in joint venture – (3 893) Net profit on disposal of available-for-sale financial assets (16 336) (1 123) Unrealised profit on foreign exchange contracts and on foreign

exchange differences (4 160) (3 749) Fair value of embedded derivative financial instruments (315) 1 186 Fair value of commodity futures and options 58 (354) Change in provision for impairment of trade receivables 13 801 (2 590) Change in allowance for outstanding credit notes (5 826) (8 260) Once-off share-based payment charge on B-BBEE equity transaction – 160 745 Share-based payments 161 096 (21 750) Changes in provisions for post-retirement medical benefits and long-service awards 13 245 7 503 Non-current biological asset adjustments – 748 Dividends received (1 651) (1 431) Interest received (18 227) (19 073) Interest paid 129 399 136 629 Share of profit of associated companies (1 225) (1 331) 1 623 338 1 514 900

38. Working capital changes Increase in inventory (276 097) (135 660) Decrease/(increase) in trade and other receivables 278 (161 853) Increase in trade and other payables 369 863 34 414 Increase in current biological assets (34 002) (4 934) Changes to derivative financial instruments (assets and liabilities) 3 847 12 383 Provisions paid (11 009) (10 504) 52 880 (266 154)


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39. Dividends paid to Group ordinary shareholders Amounts unpaid at beginning of year (515) (413) As disclosed in statement of changes in equity (211 321) (151 549) Dividends declared to ordinary shareholders (257 753) (178 082) Treasury dividends received by share incentive trusts 2 128 2 535

Treasury dividends received by subsidiary 20 859 15 105Treasury dividends received by participants to B-BBEE equity transaction 20 986 7 960

Treasury dividends received by Pioneer Foods Broad-Based BEE Trust 2 459 933 Amounts unpaid at end of year 336 515 (211 500) (151 447)

40. Income tax paidAmounts unpaid at beginning of year (479) (10 867)As disclosed in profit or loss (264 342) (255 275)Income tax effect of disposal of shares of management share incentive scheme (1 207) (1 114)Hedging reserve – reversal of previous year income tax to profit or loss (4 665) 4 361Hedging reserve – income tax current year (1 687) 4 665Amounts unpaid at end of year 29 302 479

(243 078) (257 751)

41. Proceeds on disposal of property, plant and equipment and intangible assets Book value of property, plant and equipment and intangible assets 32 966 24 413 Net loss on disposal of property, plant and equipment and intangible assets (4 549) (10 370)

28 417 14 043 42. Proceeds on disposal of available-for-sale financial assets

Cost price of available-for-sale financial assets 4 178 3 429Net profit on disposal of available-for-sale financial assets 16 336 1 123

20 514 4 552

43. Disposal of subsidiaries No subsidiaries were disposed of during the current or previous year.


193



GROUP

2013 R’000

2012 R’000

44. Business combinations44.1 Summary of business combinations during current year Effect on movement of: Property, plant and equipment 293 440 70 274 Goodwill 30 033 5 632 Inventories 1 099 928 Current biological assets 22 482 13 632 Trade and other receivables – 5 543

Cash and cash equivalents – (11 258)Borrowings – (20 843)

Deferred income tax (30 033) (8 569) Trade and other payables (2 012) (3 652)

315 009 51 687Purchase consideration due – (22 000)Fair value of previously held interest in joint venture – (4 227) 315 009 25 460Refer to note 44.2 for further detail.

44.2 Detail of business combinations during current year – discontinued operations before year-end

44.2.1 DFC Kikoesvlei Broiler FarmThe assets and liabilities of this business were acquired on 8 January 2013 and can be summarised as follows:Fair value Land and buildings 9 611 –Plant, machinery and equipment 66 515 –Goodwill 18 507 –Vehicles 374 –Current biological assets 165 –Inventories 394 –Trade and other payables (1 210) –Deferred income tax (18 507) –Purchase consideration – settled in cash 75 849 –

Reason for business combination:To increase own production capacity and to increase abattoir throughput.

Reason for goodwill paid or bargain purchase received:Goodwill resulted from the recognition of deferred income tax on property, plant and equipment as a result of the business combination.

Carrying valueAs the Group acquired the assets and liabilities of this business rather than the shares of the legal entity that previously owned such assets and liabilities, it is impracticable to disclose the carrying amounts in the accounting records of the previous owners prior to the acquisition. In these circumstances the Group does not have access to such carrying values.

Contribution since acquisition:Revenue 80 789 –Operating profit before impairment of Quantum Foods 2 017 –

Contribution assuming the acquisition was at the beginning of the year:Revenue 110 857 –Operating profit before impairment of Quantum Foods 2 768 –


194



GROUP

2013 R’000

2012 R’000

44. Business combinations (continued)44.2 Detail of business combinations during current year – discontinued operations before

year-end (continued)44.2.2 DFC Langspruit Breeder Farm

The assets and liabilities of this business were acquired on 23 October 2012 and can be summarised as follows:Fair value Land and buildings 14 564 –Plant, machinery and equipment 24 320 –Goodwill 7 425 –Vehicles 116 –Inventories 446 –Current biological assets 5 195 –Trade and other payables (345) –Deferred income tax (7 425) –Purchase consideration – settled in cash 44 296 –

Reason for business combination:To increase own production capacity and to increase abattoir throughput.



Contribution since acquisition:Revenue 1 668 –Operating loss before impairment of Quantum Foods (275) –

Contribution assuming the acquisition was at the beginning of the year:Revenue 1 775 –Operating loss before impairment of Quantum Foods (292) –

44.2.3 Lemoenkloof FarmThe assets and liabilities of this business were acquired on 1 February 2013 and can be summarised as follows:Fair value Land and buildings 10 050 –Plant, machinery and equipment 33 700 –Goodwill 4 101 –Vehicles 250 –Current biological assets 6 951 –Inventories 259 –Trade and other payables (133) –Deferred income tax (4 101) –Purchase consideration – settled in cash 51 077 –


195



GROUP

2013 R’000

2012 R’000

44. Business combinations (continued)44.2 Detail of business combinations during current year – discontinued operations before

year-end (continued)44.2.3 Lemoenkloof Farm (continued)

Reason for business combination:Additional laying capacity in region.



Contribution since acquisition:Revenue 63 969 –Operating profit before impairment of Quantum Foods 224 –

Contribution assuming the acquisition was at the beginning of the year:Revenue 95 953 –Operating profit before impairment of Quantum Foods 336 –

44.2.4 Mega EggsThe assets and liabilities of this business were acquired on 20 March 2013 and can be summarised as follows:Fair value Land and buildings 56 709 –Plant, machinery and equipment 72 927 –Vehicles 4 304 –Current biological assets 10 171 –Trade and other payables (324) –Purchase consideration – settled in cash 143 787 –

Reason for business combination:Expansion of Zambian business to extend the value chain from day-old-chicks to rearing of commercial layers to produce commercial eggs for sale.


Contribution since acquisition:Revenue 40 158 –Operating profit before impairment of Quantum Foods 10 313 –

Contribution assuming the acquisition was at the beginning of the year:Revenue 80 317 –Operating profit before impairment of Quantum Foods 20 625 –


196



GROUP

2013 R’000

2012 R’000

45. Segment informationManagement has determined the operating segments based on the reports reviewed on a regular basis by the chief operating decision-maker (“CODM”) in order to make strategic decisions.

Operating segments are divided into the following:SaskoQuantum FoodsBokomo FoodsCeres BeveragesOther

Sasko includes products such as wheaten flour, maize meal, rice, pasta, bread and the businesses of Bowman Ingredients (SA), Bokomo Namibia and Bokomo Botswana. Quantum Foods includes eggs, broilers and animal feeds and the businesses of Bokomo Zambia and Bokomo Uganda. Bokomo Foods includes breakfast cereals, dried fruit and other fast moving consumer goods and the Heinz Foods SA and Bokomo Foods (UK) businesses. Ceres Beverages includes fruit juices, fruit concentrate mixtures and carbonated soft drinks. The other operating segment represents all operations not included in the segments above.

The Agri Business segment has been renamed as Quantum Foods since the previous reporting period.

The Quantum Foods segment has been classified as a disposal group held for sale and as a discontinued operation.

From the beginning of the current reporting period the CODM reviewed the operating results of the Bokomo Zambia and Bokomo Uganda businesses as part of the Quantum Foods segment. The nature of these businesses are more aligned to the Quantum Foods segment as their operations predominantly include the production of animal feeds and the production and sale of commercial eggs and day-old chicks. As a result the previously reported segment revenue and results have been restated. Refer to note 54 for more detail.

The segment results disclosed per segment below is the CODM’s measure of each segment’s operational performance. The measure represents adjusted operating profit before items of a capital nature, after non-controlling interest before income tax and includes dividend income.

External revenue and all other items of income, expenses, profits and losses reported in the segment report is measured in a manner consistent with that in the statement of comprehensive income.

Segment assets consist of property, plant and equipment, intangible assets, inventories, biological assets, trade and other receivables and derivative financial instrument assets and exclude cash and cash equivalents, available-for-sale financial assets, loans to joint ventures, investment in associates, deferred and current income tax assets and loans receivable.

Segment liabilities consist of trade and other payables, provisions for other liabilities and charges, share-based payment liabilities and derivative financial instrument liabilities, and exclude borrowings, current and deferred income tax liabilities, loan from joint venture and dividends payable.

Segment capital expenditure consists of additions and replacements of property, plant and equipment and intangible assets.


197



GROUP

2013 R’000

2012 R’000

45. Segment information (continued) Segment revenue 20 895 849 18 907 784 Sasko 10 772 354 9 940 366 Quantum Foods 3 575 555 3 097 655 Bokomo Foods 3 526 690 3 071 546 Ceres Beverages 3 021 250 2 798 217 Less: Internal revenue (344 727) (298 025) Sasko (248 582) (204 373) Quantum Foods (16 686) (22 418) Bokomo Foods (60 104) (52 339) Ceres Beverages (19 355) (18 895)

External revenue 20 551 122 18 609 759 Sasko 10 523 772 9 735 993 Quantum Foods 3 558 869 3 075 237 Bokomo Foods 3 466 586 3 019 207 Ceres Beverages 3 001 895 2 779 322

Segment results 1 202 530 1 161 949Sasko 824 720 941 602Quantum Foods (18 858) (42 284)Bokomo Foods 289 293 263 827Ceres Beverages 263 767 88 314Other (156 392) (89 510)

Add: Dividend incomeOther 1 651 1 431

Less: Non-controlling interest (before income tax) Bokomo Foods (2 085) (1 633)

Adjusted segment results 1 202 096 1 161 747Sasko 824 720 941 602Quantum Foods (18 858) (42 284)Bokomo Foods 287 208 262 194Ceres Beverages 263 767 88 314Other (154 741) (88 079)


198



GROUP

2013 R’000

2012 R’000

45. Segment information (continued)

A reconciliation of the segment results to operating profit before income tax is provided below:

Segment results 1 202 096 1 161 747Share-based payment on broad-based share incentive scheme (145 888) 35 587Once-off share-based payment charge on B-BBEE equity transaction – (160 745)Operating profit before items of a capital nature 1 056 208 1 036 589

Adjusted for: Items of a capital nature (233 191) (5 354) Interest income 18 228 19 073 Finance costs (129 399) (136 629) Share of profit of associated companies 1 224 1 331 Non-controlling interest before income tax added back 2 085 1 633 Profit before income tax per statement of comprehensive income 715 155 916 643 Segment assets 11 237 599 10 093 490 Sasko 4 484 166 4 014 752 Quantum Foods 1 918 463 1 589 855 Bokomo Foods 2 824 537 2 497 616 Ceres Beverages 1 795 939 1 792 436 Other 214 494 198 831 A reconciliation of the segments’ assets to the Group’s assets is provided below: Segment assets per segment report 11 237 599 10 093 490 Adjusted for: Loans to joint ventures 31 922 39 585 Investment in associates 18 904 17 315 Available-for-sale financial assets 59 044 52 759 Loans receivable 20 876 20 444 Current and deferred income tax assets 79 145 6 978 Cash and cash equivalents 423 235 375 646 Total assets per statement of financial position 11 870 725 10 606 217 Total segment liabilities 2 673 858 2 379 054 Sasko 1 147 494 1 158 531 Quantum Foods 284 056 319 032 Bokomo Foods 467 343 383 026 Ceres Beverages 418 227 346 237 Other 356 738 172 228


199



GROUP

2013 R’000

2012 R’000

45. Segment information (continued) A reconciliation of the segments’ liabilities to the Group’s liabilities is provided below: Segment liabilities per segment report 2 673 858 2 379 054 Adjusted for: Non-current and current borrowings 1 885 408 1 369 423 Current and deferred income tax liabilities 714 214 657 087 Loan from joint venture 7 370 7 000 Dividends payable 336 515 Total liabilities per statement of financial position 5 281 186 4 413 079

Total segment capital expenditure (excluding business combinations) 1 085 063 733 917 Sasko 700 755 318 572 Quantum Foods 160 212 74 256 Bokomo Foods 96 075 182 654 Ceres Beverages 55 849 112 309 Other 72 172 46 126

Total segment capital expenditure (business combinations)

Quantum Foods 323 473 75 906

Total segment depreciation and amortisation 388 798 344 630 Sasko 145 989 137 242 Quantum Foods 56 075 44 517 Bokomo Foods 78 187 70 182 Ceres Beverages 62 885 53 592 Other 45 662 39 097

Items of a capital nature per segment (Loss)/profit on disposal of property, plant and equipment before income tax (4 550) (10 370) Sasko (7 023) (4 283) Quantum Foods 1 058 1 504 Bokomo Foods (1 162) (6 588) Ceres Beverages (1 283) (150) Other 3 860 (853) Remeasurement profit on previously held interest in joint venture Quantum Foods – 3 893

Profit on available-for-sale financial assets before income tax Other 16 336 1 123 Impairment of property, plant and equipment, intangible assets and loan before income tax (244 977) –

Sasko (606) –Quantum Foods (232 000) –

Bokomo Foods (11 557) – Other (814) –

Items of a capital nature before income tax (233 191) (5 354) Income tax effect 25 088 2 741 Items of a capital nature after income tax (208 103) (2 613)


200



GROUP

2013 R’000

2012 R’000

45. Segment information (continued) Other material items of income or expenses per segment Inventory written off per segment 139 165 123 225 Sasko 48 085 36 033 Quantum Foods 26 453 25 711 Bokomo Foods 43 330 41 227

Ceres Beverages 21 297 20 254

Geographical information The Group mainly operates in South Africa. Other operations are located in Africa with one

subsidiary in the United Kingdom. Due to the immaterial extent of operations in individual foreign countries in relation to South Africa, these foreign countries were grouped together as a single geographical segment.

Revenue derived by Group companies domiciled in the Republic of South Africa is classified as

revenue from South Africa. Revenue derived by Group companies domiciled in other countries is disclosed as foreign revenue. The same principles apply to segment assets and capital expenditure.

Segment revenue 20 825 024 18 841 999 South Africa 19 685 608 17 974 195 Foreign countries 1 139 416 867 804 Less: Internal revenue (273 903) (232 240) South Africa (271 564) (232 240) Foreign countries (2 339) –

External revenue 20 551 121 18 609 759 South Africa 19 414 044 17 741 955 Foreign countries 1 137 077 867 804

Total segment non-current assets 6 415 426 5 526 559 South Africa 6 000 663 5 292 539 Foreign countries 414 763 234 020

Total segment capital expenditure (excluding business combinations) 1 085 063 733 917 South Africa 1 062 108 704 860 Foreign countries 22 955 29 057

Total segment capital expenditure (business combinations) 323 473 75 906 South Africa 193 838 75 906 Foreign countries 129 635 –

Information regarding major customersDuring the period under review, revenue from certain customers exceeded 10% of Group revenue:Customer A 3 408 790 3 452 949Customer B 2 275 760 2 291 578

Revenue from these customers is reported within all operating segments except other.


201



GROUP

2013 R’000

2012 R’000

46. Events after the reporting periodDividend

A final dividend of 86 cents (2012: 70 cents) per ordinary share has been declared for the year. This will only be reflected in the statement of changes in equity for the next reporting period.

The 10,599,988 Pioneer Foods shares issued to the Pioneer Foods Broad-Based BEE Trust

during April 2012, is entitled to 20% of the final gross dividend payable, i.e. 17.2 cents per share (2012: 14.0 cents).

Other eventsNo other events that may have a material effect on the Group occurred after the end of the reporting period and up to the date of approval of the annual financial statements by the Board.


202



GROUP

Name of subsidiary(Pty) Ltd (except where indicated otherwise)

Country of incorporation

Issued share capital of subsidiary

Percentage interest

2013R

2012R

2013%

2012%

(except where indicated otherwise)47. Interest in subsidiaries 47.1 Manufacturing Bokomo Foods (UK) Ltd United Kingdom GBP3 000 120 GBP3 000 120 100 100 Bokomo Uganda Uganda UGX335 400 500 UGX335 400 500 100 100 Bokomo Zambia Ltd Zambia – Ordinary shares ZMK96 800 ZMK1 800 100 100 – Preference shares ZMK200 ZMK200 100 100 Ceres Fruit Juices South Africa 100 000 100 000 100 100 Continental Beverages South Africa 1 000 1 000 100 100 Grain Health Foods (UK) Ltd & United Kingdom GBP1 GBP1 100 100 Lohmann Breeding SA South Africa 100 100 100 100

MaitlandVinegarWorks South Africa 460 593 460 593 75 75 Pioneer Foods South Africa 252 252 100 100 Retail Brands Interafrica South Africa 1 000 1 000 100 100 Philadelphia Chick Breeders South Africa 900 900 100 100 Sasko Pasta ^ South Africa – 1 000 – 10047.2 Properties and letting Sasned # South Africa 2 2 100 10047.3 Investments Ceres Fruit Juices Investment Holdings # South Africa 200 200 100 100 Ceres Investment Company # South Africa 195 000 195 000 100 100 Pioneer Foods Holdings Ltd South Africa 220 220 100 10047.4 Services Sasguard Insurance Company Ltd South Africa 30 000 30 000 100 100

Notes:# Dormant at 30 September 2013.^ Deregistered during the year.& Dormant and in process to be dissolved at 30 September 2013.


203



GROUP

Name of joint venture (Pty) Ltd

Country of incorporation

Percentage interest

2013%

2012%

48. Interest in and loans to/(from) joint ventures48.1 Interest in joint ventures48.1.1 Manufacturing

Alpen Food Company South Africa South Africa 50 50Bokomo Botswana Botswana 50 50Bokomo Namibia Namibia 50 50Bowman Ingredients (SA) South Africa 50 50Heinz Foods SA South Africa 50 50

48.1.2 Properties and lettingAmigearVentures Botswana 49 49

GROUP

2013 R’000

2012 R’000

48.2 Loans to/(from) joint ventures Non-currentInterest-bearing loans 20 562 28 225Alpen Foods Company South Africa 4 437 4 077Bowman Ingredients (SA) – 1 014Heinz Foods SA 2 500 10 460Bokomo Namibia (normal loan) 1 000 1 006Bokomo Botswana 26 24Bokomo Namibia (redeemable preference shares) 12 599 11 644 Interest-free loansHeinz Foods SA 11 360 11 360

31 922 39 585CurrentInterest-bearing loans Bowman Ingredients (SA) (7 370) (7 000)

(7 370) (7 000)

Total loans to/(from) joint ventures 24 552 32 585

Loans are unsecured and interest-bearing, except where indicated otherwise, with no fixed terms of repayment. The interest rates at year-end applicable to interest-bearing loans varied from 5.0% to 7.5% (2012: 5.0% to 9.5%).

Financial assets that are neither past due nor impaired are considered to be fully performing. The total carrying amount of loans to joint ventures was fully performing at year-end. The credit quality of these fully performing loans is considered to be good based on historical default rates.


204



GROUP

Name of associate (Pty) Ltd

Percentage interest

Cost of shares

2013%

2012%

2013R’000

2012R’000

49. Investment in associates Farming Bergsig Breeders 28 28 1 700 1 700 Mynsar Eggs 35 35 4 010 4 010

Cottesloe Consultants 25 25 10 491 10 491 Total 16 201 16 201

Transferred to disposal group classified as held for sale (5 710) –10 491 16 201

Interest in retained earnings and reserves: Balance at beginning of year 1 114 (895) Share of profit of associated companies 1 225 1 331 Deferred unrealised profit on disposal of property, plant

and equipment recognised 678 678 Dividends paid (314) –

Transferred to disposal group classified as held for sale (1 088) – Balance at end of year 1 615 1 114

Investment in associates 12 106 17 315 The following is the summarised statement of financial

position of the abovementioned associ ated companies: Non-current assets 44 754 48 022 Current assets 23 007 33 292 Total assets 67 761 81 314 Non-current liabilities 26 149 25 680 Current liabilities 6 209 9 260 Total liabilities 32 358 34 940 Capital and reserves 35 403 46 374 Total equity and liabilities 67 761 81 314 The following is the summarised profit or loss of the

associated companies (after interest was acquired): Revenue 59 703 66 354 Operating profit 7 366 6 285 Net profit after income tax 3 904 5 018


205



GROUP

CapitalR’000

InterestR’000

TotalR’000

50. Maturity analysis of financial liabilities 30 September 2013 Not later than 1 year Borrowings excluding bank overdrafts and call loans 47 875 108 374 156 249 Trade and other payables 1 793 248 – 1 793 248 Other derivative financial instruments 6 241 – 6 241 Dividends payable 336 – 336

Loan from joint venture 7 370 369 7 739 Financial guarantees 46 825 – 46 825 1 901 895 108 743 2 010 638 Between 1 and 2 years Borrowings excluding bank overdrafts and call loans 10 208 107 492 117 700 10 208 107 492 117 700 Between 2 and 10 years Borrowings excluding bank overdrafts and call loans 1 473 855 288 564 1 762 419 1 473 855 288 564 1 762 419 Total Borrowings excluding bank overdrafts and call loans 1 531 938 504 430 2 036 368 Trade and other payables 1 793 248 – 1 793 248 Other derivative financial instruments 6 241 – 6 241 Dividends payable 336 – 336 Loan from joint venture 7 370 369 7 739 Financial guarantees 46 825 – 46 825 3 385 958 504 799 3 890 757

Note: Financial liabilities do not include provisions, accrual for 13th cheque, deferred revenue, government grants, accrual for leave, accrual for Competition CommissionpenaltiesandVATamountspayable.


206



GROUP

CapitalR’000

InterestR’000

TotalR’000

50. Maturity analysis of financial liabilities (continued) 30 September 2012 Not later than 1 year Borrowings excluding bank overdrafts and call loans 864 195 78 786 942 981 Trade and other payables 1 692 174 – 1 692 174 Other derivative financial instruments 3 124 – 3 124 Dividends payable 515 – 515

Loan from joint venture 7 000 350 7 350 Financial guarantees 47 643 – 47 643 2 614 651 79 136 2 693 787 Between 1 and 2 years Borrowings excluding bank overdrafts and call loans 8 587 26 490 35 077 8 587 26 490 35 077 Between 2 and 10 years Borrowings excluding bank overdrafts and call loans 489 135 255 341 744 476 489 135 255 341 744 476 Total Borrowings excluding bank overdrafts and call loans 1 361 917 360 617 1 722 534 Trade and other payables 1 692 174 – 1 692 174 Other derivative financial instruments 3 124 – 3 124 Dividends payable 515 – 515 Loan from joint venture 7 000 350 7 350 Financial guarantees 47 643 – 47 643 3 112 373 360 967 3 473 340

Note: Financial liabilities do not include provisions, accrual for 13th cheque, deferred revenue, government grants, accrual for leave, accrual for Competition CommissionpenaltiesandVATamountspayable.


207



GROUP

Loans and receivables

Assets at fair value through

profit or loss

Derivatives used for hedging

Available-for-sale Total

R’000 R’000 R’000 R’000 R’00051. Financial instruments by category

30 September 2013Assets as per statement of financial positionLoans to joint ventures 31 922 – – – 31 922Available-for-sale financial assets – – – 59 042 59 042Derivative financial instruments – 9 075 1 903 – 10 978Trade and other receivable (refer to note 1 below) 1 697 037 – – – 1 697 037Cash and cash equivalents 398 646 – – – 398 646Total 2 127 605 9 075 1 903 59 042 2 197 625

Liabilities at fair value through

profit or loss

Other financial

liabilities TotalR’000 R’000 R’000

Liabilities as per statement of financial positionBorrowings – 1 885 401 1 885 401Derivative financial instruments 6 241 – 6 241Trade and other payables (refer to note 2 below) – 1 793 248 1 793 248Dividends payable – 336 336Loan from joint venture – 7 370 7 370Total 6 241 3 686 355 3 692 596

GROUP

Loans and receivables

Assets at fair value through

profit or loss

Derivatives used for hedging

Available-for-sale Total

R’000 R’000 R’000 R’000 R’00030 September 2012Assets as per statement of financial positionLoans to joint ventures 39 585 – – – 39 585Available-for-sale financial assets – – – 52 759 52 759Derivative financial instruments – 6 290 501 – 6 791Trade and other receivable (refer to note 1 below) 1 949 689 – – – 1 949 689Cash and cash equivalents 375 646 – – – 375 646Total 2 364 920 6 290 501 52 759 2 424 470

Liabilities at

fair value through

profit or loss

Other financial

liabilities TotalR’000 R’000 R’000

Liabilities as per statement of financial positionBorrowings – 1 369 423 1 369 423Derivative financial instruments 3 124 – 3 124Trade and other payables (refer to note 2 below) – 1 692 174 1 692 174Dividends payable – 515 515Loan from joint venture – 7 000 7 000Total 3 124 3 069 112 3 072 236

Note1: FinancialassetsdonotincludeprepaidexpensesandVATamountsreceivable.Note 2: Financial liabilities do not include provisions, deferred revenue, government grants, accrual for 13th cheque, accrual for leave, accrual for Competition

CommissionpenaltiesandVATamountspayable.


208



GROUP

Level 1 R’000

Level 2 R’000

Level 3 R’000

Total R’000

52. Fair value categories of financial instruments measured at fair value 30 September 2013 Assets measured at fair value Available-for-sale financial assets– Listed securities 58 418 – – 58 418– Unlisted securities (traded over-the-counter) – 624 – 624Derivative financial instruments– Foreign exchange contracts – 10 663 – 10 663– Embedded derivatives – 315 – 315Total 58 418 11 602 – 70 020 Liabilities measured at fair valueDerivative financial instruments– Foreign exchange contracts – 6 183 – 6 183– Futures – fair value hedges – 58 – 58Total – 6 241 – 6 241

30 September 2012 Assets measured at fair value Available-for-sale financial assets – Listed securities 43 780 – – 43 780– Unlisted securities (traded over-the-counter) – 8 979 – 8 979Derivative financial instruments– Foreign exchange contracts – 6 437 – 6 437– Futures – fair value hedges – 354 – 354Total 43 780 15 770 – 59 550 Liabilities measured at fair value Derivative financial instruments– Foreign exchange contracts – 1 938 – 1 938– Embedded derivatives – 1 186 – 1 186Total – 3 124 – 3 124

Note: There were no transfers between level 1 and level 2 during the period.


209



GROUP

53. Shareholder information Shareholder spread

Category

Number of ordinary

shareholders% of

shareholdersNumber of

ordinary shares% of total

ordinary shares Ordinary shares Individuals 3 841 74.5 22 724 882 9.8 Nominees and trusts 673 13.1 13 014 328 5.6 Investment companies and corporate bodies 640 12.4 195 267 637 84.6 5 154 100.0 231 006 847 100.0 Non-public/public shareholders

Pursuant to the JSE Listings Requirements and to the best knowledge of the directors, after reasonable enquiry, the spread of shareholders at 30 September 2013, is as follows:

Analysis of shareholding – ordinary shares Public shareholding

Major shareholders Government Employees Pension Fund 1 – 22 697 131 9.8 Thembeka Capital Ltd 1 – 9 326 640 4.0

Other shareholders 5 142 100.0 112 490 473 48.7

Non-public shareholdingMajor shareholders

AgriVoedselLtd 1 – 55 627 707 24.1 Pioneer Foods (Pty) Ltd 1 – 17 982 056 7.8

Other shareholders Pioneer Foods Broad-Based BEE Trust 1 – 10 599 988 4.6

Pioneer Foods Share Incentive Trust 1 – 1 422 116 0.6 Directors (including subsidiary directors) 6 – 860 736 0.4 5 154 100.0 231 006 847 100.0 Distribution of ordinary shareholders Number of shares 1 – 1 000 shares 2 589 50.2 876 850 0.4 1 001 – 10 000 shares 1 592 30.9 5 985 756 2.6 10 001 – 50 000 shares 652 12.7 15 310 317 6.6 50 001 – 100 000 shares 130 2.5 9 183 848 4.0 100 001 – 500 000 shares 145 2.8 31 814 729 13.8 500 001 shares and over 46 0.9 167 835 347 72.6 5 154 100.0 231 006 847 100.0


210



54. Restatement of financial information for comparative periods54.1 Reclassification of line items of statement of comprehensive income During the current year the Group renamed the line item ‘Distribution costs’ to ‘Sales and distribution costs’ and added a new line item

‘Marketing costs’. In addition staff costs have been reallocated from ‘Other operating expenses’ to ‘Sales and distribution costs’, ‘Administration expenses’ and ‘Marketing costs’. The reason for the reclassification is to reflect more appropriately the way in which economic benefits are derived from staff costs.

Before reclassification30 September

2012Reclassi-

fication

After reclassification30 September

2012Discontinued

operationsContinuing operations

R’000 R’000 R’000 R’000 R’000The impact on the comparative figures of line items of the statement of comprehensive income is as follows:Reclassification of income and expensesSales and distribution costs 1 699 173 650 390 2 349 563 (281 058) 2 068 505Marketing costs – 367 359 367 359 (24 769) 342 590

Administration expenses 337 003 285 058 622 061 (66 012) 556 049 Other operating expenses 2 205 791 (1 302 807) 902 984 (276 768) 626 216 Total 4 241 967 – 4 241 967 (648 607) 3 593 360 Since the amounts are reclassifications within the statement of comprehensive income, these reclassifications did not have any effect on the

statement of financial position.

54.2 Restatement of segment informationFrom the beginning of the current reporting period the chief operating decision-maker reviewed the operating results of the Bokomo Zambia and Bokomo Uganda businesses as part of the Quantum Foods segment. The nature of these businesses are more aligned to the Quantum Foods segment as their operations predominantly include the production of animal feeds and the production and sale of commercial eggs and day-old chicks. As a result the previously reported segment revenue and results, as well as other segment measures as indicated below, have been restated. Refer below for the effect of this restatement:

2012R’000

(Decrease)/increase in segment revenue Sasko (61 210) Quantum Foods 61 210 Total – (Decrease)/increase in operating profit before items of a capital nature Sasko (6 410) Quantum Foods 6 410

Total –

(Decrease)/increase in segment assetsSasko (34 522)Quantum Foods 34 522Total –

(Decrease)/increase in segment liabilitiesSasko (6 786)Quantum Foods 6 786Total –

(Decrease)/increase in total segment capital expenditure (excluding business combinations)Sasko (4 190)Quantum Foods 4 190Total –

(Decrease)/increase in total segment depreciation and amortisationSasko (1 760)Quantum Foods 1 760Total –

The Agri Business segment has been renamed as Quantum Foods since the previous reporting period.


211



GROUP

2013 R’000

2012 R’000

55. Non-current assets held for sale and discontinued operationsThe assets and liabilities related to the Quantum Foods segment, which include the equity interests held in the wholly owned subsidiaries Philadelphia Chick Breeders (Pty) Ltd, Lohmann Breeders SA (Pty) Ltd, Bokomo Uganda (Pty) Ltd and Bokomo Zambia Ltd and the Quantum Foods division of Pioneer Foods (Pty) Ltd, have been presented as an “asset held for sale” and as “discontinued operations” in terms of IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations for the year ended 30 September 2013 following the approval of the Board in September 2013 to restructure the Company’s interest in the Quantum Foods segment.

It is Pioneer Foods’ intention to unbundle its interests in Quantum Foods to its shareholders and subsequently list Quantum Foods as a separate legal entity on the JSE subject to market conditions and regulatory requirements, or any other acceptable corporate action, within approximately 12 months.

Assets of the disposal group classified as held for sale:Property, plant and equipment 1 129 629 –Intangible assets 59 –Investment in associates 6 798 –Available-for-sale financial assets 2 –Inventories 235 948 –Biological assets 276 737 –Trade and other receivables 275 189 –Deferred income tax 3 119 –Derivative financial instruments 901 –Current income tax 462 –Cash and cash equivalents 24 589 –

1 953 433 –

Liabilities of the disposal group classified as held for sale:Deferred income tax 196 281 –Provision for other liabilities and charges 9 294 –Trade and other payables 274 762 –Current income tax 1 673 –Borrowings 7 –

482 017 –

Currency translation reserve 22 864 –

The results of discontinued operations and the results recognised on the re-measurement of the Quantum Foods disposal group are as follows:Revenue 3 558 869 3 075 237

Operating profit/(loss) before items of a capital nature 1 298 (20 897)Items of a capital nature 1 058 5 397Investment income 1 624 1 943Finance costs (766) (520)Share of profit of associated companies 248 691Profit/(loss) before income tax 3 462 (13 386)Income tax 4 251 6 413Profit/(loss) after income tax 7 713 (6 973)Loss after income tax recognised on the re-measurement of assets of the disposal group (208 098) –

Before income tax (232 000) –Income tax 23 902 –

Loss for the year from discontinued operations (200 385) (6 973)Other comprehensive income/(loss) for the year from discontinued operations

Currency translation differences 25 296 (440)Total comprehensive loss for the year from discontinued operations (175 089) (7 413)

Cash flow of the disposal group classified as held for sale:Net cash flow from operating activities 90 778 –Net cash flow from investment activities (469 613) –Net cash flow from financing activities 391 334 –Net increase in cash, cash equivalents and bank overdrafts 12 499 –Net cash, cash equivalents and bank overdrafts at beginning of year 12 083 –Net cash, cash equivalents and bank overdrafts at end of year 24 582 –


212

Contents

Statement of comprehensive income 213

Statement of financial position 214

Statement of changes in equity 215

Statement of cash flows 216

Notes to the financial statements 217

Pioneer Food Group Ltd

Company financial statements for the year ended 30 September 2013

Financialresults


213


Statement of comprehensive incomefor the year ended 30 September 2013

COMPANY

Notes2013

R’000 2012

R’000 Other income 3 2 968 3 838 Administrative expenses 4 (6 059) (3 930)Other operating expenses 4 (2 968) (2 488)Once-off share-based payment charge on B-BBEE equity transaction 4 – (160 745)Operating loss (6 059) (163 325)Investment income 5 260 885 180 779 Profit before income tax 254 826 17 454 Income tax expense 6 (477) (2 417)Profit for the year 254 349 15 037 Other comprehensive income for the year – –Total comprehensive income for the year 254 349 15 037

Profit for the year attributable to: Owners of the Company 254 349 15 037

Total comprehensive income for the year attributable to: Owners of the Company 254 349 15 037


214


Statement of financial positionas at 30 September 2013

COMPANY

Notes2013

R’000 2012

R’000 ASSETS Non-current assets Investment in subsidiaries 8 2 517 961 2 372 073 Current assets 315 820 302 039 Trade and other receivables 3 384 3 030 Loan to subsidiary 13 305 854 282 776 Cash and cash equivalents 9 6 582 16 233

Total assets 2 833 781 2 674 112

EQUITY AND LIABILITIES Capital and reserves attributable to owners of the Company 2 580 330 2 564 717 Share capital – Ordinary shares 10 22 040 21 971 Share capital – Class A ordinary shares 10 737 820 Share premium 2 189 612 2 172 733 Other reserves 198 628 198 628 Retained earnings 169 313 170 565 Non-current liabilities Share-based payment liability 11 251 424 108 249 Current liabilities 2 027 1 146 Trade and other payables 12 1 681 547 Current income tax 10 84 Dividends payable 336 515

Total liabilities 253 451 109 395

Total equity and liabilities 2 833 781 2 674 112


215


Statement of changes in equityfor the year ended 30 September 2013

COMPANY

Share capital

ordinarysharesR’000

Share capitalclass A

ordinarysharesR’000

Share

premiumR’000

Equitycompen-

sationreserve

R’000

Retainedearnings

R’000Total

R’000Balance as at 1 October 2012 21 971 820 2 172 733 198 628 170 565 2 564 717Profit for the year – – – – 254 349 254 349Share appreciation rights scheme – issue of ordinary shares 69 – 49 533 – – 49 602Employee share scheme – repurchase of class A ordinary shares from leavers – (83) (32 654) – – (32 737)Interim dividend for 2013 – – – – (101 352) (101 352)Final dividend for 2012 – – – – (153 942) (153 942)Employee share scheme – transfer tax on share transactions – – – – (307) (307)Balance as at 30 September 2013 22 040 737 2 189 612 198 628 169 313 2 580 330

Balance as at 1 October 2011 20 124 929 1 187 398 37 832 332 899 1 579 182 Profit for the year – – – – 15 037 15 037 Recognition of share-based payments – – – 51 – 51 Share appreciation rights scheme – issue of ordinary shares 38 – 22 807 – – 22 845 Employee share scheme – repurchase of class A ordinary shares from leavers – (109) (30 858) – – (30 967)Interim dividend for 2012 – – – – (96 632) (96 632)Final dividend for 2011 – – – – (80 517) (80 517)Employee share scheme – transfer tax on share transactions – – – – (222) (222)Ordinary shares issued – B-BBEE equity transaction 1 809 – 997 479 – – 999 288 Cost to issue ordinary shares to participants of B-BBEE equity transaction – – (4 093) – – (4 093)Once-off share-based payment charge on B-BBEE equity transaction – – – 160 745 – 160 745 Balance as at 30 September 2012 21 971 820 2 172 733 198 628 170 565 2 564 717


216


Statement of cash flowsfor the year ended 30 September 2013

COMPANY

Notes2013

R’000 2012

R’000 NET CASH FLOW FROM OPERATING ACTIVITIES (5 830) (7 829)Net cash loss from operating activities 14 (6 059) (2 580)Working capital changes 15 780 (2 907)Income tax paid 16 (551) (2 342)NET CASH FLOW FROM INVESTMENT ACTIVITIES 237 807 (101 997)Loan granted to related party (23 078) (282 776)Interest received 5 418 242 Dividends received 5 260 467 180 537 NET CASH FLOW FROM FINANCING ACTIVITIES (241 628) 115 577 Share appreciation rights – issue of ordinary shares 49 602 22 845 Proceeds from issue of ordinary shares – B-BBEE equity transaction – 999 288 Class A ordinary shares bought back and transfer tax on employee share scheme transactions (33 044) (31 189)Dividends paid to ordinary shareholders 17 (255 473) (177 047)Dividends paid to class A ordinary shareholders 17 (2 713) (2 177)Cost to issue ordinary shares to participants of B-BBEE equity transaction – (4 093)Repayments of loan from related party – (692 050)

Net decrease in cash and cash equivalents (9 651) 5 751 Net cash and cash equivalents at beginning of year 16 233 10 482 Net cash and cash equivalents at end of year 9 6 582 16 233


217


Notes to the financial statementsfor the year ended 30 September 2013

COMPANY

2013 R’000

2012 R’000

1. Accounting policies The Company applies the same principal accounting policies as the Group in the preparation of these financial statements. Refer to note 1 of the Group financial statements.

2. Critical accounting estimates and judgements

The Company applies the same accounting estimates and judgements as the Group. Refer to note 2 of the Group financial statements.

3. Other income

Administration fees received 2 968 2 658 Donations received – 1 060 Sundry income – 120

2 968 3 838

4. Operating loss The operating loss is calculated after taking into account other income (refer to note 3), as well as the following:Auditors’ remuneration

Audit – current year 409 385 Audit – under provision previous year 5 41 Tax-related services 43 –Other consulting services 23 –

Technical services from non-employees 2 490 795 Legal fees 367 158 Shareholder communication 2 054 2 038 Directors’ remuneration (refer to note 13) 2 749 7 772Once-off share-based payment charge on B-BBEE equity transaction – 160 745

5. Investment income Interest income on financial assets: loans and receivables

Call accounts and other 418 242 Dividends received

Unlisted shares in subsidiary: Pioneer Foods Holdings Ltd 260 467 180 537 260 885 180 779

6. Income tax expense

Current income tax Current year 108 238

Secondary taxation on companiesCurrent year – 2 179

Withholding tax on dividendsCurrent year 369 –

477 2 417 The income tax on the Company’s profit before income tax differs from the theoretical amount that would arise using the statutory rate of 28% (2012: 28%) as follows:

% % Standard rate for companies 28.0 28.0 Increase/(decrease) in rate:

Exempt income (28.6) (290.8)Secondary taxation on companies – 12.5 Withholding tax on dividends 0.1 – Non-deductible expenditure 0.7 264.1

Effective rate 0.2 13.8


218

Notes to the financial statementsfor the year ended 30 September 2013 (continued)


COMPANY

2013 R’000

2012 R’000

7. Dividend per ordinary share Interim

46.0 cents (2012: 44.0 cents) per ordinary share 101 352 96 632 Final

86.0 cents (2012: 70 cents) per ordinary share 189 550 153 942 290 902 250 574

Dividends payable are not accounted for until they have been declared by the Board of directors. The statement of changes in equity does not reflect the final dividend payable. The final dividend for the year will be accounted for as an appropriation of retained earnings in the following year. Secondary tax on companies was applicable to all dividends paid up to 31 March 2012 at a rate of 10%. Dividends withholding tax, a new dividends withholding tax regime, became effective from 1 April 2012 at a rate of 15%.

The total rand value of the final dividend for the year is an approximate amount. The exact amount is dependent on the number of shares in issue at the record date. The final dividend of the prior year was restated to the actual amount paid.

8. Investment in subsidiaries

Unlisted – at cost Pioneer Foods Holdings Ltd – –

Capital contribution towards subsidiaries Pioneer Foods Holdings Ltd 2 206 660 2 206 660 Pioneer Foods (Pty) Ltd 280 268 153 501 Ceres Fruit Juices (Pty) Ltd 31 033 11 912

2 517 961 2 372 073

9. Cash and cash equivalents Cash at bank 4 306 7 940 Short-term bank deposits 2 276 8 293

6 582 16 233

For the purposes of the statement of cash flows, the year-end cash, cash equivalents and bank overdrafts comprise the following:

Cash and short-term deposits 6 582 16 233

10. Share capital Number Number

Issued and fully paid – number of ordinary listed shares At beginning of year 219 714 498 201 236 929 Shares issued in terms of management share appreciation rights scheme 692 361 385 908 Shares issued to participants of the B-BBEE equity transaction – 18 091 661 Shares issued to the Pioneer Foods Broad-Based BEE Trust – 10 599 988 Shares issued to the Pioneer Foods Broad-Based BEE Trust – consolidated – (10 599 988)At end of year 220 406 859 219 714 498

During the year 692,361 (2012: 385,908) listed ordinary shares of 10 cents each were issued at an average of R71.64 (2012: R59.20) per share in terms of the management share appreciation rights scheme.

In terms of the B-BBEE equity transaction in 2012, 17,488,631 and 603,030 listed ordinary shares of 10 cents each were issued at R55.14 and R58.04 to BEE strategic partners and current and former BEE directors respectively.

The shares issued to the Pioneer Foods Broad-Based BEE Trust is consolidated in terms of IFRS since the Pioneer Foods Broad-Based BEE Trust acts as an agent on behalf of the Company.


219



COMPANY

2013 Number

2012Number

10. Share capital (continued)Issued and fully paid – number of ordinary unlisted class A shares

At beginning of year 8 198 120 9 294 530 Shares bought back and cancelled (830 760) (1 096 410)At end of year 7 367 360 8 198 120

During 2006 the Company introduced a broad-based employee share scheme for all employees other than management qualifying for the share-based compensation scheme. In terms of the scheme, 18,130,000 class A ordinary shares of 10 cents each were authorised. The issued shares are all held by the employee share scheme trust.

During the year the Company bought back 830,760 (2012: 1,096,410) class A ordinary shares at an average premium of R39.31 (2012: R28.14) per share in addition to the par value of R0.10 per share.

Class A ordinary shares are not listed on the JSE Ltd. These shares have full voting rights, similar to those of the ordinary shares. Refer to note 22 of the Group financial statements for further detail.

R’000 R’00011. Share-based payment liability

Balance at beginning of year 108 249 146 013 Share-based payment 145 888 (35 587)Dividends paid on class A ordinary shares (2 713) (2 177)

251 424 108 249

12. Trade and other payables Trade payables 1 100 13 Value-addedtax 166 151 Other 415 383

1 681 547

13. Related-party transactions During the financial year the Company conducted the following transactions with its subsidiaries:

Rendering of services Administration fees charged to Pioneer Foods (Pty) Ltd 2 968 2 658

Receivables from related party Receivables from Pioneer Foods (Pty) Ltd 3 384 3 030

Loans to/(from) related party Loan to/(from) Pioneer Foods (Pty) Ltd

Beginning of year 282 776 (692 050)Loans advanced during the year (311 786) 282 776 Loans repaid during the year 334 864 692 050 End of year 305 854 282 776

Unsecured interest-free loan with no fixed terms of repayment.

Key management personnel compensation Non-executive directors

Fees 2 749 2 380 Fair value of deemed options granted: B-BBEE equity transaction – 5 392

2 749 7 772


220



COMPANY

2013 R’000

2012 R’000

14. Net cash loss from operating activitiesReconciliation of profit before income tax and cash loss from operating activities:Profit before income tax 254 826 17 454 Adjusted for:Dividends received (260 467) (180 537)Interest received (418) (242)Once-off share-based payment charge on B-BBEE equity transaction – 160 745

(6 059) (2 580)

15. Working capital changes Increase in trade and other receivables (354) (2 700)Increase/(decrease) in trade and other payables 1 134 (207)

780 (2 907)

16. Income tax paidAmounts unpaid at beginning of year (84) (9)As disclosed in profit or loss (477) (2 417)Amounts unpaid at end of year 10 84

(551) (2 342)

17. Dividends paid Ordinary shareholders Amounts unpaid at beginning of year (515) (413)As disclosed in statement of changes in equity (255 294) (177 149)Amounts unpaid at end of year 336 515

(255 473) (177 047)Class A ordinary shareholders As accounted for against share-based payment liability (2 713) (2 177)

COMPANY

CapitalR’000

InterestR’000

TotalR’000

18. Maturity analysis of financial liabilities 30 September 2013 Not later than 1 year

Trade and other payables 1 515 – 1 515Dividends payable 336 – 336

1 851 – 1 851

30 September 2012Not later than 1 year

Trade and other payables 396 – 396 Dividends payable 515 – 515

911 – 911

Note: Trade and other payables do not include amounts for value-added tax payable.


221



COMPANY

Loans andreceivables

R’00019. Financial instruments by category

30 September 2013 Assets as per statement of financial position Trade and other receivables 3 384Loan to subsidiary 305 854Cash and cash equivalents 6 582Total 315 820

Other

financialliabilities

R’000Liabilities as per statement of financial position Trade and other payables 1 515Dividends payable 336Total 1 851

Loans andreceivables

R’00030 September 2012Assets as per statement of financial position Trade and other receivables 3 030 Loan to subsidiary 282 776 Cash and cash equivalents 16 233 Total 302 039

Other

financialliabilities

R’000Liabilities as per statement of financial position Trade and other payables 396 Dividends payable 515 Total 911

Note: Trade and other payables do not include amounts for value-added tax payable.


222

Key facts and dates

Corporate information

Holding companyPioneer Food Group Ltd Registration number: 1996/017676/06JSE Securities Exchange Symbol: PFGJSE Securities Exchange Sector: Food & Beverage

Country of incorporationSouth Africa

Date of incorporation13 June 1997 (date of the merger between Sasko (Pty) Ltd and Bokomo (Pty) Ltd)

ISIN codeZAE000118279

Company secretary and registered officeJay-Ann Jacobs32 Market Street, Paarl, 7646 PO Box 20, Huguenot, 7645Tel: +27 21 807 5100 Fax: +27 21 807 5280email: [email protected]: [email protected]

Transfer secretaryComputershare Investor Services (Pty) Ltd70 Marshall Street, Johannesburg, 2001PO Box 61051, Marshalltown, 2107Tel: +27 11 370 5000Fax: +27 11 688 5209

AuditorsPricewaterhouseCoopers Inc.(Registration number: 1998/012055/21)PricewaterhouseCoopers BuildingZomerlust EstateBerg River BoulevardPaarl, 7646

BankersThe Standard Bank of South Africa LtdAbsa Bank LtdNedbank LtdFirstRand Bank LtdOld Mutual Specialised Finance (Pty) LtdThe Hongkong and Shanghai Banking Corporation Ltd

SponsorPSG Capital (Pty) Ltd(Registration number: 2006/015817/07) 1st Floor, Ou Kollege, 35 Kerk Street,Stellenbosch, 7600PO Box 7403, Stellenbosch, 7599Tel: +27 21 887 9602Fax: +27 21 887 9624

Financial calendar

Financial year-end 30 September

Annual general meeting 14 February 2014

Reports

Interim report for the half year ended 31 March 2014 May 2014

Announcement of results for the year ended 30 September 2014 November 2014

Integrated report for the year ended 30 September 2014 December 2014

Dividends

Interim – Announcement May 2014

– Payment July 2014

Final – Announcement November 2014

– Payment February 2014

GREYMATTER & FINCH # 7249

www.pioneerfoods.co.za

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