A E C I LIMITED — Annual Report 2018

May 2, 2019

ANNUAL FINANCIAL STATEMENTS

CONTENTS

AVAILABILITY OF REPORTS	2
DECLARATION BY THE GROUP COMPANY SECRETARY	2
PREPARATION OF ANNUAL FINANCIAL STATEMENTS	2
AUDIT COMMITTEE'S REPORT TO STAKEHOLDERS	3
DIRECTORS' REPORT	6
INDEPENDENT AUDITOR'S REPORT	8
BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES	12
FINANCIAL STATEMENTS	21
ADMINISTRATION	100

AVAILABILITY OF REPORTS

These annual financial statements are available electronically at https://www.aeciworld.com/reports/ar-2018/pdf/full-afs.pdf. The integrated annual report is also available on the Company's website (https://www.aeciworld.com/reports/ar-2018/pdf/full-iar.pdf) as is the Notice of Annual General Meeting of ordinary shareholders scheduled to be held on 29 May 2019 (https://www.aeciworld.com/reports/ar-2018/pdf/agm-notice.pdf)

Shareholders, bondholders and other stakeholders are advised that they are entitled to request printed copies of all or any of these documents by contacting the Group Company Secretary, in writing, as follows: EN Rapoo, Group Company Secretary, AECI Ltd, Private Bag X21, Gallo Manor, 2052; nomini.rapoo@aeciworld.co.za or groupcommunications@aeciworld.com.

DECLARATION BY THE GROUP COMPANY SECRETARY

I hereby confirm that AECI Ltd has lodged with the Registrar of Companies all such returns in respect of the year under review as are required of a public company in terms of the Companies Act, and that all such returns are, to the best of my knowledge and belief, true, correct and up-to-date.

Nomini Rapoo Group Company Secretary

Woodmead, Sandton 25 February 2019

PREPARATION OF ANNUAL FINANCIAL STATEMENTS

The Group annual financial statements and Company annual financial statements were published on 26 February 2019 and are for the year ended 31 December 2018. These comprise the Audit Committee's report to stakeholders, the Directors' report, the Declaration by the Group Company Secretary, the Independent Auditor's report, the Basis of Reporting and Significant Accounting Policies, and the financial statements.

The financial statements have been audited as required by the Companies Act and their preparation was supervised by the Chief Financial Officer, Mr KM Kathan CA(SA), AMP (Harvard).

AUDIT COMMITTEE'S REPORT TO STAKEHOLDERS

Dear stakeholders

This report is provided by the Audit Committee ("the Committee") appointed in respect of the 2018 financial year of AECI Ltd. This report incorporates the requirements of the Companies Act, other regulatory requirements and King IV principles. The Committee's operation is guided by detailed terms of reference that are informed by the Companies Act and King IV and were approved by the Board.

MEMBERSHIP

The Committee was nominated by the Board in respect of the 2018 financial year and its members were confirmed by shareholders at the AGM held on 31 May 2018. Shareholders will be requested to confirm the appointment of the members of the Committee presenting themselves for re-election for the 2019 financial year at the AGM scheduled for 29 May 2019.

There were four meetings held in the year. Full details of the meeting dates and attendance are available via the link https://www. aeciworld.com/pdf/board-meetings/2018/ board-meetings.pdf.

The Committee comprises solely Independent Non-executive Directors. Abridged biographies of these Directors are published at https://www. aeciworld.com/about-leadership.php.

Members in the period were:

• › G Gomwe (Chairman)
• › GW Dempster
• › AJ Morgan
• › PG Sibiya

The Chief Executive, the Chief Financial Officer, the Group Financial Manager, the external auditor and Internal Audit attend by invitation, as does the Group Tax Manager as required.

Mr Morgan has served on the Committee since 2010, Mr Gomwe since 2015 (and as Chairman since September 2017) and Mr Dempster since 2016. Ms Sibiya was appointed on 27 February 2018.

PURPOSE

The purpose of the Committee is to:

• › assist the Board in overseeing the quality and integrity of the Company's integrated reporting process, including the financial statements and sustainability reporting, and announcements in respect of the financial results, thereby enhancing the credibility of financial reporting and providing a channel for communication between the Board, the internal and external auditors and management;

• › ensure that an effective control environment in the AECI Group is maintained by supporting the Board in the discharge of its duties relating to the safeguarding of assets, the operation of adequate systems and controls, risk management and the integrity of financial statements and reporting;

• › provide the Company's Financial Director, the external auditor and the Head of Internal Audit with unrestricted access to the Committee and its Chairman, as required, in relation to any matter falling within the remit of the Committee;

• › meet with the external auditor, Senior Managers, Executives and Executive Directors as the Committee may elect;

• › meet at least once a year with the Head of Internal Audit and members of his team without the external auditor, other Executive Board members or the Company's Financial Director being present;

• › review and recommend to the Company's Board, for approval, the Company's unaudited interim financial results for the half-year to 30 June;

• › review and recommend to the Company's Board, for approval, the Company's audited financial statements for the financial year to 31 December;

• › oversee the activities of, and ensure coordination between, the activities of the internal and external auditors;

• › perform duties that are assigned to it by the Companies Act and as governed by other legislative requirements, including the statutory Audit Committee functions required for subsidiary companies;

• › receive and deal with any complaints concerning accounting practices, the Internal Audit function or the content and audit of financial statements or related matters;

• › conduct annual reviews of the Committee's work and terms of reference and make recommendations to the Board to ensure that the Committee operates at maximum effectiveness; and

• › assess the performance and effectiveness of the Committee and its members on a regular basis.

ROTATION OF EXTERNAL AUDITOR

In December 2017 the Board resolved in favour of the early adoption of the Independent Regulatory Board for Auditors' decision in respect of the mandatory rotation of external auditors at least every 10 years. Accordingly, KPMG Inc. was not considered for reappointment for the 2018 financial year. After a rigorously governed selection process, Deloitte & Touche was appointed with effect from 6 April 2018, with Mr Patrick Ndlovu serving as the designated partner.

EXECUTION OF FUNCTIONS

The Committee executed its duties and responsibilities during the 2018 financial year in accordance with its terms of reference as they relate to the Group's accounting, internal auditing, internal control, and integrated reporting practices, and pursuant to the provisions of the JSE Listings Requirements.

During the year under review:

In respect of the external auditor and the external audit, the Committee among other matters:

• › nominated Deloitte & Touche as the external auditor to shareholders for appointment as auditor for the financial year ended 31 December 2018, and ensured that the appointment complied with all applicable legal and regulatory requirements for the appointment of an auditor. The Committee confirms that the auditor is accredited by the JSE;

• › as required by section 3.84(g) of the JSE Listings Requirements, obtained the information listed in paragraph 22.15(h) of the JSE Listings Requirements in its assessment of the suitability of Deloitte & Touche, as well as Mr Patrick Ndlovu, for appointment as external auditor with effect from 6 April 2018;

• › approved the external audit engagement letter, the audit plan and the budgeted audit fees payable to the external auditor;

• › reviewed the audit, evaluated the effectiveness of the auditor and its independence and evaluated the external auditor's internal quality control procedures;

• › obtained an annual written statement from the auditor that its independence was not impaired;

• › obtained assurance that no member of the external audit team was hired by the Company or its subsidiaries during the year;

• › obtained assurances from the external auditor that adequate accounting records were being maintained by the Company and its subsidiaries;

• › applied a policy setting out the categories of non-audit services that the external auditor may or may not provide, split between permitted, permissible and prohibited services;

• › approved all non-audit services with Deloitte & Touche from its appointment onwards;

• › considered whether any Reportable Irregularities were identified and reported by the external auditor in terms of the Auditing Profession Act, No. 26 of 2005, and determined that there were none; and

• › nominated the external auditor for each subsidiary company.

In respect of the financial statements, the Committee among other matters:

• › confirmed the going-concern as the basis of preparation of the interim and annual financial statements;
• › reviewed compliance with the financial conditions of loan covenants and determined that the capital of the Company was adequate;
• › examined and reviewed the interim and annual financial statements, as well as all financial information disclosed to stakeholders, prior to submission to and approval by the Board;
• › ensured that the financial statements fairly present the financial position of the Company and of the Group as at the end of the financial year and the results of operations and cash flows for the financial year, and considered the basis on which the Company and its subsidiaries, joint ventures and associates were determined to be going concerns;
• › considered accounting treatments, significant unusual transactions and accounting judgements;
• › considered the appropriateness of the Accounting Policies and adopted any changes thereto;
• › ensured that the Company has established appropriate financial reporting procedures, and that those procedures are operating effectively;
• › reviewed the external auditor's audit report;
• › reviewed the representation letter relating to the Group financial statements, which was signed by management;
• › considered any problems identified and reviewed any significant legal and tax matters that could have a material impact on the financial statements; and
• › met separately with management, the external auditor and the Head of Internal Audit.

In respect of internal control and Internal Audit, including forensic audit, the Committee among other matters:

• › reviewed and approved the Internal Audit charter and annual audit plan and evaluated the independence, effectiveness and performance of the Internal Audit function and compliance with its charter;
• › considered the reports of the internal auditor and the external auditor on the Group's systems of internal control including financial controls, business risk management and the maintenance of effective internal control systems;
• › received assurance that proper and adequate accounting records were maintained and that the systems safeguarded the assets against unauthorised use or disposal thereof;
• › reviewed significant issues raised by the internal and forensic audit processes and the adequacy of corrective actions in response to significant internal and forensic audit findings; and
• › based on the above, the Committee formed the opinion that there were no material breakdowns in internal control, including financial controls, business risk management and the maintenance of effective material control systems.

In respect of risk management and IT, the Committee, insofar as relevant to its functions:

• › reviewed the Group's policies on risk assessment and risk management, including fraud risks and IT risks as they pertain to financial reporting and the going-concern assessment, and found them to be sound;
• › considered and reviewed the findings and recommendations of the Risk Committee;
• › considered the reports of Internal Audit and the external auditor insofar as these were relevant to risk management and IT and could have an impact on financial controls, and ensured that the related management action plans were adequate; and
• › reviewed and considered feedback from the AEL Financial Review and Risk Committee meetings, insofar as these related to risk management and IT.

In respect of sustainability issues the Committee has:

› overseen the process of sustainability reporting and considered the findings and recommendations of the Risk Committee and the Social and Ethics Committee.

In respect of legal and regulatory requirements to the extent that these may have an impact on the financial statements, the Committee:

• › reviewed with management legal matters that could have a material impact on the Group;
• › reviewed with the Company's internal counsel the adequacy and effectiveness of the Group's procedures, including its Risk Management Framework, to ensure compliance with legal and regulatory responsibilities.
• › monitored complaints received via the Group's whistle-blowing service, including complaints or concerns regarding accounting matters, Internal Audit, internal accounting controls, contents of the financial statements, potential violations of the law and questionable accounting or auditing matters; and
• › considered reports provided by management, Internal Audit and the external auditor regarding compliance with legal and regulatory requirements.

In respect of the coordination of assurance activities, the Committee reviewed the plans and work outputs of the external and internal auditors and concluded that these were adequate to address all significant financial risks facing the business.

Considered the appropriateness of the experience and expertise of the Chief Financial Officer and Financial Director and his Finance team and concluded that these were appropriate.

KEY AUDIT MATTERS

The Committee noted the key audit matters set out in the independent auditor's report, which are:

• › purchase price allocation on the acquisitions of Schirm GmbH and Much Asphalt (Pty) Ltd;
• › impairment assessment of goodwill amounts that arose on the above acquisitions; and
• › impairment assessment of property, plant and equipment in AEL South Africa, in the Mining Solutions segment.

The Committee has considered and evaluated these matters and is satisfied that they are represented correctly.

INDEPENDENCE OF THE EXTERNAL AUDITOR

The Committee is satisfied that Deloitte & Touche is independent of the Company and the Group after taking the following factors into account:

• › representations made by Deloitte & Touche to the Committee;
• › the amendments to the JSE Listings Requirements, effective 15 October 2017, regarding the new auditor accreditation process were also considered. Deloitte & Touche and Mr P Ndlovu were first appointed designated auditor to the Company for the 2018 financial year. The Committee reviewed the performance of the external auditor and nominated, for approval at the forthcoming AGM, Deloitte & Touche as the external auditor for the 2019 financial year;
• › the auditor does not, except as external auditor or in rendering permitted non-audit services, receive any remuneration or other benefits from the Company;
• › the auditor's independence was not impaired by any consultancy, advisory or other work undertaken by the auditor;
• › the auditor's independence was not prejudiced as a result of any previous appointment as auditor; and
• › the criteria specified for independence by the Independent Regulatory Board for Auditors and international regulatory bodies.

NON-AUDIT SERVICE FEES

Deloitte & Touche was nominated as external auditor by the Committee and appointed as external auditor by the shareholders at the AGM held on 31 May 2018.

Prior to appointment as external auditor, Deloitte & Touche provided certain non-audit services to the Company. Since its appointment, Deloitte & Touche has transitioned out of most of its non-audit service assignments. During the overlapping transition period, the Committee carefully reviewed the nature of services that Deloitte & Touche could perform and, to the extent that these services potentially impaired its independence, they were discontinued.

The Committee, in line with the Company's Non-Audit Services Policy, will approve in advance non-audit services to be performed by Deloitte & Touche in future.

ANNUAL FINANCIAL STATEMENTS

Following the review by the Committee of the annual financial statements of AECI Ltd for the year ended 31 December 2018, the Committee is of the view that in all material respects they comply with the relevant provisions of the Companies Act and IFRS and fairly present the Group and Company financial position at that date and the results of operations and cash flows for the year then ended.

Having met its obligations, the Committee recommended the annual financial statements for the year ended 31 December 2018 for approval to the AECI Board on 25 February 2019.

The Board has approved this report, which will be open for discussion at the forthcoming AGM.

On behalf of the Audit Committee

Godfrey Gomwe Chairman

Woodmead, Sandton 25 February 2019

DIRECTORS' REPORT

The Directors have pleasure in submitting their report together with the consolidated and separate financial statements for the year ended 31 December 2018.

NATURE OF BUSINESS

PROFILE AND STRATEGY

AECI is a diversified Group of 17 companies. It has regional and international businesses in Africa, Europe, South East Asia, North America, South America and Australia. Products and services are provided to a broad spectrum of customers in the mining, water treatment, plant and animal health, food and beverage, infrastructure and general industrial sectors.

The Group's strategy is to be the supplier of choice in the markets in which it operates and to continue to grow domestically as well as through ongoing expansion of its footprint within the geographies and markets served. In line with this strategy, businesses are managed in five growth pillars: Mining Solutions (AEL Intelligent Blasting, Experse and Senmin), Water & Process (ImproChem), Plant & Animal Health (Nulandis and Schirm), Food & Beverage (Lake Foods and Southern Canned Products), and Chemicals (Chemfit, Chemical Initiatives, ChemSystems, Industrial Oleochemical Products, Much Asphalt and SANS Technical Fibers). Included in this pillar are two joint ventures — Crest Chemicals and Specialty Minerals South Africa.

These pillars are AECI's key reporting segments.

AECI also has a property division, Acacia Real Estate. Its main activities are the management of the Company's leasing portfolio and the provision of services at the Umbogintwini Industrial Complex in KwaZulu-Natal. Together with Head Office support functions, including the treasury, Acacia Real Estate constitutes the Group's sixth reporting segment, namely Property & Corporate.

All business activities are underpinned by the Group's BIGGER values — of being Bold, Innovative, Going Green and being Engaged and Responsible.

MINING SOLUTIONS

These businesses provide a mine-to-mineral solution for the mining sector internationally. The offering includes surfactants for explosives manufacture, commercial explosives, initiating systems and blasting services right through the value chain to chemicals for ore beneficiation and tailings treatment.

WATER & PROCESS

ImproChem provides integrated water treatment and process chemicals, and equipment solutions, for a diverse range of applications in Africa. These include, inter alia, public and industrial water, desalination and utilities.

PLANT & ANIMAL HEALTH

Nulandis manufactures and supplies an extensive range of crop protection products, plant nutrients and services for the agricultural sector in Africa.

Schirm, based in Germany, is a contract manufacturer of agrochemicals and fine chemicals with a European and US footprint. It is the largest provider of external agrochemical formulation services in Europe.

FOOD & BEVERAGE

The businesses in this pillar supply ingredients and commodities to the dairy, beverage, wine, meat, bakery, health and nutrition industries.

The other main activity is the manufacture and distribution of a broad range of juice-based products and drinks, including formulated compounds, fruit concentrate blends and emulsions.

CHEMICALS

AECI's Chemicals businesses supply chemical raw materials and related services for use across a broad spectrum of customers in the manufacturing, infrastructure and general industrial sectors, mainly in South Africa and in other Southern African countries. SANS Technical Fibers is based in the USA.

AECI was registered as a company in South Africa in 1924 and has been listed on the JSE since 1966. At the end of 2018 its market capitalisation was R10,2 billion and it had 8 038 employees.

DIRECTORS' AND GROUP COMPANY SECRETARY'S INTERESTS IN SHARES

At 31 December 2018, the Directors and Group Company Secretary had direct beneficial interests in the share capital of the Company as set out on the facing page. None of the Directors' associates (as defined in terms of the JSE Listings Requirements) had any interests. The direct beneficial interests of Messrs Dytor and Kathan and Ms Rapoo were unchanged between the end of the financial year and the

publication of the annual financial statements on 26 February 2016.

No Non-executive Director has been granted options or shares. The Executive Directors and the Prescribed Officers have been issued long-term incentive benefits as disclosed in note 30 to the financial statements.

GOING-CONCERN

The financial statements have been prepared using appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The Directors are of the opinion that the Company and its subsidiaries, joint ventures and associates have adequate resources to continue as going-concerns in the foreseeable future.

BORROWING POWERS

In terms of its MOI the Company has unlimited borrowing powers.

SHARE CAPITAL AND SHARE PREMIUM

The issued share capital of the Company is 121 829 083 listed ordinary shares of R1 each (2017: 121 829 083 shares), 10 117 951 unlisted redeemable convertible B ordinary shares of no par value (2017: 10 117 951 shares) and 3 000 000 listed 5,5% cumulative preference shares of R2 each (2017: 3 000 000 shares).

STRATE

The dematerialisation of the Company's issued shares commenced in July 2001. Shares still in paper form are no longer good for delivery and will need to be dematerialised before participation in any transaction.

Shareholders may direct any enquiries in this regard to the Company's Transfer Secretaries on telephone number +27 (0) 861 100 950 in South Africa, or +44 (0) 870 889 3176 in the United Kingdom.

DIVIDENDS TO ORDINARY AND PREFERENCE SHAREHOLDERS

An interim ordinary cash dividend of 149 cents was declared on 24 July 2018 and was paid on 3 September 2018.

A final ordinary cash dividend of 366 cents was declared on 25 February 2019 and will be paid on 8 April 2019.

DIRECTORS' AND GROUP COMPANY SECRETARY'S INTERESTS IN SHARES

		2018	2017
Number of shares	Direct	Indirect	Direct	Indirect
EXECUTIVE DIRECTORS
MA Dytor	83 291	—	62 061	—
KM Kathan	78 873	—	63 244	—
	162 164	—	125 305	—
GROUP COMPANY SECRETARY
EN Rapoo	4 145	—	—	—
	166 309	—	125 305	—

Preference share dividends were paid on 15 June 2018 and on 14 December 2018.

See note 25 to the financial statements for details in this regard.

CHANGES TO THE BOARD

Mr J Molapo was appointed to the Board as a Non-executive Director on 1 June 2018. As indicated in the Directors' report included in the 2017 integrated report, and dated 27 February 2018, Ms PG Sibiya was appointed in the same capacity with effect from that date.

DIRECTORATE AND SECRETARY

Details of the Directorate and Secretary of the Company are published in the integrated report and are also available at https://www. aeciworld.com/about-leadership.php.

In terms of the Company's MOI Ms PG Sibiya and Messrs MA Dytor, G Gomwe and AJ Morgan retire by rotation at the forthcoming AGM and, being eligible, offer themselves for re-election.

As already indicated, Mr J Molapo was appointed to the Board with effect from 1 June 2018.

MAJOR SHAREHOLDERS

Details of the interests of shareholders who hold beneficial interests equal to or in excess of 5% of the Company's share capital are included in note 13 to the financial statements.

SPECIAL RESOLUTIONS

The Company passed the following special resolutions at the AGM held on 31 May 2018:

• 1. to approve the annual fees payable by the Company to its Non-executive Directors;
• 1. to grant the Directors a general authority to repurchase the Company's issued shares;

1. to grant the Directors the authority to cause the Company to provide financial assistance to any company or other legal entity which is related or inter-related to the Company; and

2. to amend the Company's MOI.

No special resolutions referred to in paragraph 8.63(i) of the JSE Listings Requirements were passed by its subsidiary companies.

MATERIAL CHANGES

There have been no material changes in the financial or trading position of the Company and its subsidiaries since 31 December 2018.

REGULATORY INTERACTION

The Group is involved in various legal proceedings and is in consultation with its legal counsel, assessing the outcome of these proceedings on an ongoing basis. As proceedings progress, the Group's management makes provision in respect of legal proceedings where appropriate. Litigations, current or pending, are not likely to have a material adverse effect on the Group.

INTERESTS OF DIRECTORS AND OFFICERS

During 2018, no contracts were entered into in which Directors had an interest and which significantly affected the business of the Group. The Directors and Prescribed Officers had no interests in any third party or company responsible for managing any of the business activities of the Group.

REMUNERATION AND EMPLOYEE INCENTIVE PARTICIPATION SCHEMES

Full details regarding the remuneration and participation in the Group's long-term incentive schemes by the Company's Executive Directors and Prescribed Officers are disclosed in note 30 to the financial statements.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made, and that this statement contains all information required by law and the JSE Listings Requirements.

The Directors acknowledge that their responsibility includes:

• › ensuring that internal controls relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error, are appropriately designed, implemented and maintained;
• › selecting and applying appropriate accounting policies; and
• › making accounting estimates that are reasonable in the circumstances.

The Directors' responsibility also includes ensuring that adequate accounting records and an effective system of risk management are maintained.

APPROVAL OF CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

The consolidated and separate annual financial statements of the Company were approved by the Board of Directors on 25 February 2019 and were signed on that date by:

Mark Dytor Mark Kathan Chief Executive Chief Financial Officer

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDERS OF AECI LTD

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

OPINION

We have audited the consolidated and separate financial statements of AECI Ltd ("the Group") set out on pages 12 to 99 which comprise the statements of financial position as at 31 December 2018, and the income statements and statements of comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 31 December 2018, and its consolidated and separate financial performance and 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.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors ("IRBA Code") and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. None of the matters below relate to the separate financial statements.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Purchase price allocation ("PPA") on the acquisition of Schirm GmbH and Much Asphalt (Pty) Ltd

As disclosed in note 12, the Group acquired 100% of the share capital in Schirm GmbH for €134,4 million (R1 997 million) and 98% of the share capital of Much Asphalt (Pty) Ltd for R2 047 million during the financial year.

In line with the requirements of IFRS 3 – Business Combinations the Directors performed a PPA.

The PPA is subject to significant Directors' judgement and estimation in the following areas:

• › identification of intangible assets;
• › valuation of tangible and intangible assets (including goodwill); and
• › determination of the amortisation period for the identified intangible assets.

Through the use of independent specialists, the Directors performed the PPA and also determined the resulting goodwill. The judgement involved in determining the PPA as well as the value allocated to intangible assets makes the purchase price allocation a key audit matter.

We assessed the design and tested the implementation of the key controls over the PPA process.

We engaged our internal corporate finance valuation specialists to perform an independent assessment of the fair values of the identifiable assets acquired and liabilities assumed on the respective acquisition dates specifically relating to the valuation and identification of intangible assets and the resultant goodwill which was recognised. This independent assessment was evaluated against the Directors' experts' assessment by performing the following procedures:

• › we assessed the competence, capabilities and objectivity of the Directors' independent experts and verified their qualifications and independence;
• › we discussed the scope of work with the experts to determine that there were no matters affecting their independence and objectivity and that no scope limitations were imposed upon them;
• › we confirmed that the valuation techniques used are consistent with industry norms;
• › we confirmed that identifiable assets acquired and liabilities assumed were appropriately valued, in all material respects;
• › we assessed the Directors' judgement that there is no foreseeable limit to the period over which the identified indefinite useful life intangibles will generate cash flows;
• › we assessed the reasonableness of the assumptions used in determining the useful lives of the definite life intangible assets acquired, against those determined by the Directors' independent experts;
• › we confirmed that the goodwill and intangible assets recognised as a result of the PPA allocation are appropriate.
• › We assessed the disclosures included in notes 12 against the relevant IFRS disclosure requirements.

We concur with the Directors' IFRS 3 acquisition date accounting treatment including the valuation, identification and conclusions on useful lives of the identified intangible assets and the resultant goodwill. We found that the disclosures required by IFRS 3 were presented appropriately in all material respects.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

Impairment assessment of goodwill amounts that arose on the acquisition of Schirm GmbH and Much Asphalt (Pty) Ltd

As disclosed in note 4, the Group's goodwill balance is R3,4 billion. R1,531 billion of this balance arose on the acquisition of Much Asphalt (Pty) Ltd and R376 million (€20 million) in respect of the acquisition of Schirm GmbH.

These goodwill amounts arose as part of the PPA exercise referred to in the preceding key audit matter.

In line with IAS 36 — Impairment of Assets, the Directors are required to assess annually whether goodwill that arose on acquisition of these subsidiaries is potentially impaired.

The impairment assessment is subject to significant management judgement and estimation in the following areas:

• › the selection of the appropriate impairment model to be used, in this case the discounted cash flow model;
• › assessment and determination of the expected cash flows from the businesses;
• › setting appropriate terminal growth rates; and
• › selection of the appropriate discount rate.

As disclosed in note 4, the Directors performed the cash flow projections utilising the following key assumptions:

• › in respect of cash flows associated with Much Asphalt (Pty) Ltd, projected government spend on capital projects will materialise in the foreseeable future based on South African National Treasury forecasts; and
• › in respect of cash flow forecasts associated with Schirm GmbH, various challenges associated with the commissioning of the new synthesis plant and registration of certain products are anticipated to be resolved in the foreseeable future.

In light of the significant Directors' judgement as noted above, we consider this to be a key audit matter.

We assessed the design and tested the implementation of the key controls over the goodwill impairment process.

We obtained the respective discounted cash flow models which assessed the carrying value of goodwill and performed the following procedures:

• › we assessed the appropriateness and mathematical accuracy of the impairment models used by the Directors;
• › we assessed the reasonableness of the key assumptions employed in the valuation models such as the revenue growth rates, trading profit percentages, capital expenditure and working capital forecasts against historic performance and approved budgets;
• › we used our Corporate Finance specialists to assess the appropriateness of the discount rates utilised to present value future cash flows; and
• › we challenged and evaluated key management's assumptions related to revenue projection.

Based on the procedures performed, the valuation methodology used is considered appropriate, the forecast cash flows are considered to be materially reasonable and the valuation headroom confirms that the carrying values of goodwill and indefinite life intangible assets are not impaired.

We reviewed the disclosure in note 4 to the financial statements with respect to the judgements applied by the Directors in assessing goodwill for impairment and we consider these to be appropriate.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

Impairment assessment of plant and equipment ("PPE") in AEL South Africa within the Mining Solutions segment

As disclosed in note 1, the Group's PPE carrying amount is R3 517 million (2017: R2 458 million). Of this amount, R652 million (2017: R713 million) relates to AEL South Africa.

In line with IAS 36: Impairment of Assets, the Directors are required to assess whether any internal or external indicators of impairment exist in relation to PPE. The Directors identified impairment indicators with regards to the assets related to AEL South Africa's operations, and therefore carried out an impairment assessment.

As disclosed in the accounting policies of the financial statements, the recoverable amount of PPE is considered by the Directors to be a significant source of estimation uncertainty.

The impairment assessment is subject to significant judgement and estimation in the following areas:

• › allocation of the PPE to the relevant CGUs;
• › the selection of the appropriate impairment model to be used, in this case the discounted cash flow model;
• › assessment and determination of the expected cash flows from the operations, particularly with regards to assumptions related to projected revenue and anticipated savings; and
• › selection of the appropriate discount rate.

Our audit procedures performed included the following:

• › we assessed whether the PPE allocated to the respective CGUs was appropriate in terms of the relevant accounting standards;
• › we used our Corporate Finance Specialist to assess the appropriateness of the discount rate utilised to present value the future cash flows;
• › we challenged the reasonableness of the key assumptions used with reference to external data in respect of sales volumes and prices;
• › we critically assessed the future projected cash flows used in the models to determine whether they are reasonable and supportable, given the current macroeconomic climate and expected future performance of the individual CGUs based on our knowledge of the business;
• › we subjected the key assumptions to sensitivity analyses; and
• › we assessed the appropriateness of the disclosures in the consolidated financial statements as set out in the accounting policies.

KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

Impairment assessment of plant and equipment ("PPE") in AEL South Africa within the Mining Solutions segment continued

The Directors have performed an impairment assessment on all of AEL South Africa's CGUs and concluded that no impairment should be recognised in the current year.

The judgement involved in assessing these assets for impairment and the amount of audit effort involved makes this assessment a key audit matter.

OTHER INFORMATION

The Directors are responsible for the other information. The other information comprises the Directors' Report, the Audit Committee's Report and the Declaration by the Group Company Secretary as required by the Companies Act of South Africa, which we obtained prior to the date of this report, and the Integrated Report which is expected to be made available to us after that date. The other information does not include the consolidated and separate financial statements and our auditor's report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

The Directors are responsible for the preparation and fair presentation of the 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.

In preparing the consolidated and separate financial statements, the Directors are responsible for assessing the Group's and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going-concern basis of accounting unless the Directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• › identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• › obtain an understanding of internal control relevant to the audit 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 Group's and the Company's internal control;
• › evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;
• › conclude on the appropriateness of the Directors' use of the going-concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group and/or the Company to cease to continue as a going concern;
• › evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and
• › obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that Deloitte & Touche has been the auditor of AECI Ltd for one year.

Deloitte & Touche Registered Auditor Per: Patrick Ndlovu Partner

25 February 2019

BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY

AECI Ltd ("the Company") is a public company domiciled in South Africa. The address of the Company's registered office is the First Floor, AECI Place, 24 The Woodlands, Woodlands Drive, Woodmead, Sandton. The consolidated financial statements of the Company for the year ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as "the Group" and individually as "Group entities" or "business entities") and the Group's interest in associates and joint arrangements. The Group operates in six operating segments: Mining Solutions, Water & Process, Plant & Animal Health, Food & Beverage, Chemicals, and Property & Corporate. Refer to note 31 for further details.

BASIS OF PREPARATION

STATEMENT OF COMPLIANCE

The Group financial statements and the Company financial statements have been prepared in compliance with IFRS, and interpretations of those standards as adopted by the IASB, the SAICA Financial Reporting Guides issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and in accordance with the requirements of the Companies Act.

The following accounting standards, interpretations and amendments to published accounting standards, which are relevant to the Group but not yet effective, have not been adopted in the current year and will be applied in the reporting period in which they become effective:

› IFRS 16 Leases — this standard introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exceptions for short-term leases and leases for which the underlying asset is of low value. Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC 15 Operating Leases — Incentives and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. It includes more disclosures for both lessees and lessors.

i. Leases in which the Group is a lessee

The Group will recognise right-of-use assets and lease liabilities for its operating leases. The nature of expenses related to those leases will change because the Group will recognise a depreciation charge for right-of-use assets and an interest expense on lease liabilities. Previously, the Group recognised an operating lease expense on a straight line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

The right-of-use assets will be measured at cost initially and subsequently (subject to certain exemptions) less accumulated depreciation and impairment losses, adjusted by any remeasurement of the lease liability. The lease liability will be measured at the represent value of lease payments that are not paid at that date. Subsequently, the lease liability will be adjusted for interest and lease payments, as well as the impact of lease modifications, among others.

The classification of cash flows will also be affected as operating lease payments under IAS 17 are presented as operating cash flows, whereas under the IFRS 16 model the lease payments will be split into principal and interest portions. These will be presented as financing and operating cash flows, respectively.

Management is collating and analysing all lessee arrangements across the Group and evaluating the terms and conditions of these arrangements in order to prepare the relevant calculations and system changes required to implement the new standard.

At 31 December 2018, the Group's noncancellable operating lease commitments amounted to R932 million. Management's assessment indicates that these arrangements will meet the definition of a lease under IFRS 16. Consequently, the Group will recognise a right-of-use asset and corresponding liability in respect of these leases unless they qualify as leases for which the underlying asset is of low value or for short-term lease exemptions under IFRS 16.

The new requirement to recognise a rightof-use asset and the related liability is expected to have a significant impact on the amounts recognised in the Group's consolidated financial statements. Based on the information currently available, right-of-use assets equal to between 75% and 85% of the non-cancellable operating lease commitments of R932 million are likely to be recognised, with corresponding lease liabilities of an equal and opposite amount. In addition, the Group has identified R56 million (€3,4 million, translated at the closing rate) of lease prepayments that will be recognised as right-of-use assets with no corresponding lease liabilities. It is anticipated that the impact of releasing operating lease smoothing liabilities to opening retained earnings, net of tax, will be less than R30 million.

ii. Leases in which the Group is a lessor No significant impact is expected for other leases in which the Group is a lessor.

iii. Transition

The Group will apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information.

The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. Accordingly, IFRS 16 will be applied to all contracts entered into before 1 January 2019 and identified as leases in terms of IAS 17 and IFRIC 4, SIC 15 and SIC 27.

› IFRIC 23 Uncertainty over Income Tax Treatments — this standard clarifies the accounting for income tax treatments that have yet to be accepted by tax authorities. Specifically, IFRIC 23 provides clarity on how to incorporate this uncertainty into the measurement of tax as reported in the financial statements.

IFRIC 23 does not introduce any new disclosures but reinforces the need to comply with existing disclosure requirements for:

• » judgements made;
• » assumptions and other estimates used; and
• » the potential impact of uncertainties that are not reflected.

IFRIC 23 applies for annual periods beginning on or after 1 January 2019 and will not have a material effect on the Group's financial results.

BASIS OF MEASUREMENT

The Group financial statements and the Company financial statements have been prepared on the going-concern basis using the historical cost convention, except for available-for-sale financial assets, contingent consideration, pension fund employer surplus accounts and post-retirement medical aid obligation liabilities which are measured at fair value. Equity-settled share-based payments are measured at fair value at the grant date.

FUNCTIONAL AND PRESENTATION CURRENCY

The Group financial statements and the Company financial statements have been prepared in South African rand, which is the Company's functional currency. All the financial information has been rounded to the nearest million of rand, except where otherwise stated.

SIGNIFICANT JUDGEMENTS MADE BY MANAGEMENT AND SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which estimates are revised and in any future periods affected.

The accounting policies which have been identified as including assumptions and estimation uncertainties that may have an impact on the future results are as follows:

INCOME AND DEFERRED TAX

The Group is subject to income taxes in various jurisdictions which apply different tax legislation and the calculation of the Group's tax charge involves a degree of estimation and judgement. Deferred tax assets are recognised to the extent that it is probable that taxable income will be available in future against which they can be utilised. Future taxable profits are estimated based on business plans which include estimates and assumptions regarding economic growth, interest and inflation rates and market conditions.

ENVIRONMENTAL REMEDIATION

Estimating the future costs of environmental remediation obligations is complex and requires management to make estimates and judgements because most of the obligations will be fulfilled in the future and laws are often not clear regarding what is required. The resulting provisions are influenced further by changing technologies and social, political, environmental, safety, business and statutory considerations. As explained in note 15 to the financial statements, the Group has to apply judgement in determining the environmental remediation provision. The provision may need to be adjusted when detailed characterisation of the land is performed or when the end use is changed.

ASSET LIVES AND RESIDUAL VALUES

Property, plant and equipment, investment property and intangible assets are depreciated or amortised over their estimated useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product lifecycles and maintenance programmes are taken into account. Residual value assessments consider issues such as current market conditions, the remaining useful life of an asset and disposal values.

POST-RETIREMENT BENEFIT OBLIGATIONS

Post-retirement defined benefits are provided for certain existing and former employees. Actuarial valuations are based on assumptions which include employee turnover, mortality rates, the discount rate, the expected long-term rate of return of retirement plan assets, healthcare inflation costs and rates of increase in compensation costs. The net present value of current estimates for post-retirement medical aid benefits has been discounted to its present value at 9,8% per annum (2017: 9,5%), being the estimated investment return assuming the liability is fully funded. Medical cost inflation of CPI +1% per annum has been assumed (2017: CPI +1%). See note 29 to the financial statements.

IMPAIRMENTS

An asset is impaired when its carrying amount exceeds its recoverable amount. Goodwill and intangible assets with indefinite useful lives are tested for impairment annually while other assets are tested if there is an indication that they may be impaired. The assessment of recoverable amounts involves the application of judgement relating to the calculation of value-in-use, which is based on cash flow projections, variations in the amount and timing of these cash flows and the discount rate used to determine the present value of those future cash flows.

These are assessed for each cash generating unit ("CGU") to which goodwill is attributed or for the CGU or asset where indicators of impairment have been assessed. See note 4 for significant assumptions on value-in-use for goodwill.

As disclosed in note 1, the Group's plant and equipment carrying amount is R3 517 million (2017: R2 458 million). Of this amount, R652 million (2017: R713 million) relates to AEL South Africa. In line with IAS 36 Impairment of Assets, the Directors are required to assess whether any internal or external indicators of impairment exist in relation to plant and equipment.

The Directors identified impairment indicators with regard to the assets related to AEL South Africa's operations and, therefore, carried out an impairment assessment.

The impairment assessment was subject to significant judgement and estimation in the following areas:

• › allocation of the plant and equipment to the relevant CGUs;
• › the selection of the appropriate impairment model to be used, in this case the discounted cash flow model;
• › assessment and determination of the expected cash flows from the operations, particularly with regard to assumptions related to projected revenue and anticipated savings; and
• › selection of the appropriate discount rate.

Having performed the impairment assessment on all of AEL South Africa's CGUs, the Directors concluded that no impairment should be recognised in the current year.

FINANCIAL INSTRUMENTS

The fair value of unlisted investments requires judgement and estimation of the key inputs into valuation techniques used to determine the fair value.

Determining expected credit losses requires assessments of general economic conditions, both current and future, and their impacts on the credit risk of financial assets, as well as using periods that amounts are past due, to indicate levels of credit loss expected. Credit losses may occur differently to these expectations, both in terms of timing and amount.

PURCHASE PRICE ALLOCATION ON THE ACQUISITION OF SCHIRM GMBH AND MUCH ASPHALT (PTY) LTD

As disclosed in note 12, during the year the Group acquired 100% of the share capital of Schirm GmbH for €134,4 million (R1 997 million) and 98% of the share capital of Much Asphalt (Pty) Ltd for to R2 047 million. In line with the requirements of IFRS 3 — Business Combinations the Directors performed a purchase price allocation ("PPA").

The PPA is subject to significant judgement and estimation by the Directors, in the following areas:

• › identification of intangible assets;
• › valuation of tangible and intangible assets (including goodwill); and
• › determination of the amortisation period for the identified intangible assets.

The assumptions with the most significant impact on the PPA included:

• › fair value of tangible assets acquired;
• › identification of intangible assets;
• › fair value of identified intangible assets
• › amortisation period of the identified intangible assets; and
• › profitability forecasts.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Group, as set out herein, have been applied consistently throughout the Group and are consistent with those followed in the prior year in all material respects, except to the extent that these have been affected by the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments. Unless specifically stated otherwise, the Company also applies all of the Group's accounting policies.

BASIS OF CONSOLIDATION

SUBSIDIARIES

Subsidiaries are those entities controlled by the Company. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Group financial statements incorporate the financial statements of the Company and its subsidiaries. The results of subsidiaries, including those acquired or disposed of during the year, are included from the dates control commenced and up to the dates control ceased. Inter-Group transactions and balances between Group entities, as well as any unrealised income and expenditure arising from such transactions, are eliminated on consolidation. Non-controlling interests in the net assets of subsidiaries are identified separately from the Group's equity therein.

The non-controlling interest, which represents the present ownership interests and would entitle shareholders to a proportionate share of the entity in the event of liquidation, is measured at the non-controlling interest's proportional share of the acquiree's identifiable net assets. Subsequent profits or losses, and each component of other comprehensive income, are attributed to non-controlling interest even if it results in the non-controlling interest having a deficit balance. All other components of non-controlling interest are measured at their acquisition date fair values.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in the income statement.

JOINT ARRANGEMENTS

Joint arrangements are those entities in respect of which there is a contractual agreement whereby the Group and one or more other parties undertake an economic activity, which is subject to joint control.

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

A joint venture is an arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

A joint operation is an arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group's participation in joint ventures is accounted for using the equity method. Joint ventures are recognised at cost initially, which includes transaction costs. Subsequent to initial recognition, the Group financial statements include the Group's share of profits or losses and other comprehensive income of the equity-accounted investees, until the date on which joint control ceases. The Group's participation in joint operations is accounted for by recognising the Group's share of assets, liabilities, revenue and expenses on a line-byline basis.

Where a Group entity transacts with a joint arrangement of the Group, unrealised profits are eliminated to the extent of the Group's interest in the joint arrangement.

ASSOCIATES

An associate is an entity in which the Group holds an equity interest, over which the Group has significant influence and is neither a subsidiary nor an interest in a joint arrangement. Significant influence is the power to participate in the financial and operating policy decisions of the associate but is not control or joint control over those policies.

An associate is recognised at cost in the Company financial statements.

An associate is recognised at cost initially in the Group. Post-acquisition results of associate companies are accounted for in the Group financial statements, using the equity method of accounting from the date that significant influence commences until the date that significant influence ceases. An impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognised in the income statement and is reversed if there has been a favourable change in the estimates used to determine the recoverable

amount. Where a Group entity transacts with an associate of the Group, unrealised profits are eliminated to the extent of the Group's interest in the associate.

When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued, except to the extent that the Group has an obligation to or has made payments on behalf of the investee.

INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries in the Company financial statements are recognised at cost less impairment losses and include the equity contributions of share-based payments to employees of subsidiaries as well as loans owing from non-operating subsidiaries.

BUSINESS COMBINATIONS AND GOODWILL

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Goodwill is not amortised. The goodwill of joint ventures and associates is included in the carrying amount of the relevant equity-accounted investee. Goodwill is reviewed for impairment at least annually.

CGUs represent the business operations from which the goodwill arose at the date of acquisition. On disposal of a subsidiary, joint venture or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group measures goodwill at the acquisition date as:

• › the fair value of the consideration transferred; plus
• › the recognised amount of any non-controlling interests in the acquiree; less
• › the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business combination, are expensed as incurred.

Any contingent consideration is measured at fair value at the date of acquisition. The contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in the income statement. A change in estimate of the contingent consideration is recognised in net operating costs and changes as a result of the time value of money are recognised in interest expense.

DEFERRED TAX

A deferred tax asset is the amount of income tax recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and unused tax credits. A deferred tax liability is the amount of income tax payable in future periods in respect of taxable temporary differences.

Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The tax base of an asset is the amount that is deductible for tax purposes if the economic benefits from the asset are taxable, or is the carrying amount of the asset if the economic benefits are not taxable. The tax base of a liability is the carrying amount of the liability less the amount deductible in respect of that liability in future periods.

Deferred tax is recognised in respect of temporary differences between the carrying values of assets and liabilities for accounting purposes and their corresponding values for tax purposes. Deferred tax is also recognised on tax losses. No deferred tax is recognised on temporary differences relating to the initial recognition of goodwill, the initial recognition (other than in a business combination) of an asset or a liability to the extent that neither accounting nor tax profit is affected on acquisition, and differences relating to investments in subsidiaries, joint arrangements and associates to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets are reviewed at each reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure directly attributable to the acquisition of an asset. The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bringing the asset into a working condition for its intended use, as well as gains and losses on qualifying cash flow hedges and borrowing costs attributable to that asset. Depreciation is provided on property, plant and equipment (other than land) on the straight line basis at rates which will write off the assets over their estimated useful lives. Assets under construction are not depreciated until they are available for use. Depreciation methods, useful lives and residual values are reviewed at each reporting date.

The estimated useful lives are as follows:

› Property

	» land	unlimited
	» buildings	5 to 50 years
	› Plant and equipment
	» plant and equipment	3 to 30 years
	» furniture and fittings	3 to 15 years

» computer equipment	3 to 10 years
» motor vehicles	3 to 12 years

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amounts of the items sold and are recognised in the income statement.

Specific plant spares are measured at cost and are depreciated over the estimated useful lives of the plants to which they relate.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied in the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The cost of maintaining property, plant and equipment is recognised in the income statement.

INVESTMENT PROPERTIES

Investment properties, comprising properties or portions of properties leased to third parties, are measured at cost less accumulated depreciation and accumulated impairment losses. Land is not depreciated and buildings are depreciated on a straight line basis over their useful lives of 20 years. Depreciation methods, useful lives and residual values are reviewed at each reporting date. Any gain or loss on disposal (calculated as the difference between the net proceeds from disposal and the carrying amount) is recognised in the income statement.

Transfers to and from investment property are made when there is evidence of a change in use. Transfers are measured at the carrying amount immediately prior to transfer and no changes to the carrying amount are made unless the change in use results in an indication of impairment.

INTANGIBLE ASSETS

Intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are recognised if it is probable that future economic benefits will flow from the intangible assets and their costs can be measured reliably. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the income statement as incurred.

Intangible assets with finite useful lives are amortised on a straight line basis over their estimated useful lives. The amortisation methods and estimated remaining useful lives are reviewed at least annually.

Intangible assets with indefinite useful lives are not amortised but are tested for impairment at each reporting date.

The estimated useful lives are as follows:

› customer and marketing
relationships	5 to 20 years
› brands	indefinite
› patents and trademarks	15 to 20 years
› technical and licensing
agreements	17 years
› other	3 to 10 years

Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the income statement when the asset is derecognised.

INTANGIBLE ASSETS ACQUIRED IN A BUSINESS COMBINATION

Intangible assets acquired in a business combination, and recognised separately from goodwill, are recognised initially at their fair value at the acquisition date. Subsequently, these intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

RESEARCH AND DEVELOPMENT

Research costs are expensed in the income statement in the year in which they are incurred. Development costs are reviewed on an ongoing basis and are capitalised if they can be measured reliably, the product or process is technically and commercially feasible, it is probable that the asset will generate future economic benefits and the Group intends, and has sufficient resources, to complete development and to use or sell the asset. Development costs are expensed in the income statement if they do not qualify for capitalisation. If a project is abandoned during the development stage, the total accumulated expenditure is written off in the income statement.

NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

Management classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Property, plant and equipment and intangible assets are not depreciated or amortised once they have been classified as held for sale.

A non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is allocated first to goodwill and then to the remaining assets and liabilities on a pro-rated basis except that no loss is allocated to inventories, financial assets, deferred tax assets and employee benefits, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held for sale, and subsequent gains or losses on remeasurement, are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment losses.

IMPAIRMENT

FINANCIAL ASSETS

The Group recognises a loss allowance for expected credit losses on financial assets except for the assets at fair value through other comprehensive income. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial asset.

The Group recognises lifetime expected credit losses for accounts receivable and these are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current and forecast direction of conditions, including the time value of money where appropriate.

For all other financial assets, the Group recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition. If there has been no significant increase in credit risk, the loss allowance is measured at an amount equal to the 12-month expected credit losses.

The Group determines increases in credit risk by considering any change in the risk of default occurring since the date of initial recognition. The Group considers that default has occurred when a financial asset is more than 90 days past due.

NON-FINANCIAL ASSETS

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If there is any indication that an asset may be impaired, its recoverable amount is estimated to determine the extent of the impairment loss. The recoverable amount is the higher of its fair value, less costs to sell, and its value-in-use.

Value-in-use is estimated taking into account future cash flows, forecast market conditions and the expected lives of the assets. An impairment loss is recognised whenever the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognised in the income statement. Subsequent to the recognition of an impairment loss, the depreciation charge for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life.

Impairment losses recognised in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets of the CGU.

An impairment loss is reversed only to the extent that the carrying amount of the asset or CGU does not exceed the net carrying amount that would have been determined if no impairment loss had been recognised. A reversal of an impairment loss is recognised in the income statement.

Goodwill is allocated to CGUs that are expected to benefit from the synergies of the business combination. Goodwill and the CGUs to which it has been allocated are tested for impairment on an annual basis, even if there is no indication of impairment. Impairment losses on goodwill are not reversed.

INVENTORIES

Inventories of raw and packaging materials, products and intermediates and merchandise are measured at cost using the first-in first-out method or the weighted average cost method, depending on the nature of the inventories or their use to businesses in the Group.

The cost of finished goods and work in progress comprises raw and packaging materials, manufacturing costs, depreciation and an appropriate allocation of production overheads. Costs may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases.

In all cases inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses, taking into account obsolescence.

PROVISIONS

A provision is recognised when the Group has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will occur and where a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the obligation at the reporting date, taking into account the risks and uncertainties associated with the obligation. Non-current provisions are determined by discounting the expected future cash flows to their present value at a pre-tax rate that reflects current market assessment of the time value of money. The unwinding of the discount is recognised in interest expense.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

ENVIRONMENTAL REMEDIATION

A provision for environmental remediation is recognised in accordance with the Group's SHEQ Policy and applicable legal requirements. The adequacy of the provision is reviewed annually at the reporting date against changed circumstances, legislation and technology.

SHARE CAPITAL

Share capital comprises ordinary shares and redeemable convertible B ordinary shares and is classified as equity. Issued ordinary shares are measured at the fair value of the proceeds received less any directly attributable issue costs. An amount equal to the par value of the shares issued is presented as share capital. The amount by which the fair value exceeds par value is presented as share premium. For no par value shares, the fair value is presented in full as share capital.

PREFERENCE SHARES

Preference shares are measured at historical cost, are cumulative and are classified as equity. Dividends paid are disclosed in the statement of changes in equity.

TREASURY SHARES

Treasury shares are Company shares held by a subsidiary and by the AECI Employees Share Trust ("EST") and are excluded from the shares recognised as Group equity.

EARNINGS PER SHARE

BASIC EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year.

DILUTED EARNINGS PER SHARE

Diluted earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue, adjusted for the dilutive effect of the contingently returnable ordinary shares issued to the AECI Community Education and Development Trust ("CEDT"), the potential shares issued to the EST and the performance shares issued as part of the Group's Long-term Incentive Plan ("LTIP").

REVENUE

REVENUE RECOGNITION

The Group recognises revenue from the following major sources:

• › sale of goods in all its operating segments;
• › sale of goods and related product application services in its Mining Solutions, Water & Process and Chemicals operating segments; and
• › rental income and related facilities management services in its Property & Corporate operating segment.

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer. For certain revenue categories the Group identifies "sale of goods and services" as "not distinct" and thus combines goods and services with other promised goods or services until it identifies a "combined bundle of goods and services" as a single performance obligation.

SALE OF GOODS IN ALL OPERATING SEGMENTS

For sales of goods to customers, revenue is recognised when control of the goods has transferred, being when the goods have been delivered to the customer's specific location (delivery). Following delivery, the customer has full discretion over the manner of use or further distribution and price to sell the goods, has the primary responsibility for the goods and bears the risks of obsolescence and loss in relation to the goods. A receivable is recognised by the Group when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, since only the passage of time is required before payment is due.

SALE OF GOODS AND RELATED PRODUCT APPLICATION SERVICES IN THE MINING SOLUTIONS, WATER & PROCESS AND CHEMICALS OPERATING SEGMENTS

The Group provides product application services to customers. These are performed as and when goods are delivered and relate mainly to:

• › blasting services, where explosives are delivered directly to the point and location of usage, and detonated within hours of delivery; and
• › dosing of chemicals directly into a customer's manufacturing or water treatment process, where the promise to the customer is a specific outcome to the process regardless of product volumes or service levels required to achieve that outcome.

The goods and services are delivered simultaneously or near-simultaneously and results in the product being used by the customer at that point in time. As a consequence, revenue is recognised when the product and related application service are delivered and the right to consideration becomes unconditional.

RENTAL INCOME AND RELATED FACILITIES MANAGEMENT SERVICES IN THE PROPERTY & CORPORATE OPERATING SEGMENT

IFRS 15 does not apply to revenue from lease contracts within the scope of IAS 17 Leases. Consequently, the Group continues to recognise revenue in respect of rentals received from leasing activities on a straight line basis over the period of the lease, where fixed escalation clauses apply, and when there is a reasonable expectation that recovery of the lease rental is probable. Where no fixed escalation clauses are applicable to a lease, rental income is recognised in the period in which it is due by the lessee.

Facilities management services to lessees comprise rail, environmental and laboratory services, steam generation, effluent treatment, electricity provision and storage and handling services. Revenue from these services is recognised as and when the services are provided, since these services are usage-based and are delivered at a point in time.

FOREIGN CURRENCIES

FOREIGN CURRENCY TRANSLATIONS

Transactions in foreign currencies are translated into the functional currencies of each entity in the Group at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency of the entity concerned at the rates of exchange ruling at the dates of the transactions.

Gains or losses arising on exchange differences are recognised in the income statement. Costs associated with forward cover contracts linked to borrowings are included in financing costs.

FOREIGN OPERATIONS

The financial statements of foreign operations in the Group are translated into South African rand as follows:

• › assets, including goodwill, and liabilities at the rates of exchange ruling at the reporting date;
• › income, expenditure and cash flow items at the weighted average rate of exchange during the accounting period; and
• › equity at historical rates.

Differences arising on translation are recognised in other comprehensive income and are presented in the foreign currency translation reserve in reserves. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, while retaining control, the relevant portion of the cumulative foreign currency translation reserve is recognised in non-controlling interest. Differences arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered part of the net investment in a foreign operation and are recognised in other comprehensive income in the foreign currency translation reserve.

FINANCIAL INSTRUMENTS

Financial instruments are recognised at fair value initially. Directly attributable transaction costs are included in the amount recognised only when changes in fair value are not subsequently recognised in the income statement. Subsequent to initial recognition, these instruments are measured as set out as follows in respect of derivative and non-derivative financial instruments.

OFFSET

If a legally enforceable right currently exists to set off recognised amounts of financial assets and financial liabilities, which are in determinable monetary amounts, and the Group intends either to settle on a net basis or realise the asset and settle the liability simultaneously, the relevant financial assets and financial liabilities are offset.

NON-DERIVATIVE FINANCIAL INSTRUMENTS

Non-derivative financial instruments comprise investments in equity securities, the pension fund employer surplus accounts in the defined-contribution plans ("ESAs"), loans to and from subsidiaries, accounts receivable, cash, loans and borrowings, loans from joint ventures, contingent consideration and accounts payable.

The Group recognises loans and receivables on the date on which they are originated. All other financial instruments are recognised on the date on which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantively all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

INVESTMENTS

Investments in unlisted equity securities are classified as financial assets at fair value through other comprehensive income and are measured at fair value with any gains or losses, including foreign exchange, recognised in other comprehensive income, along with the associated deferred tax.

When these assets are derecognised, the gain or loss accumulated in other comprehensive income is reclassified to retained income. Dividends on these investments are recognised in the income statement as investment income when they are declared and the Group has a right to receive them.

ACCOUNTS RECEIVABLE

Accounts receivable are measured at amortised cost using the effective interest method, less any impairment losses.

CASH

Cash is measured at amortised cost.

LOANS TO SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES

Loans by the Company to subsidiaries, joint arrangements and associates are measured at amortised cost using the effective interest method, less any impairment losses.

FINANCIAL LIABILITIES

Financial liabilities, including borrowings and accounts payable, are measured at amortised cost using the effective interest method.

FINANCE COSTS

Interest is recognised in the income statement in the period in which it is incurred.

DERIVATIVE FINANCIAL INSTRUMENTS

The Group uses derivative financial instruments including currency swaps, forward rate agreements and forward exchange contracts to manage its exposure to foreign exchange risk arising from operational, financing and investment activities. The Group does not hold or issue derivative financial instruments for trading purposes.

DERIVATIVE INSTRUMENTS

Derivative instruments are recognised and measured at fair value with changes in fair value being included in the income statement, other than derivatives designated as cash flow hedges.

HEDGE ACCOUNTING

If a fair value hedge meets the conditions for hedge accounting, any gain or loss on the hedged item attributable to the hedged risk is included in the carrying amount of the hedged item and recognised in the income statement.

If a cash flow hedge meets the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in the income statement.

If an effective hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses recognised in other comprehensive income are transferred to the income statement in the same period in which the asset or liability affects the income statement.

If the hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or liability, the associated gains or losses recognised in other comprehensive income are included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued on a prospective basis when the hedge no longer meets the hedge accounting criteria (including when the hedge becomes ineffective), when the hedge instrument is sold, terminated or exercised, when, for cash flow hedges, the forecast transaction is no longer expected to occur, or when the hedge designation is revoked. Any cumulative gain or loss on the hedging instrument for a forecast transaction is retained in other comprehensive income until the transaction occurs, unless the transaction is no longer expected to occur in which case it is transferred to the income statement.

INVESTMENT INCOME

Interest income is recognised in the income statement as it accrues and it is measured using the effective interest method. Dividend income from investments is recognised in the income statement when the shareholders' right to receive payment has been established.

LEASES

FINANCE LEASES

Leases that transfer substantively all the risks and rewards of ownership are classified as finance leases. Assets acquired in terms of finance leases are capitalised at the lower of fair value and the present value of the minimum lease payments at the inception of the lease and depreciated over the estimated useful life of the asset or the lease term, if shorter. Lease payments are allocated using the effective interest method to determine the lease finance cost, which is recognised in the income statement over the lease period, and the capital repayment, which reduces the finance lease liability to the lessor.

OPERATING LEASES

All other leases are classified as operating leases. Payments made under operating leases are charged against income on a straight line basis over the period of the lease.

EMPLOYEE BENEFITS

SHORT-TERM EMPLOYEE BENEFITS

The cost of all short-term employee benefits is recognised in the income statement during the period in which the employee renders the related service. Accruals for employee entitlements to salaries, performance bonuses and annual leave represent the amount of the Group's present obligation as a result of employees' services provided up to the reporting date. Accruals are calculated at undiscounted amounts based on current salary rates.

RETIREMENT BENEFITS

The Group provides defined-contribution and, historically, defined-benefit funds for its employees, the assets of which are held in separate funds. These funds are financed by payments from employees and the Group, taking account of the recommendations of independent actuaries.

DEFINED-CONTRIBUTION PLANS

A defined-contribution plan is a post-retirement benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined-contribution pension plans are recognised in the income statement as the related service is provided.

The Group's two defined-contribution plans both have ESAs which were created through transfers from the ESAs in the AECI Pension Fund (a defined-benefit plan). These ESAs can only be utilised in accordance with the allowed uses as defined by the Pension Funds Act, No. 24 of 1956, as amended ("the Act").

The ESAs in the defined-contribution plans are recognised as financial assets and are measured at fair value, with all changes in fair value being recognised in the income statement.

The ESAs have been utilised to fund a portion of the employer contribution made on behalf of members to these funds. The ESAs are invested in money market assets and earn a return on this investment. The ESA of the AECI Defined Contribution Pension Fund may also increase as a result of the unvested retirement benefit equalisation target ("RBET"), transferred when employees leave the fund before becoming entitled to that portion of the RBET (see note 29).

DEFINED-BENEFIT PLANS

A defined-benefit plan is a post-retirement benefit plan other than a defined-contribution plan.

The Group's net obligation in respect of defined-benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on suitable corporate bonds that have maturity dates approximating the terms of the Group's obligations. The South African obligations are contained in separate legal entities and are denominated in rand, while the German obligations, acquired as part of the Schirm business combination, are unfunded and are denominated in euro.

Actuarial valuations are conducted annually by a qualified actuary and the calculation is performed using the projected unit credit method.

In the South African entities, the calculation results in a benefit to the Group. However, the recognised asset is limited to amounts credited to the ESAs in accordance with the Act, where this does not exceed the present value of economic benefits available in the form of reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realisable during the life of the plan or on settlement of the plan liabilities.

The defined-benefit cost recognised in net operating costs in the income statement includes the current service cost and the net interest on the net defined-benefit liability/ (asset). Net interest expense/(income) is the interest on the net defined-benefit liability/ (asset) at the beginning of the period, calculated using the discount rate used in the prior year's actuarial valuation. The interest takes into account changes in the net defined-benefit liability/(asset) during the year as a result of contributions and benefit payments.

The defined-benefit cost relating to actuarial gains and losses, which include the return on plan assets (excluding the interest income recognised in the income statement) and the effect of the asset ceiling (excluding the interest cost) and any changes in actuarial assumptions or experience adjustments, are remeasurements and are recognised immediately in other comprehensive income.

DEFINED-BENEFIT POST-RETIREMENT MEDICAL AID ("PRMA") OBLIGATIONS

The Group provides defined-benefit postretirement healthcare benefits to certain of its retirees and eligible employees. The Group's net obligation is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The discount rate is the yield at the reporting date on suitable corporate bonds that have maturity dates approximating the terms of the Group's obligations and are denominated in rand as the benefits are expected to be paid in rand.

Actuarial valuations are conducted annually by a qualified actuary and the calculation is performed using the projected unit credit method.

The defined-benefit cost recognised in net operating costs in the income statement includes the current service cost and the net interest on the net defined-benefit liability. Net interest expense is the interest on the net defined-benefit liability at the beginning of the period, calculated using the discount rate used in the prior year's actuarial valuation. The interest takes into account changes in the net defined-benefit liability during the year as a result of contributions and benefit payments.

The defined-benefit cost relating to actuarial gains and losses, which include any changes in actuarial assumptions or experience adjustments, are remeasurements and are recognised immediately in other comprehensive income.

TERMINATION BENEFITS

Termination benefits are recognised at the earlier of when the Group can no longer withdraw from the offer of those benefits or when the Group recognises costs of restructuring.

OTHER LONG-TERM EMPLOYEE BENEFITS

The Group's obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Remeasurements are recognised in the income statement in the period in which they arise.

SHARE-BASED PAYMENTS

The Group has equity-settled and cash-settled share-based compensation plans.

CASH-SETTLED SHARE-BASED SCHEME (BENEFIT AND RETENTION UNITS)

These schemes allow senior Group employees to participate in the performance of AECI's ordinary share price, in return for services rendered, through the payment of cash incentives which are based on the market price of AECI ordinary shares. These share appreciation rights are recognised as a liability at fair value at each reporting date, in the statement of financial position, until the date of settlement. The fair value of these rights is determined at each reporting date and the unrecognised cost is amortised in the income statement as an employee cost over the period that employees provide services to the Group.

EQUITY-SETTLED SHARE-BASED SCHEMES

The EST equity-settled share-based scheme awards certain employees B ordinary shares which will be converted to ordinary shares after a 10-year lock-in period based on a predetermined award formula.

Senior employees are awarded performance shares. Performance shares are awards that entitle certain employees to receive ordinary shares after a three-year lock-in period based on the performance of the Company's ordinary share price relative to a peer group of listed companies. The 2018 allocations under the scheme carry two additional conditions, compared to the conditions that applied in prior years, relating to targets for the Company's headline earnings per share ("HEPS") and its return on net assets ("RONA") over the performance period.

Such equity-settled share-based payments are measured at fair value at the date of the grant. The fair value on the 2018 allocation also takes into account the expectation of achieving the HEPS and RONA targets.

The fair value determined at the grant of the equity-settled share-based payments is charged as an employee cost, with a corresponding increase in equity, on a straight line basis over the period that the employee becomes unconditionally entitled to the shares, based on management's estimation of the shares that will vest and adjusted for effects of non-market based vesting conditions. On settlement, where shares are repurchased in the market, the cost is recognised as a change in the share-based payment reserve.

INCOME TAX

Income tax comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of prior years.

DIVIDENDS

Dividends are recognised as a liability when declared and are included in the statement of changes in equity.

SEGMENT REPORTING

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. The operating results of all segments are reviewed monthly by the AECI Executive Committee to make decisions about resources to be allocated to them and to assess their performances.

Inter-segment transactions are concluded on terms that are no more and no less favourable than transactions with unrelated external parties.

The Group reports on its segments based on the nature of the products or services offered, as follows:

• › Mining Solutions the businesses in this segment provide a mine-to-mineral solution for the mining sector internationally. The offering includes surfactants for explosives manufacture, commercial explosives, initiating systems and blasting services right through the value chain to chemicals for ore beneficiation and tailings treatment;
• › Water & Process ImproChem provides integrated water treatment and process chemicals, and equipment solutions, for a diverse range of applications in Africa. These include, inter alia, public and industrial water, desalination and utilities;
• › Plant & Animal Health Nulandis manufactures and supplies an extensive range of crop protection products, plant nutrients and services for the agricultural sector in Africa. Schirm, based in Germany, is a contract manufacturer of agrochemicals and fine chemicals with a European and US footprint. It is the largest provider of external agrochemical formulation services in Europe;
• › Food & Beverage these businesses supply ingredients and commodities to the dairy, beverage, wine, meat, bakery, health and nutrition industries. The other main activity is the manufacture and distribution of a broad range of juice-based products and drinks, including formulated compounds, fruit concentrate blends and emulsions;
• › Chemicals supply of chemical raw materials and related services for use across a broad spectrum of customers in the manufacturing, infrastructure and general industrial sectors;
• › Property & Corporate mainly property leasing and management in the office, industrial and retail sectors, and corporate functions including the treasury.

Segment reporting is based on IFRS and is representative of the internal structure used for management reporting.

STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2018

			GROUP		COMPANY
R millions	Note	2018	2017	2018	2017
ASSETS
NON-CURRENT ASSETS		11 681	7 365	10 396	8 657
Property, plant and equipment	1	5 768	3 965	536	519
Investment property	2	222	216	249	247
Intangible assets	3	1 039	188	4	4
Goodwill	4	3 410	1 524	754	754
Pension fund employer surplus accounts	29	341	487	341	487
Investment in subsidiaries	5			7 913	6 125
Loans to subsidiaries	5			434	367
Investment in joint ventures	6	258	274	28	28
Investment in associates	7	135	199	24	24
Other investments	8	126	117	113	102
Deferred tax	9	382	395	—	—
CURRENT ASSETS		10 594	8 606	6 160	5 830
Inventories	10	4 081	3 355	1 320	1 235
Accounts receivable	11	4 650	3 793	1 387	1 503
Other investments	8	218	155	135	78
Loans to joint ventures	6	7	—	—	—
Loans to subsidiaries	5			3 301	2 846
Tax receivable		57	97	—	43
Cash		1 581	1 206	17	125
TOTAL ASSETS		22 275	15 971	16 556	14 487
EQUITY AND LIABILITIES
ORDINARY CAPITAL AND RESERVES		10 043	9 234	5 034	3 728
Share capital and share premium	13	110	110	128	128
Reserves		1 557	1 102	271	225
Retained earnings		8 376	8 022	4 635	3 375
PREFERENCE SHARE CAPITAL	13	6	6	6	6
SHAREHOLDERS' EQUITY		10 049	9 240	5 040	3 734
NON-CONTROLLING INTEREST	33	156	116
TOTAL EQUITY		10 205	9 356	5 040	3 734
NON-CURRENT LIABILITIES		6 646	1 614	6 080	2 171
Deferred tax	9	547	93	60	18
Loans from subsidiaries	5			2 197	703
Non-current borrowings	14	5 475	1 100	3 480	1 100
Contingent consideration		10	29	10	29
Put option liability	33	31	—	—	—
Non-current provisions and employee benefits	15	583	392	333	321
CURRENT LIABILITIES		5 424	5 001	5 436	8 582
Accounts payable	16	5 010	4 272	2 072	2 122
Current borrowings	17	283	530	280	530
Loans from joint ventures	6	—	130	30	178
Loans from subsidiaries	5			3 043	5 752
Tax payable		131	69	11	—
TOTAL LIABILITIES		12 070	6 615	11 516	10 753
TOTAL EQUITY AND LIABILITIES		22 275	15 971	16 556	14 487

INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

			GROUP		COMPANY
R millions	Note	2018	2017	2018	2017
REVENUE	18	23 314	18 482	5 665	5 716
Net operating costs	19	(21 315)	(16 903)	(5 300)	(5 616)
OPERATING PROFIT		1 999	1 579	365	100
Impairment of equity-accounted investee	7	(78)	—
Share of profit of equity-accounted investees, net of tax	6, 7	—	—
PROFIT FROM OPERATIONS ANDEQUITY-ACCOUNTED INVESTEES		1 921	1 579	365	100
Dividends received	28			1 817	1 864
Net finance costs		(365)	(167)	(188)	(279)
Interest expense	21	(403)	(202)	(413)	(444)
Interest received	22	38	35	225	165
PROFIT BEFORE TAX		1 556	1 412	1 994	1 685
Tax (expense)/credit	23	(529)	(429)	(82)	12
PROFIT FOR THE YEAR		1 027	983	1 912	1 697
ATTRIBUTABLE TO:
Ordinary shareholders		990	950	1 909	1 694
Preference shareholders		3	3	3	3
Non-controlling interest		34	30
		1 027	983	1 912	1 697
PER ORDINARY SHARE (CENTS):
— Basic earnings	24	938	900
— Diluted basic earnings	24	909	859
— Headline earnings	24	1 045	959
— Diluted headline earnings	24	1 012	915
— Ordinary dividends paid	25	489	438
— Ordinary dividends declared after the reporting date	25	366	340

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018

	GROUP		COMPANY
R millions	2018	2017	2018	20171 69711——————15—15(4)—(4)1 7081 7053
PROFIT FOR THE YEAR	1 027	983	1 912
OTHER COMPREHENSIVE INCOME/(LOSS) NET OF TAX:	416	(205)	(27)
Items that may be reclassified subsequently to profit or loss:	482	(239)	14
— Foreign currency loan translation differences	64	(58)	11
— Foreign operations translation differences	413	(177)	—
— Effective portion of cash flow hedges	5	(4)	3
Tax effect on items that may be reclassified subsequently
to profit or loss:	(16)	23	(3)
— Foreign currency loan translation differences	(16)	23	(3)
Items that may not be reclassified subsequently to profit or loss:	(69)	15	(53)
— Remeasurement of defined-benefit obligations	(24)	—	(24)
— Remeasurement of post-retirement medical aid obligations	(45)	15	(29)
Tax effects on items that may not be reclassified subsequently
to profit or loss:	19	(4)	15
— Remeasurement of defined-benefit obligations	11	—	7
— Remeasurement of post-retirement medical aid obligations	8	(4)	8
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	1 443	778	1 885
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Ordinary shareholders	1 389	752	1 882
Preference shareholders	3	3	3
Non-controlling interest	51	23
	1 443	778	1 885	1 708

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018

R millions	Ordinarysharecapital	Sharecapitaland sharepremium	Foreigncurrencytranslationreserve	Share-basedpaymentreserve
GROUP
BALANCE AT 1 JANUARY 2017TOTAL COMPREHENSIVE INCOME FOR THE YEAR	110	110	1 086(205)	195
Remeasurement of post-retirement medical aid obligations
Deferred tax on remeasurement of post-retirement medical aid obligations
Cash flow hedge fair value adjustments
Foreign currency loan translation differences			(58)
Deferred tax on foreign currency loan translation differences			23
Foreign operations translation differences			(170)
Profit for the year
TRANSACTIONS WITH OWNERS			2	29
Change in ownership percentage			2
Dividends paid
Share-based payment reserve				73
Settlement cost of performance shares				(44)
BALANCE AT 31 DECEMBER 2017	110	110	883	224
Adjustment on adoption of IFRS 9, net of deferred tax
ADJUSTED BALANCE AT 31 DECEMBER 2017	110	110	883	224
TOTAL COMPREHENSIVE INCOME FOR THE YEAR			444
Remeasurement of defined-benefit obligations
Deferred tax on remeasurement of defined-benefit obligations
Remeasurement of post-retirement medical aid obligations
Deferred tax on remeasurement of post-retirement medical aid obligations
Cash flow hedge fair value adjustments
Foreign currency loan translation differences			64
Deferred tax on foreign currency loan translation differences			(16)
Foreign operations translation differences			396
Profit for the year
TRANSACTIONS WITH OWNERS				35
Acquisition of non-controlling interest
Change in ownership percentage
Recognition of put option liability for the future buy-outof non-controlling interests
Dividends paid
Share-based payment reserve				81
Settlement cost of performance shares				(46)
BALANCE AT 31 DECEMBER 2018	110	110	1 327	259

FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve comprises all the Group's foreign exchange differences from the translation of the financial statements of foreign operations, as well as from the translation of monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future.

SHARE-BASED PAYMENT RESERVE

The share-based payment reserve comprises the accumulated share-based payments over the vesting periods of the underlying instruments. Once all the instruments have vested, the reserve will be transferred to retained earnings.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 CONTINUED

Totalequity	Preferencesharecapital	Noncontrollinginterest	Total	Retainedearnings	Totalotherreserves	Otherreserves	Change-inownershipreserve
9 046	6	127	8 913	7 523	1 280	(1)
778	3	23	752	961	(209)	(4)
15			15	15
			(4)	(4)
			(4)		(4)	(4)
(58)			(58)		(58)
23			23		23
(177)		(7)	(170)		(170)
983	3	30	950	950
(468)	(3)	(34)	(431)	(462)	31
		(17)	17	15	2
(497)	(3)	(17)	(477)	(477)
73			73		73
(44)			(44)		(44)
9 356	6	116	9 234	8 022	1 102	(5)
(42)			(42)	(42)
9 314	6	116	9 192	7 980	1 102	(5)	—
1 443	3	51	1 389	940	449	5
(24)			(24)	(24)
11			11	11
(45)			(45)	(45)
			8	8
			5		5	5
			64		64
			(16)		(16)
		17	396		396
	3	34	990	990
64(16)4131 027(552)	(3)	(11)	(538)	(544)	6		(29)
32		32
(19)		(15)	(4)	(4)
(29)			(29)		(29)		(29)
	(3)	(28)	(540)	(540)
			81		81
(571)81(46)			(46)		(46)
	6	156	10 043	8 376	1 557	—	(29)

CHANGE-IN-OWNERSHIP RESERVE

The change-in-ownership reserve is the reserve set aside for the buy-out of non-controlling interests at a date in the future. The future buy-out will be done in terms of a put option held by the minority shareholders of the Much Asphalt group of companies.

OTHER RESERVES

The reserve for effective cash flow hedges.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 CONTINUED

R millions	Ordinarysharecapital	Sharepremium
COMPANYBALANCE AT 1 JANUARY 2017TOTAL COMPREHENSIVE INCOME FOR THE YEAR	122	6
Remeasurement of post-retirement medical aid obligationsDeferred tax on remeasurement of post-retirement medical aid obligationsProfit for the year
TRANSACTIONS WITH OWNERSDividends paidShare-based payment reserveSettlement cost of performance shares
BALANCE AT 31 DECEMBER 2017	122	6
Adjustment on adoption of IFRS 9, net of deferred tax
ADJUSTED BALANCE AT 31 DECEMBER 2017	122	6
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Remeasurement of defined-benefit obligationsDeferred tax on remeasurement of defined-benefit obligationsRemeasurement of post-retirement medical aid obligationsDeferred tax on remeasurement of post-retirement medical aid obligationsCash flow hedge fair value adjustmentsForeign currency loan translation differencesProfit for the yearTRANSACTIONS WITH OWNERSDividends paidShare-based payment reserveSettlement cost of performance shares
BALANCE AT 31 DECEMBER 2018	122	6

Sharecapitaland sharepremium	Share-basedpaymentreserve	Otherreserves	Totalotherreserves	Retainedearnings	Total	Preferencesharecapital	Totalequity
128	196	—	196	2 198	2 522	6	2 528
				1 705	1 705	3	1 708
				15	15		15
				(4)	(4)		(4)
				1 694	1 694	3	1 697
	29		29	(528)	(499)	(3)	(502)
				(528)	(528)	(3)	(531)
	73(44)		73(44)		73(44)		73(44)
128	225	—	225	3 375	3 728	6	3 734
				(13)	(13)		(13)
128	225	—	225	3 362	3 715	6	3 721
		11	11	1 871	1 882	3	1 885
				(24)	(24)		(24)
				7	7		7
				(29)	(29)		(29)
				8	8		8
		3	3		3		3
		8	8	1 909	81 909	3	81 912
	35	—	35	(598)	(563)	(3)	(566)
	81		81	(598)	(598)81	(3)	(601)81
	(46)		(46)		(46)		(46)
							5 040
128	260	11	271	4 635	5 034	6

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 CONTINUED

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018

				GROUP		COMPANY
R millions		Note	2018	2017	2018	2017
CASH GENERATED BY OPERATIONS		i	2 955	2 350	597	401
Dividends received			18	55	—	—
Interest paid			(370)	(202)	(391)	(444)
Interest received			38	35	225	165
Tax paid		ii	(302)	(481)	32	(43)
Changes in working capital		iii	(155)	(358)	(19)	(270)
Cash flows relating to defined-benefit costs			(19)	(101)	(17)	(101)
Cash flows relating to non-current provisionsand employee benefits			(136)	(77)	(85)	(37)
	CASH AVAILABLE FROM OPERATING ACTIVITIES		2 029	1 221	342	(329)
Dividends paid		iv	(571)	(497)	(601)	(531)
CASH FLOWS FROM OPERATING ACTIVITIES			1 458	724	(259)	(860)
CASH FLOWS FROM INVESTING ACTIVITIES			(4 759)	(698)	(1 933)	687
Net replacement to maintain operations			(406)	(368)	(55)	(25)
Replacement of	— property, plant and equipment		(519)	(416)	(111)	(57)
recognition of investment in associate	Proceeds from disposal of assets classified as held for sale and		—	30	—	30
investment property and intangible assets	Proceeds from disposal of property, plant and equipment,		113	18	56	2
Investments to expand operations			(4 353)	(330)	(1 878)	712
Acquisition of	— property, plant and equipment		(291)	(210)	(29)	(56)
	— intangible assets		(1)	—	(1)	(4)
	— investment property		(36)	(78)	(36)	(190)
	— investments		(5)	(94)	276	(85)
	— subsidiaries, net of cash acquired	12	(3 884)	—	(2 087)	—
Loans with	— associates and other investments		1	(3)	(1)	(2)
	— subsidiaries and joint ventures		(137)	55	—	1 049
Sale of business			—	—	—	(2)
NET CASH (UTILISED)/GENERATED BEFORE
FINANCING ACTIVITIES			(3 301)	26	(2 192)	(175)
CASH FLOWS FROM FINANCING ACTIVITIES			3 519	(176)	2 084	(22)
Non-current borrowings	— raised		4 331	—	2 380	—
Current borrowings	— raised		4 526	250	2 622	250
	— repaid		(5 281)	(382)	(2 872)	(228)
Buy-out of non-controlling interest		33	(11)	(11)
	Proceeds from disposal to non-controlling interest		—	11
Settlement of performance shares			(46)	(44)	(46)	(44)
INCREASE/(DECREASE) IN CASH			218	(150)	(108)	(197)
Cash at the beginning of the year			1 206	1 465	125	322
Translation gain/(loss) on cash			157	(109)
CASH AT THE END OF THE YEAR			1 581	1 206	17	125

NOTES TO THE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018

				COMPANY
R millions	2018	2017	2018	2017
i. CASH GENERATED BY OPERATIONS
Profit from operations	1 999	1 579	365	100
Adjusted for non-cash movements:
Defined-benefit and defined-contribution costs	88	56	84	56
Depreciation and amortisation	710	597	101	80
Share-based payment expense	81	73	39	32
Impairment of goodwill	31	3	—	130
Impairment of property, plant and equipment	—	10	—	—
Non-current provisions and employee benefits	40	69	7	32
Loss/(surplus) on disposal of property, plant and equipment	6	(8)	1	—
Loss on disposal of investment in associate company	—	2	—	2
Gain on reassessment of contingent consideration	—	(31)	—	(31)
	2 955	2 350	597	401
ii. TAX PAID
Owing at the beginning of the year	28	(14)	43	(6)
Charge for the year	(412)	(439)	(22)	6
Business combinations	8	—	—	—
Owing/(receivable) at the end of the year	74	(28)	11	(43)
	(302)	(481)	32	(43)
iii. CHANGES IN WORKING CAPITAL
Increase in inventories	(330)	(194)	(85)	(141)
Increase in accounts receivable	(208)	(452)	106	(131)
Increase in accounts payable	236	313	(40)	44
	(302)	(333)	(19)	(228)
Translation differences and other	GROUP(25)147(358)(155)(480)(543)(17)(28)(497)(571)	—	(42)
			(19)	(270)
iv. DIVIDENDS PAID
Paid during the year (see note 25)			(601)	(531)
Paid to non-controlling interest
			(601)	(531)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

1. PROPERTY, PLANT AND EQUIPMENT

GROUP
R millions	Property	Plant andequipment	Furnitureand fittings	Computerequipment	Motorvehicles	Underconstruction	Total
2018
COST	1 847	7 304	138	320	659	705	10 973
At the beginning of the year	1 291	6 210	132	399	584	444	9 060
Additions	36	229	2	8	20	515	810
Additions through
business combinations	442	879	3	2	18	119	1 463
Disposals	(50)	(593)	(10)	(104)	(25)	(12)	(794)
Transfers	39	331	4	9	10	(393)	—
Translation differences	89	248	7	6	52	32	434
ACCUMULATED DEPRECIATIONAND IMPAIRMENT	536	3 787	90	254	538		5 205
At the beginning of the year	480	3 752	79	318	466		5 095
Disposals	(34)	(531)	(8)	(103)	(26)		(702)
Depreciation for the year	85	466	10	34	48		643
Translation differences	5	100	9	5	50		169
CARRYING AMOUNT	1 311	3 517	48	66	121	705	5 768
2017
COST	1 291	6 210	132	399	584	444	9 060
At the beginning of the year	1 237	5 951	125	354	611	420	8 698
Additions	58	324	11	52	25	156	626
Disposals	(2)	(36)	(6)	(7)	(14)	(9)	(74)
Transfers	10	75	4	5	4	(98)	—
Transfers from inventories	—	24	—	—	—	—	24
Translation differences	(12)	(128)	(2)	(5)	(42)	(25)	(214)
ACCUMULATED DEPRECIATION
AND IMPAIRMENT	480	3 752	79	318	466		5 095
At the beginning of the year	429	3 455	84	289	451		4 708
Disposals	(1)	(31)	(13)	(6)	(13)		(64)
Transfers from inventories	—	9	—	—	—		9
Impairment for the year	—	10	—	—	—		10
Depreciation for the year	59	404	10	40	59		572
Translation differences	(7)	(95)	(2)	(5)	(31)		(140)
CARRYING AMOUNT	811	2 458	53	81	118	444	3 965

1. PROPERTY, PLANT AND EQUIPMENT CONTINUED

COMPANY
R millions	Property	Plant andequipment	Furnitureand fittings	Computerequipment	Motorvehicles	Underconstruction	Total
2018
COST	56	981	22	54	21	103	1 237
At the beginning of the year	52	855	24	59	26	130	1 146
Additions	4	62	—	5	1	68	140
Disposals	—	(31)	(2)	(10)	(6)	—	(49)
Transfers	—	95	—	—	—	(95)	—
ACCUMULATED DEPRECIATIONAND IMPAIRMENT	37	585	18	47	14		701
At the beginning of the year	33	512	18	49	15		627
Disposals	(1)	(6)	(2)	(7)	(3)		(19)
Depreciation for the year	5	79	2	5	2		93
CARRYING AMOUNT	19	396	4	7	7	103	536
2017
COST	52	855	24	59	26	130	1 146
At the beginning of the year	62	853	26	75	29	146	1 191
Additions	1	77	2	3	1	29	113
Disposals through sale of business	(10)	(106)	(2)	(17)	(1)	(9)	(145)
Transfers from inventories	—	24	—	—	—	—	24
Disposals	(1)	(22)	(2)	(3)	(3)	(6)	(37)
Transfers	—	29	—	1	—	(30)	—
ACCUMULATED DEPRECIATION
AND IMPAIRMENT	33	512	18	49	15		627
At the beginning of the year	30	523	26	57	16		652
Disposals through sale of business	(1)	(59)	(2)	(13)	(1)		(76)
Transfers from inventories	—	9	—	—	—		9
Disposals	(1)	(21)	(7)	(3)	(3)		(35)
Depreciation for the year	5	60	1	8	3		77
CARRYING AMOUNT	19	343	6	10	11	130	519

2. INVESTMENT PROPERTY

	GROUP			COMPANY
R millions	2018	2017	2018	2017
COST	250	241	280	271
At the beginning of the year	241	163	271	81
Additions	36	78	36	190
Disposals	(27)	—	(27)	—
ACCUMULATED DEPRECIATION	28	25	31	24
At the beginning of the year	25	23	24	21
Depreciation for the year	3	2	7	3
CARRYING AMOUNT	222	216	249	247
ADDITIONAL INFORMATION
Fair value 1,2	797	809	1 563	1 571
Rental and service income from investment property	312	300	368	339
Direct operating expenses — relating to rental and service income	(325)	(298)	(325)	(298)

1 The fair value measurement for all of the investment properties has been categorised as a Level 3 fair value, based on the inputs of the valuation techniques used.

2 The fair value in the Group is lower than the fair value in the Company because certain properties become owner-occupied on consolidation.

The Company leases property, offices and industrial sites to external customers as well as to its subsidiary companies under operating leases. The lease periods are between one and five years, with most leases having a three-year term, with annual rental escalations between 6% and 8%. At 31 December 2018, the gross lettable area of the office and industrial buildings was 177 133m2 (2017: 177 133m2). Revenue from the investment property also includes amounts related to the provision of steam, water, effluent management, rail services and bulk electricity, mainly at the Umbogintwini Industrial Complex.

MEASUREMENT OF FAIR VALUES

FAIR VALUE HIERARCHY

The fair value of investment property is determined by an external independent property valuation expert, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued, on a three-year cycle as per Group policy. In the prior year, such a fair value of investment property was thus determined by an independent valuation expert. In the current year an assessment of the key assumptions was performed by management and no significant changes to the key assumptions were identified.

The fair value for the investment property has been split into its components. Fair value measurement for buildings and land has been categorised as a Level 3 fair value based on the inputs of the valuation technique used.

UNOBSERVABLE INPUTS

A number of valuation techniques were used, depending on the optimal likely use of the property. The following table summarises the valuation techniques used in measuring the fair value of investment property, as well as the significant unobservable inputs considered:

VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	INTER-RELATIONSHIPBETWEEN KEY UNOBSERVABLEINPUTS AND FAIR VALUE MEASUREMENT
The comparable sales approach was used tovalue vacant land.	Comparable sales for parcels of raw, unservicedor rezoned and fully serviced land.	The enhanced fair value rate per square metrehas a direct influence on fair value.
The valuation model was based on sales ofcomparable properties in the surrounding area,which were analysed to provide an estimateof the value for the property with adjustmentsmade for differing characteristics.	The land valued at Modderfontein andUmbogintwini is zoned for business use andis partially serviced but it is not immediatelysub-divisible and developable.Therefore, a fair value per square metre had
The comparable transactions were analysedin terms of their use and the purchase priceadjusted for variances in the quality of thespace. This purchase price was then dividedby the land size to determine a value rate persquare metre which was applied to the landin order to derive a fair value.	to be derived with reference to a comparableunzoned and unserviced parcel of land butenhanced by the perceived value of installedservices and zoning.

2. INVESTMENT PROPERTY CONTINUED

VALUATION TECHNIQUE	SIGNIFICANT UNOBSERVABLE INPUTS	INTER-RELATIONSHIPBETWEEN KEY UNOBSERVABLEINPUTS AND FAIR VALUE MEASUREMENT
The income approach was used to valuethe buildings.	› Capitalisation rate: 10,5% – 14,0%› Vacancy rate for office space: 10,0% – 30,0%	The estimated fair value would increase/(decrease) if:
The valuation model was based on discountedcash flows incorporating the lease obligations,including escalations, to termination. Atlease expiry, a new lease is assumed andthe commencing rental is assumed to be thecurrent gross market rental escalated at anappropriate growth rate.The present value of the future cash flows wasadded to the present value of the hypothetical	› Vacancy rate for industrial space:10,0% – 30,0%› Operating expenses for all buildings:R21,00/m2 – R26,30/m2	› the capitalisation rate were lower/(higher);› the vacancy rate for office space were lower/(higher);› the vacancy rate for industrial space werelower/(higher);› the operating expenses for all buildings werelower/(higher).
exit value, being the hypothetical net annualincome capitalised into perpetuity at anappropriate market-related rate.
The discount and exit capitalisation rates weredetermined by reference to comparable sales,appropriate surveys prepared by industryprofessionals, benchmarking against othercomparable valuations, and after consultationwith experienced and informed people in theproperty industry including other valuers,brokers, managers and investors.

3. INTANGIBLE ASSETS

GROUP

R millions	Customer andmarketingrelationships	Brands	Technicaland licensingagreements	Patents,trademarksand other	Total
2018
COST	901	147	139	39	1 226
At the beginning and end of the year	134	—	138	39	311
Additions through business combinations	733	139	—	—	872
Additions	—	—	1	—	1
Translation differences	34	8	—	—	42
ACCUMULATED AMORTISATION AND IMPAIRMENT	100	—	59	28	187
At the beginning of the year	46	—	51	26	123
Amortisation for the year	54	—	8	2	64
CARRYING AMOUNT	801	147	80	11	1 039
2017
COST	134	—	138	39	311
At the beginning of the year	134	—	138	39	311
ACCUMULATED AMORTISATION AND IMPAIRMENT	46	—	51	26	123
At the beginning of the year	32	—	44	24	100
Amortisation for the year	14	—	7	2	23
CARRYING AMOUNT	88	—	87	13	188

3. INTANGIBLE ASSETS CONTINUED

COMPANYR millions	Patents,trademarksand other
2018
COST	5
At the beginning and end of the year	4
Additions	1
ACCUMULATED AMORTISATION AND IMPAIRMENT	1
At the beginning of the year	1
CARRYING AMOUNT	4
2017
COST	4
Additions	4
CARRYING AMOUNT	4

SCHIRM

Company brand 83

Schirm was acquired via a share deal, resulting in the brand also being acquired by AECI. Schirm's company name has a long tradition in the agrochemicals and fine chemicals industries. The company name is considered a quality signal to the market and carries an attributable value. Schirm operates as a contract manufacturer and does not sell products under its own product brands or trademarks.

Since all of Schirm's sales are affected by the company brand, total revenue was considered as the basis for the valuation. Due to Schirm's stable market position, characterised by a long-established customer base and high barriers to entry for competitors, the Schirm brand was assessed as having an indefinite useful life.

MUCH ASPHALT

Company brand 64

Much Asphalt is South Africa's largest manufacturer and supplier of asphalt products, bituminous road binders and emulsions. It has a strong brand reputation, established over more than 50 years of operations, and is recognised as a leader in its field.

Much Asphalt operates in terms of a business-to-business ("B2B") model and its customers include road construction companies ("RCCs"). These RCCs regularly approach Much Asphalt for non-binding quotations. They have their own in-house asphalt manufacturing capabilities or have relationships with competing asphalt manufacturers. Pricing plays a significant role in winning contracts, even though Much Asphalt may be able to negotiate prices based on its experience, the quality of the work provided and the technology it has at its disposal.

Given Much Asphalt's long history and that its predominant business model is B2B, with price competitiveness playing a major role in securing business against competitors with similar competitive products and manufacturing process, the company's brand was assessed as having an indefinite useful life.

Intangible assets with an indefinite useful life as assess annually for impairment.

4. GOODWILL

	GROUP			COMPANY
R millions	2018	2017	2018	2017
COST	3 585	1 662	936	936
At the beginning of the year	1 662	1 711	936	1 011
Additions through business combinations	1 836	—	—	—
Disposals through sale of business	—	(1)	—	(19)
Written off	(1)	(35)	—	(56)
Translation differences	88	(13)	—	—
ACCUMULATED IMPAIRMENT LOSSES	175	138	182	182
At the beginning of the year	138	170	182	108
Written off	—	(35)	—	(56)
Impairment charge for the year	31	3	—	130
Translation differences	6	—	—	—
CARRYING AMOUNT	3 410	1 524	754	754
Goodwill is allocated to cash generating units based on the Group'soperating segments as follows:
Mining Solutions	467	467	—	—
Water & Process	349	349	—	—
Plant & Animal Health	545	190	100	100
Food & Beverage	198	198	62	62
Chemicals	1 851	320	592	592
CARRYING AMOUNT	3 410	1 524	754	754

IMPAIRMENT OF GOODWILL

Goodwill is tested for impairment by calculating the value-in-use of the cash generating unit ("CGU") or units to which the goodwill is allocated. The goodwill in the operating segments comprises individual CGUs, each of which has been tested for impairment. The goodwill balances are aggregated, per operating segment, due to no single CGU in each operating segment being considered individually significant, except as detailed below.

Value-in-use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGU and was based on the following key assumptions:

• › cash flows were projected based on actual operating results and the business plan for a period of at least five years and using an average trading profit growth rate of 10% over the five years;
• › a pre-tax discount rate between 8% and 22% (2017: 12% and 18%) was applied in determining the recoverable amount of the CGUs. The discount rate was estimated based on the Group's weighted average cost of capital, adjusted for the risk profile applicable to each CGU; and
• › terminal value growth rates of between 1% and 6% (2017: 2% and 3%) were applied. This was based on sustainable earnings and a conservative growth model.

A reasonably possible change in the assumptions used to calculate the value-in-use is not likely to cause the recoverable amount to fall below the carrying value of the remaining CGUs.

4. GOODWILL CONTINUED

IMPAIRMENTS DURING THE YEAR

An impairment was recognised for the Farmers Organisation Ltd ("FOL") business, in Malawi, that is part of the Plant & Animal Health segment. The cash flow synergies relating to this business unit are no longer expected to be realised in full as a result of the penetration of generic products into its market, the persistent effects of below average rainfall, lower output from the key crops of tobacco and cotton, and a devaluation of the Malawian kwacha against both the US$ and the rand. The combination of these factors necessitated an impairment of the goodwill.

In December, the Group's goodwill raised on the FOL business was impaired by US$2,6 million (R37,2 million translated at that date), of which R5,8 million comprised a reversal of foreign currency translation reserve and the remaining R31,4 million was included in net operating costs in the income statement). The value-in-use was reassessed at 31 December by discounting the expected future cash flows to be generated from this CGU. The recoverable amount was US$13,1 million (R188,5 million translated at that date), compared to the carrying value of US$15,7 million (R225,7 million translated at that date), resulting in the recognition of the impairment.

The impairment assessment was performed using a discounted cash flow model, in accordance with the Group's policy on impairment of non-financial assets. The following key assumptions were applied:

• › material margin percentages were determined by management, using judgement and best estimates derived from information available at the time;
• › sales volumes were determined after considering sustainable production capacity and demand observed in the market in which FOL operates;
• › the discount rate of 22,2% applied in the model was calculated using the Group's weighted average cost of capital, the Malawian risk-free rate and the Malawian country risk premium;
• › the cash flows were projected based on actual operating results and the business plan for a period of five years; and
• › a terminal value growth rate of 4,5% was applied and was based on sustainable earnings and a conservative growth model into perpetuity.

IMPAIRMENT TESTING FOR CGUs CONTAINING GOODWILL

For the purposes of impairment testing, goodwill has been allocated to the Group's CGUs as follows:

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Much Asphalt	1 531	—	—	—
Schirm	376	—	—	—
Multiple units with individually insignificant goodwill1	1 503	1 524	754	754
CARRYING AMOUNT	3 410	1 524	754	754

1 The remainder of the Group's goodwill comprises 33 CGUs which are individually insignificant.

MUCH ASPHALT

The recoverable amount of this CGU was based on the value-in-use, estimated using discounted cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.

		GROUP
%	2018	2017
Discount rate	14,8	—
Terminal value growth rate	5,5	—
Budgeted revenue growth rate (average for the next five years)	13,2	—

4. GOODWILL CONTINUED

A pre-tax discount rate was applied in determining the recoverable amount of the CGU. The discount rate was estimated based on the Group's weighted average cost of capital, adjusted for the risk profile applicable to the CGU, with a possible debt leveraging of 40%.

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on management's estimate of the long-term compound annual earnings before interest, tax, depreciation and amortisation ("EBITDA") growth rate, consistent with the assumptions that a market participant would make.

Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next five years. It was assumed that sales would increase in line with projected government expenditure on road infrastructure that will materialise in the foreseeable future, based on South African National Treasury forecasts for the next five years.

The estimated recoverable amount of the CGU exceeded its carrying amount by approximately R392 million. Management identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. The following table shows the amount by which these two assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount.

CHANGE REQUIRED FOR CARRYING AMOUNT TO EQUAL RECOVERABLE AMOUNT

%	2018	2017
Discount rate	1,8	—
Budgeted revenue growth rate (average for the next five years)	(4,1)	—

SCHIRM

The recoverable amount of this CGU was based on the value-in-use, estimated using discounted cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.

	GROUP
%2018		2017
Discount rate8,1		—
Terminal value growth rate1,8		—
Budgeted revenue growth rate (average for the next five years)5,7		—

A pre-tax discount rate was applied in determining the recoverable amount of the CGU. The discount rate was estimated based on the Group's weighted average cost of capital, adjusted for the risk profile applicable to the CGU, with a possible debt leveraging of 40%.

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on management's estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make.

Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next five years. It was assumed that sales would increase in line with the expectation that challenges associated with the commissioning of the new synthesis plant, and registration of certain products over the next five years, will be resolved.

The estimated recoverable amount of the CGU exceeded its carrying amount by approximately €10 million (R165 million translated at 31 December). Management identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. The following table shows the amount by which these two assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount.

CHANGE REQUIRED FOR CARRYING AMOUNT TO EQUAL RECOVERABLE AMOUNT

%	2018	2017
Discount rate	0,5	—
Budgeted revenue growth rate (average for the next five years)	(1,6)	—

5. INVESTMENT IN SUBSIDIARIES AND LOANS WITH SUBSIDIARIES

COMPANY
R millions	2018	2017
Unlisted shares (see note 32)	7 562	5 706
At cost	7 613	5 757
Less: impairment losses	(51)	(51)
Non-current loans to subsidiaries	351	419
Amounts owing 1	351	419
Investment in subsidiaries	7 913	6 125
Non-current loans from subsidiaries 1	(2 197)	(703)
NET INVESTMENT IN SUBSIDIARIES	5 716	5 422
Interest-bearing non-current loans to subsidiaries	434	367
Interest-bearing current loans to subsidiaries 2	3 301	2 846
INTEREST-BEARING LOANS TO SUBSIDIARIES	3 735	3 213
Interest-bearing current loans from subsidiaries	(3 043)	(5 752)
INTEREST-BEARING LOANS FROM SUBSIDIARIES	(3 043)	(5 752)
NET LOANS WITH SUBSIDIARIES (SEE NOTE 32)	(1 154)	(2 823)

1 Other loans provided by and to the Company are not expected to be repaid within 12 months and are classified as non-current.

2 Business entities are funded through the central treasury of the Company and such loans are classified as current.

The loans with non-operating business entities are considered part of the net investment in those entities and bear no interest.

All significant subsidiaries' financial information included in the financial statements is prepared as at the reporting date of the parent.

Impairment assessments on investments in unlisted shares of dormant entities were made with reference to the net asset value of those entities. Where this resulted in the value of the investment having a recoverable amount lower than the carrying value, the investments were impaired.

Impairment assessments on investments in and loans to subsidiaries were made with reference to the net asset value, future business plans and cash flow forecasts of those subsidiaries. Where this resulted in the value of the investment having a recoverable amount lower than the carrying value, the investments were impaired.

Loans bear interest at market-related variable rates, are unsecured and have no fixed terms of repayment.

6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURES

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Interest-bearing current loans to/(from) joint ventures	7	(130)	(30)	(178)
LOANS TO/(FROM) JOINT VENTURES	7	(130)	(30)	(178)

Loans bear interest at market-related variable rates, are unsecured and have no fixed terms of repayment.

INTERESTS IN JOINT VENTURES

The Group's share of profit in the equity-accounted investees for the year was R2 million (2017: R1 million).

In 2018 the Group received dividends of R18 million from its equity-accounted investees (2017: R55 million).

Crest Chemicals ("Crest") is a joint venture with the Brenntag AG Group. Crest represents several international manufacturers of specialty and commodity chemical products and distributes these to a large number of industries in Southern Africa. Its six divisions service the following key markets: food, paints and coatings, pharmaceuticals and personal care, mining and water treatment, surfactants and general industry.

Specialty Minerals South Africa ("SMSA") is a joint venture with Specialty Minerals Inc., a wholly-owned subsidiary of Minerals Technologies Inc., which is a global leader in precipitated calcium carbonate technology. Accordingly, SMSA has access to the most up-to-date technology and technical services. The company's products are used as a value-adding filler material in the manufacture of copy grade paper in South Africa.

The Group has a residual interest in the net assets of Crest and SMSA and thus they are classified as joint ventures.

None of the Group's equity-accounted investees are publicly listed entities and, therefore, they do not have published price quotations.

6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURES CONTINUED

STATEMENTS OF FINANCIAL POSITION
R millions	Crest	SMSA	Total
2018
OWNERSHIP (%)	50	50
Current assets excluding cash and cash equivalents	464	25	489
Cash and cash equivalents	28	121	149
Non-current assets	172	13	185
TOTAL ASSETS	664	159	823
Trade and other payables	225	32	257
Non-current liabilities	27	—	27
TOTAL LIABILITIES	252	32	284
Non-controlling interest	25	—	25
NET ASSETS	387	127	514
Group's share of net assets	194	64	258
CARRYING AMOUNT	194	64	258
2017
OWNERSHIP (%)	50	50
Current assets excluding cash and cash equivalents	733	22	755
Cash and cash equivalents	16	104	120
Non-current assets	150	19	169
TOTAL ASSETS	899	145	1 044
Trade and other payables	425	26	451
Non-current liabilities	20	3	23
TOTAL LIABILITIES	445	29	474
Non-controlling interest	22	—	22
NET ASSETS	432	116	548
Group's share of net assets	216	58	274
CARRYING AMOUNT	216	58	274
INCOME STATEMENTS
R millions	Crest	SMSA	Total
2018
OWNERSHIP (%)	50	50
Revenue	1 515	172	1 687
Net operating costs excluding depreciation and amortisation	(1 563)	(107)	(1 670)
Depreciation and amortisation	(10)	(3)	(13)
Interest expense	(1)	—	(1)
Interest received	2	5	7
Tax expense/(credit)	14	(18)	(4)
Non-controlling interest	(2)	—	(2)
(LOSS)/PROFIT	(45)	49	4
Group's share of (loss)/profit	(23)	25	2

6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURES CONTINUED

INCOME STATEMENTS

R millions	Crest	SMSA	Total
2017
OWNERSHIP (%)	50	50
Revenue	1 710	149	1 859
Net operating costs excluding depreciation and amortisation	(1 637)	(93)	(1 730)
Depreciation and amortisation	(16)	(2)	(18)
Impairment of goodwill	(9)	—	(9)
Impairment of intangible assets	(98)	—	(98)
Interest expense	(1)	—	(1)
Interest received	4	5	9
Tax expense/(credit)	9	(17)	(8)
Non-controlling interest	(2)	—	(2)
(LOSS)/PROFIT	(40)	42	2
Group's share of (loss)/profit	(20)	21	1

INTEREST IN JOINT OPERATIONS

COMPANY
R millions	2018	2017
Unlisted shares at amortised cost	28	28

DetNet is a joint venture with Dyno Nobel, a subsidiary of Incitec Pivot Ltd. DetNet is represented globally by both AEL Intelligent Blasting and Dyno Nobel, thus providing global access and support for all its products. The Group has rights to the assets and obligations for the liabilities of DetNet and thus it is classified as a joint operation, which is proportionately consolidated.

PERCENTAGE HELD BY AECI

Ownership (%)	2018	2017
DetNet South Africa (Pty) Ltd	50	50
GROUP'S SHARE OF INCOME STATEMENT
R millions	2018	2017
OWNERSHIP (%)	50	50
Revenue	196	166
Net operating costs excluding depreciation and amortisation	(172)	(153)
Depreciation and amortisation	(3)	(2)
Interest received	3	3
Tax expense	(3)	(2)
PROFIT	21	12

6. INVESTMENT IN JOINT VENTURES AND LOANS WITH JOINT VENTURES CONTINUED

			GROUP'S SHARE OF FINANCIAL POSITION
--	--	--	-------------------------------------	--

R millions	2018	2017
OWNERSHIP (%)	50	50
Current assets excluding cash and cash equivalents	96	89
Cash and cash equivalents	25	9
Non-current assets	22	21
TOTAL ASSETS	143	119
Trade and other payables	25	24
Non-current liabilities	1	1
TOTAL LIABILITIES	26	25
NET ASSETS	117	94

7. INVESTMENT IN ASSOCIATES

GROUP
	GROUP		COMPANY
R millions	2018	2017	2018	2017
UNLISTED SHARES AT COST	299	289	24	24
At the beginning of the year	289	273	24	—
Acquisitions	10	24	—	24
Disposals	—	(8)	—	—
POST-ACQUISITION RETAINED EARNINGS	(164)	(90)
Balance at the beginning of the year	(90)	(79)
Impairment	(78)	—
Translation differences	6	(10)
Current year's share of net losses of associate companies	(2)	(1)
TOTAL INVESTMENT IN ASSOCIATES	135	199	24	24

The Group has a 42,6% interest in PT Black Bear Resources Indonesia ("BBRI"). BBRI is an Indonesian company and has built an ammonium nitrate plant which supplies ammonium nitrate solution to the region, thereby improving AECI Mining Solutions' supply chain. BBRI is a strategic investment for that segment as it enables local supply to replace imports into this market.

BBRI was impaired as the forecast cash flows could not justify the current cost of the investment due to the high debt levels in the entity.

The value-in-use was reassessed at 31 December by discounting the expected future cash flows to be generated from the investment over the useful life of the underlying plant, using a discount rate of 12,36%. The recoverable amount was US$6,6 million (R96 million translated at that date), compared to the carrying value of US$12,1 million (R174 million translated at that date), resulting in the recognition of an impairment of US$5,5 million (R78 million) at year-end.

The impairment assessment was performed using a discounted cash flow model, in accordance with the Group's policy on impairment of non-financial assets. The following key assumptions were applied:

• › material margin percentages were determined by management, using historical trends, judgement and best estimates derived from information available at the time;
• › sales volumes were determined after considering sustainable production capacity and demand observed in the markets in which BBRI operates;
• › the discount rate of 12,36% applied in the model was calculated using the Group's weighted average cost of capital, the US risk-free rate and the Indonesian country risk premium;
• › the discount period was based on the useful economic life of the underlying plant, determined in terms of the Group's policy on property, plant and equipment;
• › the cash flows were projected based on actual operating results and the business plan for a period of five years; and
• › a terminal value growth rate of 0,5% was applied.

7. INVESTMENT IN ASSOCIATES CONTINUED

The Group has a 49% interest in Clover Pride (Pty) Ltd ("Clover Pride"), a South African manufacturer and importer of olive oils, extra virgin olive oils, balsamic vinegars and related products. The investment in Clover Pride is carried at cost by the Company.

The Group has a 27% interest in Specialised Road Technologies (Pty) Ltd ("SRT"). SRT has a wide range of specialised equipment at its disposal for road surveillance testing and its laboratory is equipped to meet the latest requirements of asphalt design protocol and performance grade binder specification testing. SRT is an associate of Much Asphalt acquired in the current year and is consolidated in the Chemicals operating segment (see note 12).

CARRYING AMOUNT OF INTEREST IN ASSOCIATE	96	29	10	135
NET ASSETS (100%)	257	57	39	353
Non-current liabilities	—	(12)	(2)	(14)
Current liabilities	(222)	(15)	(1)	(238)
Non-current assets	365	42	12	419
Current assets	114	42	30	186
STATEMENT OF FINANCIAL POSITION
OWNERSHIP (%)	42,6	49,0	27,0
2018
R millions	BBRI	Pride	SRT	Total
		Clover

The Company's investment of R24 million in Clover Pride is carried at cost less accumulated impairments.

R millions	BBRI	CloverPride	SRT	Total
2017
OWNERSHIP (%)	42,6	49,0	—
STATEMENT OF FINANCIAL POSITION
Current assets	93	38	—	131
Non-current assets	331	43	—	374
Current liabilities	(87)	(13)	—	(100)
Non-current liabilities	(126)	(11)	—	(137)
NET ASSETS (100%)	211	57	—	268
CARRYING AMOUNT OF INTEREST IN ASSOCIATE	170	29	—	199
INCOME STATEMENTR millions	BBRI	CloverPride	SRT	Total
2018OWNERSHIP (%)	42,6	49,0	27,0
Revenue	185	108	20	313
Net operating costs excluding depreciation and amortisation	(139)	(106)	(17)	(262)
Depreciation and amortisation	(40)	—	(3)	(43)
Interest expense	(12)	(2)	—	(14)
Interest received	1	—	1	2
Tax expense	—	—	(1)	(1)
LOSS	(5)	—	—	(5)
GROUP SHARE OF LOSS	(2)	—	—	(2)

7. INVESTMENT IN ASSOCIATES CONTINUED

INCOME STATEMENT		Clover
R millions	BBRI	Pride	SRT	Total
2017OWNERSHIP (%)	42,6	49,0	—
Revenue	179	99	—	278
Net operating costs excluding depreciation and amortisation	(147)	(86)	—	(233)
Depreciation and amortisation	(32)	—	—	(32)
Interest expense	(13)	(1)	—	(14)
Interest received	2	—	—	2
Tax expense	(1)	(3)	—	(4)
(LOSS)/PROFIT	(12)	9	—	(3)
GROUP SHARE OF (LOSS)/PROFIT	(5)	4	—	(1)

8. OTHER INVESTMENTS

	GROUP		COMPANY
R millions	2018	2017	2018	2017
NON-CURRENT INVESTMENTS
Equity instruments	101	91	99	89
Unlisted shares 1	97	87	95	85
Capital contributions	4	4	4	4
Loans and receivables	25	26	14	13
OTHER NON-CURRENT INVESTMENTS	126	117	113	102
CURRENT INVESTMENTS	218	155	135	78
Money market investment2	83	77	—	—
Employer surplus accounts 3	135	78	135	78
OTHER CURRENT INVESTMENTS	218	155	135	78

1 During 2017, AECI invested US$5 million (R65 million translated at the time) in Origin Materials ("Origin"), a start-up company based in California, USA, that has pioneered the development of bio-based chemicals which can be processed into a large number of products for application in global markets. Included in the unlisted shares is a R22 million investment in the Good Chemistry Fund. The Group designates these investments as measured at fair value through other comprehensive income. Previously, these assets were designated as available-for-sale financial assets. The fair value of the investment in Origin was categorised as a Level 3 asset because the shares were not listed on an exchange and there were no recent observable arm's length transactions in the shares other than the amount invested. The Good Chemistry Fund is also considered to be a Level 3 asset in the fair value hierarchy.

2 The money market investment is an investment in a collective investment scheme with Investec Bank Ltd. The investment is considered to be a Level 1 financial asset and its carrying value, therefore, was the same as its fair value at the reporting date.

3 Employer surplus accounts include the surpluses from the AECI Defined Contribution Pension Fund and the AECI Employees Provident Fund. The funds are invested in a money market account and the investment is thus considered to be a Level 1 financial asset. Its carrying value, therefore, was the same as its fair value at the reporting date. See note 29 for further information in this regard.

9. DEFERRED TAX

	GROUP		COMPANY
R millions	2018	2017	2018	2017
At the beginning of the year	302	273	(18)	(21)
Recognised in the income statement
— normal activities	(117)	3	(60)	6
— rate change	—	7	—	—
Recognised in other comprehensive income
— foreign currency loan translation differences	(16)	23	—	—
— defined-benefit obligations	11	—	7	—
— post-retirement medical aid obligations	8	(4)	8	(4)
Business combinations	(352)	—	—	—
Other	(1)	—	3	1
AT THE END OF THE YEAR	(165)	302	(60)	(18)
Analysis by major temporary differences:
Property, plant and equipment	(710)	(391)	(56)	(37)
Intangible assets	(142)	—	—	—
Provisions and deferred income	424	361	177	192
Pension fund employer surplus accounts	(133)	(158)	(133)	(158)
Deferred foreign exchange differences	(68)	(53)	(47)	(28)
Computed tax losses	460	524	—	13
Other	4	19	(1)	—
	(165)	302	(60)	(18)
Comprising:
Deferred tax assets	382	395	—	—
Deferred tax liabilities	(547)	(93)	(60)	(18)
	(165)	302	(60)	(18)

Deferred tax assets of R382 million (2017: R395 million) were recognised to the extent that it is probable that taxable income will be available in future against which they can be utilised. Future taxable profits were estimated based on business plans which include estimates and assumptions regarding economic growth, interest and inflation rates and market conditions. These deferred tax assets do not expire.

10. INVENTORIES

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Raw and packaging materials	1 503	1 114	232	308
In progress	68	25	10	7
Finished goods and merchandise	2 180	1 970	1 048	906
Consumable stores	186	182	—	—
Spares and other	144	64	30	14
	4 081	3 355	1 320	1 235
INCOME STATEMENT
Cost of inventories recognised as an expense	12 935	10 548	3 856	3 932
Losses and write-down of inventories	14	6	8	4
Inventory adjustments	64	3	7	21

11. ACCOUNTS RECEIVABLE

	GROUP			COMPANY
R millions	2018	2017	2018	2017
Trade	4 086	3 226	1 109	1 072
Contracts with customers	4 084	3 222	1 107	1 068
Lease receivables	2	4	2	4
Pre-payments	197	153	29	29
VAT	144	204	32	104
Other	182	152	50	62
Forward exchange contracts	26	43	8	7
Joint ventures and associates	15	15	16	18
Subsidiaries	—	—	143	211
	4 650	3 793	1 387	1 503

Trade receivables are exposed to credit risk as described in note 27.

The maximum exposure to credit risk for trade receivables at 31 December by geographic region was:

	GROUP			COMPANY
R millions	2018	2017	2018	2017
South Africa	2 427	2 134	1 032	1 005
Rest of Africa	1 070	867	65	58
North America	47	39	—	1
South America	15	19	—	—
Asia	96	67	5	4
Australia	87	59	—	1
Europe	344	41	7	3
	4 086	3 226	1 109	1 072

CONCENTRATION OF CREDIT RISK

The following table provides information about the exposure to credit risk and expected credit loss rates ("ECLs") for trade receivables and contract assets by geographic region as at 31 December 2018.

GROUP	Weighted	Gross
	average loss	carrying	Specific loss	Lifetime ECL	Total loss
R millions	rate (%)	amount	allowances	allowance	allowance
SOUTH AFRICA
Current (not yet due)	—	1 998	(1)	(5)	(6)
1 to 30 days past due	2	315	(5)	(5)	(10)
31 to 60 days past due	3	73	(2)	(2)	(4)
61 to 90 days past due	14	27	—	(3)	(3)
More than 90 days past due	100	81	(6)	(69)	(75)
		2 494	(14)	(84)	(98)
REST OF AFRICA
Current (not yet due)	1	737	—	(4)	(4)
1 to 30 days past due	1	246	—	(2)	(2)
31 to 60 days past due	1	70	—	(1)	(1)
61 to 90 days past due	5	23	—	(1)	(1)
More than 90 days past due	100	105	(1)	(102)	(103)
		1 181	(1)	(110)	(111)

11. ACCOUNTS RECEIVABLE CONTINUED

GROUP
	Weighted	Gross
R millions	average lossrate (%)	carryingamount	Specific lossallowances	Lifetime ECLallowance	Total lossallowance
EUROPE
Current (not yet due)	1	291	—	(3)	(3)
1 to 30 days past due	6	50	—	(3)	(3)
31 to 60 days past due	3	6	—	—	—
61 to 90 days past due	1	2	—	—	—
More than 90 days past due	100	7	—	(6)	(6)
		356	—	(12)	(12)
OTHER REGIONS
Current (not yet due)	0	232	—	(1)	(1)
1 to 30 days past due	—	13	—	—	—
31 to 60 days past due	—	1	—	—	—
61 to 90 days past due	—	—	—	—	—
More than 90 days past due	100	2	—	(2)	(2)
		248	—	(3)	(3)

Other regions include North America, South America, Asia and Australia.

COMPANY
R millions	Weightedaverage lossrate (%)	Grosscarryingamount	Specific lossallowances	Lifetime ECLallowance	Total lossallowance
SOUTH AFRICA
Current (not yet due)	—	877	(1)	(1)	(2)
1 to 30 days past due	3	135	(5)	(4)	(9)
31 to 60 days past due	—	26	(2)	—	(2)
61 to 90 days past due	—	11	—	—	—
More than 90 days past due	100	21	(4)	(16)	(20)
		1 070	(12)	(21)	(33)
REST OF AFRICA
Current (not yet due)	—	45	—	—	—
1 to 30 days past due	—	12	—	—	—
31 to 60 days past due	—	6	—	—	—
61 to 90 days past due	1	2	—	—	—
More than 90 days past due	100	5	—	(5)	(5)
		70	—	(5)	(5)

Other regions amount to R12 million, with no losses expected. These include receivables from North America, South America, Europe, Asia and Australia.

11. ACCOUNTS RECEIVABLE CONTINUED

IMPAIRMENT ALLOWANCES OF TRADE RECEIVABLES

The movements in the allowance for impairment in respect of trade receivables and contract assets during the reporting period were as follows:

		GROUP		COMPANY
R millions	2018	2017	2018	2017
At the beginning of the year	(149)	(185)	(16)	(24)
Adjustment due to recognition of expected credit losses under IFRS 9*	(56)	—	(19)	—
Subsidiaries acquired	(57)	—	—	—
Net remeasurement of loss allowance	10	24	(6)	(4)
Impairment allowances applied to trade receivables deemed irrecoverable	28	12	3	12
AT THE END OF THE YEAR	(224)	(149)	(38)	(16)
Contracts with customers	(223)	(148)	(37)	(15)
Lease receivables	(1)	(1)	(1)	(1)

* The Group initially applied IFRS 9 at 1 January 2018. Under the transition method chosen, comparative information is not restated. See note 34.

The increase in loss allowance is mainly attributable to an increase in the gross carrying amounts of trade receivables and contract assets.

The loss allowance is calculated using an ECL model instead of an incurred loss model. The Group uses a provision matrix to calculate ECLs, with amounts more than 90 days past due viewed as default events.

The ECLs were calculated based on actual credit loss experience over the past few years. The Group performed the calculation of ECL rates separately by geographic region. Exposures were segmented based on common credit risk characteristics and focused on the geographic region.

Actual credit loss experience was adjusted to reflect differences between economic conditions during the period over which the historical data was collected, current conditions and the Group's view of economic conditions over the expected lives of the receivables.

12. BUSINESS COMBINATIONS

GROUP

ACQUISITION OF SCHIRM

AECI Mauritius Ltd, a wholly-owned subsidiary of AECI, acquired 100% of the share capital of Schirm GmbH and shareholder loan claims from Imperial Chemical Logistics GmbH ("ICL"), a wholly-owned subsidiary of Imperial Holdings Ltd at the time. The effective date of this transaction was 30 January 2018. As part of the acquisition, Schirm GmbH acquired the contract manufacturing service business of ICL and a property in Wolfenbüttel, Germany (collectively, "Schirm"). On 17 January 2018, all conditions precedent to the transaction had been fulfilled and the transaction became unconditional. The financial results of Schirm were consolidated from the effective date in the Group's Plant & Animal Health operating segment, with Schirm operating as a stand-alone business.

The purchase consideration for the transaction was €128,4 million (R1 901 million), which was paid in cash on the effective date. A further payment of €6 million (R96 million) was made on 29 June 2018 following a purchase price adjustment, bringing the total consideration paid to €134,4 million (R1 997 million).

AECI already has well-established businesses in Africa, South East Asia, the USA and Australia. Domestic and international growth in the Group's five strategic pillars is a key focus. The acquisition of Schirm is in line with the Company's international expansion strategy as Schirm is a market leader in the provision of formulation services for agrochemicals in Europe; it has long-standing customer relationships with its blue-chip customer base; it invested substantially in capital expenditure in recent years and it is expected that this investment will enable significant revenue growth as well as cost efficiencies. Furthermore, there are potential synergies associated with the extension of Schirm's manufacturing expertise to AECI as well as expansion and supply chain opportunities for the Group's Plant & Animal Health segment as a whole.

12. BUSINESS COMBINATIONS CONTINUED

The initial accounting for the acquisition had not been provisionally determined at the previous reporting date. At the date of finalisation of these results, the market valuations and other calculations resulted in adjustments to the initial accounting as reflected as follows:

CARRYING VALUE OF ACQUIREE'S NET ASSETS AT THE ACQUISITION DATE

R millions	Original	Adjustment	Revised
Property, plant and equipment	847	155	1 002
Intangible assets	—	384	384
Inventory	244	20	264
Accounts receivable	466	10	476
Accounts payable	(231)	12	(219)
Cash and cash equivalents	127	—	127
Net deferred tax liability	(13)	(166)	(179)
Net current tax receivable	3	(9)	(6)
Non-current provisions	(154)	(3)	(157)
NET IDENTIFIABLE ASSETS AND LIABILITIES ACQUIRED	1 289	403	1 692
Goodwill on acquisition	708	(403)	305
GROSS CONSIDERATION PAID	1 997	—	1 997
Less: cash and cash equivalents	(127)	—	(127)
NET CONSIDERATION PAID	1 870	—	1 870

GROUP AND COMPANY

ACQUISITION OF MUCH ASPHALT

The Group entered into an agreement with Capitalworks Private Equity, MIC Investment Holdings (Pty) Ltd and the Much Asphalt management team whereby management retained approximately 2% of the shares of Much Asphalt and AECI acquired approximately 98% of the entire issued share capital of Much Asphalt. All conditions precedent to the transaction were fulfilled on 3 April 2018 and the transaction took effect on that date. The results of Much Asphalt were consolidated in the Chemicals segment's results from this date, with Much Asphalt operating as a stand-alone entity.

The purchase consideration of R1 988 million was paid on the effective date and was subject to further adjustments pending the finalisation of the effective date accounts. Consequently, an additional amount of R59 million was paid on 20 June 2018 as a purchase price adjustment, bringing the total consideration paid to R2 047 million.

Much Asphalt is South Africa's leading asphalt producer, servicing a range of customers engaged mainly in road construction and maintenance activities. In addition to the focus on domestic growth and ongoing expansion outside South Africa in its current strategic pillars, AECI's growth strategy also includes expansion into new areas of business. The transaction, therefore, was in line with the Group's strategy to diversify the markets in which it operates.

12. BUSINESS COMBINATIONS CONTINUED

The initial accounting for the acquisition had not been provisionally determined at the previous reporting date. At the date of finalisation of these results, the market valuations and other calculations resulted in adjustments to the initial accounting as reflected below:

CARRYING VALUE OF ACQUIREE'S NET ASSETS AT THE ACQUISITION DATE

R millions	Original	Adjustment	Revised
Property, plant and equipment	552	(91)	461
Intangible assets	—	488	488
Investment in associates	10	—	10
Inventory	132	—	132
Accounts receivable	221	2	223
Accounts payable	(280)	—	(280)
Net deferred tax liability	(61)	(112)	(173)
Net current tax receivable	14	—	14
Cash and cash equivalents	33	—	33
Borrowings	(360)	—	(360)
Non-controlling interest	(27)	(5)	(32)
NET IDENTIFIABLE ASSETS AND LIABILITIES ACQUIRED	234	282	516
Goodwill on acquisition	1 813	(282)	1 531
GROSS CONSIDERATION PAID	2 047	—	2 047
Less: cash and cash equivalents	(33)	—	(33)
NET CONSIDERATION PAID	2 014	—	2 014

Bridging finance loans were utilised initially to finance the business combinations of Schirm and Much Asphalt, and were provided by the Standard Bank Group as follows:

› a €128,4 million (R1 901 million) loan to AECI Mauritius Ltd to acquire the shares and shareholder loan claims of Schirm. The loan bore interest at a variable rate linked to 3-month EURIBOR and was repayable by 30 November 2018; and

› a R2 347 million loan to AECI to acquire the shares and loan claims of Much Asphalt and to repay Much Asphalt's existing external borrowings. The loan bore interest at a variable rate linked to 3-month JIBAR and was repayable by 2 April 2019.

The Group has subsequent to this settled both the above bridging facility loans and replaced this with term funding on 21 November 2018 (see note 14).

If the business combinations in 2018 had occurred on 1 January 2018, management estimates that AECI's consolidated revenue and consolidated profit from operations would have been:

R millions	Much Asphalt	Schirm	Revenue	Much Asphalt	Schirm	Profit fromoperations
Reported			23 314			1 999
Less: business combinations reported	(1 385)	(1 755)	(3 140)	(111)	(20)	(131)
			20 174			1 868
Estimated impact ofbusiness combinations	1 740	1 923	3 663	144	37	181
			23 837			2 049

13. SHARE CAPITAL AND SHARE PREMIUM

	NUMBER OF SHARES		GROUP		COMPANY
R millions	2018	2017	2018	2017	2018	2017
ORDINARY SHARES
Authorised
Ordinary shares of R1 each	180 000 000	180 000 000	180	180	180	180
B ordinary shares of no par value	10 117 951	10 117 951
LISTED ORDINARY SHARES AT THE BEGINNINGAND END OF THE YEAR
At the beginning of the year
Group	109 944 384	109 944 384	110	110
Company	121 829 083	121 829 083			122	122
At the end of the year
Group	109 944 384	109 944 384	110	110
Company	121 829 083	121 829 083			122	122
UNLISTED REDEEMABLE CONVERTIBLE BORDINARY SHARES AT THE BEGINNINGAND END OF THE YEAR
Company	10 117 951	10 117 951
Share premium less share issue expenses			—	—	6	6
Total ordinary shares
Group	109 944 384	109 944 384	110	110
Company	131 947 034	131 947 034			128	128
No par value treasury shares held by a consolidated trust	10 117 951	10 117 951
Par value treasury shares held by a subsidiary company	11 884 699	11 884 699
Total treasury shares	22 002 650	22 002 650
LISTED PREFERENCE SHARES
Authorised and issued
5,5% cumulative shares of R2 each	3 000 000	3 000 000	6	6	6	6

In terms of the Company's MOI, all payments of dividends on the preference shares and all payments to be made in respect of the preference shares in the event of liquidation shall be made in pound sterling and calculated as though the shares were one pound sterling. The capital repayment to preference shareholders in the event of liquidation is limited to 3 150 000 pound sterling (1,05 pound sterling per share).

Other than treasury shares, the following beneficial shareholders held 5% or more of the Company's listed ordinary shares at 31 December 2018:

	Numberof shares	% of issuedordinary shares
BENEFICIAL SHAREHOLDER
Public Investment Corporation	15 264 349	13,4

CAPITAL MANAGEMENT

The Board of Directors' policy is to maintain a strong capital base so as to maintain investor and market confidence and sustain future development of the business. The Board of Directors monitors the spread of shareholders, the level of dividends to ordinary shareholders and return on capital. Return on capital is defined as profit from operations plus investment income related to average property, plant and equipment, investment property, intangible assets, goodwill, investments, inventories, accounts receivable and assets classified as held for sale less accounts payable. There are no externally imposed capital requirements.

14. NON-CURRENT BORROWINGS

R millions (unless otherwise indicated)			Weightedclosinginterest	GROUP		COMPANY
Facility	Terms of repayment	Interest rate 1	rate (%)	2018	2017	2018	2017
UNSECURED
LOCAL
LOANS
Term loan	Settled on 25 Jun 2018		8,71	—	500	—	500
Term loan	Repayable in full on12 Apr 2021	JIBAR + 1,94%	8,97	1 100	1 100	1 100	1 100
	Repayable in full on21 Nov 2021	JIBAR + 1,44%	8,44	200	—	200	—
	Repayable in full on21 Nov 2023	JIBAR + 1,63%	8,63	500	—	500	—
DMTN PROGRAMME2
AECI01	Repayable in full on11 Sep 2021	JIBAR + 1,55%	8,56	360	—	360	—
AECI02	Repayable in full on11 Sep 2023	JIBAR + 1,75%	8,76	520	—	520	—
AECI03	Repayable in full on21 Nov 2022	JIBAR + 1,51%	8,54	500	—	500	—
AECI04	Repayable in full on21 Nov 2023	JIBAR + 1,56%	8,59	300	—	300	—
FOREIGN
LOANS — US DOLLAR
	Repayable in full on20 Nov 2020	LIBOR + 1,45%	4,09	173	—
	Repayable in full on20 Nov 2021	LIBOR + 1,52%	4,16	201	—
	Repayable in full on20 Nov 2022	LIBOR + 1,83%	4,47	216	—
	Repayable in full on20 Nov 2023	LIBOR + 1,98%	4,62	287	—
LOANS — EURO
	Repayable in full on20 Nov 2023	EURIBOR + 2,00%3	1,63	559	—
	Repayable in full on20 Nov 2023	0,27% + 2,00%	2,27	559	—
				5 475	1 600	3 480	1 600
Current portion(see note 17)				—	(500)	—	(500)
CARRYING AMOUNT				5 475	1 100	3 480	1 100

1 Applicable three-month base rate with interest accrued and repaid every three months.

2 The JSE Ltd granted AECI the listing of its Senior Unsecured Floating Rate Notes, in terms of its Domestic Medium Term Note Programme ("DMTN Programme"), dated 4 September 2018, and is guaranteed by AECI Mining Solutions Ltd, Chemical Services Ltd, Much Asphalt (Pty) Ltd and AECI Mauritius Ltd, effective from 11 September 2018.

3 Three-month EURIBOR, provided that if at any time while any amount is outstanding under the facility, the sum of such margin and EURIBOR is negative, the lenders will apply a floor of -2,00% to EURIBOR, such that the sum of the margin and EURIBOR remains greater than or equal to zero.

14. NON-CURRENT BORROWINGS CONTINUED

SUMMARY OF REPAYMENTS
	TOTALOWING	REPAYABLE DURING THEYEAR ENDING 31 DECEMBER				TOTALOWING
R millions	2018	2020	2021	2022	2023	2017
GROUP
Total rand	3 480	—	1 660	500	1 320	1 600
Total foreign currencies	1 995	173	201	216	1 405	—
TOTAL NON-CURRENT BORROWINGS	5 475	173	1 861	716	2 725	1 600
COMPANY
Total rand	3 480	—	1 660	500	1 320	1 600
TOTAL NON-CURRENT BORROWINGS	3 480	—	1 660	500	1 320	1 600

15. NON-CURRENT PROVISIONS AND EMPLOYEE BENEFITS

	GROUP	COMPANY
R millions	2018	2017	2018	2017
ENVIRONMENTAL REMEDIATION
At the beginning of the year	167	165	109	104
Paid during the year	(20)	(27)	(2)	(1)
Charged to net operating costs during the year
— Additional provision made	16	31	—	6
Translation differences	2	(2)	—	—
	165	167	107	109
Current portion included in accounts payable (see note 16)	(16)	(12)	—	—
AT THE END OF THE YEAR	149	155	107	109
EARNINGS-BASED INCENTIVE SCHEME
At the beginning of the year	37	67	35	63
Paid during the year	(19)	(26)	(18)	(24)
Charged to net operating costs during the year
— Additional provision made	4	4	4	4
— Reversal of provision	—	(8)	—	(8)
	22	37	21	35
Current portion included in accounts payable (see note 16)	(22)	(37)	(21)	(35)
AT THE END OF THE YEAR	—	—	—	—
EARNINGS-GROWTH INCENTIVE SCHEME
At the beginning of the year	119	108	53	48
Paid during the year	(59)	(20)	(27)	(8)
Disposal through sale of business	—	—	—	(6)
Charged to net operating costs during the year
— Additional provision made	36	35	16	21
— Reversal of provision	(5)	(4)	(2)	(2)
	91	119	40	53
Current portion included in accounts payable (see note 16)	(67)	(73)	(30)	(32)
AT THE END OF THE YEAR	24	46	10	21

15. NON-CURRENT PROVISIONS AND EMPLOYEE BENEFITS CONTINUED

	GROUP	COMPANY
R millions	2018	2017	2018	2017
CASH-SETTLED SHARE-BASED INCENTIVE SCHEME
At the beginning of the year	45	38	45	38
Paid during the year	(12)	(4)	(12)	(4)
Charged to net operating costs during the year
— Additional provision made	4	11	4	11
— Reversal of provision	(15)		(15)	—
	22	45	22	45
Current portion included in accounts payable (see note 16)	(22)	(39)	(22)	(39)
AT THE END OF THE YEAR	—	6	—	6
POST-RETIREMENT MEDICAL AID OBLIGATIONS
Actuarial valuation of obligations (see note 29)	410	185	216	185
AT THE END OF THE YEAR	410	185	216	185
TOTAL NON-CURRENT PROVISIONS	583	392	333	321

ENVIRONMENTAL REMEDIATION

The environmental remediation provision is based on the Group's SHEQ Policy and obligations in terms of legislation to remediate land. The expenditure is expected to be incurred as and when the Group is legally required to do so, depending on end use. The Group's environmental costs could increase depending on the impact of possible changes in legislation and possible changes in practices by the environmental authorities. The provision is based on the assumption that the end-use will be for industrial purposes.

EARNINGS-BASED, EARNINGS-GROWTH AND CASH-SETTLED SHARE-BASED INCENTIVE SCHEMES

The earnings-based incentive scheme, earnings-growth incentive scheme and cash-settled share-based incentive scheme provisions represent the present value of obligations to employees who have been granted units in terms of the incentive schemes (see note 29).

The amount payable depends on employees meeting the vesting conditions pertaining to their period of employment as well as the earnings of the Group or the Company's share price performance during the life of the units.

POST-RETIREMENT MEDICAL AID OBLIGATIONS

Details of the nature of the post-retirement medical aid obligations provision are contained in note 29. The costs will be incurred over the lifetime of all eligible employees and will vary depending on expected lives, changes to salary inflation, healthcare costs and discount rates.

Assumptions used to determine the obligations are also detailed in note 29.

16. ACCOUNTS PAYABLE

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Trade	3 736	3 016	1 434	1 367
Payroll-related accruals	622	547	212	199
Other payables	455	412	220	270
Forward exchange contracts	26	109	9	58
VAT	27	11	—	—
Subsidiaries	—	—	121	116
Joint ventures and associates	17	16	3	6
	4 883	4 111	1 999	2 016
Current portion of non-current provisions (see note 15)	127	161	73	106
	5 010	4 272	2 072	2 122

17. CURRENT BORROWINGS

	GROUP	COMPANY
R millions	2018	2017	2018	2017
Current portion of non-current borrowings (see note 14)	—	500	—	500
Unsecured interest-bearing short-term borrowings	283	30	280	30
	283	530	280	530

18. REVENUE

DISAGGREGATION OF REVENUE BY NATURE

		GROUP		COMPANY
R millions	2018	2017	2018	2017
MINING SOLUTIONS	11 013	9 718	—	295
Sale of goods	9 449	8 316	—	295
Sale of goods and related product application services	1 564	1 402	—	—
WATER & PROCESS	1 376	1 454	—	—
Sale of goods	79	36
Sale of goods and related product application services	1 297	1 418
PLANT & ANIMAL HEALTH	4 423	2 543	2 433	2 310
Sale of goods	4 423	2 543	2 433	2 310
FOOD & BEVERAGE	1 248	1 195	461	442
Sale of goods	1 248	1 195	461	442
CHEMICALS	5 266	3 564	2 460	2 334
Sale of goods	5 215	3 515	2 409	2 292
Sale of goods and related product application services	51	49	51	42
PROPERTY & CORPORATE	311	297	295	275
Sale of goods	15	22	—	—
Sale of services	296	275	295	275
REVENUE RECOGNISED AT A POINT IN TIME	23 637	18 771	5 649	5 656
PROPERTY & CORPORATE	128	109	128	109
Rental income	128	109	128	109
Inter-segment	(451)	(398)	(112)	(49)
TOTAL	23 314	18 482	5 665	5 716

18. REVENUE CONTINUED

DISAGGREGATION OF REVENUE BY INDUSTRY

		GROUP		COMPANY
R millions	2018	2017	2018	2017
Mining	11 263	9 900	295	311
Agriculture	4 719	3 073	2 404	2 382
Chemicals	2 271	524	380	299
Food and beverage	1 297	1 261	430	407
Oil and refining	650	705	197	137
Textiles and leather	451	422	4	15
Paper and packaging	386	325	359	300
Toiletries, cosmetics and pharmaceuticals	371	379	367	377
Plastics and rubber	338	363	61	100
Property	320	300	306	288
Coatings, ink and adhesives	281	288	141	156
Detergents	192	186	192	185
Engineering and foundry	191	170	188	160
Potable water	182	162	—	—
Steel and metals	85	82	48	49
Energy	76	72	24	16
Construction	62	69	34	51
Automotive	33	26	22	19
Appliances and furniture	17	29	11	19
Other	80	133	2	7
Subsidiaries	—	—	200	438
Joint ventures and associates	49	13	—	—
TOTAL	23 314	18 482	5 665	5 716
DISAGGREGATION OF REVENUE BY GEOGRAPHICAL END MARKET
SADC1	14 981	13 146	5 288	5 085
Rest of Africa	4 470	3 648	150	154
International	3 814	1 675	27	39
Subsidiaries	—	—	200	438

Joint ventures and associates 49 13 — — TOTAL 23 314 18 482 5 665 5 716

1 Comprises South Africa, Botswana, Namibia and Lesotho only.

19. NET OPERATING COSTS

		GROUP	COMPANY
R millions	2018	2017	2018	2017
Cost of sales	15 528	12 263	4 543	4 604
Selling and distribution expenses	1 832	1 735	420	429
Administrative expenses	3 955	2 905	337	583
NET OPERATING COSTS	21 315	16 903	5 300	5 616
Net operating costs have been arrived at after taking into account:
Auditor's remuneration	50	27	26	8
— Audit fees	24	19	5	5
— Other services	26	8	21	3
Depreciation and amortisation	710	597	101	80
— Property, plant and equipment	643	572	93	77
— Investment property	3	2	7	3
— Intangible assets	64	23	1	—
Foreign exchange gains	(627)	(223)	(74)	—
Foreign exchange losses	539	268	—	55
Impairment of goodwill	31	3	—	130
Impairment of property, plant and equipment	—	10	—	—
Increase in non-current provisions and employee benefits	40	69	7	32
— Environmental remediation	16	31	—	6
— Earnings-based incentive scheme	4	(4)	4	(4)
— Earnings-growth incentive scheme	31	31	14	19
— Cash-settled share-based incentive scheme	(11)	11	(11)	11
Operating lease costs	229	173	33	33
Research and development expenditure	61	50	7	—
Gain on reassessment of contingent consideration	—	31	—	31
Loss on disposal of investment in associate company	—	2	—	2
Loss/(surplus) on disposal of property, plant and equipment	6	(8)	1	—
Total salaries and other staff costs	4 193	3 246	723	739
— Salaries and other staff costs	4 112	3 173	684	707
— EST share-based payment	3	19	(2)	3
— Performance share-based payment	78	54	41	29

20. SHARE-BASED PAYMENTS

AECI EMPLOYEES SHARE TRUST ("EST")

		GROUP		COMPANY
R millions	2018	2017	2018	2017
Equity-settled share-based payment	3	19	3	19
— Recognised in profit from operations	3	19	(2)	3
— Investment in subsidiaries and joint ventures			5	16

On 9 February 2012, the EST subscribed for 10 117 951 redeemable convertible AECI B ordinary shares of no par value, for no cash consideration. The EST will hold the shares on behalf of its beneficiaries for a period of 10 years. The beneficiaries are permanent employees who did not participate in any of the Group's existing long-term incentive schemes at 9 February 2012 and Black Managers who were employed as at that same date in the Group's South African operations, and any other employees and Black Managers who are employed subsequently and granted allocations by the AECI Executive Committee.

The number of shares for Black Managers was determined on the basis of annual basic salary divided by the issue price of R75,82. The number of shares for the remaining eligible employees was 1 022 AECI B ordinary shares per employee plus 102 AECI B ordinary shares for every year of completed service up to a maximum of 10 years, as indicated in the following table:

Number of yearsof completed service	Total numberof shares allocated
Less than 1	1 022
1	1 124
2	1 226
3	1 328
4	1 430
5	1 532
6	1 634
7	1 736
8	1 838
9	1 940
10	2 042

The shares are unlisted, not transferable or saleable, have the same voting rights as AECI ordinary shares and any dividend declared on the B ordinary shares may not exceed the dividend declared on the ordinary shares.

At the end of the 10-year lock-in period, the shares allocated to beneficiaries will be distributed in accordance with the EST distribution formula. These entitlement shares will then be converted to AECI ordinary shares and the remainder of the B ordinary shares will be redeemed for no consideration. Any shares which have not been allocated to employees will be distributed to the AECI Community Education and Development Trust.

The number of shares to be distributed and available for conversion to AECI ordinary shares will be determined in accordance with the EST distribution formula:

A = B × {1 - [(C - E + F + X) ÷ D]}

A is the number of the vested B ordinary shares to which an EST beneficiary is entitled, provided that fractions arising will be rounded to the nearest whole number. If A is zero, there will be no distribution and the remaining vested shares not distributed will be redeemed for no consideration. B is the total number of shares vested in beneficiaries at the termination date.

C is R75,82 being the issue price, increased by the rate of 85% of the prime rate compounded monthly in arrears during the EST term.

D is the volume weighted average price ("VWAP") of an AECI ordinary share for the higher of the 30 or 60 trading days ending at the close of trading on the EST termination date.

E is an amount equal to the distributions which would have been paid on the vested shares had they been AECI ordinary shares instead of B ordinary shares and as though they had been held from 9 February 2012.

F is an amount equal to the dividends and any other payments and distributions which have actually been paid in respect of B ordinary shares over the EST term.

X is an amount equal to the aggregate administration costs of the EST paid by the Group over the EST term divided by the total number of B ordinary shares held by the EST.

20. SHARE-BASED PAYMENTS CONTINUED

A share-based payment expense is recognised as an equity-settled share-based payment in profit from operations, with a corresponding credit to a share-based payment reserve, and will be recognised over the vesting period of the shares with reference to the fair value of the equity instruments granted. The vesting period is based on a forfeiture profile as follows:

Percentage of B ordinary shares to be forfeited %

Less than 3 years	100
3 but less than 4 years	80
4 but less than 5 years	60
5 but less than 6 years	40
6 but less than 7 years	20
More than 7 years	—

The fair value of the equity instruments was determined using a Monte Carlo option pricing approach to simulate the future share price of the Company's listed shares over the period of the transaction. The approach involves a large number of simulations of the price calculated at the end of the term, discounted to present value using a risk-free rate. The present value of all simulations is averaged to determine the fair value of the equity instrument.

The inputs for the model, based on market conditions at the grant date, and fair value determined were:

	Firstallocation	Secondallocation	Thirdallocation	Fourthallocation	Fifthallocation
Market price of the Company's listed sharesat the grant date (rand)	88,89	80,95	116,76	120,59	91,00
Issue price (rand)1	75,82	75,82	75,82	75,82	75,82
Risk-free interest rates			South African rand zero swaps curve
Prime rates	South African rand prime curve
Dividend yield	Based on 10% of forecast dividends
Grant date	30 Apr 2012	1 Oct 2012	1 Sep 2013	1 Sep 2014	31 Mar 2016
Termination date	9 Feb 2022	9 Feb 2022	9 Feb 2022	9 Feb 2022	9 Feb 2022
Hurdle price (rand)2	216,26	199,75	222,35	203,25	104,00
Share price volatility (% per annum)3	24,70	22,50	22,00	23,93	22,77
Vesting dates	7 years, in accordance with the forfeiture profile above
Number of simulations	50 000	50 000	50 000	50 000	500 000
Fair value of equity instrument (rand)	18,54	12,27	29,64	32,81	8,08
Number of shares allocated	7 569 669	509 102	560 978	710 562	1 897 590

1 The issue price was calculated as the higher of the VWAP for the 30 or 60 trading days ended at the close of business on 7 October 2011, being the Friday prior to the signature date of the EST subscription agreement as determined by the rules.

2 The issue price increased by the rate of 85% of the prime rate compounded monthly in arrears over the 10-year EST term.

3 Volatility was measured using the daily historic volatility equally weighted over a period of 10 years, being equivalent to the EST term.

	NUMBER OF SHARES
	2018	2017
EST SHARE ALLOCATION
Number of shares issued to the EST	10 117 951	10 117 951
Number of shares allocated to beneficiaries	(11 247 901)	(11 247 901)
Number of shares forfeited	1 862 698	1 415 541
UNALLOCATED POOL SHARES	732 748	285 591

The EST is consolidated in the Group in line with IFRS 10 Consolidated Financial Statements, given that the AECI Executive Committee controls and determines the number of shares allocated to beneficiaries. The B ordinary shares are treated as treasury shares. Any dividends received by the EST will be eliminated together with the dividend paid by the Company in the Group results. Dividends paid to beneficiaries of the EST are not eliminated.

B ordinary shares forfeited return to the pool of unallocated shares and are available for reallocation.

20. SHARE-BASED PAYMENTS CONTINUED

AECI PERFORMANCE SHARES ("PS")
		GROUP		COMPANY
R millions	2018	2017	2018	2017
Equity-settled share-based payment	78	54	78	54
— Recognised in profit from operations	78	54	41	29
— Investment in subsidiaries and joint ventures			37	25
				NUMBER OF SHARES
			2018	2017
SHARE ALLOCATION
Number of PS allocated at the beginning of the year			1 368 141	915 714
Number of PS allocated to beneficiaries during the year			920 224	675 369
Number of PS exercised during the year			(313 895)	(222 942)
Number of PS forfeited during the year			(20 185)	—
TOTAL PS ALLOCATED AS AT 31 DECEMBER			1 954 285	1 368 141

The AECI Long-term Incentive Plan ("LTIP") was approved by shareholders in 2012. The purpose of the plan is to attract, retain, motivate and reward Executives and Managers who are able to influence the performance of AECI and its subsidiaries on a basis which aligns their interests with those of the Group.

Annual conditional awards of PS will be allocated to Executives and Senior Managers. PS will vest on the third anniversary of their award to the extent that the Company has met specific performance criteria over the intervening period. Essentially the value per share that vests is the full value, but the number of shares that will vest will depend on whether the Company's performance over the intervening three-year period has been on target, or an under- or over-performance against the target(s) set at the award date. The PS do not have an issue price.

The methodology of vesting will target the Company's comparative total shareholder return ("TSR") in relation to a peer group of companies. A peer group of 16 JSE-listed companies (including AECI) has been used to determine AECI's relative performance. From 2018, in respect of new awards, the vesting performance measurements included a measure on return on net assets ("RONA") and growth of HEPS over the three-year vesting period.

The fair value of the PS was determined using a Monte Carlo option pricing approach to simulate the future share price of the Company's listed shares and those of the peer companies, and their correlations to one another. The approach involves a large number of simulations of the share prices using the spot share prices on the grant date, as well as risk-free interest rates and volatilities for the different shares as inputs. As the TSR calculation requires the simulation of a number of correlated random variables, the correlations between the share price returns of AECI and the peer companies are incorporated into the valuation. For each outcome of the AECI and peer companies' share prices, the TSR will be calculated, incorporating the historical TSR indices. A vesting percentage for the PS will be determined in accordance with the pre-defined ranking rules. The product of this vesting percentage and the simulated AECI share price will provide the fair value of the PS for each simulation. The present value of all simulations was averaged to determine the fair value of the PS.

The RONA and HEPS performance measures are estimated at each reporting period, based on actual results and latest forecasts of the RONA and HEPS for the Group, to determine the expected number of shares that will vest. The cost recognised in the income statement is adjusted accordingly, if required.

The inputs for the model, based on market conditions at the grant date, and fair value determined were as follows:

	Fourthallocation	Fifthallocation	Sixthallocation	Seventhallocation
Market price of AECI's listed shares at the grant date (rand)	95,20	83,00	106,28	114,87
Risk-free interest rates			South African rand zero swaps curve
Prime rates	South African rand prime curve
Dividend yield			Based on forecast dividends
Grant date	31 Oct 2015	30 Jun 2016	30 Jun 2017	16 Apr 2018
Vesting date	30 Jun 2018	30 Jun 2019	30 Jun 2020	16 Apr 2021
AECI share price volatility (% per annum)	21,84	24,33	24,96	24,40
Fair value of equity instrument (rand)	102,95	108,51	199,46	110,89
Number of PS allocated	336 182	388 290	675 369	920 224

20. SHARE-BASED PAYMENTS CONTINUED

The fourth allocation was approved in October 2015 resulting in a grant date of 31 October 2015, though the award date was 30 June 2015. The performance period was from 1 June 2015 to 1 June 2018. The fifth allocation was approved in June 2016 resulting in a grant date of 30 June 2016. The performance period is from 1 June 2016 to 1 June 2019. The sixth allocation was approved in June 2017 resulting in a grant date of 30 June 2017. The performance period is from 1 June 2017 to 1 June 2020. The seventh allocation was approved in April 2018 resulting in a grant date of 16 April 2018. The performance period is from 1 January 2018 to 31 December 2021, in alignment with the financial year.

The fourth allocation of PS vested on 30 June 2018. The performance period for those shares was completed on 1 June 2018 and AECI achieved seventh position in the peer group, with the number of shares vesting equal to the allocated shares multiplied by 1,4. The number of PS granted to eligible employees was 336 182 with 22 287 shares having been forfeited prior to vesting. Each awarded share was multiplied by 1,4 and this resulted in 439 451 ordinary shares vesting to eligible employees. AECI contracted with Avior Capital Markets (Pty) Ltd ("Avior") to purchase the shares on the JSE Ltd and to deliver them to eligible employees on the vesting date. Avior purchased the shares at a cost of R46 million and this settlement was recognised in the share-based payment reserve. Avior facilitated the transfer or sale of shares as desired by eligible employees. The shares were settled in equity by AECI and the facilitation of further transactions on the vested shares does not alter the nature of the scheme.

21. INTEREST EXPENSE

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Non-current borrowings	(203)	(148)	(163)	(148)
Current borrowings	(196)	(52)	(182)	(47)
Subsidiary companies and joint ventures			(61)	(247)
Unwinding of discount on contingent consideration	(4)	(2)	(7)	(2)
	(403)	(202)	(413)	(444)

22. INTEREST RECEIVED

	GROUP			COMPANY
R millions	2018	2017	2018	2017
Subsidiary companies and joint ventures	1	—	206	146
Loans and receivables	37	35	19	19
	38	35	225	165

23. TAX (EXPENSE)/CREDIT

	GROUP			COMPANY
R millions	2018	2017	2018	2017
Current tax	(410)	(451)	(24)	—
South African and foreign normal tax	(362)	(415)	(20)	—
Foreign withholding taxes	(43)	(36)	—	—
Securities transfer tax	(5)	—	(4)	—
Deferred tax	(94)	23	(35)	6
South African and foreign deferred tax	(94)	16	(35)	6
Deferred tax rate change	—	7	—	—
	(504)	(428)	(59)	6
Adjustment for prior years	(25)	(1)	(23)	6
South African and foreign normal tax	(2)	12	2	6
Deferred tax	(23)	(13)	(25)	—
	(529)	(429)	(82)	12
Analysis of deferred tax charge by major temporary differences:
Property, plant and equipment	(36)	119	(5)	(9)
Intangible assets	5	—	—	—
Provisions and deferred income	12	(17)	(23)	(21)
Pension fund employer surplus accounts	18	11	18	11
Deferred foreign exchange differences	5	47	(16)	11
Computed tax losses (utilised)/raised	(87)	(141)	(4)	13
Change in rate	—	7	—	—
Other	(11)	(3)	(5)	1
	(94)	23	(35)	6
Adjustment for prior years	(23)	(13)	(25)	—
	(117)	10	(60)	6
Computed tax losses
Utilised to reduce deferred tax or create deferred tax assets	(332)	(503)	4	46
Losses on which no deferred tax assets were raised because of uncertaintyregarding their utilisation	20	30	—	—
	(312)	(473)	4	46
%	GROUP2018	2017	2018	COMPANY2017
Reconciliation of tax rate computed in relation to profit before tax:
Effective rate	34,0	30,4	4,1	(0,7)

SOUTH AFRICAN STANDARD RATE	28,0	28,0	28,0	28,0
Other	(2,1)	3,1	0,2	2,6
Securities transfer tax	(0,9)	—	(0,2)	—
Effects of share-based payment arrangements	1,0	0,9	(0,2)	0,4
Adjustment for prior years	(1,4)	(0,1)	(1,2)	0,4
Foreign withholding taxes	(2,2)	(2,6)	—	—
Impairment of goodwill and equity-accounted investee (non-deductible)	(1,9)
Non-deductible expenses	(2,5)	(10,7)	(0,3)	(6,5)
Capital and non-taxable receipts	4,0	6,5	25,6	31,8
Effective rate	34,0	30,4	4,1	(0,7)

24. EARNINGS PER SHARE

GROUP

R millions	2018	2017
HEADLINE EARNINGS ARE DERIVED FROM:
Profit attributable to ordinary shareholders	990	950
Impairment of goodwill1	31	3
Impairment of property, plant and equipment	—	10
Impairments related to equity-accounted investees — net	78	40
Impairments related to equity-accounted investees — gross 2	78	54
Tax effect of impairments related to equity-accounted investees	—	(14)
Foreign currency translation differences reclassified on net investments in foreign operations — net	—	13
Foreign currency translation differences reclassified on net investments in foreign operations — gross 2		18
Tax effect on translation differences reclassified on net investments in foreign operations	—	(5)
Loss on disposal of equity-accounted investee 1,2	—	2
Loss/(surplus) on disposal of property, plant and equipment — net	4	(6)
Loss/(surplus) on disposal of property, plant and equipment — gross 2	6	(8)
Tax effects of disposal of property, plant and equipment	(2)	2
HEADLINE EARNINGS	1 103	1 012
1 The remeasurements had no tax effect.
2 The remeasurements had no non-controlling interest effect.
GROUP
	2018	2017
EARNINGS PER ORDINARY SHARE
Basic (cents)	938	900
Headline (cents)	1 045	959
Weighted average number of ordinary shares in issue	131 947 034	131 947 034
Weighted average number of ordinary shares held by the consolidated EST	(10 117 951)	(10 117 951)
Weighted average number of contingently returnable ordinary shares held by the CEDT	(4 426 604)	(4 426 604)
Weighted average number of shares held by a consolidated subsidiary	(11 884 699)	(11 884 699)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC AND HEADLINE EARNINGS PER SHARE	105 517 780	105 517 780

Basic and headline earnings per share have been calculated on the profit attributable to ordinary shareholders and headline earnings, respectively, for the financial year as shown above and on the weighted average number of ordinary shares in issue of 105 517 780, net of treasury shares (2017: 105 517 780, net of treasury shares).

GROUP
Cents	2018	2017
DILUTED EARNINGS PER ORDINARY SHARE
Basic	909	859
Headline	1 012	915

The B ordinary shares issued to the EST in 2012, which may be converted to ordinary shares, the contingently returnable shares issued to the CEDT in 2012 and the PS allocations are all dilutive potential ordinary shares. The dilutive effect is based on the number of ordinary shares that are expected to be issued in future. Taking these dilutive potential ordinary shares into account, diluted EPS and diluted HEPS have been calculated on the profit attributable to ordinary shareholders and headline earnings, respectively, for the financial year as shown above and on a weighted average number of shares of 108 965 495 (2017: 110 548 653). AECI's average share price since the beginning of the financial year, used in the determination of potentially dilutive ordinary shares, was R105,04 (2017: R104,22). The other potential ordinary shares do not have an exercise price.

24. EARNINGS PER SHARE CONTINUED

GROUP

	2018	2017
RECONCILIATION OF THE WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR DILUTEDEARNINGS PER SHARE:
Weighted average number of ordinary shares	105 517 780	105 517 780
Dilutive adjustment for potential ordinary shares	3 447 715	5 030 873
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR DILUTED EARNINGS PER SHARE	108 965 495	110 548 653

25. DIVIDENDS

		GROUP	COMPANY
R millions	2018	2017	2018	2017
ORDINARY
Final for the prior year: No. 168 of 340 cents (2017: 300 cents)paid on 9 April 2018	368	324	408	360
Interim for the current year: No. 169 of 149 cents (2017: 138 cents)paid on 3 September 2018	161	150	179	165
Total ordinary dividends paid: 489 cents (2017: 438 cents)	529	474	587	525
PREFERENCE
Nos. 160 and 161 paid on 15 June 2018 and 14 December 2018respectively	3	3	3	3
EST
A dividend of 84 cents per share was declared in 2017 and paidin the current year	7	3	7	3
A dividend of 49 cents per share was declared and paid in the current year	4	—	4	—
	543	480	601	531
Proposed final dividend No. 170 for the year ended 31 December 2018 of 366cents (2017: 340 cents) per share payable on 8 April 2019	402	374	446	414
	402	374	446	414

26. COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS

	GROUP			COMPANY
R millions	2018	2017	2018	2017
Capital commitments authorised	516	405	21	14
Contracted for	103	119	18	12
Not contracted for	413	286	3	2
Acquisitions authorised and contracted for	91	4 137	—	2 272
Future rentals on leased property, plant and equipment	932	367	35	2
Payable within 1 year	257	116	17	2
Payable between 1 and 5 years	547	224	18	—
Payable thereafter	128	27	—	—

The Group's leasing arrangements relate primarily to property and vehicles and the lease periods range from one to 10 years. Certain of the properties have renewal options at the option of either the lessor or the Group.

CONTINGENT LIABILITIES

The Group is involved in various legal proceedings and is in consultation with its legal counsel, assessing the outcome of these proceedings, on an ongoing basis. As proceedings progress, the Group's management makes provision in respect of legal proceedings where appropriate. Litigations, current or pending, are not likely to have a material adverse effect on the Group.

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Group finances its operations by a combination of retained profits, current borrowings, non-current borrowings and financial instruments denominated in both rand and foreign currencies. The Group also enters into derivative transactions to manage the currency and interest rate risks arising from its operations.

The Group raises non-current and current borrowings centrally and on-lends to its business entities at market-related interest rates. The Group borrows in both the local and international debt markets in rand and foreign currencies. It uses derivatives, where appropriate, to generate the desired effective currency and interest rate profile. The derivatives used for this purpose are principally forward foreign currency contracts and forward rate agreements.

The Group does not write interest rate or currency options and only purchases currency options when these are considered to offer a cost-effective alternative to forward foreign exchange contracts. It is Group policy that no financial instruments be purchased or sold unless they relate to underlying commercial transactions.

The main risks arising in the normal course of business from the Group's financial instruments are currency, interest rate, liquidity, credit and equity price risk. This note presents information about the Group's exposure to these risks and the Group's objectives, policies and processes for measuring and managing them. Further quantitative disclosures are included with other relevant notes as indicated.

The Board of Directors is responsible for the risk management activities in the Group. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Internal Audit function undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Risk Committee. The Risk Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the Risk Management Framework in relation to the risks faced by the Group.

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

CATEGORIES OF FINANCIAL INSTRUMENTS AND FAIR VALUES

		CARRYING AMOUNT	FAIR VALUE
R millions	2018	2017	2018	2017
GROUP
FINANCIAL ASSETS
FVOCI — equity instrument1	97	87
— Unlisted shares — Level 3	97	87
Financial assets at fair value through profit or loss	244	198	244	198
— Forward exchange contracts — Level 2	26	43	26	43
— Money market investment in collective investment scheme — Level 1	83	77	83	77
— Employer surplus accounts — Level 1	135	78	135	78
Amortised cost	5 896	4 625
— Accounts receivable 2	4 283	3 393
— Cash 3	1 581	1 206
— Loans from joint ventures 3	7	—
— Loans and receivables relating to other investments 3	25	26
	6 237	4 910
FINANCIAL LIABILITIES
Financial liabilities not measured at fair value	(9 966)	(5 204)
— Accounts payable 2	(4 208)	(3 444)
— Loans from joint ventures 3	—	(130)
— Borrowings 4	(5 758)	(1 630)
Financial liabilities at fair value through profit or loss	(67)	(138)	(67)	(138)
— Forward exchange contracts — Level 2	(26)	(109)	(26)	(109)
— Contingent consideration — Level 3	(10)	(29)	(10)	(29)
— Put option liability — Level 3	(31)	—	(31)	—
	(10 033)	(5 342)

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

CATEGORIES OF FINANCIAL INSTRUMENTS AND FAIR VALUES

		CARRYING AMOUNT	FAIR VALUE
R millions	2018	2017	2018	2017
COMPANY
FINANCIAL ASSETS
FVOCI — equity instrument1	95	85
— Unlisted shares — Level 3	95	85
Financial assets at fair value through profit or loss	143	85	143	85
— Forward exchange contracts — Level 2	8	7	8	7
— Employer surplus accounts — Level 1	135	78	135	78
Amortised cost	5 435	5 133
— Accounts receivable 2	1 318	1 363
— Cash 3	17	125
— Non-current loans to subsidiaries 3	785	786
— Current loans to subsidiaries 3	3 301	2 846
— Loans and receivables relating to other investments 3	14	13
	5 673	5 303
FINANCIAL LIABILITIES
Financial liabilities at fair value through profit or loss	(19)	(87)	(19)	(87)
— Forward exchange contracts — Level 2	(9)	(58)	(9)	(58)
— Contingent consideration — Level 3	(10)	(29)	(10)	(29)
Financial liabilities not measured at fair value	(10 808)	(10 022)
— Accounts payable 2	(1 778)	(1 759)
— Borrowings 4	(3 760)	(1 630)
— Loans from joint ventures 3	(30)	(178)
— Non-current loans from subsidiaries 3	(2 197)	(703)
— Current loans from subsidiaries 3	(3 043)	(5 752)
	(10 827)	(10 109)

1 Fair value through other comprehensive income ("FVOCI"). The investments in unlisted shares are carried at fair value and movements are recognised through other comprehensive income.

2 The fair value for financial instruments such as short-term receivables and payables have not been disclosed because their carrying amounts are a reasonable approximation of fair value.

3 The fair value would not be materially different from the carrying amounts.

4 The fair values of the interest-bearing borrowings have not been disclosed as they are not materially different from the carrying amounts.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments are either at fair value based on methods and assumptions for determining the fair value, or at values which approximate fair value based on the nature or maturity period of the financial instrument.

Fair value measurements can be classified into three levels, based on the observability and significance of the inputs used in making the measurement:

• › Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• › Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• › Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values for forward exchange contracts are based on quotes from brokers. Similar contracts are traded in an active market and the quotes reflect the actual transactions on similar instruments. The fair value of the money market investment in a collective investment scheme and the employer surplus accounts is based on quoted market prices (see note 8).

The fair value of the contingent consideration is calculated using discounted cash flows. The valuation model considers the present value of the expected future payment, discounted using a risk-adjusted discount rate of 9,2% (2017: 7,5%). The expected payment is determined by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario.

There were no transfers between Levels 1, 2 or 3 of the fair value hierarchy during the year.

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

MARKET RISK

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's income and the value of its financial instruments. The objective of market risk management is to manage and control exposures within acceptable limits.

(A) CURRENCY RISK

Where possible, the Group's non-South African operations match their assets and liabilities in the same currency to avoid unnecessary currency exposures. However, forward currency markets do not exist in some of the countries in which the Group operates.

Currency risk arises as a result of sale and purchase transactions, cash and borrowings in currencies other than rand. The currencies giving rise to currency risk are mainly euro and US dollar. Currency exposures are managed using appropriate exposure management techniques.

The management of each business entity is tasked with managing the foreign currency exposures arising in its own entity in consultation with the central treasury. All material purchases and sales in foreign currencies are transacted through the central treasury.

HEDGE ACCOUNTING

FAIR VALUE HEDGES

Fair value hedges have been recognised for the net exposure to trading in foreign currency. Forward exchange contracts have been designated as hedging instruments in respect of amounts denominated in euro and US dollars.

		GROUP	COMPANY
R millions	2018	2017	2018	2017
Rand value of the hedging instrument, based on the contract rates	333	522	453	468
Profit on the hedging instruments recognised in the income statement	20	66	15	30

CASH FLOW HEDGES

The Group has hedged its foreign currency exposure on imports of raw materials by entering into forward exchange contracts for the purchase commitments.

		GROUP		COMPANY
R millions	2018	2017	2018	2017
Value of hedging instruments, based on the contract rates	81	73	34	48

The cash flows relating to the hedging instruments will occur in 2019 and will not affect the income statement if the hedge is effective as the amount recognised in other comprehensive income will be removed from other comprehensive income and recognised in the initial cost of the items of plant and equipment and inventory.

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Amount recognised directly in other comprehensive income for the year inrespect of the cash flow hedges	(5)	4	—	—

EXPOSURE TO CURRENCY RISK

The Group's exposure to foreign currency risk at 31 December was:

		2018			2017
R millions	Euro	US dollar	Other	Euro	US dollar	Other
Cash	31	187	88	11	21	19
Trade receivables	41	515	64	48	185	22
Interest-bearing liabilities	—	—	—	—	(30)	—
Trade payables	(205)	(724)	(92)	(132)	(426)	(55)
Gross exposure	(133)	(22)	60	(73)	(250)	(14)
Forward exchange contracts	254	228	(68)	187	467	(59)
NET EXPOSURE	121	206	(8)	114	217	(73)

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

The Company's exposure to foreign currency risk at 31 December was:

		2018			2017
R millions	Euro	US dollar	Other	Euro	US dollar	Other
Cash	—	4	1	1	1	—
Trade receivables	3	58	—	2	80	—
Loans to subsidiaries	—	434	—	—	363	—
Interest-bearing liabilities	—	—	—	—	(30)	—
Trade payables	(80)	(373)	—	(75)	(283)	(1)
Gross exposure	(77)	123	1	(72)	131	(1)
Forward exchange contracts	131	353	3	118	395	3
NET EXPOSURE	54	476	4	46	526	2

The following significant exchange rates applied during the year:

	CLOSING RATE		AVERAGE RATE
Rand	2018	2017	2018	2017
Euro	16,45	14,75	15,61	15,04
US dollar	14,37	12,31	13,24	13,31

SENSITIVITY ANALYSIS

Based on the Group's net exposure to currency risk, a 10% strengthening of the rand at 31 December would have decreased or increased equity and profit by the amounts shown below, assuming all other variables remained constant:

	GROUP			COMPANY
R millions	2018	2017	2018	2017
Equity	(16)	(66)	(39)	(54)
Profit for the year before tax	23	(33)	(49)	(54)

(B) INTEREST RATE RISK

The Group borrows extensively in both local and offshore markets to minimise its borrowing costs in rand terms.

Exposure to interest rate risk on borrowings and receivables is managed on a proactive basis. Depending on market conditions, the Group makes appropriate use of forward rate agreements, interest rate swaps and interest rate caps and floors to generate the desired interest rate profile and to manage exposure to interest rate fluctuations. No target levels of exposure are maintained.

The interest rate risk profile of financial liabilities at 31 December was:

		TOTAL		FLOATING RATEFINANCIAL LIABILITIES	FIXED RATEFINANCIAL LIABILITIES
R millions	2018	2017	2018	2017	2018	2017
GROUP
Rand
— Current	283	530	283	530	—	—
— Non-current	3 480	1 100	3 480	1 100	—	—
Euro
— Non-current	1 995	—	1 436	—	559	—
	5 758	1 630	5 199	1 630	559	—
Loans from joint ventures	—	130	—	130	—	—
TOTAL	5 758	1 760	5 199	1 760	559	—

		TOTAL		FLOATING RATEFINANCIAL LIABILITIES	FIXED RATEFINANCIAL LIABILITIES
R millions	2018	2017	2018	2017	2018	2017
COMPANY
Rand
— Current	280	530	280	530	—	—
— Non-current	3 480	1 100	3 480	1 100	—	—
	3 760	1 630	3 760	1 630	—	—
Loans from joint ventures	30	178	30	178	—	—
Loans from subsidiaries	3 043	5 752	3 043	5 752	—	—
TOTAL	6 833	7 560	6 833	7 560	—	—

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

SENSITIVITY ANALYSIS

The Group has used a sensitivity analysis technique that measures the estimated change to profit or loss of an instantaneous increase or decrease of 1% (100 basis points) in market interest rates, from the rate applicable at 31 December, for each class of financial instrument with all other variables remaining constant. This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation.

The Group is exposed mainly to fluctuations in the following market interest rates: JIBAR, LIBOR, EURIBOR and money market rates. Changes in market interest rates affect the interest income or expense of floating rate financial instruments.

A change in the above market interest rates at the reporting date would have increased/(decreased) profit before tax by the amounts shown below.

The analysis has been performed on the basis of the change occurring at the start of the reporting period and assumes that all other variables, in particular foreign currency rates, remained constant. The analysis was performed on the same basis as was used for 2017.

		2018(DECREASE)/INCREASEIN PROFIT BEFORE TAX	2017(DECREASE)/INCREASEIN PROFIT BEFORE TAX
R millions	Upwardchange ininterestrate	Downwardchange ininterestrate	Upwardchange ininterestrate	Downwardchange ininterestrate
3-month JIBAR	35	(35)	16	(16)
3-month LIBOR	9	(9)	—	—
3-month EURIBOR	6	(6)	—	—
Money market	3	(3)	—	—

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

LIQUIDITY RISKS

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk through the management of working capital and cash flows. A balance between continuity of funding and flexibility is maintained through the use of borrowings from a range of institutions, with varying debt maturities.

i. MATURITY PROFILE OF FINANCIAL LIABILITIES AT 31 DECEMBER

GROUP

R millions	Carryingamount	Contractualcash flows	Within1 year	1 to 2years	2 to 5years
2018
FINANCIAL LIABILITIES
Unsecured borrowings	5 811	7 074	646	536	5 892
— Capital	5 758	5 758	283	173	5 302
— Interest accrued 1	53	1 316	363	363	590
Trade and other payables	4 155	4 155	4 155	—	—
Contingent consideration	10	16	—	16	—
Put option liability	31	47	—	—	47
DERIVATIVE FINANCIAL LIABILITIES
Forward exchange contracts
— inflows	(26)	(1 475)	(1 475)	—	—
— outflows	26	1 062	1 062	—	—
TOTAL FINANCIAL LIABILITIES	10 007	10 879	4 388	552	5 939
PERCENTAGE PROFILE (%)		100	40	5	55
2017
FINANCIAL LIABILITIES
Unsecured borrowings	1 654	2 009	684	98	1 226
— Capital	1 630	1 630	530	—	1 100
— Interest accrued 1	24	379	154	98	126
Loans from joint ventures	130	130	130	—	—
Trade and other payables	3 420	3 420	3 420	—	—
Contingent consideration	29	29	—	29	—
DERIVATIVE FINANCIAL LIABILITIES
Forward exchange contracts
— inflows	(43)	(1 239)	(1 239)	—	—
— outflows	109	644	644	—	—
TOTAL FINANCIAL LIABILITIES	5 299	4 993	3 639	127	1 226
PERCENTAGE PROFILE (%)		100	73	3	25

1 Interest is based on the closing rate at 31 December and the repayment dates of the borrowings.

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

R millions	Carryingamount	Contractualcash flows	Within1 year	1 to 2years	2 to 5years
2018
FINANCIAL LIABILITIES
Unsecured borrowings	1 426	4 829	583	303	3 943
— Capital	1 380	3 760	280	—	3 480
— Interest accrued 1	46	1 069	303	303	463
Loans from joint ventures	30	30	30	—	—
Non-current loans from subsidiaries	2 197	2 197	—	—	2 197
Current loans from subsidiaries	3 043	3 043	3 043	—	—
Trade and other payables	1 732	1 732	1 732	—	—
Contingent consideration	10	29	—	29	—
DERIVATIVE FINANCIAL LIABILITIES
Forward exchange contracts
— inflows	(8)	(569)	(569)	—	—
— outflows	9	82	82	—	—
TOTAL FINANCIAL LIABILITIES	8 439	11 373	4 901	332	6 140
PERCENTAGE PROFILE (%)		100	43	3	54
2017
FINANCIAL LIABILITIES
Unsecured borrowings	1 654	2 009	684	98	1 226
— Capital	1 630	1 630	530	—	1 100
— Interest accrued 1	24	379	154	98	126
Loans from joint ventures	178	178	178	—	—
Non-current loans from subsidiaries	703	703	—	—	703
Current loans from subsidiaries	5 752	5 752	5 752	—	—
Trade and other payables	1 735	1 735	1 735	—	—
Contingent consideration	29	29	—	29	—
DERIVATIVE FINANCIAL LIABILITIES
Forward exchange contracts
— inflows	(7)	(602)	(602)	—	—
— outflows	58	86	86	—	—
TOTAL FINANCIAL LIABILITIES	10 102	9 890	7 833	127	1 929
PERCENTAGE PROFILE (%)		100	79	1	20

1 Interest is based on the closing rate at 31 December and the repayment dates of the borrowings.

The Company's liquidity risk is managed through short-term borrowing facilities from which funding is drawn down as and when required. In addition, the repayment of loans from subsidiaries is controlled by the Company as these loans do not have fixed repayment terms and repayment can be deferred if needed.

ii. BORROWING FACILITIES

The Group ensures that adequate borrowing facilities are in place. The Group maintains a policy of ensuring that expected peak cash flows over the next 12 months are comfortably exceeded by existing facilities in order to preserve operational flexibility.

Some of the Group's loan agreements contain financial covenants. As in the prior year, the Group complied with all such covenants.

27. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED

CREDIT RISKS

Credit risks arise on cash, investments and accounts receivable. The risk on cash is managed by investing with financially sound institutions only and by setting prudent exposure limits for each institution. The risk arising on trade receivables is managed through normal credit policies using credit limits, continual review and exception reporting. The exposure to credit risk relating to trade receivables is decentralised, with each operating business entity managing its own credit control procedures because of the Group's diversified customer base. Adequate allowance is made for impairment losses.

Details of the carrying amounts and exposure to credit risk of trade receivables, as well as impairments recognised, are contained in note 11.

At the reporting date, the maximum exposure to credit risk is represented by the carrying amount of each financial asset.

28. RELATED PARTY INFORMATION

The significant operating subsidiaries of the Group are identified in note 32, joint ventures in note 6 and associate companies in note 7.

All transactions and balances with these related parties have been eliminated in accordance with, and to the extent required by, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures.

No dividends were received from associate companies (2017: nil).

Transactions with Directors are disclosed in note 30.

Transactions with related parties are concluded on terms that are no more and no less favourable than transactions with unrelated external parties.

COMPANY
R millions	2018	2017
TRANSACTIONS THAT TOOK PLACE WITH RELATED PARTIES OF THE COMPANY WERE:
Leasing income and sales by the Company to
— Subsidiaries	200	438
Sales to the Company by
— Subsidiaries	138	106
— Joint ventures	87	67
Dividends received by the Company from
— Subsidiaries	1 817	1 864
Interest received by the Company from
— Subsidiaries	205	146
— Joint ventures	1	—
Interest paid by the Company to
— Subsidiaries	54	239
— Joint ventures	6	8
Rental of premises to the Company by
— Subsidiaries	31	34
Secretarial and administration fees paid to the Company by
— Subsidiaries	164	163
— Joint ventures	9	8
OUTSTANDING BALANCES WITH RELATED PARTIES OF THE COMPANY AT 31 DECEMBER WERE(SEE NOTES 5 AND 6):
Loan amounts owing to the Company by
— Subsidiaries	4 086	3 632
Loan amounts owing by the Company to
— Subsidiaries	5 240	6 455
— Joint ventures	30	178

28. RELATED PARTY INFORMATION CONTINUED

GROUP
R millions	2018	2017
KEY MANAGEMENT PERSONNEL COMPENSATION:
— short-term employee benefits	34	64
— post-retirement benefits	2	3
— other long-term benefits	6	6
	42	73

Accounts receivable from and payable to related parties of the Group and the Company are disclosed in notes 11 and 16. Loans with joints ventures and dividends received from joint ventures are disclosed in note 6.

Key management personnel are the Directors, Prescribed Officers and Managing Directors or equivalent of operating business entities.

The key management personnel compensation above relates to the Managing Director or equivalent and excludes Directors' and Prescribed Officers' remuneration which is set out in note 30.

29. EMPLOYEE BENEFITS

RETIREMENT BENEFITS

The Group provides retirement benefits for all its permanent employees by means of an independent defined-contribution pension fund and an independent defined-contribution provident fund. The Group has four legacy defined-benefit pension funds which have no active members. The employees of the acquired companies have separate retirement benefit arrangements. Schirm has statutory arrangements whilst Much Asphalt makes available membership in umbrella funds which employees may contribute to.

Following the settlement of the defined-benefit liabilities for the majority of the active members, deferred pensioners and pensioners (collectively referred to as "members") of the AECI Pension Fund ("APF") and all members of the AECI Supplementary Pension Fund ("ASPF"), the liabilities of the 22 remaining deferred pensioners and 20 of the 24 remaining pensioners of the APF were settled through transfers to external pension funds, the AECI Defined Contribution Pension Fund ("ADCPF") or outsourced to Sanlam. The liabilities and assets for the remaining members have not yet been accounted for as a settlement but the asset values to be settled were set aside in 2015 with an asset limitation being applied to reduce AECI's recognised asset to the amount in the employer surplus account ("ESA").

In October 2016, the Group made offers to members of its remaining defined-benefit funds. These are the AECI Employees Pension Fund ("AEPF"), which has over 1 683 members but only seven active employees, and the Dulux Employees Pension Fund ("DEPF"), which has 68 pensioner members. Because the surpluses in both funds are significantly higher than their liabilities, it was possible to offer members significant enhancements. The required rule amendments of the funds have been approved by the Registrar of Pension Funds ("Registrar") and more than 75% of the members of each fund have accepted the offers made to them. On 13 February 2014, the Registrar approved the application for the DEPF. Implementation of the settlement and transfer must take place within 60 days of that date. The active employees were transferred to the ADCPF from 1 December 2016 and are now contributing members of this fund in anticipation of the conversion.

AECI transferred assets from the ESA of the APF to the ESA of the ASPF (R8 million) and to that of the AECI Employees Provident Fund ("AEPrF") (R41 million) during the year. The ESA of the AEPrF has been utilised to take a continued contribution holiday. The ADCPF ESA is also being utilised for this purpose.

INFORMATION PERTAINING TO THE AEPF AND THE DEPF

As the relevant transfer applications have yet to be submitted to the Registrar, the funds are treated as ongoing defined-benefit funds.

Members were required to pay a contribution of 6% of pensionable earnings, with the employer's contribution being 9% of pensionable earnings.

Members are entitled to receive an annual pension, at pensionable age of 65 years, calculated as 1/53 multiplied by the number of years of continuous service multiplied by average annual pensionable emoluments over the last two years of membership.

Members with at least five years of pensionable service may elect to retire within 10 years of pensionable age, based on pensionable service up to retirement age, reduced by 0,25% for each month that actual retirement age is less than 62 years.

Ill-health retirement pension becomes payable from the date of ill-heath retirement based on the same benefit, with pensionable service being based on the service that could have been served until normal retirement and pensionable emoluments, calculated at the date of ill-health retirement.

In the event of death, the funds pay a pension of 50% of the amount that was being received at the date of the principal member's death, from the date of death, to qualifying beneficiaries.

29. EMPLOYEE BENEFITS CONTINUED

All funds are governed by the Pension Fund Act, No. 24 of 1956, as amended ("the Act"). The Act provides that any actuarial surplus in any fund belongs to the fund and that the only portion of the assets of the funds that may be utilised by, or for the benefit of, the employer are any credit balances in the ESA, unless specified otherwise in the fund's rules. The ESA in the funds represent the asset ceiling.

The assets of the funds are under the control of the Trustees of the respective funds. Regulation 28 of the Act limits the amount and extent to which the funds may invest in particular classes of assets. The Trustees' investment strategies are aligned with the nature of the funds' liabilities and the achievement of adequate returns to ensure that those obligations can be settled when they are due. The assets are invested in segregated or pooled investments with a spread of asset classes including South African equities, bonds, property and cash, as well as foreign equities and bonds. The defined-benefit funds expose the Group to actuarial risks such as longevity risks, interest rate risk and market (investment) risk.

Defined-benefit funds are actuarially valued every year using the projected unit credit method of valuation by independent firms of consulting actuaries, while for defined-contribution funds no valuations are required.

The Group has the following ESAs:

GROUP AND COMPANY

R millions	2018	2017
NON-CURRENT	341	487
AECI Pension Fund ("APF")	18	468
AECI Employees Pension Fund ("AEPF")	12	11
AECI Supplementary Pension Fund ("ASPF")	5	7
Dulux Employees Pension fund ("DEPF")	1	1
AECI Defined Contribution Pension Fund ("ADCPF")	305	—
CURRENT — CLASSIFIED AS A FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
(SEE NOTE 8)	135	78
AECI Employees Provident Fund ("AEPrF")	17	26
AECI Defined Contribution Pension Fund ("ADCPF")	118	52
	476	565

PENSION FUNDS' ESAs

R millions	ADCPF2018	AEPrF2018	Total2018
At the beginning of the year	52	26	78
S15E transfer from the APF	408	62	470
Contribution holiday	(62)	(73)	(135)
Unvested retirement benefit equalisation target	20	—	20
Investment return	5	2	7
AT THE END OF THE YEAR	423	17	440

29. EMPLOYEE BENEFITS CONTINUED

The financial information of the defined-benefit funds has been disaggregated even though the plans have similar risks due to the settlements that took place during the year.

Based on interim valuations by the funds' actuaries, the defined-benefit funds' financial positions at 31 December were:

GROUP AND COMPANY

R millions	APF2018	ASPF2018	AEPF2018	DEPF2018	Total2018	Total2017
FAIR VALUE OF PLAN ASSETS	566	6	833	39	1 444	1 865
At the beginning of the year	985	7	834	39	1 865	2 058
Interest income	96	1	82	4	183	187
Return on plan assets below interest income	(25)	—	(48)	(3)	(76)	(112)
S15E transfers	(470)	—	—	—	(470)	(41)
Settlement of PRMA liability	—	—	—	—	—	(101)
Benefits paid	(20)	(2)	(35)	(1)	(58)	(37)
Assets transferred on settlement	—	—	—	—	—	(89)
PRESENT ACTUARIAL VALUE
OF DEFINED-BENEFIT OBLIGATIONS	(8)	—	(362)	(12)	(382)	(394)
At the beginning of the year	(4)	—	(377)	(13)	(394)	(482)
Interest expense	—	—	(36)	(1)	(37)	(41)
Benefits paid	20	2	35	1	58	37
Actuarial gain from changes in financial assumptions	—	—	9	—	9	20
Actuarial (loss)/gain on experience	(24)	(2)	7	1	(18)	21
Present value of liabilities settled	—	—	—	—	—	51
ASSET CEILING	(540)	(1)	(459)	(26)	(1 026)	(984)
At the beginning of the year	(513)	—	(446)	(25)	(984)	(993)
Interest cost	(52)	—	(46)	(3)	(101)	(98)
Effects of settlement	—	—	—	—	—	37
Change in effect of the asset ceiling	25	(1)	33	2	59	70
PENSION FUNDS' ESA	18	5	12	1	36	487

The fair value of the funds' plan assets at 31 December 2018 comprised bonds (7%; 2017: 5%), cash (52%; 2017: 52%) and insurance policies (41%; 2017: 43%). The fair value of the funds' plan assets at 31 December 2018 did not comprise any equity instruments.

The fair value of the funds' plan assets did not include any AECI shares.

All assets of the funds are held in instruments that have quoted market prices in active markets. The APF holds the assets in a combination of segregated and pooled portfolios. The AEPF and DEPF have linked policies and insurance policies with Old Mutual and Coronation and do not own the underlying instruments. The asset allocations are derived from the strategic asset allocation of the linked and cash policies.

Principal actuarial assumptions applied at 31 December in the valuations were:

%	2018	2017
Discount rate	9,96	10,23
Expected return on plan assets	9,96	10,23
Future price inflation	5,58	6,32
Expected salary increases	—	7,82
Future pension increases	5,03	5,69

29. EMPLOYEE BENEFITS CONTINUED

SENSITIVITY ANALYSIS
GROUP AND COMPANY	31 Dec	Discountrate +1%	Discountrate -1%	Mortalityrates
For a change in significant actuarial assumptions:
Present actuarial value of defined-benefit obligations (R millions)	(382)	(341)	(396)	(379)
Change in liability (%)		(7,0)	8,1	3,3

The sensitivity was determined by keeping all other assumptions constant except for a change in the discount rate, up from 9,96% to 10,96% and down from 9,96% to 8,96%. The post-retirement mortality rates used were adjusted from PA(90) minus two years to PA(90) minus three years.

The total R145 million cost recognised in the income statement (2017: R135 million) in respect of the defined-contribution funds represents contributions payable by the Group at rates specified in the rules of the schemes. These contributions were paid from the ESA of the defined-contribution funds as a contribution holiday (R128 million) and in cash (R17 million).

Amounts recognised in the income statement in respect of the defined-benefit obligations were:

GROUP AND COMPANY

R millions	APF2018	ASPF2018	AEPF2018	DEPF2018	Total2018	Total2017
Interest cost	—	—	(36)	(1)	(37)	(41)
Expected return on plan assets	96	—	82	4	182	187
Change in the effect of the asset ceiling	(52)	—	(46)	(3)	(101)	(98)
Loss on settlement	—	(2)	—	—	(2)	—
Fair value of assets transferred on settlement	—	—	—	—	—	(88)
Liabilities extinguished	—	(2)	—	—	(2)	51
Asset ceiling utilised	—	—	—	—	—	37
RECOGNISED IN THE INCOME STATEMENT	44	(2)	—	—	42	48
Remeasurements recognised in other comprehensive incomein respect of the defined-benefit obligations were:
Actuarial gain on financial assumptions	—	—	9	—	9	20
Actuarial (loss)/gain on experience	(24)	—	7	1	(16)	21
Actual return in excess of expected interest income	(25)	—	(48)	(3)	(76)	(112)
Change in the effect of the asset ceiling	25	(1)	33	2	59	70
RECOGNISED IN OTHER COMPREHENSIVE INCOME	(24)	(1)	1	—	(24)	—

29. EMPLOYEE BENEFITS CONTINUED

During the year, the Group acquired the shares of Schirm GmbH (see note 12). The employees of Schirm in Germany are entitled to retirement benefits which are dependent on their seniority, length of service and level of pay, and the plans are unfunded. The defined-benefit obligations are actuarially valued every year using the projected unit credit method of valuation by an independent firm of consulting actuaries. The liability is denominated in euro and the disclosure has been prepared using the year-end ZAR/€ exchange rate.

GROUP
R millions	2018
At the beginning of the year	—
Acquired through business combination	(158)
Employee contributions	—
Benefits paid	2
Exchange difference	(19)
RECOGNISED IN THE INCOME STATEMENT	(4)
Current service cost	(2)
Interest expense	(2)
RECOGNISED IN OTHER COMPREHENSIVE INCOME	(15)
Actuarial loss from changes in financial assumptions	(6)
Actuarial loss on experience	(9)
PRESENT ACTUARIAL VALUE OF DEFINED-BENEFIT OBLIGATIONS	(194)

Principal actuarial assumptions applied at 31 December in the valuations were:

%	2018
Discount rate	1,70
Expected salary increases	2,00
Future pension increases	1,75

A reasonably possible change to the discount rates and mortality rates used in the valuation will not have a material impact on the liability.

POST-RETIREMENT MEDICAL AID ("PRMA") BENEFITS

The Group provides medical aid benefits for all its permanent employees domiciled in South Africa, principally via the AECI Medical Aid Society. Historically, qualifying employees were granted a subsidy on their medical aid contributions after retirement. The obligation of the employer to continue to subsidise medical aid contributions after retirement is no longer a condition of employment for new employees and has not been offered since 1 January 2002.

The subsidy is a portion of the required medical aid contributions of participating members in a ratio between 3,0% and 66,7% of the total contribution, depending on each employee's date of employment in the Group. The medical aid fund is liable to pay medical claims in terms of its rules and the risk in respect of the liability relates to the increase in contribution levels required by the medical aid fund. The Group does not have any specific obligation to the medical aid fund.

Based on interim valuations by the actuaries, the funded status of the PRMA obligations at 31 December was:

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Present actuarial value of defined-benefit obligations	(216)	(185)	(216)	(185)
At the beginning of the year	(185)	(207)	(185)	(207)
Current service cost	(1)	(1)	(1)	(1)
Interest cost	(17)	(18)	(17)	(18)
Benefits paid	17	19	17	19
Liabilities settled	—	7	—	7
Net actuarial (losses)/gains	(30)	15	(30)	15
NET PRMA LIABILITY	(216)	(185)	(216)	(185)

29. EMPLOYEE BENEFITS CONTINUED

Principal actuarial assumptions for the PRMA obligations were:

GROUP

%	2018	2017
Annual increase in healthcare costs	CPI + 1	CPI + 1
Discount rate	9,80	9,50

Healthcare cost inflation was estimated based on CPI, with the result that the percentages used in the valuation were:

2019/2020	6,1
2020/2021	5,6
2021/2022	5,4
2022 and later	8,1

The estimated employer's contributions in respect of PRMA obligations for the coming year for both the Group and the Company are R19 million, representing the subsidies for the remaining eligible pensioners.

Amounts recognised in the income statement in respect of the PRMA obligations were:

			GROUP		COMPANY
R millions		2018	2017	2018	2017
Current service cost		(1)	(1)	(1)	(1)
Interest cost		(17)	(18)	(17)	(18)
Loss on settlement of obligation for certain pensioners		—	(4)	—	(4)
Liabilities settled		—	7	—	7
Cost of annuities accrued (see note 16)		—	172	—	172
Cost of annuities paid in cash		—	(82)	—	(82)
Cost of annuities transferred from the APF		—	(101)	—	(101)
RECOGNISED IN THE INCOME STATEMENT		(18)	(23)	(18)	(23)
Remeasurements recognised in other comprehensive income in respectof PRMA obligations:
Actuarial gain		(30)	15	(30)	15
RECOGNISED IN OTHER COMPREHENSIVE INCOME		(30)	15	(30)	15
SENSITIVITY ANALYSIS
	31 Dec	Discountrate +1%	Discountrate -1%	Futureinflation +1%	Futureinflation -1%
For a change in significant actuarial assumptions:
Present actuarial value of obligations (R millions)	(216)	(197)	(239)	(238)	(197)
Change in liability (%)		(8,8)	10,5	10,1	(8,6)
Current service cost for 2019 (R millions)	1	1	1	1	1
Change in current service cost (%)		—	—	20,1	(13,4)
Interest cost for 2019 (R millions)	20	20	20	22	18
Change in interest cost (%)		—	—	7,5	(10,8)

29. EMPLOYEE BENEFITS CONTINUED

CASH-SETTLED SHARE-BASED SCHEME ("BENEFIT UNITS")

The Group offered benefit units, without payment, to those employees of the Company or its subsidiary companies who the Board of Directors, in its absolute discretion, considers play a role in the management of the Company or its subsidiary companies and contribute to their growth and profitability.

The benefit on realisation of a benefit unit is calculated based on the AECI share price at its exercise date after deducting the issue price of that unit, and is settled in cash.

Participants are entitled to exercise their units as follows:

After 2 years — up to 20% of the units

After 3 years — up to 40% of the units

After 4 years — up to 60% of the units

After 5 years — up to 100% of the units

If a unit is not exercised within 10 years from the date such unit was granted, it will lapse.

If a participant retires on pension, or otherwise leaves the employ of the Group or one of its subsidiary companies for a reason approved by the Board of Directors, the participant shall nevertheless continue to have the same rights and obligations under the scheme in respect of the participant's units as if the participant had remained in the employ of the Group.

In the event that a participant ceases to be an employee otherwise than as a result of death, retirement on pension or other reasons approved by the Board of Directors, any unit not yet exercised will lapse.

Details of benefit units at 31 December were:

			NUMBER OF UNITS
Expiry date	Grant date	Issue price(Rand)	Granted	Exercised	Forfeited	Outstanding
February 2018	March 2008	67,25	184 550	138 020	46 530	—
February 2019	March 2009	43,42	382 650	180 054	45 150	157 446
February 2020	March 2010	59,80	399 316	175 226	41 412	182 678
February 2021	March 2011	83,82	447 640	169 892	67 858	209 890
			1 414 156	663 192	200 950	550 014

	GROUP		COMPANY
R millions	2018	2017	2018	2017
Cash-settled share-based payment transactions recognisedin the income statement	(4)	3	(4)	3
Total carrying amount of cash-settled share-based transactionliabilities (see note 15)	9	32	9	32
Total intrinsic value of vested cash-settled share-basedtransaction liabilities	11	24	11	24

29. EMPLOYEE BENEFITS CONTINUED

DEFERRED SHARES FOR EXECUTIVES AND SENIOR MANAGERS ("DS")

The Group offered DS, without payment, to those employees of the Company or its subsidiary companies who the Board of Directors, in its absolute discretion, considers play a significant role in the management of the Company or subsidiary companies and contribute to their growth and profitability.

The benefit on realisation of a DS is calculated based on the AECI share price at the exercise date, after deducting the issue price of that unit, and is settled in cash.

Vesting will take place on the third anniversary of the allocation (or the closest working day).

If a participant leaves the employ of the Group or one of its subsidiary companies for any reason on or before the vesting date, all units granted will lapse.

Details of DS at 31 December were:

				NUMBER OF UNITS
Expiry date	Grant date	Granted	Exercised	Forfeited	Outstanding
July 2018	January 2016	81 532	77 108	4 424	—
July 2019	August 2016	137 874	—	6 333	131 541
		219 406	77 108	10 757	131 541
		GROUP		COMPANY
		2018	2017	2018	2017
in the income statement	Cash-settled share-based payment transactions recognised	8	8	8	8
liabilities (see note 15)	Total carrying amount of cash-settled share-based transaction	13	13	13	13
transaction liabilities	Total intrinsic value of vested cash-settled share-based	11	21	11	21

EARNINGS-BASED INCENTIVE SCHEMES ("EBIS UNITS")

The Group offers EBIS units, without payment, to those employees of the Company or its subsidiary companies who the Board of Directors, in its absolute discretion, considers play a significant role in the management of the Company or its subsidiary companies and contribute to their growth and profitability.

The benefit on realisation of an EBIS unit is calculated on an earnings number, similar to HEPS of the Group, as published at every reporting date of the Group, after deducting the issue price of that unit.

Participants are entitled to exercise their units as follows:

FOR UNITS ISSUED FROM 2010

After 3 years — up to 33,3% of the units

• After 4 years up to 66,6% of the units
• After 5 years up to 100% of the units

FOR UNITS ISSUED PRIOR TO 2010

After 2 years — up to 20% of the units

After 3 years — up to 40% of the units

After 4 years — up to 60% of the units

After 5 years — up to 100% of the units

If a unit is not exercised within 10 years from the date such unit was granted, it will lapse.

If a participant retires on pension, or otherwise leaves the employ of the Group or one of its subsidiary companies for a reason approved by the Board of Directors, the participant shall nevertheless continue to have the same rights and obligations under the scheme in respect of the participant's units as if the participant had remained in the employ of the Group.

In the event that a participant ceases to be an employee otherwise than as a result of death, retirement on pension or other reasons approved by the Board of Directors, any units not yet exercised will lapse.

29. EMPLOYEE BENEFITS CONTINUED

Details of EBIS units at 31 December were:

					NUMBER OF UNITS
Expiry date	Grant date	Issue price(Rand)	Granted	Exercised	Forfeited	Outstanding
February 2018	March 2008	5,12	5 417 800	4 419 400	998 400	—
February 2019	March 2009	5,96	6 258 700	5 371 180	525 600	361 920
February 2020	March 2010	3,34	18 594 101	15 016 904	2 160 878	1 416 319
February 2021	March 2011	5,84	17 643 920	12 335 277	2 655 770	2 652 873
			47 914 521	37 142 761	6 340 648	4 431 112

EARNINGS-GROWTH INCENTIVE SCHEME ("EG UNITS")

The Group offers EG units, without payment, to those employees of the Company or its subsidiary companies who the Board of Directors, in its absolute discretion, considers play a significant role in the management of the Company or its subsidiary companies and contribute to their growth and profitability.

On settlement, the value accruing to participants will be their share of the full appreciation in the Group's HEPS.

Participants are entitled to exercise their units as follows:

After 3 years — up to 33,3% of the units

After 4 years — up to 66,6% of the units

After 5 years — up to 100% of the units

If a unit is not exercised within seven years from the date such unit was granted, it will lapse.

If a participant retires on pension, or otherwise leaves the employ of the Group or one of its subsidiary companies for a reason approved by the Board of Directors, the participant shall nevertheless continue to have rights and obligations under the scheme in respect of the participant's units as if the participant had remained in the employ of the Group.

In the event that a participant ceases to be an employee otherwise than as a result of death, retirement on pension or other reasons approved by the Board of Directors, any units not yet exercised will lapse.

The EG units were issued for the first time in 2012.

Details of EG units at 31 December were:

					NUMBER OF UNITS
Expiry date	Grant date	Issue price(Rand)	Granted	Exercised	Forfeited	Outstanding
November 2019	November 2012	7,21	15 067 761	9 137 824	2 992 879	2 937 058
June 2020	June 2013	6,27	19 361 771	10 437 304	3 633 437	5 291 030
June 2021	June 2014	7,91	13 833 744	4 316 440	2 266 869	7 250 435
June 2022	June 2015	6,63	10 532 462	1 699 450	909 436	7 923 576
June 2023	June 2016	7,53	8 097 793		300 193	7 797 600
			66 893 531	25 591 018	10 102 814	31 199 699
			GROUP			COMPANY
R millions			2018	2017	2018	2017
	Total carrying amount of EG units liabilities (see note 15)		91	119	40	53

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS

INTEREST OF DIRECTORS AND PRESCRIBED OFFICERS IN THE SHARE CAPITAL OF THE COMPANY The aggregate beneficial holdings of the Directors and Prescribed Officers of the Company in the issued ordinary shares of the Company at 31 December were:

	NUMBER OF SHARES
	2018Direct	2018Indirect	2017Direct	2017Indirect
EXECUTIVE DIRECTORS
MA Dytor	83 291	—	62 061	—
KM Kathan	78 873	—	63 244	—
	162 164	—	125 305	—
PRESCRIBED OFFICERS
EE Ludick	8 240	—	—	—
MVK Matshitse 1	13 364	—	—	—
DJ Mulqueeny	—	—	—	—
DK Murray	5 639	—	—	—
	21 604	—	—	—
	183 768	—	125 305	—

1 Retired with effect from 31 January 2019.

Non-executive Directors did not have any beneficial holdings in either of the years presented.

There has been no change in the aggregate beneficial holdings of the Directors and Prescribed Officers of the Company between year-end, the date of issuing the financial statements and the date of the integrated report.

NON-EXECUTIVE DIRECTORS' REMUNERATION

R thousands	Directors'fees	Chairman/Committeefees	Attendancefees	2018Total	2017Total
GW Dempster	244	306	213	763	852
RMW Dunne (retired on 29 May 2017)	—	—	—	—	384
S Engelbrecht (retired on 28 February 2017)	—	—	—	—	252
Z Fuphe	244	190	113	547	459
G Gomwe	244	425	236	905	828
RM Kgosana (resigned on 29 September 2017)	—	—	—	—	306
LL Mda (resigned on 27 November 2017)	—	—	—	—	344
KDK Mokhele	—	1 564	191	1 755	1 440
AJ Morgan	244	456	224	924	882
R Ramashia	244	268	225	737	720
J Molapo (appointed on 1 June 2018)	146	—	11	157
PG Sibaya (appointed on 28 February 2018)	204	87	57	348
	1 570	3 296	1 270	6 136	6 467

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

EXECUTIVE DIRECTORS' REMUNERATION
R thousands	MADytor	KMKathan	Total
2018
Basic salary	4 943	4 152	9 095
Bonus and performance-related payments 1	4 995	4 150	9 145
Expense allowances, medical aid and insurance contributions	641	567	1 208
Leave pay	184	—	184
Retirement fund contributions	478	405	883
Total cash-settled share-based payments and other long-term benefits	2 776	3 474	6 250
Benefit unit payments 2	195	—	195
EG unit payments 3	1 710	2 697	4 407
DS unit payments 4	871	777	1 648
Pre-tax benefit of PS vested	4 113	3 028	7 141
Aggregate remuneration	18 130	15 776	33 906
Pre-tax benefit of PS vested	(4 113)	(3 028)	(7 141)
AGGREGATE REMUNERATION PAID BY THE COMPANY	14 017	12 748	26 765
2017
Basic salary	4 388	3 917	8 305
Bonus and performance-related payments 1	5 198	4 578	9 776
Expense allowances, medical aid and insurance contributions	635	522	1 157
Leave pay	169	—	169
Retirement fund contributions	428	382	810
Total cash-settled share-based payments and other long-term benefits	1 002	—	1 002
Benefit unit payments	114	—	114
EG unit payments	888	—	888
Pre-tax benefit of PS vested	3 505	2 679	6 184
Aggregate remuneration	15 325	12 078	27 403
Pre-tax benefit of PS vested	(3 505)	(2 679)	(6 184)
AGGREGATE REMUNERATION PAID BY THE COMPANY	11 820	9 399	21 219

1 Bonus and performance-related amounts are in respect of the current year's performance but are paid in the following year.

2 MA Dytor exercised 4 250 benefit units which generated a benefit of R195 118 before tax.

3 MA Dytor exercised 385 100 EG units which generated a benefit of R1 709 915 before tax. KM Kathan exercised 603 087 EG units which generated a benefit of R2 696 907 before tax.

4 MA Dytor exercised 8 292 DS units which generated a benefit of R870 743 before tax. KM Kathan exercised 7 401 DS units which generated a benefit of R777 179 before tax.

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

PRESCRIBED OFFICERS' REMUNERATION1
	EE	MVK	DJ	DK
R thousands	Ludick	Matshitse	Mulqueeny	Murray	Total
2018
Basic salary	3 375	2 883	2 913	2 853	12 024
Bonus and performance-related payments 2	3 357	850	2 902	2 809	9 918
Expense allowances, medical aid and insurance contributions	475	438	539	551	2 003
Retirement fund contributions	329	281	284	278	1 172
Total cash-settled share-based payments and other
long-term benefits	1 745	1 288	516	1 298	4 847
EG unit payments 3	1 220	746	—	786	2 752
DS unit payments 4	525	542	516	512	2 095
Pre-tax benefit of PS vested	1 597	1 433	—	1 093	4 123
Aggregate remuneration	10 878	7 173	7 154	8 882	34 087
Pre-tax benefit of PS vested	(1 597)	(1 433)	—	(1 093)	(4 123)
Aggregate remuneration paid by subsidiaries	9 281	—	—	—	9 281
AGGREGATE REMUNERATION PAID BY THE COMPANY	—	5 740	7 154	7 789	20 683
2017
Basic salary	3 183	2 733			5 916
Bonus and performance-related payments 2	3 749	3 167			6 916
Expense allowances, medical aid and insurance contributions	443	414			857
Retirement fund contributions	310	266			576
Pre-tax benefit of PS vested	1 187	1 199			2 386
Aggregate remuneration	8 872	7 779			16 651
Pre-tax benefit of PS vested	(1 187)	(1 199)			(2 386)
Aggregate remuneration paid by subsidiaries	(7 685)	—			(7 685)
AGGREGATE REMUNERATION PAID BY THE COMPANY	—	6 580			6 580

1 Members of the AECI Executive Committee exercise general control over the management of the business and activities of the Company. There are no other persons who exercise such control over the business or a significant portion thereof. Accordingly, the AECI Executive Committee members are the Company's Prescribed Officers.

2 Bonus and performance-related amounts are in respect of the current year's performance but are paid in the following year.

3 EE Ludick exercised 282 070 EG units which generated a benefit of R1 121 794 before tax. MVK Matshitse exercised 202 260 EG units which generated a benefit of R746 049 before tax. DK Murray exercised 193 010 EG units which generated a benefit of R786 245 before tax.

4 EE Ludick exercised 4 995 DS units which generated a benefit of R524 525 before tax. MVK Matshitse exercised 5 164 DS units which generated a benefit of R542 272 before tax. DJ Mulqueeny exercised 4 915 DS units which generated a benefit of R516 124 before tax. DK Murray exercised 4 879 DS units which generated a benefit of R512 344 before tax.

5 There were no other pensions paid by the Company to any Directors, Prescribed Officers, past Directors or past Prescribed Officers of the Company.

AGGREGATE REMUNERATION

R thousands	2018	2017
Non-executive Directors	6 136	6 467
Executive Directors	33 906	27 403
Prescribed Officers	34 087	16 651
	74 129	50 521

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

LONG-TERM INCENTIVE SCHEMES

Certain Directors and Prescribed Officers have outstanding share options and long-term incentive units under the long-term incentive schemes as described in note 29.

CASH-SETTLED SHARE-BASED SCHEME ("BENEFIT UNITS")

Included in benefit units were the following units granted to Directors and Prescribed Officers:

					NUMBER OF UNITS
	Grant date	Issue price(Rand)	Granted	Exercised	Lapsed orforfeited	Outstanding
MA Dytor	March 2008	67,25	4 250	4 250	—	—
	March 2009	43,42	7 910	—	—	7 910
	March 2010	59,80	7 600	—	—	7 600
	March 2011	83,82	6 600	—	—	6 600
KM Kathan	March 2009	43,42	59 700	—	—	59 700
	March 2010	59,80	47 320	—	—	47 320
	March 2011	83,82	18 100	—	—	18 100
EE Ludick	March 2011	83,82	5 100	—	—	5 100
			156 580	4 250	—	152 330

Movements in the number of benefit units held by Directors and Prescribed Officers were:

	NUMBER OF UNITS
	2018	2017
Outstanding at the beginning of the year	156 580	160 080
Exercised during the year	(4 250)	(3 500)
OUTSTANDING AT THE END OF THE YEAR	152 330	156 580

MA Dytor exercised 4 250 benefit units which generated a benefit of R195 118 before tax.

Neither KM Kathan nor EE Ludick exercised any benefit units in the current year.

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

EARNINGS-GROWTH INCENTIVE SCHEMES ("EG UNITS")

Included in EG units were the following units granted to Directors and Prescribed Officers:

				NUMBER OF UNITS
	Grant date	Issue price(Rand)	Granted	Exercised	Outstanding
MA Dytor	November 2012	7,21	157 857	157 857	—
	June 2013	6,27	393 974	393 974	—
	June 2014	7,91	210 594	140 396	70 198
	June 2015	6,63	392 862	130 954	261 908
	June 2016	7,53	258 598	—	258 598
KM Kathan	November 2012	7,21	182 233	182 233	—
	June 2013	6,27	443 119	443 119	—
	June 2014	7,91	195 120	130 080	65 040
	June 2015	6,63	350 549	116 849	233 700
	June 2016	7,53	230 761	—	230 761
EE Ludick	November 2012	7,21	107 340	107 340	—
	June 2013	6,27	133 266	133 266	—
	June 2014	7,91	114 166	76 110	38 056
	June 2015	6,63	243 999	81 333	162 666
	June 2016	7,53	156 588	—	156 588
MVK Matshitse	November 2012	7,21	109 668	109 668	—
	June 2013	6,27	136 069	90 712	45 357
	June 2014	7,91	115 308	38 435	76 873
	June 2015	6,63	219 003	—	219 003
	June 2016	7,53	136 124	—	136 124
DJ Mulqueeny	June 2016	7,53	125 539	—	125 539
DK Murray	November 2012	7,21	115 118	115 118	—
	June 2013	6,27	122 335	122 335	—
	June 2014	7,91	109 824	73 215	36 609
	June 2015	6,63	231 882	77 249	154 633
	June 2016	7,53	127 794	—	127 794
			5 119 690	2 720 243	2 399 447

Movements in the number of EG units held by Directors and Prescribed Officers were as follows:

	NUMBER OF UNITS
	2018	2017
Outstanding at the beginning of the year	3 427 389	3 681 528
Prescribed Officers appointed during the year	637 585	—
Exercised during the year	(1 665 527)	(254 139)
OUTSTANDING AT THE END OF THE YEAR	2 399 447	3 427 389

MA Dytor exercised 385 100 EG units which generated a benefit of R1 170 915 before tax. KM Kathan exercised 603 087 EG units which generated a benefit of R2 269 907 before tax. EE Ludick exercised 282 070 EG units which generated a benefit of R1 121 794 before tax. MVK Matshitse exercised 202 260 EG units which generated a benefit of R746 049 before tax. DK Murray exercised 193 010 EG units which generated a benefit of R786 245 before tax.

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

DEFERRED SHARES FOR EXECUTIVES AND SENIOR MANAGERS ("DS")

Included in DS were the following units granted to Directors and Prescribed Officers:

				NUMBER OF UNITS
	Grant date	Issue price(Rand)	Granted	Vested	Outstanding
MA Dytor	January 2016	96,82	8 292	8 292	—
	August 2016	96,82	11 870	—	11 870
KM Kathan	January 2016	96,82	7 401	7 401	—
	August 2016	96,82	10 594	—	10 594
EE Ludick	January 2016	96,82	4 995	4 995	—
	August 2016	96,82	8 611	—	8 611
MVK Matshitse	January 2016	96,82	5 164	5 164	—
	August 2016	96,82	7 392	—	7 392
DJ Mulqueeny	January 2016	96,82	4 915	4 915	—
	August 2016	96,82	7 036	—	7 036
DK Murray	January 2016	96,82	4 879	4 879	—
	August 2016	96,82	7 017	—	7 017
			88 166	35 646	52 520

Movements in the number of DS held by Directors and Prescribed Officers were as follows:

	NUMBER OF UNITS
	2018	2017
Outstanding at the beginning of the year	64 319	64 319
Prescribed Officers appointed during the year	23 847	—
Exercised during the year	(35 646)	—
OUTSTANDING AT THE END OF THE YEAR	52 520	64 319

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

AECI PERFORMANCE SHARES ("PS")

Included in PS were the following granted to Directors and Prescribed Officers:

			NUMBER OF PS
	Grant date	Granted	Vested 1	Outstanding
MA Dytor	June 2015	27 783	27 783	—
	June 2016	28 049	—	28 049
	June 2017	43 766	—	43 766
	April 2018	62 474	—	62 474
KM Kathan	June 2015	20 453	20 453	—
	June 2016	20 650	—	20 650
	June 2017	35 215	—	35 215
	April 2018	46 200	—	46 200
EE Ludick	June 2015	10 785	10 785	—
	June 2016	10 615	—	10 615
	June 2017	25 096	—	25 096
	April 2018	31 004	—	31 004
MVK Matshitse	June 2015	9 680	9 680	—
	June 2016	9 228	—	9 228
	June 2017	14 476	—	14 476
	April 2018	17 881	—	17 881
DJ Mulqueeny	June 2016	6 127	—	6 127
	June 2017	14 966	—	14 966
	April 2018	22 984	—	22 984
DK Murray	June 2015	7 380	7 380	—
	June 2016	6 237	—	6 237
	June 2017	14 990	—	14 990
	April 2018	22 685	—	22 685
		508 724	76 081	432 643

1 The pre-tax benefits generated by PS vested in Directors and Prescribed Officers were:

MA Dytor R4 112 863 KM Kathan R3 027 759 EE Ludick R1 596 568 MVK Matshitse R1 432 988 DK Murray R1 092 506

30. DIRECTORS' AND PRESCRIBED OFFICERS' REMUNERATION AND INTERESTS CONTINUED

Movements in the number of PS held by Directors and Prescribed Officers were:

	NUMBER OF PS
	2018	2017
Outstanding at the beginning of the year	255 796	181 151
Prescribed Officers appointed during the year	49 700	—
Issued during the year	203 228	118 553
Vested during the year	(76 081)	(43 908)
OUTSTANDING AT THE END OF THE YEAR	432 643	255 796

31. OPERATING SEGMENTS

BASIS OF SEGMENTATION

The Group's key growth pillars, which are its reportable segments, are described below. Businesses in the pillars offer differing products and services and are managed separately because they require different technology and marketing strategies.

REPORTABLE SEGMENTS	OPERATIONS
Mining Solutions	The businesses in this pillar provide a mine-to-mineral solution for the mining sector internationally. The offeringincludes surfactants for explosives manufacture, commercial explosives, initiating systems and blasting servicesright through the value chain to chemicals for ore beneficiation and tailings treatment.
Water & Process	ImproChem provides integrated water treatment solutions, process chemicals and equipment solutions for adiverse range of applications in Africa. These include, inter alia, public and industrial water, desalination and utilities.
Plant & Animal Health	Nulandis manufactures and supplies an extensive range of crop protection products, plant nutrients and servicesfor the agricultural sector in Africa. Schirm, based in Germany, is a contract manufacturer of agrochemicals andfine chemicals with a European and US footprint. It is the largest provider of external agrochemical formulationservices in Europe.
Food & Beverage	These businesses supply ingredients and commodities to the dairy, beverage, wine, meat, bakery, health andnutrition industries. The other main activity is the manufacture and distribution of a broad range of juice-basedproducts and drinks, including formulated compounds, fruit concentrate blends and emulsions.
Chemicals	Supply of chemical raw materials and related services for use across a broad spectrum of customers in themanufacturing, infrastructure and general industrial sectors mainly in South Africa and in other SouthernAfrican countries.
Property & Corporate	Mainly property leasing and management in the office, industrial and retail sectors, and corporate centrefunctions including the treasury.

There are varying levels of integration between the segments. This includes transfers of raw materials and finished goods, and property management services. Inter-segment pricing is determined on terms that are no more and no less favourable than transactions with unrelated external parties.

31. OPERATING SEGMENTS CONTINUED

INFORMATION RELATING TO REPORTABLE SEGMENTS

Information relating to each reportable segment is set out below. Segmental profit from operations is used to measure performance because AECI's Executive Committee believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

	EXTERNAL REVENUE		INTER-SEGMENT REVENUE		TOTAL SEGMENT REVENUE
R millions	2018	2017	2018	2017	2018	2017
Mining Solutions	10 918	9 643	95	75	11 013	9 718
Water & Process	1 327	1 409	49	45	1 376	1 454
Plant & Animal Health	4 386	2 479	37	64	4 423	2 543
Food & Beverage	1 201	1 190	47	5	1 248	1 195
Chemicals	5 153	3 445	113	119	5 266	3 564
Property & Corporate	329	316	110	90	439	406
Inter-segment	—	—	(451)	(398)	(451)	(398)
	23 314	18 482	—	—	23 314	18 482

	PROFIT/(LOSS) FROMOPERATIONS		DEPRECIATION ANDAMORTISATION		IMPAIRMENTS
R millions	2018	2017	2018	2017	2018	2017
Mining Solutions	1 274	1 097	337	424	—	10
Water & Process	120	182	45	50	—	—
Plant & Animal Health	119	133	130	12	31	—
Food & Beverage	74	64	16	15	—	—
Chemicals	559	365	129	71	—	3
Property & Corporate	(147)	(262)	53	25	—	—
	1 999	1 579	710	597	31	13

	OPERATING ASSETS		OPERATING LIABILITIES		CAPITAL EXPENDITURE
R millions	2018	2017	2018	2017	2018	2017
Mining Solutions	7 023	6 308	1 946	1 717	410	435
Water & Process	1 183	1 228	255	265	24	21
Plant & Animal Health	4 298	1 664	1 383	1 087	119	64
Food & Beverage	875	819	292	256	29	11
Chemicals	5 072	2 244	1 039	798	193	42
Property & Corporate	719	778	95	149	72	131
	19 170	13 041	5 010	4 272	847	704

Operating assets comprise property, plant and equipment, investment property, intangible assets, goodwill, inventories, accounts receivable and assets classified as held for sale. Operating liabilities comprise accounts payable.

32. PRINCIPAL SUBSIDIARIES

	ISSUEDSHARECAPITAL	EFFECTIVESHAREHOLDING			INTEREST OFAECI LTD#SHARES	INTEREST OFAECI LTD#LOANS TO/(FROM)
	2018Numberof shares	2018%	2017%	2018R millions	2017R millions	2018R millions	2017R millions
HOLDING COMPANIES
DIRECTLY HELD
AECI Treasury Holdings (Pty) Ltd	100	100	100	—	—	(89)	(31)
INSURANCE
DIRECTLY HELD
AECI Captive Insurance Company Ltd	810 000	100	100	51	11	(30)	(67)
MINING SOLUTIONS
DIRECTLY HELD
AECI Mining Solutions Ltd	400 000 000	100	100	4 438	4 438	1 029	1 266
INDIRECTLY HELD
AECI Australia (Pty) Ltd	13 700 000	100	100	—	—	—	—
AECI Ghana Ltd	1 000 000	100	100	—	—	—	—
AECI (Mauritius) Ltd	866	100	100	—	—	—	—
AECI Mining and Chemical Services Namibia
(Pty) Ltd	100	100	100	—	—	—	—
AECI Mining and Chemical Services (Chile) Ltda	2	100	100	—	—	—	—
AEL Burkina SARL 1	100 000	100	100	—	—	—	—
AEL DRC SPRL 2	10 000	100	100	—	—	—	—
AEL Mali SARL	8 659	100	100	—	—	—	—
AEL Morocco	2 500	100	100	—	—	—	—
AEL Zambia plc	25 508 250	75	75	—	—	—	—
AEL Mining Services Ltd +	100	100	100	—	—	(419)	(409)
African Explosives (Botswana) Ltd	3	100	100	—	—	—	—
African Explosives Holdings (Pty) Ltd	4 331 278	100	100	—	—	(1 056)	(853)
African Explosives (Tanzania) Ltd	26	100	100	—	—	—	—
PT AEL Indonesia	1 150	100	100	—	—	—	—
WATER & PROCESS
INDIRECTLY HELD
Blendtech (Pty) Ltd	1 800	100	100	—	—	(54)	(35)
ImproChem (Pty) Ltd	4 000	100	100	—	—	(105)	(38)

Cost less impairments.

• Trading as an agent on behalf of AECI Mining Solutions Ltd.

All companies are incorporated in the Republic of South Africa except for those whose country of incorporation is indicated by their registered company name, and those annotated as follows: 1. Burkina Faso 2. Democratic Republic of Congo.

32. PRINCIPAL SUBSIDIARIES CONTINUED

	ISSUEDSHARECAPITAL		INTEREST OFEFFECTIVESHAREHOLDING		AECI LTD#SHARES	INTEREST OFAECI LTD#LOANS TO/(FROM)
	2018Numberof shares	2018%	2017%	2018R millions	2017R millions	2018R millions	2017R millions
PLANT & ANIMAL HEALTH
DIRECTLY HELD
Biocult (Pty) Ltd	5 000	100	100	17	17	16	9
INDIRECTLY HELD
Farmers Organisation Ltd 3	240	100	100	—	—	—	2
Schirm GmbH4	100	100	—	—	—	—	—
Other Plant & Animal Health subsidiaries				—	—	(39)	(36)
FOOD & BEVERAGE
DIRECTLY HELD
Afoodable (Pty) Ltd	100	100	100	16	16	30	36
Southern Canned Products (Pty) Ltd	100 000	100	100	241	241	158	183
CHEMICALS
DIRECTLY HELD
Chemical Services Ltd	83 127 950	100	100	818	818	(2)	(1 824)
SANS Fibers Inc.5	100	100	100	—	—	434	363
SANS Fibres (Pty) Ltd ++	17 979 433	100	100	8	8	(126)	(126)
Much Asphalt (Pty) Ltd	100	98	—	1 801	—	524	—
INDIRECTLY HELD
Chemfit (Pty) Ltd	4 000	100	100	—	—	(72)	(48)
Chemfit Fine Chemicals (Pty) Ltd	1 000	100	90	—	—	(53)	(29)
Other Chemicals subsidiaries				—	—	(365)	(321)
PROPERTY
Acacia Real Estate (Pty) Ltd	1 000	100	100	—	—	(279)	(276)
Paardevlei Properties (Pty) Ltd	1	100	100	—	—	(375)	(319)
Other property subsidiaries	—	—		3	3	(266)	(264)
OTHER				169	154	(15)	(6)
				7 562	5 706	(1 154)	(2 823)

Cost less impairments.

++ Trading as an agent on behalf of AECI Ltd.

All companies are incorporated in the Republic of South Africa except for those whose country of incorporation is indicated by their registered company name, and those annotated as follows: 3. Malawi 4. Germany 5. United States of America.

33. NON-CONTROLLING INTEREST

The following table summarises the information relating to each of the Group's subsidiaries that has material non-controlling interest:

R millions	AELZambia	MuchAsphalt1	Other	Total
2018
NON-CONTROLLING INTEREST (%)	25	2
Non-current assets	66	1 431
Current assets	438	315
Non-current liabilities	(14)	(441)
Current liabilities	(89)	(430)
NET ASSETS	401	875
Carrying amount of non-controlling interest	100	40	16	156
Revenue	(813)	(1 497)
Profit	(107)	(82)
PROFIT FOR THE YEAR ALLOCATED
TO NON-CONTROLLING INTEREST	(27)	(8)	1	(34)
Other comprehensive income	(68)	—	—	(68)
OTHER COMPREHENSIVE INCOME ALLOCATED
TO NON-CONTROLLING INTEREST	(17)	—	—	(17)
TOTAL COMPREHENSIVE INCOME ALLOCATED
TO NON-CONTROLLING INTEREST	(44)	(8)	1	(51)
Cash flows from operating activities	11	(135)
Cash flows from investing activities	—	—
Cash flows from financing activities	(2)	144
Increase/(decrease) in cash	9	9
Cash at the beginning of the year	133	—
Cash acquired		33
Translation loss on cash	—	—
CASH AT THE END OF THE YEAR	142	42

33. NON-CONTROLLING INTEREST CONTINUED

R millions	AELZambia	MuchAsphalt1	Other	Total
2017NON-CONTROLLING INTEREST (%)	25
Non-current assets	62
Current assets	337
Non-current liabilities	(15)
Current liabilities	(48)
NET ASSETS	336
Carrying amount of non-controlling interest	84		32	116
Revenue	(722)
Profit	(88)
PROFIT FOR THE YEAR ALLOCATED TO NON-CONTROLLING INTEREST	(21)		(9)	(30)
Other comprehensive income	28		—	28
OTHER COMPREHENSIVE INCOME ALLOCATEDTO NON-CONTROLLING INTEREST	7		—	7
TOTAL COMPREHENSIVE INCOME ALLOCATEDTO NON-CONTROLLING INTEREST	(14)		(9)	(23)
Cash flows from operating activities	(14)
Cash flows from investing activities	—
Cash flows from financing activities	5
Increase in cash	(9)
Cash at the beginning of the year	157
Translation loss on cash	(15)
CASH AT THE END OF THE YEAR	133

ACQUISITION OF NON-CONTROLLING INTERESTS

The Group entered into an agreement with Capitalworks Private Equity, MIC Investment Holdings (Pty) Ltd and the Much Asphalt (Pty) Ltd ("Much Asphalt") management team whereby management retained approximately 2% of the shares of Much Asphalt and AECI acquired approximately 98% of the entire issued share capital of Much Asphalt. Also included was East Coast Asphalt (Pty) Ltd ("East Coast"), with a 45% minority. East Coast's figures have been included in the figures relating to Much Asphalt. See note 12.

On 1 July 2018, the Group acquired the remaining 10% interest in Chemfit Fine Chemicals (Pty) Ltd ("Chemfit Fine") for R15 million in cash, increasing its ownership from 90% to 100%. The carrying amount of Chemfit Fine's net assets in the Group's consolidated financial statements on the date of acquisition was R155 million. The Group recognised a decrease in non-controlling interest of R11 million and a decrease in retained earnings of R4 million attributable to changes in the Company's ownership interest in Chemfit Fine.

R millions	2018
Carrying amount of non-controlling interest acquired (R155 million x 10%)	15
Consideration paid to non-controlling interest	(11)
Option liability derecognised	(8)
Decrease in equity attributable to ordinary shareholders of the Group	(4)

33. NON-CONTROLLING INTEREST CONTINUED

NON-CONTROLLING INTEREST PUT OPTION LIABILITY

The business combination of Much Asphalt included a clause whereby the non-controlling interest equity holders are able to put 100% of their shareholding to the Group on 3 April 2023, the expiry date of the option.

The put option liability is the present value of the fair value of the option at exercise date. In arriving at the option value, a weighted average EBITDA for the three years preceding the exercise date, less net debt estimated at the exercise date, was multiplied by an EBITDA multiple of 7,7. This liability is considered to be a Level 3 financial liability at fair value through profit or loss. The discount rate was estimated based on the Group's weighted average cost of capital adjusted to reflect the most affordable funding available to the Group at the reporting date.

NON-CONTROLLING INTEREST PUT OPTION LIABILITY	31	—
Unwinding of discount	2	—
At acquisition date	29	—
R millions	2018	2017

34. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

The changes in accounting policies reflected below were also reflected in the Group's interim consolidated results as at and for the half-year ended 30 June 2018.

The Group adopted IFRS 15 Revenue from Contracts with Customers (see note 34(a)) and IFRS 9 Financial Instruments (see note 34(b)) from 1 January 2018. A number of other new standards and amendments to existing standards became effective from 1 January 2018, but these did not have a material effect on the Group's financial statements.

The effect of initially applying these standards was mainly as follows:

• › earlier recognition of revenue from consignment stock contracts, where control of the goods passes to the customer earlier than the risks and rewards of ownership;
• › changes in the amount of revenue recognised from product sales as a result of variable considerations that affect the transaction price; and
• › an increase in impairment losses recognised on financial assets.

(A) IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

The Group applied IFRS 15 Revenue from Contracts with Customers in the current year. IFRS 15 replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalties Programs. IFRS 15 introduces a five-step approach to revenue recognition. Far more prescriptive guidance has been added to deal with specific scenarios.

The Group adopted IFRS 15 using the cumulative effect method (without practical expedients), at the date of initial application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated — i.e. it is presented, as previously reported, under IAS 18, IAS 11 and related interpretations.

Apart from more extensive disclosure on the Group's revenue transactions, the application of IFRS 15 has not had a significant impact on the financial position and/or financial performance of the Group as described below, and accordingly no adjustment was made to opening reserves.

The impact of the transition to IFRS 15 on 1 January 2018 would have resulted in an increase in revenue of R10 million, an increase in operating expenses of R12 million and a resulting decrease in profit before tax of R2 million. The impact on opening retained earnings would have been a decrease of R1 million, with no impact on non-controlling interest.

Refer to the Basis of Reporting and Significant Accounting Policies for the Group's treatment of its revenue streams.

(B) IFRS 9 FINANCIAL INSTRUMENTS

The standard sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement.

The following table summarises the impact, net of tax, of transition to IFRS 9 on the opening balance of reserves and retained earnings at 1 January 2018.

R millions	Group	Company
IMPACT OF ADOPTING IFRS 9 AT 1 JANUARY 2018
Recognition of expected credit losses under IFRS 9	56	19
Related tax	(14)	(6)
Decrease in retained earnings	42	13

The adoption of IFRS 9 had no impact on non-controlling interest.

34. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(i) CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets as at 1 January 2018:

R millions	Note	Original classificationunder IAS 39	New classificationunder IFRS 9	Original carryingamount underIAS 39	New carryingamount underIFRS 9
FINANCIAL ASSETS
Unlisted shares (Level 3)	(1)	Available-for-sale	FVOCI — equity instrument	87	87
Forward exchange contracts (Level 2)	(2)	Fair value-hedginginstrument	Fair value-hedginginstrument	43	43
Money market investment in collectiveinvestment scheme (Level 1)		Designated as at FVTPL	Mandatorily at FVTPL	77	77
Employer surplus accounts (Level 1)		Designated as at FVTPL	Mandatorily at FVTPL	78	78
Accounts receivables	(3)	Loans and receivables	Amortised cost	3 393	3 393
Cash		Loans and receivables	Amortised cost	1 206	1 206
Loans receivable to other investments		Loans and receivables	Amortised cost	26	26
TOTAL FINANCIAL ASSETS				4 910	4 910

(1) Included in the unlisted shares is a R65 million investment in Origin Materials ("Origin") which is considered to be a Level 3 financial asset. The Group had applied the IAS 39 exemption (paragraph 46c) and carried the investment at cost in the prior year. These equity securities represent investments that the Group intends to hold for long-term strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at fair value through other comprehensive income ("FVOCI"). Previously, these assets were designated as available-for-sale financial assets.

• (2) The Group measures forward exchange contracts at fair value using inputs as described in Level 2 of the fair value hierarchy. The fair values for forward exchange contracts are based on quotes from brokers. Similar contracts are traded in an active market and the quotes reflect the actual transactions on similar instruments. The carrying values of all other financial assets and liabilities approximate their fair values based on the nature or maturity period of the financial instrument. There were no transfers between Levels 1, 2 or 3 of the fair value hierarchy during the year ended 31 December 2018.
• (3) Accounts receivable that were classified as loans and receivables under IAS 39 are now classified at amortised cost. An increase of R56 million in the allowance for impairment over these receivables was recognised in opening retained earnings at 1 January 2018 on transition to IFRS 9. No additional trade receivables were recognised at 1 January 2018 on the adoption of IFRS 15, and consequently no additional impairment was necessary.

Changes in significant accounting policies resulting from the adoption of IFRS 9 are disclosed in the accounting policies, and have been applied retrospectively, except as described below:

› the Group has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Therefore, comparative periods have been restated only for retrospective application of the cost of hedging approach for forward points. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 but rather those of IAS 39.

The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:

• › the determination of the business model in which a financial asset is held;
• › the designation and revocation of previous designations of certain financial assets and financial liabilities as measured at fair value through profit or loss ("FVTPL");
• › the designation of certain investments in equity instruments not held for trading as at FVOCI;
• › if an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Group has assumed that the credit risk on the asset had not increased significantly since its initial recognition;
• › changes to hedge accounting policies have been applied prospectively except for the cost of hedging approach for forward points which has been applied retrospectively to hedging relationships that existed on, or were designated after, 1 January 2017;
• › all hedging relationships designated under IAS 39 at 31 December 2017 met the criteria for hedge accounting under IFRS 9 at 1 January 2018 and, therefore, are therefore regarded as continuing hedging relationships.

34. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(ii) IMPAIRMENT OF FINANCIAL ASSETS

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' ("ECL") model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39.

The financial assets at amortised cost consist of trade receivables, cash and cash equivalents, and corporate debt securities.

Under IFRS 9, loss allowances are measured on either of the following bases:

• › 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
• › lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured as 12-month ECLs:

• › debt securities that are determined to have low credit risk at the reporting date; and
• › other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

The Group has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information.

The Group considers a financial asset to be in default when:

• › the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or
• › the financial asset is more than 90 days past due.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

MEASUREMENT OF ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

CREDIT-IMPAIRED FINANCIAL ASSETS

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

PRESENTATION OF IMPAIRMENT

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of reducing the carrying amount of the asset.

Impairment losses related to trade and other receivables, including contract assets, are presented separately in the statement of profit or loss and OCI. As a result, the Group reclassified impairment losses amounting to R42 million, recognised under IAS 39, from 'other expenses' to 'impairment loss on trade and other receivables, including contract assets' in the statement of profit or loss and OCI.

IMPACT OF THE NEW IMPAIRMENT MODEL

For assets in the scope of the IFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile. The Group has determined that the application of IFRS 9's impairment requirements at 1 January 2018 results in an additional impairment allowance of R56 million.

TRADE RECEIVABLES AND CONTRACT ASSETS

The following analysis provides further detail about the calculation of ECLs related to trade receivables and contract assets on the adoption of IFRS 9. The Group considers the model and some of the assumptions used in calculating these ECLs as key sources of estimation uncertainty.

The ECLs were calculated based on actual credit loss experience over the past few years. The Group performed the calculation of ECL rates separately by geographic region. Exposures were segmented based on common credit risk characteristics and focused on the geographic region.

Actual credit loss experience was adjusted to reflect differences between economic conditions during the period over which the historical data was collected, current conditions and the Group's view of economic conditions over the expected lives of the receivables.

34. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUED

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets by geographic region as at 1 January 2018:

GROUP

	Weightedaverage loss	Grosscarrying	Specific loss	Lifetime ECL	Total loss
R millions	rate (%)	amount	allowances	allowance	allowance
SOUTH AFRICA
Current (not yet due)	1	1 976	(4)	(15)	(19)
1 to 30 days past due	0	258	(1)	(1)	(2)
31 to 60 days past due	12	44	—	(5)	(5)
61 to 90 days past due	12	8	(1)	(1)	(2)
More than 90 days past due	100	45	(13)	(27)	(40)
		2 331	(19)	(49)	(68)
REST OF AFRICA
Current (not yet due)	1	447	—	(6)	(6)
1 to 30 days past due	2	205	—	(3)	(3)
31 to 60 days past due	5	44	—	(2)	(2)
61 to 90 days past due	14	27	(1)	(3)	(4)
More than 90 days past due	100	121	(110)	(11)	(121)
		844	(111)	(25)	(136)
OTHER REGIONS
Current (not yet due)	—	178	(1)	—	(1)
1 to 30 days past due	—	13	—	—	—
31 to 60 days past due	—	3	—	—	—
61 to 90 days past due	—	—	—	—	—
More than 90 days past due	100	2	(1)	—	(1)
		196	(2)	—	(2)

Other regions include North America, South America, Asia and Australia.

COMPANY

	Weightedaverage loss	Grosscarrying	Specific loss	Lifetime ECL	Total loss
R millions	rate (%)	amount	allowances	allowance	allowance
SOUTH AFRICA
Current (not yet due)	1	851	—	(4)	(4)
1 to 30 days past due	0	121	(1)	—	(1)
31 to 60 days past due	28	14	—	(4)	(4)
61 to 90 days past due	19	4	—	(1)	(1)
More than 90 days past due	100	23	(4)	(17)	(21)
		1 013	(5)	(26)	(31)
REST OF AFRICA
Current (not yet due)	1	47	—	(1)	(1)
1 to 30 days past due	0	9	—	—	—
31 to 60 days past due	0	1	—	—	—
61 to 90 days past due	1	3	—	—	—
More than 90 days past due	100	3	(2)	(1)	(3)
		63	(2)	(2)	(4)

34. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUED

More than 90 days past due	—	—	—	—	—
61 to 90 days past due	—	—	—	—	—
31 to 60 days past due	—	—	—	—	—
1 to 30 days past due	—	1	—	—	—
Current (not yet due)	—	8	—	—	—
OTHER REGIONS
R millions	Weightedaverage lossrate (%)	Grosscarryingamount	Specific lossallowances	Lifetime ECLallowance	Total lossallowance
COMPANY

Other regions include North America, South America, Asia and Australia.

35. EVENTS AFTER THE REPORTING DATE

GROUP

ACQUISITION OF DINACON LORENA PLANT, BRAZIL

The Group, through its subsidiary, AECI Latam Produtos Quimicos Ltd ("AECI Latam"), acquired an explosives business in Lorena, Brazil from Dinacon for a cash consideration of US$6,3 million. This acquisition was made through a judicial recovery auction process in mid-September 2018. It entitles the Group to 100% ownership of an explosives manufacturing plant, distribution and storage facilities and the requisite explosives operating licences. The transaction has not yet taken effect but is expected to be finalised by the end of the first quarter of 2019. The acquisition provides an opportunity for entry into the explosives market in Brazil and the rest of Latin America, in line with the Group's intent to continue expanding the geographic footprint of its Mining Solutions strategic growth pillar. In the past, Dinacon supplied explosives mainly to the Brazilian civil and construction industry. Its business in the local mining sector, which accounts for the world's third largest output by value, has been limited. Brazil has more than 8 000 mines so there is a sizeable opportunity for growth, particularly in terms of leveraging AEL's significant experience in open pit and underground mining; its African, Australian and Indonesian footprint; and its long-standing relationships with international mining companies.

At the reporting date, the conditions precedent to make the transaction unconditional had not been fulfilled. The initial accounting for the business combination had thus not been completed and, accordingly, it was not possible for IFRS 3 Business Combinations disclosures to be made.

36. GOING CONCERN

The financial statements have been prepared using appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The Directors are of the opinion that the Company and its subsidiaries, joint ventures and associates have adequate resources to continue as going-concerns in the foreseeable future.

The Directors have formally reviewed the budgets and forecasts of the businesses and have concluded that the Group will continue in business for the foreseeable future. They also conducted liquidity and solvency tests as required by the Companies Act. Accordingly, the going-concern basis of accounting remains appropriate.

ADMINISTRATION

GROUP COMPANY SECRETARY AND REGISTERED OFFICE

EN Rapoo First Floor AECI Place 24 The Woodlands Woodlands Drive Woodmead Sandton (no postal deliveries to this address)

POSTAL ADDRESS AND CONTACT DETAILS

Private Bag X21 Gallo Manor 2052 Telephone: +27 (0)11 806 8700 Telefax: +27 (0)11 806 8701 Email: groupcommunications@aeciworld.com

WEB ADDRESS

www.aeciworld.com

LONDON SECRETARY

St James's Corporate Services Ltd Suite 31, Second Floor 107 Cheapside London EC2V 6DN England

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Ltd Rosebank Towers 15 Biermann Avenue Rosebank 2196 PO Box 61051 Marshalltown 2107 South Africa and Computershare Investor Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH England

AUDITOR

Deloitte & Touche

PRIMARY TRANSACTIONAL AND FUNDING BANKS

Absa Bank Ltd Investec Bank Ltd First National Bank of Southern Africa Ltd Nedbank Ltd Sanlam Life Insurance Ltd (acting through its Sanlam Capital Markets division) Standard Chartered Bank The Standard Bank of South Africa Ltd

SOUTH AFRICAN SPONSOR

Rand Merchant Bank (A division of FirstRand Bank Ltd) 1 Merchant Place Corner Rivonia Road and Fredman Drive Sandton 2196

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