A E C I LIMITED — Annual Report 2021

Apr 26, 2021

2020 INTEGRATED REPORT

AND SUMMARISED FINANCIAL STATEMENTS

CONTENTS

OUR REPORTING	2
OUR PROFILE	4
OUR VALUE-CREATING BUSINESS MODEL ACROSS SIX CAPITALS	6
OUR STRATEGY	8
STAKEHOLDERS WHO HELP US CREATE VALUE	12
OUR OPERATING CONTEXT	14
MATERIAL ISSUES SHAPING OUR BETTER WORLD	16
OUR FINANCIAL CONTRIBUTION TO A BETTER WORLD	18
THE WEALTH WE GENERATED AND DISTRIBUTED	20
FROM OUR CHAIRMAN	22
FROM OUR CHIEF EXECUTIVE	26
CHIEF FINANCIAL OFFICER'S REPORT	34
OUR SUSTAINABILITY JOURNEY, FOR A BETTER WORLD	40
OUR LEADERSHIP	44
GOVERNANCE IN SUPPORT OF A BETTER WORLD	48
REMUNERATION REPORT	58
AUDIT COMMITTEE'S REPORT TO STAKEHOLDERS	74
SOCIAL AND ETHICS COMMITTEE'S REPORT TO STAKEHOLDERS	78
SHAREHOLDER ANALYSES	80
HISTORICAL FINANCIAL INFORMATION	85
SUMMARISED FINANCIAL STATEMENTS	87
APPROVAL	101
ADMINISTRATION	102

1

OUR REPORTING

Our integrated report to stakeholders includes an electronic and printed report supplemented by full sustainability and financial reports online, all of which are available at www.aeciworld.com.

Also online is additional governance-related information such as a scorecard indicating our adherence to King IV. Together with our integrated report, this and other online information provides stakeholders with a holistic view of who we are, the value we create and how we expect to continue doing so in a purpose-led world. The aim is to assist stakeholders in making an informed appraisal of our integrated performance and prospects.

SCOPE AND BOUNDARIES

This report relates to the reporting period 1 January 2020 to 31 December 2020. Its scope includes all of our subsidiaries, joint ventures and associates in every country and region where we operate.

FINANCIAL REPORTING ENTITY

(control and significant influence)

Shareholders and funders | Employees | Trade unions | Customers | Suppliers | Industry bodies | Government and regulators | Communities and civil society

REPORTING FRAMEWORKS

FINANCIAL INFORMATION

• › International Financial Reporting Standards (IFRS)
• › the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council
• › the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants

NON-FINANCIAL INFORMATION

REGULATORY FRAMEWORK

• › the Companies Act, No. 71 of 2008 (the Companies Act), in South Africa
• › the Listings Requirements and Debt Listings Requirements (collectively, the Listings Requirements) of the JSE Ltd (the JSE)
• › the King Report on Corporate Governance for South Africa (King IV)
• › the International Framework of the Integrated Reporting Council (IIRC)
• › our Memorandum of Incorporation (MOI)

SUSTAINABILITY

• › the international chemical industry's Responsible Care® programme › the CDP Climate Change and Water Programs
• › the 10 principles set out in the United Nations Global Compact
• › selected United Nations Sustainable Development Goals (UN SDGs)
• › our own internal policies, standards and reporting requirements › feedback from you, our stakeholders

MATERIALITY

Issues that have or could have a meaningful positive or negative effect on our ability to generate value in the short, medium or long term are defined as being material. They guide our integrated reporting because they can influence the delivery of our strategy, our business model and hence the six capitals we rely on to create value for ourselves and our stakeholders to mutual benefit. In broad terms, material matters relate to opportunities and risks in the context of the environment in which we operate and the factors that shape it, our prospects and our major economic, social and environmental impact.

Our overall Risk Management Framework (Framework), including our Enterprise Risk Management Policy Statement, mirrors these material issues of mutual interest and underpins the identification of material matters for inclusion in this report.

The information in this report is aligned with the six capitals of the Framework. A set of icons has been incorporated into the narrative to highlight where the information touches on the respective capitals. A key explaining these icons is presented below.

ASSURANCE AND COMPARABILITY

Deloitte & Touche (Deloitte), as External Auditor, expressed an unmodified opinion on the annual financial statements for 2020 published on 24 February 2021.

The External Auditor has also expressed limited assurance on data relating to our safety, health and environmental performance across our geographic footprint. We believe these indicators are paramount in view of the nature of our businesses and the environment in which they operate. Limited assurance has also been expressed on certain data on our Employment Equity performance in South Africa.

The Group's Internal Audit function assesses Group entities' internal controls and, on an annual basis, submits its related opinion to the Board of Directors (the Board). The management of each operating business entity also submits an annual self-assessment of internal controls (Internal Control Matrix) to Internal Audit for consolidation and onward transmission to the AECI Executive Committee and the Audit Committee. These assessments confirm that the systems of internal control, per entity, are adequate for the operations in question and are functioning effectively.

There have been no material changes to the scope or structure of reporting from the prior year.

OUR PROFILE

OUR VISION AND VALUES

Our vision is to deliver sustainable solutions for a better world through innovation and excellence founded on "good chemistry". This vision, our overall philosophy and practices are implicit in our BIGGER values: we are Bold, Innovative, Going Green, Engaged and Responsible.

OUR PROFILE

AECI provides products and services to diverse customers across a strategic footprint

Africa, Europe | Asia's South Eastern region | Australia | North America | South America

OUR BUSINESSES ARE STRUCTURED IN FOUR STRATEGIC PILLARS

THEIR PRODUCTS AND APPLICATION KNOW-HOW ARE ESSENTIAL INPUTS FOR CUSTOMERS IN DIVERSE INDUSTRIES

• + The global mining sector + The African continent's water treatment market
• + The plant and animal health industries on the African continent, in Europe and in the USA
• + The manufacturing, road infrastructure, food and beverage and general industrial sectors, mainly in Southern Africa

BOLD INNOVATIVE Pushing our performance above and beyond for a better world

• › We are courageous in pursuing ambitious goals
• › We are decisive, resilient and tenacious in facing challenges
• › We are fearless in pioneering new opportunities and pushing the boundaries to grow responsibly
• › We are committed to a better world in everything we do

Actively challenging ourselves to reinvent who we are, what we do and how we do it

• › We have an adaptive, experimental mind-set that encourages and seeks new ideas, opportunities and solutions to create shared value and improve our competitiveness
• › We embrace the Fourth Industrial Revolution and fast track the digitalisation of our business
• › We lead with game-changing differentiation for our customers' success

GOING GREEN Driving solutions for a sustainable future

• › We provide sustainable solutions for our customers
• › We conserve energy and other natural resources
• › We develop and embrace smart, green technologies that deliver a better world

Our diversity in terms of the markets we serve in the 22 countries and regions where we operate makes us more agile and resilient in our response to circumstances in the broader business environment and to the changing needs of our customers.

None of what we have achieved, nor the realisation of our growth aspirations, would be possible without the input of our 6 807 employees. They are our most valuable asset.

17

Zimbabwe

Further consolidation and expansion of our footprint will continue through organic growth and acquisitions. The objective remains to deliver value for all stakeholders in line with our commitment to being purpose-led in who we are and in everything we do.

Purpose is at the core of our One AECI, for a better world strategy. It is also reflected in our organisational structure and our branding, both of which changed in 2020.

supplement our opportunities to make

a meaningful contribution to "a better world" into the future.

7

Mali

China

GOING GREEN Driving solutions for a sustainable future

• › We provide sustainable solutions for our customers
• › We conserve energy and other natural resources
• › We develop and embrace smart, green technologies that deliver a better world

48

Being committed to a culture of accountability, honesty and inclusivity

• › We take ownership of our actions and decisions and understand their impact
• › We are honest, open and respectful in all dealings
• › We embrace diversity, equality, inclusivity and fairness
• › We put our customers first and at the core of our business

ENGAGED RESPONSIBLE

Acting in a manner that is mindful of all stakeholders' interests

• › We optimise our business to deliver value to stakeholders
• › We live our corporate, ethical and social responsibilities
• › We strive for Zero Harm across our value chain
• › We value and protect our assets, confidential information and intellectual property

OUR VALUE-CREATING BUSINESS MODEL ACROSS SIX CAPITALS

We rely on inputs across our financial, manufactured, intellectual, human, social and natural capitals. A high level summary of these inputs and how they enabled value creation for distribution to stakeholders is summarised below, as are their respective outputs and outcomes.

OUR STRATEGY

Our strength is founded on our diversified product and service offering to customers across all the markets and in all the countries where a strategic footprint has been established over time.

AECI has evolved significantly since 1924 when, as African Explosives & Industries (AE&I), it was registered as a company with headquarters in Johannesburg where we are still based today.

AE&I serviced the burgeoning local mining industry. Supply to this sector remains a key component of our activities but we now also have businesses that provide inputs for products that are essential to daily life in other end-use markets.

Changes in all these markets, the macro environment, technology and the evolving expectations of end users have shaped us. Even before COVID-19 shifted priorities and expectations globally, we had started a journey to review and refine our vision and strategy in acknowledgement of the need to make the world better.

POSITIONING AECI FOR A BETTER WORLD, FOR 2025 AND BEYOND MILESTONES TO DATE

BOARD, EXECUTIVE AND MANAGEMENT BREAKAWAY

SENIOR MANAGEMENT BREAKAWAY

VISIONING FOR 2025

COVID-19 FOCUSED ON RESILIENCE: ONGOING

2019 JAN 2020 MAR 2020 APR-SEP 2020

DEVELOPED A STRATEGY 2025 FRAMEWORK DIRECTION

Global megatrends that are shaping the world provided context for the strategic review in 2020.

These megatrends include a shift towards a purpose-led world, where authenticity in creating harmony between actions is paramount. As a Group we have much to offer in helping solve urgent global challenges like water scarcity, food security, and the safer and more responsible extraction of the world's mineral wealth.

To deliver growth and maximise resources in a sustainable way, we have adopted a more collaborative and integrated approach in everything we do. We also recognised that a sharper focus on customer-centricity would leverage our contribution.

ONE AECI, FOR A BETTER WORLD embodies all of this.

DEFINING ONE AECI, FOR A BETTER WORLD

PURPOSE for us emphasises leveraging integrated Group know-how and becoming a truly sustainable and futurefit organisation.

Our brand promise of One AECI emphasises an inclusive approach to all our stakeholders.

• › We will unlock the value of One AECI by leveraging our resources, knowledge, products and people in an integrated approach to the market in terms of:
• » capabilities
• » technology and IP
• » relationships
• » our customers
• » suppliers, principals and partners
• » innovation/ideation through integration
• › We will contribute to A BETTER WORLD through our commitment to selected UN SDGs, circular economy principles and the environmental, social and governance (ESG) agenda.

Our Sustainability Framework is a milestone in this regard. The Framework, the progress we have already made and the targets we have set ourselves are unpacked in our 2020 sustainability report.

› Our mantra of GOOD CHEMISTRY applies to our relationships with all stakeholders.

STRATEGIC PLATFORMS FOR A BETTER WORLD

ZERO HARM AND SUSTAINABILITY

We will operate sustainably, without harm to people, the environment and the communities in which we operate. We have begun evolving the business to align with our purpose and the sustainability agenda and opportunities.

INNOVATION

We understand that innovation is a long-term driver of future financial performance and value creation. It is an opportunity to enhance our competitiveness.

DIGITALISATION

This is an essential and intentional part of our strategy. It will be integrated across the business to serve customers better and drive efficiency.

OUR SUSTAINABILITY TARGETS

TOTAL RECORDABLE INCIDENT RATE (TRIR)

MODERATE ENVIRONMENTAL INCIDENTS

POTABLE WATER CONSUMPTION DISCHARGE TO SEA OR SEWERS DECREASE IN SCOPE 1 EMISSIONS

INCREASE IN ELECTRICITY FROM RENEWABLES

SUSTAINABILITY FRAMEWORK ONE AECI, FOR A BETTER WORLD We will drive innovation and growth in support of the SDGs 1 2 3 4

RESPONSIBLE OPERATIONS

REDUCE Carbon Intensity of our operations

REDUCE our Water footprint

Zero Harm across our value chain

We will minimise our environmental impact and strive for

We will nurture a high-performance culture in an inclusive,

LIVE our values in a purpose-led organisation

PASSIONATE

PEOPLE

NURTURE our passionate people and collaborate with our stakeholders

purpose-led environment

THRIVE in a high-performance and inclusive culture

STAKEHOLDERS WHO HELP US CREATE VALUE

SHAREHOLDERS AND FUNDERS

KEY ISSUES

SAFEGUARDING the Company's financial health, particularly in terms of liquidity through the pandemic

DEBT LEVELS and COVENANTS

BUSINESS CONTINUITY

OUR ACTIONS

Payment of final ordinary cash dividend declared for 2019 financial year postponed from April to October 2020. Vesting of PERFORMANCE SHARES also deferred

REGULAR INTERACTION with debt funders, transactional banks, institutional shareholders All covenants met

Cash preservation: gearing reduced

to 22% from 36%

Foreign dividends and interest of US\$20m repatriated ENHANCED CYBER SECURITY CAPABILITIES, including controls and end user awareness training

ENHANCED governance, risk management and compliance of IT applications

MATERIAL ISSUES AND CAPITALS

GLOBAL NEGATIVE FINANCIAL EFFECTS of COVID-19 on financial markets, future waves of infection, potential future pandemics

Threat of CATASTROPHIC/PROLONGED IT-related threats (e.g. cyber attacks)

GOVERNANCE, including tax regime, in emerging economies

NEGATIVE/LOW economic growth

IMPACT of COVID-19 on people and the business

WORKPLACE SAFETY and HEALTH, including COVID-19-related imperatives

OUR ACTIONS OUR ACTIONS

RESPONSE plan in place FOUR colleagues died from COVID-19-related

illness 1 450 employees tested

(594 positive, 0,058% mortality rate)

Working arrangements ADAPTED (e.g. work from home, revised shift patterns)

PRESERVATION of income RESTRUCTURING and retrenchments Ongoing roll-out of enhanced employee VALUE PROPOSITION,

including learning and development

EMPLOYEES TRADE UNIONS/OTHER REPRESENTATIVE BODIES

KEY ISSUES KEY ISSUES

RELATIONSHIPS between organised labour and the business Job losses owing to RESTRUCTURING Wage NEGOTIATIONS UNEMPLOYMENT levels, particularly among the youth

FORMAL RECOGNITION

agreements remain in place

EMPLOYER/EMPLOYEE committees and forums

Consultation with affected employees and unions in BUSINESS REALIGNMENT

PROCESSES (including redeployment, reskilling)

OPPORTUNITIES presented by skills in innovative business and technology developments

CENTRALISED wage agreements in place in many sectors (South Africa)

R30m invested in bursaries, learnerships and internships for 470 individuals (including 298 unemployed youths, 78 people with disabilities)

LEARNING AND DEVELOPMENT: R67,8m invested in

1 986 employees

Poor/negative ECONOMIC GROWTH and uncertainty restricted job opportunities

sanitisation, distribution of protective masks, social distancing and installation of more protective screens, All employees REMUNERATED throughout

Workplace made SAFER — additional

Information System in 16 of 22 countries

Disappointing safety performance (TRIR of 0,42)

240 retrenchments owing to business realignment Continued deployment of online and standardised Human Capital

MATERIAL ISSUES AND CAPITALS MATERIAL ISSUES AND CAPITALS

Uncertainty and ONGOING EFFECTS of COVID-19 current and future waves Effects of any catastrophic SHEQ INCIDENT Non-availability of REQUIRED SKILLS at the required time

12

We rely on seven key stakeholder groups to create value sustainably and responsibly. The main issues that affected our relationships with each of them in 2020 are summarised here. Although strong partnerships have been established over time in many instances, work remains to be done in terms of closer collaboration in others.

SUPPLIERS

KEY ISSUES

COMPLEX global supply chain VOLATILITY in supply/demand patterns and prices compounded by COVID-19

Distribution networks also IMPACTED by pandemic

OUR ACTIONS

Risk Management Committee ESTABLISHED to stay abreast of changing environment

Regular ENGAGEMENT with suppliers to

MATERIAL ISSUES AND CAPITALS

Raw material BUFFER LEVELS managed successfully in line with demand

CENTRALISED shipping department helped clear backlogs ex Chinese ports and longer lead times ex European ports

supply chain risks Supplier network EXTENDED to mitigate interruption risk Near-shored supply and CHANGED MODES

suppliers met

Opportunities REALISED in water treatment, agriculture, food and beverage,

personal care and homecare CHANGING consumer expectations

and demand landscape

understand their own

of transport where necessary Support for Enterprise and Supplier Development continued (R60m over two years)

Essential products and services permits and declaration of nature of hazardous cargo EXPEDITED MOVEMENT at borders within Southern Africa Financial COMMITMENTS to

GOVERNMENT AND REGULATORS

KEY ISSUES

AECI and all its businesses are subject to the LAWS AND REGULATIONS of the jurisdictions where they operate

Government engagement by employees and the business is subject to the Group's Code of Ethics and Business Conduct and associated guidelines, as approved by the Board

OUR ACTIONS

Ongoing PROACTIVE and reactive engagement with governments at all levels

Public/private partnership approach VALIDATED further by COVID-19 effects

POSITIVE contribution to water and food security, in particular

COLLABORATION with multiple governmentbased partners

MATERIAL ISSUES AND CAPITALS

COVID-19 constraints DELAYED some collaboration projects

THESE WILL RESUME IN 2021, further supporting our operations and sustainability

INTERACTIONS with regulators on key ongoing matters, directly or through industry representative bodies

CUSTOMERS

COVID-19 effects/restrictions and RECOVERY not uniform across markets and geographies IMPACT most severe in South Africa,

in AECI Mining and AECI Chemicals (including infrastructure sector)

OUR ACTIONS

Business continuity plans ACTIVATED.

Close, flexible engagements to ADAPT to circumstances

Some TRIALS at customer sites delayed to 2021

HELPED customers meet own requirements for workplace safety and health during COVID-19 (sanitisers, disinfectants) Replacement of lost explosives contract: 65%

of contribution recovered

MATERIAL ISSUES AND CAPITALS

We DIFFERENTIATE ourselves through the value we add to customers

Organisational changes to a more customer-centric solution-oriented culture. Customer-centricity, business excellence, partnerships and ecosystems are DRIVERS in our purpose-led strategy INNOVATION and digitalisation are strategic platforms

through new/enhanced business. New explosives contracts GAINED and existing business RETAINED in Australia and Indonesia

COMMUNITIES AND CIVIL SOCIETY

KEY ISSUES KEY ISSUES

We must OPERATE as a RESPONSIBLE, value-adding neighbour and corporate citizen

OUR ACTIONS

Formal ENGAGEMENT through representative bodies/associations/ societies

Information SHARING on site operations, emergency preparedness and response, SHE performance, development plans Local SOCIO-ECONOMIC DEVELOPMENT PROJECTS (education, health, the environment, skills and enterprise

development, charitable donations)

COVID-19 RELIEF provided through multiple partners for

38 communities

MATERIAL ISSUES AND CAPITALS

SUSTAINABLE delivery of value for all stakeholders

Evolving SOCIETAL EXPECTATIONS in respect of corporate citizenship in an ever more connected world

COVID-19 effects continue to CHALLENGE the most vulnerable communities

STAKEHOLDERS WHO HELP US CREATE VALUE

OUR OPERATING CONTEXT

The environment in which we operate has both a positive and negative effect on the delivery of our growth aspirations and strategy.

How we respond to opportunities and challenges determines how we continue to generate value. Key considerations are summarised here.

COVID-19

The pandemic created high levels of uncertainty through both the first and second waves of infections. It has reset economic priorities and growth prospects, there have been shifts in demand patterns for goods and services and, in many instances, the mobility of people and products has been restricted.

PROTECTING OUR PEOPLE AND OUR BUSINESS

A COVID-19 Task Team was established in March 2020. The team developed a strategy focused on preventing and minimising the spread of the virus and also on ensuring our business remained operational. We manufacture products which are supplied to, among others, the personal healthcare, water treatment, food and beverage, agricultural and mining sectors. It was of international importance that these and other sectors remained functional and therefore strategic that some of our businesses remained operational at all times.

A response plan was formulated and updated as required by changing circumstances. It remains in place. The pandemic and its effects are referenced throughout this report and in the sustainability report published in March 2021.

BUSINESS CONTINUITY PLANNING (BCP)

The objective was to keep supporting our customers within the parameters set by authorities in countries where we operate. The Group's supply chain is diverse and complex, with optimal management thereof overseen by the AECI Group Strategic Sourcing function in close collaboration with colleagues in each business and a network of suppliers and other stakeholders. From March, five key elements were assessed by the function's experts on a continual basis: Sales and Operations, Procurement and Commercial, Manufacturing, Warehouse and Fulfilment, and Distribution. This planning was fundamental in an environment where certain raw materials were short or, conversely, the world was oversupplied. This has had implications for pricing. COVID-19 also amplified challenges in transport logistics and costs, for example.

OUR AGILITY DEMONSTRATED

In just three months the team at AECI Schirm, in Germany, procured raw materials, obtained all regulatory and other permissions and repurposed some manufacturing capacity to produce and deliver 1,9 million litres of sanitiser ordered by the German Department of Interior. Similarly, the ability to take responsible advantage of opportunities presented by changing circumstances saw AECI Specialty Chemicals manufacture and sell sanitiser and disinfectants to customers in the mining sector in South Africa, among others.

FINANCIAL

Safeguarding the Company's financial wellbeing in terms of liquidity became an imperative early in the year as uncertainty regarding the extent and duration of current and future waves of infection grew. We did this successfully, as demonstrated by indicators such as our gearing ratio of 22% at year-end (36% at 31 December 2019). This gave the Board confidence in declaring ordinary cash dividends of 570 cents per share for the financial year, matching the dividends declared for 2019.

The estimated negative financial impact of COVID-19 on the Group was R1 091 million in revenue, R527 million in operating profit and 341 cents in terms of headline earnings per share (HEPS). A claim in terms of the Infectious Disease clause, under the Property Damage section of our insurance cover, is being prepared for submission.

A BETTER WORLD

Communities neighbouring our operations and those of our customers are valued stakeholders. Collaborative efforts with them, directly or through our partners in government and civil society, saw us invest R15 million in COVID-19 relief initiatives internationally. This included the distribution of food parcels to 12 315 families in need.

The pandemic is not over and its effects continue to be felt most keenly by the vulnerable members of society so relief initiatives will continue in 2021.

EXCHANGE RATE OF THE RAND

In 2020, foreign and export revenue accounted for 44% of our total revenue, denominated mainly in US dollar and Euro. This demonstrates the diversity of our revenue streams. The target remains to increase the ratio to at least 50% by growing our existing footprint and by capitalising on export opportunities enabled by a long-term weaker rand exchange rate trend.

At 31 December 2020, the ZAR/US\$ rate closed at 14,65 (2019: 14,03) and the ZAR/€ rate at 16,46 (2019: 14,45). Many of the raw materials we require are derived from oil or their prices are linked to that of crude oil. These materials are imported or manufactured locally, priced at import parity. Therefore, fluctuating oil prices affect our input costs, particularly for businesses in AECI Chemicals.

It is not always possible to pass resultant price increases on to customers quickly and in full. Therefore, price volatility is always a risk.

TRADING CONDITIONS IN THE GLOBAL MINING SECTOR

At global level, activity improved as the year progressed and the outlook remains positive as firm prices for many minerals support higher production from the mining sector.

AECI Mining offers a mine-to-mineral solution internationally, across minerals and mining methods. The resilience added by this diversification was evident in 2020. In West Africa and South Africa, for example, the high gold price resulted in some mines re-opening operations or accelerating ramp-up plans. In Australia and Indonesia, where economic activity was largely unaffected by COVID-19, existing business was rolled over and new contracts were secured.

CONDITIONS IN SOUTH AFRICA'S MANUFACTURING SECTOR

Already depressed trading conditions in the South African manufacturing, infrastructure and general industrial sectors were exacerbated by the adverse effects of COVID-19. However, signs of a level of overall economic recovery began emerging in the latter months of 2020, including in the sectors where we operate. Sustained demand for our products and services is thus anticipated, particularly in water treatment, agriculture, food and beverage and homecare.

SHIFTS TO A PURPOSE-LED WORLD

We recognise and support global shifts towards a more equal and sustainable world. Our response to this underpins our renewed strategy and our Sustainability Framework. The Framework presents 10 goals across the tiers of good chemistry, responsible operations and passionate people. The key areas where we will make a positive contribution are Better Mining, Better Water, Better Food Systems and Better Chemistry.

MATERIAL ISSUES SHAPING OUR BETTER WORLD

1

DESCRIPTION

Unstable electricity supply and electrical infrastructure challenges in South Africa, potentially leading to business disruption. This is caused by constraints on the national power grid. Production schedules may be affected when power outages occur, leading to loss of revenue

OUR ACTIONS

Our key operating sites (Modderfontein, Sasolburg, Umbogintwini) are on the National Key Points list so supply is prioritised by Eskom

Generator back-up supply has been installed at these and certain other sites

LOOKING AHEAD

Solar project in progress and potential use of lithium batteries (from December 2021 onwards)

Alternative sources of ammonium nitrate are investigated/secured by AECI Group Strategic Sourcing (key raw material for AECI Mining Explosives) as back-up

Top-level engagement with the Eskom leadership, directly or through representative industry bodies

Addition/expansion of alternative energy sources thereafter, in line with sustainability targets

DESCRIPTION

Catastrophic safety, environmental, quality and/or plant incident resulting in reputational damage and possible loss of licence to operate in areas of increasing urban encroachment

OUR ACTIONS

Zero Harm strategy

Comprehensive SHE Management policies, standards and processes

Emergency management and business resumption plans

Legal compliance processes in place for all SHE laws and regulations

Ongoing training

LOOKING AHEAD

Zero Harm improvement plan roll-out

Enhanced BCM processes, especially for plants close to public residential/ recreational areas

Complete development and roll-out of the revised SHEQ Framework (including Process Safety management procedures) by December 2021

Process Safety management, including Asset Management and Operational Excellence initiatives

Audits by risk engineers in line with our global insurance programme

Engagement with neighbours and other interest and affected parties individually and via focus groups/forums/ committees (emergency response plans, operations/development plans/etc.)

Focus on high risk (material events) and critical control management

Safety enhancements in manufacturing processes and products/applications through digitalisation in line with the 2025 strategy

Continual review and enhancement of all SHEQ policies and processes

DESCRIPTION

Global negative effects of COVID-19 on financial markets, future COVID-19 waves, potential future pandemics

OUR ACTIONS

Financial and risk stewardship is a key strategic theme

Maximise benefits of integrated synergies (One AECI), including cost optimisation

We were a certified provider of essential products and services, which curtailed business disruption and should do so again in the event of future waves

Robust BCM plans adapted as required and activated

Global diversification strategy

LOOKING AHEAD

We support the roll-out of mass vaccination programmes and have resources to assist in the process

DESCRIPTION

OUR ACTIONS Catastrophic/prolonged IT-related threats to the Group, due to cyber attacks

Cyber Insurance cover through

global underwriters Execution of Cyber Security Plan

Ongoing participation in forums on

IT Disaster Recovery Plan in place

Regular communication and awareness from Group IT function on cyber security risks to all employees

4

3

cyber trends

LOOKING AHEAD

Further enhancement of Disaster Recovery capability across all Group IT solutions — Operations Technology Environment

5

Thorough understanding and management of opportunities, balanced against their associated risks, enables informed decision-making and resource allocation to deliver a better world. Issues identified as being the most material in this regard are presented here. The same issues are reflected in our Sustainability Framework and our growth strategy as a whole.

DESCRIPTION

Extreme and unpredictable weather events Failure of climate change mitigation and adaptation, leading to drought, water shortages and reduced agricultural output (affecting the mining, water treatment and agricultural sectors).

Additional regulatory compliance relating to CO2 emissions

OUR ACTIONS

R&D and innovative/alternative products for affected markets (e.g. agricultural products tailor-made for challenging growing conditions)

Collaboration/partnerships with customers in the agricultural and water sectors Compliance universes per Group entity in respect of regulatory compliance

Effects of weather- and climate-related phenomena monitored and reacted to as appropriate

LOOKING AHEAD

Ongoing geographic diversification of businesses to minimise localised phenomena

Growth opportunities for Better Water and Better Food Systems, in particular

DESCRIPTION

Governance, including tax regime, in emerging economies

OUR ACTIONS

Supporting "a better world" through financial and risk stewardship

Regular engagement with in-country experts, governments and regulators

Repatriation of foreign dividends and interest

LOOKING AHEAD

Further implementation of the Group Compliance Framework

Technology developments, e.g. water recycling

Reduce reliance on water-dependent technologies

Assistance to customers in the affected markets, (e.g. precision farming)

Potential ban on certain chemical products

Better Chemistry initiatives

Strong customer relationships provide early warning of changing legal/market requirements

LOOKING AHEAD Green chemical industry initiatives Input of the AECI.GO for the Business of Tomorrow

9

Action in terms of Climate Change Adaptation strategy and scenario analysis

Extreme weather scenario planning and response (disaster management).

6 7 8 Unstable water supply due to failure of local infrastructure, resulting in business disruption

Better Water initiatives on the continent

Geographic diversification and customer partnerships

LOOKING AHEAD Identify and action business growth opportunities Stronger/new partnerships in public and private sectors

DESCRIPTION

Negative/low economic growth — impact on our customers' businesses and ours

This could threaten achievement of our own value-generation expectations and theirs

OUR ACTIONS

Drive focused organic and acquisitive growth strategy in chosen markets and regions

Pursue new opportunities identified by the AECI.GO

LOOKING AHEAD

Execution of strategy plan to 2025

Partner with customers to make them more competitive through further value-add in existing offering and innovative solutions

Portfolio management approach adopted for each pillar, collectively contributing to "a better world"

Intimate knowledge of customer and

Enable achievement of customers' own sustainability commitments as a result of these

Further geographic and portfolio

DESCRIPTION

Opportunities presented by market disruptors (substitution of minerals, products and technology) for us and our customers

OUR ACTIONS

market trends Sustainability Framework implementation Centralised AECI.GO outputs

Clearly defined focus/priority areas for innovative developments (external and in-house opportunities)

Investment in/acquisition of innovative start-ups

Participation in influencing industry forums

LOOKING AHEAD diversification into higher growth markets Roll-out for innovation and digitalisation plans (per strategy) 10

OUR ACTIONS OUR ACTIONS

DESCRIPTION DESCRIPTION

OUR FINANCIAL CONTRIBUTION TO A BETTER WORLD

GROUP RESULTS AT A GLANCE

	2020	2019	% change
Revenue (R millions)	24 111	24 799	(2,8)
Profit from operations (R millions)	917	2 031	(54,8)
Headline earnings (R millions)	928	1 213	(23,5)
Net profit attributable to ordinary shareholders (R millions)	133	1 291	(89,7)
Headline earnings per ordinary share (cents)	880	1 045	(15,8)
Dividends declared per ordinary share (cents)	570	515	10,7
Market capitalisation at 31 December (R millions)	9 565	10 174	(6,0)
Profit from operations to revenue (%)	3,8	8,2
Net working capital to revenue (%)	14,5	17,2
Return on net assets (%)	6,7	16,6
Return on invested capital (%)	4,9	9,7
Return on shareholders' interest (%)	9,0	11,4
Net borrowings as a percentage of shareholders' interest (%)	22,0	40,9

REVENUE: CONTRIBUTION BY PILLAR (%)

15

5

0

BORROWINGS AND GEARING

RETURN ON SHAREHOLDERS' INTEREST

AVERAGE ORDINARY SHAREHOLDERS' INTEREST (Rm)

RETURN ON SHAREHOLDERS' INTEREST (%)

NET WORKING CAPITAL TO REVENUE

AVERAGE ASSETS AT COST (Rm) RETURN ON NET ASSETS (%)

RETURN ON NET ASSETS

RETURN ON INVESTED CAPITAL (%)

OUR FINANCIAL CONTRIBUTION TO A BETTER WORLD

THE WEALTH WE GENERATED AND DISTRIBUTED

We generated wealth of R6 625 million in 2020, after deducting payments to suppliers, principals and partners. The main stakeholders to whom this wealth was distributed were our employees, funders, shareholders and governments (in the form of taxes) to the extent that the strength of the balance sheet is safeguarded and we retain sufficient resources to continue investing in the growth of our businesses.

REVENUE FROM CUSTOMERS AND OTHER INCOME (Rm) PURCHASED FROM SUPPLIERS, PRINCIPALS AND PARTNERS (Rm)

FROM OUR CHAIRMAN

KHOTSO MOKHELE CHAIRMAN

Dear Stakeholders As a Board, my fellow Directors and I have the responsibility to safeguard AECI's success and sustainability in the short-, medium- and long-term for the benefit of all stakeholders. We execute this responsibility by exercising independent judgement and our duty of care. We guide and approve strategy, and support as well as challenge management in the execution of the strategy agreed with them.

Our effectiveness as a Board is measured annually through a formal evaluation process. In 2020 the process focused on those Non-executive Directors who will retire by rotation at the AGM on 25 May 2021 and no issues of material concern were identified. In addition, and as required in terms of our Board Charter and policy, an independent service provider assists us every third year in evaluating the effectiveness of individual Directors and the Board as a whole.

This process was completed in 2021 and confirmed that our leadership is professional, well regarded and that governance is managed to a high standard. Two key areas of focus going forward will be the Board's increasing role in contributing to, guiding and overseeing strategy, and enhancing the robustness of succession plans. Both items will receive particular attention from me in the coming year.

COVID-19

The challenges that 2020 presented called on our collective skills and experience across the spectrum of Board duties. I am pleased to report that AECI was able to deliver a creditable result in a year when upheaval prevailed for people and businesses across the globe to a greater or lesser extent.

AN AGILE RESPONSE

PROTECTING OUR PEOPLE AND REACHING OUT TO OUR COMMUNITIES

Mitigations of the threats and effects of the pandemic on the health and livelihoods of our people and the communities in which they live was an overriding objective from the outset. The strategy was to prevent and minimise the spread of the coronavirus but also on safeguarding our business. In March 2020 a COVID-19 Task Team was formed and a comprehensive response plan was developed in line with this strategy. It included information on COVID-19, guidelines and protocols for employees in terms of adapted working arrangements, preparedness and protection in the workplace, response in the event of a suspected or confirmed case of infection and returning to work after treatment.

To maximise the plan's usefulness, it was also shared with customers, suppliers and society at large via AECI's website. A more detailed summary of the plan and the actions that flowed from it, including how we were able to assist some of society's most vulnerable people, is provided by our Chief Executive, Mark Dytor, in his report on page 26.

The plan was adapted as circumstances changed and new information came to light. It remains in place and will remain so until there is a high level of certainty that the risks posed by current or future waves of COVID-19 have declined significantly, be this as a result of mass vaccination programmes, or confirmation of so-called herd immunity by other means. In terms of vaccinations, AECI has the resources to assist in roll-out and is ready to do so. You are welcome to access the plan at https://static1.squarespace. com/static/5dc3e3a1ddb32f457c64c6af/t/6024f2bf87d7df2a6 09f7980/1613034179567/12-august-2020-aeci-response-planfor-covid-19-rev12.pdf.

CONDOLENCES

On 8 July 2020 we learnt with deep sadness of the first COVID-19-related death of one of our employees, in South Africa. We lost another three members of the AECI family, also in South Africa, thereafter. I reiterate my own condolences and those of the Board to the families, friends and colleagues of the deceased.

OUR BUSINESS

Throughout the COVID-19 pandemic, our customers in the personal healthcare, water treatment, food and beverage, agriculture and mining sectors were required to continue operating. It was of international importance, therefore, that our Group's related businesses also remained operational and AECI was thus deemed a provider of essential products and services. We discharged our responsibilities in this regard to good effect, guided by the response plan where the fundamental importance of business continuity planning and management was recognised. Commitments to customers were met and opportunities to meet changes in their requirements were maximised. Notable here was how raw materials were procured, plant processes were repurposed and distribution channels were altered or expanded to meet the urgent demand for sanitiser and disinfectants.

The need to preserve the Company's financial position in terms of liquidity was an imperative from the first quarter when it was already evident that the uncertainty as to the extent and duration of the COVID-19 pandemic were cause for great concern. We were very pleased with the full-year outcome of this. Among the actions taken was the postponement of payment of the final ordinary cash dividend declared for the 2019 financial year. Instead of the original payment date of 6 April 2020, the dividend was paid six months later, on 26 October 2020, to holders of ordinary shares recorded in the register of the Company on the record date of 3 April 2020. This was the record date set by the Board at the time of declaring the dividend. I thank our shareholders for their understanding and patience.

Details that demonstrate how our finance teams across the Group pulled together to respond swiftly and flexibly to unique challenges are provided by Mark Kathan, our Chief Financial Officer, in his report on page 34.

Also pleasing was the on-target delivery of benefits from business realignment projects in AECI Mining Explosives and AECI Water in 2019. The realignment of the former Chemicals and Food & Beverage pillars was executed successfully in 2020, notwithstanding the challenges of COVID-19. By year-end, the benefits of this process were in line with expectations.

GOING DIGITAL

Restrictions on the gathering and movement of people internationally, and in most countries in which we have operations as a result of the COVID-19 pandemic, made it impossible for the Board and its Committees to meet in person and undertake business and site visits. Such visits add significant value to the ongoing development of Non-executive Directors and deepen their understanding of the Group and its operations. Nonetheless, 2020 presented opportunities in other ways. There was more time for reflection and in-depth debate and the Board took full advantage of these. We used online platforms extensively to remain fully appraised on all aspects of the Group's operation and provided management with the necessary guidance as the team and all of AECI's people navigated the COVID-19 pandemic. Circumstances brought about massive acceleration in the deployment of digital tools in all spheres of human activity, including in the conduct of business. We plan to continue to take advantage of digital advances beyond the end acute phase of the COVID-19 pandemic.

OCCUPATIONAL HEALTH AND SAFETY

Although we achieved a great deal in very difficult circumstances in 2020, the AECI Group's overall safety performance was not among the highlights.

Our Safety, Health, Environment and SHEQ Policy states: "The safety and wellbeing of all our people (employees, contractors, suppliers, customers and communities) and the environment is of paramount importance to the AECI Group and fundamental to the sustainability and growth of our operations. Our aspiration is to operate sustainably, without harm to people, the environment and the communities in which we operate." Zero Harm is the goal.

Safety performance in AECI is measured as the Total Recordable Incident Rate (TRIR), which measures the rate at which injuries occur in relation to hours worked. At the end of December 2020 the TRIR had deteriorated to 0,42 from 0,38 a year earlier. Reversing this unfortunate trend is the priority for the coming year. Management is fully committed to achieving this and a re-energised awareness campaign is in roll-out phase internationally, as are associated improvement plans. I look forward to sharing the positive outcome of these efforts with you in the next integrated report.

MOVING FORWARD, FOR A "BETTER WORLD"

The global push for a better, more sustainable world, and its accompanying societal shifts that brought to the fore greater equality, more equitable distribution of wealth and environmental sustainability has become irreversibly embedded in the fabric of life.

Companies are now expected to report more explicitly on the three central factors that measure sustainability, these being Environmental, Social and Governance factors. The AECI Board, and AECI as a Company are fully committed to good citizenship for this better world. Early in 2019 we embarked on a journey to improve our Company's alignment with these shifts. Our aim was to reposition AECI such that we would be ideally placed to maximise the opportunities and minimise the risks associated with these trends. The recent release of the first dedicated sustainability report for 2020, which like this integrated report is titled "One AECI, for a better world", is an explicit demonstration of our commitment. The dedicated report includes a Sustainability Framework and quantitative improvement targets.

In 2020 the full Board participated extensively in the development and finalisation of the strategy for the next five years. The process culminated in our statement of strategic intent which is:

We are purpose-led in who we are and in everything we do

The strategy is founded on three platforms: Zero Harm and Sustainability, Innovation, and Digital. The strategy is summarised in the graphic on page 9 and work to deliver the strategic aspirations has already progressed.

In terms of Sustainability, our strategy is underpinned by a strong commitment to research, development and innovation. All our businesses have well elaborated initiatives in support of delivery. One of the commitments we've made is to reduce our carbon intensity. A number of projects to achieve this are already underway or under investigation. A pleasing addition to the longerterm opportunity pipeline earlier this month was the extension of our existing joint agreement to develop low-carbon materials based on renewable chemistry with Origin Materials. AECI SANS Fibers and AECI Much Asphalt are the two businesses involved. AECI has been a strategic investor in Origin Materials, the world's leading carbon-negative materials company, since 2017.

DIRECTORATE AND GROUP COMPANY SECRETARY

The appointments of Steve Dawson and Walter Dissinger as Non-executive Directors were announced in December 2019 and took effect on 1 January 2020. Their expertise and extensive experience in business areas closely aligned with the Group's strategic growth has been value-adding. Marna Roets also joined us as Non-executive Director with effect from 1 June 2020. Her appointment further strengthens the Board, particularly in terms of financial market knowledge and auditing skills, balanced against gender diversity.

Allen Morgan retired as a Non-executive Director on 26 May 2020 after 10 years on the Board, and Jonathan Molapo resigned on 24 November 2020 owing to the demands of his executive commitments outside the Group. I reiterate the Board's appreciation for their services.

Nomini Rapoo resigned from her position as Group Company Secretary, with effect from 31 December 2020, after almost a decade in that role. We thank her for her contribution. Wynand Strydom was appointed to act in this position with effect from 1 January 2021.

CONCLUSION

I thank my fellow Board members, AECI's management and employees and all our stakeholders for their unwavering support in 2020. The COVID-19 pandemic is still with us but I am confident that the same levels of commitment will be evident going forward and will keep us in good stead.

AECI has a long and proud history. The Company now also has an exciting new strategy to deliver "a better world" and a structure and common ethos that encourage collaboration and cross-business synergies. I am excited by this and look forward to sharing our progress on strategic execution and the achievement of the milestones we have set ourselves in future reports.

Khotso Mokhele Chairman 22 April 2021

FROM OUR CHIEF EXECUTIVE

Dear Stakeholders

At the start of 2020 none of us could have imagined the changes that COVID-19 would necessitate in every aspect of our lives. We had to adapt quickly and sometimes radically, in line with plans put in place by governments in countries where we live and work.

It has meant new ways of interacting with our families, maintaining social relationships without putting ourselves and others at risk, not being able to travel locally or internationally as freely as we used to and even reinventing our shopping patterns! The same flexibility in adapting effectively to the "new normal" was necessary in our working lives and our business.

I thank all of you for your support. Without it, the impact of the pandemic on AECI could have been far more severe. I wish to make special mention of the diligence and resilience of all our employees across the world.

MARK DYTOR CHIEF EXECUTIVE Sadly, four of our colleagues in South Africa have succumbed to COVID-19-related illnesses to date and many others have experienced tragedy in their own families and among their friends. I extend my personal condolences to the families of our deceased colleagues and to all our employees and others among you who have suffered similar bereavement.

Throughout the pandemic we concentrated on preventing and minimising the spread of the virus, at the same time ensuring our business remained operational. As far back as February 2020 we initiated our first response to the COVID-19 pandemic, in the form of an international travel cautionary. A month later a TASK TEAM was formed to oversee our wide-ranging plan. The team comprised my AECI Executive Committee colleagues and I, supplemented by Medical, Human Capital, Stakeholder Relations, IT, SHEQ and Risk specialists. We met daily until September 2020 when frequency was reduced as the immediate threat abated.

THE STRATEGIC INTENT OF THE TEAM WAS:

• › TO PREVENT OR REDUCE, as far as possible, the infection of our employees, their families, co-workers and others who may come into contact with them
• › TO HELP REDUCE the risk of COVID-19 becoming a community, national or international disaster
• › TO ENSURE prompt and adequate detection and treatment
• › TO REDUCE the level of absenteeism, due to direct or indirect effects of COVID-19
• › TO MINIMISE the impact on our operations and ensure we could honour contractual obligations, and that we continued to secure our revenue streams
• › TO REDUCE the spread of COVID-19 and ultimately reduce the strain on international healthcare systems
• › TO ULTIMATELY RESTORE society back to "business as usual"
• › TO INCREASE our readiness for future outbreaks

Although the plan remains in place, we are also looking forward. We endorse the global roll-out of vaccinations and we are ready and able to participate in the process, directly or in partnership with stakeholders such as government authorities, employee representative structures, industry bodies and communities.

What COVID-19 highlighted perhaps more than ever before was the vital role that partnerships play to mutual benefit, including those between the private and public sectors and civil society. It was through these partnerships that we were able to make a meaningful difference in the lives of others.

A few examples were the work we did with Metros and municipalities to provide access to potable water for vulnerable communities, the manufacture and distribution of sanitisers and disinfectants, and distribution of 12 315 food parcels to families in need. The R3,5 million used to purchase these parcels was raised through our iPledge crowdfunding campaign. I thank everyone concerned for their generosity including our Board members, employees, suppliers and shareholders.

We developed a response plan and updated it 12 times as circumstances changed.

R15m

12 315

FAMILIES IN NEED

CONTRIBUTED TO COVID-19 RELIEF

FOOD PARCELS DISTRIBUTED TO

No infection

OUTBREAKS IN THE WORKPLACE

THE PLAN COVERS THE FOLLOWING:

• › PREVENTION AND READINESS (including the monitoring of compliance in the workplace)
• › TRAVEL RESTRICTIONS and what's expected of our employees and others in this regard
• › WORKPLACE PREPAREDNESS AND RESPONSE in the event of a suspected or confirmed case of infection
• › ALL PEOPLE-RELATED MATTERS such as working arrangements, quarantine and leave management, protocols for vulnerable employees and returning to work after treatment for COVID-19.

ZERO HARM IN A BETTER WORLD

Because the safety of our people is the priority a disappointment in 2020 was our occupational health and safety performance, which is expressed as the Total Recordable Incident Rate (TRIR). The TRIR measures the

rate at which injuries occur in relation to hours worked and ours deteriorated to 0,42 at year-end from 0,38 in December 2019. This is contrary to the values we embrace and our commitment to a better world which has Zero Harm and sustainability at its core.

Part of the deterioration was undoubtedly the knock-on effect of emotional and logistical challenges that COVID-19 continues to present for our employees, both in their homes and in the workplace. We recognise this and, with the Boards' oversight and support, we have launched a new programme focused on holistic wellness and safety Group-wide to enable improvement. Key elements of the programme cover people engagement, behaviour-based safety, risk management and process safety.

NAVIGATING THE UNCERTAINTY

Just as every individual had to adapt to living with the pandemic, so did our business. From the outset and with the support of our Board, the Group's leadership team focused on safeguarding AECI's liquidity through what we recognised would be a period of unprecedented volatility of uncertain duration. The successful outcome of our related efforts was a particular highlight for me. There was a step-change improvement in cash generation from our operating activities and we managed cash very well, as explained by the Chief Financial Officer in his report. Importantly, we were able to remunerate all our people and meet our obligations to our suppliers and funders. We also continued to work with our long-standing CSI partners over and above our investment in COVID-19 relief.

We estimate that COVID-19 had a negative effect of R1 091 million on revenue and R527 million on operating profit. The worst impact was in the first half-year, mainly in AECI Mining and AECI Chemicals. Fortunately we are providers of essential products and services for the water treatment, agriculture, food and beverage, and personal and homecare sectors so our related businesses continued to operate notwithstanding restrictions imposed by governments to slow the spread and mitigate the consequences of the coronavirus.

RESILIENCE THROUGH DIVERSITY

AECI has pursued its strategy to diversify geographically and in terms of the markets served for a number of years. We now operate across the globe and service a wide range of customers. The added resilience and agility this has provided in responding to changing market conditions were evident in 2020.

The Group's businesses are managed in four strategic pillars, providing inputs for customers who deliver products and services that add value to daily life. I share a brief summary of each pillar's performance with you, as well as the factors that assisted or limited this, and their prospects. The Group's overall performance is covered in detail in the Chief Financial Officer's report.

AECI Mining
REVENUE	EBITDA	TRADING PROFIT	TRADING MARGIN	TRADE WC
R11 189m 3,0%	R1 744m 9,3%	R1 120m 14,2%	10,0% 2019: 11,3%	13,7% 2019: 19,3%
UNDERLYING R11 886m 3,0%	UNDERLYING R2 170m 12,8%	UNDERLYING R1 546m 18,5%	UNDERLYING 2020: 13,0%

AECI Mining Explosives and AECI Mining Chemicals provide a mine-to-mineral solution for Better Mining internationally. This includes commercial explosives, initiating systems, blasting services and surfactants for explosives manufacture right through the value chain to chemicals for ore beneficiation and tailings treatment.

Customers mine a variety of minerals through different mining processes and AECI Mining services this spectrum, again demonstrating the advantages of diversity.

GROUP REVENUE BY MINERAL MINED (%)

Declines in revenue and profitability were the direct result of COVID-19 restrictions on mining activity in Africa, estimated at R697 million and R426 million respectively. Excluding this the year-on-year improvement trend was maintained, including underlying margins which benefited from effective cost-saving initiatives and an excellent reduction in working capital. In 2019, AECI Mining Explosives undertook a business realignment project. Annualised benefits of R200 million were anticipated and it was satisfying that the actual result exceeded this.

AECI Mining is our most internationalised business, with 61% of total revenue generated outside South Africa in 2020 and mainly in US dollars. Therefore, a weaker rand had a positive effect.

AECI MINING EXPLOSIVES

Overall bulk explosives volumes declined by 6,7% and those for initiating systems by 22%. The decrease in bulk explosives volumes was due to the pandemic's effects and business lost in the iron ore and platinum surface mining sectors in South Africa. Progress was made in replacing these lost volumes and it is encouraging that by year-end 65% of the related contribution had been recovered.

Sales of initiating systems were impacted directly by the hard lockdown restrictions in South Africa in the second quarter. Some recovery was evident thereafter but at a rate that was limited by our customers activating their own COVID-19 response plans to protect their employees at underground mines.

The high gold price drove demand in West Africa and the business there sustained its robust performance trend. In Central Africa, firsthalf sales to customers in the copper and cobalt mining sectors were depressed due to lower copper prices and COVID-19 restrictions on mining activity. A steady recovery followed, leading to a solid performance for the full year.

Further volume growth was achieved in Asia Pacific, comprising the businesses in Australia and Indonesia. Mining sector operations in those countries were largely unaffected by the pandemic. There were high sales of traded products and, in Australia, 24 000 tonnes of previously opportunistic sales were converted to contracted sales.

Ongoing expansion of our strategic footprint remains high on our agenda. In AECI Mining Explosives, growth plans for the recently acquired Brazilian operations began to be implemented and some new business was secured. Progress was slower than we would have liked because of international travel challenges and in-country restrictions to mitigate the coronavirus. The strategy remains to expand the customer base through the delivery of a high quality service offering to the Brazilian mining sector. A market entry in Chile is still very much on our radar and establishment of a manufacturing site there will be pursued in 2021.

AECI MINING CHEMICALS

Just as volumes of initiating systems were curtailed by lockdown restrictions so were sales of mining chemicals, particularly sales of liquid xanthates in the local market. A recovery was noted in the last three months as customers ramped up their production levels. A more favourable product mix and stronger margins offset lower sales to an extent.

Exports to other countries on the continent grew in spite of some large customers' mining operations remaining under care and maintenance. Indications are that these activities will resume in the second quarter of 2021. There was growth in exports of flocculants to Zambia, the DRC and Latin America and sales of surfactants grew strongly, notably in Latin America, Europe and Australia.

Better Mining means a safer and more efficient customer offering in terms of resource maximisation and costs. We already provide some of these solutions and continue to add more.

Products that deliver better results in hot hole and reactive ground conditions, conversion to underground bulk emulsion systems and the in-house development of digitalised solutions are examples of our immediate focus.

Internally, the integration of AECI Mining Chemicals into the pillar is complete. Among other things, this means shared financial and other services on a common platform. The result is a more holistic, seamless customer experience of our mine-tomineral value proposition.

	AECI Water
REVENUE	EBITDA	TRADING PROFIT	TRADING MARGIN	TRADE WC
R1 447m 0,3%	R259m 13,1%	R211m 11,1%	14,6% 2019: 13,1%	19,1% 2019: 19,1%
UNDERLYING R1 507m 3,8%	UNDERLYING R289m 26,1%	UNDERLYING R241m 26,7%	UNDERLYING 2020: 16,0%

AECI Water was a provider of essential products and services through all COVID-19 Alert levels in South Africa and thus the business remained operational. However, key customers in the oil refining and mining sectors were impacted to a significant extent. Operational outages at oil refineries in Durban and Cape Town presented additional challenges. Unfortunately, both these facilities are expected to remain offline for an extended period. This is not helpful for AECI Water nor for AECI Industrial Chemicals and AECI Much Asphalt from supply chain perspectives.

For AECI Water, the pandemic's effect on revenue was estimated at R61 million and R30 million in operating profit terms. Main considerations here were customer closures, other customers experienced cash constraints towards year-end, and shipping of some orders to other African countries were delayed in line with our debtor management policies.

Business in the public water sector in South Africa and in the rest of the African continent increased by 37%, demonstrating the benefits of product mix and geographic diversification. 31% of total revenue from this market sector was generated in US dollars. The trading margin for AECI Water as a whole improved and we are confident that a margin of 15% is sustainable going forward.

The anticipated R100 million benefit of 2019's realignment project was largely achieved, with structural and internal costs benefits realised in full.

In upliftment projects 75% of the benefit was delivered, with the balance delayed to 2021 by COVID-19 constraints. Delays included progress in establishing and consolidating partnerships with local authorities and others in the public sector. These partnerships exemplify AECI Water's positioning as a Business with Purpose, providing Better Water for the African continent.

Partnerships in the private and industrial sectors are equally important, including within the Group. The first of three phases of a water re-use project for AECI Mining Explosives, at Modderfontein, was concluded. It has decreased the Group's water usage footprint and the financial benefits will accrue to both businesses in 2021. A pipeline of projects in the mining and public water sectors will be executed this year, supporting the quality of earnings from 2021 onwards.

Although challenges related to COVID-19 remain for the immediate term, particularly in the middle market segment and the oil and gas sector, further growth in public water is anticipated. The expectation is that almost 50% of sales in that market segment will be beyond South Africa's borders. New technologies in support of sustainable Better Water are assessed on an ongoing basis. Some of them show good promise and could add further diversity to the portfolio.

		AECI Agri Health
REVENUE	EBITDA	TRADING PROFIT	TRADING MARGIN	TRADE WC
R6 056m 17,5%	R518m 26,7%	R290m 27,2%	4,8% 2019: 4,4%	13,1% 2019: 15,0%

WATER AECI Agri Health's excellent result was supported by favourable rainfall and more normalised weather patterns in Southern Africa as well as the once-off sale of 1,9 million litres of sanitiser by AECI Schirm to the German Department of Interior. This contract exemplified our ability to respond quickly and effectively to changing market needs. It took just three months to procure raw materials, adapt plant processes, produce and deliver all the volumes to the customer in a responsible manner.

AECI SCHIRM

The 16% increase in the average rate of exchange of the Euro against the rand assisted performance (ZAR/€ of R18,78 vs R16,18 in 2019). Over and above the sanitiser contract, better profitability was attributable to cost realignment projects, implementation of a biocide formulation contract in Wolfenbüttel (Germany) and another strong result from the business in the USA on the back of solid demand for agrochemicals.

On the downside, growth was curtailed to an extent by poor demand from the high margin automotive sector in Germany but a recovery was evident by early 2021. COVID-19 effects also caused some slowdown in the overall agrochemicals market in Europe. That market remains of some concern. In particular, the poor demand for sugar beet herbicide forecast for the first half of 2021 is a risk.

Key projects completed in the year also had a positive effect. In Germany these included exiting the end-of-life leased Magdeburg site and transferring all production to the multipurpose synthesis facility at Schönebeck, and installation of a new blender at Baar-Ebenhausen. This is 70% loaded to June 2021. In the USA a new suspension concentrate herbicide facility was built and commissioned. It is fully loaded to June 2021.

Ongoing work in Germany to optimise operating costs includes the consolidation of some product lines from the Lübeck site with those at other locations. The overall project pipeline remains robust and the award of significant tenders, which is pending, would boost the German business further.

AECI Schirm's safety performance has been of concern since acquisition in 2018. Although work remains to be done, I am pleased to report that improvement has continued.

AECI PLANT HEALTH

The growth trend established in the second half of 2019 continued and the benefits of restructuring in the year were realised. The pandemic's impact on this business was minimal because it was a provider of essential products and services in South Africa and was also an approved supplier to the COVID-19 Agricultural Disaster Support Fund.

Sales of in-house formulated and registered products increased to 32% of total revenue, supporting the quality of earnings. 78 new registrations were completed and a pipeline of others is pending. In-house formulations remain the focus for R&D. This includes greener and Better Chemistry. Biocult, which produces eco-friendly mycorrhizae to enhance soil conditions and plant nutrition, is an example of this. Local growth was achieved and progress made in registering the product in North America. The first orders were shipped in the last quarter.

The businesses in this pillar remain highly cash generative. However, already depressed trading conditions in the South African manufacturing, infrastructure and general industrial sectors were exacerbated by the adverse effects of COVID-19. We estimate that these effects reduced profitability by R198 million.

REALIGNED STRUCTURE

Also in line with our Sustainability Framework, roll-out of the SupPlant smart irrigation system continued.

The SupPlant technology was diversified to include options for lower levels of capital investment by farmers. Success stories are emerging. For example, the AECI Plant team completed the first macadamia orchard installation in the world in Limpopo, South Africa. Even though the focus was on constant fruit and trunk growth during heat waves, drought and rain, the technology helped the farmer increase his yield by 21% in year one. He now intends increasing the installation on his farm five-fold.

Also pleasing were the results of Farmers Organisation in Malawi, where a turnaround in performance was achieved as market share was regained.

AECI Animal Health, previously managed independently, was incorporated into AECI Agri Health at year-end. This diversifies and enhances further the focus of our offering to the agricultural sector as a whole.

	AECI Chemicals
REVENUE	EBITDA	TRADING PROFIT	TRADING MARGIN	TRADE WC
R5 427m 18,6%	R555m 42,8%	(R531m) >100%	(9,8%) 2019: 6,0%	14,2% 2019: 13,0%
UNDERLYING R6 090m 8,7%	UNDERLYING R652m 11,5%	UNDERLYING R456m 16,5%	UNDERLYING 2020: 7,5%

Realignment of the AECI Chemicals pillar and the former standalone Food & Beverage pillar is complete. Within AECI Chemicals (excluding AECI Much Asphalt and AECI SANS Fibers), there are now three business units, namely AECI Industrial Chemicals, AECI Specialty Chemicals and AECI Food & Beverage. The costs associated with the realignment project were incurred in the first six months. Thereafter, benefits to offset these costs were realised to expectations and annualised structural and sustainable benefits of R100 million will materialise from 2021. The quality of earnings is already improving and the targeted 10% trading margin is in sight.

In AECI Industrial Chemicals, demand from the personal and homecare sectors was robust but that for sulphur-based products in South Africa and in Central Africa was weak. Constrained supply of acid from the mining sector and molten sulphur shortages from local refineries added to the challenge.

COVID-19 presented opportunities for AECI Specialty Chemicals. Notable in this regard was the manufacture and sale of sanitiser and disinfectant products, mainly in the first six months. As in the case of AECI Schirm, agility across the value chain was proven. Demand for products in the balance of this business' portfolio was erratic.

AECI Food & Beverage's volumes increased locally and in the rest of the continent. This business has refocused its portfolio and better margins are already evident. Without restrictions on the sale of alcoholic beverages during lockdown in South Africa, an even stronger result would have been possible.

AECI SANS Fibers recovered well in the last quarter as the US automotive and apparel markets rallied.

31

AECI MUCH ASPHALT

The worst pandemic-related impact was on AECI Much Asphalt where operations ceased from 26 March 2020 until end-April. The sectors in which the business' customers operate were not considered essential during hard lockdown and operations only resumed in May 2020. We estimate that COVID-19 had a negative effect of R215 million on revenue and R69 million on operating profit for AECI Much Asphalt.

In the second six months we undertook an assessment of the goodwill which arose on the acquisition of AECI Much Asphalt. The decision was taken to impair this goodwill by more than 50%, in the amount of R821 million. A balance of R710 million remains on the goodwill.

The team in the business has realigned the cost base to deliver annualised savings of R40 million, with R27 million delivered in 2020.

The outlook for AECI Much Asphalt has improved. SANRAL has awarded some contracts for work on the N2/N3 highways, most major customers are indicating increased activity levels in the medium term and there is an upward trend in mobile-type work. This should support a return to 2019's volumes, which nonetheless were themselves well below market demand in 2017.

For the rest of AECI Chemicals, there was a level of recovery in South Africa's manufacturing output towards year-end even though the year-on-year decline was 11%. We are well aligned to maximise any upside going forward.

The market supply-demand balance for sulphuric acid is normalising and sulphur prices have increased sharply. This will benefit AECI Industrial Chemicals as will continued demand from customers in the personal and homecare industries. AECI Specialty Chemicals has gained new business in the resin market and will roll out Better Chemistry in terms of new sanitiser and disinfectant products. Export opportunities remain a focus. AECI Food & Beverage will continue to support its customers in South Africa and further afield through its current portfolio as well as additional products in support of Better Food Systems.

OUR FOCUS IN 2021

The COVID-19 pandemic remains the overriding risk given uncertainty as to current and future waves of infection, the availability of vaccines for mass vaccinations, their efficacy and equitable roll-out, and the time and extent of post-pandemic economic recovery.

For this reason, we will remain vigilant in managing cash and monitoring the delivery of realignment projects and other business maximisation interventions over the last two years.

There are indications of accelerated economic improvements particularly in some leading global economies and this is driving demand and hence prices for commodities. Global miners indicate they're gearing up for a super-cycle and this has significant potential upside for AECI Mining. We are well positioned to take advantage of this.

Our diversity, flexibility and agile response to changing circumstances stood us in good stead in 2020. We expect the same to be true in the coming year, with demand for our products being sustained as economies recover at different rates. This is particularly true for the water treatment, agricultural, food and beverage, personal and homecare sectors.

We also recognise that it's critical to navigate and mitigate local challenges in addition to macro issues such as the pandemic. In South Africa, the most serious among these are the reliability of electricity supply, unacceptably high levels of unemployment, especially among the youth, and the consequent impact on consumer spend. We will continue to work with our stakeholders in our commitment to making a positive contribution to solutions that benefit us all.

ONE AECI, FOR A BETTER WORLD

I've highlighted the need to improve our safety performance and this is the priority for the coming year. Together with sustainability, Zero Harm is at the centre of our One AECI, for a Better World purpose-led strategy which we finalised in 2020 and is shared with you in this integrated report. We acknowledge that what we do and how we do it must contribute to a more sustainable and equitable world where we generate returns to expectations for investors and at the same time add value for all other stakeholders. What we've already achieved and how we'll do much more is detailed in our sustainability report published last month. This report in itself is a milestone of which I'm very proud.

AECI is on an exciting journey and I look forward to sharing it with you.

Mark Dytor Chief Executive 22 April 2021

CHIEF FINANCIAL OFFICER'S REPORT

Dear Stakeholders

This report is intended to provide a high level overview of the financial performance of our Group for the year ended 31 December 2020.

It should be read in conjunction with the full annual financial statements for the year, available at

https://investor.aeciworld.com/s/ AECI2020fullafs.pdf

2020 will always be remembered as the year of COVID-19 and the material effects it had on the global financial environment. As AECI we did not escape the consequences of this but we are pleased with how we navigated the challenges and maintained a strong financial position.

MARK KATHAN CHIEF FINANCIAL OFFICER Both our Chairman and our Chief Executive have commented on the pandemic as well as our efforts to alleviate some of its worst effects on our people internationally, our business and our communities.

I wish to thank our suppliers, service providers and, in particular, each one of our employees for their dedication. They made it possible to maintain the supply of our essential products and services to customers and they trusted us to keep them safe in the workplace.

I am particularly pleased with how our business management teams pulled together to preserve cash, contain expenditure and manage working capital sustainably. We met our financial obligations to suppliers and all employees throughout the period and ended 2020 in a strong financial position.

FINANCIAL PERFORMANCE

COVID-19

From April 2020 the positive and negative consequences of restrictions in line with governments' efforts to minimise the spread and effects of the coronavirus became evident. We remain fully supportive of these efforts. Although a return to more normalised trading returned in the second half-year, "business as usual" had not been fully restored.

Each Group operating entity estimated the impact of the COVID-19 pandemic on revenue, volumes and costs as accurately as it was possible to do so from March 2020 onwards. Their calculations were based on the following:

REVENUE

• › Additional revenue generated directly related to the pandemic
• › Loss of revenue based on historical trends, revenue levels preceding 1 April 2020 and open orders cancelled as a direct result of the pandemic

COST OF SALES

• › Costs not incurred as a direct result of revenue assumptions above
• › Overhead under-recoveries as a direct result of the loss of revenue
• › Costs incurred as a direct result of additional revenue generated
• › Calculated as volumes not sold at current market prices or estimates of costs based on an estimated gross profit percentage

OPERATING COSTS

• › Costs not incurred as a direct result of the pandemic
• › Additional costs incurred as a direct result of the pandemic

TAX ON ABOVE

› Tax at the Group's effective tax rate, excluding impairments

Group revenue declined by 3% to R24 111 million (2019: R24 799 million). We estimate that revenue lost due to the pandemic was R1 091 million and, therefore, an increase of approximately 2,0% would have been achieved in normal circumstances.

The swift response by AECI Schirm and AECI Specialty Chemicals to satisfy demand for sanitiser and disinfectant products lifted the performance. AECI Schirm generated €20 million from this revenue stream. To an extent, the associated volumes in both businesses offset other sales volumes lost by the Group, albeit that this auxiliary production was sold at below average margins.

Operating profit was 55% lower at R917 million (2019: R2 031 million). Overall Group costs, and employee costs in particular, did not decline. The lost contribution, together with additional costs incurred to keep everyone safe, had a material impact. We estimate that COVID-19 curtailed operating profit by R527 million. Without this, as well as the impairments and net profit from the sale of businesses described below, operating profit would have been about 3% higher year-on-year.

PERFORMANCE SUMMARY

REVENUE -3% TO R24 111m Underlying* +2% to R25 202m Foreign & export revenue: 44% of total revenue

EBITDA -15% TO R2 943m Underlying* +4% to R3 368m

PROFIT FROM OPERATIONS -55% TO R917m Underlying* +3% to R2 232m

HEPS

-23% TO 880c

Underlying* +6% to 1 221c

TOTAL IMPAIRMENTS OF R890m

REALIGNMENT PROJECTS DELIVERING VALUE TO EXPECTATIONS

* Excl. impairments, net profit from sale of businesses and estimated COVID-19 impact

REPORTED AND UNDERLYING PROFIT FROM OPERATIONS ANALYSED (Rm)

IMPAIRMENT OF GOODWILL: AECI MUCH ASPHALT

AECI Much Asphalt's operations ceased from 26 March 2020 until end-April, in line with Alert Level 5 restrictions in South Africa. The sectors in which the business' customers operate were not considered essential during hard lockdown and operations only resumed in May 2020. Ramp-up thereafter was slow and some planned projects were postponed. The new runway at Cape Town International Airport is an example.

The South African Presidency has announced the establishment of an Infrastructure Fund which has the potential to drive investment in, among others, road infrastructure and enable the acceleration of an economic recovery. In management's view, owing to fiscal priorities as a result of COVID-19, a level of uncertainty remains as to the pace at which it will be possible to execute these projects which would enable the road infrastructure sector to return to normalised levels of activity. Further, two oil refineries in South Africa are offline and this has presented supply chain challenges for AECI Much Asphalt.

These factors led us to reassess the future cash flows that are likely to be generated by this business. As a consequence, we undertook an assessment of the goodwill that arose on the acquisition of AECI Much Asphalt and, using conservative forecasts, decided to impair this goodwill by more than 50% (R821 million). A balance of R710 million remains on the goodwill.

BUSINESS REALIGNMENT

Late in 2019 we initiated a project to realign businesses in the former Chemicals and Food & Beverage segments, in keeping with our proactive portfolio management approach.

Trading conditions in South Africa's manufacturing sector have become more difficult over time, even excluding the additional challenges associated with COVID-19, so it became necessary to right-size our portfolio to support future performance and enhance alignment with our "One AECI, for a better world" promise. Details on the rationale for our revised structure and the benefits it will bring have been explained by the Chief Executive

in his review. Affected businesses were merged or moved between segments, some manufacturing capacity was closed and, regrettably, there were 240 redundancies. Related people costs of R37 million were incurred. Impairments of goodwill, property, plant and equipment associated with this process amounted to R69 million. These impairments and the impairment of goodwill in AECI Much Asphalt (for total impairments of R890 million) were partly offset by the net profit of R102 million on disposal of three businesses as part of the realignment project.

Group EBITDA of R2 943 million was 15% lower (2019: R3 326 million, up 26% from 2018). In 2019, the result was assisted by the net profit of R234 million recognised from the sale of our 50% holding in the Crest Chemicals joint venture. In this context, and in addition to COVID-19 considerations, our EBITDA result indicated the business' resilience.

EARNINGS PER SHARE

HEPS decreased by 23% to 880 cents. Basic earnings, at 127 cents per share, was 90% lower (2019: 1 223 cents per share). Key reasons for the latter were the goodwill impairments and business disposals, neither of which is included in the HEPS calculation.

DIVIDENDS

The Board declared a final ordinary cash dividend of 470 cents for the 2020 financial year and an interim dividend of 100 cents per share was paid in September. The total dividend of 570 cents matched that paid for 2019. The dividend at this level represented 1,5 times dividend cover for 2020.

On 27 March 2020 we advised shareholders that payment of 2019's final dividend (414 cents) had been delayed, in line with our focus on safeguarding our financial position in terms of liquidity at a time when the duration and full impact of COVID-19 were particularly unclear. Notwithstanding confirmation of AECI's robust financial position in terms of liquidity at that time, the Board considered it prudent and in the best interests of the Company and all its stakeholders to postpone the payment.

Instead of the scheduled date of 6 April 2020 the dividend was paid on 26 October 2020.

Participating senior employees are awarded performance shares in terms of the AECI Long-term Incentive Plan. The 2017 tranche of shares should have vested on 30 June 2020. For the same liquidity-related reasons, and with the approval of the Remuneration Committee, this vesting was postponed to October 2020 when all eligible employees received their allocations.

Also paid in the year were dividends in the amount of R10 million to the 5 607 current beneficiaries of the AECI Employees Share Trust.

FINANCIAL POSITION AND CASH FLOW

Our cash management and generation were outstanding in 2020, despite the challenges and uncertainty that came with the pandemic. I commend my colleagues across all Group businesses and support functions for their conscientiousness in safeguarding our financial position.

We generated R3 132 million from operating activities, an improvement of 68% over the prior year in spite of a decline of 15% in EBITDA. Working capital was managed very diligently (R913 million inflow) and a lower net interest cost was incurred through good cash management. The Group's interest cover was 8,5 times.

Lower profits meant lower tax payments of R346 million (2019: R509 million). The effective rate for the year was 75,9%, elevated mainly as a result of the AECI Much Asphalt goodwill impairment. Excluding this, the rate was 33,9% (2019: 27,8%) owing to more foreign withholding taxes being paid, other impairments and the tax effect on the disposal of businesses. Dividends of US\$20 million were repatriated from foreign operations (2019: US\$20 million).

The working capital improvement was achieved through careful inventory management at a time of fluctuating demand, and unwaivering focus on collecting receivables while ensuring that creditors were paid on time. The net working capital to revenue ratio was 14,5% at year-end (17,2% in December 2019). We paid dividends of R604 million, R10 million more than 2019, thereby demonstrating further that our financial position remained solid in one of the most difficult years in our long history.

R632 million was invested in capital projects (2019: R833 million) with replacement projects curtailed or deferred where possible if it was prudent to do so owing to restrictions on movement and the volatile trading environment. Examples were the postponement to February 2021 of the statutory shutdown of AECI Mining Explosives' No. 11 Nitric Acid plant, at Modderfontein, and completion of air emissions abatement projects at that same site. R80 million of the total required investment for the latter projects was spent in 2019 and they will be completed in 2021.

Notwithstanding immediate challenges our commitment to growing the business has not changed. R201 million was invested in support of expansion, mainly in AECI Mining Explosives and AECI Schirm.

Net debt, which includes long-term and short-term debt and cash balances, was R2,4 billion (including R397 million in lease liabilities accounted for under IFRS 16), substantially lower than the R4 billion at the end of 2019.

Term debt was R5 420 million at 31 December 2020 with short-term debt, cash and cash equivalents of R3 434 million. The term debt is payable at the end of the term of each loan, with major terms ending in 2021 and 2023. Short-term debt was R1 865 million: R1 300 million in rand-denominated loans, R360 million in rand-denominated Senior Unsecured Floating Rate Notes (listed on the JSE in terms of a Domestic Medium Term Note programme) and US\$14 million in US\$-denominated floating rate loans payable in 2021. One of the US\$-denominated loans was settled on due date of 23 November 2020.

NET DEBT ANALYSIS

Rm	2021	2022	2023	TOTAL
Existing term	1 100			1 100
DMTM auction	360		520	880
DMTN private placement		500	300	800
Term — ZAR	200		500	700
Term — US\$	205	220	293	718
Term — EUR			1 222	1 222
Short-term borrowings				—
Gross debt (excl. IFRS 16)	1 865	720	2 835	5 420
IFRS 16 lease liabilities				397
Cash and cash equivalents and bank overdraft				(3 434)
Net debt				2 383
US\$	14	15	20	49
EUR			68	68

Group loan covenants Net debt to EBITDA: ≤2,5 Actual: 0,8

Net debt to EBITDA breached if Borrowings +R4,8bn or EBITDA -R1,9bn

EBITDA to net financing cost: ≥3,0 Actual: 7,8

Consolidated tangible net worth ≥ R2,5bn Actual R7,5bn

Managing our debt exposure was a particular focus in the year and we increased the frequency and sensitivity of stress testing our forecasts against the covenants associated with term debt. The covenants describe thresholds for net debt to EBITDA (rolling 12 months), EBITDA (rolling 12 months) to net interest and tangible net worth. As part of this discipline, stringent solvency and liquidity tests are conducted before any dividends are declared.

All loan covenants were comfortably met again and communicated to our key funders. AECI's external credit rating from a South African credit rating agency was maintained at a long-term A+ rating with a stable outlook. The agency took comfort in the strength of our financial position (including cash generation and management), the steps taken to ensure we would meet our obligations when due and that any associated risks had been minimised.

BUSINESS COMBINATIONS AND DISPOSALS

The acquisition of an explosives business from Dinacon, in Brazil, for a cash consideration of US\$6,3 million was completed after the final operating licences were transferred at the end of February 2020. The consideration price was settled on 30 June 2020 and we now operate the business. The transfer of property on which the business operates is expected to occur in 2021. The purchase price allocation was completed and an intangible asset was recognised in respect of the benefit of obtaining the licences and a higher fair value of property, plant and equipment. The fair value adjustments resulted in the net asset value acquired exceeding the net consideration paid. Accordingly, a gain on bargain purchase of R24 million was recognised.

As part of realigning the Chemicals and Food & Beverage segments, the pulp and paper chemicals business unit was disposed of for R208 million, with profit on disposal of R108 million. The underperforming sauces business, Afoodable, was to be closed at an estimated cost of R35 million. Fortunately we were able to reach an agreement to dispose of it, prevent job losses and limit the loss on disposal to R6 million. We also sold our remaining 49% investment in Olive Pride, incurring a small loss (R3 million) after receipt of a final dividend of R8 million.

DEFINED BENEFITS

The long journey to de-risk AECI's retirement funds progressed further. Liquidators have been appointed and approved for two of the four legacy funds. The liquidation process is subject to a rigorous process through the Financial Services Conduct Authority and will take at least 18 months to complete. However, the approval indicates that all outstanding member obligations of those funds have been settled.

The other two legacy funds received approval to transfer the majority of remaining members and related obligations to Old Mutual. A small group of members is still awaiting approval and, once this is received, all the members of these funds will have been transferred. The funds have unclaimed benefits owing to former members from the apportionment of fund surplus at 1 March 2004, as approved by the Registrar in 2007. The funds have determined that the obligations and the assets, which fully cover those obligations, will be transferred to an unclaimed benefits fund administered by MMI. It is hoped that these processes can be completed in 2021 and that any remaining surplus can be distributed as additional pension benefits to stakeholders during

the year. If all steps progress well, it is intended that the funds be placed into liquidation before year-end.

The defined-benefit obligation recognised by AECI Schirm in Germany increased, due primarily to the movement in the ZAR/€ exchange rate rather than changes in the underlying liability or actuarial valuation. The valuation of the liability recognised at 31 December 2020 was R267 million.

AECI's obligation relating to post-retirement medical aid benefits reduced as a result of a steep increase in the discount rate and expected future medical inflation as well as the low contribution increase approved for 2021. The participants are mainly members of AECI's closed medical scheme and the scheme remains in a sound financial position. The valuation of this liability recognised at 31 December 2020 was R189 million.

TREASURY SHARES

As highlighted in my 2019 report, AECI Treasury Holdings (Pty) Ltd (TreasuryCo), a wholly-owned subsidiary, held 11 884 699 listed ordinary shares in the Company (representing 9,76% of the issued share capital). These shares were accounted for as treasury shares and excluded from the number of shares of AECI's per share calculations and had no voting rights while held by TreasuryCo. The transaction to wind up TreasuryCo and the related distribution of its assets to AECI was approved by AECI shareholders at the AGM on 26 May 2020 and by the board of TreasuryCo. The distribution was executed in accordance with the Companies Act and was cash neutral for the Group. The treasury shares were cancelled and delisted from the JSE on 26 June 2020.

GOVERNANCE

PARAGRAPH 3.84(k) OF THE JSE LISTINGS REQUIREMENTS: THE CEO AND CFO SIGN OFF

This requirement was complied with in full. Please see the Governance report commencing on page 48 and the Audit Committee's report on page 74.

A comprehensive gap analysis was performed in line with guidance issued by SAICA in August 2020, followed by the design and implementation of a robust process in all our businesses. The Group's External Audit materiality of R100 million was utilised to guide the scoping and assessment of material reporting risks in developing the financial reporting control framework and, on a secondary basis, to understand the effects of control weaknesses and errors and, in turn, develop remedial actions.

A special combined meeting of the Audit and Risk Committees was convened to discuss the requirements of paragraph 3.84(k) and actions to be taken by the Group's financial community.

The areas requiring remedial action were identified as follows:

› certain control weaknesses exist with regard to IT general controls, particularly relating to access to programmes and data (e.g. conflict of duties within user access profiles, excessive privilege accounts, and management of access to the default administration accounts)

› no formal combined assurance programme has been implemented

We embarked on a journey to resolve these two key issues and it is our expectation that good progress will have been made by the end of 2021.

GOVERNANCE COMMITTEES IN FINANCE

We have continued to drive excellent governance, internal controls and good practice through the following structures, which provide guidance and training for all our businesses:

• › Finance Executive's forum
• › Tax Steering Committee
• › Technical Accounting Committee
• › Foreign Investment Committee

Early in 2021 a project was initiated to refresh all of the Group's accounting policies to ensure consistent reporting and best practice.

ACKNOWLEDGEMENTS

I wish to thank the Audit Committee for its guidance and support in the year. I also take this opportunity to acknowledge the contribution of the Group's Reporting, Tax, Governance, Legal, Internal Audit, IT, Treasury, Investor Relations and Retirement Funds teams in all the businesses and countries in which we operate. Their continued diligence and professional oversight of the Group's finances, internal controls and related matters is appreciated by me, my Executive Committee colleagues and the Board.

Mark Kathan Chief Financial Officer

22 April 2021

OUR SUSTAINABILITY JOURNEY, FOR A BETTER WORLD

OUR TARGETS

POTABLE WATER CONSUMPTION DISCHARGE TO SEA OR SEWERS DECREASE IN SCOPE 1 EMISSIONS

ENVIRONMENTAL PERFORMANCE DATA

GHG EMISSIONS

SCOPE 1 EMISSIONS (tonnes CO2e)

314 780*	2016	217 088*
	2017	216 971*
308 216*	2018
	2019			341 997*
334 225*	2020
	2025	Baseline#: 273 548 tonnes CO₂e
	351 317 366 980		SCOPE 2 EMISSIONS (tonnes CO2e)	254 234 241 150 Target#: 252 163 tonnes CO₂e (i8%)

ENERGY

ELECTRICITY (MWh)

2016		211 239*
2017		211 635*
2018			258 617*
2019			260 763*
2020		228 065*
2025	Target#: 224 047 MWh (i8%) Baseline#: 249 609 MWh

WATER

POTABLE WATER CONSUMPTION (m3) EFFLUENT DISCHARGED TO SEA AND SEWER (m3)

Our dedicated sustainability report was published on 25 March 2021. It is available for viewing and downloading at http://www.aeciworld.com/sustainability-1

We are proud of this milestone which explains our new Sustainability Framework, summarises our achievements to date and sets out the targets we've committed to achieving by 2025.

For ease of reference, performance data for 2020 and prior years has been extracted from that report and is presented here.

TOTAL RECORDABLE INCIDENT RATE (TRIR)

This graph depicts the occurrence of Process Safety incidents. The term "Reportable" is an industry-agreed definition. An incident is deemed reportable when certain thresholds are exceeded.

ADDITIONAL PERFORMANCE DATA

ENERGY CONSUMPTION (GJ)

2016	2 295 753*
2017	2 320 449*
2018		3 121 388*
2019		3 269 369*
2020		2 930 501*

WASTE

RECYCLED WASTE (tonnes) 2016 2017 2018^∆ 2019 2020 10 323 9 644 7 346 6 280 3 288*

Note: decrease in 2020 due to reduction in production as a consequence of COVID–19

SOCIO-ECONOMIC DEVELOPMENT

NO. OF BURSARIES (EXTERNAL AND EMPLOYEE DEPENDANTS) NO. OF LEARNERSHIPS, INTERNSHIPS, APPRENTICESHIPS AND GRADUATES

HAZARDOUS WASTE (tonnes) 2016 2017 2018^∆ 2019 2020 7 474* 6 592* 10 492* 13 134* 15 844*

Note: increases in 2018 and 2019 were due to the inclusion of AECI Schirm. Increase in 2020 due to ash generated from coal-fired boiler which ran at a higher rate.

CSI SPEND (Rm) NO. OF EMPLOYEES WHO HAVE ATTENDED LEADERSHIP PROGRAMMES

* Indicates limited assurance. See https://investor.aeciworld.com/s/2020Deloitteoasi.pdf.

Baselines were determined by analysing the data in the respective years of highest production over the period 2017–2019. See www.aeciworld.com/pdf/sustainability/assurance-statement-2020a.pdf.

∆ Increase due to inclusion of data from AECI Schirm and AECI Much Asphalt.

OUR PEOPLE: REPRESENTATION BY OCCUPATIONAL LEVEL, RACE AND GENDER — YEAR-ON-YEAR COMPARATIVES

The graphs below illustrate the diversity of our employees based in South Africa in numeric terms and indicate the ratio of Black people (African, Coloured or Indian) and White females as a percentage of all employees at each occupational level.

2020* OUTER CIRCLE | 2019* INNER CIRCLE

BLACK FEMALE BLACK MALE WHITE FEMALE WHITE MALE

TOP MANAGEMENT 50% (2019: 40%)

MIDDLE MANAGEMENT AND PROFESSIONALS 64% (2019: 62%)

SENIOR MANAGEMENT 47% (2019: 47%)

JUNIOR MANAGEMENT AND SKILLED 86% (2019: 85%)

SEMI-SKILLED AND DISCRETIONARY DECISION-MAKING 98% (2019: 98%)

OUR INDEPENDENT NON-EXECUTIVE DIRECTORS

KHOTSO MOKHELE (65)

BSc (Agriculture), MSc (Food Science), PhD (Microbiology)

Khotso joined the AECI Board in 2016 and took up his position as Chairman a year later. He is also Chairman of the Nomination and Investment Committees and a member of the Remuneration Committee. Khotso is the Lead Independent Non-executive Director at the MTN Group and a Non-executive Director of Hans Merensky Holdings.

FIKILE DE BUCK (60)

BA Economics and Accounting, FCCA

Fikile joined the AECI Board in 2019. She chairs the Social and Ethics Committee and is a member of the Audit Committee and AECI Mining's Financial Review Committee (FRC).

Fikile is an Independent Non-executive Director of Harmony Gold Mining Company, where she chairs the Audit and Risk Committee and is a member of the Social and Ethics, Remuneration and Nomination Committees. She also serves in a Non-executive capacity on the board of Mercedes-Benz South Africa, where she chairs the Audit Committee and is a member of the Social and Ethics Committee. Fikile is the South Africa Chapter President of the Global Forum of Women Entrepreneurs. She is also a member of Women in Mining South Africa.

STEVE DAWSON (56)

BSc (Hons), MBA, Australian Institute of Company Directors

Steve joined the Board in January 2020. He is member of the Risk and Investment Committees and the AECI Mining FRC. In his career Steve has fulfilled senior global roles at Dyno Nobel and Incitec Pivot across sales, operations, safety and risk related to explosives and fertilizers.

MEng (Industrial)

Walter joined the Board in January 2020. He is a member of the Risk and Investment Committees and the Integrated Chemicals FRC. Walter is an Independent Non-executive Director at a number of international companies in Brazil, including Evora SA and Tenda Atacado. He was Chief Executive Officer of Votorantim Cimentos S.A. Before this, he served in senior positions at BASF in South America and Europe.

GODFREY GOMWE (65)

BAcc, MBL, CA(Z), CD(SA)

Godfrey joined the AECI Board in 2015. He is Chair of the Remuneration Committee and AECI Mining FRC as well as a member of the Audit, Nomination and Investment Committees. Godfrey is an Independent Non-executive Director of Orion Minerals and Econet Wireless Zimbabwe and serves on the Boards of a number of non-listed entities. In his career he was, among others, Chief Executive of Anglo American Thermal Coal and was also responsible for Anglo American's manganese interests in the joint venture with BHP Billiton.

MARNA ROETS (54)

CA(SA)

Marna joined the Board and the Audit and Remuneration Committees on 1 June 2020. She is a member of the Integrated Chemicals FRC and in March 2021 she was also appointed to the AECI Captive Insurance FRC. Marna has more than 30 years' experience in business, financial services, banking, corporate finance and auditing and advises companies in the financial sector regarding business, expansion and compliance matters. She was an Audit Partner at PwC before serving in various Executive capacities at major banking groups on the African continent for 18 years. Marna is a Non-executive Director and shareholder of No More Plastic, a company that manufactures biodegradable products.

RAMS RAMASHIA (63)

BIuris, LLB, LLM

Rams joined the AECI Board in 2010. He chairs the Risk Committee and is a member of the Social and Ethics Committee, Nomination and Remuneration Committees. Rams is Chairman of Rand Refinery where he chairs the Nomination and Remuneration Committee. He is also a Board member at the Mineworkers Investment Company where he serves on the Remuneration Committee. Rams is a practising advocate of the High Court and a member of the Pretoria Society of Advocates. Past responsibilities include, among others, Non-executive Chairman: BP Southern Africa and Executive Chairman: BP Africa.

PHILISIWE SIBIYA (44) CA(SA)

Philisiwe (Phili) joined the AECI Board in 2018. She chairs the Audit Committee and Integrated Chemicals FRC and is a member of the Risk Committee. Other directorships include the Investec Group and Gold Fields. She is also CEO and former Chair of the Shingai Group, the investment holding company founded by her. She was formerly CFO at MTN South Africa and CEO at MTN Cameroon. Recognitions include Global Telecoms Business "Top 50 Women to Watch for 2017", The Africa Report's "Top 50 Star Dealmakers 2017" and Jeune Afrique's "Top 50 Businesswomen in Africa".

OUR EXECUTIVE COMMITTEE

AND GROUP COMPANY SECRETARY

MARK DYTOR* (59)

HNDP (Metalliferous Mining), PMD (UCT)

Mark has been AECI's Chief Executive since 2013. Earlier in that year he had been appointed to the Board, having joined the AECI Executive Committee in 2010. His 37-year career in the Group started in 1984 at Chemical Services Ltd (Chemserve) where he was a Sales Representative. He went on to serve as Managing Director of two companies in that Group and Chair of a number of others. Mark was appointed to Chemserve's Executive Committee in 1998 and subsequently to its Board. In addition to his responsibilities as Chief Executive, he is Chairman of AECI Mining.

MARK KATHAN* (50)

CA(SA), AMP (Harvard)

Mark was appointed as AECI's CFO in 2008. Prior to joining AECI, he was Financial Director for South Africa and Africa at Nampak and served on that company's Group Executive Committee. In addition to overall responsibility for the Finance and Treasury functions, Mark oversees AECI's Corporate Communications and Investor Relations, Legal and Secretariat, Internal Audit and IT functions as well as its Retirement Funds. He also plays a leading role in M&A activities. He is Chairman of AECI Schirm, AECI SANS Fibers and AECI Property Services.

EDWIN LUDICK (56)

BCom (Hons), PMD (UCT)

Edwin is Group Executive: AECI Mining. He joined Chemserve as a Human Resources Manager in 1991 and ultimately served on that Group's Executive Committee and Board before joining AECI's Executive Committee in 2010. Edwin has held positions as Managing Director and Chair at a number of AECI entities.

* Executive Director

DEAN MULQUEENY (54)

NHD Analytical Chemistry, Global Executive Development Programme (GIBS)

Dean is Group Executive: Water. He joined Chemserve as a Sales Representative in 1990 and held several sales positions before going on to serve as Managing Director of three Group businesses from 2004. He left AECI in 2011, returning in 2015 as a member of the then AECI Chemicals Executive. He was appointed to the AECI Executive Committee in 2018. Dean is also Chairman of AECI Much Asphalt and the Specialty Minerals SA joint venture. In addition, he oversees the AECI Growth Office which spearheads the Group's innovation drive.

DEAN MURRAY (52)

NDip Chemical Engineering, Global Executive Development Programme (GIBS)

Dean is the Group Executive with responsibility for AECI Agri Health and AECI Chemicals. He joined the Group as Managing Director of Chemiphos when Chemserve acquired that business in 2006. In 2007, he was appointed Managing Director of Lake International. Dean joined the then AECI Chemicals Executive in 2013 and the AECI Executive Committee in 2018.

CANDICE WATSON (39)

BA (Hons), MBA, Dip. General Management

Candice joined AECI as Group Executive: Human Capital in January 2020. She has functional and leadership skills across industries that include FMCG, logistics, financial services and IT. Before joining the Group, Candice was Human Resources Director at British American Tobacco Southern Africa. There she led the people agenda through execution of talent strategy and organisational effectiveness initiatives to support business performance and the leadership succession pipeline. She was responsible for repositioning the organisation as an employer of choice.

WYNAND STRYDOM (48)

BCom, LLB, LLM (Tax), HDip (International Tax), Global Executive Development Programme (GIBS)

Wynand is AECI's Head of Legal and was appointed Acting Group Company Secretary on 1 January 2021. He was a consultant to AECI and subsequently joined the Group as Legal Advisor in 2006. He is a corporate and commercial lawyer with more than 20 years' experience across related disciplines. He also serves as Trustee of the Company's Retirement Funds.

47

GOVERNANCE IN SUPPORT OF A BETTER WORLD

Never in recent Company history was the need to preserve short-term value for stakeholders, while continuing to assess and endorse opportunities for future growth, more evident than during COVID-19. The AECI Board of Directors (the Board) is the Company's governing body and hence the ultimate custodian of corporate governance. The Board responded to 2020's unique challenges by supporting management to navigate these and, at the same time, look ahead to the future.

Fundamental was input in developing AECI's strategy for the next five years, based on maximising the opportunities of "One AECI, for a Better World". At the same time the Board continued to provide independent, informed and critical judgement and leadership on material decisions reserved for itself.

At the heart of all governance practices is our commitment to ethical business conduct, in line with the principles of engagement and responsibility embodied in AECI's values. Governance is framed by policies, standards and processes designed to safeguard regulatory compliance, enable growth and support overall sustainability across the Group in terms of:

• › strategic direction and remit
• › legal compliance
• › financial control and risk management
• › sustainability

Every country where we operate has differing socio-economic, regulatory and risk contexts. Therefore, review and fine-tuning are ongoing to ensure that the framework and associated processes remain appropriate for each context. Again, the effects of the pandemic required more focus and engagement than usual in 2020 since their effects were not uniform at global level.

The Board continued to align its governing processes to the new amendments of the Listings Requirements, other regulatory changes across the Group's geographic footprint and general best practices and governance codes, including King IV. A summary of our implementation of King IV is on page 56 with full details, as required in terms of the Listings Requirements, at https://static1.squarespace.com/static/ 5ef9c6ed308afe044f73cd35/t/6062d0a8ae23eb39d51fd7 8f/1617088682912/KINGIVCOMPLIANCEMARCH2021. pdf. Implementation of all 16 King IV principles is reviewed and updated annually.

OUR UNITARY BOARD STRUCTURE

Our Board is led by an Independent Non-executive Chairman, seven other Independent Non-executive Directors and two Executive Directors. This composition is in line with AECI's MOI and the Board Charter (the Charter) which stipulates: "The Board comprises Executive and Non-executive Directors, with a majority of Non-executive Directors. A majority of the Non-executive Directors should always be Independent."

The Charter also stipulates that the Chairman of the Board may not be the Chief Executive or hold any executive position in the Group. Accordingly, the roles and persons of the Chief Executive and Chairman are and must always be separate. The appropriate distribution of power in decision-making is supported further by the following in regard to the Chairman:

• › may not be a member of the Audit Committee
• › may be a member of but not chair the Remuneration Committee
• › must be a member of and chair the Nomination Committee, and
• › may be a member but not chair of the Risk Committee

CHANGES DURING THE YEAR

The Charter and the Board Nomination, Composition and Diversity Policy detail the procedure and considerations for directorate appointments. Both documents, and those relating to the other Board Committees, are available for viewing at https://aeci-investor.squarespace.com/governance.

We were happy to welcome Marna Roets as a new Independent Non-executive Director. Her appointment was made in line with our policy commitments to the promotion of broader diversity at Board level, specifically focusing on the promotion of the diversity attributes of gender, race, culture, age, field of knowledge, skills and experience. This diversity supports the Board's ability to execute its functions to maximum effect.

CHANGES DURING THE YEAR	EXPERIENCE
Marna Roets joined the Board on 1 June 2020. She is a member of the Audit and Remuneration Committees. She is also a member of the Integrated Chemicals FRC.	Marna has more than 30 years' experience in business, financial services, banking, corporate finance and auditing and advises companies in the financial sector regarding business, expansion and compliance matters.
	Her appointment further strengthens the Board's ability to discharge its fiduciary duties, specifically in terms of financial markets and auditing skills, balanced against gender diversity.
Allen Morgan resigned on 26 May 2020 after 10 years' service as a Non-executive Director. Jonathan Molapo resigned on 24 November 2020 owing to the demands of his responsibilities as the Chief Executive Officer of Astron Energy (Pty) Ltd.

BOARD MEETINGS

during their tenures.

The Board met five times in the year, including a two-day session to provide input into the development of the 2025 strategy. A special meeting was convened to focus on the Group's risk management and other strategic imperatives, also for the next five years. Discussions covered the following:

We remain grateful to Allen and Jonathan for their contribution

• › establishing a refocused Group structure to fit the new "One AECI, for a Better World" context
• › supporting and enhancing processes and systems for the execution of strategies, especially for new markets
• › reframing risk management and the control environment, especially in relation to COVID-19 considerations and IT
• › Board composition, tenure and diversity imperatives

Non-executive Directors engage before each Board meeting to raise matters of interest and concern, without participation by the Executive Directors. This contributes to the overall maturity of governance and allows the Board to have unfettered discussions. The Chairman of the Board conveys related discussions to the Executive Directors, as warranted.

The Chairman, assisted by the Chief Executive and the Group Company Secretary, is responsible for setting the agenda for each Board meeting. The full Board has the opportunity to provide input. Board meetings are scheduled well in advance and the Group Company Secretary ensures that all Directors are provided with the information required timeously to enable them to prepare for meetings and formulate their views on matters.

Membership, meeting dates and details of attendance for the Board and its Committees are published at https://static1. squarespace.com/static/5ef9c6ed308afe044f73cd35/ t/6076e6ec27df9d437e3a3eda/1618405100890/

AECIBoardandCommittees2020.pdf. From March 2020, all meetings were held on virtual platforms in compliance with COVID-19 restrictions and in the interests of safeguarding the health and safety of all members.

TENURE AND ROTATION

In terms of the Charter, the Company submits for retirement those Board members who are more than 70 years of age (in the context of the Company's needs and in agreement with the Directors concerned).

Generally, Non-executive Directors may serve for up to nine years subject to retirement and re-election by rotation as set out in the MOI. Extensions of this period may be granted if the Nomination Committee remains satisfied that the Director's independence has not been compromised. The independence assessment is part of the Board and Committee evaluation and is conducted on a case-by-case basis, with all Board members participating in the review process.

Advocate Rams Ramashia has served on our Board since 2010. Due to COVID-19 and related constraints, the planned independence assessment for him was deferred to early in 2021.

TERMS OF EMPLOYMENT OF AND REMUNERATION OF DIRECTORS

Executive Directors are employees of the Company and have standard terms and conditions of employment. Their notice periods are six months. They do not receive any special remuneration or other benefits for their additional duties as Directors. Through the Nomination Committee, the Board had detailed discussions with the two Executive Directors regarding succession plans for all key roles, including their own. Although the Board is generally satisfied that the potential risk associated with the continuity of leadership at this level has been mitigated, succession planning at the most senior levels will receive even more focus in 2021.

On the recommendation of the Remuneration Committee, the Board determines the remuneration of Executive Directors, Executives and other Senior Managers in line with AECI's remuneration philosophy.

None of the Non-executive Directors are Company employees. Non-executive Directors' remuneration is determined after an annual benchmarking exercise performed by the Executive Directors and the approval by shareholders of the proposed fees, on the Board's recommendation.

BOARD COMMITTEES

Standing Committees assist the Board in executing its duties. Each of them has a formal annual work plan and all of them executed their plans and their mandates in the year. They report on their work to the full Board. Other than the Executive Committee, membership comprises mainly Non-executive Directors (including their respective Chairs), as presented in the table on page 50. A summary of focus areas per Committee is also on page 50.

			Social				Mining	Integrated
Director	Audit	Risk	and Ethics	Nomination	Remuneration	Investment	FRC	Chemicals FRC
SA Dawson
FFT De Buck
WH Dissinger
G Gomwe
KDK Mokhele *
R Ramashia
AM Roets
PG Sibiya
* Board Chair							Chair	Member

BOARD COMMITTEES: CHAIRS AND MEMBERS

At a joint meeting of the Audit Committee and the Risk Committee in 2020, the following areas were addressed:

• › considered the status and action plans with regard to compliance with the Listings Requirements paragraph 3.84(k)
• › considered the process followed to ensure that a risk-based approach is followed for the annual audit plan, and recommended improvements to ensure detailed evidence of the risk-based approach is formulated for future audit plans
• › considered the Enterprise Risk Management process and the Enterprise Risk Management Framework and made recommendations for improvement
• › approved the proposal that a formal Combined Assurance model be implemented in the Group from 2021

MANDATES AND 2020 FOCUS AREAS FOR EACH COMMITTEE

AUDIT (comprised solely of Non-executive Directors)

• › the results of an independent review of its terms of reference, which were subsequently amended
• › the External Auditor and the external audit
• › the financial statements
• › internal control and Internal Audit, including ad hoc investigations
• › risk management and IT, insofar as was relevant to its functions
• › legal and regulatory requirements to the extent that these may have an impact on the financial statements
• › the key audit matter set out in the External Auditor's report for the financial statements for 2020

The Committee's full report is on page 74. The Committee is assisted by Financial Review Committees, chaired by Independent Non-executive Directors.

RISK

50

• › consideration of emerging risks, and mitigation, at business and Group levels
• › IT risks and continuity
• › business continuity management
• › current or potential litigation matters
• › compliance and ethics
• › ongoing training in risk-related matters
• › renewal of Group insurance cover

SOCIAL AND ETHICS

• › B-BBEE, including the AECI Employees Share Trust and the AECI Community Education and Development Trust
• › Employment Equity
• › Labour and employment
• › Safety, health and the environment
• › Socio-economic development of defined communities
• › ethical business conduct
• › stakeholder engagement

NOMINATION (comprised solely of Non-executive Directors)

• › considered suitable nominations for appointment to the Board and Executive succession planning, and made appropriate recommendations based on qualifications, experience, race and gender when gaps are identified or vacancies arise
• › oversaw the appointment of Board members to serve on various Committees
• › oversaw the assessment of the Board and its Committees in pursuit of continual governance improvement

REMUNERATION (comprised solely of Non-executive Directors)

• › establish the Group's remuneration philosophy
• › determine the remuneration framework for Executives and Senior Managers
• › consider, review and approve Group policy on Executive remuneration and communicate this and the implementation thereof to stakeholders in the Company's integrated report

INVESTMENT (comprised solely of Non-executive Directors)

• › assist and advise Executive management in the event of acquisition opportunities or significant projects that fall outside of the ordinary course of business
• › make recommendations to the full Board regarding material transactions or acquisition opportunities
• › monitor progress, performance and impact of material transactions/acquisitions and report these to the full Board

BOARD AND COMMITTEE STRUCTURE

EXECUTIVE (the highest executive decision-making structure)

• › manage the day-to-day operations of the Group per the authority derived from the Board in line with the Delegation of Authority Framework
• › formulate, implement and execute of the Group's strategy and policy direction, ensure that all business activities are aligned in this respect and that the business strategy is implemented accordingly
• › the Chief Executive works with an Executive Committee to assist him in this task
• › scheduled meetings are held monthly and ad hoc meetings are convened as necessary

BOARD AND COMMITTEE PERFORMANCE EVALUATION

In the execution of its duties and in line with the evaluation policy, the Board undertook its annual effectiveness evaluation process in 2020. An external service provider was retained for this and focus was on evaluating those Directors who will stand for re-election at the 2021 AGM. The Nomination Committee considered the results and the Chairman of the Board discussed the outcome with impacted Directors. No issues of material concern were identified in the process. This evaluation practice supports the Board's execution of its duties and achievement of its objectives in terms of continuing to add value to the Company.

Further, a full Board effectiveness review was concluded in January 2021. Criteria used in the assessment were how each Director has performed his or her duties in line with requirements and expectations detailed in the Charter and in each Committee's terms of reference. Key points noted were as follows:

FINDINGS

PROFESSIONAL

• › The Board is cohesive, supportive and comprised of professional and skilled members. Although some members have limited tenure, contributions are balanced. There is good diversity (race, gender, personality, geography) and members prepare and contribute well
• › There is a good atmosphere and positive chemistry during Board meetings and members show good respect for each other and the work of the Board. There is a sense of a team with cohesiveness and transparency. Deliberations are robust and rigorous and all are in agreement that no subject is off limits
• › The size of the Board is appropriate and its work is relevant, focused and professional. Board meetings are managed efficiently and focus on the critical issues facing AECI
• › Virtual meetings have been dealt with professionally and effectively. The Board has been able to fully discharge its duties during the COVID-19 pandemic while being supportive of management

THE BOARD DEALS WELL WITH GOVERNANCE

› Processes and structures enable the Board to discharge its duties with respect to all aspects of its governance role such as risk, audit, compliance and control and the Board interrogates critical issues appropriately

BOARD LEADERSHIP IS WELL REGARDED

• › The Chairman is acknowledged for his strong leadership, experience, knowledge and focus. He is inclusive and successfully and proactively led the Board through the challenges of COVID-19. Meetings are managed well, he is organised, disciplined, structured, prepared and skilled at extracting views from all members
• › The relationships between the Board and management are healthy and appropriate. There are adequate levels of trust. Management is duly empowered to execute the Board-agreed strategy
• › The Committees are viewed as effective. With a small Board and a relatively high number of Committees, there is a significant workload on each Non-executive Director. This is discharged responsibly and with commitment
• › Committee Chairs are highly regarded and they lead Committee meetings well

THE WAY THE BOARD WORKS IS EFFECTIVE, INCLUDING INTERACTION WITH MANAGEMENT

• › AECI is seen to be well-led by a competent Chief Executive and Executive team
• › Management is seen as open, sharing both good and bad news, and willing to take criticism and advice from the Board
• › The Board displayed strong courage addressing the ongoing COVID-19 challenges and has been effective in making necessary decisions. Discussions have been candid, frank and open during difficult times
• › The process for evaluating the Chief Executive and management performance is flexible and with good balance
• › Board members have adequate access to management below the Chief Executive, mainly through the work of the Committees
• › In addition to recent appointments to the Board, the Board is actively planning future rotation and adding new skills to its membership

BOARD AND ORGANISATIONAL CULTURE

52

• › Organisational transformation is well underway and the Board understands AECI's culture
• › The culture of the Board is healthy, with good working relationships and commitment
• › Board members hold each other to account and their commitment is steadfast
• › Management is strongly focused on a strategy founded on sustainability. This is supported by the Board in all aspects

FOCUS AREAS GOING FORWARD

STRATEGIC DIRECTION

Without deviating from its responsibilities as the custodian of good governance, the Board will have an increasingly important role to play in terms of contributing to, guiding and overseeing the Group's strategy. Its input will be fundamental in delivering a Group that is shaped for optimal operation in "a better world".

SUCCESSION PLANNING

The robustness of succession planning in respect of the Chairman, the Chief Executive and other members of the Executive Committee should be reviewed and bolstered, as required.

These key areas have been well noted by the Board as a whole and will receive specific attention from the Chairman in 2021.

CODE OF ETHICS AND BUSINESS CONDUCT, AND CONFLICTS OF INTEREST

The Code of Ethics and Business Conduct (the Code) was revised in 2019 and has been rolled out. The Code provides clear guidance and procedures for Directors on managing and dealing with potential conflicts of interest situations. The Code applies equally to all Group employees who have outside interests, which must be declared on an annual basis. Employees are also encouraged to declare any gifts that they may have accepted or given above a stated monetary value equivalent, further underpinning the ethos of doing business ethically.

In view of changes in the Listings Requirements, the revised Code was reviewed to confirm that it adequately addresses the identification and management of conflicts of interest. The process duly confirmed adequacy but a Supplement was added for conflicts of interest and the declaration of these by Directors and Executive management. The Code and the Supplement are accessible at

https://static1.squarespace.com/static/5ef9c6ed308afe044f73cd35/ t/60645c56cb445442e8f2f8dc/1617189999567/ Codeofethicsandconflictsofinterestupdated.pdf

The Group Company Secretary maintains a comprehensive register of Directors' declarations of interests and this is submitted for updating by them before each Board meeting. They all duly completed and updated this register in 2020 and no conflicts of interests were reported or recorded.

INDUCTION AND ONGOING DEVELOPMENT OF DIRECTORS

The Company's Directors have expertise and experience in diverse industries including banking, chemicals, mining, technical, accounting and strategic matters.

Steve Dawson, Walter Dissinger and Marna Roets joined the Board in 2020. They participated in a Group-specific induction programme which, owing to logistical challenges presented by the pandemic, was less hands-on than usual. Induction includes one-on-one engagement with Executives, Senior Managers and the leadership of Group businesses. With regard to formal training, the Group Company Secretary sources and organises relevant training for Board members, based largely on the specific needs of each Director. In 2020, all Directors participated in training to refresh their knowledge of the Listings Requirements and familiarise themselves with amendments. The Group Company Secretary also sources and distributes information on key trends, changes in the Group's regulatory universe and topical industry issues.

RELATIONSHIPS WITH STAFF AND EXTERNAL ADVISORS

Board members have unrestricted access to the Company's records, information, documents and property to the extent they require this to make informed decisions. They also have unrestricted access to Executives, Senior Managers, the Internal and the External auditors to consult on any aspect of the Company's operations. Board members may collectively or individually, at the expense of the Company, consult external professional advisors on any matters of concern to themselves or the Company after having advised the Chief Executive or the Chairman.

GROUP COMPANY SECRETARY

The Group Company Secretary oversees the portfolio of secretariat, legal services, risk and compliance management. The Group Company Secretary assists the Board and Committees in preparing annual plans, agendas, minutes, and terms of reference as warranted, and attends all Board and Committee meetings as secretary.

The Board as a whole and individual Directors have access to the Group Company Secretary who provides guidance on how they should discharge their duties and responsibilities in the best interests of the Company. The Board executed its responsibility in terms of considering and satisfying itself on the competence, qualifications and experience of the Group Company Secretary.

The Group Company Secretary is not a Director of the Company nor of any of its subsidiaries and, accordingly, maintains an arm's length relationship with the Board and its Directors.

Nomini Rapoo resigned from the Group at the end of 2020 to pursue new career opportunities after having been with AECI for almost 10 years. A process to appoint a successor is underway. Until this process has been completed Wynand Strydom, AECI Head of Legal, will serve as Acting Group Company Secretary. He assumed these additional responsibilities on 1 January 2021.

INFORMATION TECHNOLOGY (IT)

GOVERNANCE

The Board's accountability for IT governance is embedded in its Charter. The Board has delegated overall responsibility for overseeing IT governance structures, policies and procedures to the CFO. The Chief Information Officer reports to the CFO and is responsible for the implementation and execution thereof.

The IT Steering Committee (the Committee) is chaired by the CFO. Its membership comprises the Chief Information Officer, most other members of the AECI Executive Committee, subject matter specialists from individual businesses and at Group level, including the centralised Group IT function. The Committee has a well-defined Charter which details its oversight role in terms of the Group's IT strategy, establishing cyber-resilience and overseeing architectural and operational excellence. The Committee also ensures that AECI's IT capabilities support and enable achievement of the Company's objectives and strategy.

In line with the annual audit plan, the Internal and External Auditors perform assessments of the Committee, its work, IT management and governance. All significant IT-related audit findings are reported to the Risk Committee for review and the approval of remedial actions, as required.

The IT and operational technology (OT) functions are managed separately at present. A strategic review of this arrangement has been scheduled for 2021 and it is envisaged that more integration and collaboration between the two functions will flow, thereby enhancing value-add. Key elements of the updated strategy will focus on AECI's ability to manage cyber security, enhance business/ technology partnerships and enable digital transformation.

AECI has adopted the IT Governance Institute's model as a framework. The Company also applies the guidelines set out in the Control Objectives for IT and related infrastructure Library. This supports the establishment and maintenance of effective internal controls, continuity and risk management as embedded in AECI's risk management agenda.

KEY ACTIVITIES IN 2020

• › rapidly deployed a "work-from-home" capability, enabling the business to continue operating during the global pandemic
• › materially consolidated and simplified the technical and application architecture in the Enterprise Cloud
• › further enhanced AECI's cyber security capabilities, including controls and end-user awareness training as defined in the Group's Cyber Security Framework and high-level Cyber Incident Response process
• › commissioned a software-defined network technology at most Group sites in support of the cloud computing strategy
• › enhanced the governance, risk management and compliance of business applications
• › initiated the migration of the IT environments of AECI Schirm and AECI Much Asphalt to the Group's standards
• › implemented an integrated SAP enterprise resource planning (ERP) system, incorporating finance and supply chain management, across AECI Mining globally. This work was substantially completed by year-end and the balance will be completed in 2021
• › initiated a project to address the internal control weakness relating to the segregation of duties within the SAP ERP system at AECI Mining
• › continued to roll out an integrated Human Capital information system to replace legacy systems

KEY ACTIVITIES PLANNED FOR 2021

• › define the IT strategy to 2025, including AECI's digitalisation journey (incorporating OT functions and alignment with the overall business strategy, enabling digital transformation and enhancing business process efficiency)
• › improve cyber security controls further, including user awareness, in line with the Cyber Security Framework roll-out plan
• › complete the resolution of segregation of duties conflicts in respect of the SAP ERP system in AECI Mining
• › initiate a longer-term project to address the internal control weakness as it relates to the segregation of duties in certain other Group businesses and functions
• › mature the Project Management Office
• › design and commission IT solutions to support the business in the areas of SHEQ, Human Capital management, financial shared services, working capital reduction, supply chain efficiencies, inter-Group collaboration and data analytics. All of this aligns closely with the Group's renewed customer-centricity focus as detailed in AECI's revised 2025 strategy, and

› improve the software-defined wide area network reliability and performance through increased redundancy and automation

FULFILMENT OF BOARD RESPONSIBILITIES

ACCOUNTABILITY AND INTERNAL CONTROL

The Directors are required in terms of the Companies Act and the Listings Requirements to prepare annual financial statements which fairly present the state of affairs of the Group as at the end of the financial year and of the profit or loss for that period, in conformity with IFRS.

The External Auditor is responsible for auditing the financial statements of the Company and its subsidiaries and for expressing its opinion on these statements to shareholders. The External Auditor must also confirm whether the financial statements meet the requirements of the Companies Act and IFRS. In 2020 this auditor also carried out certain agreed upon procedures pertaining to the Group's half-year results to 30 June.

Following discussions with the External Auditor the Directors consider that, in preparing the financial statements, the Company has consistently used appropriate accounting policies supported by reasonable and prudent judgement and estimates. All applicable international financial reporting standards have been followed.

GOING CONCERN

The Board reviewed the budgets and forecasts of the Group and concluded that it will continue in business for the foreseeable future. Liquidity and solvency tests in this regard were conducted as required by the Companies Act. Accordingly, the going concern basis of accounting remains appropriate.

COMPLIANCE

54

The Board subscribes to compliance with applicable laws and regulations in all jurisdictions in which the Group operates. During the financial year ended 31 December 2020, AECI was compliant in all material respects with the requirements of the Companies Act, the Companies Act Regulations, the Listings Requirements, and acted in conformity with its MOI.

The Board and its Committees monitor implementation of AECI's Compliance Framework and related processes. Laws identified as key compliance risk areas remain of primary focus. Key among these are laws relating to competition, anti-bribery, anti-corruption and SHE matters. The Board, via the Risk Committee, has implemented related compliance risk mitigations and controls. This benefits the balance between compliance and consideration of the Company's obligations, rights and related costs.

The compliance universe considers related developments in the regulatory context across our footprint.

Notwithstanding COVID-19 restrictions, some further roll-out of the Compliance Framework was possible in 2020, including key internal processes. Some work remains to be done in refining this Framework for circumstances in countries beyond South Africa.

Interactions with regulators in South Africa on key ongoing matters are summarised below. Their outcomes are not expected to have a material effect on either the operations of the Group or its sustainability going forward.

ETHICAL BUSINESS CONDUCT

An ethical culture is fundamental to driving long-term business value and stakeholders' support of businesses. The Compliance team monitors the application of the Code of Ethics and Business Conduct across the Group and reports periodically to the Social and Ethics Committee.

ETHICAL RISKS IDENTIFIED AND WHISTLE-BLOWING

Key risks are conflicts of interest, bribery and corruption. Mitigation processes include a whistle-blowing service, management reports, education and communication.

The whistle-blowing service, Tip-offs Anonymous, is managed by an independent third party (Deloitte). It is a tool for employees to register concerns regarding non-compliance with policies, fraud and other matters relating to acceptable business conduct. Reports are investigated by Internal Audit and are shared with the Board and its Committees as required.

DEALING IN SECURITIES

In terms of the Dealing in Securities and Price Sensitive Information Policy, there is a "closed period" from the end of a financial reporting period until the publication of financial results for that period. Additional closed periods may be declared if warranted by circumstances.

Authority	Purpose of visit	Outcome
B-BBEE Commissioner	Engagement regarding ownership recognition of Broad-Based Black Ownership Schemes in terms of the Codes of Good Practice	Further engagement is anticipated to clarify this matter
Department of Environment, Forestry and Fisheries	Application for exclusion of boiler ash as a waste stream to facilitate waste recycling and re-use at Modderfontein	Notice of intention to issue decision gazetted in November 2020 for public comment
NERSA	Application for Petroleum Products Licence for the loading and storage facility at the Durban Harbour	Application lodged and advertised without objection. Formal issue expected during 2021

REGULATORY INTERACTIONS IN SOUTH AFRICA

COMPLAINTS IN 2020	Status
Complaint type	Number	Valid allegation	Not confirmed/invalid	In progress
Fraud	1		1
Theft	1			1
Bribery	2		2
Unethical behaviour/conflicts of interest	3		3
Inappropriate behaviour/irregularities	7		5	2
Non-compliance	1		1
Appointment irregularities	1		1
Favouritism	3		3*
Total	19		16	3

* In one instance, an employee was dismissed following investigation into other matters.

During closed periods Directors, Prescribed Officers and other designated employees are prohibited from dealing in the Company's securities, either directly or indirectly. Identified employees are advised to this effect. The Group Company Secretary advises the Directors of all the closed periods.

The Company also has in place an Information Disclosure and Communications Policy which sets out procedures for communicating with stakeholders such as the investment community, securities professionals and the media. The objective is to avoid the selective disclosure of material information and govern the disclosure of price-sensitive information to the public in a broad, comprehensive and lawful manner. The Policy has been brought to the attention of all employees and their compliance is not negotiable.

LIABILITY INSURANCE

The Company has in place Directors' and Prescribed Officers' liability insurance which provides some cover against legal action by third parties.

INVESTOR RELATIONS AND COMMUNICATION

The Company's Chief Executive, Chief Financial Officer and members of the Executive Committee conduct timely presentations on the Group's performance and strategy to financiers, institutional investors, financial analysts and the media. Non-executive Directors have a standing invitation to attend.

Presentations, corporate actions and financial results, as well as any other relevant information, are published on the website, other electronic media and in print, as specified by the Listings Requirements. Shareholders, noteholders and other stakeholders are advised of publication via SENS.

Other information on the Company, such as inter alia its management team and sustainability information, is also available on the website.

CHIEF EXECUTIVE AND CFO RESPONSIBILITY STATEMENT: PARAGRAPH 3.84(k) OF THE LISTINGS REQUIREMENTS

After due, careful and proper consideration, the Directors whose names are stated below hereby confirm that:

• a) the annual financial statements for the financial year ended 31 December 2020, issued on 24 February 2021 (https:// investor.aeciworld.com/s/AECI2020fullafs.pdf) as well as the summarised consolidated financial statements derived from those statements and set out on pages 87 to 100, fairly present in all material respects the financial position, financial performance and cash flows of the Company and the Group in terms of IFRS
• b) no facts have been omitted or untrue statements made that would make the annual financial statements false or misleading
• c) internal financial controls have been put in place to ensure that material information relating to the Company and its consolidated subsidiaries have been provided to effectively prepare the financial statements of the issuer, and
• d) the internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function within the combined assurance model pursuant to principle 15 of King IV. Where we are not satisfied, we have disclosed to the audit committee and the auditors the deficiencies in design and operational effectiveness of the internal financial controls and any fraud that involves directors, and have taken the necessary remedial action.

Please see the Chief Financial Officer's report and the Audit Committee's report commencing on pages 34 and 74, respectively, for information of key remedial actions to be undertaken by the Company in 2021.

Mark Dytor Mark Kathan Woodmead, Sandton 22 April 2021

Chief Executive Chief Financial Officer

SUMMARY OF OUR IMPLEMENTATION OF KING IV

PRINCIPLE	APPLIED	COMMENT
Principle 1: The Governing Body (GB) should lead ethically and effectively		See Code of Ethics and Business Conduct and Conflicts of Interest on page 52. The Board approved the new Code in 2019 and the majority of employees have undertaken training on this
Principle 2: The GB should govern the ethics of the organisation in a way that supports the establishment of an ethical culture		Ongoing efforts to engage and create awareness of the Code and its impact among diverse stakeholders. Ongoing reporting undertaken including tracking and investigating all reports made via the whistle blowing service. Reports are tabled at meetings of the Audit and Social and Ethics Committees for oversight
Principle 3: Responsible corporate citizenship		Good traction in engaging with environmental authorities on matters that impact the Company. Ongoing proactive approach through various programmes (audits by experts, self-assessment etc.)
Principle 4: The GB should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process		› The Group's strategic direction is clear, the process of setting it is entrenched and led by the Board and management is charged with implementation. Periodic reviews are undertaken › Executive KPIs are approved by Remco and these are aligned to the Group's strategic objectives
		› The Group's viability, solvency and liquidity are assessed periodically by the Audit Committee throughout the financial year as warranted (e.g. declaration of dividends, major acquisitions)
Principle 5: The GB should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation's performance		› The Board approves reporting framework inclusive of content, with specific focus on compliance with regulations as well as alignment with best practices
and its long, medium and short term prospects		› There is engagement with key institutional shareholders on material issues and concerns (meetings, roadshows etc.) and feedback is shared with the Board for consideration
		› Annual development of IR and Board reports on the basis of materiality › Assurance information the subject to external assurance and oversight provided by the Audit Committee (selected sustainability indicators)
Principle 6: The GB should serve as a focal point and custodian of corporate governance in the organisation		See https://investor.aeciworld.com/governance for the Board Charter and terms of reference for Committees. The structure enables the proper balance of power and authority at Board level. Also see Our unitary Board structure on page 48 and the Board Committees Chairs/members table on page 50
Principle 7: The GB should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively		› All AECI's Non-executive Directors are Independent. The GB, via its Nomination Committee, is mindful of diversity objectives in its appointment and succession planning processes, in line with policy. At end-2020, 60% of Board members were Black (ahead of the voluntary 50% target) and 30% were women, in line with the voluntary target
		› The Board Charter will be revised in 2021 to reflect that the independence assessment of long-serving NEDs is conducted annually as practice
		› The robustness of succession plans will be reviewed/tested in 2021 › A full Board effectiveness review facilitated by an external resource was concluded in January 2021. Key findings are on page 51
Principle 8: The GB should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with the balance of power and effective discharge of duties		The GB has established standing Committees with clear mandates to support its work, and these report back to the GB at each Board meeting. See page 49 — Board Committees
Principle 9: The GB should ensure that the evaluation of its own performance and that of its Committees and individual members support continued improvement in its performance and effectiveness		The GB conducts an evaluation of its performance annually. See Principle 7 above

SUMMARY OF OUR IMPLEMENTATION OF KING IV CONTINUED

PRINCIPLE	APPLIED	COMMENT
Principle 10: The GB should ensure that the appointment of and delegation of management contribute to role clarity and effective exercise of authority and responsibilities		The Chief Executive's appointment is approved by the Board via its Nomination Committee and his performance is evaluated by the Board Chair and ratified by the full Board. The Group Company Secretary is appointed by the Board via the Board Chair and the CFO. The incumbent's performance is evaluated by both of them and ratified by the Board via the Remuneration Committee
Principle 11: The GB should govern risk in a way that supports the organisation in setting and achieving its strategic objectives		The full Board participated in detailed discussions on formulating and finalising the strategy for the next five years, summarised as "One AECI, for a better world". Business with purpose is at the core of the strategy
Principle 12: The GB should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives		AECI has adopted the IT Governance Institute's model as a framework. The Company also applies the guidelines set out in the Control Objectives for IT and related infrastructure Library. This supports the establishment and maintenance of effective internal controls, continuity and risk management as embedded in AECI's risk management agenda. Further progress in IT matters was made in 2020. See page 53 for key activities and focus areas for 2021
Principle 13: The GB should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that it supports the organisation's ethical and good corporate citizenship		› Ongoing process of ensuring that there is alignment in compliance management and continuous improvement and training › The Group Compliance Management Framework was approved and is in implementation phase › Continued training on key and high impact legislation (e.g. Competition Act)
Principle 14: The GB should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of the organisation's strategic objectives and positive outcomes in the short, medium and long term		› Within the ambit of responsibility of Remco is the review of the remuneration philosophy and the GB reviews ongoing income differentials and analysis of remuneration practices. Review of the analysis of remuneration trends across race and gender are a fixed item on the Remco work plan for the year › The current Remuneration Policy has been reviewed and approved by Remco and all pertinent elements are disclosed. See the report commencing on page 58 › Interaction with shareholders on the Policy and its various components is ongoing and will remain a regular feature of shareholder feedback
Principle 15: The GB should ensure that assurance services and functions enable an effective control environment and that these support the integrity of information for internal decision-making and of the organisation's external reports		› Implementation of a formal Combined Assurance model is in progress › Strong Internal Audit function with high levels of independence › The internal Audit Manager is not member of Executive management and has a reporting line to the Audit Committee Chair) › In 2020 an external quality assessment review was conducted on the Internal Audit function. The rating achieved was the highest attainable in terms of compliance with the International Institute of Internal Auditors' Standards › Strong external audit partners › External and internal assurance of selected non-financial indicators
Principle 16: The GB adopts a stakeholder inclusive approach that balances needs, interests and expectations of material stakeholders in the best interests of the organisation over time		See page 12 for information on our stakeholders and how they assist us in value-creation Our stakeholder engagement model is under review and will be finalised in 2021

REMUNERATION REPORT

GLOSSARY OF TERMS

TERM	DESCRIPTION
CPI	Consumer price index
DS	Deferred Shares scheme which was replaced with the revised Performance Share scheme in 2017
EGU	Earnings-growth units. A cash-settled scheme which tracks growth in HEPS
EVP	Employee value proposition
EVA	Economic value added
GDP	Gross domestic product
GP	Guaranteed package. Basic salary, fixed cash allowances and Company contributions to benefit schemes
HEPS	Headline earnings per share
HIPO	High-potential employee
LTI	Long-term incentive. Company scheme referred to as the AECI LTIP or the LTIP
MEDIAN/50th PERCENTILE	The value at the midpoint of a frequency distribution where there is an equal probability of falling above or below
ON-TARGET	Targeted earnings at the median or the 50th percentile
PS	Performance Share awards. AECI ordinary share award which tracks Company performance; equity-settled
RONA	Return on net assets
STI	Short-term incentive
TOTAL REMUNERATION PACKAGE	Basic salary, fixed cash allowances, Company contributions to benefit schemes, variable pay (STI, LTI)
TP	Trading profit
TSR	Total shareholder returns
VWAP	Volume weighted average price

1. FROM THE CHAIR

Dear Stakeholders

Our remuneration is designed to support our strategic goals and purpose and is aligned to equitable market-related pay practices. How we reward our people has a direct impact on operational excellence, our performance, delivery of strategic objectives, transformation, and our sustainability in "a better world".

Even as the worldwide community continues to struggle with the ongoing effects of the global COVID-19 pandemic and we look back on the challenges this added on behalf of the Remuneration Committee (the Committee) I take this opportunity to acknowledge the incredible hard work and dedication which AECI employees, Executive management and the Board demonstrated in these unprecedented times.

Notwithstanding the very real and urgent need to ensure that operations continued in an efficient manner while applying strict cash flow management protocols, AECI's Executives maintained focus on enhancing the delivery of shareholder value and safeguarding sound business practices.

The Committee embraced and made full use of the "new normal" of virtual meetings. We met four times in 2020, with full attendance on each occasion, and tackled new questions relating to the impact of pandemic on incentives and ongoing matters relating to shareholders, performance and transformation of the Group. Details of meetings and attendance are at https://static1.squarespace.com/static/ 5ef9c6ed308afe044f73cd35/t/6076e6ec27df9d437e3a3eda/1618405100890/AECIBoardandCommittees2020.pdf.

I was privileged to engage with key institutional shareholders and management likewise tabled matters which shareholders had raised in 2019 on our Remuneration Policy (the Policy). We will review all feedback in light of the broader Group strategic vision for 2025 and associated deliverables, and will provide specific feedback during 2021. Shareholder voting at the AGM held on 26 May 2020 reflected the improved year-on-year view these very important stakeholders held of our Policy and implementation thereof. I thank them for their support.

Percentage vote (%)	For	Against	Abstain *
2020
Ordinary resolution No. 7.1: Remuneration Policy	98,09	1,91	9,02
Ordinary resolution No. 7.2: Implementation of Remuneration Policy	99,54	0,46	9,02
Special resolution No 1: Directors' fees and remuneration	97,70	2,93	0,01
2019
Ordinary resolution No. 7.1: Remuneration Policy	97,66	2,34	0,01
Ordinary resolution No. 7.2: Implementation of Remuneration Policy	98,91	1,09	0,01
Ordinary resolution No. 8: Amendment of Company's LTI Plan	99,10	0,90	0,01
Special resolution No. 1: Directors' fees and remuneration	99,24	0.76	0,01

VOTING ON REMUNERATION RESOLUTIONS AT THE AGM

* Shares abstained as a percentage of the total issued share capital.

In 2019 we welcomed Philiswe Sibiya to the Committee. Owing to her commitments as Chair of the Audit Committee, however, her portfolio was amended mid-2020 and new Non-executive Director Marna Roets joined our ranks in July 2020. I thank Philiswe for her insights and contribution during her tenure. We welcome Marna and look forward to her bringing her vast experience to bear on the working of the Committee.

As we look ahead to the challenges and opportunities for 2021, the realities of current and future COVID-19 waves remain and they continue to affect our people and our business. The Committee remains appreciative of the commitment of management and all our employees to achieving the Company's goals in circumstances that remain difficult.

We are satisfied that we continue to fulfill our mandate in accordance with the Board Charter and will sustain our efforts to ensure the Group's strategy and objectives are reflected in the way we remunerate our people.

Godfrey Gomwe Chairman 22 April 2021

ACTIVITIES

The Committee is comprised of four Non-executive Directors all of whom, including the Chairman, are Independent. Meetings of the Committee are held four times a year and additional meetings may be held when deemed necessary. The Chief Executive and the Chief Financial Officer are invited to attend to discuss the remuneration of Executives and Senior Managers and to contribute to other discussions as warranted. The Group Executive: Human Capital and the Group Compensation and Benefits Manager also attend the meetings as invitees. No attendee may participate in or be present at any discussion or decision regarding his/her own remuneration. Members of the Committee in the year were:

• › G Gomwe (Chair)
• › KDK Mokhele
• › R Ramashia
• › PG Sibiya (retired by rotation on 30 May 2020)
• › AM Roets (appointed on 1 June 2020)

The responsibilities of the Committee are in accordance with its Board-approved terms of reference, which comply with King IV. A copy thereof is available via the link https://static1.squarespace. com/static/5ef9c6ed308afe044f73cd35/t/5fa14fc999f65 87d303d0e45/1604407243732/remuneration-committee. pdf. The Board is satisfied that the Committee's composition is appropriate with regard to the necessary balance of knowledge, skill and experience of its members.

The Committee considered the following matters and took key decisions, as appropriate:

• › approval of remuneration packages for Executives and Senior Managers for 2020
• › approval of STI payments for 2020 against 2019 performance for the Group and for its individual businesses

• › approval of performance conditions and targets for the STI scheme for 2020 to 2022

• › approval of LTI allocation principles for 2020

• › approval of performance conditions for 2020 LTI award
• › review and approval of the deferred vesting of the LTIs awarded in 2017
• › approval of the deferred vesting date
• › review of Non-executive Directors' fees and remuneration, as recommended by the Executive Directors, and the formulation of a recommendation to shareholders for the approval of increases
• › review and consideration of reports on Remuneration Analysis focused on race and gender
• › review of Executive remuneration against benchmarks and market data
• › review and approval of the Company's 2020 Remuneration report, and
• › review of response and activities related to remuneration with respect to the COVID-19 pandemic.

Management engaged the services of Vasdex to assist with market benchmarks, advice, and recommendations. The fees paid to Vasdex for services rendered in the period amounted to R130 000.

2. THE POLICY

OUR STRATEGY

AECI remunerates employees equitably relative to the market in which we operate in order to attract, reward and retain suitably qualified and high-performing individuals who are purpose-led in all they do. This supports the achievement of our strategic goals and purpose, where reward has a direct impact on operational excellence, long-term sustainability and transformation of our Group.

OUR PHILOSOPHY AND PRINCIPLES

The principles outlined below underpin the Remuneration philosophy. These principles are aligned with the Group's BIGGER values and embed fair and responsible remuneration practices.

Align remuneration to strategic objectives	› Remunerate employees such that superior performance in the achievement of strategic objectives is rewarded through incentive schemes.
Attract, motivate and retain passionate, purpose-led top talent	› Position to attract, motivate and retain high performers through the provision of comprehensive benefits, market-related salaries, value-driven incentive schemes and a robust EVP.
Recognise and reward exceptional performance	› Recognise exceptional performance and encourage ongoing achievement of long-term objectives. › Encourage and reinforce behaviours which offer long-term, sustainable financial performance balanced with embedding a culture of safety, sustainability and transformation with other key non-financial annual and longer-term objectives.
Offer fair, responsible and equitable remuneration	› Enable the fair and equitable provision of remuneration and benefits across all employment levels, as appropriate. › Benchmark AECI's pay levels against market peers, internal salary ranges and against a "living" wage standard.
Embrace good governance and adopt best practice	› Balance and align the needs and expectations of shareholders, employees, customers and regulators to create long-term sustainable growth. › Embed the principles of good corporate governance to provide the appropriate share of value to relevant stakeholders.

OUR APPROACH

We seek to offer employees competitive GPs which are relevant to market benchmarks and allow us to secure key technical skills, high performers and fill critical roles. Remuneration is linked closely to the AECI EVP and Performance Management system. Guaranteed Pay and on-target variable pay targets the 50th percentile of total reward market benchmarks.

The Total Remuneration Package includes the GP and the variable pay elements. Dependent on the employee's level, the variable pay element includes an STI and LTI. The mix between GP and variable pay may vary.

	Guaranteed package	Short-term incentive	Long-term incentive
Principle	Fair and competitive salaries to attract talent and provide our people with benefits designed to provide for their families and retirement.	Recognise performance and the achievement of Company and individual goals and objectives.	Link employee and Company performance to shareholder value creation, long-term performance and sustainability in line with the strategy.

GUARANTEED PACKAGE

Description	› AECI defines GP as the total sum of base pay (or salary), fixed allowances, and retirement, Group life and medical aid Company contributions.
Benchmarks	› AECI compares salaries to the local national market as represented in industry surveys published annually in countries across our strategic international footprint. Where sector-specific surveys exist, those surveys are sourced for comparative purposes. › Local benefits such as travel allowances and contributions to retirement and medical aid funds are reviewed against relevant market data which can be country-specific.
Benefits	› All AECI employees have access to retirement and medical benefits. Our philosophy for being a responsible employer feeds into the approach that membership and participation in a retirement fund is compulsory where government schemes do not exist.

SHORT-TERM INCENTIVE

All employees at all levels of employment in South Africa participate in an STI scheme as detailed below.

Bargaining unit	Non-bargaining unit (including Executives)	Sales personnel
Guaranteed 13th cheque (as per Chemical Industries Bargaining Agreement)	Incentive bonus schemes	Commission schemes

Similar schemes are in place for international operations, as determined by local policy and legislation/union agreements.

Executive and Senior management scheme

A base TP or HEPS is set every three years. Growth hurdles above CPI and GDP are measured cumulatively from that base. Base performance is defined as CPI plus GDP plus 1%.

During the three-year period the "base" hurdle of the prior year becomes the growth base for the next year. Therefore, each year during this "crawling peg" cycle AECI and each of its businesses need to grow from the base of CPI plus GDP plus 1%.

Performance metrics Base year 1 — approved by the Committee

Base year 2 — year 1 base plus GDP plus CPI plus 1%

Base year 3 — year 2 base plus GDP plus CPI plus 1%

Metric	Weighting	Minimum	Target	Stretch	Maximum
HEPS or TP improvement	75%	90% of base	Base plus CPI plus GDP plus 9%	Base plus CPI plus GDP plus 27%	Base plus CPI plus GDP plus 45%
Individual performance	25%	Personal key performance areas linked to strategic goals and initiatives.

Financial performance	The financial element is determined by measuring actual financial performance against predetermined hurdles. HEPS and TP growth against the prior year's performance is set at a series of performance hurdles as outlined in the table on page 61. The hurdles target growth in relation to CPI plus GDP plus a set percentage at each hurdle against a base year performance. On-target performance is deemed to be at CPI plus GDP plus 9% (real growth of 9%).
Individual performance	This element is measured on the achievement of personal targets and is not dependent on the financial performance of the Company/Group business.
	Personal KPIs typically include aspects such as:
	› safety and health performance – measured against fatal accidents and the Total Recordable Incident Rate on a linear scale
	› cash flow management – measured on improved working capital management and capital spend
	› B-BBEE/Employment Equity – measured against specific acquisition, retention, development and governance targets for businesses in South Africa
	› governance and integrity of financial reporting › implementation of strategic projects — measured against specific project deliverables agreed to with the Board.
Outcomes	The table below outlines the percentage of GP payable at each hurdle:
	% of TGP	Below threshold	On-target	Stretch	Maximum
	CE	0%	75%	100%	150%
	Other Exco members, including the CFO		70%	100%
	Managing Executives (MEs)		68%	95%
	HODs		45%	60%
Maximum bonus percentages	All STI payments are capped at 150% of GP. In exceptional cases, the Committee has the authority to extend the bonus cap to 250% of GP. This will only occur if there has been exceptional growth in profits and if the EVA
	and TP-sharing targets have been met by the Group or business concerned.
Discretion of the Committee	The Committee has discretion to review the appropriateness of the scheme rules taking into account a balance between fair reward for the individual and stakeholders' interests. As appropriate, discretionary awards may be motivated for consideration in the context of performance and reasonableness.

LONG-TERM INCENTIVE

The purpose of the LTIP is to attract, retain, motivate and reward Executives and Senior Managers who are able to influence the performance of AECI and its businesses on a basis which aligns their interests with those of stakeholders. The scheme allows AECI to remain competitive in terms of LTIs as it rewards long-term sustainable Company performance, acts as a retention tool and ensures that Executives and Senior Managers share a significant level of personal risk with stakeholders. The PS element aligns the interests of stakeholders and AECI's senior employees closely by rewarding superior shareholder returns and financial performance in the future. As annual awards are made, each award requires the resetting of the performance criteria. It is only with continued and sustained outperformance by the Company that significant reward accrues to participants.

Specific awards under the same terms as the scheme below were granted to employees identified as HIPOs and future leaders.

Operation and instruments	Annual award of PS (element of LTIP).
Quantum of awards	Allocations and awards are governed by AECI's reward strategy (pay mix) in which, inter alia, the "target reward" of long-term incentivisation is set for defined categories of Executives and Senior Managers.
Award date	April.

PS The PS vest on the third anniversary of the award to the extent that the Company has met specified performance criteria over the intervening period.

The value per share that vests is the full value of the share (there is no strike price), but the number of shares that will vest depends on whether the Company's performance over the intervening three-year period has been on target, or at under- or over-performance against the target/s set at the award date.

Performance conditions for PS Three-year performance criteria:

Measure	Weighting	Below threshold	Threshold	Target	Maximum
		0%	50%	100%	200%
TSR	30%	Rank 16 to 9	Rank 8	Rank 6	Ranks 1 and 2
RONA	30%	Below 15%	15%	17%	20% or more
HEPS	40%	Below CPI	CPI + GDP	CPI+GDP+ 2%	CPI+GDP+5% or more

Incremental performance against the RONA and HEPS conditions will be determined through linear interpolation of the result between the designated milestones.

TSR

AECI's relative ranking in a peer group of 16 companies, where performance below the median results in no award vesting. Eighth rank or the median (50th percentile) results in the threshold being achieved whereas target occurs at rank 6. Ranks 1 and 2 result in the maximum percentage. Vesting percentage results have been set for each rank from 1 to 16.

Including AECI, the 16 companies in the peer group are:

Astral Foods	KAP Industrial Holdings	RCL Foods
Aveng	Nampak	Reunert
AVI	Northam Platinum	Sappi
Barloworld	Omnia Holdings	Super Group
Grindrod	PPC	Tongaat Hulett

In the event of a peer in the peer group delisting, a reserve list applies. The first company on this list will be included in the peer group and the TSR position recalculated for the whole period.

RONA

As approved by the Committee, the RONA target will factor in unusual corporate transactions to ensure that financially sound business decisions continue to be made; decisions otherwise might adversely affect the RONA performance. Thus, management will continue to maintain a long-term financial view on the Company's growth and performance even while continuing to ensure that an adequate measure on return is in place in the LTI scheme.

HEPS growth

The final CPI figure used in these calculations is linked to the same methodology used to translate foreign income into rand terms and on the same proportional basis.

Furthermore, the HEPS target and base will be adjusted for major corporate transactions which may hyper-inflate current performance or moderate good performance.

Outcomes The table below outlines the percentage of GP payable at each hurdle:

% of GP	Below threshold	Threshold	Target	Maximum
CE	0%	50%	100%	200%
CFO		43%	85%	170%
Other Exco members		35%	70%	140%
MEs and HODs		30%	60%	120%

EXECUTIVE PAY MIX

The principle that the performance-based pay of Executives and Senior Managers should form a greater portion of their expected total compensation is a key underlying feature of the pay mix. Further, the outcome of variable pay must reward long-term sustainable performance (through long-term and/or share-based incentives), more so than operational performance (through annual cash awards). This is particularly relevant at Executive level where the focus is on shareholder value and positioning the Group for sustainable growth and returns.

63 REMUNERATION REPORT

The mix of fixed and variable pay is designed to meet AECI's operational needs and strategic objectives based on targets that are stretching, verifiable and relevant. The pay mix proportionality of the CE through to that of a Senior Manager is shown in the schematics below. Four remuneration scenarios are demonstrated: remuneration at minimum performance, remuneration at on-target performance, remuneration at stretch performance and remuneration at maximum performance.

EXECUTIVE PAY MIX

GP STI LTI

CE — CHIEF EXECUTIVE

CFO — CHIEF FINANCIAL OFFICER

EXCO — OTHER EXECUTIVE COMMITTEE MEMBERS

MEs — MANAGING EXECUTIVES

HODs — HEADS OF FUNCTIONAL DEPARTMENTS

64 REMUNERATION REPORT

STI and LTI outcomes are subject to extensive review through two mechanisms:

1. Performance Management review

Each employee who participates in the incentive schemes participates in the AECI Performance Management process which involves a bi-annual review of set KPIs linked to AECI's key non-financial objectives.

2. Full-year performance and audited financial statements

The impact of the Company's financial performance on incentive outcomes is subject to review by the Executive Committee and the Remuneration Committee. The audited financial results are utilised in the calculation.

EXECUTIVE DIRECTORS' CONTRACTS

Neither of the Executive Directors have extended employment contracts or special termination benefits. Both have a 12-month restraint of trade in place. Their service contracts and those of the other Executives are in accordance with AECI's standard terms and conditions of employment and their notice period is six months.

In principle, AECI does not offer sign-on bonuses but, in instances where a sign-on bonus is included, the contract will stipulate that the employee must remain employed by the Group for a period of between one and three years depending on the quantum of the sign-on bonus. The sign-on bonus is paid in instalments over the retention period and all payments are subject to a claw back condition.

Generally, it is not AECI's policy to offer balloon payments on termination of service. An employee, even at Executive level, who resigns from the Group forfeits all LTI awards and will not receive any further outstanding STI payments. Where an employee's service is terminated through the sale of a business or no-fault retrenchment, the terms of that termination are negotiated and may include either the early vesting of LTI awards or the continued vesting of existing LTI awards. STI payments may be included if termination occurs in the last quarter of the financial year or in the first quarter of the next financial year.

The Executive Directors' contracts do not have any specific conditions or clauses relating to a termination payment or retention agreement in relation to a change of control of the Company. In terms of the LTIP, there are no provisions which govern the lapsing or acceleration of previously awarded shares.

In the event of a change of control, shareholders would be advised and alerted and management engaged on the impact of the process.

MINIMUM SHAREHOLDING REQUIREMENT

A minimum shareholding guideline was adopted in 2018 and provided the Executives with a five-year timeframe to accumulate the level of holdings required. Accordingly, the first measurement will be as at 31 December 2023.

The table below outlines the proposed percentages to be held, by level:

Title	% of GP
CE	200
CFO	150
Other Exco members	100

As at 31 December 2020, using a share price of R87,18, the progress of Executives (who are AECI's Prescribed Officers) in achieving the MSR is reflected below. Using a vesting of 100% on inflight LTIs, all Executive Committee members are projected to reach the required MSR levels in the required time.

Exco member	Goal (%)	MSR as at Dec 2020 (%)	Years remaining to reach MSR target
MA Dytor	200	88	3
KM Kathan	150	89	3
EE Ludick	100	73	3
DJ Mulqueeny	100	56	3
DK Murray	100	49	3
CBH Watson*	100	—	5

* CBH Watson joined AECI on 1 January 2020 and thus is in year 1 of the MSR requirement.

NON-EXECUTIVE DIRECTORS' FEES AND REMUNERATION

Non-executive Directors do not have service contracts, they do not participate in any of the Company's STI or LTI schemes and no shares are granted to them. In 2020, these Directors received a fixed fee per annum for their contribution, comprising a base retainer fee and, where applicable, committee membership fees. Meeting attendance fees are paid at a fixed value per meeting.

In addition, the Company pays for all travel and accommodation expenses incurred by Non-executive Directors to attend Board and committee meetings and visits to Company businesses.

Non-executive Directors' fees are arrived at after an independent benchmarking exercise commissioned by the Executive Directors. After the Board's review of the proposal, the fees are tabled for approval by shareholders at the AGM. In arriving at the proposed fee, cognisance is taken of market norms and practices.

Details of the emoluments paid to the Non-executive Directors in 2020 are disclosed in Part 3 of this report and the proposed fees are disclosed in the Notice of AGM for 2021.

3. IMPLEMENTATION

THE IMPACT OF COVID-19 ON REMUNERATION

Levels of restrictions on the movement of people, including work arrangements, affected the whole world to a lesser or greater extent. AECI's objectives were to keep all its people healthy while continuing to safeguard the business. Across our geographic footprint, the majority of employees were able to work from home or were engaged in providing products and services deemed essential and thus continued to work on site.

Employees who worked from home were paid in full and no adjustments to their remuneration were made. Where an employee was not able to work, either from home or on site, that employee was placed on annual leave for the duration of the applicable lockdown period.

SOUTH AFRICA

South African employees affected by lockdown restrictions were granted 10 days "additional" leave during that time, thereby extending their annual leave balances. Further, AECI applied for the UIF TERS benefit and upon receipt of such credited the affected employees' leave balances with the equivalent days.

During the initial lockdown period (from 26 March 2020 to 16 April 2020), employees who were required to work on site by virtue of providing essential products and services received a special bonus for the days worked during that period. A maximum of 10 days' additional salary was paid to qualifying employees. Senior management employees on site did not qualify for this bonus.

Lockdown was subsequently extended to 30 April 2020. A few employees entered into an unpaid leave period but the remuneration of most employees was not reduced. In addition, no benefits were reduced and contributions to the medical benefits and retirement funds remain unchanged. The biggest impact on remuneration was the delayed vesting of the LTI award as explained below.

Employees were encouraged to contribute to iPledge, our own crowdsourcing relief fund. All and the Non-executive Directors nominated one-third of their fees for the second quarter to iPledge.

GUARANTEED PACKAGE ADJUSTMENTS

The Executive Committee undertook a lengthy review of the impact of COVID-19 on our operations and cash flows and submitted an average increase of 3,5% to the Committee for approval. This increase was slightly above anticipated inflation for the full year 2020 but perhaps lagging inflation levels forecast for 2021. On that basis, the Committee approved an additional 0,5% increase for the 2021 salary adjustments in recognition of extra effort during COVID-19.

At bargaining unit level, a 6,5% increase had been approved at the Industrial Chemicals Sector Wage Negotiations and a 7,5% increase was approved by the Bargaining Council for the Civil Engineering Industry. This increase was passed to all bargaining unit employees.

For employees across the rest of the Group's international footprint, general inflation was used as a guideline for increases. As part of an ongoing remuneration review for employees at lower levels, the Company budgets for and awards ad hoc increases in instances where employees are below the designated minimum salary for their level.

2020 SHORT-TERM AND VESTING LONG-TERM INCENTIVE

The impact of the global pandemic was felt in the Group's results for the year. Profit from operations fell 55% and consequently HEPS declined by 23%. The overall impact on the Group's incentive schemes was reviewed holistically in terms of both short- and long-term schemes. This impact was quantified into rand loss expressed in both profits and HEPS. In addition the Committee reviewed the actions of management during 2020 to preserve cash, manage cash flow, and deliver on business project optimisation targets and other key deliverables. The Committee was pleased with the outcomes of those efforts. As such, it was agreed that 50% of the losses attributable to COVID-19 would be "added" back to the financial results and a discretionary STI would be granted. Also, a discretionary vesting of the LTI would be granted on that basis.

The table below illustrates an average effect of this discretion for the Executive Directors. The effect for Senior Managers is different in that the HEPS metric is replaced by TP and the TP results varied greatly between divisions.

Metric	Weight	Weighted result prior to Committee discretion on COVID-19 loss	Weighted result with 50% of COVID-19 loss included	Weighted result after Committee discretion on COVID-19 loss
HEPS	75%	0%	78%	75%
Individual performance	25%	19%	19%	19%
Total	100%	19%	97%	94%

Individual performance was unaffected by the Committee's discretion with respect to the COVID-19 loss and adding back 50% of this loss resulted in a HEPS calculation amounting to 103% on the portion of the STI linked to Company performance (78% on a weighted basis). However, the Committee limited the overall impact to no more than 100% of the financial portion (75% on a weighted basis).

2020 INTEGRATED REPORT AND SUMMARISED FINANCIAL STATEMENTS AECI LIMITED

R thousands	Total STI in pre-discretion adjustment	Value of adjustment	Total STI post-discretion adjustment
MA Dytor	629	2 300	2 929
KM Kathan	463	1 757	2 220

The STI has an element of individual performance linked to key performance areas. The table below reflects the levels of achievement by the Executives against their individual KPIs in 2020. The KPIs are outlined in broad categories.

Strategic objective	KPI	Performance
Financial	Improvement in cash from operating activities
	Management of debt and loans
	Improvement in RONA
Safety	Reduction in TRIR and no fatal accidents
Transformation	B-BBEE rating improvement
	Improvement in achieving Employment Equity goals
Growth	Delivery of investment case of AECI Much Asphalt and AECI Schirm
Business optimisation	Delivery of business optimisation projects
	Shared services centres implementation
	Achieved Partially achieved	Not achieved

2018 LONG-TERM INCENTIVE

The 2018 LTI vests early in 2021, based on performance conditions evaluated over the financial years 2018 to 2020. In terms of the performance conditions for this LTI vesting, AECI achieved second place in a peer group of 16 companies, resulting a 200% vesting on the TSR condition (60% on a weighted basis). Similarly to what has been described for the STI, a discretionary additional vesting of the LTI was granted on the basis that adding back 50% of losses attributable to COVID-19 would have resulted in a 108% vesting on the HEPS performance condition. As such, the Committee approved a discretionary vesting of 100% for active participants of the scheme. Participants who have left the employ of AECI will receive vesting at 60%.

Metric	Weight	Weighted result prior to Committee discretion on COVID-19 loss	Weighted result with 50% of COVID-19 loss included	Weighted result post Committee discretion on COVID-19 loss
TSR	30%	60%	60%	60%
RONA	30%	0%	0%	0%
HEPS	40%	0%	48%	40%
Total	100%	60%	108%	100%

TSR and RONA were unaffected by the Committee's decision on COVID-19 relief.

R thousands	Total LTI in pre-discretion adjustment	Value of adjustment	Total LTI post discretion adjustment
MA Dytor	3 267	2 179	5 446
KM Kathan	2 416	1 611	4 028

The values above were calculated using the share price at 31 December 2020 in line with the single figure tables commencing on page 69.

Since 2018, the LTI awards have performance conditions which conclude on 31 December of each financial year. As such, these awards will form the basis for the LTI element of the single figure disclosure for the 2020 and future financial years (in line with King IV).

2017 LONG-TERM INCENTIVE

The 2017 LTI award was the final award with solely a TSR performance condition and was the final year in which awards were made in June of each year. This award was due to vest on 30 June 2020. However, due to cash preservation imperatives the vesting was deferred to October 2020. The Committee approved this proposal together with an additional consideration of 1% deferral benefit for each month to compensate participants for the delay.

The deferral benefit was delivered as a cash benefit, calculated on the capital value of the shares on vesting date. The vesting award is reflected in note 31 to the annual financial statements. As explained above it is not included in the single figure disclosure, however, since the 2018 award is included in that disclosure.

EXECUTIVE REMUNERATION OUTCOMES

The outcomes of this decision are illustrated in the graphics below and the single figure tables commencing on page 69.

2020 LONG-TERM INCENTIVE AWARDS

The performance conditions for the awards have a base in the reported RONA and HEPS for the Group for 2020. The 2020 LTI award was based on a five-day VWAP in April 2020 and will vest after three years, in April 2023.

The details of the award were reviewed and approved by the Committee in February 2020. No amendments to the award were made in light of the impact of the global pandemic.

		Market value based on award price (5-day VWAP) of R73,77 per share
	No. of PS	(R thousands)	% of total GP
MA Dytor	120 924	8 921	120
KM Kathan	80 152	5 913	102
EE Ludick	53 893	3 976	84
DJ Mulqueeny	39 323	2 901	70
DK Murray	38 865	2 867	70
CBH Watson	32 671	2 410	70

REMUNERATION OUTCOMES (SINGLE FIGURE AND UNVESTED AWARDS)

Details of the basic salary and GP (basic salary plus benefits) paid to the Executive Directors and the Prescribed Officers are set out in the tables that follow, with the face value of the vested incentive schemes included. The relevant table of unvested awards for each individual is also included.

MA DYTOR

R thousands	2020	2019	% change
Basic salary	6 135	5 577	10,00
Benefits	1 201	1 105	8,69
STI	2 929	4 146	(29,34)
GP + STI	10 265	10 828	(5,20)
LTI
PS1	5 446	3 602	51,22
EGU2	1 032	703	46,81
DS3	0	1 099
Other4	728	341	113,63
TOTAL	17 472	16 573	5,43

R thousands				Number of outstanding awards
Instrument	Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
EGU	2014	2019	70 198	—	70 198	—
EGU	2015	2020	261 908	—	261 908	—
EGU	2016	2021	258 598		172 399	86 199
PS	2017	2020	43 766	52 519	96 285	—
PS	2018	2021	62 474	—	—	62 474
PS	2019	2022	70 494	—	—	70 494
PS	2020	2023	120 924	—	—	120 924

R thousands	Value of outstanding awards
Instrument	Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
EGU	—	188		81	269	—
EGU	—	1 188		151	1 338	—
EGU	—	627		99	726	—
PS1	4 619		(1 137)	4 177	7 659	—
PS	7 045		(1 598)		—	5 446
PS	6 779		(634)	369	—	6 514
PS	8 921		1 622	(4 111)	—	6 431

KM KATHAN

R thousands	2020	2019	% change
Basic salary	4 686	4 442	5,50
Benefits	1 041	973	6,94
STI	2 220	3 308	(32,88)
GP + STI	7 948	8 724	(8,89)
LTI
PS1	4 028	2 652	51,8
EGU2	889	632	40,73
DS3		981
Other4	432
TOTAL	13 296	12 989	2,37

69

KM KATHAN CONTINUED

R thousands		Number of outstanding awards
Instrument	Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
EGU	2014	2019	65 040	—	65 040	—
EGU	2015	2020	233 699	—	233 699	—
EGU	2016	2021	230 761		153 841	76 920
PS	2017	2020	35 215	42 258	77 473	—
PS	2018	2021	46 200	—	—	46 200
PS	2019	2022	48 531	—	—	48 531
PS	2020	2023	80 152	—	—	80 152

R thousands	Value of outstanding awards
Instrument	Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
EGU	—	174		57	232	—
EGU	—	1 028		103	566	451
EGU	—	559		(8)	324	228
PS	3 716		(915)	3 361	6 162	—
PS	5 210		(1 182)			4 028
PS	4 667		(436)	254	—	4 485
PS	5 913		1 075	(2 725)	—	4 262

EE LUDICK

R thousands	2020	2019	% change
Basic salary	3 792	3 594	5,50
Benefits	876	820	6,82
STI	1 777	2 658	(33,13)
GP + STI	6 445	7 072	(8,87)
LTI
PS1	2 703	1 363	98,31
EGU2	635	424	49,85
DS3		797
Other4	151
TOTAL	9 934	9 656	2,88

R thousands				Number of outstanding awards
Instrument	Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
EGU EGU	2015 2016	2020 2021	162 666 156 588	—	81 333 52 196	81 333 104 392
PS	2017	2020	25 096	30 115	55 211	0
PS	2018	2021	31 004	—	—	31 004
PS	2019	2022	32 632	—	—	32 632
PS	2020	2023	53 893	—	—	53 893

EE LUDICK CONTINUED

R thousands	Value of outstanding awards
Instrument	Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
EGU	—	738		(8)	416	314
EGU	—	379		(5)	220	155
PS	2 648		(652)	2 395	4 391	—
PS	3 496		(793)		—	2 703
PS	3 138		(293)	171	—	3 016
PS	3 976		723	(1 832)	—	2 866

DJ MULQUEENY

R thousands	2020	2019	% change
Basic salary	3 227	3 073	5,00
Benefits	866	809	7,00
STI	1 476	2 269	(34,93)
GP + STI	5 569	6 151	(9,47)
LTI
PS1	1 828	787	132,29
DS3		651
Other4	252	19	1 228,79
TOTAL	7 650	7 608	0,54

R thousands				Number of outstanding awards
Instrument	Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
EGU	2016	2021	125 539		—	125 539
PS	2017	2020	14 966	17 959	32 925	—
PS	2018	2021	22 984	—	—	22 984
PS	2019	2022	28 683	—	—	28 683
PS	2020	2023	39 323	—	—	39 323

R thousands	Value of outstanding awards
Instrument	Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
EGU	—	304		(56)	—	248
PS	1 579		(389)	(1 190)	2 619	—
PS	2 592		(764)		—	1 828
PS	2 758		(258)	150	—	2 651
PS	2 901		527	(1 337)	—	2 091

71

DK MURRAY

R thousands	2020	2019	% change
Basic salary	3 161	3 010	5,00
Benefits	880	826	6,55
STI	1 462	2 223	(34,24)
GP + STI	5 503	6 059	(9,18)
LTI
PS1	1 978	801	146,90
EGU2	574	389	47,64
DS3		650
Other4	263	21	1 150,73
TOTAL	8 317	7 920	5,01

R thousands				Number of outstanding awards
Instrument	Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
EGU	2014	2019	36 608	—	36 608	—
EGU	2015	2020	154 588	—	154 588	—
EGU	2016	2021	127 794		85 196	42 598
PS	2017	2020	14 990	—	—	14 990
PS	2018	2021	22 685	—	—	22 685
PS	2019	2022	28 313	—	—	28 313
PS	2020	2023	38 865	—	—	38 865

R thousands	Value of outstanding awards
Instrument	Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
EGU	—	98		42	140	—
EGU	—	701		89	790	—
EGU	—	310		49	359	—
PS	1 582		(390)	1 431	2 623	—
PS	2 558		(580)		—	1 978
PS	2 723		(255)	148	—	2 616
PS	2 867		521	(1 321)	—	2 067

CBH WATSON

2020
2 760
713
865
4 339
4 339

CBH WATSON CONTINUED

Grant date	Vesting date	Opening balance	Gained in year	Settled in year	Closing balance
2020	2023	32 671	—	—	32 671
Value at award date	Value at vesting date	Effect of share price	Effect of performance	Settled in year	Value at year-end
2 410		438	(1 111)	—	1 737
				Value of outstanding awards	Number of outstanding awards

1 PS The share award disclosed in single figure is the award granted in 2018, for which the performance conditions ended at 31 December 2020. During 2020, the 2017 PS award vested but its performance period ended in June 2020. Thus, in this report for 2020 the 2017 award is disclosed in the unvested tables only and in note 31 to the annual financial statements. The 2018 award will vest on 16 April 2021. Its value reflects the AECI share price at 31 December 2020, at the discretionary vesting of 100%. 2 EGUs EGUs vest over a three-year period and track HEPS performance.

3 Deferred shares The last award vested in 2019.

4 Other Inclusive of: sale of leave, club fees, estate planning and private use of Company car, deferral benefit for delayed 2017 LTI vesting.

NON-EXECUTIVE DIRECTORS' FEES AND REMUNERATION

At the AGM scheduled for 25 May 2021 shareholders will be asked to pass special resolutions, to take effect from that date, approving the proposed changes in Non-executive Directors' fees by an average of 3,5% (in line with CPI and the increases awarded to the Executive Directors) as set out in the Notice of AGM for 2021.

The holdings in the Company's securities of the Directors, the Director of a major subsidiary, the Group Company Secretary and the Prescribed Officers in 2020 are disclosed in note 31 to the annual financial statements. These statements are available on AECI's website at https://investor.aeciworld.com/s/AECI2020fullafs.pdf and printed copies are available on request.

Details of fees paid to the Non-executive Directors in 2020 are also disclosed in note 31 to the annual financial statements.

NON-BINDING ADVISORY VOTE

In terms of the Listings Requirements and the recommendations of King IV, the Remuneration Policy and its implementation will be put to a non-binding vote at the AGM of shareholders of the Company scheduled for 25 May 2021.

In the event that either the Policy or the implementation vote receive 25% or more votes against, the Committee commits to the following:

• › those shareholders who voted against will be invited to engage with the Committee regarding their concerns and the reasons that motivated their negative votes
• › individual or combined interactions will be scheduled to understand the concerns of those shareholders
• › the Committee will aggregate their responses and analyse them to determine where changes are necessary in the Policy or in its implementation
• › a shareholder communication pack will be prepared, highlighting the Policy or implementation changes being undertaken as well as reasons and motivation for elements where the Committee determines that no change is warranted
• › shareholders will then be engaged regarding the changes that the Committee will implement in response to the issues and concerns raised.

AUDIT COMMITTEE'S REPORT TO STAKEHOLDERS

This report is provided by the Audit Committee (the Committee) appointed in respect of the 2020 financial year of AECI Ltd. This report incorporates the requirements of the Companies Act No. 71 of 2008 (Companies Act), the JSE Ltd (JSE) Listings Requirements and Debt Listings Requirements (Listings Requirements), and the principles of the King IV Report of Corporate Governance for South African (King IV). The Committee's operation is guided by detailed terms of reference that are informed by the Companies Act and King IV Code in South Africa and were approved by the Board.

MEMBERSHIP

The Committee was nominated by the Board in respect of the 2020 financial year and its members were confirmed by shareholders at the AGM held on 26 May 2020. Shareholders will be requested to confirm the appointment of the members of the Committee presenting themselves for re-election for the 2021 financial year at the AGM scheduled for 25 May 2021.

The Committee comprises solely Independent Non-executive Directors. Abridged biographies of these Directors are published on pages 44 and 45.

Members in the period were:

• › PG Sibiya (Chair)
• › FFT De Buck
• › G Gomwe
• › AJ Morgan
• › AM Roets

The Chief Executive, the Chief Financial Officer (CFO), the Group Financial Manager, the External Auditor and the Head of Internal Audit attend by invitation, as does the Group Tax Manager and the PwC Internal Audit Engagement Partner, as required.

Five meetings were held in the year. Dates and attendance are available at https://static1.squarespace.com/static/ 5ef9c6ed308afe044f73cd35/t/6076e6ec27df9d437e3a3e da/1618405100890/AECIBoardandCommittees2020.pdf.

Allen Morgan served on the Committee from 2010. He resigned from the Board at the AGM held on 26 May 2020. The Committee thanks him for his service and guidance during his tenure.

Marna Roets was appointed on 1 June 2020.

PURPOSE

The purpose of the Committee is to:

› assist the Board in overseeing the quality and integrity of the Company's integrated reporting process, specifically as it relates to the financial statements 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 External and Internal Auditors, management and stakeholders

• › ensure that an effective financial 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, the integrity of financial statements and reporting and related risk management
• › provide the Company's CFO, the External Auditor and the Head of Internal Audit with unrestricted access to the Committee and its Chair, as required, in relation to any matter falling within the remit of the Committee
• › meet with the External Auditor, the Head of Internal Audit, Senior Managers, Executives and Executive Directors as the Committee may elect
• › assess the performance of the CFO and the Head of Internal Audit
• › review and recommend to the Company's Board, for approval, the Company's unaudited interim financial statements 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 King IV
• › 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
• › assess the performance and effectiveness of the Committee and its members on a regular basis.

In addition, the Chair of the Committee meets regularly with the Head of Internal Audit without the External Auditor, other Executive Board members or the Company's CFO being present.

EXECUTION OF FUNCTIONS

The Committee executed its duties and responsibilities during the 2020 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, specifically relating to the financial statements, and pursuant to the provisions of the Listings Requirements.

The Committee Chair reported to the Board on the Committee's activities, highlighting key matters discussed, after each Committee meeting.

During the year under review:

› the Committee considered the results of an independent review of its terms of reference and subsequently made amendments to the terms of reference

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

• › nominated Deloitte & Touche (Deloitte) for appointment as auditor for the financial year ended 31 December 2020, and ensured that the appointment was approved by shareholders at the AGM held on 26 May 2020 and 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 paragraph 3.84(g) and 7.3(e)(iii) of the Listings Requirements and Debt Listings Requirements, respectively, obtained the information listed in paragraph 22.15(h) of the Listings Requirements in its assessment of the suitability of Deloitte, as well as Mr Patrick Ndlovu, for appointment as External Auditor and designated individual audit partner respectively
• › 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. This included a review of the following:
• » information related to the outcome of external inspections conducted by the Independent Regulatory Board for Auditors (IRBA)
• » the internal monitoring processes followed by Deloitte
• » context in terms of the areas of improvement raised
• » the impact on the ability of the system of quality control to meet its objectives and the External Auditor's ability as an audit firm to meet its obligations in terms of the Listings Requirements
• › obtained an annual written statement from the External 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
• › 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
• › considered whether any non-audit services had been undertaken by Deloitte, which specifically required Committee approval per the policy, and determined that there were none

› 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 concluded that there were none

The Committee is satisfied with the quality of the external audit in relation to the audit quality indicators.

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 presented the financial position of the Company and of the Group as at the end of the financial year, changes in equity, and the results of operations and cash flows for the financial year and considered the basis on which the Company and the Group 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
• › obtained assurances from management that adequate accounting records were being maintained by the Company and its subsidiaries
• › ensured that the Company has established appropriate financial reporting procedures and that those procedures are operating effectively
• › considered all entities included in the consolidated Group IFRS financial statements, and ensured that it has access to all the financial information, to allow the Company to prepare and report on the financial statements of the Group 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
• › met separately with management, the External Auditor and the Head of Internal Audit

In respect of internal control and Internal Audit, including ad hoc investigations, 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 and External Auditors 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 internal audit processes and the adequacy of corrective actions in response to significant internal audit findings and, where appropriate, challenged the actions taken by management

• › ensured that the Head of Internal Audit had a direct reporting line to the Committee Chair and noted the administrative reporting line to the CFO
• › oversaw the performance of an external quality assessment review on the Internal Audit function. The rating in this regard was the highest attainable in terms of compliance with the International Institute of Internal Auditors' Standards. The Committee noted the recommendations made for further improvement
• › 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 maintenance of effective material control systems, which resulted in any identified material financial loss

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

• › 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
• › reviewed the continued progress made, and remedial action plans, by management on the IT general control environment, which has received significant attention in recent years, and agrees that this area is still of critical importance to the Group and that focus must be maintained to ensure delivery of the required enhancements in this key area. This will enable reliance on general IT controls and a more efficient audit approach to be adopted by the External Auditor
• › agreed with the implementation of a formal combined assurance model in the Group which commenced in January 2021
• › reviewed and considered feedback from the Financial Review Committees' meetings, including those that related to risk management and IT

Joint meeting of the Audit Committee and the Risk Committee:

At a joint meeting of the Audit Committee and the Risk Committee, the following areas were addressed:

• › considered the status and action plans with regard to compliance with paragraph 3.84(k) of the Listings Requirements
• › considered the process followed to ensure that a risk-based approach is followed in terms of the annual audit plan, and recommended improvements to ensure detailed evidence of the risk-based approach is formulated for future audit plans
• › considered the Enterprise Risk Management process and the Enterprise Risk Management Framework and made recommendations for improvement in this regard
• › approved the proposal that a formal combined assurance model be implemented in the Group

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

› 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

› 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 CFO and his Finance team and concluded that these were appropriate.

Considered the appropriateness of the experience, expertise and the effectiveness of the Head of Internal Audit and concluded that his experience, expertise and performance were appropriate.

RESPONSIBILITY STATEMENT IN TERMS OF PARAGRAPH 3.84(k) OF THE LISTINGS REQUIREMENTS

The Committee:

• › noted the Responsibility Statement submitted by the Chief Executive and the CFO in this regard. The Chief Executive, the CFO and the Internal Auditors, based on the audit scope, reviewed the controls over financial reporting and presented the findings to the Committee. The evaluation of controls by the Chief Executive and the CFO included:
• » the identification and classification of risks, including the determination of materiality
• » testing the design and determining the implementation of controls to address high risk areas
• » utilising Internal Audit to test the operating effectiveness of controls to address the high risk areas on an annual basis, and other risk areas on a rotational basis
• » obtaining control declarations from divisional and subsidiary management on the operating effectiveness of all key controls on a bi-annual basis
• › noted the following two areas which were stated as supplementary information to the Responsibility Statement:
• » control weaknesses existed at year-end with regard to IT general controls, particularly relating to access to programmes and data (e.g. conflict of duties within user access profiles, excessive privilege accounts, and management of access to the default administrator accounts)
• » a formal combined assurance model had not been implemented during the financial year. Implementation thereof was effected in January 2021
• › noted the remedial action taken to address the above two areas, as well as the related timelines for implementation

Notwithstanding the above, compensating detective controls are in place to address these control weaknesses and these weaknesses did not result in any material breakdowns in internal control, including financial controls, business risk management and maintenance of effective material control systems.

KEY AUDIT MATTER

The Committee noted the key audit matter set out in the External Auditor's report. The Committee considered the appropriateness of the key audit matter reported and considered the key judgements and estimates relating to the annual financial statements.

This was addressed by the Committee as follows:

SIGNIFICANT MATTER HOW THE COMMITTEE ADDRESSED THE MATTER

The impairment assessment of goodwill amounts and indefinite life intangible assets that arose on the acquisition of Schirm GmbH and Much Asphalt (Pty) Ltd. The Committee has considered and evaluated this matter and is satisfied that it is represented correctly.

INDEPENDENCE OF THE EXTERNAL AUDITOR

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

• › representations made by Deloitte to the Committee
• › the Committee's review of the performance of the External Auditor and consequently nominated, for approval at the forthcoming AGM, Deloitte as the External Auditor for the 2021 financial year and Mr Patrick Ndlovu as the designated individual audit partner respectively
• › the auditor does not, except as External Auditor or in rendering permitted non-audit services, receive any remuneration or other benefits from the Company (please refer to Non-audit Service Fees below, and the Company's Non-audit Services Policy, in particular. This is available at https://static1. squarespace.com/static/5ef9c6ed308afe044f73cd35/ t/60229ca110202c2600f 718b0/1612881057566/ non-audit-services-policy.pdf
• › this is Deloitte's third year of appointment as External Auditor
• › the designated individual audit partner has served for the same period
• › the criteria specified for independence by the IRBA and international regulatory bodies

NON-AUDIT SERVICE FEES

All new non-audit services performed by Deloitte during 2020 complied with the Company's Non-audit Services Policy in terms of the type of service provided as well as the quantum thereof. The Committee considered whether any non-audit services had been undertaken by Deloitte, which specifically required Committee approval according to the Policy threshold, and determined that there were none. All non-audit services performed, below the Policy threshold, were approved by the CFO. All non-audit services are pre-approved by Deloitte in accordance with its own independence policy framework.

ANNUAL FINANCIAL STATEMENTS AND INTEGRATED REPORT

Following the review by the Committee of the annual financial statements of AECI Ltd for the year ended 31 December 2020, 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 2020 for approval to the AECI Board on 23 February 2021.

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

KEY FOCUS AREAS FOR 2021

The Committee will continue to focus on ensuring that the Group's internal financial controls are effective and that remedial plans are properly monitored and executed.

The Committee will monitor progress on action plans to address control weaknesses with regard to IT general controls, particularly relating to access to programmes and data, i.e. conflict of duties within user access profiles, excessive privilege accounts, and management of access to the default administrator accounts.

The Committee will monitor the roll-out of the formal combined assurance model.

The Committee will monitor the implementation of recommended improvements to ensure that detailed evidence of the fully risk-based approach is formulated in internal audit plans.

CONCLUSION

The Committee is satisfied that it has complied with all its statutory duties as well as its terms of reference.

On behalf of the Audit Committee

Philisiwe Sibiya

Chair

Woodmead, Sandton 23 February 2021 and 22 April 2021

SOCIAL AND ETHICS COMMITTEE'S REPORT TO STAKEHOLDERS

This report is provided by the Social and Ethics Committee (the Committee) appointed in respect of the 2020 financial year of AECI Ltd. This report incorporates the requirements of section 43 of the Regulations of the Companies Act.

MEMBERSHIP

Four meetings were held in the year and details on dates and attendance are available at https://static1.squarespace.com/ static/5ef9c6ed308afe044f73cd35/t/6076e6ec27df9d437e3a 3eda/1618405100890/AECIBoardandCommittees2020.pdf.

The members in the year were:

• › FFT De Buck (Chairman from 1 June 2020)
• › R Ramashia (Chairman until 1 June 2020)
• › MA Dytor
• › NA Franklin
• › CBH Watson
• › AJ Morgan (resigned on 26 May 2020)
• › J Molapo (resigned on 24 November 2020)

I joined the Committee on 1 January 2020 and succeeded Adv Ramashia as Chair on 1 June 2020, when he assumed chairmanship of the Risk Committee. Adv Ramashia continues to serve as a valuable member. Mr Molapo had been appointed to our ranks in November 2019 and served on the Committee until his resignation from the AECI Board on 24 November 2020. On 1 January 2020 we welcomed a new member Ms Watson, AECI Group Executive, Human Capital. We also said farewell to Mr Morgan after six years and wish him well in his retirement. Adv Ramashia has served on the Committee since 2010, Mr Dytor since 2013 and Mr Franklin since 2017. I would like to thank all members, both current and former, for their valued contributions to the work of this Committee.

Mr Kathan, Chief Financial Officer, attends meetings by invitation as do representatives from the Group Compliance function and the External Auditor.

OBJECTIVES

The Board of Directors has conferred upon the members of the Committee the following powers:

STATUTORY DUTIES

• › To consider, recommend and monitor AECI's activities with regard to the following and report accordingly to the Board:

• » good corporate citizenship, specifically in relation to (i) the promotion of equality, (ii) the prevention of unfair discrimination and the reduction of corruption, and (iii) AECI's record of sponsorship, donations and charitable giving

• » labour and employment matters: specifically in relation to AECI's standing on (i) the International Labour Organization's protocol on decent work and working conditions, and (ii) employee relations and contributions to the educational development of employees

• » safety, health and the environment: specifically in relation to the impact of the AECI Group's activities and those of its products and services
• » social and economic development of defined communities: specifically, in relation to (i) the 10 principles set out in the United Nations Global Compact, (ii) the Organisation for Economic Co-operation and Development's recommendations regarding corruption, (iii) the South African Employment Equity Act, No. 55 of 1998, (Employment Equity Act), and (iv) the South African Broad-based Black Economic Empowerment Act, No. 53 of 2003
• » consumer relations: specifically, in relation to advertising, public relations and compliance with consumer protection laws
• › To monitor and advance the implementation of policies and plans approved by the Board on matters as contemplated above

NON-STATUTORY DUTIES

The Committee is further mandated as follows:

• › to monitor to the best of its ability that AECI and its operating business entities adhere to the approved Code of Ethics and Business Conduct Policy and Guidelines, including the Conflicts of Interest Supplement
• › to provide guidance and advice on sustainability trends and issues relevant to the AECI Group as well as review and approve the Group's Sustainability Policy from time to time. The Committee will be informed of the sustainability risks as recorded in the AECI Group risk register and provide related input to the Risk Committee, as appropriate. Further, the Committee will review Safety, Health and Environmental Incident reports
• › to monitor to the best of its ability that AECI and its operating businesses have properly identified stakeholders, and understand their issues, and ensure that all stakeholders are treated in an equitable and fair manner. Details of our engagements with key stakeholders across all six capitals are presented on page 12

In line with the mandate, key activities in 2020 were as summarised below.

RESPONSE TO COVID-19

A significant portion of the Committee's time was dedicated to monitoring AECI's response to the COVID-19 pandemic, across its operations internationally. This included focusing on the families of our employees and the communities in which they live. It was pleasing that we were able to reach out to these communities through many COVID-19 relief efforts, through our centralised CSI programme and at individual Group business level.

AECI formed a COVID-19 Task Team in March 2020. It is led by the Chief Executive and has 15 members. Additional input from subject specialists is sought as required. The team met online every work day until a meaningful downward trend in infection rates had been confirmed. The team kept the Committee fully appraised on the execution of AECI's response plan and the impact of the pandemic on people and the business. Sadly, four members of the AECI family in South Africa passed away owing to pandemic-related health effects.

The Committee acknowledges the manner in which AECI responded to the pandemic and continues to do so.

SAFETY, HEALTH, ENVIRONMENT AND QUALITY (SHEQ)

The Committee received and evaluated reports on AECI's SHEQ performance and compliance with applicable laws and regulations. It also received and evaluated progress reports on implementation of the Group's Zero Harm strategy. The following were noted:

• › no Major occupational safety, process safety or product transportation incidents occurred
• › no Major or Serious environmental incidents occurred and the rate of Moderate incidents continued to improve
• › there were no fatalities on-site or associated with product transportation off-site
• › one new occupational illness was diagnosed
• › the Group's TRIR deteriorated by 10% over the year (0,38 to 0,42). This, together with a life-altering injury which occurred in December, were the biggest disappointments of 2020
• › the total number of process safety incidents as well as those deemed Serious increased marginally. We attribute the marginality of this increase partly to improvements in awareness and the reporting culture
• › the remediation of land contaminated by historical activities continued. Targeted sites were cleaned up successfully and other areas of interest were assessed
• › good progress has been made in matters of environmental compliance, specifically in relation to the South Africa Minimum Emissions Standards. Compliance was tested several times during the year, with planned and unannounced visits from enforcement agencies. No non-compliance issues were raised by them
• › the pace of implementing the Group's Zero Harm strategy was impeded by restrictions associated with the COVID-19 pandemic. Nonetheless, good progress was made in line with a slightly adjusted plan

SUSTAINABILITY

A notable achievement was the finalisation of AECI's inaugural dedicated sustainability report, tabled at the Committee's meeting in November. Approval by the full Board followed

and the report was released in March 2021. It marks a significant step towards the Group's achievement of "a better world" and commitment to six UN SDGs.

The Committee was pleased that the AECI Group was recognised for its achievements in the SHE arena and for its promotion of gender equality. Details of the related awards received are provided in the sustainability report.

HUMAN CAPITAL, INCLUDING TRANSFORMATION

The Committee received and reviewed reports on the following:

• › AECI's talent management processes, including retention strategies, succession plans and reports on termination trends
• › the AECI Employees Share Trust, including approval of dividend payments to beneficiaries of this Trust during 2020
• › the operation of and investments by the AECI Community Education and Development Trust
• › AECI's progress on Employment Equity (EE) in its South African operations. This included monitoring progress against the targets which management submitted to the South African Department of Employment and Labour in its three-year EE Plan for the period 2017 to 2020. Numerical targets and goals for the next three-year cycle were finalised and are part of the new three-year EE Plan for the period 2020 to 2023
• › with regard to Broad-based Black Economic Empowerment the Committee, inter alia, remained fully informed and engaged in terms of the Company's approach and responses to the B-BBEE Commissioner regarding ownership recognition of Broad-Based Black Ownership Schemes in terms of the Codes of Good Practice

ETHICAL BUSINESS CONDUCT

In 2019 the Group revised its Code of Ethics and Business Conduct to align with the global market practices from the UK Bribery and Foreign Corrupt Practices Acts. For better alignment with the JSE Listings Requirements, a Conflicts of Interest Supplement for Directors and Executive management has been added to the Code.

Roll-out of the Code and associated Guidelines was largely completed during 2020. The Committee received running reports in this regard. Further entrenchment of the principles encapsulated in the Code will continue in 2021 and future years.

The Committee received and reviewed reports on ethics management across the Group, including the workings of the Tip-offs Anonymous whistle-blowing line. It was noted that of the 19 reports originated through Tip-offs Anonymous and received by the Committee, one related to fraud and five to supply chain irregularities. A number of cases were human resource related.

All the cases were investigated by management and the more serious allegations were investigated by the Internal Audit function or an external investigation entity, as appropriate. None of the allegations were verified. However, in one instance an employee was dismissed on unrelated matters whilst the investigation was underway.

On behalf of the Social and Ethics Committee

Fikile De Buck Chairman 22 April 2021

SHAREHOLDER ANALYSES ORDINARY SHAREHOLDER ANALYSIS

1. ANALYSIS OF REGISTERED ORDINARY SHAREHOLDERS AND COMPANY SCHEMES

Source: J.P. Morgan Cazenove

REGISTERED SHAREHOLDER SPREAD

In accordance with the JSE Listings Requirements, the following table confirms that the spread of registered shareholders as detailed in the integrated report and accounts at 31 December 2020 was:

	Number of holders	% of total shareholders	Number of shares	% of issued capital
SHAREHOLDER SPREAD
1 – 1 000 shares	3 251	67,00	874 600	0,79
1 001 – 10 000 shares	1 044	21,51	3 436 645	3,13
10 001 – 100 000 shares	389	8,02	13 828 315	12,58
100 001 – 1 000 000 shares	146	3,00	37 474 540	34,08
1 000 001 shares and above	23	0,47	54 330 284	49,42
TOTAL	4 853	100	109 944 384	100

PUBLIC AND NON-PUBLIC SHAREHOLDINGS

Within the shareholder base, we are able to confirm the split between public shareholdings and Directors/Company-related schemes as being:

	Number of holders	% of total shareholders	Number of shares	% of issued capital
SHAREHOLDER TYPE
Public	4 847	99,88	109 528 014	99,62
Non-public shareholders	6	0,12	416 370	0,38
Treasury shares	—	—	—	—
Directors1/related holdings	6	0,12	416 370	0,38
TOTAL	4 853	100	109 944 384	100

1 Includes Company Directors, the Director of a major subsidiary, the Group Company Secretary and Principal Officers.

2. SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS

SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS ABOVE 3%

Through regular analysis of STRATE registered holdings, and pursuant to the provisions of section 56 of the Companies Act, the following shareholders held directly and indirectly equal to or in excess of 3% of the issued ordinary share capital as at 31 December 2020:

	Total shareholding (number of shares)	% of issued capital
INVESTMENT MANAGER
Allan Gray	18 303 479	16,65
PIC	11 813 790	10,75
PSG Asset Management	7 799 960	7,09
Kagiso Asset Management	7 495 390	6,82
Coronation Fund Managers	4 911 651	4,47
Dimensional Fund Advisors	4 534 097	4,12
AECI Community Education and Development Trust	4 426 604	4,03
The Vanguard Group	3 507 462	3,19
TOTAL	62 792 433	57,12

BENEFICIAL SHAREHOLDINGS

	Total shareholding (number of shares)	% of issued capital
Government Employees Pension Fund (PIC)	11 557 997	10,51
Allan Gray Balanced Fund	6 587 960	5,99
AECI Community Education and Development Trust	4 426 604	4,03
PSG Flexible Fund	3 641 176	3,31
TOTAL	26 213 737	23,84

PREVIOUSLY DISCLOSED HOLDINGS

INVESTMENT MANAGERS NOW HOLDING BELOW 3%

TOTAL	2 524 677	2,30	3,69
INVESTMENT MANAGER Ninety One (formerly Investec Asset Management)	2 524 677	2,30	3,69
	Total shareholding (number of shares)	% of issued capital	Previous %

BENEFICIAL SHAREHOLDERS NOW HOLDING BELOW 3%

No beneficial shareholders holding greater than 3% of the issued share capital in 2019 now hold below 3%.

3. GEOGRAPHIC SPLIT OF SHAREHOLDERS

GEOGRAPHIC SPLIT OF INVESTMENT MANAGERS AND COMPANY-RELATED HOLDINGS

	Total shareholding (number of shares)	% of issued capital
REGION
South Africa	87 681 465	79,75
USA and Canada	17 150 094	15,60
United Kingdom	892 228	0,81
Rest of Europe	1 086 118	0,99
Rest of the world	3 134 479	2,85
TOTAL	109 944 384	100,00

GEOGRAPHIC SPLIT OF BENEFICIAL SHAREHOLDERS

TOTAL	109 944 387	100,00
Rest of the world	8 426 834	7,66
Rest of Europe	1 917 250	1,74
United Kingdom	539 703	0,49
USA and Canada	16 470 829	14,99
South Africa	82 589 771	75,12
REGION
	Total shareholding (number of shares)	% of issued capital

4. SHAREHOLDER CATEGORIES

BENEFICIAL SHAREHOLDER CATEGORIES

An analysis of beneficial shareholdings, supported by the section 56 enquiry process, confirmed the following beneficial shareholder types:

	Total shareholding (number of shares)	% of issued capital
CATEGORY
Unit trusts	42 559 047	38,71
Pension funds	32 348 151	29,42
Mutual fund	7 118 426	6,47
Black Economic Empowerment	5 596 271	5,09
Insurance companies	4 753 904	4,32
Private investor	4 496 235	4,09
Trading position	2 964 349	2,70
Hedge fund	1 226 131	1,12
Other	8 881 873	8,08
TOTAL	109 944 387	100,00

SHAREHOLDER ANALYSES PREFERENCE SHAREHOLDER ANALYSIS

1. ANALYSIS OF REGISTERED PREFERENCE SHAREHOLDERS AND COMPANY SCHEMES

Source: J.P. Morgan Cazenove

REGISTERED SHAREHOLDER SPREAD

In accordance with the JSE Listings Requirements, the following table confirms that the spread of registered shareholders as detailed in the integrated report and accounts dated 31 December 2020 was:

	Number of holders	% of total shareholders	Number of shares	% of issued capital
SHAREHOLDER SPREAD
1 – 1 000 shares	14	8,28	6 941	0,25
1 001 – 10 000 shares	102	60,36	440 989	15,58
10 001 – 100 000 shares	50	29,60	1 203 686	42,52
100 001 – 1 000 000 shares	3	1,76	1 179 206	41,65
TOTAL	169	100	2 830 822	100

There are no non-public holders of preference shares.

2. SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS

SUBSTANTIAL INVESTMENT MANAGEMENT AND BENEFICIAL INTERESTS ABOVE 3%

Through regular analysis of STRATE registered holdings, and pursuant to the provisions of section 56 of the Companies Act, the following shareholders held directly and indirectly equal to or in excess of 3% of the issued preference share capital as at 31 December 2020:

	Total shareholding (number of shares)	% of issued capital
INVESTMENT MANAGER
Gingko Investments No. 2	769 952	27,20
Philip Schock Char and Educational Trust	298 124	10,53
Legae Peresec	111 130	3,93
Monro Family Trust	92 491	3,27
TOTAL	1 271 697	44,93
BENEFICIAL SHAREHOLDINGS	Total shareholding	% of

	(number of shares)	issued capital
Gingko Investments No. 2	769 952	27,20
Philip Schock Char and Educational Trust	298 124	10,53
Legae Peresec	111 130	3,93
Monro Family Trust	92 491	3,27
TOTAL	1 271 697	44,93

PREVIOUSLY DISCLOSED HOLDINGS

INVESTMENT MANAGERS NOW HOLDING BELOW 3%

No investment managers holding greater than 3% of the preference share capital in 2019 now hold below 3%.

3. GEOGRAPHIC SPLIT OF SHAREHOLDERS

GEOGRAPHIC SPLIT OF INVESTMENT MANAGERS AND COMPANY-RELATED HOLDINGS

TOTAL	2 830 822	100,00
Rest of Europe	8 480	0,30
South Africa	2 822 342	99,70
REGION
	Total shareholding (number of shares)	% of issued capital

GEOGRAPHIC SPLIT OF BENEFICIAL SHAREHOLDERS

	Total shareholding (number of shares)	% of issued capital
REGION
South Africa	2 822 342	99,70
Rest of Europe	8 480	0,30
TOTAL	2 830 822	100,00

4. SHAREHOLDER CATEGORIES

An analysis of beneficial shareholdings, supported by the section 56 enquiry process, confirmed the following beneficial shareholder types:

BENEFICIAL SHAREHOLDER CATEGORIES

	Total shareholding (number of shares)	% of issued capital
CATEGORY
Private investor	2 052 390	72,50
Custodians	8 480	0,30
Unclassified	769 952	27,20
TOTAL	2 830 822	100,00

SUMMARISED FINANCIALS

HISTORICAL FINANCIAL INFORMATION

ABRIDGED FINANCIAL STATEMENTS

R millions	2020	2019	2018	2017	2016
INCOME STATEMENTS 1
Revenue	24 111	24 799	23 314	18 482	18 596
Local	13 583	14 766	14 107	12 246	12 117
Foreign	10 528	10 033	9 207	6 236	6 479
Profit from operations	917	2 031	1 999	1 579	1 335
Net financing costs	278	457	365	167	215
Tax	503	511	529	429	336
Profit attributable to ordinary shareholders	133	1 291	990	950	777
Headline earnings	928	1 213	1 103	1 012	864
STATEMENTS OF FINANCIAL POSITION
Total shareholders' interest	10 815	11 084	10 205	9 356	9 046
Deferred tax (net)	417	293	165	(302)	(273)
Net interest-bearing debt	2 383	4 030	4 177	424	297
Capital employed	13 615	15 407	14 547	9 478	9 070
Represented by:
Non-current assets excluding deferred tax assets	10 547	11 650	11 299	6 970	7 011
Net current assets, excluding cash, less non-current provisions	3 090	3 774	3 279	2 508	2 059
Employment of capital	13 637	15 424	14 578	9 478	9 070
STATEMENTS OF CASH FLOWS
Cash generated by operations2	2 338	2 491	2 339	1 757	1 555
Changes in working capital	913	(538)	(155)	(358)	488
Expenditure relating to non-current provisions, employee
benefits and restructuring	(119)	(85)	(155)	(178)	(103)
Net replacement to maintain operations3	(364)	(551)	(406)	(368)	(305)
	2 768	1 317	1 623	853	1 635
Dividends paid	(604)	(594)	(571)	(497)	(435)
	2 164	723	1 052	356	1 200
Investment to expand operations3	(196)	(141)	(4 353)	(330)	(147)
Proceeds from disposal of businesses, investments and joint venture	26	390	—	—	—
Lease payments	(269)	(246)	—
Borrowings paid	(214)	(256)	3 576	(132)	(1 510)
Settlement of performance shares	(102)	(45)	(46)	(44)	(22)
Other financing activities	(6)	—	(11)	—	(39)
Net cash generated/(utilised)	1 403	425	218	(150)	(518)
Depreciation and amortisation charges	1 112	1 031	710	597	626
COMMITMENTS
Capital expenditure authorised	544	574	516	405	233
Future rentals on property, plant and equipment leased	—	—	932	367	443
	544	574	1 448	772	676

1 Includes the results of discontinued operations.

2 Profit from operations plus depreciation and amortisation of property, plant and equipment, investment property and intangible assets and other non-cash flow items and after investment income, net financing costs and taxes paid.

3 Excludes property, plant and equipment of companies acquired.

RATIOS AND EMPLOYEE DETAILS

	2020	2019	2018	2017	2016
PROFITABILITY AND ASSET MANAGEMENT
Profit from operations to revenue (%)	3,8	8,2	8,6	8,5	7,2
Trading cash flow to revenue (%)	8,4	12,3	11,6	11,8	10,5
Return on average net assets (%)1	6,7	13,8	16,6	17,3	14,4
Return on invested capital (%)2	4,9	10,2	12,0	12,5	10,6
Return on average ordinary shareholders' interest (%)3	9,0	11,6	11,4	11,2	9,7
Net working capital to revenue (%)4	14,5	17,2	16,0	15,6	12,7
Inventory cover (days)	71	76	79	81	76
Average credit extended to customers (days)	64	59	64	64	57
LIQUIDITY
Cash interest cover5	8,5	7,8	8,2	13,4	11,0
Interest-bearing debt less cash to cash generated by operations	0,8	1,2	1,4	0,2	0,1
Gearing (%)6	22,0	36,4	40,9	4,5	3,3
Current assets to current liabilities	1,7	2,1	2,0	1,7	1,9
EMPLOYEES
Number of employees at year-end 7	6 807	7 506	8 038	6 522	6 630
Employee remuneration (R millions)	4 485	4 496	4 200	3 229	3 404
Value added per rand of employee remuneration (rand)	1,48	1,75	1,64	1,68	1,60

1 Profit from operations plus investment income related to average property, plant, equipment, investment property, intangible assets, goodwill, investments, loans receivable, inventories, accounts receivable and assets classified as held for sale less accounts payable and liabilities classified as held for sale.

2 Profit from operations less tax at the standard rate plus investment income related to average property (excluding land revaluation), plant, equipment, investment property, intangible assets, goodwill, investments, inventories, accounts receivable and assets classified as held for sale less accounts payable, liabilities classified as held for sale and tax payable.

3 Headline earnings related to average ordinary shareholders' interest.

4 Excluding businesses sold and equity-accounted investees and including working capital.

5 Ratio of profit from operations plus return on pension fund employer surplus accounts and return on plan assets from post-retirement medical aid liabilities less closure costs less CST share-based payments plus depreciation and dividends received to net finance costs paid.

6 Interest-bearing debt less cash as a percentage of total shareholders' interest.

7 Includes proportional share of joint operations employees.

ORDINARY SHARE STATISTICS

86

	2020	2019	2018	2017	2016
MARKET PRICE (CENTS PER SHARE)
High	10 995	11 199	12 100	10 241	11 000
Low	6 401	7 701	8 239	10 000	7 401
31 December	8 700	10 700	8 351	10 000	10 110
Earnings yield (%)	10,1	10,7	12,5	9,6	8,1
Dividend yield (%)*	6,6	5,3	6,2	4,8	4,3
Dividend cover*	1,5	2,0	2,0	2,0	1,9
In issue (millions)	109,9	121,8	121,8	121,8	121,8
Value traded (R millions)	4 297	4 799	5 849	6 174	7 031
Volume traded (millions)	51,1	50,6	55,5	101,5	75,2
Volume traded (%)	46,5	41,5	45,6	83,3	61,7
Market capitalisation (R millions)	9 565	13 036	10 174	12 183	12 317
ORDINARY SHARE PERFORMANCE (CENTS PER SHARE)
Headline earnings	880	1 150	1 045	959	818
Dividends declared *	570	570	515	478	435
Special dividend declared	—	—	—	—	—
Net asset value	9 679	9 925	9 135	8 399	8 107

* The interim dividend in the current year and the final dividend declared after the reporting date have been used in the calculation.

SUMMARISED FINANCIALS

SUMMARISED FINANCIAL STATEMENTS

INCOME STATEMENT

			2020	2019
R millions	Note	% change	Audited	Audited
REVENUE	2	(3)	24 111	24 799
Net operating costs			(23 194)	(22 768)
PROFIT FROM OPERATIONS		(55)	917	2 031
(Loss)/profit on disposal of equity-accounted investees	4.2		(3)	234
Share of profit of equity-accounted investees, net of tax			27	30
PROFIT FROM OPERATIONS AND EQUITY-ACCOUNTED INVESTEES		(59)	941	2 295
Net finance costs			(278)	(457)
Interest expense			(365)	(516)
Interest received			87	59
PROFIT BEFORE TAX			663	1 838
Tax expense			(503)	(511)
PROFIT FOR THE YEAR			160	1 327
Profit attributable to:
— Ordinary shareholders			133	1 291
— Preference shareholders			4	3
— Non-controlling interest			23	33
			160	1 327
PER ORDINARY SHARE (CENTS):
Basic earnings		(90)	127	1 223
Diluted basic earnings			121	1 179
Headline earnings		(23)	880	1 150
Diluted headline earnings			844	1 108
Ordinary dividends declared after the reporting date			470	414
Ordinary dividends paid			514	522
HEADLINE EARNINGS ARE DERIVED FROM:
Profit attributable to ordinary shareholders			133	1 291
Impairment of goodwill	4 and 7.2		863	147
Impairment of property, plant and equipment	4		27	—
Loss/(profit) on disposal of equity-accounted investees	4.2		3	(234)
(Profit)/loss on disposal of businesses and investment in subsidiaries	4.1 and 5		(102)	—
Gain on bargain purchase	3		(24)	—
Surplus on disposal of investment property and property,
plant and equipment			(12)	(69)
Tax effects of the above items			40	78
HEADLINE EARNINGS			928	1 213

STATEMENT OF FINANCIAL POSITION

	2020	2019
R millions Note	At 31 Dec Audited	As 31 Dec Audited
ASSETS
NON-CURRENT ASSETS	10 720	11 884
Property, plant and equipment 4	5 671	5 722
Right-of-use assets	404	592
Investment property	225	228
Intangible assets	999	964
Goodwill 4 and 7.2	2 363	3 201
Pension fund employer surplus accounts	584	662
Investments in joint ventures	52	33
Investments in associates 4.2	125	141
Other investments	124	107
Deferred tax	173	234
CURRENT ASSETS	12 921	11 249
Inventories	3 761	4 034
Accounts receivable	5 129	4 908
Other investments	398	252
Tax receivable	76	77
Cash	3 557	1 978
TOTAL ASSETS	23 641	23 133
EQUITY AND LIABILITIES
EQUITY	10 815	11 084
Ordinary share capital and reserves	10 641	10 912
Non-controlling interest	168	166
Preference share capital	6	6
NON-CURRENT LIABILITIES	5 037	6 764
Deferred tax	590	527
Non-current borrowings	3 555	5 237
Lease liabilities	247	366
Put option liability	22	32
Non-current provisions and employee benefits	623	602
CURRENT LIABILITIES	7 789	5 285
Accounts payable	5 391	4 683
Current borrowings	1 865	195
Lease liabilities	150	210
Contingent consideration	—	15
Loans from joint ventures	98	62
Tax payable	162	120
Bank overdraft	123	—
TOTAL EQUITY AND LIABILITIES	23 641	23 133

STATEMENT OF COMPREHENSIVE INCOME

	2020	2019
R millions	Audited	Audited
PROFIT FOR THE YEAR	160	1 327
OTHER COMPREHENSIVE INCOME NET OF TAX
Items that may be reclassified subsequently to profit or loss:
— Foreign currency translation differences	230	(146)
— Effective portion of cash flow hedges	(4)	—
Items that may not be reclassified subsequently to profit or loss:
— Remeasurement of defined-benefit and post-retirement medical aid obligations	6	243
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	392	1 424
Total comprehensive income attributable to:
— Ordinary shareholders	358	1 388
— Preference shareholders	4	3
— Non-controlling interest	30	33
	392	1 424

STATEMENT OF CHANGES IN EQUITY

	2020	2019
R millions Note	Audited	Audited
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	392	1 424
Dividends paid	(604)	(594)
Share-based payment reserve	(63)	38
Non-controlling interest acquired 3	6	—
Adjusted equity at the beginning of the year	11 084	10 216
Equity at the beginning of the year	11 084	10 205
Adjustment on adoption of IFRS 16, net of deferred tax	—	11
EQUITY AT THE END OF THE YEAR	10 815	11 084
Made up as follows:
Ordinary share capital	110	110
Reserves	1 636	1 487
— Foreign currency translation reserve	1 404	1 181
— Other reserves	(27)	(29)
— Share-based payment reserve	259	335
Retained earnings	8 895	9 315
Non-controlling interest	168	166
Preference share capital	6	6
	10 815	11 084

STATEMENT OF CASH FLOWS

		2020	2019
R millions	Note	Audited	Audited
CASH GENERATED BY OPERATIONS		2 915	3 347
Dividends received		8	50
Interest paid		(326)	(456)
Interest received		87	59
Tax paid		(346)	(509)
Changes in working capital		913	(538)
Cash outflows relating to defined-benefit and post-retirement medical aid obligations		(21)	(20)
Cash outflows relating to non-current provisions and employee benefits		(98)	(65)
CASH AVAILABLE FROM OPERATING ACTIVITIES		3 132	1 868
Dividends paid		(604)	(594)
CASH FLOWS GENERATED FROM OPERATING ACTIVITIES		2 528	1 274
CASH FLOWS FROM INVESTING ACTIVITIES		(534)	(302)
Acquisition of subsidiaries, net of cash acquired		(82)	—
Loans with joint ventures		36	69
Other net investment activities		(161)	(51)
Investment in associates		(10)	—
Proceeds from disposal of businesses and investment in subsidiaries	4.1 and 5	222	—
Proceeds from disposal of equity-accounted investees	4.2	26	390
Net capital expenditure		(565)	(710)
NET CASH GENERATED BEFORE FINANCING ACTIVITIES		1 994	972
CASH FLOWS FROM FINANCING ACTIVITIES		(591)	(547)
Lease payments		(269)	(246)
Cash paid on buy-out of non-controlling interest		(6)	—
Settlement of performance shares		(102)	(45)
Borrowings raised		—	875
Current borrowings repaid		(214)	(1 131)
NET INCREASE IN CASH		1 403	425
Cash at the beginning of the year		1 978	1 581
Translation gain/(loss) on cash		53	(28)
CASH AT THE END OF THE YEAR 1		3 434	1 978

1 Includes cash of R3 276 million, restricted cash of R281 million and bank overdraft of R123 million (2019: cash of R1 978 million).

RECONCILIATION OF WEIGHTED AVERAGE NUMBER OF SHARES

	2020	2019
Millions	Audited	Audited
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES AT THE BEGINNING OF THE YEAR	131,9	131,9
Weighted average number of shares held by consolidated subsidiary cancelled during the year	(11,9)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES AT THE END OF THE YEAR	120,0	131,9
Weighted average number of unlisted ordinary shares held by consolidated EST	(10,1)	(10,1)
Weighted average number of contingently returnable ordinary shares held by CEDT	(4,4)	(4,4)
Weighted average number of shares held by consolidated subsidiary	—	(11,9)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC EARNINGS PER SHARE	105,5	105,5
Dilutive adjustment for potential ordinary shares	4,5	4,0
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR DILUTED EARNINGS PER SHARE	110,0	109,5

INDUSTRY SEGMENT ANALYSIS

BASIS OF SEGMENTATION

The realignment and rebranding of the Group's businesses was completed in the year. This included repositioning businesses into four strategic pillars. These pillars, together with AECI Property Services & Corporate, are the Group's reportable segments and are described below.

The Food & Beverage segment, previously reported separately, was integrated with the AECI Chemicals segment in the current year. AECI Animal Health transferred from AECI Chemicals to AECI Agri Health. Associated internal reporting was amended to reflect these changes and audited 2019 disclosure has been restated accordingly.

Businesses in each pillar offer differing products and services and are managed separately because they require different technology and marketing strategies.

REPORTABLE SEGMENTS	OPERATIONS
AECI MINING	The businesses in this segment provide a mine-to-mineral solution for the mining sector internationally. The offering includes commercial explosives, initiating systems, blasting services and surfactants for explosives manufacture right through the value chain to chemicals for ore beneficiation and tailings treatment.
AECI WATER	This business provides customers on the African continent with integrated water treatment solutions, process chemicals and equipment solutions for a diverse range of applications. These include, inter alia, public and industrial water, desalination and utilities.
AECI AGRI HEALTH	Businesses in this pillar manufacture and distribute crop protection products, plant nutrients, animal premixes, specialty animal health products and fine chemicals on the African continent, in Europe and in the USA.
AECI CHEMICALS	Businesses in this segment supply raw materials and related services to a broad spectrum of customers in the food and beverage, manufacturing, infrastructure and general industrial sectors. Their markets are mainly in South Africa and in other Southern African countries, except for AECI SANS Fibers which is based in the USA.
AECI PROPERTY SERVICES & CORPORATE	Mainly property leasing and management in the office, industrial and retail sectors, and corporate centre functions 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.

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.

	2020	2019	2020	2019	2020	2019
R millions	Audited	Audited Restated	Audited	Audited Restated	Audited	Audited Restated
	EXTERNAL REVENUE		INTER-SEGMENT REVENUE		TOTAL SEGMENT REVENUE
AECI Mining	11 035	11 429	154	108	11 189	11 537
AECI Water	1 421	1 415	26	37	1 447	1 452
AECI Agri Health	6 005	5 109	51	47	6 056	5 156
AECI Chemicals	5 304	6 504	123	164	5 427	6 668
AECI Property Services & Corporate	346	342	133	129	479	471
Inter-segment	—	—	(487)	(485)	(487)	(485)
	24 111	24 799	—	—	24 111	24 799

INDUSTRY SEGMENT ANALYSIS continued

INFORMATION RELATING TO REPORTABLE SEGMENTS

	2020	2019	2020	2019	2020	2019
R millions	Audited	Audited Restated	Audited	Audited Restated	Audited	Audited Restated
	DEPRECIATION		AMORTISATION		IMPAIRMENTS1
AECI Mining	613	615	7	1	—	—
AECI Water	33	20	15	19	—	—
AECI Agri Health	196	154	31	27	—	—
AECI Chemicals	154	139	23	23	890	147
AECI Property Services & Corporate	74	67	5	5	—	—
Inter-segment	(39)	(39)	—	—	—	—
	1 031	956	81	75	890	147
	PROFIT/(LOSS) FROM OPERATIONS		EBITDA2		CAPITAL EXPENDITURE
AECI Mining	1 120	1 305	1 744	1 923	325	479
AECI Water	211	190	259	229	40	22
AECI Agri Health	290	228	518	409	166	121
AECI Chemicals	(531)	399	555	970	78	139
AECI Property Services & Corporate	(165)	(83)	(86)	(11)	23	72
Inter-segment	(8)	(8)	(47)	(47)	—	—
	917	2 031	2 943	3 473	632	833
			OPERATING ASSETS3		OPERATING LIABILITIES3
AECI Mining			7 044	7 917	1 964	1 931
AECI Water			1 205	1 205	256	263
AECI Agri Health			5 113	4 529	1 857	1 491
AECI Chemicals			4 631	5 396	1 384	1 024
AECI Property Services & Corporate			1 082	1 126	319	328
Inter-segment			(523)	(524)	(389)	(354)
			18 552	19 649	5 391	4 683

1 Includes impairments of goodwill, property, plant and equipment.

2 Earnings before interest, taxation, depreciation and amortisation calculated as profit from operations and equity-accounted investees plus depreciation, amortisation and impairment.

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

Geographical information on non-current assets has not been disclosed as it is not readily available.

OTHER SALIENT FEATURES

	2020	2019
R millions Note	Audited	Audited
Capital expenditure	632	833
— expansion	201	159
— replacement	431	674
Capital commitments	544	574
— contracted for	239	182
— not contracted for	305	392
Acquisitions authorised and contracted for	—	88
Future rentals on short-term and low value assets	50	35
— payable within one year	46	22
— payable thereafter	4	13
Net borrowings 1	2 383	4 030
EBITDA	2 943 3	3 4733
Depreciation	1 030	956
Amortisation	82	75
Gearing (%) 2	22 3	363
Current assets to current liabilities	1,7 3	2,13
Net asset value per ordinary share (cents)	9 679	9 925
ZAR/€ closing exchange rate (rand)	17,97	15,73
ZAR/€ average exchange rate (rand)	18,78	16,18
ZAR/US\$ closing exchange rate (rand)	14,65	14,03
ZAR/US\$ average exchange rate (rand)	16,46	14,45

1 Current and non-current borrowings, including finance lease liabilities and bank overdrafts, less cash.

2 Net borrowings, as a percentage of equity.

3 Unaudited.

NOTES

(1) (a)Basis of preparation and accounting policies

The summarised consolidated financial results are prepared in accordance with the requirements of the JSE Limited's Listings Requirements (JSE and Listings Requirements) for provisional reports and the requirements of the Companies Act of South Africa applicable to summarised financial statements. The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS); the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee; Financial Pronouncements as issued by the Financial Reporting Standards Council; and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the audited consolidated financial statements, from which the summarised consolidated financial results were derived, are in terms of IFRS and are consistent with those applied in the previous consolidated financial statement.

The preparation of these summarised consolidated financial results and the consolidated financial statements for the year ended 31 December 2020 was supervised by the Financial Director, Mr KM Kathan CA(SA) AMP (Harvard).

(1) (b)Financial statements preparation and external audit

These summarised consolidated financial statements for the year ended 31 December 2020 have been audited by Deloitte & Touche which expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the consolidated financial statements from which these summarised consolidated financial statements were derived. The auditor's report does not necessarily report on all the information contained in this announcement. Accordingly, shareholders and noteholders are advised that, to obtain a full understanding of the nature of the auditor's engagement, they should obtain a copy of the auditor's report together with the accompanying financial information.

The auditor identified the impairment assessment of indefinite life intangible assets and goodwill amounts that arose on the acquisition of Schirm GmbH and Much Asphalt (Pty) Ltd as a key audit matter. Details of the key audit matter and how it was addressed in the audit of the consolidated financial statements for the year ended 31 December 2020 are contained in the auditor's report. The auditor does not report on any forward-looking statements.

A copy of the auditor's report on the summarised consolidated financial statements, the auditor's report on the consolidated financial statements and the auditor's key audit matter are available for inspection at the Company's registered office, together with the financial statements identified in the respective auditor's reports.

The Company's Directors take full responsibility for the preparation of this provisional report and for the financial information having been extracted correctly from the underlying financial statements.

The summarised consolidated financial results do not include all of the disclosures required for full financial statements and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2020.

• (2) Revenue includes foreign and export revenue of R10 528 million (2019: R10 033 million).
• (3) Acquisition of a business

In 2018 the Group, through its subsidiary, AECI Latam Produtos Quimicos Ltd, acquired 100% of an explosives business in Brazil, from Dinacon, for a cash consideration of US\$6,3 million.

On 1 March 2020, the effective date of the transaction, conditions precedent to make the transaction unconditional had been fulfilled. The initial accounting for the acquisition had been provisionally determined at the previous reporting date. At the date of finalisation of these results, the necessary market valuations and other calculations resulted in adjustments to the fair values of identifiable assets and liabilities. This, in turn, resulted in the recognition of a gain on bargain purchase.

	R millions
Carrying value of acquirees' net assets at the acquisition date
Property, plant and equipment	29
Definite life intangible assets	79
Inventory	4
Non-controlling interest acquired	(6)
Net identifiable assets and liabilities acquired	106
Gain on bargain purchase	(24)
Net consideration paid	82

(4) Segment realignment project: Food & Beverage and Chemicals

Trading conditions for businesses in these segments have become increasingly challenging. In South Africa, subdued economic growth resulted in a slowdown in the manufacturing sector coupled with a slowdown in consumer spending, which directly impacted the affected serviced customers. In this context, operating costs increased progressively over time.

The impact of the COVID-19 pandemic compounded the challenges, with economic and industry forecasts revised downwards to account for the effects on business operations, as well as market uncertainty in respect of future economic activity.

The AECI Executive Committee considered various measures to deal with the challenges and to address the Group's operational requirements in this context. Following a business review of the two affected segments, they were integrated. This provides the Group with the opportunity to reduce costs, improve efficiencies, optimise synergies and have the agility to respond more effectively to market changes going forward.

The project resulted in a decision to exit non-performing businesses and, as a consequence, resulted in the following impairments being recognised:

	R millions
Goodwill	(42)
IOP distillation plant shutdown	(30)
Afoodable operational shutdown	(7)
Cobito brine market exit	(5)
Property, plant and equipment	(27)
IOP distillation plant shutdown	(19)
Chemical Initiatives plant nutrient elemental sulphur plant shutdown	(8)
IMPAIRMENTS	(69)

(4.1) Sale of sauces business

A decision was taken by management to exit the sauces business. Accordingly, Afoodable (Pty) Ltd was sold to Lluvia Holdings (Pty) Ltd. All conditions were fulfilled in line with the sale agreement and, accordingly, the transaction was finalised on 4 August 2020. The goodwill relating to this business, amounting to R7,4 million, was impaired at 30 June 2020.

	R millions
Carrying value of net assets disposed
Property, plant and equipment	13
Right-of-use assets	2
Deferred tax	(2)
Inventories	7
Accounts receivable	8
Lease liabilities — non-current	(2)
Accounts payable	(2)
Tax payable	(4)
Net assets disposed of (excluding cash)	20
Loss on disposal	(6)
Proceeds on disposal	14

(4.2) Disposal of interest in associate (Olive Pride)

In 2016, AECI entered into a transaction with Clover S.A (Pty) Ltd (Clover) in which AECI sold 51% of its shareholding in Olive Pride to Clover in return for a consideration of R26 million. AECI's 49% stake in Olive Pride was treated as an equity-accounted investee in the AECI Chemicals operating segment. The initial sale agreement made provision for a call and put option exercisable after June 2020. Clover exercised its call option in October 2020 to purchase the remaining 49% of Olive Pride from AECI, with effect from 30 November 2020.

	R millions
Final adjusted purchase price	26
Carrying value of investment disposed	(29)
Loss of sale of associate	(3)

(5) Sale of pulp and paper chemicals business unit

On 1 June 2020, AECI finalised the sale of its pulp and paper chemicals business unit to Solenis Technologies South Africa (Pty) Ltd (Solenis). The business operated in AECI Specialty Chemicals which is part of the AECI Chemicals operating segment.

AECI Specialty Chemicals produces and supplies specialised chemical solutions for broadly the same spectrum of industries as Solenis, including the pulp, paper and tissue manufacturing industries in South Africa and Sub-Saharan Africa. Until this disposal, AECI Specialty Chemicals was Solenis' distributor in Africa.

	R millions
Carrying value of net assets disposed
Property, plant and equipment	8
Goodwill	19
Inventories	31
Accounts receivable	20
Net assets disposed	78
Employee liabilities recognised	22
Profit on disposal	108
Proceeds on disposal	208

(6) Cash and debt covenants

The Company's net borrowings at 31 December 2020 were R2 383 million compared to R4 030 million at 31 December 2019, with undrawn finance facilities of R4 400 million. All covenant requirements were met in the current and prior year.

(7) Financial impact of COVID-19

(7.1) Property, plant and equipment

The Group has assessed the impact of the COVID-19 pandemic on the assumptions and significant judgements made in the valuation of items of property, plant and equipment.

Considered in this process were factors included in the Group's COVID-19 Response Plan and impairments that resulted in the pillar realignment project undertaken in the year (see note 5). It was concluded that the effects of the coronavirus will not have a lasting effect on the productivity of the Group's property, plant and equipment.

In assessing the potential future impact of the pandemic's effects on the value of items of property, plant and equipment the following were considered:

• › several Group businesses were deemed to be providers of essential goods and services at all stages of restrictions on activity and movement imposed to mitigate the spread of the coronavirus
• › other businesses, where activities were curtailed or halted, are slowly returning to pre-pandemic productivity in line with a gradual economic recovery
• › as a consequence of this, together with the benefits of business realignment initiatives undertaken in the year, the present value of future cash flows of property, plant and equipment is not expected to be impacted negatively, and
• › the Group has been assessed as a going concern and plans to continue utilising items of property, plant and equipment to support its revenue-generating activities. The negative impact of COVID-19 has not been significant in this regard.

In view of the above, management does not expect that any medium-term changes in the value of items of property, plant and equipment assets will be material.

96

(7.2) Goodwill

Significant cash-generating unit (CGU)

AECI 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 market sector and have been based on historical data from both external and internal sources.

	%
Post-tax discount rate	14,3
Terminal value growth rate	4,8
Budgeted revenue growth rate 1	4,7

1 Revenue growth of 59% in 2021 and average of 4,7% for the next four years.

A post-tax discount rate was applied in determining the recoverable amount of the CGU and 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 30%. The discount rate is influenced by changes in the country risk-free rate, currency default spread and risk premiums which, in turn, are influenced by changes in the macro-economic environment.

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, depreciation and amortisation (EBITDA) growth rate, consistent with the assumptions that a market participant would make.

Revenue growth and trading margins were projected taking into account the average growth levels over the past five years and the estimated sales volume and price growth for the next five years. Previously it was assumed that sales would increase in line with projected investment in road infrastructure that would materialise in the foreseeable future, based on the South African government's commitments to infrastructure spend as published by the National Treasury in its forecasts for the next five years.

However, owing to government's fiscal priorities as a result of COVID-19, uncertainty remains as to the pace at which infrastructure projects will be executed in the medium term. The potential negative effects of this on the industry as a whole in the longer term is unclear as is the ongoing pandemic's socio- economic impact in the medium term. Against this background, management reduced its revenue growth and trading margin projections for the next five years. This resulted in the full realisation of the cash flows relating to this CGU no longer being expected.

The value-in-use of the CGU was reassessed at 31 December 2020 by discounting its expected future cash flows based on the considerations above. Its recoverable amount was R1 690 million compared to its carrying value of R2 527 million. Accordingly, R821 million (attributable to ordinary shareholders) of the R1 531 million goodwill recognised at the acquisition date was impaired.

Following the impairment loss recognised, the recoverable amount of the CGU was equal to the carrying amount. Therefore, any adverse movement in a key assumption would lead to further impairment.

The following changes in assumptions would have resulted in a significant increase in the impairment loss as follows:

R millions	Impairment higher by
An increase in the post-tax discount rate from 14,3% to 16,0%	233
A decrease in the terminal growth rate from 4,8% to 3,8%	100
A decrease of 1,0% in the trading margin from 2021 to 2025	150

AECI 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 market sectors and have been based on historical data from both external and internal sources.

	%
Post-tax discount rate 1	7,8
Terminal value growth rate	2,1
Budgeted revenue growth rate (average for the next five years)2	3,0

1 Germany 7,6% and USA 8,0%.

2 Germany 2,7% and USA 3,2%.

A post-tax discount rate was applied in determining the recoverable amount of the CGU and 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 15% in both Germany and the USA. The discount rate is influenced by changes in the country risk-free rates, currency default spread and risk premiums which, in turn, are influenced by changes in the macro-economic environment.

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 average growth levels 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 of a strong economic recovery post COVID-19 (especially in the automotive sector in Germany), securing major customers on tender, optimisation of existing manufacturing facilities and the delivery to expectations of capital investments in the USA.

The estimated recoverable amount of the CGU was equal to its carrying amount at 31 December 2020, but is sensitive to changes in certain key assumptions. Management identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. The following changes in assumptions would have resulted in an impairment loss as follows:

R millions Impairment of

An increase in the post-tax discount rate of 1%	290
A decrease of 2% in the revenue growth rate from 2021 to 2025	120

Other CGUs

98

Goodwill is tested for impairment by calculating the value-in-use of the CGU or CGUs 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, other than the CGUs disclosed above.

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, approved budgets for three years and the business plan for a period of at least five years, and using an average trading margin between 9% and 10% (2019: 8% and 11%) over the five years
• › a post-tax discount rate between 7% and 26% (2019: 7% and 21%) was applied in determining the recoverable amount of the CGU and the discount rate was estimated based on the Group's weighted average cost of capital, adjusted for the risk profile applicable to each CGU
• › terminal value growth rates between 2% and 5% (2019: 2% and 6%) were applied. This was based on sustainable earnings and a conservative growth model

For each of the sensitive inputs, management provided the possible impact of decreased profitability on the goodwill valuation by testing multiple scenarios.

Other than AECI Schirm, the impairments of AECI Much Asphalt and those resulting from the segment realignment project in Food & Beverage and Chemicals, 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.

(7.3) Deferred tax

The COVID-19 pandemic negatively impacted the Group's profitability in the short term. However, management remains confident of the Group's ability to continue to generate future taxable income. Future taxable profits were estimated based on business plans which include estimates and assumptions regarding economic growth, interest and inflation rates and current market conditions as a result of the pandemic. Deferred tax assets were recognised to the extent that it is probable that taxable income will be available in future against which they can be utilised. These deferred tax assets do not expire.

(7.4) Trade receivables

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.

The loss allowance is calculated using an expected credit loss (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 rebuttable default events. The weighted average loss rate is not applied to receivables that carry an insignificant risk of default due to credit insurance, letters of credit or other forms of guarantee.

The ECLs were calculated based on actual credit loss experience. The Group performed the calculation of ECL rates separately by segmenting exposures based on common credit risk characteristics and focused on the risks relevant to each 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.

The following were considered by management in the forward-looking assessment to determine if the ECL was further affected by the impact of COVID-19:

• › the expected loss rate (allowance for credit losses) is applied to the outstanding balances to derive the amount provided for doubtful debt.
• › the trade receivables were assessed by analysing the industries in which the Group's customers operate as well as reviewing publicly available information to ascertain whether any of the Group's customers or their industries were at risk of being impacted by adverse economic conditions or COVID-19 effects at the reporting date. The Group also considered any specific communications from customers that would cause concern in terms of their ability to meet their short-term obligations as at the reporting date. No such communications were received
• › the data and research also showed that an insignificant number of customers had formally requested an extension on current terms. None were in business rescue
• › management also considered the type of products and services the Group provides to its customers. Certain of them, were classified as providers of essential products and services throughout lockdowns and periods of restrictions associated with mitigating the spread of COVID-19. This allowed the Group to generate income, albeit at reduced levels in some instances.
• (8) The Group entered into various sale and purchase transactions with related parties in the Group in the ordinary course of business, the nature of which was consistent with those previously reported. Those transactions were concluded on terms that were no more and no less favourable than transactions with unrelated external parties. All transactions and balances with these related parties have been eliminated appropriately in the consolidated results.
• (9) Dispute in West Africa

A subsidiary in the West African region is defending an action brought by an Administration of Customs, claiming CFA1 652 000 000 (US\$2,8m) and penalties up to CFA44 546 724 967 (US\$76m). Based on local and international legal advice, management is confident in its legal position. Subsidiaries in this region comply strictly with the Common External Tariff adopted in and applied by the West African Economic Monetary Union.

• (10) No reportable events occurred after the reporting date.
• (11) The following changes to the Board and Group Company Secretary were announced during the year:

Non-executive Directors

Resignations

• › J Molapo, with effect from 24 November 2020; and
• › AJ Morgan, with effect from 26 May 20200.

Appointments

• › SA Dawson, with effect from 1 January 2020;
• › WH Dissinger, with effect from 1 January 2020; and
• › AM Roets, with effect from 1 June 2020.

Group Company Secretary

• Resignation and appointment
• › EN Rapoo resigned with effect from 31 December 2020 after almost a decade in the role; and
• › WJ Strydom was appointed to this position in an acting capacity with effect from 1 January 2021

APPROVAL

The Board acknowledges its responsibility to ensure the integrity of the integrated report. All the Directors whose names appear below confirm that individually and collectively they have reviewed the content of this report. They believe it is a fair presentation of the integrated performance of the Group in the context of material issues that affected 2020's performance and those that will shape its future prospects.

The Board approved the annual financial statements for the year ended 31 December 2020 on 24 February 2021 and the release of the integrated report on 22 April 2021.

DIRECTORS

Khotso Mokhele (Chairman)

Steve Dawson

Fikile De Buck

Walter Dissinger

Mark Dytor

Woodmead, Sandton 22 April 2021

Godfrey Gomwe

Mark Kathan

Rams Ramashia

Marna Roets

Philisiwe Sibiya

ACTING GROUP COMPANY SECRETARY AND REGISTERED OFFICE

Wynand Strydom First Floor AECI Place 24 The Woodlands, Woodlands Drive, Woodmead, Sandton 2191 South Africa (no postal deliveries to this address) Email: wynand.strydom@aeciworld.com

POSTAL ADDRESS AND CONTACT DETAILS

Private Bag X21 Gallo Manor 2052 Telephone: +27 (0)11 806 8700 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 Private Bag X9000 Saxonwold 2132 South Africa

and

Computershare Investor Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH England

EXTERNAL AUDITOR

Deloitte & Touche

PRIMARY TRANSACTIONAL AND FUNDING BANKS

Absa Bank Ltd

First National Bank of Southern Africa Ltd (A Division of FirstRand Bank Ltd)

Investec Bank 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 EQUITY AND DEBT SPONSOR

Rand Merchant Bank Ltd (A Division of FirstRand Bank Ltd) 1 Merchant Place Corner Rivonia Road and Fredman Drive Sandton 2196 South Africa

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