NCP Sustainability Report

Sustainability Development Report 2010

ContentS

Letter from our CEO.................................................................................... 2 What we’re about ....................................................................................... 3 Goals and Performance highlights ................................................................. 4 Product .................................................................................................... 6 Health . ..................................................................................................... 7 Community ................................................................................................ 8 Environment ............................................................................................ 10 Recycling ................................................................................................. 13 Workplace ............................................................................................... 14 Code of Conduct....................................................................................... 16 Future Statements ................................................................................... 17

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Letter from our CEO CEO’s letter Every era faces its own challenges. No doubt those that established NCP as a small rum distillery on the banks of the Umgeni River 143 years ago in 1868, had their concerns – including crocodiles, perhaps.

While NCP Alcohols is now a world-class operation, it is still located in the same place on the same river, and yes, we still have crocodiles – perhaps. It is also worth noting that our sales volumes have grown 220% over the past ten years, and that our business has developed from almost 100% local market focus to one where international sales make up 61% of our total sales.

We have achieved this against a backdrop of a recent decline in margins and local sugar production. And yet, at the same time we are aware that the global biofuels industry may present some opportunities, going forward.

And, while thinking of NCP Alcohols’ commitment to sustainable practice, and its place in the supply chain to the rest of the planet, it is satisfying to note that safety, health, environment and responsible sustainable growth will also come under a global spotlight in Durban this year – the “United Nations’ Framework Convention on Climate Change” (COP 17) is to be held here during November and December.

In the meantime, whatever the challenges we at NCP Alcohols face, we are committed to continual improvement and to growth, while having a positive impact on society, the environment and the economy – creating a sustainable future.

NCP Alcohols produces this Sustainability Report every year, primarily as part of its effort to be transparent and accountable to our stakeholders which includes staff, shareholders and the surrounding community.

Peter Starling Chief Executive Officer

The report also demonstrates our commitment to the growing global move toward ‘integrated reporting’; this refers to the call for companies to publish information on sustainability, so that stakeholders can make an informed assessment of how these issues have been incorporated into the company’s strategic direction.

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What we’re about We’re passionate about making high-quality fermentation alcohol for the international cosmetic, pharmaceutical and beverage markets – from one site which is 143 years old. Our product is made from molasses, sugar cane’s aromatic derivative, and we use our worldclass hi-tech processing equipment to attain the sought-after quality of NCP’s fermented alcohol.

Our people match the excellence of our operations, and 48 consecutive years of awards from the Monde Selection: The International Institute for Quality Selections for our ethanol and light spirits is evidence to that. Our values define what is important to us and how we operate the business. Our company culture is critical to our objective of keeping things simple while at the same time rewarding our customers with really good products and service.

We have deep roots in the African continent; in 1868 the first rum distillery in South Africa was built at our site on the banks of the uMngeni River in the KwaZuluNatal province. Known as Umgeni Distillers during the 1920s, the company was acquired by National Chemical Products (NCP). During the late 1960s NCP became a founding member of the Sentrachem Group, whereafter it was purchased by the Dow Chemical Company. In 2001 NCP Alcohols became part of the Alco Group, one of the largest alcohol-trading and distribution organisations in the global ethanol market, with production facilities on four continents.

PRODUCT

Manufacture products to meet global consumer needs

HEALTH

Dedicated to the sustainable health of the company, people the environment.

COMMUNITY

Nurture sustainable communities through economic development and providing social opportunities.

ENVIRONMENT

RECYCLING

WORKPLACE

Aim for zero environmental impact, energy efficiency and endless innovation.

Re-use material and water as a valuable future resource.

Creating a workplace that is healthy, safe and respectful of individual rights.

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Goals and performance highlights NCP is dedicated to the sustainable health of our company, people and the planet. We are committed to achieving sustained development guided by the principles of broadbased economic development to benefit our stakeholders, customers, employees and communities. This report is guided by our principles of integrity, transparency and social responsibility, principles that define the way we manufacture and market our products and conduct our business throughout the world.

This 2010 report details our company’s performance and progress in critically important areas ranging from corporate governance and ethics to environmental initiatives and our positive social contributions.

We have also included comprehensive data wherever possible and provided information that we believe is clear and accurate.

Performance Highlights Awards: NCP Alcohols received the prestigious Grand Gold and Gold awards from the Monde Selection International Institute for Quality Selections during the 2010 Quality Selection awards for their Potable Alcohol and Light Spirit respectively. This is the third consecutive year in which the Grand Gold has been achieved for our potable alcohols and is testament to the dedication to quality and customer service by the entire team.

Engineering: One of our major goals in 2010 was improved turbine availability, and to this end a major overhaul of the turbine was carried out. Our other major goal was to reduce on-site power consumption.

Emissions: Since the introduction in 2008 of a gas-fired boiler, our emissions to air have been negligible, in fact far below the minimum standards required by the National Environment Management: Air Quality Act, 2004 (Act no. 39 of 2004).

Operating standards: During 2010 we were re-certified against the ISO 14001 standard and maintained certification on the ISO 9001 and HACCP systems. We also managed to successfully integrate these three systems.

Business processes: During 2010 our enterprise resource system was replaced by Microsoft Dynamics to enable us to take control of our essential business processes.

Procurement: NCP Alcohols procures suitable products and services in accordance with a system that is fair, competitive and cost effective. Procurement is undertaken with total cost of ownership in mind. We aim to procure from companies owned or managed by historically disadvantaged South Africans (BEE Procurement). NCP Alcohols further endeavours to undertake “green” procurement while giving consideration to the principle of reducing, reusing and recycling.

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Broad-Based Black Economic Empowerment: Through our commitment to benefit enterprises, we have assisted three companies with funding, mentoring and management in the fields of fitting and turning, mechanical engineering, hospitality and environmental maintenance and management. Our social economic development was extended to Kenville Primary School where we focused on empowering teachers, who often fill the role of parent during school hours, with a Child Nurturing Workshop: Jacob’s Badge of Good Character.

Skills Development: We spent R 319 802 on training and developing our staff and have invested R 557 807 on learners, students and an apprentice; they completed their in-service training on site during 2010.

Goals achieved Energy consumption

• 4% reduction in electricity use in 2010 as a result of focused efforts on energy reduction and variable speed drives on the main cooling-tower fans.

• 1.3% reduction of gas usage due to improved boiler and operational control.

Water

Solid Waste

Transportation

Employees

• 8.7% reduction through reuse and improved manufacturing processes.

• 23% water from our feedstock is used for a variety of purposes in our manufacturing process and a variety of Cleaning in Place (CIP) duties.

• 40% reduction of solids to effluent during 2010 as a result of reducing the impurity levels of certain effluent streams and improved plant efficiencies.

• 83% less oil in vehicles transporting our product as a result of a “Green Logistics” approach using an advanced oil management system that extends oil changes to only once every six months.

• We have policies and practices in place to ensure that workplace- and human-rights are upheld and embedded in our business. Ethics and compliance is expected and required of all our employees at all times. We maintain this high standard through our commitment to communication, training, workplace investigations and monitoring.

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Product

(Manufacture products to meet global consumer needs) NCP Alcohols is globally recognised as a consistent supplier of premium grade, potable ethanol – this fact supported by our 48th consecutive Gold or Grand Gold award from Monde Selection, our continued partnerships with some of the world’s biggest liquor companies and our thriving exports to 32 countries outside of South Africa.

Numerous globally recognised brands depend on the consistency and quality of our manufacturing operation at Umgeni and the service excellence that we provide through partnering with like minded logistics companies, especially in shipping to destinations as far afield as in the Philippines, Australia and Sri Lanka, to name a few.

Manufacturing and transporting neutral potable ethanol products to their end destinations, where they are used as the basis for many of our favourite spirit and liqueur brands, requires incredible attention to detail across the entire value chain to ensure the quality differentiation that discerning consumers demand.

Sustainable Circle

Community

Materials

Transport

Manufacturing

Recycling

Customers

Our goals for 2011 are to build on the dominant position we command in Southern and East African regions as well as consolidating our recent forays into the competitive West African region by focusing on service excellence and distribution strategies to enhance our well established reputation for product quality, consistency and reliability in the region.

Global recognition and global competitiveness are inexorably linked and we continue to strive to manufacture and distribute products at equitable prices through focus on sustainability, efficiencies and service excellence throughout the entire value chain.

Distribution

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Health (We are dedicated to the sustainable health of people the planet and our company.)

We are keenly aware that leading an active and healthy lifestyle is much more complex than simply being physically active. NCP strives to enhance employee health and well-being through education and physical activity. We continuously let staff know the importance of balancing life, work and play. Our staff have access to an on-site clinic focusing on occupational health, primary health care, compulsory medicals that are done every two years and any additional tests that may be recommended.

Staff are encouraged to undergo voluntary testing for HIV/Aids and last year our staff and contractors signed a pledge to celebrate World Aids Day on 1 December 2010.

Entrance and participation to an annual walk/run relay is encouraged and the number of participants grows each year.

During 2011 employee wellness programmes will be presented to continue the partnership with our employees and to promote the importance of having a balanced lifestyle. Our staff are encouraged to play in our soccer team, NCP United Football Club (NUFC), to run in the annual business relay and to donate blood in order to give back to society.

Diabetes is a global epidemic and we believe we all need to play a role in it. Our canteen offers healthier options for those staff members that suffer from diabetes. Our clinic offers assistance to our primary health care staff by checking blood-sugar levels and issuing medicine.

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Community (Nurture sustainable communities through economic development and providing social opportunities.)

In the run-up to celebrating Biodiversity Day on 22 May, NCP took part in a Score Green Goals drive by the eThekwini Municipality.

This initiative is part of a bigger drive to mobilise businesses on the banks of the Umgeni River to take interest in the upkeep of the portion of land in front of their site on the river bank.

During the event staff from participating companies were encouraged to fill as many bags as possible with litter, with one bag of litter being equal to one goal.

NCP scored 35 goals in under one hour and will continue to be part of this drive in future.

Our transformation programmes are based on the real needs of the people in the areas where we operate and the majority of our beneficiaries are disadvantaged communities and individuals. We focus on building capacity through skills development and mentoring / management to guarantee the sustainability of the projects. We focus our social responsibility initiatives on areas that are relevant in the South African context namely, Education, Health and Welfare, Safety and Environment Conservation.

Our corporate social investment programme gives our staff the opportunity to take part in activities that help those less fortunate than themselves.

The company supports and encourages staff to form sport clubs and our football club has quarterly games with customers and suppliers.

NCP United Football Club is part of how the company contributes towards the staff’s social wage.

“90% of South African business es fail in the first

two years.�

The company has its operations on the banks of one of the biggest rivers in the province of KwaZulu-Natal and has developed and now supports the Umvubu Environment Management Services Co-operative with management and mentoring, to maintain and rehabilitate the sensitive uMngeni riverbank area.

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The co-operative will expand its services during 2011 to include garden landscaping, a field that offers them more business opportunities.

We provide working space for three emerging permanent contractors on site free of charge, thus supporting them economically. Because of the high failure rate of new businesses in South Africa, NCP’s Enterprise Development contributions are carefully planned to grow the economy and receive a return on the investment.

The company belongs to the Cosmetic, Toiletry and Fragrance Association (CTFA) of South Africa and supports their ‘Look Good Feel Better’ initiative where make-overs are given to female cancer patients undergoing active treatment in a practical positive way. The LGFB programme provides free two-hour beauty workshops through a network of hospitals, oncology clinics, and interim homes specifically designed to assist these women to manage the appearance-related side-effects of chemotherapy and radiotherapy, thereby helping to restore their appearance and self-image. Our contributions to the programme are extended to our staff who volunteer and assist the care workers during these workshops.

We encourage our staff to support informal entrepreneurship and make the site available to a car-wash entrepreneur who washes the cars of staff.

The company supports the entrepreneur by supplying equipment and product to operate the business.

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Environment (Aim to be energy efficient to protect nature.)

NCP Alcohols continues to be certified against the ISO 14001:2004 standard. Our focus is to maintain statutory and legal compliance as well as to reduce the impacts of our activities on the environment. We are also sharpening our focus on environmental management in our projects and daily operations.

Reflecting our commitment to environmental responsibility, NCP has conserved paper and energy by producing this report online exclusively.

While the company has worked for many years to manage our impact on the environment responsibly, policies and practices are now in place to comply with the statutory and legal requirements.

It makes sound environmental and financial sense to sell our by-products. A case in point is Concentrated Molasses Solids (CMS), a by-product of our evaporator process, which is sold for use in the animal feeds industry. CMS is also used in fertiliser as it is high in potassium.

A four-year project to bund the entire site, thus protecting it from potential contamination, also continued in 2010.

Air

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Energy The spotlight continues to shine on our efforts to boost energy efficiency – which in turn will reduce our environmental impact. We endeavour to select a combination of energy sources when producing and distributing our products, in order to reduce energy consumption and boost energy efficiency.

Measures to track and manage our carbon emissions are ongoing and where possible, we prefer to invest in renewable energy resources.

Electricity consumption decreased by 4% in 2010 as a result of our ongoing focus on energy reduction, and new variable speed drives on the main cooling tower fans.

In addition, our Co-Generation (Co-Gen) of Power Project continues, with turbine modifications, electronic synchronisation control ready for installation at our next annual shutdown. This includes an electronic 11000-volt breaker between the company and the eThekwini Municipality’s Electricity Department.

The goal of the Co-Gen Project is to be in a position to sell excess electricity to the council after new equipment is installed during the planned shutdown in 2011. NCP expects to generate approximately R500 000 in revenue through the project.

A smaller, more efficient, air dryer was installed on our plant air supply system, leading to reduced power consumption of 21% and reduced air consumption of 12%. As a result of this our maintenance on plant Instrumentation was also reduced due to the improved quality of air produced.

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Water Ways to reduce the amount of water bought are constantly being sought and a reduction in water usage of 0.87% was achieved in 2010. Water is recycled where possible. Incoming molasses contains approximately 23% water and during the alcohol-manufacturing process this water is separated and used for a variety of purposes. For example, it is combined with molasses in a 1:1 ratio to produce a mash which makes the sugars in the molasses accessible to the yeast. Additionally it is used for a variety of cleaning in place (CIP) duties, making a significant contribution to water savings.

Condensate Return History

Effluent Our goal for 2011 is to reduce the impurity levels of certain effluent streams and simultaneously improve our plant efficiencies. The volume of solids to effluent continued to reduce in 2010. A 40% reduction was achieved while the volume of effluent per kl of product has remained approximately 4.3 over recent years, including 2010. This is achieved by reworking sludge from our alcohol process and recycling into the compost industry. Part of NCP’s drive to reduce water consumption has seen increased focus on improving steam condensate return, resulting in a slight improvement in 2010.

An initiative to recover condensate from steam traps in the boiler house was implemented in 2010 contributing towards the reduction of effluent volume while at the same time increasing boiler efficiencies. Other areas are now also being evaluated.

Effluent Volumes

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Recycling (Re-use material and water as a valuable future resource.)

Our guiding principle is, where possible, not to generate waste by eliminating it at source; this results in the twin benefits of reduced cost to the business and reduced effect on the environment. We re-use materials where possible, including water which is viewed as a valuable resource.

There are separate skips on site for ferrous and nonferrous metals, as well as general waste and highpressure cleaning residue. In 2010, an initiative was started to collect office paper, cardboard and aluminium cans at various areas on site. This initiative will be continued and expanded during 2011.

During 2010, process sludge emanating from the molasses was removed from site for use in compost manufacturing. Sludge from the fermentation plant was reworked into the evaporator process for the first time in 2010.

We continue to dispose of the drums in which our products are sold or recycle them, using a SANS 10406-accredited company.

Waste

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Workplace (Create a workplace that is healthy, safe and respectful of the individual’s rights) At our core, we strive to have happy and healthy staff who are treated fairly, and with dignity and respect.

Our staff members create the NCP culture, each one of them bringing their own personalities, abilities and talents to work every day to make this happen. They represent the company every day at work and at home where they are our ambassadors. We place a high value on this, and our company’s Code of Conduct guides our business practices requiring equality, honesty and integrity in all our business matters.

Our staff play a vital role in the success of our business and we strive to be a great place to work; we foster safe, open, inclusive and healthy work environments for them where they are treated fairly, and with dignity and respect.

Training In line with our commitment towards our staff, we pay great attention to their ongoing skills development.

All our operational staff attend annual refresher training that covers their responsibilities when issuing Safe Work Permits and serves as a reminder that safety is our first priority. We are also dedicated to the education and training needs of our brewers and distillers on site, and support them to qualify in a range of internationally recognised qualifications offered by the Institute of Brewing & Distilling (IBD). Our passion for training extends to the families of our staff and we provide study assistance to the staff, and bursaries to their children at tertiary level.

Through our programme to develop and invest in South Africa’s youth, we have strong alliances with selected educational institutions. During 2010 we had eight inservice students on registered workplace experience programmes in partnership with the Durban University of Technology in the Electronic Engineering, Mechanical Engineering, Chemical Engineering, Electrical Engineering and Analytical Chemistry fields.

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Employment Equity We have policies and practices in place to ensure that workplace and human rights are upheld and embedded in our business. Our staff vote for and elect a bi-annual Employment Equity Committee and are encouraged to report violations confidentially to their manager or employment equity member. It is our policy to afford equal opportunities to all qualified employees and applicants. We’re committed to employment equity and to recruiting and retaining a diverse group of qualified and dedicated employees. In line with this, every NCP employee is expected to adhere to company policies which prohibit discrimination including harassment, and a set of policies that establish procedures for reporting and investigating complaints for appropriate disciplinary action violations.

Employment Equity (EE) African 2008

Indian

2010

2008

Coloured 2010

2008

White

2010

2008

2010

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

44

16

41

13

29

10

30

14

2

0

1

1

14

7

14

7

Occupational Health We are committed to protecting the safety, health and welfare of our people and aim to promote and maintain the highest degree of physical, mental and social wellbeing among them.Our focus on health and wellness extends to helping our employees build healthier bodies and minds. We know that good habits begin at home and NCP is committed to helping our employees live healthier lives. We offer health checks including blood pressure and cholesterol screenings. We subsidise costs for vitamins, certain prescription medication and if needed Anti-Retroviral Treatment for HIV/Aids. We also provide free flu vaccinations and an onsite Occupational Health Practitioner. We tailor our occupational health testing to the specific environment of our employees.

Communication The free flow of information and understanding between staff, suppliers and customers is very important in our efforts to create and sustain a workplace and relationships that are mutually beneficial to everyone. Our organisational communication channels involve proactive internal communication directed at employees through electronic and print media. To ensure we do not lose sight of the fact that face-to-face interaction plays a vital role in communicating, we have monthly interactive staff meetings where employees receive and share information. For our external communication we use traditional and new media communication, increasing our content reach through our presence on the worldwide web.

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Code of Conduct NCP subscribes to a code of conduct contained in our employee manual. The purpose of this code is to promote the values and ethical business practices of the company and reflects the company’s policy on conduct. Our code of conduct summarises the expectations the company has of all its managers and employees. Acceptance of employment with the company is deemed to be acceptance of the principles set out in this code.

Ethics and compliance is expected and required of all our employees at all times. We maintain this high standard through our commitment to communication, training, workplace investigations and monitoring.

Our senior management views ethics as a company-wide priority and will provide periodic messages to employees reminding them of the principles set forth in the Employee Manual dealing with our code of conduct. The Employee Manual is on our intranet and sets employee expectations with respect to matters such as harassment, discrimination, conflicts of interest, and bribery amongst others. Staff are encouraged to raise concerns with their supervisors or managers, and if there is an opportunity for us to improve the way in which we operate, our Improvement Opportunity (IO) System can be used.

Adherence to our code of conduct is a strategic business imperative supporting our core values, which are: We’re passionate about ourselves, the Company, what we do. We honour our commitments, co-operating unselfishly in pursuit of improved performance. We do this to make business pleasurable.

Our uncompromising quality is as a result of our global standards in leadership, manufacturing, products and the building of partnerships with our Customers, above all in creating an environment where our people can develop to enhance the company’s competitive performance.

Honesty is important for us to grow. We’ll do this by accepting constructive criticism, encouraging openness, frankness, challenge and debate to build trust while behaving with integrity and respect.

We keep it Simple.

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Future Statements Our vision to remain a world-class producer and supplier of quality natural ethanol products passionately focuses on building strong partnerships with our customers.

The company is dedicated to the cost-effective and responsible production and distribution of alcohol products tailored to meet the needs of our customers.

NCP Alcohols have always regarded sustainability as a business and social necessity and have included performance measures in a Game Plan, a strategic management system that tracks our performance from four key balanced perspectives: Finances highlight our improved bottom-line results and improved financial performance.

In addition, the implementation of our new Enterprise Resource System (ERP) during 2010, Microsoft Dynamics, will provide the company with access to business-critical financial data in real time from 2011 onwards. The company’s payment process will also be expedited with the system’s automated payment scheduling.

Customer indicators tell how well we focus on new opportunities in the market to grow with our current and potential customers. The development of distribution facilities in other parts of Africa, like Kenya and Zambia, to facilitate quicker access to our products for our African markets will be looked at during 2011. Cross trade, whereby traded products are shipped direct from suppliers to our customers, will be increased to reduce costs on handling and additional transport.

Internal processes ensure NCP’s sustained operational excellence with reduced costs and the improved use of assets while ensuring focus on those processes that support the development of growth partnerships with customers and new business opportunities in the market place. Our new ERP system will give us more control of various business processes and improve our regulatory compliance through its enhanced features.

If you wish to share your feedback about the 2010 Sustainability Report, please e-mail us at: info@ncpalcohols.com

Learning and growth is encouraged by implementing processes that aim to create an environment that encourages employee co-operation, commitment and focus. This is achieved by focusing on and measuring success in key areas including personal competencies and development, and effective co-operation and communication.

We remain deeply committed to our current status amongst our various stakeholders and continue to align our company’s future development in such a manner as to contribute to our goal of being a company of choice and to create sustainable value for all. We achieve tangible business value out of our quality, environment, health and safety projects by integrating related processes to drive continuous improvement.

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E-mail: info@ncpalcohols.com Website: www.ncpalcohols.com Physical address: 121 Sea Cow Lake Road, Durban, 4001, South Africa Tel: +27 (0)31 560 1111 Fax: +27 (0)31 579 1541