Kansai Plascon Sustainability Report

S U S T A I N A B I L I T Y R E P O R 2015

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Contents Introduction from Kansai Plascon Africa Ltd. CEO........................ - 3 1. About this report .............................................................................. - 4 2. Organisational Profile .................................................................... - 5 3. Report Parameters, Boundaries and Content ........................... - 8 4. Governance, Commitments and Engagement ..................... - 10 5. Risk Management ......................................................................... - 11 6. Materiality ....................................................................................... - 12 7. Economic Performance ............................................................... - 12 8. Human Capital .............................................................................. - 14 9. Corporate Social Investment ...................................................... - 22 10. Occupational Health and Safety ............................................ - 25 11. Environmental Sustainability ...................................................... - 27 12. Product Innovation ..................................................................... - 39 13. Conclusion.................................................................................... - 41 -

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Introduction from Kansai Plascon Africa LTD CEO

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s part of our aim to be Africa’s fastest growing coatings company, Kansai Plascon is firmly committed to the values of good corporate governance and citizenship. At the heart of this ethos is the challenge of truly understanding what it means to be a sustainable company, respondent to all our stakeholders and ensuring that we produce a net positive impact on society.

First and foremost is the belief that we must meaningfully enhance value for all stakeholders including shareholders, employees, suppliers, customers, the countries and communities in which we operate and the natural environment on whose services and resources we depend. There can be no hiding the fact that 2015 was a tough year for the global economy and, especially, local Southern African economies. Low economic growth rates, commodity price slumps and devaluating local currencies made for difficult operating conditions. Nevertheless, within these testing times, we have insisted on ensuring that we do not lose focus on our sustainability objectives. Robust risk management systems in the form of high level risk analysis across our business, reinforced by strong governance practices, have been upgraded across the company and the final implementation of the SAP ERP platform has been undertaken.

Within the workplace, we will always uphold human rights as paramount to our employee relationships. Union membership is protected and programmes of transformation and employment equity continue. Our occupational, health and safety record is impeccable and we remain committed in our belief that an “injury-free� workplace is a realistic achievement. To this end, lost-time injuries have reduced by 36 percent and non-lost time injuries by 27 percent.

Our outreach to the communities in which we operate remains important to us, where we place a specific focus on assisting schools and places of learning. The Kansai Plascon Schools Programme and the Transnet Kansai School Improvement Project are instrumental in school infrastructural upgrades throughout the country. Ad hoc product donations to NGOs and other community organisations remain an important part of our CSI activities.

Our Ecoforum Committee oversees the monitoring of our environmental impact and the use of scarce, and increasingly expensive, resources.

Further progress has been achieved in improving our electricity, water and waste to landfill efficiencies and new environmental reduction targets have been set. Also pleasing has been the meeting of our carbon reduction targets for the year 2015. We continue to vigilantly monitor hazardous substances in our product formulations and have put in place a framework for the continued minimisation of such substances.

Finally, sustainability would be meaningless if our actual product did not contribute to a more sustainable world. Coatings are a force for good. They protect goods and buildings from environmental damage, thereby reducing wastage and enhancing the lifespan of these objects. We continue to explore ways in which we can improve the quality of our product and guarantee their durability.

It is with great pleasure that I present this report on the sustainability activities and achievements of Kansai Plascon during 2015.

Nauman Malik CEO, Kansai Plascon Africa Ltd -3-

1. About this report This report presents a balanced analysis of our sustainability performance and focuses on the commitment of Kansai Plascon Africa Ltd. (“KPAL”) to sustainable management of our financial, safety, environmental and social impacts.

1.1 Overview From our inception of the Kansai Plascon Africa Ltd. group (“the Group”), we have been founded on a commitment to being a good corporate citizen of the world, by operating in a way that will sustain our profitability, provide sustainable returns for our shareholders, on-going work for our employees who meet their performance targets, sustainable, successful business arrangements for our suppliers and customers alike and committed environmental stewardship and continual corporate social investment in the communities within which we operate.

KPAL consists of companies in two broad segments of the Paint and Allied Products Coatings Solutions Market namely the Decorative Coatings and the Performance Coatings Business Units. Decorative Coatings supplies and manufactures products and coatings solutions to consumers, architects and interior designers through retailers, merchants and commercial contractors. Performance Coatings encompasses businesses in the performance coatings areas selling and manufacturing automotive, industrial, protective coatings and colourants products.

Sustainability, being part of our operating ethos, is at the heart of our business. It drives our decisions, both current and future, by ensuring that any strategic action meets the goal of enhancing value for shareholders, employees, customers, suppliers and the environment through new and innovative ways of thinking. Sustainability implies doing things now which will not impede the business, but will rather add to the overall value of the triple bottom line (economic, social and environmental pillars) in the years ahead. The Company subscribes wholeheartedly to this definition and strives to meet it in its vision and values.

1.2 Sustainability report at a glance Where possible we have followed internationally recognized standards on sustainability reporting, such as the Global Reporting Initiative (GRI) and UN Compact guidelines. This report is for all stakeholders of Kansai Plascon Africa Ltd. – employees, shareholders, customers, partners, suppliers, nongovernmental organisations, Government and the public.

This year we continued our sustainability journey, achieving the following: 1. Maintaining our reporting boundaries to ensure: • •

the robustness and comparability of information reported the capability to perform third party assurance testing in the future

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2. Continued monitoring of: Environmental metrics critical to our business operation, inclusive of carbon footprints per operation, covering Scopes 1, 2 and 3 greenhouse gas emissions.

3. Continual measurement against our environmental reduction targets over the period 2016-2020 • • • •

Energy consumption (kWh)- 7.5% per unit of production Water usage (kl) – 5% per unit of production Waste to landfill – 10% reduction per unit of production year on year Carbon reduction target of 7.5% tCO2e per unit of production

4. Considered ways of extending our measurements to include all our sites in Southern Africa.

1.3 Strategy and Analysis KPAL is pleased to present to all stakeholders our seventh sustainability report. This report highlights our broader social, economic and environmental impacts and contributions for the 2015 financial year. While this report builds on previous sustainability reports, specifically the 2010 report where we published our 2009 base lines and better defined the boundaries of our reporting, it also reflects the changed emphasis in our business, with the takeover of Kansai Plascon by Kansai Paint Co. Ltd (‘Kansai Paint’), a world leader in coatings.

Although there is a changed business focus from being Kansai Paint’s regional hub for developing their coatings business, initially in South Africa to sub-Saharan Africa, we have not had to make any changes to the sustainability report boundary, which has made year-on-year comparatives relevant.

2. Organisational Profile 2.1 Name of Organisation Kansai Plascon Africa Ltd. and its subsidiaries and associates.

2.2 Product Segments • •

Decorative Coatings Performance Coatings, which includes Industrial Coatings, Automotive Coatings and Colourants

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2.3 Operational Structure

2.4 Location of Corporate Office Kansai Plascon Africa Ltd. Balvenie Building Kildrummy Office Park Umhlanga Avenue Paulshof 2056

With effect from 25th January 2016 this has been changed to: 10 Frederick Cooper Drive Factoria Krugersdorp 1739 -6-

2.5 Countries where organization operates The Organization has operations in seven (7) countries, namely South Africa, Botswana, Malawi, Namibia, Swaziland, Zambia and Zimbabwe, and it exports to ten other countries, with the stated intention of becoming Africa’s fastest growing coatings company.

2.6 Nature of ownership and legal form Kansai Plascon Africa Ltd. is a public company incorporated in the Republic of South Africa. The major shareholder of KPAL is Kansai Paint Co. Ltd a Japanese listed public company. It has four associates where it has in excess of 20% but less than 50% shareholding. We have board representation on each of these. We have a 60% shareholding in Kansai Plascon Nigeria Ltd., a subsidiary incorporated during 2015.

2.7 Markets served The various companies within the Group serve the following markets in the countries in which we sell our products: • • • • •

Consumers Painting Contractors Industrial Automotive Asset Owners

•

Government

2.8 Scale of the Organization reported on Total number of Permanent Employees = 1 862 Net Sales for group = R2, 918 billion

Total Capitalisation Equity = R3, 968 billion Net Debt = R0, 247 billion

2.9 Significant changes during the period During the 12-month period the group completed the rebranding project to Kansai Plascon across all sites in Africa. Other initiatives included the launch of the ’Company Values’ and the ‘Brand Positioning and Toolkit’ to all employees through dedicated brand ambassadors.

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2.10 Awards Received Kansai Plascon won a global POPAI award for Plascon Inspired Colour at Builders Warehouse in Rivonia. In addition we were awarded Steinbuild Supplier of the Year (Penny Pinchers & Timber City), Build It Runner up Supplier of the Year, Mica Eastern Cape Supplier of the Year and Build It Western Cape Supplier of the Year.

2.11 Our Commitment to Product Quality 2015 saw further developments in product quality. A 7-year guarantee was included for Plascon Polvin, Super Universal Enamel and Eggshell Enamel. Polvin quality was enhanced with Ceramic Technology which improved washability and durability.

2.12 Investing in the Brand Our investment in the brand continued throughout 2015. We achieved category leadership in media, with close to a 50% share of total media in 2015. We held a successful new products launch in August and ran successful customer and consumer incentives. We continue to focus on the customers shopping experience and in-store branding and product education. Our brand equity at a consumer bonding level grew in 2015 ensuring our continued leadership of the category.

2.13 Customer Incentive Programme The “Go Places, Go Red, Go Plascon� incentive aimed at all business units and customer channels throughout Africa assisted our sales efforts in the second half of the year, albeit that it was slightly dampened by the delivery and stock problems experienced around the implementation of SAP in quarter 4.

3. Report Parameters, Boundaries and Content 3.1 Report Profile This report covers the period 1st January 2015 to 31st December 2015 which is in line with our financial year.

3.2 Previous Report The previous report was completed for the 12 months ended 31st December 2014.

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3.3 Reporting Cycle The sustainability report is completed on an annual cycle, although information is gathered monthly and performance reviewed on a bi-monthly basis.

3.4 Contact Point Dorcas Moleli dmoleli@kansaiplascon.co.za +27 11 951-4821

Alex Hetherington alex@ahmedia.co.za +27 21 671 9883

3.5 Report Scope and Boundary The process for defining the report content was conducted by the members of the Ecoforum and included the following assessments:

Due to the varying sizes of our divisions within the business units and the low level of staffing in our smaller organizations, we limit the report boundaries to those KPAL entities based in South Africa, whose turnover exceeds 5% of the Group’s turnover. A proviso has been included that the aggregate turnover exclusion is limited to 15%. Should this threshold be reached, the individual division limit will be reduced and the organizations included in the report reviewed.

Units included: • • •

Decorative Coatings business unit Performance Coatings business unit Marouns (refinish)

The choice of the topics included in the report and measured by the GRI indicators have been based on prioritizing the following: • • • • •

Environmental performance Economic returns to our stakeholders Employment sustainability, safety and representation/collective bargaining Environmental stewardship Good citizenship and societal norms

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Due to the varying sizes of the divisions within the Group (which creates a lack of staff in the smaller operations to generate robust reporting) we limit the report to South African domiciled organizations. The organizations outside of South Africa are small in terms of turnover and number of employees. This resulted in the following companies being excluded from the report: • • • • • •

Kansai Plascon Botswana (Pty) Ltd Kansai Plascon Namibia (Pty) Ltd Kansai Plascon (Zambia) Ltd Kansai Plascon (Malawi) Ltd Kansai Plascon Swaziland (Pty) Ltd Astra Industries Ltd

We however manage the environmental, social and economic issues in all the above “excluded” organizations through other governance mechanisms, namely: • • •

Quarterly risk meetings Bi-monthly Ecoforum meetings Board meetings

There are no associate companies, excluded subsidiaries, leased facilities, outsourced or other operations that can significantly affect comparability from period to period.

3.6 Report availability The 2015 report will be available via the Kansai Plascon website or upon request to the Group Executive responsible for sustainability within the organisation.

4. Governance, Commitments and Engagement 4.1 Governance Structure • • • • • •

•

KPAL has a unitary board structure The Audit, Risk and Compliance Committee, consisting of three non-executive directors, (two of whom are independent) are recommended by the Board and appointed by shareholders The Remuneration and Nomination Committee, consisting of three non-executive directors (two of whom are independent) are appointed by the Board The Social and Ethics Committee consisting of three non-executive directors, (two of whom are independent) and two prescribed officers are appointed by the Board The Executive Management Committee is responsible for setting strategy and organizational oversight The Risk Management Committee, consists of executives and/or senior management who are appointed by the Executive Management Committee under the auspices of the Audit, Risk and Compliance Committee The Ecoforum Committee consists of executives and senior management who are appointed by the Executive Management Committee - 10 -

4.2 Chairman of the Board The Chairman of the Board is a non-executive director.

4.3 Composition of Board The unitary board is made up of two executive directors, the CEO and CFO, plus six non-executive directors, two of which are independent non-executive directors.

4.4 Communications to the Board The Group facilitates communication from shareholders on issues, including any sustainability concerns, to be brought to the Board through attendance of the Chairman of the Social and Ethics Committee at the Annual General Meeting and any other arranged shareholder meetings.

The Group also supports informing and consulting employees about working relationships and conditions, through formal representation bodies.

There is an Ethics Line, managed by an independent service provider, which is reviewed by senior management. All incidents are reported to the Audit Risk and Compliance Committee as well as the Social and Ethics Committee whenever these committees meet; at present this is three times per year.

4.5 Stakeholder Engagement The Group has not yet formalized its list of stakeholders with which it would need to engage. Periodic informal shareholder engagement takes place with the major shareholders.

5. Risk Management The Group philosophy on risk management is based on the premise that no operation can be successful in business without having elements of risk. We however accept that we need to have robust systems in place to identify and measure these risks and, where possible, lay them off via insurance.

To this end KPAL conducts High Level Risk Assessments (‘HLRA’) at each business unit and support function to consider the probability, severity and control environment of reputational, credit, IT, strategic, product, political, regulatory, commercial, security, human resources, operational and technical risks, as well as crisis and change management control. This is then accepted by the respective business units. A consolidated HLRA for the Group is established, based on the individual business unit assessments as well as additional central risks. It is then tabled at the Audit, Risk and Compliance Committee for approval and reported on at each Board meeting to indicate the control of the identified risks.

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This HLRA is built into our strategic plans and any additional or alternative risks emanating from the strategic plans and budgets are then integrated into the HLRAs of the Group and the business units/support functions.

The Risk Management Committee serves to manage the HLRA process as well as the operational, credit, product, asset, social and liability risks of the company, together with our insurance brokers and risk audit staff.

6. Materiality In embarking on our sustainability journey, we applied the following rationale in establishing materiality levels:

Boundaries: The report is required to cover between 80% and 85% of the Group. We used turnover as the proxy, but always ensuring that we did not exclude too many employees from the reported figures. Any division contributing more than 5% of revenue is included, with the proviso that collectively all included divisions account for more than 85% (eighty five percent) of revenue.

Performance Measures: Identified those measures applicable within our business that would give us the best opportunity of establishing baseline information and then setting targets for the greatest savings, economically, environmentally and socially. Hence our focus on the Global Reporting Initiative (GRI) G3.1. Indicators as reflected below.

7. Economic Performance At a Glance The 2015 financial year has again been difficult, with continued subdued economic growth in South Africa and some of the Southern African countries, increased input costs due to imported inflation as a result of a weaker Rand, still stubbornly high household debt and in particular in the last quarter of the financial year we moved onto a new ERP system (SAP) and this caused significant loss of business in those few months.

Turnover for the 12 months to 31st December 2015 at R2 918 million was a disappointing 3.9% down on last year, reflecting the combined impact of an economy slowing down and our internal challenges around the SAP implementation.

Normalised operating profit at R145.4 million (R-89.9 million plus R235.3 million unusual items) was lower than the adjusted operating profit of the 12 month period ended 31st December 2014 at R259.2 million (R120.3 million plus R138.9 million unusual items). This result is explained by the economic conditions and SAP implementation. This was mitigated in part by the tight expense control in other areas of the business.

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There was a decrease in the percentage of local purchases from 90% to 88.9% for the 12 months ending 31st December 2015 compared with the comparable 12 months largely due to the weaker exchange rate which pushed up the costs of foreign purchases.

Our Approach Past experience in managing economic performance measurement has shown that we need to have a proactive focus on addressing the needs and interests of our customers by offering them quality, innovative, fit for purpose and cost effective products. This in turn drives increased trading activity which generates wealth creation for our employees, suppliers, shareholders and the various government departments (national, provincial and municipal). Our profitability also allows us to make a meaningful economic contribution to the communities near our factories, depots and distribution outlets in South Africa.

Reported Group We again adopted a stance of minimising our retention of profit in the business so as to try and minimise the disruption to our various stakeholders, i.e.: Employees retained their jobs, received salary and wage increases above inflation and received incentive bonuses and a gain share in some of the performing operations. Suppliers and Customers all remained in the supply chain.

The BEE deal is also still in place as per below.

Corporate, local and transactional taxes were paid and communities receive social investment as noted in the economic performance table.

Kansai Paint Co. Ltd (75% majority shareholder in the business) once again did not require a dividend and hence no dividends have been declared this year on ordinary shares.

Broad-Based Black Economic Empowerment Ownership Transaction The B-BBEE Transaction, as previously reported resulted in the issue of 10% of KPAL’s shares to the Kopano Employee Share Trust (“the Trust�).

The beneficiaries of the Trust are permanent employees of the Kansai Plascon Group employed in South Africa, in the Patterson Bands A to D. Through the Trust these employees will be able to participate in the increased value created by the Company over the 7 years of the scheme (April 2013April 2020).

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Economic Indicators TOTAL

TOTAL

Dec-14

Dec-15

Net Sales

3 036 905

2 917 568

Operating costs

1 186 853

1 313 719

694 580

743 736

962

152

Retained earnings

14 901

191 223

Taxes - Income tax(**)

15 800

-23 916

- Assessment rates

5 711

4 407

- Customs Duty

3 231

3 808

- VAT

82 404

29 712

- PAYE

88 211

124 295

0

0

Local Spending

2 443 271

2 696 027

Total Spending

2 713 759

3 032 886

90.03%

88.9%

Employee compensation Donations

Dividends EC6

%

It should be noted that the -R23.9m in 2015 represents an assessed loss for the financial year which will be offset against future taxable profits. ** -

8. Human Capital Our approach is based on an inclusive style of management that includes all our stakeholders. We ensure that all the interested parties are involved in decision making to provide a sustainable and workable solution to all our interventions.

We have an all-inclusive programme to build our corporate values to guarantee full integration and support from everybody. These values are the cornerstone of our business, and aid us in becoming “the fastest growing coatings company in Africa�.

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The essence of our company is built on the values of teamwork, respect, accountability, challenge, and customer focus. We expect all our staff to live these values in their daily lives.

8.1 Our Workforce As at the 31st December 2015, a total of 1 862 permanent employees were in our employ. This is a decrease of 15.7% on the 2014 number of permanent employees. (2014 = 2 211, 2013 = 2 367) Casual and temporary employees are employed in vacancies and where employees are off for longer periods of time i.e. maternity leave as well as when project work requires additional resources.

Staff turnover (LTO) has increased to 13%. This excludes voluntary retrenchments and Section 197 which occurred during the relocation of the Luipaardsvlei warehouse.

LABOUR TURNOVER (%)

9

2011

2012

2013

2014

2015

13.09

12.6

9.5 8.4

8.54

9

The average years of service of employees as at December 2015 equates to 10.2.

The average age of employees equals 40 years as at December 2015.

Our employment value proposition is aligned to our Value Based Management philosophy and culture of: • • • •

Improving communication with staff Attracting talented staff Developing existing staff Supporting staff achievement - 15 -

We continuously recruit and promote internally to find the best talent available for each particular vacancy that may occur. To this end our human capital capacity building is underpinned by our Intellectual Capital Review process that supplies our leadership pipeline and produces worthy replacements for most vacancies.

We also seek to explore the open market for talent to introduce new ways of doing business within our organisation. Due to historical factors, the labour market still lacks an adequate supply of appropriately qualified and skilled people, especially among the previously disadvantaged population of our country.

8.2 Managing Employee Relations The organisation recognises the right of employees to be represented by a Trade Union of their choice; the organisation therefore recognises several different unions with their membership depicted below.

The organisation participates in the central bargaining structures of the Chemical Industry.

Union Membership 56.9%

60.0% 50.0% 40.0% 30.0%

19.8%

14.4%

20.0% 10.0% 0.0%

7.8% 1.1% NUMSA

SACWU

CEPPWAWU

GIWUSA

SATAWU

48% of our employees are covered by the collective bargaining processes.

Labour stability has been maintained during the period under review with no loss of time occurring as a result of strike action despite the national centralisation of the customer call centre and the relocation and outsourcing of the Luipaardsvlei warehouse.

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8.3 Human Rights During the period under review no incidents of discrimination were reported. The organisation monitors these matters through the Kansai Plascon Ethics Line which is managed by Deloitte’s Tip- offs Anonymous facility and is completely independent and anonymous.

The organisation fully endorses the employee rights encapsulated in the Constitution of the Republic of South Africa 1996, including the right to freedom of association, freedom of disassociation, collective bargaining and all other labour rights under the constitutional laws.

Furthermore, the organisation rejects the use of child and forced labour in any form whatsoever.

8.4 Employee Engagement & Communication Kansai Plascon branding has remained a cornerstone of the organization.

A number of key communication activities were progressed during the year; these included printed material such as the “Connections” magazine and “A Note from Nauman” (on notice boards) as well as electronic communication via the D6 company communicator.

In addition, the CEO, Mr. Nauman Malik and members of the Senior Leadership Team visit the main sites annually to communicate the past performance of the company and the strategy for the ensuing financial year. Important elements are delivered and many good questions asked and answered during the address. The communication session is well attended and forms an integral part of the overall communication strategy of the company.

Importantly, the organization conducts a group-wide employee research, the Individual Perception Monitor (IPM), to determine the climate in the organization as well as areas that need to be addressed to improve employee engagement.

Year on year, important learnings are derived from the IPM results and a critical factor is the overall improvement and ratings of the results. In spite of a negative overall climate within the South African economy the results improved (as reflected below).

ELEMENT

Values Engagement Clear Purpose and Direction Alignment Inspiring, Caring, Equitable and Professional Climate Fairness / Order / Clarity / Rules of the Game Communication Remuneration Employment Practices Workplace and Environmental Safety Sustainable Competence and Intellectual Capital (Career Development) Team Forums / MDWT / Invocoms Performance Management Employee Ownership Scheme

TOTAL

2013

2014

2015

3.09 2.93 3.09 3.08 2.95 2.96 2.88 2.77 3.02 3.00

3.13 2.96 3.16 3.1 2.97 2.97 2.92 2.86 3.04 3.08

3.24 3.05 3.26 3.23 3.05 3.07 2.98 2.91 3.1 3.12

2.76 2.93 2.77 3.02

2.81 2.95 2.86 2.99

2.88 3.01 2.91 3.07

2.92

2.97

3.04

Please note: Values < 3.00 = opportunity for improvement

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8.5 Employee Wellness Kansai Plascon continues to provide employees with the opportunity to be tested for HIV/AIDS and to be informed of their status. A partnership with an external service provider is maintained in order to provide the employees with a professional service and to retain confidentiality. Not only does the company encourage being tested, but also provides the facility of medication to employees who do not have health insurance to cover the costs of the medication and on-going treatment.

Currently there are 22 registrations on the programme of which 95% are male. The age distribution reflects the majority of registrations are across the 30 to 59 age group with the majority registrations within the KwaZulu-Natal region.

8.6 Kansai Plascon South Africa Workforce Demographics The table below reflects the employment equity demographics of permanent and temporary employees within the South African environment.

Males

All Employees

Females

Foreign Nat's

Totals

M

F

TOTALS

A

C

I

W

Total Males

A

C

I

Total W Females

Top Management

0

0

1

2

3

0

0

0

1

1

4

0

4

8

Snr Management

2

1

5

14

22

2

0

2

2

6

0

0

0

28

Prof Qual & Specialist

14

24

19

63

120

12

8

12

50

82

11

5

16

218

Jnr Management / Skilled Technical

183

83

45

125

436

78

39

17

79

213

5

5

10

659

Semi Skilled / Descretionary

582

117

19

28

746

38

42

6

20

106

5

0

5

857

Un-Skilled / Defined Decisions

54

9

1

6

70

17

3

0

1

21

1

0

1

92

835

234

90

238

92

37

153

429

26

10

36

1862

Temps

24

6

5

21

1

1

9

36

1

2

3

95

Total

859

240

95

259

93

38

162

465

27

12

39

1957

Sub Total

1397 147 56

25

1453 172

8.6.1 Employment Equity Kansai Plascon views employment equity as an integral element of the Group's overall transformation strategy. Employment equity is an opportunity to strategically position the Group to achieve certain business objectives as well as to address any historical inequality. We are committed to providing equal opportunities for all employees, regardless of ethnic origin or gender. While our employment equity strategy is guided by prevailing legislation, we recognise the business value to be gained from having a diverse workforce.

Kansai Plascon has submitted employment equity plans to the Department of Labour which consists - 18 -

of strategies and goals towards achieving equity in the workforce.

This plan is guided by group wide commitment to: • • • • • • • •

Creating a working environment that is conducive to attracting, training and retaining skilled people from all sectors of society Entrench an organisational culture that values diversity and respects the dignity and potential of every individual Establish a diverse workforce inclusive of disabled individuals – eliminating the stigmatisation surrounding disablement Broaden the company’s skills base; implement human resource development programmes aimed at enhancing the skills of employees from historically disadvantaged groups Accelerate the advancement of historically disadvantaged employees to all levels in the organisation Implement recruitment programmes / strategies to employ talented employees from historically disadvantaged groups at all levels Talent management and succession planning activities Compliance with applicable legislation and targets

The company undertook a project to encourage existing employees to disclose their disabilities to enable the company to provide reasonable accommodation where possible and where required.

Simultaneously this was an opportunity to communicate and educate employees on disabilities in the workplace.

As an organization, we will continue to focus on the support and empowerment of Black people, as well as employees with disabilities in all areas and at all levels of the organization. As the workforce demographics indicate, Black representation needs to increase at the middle and senior management levels. Black female representation at the top management level would be ideal. Action plans to increase Black representation at these levels and our progress against such plans will be monitored closely.

8.6.2 Transformation and Equity Accelerating the transformation journey was one of the key strategic initiatives for Kansai Plascon in 2015. Transformation touches every area of our business and every person we interact with – from employees to stakeholders such as clients, suppliers, business partners, shareholders as well as communities and the broader environment. As a responsible business and leader in our industry, Kansai Plascon acknowledges that to be a good corporate citizen we need to embrace fully the philosophy and principles of transformation which is critical for South Africa’s socio-economic progress. We are not just striving to meet our own EE targets and DTI recognition in terms of the B-BBEE codes, but we also want to embed the philosophies and principles of transformation in our organizational culture. This is achieved through executing strategies and plans to redress past inequalities; secure long-term stability and growth for our company and our sector; enhance economic growth outlook and create a diverse workforce.

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8.6.2.1 B-BBEE Codes Kansai Plascon maintained a level 3 contributor status on the B-BBEE scorecard in 2015, achieving a 110% procurement recognition level and 32.22% Black ownership. The 2015 scorecard was consolidated to include all group companies.

The level 3 status was supported by our advances in transformation in terms of the complementary BEE elements set out below:

Kansai Plascon continues to develop its transformation strategy in alignment with the amended DTI B-BBEE codes.

8.7 Learning and Development Our people development strategy aims to build a high performance culture, ensuring the skill level of staff is enhanced, that our people are empowered to identify and implement improvements that will improve productivity and create value for the business. In 2015 the development of our employees was supported and achieved through a wide range of learning and development interventions.

In 2015 the total amount invested in training and development programmes was R 18.384 million. Of the total amount invested, R 16.713 million was spent on permanent employees. 81.6% of the total staff trained were black and 21.2% of the total staff trained were female.

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As we strive to build a pipeline of diverse talent across all levels, Kansai Plascon specifically focused on developing managerial competence in 2015. A Management Development Programme was launched in 2015 with the aim of strengthening management capability, supporting managers to maximise their individual potential as well as increasing the organisation’s capacity to support our strategy.

In addition, a group-wide skills development strategy was executed in 2015, with various learnership programmes being implemented, including disabled learners. The overall development proposition mix includes formal accredited training, internal development programmes, behavioural/soft skills training, technical and mandatory training, product training, coaching and mentoring, stretch assignments, project involvement, rotations, job shadowing etc.

Kansai Plascon continues with the bursary programme designed to assist employees in developing their careers with the organisation, and offers financial assistance towards employees’ children.

8.8 Talent Management Kansai Plascon continues to embrace Talent Management as strategic imperative and embed the talent process across the business with the aim of identifying, developing, engaging, retaining and deploying talent within our context.

In 2015 we saw a big shift in the talent management culture, as emphasis was placed on talent management as a “mind-set” being permeated and owned by the organisation. The strategic significance attached to this process and support from the CEO and the Executive Leadership underpins its success.

Talent development can only take place successfully if an organisation understands the capabilities it needs to ensure that it can deliver its strategy, understands how best these can be identified, where gaps exist and how they can be closed. In 2015 the Paint Africa 2020 strategy was finalized and talent management has been identified as a key component to enable this business growth strategy.

Kansai Plascon’s Talent management activities are therefore closely aligned to the business strategies with a view to identifying critical roles, developing high-potential individuals who can grow into bigger roles, growing future senior managers, leadership development, identifying and developing successors.

In 2015 critical roles at a senior leadership level in line with the 2020 strategy were identified, successors were identified and plans executed. Executive development programmes such as MBA’s, Global Executive programmes, Executive Coaching and Cross functional project involvement were some development activities executed at a senior level.

Assessment centres were executed to assess potential, strengths and development areas within the middle management level. Approximately 150 managers were assessed, they received feedback and development plans were put in place. Further engagement with this management segment is underway.

A focus on attracting, developing and retaining young talent remains a key focus. In 2015 a Technical Graduate Development Programme was launched. 2 candidates from our top technical talent pool were successful in their application to participate in the African Business Education Initiative for - 21 -

Youth, an initiative implemented by the Japanese Government providing young talent with opportunities to study at Japanese universities as well as do internships at Japanese enterprises.

9. Corporate Social Investment In 2015 Kansai Plascon Corporate Social Investment (CSI) program consisted of: •

The Kansai Plascon Schools Program

•

The Transnet/Kansai Plascon School Improvement Project

•

Ad hoc paint donations

9.1 Schools Program Acting on our CSI Policy and mandate by the Social & Ethics Committee, the company continued its involvement with the Schools Program started in 2013. Continued attention was given to the upgrade of Randfontein Secondary High School with the painting of more of the classrooms. There were interaction by our Sales Cadet learners, Milton College MBA students, pupils and teachers from school. The interaction was an important one as it had the full range of learners from high school through to those Professionals from Milton College. With our three-year involvement ending with the close of the year 2015 we have seen continuing improvement in pass rates in the Grade 12s.

Much work has also been carried out by the Gauteng Department of Education with the replacement of the original external dry walls with more structured brick walls. Work also continued on the other ablution blocks.

A substantial amount of paint was donated to the Ogwini Comprehensive Technical College in Umlazi in Kwazulu-Natal. This school stands out as an exceptional school with dedication of Teachers, Management and the School Governing body. There are 3 500 pupils at the school, one of the biggest in

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South Africa, with a consistent pass rate of 92% for Grade 12s. There is strong involvement by the parents as well. Most of the school is face brick so large amounts of paint were not required.

9.2 Transnet/Kansai Plascon School Improvement Project Transnet approached Kansai Plascon to help with a specific project that they were involved with which was to support their manufacture of desks for schools. A recipient school was the Ogwini Comprehensive Technical College. Transnet manufactured desks, using their in-house apprenticeships program and using Kansai Plascon products where they trained learners in metal work, woodwork and painting. These desks were supplied to specific schools and we supplied paint for the classrooms so that between the two companies there would be a complete upgrade of facilities for the learners.

A number of schools were also completed in Uitenhage, Port Elizabeth and one in East London. Transnet did a big launch of the project on Nelson Mandela Day with their staff doing electrical work, plumbing and painting.

9.3 Paint Donations At the request of other companies, Kansai Plascon also made smaller donations of paint for projects around the country, ranging from crèches and schools to old age homes and The World Wild Life Fund. A Design/Architectural firm also did an upgrade of The Johannesburg School for Autism in the old Children’s Hospital in Hillbrow. The site has many organizations dedicated to the health and wellbeing of children. The walls that were painted in geometric patterns went a long way to improving the site.

Many crèches around the country were repainted in bright child friendly colours to stimulate them in these early childhood development areas. The bright colours stimulate learning and children react positively to the bright colours. Many crèches were cleaned up and some of the corporate companies bought blankets and goods to improve overall conditions within these crèches.

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Paint was also given to Shepstone House, an old age home in Estcourt Kwazulu-Natal, as they rely totally on help from the public with no support from Government but subsidized to a point by the local Municipality. The elderly are to a large extent neglected by society and receive little funding or help. Kansai Plascon helped create a fresh look for the home.

A number of shelters for abused woman and children received paint from Kansai Plascon. Many of the centres were in dire need of a fresh coat of paint and it is important to create a restful environment for woman and children who have often suffered from abuse and violence both sexually and physically.

The Salvation Army also deals with such cases and received paint from Kansai Plascon.

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Many ad-hoc donations were done on Mandela Day which has become an important day in South Africa’s calendar and is slowly gaining momentum around the world. Many corporates use the day as a team building exercise as well as doing good for many charities.

Kansai Plascon continues with community involvement across the country and targeting schools and crèches thus aiding in the development of the country’s young people.

10. Occupational Health and Safety Unsafe and unhealthy work conditions and behaviour affect service delivery, quality of life, health, productivity and retention.

10.1 Our Position Safety is a priority and a responsibility We view safety as a priority and a responsibility not just of management but also of every employee and contractor working at Kansai Plascon. We make safety a priority across the group by ensuring that it is a cultural mind-set and practical reality.

While management is accountable for safety and demonstrates leadership through personal example, all our people are expected to take personal responsibility for working safely by following policies and procedures, identifying hazards and acting when they see unsafe behaviour. Our behaviour based safety programmes continue to help us reach our safety targets.

The organisation seeks to create an environment that fosters the belief that it is possible to create an injury-free workplace. Where employees and their families know that their safety is paramount and fundamental to the organisation’s culture and way of doing business.

To this end we have maintained all our ISO 9001:2008 (Quality Management Systems), 14001:2004 (Environmental Management Systems), OSHAS18001 (Health and Safety Management Systems) and TS 16949 (Automotive Systems) certifications for the period under review. All our South African major manufacturing sites are certified with these standards and we continue to ensure that these are maintained.

Our objective remains zero Lost Time Injuries at each and every facility.

10.2 Our key statistics for the 2015 financial year are: • • • • • •

No fatal incidents/accidents in 2015 Lost time injuries - 36% reduction on previous year Non Lost Time Injuries - 27% reduction on previous year Lost Time Injury Frequency Rate (LTIFR) improved to 0.22 (2014 :0.39) ISO9001:2008, 14001:2004 OHSAS 18001 and TS 16949 certifications have been retained by the organization Safety culture created

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10.3 Looking forward • • • • • • •

Plan to create a culture of safety in our African Operations Address unsafe conditions by maintaining all safety systems in line with our OSHAS 18001 certification Train staff on incident investigations and problem solving Continue to engage the “hearts and minds” of our employees and contractors through safety drives, including safety talks and coaching Implement and improve our BBS programme momentum at sites where it is not yet implemented and implemented respectively Focus on our emergency preparedness and response procedures such as business continuity plans for the whole group Improve on hazard identification and risk assessments at all sites

10.4 SHERQ Approach Our objective is to enable our employees to keep their “minds on the task” by employing relevant and interesting safety communications. This has enabled our high safety awareness levels and reduced complacency factors.

SHERQ awareness initiatives include amongst others: • • •

Monthly Health and Safety themes that are discussed at each Team Forum to ensure understanding World day for Safety and Health Celebrations Environmental Day celebrations

• • •

Quality Day Celebrations Wellness Day Celebrations World Aids Day Celebrations

Pictures from the celebrations held throughout the group

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11. Environmental Sustainability 11.1 Environmental ethos and policy In line with its parent body, Kansai Paint Co. Ltd., KPAL recognises that business is dependent on the provision of numerous ecosystem services that are integral to the successful operations of its business. In acknowledgement of this, KPAL strives to minimise its impact on the environment and to use natural resources and other eco-services as efficiently as possible.

This ethos is directed by a group-wide Environmental Policy, signed by the CEO and the upholding of which is the responsibility of all employees of KPAL.

11.2 Environmental management KPAL’s environmental awareness and strategy is driven by the group Ecoforum that meets on a sixweekly basis to evaluate performance against the group environmental targets, evaluate initiatives to reduce the group’s environmental impact, share ideas between the group businesses and, amongst others, keep abreast of relevant local and international legislation.

The Ecoforum is attended by representatives of relevant areas within the group and is chaired by the Executive: Group Safety, Health, Environment, Risk and Quality (SHERQ) with the support services of an external sustainability consultant. The outputs of the Ecoforum inform the KPAL Social and Ethics Committee of the Board, who hold overall responsibility for KPAL’s impact and actions.

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Input: Input: Raw material - 119 992 365t

Energy: Heavy duty furnace oil - 14 255Gj Diesel - 27 413Gj

Water - 118 561kl

Petrol - 35 415Gj Electricity - 62 923Gj (16 357 292kWh)

KPAL 2015 (84 389kl produced)

Output: Waste - 3 778t Hazardous waste - 1 553t Water discharge -24 129kl

Output: Scope 1&2 greenhouse gas emissions 22 894tCO2e Scope 3 greenhouse gas emissions 8 070tCO2e

Overview of KPAL 2015 environmental inputs and outputs

11.3 Environmental Priorities for 2015 and moving forward • • • • •

•

Minimising the use of existing hazardous substances in our product formulation and eliminating any unnecessary new hazardous substances Managing carbon emissions, usage of energy (including electricity) and water against newly-set reduction targets for 2016 to 2020 Achieving a 10% reduction year on year on “Waste to Landfill” by 2020 Ensuring that our product and transport labelling meets the GHS (Globally Harmonised System of Classification and Labelling of Chemicals) requirements Abiding by all environmental laws and ensuring all our major sites and processes maintain ISO 14001:2004 Environmental Management System accreditation Incorporating all African operations into environmental management, measurement and target processes from 2015 onwards

- 28 -

11.4 Environmental reduction targets Due to restructuring within the KPAL group during 2013 and 2014, the original five-year environmental reduction targets for 2009-2014 was extended for a year to include 2015 (see section 10.5).

However, during 2015 an extensive exercise was conducted to develop a new set of environmental reduction targets that will see the group through to 2020. The work was based on performances achieved and lessons learned during the first target period set by KPAL between 2010 and 2015, as well as consultation with each business within the group to ascertain ambitious yet realistic goals.

Each business has subscribed to their own individual targets, and these have been extrapolated to reflect a group-wide set of targets.

During the 2016-2020 period, all energy use is being targeted, as opposed to just electricity in the past.

Kansai Plascon Decorative

Kansai Plascon Automotive

Environmetal Reduction Targets 2016-2020 Energy- 7,5% /unit production Water - 5,0% /unit production Waste to landfill - 10% reduction / unit production (2016) Recycling ratio - 10% increase (2016) Carbon Reduction Target - 2016-2020 Scope 1&2 emissions - 7,5%/unit production

Kansai Colourants

Marouns

KPAL Group Environmental Reduction Targets 2016-2020

11.5 Environmental performance 11.5.1 Electricity A 6, 4 percent reduction in electricity (2014-2015) was recorded by the group, mostly driven by initiatives within the Decorative and Automotive businesses that are now beginning to reflect in reduced consumption. This is a pleasing reversal of trends, resulting in a significant improvement in electricity efficiency with further improvements expected in coming years.

2015 initiatives included: â&#x20AC;˘ â&#x20AC;˘

Motion sensors in the Luipaardsvlei change rooms and Polycell plant Implementation of a smaller compressor for use during weekends at Luipaardsvlei - 29 -

• •

Motion sensors at the Port Elizabeth plant Changing of motors to energy efficient versions at Port Elizabeth

The Automotive plant in Port Elizabeth is also exploring options to procure renewable energy from nearby wind farms with anticipated installation in 2016.

20,000,000 18,000,000 16,000,000 14,000,000 (kWh)

12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2009

2010

2011

2012

2013

2014

2015

Total KPAL Electricity Consumption (kWh) – 2009-2015 0.250 0.219

0.215 0.194

0.192

0.200 kWh/l produced

0.215

0.160

0.168

0.150

0.139

0.100

0.050

0.000 2009

2010

2011 Total kWh/l

2012 2013 Target (-11,25%)

2014

2015

KPAL Electricity Intensity (kWh/litre produced) – 2009-2015

- 30 -

11.5.2 Water

Despite a marginal increase in total water consumption, the higher production volumes ensured that KPAL’s water intensity figures reduced year-on-year, albeit just outside the target range.

Greatest impact was delivered by the Decorative and Automotive businesses, where initiatives introduced during the year included: The reuse of waste water in the production process at Mobeni and Epping Decorative plants Rainwater harvesting at Luipaardsvlei for pot and tank cleaning and irrigation purposes Water from Luipaardsvlei NPDC sump being treated at the on-site waste water treatment plant 140,000 120,000

Kilolitres

100,000 80,000 60,000 40,000 20,000 0 2009

2010

2011

2012

2013

2014

2015

1.437

1.405

Total KPAL Water Consumption (kl) – 2009-2015 1.600 1.400

1.487 1.368

1.380 1.203

1.200 litre/litre produced

• • •

1.297

1.239

1.000 0.800 0.600 0.400 0.200 0.000 2009

2010

2011 Total l/l

2012

2013

2014

2015

Target (-4,4%)

KPAL Water Intensity (l/l produced) – 2009-2015 - 31 -

Sustainability Through Rain Water Harvesting at Luipaardsvlei

Water is one of the critical resources that is under threat in our environment, and saving it is one of the most significant ways we can positively impact our environment for future generations.

At

Kansai Plascon Luipaardsvlei we have

started contributing to this by harvesting and re-using rain water from our rooftops. Two tanks with a total capacity of 10Kl have been installed and we are collecting and re-using rain water specifically at the RMS A change rooms.

The installed filtration system is highly effective and a UV purifier has been installed to ensure that the water is safe and clean for sanitation purposes.

Since the inception of the project in September 2015 we have saved up to 80Kl of water at the site, to the value of R20 000.

During recent municipal water shortages the RMS change rooms always had water, thanks to this wonderful initiative.

- 32 -

11.5.3 Waste to landfill intensity Waste sent to landfill continues to decrease year-on-year, with the majority of gains being achieved by the Performance Coatings business which recorded a decrease from 0.101kg of waste per litre of production to 0.079 – bringing the business within its stated 2009-2015 target for the first time.

Key wins during 2015 included: • • •

Recycling 20 litre plastic buckets at Luipaardsvlei Management of non-stock returnables at Mobeni The selling of paint past its shelf life to farmers at Port Elizabeth

As the group aims for a 10% reduction in “waste to landfill” in 2016, concerted effort is being put into working with waste management service providers to reduce and reuse waste and to recycle wherever possible.

4,500.00 4,000.00 3,500.00 3,000.00

Tons

2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 2009

2010

2011

2012

2013

2014

2015

Total KPAL Waste sent to Landfill – 2009-2015

- 33 -

0.050 0.046 0.045 0.040

0.040

0.035

K

Kg/litre produced

0.035

0.040

0.036 0.032

0.032 0.029

0.030 0.025 0.020 0.015 0.010 0.005 0.000 2009

2010

2011 Total kg/l

2012

2013

2014

2015

Target (-10%)

KPAL Waste to Landfill Intensity (kg/litre produced) â&#x20AC;&#x201C; 2009-2015

Port Elizabeth waste recycling project In 2008, the Port Elizabeth plant initiated a waste-recycling project due to limited available space to hold solid waste (drums, pallets, metal scrap, flow bins, plastic buckets and paper) and the closing down of the only available outlet for the plantâ&#x20AC;&#x2122;s liquid solvent waste.

The solid waste is now sent to various independent and certified waste recycling companies, while the solvent is recycled on-site and recovered for further use, preventing all such waste from being disposed at the Motherwell Aloes landfill site.

In 2014 506, 47 ton of waste was recycled (164, 49 tons of which was solvent), and this increased to 629, 22 tons in 2015 (187, 01 tons solvent), accounting for some 60, 3 percent of all waste being recycled.

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11.6 KPAL Carbon Footprint A 2015 carbon footprint was conducted on KPAL operations. Scope 1&2 emissions relating to direct emissions from South African operating sites and indirect emissions due to electricity usage were calculated, as were selected Scope 3 (Supply Chain) emissions.

Scope 1&2 emissions have significantly decreased due to reduction in emissions from operational equipment and processes and also electricity consumption. The outsourcing of the Luipaardsvlei truck fleet was instrumental in this decrease, as is a pleasing decrease in electricity consumption and a cleaner electricity mix from the utility. This resulted in a reduction in intensity related figures, where Scope 1&2 emissions per unit of production has decreased from 0,283kg CO2e/litre produced to 0,246kg CO2e/litre in the last year, which is within the target band for 2015.

It has been part of KPALâ&#x20AC;&#x2122;s intentions to increase the boundary of Scope 3 emissions over time. It is important to note that under the Greenhouse Gas Protocol, Scope 3 supply chain emissions are voluntary by companies. It is part of KPALâ&#x20AC;&#x2122;s commitment to understanding its full impact that this area of the carbon footprint continues to be expanded and improved.

Scope 1&2 kgCO2e/litre produced

0.35 0.3

0.326 0.297

0.309 0.270

0.283 0.256

0.25

0.246 0.2 0.15 0.1 0.05 0 2010

2011

2012

Scope 1&2 kgCO2e/litre produced

2013

2014

2015

Target (-11.25%)

KPAL Scope 1&2 carbon emission intensity (kgCO2e/litre produced)

- 35 -

Year

Scope 1 (tCO2e)

Scope 2 (tCO2e)

Scope 3 (tCO2e)

Outside of scope

Total (tCO2e)

2010

9 440

19 210

5 677

-

34 327

2011

8 498

17 907

9 954

-

36 359

2012 (excl. Africa, Hamilton’s & Automotive

4 041

16 935

DNR

-

20 723

2013 (excl. Africa)

5 874

17 535

2 369

87

25 864

2014 (excl. Africa)

4 890

18 003

8 001

87

30 982

2015 (excl. Africa)

4 250

16 395

8 734

113

29 592

Mobeni)

Greenhouse gas emissions for all KPAL operations – 2010-15

Scope 3 activity

Transportation of raw materials

Scope 3 emissions

Transportation of final product

2 292

Waste landfill

2 081

to

Waste recycled

Business travel

2 759

65

1 536

Select Scope 3 emissions – 2015

11.7 Full Environmental Indicators Indicator

Unit of Measurement

2014

2015

Production volumes

l

80 885 380

84 369 403

Additives

kg

3 140 578

4 109 971

Emulsions

kg

15 400

47 688

Extenders

kg

24 470 286

31 968 254**

Fatty acids

kg

1 277 349

2 864 732

Monomers

kg

1 223 817

887 640

Pigment

kg

7 929 409

12 104 361**

Resin

kg

6 161 973

10 566 697**

Resin raw material

kg

976 202

214 414

Raw materials procured

- 36 -

Solvent

kg

21 681 908

21 828 593

Wood (incl. of pallets)

kg

76 093

86 904

Paper

T

1

2

Metal cans & pails

kg

8 768 097

8 883 205

Paper labels and cartons

kg

11 782 936

37 404 668**

Cardboard/paper packaging

kg

3 065 989

2 586 251

Plastic containers

kg

14 718 894

15 296 899

HFO

kl

334

359

Diesel

l

717 128

450 522

Petrol

l

1 060 591

1 226 811

Natural gas

t

0

2

Electricity

kWh

17 478 703

16 305 665

Municipal

kl

117 024

117 748

Scope 1&2

tCO2e

22 894

20 745

Scope 3

tCO2e

8 001

8 734

kl

24 129

29 407

Metal cans & pails

t

86

95

Steel drums

t

429

524

Pallets

t

641

888

Direct energy consumption

Indirect energy

Water consumption

Carbon emissions

Water discharge Waste by type

- 37 -

Paper board

&

card-

t

88

64

Plastic containers

t

131

75

Solid & general waste

t

571

571

Solvents

t

678

263

Paint

t

271

244

Sludge

t

883

742

Spills

t

64

65

Fines

ZAR

0

0

Total waste transported

kg

1 533 309

1 555 582

Medical waste

kg

73

39

ZAR

5 236 642

5 626 091

Spills & fines

Transportation of hazardous waste

Environmental penditure

ex-

**Increase in raw materials procured was due to early buy-in in preparation for SAP Go-Live on 1st October 2015.

** Paper Labels and Cartons - High Increase due to early buy-in in preparation for SAP Go-Live on 1st October 2015 , and also HU labels system error that resulted in more labels being bought.

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12. Product Innovation Current economic pressures have had a significant impact on profitability and competitiveness. Kansai Plascon’s continued focus on innovation to drive growth and performance has seen innovation contribution from products launched in the last 36 months increase from 5 to 10% of gross sales in each financial year. New products such as Velvaglo Water-Based, True Colour Range and Thermoplastic Road Marking are some of the notable products that have contributed to this performance.

Kansai Plascon has focused most of its development in three key areas namely: Health, Environment and Performance. Improving the impact that coatings have on people’s lives is an important R&D driver, hence in 2015 focus was placed on VOC reduction, Formaldehyde and lead content.

Volatile Organic Compounds (VOC) contributes to sick building syndrome which has a negative impact on employee health. To reduce this impact, Kansai Plascon has introduced low VOC technology in its premium interior coatings whilst maintaining critical performance of coverage, washability and colour consistency.

In the industrial segment, the drive to reduce solvent emission has resulted in several solvent based products being replaced by water-based coatings. These include water-based metal primers, road marking, furniture coatings as well as water-based polyurethane coatings for the transport sector.

Formaldehyde is a common preservative used in decorative coatings. Researchers have recently categorised it as a carcinogen, hence all decorative water-based coatings were reformulated to replace this harmful material and are now formaldehyde free.

Whilst the decorative product range has been lead free from the late 90’s, the industrial coatings have still contained some lead based pigments. Even though these coatings are not sold into retail shops and are clearly marked as “lead containing” a decision was taken to reduce lead usage and eliminate it completely from Kansai Plascon Industrial products. In 2015, 60% of lead based products were reformulated and are now lead free. The balance of the range will be converted to lead free in 2016.

Innovation and sustainability continue to be key drivers of innovation at Kansai Plascon. The R&D teams will continue their quest for sustainable coatings that meet the exacting standards of customers in all market segments.

Environmental Research at Kansai Plascon Kansai Plascon’s Research Centre, based at the University of Stellenbosch, continues to investigate areas of operational and product development that have a net positive environmental outcome. Current projects under consideration include recommendations on decreasing the company’s water consumption through reuse and purification of water on-site; the development of polymer technologies that use renewable raw materials; and, the reuse of recycled tyres as fillers in finished paint products.

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12.1 Plascon Industrial: Water-Based Launch Kansai Plascon Industrial’s commitment to environmental sustainability and service delivery excellence has culminated in a range of water-based industrial products, which was launched in South Africa in May 2015. These water-based technologies have been available for a number of years but communication about these products to our customers was limited.

These products have been developed using ‘Innovative Water-Based Technology’ – with excellent durability, fast drying times and low odour. Backed by our technical expertise, customers are assured that these are products of the highest quality.

AQUANOVA Coatings System: Together, the AQUANOVA Primer and AQUANOVA Topcoat form the ideal system for use in extreme industrial environments up to C3, and offers a lifetime expectancy of up to 12 years.

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AQUADUO Direct-To-Metal: This is an innovative primer and topcoat in one that can be applied directly to prepared mild and galvanised steel and can be tinted using the Plascon Inspired Colour system to 100’s of colours. Rust inhibitors are built into the coating, thereby negating the need for primer. This saves both time and effort, and produces a finish that withstands exposure from harsh environmental conditions, whilst maintaining a protective sheen finish.

PLASCOSAFE: PLASCOSAFE Floor Coating was developed with exceptional abrasion resistance while also enhancing the beauty of wood. PLASCOSAFE Furniture coatings are a range of coatings specifically formulated for interior furniture and can be tinted into 100’s of colours using the Plascon Inspired Colour System. PLASCOSAFE is a premium range of environmentally-aware coatings that is available in different gloss levels, is fast drying, formaldehyde-free and ideal for use on interior wood.

As the market moves rapidly towards sustainable products and services, Kansai Plascon Industrial will continue to innovate and provide solutions that are not only kinder to the environment, but also reduce the costs of protecting both wood and metals from early deterioration. Our pride in our new water-based range is enhanced by knowing that our customers will form part of a chain of environmentally aware decisions.

13. Conclusion 2015 was certainly a tough year economically and 2016 looks set to be an equally demanding year.

Despite these challenges, it is imperative that KPAL continues to uphold the highest values in corporate governance, risk management and corporate governance.

We are determined to retain KPAL’s workplace safety standards and reputation as a desired place to work. Our investment in our staff, through strategic transformation, employment equity and leadership training is critical in ensuring that we have the best human resources in place to drive KPAL towards its goal of being Africa’s leading Coatings Company.

Positive relationships with our surrounding communities is important and we look forward to being able to further support activities and organisations that fit within our corporate social investment mandate.

Perhaps more so than ever, issues of efficiency come to the fore in times of economic challenge. Our use of natural resources cannot be wasteful and, to this end, we will build on our achievements to date and strive to meet the new environmental reduction targets set for 2015 to 2020 in our energy and water usage, waste to landfill and carbon emissions.

Finally, as described by our CEO, we can never be a sustainable company if our product is not deemed to be sustainable. To this end we will always work hard to ensure that our product formulations are as safe and as durable as possible. Formaldehyde based preservatives have been phased out of all decorative water-based products. We will continue to bring products to the market that encapsulate our ethos of being a company that is a “force for good” within society.

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