Tanga-Cement-AR-2017

TANGA CEMENT PLC 2017 ANNUAL REPORT TAARIFA YA MWAKA

Building today’s Dreams for Tomorrow’s Generations

www.simbacement.co.tz Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Contents Yaliyomo

Financial Summary 1 Board of Directors 37 Vidokezo vya Mapato 2 Bodi ya Wakurugenzi 37 Directors’ Profiles 3 Directors’ Report 38 Maelezo Mafupi kuhusu Wakurugenzi 3 Statement of Directors’ Responsibilities 46 Chairperson’s Statement 7 Declaration by the Head of Finance 47 Waraka wa Mwenyekiti 9 Independent Auditor’s Report 48 Managing Director’s Report 13 Taarifa ya Mkurugenzi Mtendaji 15 Consolidated Statement of Comprehensive Income 53 Human Resources 17 Waraka wa Mapato unaotambulika 54 Rasilimali Watu 20 Consolidated Statement of Financial Position 55 Corporate Social Investment 23 Waraka wa Hali ya Kifedha 56 Uwekezaji wa Kijamii wa Kampuni 25 Consolidated Statement of Changes in Equity 57 Safety and Environment 28 Waraka wa Mabadiliko ya Hisa/Mtaji 58 Usalama na Mazingira 28 Consolidated Statement of Cash flows 59 Quality 31 Waraka wa Mtiririko wa Fedha 60 Ubora 32 Notes to the Consolidated Financial Statements 61 Value Added Statement 35 Waraka wa Ongezeko la Thamani 35 Proxy Form 104 Fomu ya Mwakilishi 105 General Information 36 Notice to Members 107 Taarifa Kwa Wanachama 108

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations Dividend per share: 2016 : Tzs 80 Financial Summary 2017 : Tzs 25

Revenue Earning per share

300000 600

250000 500

200000 400

150000 300 Tzs/ Share Tzs/ Share

100000 200

50000 100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0

-100 Year Tzs Millions Year Tzs Millions 2008 121,349.00 2013 233,060.60 2009 119,898.00 2014 232,100.72 -200 2010 199,428.26 2015 209,116.05 2011 233,863.26 2016 166,975.48 -300 2012 257,921.83 2017 171,744.72

-400 Pro t after taxation -500 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 40000

Year Tzs 35000 Year Tzs 2008 475.15 2013 505.00 2009 477.77 2014 446.00 30000 2010 512.00 2015 131.00 2011 350.00 2016 68.00 25000 2012 555.00 2017 (418.31)

20000 Dividend per share 15000 Tzs mio

10000

5000 250

200 -5000

-10000 150 Tzs/ Share -15000 100

-20000 50 -25000

-30000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Tzs bili Year Tzs Millions Year Tzs Millions Year Tzs Year Tzs 2008 30,253 2013 32,165 2008 120.00 2013 110.00 2009 30,420 2014 28,401 2009 179.00 2014 120.00 2010 32,574 2015 8,242 2010 247.00 2015 80.00 2011 22,291 2016 4,261 2011 86.00 2016 80.00 2012 37,113 2017 (26,340) 2012 100.00 2017 25.00

ANNUAL REPORT 2017 1 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations Gawio kwa Hisa: 2016 : Tsh 80 CorporateVidokezo Social Investment vya Mapato 2017 : Tsh 25

Mapato Mapato kwa Hisa

300000 600

250000 500

200000 400

150000 300 Tzs/ Share Tzs/ Share

100000 200

50000 100

0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-100 Mwaka Tsh Milioni Mwaka Tsh Milioni 2008 121,349.00 2013 233,060.60 2009 119,898.00 2014 232,100.72 -200 2010 199,428.26 2015 209,116.05 2011 233,863.26 2016 166,975.48 -300 2012 257,921.83 2017 171,744.72

-400 Faida baada ya Kodi -500 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 40000

35000 Mwaka Tsh Mwaka Tsh 2008 475.15 2013 505.00 2009 477.77 2014 446.00 30000 2010 512.00 2015 131.00 2011 350.00 2016 68.00 25000 2012 555.00 2017 (418.31)

20000 Gawio kwa Hisa 15000 Tzs mio

10000

5000 250

200 -5000

-10000 150 Tzs/ Share -15000 100

-20000 50 -25000

-30000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Tzs bili Mwaka Tsh Milioni Mwaka Tsh Milioni Mwaka Tsh Mwaka Tsh 2008 30,253 2013 32,165 2008 120.00 2013 110.00 2009 30,420 2014 28,401 2009 179.00 2014 120.00 2010 32,574 2015 8,242 2010 247.00 2015 80.00 2011 22,291 2016 4,261 2011 86.00 2016 80.00 2012 37,113 2017 (26,340) 2012 100.00 2017 25.00

TAARIFA YA MWAKA 2017 Building today’s Dreams for tomorrow’s Generations Tanga Cement PLC 2 Maelezo mafupi kuhusu Directors’ Profiles Wakurugenzi

Tanga Cement is led by a competent Board of Directors, with extensive knowledge and experience from varied sectors. Lawrence Masha (47) Board Chairperson LLM (International & Comparative Law) Tanzanian • Mr Masha is the managing partner of Gabriel and Co. Attorneys • He has close to twenty years of experience of law specialized in Banking and finance • Was a founder and Managing Partner of IMMA Advocates from 2012 to 2015 • Director of Fastjet Tanzania Limited • Director of Newforest Tanzania Limited • Former minister of energy and minerals and later on as the minister of home affairs 2000-2010 • He was recognized as a Young Global Leader by the World Economic Forum in 2009

Mwenyekiti LLM (Kimataifa & Sheria Linganishi) Reinhardt Swart (44) Mtanzania Managing Director • Bw Masha ni Mkurugenzi Mtendaji mwenza Bsc.(Mechanical Engineering), wa Gabriel and Co. Attorneys South African • Ana uzoefu wa karibu miaka ishirini katika • Mr Swart has expert knowledge in the sheria na amebobea katika sheria za benki cement manufacturing industry na fedha • Held positions of Consultant in the Group • Alikuwa Mkurugenzi Mtendaji Mwenza na Technical Services division of Holcim mwanzilishi wa IMMA Advocates tangu (Switzerland), Process Engineer, Process mwaka 2012 mpaka 2015 Performance Engineer and Maintenance • Mkurugenzi wa Fastjet Tanzania Limited Manager, before being appointed to the • Mkurugenzi wa Newforest Tanzania position of General Manager of AfriSam’s Limited Dudfield cement production facility, South • Waziri wa zamani wa nishati na madini na Africa baadaye waziri wa mambo ya ndani 2000- • He held the position of General Manager 2010 before being seconded to Tanga Cement • Alitambulika kama mmoja wa viongozi Public Limited Company to oversee the vijana duniani katika Baraza la Uchumi la successful completion of the expansion Dunia mwaka 2009 project Mkurugenzi mtendaji Shahada (Mhandisi Mitambo) Mwafrika Kusini • Bw Swart ni Mtaalam wa sekta ya saruji • Aliwahi kuwa mshauri wa kundi wa Huduma za Ufundi wa Holcim, (Switzerland) • Alikuwa Mhandisi wa mchakato, Mhandisi wa Utendaji na matengenezo, Meneja Mkuu wa kiwanda cha uzalishaji wa simenti cha AfriSam Dudfield, Afrika Kusini • Alishika nafasi ya Meneja Mkuu kabla ya kuletwa Tanga Cement Plc kusimamia ufanikishaji wa ukamilishaji mradi wa upanuzi 3 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Maelezo mafupi kuhusu Directors’ Profiles Wakurugenzi

Pieter de Jager (46) Chief Financial Officer B.Comm Accounting; B.Compt (Hons)/CTA; MBA South African • Mr De Jager has over 20 years senior management experience including major listed companies in various sectors • He worked in senior financial management and executive positions in the electrical Engineering, FMCG, Supply Chain, Freight Logistics & Warehousing- and the Mining sectors in various countries in Southern, Central and West Africa • He was the Group CFO for the Jonah Capital Group (including Jonah Mining) • Prior to joining Tanga Cement PLC, he has held the position of Group CFO and director of Andulela Investment Holdings Ltd (JSE listed) • He has also had significant experience working with junior mining companies listed on the TSX and ASX Patrick Rutabanzibwa, (62) (Independent Non-Executive) Afisa Mkuu wa fedha B.A in Chemical Engineering B. Com, Accounting; B. Compt (Hons) CTA; MBA Tanzanian Mwafrika Kusini • Mr Rutabanzibwa is the Country Chairman • Bw De Jager ana uzoefu wa zaidi ya miaka 20 of PanAfrican Energy ya uongozi wa juu ikiwa ni pamoja na kwenye makampuni yaliyoko kwenye masoko ya hisa na • Member of the Board of Directors for the sekta mbalimbali, National Housing Corporation (NHC) • Amefanyakazi katika ngazi za juu za ungozi wa • He served as Principle Secretary for a masuala ya fedha na nafasi za kiutendaji kwenye number of ministries in the country namely; makampuni yanayojishughulisha na masuala Ministry of Energy and Minerals, Ministry of ya uhandisi wa umeme, FMCG, ugavi, uchukuzi Lands, Housing and Human Settlement shehena za mizigo na uhifadhi na pia sekta Development, Ministry of Home Affairs and ya uchimbaji madini katika nchi mbali mbali Ministry of Water zilizoko katika nchi za ukanda wa kusini, kati na magharibi ya Afrika. Si-Mtendaji Shahada ya uhandisi kemikali • Alikuwa mkuu wa fedha wa kundi la makampuni Mtanzania ya Jonah Capital Group (ikijumuisha kampuni ya madini ya Jonah) • Bw Rutabanzibwa ni mwenyekiti wa nchi • Kabla hajajiunga na Tanga Cement PLC, wa PanAfrican energy na mkurugenzi wa alishika wadhifa wa mkuu wa masuala ya bodi Shirika la Nyumba la Taifa (NHC) fedha wa Andulela Investment Holdings Ltd • Alikuwa ni Katibu Mkuu wa wizara (iliyoorodheshwa JSE) mbalimbali ikiwemo ya Nishati na Madini, • Bw De Jager ana uzoefu wa kipekee wa Wizara ya ardhi, Nyumba na Maendeleo ya kufanyakazi na makampuni madogo ya madini Makazi, Wizara ya Mambo ya Ndani na pia yaliyoko katika masoko ya hisa ya TSX na ASX Wizara ya Maji

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 4 Maelezo mafupi kuhusu Directors’ Profiles Wakurugenzi

Raymond Mbilinyi (53) Rob Wessels (43) Khamis Omar (53) Acting Chief Executive Officer (Independent Non-Executive) (Independent Non-Executive) BSc in Engineering; MBA in Marketing, B.Com, LLB ; CFA Charterholder Msc (Development Studies), PGD (Business South African Administration); Advanced Diploma (Tax Certified Project Manager Management) Tanzanian • Mr Wessels was appointed Acting Chief Tanzanian • Mr Mbilinyi is the Executive Secretary of Executive Officer of AfriSam in March 2017 • Previously he was the Head of Advisory as • Mr Omar is the Principal Secretary in the Tanzania National Business Council (TNBC) well as the Head of Corporate Finance at President’s Office - Finance, Economy and • He is a Board Member in the Nedbank Capital Development Planning in Zanzibar Tanzania Industries Licensing Board (BRELA) • He serves on various boards including Victoria Microfinance Co and the Tanzania • He is a long-standing Non-Executive the Zanzibar Revenue Board Private Sector Foundation (TPSF) Member of AfriSam’s Board of Directors Bank of Tanzania and the Tanzania • He has over 19 years of professional and was integral to the financial Revenue Authority experience in Africa restructuring of AfriSam and Phembani Si-Mtendaji acquiring a 31% shareholding in AfriSam Si-Mtendaji Shahada ya uhandisi, Mtalaam wa masoko, Kaimu Afisa Mkuu Msc (Mitaala ya Mendeleo); Advanced Meneja wa Miradi aliyethibitishwa B.Com, LLB; CFA Charterholder. Diploma (Usimamizi wa Kodi); PGD(Utawala Mtanzania Mwafrika Kusini wa Biashara) Mtanzania • Bw Mbilinyi ni Katibu Mtendaji wa Baraza · Bw Wessels ameteuliwa kuwa kaimu mkuu la Taifa la Biashara(TNBC) wa AfriSam mwezi machi 2017 • Bw Omar ni Katibu Mkuu Ofisi ya • Ni mkurugenzi wa bodi mbalimbali · Amewahi kushika nyadhifa mbalimbali Rais – Fedha, Uchumi na Mipango ya zikiwemo Tanzania Industries Licensing kama vile mshauri mkuu na Mkuu wa Maendeleo, Zanzibar Board (BRELA), Victoria Microfinance • Ni mjumbe katika bodi mbalimbali fedha Nedbank capital ikiwemo ya Mapato Zanzibar, Benki Company na Tanzania Private Sector · Ni mmoja wa wakurugenzi wa muda kuu ya Tanzania na Mamlaka ya Mapato Foundation (TPSF). mrefu was Bodi ya AfriSam na alihusika Tanzania • Ana ujuzi wa zaidi ya miaka kumi na tisa katika muungano wa AfriSam na barani afrika Phembani ambapo walichukua asilimia 31 za gawio la AfriSam

5 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Maelezo mafupi kuhusu Directors’ Profiles Wakurugenzi

Trevor Wagner (70) Ni wa kujitegemea, Si-Mtendaji (Independent Non-Executive) CA(SA), MBL CA (SA), MBL Mwafrika Kusini South African • Bw Wagner ni Mkurugenzi asiye mtendaji wa • Mr Wagner serves on a number of Boards as a makampuni mbalimbali ikiwa ni pamoja na Non-Executive Director, including Xuba Polymer Xuba Polymer Industries Industries • Awali alikuwa Mkurugenzi wa fedha wa • He was previously Group Financial Director at the Kampuni iliyojulikana kama Alpha Cement then Alpha Cement Group, which subsequently Group, ambayo baadaye ilibadilika na kuwa became AfriSam Group AfriSam • He was part of a management buy-out of Alpha’s Industrial Division • Alisimamia ununuaji wa kampuni ya Alpha • Was a shareholder and Deputy CEO of Idwala, upande wa usimamizi responsible for finance, administration, human • Alikuwa ni mwanahisa na naibu mtendaji resources and business strategy mkuu wa Indwala, anaye wajibika na fedha, • He held a number of positions in the then Alpha utawala, rasilimali watu na mkakati wa Cement Group biashara • He started his career as an Audit Manager at PriceWaterhouseCoopers, • Alishika nyadhifa mbalimbali katika kundi la makampuni ya Alpha Cement • Is the past Chairman of SAICA’s (South African Institute of Chartered Accountants) Northern • Ni Mwenyekiti wa zamani wa SAICA (South Region and a past member of SAICA’s National African Institute of Chartered Accountants) ya Board. mkoa wa Kaskazini na mkurugenzi wa zamani • Mr Wagner also served as the Chairman of Idwala wa bodi ya Taifa ya SAICA ya Afrika Kusini Provident Fund and is a Trustee of Trecar Trust • Bw. Wagner aliwahi kuwa Mwenyekiti wa bodi ya Idwala Provident Fund na mdhamini wa mfuko wa Trecar

Dr Stephan Olivier (57) Si-Mtendaji, alistaafu 20 Machi 2017) (Non – Executive, resigned on 20 March 2017) BSc (Hons); MSc; PhD BSc, BSc (Hons); MSc; PhD Mwafrika Kusini South African · Dk Stephan ni Afisa Mtendaji Mkuu wa • Dr Stephan was the Chief Executive Officer of AfriSam AfriSam Group; • Amewahi kushika nyadhifa mbalimbali • He previously held the position of Chief katika kampuni ya AfriSam ikiwemo cheo Operating Officer for the AfriSam Cement cha Mkuu wa uendeshaji wa AfriSam operations upande wa uzalishaji simenti • He has served in various management • Amewahi kushika nyadhifa mbalimbali ndani positions within the organisation, including ya kampuni ikiwemo ya Mkurugenzi wa Director of Marketing and Technical Services Masoko na Huduma za Ufundi • Dr Olivier has served on a number of industry • Dk Olivier amekuwa kwenye vyombo na bodies and committees. kamati mbalimbali ndani ya sekta

Quresh Ganijee (35) Katibu wa Kampuni Company Secretary ICSA ICSA Mtanzania Tanzanian • Bw Ganijee ni Katibu wa Kampuni • Mr Ganijee is currently the Company Secretary • Amewahi kushika nyadhifa mbalimbali • He previously served on various positions kama vile, Katibu wa Kampuni Msaidizi, such as Assistant Company secretary, Cost Mhasibu wa gharama na Msimamizi wa Accountant and Payroll Administrator mambo ya mishahara • He is the registered member of ICSA (Institute • Bw Ganijee ana uzoefu wa zaidi ya miaka of Chartered secretaries and Administrators) kumi katika tasnia ya Saruji • Mr Ganijee has more than 10 years’ experience in the cement manufacturing sector

TAARIFA YA MWAKA 2017 Tanga Cement PLC 6 Building today’s Dreams for tomorrow’s Generations Chairman’s Statement

Advocate Lau Masha Chairperson of the Board

We re-affirm our commitment to all stakeholders through our high quality cement and clinker and our contribution towards the sustainable growth and development of Tanzania, a demonstration of our brand – “STRENGTH WITHIN”.

Tanga Cement PLC ANNUAL REPORT 2017 7 Building today’s Dreams for tomorrow’s Generations Chairman’s Statement

Introduction in the depreciation charge of six percent (6%) was driven by depreciation Dear Shareholders, we hereby present the audited trading results of Tanga of the new integrated production line for the full year compared to ten (10) Cement Public Limited Company for the year ended 31 December 2017. months in the prior year as well as additional capital investments in 2017 to improve production efficiencies. 2017 was a challenging financial year in the cement and construction industry. The Group recorded a loss before tax of Tanzanian shillings thirty five billion (TZS 35bn) for 2017 from a profit before tax of Tanzanian shillings six billion Sales prices were under significant pressure as the country remains in a net (TZS 6bn) in 2016 which was impacted by the decrease in gross profit and oversupply of installed cement and clinker capacity. expenses referred to above as well as the increase in financing cost and foreign exchange losses on US Dollar denominated term loans for the We re-affirm our commitment to all stakeholders through our high quality second integrated production line which was commissioned in 2016. cement and clinker and our contribution towards the sustainable growth and development of Tanzania, a demonstration of our brand – “STRENGTH The net loss after tax for 2017 of Tanzanian shillings twenty six billion WITHIN”. (TZS 26bn) is down from the net profit of Tanzanian shillings four billion (TZS 4bn) of 2016. Macro-Economic Overview Cash flows from normal trading activities declined to Tanzanian shillings Our growth in business continues to be anchored on the economic fourteen billion (TZS 14bn) from Tanzanian shillings thirty six billion progress of Tanzania. The Tanzanian Shilling depreciated by three percent (TZS 36bn) in 2016 underlining the very competitive cement market. (3%) against the United States Dollar (USD) throughout 2017 due to imports into the country exceeding exports. Tanzania also experienced Tanga Cement PLC remains optimistic about its sales and cost optimisation political stability under the leadership of President Magufuli. The average production initiatives as we continually seek to enhance value for annual headline inflation rate remained fairly stable increasing to five point stakeholders. The company remains positive about 2018 despite the three percent (5.3%) in 2017 from five point two percent (5.2%) recorded in increased competitive landscape. Government initiatives to spur economic 2016, as a result of governments’ fiscal and monetary policies. growth through infrastructure development and promotion of local industries is earmarked to boost local cement demand while reducing the In the year under review, Tanzania’s estimated GDP growth for 2017 influx of low cost imported cement. remained robust and on par with the six point eight percent (6.8%) growth of 2016. This was supported by growth in various economic sectors mainly: In support of Government’s industrialisation drive to benefit local Extractive Industries, Telecommunications and Agriculture. producers, Tanga Cement PLC also started to sell clinker during 2017, which is showing an encouraging increase in uptake from independent small Tanzania’s construction industry is projected to have a positive growth cement millers going into 2018. This will benefit the cost of production trajectory informed by a steady population growth with a younger throughput and add significant value to the profitability of the company profile that increases demand for infrastructure, housing and commercial going forward. buildings, emerging middle-class, increased consumer activity and access to financial services (banking, mortgages and commercial credit). The company achieved a significant safety record during the year reaching Anticipated infrastructure projects such as the Standard Gauge Railway, two point six million (2.6 mil) hours without lost time injuries. Our Uganda-Tanzania oil pipeline, development and upgrade of various ports commitment of creating a safe and sustainable work environment for all and the natural gas pipeline from Mtwara are expected to see cement employees and contractors on site forms an integral part of the Simba demand increase. Cement corporate culture. We remain optimistic of the ambitious infrastructure development plans Dividend under the Government’s Development Vision 2025 programme and During 2017 the board has declared and paid a final dividend for the expect the projects to pick up momentum in quarter two (Q2) of 2018. 2016 financial year of Tanzanian shillings twenty five (TZS 25) per share Tanga Cement PLC has capacity to meet a significant share of the cement amounting to Tanzanian shillings one point six billion (TZS 1.6 bn) (2015: demand in the country and remains committed to production of superior Tanzanian shillings twenty five (TZS 25) per share totalling Tanzanian cement products. shillings one point six billion (TZS 1.6 bn). The total dividend declared and paid for the 2016 financial year was Tanzanian shillings eighty (TZS 80) per Financial and Operational Overview share amounting to Tanzanian shillings five billion (TZS 5 bn). During 2017, the Company focused on increasing sales and production volumes and to confirm our market competitiveness driven by The Group has not declared an interim dividend for the 2017 year and does operational efficiency and overall business effectiveness in challenging not anticipate proposing a final dividend to the shareholders in line with market conditions. the financial performance for the year. The Board elected to be prudent by committing available current cash resources to the operational and debt Despite the fact that the group sales revenue grew by three percent (3%), to service commitments. Tanzanian shillings one hundred and seventy two billion (TZS 172bn) from Tanzanian shillings one hundred, sixty seven billion (TZS 167bn) in 2016, Conclusion competitive market headwinds impacted Tanga Cement’s profitability. Tanga Cement PLC remains grateful to its staff for their passion and dedication to the company and to its customers for their belief in the Gross profit for 2017 declined by forty six percent (46%) to Tanzanian Simba Cement brand, as the company works to achieve its short-term and shillings twenty nine billion(TZS 29bn) from Tanzanian shillings fifty four long-term growth strategy. billion (TZS 54bn) in 2016. With Tanzania being the second-largest construction market in East Africa, EBITDA declined to Tanzanian shillings nine billion (TZS 9bn) from cement output is anticipated to increase and Tanga Cement PLC is well Tanzanian shillings thirty eight billion (TZS 38bn) in the prior year. The positioned to take advantage of the growth opportunities in the regional reduction in EBITDA was mainly caused by lower sales prices dictated by market. We look forward to reaching greater heights together in 2018 in the market compared to the prior year. co-operation with all our stakeholders. Selling and administration expenses increased by ten percent (10%) to Tanzanian shillings twenty billion (TZS 20bn) over the prior year in support of the significantly improved sales and production volumes. The increase

Advocate Lau Masha TAARIFA YA MWAKA 2017 Chairman of the Board Tanga Cement PLC 8 Building today’s Dreams for tomorrow’s Generations Waraka wa Mwenyekiti

Wakili Lau Masha Mwenyekiti wa bodi

Hata hivyo tunawaahidi wadau wetu wote kuwa tutaendelea kutoa mchango wetu katika maendeleo na ukuaji wa nchi ya Tanzania kupitia simenti yetu yenye ubora usio tetereka na kuonesha kwa vitengo kauli mbiu ya chapa yetu - “STRENGTH WITHIN”.

Tanga Cement PLC ANNUAL REPORT 2017 9 Building today’s Dreams for tomorrow’s Generations Waraka wa Mwenyekiti

Utangulizi Tunaimani matarajio ya maendeleo ya miundombinu yaliyopangwa Ndugu wanahisa, tunawasilisha hesabu zilizokaguliwa za Tanga na Serikali katika mpango wa dira ya Maendeleo ya mwaka 2025 na Cement Public Limited Company kwa kipindi kinachoishia tarehe miradi inayotarajiwa itashika kasi katika robo ya pili ya mwaka 2018. 31 Disemba 2017. Tanga Cement PLC inao uwezo wa kutimiza mahitaji ya simenti kwa kiasi kikubwa nchini na tunaahidi kuendelea kuzalisha simenti yenye Mwaka wa kifedha wa 2017 ulikuwa na changamoto katika sekta ubora wa hali ya juu. ya simenti na ujenzi. Maelezo ya Fedha na Utendaji Bei ya kuuzia ilikuwa na shinikizo kubwa kutokana na mahitaji Mwaka wa fedha 2017 kampuni ilijikita katika kuhakikisha inaongeza ya simenti kuwa madogo kuliko kiwango cha usambazaji mauzo na uzalishaji ili kuwa na uhakika katika uwezo wa kushindana kulikotokana na viwanda vipya kuingia sokoni. sokoni pamoja na utendaji bora na ufanisi katika biashara kwenye soko Hata hivyo tunawaahidi wadau wetu wote kuwa tutaendelea lenye changamoto nyingi. kutoa mchango wetu katika maendeleo na ukuaji wa nchi ya Pamoja na kuwa na ongezeko la mauzo la asilimia tatu (3%) , na kufikia Tanzania kupitia simenti yetu yenye ubora usio tetereka na shilingi za kiTanzania bilioni mia moja sabini na mbili (Tsh 172 bilioni) kuonesha kwa vitendo kauli mbiu ya chapa yetu - “STRENGTH kutoka shilingi za kiTanzania bilioni mia moja sitini na saba (Tsh 167 WITHIN”. bilioni), wimbi la ushindani katika soko liliathiri faida ya Tanga Cement Mapitio ya Uchumi PLC. Ukuaji wa biashara yetu unaendelea kutegemea maendeleo Faida ghafi kwa mwaka 2017 ilipungua kwa asilimia arobaini na sita ya uchumi wa Tanzania. Mwaka 2017 shilingi ya kiTanzania (46%) na kuwa shilingi za kiTanzania bilioni ishirini na tisa (Tsh 29 bilioni) ilishuka thamani kwa asilimia tatu (3%) ikilinganishwa na dola kutoka shillingi za kiTanzania bilioni hamsini na nne (Tsh 54 bilioni) kwa ya kimarekani kutokana na kiwango kidogo cha mauzo ya nje mwaka 2016. ya nchi ikilinganishwa na bidhaa zilizoingizwa nchini. Tanzania pia ilikuwa tulivu kisiasa chini ya utawala wa Mheshimiwa Rais Mapato kabla ya riba, kodi, na uchakavu (EBITDA) yalipungua hadi Magufuli. Kiwango cha mfumuko wa bei kilikuwa cha wastani kufikia shilingi za kiTanzania bilioni tisa (Tsh 9 bilioni) kutoka shilingi kwa kuongezeka mpaka asilimia tano nukta tatu (5.3%) kutoka za kiTanzania bilioni thelathini na nane (Tsh 38 bilioni) kwa mwaka asilimia tano nukta mbili (5.2%) cha mwaka 2016 ambacho uliopita. Kupungua kwa EBITDA kulisababishwa kwa kiasi kikubwa na kilitokana na sera za kifedha za Serikali. bei ndogo ya bidhaa zetu ambazo zilisababishwa kwa kiwango kikubwa na ushindani wa soko ikilinganishwa na mwaka uliopita. Katika kipindi hiki cha mwaka 2017, ukuaji wa pato la taifa kwa Tanzania ulibaki kuwa imara na kwa kiwango cha asilimia sita Gharama za mauzo na uendeshaji ziliongezeka kwa asilimia kumi nukta nane (6.8%) ikiwa ni ukuaji sawa na wa mwaka 2016. Uimara (10%) na kufikia shilingi za kiTanzania bilioni ishirini (Tsh 20 bilioni) huu wa pato la taifa ulisaidiwa na sekta mbali mbali za kiuchumi ikilinganishwa na mwaka uliopita kutokana na ongezeko la mauzo na kama vile uchimbaji madini, mawasiliano na kilimo. uzalishaji. Uchakavu uliongezeka kwa asilimia sita (6%) uliosababishwa na uchakavu wa mtambo mpya wa uzalishaji klinka kwa mwaka mzima Sekta ya ujenzi ya Tanzania inatarajiwa kuwa na ukuaji imara ikilinganishwa miezi kumi ya mwaka uliopita pamoja na ongezeko la kutokana na ongezeko la idadi ya vijana ambapo itafanya uhitaji uwekezaji wa mitambo mipya kwa mwaka 2017 ili kuboresha ufanisi. wa ongezeko la miundombinu, makazi na majengo ya biashara, ongezeko la watu wa kipato cha kati, ongezeko la shughuli za Kampuni (kundi) ilirekodi hasara kabla ya kodi ya shilingi za kiTanzania watumiaji huduma na upatikanaji wa huduma za kifedha (kibenki bilioni thelathini na tano (Tsh 35 bilioni) kwa mwaka 2017 kutoka faida na mikopo ya biashara). Miradi ya miundombinu inayotarajiwa kabla ya kodi ya shilingi za kiTanzania bilioni sita (Tsh 6 bilioni) kwa ni kama vile reli ya kiwango (Standard Gauge Railway), bomba mwaka 2016 ambayo imesababishwa na kupungua kwa faida ghafi na la mafuta toka Uganda kuja Tanzania, upanuzi na uboreshaji matumizi yaliyoelezwa hapo juu pamoja na ongezeko la gharama za wa bandari mbalimbali pamoja na bomba la gesi asilia kutoka kifedha na hasara iliyotokana na ulipaji mikopo kwa fedha za kigeni Mtwara inategemewa kuongeza mahitaji ya simenti. yaani dola za kimarekani zilizokopwa kwaajili ya tanuru ya pili ambayo ilizinduliwa mwaka 2016.

TAARIFA YA MWAKA 2017 Tanga Cement PLC 10 Building today’s Dreams for tomorrow’s Generations Waraka wa Mwenyekiti

Hasara halisi baada ya kodi kwa mwaka 2017 ya shilingi bilioni ishirini na sita (Tsh 26 bilioni) iko chini ikilinganishwa na faida halisi ya shilingi bilioni nne (Tsh 4 bilioni) ya mwaka 2016. Hata hivyo tunawaahidi wadau Fedha inayotokana na shughuli za biashara ilipungua na kufikia shilingi za kiTanzania bilioni tatu (Tsh 3 bilioni) kutoka shilingi za kiTanzania wetu wote kuwa tutaendelea bilioni ishirini (Tsh 20 bilioni) mwaka 2016 ikithibitisha ushindani mkubwa kwenye soko la simenti. kutoa mchango wetu katika Tanga Cement PLC ina matumaini na mauzo yake na pia udhibiti wa maendeleo na ukuaji wa nchi gharama kwenye upande wa uzalishaji wakati ikiendelea kuongeza ya Tanzania kupitia simenti yetu thamani kwenye wanahisa wake. Kampuni inatumaini mwaka 2018 utakuwa mzuri ingawa kunaongezeko la ushindani sokoni. Mipango yenye ubora usio tetereka na ya Serikali ya kukuza uchumi kupitia maendeleo ya miundombinu na kuonyesha kwa vitendo kauli kukuza viwanda vya ndani inatarajiwa kuongeza matumizi ya ndani ya simenti wakati ikizuia uingizaji wa simenti ya bei nafuu toka nje ya nchi. mbiu ya chapa yetu - Katika kuiunga mkono sera ya Serikali ya viwanda ambayo itawafaidisha “STRENGTH WITHIN”. wazalishaji wa ndani, Tanga Cement PLC pia imeanza kuuza klinka mwaka 2017, ambapo imeweza kuwauzia wazalishaji wadogo wadogo wa simenti na inaonesha kuna kiwango cha ukuaji kwa mwaka 2018. Hitimisho Hii itakuwa na faida kwa upande wa gharama za uzalishaji na kuongeza faida muhimu kwa kampuni hapo baadaye. Tanga Cement PLC inawashukuru wafanyakazi wake kwa uvumilivu na kujitoa kwaajili ya kampuni na wateja wake Kampuni ilifanikiwa kuweka rekodi muhimu ya kiusalama kipindi cha wakiiamini chapa ya bidhaa za Simba Simenti, ambapo kampuni mwaka wa taarifa hii kwa kufikia masaa milioni mbili nukta sita (milioni inafanyakazi ili kufanikisha malengo yake ya muda mfupi na ya 2.6) bila kupoteza muda kutokana na watu kupata majeraha ama muda mrefu. kujeruhiwa. Dhamira yetu ya kuwa na mazingira salama na endelevu kwa wafanyakazi wetu wote na wakandarasi waliopo kiwandani Pamoja na Tanzania kuwa nchi ya pili kwa kuwa na ukubwa wa yanatengeneza sehemu kubwa ya utamaduni wetu kama Simba soko la vifaa vya ujenzi Afrika Mashariki, uzalishaji wa simenti simenti. unatarajiwa kuongezeka, na Tanga Cement PLC iko tayari kunyakua fursa hizi za ukuaji wa soko katika ukanda. Tuna shauku Gawio kubwa kufikia malengo ya juu ya pamoja kwa mwaka 2018 Mwaka 2017 bodi ilitangaza na kulipa gawio la mwisho kwa mwaka tukishirikiana na wadau wetu wote. wa fedha 2016 ambalo ni kiTanzania shillingi ishirini na tano kwa hisa (Tsh 25) ambayo jumla yake ni kiTanzania shilingi bilioni moja nukta sita (Tsh 1.6 bilioni) (mwaka 2015 ilikuwa Tsh 25 kwa hisa ambapo jumla ni Kitanzania shilingi 1.6 bilioni). Jumla ya gawio lililotangazwa na kulipwa kwa mwaka wa fedha wa 2016 lilikuwa kiTanzania shilingi themanini kwa hisa (Tsh 80) ambayo ni kiTanzania shilingi bilioni tano Advocate Lau Masha (Tsh 5 bilioni). Mwenyekiti wa Bodi Kampuni (kundi) haikutangaza gawio la nusu mwaka kwa mwaka 2017 na wala haitarajii kutangaza gawio la mwisho kwa wanahisa na hii ni kutokana na utendaji wa kampuni kifedha. Bodi imeona ni busara kutumia rasilimali ya fedha kwaajili ya shughuli za kiutendaji na kulipa madeni.

11 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations TAARIFA YA MWAKA 2017 Tanga Cement PLC 14 Building today’s Dreams for tomorrow’s Generations Tanga Cement PLC 12 Managing Director’s Report

Reinhardt Swart Managing Director

Sales revenue improved by three percent (3%) year on year to Tanzanian shillings one hundred seventy two billion (TZS 172bn) in FY2017 compared to Tanzanian shillings one hundred, sixty seven billion (TZS 167bn) in FY2016 on the back of a healthy growth in sales volumes. The competitive market pricing significantly impacted on the reduction in Gross Profit by forty six percent (46%) compared to prior year.

Tanga Cement PLC ANNUAL REPORT 2017 13 Building today’s Dreams for tomorrow’s Generations Managing Director’s Report

The 2017 financial year was testament to the challenging general Ensuring Sustainable Growth economic and business environment. Against this backdrop we made We are proactively adapting our business strategies to the good progress by increasing cement production output volumes by fluid geopolitical and macroeconomic market dynamics while ten percent (10%) over the prior year optimising our new integrated remaining cognisant of our core business and our responsibility to production line. However, the significant pricing pressure experienced all our stakeholders. Our ongoing cost optimisation and efficiency in a double oversupplied market weighed down on profitability. Our improvement programmes in production and operations are resilient business model and cost controls ensured that we remained yielding exciting results while retaining our brand equity of superior competitive while a number of cement players were forced to shut quality performance cement. The production capacity expansion down for extended periods as a result of the challenges presented. investment TK2 has positioned Tanga Cement to meet the anticipated increase in future cement demand in Tanzania. Our financial performance reflected the impact of significant competition in the market. Unpredictable and erratic price behaviour Our agreement with Tanzania Railway Limited (TRL) allows us access by other major market players was a major concern for lowering to more dedicated wagons for the Company as well as sole rental consumer expectations to unrealistic and unsustainable pricing levels. agreements of rail depots along the strategic distribution lines. Our continued Quality and Safety performance excellence of the highest This advantage reduces our storage and transportation costs while international standards contributed to our competitive advantage for enhancing rail transport and distribution capacity in Tanzania. sustainability in all areas of our business. Outlook Performance We continue to seek out new opportunities and improve on our Sales revenue improved by three percent (3%) year on year to Tanzanian production efficiency, product offering and distribution solutions to shillings one hundred seventy two billion (TZS 172bn) in FY2017 supply our products to upcoming infrastructure projects. compared to Tanzanian shillings one hundred sixty seven billion (TZS 167bn) in FY2016 on the back of a healthy growth in sales volumes. 2018 is poised to provide exciting opportunities from geopolitical The competitive market pricing significantly impacted on the reduction developments and increased competition. in Gross Profit by forty sixy percent (46%) compared to the prior year. Despite the initial delay by government in the roll-out of these The company registered a decrease in Earnings Before Interest Tax projects, we remain optimistic that they will pick up in the near Depreciation and Amortisation (EBITDA) to Tanzanian shillings nine future as indicated by government. billion (TZS 9bn) in FY2017 from Tanzanian shillings thirty eight billion (TZS 38bn) in 2016. Government approved large infrastructure projects such as the oil export pipeline from Uganda through Tanga in Tanzania, the The new integrated manufacturing line and kiln, TK2, which increased Standard Gauge Railway (SGR) and the Dar es Salaam and Tanga our clinker and cement production capacity to 1.25mt per annum, port upgrades are gaining momentum and is anticipated to boost continued to perform well by making Tanga Cement self-sufficient demand for cement in Tanzania over the next five years. in clinker in the long term. The company ramped up production throughout the year and generated additional revenue from sale of excess clinker. We further optimised our transport logistics and rail utilisation with direct access to the rail line into our packing and loading bays. Reinhardt Swart Depreciation on the new capital investment, interest on loan funding Managing Director and foreign were the main contributors to the net loss after tax of Tanzanian shillings twenty six billion (TZS 26bn) for 2017.

TAARIFA YA MWAKA 2017 Tanga Cement PLC 14 Building today’s Dreams for tomorrow’s Generations Ripoti ya Mkurugenzi Mtendaji

Reinhardt Swart Mkurugenzi Mtendaji

Mapato kutokana na mauzo yaliongezeka kwa asilimia tatu (3%) mwaka hadi mwaka na kuwa Shilingi za kiTanzania bilioni mia moja sabini na mbili (Tsh 172 bilioni) kwa mwaka wa fedha 2017 ikilinganishwa na Shilingi za kiTanzania bilioni mia moja sitini na saba (Tsh 167 bilioni) katika mwaka wa fedha wa 2016 kutokana na ukuaji bora wa mapato ya mauzo.

Tanga Cement PLC ANNUAL REPORT 2017 15 Building today’s Dreams for tomorrow’s Generations Ripoti ya Mkurugenzi Mtendaji

Mwaka wa fedha wa 2017 ulikuwa ni wenye changamoto na Tuliboresha zaidi mfumo wetu wa usafiri na matumizi ya reli ambayo mazingira magumu ya kiuchumi na kibiashara kwa ujumla. Licha hufika moja kwa moja mpaka kwenye eneo letu la kufungashia na ya changamoto hizi, tulifanikiwa kuongeza uzalishaji wa simenti kupakilia. kwa asilimia kumi (10%) katika kipindi hiki na kutumia kwa Uchakavu kwenye mtaji wetu wa uwekezaji na ulipaji riba kwenye ukamilifu tanuru yetu mpya. mkopo wa kigeni, vilichangia kwa kiasi kikubwa na kuleta hasara ya Hata hivyo, shinikizo kubwa lililotokana na mabadiliko ya bei shilingi za kiTanzania bilioni ishirini na sita (Tsh 26 bilioni) kwa mwaka katika soko ambalo lina kiwango cha simenti mara mbili zaidi 2017. ya kiwango kinachohitajika, vilichangia kushuka kwa faida. Kuhakikisha Ukuaji Endelevu Kutokana na mfumo wetu wa udhibiti wa gharama tuliweza Tunatekeleza kikamilifu mikakati yetu ya kibiashara kufuatana na kuendelea pamoja na ushindani mkubwa uliosababisha baadhi ya mienendo ya mabadiliko ya soko na ya kisiasa na kiuchumi huku wazalishaji kusimamisha uzalishaji kwa kipindi kirefu kutokana na tukiendelea kuhusisha biashara yetu na wajibu wetu kwa wadau wetu changamoto hizo. wote. Utendaji wetu kifedha umeathiriwa na matokeo ya ushindani Mpango wetu wa upunguzaji gharama na kuboresha utendaji kwenye mkubwa sokoni. Mabadiliko ya bei ya ghafla yasiyotarajiwa uzalishaji unatuletea matokeo tuliyotarajia huku tukiendelea kulinda yaliyofanywa na wazalishaji wakubwa yalikuwa kichocheo ubora wa chapa yetu kwa simenti yenye ubora wa uhakika na wenye kikubwa ambapo wateja walikuwa na matarajio yasiyo ya kweli matokeo mazuri kiutendaji. kutokana na viwango vya bei visivyo na uhakika. Uwekezaji kwenye tanuru ya pili (TK2) ili kuongeza uzalishaji, Utendaji wetu katika ubora na usalama wa viwango vya juu vya umeiwezesha Tanga Cement PLC kufikia matarajio ya ongezeko la kimataifa, ulichangia kwa kiasi kikubwa katika maeneo yetu yote mahitaji ya simenti ya Tanzania hapo baadaye. ya kibiashara kuwa ya faida endelevu. Makubaliano yetu na Tanzania Railway Limited (TRL) yanatuwezesha Utendaji kupata mabehewa maalum na pia mkataba wa kipekee wa ukodishaji Mapato kutokana na mauzo yaliongezeka kwa asilimia tatu (3%) wa maghala ya kampuni ya reli ambayo yapo maeneo ya kimkakati mwaka hadi mwaka na kuwa Shilingi za kiTanzania bilioni mia kwaajili ya usambazaji. Faida hii hupunguza gharama za uhifadhi na moja sabini na mbili (Tsh 172 bilioni) kwa mwaka wa fedha 2017 usafirishaji huku ikiboresha usafirishaji na usambazaji kwa kutumia reli ikilinganishwa na Shilingi za kiTanzania bilioni mia moja sitini na nchini Tanzania. saba (Tsh 167 bilioni) katika mwaka wa fedha wa 2016 kutokana na ukuaji bora wa mapato ya mauzo. Bei ya ushindani sokoni Mtazamo wa Mbele iliathiri na kushusha faida ghafi kwa asilimia arobaini na sita (46%) Tunaendelea kuangalia fursa na ubunifu mpya kwenye uzalishaji wa ya mwaka hadi mwaka. Kampuni ilirekodi kushuka kwa mapato kiufanisi, upatikanaji wa bidhaa na ufumbuzi katika usambazaji wa kabla ya kodi, uchakavu na mapungufu na kuwa Shilingi za bidhaa zetu katika miradi ijayo ya miundombinu. kiTanzania bilioni tisa (Tsh 9 bilioni) katika mwaka wa fedha 2017 toka shilingi za kiTanzania bilioni thelathini na nane (Tsh 38 bilioni) Mwaka 2018 unatarajiwa kuwa utatoa fursa za kusisimua kutokana na kwa mwaka 2016. maendeleo ya kisiasa na ongezeko la ushindani. Mtambo wetu mpya ulio kamili wenye tanuru ya kwanza, na Pamoja na ucheleweshwaji wa utolewaji wa miradi ya Serikali, bado tanuru ya pili (TK2), ambao umeongeza kiwango cha uzalishaji tuna matumaini kwamba muda mfupi ujao Serikali itatekeleza miradi wetu wa klinka na simenti mpaka kufikia tani million 1.25 kwa hii kama ilivyoelekeza. mwaka, uliendelea kufanyakazi vizuri na kuifanya Tanga Cement Serikali iliidhinisha miradi mikubwa ya miundombinu kama vile bomba PLC kujitosheleza kwa mahitaji ya klinka kwa muda mrefu. la usafirishaji mafuta kutoka Uganda kupitia Tanga, Tanzania, Reli ya Kampuni iliongeza uzalishaji katika kipindi chote cha mwaka na Kiwango (SGR) na uboreshaji wa bandari za Dar es Salaam na Tanga kuweza kupata mapato ya ziada kwa kuuza klinka ya ziada. ambavyo vinashika kasi, na miradi hii inatarajiwa kuongeza kasi ya mahitaji ya simenti ndani ya miaka mitano ijayo nchini Tanzania.

Reinhardt Swart Mkurugenzi Mtendaji

TAARIFA YA MWAKA 2017 Tanga Cement PLC 16 Building today’s Dreams for tomorrow’s Generations Human Resources

Our people The Afrisam Way is In this era of change, Tanga Cement’s Human Resources (HR) implemented through our department is compelled to swiftly adapt to today’s workforce StarCom methodology, which is more digitally diverse, and technology driven. The where the teams focus on: HR team has seized this opportunity to renew HR-, Talent • the right things Management-, and Organisational practices, by creating • by involving the right platforms, processes and tools that will sustain employee value people over time. • at the right time and The most notable initiatives are: frequency and • Moving from traditional specialist roles to business • in the right way to partnering; achieve sustainable business • Reviewing and developing legislatively compliant excellence employment guidelines to support business requirements; Talent • Relooking at remuneration practices and ensuring salary We support and develop parity and equity within the organisation; and more than 290 full-time • Implementing Total Guaranteed Remuneration packages. employees to ensure the right skills and capabilities to Our culture encourage commitment and The unique combination of our high performance culture and enthusiasm in achieving our employee loyalty is the driving force behind our sustainable business goals. competitive advantage. In 2016 Tanga Cement embarked on an exciting journey, “The AfriSam Way”, as a way of re-defining our culture to enable us to respond effectively to business challenges and grow our 31% shareholder’s value. 31% The AfriSam Way is based on the following core values of Tanga Cement:

People - Acting with integrity and respect 38%

Resigned Normal retirement End of Contract

Performance - to be the best in everything we do

The unique combination Planet -a responsible approach to the community of our high performance culture and employee loyalty is the driving force behind our sustainable competitive advantage.

Tanga Cement PLC ANNUAL REPORT 2017 17 Building today’s Dreams for tomorrow’s Generations Human Resources

According to Tanzania market salaries and benefits survey 2017 Tanga Cement PLC spent over TZS 497 mil on Training and report, Tanga Cement employees are remunerated significantly above Development in 2017. Tanga Cement invested in a total of 975 the market average. training days, where 53% of the training days was on specialised Over the past two years, 50% of new employees were under the age technical training, 32% on personal effectiveness and 13% on of 30 years old, in pursuit of our drive to build the workforce of the Safety Health and Environment. 235 out of 290 employees future. attended at least one training course during the year. We provide internship opportunities to about 50 young men and women annually to apply the principles and techniques acquired 600.00 from their learning institutions in the work place through practical application and training. In return Tanga Cement gains exposure to a 500.00 pool of potential talented candidates from which to recruit. 400.00 300.00 Career development opportunities 200.00 Various studies have indicated that there is high correlation between career development and employees satisfaction. Employees want to 100.00 work for an organisation that provides a clear career path and career 0.00 development opportunities. Technical SHE Leadership P/ E ectiveness (Soft Skills) Others Through our annual People Forum and Employee Development Reviews, Tanga Cement achieved the following: Recognition and rewards Tanga Cement understands that the recognition is important, • Evaluate performance and potential of our management and it is our way of acknowledging our colleague’s valued employees; contributions to the business. This is an agenda in every • Identify gaps in current performance against required StarCom, where desired behaviours and any effort above and performance; beyond normal duties are recognised and acknowledged. In • Match their aspirations with competencies required; 2017 Tanga Cement joined the Afrisam Recognition Awards • Agree on developmental plans that will close the performance online system. gaps; and • Acquire the experience needed to achieve career aspirations. As part of our continuous drive to make Tanga Cement the number one workplace of choice and to retain our employees, The people forum also avails Tanga Cement with key succession Tanga Cement offered a long term incentive programme to plans and pools of candidates. We currently have 60% of our senior employees as an opportunity to participate in the growth of the management successors identified, which are local Tanzanians. company in the long term. The allocation of these appreciation During 2017 in-house promotions counted to 31% of total vacancies units vests to employees in three tranches (2020, 2021 and filled. 2022) and matures after 7 years. Training and development In recognition of long service, Tanga Cement presents a token Investing in our people’s growth and development is pivotal to our gift as well as a certificate to employees who has completed success. 3, 5, 10, 15, 20, 25, 30 and 35 years of service, and thereafter annually up to retirement depending on management level of the employee. Policies and procedures Tanga Cement Policies and Procedures provide a roadmap for the day-to-day operations to ensure compliance, service offering excellence and streamlining of processes. In 2017 Tanga Cement proudly launched the Human Resources Manual and an additional 27 policies and procedures. A total of 47 Human Resources Policies and Procedure have been

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 18 Human Resources

developed in the past three years. These have enabled HR to run • Inter-departmental football tournaments; more smoothly, effectively and improved efficiencies, bringing • Family day; about consistency in people management practices and better • Departmental team building, service quality to our employees. • Health talks For example, the review of the leave procedure has seen • Personal finance management and retirement planning continued reduction in the leave days due liability thus impacting programmes and positively on the employee morale and the Company’s balance • International Womens’ Day celebrations. sheet. Tanga Cement has been awarded the Best Complying Employer by the National Social Security Fund (NSSF) and the Workmen’s Compensation Fund (WCF). Employee relations Tanga Cement employee relations have improved significantly as a result of our initiatives. The number of disciplinary cases has dropped by 50% in the past year. The number of unresolved employee relations issues has been reduced from 21 in 2014 to only 2 in 2017. As a result, we have been recognized by Tanzania Union of Industrial and Commercial Workers (TUICO) as the Best Employer in the Tanga Region for 2017. Employee wellness Life and work has impacts to Tanga Cement employees’ psychological, financial and physical wellbeing which eventually affects their productivity. The Human Resources team spearheads and coordinates a number of employee wellness activities and events to assist employees to manage their minds, bodies and financial wellbeing, including:

Tanga Cement PLC ANNUAL REPORT 2017 19 Building today’s Dreams for tomorrow’s Generations Rasilimali Watu

Idara ya rasilimali watu ya Tanga Cement PLC imefanikiwa kuendana AfriSam Way inatekelezwa kwa njia ya StarCom, ambapo na nguvukazi ambayo kwa karne hii ya mabadiliko ya kidijitali, ikiwa majadiliano hulenga kwenye: sambamba na kasi ya teknolojia. Timu ya rasilimali watu imetumia • Mambo sahihi fursa hii kuboresha maswala yote yanayohusiana na wafanyakazi na • Kwa kushirikisha watu sahihi kampuni, kwa kuandaa mifumo, michakato na zana zitakazosaidia • Kwa wakati sahihi kuendeleza thamani ya mfanyakazi. • Kwa njia sahihi Ili kufikia ubora wa biashara uliyo endelevu. Kati ya hatua zilizochukuliwa ni: • Kubadili mfumo wa utendaji wa kazi za rasilimali watu Talanta kitaalamu (specialist roles) na kwenda kwenye ushiriki Tunasaidia na kuendeleza wafanyakazi wa kudumu zaidi ya mia kibiashara (business partnering); mbili tisini (290) ili kuhakikisha wanapata ujuzi sahihi na uwezo, • Tanga Cement imepitia na kutengeneza miongozo ya ajira na hivyo kuhamasika kufanya kazi kwa bidii na kuwa na shauku inayofuata sheria kuendana na matakwa ya biashara; ya kufikia malengo yetu ya biashara. • Tanga Cement imepitia sera ya malipo na marupurupu ili kuleta uwiano na usawa ndani ya kampuni; na • Kutekeleza mfumo wa kujumuisha stahiki zote za mfanyakazi. Utamaduni Wetu 31% Utamaduni wetu wa utendaji wa hali ya juu pamoja na uaminifu 31% wa wafanyakazi wetu ndivyo vinavyosababisha ari ya ushindani endelevu. Tanga Cement PLC ilianza safari ya The AfriSam Way mwaka 2016, kama namna ya kuuelezea utamaduni utakaotuwezesha kukabiliana na changamoto za kibiashara ili kuboresha utendaji wetu na hatimaye kuongeza thamani ya wanahisa wetu. AfriSam Way imeundwa kwenye misingi ya maadili ya Tanga Cement, ambayo ni: 38%

Walioacha kwa hiyari Kustaafu Mwisho wa Mkataba

Watu - kutenda kwa uadilifu na heshima

Utendaji - utendaji bora katika kila tunachokifanya Utamaduni wetu wa utendaji wa hali ya juu pamoja na uaminifu wa wafanyakazi Sayari -kuwajibika kwa jamii na mazingi- wetu ndivyo ra yetu vinavyosababisha ari ya ushindani endelevu.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 20 Rasilimali Watu

na mpango wa kuandaa baadhi ya wafanyakazi kuchukua nafasi za juu za uongozi. Kwa sasa asilimia 60 ya nafasi zote za juu zina wafanyakazi watarajiwa ambao ni watanzania. Mwaka 2017, asilimia 31 ya nafasi za kazi, zilijazwa na wafanyakazi kutoka ndani. Mafunzo na maendeleo kazini Kuwekeza katika maendeleo na ukuaji wa wafanyakazi ni muhimu kwa mafanikio yetu. Tanga Cement PLC ilitumia kiasi cha zaidi ya KiTanzania shilingi milioni mia nne tisini na saba (Tsh 497 milioni) kwa ajili ya mafunzo na maendeleo kwa mwaka 2017. Tanga Cement ilitumia siku 975 za mafunzo, ambapo asilimia 53 ilikuwa ni kwenye mafunzo ya kitaalamu (technical training), asilimia 32 kwenye ufanisi na asilimia 13 kwenye usalama, afya na mazingira. Wafanyakazi 235 kati ya 290 walihudhuria angalau kipindi kimoja cha mafunzo.

600.00

500.00

400.00 Kwa mujibu wa ripoti ya mishahara na marupurupu ya soko 300.00 la Tanzania ya mwaka 2017, wafanyakazi wa Tanga Cement wanalipwa zaidi ya wastani. 200.00 100.00 Katika miaka miwili iliyopita, asilimia 50 ya waajiriwa wapya wamekuwa ni chini ya umri wa miaka 35, hii ni katika kuhakikisha 0.00 tunajenga nguvukazi endelevu. Technical SHE Leadership P/ E ectiveness (Soft Skills) Others Tunatoa fursa ya mafunzo kwa vijana wa kike na kiume wapatao Kutambua mchango wa wafanyakazi 50 kwa mwaka, ili kuwawezesha kutumia kwa vitendo kanuni Tanga Cement inatambua mchango wa wafanyakazi kuwa ni muhimu na mbinu walizopata kwenye taasisi zao za mafunzo. Kupitia na ni njia yetu ya kutambua mchango wa kila mmoja wetu mahali utaratibu huu pia Tanga Cement hupata orodha ya vijana wenye pa kazi. Hii ni ajenda kwenye kila StarCom, ambapo tabia na mifano uwezo na ujuzi ambao kampuni inaweza kuajiri. ya kuigwa pamoja na juhudi zoyote za ziada hutambuliwa. Mwaka Idadi ya walioacha kazi kwa mwaka 2017 ilikuwa ni 13 (4.15% ) tu. 2017 Tanga Cement ilijiunga na mfumo wa kielektroniki wa kutambua Chini ya wastani wa sekta yetu. juhudi na mchango wa kazi ujulikanao kama Afrisam Recognition Fursa za kujiendeleza kazini Awards. Tafiti mbalimbali zinaonyesha kwamba kuna uhusiano mkubwa Kama sehemu ya mkakati endelevu wa kuifanya Tanga Cement kuwa kati ya maendeleo kazini na kuridhika kwa wafanyakazi. mwajiri bora na kuhakikisha wafanyakazi wetu wanadumu Tanga Wafanyakazi wanapenda kufanya kazi kwenye kampuni inayotoa Cement, kampuni imeweka mpango wa motisha wa muda mrefu kwa mwelekeo wa maendeleo kazini na fursa husika. wafanyakazi ili wapate fursa ya kushiriki kwenye ukuaji wa kampuni. Hivyo, kupitia mfumo wetu wa (People Forum and Employee Mgao wa vipande hivyo utalipwa kwa awamu tatu (2020, 2021 na Development Reviews), Tanga Cement imefanya mambo 2022) kuendana na thamani yake kwa wakati huo. yafuatayo: Ili kutambua mchango wa wafanyakazi wa muda mrefu, Tanga • Kutathmini utendaji na uwezo wa wafanyakazi wetu Cement inatoa zawadi na vyeti kwa wafanyakazi wanaotimiza miaka walio kwenye ngazi za uongozi; 3, 5, 10, 15, 20, 25, 30 na 35 wakiwa kazini, baada ya hapo huzawadiwa kila mwaka hadi kustaafu kulingana na ngazi zao. • Kuangalia mapungufu katika utendaji wa sasa kulingana na utendaji unaotakiwa; Sera na Taratibu za wafanyakazi Sera na taratibu za Tanga Cement hupatia mwelekeo wa utendaji kwa • Kuoanisha matarajio ya wafanyakazi na ustadi wafanyakazi kila siku kwa kuhakikisha zinafuatwa, kutoa huduma bora unaohitajika; na kuboresha michakato yetu ya utendaji. • Kukubaliana juu ya mipango ya kujiendeleza kazini ili Mwaka 2017 Tanga Cement ilizindua Mwongozo wa Rasilimali Watu kuondoa mapungufu ya utendaji; na na sera na taratibu mpya 27. Jumla ya sera na taratibu arobaini na • Kupata uzoefu unaohitajika ili kufikia matarajio kikazi. saba (47) za rasilimali watu ziliandaliwa au kupitiwa katika miaka Mfumo wa People forum pia unaiwezesha Tanga Cement kuwa

Tanga Cement PLC ANNUAL REPORT 2017 21 Building today’s Dreams for tomorrow’s Generations Rasilimali Watu

mitatu iliyopita. Sera na taratibu hizi zimewezesha idara ya rasilimali ya kustaafu; na watu kuendesha shughuli zake vizuri zaidi, kwa ufanisi zaidi na kuleta • Maadhimisho ya siku ya wanawake duniani. viwango vilivyo sawa kwenye utendaji na huduma bora za rasilimali watu. Kwa mfano, mapitio ya utaratibu wa likizo umepelekea kupungua kwa madeni ya likizo na hivyo kuboresha morali ya wafanyakazi na urari wa mizania. Tanga Cement imepata tuzo za ubora wa shirika la Taifa la Hifadhi ya Jamii na mfuko wa pensheni wa taifa(NSSF) na Mfuko wa Fidia kwa Wafanyakazi (WCF) kwa kufuata taratibu za taasisi zao. Mahusiano kazini Tanga Cement imeboresha mahusiano mahala pa kazi kwa kiasi kikubwa kutokana na mipango mbalimbali tuliyotekeleza. Ndani ya mwaka mmoja uliopita, idadi ya kesi za nidhamu imeshuka kwa asilimia 50. Idadi ya migogoro kati ya mwajiri na wafanyakazi imeshuka kutoka 21 mwaka 2014 hadi 2 tu mwaka 2017. Matokeo yake, Chama cha Wafanyakazi wa Taasisi za Fedha, Viwanda, Huduma na Biashara (TUICO) kimeitambua Tanga Cement kama Mwajiri Bora kwa mkoa wa Tanga 2017. Ustawi wa wafanyakazi Maisha pamoja na kazi vina athari za kisaikolojia, kifedha na kimwili kwa mfanyakazi wa Tanga Cement, na hivyo kuathiri tija. Idara ya rasilimali watu inaratibu shughuli na matukio mbalimbali kwa ajili ya ustawi wa wafanyakazi ili kuboresha afya yao kiakili, kimwili na kifedha. Baadhi ya shughuli na matukio hayo ni; • Mashindano ya kiidara ya mpira wa miguu; • Siku ya familia; • Programu za kiidara kwa ajili ya kujenga timu (team building); • Mafunzo ya afya; • Umakini kwenye kusimamia fedha binafsi na maandalizi

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 22 Corporate Social Investment

Tanga Cement PLC’s Corporate Social Investment (CSI) is vital • Ten tons of cement for Chuda School of Children with hearing to Tanzania’s social development agenda because the company difficulties. The donated cement was used for expanding the has always been a responsible partner to the Government and school facilities. communities through the support it provides. The company is a • In collaboration with South African High Commission in Dar proud stakeholder in the development and growth of its people es Salaam, Tanga Cement PLC supported Miembeni Primary and communities for future generations. Tanga Cement PLC’s school in Kongwa district, Dodoma region. CSI program forms the cornerstone of its values encompassing People, Planet and Performance. The company views people as • Sixty tons of cement was donated to the Rosmini Secondary its highest valued asset and does not only invest in own people school for the construction of a school fence to improve but also in the broader communities which it supports as an safety and security of students. exemplary corporate citizen. • Eight tons for the Mlalo Ward to construct a science laboratory There are four major focus areas for Tanga Cement PLC’s CSI for the school. policy and mission statement, these are: Education, Health, Community Development and Environment. These focus areas • Worked in partnership with Tanzania Women Architects by are considered as the main contributors to the country’s general donating thirty eight tons of cement to the Pongwe Primary development. school’s expansion project and participated in construction activities. 1. Education After implementation of the fifth phase Government’s • Donated twenty five tons of cement to the Mpwapwa agenda of free education from primary to ordinary Secondary School’s renovation project, in the capital city of secondary school level, there has been an increase in a Dodoma. number of students enrolled at these levels. Tanga Cement • Kifungilo Secondary School in Lushoto Tanga, received ten PLC recognised the challenge of accommodating an tons of cement for the school expansion project. increased number of students within the existing education infrastructures and managed to increase its CSI allocation • Singida District council received thirty tons of cement for for education in 2017. various school projects in the district. During the reporting period, Tanga Cement PLC provided A total of one hundred and ninety one tons of cement were the following: donated during the reporting period for various educational projects in various regions of Tanzania.

Tanga Cement PLC’s CSI program forms the cornerstone of its values encompassing People, Planet and Performance.

23 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Corporate Social Investment

2. Health for the Communities 3. Environmental management for Sustainability Good health for any community is the most important agenda Environment is the heart of sustainability for any for any development. Tanga Cement PLC understands the community; and as such Tanga Cement PLC has been importance of health services to the communities. Apart from supporting Friends of Serengeti, an NGO that deals with providing medical services to its employees, the company is the preservation of the Serengeti and Tarangire National also supporting the fifth phase Government agenda in bringing Parks. In 2017, Tanga Cement PLC provided the NGO a total health services closer to the Tanzanian communities. This of fifty five tons of cement for use in the construction of initiative forms part of the continuous support Tanga Cement crossing drifts, observations posts, boundaries for the drifts, PLC provides to the health sector. During the reporting period the water pumps shelters and rangers posts to mention just a company supported construction of a health centre for Korogwe few. town council by donating twenty five tons of cement to construct facilities for the provision of medical services to the people of this 4. Development for our Communities community. The location of the health centre, closer to the main During the reporting period, Tanga Cement PLC supported road where vehicles travelling to Tanga, Kilimanjaro, Arusha and various projects for the Tanzanian communities’. Two of the beyond will serve to further assist travellers by making health care donations went to the police force. Twelve and half tons of services more accessible.. cement for renovation of police houses for the Tanga region police force and fifty tons of cement went to the Arusha police force to assist in rebuilding seventeen police houses after they were destroyed in a tragic fire

There are four major focus areas for Tanga Cement PLC’s CSI policy and mission statement, these are: Education, Health, Community Development and Environment.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 24 Uwekezaji wa Kijamii wa Kampuni

Uwekezaji wa kijamii wa Tanga Cement ni chachu kwa iliamua kuongeza kiwango cha uchangiaji wake wa uwekezaji agenda ya maendeleo ya kijamii ya Tanzania kwa kuwa kwa jamii upande wa elimu kwa maka 2017. kampuni imekuwa mdau mkubwa kwa Serikali na jamii kwa Katika kipindi cha mwaka wa taarifa hii, Tanga Cement PLC kupitia misaada inayoitoa. Kampuni ni mdau wa kujivunia ilichangia kama ifuatavyo: katika maendeleo na ukuaji wa watu wake na jamii kwajili ya vizazi vya sasa na vya baadae. Mpango wa uwekezaji • Tani kumi za simenti kwajili ya shule ya wanafunzi wenye kwa jamii wa Tanga Cement PLC ni msingi wa dhana yake matatizo ya kusikia, Chuda. Simenti iliyotolewa ni kwaajili ya inayoangalia mambo makuu matatu nayo ni Watu, Sayari na upanuzi wa majengo ya shule hiyo. Utendaji. • Kwa kushirikiana na ubalozi wa Afrika Kusini Dar es Salaam, Tanga Cement PLC inawaona watu wake kama mali yenye Tanga Cement PLC iliisaidia shule ya msingi Miembeni iliyopo thamani kubwa sana na haiwekezi tu kwa watu wake wilaya ya Kongwa, mkoa wa Dodoma. (wafanyakazi), bali pia kwa jamii ambapo husaidia kama raia mshirika wa mfano. • Tani sitini za simenti zilitolewa kwaajili ya kujengea uzio wa Kuna maeneo makuu manne ambayo Tanga Cement PLC shule ya sekondari Rosmini iliyopo mkoa wa Tanga, kwaajili ya inayatilia mkazo kufuatana na sera na kauli mbiu yake ya kuboresha ulinzi na usalama wa wanafunzi wa shule hiyo. uwekezaji kwa jamii ambayo ni Elimu, Afya, Maendeleo • Tani tano zilitolewa kwaajili ya kata ya Mlalo iliyopo wilaya ya ya jamii na Mazingira. Maeneo haya yanachukulia kama Lushoto ili kuwezesha ujenzi wa maabara kwaajili ya shule mchango mkubwa katika maendeleo ya Taifa kwa ujumla. katika kata hiyo. 1. Elimu • Kampuni pia ilishirikiana na wanawake wachora ramani za Baada ya utekelezaji wa sera ya Serikali ya awamu ya tano majengo Tanzania kwa kuchangia tani thelathini na nane za ya elimu bure kuanzia shule za msingi mpaka sekondari, simenti kwaajili ya mradi wa upanuzi wa shule maalum ya kumekuwa na ongezeko kubwa la idadi ya wanafunzi wanaondikishwa ili kujiunga na elimu katika ngazi zote hizo. msingi, Pongwe iliyopo mkoa wa Tanga. Tanza Cement PLC iliiona changamoto hii ya kuwapokea • Tani ishirini na tano zilitolewa kwaajili ya shule ya sekondari wanafunzi wakati ukubwa wa miundombinu ya elimu Mpwapwa kwaajili ya ukarabati wa shule hiyo iliyoko mji iliyopo hautoshelezi idadi kubwa ya wanafunzi ndio maana mkuu wa Tanzania, Dodoma. • Shule ya sekondari Kifungilo iliyopo wilaya ya Lushoto mkoa wa Tanga, ilipokea tani kumi za simenti kwaajili ya upanuzi mradi wa upanuzi wa shule hiyo. • Halmashauri ya wilaya ya Singida ilipokea tani thelathini za simenti kwaajili ya miradi mbalimbali ya shule wilayani humo.

Mpango wa uwekezaji kwa jamii wa Tanga Cement PLC ni msingi wa dhana yake inayoangalia mambo makuu matatu nayo ni Watu, Sayari na Utendaji.

Tanga Cement PLC ANNUAL REPORT 2017 25 Building today’s Dreams for tomorrow’s Generations Uwekezaji wa Kijamii wa Kampuni

Jumla ya tani mia moja na tisini na mbili za simenti zilitolewa 3. Usimamizi wa Mazingira kwaajili ya uendelevu kama msaada kwa jamii wakati kwa kipindi cha taarifa hii kwaajili Mazingira ni kiini cha uendelevu kwa jamii yoyote, na kwa ya miradi mbalimbali ya elimu katika mikoa tofauti nchini. kutambua hilo Tanga Cement PLC imekuwa ikiisaidia Friends of Serengeti, taasisi isiyo ya kiserikali ambayo inajishughulisha 2. Afya kwa jamii na utunzaji na uhifadhi wa mazingira katika mbuga za taifa Afya njema kwa jamii yoyote ni agenda muhimu kwa aina yoyote za Serengeti and Tarangire. Mwaka 2017, Tanga Cement PLC ya maendeleo. Tanga Cement PLC inaelewa vizuri umuhimu iliipatia taasisi hii jumla ya tani hamsini na tano za simenti wa huduma za afya kwa jamii. Mbali na kutoa huduma za afya kwaajili ya ujenzi wa mikondo ya kuvukia, vituo vya ulinzi, kwa wafanyakazi wake, kampuni pia inaiunga mkono Serikali ya mipaka ya mikondo, vijumba vya pampu za maji na vituo vya awamu ya tano katika kupeleka huduma za afya karibu na jamii za walinzi kwa kutaja machache kati ya hayo. kiTanzania. Mpango huu ni sehemu ya muendelezo wa msaada ambao Tanga Cement huutoa kwenye sekta ya afya. Katika kipindi 4. Maendeleo kwa jamii zetu cha mwaka 2017, kampuni ilisaidia ujenzi wa kituo cha afya Katika kipindi cha taarifa hii, Tanga Cement PLC ilisaidia kwaajili ya mji wa Korogwe kwa kuchangia tani ishirini na tano za miradi mbali mbali kwaajili ya jamii za kiTanzania. Misaada simenti ili kujenga kituo kitakacho toa huduma za afya kwaajili ya miwili kati ya yote ilikwenda kwenye kikosi cha polisi. Tani watu wa jamii hii. Kituo hiki kinajengwa karibu kabisa na barabara kumi na mbili na nusu zilikuwa ni kwaajili ya ukarabati wa kuu ambapo magari yanayokwenda Tanga, Kilimanjaro, Arusha nyumba za askari polisi wa mkoa wa Tanga na tani hamsini na zaidi hupita. Kituo kitasaidia kwa kiasi kikubwa wasafiri kwa zilikwenda kusaidia kwaajili ya maafa ya moto yaliyowapata kufanya huduma za afya zifikike kwa urahisi endapo zitahitajika polisi mkoani Arusha baada ya kuunguliwa na nyumba zao kwa wasafiri hao. kumi na saba.

Kuna maeneo makuu manne ambayo Tanga Cement PLC inayatilia mkazo kufuatana na sera na kauli mbiu yake ya uwekezaji kwa jamii ambayo ni Elimu, Afya, Maendeleo ya jamii na Mazingira

TAARIFA YA MWAKA 2017 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations Building today’s Dreams for tomorrow’s Generations 26 CSR Mission As part of oCorporateur commitmen tSocial to sustai Investmentnable development, we at Tanga Cement Company Limited recognize our social responsibilities and aim to visibly play a leading role within the company’s spheres of influence*. CSR Policy Statement We are committed to work with all our stakeholders, building and maintaining relations of mutual respect and trust. We aim to contribute and improve the quality of life of our workforce, their families and the communities around our operations. Our focus areas for social investments are health, education, community development and environment.

The CSR policy statement is an important element of our business and serves as guidance for our decisions and actions. The elaboration of the policy is based on the input of internal and external stakeholders and focuses on areas within our local spheres of influence*. Tanga Cement Company’s Corporate Social Investment (CSI) policy is to invest upto 1% of its profit before tax to specific and pre-defined projects, associations and charities. Defined areas for corporate social investments are: Health: Health is key to productivity and development. Tanzania does not have enough health care infrastructure to cater to its increasing population. The HIV/AIDS scourge has affected the country’s development progress and reduced the population in the active age group. Tanga Cement Company is focused on the support of construction of health facilities in the regions we operate within Tanzania. Education: Tanga Cement Company Limited is particularly focused on education because as employers we want to contribute to increasing the talent pool from which we recruit whilst simultaneously benefiting the economy and society as a whole. A good formal education however, must be given in the furnished classroom and our involvement is in the construction of the required infrastructure as determined by the communities in the regions in which we operate in Tanzania. Community Development: Tanga Cement Company Limited supports community based initiatives that lead to income generation for the communities within the regions we operate in Tanzania. This involves defined support of specific orphanages, particularly those with children orphaned because of HIV/AIDS as well as those infected with the virus. Environment: Tanga Cement Company Limited supports community initiatives that lead to conservation and rehabilitation of the environment. This involves support of specific conservation and environmental rehabilitation projects.

* Spheres of influence is defined as investments and activities within defined focus areas in regions where Tanga Cement Company Limited operates. This policy is subject to regular re-evaluation and revision based on stakeholder involvement and consultation.

Revision Number 02 Issued by Date October 2014 Tanga Cement PLC ANNUAL REPORT 2017 13 Building today’s Dreams for tomorrow’s Generations CSR Mission As part of our commitment to sustainable development, we at Tanga Cement Company Limited recognize our Safety and Enviroment social responsibilities and aim to visibly play a leading role within the company’s spheres of influence*. Usalama na Mazingira

CSR Policy Statement In 2017 Tanga Cement PLC ensured that all employees and contractors Mwaka 2017 Tanga Cement PLC ilihakikisha wafanyakazi wote We are committed to work with all our stakeholders, building and maintaining relations of mutual respect and play a vital role in reducing the impact of the cement manufacturing na wakandarasi wanafanya kila lililo muhimu katika kupunguza process on the environment. We have developed a common set athari zitokanazo na mchakato wa uzalishaji wa simenti kwenye trust. We aim to contribute and improve the quality of life of our workforce, their families and the communities of corporate and social behaviours which have been adopted and mazingira. Tumeanzisha utamaduni wa kikampuni na kijamii around our operations. Our focus areas for social investments are health, education, community development implemented by all employees. ambao umekubaliwa na kutekelezwa na wafanyakazi wote. and environment. We achieved an environmental performance score of ninety six Tumefanikiwa kufikia kiwango cha asilimia tisini na sita (96%) percent (96%) for the sustainability roadmap assessment. This is the kwaajili ya mazingira endelevu kutokana na ukadiriaji wa lengo The CSR policy statement is an important element of our business and serves as guidance for our decisions highest achievement amongst the AfriSam Group integrated cement lililowekwa. Haya ni mafanikio makubwa katika kampuni hodhi, and actions. The elaboration of the policy is based on the input of internal and external stakeholders and manufacturing plants for the 2017 financial year. Our highly effective AfriSam, kwa kiwanda kinachozalisha simenti kwa mwaka wa Environmental Management System ensures that we are being kifedha wa 2017. Mfumo wetu wa kifanisi wa hali ya juu wa focuses on areas within our local spheres of influence*. proactive towards minimising any environmental consequences usimamizi wa mazingira unahakikisha tunakuwa mstari wa within all our operations. Consequently we have had no major mbele katika kuhakikisha tunapunguza kwa kiasi kikubwa athari Tanga Cement Company’s Corporate Social Investment (CSI) policy is to invest upto 1% of its profit environmental concerns in 2017. za kimazingira katika utendaji wetu wote. Kwa matokeo haya hatukuwa na tukio lolote kubwa lenye athari za kimazingira kwa before tax to specific and pre-defined projects, associations and charities. Defined areas for corporate social 2017 saw Tanga cement plant 4,590 trees as well as 3,000 sisal plants mwaka 2017. investments are: at the Holili pozollana mining area in Moshi as part of our progressive rehabilitation program. Mwaka 2017 Tanga Cement PLC ilipanda tena miche ya miti ipatayo elfu nne na mia tano na tisini (4590) pamoja na miche Health: Safety elfu tatu (3000) ya katani katika eneo la uchimbaji pozolana Tanga Cement PLC had an excellent safety performance in 2017. lililopo Holili, Moshi, kama muendelezo wa mpango wetu wa Health is key to productivity and development. Tanzania does not have enough health care infrastructure to Throughout the year we had neither “lost time injuries” nor “medical ukarabati wa sehemu zetu tunazochimba malighafi. cater to its increasing population. The HIV/AIDS scourge has affected the country’s development progress and treatment injury cases”. Our Total Recordable Injury Frequency Rate reduced the population in the active age group. Tanga Cement Company is focused on the support of (“TRIFR”) for the year was zero which is well below the internal group Usalama construction of health facilities in the regions we operate within Tanzania. target of 3.28 and the Lost Time Injury Frequency Rate (“LTIFR”) was Tanga Cement PLC imefanya vizuri sana kwa upande wa usalama zero against a target of 1.28. kwa mwaka 2017. Katika kipindi cha mwaka mzima hatukuwa na upotevu wa muda kutokana na majeruhi au kupoteza muda In December 2017, Tanga Cement achieved 2,637,118 hours Education: kutokana na matibabu yaliyotokana na majeraha. Jumla ya without any serious injuries on site. This is equal to 22 injury free masaa yaliyopotea kutokana na majeraha ni sifuri kwa mwaka working months. The company was awarded with a 5 Star Platinum Tanga Cement Company Limited is particularly focused on education because as employers we want to kiwango ambacho ni cha chini kabisa kwa kundi lote ambapo Safety grading during the NOSA Safety Grading Audit conducted contribute to increasing the talent pool from which we recruit whilst simultaneously benefiting the economy kiwango cha wastani kilichowekwa kwa mwaka ni masaa in December 2017, a first time achievement in the history of the 3.28 kwa ndani ya kundi na hakukuwa na masaa yaliyopotea and society as a whole. A good formal education however, must be given in the furnished classroom and our company. Tanga Cement recognises all its employees and contractors kutokana na majeruhi wakati lengo lililowekwa ni masaa 1.28 . involvement is in the construction of the required infrastructure as determined by the communities in the for achieving these significant milestones. regions in which we operate in Tanzania. Mwezi Disemba mwaka 2017, Tanga Cement PLC ilifanikiwa kutimiza masaa milioni mbili, laki sita thelathini na saba, mia moja kumi na nane (2,637,118) bila majeruhi (watu kujeruhiwa) Community Development: yoyote sehemu ya kazi. Hii ni sawasawa na miezi ishirini na mbili Tanga Cement Company Limited supports community based initiatives that lead to income generation for the ya kazi bila majeruhi. communities within the regions we operate in Tanzania. This involves defined support of specific orphanages, Kampuni ilipewa tuzo ya nyota tano ya masuala ya usalama particularly those with children orphaned because of HIV/AIDS as well as those infected with the virus. yaani, Five Star Safety Platinum wakati wa ukaguzi wa masuala ya usalama uliofanywa mwezi Disemba mwaka 2017, mafanikio haya ni ya mara ya kwanza katika historia ya kampuni. Tanga Environment: Cement PLC inatambua mchango wa wafanyakazi wake na wakandarasi kwa kuwa ndio wameiwezesha kampuni kupata Tanga Cement Company Limited supports community initiatives that lead to conservation and rehabilitation mafanikio haya na kipekee. of the environment. This involves support of specific conservation and environmental rehabilitation projects.

Revision Number 02 Issued by Date October 2014 TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 28 Policy (OHS) My Safety Is Our Safety

Policy

Tanga Cement Company Limited is passionate about people and their health and safety. Our objective is ZERO harm. We therefore accept the following: Objectives

1. We accept OHS as an integral part of our competitive advantage where all stakeholders understand the relationship between profitability and OHS. 2. We commit to prevention of injury and ill health and the continual improvement of our systems and performance which provides a framework for setting and reviewing OHS objectives and targets. 3. We will achieve the highest levels of health and safety through active and competent risk management and the establishment of sound work practices. 4. We comply with all legislation and with other requirements where applicable. 5. We commit to train, develop, provide experience and skills to ensure our workforce acknow- ledges, understands and manages hazards and risks associated with their work. 6. Our equipment shall be maintained to the highest standards and all changes to equipment or processes shall be subject to a risk-based change management approach. 7. We openly engage and communicate with all interested and affected parties 8. We report all incidents, analyse root causes and search for best practices 9. We shall review this policy regularly to ensure relevance and appropriateness 10. This policy shall be made available to all interested and affected parties.

Revision Number 02 Issued by Date October 2013

29 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Policy (OHS) My Safety Is Our Safety

Policy

Tanga Cement Company Limited is passionate about people and their health and safety. Our objective is ZERO harm. We therefore accept the following: Objectives

Revision Number 02 Issued by Date October 2013

TAARIFA YA MWAKA 2017 Tanga Cement PLC 14 Building today’s Dreams for2016 tomorrow’s Generations Quality

SIMBA CEMENT PRODUCTS • Elements with normal and reinforced concrete in environments Simba’s high quality cement products have made a significant that require low to moderate strength cement; contribution to various infrastructural developments in East African • Elements with reinforced concrete in environments with low countries for decades. carbon aggressiveness and sulphate activity; Our cement products are used in the construction of houses, schools, • Water reservoirs; roads, bridges, dams, and other essential facilities for local communities. • Mortar for filling the joints between precast elements; • Mortar for special flooring etc. Simba cement brand products are manufactured using state of the art equipment and processes of the highest international standards which Features and Benefits is controlled by a team of dedicated professionals. • This cement offers guaranteed high-performance and The performance of our cement products are constantly monitored to reactive mineral components with excellent cementitious maintain the highest standards of quality, consistency and strength. This properties; is achieved through a program of constant review and improvement of our production processes to ensure optimal efficiency and improving • It allows for a smooth, defect-free finish on concrete, masonry product quality with the lowest possible impact on the environment. and plaster work; Our Products • It maintains strength and stability for years; Simba cement products are manufactured in accordance with Tanzania cement standard TZS 721-1:2002 which is equivalent to the European • It creates durable concrete and is suitable for aggressive Standard EN 197-1:2000 and East African Standard EAS 18-1:2001 conditions; We manufacture the following cement products which are uniquely • It is perfect for reducing the heat of hydration during bulk developed for different applications: concrete works; SIMBA BORA [CEM II/A-L, 42.5N] • It improves concrete’s resistance to chemical attack; CEM II/A-L, 42.5 N is Portland Limestone Cement with limestone • It makes concrete highly resistant to alkali-aggregate reaction extension, it is a high strength class cement specifically designed for and is suitable for reducing the permeability of concrete in applications where high strength is a requirement, and can be used for water retaining structures; the following applications: • Structures, structural and non-structural cast construction; • It offers high workability which makes it easy to work with; • Reinforced concrete for foundations, columns, beams, slabs, • It produces consistently good and predictable results. girdles, load bearing walls etc.; • Precast elements made of normal and reinforced concrete used SIMBA BARABARA [CEM II/B-M, 32.5 N] for repairs in civil and industrial work, filling and coating of CEM II/B-M, 32.5 N is a Portland Composite Cement specifically for reinforced and non-reinforced elements; use in road stabilisation. It is specially formulated to improve the • Special floor screeds and mortars; geological and engineering stability properties of soil. • Mining applications like decline ramps, vertical shafts, underground supports and reinforcements etc. It has been developed and tested to achieve excellent performance across a broad range of road material types. Features and Benefits • This versatile cement is cost-effective because of its workability, It offers consistent strength and durability to road sub-bases, strength and durability; making it ideal for road construction. • It saves time because of its faster setting time to reach optimal strength characteristics; Features and Benefits • The strength of this cement makes it ideal for various specialised • It improves the geological and engineering properties of soil applications. by reducing plasticity and enhancing the strength of road base materials; SIMBA IMARA [CEM II/B-M, 32.5 R] CEM II/B-M, 32.5 R is a Portland Composite Cement. It is a standard • It improves durability, stability and strength; strength all-purpose class cement and can be used for various • It achieves good stability across a broad range of road applications such as: materials; • Structural and non-structural cast, foundations, columns, beams, • Its longer setting time makes it ideal for road stabilisation walls, girdles, regular paving blocks, interlocking pavement blocks, as it allows for adequate time to place, form and compact roadside kerbs, block bricks etc.; material.

31 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Ubora

BIDHAA ZA CHAPA YA SIMBA SIMENTI • Majengo na miundo ya majengo, misingi, nguzo, mihimili, Bidhaa za Simba simenti zenye ubora wa hali ya juu zimetoa mchango kuta, mikanda, vibamba vya matofali ya vijia, matofali ya mkubwa katika maendeleo ya miundombinu ya Afrika Mashariki kwa vibamba, kingo za barabara, matofali makubwa n.k; miongo kadhaa. Bidhaa zetu za simenti zinatumika katika ujenzi wa • Elementi zilizo za kawaida na zilizo na zege lililoimarishwa kwa nyumba, shule, barabara, madaraja, mabwawa na vitu vingine muhimu mazingira yanayohitaji nguvu ndogo au simenti yenye nguvu kwa jamii. ya wastani; Bidhaa za simenti chapa Simba zinatengenezwa kwa kutumia mitambo • Elementi zilizo na zege lililoimarishwa kwaajili ya mazingira ya hali ya juu na michakato ya juu zaidi ya viwango vya kimataifa na yenye kaboni nyingi na shughuli za salfeti.; kudhibitiwa na timu ya wataalam waliobobea kiutendaji. • Mabwawa ya maji Utendaji wa bidhaa zetu za simenti unadhibitiwa bila kutetereka • Mota kwaajili ya kujazia viungo kati ya elementi zilizoundwa; ili kudhibiti kiwango cha juu cha ubora usio tetereka na nguvu. Hii • Mota kwaajili ya sakafu maalum n.k. inafanikiwa kupitia mpango wa mapitio ya mara kwa mara ya mchakato wa uzalishaji kuhakikisha ufanisi bora na kuboresha ubora wa bidhaa Sifa na Faida zetu kukiwa na athari za chini kabisa za kimazingira iwezekanavyo. • Simenti hii inatoa uhakika wa utendaji wa hali ya juu na viungo vya madini vyenye asili ya hali ya juu ya simenti. Bidhaa • Inaruhusu upitaji kwa wepesi, usio na kasoro wa umaliziaji wa Bidhaa za simenti chapa Simba hutengenezwa kufuatana na viwango zege, uashi na kazi za lipu; vya simenti vya Tanzania yaani TZS 721-1:2002 ambavyo ni sawa na • Inadumisha nguvu na uthabiti kwa miongo; viwango vya kimataifa yaani EN 197-1:2000 na viwango vya Afrika • Inatengeneza umadhubuti wa muda mrefu wa zege na inafaa Mashariki yaani EAS 18-1:2001 kwenye hali ya michubuko; Tunazalisha bidhaa za simenti zifuatazo ambazo zimetengenezwa • Ni simenti sahihi kwaajili ya kupunguza joto na kuzuia upotevu kwaajili ya matumizi tofauti tofauti; wa unyevunyevu wakati wa kumimina zege la kiasi kikubwa; • Inaongeza uwezo wa zege kudhibiti uharibifu unaosababishwa SIMBA BORA [CEM II/A-L, 42.5N] na kemikali. CEM II/A-L, 42.5 N ni simenti aina ya Portland Limestone yenye • Inalifanya zege kuwa na uwezo wa hali ya juu wa kuzuia athari mchanganyiko wa mawe ya chokaa, ni simenti ya daraja la juu kabisa za alkali na inafaa kwaajili ya kupunguza upungufu kwenye iliyotengenezwa maalum kwaajili ya matumizi yanayohitaji nguvu Zaidi, majengo yanayo hifadhi maji; na inaweza kutumika kwaajili ya matumizi yafuatayo; • Inatoa kiwango cha juu cha utendaji na kuzuia uvunjikaji • Majengo, miundo na ujenzi wa majengo yasiyo ya kimiundo; kiurahisi; • Zege lililoimarishwa kwaajili ya misingi, minara, mihimili, • Inatoa matokeo mazuri yanayotarajiwa ya ubora usio tetereka. mabamba, mikanda, gololi za kuta n.k; • Elementi zilizoundwa kwa zege la kawaida lililoimarishwa SIMBA BARABARA [CEM II/B-M, 32.5 N] na linalotumika kwaajili ya matengenezo ya kazi za kawaida CEM II/B-M, 32.5 N ni simenti aina ya ‘Portland Composite’ maalum na kazi za viwanda, kujaza na kupaka kwenye miundo kwaajili ya matumizi ya uimarishaji barabara. Imetengenezwa iliyoimarishwa na isiyo imarishwa; maalum ili kuboresha udongo kimazingira na ki uhandisi. • Fito maalum kwaajili ya sakafu na mota; • Matumizi katika maeneo ya machimbo (uchimbaji madini) Imetengenezwa na kujaribiwa ili kupata matokeo ya bora zaidi kwaajili ya vitu kama vile barabara za kushukia kwenda katika aina mbali mbali za malighafi nyingi za ujenzi wa barabara. machimboni/ardhini, kusaidia chini ya ardhi na uimarishaji n.k. Inaipa nguvu misingi midogo midogo ya barabara, na kuifinya iwe Sifa na Faida ndiyo inayofaa kwaajili ya ujenzi wa barbara. • Simenti hii ya matumizi mbalimbali inapunguza gharama Sifa na Faida kwasababu ya utendaji wake, nguvu na hudumu; • Inaboresha hali ya udongo kijiologia na kihandisi kwa • Huokoa muda kwasababu ya muda wake wa haraka wa kupunguza hali ya plastiki na huimarisha nguvu ya malighafi kukauka na kufikia sifa zenye ubora unaohitajika.; za misingi ya barabara; • Nguvu ya simenti hii huifanya kamilifu kwaajili ya matumizi • Inaboresha uimara, uthabiti na nguvu; mbalimbali ya kitaalamu. • Ni thabiti ikilinganishwa na malighafi zote za ujenzi wa SIMBA IMARA (CEM 11/B-M, 32.5R) barabara; CEM II/B-M, 32.5 R ni simenti aina ya ‘Portland Composite’. Ni simenti ya • Ukaukaji wake ni wa muda mrefu na hivyo kuifanya iwe sahihi kiwango kawaida kwa matumizi yote na inaweza kutumika kwaajili ya kwa uimarishaji wa barabara kwasababu inaruhusu muda matumizi mbalimbali kama vile. muafaka kuiweka, kushindilia na kuimarisha udongo.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 32 33 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Quality Policy Striving for Excellence

Policy Corporate Social Investment

The core business of Tanga Cement Public Limited Company is the manufacturing and selling of cement products to our customers. We will consistently provide product and services in line with the requirements of our customers. This quality policy will guide behaviour that aims to develop, implement and maintain a culture of customer satisfaction. To achieve this, the following policy objectives have been defined:

Objectives

• Management will provide employees with adequate resources in order to achieve the stated objectives. • Compliance with the requirements of the ISO 9001 quality management system standard and the product requirements of the TZS727:2002 and EAS 18-1:2001. • Identify customer requirements, plan their realisation and measure our success in meeting them. • Set specific quality objectives appropriate to the activities of our business units. Measure the progress and review the achievement thereof. • Audit and continually improve the effectiveness of the documented quality management system. • Increase quality awareness throughout the organisation by using the company communication systems • Striving for Excellence to communicate the quality policy to all stakeholders. • Agree on key performance indicators for all employees, which are directed towards quality performance, personal growth and business goals. • Share achievement of business performance with employees, shareholders and customers. • Employees will assist management in the execution of this policy by reporting non-conformities that have an impact on the quality of products and services.

This policy will be reviewed on a periodic basis to ensure that it is best suited to realising the business goals of Tanga Cement Public Limited Company.

Revision Number 06 Date April 2015

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 14 Value Added Statement / Waraka wa Ongezeko la Thamani

for the year ended 31 December 2017 2017 2016 TZS ‘000’ % TZS ‘000’ % Wealth Created Revenue 171,744,715 166,975,482 Other Income 61,911 2,066,529 Materials and services bought in (141,558,997) (111,770,356) 30,247,629 100 57,271,655 100

Wealth distributed To Employees as salaries wages and other benefits 19,554,050 64.6 16,088,409 28.1 To Government as rates and taxes 846,704 2.8 2,174,112 3.8 To Shareholders as dividends 1,591,776 5.3 5,093,683 8.9 To lenders of capital as interest 15,096,142 49.91 11,623,259 20.3 37,088,672 123 34,979,463 61.1 Wealth reinvested Retained (Loss)/ income (26,340,154) (87) 4,197,249 7.3 Depreciation 18,853,021 62.3 17,801,172 31.1 Asset impaired 646,089 2.1 293,771 0.5

30,247,629 100 57,271,655 100.0

Kwa mwaka ulioisha tarehe 31 Desemba 2017 2017 2016 Tsh ‘000’ % Tsh ‘000’ % Thamani iliyotengenezwa Mapato 171,744,715 166,975,482 Mapato Mengineyo 61,911 2,066,529 Bidhaa na huduma zililzonunuliwa (141,558,997) (111,770,356) 30,247,629 100 57,271,655 100

Thamani iliyotengenezwa Kwa wafanyakazi kama mishahara na marupurupu 19,554,050 64.6 16,088,409 28.1 mengine Kwa Serikali kama Kodi ya mapato ya Kampuni 846,704 2.8 2,174,112 3.8 Kwa Wanahisa kama Gawio 1,591,776 5.3 5,093,683 8.9 Kwa Taasisi za Ukopeshaji kama Riba 15,096,142 49.91 11,623,259 20.3 37,088,672 123 34,979,463 61.1 Thamani iliyowekezwa (Hasara) / Faida iliyobakishwa (26,340,154) (87) 4,197,249 7.3 Uchakavu 18,853,021 62.3 17,801,172 31.1 Uharibifu wa thamani 646,089 2.1 293,771 0.5

30,247,629 100 57,271,655 100.0

Tanga Cement PLC ANNUAL REPORT 2017 35 Building today’s Dreams for tomorrow’s Generations 2017 2016 TZS ‘000’ % TZS ‘000’ % Wealth Created Revenue 171,744,715 166,975,482 Other Income 61,911 2,066,529 Materials and services bought in (141,558,997) (111,770,356) 30,247,629 100 57,271,655 100 REGISTERED OFFICE AND TAX ADVISORS PRINCIPAL PLACE OF BUSINESS PricewaterhouseCoopers Wealth distributed Tanga Cement Public Limited Company 369 Toure Drive, Oysterbay To Employees as salaries wages and other benefits 19,554,050 64.6 16,088,409 28.1 Pongwe Factory Area P O Box 45 To Government as rates and taxes 846,704 2.8 2,174,112 3.8 P O Box 5053 Dar es Salaam Tanga, Tanzania To Shareholders as dividends 1,591,776 5.3 5,093,683 8.9 BANKERS AND FINANCIAL INSTITUTIONS Tel: +255 27 2644500/1/2 National Bank of Commerce Limited To lenders of capital as interest 15,096,142 49.91 11,623,259 20.3 Mob: +255 746 293 330 P O Box 5031 37,088,672 123 34,979,463 61.1 Fax: +255 2646148/425 Tanga, Tanzania Wealth reinvested Website: www.simbacement.co.tz Email:[email protected] Retained (Loss)/ income (26,340,154) (87) 4,197,249 7.3 CRDB Bank Plc P O Box 1180 Depreciation 18,853,021 62.3 17,801,172 31.1 Dar es Salaam Office Rooftop, Coco Plaza, Toure Drive Tanga, Tanzania Asset impaired 646,089 2.1 293,771 0.5 P O Box 78478 Dar es Salaam, Tanzania Citibank Tanzania Limited 30,247,629 100 57,271,655 100.0 Tel: +255 22 2602778-9/2602784 P O Box 71625 Mob: +255 746 293 329 Dar es Salaam, Tanzania Fax: +255 22 2602785 Standard Chartered Bank Tanzania Limited 2017 2016 COMPANY SECRETARY P O Box 9011 Tsh ‘000’ % Tsh ‘000’ % Mr Quresh Ganijee Dar es Salaam, Tanzania Thamani iliyotengenezwa Tanga Cement Public Limited Company Stanbic Bank Tanzania Limited Pongwe Factory Area Mapato 171,744,715 166,975,482 P O Box 72647 P O Box 5053 Mapato Mengineyo 61,911 2,066,529 Dar es Salaam, Tanzania Tanga, Tanzania Bidhaa na huduma zililzonunuliwa (141,558,997) (111,770,356) AUDITORS First National Bank 30,247,629 100 57,271,655 100 Ernst & Young P O Box 72290 Thamani iliyotengenezwa 4th Floor, Tanhouse Tower Dar es Salaam, Tanzania Kwa wafanyakazi kama mishahara na marupurupu 19,554,050 64.6 16,088,409 28.1 Plot 34/1-Ursino South mengine New Bagamoyo rd Public Investment Corporation (SOC) Limited (PIC South Africa) P O Box 2475 in its capacity as; Kwa Serikali kama Kodi ya mapato ya Kampuni 846,704 2.8 2,174,112 3.8 Dar es Salaam, Tanzania Investment manager for the Government Employees Pension Kwa Wanahisa kama Gawio 1,591,776 5.3 5,093,683 8.9 Fund (GEPF South Africa) LEGAL ADVISORS Kwa Taasisi za Ukopeshaji kama Riba 15,096,142 49.91 11,623,259 20.3 Menlyn Maine Central Square, Corner Aramist Avenue ENS Africa & Corobay Avenue 37,088,672 123 34,979,463 61.1 6th Floor, International House Waterkloof Glen Extension 2 Thamani iliyowekezwa Cnr of Shaaban Robert Street & Garden Avenue Private Bag X187 (Hasara) / Faida iliyobakishwa (26,340,154) (87) 4,197,249 7.3 P O Box 7495 Pretoria 001 Dar es Salaam Uchakavu 18,853,021 62.3 17,801,172 31.1 Republic of South Africa Uharibifu wa thamani 646,089 2.1 293,771 0.5

30,247,629 100 57,271,655 100.0

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 36 37 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Directors’ Report

The directors present their report and the audited consolidated and separate financial statements for the financial year ended 31 December 2017 which disclose the state of affairs of Tanga Cement Public Limited Company (“the Company” or “TCPLC”) and its subsidiary, Cement Distributors (EA) Limited (together, “the Group”).

1. INCORPORATION The Company is incorporated in Tanzania under the Tanzanian Companies Act, 2002 as a public company limited by shares.

2. GROUP’S VISION To be Eastern Africa’s preferred cement manufacturer and distributor.

3. GROUP’S MISSION To develop, produce and distribute consistently high quality cement and related products and services in a sustainable manner to satisfy our customers’ expectations.

4. PRINCIPAL ACTIVITIES The principal activities of the Group during the year continued to be manufacturing, distribution and sale of cement and clinker.

5. COMPOSITION OF THE BOARD OF DIRECTORS The directors of the Company who served during the year, and to date of this report, are:

Name Position Age Nationality Appointed /(Retired) Mr L. Masha* Chairperson 47 Tanzanian 17 May 2013 Mr R. Swart Managing Director 44 South African 11 July 2013 Mr P. De Jager Director (Chief Financial Officer) 46 South African 13 May 2016 Mr P. Rutabanzibwa* Director (Deputy Chairperson) 61 Tanzanian 22 May 2015 Mr R. Wessels# Director (Appointed 20 March 2017) 43 South African 20 March 2017 Mr K. Omar* Director 52 Tanzanian 17 May 2013 Mr L. Serfontein# Director (Alternate director to all the other directors) 43 South African 1 November 2013 Mr T. Wagner* Director 70 South African 17 May 2013 Mr R. Mbilinyi* Director 53 Tanzanian 4 March 2013 Dr S. Olivier# Director (Retired 20 March 2017) 58 South African (20 March 2017)

[# Non-executive *Independent Non-executive ]

The Company Secretary during the year ended 31 December 2017 was Mr Q. Ganijee (Tanzanian), 35 years old. The Board of Directors met five times during the year.

6. CORPORATE GOVERNANCE Code of Corporate Practice and Conduct Tanga Cement Public Limited Company is committed to the principles of good corporate governance and the Board is of the opinion that the Group currently complies with the principles.

TAARIFA YA MWAKA 2017 Tanga Cement PLC 38 Building today’s Dreams for tomorrow’s Generations Directors’ Report

The Board of Directors • The effectiveness and efficiency of operations; The composition of the Board of Directors (the Board) of Tanga • The safeguarding of the Group’s assets (including information); Cement Public Limited Company is eight directors. Apart from the • Compliance with the applicable laws, regulations and Managing Director and Chief Financial Officer, no other directors supervisory requirements; hold executive positions in the Group. The Board takes overall • The reliability of accounting records; responsibility for the Group, including responsibility for identifying • Business sustainability under normal as well as adverse key risk areas, considering and monitoring investment decisions, conditions; and, considering significant financial matters and reviewing the • Responsible behaviour towards all stakeholders. performance of management against budgets and business plans. The Board is also responsible for ensuring that a comprehensive The efficiency of any internal control system is dependent on the internal control system is effectively maintained for compliance strict observance of prescribed measures. There is always a risk of non- with Good Corporate Governance principles. compliance by staff with such measures. Consequently, even a strict and efficient internal control system can provide no more than a reasonable The Board Chairman has no executive functions. The roles of the measure of assurance in respect of the above mentioned objective. Chairman and Managing Director are separate, with each having set responsibilities. The Board assessed the internal control system throughout the financial year and is of the opinion that it is at an acceptable level. The Board is confident that its members have the knowledge, talent and experience to lead the Group. Some of the non- Ethical behaviour executive directors are independent from management and the The Group’s Code of Conduct governs all its activities, internal relations Group. With their depth of experience, they add value to Board and interactions with stakeholders in accordance with its ethical values. deliberations. All staff are expected to maintain the highest level of integrity and honesty in dealing with customers, suppliers, service providers and The Board is required to meet at least four times per year. The colleagues. Board delegates the day-to-day management of the business to the Managing Director, assisted by the senior management Compliance with the Code of Conduct is the ultimate responsibility of team. Senior management is invited to attend Board meetings the Managing Director and the Company Secretary, with day-to-day and facilitates effective communication and control over all of the monitoring delegated to line management. Group’s operational activities, acting as a medium of co-ordination The code is supplemented by the Group’s responsibility philosophy as between the Board and the various business units. well as its employment practices and its occupational health and safety All directors have access to the Company Secretary and his services controls. and may seek independent professional advice if necessary. It is Business ethics and organisational integrity the Group’s philosophy to manage and control its business on a The Group’s Code of Conduct commits it to the highest standards of decentralised basis. Senior management meets on a monthly integrity, conduct and ethics in its dealings with all parties concerned, basis to review the results, operations, key financial indicators and including its directors, managers, employees, customers, suppliers, business strategies of the Group. Board meetings are held quarterly competitors, investors, shareholders and the public in general. The to deliberate on the results of the Group. directors and staff are expected to fulfil their ethical obligations in such a way that the business is run strictly according to fair and competitive Performance evaluation and reward commercial practices. Details of the remuneration of the directors are disclosed in Note 32 to the consolidated and separate financial statements. The Principal risks and uncertainties Group utilises the results of market surveys to ensure market The principal risks that may significantly affect the Group’s strategies related salaries are paid and that market trends are followed in and development are mainly operational, fraud and financial risks as terms of changes in benefits, while taking into account the value described below: of the employee’s contribution to the Group. A portion of the Fraud risk incentive remuneration of all managerial staff, especially senior The Group could incur losses resulting from fraudulent transactions, management, is linked to the financial performance of their but controls are in place designed to mitigate this risk. respective business units and of the Group as a whole. Operational risk Risk management and internal control This is a risk resulting from the Group’s activities not being conducted in The Board accepts final responsibility for the risk management and accordance with formally recognised procedures. internal control system of the Group. It is the task of management to ensure that adequate internal financial and operational controls are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding the operational effectiveness and efficiency of:

39 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Directors’ Report

Management ensures that the Group complies with internal policies Cement Public Limited Company was supported by the following and procedures. sub-committees to which it delegated some of its functions to Financial risk ensure a high standard of corporate governance throughout the The Group’s activities expose it to a variety of financial risks and those Group: activities involve the analysis, evaluation, acceptance and management of some degree of risk or combinations of risks. More detail on the financial risks facing the Group and Company are provided in Note 35 to Audit , Risk and Compliance Committee the consolidated and separate financial statements. Name Nationality Qualification Financial reporting and auditing 1. Mr T. Wagner (Chairman) South African CA (SA), MBL The directors accept final responsibility for the preparation of 2. Mr K. Omar Tanzanian MSc. Development the consolidated and separate financial statements which fairly Studies represent: 3. Mr L. Serfontein South African B. Comm (Acc), CA (SA) • The financial positions of the Group and Company as at the end of the year under review; 4. Mr L. Masha Tanzanian LLB (Hons), LLM • The financial results of operations; and, The Audit, Risk and Compliance Committee, which comprises • The cash flows for that period. non-executive directors, reports to the Board and met four times The responsibility for compiling the consolidated and separate financial during the year. statements was delegated to senior management. Remuneration and Nomination Committee The external auditor has examined and reported on whether the consolidated and separate financial statements are fairly presented. Name Nationality Qualification The directors are satisfied that during the year under review: 1. Mr R. Wessels (Chairman)a South African BCom, LLB, CFA • Adequate accounting records were maintained; 2. Dr S. Olivier (Chairman)b South African Ph. D Biochemistry • An effective system of internal control and risk management was maintained and monitored by management; 3. Mr L. Masha Tanzanian LLB (Hons), LLM • Appropriate accounting policies, supported by reasonable and 4. Mr P. Rutabanzibwa Tanzanian B. Chemical prudent judgements and estimates, were used consistently; Engineering and, 5. Mr R. Mbilinyi Tanzanian Bsc. Engineering, • The consolidated and separate financial statements were compiled in accordance with International Financial Reporting MBA (Marketing) Standards (IFRSs) and in the manner required by the Tanzanian a Appointed 20 March 2017 Companies Act, 2002. b Resigned 20 March 2017 The directors are also satisfied that no events occurred subsequent to The Remuneration and Nomination Committee, which comprises the year-end up to the date of this report which could have a material non-executive directors, reports to the Board and met four times effect on the results of the Group or Company. during the year. The directors are of the opinion that the Group and Company have sufficient resources and commitments at its disposal to operate the 7. REMUNERATION POLICIES business for the foreseeable future. The consolidated and separate The Group has formal processes and procedures in place for financial statements have been prepared on a going concern basis. determining remuneration paid to its directors. Management periodically prepares a proposal for fees and other emoluments The Group is committed to the principles of Good Corporate to be paid to directors after having conducted market survey and Governance. The directors also recognise the importance of integrity, consulted with the parent company before forwarding the same to transparency and accountability. During the year, the Board of Tanga the Annual General Meeting (AGM) for final approval. Cement Public Limited Company was supported by the following sub- committees to which it delegated some of its functions to ensure a high standard of corporate governance throughout the Group: 8. CAPITAL STRUCTURE The Company’s capital structure for the year under review was as .The directors are of the opinion that the Group and Company have shown below: sufficient resources and commitments at its disposal to operate the business for the foreseeable future. The consolidated and separate Authorised financial statements have been prepared on a going concern basis. 63,671,045 Ordinary shares of TZS 20 each (2016: 63,671,045 Ordinary shares of TZS 20 each). The Group is committed to the principles of Good Corporate Governance. The directors also recognise the importance of integrity, Issued up and fully paid transparency and accountability. During the year, the Board of Tanga 63,671,045 Ordinary shares of TZS 20 each (2016: 63,671,045 Ordinary shares of TZS 20 each).

TAARIFA YA MWAKA 2017 Tanga Cement PLC 40 Building today’s Dreams for tomorrow’s Generations Directors’ Report

Details of the capital structure have been disclosed under Note 25 to the consolidated and separate financial statements. 9. MANAGEMENT The management of the Company is led by the Managing Director and is organised in the following functions: • Financial; • Plant Management; • Commercial, Sales and Marketing; and, • Human Resources and Administration. 10. KEY MANAGEMENT PERSONNEL OF THE GROUP The key management personnel who served during the year, and to date of this report, were: Name Position Qualifications Age Mr R. Swart Managing Director Bsc. (Mechanical Engineering) 44 Mr P. De Jager Chief Financial Officer B. Com (Accounting) B. Compt (Hons), / CTA, MBA 46 Mr B. Lema Plant Manager Bsc. (Mechanical Engineering) 58 Mr L. Breedt Risk, Occupational Health, Safety and Environment Manager B. Tech (Safety Management) 45 Mr P. Brits Commercial Manager B. Com (Fin Management), MBA 49 Mrs D. Malambugi Human Resources Manager B. Mass-Com, MHRM, CIPD 48

11. DIRECTORS’ REMUNERATION The remuneration for services rendered by the directors was as follows:

Amount in Tzs Chairperson of the Board 36,997,772 Other directors 163,192,173 Executive directors’ remuneration for the Group and the Company was TZS 2,180 million (2016: TZS 1,500 million). 12. SHAREHOLDERS OF THE COMPANY The top ten shareholders at 31 December 2017 were:

Shareholder 2016 2015 1) AfriSam (Mauritius) Investment Holdings Limited 68.3% 68.3% 2) SCBT Nominees SCB Consumer Banking Re Kimberlite Frontier Master Africa Fund RCKM 3.8% 3.8% 3) Public Service Pension Fund 2.4% 2.4% 4) National Social Security Fund 1.8% 1.8% 5) Parastatal Pension Fund 1.3% 1.3% 6) The Trustees of Tanga Cement Plc Employees’ Share Scheme 1.1% 1.1% 7) Social Action Trust Fund 0.7% 0.7% 8) BNYM SA NV AS Custodian or Trustee 0.5% 0.5% 9) SCBT nominee Re SSB TAC RE Conrad N Hilton Foundation 0.5% 0.5% 10) Emillian Paschal Busara 0.4% 0.4%

Member summary as at 31 December: 2017 2016 Number of Number of Number of Number of Members shares Members Shares 1-1,000 9,156 3,013,597 9,164 3,019,373 1,001 - 5,000 1,265 3,482,643 1,269 3,490,052 5,001-10,000 364 2,227,793 366 2,238,743 10,000 plus 131 11,418,474 129 12,296,970 AfriSam (Mauritius) Investment Ltd 1 43,504,403 1 43,504,403 Total 11,916 63,671,045 11,931 63,671,045

41 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Directors’ Report

The Managing Director, Mr R. Swart, continued to hold 7,000 ordinary shares in his personal capacity on the open market during the year. The shares were acquired with the approval of the Board on 13 May 2016. No other director held any ordinary shares in the Company..

13. STOCK EXCHANGE LISTING INFORMATION On 26 September 2002, the Company listed its shares on the Dar es Salaam Stock Exchange (DSE) through an Initial Public Offering (IPO) at a price of TZS 360 per share. The Company’s market capitalisation as at 31 December 2017 was TZS 76.4 billion (2016: TZS 101.9 billion). Total turnover of the Company’s shares traded on the DSE for the year ended 31 December 2017 was TZS 114 million (2016: TZS 1.2 billion). The average traded price of the Company’s shares for the year was TZS 1,303 per share (2016: TZS 1,890) and the share price as at 31 December 2017 was TZS 1,200 per share.

14. MACRO – ECONOMIC OVERVIEW Our growth in business continues to be anchored on the economic progress of Tanzania. The Tanzanian Shilling depreciated by three percent (3%) against the United States Dollar (USD) during the year due to lower levels of exports than imports into the country. Tanzania also experienced political stability under the leadership of President Magufuli. The average annual headline inﬂation rate remained fairly stable increasing to five point three percent (5.3%) in 2017 from five point two (5.2%) recorded in 2016, as a result of governments’ fiscal and monetary policies. During the year, Tanzania’s estimated Gross Domestic Product (GDP) growth remained robust and at par with the six point eight percent (6.8%) growth of 2016. This was supported by growth in various economic sectors mainly: Extractive Industries, Telecommunications and Agriculture. Tanzania’s construction industry is projected to have a positive growth trajectory informed by a steady population growth with a younger profile that increases demand for infrastructure, housing and commercial buildings, emerging middle-class, increased consumer activity and access to financial services (banking, mortgages and commercial credit). Anticipated infrastructure projects such as the Standard Gauge Railway, Uganda-Tanzania oil pipeline, development and upgrade of various ports and the natural gas pipeline from Mtwara are expected to see cement demand increase. We remain optimistic of the ambitious infrastructure development plans under the Government’s Development Vision 2025 programme and expect the projects to pick up momentum in quarter two (Q2) of 2018. 15. MACRO – ECONOMIC OVERVIEW Financial Performance During 2017, the Group’s revenue grew by three percent (3%) due to increased competition from new entrants to the market which put downward pressure on sales prices. External factors such as increased electricity supply interruptions and frequent power dips from the national utility caused significant operational challenges like premature kiln refractory lining failures. In the macroeconomic environment, the Group witnessed a slight devaluation of the Tanzanian shilling to the US Dollar by three percent (3%). Distribution costs were higher due to increase in volume and slight increase in transport charges by the transporters. The above factors negatively impacted on the cost of production of cement. Interest costs increased by twenty nine percent (29%) due to the additional term loan drawn down during the year under review and increase in overdraft facilities. The finance costs increased to TZS 15 billion for the current year from TZS 11.71 billion in 2016. The Group accounted for realised and unrealised foreign exchange and fair value losses amounting to TZS 9.1 billion mainly arising from the term loan which is denominated in foreign currency and fair value loss on the Interest Rate Cap (2016: loss of TZS 2.56 billion). The full year financial results are further detailed in the consolidated and separate statements of profit or loss and other comprehensive income as well as the consolidated and separate statement of cash flows in the consolidated and separate financial statements.

Financial Position The Group’s total assets decreased by three percent (3%) mainly because of the devaluation of the Interest Rate Cap financial asset due to decrease in fair value, decrease in VAT recoverable following the utilization of the balance during the year, decrease in cash and bank balances after paying the first instalment of the term loan. The principal amount of the Company’s interest bearing term borrowings increased to TZS 215 billion following an additional drawdown of USD 10 million that was received during the year (2016: TZS 199 billion) and also because of the increase in the USD to TZS exchange rate.

Capital structure The balance between equity and debt during the year under review was as follows:

TAARIFA YA MWAKA 2017 Tanga Cement PLC 42 Building today’s Dreams for tomorrow’s Generations Directors’ Report

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Equity

Issued capital 1,273,421 1,273,421 1,273,421 1,273,421 Retained earnings 162,000,436 189,884,783 161,473,124 190,095,631 163,273,857 191,158,204 162,746,545 191,369,052

Net Debt Interest bearing loans – Non-current portion 191,524,837 189,212,984 191,524,837 189,212,984 Interest bearing loans - Current portion 33,384,911 13,157,583 33,384,911 13,157,583 Bank overdrafts 12,453,135 6,984,256 12,453,135 6,984,256 237,362,883 209,354,823 237,362,883 209,354,823 Further details on the Group’s capital management are included in Note 34 to the consolidated and separate financial statements. The above capital structure was the result of a careful review of the debt carrying capacity of the Group taking account the addition of the Kiln 2 capital expansion project. The Board considered the applicable business and economic risks associated with the new capital structure and found it to be within the risk tolerance of the Group without diluting the majority shareholders of the Company. Key Performance Indicators Key performance indicators, both financial and non-financial, are used by the directors to assess the Group’s performance against its objectives. These indicators include financial budgets, production volumes and efficiency targets, improved cost management, sustainable environmental performance, marketing innovation, human resources excellence and corporate social responsibility programmes.

16. GROUP’S OBJECTIVES We are proactively adapting our business strategies to the ﬂuid geopolitical and macroeconomic market dynamics while remaining cognisant of our core business and our responsibility to all our stakeholders. Our on-going cost optimisation and efficiency improvement programmes in production and operations are yielding exciting results while retaining our brand equity of superior quality performance cement. The production capacity expansion investment TK2 has positioned Tanga Cement to meet the anticipated increase in future cement demand in Tanzania. Our agreement with Tanzania Railway Limited (TRL) allows us access to more dedicated wagons for the Company as well as sole rental agreements of rail depots along the strategic distribution lines. This advantage reduces our storage and transportation costs while enhancing rail transport and distribution in Tanzania.

17. TREASURY POLICIES AND OBJECTIVES The major financing transactions undertaken up to the date of these financial statements are: - Interest bearing term loans – to finance Kiln 2 construction - Bank overdrafts – to finance working capital requirements The effect of financing costs on the results for the year was a charge of TZS 24.3 billion (2016: TZS 14.2 billion). This is comprised of the net interest expense, interest income and foreign exchange losses for the year as detailed in the consolidated and separate statements of profit or loss and other comprehensive income. The Group’s treasury and financial risk management policies and objectives including the potential impact of interest rate changes are detailed in Note 35 to the consolidated and separate financial statements.

18. COMPLIANCE WITH BORROWING AGREEMENT COVENANTS The Company signed a borrowing agreement with the Government Employees Pension Fund of South Africa for a term loan to finance the construction of Kiln 2. The Company is required to comply with specified financial covenants as indicated in the table below:

As calculated Covenant Target Compliance Financial Covenant Ratio at 31 Dec 2017 Level (Yes/No/ N/a) Senior Debt Service Cover 1.6 >1.5 Yes Ratio Total Debt Service Cover Ratio 1.6 >1.3 Yes DEBT to EBITDA 24.6 <6.0 N/a 43 Directors’ Report

As indicated above, the Company was not in compliance concern. The basis presumes that funds will be available to with the required Debt to EBITDA ratio as at year-end. This was finance future operations and that the realisation of assets mainly because of the decrease in EBITDA and increase in debt and settlement of liabilities, contingent obligations and amount following the additional drawdown on the term loan. The commitments will occur in the ordinary course of business. Company obtained a waiver letter dated 26 October 2017 for this The Group’s accounting policies, which are laid out in Note covenant from the lender for the period up to 31 December 2018. 2 to the consolidated and separate financial statements are 19. RESULTS AND DIVIDENDS subject to an annual review to ensure continuing compliance The Group incurred a loss during the year of TZS 26,340 million with International Financial Reporting Standards. (2016: profit of TZS 4,262 million). During the year, in line with its 25. ACQUISITIONS AND DISPOSALS dividend policy, the Company declared and paid the 2016 final No material acquisitions or disposals were made during the dividend totalling TZS 1,592 million (2015: TZS 1,592 million) being current or the previous financial year. TZS 25 per share (2015: TZS 25 per share). The Board proposed no 26. INVESTMENT IN SUBSIDIARY AND ASSOCIATE interim or final dividend for 2017 (2016: interim dividend of TZS Tanga Cement Public Limited Company owns 100% of the 3,502 million or TZS 55 per share). issued share capital of Cement Distributors (EA) Limited and 20. FUTURE PROSPECTS 5% of the issued share capital of East African Rail Hauliers Although the East African market demand for cement products Limited (EARHL). is expected to continue growing, new competitors entering the Detailed information regarding the Company’s interests market are expected to continue putting pressure on sales prices in the above investments is included in Note 19 to the and volumes in the near term. consolidated and separate financial statements. The construction and commissioning of a second integrated 27. INVESTMENT IN SUBSIDIARY production line at the factory in Tanga in 2016 gave the Company Management reviewed the performance, forecasts and sufficient capacity to produce its full clinker requirements. valuation of the Company’s financial investment in Cement Accordingly, the Company will continue to increase cement Distributors (EA) Limited and found no indicators that the production at a lower cost per ton in response to growing market carrying amount of the investment in the subsidiary could be impaired as at year-end. As such, no impairment charge demand. Excess clinker produced will continue to be sold as a on the investment was recognised during the year (2016: semi-finished product. None). 21. RESOURCES 28. EMPLOYEES’ WELFARE Apart from those items that are reflected in the statement of Management and Employees’ Relationship financial position, the Group has key strengths and resources, both A healthy relationship continues to exist between tangible and intangible, which can assist the business in pursuit of management and employees. A voluntary agreement its objectives. These resources are high quality proven limestone between the Company and the Trade Union was signed in reserves, renowned consistency of products, the strong brand of 2014 following the expiration of the previous one in 2013. Simba Cement, competent management, committed and skilled There were no major unresolved complaints received by personnel and a strong sales and distribution channel. management from the employees during the year. 22. CASH FLOW PROJECTIONS The Group’s cash flow projections indicate that sufficient positive The Group is an equal opportunity employer. It gives equal cash flows will be generated from the Group’s operating activities access to employment opportunities and ensures that the and that the Group has sufficient access to working capital best available person is appointed to any given position, overdraft facilities with various banks. The cash flow projections free from discrimination of any kind and without regard to take cognisance of capital expenditure commitments, and interest gender, marital status, tribe, religion or disability. and principal repayments on the term loans. Training Facilities The Group’s liquidity position is further discussed in Note 35 to the During the year, the Group spent a sum of TZS 324 million consolidated and separate financial statements. for staff training in order to improve employee technical 23. SOLVENCY skills and effectiveness (2016: TZS 331 million). Programs The Board confirms that applicable accounting standards have have been, and continue to be, developed to ensure that been followed and that the consolidated and separate financial employees are adequately trained at all levels. statements have been prepared on a going concern basis. The Medical Scheme directors have reviewed the Group’s cash flow forecasts and, in All employees and up to four dependants each are covered the light of this review and the current financial position, they are under the Group’s Medical Scheme. satisfied that the Group has or has access to adequate resources Health and Safety to continue operating in the ordinary course of business for the The Group has a world class risk, health and safety foreseeable future. department which ensures that a culture of safety prevails 24. ACCOUNTING POLICIES at all times. All employees and contractors are provided with The consolidated and separate financial statements have been appropriate personal protective equipment, all of which prepared on the basis of accounting policies applicable to a going meet the requirements of the Occupational Health and

TAARIFA YA MWAKA 2017 Tanga Cement PLC 44 Building today’s Dreams for tomorrow’s Generations Directors’ Report

Safety Act 2003 and other legislation concerning industrial safety. 32. QUALITY The Company received a five star National Occupational Safety The Group has a formal quality assurance management programme, Association (NOSA) safety rating in 2017. accredited with the ISO 9001 quality assurance management Financial Assistance to Staff system in 2008. The Group provides education loans for approved study courses 33. CORPORATE SOCIAL INVESTMENT and also encourages staff to join the Tanga Cement Savings and During the year, the Group continued to support the Tanzanian Credit Co-operative Society (SACCOS). society through its corporate social investment programs. The Persons with Disabilities areas that have been supported are community development, It remains the Group’s policy to accept disabled persons for education, health and the environment. During the year, the Group employment for those vacancies that they are able to fill. contributed TZS 91 million (2016: TZS 252 million) towards various Opportunities for advancement are provided to each disabled corporate social investment initiatives. person when a suitable vacancy arises within the Group and 34. SECRETARY TO THE BOARD all necessary assistance is given with initial training. Where an The Secretary to the Board is responsible for advising the Board employee becomes disabled during the course of his or her on legal and corporate governance matters and, in conjunction employment, the Group will seek to provide suitable alternative with the Chairman, for ensuring the efficient flow of information employment and any necessary training. between the Board, its Committees and management. All members Employee Benefit Plans of the Board and management have access to his legal advice and Some employees are members of the PPF Pensions Fund (PPF) and services. others are members of National Social Security Fund (NSSF). The Group contributes 15% of basic salary of each employee to PPF 35. COMPLIANCE TO LAWS AND REGULATIONS and 10% of gross salary of each employee to NSSF on behalf of During the year ended 31 December 2017, there were no serious all permanent employees. All these plans are defined contribution judicial matters to report as required by the Tanzania Financial plans. Reporting Standard No. 1 (Directors’ Report). The Group’s employment terms are regularly reviewed to ensure 36. STATEMENT OF COMPLIANCE that they continue to meet statutory requirements and prevailing The Directors’ Report has been prepared in compliance with the market conditions. The Group communicates with its employees Tanzania Financial Reporting Standard No. 1 (Directors’ Report). through regular management and staff meetings and through 37. RELATED PARTY TRANSACTIONS circulars. The Group has continued to maintain a favourable The related party transactions and balances are disclosed in Note working environment in terms of factory, offices, canteen, medical 32 to the consolidated and separate financial statements. The facilities and transport. directors’ emoluments have also been disclosed in Note 32 to the Employees’ Share Trust consolidated and separate financial statements. No additional loan was advanced to the Tanga Cement Employee 38. SERIOUS PREJUDICIAL MATTERS Share Trust (the ‘Trust’) during the year 2017. The Company In the opinion of the directors, there are no serious unfavourable performed an impairment assessment of the amounts due from legal matters that can affect the Group or Company. the Trust and recognised an impairment charge of TZS 646 million 39. AUDITORS as at year-end (2016: TZS 294 million). The auditor, Ernst & Young, has expressed willingness to continue 29. GENDER PARITY in office as auditor and is eligible for re-appointment. A resolution The Group is an equal opportunity employer. It gives equal access proposing the re-appointment of Ernst & Young as auditor of the to employment opportunities and ensures that the best available Group for the 2018 financial year will be tabled for shareholders’ person is appointed to any given position free from discrimination of any kind and without regard to factors like gender, marital approval at the next Annual General Meeting. status, tribe, religion and disability which do not impair ability to discharge duties. The Company had 288 (2016: 345) employees, of APPROVED BY THE BOARD OF DIRECTORS ON 24 MAY 2018, which 35 were female and 253 were male (2016: 34 female and 311 AND SIGNED ON ITS BEHALF BY: male). The Group had 367 (2016: 365) employees, of which 45 were female and 322 were male (2016: 35 female and 330 male). 30. POLITICAL DONATIONS The Group did not make donations to any political parties or causes during the year. 31. ENVIRONMENTAL CONTROL PROGRAMME L Masha R Swart The Group has a formal environmental management programme, Chairperson Managing Director accredited with the ISO 14001 environmental quality management 24 May 2018 24 May 2018 system in 2004.

45 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Statement of Directors’ Responsibilities

For each financial year, the Tanzanian Companies Act, 2002, requires the directors to prepare consolidated and separate financial statements that present fairly the state of financial affairs of the Group and Company as at the end of the financial year and of the financial results for that year. It also requires the directors to ensure that the Group and the Company keep proper Nothing has accounting records that disclose, with reasonable accuracy, the financial position of the Group and Company. The directors are also responsible for safeguarding the assets of the Group and come to the hence for taking reasonable steps for the prevention and detection of fraud, error and other attention of irregularities. the directors to The directors accept responsibility for the consolidated and separate financial statements, which have been prepared using appropriate accounting policies supported by reasonable indicate that and prudent judgements and estimates, in conformity with International Financial Reporting the Group or Standards (IFRS) and in the manner required by the Tanzanian Companies Act, 2002. The directors accept responsibility for the preparation and fair presentation of financial statements Company will that are free from material misstatement whether due to fraud or error. not remain a The directors are of the opinion that the consolidated and separate financial statements going concern present fairly the state of the financial affairs of the Group and Company and of its profit. The directors further accept responsibility for the maintenance of accounting records that may be for at least relied upon in the preparation of consolidated and separate financial statements, as well as twelve months adequate systems of internal financial control. from the date of Nothing has come to the attention of the directors to indicate that the Group or Company will not remain a going concern for at least twelve months from the date of this statement. this statement. The National Board of Accountants and Auditors (NBAA) according to the power conferred to it under the Auditors and Accountants (Registration) Act No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a statement of declaration issued by the Head of Finance responsible for the preparation of financial statements of the entity concerned.

L Masha Chairperson R Swart 26 June 2018 Managing Director 26 June 2018

TAARIFA YA MWAKA 2017 Tanga Cement PLC 46 Building today’s Dreams for tomorrow’s Generations Declaration by the Head of Finance

The National Board of Accountants and Auditors (NBAA) according to the power conferred to it under the Auditors and Accountants (Registration) Act No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a statement of declaration issued by the Head of Finance responsible for the preparation of financial statements of the entity concerned.

It is the duty of a professional accountant to assist the Board of Directors to discharge the responsibility of preparing the financial statements of the Group and Company showing a true and fair view position of the Group and Company in accordance with International Financial Reporting Standards and the requirements of the Companies Act, 2002 of Tanzania. Full legal responsibility for the financial statements rests with the Board of Directors as indicated in the Statement of Directors’ Responsibilities on the previous page.

I Pieter De Jager being the Chief Financial Officer of Tanga Cement Public Limited Company hereby acknowledge my responsibility of ensuring that the consolidated and separate financial statements for the year ended 31 December 2017 have been prepared in compliance with International Financial Reporting Standards and the requirements of the Companies Act, 2002 of Tanzania.

I thus confirm that the consolidated and separate financial statements give a true and fair view position of Tanga Cement Public Limited Company as on that date and that they have been prepared based on properly maintained financial records.

I thus confirm that the consolidated and separate financial statements give a true Pieter De Jager Chief Financial Officer and fair view position of Tanga NBAA Membership No. 2830 Cement Public Limited Company Date: 24 May 2018 as on that date and that they have been prepared based on properly maintained financial records.

Tanga Cement PLC ANNUAL REPORT 2017 47 Building today’s Dreams for tomorrow’s Generations Independent Auditor’s Report

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS Opinion We have audited the consolidated and separate financial statements of Tanga Cement Public Limited Company (the Company) and its subsidiaries (together, the Group) set out on pages 53 to 103, which comprise the consolidated and separate statements of financial position as at 31 December 2017, and the consolidated and separate statements of profit or loss and other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group and the Company as at 31 December 2017, and of the consolidated and separate financial performance and the consolidated and separate cash flows of the Group and the Company for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act, 2002 of Tanzania.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated and separate financial statements in Tanzania, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated and separate financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provided the basis for our audit

TAARIFA YA MWAKA 2017 Tanga Cement PLC 48 Building today’s Dreams for tomorrow’s Generations Independent Auditor’s Report - Cont

No. Key audit matter How our audit addressed the key audit matter 1. Compliance with debt covenants The Company is required to comply with the covenants in Our audit procedures included but were not limited to: the loan agreement between the Company and Government • Reviewing the Company’s debt covenant calculation, Employees Pension Fund (GEPF) (the lender). We considered this evaluating compliance with the applicable debt covenants to be a key audit matter since breach of the covenants could have as of 31 December 2017 and considering the Company’s a significant effect on the results and financial position of the assessment of continued covenant compliance. Group and Company. • Comparing the disclosures in the financial statements The GEPF debt agreement stipulates certain limitations on the regarding the waiver of the Debt to EBITDA covenant to the Company when there is breach of the covenants. These limitations waiver received from the lender. include not paying dividends without prior consent of the lender. • Given the relevance of the EBITDA amount in the Debt As at 31 December 2017, the Company was in breach of its Debt to EBITDA covenant calculations, analysing the correct to Earnings Before Interest, Tax, Depreciation and Amortisation classification of items in EBITDA in accordance with the (EBITDA) covenant primarily as a result of the EBITDA being criteria as stated in the debt agreement. lower than expected when the covenants were agreed. The • Assessing that the debt amount was calculated in line with lender agreed to waive the requirement for this covenant until 31 the debt agreement. December 2018 as disclosed in Note 34 to the financial statements. The Company expects to be in compliance with the Debt to • Assessing the adequacy of the Group’s disclosures regarding EBITDA covenant by the end of the waiver period. The Company the covenants and debt agreement. was in compliance with the other applicable covenants as of 31 December 2017 and expects to continue to be compliant with these covenants for the remaining period of the credit facility. We also considered there to be a risk that: • The debt amount and EBITDA used in the calculation of the Debt to EBITDA covenant are inappropriately calculated to achieve desired results. • The Group’s disclosures regarding the covenants and debt agreement, which are included in Notes 27 and 34 to the consolidated and separate financial statements are not complete.

2. Accounting for tax positions Tax positions were significant to our audit because the assessment Our audit procedures included but were not limited to: process involves judgement in the interpretation and application • Understanding the Group’s processes for recording and of tax laws and in assessing tax liabilities and contingencies that assessing of tax provisions and contingent liabilities. could arise from tax audits. • Determining the completeness and reasonableness of The Group is required to comply with a number taxes including the amounts recognized as tax liabilities and contingent income taxes, Value Added Tax, excise duty and payroll taxes. liabilities, including the assessment of the matters in the Determination of provisions and contingent liabilities for the correspondence with tax authorities and reports of the taxes requires the directors to make judgements and estimates Company’s external tax consultant, and the evaluation of in relation to the tax exposures arising from open tax years and the related tax exposures. assessments. The Company had open unresolved assessments of • Including in our team tax specialists to analyse the tax TZS 4 billion as at year-end, which is significant to the Company’s positions and to evaluate the assumptions used to financial statements. The determination of provisions and determine tax positions. contingent liabilities arising from the open tax assessments make this a particular area of significant judgement. • Assessing relevant historical and recent judgements passed by the tax authorities in considering any precedent. We also considered there to be a risk that the disclosures on taxation in notes 14 and 36 which are significant to the • Assessing the adequacy of the Group’s disclosures in respect understanding of the Group’s and Company’s tax position are not to taxation. complete.

49 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Independent Auditor’s Report - Cont

Other Information included in the Group’s 2017 Annual and are considered material if, individually or in the aggregate, Directors’ Report they could reasonably be expected to influence the economic Other information consists of the information included in the Group decisions of users taken on the basis of these consolidated and Information, Directors’ Report, Statement of Directors’ Responsibilities separate financial statements. and the Declaration by the Head of Finance, which we obtained prior to As part of an audit in accordance with ISAs, we exercise the date of this report, and the Annual Report, which is expected to be professional judgment and maintain professional scepticism made available to us after that date, other than the financial statements throughout the audit. We also: and our auditor’s report thereon. The directors are responsible for the other information. • Identify and assess the risks of material misstatement Our opinion on the consolidated and separate financial statements does of the consolidated and separate financial statements, not cover the other information and we do not and will not express any whether due to fraud or error, design and perform audit form of assurance conclusion thereon. procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a In connection with our audit of the consolidated and separate financial basis for our opinion. The risk of not detecting a material statements, our responsibility is to read the other information and, misstatement resulting from fraud is higher than for in doing so, consider whether the other information is materially one resulting from error, as fraud may involve collusion, inconsistent with the consolidated and separate financial statements forgery, intentional omissions, misrepresentations, or the or our knowledge obtained in the audit, or otherwise appears to be override of internal control. materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s • Obtain an understanding of internal control relevant report, we conclude that there is a material misstatement of this other to the audit in order to design audit procedures that information, we are required to report that fact. We have nothing to are appropriate in the circumstances, but not for the report in this regard. purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control. When we read the contents of the Annual Report, if we conclude that there is a material misstatement therein, we are required to • Evaluate the appropriateness of accounting policies communicate the matter to the directors. used and the reasonableness of accounting estimates and related disclosures made by the directors. Responsibilities of the Directors for the Consolidated and Separate Financial Statements • Conclude on the appropriateness of the directors’ use of The directors are responsible for the preparation and fair presentation the going concern basis of accounting and, based on the of the consolidated and separate financial statements in accordance audit evidence obtained, whether a material uncertainty with International Financial Reporting Standards and the requirements exists related to events or conditions that may cast of the Companies Act, 2002 of Tanzania, and for such internal control significant doubt on the Group’s and the Company’s as the directors determine is necessary to enable the preparation of ability to continue as a going concern. If we conclude consolidated and separate financial statements that are free from that a material uncertainty exists, we are required to material misstatement, whether due to fraud or error. draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial In preparing the consolidated and separate financial statements, the statements or, if such disclosures are inadequate, to directors are responsible for assessing the Group’s and the Company’s modify our opinion. Our conclusions are based on the ability to continue as a going concern, disclosing, as applicable, audit evidence obtained up to the date of our auditor’s matters related to going concern and using the going concern basis of report. However, future events or conditions may cause accounting unless the directors either intend to liquidate the Group and the Group and / or the Company to cease to continue as / or the Company or to cease operations, or have no realistic alternative a going concern.. but to do so. • Evaluate the overall presentation, structure and content The directors are responsible for overseeing the Group’s and the of the consolidated and separate financial statements, Company’s financial reporting process. including the disclosures, and whether the consolidated Auditor’s Responsibilities for the Audit of the Consolidated and and separate financial statements represent the Separate Financial Statements underlying transactions and events in a manner that Our objectives are to obtain reasonable assurance about whether achieves fair presentation. the consolidated and separate financial statements as a whole are • Obtain sufficient appropriate audit evidence regarding free from material misstatement, whether due to fraud or error, and the financial information of the entities or business to issue an auditor’s report that includes our opinion. Reasonable activities within the Group to express an opinion on assurance is a high level of assurance, but is not a guarantee that an the consolidated and separate financial statements. audit conducted in accordance with ISAs will always detect a material We are responsible for the direction, supervision and misstatement when it exists. Misstatements can arise from fraud or error performance of the Group audit. We remain solely responsible for our audit opinion

TAARIFA YA MWAKA 2017 Tanga Cement PLC 50 Building today’s Dreams for tomorrow’s Generations Independent Auditor’s Report

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS This report, including the opinion, has been prepared for, and only for, the Company’s members as a body in accordance with the Companies Act, 2002 of Tanzania and for no other purposes. As required by the Companies Act, 2002 of Tanzania, we report to you, based on our audit, that: • We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit; • In our opinion, proper books of account have been kept by the Group and the Company, so far as appears from our examination of those books; • The Directors’ Report is consistent with the consolidated and separate financial statements; • Information specified by law regarding directors’ remuneration and transactions with the Group and the Company is disclosed; and, • The Group and the Company’s consolidated and separate statements of financial position and consolidated and separate statements of profit or loss and other comprehensive income are in agreement with the books of account. The engagement partner on the audit resulting in this independent auditor’s report is Julius Rwajekare.

Ernst & Young Certified Public Accountants Dar es Salaam

Signed by: Julius Rwajekare (Partner) 28 June 2018

51 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations TAARIFA YA MWAKA 2017 Tanga Cement PLC 52 Building today’s Dreams for tomorrow’s Generations ConsolidatedNotes to Statementthe Consolidated of Profit or Lossfinancial and other statements Comprehensive Income for thefor year the endedyear ended 31 December 31 December 2017 2017

Group Company Notes 2017 2016 2017 2016 TZS' 000' TZS' 000' TZS' 000' TZS' 000'

Revenue 5 171,744,715 166,975,482 150,488,539 153,775,982 Cost of sales 6 (142,317,940) (112,553,046) (125,714,112) (101,865,441)

Gross profit 29,426,775 54,422,436 24,774,427 51,910,541 Other income 7 61,911 2,066,529 55,558 2,062,325 Other expenses 7 (582,014) - (582,014) - Selling expenses 8 (3,866,175) (3,733,943) (3,534,844) (4,033,943) Administration expenses 9 (16,527,879) (14,821,460) (13,975,118) (12,375,690) Depreciation and amortisation 10 (18,853,021) (17,801,172) (18,762,437) (17,694,713) Impairment charge 10 (646,089) (293,771) (646,089) (293,771) Operating (loss)/profit (10,986,492) 19,838,619 (12,670,517) 19,574,749 Interest expense 11 (15,140,023) (11,706,318) (15,140,024) (11,706,318) Finance income 12 43,881 83,059 43,881 83,059 Foreign exchange loss 13 (9,162,273) (2,562,454) (9,088,724) (2,327,565)

(Loss)/profit before tax (35,244,907) 5,652,906 (36,855,384) 5,623,925

Income tax credit/(charge) 14(a) 8,904,753 (1,391,422) 9,777,070 (1,347,672) (Loss)/profit for the year (26,340,154) 4,261,484 (27,078,314) 4,276,253 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods (net of tax): Exchange differences on translation of foreign operations (13,582) (64,235) - - Other comprehensive income net of tax (13,582) (64,235) - - Total comprehensive income for (26,353,736) 4,197,249 (27,078,314) 4,276,253 the year, net of tax (Loss)/profit for the period attributable to: Owners of the parent (26,340,154) 4,261,484 (27,078,314) 4,276,253 Non-controlling interests - - - - (26,340,154) 4,261,484 (27,078,314) 4,276,253

Total comprehensive income for the year attributable to: Owners of the parent (26,353,736) 4,197,249 (27,078,314) 4,276,253 Non-controlling interests - - - - (26,353,736) 4,197,249 (27,078,314) 4,276,253

2017 2016 2017 2016 Tsh/share Tsh/share Tsh/share Tsh/share

Basic (loss)/earnings per share 15(a) (418) 68 (430) 68

Diluted (loss)/earnings per share 15(b) (418) 68 (430) 68

Tanga Cement PLC ANNUAL REPORT 2017 53 Building today’s Dreams for tomorrow’s Generations Notes to the ConsolidatedWaraka wa Mapato financial unaotambulika statements kwa mwakafor the ulioishia year ended tarehe 31 December31 Desemba 2017 2017

Kundi Kampuni Maelezo 2017 2016 2017 2016 Tsh' 000' Tsh' 000' Tsh' 000' Tsh' 000'

Mapato 5 171,744,715 166,975,482 150,488,539 153,775,982 Gharama za mauzo 6 (142,317,940) (112,553,046) (125,714,112) (101,865,441)

Faida Ghafi 29,426,775 54,422,436 24,774,427 51,910,541 Gharama nyingine za uendeshaji 7 61,911 2,066,529 55,558 2,062,325 Gharama nyingine 7 (582,014) - (582,014) - Gharama za uuzaji 8 (3,866,175) (3,733,943) (3,534,844) (4,033,943) Gharama za utawala 9 (16,527,879) (14,821,460) (13,975,118) (12,375,690) Uchakavu 10 (18,853,021) (17,801,172) (18,762,437) (17,694,713) Mali zilizoharibika 10 (646,089) (293,771) (646,089) (293,771) Faida ya Uendeshaji (10,986,492) 19,838,619 (12,670,517) 19,574,749 Gharama za riba 11 (15,140,023) (11,706,318) (15,140,024) (11,706,318) Mapato ya Fedha 12 43,881 83,059 43,881 83,059 Hasara/ Faida iliyotokana na ubadilishaji 13 (9,162,273) (2,562,454) (9,088,724) (2,327,565) fedha Faida kabla ya Kodi (35,244,907) 5,652,906 (36,855,384) 5,623,925

Kodi ya Mapato 14(a) 8,904,753 (1,391,422) 9,777,070 (1,347,672) Faida kwa Mwaka (26,340,154) 4,261,484 (27,078,314) 4,276,253

Pato kuu jingine Mapato mengine yanayotambulika kuainishwa tena kwenye faida au hasara katika kipindi kitakacho fuata (Kodi halisi):

Tofauti katika ubadilishaji fedha za kigeni (13,582) (64,235) - - Mapato Mengine yanayotambulika ya (13,582) (64,235) - - kodi halisi Jumla ya Mapato yanayotambulika (26,353,736) 4,197,249 (27,078,314) 4,276,253 ya mwaka Faida kwa kipindi kilichoidhinishwa kwa: Wamiliki wa Kampuni mama (26,340,154) 4,261,484 (27,078,314) 4,276,253 Wamiliki wasio na udhibiti - - - - (26,340,154) 4,261,484 (27,078,314) 4,276,253

Jumla ya Mapato yaliyoidhinishwa kwa:

Wamiliki wa Kampuni mama (26,353,736) 4,197,249 (27,078,314) 4,276,253 Wamiliki wasio na udhibiti - - - - (26,353,736) 4,197,249 (27,078,314) 4,276,253

2017 2016 2017 2016 Tsh/mapato Tsh/mapato Tsh/mapato Tsh/share

Mapato ya msingi kwa hisa (TSH) 15(a) (418) 68 (430) 68

Mapato ya msingi kwa hisa (TSH) 15(b) (418) 68 (430) 68 Tanga Cement PLC 54 Consolidated Statement of Financial Position As at 31 December 2017

Group Company Notes 2017 2016 2017 2016 TZS' 000' TZS' 000' TZS' 000' TZS' 000' ASSETS Non-current assets Property, plant and equipment 16 361,906,745 373,366,218 359,990,184 371,599,649 Investment in subsidiary 19(a) - - 1,746,976 1,746,976 Equity Investment 19(b) 100 100 100 100 Financial asset - Interest rate cap 20 4,994,316 7,152,393 4,994,316 7,152,393 366,901,161 380,518,711 366,731,576 380,499,118 Current assets Due from employees' share trust 18 - - 843,782 1,506,571 Inventories 21 38,043,180 32,673,142 37,518,276 32,018,334 Trade and other receivables 22 16,307,757 15,568,106 15,695,543 15,185,452 VAT recoverable 23 6,512,432 9,494,637 6,477,059 9,469,854 Current income tax recoverable 14(d) 2,303,416 2,557,299 2,129,325 2,129,325 Cash and bank balances 24 7,464,405 9,503,431 5,606,749 8,485,755 70,631,190 69,796,615 68,270,734 68,795,291

TOTAL ASSETS 437,532,351 450,315,326 435,002,310 449,294,409 EQUITY AND LIABILITIES Equity Issued capital 25 1,273,421 1,273,421 1,273,421 1,273,421 Translation reserve 9,187 22,769 - - Treasury shares 18 (843,782) (1,506,571) - - Retained earnings 162,000,436 189,884,783 161,473,124 190,095,631 Equity attributable to owners of the parent 162,439,262 189,674,402 162,746,545 191,369,052 Non-controlling interest - - - - Total equity 162,439,262 189,674,402 162,746,545 191,369,052 Non-current liabilities Provision for site restoration 26 25,077 21,364 25,077 21,364 Deferred tax liability 14(b) 6,869,709 16,757,451 6,869,709 16,757,451 Term borrowings: Non-current portion 27(a) 191,524,873 189,212,984 191,524,873 189,212,984 198,479,623 205,991,799 198,479,623 205,991,799 Current liabilities Term borrowings: Current portion 27(a) 33,384,911 13,157,583 33,384,911 13,157,583 Trade and other payables 28 30,835,419 34,507,286 27,998,095 31,791,719 Bank overdrafts 27(b) 12,453,135 6,984,256 12,453,135 6,984,256 76,673,466 54,649,125 73,836,142 51,933,558 TOTAL LIABILITIES 275,093,089 260,640,924 272,255,765 257,925,357 TOTAL EQUITY AND LIABILITIES 437,532,351 450,315,326 435,002,310 449,294,409 These consolidated and separate financial statements were approved by the Board of Directors for issue on 24 May 2018 and were signed on their behalf by:

Lawrence Masha Reinhardt Swart Chairman Managing Director

Tanga Cement PLC ANNUAL REPORT 2017 55 Building today’s Dreams for tomorrow’s Generations Waraka wa Hali ya Kifedha Kama ilivyokuwa 31 Desemba 2017

Kundi Kampuni Maelezo 2017 2016 2017 2016 Tsh' 000' Tsh' 000' Tsh' 000' Tsh' 000' RASILIMALI Rasilimali kudumu Mali, mitambo na vifaa 16 361,906,745 373,366,218 359,990,184 371,599,649 Uwekezaji tanzu 19(a) - - 1,746,976 1,746,976 Uwekezaji 19(b) 100 100 100 100 Mali za kifedha - Kiwango cha riba 20 4,994,316 7,152,393 4,994,316 7,152,393 366,901,161 380,518,711 366,731,576 380,499,118 Rasilimali za Muda Stahili kutoka mfuko wa hisa wa wafanyakazi 18 - - 843,782 1,506,571 Bidhaa 21 38,043,180 32,673,142 37,518,276 32,018,334 Wadaiwa wa kibiashara na wengine 22 16,307,757 15,568,106 15,695,543 15,185,452 Kodi inayorejesheka 23 6,512,432 9,494,637 6,477,059 9,469,854 kodi ya mapato ya kampuni itakayorudishwa 14(d) 2,303,416 2,557,299 2,129,325 2,129,325 Baki ya taslimu na benki 24 7,464,405 9,503,431 5,606,749 8,485,755 70,631,190 69,796,615 68,270,734 68,795,291

JUMLA YA RASILIMALI 437,532,351 450,315,326 435,002,310 449,294,409 HISA NA DHIMA Mtaji wa Akiba Mtaji wa hisa ulitolewa 25 1,273,421 1,273,421 1,273,421 1,273,421 Tafsiri ya akiba 9,187 22,769 - - Hisa za hazina 18 (843,782) (1,506,571) - - Mapato yaliyobakishwa 162,000,436 189,884,783 161,473,124 190,095,631 Hisa zilizoidhinishwa kwa wamiliki wa 162,439,262 189,674,402 162,746,545 191,369,052 Kampuni mama Wamiliki wasio na udhibiti - - - - Jumla 162,439,262 189,674,402 162,746,545 191,369,052 Dhima za kudumu Tengo kwa ajili ya uboreshaji wa eneo la 26 25,077 21,364 25,077 21,364 machimbo Tengo la kodi iliohirishwa 14(b) 6,869,709 16,757,451 6,869,709 16,757,451 Mkopo wa muda mrefu 27(a) 191,524,873 189,212,984 191,524,873 189,212,984 198,479,623 205,991,799 198,479,623 205,991,799 Dhima za muda Mikopo wa muda mfupi 27(a) 33,384,911 13,157,583 33,384,911 13,157,583 Madeni ya kibiashara na mengineyo 28 30,835,419 34,507,286 27,998,095 31,791,719 Mikopo yenye riba 27(b) 12,453,135 6,984,256 12,453,135 6,984,256 76,673,466 54,649,125 73,836,142 51,933,558 JUMLA YA DHIMA 275,093,089 260,640,924 272,255,765 257,925,357 JUMLA YA HISA NA DHIMA 437,532,351 450,315,326 435,002,310 449,294,409 Taarifa hizi kamili za fedha ziliidhinishwa na Bodi ya Wakurugenzi tarehe 24 Mei 2018 na zilitiwa saini kwa niaba yao na::

Lawrence Masha Reinhardt Swart Mwenyekiti Mkurugenzi Mtendaji Tanga Cement PLC 56 Consolidated Statement of Changes in Equity for the year ended 31 December 2017

Notes Issued Translation Treasury Retained Total Capital reserve Shares Earnings TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS' 000' TZS’ 000’

COMPANY At 1 January 2016 1,273,421 - - 190,318,916 191,592,337

Profit for the year - - - 4,276,253 4,276,253 Other comprehensive income - - - - Total comprehensive income - - - 4,276,253 4,276,253

Rescinded unclaimed dividend - - - 594,145 594,145 for 2009 Dividends approved 30 - - - (5,093,683) (5,093,683)

At 31 December 2016 1,273,421 - - 190,095,631 191,369,052

At 1 January 2017 1,273,421 - - 190,095,631 191,369,052 Loss for the year - - - (27,078,314) (27,078,314) Other comprehensive income - - - - - Total comprehensive income - - - (27,078,314) (27,078,314)

Rescinded unclaimed dividend for - - - 47,583 47,583 2010 Dividend approved 30 - - - (1,591,776) (1,591,776)

At 31 December 2017 1,273,421 - - 161,473,124 162,746,545

GROUP

At 1 January 2016 1,273,421 87,004 (1,853,782) 190,122,837 189,629,480

Profit for the year - - - 4,261,484 4,261,484 Other comprehensive income - (64,235) - - (64,235) Total comprehensive income - (64,235) - 4,261,484 4,197,249

Rescinded unclaimed dividend - - - 594,145 594,145 for 2009 Changes in treasury shares 18 - - 347,211 - 347,211 Dividend approved 30 - - - (5,093,683) (5,093,683)

At 31 December 2016 1,273,421 22,769 (1,506,571) 189,884,783 189,674,402

At 1 January 2017 1,273,421 22,769 (1,506,571) 189,884,783 189,674,402 Loss for the year - - - (26,340,154) (26,340,154) Other comprehensive income - (13,582) - - (13,582) Total comprehensive income - (13,582) - (26,340,154) (26,353,736)

Rescinded unclaimed dividend - - - 47,583 47,583 for 2010 Changes in treasury shares 18 - - 662,789 - 662,789 Dividend approved 30 - - - (1,591,776) (1,591,776) - - At 31 December 2017 1,273,421 9,187 (843,782) 162,000,436 162,439,263 Tanga Cement PLC 57 Building today’s Dreams for tomorrow’s Generations Waraka wa Mabadiliko ya Hisa/ Mtaji Kwa mwaka ulioishia tarehe 31 Desemba 2017

Maelezo Mtaji Mapato Treasury Retained Jumla wa hisa yaliyohifadhiwa Shares Earnings uliotolewa Tsh’ 000’ Tsh’ 000’ Tsh' 000' Tsh’ 000’ Tsh’ 000’ KAMPUNI Tarehe 1 Januari 2016 1,273,421 - - 190,318,916 191,592,337

Faida kwa Mwaka - - - 4,276,253 4,276,253 Mapato Mengineyo - - - - Jumla - - - 4,276,253 4,276,253

Gawio lililorudishwa ambalo - - - 594,145 594,145 halikuchukuliwa kwa mwaka 2009 Gawio iliyoidhinishwa 30 - - - (5,093,683) (5,093,683)

Tarehe 31 Desemba 2016 1,273,421 - - 190,095,631 191,369,052

Tarehe 1 Januari 2017 1,273,421 - - 190,095,631 191,369,052 Hasara kwa mwaka 2017 - - - (27,078,314) (27,078,314) Mapato Mengineyo - - - - - Jumla - - - (27,078,314) (27,078,314)

Gawio lililorudishwa ambalo - - - 47,583 47,583 halikuchukuliwa kwa mwaka 2010 Gawio iliyoidhinishwa 30 - - - (1,591,776) (1,591,776)

Tarehe 31 Desemba 2017 1,273,421 - - 161,473,124 162,746,545

KUNDI

Tarehe 1 Januari 2016 1,273,421 87,004 (1,853,782) 190,122,837 189,629,480

Faida kwa mwaka - - - 4,261,484 4,261,484 Mapato Mengineyo - (64,235) - - (64,235) Jumla - (64,235) - 4,261,484 4,197,249

Gawio lililorudishwa ambalo - - - 594,145 594,145 halikuchukuliwa kwa mwaka 2009 Hisa za Hazina 18 - - 347,211 - 347,211 Gawio iliyoidhinishwa 30 - - - (5,093,683) (5,093,683)

Tarehe 31 Desemba 2016 1,273,421 22,769 (1,506,571) 189,884,783 189,674,402

Tarehe 1 Januari 2017 1,273,421 22,769 (1,506,571) 189,884,783 189,674,402 Hasara kwa mwaka - - - (26,340,154) (26,340,154) Mapato Mengineyo - (13,582) - - (13,582) Jumla - (13,582) - (26,340,154) (26,353,736)

Gawio lililorudishwa ambalo - - - 47,583 47,583 halikuchukuliwa kwa mwaka 2010 Hisa za hazina 18 - - 662,789 - 662,789 Gawio iliyoidhinishwa 30 - - - (1,591,776) (1,591,776) - - Tarehe 31 Desemba 2017 1,273,421 9,187 (843,782) 162,000,436 162,439,263 Building today’s Dreams for tomorrow’s Generations Consolidated Statement of Cash Flows for the year ended 31 December 2017

Group Company Notes 2017 2016 2017 2016 TZS' 000' TZS' 000' TZS' 000' TZS' 000' OPERATING ACTIVITIES

Cash generated from operating activities 29 3,654,703 21,220,846 2,035,865 20,648,144 Interest income received 12 43,881 83,059 43,881 83,059 Income taxes paid 14(d) (618,434) (656,832) - (358,183) Net cash flows from operating activities 3,080,150 20,647,073 2,079,746 20,373,020

INVESTING ACTIVITIES

Proceeds from sale of property, plant and 3,728 2,003,503 - 1,999,320 equipment Purchase of property, plant and equipment (7,975,431) (17,288,687) (7,734,979) (17,284,923) (additions less capitalised borrowing costs) Proceeds from sale of investment in associate 651,786 - 651,786 -

Net cash flows used in investing activities (7,319,917) (15,285,184) (7,083,193) (15,285,603) FINANCING ACTIVITIES

Proceeds from borrowings 27(a) 22,216,383 - 22,216,383 - Interest expense paid (13,141,604) (17,522,122) (13,141,604) (17,522,122) Loan repayment 27(a) (11,883,494) (11,883,494) Dividends paid to equity holders of the (1,591,776) (4,992,277) (1,591,776) (4,992,277) parent

Net cash flows used in financing (4,400,491) (22,514,399) (4,400,491) (22,514,399) activities

Net decrease in cash and cash equivalents (8,640,258) (17,152,510) (9,403,938) (17,426,982) Net foreign exchange differences 971,424 1,379,093 1,056,053 1,678,316

Cash and cash equivalents at 1 January 2,519,175 18,292,592 1,501,499 17,250,165

Cash and cash equivalents at 31 24 (5,149,659) 2,519,175 (6,846,386) 1,501,499 December

Tanga Cement PLC ANNUAL REPORT 2017 59 Building today’s Dreams for tomorrow’s Generations Waraka wa Mtiririko wa Fedha Kwa mwaka ulioishia 31 Desemba 2017

Kundi Kampuni Maelezo 2017 2016 2017 2016 Tsh' 000' Tsh' 000' Tsh' 000' Tsh' 000' SHUGHULI ZA UENDESHAJI

Taslimu kutoka shughuli za biashara 29 3,654,703 21,220,846 2,035,865 20,648,144 Mapato ya Fedha 12 43,881 83,059 43,881 83,059 Kodi ya mapato iliyolipwa 14(d) (618,434) (656,832) - (358,183) Mapato halisi kutoka shughuli za biashara 3,080,150 20,647,073 2,079,746 20,373,020

SHUGHULI ZA UWEKEZAJI

Mapato yaliyopatikana kwa uuzaji wa 3,728 2,003,503 - 1,999,320 mali, mitambo na zana Ununuzi wa mitambo ya kawaida, mali na (7,975,431) (17,288,687) (7,734,979) (17,284,923) mitambo (imejumlishwa na kutoa gharama za mikopo ya mtaji) Mapato yaliyopatikana kutokana na mauzo 651,786 - 651,786 - ya uwekezaji

Mapato halisi yaliyotumika katika uwekezaji (7,319,917) (15,285,184) (7,083,193) (15,285,603)

SHUGHULI ZA KUGHARIMIA

Mapato yaliyopatikana na mikopo 27(a) 22,216,383 - 22,216,383 - Gharama za fedha (13,141,604) (17,522,122) (13,141,604) (17,522,122) Malipo ya mkopo 27(a) (11,883,494) (11,883,494) Magawio yaliyolipwa kwa wenye hisa wa (1,591,776) (4,992,277) (1,591,776) (4,992,277) kampuni mama

Fedha taslimu iliyotumiwa katika (4,400,491) (22,514,399) (4,400,491) (22,514,399) shughuli za ugharamiaji

Mapato halisi yaliyotumiwa katika (8,640,258) (17,152,510) (9,403,938) (17,426,982) shughuli za kugharimia Tofauti Halisi ya Mabadiliko ya Fedha 971,424 1,379,093 1,056,053 1,678,316 za kigeni

Fedha taslimu na Fedha linganifu mwanzo 2,519,175 18,292,592 1,501,499 17,250,165 wa mwaka Fedha taslimu na Fedha linganifu mwisho 24 (5,149,659) 2,519,175 (6,846,386) 1,501,499 wa mwaka

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 60 Notes to the consolidated Financial Statements

1. CORPORATE INFORMATION 2.2 STATEMENT OF COMPLIANCE AND BASIS OF The consolidated and separate financial statements of the Group CONSOLIDATION for the year ended 31 December 2017 were approved for issue in The consolidated and separate financial statements of Tanga accordance with a resolution of the Board of Directors on the date Cement Public Limited Company have been prepared in accordance indicated under the statement of financial position. . Tanga Cement with International Financial Reporting Standards (IFRSs) as issued by Public Limited Company, the reporting International Accounting Standards Board entity, is incorporated in Tanzania under the (IASB) and the requirements of the Tanzanian Companies Act 2002 as a limited liability Companies Act, 2002. company and is domiciled in Tanga, Tanzania. The financial statements comprise the The name of the reporting entity was changed financial statements of the Group and its from Tanga Cement Company Limited to subsidiary and consolidated structured entity Tanga Cement Public Limited Company as as at 31 December 2017. The subsidiary is fully per the Company Registrar’s instructions on consolidated from the date of acquisition, the 25 June 2014. The Company’s shares are being the date on which the Group obtained publicly traded on the Dar es Salaam Stock control (Control is achieved when the Group Exchange. is exposed, or has rights, to variable returns The principal activities of the Group are from its involvement with the investee and disclosed in the Directors’ Report. Information has the ability to affect those returns through about the Group is disclosed on page 36. its power over the investee), and continues to be consolidated until the date when such The Company has one fully owned subsidiary, control ceases. The financial statements of Cement Distributors (EA) Limited (CDEAL) that the subsidiary are prepared for the same is incorporated and domiciled in Tanzania. reporting period as the parent company, CDEAL is incorporated in Tanzania and fully using consistent accounting policies. Profit owns and controls Cement Distributors (EA) or loss and each component of other Limited – Rwanda and Cement Distributors comprehensive income (OCI) are attributed (EA) Limited – Burundi that are incorporated to the equity holders of the parent of the and domiciled in Rwanda and Burundi Group and to the non-controlling interests, respectively. The Company also owns 5% of even if this results in the non-controlling the shares in East African Railway Hauliers interests having a deficit balance. Limited (EARHL). When necessary, adjustments are made to the financial statements From the Group perspective, the Employee Share Trust is a of the consolidated entities to bring their accounting policies in line consolidated structured entity since the Trust was specifically set with the Group’s accounting policies. up in order to facilitate the delivery of shares to the Company’s All intra-group balances, transactions, and unrealised gains and employees. losses resulting from intra-group transactions and dividends are Information on the ultimate parent of the Company is presented in eliminated in full. Note 37 to the consolidated and separate financial statements.. The investment in the subsidiary is measured at cost in the 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT Company’s separate financial statements. ACCOUNTING POLICIES A change in the ownership interest of a subsidiary, without a loss of 2.1 BASIS OF PREPARATION control, is accounted for as an equity transaction. If the Group loses The consolidated and separate financial statements have been control over a subsidiary, it: prepared on a historical cost basis, except for derivative financial • Derecognises the assets (including goodwill) and liabilities instruments, which are measured at fair value. of the subsidiary; The consolidated and separate financial statements are prepared in • Derecognises the carrying amount of any non-controlling Tanzanian Shillings with all values rounded to the nearest thousand interest; (TZS‘000’), except when otherwise indicated. These consolidated and • Derecognises the cumulative translation differences, separate financial statements cover the year ended 31 December recorded in equity; 2017. • Recognises the fair value of the consideration received;

61 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated Financial Statements

• Recognises the fair value of any investment retained; b) Investment in an associate • Recognises any surplus or deficit in profit or loss; or An associate is an entity over which the Group has significant • Reclassifies the parent’s share of components previously influence. Significant influence is the power to participate in the recognised in other comprehensive income to profit or financial and operating policy decisions of the investee, but is not loss or retained earnings, as appropriate. control or joint control over those policies. The Group’s investment in its associate is accounted using the equity method. 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Under the equity method, the investment in the associate is a) Business combinations and goodwill carried in the consolidated statement of financial position at cost Business combinations are accounted for using the acquisition plus post acquisition changes in the Group’s share of net assets of method. The cost of an acquisition is measured as the aggregate the associate. Goodwill relating to the associate is included in the of the consideration transferred, measured at acquisition date carrying amount of the investment and is neither amortised nor fair value and the amount of any non-controlling interest in the individually tested for impairment. acquiree. For each business combination, the acquirer measures The consolidated statement of profit or loss and other the non-controlling interest in the acquiree either at fair value comprehensive income reflects the share of the results of operations or at the proportionate share of the acquiree’s identifiable net of the associate. Where there has been a change recognised directly assets. Acquisition costs incurred are expensed and included in in the equity of the associate, the Group recognises its share of any administrative expenses. changes and discloses this, when applicable, in the statement When the Group acquires a business, it assesses the financial of changes in equity. Unrealised gains and losses resulting from assets and liabilities assumed for appropriate classification and transactions between the Group and the associate are eliminated designation in accordance with the contractual terms, economic to the extent of the interest in the associate. The share of profit of circumstances and pertinent conditions as at the acquisition date. an associate is shown on the face of the consolidated statement This includes the separation of embedded derivatives in host of profit or loss and other comprehensive income. This is the profit contracts by the acquiree. attributable to equity holders of the associate and therefore is profit after tax and non-controlling interests in the subsidiaries of If the business combination is achieved in stages, the acquisition the associate. date fair value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date The financial statements of the associate are prepared for the same through profit or loss. reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Any contingent consideration to be transferred by the acquirer Group. will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is The investment in associate is measured at cost at the Company’s deemed to be an asset or liability are recognised in profit or loss. If financial statements. the contingent consideration is classified as equity, it should not be After application of the equity method, the Group determines re-measured until it is finally settled within equity. whether it is necessary to recognise an impairment loss on the Goodwill is initially measured at cost, being the excess of the Group’s investment in its associate. The Group determines at each aggregate of the consideration transferred and the amount reporting date whether there is any objective evidence that the recognised for non-controlling interest over the net identifiable investment in the associate is impaired. If this is the case, the Group assets acquired and liabilities assumed. If this consideration is lower calculates the amount of impairment as the difference between than the fair value of the net assets of the subsidiary acquired, the the recoverable amount of the associate and its carrying value and difference is recognised in profit or loss. recognises the amount in the ‘share of profit of an associate’ in the statement of profit or loss and other comprehensive income. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment Upon loss of significant influence over the associate, the Group testing, goodwill acquired in a business combination is, from the measures and recognises any retained investment at its fair value. acquisition date, allocated to each of the Group’s cash-generating Any difference between the carrying amount of the associate units that are expected to benefit from the combination, upon loss of significant influence and the fair value of the retained irrespective of whether other assets or liabilities of the acquiree are investment and proceeds from disposal is recognised in profit or assigned to those units. loss. Where goodwill has been allocated to a cash-generating unit and c) Current versus non-current classification part of the operation within that unit is disposed of, the goodwill The Group presents assets and liabilities in the consolidated and associated with the disposed operation is included in the carrying separate statement of financial position based on current/non- amount of the operation when determining the gain or loss on current classification. An asset is current when it is: disposal. Goodwill disposed in these circumstances is measured • Expected to be realised or intended to be sold or based on the relative values of the disposed operation and the consumed in the normal operating cycle; portion of the cash-generating unit retained. • Held primarily for the purpose of trading; • Expected to be realised within twelve months after the reporting period; or

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 62 Notes to the consolidated Financial Statements

• Cash or cash equivalent unless restricted from being Sale of goods exchanged or used to settle a liability for at least twelve Revenue from the sale of goods is recognised when the significant months after the reporting period. risks and rewards of ownership of the goods have passed to the All other assets are classified as non-current. buyer, usually on delivery of the goods. A liability is current when: Technical fees • It is expected to be settled in the normal operating cycle; Revenue is recognised when the Group’s right to receive payment is • It is held primarily for the purpose of trading; established. • It is due to be settled within twelve months after the reporting period; or Interest income • There is no unconditional right to defer the settlement For all financial instruments measured at amortised cost and interest- of the liability for at least twelve months after the reporting bearing financial assets classified as Available For Sale, interest income period. or expense is recorded using the effective interest rate (EIR), which is The Group classifies all other liabilities as non-current. the rate that exactly discounts the estimated future cash payments Deferred tax assets and liabilities are classified as non-current assets or receipts through the expected life of the financial instrument or and liabilities. a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance d) Foreign currency translation income in profit or loss. The Group and Company’s financial statements and Company’s separate financial statements are presented in Tanzanian Shillings Transportation services (TZS), which is also the Group and Company’s functional currency. Revenue is recognised when the Group has provided the services and Each entity in the Group determines its own functional currency and the right to receive payment is established. items included in the consolidated and separate financial statements of each entity are measured using that functional currency. f) Taxation Current income tax i) Transactions and balances Current income tax assets and liabilities for the current period are Transactions in foreign currencies are initially recorded by the Group measured at the amount expected to be recovered from, or paid to, entities at their respective functional currency rates prevailing at the the taxation authorities. The tax rates and tax laws used to compute date of the transaction. the amount are those that are enacted or substantively enacted at Monetary assets and liabilities denominated in foreign currencies are the reporting date. retranslated at the functional currency spot rate of exchange ruling at Current income tax relating to items recognised outside profit or loss the reporting date. All differences are taken to profit or loss. is recognised outside profit or loss in correlation to the underlying Non-monetary items that are measured in terms of historical cost in transaction either in other comprehensive income or directly in a foreign currency are translated using the exchange rates as at the equity. Management periodically evaluates positions taken in the tax date of the initial transaction. Non-monetary items measured at fair returns with respect to situations in which applicable tax regulations value in a foreign currency are translated using the exchange rates at are subject to interpretation and establishes provisions where the date when the fair value is determined. appropriate. ii) Group companies Deferred tax The assets and liabilities of foreign operations are translated into Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their Tanzanian Shilling (TZS) at the rate of exchange prevailing at the carrying amounts for financial reporting purposes at the reporting reporting date and their statements of comprehensive income date. balances are translated at exchange rates prevailing at the dates of Deferred tax liabilities are recognised for all taxable temporary the transaction or the average rates for the period. The exchange differences, except: differences arising on the translation are recognised in other • Where the deferred tax liability arises from the initial comprehensive income. On disposal of a foreign operation, the recognition of goodwill or of an asset or liability in a component of other comprehensive income relating to that transaction that is not a business combination and, at the particular foreign operation is recognised in profit or loss. time of the transaction, affects neither the accounting profit e) Revenue recognition nor taxable profit or loss. Revenue is recognised to the extent that it is probable that the • In respect of taxable temporary differences associated with economic benefits will flow to the Group and the revenue can be investments in associates and interests in joint ventures, reliably measured, regardless of when payment is received. Revenue is where the timing of the reversal of the temporary differences measured at the fair value of the consideration received or receivable, can be controlled and it is probable that the temporary taking into account contractually defined terms of payment and differences will not reverse in the foreseeable future. excluding discounts, rebates and Value Added Tax. Deferred tax assets are recognised for all deductible temporary The specific recognition criteria described below must also be met differences, carry forward of unused tax credits and unused tax losses, before revenue is recognised. to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry

ANNUAL REPORT Tanga Cement PLC 2017 63 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated Financial Statements

forward of unused tax credits and unused tax losses can be utilised, except: equipment and borrowing costs for long-term construction projects • Where the deferred tax asset relating to the deductible if the recognition criteria are met. When significant parts of property, temporary difference arises from the initial recognition of plant and equipment are required to be replaced at intervals, the an asset or liability in a transaction that is not a business Group recognises such parts as individual assets with specific useful combination and, at the time of the transaction, affects lives and depreciates them accordingly. Likewise, when a major neither the accounting profit nor taxable profit or loss. inspection is performed, its cost is recognised in the carrying amount • In respect of deductible temporary differences associated of the plant and equipment as a replacement if the recognition criteria with investments in subsidiaries and associates, deferred tax are satisfied. All other repair and maintenance costs are recognised in assets are recognised only to the extent that it is probable profit or loss as incurred. The present value of the expected cost for that the temporary differences will reverse in the foreseeable the decommissioning of an asset after its use is included in the cost of future and taxable profit will be available against which the the respective asset if the recognition criteria for a provision are met temporary differences can be utilised. Depreciation on property, plant and equipment is computed on a The carrying amount of deferred tax assets is reviewed at each straight line basis over the estimated useful lives of the assets. The reporting date and reduced to the extent that it is no longer probable rates of depreciation used are: that sufficient taxable profit will be available to allow all or part of the Asset Rate deferred tax asset to be utilised. Unrecognised deferred tax assets are • Leasehold land 1.00% – 10.00% reassessed at each reporting date and are recognised to the extent • Buildings, roads and railway siding 2.86% – 10.00% that it has become probable that future taxable profits will allow the • Plant, machinery and equipment 3.33% – 10.00% deferred tax asset to be recovered. • Motor vehicles and construction vehicles 3.33% – 20.00% Deferred tax assets and liabilities are measured at the tax rates that are • Fixtures, fittings and equipment 3.33% – 33.33% expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or An item of property, plant and equipment is derecognised upon substantively enacted at the reporting date. disposal or when no future economic benefits are expected from its Deferred tax relating to items recognised outside profit or loss is use or disposal. Any gain or loss arising on derecognition of the asset, recognised outside profit or loss in correlation to the underlying (calculated as the difference between the net disposal proceeds and transaction either in other comprehensive income or directly in the carrying amount of the asset) is included in profit or loss in the equity. Deferred tax assets and deferred tax liabilities are offset, if a year the asset is derecognised. legally enforceable right exists to set off current tax assets against The assets’ residual values, useful lives and depreciation methods are current income tax liabilities and the deferred taxes relate to the same reviewed at each financial year end and adjusted prospectively, if taxable entity and the same taxation authority. appropriate. Tax benefits acquired as part of a business combination, but not Construction in progress includes accumulated cost of property, satisfying the criteria for separate recognition at that date, would be plant and equipment which is under construction, or for which cost recognised subsequently if information about facts and circumstances has been incurred, but which is not yet ready for use by the Group. changed. The adjustment would either be treated as a reduction It also includes cost incurred for assets being constructed by third to goodwill (as long as it does not exceed goodwill) if it is incurred parties, assets which have not been delivered to, or installed in, the during the measurement period or recognised in profit or loss. facility and assets which cannot be used until certain other assets are Value Added Tax acquired and installed. Revenues, expenses and assets are recognised net of the amount of Where there is a significant interval between the times at which cost Value Added Tax, except: is incurred in connection with the acquisition of an asset and when • Where the Value Added Tax incurred on a purchase of assets the asset will be ready for use, the cost is accumulated in capital work or services is not recoverable from the taxation authority, in in progress. At the time the asset is ready for use, the accumulated which case the Value Added Tax is recognised as part of the cost is to be transferred to the appropriate category and depreciation cost of acquisition of the asset or as part of the expense item starts. as applicable. Construction in progress is not depreciated, since by the definition it • Receivables and payables that are stated with the amount of is not yet ready for use. Value Added Tax included. h) Leases The net amount of Value Added Tax recoverable from, or payable to, The determination of whether an arrangement is, or contains, a the taxation authority is included as part of receivables or payables in lease is based on the substance of the arrangement at the inception the consolidated statement of financial position. date. The arrangement is assessed for whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or g) Property, plant and equipment the arrangement conveys a right to use the asset, even if that right is Property, plant and equipment is stated at cost, net of accumulated not explicitly specified in an arrangement. depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 64 Notes to the consolidated Financial Statements

Group as a lessee of consumption of future economic benefits embodied in an asset, Operating lease payments are recognised as an operating expense are accounted for by changing the amortisation period or method, in the profit or loss on a straight line basis over the lease term. as appropriate, and are treated as changes in accounting estimates. Finance leases which transfer to the Group substantially all the The amortisation expense on intangible assets with finite lives is risks and benefits incidental to ownership of the leased item are recognised in profit or loss in the expense category consistent with capitalised at the commencement of the lease at the fair value of the function of the intangible assets. the leased property or, if lower, at the present value of the minimum Intangible assets with indefinite useful lives are not amortised, but lease payments. Lease payments are apportioned between finance are tested for impairment annually, either individually or at the cash- charges and reduction of the lease liability in order to achieve a generating unit level. The assessment of indefinite life is reviewed constant rate of interest on the remaining balance of the liability. annually to determine whether the indefinite life continues to be Finance charges are recognised in finance costs in the consolidated supportable. If not, the change in useful life from indefinite to finite and separate statements of profit or loss and other comprehensive is made on a prospective basis. income. An item of intangible asset is derecognised when an item is A leased asset is depreciated over the useful life of the asset. If, disposed or when no future economic benefit is expected from however, there is no reasonable certainty that the Group will obtain its use or disposal. Gains or losses arising from derecognition of an ownership by the end of the lease term, the asset is depreciated intangible asset are measured as the difference between the net over the shorter of the estimated useful life of the asset and the disposal proceeds and the carrying amount of the asset and are lease term. recognised in profit or loss when the asset is derecognised.

i) Borrowing costs k) Financial instruments – initial recognition and Borrowing costs directly attributable to the acquisition, construction subsequent measurement or production of an asset that necessarily take a substantial period i) Financial assets of time to prepare for its intended use or sale, are capitalised as part Initial recognition and measurement of the cost of the respective asset. All other borrowing costs are Financial assets within the scope of IAS 39 are classified as financial expensed in the period in which they occur. Borrowing costs consist assets at fair value through profit or loss, loans and receivables, of interest and other costs that an entity incurs in connection with the borrowing of funds. held-to-maturity investments or available-for-sale financial assets, as appropriate. The Group determines the classification of its financial Borrowing costs may include: assets at initial recognition. • Interest expense calculated using the effective interest All financial assets are recognised initially at fair value plus, in the method as described in IAS 39 Financial Instruments: case of investments not at fair value through profit or loss, directly Recognition and Measurement; attributable transaction costs. • Finance charges in respect of finance leases recognised in accordance with IAS 17 Leases; and Purchases or sales of financial assets that require delivery of assets • Exchange differences arising from foreign currency within a time frame established by regulation or convention in the borrowings to the extent that they are regarded as an marketplace (regular way trades) are recognised on the trade date, adjustment to interest costs. i.e., the date that the Group commits to purchase or sell the asset. The Group capitalises borrowing costs for all eligible assets. The Group’s financial assets include cash and short-term deposits j) Intangible assets (included under cash and cash equivalents), trade and other Intangible assets acquired separately are measured on initial receivables, interest rate cap and the amount due from employees’ recognition at cost. The cost of an intangible asset acquired in a share trust. business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less Subsequent measurement any accumulated amortisation and accumulated impairment losses, Cash and short-term deposits, loan and receivables loans are non- if any. Internally generated intangible assets, excluding capitalised derivative financial assets with fixed or determinable payments that development costs, are not capitalised and expenditure is reflected are not quoted in an active market. After initial recognition, such in profit or loss in the year in which the expenditure is incurred. financial assets are subsequently measured at amortised cost using the effective interest method, less impairment. Amortised cost The useful lives of intangible assets are assessed as either finite or is calculated by taking into account any discount or premium on indefinite. acquisition and fees or costs that are an integral part of the Effective Intangible assets with finite lives are amortised over their useful Interest Rate (EIR). The EIR amortisation is included in finance economic lives and assessed for impairment whenever there is an income in the profit or loss. The losses arising from impairment are indication that an intangible asset may be impaired. The amortisation recognised in profit or loss. period and the amortisation method for an intangible asset with a Derecognition finite useful life are reviewed at least at the end of each reporting A financial asset, or where applicable a part of a financial asset or period. Changes in the expected useful life, or the expected pattern

ANNUAL REPORT Tanga Cement PLC 2017 65 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated Financial Statements

part of a Group of similar financial assets is derecognised when: incurred, the amount of the loss is measured as the difference • The rights to receive cash flows from the asset have expired; between the assets carrying amount and the present value of • The Group has transferred its rights to receive cash flows from estimated future cash flows (excluding future expected credit the asset or has assumed an obligation to pay the received losses that have not yet been incurred). The present value of the cash flows in full without material delay to a third party estimated future cash flows is discounted at the financial asset’s under a ‘pass-through’ arrangement; and either (a) the Group original effective interest rate. If a loan has a variable interest rate, has transferred substantially all the risks and rewards of the the discount rate for measuring any impairment loss is the current asset, or (b) the Group has neither transferred nor retained effective interest rate. substantially all the risks and rewards of the asset, but has The carrying amount of the asset is reduced through the use of an transferred control of the asset. allowance account and the amount of the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced When the Group has transferred its rights to receive cash flows from carrying amount and is accrued using the rate of interest used to an asset, or has entered into a pass-through arrangement, and has discount the future cash flows for the purpose of measuring the neither transferred nor retained substantially all of the risks and impairment loss. The interest income is recorded as part of finance rewards of the asset nor transferred control of the asset, the asset income in profit or loss. is recognised to the extent of the Group’s continuing involvement in the asset. Receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all In that case, the Group also recognises an associated liability. The collateral has been realised or has been transferred to the Group. transferred asset and the associated liability are measured on a basis If, in a subsequent year, the amount of the estimated impairment that reflects the rights and obligations that the Group has retained. loss increases or decreases because of an event occurring after the Continuing involvement that takes the form of a guarantee over the impairment was recognised, the previously recognised impairment transferred asset is measured at the lower of the original carrying loss is increased or reduced by adjusting the allowance account. If amount of the asset and the maximum amount of consideration a future write-off is later recovered, the recovery is credited to profit that the Group could be required to repay. or loss Impairment of financial assets Derivative financial instruments The Group assesses at each reporting date whether there is any The Company uses derivative financial instruments, such as interest objective evidence that a financial asset or a group of financial rate swaps to hedge its interest rate risks. Such derivative financial assets is impaired. A financial asset or a group of financial assets is instruments are initially recognised at fair value on the date on deemed to be impaired if, and only if, there is objective evidence of which a derivative contract is entered into and are subsequently impairment as a result of one or more events that has occurred after re-measured at fair value. Derivatives are carried as financial assets the initial recognition of the asset (an incurred ‘loss event’) and that when the fair value is positive and as financial liabilities when the fair loss event has an impact on the estimated future cash flows of the value is negative. financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a The premium paid is recognized at fair value and any changes are debtor or a group of debtors is experiencing significant financial capitalized as borrowing costs under the qualifying Property, Plant difficulty, default or delinquency in interest or principal payments, and Equipment item if the capitalisation criteria in note 2.3(i) is met. the probability that they will enter bankruptcy or other financial Note 20 of consolidated and separate financial statements provide a reorganisation and where observable data indicate that there is detailed breakdown of the interest rate cap disclosure. a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with ii) Financial liabilities defaults. Initial recognition and measurement Financial liabilities within the scope of IAS 39 are classified as financial Financial assets carried at amortised cost liabilities at fair value through profit or loss, loans and borrowings, For financial assets carried at amortised cost, the Group first assesses or as derivatives designated as hedging instruments in an effective whether objective evidence of impairment exists individually for hedge, as appropriate. The Group determines the classification of its financial assets that are individually significant, or collectively for financial liabilities at initial recognition. financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an All financial liabilities are recognised initially at fair value and in the individually assessed financial asset, whether significant or not, it case of loans and borrowings, plus directly attributable transaction includes the asset in a group of financial assets with similar credit costs. risk characteristics and collectively assesses them for impairment. The Group’s financial liabilities include trade and other payables, Assets that are individually assessed for impairment and for which an bank overdrafts, loans and borrowings. impairment loss is, or continues to be, recognised are not included Subsequent measurement in a collective assessment of impairment. After initial recognition, trade and other payables, bank overdrafts, interest-bearing loans and borrowings are subsequently measured If there is objective evidence that an impairment loss has been at amortised cost using the effective interest method. Gains

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 66 Notes to the consolidated Financial Statements

and losses are recognised in profit or loss when the liabilities are valuation model is used. These calculations are corroborated derecognised as well as through the effective interest method by valuation multiples, quoted share prices for publicly traded amortisation process. subsidiaries or other available fair value indicators. Amortised cost is calculated by taking into account any discount or The Group bases its impairment calculation on detailed budgets premium on acquisition and fees or costs that are an integral part and forecast calculations which are prepared separately for each of of the EIR. The EIR amortisation is included in finance costs in profit the Group’s cash-generating units to which the individual assets are or loss. allocated. These budgets and forecast calculations generally cover Derecognition a period of five years. For longer periods, a long term growth rate A financial liability is derecognised when the obligation under the is calculated and applied to project future cash flows after the fifth liability is discharged or cancelled or expires. year. When an existing financial liability is replaced by another from the Impairment losses of continuing operations, including impairment same lender on substantially different terms, or the terms of an on inventories, are recognised in profit or loss in those expense existing liability are substantially modified, such an exchange or categories consistent with the function of the impaired asset. modification is treated as a derecognition of the original liability and For assets excluding goodwill, an assessment is made at each the recognition of a new liability. The difference in the respective reporting date as to whether there is any indication that previously carrying amounts is recognised in profit or loss. recognised impairment losses may no longer exist or may have Offsetting of financial instruments decreased. If such indication exists, the Group estimates the asset’s or Financial assets and financial liabilities are offset and the net amount cash-generating unit’s recoverable amount. A previously recognised is reported in the consolidated statement of financial position if impairment loss is reversed only if there has been a change in the there is a currently enforceable legal right to offset the recognised assumptions used to determine the asset’s recoverable amount amounts and there is an intention to settle on a net basis, or to since the last impairment loss was recognised. The reversal is realise the assets and settle the liabilities simultaneously. limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceed the carrying amount that would i) Inventories have been determined, net of depreciation or amortisation, had no Inventories are valued at the lower of cost and net realisable value. impairment loss been recognised for the asset in prior years. Such Costs incurred in bringing each product to its present location and reversal is recognised in profit or loss. condition is accounted for as follows: The following criteria are also applied in assessing impairment of Raw materials: specific assets: Purchase cost on a first in, first out basis. Goodwill Finished goods and work in progress: Goodwill is tested for impairment annually (as at 31 December) Cost of direct materials and labour and a proportion of and when circumstances indicate that the carrying value may be manufacturing overheads based on normal operating capacity but impaired. excluding borrowing costs. Impairment is determined for goodwill by assessing the recoverable Net realisable value is the estimated selling price in the ordinary amount of each cash-generating unit (or group of cash-generating course of business, less estimated costs of completion and the units) to which the goodwill relates. Where the recoverable amount estimated costs necessary to make the sale. of the cash-generating unit is less than its carrying amount, an m) Impairment of non-financial assets impairment loss is recognised. Impairment losses relating to The Group assesses, at each reporting date, whether there is an goodwill cannot be reversed in future periods. indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group n) Royalties estimates the asset’s recoverable amount. An asset’s recoverable Royalties payable to the representatives of the Ministry of Energy amount is the higher of an asset’s, or cash-generating unit’s (CGU), and Minerals, the Resident Mines Officer and Zonal Mines Officer fair value less costs of disposal and its value in use, and is determined and, in some instances, local government, are included under for an individual asset, unless the asset does not generate cash the cost of sales. Royalties are calculated based on quantities of inflows that are largely independent of those from other assets or limestone and red clay crushed/hauled and pozzolana used during groups of assets. Where the carrying amount of an asset or CGU the year under review, royalties are recognised up on consumption exceeds its recoverable amount, the asset is considered impaired of the respective materials. and is written down to its recoverable amount. o) Cash and cash equivalent In assessing value in use, the estimated future cash flows are Cash and cash equivalents in the consolidated statement of financial discounted to their present value using a pre-tax discount rate that position comprise cash at banks and on hand and short-term reflects current market assessments of the time value of money and deposits with a maturity of three months or less. the risks specific to the asset. In determining fair value less costs For the purpose of the consolidated statement of cash flows, cash of disposal, recent market transactions are taken into account, if and cash equivalents consist of cash and short-term deposits as available. If no such transactions can be identified, an appropriate defined above, net of outstanding bank overdrafts.

ANNUAL REPORT Tanga Cement PLC 2017 67 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated Financial Statements

Cash and cash equivalents are carried at amortised cost in the conform to changes in the presentation in the reporting period. No consolidated statement of financial position. adjustments or reclassification have been made in the current year. p) Provisions t) Determination of fair value General The fair value for financial instruments traded in active markets at Provisions are recognised when the Group has a present obligation the financial reporting date is based on their quoted market price or (legal or constructive) as a result of a past event, it is probable that an dealer price quotations (bid price for long positions and ask price for outflow of resources embodying economic benefits will be required short positions), without any deduction for transaction costs. to settle the obligation and a reliable estimate can be made of the For all other financial instruments not listed in an active market, the amount of the obligation. Where the Group expects some or all of a fair value is determined by using appropriate valuation techniques. provision to be reimbursed, for example under an insurance contract, Valuation techniques include net present value techniques, the reimbursement is recognised as a separate asset but only when comparison to similar instruments for which market observable the reimbursement is virtually certain. The expense relating to any prices exist, options pricing models and other relevant valuation provision is presented in profit or loss net of any reimbursement. models. Site restoration provision There were no transfers into and out of the fair value hierarchies. The provision for restoration represents the cost of restoring site The Group has no nonfinancial assets and liabilities that are damage after the start of production. Increases in the provision are measured at fair value. charged to profit or loss as a cost of production. u) Cash Dividend and non-cash distributions Restoration costs are estimated at the present value of the The Group recognises dividend liability when the distribution is expenditures expected to settle the obligation, using estimated authorised and the distribution is no longer at the discretion of the cash flows based on current prices. The estimates are discounted at Company. A distribution is authorised when it is approved by the a pre-tax rate that reflects current market assessments of the time Board of Directors. A corresponding amount is recognised directly value of money and risks specific to the liability. in equity. q) Employees’ benefits Non-cash distributions are measured at the fair value of the assets Pension benefit to be distributed with fair value re-measurement recognised directly All the Group’s local employees are either members of the National in equity. Social Security Fund (NSSF) or the PPF Pensions Fund (PPF), Upon distribution of non-cash assets, any difference between the which are defined contribution plans. These plans are prescribed carrying amount of the liability and the carrying amount of the by law. All employees must be a member of at least one of the assets distributed is recognised in profit or loss. aforementioned. The Group and employees both contribute 10% of the employees’ gross salaries to the NSSF. For PPF, the Group and v) Share capital and treasury shares employees contribute 15% and 5% of the employees’ basic salaries Ordinary shares are classified as equity. Incremental costs directly to the scheme respectively. The Group’s contributions are charged attributable to the issue of new shares or options are shown in to the profit or loss when incurred. equity as a deduction from the proceeds, net of tax. Termination benefits Where any Group controlled entity purchases the Company’s Termination benefits are payable when employment is terminated equity share capital, the consideration paid, including any directly before the normal retirement date, or when an employee accepts attributable incremental costs (net of income tax), is deducted voluntary redundancy in exchange for these benefits. The from equity attributable to the Company’s equity holders until the company recognises termination benefits when it is demonstrably shares are cancelled, reissued or disposed of. Where such shares committed to either: terminating the employment of current are subsequently sold or reissued, any consideration received, net employees according to a detailed formal plan without possibility of of any directly attributable incremental transaction costs and the withdrawal; or providing termination benefits as a result of an offer related income tax effects, are included in equity attributable to the made to encourage voluntary redundancy based on the number of Company’s equity holders. employees expected to accept the offer. No gain or loss is recognised in profit or loss in the purchase, sale or r) Employees bonus cancellation of the Group’s own equity instruments. Share options Employees are entitled for annual bonuses which are performance exercised by employees during the reporting period are satisfied based; the company recognises a liability and an expense for with treasury shares. bonuses, based on a formula that takes into consideration individual’s w) Dividend distribution achievement on the pre agreed annual targets. The company Dividend distribution to the Company’s shareholders is recognised recognises a provision where contractually obliged or where there is as a liability in the period in which the dividends are approved by the a past practice that has created a constructive obligation. Company’s Board of Directors. r) Comparatives Dividend withholding tax Where necessary, comparative figures are adjusted or reclassified to Dividend withholding tax is payable at a rate of 5% on dividends

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 68 Notes to the consolidated Financial Statements

distributed to shareholders. This tax is not attributable to the 15 metres. The overburden materials vary in thickness, but seldom Company paying the dividend but is collected by the Company and exceed 0.5 metres. The removed overburden is later used as natural paid to the tax authorities on behalf of the shareholder. Dividend backfill material on the mined benches. Limestone is mined from the withholding tax is included in dividend paid in the statement of quarry in a way that leaves the “used” area as a one-level horizontal changes in equity. plateau (bench). The Group has re-cultivated the lands of the quarry 2.4 NEW AND AMENDED STANDARDS AND that will no longer be mined. The Group has prepared a quarry INTERPRETATIONS restoration plan. The accounting policies adopted are consistent with those used in For the carrying amount of the provision for site restoration refer to the previous year. The amendments to IAS 7 Statement of Cash Flows Note 26 to the consolidated and separate financial statements. did not have an impact on the financial statements of the Group as Asset useful lives the additional disclosures required by the amendment were already The estimated useful lives and residual values of items of property, included in the Group’s financial statements as presented in Note plant and equipment are reviewed annually and are in line with the 27. The other new and amended standards and interpretations that rates at which they are depreciated. became effective during the year did not have a significant impact For the carrying amount of property, plant and equipment, refer to on the Group’s accounting policies, financial position or results. Note 16 to the consolidated and separate financial statements. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES Contingent liabilities AND ASSUMPTIONS By their nature, contingent liabilities will only be resolved when one The preparation of the consolidated and separate financial or more future events occur or fail to occur. The assessment of such statements requires management to make judgments, estimates contingent liabilities inherently involves the exercise of significant and assumptions that affect the reported amounts of revenues, judgement and estimates of the outcome of future events. expenses, assets and liabilities, the accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these Litigation and other judicial proceedings as a rule raise difficult and assumptions and estimates could result in outcomes that require complex legal issues and are subject to uncertainties and complexities a material adjustment to the carrying amount of assets or liabilities including, but not limited to, the facts and circumstances of each affected in future periods. particular case, issues regarding the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution Judgments of any pending legal matter, the Group may be forced to incur In the process of applying the Group’s accounting policies, charges in excess of the presently established provisions and related management has made the judgments, apart from those involving insurance coverage. It is possible that the financial position, results estimations, which have had significant effects on the amounts of operations or cash flows of the Group could be materially affected recognized in the consolidated and separate financial statements. by the unfavourable outcome of litigation. Operating lease commitments – Group as a lessee For details on the contingent liabilities amounts, refer to Note 36 to The Group has entered into lease agreements for office space the consolidated and separate financial statements. and residential premises. The Group has determined, based on an Fair value of financial instruments evaluation of the terms and conditions of the arrangements, such Where the fair value of financial assets and financial liabilities as the lease term not constituting a major part of the economic recorded in the statement of financial position cannot be derived life of the leased assets and the present value of the minimum from active markets, their fair value is determined using valuation lease payments not amounting to substantially all of the fair value techniques including the discounted cash flow model. The inputs to of the leased assets, that it does not take on all the significant risks these models are taken from observable market data where possible, and rewards of ownership of the leased assets and accounts for the but where this is not feasible, a degree of judgement is required in arrangements as operating leases. establishing fair values. The judgements include considerations Refer to Note 31 for details on operating leases. of inputs such as liquidity risk, credit risk and volatility. Changes in Estimates and assumptions assumptions about these factors could affect the reported fair value The key assumptions concerning the future and other key sources of financial instruments. of estimation uncertainty at the reporting date, that have a Refer to Notes 20 and 38 to the consolidated and separate financial significant risk of causing a material adjustment to the carrying statements for further disclosures on fair value measurements. amounts of assets and liabilities within the next financial year, are Impairment of non-financial assets described below. The Group based its assumptions and estimates on The Group reviews its accounts and other receivables to assess parameters available when the consolidated and separate financial impairment at least on every reporting date. In determining whether statements were prepared. Existing circumstances and assumptions an impairment loss should be recorded in profit or loss, the Group about future developments may, however, change due to market makes judgments as to whether there is any observable data changes or circumstances arising beyond the control of the Group. indicating that there is a measurable decrease in the estimated future Such changes are reflected in the assumptions when they occur. cash flows of an individual debtor in that portfolio. This evidence Provision for quarry restoration may include observable data indicating that there has been an adverse change in the payment status of customers, or national or The Group’s quarry is an open pit quarry with bench heights at 12-

ANNUAL REPORT Tanga Cement PLC 2017 69 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated Financial Statements

local economic conditions that correlate with defaults on assets. statements. Refer to Notes 18 and 22 to the consolidated and separate financial 4. STANDARDS ISSUED BUT NOT YET EFFECTIVE statements for further details on impairment of receivables. The standards and interpretations that are issued, but not yet Impairment of non-financial assets effective, up to the date of issuance of the consolidated and separate Impairment exists when the carrying amount of an asset or cash financial statements are disclosed below. The Group intends to generating unit exceeds its recoverable amount, which is the higher adopt these standards, if applicable, when they become effective. of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data IFRS 9 Financial Instruments from binding sales transactions, conducted at arm’s length, for IFRS 9 addresses the classification, measurement and recognition similar assets or observable market prices less incremental costs of financial assets and financial liabilities. It replaces IAS 39 Financial for disposing of the asset. When value in use calculations are Assets: Recognition and Measurement. IFRS 9 requires financial undertaken, management must estimate the expected future cash assets to be classified into three measurement categories: those flows from the asset or cash generating unit and choose a suitable measured at fair value through profit or loss (FVPL), fair value discount rate in order to calculate the present value of the cash through other comprehensive income (FVOCI), and those measured flows. at amortized cost. Equity instruments should be measured at fair value and those that are not held for trading may be irrevocably Refer to Notes 16, 17, 19 and 2.3(m) for the carrying amounts of the designated as measured at fair value through other comprehensive impaired non-financial assets and accounting policy on impairment income (FVOCI) with no subsequent reclassification of gains or losses of non-financial assets. to profit or loss. The determination is made at initial recognition. The Intangible assets are tested for impairment annually as well as at classification depends on the entity’s business model for managing other times when such indicators exist. Other non-financial assets its financial instruments and the contractual cash flow characteristics are tested for impairment when there are indicators that the carrying of the instrument. For financial liabilities, the standard retains most amounts may not be recoverable. of the IAS 39 requirements. The main change is that, in cases where The Group performed the annual impairment assessment at year- the fair value option is taken for financial liabilities, the part of a end. The Group considers the relationship between value in use and fair value change due to an entity’s own credit risk is recorded in carrying amount of the asset, among other factors, when reviewing other comprehensive income rather than in profit or loss, unless this for indicators of impairment. As at 31 December 2017 and 31 creates an accounting mismatch. December 2016, the impairment assessment indicated that there IFRS 9 does not change the general principles of how an entity were no indicators that the carrying amounts of the non-financial accounts for effective hedges. assets could be impaired. The Group expects that implementation of the standard will have Taxes the following impact: Uncertainties exist with respect to the interpretation of complex • Trade and other receivables, bank balances and amounts tax regulations, changes in tax laws, and the amount and timing due from related parties are expected to pass the solely for of future taxable income. Given the wide range of international payment of principal and interest (SPPI) test and are held to business relationships and the long-term nature and complexity of collect contractual cash flows. These are therefore expected existing contractual agreements, differences arising between the to be measured at amortized cost using the effective interest actual results and the assumptions made, or future changes to such method. The expected credit losses on these financial assets assumptions, could necessitate future adjustments to tax income are not expected to be significantly different from the and expense already recorded. The Group establishes provisions, impairment losses under IAS 39. based on reasonable estimates, for possible consequences of audits • The interest rate cap which is a derivative instrument will by the tax authorities of the respective countries in which it operates. continue to be measured at fair value through profit or loss. The amount of such provisions is based on various factors, such as • The classification and measurement of financial liabilities is experience of previous tax audits and differing interpretations of tax not expected to change on the adoption of this standard. regulations by the taxable entity and the responsible tax authority. • The equity investment in EARHL will be measured at fair Such differences of interpretation may arise on a wide variety of value. However, considering the level of shareholding and size of the investee, this is not expected to materially impact issues, depending on the conditions prevailing in the respective the financial statements. domicile of the Group companies. The Group will adopt the new standard on the required effective Deferred tax assets are recognised for unused tax losses to the extent date using the modified retrospective transition approach. that it is probable that taxable profit will be available against which IFRIC Interpretation 23 Uncertainty over Income Tax Treatment the losses can be utilised. Significant management judgement is The interpretation addresses: i) whether an entity considers required to determine the amount of the deferred tax assets that uncertain tax treatments separately; ii) the assumptions an entity can be recognised, based upon the likely timing and the level of makes about the examination of tax treatments by taxation future taxable profits together with future tax planning strategies. authorities; iii) how entity determines taxable profit (tax loss), tax For disclosures and details on tax and tax contingencies, refer bases, unused tax losses, unused tax credits and tax rates. An entity to Notes 14 and 36 of the consolidated and separate financial must determine whether to consider each uncertain tax treatment

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 70 Notes to the consolidated Financial Statements

separately or together with one or more other uncertain tax to make more extensive disclosures than under IAS 17. treatments. The approach that better predicts the resolution of the The application of the standard will primarily affect the accounting uncertainty should be followed. The interpretation is effective for for the Group’s operating leases. As at the reporting date, the Group annual reporting periods beginning on or after 1 January 2019. The had the operating lease commitments disclosed in Note 31. Some Group is still assessing the impact of this interpretation. of the commitments may be covered by the exceptions for short- IFRS 16 Leases term and low-value leases and some commitments may relate to The scope of the new standard includes leases of all assets, with arrangements that will not qualify as leases under IFRS 16. The Group certain exceptions. A lease is defined as a contract, or part of a is still assessing to what extent these lease commitments will result contract, that conveys the right to use an asset (the underlying in the recognition of an asset and a liability for future payments asset) for a period of time in exchange for consideration. The key and how this will affect the Group’s results and classification of features of the new standard are: cash flows. This said, it has been determined that the application of this standard will affect EBITDA, net debt and leverage ratios of • The new standard requires lessees to account for all leases the Group. under a single on-balance sheet model (subject to certain exemptions) in a similar way to finance leases under IAS 17. Other new and amended standards • Lessees recognise a liability to pay rentals with a The followings new and amended standards and interpretations corresponding asset, and recognise interest expense and issued but not yet effective are not expected to have an impact on depreciation separately. the Group’s financial statements: • The new standard includes two recognition exemptions for • IFRS 15 Revenue from Contracts with Customers lessees – leases of ’low-value’ assets (e.g., personal computer) (Effective 1 January 2018): The Group has no significant and short-term leases (i.e., leases with a lease term of 12 revenue contracts with customers for which the months or less). accounting treatment will differ significantly on adoption of this standard. • Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the • IFRIC Interpretation 22 Foreign Currency Transactions lessee is required upon certain events. and Advance Consideration (Effective 1 January 2018). • Lessor accounting is substantially the same as today’s lessor The other new and amended standards issued but not yet effective, accounting, using IAS 17’s dual classification approach and not listed above, are not expected to have an impact on the Group’s financial statements The new standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. The new standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. The new standard’s transition provisions permit certain reliefs. The new standard requires lessees and lessors

ANNUAL REPORT Tanga Cement PLC 2017 71 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 5 REVENUE

Cement revenue 156,391,179 162,145,154 141,131,008 148,945,654 Transport revenue 15,353,536 4,830,328 9,357,531 4,830,328 Total 171,744,715 166,975,482 150,488,539 153,775,982

6 COST OF SALES Distribution costs 35,011,543 29,302,823 18,407,715 18,615,218 Variable costs 68,613,376 56,536,908 68,613,376 56,536,908 Fixed costs 38,693,021 26,713,314 38,693,021 26,713,314 142,317,940 112,553,046 125,714,112 101,865,441

The following are included in cost of sales:

ROYALTIES Limestone 697,174 389,554 697,174 389,554 Red soil 34,049 23,847 34,049 23,847 Pozzolana 57,480 94,598 57,480 94,598 Total 788,703 507,999 788,703 507,999

Cost of sales includes the cost incurred on raw materials, fuel, electricity, personnel, maintenance, distribution and other production expenses. Royalties payable to the Ministry of Energy and Minerals during the year are recognised as expenses and are included in the cost of sales line item as part of direct costs of raw materials.

7 OTHER INCOME/(EXPENSES) Other income Sundry income 55,558 69,650 55,558 69,041 Decrease in site restoration provision - 124,238 - 124,238 (Note 26) Gain on disposal of investment in - 380,174 - 380,174 associate Gain on sale of property, plant and equipment 6,353 1,492,467 - 1,488,872 Total 61,911 2,066,529 55,558 2,062,325 Other expenses Loss on sale of property, plant and (582,014) - (582,014) - equipment

8 SELLING EXPENSES Other marketing and sales 690,897 509,685 690,897 509,685 expenses Personnel expenses 1,040,792 1,012,542 1,040,792 1,012,542 Allowances for bad and doubtful 725,053 79,928 393,722 23,266 debts net of recoveries Purchase of services from related 1,409,433 2,131,788 1,409,433 2,488,450 and third parties Total 3,866,175 3,733,943 3,534,844 4,033,943

9 ADMINISTRATION EXPENSES Personnel expenses 10,914,215 10,784,847 9,120,268 8,339,077 Third party services 2,318,553 2,383,803 2,318,553 2,383,803 Other administration expenses 3,295,111 1,652,810 2,536,297 1,652,810

Total 16,527,879 14,821,460 13,975,118 12,375,690

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 72 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 10 OPERATING PROFIT Operating profit is arrived at after charging/ (crediting): (Gain)/loss on sale of property, plant and 575,661 (1,492,467) 582,014 (1,488,872) equipment Audit fees - Health and safety audit 20,250 57,000 20,250 57,000 - Auditors’ remuneration and related expenses 249,451 211,942 189,331 174,741

Directors’ remuneration - Directors’ emoluments 2,379,941 1,721,341 2,379,941 1,721,341

Staff costs: - Service costs 17,947,281 16,812,293 16,349,525 15,220,126 - Pension costs (Defined contribution plan) 2,254,900 2,225,595 2,131,530 2,225,595

Rentals - Operating lease payments 9,415,707 5,698,848 9,260,672 5,497,879

Depreciation Charge for the year (Note 16) 18,853,021 17,801,172 18,762,437 17,694,713 18,853,021 17,801,172 18,762,437 17,694,713

Impairment charge - On value of treasury shares/amount due from the Trust (Note 18) 646,089 293,771 646,089 293,771 646,089 293,771 646,089 293,771 11 INTEREST EXPENSE Interest expense on bank overdrafts 1,561,121 832,061 1,561,121 832,061 Interest expense on term loans 13,578,902 12,054,199 13,578,902 12,054,199 Total interest expense 15,140,023 12,886,260 15,140,024 12,886,260

Less: Interest expense capitalised in property, plant & - (1,179,942) - (1,179,942) equipment Interest expense charged to profit or loss 15,140,023 11,706,318 15,140,024 11,706,318

12 FINANCE INCOME Interest income on bank deposits 43,881 83,059 43,881 83,059

FOREIGN EXCHANGE LOSS AND FAIR 13 VALUE LOSS Net foreign exchange and fair value loss 9,162,273 2,596,179 9,088,724 2,361,290 Less: Foreign exchange gain/(loss) capitalised - 33,725 - (33,725) in property, plant & equipment* Net charge to profit or loss 9,162,273 2,562,454 9,088,724 2,327,565

*The 2016 balance comprises foreign exchange gains of TZS 544,688,000 and interest rate cap fair value losses of TZS 578,413,000. 73 Tanga Cement PLC Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 14 INCOME TAX (a) Income tax (credit)/ charge Current income tax 512,666 43,750 - - Current income tax adjustments in respect of prior 470,323 (170,253) 110,672 (170,253) years Deferred tax (credit)/charge for the year (10,857,095) 1,789,893 (10,857,095) 1,789,893 Deferred tax adjustments in respect of prior years 969,353 (271,968) 969,353 (271,968) (8,904,753) 1,391,422 (9,777,070) 1,347,672

(b) Deferred tax liability At 1 January 16,757,451 15,239,526 16,757,451 15,239,526 (Credit)/charge for the year (9,887,742) 1,517,925 (9,887,742) 1,517,925 At 31 December 6,869,709 16,757,451 6,869,709 16,757,451

Deferred tax liabilities/(assets) Accelerated depreciation 42,472,703 43,200,574 42,564,584 43,304,375 Provision for bad debts (253,326) (97,535) (146,140) (28,023) Provision for obsolete inventories (2,387,057) (1,787,316) (2,387,057) (1,787,316) Impairment of investment in subsidiary - - - (893,231) Impairment of assets - (893,231) - - Impairment of treasury shares/amount due (281,958) (88,132) (281,958) (88,132) from Trust Unrealised foreign exchange loss (2,321,788) (2,449,235) (2,321,788) (2,449,235) Unrealised foreign exchange gains 11,074 1,080 - - Provision for bonus (479,277) (328,876) (459,890) (309,203) Current income tax losses carried forward (30,098,042) (20,992,992) (30,098,042) (20,985,375) Provision for site restoration - (6,409) - (6,409) 6,662,329 16,557,928 6,869,709 16,757,451

Deferred tax asset not recognised CDEAL - Tanzania 185,781 177,638 - - CDEAL - Rwanda 21,599 21,885 - - 207,380 199,523 - -

Net deferred tax liability recognised 6,869,709 16,757,451 6,869,709 16,757,451

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 74 Notes to the Consolidated financial statements for the year ended 31 December 2017

The net deferred income tax assets for CDEAL Tanzania and CDEAL Rwanda have not been recognised because in the opinion of the directors, there is no convincing evidence that future taxable profits will be available against which the deferred tax assets can be utilised for the respective companies. The current tax losses have no time limit over which they must be utilised.

(c ) Tax rate reconciliation Group Company 2017 2016 2017 2016 A reconciliation between the income tax expense and the accounting profit multiplied by the domestic tax rate is as % % % % follows:

Standard rate applicable on (tax allowable loss)/taxable (30.00) 30 (30.00) 30 profit The standard rate has been affected by: - Expenses not deductible for tax purposes 0.62 2 0.54 2 - Deferred income tax credit not recognised 0.02 1 - - - Adjustments in respect of previous year current tax 1.33 (3) 0.30 (3) - Adjustments in respect of previous year deferred tax 2.75 (5) 2.63 (5) Effective tax rate (25.27) 25 (26.53) 24

‘(d) Income tax recoverable Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’

At 1 January (2,557,299) (1,773,964) (2,129,325) (1,600,889) Payment made during the year (618,434) (656,832) - (358,183) Prior year under/(over) provision (Note 14a)* 359,651 (170,253) - (170,253) Current year provision (Note 14a) 512,666 43,750 - - At 31 December (2,303,416) (2,557,299) (2,129,325) (2,129,325)

*The current income tax adjustment in respect of prior years of TZS 111 million for the Company was settled against tax deposits in other receivables.

Tanga Cement PLC ANNUAL REPORT 2017 75 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

15 (LOSS)/EARNINGS PER SHARE (a) Basic (loss)/earnings per share Basic loss/ earnings per share amounts are calculated by dividing the (loss)/profit for the year attributable to ordinary equity holders of the Group and Company by the weighted average number of ordinary shares outstanding during the year. The calculation is based on: Group Company

2017 2016 2017 2016

(Loss)/profit attributable to ordinary shareholders (TZS’ 000) (26,340,154) 4,261,484 (27,078,314) 4,276,253

Total weighted average number of ordinary shares 63,671,045 63,671,045 63,671,045 63,671,045 Treasury shares (703,152) (703,152) (703,152) (703,152) Weighted average number of ordinary shares less treasury shares 62,967,893 62,967,893 62,967,893 62,967,893 Basic earnings per share (TZS/share) (418) 68 (430) 68 (b) Diluted earnings per share Diluted (loss)/earnings per share amounts are calculated by dividing the (loss)/profit attributable to ordinary equity holders of the Group and Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. This calculation is based on:

(Loss)/profit attributable to ordinary shareholders (TZS' 000) (26,340,154) 4,261,484 (27,078,314) 4,276,253

Weighted average number of issued ordinary shares 63,671,045 63,671,045 63,671,045 63,671,045 Treasury shares (703,152) (703,152) (703,152) (703,152) Weighted average diluted number of issued ordinary shares 62,967,893 62,967,893 62,967,893 62,967,893 Diluted (loss)/earnings per share (TZS/share) (418) 68 (430) 68

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 76 Notes to the Consolidated financial statements for the year ended 31 December 2017

16 PROPERTY, PLANT AND EQUIPMENT 16(a) (a) GROUP

Capital Furniture Land and Plant and Motor Work in Fittings & Total Buildings Machinery Vehicles Progress Equipment (CWIP) TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’

At 1 January 2017 35,645,976 398,279,082 3,282,830 2,403,342 2,004,309 441,615,539 Additions 237,063 221,669 - - 7,187,884 7,646,615 Insurance spares additions - 328,817 - - - 328,817 Transfer from CWIP 1,075,999 5,432,213 295,859 - (6,804,071) - Disposals - (1,119,707) (21,034) (4,992) - (1,145,733) Translation differences - 51 492 161 - 704 At 31 December 2017 36,959,038 403,142,125 3,558,147 2,398,511 2,388,122 448,445,942 Depreciation and impairment At 1 January 2017 8,772,111 56,374,596 2,439,112 663,502 - 68,249,321 Charge for the year 899,553 17,484,683 155,387 313,398 - 18,853,021 Disposals - (539,081) (21,034) (3,611) - (563,726) Translation differences - 163 406 11 - 580 At 31 December 2017 9,671,664 73,320,361 2,573,872 973,300 - 86,539,197

Carrying amount

At 31 December 2017 27,287,373 329,821,764 984,275 1,425,211 2,388,122 361,906,745

At 1 January 2016 26,262,517 112,778,354 3,089,367 1,979,229 280,852,698 424,962,165 Additions 175,626 7,971,341 234,416 424,404 8,249,121 17,054,908 Disposals (281,207) (1,527,467) (42,937) (588) - (1,852,199) Transfer from CWIP 9,489,040 277,608,470 - - (287,097,510) - Insurance spares additions - 1,447,446 - - - 1,447,446 Translation differences - 938 1,984 297 - 3,219 At 31 December 2016 35,645,976 398,279,082 3,282,830 2,403,342 2,004,309 441,615,539 Depreciation At 1 January 2016 7,971,537 41,110,740 2,311,980 390,503 - 51,784,760 Charge for the year 883,599 16,476,700 167,939 272,934 - 17,801,172 Disposal (83,025) (1,213,768) (42,937) - - (1,339,730) Translation differences - 924 2,130 65 - 3,119 At 31 December 2016 8,772,111 56,374,596 2,439,112 663,502 - 68,249,321

Net carrying amount

At 31 December 2016 26,873,865 341,904,486 843,718 1,739,840 2,004,309 373,366,218

Tanga Cement PLC ANNUAL REPORT 2017 77 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Information relating to property, plant and equipment: i) The property, plant and equipment are used as security for facilities provided by NBC Limited, Standard Chartered BankLimited, First National Bank Tanzania Limited and Government Employees Pension Fund. Refer to Note 27 for further disclosures. ii) Capitalised borrowing costs: The Group started the construction of a project referred to as TK2 for the approved construction of the second production line. The projected total cost for TK2 was TZS 300.9 billion. The project was completed in 2016. The amount of borrowing costs capitalised during the year ended 31 December 2016 was TZS 1.2 billion. The borrowings were specific for the construction of TK2 and therefore all qualifying borrowing costs were capitalised until the end of construction in 2016. iii) Included in plant and machinery as at 31 December 2017 is TZS 5.5 billion ( 2016: TZS 5.2 billion) relating to standby equipment or significant components thereof (insurance spares) moved from inventory to plant, machinery and equipment. iv) No item of property, plant and equipment was temporarily idle/not in use as at 31 December 2017 (2016: None).

16(b) PROPERTY, PLANT AND EQUIPMENT (b) COMPANY Capital Land and Plant and Motor Furniture Work in Fittings & Progress Total Buildings Machinery Vehicles Equipment (CWIP) TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’

At 1 January 2017 30,417,698 398,331,814 2,552,693 1,843,061 2,004,309 435,149,575 Additions - 218,279 - - 7,187,884 7,406,162 Insurance spares - 328,817 - - - 328,817 additions Transfer from CWIP 1,075,999 5,432,213 295,859 - (6,804,071) - Disposals - (1,119,707) - (4,992) - (1,124,699) At 31 December 2017 31,493,697 403,191,416 2,848,552 1,838,069 2,388,122 441,759,855

Depreciation At 1 January 2017 5,281,018 56,116,138 1,602,235 550,535 - 63,549,926 Charge for the year 825,186 17,471,215 154,499 311,537 - 18,762,437 Disposals - (539,081) - (3,611) - (542,692) At 31 December 2017 6,106,204 73,048,272 1,756,734 858,461 - 81,769,671

Carrying amount At 31 December 2017 25,387,493 330,143,144 1,091,817 979,608 2,388,122 359,990,184

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 78 Notes to the consolidated financial statements for the year ended 31 December 2017

16(b) PROPERTY, PLANT AND EQUIPMENT - COMPANY (continued) Furniture Capital Land and Plant and Motor Fittings & Work in Total Buildings Machinery Vehicles Equipment Progress (CWIP) TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ At 1 January 2016 21,034,239 112,835,788 2,318,277 1,418,657 280,852,698 418,459,659 Additions 175,626 7,967,577 234,416 424,404 8,249,121 17,051,144 Disposals (281,207) (1,527,467) - - - (1,808,674) Insurance spares additions - 1,447,446 - - - 1,447,446 Transfer from CWIP 9,489,040 277,608,470 - - (287,097,510) - At 31 December 2016 30,417,698 398,331,814 2,552,693 1,843,061 2,004,309 435,149,575

Depreciation At 1 January 2016 4,553,823 40,872,950 1,445,646 279,587 - 47,152,006 Charge for the year 810,220 16,456,956 156,589 270,948 - 17,694,713 Disposals (83,025) (1,213,768) - - - (1,296,793) At 31 December 2016 5,281,018 56,116,138 1,602,235 550,535 - 63,549,926 Net carrying amount

At 31 December 2016 25,136,680 342,215,676 950,458 1,292,526 2,004,309 371,599,649

Refer to Note 16 (a) i - iv) for further disclosures.

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 17 INTANGIBLE ASSETS (a) Computer software

Cost 239,025 239,025 239,025 239,025 Accumulated amortisation (239,025) (239,025) (239,025) (239,025) At 31 December - - - -

Tanga Cement PLC ANNUAL REPORT 2017 79 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated financial statements for the year ended 31 December 2017

This was the initial installation cost for the accounting software which was capitalised in 2003 and amortised over six years. Subsequently, the Group pays annual licence and royalty fees for using the software and this is expensed in the respective year when incurred.

(b) Goodwill

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Cost At 1 January 7,444,384 7,444,384 - - Changes in goodwill - - - - At 31 December 7,444,384 7,444,384 - -

Impairment At 1 January (7,444,384) (7,444,384) - - Impairment charge - - - - At 31 December (7,444,384) (7,444,384) - -

Net carrying amount - - - -

The goodwill was acquired through business combinations whereby the fair value of the non-controlling interest in Cement Distributors (EA) Limited was estimated by computing the net present value of future cash flows from subsidiary since it is not a listed company and no market information was available for its share price. The goodwill was reviewed for impairment annually based on projected cash flows for the subsidiary as a single cash generating unit. The impairment testing performed during 2015 resulted in fully impairing the carrying amount of the goodwill and therefore the carrying amount of goodwill as at 31 December 2017 and 31 December 2016 was Nil.

The intangible assets’ titles are not restricted and the intangible assets have not been pledged as security for liabilities.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 80 Notes to the consolidated financial statements for the year ended 31 December 2017

18 EMPLOYEES’ SHARE TRUST Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ At 1 January 1,853,782 1,853,782 1,853,782 1,853,782 Refunds received (70,140) (53,440) (70,140) (53,440) Impairment charge (939,860) (293,771) (939,860) (293,771) At 31 December 843,782 1,506,571 843,782 1,506,571 Refunds At 1 January (53,440) - (53,440) - Charge for the year (16,700) (53,440) (16,700) (53,440) At 31 December (70,140) (53,440) (70,140) (53,440) Impairment At 1 January (293,771) - (293,771) - Charge for the year (646,089) (293,771) (646,089) (293,771) At 31 December (939,860) (293,771) (939,860) (293,771) The amount was advanced to the Tanga Cement Employees’ Share Trust (the Trust), an independent entity, established by the Company’s employees under Chapter 375 of the laws of Tanzania to purchase shares of the Company for the benefit of the Company’s employees. The amount is due on demand from the Company’s perspective. From the Group’s perspective, the Employee Share Trust is a consolidated structured entity. The Trust was set up in order to facilitate the delivery of shares to the Company’s employees. The Trust holds shares that may be allocated to employees in the future. The 703,152 (2016: 703,152) shares held by the Trust are accounted for as treasury shares in the Group financial statements. 19 INVESTMENTS (a) Investment in subsidiary Cost At 1 January - - 11,596,812 11,596,812 Additional investment - - - - At 31 December - - 11,596,812 11,596,812

Impairment At 1 January - - (9,849,836) (9,849,836) Impairment charge for the year - - - At 31 December - - (9,849,836) (9,849,836)

Net carrying amount - - 1,746,976 1,746,976

The Company made a decision to change its distribution model due to changes in the market conditions, where a number of distributors are now used instead of using CDEAL as the major distribution company. This decreased the CDEAL operations leading to reduced profit. Impairment charges were recognised in the prior years to reflect the recoverable amount of the investment. There were no indicators that the carrying amount of the investment could be impaired as at 31 December 2017 and 31 December 2016. (b) Equity investment

The principal activity of EARHL is rail transportation of cement manufactured by the Company. EARHL is a private entity that is not listed on any public stock exchange and there are no published price quotations for the fair value of this investment. The investment is measured at cost.

In 2016, the Company disposed of 15% of the previously held 20% of the issued ordinary share capital of EARHL. The remaining investment of 5% of the issued share capital of EARHL was allocated a nominal value of TZS 100,000 which is the deemed cost and carrying amount as at 31 December 2017 and 31 December 2016. .

Tanga Cement PLC ANNUAL REPORT 2017 81 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ At 1 January 100 531,875 100 531,875 Disposal - (531,775) - (531,775) At 31 December 100 100 100 100

Impairment At 1 January - 260,163 - 260,163 Disposal - (260,163) - (260,163) At 31 December - - - -

Net carrying amount 100 100 100 100

(c) Other disclosures on interests in other entities There are no significant restrictions on the ability of the Group to access or use the assets and settle liabilities of investees. There are no protective rights of non-controlling interests since the Group has no non-controlling interest. There were no changes in ownership of the investees in 2017 and 2016 other than the disposal in 2016 of the 15% stake previously held in EARHL and the Company has no interests in unconsolidated subsidiaries or structured entities.

20 FINANCIAL ASSET - INTEREST RATE CAP The Company entered into an Interest Rate Cap (IRC) contract with Standard Chartered Bank Limited to mitigate the volatility of the interest rate on the borrowing facility of USD 45,000,000 for a period of 12 years. The effective date of commencement of the IRC was 27 June 2014. The premium paid was USD 6,690,000 with a floating rate of 6 months USD Libor capped at 2%. Hedge accounting has not been adopted for the IRC instrument as the hedging arrangements did not meet the criteria for hedge accounting stipulated in IAS 39 Financial Instruments: Recognition and Measurement. Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’

At 1 January 7,152,393 7,629,752 7,152,393 7,629,752 Fair value loss (2,924,315) (609,470) (2,924,315) (609,470) Foreign exchange gain 766,238 132,111 766,238 132,111 At 31 December 4,994,316 7,152,393 4,994,316 7,152,393

Net loss on the interest rate cap (2,158,077) (477,359) (2,158,077) (477,359)

The losses on the interest rate cap that are recognised in profit or loss are included in Note 13.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 82 Notes to the Consolidated financial statements for the year ended 31 December 2017

The following table includes the fair value measurement hierarchy of the IRC which is the only financial instrument held by the Group and Company that is measured at fair value: Fair value measurement as at 31 December 2017: Interest rate cap valuation Date USD TZS ‘000’ Valuation 01 Jan 2017 3,551,165 7,152,393 Loss on fair value (1,311,627) (2,924,315) Balance after fair value adjustment 31 Dec 2017 2,239,538 4,228,078 Foreign currency valuation at year end 31 Dec 2017 2,239,538 4,994,316 Exchange rate gain on valuation 766,238

Fair value measurement as at 31 December 2016: Interest rate cap valuation Date USD TZS ‘000’ Valuation 01 Jan 2016 3,551,165 7,629,752 Loss on fair value (275,405) (609,470) Balance after fair value adjustment 31 Dec 2016 3,275,760 7,020,282 Foreign currency valuation at year end 31 Dec 2016 3,275,760 7,152,393 Exchange rate gain on valuation 132,111 Refer to Note 39 for further disclosures on fair value.

Tanga Cement PLC ANNUAL REPORT 2017 83 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 21 INVENTORIES TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Raw materials (at cost) 14,595,588 6,048,348 14,595,588 6,048,348 Semi finished and finished products (at cost) 8,114,932 8,769,950 7,590,028 8,115,142 Fuels (at cost) 2,040,782 2,713,107 2,040,782 2,713,107 Parts and consumables (at cost) 21,248,735 21,099,458 21,248,735 21,099,458 Total cost 46,000,037 38,630,863 45,475,134 37,976,055 Provision for obsolete inventories (7,956,858) (5,957,721) (7,956,858) (5,957,721) Total inventories at the lower of cost and net realisable 38,043,180 32,673,142 37,518,276 32,018,334 value Movement in the provision for obsolete inventory At 1 January 5,957,721 6,003,555 5,957,721 6,003,555 Increase (Decrease)/charge for the year 1,999,137 (45,834) 1,999,137 (45,834) At 31 December 7,956,858 5,957,721 7,956,858 5,957,721

The obsolete inventory provision is computed on spare parts not used for a period above one year percentage wise. The change in the provision during the year is recognised as part of cost of sales. The table below indicates how the provision was arrived at:

Calculation for the provision for obsolete inventory as at 31 December 2017 Amount in TZS ‘000’ Company % Provision TZS ‘000’ Provision Inventory with no movement for past 1 year 3,336,009 30% 1,000,803 Inventory with no movement for past 2 years 1,534,743 50% 767,372 Inventory with no movement for past 3+ years 7,735,853 80% 6,188,682 Total 12,606,605 7,956,858

The provisioning rates are based on management’s estimates of the rate at which spare parts are written off from experience.

Calculation for the provision for obsolete inventory as at 31 December 2016 Amount in TZS ‘000’ Company % Provision TZS ‘000’ Provision Inventory with no movement for past 1 year 2,502,512 30% 750,754 Inventory with no movement for past 2 years 1,523,877 50% 761,938 Inventory with no movement for past 3+ years 5,556,285 80% 4,445,029 Total 9,398,827 5,957,721

During 2017, no expense was recognised for inventory carried at net realisable value (2016: Nil). The unrealised profit for the year relating to inventory held by the subsidiary was TZS 86.4 million (2016: TZS 221 million). The cost of inventories recognised as an expense and included in the consolidated cost of sales amounted to TZS 135 million (2016: Expense of TZS 16 million). The carrying amount of inventories has been pledged as security for borrowings. Refer to Note 27.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 84 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 22 TRADE AND OTHER RECEIVABLES Trade receivable 12,912,461 7,800,433 12,014,413 7,474,607 Prepaid expenses 2,622,345 5,149,998 2,514,438 5,030,759 Other receivables 1,653,826 2,773,496 1,653,824 2,773,496 Provision for impairment of (880,874) (155,821) (487,132) (93,410) receivables Total 16,307,757 15,568,106 15,695,543 15,185,452

Movement in the provision for impairment At 1 January 155,821 80,595 93,410 74,846 Increase in provision 725,053 79,928 393,722 23,266 Write off/recoveries - (4,702) - (4,702) At 31 December 880,874 155,821 487,132 93,410

Trade receivables are non-interest bearing and are generally on 30 day terms. As at 31 December 2017 and 31 December 2016, some trade receivables were impaired as indicated under provision for impairment above. Days sales outstanding for 2017 were 43 days (2016: 17 days).

The ageing analysis of trade receivables was as follows: Up to 30 days 7,539,685 4,581,064 9,986,715 3,798,647 31 -60 days 2,962,807 1,262,745 1,207,524 2,332,990 61-90 days 537,577 913,544 169,505 1,001,357 Over 91 days 1,872,391 1,043,080 650,669 341,613 At 31 December 12,912,460 7,800,433 12,014,413 7,474,607

For details on the Company’s and Group’s credit risk management processes and the carrying amounts of the Company’s and Group’s trade and other receivables which are denominated in different currencies refer to Note 35. The carrying amounts of the above receivables approximate to their fair values because they are short term in nature and their is no additional credit risk that has not already been considered in the impairment allowance. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable mentioned above. The Company and Group do not hold any collateral as security for the trade and other receivables.

Tanga Cement PLC ANNUAL REPORT 2017 85 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 23 VAT RECOVERABLE At 1 January 9,494,637 17,019,367 9,469,854 16,983,726 Net input VAT for the year 10,590 39,704 50,562 Amounts utilised during the year (2,992,795) (7,564,434) (2,992,795) (7,564,434) At 31 December 6,512,432 9,494,637 6,477,059 9,469,854 The Value Added Tax (VAT) recoverable will be utilised to offset future output VAT. Where not recovered through this mechanism, the amount is claimable for refund from the revenue authority.

24 CASH AND BANK BALANCES Cash at banks and on hand 7,464,405 9,503,431 5,606,749 8,485,755 Total 7,464,405 9,503,431 5,606,749 8,485,755 The carrying amounts disclosed above reasonably approximate fair values at the reporting date. No amount of cash and cash equivalent was held but not available for use as at 31 December 2017 and 31 December 2016. The cash and cash equivalents position for the purpose of the statement of cash flow was as follows: Cash and cash equivalents as above 7,464,405 9,503,431 5,606,749 8,485,755 Bank balances not available for use by group* (160,929) - - - Bank overdraft (Note 27b) (12,453,135) (6,984,256) (12,453,135) (6,984,256) Net cash and cash equivalents (5,149,659) 2,519,175 (6,846,386) 1,501,499

*This amount relates to the bank balance denominated in Burundi Francs held by Cement Distributors (EA) Limited - Burundi. Foreign exchange controls in Burindi limit the Group’s ability to repatriate the amount for use by the Group outside Burundi. The directors are considering implementing a discount scheme that will involve utilisation of the Burundi Francs in Burundi.

Undrawn borrowing facilities - overdraft facilities Standard Chartered Bank 3,848,630 9,078,328 3,848,630 9,078,328 National Bank of Commerce (NBC) 2,618,235 5,988,370 2,618,235 5,988,370 First National Bank Tanzania Limited (FNB) - 5,553,219 5,553,219 5,553,219

25 ISSUED CAPITAL (a) Authorised 63,671,045 Ordinary shares of TZS 20 each 1,273,421 1,273,421 1,273,421 1,273,421 (b) Issued and fully paid 63,671,045 Ordinary shares of TZS 20 each 1,273,421 1,273,421 1,273,421 1,273,421

There were no movements in the share capital of the Company during the year. The Company has only one class of ordinary shares which carries no right to fixed income. The ownership structure is as set out as below. The proportion of shareholding is as follows: % % % %

AfriSam (Mauritius) Investment Limited 68.33 68.30 68.33 68.30 Tanga Cement Employee Share Trust 1.10 1.10 1.10 1.10 General public 30.57 30.60 30.57 30.60 100.00 100.00 100.00 100.00

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 86 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 26 PROVISION FOR SITE RESTORATION At 1 January 21,364 145,602 21,364 145,602 Additional provision during the year 3,713 - 3,713 - Decrease due to change in estimates - (124,238) - (124,238) At 31 December 25,077 21,364 25,077 21,364

The provision for site restoration is calculated at every reporting date basing on the costing estimates prepared by the environmental specialist. The provision is assessed annually by management and new cost estimates are prepared by the environmental specialist every two years. The increase in the provision is recognised in profit or loss under cost of sales while decreases are recognised under other income. The key assumptions used in determining the provision are: - The useful life of the site is estimated to be 50 years and the provision is made based on the discounted expected cost of closure at the end of this period. - The discount rate used was 16.57% - The site is of medium risk and medium sensitivity - Tanzania inflation rate used was 5.4% (2016: 4.9%) - The estimated actual site restoration cost assuming closure happened as at year-end was TZS 3.86 billion (2016: TZS 3.2 billion).

27 INTEREST - BEARING BORROWINGS The details of the external borrowing facilities as at year-end were as set out below: (a) Government Employees Pension Fund (SAGEPF) SAGEPF is managed by The Public Investment Corporation SOC Limited (PIC) as agent and security trustee for the South African SAGEPF.

At 1 January 202,370,567 204,792,600 202,370,567 204,792,600 Proceeds received 22,216,383 - 22,216,383 - Loan repayment (11,883,494) - (11,883,494) - Interest accrued 13,578,902 12,054,199 13,578,902 12,054,199 Interest paid (6,163,481) (16,690,061) (6,163,481) (16,690,061) Foreign exchange difference 4,790,871 2,213,829 4,790,871 2,213,829 At 31 December 224,909,748 202,370,567 224,909,748 202,370,567

Less: Current portion (33,384,911) (13,157,583) (33,384,911) (13,157,583)

Non current portion 191,524,837 189,212,984 191,524,837 189,212,984

Tanga Cement PLC ANNUAL REPORT 2017 87 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Group and Company 2017 2016 TZS’ 000’ TZS’ 000’

Loan Facility Interest rate Maturity type USD 60 million PIC term loan A and USD 52 million PIC term loan B 2017: USD 57,000,000 (2016: USD 6 months US By September Loan A 96,921,498 103,615,740 60,000,000) Libor +3.9% 2026 2017: USD 39,534,253 (2016: USD 6 months US By September Loan B 79,054,382 62,027,251 31,859,822) Libor +4.5% 2025 Fx revaluation 39,301,631 33,933,369 at year end Total principal amount 215,277,511 199,576,360 Interest accrued 9,632,238 2,794,207 Total amount outstanding 224,909,748 202,370,567 The current portion is made up as follows: Principal amount 21,535,111 10,363,376 Interest accrued 9,632,238 2,794,207 31,167,349 13,157,583

Repayment/ Settlements Available facilities Interest rate USD terms By September 6m US Libor Term Loan (Facility A) 60,000,000 2026 +3.9% By September 6m US Libor Term Loan (Facility B) 52,000,000 2025 +4.5% By September 6m US Libor Term Loan (Facility C) 30,000,000 2025 +4.5% 142,000,000

The remaining available balance on Facility B and the entire Facility C was cancelled by mutual agreement between the lender (PIC) and the borrower (TCPLC) after final drawdown of USD 10 million was made on Facility B during the year. The purpose of the term loan was to fund the construction of a new production line with a kiln for the production of 750,000 tons of clinker per annum. The specific terms and conditions are as follows:

(i) All three facilities have a three year grace period for repayments, during which only interest will be paid. (ii) All three facilities are repayable in equal six-monthly instalments after the initial grace period. (iii) Drawings must be in minimum amounts of USD 500,000 or the remaining amount of funds available. (iv) The borrower may, with the agreement of the lender and on 30 days notice, make early repayments with a minimum value of USD 2,500,000. (v) Early repayments under facility C will attract penalties equal to 2% of the amount repaid early. (vi) Amounts repaid early are not available for re-borrowing. (vii) Penalty interest charge of 2% shall be accrued on the unpaid sum from the default date up to the date upon which the waiver for the Debt to EBITDA ratio covenant lapses. Group Company

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 88 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Security pledged (i) Secured by fixed and floating assets shared with National Bank of Commerce (NBC) Limited, Standard Chartered Bank Tanzania Limited and First National Bank Tanzania Limited on pari passu basis. (ii) Legal Mortgage over Title No. 1802 registered in name of Tanga Cement Factory, Maweni. (iii) Legal Mortgage over Title No. 33155 registered in name of Tanga Cement Factory, Pongwe. (iv) Legal Mortgage over Title No. 33049 registered in name of Tanga Cement Factory, Raskazone.

(b) Bank overdraft facilities Standard Chartered Bank Tanzania Limited 5,071,370 921,672 5,071,370 921,672 National Bank of Commerce Limited (NBC) 7,381,765 4,011,630 7,381,765 4,011,630 First National Bank Tanzania Limited (FNB) - 2,050,954 - 2,050,954 Total 12,453,135 6,984,256 12,453,135 6,984,256

Standard Chartered Bank Tanzania Limited Repayment/ Settlements Details Amount terms

Overdraft facility (USD) 4,000,000 On demand 6 months T-Bill +2.75% per annum

Security held by the bank (i) Secured by fixed and floating assets shared with National Bank of Commerce Limited, First National Bank Tanzania Limited and SASAGEPF on a pari passu basis; (ii) Legal Mortgage over Titles No. 1802, 33155, 33049 registered in name of Tanga Cement Factory, shared pari passu with National Bank of Commerce Limited, First National Bank Tanzania Limited and SAGEPF. Interest rate The overdraft bears a rate of interest of 6 months treasury bill rate plus 2.75% (2016: 6 months treasury bill rate plus 2.75% per annum), charged every month on the daily outstanding amount. It is agreed that, the bank is entitled to vary the rate of interest provided that due notice shall be given to the Company. All funding agreements share in the same intercredit agreement with SAGEPF.

National Bank of Commerce Limited (NBC)

Repayment/ Settlements Amount Facility terms Overdraft facility (TZS ‘000) 10,000,000 On demand 12 months T-Bill +2.5% per annum Security held by the bank (i) Secured by fixed and floating assets shared with Standard Chartered Bank Tanzania Limited, First National Bank Tanzania Limited and SAGEPF on a pari passu basis; (ii) Legal Mortgage over Titles No. 1802, 33155, 33049 registered in the name of Tanga Cement Factory, shared pari passu with Standard Chartered Bank Tanzania Limited, First National Bank Tanzania Limited and SAGEPF.

Tanga Cement PLC ANNUAL REPORT 2017 89 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Interest rate The overdraft bears a rate of interest of 1 year treasury bill rate plus 2.5% (2016: 1 year treasury bill rate plus 2.5%), charged every month on the daily outstanding amount. It is agreed that, the bank is entitled to vary the rate of interest provided that due notice shall be given to the Company.

First National Bank Limited (FNB) Repayment/ Expiry Amount Settlements Interest rate Date (USD) terms Overdraft facility June 2017 3,500,000 On demand LIBOR + 6.6% per annum Security held by the bank (i) Secured by fixed and floating assets shared with National Bank of Commerce Limited, Standard Chartered Bank Tanzania Limited and SAGEPF on a pari passu basis; (ii) Legal Mortgage over Titles No. 1802, 33155, 33049 registered in the name of Tanga Cement Factory, shared pari passu with National Bank of Commerce Limited, Standard Chartered Bank Tanzania Limited and SAGEPF. Interest rate The overdraft had a rate of interest of LIBOR plus 6.6% (2016: LIBOR plus 6.6%), charged every month on the daily outstanding amount. It was agreed that, the bank was entitled to vary the rate of interest provided that due notice was given to the Company.

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 28 TRADE AND OTHER PAYABLES Trade accounts payable 4,235,948 10,301,344 4,690,415 7,585,776 Advances from customers 3,088,766 591,433 1,734,884 591,433 Freight and duty clearing 2,463,065 1,041,404 2,463,065 1,041,404 Dividend payable 1,110,849 1,154,279 1,110,849 1,154,279 Accrued expenses 7,149,622 5,457,222 7,132,105 5,457,222 Contract retention - 11,900,685 - 11,900,685 Other payables 12,787,169 4,060,919 10,866,777 4,060,920 Total 30,835,419 34,507,286 27,998,095 31,791,719 Included in the other payables balance are accruals for received but not yet invoiced goods of TZS 2.34 billion (2016: TZS 1.34 billion) and accruals for rebates of TZS 5.34 billion (2016: TZS 2.7 billion). Terms and conditions of the above financial liabilities: - Trade payables are non-interest bearing and are normally settled between 15 to 45 days after date of invoice. - Advances from customers are non-interest bearing and have an average term of 30 days. - Other payables are non-interest bearing and have an average term of three to six months. - Contract retention balances related to liabilities for the TK2 project which were settled after the contractor handed over the project. - For terms and conditions relating to related parties, refer to Note 32. The carrying amounts of the above trade and other payables approximate to their fair values due to the short term nature of the financial liabilities.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 90 Notes to the consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 29 CASH GENERATED FROM OPERATING ACTIVITIES Reconciliation of operating (loss)/profit before tax to cash flows from operating activities: Operating (loss)/profit (10,986,492) 19,838,619 (12,670,517) 19,574,749 Adjusted for non cash movement: Depreciation (Note 10) 18,853,021 17,801,172 18,762,437 17,694,713 Impairment charge on amount due from the Trust 646,089 293,771 646,089 293,771 Gain on disposal of investment - (380,174) - (380,174) Loss /(profit) on sale of property, 575,661 (1,492,467) 582,014 (1,488,872) plant & equipment Increase/(decrease) in site restoration provision 3,713 (124,238) 3,713 (124,238) Provision for bad and doubtful debts 725,053 79,928 393,722 23,266 Increase/(decrease) in provision for obsolete inventories 1,999,137 (45,834) 1,999,137 (45,834) Net change in the value of the interest rate cap not capitalised 2,158,077 (101,054) 2,158,077 (101,054) Operating profit before working capital changes 13,974,259 35,869,723 11,874,672 35,446,327

Decrease in amount due from the Trust 16,700 53,440 16,700 53,440 (Increase)/decrease in inventories - less provisions (7,369,175) 5,496,581 (7,499,079) 5,251,902 Decrease/(increase) in trade and other receivables - less provisions (2,116,490) (7,871,181) (1,555,599) (6,450,464) Decrease in VAT recoverable 2,982,205 7,524,730 2,992,795 7,513,872 Decrease in trade and other payables (3,671,867) (19,852,447) (3,793,624) (21,166,933) Increase in restricted bank balances (160,929) - - - Cash generated from operating activities 3,654,703 21,220,846 2,035,865 20,648,144

30 DIVIDEND PROPOSED AND APPROVED Dividend approved during the year Dividends on ordinary shares: Final dividend 2016: TZS 25 per share (2015: TZS 25 per share) 1,591,776 1,591,776 1,591,776 1,591,776 Interim dividend 2017: TZS nil per share (2016: TZS 55 per share) - 3,501,907 - 3,501,907 Total 1,591,776 5,093,683 1,591,776 5,093,683

Where required by law, dividends paid are subject to withholding tax which is payable to Tanzania Revenue Authority. Subsequent to year-end, the Board proposed a final dividend for 2017 totalling TZS NIL million (2016: TZS 1,592 million) being TZS NIL per share (2016: TZS 25 per share). Any dividends not claimed after seven years are rescinded. As at year-end, the 2010 unclaimed dividends amounting to TZS 47.6 million were rescinded.

Tanga Cement PLC ANNUAL REPORT 2017 91 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 31 OPERATING LEASES During the year, the Company and Group entered into operating lease agreements for a number of properties and quarry fleet equipment, under which the minimum lease payments are as follows: Lease commitments: - Within one year 5,963,929 5,965,798 5,808,894 5,965,798 - - Within two to five years 8,556,644 5,705,494 8,556,644 5,705,494 14,520,573 11,671,292 14,365,538 11,671,292 The Group and Company have no significant leasing arrangements with restrictions or purchase options (2016: None). The leases have no escalation clauses. The expenses charged to profit or loss by the Group and the Company in respect of these leases are included in the rental expenses disclosed in Note 10.

32 RELATED PARTY DISCLOSURES Refer to Note 38 for the disclosures on the ultimate holding company. (a) Sales to related parties The Company sells products to related companies. The transactions with the related companies were as follows: Related party Relationship Cement Distributors (E.A) Limited Subsidiary - - 74,269,529 20,494,681 (b) Purchases from related parties The Group purchases services from related party companies as follows: Related party Relationship CDEAL - Transportation services Subsidiary - - 5,996,005 8,746,380 CDEAL - Marketing services Subsidiary - - - 300,000 AfriSam South Africa Properties (Pty) Ltd - Shareholder 2,286,774 1,114,715 2,286,774 1,114,715 Reimbursable expenses PIC (SAGEPF) - interest expense Shareholder 13,578,902 12,054,199 13,578,902 12,054,199 East African Rail Hauliers Limited Investee - 104,595 - 104,595

The Group utilises services of EARHL for the transportation of cement to upcountry markets at agreed rates. EARHL is a company in which the Company owned 20% of the issued share capital until 2016 when the Company reduced its holding to 5%. EARHL commenced operations in December 2004. Its business is to provide rail services to the Company for the transportation of cement in Tanzania according to a commercial contract signed between the two parties. AfriSam (Mauritius) Investment Holdings Limited is the immediate holding company which owns the majority of the shares in the Company. AfriSam South Africa Properties (Pty) Limited controls AfriSam (Mauritius) Investment Holdings Limited. There were no transactions between AfriSam (Mauritius) Investment Holdings Limited and the Company during the year (2016: Nil). (c) Key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group and Company, directly or indirectly, including any director (whether executive or otherwise) of the Group. Compensation for key management personnel Short-term employee benefits (salary) 5,519,068 4,877,496 3,921,313 4,877,496 Post-employee benefits (Defined contribution plans) 506,448 459,953 383,077 459,953 6,025,516 5,337,449 4,304,390 5,337,449

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 92 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ The amounts disclosed in the table above are the amounts recognised as expenses during the reporting period related to key management personnel. As at 31 December 2017, there was no outstanding amount with key management personnel (2016: Nil). Directors’ emoluments Non-executive Chairman 36,998 41,107 36,998 41,107 Non-executive Directors 163,192 180,103 163,192 180,103 Executive Directors (included in key management personnel above) 2,179,751 1,500,132 2,179,751 1,500,132 2,379,941 1,721,341 2,379,941 1,721,341 As at 31 December 2017, there were no outstanding balance with the directors (2016: Nil). (d) Amounts due to/from related parties Balances outstanding at the end of the year to and from related companies are as follows: Due from related parties Due from the Trust - - 843,782 1,506,571 Cement Distributors (EA) Limited - - 7,954,622 4,114,597 Due to related companies Cement Distributors (EA) Limited - - 424,485 873,162 Government Employees Pension Fund - PIC loan 224,909,749 202,370,567 224,909,749 202,370,567 AfriSam South Africa (Pty) Limited 588,337 220,022 588,337 220,022

The Company did not pay any group fee to AfriSam Group (Pty) Limited. The amount due to AfriSam South Africa (Pty) Limited relates to reimbursable expenses incurred on behalf of the Company. The amount due to CDEAL relates to various services provided to the Company. Except for the PIC loan, the outstanding balances at the year-end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. At 31 December 2017, the Group has not recorded any impairment on receivables relating to amounts owed by related parties (2016: Nil). This assessment is undertaken at the end of each financial year through examining the financial position of the related party and the market in which the related party operates. The terms and conditions for the PIC loan are disclosed in Note 27. 33 COMMITMENTS Capital commitments As at the reporting date, the Group had the following capital commitments: Approved and contracted for : Other capital projects 323,932 14,615,659 323,932 14,615,659

Other commitments The Board agreed to dissolve the employee share trust scheme and replace it with the Long Term Incentive Scheme. Long Term Incentive Scheme This is a new scheme which replaced the Share Trust Scheme starting in October 2017. The Board is responsible for the operation and administration of the scheme. The scheme will last for seven years. The employees can start to exercise one third of the allocation after three years subject to the appreciation of the units. Only permanent employees are eligible to participate in the scheme. The units are allocated according to the salary grade of the employee. No upfront payments, loan advances or dividend payments for repayment of the units are provided for in the scheme. The liability is calculated based on appreciation of the unit value, as the excess above TZS 1,360 per unit of the Company’s share price as published by the Dar es Salaam Stock Exchange (DSE). The calculation formula for the liability is as shown below: A = EV-AV, where as: A = Appreciation, EV = Exercise value, AV = Allocation value The total units allocated to employees was 703,000 at an allocation value of TZS 1,360 each.

As at 31 December 2017, A = ((1,200-1,360) x 703,000) - (1,360x703,000) = (112,480,000) As such, no liability was recognised in 2017 as the appreciation value was below the allocation value.

Tanga Cement PLC ANNUAL REPORT 2017 93 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ 34 CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2017 and 31 December 2016. The Group and Company monitor capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt bank overdrafts, interest-bearing borrowings, trade and other payables less cash and cash bank balances. Capital includes issued and fully paid share capital (including any treasury shares), retained earnings and other reserves. Note Bank overdrafts 27(b) 12,453,135 6,984,256 12,453,135 6,984,256 Interest-bearing loans and 27(a) 224,909,749 202,370,567 224,909,749 202,370,567 borrowings Trade and other payables 28 30,835,419 34,507,286 27,998,095 31,791,719 Less: Cash and bank balances 24 (7,464,405) (9,503,431) (5,606,749) (8,485,755) Net debt 260,733,898 234,358,678 259,754,230 232,660,787

Total capital 162,439,262 189,674,402 162,746,545 191,369,052

Capital and net debt 423,173,160 424,033,080 422,500,775 424,029,839

Gearing ratio 62% 55% 61% 55%

The Group’s and Company’s policy is to maintain a gearing ratio of between 20% to 70%. The gearing ratio increased to 61% as of 31 December 2017 (2016: 55%) due to the increase in net debt and decrease in total capital. As indicated in Note 16 of the Directors’ Report, as at year-end, the Company was not in compliance with the Debt: EBITDA ratio required in the SAGEPF (PIC) loan borrowing agreement. This was mainly because of the decrease in EBITDA and increase in the debt amount following the drawdown made during 2017. The loan does not become repayable on demand because of this. The Company obtained from the lender a waiver letter dated 26 October 2017 for this covenant for the period up to 31 December 2018.

35 FINANCIAL RISK MANAGEMENT Financial instruments by category The Group’s financial assets are categorised as loans and receivables except for the interest rate cap which was designated as at fair value through profit or loss on initial recognition. All the Group’s financial liabilities are classified as financial liabilities measured at amortised cost. The carrying amounts of these financial instruments are presented in the interest rate exposure tables in Note 35(a). Financial risk management policies The Company’s and Group’s principal financial liabilities are comprised of interest bearing loans, bank overdrafts and trade and other payables. The Company and Group do not enter into derivative transactions for trading purposes. The main purpose of these financial liabilities is to raise finance for the Company’s and Group’s operations. The Company and Group have various financial assets such as trade and other receivables and cash and bank balances, which arise directly from its operations, and a derivative financial asset (interest rate cap) which is a hedging instrument against interest rate fluctuations on the SAGEPF (PIC) loan. The main risks arising from the Company’s and Group’s financial instruments are liquidity risk, market risk and credit risk. Market risk comprises interest rate risk, foreign exchange risk and price risk. The Company and Group do not have significant exposure to price risk since no price sensitive financial instruments are held. Policies are reviewed and agreed upon at Company and Group level in order to manage the financial risks as summarised below: (a) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices relevant to the Group and Company comprise two types of risks: interest rate risk and currency risk.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 94 Notes to the Consolidated financial statements for the year ended 31 December 2017

The sensitivity analysis in the following sections relate to the positions as at 31 December in 2017 and 2016. The sensitivity analysis has been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant at year-end. The analysis excludes the impact of movements in market variables on provisions and non-financial assets and liabilities. The following assumption has been made in calculating the sensitivity analysis: - The sensitivity of the relevant profit or loss item is the effect of the assumed changes in the respective market risks. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s and Group’s exposure to the risk of changes in market interest rates relates primarily to the long term debt and overdraft facilities with floating interest rates.

To manage the interest rate risk on the long term loan, the Company entered into an interest rate cap arrangement with Standard Chartered Bank which caps the floating USD 6 months LIBOR at 2%. The interest rate cap agreement with the bank is for a period of 12 years and covers the first USD 45 million of the total principle amount owing of USD 96.5 million resulting in an unhedged debt amount of USD 51.5 million (53.4% of the principal term loan debt). The premium paid upfront for the interest rate cap was USD 6.7 million.

The Group has used a sensitivity analysis technique that measures the estimated change before tax to profit of an instantaneous increase and decrease of 100 basis points in market interest rates on financial liabilities with all other variables remaining constant. The calculations were determined with reference to the total unhedged outstanding term loan balances for the year. This represents no change from the prior period in the method and assumptions used. This analysis is for illustrative purposes only and represents management’s best estimate of a reasonably possible change in market interest rates in the medium term. Although market indicators are that interest rates are more likely to increase, both a 1% increase and a 1% decrease have been included for purposes of comparative sensitivity analysis.

Effect on (loss)/profit before tax Effect on equity 1% increase 1% decrease 1% increase 1% decrease

TZS’000’ TZS’000’ TZS’000’ TZS’000’ 2017 Group and Company Interest bearing term loan (2,249,097) 2,249,097 (1,574,368) 1,574,368 Bank overdraft (124,531) 124,531 (87,172) 87,172 2016 Group and Company Interest bearing term loan (1,018,084) 1,018,084 (712,659) 712,659 Bank overdraft (69,843) 69,843 (48,890) 48,890

The Company’s investments in interest bearing bank deposits are mainly on negotiated fixed interest rates. The table below summarises the Group’s and Company’s exposure to interest rate risk. Included in the table are the Group’s and Company’s financial instruments at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates.

Tanga Cement PLC ANNUAL REPORT 2017 95 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Non interest On demand 1 - 12 months 1 - 5 years > 5 years bearing Total TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Group At 31 December 2017 Financial assets Financial asset - Interest rate - - - - 4,994,316 4,994,316 cap Trade and other receivables - - - - 13,685,413 13,685,413 Cash and bank balances - 2,076,215 - - 5,388,190 7,464,405 - 2,076,215 - - 24,067,919 26,144,134 Financial liabilities Term borrowings - 31,167,349 93,270,397 100,472,003 - 224,909,749 Trade and other payables - - - - 27,746,653 27,746,653 Bank overdrafts 12,453,135 - - - - 12,453,135 12,453,135 31,167,349 93,270,397 100,472,003 27,746,653 265,109,537

Net exposure (12,453,135) (29,091,134) (93,270,397) (100,472,003) (3,678,734) (238,965,403)

At 31 December 2016 Financial assets Financial asset - Interest rate - - - - 7,152,393 7,152,393 cap Trade and other receivables - - - - 10,418,108 10,418,108 Cash and bank balances - 2,805,177 - - 6,698,254 9,503,431 - 2,805,177 - - 24,268,755 27,073,932 Financial liabilities Term borrowings - 13,157,583 93,270,397 95,942,587 - 202,370,567 Trade and other payables - - - - 32,761,574 32,761,574 Bank overdrafts 6,984,256 - - - - 6,984,256 6,984,256 13,157,583 93,270,397 95,942,587 32,761,574 242,116,397

Net exposure (6,984,256) (10,352,406) (93,270,397) (95,942,587) (8,492,819) (215,042,465)

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 96 Notes to the consolidated financial statements for the year ended 31 December 2017

Non interest On demand 1 - 12 months 1 - 5 years > 5 years Total bearing Company TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ At 31 December 2017 Financial assets Financial asset - Interest - - - - 4,994,316 4,994,316 rate cap Due from employees' share - - - - 843,782 843,782 trust Trade and other receivables - - - - 13,181,105 13,181,105 Cash and bank balances - 2,076,215 - - 3,530,534 5,606,749 Cash and bank balances - 2,076,215 - - 22,549,737 24,625,952

Financial liabilities Term borrowings - 31,167,349 93,270,397 100,472,003 - 224,909,749 Trade and other payables - - - - 26,263,211 26,263,211 Bank overdrafts 12,453,135 - - - - 12,453,135 12,453,135 31,167,349 93,270,397 100,472,003 26,263,211 263,626,095

Net exposure (12,453,135) (29,091,134) (93,270,397) (100,472,003) (3,713,474) (239,000,143)

At 31 December 2016 Financial assets Financial asset - Interest rate - - - - 7,152,393 7,152,393 cap Due from employees' share - - - - 1,506,571 1,506,571 trust Trade and other receivables - - - - 10,154,693 10,154,693 Cash and bank balances - 2,805,177 - - 5,680,578 8,485,755 - 2,805,177 - - 24,494,235 27,299,412 Financial liabilities Term borrowings - 13,157,583 93,270,397 95,942,587 - 202,370,567 Trade and other payables - - - - 30,046,007 30,046,007 Bank overdrafts 6,984,256 - - - - 6,984,256 6,984,256 13,157,583 93,270,397 95,942,587 30,046,007 239,400,830

Net exposure (6,984,256) (10,352,406) (93,270,397) (95,942,587) (5,551,772) (212,101,418)

Tanga Cement PLC ANNUAL REPORT 2017 97 Building today’s Dreams for tomorrow’s Generations Notes to the consolidated financial statements for the year ended 31 December 2017

Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates. The Company’s and Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities, when expenses are denominated in a different currency from the Company’s and Group’s functional currency. Foreign currency risk is managed at an operational level and monitored by the Chief Financial Officer. Exposure to losses from foreign currency liabilities is managed through prompt payment of outstanding liabilities and matching of receipts with payments in the same currencies. The following table demonstrates the sensitivity to possible changes in the exchange rate between the Tanzanian Shilling (TZS) and foreign currencies (mainly US dollar, other currencies are considered to be immaterial), with all other variables held constant, of the Group’s equity (due to changes in the fair value of monetary assets and liabilities).

2017 2016 Increase/ Effect on Increase/(de- Effect on (decrease) in profit and crease) in the profit and the value of equity value of TZS equity TZS vs. USD TZS’000 vs. USD TZS’000 Net effect based on statement of financial position +10% (22,040,995) 10% (19,387,351) Net effect based on statement of financial position -10% 22,040,995 -10% 19,387,351

The Company’s and Group’s sensitive analysis has been determined based on net transaction exposure as at year-end. A change in 10% is used when the net foreign currency transaction risk reported internally to key management personnel to assess reasonably possible change in foreign exchange rates. The various currencies to which the Company and Group was exposed as 31 December 2017 and 2016 are summarised in the table below ( All amounts expressed in TZS ‘000). Group - At 31 December 2017 Total in Exposure in Exposure in Exposure in functional USD EURO ZAR currency Financial assets Financial asset - Interest rate cap 4,994,316 - - 4,994,316 Trade and other receivables 995,005 - - 995,005 Cash and bank balances 1,123,308 169,565 439,636 1,732,509 7,112,629 169,565 439,636 7,721,830 Financial liabilities Term borrowings 224,909,749 - - 224,909,749 Trade and other payables 1,891,110 463,408 268,216 2,622,734 226,800,859 463,408 268,216 227,532,483

Net exposure (219,688,230) (293,843) 171,420 (219,810,653)

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 98 Notes to the Consolidated financial statements for the year ended 31 December 2017

Group - Group - At 31 December 2016

Exposure in Exposure in Exposure in Total in functional USD EURO ZAR currency Financial assets Financial asset - Interest rate cap 7,152,393 - - 7,152,393 Trade and other receivables 1,849,859 - - 1,849,859 Cash and bank balances 2,669,407 353,036 162,861 3,185,304 11,671,659 353,036 162,861 12,187,556 Financial liabilities Bank overdrafts 2,050,954 - - 2,050,954 Term borrowings 202,370,567 - - 202,370,567 Trade and other payables 1,123,646 805,384 73,727 2,002,757 205,545,167 805,384 73,727 206,424,278

Net exposure (193,873,508) (452,348) 89,134 (194,236,722)

Company - At 31 December 2017

Exposure in Exposure in Exposure in Total in functional USD EURO ZAR currency Financial assets Financial asset - Interest rate cap 4,994,316 - - 4,994,316 Trade and other receivables 403,379 - - 403,379 Cash and bank balances 993,217 169,566 439,636 1,602,418 6,390,911 169,566 439,636 7,000,113 Financial liabilities Term borrowings 224,909,749 - - 224,909,749 Trade and other payables 1,891,110 463,408 268,216 2,622,734 226,800,859 463,408 268,216 227,532,483

Net exposure (220,409,948) (293,841) 171,420 (220,532,370)

Tanga Cement PLC ANNUAL REPORT 2017 99 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

Company - At 31 December 2016 Exposure in Exposure in Exposure in Total in functional USD EURO ZAR currency Financial assets Financial asset - Interest rate cap 7,152,393 - - 7,152,393 Trade and other receivables 1,680,770 - - 1,680,770 Cash and cash equivalents 2,289,280 - - 2,289,280 11,122,444 - - 11,122,444 Financial liabilities Bank overdrafts 2,050,954 - - 2,050,954 Term borrowings 202,370,567 - - 202,370,567 Trade and other payables 1,100,616 805,384 73,727 1,979,727 205,522,137 805,384 73,727 206,401,247

Net exposure (194,399,693) (805,384) (73,727) (195,278,803)

Applicable exchange rates: USD Euro ZAR Average for the year ended 31 December 2017 2,201 2,466 170 At 31 December 2017 2,230 2,662 181

Average for the year ended 31 December 2016 2,177 2,399 149 At 31 December 2016 2,173 2,270 159

(b) Credit risk The Company and Group deal only with recognised, creditworthy third parties. It is the Company’s and Group’s policy that all customers who wish to trade on credit terms are subjected to credit verification procedures. In addition, debtors’ balances are monitored on an ongoing basis, with the result that the Company’s and Group’s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Company or Group do not offer credit terms without the approval of Group management. With respect to credit risk arising from the other financial assets of the Company and Group which comprise bank balances, the Group uses banks which are regulated. The Company and Group evaluate the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries that operate in largely independent markets. The Company’s and Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The maximum exposure to credit risk at the reporting date is the carrying value of the balances indicated below: Group Company Note 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Due from employees’ share trust 18 - - 843,782 1,506,571 Financial asset - Interest rate cap 20 4,994,316 7,152,393 4,994,316 7,152,393 Trade and other receivables (gross less 22 14,566,286 10,573,929 13,668,237 10,248,103 prepayments) Bank balances 24 7,464,405 9,503,431 5,606,749 8,485,755 27,025,008 27,229,753 25,113,084 27,392,822

(c ) Liquidity risk Liquidity risk is the risk that suitable sources of funding for the Group’s business activities may not be available and thus the Group being unable to fulfil its existing and future cash flow obligations. The directors have assessed that any existing breaches of borrowing agreement covenants do not materially impact the Group’s and Company’s liquidity.

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 100 Notes to the Consolidated financial statements for the year ended 31 December 2017

The Group monitors its liquidity risk by using cash flow projections. The Group’s objective is to maintain a balance between continuity of funding through the use of overdrafts, creditors and term borrowings. The table below summarises the maturity profile of the Group’s financial liabilities at year-end based on contractual undiscounted payments. The ageing of the interest bearing term loans is determined based on the contractual repayment obligations, that is, six-monthly equal instalments after the three year grace period.

Less than 3 More than 5 Group On demand 1 to 5 years Total months years TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ At 31 December 2017 Bank overdrafts 12,453,135 - - - 12,453,135 Term borrowings - 15,189,914 130,146,304 136,048,452 281,384,670 Trade and other payables - 27,746,653 - - 27,746,653 12,453,135 42,936,567 130,146,304 136,048,452 321,584,458 At 31 December 2016 Bank overdrafts 6,984,256 - - - 6,984,256 Interest-bearing loans - - 147,460,112 128,391,048 275,851,160 Trade and other payables - 32,761,574 - - 32,761,574 6,984,256 32,761,574 147,460,112 128,391,048 315,596,990 Company At 31 December 2017 Bank overdrafts 12,453,135 - - - 12,453,135 Interest-bearing loans - 15,189,914 130,146,304 136,048,452 281,384,670 Trade and other payables - 26,263,211 - - 26,263,211 12,453,135 41,453,125 130,146,304 136,048,452 320,101,016 At 31 December 2016 Bank overdrafts 6,984,256 - - - 6,984,256 Interest-bearing loans - - 147,460,112 128,391,048 275,851,160 Trade and other payables - 30,046,007 - - 30,046,007 6,984,256 30,046,007 147,460,112 128,391,048 312,881,423

36 CONTINGENT LIABILITIES There are several court cases instituted against the Group by some of its ex-employees whose services ceased as part of a specific redundancy exercise and others due to termination of employment or retirement. These ex-employees are claiming various employment termination benefits aggregating to over TZS 7.5 billion (2016: TZS 7.5 billion). As at 31 December 2017, there is an ongoing legal dispute over land with villagers from Pande who are claiming TZS 7 billion from the Company. The case was to be mentioned in court in March 2018.

As at 31 December 2017, the Company was a defendant in other lawsuits. The plaintiffs are claiming damages and interest thereon for losses caused by the Group due to breach of contract. The amount estimated as loss has not been estimated so far. As at 31 December 2017, the Company had contingent liabilities of TZS 4 billion relating to unresolved income tax and VAT assessments. The unresolved income tax assessments include TZS 1,577 million relating to group management fees and TZS 381 million relating to marketing fees. The unresolved VAT assessments include claims of TZS 2,068 million for various reasons. The Company objected to the assessments and paid the required one third of the assessed amounts where required. The Company has submitted detailed documentation to the revenue authority to support the objections. The Company received a claim of TZS 4.7 billion from the Fair Competition Commission (FCC) of Tanzania on the basis that the transaction that resulted into the AfriSam Group acquiring control of the Company did not follow the competition regulations of Tanzania. The Company is contesting the claim and lodged an appeal to the Court of Appeal. The directors are of the opinion, based on legal advise of the Company’s lawyers, that no material financial loss will result from this claim. In the opinion of the directors and the Group’s legal counsel, no material liabilities are expected to crystallise from the above matters.

Tanga Cement PLC ANNUAL REPORT 2017 101 Building today’s Dreams for tomorrow’s Generations Notes to the Consolidated financial statements for the year ended 31 December 2017

37 ULTIMATE HOLDING COMPANY The immediate holding company of the Group is AfriSam (Mauritius) Investment Holdings Limited which is controlled by AfriSam Group (Pty) Limited, a company incorporated in South Africa. The ultimate controlling entity is the Government Employees Pension Fund of South Africa which owns 66% of the shares in AfriSam Group (Pty) Limited through a fund managed by the Public Investment Corporation (SOC) Limited. 38 FAIR VALUE MEASUREMENTS IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. This level includes listed equity securities and debt instruments on exchanges; • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices, interest and yield curves) or indirectly (that is, derived from prices); and • Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs to valuation techniques). The fair value of the only financial instrument measured at fair value in the consolidated and separate financial statements, that is, the derivative asset resulting from the interest rate cap, is valued using fair values independently sourced from the vendor. The fair value is based on quoted values as provided by the vendor at the reporting date being the values that the vendor sells similar instruments in an active market. As such, the interest rate cap financial asset is categorised under Level 2 for the purpose of fair value measurement. Description of valuation techniques used and key inputs to valuation of the interest rate cap financial asset: Significant observable Valuation technique Range (weighted average) inputs 2017 2016 6 months LIBOR interest 1.46%-1.9% 0.84% - 1.32% rates Market approach TZS:USD foreign exchange 2,201-2,230 2,173 - 2,177 rates

The fair value of the Group's and Company's other financial assets and liabilities reasonably approximates the carrying amounts. - Trade and other receivables and payables, and bank balances: Due to the short term nature of the financial instruments. - Interest bearing borrowings: The interest rates charged on the borrowings are in line with the market interest rates charged on similar loans. 39 SEGMENT INFORMATION The Group is organised into one single business unit for management purposes. Management monitors the operating results of the business as a single unit for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which is measured the same as the operating profit or loss in the financial statements. The Group’s operations are restricted to manufacturing and selling of cement to consumers. No single customer of the Company contributes revenue amounting to more than 10% of the Company’s revenue except for the fully owned subsidiary, Cement Distributors (E.A) Limited which contributed 19% of the Company’s revenue for the current year (2015: 13%).

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 102 Notes to the consolidated financial statements for the year ended 31 December 2017

Group Company 2017 2016 2017 2016 TZS’ 000’ TZS’ 000’ TZS’ 000’ TZS’ 000’ Location of non-current assets Non-current assets located in Tanzania 366,896,648 380,512,131 366,731,576 380,499,118 Non-current asses located in 4,513 6,580 - - Rwanda and Burundi 366,901,161 380,518,711 366,731,576 380,499,118 Source of revenue Revenue from Tanzania 162,685,484 156,627,534 143,631,577 124,534,921 Revenue from Rwanda and Burundi 9,059,231 10,347,948 6,856,962 29,241,061 171,744,715 166,975,482 150,488,539 153,775,982

The Group and Company’s revenue is from sale of cement and transportation services as disclosed in Note 5.

40 APPROVAL OF FINANCIAL STATEMENTS The financial statements were authorised for issue by the Board of Directors on the date shown on the statement of financial position page. They are subject to approval by the shareholders during the Annual General Meeting. 41 GOING CONCERN ASSESSMENT The Group and Company incurred losses of TZS 26,340 million and TZS 27,078 million respectively during the year ended 31 December 2017 (2016: profit of TZS 4,261 million and TZS 4,276 million respectively), and as at that date, the Group’s and Company’s current liabilities exceeded current assets by TZS 6,042 million and TZS 5,565 million respectively (2016: current assets exceeded current liabilities by TZS 15,147 million and TZS 16,862 million respectively). The Company’s directors have made an assessment of the Group’s and Company’s ability to continue as going concerns and are satisfied that the Group and Company have access to sufficient resources necessary to continue in business for the foreseeable future. The Group and Company are solvent, have positive net cash flows from operations and sufficient approved undrawn working capital facilities. Subsequent to the reporting period, PIC has confirmed to the Company’s directors that it is not its intention to demand for repayment of the term loan amounts due to SAGEPF in a manner that would jeopardize the going concern of the Company. Furthermore, the directors are not aware of any material uncertainties that may cast significant doubt upon the Group’s and Company’s ability to continue as going concerns. Therefore, these consolidated and separate financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 42 EVENTS AFTER REPORTING PERIOD Approval of working capital facility Subsequent to the reporting period, Stanbic Bank Tanzania Limited approved an overdraft facility to be utilised by the Company of USD 5 million (TZS 11.5 billion). Confirmation regarding the SAGEPF term loan Subsequent to the reporting period, the Company’s directors received a confirmation from PIC, as the authorized representative of the SAGEPF in respect to the Term Loan Facilities Agreement between the Company and GEPF, stating that it is not PIC’s intention to demand repayment of all or part of the term loan in a manner that would jeopardize the Company’s ability to continue as a going concern for the foreseeable future. In addition, PIC confirmed that it will exercise its rights as the authorized agent in such a manner so as to support the Company to continue in operational existence for the foreseeable future in accordance with the principles of sound business practice. Other events There are no other events after the reporting date which require adjustment to or disclosure in the consolidated and separate financial statements.

Tanga Cement PLC ANNUAL REPORT 2017 103 Building today’s Dreams for tomorrow’s Generations Tanga Cement Public Limited Company

I/ We...... of P O Box ...... being a

shareholder/ shareholders of Tanga Cement PLC hereby appoint ...... of

P O Box ...... as my/ Proxy to vote for me/ on our behalf at the Annual General Meeting

of the Company to be held on Friday 24 August 2018, at the Double Tree Hilton, Dar Es Salaam, or at any adjournment thereof.

Signed and witnessed on this day of ...... 2018

...... (Signature/s)

TAARIFA YA MWAKA 2017 Tanga Cement PLC Building today’s Dreams for tomorrow’s Generations 104 Tanga Cement Public Limited Company

Mimi/Sisi...... wa S L P ......

Nikiwa mwanahisa/wanahisa wa Tanga Cement PLC, nachagua ...... wa

S L P ...... kama mwakilishi wangu/wawakilishi/wetu kupiga kura kwa ajili yangu/yetu

na kwa niaba yangu/ yetu katika Mkutano Mkuu wa Mwaka wa Kampuni utakao fanyika siku ya Ijumaa 24 Agosti 2018, Hoteli ya

Double Tree Hilton, Dar Es Salaam, au mahali popote patakapo amuliwa.

Kama shahidi saini yangu/zetu leo Tarehe ...... 2018

...... (Saini)

105 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations TAARIFA YA MWAKA 2017 Tanga Cement PLC 106 Building today’s Dreams for tomorrow’s Generations Notice to Members

TANGA CEMENT PUBLIC LIMITED COMPANY (Incorporated in the United Republic of Tanzania) Notice is hereby given that the twenty fourth Annual General Meeting of Shareholders of Tanga Cement Public Limited Company will be held at the DoubleTree by Hilton Oysterbay in Dar es Salaam on Friday 24 August 2018 at 10H00, for the following purposes:

1. Notice of Meeting Notice convening the meeting to be taken as read.

2. Approval of Minutes To approve and sign the minutes of the twenty third Annual General Meeting held on 5 May 2017.

3. Financial Statements and Directors’ Reports To review and adopt the Financial Statements and Directors’ report for the year ended 31 December 2017.

4. Dividend for the year ended 31 December 2017 Shareholders to consider the proposal from board not to declare a final dividend for the financial year ended 31 December 2017.

5. Appointment of Directors To appoint Directors to the Board.

6. Approval of Directors Remuneration To approve the directors remuneration for the 2018 financial year.

7. Appointment of External Auditors To approve the appointment of the External Auditors for the 2018 financial year.

8. General Any other business.

Any member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote on their behalf. If a member is an organisation then they must submit proxy forms and a Board resolution to approve the appointment of the proxy. These proxies are to reach the registered office of the Company not less than 48 hours before the time of the meeting. Members and holders of proxies are required to bring with them acknowledgements of receipt of delivery of proxy forms, copies of proxy forms and identification card for registration purposes.

By order of the Board.

Quresh Ganijee Company Secretary 24 July 2018

107 Tanga Cement PLC ANNUAL REPORT 2017 Building today’s Dreams for tomorrow’s Generations Taarifa Kwa Wanachama

TANGA CEMENT PUBLIC LIMITED COMPANY (Imeshirikishwa katika Jamhuri ya Muungano wa Tanzania)

Taarifa inatolewa kwa wanahisa kwamba Mkutano Mkuu wa Mwaka wa ishirini na nne wa wanahisa wa Kampuni ya Tanga Cement PLC utakaofanyika Hoteli ya Double Tree Hilton, Dar es Salaam, siku ya Ijumaa tarehe 24 Agosti 2018 kuanzia saa nne (4) asubuhi kwa madhumuni yafuatayo:

1. Taarifa ya Mkutano Taarifa ya kuitisha mkutano ichukuliwe kama inavyosomeka.

2. Kupitisha Kumbukumbu Kuidhinisha na kusaini kumbukumbu za Mkutano Mkuu wa Mwaka wa ishirini na mbili uliofanyika tarehe 5 Mei 2017.

3. Taarifa za Fedha na Ripoti za Wakurugenzi Kupitia na kupitisha Taarifa za Fedha na ripoti za Wakurugenzi kwa mwaka ulioishia tarehe 31 Desemba 2017.

4. Gawio kwa mwaka ulioishia tarehe 31 Disemba 2017 Kuidhinisha tamko la gawio kwa mwaka ulioishia tarehe 31 Desemba 2017.

5. Uteuzi wa Wakurugenzi Kuteua Wakurugenzi wa Bodi.

6. Kuidhinisha Mapato ya Wakurugenzi Kuidhinisha mapato ya Wakurugenzi kwa mwaka wa fedha 2018.

7. Uteuzi wa Wakaguzi wa Nje Kuidhinisha uteuzi wa Wakaguzi wa Nje kwa mwaka wa fedha 2018.

8. Majumuisho Mengineyo.

Mwanachama yeyote anayestahili kuhudhuria na kupiga kura kwenye mkutano ana haki ya kuchagua mwakilishi au wawakilishi na kupiga kura kwa niaba yake. Kama mwanachama ni shirika basi mwakilishi anatakiwa fomu za uwakilishi pamoja na maamuzi ya Bodi ya kumteua mwakilishi huyo. Fomu hizo zifike katika ofisi iliyosajiliwa ya Kampuni si chini ya ya masaa 48 kabla ya muda wa mkutano kuanza. Wanachama au wawakilishi wanatakiwa kuja na risiti ya amana na kitambulisho kwaajili ya usajili.

Kwa agizo la Bodi.

Quresh Ganijee Katibu wa Kampuni 24 Julai 2018

TAARIFA YA MWAKA 2017 Tanga Cement PLC 108 Building today’s Dreams for tomorrow’s Generations TANGA CEMENT PUBLIC LIMITED COMPANY

Registered office Dar es Salaam office: Korogwe Road, Pongwe Factory Area Rooftop, Coco Plaza, 254 Toure Drive P O Box 5053, Tanga, Tanzania P O Box 78478, Dar es Salaam, Tanzania Tel: +255 27 2644500-3/2610604 Tel: +255 22 2602784/ 2602778/ 79 Mob: +255 746 293325/ 26 Mob: +255 746 293328/ 746 293330 Fax: +255 27 2646148 Fax: +255 22 2602785

Website: www.simbacement.co.tz | Email: [email protected]