IPAP 2012/21

1. IPAP 2012/21

2. Content IPAP 2012/21 • Brief introduction to Shatterprufe • Impact of Electricity cost increases • What the business has done to improve competitiveness • Why the current and planned electricity costs are unsustainable? • Conclusion

3. GA RANKUWA LONG RUN TOUGHENED LONG RUN LAMINATES LAMINATES 1 810 000 TEMPERED 4 500 000 IPAP 2012/21 Pretoria Johannesburg DURBAN ASSEMBLY FACILITY NEAVE SHORT RUN LAMINATES STRUANDALE SHORT RUN TOUGHENED NEAVE LG Durban EastLondon EXPORT LOGISTICS DISTRIBUTION WAREHOUSE Port Elizabeth

4. Company Profile IPAP 2012/21 • Shatterprufe was established in 1935 and the PG Group was established in 1898 • Producer of automotive laminated and toughened product • Supplier into the domestic and export aftermarkets and notably the only SA manufacturer supplying the OEMs • Glass is shaped by bending in electrical furnaces making the business a high energy user • A division of the PG Group which invested R1bn in a dedicated automotive flat glass float line in 2007 • Shatterprufe currently employs 1279 people with 954 employed in the Nelson Mandela Bay Metro • Shatterprufe’s capital employed is R500m and spends R30m pa on fixed investments. Currently investing R40m to improve competitiveness on door glasses. The PG Group’s capital employed is more than R3bn.

5. OEM CUSTOMERS IPAP 2012/21 BUS & TRUCK OEM CUSTOMERS MAJOR OEM CUSTOMERS BUSMARK 2000

6. SALES REVENUE IPAP 2012/21 2011 2012 FC

7. SYSTEM COMPLIANCE IPAP 2012/21

8. Electricity costs IPAP 2012/21

9. Sales Volume in m2 vs Electricity costs IPAP 2012/21

10. What Shatterprufe has done to improve competitiveness? IPAP 2012/21 • Invested in technology for competitiveness improvement initiatives - for the period 2005 to 2012 the manufacturer’s average capital investment was R30m pa and the PG Group invested a further R1bn in a dedicated automotive glass float line in 2007 • A technical agreement has been secured by Shatterprufe with St Gobain-Sekuritat a significant cost to ensure that the business remains abreast of best-in-class technology, processes and standardised work practices. It is essential to have this support to remain capable of supporting the domestic OE industry. • Initiatives have been introduced to improve efficiency, yields and reduce waste. This included the Tirisano cluster programme with the AIDC (Unido) which was focussed on improving energy efficiency. (2010/11) • Invested in new product development to ensure the autoglass offered supports the ever growing model range in the car parc. (between 10 and 20 windscreens per month) • Has developed flexible manufacturing capability to cater for the short run manufacturing requirements of the South African market (minimum run length of 10 windscreens) • Investment in people ; human resource development and training is an essential part of the business’s competitiveness improvement initiatives • Flexed labour to volume demands which unfortunately resulted in 221 retrenchments since 2010 • Absorbed financial losses to avoid closure and further related job losses – Shareholders have not received dividends for a number of years • Leveraged loans to support the businesses during the turnaround and capital investments – e.g. R150m loan from the IDC added to PG Group’s R1.1bn exposure and Shareholders invested a further R400m • Engaged with the NMBM since mid 2011 in an attempt to secure assistance to reduce electricity costs - much discussion with no progress while companies are in financial distress

11. Why the current and planned electricity costs are unsustainable? IPAP 2012/21 • Higher energy user • Operates in a competitive environment • OEMs require long term productivity improvements ie price reductions • Competes on a global platform where low cost countries such as China, Thailand, India and others are not exposed to such significant structural cost increases • If an OEM were to accept such electricity cost increases being passed on in price ; the next global competitiveness benchmark review would show product costs to be uncompetitive resulting in a re-sourcing decision ; therefore even short term price relief is not a sustainable solution • SA manufacturers are already disadvantaged by relatively lower volumes which is highly punitive to the manufacturing costs of autoglass because it’s processes include high change-over time relative to production cycle times • Shatterprufe is currently in a loss making situation and is cross subsidised by the PG Group which will need to decide whether to exit the automotive stream due to unsustainable losses. Shatterprufe’s discontinuation will impact severely on local content and trade balances in the local automotive industry.

12. Conclusion IPAP 2012/21 • The electricity rates are unaffordable , unsustainable and will result in high energy users discontinuing operations in the Eastern Cape • A special tariff must be made available to high energy users to promote industrial competitiveness • Should municipalities like the Nelson Mandela Bay Metro be unable to provide locally and globally competitive rates, manufacturers should be allowed to benefit from direct ESKOM supply and ESKOM’s future increments must reflect CPI levels • The alternative is massive job losses and de-industrialisation of the Eastern Cape economy

13. IPAP 2012/21 THANK YOU – We invite you to visit our plants