3 INTEGRATED ANNUAL REPORT 2024
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2 INTEGRATED ANNUAL REPORT 2024 NCT is a timber marketing co-operative catering to the needs of private and independent timber growers. Established in 1949, NCT is recognised as an international supplier of quality hardwood pulp wood chips, round-wood timber, and is the largest forestry marketing organisation in southern Africa. OUR MISSION To assist members to achieve their full forestry potential and thereby optimise financial results on a sustainable basis. OUR STRATEGY With the strength inherent in co-operative principles, employing motivated staff and appropriate technology, our mission is achieved by • Marketing round-wood timber • Research and development • Extension and planning services • Securing additional timber supplies • Facilitating the harvesting and transportation of timber • Managing the assets of NCT • Distributing available surpluses to members in proportion to patronage • Interacting with appropriate forestry-related stakeholders • Encouraging social responsibility and sustainable forestry stewardship • Promoting value adding activities OUR VISION To win and maintain the unreserved confidence and support of all our members, customers and employees.
3 INTEGRATED ANNUAL REPORT 2024 About this Report Business Model Chairman’s Report General Manager’s Report Wood Chipping Operations Sales, Purchases, Logistics and Transportation Tree Farming ESG Report Environmental Social Governance Finance Contents 4 6 8 12 14 16 19 21 24 36 61
4 INTEGRATED ANNUAL REPORT 2024 ABOUT THIS REPORT This integrated report aims to provide an accurate and concise overview of all material matters and describe how the NCT group achieved its business goals and created value for the financial year ended 29 February 2024. The NCT group includes NCT Forestry Agricultural Co-operative Limited and its subsidiaries (please refer to our governance section). This report contains both financial and non-financial information and has been compiled by management. Materiality was determined by the impact a reporting item might have on our various stakeholders. This report was prepared in accordance with IFRS for SME’s accountnig standards, the requirements of the Companies Act (where applicable), the Co-operatives Act, the principles of King IV and the International Integrated Reporting Framework. Co-operative Reports The Board is not required to complete a social report, or a management decision report as stipulated in regulations 33 and 34 of the Co-operatives Act 14 of 2005 respectively as NCT is a category C co-operative and the annual financial statements are independently audited. This integrated report, however, contains details ordinarily required by the social report, and the management decision report. The Board certifies that to the best of their knowledge and belief the social and ethical performance of NCT is aligned with its vision, mission, and goals and within the scope of the NCT Constitution as monitored by the Social and Ethics Committee. The Board further certifies that to the best of their knowledge and belief NCT has complied with all legal requirements and the NCT Constitution.
5 INTEGRATED ANNUAL REPORT 2024 Approval The Board can assure the NCT membership that NCT is a strong organisation and, with the joint effort of the Board, Management and the NCT staff, will continue to achieve its business goals. The Board acknowledges its responsibility in ensuring the integrity of this Integrated Report. The Board has applied its mind to the Integrated Report and in its opinion this report addresses the material issues and represents fairly the performance of the NCT Group. AV Schefermann | CHAIRMAN Assurance The Board and NCT Management obtain both internal and external assurance to test the reliability of the information reported on. The non-financial information has not been audited, but it has been presented to the Audit and Risk Committee as well as the Social and Ethics Committee. The Board is satisfied that the information contained in this report is a fair reflection of NCT’s non-financial performance. Any projections made in this report are made on subjective criteria and cannot be verified nor relied upon for any decision making. The Internal Audit function tests the internal control measures put in place by management to ensure that processes conform to NCT’s quality management systems. The internal audit report can be found on page 47. NCT is endorsed by two forestry certification standards, Forestry Stewardship Council®(FSC®) and the Programme for Endorsement of Forest Certification (PEFC) which ensures that timber is sourced from operations that comply with both schemes’ controlled-wood requirements. All financial information was externally audited by Colenbrander Inc. The external audit report can be found on page 53.
6 INTEGRATED ANNUAL REPORT 2024 Growing a sustainable resource with access to over 200 000ha of members’ and NCT-owned commercial plantations. NCT-owned plantations act as a reservior Improving efficiencies and investing in equipment and technologies. Three woodchipping plants, four timber depots and six member-services’ offices Financial prudence and discipline Integrating the network of professional minds and using modern technology to enhance data management Employing and investing in 702 diverse and professional people to reach operational goals Improving the relationship with a broad range of stakeholders STAKEHOLDERS – Members | Customers | Employees | Communities | Service providers | Industry bodies | B U S I N E S S INPUTS SOCIAL HUMAN INTELLECTUAL FINANCIAL MANUFACTURING NATURAL SUPPORT SERVICES CORE ACTIVITIES THE BUSINESS Logistics Tree Farming Finance Forest Technology Human Resources Wood Chipping Information and Communication techniology Markets Members GOVERNANCE N C T ’ s C A P I T A L S ACTIVITIES
7 INTEGRATED ANNUAL REPORT 2024 Government departments | Competitors | Media | Environmental/conservation lobby groups | General public TURNOVER Group R2.94 billion Co-operative R2.94 billion TOTAL ASSETS Group R2.61 billion Co-operative R2.06 billion LOGISTICS Road: 553 000 tonnes Rail: 82 791 tonnes Loading operations 346 196 tonnes R&D INVESTMENT R3 245 000 TRANSPORT CARBON FOOTPRINT A saving of 211 209kg BIODIVERSITY FOOTPRINT 2 469 ha (NCT farms) KEY OUTCOMES M O D E L OUTPUTS WOOD CHIP EXPORTS 1.1 million tonnes DOMESTIC MARKET Pulpwood 416 267 tonnes Non-pulpwood 78 518 tonnes CERTIFICATION FSC 66 680 ha PEFC 7 960 ha SKILLED AND MOTIVATED EMPLOYEES 851 training opportunities Acacia 923 821 16 319 70% to 110% plus of GST Eucalyptus 895 700 13 676 70% to 110% of GST TOTAL 1 798 1 521 29 995 MEMBERS Genus GST Actual supply Payment Sliding scale amendment (Tonnes ‘000) (R’000) TRAINING SPEND R1.5 million CSR & BBBEE SPEND R3.2 million
8 INTEGRATED ANNUAL REPORT 2024 were three ships en route. At the time of the disaster, we had exported around 750 000 tonnes of woodchips for the year, together with around 300 000 tonnes of local sales, resulting in a turnover of approximately R2 biillion. This was on the back of the higher dollar prices underpinned by the exchange rate. The fire of 2023 is the biggest single disastrous occurrence that has struck our Co-operative in our 75year history. When comparing the challenges of the Covid-19 pandemic, the chipper incident at Richards Bay, the challenges of our State-Owned Enterprises (SOEs), including the failing rail and port networks, they all pale into insignificance when 50% of the country’s export chipping capacity goes up in flames. Those fateful days of the fire displayed the true spirit of our Co-operative. The spirit of Ubuntu came to the fore as our members, staff, and the community in Richards Bay pulled together to stop the spread of the fire to our neighbours and limit any further damage to our industry, the city surrounds and the environment. For those present at the fire, the shock was overshadowed by the collective action of those present and the many hidden talents which were revealed and which would aid Chairman’s Report 2024 The year under review is characterised by two distinct halves separated by the devastating fire at our Richards Bay Mill Complex. NCT initially had a full order book and was on track to surpass the previous year’s record sales in value. Dollar prices were at an all-time high and NCT was able to pay to its members the highest mill-delivered price on record. In essence NCT was well on track to achieve its mission of assisting members to market their timber whilst optimising financial results. As the year continued however, there was push-back from our Chinese customers requesting postponement rather than cancellation of ships they were due to take from us. Fortunately, one of our strategic objectives of diversifying our markets meant that our orders to Japan as well as the Biomass Market were still well on track. The higher stock levels at the Richards Bay Mill Complex at the time of the fire were as a direct result of the bigger order books, delayed shipments by our Chinese customers and NCT’s objective of assisting members to keep the Mill allocation at levels that would satisfy member requests. As a result, there were more than 200 000 tonnes of woodchips on the stockpiles at Richards Bay on that fateful day of 29 September 2023. The stock loss would have been reduced by almost twothirds had the fire occurred two weeks later as there V E R N S C H E F E RMANN
9 INTEGRATED ANNUAL REPORT 2024 us as an organisation in this time of utter devastation. Once the fire was extinguished, an emergency Board meeting was held in Richards Bay, and “Project Phoenix” and the Mill Rebuild Committees were born. The objective was to rebuild our facilities to be more streamlined and be able to continue to serve our members for decades to come. Much time has been spent on managing the process of the insurance claim, the disassembly of the burnt infrastructure, cleaning of the facility and assessment and planning of what to do and when regarding the reconstruction. We were due to celebrate the 50th Anniversary of our business relationship with Sumitomo and Nippon in October 2023. These festivities were postponed by mutual consent with our customers, given that we would celebrate once our facilities were again up and running. The support from our international wood chip customers was confirmed during our courtesy visits to Singapore and Japan. Naturally, there was much interest and many questions at the International Woodchip Conference as to how the fire had started and what had transpired during the disaster. Following the fire the second half of the year was focussed on trying to manage our resource and member supply to flow via NCT Durban Wood Chips, SAPPI Saiccor and other secondary outlets. The NCT team in Durban really took on the challenge and broke many records including the highest Acacia intake in December 2023 as well as the most tonnes sold through the mill for a Financial Year (achieving just over 640 000 tonnes). This was achieved even in light of Durban experiencing its own black swan event during February 2024 in the form of a fire on the export line. However, our team pulled together and were instrumental in getting the port-owned export equipment replaced and refurbished to prevent any delays in our shipping schedule. Notwithstanding the disaster, NCT managed a turnover of R2.9 billion, marketing a total of 1.7 million tonnes. Unfortunately, because of the large stock write-off due to the fire, the profits were significantly reduced. The balanced approach of paying market leading prices, whilst building reserves has stood us in good stead as our cash reserves have been a lifeline in this period of uncertainty. At Board level, our long-serving board members, Graeme Freese and Micheon Ngubane, retired at the Annual General Meeting in August 2023, and we thank them for their dedication and enthusiastic service over many years. Brian Bhengu and Julia Rees were welcomed onto the Board, and with their expertise and experience, they will add to the strength of our Board and add a novel perspective to our deliberations. In August 2023 I was elected Chairman and took over from Philip Day. We thank Philip for his leadership over the past years. He has led the Board well with his patient demeanour and attentive ear. He has steadied the ship through many challenges and some great achievements over the past years. His experience is however not lost as he was elected Vice Chairman and has accepted the challenge of supporting and mentoring his successor through the stormy waters that lie ahead. Our General Manager, Danny Knoesen, was a pillar of strength through the entire disaster. He led from the front, dealt with every press conference with great finesse, and continues to lead his management team and staff as we tackle the immense challenge of rebuilding the facilities from ground zero. The strength and courage shown by all staff during this time was unmeasurable and we will continue to mine and nurture the amazing talent that is within our organisation. The 75th year of our wonderful existence is on our
10 INTEGRATED ANNUAL REPORT 2024 doorstep, and we look forward to celebrating this milestone with the restarting of our wood-chipping facilities at Richards Bay. Already the introduction of a mobile chipper to serve our Eucalyptus-growing members with a biomass market, saw the facility having woodchips on the ground again, with the first ships being loaded in April and May 2024. Although we have been severely tested over the past few years, the remarkable strength of resolve, the spirit of Ubuntu of our staff and sense of social, environmental and community responsibility of our wonderful organisation will serve us strongly as we literally rise out of the ashes, rebuild our facilities, and remain among the leaders in the global woodchip industry. VERN SCHEFERMANN | CHAIRMAN
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12 INTEGRATED ANNUAL REPORT 2024 It seems that every year I pen the General Manager’s report there has been some extreme event or condition that deserves mention, either on the world stage, in our markets, or within South Africa itself. None that I recall, arguably in the history of NCT over 75 remarkable years, will top the Richards Bay fire of October 2023. As we pour energy into the rebuilding of both lines, much has been said of the fire, the source, the devastating damage, interim plans, and the timelines to restore normal operations. It’s hard to take positives out of what will end up being months of downtime in Richards Bay, but nonetheless there are indeed some that deserve mention. We have still been able to handle, tranship, store and process (via Durban) a decent portion of our northern members’ Acacia over the period. We have started up mobile chippers, processed and loaded more than 80 000 tonnes of Eucalyptus for biomass markets. We have transferred some of Richards Bay’s vessels to our Durban operation which has, ironically, been a strategic intention for many a year. Despite the massive impact our fire had on the local businesses and communities, we have been praised by the media, the municipalities, and officials on how we handled the disaster. Our constant and transparent communication outwards as well as our willingness to engage and share our experiences, learnings and gratitude was well received. It is at times of extreme calamity that one can deduce the mettle of one’s troops, and our NCT staff again rose to the occasion in fantastic form, and I commend all of them, and am very proud of how they have contributed to and handled a remarkably difficult year. From a market perspective, fires or not, the pulp and paper markets remain in the doldrums, held down by an ongoing Chinese recession and other world events. Demand for pulp and paper remains negative, complicated by further pulp production capacity coming online in China and South America. Dollar prices for BHK pulp have edged towards $650 per tonne but show no signs of further recovery in the short to medium term. That translates into challenging pressure on dollar prices for wood chips and volumes into the markets in Japan and China. Ironically, with the volumes we were trading, at favourable pricing and exchange rates, we may have been able to report another record-breaking year had we not experienced the fire. In fact, with a couple of Richards Bay ships moved over to our Durban operation, our DWC Mill was able to break volume and profit records for the year under review. General Manager’s Report DANN Y KNO E S E N
13 INTEGRATED ANNUAL REPORT 2024 and our organisation as we recover from the 2023 fire. I sincerely thank outgoing Chairman, Mr Philip Day, for his remarkable support and contributions over the past years, and welcome our new Chairman, Mr Vern Schefermann, as he settles in after what was literally a “baptism of fire”. A word of thanks too for our Board members and their ongoing support to the management team and the Co-operative. DANNY KNOESEN | GENERAL MANAGER From NCT’s customer perspective, our blue-chip customers in both Japan and China have been incredibly supportive as we rebuild. They have demonstrated patience and understanding, and every indication is that they await our return to normal operations to continue trading the usual volumes from us. Having said that, we do observe that under tough trading conditions, the wood-chip markets will likely face continued pressure over the next 18 months. I take this opportunity to congratulate our management team and staff for their contributions throughout an incredibly challenging year and am proud that we can count on their ongoing commitment to our members
14 INTEGRATED ANNUAL REPORT 2024 Wood Chipping Operations NCT operates two wood-chipping facilities – NCT Durban Wood Chips (DWC) and NCT Richards Bay Complex comprising NCT Richards Bay Wood Chips (RBWC) and BayFibre. These operations facilitate the export of wood chips to key markets such as Japan, China and others. The strategic positioning of these wood-chip mills not only benefits NCT but also increases access to global markets for a significant portion of South African timber resources, thereby enhancing pricing and financial returns for local timber growers. Early in the financial year under review, RBWC encountered a production setback due to repairs needed for the chipper. However, through a concerted effort headed by NCT plant engineers from both Richards Bay and Durban, the chipper replacement process was expedited, showcasing the synergy and resourcefulness within our facilities. With the support of DWC providing crucial components, the repairs, initially anticipated for late May, were successfully completed by early April 2023. Despite the challenges, the biomass project at RBWC concluded successfully, demonstrating adaptability by utilising mobile chippers during the main chipper’s repair phase. Subsequently, the continuation of the biofuel project post chipper replacement ensured uninterrupted production of Eucalyptus and E. Smithii at the mills. The lessons learned from these experiences have been invaluable, paving the way for the integration of efficiencies into the construction of a second chip line facility at the mill. The procurement of a a chipper and related equipment, led by our plant engineer, further exemplifies our commitment to enhancing operational effectiveness. During the year under review a new stevedoring contractor was appointed. The transition of stevedoring contractors was seamless, with no compromise in operational efficiency. The new contractors unwavering support during the fire in October highlights the strength of collaborative partnerships within our operations. The integration of BayFibre and RBWC operations marks a significant milestone, fostering interchangeability among operational staff, thereby enhancing capacities, operational efficiencies, and service offerings to our suppliers. To mitigate disruptions caused by the fire, Acacia was transitioned from RBWC into DWC. This collaborative effort limited disruption to production under the conditions prevailing. DWC increased production to maximum capacity, given transhipping of timber from BayFibre to DWC daily. Exceptional timber intake months resulted with December 2023 marking the highest log intake for DWC since its inception in 2004. This heightened production enabled the loading of two extra vessels in the financial year, resulting in a record-breaking performance for DWC in terms of tonnes exported. Continuous maintenance by our engineering team and the implementation of a wash station on the DWC log deck have played pivotal roles in achieving and sustaining high production rates. Operational challenges persist, particularly in port logistics. The competition for berth bookings and maintenance issues on port infrastructure necessitate proactive measures. To address these challenges, DWC staff are actively involved in the maintenance of port-owned equipment. By prioritising production efficiency and fostering collaborative integration between mills, NCT is maintaining its key position in global wood-chip supply
15 INTEGRATED ANNUAL REPORT 2024 Total tonnes exported 2023/2024
16 INTEGRATED ANNUAL REPORT 2024 Sales, Purchases, Logistics and Transportation The performance metrics of NCT are both comprehensive and revealing. Sales figures shown in the graph below reflect a substantial dominance of NCT Chip Mills. Special (Non-pulpwood) Markets, on the other hand, show high demand, primarily driven by peeler market dynamics, fuelled by supply challenges. However, the species specificity of Peelers presents a limitation, impacting Midland’s members disproportionately. Moreover, a shift in member mindset towards reducing pulp loads from plantations has been noted, with credit issues hindering supply to major treating plants. Pine sales have undergone a significant decline by almost 50% due to reduced availability, compounded by challenges faced by sawmills in sales and pricing. The Richards Bay fire has led to a rise in special markets’ sales in the northern region, facilitated by diversified market options offered through NCT Tree Farming. Additionally, sales have seen a slight increase due to pricing dynamics and increased timber felling in specific regions. Conversely, load-shedding has severely impacted sales into our market in Piet Retief, with hopes pinned on an increase in sales in the upcoming financial year. Overall, purchases tonnage has witnessed a marginal decline compared to the previous year. Timber Supplied
17 INTEGRATED ANNUAL REPORT 2024 The limited intake of pulpwood changed some of the direction of sales into the special-market arena. The new financial year brings new markets. We have at least five Chinese owned peeler markets possibly entering the possible channels of supply. Dealing with such entities brings its own challenges. The NCT Scheduling system continues to create valuable visibility in our supply chains and allows for the measurement and control of approximately 9 000 tonne/day or 263 truckloads/day to seven major chip markets, pulp and paper mills as well as NCT depots. Post the Richards Bay fire, the system’s role in planning and visibility amplified significantly. Continuous development and implementation efforts, including system-based measurements and the growth of the Business Analyst position, underscore a commitment to operational refinement. Noteworthy focus areas include ongoing efforts towards the development of a cellphone app integrating logistics functionalities. Depots function as critical nodes in the logistical network, despite being riddled with challenges ranging from poor service levels to environmental hurdles. Investigations into additional depots remain underway, signalling a commitment to optimising logistical infrastructure. • The Vryheid East Procurement Depot: Transnet Freight Rail (TFR) service levels remain poor throughout the system T1-T4 and this impacts costs of sales and necessitates expensive road transport. Total throughput was 88 773 tonnes for the year supplied by 161 members. Growth and throughput volumes were impacted by poor service levels from Transnet Freight Rail and the Richards Bay fire. • The turnaround time for the year (TAT) at all our depots remains a positive 48 minutes. • Umlaas Road Holding Depot: the environmental impact assessment and transition from agricultural land to light industrial zoning is ongoing. The final Environmental Impact Assessment has been submitted for review and we have conducted a successful site visit with the Department. • Ahrens and Glenside Holding Depots: Like Glenside, Ahrens now has a logger and operator permanently on site to assist suppliers with offloading. The increased volume of 18 185 tonnes purchased into two Holding depots is a growth and evidence of the well-supported Ahrens Depot. These depots are important to SSTG supply points and possible expansion remains a focus. • A total of 164 suppliers made use of the depots during the year. Stutterheim operations continue to serve as a reliable source of quality timber from the Eastern Cape, with steady utilisation by members, highlighting its strategic importance in regional operations.
18 INTEGRATED ANNUAL REPORT 2024 PBS Volumes – 11-year period Tonnes Rand Value
19 INTEGRATED ANNUAL REPORT 2024 TREE FARMING The NCT Group owns approximately 19 000ha of plantations. These farms have played an important role in ensuring that the Co-operative is a reliable supplier of wood into various markets and ensures that NCT meets its certified wood requirements. The owned farms act as a reservoir that can be activated in times of undersupply and operations can be slowed down during periods of oversupply. This occurred during the past supply season where E. smithii harvesting during the winter months was accelerated to meet the strong demand for this species and then, at short notice, harvesting was suspended in the aftermath of the Richards Bay fire. This was done to allow members full access to available markets. The plantation species planted on owned farms are based on market consideration rather than optimal growth. On suitable sites E. smithii is the species of choice because it has very good pulping properties and is the preferred pulpwood species for several customers. Mixed Eucalypt wood chip sales can be negotiated on the back of securing E. smithii deals. NCT farms supplied 61% of the timber for the 2023 DWC E. smithii project. Acacia is the other species of choice for NCT farms because this resource is sought after by export customers. E. grandis and grandis hybrids are planted on remaining suitable sites as the timber from these genotypes can be sold into Special Markets and is a useful resource for developing new markets for members. Fire is a major risk to the Tree Farming plantations, and NCT maintains a formidable array of fire protection equipment and standby crews. Built to specification fire tenders are maintained on estates and the newer tenders carry 6 000 litres of water with foaming units. The NCT firefighting capacity provides additional resources to the Co-operative and members in the areas where farms are located. This resource proved to be very useful with the fire at the Richards Bay mill, with farms deploying tenders that helped contain the spread of fire in and around the mill. The NCT Tree Farming Plantation Information Management System (PIMS) core features are currently operational, with ongoing user training. The main advantage of this cloud-based system is its capacity for smooth integration with NCT’s Oracle financials and supply chain systems. Work on the system is ongoing, with some peripheral features yet to be completed. Additionally, there are ongoing efforts to enhance and prototype existing processes. NCT Farms and Leases – Timber sales tonnes
20 INTEGRATED ANNUAL REPORT 2024 2023 Tree Farmers of the Year
21 INTEGRATED ANNUAL REPORT 2024 ENVIRONMENTAL Many timber growers prioritise sustainable forestry practices, which not only ensure the long-term viability of their operations but also contribute to the preservation of ecosystems and biodiversity. By adhering to sustainability standards and promoting responsible land management, timber growers demonstrate their commitment to environmental stewardship, which positively impacts both present and future generations. Thus, the social impact of timber growers extends beyond economic considerations, encompassing community development, environmental conservation, and the promotion of sustainable practices. Certification NCT manages Forestry Stewardship Council® (FSC®) and Programme for Endorsement of Forest Certification (PEFC) group schemes to facilitate forest management certification. These groups are open to NCT members to enable them to grow certified timber. These two schemes are audited annually by an independent certification body. The last audits proved challenging with some issues raised as major findings. These have been closed out. NCT-owned farms provide an essential portion of FSC-certified timber for the co-operative marketing requirement. More than one third of NCT’s FSC timber is supplied from NCT-owned farms. Without this timber NCT would not be able to meet its market requirements for certified material. To streamline forest management certification, at least for PEFC, NCT has now moved its PEFC group to the AES Landscape Certification Programme. This move should allow some economies of scale, a reduction in audit intensity and for the identification and treatment of risks at a landscape level. NCT was audited on a main assessment for a combined PEFC and FSC Chain-of-Custody (CoC) certificate. This was successful and NCT now holds a dual FSC / PEFC CoC certificate. This CoC certificate enables NCT to market timber grown on the forest management certificates, as certified material. Research and Development The NCT Forestry research programme has been integrated into the Tree Farming Department. This is a logical restructure as the NCT farms play an important role in providing sites and resources for research trials. Many of the ICFR seed orchards are located on NCT estates. These orchards supply the bulk of the seed to nurseries for producing seedlings for members. A third generation E. smithii grafted seed orchard is being established on the Enon plantation for future improved seed production. NCT manages a clone programme that supplies clones to private nurseries. Most of the clone screening trials are planted on our land, this is an important service because it allows material to be thoroughly tested before it is commercialised for members to plant on their farms. Acacia clones are a recent innovation from this programme, and they are proving to be very successful both in terms of improving tree growth and resilience to pests. Many of the farms are also used by various research partners for implementing trials or for monitoring pests. This work
22 INTEGRATED ANNUAL REPORT 2024 Carbon Footprint An evident environmental indicator lies in measuring the carbon emissions associated with NCT’s road and rail transport. In the year 2023 alone, a noteworthy total of 11 209kg of carbon emissions reduction was accomplished. These reductions can be directly linked to strategic logistics choices made, including mode selection, technological advancements, and target market decisions. Mode/Market Tonnes Average KMs Carbon Factor Total Emissions Carbon Factor Savings Comments (g) (kg) (kg) Road 352 559 490 62 10 711 Rail 82 791 600 22 1 093 All Road 435 350 545 62 14 710 3 999.73 Savings using rail as an alternative mode PBS 201 240 490 50 4 930 20% less fuel and improved technology PBS to Standard Road 553 799 490 62 16 824 6 113.67 Savings using PBS vehicles SAPPI /NCT SWOP 80 371 220 62 1 096 1 096.27 Logistics savings Total Savings 11 209.67 To calculate the carbon emissions, the activity-based approach will be followed shown below as: CO2 = tonnes transported x average distance travelled x CO2 emissions factor per tonne – km / 1 000 000 Carbon Footprint Scorecard Brokered Volume as of March 2023 - February 2024 ultimately benefits members through improved forestry knowledge and products. A good example is the establishment agro-chemical trials for registration of new products. Biodiversity About 25% of the land area owned by NCT is managed as unplanted spaces. These include natural forests, woodlands, grasslands, wetlands, and riparian areas. A comprehensive delineation programme has been implemented on farms to ensure that adequate buffers are maintained between plantations and streams and wetlands. These buffers or riparian areas protect the water resource and provide an important habitat for biodiversity. The riparian areas often link important conservation areas (forests, grasslands etc) and provide important corridors to link habitats and allow for movement of biodiversity. Several sites of conservation significance occur on NCT land, namely the 200ha Enon natural forest; the protected Natal cycad colony on the Lenjane Estate; and the 350ha grasslands on the Vergelegen farm which is part of the vulnerable Northern Midlands Moist Mistbelt Grasslands. Several threatened plant and animal species have been recorded in these protected areas including the rare Helichrysum woodii, Hilton daisies, Cape parrot, oribi antelope and some rare amphibians.
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24 INTEGRATED ANNUAL REPORT 2024 SOCIAL CAPITAL In examining the social aspects of NCT, the Human Resources (HR) department plays a pivotal role in fostering a positive and inclusive work environment. By implementing policies that prioritise diversity, equity, and inclusion, HR ensures that employees feel valued and respected, thus contributing to higher morale and productivity. Additionally, community projects organised by NCT not only demonstrate corporate social responsibility but also strengthen ties with the local community. These initiatives, whether through volunteering efforts, charitable donations, or partnerships with community organisations, reflect NCT’s commitment to making a meaningful impact beyond its immediate operations. When considering the social aspects of an organisation, particularly in the context of timber growers, it’s imperative to acknowledge their significant role in both local communities and environmental conservation efforts. Timber growers often operate within rural areas, where they play a vital economic role by providing employment opportunities and stimulating local economies. Overall, these interconnected social aspects contribute to a harmonious and socially responsible organisational culture that values its employees and members, and actively contributes to the broader community.
25 INTEGRATED ANNUAL REPORT 2024 Members The primary role of NCT, given its very nature, must be one of service delivery to its members, comprising both growers and trade suppliers of timber. The course of the year certainly illustrated such innovative service delivery in many guises, and which led ultimately to maximising member benefit from available markets all experiencing the ebbs and flows of dynamic and unprecedented circumstances. A list of the services and actions implemented for members makes for an interesting commentary and, in our opinion, is certainly worth celebrating. Let’s start at the beginning of the year and make our way through to year end outlining what can be considered key service deliveries, but which still does not cover all the NCT inputs. The chipper disaster at NCT Richards Bay Wood Chips (February 2023) led to NCT opening the year with the creation of a unique arrangement with our biomass client to place two mobile chippers and a temporary feed line on site to keep the biomass operation going. This whilst damage to the NCT chipper was repaired in record time. Vessel schedules with our major chip clients were amended appropriately resulting in no loss of custom during the NCT chipper downtime. Strategic Acacia storage further allowed now accessible BayFibre capacity to chip mixed Eucalyptus to service an inbound Eucalyptus vessel. The inclement weather experienced in the early months led to NCT mills applying some flexibility to booked vehicle loads that had experienced legitimate and unavoidable delays. The ongoing and concerning collapse of state-owned service delivery encouraged NCT to place more focus on the use of NCT Tree Farming depots, using the Vryheid East depot more as a storage depot, and maximising mill storage and handling capacities. The establishment of the Cato Ridge depot in the south continued as an urgent work in progress (sadly delayed by state bureaucracy). A devastating break-in at the Vryheid District Office early in the year led to massive focus in upping the security of the office and in light of not wasting a good crisis, establishing much improved electrical supply backups and more streamlined IT connectivity. NCT Head Office invested in full solar allowing it to operate off the electrical grid. Roll-out of solar commenced to the District Offices. Fully understanding the members’ concerns regarding timber moisture measurements and the need for accuracy, intensive trials of both near infrared and magnetic resonance testing were conducted at Richards Bay. This led to the decision of NCT embracing magnetic resonance as the official moisture test platform going forward. On the financial side, continued judicious exchange-rate protocols were the norm as was critical attention to maintenance of a strategic NCT financial reserve. This reserve was to prove its immense value after the Richards Bay mill-complex fire disaster.
26 INTEGRATED ANNUAL REPORT 2024 The May 2023 heavy winds damaged the metal cladding and chipper trolleys at NCT Durban Wood Chips, leading once again to a concerted effort by NCT engineers to effect repairs in record time and with minimal downtime. Lessons learned during the early year biomass project facilitated efficiencies being engineered into the second chipper line under construction at Richards Bay Wood Chips, providing NCT with a potential leading edge in biomass manufacture. NCT top management continued to place pressure on engaging formally with top State-owned enterprise management, industry partners, lobby organisations and even the State President to effect state service improvement. The joint Acacia / E. smithii project into NCT Durban Wood Chips commencing May 2023, provided valuable and parallel market access to both Acacia and E. smithii members, without the need to shut down flow of a single commodity entirely. Mill efficiencies at all NCT mills were optimised and stock levels grew in anticipation of a busy second half year. The strike rate on Acacia supply was almost 100% against allocation further illustrating the ease of access to market created by NCT for its members. Commission was no longer charged on special market sales (non-pulpwood) leading to greater throughput of nonpulpwood via NCT. The NCT marketing team achieved a significant price increase for wood chips in Japan, despite the global pulp price decline, in which process NCT’s clients expressed appreciation for NCT’s flexibility in a highly challenging economic environment. A well-attended Annual General Meeting of NCT members highlighted the high regard that many of our members have for NCT as their marketing organisation of choice. Whilst understanding that NCT Tree Farming supply must not impede member supply, the FSC certified rendering from this quarter played an extremely important role in securing sustained and essential market access for member timber. By mid-year, our Chinese clients were postponing scheduled vessels for one to three months, given the severe decline in global pulp prices and demand, and high pulp stock inventories growing at ports. Of significance, however, was the postponement rather than cancellation of vessels. NCT interprets this as a mark of respect for NCT as an organisation and the ongoing trust relationship between NCT and client. Reading the market situation, NCT engaged with alternative markets in the search for opportunity and an Indian opportunity nearly came to fruition. Japan maintained their strong trade relationship with NCT despite the global decline. Again, this was an accolade to the trust relationship with NCT. The Road Traffic legislation pertaining to overloading seemingly spawned an illegal industry in dumped timber with timber either being dumped before or after mill entry and collected by criminals for sale back into the industry. NCT accordingly joined the FSA industry initiative to come up with innovative means to put a stop to truck skimming. NCT also provided members and suppliers with regular guidance as to how to maintain vigilance over their loads throughout the supply chain.
27 INTEGRATED ANNUAL REPORT 2024 Reduced orders particularly for Eucalyptus resulted in NCT maximising Vryheid East access and curbing NCT Tree Farming access. Allocations were done appropriately to not overstock mill storage capacities but still allow a critically needed controlled timber flow for member cash flow purposes. Given the sudden downturn in the market, NCT published a series of Member Briefs to keep members updated of the situation unfolding on the global front and providing some decision-making tools with which to plan their harvesting operations. As stock levels increased in the NCT mills NCT Tree Farming offset vehicle capacity to the mill complex to move logs internally from log stock through to the chippers to speed up space availability for continued, albeit limited, member access. Specialised NCT work groups were established, each tasked to strategise around specific identified key areas of concern and to come up with workable and innovative solutions, alternatives and options. The market decline offered breathing space for NCT to reflect on chain-of-custody concerns, determine where the true risks lie, and to implement ameliorative measures. This given that supply chain integrity had arguably become rather loose during the “high road” marketing period. The tragic and devastating fire at the NCT Richards Bay Wood Chips Complex on 29 September 2023 changed the strategic trajectory of NCT significantly. Once the firefighting efforts were complete, NCT immediately prioritised the re-build and recovery phase: • Affected staff were reassigned tasks resulting in null staff losses post fire. • A commitment made to protect as best possible the Acacia bark industry. • A series of cascading market access points created for Acacia, north to south: NTE depots, Vryheid East depot, BayFibre Acacia storage, direct supply to NCT Durban Wood Chips. • Special Markets explored for every opportunity. • Strict financial prudence on all levels • Decontamination and refurbishment of damaged mill infrastructure as far as ongoing investigative and financial constraints allowed. • Client liaison and retention of trade relations. • NCT Tree Farming supply “removed” from the supply chain to maximise member access. • Establishing a robust Eucalyptus biomass project using mobile chippers. • Engaging with members and NCT Durban Wood Chips management to facilitate less vehicle congestion and freer flow of Acacia. • Regular post-fire update briefs to members. • Regular member mill visits. • Attend to and close out the unintended environmental consequences of the fire caused ostensibly by the fire water run-off.
28 INTEGRATED ANNUAL REPORT 2024 • “Squeezing” a few more vessels into NCT Durban Wood Chips. • Apply appropriate order-allocation criteria to favour bark-linked timber growers, and growers ahead of bought-in or traded agent timber. Providing some financial relief to members the NCT Board resolved to: • Pay a Guaranteed Supply Premium (GSP) of R25 per tonne on all tonnes both Acacia and Eucalyptus, supplied within the 70% to 110% performance band (supply against GST). • Pay R25 / tonne for all C500 tonnes, both Acacia and Eucalyptus, not exceeding 500 tonnes. Post-fire conditions provided the appropriate foundation to emphasise the use of the NCT app and its source verification capabilities. This to enhance supply-chain visibility and ensure that only legitimate timber enters a constrained flow. The serious malfunction of the NCT Durban Wood Chips chipper motor-brush lifting kit early in 2024, meant that our engineering teams had to prove themselves once again as repair time record beaters, which they accomplished well. On completion of this repair a fire on the Port-owned loading gantry at Durban Port threatened NCT’s access to an inbound vessel. NCT convinced the Port authorities to allow the NCT team to effect the required repairs which was done thereby preventing a protracted outage of a critical service. NCT has demonstrated remarkable resilience and innovative service delivery throughout a challenging year. Addressing critical disruptions like the Richards Bay chipper disaster and severe weather conditions, enhancing security and operational efficiencies, and adopting new technologies such as magnetic resonance testing, NCT has consistently prioritised member benefits. The integration of mill operations, establishment of alternative markets, and proactive crisis management – such as during the devastating Richards Bay fire – underscore NCT’s commitment to service excellence. Engaging with industry and government partners, achieving market success despite global declines, and focusing on sustainable practices highlight NCT’s strategic acumen. These accomplishments reflect NCT’s resilience and the collective strength within its community, ensuring sustained value and support for its members.
29 INTEGRATED ANNUAL REPORT 2024 Employees: Our Human Capital When celebrating 75 years of linking members to markets, we need to pause and recognise that this is all thanks to a group of dedicated people committed to our members, and forestry in general. At the end of the reporting period NCT employed 702 full time employees across all its operations. Southern Farms 179 Northern Farms 195 NCT Durban Wood Chips 92 NCT Richards Bay Wood Chips 163 Depots & Loading Ops 24 District Offices 19 Head Office 70 During the reporting period we had employees retire with 30 to 40 years of service. This is a lifetime of dedication, and we recognise their efforts in making NCT a great organisation. We are pleased to see that 70% of our staff have been in our service for more than five years and that 28% have been with NCT for more than 15 years. NCT Staff – 2024 Employees Years of Service
30 INTEGRATED ANNUAL REPORT 2024 Employee Training and Development During the reporting period NCT spent R1.5 million on training of staff. NCT recovered R382 845 from the Fibre Processing and Manufacturing SETA as a skills development refund for the training NCT did in the previous reporting period. The voluntary employee turnover for NCT was 0.14% during 2023. This is an incredibly low number considering that other local forestry organisations have shown turnover figures of more than 6% and globally the voluntary turnover of staff is at 6.15%. This gives us confidence that NCT is still an employer of choice, and that we can offer an employee value proposition which is both attractive and marketrelated. It further contributes to keeping costs associated with recruitment lower than the average organisation in South Africa which needs to fill more vacancies. NCT is mindful of the global “great resignation”, and we will adjust our employee retention strategy as may be required. Voluntary Employee Turnover – NCT Group Group Training Spend Group SETA Refund
31 INTEGRATED ANNUAL REPORT 2024 Employee Demographics The Employment Equity Committee oversees all equity-related matters in NCT. The committee met four times during the reporting period during which it conducted barrier analyses and noted the workplace skills plan and annual training report. The Committee further attended training to get a better understanding of the role the Committee plays, and the complexities associated with workplace transformation. The employment equity reports were submitted and accepted for the Co-operative as well NCT Durban Wood Chips (Pty) Ltd and BayFibre (Pty) Ltd. At the end of the reporting period the male-female representation remained at 74% and 26% respectively. The overall racial distribution is closely aligned to the KZN economically active population. It should be noted that this is only the overall distribution across all occupation levels, and that there is still a need for better representation on middle and upper management. Female % 73% 74% 74% 74% 27% 26% 26% 26% 2021 2022 2023 2024 Male % 2% 6% 9% 83% African Coloured Indian White
32 INTEGRATED ANNUAL REPORT 2024 NCT remains committed to meeting transformation objectives in line with government policy and in a responsible and just manner. The overall transformation strategy has been complicated by the uncertainty of the proposed transformation targets. NCT will be in a better position to develop longer term strategy once these targets are concluded by government. Employee Wellness An inhouse employee engagement survey was conducted at the end of 2023 to collect feedback from staff about their experience of NCT, its leadership and the workplace environment. Feedback was collected via anonymous online, and paper-based questionnaires. The results for the whole of NCT are summarised in the table below. The survey showed that staff have confidence in the future for both themselves and NCT, and in the NCT strategy and culture. It also showed that staff are engaged in their teams and the role they play in NCT. NCT and my future Strategy and culture Teams and wellness My role at NCT Completely agree Mostly agree Neutral Slightly agree Mostly disagree 59% 27% 9% 3% 3% 52% 34% 10% 2% 2% 51% 35% 9% 2% 3% 52% 33% 11% 3% 2% The positive employee survey results show elevated levels of engagement which is indicative of a motivated and dedicated workforce. Engaged employees tend to be more productive, creative, and willing to go the extra mile to contribute to the company’s success. NCT will act upon the less positive survey findings by implementing targeted strategies to improve employee engagement. To improve employee wellness further, NCT provided employees with access to Discovery Healthy Company, which is Discovery’s digitally enabled, comprehensive employee assistance programme that proactively supports employees to improve overall employee wellbeing. NCT Group – Employee confidence level in:
33 INTEGRATED ANNUAL REPORT 2024 Health And Safety The devastating fire at the Richards Bay Mill was a good test for NCT’s overall health and safety preparedness. The two weeks of active firefighting proceeded without serious injuries to any person on site. This achievement can be attributed to well-trained and capable NCT employees led by experienced and dedicated managers and supervisors. Experience in terms of health and safety compliance in each of NCT’s workplaces enabled employees to work safely in an unfamiliar environment with many risks and hazards all around them. During this reporting period 12 injuries on duty were recorded which involved employees taken to hospital for treatment. None of these injuries were serious or disabling, and all employees recovered successfully. NCT is focussing on streamlining and upgrading the online safety file management of each responsible Section 16.2 appointee. The focus for the next reporting period will be on the review of risk assessments and the updating of safe work procedures. Fire training for NCT staff at Head Office
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