Download Annual Report 2006 - Foskor

however, due to the igneous nature of the oresource, compared to sedimentary types of rock,the plant remains in the top 10th percentile interms of cost of production of rock phosphateproducers in the world. The challenge is tofind niche, high value markets for this superiorquality rock phosphate.The investment of some four years ago ofexpanding the installed capacity at RichardsBay to circa 750 000 tons of P 2O 5, is now,with the assistance of CFL, starting to payoff. Production levels of phosphoric acid wererestricted by unforeseen shutdowns as well aslogistical constraints in getting the phosphaterock from Phalaborwa to Richards Bay. Year onyear the production cost per ton of phosphoricacid was well controlled, partly due to thevolume effect, but was negatively impactedby, predominantly, increased maintenance.The Foskor Group is now looking forward toextracting maximum value from the expansionand capturing market share by producing atcapacity within the near future.The increased capacity utilisation of theRichards Bay plant culminated in an increasein phosphoric acid sales into India and granularfertiliser sales locally.One local converter of phosphate rock has shutdown its operation, which led to a reduction ofphosphate rock sales into the domestic market.As a further result of the increased rockrequirements of the Richards Bay plant, exportsto Japan were limited.Trading conditions into India will remaintight, specifically as a result of difficult pricenegotiations and the Indian government’sproposed amended pricing policies.The Group expects that sales tonnages andprices of phosphoric acid, granular fertiliserand phosphate rock will continue to increase inthe future leading to improved profitability.The objective is to further diversify the marketsand become less reliant on the Indian consumergroups.The market for the procurement of strategicraw materials remained at high levels andwill continue to be a key driver for the Group.Sulphur and ammonia markets are watchedclosely in order to ensure the best deals forFoskor. The increased focus and participationof our suppliers are beginning to pay off and thepositive impact on production costs can be seenin the operations.Foskor, as a strategic investment of the IDC,has an obligation to the government to be afrontrunner and role model with respect to thepromotion of Broad Based Black EconomicEmpowerment (BBBEE). Direct purchasesfrom BBBEE suppliers have reached 40% ofdiscretionary procurement for the whole Group,which placed orders to the value of R270mwith SMMEs (small, medium and microenterprises) and true black empowered andowned companies. This will continue to increasethrough the focused efforts and dedicationof Foskor management, enabling the realempowerment of the black community into themainstream economy of our country.The Foskor Human Capital is and will remainof strategic and vital importance to the successof the Group.The Foskor Group has adopted and implementeda formal Employment Equity Policyrecognising the importance of changing thecompany’s demographic profile, in line with thedemographics of the areas in which it operates, tocreate a diverse and skilled employee workforce.These targets have been incorporated into theperformance management targets of top andsenior management. Attracting and retainingHistorically Disadvantaged South Africans(HDSAs) to Phalaborwa continues to be a majorchallenge. The national shortage of artisansis also now having an impact on the Group’sability to attract and retain skilled artisans andthis is one area where the achievement of the settargets is proving extremely challenging. Labourrelations throughout the Group continued toflourish without any industrial action takingplace during the period under review.Foskor’s dual strategic approach of dealingwith the impacts and seriousness of the HIV/AIDS pandemic includes both preventativeprogrammes, such as education and awareness,and support programmes, which include theprovision of anti-retroviral treatment andnutritional supplements. These efforts towardscombating this challenge and managing theimpacts thereof in the workplace will remainhigh on the corporate agenda for the Group.A revised health care policy, with a changein medical aid service provider for the lowerincome groups, was approved and implementedduring the year under review. All employees nowhave the option to belong to one of the medicalaid schemes utilised by the company.In conclusion, I would like to acknowledge theefforts of the executive team, employees andcontractors and express the Board’s sincerethanks and appreciation for their commitmentand achievements during the year. At the sametime I wish to assure them of the continuedsupport of the Board for their efforts, becausewe all believe in the sustainable future of Foskor.I would also like to express my appreciation tomy colleagues on the Board for their wisdom andcounsel. As with 2005, this certainly has beenanother challenging year but I look forward withconfidence to improved performance during thenext financial year.5