REG - Steppe Cement Ltd - Annual Financial Report
09/06/2023 07:00
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RNS Number : 2006C Steppe Cement Limited 09 June 2023
9 June 2023
Steppe Cement Ltd
CEO STATEMENT
Overall, the cement market in Kazakhstan remained stable in 2022 compared with
the historical high achieved during 2021 and on a per capital level, the
consumption for the 2022 year of 630 kg per capita is consistent with that
which should be expected based on actual GDP and the anticipated GDP
growth rate.
The Kazak cement market remained stable at 11.6 million tonnes, with sales
volume by Steppe Cement decreasing by 1% year on year, due mostly to
logistical problems in the railway system in the third and fourth quarters.
The blend of this was that domesticl sales increased by 4% and exports reduced
to virtually zero.
Imports into Kazakshtan decreased by 25% to 0.6 million tonnes, being
equivalent to 5% of the total market, with these coming mostly from Russia.
Exports from local producers decreased again by 33% to 1.1 million tonnes,
with these being mostly to Uzbekistan and Kyrgystan as new capacity has been
commisioned in Uzbekistan. Exports remain concentrated to the Tashkent and
Bishkek areas.
The market demand in 2023 has shown a decrease in the first quarter due to
weather conditions, logistics and persistant high inflation and we expect the
market to improve in the coming quarters. High interest rates will slow down
the mortgage market but the economy remains strong driven by commodities.
During 2021 and 2022 the government implemented incentives which helped the
construction industry, particularly the ability to withdraw part of the
individual pension funds and use them for real estate acquisitions. The
development of the main cities continues, and the rate of urbanization is
estimated to grow from the current 59% to 69% in the next 25 years. The banks
are actively promoting long term mortgages and the program has been very
successful.
The political unrest at the beginning of 2022 as well as the conflict in
Ukraine have brought higher inflation and more populist policies. After a
phase of salary increases to compensate for inflation, the government seems to
be committed to lowering inflation.
In 2022, Steppe Cement posted a net profit of USD17.9 million while EBITDA
remained stable at USD31 million. Higher pricing compensated for the increase
in costs and slightly lower volumes. Steppe Cement's average cement selling
prices increased by 12% in KZT and 4% in USD, to USD52 per tonne delivered.
Steppe Cement operated both lines at 86% of their current combined capacity
(which is 1.1 million tonnes for line 5 and 0.85 million tonnes for line 6).
Shareholders' funds remained stable at USD65.1 million after the dividend
distribution USD12.6 million to shareholders (5 UK pence per share).
Key financials Year ended Year ended Inc/(Dec)%
31- Dec-22
31- Dec-21
Sales (tonnes of cement) 1,670,174 1,688,544 (1%)
Consolidated turnover (KZT million) 40,023 36,020 11%
Consolidated turnover (USD million) 86.7 84.6 3%
Consolidated profit before tax (USD million) 21.7 21.4 1%
Consolidated profit after tax (USD million) 17.9 17.1 5%
Profit per share (US cents) 8.2 7.8 5%
Shareholders' funds (USD million) 65.1 65.6 (1%)
Average exchange rate (KZT/USD) 461 426 (8%)
Exchange rate as at year end (KZT/USD) 462 434 (6%)
Production and costs
Line 5 produced 60% 995,933 tonnes of cement while Line 6 produced 663,955
tonnes.
Line 5 performed at 90% capacity as it was limited by roller maintenance while
Line 6 was limited by reliability. In 2023 we expect higher production from
Line 6 and similar in Line 5.
Cost per tonne increased by 20% in KZT at slightly higher pace than inflation.
The average cash production cost of clinker increased from USD20/tonne to
USD23/tonne while cement cash cost increased from USD23/tonne to USD26/tonne
in 2022. The cost of production increased by 20% in local currency in line
with inflation of 18.8% year on year. The devaluation of the currency was
limited to 8%.
Despite the increase of transportation costs, selling expenses, reflecting
mostly cement delivery costs, were reduced to USD6.6/tonne as we focused in
markets closer to the factory.
General and administrative expenses we reduced to USD6.4 million from USD6.7
million in 2021 due to cost control measures.
On 31 March 2023 the company had 799 employees a similar level to 2022.
In 2022, finance costs remained stable at USD 1 million. Without operating
lease interest of USD0.2 million under IFRS 16, the finance cost was USD0.8
million, mostly interest on loans.
Other income of USD2.4 million reflects the write-back of receivables
previously written down and the write-back of deferred income from the
government subsidied loans.
The factory receives an allocation CO(2) emissions from the government and
does not trade them as they are at a level similar to historical production.
There is a very limited market for alternative fuels and the increase in
additives in the cement is not yet accepted beyond certain levels.
Capital investment increased significantly in 2022 but it will be limited
going forward
Capital investment was accelerated to USD10 million to complete the work
started in 2021 and to compensate for the slow down in investment during 2019
and 2020 due to COVID19. Apart from the traditional maintenance capex and
purchase of key spares for USD3 million per year, we managed to complete a
significant number of projects in 2022:
- New FL Smith close circuit separator for cement mill number 1 with
an investment of USD3.6 million. The mill capacity was increased by 30%, slag
content can be increased to 25%, power consumption has been reduced and the
quality and stability has improved
- A similar separator for cement mill number 2,. The project was
started and USD1.5 million was spent in 2022. Commissioning will be done
between the winter 2023 and spring 2024.
- Replacement of one reducer for one cement mill at a cost of USD 0.9
million
- Bucket crane revamping to support summer sales USD 0.3 million
- Online monitoring of main stack emissions to comply with ecological
requirements USD0.15 million
- Coal dosing system to improve feeding reliability
- High tension drive motors to maintain key spares
- Additional gas analyzer for kiln system to maintain clinker
stability
Those projects were financed by USD4.3 million in subsidized loans and USD 3.5
million from internal cash flow.
We have plans for a further USD4 million investment in 2023 and the first
quarter of 2024 including:
- Complete the new separator for cement mill 2 for USD 2 million
- Preheater raiser duct extension by 24 meters to improve the
preheater calcination in line 6
- Software upgrades to the ABB control system at a cost of USD0.7
million to allow further automatisation of the factory and prevent
obsolescence
- Engineering of raw mill 3 separator conversion to dynamic separator
to support the increase in production of line 6 by 10% when completed
- Upgrades to bag filters to improve maintenance and future enviroment
requirements
The government has announced that the subsidized credit lines will be limited
as the focus shifts to the control of inflation. We will try to complete the
remaining capex planned with our cash flow to avoid borrowings at commercial
KZT rates as much as possible.
Financial position: New debt will be limited as interest rates in Kazakhstan
have increased to 20% per annum in 2023
During the year, our total loans outstanding were stable at USD6.7 million
versus USD5.6 million in 2021. The loans had good subsidized rates in KZT but
the renewal will be most likely made at near commercial rates and the company
has an incentive to reduce the borrowing in 2023. The company ended the year
with net debt of USD2.6 million, excluding IFRS 16 leases.
Long-term loans were increased from USD3.2million to USD5.4million while short
term loans were reduced from USD 2.3 to USD 1.3million.
Despite the politically unstable environment in Kazakhstan at the beginning of
the year, the unpredictable situation in the region and the surge in
inflation, the KZT had only an 8% devaluation against the USD and an average
exchange rate of 461 vs 426 in 2021.
We maintain short term credit lines available as stand by:
- KZT 1 billion short term in a government subsidized program in KZT
at 6% per annum, but it will difficult to renew
- KZT 2 billion from Halyk Bank at 6% p.a. in USD or 20% in KZT.
Depreciation of property, plant and equipment decreased to USD6.1 million in
2022 due to devaluation
Steppe Cement's effective income tax rate was 20% consistent with last year.
Javier del Ser Perez
Chief Executive Officer
Annual Report 2022 and Annual General Meeting
Steppe Cement will release its Annual Report 2022 on its web site at
www.steppecement.com during the week commencing 20th June 2023. The Company's
Annual General Meeting is expected to take place at its Malaysian Office at
Suite 10.1, 10th Floor, West Wing, Rohas Perkasa, 8 Jalan Perak, Kuala Lumpur
Malaysia on Wednesday, 12th July 2023 at 4 p.m.
Steppe Cement's AIM nominated adviser and broker is RFC Ambrian Limited.
Nominated Adviser contact: Stephen Allen or Andrew Thomson on +61 8 9480 2500.
Broker contact: Charlie Cryer at +44 20 3440 680
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group The Company
Note 2022 2021 2022 2021
USD USD USD USD
Revenue 4 86,732,039 84,578,739 14,641,442 1,469,264
Cost of sales (49,107,243) (44,834,182) - -
Gross profit 37,624,796 39,744,557 14,641,442 1,469,264
Selling expenses (10,997,920) (12,264,221) - -
General and
administrative
expenses (6,393,080) (6,761,722) (369,812) (324,207)
Interest income 573,913 401,619 - -
Finance costs 5 (1,048,888) (1,090,949) - -
Net foreign exchange 6
loss (435,204) (227,951) (330,675) (825)
Other income, net 2,367,459 1,616,216 - 112,940
Profit before income tax 7 21,691,076 21,417,549 13,940,955 1,257,172
Income tax expense 8 (3,807,706) (4,352,182) - -
Profit for the year 17,883,370 17,065,367 13,940,955 1,257,172
Attributable to
shareholders of the
Company 17,883,370 17,065,367 13,940,955 1,257,172
Earnings per share:
Basic and diluted (cents) 9 8.2 7.8
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group The Company
2022 2021 2022 2021
USD USD USD USD
Profit for the year 17,883,370 17,065,367 13,940,955 1,257,172
Other comprehensive
(loss)/income:
Items that may not be
reclassified subsequently to
profit or loss:
Revaluation gain on property,
plant and equipment, net of
tax - - - -
Gain on recovery of impaired
assets - 15,373 - -
Increase in provision for
site restoration - (23,611) - -
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences
arising from translation of
foreign operations (5,829,119) (1,923,738) - -
Total other comprehensive
loss (5,829,119) (1,931,976) - -
Total comprehensive
income for the year 12,054,251 15,133,391 13,940,955 1,257,172
Attributable to the
shareholders of the
Company 12,054,251 15,133,391 13,940,955 1,257,172
.
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2022
The Group The Company
Note 2022 2021 2022 2021
USD USD USD USD
Assets
Non-Current Assets
Property, plant and
equipment 10 49,361,749 48,437,801 - -
Right-of-use assets 11 5,525 1,700,510 - -
Investment in subsidiary
companies 12 - - 36,199,599 36,199,599
Loans to subsidiary
company 27 - - 30,050,000 30,080,000
Other assets 13 1,530,916 155,132 - -
Total Non-Current
Assets 50,898,190 50,293,443 66,249,599 66,279,599
Current Assets
Inventories 14 20,646,156 16,023,541 - -
Trade and other receivables 15 2,045,004 1,751,720 2,372,114 1,724,364
Other assets 13 1,081,719 2,258,501 - -
Income tax recoverable 602,734 911,395 - -
Loans and advances to
subsidiary companies 27 - - 60,352 49,536
Advances and prepaid
expenses 16 8,577,714 5,233,894 7,305 4,971
Cash and cash
equivalents 17 4,143,953 10,136,022 1,239,827 614,225
Total Current Assets 37,097,280 36,315,073 3,679,598 2,393,096
Total Assets 87,995,470 86,608,516 69,929,197 68,672,695
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2022 (CONTINUED)
The Group The Company
Note 2022 2021 2022 2021
USD USD USD USD
Equity and Liabilities
Capital and Reserves
Share capital 18 73,760,924 73,760,924 73,760,924 73,760,924
Revaluation reserve 19 1,795,426 2,068,114 - -
Translation reserve 19 (126,267,201) (120,438,082) - -
Retained earnings/
(Accumulated losses) 19 115,791,111 110,190,323 (4,220,191) (5,605,876)
Net Equity 65,080,260 65,581,279 69,540,733 68,155,048
Non-Current Liabilities
Borrowings 20 3,913,689 1,941,383 - -
Lease liabilities 21 - 8,571 - -
Deferred taxes 22 3,266,775 4,318,652 - -
Deferred income 23 2,572,552 1,588,098 - -
Provision for site
restoration 178,420 180,314 - -
Total Non-Current
Liabilities 9,931,436 8,037,018 - -
Current Liabilities
Trade and other payables 24 7,348,587 5,061,705 - -
Accrued and other
liabilities 25 2,250,689 1,552,778 143,808 227,897
Amount owing to a
subsidiary company 27 - - 244,656 289,750
Borrowings 20 2,814,525 3,614,801 - -
Lease liabilities 21 58,960 2,017,879 - -
Deferred income 23 140,259 103,720 - -
Taxes payable 26 370,754 639,336 - -
Total Current Liabilities 12,983,774 12,990,219 388,464 517,647
Total Liabilities 22,915,210 21,027,237 388,464 517,647
Total Equity and
Liabilities 87,995,470 86,608,516 69,929,197 68,672,695
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Non-distributable
Distributable
Share Revaluation reserve Translation reserve Retained earnings
The Group capital Net*
USD USD USD USD USD
As of 1 January 2022 73,760,924 2,068,114 (120,438,082) 110,190,323 65,581,279
Profit for the year - - - 17,883,370 17,883,370
Other comprehensive loss - - (5,829,119) - (5,829,119)
Total comprehensive income for the year - - (5,829,119) 17,883,370 12,054,251
Other transactions impacting equity:
Dividends paid (Note 19) - - - (12,555,270) (12,555,270)
Transfer of revaluation reserve relating to
property, plant and equipment through use - (272,688) - 272,688 -
As of 31 December 2022 73,760,924 1,795,426 (126,267,201) 115,791,111 65,080,260
* Attributable to the shareholders of the Company
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 (CONTINUED)
Non-distributable
Distributable
Share Revaluation reserve Translation reserve Retained earnings
The Group capital Net*
USD USD USD USD USD
As of 1 January 2021 73,760,924 2,370,706 (118,514,344) 100,325,002 57,942,288
Profit for the year - - - 17,065,367 17,065,367
Other comprehensive loss - (8,238) (1,923,738) - (1,931,976)
Total comprehensive income for the year - (8,238) (1,923,738) 17,065,367 15,133,391
Other transactions impacting equity:
Dividends paid (Note 19) - - - (7,494,400) (7,494,400)
Transfer of revaluation reserve relating to
property, plant and equipment through use - (294,354) - 294,354 -
As of 31 December 2021 73,760,924 2,068,114 (120,438,082) 110,190,323 65,581,279
* Attributable to the shareholders of the Company
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
(Accumulated
losses)/
Distributable
Share Retained earnings
The Company Capital Net
USD USD USD
As of 1 January 2022 73,760,924 (5,605,876) 68,155,048
Total comprehensive income
for the year - 13,940,955 13,940,955
Dividends paid (Note 19) - (12,555,270) (12,555,270)
As of 31 December 2022 73,760,924 (4,220,191) 69,540,733
As of 1 January 2021 73,760,924 631,352 74,392,276
Total comprehensive income
for the year - 1,257,172 1,257,172
Dividends paid (Note 19) - (7,494,400) (7,494,400)
As of 31 December 2021 73,760,924 (5,605,876) 68,155,048
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group The Company
2022 2021 2022 2021
USD USD USD USD
CASH FLOWS FROM/
(USED IN) OPERATING
ACTIVITIES
Profit before income tax 21,691,076 21,417,549 13,940,955 1,257,172
Adjustments for:
Depreciation of property,
plant and equipment 6,135,236 7,039,116 - -
Depreciation of right-of-use
assets 1,587,293 1,716,748 - -
Dividend income - - (13,309,140) -
Gain on disposal of property, plant
and equipment (27,725) - - -
Interest income (573,913) (401,619) (1,332,302) (1,469,264)
Finance costs 1,048,888 1,090,949 - -
Net unrealised foreign exchange
loss 538,663 227,951 - -
Provision for obsolete
inventories 167,628 142,387 - -
Credit loss allowance for
doubtful receivables 174,650 594,901 - -
Allowance for advances paid
to third parties 157,723 11,676 - -
Deferred income (140,259) (105,947) - -
Reversal of allowance for trade receivable no longer required
(172,464) (769,654) - -
Operating cash flows before
movements in working capital 30,586,796 30,964,057 (700,487) (212,092)
Movement in working capital:
(Increase)/Decrease in:
Inventories (8,501,824) (6,054,197) - -
Trade and other receivables (427,760) 302,194 (865,000) (90,000)
Loans and advances to
subsidiary companies - - 19,184 20,176
Advances, prepaid expenses and
other assets (5,608,461) (2,820,912) (2,334) 877
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022 (CONTINUED)
The Group The Company
2022 2021 2022 2021
USD USD USD USD
Increase/(Decrease) in:
Trade and other payables 2,097,417 659,458 - -
Accrued and other liabilities 786,440 54,890 (84,089) 41,149
Cash Generated From/(Used In)
Operations 18,932,608 23,105,490 (1,632,726) (239,890)
Income tax paid (4,599,594) (3,985,384) - -
Net Cash From/(Used In) Operating
Activities 14,333,014 19,120,106 (1,632,726) (239,890)
CASH FLOWS (USED IN)/ FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (7,768,695) (6,215,744) - -
Contribution to site restoration
fund (334) (18,414) - -
Proceeds from disposal of
property, plant and equipment 85,599 118,234 - -
Dividends received from
subsidiary - - 13,309,140 6,610,895
Interest received 573,913 401,619 1,549,552 -
Net Cash (Used In)/From
Investing Activities (7,109,517) (5,714,305) 14,858,692 6,610,895
CASH FLOWS FROM/
(USED IN) FINANCING
ACTIVITIES
(Repayment to)/Advance from a subsidiary company
- - (45,094) 289,750
Return of net investment from a
subsidiary company - - - 94,920
Proceeds from borrowings* 7,299,722 5,502,753 - -
Repayment of borrowings* (4,472,018) (6,345,979) - -
Repayment of lease liabilities* (1,838,949) (1,805,362) - -
Dividends paid (12,555,270) (7,494,400) (12,555,270) (7,494,400)
Interest paid (1,038,335) (1,081,123) - -
Net Cash Used In Financing
Activities (12,604,850) (11,224,111) (12,600,364) (7,109,730)
Company No. LL04433
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia under Labuan Companies Act, 1990)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022 (CONTINUED)
The Group The Company
2022 2021 2022 2021
USD USD USD USD
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS (5,381,353) 2,181,690 625,602 (738,725)
EFFECTS OF FOREIGN
EXCHANGE RATE
CHANGES (610,716) (259,348) - -
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR 10,136,022 8,213,680 614,225 1,352,950
CASH AND CASH
EQUIVALENTS AT
END OF YEAR (Note 17) 4,143,953 10,136,022 1,239,827 614,225
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