STCM — Steppe Cement News Story

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REG - Steppe Cement Ltd - Annual Financial Report

Steppe CementAnnouncement

26/06/2025 08:00

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RNS Number : 5312O Steppe Cement Limited 26 June 2025

26 June 2025

Steppe Cement Limited

("Steppe Cement" or the "Company")

Final Results for the Year Ended 31 December 2024

Notice of Annual General Meeting

The Board of Steppe Cement (AIM: STCM) is pleased to announce the Company's
final results for the year ended 31 December 2024, which are set out below.

Highlights:

- Resilient Operational Performance Amid Market Pressures

Steppe Cement maintained a 14.5% market share in a competitive domestic
market, with cement consumption rising to 11.9 million tonnes (2023: 11.5
million tonnes) supported by infrastructure demand. Strategic and disciplined
pricing helped defend volume despite intensified competition.

- Stable Revenue, Profit Impacted by Cost Inflation

Revenue increased to USD 84.9 million (+4% versus the prior year), but EBITDA
fell to USD 7.5 million (2023: USD 12.4 million) due to rising input costs,
especially electricity, and a one-off VAT charge. Net profit declined to USD 1
million (2023: USD 4.5 million), reflecting margin pressures and currency
effects.

- Continued Production Strength and Cost Focus

Completion of the Line 6 upgrade lifted clinker output to 1.47 million tonnes,
above budget. Despite a 42% rise in electricity tariffs, cement and clinker
cash costs were maintained at USD 31 and USD 27/tonne respectively through
operational efficiency.

The Company's forthcoming Annual General Meeting ("AGM") 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 Friday, 25 July 2025 at 4:00
p.m. (UTC+8).

The full Annual Report and the formal Notice of AGM will shortly be made
available on the Company's website at www.steppecement.com.

For further information, please contact:

Steppe Cement Limited www.steppecement.com
Javier del Ser Pérez, Chief Executive Officer Tel: +(603) 2166 0361

Strand Hanson Limited (Nominated & Financial Adviser and Broker) www.strandhanson.co.uk (http://www.strandhanson.co.uk)
James Spinney / Robert Collins / Ritchie Balmer Tel: +44 20 7409 3494

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018, as amended by virtue of the Market
Abuse (Amendment) (EU Exit) Regulations 2019.

CEO STATEMENT

2024 was a year of operational resilience and strategic focus for Steppe
Cement as we navigated a complex and evolving market environment, both in
Kazakhstan and globally.

Market and Economic Context

Kazakhstan's economy continued its recovery and modernization path in 2024,
with official inflation decreasing to 8.6%, down from 9.8% the previous year.
Population growth and government initiatives supported a steady demand for
housing and infrastructure, contributing to an increase in cement consumption
to 11.9 million tonnes (up from 11.5 million tonnes in 2023). The National
Bank of Kazakhstan started 2024 with interest rates at 15.25%, then reduced
them to 14.25% following which they were increased again to 15.25% at the end
of the year while the TONIA (Interbank rate) also increased to 14.4% from 13%
over the course of the year. Those rates have continued their climb in 2025
reaching 16.5% for the National Bank rate and 15.8% for the interbank rate in
May 2025. The gap between official inflation and interest rates makes
investment decisions for capital investment more challenging.

The domestic cement market showed heightened competition. Overall imports
declined to 0.51 million tonnes in 2024 from 0.7 million tonnes in 2023, while
exports were reduced to 0.9 million tonnes from 1.2 million tonnes. Cement
imports from Uzbekistan entered the market for the first time in many years,
applying pressure on southern regions. This trend is expected to continue as
capacity in Uzbekistan has more than doubled in the last five years and the
factories there are running at below 60% capacity. The consequent pricing
pressure and reduction in export volumes from Kazakhstan are expected to
continue in the more dynamic South Kazakhstan market (the biggest region for
cement consumption in Kazakhstan), with implications for the broader Kazakh
market.

Steppe Cement maintained a 14.5% share of the Kazakh market albeit at the
expense of maintaining lower prices.

Operational and Financial Performance

Revenue increased to Kazakh Tenge (KZT) 39.8 billion (USD 84.9 million) in
2024, 7% higher in KZT terms compared to 2023 while gross profit was USD 23.4
million, a drop of USD 1.2 million. EBITDA fell from USD 12.4 million to USD
7.5 million as a consequence of inflation in costs, mostly electricity, that
could not be passed onto clients in the form of higher selling prices, as well
as a one off charge reflecting the reversal of VAT provision (USD 1.3
million). Net profit for the year was USD 1 million compared to 4.5 million in
2023.

The ex-factory selling price per tonne was maintained at USD 42 per tonne. In
2025 we expect a modest increase in prices in KZT, while the KZT may continue
to devalue against the USD.

The balance sheet shows a foreign exchange translation loss of over USD 8.7
million. The translation reserve was mainly due to an unrealised forex loss on
an intercompany loan of approximately USD 4 million and the translation (from
KZT to USD) of the net assets of the Kazakh subsidiaries of approximately USD
4 million as a result of depreciation of the Tenge against the USD in 2024
versus 2023. Since inception the Company has accumulated a foreign translation
reserve of USD 134 million as we hold a KZT denominated asset and the KZT has
continued to devalue due to high inflation, from 130 KZT/USD in 2005, when we
listed on the London Stock Exchange, to 510 KZT/USD in 2025.

This is the most important factor contributing to the decline in total equity
to USD 57 million, compared to USD 70.7 million at end of 2023.

Nonetheless, we are in a net cash position at a group level and ended the year
with over USD 6 million in cash, demonstrating our ability to sustain
operations prudently.

Key financial and performance indicators Year ended 31 Dec 2024 Year ended 31 Dec 2023 Change (%)
Sales tonnes of cement sold (million) 1.71 1.63 +5%
Consolidated turnover (KZT million) 39,829 37,284 +7%
Consolidated turnover (USD million) 84.9 81.8 +4%
Gross Profit (USD million) 23.3 24.2 (5%)
Consolidated profit before tax (USD million) 0.1 5.4 (99%)
Consolidated profit after tax (USD million) 1.0 4.5 (78%)
Profit per share (US cents) 0.46 2.07 (78%)
Shareholders' funds (USD million) 57.1 70.7 (19%)
Average exchange rate (KZT/USD) 469 456 +3%
Exchange rate as at year end (KZT/USD) 523 454 +15%
Cash Position (USD million) 6.1 6.4 (6%)

Electricity remains cheap by international standards, but 2024 saw prices rise
42% year-on-year, driven by regulation and grid distribution tariffs. Clinker
production cost per tonne was therefore 16% higher than 2023, though
consumable, repair and maintenance costs were kept within budget. We
maintained a cash cost per tonne of clinker at USD 27 and cement at USD 31.
Real selling expenses were stable at USD8.2 per tonne. However, sales costs
for deliveries by truck were reclassified (please see note 33 for a summary of
reclassifications between 2023 and 2024) from selling expenses to other
expenses, which correspondingly increased by USD 2 million. Administrative
expenses of USD 8.6million included a one-off cancellation of USD 1.4 million
in recoverable VAT. Excluding this charge, administrative expenses increased
to USD 7.2 million from USD 7.1 million in 2023, in line with inflation and
salary adjustments.

The increased production and higher reliability of Line 6 should allow us to
decrease the costs in 2025.

Production and Investments

We completed the upgrade of the Line 6 pre-calciner, achieving clinker
production of 1.471 million tonnes in 2024, exceeding budget. Operational
reliability improved, despite some setbacks including refractory failure in
May and kiln issues in November-December.

We ended 2024 with a stock of 140,000 tonnes of clinker, to support our 2025
sales target of 1.85 million tonnes. Capex was limited at USD 1.5 million,
focused on automation, emissions systems, and reliability improvements.
Increases in production levels and reliability in Line 6 remains key to our
production strategy in the coming years.

The improved performance across both kilns during the first quarter will
support higher production. We expect clinker production to increase by 90,000
tonnes, with improved reliability and lower heat consumption.

For the full year, we forecast clinker production of 1.55 million tonnes,
above the 1.47 million tons in 2024. Cement production is expected to reach
1.85 million tonnes.

Cost efficiency has improved significantly in 2025, however, electricity costs
continue to rise, now over 22% higher year-on-year due to centralised grid
cost increases.

We anticipate a stable 2025, with limited capex (USD 2.5 million planned)
focusing on reliability and emissions compliance. We have started to work on a
multiyear strategic investment in Line 6 to increase the production to 2.2
million tonnes, if market conditions allow. In the meantime we continue to
pursue growth cautiously, balancing margin preservation with market share. The
cement market remains competitive and we expect moderate growth supported by
domestic demand.

Our average headcount remained stable. Additional subcontracting of machinery
will reduce our headcount in the future. We monitor and maintain competitive
compensation across all categories to keep our key personnal.

There is an ongoing tax dispute involving our subsidiary KarCement (as
referenced in note 32). The claim relates to asset classifications,
intercompany transactions, and tax requalifications. We consider that we have
a strong case and grounds to have this claim rejected by the courts (we have
won the hearings so far) and therefore we have not taken a provision. We
expect the case to be resolved in the summer 2025.

We managed to return USD 8.4 million to the shareholders in the form of
capital reduction. Half of that amount was related to income derived from 2023
that was paid early in 2024, while the balance was paid at the end of the
year. We intend to continue this way of returning capital to the shareholders
while we simplify the structure of the ownership of the operating companies.

Sincerely,

Javier del Ser Pérez

Chief Executive Officer

STEPPE CEMENT LTD