REG - Steppe Cement Ltd - FY2021 Accounts
13/06/2022 07:01
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RNS Number : 6047O Steppe Cement Limited 13 June 2022
13 June 2022
Steppe Cement Ltd
CEO STATEMENT
Kazakhstan has experienced a boom in construction and cement consumption
towards the end of the pandemic mostly due to government incentives. Our
factory continued to perform and we managed to initiate various internal
capital projects that will allow us to increase the production volumes in the
coming years.
The construction sector grew very fast in 2021 and the financial markets
remained fairly stable. The stability was subsequently shatered in early 2022
with internal political upheaveal starting in West and Southern Kazakshtan and
the subsequent events in Ukraine in February 2022. Although the cement market
remains strong in 2022, the uncertainty is likely to continue during the
remaining months of the year. The management will continue a conservative
financial and investment policy.
In 2021, Steppe Cement posted a net profit of USD17 million while the EBITDA
increased to USD31.5 million from USD24.2 million in 2020 mostly due to
bigger volumes and 13% higher prices in KZT. The increase of cost of
production was contained and the devaluation was limited to only 3% for the
year.
The overall domestic cement market increased by 23% to 11.6 million tonnes.
Our sales volume increased by 3%. Local sales increased by 11% while exports
decreased by 57% as we focused on the domestic market.
The increase of the market is attributable mostly to the government decision
that allowed individuals to use a portion of their pensions to buy or improve
properties or for health reason as part of the estimulus of the Covid
pandemic. It is estimated that around USD6 billion have been taken from the
pension fund system since the beginning of the program in 2020. This
represents around 20% of the USD30 billion currently in the national pension
fund.
Steppe Cement operated both lines at 87% of their current combined capacity
(which is 1.1 million tonnes for line 5 and 0.85 million tonnes for line 6).
Shareholders' funds increased to USD65.5 million from USD57.9 million after
dividend distribution to shareholders. The replacement cost of the Company's
assets remains many times higher than their current book value.
Key financials Year ended Year ended Inc/(Dec)%
31- Dec-21
31- Dec-20
Sales (tonnes of cement) 1,688,544 1,645,744 3%
Consolidated turnover (KZT million) 36,020 30,958 16%
Consolidated turnover (USD million) 84.6 74.8 13%
Consolidated profit before tax (USD million) 21.4 13.1 63%
Consolidated profit after tax (USD million) 17.0 11.1 53%
Profit per share (US cents) 7.8 5.1 53%
Shareholders' funds (USD million) 65.5 57.9 13%
Average exchange rate (KZT/USD) 426 413 (3%)
Exchange rate as at year end (KZT/USD) 432 421 (3%)
The Kazakh cement market increased by 23% in 2021 and we expect 2022 to be at
a similar level
The Kazakh cement market in 2021 increased to 11.6 million tonnes or 23% from
2020. Imports into Kazakshtan increased by 34% to 0.8 million tonnes
equivalent to 7% of the total market, as shipping from Iran was resumed.
Exports from local producers decreased by 19% to 1.6 million tonnes mostly to
Uzbekistan and Kyrgyzstan. Exports to Uzbekistan, concentrated in the Tashkent
area, will continue to decline as the country commissions new facilities.
The market demand in 2022 continues to be strong. After a very strong first
quarter we expect the market to stabilise. While we expect the construction
driven by pension withdrawals to tapper off, oil prices are at near a
historical high and government stimulus packages continue.
On the back of the market growth, Steppe Cement's average cement selling
prices increased by 13% in KZT and 10% in USD, to USD50 per tonne delivered.
Production and costs
Line 5 produced 62% of total production, or 1,050,373 tonnes of cement while
Line 6 produced 638,170. Line 5 performed at 95% capacity while Line 6 was
limited by exceptional maintenance. In 2022 we will endeavor to keep the good
performance of Line 5 and increase signicantly the production of clinker of
Line 6. We intend to achieve production of 1.75 to 1.8 million tons. In
addition to increases in clinker production, we intend to use more slag. This
will bring a reduction in CO(2) emissions and lower costs.
Cost per tonne increased by 6% in KZT in line with inflation. The average cash
production cost of clinker increased from USD19/tonne to USD20/tonne while
cement cash cost increased from USD21.5/tonne to USD23/tonne in 2020 due to
inflation in electricity and transportation.
Despite the increase of transportation costs, selling expenses, reflecting
mostly cement delivery costs, were reduced to USD7.3/tonne as we focused in
markets closer to the factory and reduced exports significantly.
Foreign exchange losses are now negligeable at USD0.2 million as we don't have
USD denominated loans. Those are atributable mostly to the time difference
between the purchase of consumable and capex materials throughout the year.
Other income of USD1.6 million reflects the write-back of receivables
previously written down and the write-back of deferred income from the
government subsidised loans.
The government has started to prepare the ground for a trading market in CO(2)
emissions. They are following the European model of allocation to factories
based on current production and eventually pushing towards reduction through
investment in alternative fuels, technology or promoting cement with lower
emisions. We will continue to upgrade our shareholders particularly if this
policy has an impact in our operations.
General and administrative expenses
General and administrative expenses increased to USD6.7 million from USD6.2
million in 2020 in line with inflation.
Labor and Covid-19
On 31 March 2022 the labour count stood at 801 from 781 in 2021 as we have
replaced certain subcontractors with our own staff. This policy will be
constantly under revision as we evaluate the quality and pricing of the
different subcontractors that become available in the region.
We didn't have any further covid deaths in 2021. All employees were offered
voluntary vaccination and 75% of them took it. This compared favorably with
the overall region and country statistics across all age groups. An employee
of our subcontractors had a fatal accident in the factory and the
subcontractor was terminated following an investigation.
Capital investment increased significantly in 2021 and the trend will continue
in 2022
Capital investment was accelerated to USD6.2 million to compensate the slow
down in investment during 2019 and 2020. Apart from the traditional
maintenance capex and key spare purchasing in the region of USD2 million per
year we managed to complete a significant number of projects and some of them
will be continuing in 2022. The main investment completed during the year 2021
were:
- Bag feeder automatisation to improve productivity
- Coal mill gas duct size change to save power and increase production
- Kiln 6 main gear drive replacement to improve reliability and reduce
power consumption
- New coal dosing system, to better control the feed to the preheater
in line 6
- Slag drying dedusting and automatisation to improve ecology and
stability
- XRF analyser for laboratory to increase clinker quality and
stability
- Acquisition of rail line connection to main train station to save
transportation costs
- Start of new separator for cement mill number 1
We have plans for further USD7 million investment in 2022 and the first half
of 2023 including:
- Complete the new separator for cement mill number 1 to increase slag
content and cement production and to reduce electricity consumption
- Start the new separator for cement mill number 2
- Crane revamping as maintenance capex
- Replacement of one reducer for cement mill as a key spare part
- Two new cement mill motors as key spare parts
- One new motor for preheater fan to reduce power consumption
- Raw mill 3 separator revamp to increase production of line 6
- Modifications to the line 6 preheater to increase production
- Software upgrades to the control system to prevent obsolescency
- Online monitoring of main stack emissions to improve ecology
- Upgraded bag filters to improve ecology
We have obtained additional subsidised loans of USD4.5 million in KZT at 6%
and we will use them in 2022 mostly for the cement mill separators.
Effects of application of IFRS 16 in the accounts
The application of IFRS 16 affect the accounting the rental of wagons that
Steppe Cement does not own. Some wagons were rented for three years and the
last year is 2022. The accounting standard requires to account for a new
non-current asset called right-of-use assets evaluated in 2021 at USD1.7
million vs USD3.5 million in 2020 (the lease contracts have already been
accounted for two years). The amount will be nearly eliminated in 2022 unless
the rental contracts are renewed in a multi year basis and it may increase
again depending on the renewal terms. The corresponding entries in the
liabilities are called lease liabilities of USD2 million in 2021 vs
USD3.9million in 2020.
The selling expenses have been reduced to USD12.3 million while the
corresponding lease finance cost has been calculated at USD0.4 million
increasing the financial expenses but less than in 2020 when they were
increased by USD0.6 million.
Without IFRS 16 accounting, the finance expenses would have been USD0.7
million and the selling expenses USD13.6 million. Consequently, the profit
before taxation has been increased by USD1million.
The EBITDA increased due to the recognition of the depreciation of right of
use assets. Without this depreciation, the EBITDA for 2021 would have been
USD29.8 million.
Financial position: New debt has been limited to subsidied credit lines as
interest rates in Kazakhstan have increased to 14% in 2022
During the year, our total loans outstanding were reduced from USD7 million to
USD5.6 million, the majority of the loans have very favourable subsidized
rates in KZT. The company ended the year with a net cash position of USD4.6
million, excluding IFRS 16 leases.
Long-term loans were reduced from USD2.4 million to USD1.9 million mostly due
to repayment of subsidized loans.
Our short term loans and current part of the long term loans decreased from
USD4.4 million in 2020 to USD3.6 million in 2021, while the cash position at
the end of the year increased from USD8.2 million to USD10.1 million.
In 2021, finance costs decreased to USD1.09 million from USD1.25 million in
2020. Without operating lease interest of USD0.4 million under IFRS 16, the
finance cost was USD0.7 million of which USD0.4 million was interest on
loans.
The KZT had a stable year against the USD, it fluctuated between 417 and 437
KZT/USD suffering only a 3% devaluation against the USD year on year. This is
quite a contrast with the situation experienced in 2020 and the beginning of
2022 with significant political instability in Kazakhstan in January and in
the CIS region from February. The average rate for the year was 426.
We maintain short term credit lines available as stand by:
- KZT 1 billion short term in a government subsidized program in KZT
at 6% p.a.
- KZT 2 billion from Halyk Bank at 6% p.a. in USD or 14% in KZT.
- KZT 0.9 billion from Altyn Bank at 14% p.a. in KZT.
Depreciation of property, plant and equipment increased slightly to USD7.1
million in 2021 due to the increased capex.
Steppe Cement's effective income tax rate was in line with the statutory rate
of 20% in Kazakhstan.
Javier del Ser Perez
Chief Executive Officer
Annual Report and Annual General Meeting
Steppe Cement will release its Annual Report 2021 on its web site at
www.steppecement.com during the week commencing 13 June 2022.
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, 13 July 2022 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 6800
STEPPE CEMENT LTD
(Incorporated in Labuan FT, Malaysia under the Labuan Companies Act, 1990)
STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group The Company
2021 2020 2021 2020
USD USD USD USD
Revenue 84,578,739 74,774,297 1,469,264 10,796,326
Cost of sales (44,834,182) (42,439,633) - -
Gross profit 39,744,557 32,334,664 1,469,264 10,796,326
Selling expenses (12,264,221) (12,966,168) - -
General and administrative
expenses (6,761,722) (6,225,928) (324,207) (311,871)
Interest income 401,619 199,332 - 934
Finance costs (1,090,949) (1,249,051) - -
Net foreign exchange loss (227,951) (808,977) (825) (3,981)
Other income, net 1,616,216 1,817,314 112,940 82,507
Profit before income tax 21,417,549 13,101,186 1,257,172 10,563,915
Income tax expense (4,352,182) (1,983,727) - -
Profit for the year 17,065,367 11,117,459 1,257,172 10,563,915
Attributable to:
Shareholders of the Company 17,065,367 11,117,459 1,257,172 10,563,915
Earnings per share:
Basic and diluted (cents) 7.8 5.1
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group The Company
2021 2020 2021 2020
USD USD USD USD
Profit for the year 17,065,367 11,117,459 1,257,172 10,563,915
Other comprehensive (loss)/income:
Items that will not be reclassified subsequently to profit or loss:
Revaluation gain on property, plant and equipment, net of tax - 760,291 - -
Gain on recovery of impaired assets 15,373 - - -
Increase in provision for site restoration (23,611) (74,671) - -
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from translation of foreign operations (1,923,738) (5,228,388) - -
Total other comprehensive loss (1,931,976) (4,542,768) - -
Total comprehensive income for the year 15,133,391 6,574,691 1,257,172 10,563,915
Attributable to:
Shareholders of the Company 15,133,391 6,574,691 1,257,172 10,563,915
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2021
The Group The Company
2021 2020 2021 2020
USD USD USD USD
Assets
Non-Current Assets:
Property, plant and equipment 48,437,801 48,856,410 - -
Right-of-use assets 1,700,510 3,483,259 - -
Investment in subsidiary companies - - 36,199,599 36,294,519
Loan to subsidiary company - - 30,080,000 30,110,000
Advances - - - -
Other assets 155,132 1,900,656 - -
Total Non-Current Assets 50,293,443 54,240,325 66,279,599 66,404,519
Current Assets
Inventories 16,023,541 12,367,557 - -
Trade and other receivables 1,751,720 1,910,839 1,724,364 6,775,995
Other assets 2,258,501 726,517 - -
Income tax recoverable 911,395 1,435,100 - -
Loans and advances to subsidiary companies - - 49,536 39,712
Advances and prepaid expenses 5,233,894 2,374,094 4,971 5,848
Cash and cash equivalents 10,136,022 8,213,680 614,225 1,352,950
Total Current Assets 36,315,073 27,027,787 2,393,096 8,174,505
Total Assets 86,608,516 81,268,112 68,672,695 74,579,024
The Group The Company
2021 2020 2021 2020
USD USD USD USD
Equity and Liabilities
Capital and Reserves
Share capital 73,760,924 73,760,924 73,760,924 73,760,924
Revaluation reserve 2,068,114 2,370,706 - -
Translation reserve (120,438,082) (118,514,344) - -
Retained earnings/(Accumulated losses) 110,190,323 100,325,002 (5,605,876) 631,352
Total Equity 65,581,279 57,942,288 68,155,048 74,392,276
Non-Current Liabilities
Borrowings 1,941,383 2,368,296 - -
Lease liabilities 8,571 2,076,668 - -
Deferred taxes 4,318,652 4,559,927 - -
Deferred income 1,588,098 1,492,432 - -
Provision for site restoration 180,314 150,878 - -
Total Non-Current Liabilities 8,037,018 10,648,201 - -
Current liabilities
Trade and other payables 5,061,705 4,075,078 - -
Accrued and other liabilities 1,552,778 1,531,039 227,897 186,748
Amount owing to a subsidiary company - - 289,750 -
Borrowings 3,614,801 4,429,053 - -
Lease liabilities 2,071,879 1,830,755 - -
Deferred income 103,720 106,420 - -
Taxes payable 639,336 705,278 - -
Total Current Liabilities 12,990,219 12,677,623 517,647 186,748
Total Liabilities 21,027,237 23,325,824 517,647 186,748
Total Equity and Liabilities 86,608,516 81,268,112 68,672,695 74,579,024
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Distributable
The Group Share capital Revaluation reserve Translation reserve Retained earnings 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 - - - (7,494,400) (7,494,400)
Transfer on revaluation reserve relating to property, plant and equipment - (294,354) - 294,354 -
through use
As of 31 December 2021 73,760,924 2,068,114 (120,438,082) 110,190,323 65,581,279
Distributable
The Group Share capital Revaluation reserve Translation reserve Retained earnings Net
USD USD USD USD USD
As of 1 January 2020 73,760,924 2,015,943 (113,285,956) 100,386,012 62,876,923
Profit for the year - - - 11,117,459 11,117,459
Other comprehensive income/(loss) - 685,620 (5,228,388) - (4,542,768)
Total comprehensive income for the year - 685,620 (5,228,388) 11,117,459 6,574,691
Other transactions impacting equity:
Dividends paid - - - (11,509,326) (11,509,326)
Transfer on revaluation reserve relating to property, plant and equipment - (330,857) - 330,857 -
through use
As of 31 December 2020 73,760,924 2,370,706 (118,514,344) 100,325,002 57,942,288
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group The Company
2021 2020 2021 2020
USD USD USD USD
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Profit before income tax 21,417,549 13,101,186 1,257,172 10,563,915
Adjustments for:
Depreciation of property, plant and equipment 7,039,116 6,873,876 - -
Depreciation of right-of-use 1,716,748 2,116,952 - -
assets
Dividend income - - - (9,441,251)
Loss on disposal of property, plant and equipment - 26,546 - -
Interest income (401,619) (199,332) (1,469,264) (1,356,009)
Finance costs 1,090,949 1,249,051 - -
Net unrealised foreign exchange loss 227,951 702,427 - -
Provision for obsolete inventories 142,387 100,475 - -
Credit loss allowance for doubtful receivables 594,901 813,812 - -
Allowance for advances paid to third parties 11,676 69,152 - -
Reversal of provision for obsolete inventories - (170,345) - -
Deferred income (105,947) (108,310) - -
Bad debts recovered (769,654) - - -
Operating profit/(loss) before working capital changes 30,964,057 24,575,490 (212,092) (233,345)
Movement in working capital:
(Increase)/Decrease in:
Inventories (6,054,197) (3,817,367) - -
Trade and other receivables 302,194 2,578,712 (90,000) -
Loans and advances to subsidiary companies - - 20,176 (76,385)
Advances, prepaid expenses and other assets (2,820,912) 487,543 877 10,096
(Decrease)/Increase in:
Trade and other payables 659,548 (1,538,598) - -
Accrued and other liabilities 54,890 449,819 41,149 30,925
Cash Generated From/(Used In) Operations 23,105,490 22,735,599 (239,890) (268,709)
Income tax paid (3,985,384) (2,925,488) - -
Net Cash From/(Used In) Operating Activities 19,120,106 19,810,111 (239,890) (268,709)
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Purchase of property, plant and equipment (6,215,744) (3,108,678) - -
Contribution to site restoration fund (18,414) (33,825) - -
Proceeds from disposal of property, plant and equipment 118,234 134,630 - -
Dividends received from subsidiary - - 6,610,895 11,509,326
Interest received 401,619 199,332 - 1,359,861
Net Cash (Used In)/From Investing Activities (5,714,305) (2,808,541) 6,610,895 12,869,187
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
Advance from a subsidiary company - - 289,750 -
Return of net investment from a subsidiary company - - 94,920 -
Proceeds from bank borrowings 5,502,753 7,414,558 - -
Repayment of bank borrowings (6,345,979) (9,657,053) - -
Repayment of lease liabilities (1,805,362) (2,014,790) - -
Dividends paid (7,494,400) (11,509,326) (7,494,400) (11,509,326)
Interest paid (1,081,123) (1,240,129) - -
Net Cash Used In Financing Activities (11,224,111) (17,006,740) (7,109,730) (11,509,326)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,181,690 (5,170) (738,725) 1,091,152
EEFFECTS OF FOREIGN EXCHANGE RATE CHANGES (259,348) (795,510) - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,213,680 9,014,360 1,352,950 261,798
CASH AND CASH EQUIVALENTS AT END OF YEAR 10,136,022 8,213,680 614,225 1,352,950
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