TIDMSTCM
RNS Number : 5054P
Steppe Cement Limited
10 June 2020
CEO STATEMENT
In 2019, Steppe Cement posted a net profit of USD 9.7 million.
Steppe Cement's EBITDA increased to USD 23.9 million from USD 21.4
million in 2018 as higher prices in KZT, lower cost of production
and the implementation of IFRS 16 were balanced by a devaluation of
11%.
The overall domestic cement market increased by 2% to 8.9
million tonnes, while our sales volume remained flat. Our local
sales increased by 4% while exports decreased by 29% due to
increased competition from new factories and the strength of the
KZT against the Uzbek Som in the second half of the year.
In 2019 our cost of production per tonne in KZT increased by
10%, higher than inflation of 5% due to coal and transportation
pricing.
Steppe Cement operated both lines at 88% 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 USD62.9 million from USD61.0
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-19 31- Dec-18
Sales (tonnes of cement) 1,715,761 1,720,629 0
------------ ------------ -----------
Consolidated turnover (KZT million) 30,594 28,342 8%
------------ ------------ -----------
Consolidated turnover (USD million) 79.9 82.2 (3%)
------------ ------------ -----------
Consolidated profit before tax
(USD million) 12.5 10.8 16%
------------ ------------ -----------
Consolidated profit after tax
(USD million) 9.7 9.1 7%
------------ ------------ -----------
Profit per share (US cents) 4.4 4.1
------------ ------------ -----------
Shareholders' funds (USD million) 62.9 61.0 3%
------------ ------------ -----------
Average exchange rate (KZT/USD) 383 345 (11%)
------------ ------------ -----------
Exchange rate as at year end (KZT/USD) 381 384 1%
------------ ------------ -----------
The Kazakh cement market increased by 2% in 2019 but we expect
headwinds in 2020
The Kazakh cement market in 2019 was 8.9 million tonnes, an
increase of 2% from 2018. Imports into Kazakshtan decreased by 10%
to 0.7 million tonnes or 8% of the total market. E xports from
local producers decreased by 17% to 1.6 million tonnes.
The market demand in 2020 is very difficult to estimate as we
can see the drop in demand during the COVID-19 lock down period. We
expect a potential decrease of 10% as the effect of the lockdown
and lower oil prices are felt across the economy. However we are
still confident to maintain the volumes over the summer.
Exports, mostly to Uzbekistan and Kyrgyzstan, were reduced as
they deployed their new factories and prices became more
competitive. Still the companies located in the south of Kazakhstan
benefited most. In April 2020, the government closed imports from
Iran to west Kazakhstan and so it will benefit the companies
operating in that region. At the same time Uzbekistan stopped
imports from Kazakhstan. We expect imports and exports to be
significantly reduced.
Steppe Cement's average cement selling prices increased by 8% in
KZT, but decreased by 2% in USD, to USD 46.6 per tonne
delivered.
Line 5 produced 995,141 tonnes of cement while Line 6 produced
720,620. We continue to make small improvements in Line 6 that will
deliver additional production capabilities and lower costs in
2020.
Capital investment in 2019 was directed to the improvement of
cement mills, silos, packing and to reduce power consumption. In
2020 we will endeavour to conserve cash and limit the capital
investment to ecological and energy saving projects.
In 2019 we completed the following projects:
- Increasing the capacity of the new 50 kg bags packing line to
2,400 bags per hour, equivalent to 120 tonnes per hour,
- Commissioning the fully automated loading of wagons and trucks,
- Installing a separator in cement mill number four that will
allows us to increase the sales of M500 and decrease the production
cost of M400,
- Changing the two preheater fans in Line 6 to improve energy efficiency, and
- Automating the silos and loading in the wet line mills area.
Capital investment was maintained at USD3 million.
In 2020, we plan the limit the capex to USD2 million
including:
- Cooler EP fan system,
- Pan conveyor replacement,
- Slag drier filter and automation,
- Cooler fan replacement, and
- Laboratory equipment.
Cost per tonne increased on the back of coal price increases
The average cash production cost of cement was maintained at USD
23/tonne as cost increases in KZT were balanced by currency
depreciation of 11% over the year.
We expect the coal price to be reduced in 2020.
Selling expenses, reflecting mostly cement delivery costs,
decreased to USD8/tonne from USD9/tonne in 2018, due to lower
export volumes (-29%) and the net reclassification of 0.4 million
wagon rental expenses from selling expenses to cost of sales and
finance costs based on IFRS 16.
Effects of application of IFRS 16 in the accounts
The application of IFRS 16 in our accounts affects mostly the
accounting of the expenses associated with the rental of wagons
that Steppe Cement does not own. Some wagons are rented for more
than one year and the accounting standard requires to account for a
new non-current asset called right-of-use assets evaluated at
USD6.1 million (note 11 of the financial statements). The
corresponding entries in the liabilities are called lease
liabilities segregated between non-current and current at USD4.3
million and USD2.2 million respectively (note 21). The
transportation expenses have been reduced by USD0.4 million to
USD13.3 million while the corresponding lease finance cost has been
calculated at USD0.9 million (note 5) increasing the financial
expenses.
Without IFRS 16 accounting, the finance expenses would have been
USD1.1 million and the transportation expenses USD13.8 million.
Consequently, the gross profit has been reduced by USD0.4 million.
As the tax authorities do not recognise for the effects of IFRS 16
accounting, Steppe Cement's effective income tax rate has increased
to 23%.
The EBITDA has been increased due to the recognition of the
depreciation of right of use assets. Without this depreciation, the
EBITDA for 2019 would have been USD21.6 million.
General and administrative expenses
General and administrative expenses decreased by 5% to USD5.9
million from USD6.2 million in 2018 as we reduced the number of
expatriates and contained inflation in salaries.
On 31 March 2020, the labour count stood at 751 from 735 in
2018. The increase is due to the termination of the subcontractor
for bag packing. We are now employing directly the required
personnel.
Financial position: Continuous debt reduction
During the year, our total loans outstanding were reduced from
USD11.8 million to USD10.3 million. The cash position increased to
USD 9.0 million leaving the company almost in net cash position at
the end of 2019.
Long term loans were reduced from USD6.6 million to USD3.9
million. Of this reduction USD 1.6 million were due to repayment of
loans and the balance due to the lower value in USD of long term
KZT denominated loans. The effective blended interest rate in the
long term loans in USD and KZT was maintained at 6.2% per
annum.
Our short term loans and current part of the long term loans
were slightly increased from USD5.2 million in 2018 to USD6.4
million in 2019, while the cash position at the end of the year was
increased from USD5.7 million to USD9.0 million.
In 2019, finance costs (ex-operating leases) decreased to USD1.1
million from USD1.6 million in 2018 due to the continuous repayment
of loan principal. Finance costs increased to USD2.0 million after
accounting for operating lease interest costs of USD0.9 million
under IFRS 16.
Following the drop of oil prices and the devaluation of the
Russian Rouble in March 2020, the KZT devalued from 380 to 430
KZT/USD. Our current loans in USD are balanced by similar cash
deposits in foreign currency.
We maintain two short term credit lines available as stand
by:
- KZT3 billion from Halyk Bank at 6% p.a. in USD or 13% in KZT
which includes a government subsidized program of KZT0.5 billion in
KZT at 6% p.a.
- KZT0.9 billion from Altyn Bank at 11% p.a. in KZT.
All covenants under the various credit lines have been met
comfortably. Depreciation of property, plant and equipment
decreased slightly from USD7.1 million in 2018 to USD6.9 million in
2019.
The statutory corporate income tax rate remains at 20% in
Kazakhstan.
Javier del Ser Perez
Chief Executive Officer
2019 Annual Report and Annual General Meeting
Steppe Cement will release its 2019 Annual Report on its website
at www.steppecement.com during the week commencing 8 June 2020.
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 8 July 2020 at 4
p.m. and telematically due to travelling restrictions.
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 YEARED 31 DECEMBER 2019
The Group The Company
2019 2018 2019 2018
USD USD USD USD
Restated
Revenue 79,929,953 82,184,670 9,915,657 8,912,843
Cost of sales (46,244,126) (46,737,415) - -
------------ ------------ --------- ---------
Gross profit 33,685,827 35,447,255 9,915,657 8,912,843
Selling expenses (13,371,624) (15,612,203) - -
General and administrative
expenses (5,921,545) (6,226,994) (318,980) (300,517)
Interest income 128,735 42,649 6,023 458
Finance costs (2,061,008) (1,637,834) - -
Net foreign exchange
(loss)/gain (84,400) (1,786,724) (35,941) 26,141
Other income/(expense),
net 166,115 576,570 - (4,855)
Profit before
income tax 12,542,100 10,802,719 9,566,759 8,634,070
Income tax expense (2,835,709) (1,744,486) - -
------------ ------------ --------- ---------
Profit for the
year 9,706,391 9,058,233 9,566,759 8,634,070
============ ============ ========= =========
Attributable to:
Shareholders of
the Company 9,706,391 9,058,233 9,566,759 8,634,070
============ ============ ========= =========
Earnings per share:
Basic and diluted
(cents) 4.4 4.1
============ ============
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
The Group The Company
2019 2018 2019 2018
USD USD USD USD
Restated
Profit for the year 9,706,391 9,058,233 9,566,759 8,634,070
Other comprehensive
income/(loss):
Items that may be
reclassified subsequently
to profit or loss
:
---------------------------
Exchange differences
arising on translation
of foreign operations 572,722 (9,445,330) - -
Total other comprehensive
income/(loss) 572,722 (9,445,330) - -
---------- ----------- --------- ---------
Total comprehensive
income/(loss) for
the year 10,279,113 (387,097) 9,566,759 8,634,070
Attributable to:
Shareholders of the
Company 10,279,113 (387,097) 9,566,759 8,634,070
========== =========== ========= =========
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2019
The Group The Company
2019 2018 2019 2018
USD USD USD USD
Restated
Assets
Non-Current Assets:
Property, plant
and equipment 55,807,917 59,642,055 - -
Right-of-use assets 6,140,152 - - -
Investment in subsidiary
companies - - 36,197,767 26,500,001
Loan to subsidiary
company - - 30,140,000 30,170,000
Advances 5,992 191,242 - -
Other assets 2,426,938 2,203,459 - -
Total Non-Current
Assets 64,380,999 62,036,756 66,337,767 56,670,001
--------------- ---------------- ------------- ------------
Current Assets
Inventories 10,811,542 13,381,295 - -
Trade and other
receivables 5,790,278 3,500,468 8,847,922 8,883,956
Income tax recoverable 405,147 175,336 - -
Loans and advances
to subsidiary companies - - 30,079 9,634,325
Advances and prepaid
expenses 3,682,896 2,312,534 15,944 6,704
Cash and cash equivalents 9,014,360 5,719,491 261,798 23,570
--------------- ---------------- ------------- ------------
Total Current Assets 29,704,223 25,089,124 9,155,743 18,548,555
--------------- ---------------- ------------- ------------
Total Assets 94,085,222 87,125,880 75,493,510 75,218,556
=============== ================ ============= ============
The Group The Company
2019 2018 2019 2018
USD USD USD USD
Restated
Equity and Liabilities
Capital and Reserves
Share capital 73,760,924 73,760,924 73,760,924 73,760,924
Revaluation reserve 2,015,943 2,349,282 - -
Translation reserve (113,285,956) (113,858,678) - -
Retained earnings 100,386,012 98,735,515 1,576,763 399,237
--------------- ---------------- ------------- ------------
Total Equity 62,876,923 60,987,043 75,337,687 74,160,161
--------------- ---------------- ------------- ------------
Non-Current Liabilities
Borrowings 3,892,851 6,606,910 - -
Lease liabilities 4,306,929 - - -
Deferred taxes 4,651,541 2,054,758 - -
Deferred income 1,421,368 1,490,942 - -
Provision for site
restoration 74,435 65,354 - -
Total Non-Current
Liabilities 14,347,124 10,217,964 - -
--------------- ---------------- ------------- ------------
Current liabilities
Trade and other
payables 6,203,453 6,614,604 - -
Accrued and other
liabilities 1,405,123 2,682,569 155,853 1,058,395
Borrowings 6,420,573 5,217,009 - -
Lease liabilities 2,190,586 - - -
Deferred income 81,387 138,566 - -
Taxes payable 560,053 1,268,125 - -
Total Current Liabilities 16,861,175 15,920,873 155,853 1,058,395
--------------- ----------------
Total Liabilities 31,208,299 26,138,837 155,853 1,058,395
--------------- ----------------
Total Equity and
Liabilities 94,085,222 87,125,880 75,493,510 75,218,556
=============== ================ ============= ============
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Distributable
The Group Share capital Revaluation Translation Retained Total
reserve reserve earnings
USD USD USD USD USD
As at 1 January 2019
As previously stated 73,760,924 2,349,282 (116,266,492) 96,112,997 55,956,711
Adjustments - - 2,407,814 2,622,518 5,030,332
-------------- ------------ -------------- -------------- ------------
As restated 73,760,924 2,349,282 (113,858,678) 98,735,515 60,987,043
Profit for the year - - - 9,706,391 9,706,391
Other comprehensive income - - 572,722 - 572,722
-------------- ------------ -------------- -------------- ------------
Total comprehensive income
for the year - - 572,722 9,706,391 10,279,113
Other transactions impacting
equity :
Dividends paid - - - (8,389,233) (8,389,233)
Transfer on revaluation
reserve relating to property,
plant and equipment through
use - (333,339) - 333,339 -
-------------- ------------ -------------- -------------- ------------
Balance as at 31 December
2019 73,760,924 2,015,943 (113,285,956) 100,386,012 62,876,923
============== ============ ============== ============== ============
Distributable
The Group Share capital Revaluation Translation Retained Total
reserve reserve earnings
USD USD USD USD USD
As at 1 January 2018
As previously stated 73,760,924 2,680,003 (106,741,124) 89,817,170 59,516,973
Adjustments - - 2,327,776 2,488,738 4,816,514
-------------- ------------ --------------- -------------- ------------
As restated 73,760,924 2,680,003 (104,413,348) 92,305,908 64,333,487
Profit for the year as
previously stated - - - 8,924,453 8,924,453
Adjustments - - - 133,780 133,780
-------------- ------------ --------------- -------------- ------------
Profit for the year as
restated - - - 9,058,233 9,058,233
-------------- ------------ --------------- -------------- ------------
Other comprehensive loss
as previously stated - - (9,525,368) - (9,525,368)
Adjustments - - 80,038 - 80,038
-------------- ------------ --------------- -------------- ------------
Other comprehensive loss
as restated - - (9,445,330) - (9,445,330)
-------------- ------------ --------------- -------------- ------------
Total comprehensive
(loss)/income
for the year - - (9,445,330) 9,058,233 (387,097)
Other transactions impacting
equity :
Dividends paid - - - (2,959,347) (2,959,347)
Transfer on revaluation
reserve relating to property,
plant and equipment through
use - (330,721) - 330,721 -
-------------- ------------ --------------- -------------- ------------
Balance as at 31 December
2018 73,760,924 2,349,282 (113,858,678) 98,735,515 60,987,043
============== ============ =============== ============== ============
STATEMENTS OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2019
The Group The Company
2019 2018 2019 2018
USD USD USD USD
Restated
CASH FLOWS FROM/(USED
IN) OPERATING ACTIVITIES
Profit before income
tax 12,542,100 10,802,719 9,566,759 8,634,070
Adjustments for:
Depreciation of property,
plant and equipment 6,880,944 7,138,659 - -
Depreciation of right-of-use
assets 2,285,530 - - -
Amortisation of quarry
stripping costs - 4,654 - -
Amortisation of site
restoration costs 1,410 1,566 - -
Dividend income - - (8,678,970) (8,389,233)
Reversal of dividend
accrued - - - 4,855
Loss on disposal of property,
plant and equipment 140,656 30,925 - -
Interest income (128,375) (42,649) (1,242,710) (524,068)
Finance costs 2,061,008 1,637,834 - -
Net foreign exchange
loss/(gain) 84,400 1,786,724 1,339 (50,676)
Provision for obsolete
inventories 36,146 46,562 - -
Loss allowance for doubtful
receivables 433,412 168,365 - -
Allowance for advances
paid to third parties 142,400 139,979 - -
Reversal of provision
for obsolete inventories (118,792) (346,533) - -
Deferred income (246,290) (41,192) - -
24,114,189 21,327,613 (353,582) (325,052)
Movement in working capital:
Decrease/(Increase) in:
Inventories 2,704,172 (2,304,350) - -
Trade and other receivables (2,687,961) (2,434,470) - (125)
Loans and advances to
subsidiary companies - - (63,520) (199,034)
Advances and prepaid
expenses (1,514,504) - (9,240) -
(Decrease)/Increase in:
Trade and other payables (354,224) (161,809) - -
Accrued and other liabilities (2,002,941) 2,244,060 (903,911) 39,589
------------ ------------ ----------- -----------
Cash Generated From/(Used
In) Operations 20,258,731 18,671,044 (1,330,253) (484,622)
Income tax paid (493,734) (151,305) - (4,941)
Net Cash From/(Used In)
Operating Activities 19,764,997 18,519,739 (1,330,253) (489,563)
------------ ------------ ----------- -----------
CASH FLOWS FROM/(USED
IN) INVESTING ACTIVITIES
Purchase of property,
plant and equipment (2,837,509) (3,138,098) - -
Purchase of other assets (14,982) (25,621) - -
Proceeds from disposal
of property, plant and
equipment 149,482 - - -
Dividends received from
subsidiary - - 8,389,233 3,430,150
Interest received 128,735 42,649 1,568,481 29,345
------------ ------------ ----------- -----------
Net Cash (Used In)/From
Investing Activities (2,574,274) (3,121,070) 9,957,714 3,459,495
------------ ------------ ----------- -----------
CASH FLOWS FROM/(USED
IN) FINANCING ACTIVITIES
Proceeds from bank borrowings 7,834,646 9,363,949 - -
Repayment of bank borrowings (9,432,630) (16,732,905) - -
Repayment of lease liabilities (1,929,741) - - -
Dividends paid (8,389,233) (2,959,347) (8,389,233) (2,959,347)
Interest paid (2,036,609) (1,650,182) - -
------------ ------------ ----------- -----------
Net Cash Used In Financing
Activities (13,953,567) (11,978,485) (8,389,233) (2,959,347)
------------ ------------ ----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,237,156 3,420,184 238,228 10,585
EFFECTS OF FOREIGN EXCHANGE
RATE CHANGES 57,713 (746,029) - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 5,719,491 3,045,336 23,570 12,985
------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR 9,014,360 5,719,491 261,798 23,570
============ ============ =========== ===========
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