TIDMSTCM
RNS Number : 9333Y
Steppe Cement Limited
15 May 2019
CEO STATEMENT
In 2018, Steppe Cement posted a net profit of USD 8.9 million.
Steppe Cement's EBITDA increased to USD 21.3 million from USD 11.6
million in 2017 mostly due to higher prices and volumes.
The overall domestic cement market decreased by 4% to 8.6
million tonnes, but our sales volume increased by 6% mostly due to
an increase of 63% in exports, helped by the continued weakness of
the KZT against the neighbouring currencies. The delivered price in
USD increased by 18%.
In 2018 our cost of production per tonne in KZT increased by 6%,
in line with inflation.
Steppe Cement operated both lines at 90% of their current
combined capacity (which is 1.1 million tonnes for line 5 and 0.8
million tonnes for line 6). We aim to increase their utilization
and we are planning to increase the capacity of line 6 to 0.9
million tonnes in late 2019.
Shareholders' funds decreased to USD55.9 million from USD59.5
million after dividend distribution of USD3 million to shareholders
and due to the devaluation of the KZT. However, 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-18 31- Dec-17
Sales (tonnes of cement) 1,720,629 1,630,230 6
------------ ------------ -----------
Consolidated turnover (KZT million) 28,342 21,443 32
------------ ------------ -----------
Consolidated turnover (USD million) 82.2 65.9 25
------------ ------------ -----------
Consolidated profit before tax
(USD million) 10.7 1.9 >400
------------ ------------ -----------
Consolidated profit after tax
(USD million) 8.9 1.2 >700
------------ ------------ -----------
Profit per share (US cents) 4.1 0.6 >600
------------ ------------ -----------
Shareholders' funds (USD million) 55.9 59.5 (6)
------------ ------------ -----------
Average exchange rate (USD/KZT) 345 326 6
------------ ------------ -----------
Exchange rate as at year end (USD/KZT) 384 332 13
------------ ------------ -----------
The Kazakh cement market decreased by 4% in 2018 but we expect
it to improve in 2019
The Kazakh cement market in 2018 was 8.6 million tonnes, a
decrease of 4% from 2017. Imports into Kazakshtan decreased by 4%
to 0.65 million tonnes or 8% of the total market. Exports from
local producers increased by 118% to 1.9 million tonnes.
Our expectations are that overall market demand in 2019 will
increase by 5% reflecting a recovering of the market from 2018. The
Kazakh population has reached 18 million people and therefore
consumption represents 500 kg/person per year.
Improving exports mostly to Uzbekistan and Kyrgyzstan helped
local companies to increase their overall volumes by 7%. The
companies that benefited most were the ones in the south. In the
west, a new competitor has started near Kyzylorda and is expected
to increase its production steadily during the year.
In 2019, the local cement factories should maintain these trends
with similar level of exports. Imports into Kazakhstan should
remain contained to regions near the Russian border and be subject
to competiton from a new factory.
Steppe Cement's average cement selling prices increased by 25%
in KZT and by 18% in USD, to USD 47.7 per tonne delivered.
Line 5 produced 993,850 tonnes of cement while Line 6 produced
726,767. We continue to make small improvements in Line 6 that we
expect will contribute to an additional 80,000 tonnes in 2019.
Capital investment in 2018 was directed to the improvement of
packing and logistics and we will continue to do so in 2019
The new packing line for 1,800 bags per hour was commisionned in
the summer of 2018 and we have doubled the capacity of the big bag
facility to 100 tonnes per hour. Capital investment was increased
slightly to USD2.7 million from USD1.6 million in 2017.
In 2019, we will plan the following capital investments:
- Increase the capacity of the 50 kg bags packing line to 2,400
bags per hour, equivalent to 120 tonnes per hour.
- Commission the fully automated loading of wagons and trucks.
- Installation of a separator in cement mill number four.
- Change the two preheater fans in Line 6 to improve energy efficiency.
- Automatize the silos and loading in the wet line mill area.
Cost per tonne were maintained as volumes increased
The average cash production cost of cement was maintained at
USD23/tonne as production and sales increased offsetting some of
inflation increases. Some of the variable costs have been
reassigned to fixed costs in 2018 - if we compare with the same
cost base 2017 and 2018, the variable cost has increased by around
USD0.7/tonne or 3%.
Selling expenses, reflecting mostly cement delivery costs,
increased to USD9/tonne from USD7/tonne in 2017, due to higher
export volumes (+63%) and transportation tariffs.
General and administrative expenses
General and administrative expenses increased by 19% to USD 6.2
million from USD 5.2 million in 2017. The general expenses have
been adjusted both for 2017 and 2018 and include expense previously
included in the production costs.
In 2017, we transferred USD1 million from cost of production to
general expenses of which USD0.65 million were transfers of
management salaries and USD0.35 million were provisions for
obsolete inventory. Cost of production for 2017 was therefore
decreased by 0.6 USD/tonne.
After taking into consideration these adjustments, the general
expenses in 2018 have still increased by USD1 million. This is
broken down as follows:
- USD0.28 million as transfers of maintenance and logistic from production to general expenses.
- USD0.25 million as a provision of doubtful receivables in accordance with changes in IFRS9.
- USD0.15 million as increased salaries, extra half month bonus
and other compensation as company performance has improved.
- USD0.06 million in increased bank commission as we try to reduce the cash payments.
The balance represents an effective increase of 5% which is in
line with the increase of volumes.
On 31 March 2019 the labour count stood at 735 the same level as
last year.
Financial position: Continuous debt reduction
During the year, our total loans outstanding were reduced from
USD20 million to USD11.8 million.
Long term loans were reduced from USD9.8 million to USD 6.6
million as we continued to repay principals to Halyk Bank for the
long term loan for wagons and various government subsidised loans
for capex. In addition, due to devaluation, the KZT denominated
loans were reduced in USD.
The effective interest rate in the long term loans in USD and
KZT was maintained at 6.2% per annum (p.a.).
Our short term loans and current part of the long term loans
were significantly reduced from USD10.2 million in 2017 to USD5.2
million in 2018, while the cash position at the end of the year was
increased from USD3 million to USD5.7 million.
We consider the risk of a sharp devaluation is now much lower
but we have not borrowed significantly since December 2018. We have
drawn subsidized short term loans at 6% p.a. in KZT and short term
loans at 10% p.a. in KZT when the banks offered them.
We maintain three short term credit lines available as stand
by:
- KZT3 billion from Halyk Bank at 6% p.a. in USD or 12% p.a. 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 10% p.a. in KZT.
- KZT3 billion from VTB Bank Kazakhstan at 11.5% p.a. signed in March 2018.
In 2017, finance costs decreased to USD1.6 million from USD2.2
million in 2017 due to the continuous repayment of loan
principals.
All covenants under the various credit lines have been met
comfortably.
Depreciation stayed the same in 2018 at USD7.3 million.
The statutory corporate income tax rate remains at 20% in
Kazakhstan.
Javier del Ser
Chief Executive Officer
2018 Annual Report and Annual General Meeting
Steppe Cement expects to release its 2018 Annual Report on its
web site at www.steppecement.com during the week commencing 15 May
2019.
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, 12 June
2019 at 2:30 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 YEARED 31 DECEMBER 2018
The Group The Company
2018 2017 2018 2017
USD USD USD USD
Revenue 82,184,670 65,855,137 8,912,843 3,535,005
Cost of sales (46,871,195) (45,211,517) - -
------------ ------------ --------- ---------
Gross profit 35,313,475 20,643,620 8,912,843 3,535,005
Selling expenses (15,612,203) (11,819,521) - -
General and administrative
expenses (6,226,994) (5,245,588) (300,517) (270,136)
Interest income 42,649 61,449 458 39
Finance costs (1,637,834) (2,236,516) - -
Net foreign exchange
(loss)/gain (1,786,724) (205,610) 26,141 (81,355)
Other income,
net 576,570 736,727 (4,855) -
Profit before
income tax 10,668,939 1,934,561 8,634,070 3,183,553
Income tax expense (1,744,486) (703,091) - (4,941)
------------ ------------ --------- ---------
Profit for the
year 8,924,453 1,231,470 8,634,070 3,178,612
============ ============ ========= =========
Attributable to:
Shareholders of
the Company 8,924,453 1,231,470 8,634,070 3,178,612
============ ============ ========= =========
Earnings per share:
Basic and diluted
(cents) 4.1 0.6
============ ============
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
The Group The Company
2018 2017 2018 2017
USD USD USD USD
Profit for the year 8,924,453 1,231,470 8,634,070 3,178,612
Other comprehensive
(loss)/income:
Items that may be
reclassified subsequently
to profit or loss:
---------------------------------
Exchange differences
arising on translation
of foreign operations (9,525,368) 244,646 - -
Total other (loss)/comprehensive
income (9,525,368) 244,646 - -
----------- --------- --------- ---------
Total comprehensive
(loss/)income for
the year (600,915) 1,476,116 8,634,070 3,178,612
Attributable to:
Shareholders of the
Company (600,915) 1,476,116 8,634,070 3,178,612
=========== ========= ========= =========
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2018
The Group The Company
2018 2017 2018 2017
USD USD USD USD
Assets
Non-Current Assets:
Property, plant
and equipment 54,611,723 67,358,584 - -
Investment in subsidiary
companies - - 26,500,001 26,500,001
Loan to subsidiary
company - - 30,170,000 -
Advances 191,242 508,555 - -
Other assets 2,203,459 1,247,835 - -
Total Non-Current
Assets 57,006,424 69,114,974 56,670,001 26,500,001
---------- ---------- ---------- ----------
Current Assets
Inventories 13,381,295 13,013,642 - -
Trade and other
receivables 3,500,468 3,101,667 8,883,956 3,435,005
Income tax recoverable 175,336 127,208 - -
Loans and advances
to subsidiary companies - - 9,634,325 39,605,291
Advances and prepaid
expenses 2,312,534 3,477,179 6,704 6,579
Cash and cash equivalents 5,719,491 3,045,336 23,570 12,985
---------- ---------- ---------- ----------
Total Current Assets 25,089,124 22,765,032 18,548,555 43,059,860
---------- ---------- ---------- ----------
Total Assets 82,095,548 91,880,006 75,218,556 69,559,861
========== ========== ========== ==========
The Group The Company
2018 2017 2018 2017
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 2,349,282 2,680,003 - -
Translation reserve (116,266,492) (106,741,124) - -
Retained earnings/
(Accumulated losses) 96,112,997 89,817,170 399.237 (5,275,486)
------------- ------------- ---------- -----------
Total Equity 55,956,711 59,516,973 74,160,161 68,485,438
------------- ------------- ---------- -----------
Non-Current Liabilities
Borrowings 6,606,910 9,834,719 - -
Deferred taxes 2,054,758 637,777 - -
Deferred income 1,629,508 1,519,487 - -
Provision for site
restoration 65,354 66,861 - -
Total Non-Current
Liabilities 10,356,530 12,058,844 - -
------------- ------------- ---------- -----------
Current liabilities
Trade and other
payables 6,614,604 7,684,371 - -
Accrued and other
liabilities 2,682,569 2,229,254 1,058,395 1,069,482
Borrowings 5,217,009 10,194,584 - -
Taxes payable 1,268,125 195,980 - 4,941
Total Current Liabilities 15,782,307 20,304,189 1,058,395 1,074,423
------------- -------------
Total Liabilities 26,138,837 32,363,033 1,058,395 1,074,423
------------- -------------
Total Equity and
Liabilities 82,095,548 91,880,006 75,218,556 69,559,861
============= ============= ========== ===========
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Distributable
The Group Share capital Revaluation Translation Retained Total
reserve reserve earnings
USD USD USD USD USD
Balance as at 1 January
2018 73,760,924 2,680,003 (106,741,124) 89,817,170 59,516,973
-------------- ------------ -------------- -------------- ------------
Profit for the year - - - 8,924,453 8,924,453
Other comprehensive loss - - (9,525,368) - (9,525,368)
-------------- ------------ -------------- -------------- ------------
Total comprehensive (loss)/income
for the year - - (9,525,368) 8,924,453 (600,915)
Other transactions impacting
equity:
Dividends paid - - - (2,957,347) (2,957,347)
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 (116,266,492) 96,112,997 55,956,711
============== ============ ============== ============== ============
Distributable
The Group Share capital Revaluation Translation Retained Total
reserve reserve earnings
USD USD USD USD USD
Balance as at 1 January
2017 73,760,924 3,062,343 (106,985,770) 88,203,360 58,040,857
-------------- ------------ -------------- -------------- -----------
Profit for the year - - - 1,231,470 1,231,470
Other comprehensive income - - 244,646 - 244,646
-------------- ------------ -------------- -------------- -----------
Total comprehensive income
for the year - - 244,646 1,231,470 1,476,116
Other transactions impacting
equity:
Transfer on revaluation
reserve relating to property,
plant and equipment through
use - (382,340) - 382,340 -
-------------- ------------ -------------- -------------- -----------
Balance as at 31 December
2017 73,760,924 2,680,003 (106,741,124) 89,817,170 59,516,973
============== ============ ============== ============== ===========
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group The Company
2018 2017 2018 2017
USD USD USD USD
CASH FLOWS FROM/(USED
IN) OPERATING ACTIVITIES
Profit before income
tax 10,668,939 1,934,561 8,634,070 3,183,553
Adjustments for:
Depreciation of property,
plant and equipment 7,272,439 7,265,935 - -
Amortisation of quarry
stripping costs 4,654 30,398 - -
Amortisation of site
restoration costs 1,566 1,656 - -
Dividend income - - (8,389,233) (3,435,005)
Reversal of dividend
accrued - - 4,855 -
Loss on disposal of property,
plant and equipment 30,925 72,728 - -
Interest income (42,649) (61,449) (524,068) -
Finance costs 1,637,834 2,236,516 - -
Net foreign exchange
loss/(gain) 1,786,724 205,610 (50,676) 79,897
Provision for obsolete
inventories 46,562 33,175 - -
Credit loss allowance
for doubtful receivables 168,365 25,532 - -
Allowance for advances
paid to third parties 139,979 43,782 - -
Reversal of provision
for obsolete inventories (346,533) (356,280) - -
Deferred income (41,192) (49,096) - -
Reversal of doubtful
receivables - (138) - -
Write-off of inventories - 46,820 - -
21,327,613 11,429,750 (325,052) (171,555)
Movement in working capital:
Decrease/(Increase) in:
Inventories (2,304,350) 2.606.085 - -
Trade and other receivables (2,434,470) 430,552 (125) -
Loans and advances to
subsidiary companies - - (199,034) 104,828
Advances and prepaid
expenses - (2,682,456) - 2,549
Increase/(Decrease) in:
Trade and other payables (161,809) (140,863) - -
Accrued and other liabilities 2,244,060 570,636 39,589 3,527
------------ ------------ ----------- -----------
Cash Generated From/(Used
In) Operations 18,671,044 12,213,704 (484,622) (60,651)
Income tax paid (151,305) - (4,941) -
Cash Generated From/(Used
In) Operating Activities 18,519,739 12,213,704 (489,563) (60,651)
------------ ------------ ----------- -----------
CASH FLOWS FROM/(USED
IN) INVESTING ACTIVITIES
Purchase of property,
plant and equipment (3,138,098) (2,104,293) - -
Purchase of other assets (25,621) (68,273) - -
Proceeds from disposal
of property, plant and
equipment - 476,689 - -
Dividends received from
subsidiary - - 3,430,150 -
Interest received 42,649 61,449 29,345 -
------------ ------------ ----------- -----------
Net Cash Used In/(From)
Investing Activities (3,121,070) (1,634,428) 3,459,495 -
------------ ------------ ----------- -----------
CASH FLOWS FROM/(USED
IN) FINANCING ACTIVITIES
Redemption of bonds - (4,483,495) - -
Proceeds from bank borrowings 9,363,949 18,201,873 - -
Repayment of bank borrowings (16,732,905) (20,045,342) - -
Dividends paid (2,959,347) - (2,959,347) -
Interest paid (1,650,182) (2,235,965) - -
------------ ------------ ----------- -----------
Net Cash Used In Financing
Activities (11,978,485) (8,562,929) (2,959,347) -
------------ ------------ ----------- -----------
NET INCREASE/(DECREASE)
IN CASH AND CASH EQUIVALENTS 3,420,184 2,016,347 10,585 (60,651)
EEFFECTS OF FOREIGN EXCHANGE
RATE CHANGES (746,029) 5,784 - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,045,336 1,023,205 12,985 73,636
------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR 5,719,491 3,045,336 23,570 12,985
============ ============ =========== ===========
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END
MSCZZLBFKEFLBBD
(END) Dow Jones Newswires
May 15, 2019 02:00 ET (06:00 GMT)
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