19 June 2024
Steppe Cement
Limited
("Steppe
Cement" or the "Company")
Final Results for the Year
Ended 31 December 2023
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 2023, which are set out below.
Highlights:
·
Steppe Cement has focused on maintaining its
market share, limiting cost increases and reducing capex to
maintain a healthy balance sheet while interest rates remain
high
·
The Company operated in a high inflationary
environment which led to an increase in cost of production of USD8
million and a fall in net profit to USD4.5 million (2022: USD17.9
million)
·
The Company generated revenue of USD81.8 million
(2022: 86.7 million) following increasing competition in the local
market due to new capacity and inability to export to neighbouring
countries
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, 12
July 2024 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
|
|
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
The political environment stabilised
in Kazakhstan in 2023 benefiting the country through higher trade
and transit of goods. Meanwhile, Kazakhstan's population, primarily
concentrated in the southern regions, continues to grow reaching 20
million people by the end of 2023. The growth in the economy and
population brought significant inflation across the board and
specifically in the transport sector with logistical bottlenecks in
the main corridors to Russia and China caused by the overload of
the rail transport system.
In a more stable political
environment, the cement market in Kazakhstan decreased slightly in
2023 to 11.5 million tonnes resulting in a per capita consumption
of 575 kg/person per year. Looking ahead, significant population growth, lower interest rates and high
commodity prices are expected to improve the housing construction
sector in 2024.
Steppe Cement's sales volume decreased by 3% compared with the
previous year, due to logistical difficulties in the railway
system. Traffic to and from Russia, as well as transit from China,
increased significantly in 2023. The Company's domestic sales
increased by 4%, but exports were reduced to virtually
zero.
Overall, cement imports into
Kazakshtan mostly from Russia to the Aktobe region, decreased by
0.1 million tonnes to 0.5 million tonnes during the period, being
equivalent to 4% of the total cement market. Exports from local
producers increased slightly by 9% to 1.2 million tonnes during the
year, with these being increasingly to Kyrgystan. Uzbekistan has
commisioned a lot of new capacity that has brought lower prices
such that exports from Kazakhstan are now less profitable. Exports
remain concentrated towards the Tashkent and Bishkek areas which
are very close to the three main producers in South
Kazakhstan.
The Kazakhstan cement market has
balanced demand and production levels, although some new entrants
have won market share at the expense of historical players.
Seasonal market demand decreased in the first quarter of the year
due to weather conditions; and then bounced back in the summer
season. The northen regions are more affected by this tendency and
we expected this pattern to continue over the course of 2024. We
therefore decided to build our stocks of clinker in the first
quarter of 2024 in preparation for meeting demand later in the
year.
From early 2023, the Kazakhstan
government stated its intention to lower inflation. However,
at an annualized rate of 9.8% in 2024, it remains similar to
2023. The National Bank has reduced the base interest rate to
14.75% as of April 2024 from a peak of 16.75% in mid 2023. The
interbank rate (TONIA) which was hovering at 9% from 2018 to early
2022, peaked at 17.5% in late 2022 and has now come down to 13%.
Higher interest rates makes investment in house building as well as
new cement capacity more difficult to justify.
In 2023, Steppe Cement recorded a
net profit of USD4.5 million compared to a net profit of USD17.9
million in 2022, while EBITDA fell to USD12.4 million from USD 31
million. This reduction was mostly due to an increase in the cash
cost of production of USD8 million due to inflation. The Company
could not pass this increased cost to its clients due to strong
competition from other cement producers. Other factors contributing
to a higher cost of production were the higher transportation
costs, despite the focus on markets closer to Karaganda, lower
selling prices and lower sales volumes. Steppe
Cement's average cement selling prices decreased by 4%
in KZT and USD, to USD50 per tonne
delivered.
During 2023, Steppe Cement operated
both lines at 82% of their combined capacity. Capacity has been
increased by 0.1 million tonnes so far in 2024 after the
modification to the preheater tower at line 6, which was completed
in late 2023. This was part of a USD3.1
million CAPEX/ refurbishment programme to ensure the ability of our
plant and equipment to efficiently meet future production
requirements. It is expected that USD2.4 million will be invested
in 2024 to continue this work. Further details on CAPEX are set out
below.
Shareholders' funds increased to
USD70.7 million at the end of 2023 from USD65.1 million at the end of 2022 as there
was no dividend distributed. A capital repayment of approximately
USD4.2 million was subsequently paid in June
2024.
It is also worth noting that our
factory receives an allocation of CO2 emissions from the
government and it does not trade them, as we need them for
production. There is a very small market for alternative fuels and
they are so far not competitively priced versus coal. However we
have started to use pyrolysis oil in lieu of diesel wherever
possible. At the same time, the use of additives in the cement
formula is limited by current regulations. Clients tend to prefer
cement with a limited amount of additives, particularly in the
winter season.
|
Key
financials
|
Year ended
31- Dec-23
|
Year ended
31- Dec-22
|
Inc/(Dec)%
|
|
Sales (tonnes of cement)
|
1,626,268
|
1,670,174
|
(3%)
|
|
Consolidated turnover (KZT million)
|
37,286
|
40,023
|
(7%)
|
|
Consolidated turnover (USD million)
|
81.8
|
86.7
|
(6%)
|
|
Consolidated profit before tax (USD million)
|
5.4
|
21.3
|
(75%)
|
|
Consolidated profit after tax (USD million)
|
4.5
|
17.4
|
(74%)
|
|
Profit per share (US cents)
|
2.1
|
8.0
|
(74%)
|
|
Shareholders' funds (USD million)
|
70.7
|
65.1
|
9%
|
|
Average exchange rate (KZT/USD)
|
456
|
461
|
(1%)
|
|
Exchange rate as at year end (KZT/USD)
|
454
|
462
|
(2%)
|
Production and operating costs
Line 5 worked at 80% of its
capacity, producing 878,184 tonnes of cement, while Line 6 worked
at 83% and produced 748,084 tonnes. As mentioned above, the Company
expects higher figures for 2024 as clinker production has already
increased by 27% in the first quarter of 2024.
In 2023, cost per tonne of cement
increased by 19% in KZT which was a higher rate than the official
inflation figure published by the National Bank of Kazakhstan of
9.8%. Electricity tariffs increased by 38%, coal costs by 21%,
railway tariffs by 28%, diesel costs by 8%, salary expenses by 20%
and wagon rental increased by 90% as our long term rental agreement
had to be renewed, but it was partly offset by our higher rental
revenue in winter through leasing out the wagons when not in use.
These increases were implemented in the first half of 2023 after
the official inflation figure for 2022 of 20.3% was
published.
The average production cost of
clinker increased from USD23/tonne to USD29/tonne, while the cost
of cement increased from USD27/tonne to USD33/tonne in
2023.
Selling expenses, reflecting mostly
cement delivery costs, inceased to USD8.1/tonne from USD6.7/tonne
last year. The inflation in railway transport was much higher but
we concentrated our sales in nearby markets by truck delivery,
thereby reducing our reliance on the railway lines. General and
administrative expenses also increased to USD7.1 million in 2023
from USD6.2 million in 2022 as a consequence of salary
increases.
On 31 March 2024 the Company had 794
employees, a 2% decrease compared with the previous
year.
In 2023, finance costs were USD 0.9
million, 13% lower than in 2022, mostly as a result of decreased
interest paid on loans and current banking fees. Other income of USD1.8 million during the period reflects
mostly the income from the rental of the Company's railway wagons
when they are not being used in winter.
Capital investment
Capital investment reduced
significantly to USD3.1 million during the year following the
reduction in margins. The Company managed to complete three major
projects in 2023 which were financed by internal cash
flow:
-
the implemation of a new separator for cement mill
two, at a cost of USD 2 million, which was finally commissioned in
March 2024 and which has so far increased its capacity by 25% since
its installation;
-
the preheater raiser duct's extension by 24 meters
to improve the preheater calcination in line 6 which has shown very
positive results in terms of capacity and heat consumption;
and
-
the conversion of raw mill 3's separator into a
dynamic separator to support the increased production of line 6 by
10% when completed.
The Company has plans for a further
USD2.4 million investment in 2024 including:
-
the conversion of the raw mill 3 separator, from
static to dynamic, at a cost of USD1 million to increase capacity,
reliability, quality and to reduce electricity
consumption;
-
the modification of the line 6 cooler extraction
system at a cost of USD 0.35 million to improve reliability and
reduce heat losses; and
-
software and hardware upgrades in the control
system at a cost of USD0.7 million to allow further automatisation
of the factory.
Financing
Commercial interest rates in
Kazakhstan remain high at 14.5% after having reached 20% per annum
in 2023. The government has reactivated the subsidised credit lines
under certain conditions and the Company intends to apply to obtain
them to finance capex whenever possible. At the end of 2023, the
Company's total loans outstanding were stable at USD6.5 million
versus USD6.7 million in 2022. Long-term loans decreased to USD2.8
million from USD3.9million, while short term loans increased to
USD3.6 million from USD2.8 million. All the loans had
subsidized interest rates.
Taking the cash on hand into
consideration, the Company ended 2023 with
zero net debt, excluding IFRS 16 leases, mostly rental
wagons.
Steppe maintains its short term
credit lines as a stand by including:
-
KZT 1 billion short term in a government
subsidized program in KZT at 6% per annum
-
KZT 2 billion from Halyk Bank at 6% p.a. in USD or
20% in KZT.
The KZT strenghtened by 1% against
the USD with an average exchange rate of 456 KZT/USD in 2023 vs 461
KZT/USD in 2022.
Javier del Ser Perez
Chief Executive Officer
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia
under Labuan Companies Act, 1990)
STATEMENTS OF PROFIT OR LOSS
FOR
THE YEAR ENDED 31 DECEMBER 2023
|
|
|
The Group
|
|
The Company
|
|
|
Note
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
USD
|
|
USD
|
|
USD
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
81,762,548
|
|
86,732,039
|
|
1,401,554
|
|
14,641,442
|
|
Cost of sales
|
|
|
(57,563,625)
|
|
(49,107,243)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
24,198,923
|
|
37,624,796
|
|
1,401,554
|
|
14,641,442
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(13,225,616)
|
|
(11,260,494)
|
|
-
|
|
-
|
|
General and
administrative
expenses
|
|
|
(7,051,216)
|
|
(6,233,171)
|
|
(402,767)
|
|
(369,812)
|
|
Interest income
|
|
|
452,740
|
|
573,913
|
|
17,753
|
|
-
|
|
Finance costs
|
|
|
(910,441)
|
|
(1,048,888)
|
|
-
|
|
-
|
|
Reversal/(impairment) of losses of
financial assets
|
|
|
381,377
|
|
(159,909)
|
|
-
|
|
-
|
|
Net foreign exchange
(loss)/gain
|
|
|
(300,740)
|
|
(435,204)
|
|
55,437
|
|
(330,675)
|
|
Other income, net
|
|
|
1,848,195
|
|
2,630,033
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax
|
|
|
5,393,222
|
|
21,691,076
|
|
1,071,977
|
|
13,940,955
|
|
Income tax expense
|
|
|
(867,801)
|
|
(3,807,706)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
4,525,421
|
|
17,883,370
|
|
1,071,977
|
|
13,940,955
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
|
|
shareholders of
the
Company
|
|
|
4,525,421
|
|
17,883,370
|
|
1,071,977
|
|
13,940,955
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (cents)
|
|
|
2.1
|
|
8.2
|
|
|
|
|
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 2023
|
|
|
|
The Group
|
|
The Company
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
USD
|
|
USD
|
|
USD
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for
the year
|
|
|
4,525,421
|
|
17,883,370
|
|
1,071,977
|
|
13,940,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to profit or
loss:
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences
arising from
translation of
foreign
operations
|
|
|
1,089,351
|
|
(5,829,119)
|
|
-
|
|
-
|
|
|
Total other comprehensive
income/(loss)
|
|
|
1,089,351
|
|
(5,829,119)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income for the
year
|
|
|
5,614,772
|
|
12,054,251
|
|
1,071,977
|
|
13,940,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of
the
Company
|
|
|
5,614,772
|
|
12,054,251
|
|
1,071,977
|
|
13,940,955
|
|
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia
under Labuan Companies Act, 1990)
STATEMENTS OF FINANCIAL
POSITION
AS
OF 31 DECEMBER 2023
|
|
|
The Group
|
|
The Company
|
|
|
Note
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
USD
|
|
USD
|
|
USD
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current
Assets
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and
equipment
|
|
|
50,543,528
|
|
49,361,749
|
|
-
|
|
-
|
|
Right-of-use assets
|
|
|
-
|
|
5,525
|
|
-
|
|
-
|
|
Investment
in subsidiary
companies
|
|
|
-
|
|
-
|
|
36,199,699
|
|
36,199,599
|
|
Loans to
subsidiary
company
|
|
|
-
|
|
-
|
|
30,020,000
|
|
30,050,000
|
|
Other
assets
|
|
|
222,609
|
|
1,530,916
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Current
Assets
|
|
|
50,766,137
|
|
50,898,190
|
|
66,219,699
|
|
66,249,599
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
28,956,767
|
|
20,646,156
|
|
-
|
|
-
|
|
Trade and other
receivables
|
|
|
1,736,937
|
|
2,045,004
|
|
-
|
|
2,372,114
|
|
Other assets
|
|
|
2,853,142
|
|
1,081,719
|
|
-
|
|
-
|
|
Income tax recoverable
|
|
|
2,167,844
|
|
602,734
|
|
-
|
|
-
|
|
Loans and advances to
subsidiary
companies
|
|
|
-
|
|
-
|
|
65,761
|
|
60,352
|
|
Advances, deposits and prepaid
expenses
|
|
|
2,903,169
|
|
8,577,714
|
|
10,633
|
|
7,305
|
|
Cash and cash
equivalents
|
|
|
6,435,437
|
|
4,143,953
|
|
4,623,695
|
|
1,239,827
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current
Assets
|
|
|
45,053,296
|
|
37,097,280
|
|
4,700,089
|
|
3,679,598
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
95,819,433
|
|
87,995,470
|
|
70,919,788
|
|
69,929,197
|
STEPPE CEMENT LTD
(Incorported in Labuan FT, Malaysia
under Labuan Companies Act, 1990)
STATEMENTS OF FINANCIAL
POSITION
AS
OF 31 DECEMBER 2023 (CONTINUED)
|
|
|
|
The Group
|
|
The Company
|
|
|
Note
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
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
|
|
|
1,515,896
|
|
1,795,426
|
|
-
|
|
-
|
|
Translation reserve
|
|
|
(125,177,850)
|
|
(126,267,201)
|
|
-
|
|
-
|
|
Retained earnings/
(Accumulated
losses)
|
|
|
120,596,062
|
|
115,791,111
|
|
(3,148,214)
|
|
(4,220,191)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Equity
|
|
|
70,695,032
|
|
65,080,260
|
|
70,612,710
|
|
69,540,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
2,845,655
|
|
3,913,689
|
|
-
|
|
-
|
|
Deferred taxes
|
|
|
3,168,141
|
|
3,266,775
|
|
-
|
|
-
|
|
Deferred income
|
|
|
2,350,932
|
|
2,572,552
|
|
-
|
|
-
|
|
Provision for site
restoration
|
|
|
193,303
|
|
178,420
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current
Liabilities
|
|
|
8,558,031
|
|
9,931,436
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
9,873,140
|
|
7,348,587
|
|
118
|
|
-
|
|
Accrued and other
liabilities
|
|
|
2,425,105
|
|
2,250,689
|
|
163,386
|
|
143,808
|
|
Amount owing to a
subsidiary
company
|
|
|
-
|
|
-
|
|
143,574
|
|
244,656
|
|
Borrowings
|
|
|
3,638,305
|
|
2,814,525
|
|
-
|
|
-
|
|
Lease liabilities
|
|
|
-
|
|
58,960
|
|
-
|
|
-
|
|
Deferred income
|
|
|
194,729
|
|
140,259
|
|
-
|
|
-
|
|
Taxes payable
|
|
|
435,091
|
|
370,754
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
16,566,370
|
|
12,983,774
|
|
307,078
|
|
388,464
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
25,124,401
|
|
22,915,210
|
|
307,078
|
|
388,464
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity and
Liabilities
|
|
|
95,819,433
|
|
87,995,470
|
|
70,919,788
|
|
69,929,197
|