TIDMSTCM
RNS Number : 8503A
Steppe Cement Limited
07 June 2021
7 June 2021
Steppe Cement Ltd
CEO STATEMENT
I would like to thank all of our staff in Kazakhstan that showed
incredible resilience in spite of all public health challenges and
limitations. Our factory continued to work almost normally and this
is only thanks to our employees and their commitment to the future
of the company.
In 2020, Steppe Cement posted a net profit of USD11.1 million.
Steppe Cement's EBITDA increased to USD 24.2 million from USD23.9
million in 2019 as higher prices in KZT, lower cost of production
and the implementation of IFRS 16 were balanced by a devaluation of
8%.
The overall domestic cement market increased by 6% to 9.4
million tonnes, while our sales volume decreased slightly. Our
local sales decreased by 6% due to milling limitations during two
months of the high season, while exports increased by 20% in line
with the market.
In 2020, our cost of production per tonne in KZT decreased by
3%.
Steppe Cement operated both lines at 85% of their current
combined capacity (which is 1.1 million tonnes for line 5 and 0.85
million tonnes for line 6).
Shareholders' funds decreased to USD57.9 million from USD62.9
million due to currency devaluation and 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-20 31-Dec-19
Sales (tonnes of cement) 1,645,744 1,715,761 (4%)
----------- ----------- -----------
Consolidated turnover (KZT million) 30,958 30,534 1%
----------- ----------- -----------
Consolidated turnover (USD million) 74.8 79.9 (6%)
----------- ----------- -----------
Consolidated profit before tax
(USD million) 13.1 12.5 5%
----------- ----------- -----------
Consolidated profit after tax
(USD million) 11.1 9.7 14%
----------- ----------- -----------
Profit per share (US cents) 5.1 4.4 14%
----------- ----------- -----------
Shareholders' funds (USD million) 57.9 62.9 (8%)
----------- ----------- -----------
Average exchange rate (KZT/USD) 413 383 (8%)
----------- ----------- -----------
Exchange rate as at year end (KZT/USD) 421 381 (10%)
----------- ----------- -----------
The Kazakh cement market increased by 6% in 2020 and we expect a
modest increase in 2021
Despite the impact of Covid-19, the Kazakh cement market in 2020
increased to 9.4 million tonnes (6%) from 2019. Imports into
Kazakshtan decreased by 13% to 0.6 million tonnes equivalent to 6%
of the total market, mostly due to the ban on imports from Iran. E
xports from local producers increased by 22% to 2 million tonnes
mostly to Uzbekistan and Kyrgyzstan.
The market demand in 2021 seems strong despite the effects of
COVID-19 temporary lock downs. We expect a potential increase of
2-4% as oil prices have recovered and the government stimulus
packages continue.
Exports, mostly to Uzbekistan were increased as demand in the
Tashkent area remained strong and the companies located in the
south of Kazakhstan continued to benefit. Volumes exported to
Uzbekistan by Kazakh operators will be reduced once the new
factories built in Uzbekistan become operational, most likely in
late 2021.
Steppe Cement's average cement selling prices increased by 6% in
KZT, but decreased by 3% in USD, to USD 45.4 per tonne
delivered.
Production and costs
Line 5 produced 938,074 tonnes of cement while Line 6 produced
707,670. Line 5 had two planned maintenance stops during the year
and L6 performed as planned, but further improvements are expected
in 2021 when we expect production is excess of 1.75 million
tonnes.
Cost per tonne decreased by 3% in KZT due to saving on
electricity and coal, partly offset by increases repairs and
maintenance.
The average cash production cost of cement was reduced to USD
19/tonne due to cost savings and currency depreciation.
We expect the coal price to be maintained in 2021.
Selling expenses, reflecting mostly cement delivery costs, were
maintained at USD8/tonne, due to higher export volumes (+20%) and
transportation inflation.
Foreign exchange losses increased as we maintained some loans in
USD until full repayment in August 2020 and the currency
experienced an 8% devaluation having remained stable in 2019.
Other income increased significantly due to the write-back of a
payable of USD 1 million previously written down, as well as the
write-back of deferred income from the government subsidied
loans.
General and administrative expenses
General and administrative expenses increased to USD6.2 million
from USD5.6 million in 2019. The increase is due to higher
provision for doubtful debts and withholding tax of USD0.4 million
on transfers from Karcement to the holding company, Steppe
Cement.
Labour and Covid-19
On 31 March 2021, the labour count stood at 7 81 from 751 in
2020. The difference is mostly due to the increased proportion of
bagged cement on our product mix with subcontractors replaced by
our own staff.
To prevent the spread of Covid-19 we took standard measures:
temperature checking at the entry gates of the factory, masks and
distribution of information and advice to all workers. We also made
testing available to all workers who wished to be tested and in
2021 we have facilitated vaccination to those willing to take it,
with this option still being offered.
During 2020, the government provided different statistics about
the number of deceased due to Covid-19 or pneumonia without a clear
distinction between the two. We had three employees that died in
2020 of which two had comorbidities although only one was
recognised officially as a victim of Covid-19. In 2021, we had an
additional casualty but he was not based in the factory as he had a
sales position in Almaty.
Capital investment slowed down but will increase in 2021 and
2022
Capital investment in 2020 was directed to the improvement of
packing and to reduce power consumption. We managed to invest less
than USD1 million in investment capex due to the Covid-19
restrictions mostly during the summer of 2020 as we didn't have a
full team of engineers in place, but we executed our planned
maintenance capex of USD2 million. We managed to complete the
following projects:
- Pan conveyor replacement;
- Cooler EP fan system replacement;
- Cooler static head fan system; and
- Automatic bag feeder (commissioned in March 2021)
In the fourth quarter of 2020, we purchased through a 6%
subsidized loan a new fleet of 70 boxed wagons for transportation
of bagged cement. We borrowed KZT0.8 billion before the end of the
year and an additioal KZT0.4 billion in February 2021 when the
wagons arrived in the factory. We will use this small fleet
year-round and we will rent between 200-250 additional box wagons
during the high season. This operation is similar to the 330 bulk
wagons that we bought in 2014. The return on these wagons is higher
than the cost of funds.
In addition, in 2021 we plan to increase investment capex to at
least USD3 million to compensate for the lower capex in 2020 while
we expect maintenance capex to be smaller. The projects will
include:
- a new XRF (X-ray analyser) for the laboratory to improve clinker quality and stability;
- slag drier filter and automation for ecological reasons;
- an automatic bag feeder to reduce labour cost and increase bagged cement;
- a new Schenck coal dosing system, to better control the feed to the preheater in line 6;
- coal mill ducting modifications to increase coal milling capacity;
- railway line extension purchase to save transportation fees; and
- cement mill separators that will allow us to increase the
amount of additives as well as control the cement finess. This
project will be carried over 2022.
Effects of application of IFRS 16 in the accounts
The application of IFRS 16 in our accounts continues to affect
the accounting of the rental of wagons that Steppe Cement does not
actually own. Some wagons are rented for more than two years and
the accounting standard that we started to implement in 2019
requires us to account for a new non-current asset called
'right-of-use' assets evaluated in 2020 at USD 3.5 million vs USD
6.1 million in 2019 (the lease contracts have already been
accounted for one year). The amount will be reduced yearly until
these contracts are renewed and it may increase again depending on
the renewal terms. The corresponding entries in the liabilities are
called lease liabilities seggregated between non-current at USD2.1
million in 2020 vs USD4.3 million in 2019 and current of USD1.8
million vs USD2.2 million in 2019.
The selling expenses have been reduced to USD13 million while
the corresponding lease finance cost has been calculated at USD0.6
million increasing the financial expenses but less than in 2019
when they were increased by USD0.9 million.
Without IFRS 16 accounting, the finance expenses would have been
USD0.6 million and the selling expenses USD 13.5 million.
Consequently, the gross profit has been reduced by USD 0.1
million.
The EBITDA has been increased due to the recognition of the
depreciation of right-of-use assets. Without this depreciation, the
EBITDA for 2020 would have been USD22.1 million.
Financial position: Debt has all been repaid apart from the
subsidised lines.
During the year, our total loans outstanding were reduced from
USD10.3 million to USD6.8 million, the majority of these loans have
very favourable subsidized rates in KZT. The company ended the year
with a net cash position of USD1.4 million, excluding IFRS 16
leases.
Long-term loans were reduced from USD3.9 million to USD2.4
million. Of this reduction USD1.5 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 reduced to 5% per annum.
Our short term loans and current part of the long term loans
decreased from USD6.4 million in 2019 to USD4.4 million in 2020,
while the cash position at the end of the year was slightly
decreased from USD9 million to USD8.2 million.
In 2020, finance costs decreased to USD1.2 million from USD2.1
million in 2019. Without operating lease interest of USD0.6 million
under IFRS 16, the finance cost was USD0.6 million of which USD0.4
million was interest on loans.
The KZT had a very bumpy ride against the USD, devaluing from
380 to 430 KZT/USD during the beginning of the Covid crisis and
following the drop of oil prices. It then strengthened back to 400
by the beginning of the summer and devalued to 430 by the winter.
The average rate for the year was 413.
We maintain short term credit lines available as stand by:
- KZT 1 billion in a government subsidized program in KZT at 6% p.a.
- KZT 2 billion from Halyk Bank at 6% p.a. in USD or 13% in KZT.
- KZT 0.9 billion from Altyn Bank at 12% p.a. in KZT.
All covenants under the various credit lines have been met
comfortably.
Depreciation of property, plant and equipment remained the same
at USD6.9 million for 2020 and 2019.
Steppe Cement's effective income tax rate has decreased to 15%.
The statutory corporate income tax rate remains at 20% in
Kazakhstan.
Javier del Ser Perez
Chief Executive Officer
Annual Report 2020 and Annual General Meeting
Steppe Cement will release its Annual Report 2020 on its web
site at www.steppecement.com during the week commencing 7 June
2021.
The Company's virtual 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, 7
July 2021 at 4 p.m., 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 2020
The Group The Company
2020 2019 2020 2019
USD USD USD USD
Revenue 74,774,297 79,929,953 10,796,326 9,915,657
Cost of sales (42,439,633) (46,244,126) - -
------------ ------------ ---------- ---------
Gross profit 32,334,664 33,685,827 10,796,326 9,915,657
Selling expenses (12,966,168) (13,371,624) - -
General and administrative
expenses (6,225,928) (5,921,545) (311,871) (318,980)
Interest income 199,332 128,735 934 6,023
Finance costs (1,249,051) (2,061,008) - -
Net foreign exchange
loss (808,977) (84,400) (3,981) (35,941)
Other income,
net 1,817,314 166,115 82,507 -
Profit before
income tax 13,101,186 12,542,100 10,563,915 9,566,759
Income tax expense (1,983,727) (2,835,709) - -
------------ ------------ ---------- ---------
Profit for the
year 11,117,459 9,706,391 10,563,915 9,566,759
============ ============ ========== =========
Attributable to:
Shareholders of
the Company 11,117,459 9,706,391 10,563,915 9,566,759
============ ============ ========== =========
Earnings per share:
Basic and diluted
(cents) 5.1 4.4
============ ============
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
The Group The Company
2020 2019 2020 2019
USD USD USD USD
Profit for the year 11,117,459 9,706,391 10,563,915 9,566,759
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 - - -
Increase in provision
for site restoration (74,671) - - -
Items that may be
reclassified subsequently
to profit or loss
:
---------------------------
Exchange differences
arising from translation
of foreign operations (5,228,388) 572,722 - -
Total other comprehensive
(loss)/income (4,542,768) 572,722 - -
----------- ---------- ---------- ---------
Total comprehensive
income for the year 6,574,691 10,279,113 10,563,915 9,566,759
Attributable to:
Shareholders of the
Company 6,574,691 10,279,113 10,563,915 9,566,759
=========== ========== ========== =========
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2020
The Group The Company
2020 2019 2020 2019
USD USD USD USD
Assets
Non-Current Assets:
Property, plant
and equipment 48,856,410 55,807,917 - -
Right-of-use assets 3,483,259 6,140,152 - -
Investment in subsidiary
companies - - 36,294,519 36,197,767
Loan to subsidiary
company - - 30,110,000 30,140,000
Advances - 5,992 - -
Other assets 1,900,656 2,426,938 - -
Total Non-Current
Assets 54,240,325 64,380,999 66,404,519 66,337,767
---------- ---------- ---------- ----------
Current Assets
Inventories 11,097,613 10,811,542 - -
Trade and other
receivables 2,332,410 5,790,278 6,775,995 8,847,922
Other assets 304,946 - - -
Income tax recoverable 1,435,100 405,147 - -
Loans and advances
to subsidiary companies - - 39,712 30,079
Advances and prepaid
expenses 3,644,038 3,682,896 5,848 15,944
Cash and cash equivalents 8,213,680 9,014,360 1,352,950 261,798
---------- ---------- ---------- ----------
Total Current Assets 27,027,787 29,704,223 8,174,505 9,155,743
---------- ---------- ---------- ----------
Total Assets 81,268,112 94,085,222 74,579,024 75,493,510
========== ========== ========== ==========
The Group The Company
2020 2019 2020 2019
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 2,370,706 2,015,943 - -
Translation reserve (118,514,344) (113,285,956) - -
Retained earnings 100,325,002 100,386,012 631,352 1,576,763
------------- ------------- ---------- ----------
Total Equity 57,942,288 62,876,923 74,392,276 75,337,687
------------- ------------- ---------- ----------
Non-Current Liabilities
Borrowings 2,368,296 3,892,851 - -
Lease liabilities 2,076,668 4,306,929 - -
Deferred taxes 4,559,927 4,651,541 - -
Deferred income 1,492,432 1,421,368 - -
Provision for site
restoration 150,878 74,435 - -
Total Non-Current
Liabilities 10,648,201 14,347,124 - -
------------- ------------- ---------- ----------
Current liabilities
Trade and other
payables 4,075,078 6,203,453 - -
Accrued and other
liabilities 1,531,039 1,405,123 186,748 155,853
Borrowings 4,429,053 6,420,573 - -
Lease liabilities 1,830,755 2,190,586 - -
Deferred income 106,420 81,387 - -
Taxes payable 705,278 560,053 - -
Total Current Liabilities 12,677,623 16,861,175 186,748 155,853
------------- -------------
Total Liabilities 23,325,824 31,208,299 186,748 155,853
------------- -------------
Total Equity and
Liabilities 81,268,112 94,085,222 74,579,024 75,493,510
============= ============= ========== ==========
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Distributable
The Group Share capital Revaluation Translation Retained Net
reserve reserve earnings
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 loss - 685,620 (5,228,388) - (4,542,768)
-------------- ------------ -------------- -------------- -------------
Total comprehensive
income/(loss)
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 through
use - (330,857) - 330,857 -
-------------- ------------ -------------- -------------- -------------
As of 31 December 2020 73,760,924 2,370,706 (118,514,344) 100,325,002 57,942,288
============== ============ ============== ============== =============
Distributable
The Group Share capital Revaluation Translation Retained Net
reserve reserve earnings
USD USD USD USD USD
As of 1 January 2019 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 -
-------------- ------------ -------------- -------------- ------------
As of 31 December 2019 73,760,924 2,015,943 (113,285,956) 100,386,012 62,876,923
============== ============ ============== ============== ============
STATEMENTS OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
The Group The Company
2020 2019 2020 2019
USD USD USD USD
CASH FLOWS FROM/(USED
IN) OPERATING ACTIVITIES
Profit before income
tax 13,101,186 12,542,100 10,563,915 9,566,759
Adjustments for:
Depreciation of property,
plant and equipment 6,873,876 6,880,944 - -
Depreciation of right-of-use
assets 2,116,952 2,285,530 - -
Amortisation of site
restoration costs - 1,410 - -
Dividend income - - (9,441,251) (8,678,970)
Reversal of dividend - - - -
accrued
Loss on disposal of property,
plant and equipment 26,546 140,656 - -
Interest income (199,332) (128,375) (1,356,009) (1,242,710)
Finance costs 1,249,051 2,061,008 - -
Net foreign exchange
loss 702,427 84,400 - 1,339
Provision for obsolete
inventories 100,475 36,146 - -
Credit loss allowance
for doubtful receivables 813,812 433,412 - -
Allowance for advances
paid to third parties 69,152 142,400 - -
Reversal of provision
for obsolete inventories (170,345) (118,792) - -
Deferred income (108,310) (246,290) - -
Operating profit/(loss)
before working capital
changes 24,575,490 24,114,189 (233,345) (353,582)
Movement in working capital:
(Increase)/Decrease in:
Inventories (2,528,062) 2,704,172 - -
Trade and other receivables 2,167,282 (2,687,961) - -
Loans and advances to
subsidiary companies - - (76,385) (63,520)
Advances and prepaid
expenses (390,332) (1,514,504) 10,096 (9,240)
(Decrease)/Increase in:
Trade and other payables (1,538,598) (354,224) - -
Accrued and other liabilities 449,819 (2,002,941) 30,925 (903,911)
------------ ------------ ------------ -----------
Cash Generated From/(Used
In) Operations 22,735,599 20,258,731 (268,709) (1,330,253)
Income tax paid (2,925,488) (493,734) - -
Net Cash From/(Used In)
Operating Activities 19,810,111 19,764,997 (268,709) (1,330,253)
------------ ------------ ------------ -----------
CASH FLOWS FROM/(USED
IN) INVESTING ACTIVITIES
Purchase of property,
plant and equipment (3,108,678) (2,837,509) - -
Contribution to site
restoration fund (33,825) (14,982) - -
Proceeds from disposal
of property, plant and
equipment 134,630 149,482 - -
Dividends received from
subsidiary - - 11,509,326 8,389,233
Interest received 199,332 128,735 1,359,861 1,568,481
------------ ------------ ------------ -----------
Net Cash (Used In)/From
Investing Activities (2,808,541) (2,574,274) 12,869,187 9,957,714
------------ ------------ ------------ -----------
CASH FLOWS FROM/(USED
IN) FINANCING ACTIVITIES
Proceeds from bank borrowings 7,414,558 7,834,646 - -
Repayment of bank borrowings (9,657,053) (9,432,630) - -
Repayment of lease liabilities (2,014,790) (1,929,741) - -
Dividends paid (11,509,326) (8,389,233) (11,509,326) (8,389,233)
Interest paid (1,240,129) (2,036,609) - -
------------ ------------ ------------ -----------
Net Cash Used In Financing
Activities (17,006,740) (13,953,567) (11,509,326) (8,389,233)
------------ ------------ ------------ -----------
NET (DECREASE)/INCREASE
IN CASH AND CASH EQUIVALENTS (5,170) 3,237,156 1,091,152 238,228
EEFFECTS OF FOREIGN EXCHANGE
RATE CHANGES (795,510) 57,713 - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 9,014,360 5,719,491 261,798 23,570
------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR 8,213,680 9,014,360 1,352,950 261,798
============ ============ ============ ===========
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June 07, 2021 03:01 ET (07:01 GMT)
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