Annual Results

RNS Number : 3139I

Steppe Cement Limited

14 June 2011

 



Annual results (unaudited) for the year ended 31 December 2010

Steppe Cement Ltd ("Steppe Cement" or "the Company") is pleased to announce its annual results (unaudited) for the year ended 31 December 2010:

Key financials	Year ended 31-Dec-10	Year ended 31-Dec-09	Inc/(Dec) %
Sales (tonnes of cement)	1,153,874	930,297	24
Consolidated turnover (USD Million)	72.8	59.1	23
Consolidated loss before tax (USD Million)	(6.9)	(19.0)	(64)
Consolidated loss after tax (USD Million)	(3.7)	(16.5)	(77)
Loss per share (US cents)	(2.4)	(12)	(80)
Shareholders' funds (USD Million)	124.7	102.0	22
Average exchange rate (USD/KZT)	147.4	147.8	0
Exchange rate as at year end (USD/KZT)	147.4	148.4	0

 CEO Statement 

Steppe Cement continued to improve its volumes while the market confirmed the turnaround started in the second half of 2009, even though cement prices remained flat. Steppe Cement reduced its losses to USD 3.7 million, increased its capacity utilization to 75% and continued operational improvements that helped offset the effects of low cement prices and higher utility and transportation costs. Steppe Cement managed to successfully raise additional equity in November 2010 with proceeds mainly to be utilised towards the repayment of the bonds due in August 2011. Steppe Cement stands to benefit from both the deleveraging of its balance sheet and Tenge strength against the USD. The cement market continues to improve and Steppe Cement has started to reconsider the completion of line 5 subject to better outlook in market prices and financing.

The market volume increased by 12% in 2010 and we expect continued growth in 2011

The Kazakh cement market demand in 2010 amounted to 5.7 million tonnes, an increase of 12% compared to 5.1 million tonnes in 2009, confirming the recovery announced in the second half of 2009. Our expectations are that overall market demand in 2011 will increase by 7% to 6.1 million tonnes, a level close to that achieved in 2006.

Imports declined again in 2010 and the share of local producers increased from 78% to 80%. Average cement prices were stable when compared to the previous year in Tenge and USD terms at USD 54 per tonne ex-factory or approximately USD 63 per tonne delivered.

Steppe Cement managed to increase its volumes by 24% and its market share from 18% to 20%. We are seeking to maintain our market share and increase prices in 2011. 

The dry line continues to improve its performance while wet lines costs have been optimised

The four wet lines produced 597,513 tonnes in 2010, a reduction of 5% when compared to 2009. The dry line contributed 556,361 tonnes, an increase of 90% over 2009. This trend will continue in the coming years as the capacity of line 6 increases and line 5 is brought into production.

The wet lines can produce 2,000 tonnes of clinker per day or 2,450 tonnes of cement per day. However, preference is given to the dry line whenever technically possible. 

Line 6 produced up to 2,100 tonnes of clinker per day in 2010 and it is now able to produce 2,500 tonnes per day of clinker or the equivalent of 3,100 tonnes of cement. Improvements in 2010 included pre heater fans, cooler, a new burner, modifications to the cooler, changes in the kiln inlet seal and the pre-heater.

We have improved the cement mills and they allow us to produce at least 150,000 tonnes of cement per month. We intend to run the wet lines and line 6 to their maximum capacity during the summer months and carry some stock during the winter months. 

Costs increased in 2010 driven by external inputs (electricity, coal and transport) but were partly offset by higher productivity and lower fuel consumption

During 2010, we had increases in the cost of electricity, coal and transportation while we managed to reduce the labour cost and the fuel consumption per tonne. This allowed us to limit the cash cost increase from USD 37 to USD 38 per tonne.

Selling expenses reflecting mostly delivery costs increased from USD 8.2 per tonne in 2009 to USD 10.5 per tonne. This was due to a combination of higher wagon rental rates, rates charged by the Kazakhstan TemirZholy (the national railway company) and the fact that more cement was sold into markets further from the factory, such as Almaty, where a major sales effort was made.

General and administrative expenses increased by 4% from 2009 while the official inflation rate was 7.8% in 2010.

In 2011, we again expect increasing costs of electricity and transportation that will be partly offset by the increasing productivity from the dry line resulting in lower energy consumption per unit of production. We intend to start a number of projects to reduce the impact of the inflation in utility prices. 

The labour count stands at 1,057 as of March 2011 compared with 1,125 in March 2010. We have 763 employees in the wet lines and administration and 294 in the dry line.

The Kazakh economy has continued to rebound in 2010, helped by higher commodity prices. According to National Bank of Kazakhstan the Gross Domestic Product grew by 7% in 2010. The government has maintained its program of road and railway construction and infrastructure investment in the main cities.

Some of the main Kazakh banks have completed the restructuring of their debts and cut sharply the credit to the construction sector and the economy at large. We are now seeing signs of increased lending activity although the recovery will probably only be felt in 2012.

The VAT and corporate income tax rate remain at 12% and 20% respectively and it seems that further revisions are unlikely during 2011. Karcement, the wholly owned subsidiary of Steppe Cement, enjoys a 0% income tax rate until 2014.

Finance cost and loans

In 2010, depreciation and finance costs amounted to USD 9.3 million and USD 6.2 million respectively. 

During 2010, we successfully renegotiated the EBRD and HSBC loans. The loan's maturity was extended by two years to September 2015 and the interest increased to an average of Libor (6 months USD) + 5.9% from Libor (6 months USD) + 4.7%.

In November 2010, Steppe Cement issued 25 million new shares in the AIM market of the London Stock Exchange at 40 pence per share that raised GBP 9.7 million net of expenses. The total number of outstanding shares stands at 179 million reflecting a stronger capital base. The proceeds were kept in cash or used to reduce short-term loans.

Steppe Cement expects to repay the KZT 2.7 billion bonds listed in the Kazakhstan Stock Exchange in August 2011.

As of 31 December 2010, the total indebtedness decreased to USD 73.7 million down from USD 80.7 million in 2009 and the cash reserves stood at USD 9.5 million. As of 8 June 2011, the cash balance exceeded USD 15 million.

Steppe Cement undertook a revaluation of the land and buildings during 2010 in line with the practice of revaluing the properties every five years. The result has been an increase of the value of properties by USD 12.7 million that is reflected in the fixed assets and equity.

We have restarted the budgeting and evaluation of the pending works to complete the refurbishment of line 5. The decision of the continuation will be made based on the evolution of the market, the competition, and the availability of long term financing.

Dividends will not be proposed in respect of the 2010 financial year.  Neither is it expected that a dividend will be proposed in respect of the 2011 financial year.

 Javier del Ser
Chief Executive Officer

Annual Report and Annual General Meeting 2011

Steppe Cement expects to release its 2010 Annual Report on its web site www.steppecement.com during the week commencing 20 June 2011.

The Company's Annual General Meeting will take place in its Malaysian Office at Suite 10, 10th Floor, West Wing, Rohas Perkasa, 8 Jalan Perak, Kuala Lumpur, Malaysia on, 4 July 2011 at 2.30 p.m.

Steppe Cement's AIM nominated adviser is RFC Corporate Finance Ltd.

Contact Stephen Allen or Trinity McIntyre on [phone].

STEPPE CEMENT LTD

(Incorporated in Labuan FT, Malaysia under the Labuan Companies Act, 1990)

AND ITS SUBSIDIARY COMPANIES

INCOME STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010

			The Group				The Company
			2010		2009		2010		2009
			USD		USD		USD		USD
Revenue			72,848,722		59,128,534		100,000		100,000
Cost of sales			(51,829,026)		(41,301,565)		-		-
Gross profit			21,019,696		17,826,969		100,000		100,000
Selling expenses			(12,094,165)		(7,600,633)		-		-
General and administrative
expenses			(10,252,237)		(9,864,821)		(486,140)		(550,667)
Operating (loss)/profit			(1,326,706)		361,515		(386,140)		(450,667)
Investment income			2,407		88,945		52		406
Finance costs			(6,239,700)		(6,825,090)		-		-
Other income/(expense), net			644,796		(12,625,398)		104,115		61,582
Loss before income tax			(6,919,203)		(19,000,028)		(281,973)		(388,679)
Income tax credit			3,181,440		2,483,108		-		-
Loss for the year			(3,737,763)		(16,516,920)		(281,973)		(388,679)
Attributable to:
Shareholders of the Company			(3,737,763)		(16,516,920)		(281,973)		(388,679)
Loss per share:
Basic (cents)			(2)		(12)

 

 

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

			The Group				The Company
			2010		2009		2010		2009
			USD		USD		USD		USD
Loss for the year			(3,737,763)		(16,516,920)		(281,973)		(388,679)
Other comprehensive Income/(Loss):
Revaluation of property, plant and equipment			12,681,224		-		-		-
Deferred tax assets from revaluation of property, plant and equipment			(2,536,249)		-		-		-
Effects of change in tax rate			(1,069,542)		810,328		-		-
Exchange differences arising on translation of foreign subsidiary companies			1,919,194		(26,263,752)		-		-
Total comprehensive income/(loss) for the year			7,256,864		(41,970,344)		(281,973)		(388,679)
Attributable to:
Shareholders of the Company			7,256,864		(41,970,344)		(281,973)		(388,679)

 

STATEMENTS OF FINANCIAL POSITION

AS OF 31 DECEMBER 2010

			The Group					The Company
				2010		2009		2010		2009
				USD		USD		USD		USD
Assets
Non-Current Assets:
Property, plant and equipment				142,509,056		135,126,257		-		-
Investment in subsidiary companies				-		-		26,500,001		26,500,001
Advances paid				322,467		6,704,505		-		-
Other assets				32,434,084		28,181,945		-		-
Total Non-Current Assets				175,265,607		170,012,707		26,500,001		26,500,001
Current Assets
Inventories, net				15,333,961		14,275,514		-		-
Trade receivables, net				2,135,095		825,764		-		-
Amount owing by subsidiary companies				-		-		28,589,870		10,889,037
Other receivables, advances and prepaid expenses				8,576,274		7,483,068		987		3,836
Short-term investments				-		-		-		-
Cash and bank balances				9,531,530		6,545,329		964,171		3,885,860
Total Current Assets				35,576,860		29,129,675		29,555,028		14,778,733
Total Assets				210,842,467		199,142,382		56,055,029		41,278,734

		The Group					The Company
			2010		2009		2010		2009
			USD		USD		USD		USD
Equity and Liabilities
Capital and Reserves
Share capital			58,298,542		1,540,000		58,298,542		1,540,000
Share premium			-		41,296,193		-		41,296,193
Revaluation reserve			10,940,027		3,023,894		-		-
Translation reserve			(18,944,421)		(20,863,615)		-		-
Retained earnings/ (Accumulated loss)			74,425,068		77,003,531		(3,038,846)		(2,756,873)
Total Equity			124,719,216		102,000,003		55,259,696		40,079,320
Non-Current Liabilities
Bonds			-		18,034,674		-		-
Loans			52,462,014		43,031,506		-		-
Deferred tax liabilities, net			4,687,225		6,420,953		-		-
Total Non-Current Liabilities			57,149,239		67,487,133		-		-
Current liabilities
Trade payables			4,465,134		6,445,945		-		-
Other payables and accrued liabilities			2,617,740		3,213,763		795,333		747,793
Bonds			18,954,923		-		-		-
Loans			2,248,456		19,682,609		-		-
Amount owing to subsidiary companies			-		-		-		451,621
Taxes payable			687,759		312,929		-		-
Total Current Liabilities			28,974,012		29,655,246		795,333		1,199,414
Total Liabilities			86,123,251		97,142,379		795,333		1,199,414
Total Equity and Liabilities			210,842,467		199,142,382		56,055,029		41,278,734

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

 

			Non-distributable						Distributable
The Group	Share capital		Share Premium		Revaluation reserve		Translation reserve		Retained earnings			Total/Net
	USD		USD		USD		USD		USD			USD
Balance as at 1 January 2009	1,140,000		26,646,982		3,364,936		5,400,137			92,369,081			128,921,136
Loss for the year	-		-		-		-			(16,516,920)			(16,516,920)
Effects of change in tax rate	-		-		810,328		-			-			810,328
Exchange differences arising on   translation of foreign subsidiary companies	-		-		-		(26,263,752)			-			(26,263,752)
Total comprehensive income/(loss) for the year	-		-		810,328		(26,263,752)			(16,516,920)			(41,970,344)
Transfer on revaluation reserve relating to property, plant and equipment through use	-		-		(1,151,370)		-			1,151,370			-
Issue of shares	400,000		14,688,578		-		-			-			15,088,578
Share issue expenses	-		(39,367)		-		-			-			(39,367)
Balance as at 31 December 2009	1,540,000		41,296,193		3,023,894		(20,863,615)			77,003,531			102,000,003

			Non-distributable						Distributable
The Group	Share capital		Share Premium		Revaluation reserve		Translation reserve		Retained earnings			Total/Net
	USD		USD		USD		USD		USD			USD
Balance as at 1 January 2010	1,540,000		41,296,193		3,023,894		(20,863,615)			77,003,531			102,000,003
Loss for the year	-		-		-		-			(3,737,763)			(3,737,763)
Revaluation of property, plant and equipment	-		-		12,681,224		-			-			12,681,224
Deferred tax assets from revaluation of property, plant and equipment	-		-		(2,536,249)		-			-			(2,536,249)
Effects of change in tax rate	-		-		(1,069,542)		-			-			(1,069,542)
Exchange differences arising on   translation of foreign subsidiary companies	-		-		-		1,919,194			-			1,919,194
Total comprehensive income/(loss) for the year	-		-		9,075,433		1,919,194			(3,737,763)			7,256,864
Issue of shares	250,000		15,724,957		-		-			-			15,974,957
Share issue expenses	-		(512,608)		-		-			-			(512,608)
Conversion to no par value shares	56,508,542		(56,508,542)		-		-			-			-
Transfer on revaluation reserve relating to property, plant and equipment through use	-		-		(1,159,300)		-			1,159,300			-
Balance as at 31 December 2010	58,298,542		-		10,940,027		(18,944,421)			74,425,068			124,719,216

 

END

 

 

FR UOVWRAVANARR