Preliminary Results Update

RNS Number : 9502J

Steppe Cement Limited

12 April 2010

 



Preliminary annual results (unaudited) for the year ended 31 December 2009

Steppe Cement Ltd ("Steppe Cement" or "the Company") is pleased to announce its preliminary annual results (unaudited) for the year ended 31 December 2009:

Key financials	Year ended 31-Dec-09	Year ended 31-Dec-08	Inc/ (Dec) %
Sales (tonnes of cement)	930,297	805,000	+16%
Consolidated turnover in USD Million	59.1	91.5	(35%)
Consolidated profit (loss) before tax (USD Million)	(19.0)	26.6	(171%)
Consolidated profit (loss) after tax (USD Million)	(16.5)	18.6	(188%)
Earnings (loss) per share (US cents)	(12)	16	(175%)
Shareholders' funds (USD Million)	102.0	128.9	(21%)
Average exchange rate (USD/KZT)	147.8	120.3	(23%)
Exchange rate as at year end (USD/KZT)	148.4	120.8	(23%)

CEO Statement

Steppe Cement completed its first full year of operation with increasing capacity at a time when the cement market weakened, as both prices and volumes decreased significantly. The decision of the Government to devalue the Tenge in February 2009 increased the effective cost of servicing and repaying our USD denominated debt facilities and prompted us to issue new equity in May 2009. The market has improved from the summer 2009 and we expect to benefit in the coming years as we shall enjoy the lower production cost from the dry lines.

The market decreased by 10% in 2009 but we expect a recovery in 2010

The Kazakh cement market in 2009 was 5.1 million tonnes, being 10% down from the 5.7 million tonnes in 2008 and continued the declining trend from 2007 when the peak consumption of 7.6 million tonnes was recorded. However the Kazakh cement market reached similar sizes in the second half of 2009 as in second half of 2008 and above our previously announced forecast. Our expectations are that overall market demand in 2010 will be at least similar to that in 2008.

Import volumes halved in 2009 from 2008 and the share of the market of the local producers increased from 65% to 78%. Average cement prices decreased by 34% in Tenge and by 47% in USD to USD 55 per tonne ex factory or approximately USD 63 per tonne delivered.

In spite of poor market conditions Steppe Cement managed to increase its volumes by 16% and its market share from 14% to 18%. The Company is seeking to increase sales volumes by 15% in 2010 and its market share to 20%. Alongside this trend, we expect prices to increase during 2010.

Improvement in the dry lines will help reduce our costs and increase volumes

The four wet lines produced 637,000 tonnes during 2009 while the operating dry line (line 6) contributed 293,000 tonnes. These figures will be reversed in the coming years as the reliability and capacity of the dry line increases. The second string of the pre-heater in line 6 was commissioned and improvements in the pre-heater fans, cooler and the burner will allow us to increase its capacity to 2,300 tonnes per day of clinker (the equivalent of 2,900 tonnes per day of cement).

We have improved the cement mills and they should allow us to produce over 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 as much stock as we can during the winter months.

Dry line number 5 (1.4 million tonnes per year capacity) continues on stand-by. We shall study the demand and the cement pricing this summer and the Board will then decide the timing of its com-missioning during 2010. We estimate that an additional USD25 million is needed to complete line 5.

Costs were contained in 2009 but we expect some cost increases in 2010

During 2009 we managed to reduce the labour cost and maintain the cost of coal, electricity and transportation. However, in 2010 we expect costs of main inputs to increase by 5 to 15% especially electricity and transportation. Nevertheless, the increased productivity from the dry line will result in lower energy consumption per unit of production.

The labour count stands at 1,125 as of March 2010 compared with 1,313 in March 2009. We have 831 employees on the wet lines and 294 on the dry line.

The Kazakh economy has stabilized and we expect increasing demand from the government infrastructure programmes particularly in road construction

The increase in oil prices and Government spending accelerated the economic recovery and is having the desired effect in the construction sector. Some of the main banks opted to restructure their debts and cut sharply the credit to the construction companies and businesses at large. The Kazakhstan Government supported the financial sector and, early in the year, decided to devalue the currency to support the exporting industries and arrest the flight of capital. GDP was in negative territory most of the year although it just edged ahead in the last few months of 2009. The Government expects moderate growth in 2010.

The VAT and income tax rate remain at 12% and 20% respectively and it seems that further revisions are unlikely during 2010.

Financial cost and loans

In 2009 we charged nearly a full year of depreciation against line 6 totaling USD 4 million and we expensed the full interest cost on debt facilities associated with the dry line refurbishment of both dry lines 5 and 6 totaling USD 3.9 million.

During 2009 and the first quarter of 2010 we used most of our cash flow and the USD15 million proceeds from the May 2009 share issue to service and repay debt facilities. At 31 December 2009 our total indebtedness was USD 80.7 million of which USD 74.6 million corresponded to EBRD, HSBC and the bond holders.

In addition we have short term credit lines available from Halik Bank of up to USD 10 million and Bank Center Credit of up to USD 4 million to finance our working capital needs.

Dividends will not be proposed in respect of the 2009 year and it is not expected that a dividend will be proposed in respect of the 2010 year.

Javier del Ser
Chief Executive Officer

Annual report and Annual General Meeting 2010

Steppe Cement expects to release its 2009 Annual Report on its web site www.steppecement.com during the week commencing 20 April 2010.

The Company's Annual General Meeting will take place in its Malaysian Office at Suite 10, 10^th Floor, West Wing, Rohas Perkasa, 8 Jalan Perak, Kuala Lumpur Malaysia  on Monday, 10 May 2010 at 2.00 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 2009

			The Group				The Company
			2009		2008		2009		2008
			USD		USD		USD		USD
Revenue			59,128,534		91,525,652		100,000		100,000
Cost of sales			(41,301,565)		(40,859,535)		-		-
Gross profit			17,826,969		50,666,117		100,000		100,000
Selling expenses			(7,600,633)		(7,536,189)		-		-
General and administrative
Expenses			(9,864,821)		(13,892,248)		(550,667)		(591,711)
Operating Profit			361,515		29,237,680		(450,667)		(491,711)
Investment income			88,945		21,545		406		-
Finance costs			(6,825,090)		(2,804,520)		-		-
Other (expense)/ income, net			(12,625,398)		180,640		61,582		2,524
(Loss)/profit before  income tax			(19,000,028)		26,635,345		(388,679)		(489,187)
Income tax credit/(expense)			2,483,108		(7,993,412)		-		-
(Loss)/Profit for the  year			(16,516,920)		18,641,933		(388,679)		(489,187)
Attributable to:
Shareholders of the  Company			(16,516,920)		18,641,933		(388,679)		(489,187)
(Loss)/Earnings per share:
Basic (cents)	10		(12)		16

 

 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

			The Group				The Company
			2009		2008		2009		2008
			USD		USD		USD		USD
(Loss)/Profit for the year			(16,516,920)		18,641,933		(388,679)		(489,187)
Other comprehensive (Loss)/Income:
Effects of changes in tax rate			810,328		-		-		-
Exchange differences arising on translation of foreign subsidiary companies			(26,263,752)		(189,393)		-		-
Total comprehensive (Loss)/Income for the year			(41,970,344)		18,452,540		(388,679)		(489,187)
Attributable to:
Shareholders of the Company			(41,970,344)		18,452,540		(388,679)		(489,187)

 

STATEMENT OF FINANCIAL POSITION

AS OF 31 DECEMBER 2009

			The Group					The Company
				2009		2008		2009		2008
				USD		USD		USD		USD
Assets
Non-Current Assets:
Property, plant and equipment				135,126,257		172,250,501		-		-
Investment in subsidiary companies				-		-		26,500,001		26,500,001
Advances paid				6,704,505		9,145,506		-		-
Other assets				28,181,945		33,492,095		-		-
Total Non-Current Assets				170,012,707		214,888,102		26,500,001		26,500,001
Current Assets
Inventories, net				14,275,514		20,508,732		-		-
Trade receivables, net				825,764		957,932		-		-
Amount owing by subsidiary companies				-		-		10,889,037		746,873
Other receivables, advances and prepaid expenses				7,483,068		8,950,510		3,836		3,467
Short-term investments				-		2,391,437		-		-
Cash and bank balances				6,545,329		729,636		3,885,860		135,408
Total Current Assets				29,129,675		33,538,247		14,778,733		885,748
Total Assets				199,142,382		248,426,349		41,278,734		27,385,749

		The Group					The Company
			2009		2008		2009		2008
			USD		USD		USD		USD
Equity and Liabilities
Capital and Reserves
Share capital			1,540,000		1,140,000		1,540,000		1,140,000
Share premium			41,296,193		26,646,982		41,296,193		26,646,982
Revaluation reserve			4,673,006		3,364,936		-		-
Translation reserve			(20,863,615)		5,400,137		-		-
Retained earnings/ (Accumulated loss)			75,354,419		92,369,081		(2,756,873)		(2,368,194)
Total Equity			102,000,003		128,921,136		40,079,320		25,418,788
Non-Current   Liabilities
Bonds			18,034,674		22,064,099		-		-
Loans			43,031,506		55,089,531		-		-
Deferred tax liabilities, net			6,420,953		9,547,207		-		-
Total Non-Current Liabilities			67,487,133		86,700,837		-		-
Current liabilities
Trade payables			6,445,945		12,341,535		-		-
Other payables and accrued liabilities			3,213,763		3,663,239		747,793		666,191
Loans			19,682,609		14,987,979		-		-
Amount owing to subsidiary companies			-		-		451,621		1,300,770
Taxes payable			312,929		1,811,623		-		-
Total Current Liabilities			29,655,246		32,804,376		1,199,414		1,966,961
Total Liabilities			97,142,379		119,505,213		1,199,414		1,966,961
Total Equity and Liabilities			199,142,382		248,426,349		41,278,734		27,385,749

 

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 

			Non-distributable						Distributable
The Group	Share capital		Share Premium		Revaluation reserve		Translation reserve		Retained earnings/(Accumulated loss)			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	-		-		2,459,440		-			(1,649,112)			810,328
Exchange differences arising on   translation of foreign subsidiary companies	-		-		-		(26,263,752)			-			(26,263,752)
Depreciation of revaluation surplus	-		-		(1,151,370)		-			1,151,370			--
Total comprehensive income/(loss) for the year	-		-		1,308,070		(26,263,752)			(17,014,662)			(41,970,344)
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		4,673,006		(20,863,615)			75,354,419			102,000,003

			Non-distributable						Distributable
The Group	Share capital		Share Premium		Revaluation reserve		Translation reserve		Retained earnings/(Accumulated loss)		Total/Net
	USD		USD		USD		USD		USD		USD
Balance as at 1 January 2008	1,140,000		26,646,982		4,601,668		5,589,530		72,490,416		110,468,596
Profit for the year	-		-		-		-		18,641,933		18,641,933
Exchange differences arising on   translation of foreign subsidiary companies	-		-		-		(189,393)		-		(189,393)
Depreciation of revaluation surplus	-		-		(1,236,732)		-		1,236,732		-
Total comprehensive income/(loss) for the year	-		-		(1,236,732)		(189,393)		19,878,665		18,452,540
Balance as at 31 December 2008	1,140,000		26,646,982		3,364,936		5,400,137		92,369,081		128,921,136

			Non-distributable
The Company	Share capital		Share Premium		Accumulated loss		Total/Net
Balance as at 1 January 2008	1,140,000		26,646,982		(1,879,007)		25,907,975
Total comprehensive loss for the year	-		-		(489,187)		(489,187)
Balance as at 31 December 2008	1,140,000		26,646,982		(2,368,194)		25,418,788
Balance as at 1 January 2009	1,140,000		26,646,982		(2,368,194)		25,418,788
Total comprehensive loss for the year	-		-		(388,679)		(388,679)
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		(2,756,873)		40,079,320

 

 

END

 

 

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