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Kazakhstan Kagazy (KAG)

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Thursday 30 December, 2010

Kazakhstan Kagazy

3rd Quarter Results

RNS Number : 7450Y
Kazakhstan Kagazy PLC
30 December 2010




2010, a year of consolidation


30 December, 2010                                                                                                             


Kazakhstan Kagazy PLC (the "Group"/the "Company") has pleasure in announcing its unaudited results for the 9 months ended 30 September 2010 (the "Period"). These results have been extracted from consolidated unaudited financial statements for the Period and reflect the measures taken by the Company during the last twelve months aimed at first consolidating and then improving the Group's position. The benefits can already be seen in the profitability of the third quarter of 2010. The management expects that this will continue in the fourth quarter of 2010 but that the full impact of these measures will be seen only in 2011.


·      Group revenue for the Period increased by 5.3% compared to the same period last year and amounted to 49.6 million USD.

·      Cash flow from operations for the period amounted to USD 12.8 million.

·      Group administrative expenses for the Period down by 21.9%

·      Revenue for the three months ended 30 September 2010 was USD17.5 million an increase of 4.3% compared with the same period last year.

·      Gross profit for the 3 months ended 30 September 2010 was USD5.9 million an increase of 31.0% compared with the same period last year.


Summary statement of comprehensive income

US$ 000

9m 2010

9m 2009

Revenue from sale of goods and services

49 620

47 106

Cost of goods and services sold

(34 280)

(30 108)

Gross profit

15 340

16 998


Selling expenses

(4 496)

(3 756)

Administrative expenses

(10 181)

(13 034)

Loss from Impairment of assets


(225 120)

Other operating (expenses)/income

(2 319)

2 608

Loss from operations

(1 656)

(222 304)


Financial income


17 095


9 000

Financing costs

(33 429)

(51 150)

Loss before tax

(17 990)

(264 454)

Income tax expenses



Net loss for the period

(17 990)

(264 301)






9m 2010

9m 2009







Rental income







Note: 1. Since April 2009, the Group has operated its class A warehouse which was previously rented to a third party. Accordingly, there is no rental income in 2010.



Appointment of new General director of Kazakhstan Kagazy JSC ("KKJSC")


On 25 November 2010 Kazakhstan Kagazy JSC, the holding company of the Group's Kazakh operations, announced the appointment of Taissiya Kogutyuk as the new General Director of KK JSC, the most senior executive role in the Group. Mrs. Kogutyuk has been the Administrative Director of KK JSC since 2003. She has played a key role in the restructuring of the Group's debt and her knowledge and experience make her ideally suited for this role.


Key operational restructuring measures




Production and sales increases have been complemented by efficiency increases (including the rationalization of the Group's production sites), significant price increases and the introduction of new management techniques based on the highly successful Japanese Kaizen system, which we expect will enable us to increase production further.




In November 2010 the Group consolidated its logistic operations (which comprise currently, the Class A warehouse ("PDL") and Class B warehouse ("Peak") and its container terminal ("AK") in Almaty) which are now the responsibility of Mr. Yermek Mubarakov, who had previously been responsible solely
for PDL. Mr. Mubarakov, who was appointed as the General Director of PDL in November 2009, has overseen the occupancy of the Group's Class A warehouse grow from 25.9% at the beginning of the year to 51.2% in November 2010. The new unified structure will provide an integrated service to its customers, which we hope will lead to improved efficiencies and increased revenues.


In the first quarter of 2011, we will finalize the upgrade of the systems at Astana Contract, concentrate on providing a fully integrated service and to maximize the benefits of the integration of the Group's logistics business.


Financial review




In the Period, Kagazy Recycling LLP cemented its commanding position in the paper, cardboard and corrugated package production in Kazakhstan.


·    Corrugated packaging production rose 21% to 72.5 million m2 (9m 2009 -
59.7 million m2);

·    Paper and board production rose 13% to 32 925 tones (9m 2009 - 29 052 tones);

·    In October and November 2010, sales of corrugated package reached record highs of over 10 million m2 per month (average for 2009 - 6.9 million m2);



In 2011, we will continue to strive to improve the quality of our products, and concentrate on identifying new sources for waste paper collection, and subject to finance being available increasing our product range.





The logistics business showed significant improvement in the Period. In May 2010, the logistics division undertook a reorganization resulting in improved operational activities.


Occupancy at Peak has increased from 38% in January 2010 to 59% in November 2010. The number of containers processed at Astana Contract in the Period increased by 16% or by 1,992 containers compared with the comparable period.



In November 2010, the Company restructured its loan from Alliance Bank ("Alliance") (USD 29.3 million) and at the same time, Alliance refinanced the Group's loan from Eurasian Bank ("Eurasian")
(USD 5.5 million) which matured in August 2010. This is a significant step in the restructuring of the Group's debt.

Alliance agreed to reduce the interest rate payable, to suspend interest and principal for a period (subject to the agreement to refinance in 2011 half of the Eurasian Loan), to re-dominate the loan in KZT and to waive all fines and penalties.

Negotiations with its other Banks continue and the Company is confident that agreement will be reached. 




Negotiations with Bondholders continue and the Company is confident that agreement will be reached. 


Mrs. Taisiya Kogutyuk, General Director of Kazakhstan Kagazy JSC, comments:


 "I am extremely pleased with the progress that has been made in 2010. The results of our operational restructuring are beginning to flow through into improved financial results and I expect that the full benefit of these actions will be shown in 2011. We will also benefit as the Kazakh economy continues to recover; increasing demand for our products and strengthening prices further.  We have made significant progress in our discussions with our lending banks and bond holders and I hope that this process will be completed in the first half of 2011".


The Group remains in constructive discussion with its lenders pursuant to the restructuring program and the Board of the Company notes that if agreement is not reached with bondholders of Kazakhstan Kagazy JSC or if discussions with the Group's lenders do not result in a satisfactory outcome, the ongoing prospects of the Group will be uncertain.


This announcement contains certain forward-looking statements regarding financial standing, results and activities of the Group. These statements and forecasts may contain definite risks and discrepancies as they relateto events and depend on circumstances that will occur in the future. There are important factors that could cause actual results, affecting on performance and achievements of the Company, so that the latter may differ significantly from the performance or achievements shown  or understood in such forward-looking statements. Information, contained in this announcement, should not be interpreted as a profit forecast.


Should you have questions, please contact us:


SP Angel Corporate Finance

David Facey

John Mackay                                                    +7 727 244 87 87 


Kazakhstan Kagazy JSC

Aida Yelgeldiyeva                                             +7 727 244 87 87


Kazakhstan Kagazy JSC

Nellya Kim                                                       +7 727 244 87 96

Press office

This information is provided by RNS
The company news service from the London Stock Exchange