Steppe Cement Limited

Interim / Quarterly Report • Sep 18, 2018

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RNS Number : 0518B

Steppe Cement Limited

18 September 2018

Steppe Cement Ltd

Interim Results for the Half Year 30 June 2018

and General Market Update

1. Interim Results

Steppe Cement Ltd ("Steppe Cement" and "the Company") posted a consolidated profit after tax of USD0.2 million for the six months ended 30 June 2018.

	6 months ended 30 June 18	6 months ended 30 June 17	% of change
Sales (Tonnes)	738,228	650,333	14%
Consolidated turnover KZT million	10,539	8,553	23%
Consolidated turnover (USD Million)	32.8	26.8	22%
Consolidated profit (loss) after tax (USD Million)	0.2	(0.3)
Profit (loss) per share (Cents)	0.1	(0.2)
Average exchange rate (USD/KZT)	326	319

·     The Company continued its strategy of focusing on price rather than in volume until the summer.

·     The average ex-factory price increased from 11,147 KZT /tonne to 11,560 KZT /tonne or 4% during the period.

·     Steppe Cement's gross margin increased from 27% to 32% in USD terms mostly because of better pricing in markets further from the factory.

·     Selling expenses increased as sales to the south and exports grew significantly.

·     Administrative expenses were maintained relative to turnover and were increased compared to 2017 due to bonus payment.

·     The Kazakh Tenge depreciated slightly in the first half by 2% compared to the first half of 2017. The company booked foreign exchange losses of USD 0.5 million in the first half of 2018 compared to a gain of USD 0.57 million in 1H2017.

·     The company generated operating profit before working capital changes of USD 5.4 million in 1H 2018 against USD 4.9 million in 2017.

·     The Kazakhstan economy grew at 4.1% in the first half 2018.

·     Reported inflation has been 2.9% until the end of August 2018.

2. Production costs

·     Cement production costs per tonne were maintained in KZT as inflation was offset by the higher volumes achieved.

3. Update on the Kazakh cement market

·     The Kazakh cement market grew at 5% during the first half of the year. Steppe Cement expects a market of about 9 million tonnes for the full year 2018 similar to 2017.

·     Steppe Cement increased its local market share from 14.5% in 1H2017 to 15.5% in 1H2018. We expect to achieve 17% for the full year. Exports represented 12% of the volumes in the 1H2018 from 10% last year.

·     Imports into Kazakhstan have increased by 30% in 2018 to 0.34 million tonnes and they represent 8% of the market up from 6% last year.

·     Exports from Kazakhstan have increased from 0.45 million tonnes to 0.92 million tonnes in the first half of 2018, mostly due to demand from Uzbekistan.

·     Exports from Kazakhstan now represent 19% of local production up from 11% last year.

·     Overall production of all factories in Kazakhstan has increased by 14% to 4.8 million tonnes for the 1H2018. This increase will most likely not be maintained in the second half.

·    Currently 78% of production in the country is coming from dry lines, an increase of 4% compared to last year's level.

·     Construction remains strong particularly in the west and south of the country.

4. Financing

The debt position of the company as of 30 June 2018 comprised:

·     A capital loan of USD 4 million from Halyk bank at 6% p.a. interest due in 2019.

·     A long-term USD 7 million loan from Halyk Bank for the purchase of the wagons and repayable monthly till November 2021 at 6.5% p.a. and secured with the pledge of the wagons.

·     Loans of KZT1,688 million and KZT 580 million from Halyk Bank JSC subsidised by the government for capital investment at 6%.

·     We have maintained KZT3.9 billion of available working capital lines from Halyk Bank, Altyn Bank and VTB Bank. The current rates are 6% p.a. in USD and 12% p.a. in KZT.

As of 30 June 2018 we had the equivalent of USD 2.7 million outstanding from these working capital loans.

·     As of 31 August 2018, the first Halyk bank loan of USD 4 million had been repaid and the working capital lines reimbursed. The total bank debt net of cash amounted to USD11 million of which 64% is denominated in USD and the balance in KZT.

The following are the unaudited condensed consolidated statements of profit and loss, comprehensive income, financial position, changes in equity and cash flows. A copy of the full interim financial statements is available on the company's website at www.steppecement.com.

Steppe Cement's AIM nominated adviser and broker is RFC Ambrian Limited.

Nominated Adviser: Contact Stephen Allen or Andrew Thomson at +61 8 94802500.

Broker: Contact Charlie Cryer at +44 20 3440 6800

SUMMARY OF INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

(In United States Dollars)

The Notes to the Interim Financial Statements form an integral part of the Condensed Financial Statements. Please visit the Company's website at www.steppecement.com to view the full interim financial statements.

STEPPE CEMENT LTD

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

AND ITS SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS

FOR THE PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

		The Group				The Company
		6 months ended				6 months ended
		30 June 2018		30 June 2017		30 June 2018		30 June 2017
		USD'000		USD'000		USD'000		USD'000
Revenue		32,838		26,839		50		50
Cost of sales		(22,114)		(20,050)		-		-
Gross profit		10,724		6,789		50		50
Selling expenses		(6,450)		(4,145)		-		-
General and administrative
expenses		(2,838)		(2,195)		(145)		(138)
Operating profit/(loss)		1,436		449		(95)		(88)
Interest income		15		16		^		^
Finance costs		(942)		(1,310)		-		-
Net foreign exchange (loss)/gain		(500)		572		21		47
Other income, net		396		278		-		-
Profit/(Loss) before income tax		405		5		(74)		(135)
Income tax expense		(199)		(346)		(2)		-
Profit/(Loss) for the period		206		(341)		(76)		(135)
Attributable to:
Shareholders of the Company		206		(341)		(76)		(135)
Profit/(Loss) per share:
Basic and diluted (cents)		0.1		(0.2)

^ Insignificant amount.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

		The Group				The Company
		6 months ended				6 months ended
		30 June 2018		30 June 2017		30 June 2018		30 June 2017
		USD'000		USD'000		USD'000		USD'000
Profit/(Loss) for the period		206		(341)		(76)		(135)
Other comprehensive (loss)/income:
Item that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign subsidiary companies		(1,756)		2,453		-		-
Total other comprehensive income for the period		(1,756)		2,453		-		-
Total comprehensive (loss)/income for the period		(1,550)		2,112		(76)		(135)
Attributable to:
Shareholders of the Company		(1,550)		2,112		(76)		(135)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018 (UNAUDITED)

		The Group					The Company
			Unaudited		Audited		Unaudited		Audited
			30 June 2018		31 Dec 2017		30 June 2018		31 Dec 2017
			USD'000		USD'000		USD'000		USD'000
Assets
Non-Current Assets:
Property, plant and equipment			64,597		67,358		-		-
Investment in subsidiary companies			-		-		26,500		26,500
Advances and prepaid expenses			226		509		-		-
Other assets			537		1,248		-		-
Total Non-Current Assets			65,360		69,115		26,500		26,500
Current Assets
Inventories			14,016		13,014		-		-
Trade and other receivables			5,469		3,102		3,435		3,435
Income tax receivable			179		127		-		-
Loans and advances to subsidiary companies			-		-		39,467		39,605
Advances and prepaid expenses			3,707		3,477		19		9
Cash and cash equivalents			3,654		3,045		90		13
Total Current Assets			27,025		22,765		43,011		43,060
Total Assets			92,385		91,880		69,511		69,560

		The Group					The Company
			Unaudited		Audited		Unaudited		Audited
			30 June 2018		31 Dec 2017		30 June 2018
			USD'000		USD'000		USD'000		USD'000
Equity and Liabilities
Capital and Reserves
Share capital			73,761		73,761		73,761		73,761
###### Revaluation reserve			2,494		2,680		-		-
Translation reserve			(108,497)		(106,741)		-		-
Retained earnings/ (Accumulated loss)			87,318		89,817		(8,242)		(5,275)
Total Equity			55,076		59,517		65,519		68,486
Non-Current Liabilities
Borrowings			9,013		9,835		-		-
Deferred taxes			794		638		-		-
Deferred income			1,866		1,519		-		-
Provision for site restoration			69		67		-		-
Total Non-Current Liabilities			11,742		12,059		-		-
Current liabilities
Trade and other payables			9,583		7,684		2,891		-
Accrued and other liabilities			6,147		2,229		1,094		1,069
Borrowings			8,759		10,195		-		-
Taxes payable			1,078		196		7		5
Total Current Liabilities			25,567		20,304		3,992		1,074
Total Liabilities			37,309		32,363		3,992		1,074
Total Equity and Liabilities			92,385		91,880		69,511		69,560

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

			Non-distributable				Distributable
The Group	Share capital		Revaluation reserve		Translation reserve		Retained earnings		Total
	USD'000		USD'000		USD'000		USD'000		USD'000
Balance as at 1 January 2018	73,761		2,680		(106,741)		89,817		59,517
Profit for the period	-		-		-		206		206
Other comprehensive loss	-		-		(1,756)		-		(1,756)
Total comprehensive (loss)/income for the period	-		-		(1,756)		206		(1,550)
Dividend payable	-		-		-		(2,891)		(2,891)
Transfer of revaluation reserve relating to the depreciation of property, plant and equipment through use	-		(186)		-		186		-
Balance as at 30 June 2018	73,761		2,494		(108,497)		87,318		55,076

			Non-distributable				Distributable
The Group	Share capital		Revaluation reserve		Translation reserve		Retained earnings		Total
	USD'000		USD'000		USD'000		USD'000		USD'000
Balance as at 1 January 2017	73,761		3,062		(106,985)		88,203		58,041
Loss for the period	-		-		-		(341)		(341)
Other comprehensive income	-		-		2,453		-		2,453
Total comprehensive income/(loss) for the period	-		-		2,453		(341)		2,112
Transfer of revaluation reserve relating to the depreciation of property, plant and equipment through use	-		(197)		-		197		-
Balance as at 30 June 2017	73,761		2,865		(104,532)		88,059		60,153

The Company	Share capital		Accumulated losses		Total
	USD'000		USD'000		USD'000
Balance as at 1 January 2018	73,761		(5,275)		68,486
Total comprehensive loss for the period	-		(76)		(76)
Dividend payable	-		(2,891)		(2,891)
Balance as at 30 June 2018	73,761		(8,242)		65,519
Balance as at 1 January 2017	73,761		(8,454)		65,307
Total comprehensive loss for the period	-		(135)		(135)
Balance as at 30 June 2017	73,761		(8,589)		65,172

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2018 (UNAUDITED)

			The Group				The Company
			6 months ended				6 months ended
			30 June 2018		30 June 2017		30 June 2018		30 June 2017
			USD'000		USD'000		USD'000		USD'000
#### OPERATING ACTIVITIES
Profit/(Loss) before income tax			405		5		(73)		(135)
Adjustments for non-cash items			4,870		4,898		(21)		47
Operating Profit/(Loss) Before Working Capital Changes			5,275		4,903		(94)		(88)
(Increase)/ Decrease in:
Inventories			(1,309)		(1,741)		-		-
Trade and other receivables,			(2,169)		(2,878)		(12)		(11)
advances and prepaid expenses
Loans and advances to subsidiary companies			-		-		-		88
Increase/(Decrease) in:
Trade and other payables,			4,038		1,234		45		67
accrued and other liabilities
Loans and advances to subsidiary companies			-		-		138		-
Cash Generated From Operations			5,835		1,518		77		56
Income tax paid			-		(51)		-		-
Interest paid			(947)		(1,303)		-		-
Net Cash Generated From  Operating Activities			4,888		164		77		56
INVESTING ACTIVITIES
Purchase of property, plant and equipment			(2,437)		(740)		-		-
Purchase of other assets			(28)		(32)		-		-
Interest received			15		16		-		-
Net Cash Used In Investing Activities			(2,450)		(756)		-		-
FINANCING ACTIVITIES
Proceeds from borrowings			7,253		13,611		-		-
Repayment from borrowings			(9,013)		(12,319)		-		-
Net Cash (Used In)/Generated From Financing Activities			(1,760)		1,292		-		-
NET INCREASE IN CASH AND CASH EQUIVALENTS			678		700		77		56
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES			(69)		30		-		-
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD			3,045		1,023		13		74
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD			3,654		1,753		90		130

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