Steppe Cement shares financial report

The overall domestic cement market increased by 2% to 8.9 million tonnes, while the company’s sales volume remained flat. Local sales increased by 4% while exports decreased by 29% due to increased competition from new factories and the strength of the KZT against the Uzbek Som in the second half of the year.

In 2019 Steppe Cement’s cost of production per tonne in KZT increased by 10%, higher than inflation of 5% due to coal and transportation pricing.

Steppe Cement operated both lines at 88% of their current combined capacity (which is 1.1 million t for line 5 and 0.85 million tonnes for line 6). Shareholders’ funds increased to US$62.9 million from US$61.0 million after dividend distribution to shareholders. The replacement cost of the company’s assets remains many times higher than its current book value.

The Kazakh cement market increased by 2% in 2019 but the company expects headwinds in 2020. The Kazakh cement market in 2019 was 8.9 million tonnes, an increase of 2% from 2018. Imports into Kazakshtan decreased by 10% to 0.7 million tonnes or 8% of the total market.

Exports from local producers decreased by 17% to 1.6 million tonnes. The market demand in 2020 is very difficult to estimate due to the drop in demand during the COVID-19 lock down period. The company expects a potential decrease of 10% as the effect of the lockdown and lower oil prices are felt across the economy. However, the company is still confident to maintain the volumes over the summer.

Exports, mostly to Uzbekistan and Kyrgyzstan, were reduced as they deployed their new factories and prices became more competitive. Still the companies located in the south of Kazakhstan benefited most. In April 2020, the government closed imports from Iran to west Kazakhstan and so it will benefit the companies operating in that region. At the same time Uzbekistan stopped imports from Kazakhstan. Imports and exports are expected to be significantly reduced.

Steppe Cement’s average cement selling prices increased by 8% in KZT, but decreased by 2% in US dollars to US$46.6 per tonne delivered. Line 5 produced 995 141 tonnes of cement while Line 6 produced 720 620. The company continues to make small improvements in Line 6 that will deliver additional production capabilities and lower costs in 2020.

Capital investment in 2019 was directed to the improvement of cement mills, silos, packing and to reduce power consumption. In 2020 the company will endeavour to conserve cash and limit the capital investment to ecological and energy saving projects.

In 2019 Steppe Cement completed the following projects:

• Increasing the capacity of the new 50 kg bags packing line to 2 400 bags per hour, equivalent to 120 tph.
• Commissioning the fully automated loading of wagons and trucks
• Installing a separator in cement mill number four that will allow the company to increase the sales of M500 and decrease the production cost of M400
• Changing the two preheater fans in Line 6 to improve energy efficiency
• Automating the silos and loading in the wet line mills area.

In 2020, the company plans to the limit the capex to US$2 million including:

• Cooler EP fan system
• Pan conveyor replacement
• Slag drier filter and automation
• Cooler fan replacement
• Laboratory equipment

Read the article online at: https://www.worldcement.com/asia-pacific-rim/11062020/steppe-cement-shares-financial-report/