Steppe Cement : Interim Results for the Half Year ended 30 June 2020 and General Market Update

Company No. LL04433

Steppe Cement Ltd

Interim Results for the Half Year ended 30 June 2020

and General Market Update

1. Interim Results

Steppe Cement Ltd ("Steppe Cement" and "the Company") posted a consolidated profit after tax of USD4.1 million for the six months ended 30 June 2020.

	6 months	6 months	% of
	ended	ended	change
	30 June 20	30 June 19
Sales (Tonnes)	764,752	780,315	-2%
Consolidated turnover KZT million	13,677	14,079	-3%
Consolidated turnover (USD Million)	33.8	37.1	-9%
Consolidated profit after tax (USD	4.1	3.1
Million)
Earnings per share (Cents)	1.9	1.4
Average exchange rate (USD/KZT)	405	379	-7%

1. • The Company maintained prices from last summer until the Covid crisis affected the second quarter.
   • The average ex-factory price decreased slightly from 15,148 KZT /tonne to 14,727 KZT/tonne or 3% during the period.
   • Steppe Cement's gross margin increased from 37% to 40% in USD terms due to cost containment measures.
   • Selling expenses per tonne decreased in USD terms by 20% and in KZT by 13% due to distribution in areas closer to the factory and the implementation of IFRS 16 as some of the rental fees for wagons have been transferred to financial leases reducing the transport costs.
   • Administrative expenses remained constant in USD.
   • The Kazakh Tenge depreciated by 7% compared to the first half of 2019 that translated in a foreign exchange loss of USD 0.6 million.
   • The Company generated operating profit before working capital changes of USD 11 million in 1H 2020 against USD 7.9 million in 2019.
   • Kazakhstan GDP increased by 2.7% in 1Q2020 but decreased -1.8% in 1H2020 because of Covid-19.
   • Reported inflation has been 6.5% up to the end of July 2020.
2. Production costs
3. • Production costs decreased by 4% in KZT mostly due to the higher production of clinker and lower maintenance and coal costs.
4. Update on the Kazakh cement market
5. • The Kazakh cement market increased by 2% during the first half of the year. The increase happened mostly in the 1Q while 2Q was slightly below 2019. Steppe Cement currently

Company No. LL04433

expects a market of about 9.1 million tonnes for the full year 2020, an increase of 2% over 2019.

• Steppe Cement decreased its local market share from 17% in 1H2019 to 16.5% in 1H2020. We expect to maintain this share for the full year. Exports represented 11% of the volumes in the 1H2020 like last year.
• Imports into Kazakhstan have been reduced to 0.25 million tonnes in 2020 due to the closure of the market to Iranian exports. Imports represent 6% of the market.
• Exports from Kazakhstan have been maintained at 0.87 million tonnes.
• Exports from Kazakhstan represent 18% of local production from 19% last year.
• Overall production of all factories in Kazakhstan has increased by 2% to 4.7 million tonnes for the 1H2020 as closures in the smaller factures were balanced by increased in Kokshe and Gezhuoba.
• Currently 80% of production in the country is manufactured from dry lines.

4. Financing

• Interest expenses on bank debt were reduced to USD 0.41 million from USD 0.55 million in 2019 while we added interest expenses on lease liabilities of USD 0.35 million due to the application of IFRS 16. The rental on those wagons was considered selling expenses before.
• Steppe Cement recorded a net cash position of USD6.4 million compared to net debt of USD1.1 million as of 30 June 2019.
• The borrowings of the Company as of 30 June 2020 were USD3.2 million (USD 2.3 million current and USD 0.9 million long term) while we carried a cash balance of USD 9.6 million. For comparison, on 30 June 2019 we had USD10.1 million in borrowings and USD 9 million in cash.
• The USD loan outstanding to Halyk Bank for the purchase of the wagons and repayable monthly till November 2021 at 6.5% p.a. was subsequently repaid in August 2020 in advance.
• As of 31 August 2020 after paying the dividend, the financial debt was the equivalent of USD 2 million (all denominated in KZT) and the cash was USD 5.7 million.
• We have maintained the working capital lines available for the winter.

A pdf copy of the announcement and 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 [phone].

Broker: Contact Charlie Cryer at [phone]

Company No. LL04433

INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2020

(Unaudited)

(In United States Dollars)

Company No. LL04433

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 2020 (UNAUDITED)

		The Group		The Company
		6 months ended		6 months ended
		30 June 2020		30 June 2019		30 June 2020		30 June 2019
		USD'000		USD'000		USD'000		USD'000
Revenue	33,786	37,122	701	629
Cost of sales	(20,285)		(23,515)		-		-
Gross profit	13,501	13,607	701	629
Selling expenses	(5,162)	(6,584)	-	-
General and administrative
expenses	(2,566)		(2,563)		(135)		(147)
Operating profit	5,773	4,460	566	482
Interest income	112	147	^	^
Finance costs	(766)	(554)	-	-
Net foreign exchange	(571)	(36)	3	3
(loss)/gain
Other income, net	248		148		82		-
Profit before income tax	4,796	4,165	651	485
Income tax expense	(736)		(1,083)		-		-
Profit for the period	4,060	3,082	651	485
Attributable to:
Shareholders of the	4,060	3,082	651	485
Company
Earnings per share:
Basic and diluted (cents)		1.9		1.4

^ Insignificant amount.