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LONDON (Alliance News) - Kazakhstan-focused Steppe Cement Ltd Monday said it swung to a loss in the first half, as it was hit by currency translation issues.
The cement producer posted pretax loss of USD6.4 million for the six months ended June 30, compared with a USD3.8 million profit a year earlier, as revenue fell to USD51.8 million from USD54.3 million.
Profit was dented by finance costs, which rose to USD5.4 million compared with just USD781,000 a year earlier.
Sales increased by 26% in volume and 16% in Kazakhstani tenge terms in the first half of 2014 against the first half of 2013. However as a consequence of the February devaluation of the tenge against the dollar, revenue in dollar terms fell 5%.
The devaluation resulted in a USD5.1 million realised foreign exchange loss - as the company's long-term loans are denominated in dollars - as well as losses in the group's reserves arising from the translation of the financial statements of the Kazakh subsidiaries whose balance sheets are denominated in tenge.
The company said its gross margin decreased to 29% from 37% a year earlier, but is expected to increase by the end of the year as Line 5 production increases. Line 5 is the company's new plant.
Steppe Cement said the average ex-factory price decreased 11% to KZT10,797 per tonne tonne in the first half from KZT12,084 per tonne a year earlier.
"Both the increase in volumes and the decrease in prices are consequences of the strategy of volume over prices pursued in 2014. This strategy will continue until we maximise production from the newly commissioned dry line number 5," Steppe Cement said.
Overall, Steppe Cement said the Kazakhstan cement market increased by 2.5% during the first half of 2014. Steppe Cement expects a market of 8.4 million tonnes for the full year 2014, up from 8.2 million in 2013.
Financially, Steppe Cement said it repaid USD2.1 million of debt to HSBC Holdings PLC during the first half.
In addition, it refinanced the remaining debt from the European Bank for Reconstruction and Development worth USD24 million and from HSBC Holdings PLC worth USD5.1 million, with a 2.5 year loan from VTB Bank at 6.2% a year.
"This loan allows us to divide the principal payments equally over 2014 to 2016 and pay during and after the selling season as opposed to the two years and repayments during the first half of each year with the previous loans," the company said.
Steppe Cement shares were quoted up 1.3% at 39.00 pence Monday morning.
By Anthony Tshibangu; anthonytshibangu@alliancenews.com; @AnthonyAllNews
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