LONDON (Alliance News) - Kazakhstan-based Steppe Cement Ltd on Wednesday said its pretax loss widened in 2015 due to further devaluation of the Kazakhstan tenge as well as a slowdown in cement consumption, as the company said it expects no growth in market volume in 2016.
The construction materials producer reported a pretax loss of USD8.8 million in 2015, wider than the USD8.1 million it posted a year earlier, as revenue declined and foreign exchange losses rose.
Revenue fell to USD93.6 million from USD116.6 million a year earlier, Steppe said, although net foreign exchange losses grew to USD16.4 million from USD5.3 million a year earlier. However the USD3.1 million impairment on property, plant and equipment Steppe recorded in 2014 did not repeat in 2015, the company said, with this figure dropping to USD298,397.
"The 2015 results were significantly affected by the sharp devaluation of the Kazakhstan tenge against our reporting currency between August 2015 and January 2016," said the company.
"The relative strength of the tenge against the Russian rouble until August forced local producers to lower their selling prices to fence off imports into Kazakhstan. As a result, our sales volume in tonnes increased only by 2.0% while the price in tenge decreased by 8.0%. After September imports slowed down significantly, but so did the economy as well as the cement consumption," Steppe added.
In 2015, Steppe produced exclusively from its dry lines and, as such, the cost of production was lowered more than its selling price, increasing its gross margin. It sold 1.64 million tonnes of cement during the year, up fro 1.61 million a year earlier. Average cash production costs in the dry lines was reduced to USD30 per tonne from USD38 per tonne in 2014, Steppe added, saying it expected to contain cost increases in 2016.
However, while the market increased by 14% in 2015, Steppe said it expects overall market demand will be stable or decrease in 2016, depending upon "the government investment plans and macroeconomic situation. The indication in the first months of 2016 is that, despite the drop in the oil price, the government remains committed to a strong infrastructure plan and the outlook of the construction industry in Kazakhstan remains positive, driven by the Expo 2017 and road building programs."
In 2016 the local cement factories should maintain at least similar volumes to 2015, Steppe said.
Steppe Cement had a market share of 17% in 2015 compared to 19% in 2014, but the company said it expects to regain its market share in 2016 in line with higher capacity utilisation.
Steppe's average cement selling prices decreased by 8.0% in tenge and by 21% in dollars to USD56.9 per tonne delivered, the company added.
Shares in Steppe were down 4.6% at 13.60 pence on Wednesday.
By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland
Copyright 2016 Alliance News Limited. All Rights Reserved.
Steppe Cement (STCM)