Steppe Cement Ltd

Interim Results for the Half Year ended 30 June 2022

and General Market Update

1. Interim Results

Steppe Cement Ltd ("Steppe Cement" and "the Company") posted a consolidated profit after tax of USD10.2 million for the six months ended 30 June 2022, an increase of 65% over the corresponding period for the previous year.

·    The Company managed to increase prices in the first during the first half of 2022, with the average ex-factory price achieved increasing from 16,571 KZT /tonne (USD39 per tonne) to 20,485 KZT/tonne (USD 45 per tonne) or 18% compared with first half 2021.

·    Steppe Cement's gross margin increased from 44% to 46% in USD terms compared with first half 2021 due to the price increases.

·    Selling expenses per tonne decreased in USD terms by 20% compared with the corresponding period in 2021 primarily due to increased sales to markets closer to the factory.

·    Administrative expenses increased by 7% in USD terms compared with first half of 2021.

·    On average, the Kazakh Tenge depreciated by 6% compared to the first half of 2021 but only translated in a small foreign exchange loss of USD 0.2 million.

·    The Company generated operating profit before working capital changes of USD 16.3 million in 1H 2022 against USD 12.9 million in the corresponding period for 2021.

·    Kazakhstan GDP increased by 3.4% in the first half of 2022 compared to the first half of  2021. In the first quarter of 2022 the GDP growth was 4.6% despite the January and February local and international instability.

·    Reported inflation has been 15% up to the end of June 2022.

2. Production and capex

·    Production costs increased by 11% in KZT in the first half of 2022 primarily due to the higher electricity cost, diesel and spare parts for maintenance.

·    The separator of cement mill number 1 has been commissioned and work has started in the separator of cement mill number 2.

3. Update on the Kazakh cement market

·    The Kazakh cement market increased by 2% during the first half of the year as the government has maintained its incentives for construction.

·    Steppe Cement maintained its local market share at 14.5% in 1H2022. We expect to maintain or increase this share for the full year.

·    Exports at 0.54 million tonnes represented 10% of the volumes in the 1H2022 from 9% last year.

·    Imports into Kazakhstan have been decreased to 0.35 million tonnes in 2022 and represent 6% of the market.

·    Overall production of all factories in Kazakhstan has decreased by 0.4 million tonnes to 4.8 million tonnes for the 1H2022 as reductions in bigger factories were balanced by increased volumes in Gezhuoba and Alacem.

·    Currently 82% of production in the country is manufactured from dry lines a similar figure than last year.

4. Finance

·    Interest expenses on bank debt reduced to USD 0.2 million from USD 0.3 million in 2021 mostly on subsidised loans while we maintained interest expenses on lease liabilities at USD 0.1 million after to the application of IFRS 16 on the 3-year wagon leases. The rental on those wagons was previously treated as selling expenses. The contract to rent wagons is due for renewal in in the second half of 2022.

·    Steppe Cement recorded a net cash position of USD9.3 million compared to net cash of USD7.4 million as of 30 June 2021.

·    The borrowings of the Company as of 30 June 2022 were USD5.4 million while we carried a cash balance of USD14.7 million. For comparison, on 30 June 2021 the Company had USD6.1 million of borrowings and USD13.5 million in cash.

·    Pursuant to the announcement of the Company on 13 June 2022, the Company has reserved GBP11 million in cash (5p/share) for payment to shareholders through a dividend or alternative process such as a capital return, in respect of the results for the full year ended 31 December 2021.  The approach to be taken on how to proceed with payment of this amount to shareholders in the most tax effective way remains under consideration, however, the Company anticipates an announcement regarding this distribution and its timing will be made in November. 

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 +61 8 9480 2500.

Broker: Contact Charlie Cryer at +44 20 3440 6800

SUMMARY OF INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2022 (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 2022 (UNAUDITED)

^ Insignificant amount.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2022 (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2022 (UNAUDITED)