The Kazakh cement producer Steppe Cement saw cement deliveries decline by 1.6% last year to 0.81Mt, with virtually all of the volume reduction taking place in the final quarter, while in the first half cement shipments had still grown by 7.8%.
The cement price declined by some 9% last year, with a more notable price reduction in the second half, as the Kazakh cement capacity exceeded local demand during November and December. Cement prices continued to weaken during the early months of 2009, but are now expected to stabilise at these lower levels. Current effective cement prices of US$50 to US$60 per tonne compare with a peak last summer of US$150 /t, while in neighbouring markets cement prices are generally a little higher than in Kazakhstan. Turnover, which had been up by 35.2% in the first half, declined by 9.2% to US$91.53m for the full year and the trading profit dropped by 46.3% to US$29.24m and the pre-tax profit by 49.6% to US$26.64m.
All the production sold last year came from the four wet lines. Although the dry process No. 6 production line was commissioned last October, an operating licence was not obtained until early February. When the second part of the pre-heater is commissioned, the annual production capacity of the No. 6 line should reach 0.8Mta. The cement coming from the No. 6 line should cost between US$8 and US$12/t less to produce than at the wet lines. The wet lines will now be used only to the extent that demand requires it. Work on the refurbishment and upgrading of the 1.4Mta No. 5 production line has been reduced to what can be carried out by a skeleton staff and the US$25m of capital expenditure still being required to bring it on line will only be committed when the market has stabilised and the revels of demand can be better assessed.
Cement consumption in Kazakhstan dropped by around a quarter last year to 5.7Mt as the growth rate in the GDP dropped from some 10% to around 3%. Largely because of a shortage of finance, the domestic cement market is currently expected to drop by a further 25% or so this year to around 4.5Mt.
At the end of December, Steppe Cement had a net debt of US$101.77m, which represented a gearing level of 78.9%. The company aims to raise UK£10.0m (US$14.4m) fresh equity from existing shareholders from what is effectively a one for three rights issue. The quarrying licence for limestone has been extended by 25 years and now runs until 2043.