Steppe Cement 1H Pretax Profit $15.6M Vs $11.5m

Steppe Cement 1H Pretax Profit $15.6M Vs $11.5m
Published: 06 September 2007

Steppe Cement said Wednesday that first half pretax profit was $15.6m, compared with $11.5m the previous year.  
The company said that at the operational level, sales have increased by 42% in Tenge with the average sales price achieved rising from US$78/ton to US$101/ton compared with the corresponding period last year.  
Production costs have been held to 2006 levels as increased utility, transport and labour costs were offset by increased productivity due to the increased efficiency of the wet lines.  
The refurbishment of the wet lines was completed in April 2007 and the company said the full effect will be reflected in the second half of the year.  
The company said the Kazakhstan cement market grew by 16% during the first half of the year. The average price per ton increased significantly towards the end of the second quarter as the factories struggled to satisfy the demand at the beginning of the high season. 
The increase in supply has come mainly from local companies de-bottlenecking their facilities while cement imports remained flat during the first half as neighbouring countries struggled to meet internal domestic demand. The deficit in the market will continue, at least until Steppe commissions its 2 lines, it said.  
The company said the credit tightening in the world markets started to spread to Kazakhstan in August and the portion of the construction sector financed by the local banks is likely to slow down in the coming months. Public works will represent an increasing share of the market as investment in infrastructure by the government is accelerating. 
The refurbishment of the kilns in the wet lines was completed in April and their capacity is now 860,000 tons in a full year of operation. The company said it expects to increase their capacity further in 2008 with additional investment in the chain systems, coolers and probably filters. Cement mill number 7 is also scheduled to be restarted during September 2007.  
The refurbishment project for dry lines 5 and 6 is gathering pace with 80% of the contracts for the project now awarded and most of the required materials either on site or on the way. The construction site now employs over 700 workers and 25 engineers in the project team. 
The company said it has also started to engage the operators for line number 6 with a mix of experienced overseas engineers and existing workers from the wet lines. Recommissioning of the dry process lines is expected to commence with the introduction of Line 6 in the last quarter followed by Line 5 in 2008.  
The company said there is not an interim dividend as the cash flow was applied to the refurbishment programmes and the same policy will apply to the second half of the year.  
The improved cash flow from the wet lines since May has allowed deferring the drawdown of the loan from EBRD until August 2007. EBRD has committed to provide up to US$ 42 million and Kazcommertz Bank up to US$ 23 m of which US$8 m had been drawn down by the end of June.