2006 saw Steppe Cement’s sales volumes increase by 4% and selling prices by 11% in Tenge over the previous year. Gross profit grew 11% for the operating company, CAC (Central Asia Cement JSC).
During 2006 the Company completed the refurbishment of three of the four wet kilns and, despite the prolonged shutdowns, production for the year was 740,000t of cement, representing a 4% increase over the previous year. The remaining wet kiln was refurbished during February and March of 2007, and with all wet lines now fully operational, the total capacity of the Company’s wet lines is expected to be approximately 670,000t of clinker (for 860,000tpa of cement). Total clinker production from the wet lines during 2006 was 602,000t.
The consolidated profit after tax reduced from the $16.7m achieved during 2005 to $14.4m. The 2005 consolidated result included a positive restructuring adjustment of $12.4m and the 2006 result includes the impact of foreign exchange losses of $0.4 million incurred on holding of foreign currency and a charge of $0.24 million for a number of costs associated with the refurbishment of the dry lines which were not capitalized as plant and equipment.
As required by IFRS, the Group revalued its plant during the year by $12.6 million and this resulted in an increase to the depreciation charge of $1.4 million. The revaluation surplus was taken directly to the revaluation reserve account.
Steppe Cement has expanded the scope of refurbishment work of the two dry lines at its Karaganda cement plant as follows:
* Line 5 and 6 - raw materials, cement milling, dispatching areas, compressors, boilers and quarry equipment that were not included in the original scope
* Line 6 - upgrade the filters to improve environmental standards together with the pre-heater, kiln, cooler and coal feed equipment
The contracts for additional work are expected to be signed by June 2007.
With the expanded scope of works, the capital cost of the dry line upgrades are now expected to be $81m for line 5 and $39m for line 6 for a total of $120m. The original estimates before the expansion to the scope of works were $73m and $20m respectively with a total of $93m.
The expected annual cement production following re-commissioning will be 1.4Mt for line 5 and 1Mt for line 6. Line 6 will however have capacity to produce 1.3Mta of cement if demand warrants this level of production.
Line 5 is expected to be re-commissioned during the summer 2008 and line 6 during the summer 2007.
The additional scope of works is being financed by an increase in the EBRD loan facility (originally signed in December 2005) from $35 million to $65 million and improved operational cash flows. The facility includes a local bank.