ANNUAL
REP OR T 2015
Plant Location In Kazakhstan
Aktobe
Astana
Karaganda
KAZAKHSTAN
Atrau
Aktau
Shymkent
Semey
Almaty
2
Steppe Cement Ltd. Major Projects
EXPO 2017
EAST WEST AND CENTER SOUTH ROAD PROJECT
ABU DHABI PLAZA
Annual Report 2014
3
3
Annual Report 2015 CONTENTS
05 - Financial Highlights
06 - Operational and market data
07 - Financial Ratios
09 - Corporate Information
10 - Chairman’s Statement
12 - CEO’s Statement
16 - Group Structure
17 - Board Of Directors
18 - Senior Management Karcement JSC
19 - Senior Management CAC JSC
20- Corporate Governance Statement
28 - Financial Statements
94 - Statement by a Director
95 - Notice of Annual General Meeting
4
Steppe Cement Ltd. Financial Highlights
Revenue (USD Million)
2015
2014
2013
2012
2011
93.6
116.6
128.0
120.2
96.1
EBITDA* (USD Million)
2015
2014
2013
2012
2011
22.7
17.4
28.7
24.9
20.0
* excluding foreign exchange losses arising on devaluation of the Tenge.
Profit/Loss after Tax (USD Million)
3.4
7.9
2015
2014
2013
2012
2011
10.5
8.4
3.3
Shareholders Fund (USD Million)
2015
2014
2013
2012
2011
56.7
117.6
120.7
154.6
149.2
5
Annual Report 2015 Operational and Market Data
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
49
60
79
74
67
Ex-factory price (USD)
9.7
8.5
8.1
7.0
6.2
Market Size (million tonnes)
* estimated
2.0
2.0
1.6
1.6
1.6
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
1.64
1.61
1.37
1.35
1.23
Sales Volume (million tonnes)
17
17
19
19
20
Market Share (%)
82
80
86
84
80
Annual Production Capacity
(million tonnes)
Capacity utilisation (%)
Wet Lines/ Dry Lines production mix
* estimated
100%
Dry Lines
2015
6
* Wet Lines were dicontinued
in October 2014
71%
29%
43%
57%
Wet Lines
Dry Lines
Wet Lines
Dry Lines
2014
2013
Steppe Cement Ltd. Financial Ratios
Ratios
2011
2012
2013
2014
2015
Gross profit margin (%)
39
40
42
Profit / (Loss) after tax margin (%)
Net earnings / (Loss) per share (cents)
Return on shareholders funds (%)
3
2
3
7
5
6
8
5
7
NTA Per Share (cents per share)
71
68
71
31
(7)
(4)
(7)
54
36
(4)
(2)
(6)
26
Shares data
Number of shares issued (million)
179
219
219
219
219
7
Annual Report 2015 8
Steppe Cement Ltd. Corporate Information
Listing
London Stock Exchange AIM Market,
London
Since 15 September 2005
AIM Stock Code
STCM
Bloomberg Ticker
STCM LN
Reuters Ticker
STCM L
Company Registration
LL04433
Country of incorporation
Federal Territory of Labuan, Malaysia
Registered Address
Brumby Centre
Lot 42, Jalan Muhibbah
87000 Federal Territory of Labuan
Malaysia
Head Office Address
Suite 10.1, 10th Floor
Rohas Perkasa, West Wing
No.8, Jalan Perak
50450 Kuala Lumpur
Malaysia
Main Country of Operation
(Operating Subsidiaries’ Address)
472380, Aktau Village
Karaganda Region
Republic of Kazakhstan
Company Secretary
TMF Trust Labuan Limited
Nominated Advisor
RFC Ambrian Limited
Level 14, 19-31 Pitt Street
Sydney, NSW 2000
Australia
Level 28, QV1 Building
250 St Georges Tce
Perth, Western Australia 6000
Broker
RFC Ambrian Limited
Level 5, Condor House
10 St Paul’s Churchyard
Londond EC4M 8AL, United Kingdom
Group Auditor
Deloitte & Touche
Unit 3(I2) Main Office Tower
Financial Park Labuan Complex
Jalan Merdeka
87000 Wilayah Persekutuan Labuan
Malaysia
UK Registrar
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Bankers
VTB Bank (Austria) AG
VTB Bank (France) SA
Halyk Bank JSC
Altyn Bank JSC
Solicitor
BMF Group LLP
Alatau Business Center
151 Abay Street, Almaty
050009, Republic of Kazakhstan
Adelaida Legal Group, LLP
12/1 Kunayev Street, Block 5B, 4th floor,
Office #1, Astana
010000, Republic of Kazakhstan
9
Annual Report 2015 Chairman’s Statement
and
volatility
The year 2015 placed before the
Company two main external challenges:
additional
currency
However,
competitive pressures.
coupled with
internal
improvements
streamlining
costs and
controlling
operations,
pro-actively addressing externalities,
Steppe Cement ended up at year-
end on a sounder footing to meet the
exigencies of 2016.
significant
from
The Kazakh Tenge started the year
at an exchange rate of USD/KZT 182
and ended the year at USD/KZT 339.
Correspondingly, Steppe Cement’s
share price decreased from 29.50 pence
on December 31, 2014 to 14.50 pence
at 2015 year end. Currency volatility
persisted during the first quarter of 2016
with the Tenge reaching USD/KZT 399
but, with historical parity to the Russian
Ruble more than restored, retreated
to USD/KZT 326 as of May 10th with
possible room for further improvement.
Steppe’s share price has remained quite
stable during this period.
also
The Kazakh government’s decision in
August to adopt a floating exchange rate
served to stem the flow of imports from
Russia which had earlier significantly
affected both the Company’s sales
volumes, margins and market share.
This devaluation
intensified
inflationary pressures with a resulting
13.6% year-on-year spike in December
2015 and continued high
inflation
forecast for 2016. Overall, the growth
rate of the Kazakh economy slowed
from 4.3% in 2014 to 1% in 2015, largely
as a result of continuing low oil prices
and decreased domestic demand. The
economic outlook for 2016 remains
uncertain with forecasts ranging from
anemic growth to possible contraction.
The government’s
stimulus policy,
however, more than offset decreased
private sector capital investment in
2015 by actively supporting lending
The economic outlook for 2016
remains uncertain with forecasts
ranging from anemic growth to
possible contraction.
10
Steppe Cement Ltd. infrastructure,
to industrial companies and the
construction sector by financing
road
housing,
construction and Expo 2017 in
Astana. We expect this level of
support to remain fairly stable in
2016. High interest rates have
also made large-scale, long-term
capital financing very difficult
which could discourage future
investment into the cement sector.
In addition, existing competitors
with a much higher ratio of
foreign currency debt per tonne
of capacity than Steppe should
experience greater pressures on
their margins, thereby providing
us with a competitive advantage.
in
the
from
resulted
Additional competitive pressures
have
two
new dry lines, one at Shymkent
(replacing their old wet lines)
and Standard Cement’s second
line, not to mention the two new
entrants during late 2013 and
early 2014 although one of them
is near the Caspian sea and far
from our potential markets. The
impact of this cumulative
full
increase
competition will
depend on the actual size of the
market in 2016. While demand in
2015 increased substantially from
that of 2014 (from 8.5 million to
9.7 million tonnes), country-wide
production capacity appears now
for the first time in several years
to exceed anticipated demand.
While monthly demand through
October 2015 was greater than
that for each month of the previous
year, the period of November
through March 2016 experienced
an overall decrease of 16% over
the preceding period. However,
historically, demand has always
increased as summer approaches.
April and May results confirm this
trend.
Notwithstanding, Steppe’s sales
of cement
increased to 1.64
million tonnes in 2015, 2% more
than the 1.61 million tonnes sold
the previous year, yet resulting in
a reduced market share of 17.3%
down from 19%. Increased price
pressure from Russian imports
prior to the further de facto
devaluation of the Tenge resulted
in an average ex-factory price
6% below that of 2014. Total
revenue therefore decreased to
KZT 19.537 million which was
7% lower than 2014. In spite of
this situation, a real margin of
21.5% represented a significant
increase over the 16.3% achieved
the previous year. Although a
forex loss of USD16.4 million was
posted, the overall net loss for
2015 narrowed to USD3.4 million
from USD8 million the previous
year – a 58% improvement - while,
during this same period, net debt
was reduced by 42% from USD48
million to USD28 million.
targeted capex
These results were made possible
by the operational cost reductions
invested
and
during 2014 and 2015 which
resulted
in significant savings
and vindicated management’s
investment and cost containment
strategies.
Personnel cost reductions were
achievable because of
also
management’s efforts,
starting
at the top. The Board not only
decided to remain at three in
number but also to reduce its levels
of compensation. In addition, RFC
Ambrian Limited was asked to
serve as the Company’s Broker as
well as its Nominated Advisor, thus
realizing a further cost efficiency.
The task of rationalization of the
Company’s work force to 800
personnel – including expatriate as
well as local - had been assigned
in October 2014 and achieved by
December 31, 2015. A further
goal was established for year-
end 2017. Equally important is
the increased effort both to instill
greater employee discipline as well
as to transform the understanding
of individual responsibilities, all
in the context of open offices
and
function
regrouped by
improved communications.
During 2015,
the Company
had secured a KZT 2.1 billion
subsidized loan with attractive
terms from Halyk Bank, KZT 500
million of which was to be used
for working capital and KZT 1.6
billion for capex. It is anticipated
that all investments contracted
for during 2015 will be completed
by September 2016. The cement
grinding mills
the
greatest investment but the kilns,
cement
facilities and
laboratory will all benefit both
from the ability to handle both
the increased volumes of cement
and to do so more efficiently
while maintaining product quality.
Some impact was felt in 2015 but
the groundwork has been laid for
significant gains in productivity
and cost reduction in 2016 and
beyond.
received
loading
Given the current indeterminate
market, currency and cash flow
situations combined with
the
reduced but still substantial hard
currency debt, the Company will
be unable to pay a dividend in
respect of 2015. It is planned,
however,
the
current portion of that debt
onto a schedule that will give
the Company greater financial
flexibility with
the possibility
of being able to pay a further
dividend once
current
economic environment becomes
clearer.
refinance
the
to
I am also pleased to report that
this year’s audit report contains
no qualifications.
As 2016 begins, your Company’s
fundamentals are strong and the
steps taken during 2015 should
ensure a solid foundation for a
more profitable future, even in
difficult times.
Respectfully submitted,
Paul Rodzianko
Non-Executive Chairman
11
Annual Report 2015 CEO’s Statement
In 2015 we produced exclusively
from the dry lines and, as
a consequence, our cost of
production was lowered more
than our selling price, thereby
increasing our gross margin.
12
The 2015 results were significantly
affected by the sharp devaluation of
the Kazakhstan Tenge (KZT) against our
reporting currency between August
2015 and January 2016. The relative
strength of the KZT against the 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% while the price in KZT
decreased by 8%. After September
imports slowed down significantly,
but so did the economy as well as the
cement consumption.
In 2015 we produced exclusively from
the dry lines and, as a consequence,
our cost of production was lowered
more than our selling price, thereby
increasing our gross margin. Steppe
Cement operated Line 5 at 85% of its
current capacity (1.1 million tonnes)
and Line 6 at 87% of capacity (0.8
million tonnes). With small capital
investments taking place
in 2016
and 2017, we expect to increase the
capacity to 1.2 million tonnes in Line 5
and 1.0 million tonnes in Line 6.
Steppe Cement was able to hedge
some of the impact of the devaluation
as it maintained a healthy cash balance
in USD during the year and devoted
most of its cash flow to repay term
loan principal (USD13.2 million) and
interest. Besides, the short-term credit
lines available were
to
KZT3.8 billion as at end of the year.
increased
funds reduced
Shareholders’
from
USD117.7 million to USD56.7 million
over the year due to the combined
effect of a USD3.4 million loss for the
year and a USD57.6 million charge
Steppe Cement Ltd. Key financials
Year ended
31-Dec-2015
Year ended
31-Dec-2014
Inc/
(Dec)%
Sales (tonnes of cement)
1,643,136
1,612,709
Consolidated turnover (KZT million)
Consolidated turnover (USD Million)
Consolidated loss before tax (USD Million)
Consolidated loss after tax (USD Million)
Loss per share (US cents)
Shareholders’ funds (USD Million)
Average exchange rate (USD/KZT)
Exchange rate as at year end (USD/KZT)
19,537
93.6
(8.8)
(3.4)
(1.5)
56.7
222
339.5
20,926
116.6
(8.1)
(7.9)
(3.6)
117.7
179.5
182.3
2%
(7%)
(20%)
(9%)
56%
58%
(52%)
(24%)
(86%)
against asset carrying values arising from the
substantial devaluation of the KZT to the USD
over the course of the year (from 182 to 339).
However as most of the assets required to build a
new cement factory are denominated in USD, the
replacement cost for the cement plant would be
relatively unchanged in USD terms.
In 2015 Steppe Cement posted a net loss of
USD3.4 million due to the foreign exchange loss
of USD16.4 million. Steppe Cement’s EBITDA
increased to USD22.7 million from USD17.4
million in 2014 with a lower production cost amidst
stable volumes, lower pricing and despite the
KZT devaluation. The EBITDA calculated in 2015
includes the write back of USD1.9 million charged
two years before as electricity expense and it has
been reinstated in 2015 as the time for appeal of
the court decision has expired.
The market volume increased by 14% in 2015 but
we expect no growth in 2016
The Kazakh cement market in 2015 was 9.7 million
tonnes, an increase of 14% compared to 8.5 million
tonnes in 2014. The increase in market size was
taken up by imports growing at 30%, Heidelberg,
Standard Cement and Vicat. The local producers’
market share decreased slightly to 86% from 87%
in 2014.
Our expectations are that overall market demand in
2016 will be stable or decrease slightly. The demand
depends 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.
After the sharp devaluation of KZT, imports have
plummeted by 75% while exports from Kazakhstan
increased. Therefore in 2016 the local cement
factories should maintain at least similar volumes to
2015. Steppe Cement had a market share of 17%
in 2015 compared to 19% in 2014. We expect to
regain our market share in 2016 in line with higher
capacity utilization.
Steppe Cement’s average cement selling prices
decreased by 8% in KZT and by 21% in USD to
USD56.9 per tonne delivered (equivalent to USD48.4
per tonne ex-factory).
Line 5 produced 0.94 million tonnes of cement while
Line 6 produced 0.70 million tonnes. The combined
production of both dry lines was increased by 45%
from 1.13 million tonnes in 2014 to 1.64 million in
2015 resulting in a significant reduction in production
costs per tonne.
13
Annual Report 2015 Limited capital investment in 2015
During 2015 capital investment was limited to USD2
million from USD21.8 million in 2014.
In the second quarter we negotiated a capital
investment credit facility of KZT1.69 billion at 6%
and repayable over 10 years. The facility was used
mostly in the first four months of 2016 to improve the
reliability of the milling department and in logistics i.e.
silos, loading areas, bagging plant and the terminal in
Astana.
Significant cost reduction in dry lines
Average cash production costs in the dry lines was
reduced to USD30/tonne from USD38/tonne in
2014. Measured in KZT, production cost per tonne
decreased by 8% despite inflation declared of 13.6%
in 2015. We expect to contain cost increases in 2016.
Selling expenses, reflecting mostly cement delivery
costs, were reduced to USD8/tonne from USD12/
tonne in 2014. This is due to increasing deliveries
to Astana and nearby construction sites, savings on
wagon rental and the devaluation.
General and administrative expenses
General and administrative expenses decreased
by 34% to USD8 million from USD12.2 million in
2014 due mostly to management efforts and the
effect of devaluation.
The labour count stood at 785 on 31 March 2016
compared with 926 on 31 March 2015. Of those
82 are in administration, 177 in the quarry and
transportation departments and the balance in
production. We will continue to optimize the labor
count until the end of 2017.
Dry lines’ improved operating performance
In 2015 Line 5 contributed 57% of sales and Line
6 the balance. In 2016 it is expected that Line 5
will contribute 59% and its production increase
by at least 7%. Both lines should be operating at
90% capacity. Line 5’s further target is to be able to
produce 1.2 million tonnes of cement by 2017 and
Line 6 1.0 million tonnes.
Financial position: Strong debt reduction and
ratios compliance
During the year we decreased our non-current portion
of borrowings significantly from USD30.4 million to
USD14.9 million. This comprised the repayment of
USD13.2 million in principal to VTB Bank, the reduction
in the value of the bond (denominated in KZT) from
USD7.9 million to USD4.3 million and an increase in
capital investment loan of USD1.3 million.
14
Steppe Cement Ltd. In 2015 finance costs decreased to USD4.2 million
from USD4.8 million in 2014 due to the continuous
repayment of loan principals.
Depreciation decreased to USD10.7 million in 2015
from USD12.2 million in 2014 mostly due to the
exchange rate.
The statutory corporate income tax rate remains at
20% in Kazakhstan.
Javier del Ser
Chief Executive Officer
The current portion of borrowings was reduced from
USD27.0 million to USD15.7 million as we controlled
the draw down of the short-term lines and limited the
cash position at the end of year to USD2.4 million from
USD9.3 million at 31 December 2014. We consider the
risk of further devaluation is now much lower and the
cost of borrowing in KZT has come some way off its
early 2016 high.
The liquidity ratio improved to 0.7 from 1.55 at 31
December 2014 and all covenants under the various
credit lines have been met comfortably.
We have renewed the revolving working capital
credit line from Halyk Bank of KZT3 billion until 2018
but the interest remains high (15-20% p.a.). Therefore
we have been borrowing at 6% in USD during the
first quarter of 2016. KZT0.5 billion from that line
will remain in KZT at 6% under the government
subsidized program. We have an additional credit
line from Altyn Bank of KZT which will be increased
to KZT0.9 billion and prolonged later in May 2016.
The KZT2.19 billion government subsidized loan
that we negotiated covers KZT1.69 billion capital
expenditure and replaces KZT0.5 billion of the
working capital lines. Both lines are denominated
in KZT, priced at 6% and have been substantially
disbursed as of 31 March 2016.
15
Annual Report 2015
Group Structure
100%
Mechanical and Electrical
Consulting Services Ltd
(Malaysia)
100%
Steppe Cement (M) Sdn Bhd
(Malaysia)
100%
Steppe Cement Holdings B.V.
(Netherlands)
100%
100%
100%
Central Asia Services LLP
Central Asia Cement
JSC
(Kazakhstan)
Karcement JSC
(Kazakhstan)
16
Steppe Cement Ltd.
Board of Directors
Paul Rodzianko (Non-Executive Chairman)
in the energy,
Paul Rodzianko, 70, is an international business executive with
infrastructure and green
extensive experience
technology sectors. He serves as Chairman or Independent Director
of several emerging companies. Currently volunteering as Chairman
Emeritus of the Hermitage Museum Foundation (USA), he serves on
the boards of the US-Russia Business Council, the Kennan Council of
the Woodrow Wilson International Center, and the International Tax
& Investment Center. Previously he was Vice-chairman of the Board of
the US-Kazakhstan Business Association and Director of Energibolaget
i Sverige (Sweden). He has served in senior executive capacities at
Access Industries, Bogatyr Access Komir (Kazakhstan), the General Electric Company, Grace
Geothermal Corporation, GreenFuel Technologies Corporation, CNPC-Aktobemunaigas
(Kazakhstan), Sterling Grace & Co., Tyumen Oil Company (Russia), DataPort at the World
Trade Center, and Mt. Hope Hydro. Paul holds a B.A. from Princeton University and an M.A.
from the Institute of Critical Languages. He is a Fellow of The Explorers Club and the Royal
Geographic Society.
Javier Del Ser Perez (Chief Executive Officer)
Javier del Ser Perez, 50, is a Chartered Engineer (Spain), master
in Structural Engineering and has a degree in Finance from HEC.
Javier has lived in Kazakhstan since 1996, when he was appointed
as the Investment Adviser to a large investment fund focused
on the country. It was through this role that Javier first became
involved with the Group’s cement business. He is the Chairman
of the Company’s operating subsidiaries, Central Asia Cement
and Karcement. Javier has other business interests in Kazakhstan,
including being a Director and large shareholder in the Chagala
Group. Javier is also a Director of Steppe Cement Holding B.V.
and Mechanical and Electrical Consulting Services Ltd.
Xavier Blutel (Non-Executive Director)
Xavier Blutel, 61, is currently the Senior Adviser, Wagram Corporate
Finance, President and founding partner of SAS Baudrimont and
a Conseiller du Commerce Extérieur de la France. Xavier Blutel
spent 33 years as an international executive in capital intensive
industries such as the cement industry, with Italcementi Group
and Ciments Français Group, and the petrochemicals industry.
Besides managing various operations in numerous countries, he
was actively involved in screening approach, negotiation and
integration of new acquisitions, disposals of non-core businesses
and potential mergers. He also spent 6 years (2002-2007) in
international lobbying and developed and implemented the Sustainable Development
approach in Italcementi Group. He was formerly a director of Shymkent JSC and Beton
ATA LLP from 2008 to 2013.
17
Annual Report 2015 Senior Management
Management & staff of Karcement JSC
Gan Chee Leong
General Director
Gan is a Chartered Accountant from
England and Wales. He started work
in Kuala Lumpur as a senior auditor
with a well-known international firm.
He has about 23 years of experience in
cement industry in various capacities.
Before joining CAC and Karcement,
he was GM-marketing of a leading
cement company in Malaysia and
held various directorships within the
Group companies He also held a
number of positions in the Cement
and Concrete Association Malaysia
and was once the Deputy Secretary
General of Asian Federation of
Cement Manufacturers.
George Ramesh
Operation Director
A Mechanical Engineer by profession
with a Master degree in Business
Management (Finance & Marketing)
from India. He has about 24 years’
of vast experience in the Dry process
cement industry in various countries
(India, Malaysia &
Singapore),
handled plant improvement projects,
operational reliability, methodology
and maintenance.
development
Before
in
Karcement
September 2007, he worked as
Maintenance & Project Manager for
Holcim (Malaysia) and prior to that,
with Lafarge (Malaysia). He was the
Project Manager of the Line 5 dry line
modernization Project in Karcement
which was successfully commissioned
in 2014.
joining
18
P. Sampathkumar
Head of Production
He is a Chemistry graduate with a
Master degree in Sociology, Post
Graduate Diploma holder in Personnel
Management & Industrial Relations
and also a holder of Technical Diploma
in Total Productive Maintenance
(Gemba Kaizen).
He has extensive experience of more
than 33 years in the operation of all
types of kilns right from wet process
to modern kilns. He specializes in
process stabilization and optimization.
He has worked in India, Iraq, and UAE
with companies like ACC Ltd – (Now
HOLCIM) and Lafarge.
G. Srinivasa Reddy
Head of Maintenance
A Mechanical Engineer from India
and graduated from the prestigious
College,
Engineering
Regional
Warangal.
extensive
has
He
experience in the cement industry
for more than 23 years in projects,
maintenance and operation in various
capacities. He has worked at India
Cements Ltd, Dalmia Cements (B)
Ltd. and Holcim India before joining
Karcement in 2008. He has very good
knowledge about modern dry plant
maintenance, operation, process
control and optimization.
Veronica Kuznetsova
Legal Department Chief
A graduate
the Legal
from
Academy of Kazakhstan with a
Master’s Degree in Law. She joined
CAC in 2005 as a Lawyer. In 2007
she was transferred to Karcement
and from 2010, she was appointed
Chief of the Legal Department.
Svetlana Alekseeva
Chief Accountant:
Svetlana
certified
is a CAP
accountant and an Engineer-
Economist by qualification. She
graduated
Karaganda
from
Polytechnic Institute.
Tanzilya Sirazieva
Quality Assurance
She qualified as a chemical-
from
engineer
technologist
Belgorod Technological
Institute
of Building Materials and has 42
years of experience in the cement
industry.
Steppe Cement Ltd. Senior Management
Management & staff of Central Asia Cement JSC
Peter Durnev
General Director
A graduate of Academy Marketing
Moscow. He has worked in CAC for
about 18 years rising from marketing
executive to his present position. He
also holds the position of Marketing
Director.
Chan Keng Chung
Finance Director
Chan Keng Chung is a member of
Malaysian Institute of Certified Public
Accountants (MICPA) and a graduate
from the University of Malaya in
bachelor degree of accountancy.
He has over 18 years of working
experience including in audit with
a big-four accounting firm in Kuala
Lumpur, and in commerce with a
Hong-Kong listed company. Before
joining CAC, he held the position of
financial controller based in Hong
Kong, after having spent 6 years in
Shanghai. His expertise encompasses
audit, financial reporting,
internal
control procedures, corporate finance
and investment evaluation.
Zilya Khasanova
Chief Accountant
She holds a bachelor degree in
accounting and audit
the
Karagandy Economical University of
Kazpotrebsouz and has worked for 25
years in the cement industry.
from
Irina Poluychik
Personnel Manager
An economist by qualification. She
specializes
resources
in human
matters. She has been with CAC for
more than 25 years.
19
Annual Report 2015 Corporate Governance
• Review of internal controls annually. The review
should encompass all material controls including
financial, operational and compliance controls
and risk management systems.
Steppe Cement complies with the QCA guidelines.
Nonetheless, Steppe Cement adopts the principal
requirements of the Combined Code, as far as
practicable, to ensure high standards of corporate
governance.
BOARD PROCESSES
The Board has established a framework for the
management of the Group including a system of
internal control, risk management practices and the
establishment of appropriate ethical standards. The
Board holds regular meetings to discuss strategy,
operational matters and any extraordinary meetings
at such other times as may be necessary to address
any specific and significant matters that may arise.
The Board has determined that individual directors
have the right qualification and experience to
perform their duties and responsibilities as directors.
is
(“Board”)
The Board of Directors
fully
committed and strives to take the necessary
measures to uphold the best principles and
practices of corporate governance in the Group.
Good corporate governance is fundamental to the
Group’s discharge of its corporate responsibilities
and accountability to protect and enhance the
financial performance and shareholders’ value of
the Group.
Steppe Cement is not required to comply with the
UK Combined Code of Corporate Governance
(“Combined Code”) published by the UK Financial
Reporting Council. The Combined Code applies
to companies listed on the Main Board but not
AIM companies.
The Quoted Companies Alliance (“QCA”) has
published a set of corporate governance guidelines
for AIM companies as a minimum standard to
follow. The QCA guidelines are less rigorous
than the Combined Code and recommendations
include the following:
• Separation of Chairman and CEO roles –both
roles should not be performed by the same
individual;
•
Independent non-executive directors – at least
two independent non-executive directors, one
of whom may be the Chairman.
• Establishment of Audit, Remuneration and
Nomination Committees and that Audit and
Remuneration Committees should comprise at
least two independent non-executive directors.
• Re-election of directors – All directors should
be submitted to re-election at regular intervals
subject to continued satisfactory performance of
the directors.
• Dialogue with shareholders – there should be
a dialogue with shareholders based on mutual
understanding of objectives.
• Matters reserved for the Board – there be a
formal schedule of matters specifically reserved
for the Board’s decision;
• Timely information – the Board should be
supplied with timely information to discharge its
duties;
20
Steppe Cement Ltd. Directors
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Paul Rodzianko
(Non-Executive Chairman)
Javier Del Ser Perez
(Chief Executive Officer)
Xavier Blutel
(Non-Executive Director)
4
4
2
4
4
N/A
N/A
2
2
4
4
2
Committee meetings are held concurrently with the board meetings.
Board Meetings
During the year ended 31 December 2015, 4 board
meetings were held. The above is the attendance
record of the directors:
or group of directors is able to unduly influence
the Board’s decision making. This enables the
independent directors to debate and constructively
challenge the management on the Group’s strategy,
financial and operational matters.
BOARD COMPOSITION
Selection and appointment of directors
At least half of the Board comprises of independent
non-executive directors. The Board composition
reflects the balance of skills and expertise to ensure
that these are in line with the Group’s strategies.
There is a clear segregation of roles of between the
Chairman and Chief Executive Officer. The Chairman
is responsible for leadership and management of
the Board and ensures that it operates effectively
and fully discharges its responsibilities. The Board
has delegated responsibility for the day-today
management and operations of the Group in
accordance with the objectives and strategies
established by the Board to the Chief Executive
Officer and the senior management.
Independence
The Non-Executive Directors are responsible for
providing independent advice and are considered
by the Board to be independent of management
and free from any business or relationship that would
materially interfere with the exercise of independent
judgment as a member. No one individual in the Board
has unfettered powers of decision and no director
The mix of skills, business and industry experience
of the directors is considered to be appropriate for
the proper and efficient functioning of the Board.
The Board has delegated the functions of selection
and appointment of directors to the Nomination
Committee including the annual review of the
structure, size, composition and balance of the Board.
Section 87(1) of the Labuan Companies Act 1990
provides that every offshore company shall have at
least one director who may be a resident director.
Section 87(2) states that only an officer of a trust
company established in Labuan shall act or be
appointed as a resident director. The Company’s
Articles provide that there shall be at least one
and not more than 7 directors. If the Company’s
activities increase in size, nature and scope the size
of the Board will be reviewed periodically and the
optimum number of directors required to supervise
adequately the Company is determined within the
limitations imposed by the Company’s Articles and
as circumstances demand.
21
Annual Report 2015 Corporate Governance
Performance evaluation
Nomination Committee
The Board conducts regular evaluates its performance
and the effectiveness of the Board Committees. The
performance of the Chairman and individual directors
is continually assessed to ensure that each director
continues to contribute effectively and demonstrates
commitment to the role.
Re-election of directors
The Committee comprises of majority independent
Non-Executive Directors. The Terms of Reference of
the Nomination Committee was approved by the
Board. The Nomination Committee meets at least
once a year.
The Nomination Committee’s members comprises
of:
Every year, the directors offer themselves for re-
election and their re-election is subject to the
shareholders approval at the Company’s Annual
General Meeting.
1.
2.
3.
Paul Rodzianko (Chairman)
Javier Del Ser Perez
Xavier Blutel
Remuneration policy
Remuneration levels are competitively set to attract
and retain appropriately qualified and experienced
directors and senior executives. The Board has
delegated the setting of broad remuneration policy
to the Remuneration Committee. The purpose of the
policy is to ensure the remuneration package properly
reflects the person’s duties and responsibilities and
level of performance, and that remuneration is
competitive in attracting, retaining and motivating
people of the highest quality. Where necessary,
independent advice on the appropriateness of
remuneration packages is obtained.
Independence advice and insurance
The Board may seek independent consultant’s advice
at the Company’s expense in relation to director’s
rights and duties and the engagement is subject to
prior approval of the Chairman and this will not be
withheld unreasonably. The company maintains a
Directors’ and Officers’ Liability Insurance policy that
provides appropriate cover in respect of legal action
brought against its directors.
BOARD COMMITTEES
the Nomination
The Board has established
Committee, the Remuneration Committee and the
Audit Committee and delegated certain functions
to these committees as set out in each Committee’s
Terms of Reference.
22
The principal objectives of the Committee are to
review that the Board structure, size, composition
and the mix of skills and expertise to ensure that
these are in line with the Group’s strategies and to
recommend to the Board the potential candidates
for directorship. The selection criteria for selection
the potential candidates
and
include qualifications of
for directorship shall
and
knowledge
the
achievements, credibility and background and ability
of the candidates to contribute effectively to the
Board and Group.
individual, experience,
recruitment of
The functions of the Nomination Committee include:
• Review annually
size and
composition of the Board taking into account the
Group’s strategies;
structure,
the
•
Identify and nominate the potential candidates
to the Board for approval;
• Monitor the appointment process of directors;
• Recommend to the Board for approval on the re-
appointment of directors;
• Oversee the succession planning of directors
the Group’s
into consideration of
taking
strategies;
• Report and make recommendations to the Board
on the Committee’s activities; and
• Review and update the Terms of Reference at
least once a year.
Steppe Cement Ltd.
Remuneration Committee
The Remuneration Committee comprises entirely of independent Non-Executive Directors. The functions of
the Remuneration Committee are governed by the Terms of Reference which was approved by the Board.
The Remuneration Committee meets at least twice (2) a year.
The principal objectives of the Committee are to ensure that the broad remuneration policy and practices of
the Group reflect the level of responsibilities, performance, relevant legal requirements and high standards
of governance. In determining such policy, the Committee shall ensure that remuneration levels are
appropriately and competitively set to attract, retain and motivate people of the highest quality.
The functions of the Remuneration Committee include:
• Determine and review the broad remuneration policy of the Chairman, Chief Executive Officer, Executive
Directors and Senior Executives;
• Review the contracts for the Chairman, Chief Executive Officer, Executive Directors and the contractual
terms;
• Obtain information on the remuneration of other listed companies of similar size and industry;
• Report and make recommendations to the Board on the Committee’s activities; and
• Review and update the Terms of Reference every two (2) years, or more frequently as required to ensure
its ongoing relevance and effectiveness.
23
Annual Report 2015 Corporate Governance
The Remuneration Committee’s members comprises of:
1.
2.
Xavier Blutel (Chairman)
Paul Rodzianko
Audit Committee
The Audit Committee comprises entirely of independent Non-Executive Directors. The functions of the
Audit Committee are governed by the Terms of Reference which was approved by the Board. The Audit
Committee meets at least three times (3) a year.
The principal objectives of the Committee are to monitor and review the adequacy, integrity and compliance
of the Group’s financial reporting and policies, internal controls system and procedures including risk
management, and compliance and the external audit process. The Committee shall make the necessary
recommendations to the Board to achieve its objectives.
The functions of the Audit Committee include:
• Review the Group’s financial statements, regulatory announcements relating to the Group’s results;
• Review the Group’s significant accounting policies and practices;
• Review compliance with international financial reporting standards, regulatory and other legal requirements;
24
Steppe Cement Ltd. The Audit Committee’s members comprises of:
1.
2.
Paul Rodzianko (Chairman)
Xavier Blutel
BUSINESS CONDUCT AND ETHICS
In the course of business, the Board acknowledges
the need to maintain high standards of business
and ethical conduct by all Directors, management
and employees of the Group. In this respect, the
Group has the responsibility to observe local laws,
customs and culture of each country in which it
operates in particular Kazakhstan and to adopt the
high standards of business practice, procedure and
integrity. All Directors and employees are expected
to act with the utmost integrity and objectivity,
striving at all times to enhance the reputation and
performance of the Group.
Conflict of interest
All Directors must keep the Board advised, on an
ongoing basis, of any interest that could potentially
conflict with those of the Group. Where the Board
believes that a significant conflict exists for a
director on a board matter, the director concerned
does not receive the relevant board papers and
is not present at the meeting whilst the item is
considered. Directors are required to take into
consideration any potential conflicts of interest
when accepting appointments to other Boards.
INVESTOR RELATIONS
The Board recognises and values the importance
of managing its relationship with the investing
community. The Board
is committed and
communicates regularly with shareholders on
the Group’s strategy, financial performance,
developments and prospects via issuance of annual
and interim financial statements to shareholders,
stock exchange announcements and in meetings.
The Group’s management meets regularly with fund
managers, analysts and shareholders to convey
information about the development of the Group’s
performance and operations in Kazakhstan.
25
• Review and advise the Board on the appointment,
nomination and re-appointment of the external
auditors;
• Oversee the relationship with the external
auditors, including the engagement of auditors,
the audit scope, plan,
remuneration and
objectivity;
• Evaluate and monitor
the adequacy and
effectiveness of the internal controls system
and procedures including risk management and
compliance;
• Monitor and review the performance and
effectiveness of the internal audit function;
• Report and make recommendations to the Board
on the Committee’s activities; and
• Review and update the Terms of Reference at
least once a year and recommend any changes
to the Board for approval.
Annual Report 2015 Corporate Governance
Annual General Meeting
Purpose
The Annual General Meeting (“AGM”) provides
the main forum and opportunity for discussion and
interaction between the Board and the shareholders.
The Board encourages the active participation of
shareholders, both individuals and institutional at
the AGM on important and relevant matters. The
results of the AGM are announced via Regulatory
News Service to the public after the AGM.
investments. The Group’s
The Group’s internal control system is designed
to safeguard the Group’s assets and enhance the
internal
shareholders
control system is designed to manage rather than
fully eliminate the risk of failure to achieve business
objectives. Therefore, that the
internal control
system can only provide reasonable but not absolute
assurance against material misstatement or loss.
INTERNAL CONTROL
Key elements
The Board places importance on the maintenance
of a strong internal control system in the Group,
including compliance and risk management practices
to ensure good corporate governance. The Board
regularly evaluates and monitors the effectiveness of
the internal control system.
The key elements of the Group’s internal control
system are:
• Control - an organisational structure is in place
with clearly defined levels of responsibility and
authority together with appropriate reporting
procedures, particularly with respect to financial
information and capital expenditure
.
26
Steppe Cement Ltd. • Financial Reporting and Budgeting – A financial
reporting and budgeting system with an annual
budget approved by the directors has been
established to monitor the performance of the
subsidiaries. The management evaluates the
actual against budget to identify and explain the
causes of the significant variances for appropriate
action. The budgets are
regularly
taking into internal and external variables such
as performance, costs, capital expenditure
requirements, macro outlook and other relevant
factors.
revised
• Risk Management and Compliance – Risk
management and compliance policies, controls
and practices are in place for the Group to identify,
assess, manage and monitor key business risks
and exposure and for evaluation of their financial
impact and other implications.
Monitoring and review mechanism
The Audit Committee is tasked to monitor and review
the adequacy and effectiveness of the internal control
system and procedures including risk management
and compliance. The Group’s internal audit function
is responsible for conducting internal audits based
on the risk-based audit plan approved annually by
the Audit Committee. The internal audit function
provides regular reports to the Audit Committee
highlighting the observations, recommendations and
management action to improve the internal control
system. The scope of work, authority and resources
of the internal audit function are reviewed by the
Audit Committee at annually. The Audit Committee
also deliberates on control issues highlighted by
the external auditors during the course of statutory
audits.
27
Annual Report 2015 FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31DECEMBER 2015
(In United States Dollar)
28
Steppe Cement Ltd. CONTENTS
Independent auditors’ report
Income statements
Statements of comprehensive income
Statements of financial position
Statements of changes in equity
Statements of cash flows
Notes to the financial statements
Statement by a director
PAGES
30 - 31
32
33
34 - 35
36 - 38
39 - 41
42 - 93
94
29
Annual Report 2015 INDEPENDENT AUDITORS’ REPORT
REPORT TO THE MEMBERS OF STEPPE CEMENT LTD
(Incorporated in Labuan FT, Malaysia under the Labuan Companies Act, 1990)
Report on the Financial Statements
We have audited the financial statements of STEPPE CEMENT LTD, which comprise the statements
of financial position of the Group and of the Company as of 31 December 2015, and the income
statements, statements of comprehensive income, statements of changes in equity and statements
of cash flows of the Group and of the Company for the year then ended, and a summary of significant
accounting policies and other explanatory information, as set out on pages 32 to 93.
Directors’ Responsibility for the Financial Statements
The directors of the Company are responsible for the preparation of these financial statements so as to
give a true and fair view in accordance with International Financial Reporting Standards and the Labuan
Companies Act, 1990 in Malaysia. The directors are also responsible for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors’ judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation of financial statements that give a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
30 Steppe Cement Ltd.
30
Steppe Cement Ltd. Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Group
and of the Company as of 31 December 2015 and of their financial performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards and the requirements
of Labuan Companies Act, 1990 in Malaysia.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with Section
117(1) of the Labuan Companies Act, 1990 in Malaysia and for no other purpose. We do not assume
responsibility towards any other person for the contents of this report.
DELOITTE & TOUCHE
AAL 0011
Chartered Accountants
LIM KENG PEO
Partner - 2939/01/18 (J/PH)
Chartered Accountant
16 May 2016
Annual Report 2015 31
31
Annual Report 2015
INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
Note
2015
USD
2014
USD
2015
USD
2014
USD
4
93,632,720
116,634,875
100,000
4,247,325
(60,383,321)
(80,925,733)
-
-
33,249,399
35,709,142
100,000
4,247,325
(13,082,506)
(19,139,532)
-
-
(8,037,254)
(12,151,311)
(383,830)
(531,641)
40,584
8,245
(4,215,275)
(4,787,593)
-
-
-
-
(16,376,575)
(5,281,327)
72,203
29,391
5
6
(94,795)
691,630
-
-
-
(4,000,001)
10
(298,397)
(3,144,100)
-
-
-
-
7
8
(8,814,819)
(8,094,846)
(4,211,628)
3,745,075
5,433,161
154,161
-
(5,720)
(3,381,658)
(7,940,685)
(4,211,628)
3,739,355
(3,381,658)
(7,940,685)
(4,211,628)
3,739,355
9
(1.5)
(3.6)
Revenue
Cost of sales
Gross profit
Selling expenses
General and
administrative
expenses
Interest income
Finance costs
Net foreign exchange
(loss)/gain
Other (loss)/income, net
Impairment loss on invest-
ment
Impairment loss on
property, plant and
equipment, net of tax
(Loss)/Profit before
income tax
Income tax
credit/(expense)
(Loss)/Profit for the
year
Attributable to:
Shareholders of the
Company
Loss per share:
Basic and diluted
(cents)
The accompanying notes form an integral part of the financial statements.
32
Steppe Cement Ltd. STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
Note
2015
USD
2014
USD
2015
USD
2014
USD
(Loss)/Profit for the year
(3,381,658)
(7,940,685)
(4,211,628)
3,739,355
Other comprehensive
loss:
Items that will not be reclassi-
fied subsequently to profit or
loss:
Revaluation gain on property,
plant and equipment, net of
tax
10
124,531
-
Impairment loss on property,
plant and equipment, net of
tax
10
(142,081)
(481,777)
-
-
-
-
-
-
-
-
(57,566,026)
(24,936,678)
(57,583,576)
(25,418,455)
(60,965,234)
(33,359,140)
(4,211,628)
3,739,355
Items that may be reclassified
subsequently to profit or loss:
Exchange differences
arising on translation of
foreign operations
Total other comprehensive
loss
Total comprehensive
(loss)/income for the year
Attributable to:
Shareholders of the Company
(60,965,234)
(33,359,140)
(4,211,628)
3,739,355
The accompanying notes form an integral part of the financial statements.
33
Annual Report 2015
STATEMENTS OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
Note
2015
USD
2014
USD
2015
USD
2014
USD
10
11
16
12
13
14
15
25
71,787,157
151,695,517
-
-
-
-
26,500,001
30,500,002
1,270,919
50,666
2,442,499
7,021,239
549,669
-
-
-
-
-
-
-
76,050,244
158,767,422
26,500,001
30,500,002
13,319,832
22,112,879
2,290,736
3,949,124
547,232
1,211,045
-
-
-
-
-
-
-
-
39,845,904
40,377,069
16
1,432,447
2,514,290
6,582
17
2,406,309
9,295,439
338,124
5,731
2,112
Assets
Non-Current Assets
Property, plant and
equipment
Investment in subsidiary
companies
Advances and prepaid
expenses
Other assets
Deferred taxes
Total Non-Current
Assets
Current Assets
Inventories
Trade and other
receivables
Income tax recoverable
Loans and advances to sub-
sidiary companies
Advances and prepaid
expenses
Cash and cash
equivalents
Total Current Assets
19,996,556
39,082,777
40,190,610
40,384,912
Total Assets
96,046,800
197,850,199
66,690,611
70,884,914
34
Steppe Cement Ltd. STATEMENTS OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
Note
2015
USD
2014
USD
2015
USD
2014
USD
18
19
19
19
20
13
21
22
23
20
24
73,760,924
73,760,924
73,760,924
73,760,924
3,443,582
3,986,065
(108,124,581)
(50,558,555)
-
-
-
-
87,646,119
90,502,844
(8,427,886)
(4,216,258)
56,726,044
117,691,278
65,333,038
69,544,666
14,857,018
30,363,401
-
7,399,794
517,778
-
51,265
84,458
15,426,061
37,847,653
4,485,684
7,658,755
-
-
-
-
-
-
-
-
-
-
-
-
3,084,812
6,638,802
1,357,573
1,334,528
15,822,258
27,088,698
501,941
925,013
-
-
-
5,720
23,894,695
42,311,268
1,357,573
1,340,248
39,320,756
80,158,921
1,357,573
1,340,248
96,046,800
197,850,199
66,690,611
70,884,914
Equity and Liabilities
Capital and Reserves
Share capital
Revaluation reserve
Translation reserve
Retained earnings/
(Accumulated losses)
Total Equity
Non-Current Liabilities
Borrowings
Deferred taxes
Deferred income
Provision for site
restoration
Total Non-Current
Liabilities
Current Liabilities
Trade and other payables
Accrued and other
liabilities
Borrowings
Taxes payable
Total Current
Liabilities
Total Liabilities
Total Equity and
Liabilities
The accompanying notes form an integral part of the financial statements.
35
Annual Report 2015
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Non-distributable
Distributable
The Group
Share capital Revaluation reserve Translation reserve Retained earnings
USD
USD
USD
USD
Total*
USD
As of 1 January 2015
73,760,924
3,986,065
(50,558,555)
90,502,844
117,691,278
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Other transactions impacting equity:
Transfer of revaluation reserve
relating to property, plant and
equipment through use
-
-
-
-
-
(17,550)
(17,550)
-
(3,381,658)
(57,566,026)
(57,566,026)
-
(3,381,658)
(3,381,658)
(57,583,576)
(60,965,234)
(524,933)
-
524,933
-
As of 31 December 2015
73,760,924
3,443,582
(108,124,581)
87,646,119
56,726,044
*Attributable to the shareholders of the Company
36
36
Steppe Cement Ltd.Annual Report 2015 Non-distributable
Distributable
The Group
Share capital Revaluation reserve Translation reserve Retained earnings
USD
USD
USD
USD
Total*
USD
As of 1 January 2015
73,760,924
3,986,065
(50,558,555)
90,502,844
117,691,278
-
(17,550)
(17,550)
(57,566,026)
(57,566,026)
(3,381,658)
-
(3,381,658)
(3,381,658)
(57,583,576)
(60,965,234)
-
-
As of 31 December 2015
73,760,924
3,443,582
(108,124,581)
87,646,119
56,726,044
(524,933)
524,933
-
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Other transactions impacting equity:
Transfer of revaluation reserve
relating to property, plant and
equipment through use
-
-
-
-
*Attributable to the shareholders of the Company
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Non-distributable
Distributable
The Group
Share capital Revaluation reserve
Translation reserve Retained earnings
USD
USD
USD
USD
Total*
USD
As of 1 January 2014
73,760,924
5,603,756
(25,621,877)
100,883,344
154,626,147
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Other transactions impacting equity:
Dividends (Note 19)
Transfer of revaluation reserve
relating to property, plant and
equipment through use
-
-
-
-
-
-
(481,777)
(481,777)
-
(1,135,914)
-
(7,940,685)
(24,936,678)
(24,936,678)
-
(7,940,685)
(7,940,685)
(25,418,455)
(33,359,140)
-
-
(3,575,729)
(3,575,729)
1,135,914
-
As of 31 December 2014
73,760,924
3,986,065
(50,558,555)
90,502,844
117,691,278
*Attributable to the shareholders of the Company
37
37
Steppe Cement Ltd.Annual Report 2015
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
The Company
Share capital
Accumulated losses
USD
USD
Total
USD
As of 1 January 2015
73,760,924
(4,216,258)
69,544,666
Total comprehensive loss for the year
-
(4,211,628)
(4,211,628)
As of 31 December 2015
73,760,924
(8,427,886)
65,333,038
As of 1 January 2014
Total comprehensive income for the
year
Other transaction impacting equity:
Dividends (Note 19)
73,760,924
(4,379,884)
69,381,040
-
-
3,739,355
3,739,355
(3,575,729)
(3,575,729)
As of 31 December 2014
73,760,924
(4,216,258)
69,544,666
The accompanying notes form an integral part of the financial statements.
38
Steppe Cement Ltd.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
CASH FLOWS FROM OPERATING
ACTIVITIES
(Loss)/Profit before income tax
(8,814,819)
(8,094,846)
(4,211,628)
3,745,075
Adjustments for:
Depreciation of property, plant
and equipment
Amortisation of quarry stripping
costs
Amortisation of site restoration
costs
Loss on disposal of property, plant
and equipment
10,685,978
12,239,764
-
15,699
2,430
-
545,175
237,877
-
-
-
-
Impairment loss on investment
-
-
4,000,001
Impairment loss on property,
plant and equipment
Dividend income
Interest income
Finance costs
298,397
3,144,100
-
-
(40,584)
(8,245)
4,215,275
4,787,593
-
-
-
-
-
-
-
-
-
-
(4,147,325)
-
-
Net foreign exchange loss/(gain)
16,376,575
5,284,714
(68,172)
(66,613)
Provision for obsolete inventories
395,646
1,750,864
Provision for doubtful receivables
33,502
103,630
Provision on advances paid to
third parties
Accrued unused leaves
Reversal of accrued unused leaves
Reversal of provision of electricity
39,347
-
(6,799)
119,956
19,359
(55,688)
charges
(1,922,083)
-
-
-
-
-
-
-
-
-
-
-
-
-
21,808,040
19,544,777
(279,799)
(468,863)
39
Annual Report 2015 STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
Movement in working capital:
(Increase)/Decrease in:
Inventories
2015
USD
2014
USD
(2,324,878)
(3,619,182)
Trade and other receivables
1,844,366
1,069,568
2015
USD
-
(851)
2014
USD
-
3,156
Loans and advances to
subsidiary companies
Advances and prepaid
expenses
Increase/(Decrease) in:
-
-
531,165
(468,393)
(909,535)
1,505,920
-
-
-
-
Trade and other payables
452,420
(169,749)
Accrued and other liabilities
1,462,067
1,483,330
90,977
126,505
Cash From/(Used In) Operations
22,332,480
19,814,664
341,492
(807,595)
Income tax paid
Interest paid
(398,712)
(1,448,896)
(4,073,196)
(4,806,663)
(5,480)
-
-
-
Net Cash From/(Used In) Operating
Activities
17,860,572
13,559,105
336,012
(807,595)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(1,831,446)
(21,834,528)
Purchase of other assets
(26,002)
(356,421)
Dividends received
Interest received
-
40,584
-
8,245
Net Cash (Used In)/From
Investing Activities
(1,816,864)
(22,182,704)
-
-
-
-
-
-
-
4,147,325
-
4,147,325
40
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid
-
(3,575,729)
Proceeds from bank loans
20,184,000
89,745,890
Repayment of bank loans
(38,853,066)
(71,954,803)
Net Cash (Used In)/From Financing
Activities
(18,669,066)
14,215,358
-
-
-
-
(3,575,729)
-
-
(3,575,729)
NET (DECREASE) /INCREASE IN
CASH AND CASH
EQUIVALENTS
EFFECTS OF FOREIGN EX-
CHANGE RATE CHANGES
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
AT END OF YEAR (Note 17)
(2,625,358)
5,591,759
336,012
(235,999)
(4,263,772)
(595,503)
-
-
9,295,439
4,299,183
2,112
238,111
2,406,309
9,295,439
338,124
2,112
The accompanying notes form an integral part of the financial statements.
41
Annual Report 2015 1. GENERAL INFORMATION
Steppe Cement Ltd (the “Company”) is a limited liability company incorporated in Malaysia. The
Company’s registered office is Brumby Centre, Lot 42, Jalan Muhibbah, 87000 Labuan FT, Malaysia.
The Company’s shares are listed on the Alternative Investment Market of the London Stock Ex-
change. The group comprises the Company and the subsidiary companies (collectively the “Group”)
that are disclosed in Note 11.
The principal place of business of the Company’s operating subsidiary companies is located at
472380, Aktau village, Karaganda Region, the Republic of Kazakhstan.
The Company’s principal activity is investment holding. The Company’s operating subsidiary are
principally engaged in the production and sale of cement. The principal activities of the subsidiary
companies are disclosed in Note 11.
The financial statements of the Group and of the Company have been approved by the Board of
Directors and were authorised for issuance on 16 May 2016.
2.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board (“IASB”).
Application of new and revised International Financial Reporting Standards (IFRSs)
Amendments to IFRSs and the new Interpretation that are mandatorily effective for the current
year
In the current year, the Group and the Company have applied a number of amendments to IFRSs
issued by IASB that are mandatorily effective for an accounting period that begins on or after 1
January 2015.
Amendments to IAS 19
Defined Benefit Plans - Employee Contributions
Amendments to IFRSs contained in the document entitled Annual Improvements to IFRSs 2010 -
2012 Cycle and 2011 - 2013 Cycle
The application of these amendments has had no material impact on the disclosures in the Group’s
consolidated financial statements.
42
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 New and revised IFRSs in issue but not yet effective
IFRS 9
IFRS 15
IFRS 16
Amendments to
IFRS 11
Amendments to
IAS 1
Amendments to
IAS 7
Amendments to
IAS 12
Amendments to
IAS 16 and
IAS 38
Amendments to
IAS 16 and
IAS 41
Amendments to
IFRS 10 and
IAS 28
Amendments to
IFRS 10, 12 and
IAS 28
Amendments to
IFRSs
Financial Instruments3
Revenue from Contracts with Customers3
Leases5
Accounting for Acquisitions of interests in Joint Operations1
Disclosure Initiative1
Disclosure Initiative2
Recognition of Deferred Tax Assets for Unrealised Losses2
Clarification of Acceptable Methods of Depreciation and
Amortisation1
Agriculture: Bearer Plants1
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture4
Investment Entities: Applying the Consolidation Exception1
Annual Improvements to IFRSs 2012-2014 Cycle1
1 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
2 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted.
3 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
4 Effective date deferred to a date to be determined and announced, with earlier application still permitted.
5 Effective for annual periods beginning on or after 1 January 2019. Earlier application is permitted
provided MFRS 15 is also applied.
The directors anticipate that the abovementioned Standards and Amendments will be adopted
in the financial statements of the Group and the Company when they become effective and that
the adoption of these Standards and Amendments will have no material impact on the financial
statements of the Group and the Company except for the application of IFRS 9 and IFRS 15 which
may have impact on the disclosure as described below.
43
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
IFRS 9 Financial Instruments
IFRS 9 issued by IASB in November 2009 introduces new requirements for the classification and
measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include the
requirements for the classification and measurement of financial liabilities and for derecognition,
and in November 2013 to include the new requirements for general hedge accounting. Another
revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for
financial assets and b) limited amendments to the classification and measurement requirements by
introducing a ‘fair value through other comprehensive income’ measurement category for certain
simple debt instruments. Key requirements of IFRS 9 are described as follows:
• All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition
and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt
investments that are held within a business model whose objective is to collect the contractual
cash flows, and that have contractual cash flows that are solely payments of principal and interest
on the principal outstanding are generally measured at amortised cost at the end of subsequent
accounting periods. All other debt investments and equity investments are measured at their
fair values at the end of subsequent accounting periods. In addition, under IFRS 9, entities may
make an irrevocable election to present subsequent changes in fair value of equity instrument
(that is not held for trading) in other comprehensive income, with only dividend income generally
recognised in profit or loss.
• With regards to the measurement of financial liabilities designated as at fair value through profit
or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liabilities, is presented in other comprehensive
income, unless the recognition of the effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes
in fair value attributable to financial liability’s credit risk are not subsequently reclassified to profit
or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability
designated as at fair value through profit or loss is presented in profit or loss.
•
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as
opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires
an entity to account for expected credit losses and changes in those expected credit losses at
each reporting date to reflect changes in credit risk since initial recognition. In other words, it is
no longer necessary for credit event to have occurred before credit losses are recognised; and
• The new general hedge accounting requirements retain the three types of hedge accounting
mechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced
to the types of transactions eligible for hedge accounting, specifically broadening the types
of instruments that qualify for hedging instruments and the types of risk components of non-
financial items that are eligible for hedge accounting. In addition, the effectiveness test has
been overhauled and replaced with the principle of an “economic relationship”. Retrospective
assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements
about any entity’s risk management activities have also been introduced.
The directors of the Company anticipate that the application of IFRS 9 in the future may have a
material impact on amounts reported in respect of the Group’s and of the Company’s financial assets
and liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9
until the Group and the Company complete a detailed review.
IFRS 15 Revenue from Contracts with Customers
In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use
44
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current
revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the
related Interpretations when it becomes effective. The core principle of IFRS 15 is that an entity
should recognise revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:
• Step 1: Identify the contract(s) with a customer.
• Step 2: Identify the performance obligations in the contract.
• Step 3: Determine the transaction price.
• Step 4: Allocate the transaction price to the performance obligations in the contract.
• Step 5 : Recognise revenue when (or as) the entity satisfies a performance obligation.
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e.
when ‘control’ of the goods or services underlying the particular performance obligation is transferred
to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific
scenarios. Furthermore, extensive disclosures are required by IFRS 15.
The directors of the Company anticipate that the application of IFRS 15 in the future may have a
material impact on the amounts reported and disclosures made in the financial statements of the
Group. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until
the Group performs a detailed review.
3.
SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Group and of the Company have been prepared under the historical
cost convention except for the revaluation of land and building made in accordance with IAS 16
Property, Plant and Equipment (Note 10).
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price
is directly observable or estimated using another valuation technique. In estimating the fair value of
an asset or a liability, the Group and the Company take into account the characteristics of the asset
or liability if market participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for the measurement and/or disclosure purposes in
these financial statements is determined on such basis.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
45
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company
and its subsidiary companies. Control is achieved when the Company:
• has the power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power
over the investee when the voting rights are sufficient to give it the practical ability to direct
the relevant activities of the investee unilaterally. The Company considers all relevant facts
and circumstances in assessing whether or not the Company’s voting rights in an investee are
sufficient to give it power, including:
•
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
rights arising from other contractual arrangements; and
• potential voting rights held by the Company, other vote holders or other parties;
•
• any additional facts and circumstances that indicate that the Company has, or does not
have, the current ability to direct the relevant activities at the time that decisions need to
be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary company begins when the Company obtains control over the
subsidiary company and ceases when the Company loses control of the subsidiary company.
Specifically, income and expenses of a subsidiary company disposed of during the year are
included in the income statement from the date the Company gains control until the date when
the Company ceases to control the subsidiary company.
Profit or loss and each component of the other comprehensive income are attributed to the
owners of the Company. Total comprehensive income of subsidiary companies is attributed to
the owners of the Company.
Where necessary, adjustments are made to the financial statements of subsidiary companies to
bring their accounting policies to be in line with those used by other subsidiary companies of
the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on
consolidation.
Changes in the Group’s ownership interests in existing subsidiary companies
Changes in the Group’s ownership interests in subsidiary companies that do not result in the
Group losing control over the subsidiary companies are accounted for as equity transactions.
The carrying amounts of the Group’s interests are adjusted to reflect the changes in their relative
46
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 interests in the subsidiary companies.
When the Group loses control of a subsidiary company, the profit or loss on disposal is calculated
as the difference between (i) the aggregate of the fair value of the consideration received and the fair
value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill),
and liabilities of the subsidiary company. All amounts previously recognised in other comprehensive
income in relation to that subsidiary company are accounted for as if the Group had directly disposed
of the related assets or liabilities of the subsidiary company (i.e. reclassified to profit or loss or trans-
ferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment
retained in the former subsidiary company at the date when control is lost is regarded as the fair value
on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and
Measurement or, when applicable, the cost on initial recognition of an investment in an associate or
a joint venture.
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Revenue of the
Group represents sale of cement, transmission and distribution of electricity and interest income.
Sale of cement and transmission and distribution of electricity are stated at invoice value net of dis-
counts, rebates, commissions and returns. Revenue of the Company represents management fee
and dividend income.
Sale of goods
Upon shipment/delivery of goods and when the risks and rewards of ownership have passed to the
customers, revenue is recognised at gross invoiced value, net of discounts, rebates, commissions
and returns.
Transmission and distribution of electricity
Revenue is recognised upon delivery of electricity to the customers.
Interest income
Interest income is recognised on an accrual basis by reference to the principal outstanding and at the
effective interest rate applicable.
Management fee income
Management fee is recognised on a straight-line basis over the period of the agreement as the ser-
vices are provided.
Dividend income
Dividend income is recognised when the right to receive payment is established.
Government Grants
Government grants are not recognised until there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the
Group recognises as expenses the related costs for which the grants are intended to compensate.
Specifically, government grants whose primary condition is that the Group should purchase, construct
or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated
statement of financial position and transferred to profit or loss on a systematic and rational basis over
the useful lives of the related assets.
47
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Government grants that are receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the Group with no future related costs are
recognised in profit or loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government
grant, measured as the difference between proceeds received and the fair value of the loan based
on prevailing market interest rates.
Foreign Currencies
The individual financial statements of each group entity are presented in the currency of the primary
economic environment in which the entity operates (its functional currency). For the purpose of the
financial statements of the Group, the results and financial position of each entity are expressed in
United States Dollars (“USD”), which is the functional currency of the Company, and the presentation
currency for the financial statements of the Group. The functional currency of the principal subsidiary
companies, Karcement JSC and Central Asia Cement JSC (“CAC JSC”), is the Kazakhstan Tenge
(“KZT”).
In preparing the financial statements of the individual entities, transactions in currencies other than
the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of
the transactions. At each reporting date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at the rates prevailing on the date when
the fair value was determined. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary item and on the retranslation of
monetary items are included in the income statement for the year. Exchange differences arising on
the retranslation of non-monetary items carried at fair value are included in the income statement for
the year except for differences arising on the retranslation of non-monetary item in respect of which
gains and losses are recognised in other comprehensive income. For such non-monetary items, any
exchange component of that gain or loss is also recognised in other comprehensive income.
For the purposes of presenting financial statements, the assets and liabilities of the Group’s foreign
operation (including comparatives) are expressed in USD using exchange rates prevailing on the
reporting date. Income and expense items (including comparatives) are translated at the average
rates at the dates of the transactions. Exchange differences arising, if any, are recorded in other
comprehensive income and accumulated in the Group’s translation reserve. Such translation
differences are recognised in the income statement in the year in which the foreign operation is
disposed of.
Goodwill (if any) and fair value adjustments arising on the acquisition of foreign operations are treated
as assets and liabilities of the foreign operation and translated at the closing rate.
The principal closing rates used in translation of foreign currency amounts are as follows:
48
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
1 Sterling Pound (“GBP”)
1 Euro (“EUR”)
1 Ringgit Malaysia (“MYR”)
1 Russian Ruble (“RUB”)
2015
USD
1.4736
1.0862
0.2329
0.0138
KZT
2014
USD
1.5577
1.2098
0.2860
0.0173
KZT
1 USD
339.47
182.35
Retirement Benefit Costs
In accordance with the requirements of the legislation of the country in which the Group operates, the
Group withholds amounts of pension contributions (a defined contribution plan) equivalent to 10%
of each employee’s wage, but not more than USD440 per month per employee (2014: USD821) from
employee salaries and pays them to the state pension fund. In addition, such pension system provides
for calculation of current payments by the employer as a percentage of current total disbursements
to staff. Such expenses are charged in the period the related salaries are earned. Upon retirement
all retirement benefit payments are made by pension funds selected by the employees. The Group
does not have any pension arrangements separate from the state pension system of the countries
where its subsidiary companies operate. In addition, the Group has no post-retirement benefits or
other significant compensation benefits requiring accrual.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax and is calculated
in accordance with tax legislation applicable to the respective jurisdiction and based on the operating
results for the year after adjustments for amounts which are non-taxable or non-deductible for tax
purposes.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the income statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are not taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit,
and are accounted for using the liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit.
49
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
when the liability is settled or the asset realised, based on the tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
entity expects, at the end of the reporting period, to recover or to settle the carrying amount of its
assets and liabilities. Deferred tax is charged or is credited to the income statement, except when it
is related to items that are recognised outside profit or loss (whether in other comprehensive income
or charged or credited directly to equity), in which case the deferred tax is also dealt with outside
profit or loss, or where they arise from the initial accounting for a business combination. In the case
of a business combination, the tax effect is included in the accounting for the business combination.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiary companies, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Property, Plant and Equipment
Property, plant and equipment except for land and buildings and construction in progress
Property, plant and equipment except for land and buildings are carried at historical cost less
accumulated depreciation and any recognised impairment loss. The initial cost of property, plant and
equipment consists of its purchase price, including import duties, taxes and any directly attributable
cost to bring the property, plant and equipment to its working condition and location for its intended
use.
Land and buildings
Land and buildings held for use in the production or supply of goods or services, or for administrative
purposes, are stated at their revalued amounts in the statement of financial position, being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses, if any. Revaluations are performed with sufficient regularity such that
the carrying amounts do not differ materially from those that would be determined using fair values
at the end of each reporting period.
Any revaluation increase arising on revaluation of such land and buildings is recognised in other
comprehensive income and revaluation reserve in equity, except to the extent that it reverses a
revaluation decrease for the same asset previously recognised in the income statement, in which
case, the increase is credited to the income statement to the extent of the decrease previously
expensed. A decrease in the carrying amount arising on revaluation of such land and buildings is
recognised in the income statement to the extent that it exceeds the balance, if any, held in the
revaluation reserve relating to a previous revaluation of that asset.
50
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Revaluation surplus is transferred directly to retained earnings as and when the revalued asset is
used by the Group. The amount of the surplus transferred is calculated as the difference between
depreciation calculated based on the revalued carrying amount of the asset and depreciation based
on the asset’s original cost.
Construction in Progress
Assets in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impaired loss. Cost includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Such assets will be
presented in the appropriate categories of property, plant and equipment when they are completed
and ready for intended use.
Depreciation
Depreciation of property, plant and equipment commences when the assets are ready for their
intended use.
Depreciation on revalued buildings is recognised in the income statement. On the subsequent sale
or retirement of revalued assets, their remaining revaluation surplus recorded in the revaluation
reserve is transferred directly to retained earnings.
Freehold land is not depreciated.
Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land
and construction in progress) less their residual values over their useful lives using the straight-line
method. The estimated useful lives are as follows:
Buildings
Machinery and equipment
Railway wagons
Other assets
25 years
14 years
20 years
5 - 10 years
The estimated useful lives, residual values and depreciation method of assets are reviewed at the end
of each reporting period with the effect of any changes in estimate accounted for on a prospective
basis.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sale proceeds and the carrying amount of the asset and is recognised in the income
statement.
51
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Mining assets
Mining assets comprise quarry stripping costs and site restoration costs relating to quarry used by
the Group.
(i) Quarry stripping costs
The cost of removal of the overburden from the quarry is deferred until the commencement of
physical extraction of limestone from the site. Such costs are amortised over the expected life of
the quarry from the date of commencement of extraction.
(ii) Site restoration costs
Site restoration provisions are made in respect of the estimated discounted costs of closure
and restoration, and for environmental rehabilitation costs (which include the dismantling and
demolition of infrastructure, removal of residual material and remediation of disturbed areas).
Over time, the discounted obligation is increased for the change in present value based on the
discount rates that reflect current market assessments of the time value of money and the risks
specific to the liability. A corresponding asset is capitalised where it gives rise to a future benefit
and depreciated over the remaining life of the quarry to which it relates on a straight-line basis.
The provision is reviewed on an annual basis for changes in cost estimates, discount rates or life
of operations. Any change in restoration costs or assumption will be recognised as additions or
charges to the corresponding asset and provision when they occur.
Impairment of property, plant and equipment
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable amount of the cash-generating unit
(“CGU”) to which the asset belongs. Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to
the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of the fair value less costs to sell and the value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that management believes reflects the current market assessments of the time value of
money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. An impairment loss is recognised
immediately in the income statement unless the relevant asset is carried at a revalued amount
in which case the impairment loss is treated as a revaluation decrease (see accounting policy on
property, plant and equipment above).
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised
immediately in income statement unless the relevant asset is carried at a revalued amount in which
case the reversal of the impairment loss is treated as a revaluation increase.
52
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials
and, where applicable, direct labour costs and those overheads that have been incurred in bringing
the inventories to their present location and condition. Cost is calculated using the weighted average
method. Net realisable value represents the estimated selling price less all estimated costs of
completion and the estimated costs necessary to make the sale.
At each reporting date, the Group evaluates its inventory balances for excess quantities and
obsolescence and, if necessary, records a provision to reduce inventory for obsolete, slow-moving
raw materials and spare parts. Provision is determined based on inventory ageing as follows:
Not moving more than 1 year
Not moving more than 2 years
Not moving more than 3 years
33.3%
66.7%
100%
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, and it is probable that the Group will be required to settle that obligation and a
reliable estimate can be made of the amount of the obligation. Provisions are measured at the
directors’ best estimate of the expenditure required to settle the obligation at the reporting date,
and are discounted to present value where the effect is material.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows (where the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will
be received and the amount of the receivable can be measured reliably.
Equity
Ordinary shares are classified as equity. Distributions to holders of ordinary shares are debited directly
to equity and dividend declared on or before the reporting date is recognised as liability. Costs
directly attributable to equity transactions are accounted for as a deduction, net of tax, from equity.
Contingent Liabilities
Contingent liabilities are not recognised in the statement of financial position but are disclosed
unless the possibility of any outflow in settlement is remote.
Financial Instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the
Group becomes a party to the contractual provisions of the financial instrument.
53
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in the income statement.
Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a financial asset or
financial liability and of allocating interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts or payments (including
all fees, paid or received, which comprise an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the financial asset or financial
liability, or, where appropriate, a shorter period.
Financial Assets
Financial assets are classified into the following specified categories: financial assets at fair value
through profit or loss (“FVTPL”), held-to-maturity investments, available-for-sale (“AFS”) financial
assets and loans and receivables. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Loans and receivables (including cash and cash equivalents, short-
term investments, trade and other receivables and loans and advances to subsidiary companies)
are measured at amortised cost using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate, except for short-term receivables where
the recognition of interest would be immaterial.
The Group does not have financial assets designated as at FVTPL, held-to-maturity investments or
AFS financial assets.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly
liquid investments with initial maturity period of up to three months that are readily convertible to
a known amount of cash and are subject to an insignificant risk of changes in value. When cash and
cash equivalents are restricted from use, they are disclosed in the notes to the financial statements.
Short-term Investments
Short-term investments represent fixed short-term deposits in banks with original maturity of more
than three months.
Trade and Other Receivables
Trade and other receivables are recognised and carried at fair value upon initial recognition. After
initial measurement, such financial assets are subsequently measured at amortised cost using the
effective interest method, less impairment.
54
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Impairment of Financial Assets
The Group provides an allowance for impairment of financial assets when there is an objective
evidence of impairment of a financial asset. Financial assets are assessed on individual basis. The
allowance for impairment of financial assets represents a difference between the carrying value of
the assets and present value of estimated future cash inflows, discounted using the original effective
interest rate on the financial instrument, which is reflected at amortised value. If in a subsequent
period the value of the financial asset increases, and such an increase can be objectively connected
with an event which happen after recognition of the impairment then the previously recognised
impairment loss is reversed with an adjustment of the allowance account.
For financial assets carried at cost, the impairment loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flow, discounted at the current
market rate of return for a similar financial instrument.
The changes in impairment allowances are charged to the income statement and the assets are
reduced by the amount of the impairment allowances. The factors evaluated in determining whether
the evidence of impairment is objective includes information on liquidity of borrowers, solvency and
exposure to financial risks, insolvency trends regarding similar financial assets, general economic
condition and fair value of security and guarantees.
Financial Liabilities and Equity Instruments Issued by the Group
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangement. An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are
recorded at the proceeds received, net of direct issue costs.
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
Other financial liabilities (including accrued and other financial liabilities, borrowings and trade and
other payables) are subsequently measured at amortised cost using the effective interest method.
The Group does not have financial liabilities designated as FVTPL.
Offset of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are offset and recorded on a net basis in the statement of
financial position when the Group is legally entitled to offset certain amounts and the Group intends
to either record on a net basis or receive assets and offset liabilities simultaneously.
Derecognition of Financial Liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or they expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in the income statement.
55
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets until such time as the assets are substantially ready
for their intended use or sale. Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are
incurred.
Statements of Cash Flows
The Group and the Company adopt the indirect method in the preparation of the statements of cash
flows.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires the directors to make
judgements, estimates and assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses and the disclosure of liabilities. Due to the inherent uncertainty in making
those judgements and estimates, actual results reported in future periods could differ from such
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and
future periods.
Revaluation of Property, Plant and Equipment
As stated in Note 10, land and buildings of the Group are measured at fair value at the date of
revaluation less accumulated depreciation and impairment losses recognised. The carrying amount
of the land and buildings was determined by professional valuers on 31 August 2015. Valuation
techniques used by the professional valuers are subjective and involve the use of professional
judgement in the estimation of, amongst others, the Group’s future cash flows from operations and
appropriate discount factors and in the application of relevant market information.
As of 31 December 2015, the directors consider that the carrying amount of the land and buildings
is reflective of the fair value of these assets.
Impairment of Property, Plant and Equipment
The Group assesses at each reporting date whether there is any indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or CGU’s fair value less costs to sell and its value in use and is determined for an
individual asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
The determination of impairment of property, plant and equipment involves the use of estimates
that include, but not limited to, the cause, timing and amount of the impairment. Impairment is
determined based on a large number of factors, such as expected growth in the industry, changes in the
56
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 future availability of financing, technological obsolescence, discontinuance of service, current
replacement costs and other changes in circumstances that indicate an impairment exists. The
recoverable amount and the fair values are typically determined using a discounted cash flow
method which incorporates reasonable market participant assumptions. The identification of
impairment indicators, the estimation of future cash flows and the determination of fair values
for assets (or group of assets) requires management to make significant judgments concerning
the identification and validation of impairment indicators, expected cash flows, applicable
discount rates, useful lives and residual values. The determination of the recoverable amount
of a CGU involves the use of estimates by management. These estimates can have a material
impact on the fair value and ultimately the amount of any property, plant and equipment
impairment.
On 31 August 2015, the Group performed a revaluation of land and buildings based on inde-
pendent revaluation. As a result of the revaluation, the Group recognised a net loss on reval-
uation of USD95,551, of which USD251,216 was recognised as impairment loss in the income
statement, while a net revaluation gain of USD124,531 was recognised in revaluation reserve,
net of deferred tax of USD31,134.
On 31 August 2015, several buildings which were no longer in use as a result of operational
streamlining were identified as unlikely to be re-used. As such, those buildings were subject to
full impairment loss on that date. The Group recognised an impairment loss of USD224,780 of
which USD47,181 was recognised in the income statement and USD142,081 was charged to
revaluation reserve, net of deferred tax of USD35,518.
Useful Lives of Property, Plant and Equipment
The estimated useful lives and residual values of property, plant and equipment and deprecia-
tion method are reviewed at each year end. The useful lives and residual values are estimated
based on normal life expectancies and industry factors. Changes in expected level of usage
could impact the economic useful lives and the residual values of these assets, hence future
depreciation charges on such assets could be revised.
Provisions for Doubtful Debts, Advances paid to Third Parties and Inventories
The Group makes provisions for doubtful debts and advances paid to third parties. Significant
judgement is used to estimate doubtful debts. In estimating doubtful debts, historical and an-
ticipated customer performances are considered. Changes in the economy or specific custom-
er conditions may require adjustments to the provision for doubtful debts and advances paid
to third parties. As of 31 December 2015, provision for doubtful debt amounted to USD40,171
(2014: USD481,826) (Note 15) and advances paid to third parties amounted to USD86,888
(2014: USD1,107,623) (Note 16).
The Group makes provision for obsolete and slow-moving inventories based on information
obtained from annual stock count and the results of inventory turnover analysis. As of 31 De-
cember 2015, provision for obsolete and slow moving inventories amounted to USD2,805,285
(2014: USD4,485,879) (Note 14).
Provision for Electricity Charges
As stated in Note 23, as of 31 December 2015, a provision of USD617,698 (2014: USD3,492,586)
was made by the Group pertaining to ongoing lawsuit between a subsidiary company, CAC
JSC, and Karaganda Zharyk LLP on electricity transportation services. There is an inherent
uncertainty in the final outcome of the court case. Having considered all pertinent factors,
including after due consultation with solicitor and assessment of the merits of the case,
management considers the provision made as adequate.
57
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Provision for Site Restoration
The Company’s subsidiary company, CAC JSC, engaged professional consultants with geology and
environmental protection expertise to estimate site restoration obligation which may arise from its
limestone and clay quarries in accordance with Subsurface Use Contracts and relevant legislations. In
arriving at the present value of site restoration obligation, a pre-tax discount rate of 13% (2014:13%)
is used as it reflects current market assessment of the time value of money and the risk specific to
site restoration obligation.
4.
REVENUE
The Group
The Company
Sale of manufactured goods
93,606,443
116,576,914
Transmission and distribution of
electricity
Dividend income
Management fee receivable from
subsidiary company
26,277
57,961
-
-
-
-
2015
USD
2014
USD
2015
USD
2014
USD
-
-
4,147,325
-
-
-
100,000
100,000
5.
FINANCE COSTS
Interest expenses on:
- Bank loans
- Bonds issued
Amortisation of discount on bonds
issued
Others
93,632,720
116,634,875
100,000
4,247,325
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
3,407,346
3,774,373
713,191
830,084
61,497
33,241
64,217
118,919
4,215,275
4,787,593
-
-
-
-
-
-
-
-
-
-
The Group’s weighted average interest rate on the bank loans is 7.26% (2014: 7.65%) per annum.
58
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 6.
NET FOREIGN EXCHANGE (LOSS)/GAIN
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Net foreign exchange (loss)/gain
(16,376,575)
(5,281,327)
72,203
29,391
During the year, foreign exchange losses of USD16,505,050 arose from the translation of the USD
denominated bank loans due to significant decline in the value of KZT against USD. These losses are
presented as part of the repayment of bank loans in statement of cash flows.
7.
(LOSS)/PROFIT BEFORE INCOME TAX
(Loss)/Profit before income tax includes the following (expenses)/income:
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Staff costs
(5,788,259)
(8,713,682)
Depreciation of property, plant
and equipment
Amortisation of quarry stripping
costs
Amortisation of site restoration
costs
(10,685,978)
(12,239,764)
-
(15,699)
(2,430)
-
Loss on disposal of property, plant
and equipment
(545,175)
(237,877)
Provision for obsolete inventories
(395,646)
(1,750,864)
Provision for doubtful receivables
(33,502)
(103,630)
Provision for doubtful advances
paid to third parties
Accrued unused leaves
Reversal of accrued unused leaves
Reversal of provision for electricity
(39,347)
(119,956)
-
6,799
(19,359)
55,688
charges
1,922,083
-
Impairment loss on property, plant
and equipment
298,397
3,144,100
-
-
-
-
-
-
-
-
-
-
-
-
Impairment loss on investment
-
-
4,000,001
-
-
-
-
-
-
-
-
-
-
-
-
-
59
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 8.
INCOME TAX CREDIT/(EXPENSE)
The income tax credit/(expense) is as follows:
The Group
The Company
2015
USD
2014
USD
2015
USD
Current tax credit/(expense):
- Company
-
(5,720)
- Subsidiary companies
(433,764)
-
- Over/(Under)provision
in prior years
Deferred tax credit
(Note 13):
29,893
(246,479)
- Subsidiary companies
5,837,032
406,360
5,433,161
154,161
-
-
-
-
-
2014
USD
(5,720)
-
-
-
(5,720)
Under the Labuan Business Activity Tax Act, 1990, the Company has to elect annually whether it is
to be charged tax at the amount of RM20,000 (USD5,120) or at a tax rate of 3% on the chargeable
profits of a Labuan company carrying on Labuan trading activities for the basis period for that year
of assessment. No tax is charged on Labuan non-trading activities.
The profits earned by the subsidiary companies incorporated in the Republic of Kazakhstan are
subject to the prevailing statutory tax rate of 20% (2014: 20%), and Malaysian and Netherland
subsidiaries are subject to statutory tax rates of 25% (2014: 25%).
60
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 A reconciliation of income tax (credit)/expense applicable to (loss)/profit before income tax at the
applicable statutory income tax rate to income tax (credit)/expense at the effective income tax rate
of the Group is as follows:
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
(Loss)/Profit before income tax
(8,814,819)
(8,094,846)
(4,211,628)
3,745,075
Tax (credit)/expense calculated at
domestic tax rates applicable to
the respective jurisdictions
Tax effects of expenses not
deductible for tax purposes
Tax effects of income not assess-
able for tax purposes
Effect of previously unrecognised
temporary differences
Effect of unused tax losses
not recognised as deferred tax
assets
(Over)/Underprovision of current
tax in prior years
(5,466,622)
(1,295,729)
(126,349)
112,352
531,774
765,703
120,000
-
(302,432)
(60,540)
(248,545)
-
-
-
(124,420)
-
82,557
184,206
6,349
12,068
(29,893)
246,479
Election of tax at RM20,000
-
5,720
Income tax (credit)/expense
(5,433,161)
(154,161)
-
-
-
-
5,720
5,720
The high effective tax rate at 62% as compared to the prevailing statutory tax rate of 20% of subsidiary
companies in Kazakhstan is due to tax effects arising on foreign exchange losses on intercompany
loan deductible for tax purposes.
61
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 9.
LOSS PER SHARE
Basic and diluted
The Group
2015
USD
2014
USD
Loss attributable to ordinary shareholders
(3,381,658)
(7,940,685)
Number of ordinary shares in issue at beginning
and end of year
219,000,000
219,000,000
2015
2014
Weighted average number of ordinary shares
in issue
219,000,000
219,000,000
Loss per share, basic and diluted (cents)
2015
(1.5)
2014
(3.6)
The basic loss per share is calculated by dividing the loss attributable to shareholders of the Company
by the weighted average number of ordinary shares in issue during the financial year.
There are no dilutive instruments outstanding for the years ended 31 December 2015 and 2014.
62
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
Freehold
land and land
improvement
Buildings
Machinery
and equipment
Railway
wagons
Stand-by
equipment
and major
spare parts
Construction
in progress
Other
assets
Total
USD
USD
USD
USD
USD
USD
USD
USD
The Group
Cost
At 1 January 2014
4,026,848
48,598,957
78,169,165
-
-
82,644,609 15,662,124
229,101,703
5,654
8,045
6,822
15,063,905
5,409,970
6,515,809
210,617
27,220,822
1,989,542
78,259,929
9,344
(10,480)
(81,019,758)
771,423
-
-
-
(296)
(238,870)
(602,223)
-
-
-
-
(60)
(45,632)
(186,844)
-
-
-
-
-
(471,702)
(602,223)
Exchange differences
(620,093)
(7,474,321)
(18,365,169)
(7,372,912)
(2,411,804)
(36,244,299)
3,412,409
42,519,704
137,831,877
15,073,249
5,399,430
722,116 14,045,516
219,004,301
6,313
-
(7,600)
-
(669,885)
(281,759)
35,649
1,544,643
(1,107,667)
Revaluation gain/(loss)
391,307
(235,642)
-
-
-
-
-
-
-
-
-
-
1,895,082
113,908
2,050,952
(1,660)
(9,836)
(816,355)
-
(1,798,277)
925,179
-
(3,469)
(2,334,290)
(3,744,621)
-
-
-
-
(816,355)
155,665
Exchange differences
(1,696,309)
(19,280,506)
(66,885,999)
(6,976,490)
(2,188,057)
(391,603)
(6,053,577)
(103,472,541)
At 31 December 2015
2,106,120
22,051,912
71,418,503
8,096,759
2,383,522
423,849
6,696,736
113,177,401
63
63
Additions
Transfers
Disposals
Impairment losses
At 31 December
2014/
1 January 2015
Additions
Transfers
Disposals
Reclassification to
inventories
Steppe Cement Ltd.Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The Group
Freehold
land and land
improvement
Buildings
Machinery
and equipment
Railway
wagons
Stand-by
equipment
and major
spare parts
Construction
in progress Other assets
USD
USD
USD
USD
USD
USD
USD
Total
USD
Accumulated
depreciation and
impairment losses
At 1 January 2014
Charge for the year
Transfers
Disposals
Impairment losses
Exchange differences
At 31 December 2014/
1 January 2015
Charge for the year
Transfers
Disposals
Impairment losses
Exchange differences
At 31 December 2015
Net Book Value
At 31 December 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
23,172,676
30,436,872
-
1,858,195
8,910,156
338,418
16
(22)
195,944
-
(114,741)
2,947,554
-
-
-
(3,600,456)
(4,872,288)
(5,289)
21,626,353
37,307,553
1,314,124
(95,253)
(228,652)
475,996
7,795,690
32,270
(676,787)
-
333,129
618,358
-
-
-
(10,494,204)
(19,736,716)
(367,706)
12,598,364
24,722,010
583,781
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,327,256
61,936,804
1,132,995
12,239,764
(16)
-
(119,062)
(233,825)
602
3,144,100
(1,300,026)
(9,778,059)
8,041,749
67,308,784
957,806
10,685,978
62,983
-
(2,294,007)
(3,199,446)
-
475,996
(3,282,442)
(33,881,068)
3,486,089
41,390,244
2,106,120
9,453,548
46,696,493
7,512,978
2,383,522
423,849
3,210,647
71,787,157
At 31 December 2014
3,412,409
20,893,351
100,524,324
14,740,120
5,399,430
722,116
6,003,767
151,695,517
64
64
Steppe Cement Ltd.Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 D
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A
Land and buildings were revalued on 31 August 2015 by an independent professional valuer based
on depreciated replacement cost and income approach. Valuation of buildings was arrived at by
reference to the discounted cash flows method, as the property is a production facility, which is a
level [3] measurement in the fair value hierarchy.
The following significant unobservable inputs were used in preparing the discounted cash flow:
the forecast period was from September 20l5 to December 2018;
•
• derivation of a terminal value using a constant growth model;
• discount rate of 17.31% was applied.
Valuation of land was arrived at by reference to market evidence of transaction prices for comparable
properties, which is a level [2] measurement in the fair value hierarchy.
The carrying amount of the land and buildings, which is stated at fair value at the revaluation date
less subsequent accumulated depreciation and impairment losses, amounted to USD11,559,668 as
of 31 December 2015 (2014: USD24,305,760). In the fair value assessment, the highest and best
use of the land and buildings is their current use which is production and sale of cement facility.
According to International Accounting Standard 16, Property, Plant and Equipment, for property,
plant and equipment that is accounted for under revaluation model, revaluations shall be made with
sufficient regularity to ensure that the carrying amount does not differ materially from that which
would be determined using fair value at the end of the reporting period.
The directors are of the opinion that the carrying amounts of the land and buildings since the date of
revaluation until 31 December 2015 do not differ significantly from their fair values.
If the land and buildings are measured using the cost model, the net carrying amounts would be as
follows:
Land
Buildings
The Group
2015
USD
2014
USD
241,317
1,761,291
428,977
3,649,705
As a result of the revaluation on 31 August 2015, the Group recognised a net loss on revaluation
of USD95,551, of which 251,216 was recognised as impairment loss in the income statement, while
a net revaluation gain of USD124,531 was recognised in revaluation reserve, net of deferred tax of
USD31,134.
On 31 August 2015, several buildings which were no longer in use as a result of operational
streamlining were identified as unlikely to be re-used. As such, those buildings were subject to full
impairment loss on that date. The Group recognised an impairment loss of USD224,780 of which
USD47,181 was recognised in the income statement and USD142,081 was charged to revaluation
reserve, net of deferred tax of USD35,518.
65
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Other assets included in property, plant and equipment comprise commonly used assets for pro-
duction, administrative facilities, computer and software and constructed items including cables,
conveyors and heaters which are usable for a certain period of time.
As of 31 December 2015, property, plant and equipment of a subsidiary company (Karcement JSC)
with a cost and net book value of USD32,496,942 (2014: USD52,061,892) and USD23,226,910
(USD41,794,308), respectively, is pledged to secure the loan from VTB Bank (Austria) AG and VTB
Bank (France) SA.
As at 31 December 2015, property, plant and equipment with a cost and net book value of
USD7,442,160 and USD6,449,527 respectively were pledged as collateral for the government-sub-
sidised loan (Note 20).
As of 31 December 2015, the cost of property, plant and equipment that is fully depreciated amount-
ed to USD614,967 (2014: USD907,365).
11.
INVESTMENT IN SUBSIDIARY COMPANIES
Unquoted shares, at cost
Less: Impairment loss
The Company
2015
USD
2014
USD
30,500,002
(4,000,001)
30,500,002
-
26,500,001
30,500,002
66
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 The details of subsidiary companies are as follows:
Place of
incorporation (or
registration) and
operation
Proportion of
ownership interest
and voting power
held
Principal
activities
2015
2014
%
%
Malaysia
100
100
Malaysia
100
100
Investment
holding
company
Provision of
consultancy
services
Direct Subsidiary
Companies
Steppe Cement (M)
Sdn. Bhd.
Mechanical & Electrical
Consulting Services Ltd.
(“MECS Ltd”)
Indirect Subsidiary
Companies
Held through Steppe
Cement (M) Sdn. Bhd.:
Steppe Cement Holdings
B.V. (“SCH BV”)
Netherlands
100
100
Investment
holding
company
Held through SCH BV:
Central Asia Cement JSC
(“CAC JSC”)
Karcement JSC
Republic of
Kazakhstan
Republic of
Kazakhstan
100
100
100
Sale of Cement
100
Production
and sale
of cement
Central Asia Services LLP
(“CAS LLP”)
Republic of
Kazakhstan
100
100
Transmission
and
distribution
of electricity
67
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 12. OTHER ASSETS
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
VAT recoverable - non-
current
2,170,009
6,557,845
Quarry stripping costs
167,214
297,412
Site restoration costs
Site restoration fund
43,777
61,499
84,458
81,524
Quarry stripping costs
2,442,499
7,021,239
-
-
-
-
-
-
-
-
-
-
Quarry stripping costs comprised of stripping cost and site restoration cost. Stripping cost represent-
ed costs removing the overburden related to the expansion of the existing quarry. The overburden
removal work began in 2009 and continued as necessary up to 31 December 2015. Amortisation
commenced upon physical extraction of limestone and clay from this quarry.
Movement of quarry stripping costs is as follows:
The Group
The Company
At beginning of year
Exchange differences
Additions
Amortisation
2015
USD
297,412
(137,654)
7,456
2014
USD
371,402
(58,291)
-
-
(15,699)
At end of year
167,214
297,412
Site restoration costs
2015
USD
2014
USD
-
-
-
-
-
-
-
-
-
-
Site restoration cost pertains to CAC’s use of limestone and clay quarries and is calculated with ref-
erence to the scope of rehabilitation work required under the present relevant laws. The expected
timing of economic outflow used in arriving at the site restoration provision is at the expiry of the
agreement on 24 June 2043.
68
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 13. DEFERRED TAXES
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
At beginning of year
7,399,794
9,357,535
Exchange differences
(2,108,047)
(1,430,935)
Credited to income statement
(Note 8)
Credited to other
comprehensive income
(5,837,032)
(406,360)
(4,384)
(120,446)
At end of year
(549,669)
7,399,794
-
-
-
-
-
-
-
-
-
-
Movement in net deferred tax assets/(liabilities) of the Group is as follows:
Opening
balance
Exchange
rate
differences
Recognised
in profit or
loss
Recognised
in other
comprehensive
income
Closing
balance
USD
USD
USD
USD
USD
2015
Temporary
differences:
Property, plant and
equipment
(11,925,928)
5,653,127
(739,819)
4,384
(7,008,236)
Inventories
780,697
(385,460)
Trade receivables
96,365
(28,191)
(91,732)
(60,208)
Accrued unused
leaves
Tax losses
Payables
Others
25,502
(12,299)
1,386
3,439,709
(3,035,464)
6,645,567
183,861
-
(69,585)
(14,081)
30,175
51,663
-
-
-
-
-
-
303,505
7,966
14,589
7,049,812
144,451
37,582
(7,399,794)
2,108,047
5,837,032
4,384
549,669
69
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Opening
balance
Exchange
rate
differences
Recognised
in profit or
loss
Recognised
in other
comprehensive
income
USD
USD
USD
USD
Closing
balance
USD
2014
Temporary
differences:
Property, plant and
equipment
(10,223,439)
1,626,330
(3,449,265)
120,446
(11,925,928)
Inventories
646,567
(221,591)
Trade receivables
89,409
(14,097)
355,721
21,053
Accrued unused
leaves
Tax losses
Payables
29,746
(4,584)
340
-
(54,614)
3,494,323
100,182
99,491
(15,812)
-
-
-
-
-
780,697
96,365
25,502
3,439,709
183,861
(9,357,535)
1,430,935
406,360
120,446
(7,399,794)
The loss of the Group in 2015 was due to the foreign exchange losses as a result from the devaluation
of the KZT against the USD in 2015. The Group has forecasts that it will have sufficient future taxable
profits arising that will enable the reversal of existing temporary differences from unutilised tax losses.
Management expects the KZT to recover in the future.
The cumulative tax losses for which no deferred tax assets have been recognised are as follows:
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Cumulative tax losses for which no
deferred tax assets have been
recognised
138,944
184,206
6,349
12,068
70
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 14.
INVENTORIES
Spare parts
Work-in-progress
Raw materials
Finished goods
Packing materials
Fuel
Goods held for resale
Construction materials
Others
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
9,234,446
11,664,601
4,118,685
2,335,670
52,211
61,201
12,785
35,175
13,391
6,692,975
5,331,523
1,683,035
317,104
237,960
68,966
45,769
261,553
556,825
16,125,117
26,598,758
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Less: Provision for
obsolete inventories
(2,805,285)
(4,485,879)
The movements in the provision for obsolete inventories are as follows:
13,319,832
22,112,879
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
At beginning of year
(4,485,879)
(3,232,839)
Add: Provision for obsolete
inventories
(395,646)
(1,750,864)
Exchange differences
2,076,240
497,824
At end of year
(2,805,285)
(4,485,879)
-
-
-
-
-
-
-
-
As of 31 December 2015, inventories amounting to USD2,778,944 (2014: USD7,708,626) are pledged
to secure the short-term loan obtained from Halyk Bank JSC (Note 20).
71
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
15.
TRADE AND OTHER RECEIVABLES
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Trade receivables
391,708
946,285
Less: Provision for
doubtful receivables
(40,171)
(481,826)
Other receivables:
VAT recoverable -
current
Receivables from related
party
Receivables from
employees
Others
351,537
464,459
1,495,844
2,741,782
33,850
88,943
10,690
398,815
11,900
642,040
-
-
-
-
-
-
-
2,290,736
3,949,124
-
-
-
-
-
-
-
-
-
The Company enters into sales contracts with trade customers on cash terms. Some customers with
good payment history are granted certain credit periods on their cement purchases which are se-
cured against bank guarantee or other credit enhancements.
Age of trade receivables that are past due but not impaired as of 31 December are as follows:
The Group
2014
USD
256,764
44,135
26,252
68,479
2015
USD
207,385
78,266
10,340
16,829
312,820
395,630
1-90 days
91-180 days
181-270 days
271-360 days
72
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Trade receivables disclosed above include amounts that are past due at the end of the reporting
period for which the Group has not recognised a provision for doubtful debts because there has
not been a significant change in credit quality and the amounts are still considered recoverable.
Age of impaired trade receivables as of 31 December are as follows:
1-2 years
> 2 years
> 3 years
The Group
2015
USD
38,286
40,602
-
2014
USD
39,901
126,674
384,080
78,888
550,655
Movement in the provision for doubtful trade receivables is as follows:
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
At beginning of year
(481,826)
(447,034)
Exchange differences
223,008
68,838
Add: Provision for doubtful
receivables
Less: Write-off of
provision for doubtful
receivables
(33,502)
(103,630)
252,149
-
At end of year
(40,171)
(481,826)
-
-
-
-
-
-
-
-
-
-
The recoverability of trade accounts receivable depends to a large extent on the Group’s
customers’ ability to meet their obligations and other factors which are beyond the Group’s
control. The recoverability of the Group’s trade accounts receivable is determined based on
conditions prevailing and information available as at reporting date.
Other receivables mainly comprise VAT recoverable and customs duties that are refundable.
VAT recoverable are value added tax credits arising from the purchase of materials, property,
plant and equipment and repair and maintenance services made or procured by a subsidiary
company (Karcement JSC) in relation to the refurbishment of a production line. Refundable
customs duties represent customs duties levied on the import of property, plant and equip-
ment for the refurbishment project.
73
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
16. ADVANCES AND PREPAID EXPENSES
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Advances paid to third
parties
Less: Provision on
advances paid to third
parties
Less: Non-current
portion of advances
paid to third parties
Current portion of
advances paid to third
parties
2,474,060
3,281,108
(86,888)
(1,107,623)
2,387,172
2,173,485
(1,270,919)
(50,666)
1,116,253
2,122,819
-
-
-
-
-
-
-
-
-
-
Prepaid expenses
316,194
391,471
6,582
5,731
1,432,447
2,514,290
6,582
5,731
Non-current advances paid to third parties represent advances made to suppliers by subsidiary
companies for the purchase of machinery, equipment and construction work at cement production
plant, while short-term advances are mainly advance payments for materials.
Movement of provision on advances paid to third parties is as follows:
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
At beginning of year
(1,107,623)
(1,188,261)
Exchange differences
512,650
182,980
Add: Provision on
advances paid
to third parties
Less: Write-off of
provision on
advances paid to third
parties
(39,347)
(119,956)
547,432
17,614
At end of year
(86,888)
(1,107,623)
-
-
-
-
-
-
-
-
-
-
74
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
-
(86,888)
(839,583)
(268,040)
(86,888)
(1,107,623)
-
-
-
-
-
-
Provision for doubtful
advances paid to third
parties:
Non-current portion
Current portion
17. CASH AND CASH EQUIVALENTS
The Group
The Company
2015
USD
2014
USD
2015
USD
Cash in hand and at banks
2,369,419
9,259,047
338,124
Short-term deposit
36,890
36,392
-
2014
USD
2,112
-
2,406,309
9,295,439
338,124
2,112
As at 31 December 2015, in accordance with the Law on Labor of the Republic of Kazakhstan, a
non-interest bearing deposit of USD36,890 (2014: USD36,392) was placed with Kazkommertsbank
JSC as part of work permit requirements for non-resident employees of the Republic of Kazakhstan
which include annual renewal of work permit.
18.
SHARE CAPITAL
The Group and
the Company
2015
USD
2014
USD
Issued and fully paid:
219,000,000 ordinary shares of no par value each:
At beginning and end of year
73,760,924
73,760,924
75
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
19.
RESERVES
Revaluation reserve
Revaluation reserve represents the reserve arising from the revaluation of land and buildings of
subsidiary companies (CAC JSC and Karcement JSC) performed by an independent valuation
appraiser.
Translation reserve
Exchange differences arising from the translation of assets and liabilities of foreign subsidiary
companies are recognised in other comprehensive income and accumulated in the translation
reserve.
On 20 August 2015, the National Bank of Kazakhstan adopted the floating rate regime for the
Kazakhstan Tenge (“KZT”).With the floating rate mechanism, the exchange rate of the KZT is based
on its market demand and supply driven by both internal and external economic factors.
As at 31 December 2015, the KZT closed at 339.47 (2014: 182.35) to the USD, representing a 86%
decline against the USD through the financial year. The sharp decline caused a significant loss of
USD57,566,026 recorded in the translation reserve due to re-translation of the financial statements
of the foreign subsidiaries’ financial statements whose functional currency is the KZT.
Retained earnings
Any dividend distributions to be made by foreign subsidiary companies are subject to dividend
withholding tax ranging from 15% to 25% which may be reduced to 5% or waived subject to
compliance with the relevant tax treaties requirements. Deferred taxation has not been provided
for in the consolidated financial statements in respect of temporary differences attributable to
accumulated profits of these subsidiary companies as the Group is able to control the timing of the
reversal of the temporary differences and it is probable that the temporary differences will not be
reversed in the foreseeable future.
Under the Malaysian tax law, any dividend income received by Malaysian subsidiary companies will
be credited into an exempt income account from which tax-exempt dividends can be distributed.
There is no withholding tax on dividends distributed by Malaysian subsidiary companies.
Under the Labuan Business Activity Tax Act, 1990, any dividends received by the Company from
Steppe Cement (M) Sdn. Bhd., a subsidiary company incorporated in Malaysia, will be exempted
from tax. There is no withholding tax on dividends distributed to its shareholders.
76
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Dividends
Interim tax exempt dividends of GBP0.01 per ordinary
share of no par value each in total of GBP2,190,000 in
respect of the financial year ended 31 December 2014:
The Group and
the Company
2015
USD
2014
USD
-
3,575,729
No final dividend will be proposed in respect of the financial year ended 31 December 2015
at the forthcoming Annual General Meeting.
20.
BORROWINGS
Unsecured - at amortised cost
Bonds issued at price of:
96.2458%
Discount on bonds issued
Accrued interest
Secured - at amortised cost
Bank loans
Current portion:
Bonds
Bank loans
Non-current portion:
Bonds
Bank loans
The Group
2015
USD
2014
USD
4,389,195
8,171,100
(83,695)
47,969
(226,268)
89,301
4,353,469
8,034,133
26,325,807
49,417,966
30,679,276
57,452,099
47,969
89,301
15,774,289
26,999,397
15,822,258
27,088,698
4,305,500
7,944,832
10,551,518
22,418,569
14,857,018
30,363,401
30,679,276
57,452,099
77
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
In November 2012, a subsidiary company (CAC JSC) issued 5-year KZT1.49 billion (USD9,904,281
net of USD99,043 issue cost) bonds at a coupon rate of 10% per annum maturing in November 2017.
The bond coupon is payable semi-annually. The bonds are listed on the Kazakhstan Stock Exchange
and all amounts due in relation to the bonds issued are guaranteed by the Company and its subsid-
iary company (Karcement JSC).
Details of bank loans are as follows:
Currency Maturity date
Interest
rate
The Group
2015
USD
2014
USD
Karcement JSC:
VTB Bank (Austria)
AG and VTB Bank
(France) SA
VTB Bank (Austria)
AG and VTB Bank
(France) SA
USD
15 November
2016
6.20% p.a.
10,970,424
21,805,435
USD
11 March 2019 7.20% p.a.
11,729,549
13,861,129
Altyn Bank JSC
USD
9 April 2016
7.50% p.a.
2,420,500
-
Altyn Bank JSC
KZT
9 April 2016
Halyk Bank JSC
USD
9 September
to November
2025
CAC JSC:
8.5 % to
13.85%
p.a.
6% p.a.
-
4,186,998
89,410
-
Halyk Bank JSC
KZT
23 February
2018
10.75%
p.a.
-
9,300,795
Halyk Bank JSC
KZT
9 September
to November
2025
6% p.a.
1,014,560
-
Accrued interest
Total outstanding
78
101,364
263,609
26,325,807
49,417,966
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Karcement JSC
On 11 April 2014, Karcement JSC signed a USD60 million credit facility agreement with VTB Bank
(Austria) AG and VTB Bank (France) SA (“VTB”). The VTB credit facility consists of three tranches:
• Tranche A loan of up to USD30 million. The purpose of the loan is to refinance the outstanding
loans due to EBRD and SB HSBC Bank Kazakhstan JSC of up to USD29.1 million and the remain-
ing balance loan of USD0.9 million is for general working capital purposes. The first instalment of
the loan was repayable in 15 July 2014 and the remaining loan outstanding is repayable in equal
instalments on 15 July and 15 November annually with the final instalment repayable on maturity
date. The applicable interest rate on the loan is 6.2% per annum payable on a quarterly basis on
12 August annually until maturity; and
• Tranche B and C loans of up to USD30 million. The purpose of the loans is for the purchase of
railway wagons. 70% of the principal amounts of the loans is to be repaid in equal monthly in-
stalments with the remaining 30% to be repaid on maturity dates. The maturity dates of Tranche
B and C loans are 60 months from 11 April 2014 and up to 60 months from 31 March 2015, re-
spectively. The applicable interest rate on the Tranche B loan is 7.2% per annum repayable on a
quarterly basis and the interest rate on Tranche C loan will be fixed at a date to be determined
on drawdown. The Tranche C of USD15 million is not available for use as the availability period
has expired on 30 June 2015.
On 9 April 2015, Karcement JSC signed a credit line agreement for working capital with Altyn Bank
JSC with a limit of KZT750 million (or equivalent of USD2.2 million) which matures on 9 April 2016.
The line carries an interest rate of 8.5% per annum, subject to discretion of Altyn Bank JSC on pre-
vailing market interest rate.
On 19 June 2015, both CAC JSC and Karcement JSC signed a loan agreement with Halyk Bank
Kazakhstan JSC on terms subsidised under government programs. The loan of KZT2.19 billion (or
equivalent of USD6,445,341) carries a subsidised fixed interest rate of 6% per annum and is available
for drawdown until 19 June 2016. The loan is used for the following purpose:
• KZT1.69 billion, approximately USD4,974,457, for capital expenditure with maturity period of 10
years. KZT1.19 billion (or USD3,499,573) and KZT500 million (or USD1,472,884) loan comes with
a 2 year grace period and no grace period with monthly principal repayment, respectively; and
• KZT500 million, approximately USD1,472,884, for 5 years working capital requirement on a re-
volving basis with interest payable monthly.
This government-subsidised loan is initially recognised at fair value at interest rate of 14% per annum,
and subsequently carried at amortised cost effective interest method (Note 21).
CAC JSC
On 23 January 2014, CAC JSC signed an extension of working capital credit line agreement, matur-
ing on 23 January 2016 with Halyk Bank JSC with the same credit limit of KZT3 billion (or equivalent
of USD16.4 million).
Subsequent to year end, CAC JSC signed an agreement with Halyk Bank Kazakhstan JSC, to extend
the existing working capital credit line from 23 January 2016 to 23 February 2018 (Note 30). The
loan from the Halyk Bank JSC is secured by inventories of both CAC JSC and Karcement JSC with a
carrying amount of USD2,778,944 (2014: USD7,708,626) (Note 14).
79
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Undrawn loan amounts
As of 31 December 2015, the Group has fully drawndown the loan facilities from VTB Bank (Austria)
AG and VTB Bank (France) SA.
As at 31 December 2015, USD4,836,560 is available for drawdown under the government-subsidised
loan granted by Halyk Bank JSC.
As of 31 December 2015, CAC JSC’s short-term loan of USD7,364,421 with Halyk Bank JSC is
available for drawdown.
21. DEFERRED INCOME
Deferred income represents government grant in the form of interest rate lower than market interest
rates on government-subsidised loan for capital investment from Halyk Bank Kazakhstan JSC (Note
20). It represents the difference between the initial carrying amount of the loan measured at fair
value using interest rate of 14% per annum and the proceeds received, and is amortised to income
statement as other income over the useful lives of the related assets.
Pursuant to the government-subsidised loan agreement, CAC JSC and Karcement JSC are jointly
entitled to undrawn loan amount of USD3,363,673 for capital expenditure. The undrawn loan amount
is available until 19 June 2016.
As at 31 December 2015, the related assets were not utilised.
22.
TRADE AND OTHER PAYABLES
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Trade payables
Others
4,484,161
7,648,774
1,523
9,981
The credit period granted by creditors ranges from 1 to 30 days.
4,485,684
7,658,755
-
-
-
-
-
-
80
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 23. ACCRUED AND OTHER LIABILITIES
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
Provision for electricity
charges
617,698
3,492,586
-
-
Accrued directors’ fees
1,324,200
1,288,996
1,324,200
1,288,996
Advances from customers
Accrued salaries
Accrued unused leaves
Others
665,959
197,028
72,937
206,990
909,350
370,200
127,502
450,168
-
-
-
-
-
-
33,373
45,532
The movement in the provision for electricity charges is as follows:
3,084,812
6,638,802
1,357,573
1,334,528
The Group
The Company
2015
USD
2014
USD
2015
USD
2014
USD
At beginning of year
Exchange differences
Less: Reversal of
provision for electricity
charges
3,492,586
4,128,301
(952,805)
(635,715)
(1,922,083)
-
At end of year
617,698
3,492,586
-
-
-
-
-
-
-
-
Provision for electricity charges represents electricity transportation charges provided by the Group
in relation to potential claims by Karaganda Zharyk LLP against CAC JSC for the use of its electrical
equipment from 1 January 2013 to 30 June 2013.
During the year, the management reversed provision for electricity transportation services of
USD1,922,083 for services provided in the year 2012. This is due to the expiry of the permissible
period of 3 years for filing of appeal by Karaganda Zharyk LLP against CAC JSC.
The management considers the provision of electricity transportation services as at 31 December
2015 as adequate, given its assessment of the most probable final outcome of the ongoing and
future court cases.
81
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 24.
TAXES PAYABLE
Corporate income tax
Other taxes:
VAT payable
Withholding taxes
Emission taxes
Pension fund
Royalty
Personal income tax
Social
Other taxes
25. RELATED PARTIES
The Group
The Company
2015
USD
27,873
2014
USD
5,720
230,880
534,818
-
159,917
20,809
-
27,334
23,601
11,527
8,610
220,088
41,793
36,167
36,111
27,886
13,820
501,941
925,013
2015
USD
-
-
-
-
-
-
-
-
-
-
2014
USD
5,720
-
-
-
-
-
-
-
-
5,720
Related parties include shareholders, directors, affiliates and entities under common ownership
(which the Group has the ability to exercise a significant influence).
Other related parties include entities which are controlled by a director, which a director of the Group
has ownership interests and exercises significant influence.
Receivable from/(payable) to related parties and other related parties, which arose mainly from trade
transactions and expenses paid on behalf, is unsecured, interest-free and repayable on demand
except as mentioned below.
Balances and transactions between the Company and its subsidiary companies, which are related
parties of the Company, have been eliminated on consolidation.
Loans and advances to subsidiary companies of the Company are unsecured, interest-free and
repayable on demand.
82
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 The transactions between related parties and the Group included in the income statement and state-
ment of financial position are as follows:
Other related party
Opera Holding LLP
Other related parties
Opera Holding LLP
Others
Purchase of services
2015
USD
2014
USD
16,427
21,170
Receivable from/(Payable) to
related parties
2015
USD
(804)
33,850
2014
USD
-
88,944
83
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The following transactions and balances of the Company with subsidiary companies are included in
the income statement and statement of financial position of the Company:
Subsidiary Company
Nature of
transactions
Revenue from services
performed
2015
USD
2014
USD
Steppe Cement (M) Sdn. Bhd.
Dividend income
-
4,147,325
MECS Ltd.
Management fees
100,000
100,000
Subsidiary Companies
Nature of
transactions
Receivable from subsidiary
companies
2015
USD
2014
USD
Karcement JSC
Intercompany loans
31,920,000
34,690,000
MECS Ltd.
Advances and
management fees
Steppe Cement (M) Sdn. Bhd.
Advances
5,302,886
3,117,634
2,623,018
2,569,435
39,845,904
40,377,069
Compensation of key management personnel
The remuneration of directors and other members of key management are as follows:
Remuneration
Short-term benefits
The Group
The Company
2015
USD
701,191
123,586
2014
USD
782,664
135,376
2015
USD
2014
USD
142,341
219,763
-
-
Total
824,777
918,040
142,341
219,763
The remuneration of directors and key executives is determined by the remuneration committees of
the Company and subsidiary companies having regard to the performance of individuals and market
trends.
84
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 The directors’ remuneration in the Company is as follows:
Director fees
Executive director:
Javier del Ser Perez
Non-executive director:
Paul Rodzianko
Xavier Blutel (appointed on 29 June 2015)
Malcolm Brown (retired on 28 May 2015)
The Company
2015
USD
2014
USD
59,667
102,868
37,510
15,288
29,876
38,965
-
77,930
Total
142,341
219,763
85
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
26.
FINANCIAL INSTRUMENTS
Capital Risk Management
The Group’s capital risk management objectives are to maximise value to shareholders and to
ensure that the Group’s subsidiary companies will continue to operate as a going concern through
optimisation of debt and equity balance.
The Group’s capital structure consists of net debt (which comprise of borrowings as detailed in Note
20 offset by cash and cash equivalents) and equity attributable to the shareholders of the Group.
Equity attributable to the shareholders of the Group includes share capital, reserves and retained
earnings. The Group monitors and reviews its capital structure based on its business and operating
requirements.
Financial Risk Management Objectives and Policies
Financial risk management is an essential element of the Group’s operations. The Group monitors
and manages financial risks relating to the Group’s operations through internal reports on risks
which analyse the exposure to risk by the degree and size of the risks. The operations of the Group
are subject to various financial risks which include foreign currency risk, credit risk, liquidity risk and
interest rate risk.
The Group continuously manages its exposures to risks and/or costs associated with the financing,
investing and operating activities of the Group.
(i)
Foreign Currency Risk
The Group undertakes trade and non-trade transactions with its trade customers and suppliers
which are denominated in foreign currencies. As a result, the amount outstanding is exposed to
currency translation risks.
Besides maximising cash at bank in US Dollars, the Group monitors the fluctuations in exchange rate
of foreign currencies to limit currency risk. The Group does not use derivative instruments for the
purpose of currency risk management.
86
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Foreign currency sensitivity analysis
The carrying amounts of the Group’s financial assets and financial liabilities in foreign currencies as of 31 December are presented below:
2015
KZT
GBP
EUR
MYR
RUB
USD
Total
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Accrued and other liabilities
Borrowings
1,922,362
351,537
2,844,605
1,049,762
5,368,029
-
-
-
1,324,775
-
48,980
4,427
-
-
430,540
2,406,309
-
351,537
19,000
969,983
4,485,684
33,008
-
-
-
31,316
2,467,114
25,311,247
30,679,276
2014
KZT
GBP
EUR
MYR
RUB
USD
Total
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Accrued and other liabilities
Borrowings
1,711,160
464,459
6,404,595
1,687,386
21,577,386
-
-
-
1,290,679
-
66,290
5,437
-
-
7,512,552
9,295,439
-
464,459
18,218
860,455
7,658,755
38,253
-
-
-
99,931
3,146,216
35,874,713
57,452,099
-
-
-
-
-
651,996
28,253
-
-
375,487
29,967
-
87
87
Steppe Cement Ltd.Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 The following table displays the Group’s sensitivity to a 20% increase and decrease against the
relevant foreign currencies. A benchmark sensitivity rate of 20% is used to report foreign currency
risk internally to key management and represents management’s assessment of the reasonably
possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the year end for a 20% change
in foreign currency rates. The sensitivity analysis below indicates the changes in financial assets and
liabilities of the effect of a 20% increase in value of USD against KZT and the other relevant foreign
currencies, respectively. The positive figure indicates an increase in profit before tax and negative
indicates a decrease in (loss)/profit before tax for the reporting period. In the case of 20% decrease
in value of USD against KZT and the relevant foreign currencies, respectively, there would be an
equal and opposite impact on the Group’s (loss)/profit before tax and equity.
Impact on (loss)/profit before tax and
equity
2015
2014
1,521,131
264,955
5,286,959
129,068
126,254
33,916
5,716
3,820
3,282
1,822
KZT
GBP
EUR
MYR
RUB
(ii)
Credit Risk
Credit risk arises when the counterparty defaults on its contractual obligation resulting in financial loss
to the Group. The Group adopts a policy of trading only with creditworthy counterparties to mitigate
risk of financial loss from defaults. The requirement of cash upfront for sales with major customers
limits the credit risk of the Group. The maximum exposure to credit risk equals the carrying amount
of each financial asset.
Concentration of credit risk can arise when several debts are due from one customer or group of
customers with similar borrowing terms for which there is a basis to expect that changes in economic
terms or other circumstances can equally affect their capacity to meet their obligations.
Concentration of credit risk on trade receivables is limited as sales to major customers are based on
cash prepayment terms before the actual delivery of cement.
88
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
The Group maintains a stringent credit control policy which includes dealing only with customers with
adequate credit history and monitoring of outstanding trade receivables to ensure that customers do
not exceed their respective credit limits.
The Group maintains cash balances only with internationally reputable banks and domestic banks of
high credit standing.
(iii)
Liquidity Risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has
established an appropriate liquidity risk management framework for the management of the Group’s
short, medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves, bank loans and accessible credit lines. The Group
actively monitors its forecasts and actual cash flows and matches the maturity profiles of financial
assets and liabilities to determine any shortfall in cash requirements.
As of 31 December 2015, the Group has available of USD4,836,560 and USD7,364,421 for drawdown
under the government-subsidised loan program and short-term loan with Halyk Bank Kazakhstan
JSC respectively (Note 20).
Subsequent to financial year end (Note 30), CAC JSC, signed an agreement with Halyk Bank
Kazakhstan JSC on 2 February 2016, to extend the existing working capital credit line to mature on
23 February 2018. The interest rate of the credit line was revised from 10.75 % to 20% per annum.
89
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 Tables on Liquidity and Interest Rate Risk
The following table reflects contractual terms of the financial liabilities of the Group. The table is prepared based on the undiscounted cash flows on financial
liabilities on the basis of the earliest date at which the Group can be required to pay. The table includes both interest and principal cash flows.
Weighted average
interest rate
Less than
1 month
1-3 months
3 months
- 1 year
1-5 years
Greater than
5 years
Total
2015
Interest bearing
Borrowings
Bonds
Bank loans
Non-interest bearing
Trade and other payables
Accrued and other liabilities
2014
Interest bearing
Borrowings
Bonds
Bank loans
Non-interest bearing
Trade and other payables
Accrued and other liabilities
11.15%
7.26%
-
-
11.15%
7.65%
-
-
-
-
438,919
4,828,114
-
5,267,033
270,015
3,186,058
13,852,491
11,867,452
959,614
30,135,630
1,382,803
3,102,881
-
-
373,657
45,273
57,246
1,324,979
-
-
4,485,684
1,801,155
2,026,475
6,334,212
14,348,656
18,020,545
959,614
41,689,502
-
817,110
9,805,319
-
2,723,630
3,431,610
23,070,145
25,600,088
2,401,519
4,662,177
595,059
-
494,034
294,055
1,341,887
106,890
5,619,183
9,204,952
34,812,410
25,706,978
-
-
-
-
-
10,622,429
54,825,473
7,658,755
2,236,866
75,343,523
The amounts included above for borrowings represent amounts the Group expects to repay according to repayment terms in loan agreements. As at financial
year end, the Group is in compliance with the financial covenants of the loan agreements.
90
90
Steppe Cement Ltd.Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
Tables on Liquidity and Interest Rate Risk
The following table reflects contractual terms of the financial liabilities of the Group. The table is prepared based on the undiscounted cash flows on financial
liabilities on the basis of the earliest date at which the Group can be required to pay. The table includes both interest and principal cash flows.
Weighted average
interest rate
Less than
1 month
3 months
- 1 year
1-3 months
1-5 years
5 years
Total
Greater than
2015
Interest bearing
Borrowings
Bonds
Bank loans
Non-interest bearing
Trade and other payables
Accrued and other liabilities
2014
Interest bearing
Borrowings
Bonds
Bank loans
Non-interest bearing
Trade and other payables
Accrued and other liabilities
11.15%
7.26%
-
-
438,919
4,828,114
5,267,033
270,015
3,186,058
13,852,491
11,867,452
959,614
30,135,630
1,382,803
3,102,881
-
-
373,657
45,273
57,246
1,324,979
4,485,684
1,801,155
2,026,475
6,334,212
14,348,656
18,020,545
959,614
41,689,502
11.15%
7.65%
-
817,110
9,805,319
2,723,630
3,431,610
23,070,145
25,600,088
2,401,519
4,662,177
595,059
494,034
294,055
1,341,887
106,890
5,619,183
9,204,952
34,812,410
25,706,978
-
-
10,622,429
54,825,473
7,658,755
2,236,866
75,343,523
-
-
-
-
-
-
-
-
-
-
-
-
The amounts included above for borrowings represent amounts the Group expects to repay according to repayment terms in loan agreements. As at financial
year end, the Group is in compliance with the financial covenants of the loan agreements.
The following table reflects expected maturities of non-derivative financial assets of the Group. The table was prepared based on undiscounted contractual
terms of financial assets, including interest received on these assets, except when the Group expects the cash flow in a different period.
2015
Non-interest bearing
Cash and cash equivalents
Trade and other receivables
2014
Non-interest bearing
Cash and cash equivalents
Trade and other receivables
Weighted
average
interest rate
Less than
1 month
1-3 months
3 months
- 1 year
1-5 years
Greater than
5 years
-
-
-
-
2,406,309
-
-
286,122
207,730
267,231
2,692,431
207,730
267,231
9,295,439
-
-
555,563
498,448
469,400
9,851,002
498,448
469,400
-
-
-
-
-
-
-
-
-
-
-
-
Total
2,406,309
761,083
3,167,392
9,295,439
1,523,411
10,818,850
91
91
Steppe Cement Ltd.Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015
(iv)
Interest rate risk
Interest rate risk is the risk that changes in floating interest rates will adversely impact the financial
results of the Group. The Group does not use derivative instruments for the purpose of interest rate
risk management.
As at 31 December 2015 and 2014, the Group does not have any exposure to floating interest
rates as the interest rates of the Group’s loans are fixed and therefore, the Group is not exposed to
variability in cashflows due to interest rate risk.
Fair Value of Financial Assets and Financial Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction in the principal (or most advantageous) market at the measurement date under
current market condition regardless of whether that price is directly observable or estimated using
another valuation technique. As no readily available market exists for a large part of the Group’s
financial instruments, judgement is necessary in arriving at fair value, based on current economic
conditions and specific risks attributable to the instrument. The fair value of the instruments presented
herein is not necessarily indicative of the amounts the Group could realise in a market exchange from
the sale of its full holdings of a particular instrument.
The following methods and assumptions were used by the Group to estimate the fair value of financial
instruments that are not measured at fair value on a recurring basis (but fair value disclosures are
required):
Cash and cash equivalents
The carrying value of cash and cash equivalents approximates their fair value due to the short-term
nature of maturity of these financial instruments.
Short-term investments, trade and other receivables, trade and other payables and accrued and
other liabilities
For assets and liabilities with maturity less than twelve months, the carrying value approximates fair
value due to the short-term nature of maturity of these financial instruments.
Borrowings
The fair values of the borrowings are estimated by discounting expected future cash flows at market
interest rates prevailing at the end of the relevant year with similar maturities adjusted by credit risk.
As of 31 December 2015 and 2014, the fair values of financial assets and financial liabilities approxi-
mate their carrying values, except for the following:
Carrying amount
Fair Value
2015
USD
2014
USD
2015
USD
2014
USD
Borrowings
22,890,747
35,874,708
23,291,372
33,964,936
92
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 The fair values of the borrowings with VTB Bank (Austria) AG and VTB Bank (France) SA are included
in the Level 3 of fair value hierarchy, as the fair values have been determined in accordance with gen-
erally accepted pricing models based on a discounted cash flow analysis with the most significant
inputs being the discount rate that reflects the credit risk of counterparties. The discount rate used
in the fair value calculation of Tranche A and Tranche B is 6.5% and 7.1% per annum, respectively.
If the discount rate used in the fair value calculation of the borrowings with VTB had been increased by
1%, the fair value of the borrowings as of 31 December 2015 would have decreased by USD315,135.
27. CONTINGENCIES
The Group has and continues to be engaged in legal proceedings and adjudications. The Group has
recognised the electricity transportation charges in respect of potential claims by Karaganda Zharyk
LLP against CAC JSC for the use of its electrical equipment. The directors are of the opinion that the
amount recognised to date is adequate based on the outcome of recent legal proceedings (Note
23).
Commercial legislation of the Kazakhstan where the Group operates, including tax legislation, may
allow more than one interpretation. In addition, there is a risk of tax authorities making arbitrary
judgments of business activities. If a particular treatment, based on management’s judgment of the
Group’s business activities, was to be challenged by the tax authorities, the Group may be assessed
additional taxes, penalties and interest. Such uncertainty may relate to the valuation of provision for
taxation and the market pricing of transactions. The management of the Group believes that it has
accrued all tax amounts due and therefore no additional allowance has been made in the financial
statements of the Group.
28. COMMITMENTS
The Group has outstanding amount of contractual commitments for the acquisition of property, plant
and equipment of USD3,121,419 as at 31 December 2015 (2014: Nil).
29.
SEGMENTAL REPORTING
No industry and geographical segmental reporting are presented as the Group’s primary business is
the production and sale of cement which is located in Karaganda region, the Republic of Kazakhstan.
30. SUBSEQUENT EVENT
On 2 February 2016, CAC JSC signed an agreement with Halyk Bank Kazakhstan JSC, to extend the
existing working capital credit line to mature on 23 February 2018. The interest rate of the credit line
was revised from 10.75 % to 20% per annum.
On 19 February 2016, Karcement JSC has repaid working capital credit due to Altyn Bank on a draw-
down amounting to USD 2,400,000.
93
Annual Report 2015NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2015 STATEMENTS BY A DIRECTOR
STEPPE CEMENT LTD
(Incorporated in Labuan FT, Malaysia under the Labuan Companies Act, 1990)
AND ITS SUBSIDIARY COMPANIES
I, JAVIER DEL SER PEREZ, on behalf of the directors of STEPPE CEMENT LTD, state that, in the
opinion of the directors, the accompanying statements of financial position and the related statements
of income, changes in equity and cash flows are drawn up in accordance with International Financial
Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the
Company as of 31 December 2015 and of their financial performance and cash flows for the year end-
ed on that date.
Signed in accordance with a
resolution of the Directors,
______________________________
JAVIER DEL SER PEREZ
Labuan
16 May 2016
94
Steppe Cement Ltd. Notice of the 2016 AGM
NOTICE IS HEREBY GIVEN that the 2016 ANNUAL GENERAL MEETING of the Company will be held at
the office of Steppe Cement Ltd, Suite 10.1, 10th Floor, West Wing, Rohas Perkasa, 8 Jalan Perak, Kuala
Lumpur, Malaysia on Friday, 10 June 2016 at 2.30 p.m. for the purpose of considering and if thought fit,
passing the following Resolutions:
ORDINARY RESOLUTIONS
1.
ADOPTION OF AUDITED FINANCIAL STATEMENTS
To receive and adopt the audited financial statements for year
ended 31 December 2015.
RESOLUTION 1
2.
RE-ELECTION OF DIRECTORS
To re-elect the following Directors who offered themselves for
re-election:
RESOLUTION 2
2.1 Javier Del Ser Perez
2.2 Paul Rodzianko
2.3 Xavier Blutel
3.
To transact any other business of which due notice shall have
been given in accordance with the Labuan Companies Act,
1990.
BY ORDER OF THE BOARD
TMF Secretaries Limited
(f.k.a. Equity Trust Secretaries Ltd.)
Corporate Secretary
Labuan F.T., Malaysia
25 May 2016
95
Annual Report 2015
Notes:
1.
2.
3.
4.
A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy
to appoint and vote instead of him.
The instrument appointing a proxy shall be produced at the place appointed for the meeting before
the time for holding the meeting at which the person named in such instrument proposes to vote.
The instrument appointing a proxy shall be in writing under the hand of the appointer, unless the
appointer, is a corporation or other form of legal entity other than one or more individuals holding
as joint owners, in which case the instrument appointing a proxy shall be in writing under the hand
of an individual duly authorised by such corporation or legal entity to execute the same.
Copies of the proxy form and form of instruction are available at the UK Registrar Computershare
Investor Services PLC, The Pavilions, Bridgwater Road BS13 8AE.
96
Steppe Cement Ltd. 97
Annual Report 2015 STEPPE CEMENT LTD
(Corporate Office)
Suite 10.1, 10th Floor
Rohas Perkasa, West Wing
No.8, Jalan Perak
50450 Kuala Lumpur
Malaysia
Tel: +(603) 2166 0361
Fax: +(603) 2166 0362