Plant location in KazaKhstan
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2
Steppe Cement Ltd.
Steppe Cement Ltd. Contents
04 Financial Highlights
05 Operational and Market Data
06 Financial Data
07 Corporate Information
08 Chairman’s Statement
10 CEO’s Statement
15 Board Of Directors
16 Senior Management Karcement JSC & CAC JSC
18 Chairman Statement on Governance
20 Corporate Governance
25 Nomination Committee Report
26 Remuneration Committee Report
27 Audit Committee Report
32 Financial Statements
105 Statement by a Director
106 Notice of Annual General Meeting
Annual Report 2021
3
3
Annual Report 2021 Revenue (USD Million)
2021
2020
2019
2018
2017
84.6
74.8
79.9
82.2
65.8
Profit after Tax
(USD Million)
2021
2020
2019
2018
2017
1.2
17.1
11.1
9.7
9.1
36
31.5
Revenue
(KZT Billion)
2021
2020
2019
2018
2017
30.9
30.5
28.3
21.4
EBITDA*
2021
2020
2019
2018
2017
24.2
23.9
21.4
11.6
*
excluding foreign exchange gain/ losses
arising on devaluation of the Tenge.
Shareholders Funds
(USD Million)
2021
2020
2019
2018
2017
65.6
58
62.9
61
59.5
4
4
Steppe Cement Ltd.
Steppe Cement Ltd. Ex-factory price (KZT’000)
Ex-factory price (USD)
2021
2020
2019
2018
2017
18.1
15.8
14.9
13.3
10.9
2021
2020
2019
2018
2017
43
38
39
39
33
Sales volume (million tonnes)
Market Size (million tonnes)
2021
2020
2019
2018
2017
1.60
1.44
1.55
1.50
1.56
0.09
1.69
0.20
1.64
0.16
1.71
0.22
1.72
0.07
1.63
Export
Domestic
2021
2020
2019
2018
2017
11.6
9.4
8.9
8.6
9.0
Average exchange rates (USD/KZT)
Capacity utilisation (%)
2021
2020
2019
2018
2017
426
413
383
345
326
2021
2020
2019
2018
2017
87
87
90
90
86
5
Annual Report 2021 Financial Data
Data
2017
2018
2019
2020
2021
Gross profit margin (%)
Profit after tax margin (%)
Net earnings per share (cents)
Return on shareholders funds (%)
NTA Per Share (cents per share)
30
2
0.6
2
27
43
11
4
15
28
42
12
4
15
29
43
15
5
19
26
47
20
8
26
30
Number of shares issued (million)
219
219
219
219
219
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6
Steppe Cement Ltd.
Steppe Cement Ltd. Corporate
Information
Listing
Nominated Advisor
London Stock Exchange AIM, London
Since 15 September 2005
RFC Ambrian Limited
Level 34, Grosvenor Place Tower, 225
George Street, Sydney NSW 2000 Australia
AIM Stock Code
STCM
Country of incorporation
Federal Territory of Labuan, Malaysia
Company Registration
LL04433
Registered Office
Brumby Centre
Lot 42, Jalan Muhibbah
87000 Federal Territory of Labuan
Malaysia
Kuala Lumpur Office
Suite 10.1, 10th Floor
Rohas Perkasa, West Wing
No.8, Jalan Perak
50450 Kuala Lumpur Malaysia
Labuan Office
Suite No. 4, Unit Level 9(E)
Main Office Tower, Financial Park
Labuan Jalan Merdeka
87000 Federal Territory of Labuan
Malaysia
Main Country of Operation
(Operating Subsidiaries Address)
472380, Aktau Village
Karaganda Region
Republic of Kazakhstan
Company Secretary
TMF Trust Labuan Limited
and
L48 Central Park
152-158 St Georges Terrace
Perth WA 6000 Australia
Broker
RFC Ambrian Limited
Octagon Point
5 Cheapside
London EC2V 6AA, United Kingdom
Group Auditor
Deloitte PLT
Suite 9, 4th Floor, Business Centre
Wisma Wong Wo Lo
Jalan Tun Mustapha
87000 Wilayah Persekutuan Labuan
Malaysia
UK Registrar
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Bankers
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
Annual Report 2021
7
7
Annual Report 2021 Chairman’s Statement
“With a population slowly
increasing to 19.1 million
inhabitants this translates
into 607 kg per capita, a level
which is reasonable, possibly
on the higher end of what can
be considered as a sustainable
structural demand in the
medium-term horizon.”
short term fluctuations around this level, caused by
external factors or public policies, but the trend will
probably average around this level.
One such ‘external factor’ appeared and shocked
the country in January 2022, when mass protests
occurred and were followed by social unrest and the
declaration of a state of emergency. This brought
the urban areas to a standstill. It was followed by
an important reshuffling in many State and local
agencies, a Presidential announcement of several
changes
in
democracy, and several social programmes. At a
local level, all governors were instructed to strongly
encourage the private sector to decide substantial
increases for the lowest salaries. The situation seems
now stabilized.
in governance to favour progress
Against all odds, these important disruptions did not
affect demand in cement: during the first quarter,
consumption, usually low during the winter period,
broke new records, standing at 2 mt, almost 15%
above 2021. Your Company’s base is in a rural area
which was not affected by the disruptions reported in
the main cities. Production, which was only stopped
Against all odds 2021 was an outstanding year
for Steppe Cement and the Board is pleased to
announce to shareholders a net profit of USD17
million. The EBITDA increased by 30% against 2020
at USD 31.5 million.
In the first months of 2021 your Board of directors
was expecting serious adverse conditions with the
persistent presence of COVID. A worrying 2.5%
GDP contraction hit Kazakhstan in 2020. This is now
history, offset as it is by a 3.5% growth achieved
in 2021, the first four months of 2022 placing the
country on a path to 3.7%. We must here report the
positive effects on our business of the governmental
economic and fiscal measures in reaction to the
health situation: special incentives and substantial
public investment contributed to stimulate the
construction sector. State spending in infrastructures
and social housing, temporary allowance to draw
from pension plans for individual housing projects
resulted in a record domestic demand in cement:
with 11.6 mt consumed, a 23 % increase on 2020 (9.4
mt), all expectations were beaten. Even the highest
levels recorded during the Soviet times in the late
1980s were exceeded.
With a population slowly increasing to 19.1 million
inhabitants this translates into 607 kg per capita, a
level which is reasonable, possibly on the higher end
of what can be considered as a sustainable structural
demand in the medium-term horizon. There will be
8
Steppe Cement Ltd.
by technical issues but never by external causes,
remained at 1.7 mt. Our management held a number
of discussions with workers representatives and local
authorities to define and implement reasonable
increases in salaries, in line with the industrial sector.
Special attention was given to improve the living of
our least qualified workers and to offer competitive
remuneration to our key
local specialists and
managers who were developed internally and need
to be retained.
Then March came, bringing a new crisis, which
may last for an undetermined period: The events in
Ukraine had an immediate negative impact on the
value of the national currency. However, the Tenge
recovered a few weeks later against the dollar, in
parallel with the ruble. The inflation on mineral and
energy prices benefits the National Economy and
this should help maintaining the current Keynesian
policy.
The only negative direct impact observed on our
operations has been a need to adjust logistics for
certain supplies coming from western Europe, like
refractories or special spare parts. Strategic spare
parts are safely stored and available according to
our procedures. Our operations will bear a minimal
impact, alternate routes having already been
identified to reorganize our procurement processes.
Once more, the local nature of the cement market,
the good location of our factory well positioned with
regards to its markets and near its sources of raw
materials and energy, the continuous maintenance
and modernization of the equipment and machinery,
and a proper anticipation in the management of our
strategic stocks have secured a strong resilience in
this unstable environment. A strong balance sheet
with virtually all long-term external debt reimbursed
also provides a very solid protection against any
severe possible financial turmoil.
Domestic competitors were increasingly active and
took their share of this favourable environment.
National production reached a record at 12.4 mt, an
18% increase on 2021 (10.5 mt). The main producers
maintained or increased their output and two smaller
manufacturers managed to solve their recurring
technical problems, adding together an additional
supply of some 1.6 mt compared to previous year.
Imports from Iran remained minimal whilst some 0.7
mt were supplied from Russia. With this unbalanced
supply/demand situation the excess capacity was
mostly absorbed by Uzbekistan (1.1 mt), Kyrgyzstan
and Russia (0.25 mt each). Those markets are likely
to be progressively lost with the start-up of new
capacities in Uzbekistan and increasing competition
from recent plants in Tajikistan and South Kyrgyzstan.
We expect the southern producers of Kazakhstan
to redirect most of their reduced exports into the
Almaty region. Although this has not materialized as
of May 2022, we anticipate some impact on selling
prices under this increasingly competitive scenario.
The company and its Board of Directors move ahead
in 2022 with great confidence and endeavour to
keep returning an attractive value to its shareholders.
Xavier Blutel
Chairman of the Board
9
Annual Report 2021
CEO’s Statement
“The market demand in 2022 continues to be
strong. After a very strong first quarter we expect
the market to stabilise. While we expect the
construction driven by pension withdrawals to
taper off, oil prices are at near a historical high
and government stimulus packages continue.”
Kazakhstan has experienced a boom in construction
and cement consumption towards the end of the
pandemic, mostly due to government incentives.
Our factory continued to perform and we managed
to initiate various internal capital projects that will
allow us to increase the production volumes in the
coming years.
The construction sector grew very fast in 2021 and
the financial markets remained fairly stable. The
stability was subsequently shattered in early 2022
with internal political upheaveal starting in West and
Southern Kazakshtan and the subsequent events
in Ukraine in February 2022. Although the cement
market remains strong in 2022, the uncertainty is
likely to continue during the remaining months of the
year. The management will continue a conservative
financial and investment policy.
In 2021, Steppe Cement posted a net profit of
USD17 million while EBITDA increased to USD 31.5
million from USD24.2 million in 2020, mostly due to
bigger volumes and 13% higher prices in KZT. The
increase of cost of production was contained and the
KZT devaluation against the USD was limited to only
3% for the year.
The overall domestic cement market increased
by 23% to 11.6 million tonnes. Our sales volume
increased by 3%. Local sales increased by 11% while
exports decreased by 57% as we focused on the
domestic market.
10
The increase of the market is attributable mostly to
the government decision that allowed individuals to
use a portion of their pensions to buy or improve
properties or for health reason as part of the estimulus
of the Covid pandemic. It is estimated that around
USD6 billion have been taken from the pension fund
system since the beginning of the program in 2020.
This represents around 20% of the USD30 billion
currently in the national pension fund.
Steppe Cement operated both lines at 87% of their
current combined capacity (which is 1.1 million
tonnes for line 5 and 0.85 million tonnes for line 6).
Shareholders’ funds increased to USD65.6 million
from USD57.9 million after dividend distribution to
shareholders. The replacement cost of the Company’s
assets remains many times higher than their current
book value.
The Kazakh cement market in 2021 increased to
11.6 million tonnes or 23% from 2020. Imports into
Kazakshtan increased by 34% to 0.8 million tonnes
equivalent to 7% of the total market, as shipping
from Iran was resumed. Exports from local producers
decreased by 19% to 1.6 million tonnes mostly to
Uzbekistan and Kyrgyzstan. Exports to Uzbekistan,
concentrated in the Tashkent area, will continue to
decline as the country commissions new facilities.
Steppe Cement Ltd. Key financials
Year ended
31-Dec-2021
Year ended
31-Dec-2020
Inc/
(Dec)%
Sales (tonnes of cement)
1,688,544
1,645,744
Consolidated turnover (KZT million)
36,020
30,958
Consolidated turnover (USD million)
Consolidated profit before tax (USD million)
Consolidated profit after tax (USD million)
Profit per share (US cents)
Shareholders’ funds (USD million)
Average exchange rate (USD/KZT)
Exchange rate as at year end (USD/KZT)
84.6
21.4
17.0
7.8
65.6
426
432
74.8
13.1
11.1
5.1
57.9
413
421
3%
16%
13%
63%
53%
53%
13%
(3%)
(3%)
The Kazakh cement market increased by 23% in
2021 and we expect 2022 to be at a similar level
The market demand in 2022 continues to be strong.
After a very strong first quarter we expect the market
to stabilise. While we expect the construction driven
by pension withdrawals to taper off, oil prices are
at near a historical high and government stimulus
packages continue.
On the back of the market growth, Steppe Cement’s
average cement selling prices increased by 13% in
KZT and 10% in USD, to USD50 per tonne delivered.
Production and costs
Line 5 produced 62% of total production or
1,050,373 tonnes of cement while Line 6 produced
638,170. Line 5 performed at 95% capacity while Line
6 was limited by exceptional maintenance. In 2022
we will endeavor to keep the good performance of
Line 5 and increase signicantly the production of
clinker of Line 6. We intend to achieve production
of 1.75 to 1.8 million tons. In addition to increases
in clinker production, we intend to use more slag.
This will bring a reduction in CO2 emissions and
lower costs.
Cost per tonne increased by 6% in KZT in line with
inflation. The average cash production cost of clinker
increased from USD19/tonne to USD20/tonne while
cement cash cost increased from USD21.5/tonne to
USD23/tonne in 2020 due to inflation in electricity
and transportation.
Despite the increase of transportation costs, selling
expenses, reflecting mostly cement delivery costs,
were reduced to USD7.3/tonne as we focused in
markets closer to the factory and reduced exports
significantly.
Foreign exchange losses are now negligible at
USD0.2 million as we don’t have USD denominated
loans. Those are attributable mostly to the time
difference between the purchase of consumable and
capex materials throughout the year.
Other income of USD1.6 million reflects the write-
back of receivables previously written down and the
write-back of deferred income from the government
subsidised loans.
General and administrative expenses
General and administrative expenses increased to
USD6.7 million from USD6.2 million in 2020 in line
with inflation.
11
Annual Report 2021 CEO’s Statement
Labor and Covid-19
On 31 March 2022 the labour count stood at 801
from 781 in 2021 as we have replaced certain
subcontractors with our own staff. This policy will be
constantly under revision as we evaluate the quality
and pricing of the different subcontractors that
become available in the region.
We didn’t have any further covid deaths in 2021. All
employees were offered voluntary vaccination and
75% of them took it. This compared favorably with
the overall region and country statistics across all
age groups. An employee of our subcontractors had
a fatal accident in the factory and the subcontractor
was terminated following an investigation.
Capital investment increased significantly in 2021
and the trend will continue in 2022
Capital investment was accelerated to USD6.2
million to compensate the slow down in investment
during 2019 and 2020. Apart from the traditional
maintenance capex and key spare purchasing in
the region of USD2 million per year we managed
to complete a significant number of projects and
some of them will be continuing in 2022. The main
investment completed during the year 2021 were:
- Bag
feeder automatisation
to
improve
productivity
We have plans for a further USD7 million investment
in 2022 and the first half of 2023 including:
- Complete the new separator for cement
mill number 1 to increase slag content and
cement production and to reduce electricity
consumption
- Start the new separator for cement mill
number 2
- Crane revamping as maintenance capex
- Replacement of one reducer for cement mill
as a key spare part
- Coal mill gas duct size change to save power
- Two new cement mill motors as key spare
and increase production
parts
- Kiln 6 main gear drive replacement to improve
reliability and reduce power consumption
- New coal dosing system, to better control
- One new motor for preheater fan to reduce
power consumption
- Raw mill 3 separator revamp to increase
the feed to the preheater in line 6
production of line 6
- Slag drying dedusting and automatisation to
- Modifications to the line 6 preheater to
improve ecology and stability
increase production
- XRF analyser for laboratory to increase clinker
- Software upgrades to the control system to
quality and stability
prevent obsolescency
- Acquisition of rail line connection to main
train station to save transportation costs
- Start of new separator for cement mill
- Online monitoring of main stack emissions to
improve ecology
- Upgraded bag filters to improve ecology
number 1
We have obtained additional subsidised loans of
USD4.5 million in KZT at 6% and we will use them in
2022 mostly for the cement mill separators.
12
Steppe Cement Ltd.
Financial position: New debt has been limited
to subsidied credit lines as interest rates in
Kazakhstan have increased to 14% in 2022
During the year, our total loans outstanding were
reduced from USD7 million to USD5.6 million, the
majority of the loans have very favourable subsidized
rates in KZT. The company ended the year with a net
cash position of USD4.6 million, excluding IFRS 16
leases.
Long-term loans were reduced from USD2.4 million
to USD1.9 million mostly due to repayment of
subsidised loans.
Our short term loans and current part of the long
term loans decreased from USD4.4 million in 2020
to USD3.6 million in 2021, while the cash position at
the end of the year increased from USD8.2 million to
USD10.1 million.
In 2021, finance costs decreased to USD1.09 million
from USD1.25 million in 2020. Without operating
lease interest of USD0.4 million under IFRS 16, the
finance cost was USD0.7 million of which USD0.4
million was interest on loans.
The KZT had a stable year against the USD, it
fluctuated between 417 and 437 KZT/USD suffering
only a 3% devaluation against the USD year on year.
This is quite a contrast with the situation experienced
in 2020 and the beginning of 2022 with significant
political instability in Kazakhstan in January and in
the CIS region from February. The average rate for
the year was 426.
We maintain short term credit lines available as stand
by:
- KZT 1 billion short term in a government sub-
sidized program in KZT at 6% p.a.
- KZT 2 billion from Halyk Bank at 6% p.a. in
USD or 14% in KZT.
- KZT 0.9 billion from Altyn Bank at 14% p.a.
in KZT.
Depreciation of property, plant and equipment
increased slightly to USD7 million in 2021 due to the
increased capex.
Steppe Cement’s effective income tax rate was in
line with the statutory rate of 20% in Kazakhstan.
Effects of application of IFRS 16 in the accounts
The application of IFRS 16 affects the accounting
for the rental of wagons that Steppe Cement does
not own. Some wagons were rented for three years
and the last year is 2022. The accounting standard
requires to account for a new non-current asset called
right-of-use assets evaluated in 2021 at USD1.7
million vs USD3.5 million in 2020 (the lease contracts
have already been accounted for two years). The
amount will be nearly eliminated in 2022 unless the
rental contracts are renewed on a multi year basis
and it may increase again depending on the renewal
terms. The corresponding entries in the liabilities
are called lease liabilities of USD2 million in 2021 vs
USD3.9 million in 2020.
The selling expenses have been reduced to USD12.3
million while the corresponding lease finance cost
has been calculated at USD0.4 million increasing the
financial expenses but less than in 2020 when they
were increased by USD0.6 million.
Without IFRS 16 accounting, the finance expenses
would have been USD0.7 million and the selling
expenses USD13.6 million. Consequently, the profit
before taxation has been increased by USD1million.
The EBITDA increased due to the recognition of
the depreciation of right of use assets. Without this
depreciation, the EBITDA for 2021 would have been
USD29.8 million.
Javier del Ser Perez
Chief Executive Officer
13
Annual Report 2021
Group Structure
Steppe Cement (M) Sdn Bhd
(Malaysia)
100%
Mechanical & Electrical
Consulting Services Ltd
(Malaysia)
100%
Steppe Cement Holdings
B.V.
(Netherlands)
100%
100%
100%
100%
Central Asia
Services LLP
(Kazakhstan)
Karcement JSC
(Kazakhstan)
Central Asia
Cement
JSC
(Kazakhstan)
14
Steppe Cement Ltd.
BOARD OF DIRECTORS
Xavier Blutel, 67, is currently member of the Strategic Board of Wagram Corporate
Finance and President and founding partner of SAS Baudrimont. Xavier Blutel
spent 33 years as an international executive in capital intensive industries such
as the cement industry, with ItalcementiGroup 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.
Javier del Ser Perez, 56, 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. Javier is also a Director of Steppe Cement
Holding B.V. and Mechanical and Electrical Consulting Services Ltd.
Rupert Wood, 51, has been involved in Emerging Market Equities since the mid-
1990s, predominantly in Central and Eastern Europe. Starting his career at NatWest
Markets in 1996 covering Emerging Europe as an analyst and then in equity sales,
he worked at CA-IB/Bank Austria and then at ING, where he managed distribution
of Emerging Market Equities to institutional investors as Head of EMEA Equity
Sales. He then joined Wood & Co as Head of Sales, before becoming Head of
Equities and subsequently Senior Advisor. His wide capital markets experience
has spanned the broader EMEA region including Central Asia, Turkey, the Gulf,
South Africa, as well as Latin America. He holds degrees from the University of
Oxford and the School of Slavonic and East European Studies (SSEES), now a part
of University College London (UCL). He is a Board Advisor at Adtones, the mobile
advertising technology platform.
Gan Chee Leong, 65, is currently the Executive Director of Mechanical and Electrical
Consulting Services Ltd (MECS Ltd). He is a Chartered Accountant from England
and Wales. He has about 27 years of experience in cement industry in various
capacities. Gan joined CAC and Karcement in August 2004. He was the General
Director of Karcement from 2007 till 2018. He held positions as Director of CAC
and Karcement until 2018. After many years of service, Gan retired from full time
engagement in Kazakhstan at end of 2018, but have retained his engagement on
a part time basis in Kuala Lumpur. Since 2019, Gan is also a Director of Steppe
Cement (M) Sdn Bhd in Malaysia. Gan Chee Leong is the Alternate Director to the
Chief Executive Officer, Javier Del Ser Perez.
Charles Tingey, 46, is currently the Director of Partnerships, Asian Tour. He is
responsible for all commercial matters pertaining to the Asian Tour alongside
providing key strategic advice. He has over 20 years industry experience in
professional sports event delivery, sports marketing & commercial sales, client
servicing and government relationships. Charles Tingey is the Alternate Director
to the Independent Non-Executive Director, Rupert Wood.
15
XAVIER BLUTEL
Non-Executive Director
JAVIER DEL SER PEREZ
Chief Executive Officer
RUPERT WOOD
Non-Executive Director
GAN CHEE LEONG
Alternate Director
CHARLIE TINGEY
Alternate Director
Annual Report 2021 Senior Management
MANAGEMENT AND STAFF OF
Peter Durnev, General Director
A graduate of Academy Marketing Moscow. He has worked in CAC for about 20 years rising
from marketing executive to his present position. He also holds the position of Marketing
Director.
Derek Kuan Boon San, Finance Director
Derek Kuan is a member of Malaysian Institute of Certified Public Accountants (MICPA). 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 from the Karagandy Economical University
of Kazpotrebsouz and has worked for 32 years in the cement industry.
Irina Poluychik, Personnel Manager
An economist by qualification. She specialises in human resources matters. She has been with
CAC for 37 years.
16
Steppe Cement Ltd. Senior Management
MANAGEMENT AND STAFF OF
George Rozario Ramesh, General Director
A Mechanical Engineer by profession with a Master degree in Business Management (Finance
& Marketing) from India. He has about 30 years of experience in the dry process cement
industry in various countries (India, Malaysia & Singapore), handled plant improvement
projects, operational reliability, methodology development and maintenance. Before joining
Karcement in 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 modernisation Project in Karcement which was successfully commissioned in 2014.
Srinivasa Reddy, Maintenances Head
A Mechanical Engineer from India and a graduate from the National Institute of Technology,
Warngal with strong academics. He joined us in 2008 with 19 years of dry process cement
plants experience. His experience includes greenfield projects execution with latest art of
technology built in machinery, plant operation, maintenance and optimisation. He had vast
experience in vertical mills, ball mills and modern kilns. He also worked in plant upgradation
projects in his career. Before joining us, he was working with Holcim (ACC Limited, India) in
plant operation, maintenance and optimisation of 1 MTPA plant. Apart from maintenance he
has expertise in production and process optimisation.
Gottapu Nageswara Rao, Head of Production, Processes and Quality Assurance
A chemist by profession with a Bachelor Degree in Chemistry from India. He has about 34
years of vast experience in dry process cement industry in India and abroad, handled raw
mix preparation, product development, product quality control, alternative fuels and raw
materials planning and ISO systems. Before joining Karcement in April 2017, he worked
as Chief Chemist for Lafarge Holcim (Malaysia)for 17 years in quality and optimization
department in various positions and projects. Prior to that, with Cheran Cements as project
and Plant Manager for grinding unit.
Veronica Kuznetsova, Legal Department Chief
A graduate from the Legal 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.
Lidiya Timoshenko, Chief Accountant
Graduated from Karaganda State Industrial University with a bachelor’s degree in accounting
and auditing. 18 years of experience as an accountant in the manufacturing sector. She has
been working in JSC Karcement for 7 years.
17
Annual Report 2021 Chairman Statement on Governance
We are pleased to present our 2021 Corporate Governance Statement.
This Statement describes our approach to corporate governance
and the governance practices in place at Steppe Cement and its
subsidiaries.
OUR VISION
To be Kazakhstan’s leading, most sustainable,
profitable, trusted and competitive cement producer
OUR VALUES
DEDICATION
TO
CUSTOMERS
QUALITY OF
PRODUCT &
SERVICES
SAFEGUARD
AND
ENHANCE
ASSET VALUE
EMPOWER
AND RESPECT
EMPLOYEES
BE
ACCOUNTABLE
AT ALL LEVELS
SHAREHOLDERS
STEPPE CEMENT BOARD
BOARD AUDIT
COMMITTEE
BOARD
REMUNERATION
COMMITTEE
BOARD
NOMINATIONS &
GOVERNANCE
COMMITTEE
MANAGEMENT
CHIEF EXECUTIVE OFFICER
EXECUTIVE LEADERSHIP AND
OPERATIONAL MANAGEMENT
The Board reserves certain power for itself and delegates certain authority and
responsiblitity for day-to-day management of our business. The Group CEO in
turn delegates certain authorities and responsibilities to senior executives.
These delegations are regularly reviewed and confirmed
18
18
Steppe Cement Ltd.
Steppe Cement Ltd. Chairman Statement on Governance
The Board held five formal meetings and was able
to work adequately despite the impossibility to
spend time in the factory. Several informal meetings
were also held by phone to solve urgent matters.
Statutory physical meetings in Malaysia were held
with alternate directors and this will probably no
longer be needed in 2022 with more relaxed travel
rules. The Audit Committee was particularly active
and had numerous exchanges with the factory and
the external Auditors.
The overall environment requested substantial
reviews by the three Board Committees who met
after each Board Meeting, and on several other
occasions for the Audit Committee.
Xavier Blutel
Chairman of the Board
The structured process presented in 2020 to ensure
proper Governance was rolled out and carefully
monitored in a heavily constrained context.
With the ongoing restrictions imposed for health
reasons, the Board of Directors and some expatriate
managers remained physically distant from the
operations on the ground, a vigorous real-life test of
this Governance process.
It did work as well as could be expected. However
weaker points in this difficult environment were
it appeared
identified and corrected: Whilst
productive enough
to hold Board meetings
involving the management from a distance via
videoconferencing, operational management must
be ensured onsite: we had to realise that, in the
absence of senior expatriate technical managers, the
continuous production process was running smoothly
… until, on one occasion, our first line technical staff
could not readjust their parameters adequately to
cope with unusually high production levels. The
broad experience and the theoretical knowledge
were missing, and in one instance proper instructions
arrived only after the damage. This translated into
losses of production and higher maintenance costs.
This was corrected. Since then, recruitment of
local talent and development of junior managers
were successfully completed. The company has
now replaced three Indian expatriates with local
engineers who can react and liaise quickly with
George Ramesh, the technical manager, even when
he cannot be onsite. The first quarter of 2022 shows
very positive achievements in this respect.
Annual Report 2021
19
19
Annual Report 2021 Corporate Governance
The Board’s role in Corporate Governance
in
The Board of Directors (“Board”) is fully committed
and strives to take the necessary measures to uphold
the best principles and practices of corporate
governance
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. The Board sets the
tone by defining and demonstrating the Company’s
values and standards. The Board recognises that a
robust corporate governance framework is essential
to effective delivery of the strategy of the Group and
ensure the highest standards of integrity.
Chairman’s role in Corporate Governance
The Chairman’s role is to ensure that the governance
structure remains relevant and appropriate, whilst
supporting the Group’s strategy and culture and
ensuring that the Board delivers effective leadership
in order to discharge its duties responsibly and
effectively to ensure the long-term success of the
Group.
Compliance with QCA code
Steppe Cement complies with the latest Quoted
Companies Alliance Corporate Governance Code
(“QCA”) guidelines published in 2018. Nonetheless,
Steppe Cement adopts the principal requirements of
the UK Combined Code of Corporate Governance
(Combined Code), as far as practicable, to ensure
high standards of corporate governance.
Steppe Cement is not required to comply with the
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 QCA has published a set of corporate governance
guidelines for as a minimum standard to follow for
companies, such as those listed on AIM, which adopt
the QCA. The QCA guidelines are less rigorous
than the Combined Code and recommendations,
examples of which include the following:
• Separation of Chairman and Chief Executive
Officer (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.
20
• 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.
• Review of
internal controls annually. The
review should encompass all material controls
including financial, operational and compliance
systems
controls
risk management
and
• The application of the principles of the QCA code
by Steppe Cement are published on Steppe
Cement’s website.
BOARD OF DIRECTORS
The Board’s primary objective is to protect and
enhance long-term shareholders’ value. The Board
is responsible for:
•
•
formulating the Group’s strategic direction and
major policies;
review performance of the Group and monitor
the achievement of management’s goals;
• approval of the Group’s financial statements,
annual report and announcements;
• approval of Group’s operational and capital
budgets;
• approval of major contracts, capital expenditure,
acquisitions and disposals;
Steppe Cement Ltd.
Corporate Governance
•
•
setting the remuneration, appointing, removing
and creating succession policies for Directors
and senior executives;
the effectiveness and integrity of the Group’s
internal control and management information
systems; and
• overall corporate governance of the Group.
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.
BOARD COMPOSITION
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 CEO. 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 CEO and the senior management.
Independence
challenge the management on the Group’s strategy,
financial and operational matters.
Selection and appointment of Directors
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 provides
that every 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.
Performance evaluation
The Board conducts regular evaluations of 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
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.
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
or group of Directors is able to unduly influence
the Board’s decision making. This enables the
independent Directors to debate and constructively
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
21
Annual Report 2021 Corporate Governance
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 the advice of independent
consultants at the Company’s expense in relation
to Director’s rights and duties - 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 Board has established
the Nomination
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.
Board Meetings
During the year ended 31 December 2021, 5 board
meetings were held.
The following is the attendance record of the
directors:
Nomination Committee
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 comprise:
1. Rupert Wood (Chairman)
2. Javier Del Ser Perez
3. Xavier Blutel
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 the structure, size and
composition of the Board taking into account
the Group’s strategies;
Directors
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Xavier Blutel
(Non-Executive Chairman)
Javier Del Ser Perez
(Chief Executive Officer)
Rupert Wood
(Non-Executive Director)
Gan Chee Leong
(Alternate Director to Javier Del Ser Perez)
Charlie Tingey
(Alternate Director to Rupert Wood)
5
4
4
1
1
4
4
N/A
N/A
4
-
-
4
-
-
4
4
4
-
-
Committee meetings are held concurrently with the board meetings.
22
Steppe Cement Ltd. Corporate Governance
•
Identify and nominate the potential candidates
to the Board for approval;
• Review and update the Terms of Reference every
two (2) years, or more frequently as required to
ensure its ongoing relevance and effectiveness.
• Monitor the appointment process of Directors;
The Remuneration Committee’s members comprise:
• Recommend to the Board for approval on the
re-appointment of Directors;
1. Xavier Blutel (Chairman)
2. Rupert Wood
• Oversee the succession planning of Directors
taking into consideration of the Group’s
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.
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
legal
of responsibilities, performance, relevant
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, CEO, Executive Directors
and senior executives;
• Review the contracts for the Chairman, CEO,
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
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.
Details on the roles and responsibilities of the Audit
Committee are described in the Audit Committee
Report.
1. The Audit Committee’s members comprise:
2. Rupert Wood (Chairman)
3. 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.
23
Annual Report 2021
Corporate Governance
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
committed and
regularly with shareholders on
communicates
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.
is
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.
Annual General Meeting
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.
INTERNAL CONTROL
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.
Purpose
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
investments. The Group’s
24
fully eliminate the risk of failure to achieve business
objectives. Therefore, the internal control system can
only provide reasonable but not absolute assurance
against material misstatement or loss.
Key elements
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.
• 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.
Steppe Cement Ltd.
Nomination Committee Report 2021
Dear Shareholder
2021 saw a certain number of management changes, with the recently recruited Head of
Internal Audit departing in H1 2021, the Chief Accountant leaving at the end of 2021 and
a new hire in production (a Kazakh National) deciding not to stay. The Committee, and the
Board, have been looking at strengthening the resilience of the management team, after
several of our expat managers were stuck abroad or preferred to remain away during the
pandemic. These efforts continue. The positions mentioned above have been filled internally
or are the subject of search presently.
We also were notified at the end of the year that Derek Kuan Boon San had decided to return
to Malaysia for personal reasons. We are saddened to see him leave but wish him the best and
offer our thanks for his hard work in challenging times. The Board is in the process of recruiting
his successor.
At the Board level, during 2021 we maintained the Alternate Director status for Gan Chee
Leong and Charlie Tingey to stand in for Javier del Ser and myself at physical Board Meetings,
required at least once annually by Malaysian law, and thank them for their assistance. Now that
travel restrictions have eased, the Nomination Committee recommended to the Board that
the Alternate Directors should no longer be necessary, and hence should be thanked for their
service and will be stepping down at the close of the AGM.
The Board also recently received a letter from the Company’s largest shareholder representing
some 31% of the Company, Azmi Wan Hamzah, to formally request the appointment of his
son, Affan Wan Azmi to the Board as the family representative. The Nomination Committee
considered the balance of Independent Directors against Non-Independent Directors on the
Board, and has resolved that the Chairman will retain a casting vote in the case of any deadlock
on the Board. Affan’s nomination as a Director is hereby put to the shareholders as a resolution
at the AGM for your approval.
Rupert Wood
Nomination Committee Chairman
Annual Report 2021
25
25
Annual Report 2021 Remuneration Committee Report 2021
The Remuneration Committee reviewed the salaries proposed by the CEO for new hires of
engineers and key managers. After 2021, it approved in early 2022 the significant increases
of the lowest salaries requested by workers against industry references provided by public
sources and local authorities. It also benchmarked and reviewed Directors’ fees, referencing
independent blue chip surveys such as the KPMG’s Report on AIM Listed Companies.
With a view to maintaining cost efficiency, Directors’ fees have been kept at the same level
for over ten years and are now at the bottom of the reference range for companies by both
market capitalisation and turnover.
Taking this into consideration, the Committee recommended to the Board that Directors’ fees
would remain unchanged, but that the Chairman of the Board’s remuneration would be raised
to USD50,000 and that the Chairman of the Audit Committee would receive USD10,000, from
January 1st 2022, reflecting the changing landscape of Board Governance
Xavier Blutel
Remuneration Committee Chairman
2626
Steppe Cement Ltd.
Steppe Cement Ltd. Audit Committee Report 2021
Dear Shareholder
Throughout 2021 the Audit Committee continued to meet alongside regular Board Meetings,
as well as separately, especially around the External Audit, where again the Committee held
calls with Deloitte to set the terms of reference for the Audit, review its progress and hear the
results and comments. We are pleased to report that no material matters have been raised and
the audit process was completed smoothly.
During the course of 2021 the Committee renewed its search for a replacement to the Head
of Internal Audit position, and identified a candidate locally in Kazakhstan who seemed to fit
the bill. The process took some time with the travel restrictions in place and unfortunately the
candidate fell through. We have now identified two other candidates and are in the process of
interviewing them with a view to completing the process in the near future. We view the role of
Internal Audit as integral to the 3 lines of defence and the proper functioning of independence
and management accountability and look forward to having positive news to report next year.
At the end of 2021, the Company’s Finance Director, Derek Kuan Boon San, indicated that he
would like to return to Malaysia for personal reasons. He offered to stay with the Company
through the completion of the 2021 Audit, and to conduct a handover to his replacement. We
wish him well and thank him for his hard work and service to the company, particularly at such
a challenging time during the pandemic.
The Chief Accountant of Karcement, Yulia Vladislavovna Tkachenko, also took another offer
and left the company at the end of 2021, after seven years with the company. She was replaced
internally by Lidiya Timoshenko who has been with the company since 2015.
Zilya Hasanova is the chief accountant of Central Asia Cement and has been with the company
since 1990.
During the course of 2021 the Committee discussed the possibility of re-tendering the role of
External Auditor. The Company has been happy with Deloitte, who has been your Company’s
Auditor since the IPO in 2005, some 17 years, but it was felt that the possibility of a rotation
should be considered. However, with the resignation of the Finance Director the Committee
decided to delay any tender until next year. Change is often a positive, but too much too fast
can be unnecessarily problematic.
Rupert Wood
Audit Committee Chairman
Annual Report 2021
27
27
Annual Report 2021 FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(In United States Dollar)
28
28
Steppe Cement Ltd.
Steppe Cement Ltd. CONTENTS
Independent auditors’ report
Statements of profit and loss
Statements of profit and loss and other
comprehensive income
Statements of financial position
Statements of changes in equity
Statements of cash flows
PAGES
30 - 33
34
35
36 - 37
38 - 40
41 - 44
Notes to the financial statements
45 - 104
Statement by a director
105
Annual Report 2021
29
29
Annual Report 2021 INDEPENDENT AUDITORS’ REPORT
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of STEPPE CEMENT LTD (the “Company”) and its subsidiaries (the
“Group”), which comprise the statements of financial position as of 31 December 2021 of the Group and
of the Company, and the statements of profit or loss, statements of profit or loss and other 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 notes to the financial statements, including a summary of significant accounting
policies, as set out on pages 34 to 104.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the
Group and of the Company as of 31 December 2021, and of their financial performance and their cash flows
for the year then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and International
Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence and Other Ethical Responsibilities
We are independent of the Group and of the Company in accordance with the By-Laws (on Professional
Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International
Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (Including
International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities
in accordance with the By-Laws and the IESBA Code.
Key Audit Matter
Key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the
financial statements of the Group and of the Company for the current year. This matter was addressed in the
context of our audit of the financial statements of the Group and of the Company as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on this matter.
30
Steppe Cement Ltd. Key audit matter
Revenue recognition
As of 31 December 2021, revenue from sale of
cements amounts to USD84,567,571, which
represented 99.9% of the Group’s revenue.
Revenue recognition is significant to our audit as
the Group might have inappropriately accounted
the revenue in advance during this economic
downturn caused by the Covid-19 pandemic.
Refer to revenue accounting policy in Note 3 and
4 to the Financial Statements.
How our audit addressed the key audit matter
Our audit procedures included the following:
• We have reviewed the terms and conditions of
significant sale transactions to ensure that revenue is
recognised in accordance with Group’s accounting
policy and the requirements of IFRS 15 Revenue
from Contracts with Customers.
• We have obtained an understanding of the relevant
controls put in place by the Group in respect of
revenue recognition and performed procedures
to evaluate the design and implementation and
operating effectiveness of such controls.
• Performed statistical sampling test of details on
revenue and one month cut-off review to ensure
the sales are valid and recorded in the correct
accounting period.
• Reviewed the reconciliations and adjustments to
revenue, if any and any unusual credit memo with
significant amounts issued during the year and
subsequent year.
• Performed gross profit margin analysis.
We have not identified any key audit matter pertaining to the financial statements of the Company for the
year ended 31 December 2021.
Information Other than the Financial Statements and Auditors’ Report Thereon
The directors of the Company are responsible for the other information. The other information comprises
the information included in the Annual Report but does not include the financial statements of the Group
and of the Company and our auditors’ report thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of the Group and of the Company, our responsibility
is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
31
Annual Report 2021 INDEPENDENT AUDITORS’ REPORT
Responsibilities of the Directors for the Financial Statements
The directors of the Company are responsible for the preparation of financial statements of the Group
and of the Company that give a true and fair view in accordance with International Financial Reporting
Standards. The directors are also responsible for such internal control as the directors determine is necessary
to enable the preparation of financial statements of the Group and of the Company that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements of the Group and of the Company, the directors are responsible for
assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to
do so.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and
of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not
a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards
on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements of the Group and of
the Company, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s and of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the financial statements of the Group and of the
Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditors’ report. However, future events or
32
Steppe Cement Ltd. conditions may cause the Group or the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements of the Group and of
the Company, including the disclosures, and whether the financial statements of the Group and of the
Company represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial statements of the Group. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial statements of the Group and of the Company for the current year and are
therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
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 to
any other person for the content of this report.
DELOITTE PLT (LLP0010145-LCA)
Chartered Accountants (AAL 0009)
WONG KING YU
Partner - 03194/06/2023 J
Chartered Accountant
Labuan
33
Annual Report 2021 STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group
The Company
Note
2021
USD
2020
USD
2021
USD
2020
USD
Revenue
Cost of sales
4
84,578,739
74,774,297
1,469,264
10,796,326
(44,834,182)
(42,439,633)
-
-
Gross profit
39,744,557
32,334,664
1,469,264
10,796,326
Selling expenses
General and
administrative
expenses
Interest income
Finance costs
Net foreign exchange
loss
Other income, net
Profit before income tax
Income tax expense
5
6
7
8
(12,264,221)
(12,966,168)
-
-
(6,761,722)
(6,225,928)
(324,207)
(311,871)
401,619
199,332
(1,090,949)
(1,249,051)
-
-
(227,951)
(808,977)
(825)
1,616,216
1,817,314
112,940
934
-
(3,981)
82,507
21,417,549
13,101,186
1,257,172
10,563,915
(4,352,182)
(1,983,727)
-
-
Profit for the year
17,065,367
11,117,459
1,257,172
10,563,915
Attributable to
shareholders of the
Company
Earnings per share:
17,065,367
11,117,459
1,257,172
10,563,915
Basic and diluted (cents)
9
7.8
5.1
The accompanying notes form an integral part of the financial statements.
34
Steppe Cement Ltd. STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Profit for the year
17,065,367
11,117,459
1,257,172
10,563,915
Other comprehensive
(loss)/income:
Items that may not be reclassified
subsequently to profit or loss:
Revaluation gain on property,
plant and equipment, net of tax
Gain on recovery of impaired as-
sets
-
760,291
15,373
-
Increase in provision for
site restoration
(23,611)
(74,671)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences arising from
translation of foreign operations
(1,923,738)
(5,228,388)
Total other comprehensive loss
(1,931,976)
(4,542,768)
-
-
-
-
-
-
-
-
-
-
Total comprehensive income for
the year
15,133,391
6,574,691
1,257,172
10,563,915
Attributable to the shareholders
of the Company
15,133,391
6,574,691
1,257,172
10,563,915
The accompanying notes form an integral part of the financial statements.
35
Annual Report 2021
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2021
The Group
The Company
Note
2021
USD
2020
USD
2021
USD
2020
USD
Assets
Non-Current Assets
Property, plant and
equipment
Right-of-use assets
Investment in subsidiary
companies
Loans to subsidiary
company
Other assets
Total Non-Current
Assets
Current Assets
Inventories
Trade and other
receivables
Other assets
Income tax recoverable
Loans and advances to
subsidiary companies
Advances and prepaid
expenses
Cash and cash
equivalents
10
11
12
27
13
14
15
13
27
16
17
48,437,801
48,856,410
1,700,510
3,483,259
-
-
-
-
-
-
-
-
36,199,599
36,294,519
30,080,000
30,110,000
155,132
1,900,656
-
-
50,293,443
54,240,325
66,279,599
66,404,519
16,023,541
12,367,557
-
-
1,751,720
1,910,839
1,724,364
6,775,995
2,258,501
726,517
911,395
1,435,100
-
-
-
-
-
-
49,536
39,712
5,233,894
2,374,094
4,971
5,848
10,136,022
8,213,680
614,225
1,352,950
Total Current Assets
36,315,073
27,027,787
2,393,096
8,174,505
Total Assets
86,608,516
81,268,112
68,672,695
74,579,024
36
Steppe Cement Ltd. STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2021
The Group
The Company
Note
2021
USD
2020
USD
2021
USD
2020
USD
Equity and Liabilities
Capital and Reserves
Share capital
Revaluation reserve
Translation reserve
Retained earnings/
(Accumulated losses)
Total Equity
Non-Current Liabilities
Borrowings
Lease liabilities
Deferred taxes
Deferred income
18
19
19
19
20
21
22
23
Total Non-Current
Liabilities
Current Liabilities
Trade and other payables
Accrued and other liabilities
Amount owing to a
subsidiary company
Borrowings
Lease liabilities
Deferred income
Taxes payable
24
25
27
20
21
23
26
73,760,924
73,760,924
73,760,924
73,760,924
2,068,114
2,370,706
(120,438,082)
(118,514,344)
-
-
-
-
110,190,323
100,325,002
(5,605,876)
631,352
65,581,279
57,942,288
68,155,048
74,392,276
1,941,383
8,571
4,318,652
1,588,098
2,368,296
2,076,668
4,559,927
1,492,432
8,037,018
10,648,201
5,061,705
4,075,078
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,552,778
1,531,039
227,897
186,748
-
3,614,801
2,017,879
103,720
639,336
-
289,750
4,429,053
1,830,755
106,420
705,278
-
-
-
-
-
-
-
-
-
Provision for site restoration
180,314
150,878
Total Current Liabilities
12,990,219
12,677,623
517,647
186,748
Total Liabilities
21,027,237
23,325,824
517,647
186,748
Total Equity and Liabilities
86,608,516
81,268,112
68,672,695
74,579,024
The accompanying notes form an integral part of the financial statements.
37
Annual Report 2021 l
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STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
The Company
(Accumulated
losses)/
Distributable
Retained
earnings
USD
Share
Capital
USD
Total
USD
As of 1 January 2021
Total comprehensive income
for the year
Dividends paid (Note 19)
73,760,924
631,352
74,392,276
-
-
1,257,172
(7,494,400)
1,257,172
(7,494,400)
As of 31 December 2021
73,760,924
(5,605,876)
68,155,048
As of 1 January 2020
Total comprehensive income
for the year
Dividends paid (Note 19)
73,760,924
1,576,763
75,337,687
-
-
10,563,915
10,563,915
(11,509,326)
(11,509,326)
As of 31 December 2020
73,760,924
631,352
74,392,276
The accompanying notes form an integral part of the financial statements.
40
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
21,417,549
13,101,186
1,257,172
10,563,915
7,039,116
6,873,876
1,716,748
2,116,952
-
-
-
26,546
-
-
-
-
-
-
(9,441,251)
-
(401,619)
(199,332)
(1,469,264)
(1,356,009)
1,090,949
1,249,051
227,951
702,427
142,387
100,475
594,901
813,812
11,676
69,152
-
(105,947)
(769,654)
(170,345)
(108,310)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,964,057
24,575,490
(212,092)
(233,345)
CASH FLOWS FROM/
(USED IN) OPERATING
ACTIVITIES
Profit before income tax
Adjustments for:
Depreciation of property,
plant and equipment
Depreciation of right-of-use
assets
Dividend income
Loss on disposal of property,
plant and equipment
Interest income
Finance costs
Net unrealised foreign exchange
loss
Provision for obsolete
inventories
Credit loss allowance for
doubtful receivables
Allowance for advances paid
to third parties
Reversal of provision for
obsolete inventories
Deferred income
Bad debts recovered
Operating cash flows before
movements in working capital
Movement in working capital:
(Increase)/Decrease in:
Inventories
(6,054,197)
(3,817,367)
-
-
-
Trade and other receivables
302,194
2,578,712
(90,000)
Loans and advances to
subsidiary companies
Advances, prepaid expenses
and other assets
-
-
20,176
(76,385)
(2,820,912)
487,543
877
10,096
41
Annual Report 2021 STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
(Decrease)/Increase in:
Trade and other payables
659,458
(1,538,598)
-
-
Accrued and other liabilities
54,890
449,819
41,149
30,925
Cash Generated From/(Used In)
Operations
23,105,490
22,735,599
(239,890)
(268,709)
Income tax paid
(3,985,384)
(2,925,488)
-
-
Net Cash From/(Used In) Operating
Activities
19,120,106
19,810,111
(239,890)
(268,709)
CASH FLOWS FROM/
(USED IN) INVESTING
ACTIVITIES
Purchase of property, plant and
equipment
(6,215,744)
(3,108,678)
Contribution to site restoration fund
(18,414)
(33,825)
-
-
-
-
-
-
118,234
134,630
-
-
6,610,895
11,509,326
401,619
199,332
-
1,359,861
(5,714,305)
(2,808,541)
6,610,895
12,869,187
Proceeds from disposal of
property, plant and equipment
Dividends received from
subsidiary
Interest received
Net Cash (Used In)/From
Investing Activities
42
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
CASH FLOWS FROM/
(USED IN) FINANCING
ACTIVITIES
Advance from a subsidiary
company
Return of net investment from a
subsidiary company
-
-
-
-
289,750
94,920
Proceeds from borrowings*
5,502,753
7,414,558
Repayment of borrowings*
(6,345,979)
(9,657,053)
Repayment of lease liabilities*
(1,805,362)
(2,014,790)
-
-
-
-
-
-
-
-
Dividends paid
Interest paid
(7,494,400)
(11,509,326)
(7,494,400)
(11,509,326)
(1,081,123)
(1,240,129)
-
-
Net Cash Used In Financing
Activities
NET INCREASE/(DECREASE)
IN CASH AND CASH
EQUIVALENTS
EFFECTS OF FOREIGN
EXCHANGE RATE
CHANGES
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH
EQUIVALENTS AT
END OF YEAR (Note 17)
(11,224,111)
(17,006,740)
(7,109,730)
(11,509,326)
2,181,690
(5,170)
(738,725)
1,091,152
(259,348)
(795,510)
-
-
8,213,680
9,014,360
1,352,950
261,798
10,136,022
8,213,680
614,225
1,352,950
43
Annual Report 2021 STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
The following table shows the reconciliation in the Group’s liabilities arising from financing activities:
Opening
balance
USD
Financing
cash flows
Non-cash
movements[1]
USD
USD
Closing
balance
USD
2021
Borrowings (Note 20)
6,797,349
(843,226)
(397,939)
5,556,184
Lease liabilities (Note 21)
3,907,423
(1,805,362)
(75,611)
2,026,450
2020
Borrowings (Note 20)
10,313,424
(2,242,495)
(1,273,580)
6,797,349
Lease liabilities (Note 21)
6,497,515
(2,014,790)
(575,302)
3,907,423
Non-cash movements primarily relates to foreign currency exchange differences, accrued interests
[1]
and deferred income.
The accompanying notes form an integral part of the financial statements.
44
Steppe Cement Ltd. 1.
GENERAL INFORMATION
Steppe Cement Ltd (the “Company”) is a limited liability company incorporated in Malaysia. The
Company’s registered office and principal place of business 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 Exchange. The Group comprises the Company and the subsidiary companies
(collectively the “Group”) that are disclosed in Note 12.
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 information on the name, place of incorporation, principal place of operation, principal activities
and proportion of ownership interest and voting interest held by the holding company in each
subsidiary is as disclosed in Note 12.
The financial statements of the Group and of the Company have been approved by the Board of
Directors and were authorised for issuance on 31 May 2022.
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 IFRS
Amendments to IFRSs 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 2021.
Amendments to IFRS 9,
Interest Rate Benchmark Reform - Phase 2
IAS 139, IFRS 7,
IFRS 4 and IFRS 16
The application of these amendments to IFRSs did not result in significant changes in the accounting
policies of the Group and of the Company and have no material impact on the disclosures in the
financial statements of the Group and of the Company.
45
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 New and amendments to IFRS in issue but not yet effective
Amendments to IFRS 16
COVID-19 - Related Rent Concessions beyond 30 June 20211
Amendments to IFRSs
Annual Improvements to IFRS Standards 2018-20202
Amendments to IFRS 3
Reference to Conceptual Framework2
Amendments to IAS 16
Property, Plant and Equipment - Proceeds before Intended
Use2
Amendments to IAS 137
Onerous Contracts - Costs of Fulfilling a Contract2
IFRS 17
Insurance Contracts3
Amendments to IFRS 4
Extension of the Temporary Exemption from Applying IFRS 93
Amendments to IAS 1
Classification of Liabilities as Current or Non-current3
Amendments to IAS 1
and IFRS Practice
Statement 2
Disclosure of Accounting Policies3
Amendments to IAS 8
Definition of Accounting Estimates3
Amendments to IFRS 17
Insurance Contracts3
Amendments to IFRS 17
Initial application of IFRS 17 and IFRS 9 - Comparative
Information3
Amendments to IAS 12
Deferred tax related to Assets and Liabilities arising from a
Single Transaction3
Amendments to IFRS 10
and IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture4
1
2
3
4
Effective for annual periods beginning on or after 1 April 2021, with earlier application
permitted.
Effective for annual periods beginning on or after 1 January 2022, with earlier application
permitted.
Effective for annual periods beginning on or after 1 January 2023, with earlier application
permitted.
Effective date yet to be determined.
The directors anticipate that the abovementioned new and amendments to IFRSs will be adopted
in the financial statements of the Group and of the Company when they become effective and that
the adoption of these new and amendments to IFRSs will have no material impact on the financial
statements of the Group and of the Company.
46
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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) and financial assets and financial liabilities that are
recognised at amortised cost.
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
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;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
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.
47
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
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;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
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 and each component of the other comprehensive income of a subsidiary company are
included in the consolidated statement of profit or loss and consolidated statement of profit or loss
and other comprehensive income respectively from the date the Company gains control until the
date when the Company ceases to control the subsidiary 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 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 interests 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 transferred
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 IFRS 9 Financial Instruments or, when applicable, the
cost on initial recognition of an investment in an associate or a joint venture.
48
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Revenue
Revenue is measured based on the consideration specified in a contract with a customer. The
Group recognises revenue when it transfers control of a product or service to a customer. Revenue
of the Group represents sale of cement, transmission and distribution of electricity. Revenue of the
Company represents interest and dividend income.
Sale of cement
Revenue is recognised at a point in time when control of the promised goods has transferred,
being when the goods have been shipped to the customers’ specific location (delivery). Following
delivery, the customer has full ownership of the goods and bears the risks of loss and damage
in relation to the goods. A receivable is recognised by the Group when the goods are delivered
to the customer as this represents the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before payment is due. Payment of the
transaction price is due immediately for customers without credit terms granted.
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.
Dividend income
Dividend from an equity instrument is recognised when the Company’s right, as a shareholder of
the investee is established, which is the date the dividend is appropriately authorised.
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.
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.
49
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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 and of the Company. The functional currency of the
principal subsidiaries, 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. Monetary items denominated in foreign currencies are retranslated at the rates
prevailing on the end of the reporting period. 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 profit or loss for the year. Exchange differences arising on the retranslation
of non-monetary items carried at fair value are included in profit or loss 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 at the end
of the reporting period. Income and expense items (including comparatives) are translated at the
average rates at the dates of the transactions. Exchange differences arising on a monetary item that
represents a net investment in a foreign operation, if any, are recorded in other comprehensive income
and accumulated in the Group’s translation reserve. Such translation differences are recognised in
profit or loss 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:
1 Sterling Pound (“GBP”)
1 Euro (“EUR”)
1 Ringgit Malaysia (“MYR”)
1 Russian Ruble (“RUB”)
1 USD
50
2021
USD
1.3477
1.1370
0.2395
0.0133
KZT
2020
USD
1.3649
1.2216
0.2489
0.0135
KZT
431.67
420.71
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Employee benefits
(i)
Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the
year in which the associated services are rendered by employees. Short-term accumulating
compensated absences such as paid annual leave are recognised when services are rendered
by employees that increase their entitlement to future compensated absences. Short-term
non-accumulating compensated absences such as sick leave are recognised when the
absences occur.
(ii)
Defined contributions plans
As required by law, companies in Malaysia make contributions to the state pension scheme,
the Employees Provident Fund (“EPF”). Such contributions are recognised as an expense in
the period in which the related service is performed.
(iii)
Retirement Benefit Costs
In accordance with the requirements of the legislation of the country in which the subsidiaries
(CAC JSC and Karcement JSC) operate, the subsidiaries withholds amounts of pension
contributions (a defined contribution plan) equivalent to 10% of each employee’s wage,
but not more than KZT 212,500 (USD499) per month per employee (2020: USD515) from
employee’s 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 to profit or loss in the period the related
salaries are earned. Upon retirement, all retirement benefit payments are made by pension
funds selected by the employees. The subsidiaries (CAC JSC and Karcement JSC) do not
have any pension arrangements separate from the state pension system of the countries.
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 profit or loss 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 end of the reporting period.
A provision is recognised for those matters for which the tax determination is uncertain but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are
measured at the best estimate of the amount expected to become payable. The assessment is based
on the judgement of tax professionals within the Group supported by previous experience in respect
of such activities and in certain cases based on specialist independent tax advice.
51
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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.
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 is 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 profit or loss, 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, 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.
Leases
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The
Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the
lease payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits from
the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid
at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be
readily determined, the lessee uses its incremental borrowing rate.
The lease liability comprises monthly fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable, presented as a separate line in the statements of financial position.
52
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The lease liability is subsequently measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by reducing the carrying amount to reflect
the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related
right-of-use asset) whenever:
•
•
The lease term has changed in which case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate.
A lease contract is modified and the lease modification is not accounted for as a separate lease,
in which case the lease liability is remeasured based on the lease term of the modified lease
by discounting the revised lease payments using a revised discount rate at the effective date
of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day, less any lease incentives received and any
initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore
the site on which it is located or restore the underlying asset to the condition required by the terms
and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless
those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the statements of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the accounting policies on ‘Impairment of tangible assets’.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead
account for any lease and associated non-lease components as a single arrangement. The Group has
not used this practical expedient.
The Group as lessor
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the
terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the
contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two
separate contracts. The sublease is classified as a finance or operating lease by reference to the
right-of-use asset arising from the head lease.
53
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Rental income from operating leases is recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised on a straight-line basis over the lease
term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the
Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as
to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of
the leases.
When a contract includes lease and non-lease components, the Group applies IFRS 15 to allocate
the consideration under the contract to each component.
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 profit or loss, in which case, the
increase is credited to profit or loss 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 profit or loss
to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous
revaluation of that asset.
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.
54
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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.
Freehold land and land improvement with indefinite useful lives are not depreciated.
Depreciation on revalued buildings is recognised in profit or loss. On the subsequent sale or
retirement of revalued assets, their remaining revaluation surplus recorded in the revaluation reserve
is transferred directly to retained earnings.
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
Depreciation on stand-by equipment and major spare parts begins when it is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
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 profit or loss.
55
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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. The quarry stripping costs are
included in “Property, Plant and Equipment”.
(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 tangible assets
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 profit or loss 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).
56
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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 profit or loss 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.
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 the end of each reporting period, 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%
100.0%
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 end of the reporting period is recognised as liability.
Costs directly attributable to equity transactions are accounted for as a deduction, net of tax, from
equity.
57
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
Contingent Liabilities
Contingent liabilities are not recognised in these financial statements, except for liabilities on which
there are probable outflows of resources, needed for settlement of the liabilities and which can be
measured reliably.
Financial Instruments
Financial assets and financial liabilities are recognised in the statements of financial position when
the Group becomes a party to the contractual provisions of the financial instrument.
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 profit or loss.
All regular way purchases or sales of financial assets are recognised or derecognised on a trade
date basis. Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their entirely at either amortised cost or
fair value, depending on the classification of the financial assets.
(i) Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised
cost.
(a)
(b)
the financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.
All the Group’s and the Company’s financial assets meet the definition of financial assets at
amortised cost.
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset
and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) excluding expected credit losses
(“ECL”), through the expected life of the debt instrument, or, where appropriate, a shorter
period, to the gross carrying amount of the debt instrument on initial recognition.
58
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The amortised cost of a financial asset is the amount at which the financial asset is measured
at initial recognition minus the principal repayments, plus the cumulative amortisation using
the effective interest method of any difference between that initial amount and the maturity
amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the
amortised cost of a financial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Financial assets of the Group and of the Company measured
subsequently at amortised cost are short-term deposits, cash and bank balances, trade
receivables, other receivables (excluding value added taxes), refundable deposits and inter-
company indebtedness.
(ii)
Impairment of financial assets
The Group and the Company recognise a loss allowance for expected credit losses on
investments in debt instruments that are measured at amortised cost. The amount of expected
credit losses is updated at the end of each reporting period to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group and the Company always recognise lifetime ECL for trade receivables. The expected
credit losses on these financial assets are estimated using a provision matrix based on the
Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast
direction of conditions at the end of the reporting period, including time value of money where
appropriate.
For all other financial instruments such as other receivables and amount owing by subsidiary
companies, the Group and the Company recognise lifetime ECL when there has been a
significant increase in credit risk since initial recognition. If, on the other hand, the credit risk
on the financial instrument has not increased significantly since initial recognition, the Group
measures the loss allowance for that financial instrument at an amount equal to 12 months ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default
events over the expected life of a financial instrument. In contrast, 12 months ECL represents
the portion of lifetime ECL that is expected to result from default events on a financial instrument
that are possible within 12 months after the end of the reporting period.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since
initial recognition, the Group and the Company compare the risk of a default occurring on the
financial instrument as of the end of the reporting period with the risk of a default occurring on
the financial instrument as of the date of initial recognition. In making this assessment, the Group
considers both quantitative and qualitative information that is reasonable and supportable,
including overdue status, collection history and forward looking macro-economic factors.
The Group assumes that the credit risk on a financial instrument has not increased significantly
since initial recognition if the financial instrument is determined to have low credit risk at the
end of the reporting period. A financial instrument is determined to have low credit risk if i)
the financial instrument has a low risk of default, ii) the borrower has a strong capacity to meet
59
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 its contractual cash flow obligations in the near term and iii) adverse changes in economic and
business conditions in the longer term may, but will not necessarily, reduce the ability of the
borrower to fulfil its contractual cash flow obligations. The Group considers a financial asset to
have low credit risk when it has an internal or external credit rating of ‘investment grade’ as per
globally understood definition.
The Group regularly monitors the effectiveness of the criteria used to identify whether there
has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant increase in credit risk before the amount becomes
past due.
Definition of default
The Group considers the following as constituting an event of default for internal credit risk
management purposes as historical experience indicates that financial assets that meet either
of the following criteria are generally not recoverable:
(a) when there is a breach of financial covenants by the debtor; or
(b)
information developed internally or obtained from external sources indicates that the
debtor is unlikely to pay its creditors, including the Group, in full (without taking into
account any collateral held by the Group).
Credit‑impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial asset have occurred. Evidence that a financial
asset is credit-impaired includes observable data about the following events:
(a)
significant financial difficulty of the issuer or the borrower;
(b)
a breach of contract, such as a default or past due event (see (ii) above);
(c)
the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s
financial difficulty, having granted to the borrower a concession(s) that the lender(s) would
not otherwise consider;
(d)
it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
(e)
the disappearance of an active market for that financial asset because of financial difficulties.
Write off policy
The Group writes off a financial asset when there is information indicating that the debtor is in
severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has
been placed under liquidation or has entered into bankruptcy proceedings. Financial assets
written off may still be subject to enforcement activities under the Group’s recovery procedures,
taking into account legal advice where appropriate. Any recoveries made are recognised in
profit or loss.
60
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given
default and the exposure at default. The assessment of the probability of default and loss given
default is based on historical data adjusted by forward-looking information. Exposure at default
is represented by the assets’ gross carrying amount at the end of the reporting period.
Expected credit loss is estimated as the difference between all contractual cash flows that are
due to the Group in accordance with the contract and all the cash flows that the Group expects
to receive, discounted at the original effective interest rate.
Where lifetime ECL is measured on a collective basis to cater for cases where evidence of
significant increases in credit risk at the individual instrument level may not yet be available,
the financial instruments are grouped on 1) Nature of financial instruments; 2) Past-due status;
3) Nature, size and industry of debtors; and 4) External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics. If the Group has measured the loss allowance
for a financial instrument at an amount equal to lifetime ECL in the previous reporting period,
but determines at the end of the current reporting period that the conditions for lifetime ECL
are no longer met, the Group measures the loss allowance at an amount equal to 12 months
ECL at the end of the current reporting period.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
with a corresponding adjustment to their carrying amount through a loss allowance account.
(iii) Financial liabilities at amortised costs
Financial liabilities that are not 1) contingent consideration of an acquirer in a business
combination, 2) held-for trading, or 3) designated as at FVTPL, are subsequently measured at
amortised cost using the effective interest method.
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 profit or loss 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.
Cash equivalents are short-term, highly liquid investments with maturities of three months or less
from the date of acquisition and are readily convertible to cash with insignificant risks of changes in
value.
61
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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
judgement and 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.
(a)
Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the
following judgement, apart from those involving estimations, which has the most significant
effect on the amounts recognised in the financial statements:
Lease term in contracts with an option to extend
The Group defines a lease term as a non-cancellable lease period, together with periods for
which there is an option to extend if the reasonably certain to exercise that option, or periods
for which there is an option to determine the lease if the lessee is reasonably certain not to
exercise that option.
Under certain lease agreements, the Group has an option to extend the lease for additional
period. The Group uses judgement to determine whether there it is reasonable certain that it
will exercise this option to extend or not. At the same time, it takes into account all relevant
factors that give rise to an economic incentive or cost to exercise the option to extend the
lease.
The Group has taken into account the periods for which an extension options is available when
determining the lease term for office or other premises to accommodate communications
equipment in view of the significance of these assets for operating activities. These leases
are short-term, subject to early termination (from one to six months), and the ability to easily
replace these assets will not have a significant impact on the production process. Most of the
contracts are concluded for one year without the right to prolongation.
(b)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at
the reporting date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
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 2020.
Valuation techniques used by the professional valuers are subjective and involved 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.
62
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 As of 31 December 2021, the directors consider that the carrying amount of the land and
buildings is reflective of the fair values of these assets.
Useful lives of property, plant and equipment
As described in Note 3, the Group reviews the estimated useful lives of property, plant and
equipment at the end of each reporting period. Estimation of the asset’s useful life depends
on factors such as economic exploitation, repair and maintenance programs, technological
improvements and other business conditions. Management’s estimation of the useful lives of
property, plant and equipment reflects the relevant information available at the date of the
financial statements.
Taxes receivable, other than income tax
Current taxes receivable, other than income tax represents Value Added Tax (“VAT”)
receivable. Using the management estimate the Group determines whether VAT receivable
is recoverable at least on an annual basis.
On the basis of the model for determining future revenues and expenses expected to be
received and accrued by the Group which are subject to VAT, the Group determined that the
VAT will be fully offset against VAT charges to be paid by decreasing the cost of raw materials
purchased from a subsidiary (Karcement JSC) and maintaining the same level of sales and
production.
Loss Allowance for Doubtful Receivables, Advances paid to Third Parties and Provision for
Inventories
The Group makes loss allowance for doubtful receivables and advances paid to third parties.
Significant judgement is used to estimate doubtful receivables. Loss allowance for doubtful
receivables is established based on an expected credit loss model. The Group accounts
for expected credit losses and changes in those expected credit losses at the end of each
reporting period to reflect changes in credit risk since initial recognition. The primary factors
that the Group considers whether a receivable is impaired is its overdue status, collection
history and forward looking macro-economic factors. As of 31 December 2021, loss allowance
for doubtful trade receivables amounted to USD1,233,713 (2020: USD1,340,469) (Note 15)
and on advances paid to third parties amounted to USD127,706 (2020: USD119,054) (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 based upon
past experience and the level of write-offs in previous years. As of 31 December 2021,
provision for obsolete and slow-moving inventories amounted to USD2,014,636 (2020:
USD1,921,024) (Note 14).
Provision for site restoration
The Company’s subsidiary (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 on 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% (2020: 13%) is used as it reflects current market assessment of the time
value of money and the risk specific to site restoration obligation.
63
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 4.
REVENUE
The Group derives its revenue from the sale of cement at a point in time. Transmission of electricity
is determined to be a single performance obligation satisfied over time and represents a promise
to transfer to the customer a series of distinct goods that are substantially the same and have the
same pattern of transfer to the customer. The Group primarily operates in one geographic location
(segment) and as such, no segmental information is presented.
The Group
The Company
Sale of cement
84,567,571
74,762,650
Transmission and distribution
of electricity
Dividend income
Net interest income
11,168
11,647
-
-
-
-
2021
USD
2020
USD
2021
USD
2020
USD
-
-
9,441,251
-
-
-
1,469,264
1,355,075
Total
84,578,739
74,774,297
1,469,264
10,796,326
The Group applied the practical expedient under IFRS 15 not to disclose the aggregate amount of
the transaction price allocated to performance obligations that are unsatisfied (or partially satisfied)
as of the end of the reporting period as all unsatisfied contracts with customers are expected to be
fulfilled within one year.
5.
FINANCE COSTS
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Interest expenses on:
- Bank loans
- Lease liabilities
Unwinding of discount on
provision for site
restoration
Others
Total
395,338
376,590
398,540
631,442
9,826
309,195
8,922
210,147
1,090,949
1,249,051
-
-
-
-
-
-
-
-
-
-
Other finance charges comprise mainly bank and other commitment charges incidental to secure
loan facilities from financial institutions as disclosed in Note 20.
64
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 6.
NET FOREIGN EXCHANGE LOSS
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Net foreign exchange loss
(227,951)
(808,977)
(825)
(3,981)
7.
PROFIT BEFORE INCOME TAX
Profit before income tax includes the following income/(expenses):
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Reversal of provision for
obsolete inventories
Amortisation of deferred
income
Rental income
Bad debts recovered
Allowance for advances
paid to third parties
Credit loss allowance for
doubtful receivables
Depreciation of property,
plant and equipment
-
170,345
105,947
543,687
769,654
108,310
691,896
-
(11,676)
(69,152)
(594,901)
(813,812)
(7,039,116)
(6,873,876)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Employee benefit expenses
(5,683,931)
(4,874,390)
(15,270)
(14,307)
Depreciation of right-of-use
assets
(1,716,748)
(2,116,952)
Loss on disposal of
property, plant and
equipment
Provision for obsolete
inventories
-
(26,546)
(142,387)
(100,475)
-
-
-
-
-
-
Employee benefit expenses include contributions paid by the Group and the Company to defined
contribution plans amounting to USD468,596 (2020: USD471,933) and USD3,175 (2020: USD2,986)
respectively.
65
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 8.
INCOME TAX EXPENSE
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Income tax - current year
- current year
- prior year
4,430,049
1,771,721
-
27,291
Deferred tax (Note 22)
(77,867)
184,715
Total
4,352,182
1,983,727
-
-
-
-
-
-
-
-
Under the Labuan Business Activity Tax Act, 1990, no tax is chargeable on the Company’s Labuan
non-trading activities for the current and prior years of assessment. Effective 1 January 2019, a
Labuan company carrying on Labuan trading activities shall be charged at a tax rate of 3% on the
chargeable profits of the Labuan company for a particular year of assessment.
The profits earned by the subsidiary companies incorporated in the Republic of Kazakhstan are
subject to the prevailing statutory tax rate of 20% (2020: 20%), and Malaysian and Netherland
subsidiaries are subject to statutory tax rates of 24% (2020: 24%) and 25% (2020: 25%) respectively.
66
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 A reconciliation of income tax expense applicable to profit before income tax at the applicable
statutory income tax rate to income tax expense at the effective income tax rate of the Group and of
the Company is as follows:
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Profit before income tax
21,417,549
13,101,186
1,257,172
10,563,915
Tax expense calculated at
domestic tax rates
applicable to the
respective jurisdictions
Tax effects of expenses not
deductible for tax purposes
Utilisation of deferred
tax assets previously not
recognised
Effect of unused tax losses
not recognised as deferred
tax assets
3,866,089
2,517,693
444,423
303,160
-
(899,336)
41,670
34,919
Income tax - prior year
-
27,291
Income tax expense
4,352,182
1,983,727
-
-
-
-
-
-
-
-
-
-
-
-
The tax expense calculated at domestic tax rates represents a blend of the tax rates of the jurisdictions
in which taxable profits have arisen.
67
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 9.
EARNINGS PER SHARE
Basic and diluted
The Group
2021
USD
2020
USD
Profit attributable to ordinary shareholders
17,065,367
11,117,459
2021
2020
Number of ordinary shares in issue at beginning
and at end of year
219,000,000
219,000,000
Weighted average number of ordinary shares
in issue
Earnings per share, basic and diluted (cents)
219,000,000
219,000,000
2021
7.8
2020
5.1
The basic earnings per share is calculated by dividing the profit 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 2021 and 2020.
68
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 l
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021Annual Report 2021Steppe Cement Ltd.
There was no valuation carried out in 2021. Land and buildings were revalued on 31 August 2020
by an independent professional valuer based on market approach for freehold land and depreciated
replacement cost for buildings respectively. 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.
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 inputs were used in preparing the discounted cash flow:
•
•
•
the forecast period was from September 2020 to December 2025;
derivation of a terminal value using a constant growth model; and
discount rate of 15.00% was applied.
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 USD7,709,267 as of
31 December 2021 (2020: USD7,076,092). 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.
At each year end the directors:
•
•
verifies all major inputs to the independent valuation reports;
assess property valuation movements compared to the prior year valuation reports.
The directors are of the opinion that the carrying amounts of the land and buildings as of 31 December
2021 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
2021
USD
187,556
347,260
2020
USD
192,442
490,786
During the current financial year, management of the subsidiary companies performed an impairment
test on the cement manufacturing facilities and right-of-use assets collectively and concluded that no
further impairment losses were required to be recognised as their recoverable amounts exceed their
net book values as of the end of the reporting period.
As of 31 December 2021, property, plant and equipment of a subsidiary companies with a cost
and net book value of USD6,696,409 and USD3,646,621 (2020: USD6,060,992 and USD3,162,045)
respectively are pledged as collateral for the government-subsidised loan (Note 20).
As of 31 December 2021, the cost of property, plant and equipment that is fully depreciated amounted
to USD2,302,476 (2020: USD1,910,273).
71
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 11.
RIGHT-OF-USE ASSETS
Cost
At 1 January 2020
Exchange differences
At 31 December 2020
Exchange differences
At 31 December 2021
Accumulated depreciation
At 1 January 2020
Charge for the year
Exchange differences
At 31 December 2020
Charge for the year
Exchange differences
The Group
Railway wagons
Buildings
USD
USD
8,400,703
(789,333)
7,611,370
(193,250)
7,418,120
(2,288,640)
(2,110,476)
251,917
(4,147,199)
(1,709,838)
127,645
35,112
(3,299)
31,813
(808)
31,005
(7,023)
(6,476)
774
(12,725)
(6,910)
412
Total
USD
8,435,815
(792,632)
7,643,183
(194,058)
7,449,125
(2,295,663)
(2,116,952)
252,691
(4,159,924)
(1,716,748)
128,057
At 31 December 2021
(5,729,392)
(19,223)
(5,748,615)
Carrying amount
At 31 December 2020
3,464,171
19,088
3,483,259
At 31 December 2021
1,688,728
11,782
1,700,510
Amount recognised in profit or loss:
Interest expense on lease liabilities
Expense relating to short-term leases
Income from sub-leasing of right-of-use assets
The Group
2021
USD
376,590
141,528
543,687
2020
USD
631,442
146,246
691,895
Total cash outflow for leases
1,779,793
2,100,583
The Group relies on railway wagons for delivery of finished goods to customers. The Group and
the Company did not enter into any low value asset leases or variable lease payment arrangements
during the current financial year. The lease terms, including extensions, are 5 years for buildings and
2 to 4 years for railway wagons respectively.
72
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 12.
INVESTMENT IN SUBSIDIARY COMPANIES
The Company
2021
USD
2020
USD
Unquoted shares, at cost
Net investment in a subsidiary company
40,199,600
40,199,600
-
94,920
Less: Accumulated impairment loss
40,199,600
(4,000,001)
40,294,520
(4,000,001)
Net
36,199,599
36,294,519
Loan that is part of net investment represents amount receivable from a subsidiary which is non-trade,
unsecured and is interest-free. The settlement of the amount is neither planned nor likely to occur in
the foreseeable future as it is the intention of the Company to treat this amount as a long-term source
of capital to the subsidiary company. As this amount is, in substance, a part of the Company’s net
investment in the subsidiary, it is stated at cost less accumulated impairment loss, if any. However,
during the year the subsidiary has made full repayment of the net investment made by the Company
of USD94,920 as well as advance to the Company of USD289,750 as disclosed in Note 27.
In year 2020, the Company subscribed for 10,423,167 additional ordinary shares in SCM at
USD2,957,192 by way of capitalisation of amount owing by the subsidiary company.
73
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The details of subsidiary companies are as follows:
Place of incorporation
(or registration) and
operation
Proportion
of ownership
interest and
voting power held
2021
2020
%
%
Principal activities
Malaysia
100
100
Malaysia
100
100
Investment
holding
Provision of
consultancy
services
Direct Subsidiary
Companies
Steppe Cement (M)
Sdn. Bhd. (“SCM”)
Mechanical & Electrical
Consulting Services Ltd.
(“MECS Ltd”)
Indirect Subsidiary
Companies
Held through SCM:
Steppe Cement Holdings
B.V. (“SCH BV”) *
Netherlands
100
100
Investment
holding
Indirect Subsidiary
Companies
Held through SCH BV:
Central Asia Cement JSC
(“CAC JSC”)
Republic of Kazakhstan
100
100
Karcement JSC
Republic of Kazakhstan
100
100
Central Asia Services LLP
(“CAS LLP”)*
Republic of Kazakhstan
100
100
Production and
sale of cement
Production and
sale of clinker
Transmission and
distribution of
electricity
*
The financial statements of this subsidiary company was not required to be audited.
74
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 13. OTHER ASSETS
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
VAT recoverable -
non-current
VAT recoverable - current
Site restoration fund
Others
Less: non-current portion
of other assets
Current portion of
other assets
-
1,760,129
1,694,707
155,132
563,794
421,571
140,527
304,946
2,413,633
2,627,173
(155,132)
(1,900,656)
2,258,501
726,517
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 (Karcement
JSC) in relation to the maintenance of a production line. Refundable customs duties represent
customs duties levied on the import of certain property, plant and equipment of the Group.
Site restoration costs
A subsidiary company entered into a Subsurface Use Contract for mining of limestone and loam in
Karaganda, Kazakhstan and is obliged to contribute 1% out of the total expenditure incurred on
extraction of limestone and loam from the quarry annually to the site restoration fund.
In accordance with the Law on Land of the Republic of Kazakhstan and resource usage and
Environmental rehabilitations, the subsidiary company will be obliged to provide additional resources
in the event the site restoration fund is insufficient to cover actual site restoration and abandonment
costs in the future.
75
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 14.
INVENTORIES
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Finished goods
Work-in-progress
Spare parts
Raw materials
Packing materials
Construction materials
Goods held for resale
Others
Total
2,703,439
2,725,988
7,016,904
1,476,806
636,875
6,215
37,573
3,130,122
1,669,353
5,025,089
2,248,630
648,128
43,983
38,551
3,434,377
1,484,725
18,038,177
14,288,581
Less: Provision for
obsolete inventories
(2,014,636)
(1,921,024)
Net
16,023,541
12,367,557
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The cost of inventories of the Group recognised as an expense during the financial year was
USD44,834,182 (2020: USD42,439,633).
The movements in the provision for obsolete inventories are as follows:
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
At beginning of year
(1,921,024)
(2,197,359)
Exchange differences
Provision for obsolete
inventories
Reversal of provision for
obsolete inventories
48,775
206,465
(142,387)
(100,475)
-
170,345
At end of year
(2,014,636)
(1,921,024)
-
-
-
-
-
-
-
-
-
-
As of 31 December 2021, inventories of USD4,297,227 (2020: USD4,729,702) were pledged to
secure the Halyk Bank JSC working capital facilities (Note 20).
76
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
15.
TRADE AND OTHER RECEIVABLES
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Trade receivables
2,392,267
2,849,499
Less: Loss allowances
(1,233,713)
(1,340,469)
Net
1,158,554
1,509,030
Other receivables:
Receivables from
employees
Others
Dividend receivable
Interest receivable
172,078
421,088
-
-
86,055
315,754
-
-
-
-
-
-
-
-
1,724,364
-
-
-
-
-
6,610,895
165,100
Total
1,751,720
1,910,839
1,724,364
6,775,995
The Group 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 secured
against bank guarantee or other credit enhancements.
Movement in the credit loss allowances for trade receivables is as follows:
The Group
The Company
2021
USD
At beginning of year
(1,340,469)
Exchange differences
Add: Impairment losses
Less: Write-offs
34,034
(594,901)
667,623
2020
USD
(626,053)
52,573
(813,812)
46,823
At end of year
(1,233,713)
(1,340,469)
2021
USD
2020
USD
-
-
-
-
-
-
-
-
-
-
77
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The Group measures the loss allowance for trade accounts receivable at an amount equal to lifetime
ECL. The expected credit losses on trade accounts receivable are collectively assessed and estimated
using the following provision matrix by reference to past default experience of the debtors and an
analysis of the debtors’ current financial position, adjusted for factors that are specific to the debtors,
general economic conditions of the industry in which the debtors operate and an assessment of both
the current as well as the forecast direction of conditions at the end of the reporting period:
Expected credit
loss rate
Gross carrying amount
at default
The Group
Days past due
2021
Not past due
1-90 days
91-180 days
181-270 days
271-360 days
1-2 years
>2 years
2020
Not past due
<180 days
181-270 days
271-360 days
1-2 years
>2 years
USD
751,507
110,974
173,246
65,138
13,550
219,920
1,057,932
Lifetime ECL
USD
-
5,549
13,860
14,330
5,691
136,351
1,057,932
2,392,267
1,233,713
427,232
390,913
166,233
459,200
417,171
988,750
11,834
11,728
16,624
91,840
266,989
941,454
2,849,499
1,340,469
0%
5%
8%
22%
42%
62%
100%
3%
3%
10%
20%
64%
100%
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 at the end of the reporting period. There has been no change in the
estimation techniques or significant assumptions made during the current reporting period. None of
the trade receivables that have been written off is subject to enforcement activities.
There were staff loan and advances amounting to USD28,082 (2020: USD29,279) included in other
receivables.
78
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 16.
ADVANCES AND PREPAID EXPENSES
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Advances paid to third
parties
Less: Provision on
advances paid to third
parties
5,029,506
2,229,657
(127,706)
(119,054)
Net advances paid to third
parties
4,901,800
2,110,603
-
-
-
-
-
-
Prepaid expenses
332,094
263,491
4,971
5,848
Total
5,233,894
2,374,094
4,971
5,848
Advances are mainly advances for materials and services.
Movement of allowance for advances paid to third parties is as follows:
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
At beginning of year
Exchange differences
Add: Allowance for
advances paid
to third parties
Less: Write-offs
(119,054)
3,024
(334,454)
31,423
(11,676)
-
(69,152)
253,129
At end of year
(127,706)
(119,054)
-
-
-
-
-
-
-
-
-
-
79
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
17.
CASH AND CASH EQUIVALENTS
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Cash in hand and at banks
1,142,923
5,984,116
614,225
1,352,950
Short-term deposits
8,993,099
2,229,564
-
-
Total
10,136,022
8,213,680
614,225
1,352,950
As of 31 December 2021, the Group had short-term deposits on demand in Halyk Bank JSC and
Altyn Bank JSC at the interest rate of 7% and 8% per annum respectively.
18.
SHARE CAPITAL
The Group and the
Company
2021
USD
2020
USD
Issued and fully paid:
219,000,000 ordinary shares of no par value each:
Year-end balance
73,760,924
73,760,924
80
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 19.
RESERVES
Revaluation reserve
Revaluation reserve represents the reserve arising from the revaluation of land and buildings of
subsidiaries (CAC JSC, Karcement JSC and CAS LLP) 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.
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. However,
in the tabling of Budget 2022, the government had announced that foreign source income will be
taxed from 1 January 2022. Subject to Inland Revenue Board criteria and guidelines, income tax
exemption on dividends will be given to 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.
Dividends paid
In 2020, the Company declared a first and final dividend of GBP0.03 per ordinary share of no par
value each amounting to GBP6,570,000 (USD8,678,970) in respect of year ended 31 December
2019. The payment was made on 20 July 2020.
In 2020, the Company also declared an interim dividend of GBP0.01 amounting to GBP2,190,000
(USD2,830,356) in respect of year ended 31 December 2020. The payment was made on 5 November
2020.
In 2021, the Company declared a final dividend of GBP0.025 per ordinary share of no par value each
amounting to GBP5,475,000 (USD7,494,400) in respect of the year ended 31 December 2020. The
payment was made on 20 July 2021.
81
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
20.
BORROWINGS
Secured - at amortised cost
Bank loans
Bank loans:
Current
Non-current
Details of bank loans are as follows:
The Group
2021
USD
2020
USD
5,566,184
6,797,349
3,614,801
1,941,383
4,429,053
2,368,296
5,566,184
6,797,349
Currency
Maturity month
Interest
rate
The Group
2021
USD
2020
USD
KZT
KZT
KZT
August 2022
6% p.a.
145,296
448,551
June 2025
6% p.a.
305,702
390,554
September to
November 2025
6% p.a.
747,024
1,048,718
KZT
December 2027
6% p.a.
1,912,062
1,578,795
KZT
December 2027
6% p.a.
127,850
-
KZT
KZT
KZT
April 2021
6% p.a.
-
1,190,588
June 2022
6% p.a.
2,317,370
-
June 2021
12% p.a.
-
2,139,241
880
902
5,556,184
6,797,349
Halyk Bank JSC
for capital
expenditure
Halyk Bank JSC
for working capital
Altyn Bank JSC
for working capital
Accrued interest
Total outstanding
82
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
Halyk Bank JSC capital expenditure facilities
On 17 July 2017, the subsidiary (CAC JSC) signed a loan agreement with Halyk Bank JSC on terms
subsidised under government programs. The loan of KZT580 million (USD1,500,000) carries a
subsidised fixed interest rate of 6% per annum. The loan is used for capital expenditure with maturity
period of 5 years and secured against property, plant and equipment with a net book value of
USD3,646,621 (2020: USD3,162,045) (Note 10). No further amounts are available for drawdown from
this facility.
On 29 December 2020, the subsidiary (CAC JSC) entered into a long-term facility agreement with
Halyk Bank JSC under the government program for KZT809 million (USD1,923,000) to acquire 70
additional railway wagons for own use. The facility is repayable on 28 December 2027 and bears
an interest rate of 6% per annum. As of 31 December 2021, no further amounts are available for
drawndown from this facility as the remaining facility of KZT423 million which brought down from
year 2020 has been fully drawn in year 2021 as mentioned in the below.
In 2021, the subsidiaries (CAC JSC and Karcement JSC) concluded long-term agreements under
the remaining government programs with Halyk Bank JSC for KZT346 million (USD 0.8 million) and
KZT77 million (USD0.2 million) respectively at 6% per annum to purchase wagons and front wheel
loaders with a maturity date on 28 December 2027.
The government-subsidised loans are initially recognised at fair value at interest rate of 14% per
annum, and subsequently carried at amortised cost (Note 23).
Halyk Bank JSC working capital facilities
During the year, the subsidiaries (CAC JSC and Karcement JSC) entered into short-term facility
agreements with Halyk Bank JSC for working capital requirements of KZT0.6 billion (USD1.3 million)
and KZT 0.4 billion (USD1.0 million) respectively under the government programs bearing an interest
rate of 6% per annum. The short-term borrowings are repayable in June 2022 and are secured
against inventories of USD4,297,227 (2020: USD4,729,702) (Note 14).
As of 31 December 2021, all working capital facilities of KZT2 billion (2020: KZT2.5 billion) with Halyk
Bank JSC are available for drawdown which is equivalent to USD4,633,000 (2020: USD5,942,000).
Altyn Bank JSC working capital facility
The KZT900 million (USD2.1 million) credit line facility with Altyn Bank JSC for working capital
financing is available for drawdown up to KZT900 million at prevailing market interest rate.
83
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 21.
LEASE LIABILITIES
Operating leases analysed as:
Non-current
Current
The Group
2021
USD
2020
USD
8,571
2,017,879
2,076,668
1,830,755
Balance as of 31 December
2,026,450
3,907,423
The following table shows the maturity profile of the undiscounted operating lease payments and
the effects of discounting on the lease liabilities at 31 December 2021:
Maturity analysis:
Year 1
Year 2
Year 3
Less: Future finance charges
Balance as of 1 January
Payment of lease liabilities
Finance costs (Note 5)
Exchange differences
2021
USD
2,156,391
9,174
-
2,165,565
(139,115)
The Group
2020
USD
2,211,712
2,211,712
8,557
4,431,981
(524,558)
2,026,450
3,907,423
2021
USD
3,907,423
(2,181,952)
376,590
(75,611)
The Group
2020
USD
6,497,515
(2,646,232)
631,442
(575,302)
Balance as of 31 December
2,026,450
3,907,423
The incremental borrowing rate was 12.3%. All leases are on a fixed repayment basis and no
arrangements have been entered for contingent rental payments.
84
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
22. DEFERRED TAXES
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
At beginning of year
(4,559,927)
(4,651,541)
Exchange differences
163,408
466,400
Recognised in profit or loss
(Note 8)
Recognised in other
comprehensive income
77,867
(184,715)
-
(190,071)
At end of year
(4,318,652)
(4,559,927)
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
2021
Temporary
differences:
Property, plant and
equipment
(5,184,229)
Inventories
Trade receivables
Accrued unused
leaves
Payables
Others
384,205
258,366
23,522
12,419
(54,210)
131,106
(10,135)
(6,475)
1,594
(2,526)
49,844
39,763
28,916
(6,544)
2,678
(1,136)
14,190
Total
(4,559,927)
163,408
77,867
-
-
-
-
-
-
-
(5,013,360)
402,986
245,347
27,794
8,757
9,824
(4,318,652)
85
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Opening
balance
Exchange
rate
differences
Recognised
in profit or
loss
Recognised
in other
comprehensive
income
Closing
balance
USD
USD
USD
USD
USD
2020
Temporary
differences:
Property, plant
and
equipment
Inventories
Trade
receivables
Accrued
unused
leaves
Tax losses
Payables
Others
(5,995,170)
438,798
555,522
(40,992)
445,490
(13,601)
125,211
(14,342)
147,497
16,400
763,746
35,346
(35,872)
(1,696)
8,818
(59,455)
(704,291)
(2,973)
30,336
(19,954)
(48,674)
(190,071)
(5,184,229)
-
-
-
-
-
-
384,205
258,366
23,522
-
12,419
(54,210)
Total
(4,651,541)
466,400
(184,715)
(190,071)
(4,559,927)
The tax losses for which no deferred tax assets have been recognised as it is not probable that
future taxable profits will be available against which the tax losses can be utilised are as follows:
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Tax losses for which no
deferred tax assets have
been recognised
1,398,350
1,190,000
-
-
The unutilised tax losses of USD1,398,350 (2020: USD1,190,000) has been imposed with a time
limit of utilisation, which will be disregarded in the year of assessment 2026 to 2031 (2020: 2026 to
2030).
86
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 23. DEFERRED INCOME
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Deferred income
1,691,818
1,598,852
Less: Amount due within
12 months
(103,720)
(106,420)
Non-current
1,588,098
1,492,432
Movement of deferred income are as follows:
-
-
-
-
-
-
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
At beginning of year
1,598,852
1,502,755
Exchange differences
Additions
(40,594)
239,507
Recognised in profit or loss
(105,947)
(145,419)
349,826
(108,310)
At end of year
1,691,818
1,598,852
-
-
-
-
-
-
-
-
-
-
Deferred income represents government grant in the form of interest rate lower than market interest
rates on government-subsidised loan for capital expenditure from Halyk Bank 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 profit or loss as other
income over the useful lives of the related assets.
In 2021 and 2020, the subsidiaries (CAC JSC and Karcement JSC) concluded long-term agreements
under the remaining government programs with Halyk Bank JSC (Note 20). The difference at fair
value using 14% amounted USD239,507 (2020: USD349,826) was recognised as deferred income in
the statement of financial position.
As of 31 December 2021, the related assets in the amount of USD796,391 were put into use (2020:
USD817,138). During financial year, the Group recognised USD105,947 (2020: USD108,310) in profit
or loss as other income on a straight-line basis over the useful lives of these related assets.
87
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 24.
TRADE AND OTHER PAYABLES
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Trade payables
Other payables
Amount due to related parties
Others
Total
3,911,856
2,594,495
1,139,167
1,466,186
765
9,917
-
14,397
5,061,705
4,075,078
-
-
-
-
-
-
-
-
-
-
The credit period granted by creditors ranges from 1 to 30 days (2020: 1 to 30 days).
Other payables mainly arose from purchase of property, plant and equipment and spare parts.
25.
ACCRUED AND OTHER LIABILITIES
The Group
The Company
2021
USD
178,472
783,990
336,199
96,576
157,541
2020
USD
148,974
851,475
300,338
90,112
140,140
2021
USD
2020
USD
178,472
148,974
-
-
-
-
-
-
49,425
37,774
1,552,778
1,531,039
227,897
186,748
Accrued directors’ fees
Advances from customers
Accrued salaries
Accrued unused leave
Others
Total
88
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 26.
TAXES PAYABLE
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Corporate income tax
276,473
210,302
Other taxes:
VAT payable
Royalties
Emission taxes
Pension fund
Personal income tax
Social tax
Withholding tax
Others
213,571
195
67,026
32,606
32,279
13,522
115
3,549
227,399
52,345
108,488
25,787
31,677
12,080
30,845
6,355
Total
639,336
705,278
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
89
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 27.
RELATED PARTIES AND AMOUNT OWING TO A SUBSIDIARY COMPANY
Amount owing to a subsidiary company is unsecured, interest-free and repayable on demand.
Related parties include shareholders, directors, affiliates and entities under common ownership
(which the Group has the ability to exercise a significant influence).
Other related party includes an entity which is controlled by a director, in which a director of the
Group has ownership interests and exercises significant influence.
Receivables from/(payables to) related parties and other related parties, which arose mainly from
trade transactions and expenses paid on behalf, are unsecured, interest-free and are repayable on
demand.
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
are repayable on demand except for loan to a subsidiary company of USD30,110,000 (2020:
USD30,140,000) which bears interest at 8% per annum repayable by year 2033.
The transactions between a related party and the Group included in the statement of profit or loss
and the statement of financial position are as follows:
Other related party
Office rental
Other related party
Office rental
Purchase of services
2021
USD
2020
USD
9,295
5,469
Payable to related party
2021
USD
2020
USD
765
-
The following transactions and balances of the Company with subsidiary companies are included in
the statement of profit or loss and the statement of financial position of the Company:
90
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
Subsidiary companies
Nature of
transactions
2021
USD
2020
USD
Steppe Cement (M) Sdn. Bhd.
Dividend income
-
9,441,251
Karcement JSC
Interest income
1,469,264
1,355,075
MECS Ltd.
Interest income
assigned
740,000
730,000
Subsidiary companies
Nature of
transactions
Receivable from/(payable to)
subsidiary companies
2021
USD
2020
USD
Karcement JSC
Intercompany loans
30,110,000
30,140,000
Karcement JSC
Interest income
1,724,364
165,100
MECS Ltd.
Advances
19,536
9,712
Steppe Cement (M) Sdn. Bhd.
Advances
(289,750)
94,920
Total
31,564,150
30,409,732
91
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 Compensation of key management personnel
The remuneration of directors and other members of key management are as follows:
The Group
The Company
2021
USD
2020
USD
2021
USD
2020
USD
Short-term benefits
789,942
758,880
100,000
100,000
Short-term benefits include contributions paid by the Group and by the Company to defined
contribution plans amounting to USD22,848 (2020: USD26,642) and Nil (2020: Nil) respectively.
The directors’ remuneration in the Company is as follows:
Directors’ fees
Executive director:
Javier del Ser Perez
Non-executive directors:
Xavier Blutel
Rupert Wood
The Company
2021
USD
2020
USD
30,000
30,000
40,000
30,000
40,000
30,000
Total
100,000
100,000
Alternate directors’ allowance
Alternate directors:
Gan Chee Leong (Alternate to Javier del Ser Perez)
Charlie Tingey (Alternate to Rupert Wood)
500
500
500
500
Total
1,000
1,000
The alternate directors are paid for their attendance in board meetings to represent Javier del Ser
Perez and Rupert Wood respectively.
92
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 28.
FINANCIAL INSTRUMENTS
Categories of financial instruments
Financial assets
At amortised cost:
Trade and other receivables
Cash and cash equivalents
Financial liabilities
At amortised cost:
Trade and other payables
Accrued and other liabilities
Borrowings
Lease liabilities
Financial assets
At amortised cost:
Interest receivable
Dividend receivable
Loans and advances to subsidiary companies
Cash and cash equivalents
Financial liability
At amortised cost:
The Group
2021
USD
2020
USD
1,751,720
10,136,022
1,910,839
8,213,680
5,061,705
768,788
5,556,184
2,026,450
4,075,078
679,564
6,797,349
3,907,423
The Company
2021
USD
2020
USD
1,724,364
-
30,129,536
614,225
165,100
6,610,895
30,149,712
1,352,950
Accrued and other liabilities
Advance from a subsidiary company
227,897
289,750
186,748
-
93
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 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 cash (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.
94
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 :
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i
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021Annual Report 2021Steppe Cement Ltd.
The Company
2021
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
2020
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
GBP
EUR
MYR
Total
-
67
6,322
6,389
42,992
-
47,343
90,335
546
72
35
653
44,467
-
34,190
78,657
96
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The following table displays the Group’s and the Company’s sensitivity to a 20% increase and
decrease of the functional currency of each subsidiary company and the Company 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 financial liabilities of
the effect of a 20% increase in value of the functional currency of each subsidiary company and
the Company against the relevant foreign currencies respectively. The positive figure indicates an
increase in profit before tax for the reporting period. In the case of 20% decrease in value of the
functional currency of each subsidiary company and the Company against the relevant foreign
currencies, respectively, there would be an equal but opposite impact on the Group’s and the
Company’s profit before tax.
Impact on profit or loss and
equity
The Group
GBP
EUR
MYR
RUB
The Company
GBP
EUR
MYR
2021
8,249
103,082
11,504
11,760
8,598
(13)
8,204
2020
8,423
56,898
8,763
(377,446)
8,784
(14)
6,831
97
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
(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. As of 31 December
2021, the Group’s trade receivables from third parties are mostly represented by ten large
customers, representing 53% of trade accounts receivable for cement sales (2020: 72%). The
Group believes that credit risk is limited as both counterparties are reliable partners. The
financial assets are not secured by any collateral or credit enhancements.
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. The credit risk on liquid funds are limited because the
counterparties are banks with high credit-ratings assigned by international credit-rating
agencies.
At the end of the reporting period, there is no significant increase in credit risk in financial
assets since initial recognition. There are no significant changes in gross carrying amount of
trade receivables that contribute to changes in the loss allowance.
(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, actual cash flows, availability of short-
term funding and matches the maturity profiles of financial assets and financial liabilities to
determine suitable funding to meet any shortfall in cash requirements.
As of 31 December 2021, the subsidiaries (CAC JSC and Karcement JSC) working capital
facilities of USD6.7 million (2020: USD5.9 million) with Halyk Bank JSC and Altyn Bank JSC are
available for drawdown at the discretion of the directors. The Group expects to meet its other
obligations from operating cash flows and proceeds from maturing financial assets.
98
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021Annual Report 2021Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021Annual Report 2021Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021Annual Report 2021Steppe Cement Ltd.
(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 of 31 December 2021 and 2020, 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 cash flows due to interest rate risk.
Fair Values 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 values, based on current economic
conditions and specific risks attributable to the instrument. The fair values 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 values 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 values of cash and cash equivalents approximate their fair values due to the short
maturity of these financial instruments.
Trade and other receivables, trade and other payables and accrued and other liabilities
For financial assets and financial liabilities with maturity less than twelve months, the carrying values
approximate fair values due to the short maturity of these financial instruments.
Borrowings and lease liabilities
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.
The fair values of the lease liabilities are estimated by discounting expected future cash flows at the
Group’s incremental borrowing rate.
As of 31 December 2021 and 2020, the fair values of borrowings were not significantly different from
their carrying value.
29.
CAPITAL COMMITMENTS
The Group has outstanding amount of contractual commitments for the acquisition of property, plant
and equipment of USD7,599,836 as of 31 December 2021 (2020: USD2,172,435).
102
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021
30.
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.
31.
COMPARATIVE FIGURES
Certain comparative figures in the financial statements have been reclassified to conform with the
current year’s presentation.
Statement of financial
position
Note
As previously
stated
Reclassification
As reclassified
USD
USD
USD
Inventories
Advances and prepaid
expenses
Trade and other
receivables
Other assets-current
14
16
15
13
11,097,613
1,269,944
12,367,557
3,644,038
(1,269,944)
2,374,094
2,332,410
304,946
(421,571)
421,571
1,910,839
726,517
Statement of cash flow
As previously
stated
Reclassification
As reclassified
USD
USD
USD
Inventories
Advances, prepaid
expenses and other
assets
Trade and other
receivables
(2,528,062)
(1,289,305)
(3,817,367)
(390,332)
877,875
487,543
2,167,282
411,430
2,578,712
32.
SUBSEQUENT EVENTS
(a)
Subsidiaries in Kazakhstan
At the start of January 2022, Kazakhstan witnessed mass protests, which turned into social
unrest. On 5 January 2022, the President introduced a state of emergency across the country,
which was in place until 19 January 2022. During the mass protests internet access was
restricted across Kazakhstan, banking operations and transactions were suspended, stock
and commodity exchanges were closed, and flights were cancelled, resulting in businesses
being unable to function effectively.
103
Annual Report 2021NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 The situation in Kazakhstan stabilised and was under the control of the authorities by 15
January 2022. The government is focusing on addressing the political and socio-economic
situation.
In February 2022, Tenge depreciated significantly against major foreign currencies amid the
external geopolitical situation with the Russia-Ukraine war. In order to reduce the negative
impact of external factors on the Kazakhstan economy, the National Bank of the Republic of
Kazakhstan (“NBK”) raised the base rate from 10.25% to 13.5% per annum with a corridor
of +/- 1.0 p.p, and interventions on the currency market were performed to support Tenge
exchange rate against foreign currencies. However, there is uncertainty exists related to the
future development of the geopolitical risks and their impact on the economy of the Republic
of Kazakhstan.
These events did not have a material impact on the Company’s operating and financing
activities and its separate financial statements.
The Group is monitoring developments in the economic and political situation and taking
measures it considers necessary in order to support the sustainability and development of the
Group’s business for the foreseeable future. However, the consequences of these events and
related future changes may have a significant impact on the Group’s operations.
(b)
Subsidiary in Malaysia
With the economic substance regulations gazetted under the Labuan Business Activity Tax
(Requirements for Labuan Business Activity) Regulations 2018 [P.U.(A) 392/2018] and the
Labuan Business Activity Tax (Requirements for Labuan Business Activity) 2018 (Amendment)
Regulations 2020 [P.U.(A) 375/2020], the Group had on 2 May 2021 filed a judicial review in
respect of these economic substance regulations.
However, new economic substance regulations were issued on 22 November 2021 (P.U.(A)
423/2021) (“PU(A) 423”) which sought to impose substance requirements retrospectively
with effect from 1 January 2019. With the gazetted PU(A) 423, the Labuan Business Activity
Tax (Requirements for Labuan Business Activity) Regulations 2018 [P.U.(A) 392/2018] and the
Labuan Business Activity Tax (Requirements for Labuan Business Activity) 2018 (Amendment)
Regulations 2020 [P.U.(A) 375/2020] were revoked accordingly. On 18 February 2022, the
subsidiary company filed another judicial review application in the High Court of Sabah and
Sarawak in the Federal Territory of Labuan with Director General of Inland Revenue and the
Ministry of Finance named as respondents on this matter.
The hearing date of the Group’s application for judicial review on the merits was held on 10
February 2022, 7 March 2022 and to be continued on 13 June 2022.
Labuan entities that did not comply with substantial activity requirements in PU(A) 423 would
be taxed at the rate of 24%. The Directors of the Group are of the opinion that the subsidiary
company should be taxed under the Labuan Business Activity Tax Act, 1990 and not under
the Income Tax Act, 1967. The Directors of the Group also opined that there will be no tax
impact regardless of the outcome of the judicial review as the subsidiary company is a loss-
making entity.
104
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2021 STATEMENT BY A DIRECTOR
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 profit or loss, profit or loss and other comprehensive 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 2021 and of their financial performance and cash flows for the year ended on that
date.
Signed in accordance with a
resolution of the Directors,
______________________________
JAVIER DEL SER PEREZ
Labuan
105
Annual Report 2021 NOTICE OF THE 2022 AGM
NOTICE IS HEREBY GIVEN that the 2022 ANNUAL GENERAL MEETING of the Company will
be held online at the office of Steppe Cement Ltd, Suite 10.1, 10th Floor, West Wing, Rohas
Perkasa, 8 Jalan Perak, Kuala Lumpur, Malaysia on Wednesday, 13 July 2022 at 4.00 p.m. for
the purpose of considering and if thought fit, passing the following Resolutions:
1.
2.
ORDINARY RESOLUTIONS
ADOPTION OF AUDITED FINANCIAL STATEMENTS
RESOLUTION 1
To receive and adopt the audited financial statements for year
ended 31 December 2021.
RE-ELECTION OF DIRECTORS
RESOLUTION 2
To re-elect the following Directors who offered themselves for
re-election:
2.1 Xavier Blutel
2.2 Javier Del Ser Perez
2.3 Rupert Wood
3.
APPOINTMENT OF DIRECTOR
RESOLUTION 3
To appoint Wan Affan Wan Azmi as Director
(non-independent non-executive).
Wan Affan Wan Azmi’s profile is appended in the following
page.
BY ORDER OF THE BOARD
TMF Secretaries Limited
Corporate Secretary
Labuan F.T., Malaysia
106
Steppe Cement Ltd. 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.
Wan Affan Wan Azmi
Wan Affan Wan Azmi, 35, is currently the Chief Operating Officer (COO), Rohas-Euco Industries
Berhad. He joined Rohas-Euco Industries Berhad in 2013 as a Business Executive, initially in
Marketing and later directly involved in IT, Media and Communications. In 2019, he was assigned
as Assistant to the COO, then promoted to Deputy COO in January 2020 and subsequently as
COO in October 2020. He is currently running the day-to-day operations at both headquarters in
Kuala Lumpur as well as the manufacturing facilities in Bentong, Pahang in Malaysia
Wan Affan Wan Azmi is the son of Steppe Cement Ltd’s (Steppe Cement or Company) largest
shareholder, Wan Azmi Wan Hamzah, who currently holds 31% interest in Steppe Cement via
Halfmoon Bay Capital Limited, Mango Bay Enterprises Inc. and Alwaha Fund Limited.
Wan Affan Wan Azmi has under 20% direct beneficial interests in each of the above entities that
holds shares in the Company. He currently holds or has held the following directorship or partnership
in the last five years:
Current Directorship
None
Past Directorship
None
Wan Affan Wan Azmi has not been involved with any unspent convictions in relation to indictable
offences, bankruptcy, creditors voluntary arrangements, receiverships, compulsory liquidations,
creditors voluntary liquidations, administrations, public criticisms or other matters which require
disclosure pursuant to Schedule 2(g) of the AIM rules.
There are no other matters in relation to Wan Affan Wan Azmi that is required to be disclosed
pursuant to Schedule 2(g) of the AIM Rules for Companies.
107
Annual Report 2021
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
www.steppecement.com