Annual
Report
Plant Location In
2
2
Steppe Cement Ltd.
Steppe Cement Ltd. 04 Financial Highlights
05 Operational and Market Data
06 Financial Data
07 Corporate Information
08 Chairman’s Statement
12 CEO’s Statement
17 Board Of Directors
18 Senior Management Karcement JSC & CAC JSC
20 Chairman’s Statement on Governance
24 Corporate Governance
30 Nomination Committee Report
31 Remuneration Committee Report
32 Audit Committee Report
36 Financial Statements
109 Statement by a Director
110 Notice of Annual General Meeting
Annual Report 2022
3
3
Annual Report 2022Contents Financial Highlights
0
4
6
3
5
.
0
3
9
.
0
3
3
.
8
2
4
.
1
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
Revenue
(KZT Billion)
7
.
6
8
6
.
4
8
2
.
2
8
9
.
9
7
8
.
4
7
8
.
5
6
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
Revenue
(USD Million)
6
.
5
6
1
.
5
6
9
.
2
6
1
6
5
.
9
5
8
5
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
Shareholders
Funds
(USD Million)
5
.
1
3
9
.
0
3
2
.
4
2
9
.
3
2
4
.
1
2
6
.
1
1
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
EBITDA*
(USD Million)
*excluding foreign exchange gain/losses
arising on devaluation of the Tenge
4
9
.
7
1
1
.
7
1
.
1
1
1
7
9
.
1
9
.
2
1
.
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
PROFIT AFTER
TAX
(USD Million)
Steppe Cement Ltd. Operational and Market Data
21.0
18.1
45
43
13.3
14.9
15.8
10.9
39
39
38
33
2017
2018
2019
2020
2021
2022
2017
2018
2019
2020
2021
2022
Ex-factory price (KZT per tonne ‘000)
Ex-factory price (USD)
2
2
.
0
6
1
.
0
7
0
.
0
9
0
.
0
-
0
2
.
0
11.6
11.6
9.4
9.0
8.9
8.6
6
5
.
1
0
5
.
1
5
5
.
1
4
4
.
1
0
6
.
1
7
6
.
1
2017 2018 2019 2020 2021
2022
Sales volume (Million tonnes)
Export
Domestic
461
426
413
383
345
326
2017
2018
2019
2020
2021
2022
Market Size (Million tonnes)
90
90
87
87
87
86
2017
2018
2019
2020
2021
2022
Average exchange rates (USD/KZT)
2017
2018
2019
2020
2021
2022
Capacity utilisation (%)
5
Annual Report 2022 Financial Data
Data
2017
2018
2019
2020
2021
2022
Gross profit margin (%)
Profit after tax margin (%)
30
2
43
11
Net earnings per share (cents)
0.6
4
Return on shareholders funds (%)
NTA Per Share (cents per share)
2
27
15
28
42
12
4
15
29
43
15
5
19
26
47
20
8
26
30
43
21
8
27
30
Number of shares issued (million)
219
219
219
219
219
219
6
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
and
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
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,
Labuan, 87000
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 2022
7
7
Annual Report 2022 Chairman’s Statement
The price
and demand for
commodities, especially
oil, gas, and minerals, have
been the main beneficiaries of
the international tensions and
sanctions. With all its resources
and thanks to its geopolitical
position, Kazakhstan, although
not fully immune from
potential threats,
maintain this strong
advantages
The unannounced strategy consists of slowly reducing
the importance of bilateral trade with Russia and to
discourage the Russians from trying to dominate
this vast and rich territory. This, however, has been
counterbalanced in 2022 and 2023 by substantial
increases attributable to trading strategies in the
supply chain to Russia from Europe and Asia, aimed
at circumventing western sanctions. The Government
is officially committed to fighting such practices and
issued legislation and installed controls in 2023, but
full compliance is considered unlikely. Kazakhstan
also benefits by being a substitute to Russia, for
example by supplying coal to countries such as
Poland, Latvia, or Turkey.
In 2022, facilitated by the Eurasian Economic Union
and structurally unavoidable, Russian imports made
up about 30% of Kazakhstan’s total imports, down
from over 40% before the conflict, while exports
to Russia made up about 10% of the total Kazakh
exports. Kazakhstan mostly exports iron ore and
uranium to Russia while importing cars, semi-finished
goods, coal, and refined petroleum.
These reductions are mirrored by a strong increase
in trade with China: Kazakhstan is a vital - and
already congested - artery in the Belt and Road
Initiative. This land corridor between China and
the West provides an attractive alternative to the
ocean routes when tensions abound around Taiwan,
and other land roads, are closed due to the events
in Ukraine. Bilateral trade between Kazakhstan
and China in 2022 grew by 23.6% and reached a
staggering US$31.2 billion. One of the key aspects
of Kazakh-Chinese cooperation has been the
construction of new transport and logistics corridors,
and related infrastructure. In total, 52 joint industrial
projects worth more than US$21 billion are being
implemented between Kazakhstan and China.
In parallel, strong messages are sent to reaffirm
Kazakh identity and sovereignty – the Latinised
alphabet has begun to replace the Cyrillic alphabet
Dear Shareholders
In 2022 Kazakhstan encountered serious challenges
which might have profoundly affected its political,
social, and economic stability. Everyone should
remember the social unrest which almost resulted
in revolution and anarchy; and everyone should be
fully conscious that the war in Ukraine, with all its
unforeseen consequences on the world’s economies,
should particularly impact a country with a 7,644 km
border with Russia, 23% of its population having
Russian roots, sharing numerous natural resources
and much infrastructure, and with considerable
bilateral trade.
On the International scene Mr Tokayev, a diplomat
by background, appears to have skilfully walked the
tight rope following in his predecessor’s footsteps.
Kazakhstan’s foreign trade turnover hit a record high
of $134.4 billion in 2022, a rise of 82 percent over
2021 and four times that of 2020. The country’s
import volumes reached $50 billion for the first time,
surpassing a 2013 record of $48.8 billion. Compared
to 2021, the figure increased by 21 percent. Exports,
at $84.4 billion, increased by 40%.
8
Steppe Cement Ltd. and the very name of the country is increasingly
written as ‘Qazaqstan’. Repeated signs of neutrality
are given to western countries, public statements
and votes at the UN aim at dissociating the Republic
from the Russian moves into Ukraine. This is carefully
managed, without prejudice to the continuous
communication channels remaining open between
the Russian and Kazakh Heads of State.
Internally, tangible changes are being put in place,
setting the stage for a more democratic institutional
framework. Several privileges accumulated during
the Nazarbayev era were cancelled. Securing social
peace is at the top of priorities and can only be
achieved by injecting purchasing power among
the population faced with a severe inflationary
backdrop. Early in 2022, after the period of civil
unrest seemingly sparked by increases to LPG prices
in the West in particular, government spending was
increased to provide enough economic support
to the population, and regional governors were
requested to put pressure on private businesses for
higher wages to offset the price rises.
All this appears to be politically successful, and Mr
Tokayev obtained an overwhelming vote, over 80%,
for his snap re-election in November 2022. Snap
legislative elections to the lower chamber Mäjilis held
on 19 March 2023, confirmed the supremacy of the
ruling Amanat party. This came after a constitutional
referendum granting more powers to the Mäjilis.
Despite all the mounting threats to international
peace and global trade, Kazakhstan manages to
draw some advantages from the situation and
seems to enjoy stability and a favourable business
environment.
An island of stability in an ocean of volatility?
The price and demand for commodities, especially oil,
gas, and minerals, have been the main beneficiaries
of the international tensions and sanctions. With all
its resources and thanks to its geopolitical position,
Kazakhstan, although not fully immune from potential
threats, maintain this strong advantages. Moreover,
domestic demand was stimulated by a substantial
inflow of population relocating from Russia.
The removal of COVID-19 restrictions, coupled
with rising prices for oil and metals, led to a 25.4%
increase in tax payments to Kazakhstan’s budget
in 2022 on income earned in 2021, according to
statistics released in January 2023 by the Ministry
of Finance. Moreover, the top 25 foreign private
companies operating in the country accounted for
around 36% of all tax revenues, while for 2020, their
share was 28%. Most of it derives from the oil sector.
To maintain these very positive improvements,
Kazakhstan needs a secure distribution of oil, which
accounts for about 15% of GDP, more than 30%
of general government revenue, and over half of
exports. And to this end, it depends on the Caspian
Pipeline Consortium (CPC) for about 80% of its oil
exports, a prolonged disruption of which could
negatively affect its external and fiscal metrics. The
pipeline runs mostly on Russian territory to reach
Novorossiysk on the Black Sea. Kazakhstan sharply
increased its oil exports bypassing Russian terminals
through the Baku-Tbilisi-Ceyhan (BTC) pipeline. In
2022, 1.3 million tons of oil were exported through
Georgia - 10 times more than a year before.
9
Annual Report 2022 Around 70% of rail cargo currently exported from
Kazakhstan moves on Russian railways. Meanwhile,
rail exports to Iran via Turkmenistan in 2022 were 8.5
times greater than the previous year, while exports
by rail and sea via the Trans-Caspian International
Transport Route (TITR) increased 6.6 times over 2021.
Another crucial factor is inflation. CPI was 14.9%
above the previous year according to Kazakhstan’s
National Statistics Bureau. Inflation on foodstuff was
even higher, at 25.3%. December inflation topped
20% in year-on-year terms, based on data released
on January 4. This is a level last time seen in 1996, a
few years after the USSR collapse.
It is partly a consequence of the positive factor
mentioned earlier, the high price of commodities. It
directly affects the cost of utilities and, indirectly, of
most basic consumers goods. “Sharp strengthening
of the Russian rouble against the U.S. dollar has
caused a price surge for Russian goods, which
account for 40 percent of all imports to Kazakhstan,”
Prime Minister Alikhan Smailov explained in October.
At the same time, the Tenge remained weak against
the rouble. The parity between the two currencies
has only bounced back recently to its historical levels
of 5.5-6.0 KZT to 1 RUB during the first month of
2023. It had culminated at 7.5-8.0 during June-
October 2022. Supply-chain disruptions caused by
the sanctions have also generated additional costs.
Government borrowing costs are increasing, given
rising interest rates and the reliance on domestic
debt issuance, and credit becomes less available for
domestic investment and consumption.
Government policy aims to diversify the economy
through capital investment programs, including
infrastructure and housing projects, which requires
cement. The pool of investment projects under
consideration amounts to KZT30 trillion (26% of
2023 GDP).
10
The economy expanded an estimated 3.2% year on
year in 2022, supported by growth in construction,
information and communications, trade, transport,
and manufacturing. The IMF foresees a 4.3% increase
in 2023.
What does all this mean for the cement industry?
In this landscape, demand for cement remained
strong, with 11.55m tonnes consumed in 2022
against 11.6m tonnes during the historical peak
year of 2021. The first month of 2023 have shown
a softening market and visibility is uncertain for the
rest of 2023. The market in Kazakhstan has strong
seasonality and the domestic cement consumption
for the year to come and demand may still recover
somewhat, but this is hard to predict.
Imports and exports of cement fell
in 2022:
neighbouring countries have built new capacities to
match their domestic demand in Uzbekistan, while
logistics issues and a high-cost base in rouble terms
have affected Russian exports to West Kazakhstan.
Cement factories in Kazakhstan produced similar or
lower volumes compared with 2021, except for two
new producers, and all benefited from higher selling
prices.
Steppe Cement Ltd. And for your Company?
Again, inflationary pressure hit the cement industry
hard: salary increases were needed to retain the
Company’s employees, and, above all, increased
energy costs, namely coal and electricity, had the
biggest impact. Your Company is best placed to resist
these inflationary pressures thanks to its proximity
with the main coal mines and with the nearby steel
factory providing slag, a partial substitute to clinker.
Refractories and spare parts are imported, and
everyone has had to find an alternate supply or new
logistics, at some significant cost.
Energy costs were one
issue, but availability
has indeed been another. Electricity supply was
sometimes restricted, impacting production and
sales were hindered by the congestion of the railway
network being overloaded by goods transported
to and from Russia, leading to a surplus of empty
wagons choking the rail network.
The management of the Company confronted all the
challenges mentioned successfully and maintained a
strong level of activity and profitability. Production
for the first quarter was good and inventories will be
available to supply clients during the incoming high
season.
A strong balance sheet with a minimal level of debt
reduced the negative effects of interest rates hikes.
The Chief Executive Officer’s report provides more
insight on the Company’s performance in 2022.
Last year, uncertainties in the tax legislation in
Malaysia led us to change the process for paying
dividends. Some changes to the tax treatment of
the chain of dividend flows from the operating
subsidiaries in Kazakhstan have been studied with
professional firms and will be implemented to
simplify the structure, to minimise the risk of double
taxation, and to streamline the process. They will be
publicised in due course.
On behalf of the Board of Directors, I express here
our recognition for the Management and personnel’s
strong commitment and dedication.
The Board and I would like to express their recognition
for your loyalty as shareholders. All efforts are made
to maintain and possibly increase the return you
expect from your investment.
Xavier Blutel
Chairman,
Independent Non-Executive Director
11
Annual Report 2022 CEO’s Statement
In 2022,
Steppe Cement
posted a net profit of
USD17.9 million while
EBITDA remained stable at
USD31 million. Higher pricing
compensated for the increase
in costs and slightly lower
volumes. Steppe Cement’s
average cement selling
prices increased by 12% in
KZT and 4% in USD, to
USD52 per tonne
delivered.
Overall, the cement market in Kazakhstan remained
stable in 2022 compared with the historical high
achieved during 2021 and on a per capita level, the
consumption for the year 2022, of 630 kg per capita
is consistent with that which should be expected
based on actual GDP and the anticipated GDP
growth rate.
The Kazak cement market remained stable at
11.6 million tonnes, with sales volume by Steppe
Cement decreasing by 1% year on year, due mostly
to logistical problems in the railway system in the
third and fourth quarters. The blend of this was that
domestic sales increased by 4% and exports reduced
to virtually zero.
Imports into Kazakshtan decreased by 25% to 0.6
million tonnes, being equivalent to 5% of the total
market, with these coming mostly from Russia.
Exports from local producers decreased again by
33% to 1.1 million tonnes, with these being mostly
to Uzbekistan and Kyrgystan as new capacity has
been commissioned in Uzbekistan. Exports remain
concentrated to the Tashkent and Bishkek areas.
The market demand in 2023 has shown a decrease in
the first quarter due to weather conditions, logistics
and persistent high inflation and we expect the
market to improve in the coming quarters. High
interest rates will slow down the mortgage market but
the economy remains strong driven by commodities.
During 2021 and 2022 the government implemented
incentives which helped the construction industry,
particularly the ability to withdraw part of the
individual pension funds and use them for real estate
acquisitions. The development of the main cities
continues, and the rate of urbanization is estimated
to grow from the current 59% to 69% in the next
25 years. The banks are actively promoting long
term mortgages and the program has been very
successful.
The political unrest at the beginning of 2022 as
well as the conflict in Ukraine, have brought higher
inflation and more populist policies. After a phase
of salary increases to compensate for inflation, the
government seems to be committed to lowering
inflation.
In 2022, Steppe Cement posted a net profit of
USD17.9 million while EBITDA remained stable at
USD31 million. Higher pricing compensated for the
increase in costs and slightly lower volumes. Steppe
Cement’s average cement selling prices increased
by 12% in KZT and 4% in USD, to USD52 per tonne
delivered.
Steppe Cement operated both lines at 86% of their
current combined capacity (which is 1.1 million
tonnes for line 5 and 0.85 million tonnes for line 6).
Shareholders’ funds remained stable at USD65.1
million after the dividend distribution of USD12.6
million to shareholders (5 UK pence per share).
12
Steppe Cement Ltd. Key Financials
Year ended
31- Dec-22
Year ended
31- Dec-21
Inc/(Dec)%
Sales (tonnes of cement)
1,670,174
1,688,544
Consolidated turnover (KZT million)
40,023
36,020
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 (KZT/USD)
Exchange rate as at year end (KZT/USD)
86.7
21.7
17.9
8.2
65.1
461
462
84.6
21.4
17.1
7.8
65.6
426
434
(1%)
11%
3%
1%
5%
5%
(1%)
(8%)
(6%)
Production and costs
Line 5 produced 60% 995,933 tonnes of cement
while Line 6 produced 663,955 tonnes.
Line 5 performed at 90% capacity as it was limited
by roller maintenance while Line 6 was limited by
reliability. In 2023, we expect higher production
from Line 6 and similar in Line 5.
Cost per tonne increased by 20% in KZT at slightly
inflation. The average cash
higher pace than
production cost of clinker increased from USD20/
tonne to USD23/tonne while cement cash cost
increased from USD23/tonne to USD26/tonne in
2022. The cost of production increased by 20% in
local currency in line with inflation of 18.8% year on
year. The devaluation of the currency was limited to
8%.
Despite the increase of transportation costs, selling
expenses, reflecting mostly cement delivery costs,
were reduced to USD6.6/tonne as we focused in
markets closer to the factory.
General and administrative expenses were reduced
to USD6.4 million from USD6.7 million in 2021 due
to cost control measures.
On 31 March 2023 the company had 799 employees
a similar level to 2022.
In 2022, finance costs remained stable at USD1 million.
Without operating lease interest of USD0.2 million
under IFRS 16, the finance cost was USD0.8 million,
mostly interest on loans.
Other income of USD2.4 million reflects the write-
back of receivables previously written down and the
write-back of deferred income from the government
subsidied loans.
The factory receives an allocation of CO2 emissions
allowances from the government and does not
trade them as they are at a level similar to historical
production. There is a very limited market for
alternative fuels and the increase in additives in the
cement is not yet accepted beyond certain levels.
13
Annual Report 2022 CEO’s Statement
Capital investment increased significantly in 2022
but it will be limited going forward.
Capital investment was accelerated to USD10 million to
complete the work started in 2021 and to compensate
for the slow down in investment during 2019 and
2020 due to COVID-19. Apart from the traditional
maintenance capex and the purchase of key spares
for USD3 million per year, we managed to complete a
significant number of projects in 2022:
• New FL Smith close circuit separator for cement
mill number 1 with an investment of USD3.6
million. The mill capacity was increased by 30%,
slag content can be increased to 25%, power
consumption has been reduced and the quality
and stability has improved
• A similar separator for cement mill number 2,
The project was started and USD1.5 million
was spent in 2022. Commissioning will be done
between the winter 2023 and spring 2024
Those projects were financed by USD4.3 million in
subsidized loans and USD 3.5 million from internal
cash flow.
We have plans for a further USD4 million investment
in 2023 and the first quarter of 2024 including:
• Complete the new separator for cement mill 2
for USD 2 million
• Preheater raiser duct extension by 24 meters to
improve the preheater calcination in Line 6
• Software upgrades to the ABB control system
at a cost of USD 0.7 million to allow further
automatisation of the factory and prevent
obsolescence
• Engineering of raw mill 3 separator conversion
to dynamic separator to support the increase in
production of line 6 by 10% when completed
• Replacement of one reducer for one cement
mill at a cost of USD0.9 million
• Upgrades to bag filters to improve maintenance
and future environment requirements
• Bucket crane revamping to support summer
sales USD0.3 million
• Online monitoring of main stack emissions to
comply with ecological requirements USD0.15
million
• Coal dosing system
to
improve
feeding
reliability
• High tension drive motors to maintain key
spares
• Additional gas analyzer for kiln system to
maintain clinker stability
The government has announced that the subsidized
credit lines will be limited as the focus shifts to the
control of inflation. We will try to complete the
remaining capex planned with our cash flow to avoid
borrowings at commercial KZT rates as much as
possible.
Financial position: New debt will be limited as
interest rates in Kazakhstan have increased to
20% per annum in 2023.
During the year, our total loans outstanding were
stable at USD6.7 million versus USD5.6 million in
2021. The loans had good subsidized rates in KZT
but the renewal will be most likely made at near
commercial rates and the Company has an incentive
to reduce the borrowing in 2023. The Company
ended the year with net debt of USD2.6 million,
excluding IFRS 16 leases.
14
Steppe Cement Ltd. Long-term loans were increased from USD3.2million
to USD5.4million while short-term
loans were
reduced from USD 2.3 to USD 1.3million.
the politically unstable environment
Despite
in Kazakhstan at the beginning of the year, the
unpredictable situation in the region and the surge
in inflation, the KZT had only an 8% devaluation
against the USD and an average exchange rate of
461 vs 426 in 2021.
We maintain short term credit lines available as stand
by:
KZT 1 billion short-term in a government subsidized
program in KZT at 6% per annum, but this will be
difficult to renew.
KZT 2 billion from Halyk Bank at 6% p.a. in USD or
20% in KZT.
Depreciation of property, plant and equipment
decreased to USD6.1 million in 2022 due to
devaluation.
Steppe Cement’s effective income tax rate was 20%
consistent with last year.
Javier del Ser Perez
Chief Executive Officer
Annual Report 2022
15
15
Annual Report 2022 Mechanical & Electrical
Consulting Services Ltd
(Malaysia)
100%
Steppe Cement (M) Sdn Bhd
(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)
16 Steppe Cement Ltd.
16
Steppe Cement Ltd.
BOARD OF DIRECTORS
JAVIER DEL SER PEREZ
Chief Executive Officer
XAVIER BLUTEL
Chairman,
Independent Non-Executive
Director
RUPERT WOOD
Independent Non-Executive
Director
WAN AFFAN AZAM
WAN AZMI
Non-Independent
Non-Executive Director
Xavier Blutel, 68, spent 33 years as an International Executive in capital intensive industries such as the
cement industry, with Italcementi Group and Ciments Français Group, and the petrochemicals industry.
Besides managing various operations in numerous countries, he was actively involved in screening approach,
negotiation and integration of new acquisitions, disposals of non-core businesses and potential mergers. He
also spent 6 years (2002-2007) in international lobbying and developed and implemented the Sustainable
Development approach in Italcementi Group. He was formerly a director of Shymkent JSC and Beton ATA
LLP from 2008 to 2013.
Javier del Ser Perez, 57, 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, 52, 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.
Wan Affan Azam Wan Azmi, 36, is currently the Chief Operating Officer of Rohas-Euco Industries Berhad,
a regional Utility infrastructure, Power & Energy and Telecommunication based company primarily focused
on transmission towers and other engineering projects. He was a representative of the Malaysian contingent
to the International Galvanizers Conference in Bangkok, Thailand. Wan Affan is involved in the rollout of the
JENDELA project (Malaysian nationwide telecommunications expansion for 3G and 4G services), as well as
the new 5G national rollout. Wan Affan joined the Board in 2022.
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17
Annual Report 2022 Central Asia Cement JSC
Peter Durnev, General Director
A graduate of Academy Marketing Moscow. He has worked in CAC for 26 years rising from
marketing executive to his present position. He oversees marketing, logistics, government
relations and human resources.
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’s Degree in Accounting and Audit from the Karagandy Economical
University of Kazpotrebsouz and has worked for 33 years in the cement industry.
Irina Poluychik, Personnel Manager
An economist by qualification. She specializes in human “resources” matters. She has been
with CAC for 38 years.
18
18
Steppe Cement Ltd.
Steppe Cement Ltd.Senior Management Karcement Jsc
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 modernization Project in Karcement which was successfully commissioned in 2014.
Srinivasa Reddy, Maintenance 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 optimization. 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 optimization of 1 MTPA plant. Apart from
maintenance, he has expertise in production and process optimization.
Gottapu Nageswara Rao, Head of Production, Process and Quality Assurance
A chemist by profession with a Bachelor’s 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, he was with Cheran
Cements as Project and Plant Manager for grinding unit.
Yevgeniya Orlova, Legal Department Chief
Graduated from Karaganda State University with a Bachelor’s Degree in Law and from Ural State University
with a Master’s Degree in Law. She joined Karcement in 2008 as a Lawyer, and from 2022 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 8 years.
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Annual Report 2022 Chairman’s Statement on Governance
We are pleased to present our 2022 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
20 Steppe Cement Ltd.
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20 Steppe Cement Ltd.
Steppe Cement Ltd. Chairman’s Statement on Governance
This report on Corporate Governance, the Company takes inspiration from the Financial Reporting Council
(“FRC”) recommendations and its Corporate Reporting Reviews. Their recommendations are progressively
implemented whenever they are applicable to the nature, the size and the level of risk associated with of
our Group of Companies, and to the expectations of its stakeholders. This report as well as the Chairman’s,
CEO’s and Committee Chairmen’s reports are shared with the Company’s Auditors and, if necessary, adjusted
for any need of clarification.
OBJECTIVES AND STRATEGY
The main objective of the Company is to protect
in a sustainable way its assets, its expertise and
its “licence to operate” and to remain a leader in
supplying the cement market in Kazakhstan with a
proper allocation of financial, human, physical assets
and resources.
To meet this objective, investment in capital must
be dedicated to maintain and possibly improve this
position over a long horizon of time, including during
periods of strong competitive pressure or adverse
economic conditions. Initial borrowings have reached
a minimal level and with the continuously growing
interest rates, debt will only be used for specific
projects with adequate return. Cash generated from
the operations is primarily utilized for investments
considered necessary. Whenever
they appear,
external growth opportunities where the Company
can create value are carefully assessed; all these
priorities being satisfied, the board is committed to
propose the highest possible dividend payout from
surplus cash.
PROPER STRUCTURE OF COMPANIES
The business of Steppe Cement (STCM) is entirely
conducted in Kazakhstan by two local wholly-owned
subsidiaries, namely Karcement (“KarCem”) and
Central Asia Cement (“CAC”). They operate a single
factory in Aktau, one hour drive North of the City of
Karaganda and 200km South of Astana. The Ultimate
Holding Company, Steppe Cement is registered
in Labuan (Malaysia) and listed on the AIM. There
are no material transactions between parent and
intermediate companies other than the distribution
of dividends and remuneration for services of a
handful of expatriates working for the operational
subsidiaries in Kazakhstan.
Intermediate holding companies exist between
STCM and CAC/KarCem for historical reasons.
They have been established in full compliance with
national and International legal and tax regulations.
Their main purpose is to avoid double taxation in the
dividend flow. Regulations can never be considered
as granted for ever and the Board is paying particular
attention to identify and anticipate any material
change in this respect. Increasing uncertainties in the
tax code in Malaysia have led the Board of Directors
to consider a change in the chain of ownership of
the operational subsidiaries. In-depth advice is in
its final stages and will be reviewed to provide solid
alternatives which will be communicated as soon as
the Board will have selected a preferred structure
giving maximum comfort. Since 2022, all Board of
Director meetings have addressed this topic, and has
also been discussed in numerous communications
between the Directors and their external tax advisors.
One or two possibilities are now in their final stages
of validation and, if endorsed by the Board, the most
optimal will be publicized and implemented under
its supervision.
ALLOCATION OF CAPITAL
It is common knowledge that cement manufacturing
is by nature capital intensive. Good governance must
ensure that investments in plant and equipment
are properly justified. Their main purposes consist
in increasing productivity and efficiency, ensuring
reliability-one day of production contributes by more
than USD100k in profits, safeguarding the condition
of the assets and the duration of their lifetime, and
protecting our “licence to operate” under the local
regulatory framework. The latter element commands
very substantial capital expenditures for the so
important requirements of preserving health and the
environment.
A detailed review of capital expenditures is part of
every quarterly Board meeting. At least two Board
meetings per year are held in the cement factory.
They include detailed functional meetings with the
operational management and on-site inspection
of the plant by the Directors. For investments
aimed at improving productivity, capacity, logistics,
distribution or diversifying finished products, the
Board verifies that the return expected will exceed
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Annual Report 2022 Chairman’s Statement on Governance
the cost of capital. For ecological investments,
wherever some negotiations with the Authorities
can be held, multiyear programs are developed to
spread over a certain period the cost of expensive
devices. An illustration of this can be given for dust
emission reduction at the source: the Company is
well advanced in the progressive replacement of less
effective Electro-static precipitators (‘ESPs’) by bag
filters costing some USD0.4m each. The two kilns, the
finishing mills and the slag dryer are fully equipped
and what remains to be done in this respect will be
spread over four to five years.
PROPER UTILIZATION OF HUMAN RESOURCES
Qualified management and production staff must be
retained. The factory is in an industrial basin where
workers with limited qualifications are available but
should receive a decent compensation. Qualified
staff is much more difficult to attract in this remote
area. For key positions, it is also sometimes necessary
to employ expatriates with the proper background.
In production management, experience, and an
intimate knowledge of the equipment in place
and material available are crucial, as well as the
expertise for solving problems and the access to a
network of technical experts and reliable suppliers
for engineering and equipment supply.
The Board and its Nomination and Remuneration
Committees take responsibility for validating new
appointments
for key positions, continuously
reviewing all levels of compensation against national
and local practices to ensure the need of stability
and loyalty. It encourages the development of
local citizens and limits expatriates to a few critical
positions where no alternative could be found in the
country.
RISKS ASSOCIATED WITH CO2 EMISSIONS
Cement production requires high levels of energy,
entirely derived from fossil fuels (coal and electricity,
largely produced from coal in Kazakhstan). The
process requires a high temperature combustion
which
called
“decarbonation”, in other words, CO2 emissions.
Mitigation is only achieved through three separate
lines of action:
triggers a
chemical
reaction
• Energy efficiency, a continuous priority for the
technical staff since it also affects the highest cost
component of the final product. Kiln no.5 is close
to an optimal level of performance in this respect
whilst kiln no.6, with an older design, offers limited
potential for improvements with substantial and
expensive modifications and which will never be
able to attain a similar performance.
• Reduction of the clinker content in cement:
clinker is the intermediate product requiring
combustion and decarbonation. Under the
Product Standards and in compliance with all
quality norms it can be partially replaced by
slag from the steel industry, fly-ash from coal-
fired plants, or pozzolanic material. The cement
factory has significantly increased its utilization of
slag and benefits from its proximity to a leading
steel producer.
• Use of “alternate fuels” as substitutes to fossil
fuels: various waste materials are increasingly
burnt in Western Europe or the USA instead
of conventional
incineration: this avoids a
duplication of CO2 emissions. Kazakhstan has
not reached yet a level of maturity allowing
for
transportation
and preparation of such substitutes. As yet, no
financial incentives or penalties have been put in
place by regulators to allow a proper, stable, and
economically viable stream of waste that could
be utilized as alternate fuels.
the adequate collection,
The Board continuously challenges management
to minimize emission. It monitors the evolution
of regulations, innovation in the building industry
practices.
The Company, like all large industrial emitters of
greenhouse gases in Kazakhstan, is subject to a
National Cap and Trade scheme of CO2 emission
allowances. Currently under review, it will certainly
be inspired by the EU scheme. As all competitors are
being affected to a comparable extent, it is expected
that some of this additional cost will be passed onto
selling prices.
Substitutes to cement/concrete offering similar
functionalities, cost and availability in terms of
volume are not to be found with the current
technologies and construction practices. Clients
from the concrete industry will increasingly utilize
22 Steppe Cement Ltd.
22
22 Steppe Cement Ltd.
Steppe Cement Ltd. Chairman’s Statement on Governance
performance admixtures and additives which will
reduce the quantity of cement used for a cubic meter
of concrete and this can only have a negative impact
in the long term on the volume of cement consumed
per capita.
The answer to this challenge is to remain one of
the lowest cost producers, and to ensure proper
availability and sustainability of our equipment,
material, and energy sourcing.
WORKINGS OF THE BOARD OF DIRECTORS AND
ITS COMMITTEES
In 2022, at last it was possible for your Board of
Directors to meet physically again and to visit the
cement factory staff in Karaganda.
The Board is now composed of two independent
Directors, including its Chairman who has a casting
vote in the event of a tied vote, and two Non-
Independent Directors, namely the CEO Javier
del Ser and Affan Wan Azmi, both substantial
shareholders or their nominees.
On July 13 2022, the two alternate Directors in
Malaysia, Messrs Gan Chee Leong and Charles
Tingey resigned. They had been appointed on
October 1 2020, to act on behalf of Messrs Javier
del Ser and Rupert Wood respectively when travel
restrictions were in full force.
Each meeting of the Board of Directors was followed
by meetings of the three Board Committees. Several
conference calls were held to deliberate on such
issues as dividend distribution, which required an
Extraordinary General meeting of shareholders, and
corporate restructuring.
The two Independent Directors also accompany,
when deemed necessary, the local management
in specific meetings with regulators and local
Authorities. Regular contacts are maintained
between the Auditors and the same directors, who
form the Audit Committee.
The following pages provide a comprehensive
update on our Governance and how it was effectively
applied in 2022.
Xavier Blutel
Chairman,
Independent Non-Executive Director
Formal BOD meetings and
the three Committees
General Meetings
Calls involving at least
three Directors
February 2
April 27
July 13
July 13 - (AGM)
4
October 12
September 28 - (EGM)
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Annual Report 2022
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.
• 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 should
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
controls and risk management systems.
The application of the principles of the QCA code by
Steppe Cement are published on Steppe Cement’s
website.
2424 Steppe Cement Ltd.
Steppe Cement Ltd.
Corporate Governance
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;
•
•
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-to-day 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
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
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.
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Annual Report 2022
Corporate Governance
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.
REMUNERATION POLICY
Remuneration levels are competitively set to attract and retain appropriately qualified and experienced
Directors and senior executives. The Board has delegated the setting of broad remuneration policy to the
Remuneration Committee. The purpose of the policy is to ensure the remuneration package properly reflects
the person’s duties and responsibilities and level of performance, and that remuneration is competitive in
attracting, retaining and motivating people of the highest quality. Where necessary, independent advice on
the appropriateness of remuneration packages is obtained.
INDEPENDENCE ADVICE AND INSURANCE
The Board may seek 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 2022, 4 board meetings were held.
The following is the attendance record of the Directors:
Directors
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Xavier Blutel
(Chairman)
(Independent Non-Executive Director)
Javier Del Ser Perez
(Chief Executive Officer)
Rupert Wood
(Independent Non-Executive Director)
Wan Affan Wan Azmi
(Non-Independent Non-Executive Director)
4
4
4
1*
4
4
N/A
N/A
4
-
4
-
4
4
4
1
*Wan Affan Wan Azmi joined the Board in July 2022 and hence was only eligible to attend one board meeting.
Committee meetings are held concurrently with the board meetings.
26
Steppe Cement Ltd.
Corporate Governance
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
the
and
knowledge
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;
•
Identify and nominate the potential candidates
to the Board for approval;
• Monitor the appointment process of Directors;
• Recommend to the Board for approval on the
re-appointment of Directors;
REMUNERATION COMMITTEE
The Remuneration Committee comprises entirely of
independent Non-Executive Directors. The functions
of the Remuneration Committee are governed by
the Terms of Reference which was approved by
the Board. The Remuneration Committee meets at
least twice (2) a year. The principal objectives of the
Committee are to ensure that the broad remuneration
policy and practices of the Group reflect the level
of responsibilities, performance, relevant
legal
requirements and high standards of governance.
In determining such policy, the Committee shall
ensure that remuneration levels are appropriately
and competitively set to attract, retain and motivate
people of the highest quality.
The functions of the Remuneration Committee
include:
• Determine and review the broad remuneration
the Chairman, CEO, Executive
policy of
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
• Review and update the Terms of Reference every
two (2) years, or more frequently as required to
ensure its ongoing relevance and effectiveness.
The Remuneration Committee’s members comprise:
1. Xavier Blutel (Chairman)
2. Rupert Wood
• Oversee the succession planning of Directors
the Group’s
into consideration of
taking
strategies;
• Report and make recommendations to the
Board on the Committee’s activities; and
• Review and update the Terms of Reference at
least once a year.
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Corporate Governance
AUDIT COMMITTEE
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
strategy, financial performance,
the Group’s
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
investments. The Group’s
The Group’s internal control system is designed
to safeguard the Group’s assets and enhance the
shareholders
internal
control system is designed to manage rather than
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.
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.
The Audit Committee’s members comprise:
1. Rupert Wood (Chairman)
2. Xavier Blutel
BUSINESS CONDUCT AND ETHICS
In the course of business, the Board acknowledges
the need to maintain high standards of business
and ethical conduct by all Directors, management
and employees of the Group. In this respect, the
Group has the responsibility to observe local laws,
customs and culture of each country in which it
operates in particular Kazakhstan and to adopt the
high standards of business practice, procedure and
integrity. All Directors and employees are expected
to act with the utmost integrity and objectivity,
striving at all times to enhance the reputation and
performance of the Group.
CONFLICT OF INTEREST
All Directors must keep the Board advised, on an
ongoing basis, of any interest that could potentially
conflict with those of the Group. Where the Board
believes that a significant conflict exists for a Director
on a board matter, the Director concerned does not
receive the relevant board papers and is not present
at the meeting whilst the item is considered. Directors
are required to take into consideration any potential
conflicts of interest when accepting appointments to
other Boards.
28
Steppe Cement Ltd.
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 revised
regularly taking into internal and external
variables such as performance, costs, capital
expenditure requirements, macro outlook and
other relevant factors.
• 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’s 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 annually. The Audit Committee
also deliberates on control issues highlighted by
the external auditors during the course of statutory
audits.
29
Annual Report 2022
Nomination Committee Report 2022
Dear Shareholder,
Year 2022 saw several changes to the governance and management of your Company which are
outlined below, though these were flagged in last year’s report. During 2022, the Nomination
Committee met 4 times, alongside scheduled Board meetings, and held several ad hoc calls
to discuss matters at hand.
Following his nomination by the Company’s largest shareholder, at the 2022 AGM Affan Wan Azmi
joined the Board as a Non-Executive Director and subsequently also became the resident Director
in Malaysia.
As also flagged in last year’s report, upon recommendation from the Nomination Committee,
the Board resolved to unwind the position of the Alternate Directors who had provided
representation for the CEO and myself at physical Board Meetings of your Company in its
jurisdiction during the years of restricted travel. They ceased to be Alternate Directors after
the AGM in 2022.
Year 2022 saw the reappointment after review of the Directors of the Kazakh subsidiaries, CAC
and Karcement. For CAC, these are Xavier Blutel, Tan and Javier del Ser, while for Karcement
they are Rinat Mukhamedshin, Francesco Parillo and Javier del Ser.
At a Company level, year 2022 saw the departure of the Head of Legal, Veronika Kuznetsova,
who had moved to Russia from Kazakhstan, after 17 years with the Company. We thank her for
her dedication over so many years and wish her all the best. Evgeniya Orlova has taken over
as the Head of Legal, stepping up from her role as Deputy Head of Legal.
Derek Kuan Boon San has elected to stay with the Company, having previously indicated that
he wished to return to leave Kazakhstan, and continues as Finance Director of CAC.
Rupert Wood
Nomination Committee Chair
30 Steppe Cement Ltd.
30
Steppe Cement Ltd. Remuneration Committee Report 2022
The Committee met on four occasions in 2022.
Overall remuneration practice for all employees, although not strictly within the scope for
this Committee, are systematically reviewed. Special attention was given to the increasing
inflationary context and to the pressure from local authorities so that the workforce could
maintain a decent standard of living.
Expatriates’ remuneration packages have remained the same, with one change: bonuses
were calculated based on the time spent in the factory. Staff, including expatriates, who had
worked full-time in the factory during the year received 2 months in full.
Based on the broadening of his responsibilities and on remuneration given for comparable
positions, the salary of the Head of Marketing and Logistics was increased.
Search for new executives in financial and audit positions were launched with remuneration
proposals in line with the market for similar assignments in Malaysia and Kazakhstan. Some
flexibility is seen as necessary for good candidates, taking into account the difficulty to attract
and retain senior managers in the area of the factory.
Board Directors: the level of the Independent Directors’ fees was low as compared to the
benchmark for companies of a similar size in a KPMG survey published in 2020. Additionally,
among London-listed companies it is standard practice to grant separate fees for committee
memberships. Moreover, directors were given regular increase in fees in recent years in line
with their responsibilities and risks attached to directorship.
As a result, the Chairman’s remuneration was raised from USD40k to 50k per annum, and
USD10k were proposed for the Chairman of the Audit Committee, the most demanding
position among the three Committees.
Xavier Blutel
Chairman of the Executive Committee
Annual Report 2022
31
31
Annual Report 2022 Audit Committee Report 2022
Dear Shareholder,
Year 2022 saw the Audit Committee meets regularly alongside scheduled Board Meetings, as well as holding
several separate calls and meetings to discuss matters in hand. Not least of these was the External Audit,
negotiating fees, setting the Terms of Reference, assessing progress and feedback.
Throughout 2022, the Company spent considerable time and effort to resolve issues created by changes
in the interpretation of the tax codes in Malaysia (and uncertainty owing to delays in clarification of the tax
code status). Ultimately, albeit with a delay, in December, the Company was able to pay the planned 5p
dividend.
As a result of the changing tax regime, both in Kazakhstan and Malaysia, the Company has been exploring
restructuring options in order to minimise the taxation risk on the flow of dividends to shareholders from the
operating subsidiaries going forward. The Committee has monitored this closely.
In this regard, the Audit Committee considered the proposed appointment of Deloitte to provide Tax
Advisory Services with a view to restructuring and the potential options available to the Company, whilst
continuing to act as Auditor, and whether there would be any conflict of interest. Given Deloitte’s position
and understanding of both the Company and the jurisdictional requirements for such advice, the Board
decided that they would be best placed to provide the consulting services from a tax advisory perspective
and for the restructuring options of the Company.
During 2023, the Audit Committee has overseen the remit of these consulting services and monitors this
process and the provision of these Non-Audit Services (NAS). The Committee recommended to the Board
that Deloitte be retained for the NAS role, having determined that independence of the Audit function
would not be impaired. The Company has also received assurances from Deloitte as to the independence
of their External Audit function.
Clearly 2022 highlighted several Risk factors which, whilst always in the background, moved to the forefront
last year – namely political risk and geopolitics. The domestic unrest and civil strife, combined with domestic
political wrangling, in January 2022 in Kazakhstan put into focus an element beyond the control of the
Management or Board. By February, the invasion of Ukraine bringing economic dislocation, sanctions, and
an exacerbation of inflationary pressures already building after the policy response to Covid-19 in previous
years almost made the domestic disturbances in January recede from memory. Many of these risk factors
cannot be ameliorated in any meaningful way though they can be thought through in part in advance. Some
can be mitigated in part. For example, as part of our contingency plan, the Company has maintained a stock
of Critical Spares, to ensure that any breakdowns are minimised and stoppages limited, especially given the
lead time to re-order certain replacement parts. This has been complicated by lengthened order times and
supply chain issues as a result of sanctions and the war and could not be made perfect, but has proved to
be an important component of operational risk management by the Company.
Taxation risk, as referenced above with regard to changes to the Malaysian Tax Code, but also regarding
the Kazakh taxation environment and its often arbitrary nature, remains an area that the Committee and the
Board continue to monitor (see note 31a in the Auditor’s Notes on page 108 of the Annual Report). These
risks have risen over the last year and remain an area for vigilance.
By the same token, the Committee also monitors the Company’s environmental obligations (see note 31b
below), where such risk is managed by investment into improving environmental standards and ensuring
compliance with such legal obligations (also see the Chairman’s Statement and the Chairman’s Statement
on Governance). Environmental issues however remain an area where the regulatory backdrop can take an
adverse turn with little notice.
Rupert Wood
Audit Committee Chair
32 Steppe Cement Ltd.
32
Steppe Cement Ltd.
Annual Report 2022
3333
Annual Report 2022 FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2022
(In United States Dollar)
34 Steppe Cement Ltd.
34
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
36 - 39
40
41
42 - 43
44 - 46
47 - 49
Notes to the financial statements
50 - 108
Statement by a director
109
Annual Report 2022
35
35
Annual Report 2022 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 2022 of the Group and
of the Company, 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 40 to 108.
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 2022, 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.
36
Steppe Cement Ltd. Key audit matter
Revenue recognition
As of 31 December 2022, revenue from sale
of cements amounts to USD86,707,809, 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.
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
the design and
implementation and operating effectiveness of
such controls.
to evaluate
• Performed statistical sampling test of details
on revenue and one month cut-off review
to ensure the sales are valid by tracing to
the delivery documents and checked to the
delivery or shipping terms to ensure the control
are transferred to the customer(s) and recorded
in the correct accounting period.
• Performed gross profit margin analysis.
We have not identified any key audit matter pertaining to the financial statements of the Company for the
financial year ended 31 December 2022.
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.
37
Annual Report 2022 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 conditions
may cause the Group or the Company to cease to continue as a going concern.
38
Steppe Cement Ltd. • 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
Date: 26 May 2023
39
Annual Report 2022 STATEMENTS OF PROFIT AND LOSS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group
The Company
Note
2022
USD
2021
USD
2022
USD
2021
USD
4
86,732,039
84,578,739
14,641,442
1,469,264
(49,107,243)
(44,834,182)
-
-
37,624,796
39,744,557
14,641,442
1,469,264
(10,997,920)
(12,264,221)
-
-
(6,393,080)
(6,761,722)
(369,812)
(324,207)
573,913
401,619
(1,048,888)
(1,090,949)
-
-
-
-
(435,204)
2,367,459
(227,951)
1,616,216
(330,675)
-
(825)
112,940
21,691,076
21,417,549
13,940,955
1,257,172
(3,807,706)
(4,352,182)
-
-
5
6
7
8
Revenue
Cost of sales
Gross profit
Selling expenses
General and
administrative
expenses
Interest income
Finance costs
Net foreign exchange
loss
Other income, net
Profit before income tax
Income tax expense
Profit for the year
17,883,370
17,065,367
13,940,955
1,257,172
Attributable to
shareholders of the
Company
Earnings per share:
17,883,370
17,065,367
13,940,955
1,257,172
Basic and diluted (cents)
9
8.2
7.8
The accompanying notes form an integral part of the financial statements.
40
Steppe Cement Ltd. STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Profit for the year
17,883,370
17,065,367
13,940,955
1,257,172
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 assets
Increase in provision for site
restoration
Items that may be reclassified
subsequently to profit or loss:
-
-
-
-
15,373
(23,611)
Exchange differences arising from
translation of foreign operations
(5,829,119)
(1,923,738)
Total other comprehensive loss
(5,829,119)
(1,931,976)
-
-
-
-
-
-
-
-
-
-
Total comprehensive income for the
year
Attributable to the shareholders of
the Company
12,054,251
15,133,391
13,940,955
1,257,172
12,054,251
15,133,391
13,940,955
1,257,172
The accompanying notes form an integral part of the financial statements.
41
Annual Report 2022 STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2022
The Group
The Company
Note
2022
USD
2021
USD
2022
USD
2021
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
49,361,749
5,525
48,437,801
1,700,510
-
-
-
-
-
-
-
-
36,199,599
36,199,599
30,050,000
30,080,000
1,530,916
155,132
-
-
50,898,190
50,293,443
66,249,599
66,279,599
20,646,156
16,023,541
-
-
2,045,004
1,081,719
602,734
1,751,720
2,258,501
911,395
-
-
2,372,114
1,724,364
-
-
60,352
8,577,714
5,233,894
7,305
4,143,953
10,136,022
1,239,827
614,225
-
-
49,536
4,971
Total Current Assets
37,097,280
36,315,073
3,679,598
2,393,096
Total Assets
87,995,470
86,608,516
69,929,197
68,672,695
42
Steppe Cement Ltd. STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2022
The Group
The Company
Note
2022
USD
2021
USD
2022
USD
2021
USD
18
19
19
19
20
21
22
23
24
25
27
20
21
23
26
73,760,924
73,760,924
73,760,924
73,760,924
1,795,426
2,068,114
(126,267,201)
(120,438,082)
-
-
-
-
115,791,111
110,190,323
(4,220,191)
(5,605,876)
65,080,260
65,581,279
69,540,733
68,155,048
3,913,689
1,941,383
-
3,266,775
2,572,552
8,571
4,318,652
1,588,098
178,420
180,314
9,931,436
8,037,018
7,348,587
5,061,705
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,250,689
1,552,778
143,808
227,897
-
2,814,525
58,960
140,259
370,754
-
244,656
289,750
3,614,801
2,017,879
103,720
639,336
-
-
-
-
-
-
-
-
Equity and Liabilities
Capital and Reserves
Share capital
Revaluation reserve
Translation reserve
Retained earnings/
(Accumulated losses)
Net Equity
Non-Current Liabilities
Borrowings
Lease liabilities
Deferred taxes
Deferred income
Provision for site
restoration
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
Total Current Liabilities
12,983,774
12,990,219
388,464
517,647
Total Liabilities
Total Equity and
Liabilities
22,915,210
21,027,237
388,464
517,647
87,995,470
86,608,516
69,929,197
68,672,695
The accompanying notes form an integral part of the financial statements.
43
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STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2022 Annual Report 2021Steppe Cement Ltd.
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STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2022 Annual Report 2021Steppe Cement Ltd.
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
(Accumulated losses)/Distributable
The Company
Share Capital
Retained earnings
USD
USD
Net
USD
As of 1 January 2022
Total comprehensive income
for the year
Dividends paid (Note 19)
73,760,924
(5,605,876)
68,155,048
-
-
13,940,955
13,940,955
(12,555,270)
(12,555,270)
As of 31 December 2022
73,760,924
(4,220,191)
69,540,733
As of 1 January 2021
73,760,924
631,352
74,392,276
Total comprehensive income
for the year
Dividends paid (Note 19)
-
-
1,257,172
1,257,172
(7,494,400)
(7,494,400)
As of 31 December 2021
73,760,924
(5,605,876)
68,155,048
The accompanying notes form an integral part of the financial statements.
46
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
CASH FLOWS FROM/ (USED
IN) OPERATING ACTIVITIES
Profit before income tax
21,691,076
21,417,549
13,940,955
1,257,172
Adjustments for:
Depreciation of property,
plant and equipment
Depreciation of right-of-use
assets
Dividend income
Gain 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
Deferred income
Reversal of allowance for trade
receivable no longer required
Operating cash flows before
movements in working capital
Movement in working capital:
(Increase)/Decrease in:
Inventories
6,135,236
7,039,116
1,587,293
1,716,748
-
-
-
-
(13,309,140)
-
-
-
-
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-
(27,725)
(573,913)
1,048,888
(401,619)
1,090,949
538,663
227,951
167,628
142,387
174,650
594,901
157,723
(140,259)
11,676
(105,947)
(172,464)
(769,654)
(1,332,302)
(1,469,264)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,586,796
30,964,057
(700,487)
(212,092)
(8,501,824)
(6,054,197)
-
-
Trade and other receivables
(427,760)
302,194
(865,000)
(90,000)
Loans and advances to
subsidiary companies
Advances, prepaid expenses
and other assets
-
-
19,184
20,176
(5,608,461)
(2,820,912)
(2,334)
877
47
Annual Report 2022 STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group
The Company
2022
USD
2021
USD
2,097,417
786,440
659,458
54,890
2022
USD
-
(84,089)
2021
USD
-
41,149
18,932,608
(4,599,594)
23,105,490
(3,985,384)
(1,632,726)
(239,890)
-
-
14,333,014
19,120,106
(1,632,726)
(239,890)
(7,768,695)
(6,215,744)
(334)
(18,414)
85,599
118,234
-
-
-
-
-
-
-
-
573,913
401,619
13,309,140
1,549,552
6,610,895
-
(7,109,517)
(5,714,305)
14,858,692
6,610,895
-
-
-
-
7,299,722
(4,472,018)
(1,838,949)
(12,555,270)
(1,038,335)
5,502,753
(6,345,979)
(1,805,362)
(7,494,400)
(1,081,123)
(45,094)
289,750
-
-
-
-
94,920
-
-
-
(12,555,270)
(7,494,400)
-
-
(12,604,850)
(11,224,111)
(12,600,364)
(7,109,730)
Increase/(Decrease) in:
Trade and other payables
Accrued and other liabilities
Cash Generated From/(Used In)
Operations
Income tax paid
Net Cash From/(Used In)
Operating Activities
CASH FLOWS (USED IN)
/ FROM INVESTING
ACTIVITIES
Purchase of property, plant and
equipment
Contribution to site restoration
fund
Proceeds from disposal of
property, plant and equipment
Dividends received from
subsidiary
Interest received
Net Cash (Used In)/From
Investing Activities
CASH FLOWS FROM/
(USED IN) FINANCING
ACTIVITIES
(Repayment to)/Advance from a
subsidiary company
Return of net investment from a
subsidiary company
Proceeds from borrowings*
Repayment of borrowings*
Repayment of lease liabilities*
Dividends paid
Interest paid
Net Cash Used In Financing
Activities
48
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
(5,381,353)
2,181,690
625,602
(738,725)
(610,716)
(259,348)
-
-
10,136,022
8,213,680
614,225
1,352,950
4,143,953
10,136,022
1,239,827
614,225
NET (DECREASE)/INCREASE
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)
* The following table shows the reconciliation in the Group’s liabilities arising from financing activities:
2022
Opening
balance
Financing cash
flows [1]
Non-cash
movements[2]
USD
USD
USD
Closing
balance
USD
Borrowings (Note 20)
Lease liabilities (Note 21)
5,556,184
2,026,450
2,827,704
(1,655,674)
6,728,214
(1,838,949)
(128,541)
58,960
2021
Borrowings (Note 20)
Lease liabilities (Note 21)
6,797,349
3,907,423
(843,226)
(397,939)
5,556,184
(1,805,362)
(75,611)
2,026,450
[1]
Financing cash flows make up the net amount of proceeds from borrowings and repayments of
borrowings in the statement of cash flows.
[2] Non-cash movements primarily relates to foreign currency exchange differences, accrued interests and
deferred income.
The accompanying notes form an integral part of the financial statements.
49
Annual Report 2022 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 26 May 2023
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 Stan-
dards 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 Jan-
uary 2022.
Amendments to IFRS 3
Amendments to IAS 16
Reference to the Conceptual Framework
Property, Plant and Equipment - Proceeds before Intended Use
Amendments to IAS 37
Annual Improvements to IFRS
Accounting Standards
2018-2020 Cycle
Onerous Contracts - Cost of Fulfilling a Contract
Amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards, IFRS 9 Financial Instruments, IFRS
16 Leases, and IAS 41 Agriculture
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 or on the
amounts reported in the financial statements of the Group and of the Company.
50
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 New and amendments to IFRS in issue but not yet effective
New or revised standard or interpretation
Amendments to IFRS 4 “Extension of the Temporary Exemption from
Applying IFRS 9”
Applicable to annual
reporting periods
beginning on or after
1 January 2023
Amendments to IAS 1 “Classification of Liabilities as Current or Non-
current” (as part of the project to formulate Annual Improvements to
IFRS 2010-2012 cycles).
1 January 2023
Amendments to IAS 8 “Definition of Accounting Estimates”
1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 – “Disclosure of
Accounting Policies”
Amendments to IAS 12 Deferred Tax Relating to Assets and Liabilities
Arising from a Single Transaction
IFRS 17 “Insurance contract” (including the June 2020 and December
2021 amendments to IFRS 17)
1 January 2023
1 January 2023
1 January 2023
Amendments to IAS 1 “Non-current Liabilities with Covenants”
1 January 2024
Amendments to IFRS 16 “Lease Liability in a Sale and Leaseback”
1 January 2024
Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
Date to be determined
by the IASB
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 are not expected to have a material impact on the
financial statements of the Group and of the Company in future periods.
51
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
Going Concern
The directors have, at the time of approving the financial statements, a reasonable expectation that
the Group and the Company have adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing
the financial statements.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and its
subsidiary companies. Control is achieved when the Company:
• has the power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
52
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
When the Company has less than a majority of the voting rights of an investee, it has power over
the investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an investee are sufficient to give it power,
including:
•
the size of the Company’s holding of voting rights relative to the size and dispersion of holdings
of the other vote holders;
rights arising from other contractual arrangements; and
• potential voting rights held by the Company, other vote holders or other parties;
•
• any additional facts and circumstances that indicate that the Company has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary company begins when the Company obtains control over the subsidiary
company and ceases when the Company loses control of the subsidiary company. Specifically, income
and expenses 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.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at
cost less impairment lossess. On disposal of such investments, the differences between net disposal
proceeds and their carrying amounts is included in profit or loss.
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.
53
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
54
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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 subsidiaries, Karcement JSC (“KAC JSC”), Central Asia Cement JSC (“CAC JSC”) and Central
Asia Services LLP (“CAS LLP”), is the Kazakhstan Tenge (“KZT”). The functional currency of the
subsidiaries, Steppe Cement Holdings B.V. (“SCH BV”) and Mechanical & Electrical Consulting
Services Ltd (“MECS Ltd”) is USD. The functional currency of the subsidiary, Steppe Cement (M) Sdn
Bhd (“SCM”) is Ringgit Malaysia (“RM”).
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.
55
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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”)
2022
USD
1.2039
1.0702
0.2278
0.0133
KZT
2021
USD
1.3477
1.1370
0.2395
0.0133
KZT
1 USD
462.65
431.67
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, Karcement JSC and CAS LLP) operate, the subsidiaries withholds amounts of
pension contributions (a defined contribution plan) equivalent to 10% of each employee’s
wage, but not more than KZT300,000 (USD651) per month per employee (2021: USD499)
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.
56
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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.
57
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
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.
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 depreciated terms are 5 years for
building and 2 to 4 years for wagon.
The right-of-use assets are presented as a separate line in the statements of financial position.
58
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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.
59
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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.
60
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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-other assets”.
(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).
61
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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.
62
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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) the financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and
(b) 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.
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.
63
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 (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 at the end of the reporting period with the risk of a default occurring on
the financial instrument as at 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 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.
64
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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)
(b)
when there is a breach of financial covenants by the debtor; or
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)
(b)
(c)
(d)
(e)
significant financial difficulty of the issuer or the borrower;
a breach of contract, such as a default or past due event (see (ii) above);
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;
it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
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.
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.
65
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
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.
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.
66
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 (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.
As of 31 December 2022, 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.
67
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 Taxes receivable, other than income tax
As stated in Note 13, non-current and 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 2022, loss allowance
for doubtful trade receivables amounted to USD1,166,679 (2021: USD1,233,713) (Note 15)
and on advances paid to third parties amounted to USD263,486 (2021: USD127,706) (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 2022,
provision for obsolete and slow-moving inventories amounted to USD2,047,360 (2021:
USD2,014,636) (Note 14).
68
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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,
Kazakhstan, (segment) and as such, no segmental information is presented.
The Group
The Company
Sale of cement
86,707,809
84,567,571
2022
USD
2021
USD
Transmission and
distribution of electricity
Dividend income
Net interest income
24,230
11,168
-
-
-
-
13,309,140
1,332,302
2022
USD
-
-
2021
USD
-
-
-
1,469,264
Total
86,732,039
84,578,739
14,641,442
1,469,264
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
2022
USD
2021
USD
2022
USD
2021
USD
Interest expenses on:
- Bank loans
Less: Interest capitalised
(Note 10)
- Bank loans
- Lease liabilities
Unwinding of discount on
provision for site
restoration
Others
Total
456,140
395,338
(98,844)
357,296
194,232
10,553
486,807
-
395,338
376,590
9,826
309,195
1,048,888
1,090,949
-
-
-
-
-
-
-
-
-
-
-
-
Other finance costs comprise mainly bank and other commitment charges incidental to secure loan
facilities from financial institutions as disclosed in Note 20.
69
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 6.
NET FOREIGN EXCHANGE LOSS
Unrealised foreign
exchange loss
Realised foreign exchange
gain/(loss)
The Group
The Company
2022
USD
2021
USD
(538,663)
(227,951)
2022
USD
-
103,459
-
(330,675)
(435,204)
(227,951)
(330,675)
2021
USD
-
(825)
(825)
7.
PROFIT BEFORE INCOME TAX
Profit before income tax includes the following income/(expenses):
Amortisation of deferred
income
Rental income
Allowance for trade
receivables and advances
no longer required
Allowance for advances paid
to third parties
Credit loss allowance for
doubtful receivables
Depreciation of property,
plant and equipment
The Group
The Company
2022
USD
140,259
1,131,881
2021
USD
105,947
543,687
172,464
769,654
(157,723)
(11,676)
(174,650)
(594,901)
(6,135,236)
(7,039,116)
2022
USD
2021
USD
-
-
-
-
-
-
-
-
-
-
-
-
Employee benefit expenses
(6,648,483)
(5,683,931)
(14,345)
(15,270)
Depreciation of right-of-use
assets
Gain on disposal of property,
plant and equipment
Provision for obsolete
inventories
Short-term leases
(1,587,293)
(1,716,748)
27,725
-
(167,628)
(158,683)
(142,387)
(141,528)
-
-
-
-
-
-
(3,600)
(3,600)
Employee benefit expenses include contributions paid by the Group and the Company to defined
contribution plans amounting to USD603,035 (2021: USD468,596) and USD2,996 (2021: USD3,175)
respectively and Directors’ remuneration as dislosed in Note 27.
70
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 8.
INCOME TAX EXPENSE
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Income tax -
- current year
- prior year
4,466,088
4,430,049
155,432
-
Deferred tax (Note 22)
(813,814)
(77,867)
Total
3,807,706
4,352,182
-
-
-
-
-
-
-
-
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% (2021: 20%), and Malaysian and Netherland
subsidiaries are subject to statutory tax rates of 24% (2021: 24%) and 25% (2021: 25%) respectively.
71
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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
2022
USD
2021
USD
2022
USD
2022
USD
Profit before income tax
21,691,076
21,417,549
13,940,955
1,257,172
Tax expense calculated at
domestic tax rates
applicable to the respective
jurisdictions
Tax effects of expenses not
deductible for tax purposes
Effect of unused tax losses
not recognised as deferred
tax assets
3,314,152
3,866,089
338,122
444,423
-
41,670
Income tax - prior year
155,432
-
Income tax expense
3,807,706
4,352,182
-
-
-
-
-
-
-
-
-
-
The tax expense calculated at domestic tax rates represents a blend of the tax rates of the jurisdictions
in which taxable profits have arisen.
Judicial Review Application against the Director General of Inland Revenue (“DGIR”) and Minister
of Finance (“MOF”)
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, one of the subsidiary companies filed another
judicial review application (“2nd JR application”) in the High Court of Sabah and Sarawak in the
Federal Territory of Labuan with DGIR and the MOF named as respondents on this matter.
72
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd. The hearing was then held on 13 June 2022 where the High Court Judge ruled in favour of the Group
and quashed the DGIR and the MOF’s decision, among others, and held that the gazetted PU(A) 423
has no retrospective effect to the Group. The DGIR and MOF have then filed an appeal to the Court
of Appeal against the High Court’s decision.
The 2nd judicial review application is currently pending before the High Court to which the hearing
date of the Group’s application for judicial review on the merits has yet to be fixed as of the date of
this report.
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.
9.
EARNINGS PER SHARE
Basic and diluted
The Group
2022
USD
2021
USD
Profit attributable to ordinary shareholders
17,883,370
17,065,367
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
219,000,000
219,000,000
Earnings per share, basic and diluted (cents)
8.2
7.8
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 2022 and 2021.
73
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 9
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Annual Report 2021Steppe Cement Ltd.
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7
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Annual Report 2022Steppe Cement Ltd.
There was no valuation carried out in 2022. 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 USD6,736,717 as of
31 December 2022 (2021: USD7,709,267). 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 financial 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
2022 and 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
2022
USD
174,997
168,924
2021
USD
187,556
347,260
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 2022, property, plant and equipment of a subsidiary company with a cost and
net book value of USD6,407,904 and USD3,671,853 (2021: USD6,696,409 and USD3,646,621)
respectively are pledged as collateral for the government-subsidised loan (Note 20).
76
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd. As of 31 December 2022, the cost of property, plant and equipment that is fully depreciated amounted
to USD3,360,683 (2021: USD2,302,476).
As of 31 December 2022, there is capitalised interest expenses in the amount of USD98,844
(2021: Nil).
11.
RIGHT-OF-USE ASSETS
The Group
Railway wagons
Buildings
USD
USD
Total
USD
Cost
At 1 January 2021
Exchange differences
At 31 December 2021/1 January 2022
Exchange differences
7,611,370
(193,250)
7,418,120
(496,732)
31,813
(808)
31,005
(2,076)
7,643,183
(194,058)
7,449,125
(498,808)
At 31 December 2022
6,921,388
28,929
6,950,317
Accumulated depreciation
At 1 January 2021
Charge for the year
Exchange differences
At 31 December 2021/1 January 2022
Charge for the year
Exchange differences
(4,147,199)
(1,709,838)
127,645
(5,729,392)
(1,580,905)
389,803
(12,725)
(4,159,924)
(6,910)
(1,716,748)
412
128,057
(19,223)
(5,748,615)
(6,388)
1,313
(1,587,293)
391,116
At 31 December 2022
(6,920,494)
(24,298)
(6,944,792)
Carrying amount
At 31 December 2021
1,688,728
11,782
1,700,510
At 31 December 2022
894
4,631
5,525
77
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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
2022
USD
194,232
158,683
-
Total cash outflow for leases
2,191,864
1,779,793
Amount recognised in profit or loss:
Expense relating to short-term leases
The Company
2022
USD
3,600
2021
USD
3,600
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 are 5 years for buildings and 2 to 4 years for railway
wagons respectively.
12.
INVESTMENT IN SUBSIDIARY COMPANIES
Unquoted shares, at cost
Less: Accumulated impairment loss
Net
The Company
2022
USD
2021
USD
40,199,600
(4,000,001)
40,199,600
(4,000,001)
36,199,599
36,199,599
78
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 The details of subsidiary companies are as follows:
Place of
incorporation (or
registration) and
operation
Proportion of
ownership interest
and voting power
held
Principal activities
2022
2021
%
%
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
Held through SCH BV:
Central Asia Cement JSC
(“CAC JSC”)
Republic of Kazakhstan
Karcement JSC (“KAC JSC”) Republic of Kazakhstan
100
100
100
100
Production and
sale of cement
Production and
sale of clinker
Central Asia Services LLP
(“CAS LLP”)*
Republic of Kazakhstan
100
100
Transmission
and distribution
of electricity
*
The financial statements of this subsidiary company was not required to be audited.
79
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 13. OTHER ASSETS
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
VAT recoverable
Site restoration fund
Others
1,742,248
1,694,707
162,341
708,046
155,132
563,794
2,612,635
2,413,633
Less: Non-current portion
of
-Other assets
-VAT recoverable
(162,341)
(1,368,575)
(155,132)
-
Current portion of
other assets
(1,530,916)
(155,132)
1,081,719
2,258,501
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 (CAC 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.
80
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
14.
INVENTORIES
Finished goods
Work-in-progress
Spare parts
Raw materials
Packing materials
Construction materials
Goods held for resale
Others
Total
Less: Provision for
obsolete inventories
2022
USD
3,647,059
3,917,067
8,151,943
1,778,880
625,097
-
-
2,703,439
2,725,988
7,016,904
1,476,806
636,875
6,215
37,573
4,573,470
3,434,377
22,693,516
18,038,177
(2,047,360)
(2,014,636)
The Group
The Company
2021
USD
2022
USD
2021
USD
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
20,646,156
16,023,541
Included in others are mainly consist of fuel.
The cost of inventories of the Group recognised as an expense during the financial year was
USD49,107,243 (2021: USD44,834,182).
The movements in the provision for obsolete inventories are as follows:
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
At beginning of year
(2,014,636)
(1,921,024)
Exchange differences
134,904
48,775
Provision for obsolete
inventories
(167,628)
(142,387)
At end of year
(2,047,360)
(2,014,636)
-
-
-
-
-
-
-
-
As of 31 December 2022, inventories of USD6,981,516 (2021: USD4,297,227) were pledged to
secure the Halyk Bank JSC working capital facilities (Note 20).
81
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 15.
TRADE AND OTHER RECEIVABLES
The Group
2021
USD
2022
USD
The Company
2021
USD
2022
USD
Trade receivables
2,690,885
2,392,267
Less: Loss allowances
(1,166,679)
(1,233,713)
Net
1,524,206
1,158,554
Other receivables:
Receivables from
employees
Others
Interest receivable
165,888
354,910
-
172,078
421,088
-
-
-
-
-
-
-
-
-
-
-
2,372,114
1,724,364
Total
2,045,004
1,751,720
2,372,114
1,724,364
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.
Interest receivable represents amount owing from a subsidiary.
Movement in the credit loss allowances for trade receivables is as follows:
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
At beginning of year
Exchange differences
Add: Impairment losses
Less: Write-offs
(1,233,713)
(1,340,469)
82,612
(174,650)
159,072
34,034
(594,901)
667,623
At end of year
(1,166,679)
(1,233,713)
-
-
-
-
-
-
-
-
-
-
82
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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:
The Group
Days past due
2022
Not past due
1-90 days
91-180 days
181-270 days
271-360 days
1-2 years
>2 years
Expected credit loss rate Gross carrying amount
at default
Lifetime ECL
USD
USD
0%
8%
11%
23%
48%
65%
100%
208,142
275,171
641,087
520,184
69,606
158,863
817,832
-
22,014
70,520
119,641
33,410
103,262
817,832
2,690,885
1,166,679
Days past due
Expected credit loss rate Gross carrying amount
at default
Lifetime ECL
USD
USD
2021
Not past due
1-90 days
91-180 days
181-270 days
271-360 days
1-2 years
>2 years
0%
5%
8%
22%
42%
62%
100%
751,507
110,974
173,246
65,138
13,550
219,920
1,057,932
-
5,549
13,860
14,330
5,691
136,351
1,057,932
2,392,267
1,233,713
83
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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 USD25,512 (2021: USD28,082) included in other
receivables.
16.
ADVANCES AND PREPAID EXPENSES
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Advances paid to third
parties
Less: Provision on
advances paid to third
parties
Net advances paid to
third parties
Prepaid expenses
8,551,618
5,029,506
(263,486)
(127,706)
8,288,132
289,582
4,901,800
332,094
Total
8,577,714
5,233,894
Advances are mainly advances for materials and services.
Movement of allowance for advances paid to third parties is as follows:
-
-
-
7,305
7,305
-
-
-
4,971
4,971
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
At beginning of year
(127,706)
(119,054)
Exchange differences
Add: Allowance for
advances paid to third
parties
Less: Write-offs
At end of year
8,551
3,024
(157,723)
(11,676)
13,392
-
(263,486)
(127,706)
-
-
-
-
-
-
-
-
-
-
84
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
17.
CASH AND CASH EQUIVALENTS
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Cash in hand and at banks
Short-term deposits
4,059,613
84,340
1,142,923
8,993,099
1,239,827
614,225
-
-
Total
4,143,953
10,136,022
1,239,827
614,225
As of 31 December 2022, 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 (2021: 7% and 8% per annum) respectively.
18.
SHARE CAPITAL
The Group and the Company
2022
USD
2021
USD
Issued and fully paid:
219,000,000 ordinary shares of no par value each:
Year-end balance
73,760,924
73,760,924
85
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
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 2021, the Company declared a final dividend of GBP0.025 per ordinary share amounting to
GBP5,475,000 (USD7,494,400) in respect of the financial year ended 31 December 2020. The
payment was made on 20 July 2021.
In 2022, the Company declared an interim dividend of GBP0.050 per ordinary share amounting to
GBP10,950,000 (USD12,555,270) in respect of financial year ended 31 December 2021. The payment
was made on 24 November 2022.
86
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 20.
BORROWINGS
Secured - at amortised cost
Bank loans
Bank loans:
Current
Non-current
Details of bank loans are as follows:
The Group
2022
USD
2021
USD
6,728,214
5,556,184
2,814,525
3,913,689
6,728,214
3,614,801
1,941,383
5,556,184
Halyk Bank JSC for
capital expenditure
Halyk Bank JSC for
working capital
Accrued interest
Total outstanding
Currency Maturity month
Interest
rate
The Group
2022
USD
2021
USD
KZT
KZT
KZT
August 2022
6% p.a.
-
145,296
June 2025
6% p.a.
210,444
305,702
September to
November 2025
6% p.a.
424,377
747,024
KZT
December 2027
6% p.a.
1,537,906
1,912,062
KZT
December 2027
6% p.a.
101,956
127,850
KZT
KZT
KZT
KZT
February to
November 2029
January to
December 2023
6% p.a.
1,759,849
6% p.a.
1,418,171
-
-
June 2022
6% p.a.
-
2,317,370
June 2023
6% p.a.
1,274,689
822
-
880
6,728,214
5,556,184
87
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
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 a
maturity period of 5 years and secured against property, plant and equipment with a net book value
of USD3,646,621 (Note 10). No further amounts are available for drawdown from this facility. This
loan has been fully repaid in year 2022.
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
drawdown 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 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.
During 2022, the subsidiary (CAC JSC) concluded long-term agreements under the government
programs with Halyk Bank JSC of Kazakhstan for KZT1,999 million (USD4,320,540) at 6% per annum
for mill modernization. The loan is used for capital expenditure with maturity period of 7 years and
secured against property, plant and equipment with a net book value of USD3,671,853 (Note 10). No
further amounts are available for drawdown from this facility.
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
In year 2021, 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 were repayable in June 2022 and are secured
against inventories of USD4,297,227 (Note 14). These short-term facilities had fully repaid in year
2022.
In year 2022, the subsidiaries (CAC JSC and Karcement JSC) entered into short-term facility
agreements with Halyk Bank JSC for working capital requirements of KZT494 million (USD1.1 million)
and KZT 96 million (USD0.2 million) respectively under the government programs bearing an interest
rate of 6% per annum. The short-term borrowings are repayable in June 2023 and are secured
against inventories of USD6,981,516 (Note 14).
As of 31 December 2022, all working capital facilities of KZT2.4 billion (2021: KZT2 billion) with Halyk
Bank JSC are available for drawdown which is equivalent to USD5,103,000 (2021: USD4.6 million).
88
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
21.
LEASE LIABILITIES
Operating leases analysed as:
Non-current
Current
Balance as of 31 December
The Group
2022
USD
-
58,960
58,960
2021
USD
8,571
2,017,879
2,026,450
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 2022:
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
The Group
2022
USD
2021
USD
66,212
2,156,391
-
-
66,212
(7,252)
9,174
-
2,165,565
(139,115)
58,960
2,026,450
The Group
2022
USD
2,026,450
(2,033,181)
194,232
(128,541)
2021
USD
3,907,423
(2,181,952)
376,590
(75,611)
Balance as of 31 December
58,960
2,026,450
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.
89
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 22. DEFERRED TAXES
The Group
The Company
At beginning of year
Exchange differences
Recognised in profit or loss
(Note 8)
2022
USD
2021
USD
(4,318,652)
(4,559,927)
238,063
163,408
813,814
77,867
At end of year
(3,266,775)
(4,318,652)
Movement in net deferred tax assets/(liabilities) of the Group is as follows:
2022
USD
2021
USD
-
-
-
-
-
-
-
-
2022
USD
USD
USD
USD
Opening
balance
Exchange rate
differences
Recognised in
profit or loss
Closing
balance
Temporary differences:
Property, plant and equipment
(5,013,360)
402,986
245,347
27,794
8,757
9,824
332,869
(27,115)
(16,556)
(1,892)
11,162
(60,405)
728,929
(3,951,562)
33,603
32,785
8,068
(1,616)
12,045
409,474
261,576
33,970
18,303
(38,536)
(4,318,652)
238,063
813,814
(3,266,775)
Inventories
Trade receivables
Accrued unused leaves
Payables
Others
Total
2021
Temporary differences:
Property, plant and equipment
(5,184,229)
131,106
39,763
(5,013,360)
Inventories
Trade receivables
Accrued unused leaves
Payables
Others
Total
384,205
258,366
23,522
12,419
(54,210)
(10,135)
(6,475)
1,594
(2,526)
49,844
28,916
(6,544)
402,986
245,347
2,678
27,794
(1,136)
14,190
8,757
9,824
(4,559,927)
163,408
77,867
(4,318,652)
90
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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
2022
USD
2021
USD
2022
USD
2021
USD
Tax losses for which no
deferred tax assets have
been recognised
1,398,350
1,398,350
-
-
The unutilised tax losses of USD1,398,350 (2021: USD1,398,350) has been imposed with a time limit
of utilisation, which will be disregarded in the year of assessment 2026 to 2031 (2021: 2026 to 2031).
23. DEFERRED INCOME
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Deferred income
2,712,811
1,691,818
Less: Amount due within
12 months
(140,259)
(103,720)
Non-current
2,572,552
1,588,098
Movement of deferred income are as follows:
-
-
-
-
-
-
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
At beginning of year
Exchange differences
Additions
Recognised in profit or loss
1,691,818
(133,630)
1,294,882
(140,259)
1,598,852
(40,594)
239,507
(105,947)
At end of year
2,712,811
1,691,818
-
-
-
-
-
-
-
-
-
-
91
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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 2022 and 2021, 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 to USD1,294,882 (2021: USD239,507) was recognised as deferred income in
the statement of financial position.
As of 31 December 2022, the related assets amounted to USD912,398 (2021: USD796,391) were put
into use. During financial year, the Group recognised USD140,259 (2021: USD105,947) in profit or
loss as other income on a straight-line basis over the useful lives of these related assets.
24.
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Amount due to related parties
Others
Total
The Group
The Company
2022
USD
4,027,000
3,307,237
-
14,350
2021
USD
3,911,856
1,139,167
765
9,917
7,348,587
5,061,705
2022
USD
2021
USD
-
-
-
-
-
-
-
-
-
-
The credit period granted by creditors ranges from 1 to 30 days (2021: 1 to 30 days).
Other payables mainly arose from purchase of property, plant and equipment and spare parts.
92
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 25.
ACCRUED AND OTHER LIABILITIES
Accrued directors’ fees
Advances from customers
Accrued salaries
Accrued unused leave
Others
Total
26.
TAXES PAYABLE
The Group
The Company
2022
USD
97,104
1,434,123
409,824
132,601
177,037
2021
USD
178,472
783,990
336,199
96,576
157,541
2022
USD
97,104
-
-
-
2021
USD
178,472
-
-
-
46,704
49,425
2,250,689
1,552,778
143,808
227,897
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Corporate income tax
142,329
276,473
Other taxes:
VAT payable
Royalties
Emission taxes
Pension fund
Personal income tax
Social tax
Withholding tax
Others
23,540
48,412
58,723
40,560
37,054
13,524
1,476
5,136
213,571
195
67,026
32,606
32,279
13,522
115
3,549
Total
370,754
639,336
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
Advances to subsidiary companies of the Company amounted to USD30,352 (2021: USD19,536) are
unsecured, interest-free and are repayable on demand.
Loan to a subsidiary company of USD30,050,000 (2021: USD30,080,000) is repayable by year 2033,
while another amount of USD30,000 (2021: USD30,000) is repayable in the subsequent year. This
loan bears interest at 8% per annum (2021: 8% per annum).
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:
The Group
Purchase of services
2022
USD
8,593
2021
USD
9,295
Payable to related party
2022
USD
-
2021
USD
765
Other related party
Office rental
Other related party
Office rental
94
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
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:
Subsidiary companies
Nature of transactions
2022
USD
Steppe Cement (M) Sdn. Bhd.
Dividend income
13,309,140
2021
USD
-
Karcement JSC
Interest income
1,332,302
1,469,264
MECS Ltd.
Interest income assigned
(865,000)
(740,000)
Subsidiary companies
Nature of transactions
Receivable from/(payable to)
subsidiary companies
2022
USD
2021
USD
Karcement JSC
Intercompany loans
30,080,000
30,110,000
Karcement JSC
Interest income
2,372,114
1,724,364
MECS Ltd.
Advances
30,352
19,536
Steppe Cement (M) Sdn. Bhd.
Advances
(244,656)
(289,750)
Total
32,237,810
31,564,150
95
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 Compensation of key management personnel
The remuneration of directors and other members of key management are as follows:
The Group
The Company
2022
USD
2021
USD
2022
USD
2021
USD
Short-term benefits
840,660
789,942
134,137
100,000
Short-term benefits include contributions paid by the Group and by the Company to defined
contribution plans amounting to USD36,784 (2021: USD22,848) and Nil (2021: 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
Wan Affan Azam Bin Wan Azmi
The Company
2021
USD
30,000
40,000
30,000
-
2022
USD
30,000
50,000
40,000
14,137
Total
134,137
100,000
Alternate directors’ allowance
Alternate directors:
Gan Chee Leong (Alternate to Javier del Ser Perez)
Charlie Tingey (Alternate to Rupert Wood)
Total
-
-
-
500
500
1,000
In prior financial year, the alternate directors were paid for their attendance in board meetings to
represent Javier del Ser Perez and Rupert Wood respectively.
96
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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
Loans and advances to subsidiary companies
Cash and cash equivalents
Financial liability
At amortised cost:
Accrued and other liabilities
Advance from a subsidiary company
The Group
2022
USD
2021
USD
2,045,004
4,143,953
1,751,720
10,136,022
7,348,587
816,566
6,728,214
58,960
5,061,705
768,788
5,556,184
2,026,450
The Company
2022
USD
2021
USD
2,372,114
30,110,352
1,239,827
1,724,364
30,129,536
614,225
143,808
244,656
227,897
289,750
97
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 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.
98
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 Foreign currency sensitivity analysis
The carrying amounts of the Group’s and of the Company’s financial assets and financial liabilities in foreign
currencies as of 31 December are presented below:
The Group
2022
Financial Asset
GBP
EUR
MYR
RUB
Total
Cash and cash equivalents
503,597
14,602
8,572
-
526,771
Financial Liabilities
Trade and other payables
-
677,808
-
222,585
Accrued and other liabilities
39,923
-
54,857
2021
Financial Asset
Cash and cash equivalents
1,747
67
9,084
-
-
Financial Liabilities
Trade and other payables
-
515,477
-
58,800
Accrued and other liabilities
42,992
-
66,602
-
900,393
94,780
10,898
574,277
109,594
99
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 The Company
2022
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
2021
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
GBP
EUR
MYR
Total
428,932
55
8,378
437,365
39,923
-
50,859
90,782
-
67
6,322
6,389
42,992
-
47,343
90,335
100
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd. 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.
The Group
GBP
EUR
MYR
RUB
The Company
GBP
EUR
MYR
Impact on profit or loss
and equity
2022
2021
(92,735)
132,641
9,257
44,517
(77,802)
(11)
8,496
8,249
103,082
11,504
11,760
8,598
(13)
8,204
101
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022
(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
2022, the Group’s trade receivables from third parties are mostly represented by ten large
customers, representing 52% of trade accounts receivable for cement sales (2021: 53%). 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 2022, the subsidiaries (CAC JSC and Karcement JSC) working capital
facilities of USD5.1 million (2021: USD6.9 million) with Halyk Bank JSC is 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.
102
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Annual Report 2022Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Annual Report 2021Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Annual Report 2022Steppe 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 2022 and 2021, 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, advances to subsidiary companies, trade and other payables and
accrued and other liabilities and amount owing to a subsidiary company
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.
Loans to subsidiary company
The fair values of the loans to subsidiary company are estimated by discounting expected future
cash flows at market interest rates prevailing at the end of the relevant year with similar maturities
adjusted by credit risk.
As of 31 December 2022 and 2021, the fair values of loans to subsidiary company was not significantly
different from their carrying value.
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.
106
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd.
As of 31 December 2022 and 2021, the fair values of borrowings were not significantly different from
their carrying value.
Fair value measurements recognised in the statement of financial position
Fair value measurement disclosure of property, plant and equipment that are recognised or measured
at fair value, can be found in Note 10.
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable.
2022
Property, plant and
equipment
2021
Property, plant and
equipment
Level 1
Level 2
Level 3
USD
USD
USD
Total
USD
-
-
1,614,044
5,122,673
6,736,717
1,729,880
5,979,387
7,709,267
There were no transfers between Level 1 to Level 3 during the year.
29.
CAPITAL COMMITMENTS
The Group has outstanding amount of contractual commitments for the acquisition of property, plant
and equipment of USD6,432,413 as of 31 December 2022 (2021: USD7,599,836).
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.
107
Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022 31. CONTINGENT LIABILITIES
(a) Tax Audit
Laws and regulations affecting business in the Republic of Kazakhstan continue to change rapidly.
The Group subsidiaries’s interpretation of such legislation as applied to their operating activities
may be challenged by the relevant authorities. Recent events suggest that the tax authorities are
taking a more assertive position in their interpretation of the legislation and assessments and as a
result, it is possible that transactions and activities that have not been challenged in the past may
be challenged. Fiscal periods generally remain open to tax audit by the authorities in respect of
taxes for five calendar years preceding the year of tax audit. Under certain circumstances reviews
may cover longer periods. The subsidiaries believe that they have provided adequately for tax
liabilities based on their interpretations of tax legislation.
During 2022, one of the subsidiaries had a tax audit for the period of from 1 January to 31
December 2016. Besides, the subsidiary had tax inspection for 2017-2020. Another subsidiary
had a tax audit for the period from 1 October 2017 to 30 September 2022.
The subsidiaries believe that they are not expecting significant impact on the financial statements.
As of the date of the financial statements the subsidiaries did not receive the tax inspection
report or claim.
(b) Environmental obligations
On 1 July 2021, the new Environmental Code of the Republic of Kazakhstan (the “Code”) came
into force. This Code contains a number of principles aimed at minimizing the consequences
of environmental damage to the activities of enterprises and / or the complete restoration of
the environment to its original state. Depending on the level and risk of negative impact on
the environment, companies are classified into four categories, where subsidiaries that have a
significant negative impact on the environment belong to the first category. The subsidiaries
have been assigned to the first category by the Ministry of Ecology, in accordance with Article
43-9 of the Law of the Republic of Kazakhstan dated 2 January 2021 “On amendments and
additions to the Code of the Republic of Kazakhstan” on the basis that the subsidiaries belongs
to the cement and lime industry. The subsidiaries have analysed effect of implementation of the
new Code and effect was not material.
108
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2022Steppe Cement Ltd. 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 2022 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
Date: 26 May 2023
109
Annual Report 2022 NOTICE OF THE 2023 AGM
NOTICE IS HEREBY GIVEN that the 2023 ANNUAL GENERAL MEETING of the Company will
be held at the office of Steppe Cement Ltd, Suite 10.1, 10th Floor, West Wing, Rohas Perkasa,
8, Jalan Tun Perak, Kuala Lumpur, Malaysia on Wednesday, 12th July 2023 at 4.00p.m. for the
purpose of considering and if thought fit, passing the following Resolutions:
ORDINARY RESOLUTIONS
1. ADOPTION OF AUDITED FINANCIAL STATEMENTS FOR
THE FINANCIAL YEAR ENDED 31 DECEMBER 2022
To receive and adopt the audited financial statements for year
RESOLUTION 1
ended 31 December 2022.
2. RE-ELECTION OF DIRECTORS
RESOLUTION 2
To re-elect the following Directors who offered themselves for
re-election:
2.1 Javier Del Ser Perez
2.2 Rupert Wood
2.3 Xavier Blutel
2.4 Wan Affan Azam Bin Wan Azmi
3. To transact any other business of which due notice shall have
been given in accordance with the Labuan Companies Act, 1990.
BY ORDER OF THE BOARD
XAVIER BLUTEL
Chairman
110
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.
111
Annual Report 2022 112
Steppe Cement Ltd. 113
Annual Report 2022 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