Plant Location In
KAZAKHSTAN
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
10 CEO’s Statement
15 Board Of Directors
16 Senior Management Karcement JSC & CAC JSC
18 Chairman’s Statement on Governance
22 Corporate Governance
28 Nomination Committee Report
29 Remuneration Committee Report
30 Audit Committee Report
34 Financial Statements
105 Statement by a Director
106 Notice of Annual General Meeting
Annual Report 2023
3
3
Annual Report 2023 Revenue (USD Million)
2023
2022
2021
2020
2019
81.8
86.7
84.6
74.8
79.9
Profit After Tax (USDMillion)
2023
2022
2021
2020
2019
4.5
17.9
17.1
11.1
9.7
Revenue (KZT Billion)
2023
2022
2021
2020
2019
37.3
40
36
30.9
30.5
EBITDA*
(USDMillion)
2023
2022
2021
2020
2019
12.4
31
31.5
24.2
23.9
*excluding foreign exchange gain/losses arising on
devaluation of the Tenge
Shareholders Funds (USDMillion)
2023
2022
2021
2020
2019
70.7
65.1
65.6
58
62.9
4
4
Steppe Cement Ltd.
Steppe Cement Ltd. 2023
2022
2021
2020
2019
20
21.0
18.1
15.8
14.9
2023
2022
2021
2020
2019
43
43
45
38
39
Ex-factory price (KZT per tonne ‘000)
Ex-factory price (USD)
2023
2022
2021
2020
2019
0.09
0.20
0.16
1.63
1.67
1.60
1.44
1.55
2023
2022
2021
2020
2019
11.5
11.6
11.6
9.4
8.9
Sales volume (Million tonnes)
Market Size (Million tonnes)
Export
Domestic
2023
2022
2021
2020
2019
456
461
426
413
383
2023
2022
2021
2020
2019
82
86
87
87
90
Average exchange rates (USD/KZT)
Capacity utilisation (%)
Annual Report 2023
5
5
Annual Report 2023 Financial Data
Data
Gross profit margin (%)
Profit after tax margin (%)
Net earnings per share (cents)
Return on shareholders funds (%)
NTA Per Share (cents per share)
2019
2020
2021
2022
2023
42
12
4
15
29
43
15
5
19
26
47
20
8
26
30
43
21
8
27
30
30
6
2
6
32
219
Number of shares issued (million)
219
219
219
219
6
6
Steppe Cement Ltd.
Steppe Cement Ltd. CORPORATE INFORMATION
Nominated Advisor
Strand Hanson Limited
26 Mount Row
London
W1K 3 SQ, United Kingdom
Broker
Strand Hanson Limited
26 Mount Row
London
W1K 3 SQ, 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
Maybank Berhad
OCBC Bank Malaysia Berhad
Solicitor
BMF Group LLP
Alatau Business Center
151 Abay Street, Almaty
050009, Republic of Kazakhstan
Listings
London Stock Exchange AIM, London
Since 15 September 2005
AIM Stock Code
STCM
Country of Incorporation
Federal Territory of Labuan, Malaysia
Company Registration
LL04433
Registered Office
Brumby Centre
Lot 42, Jalan Muhibbah
87000 Federal Territory of Labuan
Malaysia
Kuala Lumpur Office
Suite 10.1, 10th Floor
Rohas Perkasa, West Wing
No.8, Jalan Perak
50450 Kuala Lumpur Malaysia
Labuan Office
Suite No. 4, Unit Level 9(E)
Main Office Tower, Financial Park Labuan
Jalan Merdeka
87000 Federal Territory of Labuan
Malaysia
Main Country of Operation
(Operating Subsidiaries Address)
472380, Aktau Village
Karaganda Region
Republic of Kazakhstan
Company Secretary
TMF Trust Labuan Limited
7
Annual Report 2023 Chairman’s Statement
‘‘Domestic demand for cement was 11.5 million
tons, close to its historic record reached in 2021
and maintained in 2022 (11.6 million tons).
Despite a favourable exchange rate, Russian
producers did not increase exports due to their
high production costs and difficult logistics. .’’
In 2023, Kazakhstan managed to benefit from
its geopolitical position on various trade routes.
President Tokayev, with all his diplomatic experience,
has skilfully navigated the challenges posed by global
events. Kazakhstan has maintained and revived
commercial links with practically all concerned
parties, including China, Russia, the European Union,
and multinational companies in the oil and extraction
sectors.
Western sanctions do not seem to have had a
significant detrimental effect on Kazakh trade with
its larger neighbour, though there has been some
impact. The Kazakh economy remains too closely
intertwined, with the much larger neighbouring
Russian economy to be disentangled.
Halyk bank estimates a 2023 GDP growth rate of
approximately 5.1% far above prior expectations
(3.2% in 2022). Think tanks such as World Economics
Research (London), specialising in converting GDP
into Purchasing Power Parity terms, report a 32%
increase in GDP under their methodology, ranking
Kazakhstan between Belgium and Switzerland in
absolute value.
Inflation at 9.8% was substantially reduced compared
to 2022 but remains a concern for its social impact
on consumption and private
investment. The
government target for 2024 is between 5.5% and 7%
but it is still hovering above 9% in the first quarter
of 2024. The base lending rate stood at 15.75% in
December. Gross fixed capital formation was strong
but mostly attributable to a fiscal stimulus and private/
public investment in transport infrastructure and
other public investments. The Tenge, the national
currency, weakened against the US dollar between
August and November but has since recovered
Dear Shareholders,
In 2023, Steppe Cement sold 1.63 million tons of
cement, a slight decrease from the 1.67 million tons
sold in 2022.
As you are aware, the profits from 2022 and 2023
have allowed for the payment of dividends, a course
of action that the Board supports in principle.
However, as set out in RNS announcements there
are significant challenges presented by changing
legislation in relevant jurisdictions.
Over the past fourteen months the Board and
management have been working continuously to
explore all possible alternatives, concluding that
the Capital repurchase announced on 5th of April
2024 and concluded on 23rd of May 2023 was
the most effective method of distributing funds to
shareholders. The Board has resolved to restructure
existing group to minimize the number of jurisdictions
in which it has incorporated entities, and a strategy
has been developed to effect this over coming years.
8
Steppe Cement Ltd. and stabilized at the 2023 H1 level around 446 KZT
per USD. It strengthened substantially against the
Russian Ruble between January and July and has
remained at about 5 KZT/RUB since then (+24% vs.
January and +48% vs. the peak RUB value of July
2022).
How did this overall background influence the
Company’s activity and how did we react?
Domestic demand for cement was 11.5 million tons,
close to its historic record reached in 2021 and
maintained in 2022 (11.6 million tons). Despite a
favourable exchange rate, Russian producers did not
increase exports due to their high production costs
and difficult logistics.
competitive pressure
Strong
from domestic
producers is now a fact of life in South Kazakhstan.
At the same time, railway rates have increased,
wagons are scarce, and the network is extremely
congested by transit to and from Russia and along
the Silk Road. As a result, selling prices are moving
down whilst logistics costs are inflated in the Almaty
and Shymkent market.
In view of this, the Board and management have
redefined their commercial strategy to capitalize on
the Company’s structural strengths:
Sales will be concentrated to the primary Karaganda
and Astana markets, representing approximately
three million tons of consumption. Every delivery
which can be made by trucks will avoid the heavy
and expensive costs associated to rail and directly
reach the ultimate customer. We believe that we are
the lowest cost producer in this market, close to coal
mines and blast furnace slag supplies, and benefit
from our proximity to the market, good roads, and
weaker competition.
in
this
This strategy aims to maintain our market share
without sacrificing margins
inflationary
and competitive environment. Being successful
demands a high level of reliability from our factory.
I am grateful to our technical team who achieved
daily combined production of clinker in excess of
5,600 tons per day when both kilns were running
concurrently. Recent improvements demonstrate an
even better performance in January 2024. Several
modifications were tailored and implemented at
minimal cost. This continuous debottlenecking and
process optimization will increasingly bear fruit. It is
worth remembering that a better reliability not only
translates into more productive capacity but also in
lower energy consumption – every long stoppage
calls for preheating of the kiln using expensive fuel.
This comprehensive strategy leads me to express
an optimistic view for the future. The challenges
encountered in the market and in terms of fiscal
uncertainties are being responded to with adequate
actions and strong determination.
The Board and I are grateful to our employees
and management for their dedication, and to
shareholders for their trust and loyalty. We are also
glad to welcome Strand Hanson Limited as our new
Nominated and Financial Adviser.
Xavier Blutel
Chairman,
Independent Non-Executive Director
9
Annual Report 2023 CEO’s Statement
2023,
Steppe Cement
‘‘During
operated both lines at 82% of their
combined capacity. Capacity has been
increased by 0.1 million tonnes so far
in 2024 after the modification to the
preheater tower at line 6, which was
completed in late 2023.’’
The political environment stabilised in Kazakhstan
in 2023 benefiting the country through higher trade
and transit of goods. Meanwhile, Kazakhstan’s
population, primarily concentrated in the southern
regions, continues to grow reaching 20 million people
by the end of 2023. The growth in the economy
and population brought significant inflation across
the board and specifically in the transport sector
with logistical bottlenecks in the main corridors to
Russia and China caused by the overload of the rail
transport system.
In a more stable political environment, the cement
market in Kazakhstan decreased slightly in 2023
to 11.5 million tonnes resulting in a per capita
consumption of 575 kg/person per year. Looking
ahead, significant population growth, lower interest
rates and high commodity prices are expected to
improve the housing construction sector in 2024.
Steppe Cement’s sales volume decreased by 3%
compared with the previous year, due to logistical
difficulties in the railway system. Traffic to and from
Russia, as well as transit from China, increased
significantly in 2023. The Company’s domestic
sales increased by 4%, but exports were reduced to
virtually zero.
Overall, cement imports into Kazakshtan mostly from
Russia to the Aktobe region, decreased by 0.1 million
tonnes to 0.5 million tonnes during the period,
being equivalent to 4% of the total cement market.
Exports from local producers increased slightly by
9% to 1.2 million tonnes during the year, with these
being increasingly to Kyrgystan. Uzbekistan has
commisioned a lot of new capacity that has brought
lower prices such that exports from Kazakhstan are
now less profitable. Exports remain concentrated
towards the Tashkent and Bishkek areas which are
very close to the three main producers in South
Kazakhstan.
The Kazakhstan cement market has balanced demand
and production levels, although some new entrants
have won market share at the expense of historical
players. Seasonal market demand decreased in the
first quarter of the year due to weather conditions;
and then bounced back in the summer season. The
northen regions are more affected by this tendency
and we expected this pattern to continue over the
course of 2024. We therefore decided to build
our stocks of clinker in the first quarter of 2024 in
preparation for meeting demand later in the year.
10
Steppe Cement Ltd. Key financials
Year ended
31- Dec-23
Year ended
31- Dec-22
Inc/(Dec)%
Sales (tonnes of cement)
1,626,268
1,670,174
Consolidated turnover (KZT million)
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)
37,286
81.8
5.4
4.5
2.1
70.7
456
454
40,023
86.7
21.3
17.4
8.0
65.1
461
462
(3%)
(7%)
(6%)
(75%)
(74%)
(74%)
9%
(1%)
(2%)
From early 2023, the Kazakhstan government stated
its intention to lower inflation. However, at an
annualized rate of 9.8% in 2024, it remains similar
to 2023. The National Bank has reduced the base
interest rate to 14.75% as of April 2024 from a peak
of 16.75% in mid 2023. The interbank rate (TONIA)
which was hovering at 9% from 2018 to early 2022,
peaked at 17.5% in late 2022 and has now come
down to 13%. Higher interest rates makes investment
in house building as well as new cement capacity
more difficult to justify.
In 2023, Steppe Cement recorded a net profit of
USD4.5 million compared to a net profit of USD17.9
million in 2022, while EBITDA fell to USD12.4 million
from USD 31 million. This reduction was mostly due
to an increase in the cash cost of production of USD8
million due to inflation. The Company could not
pass this increased cost to its clients due to strong
competition from other cement producers. Other
factors contributing to a higher cost of production
were the higher transportation costs, despite the
focus on markets closer to Karaganda, lower selling
prices and lower sales volumes.
Steppe Cement’s average cement selling prices
decreased by 4% in KZT and USD, to USD50 per
tonne delivered.
During 2023, Steppe Cement operated both lines at
82% of their combined capacity. Capacity has been
increased by 0.1 million tonnes so far in 2024 after
the modification to the preheater tower at line 6,
which was completed in late 2023. This was part of
a USD3.1 million CAPEX/ refurbishment programme
to ensure the ability of our plant and equipment to
efficiently meet future production requirements. It
is expected that USD2.4 million will be invested in
2024 to continue this work. Further details on CAPEX
are set out below.
Shareholders’ funds increased to USD70.7 million at
the end of 2023 from USD65.1 million at the end of
2022 as there was no dividend distributed. A capital
repayment of approximately USD4.2 million was
subsequently paid in June 2024.
11
Annual Report 2023 CEO’s Statement
It is also worth noting that our factory receives an
allocation of CO2 emissions from the government
and it does not trade them, as we need them
for production. There is a very small market for
alternative fuels and they are so far not competitively
priced versus coal. However we have started to use
pyrolysis oil in lieu of diesel wherever possible. At
the same time, the use of additives in the cement
formula is limited by current regulations. Clients tend
to prefer cement with a limited amount of additives,
particularly in the winter season.
Production and operating costs
Line 5 worked at 80% of its capacity, producing
878,184 tonnes of cement, while Line 6 worked at
83% and produced 748,084 tonnes. As mentioned
above, the Company expects higher figures for 2024
as clinker production has already increased by 27%
in the first quarter of 2024.
In 2023, cost per tonne of cement increased by 19% in
KZT which was a higher rate than the official inflation
figure published by the National Bank of Kazakhstan
of 9.8%. Electricity tariffs increased by 38%, coal
costs by 21%, railway tariffs by 28%, diesel costs
by 8%, salary expenses by 20% and wagon rental
increased by 90% as our long term rental agreement
had to be renewed, but it was partly offset by our
higher rental revenue in winter through leasing out
the wagons when not in use. These increases were
implemented in the first half of 2023 after the official
inflation figure for 2022 of 20.3% was published.
The average production cost of clinker increased
from USD23/tonne to USD29/tonne, while the cost
of cement increased from USD27/tonne to USD33/
tonne in 2023.
Selling expenses, reflecting mostly cement delivery
costs, inceased to USD8.1/tonne from USD6.7/
tonne last year. The inflation in railway transport
was much higher but we concentrated our sales in
nearby markets by truck delivery, thereby reducing
our reliance on the railway lines. General and
administrative expenses also increased to USD7.1
million in 2023 from USD6.2 million in 2022 as a
consequence of salary increases.
On 31 March 2024 the Company had 794 employees,
a 2% decrease compared with the previous year.
In 2023, finance costs were USD 0.9 million, 13%
lower than in 2022, mostly as a result of decreased
interest paid on loans and current banking fees.
Other income of USD1.8 million during the period
reflects mostly the income from the rental of the
Company’s railway wagons when they are not being
used in winter.
Capital investment
Capital investment reduced significantly to USD3.1
million during the year following the reduction in
margins. The Company managed to complete three
major projects in 2023 which were financed by
internal cash flow:
•
•
•
the implemation of a new separator for cement
mill two, at a cost of USD 2 million, which was
finally commissioned in March 2024 and which
has so far increased its capacity by 25% since its
installation;
the preheater raiser duct’s extension by 24
meters to improve the preheater calcination in
line 6 which has shown very positive results in
terms of capacity and heat consumption; and
the conversion of raw mill 3’s separator into a
dynamic separator to support the increased
production of line 6 by 10% when completed.
The Company has plans for a further USD2.4 million
investment in 2024 including:
•
•
•
the conversion of the raw mill 3 separator, from
static to dynamic, at a cost of USD1 million to
increase capacity, reliability, quality and to reduce
electricity consumption;
the modification of the line 6 cooler extraction
system at a cost of USD 0.35 million to improve
reliability and reduce heat losses; and
software and hardware upgrades in the control
system at a cost of USD0.7 million to allow further
automatisation of the factory.
12
Steppe Cement Ltd. Financing
Commercial interest rates in Kazakhstan remain
high at 14.5% after having reached 20% per
annum in 2023. The government has reactivated
the subsidised credit lines under certain conditions
and the Company intends to apply to obtain them
to finance capex whenever possible. At the end of
2023, the Company’s total loans outstanding were
stable at USD6.5 million versus USD6.7 million in
2022. Long-term loans decreased to USD2.8 million
from USD3.9million, while short term loans increased
to USD3.6 million from USD2.8 million. All the loans
had subsidized interest rates.
Taking the cash on hand into consideration, the
Company ended 2023 with zero net debt, excluding
IFRS 16 leases, mostly rental wagons.
Steppe maintains its short term credit lines as a stand
by including:
• KZT 1 billion short term in a government
subsidized program in KZT at 6% per annum
• KZT 2 billion from Halyk Bank at 6% p.a. in USD
or 20% in KZT.
The KZT strenghtened by 1% against the USD with
an average exchange rate of 456 KZT/USD in 2023
vs 461 KZT/USD in 2022.
Javier del Ser Perez
Chief Executive Officer
13
Annual Report 2023 Mechanical & Electrical
Consulting Services Ltd
(Malaysia)
Steppe Cement Astana Ltd
(Kazakhstan)
Steppe Cement Malaysia
Sdn Bhd (Malaysia)
100%
100%
100%
Steppe Cement Holdings
B.V.
(Netherlands)
100%
Karcement JSC
(Kazakhstan)
100%
Central Asia
Services LLP
(Kazakhstan)
100%
Central Asia Cement
JSC
(Kazakhstan)
100%
14 Steppe Cement Ltd.
14
Steppe Cement Ltd.
BOARD OF DIRECTORS
Xavier Blutel, 69, 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.
XAVIER BLUTEL
Chairman,
Independent Non-Executive
Director
Javier del Ser Perez, 58, 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, Steppe Cement (M) Sdn Bhd and
Mechanical and Electrical Consulting Services Ltd.
JAVIER DEL SER PEREZ
Chief Executive Officer
Rupert Wood, 53, 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.
RUPERT WOOD
Independent Non-Executive
Director
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.
15
WAN AFFAN AZAM
WAN AZMI
Non-Independent
Non-Executive Director
Annual Report 2023 Central Asia Cement JSC
Peter Durnev, General Director
A graduate of Academy Marketing Moscow. He has worked in CAC for 27 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 34 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 39 years.
16
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.
Mohammed Ismail, Head of Production, Process and Quality Assurance
Mohammed Ismail, a Klin expert by profession. Having 35 years of vast experience in dry process cement
industry in India and abroad, handled pyro profile, raw mix requirements and optimization, production and
planning, refractory management, handling of alternative fuels (Hazardous and non-hazardous materials
substitution rate till 30%), handling WHRS (Waste Heat Recovery System). Before joining Kar Cement, He
served at VICAT cements in India as Deputy General Manager for Process Production and Quality Control
for 7 years. Handled two green field projects, one in abroad Saudi Arabia in SPCC and two brown field
projects in India
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 9 years.
17
Annual Report 2023 Chairman’s Statement on Governance
We are pleased to present our 2023 Corporate Governance Statement.
This Statement describes our approach to corporate governance
and the governance practices in place at Steppe Cement and its
subsidiaries.
OUR VISION
To be Kazakhstan’s leading, most sustainable,
profitable, trusted and competitive cement producer.
OUR VALUES
DEDICATION
TO
CUSTOMERS
QUALITY OF
PRODUCT &
SERVICES
SAFEGUARD
AND
ENHANCE
ASSET VALUE
EMPOWER
AND RESPECT
EMPLOYEES
BE
ACCOUNTABLE
AT ALL LEVELS
SHAREHOLDERS
STEPPE CEMENT BOARD
BOARD AUDIT
COMMITTEE
BOARD
REMUNERATION
COMMITTEE
BOARD
NOMINATIONS &
GOVERNANCE
COMMITTEE
MANAGEMENT
CHIEF EXECUTIVE OFFICER
EXECUTIVE LEADERSHIP AND
OPERATIONAL MANAGEMENT
The Board reserves certain power for itself and delegates certain authority and
responsiblitity for day-to-day management of our business. The Group CEO in
turn delegates certain authorities and responsibilities to senior executives.
These delegations are regularly reviewed and confirmed
18
18
Steppe Cement Ltd.
Steppe Cement Ltd. Chairman’s Statement on Governance
In my capacity as independent non-executive Chairman of the Board, I pay utmost attention to the governance
of our company. As an AIM-listed company Steppe Cement follows the Quoted Companies Alliance (QCA)
Governance Code, but the Board, its committees, and I, try to be as precise and effective in the definition,
implementation, and compliance of what it means in practice.
Beyond well-known external requirements, I believe that an effective set of governance principles is key for
the long-term sustainability and profitability of a cement producer.
The composition of the Company’s board,
in
particular the complementarity of our directors,
was very instrumental in this process. The board
constitutes a Malaysian director familiar with the
practices of our country of incorporation, a British
director experienced in London financial markets
and UK rules, a CEO Javier del Ser, and me with my
extensive industrial practice in this industry, including
in Kazakhstan.
After considering the merits of various candidates,
the Board elected Strand Hanson as their new
Nominated Adviser and Broker in place of RFC
Ambrian. A full, comprehensive due diligence
process was undertaken as part of their onboarding
process.
CONFLICT IN UKRAINE AND SANCTIONS
Central Asia Cement and Karaganda Cement, our
two operational companies, are the main source
of profit to Steppe Cement Limited and operate in
Kazakhstan. It is well known that cement is sold within
a limited radius around the factories as it is a weighty
commodity and is therefore geographically restricted
by transportation costs which can easily exceed the
production cost. Due to our geographical position,
we do not sell any cement to Russia. However, we
have various suppliers in Russia for certain essential
components none of which are subject to sanctions.
The Company also confirms that no payment had
been made via Russian banks under sanctions. We
have a sanctions policy formalised and protocols in
place to monitor adherence to this.
In my view, good and efficient governance of a
company should ensure that at least three objectives
are properly pursued and constantly monitored,
namely:
• Safeguarding the Company’s assets and licence
to operate in what is a capital-intensive industry
with a local market. This includes maintaining or
replacing plant, property and equipment, and
protecting our operating and mining licences.
• Providing a decent cash return to shareholders
whenever possible.
• Ensuring that the Company continuously builds
on its strengths, identifies and corrects its
weaknesses in an economic manner.
In light of those objectives, it is worth highlighting
some key events which led me and the Board to test
and improve the solidity of our governance in 2023:
TAX ISSUES, DIVIDEND PAYMENT AND INVESTOR
RELATIONS
As communicated before and in this report, changes
in taxation in Malaysia and uncertainties in the tax
treatment in the Netherlands created a substantial
risk of cash erosion in our ordinary dividend flow.
Despite repeated requests to reputable tax advisers,
no assurance could be obtained regarding the
potential impact of these changes. To provide a
short-term alternative solution to the payment of
a dividend to shareholders, the Board reached the
conclusion that a capital reduction would allow an
initial cash payment to the Company’s shareholders in
2024, and intends to undertake a legal restructuring
in the chain of ownership of some of the Company’s
subsidiaries which will provide an efficient and
permanent answer to the Company’s new tax
environment. Further updates will be announced in
due course.
Annual Report 2023
19
19
Annual Report 2023 Chairman’s Statement on Governance
COMPETITIVE AND INFLATIONARY PRESSURES
ORGANIZATION AND MANAGEMENT
The office in Kuala-Lumpur, which continuously
monitors the operations of the subsidiaries, assists
the Board with its decision-making. At least two
meetings with the Board are held in the factory every
year with detailed presentations and Q&A with the
local management.
Of paramount importance is the need to attract and
retain key personnel in a remote region of Kazakhstan.
For the first time, after a succession of expatriates, in
2024, the Company hired a highly qualified citizen of
Kazakhstan in the position of local finance director.
As support, at the parent company level we have
strengthened our finance team with new hires in
order to cope with new challenges and benefit from
a more attractive environment for professionals.
ACTIVITIES OF THE BOARD AND ITS COMMITTEES
During 2024, the tax issues and restructuring
alternatives formed a very significant part of every
Board meeting, some of which were entirely
dedicated to this matter. The CEO and certain
directors had additional discussions between
themselves and contact with external advisers and
auditors in the various countries where the group
companies are incorporated.
The Board and management have decided to
concentrate sales in the primary market, in close
proximity to the factory (Karaganda, Astana, and
the Northeast of the country) and leave Almaty and
the South. This region has overcapacity (installed
historically by other cement producers), which can
no longer be absorbed by exports to Uzbekistan,
creating an over supply in the Almaty region with the
associated impacts on pricing. Increased congestion
of the railway network remained an issue, especially
with increased transit to and from Russia. The
Company has managed this logistical bottleneck
by supplying increasing volumes directly by truck to
end-users.
SOCIAL RESPONSIBILITY
• Our factory is the main employer in the
vicinity. We encourage dialogue between our
management and the local authorities, and
our remuneration committee checks that the
salaries paid to employees are in line with
industry standards. We also make sure that
the lowest salaries are adjusted to ensure a
minimum standard of living.
•
In terms of CO2 emissions, the ‘cap-and-
trade’ scheme for the allocation of emissions
allowances foreseen in Kazakhstan has not
yet been defined. However, the Company
is taking a permanent effort to reduce the
clinker content in cement by replacing it with
blast furnace slag within the accepted limits
of the product standard. Combustion and the
chemical reaction generating CO2 are necessary
for producing clinker only, and slag is available
near the factory from the large steel mill in
TemirTau. Moreover, various
improvements
in the preheater tower and kilns provide an
improved thermal efficiency. In other words,
less CO2 emitted per ton of cement produced.
Although it has become common practice for
cement producers operating in the western
world to burn ‘alternative fuels’ by recovering
various waste, this is not yet achievable in
Kazakhstan as no collection or economic model
exists to provide these types of fuels.
20 Steppe Cement Ltd.
20
20 Steppe Cement Ltd.
Steppe Cement Ltd. Chairman’s Statement on Governance
You can see the activity of the Board and its Committees in the table below, and in their respective report:
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)
8
8
8
8
4
4
N/A
N/A
4
-
4
-
4
4
4
-
Annual Report 2023
21
21
Annual Report 2023
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.
2222 Steppe Cement Ltd.
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.
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;
Steppe Cement Ltd.
Corporate Governance
• 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 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.
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
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
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
23
Annual Report 2023
Corporate Governance
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 2023, 8 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)
8
8
8
8
4
4
N/A
N/A
4
-
4
-
Committee meetings are held concurrently with the board meetings.
4
4
4
-
24
Steppe Cement Ltd.
Corporate Governance
NOMINATION COMMITTEE
REMUNERATION 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;
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.
• Monitor the appointment process of Directors;
The Remuneration Committee’s members comprise:
• Recommend to the Board for approval on the
re-appointment of Directors;
1. Xavier Blutel (Chairman)
2. Rupert Wood
• Oversee the succession planning of Directors
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.
25
Annual Report 2023
Corporate Governance
AUDIT COMMITTEE
The Audit Committee comprises entirely of
Independent Non-Executive Directors. The functions
of the Audit Committee are governed by the Terms
of Reference which was approved by the Board. The
Audit Committee meets at least three times (3) a
year.
The principal objectives of the Committee are to
monitor and review the adequacy, integrity and
compliance of the Group’s financial reporting and
policies, internal controls system and procedures
including risk management, and compliance and the
external audit process. The Committee shall make
the necessary recommendations to the Board to
achieve its objectives.
Details on the roles and responsibilities of the Audit
Committee are described in the Audit Committee
Report.
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.
26
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.
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.
27
Annual Report 2023
Nomination Committee Report 2023
Dear Shareholder
The Nomination Committee (the “Committee”) met four times in 2023 alongside the formal
Board meetings.
It is with great sadness that at the end of the year the long-time adviser to the Company, Rinat
Muhamedshin, passed away after a lengthy illness. Mr Muhamedshin helped the Company
from its earliest days and was a stalwart supporter of the business. Following consideration
of several candidates, the Nomination Committee recommended the appointment of Zhana
Seidalina to the Board of Karcement in his place.
At the end of 2023, the Company managed to recruit Viktoria Klimushkina from the Arcelor-
Mittal plant in nearby Temirtau. Ms Klimushkina is highly experienced and is familiar with working
in both the domestic Kazakh setting as well as within the international finance environment as
part of a global multi-national. She is currently working with Derek Kuan and will be taking over
responsibility as Finance Director in the Summer, when Derek moves back to Malaysia where
he will be in charge of the finance department at Steppe Cement Sdn Bhd, the Malaysian
subsidiary. We would like to thank Derek for his hard work and dedication during his time in
Aktau.
During the course of 2023, the Company also established a wholly owned subsidiary in the
Astana International Financial Centre (“AIFC”), with a view to explore options around how the
Company’s new legal framework and support service infrastructure might be used to streamline
the Company’s operations and structure. As of 2023, this Company has one Director, the CEO,
Javier del Ser, with Piotr Durnev as the General Director, as recommended by the Nomination
Committee to the Board.
The Committee also reviewed and updated its Terms of Reference in July, which were approved
by the Board. The membership of the Board Committees was reviewed during the year with
the conclusion that the existing membership remained appropriate. The Committee Members
thus put themselves forward and were returned for a further term.
Rupert Wood
Chairman of the Nomination Committee
28 Steppe Cement Ltd.
28
Steppe Cement Ltd. Remuneration Committee Report 2023
The Remuneration Committee met four times in 2023.
Overall, remuneration practice for all employees, although not strictly within the scope for this
Committee, are systematically reviewed.
Management’s remuneration packages have increased during the year, with pay increases applied
in January. General pay increases were divided into two phases throughout 2023.
The average salaries of the Company’s employees remained comparable to the average national
salary in the industry and in the vicinity of the factory. As was the case in 2022, it was considered
necessary to increase the lowest salaries beyond the rate of general inflation, as CPI index does
not accurately reflect the actual cost of living. Local authorities have continuously pressured local
businesses to address this discrepancy.
Individual salary increases for key personnel were approved as well as retainer fees for an external
legal adviser.Bonuses were granted to several senior managers, excluding production managers,
due to underperformance in the conduct of operations late in 2022.
The CEO’s contract was renewed under the same terms, with remuneration including his fees as
chairman of two subsidiaries.
Directors Remuneration
Xavier Blutel
Javier Del Ser Perez
Rupert Wood
Wan Affan Azam Bin Wan Azmi
The Group
The Company
2023
USD
50,000
308,080
40,000
30,000
2022
USD
50,000
305,342
40,000
14,137
2023
USD
50,000
30,000
40,000
17,425
2022
USD
50,000
30,000
40,000
14,137
The Board directors’ remuneration was considered fair and remained unchanged. No other issues
regarding Board members or Senior Executives had to be discussed in 2023.
Xavier Blutel
Chairman of the Remuneration Committee
29
Annual Report 2023 Audit Committee Report 2023
Dear Shareholder
The Audit Committee (the “Committee”) met four times during 2023 at quarterly Board meetings, as
well as meeting on several other calls around the external-audit and the restructuring process.
The Committee held the usual calls with the auditor to set the fees and terms of reference for the 2023
audit and to review its progress. The external audit proceeded smoothly and was completed with no
material issues raised.
The auditor, Deloitte, also continued with its provision of NAS (“Non-Audit Services”) in our case,
Tax Advisory Services, overseen and authorised by the Committee. The Committee monitored and
reviewed the process of Deloitte’s restructuring advice and confirmed that the external audit function
remained independent of the provision of NAS. Meetings were also held with advisers on this process
alongside management. This process proved to be more complex, and lengthy, than initially hoped.
As highlighted in the Chairman’s Statement, taxation risk remains a key issue on an ongoing basis and
one where the Audit Committee has paid close attention. Mitigating exposure to potential taxation
risk in multiple jurisdictions has been at the forefront of the Committee’s focus whilst monitoring the
restructuring proposals.
2023 saw the selection and appointment of a new Nominated Adviser and Broker, Strand Hanson.
The Committee worked with the Board and management to appoint Strand Hanson, and reviewed
the documentation required for the onboarding process so as to ensure that the Company’s policies
were fully up to date. This process also saw the adoption of several new internal policies for enhanced
oversight and management.
During the year, the Committee also reviewed the Company’s cybersecurity policy. This remains a major
risk area subject to continuous change. Recommendations were made to the Board to strengthen
protocols and to ensure contingency planning in the event of a breach.
The Terms of Reference of the Audit Committee were reviewed and updated in July, when the members
of the Committee put themselves forward and were returned for a further term.
Rupert Wood
Chairman of the Audit Committee
30 Steppe Cement Ltd.
30
Steppe Cement Ltd. 31
Annual Report 2023 FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2023
(In United States Dollar)
32
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
34 - 37
38
39
40 - 41
42 - 44
45 - 47
Notes to the financial statements
48 - 104
Statement by a director
105
33
Annual Report 2023 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 2023 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 material accounting policy information, as set
out on pages 38 to 104.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of
the Group and of the Company as of 31 December 2023, 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.
34
Steppe Cement Ltd. Key audit matter
Revenue recognition
As of 31 December 2023, revenue from sale
of cements amounts to USD81,742,101, 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.
• Performed one month cut-off review to ensure
the sales are valid by tracing to the delivery
the delivery
documents and checked
or shipping term to ensure the control are
transferred to the customer(s) and recorded in
the correct accounting period.
to
• 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 2023.
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.
35
Annual Report 2023 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:
•
Indentify and assess the risk of material misstatement of the financial statements of the Group and of
the Company, wether due to fraud or error, design and perfrom 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 ommisions, 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.
36
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 - 03194/06/2025 J
Chartered Accountant
Labuan,
37
Annual Report 2023 STATEMENTS OF PROFIT AND LOSS
FOR THE YEAR ENDED 31 DECEMBER 2023
Note
The Group
The Company
2023
USD
2022 (1)
USD
2023
USD
2022
USD
4
81,762,548
86,732,039
1,401,554
14,641,442
(57,563,625)
(49,107,243)
-
-
24,198,923
37,624,796
1,401,554
14,641,442
(13,225,616)
(11,260,494)
-
-
(7,051,216)
(6,233,171)
452,740
(910,441)
573,913
(1,048,888)
381,377
(159,909)
(402,767)
17,753
-
-
(369,812)
-
-
-
(300,740)
1,848,195
(435,204)
2,630,033
55,437
(330,675)
-
-
5,393,222
(867,801)
21,691,076
(3,807,706)
1,071,977
13,940,955
-
-
5
6
7
8
Revenue
Cost of sales
Gross profit
Selling expenses
General and
administrative
expenses
Interest income
Finance costs
Impairment losses and
gains (including
reversals of impairment
losses) on financial
assets
Net foreign exchange
(loss)/gain
Other income, net
Profit before income tax
Income tax expense
Profit for the year
4,525,421
17,883,370
1,071,977
13,940,955
Attributable to
shareholders of the
Company
Earnings per share:
4,525,421
17,883,370
1,071,977
13,940,955
Basic and diluted (cents)
9
2.1
8.2
(1) Some figures have been reclassified. See Note 33
The accompanying notes form an integral part of the financial statements.
38
Steppe Cement Ltd. STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Profit for the year
4,525,421
17,883,370
1,071,977
13,940,955
Other comprehensive
income/(loss):
Items that may be reclassified
subsequently to profit or loss:
Exchange differences arising
from translation of foreign
operations
Total other comprehensive
income/(loss)
Total comprehensive income
for the year
Attributable to the
shareholders of the
Company
1,089,351
(5,829,119)
1,089,351
(5,829,119)
-
-
-
-
5,614,772
12,054,251
1,071,977
13,940,955
5,614,772
12,054,251
1,071,977
13,940,955
The accompanying notes form an integral part of the financial statements.
39
Annual Report 2023
STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2023
The Group
The Company
Note
2023
USD
2022
USD
2023
USD
2022
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, deposits and
prepaid expenses
Cash and cash
equivalents
10
11
12
27
13
14
15
13
27
16
17
50,543,528
49,361,749
-
-
-
5,525
-
-
-
-
-
-
36,199,699
36,199,599
30,020,000
30,050,000
222,609
1,530,916
-
-
50,766,137
50,898,190
66,219,699
66,249,599
28,956,767
20,646,156
1,736,937
2,853,142
2,167,844
2,045,004
1,081,719
602,734
-
-
-
-
-
2,372,114
-
-
-
-
65,761
60,352
2,903,169
8,577,714
10,633
7,305
6,435,437
4,143,953
4,623,695
1,239,827
Total Current Assets
45,053,296
37,097,280
4,700,089
3,679,598
Total Assets
95,819,433
87,995,470
70,919,788
69,929,197
40
Steppe Cement Ltd. STATEMENTS OF FINANCIAL POSITION
AS OF 31 DECEMBER 2023
The Group
The Company
Note
2023
USD
2022
USD
2023
USD
2022
USD
Equity and Liabilities
Capital and Reserves
Share capital
Revaluation reserve
Translation reserve
Retained earnings/
(Accumulated losses)
Net Equity
Non-Current Liabilities
Borrowings
Deferred taxes
Deferred income
Provision for site
restoration
Total Non-Current
Liabilities
Current Liabilities
Trade and other payables
Accrued and other
liabilities
Amount owing to a
subsidiary company
Borrowings
Lease liabilities
Deferred income
Taxes payable
Total Current Liabilities
Total Liabilities
Total Equity and
Liabilities
18
19
19
19
20
22
23
24
25
27
20
21
23
26
73,760,924
73,760,924
73,760,924
73,760,924
1,515,896
1,795,426
(125,177,850)
(126,267,201)
-
-
-
-
120,596,062
115,791,111
(3,148,214)
(4,220,191)
70,695,032
65,080,260
70,612,710
69,540,733
2,845,655
3,168,141
2,350,932
3,913,689
3,266,775
2,572,552
193,303
178,420
8,558,031
9,931,436
-
-
-
-
-
9,873,140
7,348,587
118
-
-
-
-
-
-
2,425,105
2,250,689
163,386
143,808
-
-
143,574
244,656
3,638,305
2,814,525
-
194,729
435,091
16,566,370
25,124,401
58,960
140,259
370,754
12,983,774
22,915,210
-
-
-
-
-
-
-
-
307,078
307,078
388,464
388,464
95,819,433
87,995,470
70,919,788
69,929,197
The accompanying notes form an integral part of the financial statements.
41
Annual Report 2023 *
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STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2023Annual Report 2023Steppe Cement Ltd.
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STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2023Annual Report 2023Steppe Cement Ltd.
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company
Share
Capital
USD
Accumulated
losses
USD
Net
USD
As of 1 January 2023
Total comprehensive income
for the year
73,760,924
(4,220,191)
69,540,733
-
1,071,977
1,071,977
As of 31 December 2023
73,760,924
(3,148,214)
70,612,710
As of 1 January 2022
73,760,924
(5,605,876)
68,155,048
Total comprehensive income
for the year
Dividends paid (Note 19)
-
-
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
The accompanying notes form an integral part of the financial statements.
44
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
CASH FLOWS FROM/
(USED IN) OPERATING
ACTIVITIES
Profit before income tax
Adjustments for:
Depreciation of property,
plant and equipment
Depreciation of right-of-use
assets
Dividend income
Gain on disposal of property, plant and
equipment
Net interest income
Interest income
Finance costs
Net unrealised foreign exchange
(gain)/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
Reversal of allowance for advances paid
to third parties no longer required
Operating cash flows before movements
in working capital
Movement in working capital:
(Increase)/Decrease in:
Inventories
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
5,393,222
21,691,076
1,071,977
13,940,955
5,781,506
6,135,236
5,600
-
1,587,293
-
(80,057)
(27,725)
-
-
-
-
-
-
(13,309,140)
-
-
(1,401,554)
(1,332,302)
-
(452,740)
910,441
(573,913)
1,048,888
(17,753)
-
296,577
538,663
(58,142)
144,373
167,628
268,215
174,650
44,353
(215,430)
157,723
(140,259)
(628,139)
(159,072)
(65,806)
(13,392)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,402,115
30,586,796
(405,472)
(700,487)
(11,404,636)
(8,501,824)
-
-
Trade and other receivables
703,249
(427,760)
(793,500)
(865,000)
Loans and advances to
subsidiary companies
Advances, deposits, prepaid expenses
-
-
24,591
19,184
and other assets
5,229,623
(5,608,461)
(3,328)
(2,334)
45
Annual Report 2023 Increase/(Decrease) in:
Trade and other payables
Accrued and other liabilities
Cash Generated From/(Used In)
Operations
Interest paid
Income tax paid
Net Cash From/(Used In) Operating
Activities
CASH FLOWS (USED IN)/ FROM
CASH FLOWS (USED IN)/ FROM
INVESTING ACTIVITIES
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
Contribution to site restoration
Proceeds from disposal of
property, plant and equipment
Dividends received from
subsidiary
Interest received
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Group
The Company
2023
USD
-
19,578
2022
USD
-
(84,089)
2023
USD
2022
USD
2,088,374
528,710
8,547,435
(404,092)
2,097,417
786,440
(551,528)
(2,497,453
(4,599,594)
18,932,608
(1,158,131)
(1,632,726)
-
-
-
-
5,645,890
13,781,486
(1,158,131)
(1,632,726)
(3,059,748)
(7,768,695)
fund
11,664
(334)
515,692
85,599
-
-
452,740
573,913
4,585,039
-
-
-
-
-
-
-
13,309,140
1,549,552
-
Additional investment in subsidiary
-
-
(100)
Net Cash (Used In)/From
Investing Activities
CASH FLOWS FROM/
(USED IN) FINANCING
ACTIVITIES
(2,079,652)
(7,109,517)
4,584,939
14,858,692
Repayment to a subsidiary company
-
-
(64,389)
(45,094)
Proceeds from borrowings*
Repayment of borrowings*
Repayment of lease liabilities*
Dividends paid
Interest paid
Net Cash Used In Financing
Activities
46
3,378,349
(4,131,409)
(59,788)
7,299,722
(4,472,018)
(1,838,949)
-
(12,555,270)
(506,349)
(486,807)
-
-
-
-
-
-
-
-
(12,555,270)
-
(1.319,197)
(12,053,322)
(64,389)
(12,600,364)
Steppe Cement Ltd. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
NET INCREASE/(DECREASE)
IN CASH AND CASH
EQUIVALENTS
EFFECTS OF FOREIGN
EXCHANGE RATE
CHANGES
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH
EQUIVALENTS AT
END OF YEAR (Note 17)
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
2,247,041
(5,381,353)
3,362,419
625,602
44,443
(610,716)
21,449
-
4,143,953
10,136,022
1,239,827
614,225
6,435,437
4,143,953
4,623,695
1,239,827
*
The following table shows the reconciliation in the Group’s liabilities arising from financing activities:
Opening
balance
Financing
cash flows [1]
Non-cash movements[2]
Foreign
exchange
Other [2]
Closing
balance
USD
USD
USD
USD
USD
2023
Borrowings (Note 20)
6,728,214
(753,060)
118,406
390,400
6,483,960
Lease liabilities (Note 21)
58,960
(59,788)
-
828
-
2022
Borrowings (Note 20)
5,556,184
2,827,704
(378,084)
(1,277,590)
6,728,214
Lease liabilities (Note 21)
2,026,450
(1,838,949)
(128,541)
-
58,960
[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.
47
Annual Report 2023
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 12 June 2024.
2.
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Basis of preparation
The financial statements of the Group and of the Company have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board (“IASB”).
Application of new and revised IFRS
Amendments to IFRSs that are mandatorily effective for the current year
In the current year, the Group and the Company have applied a number of amendments to IFRSs
issued by IASB that are mandatorily effective for an accounting period that begins on or after 1
January 2023.
Amendments to IFRS 4
Extension of the Temporary Exemption from Applying IFRS 9
Amendments to IAS 8
Definition of Accounting Estimates
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)
Amendments to IAS 12
International Tax Return- Pillar Two Model Rules
48
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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 except as below:
Impact on application of amendments to IAS 1 Presentation of Financial Statements
The Group and the Company have adopted the amendments to IAS 1 and IFRS Practice Statement 2
for the first time in the current year. The amendments change the requirements in IAS 1 with regard
to disclosure of accounting policies. The amendments replace all instances of the term ‘significant
accounting policies’ with ‘material accounting policy information’. Accounting policy information
is material if, when considered together with other information included in an entity’s financial
statements, it can reasonably be expected to influence decisions that the primary users of general
purpose financial statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that
relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed.
Accounting policy information may be material because of the nature of the related transactions,
other events or conditions, even if the amounts are immaterial. However, not all accounting policy
information relating to material transactions, other events or conditions is itself material.
Impact on application of amendments to IAS 12 Income Taxes
The Group and the Company have adopted the amendments to IAS 12 for the first time in the
current year. The IASB amends the scope of IAS 12 to clarify that the Standard applies to income
taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules
published by the Organisation for Economic Co-operation and Development (“OECD”), including
tax law that implements qualified domestic minimum top-up taxes described in those rules.
The amendments introduce a temporary exception to the accounting requirements for deferred
taxes in IAS 12, so that an entity would neither recognise nor disclose information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Following the amendments, the group is required to disclose that it has applied the exception and
to disclose separately its current tax expenses (income) related to Pillar Two income taxes.
Further details of the income tax are disclosed in Note 8.
49
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 New and amendments to IFRS in issue but not yet effective
New or revised standard or interpretation
Applicable to annual
reporting periods
beginning on or after
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 2024
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
Amendments to IAS 7 and IFRS 7 “Supplier Finance Arrangements”
1 January 2024
Amendments to IAS 21 “Lack of Exchangeability”
1 January 2025
Amendment to IFRS 10 and IAS 28 Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture
Date to be deter-
mined 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.
3. MATERIAL ACCOUNTING POLICY INFORMATION
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.
50
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
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;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over
the investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an investee are sufficient to give it power,
including:
•
•
•
•
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not
have, the current ability to direct the relevant activities at the time that decisions need to
be made, including voting patterns at previous shareholders’ meetings.
51
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
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.
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.
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
52
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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.
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”).
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.
The principal closing rates used in translation of foreign currency amounts are as follows:
1 Sterling Pound (“GBP”)
1 Euro (“EUR”)
1 Ringgit Malaysia (“MYR”)
1 Russian Ruble (“RUB”)
1 USD
2023
USD
1.2747
1.1039
0.2179
0.0112
KZT
454.56
2022
USD
1.2039
1.0702
0.2278
0.0133
KZT
462.65
53
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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 KZT350,000 (USD770) per month per employee (2022: USD651)
from employee’s salaries and pays them to the state pension fund. In addition, such pension
system provides for calculation of current payments by the employer as a percentage of
current total disbursements to staff. Such expenses are charged to profit or loss in the period
the related salaries are earned. Upon retirement, all retirement benefit payments are made by
pension funds selected by the employees. The subsidiaries (CAC JSC and Karcement JSC) do
not have any pension arrangements separate from the state pension system of the countries.
In addition, the Group has no post-retirement benefits or other significant compensation
benefits requiring accrual.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax and is calculated
in accordance with tax legislation applicable to the respective jurisdiction and based on the operating
results for the year after adjustments for amounts which are non-taxable or non-deductible for tax
purposes.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
as reported in profit or loss because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are not taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is uncertain but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are
measured at the best estimate of the amount expected to become payable. The assessment is based
on the judgement of tax professionals within the Group supported by previous experience in respect
of such activities and in certain cases based on specialist independent tax advice.
54
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit,
and are accounted for using the liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on the tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period. The measurement
of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the entity expects, at the end of the reporting period, to recover or to settle the carrying
amount of its assets and liabilities. Deferred tax is charged or is credited to profit or loss, except
when it is related to items that are recognised outside profit or loss (whether in other comprehensive
income or charged or credited directly to equity), in which case the deferred tax is also dealt with
outside profit or loss, or where they arise from the initial accounting for a business combination, the
tax effect is included in the accounting for the business combination.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiary companies, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Leases
The Group as lessor
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.
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.
55
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
Land and buildings
Land and buildings held for use in the production or supply of goods or services, or for administrative
purposes, are stated at their revalued amounts in the statement of financial position, being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses, if any. Revaluations are performed with sufficient regularity such that
the carrying amounts do not differ materially from those that would be determined using fair values
at the end of each reporting period.
Any revaluation increase arising on revaluation of such land and buildings is recognised in other
comprehensive income and revaluation reserve in equity, except to the extent that it reverses a
revaluation decrease for the same asset previously recognised in profit or loss, in which case, the
increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in
the carrying amount arising on revaluation of such land and buildings is recognised in profit or loss
to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous
revaluation of that asset.
Revaluation surplus is transferred directly to retained earnings as and when the revalued asset is
used by the Group. The amount of the surplus transferred is calculated as the difference between
depreciation calculated based on the revalued carrying amount of the asset and depreciation based
on the asset’s original cost.
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.
56
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 The estimated useful lives are as follows:
Buildings
Machinery and equipment
Railway wagons
Other assets
25 years
14 years
20 years
5 - 10 years
Depreciation on stand-by equipment and major spare parts begins when it is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
The estimated useful lives, residual values and depreciation method of assets are reviewed at the end
of each reporting period with the effect of any changes in estimate accounted for on a prospective
basis.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.
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.
57
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
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).
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%
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.
58
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Contingent Liabilities
Contingent liabilities are not recognised in these financial statements, except for liabilities on which
there are probable outflows of resources, needed for settlement of the liabilities and which can be
measured reliably.
Financial Instruments
Financial assets and financial liabilities are recognised in the statements of financial position when
the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in profit or loss.
All regular way purchases or sales of financial assets are recognised or derecognised on a trade
date basis. Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their entirely at either amortised cost or
fair value, depending on the classification of the financial assets.
(i)
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at
amortised cost.
(a)
(b)
the financial asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
All the Group’s and the Company’s financial assets meet the definition of financial assets at amortised
cost.
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and
of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including
all fees and points paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) excluding expected credit losses (“ECL”), through the
expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying
amount of the debt instrument on initial recognition.
59
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortisation using the effective
interest method of any difference between that initial amount and the maturity amount, adjusted for
any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial
asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Financial assets of the Group and of the Company measured
subsequently at amortised cost are short-term deposits, cash and bank balances, trade receivables,
other receivables (excluding value added taxes), refundable deposits and inter-company indebtedness.
(ii)
Impairment of financial assets
The Group and the Company recognise a loss allowance for expected credit losses on
investments in debt instruments that are measured at amortised cost. The amount of expected
credit losses is updated at the end of each reporting period to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group and the Company always recognise lifetime ECL for trade receivables. The expected
credit losses on these financial assets are estimated using a provision matrix based on the
Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast
direction of conditions at the end of the reporting period, including time value of money where
appropriate.
For all other financial instruments such as other receivables and amount owing by subsidiary
companies, the Group and the Company recognise lifetime ECL when there has been a
significant increase in credit risk since initial recognition. If, on the other hand, the credit risk
on the financial instrument has not increased significantly since initial recognition, the Group
measures the loss allowance for that financial instrument at an amount equal to 12 months ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default
events over the expected life of a financial instrument. In contrast, 12 months ECL represents
the portion of lifetime ECL that is expected to result from default events on a financial instrument
that are possible within 12 months after the end of the reporting period.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since
initial recognition, the Group and the Company compare the risk of a default occurring on the
financial instrument as 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
60
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 borrower to fulfil its contractual cash flow obligations. The Group considers a financial asset to
have low credit risk when it has an internal or external credit rating of ‘investment grade’ as per
globally understood definition.
The Group regularly monitors the effectiveness of the criteria used to identify whether there
has been a significant increase in credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant increase in credit risk before the amount becomes
past due.
Definition of default
The Group considers the following as constituting an event of default for internal credit risk
management purposes as historical experience indicates that financial assets that meet either
of the following criteria are generally not recoverable:
(a)
(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.
61
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given
default and the exposure at default. The assessment of the probability of default and loss given
default is based on historical data adjusted by forward-looking information. Exposure at default
is represented by the assets’ gross carrying amount at the end of the reporting period.
Expected credit loss is estimated as the difference between all contractual cash flows that are
due to the Group in accordance with the contract and all the cash flows that the Group expects
to receive, discounted at the original effective interest rate.
Where lifetime ECL is measured on a collective basis to cater for cases where evidence of
significant increases in credit risk at the individual instrument level may not yet be available,
the financial instruments are grouped on 1) Nature of financial instruments; 2) Past-due status;
3) Nature, size and industry of debtors; and 4) External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics. If the Group has measured the loss allowance
for a financial instrument at an amount equal to lifetime ECL in the previous reporting period,
but determines at the end of the current reporting period that the conditions for lifetime ECL
are no longer met, the Group measures the loss allowance at an amount equal to 12 months
ECL at the end of the current reporting period.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
with a corresponding adjustment to their carrying amount through a loss allowance account.
(i) 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.
62
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires the directors to make
judgements, estimates and assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses and the disclosure of liabilities. Due to the inherent uncertainty in making
those judgements and estimates, actual results reported in future periods could differ from such
judgement and estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and
future periods.
(a)
Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management is of the opinion that there
are no instances of application of judgement which are expected to have a significant effect on the
amounts recognized in the financial statements.
(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 2023, the directors consider that the carrying amount of the land and buildings
is reflective of the fair values of these assets.
Useful lives of property, plant and equipment
As described in Note 3, the Group reviews the estimated useful lives of property, plant and equipment
at the end of each reporting period. Estimation of the asset’s useful life depends on factors such as
economic exploitation, repair and maintenance programs, technological improvements and other
business conditions. Management’s estimation of the useful lives of property, plant and equipment
reflects the relevant information available at the date of the financial statements.
Taxes receivable, other than income tax
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.
63
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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 2023, loss allowance for doubtful trade receivables amounted to USD827,519 (2022:
USD1,166,679) (Note 15) and on advances paid to third parties amounted to USD246,722 (2022:
USD263,486) (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 2023, provision for obsolete and
slow-moving inventories amounted to USD2,228,170 (2022: USD2,047,360) (Note 14).
Environmental obligations
On 1 July 2011, the new Environmental Code of the Republic of Kazakhstan (the “Code”) came
into force. This code contains a number of principles aimed at minimising 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 companies that have a significant
negative impact on the environment belong to the first category. The Group belongs to the category
one in accordance with the Code requirements and therefore, the Group has analysed effect of
implementation of the new Code and effect is not material and hence, management decided not
to make any provision as of 31 December 2023. However, these laws and regulations may change
in the future. The Group is unable to provide in advance the timing and extent of changes in laws
and regulations on environmental protection, health and safety at work. In case of such changes,
the Group may need to upgrade the technology to meet new requirement and provide the required
provision if it is material.
64
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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
2023
USD
2022
USD
2023
USD
Sale of cement
81,742,101
86,707,809
Transmission and distribution
of electricity
Dividend income
Net interest income
20,447
24,230
-
-
-
-
-
-
-
1,401,554
2022
USD
-
-
13,309,140
1,332,302
Total
81,762,548
86,732,039
1,401,554
14,641,442
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
2023
USD
2022
USD
2023
USD
2022
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
527,961
456,140
(21,612)
506,349
-
-
404,092
910,441
(98,844)
357,296
194,232
10,553
486,807
1,048,888
-
-
-
-
-
-
-
-
-
-
-
-
Other finance costs comprise mainly bank and other commitment charges incidental to secure loan
facilities from financial institutions as disclosed in Note 20.
65
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 6.
NET FOREIGN EXCHANGE (LOSS)/GAIN
Unrealised
(loss)/gain
foreign
exchange
Realised foreign exchange (loss)/
gain
The Group
The Company
2023
USD
2022
USD
2023
USD
(296,577)
(538,663)
58,142
2022
USD
-
(4,163)
103,459
(2,705)
(330,675)
(300,740)
(435,204)
55,437
(330,675)
7.
PROFIT BEFORE INCOME TAX
Profit before income tax includes the following income/(expenses):
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Amortisation of deferred
income
Rental income
Allowance for trade receivables no
longer required
Allowance for advances paid to
third parties no longer required
Allowance for advances paid
to third parties
Credit loss allowance for
doubtful receivables
Depreciation of property, plant
and equipment
215,430
140,259
1,060,502
1,131,881
628,139
159,072
65,806
13,392
(44,353)
(157,723)
(268,215)
(174,650)
(5,781,506)
(6,135,236)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Employee benefit expenses
(7,500,782)
(6,648,483)
(28,561)
(14,345)
Depreciation of right-of-use
assets
Gain on disposal of property, plant
and equipment
Provision for obsolete inventories
Short-term leases
(5,600)
(1,587,293)
80,057
(144,373)
(185,179)
27,725
(167,628)
(158,683)
-
-
-
-
-
-
(3,600)
(3,600)
Employee benefit expenses include contributions paid by the Group and the Company to defined
contribution plans amounting to USD711,510 (2022: USD603,035) and USD5,545 (2022: USD2,996)
respectively and Directors’ remuneration is disclosed in Note 27.
66
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 8.
INCOME TAX EXPENSE
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Income tax -
- current year
- prior year
Deferred tax (Note 22)
- current year
- prior year
1,006,652
25,722
1,032,374
123,203
(287,776)
(164,573)
4,466,088
155,432
4,621,520
(813,814)
-
(813,814)
Total
867,801
3,807,706
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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% (2022: 20%), and Malaysian and Netherland
subsidiaries are subject to statutory tax rates of 24% (2022: 24%) and 25% (2022: 25%) respectively.
67
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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
2023
USD
2022
USD
2023
USD
2022
USD
Profit before income tax
5,393,222
21,691,076
1,071,977
13,940,955
Tax expense calculated at
domestic tax rates
applicable to the respective
jurisdictions
Tax effects of expenses not
deductible for tax purposes
Income tax - prior year
Deferred tax - prior year
908,436
3,314,152
221,419
25,722
(287,776)
338,122
155,432
-
Income tax expense
867,801
3,807,706
-
-
-
-
-
-
-
-
-
-
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.
The hearing was then held on 13 June 2022 where the High Court Judge ruled in favour of the
Company 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 Company. The DGIR and MOF have then filed an appeal
to the Court of Appeal against the High Court’s decision.
68
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 On 6 November 2022, the Group filed a Notice of Motion to strike out the MOF’s Appeal. The
hearing of the Group’s Striking Out Motion was held on 12 May 2023. Following the hearing, the
Court of Appeal ruled in favour of the Group and struck out the MOF’s Appeal. Subsequently, the
Group filed a Striking Out Motion on 8 September 2023 to strike out the DGIR’s Appeal at the Court
of Appeal, the hearing date for which is fixed for 26 September 2024.
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 been fixed for 20 May 2024. The
oral submission has been made on 20 May 2024 and the hearing will continue on 12 June 2024.
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.
Pillar Two Model Rules
The Group and the Company have applied the temporary exception from accounting for deferred
taxes arising from Pillar Two model rules, as provided in the International Tax Reform - Pillar Two
Model Rules (Amendments to IAS 12 Income Taxes) issued on June 2, 2023. Accordingly, the Group
and the Company are neither recognises nor discloses information about deferred tax assets and
liabilities related to Pillar Two income taxes.
9.
EARNINGS PER SHARE
Basic and diluted
The Group
2023
USD
2022
USD
Profit attributable to ordinary shareholders
4,525,421
17,883,370
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)
2.1
8.2
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 2023 and 2022.
69
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 l
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7
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Annual Report 2023Steppe Cement Ltd.
There was no valuation carried out in 2023. 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, amounted to USD6,000,484 as of 31 December 2023 (2022:
USD6,736,717). 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
2023 and 31 December 2022 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
2023
USD
151,471
-
2022
USD
174,997
168,924
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.
72
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 As of 31 December 2023, property, plant and equipment of a subsidiary company with a cost and
net book value of USD6,274,524 and USD3,266,178 (2022: USD6,164,807 and USD3,671,853)
respectively are pledged as collateral for the government-subsidised loan (Note 20).
As of 31 December 2023, the cost of property, plant and equipment that is fully depreciated
amounted to USD4,467,672 (2022: USD3,360,683).
As of 31 December 2023, there is capitalised interest expenses in the amount of USD21,612 (2022:
USD98,844).
11.
RIGHT-OF-USE ASSETS
Cost
At 1 January 2022
Exchange differences
Railway
wagons
USD
7,418,120
(496,732)
The Group
Buildings
USD
31,005
(2,076)
At 31 December 2022/1 January 2023
6,921,388
28,929
Exchange differences
Termination
At 31 December 2023
Accumulated depreciation
At 1 January 2022
Charge for the year
Exchange differences
Charge for the year
Exchange differences
Termination
At 31 December 2023
Carrying amount
At 31 December 2022
At 31 December 2023
123,183
(7,044,571)
516
-
-
29,445
(5,729,392)
(1,580,905)
389,803
(905)
(123,172)
7,044,571
(19,223)
(6,388)
1,313
(24,298)
(4,695)
(452)
-
-
(29,445)
894
-
4,631
-
At 31 December 2022/1 January 2023
(6,920,494)
Total
USD
7,449,125
(498,808)
6,950,317
123,699
(7,044,571)
29,445
(5,748,615)
(1,587,293)
391,116
(6,944,792)
(5,600)
(123,624)
7,044,571
(29,445)
5,525
-
73
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Amount recognised in profit or loss:
Interest expense on lease liabilities
Expense relating to short-term leases
Total cash outflow for leases
Amount recognised in profit or loss:
Expense relating to short-term leases
The Group
2023
USD
-
192,379
244,967
2022
USD
194,232
158,683
2,191,864
The Company
2023
USD
3,600
2022
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:
At beginning of year
Addition
Less: Accumulated impairment loss
The Company
2023
USD
2022
USD
40,199,600
40,199,600
100
-
40,199,700
(4,000,001)
40,199,600
(4,000,001)
Net
36,199,699
36,199,599
74
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 The details of subsidiary companies are as follows:
Place of incorporation
(or registration) and
operation
Principal activities
Proportion
of ownership
interest and
voting power
held
2023
2022
%
%
Malaysia
100
100
Malaysia
100
100
Republic of Kazakhstan
100
-
Investment
holding
Provision of
consultancy
services
Investment
holding
Netherlands
100
100
Investment
holding
Direct Subsidiary Companies
Steppe Cement (M)
Sdn. Bhd. (“SCM”)
Mechanical & Electrical
Consulting Services Ltd.
(“MECS Ltd”)
Steppe Cement Astana
Limited. (“SCA”) *
Indirect Subsidiary
Companies
Held through SCM:
Steppe Cement Holdings
B.V. (“SCH BV”) *
Held through SCH BV:
Central Asia Cement JSC
(“CAC JSC”)
Republic of Kazakhstan
100
100
Karcement JSC (“KAC JSC”)
Republic of Kazakhstan
100
100
Central Asia Services LLP
(“CAS LLP”)*
Republic of Kazakhstan
100
100
Production and
sale of cement
Production and
sale of clinker
Transmission
and distribution
of electricity
*
The financial statements of this subsidiary company was not required to be audited.
On 22 May 2023, the Company incorporated Steppe Cement Astana Limited. by investing 100% in
the paid up share capital amounting to USD100. Steppe Cement Astana Limited is an investment
holding company and has not commence business since incorporation.
75
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 13. OTHER ASSETS
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
VAT recoverable
Site restoration fund
Others
Less: Non-current portion of
-Other assets
-Site restoration fund
-VAT recoverable
2,329,846
1,742,248
189,784
556,121
162,341
708,046
3,075,751
2,612,635
(32,825)
(189,784)
-
(162,341)
-
(1,368,575)
(222,609)
(1,530,916)
Current portion of other
assets
2,853,142
1,081,719
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
76
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
14.
INVENTORIES
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Finished goods
Work-in-progress
Spare parts
Raw materials
Packing materials
Others
Total
Less: Provision for
obsolete inventories
5,796,636
8,608,891
11,369,925
2,922,901
733,637
1,752,947
3,647,059
3,917,067
8,151,943
1,778,880
625,097
4,573,470
31,184,937
22,693,516
(2,228,170)
(2,047,360)
Net
28,956,767
20,646,156
Included in others are mainly consist of fuel and coal.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The cost of inventories of the Group recognised as an expense during the financial year was
USD57,563,625 (2022: USD49,107,243).
The movements in the provision for obsolete inventories are as follows:
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
At beginning of year
Exchange differences
Provision for obsolete
inventories
(2,047,360)
(2,014,636)
(36,437)
134,904
(144,373)
(167,628)
At end of year
(2,228,170)
(2,047,360)
-
-
-
-
-
-
-
-
As of 31 December 2023, inventories of USD6,785,421 (2022: USD6,981,516) were pledged to
secure the Halyk Bank JSC working capital facilities (Note 20).
77
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 15.
TRADE AND OTHER RECEIVABLES
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Trade receivables
Less: Loss allowances
1,765,243
(827,519)
2,690,885
(1,166,679)
Net
937,724
1,524,206
Other receivables:
Receivables from
employees
Others
Interest receivable
180,104
619,109
-
191,400
329,398
-
Total
1,736,937
2,045,004
-
-
-
-
-
-
-
-
-
-
-
-
2,372,114
2,372,114
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
2023
USD
2022
USD
2023
USD
2022
USD
At beginning of year
(1,166,679)
(1,233,713)
Exchange differences
(20,764)
82,612
Add: Impairment losses
(268,215)
(174,650)
Less: Allowance no
longer required
628,139
159,072
At end of year
(827,519)
(1,166,679)
-
-
-
-
-
-
-
-
-
-
78
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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
2023
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%
6%
10%
21%
50%
64%
100%
320,184
76,351
228,929
201,135
60,351
418,508
459,785
1,765,243
-
4,581
22,892
42,239
30,176
267,846
459,785
827,519
Days past due
Expected credit loss rate Gross carrying amount
at default
Lifetime ECL
USD
USD
2022
Not past due
1-90 days
91-180 days
181-270 days
271-360 days
1-2 years
>2 years
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
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 USD180,104 (2022: USD191,400) included in other
receivables.
79
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 16.
ADVANCES, DEPOSITS, AND PREPAID EXPENSES
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
2,501,571
8,551,618
(246,722)
(263,486)
2,254,849
647,660
660
8,288,132
288,922
660
-
-
-
-
-
-
9,973
660
6,645
660
2,903,169
8,577,714
10,633
7,305
Advances paid to third
parties
Less: Provision on
advances paid to third
parties
Net advances paid to
third
parties
Prepaid expenses
Deposits
Total
Advances are mainly advances for materials and services.
Movement of allowance for advances paid to third parties is as follows:
The Group
The Company
At beginning of year
Exchange differences
Add: Allowance for
advances paid to third
parties
Less: Allowance no
longer required
2023
USD
(263,486)
(4,689)
2022
USD
(127,706)
8,551
(44,353)
(157,723)
65,806
13,392
At end of year
(246,722)
(263,486)
2023
USD
2022
USD
-
-
-
-
-
-
-
-
-
-
80
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
17.
CASH AND CASH EQUIVALENTS
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Cash in hand and at banks
914,540
4,059,613
Short-term deposits
5,520,897
84,340
305,942
4,317,753
1,239,827
-
Total
6,435,437
4,143,953
4,623,695
1,239,827
As of 31 December 2023, the Group had short-term deposits on demand in Halyk Bank JSC, Bank
Center Credit JSC at the interest rate of 14.25% to 14.75% per annum (2022: 12.5% to 14% per
annum), and Malayan Banking Berhad at the interest rate 5.3% per annum (2022: NIL).
18.
SHARE CAPITAL
The Group and
the Company
2023
USD
2022
USD
Issued and fully paid:
219,000,000 ordinary shares of no par value each:
Year-end balance
73,760,924
73,760,924
81
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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 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 2022. The payment
was made on 24 November 2022.
The directors do not recommend the payment of any dividend in respect of the current financial year.
82
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
20.
BORROWINGS
Secured - at amortised cost
Bank loans
Bank loans:
Current
Non-current
Details of bank loans are as follows:
The Group
2023
USD
2022
USD
6,483,960
6,728,214
3,638,305
2,845,655
6,483,960
2,814,525
3,913,689
6,728,214
Currency
Maturity month
Interest
rate
The Group
2023
USD
2022
USD
Halyk Bank JSC
for capital
expenditure
Halyk Bank JSC for
working capital
Accrued interest
Total outstanding
KZT
KZT
KZT
KZT
KZT
KZT
June 2025
6% p.a.
134,790
210,444
September to
November 2025
6% p.a.
138,492
424,377
December 2027
6% p.a.
1,303,966
1,537,906
December 2027
6% p.a.
86,055
101,956
February to
November 2029
January to December
2023
6% p.a.
1,305,346
1,759,849
6% p.a.
-
1,418,171
KZT January to June 2024
6% p.a
1,782,775
-
KZT
June 2023
6% p.a.
-
1,274,689
KZT January to June 2024
6% p.a.
1,731,700
836
-
822
6,483,960
6,728,214
83
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
Halyk Bank JSC capital expenditure facilities
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 USD3,266,178 (2022:
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 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 were secured against inventories of USD 6,981,516
in year 2022 (Note 14). The short-term borrowings were repaid in June 2023.
During 2023, the subsidiary (CAC JSC) signed 9 short-term agreements with Halyk Bank JSC for
working capital replenishment of KZT1,367 million (USD3,007,614) under government programs
bearing an interest rate of 6% per annum. The short-term borrowings are maturing in January to June
2024. In addition, in year 2023, the subsidiary (Karcement JSC) obtained 7 new borrowings under
the credit line from Halyk Bank, in the amount of KZT355 million (USD780,896) for working capital
financing. These borrowings were secured against inventories of USD 6,785,421 (Note 14).
As of 31 December 2023, all working capital facilities of KZT2.2 billion (2022: KZT2.4 billion) with Halyk
Bank JSC are available for drawdown which is equivalent to USD4,840,000 (2022: USD5,103,000).
84
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 21.
LEASE LIABILITIES
Operating leases analysed as:
Non-current
Current
Balance as of 31 December
The Group
2023
USD
-
-
-
2022
USD
-
58,960
58,960
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 2023:
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
Balance as of 31 December
The Group
2023
USD
-
-
-
-
-
-
2022
USD
66,212
-
-
66,212
(7,252)
58,960
The Group
2023
USD
58,960
(59,788)
-
828
-
2022
USD
2,026,450
(2,033,181)
194,232
(128,541)
58,960
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.
85
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 22. DEFERRED TAXES
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
At beginning of year
Exchange differences
Recognised in profit or loss
(Note 8)
(3,266,775)
(4,318,652)
(65,939)
238,063
164,573
813,814
At end of year
(3,168,141)
(3,266,775)
Movement in net deferred tax assets/(liabilities) of the Group is as follows:
-
-
-
-
-
-
-
-
Opening balance
Exchange
rate
differences
Recognised
in profit or
loss
Closing
balance
USD
USD
USD
USD
(3,951,562)
(70,791)
(125,627)
(4,147,980)
409,474
261,576
33,970
18,303
(38,536)
6,887
4,359
(108,342)
(80,243)
308,019
185,692
622
494
4,631
45,494
39,223
64,291
(7,510)
428,660
382,614
(3,266,775)
(65,939)
164,573
(3,168,141)
2023
Temporary differences:
Property, plant and
equipment
Inventories
Trade receivables
Accrued unused
leaves
Payables
Others
Total
86
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Opening
balance
Exchange rate
differences
Recognised in
profit or loss Closing balance
USD
USD
USD
USD
(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)
2022
Temporary differences:
Property, plant and
equipment
Inventories
Trade receivables
Accrued unused
leaves
Payables
Others
Total
(4,318,652)
238,063
813,814
(3,266,775)
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
2023
USD
2022
USD
2023
USD
2022
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 (2022: USD1,398,350) has been imposed with a time limit
of utilisation, which will be disregarded in the year of assessment 2026 to 2031 (2022: 2026 to 2031).
87
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 23. DEFERRED INCOME
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Deferred income
Less: Amount due within
12 months
2,545,661
2,712,811
(194,729)
(140,259)
Non-current
2,350,932
2,572,552
Movement of deferred income are as follows:
-
-
-
-
-
-
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
At beginning of year
Exchange differences
Additions
Recognised in profit or loss
2,712,811
48,280
-
(215,430)
1,691,818
(133,630)
1,294,882
(140,259)
At end of year
2,545,661
2,712,811
-
-
-
-
-
-
-
-
-
-
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, 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 was recognised as deferred income in the statement of financial
position.
As of 31 December 2023, the related assets amounted to USD424,333(2022: USD491,032) were put
into use. During financial year, the Group recognised USD215,430 (2022: USD140,259) in profit or
loss as other income on a straight-line basis over the useful lives of these related assets.
88
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 24.
TRADE AND OTHER PAYABLES
The Group
The Company
2023
USD
2022
USD
9,740,308
4,027,000
-
-
114,632
3,307,237
18,200
14,350
9,873,140
7,348,587
2023
USD
-
118
-
-
118
2022
USD
-
-
-
-
-
Trade payables
Interest payable
Other payables
Others
Total
The credit period granted by creditors ranges from 1 to 30 days (2022: 1 to 30 days).
Interest payable represents amount owing to a subsidiary.
Other payables mainly arose from purchase of property, plant and equipment and spare parts.
25.
ACCRUED AND OTHER LIABILITIES
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Accrued directors’ fees
126,870
97,104
119,128
97,104
Advances from customers
1,357,759
1,434,123
Accrued salaries
Accrued unused leave
Others
Total
564,104
196,119
180,253
409,824
132,601
177,037
-
-
-
-
-
-
44,258
46,704
2,425,105
2,250,689
163,386
143,808
89
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 26.
TAXES PAYABLE
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Corporate income tax
-
142,329
Other taxes:
VAT payable
Royalties
Emission taxes
Pension fund
Personal income tax
Social tax
Withholding tax
Others
7,067
65,602
85,476
88,569
51,481
19,560
2,726
114,610
23,540
48,412
58,723
40,560
37,054
13,524
1,476
5,136
Total
435,091
370,754
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.
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 USD35,761 (2022: USD30,352) are
unsecured, interest-free and are repayable on demand.
Loan to a subsidiary company of USD30,020,000 (2022: USD30,050,000) is repayable by year 2033,
while another amount of USD30,000 (2022: USD30,000) is repayable in the subsequent year. This
loan bears interest at 8% per annum (2022: 8% per annum).
90
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 The transactions between a related party and the Group included in the statement of profit or loss
and the statement of financial position are as follows:
Other related party
Office rental
The Group
Office rental
2023
USD
2022
USD
3,674
8,593
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
2023
USD
2022
USD
Steppe Cement (M) Sdn. Bhd.
Dividend income
-
13,309,140
Karcement JSC
Interest income
1,401,554
1,332,302
MECS Ltd.
Interest income assigned
(793,500)
(865,000)
Subsidiary companies
Nature of transactions
Receivable from/(payable to)
subsidiary companies
2023
USD
2022
USD
Karcement JSC
Intercompany loans
30,050,000
30,080,000
Karcement JSC
Interest income
(118)
2,372,114
MECS Ltd.
Advances
35,761
30,352
Steppe Cement (M) Sdn. Bhd.
Advances
(143,574)
(244,656)
Total
29,942,069
32,237,810
91
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Compensation of key management personnel
The remuneration of directors and other members of key management are as follows:
The Group
The Company
2023
USD
2022
USD
2023
USD
2022
USD
Short-term benefits
872,785
840,660
137,425
134,137
Short-term benefits include contributions paid by the Group and by the Company to defined
contribution plans amounting to USD35,039 (2022: USD36,784) and Nil (2022: 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
2023
USD
30,000
50,000
40,000
17,425
2022
USD
30,000
50,000
40,000
14,137
Total
137,425
134,137
92
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 28.
FINANCIAL INSTRUMENTS
Categories of financial instruments
Financial assets
At amortised cost:
Trade and other receivables
Cash and cash equivalents
Deposits
Financial liabilities
At amortised cost:
Trade and other payables
Accrued and other liabilities
Borrowings
Lease liabilities
Financial assets
At amortised cost:
Interest receivable
Loans
companies
and
advances
to
subsidiary
Cash and cash equivalents
Deposits
Financial liability
At amortised cost:
Trade and other payables
Accrued and other liabilities
Amount owing to a subsidiary company
The Group
2023
USD
2022
USD
1,736,937
6,435,437
660
2,045,004
4,143,953
660
9,873,140
1,067,346
6,483,960
-
7,348,587
816,566
6,728,214
58,960
The Company
2023
USD
2022
USD
-
2,372,114
30,085,761
4,623,695
660
30,110,352
1,239,827
660
118
163,386
143,574
-
143,808
244,656
93
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 Capital Risk Management
The Group’s capital risk management objectives are to maximise value to shareholders and to
ensure that the Group’s subsidiary companies will continue to operate as a going concern through
optimisation of debt and equity balance.
The Group’s capital structure consists of net cash (which comprise of borrowings as detailed in Note
20 offset by cash and cash equivalents) and equity attributable to the shareholders of the Group.
Equity attributable to the shareholders of the Group includes share capital, reserves and retained
earnings. The Group monitors and reviews its capital structure based on its business and operating
requirements.
Financial Risk Management Objectives and Policies
Financial risk management is an essential element of the Group’s operations. The Group monitors
and manages financial risks relating to the Group’s operations through internal reports on risks which
analyse the exposure to risk by the degree and size of the risks. The operations of the Group are
subject to various financial risks which include foreign currency risk, credit risk, liquidity risk and
interest rate risk.
The Group continuously manages its exposures to risks and/or costs associated with the financing,
investing and operating activities of the Group.
(i)
Foreign Currency Risk
The Group undertakes trade and non-trade transactions with its trade customers and suppliers
which are denominated in foreign currencies. As a result, the amount outstanding is exposed
to currency translation risks.
Besides maximising cash at bank in US Dollars, the Group monitors the fluctuations in
exchange rate of foreign currencies to limit currency risk. The Group does not use derivative
instruments for the purpose of currency risk management.
94
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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:
GBP
EUR
MYR
RUB
Total
The Group
2023
Financial Asset
Cash and cash equivalents
206,788
65
5,041
1,467
213,361
Financial Liabilities
Trade and other payables
Accrued and other
liabilities
2022
Financial Asset
-
281,642
-
72,043
353,685
42,158
-
41,845
-
-
84,003
526,771
Cash and cash equivalents
503,597
14,602
8,572
Financial Liabilities
Trade and other payables
-
677,808
-
222,585
900,393
Accrued and other
liabilities
39,923
-
54,857
-
94,780
95
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 The Company
2023
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
2022
Financial Asset
Cash and cash
equivalents
Financial Liability
Accrued and other
liabilities
GBP
EUR
MYR
Total
152,390
65
4,166
156,621
42,158
-
38,050
80,208
428,932
55
8,378
437,365
39,923
-
50,859
90,782
96
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 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
2023
2022
(32,926)
56,315
7,361
14,115
(22,046)
(13)
6,777
(92,735)
132,641
9,257
44,517
(77,802)
(11)
8,496
97
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023
(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
2023, the Group’s trade receivables from third parties are mostly represented by ten large
customers, representing 60% of trade accounts receivable for cement sales (2022: 52%). 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 2023, the subsidiaries (CAC JSC and Karcement JSC) working capital
facilities of USD4.8 million (2022: USD5.1 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.
98
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Steppe Cement Ltd. e
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Annual Report 2023Steppe Cement Ltd.
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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Annual Report 2023Steppe 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 2023 and 2022, 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 2023 and 2022, 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.
101
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Steppe Cement Ltd. As of 31 December 2023 and 2022, 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.
2023
Property, plant and
equipment
2022
Property, plant and
equipment
Level 1
Level 2
Level 3
USD
USD
USD
Total
USD
-
-
1,612,446
4,388,038
6,000,484
1,614,044
5,122,673
6,736,717
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 USD2,411,554 as of 31 December 2023 (2022: USD6,432,413).
30.
SEGMENTAL REPORTING
No industry and geographical segmental reporting are presented as the Group’s primary business is
the production and sale of cement which is located in Karaganda region, the Republic of Kazakhstan.
31.
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.
102
Steppe Cement Ltd.NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 During 2022, one of the subsidiaries (CAC JSC) had a tax audit for the period from 1 January to
31 December 2016. Besides, the subsidiary had tax inspection for 2017-2020. Another subsidiary
(Karcement JSC) had a tax audit for the period from 1 October 2017 to 30 September 2022.
In 2023, the subsidiary (CAC JSC) received act on tax inspection for 2017-2020 and filled a
claim to the court on the results of this tax inspection. The first court decision was ruled out in
favor of the the subsidiary and therefore no provision has been made based on management’s
assessment of the likelihood of successfully defending the claim. At the date of these financial
statements, tax authorities appealed on the court decision.
Based on the results of the tax inspection of the subsidiary (Karcement JSC), Notification of
the audit results No. 250 dated 02/14/2023 and Documentary Tax Audit Report No. 250 dated
02/14/2023 were received.
Having disagreed with the Notification, the Company appealed it to the Ministry of Finance of
the Republic of Kazakhstan in full in the amount of 1,831,887 thousand tenge.
As of the date of approval of these financial statements, the case has not been accepted for
consideration by the court. All legal issues related to tax inspection are under the process and
there is no final court decision yet. Management has not accounted for a provision related
to this inspection as they believe that the risk of their appeal not being successful is less than
probable.
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 2022, 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 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 2022 “On amendments and additions to the
Code of the Republic of Kazakhstan” on the basis that the subsidiaries belong to the cement
and lime industry. The subsidiaries have analysed effect of implementation of the new Code and
effect was not material.
103
Annual Report 2023NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023 32.
SUBSEQUENT EVENT
On 26 April 2024, shareholders approved the Special Resolution for a capital repayment of
approximately 1.5 pence per ordinary share, effected by way of Capital Reduction. The share capital
of the Company has been reduced from USD73,760,924 (divided into 219,000,000 ordinary shares)
to USD69,599,924 (divided into 219,000,000 ordinary shares), with such reduction affected by the
capital repayment of USD4,161,000 to entitled shareholders at the record date.
33.
COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current year’s presentation.
As
previously
stated
USD
Reclassification
USD
As
reclassified
USD
Statement of Comprehensive
Income
Selling expenses (a)
(10,997,920)
(262,574)
(11,260,494)
Other income, net (a)
2,367,459
General and administrative expenses (b)
(6,393,080)
262,574
159,909
2,630,033
(6,233,171)
Impairment of losses of financial
assets (b)
-
(159,909)
(159,909)
(a)
(b)
The reclassification from selling expenses to other income is due to one of the subsidiary
companies is acting as a principal instead of an agent in providing the services.
Hence, it should be presented as gross instead of net.
According to IAS 1:82(ba), the impairment losses and gains (including reversals of
impairment losses) on financial assets should be presented in the face of the Statement of
Profit or Loss
104
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2023Steppe 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 2023 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,
NOTICE OF THE 2024 AGM
NOTICE OF THE 2024 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 2024 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 Friday, 12th July 2024 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 2023
To receive and adopt the audited financial statements for year
ended 31 December 2023.
RESOLUTION 1
2. RE-ELECTION OF DIRECTORS
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
RESOLUTION 2
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
106
Steppe Cement Ltd. Notes:
1.
2.
3.
4.
5.
6.
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.
Shareholders will need to send a Form of Proxy. Whether or not you intend to be present at the Annual
General Meeting, you are requested to complete and return the Form of Proxy in accordance with the
instructions detailed by 9.00 a.m. BST on 10 July 2024..
Depositary Interest Holders need to instruct the custodian Computershare Company Nominees Limited how the
wish to vote in accordance with the instructions on the Form of Instruction and voting instruction needs to be
received by 5.00 p.m. BST on 9 July 2024.
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
107
Annual Report 2023 108
Steppe Cement Ltd. 109
Annual Report 2023 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