
Kazakhstan Kagazy plc (the “Group” or “Kagazy”) has pleasure in announcing its unaudited consolidated financial results for the six months ended 30 June 2010 (the “Period”). These results have been extracted from consolidated unaudited financial statements.
Highlights for the period
· Revenues up 6% to US$ 32.1 million from US$ 30.3 million
· Gross profit down 20.2% to US$ 9.4 million from US$ 11.8 million
· Net profit of US$ 0.7 million compared with a net loss of US$ 25.6 million
· Production of the Paper Division up by 25%
· Utilisation of our class A warehouse facility up by 40%
· Negotiations with the Group’s banks and bondholders progressing
The first half of 2010 was a period of consolidation for the Group as we continued to concentrate on growing revenues in a weak market. These efforts began to bear fruit in the first half of 2010 and we expect them to have a greater impact in the second half of 2010. Despite the increase in sales, gross profit was affected by the increase of the price of raw materials compounded by the continued weakness in pricing in the first half of 2010. Since the end of the period the market has continued to strengthen which we expect to result in an increased gross margin.
Financial review
Summary statement of consolidated income
|
US$ 000 |
6m 2010 |
6m 2009 |
|
Revenue from sale of goods and services |
32 086 |
30 276 |
|
Cost of goods and services sold |
(22 643) |
(18 440) |
|
Gross profit |
9 443 |
11 836 |
|
|
|
|
|
Selling expenses |
(3 153) |
(2 910) |
|
Administrative expenses |
(6 865) |
(7 429) |
|
Other operating income (expenses) |
(441) |
3 850 |
|
(Loss)/Profit from operations |
(1 016) |
5 347 |
|
|
|
|
|
Financial income |
12 478 |
8 511 |
|
Financing costs |
(10 786) |
(38 749) |
|
Profit/(loss) before tax |
676 |
(24 891) |
|
|
|
|
|
Income tax expenses |
- |
(753) |
|
Net profit/(loss) |
676 |
(25 644) |
Financial Review
Revenue
|
US$m |
6m 2010 |
6m 2009 |
|
Paper |
28.6 |
25.9 |
|
Logistics |
3.5 |
2.2 |
|
Rental income |
- |
|
|
Total |
32,1 |
30,3 |
Revenue growth in the period was due to the growth in volumes of our paper business (“Paper Division”) partly offset by the reduction in the aggregate of the income earned by our logistics division (“Logistics Division”) together with the loss of rental income from the Logistics Division.
Costs & expenses
Gross margin was reduced as the price of raw materials increased whilst sales prices remained relatively constant. Administrative expenses were reduced as a result of the cost cutting measures implemented during the first half of the year. Net finance expense was significantly reduced, primarily due to foreign exchange movements: In 2009, the devaluation of the KZT resulted in exchange loss of US$ 19.1m compared with an exchange gain of US$ 11.9m in 2010.
Financial restructuring
The Group continues to seek to reach agreement with its Lending Banks and Bondholders. Significant progress has been made since the publication of the 2009 Annual Report on 3 May 2010. It should be noted however, that until final agreement is reached, the future of the Group remains uncertain although we remain confident that we will reach agreement with our Lending Banks and Bondholders on terms that are consistent with our expectation of future cash flows.
Banks
Whilst negotiations have not yet been finalised, of our three major banks, one has approved our restructuring subject to contract, one has proposed terms to us which are acceptable to us but is subject to their final approval and contract and we remain in constructive discussion with the third.
Bondholders
We have reached agreement with 16 holders of the first issue of our Bonds, which is past its maturity date, and, therefore, no longer classed as a Bond and not subject to the same regulations as the second, third and fourth issues of our Bonds which are not past maturity and are in the Buffer Zone section of the Kazakhstan Stock Exchange. Negotiations remain constructive with all of our remaining Bondholders and, subject to the resolution of a number of structural issues we remain confident that agreement will be reached.
Operational Review
Restructuring
Our programme of operational restructuring continues. Since the end of the period, we have relocated the Kazupak operations to the Kagazy Recycling site hence reducing costs and we have also closed Kagazy Trading, our paper trading business which made a small contribution to Group profitability whilst tying up a significant amount of working capital. We have also continued the cost cutting programme in our logistics business and in overheads. Overheads have decreased by 8% despite the extra costs incurred by the group as a result of the restructuring.
Paper
The Paper Division amounted to 89% of total revenues in the first half of 2010. Volumes of corrugated packaging and container board were up by over 25% in the first half of 2010 as compared with the first half of 2009 reflecting in part an upturn in the Kazakh Fast Moving Consumer Goods sector to which the Paper Division is significantly exposed.
|
|
6 months to 30 June 2010 |
6 months to 30 2009 |
Percentage increase |
|
Corrugated packaging (000m2) |
46,787 |
36,692 |
27,5% |
|
Paper and board (Tonnes) |
21,135 |
16,787 |
25,9% |
Prices remained weak in the first half of 2010 but since the end of the period, we have sought to increase prices significantly in response to the increased demand for our products.
Logistics
The Logistics Division, which comprises principally of three operating units (a class A warehouse, a Class B warehouse and a container terminal), is also showing signs of recovery. At the end of the period our Class A warehouse was 34% full compared with 24% at the beginning of the period; our class B warehouse was 43% full compared with 36% at the beginning of the period; and the number of containers processed by our container terminal increased by 9% from 7,957 in the first half of 2009 to 8,656 in the first half of 2010.
For further information, please visit www.kazakhstankagazy.com or contact:
Aida Yelgeldiyeva: Kazakhstan Kagazy plc
Tel: +7 727 244 8787
David Facey: SP Angel corporate Finance LLP
Tel: +44 20 7647 9650
This unaudited interim statement contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Kazakhstan Kagazy plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this interim statement should be construed as a profit forecast.
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