STCM Steppe Cement Ltd

5 April 2024

Steppe Cement Ltd

("Steppe Cement" or the "Company")

Proposed Reduction & Repayment of Capital and Notice of EGM

Steppe Cement (AIM: STCM), the AIM-traded Kazakh cement producer, is pleased to announce the Proposed Capital Repayment of approximately 1.5 pence per Ordinary Share, effected by way of Capital Reduction pursuant to Section 53(9A) of the Labuan Companies Act 1990, and its Notice of EGM.

The Proposed Capital Repayment requires Shareholder approval of the Special Resolution to be proposed at an Extraordinary General Meeting of the Company to be held at Suite 10.1, 10th Floor, West Wing, Rohas Perkasa, 8 Jalan Perak, Kuala Lumpur, Malaysia on Friday, 26 April 2024 at 4.00 p.m. MYT.

Subject to the approval of the Special Resolution at the EGM, the Capital Reduction will have the effect of reducing the Company's share capital from USD73,760,924 (divided into 219,000,000 Ordinary Shares) to USD69,599,924 (divided into 219,000,000 Ordinary Shares), and that such reduction be effected by the capital repayment of USD4,161,000 in cash, which will be paid in GBP, and is expected to equate to approximately 1.5 pence per Ordinary Share, to Entitled Shareholders at the Record Date.

The number of outstanding Ordinary Shares will remain the same at 219,000,000.

A copy of the Circular containing more information in relation to the Capital Reduction and Proposed Capital Repayment, and Notice of EGM, will today be posted to Shareholders and will shortly be available on the Company's website at https://www.steppecement.com/investors/aim-rule-26/.

Terms used in this announcement, but which are otherwise undefined shall have the same meanings as set out in the Circular.  This announcement and the summary of the Capital Reduction and Proposed Return of Capital should be read in conjunction with the Circular.

For further information, please contact:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended by virtue of the Market Abuse (Amendment) (EU Exit) Regulations 2019.

Key extracts from the Circular are set out below:

Details of the Proposed Capital Repayment by way of Capital Reduction and Notice of Extraordinary General Meeting

1.            INTRODUCTION

Steppe Cement operates the Karaganda cement factory in Kazakhstan. The Company has a 100% subsidiary in Malaysia that in turns owns a 100% subsidiary in Netherlands that holds 100% of three Kazakh companies. It has a current annual production capacity of 2 million tonnes of cement.  In the year ended 31 December 2022, the Company made a net profit of circa USD 18 million or approximately 6.5 pence per Ordinary Share. The company paid a 5 pence dividend in late 2022. In 2023 the turnover of the company was 7% lower than in 2022.

The Board expressed its intention to pay a dividend of 2 to 3 pence in 2023. However, new tax legislation which has taken effect in Malaysia, the Netherlands and Kazakhstan, has made the Company's current corporate structure inefficient for the purposes of making shareholder distributions by way of a dividend. Dividends would potentially now be subject to tax charges arising in multiple jurisdictions.

2.            RATIONALE FOR THE PROPOSED CAPITAL REPAYMENT

Steppe Cement Ltd and the subsidiaries in its structure in Malaysia and the Netherlands have sufficient capital to maintain their operations and pay their expenses together with making all currently foreseeable investments in plant and machinery. The Capital Reduction will allow the Company to return excess capital to its shareholders while maintaining adequate reserves for future development.  As noted above, distribution via a dividend would potentially incur tax charges in numerous jurisdictions, whilst distribution via a share buy-back, the possibility of which has been explored, was found to be logistically inefficient. Accordingly, the Proposed Capital Repayment is considered by the Board to be the most effective and economical method of return of capital to shareholders and the Board believes that the proposed Capital Reduction is worth the extra time and expense. The Board would like to have the full support and participation of the shareholders of the Company as the resolution requires a 75% approval ratio.

For the avoidance of doubt, the number of shares outstanding after the Capital Reduction has taken effect will remain the same.

3.            EFFECTS OF THE PROPOSED CAPITAL REPAYMENT

3.1          Share Capital

If the Special Resolution is approved at the EGM, the Capital Reduction will have the effect of reducing the Company's share capital by USD4,161,000 (approximately £3,285,000) from USD73,760,924.00 to USD69,599,924.00 by cancelling and extinguishing capital to the extent of 1.9 US cents per share (being the reduction in the stated capital of USD4,161,000 divided by the 219,000,000 Ordinary Shares in issue) on each fully paid up ordinary share of no par value each in the Company and the amount by which the stated capital is so cancelled will be distributed (in GBP) to Shareholders from the Group's existing cash resources.

In accordance with Section 53(9A) of the Labuan Companies Act 1990, the reduction of share capital by way of a special resolution, may be made without confirmation by the court so long as the Directors declare by way of a Declaration of Solvency.

The Capital Reduction shall in no way affect the validity of the Shareholders' existing share certificates or CREST holdings.

The effects of the Proposed Capital Reduction on the Company's issued and paid-up share capital are as follows:

*Being the most recent year end date prior to publication of the Circular.

3.2          Funding

The Proposed Capital Repayment will be funded via the Group's existing cash balances.

3.3          Earnings per Share

The Proposed Capital Repayment will not affect the Earnings per Share of the Company as the number of shares outstanding remains unchanged after the Proposed Capital Repayment.

3.4          Shareholders' Interests

The Proposed Capital Repayment will not have any effect on the percentage shareholdings of the substantial shareholders of Steppe Cement Ltd as disclosed on the Company's website or any other shareholders' interests.

4.            TAXATION

Shareholders who are in any doubt as to their tax position should consult an appropriate professional tax adviser.

5.            EXPECTED TIMEFRAME FOR COMPLETION

The Proposed Capital Repayment is expected to be completed in Q2 2024, with further announcements, including the Record Date, to be made as appropriate by the Company.

6.            PAYMENT OF THE PROPOSED CAPITAL REPAYMENT

Depositary Interest holders will receive payment directly to their CREST payment account by way of an assured payment obligation through the CREST system. Certificated Shareholders will receive payment to their mandated bank or building society account as recorded by the Registrar, or by cheque if no such mandate is registered. Shareholders who are recorded in the books of the Registrar as "gone away" will not have their cheque issued until they contact the Registrar for security reasons.

7.            EGM AND ACTION TO BE TAKEN

Shareholders will find the Notice of EGM and the accompanying notes at the end of the Circular. The Special Resolution requires at least 75 per cent of votes in favour for it to be carried.

8.            BOARD'S RECOMMENDATION

The Board unanimously recommends that Shareholders vote in favour of the Special Resolution to be proposed at the Extraordinary General Meeting.

Expected Timetable of Principal Events

Definitions