Steppe Cement Ltd

Interim Results for the Half Year Ended 30 June 2008

and General Market Update

1.    Interim Results

Steppe Cement Ltd ("Steppe Cement") is pleased to announce a consolidated profit after tax for the six months ended 30 June 2008 of US$14.6 million.

Steppe Cement's operating results are summarized below:

Steppe Cement's net profit has increased by 38% compared to the corresponding period in 2007. At the operational level, sales grew by 32% in Tenge and volumes have increased by 8%. Average sales price rose to US$126/ton during the period compared to US$101/ton achieved in the corresponding period last year.

Production costs have increased by 19% on line with Kazakhstan inflation and mainly due to rising costs of utilities, coal, transportation, oil and labor. These cost increases will be balanced in the coming months as the dry lines are progressively brought into production.

The pace of investment has accelerated over the last 6 months after we cleared the remaining imported goods from customs. Investment in plant and equipment during the first six months was US$ 54 million.

2. Update on the Kazakh Cement Market

The Kazakhstan cement market decreased by 15% during the first half of the year. The imports' share of the market has gone down from 44% to 33% of the total while local production was stable with the exception of the temporary stoppage of the factory in Shimkent.

Steppe Cement expects an overall decrease of 20% in the market for the whole of 2008 as the summer months in 2007 witnessed a peak in consumption fuelled by the availability of credit then. The monthly consumption pattern is reverting to the trend of 2005 and 2006.

The average price per tonne in the first half has increased significantly compared to 2007 but we expect lower prices during the second half of 2008. Consumption is expected to stabilise during the summer 2008. 

The deficit in the market will continue, at least until Steppe Cement commissions its second line. The credit tightening in the world markets still affects the availability of funds for the construction sector in Kazakhstan, on the other hand the government has pledged to maintain its support for housing and infrastructure investment. 

3. Refurbishment progress

The refurbishment project for dry line 6 is now completed and commissioning began in June. All motors and electrical systems have been tested. The kiln will be fired in the coming days.  The line 6 is currently operated by 155 employees with the support of the 30 foreign specialists

Most of the imported materials for line 5 are on site or will be delivered by November 2008. Over the last three months, we experienced problems with the quality of locally manufactured steel and the delivery of structural materials as two of the sub contractors defaulted on their obligations and we had to re tender their work. This will cause a delay in commissioning of line 5 until the summer of 2009.

The new chain system for two kilns in the wet lines arrived in May but the installation has been postponed until October 2008 to maximize production during the summer months. Their existing capacity is 850,000 tons in a full year of operation. Cement mill number 7 is working as planned and cement mill number 6 will be started before the end of 2008.

4. Financing

The cash flow was applied to the refurbishment program and the same policy will apply to the second half of the year. The USD 42 m. loan of EBRD has been completely drawn down as of June 2008.  Kazcommertz Bank loan of $23.2 m. is in the process of being refinanced by HSBC Bank Kazakhstan enabling the company to save substantially in interest payments.

A pdf copy of the announcement and the interim financial statements is available on the company's website at www.steppecement.com.

Steppe Cement's AIM nominated adviser is RFC Corporate Finance Ltd. Contact Stephen Allen +61 8 94802500.

STEPPE CEMENT LTD

(Incorporated in Labuan FT, Malaysia under the Offshore Companies Act, 1990)

AND ITS SUBSIDIARY COMPANIES

INTERIM FINANCIAL STATEMENTS

STEPPE CEMENT LTD 

(Incorporated in Labuan FT, Malaysia under the Offshore Companies Act, 1990)

AND ITS SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED INCOME STATEMENT 

FOR THE PERIOD ENDED 30 JUNE 2008 (UNAUDITED)

The accompanying notes form an integral part of the Condensed Financial Statements.

STEPPE CEMENT LTD 

(Incorporated in Labuan FT, Malaysia under the Offshore Companies Act, 1990)

AND ITS SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2008 (UNAUDITED)

Assets