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Kazakhstan Kagazy takes action to mitigate impact of Rouble devaluation
The devaluation of the Russian Rouble against the Kazakhstan Tenge over the last six months is having a significant adverse effect on the performance of the Kazakh economy and, specifically, on the Company’s business. As has been widely reported in Kazakhstan’s media, the Rouble devaluation combined with the economic slowdown in Russia, which is Kazakhstan’s largest trading partner, has allowed Russian producers to aggressively undercut the pricing of Kazakh production companies. This has caused a sharp decline in sales and production for the majority of Kazakhstan-based producers.
The decline in production across Kazakhstan’s agricultural and consumer goods sectors has lead to a material fall in sales revenue for Kazakhstan Kagazy, which is the largest producer of commercial packaging in Central Asia. Additionally Kazakhstan Kagazy is facing strong competitive pricing pressure from Russian packaging producers who, as a result of the Rouble devaluation, now benefit from decreased costs and have been able to deeply discount prices for sales into Kazakhstan.
Management forecasts that sales and revenue for Q1 2015 will be down by over 18% compared to Q1 2014.
To mitigate this situation management has implemented a comprehensive cost-cutting and savings programme, which includes:
- lowering prices to maintain a competitive position in the market;
- reducing headcount and salaries for all employees across the business, including directors and management;
- minimising administrative and non-essential costs;
- moving production to a part-time schedule;
- reducing supply orders, selling non-core assets and cancelling non-essential contracts; and
- working with all suppliers and partners to reduce supply costs.
Management expects that these measures will stabilise the Company’s business, pending restoration of a more usual trade-balance with Russia. If the current economic situation continues or deteriorates, further cuts and restructuring actions may be necessary.
For more information please contact:
Kazakhstan Kagazy PLC
Hugh McGregor
General Counsel and Company Secretary
+7 (727) 244 87 87
Daniel Stewart & Company PLC
David Coffman / Liz Kirchner (Financial Adviser) / Martin Lampshire (Broker)
Tel +44 (0) 20 7776 6550
About Kazakhstan Kagazy PLC
London Stock Exchange listed Kazakhstan Kagazy PLC is the largest paper, packaging and recycling group in Kazakhstan and Central Asia.