Trading Update for the Quarter ended 31 March 2026

Steppe Cement Ltd (AIM:STCM) has released a trading update for the quarter ended 31 March 2026, reporting a notable increase in both sales volume and revenue. The company achieved cement sales of 344,058 tonnes, a 25% increase compared to the same quarter in the previous year, with revenue rising by 50% to KZT 9,696 million (approximately USD 19.5 million). The average delivered price for cement also saw a significant rise of 20% in KZT terms, reaching KZT 28,181 per tonne. Furthermore, Steppe Cement's market share in Kazakhstan has grown to 16.0%, up from 13.5% in the first quarter of 2025. While these figures appear strong in isolation, it is crucial to contextualize them against the company's historical performance and the broader market environment.

In comparing this announcement to previous disclosures, Steppe Cement's performance in Q1 2026 shows a marked improvement over Q1 2025, where the company sold 276,217 tonnes of cement for KZT 6,465 million. The increase in sales volume and revenue aligns with the company's previous guidance, which indicated expectations for growth in both production and market share. However, it is essential to note that while the sales volume has increased, the production of clinker remained stable compared to the previous year, suggesting that the company may be relying on existing inventory to meet demand rather than significantly ramping up production capabilities. This could indicate potential challenges in scaling operations to meet future demand, particularly as the company embarks on a significant expansion project aimed at increasing production capacity by 0.5 million tonnes by Summer 2027.

Financially, Steppe Cement's current market capitalization stands at GBP 41.6 million. The company is undertaking an expansion project with an estimated cost of USD 35 million, which raises questions about funding sufficiency. While the revenue growth reported in this trading update is promising, it remains to be seen whether the current cash flow can adequately support the expansion without necessitating further capital raises or incurring additional debt. The company has not disclosed its current cash position or burn rate, making it challenging to assess the funding runway and potential dilution risks associated with the expansion project.

In terms of valuation, Steppe Cement's performance can be compared to its peers in the cement sector. However, specific peer comparisons are limited due to the absence of detailed financial metrics for direct competitors in the recent news context. Nonetheless, the overall market dynamics in Kazakhstan indicate a relatively stable demand for cement, with total cement consumption expected to remain in line with 2025 levels at approximately 14.5 million tonnes. This stability, combined with Steppe Cement's increased market share, positions the company favorably against competitors. However, the decline in cement exports and the decrease in imports may suggest a tightening market that could impact future pricing power and margins.

One notable red flag in this announcement is the significant decline in cement exports from Kazakhstan, which fell by 48% year-on-year in Q1 2026. This decline indicates potential challenges in the export market and raises concerns about the company's ability to diversify its revenue streams beyond domestic sales. Additionally, the reliance on existing clinker production levels, despite increased sales, could signal operational constraints that may hinder future growth if demand continues to rise.

Looking ahead, the company has not provided specific timelines for future catalysts beyond the ongoing expansion project. The anticipated completion of the expansion by Summer 2027 is a key milestone that investors will be watching closely, as it will determine the company's ability to meet growing demand and enhance its competitive position in the market.

In conclusion, while Steppe Cement's trading update for Q1 2026 presents several positive indicators, including increased sales volume, revenue growth, and market share expansion, the context reveals a more nuanced picture. The company's reliance on existing production levels, coupled with the significant decline in exports, raises concerns about its operational capacity and market dynamics. Given these factors, the announcement can be classified as moderate, reflecting positive developments tempered by underlying challenges. The headline sentiment is somewhat warranted, but investors should remain cautious about the potential risks associated with the company's expansion plans and the broader market environment.

Key insights

• ●Sales volume increased 25%, revenue rose 50% in Q1 2026.
• ●Market share grew to 16%, but clinker production remained stable.
• ●Cement exports declined 48% year-on-year, raising concerns.

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