Tag Archives: Kazakhstan

Economic crisis wipes out Kazakh car-making industry

APRIL 15 2016, ALMATY (The Conway Bulletin) – A sharp economic downturn and a 40% overvaluation of the tenge last year combined to destroy Kazakhstan’s car making industry, new data showed.

The Kazakhstan Automobile Business Association (AKAB), an industry lobby group, said that in the first three months of 2016 Kazakhstan produced 428 cars, a fraction of the 12,450 cars produced a year earlier.

The data highlights the plight of the car making industry in Kazakhstan, which had once been held up as an example of how the country’s industrial base can modernise.

There are three car factories in Kazakhstan – AziaAvto, Saryarka AvtoProm and Avtomashholding. Between them they make cars for Lada, Kia, Chevrolet, Skoda, Hyundai, SsangYong and Peugeot.

None of the three car factories replied to Conway Bulletin requests for comment.

A general economic downturn was exacerbated last year by a disparity between the price of the tenge and the rouble until mid-August, when the Kazakh Central Bank finally allowed its currency to devalue. Between January and the devaluation, the tenge, propped up by the Central Bank, was around 40% over-valued against the rouble.

This had two effects. Kazakhs headed north to buy their new cars from Russian dealerships, undermining domestic sales, and exports to Russia collapsed.

MPs also said a $3,000 registration fee introduced at the beginning of this year on cars built in 2015 has deterred people from buying cars. It was introduced to re-coup lost revenue from Russian cars sold to Kazakhs in 2015.

Car showrooms around Almaty lie empty. There are simply no customers. Markhaba and her family have been considering buying a new car. She explained why they still haven’t one.

“The price of new cars in tenge increased by 20% to 30%, and we are still considering whether we really need to buy one or not.” she said.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Kazakh oil service firms criticise subsoil law changes

APRIL 21 2016, ALMATY (The Conway Bulletin) – Kazakh oil service companies have said they are concerned about changes in the country’s subsoil law that the government needs to make to comply with WTO and Eurasian Economic Union regulations.

Nurlan Zhumagulov, head of the Union of oil service companies, said the proposed new law could harm local businesses.

“The new code will cut support for domestic producers. It will cancel the conditional inclusion in bids of local goods, workers and services in subsoil contracts,” Mr Zhumagulov told local media.

Local content, an industry code- word for the use of domestic assets and human resources, has been a cornerstone of Kazakhstan’s oil industry. Over the past two decades, with a series of laws, the government had raised the proportion of local workers and service contracts awarded to Kazakh companies in the oil sector.

Now, WTO regulations and the prospect of similar rules in the Eurasian Economic Union might stop subsidies and favouritism, a move cheered by international firms looking to win business in Kazakhstan. They have said that the changes to the subsoil law will make the tender process fairer.

Having negotiated since the mid- 1990s, Kazakhstan finally joined the WTO in November 2015. It requires Kazakhstan to scrap its local content legislation and stop favouring its local companies.

This comes at a tough time for the oil industry. The sharp fall in oil prices, which averaged $51/barrel in 2015, meant that service industry’s revenues fell by 25% last year, accord- ing to Mr Zhumagulov.

But the Asset Issekeshev, minister of industry, appeared to brush aside these concerns

“We are aware of all these questions and they will be resolved in the framework of the new code,” he said.

Spurred on partially by an economic downturn that has hit government revenues, Kazakhstan wants to attract more foreign investment into its extractive sectors.

It has identified its current subsoil laws as a potential weakness and a barrier to entry.

ENDS

(News report from Issue No. 277, published on April 22 2016)

Business comment: Doha dissappoints

APRIL 22 2016 (The Conway Bulletin) – Energy ministers in Baku and Astana were frustrated last week after a meeting of oil producers in Doha failed to agree to freeze oil production at January 2016 levels. Advocates of capping production had said that this would help oil prices rebound.

But Azerbaijani and Kazakh objectives at the meeting may have been slightly different to those of Saudi Arabia or Russia.

Certainly, they wanted a deal to push up oil prices but they also wanted to use any agreement as a fig leaf to cover up their sinking production levels.

Azerbaijani and Kazakh production and export volumes are too low to influence oil prices directly. They are price takers, not setters. The problem is that their ageing oilfields are simply uneconomical at $40 or even $60/barrel and this has forced producers out of the market.

Azerbaijan and Kazakhstan will continue to “freeze” production, because there’s nothing else they can do. Their production, and consequently their exports, are bound to fall again this year, according to all major forecasting agencies, from OPEC to the IEA and the EIA.

A recent survey of oil experts at PRIX said, for the first time since it started polling, that global oil exports are bound to fall in Q2. Azerbaijan and Kazakhstan will be part of this trend, the quarterly report said.

Had the Doha meeting succeeded, Azerbaijan and Kazakhstan could have hidden falling production figures behind an international agreement.

Now they have to face further oil price volatility, the main outcome of the failed Doha talks, and without a smokescreen to defend their lower output figures.

ENDS

(News report from Issue No. 277, published on April 22 2016)

EBRD praises Kazakh economy

APRIL 8 2016 (The Conway Bulletin) – The European Bank for Reconstruction and Development (EBRD) has defended Kazakhstan’s economic record over the past couple of years despite a sharp currency devaluation, rising inflation and thousands of job losses, media reported. Media quoted the EBRD’s chief in Kazakhstan, Janet Hackman, saying that Kazakhstan was not faced with an economic crisis because of steps it had taken recently to join the WTO and move to an inflation targeting monetary policy.

ENDS

(News report from Issue No. 276, published on April 15 2016)

Kazakh mobile operator maintains dividend

APRIL 12 2016 (The Conway Bulletin) – Kcell, Kazakhstan’s largest mobile operator, said it would pay out 50% of its 2015 profits in dividends, disappointing investors and analysts, who expected a higher return. At 117 tenge per GDR ($0.35), this year’s dividend is lower than the $1.54 per GDR it gave out last year. Analysts at Halyk Bank expected the dividend to be around 70% of Kcell’s profits this year. Kcell revenues fell 10% in 2015 as tougher competition and an economic downturn combined to hit sales.

ENDS

(News report from Issue No. 276, published on April 15 2016)

Kazakhstan copper producer posts 12% drop in revenues

ALMATY, APRIL 11 2016 (The Conway Bulletin) — Kazakhstan-focused copper producer Central Asia Metals posted a 12% decline in revenues in 2015, a drop it said was linked to the fall in commodity prices.

Although copper cathode production grew by 8.4% to 12,071 tonnes in 2015, a new high for the company, the average selling price for copper declined by 21%, bringing down earnings.

And with lower copper prices, Central Asian Metals said that the Kazakh government also earned 14% less from the mineral extraction tax it applied to its sales than it did in 2014.

On a more positive note, the company said that it had received permission from the government to expand its 15,000 tonnes/year copper recovery plant at the Kounrad mine.

And it also said that it will maintain its dividend payment, despite the tough market conditions.

Nick Clarke, CEO of Central Asia Metals, said: “While many resource companies are cutting dividends, we are pleased to be able to honour and exceed our dividend policy.”

The total dividend the company will pay for 2015 amounted to 12.5p, the same level as last year.

Editorial: Kazakh President’s travels

APRIL 15 2016 (The Conway Bulletin) – Kazakhstan’s President Nursultan Nazarbayev is fond of grandstanding foreign tours and he was at it again this week.

Generally, when a top world leader visits Astana, the next morning official media boasts deals worth billions of dollars. And it’s the same story when he travels. Mr Nazarbayev likes a multibillion dollar deal headline, even if some of the finer details show it to be hollow, at least in part.

This was the case in Tehran where Mr Nazarbayev signed a $1b trade deal with his Iranian counterpart Hassan Rouhani. In essence there appears to be little substance to this deal.

After Tehran, Mr Nazarbayev flew to Istanbul in an important show of support for President Recep Tayyip Erdogan who is at loggerheads with Russia.

The last stage of the tour is to neighbouring Uzbekistan. Mr Nazarbayev arrived last night in Tashkent for a meeting likely to focus on the economic challenges faced by the region.

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(Editorial from Issue No. 276, published on April 15 2016)

Kazakh equity firm to invest in grain processing

APRIL 8 2016 (The Conway Bulletin) – Verny Capital, a Kazakh private equity firm, said it will invest around $100m in the grain processing sector. Yerlan Ospanov, the company’s CEO, said the investment is aimed at seizing market share. “We will produce gluten, sugar; glucose syrup, molasses,” Mr Ospanov said. The company did not specify the details of the investment.

ENDS

(News report from Issue No. 276, published on April 15 2016)

Business comment: Dividends Et Impera

APRIL 15 2016 (The Conway Bulletin) – Dividends make investors happy, when they are issued, that is.

Kazakhstan’s largest publicly-traded companies have embarked on different dividend policies to weather an economic downturn that has, frankly, clobbered markets.

This week, mobile operator Kcell, which is part-owned by Sweden’s TeliaSonera and whose GDRs are listed in London, decided to give out 50% of its profits as dividend to its shareholders.

And, sticking to a long-held company policy, London-listed Central Asia Metals said it would pay out a total dividend of 12.5p.

At the opposite end of the dividend strategy spectrum, KMG EP and Halyk Bank, whose GDRs are also listed in London, ditched their annual payout to shareholders.

Both companies had traditionally given a piece of their profits to shareholders in the past.

KMG EP, a subsidiary of state-owned Kazmunaigas, said a collapse in oil prices over the past couple of years meant it couldn’t afford to pay out dividends and in a terse statement, Halyk Bank, owned by Timur Kulibayev and his wife Dinara Kulibayeva, daughter of President Nursultan Nazarbayev, said it too wouldn’t give shareholders a handout this year.

Halyk Bank didn’t explain its decision but Kazakhstan’s banking sector is bracing itself for an increase in non-performing loans linked to a 50% fall in the value of the tenge last year Broadly, these two different strategies provide an insight into Kazakh corporate mindset. Those companies with a stronger link to the Kazakh government and the political elite simply don’t need to pay dividends to keep their key investors happy.

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(News report from Issue No. 276, published on April 15 2016)

Orsu sells mines in Kazakhstan

APRIL 11 2016 (The Conway Bulletin) – London and Toronto-listed miner Orsu Metals said it has applied to sell its 94.75% interest in the Karchiga project and its 51% stake in the Kogodai project in Kazakhstan and subsequently de-list from the stock market. Both stakes will be sold to little-known Karasat Trading, a UAE-based company already working in Kazakhstan’s mining sector. The two deals, together, could earn Orsu around $10m.

ENDS

(News report from Issue No. 276, published on April 15 2016)