Results of OJSC "SHNOS" (Kazakhstan) in 1999

/KASE, March 21, 00, Galina Tsalyuk/ - According to listing requirements, OJSC "SHNOS" (Shymkent, official list of securities, category "A") provided Kazakhstan Stock Exchange (KASE) with its audited financial statements for the year 1999: balance sheet, income statement, and cash flow statement. The audit was held by an independent auditing company "Arthur Andersen" (Almaty, Kazakhstan). After the audit of 1997 financial statements by "Arthur Andersen" OJSC "SHNOS" makes its financial statements by the standards of the auditor and present them to the Exchange. As a result, financial and economic ratios of the company and those of an independent auditor match. Following are the results of OJSC "SHNOS" in 1999 by the data of the emitter and the auditor (in th. KZT): As of As of Change, Ratio January 1' 99 January 1' 99 % ------------------------------------- ------------- ------------- ------- Authorized capital (announced) 83,097 100,000 +20.3 Authorized capital (paid) 83,097 83,097 0 Shareholders equity 11,301,652 14,357,386 +27.0 Total assets 12,880,517 17,884,068 +38.8 Net working capital 3,603,681 6,737,230 +87.0 Accounts receivable (net) 3,167,897 3,591,950 +13.4 Bad debt reserves 860,751 463,677 -46.1 Accounts payable 1,578,865 3,350,907 +112.2 Sales (services offered) 18,705,022 31,827,675 +70.2 Cost of goods sold (services offered) 13,322,730 16,345,816 +22.7 Net income (loss) of the period 2,399,269 8,415,980 +250.8 ------------------------------------- ------------- ------------- ------- Calculated based on emitter's data: ------------------------------------- ------------- ------------- ------- Return on sales (ROS), % 28.77 48.64 +69.0 Return on equity (ROE), % 21.23 58.62 +176.1 Return on assets (ROA), % 18.63 47.06 +152.6 Book value of a share, KZT 13,600.57 229.60 - Earnings per share (EPS), KZT 3,207.60 - - Price earnings ratio (P/E) 3.14 - - ------------------------------------- ------------- ------------- ------- Earnings per common share (EPS) and price earnings ratio for the year 1999 were not calculated as the amount of dividends to preferred shares was absent. When comparing book values of shares one should keep in mind that the table contains the data on the shares of different issues with various face values (in 1998 - KZT100, in 1999 - KZT1). By 1998 results, book value of a share exceeded the face value 136 times, by 1999 results - almost 230 times. Annual capacity of oil refinery is 7 mln tons of crude oil. Based on the information of the auditor, average processing capacity in 1996-1997 - 47%, in 1997-1999 - 51%. OJSC "SHNOS" processes crude oil purchased for its own funds as well as oil of their clients under mutual interest agreements. Each year the company creates necessary reserves (provisions) to minimize the risks that may have a negative impact on its activities and its financial situation. In 1999 following reserves: general reserves for bad debts for an amount of KZT463.68 mln (KZT860.75 mln - in 1998, KZT540.76 mln - in 1997), reserve for obsolescence of inventory for an amount of KZT47.00 mln (KZT72.00 mln - in 1998, no reserves in 1997), also current income tax provisions for KZT3,947.39 mln (KZT826.79 mln - in 1998, KZT1,066.31 mln - in 1997). As in previous report, the auditor notes that OJSC "SHNOS" has no insurance coverage on its equipment, production and on possible property damages or environmental hazards. Therefore, there is a risk that a loss or damage to certain assets can have a negative impact on the company's activities and its financial situation. According to auditing report made on October 9, 1999, OJSC "SHNOS" and Canadian "Hurricane Hydrocarbons Ltd." ("HHL") have signed a merger agreement. Based on the agreement, "HHL" (its affiliated structure - OJSC "Hurricane Kumkol Munai" is the main supplier of raw materials to OJSC "SHNOS") will receive about 84% of issued shares of OJSC "SHNOS" for 57.0 mln U.S. dollars and 30% of shares issued by "HHL". The report reads (beginning of quote): "Presently, "HHL" is under the protection of Canadian court on bankruptcy and is going through the restructuring of its financial matters with the lenders. The merger will depend on the successful outcome on this matter, in addition to other matters specified in the agreement. The merger agreement terminates itself on March 31, 2000 if all the matters of the agreement will not settled successfully." (end of quote) Auditing was conducted in accordance with International and Kazakhstani accounting standards. In the auditor's opinion, financial statements give a reliable and objective picture of financial situation of OJSC "SHNOS" as of December 31, 1999 and 1998, and that of the results of its activities and cash flow statements as of indicated dates in accordance with Kazakhstani accounting standards. Dynamics of sales and income of the company are shown in the next table on quarterly non-accruing basis (in th. KZT): Index I-99 II-99 Change, % III-99 Change, % IV-99 Change, % ---------- ------- ------- --------- -------- --------- -------- --------- Sales 2,722.7 5,723.7 +110.2 12,784.6 +123.4 10,596.6 -17.1 Net income -463.8 1,414.9 +405.0 2,362.6 +67.0 5,102.3 +116.0 ---------- ------- ------- --------- -------- --------- -------- --------- According to an extract from the register of the owners of OJSC "SHNOS" securities, as of December 31, 1999 17,293,655 shares of the second issue were in issuance account of the emitter, 20,567,622 shares were bought back from the shareholders by the decision of the Board of directors of November 11, 1999. At annual general meeting, which was held on February 11 of current year, shareholders of OJSC "SHNOS", taking into consideration the decision of the Board of directors of December 10, 1999 on changing issued (paid) capital of the company, made a resolution: to cancel previous (second) issue of the shares with simultaneous registration of a new issue of 62,322,701 shares.