The editorial board of FBRK continues its series of publications on the analysis of the financial statements of socially entrepreneurial corporations of Kazakhstan (SEC). Today we will look at the financial statements of SEC "Soltústik" for 2023 — a key development institution of the North Kazakhstan Region. The corporation ended the year with a positive financial result maintained, amid a moderate decline in revenue. The SEC continues to increase its investment activity in the region, as evidenced by an increase in long-term financial investments of almost 17% alongside growth in the loan portfolio to enterprises and organisations in the region.
OPERATING RESULTS: DECLINE IN REVENUE AND INCREASE IN OPERATING COSTS
Revenue of SEC "Soltústik" according to consolidated statements in 2023 amounted to 2.58 billion tenge compared to 2.98 billion tenge in the previous year, reflecting a decline of 13.2%.
Non-consolidated revenue of the parent company also decreased — to 2.47 billion tenge from 2.89 billion tenge in 2022 (a decline of 14.5%).
The structure of income reflects the multi-disciplinary nature of the corporation's activities. The main sources of revenue are: income from issuing guarantees, sale of goods and services, income from joint activities, receipts from leasing out retail spaces, and income from the "Astana" hotel complex. The largest share of the income structure is accounted for by operations for the sale of goods and services (about 50% of total revenue) and income from issuing guarantees (approximately 30%).
The cost of goods sold and services rendered according to consolidated statements amounted to 1.77 billion tenge compared to 1.73 billion tenge in the previous year. According to non-consolidated statements, the cost increased to 1.70 billion tenge from 1.68 billion tenge, indicating an increase in operating costs under both forms of reporting.
PROFITABILITY: MAINTAINING A POSITIVE RESULT
Net profit according to consolidated statements amounted to 273.9 million tenge, decreasing significantly compared to 2022 (1.30 billion tenge). According to non-consolidated statements, profit amounted to 276.6 million tenge against 1.30 billion tenge a year earlier, which also demonstrates a significant decline in the profitability of the parent company.
FINANCIAL POSITION AND LIQUIDITY
The corporation's total assets increased to 71.5 billion tenge from 63.1 billion tenge in 2022, showing growth of 13.4% under both forms of reporting. The asset structure underwent significant changes, primarily related to a large-scale revaluation of fixed assets — the revaluation reserve grew more than 13 times to 728.4 million tenge, and the authorised capital increased to 75.1 billion tenge due to the issuance of additional shares, which indicates a strengthening of the corporation's capital base and an increase in the value of its property complex.
Cash and cash equivalents grew significantly from 13.1 billion tenge to 29.3 billion tenge, demonstrating more than a twofold increase under both forms of reporting. This indicates a strengthening of the corporation's liquidity position and the accumulation of funds for implementing strategic initiatives.
The structure of fund allocation reflects a diversified approach to liquidity management: the main volumes are concentrated in current bank accounts (28.8 billion tenge), while the corporation actively uses deposits in the country's leading banks, including Halyk Bank of Kazakhstan and JSC "Eurasian Bank". The increase in cash against the backdrop of declining profit indicates a cautious financial policy and preparation for large-scale investment projects.
INVESTMENT ACTIVITY: LARGE-SCALE INVESTMENTS IN DEVELOPMENT
SEC "Soltústik" has significantly increased its investment activity. Long-term financial investments grew to 48.9 billion tenge from 41.8 billion tenge in 2022, showing growth of 17%. Short-term financial investments increased to 9.3 billion tenge from 4.7 billion tenge, demonstrating growth of 95%.
The main areas of long-term lending include the largest agro-industrial enterprises: LLP "Poultry Farm 'Severny Broiler'" (7.9 billion tenge), LLP "EMC AGRO" (6.0 billion tenge), LLP "Zelyony Sever" (5.4 billion tenge) and LLP "Kyzylzhar MTS Agro" (2.1 billion tenge). The portfolio also includes loans under the "Aul Amanaty" programme (1.6 billion tenge) and investment projects of the agro-industrial complex (AIC) (3.6 billion tenge), confirming the corporation's strategic role in the development of the region's agricultural sector.
The corporation actively participates in the implementation of state development programmes. Long-term financial liabilities at the end of 2023 amounted to 22.1 billion tenge, of which:
- State Institution "Department of Entrepreneurship and Tourism of the North Kazakhstan Region" - 3.3 billion tenge
- State Institution Department of Agriculture and Land Relations of the Akimat of the North Kazakhstan Region - 18.8 billion tenge (new liabilities in 2023)
These funds are aimed at supporting entrepreneurship, developing the regional AIC and creating infrastructure for farms. Under the agreements, projects are being implemented for the purchase of agricultural machinery, the construction of food industry facilities and the modernisation of agro-industrial enterprises.
SEC "Soltústik" is developing its long-term lease liabilities line, which decreased from 2.77 billion tenge in 2022 to 1.08 billion tenge in 2023. Under a financial lease agreement with JSC "Industrial Development Fund", the corporation purchased buses with a total value of 4.05 million tenge, which contributes to the development of the region's transport infrastructure.
MANAGEMENT EXPENSES AND CORPORATE GOVERNANCE
Administrative expenses in 2023 increased to 349.8 million tenge according to consolidated statements from 251.4 million tenge in the previous year.
According to non-consolidated statements, administrative expenses amounted to 310.4 million tenge against 223.4 million tenge a year earlier.
The main items include salaries and other payments (200.5 million tenge according to consolidated statements), taxes (19.5 million tenge), other expenses (18.8 million tenge) and business trip expenses (5.6 million tenge).
The significant 39% increase in administrative expenses according to consolidated statements is related to the expansion of the corporation's activities, an increase in staff numbers and salary increases for personnel. This also reflects investments in the development of management infrastructure and the strengthening of the company's operational capabilities amidst business expansion.
Remuneration to key management personnel according to consolidated statements amounted to 87.7 million tenge against 59.0 million tenge in 2022. According to non-consolidated statements, remuneration reached 71.5 million tenge against 34.8 million tenge a year earlier, reflecting the expansion of the management team and increased motivation for senior management.
EVENTS AFTER THE REPORTING PERIOD
According to the audit opinion, the corporation continued its active investment activity after the end of the reporting period. In March 2024, dividends were paid amounting to 648.8 million tenge, which constitutes 50% of the net income for 2022 in accordance with the decision of the akimat of the North Kazakhstan Region.
After the reporting period, SEC "Soltústik" entered into important credit agreements aimed at stabilising prices and supporting the AIC:
- December 2023: Loan Agreement No. 474 with State Institution "Department of Entrepreneurship and Tourism of the North Kazakhstan Region" for granting a loan to stabilise prices for socially significant food products in the amount of 500 million tenge for a term of 3 years.
- September 2023: Commission Agreements No. 456 and No. 470 with State Institution Department of Agriculture and Land Relations of the Akimat of the North Kazakhstan Region for taking actions to establish legal entities, peasant and farm holdings for a total amount of 18.8 billion tenge.
AUDITOR'S OPINION
Independent auditors LLP "BR-Audit" expressed an unmodified opinion on the financial statements, confirming their reliability and compliance with international financial reporting standards. The auditors noted the high quality of the reporting preparation and the effectiveness of the corporation's internal control system.
CONCLUSION
SEC "Soltústik" demonstrates sustainable development, successfully combining commercial objectives with fulfilling the social functions of a regional development institution. The growth in investment activity while maintaining a positive financial result indicates a sound management strategy and effective use of state resources.
The increase in the volume of loans and investments in the agro-industrial complex corresponds to the development priorities of the North Kazakhstan Region. At the same time, the company maintains healthy financial indicators, which allows for forecasting further growth and expansion of activities. The payment of dividends to the state confirms the effective use of budget funds and the creation of added value for the region's economy.
Previously, we analysed the financial statements of SEC "Atyrau" for 2023. In future publications, the editorial board of FBRK plans to continue the analysis of the financial statements of other regional SECs, which will allow for a comprehensive picture of the effectiveness of these development institutions and their contribution to the economy of Kazakhstan.
To be continued...