JSC National Atomic Company “Kazatomprom” (“Kazatomprom”, “KAP” or “the Company”) announces its consolidated financial results for the first half-year ended 30 June 2022, prepared in accordance with International Financial Reporting Standards (IFRS). The Company is also disclosing its 2024 production strategy and changes in the Company’s Management Board.

“Our financial results for the first half of 2022 were strong, reflecting a uranium market that has improved considerably over the past year,” said Yerzhan Mukanov, Kazatomprom’s Chief Operations Officer and acting Chief Executive Officer. “Revenue doubled compared to the first six months of 2021 to nearly 500 billion tenge in 2022, driving a rise in operating profit of 182%, and a near tripling of adjusted net profit to 167.4 billion tenge, all related primarily to customer-requested delivery timing and higher uranium prices year-to-date. From an operational standpoint, production fell slightly compared to the first half of last year, tracking slightly below the annual production plan due to the supply chain issues that delayed wellfield development work in 2021 – work that was required to support this year’s production plan. Therefore, as we have previously noted, the elevated risk that 2022 production volumes could fall short of our expectations remains a concern, though the Company continues to make progress in mitigating the related risks and annual production guidance is unchanged at this time.

“The unprescedented global economic uncertainty and significant geopolitical developments throughout the first half of 2022 have tested our corporate risk management practices, which have proven to be resilient in several key areas. However, the uncertainty and risk has presented an extraordinary challenge to the Company’s production planning and budgeting processes: in addition to aligning future production with market demand and our contractual commitments, we need to factor in the growing inflationary pressure and potential supply chain delays that could affect our production plans. Although the uranium market has improved, with an increase in long-term contracting interest, a thinning near-term market, and substantially improved pricing, we believe the fundamental shift in the supply-demand balance is still underway, with an illusion of endless secondary supply, creating ongoing opportunities for Kazatomprom as a primary supplier that maintains a disciplined approach. Therefore, consistent with our market-centric strategy and accounting for evolving mine development and production constraints, we expect to increase potential production by about 2,000 to 3,000 tU in 2024 compared to our planned range for 2023, representing continued production discipline and a decrease of approximately 10% against our total Subsoil Use Contracts level in 2024.

“A key factor contributing to the improved uranium market conditions and the bullish outlook for the nuclear power sector over the past several years, has been the international debate around the social and environmental impacts of energy infrastructure. Those discussions have become even more pronounced as of late amid the growing focus on energy security and diversification in relation to the Russia-Ukraine conflict. Various jurisdictions, including several that had abandoned nuclear plans or were committed to a phase out of clean nuclear energy, are now said to be reviewing policies and in some cases, reconsidering nuclear alongside their renewables energy strategy. That shift in support for nuclear energy would not only avoid the negative environmental impacts of fossil fuel generation, but it could help mitigate the social- and energy security-related risks that have emerged.

”Kazatomprom expects to fully participate in the mid- and long-term contracting cycle associated with that anticipated demand growth for nuclear fuel, backed by our now-proven commitment to building long-term value for our stakeholders through continued production and sales discipline.”

Corporate Update

2024 Production Plans

Kazatomprom’s Board of Directors has approved a strategy to revise the Company’s 2024 production volume down by approximately 10% compared to the total Subsoil Use Contract level of 28,691 tU, disclosed in its most recent 2021 Competent Person’s Report (“2021 CPR”).

The decision to shift production from minus 20% in 2023 to approximately minus 10% in 2024 is based primarily on Kazatomprom’s continued success in signing mid- and long-term contracts with new and existing customers. The current contract book provides sufficient confidence that the additional volume in 2024 will have a secure place in the market and be needed to fulfill future contractual obligations. However, the continued production discipline reflects Kazatomprom’s assessment of the supply-demand balance over the next two years and factors in the challenges the Company is expecting to face in terms of global supply chains and limited availability of certain key operating materials and reagents.

The full implementation of this decision could remove approximately 3,500 tU from anticipated global primary supply in 2024. Kazatomprom’s 2024 production is therefore expected to be between 25,000 tU and 25,500 tU (100% basis), compared to the total Subsoil Use Contracts level for 2024 of 28,691 tU, disclosed in the 2021 CPR. Although the year-over-year production increase from 2023 to 2024 is modest, the Company may face significant challenges to any increase above current production levels based on the current state of global supply chains.

The Company will now begin working with joint venture partners and mining subsidiaries to incorporate the required changes into the 2023 budgets and development plans, accounting for the revised production levels in 2024. Kazatomprom will continue to monitor ongoing market developments and maintain the flexibility to react quickly to changing conditions. No decision has been taken regarding mine development activity and production volumes beyond 2024.

Management Board Changes

Yerlan Tuleugozhin, Kazatomprom’s Chief Strategy & Development Officer and Member of the Company’s Management Board, decided to resign from his position effective 15 August 2022, in order to pursue a Masters Degree in Leadership and Strategy from the London School of Business. The Board has decided to reduce the number of senior management positions and not fill the vacancy, instead, redistributing the position’s responsibilities among the other company Officers. As a result, the number of Management Board members has decreased from eight to seven.

Full biographies for all members of the Management Board are available on the Company’s website, www.kazatomprom.kz

Extraordinary General Meeting of Shareholders (EGM)

The Board of Directors has initiated to convene an absentee EGM. A separate press release and corresponding EGM notice has been filed and disclosed on 18 August 2022, in accordance with regulatory requirements, and are available on the Company’s website, www.kazatomprom.kz

Key financial metrics
Six months ended 30 June (KZT billion unless noted)
2022 2021 Change
Group’s consolidated revenue 493.7 235.5 110%
Operating profit 172.8 61.3 182%
Net profit 167.4 58.1 188%

Earnings per share attributable to owners (basic and diluted), KZT/share1
467 184 154%

Adjusted EBITDA2 224.5 99.4 126%
Attributable EBITDA3 182.8 96.7 89%
Operating cash flow4 256.2 80.8 217%

1 Calculated as: Profit for the period attributable to owners of the Company divided by total share capital, rounded to the nearest KZT.
2 Adjusted EBITDA is calculated by excluding from EBITDA items not related to the main business and having a one-time effect.
3 Attributable EBITDA (previously “Adjusted Attributable EBITDA”) is calculated as Adjusted EBITDA less the share of the results in the net profit in JVs and associates, plus the share of Adjusted EBITDA of JVs and associates engaged in the uranium segment (except JV “Budenovskoye” LLP’s EBITDA due to minor effect it has during each reporting period), less non-controlling share of adjusted EBITDA of “Appak” LLP, JV “Inkai” LLP, “Baiken-U” LLP and JV “Khorasan-U” LLP, less any changes in the unrealized gain in the Group.
4 Includes income tax and interest paid.

Operating and Financial Review and Financial Statements
The Operating and Financial Review, and Consolidated Financial Statements (unaudited, reviewed) provide detailed explanations of Kazatomprom’s results for the first half-year ended 30 June 2022, as compared to the same period in 2021, with guidance for 2022. This press release should be read alongside these documents, all of which are available at www.kazatomprom.kz.

Changes in the Group structure
In the first half of 2022 the Group completed the following transactions:

As previously announced, according to a Framework Agreement signed on 22 November 2021 by the Group and Genchi Global Limited to participate in ANU Energy, created on the Astana International Financial Center, the Group made an investment of KZT 12,368 million (USD 24.25 million) in ANU Energy in March 2022, which constitutes a 32.7% share from the joint investment of the investors. The purpose of ANU Energy is to store physical uranium as a long-term investment. The Group does not have a representative on ANU Energy’s Board of Directors and does not take part in decision-making. Accordingly, the Group does not have significant influence on the management operations of ANU Energy, and the Group therefore recognizes this investment at fair value through profit or loss and does not increase the number of entities within the Holding. In accordance with the Framework Agreement, the Group and ANU Energy signed a short-term contract for the sale and purchase of natural uranium concentrates, under which the Group delivered natural uranium concentrates on 12 May 2022. As at the reporting date, the Group classifies ANU Energy as “Other investment”.
In accordance with the privatisation plan of non-core assets as presented in the Company’s 2018 IPO Prospectus, Kazatomprom and “United Chemical Technologies Trading House” LLP entered into an Agreement on 30 December 2021, for the sale of the Company’s 40% share in “Caustic” JSC. On 31 January 2022, partial payment was made for 30% of the Company’s total interest in “Caustic” JSC, therefore “United Chemical Technologies Trading House” LLP’s interest in “Caustic” JSC increased by 12% (30% of the Company’s 40% share). The remaining portion of the Company’s shares were transferred to trust management of “United Chemical Technologies Trading House” LLP until full payment for the Company’s remaining interest is completed, expected not later than 2023.
Revenue, net profit, EBITDA
During the first half of 2022, the Group’s consolidated revenue was KZT 493,716 million, an increase of 110% compared to the same period of 2021. The increase is mainly due to:

a significant increase in sales volume in the first half of 2022 in comparison to the same period of 2021 mainly related to the timing of customer requirements and the resulting differences in the timing of deliveries for first halves of 2022 and 2021;
growth in the average realized price associated with an increase in the market spot price for U3O8; and
weakening of the KZT against the USD in the first half of 2022.
Operating profit in the first half of 2022 was KZT 172,818 million, an increase of 182% compared to the same period of 2021. The increase was mainly due to higher revenues in 2022 as indicated above.

Net profit in the first half of 2022 was KZT 167,374 million, an increase of 188% compared to the same period of 2021. The increase was mainly due to higher operating profit in the first half of 2022 as indicated above. There were no significant adjusting one-time effects during the first halves of 2022 and 2021. Profit for the period attributable to non-controlling interest increased significantly during the first half of 2022 compared to the same period of 2021, impacted by the sale of a 49% share of “Ortalyk” LLP in July 2021 in addition to the explanations stated above.

Adjusted EBITDA totalled KZT 224,457 million in the first half of 2022, an increase of 126% compared to the same period of 2021, while attributable EBITDA was KZT 182,825 million in the first half of 2022, an increase of 89% compared to the same period of 2021. The changes were mainly driven by higher operating profit.

Operating cash flows for the first half of 2022 totalled KZT 256,227 million, a significant increase compared to KZT 80,833 million during the same period of 2021 mainly due to:

a KZT 425,691 million increase in cash receipts from customers during the first half of 2022 compared to the same period of 2021, due to differences in the timing of the sales schedule for the first halves 2021 and 2022, growth in the average realized price associated with an increase in the market spot price for U3O8 and the weakening of the KZT against the USD;
offset by a KZT 188,811 million increase in payments for accounts payable to suppliers during the first half of 2022 mostly due to change in timing of the purchases schedule for the first halves 2021 and 2022 and growth in the average purchase price associated with an increase in the market spot price for U3O8 and the weakening of the KZT against the USD;
a KZT 31,254 million increase in income tax paid due to the increase in profit before tax.
Cost of sales
Cost of sales totalled KZT 291,532 million in the first half of 2022, an increase of 89% compared to the same period of 2021 mainly due to higher sales volume in the first half of 2022 and an increase in the share of U3O8 purchased from JV and associates, and from third parties.

The cost of materials and supplies was KZT 206,039 million in the first half of 2022, an increase of 122% compared to the same period of 2021 due to a significant increase in the proportion of sales of uranium purchased from JVs and associates, as well as from third parties. When such uranium is sold, the cost of sales is predominantly represented by the cost of purchased materials and supplies at the prevailing spot price with certain applicable discounts. Also, the purchase price of materials and supplies, including U3O8, increased as a result of inflationary pressure, the increase in the spot prices and the weakening of the KZT against the US dollar.

Selling expenses
Selling expenses totalled KZT 10,592 million in the first half of 2022, a significant increase compared to the same period of 2021. The increase was due to a much higher shipment volume in the first half of 2022 in comparison to the same period of 2021 as well as changes in the delivery destination points for uranium products, an increase in transportation tariffs, as well as the weakening of the KZT against the USD, as a significant portion of shipping, transportation and storing expenses are denominated in foreign currency.

General & administrative expenses (G&A)
G&A expenses totalled KZT 18, 774 million in the first half of 2022 (KZT 16,499 million KZT during the same peiod of 2021). The increase in G&A expenses was partly related to the increase in provision on liabilities for uranium products to KZT 3,900 million during the first half of 2022 (six month period ended 30 June 2021: KZT 2,932 million).

Liquidity
The Group manages its liquidity requirements to ensure the continued availability of cash sufficient to meet its obligations on time, avoid unacceptable losses, and settle its financial obligations without jeopardizing its reputation.

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