Kuzbasskaya Toplivnaya Company OJSC (KTK, MICEX: «KBTK»), one of the largest producers and exporters of thermal coal in Russia, is pleased to announce its unaudited consolidated financial statements for the 3 months of 2014 under IFRS.
Financial highlights
| RUB mln | Q11 2014 | Q41 2013 | Chg | Q11 2013 | Chg2 |
| Revenue | 4 834 | 6 559 | (26%) | 4 927 | (2%) |
| Cost of sales | 4 082 | 5 769 | (29%) | 4 277 | (5%) |
| Production cash costs per tonne, RUB | 644 | 623 | 3% | 559 | 15% |
| Gross profit | 752 | 790 | (5%) | 650 | 16% |
| Gross profit margin | 16% | 12% | 4 ppts | 13% | 3 ppts |
| Distribution, administrative and other costs | 447 | 265 | 69% | 417 | 7% |
| Distribution, administrative and other costs as % of revenue | 9% | 4% | 5 ppts | 9% | - |
| Operating profit | 305 | 525 | (42%) | 233 | 31% |
| Operating profit margin | 6% | 8% | (2 ppts) | 5% | 1 ppts |
| EBITDA | 618 | 668 | (7%) | 509 | 21% |
| EBITDA margin | 13% | 10% | 3 ppts | 10% | 3 ppts |
| EBITDA per tonne, RUB | 268 | 242 | 11% | 213 | 26% |
| Net profit | 15 | 311 | (95%) | 86 | (83%) |
| Net profit margin | 0% | 5% | (5 ppts) | 2% | (2 ppts) |
Revenue
Revenue in Q1 2014 decreased by 26% to RUB 4,834 mln. The main influence on the decline in revenues has had an export segment decreased by 19% due to a new sales model in Polish market. Given the temporary reduction in shipments to Poland, the volumes of sorted coal was diverted to the domestic market, resulting in coal purchased for resale was replaced by own coal, and revenues in the segment of the coal resale decreased by 80%. At the same time revenues in the segment sales of own coal in the domestic market increased by 9% to RUB 766 mln.
Cost of sales and production cash costs
Due to the seasonal decline in production by 16% compared to Q4 2014, cost of sales 2 in Q1 decreased by 29% to RUB 4,082 mln, and production cash costs 3 increased by 3% to RUB 644 per tonne. Commercial, administrative and other expenses increased by 70% to RUB 450 mln, equivalent to 9% of total quarterly revenue and corresponds to Q1 2013.
Operating profit and EBITDA
In Q1 2014 operating income decreased by 42% compared to Q4 2013 and amounted to RUB 305 mln. At the same time, operating income shows an increase of 31% versus the level of Q1 2013. Gross profit decreased by 5% to RUB 752 mln. Compared to Q1 2013, gross profit increased by 16%. Quarterly EBITDA amounted to RUB 618 mln, decreasing by 7% compared to Q4 2013. Compared to Q1 2013, EBITDA increased by 21%.
Net profit
In Q1 2014, despite the decline in export revenue and the seasonal decline in demand for sorted coal in the domestic market, Company stays profitable with RUB 15 mln of net profit.
Debt portfolio management
| RUB mln | 31.03.14 | % of total | 31.12.13 | Chg | 31.03.13 | Chg4 |
| Long term loans | 5 029 | 68% | 5 987 | 13% | 3 411 | 47% |
| Short term loans | 2 368 | 32% | 640 | 270% | 4 765 | (50%) |
| Total debt, incl.: | 7 397 | 6 627 | 12% | 8 176 | (10%) | |
| RUB loans | 3 161 | 43% | 3 044 | 4% | 4 107 | (23%) |
| Average interest rate for RUB loans | 9,51% | 8,71% | 0,80 ppts | 9,06% | 0,45 ppts | |
| Subsidized interest for RUB loans 5 | 9,37% | 8,54% | 0,83 ppts | 8,53% | 0,84 ppts | |
| USD loans | 4 236 | 57% | 3 583 | 18% | 4 069 | 4% |
| Average interest for USD loans | 4,84% | 4,85% | (0,01 ppts) | 4,80% | 0,04 ppts | |
| Cash and cash equivalents | 2 316 | 2 710 | (15%) | 1 858 | 25% | |
| Net debt | 5 081 | 3 917 | 30% | 6 318 | (20%) | |
| Net debt / 12M EBITDA | 2,01 | 1,62 | 24% | 2,07 | (3%) |
Net debt as of March 31, 2014 amounted to RUB 5,081 mln, increasing by 30% compared with December 31, 2013. The net debt to EBITDA slightly above the level of comfort (2.00) and amounted to 2.01, increasing in Q1 by 24%. Under the terms of loan agreements with banks net debt to EBITDA should not exceed the level of 3.50 - 4.00.
The Company is one of the most reliable and efficient borrowers in Russian mining sector that reflect current interest rates on loans. As of March 31, 2014, the average effective rate on loans denominated in RUB, was 9.51%, increasing in Q1 by 0.80 percentage points. For loans denominated in USD, the average interest rate decreased by 0.01 percentage point to 4.84%.
Cash flow and investments
| RUB mln | Q1 2014 | Q4 2013 | Chg | Q1 2013 | Chg6 |
| Operating cash flow | (747) | 1 145 | n.a. | (1 354) | (45%) |
| Investment cash flow | (197) | 98 | n.a. | (180) | 9% |
| Acquisition of property, plant and equipment | (196) | (89) | 120% | (199) | (2%) |
| Financial cash flow | 440 | (562) | n.a. | 1 032 | (57%) |
| Net increase / (decrease) in cash and cash equivalents | (504) | 681 | n.a. | (502) | - |
In Q1 2014, operating cash flow amounted RUB 747 mln, which is 45% lower than in Q1 2013. Investment cash flow in Q1 2014 amounted to RUB 197 mln, investments in fixed assets were RUB 196 mln. Net cash inflow from financing activities amounted to RUB 440 mln, which is 57% lower than in Q1 2013. Net decrease in cash and cash equivalents amounted to 504 mln RUB.
Key events after reporting date
Outlook for Q2 2014
Management of KTK tracks the performance of prices in world markets, which in the last year are at a stable low level, and does not expect significant price increases in the international thermal coal market in Q2 2014. However, the price trends of past periods augur well for the growth of prices in the medium term.
Contacts for analysts and investors in Moscow:
Vasily Rumyantsev
Head of Moscow office, IRO
+7 (905) 526-41-71
vkr@oaoktk.ru
Contacts for media in Kemerovo:
Elena Sarycheva
Head of public affairs department
+7 (3842) 36-47-62
es@oaoktk.ru
Company at a glance:
KTK is one of the leading producers7 and exporters of thermal coal in Russia. Production assets of the Company include three current and two projected opent-pit mines in Kemerovo region, two washing plants and own rail infrostructure located in the Company’s industrial cluster. The Company operates a retail network in 4 regions of Western Siberia, supplying over 400,000 households and over 1,000 of industrial and municipal customers. The Company employs over 4,400 people. Shares of KTK are traded on MICEX, the free float is 34.39%.
Additional information about the Company and investor calendar: www.oaoktk.ru/investors
News and announcements (Russian only) www.facebook.com/oaoktk
Presentations: www.slideshare.net/oaoktk
Video: www.youtube.com/oaoktkru
Financial highlights under IFRS:
| RUB mln
| 2013 | 2012 | 2011 |
| Revenue | 22 490 | 23 104 | 23 939 |
| Cost of sales | 19 523 | 18 982 | 19 404 |
|
Production cash costs per tonne, RUB | 611 | 690 | 653 |
| EBITDA | 2 422 | 3 479 | 3 911 |
| EBITDA margin | 11% | 15% | 16% |
| EBITDA per tonne, RUB | 239 | 399 | 448 |
| Net profit | 640 | 1 810 | 2 018 |
| Net profit margin | 3% | 8% | 8% |
| Net debt | 3 917 | 4 681 | 2 663 |
| Net debt / EBITDA | 1,62 | 1,35 | 0,68 |
Rounding and errors:
Certain numerical figures included in this press release have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that preceded them. Calculations of change in % are made after rounding of figures.
We make every effort to check and verify the materials, but if you find any errors or inaccuracies please report it to vkr@oaoktk.ru.
Appendix
Production cash costs
| RUB mln | Q1 2014 | Q4 2013 | Chg | Q1 2013 | Chg8 |
| Consolidated cost of sales | 4 082 | 5 752 | (29%) | 4 277 | (5%) |
| Excluding cost of sales of subsidiaries | 212 | 970 | (78%) | 585 | (64%) |
| Cost of sales of KTK, excluding: | 3 870 | 4 782 | (19%) | 3 692 | 5% |
| Depreciation allocated to cost of sales | 274 | 296 | (7%) | 248 | 10% |
| Cost of coal for resale & coal for reprocessing | 1 | 202 | (100%) | 14 | (93%) |
| Change in inventories | 124 | 40 | 210% | 16 | 675% |
| Railway tariff and transportation services | 2 174 | 2 745 | (21%) | 2 186 | (1%) |
| Production cash costs | 1 297 | 1 499 | (13%) | 1 228 | 6% |
| Extraction, processing and sorting of coal | 122 | 134 | (9%) | 125 | (2%) |
| Fuel | 412 | 431 | (4%) | 378 | 9% |
| Cost of personal | 342 | 374 | (9%) | 317 | 8% |
| Spare parts | 143 | 216 | (34%) | 142 | 1% |
| Repair and maintenance | 78 | 139 | (44%) | 88 | (11%) |
| Mining and environmental taxes | 58 | 60 | (3%) | 70 | (17%) |
| Other costs | 139 | 145 | (4%) | 108 | 29% |
| % of production cash costs in consolidated cost of sales | 32% | 26% | 29% | ||
| Production cash costs per tonne, RUB | 644 | 623 | 3% | 559 | 15% |
| Production cash costs per tonne, USD9 | 18 | 19 | (4%) | 18 | - |
Segments
| RUB mln | Q1 2014 | % of total | Q4 2013 | Chg | Q1 2013 | Chg10 |
| Revenue | 4 838 | 6 559 | (26%) | 4 927 | (2%) | |
| Domestic sales of coal produced | 766 | 16% | 703 | 9% | 1 074 | 16% |
| Export sales of coal produced | 3 558 | 74% | 4 382 | (19%) | 3 272 | 9% |
| Resale of coal purchased | 237 | 5% | 1 205 | (80%) | 348 | (32%) |
| Other operations | 273 | 6% | 269 | 1% | 233 | 17% |
| Cost of sales | 4 082 | 5 769 | (29%) | 4 277 | (5%) | |
| Domestic sales of coal produced | 463 | 11% | 522 | (11%) | 746 | (38%) |
| Export sales of coal produced | 3 259 | 80% | 4 004 | (19%) | 3 053 | 7% |
| Resale of coal purchased | (171) | 4% | 1 042 | (84%) | 299 | (43%) |
| Other operations | 189 | 5% | 201 | (6%) | 179 | 6% |
| Gross profit | 752 | 790 | (5%) | 650 | 16% | |
| Domestic sales of coal produced | 303 | 40% | 181 | 67% | 328 | (8%) |
| Export sales of coal produced | 299 | 40% | 378 | (21%) | 219 | 37% |
| Resale of coal purchased | 66 | 9% | 163 | (60%) | 49 | 35% |
| Other operations | 84 | 11% | 68 | 24% | 54 | 56% |
| Gross profit margin | 16% | 12% | 4 ppts | 13% | 3 ppts | |
| Domestic sales of coal produced | 40% | 26% | 14 ppts | 31% | 9 ppts | |
| Export sales of coal produced | 8% | 9% | (1 ppts) | 7% | 1 ppts | |
| Resale of coal purchased | 28% | 14% | 14 ppts | 14% | - | |
| Other operations | 31% | 25% | 6 ppts | 25% | 6 ppts |
Production
| Q1 2014 | % of total | Q4 2013 | Chg | Q1 2013 | Chg10 | |
| Coal production11, , mln tonnes, incl.: | 2,31 | 2,76 | (16%) | 2,39 | (3%) | |
| Karakansky South open-pit mine | 0,71 | 30% | 0,90 | (21%) | 0,77 | (8%) |
| Vinogradovsky open-pit mine | 0,80 | 35% | 0,93 | (14%) | 0,69 | 16% |
| Cheremshansky open-pit mine | 0,80 | 35% | 0,92 | (13%) | 0,93 | (14%) |
| Commercial products12 , mln tonnes | 2,02 | 2,41 | (16%) | 2,39 | (15%) | |
| Coal processing13, млн. тонн, в т.ч.: | 1,71 | 85% | 2,19 | (22%) | 1,77 | (3%) |
| Sorted coal | 0,98 | 49% | 1,39 | (29%) | 1,41 | (30%) |
| Washed coal | 0,73 | 36% | 0,80 | (9%) | 0,36 | 103% |
| Washing plant Kaskad 1 | 0,24 | 33% | 0,24 | - | 0,26 | (8%) |
| Washing plant Kaskad 2 | 0,49 | 67% | 0,56 | (13%) | 0,10 | 410% |
| Stripping, mln cbm, incl.: | 15,14 | 15,11 | - | 14,70 | 3% | |
| Blasted rock mass14 , mln cbm | 8,78 | 58% | 8,41 | 4% | 6,37 | 38% |
| Average stripping ratio 15 | 6,50 | 5,50 | 18% | 6,10 | 7% | |
|
Average stripping transportation distance, km | 2,60 | 2,80 | (7%) | 2,60 | - |
Sales
| Q1 2014 | % of total | Q4 2013 | Chg | Q1 2013 | Chg 16 | |
| Sales volume17 , mln tonnes, incl.: | 2,11 | 3,08 | (31%) | 2,38 | (11%) | |
| Export sales volume | 1,47 | 69% | 1,83 | (20%) | 1,40 | 5% |
| Domestic sales volume | 0,64 | 31% | 1,25 | (49%) | 0,98 | (35%) |
| Own coal | 1,96 | 92% | 2,29 | (14%) | 2,12 | (8%) |
| Coal resale | 0,15 | 7% | 0,79 | (81%) | 0,26 | (42%) |
| Average selling price, RUB/tonne 18 | 1 146 | 1 165 | (2%) | 1 028 | 11% |
1 Here and below are unaudited figures for Q1 2014 and Q1 and Q4 2013
2 Change Q1 2014 / Q1 2013
3 Structure of cost of sales and production cash costs is in the appendices
4 Change 31.03.14 / 31.03.13
5 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
6 Change Q1 2014 / Q1 2013
7 №6 by thermal coal production in Russia. Metal Expert, January 2014
8 Change Q1 2014 / Q1 2013
9 Average exchange rates of the Central Bank of the Russian Federation, RUB/USD: Q1 2014: 35.14; Q4 2013: 32.54; Q1 2013: 30.42
10 Change, Q1 2014/Q1 2013
11 Including washing plant Kaskad 1
12 Volume of salable output after sorting and washing of produced coal
13 Coal washing and sorting
14 Included in stripping
15 Share of coal produced in stripping
16 Change, Q1 2014/Q1 2013
17 Sales for the group of companies, including third parties coal resale
18 Excluding rail tariffs and VAT
