News and events

4 April 2012

OJSC “Kuzbasskaya Toplivnaya Company” consolidated IFRS financial statements for the year ended December 31, 2011

Kemerovo, Russian Federation – OJSC "Kuzbasskaya Toplivnaya Company" (RTS/MICEX: "KBTK"), one of the fastest-growing thermal coal producers in Russia, is pleased to announce the audited consolidated IFRS financial results for the year ended December 31, 2011.

Financial highlights

RUB mln. Q41
2011
Q31
2011
Ch. 2011 2010 Ch.
Revenue 7,551 6,207 21.7% 23,939 14,160 69.1%

EBITDA2

1,360 1,078 26.2% 3,911 2,134 83.3%
EBITDA margin, % 18.0% 17.4% - 16.3% 15.1% -
Net profit 776 449 72.8% 2,018 823 145.2%
Net profit margin, % 10.3% 7.2% - 8.4% 5.8% -
Net Debt3 2,663 2,268 17.4% 2,663 1,754 51.8%
Net Debt / EBITDA4 0.68 0.66 3.9% 0.68 0.82 -17.1%

 

  • Revenue for Q4 2011 increased by 21.7% to RUB 7,551 mln. quarter-on-quarter (Q3 2011: RUB 6,207 mln.). Revenue for 12M 2011 gained 69.1% year-on-year up to RUB 23,939 mln. (2010: RUB 14,160 mln.).
  • Growth of production volumes resulted in a quarter-on-quarter increase of Q4 2011 EBITDA by 26.2% to RUB 1,360 mln. (Q3 2011: RUB 1,078 mln.). 12M 2011 EBITDA increased by 83.3% year-on-year to RUB 3,911 mln. (2010: RUB 2,134 mln.). USD equivalent of 2011 EBITDA is 90,0 % higher than in 2010 and reached USD 133 mln. (2010: 70 mln.).
  • In Q4 2011 net profit increased by 72.8% to RUB 776 mln. (Q3 2011: RUB 449 mln). As for the full year, net profit amounted to RUB 2,018 mln., 145.2% higher than the result of 2010 (RUB 823 mln.). A positive effect on net profit has resulted from the growth in sales volume as well as the rise in the price of coal, net of VAT and net of rail road tariffs.
  • As at December 31, 2011 net debt amounted to RUB 2,663 mln. It has increased by 17.4% quarter-on-quarter (Q3 2011: RUB 2,268 mln.), and by 51.8% year-on-year (2010: RUB 1,754 mln.). At the reporting date the net debt to EBITDA ratio was 0.68.

 

Operational highlights

mln. tonnes Q4
2011
Q3
2011
Ch. 2011 2010 Ch.
Coal production, incl.: 2.57 2.44 5.3% 8.74 6.80 28.5%

Coal sorting

1.51 1.50 0.7% 5.56 4.10 35.6%
Coal enrichment 0.19 0.20 -5.0% 0.74 0.20 270.0%
Coal sales 3.34 2.81 18.9% 10.66 8.54 24.8%
Average price, RUB per tonne (руб./т.)6 1,285 1,229 4.6% 1,228 977 25.7%

 

  • During Q4 2011 the Company produced 2.57 mln. tonnes of coal, which exceeded Q3 volume by 5.3% (2.44 mln. tonnes). As for 2011, the Company increased total coal production volume by 28.5% year-on-year to 8.74 mln. tonnes (2010: 6.8 mln. tonnes)
  • In Q4 the volume of coal sorted by coal-crushing and screening units remained at the level of Q3 at 1.51 mln. tonnes. In 2011 the volume of coal sorted by coal-crushing and screening units increased by 35.6% year-on-year to 5.56 mln. tonnes (2010: 4.10 mln. tonnes).
  • Coal enrichment plant “Kaskad” continued to run at close to full capacity production level. Volume of quarterly production of enriched coal fell slightly to 186 thousand tonnes (Q3 2011: 199 th. tonnes), due to the scheduled maintenance of the plant in the winter. As a result, the coal enrichment plant produced 736 tonnes of export quality coal in 2011.
  • The volume of coal sales in Q4 2011 increased by 18.9% quarter-on-quarter to 3.34 mln. tonnes (Q3 2011: 2.81 mln. tonnes). The Company exported 1.77 mln. tonnes of coal, and the remaining 1.57 mln tonnes were sold on domestic market. During the quarter coal resale volume increased by 57.4% - from 0.47 to 0.74 mln. tonnes.
  • In 2011 coal sales volume increased by 24.8% year-on-year and reached 10.66 mln. tonnes (2010: 8.54 mln. tonnes). Export sales volume increased by 72.0% to 6.45 mln. tonnes (2010: 3.75 mln. tonnes), whereas domestic sales volume decreased by 12.1% to 4.21 mln tonnes (2010: 4.79 mln. tonnes).
  • In the past quarter the average coal price net of VAT and railroad tariffs increased by 4.6% quarter-on-quarter to RUB 1,285 per tonne (Q3 2011: RUB 1,229 per tonne). The average domestic price decreased by 6.9% quarter-on-quarter to RUB 1,192 per tonne (Q3 2011: RUB 1,280 per tonne). The export price continued to increase in the fourth quarter and reached RUB 1,367 per tonne, being 14.8% higher than the price in the third quarter (RUB 1,191 per tonne).
  • During the year the average price of coal increased by 25.7% year-on-year to RUB 1,228 per tonne net of VAT and railroad tariffs (2010: RUB 977 per tonne). The average export price reached RUB 1,237 per tonne, exceeding the 2010 price by 21.2% (RUB 1,021 per tonne) due to recovery of global demand for coal. The average domestic price increased by 28.6% year-on-year from RUB 943 to RUB 1,213 per tonne. The major reason was the increased share of high-grade coal sales.

4th Quarter 2011 overview

  • The Company fulfilled the 2011 production plan of 8.74 mln tonnes and approved a plan for 2012, stating the total production volume and enrichment plant output at 9.30 mln. tonnes of coal.
  • The enrichment plant «Kaskad» continued to run at close to full capacity level of production and produced 736 thousand tonnes of export quality coal in 2011.
  • The Company won an auction for a license to mine Bryanskiy-1 coal deposit, adding an additional 250 mln. tonnes of C2 category coal reserves in close proximity to existing infrastructure. In the fourth quarter the Company made a deposit payment of RUB 171 mln.
  • Four BelAz-units of mining-transport equipment have been commissioned with a total capacity over 463 tonnes.
  • The completion of construction fuel and lubricants dump.
  • A new unheated warehouse has been commissioned in the industrial area of «Karakansky-South»

 

Igor Prokudin, CEO of the Company, commented:

“Summarizing the results of 2011, I should note a significant increase in coal production – 8.74 mln. tonnes (an increase of 1.94 mln. Tonnes to 2010). These dynamics allowed KTK to become one of the top-10 largest Russian companies by volume of thermal coal production, and enter the 5th place among the Russian exporters of coal, shipping 6.45 mln. tonnes for export. This is the highest level of sales of coal for export in the Company’s history.

At the end of December 2011 the Company won an auction for a license to mine Bryansk-1, getting an additional 250 mln. tonnes of coal reserves in close proximity to existing infrastructure. We have already started geological investigations explored the area and plan to start developing the fourth section in the future. The new field will subsequently increase the production of the Company. A significant event in 2011 for the KTK was also the start of construction of the second enrichment plant, which is expected to be finished in Q4 2012. The plant will be a unique innovative project for the Russian and possibly international practice. The investment program, which was announced to the participants of IPO in 2010, included the construction of an enrichment plant with capacity of 2 mln. tonnes. As a result the capacity of the second enrichment plant was increased to 4 mln. tonnes.

In addition, we have conducted a large reconstruction of our sorting station Uba: we have built 5 additional railway tracks with contact network, an administrative building, which housed employees of TEK "Meret" and OJSC ”RZD”. This allowed us to meet the technical conditions of OJSC ”RZD” and increase the capacity to 16.7 mln. tonnes of coal per year through this transport corridor. An important strategic direction of the Company's development is to ensure the transportation independence of KTK. Therefore, to purchase additional railroad cars for KTK, “Kuzbasskaya Transportation Company”, an associate of KTK opened a credit line with Gazprombank amounting to RUR 10 bln. for a period of 10 years.

At the beginning of 2012 “Kuzbasskaya Transportation Company”7 had 2,628 high-sided railroad cars at its disposal. Earlier this year additional 500 high-sided rail cars were purchased. It is planned that the needs of KTK in the railroad cars for transportation of coal will be fully met with this additional credit facility.

Reviewing the results of 2011, I believe that management has successfully fulfilled al the tasks. Based on the financial results for 2011 under IFRS, the company's revenue has grown in the rouble equivalent by 69.1%, net profit increased by 145.2% and earnings per share – at 122.2%. EBITDA amounted to USD 133 mln., which meets our internal forecasts. Net debt to EBITDA remains at a low level of 0.68. We met and even exceeded all financial and operational targets of the 2011 plan.

We believe that the execution of commitments, which we made to the investors during the IPO, financial transparency, high standards of corporate governance and systematic work to improve business efficiency, will lead to long-term increase in shareholder value of the Company. Management thanks all KTK’s staff for their united work and support of the management’s initiatives which ensured sustainable development of the Company during the past year.“

Conference-call

KTK’s management will host a conference call for investors and analysts followed by a Q&A session on the day of the results.
The Company will be represented by:
Eduard Alexeenko – First deputy CEO
Vasily Rumyantsev – Investor relations manager

The dial-in details are:
Date: Wednesday, 4 April 2012
Time: 09.00 New York / 14.00 London / 17.00 Moscow8
Title: 2011 IFRS Statements Conference Call of OJSC “Kuzbasskaya Toplivnaya Company”
You can join the conference call by dial-in:
Russia: +7 (495) 213 0977
International/UK: +44 (0) 20 3140 8286
USA: +1646 254 3364
Conference ID: 1042317

A live webcast or downloading of the presentation will be available at:
www.slideshare.net/oaoktk

The conference call replay will be available through April 11 2012:
Russia Replay Number: 810 (800) 2870 1012
International/UK Replay Number: +44 (0) 20 7111 1244
USA Replay Number: +1646 254 3364
Replay Access Code: 1042317 (press # after entering Access Code)

For more information please contact:
OJSC "Kuzbasskaya Toplivnaya Company" (Kemerovo)
Elena Sarycheva
Head of public relations department
T: +7 (3842) 36-47-62
E: es@oaoktk.ru

For investor and analyst enquiries please contact:
OJSC "Kuzbasskaya Toplivnaya Company" (Moscow)
Vasily Rumyantsev
Investor relations manager
T: +7 (495) 787-68-05
E: vkr@oaoktk.ru

IMPORTANT: 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 converted to USD.
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 and we will provide you with the correct data and publish any correction notes on the website www.oaoktk.ru.

 

Financial overview

RUB mln. Q49
2011
Q39
2011
Ch. 2011 2010 Ch.
Revenue 7,551 6,207 21.7% 23,939 14,160 69.1%

Cost of sales

-6,042 -4,942 22.3% -19,404 -11,457 69.4%
Gross profit 1,507 1,265 19.3% 4,535 2,703 67.8%
Commercial, administrative and other costs -440 -429 2.6% -1,640 -1,350 21.5%
Operating profit 1,067 836 27.9% 2,895 1,353 114.0%
EBITDA10 1,360 1,078 26.2% 3,911 2,134 83.3%
Net profit (loss) 776 449 72.8% 2,018 823 145.2%

Revenue

In Q4 2011 the Company’s consolidated revenue reached RUB 7,551 mln., having increased from the previous quarter by 21.7% (Q3 2011: RUB 6,207 mln.) due to the growth of sales volume by 18.9% associated with the seasonal increase in demand for coal, an increase in average sales prices by 4.6% quarter-on-quarter and an increase in the RUB/USD exchange rate, which positively affected the segment of export sales. Total revenue net of VAT and railroad tariffs increased by 24.2%

In the last quarter the revenue in export coal sales segment increased by 20.3% quarter-on-quarter to RUB 5.087 mln. (Q3 2011: RUB 4,227 mln.) as a result a 9.9% growth in export shipment volumes and a 4.6% increase of average sales prices11. Revenue in export coal sales net of VAT and railroad tariffs increased by 25.8%.

In Q4 revenue from the domestic sales of coal produced amounted to RUB 1,423 mln., increasing by 18.3% compared to Q3 (RUB 1,203 mln.). Revenue growth in coal resale segment was 25.7%, increasing from RUB 682 mln. in Q3 to RUB 857 mln. in Q4 2011. Revenue net of VAT and railroad tariffs increased by 22.3%.

In Q4 revenue from other activities amounted to RUB 184 mln., almost doubling compared to Q3 2011 (RUB 95 mln.). This increase was caused by a seasonal growth of heat and electric power sales by Anzhero-Sudzhensk power plant, owned by KTK, and growth in third party coal storage services provided at the facilities of the Company’s retail chain.

During 2011, consolidated revenue increased by 69.1% to RUB 23,939 mln. (2010: RUB 14,160 mln.). Revenue from domestic sales of own coal produced increased by 28.1% whereas export revenue increased by 109.4% year-over-year. The growth of the consolidated revenue was influenced by growth in sales of own coal, related to an increased production, as well as maintaining the volume of resale of coal from third parties and a near two-fold increase in exports.

Cost of sales

RUB mln. Q411
2011
Q312
2011
Ch. 2011 2010 Ch.
Rail road tariff and transportation 3,197 2,765 15.6% 10,623 5,437 95.4%
Purchased coal 796 529 50.5% 2,189 1,595 37.2%
Employee costs and social payments 374 301 24.3% 1,262 924 36.6%
Extraction, processing and sorting of coal 652 519 25.6% 1,790 723 147.6%
Fuel 442 284 55.6% 1,348 804 67.7%
Depreciation 284 234 21.4% 965 755 27.8%
Spare parts 130 150 -13.3% 557 499 11.6%
Extraction tax and environment payments 80 63 27.0% 280 248 12.9%
Repair and maintenance 91 117 -22.2% 375 228 64.5%
Other costs 159 84 89.3% 475 409 16.1%
Change in coal stock -162 -104 55.8% -460 -165 178.8%
Cost of sales 6,042 4,942 22.3% 19,404 11,457 69.4%

In Q4 the cost of sales increased by 22.3% and amounted to RUB 6,042 mln. (Q3 2011: RUR 4,942 mln.). The main drivers of the quarterly growth in the cost of sales were transportation expenses and the cost of coal purchased for resale, and an increase in production costs13 driven by growth in production volumes.

In Q4 transportation costs increased by 15.6% to RUB 3,197 mln. (Q3 2011: RUB 2,765 mln.) due to a 18.9% growth in sales volumes. During the quarter the cost of purchased coal for resale increased by 50.5% - from RUB 529 mln. to RUB 796 mln. This was driven by increased coal resale volumes.

In the past quarter production costs12 increased by 24.6% to RUB 1,794 mln. (Q3 2011: RUB 1,440 mln.), and their share in the cost of sales increased from 29.1% to 29.7%. The key indicators, which affect the Company’s production costs, are presented in the table below:

 

Key coal production indicators

  Q4
2011
Q3
2011
Ch. 2011 2010 Ch.
Coal production, mln. Tonnes 2.57 2.44 5.3% 8.74 6.80 28.5%
Stripping, mln. cub. M 18.85 17.99 4.8% 68.1 49.48 37.7%
Exploded rock, mln. cub. m14 10.72 7.53 42.4% 32.79 25.43 28.9%
Stripping ratio15 (т. / куб. м.) 7.35 7.38 -0.4% 7.80 7.27 7.3%
Average stripping transportation distance, km. 2.95 3.08 -4.2% 2.88 2.72 5.9%

During Q4 2011 the main categories of production costs16 have changed as follows:

 

  • Personnel costs increased by 24.3% quarter-on-quarter and composed RUB 374 mln. comparing to RUB 301 mln. in the third quarter. The growth was caused by a unplaned general wage increases by 5.0% in October 2011 and unplanned wage increases by 15.0% for drivers of mining-transport equipment. In addition, in December were paid bonus payment for long service.
  • Extraction, processing and sorting costs increased by 25.6% to RUB 652 mln. (Q3 2011: RUR 519 mln.). This increase was driven by increasing of stripping volumes processed by the third party contractors, which was 10.0% and by growth of diesel fuel market prices.
  • During the quarter there was growth in several drivers of fuel consumption: due to the transition to winter consumption rates, there was a 10.0-15.0% increase in fuel consumption by all mining and transport equipment, also there was an increase in market prices of diesel fuel by 23.4%. Despite the decline in the average distance of stripping transportation by 4.2%, the overall cost of fuel increased by 55.6% from RUB 284 mln. to RUB 442 mln.
  • In Q4 the total costs of spare parts, repair works and technical maintenance services decreased by 13.3% quarter-on-quarter to RUB 130 mln (Q3 2011: RUB 150 mln). The reduction was caused by the seasonality of repair works, as the Company’s specialists try to make the maximum amount of scheduled maintenance work during the warm months, when there is a seasonal decline in demand. Therefore the main volume of such costs falls within Q2 and Q3.

In Q4 production cash costs16 per 1 tonne of coal increased by 18.3% to RUR 698 (Q3 2011: RUR 590), primarily due to increases in payroll and fuel prices.

In Q4 depreciation included in the cost of sales increased by 21.4% quarter-on-quarter to RUB 284 mln. Extraction tax and environment payments increased by 27.0% to RUR 80 mln because of production growth and increase in sales prices increase. All other costs, including operating leases, electric power and others, increased by 89.3 % to RUR 159 mln. The main drivers of their growth were: an increase of electric power consumption due to the winter season and use of power by the enrichment plant.

Increase the balance of coal stock amounted to RUB 162 mln. compared to an increase of RUB 104 mln. in Q3 2011 compared to Q2. This increase was due to increased purchases of coal to create a coal reserve in 2012, as well as due to less-than-planned volume of retail coal sales in December 201 caused by a relatively warm weather.

As a result of the above factors, the quarterly gross profit increased by 19.1% and amounted to RUB 1,507 mln. (Q3 2011: RUB 1,265 mln.).

The full 2011 cost of sales increases by 69.4% year-on-year to RUB 19,404 mln. (2010: RUB 11,457 mln.). The cost of coal transportation increased by 95.4% to RUB 10,623 mln. (2010: RUB 5,437 mln.). This item was influenced by the 24.8% growth of sales volumes and an increase of the export share in the total sales volume from 43.8% in 2011 to 60.5% in 2010, as well as by an increase of railroad tariffs. Cost of purchases of coal from third parties during 2011 increased by 37.2% from RUB 1,595 mln. to RUB 2,189 mln., before changes in coal stock.

The last year was also characterized by a growth of production cash costs17, that increased by 28.1% to RUB 652 per tonne (2010: RUB 509). Cash costs increased due to growth of personnel costs, an increase in the volume of stripping services performed by contractors by more than three times and a rise of their costs due to increase in diesel fuel prices. In addition, the increase in cash costs was influenced by the growth of coal sorting by 35.6% and change in mining and geological conditions, which pushed up rock mass explosion and coal transportation costs, as well as expenses for rock transporting and equipment repair and maintenance. Gross profit for 2011 increased by 67.8% year-on-year and amounted to RUB 4,535 mln. (2010: RUB 2,703 mln).

Distribution, administrative and other operation costs

Distribution, administrative and other costs in Q4 increased by 2.6% to RUB 440 mln. (Q3 2011: RUB 429 mln.) due to growth of personnel costs and other expenses. The growth of distribution and administrative personnel costs, which accounted for 61.5% quarter-on-quarter, was caused by a by a general wage increase in October 2011 and bonus payment for long service in December 2011. Property tax contributions remained stable at the level of Q3 2011 and amounted to RUB 37 mln. Cost of materials in Q4 2011 reached RUB 23 mln., an increase by 91.7% (Q3 2011: RUB 12 mln.) and was driven by growth in sales during Q4.

As for the full 2011 results, distribution, administrative and other costs have increased by 21.5% year-on-year from RUB 1,350 mln. to RUB 1,640 mln. Costs of distribution and administrative personnel increased by 32.2% to RUB 812 mln. (2010: RUB 614 mln.) due to 10.0% salary indexation in the first half and 5.0% in the second half of 2011, and also due to increase of personnel numbers caused by the growth of production and sales, and an unplanned rise in salaries for certain categories of employees. Expenses on services increased by 3.0% to RUB 413 mln. Property tax contributions and other taxes increased by 18.7% and reached RUB 146 mln. The growth of distribution and administrative expenses relates to an increase in sales volumes. While there is a direct relationship in respect of distribution costs, there is a correlation in respect of administrative expenses, too albeit on a smaller scale.

Operating profit, EBITDA and net profit

In Q4 operating profit increased by 27.6% quarter-on-quarter, from RUB 836 mln. to RUB 1,067 mln. EBITDA increased by 26.2% to RUB 1,360 mln. (Q3 2011: RUB 1,078 mln.), whereas EBITDA margin increased from 17.4% to 18.0%. Notably Q4 EBITDA margin net of transportation costs, included in the price for customers amounted to 31.7%. The results of the quarter demonstrated an increase in net profit by 72.8% to RUB 776 mln. (Q3 2011: RUB 449 mln.), while its margin increased from 7.2% to 10.3%.

Operation profit for 2011 increased by 114.0% year-on-year to RUB 2,895 mln. (2010: RUB 1,353 mln.). EBITDA for the year amounted to RUB 3,911 mln., being 83.3% higher than the result of 2010 (RUB 2,134 mln.). The USD equivalent of 2011 EBITDA is 90.0% higher than the level of 2010 and reached USD 133 mln18. The company managed to increase net profit by 145.2% to RUB 2,018 mln. (2010: RUB 823 mln.) due to higher sales volumes and an increase in the average price of coal net of VAT and railroad tariffs.

Indebtedness

RUB mln. Dec 31
2011
Sep 3019
2011
Ch. Dec 31
2010
Ch.20
Long term loans and credits 2,794 2,358 18.5% 1,676 66.7%
Short term loans and credits 1,753 1,722 1.8% 535 227.7%
Total debt, including: 4,547 4,080 11.4% 2,211 105.7%
Ruble-denominated 647 1,898 -65.9% 228 183.8%
Foreign currency-denominated 3,900 2,182 78.7% 1,983 96.7%
Cash and cash equivalents 1,884 1,812 4.0% 457 312.3%
Net debt 2,663 2,268 17.4% 1,754 51.8%

During Q4 the Company increased its debt level – the net debt increased by 17.4% to RUB 2,663, and the net debt to EBITDA ratio amounted to 0.68. The share of long term debt increased from 57.8% to 61.4% and the share of short term debt decreased from 42.2% to 38.6% of the total credit portfolio. As of December 31, 2011 only 14.2% of the Company’s loans were denominated in roubles, whereas the remaining 85.8% were denominated in US dollars. The Q4 interest expense decreased by 71.4% quarter-on-quarter to RUB 36 mln. (Q3 2011: RUB 126 mln.).

During 2011 the total net debt increased by 51.8% year-on-year compared to 2010. Interest paid decreased by 24.7%, from RUB 275 mln. to RUB 207 mln. During the last year net debt to EBITDA ratio decreased from 0.82 to 0.68.

Cash flow

RUB mln.21 Q4
2011
Q3
2011
Ch. 2011 2010 Ch.
Cash flows from operations before
income tax and interest paid
1,074 759 41.5% 2,844 2,321 22.5%
Cash flows from operating activities 787 577 36.4% 2,074 2,031 2.1%
Cash flows used in investing activities -1,087 -562 93.4% -2,540 -2,435 4.3%
Cash flows from financing activities 381 1,565 -75.7% 1,906 840 126.9%
Net increase / (decrease) in cash
and cash equivalents
81 1,580 н.п. 1,440 436 н.п.

During Q4 2011 operating cash flow before tax and interest increased by 41.5% quarter-on-quarter to RUB 1,074 mln (Q3 2011: RUB 759 mln.). It was mainly driven by an increase in EBITDA of 26.2% compared to Q3 and less significant cash outflow to maintain working capital compared to Q3. Total operating cash flow for Q4 also increased by 36.4% and reached RUB 787 mln., compared to RUB 577 mln. of cash inflow in the previous quarter.

Operating cash flow before tax and interest for 2011 increased by 22.5% to RUB 2.844 mln., whereas total cash flow from operations increased by 2.1%, from RUB 2,031 mln. to RUB 2,074 mln.

Capital expenditures

In the last quarter the level of investments in fixed assets increased by 93.4% compared to Q3 and amounted to RUB 1,087 mln. (Q3 2011: RUB 562 mln.) During the quarter the Company continued to purchase various mining and transport equipment including four open-pit BelAZ trucks.

For 2011, the volume of investments in fixed and intangible assets amounted to RUB 2,581 mln., increasing by 3.3% compared to the previous year (2010: RUB 2,499 mln). All funds have been spent in accordance with the long-term investment program of the Company, which in 2011 included the construction of the second enrichment plant, acquisition of large mining and transport equipment, including 22 open-pit BelAZ mining trucks, loaders, dozers, shovels, a drilling rig, and others.

Current trading and outlook for Q1 2012 and FY 2012

In Q1 2012 the Company plans to decrease production volumes by 12.0-13.0% quarter-on-quarter due to seasonal factors, however they will still be 20.0-25.0% higher compared to the level of Q1 2011. The decrease in production will lead to an increase of stripping ratio by 19.0-20.0% which can negatively impact production cash costs per 1 tonne of coal. At the same time, management expects a growth in export coal prices.

  • During Q1 Company have almost completed construction of the crushing and screening plant for the processing of crushed rock, which, along with the acquisition of crushed rock spreaders based on BelAZ 7555, will have a beneficial effect on the transportation efficiency, and will significantly reduce the wear of tires for the transport equipment.
  • The Company continues to build the second enrichment plant at the "Vinogradovskiy" open-pit mine with a capacity of 4.0 mln. tonnes per year and plans to complete the plant in Q4 2012.

Management positively views the Company’s development perspectives in Q1 2012 and its outlook for the entire 2012. Based on concluded contracts for coal shipments to domestic and export markets, and planed increases in coal extraction and enrichment, management expects an increase of 2012 revenue, EBITDA and net profit compared to the results of 2011.

 Forward–Looking Statements

This press release might contain forward-looking statements that refer to future events or forecast financial indicators for OJSC “Kuzbasskaya Toplivnaya Company”. Such statements do not guarantee that these are actions to be taken by OJSC “Kuzbasskaya Toplivnaya Company” in the future, and estimates can be inaccurate and uncertain. Actual final indicators and results can considerably differ from those declared in any forward-looking statements. “OJSC “Kuzbasskaya Toplivnaya Company” does not intend to change these statements to reflect actual results.

 

APPENDIX

1. Calculation of EBITDA22

RUB mln. Q423
2011
Q323
2011
2011 2010
Operating prifit 1,067 836 2,895 1,353
Depreciation 305 249 1,039 820
Impairment loss (recovery) 0 -1 -1 7
Profit from disposals of property, plant and
equipment
-12 -6 -22 -46
EBITDA 1,360 1,078 3,911 2,134

2. Calculation of production cash costs

RUB mln. Q423
2011
Q323
2011
2011 2010
Consolidated cost of sales 6,042 4,942 19,404 11,457
Excluding cost of sales of subsidiaries -877 -613 -2,198 -2,261
OJSC KTK cost of sales 5,165 4,329 17,206 9,196
Excluding:        
Depreciation (in cost of sales) -279 -216 -907 -687
Purchased coal -133 -31 -549 -595
Change of inventory balances 33 -35 132 181
Railroad tariffs and transportation costs -2,992 -2,607 -10,180 -4,633
Total cash costs 1,794 1,440 5,702 3,462
Coal production, mln tonnes 2.57 2.44 8.74 6.80
Total cash costs per 1 tonne of coal, RUB 698 590 652 509

 3. Segment reporting

Domestic sales of coal produced

RUB mln. Q424
2011
Q324
2011
2011 2010
Revenue 1,423 1,203 4,026 3,144
Cost of sales -1,071 -827 -2,948 -2,373
Gross profit 352 376 1,078 771
Gross margin 24.7% 31.3% 26.8% 24.5%

Export sales of coal produced

RUB mln. Q424
2011
Q324
2011
2011 2010
Revenue 5,087 4,227 17,127 8,178
Cost of sales -4,106 -3,457 -14,200 -6,907
Gross profit 981 770 2,927 1,271
Gross margin 19.3% 18.2% 17.1% 15.5%

Resale of coal purchased25

RUB mln. Q424
2011
Q324
2011
2011 2010
Revenue 857 682 2,227 2,273
Cost of sales -739 -569 -1,853 -1,786
Gross profit 118 113 374 487
Gross margin 13.8% 16.6% 16.8% 21.4%

Other operations

RUB mln. Q424
2011
Q324
2011
2011 2010
Revenue 183 95 559 565
Cost of sales -126 -89 -403 -391
Gross profit 57 6 156 174
Gross margin 31.1% 6.3% 27.9% 30.8%

4. Financial highlights converted to USD

Comprehensive income statement highlights

USD mln.26 Q427
2011
Q327
2011
Ch.28 2011 2010 Ch.28
Revenue 242 213 13.6% 814 466 74.7%
Cost of sales -193 -170 13.5% -660 -377 75.1%
Gross profit 48 44 9.1% 154 89 73.0%
Distribution, administrative and other costs -14 -15 -6.7% -56 -44 27.3%
Operating profit 34 29 17.2% 98 45 117.8%
EBITDA29 44 37 18.9% 133 70 90.0%
Net profit (loss) 25 15 66.7% 69 27 155.6%

 

Cost of sales

USD mln.25 Q427
2011
Q327
2011
Ch.28 2011 2010 Ch.28
Railroad tariff and transportation 102 95 7.4% 361 179 101.7%
Purchased coal 25 18 38.9% 74 53 39.6%
Employee costs and social
payments
12 10 20.0% 43 30 43.3%
Extraction, processing and sorting of coal 21 18 16.7% 61 24 154.2%
Fuel 14 10 40.0% 46 26 76.9%
Depreciation 9 8 12.5% 33 25 32.0%
Spare parts 4 5 -20.0% 19 16 18.8%
Extraction tax and environment payments 3 2 50.0% 10 8 25.0%
Repair and maintenance 3 4 -25.0% 13 8 62.5%
Other costs 5 3 66.7% 16 13 23.1%
Change in coal stock -5 -4 25.0% -16 -5 220.0%
Cost of sales 193 169 14.2% 660 377 75.1%
Production cash costs per tonne, USD 22 20 10.4% 22 17 32.9%

 

Cash flows

USD mln.30 Q431
2011
Q331
2011
Ch.32 2011 2010 Ch.32
Cash flows from operations before
income tax and interest paid
34 26 30.8% 97 76 27.6%
Cash flows from operating activities 25 20 25.0% 71 67 6.0%
Cash flows used in investing activities -35 -19 84.2% -86 -81 6.2%
Cash flows from financing activities 12 54 -77.8% 65 28 132.1%
Net increase/(decrease) in cash and
cash equivalents
2 55 -96.4% 50 14 257.1%

Indebtedness

USD mln.33 Dec 31
2011
Sep 3031
2011
Ch.32
%
Dec 31
2010
Ch.3234
Long term loans and credits 87 74 17.6%% 55 58.2%
Short term loans and credits 54 54 0.0% 18 200.0%
Total debt, including: 141 128 10.2% 73 93.2%
Rouble-denominated 20 60 -66.7% 7 185.7%
Foreign currency-denominated 121 68 77.9% 65 86.2%
Cash and cash equivalents 59 57 3.5% 15 293.3%
Net debt 82 71 15.5% 58 41.4%

 

1 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited

2 EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and profit or loss on disposal of property, plant and equipment. EBITDA is not a measurement of the Company’s operating performance under IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of the Company’s liquidity

3 Net debt calculated on page 11.

4 For the purpose of the Q4 2011 ratio calculation the aggregate of EBITDA for 12M 2011 was used. For the purpose of the Q3 2011 ratio calculation the aggregate of EBITDA for 9M 2011 and Q4 2010 was used.

5 Figures were converted to USD using the average exchange rates of the Central Bank of the Russian Federation for each period (2011: 29.39 RUB/USD; 2010: 30.38 RUB/USD). Calculations of change in % are made after rounding of figures converted to USD

6 Net of VAT and rail road tariffs.

7 OJSC "Kuzbasskaya Transportation Company" is an associate of KTK and does not form part of KTK group (as there is no control over this entity). OJSC "Kuzbasskaya Toplivnaya Company" does not invest in the acquisition of rail cars but acts as a guarantor under the credit line.

8 We recommend that participants start dialing in 15 minutes before the indicated time to ensure a timely start to the conference call.

9 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited

10 EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and profit or loss on disposal of property, plant and equipment. EBITDA is not a measurement of the Company’s operating performance under IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of the Company’s liquidity.

11 Net of VAT and railroad tariffs.

12 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited.

13 Production costs include production personnel salaries, fuel, extraction and sorting costs, spare parts purchasing costs, repair and maintenance costs

14 Included in stripping volume.

15 Ratio of a volume of coal produced to a volume stripping volume processed

16 Production cash costs calculated in Appendix, Table 2

17 Production cash costs calculated in Appendix, Table 2

18 Figures were converted to USD using the average exchange rates of the Central Bank of the Russian Federation for each period (2011: 29.39 RUB/USD; 2010: 30.38 RUB/USD)

19 Hereinafter amounts for 9M 2011 are presented as unaudited

20 Change of figures as at December 31, 2011 compared to December 31, 2010.

21 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited.

22 EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and profit or loss on disposal of property, plant and equipment. EBITDA is not a measurement of the Company’s operating performance under IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of the Company’s liquidity.

23 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited

24 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited

25 The cost of, and related revenue from sale of, coal purchased from third parties at EX-works terms for further processing and sorting is alocated between “Domestic sales of coal produced” and “Export sales of coal produced” segments.

26 Figures were converted to USD using the average exchange rates of the Central Bank of the Russian Federation for each period (Q4 2011: 31.24 RUB/USD; Q3 2011: 29.08 RUB/USD; 2011: 29.39 RUB/USD; 2010: 30.38 RUB/USD).

27 Hereinafter figures for Q3 and Q4 2011 are presented as unaudited

28 Calculations of change in % are made after rounding of figures converted to USD

29 EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and profit or loss on disposal of property, plant and equipment. EBITDA is not a measurement of the Company’s operating performance under IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of the Company’s liquidity.

30 Figures were converted to USD using the average exchange rates of the Central Bank of the Russian Federation for each period (Q4 2011: 31.24 RUB/USD; Q3 2011: 29.08 RUB/USD; 2011: 29.39 RUB/USD; 2010: 30.38 RUB/USD).

31 Hereinafter figures for Q3, 9M and Q4 2011 are presented as unaudited

32 Calculations of change in % are made after rounding of figures converted to USD

33 Figures were converted to USD using the average exchange rates of the Central Bank of the Russian Federation for each date (Dec 31, 2011: 32.20 RUB/USD; Sep 30, 2011: 31.88 RUB/USD; Dec 31, 2010: 30.48 RUB/USD).

34 Change of figures as at December 31, 2011 compared to December 31, 2010