Kuzbasskaya Toplivnaya Company OJSC (MICEX: «KBTK»), one of the largest producers and exporters of thermal coal in Russia, is pleased to announce its audited consolidated financial statements for the year 2013 under IFRS.
Financial highlights
| RUB mln. | Q41 2013 |
Q31 2013 | Изм. | 2013 | 2012 | Ch. |
| Revenue | 6 559 | 6 347 | 3% | 22 490 | 23 104 | (3%) |
| Cost of sales | 5 769 | 5 381 | 7% | 19 523 | 18 982 | 3% |
| Production cash costs per tonne, RUB | 623 | 660 | (6%) | 611 | 690 | (11%) |
| Gross profit | 790 | 966 | (18%) | 2 967 | 4 122 | (28%) |
| Gross profit margin | 12% | 15% | (3 ppts.) | 13% | 18% | (5 ppts.) |
| Distribution, administrative and other costs | 265 | 514 | (48%) | 1 579 | 1 781 | (11%) |
| Distribution, administrative and other costs as % of revenue | 4% | 8% | (4 ppts.) | 7% | 8% | (1 ppts.) |
| Operating profit | 525 | 452 | 16% | 1 388 | 2 341 | (41%) |
| Operating profit margin | 8% | 7% | 1 ppts. | 6% | 10% | (4 ppts.) |
| EBITDA | 668 | 767 | (13%) | 2 422 | 3 479 | (30%) |
| EBITDA margin | 10% | 12% | (2 ppts.) | 11% | 15% | (4 ppts.) |
| EBITDA per tonne, RUB | 242 | 307 | (21%) | 239 | 399 | (40%) |
| Net profit | 311 | 285 | 9% | 640 | 1 810 | (65%) |
| Net profit margin | 5% | 5% | - | 3% | 8% | (5 ppts.) |
Commenting on the financial results of the Company's CEO Igor Prokudin said:
I rate the financial results of KTK for the 2013 as positive. All the goals the company faced in the past year have been fully completed. We managed to overcome the negative market changes, which were observed for the past year, due to the optimization of the sales strategy, timely sale of Kuzbasskaya Transportation Company LLC and the organization of the optimal logistics scheme, which significantly reduced the transportation costs. As a result, we ended the year with a profit, we managed to maintain revenues at the 2012 level, despite a decrease in average selling price of our products to more than 15% over this period. Moreover, the level of EBITDA remains higher than in 2010, when the Company conducted IPO, and net debt/EBITDA ratio is now in a comfort zone amounted 1.62. KTK - one of the few mining companies in the global market, which could increase EBITDA as compared to 2010, which allows it to fulfill the promises that were announced during the IPO and keep the payment of dividends to shareholders at the level of 2012.
I want to thank management and all the staff for their excellent work and our shareholders for their trust and support of the Company, which allows us to remain stable and profitable in a difficult period for the coal industry
.
Revenue
At the end of 2013 revenue decreased by 3% to RUB 22,490 mln compared to the 2012. The decrease in revenue was due to the reduction of sales of own coal in domestic market. Compared with 2012, this segment's revenue decreased by 34% to RUB 2,880 mln. At the same time by 21% - to RUB 2,623 mln increased revenue in the segment of coal resale, which partially offset the decline in the segment sales of own coal in the domestic market.
Revenue in Q4 2013 increased by 3% to RUB 6,559 mln. Under the influence of the traditionally high seasonal increase in coal demand, revenue growth in the segment of the coal resale was 37%, while revenues totaled RUB 1,205 mln. Revenues from export sales decreased by 5% to RUB 4,382 mln, which is 67% of consolidated quarterly revenues of the Company.
Cost of sales and production cash costs
Cost of sales2 in 2013 increased by 3% to RUB 19,523 mln, while production cash costs2 decreased by 11% to RUB 611 per tonne. Level of commercial, administrative and other expenses for the 12 months 2013 decreased by 11% to RUB 1,579 mln, equivalent to 8% of total revenue.
Cost of sales in Q4 grew by 7% to RUB 5,769 mln and production costs decreased by 6% to RUB 623 per tonne. Quarterly commercial, administrative and other expenses decreased by 48% to RUB 265 mln.
Operating profit and EBITDA
Compared to the level of 2012, in 2013 operating income decreased by 41% to RUB 1 388 mln, EBITDA and gross profit decreased by 30% to RUB 2,422 mln and by 28% to RUB 2,967 mln respectively. The main impact on the reduction of these indicators had a reduction in gross margin in all key segments of the Company business associated with low thermal coal prices in the Asia-Pacific region and the concomitant increase in competition in the domestic market. Gross margin decreased from 18% in 2012 to 13% in 2013 primarily due to export sales segment.
In the Q4 2013, operating income increased by 16% compared to the Q3 2013 and amounted RUB 525 mln. Gross profit decreased by 18% to RUB 790 mln. Quarterly EBITDA amounted to RUB 668 mln, decreasing by 13% compared to Q3 2013.
Net profit
Net income for 2013 amounted RUB 640 mln, decreasing by 65% compared with the figure for 2012. Despite a significant decline in prices for thermal coal in global markets and declining profitability of export sales, the Company's business in the domestic market is stable. This is due to the unique for the Russian market distribution network of coal warehouses, supplying more than 400,000 individuals and more than 1,000 industrial and municipal consumers of thermal coal. Gross margin of this segment in 2013 was 24% due to strong demand for sorted coal produced by the Company and the introduction of additional services for the clients. Management plans to continue the development and expansion of the retail network.
Due to seasonal demand for the thermal coal on the domestic market in Q4 2013, the Company shows a net profit of RUB 311 mln, which is 9% higher than in Q3 2013.
Debt portfolio management
| RUB mln. | 31.12.13 | % of total | 30.09.13 | Ch. | 31.12.12 | Ch.3 |
| Long term loans | 5 987 | 90% | 5 308 | 13% | 3 541 | 69% |
| Short term loans | 640 | 10% | 1 842 | (65%) | 3 502 | (82%) |
| Total debt, incl.: | 6 627 | 7 150 | (7%) | 7 043 | (6%) | |
| RUB loans | 3 044 | 46% | 3 526 | (14%) | 3 067 | (1) |
| Average interest rate for RUB loans | 8,71% | 9,35% | (0,64 ppts.) | 9,56% | (0.85 ppts.) | |
| Subsidized interest for RUB loans4 | 8,54% | 9,19% | (0,65 ppts.) | 8,45% | 0,09 ppts. | |
| USD loans | 3 583 | 54% | 3 624 | (1%) | 3 975 | (10%) |
| Average interest for USD loans | 4,85% | 4,80% | 0,05 ppts. | 4,80% | 0,05 ppts. | |
| Cash and cash equivalents | 2 710 | 1 986 | 46% | 2 362 | 15% | |
| Net debt | 3 917 | 5 164 | (24%) | 4 681 | (16%) | |
| Net debt / 12M EBITDA | 1,62 | 1,75 | (8%) | 1,35 | 20% |
Net debt at 31 December 2013 amounted RUB 3,917 mln, decreasing by 24% compared to 30 September 2013. Significant reduction in net debt due to the increased volume of term deposits. The net debt to EBITDA ratio was 1.62, down by 8% in the Q4 which is comfortable level for management. Under the terms of loan agreements with banks, net debt to EBITDA ratio 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 December 31, 2013, the average effective rate on loans denominated in RUB, was 8.71%, down for the Q4 by 0.64 percentage points. For loans denominated in USD, the average interest rate increased by 0.05 percentage points to 4.85%.
Cash flow and investments
| RUB mln. | Q4 2013 | Q3 2013 | Ch. | 2013 | 2012 | Ch. |
| Operating cash flow | 1 145 | 1 208 | (5%) | 2 127 | 2 332 | (9%) |
| Investment cash flow | 98 | (447) | n.a. | (638) | (3 944) | (84%) |
| Acquisition of property, plant and equipment | (89) | (469) | (81%) | (902) | (3 847) | (77%) |
| Financial cash flow | (562) | (767) | (27%) | (1 221) | 2 125 | n.a. |
| Net increase / (decrease) in cash and cash equivalents | 681 | (6) | n.a. | 268 | 513 | (48%) |
In 2013 operating cash flow was USD 2,127 mln, decreasing by 9%. Investment cash decreased by 84% to RUB 638 million, because after the completion of large-scale investment cycle in 2012, the Company implements a shortened investment program for 2013. Investments in fixed assets amounted RUB 902 mln, mainly used to finance construction of washing plant Kaskad 2. Net cash outflow from financing activities in 2013 amounted RUB 1,221 mln. Net increase in cash and equivalents amounted RUB 268 mln.
In the Q4 2013, operating cash flow amounted RUB 1,145 mln, which is 5% lower than in Q3 2013. Investment cash flow in Q4 2013 amounted RUB 98 mln, investments in fixed assets were RUB 89 mln. Net cash outflow from financing activities amounted RUB 562 mln, which is 27% lower than in Q3 2013. Net increase in cash and cash equivalents was RUB 681 mln.
Key events after reporting date
Outlook for Q1 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 Q1 2014. However, the price trends of past periods augur well for the growth of prices in the medium term.
FY2013 IFRS Financial results conference call details
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 – Head of Moscow office, IRO
Tuesday, April 15 2014
11:00 London (UTC +1:00)
15:00 Moscow (UTC +4:00)
18:00 Kemerovo (UTC +7:00)
We recommend that participants start dialing in 10 minutes before the indicated time to ensure a timely start to the conference call.
Presentation will be available starting in 1 hour before the conference call at:
www.oaoktk.ru/en/investors/present
www.slideshare.net/oaoktk
You can join the conference call by dial-in:
International: +44 2033679461
Great Britain (toll free): 08082381773
Russia: +7 (495) 705-94-72
In 2 weeks the record and transcript of the conference call will be published on KTK website:
www.oaoktk.ru/en/investors/audio
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 producers5 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/en/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. | Q4 2013 | Q3 2013 | Ch. | 2013 | 2012 | Ch. |
| Consolidated cost of sales6 | 5 752 | 5 402 | 6% | 19 523 | 18 982 | 3% |
| Excluding cost of sales of subsidiaries | 970 | 522 | 86% | 2 342 | 2 491 | (6%) |
| Cost of sales of KTK, excluding: | 4 782 | 4 880 | (2%) | 17 181 | 16 491 | 4% |
| Depreciation allocated to cost of sales | 296 | 285 | 4% | 1 104 | 991 | 11% |
| Cost of coal for resale & coal for reprocessing | 202 | 275 | (27%) | 505 | 418 | 21% |
| Change in inventories | 40 | 138 | (71%) | 66 | (47) | n.a. |
| Railway tariff and transportation services | 2 745 | 2 762 | (1%) | 10 028 | 9 151 | 10% |
| Production cash costs | 1 499 | 1 420 | 6% | 5 478 | 5 978 | (8%) |
| Extraction, processing and sorting of coal | 137 | 120 | 14% | 492 | 1 540 | (68%) |
| Fuel | 477 | 400 | 19% | 1 681 | 1 619 | 4% |
| Cost of personal | 448 | 365 | 23% | 1 572 | 1 431 | 10% |
| Spare parts | 223 | 263 | -15% | 827 | 664 | 25% |
| Repair and maintenance | 137 | 131 | 5% | 473 | 389 | 22% |
| Mining and environmental taxes | 61 | 68 | (10%) | 268 | 264 | 2% |
| Other costs | 16 | 73 | (356%) | 165 | 71 | 57% |
| % of production cash costs in consolidated cost of sales | 26% | 26% | - | 28% | 31% | (3 ppts.) |
| Production cash costs per tonne, RUB | 623 | 660 | (6%) | 611 | 690 | (11%) |
| Production cash costs per tonne, USD7 | 19 | 21 | (9%) | 19 | 22 | (12%) |
Segments
| RUB mln. | Q4 2013 | Q4 2013 | Ch. | 2013 | 2012 | Ch. |
| Revenue | 6 559 | 6 347 | 3% | 22 490 | 23 104 | (3%) |
| Domestic sales of coal produced | 703 | 712 | (1%) | 2 880 | 4 346 | (34%) |
| Export sales of coal produced | 4 382 | 4 618 | (5%) | 16 196 | 15 858 | 2% |
| Resale of coal purchased | 1 205 | 881 | 37% | 2 623 | 2 159 | 21% |
| Other operations | 269 | 136 | 98% | 791 | 741 | 7% |
| Cost of sales | 5 769 | 5 381 | 7% | 19 523 | 18 982 | 3% |
| Domestic sales of coal produced | 522 | 401 | 30% | 1 973 | 3 283 | (40%) |
| Export sales of coal produced | 4 004 | 4 140 | (3%) | 14 686 | 13 252 | 11% |
| Resale of coal purchased | 1 042 | 730 | 43% | 2 232 | 1 891 | 18% |
| Other operations | 201 | 110 | 83% | 632 | 556 | 14% |
| Gross profit | 790 | 966 | (18%) | 2 967 | 4 122 | (28%) |
| Domestic sales of coal produced | 181 | 311 | (42%) | 907 | 1 063 | (15%) |
| Export sales of coal produced | 378 | 478 | (21%) | 1 510 | 2 606 | (42%) |
| Resale of coal purchased | 163 | 151 | 8% | 391 | 268 | 46% |
| Other operations | 68 | 26 | 162% | 159 | 185 | (14%) |
| Gross profit margin | 12% | 15% | (3 ppts.) | 13% | 18% | (5 ppts.) |
| Domestic sales of coal produced | 26% | 44% | (18 ppts.) | 31% | 24% | 7 ppts. |
| Export sales of coal produced | 9% | 10% | (1 ppts.) | 9% | 16% | (7 ppts.) |
| Resale of coal purchased | 14% | 17% | (3 ppts.) | 15% | 12% | 3 ppts. |
| Other operations | 25% | 19% | 6 ppts. | 20% | 25% | (5 ppts.) |
Production
| Q4 2013 | Q3 2013 | Ch. | 2013 | 2012 | Ch. | |
| Coal production, mln tonnes, incl.: | 2,76 | 2,50 | 10% | 10,15 | 8,71 | 17% |
| Karakansky South | 0,90 | 0,80 | 13% | 3,22 | 3,08 | 5% |
| Vinogradovsky | 0,93 | 0,89 | 4% | 3,41 | 1,87 | 82% |
| Cheremshansky8 | 0,92 | 0,80 | 15% | 3,51 | 3,76 | (7%) |
| Coal processing9 ,mln tonnes, incl.: | 2,19 | 2,13 | 3% | 8,24 | 6,56 | 26% |
| Sorted coal | 1,39 | 1,33 | 5% | 5,56 | 5,75 | (3%) |
| Washed coal | 0,80 | 0,80 | - | 2,68 | 0,81 | 231% |
| Washing plant Kaskad 1 | 0,24 | 0,25 | (4%) | 1,01 | 0,81 | 25% |
| Washing plant Kaskad 2 | 0,56 | 0,55 | 2% | 1,67 | - | - |
| Stripping, mln cbm, incl.: | 15,11 | 14,81 | 2% | 59,40 | 66,27 | (10%) |
| Blasted rock mass10 , mln cbm | 8,41 | 7,50 | 12% | 28,92 | 31,85 | (9%) |
| Average stripping transportation distance, km | 2,80 | 3,00 | (7%) | 2,70 | 3,00 | (10%) |
| Average stripping ratio 11 | 5,50 | 5,90 | (7%) | 5,90 | 7,60 | (22%) |
Sales
| Q4 2013 | Q3 2013 | Ch. | 2013 | 2012 | Ch. | |
| Sales volume12 , , mln tonnes, incl.: | 3,0813 | 2,98 | 3% | 10,6013 | 10,20 | 4% |
| Export sales | 1,8313 | 1,96 | (7%) | 6,9313 | 5,91 | 17% |
| Domestic sales | 1,25 | 1,02 | 23% | 3,67 | 4,29 | (14%) |
| Own coal | 2,29 | 2,38 | (4%) | 8,82 | 8,51 | 4% |
| Coal re-sale | 0,79 | 0,59 | 34% | 1,78 | 1,70 | 5% |
| Average selling price, RUB/tonne 14 | 116513 | 1 146 | 2% | 1 10013 | 1 294 | (15%) |
1 Here and below are unaudited figures for Q3 and Q4 2013
2 Structure of cost of sales and production cash costs is in the appendices
3 Change 31.12.13 / 31.12.12
4 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
5 №6 by thermal coal production in Russia. Metal Expert, January 2014
6 Data for the Q3 and Q4 2013 presented in accordance with the interim unaudited financial statements and consider stripping asset, which was restated.
7 Average exchange rates of the Central Bank of the Russian Federation, RUB/USD: Q4 2013:32.54; Q3 2013: 31.47; 2013: 31.45; 2012: 31.08
8 Including Kaskad 1 washing plant
9 Coal washing and sorting
10 Included in stripping
11 Share of coal produced in stripping
12 Sales for the group of companies, including third parties coal resale
13 Restated during the audit due to changes in numbers for KTK Polska
14 Excluding rail tariffs and VAT
