KTK

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14 November 2017

Kuzbasskaya Toplivnaya Company PJSC Reports Third Quarter and Nine Months 2017 Operating and Financial Results

KEMEROVO, Russian Federation—November 14, 2017 2:00 PM(UTC +7:00)—Kuzbasskaya Toplivnaya Company PJSC (KTK, MICEX: KBTK), one of the largest producers and exporters of thermal coal in Russia, today announce dope rating and unaudited interim consolidated financial results under IFRS for the third quarter and nine months ended September 30,2017.

 

Third Quarter 2017 Key Production Results

 

Q3 2017

% of total

Q2 2017

Chg.

Q3 2016

Chg.

Coal production[1], in millions of tonnes, incl.:

3.39

 

2.72

25%

3.04

12%

Karakansky South open-pit mine

1.09

32%

0.88

24%

1.13

(4%)

Vinogradovsky open-pit mine

1.31

39%

1.10

19%

1.20

9%

Cheremshansky open-pit mine

0.68

20%

0.48

42%

0.63

8%

Bryansky open-pit mine

0.31

9%

0.26

19%

0.08

288%

Commercial products[2], in millions of tonnes

2.95

 

2.31

28%

2.65

11%

Coal processing[3], in millions of tonnes, incl.:

2.54

 

2.03

25%

2.41

5%

Sorted coal

1.57

62%

1.10

43%

1.38

14%

Washed coal

0.97

38%

0.93

4%

1.03

(6%)

Kaskad 1 washing plant

0.17

18%

0.13

31%

0.24

(29%)

Kaskad 2 washing plant

0.80

82%

0.80

0%

0.79

1%

Blasted rock mass[4], in millions of cbm

9.65

 

9.25

4%

8.84

9%

Average stripping transportation distance, km

2.99

 

2.76

8%

2.80

7%

 

  • In the third quarter of 2017 the Company produced 3.39 million tonnes of coal, raising this indicator by 12% versus the year-ago quarter and by 25% compared to the second quarter of 2017.
  • The volume of commercial products also went up, to 2.95 million tonnes, by 28% compared to the second-quarter level and by 11%to the year-ago quarter.
  • Coal processing amounted to 2.54 million tonnes, 25% higher than in the second quarter of 2017 and 5% higher than in the third quarter of 2016.
  • Total coal washing in the third quarter rose by 4% to the level of the second quarter and fell by 6% to the level of this indicator of the year-ago quarter and amounted to 0.97 million tonnes, of which 82% were processed at the Kaskad 2 washing plant. The reason for the decline in the level of washing is that Kaskad1 is going through a technical re-equipment, it was stopped and hasn’t produced anything since the end of May.
  • Coal sorting rose by 14% compared to the third quarter of 2016 and by 43% compared to the second quarter of 2017.
  • The volume of blasted rock mass in the third quarter of 2017amounted to 9.65 million cbm, going up by 4%quarter-over-quarter and by 9% over the year-ago quarter.

 

Third Quarter 2017 Key Commercial Results

 

Q3 2017

% of total

Q2 2017

Chg.

Q3 2016

Chg.

Sales volume[5], in millions of tonnes, incl.:

3.16

 

2.13

49%

2.94

7%

Export sales volume

2.25

71%

1.79

26%

1.95

15%

Domestic sales volume

0.91

29%

0.34

171%

0.99

(7%)

Own coal

2.88

91%

1.91

51%

2.49

16%

Coal resale

0.28

9%

0.22

27%

0.45

(38%)

Average selling price, RUB/tonne[6]

1,794

 

1,488

21%

1,326

35%

 

  • In the third quarter sales grew by 49% versus the volume of the previous quarter, standing at 3.16 million tonnes of coal. In the third quarter the level of sales traditionally goes up which is due to the seasonality of coal consumption.Compared to the year-ago quarter they also rose, by 9%.
  • In the third quarter export sales showed a quarterly increase of 26% and by 15% relative to the third quarter of 2016, amounting to 2.25 million tonnes.
  • For the quarter, the share of exports in total sales of coal amounted to 71%.
  • Third-quarter average coal selling price rose by 21% compared to the second-quarter figure, amounting to RUB 1,794 per tonne. This growth was due to higher coal prices and an increase in the dollar exchange rate. Compared to the third quarter of 2016, the average price went up by 35%.

 

Key production results for the nine months to September 30, 2017

 

9M 2017

% of total

9M 2016

Chg.

Coal production[7], in millions of tonnes, incl.:

9.43

 

8.56

10%

Karakansky South open-pit mine

2.93

31%

2.87

2%

Vinogradovsky open-pit mine

3.55

38%

3.52

1%

Cheremshansky open-pit mine

2.05

22%

1.72

19%

Bryansky open-pit mine

0.90

10%

0.45

100%

Commercial products[8], in millions of tonnes

8.17

 

7.42

10%

Coal processing[9], in millions of tonnes, incl.:

7.02

 

6.72

4%

Sorted coal

4.01

57%

3.62

11%

Washed coal

3.01

43%

3.10

(3%)

Kaskad1washing plant

0.57

19%

0.76

(25%)

Kaskad 2 washing plant

2.44

81%

2.34

4%

Blasted rock mass[10], in millions of cbm

27.50

 

24.69

11%

Average stripping transportation distance, km

2.81

 

2.60

8%

 

  • For the nine months of 2017 the Company produced 9.43 million tonnes of coal, 10% more than in the same period a year ago. Bryansky open-pit mine was the main contributor to this growth and produced 0.90 million tonnes of coal, 10% of all production.
  • Commercial product volume for the nine months stood at 8.17 million tonnes, a 10% increase over the year-ago corresponding period indicator.
  • Coal processing amounted to 7.02 million tonnes, a growth of 4%.
  • Total coal washing for the nine months went down insignificantly to 3.01 million tonnes.
  • Coal-sorting volume rose by 11% and stood at 4.01 million tonnes.

 

Key commercial results for the nine months to September 30, 2017

 

9M 2017

% of total

9M 2016

Chg.

Sales volume[11], in millions of tonnes, incl.:

8.35

 

7.84

7%

Export sales volume

6.26

75%

5.54

13%

Domestic sales volume

2.09

25%

2.29

(9%)

Own coal

7.71

92%

7.22

7%

Coal resale

0.64

8%

0.62

3%

Average selling price, RUB/tonne[12]

1,581

 

1,199

32%

 

  • In the nine months of 2017 sales grew by 7% compared to the level of the previous corresponding period.
  • Domestic-market coal sales fell by 9%. Export sales stood at 6.26 million tonnes, an increase of 13% in yearly terms, representing 75% of total sales.
  • At the end of the nine months of the year coal resale went up by 3%, its share being8%of total sales during this period.
  • For the nine months of 2017 the average selling price was RUB 1,581 per tonne, an increase of 32% over the year-ago period.

 

Financial highlightsfor the third quarter and nine months 2017

in millions of RUB

Q32017

Q22017

Chg.

9M 2017

9M 2016

Chg.

Revenue

10,332

6,511

59%

25,429

18,269

39%

Cost of sales

8,752

6,439

36%

22,546

16,435

37%

Gross profit

1,580

72

2094%

2,883

1,834

57%

Gross profit margin

15.3%

1.1%

14.2ppts

11.3%

10.0%

1.3 ppts

Selling, general and administrative expenses

673

612

10%

1,893

1,682

13%

Operating profit

907

(540)

n/a

990

152

551%

Operating profit margin

8.8%

 -

 -

3.9%

0.8%

3.1 ppts

EBITDA

1,422

(109)

n/a

2,340

1,138

106%

EBITDA margin

13.8%

 -

 -

9.2%

6.2%

3.0 ppts

EBITDA per tonne, RUB

419

 -

 -

248

133

87%

Net profit

514

(587)

n/a

540

(151)

n/a

Net profit margin

5.0%

 -

-

2.1%

 -

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the nine months of 2017 all major financial results showed a significant increase compared to the first nine months of 2016.

  • Gross profit increased by 57%, operating profit amounted to RUB 990 million, showing a considerable increase over the last-year period, EBITDA showed an increase of 106%, reaching a value of RUB 2,340 million.
  • The main influence on the above figures was made by an increase of revenue by 39% in the first nine months of 2017 to the level of that value last year.
  • Cost of sales in the first nine months of 2017 grew by 37% compared to last year.
  • The level of selling, general and administrative expenses for the first nine months of 2017 increased by 13% to RUB 1,893 million.
  • Net profit reached RUB 540 million at the end of the first nine months of 2017, having grown significantly compared to the negative value of this indicator a year ago.

As for the third-quarter financial indicators, they also showed growth.

  • Revenue in the third quarter of 2017 was up by 59% compared to the second quarter influenced by seasonal increase in demand for coal.
  • Gross profit showed record growth, reaching RUB 1,580 million.
  • Quarterly EBITDA rose considerably compared to the negative value of this indicator in the previous-year corresponding period, reaching RUB 1,422 million.
  • The third quarter of 2017 saw a net profit of RUB 514 million compared to a loss of RUB 587 million a year ago.

 

Debt portfolio management

in millions of RUB

30.09.17

% of total

30.06.17

Chg. 1

30.09.16

Chg. 2

Long-term loans

4,461

42%

4,990

(11%)

3,152

42%

Short-term loans

6,269

58%

5,485

14%

6,594

(5%)

Total debt, incl.:

10,730

100%

10,476

2%

9,747

10%

RUB loans

6,342

59%

4,568

39%

5,390

18%

Average interest rate for RUB loans

11.07%

  

11.27%

(0.2 ppts)

11.02%

0.05 ppts

USD loans

4,389

41%

5,907

(26%)

4,357

1%

Average interest for USD loans

4.61%

  

4.73%

(0.12 ppts)

3.97%

0.64 ppts

Cash and cash equivalents

5,196

  

4,001

30%

3,835

35%

Net debt

5,534

  

6,475

(15%)

5,912

(6%)

Net debt / 12M EBITDA

1.45

  

2.06

(30%)

3.14

(54%)

EBITDA (12months)

3,829

 

3,144

22%

 

104%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt at September 30, 2017 stood at RUB 5,534 million, 6% less compared to the year-ago level and a 15% decrease to that of the previous quarter of this year.

  • The net debt/12-month EBITDA ratio stood at 1.45, which is the lowest value since 31.12.12.This indicator is at a level which is comfortable for management, being 30% lower than in the second quarter of this year and 54% lower than a year ago.
  • Under the terms of the existing loan agreements with banks net debt/EBITDA ratio should not exceed the level of 4.00-5.00.
  • As of September 30, 2017, the average effective rate was 11.07% for loans denominated in RUB and 4.61% for loans denominated in USD.

 

Cash flow and investments

in millions of RUB

Q32017

Q22017

Chg.

9M 2017

9M 2016

Chg.

Operating cash flow

1,355

(571)

n/a

1,933

878

120%

Investment cash flow

(424)

(308)

38%

(1,509)

(1,331)

13%

Acquisition of property, plant and equipment

(445)

(313)

42%

(1,555)

(1,479)

5%

Financial cash flow

337

1,206

(72%)

1,038

1,506

(31%)

Net increase / (decrease) in cash and cash equivalents

1,268

327

288%

1,462

1,053

39%

 

 

 

 

 

 

 

  • In the nine months of 2017 operating cash flow grew significantly compared to the previous-year corresponding period and amounted to RUB 1,933 million.
  • Investment cash flow went up by 13%, amounting to RUB (1,509) million.
  • Net increase in cash and cash equivalents stood at RUB 1,462 million.
  • In the third quarter of 2017 operating cash flow went up to RUB 1,355 million.
  • Quarterly investment cash flow reached RUB (424) million, going up by 38% compared to the same period last year.
  • RUB 445 million were invested in property, plant and equipment.
  • Net increase in cash and cash equivalents amounted to RUB 1,268 million.

Outlook for 2017

  • In accordance with the production plan, the volume of coal production in the third quarter of 2017 will amount to 13.4 million tonnes.

Contacts for analysts, investors, and media:

Elena Sarycheva, head of strategic communications department

+7 (3842) 36-47-62

es@oaoktk.ru

 

KTK at a glance:

Kuzbasskaya Toplivnaya Company PJSC (KTK, MICEX: KBTK) is one of the largest manufacturers and exporters of thermal coal in Russia. Production assets of the Company include three current plots and one projected plot at the Vinogradovsky mine in Kemerovo region, as well as two washing plants and own railroad infrastructure located in the same industrial cluster with the production assets. The Company operates retail networks in four regions of Western Siberia and a wholesale network in Poland. The company employs over 4,400 people. KTK’s shares are traded on MICEX, the free float is 33.15%.

 

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Financial highlights under IFRS:

in millions of RUB

2016

2015

2014

Revenue

26,863

24,994

22,250

Cost of sales

23,220

20,932

18,925

Production cash costs per tonne, RUB

612

 

577

EBITDA

2,628

2,697

2,518

EBITDA margin

9.8%

10.8%

11%

EBITDA per tonne, RUB

225

245

237

Net profit

647

37

7

Net profit margin

2.4%

-

-

Net debt

5,487

5,642

6,101

Net debt / EBITDA

2.09

2.09

2.42

 

 

 

 

 

 

 

 

 

 

 

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 pr@oaoktk.ru.

 

[1]IncludingKaskad1washingplant

[2]Volume of salableoutputaftersorting and washing of produced coal

[3] Coal washing and sorting

[4]Includedinstripping

[5]Sales for the group of companies, including third parties coal resale

[6] Excluding rail tariffs and VAT

[7]IncludingKaskad1washingplant

[8]Volume of salableoutputaftersorting and washing of produced coal

[9] Coal washing and sorting

[10]Includedinstripping

[11]Sales for the group of companies, including third parties coal resale

[12] Excluding rail tariffs and VAT