OJSC "Kuzbasskaya Toplivnaya Company" (RTS/MICEX: «KBTK»), one of the largest producers and exporters of thermal coal in Russia, is pleased to announce its unaudited condensed interim consolidated financial statements under IFRS for the 6 months 2013 ended June 30, 2013.
Financial highlights
| RUB mln. | Q21 2013 |
Q11 2013 |
Ch. | 6M1 2013 |
6M1 2012 |
Ch. |
| Revenue | 4,657 | 4,927 | -5% | 9,584 | 11,505 | -17% |
| Cost of sales | 4,096 | 4,277 | -4% | 8,373 | 9,6882 | -14% |
| Production cash costs per tonne, RUB | 586 | 559 | -4% | 573 | 788 | -27% |
| Gross profit | 561 | 650 | -14% | 1,211 | 1,8172 | -33% |
| Gross profit margin | 12% | 13% | - 1 ppts | 13% | 16% | -3 ppts |
| Distribution, administrative and other costs | 383 | 417 | -8% | 800 | 864 | -7% |
| Operating profit | 178 | 233 | -24% | 411 | 953 | -57% |
| Operating profit margin | 4% | 5% | -1 ppts | 4% | 8% | -4 ppts |
|
EBITDA3 |
478 | 509 | -6% | 987 | 1,479 | -33% |
| EBITDA margin | 10% | 10% | - | 10% | 13% | -3 ppts |
| EBITDA per tonne, RUB | 191 | 213 | -10% | 202 | 368 | -44% |
| Net profit | -42 | 86 | n.a. | 44 | 602 | -93% |
| Net profit margin | - | 2% | n.a. | 1% | 5% | -4 ppts |
Eduard Alexeenko, First Deputy CEO, commented:
"In H1 2013, the Company showed lower revenues, EBITDA and net profit due to low prices in export markets and traditional seasonal decline in demand for thermal coal in the domestic market. However, due to lower production cash costs and cost of sales, the Company shows a positive financial result for the first half of the year. The main impact on the net profit had a loss in Q2 related to the foreign exchange differences on loans denominated in foreign currency, which totaled RUB 228 mln., which is more than 2 times higher than in 2012 (RUB 73 mln.). The Company previously showed a loss of RUB 275 mln. in Q2 2010 and RUB 294 mln. in Q2 2012."
Revenue
At the end of H1 2013, revenue decreased by 17% to RUB 9,584 mln. compared to the same period in 2012. The decrease in revenues occurred in all key segments of the Company’s business, but the major impact on this indicator had a segment of export sales of own coal, which had shown a decline of 14%.
Revenue in Q2 2013 decreased by 5% to RUB 4,657 mln. Under the influence of the seasonal decline in demand for coal, the reduction in revenue in the segment of own coal sales in the domestic market amounted to 64%. Due to contracts with the buyers of washed coal in the Asia-Pacific region in a segment of export sales of own coal quarter-on-quarter revenue rose by 20% to RUB 3,924 mln., which is equivalent to 84% of consolidated quarterly revenue of the Company.
Operating profit and EBITDA
Compared to H1 2012, for 6 months in 2013 operating income decreased by 57% to RUB 411 mln., with EBITDA and gross profit declined by 33% to RUB 1,211 mln. and 987 mln. respectively. The main influence on the reduction of these indices had a reduction of gross margin in the segment of the export sales of own coal from 16% in H1 2012 to 9% in H1 2013. Some support has had a rise in gross margin in the segment of the of own coal sales in the domestic market from 17% in H1 2012 to 28% in H1 2013 and the reduction of production cash costs by 27% to RUB 573 per tonne of produced coal. Cost of sales in H1 2013 decreased by 14% to RUB 8,373 mln. as a result of lower production cash costs and the coal purchased for resale. The level of commercial, administrative and other expenses in H1 2013 decreased by 7% to RUB 800 mln.
In Q1 2013, operating income decreased by 24% compared to the same period in 2012 and amounted RUB 178 mln. Gross profit decreased 14% to RUB 561 mln. Quarterly EBITDA amounted to RUB 478 mln. showing decrease by 6% compared to Q1 2013. Production cash costs and cost of sales were reduced in Q2 by 4% to RUB 4,096 mln. and RUB 586 per tonne respectively. Commercial, administrative and other expenses decreased by 8% to RUB 383 mln.
Net profit
Net profit in H1 2013 amounted RUB 44 mln. showing a decrease by 93% compared to the same period in 2012. Despite a significant reduction in thermal coal prices on world markets and the declining profitability of export sales, the Company's business in the domestic market is stable and shows an increase in gross margin. This is due to the own distribution network of coal warehouses which is unique for the Russian market, serving more than 400,000 individuals and more than 1,000 legal entities and municipal customers of thermal coal. Gross margin of this segment is growing thanks to strong demand for sorted coal and the introduction of additional services for the customers. Management plans to continue the development and expansion of the retail network.
Due to the seasonality of consumption of coal in the domestic market, Q2 is traditionally the weakest in the annual business cycle of the Company. In Q2 2013, the Company recorded a loss of RUB 42 mln., which is 149% lower than the loss incurred in Q2 2012. As in Q2 last year, the loss is due to foreign exchange differences on loans denominated in foreign currency in the amount RUB 228 mln.
Debt portfolio management
| RUB mln. | 30.06.13 | % of total |
31.03.13 | Ch. | 30.06.12 | Ch.4 |
| Long term loans | 4,859 | 61% | 3,411 | 42% | 5,414 | -10% |
| Short term loans | 3,097 | 39% | 4,765 | -35% | 1,333 | 132% |
| Total debt, incl.: | 7,956 | 8,176 | -3% | 6,747 | 18% | |
| RUB loans | 4,210 | 53% | 4,107 | 3% | 2,452 | 72% |
| Average interest rate for RUB loans | 8.97% | 9.06% | -0.09 ppts | 10.00% | -1.03 ppts | |
| Subsidized interest for RUB loans5 | 8.67% | 8.53% | 0.14 ppts | 9.40% | -0.73 ppts | |
| USD loans | 3,746 | 47% | 4,069 | 4,295 | -13% | |
| Average interest for USD loans | 4.74% | 4.80% | -0.06 ppts | 4.80% | -0.06 ppts | |
| Cash and cash equivalents | 1,993 | 1,858 | 7% | 1,6166 | 23% | |
| Net debt | 5,963 | 6,318 | -6% | 5,131 | 16% | |
| Net debt / 12M EBITDA | 2.00 | 2.20 | -9% | 1.31 | 52% | |
Net debt at 30 June 2013 amounted RUB 5,963 mln. showing a decrease by 6% compared with the figure as at 31 March 2013. The net debt to 12M EBITDA ratio reached a comfortable level for the management and amounted 2.00. 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 the sector, which reflect the current interest rates for loans. As of June 30, 2013, the average effective rate was 8.67% for loans denominated in RUB and 4.74% for loans denominated in USD. In Q2 2013, VTB Bank (Austria) AG confirmed a new credit line to refinance the costs incurred by the Company in the implementation of the investment project for the construction of the washing plant "Kaskad-2" in the amount USD 60 mln. for a period of 5 years. Previously, the Company raised loans for up to 3 years, and received credit line allowed to effectively restructure existing debt portfolio, together with a reduction in the effective interest rate on borrowings in USD by 0.06 percentage points.
Cash flow and investments
| RUB mln. | Q2 2013 |
Q1 2013 |
Ch. | 6M 2013 |
6M 2012 |
Ch. |
| Operating cash flow | 1,128 | -1,354 | n.a. | -226 | 567 | n.a. |
| Investment cash flow: | -109 | -180 | -39% | -289 | -2,821 | -90% |
| Acquisition of property, plant and equipment |
-145 | -199 | -27% | -344 | -2,318 | -85% |
| Financial cash flow | -924 | 1,032 | н.п. | 108 | 1,514 | -93% |
| Net increase / (decrease) in cash and cash equivalents |
95 | -502 | n.a. | -407 | -740 | -45% |
In H1 2013, operating cash flow amounted RUB -226 mln. Investment cash flow decreased by 90% to RUB -289 mln because the Company has fully completed the investment cycle of 2012. Investments in acquisition of property, plant and equipment amounted RUB 344 mln., most of which focus on the completion of the financing made earlier work on the construction of the washing plant "Kaskad-2." Net cash outflow from financing activities for H1 2013 amounted to RUB 407 mln. Net decrease in cash and cash equivalents slowed down by 45% to RUB 344 mln.
In Q2 2013, operating cash flow amounted RUB 1,128 mln. by reducing the trade receivables to RUB 2,165 mln, which is 38% lower than in Q1 2013. These trade receivables included receivables from LLC "ZapSib-Transservice" on the transaction of sale of rail cars. This batch of rail cars was purchased by the Group from LLC "Kuzbasskaya Transport Company" with the aim of further resale. The carrying value of this debt amounted to RUB 1,017 mln. In May 2013 this debt was repaid in full by the buyer. Investment cash flow in Q2 2013 amounted RUB -109 mln., investments in acquisition of property, plant and equipment were RUB 145 mln. Net cash outflow from financing activities amounted RUB 924 mln. Net increase in cash and cash equivalents amounted RUB 95 mln.
Key events in Q2 and after reporting date
Outlook for Q3 2013
Management of the KTK tracks the performance of prices in world markets, which in the last year stays at the low level, and does not expect significant price increases in the international thermal coal market in Q3 and Q4 2013. However, the price trends of past periods augur well for the growth of prices in the medium term.
6M 2013 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
Monday, August 26 2013
9:00 New York (UTC -4:00)
14:00 London (UTC +1:00)
17:00 Moscow (UTC +4:00)
20:00 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 (0) 1452 555566
Russia (toll free): 81080020972044
Conference ID: 37089330
In 2 weeks the record and transcript of the conference call will be published on KTK website:
www.oaoktk.ru/en/investors/audio
The conference call replay will be available for 2 weeks:
International: +44 (0)1452550000
Conference ID: 37089330?
Contacts for analysts and investors:
OJSC "Kuzbasskaya Toplivnaya Company", Moscow
Vasily Rumyantsev
Head of Moscow office, IRO
Tel.: +7 (495) 787-68-05
E-mail: vkr@oaoktk.ru
Contacts for press:
OJSC "Kuzbasskaya Toplivnaya Company", Kemerovo
Elena Sarycheva
Head of public affairs department
Tel.: +7 (3842) 36-47-62 (Russian only)
E-mail: es@oaoktk.ru
Additional information about the Company and investor calendar: www.oaoktk.ru/en/investors
Company at a glance:
OJSC "Kuzbasskaya Toplivnaya Company" is one of the largest manufacturers7 and exporters of thermal coal in Russia. Production assets of the Company include three current and one projected opent-pit mines, two washing plants located in the same industrial cluster in the Kemerovo region. The company employs over 4,000 employees. Shares of OJSC "Kuzbasskaya Toplivnaya Company" are traded on the RTS/MICEX, the free float is 34.39%.
News and announcements (Russian only) www.facebook.com/oaoktk
Presentations www.slideshare.net/oaoktk
Video www.youtube.com/oaoktkru
FY 2012 Financial Highlights under IFRS:
|
RUB mln.
|
2012
|
2011
|
2010
|
|
Revenue |
23,104
|
23,939
|
14,160
|
|
Cost of sales |
18,982
|
19,404
|
11,457
|
|
Production cash costs per tonne, RUB
|
690
|
653
|
509
|
|
EBITDA |
3,479
|
3,911
|
2,134
|
|
EBITDA margin
|
15%
|
16%
|
15%
|
|
EBITDA per tonne, RUB
|
399
|
448
|
304
|
|
Net profit |
1,810
|
2,018
|
823
|
|
Net profit margin
|
8%
|
8%
|
6%
|
|
Net debt |
4,681
|
2,663
|
1,754
|
|
Net debt / EBITDA
|
1.35
|
0.68
|
0.82
|
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. | Q2 2013 |
Q1 2013 |
Ch. | 6M 2013 |
6M 2012 |
Ch. |
| Consolidated cost of sales | 4,096 | 4,277 | -4% | 8,373 | 9,6888 | -14% |
|
Excluding cost of sales of subsidiaries |
264 | 585 | -55% | 850 | 9688 | -12% |
| Cost of sales of KTK, excluding: | 3,832 | 3,692 | 4% | 7,523 | 8,7198 | -14% |
| Depreciation allocated to cost of sales | -319 | -248 | 29% | -567 | -4588 | 24% |
| Cost of coal for resale & coal for reprocessing | -14 | -14 | - | -28 | -405 | -93% |
| Change in inventories | 129 | -16 | n.a. | 114 | 134 | -15% |
| Railway tariff and transportation services | -2,334 | -2,186 | 7% | -4,520 | -4,755 | -5% |
| Production cash costs | 1,294 | 1,228 | 5% | 2,522 | 3,2158 | -22% |
| % of production cash costs in consolidated cost of sales | 32% | 29% | -3 ppts | 30% | 33% | -3 ppts |
| Production cash costs per tonne, RUB | 586 | 559 | 5% | 573 | 788 | -27% |
| Production cash costs per tonne, USD | 19 | 18 | 3% | 19 | 26 | -27% |
Segments
| RUB mln. | Q2 2013 |
Q1 2013 |
Ch. | 6M 2013 |
6M 2012 |
Ch. |
| Revenue | 4,657 | 4,927 | -5% | 9,584 | 11,505 | -17% |
| Domestic sales of coal produced | 391 | 1,074 | -64% | 1,465 | 1,767 | -17% |
| Export sales of coal produced | 3,924 | 3,272 | 20% | 7,196 | 8,412 | -14% |
| Resale of coal purchased | 189 | 348 | -46% | 537 | 960 | -44% |
| Other operations | 153 | 233 | -34% | 386 | 366 | 5% |
| Cost of sales | 4,096 | 4,277 | -4% | 8,373 | 9,6888 | -14% |
| Domestic sales of coal produced | 304 | 746 | -59% | 1,050 | 1,4588 | -28% |
| Export sales of coal produced | 3,489 | 3,053 | 14% | 6,542 | 7,0318 | -7% |
| Resale of coal purchased | 161 | 299 | -46% | 460 | 916 | -50% |
| Other operations | 142 | 179 | -21% | 321 | 283 | 13% |
| Gross profit | 561 | 650 | -14% | 1,211 | 1,817 | -33% |
| Domestic sales of coal produced | 87 | 328 | -73% | 415 | 3098 | 34% |
| Export sales of coal produced | 435 | 219 | 99% | 654 | 1,3818 | -53% |
| Resale of coal purchased | 28 | 49 | -43% | 77 | 44 | 75% |
| Other operations | 11 | 54 | -80% | 65 | 83 | -22% |
| Gross profit margin | 12% | 13% | -1 ppts | 13% | 16% | -3 ppts |
| Domestic sales of coal produced | 22% | 31% | -9 ppts | 28% | 17% | 11 ppts |
| Export sales of coal produced | 11% | 7% | 4 ppts | 9% | 16% | -7 ppts |
| Resale of coal purchased | 15% | 14% | 1 ppts | 14% | 5% | 9 ppts |
| Other operations | 7% | 23% | -16 ppts | 17% | 23% | 6 ppts |
Production
| Q2 2013 |
Q1 2013 |
Ch. | 6M 2013 |
6M 2012 |
Ch. | |
| Coal production, mln. tonnes, incl.: | 2.50 | 2.39 | 5% | 4.89 | 4.08 | 20% |
| Karakansky South | 0.75 | 0.77 | -3% | 1.47 | 1.52 | 3% |
| Vinogradovsky | 0.90 | 0.69 | 30% | 1.59 | 0.65 | 145% |
| Cheremshansky9 | 0.86 | 0.93 | -8% | 1.79 | 1.98 | -10% |
| Coal processing10, mln. tonnes, incl.: |
2.14 | 1.77 | 21% | 3.91 | 3.41 | 15% |
| Sorted coal | 1.43 | 1.41 | 1% | 2.84 | 3.00 | -5% |
| Washed coal | 0.71 | 0.36 | 97% | 1.07 | 0.41 | 161% |
| Stripping, mln. cbm., incl.: | 14.78 | 14.70 | 1% | 29.48 | 38.71 | -24% |
| Blasted rock mass11, mln. cbm | 6.64 | 6.37 | 4% | 13.01 | 18.97 | -31% |
| Average stripping transportation distance, km | 2.40 | 2.60 | -15% | 2.50 | 3.19 | -22% |
| Average stripping ratio12 | 5.90 | 6.10 | -3% | 6.00 | 9.49 | -37% |
Sales
| Q2 2013 |
Q1 2013 |
Ch. | 6M 2013 |
6M 2012 |
Ch. | |
| Sales volume13 mln. tonnes, incl.: | 2.16 | 2.38 | -9% | 4.54 | 4.85 | -6% |
|
Export sales volume |
1.74 | 1.40 | 24% | 3.14 | 3.06 | 3% |
| Domestic sales volume | 0.42 | 0.98 | -57% | 1.40 | 1.79 | -22% |
| Own coal | 2.02 | 2.12 | -5% | 4.14 | 3.97 | 4% |
| Coal re-sale | 0.14 | 0.26 | -46% | 0.40 | 0.88 | -55% |
| Average selling price, RUB/tonne14 | 1,025 | 1,028 | - | 1,027 | 1,318 | -22% |
| Average export price | 980 | 900 | 9% | 945 | 1,354 | -30% |
| Average domestic price | 1,207 | 1,211 | - | 1,210 | 1,256 | -4% |
1 Here and below are unaudited figures for Q1 and Q2 2013, 6M 2013, 6M 2012
2 Recalculated data in accordance with the new standards and interpretations. Read more on pages 10-12 of financial statements.
3 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 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 measure of the Company’s liquidity.
4 Change 30.06.13 / 30.06.12
5 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
6 Including term deposits
7 Metal Expert, January 2013.
8 Recalculated data in accordance with the new standards and interpretations. Read more on pages 10-12 of financial statements.
9 Including “Kaskad” washing plant
10 Coal washing and sorting.
11 Included in stripping.
12 Share of coal produced in stripping.
13 Sales for the group of companies, including third parties coal resale.
14 Excluding rail tariffs and VAT.
