Kemerovo, Russian Federation - OJSC "Kuzbasskaya Toplivnaya Company" (RTS/MICEX: "KBTK"), one of the fastest-growing thermal coal producers in Russia, is pleased to announce its operational results for the third quarter and 9 months ended 30 September 2011.
Quarterly Operational Results1
| Mln tonnes | Q3 2011 | Q2 2011 | Change, % |
| Coal production | 2.44 | 1.91 | 28% |
|
Sorted coal |
1.51 | 1.36 | 11% |
|
Enriched coal |
0.20 | 0.19 | 5% |
| Sales volume, incl.: | 2.81 | 2.08 | 35% |
| Export sales volume | 1.61 | 1.67 | -4% |
|
Domestic sales volume |
1.20 | 0.41 | 191% |
| Average realized price, RUR / tonne2 | 1,229 | 1,175 | 5% |
| Average export price, RUR / tonne | 1,191 | 1,173 | 1% |
|
Average domestic price, RUR / tonne |
1,280 | 1,185 | 8% |
In Q3 2011 the Company increased volumes of production and sales, achieving its quarterly plans. The volume of coal production amounted to 2.44 mln tonnes, an increase by 28% quarter-on-quarter (Q2 2011: 1.91 mln tonnes). Such strong growth was connected to the seasonal increase in coal demand in Russia before the heating season starts. In Q3 the Company increased the volume of coal sorting by 11% quarter-on-quarter to 1.51 mln tonnes in order to fulfil rising demand from the clients of its retail chain, located in Western Siberia. “Kaskad” enrichment plant, which produces export-quality coal, kept its production at 100% of its capacity. Its quarterly output increased by 5% to 0.2 mln tonnes mainly due to the additional working day in Q3.
During the quarter the total volume of the Company’s sales increased by 35% to 2.81 mln tonnes of coal (Q2 2011: 2.08 mln tonnes). The quarterly growth of sales was higher than production growth, because the Company increased sales of coal, purchased from third parties, by 32% quarter-on-quarter - from 0.35 mln tonnes to 0.47 mln tonnes. The major part of such coal was resold through KTK retail chain.
In Q3 the volume of export shipments decreased by 4% and amounted to 1.61 mln tonnes (Q2 2011: 1.67 mln tonnes). During the year export sales are typically more stable than sales on domestic market, because the Company possesses a well diversified client base in Europe and South-East Asia, which helps to smooth seasonal fluctuations on separate markets.
During the quarter the Company’s domestic sales volume increased by about 3 times and reached 1.20 mln tonnes of coal (Q2 2011: 0.41 mln tonnes). The Company was very active on the retail market, distributing coal products through its own retail chain, and also shipped coal to large electricity generation companies. Despite the continued shortage of railroad cars in Kuzbass region, in Q3 “Kuzbasskaya Toplivnaya Company” continued to deliver coal to its customers in a timely manner due to the effective utilisation of railroad cars supplied by its associated transport company3.
In Q3 2011 the average price4 of coal increased by 5% quarter-on-quarter to RUR 1,229 per tonne (Q2 2011: RUR 1,175 per tonne).
The average domestic coal price increased by 8% quarter-on-quarter and reached RUR 1,280 per tonne (Q2 2011: RUR 1,185 per tonne) due to the general increase in prices on the market and the growth in sorted coal products sales. In US$ equivalent the price increased only by 4% from US$42.3 to US$44.0 due to the weakening of RUR/USD exchange rate.
The average export price increased by 1% to RUR 1,191 per tonne (Q2 2011: RUR 1,173 per tonne). In US$ equivalent the price decreased by 2% to US$40.9 (Q2 2011: US$41.9).
Year To Date Operational Results
| Mln tonnes | 9 months 2011 | 9 months 2010 | Change, % |
| Coal production | 6.17 | 4.59 | 34% |
|
Sorted coal |
4.04 | 2.94 | 37% |
|
Enriched coal |
0.55 | 0.03 | - |
| Sales volume, incl.: | 7.32 | 5.79 | 26% |
| Export sales volume | 4.68 | 2.64 | 77% |
|
Domestic sales volume |
2.64 | 3.15 | -16% |
| Average realized price, RUR / tonne5 | 1,202 | 947 | 27% |
| Average export price, RUR / tonne | 1,188 | 982 | 21% |
|
Average domestic price, RUR / tonne |
1,225 | 918 | 34% |
During the first 9 months of 2011 the Company increased coal production volume by 34% to 6.17 mln tonnes (9M 2010: 4.59 mln tonnes). Rising demand for the Company’s sorted coal products among Russian and foreign customers resulted in a growth of volume of their production by 37% year-on-year to 4.04 mln tonnes (9M 2010: 2.94 mln tonnes). The volume of high quality coal produced by "Kaskad" enrichment plant reached 0.55 mln tonnes.
9M 2011 coal sales volume increased by 26% year-on-year to 7.32 mln tonnes (9M 2010: 5.79 mln tonnes) because of active export shipments growth. The volume of export sales increased by 77% and reached 4.68 mln tonnes and the domestic sales volume decreased by 16% to 2.64 mln tonnes. Hence, the share of export in the total sales volume increased from 46% to 64% in 9M 2011, which is in line with the Company’s long term development strategy to increase its presence in the key export markets.
In 9M 2011 among the Company’s largest export markets was: Poland – 51% of the Company’s total export sales (9M 2010: 42%), China and South Korea – 45% (9M 2010: 46%), Ukraine – 2% (9M 2010: 6%) and Czech Republic – 1% (9M 2010: 3%).
During 9M 2011 the average price of the Company’s coal sale increased by 27% year-on-year to RUR 1,202 per tonne (9M 2010: RUR 947 per tonne). The average domestic coal price reached RUR 1,225 per tonne, exceeding the result of 9M 2010 by 34% (RUR 918 per tonne). Its worthy of note that the average domestic price has been gradually increasing in each of 3 quarters of 2011. In US$ equivalent the price increased by 41% from US$30.3 to US$42.66.
The average export coal price for 9M 2011 was RUR 1,188 per tonne, or 21% higher compared to the same period last year (RUR 982 per tonne). In US$ equivalent the price increased by 27% from US$32.5 to US$41.37. The growth of average export price, compared to domestic one, was slower due to higher railroad transportation costs. In order to mitigate the growth of transport costs, the Company increased the fleet of railroad cars, rented from "Kuzbass Transport Company" at fixed prices. At the reporting date the fleet of such cars was 2.6 thousand units.
Management of the Company is satisfied with the Q3 and 9M 2011 operational results, ended 30 September 2011.
The Company plans to release its unaudited interim 9M 2011 IFRS Statements on November, 24 2011. A conference-call to discuss the financial results will be held the same day at 5PM Moscow time (2PM London time). Conference call details will be issued separately.
For more information please contact:
OJSC "Kuzbasskaya Toplivnaya Company" (Kemerovo)
Elena Sarycheva
Head of public affars department
+7 384 236 47 62
Notes to editors:
Company Overview
OJSC Kuzbasskaya Toplivnaya Company ("KTK" or the "Company") is one of the fastest-growing thermal coal producers in Russia. In terms of 2010 production volume, it was ranked 7th among the largest thermal coal producers in the country. In the ten years since its establishment in 2000, the Company has commissioned and launched three open-pit mines and an enrichment plant, achieving annual production volume of 6.8 million tonnes of coal in 2010. The Company expects to continue to grow its production volume, in particular, following the launch of the Cheremshansky mine in 2008 and ongoing investments into its high performance modern mining technology, aimed at achieving the aggregate structural capacity8 of existing mines of 11 million tonnes of coal per year.
The Company’s JORC coal resources totalled 402 million tonnes of ROM coal as of January 1, 2011 and proven and probable reserves amounted to 185 million tonnes of ROM coal, recoverable during the period of 2011-2030. The Company produces exclusively thermal coal, classified as grade "D" under the Russian classification system, with a naturally low sulphur and phosphorus content, as well as a relatively high calorific value.
The Company conducts mining operations at three open-pit mines, located in the Kuzbass area, Russia’s largest coal producing region. The Company’s mining operations are supported by an extensive production and logistics infrastructure, including its own railway network and facilities, which enable the Company to transport 100% of produced coal from the open-pit mines to the main railway hub at the long-distance railway network, operated by the Russian Railways. Furthermore, as the Company’s mines are located within 5 km from each other, a number of operations are centralized, thereby minimising overhead costs and expenses.
In 2010, the Company’s total coal sales amounted to 8.5 million tonnes of coal, of which 6.4 million tonnes were produced by the Company and 2.1 million tonnes were retailed after purchasing from other coal producers. The Company maintains a diversified sales structure balanced between export and domestic sales with approximately 56% of the coal sold to domestic consumers and approximately 44% exported, primarily to Poland, South Korea and China, in 2010.
The Company’s strong regional presence is supported by an extensive retail distribution network, located throughout the Kemerovo, Novosibirsk, Omsk and Altay regions of Western Siberia. As of 01 January 2011, the Company’s distribution network included 65 owned and operated points of sale and delivered 3.3 million tonnes of coal in 2010, positioning KTK as one of the principal suppliers of coal to retail customers in Western Siberia.
Consolidated IFRS 2010 Financial Highlights
1 The Company’s business is affected by seasonality of thermal coal demand in Russia and globally. By this means its quarterly operational results can be subject to significant fluctuations. Historically, the Company has been producing more coal in Q3 and Q4 than in Q1 and Q2 of each year. However, the Company does not guarantee that this trend will continue in the future.
2 Here and further through prices shown net of transport costs and VAT.
3 "Kuzbass Transport Company" LLC, in which “Kuzbasskaya Toplivnaya Company” owns 50%.
4 Here and further through prices shown net of transport costs and VAT.
5 RUR are converted to US$ using average Central Bank of the Russian Federation exchange rates for each period (Q2 2011: 28.01 RUR/US$; Q3 2011: 29.08 RUR/US$).
6 RUR are converted to US$ using average Central Bank of the Russian Federation exchange rates for each period (9M 2010: 30.26 RUR/US$; 9M 2011: 28.74 RUR/US$).
7 RUR are converted to US$ using average Central Bank of the Russian Federation exchange rates for each period
8 The maximum production capacity that the Company believes could be achieved (taking into account projected stoppages for planned repair and maintenance) in an annual period if the Company were able to process all the coal that could be mined using the Company’s existing mine facilities after acquisition of certain mining equipment and construction of three processing/enrichment facilities in accordance with its current capital expenditure program.
9 EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and 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.
