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 unaudited consolidated IFRS financial results for Q3 and 9 months ended September 30, 2012.
Financial highlights
| RUB mln. | Q31 2012 |
Q21 2012 |
Ch. | 9M1 2012 |
9M1 2011 |
Ch. |
| Revenue | 5,370 | 4,853 | 11% | 16,875 | 16,389 | 3% |
| Cost of sales | 4,335 | 4,451 | -3% | 14,144 | 13,361 | 6% |
| Production cash costs per tonne, RUB | 561 | 875 | -36% | 729 | 633 | 15% |
| Gross profit | 1,035 | 402 | 157% | 2,731 | 3,028 | -10% |
| Gross profit margin | 19.3% | 8.3% | 16.2% | 18.5% | ||
| Distribution, administrative and other costs | 406 | 416 | -2% | 1,270 | 1,200 | 6% |
| Operating profit | 629 | -14 | 1,461 | 1,828 | -20% | |
| Operating profit margin | 11.7% | - | 8.7% | 11.2% | ||
|
EBITDA2 |
905 | 259 | 249% | 2,281 | 2,551 | -11% |
| EBITDA margin | 16.9% | 5.3% | 13.5% | 15.6% | ||
| EBITDA per tonne, RUB | 404 | 136 | 196% | 360 | 413 | -13% |
| Net profit | 608 | -391 | 1,113 | 1,242 | -10% | |
| Net profit margin | 11.3% | 6.6% | 7.6% |
Due to seasonal increase in demand in the domestic market in Q3 2012 revenue increased 11% to RUB 5,370 mln., compared to RUB 4,853 mln., received in Q2 2012. Revenue for 9M 2012 amounted to RUB 16,875 mln., 3% higher than the same period last year (9M 2011 RUR 16,389 mln.).
Due to the growth in production, increase in the average selling price and reduced operating cash costs per tonne of coal, EBITDA in Q3 2012 increased by 249% compared to Q2 2012 and amounted RUB 905 mln. (Q2 2012: RUR 259 mln.). EBITDA for 1 tonne of coal increased by 196% from RUB 136 in Q2 to RUB 404 in Q3 2012.
Key performance indicators (gross profit, operating income, EBITDA, net income) for 9M 2012 show a decrease compared to the same period of 2011, due to lower coal prices on the global market. It should be noted that with reduction of CIF ARA 6,000 index by 24% and FOB Indonesia 5,800 index by 17%, decrease of the company's key performance indicators went in a smooth manner pace. This is made possible by the management's work to reduce the cost of transportation and coal mining. 9M 2012 EBITDA decreased by 11% to RUB 2,281 mln. (9M 2011: RUB 2,251 mln.).
In Q3 2012, net income amounted to RUB 608 mln. after USD 391 mln. loss, recorded in Q2 2012. For 9M 2012 the Company received RUB 1,113 mln. net income, which is 10% lower than the same period in 2011 (9M 2011: RUB 1,242 mln.).
| RUB mln. | 30.09.12 | 30.06.12 | Ch. | % of total | 30.09.11 | Ch.3 |
| Long term loans | 5,318 | 5,414 | -2% | 73% | 2,358 | 126% |
| Short term loans | 1,953 | 1,333 | 47% | 27% | 1,722 | 13% |
| Total debt, incl.: | 7,271 | 6,747 | 8% | 4,080 | 78% | |
| Ruble-denominated | 3,823 | 2,452 | 56% | 53% | 1,898 | 101% |
| Foreign currency-denominated | 3,448 | 4,295 | -20% | 47% | 2,182 | 58% |
| Cash and cash equivalents | 2,114 | 1,146 | 84% | 1,812 | 17% | |
| Term deposits4 | 371 | 470 | -21% | |||
| Net debt | 4,786 | 5,131 | -7% | 2,268 | 111% | |
| Net debt / EBITDA5 | 1.31 | 1.35 | -2% | 0.66 | 101% |
Net debt as of 30 September 2012 amounted to RUB 4,786 mln. As compared to June 30, 2012, it decreased by 7% (30 June 2012: RUB 5,131 mln). As compared to September 30, 2011, increased by 111% (30 September 2011: RUB 2,268 mln). The net debt to EBITDA at the end of the reporting period was 1.31.
Operational highlights6
| mln. tonnes | Q3 2012 |
Q2 2012 |
Ch. | 9M 2012 |
9M 2011 |
Ch. |
| Coal production, incl.: | 2.24 | 1.90 | 18% | 6.33 | 6.18 | 2% |
| Karakansky South | 0.78 | 0.72 | 8% | 2.25 | 2.37 | -5% |
| Vinogradovsky | 0.55 | 0.28 | 96% | 1.20 | 1.17 | 3% |
| Cheremshansky7 | 0.92 | 0.91 | 1% | 2.90 | 2.66 | 9% |
| Sorted coal | 1.37 | 1.41 | -3% | 4.37 | 4.03 | 8% |
| Enriched coal | 0.21 | 0.21 | - | 0.62 | 0.55 | 13% |
| Stripping, mln. cbm. | 13.81 | 19.42 | -29% | 52.52 | 49.27 | 7% |
| Blasted rock mass8, mln. cbm. | 7.01 | 9.43 | -26% | 25.98 | 22.07 | 18% |
| Stripping ratio9 | 6.16 | 10.21 | -40% | 8.30 | 7.98 | 4% |
| Average stripping transportation distance, km | 3.20 | 3.04 | 5% | 3.05 | 2.83 | 8% |
In Q3 2012, coal production increased by 18% quarter-on-quarter and totaled 2.24 mln. tonnes (Q2 2012 1.90 mln. tonnes). During the first 9M 2012, the Company has increased its level of production to 6.33 mln. tonnes, up 2% from the same period of the previous year (6.18 mln. tonnes).
In Q3 2012, the volume of coal sorting decreased by 3% to 1.37 mln. tonnes (Q2 2012: 1.41 mln. tonnes) due to high seasonal demand for raw coal from customers of Company’s retail network in Western Siberia. In the first 9M 2012 the company increased volumes of coal sorting and washing. Sorting volume increased by 8% to 4.37 mln. tonnes (9M 2011: 4.03 mln. tonnes), which corresponds to 69% of total production for the period.
Coal production at the washing plant "Kaskad-1" corresponds to the level of Q2 2012 and amounted to 0.21 mln. tonnes. During the first 9M 2012, the output of washed coal rose 13% to 0.62 mln. tonnes (9M 2011: 0.55 mln. tonnes), which corresponds to 10% of total production for the period.
Sales
| mln. tonnes | Q3 2012 |
Q2 2012 |
Ch. | 9M 2012 |
9M. 2011 |
Ch. |
| Sales10, incl.: | 2.42 | 2.04 | 19% | 7.27 | 7.32 | -1% |
| Export sales | 1.36 | 1.45 | -6% | 4.42 | 4.68 | -6% |
| Domestic sales | 1.06 | 0.59 | 80% | 2.85 | 2.64 | 8% |
| Own coal | 2.10 | 1.80 | 17% | 6.07 | 5.99 | 1% |
| Coal re-sale | 0.32 | 0.24 | 33% | 1.20 | 1.34 | -10% |
| Average selling price11, RUB/tonne | 1,301 | 1,271 | 2% | 1,312 | 1,202 | 9% |
| Average export price, RUB/tonne | 1,333 | 1,259 | 6% | 1,347 | 1,188 | 13% |
| Average domestic price, RUB/tonne | 1,259 | 1,302 | -3% | 1,257 | 1,225 | 3% |
Due to the traditional growth in trading activity in the Russian market of thermal coal in Q3, the Company increased its sales compared to Q2 2012 to 19% by implementing the 2.42 mln. tonnes (Q2 2012: 2.04 mln. tonnes). It sold 2.10 mln. tonnes of own coal and 0.32 mln. tonnes of coal purchased from third parties. Sales in Russia grew by 80% to 1.06 mln. tonnes (Q2 2012: 0.59 mln. tonnes), and the volume of export shipments fell 6% to 1.36 mln. tonnes (Q2 2012: 1.45 mln. tonnes).
Coal sales for 9M2012 decreased by 1% to 7.27 mln. tonnes (9M 2011: 7.32 mln. tonnes), while the volume of exports decreased by 6% to 4.42 mln. tonnes (9M 2011: 7.32 mln. tonnes) and sales of coal in the domestic market increased by 8% to 2.85 mln. tonnes (9M 2011: 2.64 mln. tonnes).
In the third quarter of 2012, the average selling price10 of coal increased by 2% quarter-on-quarter and reached RUB 1,301 per tonne (Q2 2012: RUB 1,271 per tonne). Average price in Russia decreased by 3% and amounted RUB 1,302 per tonne (Q1 2012: RUB 1,233 per tonne). This decrease was due to a seasonal increase in the proportion of raw coal in total sales. Average selling price of export coal, net of railroad cost in Q3 increased by 6% quarter-on-quarter to RUB 1,333 per tonne (Q2 2012: RUB 1,259 per tonne).
For 9M 2012 the average price10 of the Company's coal sales amounted to RUB 1,312 per tonne, 9% higher than the same period last year (RUB 1,202 per tonne). Average selling price of coal in the domestic market increased by 3% and amounted RUB 1,257 per tonne (9M 2011: RUB 1,225 per tonne). The average export price for 9M 2012 amounted RUB 1,347 per tonne increased on 13% over 9M 2011 (RUB 1,188 per tonne).
Cost of sales
| RUB mln. | Q3 2012 |
Q2 2012 |
Ch. | 9M 2012 |
9M 2011 |
Ch. |
| Railway tariff and transportation services |
2,243 | 2,251 | - | 7,198 | 7,426 | -3% |
| Coal purchased | 267 | 345 | -23% | 1,324 | 1,393 | -5% |
| Extraction, processing and sorting of coal |
192 | 577 | -67% | 1,374 | 1,138 | 21% |
| Fuel | 364 | 394 | -8% | 1,219 | 906 | 35% |
| Wages, salaries and social charges | 348 | 354 | -2% | 1,042 | 888 | 17% |
| Depreciation | 259 | 255 | 2% | 771 | 681 | 13% |
| Spare parts | 168 | 170 | -1% | 473 | 427 | 11% |
| Repair and maintenance | 114 | 117 | -3% | 322 | 284 | 13% |
| Mining and environmental taxes | 66 | 61 | 8% | 195 | 200 | -3% |
| Other materials | 38 | 43 | -12% | 122 | 120 | 2% |
| Other services | 38 | 35 | 9% | 115 | 44 | 161% |
| Electricity | 17 | 17 | - | 54 | 55 | -2% |
| Operating leases | 16 | 15 | 7% | 53 | 56 | -5% |
| Security services | 13 | 12 | 8% | 36 | 28 | 29% |
| Other costs | 7 | 0 | 133% | 18 | 10 | 80% |
| Land rent | 2 | 2 | - | 5 | 3 | 67% |
| Change in coal stock | 183 | -197 | - | -177 | -298 | -41% |
| Cost of sales | 4,335 | 4,451 | -3% | 14,144 | 13,361 | 6% |
In the third quarter of 2012, the cost of sales decreased by 3% quarter-on-quarter and reached RUB 4,335 mln. (Q2 2012: RUB 4,451 mln.). For the 9M 2012 cost of sales increased by 6% year-on-year amounted RUB 14,144 mln. (9M 2011: RUB 13,361 mln.).
Production cash costs
| RUB mln. | Q3 2012 |
Q2 2012 |
Ch. | 9M 2012 |
9M 2011 |
Ch. |
| Consolidated cost of sales | 4,335 | 4,451 | -3% | 14,144 | 13,361 | 6% |
| Excluding cost of sales of subsidiaries | 691 | 244 | 183% | 1,640 | 1,321 | 24% |
| OJSC “KTK” cost of sales | 3,643 | 4,207 | -13% | 12,503 | 12,040 | 4% |
| Excluding: | ||||||
| Depreciation (in cost of sales) | -240 | -238 | 1% | -717 | -628 | 14% |
| Purchased coal | -1 | -170 | -99% | -405 | -416 | -3% |
| Change of inventory balances | -41 | 45 | - | 93 | 98 | -5% |
| Railroad tariffs and transportation costs | -2,106 | -2,179 | -3% | -6,861 | -7,189 | -5% |
| Production cash costs | 1,256 | 1,664 | -25% | 4,613 | 3,905 | 18% |
| Share of production cash costs in consolidated cost of sales | 29% | 37% | 33% | 29% | ||
| Coal production, mln. tonnes | 2.24 | 1.90 | 18% | 6.33 | 6.18 | 2% |
| Total cash costs per 1 tonne of coal, RUB | 561 | 875 | -36% | 729 | 633 | 15% |
In Q3 2012 the Company's production cash cost decreased by 36% quarter-on-quarter (Q2 2012: RUB 875 per tonne) and reached RUB 561 per tonne due to lower stripping ratio. 9M 2012 production cash cost amounted to RUB 729 per tonne, which is 15% higher than in 2011 (RUB 633 per tonne).
Igor Prokudin, CEO of the Company, commented:
"In general, the results of Q3 are positive. Despite the decline in the market, we were able to make a profit, compared with a loss in Q2. This is because the anti-crisis measures taken in a timely manner, which were made according to the plan as soon as possible, and a seasonal increase in sales of 19%. Also the reduce of stripping ratio by 40% to 6.16 positively affected production cash costs.
During the quarter a very fast pace is building the washing plant "Kaskad-2", which is scheduled to launch at the end of the year, and the opening of the washing plant will take place in early 2013. The main part of the work on the project is completed, now is the final stage of construction.
Following the period I want to note that the results of the quarter show that Company's management made a lot of work, resulted that the company was able to significantly reduce costs. Also, due to the competent policy of management, we have time to shift the focus in sales to the domestic market and to reduce export sales with low profitability for this period."
Key events in the Q3 and after reporting date
Outlook for Q4 and full 2012
Management is optimistic about the prospects of the company in Q4 2012. Based on the price situation on export markets, the management of KTK expects the decline in revenue, EBITDA and net profit in 2012 compared to 2011.
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 – Head of Moscow office, IRO
The dial-in details are:
Date: Monday, November 26, 2012
Time12 : 09.00 New York (GMT -4.00) / 14.00 London (GMT +0.00) / 17.00 Moscow (GMT +4.00)
Title: 9M 2012 IFRS Statements Conference Call of OJSC “Kuzbasskaya Toplivnaya Company”
You can join the conference call by dial-in:
International: +44 (0) 1452 555566
UK: 08444933800
Russia (toll free): 81080020972044
Sweden (toll free): 0200890171
Estonia (toll free): 8000100167
Finland (toll free): 0800112363
France (toll free): 0805632056
Germany (toll free): 08001014960
USA (toll free): 18669669439
Conference ID: 74596685
A live webcast or downloading of the presentation will be available at:
www.slideshare.net/oaoktk
www.oaoktk.ru/investors/presentations
The record and transcript of the conference call will be uploaded in 2 weeks:
www.oaoktk.ru/en/investors/
www.oaoktk.ru/investors/en/presentations
The conference call replay will be available for 2 weeks:
International: + 44 (0) 1452550000
USA: 1 (866) 2474222
UK: 08717000145
France: 0805111337
Germany: 08001013104
Replay Access Code: 74596685
Contacts for press:
OJSC "Kuzbasskaya Toplivnaya Company" (Kemerovo)
Elena Sarycheva
Head of public affairs department
Tel.: +7 (3842) 36-47-62
E-mail: es@oaoktk.ru
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
Additional information about the Company and investor calendar: www.oaoktk.ru/en/investors
KTK in social networks:
News and announcements (Russian only)
www.facebook.com/oaoktk
Presentations
www.slideshare.net/oaoktk
Video
www.youtube.com/oaoktkru
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 and we will provide you with the correct data and publish any correction notes on the website www.oaoktk.ru.
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.
1 Here and after figures for the Q2 and Q3 2012 and for 9 month 2011 and 2012 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 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.
3 Change rates in 30.09.12 to 30.09.11.
4 Included in Other investments.
5 Annualized EBITDA
6 The Company’s business is affected by seasonality of thermal coal demand in Russia and globally. This means its quarterly operational results can be subject to significant fluctuations. Historically, the Сompany 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.
7 Including “Kaskad-1” washing plant
8 Included in stripping
9 Share of coal produced in stripping.
10 Sales of the group of companies, subject to the resale of coal purchased from third parties.
11 Excluding railway tariffs and VAT.
12 We recommend that participants start dialing in 15 minutes before the indicated time to ensure a timely start to the conference call.
