News and events

KEMEROVO, Russian Federation—August 3, 20172:00 PM(UTC +7:00)—Kuzbasskaya Toplivnaya Company PJSC (KTK, MICEX: KBTK), one of the largest producers and exporters of thermal coal in Russia, today announced operating and unaudited interim consolidated financial results under IFRS for the second quarter and six months ended June 30,2017.

 

Second Quarter 2017 Key Production Results

	Q2 2017	% of total	Q1 2017	Chg.	Q2 2016	Chg.
Coal production[1], in millions of tonnes, incl.:	2.72		3.32	(18%)	2.73	(0.4%)
Karakansky South open-pit mine	0.88	32%	0.96	(8%)	0.84	5%
Vinogradovsky open-pit mine	1.10	40%	1.14	(4%)	1.13	(3%)
Cheremshansky open-pit mine	0.48	18%	0.89	(46%)	0.56	(14%)
Bryansky open-pit mine	0.26	10%	0.33	(21%)	0.20	30%
Commercial products[2], in millions of tonnes	2.31		2.91	(21%)	2.35	(2%)
Coal processing[3], in millions of tonnes, incl.:	2.03		2.45	(17%)	2.12	(4%)
Sorted coal	1.10	54%	1.33	(17%)	1.05	5%
Washed coal	0.93	46%	1.12	(17%)	1.07	(13%)
Kaskad 1 washing plant	0.13	14%	0.28	(54%)	0.27	(52%)
Kaskad 2 washing plant	0.80	86%	0.84	(5%)	0.80	0.0%
Blasted rock mass[4], in millions of cbm	9.25		8.60	8%	7.46	24%
Average stripping transportation distance, km	2.76		2.71	2%	2.60	6%

 

• In the second quarter of 2017 the Company produced 2.72 million tonnes of coal. Coal production remained virtually unchanged versus the year-ago quarter and fell by 18% compared to the first quarter of 2017.
• The volume of commercial products also went down insignificantly, to 2.31 million tonnes, by 2% compared to the year-ago quarter and by 21%to the first-quarter level.
• Coal processing amounted to 2.03 million tonnes, 4% lower than in the second quarter of 2016 and 17% lower than in the first quarter of 2017.
• Total coal washing in the second quarter fell by 17% to the level of the first quarter and by 13% to the level of this indicator of the year-ago quarter and amounted to 0.93 million tonnes, of which 86% were processed at the Kaskad 2 washing plant.
• Coal sorting rose by 5% compared to the second quarter of 2016 and went down by 17% compared to the first quarter of 2017.
• The volume of blasted rock mass in the second quarter of 2017amounted to 9.25 million cbm, going up by 8%quarter-over-quarter and by 24% over the year-ago quarter.

 

Second Quarter 2017 Key Commercial Results

	Q2 2017	% of total	Q1 2017	Chg.	Q2 2016	Chg.
Sales volume[5], in millions of tonnes, incl.:	2.13		3.06	(30%)	2.33	(9%)
Export sales volume	1.79	84%	2.22	(19%)	1.75	2%
Domestic sales volume	0.34	16%	0.84	(60%)	0.58	(41%)
Own coal	1.90	89%	2.92	(35%)	2.27	(16%)
Coal resale	0.22	11%	0.14	57%	0.06	267%
Average selling price, RUB/tonne[6]	1,488		1,426	4%	912	63%

 

• In the second quarter sales traditionally fell by 30% versus the volume of the previous quarter, standing at 2.13 million tonnes of coal. Compared to the year-ago quarter they went down by 9%.
• In the second quarter export sales showed a quarterly decrease of 19% and increased relative to the second quarter of 2016, amounting to 1.79 million tonnes.
• For the quarter, the share of exports in total sales of coal amounted to 84%, slightly exceeding the figures of last year and the first quarter of this year.
• Second-quarter average coal selling price rose by 4% compared to the first-quarter figure, amounting to RUB 1,488 per tonne. Compared to the second quarter of 2016, the average price went up by 63%.

 

Key production results for the six months to June 30, 2017

	6M 2017	% of total	6M 2016	Chg.
Coal production[7], in millions of tonnes, incl.:	6.04		5.52	9%
Karakansky South open-pit mine	1.84	30%	1.74	6%
Vinogradovsky open-pit mine	2.24	37%	2.33	(4%)
Cheremshanskyopen-pit mine	1.37	23%	1.09	26%
Bryansky open-pit mine	0.59	10%	0.37	59%
Commercial products[8], in millions of tonnes	5.22		4.77	9%
Coal processing[9], in millions of tonnes, incl.:	4.47		4.31	4%
Sorted coal	2.43	54%	2.24	8%
Washed coal	2.04	46%	2.07	(1%)
Kaskad1washing plant	0.41	20%	0.51	(20%)
Kaskad 2 washing plant	1.63	80%	1.55	5%
Blasted rock mass[10], in millions of cbm	17.85		15.85	13%
Average stripping transportation distance, km	2.71		2.50	8%

 

• For the six months of 2017 the Company produced 6.04 million tonnes of coal. Bryansky open-pit mine was the main contributor to this growth and produced 0.59 million tonnes of coal, 10% of all production.
• Commercial product volume for the six months stood at 5.22 million tonnes.
• Coal processing amounted to 4.47 million tonnes.
• All the indicators rose over the year-ago levels.
• Total coal washing for the six months went down insignificantly to 2.04 million tonnes.
• Coal sorting volume rose by 8% and stood at 2.43 million tonnes.

 

Key commercial results for the six months to June 30, 2017

	6M 2017	% of total	6M 2016	Chg.
Sales volume[11], in millions of tonnes, incl.:	5.19		4.89	6%
Export sales volume	4.01	77%	3.59	12%
Domestic sales volume	1.18	23%	1.30	(9%)
Own coal	4.82	93%	4.72	2%
Coal resale	0.37	7%	0.17	118%
Average selling price, RUB/tonne[12]	1,451		1,223	19%

 

• In the six months of 2017 sales grew by 6% compared to the level of the previous corresponding period.
• Domestic market coal sales fell by 9%. Export sales stood at 4.01 million tonnes, an increase of 12% in yearly terms, representing 77% of total sales.
• At the end of the first half of the year coal resale went up by 118%, its share being7%of total sales during this period.
• For the six months of 2017 the average selling price was RUB 1,451 per tonne, an increase of 19% over the year-ago period.

 

Financial highlightsfor the second quarter and six months 2017

in millions of RUB	Q2 2017	Q1 2017	Chg.	6M 2017	6M 2016	Chg.
Revenue	6,511	8,586	(24%)	15,097	11,093	36%
Cost of sales	6,439	7,355	(12%)	13,794	10,262	34%
Gross profit	72	1,231	(94%)	1,303	831	57%
Gross profit margin	1.1%	14.3%	(13.2 ppts)	8.6%	7.5%	1.1 ppts
Selling, general and administrative expenses	612	608	1%	1,220	1,046	17%
Operating profit	(540)	623	n/a	83	(215)	n/a
Operating profit margin	-	7.3%	-	0.5%	-	-
EBITDA[13]	(109)	1,027	n/a	918	402	128%
EBITDA marg	-	12.0%	-	6.1%	3.6%	2.5 ppts
EBITDA per tonne, RU	-	309	-	152	73	109%
Net profit	(587)	613	n/a	26	(393)	n/a
Net profit margin	-	7.1%	-	0.2%	-	-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

• In the first half of 2017 all major financial results showed a significant increase compared to the first six months of 2016.
• Gross profit increased by 57%, operating profit amounted to RUB 83 million, showing an increase to the negative value of last year for this period, EBITDA showed an increase of 128%, reaching a value of RUB 918 million.
• The main influence on the above figure was made by an increase of revenue by 36% in the first half of 2017 to the level of that value last year.
• Cost of sales in the first half of 2017 grew by 34% compared to last year as a result of the increase in stripping volume, which is necessary for the planned increase in production levels in 2017.
• The level of selling, general and administrative expenses for the first six months of 2017 increased by 17% to RUB 1,220 million.
• Net profit reached RUB 26 million at the end of the first half of 2017.

As for the second-quarter financial indicators, they showed a seasonal decline.

• Revenue in the second quarter of 2017 was down by 24% compared to the first quarter influenced by seasonal decline in demand for coal, decreasing in the segment of sales of own coal in the domestic market.
• Gross profit fell by 94% to RUB 72 million.
• Quarterly EBITDA declined to negative values.
• The second quarter of 2017 saw a loss of RUB 587 million, which is due to the seasonality of thermal coal consumption in the domestic market. The second quarter is traditionally the weakest in the annual business cycle of the company.

 

Debt portfolio management

in millions of RUB	30.06.17	% of total	31.03.17	Chg.	30.06.16	Chg.
Long-term loans	4,990	48%	5,660	(12%)	4,635	8%
Short-term loans	5,485	52%	2,710	102%	4,717	16%
Total debt, incl.:	10,476	100%	8,370	25%	9,352	12%
RUB loans	4,568	44%	3,113	-	5,346	-
Average interest rate for RUB loans	11%		11.79%	(0.52 ppts)	11.01%	(0.26 ppts)
USD loans	5,907	56%	4,789	-	4,006	-
Average interest for USD loans	5.30%		4.73%	0.57 ppts	4.06%	1.24 ppts
Cash and cash equivalents	4,001		3,515	13.83%	3,647	9.71%
Net debt	6,475		4,855	33%	5,705	13%
Net debt / 12M EBITD	2.06		1.62	27%	2.38	(14%)
EBITDA (12months)	3,144		3,006	5%	2,394	31%

 

 

 

 

 

 

 

 

 

 

 

 

 

• Net debt at June 30, 2017 stood at RUB 6,457 million, 13% more compared to the year-ago level and a 33% increase to that of the previous quarter of this year.
• The net debt/12-month EBITDA ratio stood at 2.06, which is 14% lower than a year ago and 27% higher than in the first quarter of this year.
• Most of the loans, 56%, are denominated in USD.
• The Company is one of the most reliable and efficient borrowers in the sector, which is reflected by the current interest rates for loans and credits. As of June 30, 2017, the average effective rate was 11% for loans denominated in RUB and 5.30% for loans denominated in USD.

 

Cash flow and investments

in millions of RUB	Q22017	Q12017	Chg.	6M 2017	6M 2016	Chg.
Operating cash flow	(571)	1,149	n/a	578	734	(21%)
Investment cash flow	(308)	(777)	(60%)	(1,085)	(941)	15%
Acquisition of property, plant and equipment	(313)	(797)	(61%)	(1,110)	(1,006)	10%
Financial cash flow	1,206	(505)	n/a	701	1,047	(33%)
Net increase / (decrease) in cash and cash equivalents	327	(133)	n/a	194	840	(77%)

 

 

 

 

 

• In the six months of 2017 operating cash flow amounted to RUB 578 million, going down by 21% compared to the first half of 2016.
• Investment cash flow went up by 15%, amounting to RUB (1,085) million.
• Investment in property, plant and equipment amounted to more than RUB 1 billion, most of which were spent on equipment acquisition and washing plant modernization.
• Net cash flow from financial activities for the first six months of 2017 was RUB 701 million.
• Net increase in cash and cash equivalents stood at RUB 194 million.
• In the second quarter of 2017 operating cash flow went down to RUB (571) million.
• Quarterly investment cash flow reached RUB (308) million, while RUB 313 million were invested in property, plant and equipment.
• Net increase in cash and cash equivalents amounted to RUB 327 million.

Outlook for the third quarter of 2017 In accordance with the production plan, the volume of coal production in the third quarter of 2017 will amount to 3.5 million tonnes. Contacts for analysts, investors, and media: Elena Sarycheva, head of department of strategic communications +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.

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[1]IncludingKaskad1washingplant

[2]Volume of salable output after sorting and washing of produced coal

[3] Coal washing and sorting

[4]Included in stripping

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

[6] Excluding rail tariffs and VAT

[7]IncludingKaskad1washingplant

[8]Volume of salable output after sorting and washing of produced coal

[9] Coal washing and sorting

[10]Included in stripping

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

[12] Excluding rail tariffs and VAT

[13] 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.