News and events

KEMEROVO, Russian Federation—September 3, 2018 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 announced operating and audited interim consolidated financial results under IFRS [1] for the second quarter and six months ended June 30,2018.

 

Second Quarter 2018 Key Production Results

	Q2 2018	% of total	Q1 2018	Chg.	Q2 2017	Chg.
Coal production[2], in millions of tonnes, incl.:	3.68		3.85	(4%)	2.72	35%
Karakansky South open-pit mine	0.58	16%	0.59	(2%)	0.88	(34%)
Vinogradovsky open-pit mine	1.30	35%	1.49	(13%)	1.10	18%
Cheremshansky open-pit mine	0.90	24%	0.87	3%	0.48	88%
Bryansky open-pit mine	0.90	24%	0.89	1%	0.26	246%
Commercial products[3], in millions of tonnes	3.33		3.35	(1%)	2.31	44%
Coal processing[4], in millions of tonnes, incl.:	2.80		2.74	2%	2.03	38%
Sorted coal	1.63	58%	1.58	3%	1.10	48%
Washed coal	1.17	42%	1.16	1%	0.93	26%
Kaskad 1 washing plant	0.33	28%	0.35	(6%)	0.13	154%
Kaskad 2 washing plant	0.84	72%	0.81	4%	0.80	5%
Blasted rock mass[5], in millions of cbm	13.25		10.94	21%	9.25	43%
Average stripping transportation distance, km	2.87		2.78	3%	2.76	4%

 

• In the second quarter of 2018 the Company produced 3.68 million tonnes of coal. Coal production grew versus the year-ago quarter by 35% and fell by 4% compared to the first quarter of 2018.
• The volume of commercial products went up 44%, to 3.33 million tonnes, compared to the year-ago quarter and fell insignificantly (by 1%)to the first-quarter level.
• Coal processing amounted to 2.80 million tonnes, 38% higher than in the second quarter of 2017 and 2% higher than in the first quarter of 2018.
• Total coal washing in the second quarter grew by 26% to the level of this indicator of the year-ago quarter and amounted to 1.17 million tonnes, of which 72% were processed at the Kaskad 2 washing plant and 28% at the Kaskad 1 washing plant.
• Coal sorting rose by 48% compared to the second quarter of 2017 and by 3% compared to the first quarter of 2018.
• The volume of blasted rock mass in the second quarter of 2018amounted to 13.25 million cbm, going up by 21%quarter-over-quarter and by 43% over the year-ago quarter.

 

Second Quarter 2018 Key Commercial Results

 

	Q2 2018	% of total	Q1 2018	Chg.	Q2 2017	Chg.
Sales volume[6], in millions of tonnes, incl.:	3.99		3.59	11%	2.13	87%
Export sales volume	3.49	87%	2.62	33%	1.79	95%
Domestic sales volume	0.50	13%	0.97	(48%)	0.34	47%
Own coal	3.23	81%	3.11	4%	1.90	70%
Coal resale	0.76	19%	0.48	58%	0.22	245%

 

• In the second quarter sales stood at 3.99 million tonnes of coal, 11% higher versus the volume of the previous quarter. Compared to the year-ago quarter they went up by 87%.
• The main increase in sales was due to export sales growth: 95% more relative to the second quarter of 2017 and a quarterly increase of 33%.
• For the quarter, exports amounted to 3.49 million tonnes, the share of exports in total sales of coal amounted to 87%
• The volume of sales of coal in the domestic market amounted to 0.5 million tons, which is 13% of total sales. By the first quarter of 2018, domestic sales decreased by 0.47 million tonnes, which is explained by the seasonal decline in demand for coal.

 

Key production results for the six months to June 30, 2018

 

	6M 2018	% of total	6M 2017	Chg.
Coal production[7], in millions of tonnes, incl.:	7.53		6.04	25%
Karakansky South open-pit mine	1.18	16%	1.84	(36%)
Vinogradovsky open-pit mine	2.79	37%	2.24	25%
Cheremshansky open-pit mine	1.77	24%	1.37	29%
Bryansky open-pit mine	1.79	24%	0.59	203%
Commercial products[8], in millions of tonnes	6.68		5.22	28%
Coal processing[9], in millions of tonnes, incl.:	5.56		4.47	24%
Sorted coal	3.22	58%	2.43	33%
Washed coal	2.34	42%	2.04	15%
Kaskad1washing plant	0.68	29%	0.41	66%
Kaskad 2 washing plant	1.65	71%	1.63	1%
Blasted rock mass[10], in millions of cbm	24.19		17.85	36%
Average stripping transportation distance, km	2.83		2.71	4%

 

• For the six months of 2018 the Company produced 7.53 million tonnes of coal, 25% more than in the year-ago period. Bryansky open-pit mine was the main contributor to this growth and produced 1.79 million tonnes of coal, 24% of all production.
• Commercial product volume for the six months stood at 6.68 million tonnes, a 28% growth to the year-ago quarter, including a 15% (or 0.3 million tonnes) growth in washed-coal volume.
• Coal processing amounted to 5.56 million tonnes, growing by 24% to the year-ago levels.
• Coal sorting volume rose by 33% and stood at 3.22 million tonnes.

 

Key commercial results for the six months to June 30, 2018

	6M 2018	% of total	6M 2017	Chg.
Sales volume[11], in millions of tonnes, incl.:	7.58		5.19	46%
Export sales volume	6.11	81%	4.01	52%
Domestic sales volume	1.47	19%	1.18	25%
Own coal	6.34	84%	4.82	32%
Coal resale	1.24	16%	0.37	235%

 

• In the six months of 2018 sales grew by 46% (2.39 million tonnes) compared to the level of the previous corresponding period, standing at 7.58 million tonnes.
• The main increase was in export sales – by 2.1 million tonnes (or 52%) in yearly terms, representing 81% of total sales.
• Domestic market coal went up fell by 25% and stood at 1.47 million tonnes.
• At the end of the first half of the year coal resale went up by 2.35 times, standing at 1.24 million tonnes.

 

Financial highlightsfor the second quarter and six months 2018

 

in millions of RUB	Q2 2018	Q1 2018	Chg.	6M 2018	6M 2017	Chg.
Revenue	17,073	13,497	26%	30,570	15,097	102%
Cost of sales	14,120	10,734	32%	24,854	13,798	80%
Gross profit	2,953	2,763	7%	5,716	1,299	340%
Gross profit margin	17.3%	20.5%	(3.2 ppts)	18.7%	8.6%	10.1 ppts
Selling, general and administrative expenses	819	815	0%	1,634	1,216	34%
Operating profit	2,134	1,948	10%	4,082	83	4818%
Operating profit margin	12.5%	14.4%	(1.9 ppts)	13.4%	0.5%	12.9 ppts
EBITDA[12]	2,628	2,489	6%	5,117	918	457%
EBITDA margin	15.4%	18.4%	(3.0 ppts)	16.7%	6.1%	10.6 ppts
EBITDA per tonne, RUB	713	647	10%	679	152	347%
Net profit	1,631	1,402	16%	3,033	26	11565%
Net profit margin	9.6%	10.4%	(0.8 ppts)	9.9%	0.2%	9.7 ppts

 

 

In the first half of 2018 all major financial results showed a significant increase compared to the first six months of 2017.

• The Company’s revenue in the reporting period stood at RUB 30,570 million, growing by 102% over the first quarter of the previous year. The main driver of revenue growth was the growth of sales volumes and prices in export markets.
• Cost of sales in the first half of 2018 stood at RUB 24,854 million. The main cost increase is due to the growth of production and sales, as well as rising prices for basic material and technical resources and services consumed in the production and transportation of products such as fuel, spare parts, and railway tariff.
• Gross profit stood at RUB 5,716 million, an increase by 3.4 times over the year-ago period.
• Operating profit amounted to RUB 4,082 million, showing an increase by 5 times to the last year for this period.
• EBITDA showed an increase of 4.5 times, reaching a value of RUB 5,117 million.
• Net profit reached RUB 3,033 million at the end of the first half of 2018.

 

As for the second-quarter financial indicators, they showed the following dymamics compared to the first quarter of 2018:

• Revenue in the second quarter of 2018 wasupby 26% to RUB 17,073 million.
• Gross profit grew by 7% to RUB 2,953 million.
• Quarterly EBITDA increased by 6% to RUB 2,628 million.
• Net profit grew by 16% and amounted to RUB 1,631 million.

 

 

Debt portfolio management

in millions of RUB	30.06.18	% of total	31.03.18	Chg.	30.06.17	Chg.
Long-term loans	6,005	59%	7,211	(17%)	4,990	20%
Short-term loans	4,172	41%	2,507	66%	5,485	(24%)
Total debt, incl.:	10,177	100%	9,718	5%	10,476	(3%)
RUB loans	5,530	54%	3,173	74%	4,568	21%
Average interest rate for RUB loans	9.14%		10.81%	(1.67 ppts)	11.27%	(2.13 ppts)
USD loans	1,494	15%	3,435	(57%)	5,907	(75%)
Average interest for USD loans	4.54%		4.28%	0.26 ppts	5.30%	(0.76 ppts)
EUR loans	3,152	31%	3,110	1%	-	-
Average interest for EUR loans	1.92%		2.26%	(0.34 ppts)	0.00%	2.04 ppts
Cash and cash equivalents	6,363		5,430	17%	4,001	59%
Net debt	3,814	100%	4,288	(11%)	6,475	(41%)
Net debt / 12M EBITDA	0.41		0.84	(51%)	2.06	(80%)
EBITDA (12months)	9,279		5,080	83%	3,144	195%

 

 

• Net debt at June 30, 2018 stood at RUB 3,814 million, which is 41% less than as of June 30, 2017 and 11% lower than the level of the first quarter of this year.
• The net debt/12-month EBITDA ratio stood at 0.41 which is 80% lower than a year ago.
• Most of the loans, 54%, are denominated in RUB, 31% in EUR and 15% in USD.
• As of June 30, 2018, the average effective rate was 9.14% for loans denominated in RUB, 1.92% for EUR loans and 4.54% for loans denominated in USD.

Cash flow and investments[13]

in millions of RUB	Q22018	Q12018	Chg.	6M 2018	6M 2017	Chg.
Operating cash flow	1,159	1,068	9%	2,227	578	285%
Investment cash flow	(1,041)	(677)	54%	(1,718)	(1,085)	58%
Acquisition of property, plant and equipment	(1,057)	(684)	55%	(1,741)	(1,110)	57%
Financial cash flow	(674)	729	n/a	55	701	(92%)
Net increase / (decrease) in cash and cash equivalents	(556)	1,120	n/a	564	194	191%

 

 

• In the six months of 2018 operating cash flow amounted to RUB 2,227 million, going up by 2.85 times compared to the first half of 2017.
• Investment cash flow went up by 58%, amounting to RUB (1,718) million.
• Net cash flow from financial activities for the first six months of 2018was RUB 55million.
• Net increase in cash and cash equivalents stood at RUB 564 million.
• In the second quarter of 2018 operating cash flow was at RUB (1,159) million.
• Quarterly investment cash flow reached RUB (1,041) million, while RUB (1,057) million were invested in property, plant and equipment.
• Net increase in cash and cash equivalents amounted to RUB 556 million.

Outlook for the third quarter of 2018   In accordance with the production plan, in the third quarter of 2018: volume of coal production will amount to 3.85 million tonnes. volume of commercial products – 3.4 million tonnes. Sales: to 4 million tonnes. Contacts for analysts, investors, and media: Elena Sarycheva, head of public affairs 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	2017	2016	2015
Revenue	38,662	26,863	24,994
Cost of sales	32,570	23,220	20,932
Production cash costs per tonne, RUB	871	612	676
EBITDA	5,080	2,628	2,697
EBITDA margin	13.1%	9.8%	10.8%
EBITDA per tonne, RUB	384	225	245
Net profit	2,104	647	37
Net profit margin	5.4%	2.4%	-
Net debt	4,288	5,487	5,642
Net debt / EBITDA	0.84	2.09	2.09

 

 

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] Audited accounts is regarded as a recording reported by an independent auditors in accordance with the International Standard on Review Audits 2410 "Review of Interim Financial Information Performed by an Independent Auditor of the Organization"

[2]IncludingKaskad1washingplant

[3]Volume of salableoutputaftersorting and washing of produced coal

[4] Coal washing and sorting

[5]Includedinstripping

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

[7]IncludingKaskad1washingplant

[8]Volume ofsalableoutputaftersorting 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] 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.

[13] Cash flow and investments are indicated on the basis of the consolidated cash flow statement compiled using the indirect method