News and events

KEMEROVO, Russian Federation—February 20, 2019 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 consolidated financial results under IFRS for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Key Production Results

	Q4 2018	% of tota      l	Q3 2018	Chg.	Q4 2017	Chg.
Coal production[1], in millions of tonnes, incl.:	4.25		3.88	10%	3.80	12%
Karakansky South open-pit mine	0.66	16%	0.80	(18%)	0.84	(21%)
Vinogradovsky open-pit mine	1.43	34%	1.37	4%	1.38	4%
Cheremshansky open-pit mine	1.18	28%	0.97	22%	0.74	59%
Bryansky open-pit mine	0.98	23%	0.74	32%	0.84	17%
Commercial products[2], in millions of tonnes	3.86		3.33	16%	3.27	18%
Coal processing[3], in millions of tonnes, incl.:	2.74		2.76	(1%)	2.68	2%
Sorted coal	1.60	58%	1.81	(12%)	1.69	(5%)
Washed coal	1.14	42%	0.95	20%	0.99	15%
Kaskad 1 washing plant	0.35	31%	0.16	119%	0.22	59%
Kaskad 2 washing plant	0.79	69%	0.79	0%	0.77	3%
Blasted rock mass[4], in millions of cbm	13.15		12.20	8%	11.15	18%
Average stripping transportation distance, km	2.79		2.81	(1%)	2.67	4%

• In the fourth quarter of 2018 the Company produced 4.25 million tonnes of coal, a 12% increase over the year-ago period.
• The volume of commercial products grew by 18% compared to the fourth quarter of 2017, reaching 3.86 million tonnes.
• Coal processing amounted to 2.74 million tonnes, which is 2% more than in the year-ago quarter and 1% less than in the third quarter of 2018. Insignificant changes in coal processing volumes are due to the technical re-equipment of Kaskad 2.
• Total coal washing went up by 15% compared to the fourth quarter of 2017 indicator, to 1.14 million tonnes, of which 69% belongs to the Kaskad 2 washing plant and 31% belongs to Kaskad 1.
• Coal-sorting volume went down by 5% compared to the year-ago level and by 12% to the third quarter of 2018.
• The volume of blasted rock mass was 13.15 million cbm, an increase of 8% for the quarter and 18% more compared to the year-ago period.

Fourth Quarter 2018 Key Commercial Results

	Q4 2018	% of total	Q3 2018	Chg.	Q4 2017	Chg.
Sales volume[5], in millions of tonnes, incl.:	4.76		3.93	21%	3.73	28%
Export sales volume	3.34	70%	2.99	12%	2.47	35%
Domestic sales volume	1.42	30%	0.94	51%	1.26	13%
Own coal	3.76	79%	3.13	20%	3.34	13%
Coal resale	1.00	21%	0.80	25%	0.39	156%

• In the fourth quarter sales grew by 21% versus the volume of the previous quarter, reaching 4.76 million tonnes of coal. Year-over-year this figure shows a growth by 28%.
• The main increase in sales volumes was due to the growth of sales in export markets: export sales grew by 35% compared to the year-ago period and by 12% to the third-quarter level.
• Fourth-quarter export sales stood at 2.47 million tonnes, while the share of export in total sales was 70%.
• Domestic sales in the fourth quarter amounted to 1.42 million tonnes, 30% of all sales. They demonstrate a growth of 51% quarter-over-quarter, explained by a seasonal increase in demand for coal.

Full Year 2018 Key Production Results

	FY 2018	% of total	FY 2017	Chg.
Coal production[6], in millions of tonnes, incl.:	15.66		13.23	18%
Karakansky South open-pit mine	2.65	17%	3.77	(30%)
Vinogradovsky open-pit mine	5.60	36%	4.93	14%
Cheremshansky open-pit mine	3.91	25%	2.79	40%
Bryansky open-pit mine	3.50	22%	1.74	101%
Commercial products[7], in millions of tonnes	13.87		11.44	21%
Coal processing[8], in millions of tonnes, incl.:	11.05		9.70	14%
Sorted coal	6.62	60%	5.69	16%
Washed coal	4.43	40%	4.00	11%
Kaskad 1 washing plant	1.20	27%	0.80	50%
Kaskad 2 washing plant	3.23	73%	3.20	1%
Blasted rock mass[9], in millions of cbm	49.53		38.65	28%
Average stripping transportation distance, km	2.81		2.79	1%

• For the full year 2018 the Company produced 15.66 million tonnes of coal, which is 18% more than in 2017.
• Commercial product volume in 2018 stood at 13.87 million tonnes, an increase of 21% in yearly terms.
• Coal processing amounted to 11.05 million tonnes, 14% more than in 2017.
• Total coal washing rose by 11% to 4.43 million tonnes.
• Coal-sorting volume increased by 16% to 6.62 million tonnes.
• The volume of blasted rock mass was 49.53 million cbm, a growth by 28%.
• The average stripping transportation distance in the period rose slightly and reached 2.81 km.

Full Year 2018 Key Commercial Results

	FY 2018	% of total	FY 2017	Chg.
Sales volume[10], in millions of tonnes, incl.:	16.27		12.08	35%
Export sales volume	12.43	76%	8.72	43%
Domestic sales volume	3.84	24%	3.36	14%
Own coal	13.23	81%	11.05	20%
Coal resale	3.04	19%	1.03	195%

 

• In 2018 sales increased by 35% versus the volume of the previous year, reaching 16.27 million tonnes of coal.
• The main increase in sales fell on export routes and amounted to 43%, representing 76% of total sales.
• Domestic-market coal sales grew by 14% compared to 2017, to 3.84 million tonnes.
• Coal resale stood at 3.04 million tonnes, a growth of almost two times compared to the year-ago level.

Fourth Quarter and Full Year 2018 Financial highlights

in millions of RUB	Q4 2018	Q3 2018	Chg.	FY 2018	FY 2017	Chg.
Revenue	20,573	17,336	19%	68,479	38,662	77%
Cost of sales	17,253	14,418	20%	56,525	32,580	73%
Gross profit	3,320	2,918	14%	11,954	6,082	97%
Gross profit margin	16.1%	16.8%	(0.7 ppts)	17.5%	15.7%	1.8 ppts
Selling, general and administrative expenses	1,003	960	4%	3,597	2,836	27%
Operating profit	2,317	1,958	18%	8,357	3,246	157%
Operating profit margin	11.3%	11.3%	0 ppts	12.2%	8.4%	3.8 ppts
EBITDA[11]	2,983	2,527	18%	10,627	5,080	109%
EBITDA margin	14.5%	14.6%	(0.1 ppts)	15.5%	13.1%	2.4 ppts
EBITDA per tonne, RUB	702	651	8%	679	384	77%
Net profit	1,610	1,380	17%	6,023	2,104	186%
Net profit margin	7.8%	8.0%	(0.2 ppts)	8.8%	5.4%	3.4 ppts

 

In 2018 the main financial indicators showed significant growth compared to the 2017 results.

• Revenue for 2018 was RUB 68,479 million, 77% higher than for 2017. The main driver of revenue growth was the growth of sales and prices in export markets.
• Cost of sales for 2018 amounted to RUB 56,525 million. The main reasons for this increase were: increase in production and sales volumes, as well as price growth for main material and technical resources and services consumed during production and transportation, such as lubricants, spare parts and railway tariffs.
• Full-year gross profit rose by 97% to RUB 11,954 million.
• Selling, general and administrative expenses for the full year were up by 27% to RUB 3,597 million.
• Operating profit increased by 2.5 times compared to the results of 2017 and amounted to RUB 8,357 million.
• EBITDA showed a 109% growth compared to the previous year, reaching RUB 10,627 million.
• Net profit increased significantly, reaching RUB 6,023 million.

In the fourth quarter of 2018, all the indicators showed the following dynamics compared to the third-quarter level:

• Revenue amounted to RUB 20,573 million, growing by 19% compared to the third quarter.
• Gross profit grew by 14% to RUB 3,320 million.
• Quarterly EBITDA reached RUB 2,983 million, showing a quarterly growth by 18%.
• Net profit in the fourth quarter increased by 17% compared to the results of the third quarter, to RUB 1,610 million.

Debt portfolio management

in millions of RUB	31.12.18	% of total	30.09.18	Chg. 1	31.12.17	Chg. 2
Long-term loans	15,742	75%	12,261	28%	7,211	118%
Short-term loans	5,218	25%	3,897	34%	2,507	108%
Total debt, incl.:	20,960	100%	16,158	30%	9,718	116%
RUB loans	11,090	53%	7,803	42%	3,173	250%
Average interest rate for RUB loans	9.21%		9.03%	0.18 ppts	10.81%	(1.6 ppts)
USD loans	2,940	14%	2,776	6%	3,435	(14%)
Average interest rate for USD loans	4.73%		4.73%	0 ppts	4.28%	0.45 ppts
EUR loans	6,930	33%	5,579	24%	3,110	123%
Average interest rate for EUR loans	1.93%		1.89%	0.04 ppts	2.26%	(0.33 ppts)
Cash and cash equivalents	16,823		12,083	39%	5,430	210%
Net debt	4,137	100%	4,075	2%	4,288	(4%)
Net debt / 12M EBITDA	0.39		0.39	(1%)	0.84	(54%)
EBITDA (12months)	10,627		10,384	2%	5,080	109%

 

• Net debt at December 31, 2018 stood at RUB 4,137 million, showing a quarterly rise by 2% and down 4% year-over-year.
• The net debt-to-12-month EBITDA ratio stood at 0.39, 54% less than in the previous year.
• The majority of loans in the companys loan portfolio are denominated in rubles - 53%, 33% are denominated in euros and 14% in US dollars.
• The average effective rate was 9.21% for loans denominated in RUB, 1.93% for loans denominated in EUR and 4.73% for dollar-denominated loans.

Cash flow and investments

in millions of RUB	Q4 2018	Q3 2018	Chg.	FY 2018	FY 2017	Chg.
Operating cash flow	882	1 497	(41%)	4,606	3,865	19%
Investment cash flow	(1,301)	(709)	83%	(3,728)	(2,243)	66%
Acquisition of property, plant and equipment	(1,385)	(712)	95%	(3,838)	(2,310)	66%
Financial cash flow	4,328	4,632	(7%)	9,015	64	13986%
Net increase / (decrease) in cash and cash equivalents	3,909	5,420	(28%)	9,893	1,686	487%

 

• In 2018 operating cash flow went up by 19% compared to the previous year and amounted to RUB 4,606 million.
• Investment cash flow went up by 66% to RUB (2,243) million.
• Financial cash flow in 2018 stood at RUB 9.015 million.
• Net increase in cash and cash equivalents for the full year stood at RUB 9,893 million.
• In the fourth quarter of 2018 operating cash flow stood at RUB 882 million.
• Quarterly investment cash flow amounted to RUB (1,301) million, including RUB (1,385) million on property, plant and equipment.
• Quarterly net increase in cash and cash equivalents amounted to RUB 3,909 million.

Outlook for the first quarter of 2019

• In accordance with the production plan, in the first quarter of 2019:
  1. coal production volume is expected to amount to 3.5 million tonnes.
  2. commercial products volume is expected to stand at 3.1 million tonnes.

Contacts for analysts, investors, and media: Elena Sarycheva Head of strategic communications department +7 (495) 787 68 04 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. The Company’s production assets include four current plots and one projected plot at the Vinogradovsky mine in Kemerovo region, two washing plants and own railroad infrastructure located in the same industrial cluster. The Company operates retail networks in four regions of Western Siberia and in Poland, and employs over 4,400 people. KTK’s shares are traded on MICEX, the free float is 33.15%.

Presentations	Video
www.slideshare.net/oaoktk	www.youtube.com/oaoktkru

Financial highlights under IFRS:

in millions of RUB	2018	2017	2016
Revenue	68,479	38,662	26,863
Cost of sales	56,525	32,570	23,220
EBITDA	10,627	5,080	2,628
EBITDA margin	15.5%	13.1%	9.8%
EBITDA per tonne, RUB	679	384	225
Net profit	6,023	2,104	647
Net profit margin	8.8%	5.4%	2.4%
Net debt	4,137	4,288	5,487
Net debt / EBITDA	0.39	0.84	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.

---

[1] Including Kaskad 1 washing plant

[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-party coal resale

[6] Including Kaskad 1 washing plant

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

[8] Coal washing and sorting

[9] Included in stripping

[10] Sales for the group of companies, including third-party coal resale

[11] 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 accord