Kuzbasskaya Toplivnaya Company OJSC (KTK, MICEX: KBTK), one of the largest producers and exporters of thermal coal in Russia, is pleased to announce its unaudited condensed interim consolidated financial statements under IFRS for the 6 months 2014.
Financial highlights
| RUB mln. |
Q21 2014 |
Q11 2014 |
Ch. |
6M1 2014 |
6M1 2013 |
Ch. |
| Revenue | 3 887 | 4 834 | (20%) | 8 721 | 9 584 | (9%) |
| Cost of sales | 3 575 | 4 082 | (12%) | 7 657 | 8 402 | (9%) |
| Production cash costs per tonne, RUB | 599 | 644 | (7%) | 621 | 582 | 7% |
| Gross profit | 312 | 752 | (59%) | 1 064 | 1 182 | (10%) |
| Gross profit margin | 8,0% | 15,6% | (7.6) ppts | 12,2% | 12,3% | (0.1) ppts |
| Distribution, administrative and other costs |
372 | 447 | (17%) | 819 | 800 | 2% |
| Operating profit | (60) | 305 | n.a. | 245 | 382 | (36%) |
| Operating profit margin | - | 6,3% | - | 2,8% | 4,0% | (1.2) ppts |
EBITDA2 |
167 | 618 | (73%) | 785 | 952 | (18%) |
| EBITDA margin | 4,3% | 12,8% | (8.5) ppts | 9,0% | 9,9% | (0.4) ppts |
| EBITDA per tonne, RUB | 67 | 268 | (75%) | 164 | 195 | (16%) |
| Net profit | (91) | 15 | n.a. | (76) | 21 | n.a. |
| Net profit margin | - | 0,3% | - | - | 1,0% | - |
Revenue
In H1 2014, revenue decreased by 9% to RUB 8,721 mln compared with the same period of 2013. Such a decline in revenue year-to-year was due to lower sales volumes in the domestic and European markets because of the warm winter.
Revenues in Q2 2014 decreased by 20% to RUB 3,887 mln. Under the influence of the seasonal decline in demand for coal, the reduction in revenue in the segment sales of own coal in the domestic market amounted to 44%. Revenue from export sales decreased by 7% compared with Q1 2014 and amounted to RUB 3,303 mln. Decrease in export revenue in Q2 due to structural changes in the model of coal sales on the Polish market. Management decided not to work with local traders in favor of a direct interaction with the end buyers. In consequence of these changes, KTK do not receive prepayments for coal from this market.
Operating profit and EBITDA
Compared with H1 2013, for first 6 months in 2014 operating income decreased by 36% to RUB 245 mln, and gross profit decreased by 10% to RUB 1,064 mln. The EBITDA showed a decline of 18%, reaching RUB 785 mln. The main influence on the above figure was a reduction in revenue. Cost of sales in H1 2014 decreased by 9% to RUB 7,657 mln as a result of optimization measures, carried out by the management. Cost of sales reduction occurred despite decline in coal production in comparison with the volume for H1 2013. Level of commercial, administrative and other expenses for H1 2014 increased by 2% to RUB 819 mln.
In Q2 2014, the Company showed an operating loss of RUB 60 mln. Gross profit decreased by 59% to RUB 312 mln. Quarterly EBITDA amounted RUB 167 mln. Together with income from sold unused land amounted RUB 88 mln that is enough to pay loans interest. Production cash costs and cost of sales decreased in Q2 by 12% to RUB 3,575 mln and RUB 599 per tonne, respectively. Commercial, administrative and other expenses decreased by 17% to RUB 372 mln.
Net profit
The Company shows a net loss in H1 2014, amounting to RUB 76 mln. The main factors influencing the financial result was a continued decline in the Asian markets. At the current price level of export sales to the Asia-Pacific region brings Company minor losses, but this shipments can not be interrupted in order to avoid the loss of an long-term attractive market and established customer base in South Korea and Japan. Management is convinced that if the global trend will change, key opportunities will be concentrated on this market. At the same time, thanks to the warm winter of 2014, the seasonal decline in demand for coal in the domestic market and in Poland turned out to be much more significant than in past years. System changes on the Polish market, capable in the medium term may have a positive impact on the Company's business. The domestic market, despite increased competition among Russian producers remains stable due to the existing distribution infrastructure of KTK. Gross margin in the domestic market increased from 28% in H1 2013 to 36% in H1 2014 the Company is implementing a number of projects to improve the domestic market share in the total volume of sales.
Due to the seasonality of coal consumption in the domestic market, Q2 is traditionally the weakest in the annual business cycle of the company. In Q2 2014, recorded a loss of RUB 91 mln. The company shows losses in Q2 for the third year in a row.
Debt portfolio management
| RUB mln. | 30.06.14 | % of total |
31.03.14 | Ch. | 30.06.13 | Ch.3 |
| Long term loans | 3 615 | 44% | 5 029 | (28%) | 4 859 | (26%) |
| Short term loans | 4 558 | 56% | 2 368 | 92% | 3 097 | 47% |
| Total debt, incl.: | 8 173 | 7 397 | 10% | 7 956 | 3% | |
| RUB loans | 3 858 | 47% | 3 161 | 22% | 4 210 | (8%) |
| Average interest rate for RUB loans | 10,63% | 9,51% | 1.12 ppts | 8,97% | 1.66 ppts | |
| Subsidized interest for RUB loans4 | 10,52% | 9,37% | 1.15 ppts | 8,67% | 1.85 ppts | |
| USD loans | 4 315 | 53% | 4 236 | 2% | 3 746 | 15% |
| Average interest for USD loans | 4,76% | 4,84% | (0.08) ppts | 4,74% | 0.02 ppts | |
| Cash and cash equivalents | 2 056 | 2 316 | (11%) | 1 993 | 3% | |
| Net debt | 6 117 | 5 081 | 20% | 5 963 | 3% | |
| Net debt / 12M EBITDA | 2,71 | 2,01 | 35% | 1,91 | 42% |
Net debt at 30 June 2014 amounted RUB 6,117 mln increasing by 20% compared to the March 31, 2014. The net debt to EBITDA for the 12 months was 2.71. The main reasons for the growth of debt, including the short term part of the loan portfolio was the creation of its own coal reserves in warehouses in Poland, to be sold in Q3 2014 and cover the increased trade receivables. Management plans to decrease net debt to EBITDA in H2 2014.
The company is one of the most reliable and efficient borrowers in the sector, that reflect current interest rates for loans and credits. As of June 30, 2014, the average effective rate was 10.52% for loans denominated in RUB and 4.76% for loans denominated in USD.
Cash flow and investments
| RUB mln. | Q2 2014 |
Q1 2014 |
Ch. | 6M 2014 |
6M 2013 |
Ch. |
| Operating cash flow | (643) | (747) | (14%) | (1,390) | (226) | 515% |
| Investment cash flow | (59) | (197) | (70%) | (256) | (289) | (11%) |
| Acquisition of property, plant and equipment |
(182) | (196) | (7%) | (378) | (346) | 9% |
| Financial cash flow | 535 | 440 | 22% | 975 | 108 | 803% |
| Net increase / (decrease) in cash and cash equivalents | (167) | (504) | (67%) | (671) | (407) | 65% |
In H1 2014 operating cash flow amounted RUB (1,390) mln, increasing by 515% compared to the same period in 2013. Investment cash flow decreased by 11% to RUB (256) mln. Investment in fixed assets amounted RUB 378 mln, most of which focus on modernization of the washing plant Kaskad 2 and retail network development. Net cash outflow from financial activities for H1 2014 amounted to RUB 975 mln. Net decrease in cash and cash equivalents raised by 65% to RUB 671 mln.
In Q2 2014 operating cash flow amounted RUB (643) mln. Investment cash flow in Q2 2013 amounted RUB (59) mln, for investment in fixed assets was spent RUB 182 mln. Net cash outflow from financial activities amounted RUB 975 mln. Net decrease in cash and cash equivalents amounted RUB 167 mln.
Key events in Q2 and after reporting date
Outlook for Q3 2014
6M 2014 IFRS Financial results conference call details
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
Wednesday, August 27 2014
17:00 Moscow (UTC +4:00)
We recommend that participants start dialing in 10 minutes before the indicated time to ensure a timely start to the conference call.
You can join the conference call by dial-in:
Russia:
Great Britain:
USA:
In 2 weeks the record and transcript of the conference call will be published on KTK website:
www.oaoktk.ru/en/investors/audio
Contacts for analysts and investors in Moscow:
Vasily Rumyantsev
Head of Moscow office, IRO
+7 (495) 787-68-05
vkr@oaoktk.ru
Contacts for press in Kemerovo::
Elena Sarycheva
Head of public affairs department
+7 (3842) 36-47-62
es@oaoktk.ru
Company at a glance:
Kuzbasskaya Toplivnaya Company OJSC (KTK, MICEX: KBTK) is one of the largest manufacturers5 and exporters of thermal coal in Russia. Production assets of the Company include three current and one projected opent-pit mines in Kemerovo region, two washing plants and own railroad infrostructure located in the same industrial cluster. The Company operates a retail network in 4 regions of Siberia, supplying over 400 thousands households and over thousand of public and commercial boilers. The company employs over 4,400 people. Shares of KTK are traded on MICEX, the free float is 34.39%.
Additional information about the Company and investor calendar: www.oaoktk.ru/en/investors
News and announcements (Russian only): www.facebook.com/oaoktk
Presentations: www.slideshare.net/oaoktk
Video: www.youtube.com/oaoktkru
Financial highlights under IFRS:
|
RUB mln
|
2013
|
2012
|
2011
|
|
Revenue |
22 490
|
23 104
|
23 939
|
|
Cost of sales |
19 523
|
18 982
|
19 404
|
|
Production cash costs per tonne, RUB
|
611
|
690
|
653
|
|
EBITDA |
2 422
|
3 479
|
3 911
|
|
EBITDA margin
|
11%
|
15%
|
16%
|
|
EBITDA per tonne, RUB
|
239
|
399
|
448
|
|
Net profit |
640
|
1 810
|
2 018
|
|
Net profit margin
|
3%
|
8%
|
8%
|
|
Net debt |
3 917
|
4 681
|
2 663
|
|
Net debt / EBITDA
|
1,62
|
1,35
|
0,68
|
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.
Appendix
Segments
| RUB mln. | Q2 2014 |
Q1 2014 |
Ch. | 6M 2014 |
6M 2013 |
Ch. |
| Revenue | 3 887 | 4 834 | (20%) | 8 721 | 9 584 | (9%) |
| Domestic sales of coal produced | 430 | 766 | (44%) | 1 196 | 1 465 | -18% |
| Export sales of coal produced | 3 303 | 3 558 | (7%) | 6 861 | 7 196 | (5%) |
| Resale of coal purchased | 77 | 237 | (68%) | 314 | 537 | (42%) |
| Other operations | 77 | 273 | (72%) | 350 | 386 | (9%) |
| Cost of sales | (3 575) | (4 082) | (12%) | (7 657) | (8 402) | (9%) |
| Domestic sales of coal produced | (306) | (463) | (34%) | (769) | (1 057) | (27%) |
| Export sales of coal produced | (3 101) | (3 259) | (5%) | (6 360) | (6 564) | (3%) |
| Resale of coal purchased | (70) | (171) | (59%) | (241) | (460) | (48%) |
| Other operations | (98) | (189) | (48%) | (287) | (321) | (11%) |
| Gross profit | 312 | 752 | (59%) | 1 064 | 1 182 | (10%) |
| Domestic sales of coal produced | 124 | 303 | (59%) | 427 | 408 | 5% |
| Export sales of coal produced | 202 | 299 | (32%) | 501 | 632 | (21%) |
| Resale of coal purchased | 7 | 66 | (89%) | 73 | 77 | (5%) |
| Other operations | (21) | 84 | n.a. | 63 | 65 | (3%) |
| Gross profit margin | 12% | 12% | - | 8% | 16% | (8) ppts |
| Domestic sales of coal produced | 29% | 40% | (11) ppts | 36% | 28% | 8 ppts |
| Export sales of coal produced | 6% | 8% | (2) ppts | 7% | 9% | (2) ppts |
| Resale of coal purchased | 9% | 28% | (19) ppts | 23% | 14% | 9 ppts |
| Other operations | - | 31% | - | 18% | 17% | 1 ppts |
Production
| Q2 2014 |
Q1 2014 |
Ch. | 6M 2014 |
6M 2014 |
Ch. | |
| Coal production, mln. tonnes, incl.: | 2,48 | 2,31 | 7% | 4,80 | 4,89 | (2%) |
| Karakansky South | 0,76 | 0,71 | 7% | 1,48 | 1,52 | (3%) |
| Vinogradovsky | 0,90 | 0,80 | 13% | 1,70 | 1,59 | 7% |
| Cheremshansky6 | 0,82 | 0,80 | 2% | 1,62 | 1,79 | (9%) |
| Coal processing7,mln. tonnes, incl.: | 2,07 | 1,71 | 21% | 3,78 | 3,91 | (3%) |
| Sorted coal | 1,27 | 0,98 | 30% | 2,25 | 2,84 | (21%) |
| Washed coal | 0,80 | 0,73 | 10% | 1,53 | 1,07 | 43% |
| Stripping, mln. cbm., incl.: | 15,36 | 15,14 | 1% | 30,50 | 29,48 | 3% |
| Blasted rock mass8 ,mln cbm. | 8,88 | 8,78 | 1% | 17,66 | 13,01 | 36% |
| Average stripping transportation distance, km. |
2,80 | 2,60 | 8% | 2,70 | 2,60 | 4% |
| Average stripping ratio 9 | 6,20 | 6,50 | (5%) | 6,40 | 6,00 | 7% |
Sales
| Q2 2014 |
Q1 2014 |
Ch. | 6M 2014 |
6M 2013 |
Ch. | |
| Sales volume10 , mln. tonnes, incl.: |
1,89 | 2,12 | (11%) | 4,01 | 4,54 | (12%) |
| Export sales volume | 1,61 | 1,47 | 10% | 3,08 | 3,14 | (2%) |
| Domestic sales volume | 0,28 | 0,64 | (56%) | 0,93 | 1,40 | (34%) |
| Own coal | 1,85 | 1,96 | (6%) | 3,81 | 4,14 | (8%) |
| Coal re-sale | 0,04 | 0,15 | (73%) | 0,19 | 0,40 | (53%) |
|
Average selling price, RUB/tonne 11 |
894 | 1 146 | (22%) | 1 027 | 1 027 | - |
1 Here and below are unaudited figures for Q1 and Q2 2014, 6M 2014, 6M 2013
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 30.06.14 / 30.06.13
4 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
5 Metal Expert, January 2013
6 Including «Kaskad» washing plant
7 Coal washing and sorting
8 Included in stripping
9 Share of coal produced in stripping
10 Sales for the group of companies, including third parties coal resale
11 Excluding rail tariffs and VAT
