OJSC "Kuzbasskaya Toplivnaya Company" (RTS/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 9 months 2013 ended September 30, 2013.
Financial highlights
| RUB mln. | Q31 2013 | Q21 2013 | Ch. | 9M1 2013 | 9M1 2012 | Ch. |
| Revenue | 6,347 | 4,657 | 36% | 15,931 | 16,875 | (6%) |
| Cost of sales | 5,381 | 4,096 | 31% | 13,754 | 13,9392 | (1%) |
| Production cash costs per tonne, RUB | 649 | 586 | 11% | 604 | 729 | (17%) |
| Gross profit | 966 | 561 | 72% | 2,177 | 2,9362 | (26%) |
| Gross profit margin | 15% | 12% | 3 ppts | 14% | 17% | (3 ppts) |
| Distribution, administrative and other costs | 514 | 383 | 34% | 1,314 | 1,270 | 3% |
| Distribution, administrative and other costs as % of revenue | 8.1% | 8.2% | (0.1 ppts) | 8.2% | 7.5% | 0.7 ppts |
| Operating profit | 452 | 178 | 154% | 863 | 1,6662 | (48%) |
| Operating profit margin | 7% | 4% | 3 ppts | 5% | 10% | (5 ppts) |
| EBITDA3 | 767 | 478 | 60% | 1,754 | 2,459 | (29%) |
| EBITDA margin | 12% | 10% | 2 ppts | 11% | 15% | (4 ppts) |
| EBITDA per tonne, RUB | 307 | 191 | 60% | 237 | 388 | (39%) |
| Net profit | 285 | (42) | n.a. | 329 | 1,2772 | (74%) |
| Net profit margin | 4% | - | n.a. | 2% | 8% | (6 ppts) |
Eduard Alexeenko, First Deputy CEO, commented:
"Due to the seasonal increase in demand in the domestic market, improved quality of coal and the development of the retail network, in Q3 2013 the company showed a net profit of RUB 285 mln. after a loss in Q2. Segment of own coal sales in the domestic market shows the sustainable growth.
In line with its strategy, management continues to optimize the debt portfolio. In Q3 USD 43 mln. was taken by Company from the loan attracted from VTB Bank (Austria) AG, for a period of 5 years. By reducing the investment program of the net debt/12 months EBITDA ratio decreased by 7% to 1.75 and is at a comfortable level."
Revenue
At the end of 9M 2013, revenue decreased by 6% to RUB 15,931 mln. compared to the same period in 2012. The decrease in revenues occurred in most segments of the Company’s business, but the major impact on this indicator had a segment of own coal domestic sales, which had shown a decline of 24% year-on-year.
Revenue in Q3 2013 increased by 36% to RUB 6,347 mln. Under the influence of the seasonal growth in demand for coal, the increasing in revenue in the segment of own coal sales in the domestic market amounted to 82%. Due to contracts with the buyers of washed coal in the Asia-Pacific region in a segment of export sales of own coal quarter-on-quarter revenue rose by 18% to RUB 4,618 mln., which is equivalent to 74% of consolidated quarterly revenue of the Company.
Operating profit and EBITDA
Compared to 9M 2012, for 9M 2013 operating income decreased by 48% to RUB 863 mln., with EBITDA and gross profit declined by 29% to RUB 1,754 mln. and by 26% to 2,117 mln. respectively. The main influence on the reduction of these indices had a reduction of gross margin in the segment of the export sales of own coal from 17% in 9M 2012 to 10% in 9M 2013. Some support has had a rise in gross margin in the segment of the of own coal sales in the domestic market from 22% in 9M 2012 to 33% in 9M 2013 and the reduction of production cash costs by 17% to RUB 604 per tonne of produced coal. Cost of sales in 9M 2013 decreased by 1% to RUB 13,754 mln. as a result of lower production cash costs and the coal purchased for resale. The level of commercial, administrative and other expenses in 9M 2013 increased by 3% to RUB 1,314 mln.
In Q3 2013, operating income increased by 154% compared to the Q2 2013 and amounted RUB 452 mln. Gross profit increased 72% to RUB 966 mln. Quarterly EBITDA amounted to RUB 767 mln. showing an increase by 60% compared to Q2 2013. Cost of sales and production cash costs reduced in Q3 by 31% to RUB 5,381 mln. and RUB 649 per tonne respectively. Commercial, administrative and other expenses increased by 34% to RUB 514 mln.
Net profit
Net profit in 9M 2013 amounted RUB 329 mln. showing a decrease by 74% compared to the same period in 2012. Despite a significant reduction in thermal coal prices on world markets and the declining profitability of export sales, the Company's business in the domestic market is stable and shows an increase in gross margin. This is due to the own distribution network of coal warehouses which is unique for the Russian market, serving more than 400,000 individuals and more than 1,000 corporates and municipal consumers of thermal coal. Gross margin of this segment is growing thanks to strong demand for sorted coal and the introduction of additional services for the customers. Management plans to continue the development and expansion of the retail network.
Due to the seasonality of consumption of coal in the domestic market, Q3 is traditionally the strongest in the annual business cycle of the Company. In Q3 2013, the Company’s net profit amounted to RUB 285 mln. after a loss of RUB 42 mln. in Q2 2013.
Debt portfolio management
| RUB mln. | 30.09.13 | % of total | 30.06.13 | Ch. | 30.09.12 | Ch.4 |
| Long term loans | 5,308 | 74% | 4,859 | 9% | 5,318 | - |
| Short term loans | 1,842 | 26% | 3,097 | (41%) | 1,953 | (6%) |
| Total debt, incl.: | 7,150 | 7,956 | (10%) | 7,271 | (2%) | |
| RUB loans | 3,526 | 49% | 4,210 | (16%) | 3,823 | (8%) |
| Average interest rate for RUB loans | 9.35% | 8.97% | 0.38 ppts | 9.64% | (0.29 ppts) | |
| Subsidized interest for RUB loans5 | 9.19% | 8.67% | 0.52 ppts | 9.29% | (0.10 ppts) | |
| USD loans | 3,624 | 51% | 3,746 | (3%) | 3,448 | 5% |
| Average interest for USD loans | 4.80% | 0.06 ppts | 4.74% | 4.80% | - | |
| Cash and cash equivalents | 1,986 | 1,993 | - | 2,4856 | (20%) | |
| Net debt | 5,164 | 5,963 | (13%) | 4,786 | 8% | |
| Net debt / 12M EBITDA | 1.75 | 1.88 | (7%) | 1.25 | 40% | |
Net debt at September 30, 2013 amounted RUB 5,164 mln. showing a decrease by 13% compared with the figure as at June 30, 2013. The net debt to 12M EBITDA ratio stays lower than comfortable level for the management and amounted 1.75, showing a decrease by 7% during Q3. Under the terms of loan agreements with banks, net debt to EBITDA ratio should not exceed the level of 3.50 - 4.00.
The company is one of the most reliable and efficient borrowers in the sector, which reflect the current interest rates for loans. As of September 30, 2013, the average effective rate was 9.19% for loans denominated in RUB. The growth rate by 0.52 percentage points was due to the restructuring of the portfolio and attracting more loans for a period of 3 years. For loans that are denominated in USD, the average interest rate increased by 0.06 percentage points to 4.80% due to the rise of exchange rate.
Cash flow and investments
| RUB mln. | Q3 2013 | Q2 2013 | Ch. | 9M 2013 | 9M 2012 | Ch. |
| Operating cash flow | 1,208 | 1,128 | 7% | 982 | 1,654 | (41%) |
| Investment cash flow | (447) | (109) | 310% | (736) | (3,738) | (80%) |
| Acquisition of property, plant and equipment | (469) | (145) | 223% | (813) | (3,218) | (75%) |
| Financial cash flow | (767) | (924) | (17%) | (659) | 2,286 | n.a. |
| Net increase / (decrease) in cash and cash equivalents | (6) | 95 | n.a. | (413) | 202 | n.a. |
In 9M 2013, operating cash flow amounted RUB 982 mln., decreased by 41%. Investment cash flow decreased by 80% and amounted RUB 736 mln., because after the completion of the investment cycle in 2012, the Company reduced its investment program implemented in 2013. Company invested RUB 813 mln. in acquisition of property, plant and equipment, most of which was allocated to finance made earlier works on the construction of the washing plant "Kaskad-2." Net cash inflow from financial activities for 9M 2013 amounted to RUB 659 mln. Net decrease in cash and cash equivalents amounted to RUB 413 mln.
In Q3 2013, operating cash flow amounted RUB 1,208 mln. which is 7% higher than in Q2 2013. Investment cash flow in Q3 2013 amounted RUB 447 mln., investments in in acquisition of property, plant and equipment amounted RUB 469 mln. Net cash outflow from financial activities amounted RUB 767 mln. Net increase in cash and cash equivalents amounted RUB 6 mln.
Key events in Q3 and after reporting dateы
Outlook for Q4 2013
Management of KTK tracks the performance of prices in world markets, which in the last year are at a stable low level, and does not expect significant price increases in the international thermal coal market in Q4 2013. However, the price trends of past periods augur well for the growth of prices in the medium term.
9M 2013 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
Monday, November 25 2013
7:00 New York (UTC -4:00)
12:00 London (UTC +1:00)
16:00 Moscow (UTC +4:00)
19:00 Kemerovo (UTC +7:00)
We recommend that participants start dialing in 10 minutes before the indicated time to ensure a timely start to the conference call.
Presentation will be available starting in 1 hour before the conference call at:
www.oaoktk.ru/en/investors/present
www.slideshare.net/oaoktk
You can join the conference call by dial-in:
International: +44 (0) 1452 555566
Russia (toll free): 81080020972044
Conference ID: 16258074
The conference call replay will be available for 2 weeks:
International: +44 (0)1452550000
Conference ID: 16258074
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
Contacts for press:
OJSC "Kuzbasskaya Toplivnaya Company", Kemerovo
Elena Sarycheva
Head of public affairs department
Tel.: +7 (3842) 36-47-62 (Russian only)
E-mail: es@oaoktk.ru
Additional information about the Company and investor calendar: www.oaoktk.ru/en/investors
Company at a glance:
OJSC "Kuzbasskaya Toplivnaya Company" is one of the largest manufacturers and exporters of thermal coal in Russia. Production assets of the Company include three current and one projected opent-pit mines, two washing plants located in the same industrial cluster in the Kemerovo region. The company employs over 4,000 employees. Shares of OJSC "Kuzbasskaya Toplivnaya Company" are traded on the RTS/MICEX, the free float is 34.39%.
News and announcements (Russian only) www.facebook.com/oaoktk
Presentations www.slideshare.net/oaoktk
Video www.youtube.com/oaoktkru
FY 2012 Financial Highlights under IFRS:
| RUB mln.
|
2012
| 2011 |
2010
|
| Revenue | 23,104 | 23,939 | 14,160 |
| Cost of sales | 18,982 | 19,404 | 11,457 |
| Production cash costs per tonne, RUB | 690 | 653 | 509 |
| EBITDA | 3,479 | 3,911 | 2,134 |
| EBITDA margin | 15% | 16% | 15% |
| EBITDA per tonne, RUB | 399 | 448 | 304 |
| Net profit | 1,810 | 2,018 | 823 |
| Net profit margin | 8% | 8% | 6% |
| Net debt | 4,681 | 2,663 | 1,754 |
| Net debt / EBITDA | 1.35 | 0.68 | 0.82 |
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
Production cash costs
| RUB mln. | Q3 2013 | Q2 2013 | Ch. | 9M 2013 | 9M 2012 | Ch. |
| Consolidated cost of sales | 5,475 | 4,096 | 34% | 13,848 | 14,144 | (2%) |
| Excluding cost of sales of subsidiaries | 616 | 264 | 133% | 1,466 | 1,640 | (11%) |
| Cost of sales of KTK, excluding: | 4,859 | 3,832 | 27% | 12,382 | 12,503 | (1%) |
| Depreciation allocated to cost of sales | (285) | (319) | (11%) | (814) | (717) | 14% |
| Cost of coal for resale & coal for reprocessing | (275) | (14) | 1 864% | (303) | -405 | (25%) |
| Change in inventories | (139) | 129 | n.a. | (26) | 93 | n.a. |
| Railway tariff and transportation services | (2,762) | (2,334) | 18% | (7,283) | (6,861) | 6% |
| Production cash costs | 1,397 | 1,294 | 8% | 3,957 | 4,613 | (14%) |
| % of production cash costs in consolidated cost of sales | 26% | 32% | (6 ppts) | 29% | 33% | (4 ppts) |
| Production cash costs per tonne, RUB | 649 | 586 | 11% | 604 | 729 | (17%) |
| Production cash costs per tonne, USD | 21 | 19 | 9% | 19 | 23 | (17%) |
Segments
| RUB mln. | Q3 2013 | Q2 2013 | Ch. | 9M 2013 | 9M 2012 | Ch. |
| Revenue | 6,347 | 4,657 | 36% | 15,931 | 16,875 | (6%) |
| Domestic sales of coal produced | 712 | 391 | 82% | 2,177 | 2,880 | (24%) |
| Export sales of coal produced | 4,618 | 3,924 | 18% | 11,814 | 12,057 | (2%) |
| Resale of coal purchased | 881 | 189 | 366% | 1,418 | 1,435 | (1%) |
| Other operations | 136 | 153 | (11%) | 522 | 503 | 4% |
| Cost of sales | 5,381 | 4,096 | 31% | 13,754 | 13,9398 | (1%) |
| Domestic sales of coal produced | 401 | 304 | 32% | 1,451 | 2,2478 | (35%) |
| Export sales of coal produced | 4,140 | 3,489 | 19% | 10,682 | 10,0078 | 7% |
| Resale of coal purchased | 730 | 161 | 353% | 1,190 | 1,298 | (8%) |
| Other operations | 110 | 142 | (23%) | 431 | 387 | 11% |
| Gross profit | 966 | 561 | 72% | 2,177 | 2,936 | (26%) |
| Domestic sales of coal produced | 311 | 87 | 257% | 726 | 633 | 15% |
| Export sales of coal produced | 478 | 435 | 10% | 1,132 | 2,050 | (45%) |
| Resale of coal purchased | 151 | 28 | 439% | 228 | 137 | 66% |
| Other operations | 26 | 11 | 136% | 91 | 1168 | (22%) |
| Gross profit margin | 15% | 12% | 3 ppts | 14% | 17% | (3 ppts) |
| Domestic sales of coal produced | 44% | 22% | 22 ppts | 33% | 22% | 11 ppts |
| Export sales of coal produced | 10% | 11% | (1 ppts) | 10% | 17% | (7 ppts) |
| Resale of coal purchased | 17% | 15% | 2 ppts | 16% | 10% | 6 ppts |
| Other operations | 19% | 7% | 12 ppts | 17% | 23% | (6 ppts) |
Production
| Q3 2013 | Q2 2013 | Ch. | 9M 2013 | 9M 2012 | Ch. | |
| Coal production, mln. tonnes, incl.: | 2.50 | 2.50 | - | 7.39 | 6.33 | 17% |
| Karakansky South | 0.80 | 0.75 | 7% | 2.34 | 2.25 | 4% |
| Vinogradovsky | 0.89 | 0.90 | (1%) | 2.48 | 1.20 | 107% |
| Cheremshansky9 | 0.80 | 0.86 | (7%) | 2.57 | 2.90 | (11%) |
| Coal processing10, mln. tonnes, incl.: | 2.13 | 2.14 | - | 6.05 | 4.99 | 21% |
| Sorted coal | 1.33 | 1.43 | (7%) | 4.17 | 4.37 | (5%) |
| Washed coal | 0.80 | 0.71 | 13% | 1.88 | 0.62 | 203% |
| Washing plant "Kaskad-1" | 0.25 | 0.18 | 39% | 0.76 | 0.62 | 23% |
| Washing plant "Kaskad-2" | 0.55 | 0.53 | 4% | 1.12 | - | - |
| Stripping, mln. cbm., incl.: | 14.81 | 14.78 | - | 44.29 | 52.52 | (16%) |
| Blasted rock mass11, mln. cbm | 7.50 | 6.64 | 13% | 20.50 | 25.98 | (21%) |
| Average stripping transportation distance, km | 3.00 | 2.6012 | 15% | 2.70 | 3.05 | (5%) |
| Average stripping ratio13 | 5.90 | 5.90 | - | 6.00 | 8.30 | (28%) |
Sales
| Q3 2013 | Q2 2013 | Ch. | 9M 2013 | 9M 2012 | Ch. | |
| Sales volume14, mln. tonnes, incl.: | 2.98 | 2.16 | 38% | 7.52 | 7.27 | 3% |
| Export sales volume | 1.96 | 1.74 | 13% | 5.10 | 4.42 | 15% |
| Domestic sales volume | 1.02 | 0.42 | 143% | 2.42 | 2.85 | (15%) |
| Own coal | 2.38 | 2.02 | 18% | 6.53 | 6.07 | 8% |
| Coal re-sale | 0.59 | 0.14 | 321% | 0.99 | 1.20 | (18%) |
| Average selling price, RUB/tonne15 | 1,146 | 1,025 | 12% | 1,074 | 1,30416 | (18%) |
OJSC "Kuzbasskaya Toplivnaya Company" stops publishing data on sale prices broken down by domestic/export markets; European/Asia-Pacific markets as well as on railway tariffs on the public sources because this information can harm the commercial interests of the company. This information may be provided to analysts and investors on request, aimed at vkr@oaoktk.ru.
1 Here and below are unaudited figures for Q2 and Q3 2013, 9M 2013, 9M 2012
2 Recalculated data in accordance with the new standards of interpretation.
3 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.
4 Change 30.09.13 / 30.09.12
5 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
6 Including term deposits
7 Metal Expert, January 2013.
8 Recalculated data in accordance with the new standards of interpretation.
9 Including “Kaskad” washing plant
10 Coal washing and sorting
11 Included in stripping.
12 The revised figure. Previously published data for the Q2 2013 did not include the stripping handling for the washing plants.
13 Share of coal produced in stripping.
14 Sales for the group of companies, including third parties coal resale.
15 Excluding rail tariffs and VAT.
16 Recalculated data in accordance with the new standards of interpretation.
