KEMEROVO, Russian Federation — August 27, 2014 1:00 PM (UTC +7:00) — Kuzbasskaya Toplivnaya Company OJSC (KTK, MICEX: KBTK), one of the largest producers and exporters of thermal coal in Russia, today announced its unaudited condensed interim consolidated financial results under IFRS for the nine months ended September 30, 2014.
Financial highlights
| in millions of RUB |
Q31 2014 |
Q21 2014 |
Chg |
9M1 2014 |
9M1 2013 |
Chg |
| Revenue | 5 799 | 3 887 | 49% | 14 520 | 15 931 | (9%) |
| Cost of sales | 5 241 | 3 575 | 47% | 12 898 | 13 754 | (6%) |
| Production cash costs per tonne, RUB | 554 | 599 | (9%) | 596 | 607 | (2%) |
| Gross profit | 558 | 312 | 79% | 1 622 | 2 177 | (25%) |
| Gross profit margin | 10% | 8% | 2 ppts | 11% | 14% | (3 ppts) |
| Distribution, administrative and other costs |
477 | 372 | 17% | 1 296 | 1 314 | (1%) |
| Operating profit | 81 | (60) | n.a. | 326 | 863 | (62%) |
| Operating profit margin | 1% | - | n.a. | 2% | 5% | (2 ppts) |
EBITDA2 |
382 | 167 | 129% | 1 167 | 1 754 | (33%) |
| EBITDA margin | 7% | 4% | 3 ppts | 8% | 11% | (3 ppts) |
| EBITDA per tonne, RUB | 137 | 67 | 103% | 154 | 237 | (35%) |
| Net profit | (393) | (91) | 332% | (469) | 329 | n.a. |
| Net profit margin | - | - | - | - | 2% | - |
Revenue
In the nine months of 2014 the Company posted revenue of RUB 14,520 million, 9% lower than in the same period of 2013. Revenue reduction was mainly influenced by own coal export sales segment which declined by 7% year-on-year to RUB 11,040 million due to a warm winter in Europe where heating season 2014 will start in the fourth quarter. 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.
Revenue in the third quarter rose by 49% to RUB 5,799 million. Under the influence of the seasonal growth in demand for coal, quarterly revenue increase in the sales of own coal in the domestic market segment amounted to 139%. Revenue from export sales grew by 27% compared with the previous quarter and stood at RUB 4,179 million. Coal resale segment revenue showed a considerable seasonal gain of 503% to RUB 464 million. Purchases from third-party producers are being done in order to provide resources to retail network warehouses in Western Siberia.
Operating profit and EBITDA
In the first nine months of 2014 operating income decreased by 62% compared to the year-ago period to RUB 326 million. This decline is a consequence of gross profit decrease, caused by a faster pace of reduction in revenue compared to that of cost of sales. Gross profit for the nine months of 2014 fell by 25% to RUB 1,622 million. EBITDA showed a year-on-year decline of 33%, reaching RUB 1,167 million. Cost of sales in the nine months of 2014 dropped by 6% to RUB 12,898 million as a result of optimization measures carried out by the management. Production cash costs saw a 2% decline and stood at RUB 596 per tonne of coal. Level of commercial, administrative and other expenses for the first nine months of 2014 fell by 1% to RUB 1,296 million.
After an operating loss showed in the second quarter, the Company showed an operating income of RUB 81 million in the third quarter of 2014. Gross profit rose by 79% to RUB 558 million. Quarterly EBITDA amounted to RUB 382 million showing a 129% quarterly increase. Cost of sales in the third quarter grew by 47% to RUB 5,241 million. Production cash costs fell by 9% to RUB 554 per tonne. Commercial, administrative and other expenses increased by 17% to RUB 477 million.
Net profit
The Company shows a net loss in the nine months of 2014, amounting to RUB 469 million. The main factors influencing the financial result were negative currency differences, RUB 491 million for the nine months, and a continued decline in the Asian markets. At the current price level export sales to the Asia-Pacific region bring the Company minor losses, but these shipments can not be interrupted in order to avoid the loss of a long-term attractive market and established customer base in South Korea and Japan. The management is convinced that if the global coal price trend changes, key thermal coal shipment increase opportunities will be concentrated in this very region. 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 more significant than in the past years. System changes in 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 remained at the level of the nine months of 2013, at 33%. The Company is implementing a number of projects to improve the domestic market share in the total volume of sales. The third quarter of 2014 recorded a net loss of RUB 393 million.
Debt portfolio management
| in millions of RUB | 30.09.14 | % of total |
30.06.14 | Chg | 30.09.13 | Chg3 |
| Long-term loans | 7 199 | 66% | 3 615 | 99% | 5 308 | 36% |
| Short-term loans | 3 729 | 34% | 4 558 | (18%) | 1 842 | 102% |
| Total debt, incl.: | 10 928 | 8 173 | 34% | 7 150 | 53% | |
| RUB loans | 4 591 | 42% | 3 858 | 19% | 3 526 | 30% |
| Average interest rate for RUB loans | 10,96% | 10,52% | 0,44 ppts | 9,19 | 1,77 ppts | |
| USD loans | 6 338 | 58% | 4 315 | 47% | 3 634 | 75% |
| Average interest for USD loans | 4,35% | 4,76% | 0,41 п.п. | 4,80% | (0,45 ppts) | |
| Cash and cash equivalents | 4 886 | 2 056 | 138% | 1 986 | 146% | |
| Net debt | 6 042 | 6 117 | (1%) | 5 164 | 17% | |
| Net debt / 12M EBITDA | 3,29 | 2,71 | 21% | 1,75 | 88% |
Net debt at September 30, 2014 stood at RUB 6,042 million, decreasing by 1% compared to June 30, 2014. Year-on-year it grew by 17%. The net debt to 12-month EBITDA ratio showed a 21% quarterly growth and stood at 3.29. The year-on-year growth of this indicator by 88% is caused by an EBITDA drop of 33% and a total debt growth of 53%. In agreements with banks the threshold level for this indicator is 4.00-4.50. The management is planning to bring it below 3.00 by the end of 2014. With this in mind a pool of cash and cash equivalents of RUB 4,886 million was formed.
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 September 30, 2014, the average effective rate was 10.96% for loans denominated in RUB and 4.35% for loans denominated in USD. The loan portfolio is distributed among 10 Russian and foreign banks.
Cash flow and investments
| in millions of RUB | Q3 2014 |
Q2 2014 |
Chg | 9M 2014 |
9M 2013 |
Chg |
| Operating cash flow | 783 | (643) | n.a. | (607) | 982 | n.a. |
| Investment cash flow | (198) | (59) | 236% | (454) | (736) | (38%) |
| Acquisition of property, plant and equipment |
(190) | (182) | 4% | (586) | (815) | (30%) |
| Financial cash flow | 1 891 | 535 | 253% | 2 866 | (659) | n.a. |
| Net increase / (decrease) in cash and cash equivalents | 2 476 | (167) | n.a. | 1 805 | (413) | n.a. |
In the nine months of 2014 operating cash flow amounted to RUB (607) million. Investment cash flow fell by 38% to RUB (454) million. Investment in fixed assets stood at RUB 586 million, most of which focused on the Kaskad 1 washing plant modernization and retail network development. Net cash flow from financial activities for the nine months of 2014 amounted to RUB 2,866 million. Net increase in cash and cash equivalents stood at RUB 1 805 million.
In the third quarter of 2014 operating cash flow stood at RUB 783 million. Investment cash flow in this period was RUB (198) million, RUB 190 million were spent on investment in fixed assets. Net cash flow from financial activities amounted to RUB 1,891 million. Net increase in cash and cash equivalents stood at RUB 2,476 million.
Key events in the third quarter and after the reporting date
Outlook for the fourth quarter of 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 Alekseenko – First deputy CEO
Vasily Rumyantsev – Head of Moscow office, IRO
Thursday, November 27 2014
4:00 PM Moscow time (UTC +3:00)
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:
Within two weeks the conference call record will be published on KTK website:
www.oaoktk.ru/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 manufacturers4 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. | Q3 2014 |
Q2 2014 |
Ch. | 9M 2014 |
6M 2013 |
Ch. |
| Revenue | 5 799 | 3 887 | 49% | 14 520 | 15 931 | (9%) |
| Domestic sales of coal produced | 1 026 | 430 | 139% | 2 222 | 2 177 | 2% |
| Export sales of coal produced | 4 179 | 3 303 | 27% | 11 040 | 11 814 | (7%) |
| Resale of coal purchased | 464 | 77 | 503% | 778 | 1 418 | (45%) |
| Other operations | 130 | 77 | 69% | 480 | 522 | (8%) |
| Cost of sales | 5 241 | 3 575 | 47% | 12 898 | 13 754 | (6%) |
| Domestic sales of coal produced | 713 | 306 | 133% | 1 482 | 1 451 | 2% |
| Export sales of coal produced | 4 052 | 3 101 | 31% | 10 412 | 10 682 | (3%) |
| Resale of coal purchased | 367 | 70 | 424% | 608 | 1 190 | (49%) |
| Other operations | 109 | 98 | 11% | 396 | 431 | (8%) |
| Gross profit | 558 | 312 | 79% | 1 622 | 2 177 | (25%) |
| Domestic sales of coal produced | 313 | 124 | 152% | 740 | 726 | 2% |
| Export sales of coal produced | 127 | 202 | (37%) | 628 | 1 132 | (45%) |
| Resale of coal purchased | 97 | 7 | 1 286% | 170 | 228 | (25%) |
| Other operations | 21 | (21) | n.a. | 84 | 91 | (8%) |
| Gross profit margin | 10% | 8% | 2 ppts | 11% | 14% | (3 ppts) |
| Domestic sales of coal produced | 31% | 29% | 2 ppts | 33% | 33% | - |
| Export sales of coal produced | 3% | 6% | (3 ppts) | 6% | 10% | (4 ppts) |
| Resale of coal purchased | 21% | 9% | 13 ppts | 22% | 16% | 6 ppts |
| Other operations | 16% | - | n.a. | 18% | 17% | 1 ppts |
Production
| Q3 2014 |
Q2 2014 |
Ch. | 9M 2014 |
9M 2014 |
Ch. | |
| Coal production, mln. tonnes, incl.: | 2,79 | 2,48 | 13% | 7,59 | 7,39 | 3% |
| Karakansky South | 0,88 | 0,76 | 16% | 2,36 | 2,34 | 1% |
| Vinogradovsky | 1,19 | 0,90 | 32% | 2,90 | 2,48 | 17% |
| Cheremshansky5 | 0,72 | 0,82 | (12%) | 2,34 | 2,57 | (9%) |
| Coal processing6,mln. tonnes, incl.: | 2,51 | 2,07 | 21% | 6,29 | 6,05 | 4% |
| Sorted coal | 1,72 | 1,27 | 35% | 3,97 | 4,17 | (5%) |
| Washed coal | 0,79 | 0,80 | (1%) | 2,32 | 1,88 | 23% |
| Stripping, mln. cbm., incl.: | 14,54 | 15,36 | (5%) | 45,04 | 44,29 | 2% |
| Blasted rock mass7 ,mln cbm. | 9,15 | 8,88 | 3% | 26,81 | 20,50 | 31% |
| Average stripping transportation distance, km. |
2,80 | 2,80 | - | 2,70 | 2,70 | - |
| Average stripping ratio 8 | 5,20 | 6,20 | (16%) | 5,90 | 6,00 | (2%) |
Sales
| Q3 2014 |
Q2 2014 |
Ch. | 9M 2014 |
9M 2013 |
Ch. | |
| Sales volume9 , mln. tonnes, incl.: |
2,89 | 1,89 | 53% | 6,89 | 7,52 | (8%) |
| Export sales volume | 2,00 | 1,61 | 24% | 5,08 | 5,10 | - |
| Domestic sales volume | 0,89 | 0,28 | 218% | 1,81 | 2,42 | (25%) |
| Own coal | 2,61 | 1,85 | 41% | 6,42 | 6,53 | (2%) |
| Coal re-sale | 0,28 | 0,04 | 600% | 0,47 | 0,99 | (53%) |
|
Average selling price, RUB/tonne 10 |
1 059 | 894 | 18% | 1 041 | 1 074 | (3%) |
1 Here and below are unaudited figures for Q2 and Q3 2014, 9M 2014, 9M 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 30.09.14 / 30.09.13
4 Metal Expert, January 2013
5 Including Kaskad 1 washing plant
6 Sorted and washed coal
7 Included in stripping
8 Share of coal produced in stripping
9 Sales for the group of companies, including third parties coal resale
10 Excluding rail tariffs and VAT
