Kemerovo, Russian Federation – OJSC “Kuzbasskaya Toplivnaya Company” (RTS/MICEX: “KBTK”), one of the fastest-growing thermal coal producers in Russia, is pleased to announce the unaudited consolidated IFRS financial results for 3 months ended 31 March 2012.
Financial highlights
| RUB mln. | Q11 2012 |
Q41 2011 |
Ch. | Q11 2011 |
Ch.2 |
| Revenue | 6,652 | 7,550 | -12% | 5,425 | 23% |
| Cost of sales | 5,358 | 6,043 | -11% | 4,135 | 30% |
| Production cash costs per tonne, RUB | 777 | 700 | 11% | 630 | 23% |
| Gross profit | 1,294 | 1,507 | -14% | 1,110 | 17% |
| Gross profit margin | 19.5% | 20.0% | 20.5% | ||
| Distribution, administrative and other costs | 448 | 440 | 2% | 402 | 11% |
| Operating profit | 846 | 1,067 | -21% | 708 | 19% |
| Operating profit margin | 12.7% | 14.1% | 13.1% | ||
| EBITDA3 | 1,117 | 1,360 | -18% | 948 | 18% |
| EBITDA margin | 16.8% | 18.0% | 17.5% | ||
| Net profit | 896 | 776 | 15% | 593 | 51% |
| Net profit margin | 13.5% | 10.3% | 10.9% |
Revenue for Q1 2012 increased by 23% year-on-year (Q1 2011: RUB 5,425 mln.) but was 12% lower quarter-on-quarter at RUB 6,652 mln., (Q4 2011: RUB 7,550 mln.) due to a combination of seasonal slowdown coupled with reduced demand in export markets.
Average sales prices in Q1 2012 were 13% higher year on year and 5% higher quarter on quarter, EBITDA grew by 18% year-on-year to RUB 1,117 mln. (Q1 2011: RUB 948 mln.), however Q1 2012 EBITDA was 18% lower on a quarter on quarter basis (Q4 2011: RUB 1,360 mln.) as lower volumes were not offset by higher average sales prices during the quarter.
Net profit in Q1 2012 at RUB 896 mln. increased 51% year on year (Q1 2011: RUB 593 mln.) and increased by 15% quarter on quarter (Q4 2011: RUB 776 mln.) largely due to a positive impact from Rouble exchange rate movements.
| RUB mln. | 31.03.12 | 31.12.11 | Ch. | % of total | 31.03.11 | Ch.4 |
| Long term loans | 4,001 | 2,794 | 43% | 76% | 1,921 | 108% |
| Short term loans | 1,237 | 1,753 | -29% | 24% | 146 | 747% |
| Total debt, incl.: | 5,238 | 4,547 | 15% | 2,067 | ||
| Ruble-denominated | 1,016 | 647 | 57% | 19% | 216 | 370% |
| Foreign currency-denominated | 4,222 | 3,900 | 8% | 81% | 1,851 | 128% |
| Cash and cash equivalents | 1,572 | 1,884 | -17% | 467 | 237% | |
| Net debt | 3,666 | 2,663 | 38% | 1,600 | 129% | |
| Net debt / EBITDA5 | 0.90 | 0.68 | 32% | 0.72 | 26% |
As at March 31, 2012 Net Debt amounted RUB 3,666 mln. It increased by 38% quarter-on-quarter (Q4 2011: RUB 2,663 mln.), and by 129% year-on-year (Q1 2011: RUB 1,600 mln.). At the reporting date the Net Debt to EBITDA ratio was 0.90. The Company’s debt increased as part of the investment program for 2012, in particular, the financing of the construction of the Kaskad-2 enrichment plant, which is due to come on stream towards the end of 2012. The plant will allow the Company to process 4 mln. tonnes of coal, leading to a significant increase in the percentage of enriched export quality coal and a reduction of low value added run of mine coal sales.
Operational highlights6
| mln. Tonnes | Q1 2012 |
% of total | Q4 2011 |
Ch. | Q1. 2011 |
Ch.7 |
| Coal production, incl.: | 2.18 | 2.56 | -15% | 1.83 | 19% | |
| Karakansky South | 0.75 | 34% | 0.87 | -14% | 0.69 | 9% |
| Vinogradovsky | 0.37 | 17% | 0.59 | -37% | 0.44 | -16% |
| Cheremshansky8 | 1.07 | 49% | 1.10 | -3% | 0.71 | 51% |
| Sorted coal | 1.59 | 73% | 1.52 | 5% | 1.17 | 36% |
| Enriched coal | 0.20 | 9% | 0.19 | 5% | 0.16 | 25% |
| Stripping, mln. cbm. | 19.29 | 18.85 | 2% | 14.69 | 31% | |
| Blasted rock mass9, mln. cbm | 9.54 | 49% | 10.72 | -11% | 7.21 | 32% |
| Stripping ratio10 | 8.86 | 7.35 | 21% | 8.03 | 10% | |
| Average stripping transportation distance, km | 3.33 | 2.95 | 13% | 2.59 | 29% |
In Q1 2012 the Company produced 2.18 mln. tonnes of coal, representing a 19 % increase year on year (Q1 2011: 1.83 mln. tonnes), production was down by 15% quarter-on-quarter (Q4 2011: 2.56 mln. tonnes) as a result of lower sales volumes.
The existing enrichment plant “Kaskad” at the “Cheremshansky” open-pit mine, which produces export quality coal, continued work at close to 100% capacity. The volume of quarterly production of enriched coal increased by 5% to 0.20 mln. tonnes (Q4 2011: 0.19 mln. tonnes).
In the Q1 2012 the volume of coal sorted by coal-crushing and screening units increased by 5% and amounted 1.59 mln. tonnes (Q4 2011: 1.52 mln. tonnes), up 36% higher than Q1 2011 (1.17 mln. tonnes). The stability of this volume reflects a reasonable demand for sorted coal among export clients of the Company, shipments that are not so affected by seasonality factors, however export markets saw weakness towards the end of the quarter.
Production cash costs
| RUB mln. | Q1 2012 |
Q4 2011 |
Ch. | Q1 2011 |
Ch.12 |
| Consolidated cost of sales | 5,358 | 6,043 | -11% | 4,135 | 30% |
| Excluding cost of sales of subsidiaries | 705 | 877 | -20% | 432 | 63% |
| OJSC “KTK” cost of sales | 4,653 | 5,166 | -10% | 3,703 | 26% |
| Excluding: | |||||
| Depreciation (in cost of sales) | -240 | -279 | -14% | -203 | 18% |
| Purchased coal | -234 | -133 | 76% | -220 | 6% |
| Change of inventory balances | 89 | 33 | 170% | 41 | 117% |
| Railroad tariffs and transportation costs | -2,576 | -2,992 | -14% | -2,158 | 19% |
| Production cash costs | 1,693 | 1,797 | -6% | 1,154 | 47% |
| Share of production cash costs in consolidated cost of sales | 32% | 30% | 29% | ||
| Coal production, mln. tonnes | 2.18 | 2.56 | -15% | 1.83 | 19% |
| Total cash costs per 1 tonne of coal, RUB | 777 | 700 | 11% | 630 | 23% |
In Q1 Company's total Rouble operating cash costs decreased by 6% compared to Q4 2011 due to lower production volume. Production cash costs per tonne of coal increased by 11% quarter-on-quarter (Q4 2011: RUB 700 per tonne) and 23% year-on-year as the reduction in Rouble operating costs was smaller than the fall in production volumes quarter on quarter (15%), leading to an increase in per unit costs compared to Q4 2011.
Sales
| mln. tonnes | Q1 2012 |
% of total | Q4. 2011 |
Ch. | Q1 2011 |
Ch.11 |
| Sales12, incl.: | 2.81 | 3.34 | -16% | 2.43 | 16% | |
| Export sales | 1.61 | 57% | 1.77 | -9% | 1.40 | 15% |
| Domestic sales | 1.21 | 43% | 1.57 | -23% | 1.03 | 17% |
| Own coal | 2.17 | 77% | 2.60 | -16% | 1.92 | 13% |
| Coal re-sale | 0.64 | 23% | 0.74 | -14% | 0.51 | 25% |
| Average selling price13, RUB/tonne руб./тонна |
1,352 | 1,285 | 5% | 1,193 | 13% | |
| Average export price, RUB/tonne | 1,440 | 1,367 | 5% | 1,203 | 20% | |
| Average domestic price, RUB/tonne | 1,233 | 1,192 | 3% | 1,178 | 5% |
The volume of coal sales in Q1 2012 decreased by 16% to 2.81 mln. tonnes (Q4 2011: 3.34 mln. tonnes) because of decrease of shipments to Eastern Europe. The Company sold 2.17 mln. tonnes of own coal and 0.64 mln. tonnes of coal purchased from third-parties and processed 0.20 mln. tonnes of coal. Within the reduced sales volumes, the share of export sales rose slightly from 53% to 57%.
Coal sales in the domestic market decreased by 23% at the completion of the heating season and the seasonal decline in demand and amounted 1.21 mln. tonnes (Q4 2011: 1.57 mln. tonnes). The export volume fell by 9% to 1.61 mln. tonnes compared to 1.77 mln. tonnes in Q4 2011. It should be noted the growth of exports compared to the Q1 2011, amounted to 15% (Q1 2011: 1.40 mln. tonnes).
In Q1 2012 Company’s largest export markets remained the Asia-Pacific region (57% of export volume) and Eastern European countries (42% of export volume). Export deliveries to customers in Eastern Europe decreased in Q1 2012 by 30%, reaching a level of 0.68 mln. tonnes (Q4 2011: 0.97 mln. tonnes) due to significant coal stocks in warehouses in Poland. Deliveries in the Asian-Pacific region grew by 15% and amounted to 0.92 mln. tonnes of coal (Q4 2011: 0.80 mln. tonnes).
In Q1 2012 the average price of coal increased by 5% quarter-on-quarter to RUB 1,352 per tonne net of VAT and railroad costs (Q4 2011: RUB 1,285 per tonne). The average domestic price increased by 3% to RUB 1,233 per tonne (Q4 2011: RUB 1,192 per tonne). The average export price continued its growth and reached RUB 1,440 per tonne, exceeding Q4 2011 price by 5% (RUB 1,367 per tonne). The average export price in the Asia-Pacific region reached RUR 1,472 per tonne, showing an increase of 18% compared to the Q4 2011 (RUR 1,250 per tonne) and an increase of 33% compared to the Q1 2011.(RUB 1,105 per tonne). The average selling price in the European market amounted RUB 1,421 per tonne. The strength in prices in Q1 2012 has not carried forward into Q2 due to deteriorating demand in the face of the ongoing macroeconomic turmoil.
Key events after reporting period
On April 16, 2012 the annual general meeting of shareholders approved by the payment of dividends for 2011 amounting to RUB 595,550,130, or RUB 6 per one ordinary share, which corresponds to 29.5% net profit for 2011 IFRS.
As a result of the voting stockholders formed a new Board of Directors of OJSC "Kuzbasskaya Toplivnaya Company":
Igor Prokudin, CEO of the Company, commented:
«The results of Q1 2012 showed a positive trend over the same period last year. During the quarter, all the targeted figures were held, actively conducted construction of second enrichment plant Kaskad 2, completed construction of fuel depot.
Also during this period there was a change of the Board of Directors of KTK. I am pleased to welcome a new member of the Board of Directors Independent Director Alexander Williams. I am confident that the introduction to the advice of an experienced and competent professional only increases the opportunities for our growth and supports our as a transparent and open company.
At the end of the quarter was marked change in market conditions in the coal market, which has made adjustments to the sales forecast for the future. Reduction in coal prices as the export and domestic market has forced management to make adjustments in the sales policy of the KTK in the near future. Overall the Company’s sales outlook is considered to be positive due to the fact that the structure of coal sales means that it is possible to rapidly adjust target markets and the share of each market in overall sales as the external market environment develops».
Current trading and outlook for Q2 2012
Management believes that volume demand and possibly prices will be constrained in most export markets for the remainder of 2012 due to the ongoing economic turmoil and corresponding GDP contraction in the Euro area. Based on the price situation on export markets, the management of the KTK expects revenue, EBITDA and net profit saving performance in 2012 at the level of 2011 with a possible slight increase If a favorable situation on export markets develops in the second half of 2012.
Conference call
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 – Investor relations manager
The dial-in details are:
Date: Wednesday, May 23, 2012
Time: 09.00 New York / 14.00 London / 17.00 Moscow14
Title: Q1 2012 unaudited consolidated financial results conference call of OJSC “Kuzbasskaya Toplivnaya Company”
You can join the conference call by dial-in:
Russia: +7 (495) 213-09-77
International/UK: +44 (0) 20 7784 1036
USA: +1212 444 0412
Conference ID: 9477659
A live webcast or downloading of the presentation will be available at:
www.slideshare.net/oaoktk
www.oaoktk.ru/investors/presentations
The conference call replay will be available for 2 weeks:
International/UK Replay Number: +44 (0) 20 7111 1244
Replay Access Code: 9477659 (press # after entering Access Code)
The record and transcript of the conference call will be uploaded in 2 weeks:
www.oaoktk.ru/en/investors/
www.oaoktk.ru/investors/en/presentations
Contacts for press:
OJSC "Kuzbasskaya Toplivnaya Company" (Kemerovo)
Elena Sarycheva
Head of public affairs department
Tel.: +7 (3842) 36-47-62
E-mail: es@oaoktk.ru
Contacts for analysts and investors:
OJSC "Kuzbasskaya Toplivnaya Company" (Moscow)
Vasily Rumyantsev
Investor Relations Manager
Tel.: +7 (495) 787-68-05
E-mail: vkr@oaoktk.ru
Additional information about the Company and investor calendar: www.oaoktk.ru/en/investors
KTK in social networks:
News and announcements (Russian only)
www.facebook.com/oaoktk
Presentations
www.slideshare.net/oaoktk
Video
www.youtube.com/oaoktkru
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 converted to USD.
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 and we will provide you with the correct data and publish any correction notes on the website www.oaoktk.ru.
Forward–looking statements
This press release might contain forward-looking statements that refer to future events or forecast financial indicators for OJSC “Kuzbasskaya Toplivnaya Company”. Such statements do not guarantee that these are actions to be taken by OJSC “Kuzbasskaya Toplivnaya Company” in the future, and estimates can be inaccurate and uncertain. Actual final indicators and results can considerably differ from those declared in any forward-looking statements. OJSC “Kuzbasskaya Toplivnaya Company” does not intend to change these statements to reflect actual results.
1 Hereinafter figures for Q1 2012 and Q1, Q4 2011 are presented unaudited.
2 Change rates in Q1 2012 to Q1 2011
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 rates as at 31.03.12 to 31.03.11
5 Annualized EBITDA
6 The Company’s business is affected by seasonality of thermal coal demand in Russia and globally. This means its quarterly operational results can be subject to significant fluctuations. Historically, the Сompany has been producing more coal in Q3 and Q4 than in Q1 and Q2 of each year. However, the Company does not guarantee that this trend will continue in the future.
7 Change rates in Q1 2012 to Q1 2011
8 Including Kaskad enrichment plant
9 Included in stripping
10 Share of coal produced in stripping
11 Change rates in Q1 2012 to Q1 2011
12 Sales of the group of companies, subject to the resale of coal purchased from third parties
13 Excluding railway tariffs and VAT
14 We recommend that participants start dialing in 15 minutes before the indicated time to ensure a timely start to the conference call.
