OJSC "Kuzbasskaya Toplivnaya Company" (RTS/MICEX: «KBTK»), one of the largest producers and exporters of thermal coal in Russia, is pleased to announce its financial statements under IFRS for the year 2012. Independent auditors of the financial statements is ZAO "KPMG".
Financial highlights
| RUB mln. | Q41 2012 |
Q31 2012 |
Ch. | 2012 | 2011 | Ch. |
| Revenue | 6,229 | 5,370 | 16% | 23,104 | 23,939 | -3% |
| Cost of sales | 4,838 | 4,335 | 12% | 18,982 | 19,404 | -2% |
| Production cash costs per tonne, RUB | 583 | 561 | 4% | 690 | 653 | 6% |
| Gross profit | 1,391 | 1,035 | 34% | 4,122 | 4,535 | -9% |
| Gross profit margin | 22% | 19% | 3 pip | 18% | 19% | -1 pip |
| Distribution, administrative and other costs | 511 | 406 | 26% | 1,781 | 1,640 | 9% |
| Operating profit | 880 | 629 | 40% | 2,341 | 2,895 | -19% |
| Operating profit margin | 14% | 12% | 2 pip | 10% | 12% | -2 pip |
|
EBITDA2 |
1,197 | 905 | 32% | 3,479 | 3,911 | -11% |
| EBITDA margin | 19% | 17% | 2 pip | 15% | 16% | -1 pip |
| EBITDA per tonne, RUB | 501 | 404 | 24% | 399 | 448 | -11% |
| Net profit | 697 | 608 | 15% | 1,810 | 2,018 | -10% |
| Net profit margin | 11% | 11% | - | 8% | 8% | - |
Revenue
Revenues for Q4 2012 increased by 16% to RUB 6,229 mln. under the influence of a seasonal increase in demand for coal, caused by the heating season, revenue in the segment of own coal sales in the domestic market increased by 32% to RUB 1,466 mln. Gross profit margin in this segment demonstrated record quarterly figure for the last three years, comprising 34%. In the segment of coal resale revenue increased by 52% to RUB 724 mln.
Revenue for the entire year 2012 decreased by 3% to RUB 23,104 mln. due to reduction of revenue in the segment of own coal export sales by 7% to RUB 15,858 mln. This was caused by the deterioration of market conditions in the global coal energy markets coal. Revenues from export sales decreased by 5 percentage points to 69%.
Operating profit and EBITDA
Due to the seasonal increase in demand for coal, the operating profit in Q4 2012 increased by 40% to RUB 880 mln. Production cash costs in Q4 increased by 9% to RUB 1,365 mln. as a result of increased production volume. Cost of sales in Q4 rose to RUB 4,838 mln. due to an increase in transportation costs and the purchase price of coal for resale, as well as production cash costs, which increased following the increase of production. The level of commercial, administrative and other expenses in Q4 2012 increased by 26% to RUB 511 mln. due to the increase in sales volumes. EBITDA in Q4 increased by 32% to RUB 1,197 mln.
Operating profit in 2012 decreased by 19% to RUB 2,341 mln. This measure was impacted by deterioration of the situation in the world markets of thermal coal, which was partially offset by lower cost of sales. Production costs in 2012 increased by 5% to RUB 5,978 mln. Cost of sales decreased by 2% as a result of the cost cutting program undertaken in the second half of 2012. Commercial, administrative and other expenses in 2012 increased by 9% to RUB 1,781 mln. due to the indexation of salaries to personnel. EBITDA in 2012 decreased by 11% to RUB 3,479 mln.
Net profit
Net profit in Q4 was RUB 697 mln, an increase of 15% compared to the previous quarter. Positive impact on net profit was due to high seasonal sales in domestic market, characterized by high marginality.
Net profit for the entire year of 2012 amounted to RUB 1,810 mln., decreasing by 10% under the influence of reduced revenue from export coal sales.
Debt portfolio management
| RUB mln. | 31.12.12 | 30.09.12 | Ch. | % of total | 31.12.11 | Ch.3 |
| Long term loans | 3,541 | 5,318 | -33% | 50% | 2,794 | 27% |
| Short term loans | 3,502 | 1,953 | 79% | 50% | 1,753 | 100% |
| Total debt, incl.: | 7,043 | 7,271 | -3% | 4,547 | 55% | |
| Ruble-denominated | 3,067 | 3,823 | -20% | 44% | 647 | 374% |
| Average interest rate for Ruble loans | 9.56% | 9.64% | -0.08 pip | 11.02% | -1.46 pip | |
| Subsidized interest for Ruble loans4 | 8.45% | 9.29% | -0.84 pip | 4.85% | 3.60 pip | |
| USD-denominated | 3,975 | 3,448 | 15% | 56% | 3,900 | 2% |
| Average interest for USD loans | 4.80% | 4.80% | - | 4.74% | 0.06 pip | |
| Cash and cash equivalents | 2,362 | 2,4855 | -5% | 1,884 | 25% | |
| Net debt | 4,681 | 4,786 | -2% | 2,663 | 76% | |
| Net debt / EBITDA | 1.35 | 1.316 | 2% | 0.68 | 98% | |
Net debt as at 31 December 2012 amounted to RUB 4,681 mln., decreasing by 2% in comparison with net debt as at 30 September 2012. The net debt to EBITDA ratio was 1.35. Under the terms of the existing loan agreements with banks, this ratio should not exceed the level of 3.50 - 4.00.
The company maintains an effective financial and investment policy, and as a result the average interest on borrowings denominated in rubles at the end of 2012 was 8.45%4, and for loans denominated in U.S. dollars — 4.80%.
Cash flow and investments
| RUB mln. | Q47 2012 |
Q37 2012 |
Ch. | 2012 | 2011 | Ch. |
| Operating cash flow | 940 | 968 | -3% | 2,332 | 2,096 | 11% |
| Investment cash flow, incl.: | -468 | -798 | -41% | -3,944 | -2,562 | 54% |
| Acquisition of property, plant and equipment | -713 | -906 | -21% | -3,847 | -2,409 | 60% |
| Financial cash flow | -161 | 722 | n/a | 2,125 | 1,906 | 11% |
| Net increase / (decrease) in cash and cash equivalents | 311 | 942 | -67% | 513 | 1,440 | -64% |
In Q4 2012, operating cash flow increased by 3% to RUB 940 mln. Total investment cash flow decreased by 41% to RUB 468 mln. while cash flow used in acquisition of property, plant and equipment amounted to RUB 713 mln., most of which related to the completion of construction of the washing plant, "Kaskad-2." Net cash outflow from financial activities in Q4 2012 amounted to RUB 161 mln mainly due to the repayment of financial obligations.
At the end of 2012 operating cash flow increased by 11% to RUB 2,332 mln. Investment cash flow increased by 54% to RUB 3,944 mln, of which RUB 3,847 mln. relates to cash flow used in acquisition of property, plant and equipment. Key investment projects in 2012 consisted of construction of the washing plant, "Kaskad-2", construction of the fuel storage, investment in rail infrastructure and expansion of the retail network. Net cash flow from financial activities in 2012 increased by 11% to RUB 2,125 mln.
Igor Prokudin, CEO of the Company, commented:
"2012 was difficult for Kuzbass coal companies due to the sharp fall in prices in the world market. However, thanks to coordinated team work, clear and timely anti-crisis measures, including large-scale cost cutting, changes in financial and investment policies, Kuzbasskaya Toplivnaya Company managed to prevent most of the negative effects.
Without a doubt, the main event for Kuzbasskaya Toplivnaya Company in 2012 was the completion of construction works on the second washing plant. At the moment the washing plant "Kaskad-2" undergoes comprehensive testing, planning to start work at its full capacity at the beginning of Q2 2013. The products produced by the factory will significantly increase the company's competitiveness.
At the same time, one of the most important results in 2012 includes the development and implementation of a new strategy for coal transportation. At the beginning of 2013, the KTK has structured its own transport assets and signed a beneficial five-year contract with a new supplier, which will allow for a significant cost reduction in the next reporting period.
I emphasize that the present condition of the markets has not changed the basic direction of our strategy. This is, first of all, the policy of improving the quality of products, development of mineral resource base, and modernization of the production process.
We also maintain the main direction of the dividend policy. Based on the results of 2012 the Board of Directors recommended for General Meeting of Shareholders to pay more than RUB 496 mln. in dividends, which amounted to 27% of the Company’s net profit.
Overall, despite the difficulties, I believe that 2012 has served as another important step in the implementation of the Company’s development strategy. It is important for our investors, customers and the public to understand, that we continue to move forward in the chosen direction."
Key events in Q4 and after reporting date
Outlook for Q1 and full 2013
Management of KTK tracks the prices in world markets, which in the recent year have remained at a stable low level, and does not expect any increase of thermal coal price in Q2 and Q3 2013. However, the price trends of past periods raise can expectations of rising prices in the medium term.
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 – Head of Moscow office, IRO
Thursday, April 4, 2013
13.00 London
16.00 Moscow
19.00 Kemerovo
We recommend that participants start dialing in 10 minutes before the indicated time to ensure a timely start to the conference call.
You can download the presentation starting from 10:00 (GMT +4:00) April 4, 2013 using following links:
www.oaoktk.ru/en/investors
www.oaoktk.ru/investors/presentations
www.slideshare.net/oaoktk
You can join the conference call by dial-in:
International: +44 (0) 1452 555566
Russia (toll free): 81080020972044
Conference ID: 31967303
The record and transcript of the conference call will be uploaded in 2 weeks: www.oaoktk.ru/en/investors
The conference call replay will be available for 2 weeks:
International: +44 (0)1452550000
Replay Access Code: 31967303
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
Head of Moscow office, IRO
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 at a glance:
OJSC "Kuzbasskaya Toplivnaya Company" is one of the largest manufacturers8 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%.
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.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.
Appendix
Production
| mln. tonnes | Q4 2012 |
Q3 2012 |
Ch. | 2012 | 2011 | Ch. |
| Coal production | 2.39 | 2.24 | 7% | 8.71 | 8.73 | - |
|
Sorted coal |
1.38 | 1.37 | 1% | 5.75 | 5.56 | 3% |
| Enriched coal | 0.20 | 0.21 | -5% | 0.81 | 0.74 | - |
| Stripping, mln. cbm | 13.75 | 13.81 | - | 66.27 | 68.12 | -3% |
| Blasted rock mass9, mln. cbm. | 5.87 | 7.01 | -16% | 31.85 | 32.79 | -3% |
| Stripping ratio 10 | 5.80 | 6.16 | -6% | 7.60 | 7.80 | -3% |
| Average stripping transportation distance, km | 2.80 | 3.20 | -13% | 3.00 | 2.88 | 4% |
In Q4 2012, coal production grew by 7% to 2.39 mln. tonnes. Stripping volume remained at the Q3 level and amounted to 13.75 mln. tonnes, stripping ratio decreased by 6% to 5.80 according to the production plan. The volume of blasted rock mass decreased by 16% to 5.80 mln. cubic meters. and the average stripping transportation distance decreased by 13% to 2.80 km., which positively affected the level of production cash costs, amounting to 28% of cost of sales.
At the end of 2012 the production and washing of coal remained at the level of 2011 and amounted to 8.71 mln. tonnes of raw coal and 0.81 mln. tonnes of washed coal. The volume of coal sorting increased by 3% to 5.75 mln. tonnes. This type of coal is in high demand among the households, the main sales are carried out through the Company’s retail network in Western Siberia and through partner retail networks in Poland. The volume of stripping, blasted rock mass as well as the stripping ratio showed a decrease of 3% as a consequence of cost cutting measures and reduction of services of third-party contractors. At year-end, the share production cash costs in the cost of sales was 31%.
Sales
| mln. tonnes | Q4 2012 |
Q3 2012 |
Ch. | 2012 | 2011 | Ch. |
| Sales11, incl.: | 2.93 | 2.42 | 21% | 10.20 | 10.66 | -4% |
|
Export sales |
1.49 | 1.36 | 10% | 5.91 | 6.45 | -8% |
| Domestic sales | 1.44 | 1.06 | 36% | 4.29 | 4.21 | 2% |
| Own coal | 2.44 | 2.10 | 16% | 8.51 | 8.59 | -1% |
| Coal re-sale | 0.50 | 0.32 | 56% | 1.70 | 2.08 | -18% |
| Average selling price, RUB/tonne12 | 1,269 | 1,27613 | -1% | 1,294 | 1,228 | 5% |
| Average export price, RUB/tonne | 1,228 | 1,28813 | -5% | 1,307 | 1,237 | 6% |
| Average domestic price, RUB/tonne | 1,312 | 1,259 | 4% | 1,276 | 1,213 | 5% |
Due to the traditional growth in trading activity in the Russian market of thermal coal during the heating season, the company's sales in the last quarter rose by 21% to 2.93 mln. tonnes of coal. Quarterly growth of sales was higher than coal production growth, as the Company increased its resale of coal purchased from third-parties by 56% to 0.50 mln tonnes. The growth was driven by coal sales in the domestic market, which grew by 36% to 1.44 mln. tonnes of coal. In Q4, the volume of exports increased by 10% to 1.49 mln. tonnes. During the quarter the share of exports in total sales volume of coal was reduced to 51%. In Q4 2012, the average selling price of coal fell by 1% quarter-on-quarter and reached RUB 1,269 per tonne. The average sales price in the domestic market grew by 4% to RUB 1,312 per tonne. Average selling price of coal exports in Q4 decreased by 5% to RUB 1,228 per tonne.
Sales of coal in 2012 decreased by 4% to 10.20 mln tonnes. Reduction of sales was caused by the weakening of export demand, which led to a reduction in export shipments by 8% to 5.91 mln. tonnes of coal in 2012. Sales of coal in the domestic market increased by 2% to 4.29 mln tonnes. The share of exports in total sales has declined from 61% to 58% compared with 2011.
Average selling price of coal in 2012 amounted to RUB 1,294 per tonne, which was 5% higher than in 2011. Average selling price of coal in the domestic market increased by 5% to RUB 1,276 per tonne. The average export price in 2012 amounted RUB 1,307 per tonne, which is 6% higher than in 2011.
Production cash costs
| RUB mln. | Q4 2012 |
Q3 2012 |
Ch. | 2012 | 2011 | Ch. |
| Consolidated cost of sales | 4,838 | 4,335 | 12% | 18,982 | 19,404 | -2% |
|
Excluding cost of sales of subsidiaries |
851 | 691 | 23% | 2,491 | 2,198 | 13% |
| Cost of sales of KTK, excluding: | 3,988 | 3,643 | 9% | 16,491 | 17,206 | -4% |
| Depreciation allocated to cost of sales | -274 | -240 | 14% | -991 | -907 | 9% |
| Cost of coal for resale & coal for reprocessing | -13 | 1 | n.a. | -418 | -549 | -24% |
| Change in inventories | -46 | -41 | 12% | 47 | 132 | -64% |
| Railway tariff and transportation services | -2,270 | -2,106 | 8% | -9 151 | -10,180 | -10% |
| Production cash costs | 1,365 | 1,256 | 9% | 5,978 | 5,702 | 5% |
| % of production cash costs in consolidated cost of sales |
28% | 29% | 31% | 29% | ||
| Production cash costs per tonne, RUB | 583 | 561 | 4% | 690 | 653 | 6% |
| Production cash costs per tonne, USD | 19 | 18 | 7% | 22 | 22 | - |
The investment program for Q2-Q4 2013
Due to changing conditions in the international coal markets, management decided to adjust the KTK's investment program for 2013 without giving up the key strategic priorities including the construction of a third washing plant "Vinogradovsky", development of open-pit "Bryansky", which will be the fourth mining asset of KTK. In Q1 2013 the Company did not make new investments, all the funds will be invested in Q2-Q4, 2013.
Total investment program for 2013 amounts to RUB 956 mln.14
This investment program demonstrates the key elements of investments and may change insignificantly during the year.
1 Here and after figures for the Q3 and Q4 2012 are presented as unaudited
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 30.09.12/30.09.11
4 Including subsidy of Belarus Republic for purchasing BelAZ mining trucks
5 Including term deposits
6 Annualized EBITDA
7 Here and after figures for the Q3 and Q4 2012 are presented as unaudited
8 Metal Expert, January 2013
9 Included in stripping
10 Share of coal produced in stripping.
11 Sales of the group of companies, subject to the resale of coal purchased from third parties.
12 Excluding railway tariffs and VAT.
13 Average price in Q3 2012 were restated to include operations of «KTK Polska».
14 Net of VAT.
