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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

Rapid growth in profit in the first half of 2009

Tuesday, 2009-09-01

LUBELSKI WĘGIEL BOGDANKA S.A.: RAPID GROWTH IN PROFIT IN THE FIRST HALF OF 2009; THE COMPANY CONFIRMS ITS FINANCIAL FORECASTS FOR 2009

Lubelski Węgiel Bogdanka S.A., one of the largest and most advanced hard coal mines in Poland and one of the leaders of the domestic market for power coal producers, recorded an increase in net profit of more than 60% in the first half of 2009, to PLN 83.5 mln. Operating profit in that period increased by almost 50% to PLN 104.5 mln. Revenue on sales increased by more than 5.4% to reach PLN 520.8 mln. The Company’s net margin also increased – after the first half of 2009 it reached 16%, compared to 10.5% in the first half of 2008.


The most important events in LW Bogdanka Capital Group in the first half of 2009 include:

  • Revenue on sales increased by more than 5.4% to PLN 520.8 mln, compared to PLN 493.9 mln in the same period last year.
  • The net profit of the LW Bogdanka Group in the first half of 2009 amounted to PLN 83.5 mln and was 60.7% higher than in the first half of 2008, when they reached almost PLN 52 mln.
  • EBITDA increased by more than 26.6% to PLN 173.7 mln, compared to PLN 137.1 mln in the first half of 2008.
  • Operating profit increased by more than 49% to PLN 104.5 mln, compared to PLN 70.1 mln in the same period of 2008.
  • The profitability indicators for the company’s business activities were higher than those achieved in the first half of 2008. The gross margin on sales amounted to 30.7%, while the net  margin reached 16%.
  • The company maintains its published financial forecasts published for 2009 and is continuing to implement its development strategy, which will be supported with funds obtained from the issue.

 

FINANCIAL RESULTS

The main source of revenue on sales of the LW BOGDANKA Group in the first half of 2009 (and the first half of 2008) was the production and sale of power coal. In the first half of 2009, those activities generated 95.96% of the revenue on sales generated by the LW BOGDANKA Group (compared to 96.63% in the first half of 2008). The relative decrease in the share of revenue on sales of power coal in the first half of 2009 in the revenues on total sales, relative to the first half of 2008, results from the fact that there were less sales of façade bricks in the first half of 2008 due to the fire in the Company’s EkoKLINKIER Construction Ceramics Plant in September 2007.

Most (approx. 90%) coal sales in the above-mentioned period (as well as in the same period of the previous year) were carried out on the basis of long-term commercial contracts with regular key customers of the Company (primarily Elektrownia Kozienice S.A., Elektrownia Połaniec S.A., Zakłady Azotowe Puławy S.A. and Elektrownia Ostrołęka S.A.).

 

 

Table: Selected financial information of the LW BOGDANKA Group (in PLN ’000 unless indicated otherwise)

Item

1st half of 2009

1st half of 2008

Change (%)

Revenue on sales

520,795

493,926

5.44%

Gross profit

159,620

117,768

35.54%

EBITDA*

173,695

137,145

26.65%

EBIT (Operating profit)

104,546

70,097

49.14%

Pre-tax profit

104,233

68,752

51.61%

Net profit for the financial year

83,538

51,981

60.71%

 

 

In the first half of 2009, commercial coal extraction amounted to almost 2.5 mln tonnes, a decrease relative to the first half of 2008 (almost 2.8 mln tonnes), because the Company was conducting operations in more difficult mining/geological conditions and carrying out a larger scope of preparatory work and work on gaining access to deposits, which led to a greater stone content in extracted coal and therefore a decrease in commercial coal extraction, despite the Company’s exploitation of its mining capacity remaining constant and at the optimum level. Despite the decrease in commercial coal extraction, due to the higher prices of coal, the LW Bogdanka Group generated revenue on sales of commercial coal more than 5.4% higher than in the same period of 2008.

 

Due to the increase in the Group’s revenue in the first half of 2009, accompanied by a decrease of 3.98% in the costs of products, goods and materials sold and a decrease in other operating costs of 90.75%, the profitability indicators for the company’s business activities were higher than those achieved in the first half of 2008. The gross margin on sales amounted to 30.7%, compared to 23.8% in the same period of 2008, while the net margin reached 16% compared to 10.5% in the previous year.

 

 

FULFILMENT OF FINANCIAL FORECASTS

The degree to which the financial forecasts of LW Bogdanka Capital Group for 2009 were fulfilled is shown in the table below:

Forecast item

Forecast

Performance the first half of 2009

Fulfilment of the forecast in the first half of 2009

Net revenue on sales

1,091,713

520,795

47.7%

Operating profit

178,319

104,546

58.6%

Net profit

140,603

83,538

59.4%

 

The financial results after the first half of 2009 correspond to the expectations of the Management Board, and at present the Management Board of LW BOGDANKA S.A. does not see any threat to the fulfilment of the published forecast of the financial results.

 Fulfilment of the objectives of the issue

Investments associated with completing the construction of the Company’s technical infrastructure enabling new production capacities to be started up include the following objectives, as described in the Issue Prospectus, which we plan to carry out in the period 2009-2010 and, with regard to increasing the processing capacities of the Mechanical Coal Processing Plant, in 2009-2011:

  • Construction of the 2.1 drawing and ventilation shaft – approx. PLN 53.3 million;
  • Extension of the Mechanical Coal Processing Plant – approx. PLN 319.7 million, including:

a)    increasing the processing capacity of the Mechanical Coal Processing Plant from the current level of 1,200 t/h to 2,400 t/h – approx. PLN 195.7 million;

b)    Construction of a system for transporting excavated material from the Stefanów Field to the Mechanical Coal Processing Plant – approx. PLN 120.0 million;

c)    Enlargement of the coal yard – approx. PLN 4.0 million;

  • Other investments in the technical infrastructure of the Stefanów Field – approx. PLN 61.6 million, including:

a)    Construction of building structures for the Stefanów Field – approx. PLN 41.6 million;

b)    Air-conditioning for the underground part of the Mine – approx. PLN 20.0 million;

  • Extension of the track system for Bogdanka station – approx. PLN 10.1 million.

By the date of submitting this Report, the Company had started up tender procedures relating to investments tasks such as constructing pits in the Stefanów Field, extending the Mechanical Coal Processing Plant, constructing a system for hauling excavated material from shaft 2.1 in the Stefanów Field to the Mechanical Coal Processing Plant in the Bogdanka field, constructing individual technological facilities in the Stefanów Field (a main ventilator station, a tower for shaft 2.1 and a shaft top building for shaft 2.1, and a STR-M2.1 6/05/04 kV transformer and distributor station in the hoisting machine building), and general mining works in the Stefanów Field.

The settlement of the above-mentioned tenders will lead to the start-up of a successive process (starting from the fourth quarter of 2009) of using the funds obtained by LW BOGDANKA S.A. from the public offering of C series shares.

The proceeds from the issue of the Company shares will allow it to finance, except for investment tasks specified in the Issue Prospectus (objectives of the issue), additional projects, i.e. performance of mining excavations in the Stefanów Field, construction of storage silos in the Stefanów Field as well as the purchase of a coal mine face complex.    

 

We are very pleased with the results we achieved in the first half of 2009, which confirm that Bogdanka is a very well managed organisation which also records very good results in a more difficult market environment. We maintain our financial forecasts for the whole of 2009 and we will also continue to implement our development strategy, which is aimed at building the value of our company in subsequent years for all our shareholders,” said Mirosław Taras, President of the Management Board of LW Bogdanka S.A.

 

 

Bogdanka, September 1, 2009

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