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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

LUBELSKI WĘGIEL BOGDANKA S.A. after the first half of 2012

Wednesday, 2012-08-29
PRESS RELEASE
Bogdanka, 29 August 2012


LUBELSKI WĘGIEL BOGDANKA S.A. AFTER THE FIRST HALF OF 2012:

A Three Digit Increase in EBITDA, EBIT and Net Profit
EBITDA margin: 40.30 %


Lubelski Węgiel BOGDANKA S.A., the most modern and effective hard coal mine in Poland, as well as the domestic leader on the energy coal producers market, generated in the first half of 2012 over PLN 906 million revenue, almost 56% more than in the same period in 2011. The consolidated operating profit amounted to PLN 212.82 million and the Group’s net profit reached PLN 173.25 million. These values are higher by 202.26% and 178.7%, respectively, than in the first half of 2011. During six months of 2012, the production of commercial coal, as compared to the same period of the previous year, increased by 64.52% and amounted 4,175,060 tonnes (2,537,680 in the previous year).

The main source of sales revenue for the LW BOGDANKA Group in the first half of 2012 (as well as in the first half of 2011) was production and sale of power coal. From 1 January to 30 June 2012, sales of power coal generated 96.87% of the LW BOGDANKA Group's sales revenue (92.13% in the same period of the previous year). The increase in the revenue on sales of coal is a consequence of higher volumes of coal sold (+45.94%), with a higher sale unit price.

Over 74% of coal sales (in terms of value) realised in the period from 1 January to 30 June 2012 were carried out on the basis of long-term commercial agreements concluded between LW BOGDANKA and Elektrownia Kozienice S.A., GDF Suez Energia S.A., Elektrownia Ostrołęka S.A. and Grupa Ożarów. A drop in the share of key customers in the total value of revenue (in Q1 2011 the above power plants generated more than 85% of revenue of the LW BOGDANKA Group) is a consequence of diversification of sales to smaller customers (due to additional volume of commercial coal available).

FINANCIAL RESULTS - DETAILS

Item [PLN '000] 
Q2
2012
Q2
2011
Change
[%]
2012/2011
2Qs
2012
2Qs
2011
Change
[%]
2012/2011
Revenue on sales 429 236 272 120 57.74 906 538 582 081
 55.74
Gross profit  125 516
 48 798 157.22
 301 445 121 616 147.87
EBITDA
 166 297 67 279
 147.18 365 343 145 185  151.64
EBIT (Operating profit)   93 518
 26 711 250.11 212 815
 70 409 202.26
Profit before taxation 89 655 32 194 178.48
 213 35877 029
 176.98
Net profit  74 037
 26 205
 182.53  173 247 
  62 163
  178.70


The Lubelski Węgiel BOGDANKA S.A. Group's revenue on sales amounted to PLN 906,538,000, which represents an increase of 55.74%, or by PLN 324,457,000, as compared to the same period of the previous year.

In the second quarter of 2012, the Group’s revenue on sales amounted to PLN 429,236,000, compared to PLN 272,120,000 in the analogous period of 2011 (increase by 57.74%, i.e. PLN 157,116,000).

The Group’s operating profit grew from PLN 70,409,000 (for H1 2011) to PLN 212,815,000 (for H1 2012), with the year-to-year change of + PLN 142,406,000, i.e. 202.26%.

The value of EBITDA (operating profit before depreciation/amortisation) for the period from 1 January to 30 June 2012 amounted to PLN 365,343,000 compared to PLN 145,185,000 in the same period of 2011. The increase in the operating profit derives from the launch of the Stefanów Field (in October 2011), and in consequence, an additional volume of coal allocated for sale. The second quarter itself saw an increase in the operating profit from PLN 26,711,000 (Q2 2011) to PLN 93,518,000 (Q2 2012).

The net profit for the first half of 2012 amounted to PLN 173,247,000, compared to PLN 62,163,000 for the same period of 2011, which represents an increase by 178.70%, i.e. by PLN 111,084,000.

In the second quarter of 2012 the LW BOGDANKA Group generated net profit in the amount of PLN 74,037,000, as compared to PLN 26,205,000 in the second quarter of 2011 (an increase by 182.53%).



PROFITABILITY RATIOS OF THE LW BOGDANKA GROUP

Item 
 2Qs
2012
2Qs
2011
Change
[p.p.]
2012-2011
Change
[%]
(2012/2011)
Gross margin on sales 33.25% 20.89%  12.36 59.17
EBITDA 40.30% 24.94%
 15.36 61.59
EBIT
 23.48% 12.10%
 11.38 94.05
Gross margin  23.54%  13.23% 10.31
 77.93
Net margin 
 19.11% 10.68%  8.43 78.93
Return on Assets 5.35% 2.18%
 3.17 145.41
Return on Equity
 8.02%
  3.15%
 4.87 154.60

During the first quarter of 2012, all profitability ratios achieved higher values than in the same period of the previous year.

Gross margin on sales of the LW BOGDANKA Group increased from 20.89% (for the first half of 2011) to 33.25% (for the first half of 2012). The change in value of that ratio, was a result of a lower (in nominal terms) increase in the generated revenue in relation to the incurred costs of products, goods and materials – this also translated into an increased gross profit.

In the analysed period, EBIT (operating profit) was 23.48%, which represents an increase by 11.38 p.p. in comparison to the same period in the previous year. The change in value of the described ratio results from an increase in the gross profit which is realised by an increase in revenue on sales of coal of the Parent Undertaking.

EBITDA was up from 24.94% (first half of 2011) to 40.30% (first half of 2012). The change in value of the ratio results from – except for the increasing operating profit – the value of amortisation/depreciation increasing from PLN 74,776,000 (first half of 2011) to PLN 152,528,000 (first half of 2012).

Gross margin for the first half of 2012 amounted to 23.54% and was higher than the gross profitability for the first half of 2011 (by 10.31 p.p.).

Net margin on the Lubelski Węgiel Bogdanka S.A. Group's operations amounted to 19.11% for the first half of 2012, compared to 10.68% for the first half of 2011.

The increase in ROA (from 2.18% for the first half of 2011 to 5.35% for the first half of 2012) is a consequence of a higher dynamics of the net profit relative to the increase in the value of the Group’s assets. The effects of commercial use of assets that have been so far produced by the Parent Undertaking are already noticeable.

COAL PRODUCTION AND SALES

During the first 6 months of 2012, the revenue on sales generated by the LW BOGDANKA Group resulted from coal supply orders under agreements signed by the Parent Undertaking.

Net coal production of the LW BOGDANKA Group for H1 2012 and H1 2011 ('000 tonnes)

H1 2012
H1 2011
Change (2012/2011)
[%]
 4,175.06  2,537.68
 64.52


From 1 January to 30 June 2012, as compared to the same period of 2011, the production of commercial coal increased by 64.52% and amounted to 4,175,060 tonnes, (2,537,680 tonnes in the previous year). The increase in the extraction of the commercial coal by nearly 65% occurred together with an increase by almost 46% of gross extraction, which means that in the first half of 2012 the Parent Undertaking recorded a higher output ratio than in the analogous period of the previous year.

Sale of coal of the LW BOGDANKA Group for H1 2012 and H1 2011 ('000 tonnes)

H1 2012
 H1 2011
Change (2012/2011)
[%]
 3,881.41 2,659.57 45.94%

From 1 January to 30 June 2012, 45.94% (1,221,840 tonnes) more coal was sold as compared to the analogous period of the previous year. In the first half of 2012, the sale of the commercial coal was in line with plans and agreements signed by the Parent Undertaking.

Stock of coal ['000 tonnes]

Item 
30 Jun. 2012 
31 Dec. 2011 
30 Jun. 2011
 Change [%]
(30 Jun. 2012/
31 Dec. 2011)
  Change [%]
(30 Jun. 2012/
30 Jun. 2011)
 Stock of coal
 321.44
27.85
 14.84 1,054.16% 2,066.18%


As at 30 June 2012 stock of commercial coal of the Parent Undertaking amounted to 321,443.14 tonnes, which means that the level of stock increased by 293,592.30 tonnes (+1,054.16%) as compared to the level of 31 December 2011, and by 306,603.96 tonnes (+2,066.18%) compared to the level of 30 June 2011. The current level of stock results from a delivery schedule specified on the basis of agreements with recipients of coal. It approximately corresponds to a twelve-day output of commercial coal, and constitutes operational technological stock.

Mirosław Taras, President of the Management Board of LW Bogdanka S.A.:

“It is hard to hide satisfaction while presenting the Company’s results for the first half of 2012. Especially that Bogdanka represents a business which does not enjoy favourable reputation in Poland. Especially that the three digit dynamics of operational profit growth and net profit is not “hyped” by a single event, but is a result of effective accomplishment of our strategic goals.

Bogdanka developed its business model with the use of solutions that enable maintaining cost discipline. This business model gained recognition and confidence of the capital market participants, and still has been consistently carried out. By increasing, in accordance with the forecasts, the production, we decrease, due to the scale effect, the unit costs of coal production. This is why our Company, in many opinions, is perceived to be a predictable and well organised business. I can guarantee that we will do everything to multiply such opinions.”

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