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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

LUBELSKI WĘGIEL BOGDANKA S.A. AFTER 3Qs 2012

Wednesday, 2012-11-07

BOGDANKA, 7 November 2012

PRESS RELEASE


LUBELSKI WĘGIEL BOGDANKA S.A. AFTER THREE QUARTERS OF 2012:
EXCELLENT FINANCIAL RESULTS AND THE COMPANY’S BREAKTHROUGH EXTRACTION LEVEL EXCEEDING 6 MILLION TONNES


Lubelski Węgiel BOGDANKA S.A., the most modern and effective hard coal mine in Poland, as well as the domestic leader on market of the power coal producers, after three quarters of 2012 generated revenue of nearly PLN 1.4 billion, 60.8% more than in the same period of the previous year. The consolidated operating profit was almost 233% higher than that achieved in 2011 and amounted to PLN 338.5 million, and the Group’s net profit achieved PLN 276.9 million, representing an increase of approx. 215%. After three quarters of 2012 the Company has exceeded the financial result earned in the entire 2011.

The extraction of 6.07 million tonnes was higher after three quarters by 58.3% from that achieved a year before.

During the three quarters of 2012, the Company also significantly improved profitability ratios at all levels, as compared to 2011. Net margin was almost doubled and after three quarters 2012 reached 19.9%.

The increased extraction and better financial results are the effects of consistently pursued strategy of which the key objective is to increase the level of extraction to 11.5 million tonnes per annum in 2014 (from 5.8 million tonnes in 2010), thus doubling the Company's share in the market of hard coal producers in Poland.



FINANCIAL RESULTS - DETAILS

Detailed financial results of the LW BOGDANKA Group after three quarters of 2012 are presented in the table below:
PLN ‘000
 Q3 2012  Q3 2011
Change
Q1-Q3
2012
Q1-Q3 2012
  Q1-Q3 2011
Change
Revenue on sales485 702
283 68071,21%1 392 240865 76160,81%
Gross profit
127 78761 264108,58%429 232182 880134,71%
EBITDA202 13375 477167,81%
567 476220 662157,17%
Operating profit125 66331 282
301,71%338 478101 691232,85%
Pre-tax profit127 78732 070298,46%341 145109 099
212,69%
Net profit
103 69025 880300,66% 276 937
88 043214,55%

The main source of the LW BOGDANKA Group's revenue on sales in three quarters of 2012 was the production and sale of power coal. In the first quarter that activity accounted for 96.84% of sales revenue generated by the Group (it was 93.03% 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 (by 50.29%), with a higher unit sale price.

Almost 75% of coal sales (in terms of value) were carried out on the basis of long-term trade agreements concluded between LW BOGDANKA S.A. and its key customers, i.e. Elektrownia Kozienice S.A., GDF Suez Energia S.A., Elektrownia Ostrołęka S.A. and Grupa Ożarów.

PROFITABILITY RATIOS OF LW BOGDANKA

During the three quarters of 2012, the Company significantly improved all profitability ratios, as compared to the same period of 2011.
 
Profitability ratios of the LW BOGDANKA Group:
 Item
  Q1-Q3 2012  Q1-Q3 2011Change [p.p.]
2012/2011
Change
2012/2011
Gross margin on sales30,83%
21,12%9,71 45,98%
EBITDA40,76%25,49%15,2759,91%
EBIT
24,31%11,75%
12,56
106,89%
Gross margin
24,50%12,60%11,90 94,44%
Net margin
19,89%10,17%
9,72 95,58%
Return on Assets8,56%3,09%
5,47
 177,02%
Return on Equity12,51%4,43%
8,08
 182,39%


Gross margin on sales of the LW BOGDANKA Group increased from 21.12% (for three quarters of 2011) to 30.83% (for three quarters 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 amounted to 24.31%, which means an increase by 12.56 p.p. in comparison to the analogous period in the previous year. The change in value of that ratio is related to a higher gross profit earned due to an increase in the Company’s coal sales revenue.

EBITDA increased from 25.49% to 40.76%. The change in value of the ratio results from – in addition to the increasing operating profit – the rising value of amortisation/depreciation (from PLN 118.97 million after three quarters of 2011 to PLN 229 million after three quarters of 2012).

The gross profitability for three quarters of 2012 amounted to 24.50% and was 11.90 p.p. higher than the gross profitability for three quarters of 2011.

Net margin on the Lubelski Węgiel Bogdanka Group's operations amounted to 19.89% for three quarters of 2012, given 10.17% for three quarters of 2011 (nearly 100% increase in profitability year on year).

The increase in ROA (from 3.09% for three quarters of 2011 to 8.56% three quarters 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 Company are already noticeable.

As in the case of ROA, the increase in ROE (from 4.43% to 12.51%) results from a higher net profit (by 214.55%); in nominal terms, the net profit increased by PLN 188.9 million, and the shareholders’ equity by PLN 140.9 million.

COAL PRODUCTION AND SALES

In the three quarters of 2012, the level of extraction of the commercial coal has, in the first time in the Company’s history, exceeded 6 million tonnes (reaching 6.07 million tonnes) and was higher by 58.29% from the value achieved in the same period a year before (3.8 million tonnes). The increase in the extraction of the commercial coal by nearly 60% occurred together with an increase by almost 43% of gross extraction, which means that during three quarters of 2012 the Company recorded a higher total output ratio than in the analogous period of the previous year.

The sales in the three quarters of 2012 reached a level of PLN 5.9 million tonnes, by 50.29% higher than that recorded in the previous year.

Stock of coal at LW BOGDANKA as at 30 September 2012 amounted to 166,100 tonnes, and was 570.9% higher than in the same period of 2011.

The current stock level amounts to less than a seven-day extraction of commercial coal.
 
STRATEGY

Developing and increasing the Company’s value for the shareholders continue to be the strategic development objectives of LW BOGDANKA S.A. They are to be achieved by means of:
a) gaining access to new reserves and increasing the level of coal extraction based on the enlargement of the Stefanów Field;
b) maintaining a stable position as the main supplier of coal in eastern Poland, in particular for the commercial power industry;
c)  strengthening its competitive position by cutting unit costs of extraction and production.

The main strategic development objectives defined by the Company are:
a) doubling the coal production capacity to 11.5 million tonnes in 2014 (from 5.8 million tonnes in 2010), thereby doubling the share in the market of hard coal producers in Poland,
b) improving the efficiency of hard coal extraction and production;
c) ensuring that LW BOGDANKA is self-sufficient regarding the supply of electricity by developing its activities as regards the production of electricity;
d) environmental protection measures.

Zbigniew Stopa, acting President of the Management Board and the Vice-President for Technical Affairs of LW BOGDANKA S.A. commented:
”During the IPO process and for more than three years of the Company’s presence at the stock exchange, we convinced investors and shareholders that Bogdanka is a good business. We know how to run it. And the market trusted us. Our results after three quarters, which already exceed the values generated in the entire 2011, the increasing profitability ratios approaching the planned values at all levels as well as a successive reduction of unit costs, show that we were worth this trust, and that we continue to build value for shareholders.”
“At the end of October we finalised the installation of the second plough system to mine longwalls in thin deposits. We are now carrying out the technological start-up of the machines and preparatory works underground to launch extraction of next panels,” Zbigniew Stopa added.

For more information, contact:

Tomasz Zięba
Press Spokesman of LW Bogdanka S.A.
tel. (81) 462 56 04
e-mail: tzieba@lw.com.pl

Magda Kołodziejczyk, M+G
tel. (22) 416 01 02, 501 16 88 07
e-mail: magda.kolodziejczyk@mplusg.com.pl

LW BOGDANKA – KEY INFORMATION

Lubelski Węgiel Bogdanka S.A. is 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. In 2011 the production of commercial coal was 5.84 million tonnes, and after three quarters of 2012 - 6.07 million tonnes.

LW BOGDANKA conducts mining operations including extraction, cleaning and sales of hard coal. Additionally, the Company produces façade bricks in the process of utilising carboniferous rock waste stone in the EkoKLINKIER Construction Ceramics Plant.

The BOGDANKA mine supplies coal primarily to industrial customers located in the east and north-east of Poland. The customer market is stable, and the sales are carried out mainly based on long-term agreements. Key industries for LW BOGDANKA’s sales of commercial coal include professional and industrial power engineering.

The Company’s financial results, hard coal extraction capacity as well as its investment plans distinguish it from other companies operating in the industry.

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Additional information available at: www.bogdanka.eu


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