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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

Lubelski Węgiel BOGDANKA S.A. after 2012

Thursday, 2013-03-21
 
  Bogdanka, 21 March 2013

PRESS RELEASE


LUBELSKI WĘGIEL BOGDANKA S.A. AFTER 2012:
RECORD-BREAKING LEVEL OF EXTRACTION AND EXCELLENT FINANCIAL RESULTS



The Lubelski Węgiel BOGDANKA Group, whose Parent Company is Lubelski Węgiel BOGDANKA S.A. – Poland’s most modern and efficient hard coal mine, standing at the forefront of Polish power coal producers, in 2012 generated the revenue of more than PLN 1.8 billion, being by 41% higher than in 2011. The consolidated operating profit was higher than that achieved a year before by nearly 34.5% and amounted to PLN 357.3 million, and the Group’s net profit was PLN 289.8 million, which represents an increase by almost 31%.

The extraction level achieved in 2012 of 7.78 million tonnes was higher by 33.3% from the last year’s result, and at the same time it was a historical record of the Company.

The Company maintains good profitability ratios at all levels: gross margin in the entire year was 27.52%, EBIT: 19.47%, and net margin: 15.79%.

The increased extraction and better financial results are the effects of consistently pursued strategy whose key objective is to increase the level of extraction to 11.5 million tonnes per annum following the completion of an investment in the Stefanów Field (from 5.8 million tonnes in 2010 and almost 5.84 million tonnes in 2011), thus doubling the share in the market of hard coal producers in Poland.


FINANCIAL RESULTS - DETAILS
Detailed financial results of the LW BOGDANKA Group after the first quarter of 2012 and after the entire 2012 are presented in the table below:

PLN ‘000
Q4 2012
  Q4 2011
Change
2012
2011
Change
Revenue on sales
443 561
435 588
1.83%
1 835 801
1 301 349
41.07%
Gross profit
75 958
201 773
-62.35%
505 190
384 653
31.34%
EBITDA
90 613
229 941
-60.59%
658 089
450 603
46.05%
Operating profit
18 870
164 048
-88.50%
357 348
265 739
34.47%
Profit before taxation
17 180
162 882
-89.45%
358 325
271 981
31.75%
Net profit
12 845
133 203
-90.36%
289 782
221 246
30.98%
 
The main source of the LW BOGDANKA Group's revenue on sales in 2012 was, as usual, the production and sale of power coal. The sale of power coal accounted for 96.37% of the LW BOGDANKA Group's sales revenue (94.11% 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 31.06%), with a higher average annual unit sale price.

Almost 80% 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. – Grupa ENEA S.A. (approx. 44% of share in revenue), Elektrownia Połaniec SA / GDF Suez Energia Polska – Grupa GDF Suez Energia Polska (approx. 17% of share in revenue), PGNIG Termika (approx. 14% of share in revenue) and Elektrownia Ostrołęka.

Weaker results of Q4 as compared to those of the same period of 2011 resulted from less favourable geological and mining conditions encountered by the Company in the plough wall of the Stefanów Field, consisting in a lack of seam continuity, which affected the extraction level.

Concurrently, Q4 of 2011 was exceptionally good since the plough system was launched at that time (usually the fourth quarter’s results are weaker for the mining industry, as provisions for employee costs are created, the awards related to the miner’s day – St. Barbara’s Day – as well as the so called 14th salaries are paid out).

PROFITABILITY RATIOS OF LW BOGDANKA

In 2012, the Company’s profitability ratios continued to stand at a good level, despite the worse Q4, as compared to the same period of 2011.

Profitability ratios of the LW BOGDANKA Group:


Item
2012
2011
Change
[p.p.]

2012-2011
Change
[%]
2012/2011

Gross margin on sales 27,52%
29,56%
-2,04
-6,90%
EBITDA
35,85%
34,63%
1,22
3,52%
EBIT
19,47%
20,42%
-0,95
-4,65%
Gross margin
19,52%
20,90%
-1,38
-6,60%
Net margin
15,79%
17,00%
-1,21
-7,12%
Return on Assets 8,83%
7,49%
1,34
17,89%
Return on Equity 13,06%
10,76%
2,30
21,38%
 
Gross margin on sales of the LW BOGDANKA Group decreased from 29.56% to 27.52%. The increase in that ratio resulted from a lower cost dynamics of revenues relative to the dynamics of costs of products, goods and materials sold.

EBITDA grew from 34.63% in 2011 to 35.85% in 2012. The change in value of the ratio was caused by depreciation going up from PLN 184.86 million (2011) to PLN 300.74 million (2012).

In the period under analysis, the EBIT value was 19.47%, being similar to last year’s figure.

Gross margin for 2012 was 19.52% and was slightly lower than that for 2011 (by 1.38 p.p.).

Net margin on the Lubelski Węgiel Bogdanka S.A. Group's operations amounted to 15.79% for 2012, compared to 17% for 2011.

The increase in assets profitability (from 7.49% to 8.83%) is a consequence of a higher dynamics of the net result relative to the dynamics of the average level of the Group’s assets.

As in the case of ROA, the increase in ROE was caused by a higher net profit (by 30.98%) with a concurrent increase (by 7.17%) in the value of shareholders’ equity.

COAL PRODUCTION AND SALES

In 2012 the level of commercial coal extraction achieved the Company’s historical record with the extraction of 7.78 million tonnes, representing an increase by 33.34% over 2011 (5.84 million tonnes). The average annual coal yield ratio (the relation of commercial coal to gross coal) achieved in 2012 was better than in 2011.

Sales in 2012 were nearly 7.8 million tonnes, i.e. by 31.06% more than in the previous year. The difference between the higher sales and the lower net coal extraction levels results from the Company selling majority of its reserves.

In consequence LW BOGDANKA’s reserve of coal as at 31 December 2012 was 18,300 tonnes, i.e. less by 34.19% from stock recorded in 2011. The above level of stock equals less than one-day coal production of the Company.
 
STRATEGY

Building and increasing the Company’s value for the shareholders continues to be the strategic development objective of LW BOGDANKA S.A. It is 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 edge 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 following the completion of the investment in the Stefanów Field (from 5.8 million tonnes in 2010 and almost 5.84 million tonnes in 2011), thus 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.

I find the results for 2012 satisfactory. Despite less favourable geological and mining conditions encountered in the fourth quarter by the Company in the plough wall of the Stefanów Field, consisting in a lack of seam continuity, and deteriorating situation in the coal market last year, we achieved the record-breaking level of extraction and excellent, also record, financial results. We began the year 2013 in line with our assumptions, with the extraction levels in January and February as scheduled, along with satisfactory yield levels. Currently we focus on continuing the planned investments which are to contribute to increasing our production capacity. We also signed an agreement for the third ploughing system to be delivered in June next year, and started in the third quarter of 2014,” said Zbigniew Stopa, President of the Management Board of LW BOGDANKA S.A.

“When observing the market, I believe that 2013 may be difficult for our industry as the demand for power coal drops and the coal reserves on mounds in many mines grow. Nevertheless I am convinced that LW BOGDANKA as the most efficient and most modern coal mine in Poland has the capacity to face difficult market conditions,” added Zbigniew Stopa.

Additional information available from:

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

 
LW BOGDANKA – HIGHLIGHTS

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 2012, the Bogdanka’s commercial coal production was 7.78 million tonnes.

LW BOGDANKA conducts mining activity with respect to extraction, agglomeration and sale 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 mainly the industrial customers based in the eastern and north-eastern Poland. Market of customers is stable, and the sale is carried out mainly under long-term agreements. LW BOGDANKA’s major sales channels are commercial power and industrial power industries.

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

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Additional information available at: www.bogdanka.eu

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