Kuzbasskaya Toplivnaya Company 3Q and 9M 2011 Operational Results
OREANDA-NEWS. November 02, 2011. OJSC "Kuzbasskaya Toplivnaya Company" (RTS/MICEX: "KBTK"), one of the fastest-growing thermal coal producers in Russia, is pleased to announce its operational results for the third quarter and 9 months ended 30 September 2011.
Quarterly Operational Results1
Mln tonnes Q3 2011 Q2 2011 Change, %
Coal production 2.44 1.91 28%
Sorted coal 1.51 1.36 11%
Enriched coal 0.20 0.19 5%
Sales volume, incl.: 2.81 2.08 35%
Export sales volume 1.61 1.67 -4%
Domestic sales volume 1.20 0.41 191%
Average realized price, RUR / tonne2 1,229 1,175 5%
Average export price, RUR / tonne 1,191 1,173 1%
Average domestic price, RUR / tonne 1,280 1,185 8%
In Q3 2011 the Company increased volumes of production and sales, achieving its quarterly plans. The volume of coal production amounted to 2.44 mln tonnes, an increase by 28% quarter-on-quarter (Q2 2011: 1.91 mln tonnes). Such strong growth was connected to the seasonal increase in coal demand in Russia before the heating season starts. In Q3 the Company increased the volume of coal sorting by 11% quarter-on-quarter to 1.51 mln tonnes in order to fulfil rising demand from the clients of its retail chain, located in Western Siberia. “Kaskad” enrichment plant, which produces export-quality coal, kept its production at 100% of its capacity. Its quarterly output increased by 5% to 0.2 mln tonnes mainly due to the additional working day in Q3.
During the quarter the total volume of the Company’s sales increased by 35% to 2.81 mln tonnes of coal (Q2 2011: 2.08 mln tonnes). The quarterly growth of sales was higher than production growth, because the Company increased sales of coal, purchased from third parties, by 32% quarter-on-quarter - from 0.35 mln tonnes to 0.47 mln tonnes. The major part of such coal was resold through KTK retail chain.
In Q3 the volume of export shipments decreased by 4% and amounted to 1.61 mln tonnes (Q2 2011: 1.67 mln tonnes). During the year export sales are typically more stable than sales on domestic market, because the Company possesses a well diversified client base in Europe and South-East Asia, which helps to smooth seasonal fluctuations on separate markets.
During the quarter the Company’s domestic sales volume increased by about 3 times and reached 1.20 mln tonnes of coal (Q2 2011: 0.41 mln tonnes). The Company was very active on the retail market, distributing coal products through its own retail chain, and also shipped coal to large electricity generation companies. Despite the continued shortage of railroad cars in Kuzbass region, in Q3 “Kuzbasskaya Toplivnaya Company” continued to deliver coal to its customers in a timely manner due to the effective utilisation of railroad cars supplied by its associated transport company3.
In Q3 2011 the average price4 of coal increased by 5% quarter-on-quarter to RUR 1,229 per tonne (Q2 2011: RUR 1,175 per tonne).
The average domestic coal price increased by 8% quarter-on-quarter and reached RUR 1,280 per tonne (Q2 2011: RUR 1,185 per tonne) due to the general increase in prices on the market and the growth in sorted coal products sales. In USD equivalent the price increased only by 4% from USD 42.3 to USD 44.0 due to the weakening of RUR/USD exchange rate.
The average export price increased by 1% to RUR 1,191 per tonne (Q2 2011: RUR 1,173 per tonne). In USD equivalent the price decreased by 2% to USD 40.9 (Q2 2011: USD 41.9).
Year To Date Operational Results
Mln tonnes 9 months 2011 9 months 2010 Change, %
Coal production 6.17 4.59 34%
Sorted coal 4.04 2.94 37%
Enriched coal 0.55 0.03 -
Sales volume, incl.: 7.32 5.79 26%
Export sales volume 4.68 2.64 77%
Domestic sales volume 2.64 3.15 -16%
Average realized price, RUR / tonne5 1,202 947 27%
Average export price, RUR / tonne 1,188 982 21%
Average domestic price, RUR / tonne 1,225 918 34%
During the first 9 months of 2011 the Company increased coal production volume by 34% to 6.17 mln tonnes (9M 2010: 4.59 mln tonnes). Rising demand for the Company’s sorted coal products among Russian and foreign customers resulted in a growth of volume of their production by 37% year-on-year to 4.04 mln tonnes (9M 2010: 2.94 mln tonnes). The volume of high quality coal produced by "Kaskad" enrichment plant reached 0.55 mln tonnes.
9M 2011 coal sales volume increased by 26% year-on-year to 7.32 mln tonnes (9M 2010: 5.79 mln tonnes) because of active export shipments growth. The volume of export sales increased by 77% and reached 4.68 mln tonnes and the domestic sales volume decreased by 16% to 2.64 mln tonnes. Hence, the share of export in the total sales volume increased from 46% to 64% in 9M 2011, which is in line with the Company’s long term development strategy to increase its presence in the key export markets.
In 9M 2011 among the Company’s largest export markets was: Poland – 51% of the Company’s total export sales (9M 2010: 42%), China and South Korea – 45% (9M 2010: 46%), Ukraine – 2% (9M 2010: 6%) and Czech Republic – 1% (9M 2010: 3%).
During 9M 2011 the average price of the Company’s coal sale increased by 27% year-on-year to RUR 1,202 per tonne (9M 2010: RUR 947 per tonne). The average domestic coal price reached RUR 1,225 per tonne, exceeding the result of 9M 2010 by 34% (RUR 918 per tonne). Its worthy of note that the average domestic price has been gradually increasing in each of 3 quarters of 2011. In USD equivalent the price increased by 41% from USD 30.3 to USD 42.66.
The average export coal price for 9M 2011 was RUR 1,188 per tonne, or 21% higher compared to the same period last year (RUR 982 per tonne). In USD equivalent the price increased by 27% from USD 32.5 to USD 41.37. The growth of average export price, compared to domestic one, was slower due to higher railroad transportation costs. In order to mitigate the growth of transport costs, the Company increased the fleet of railroad cars, rented from "Kuzbass Transport Company" at fixed prices. At the reporting date the fleet of such cars was 2.6 thousand units.
Management of the Company is satisfied with the Q3 and 9M 2011 operational results, ended 30 September 2011.
The Company plans to release its unaudited interim 9M 2011 IFRS Statements on November, 24 2011. A conference-call to discuss the financial results will be held the same day at 5PM Moscow time (2PM London time). Conference call details will be issued separately.
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