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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

Summary of Q1 2013 – in line with the assumptions

Thursday, 2013-05-09
Summary of Q1 2013 - in line with the assumptions

LUBELSKI WĘGIEL BOGDANKA S.A. AFTER Q1 2013:

EXTRACTION AND FINANCIAL RESULTS - IN LINE WITH THE PLAN

In Q1 2013, the Lubelski Węgiel BOGDANKA Group, in which Lubelski Węgiel BOGDANKA S.A. - the most modern and effective hard coal mine in Poland and the national leader in the power coal producers market - is the parent company, generated revenue on sales in the amount of nearly PLN 430.8 million, operating profit reaching PLN 87.4 million and net profit in the amount of PLN 69.9 million.  The Company's results are in line with the assumptions.

Extraction at the level of 2.03 million tonnes reached in Q1 2013, i.e. at a level comparable to the last year's result, was also in line with the Company's assumptions.

The current high level of extraction is the effect of a consistently pursued strategy, the key objective of which is to increase extraction to about 11.5 million tonnes per annum once the investment in the Stefanów Field is completed (from almost 5.84 million tonnes in 2011), thus doubling the share in the market of hard coal producers in Poland.

At the end of 2012, the Company's share in sales in the national power coal market reached over 14%, compared to approx. 10% at the end of 2011.

FINANCIAL RESULTS - DETAILS

Selected financial information of the LW BOGDANKA Group after Q1 2013 are presented in the table below:

 PLN ‘000

 Q1 2013

  Q1 2012

  Q1 2011

Change
2013/2012


Change
2013/2011


Revenue on sales

430,758

477,302

309,961

-10%

+39%

Gross profit

120,792

175,929

72,818

-31%

+66%

EBITDA

170,336

199,046

77,906

-14%

+119%

Operating profit (EBIT)

87,438

119,297

43,698

-27%

+100%

Net profit

69,926

99,210

35,958

-30%

+95%

 

The main source of LW BOGDANKA Group's revenue on sales in the first quarter of 2013 was traditionally the production and sale of power coal. That activity accounted for 95.33% of the LW BOGDANKA Group's revenue on sale (96.87% in the same period of the previous year).

Over 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., GDF Suez Energia S.A., PGNIG Termika, and Elektrownia Ostrołęka S.A.

Worse results in Q1 2013, compared to the same period in 2012, were connected with the fact that Q1 2012 was an exceptionally good period for the Company, both in terms of characteristics of the deposit exploited at that time, and a higher number of production days and record breaking work outcomes of the heavy-duty ploughing complex.


PROFITABILITY RATIOS OF LW BOGDANKA

The Company's profitability ratios in Q1 2013 were lower than in the same period in 2012 (which was due to the fact that Q1 2012 was exceptionally profitable for the Company), however remained at a favourable level, and were - in the majority of cases - slightly higher than the level achieved in the entire year 2012.


Profitability ratios of the LW BOGDANKA Group:

 Item

  Q1 2013

  Q1 2012

Change [p.p.]
2013/2012


Change [%] 2013/2012

Gross margin on sales

28.04%

36.86%

-8.82

-23.93%

EBITDA

39.54%

41.70%

-2.16

-5.18%

EBIT

20.30%

24.99%

-4.69

-18.77%

Gross margin

20.30%

25.92%

-5.62

-21.68%

Net margin

16.23%

20.79%

-4.56

-21.93%

Return on Assets

2.00%

3.13%

-1.13

-36.10%

Return on Equity

3.00%

4.53%

-1.53

-33.77%

 

Gross margin on sales of the LW BOGDANKA Group decreased from 36.86% (Q1 2012) to 28.04% (Q1 2013). The decrease in that ratio resulted from a negative growth rate of revenues relative to the increase of incurred costs, and products, goods and materials sold.

In the analysed period, the profitability of EBIT amounted to 20.30%, which means a decrease by 4.69 p.p. in comparison to the same period in the previous year. Apart from the reasons described in gross margins on sales, the change in value of the described ratio results also from higher sales and administrative costs.

EBITDA in Q1 2013 amounted to 39.54%, and was thus similar to the level from the same period of the previous year. Amortisation of the Group for Q1 2013 amounted to PLN 82.89 million, compared to PLN 79.75 million a year earlier.

Net margin on the Lubelski Węgiel Bogdanka Group's operations amounted to 16.23% for Q1 2013, as compared to 20.79% for Q1 2012.

COAL PRODUCTION AND SALES

In Q1 2013, the level of extraction of the Company's commercial coal was in line with the Company's assumptions and reached 2.03 million tonnes, which means that it stood at the level comparable to last year's result. Also, the achieved output level was in accordance with the assumptions and reached 68.5%.

Sales in Q1 2013 were compliant with the schedules of supplies to customers and reached the level of almost 1.86 million tonnes, i.e. it was higher by 10.74% from the last year's result. Stock of coal at the level of 172 thousand tonnes as at the end of Q1 equalled Company's seven-day production and was in line with the assumptions.

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:

  1. gaining access to new reserves and increasing the level of coal extraction based on the enlargement of the Stefanów Field;
  2. maintaining a stable position as the main supplier of coal in eastern Poland, in particular for the commercial power industry;
  3. strengthening its competitive position by cutting unit costs of extraction and production.

The main strategic development objectives defined by the Company include:

  1. doubling the coal production capacity to about 11.5 million tonnes after completing the investment in the Stefanów Field (from almost 5.84 million tonnes in 2011), thereby doubling the share in the market for hard coal producers in Poland,
  2. improving the efficiency of hard coal extraction and production;
  3. ensuring that LW BOGDANKA is self-sufficient regarding the supply of electricity by developing its activities as regards production of electricity;
  4. environmental protection measures.
 

 1_800

We inaugurated the year 2013 in line with our assumptions. In the first three months, we reached the planned levels of extraction and satisfactory output levels. I also consider the financial results for Q1 2013 to be satisfactory. Their lower level, compared to Q1 2012, was connected with the fact that Q1 of the previous year was an exceptionally good period for the Company, both in terms of characteristics of the deposit exploited at that time, and a higher number of production days and record breaking work outcomes of the ploughing complex in February and March 2012, said Zbigniew Stopa, President of the Management Board of LW BOGDANKA S.A.

At the moment, we are focusing on the continuation of the planned investments pursued with a view to increasing our production capacity. Our plans include creating over 30 km of heading working. We are also working on re-equipping our heavy-duty ploughing complex, so that it is able to begin operation in June on a new wall in Stefanów, added Zbigniew Stopa.

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