NEWS RELEASE
For Immediate Release - November 28, 2014
Chelyabinsk Zinc Plant Announces 9M 2014 Consolidated Financial Results
Chelyabinsk, Russia - November 28, 2014 - Chelyabinsk Zinc Plant (LSE, MICEX:
CHZN), Russia's largest producer of zinc and zinc alloys, is pleased to
announce its consolidated financial results for the nine months ended September
30, 2014 based on consistent accounting policy (Unaudited).
9M 2014 HIGHLIGHTS
* Chelyabinsk Zinc Plant's (CZP) revenue totalled RUB 11,064 mln.
* EBITDA amounted to RUB 2,385 mln or 22% of revenue.
* Net profit was RUB 1,637 mln or 15% of revenue.
Consolidated financial results
(in millions of Russian Roubles) 9M 9M Change, %
2014 2013
Revenue 11,064 9,773 13%
Gross profit 3,180 1,435 123%
Gross margin, % 29% 15%
EBITDA (1) 2,385 864 176%
EBITDA margin, % 22% 9%
Profit before income tax 2,102 177 >1000%
Net profit 1,637 114 >1000%
Net margin, % 15% 1%
(1) EBITDA, for any relevant period, represents operating profit before
interest, income tax, depreciation and amortization.
EBITDA is not a measurement of CZP's operating performance presented in the
financial information, prepared in accordance with IFRS, and should not be
considered as an alternative to operating profit or any other performance
measure derived in accordance with IFRS or other relevant financial framework.
Revenue
In 9M 2014, consolidated revenue increased by 13% to RUB 11,064 mln as compared
to 9M 2013.
The average LME zinc price in 9M 2014 increased by 12% as compared to the
relevant period of the previous year and amounted to US$ 2,140/tonne. The
average LME lead quotes remained at the level of 9M 2013 (US$ 2,128/tonne). US
Dollar/Russian Rouble average exchange rate increased by 12% to RUB 35.39/US
Dollar.
Revenue structure
(in millions of Russian Roubles) 9M 9M Change, %
2014 2013
Zinc and zinc alloys 7,957 7,006 14%
CZP 5,748 5,624 2%
Brock Metal 2,209 1,382 60%
Zinc tolling 1,627 1,125 45%
Lead concentrate 385 421 (8%)
CZP 73 64 14%
Nova Zinc 312 357 (13%)
Other products 1,095 1,221 (10%)
Total revenue 11,064 9,773 13%
In 9M 2014, CZP's revenue from sale of zinc and zinc alloys increased by 2% as
compared to the 9M 2013 and amounted to RUB 5,748 mln. The growth of revenue
was due to increase of average LME zinc price and US dollar exchange rate while
reducing the sales on the domestic market by 17.6% (9M 2014: 67.6 thousand
tonnes; 9M 2013: 82.0 thousand tonnes).
Revenue of The Brock Metal Company Limited for 9M 2014 amounted to RUB 2,209
mln, 60% higher than in 9M 2013. This increase was due to 29% growth of zinc
alloys sales (9M 2014: 24.1 thousand tonnes; 9M 2013: 18.7 thousand tonnes),
increase of average LME zinc price and growth of Pound Sterling (GBP)/Russian
Rouble average exchange rate (9M 2014: RUB 59.23; 9M 2013: RUB 48.89).
CZP received revenue of RUB 1,627 mln under tolling agreement in 9M 2014, which
is 45% higher compared to 9M 2013. The increase of tolling's volume (9M 2014:
60.2 thousand tonnes; 9M 2013: 41.7 thousand tonnes) was due to decrease of
zinc and zinc alloys sales on the domestic market. Fixed processing fee
amounted to RUB 27,000/tonne.
Revenue from lead concentrate sales for 9M 2014 amounted to RUB 385 mln (9M
2013: RUB 421 mln). The decrease of revenue was due to decline of Nova Zinc
lead concentrate sales (9M 2014: 5.2 thousand dmt; 9M 2013: 6.2 thousand dmt)
In 9M 2014, revenue from CZP's other by-products decreased by 10% to RUB 1,095
mln as compared to 9M 2013. The main reason of revenue decrease was the
temporary interruption of precious metals sales due to prices reduction
(average official prices for silver in 9M 2014: RUB 22.7/gram, in 9M 2013: RUB
25.2/gram).
Cost of Sales
(in millions of Russian Roubles) 9M 9M Change,
2014 2013 %
Raw materials and consumables used 4,722 4,432 7%
in production
Utilities and fuel 1,099 1,718 (36%)
Staff cost 709 629 13%
Depreciation and amortization 611 681 (10%)
Repairs and maintenance 509 555 (8%)
Mineral extraction tax 169 142 19%
Other taxes 134 140 (5%)
Production overheads 70 67 4%
Change in work-in-progress 18 111 (84%)
Inventory provision 3 (8) n/a
Change in finished goods (282) (229) n/a
Other costs 121 100 21%
Cost of sales 7,883 8,338 (5%)
Cost of materials and consumables used primarily comprises of the cost of zinc
concentrate, zinc containing raw materials, materials for alloys production and
auxiliary materials used in the production process. The main reasons of changes
were the growth of raw materials price due to increase of average LME zinc
price and exchange rates against the Rouble that were partly compensated by the
volume decline of purchased raw materials due to structure changes of zinc and
zinc alloys sales related to JSC "CZP".
In 9M 2014, costs of utilities and fuel decreased by 36% to RUB 1,099 mln
mainly due to decrease of expenses on electricity transmission services. In 9M
2014 expenses on electricity transmission services were accrued applying
tariffs of OJSC "FSK UES" while during 9M 2013 - applying tariffs of OJSC
"MRSK-Ural". As the result electricity tariff for CZP in 9M 2014 was RUB 1.83
per kWh while in 9M 2013 - RUB 2.35 per kWh.
Furthermore, cost of sales for 9M 2014 includes adjustment for the expense for
electricity transmission services accrued for the period from 1 May 2013 till
31 December 2013 for the amount of RUB 359 mln due to termination of litigation
between JSC "CZP" and OJSC "FSK".
Staff costs increased by 13% as compared to the relevant period of the previous
year, to RUB 709 mln. The increase was due to the growth of average salaries.
Distribution, General and Administrative Expenses
In 9M 2014, distribution costs increased by 11% and amounted to RUB 582 mln.
The main reason was the increase of sulphuric acid transportation costs due to
market expansion.
General and administrative expenses amounted to RUB 689 mln in 9M 2014, 5%
higher than in 9M 2013.
Other operating income and expenses
In 9M 2014, other operating income totaled RUB 364 mln (9M 2013: RUB 42 mln).
The main reason was the reversal of previously accrued impairment loss related
to LLP "Nova Zinc".
As at 31 December 2013 an impairment loss was recognized in the amount of RUB
387 mln, related to LLP "Nova Zinc". Due to a change of forecast market data,
such as the Tenge exchange rate to the US dollar and projected zinc and lead
LME (London Metal Exchange) prices, there are indicators that previously
recognized impairment loss should be reversed.
The carrying amount of assets was recovered to their book value, that would
have had been should the impairment loss had never been recognized as at 31
December 2013. The reversal of previously accrued loss amounted to RUB 318 mln.
In 9M 2014, other operating expenses totaled RUB 245 mln against RUB 159 mln in
9M 2013. The main reason was accrued provision on potential liabilities of LLP
"Nova Zinc" relating to the environmental disputes including environmental, tax
and administrative fines and penalties for the period from 1 January 2013 to 30
September 2014.
Net profit
Net profit for 9M 2014 totalled RUB 1,637 mln compared to net profit of RUB 114
mln for 9M 2013. Net income growth was due to the increase of revenue with a
simultaneous decrease of cost of sales and also to the reversal of previously
accrued impairment loss related to LLP "Nova Zinc".
About Chelyabinsk Zinc Plant
Chelyabinsk Zinc Plant is the leading Russian zinc producer. In 2013 the plant
produced 166,357 tonnes of saleable SHG zinc.
According to consolidated IFRS accounts, revenue in 2013 was RUB 13,062 mln and
EBITDA was RUB 1,077 mln.
Ordinary shares of CZP are traded on the Moscow exchange MICEX-RTS under ticker
CHZN and Global Depository Receipts (GDR) are traded on the London Stock
Exchange under ticker CHZN.
Investor and Media Contacts:
Natalya Vasilieva, PR, ngv@zinc.ru
Tel: +7 (351) 799-01-52
Evgeny Ponomarev, IR, eyp@zinc.ru
Tel: +7 963 998-55-58
This announcement may include forward-looking statements. CZP's actual results
may differ materially from those made in or suggested by the forward-looking
statements contained in this announcement. By their nature, forwarding-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future performance. Even if
the actual results are consistent with the forward-looking statements contained
in this announcement, those results may not be indicative of results or
developments in future periods. CZP does not undertake any obligation to update
any forward-looking statements to reflect events that occur or circumstances
that arise after the date of this announcement.
'000 RUB 30 September 31 December
2014 2013
Assets
Property, plant and equipment 5,968,835 5,119,417
Advances for acquisition of 183,810 179,814
property, plant and equipment
Intangible assets 101,544 94,883
Bank deposits - 686,301
Deferred tax assets - 46,373
Other non-current assets 495 377
Non-current assets 6,254,684 6,127,165
Inventories 2,588,781 2,602,039
Trade and other receivables 4,252,087 2,456,636
Current income tax prepayment 952 60,536
Loans issued 2,080 2,125
Short-term financial assets 3,642 5,636
Bank deposits 795,000 452,969
Cash and cash equivalents 545,214 444,827
Restricted cash 1,184 959
Current assets 8,188,940 6,025,727
Total assets 14,443,624 12,152,892
JSC CHELYABINSK ZINC PLANT
Consolidated Interim Condensed Statement of Financial Position as at 30
September 2014 (unaudited)
'000 RUB Note 30 September 31 December
2014 2013
Equity
Share capital 127,635 127,635
Share premium 1,375,231 1,375,231
Legal reserve 3,011 3,011
Translation reserve 154,946 (16,893)
Retained earnings 10,611,339 8,974,372
Total equity 12,272,162 10,463,356
Liabilities
Provision for asset retirement 106,934 100,693
obligations
Deferred income tax liabilities 211,298 137,984
Other non-current liabilities 56,785 55,317
Total non-current liabilities 375,017 293,994
Accounts payable, accrued 1,128,008 1,149,238
expenses and advances from
customers
Current income tax payable 134,283 5,508
Other taxes payable 534,154 240,796
Total current liabilities 1,796,445 1,395,542
Total liabilities 2,171,462 1,689,536
Total equity and liabilities 14,443,624 12,152,892
JSC CHELYABINSK ZINC PLANT
Consolidated Interim Condensed Statement of Financial Position as at 30
September 2014 (unaudited)
JSC CHELYABINSK ZINC PLANT
Consolidated Interim Condensed Statement of Profit or Loss and Other
Comprehensive Income for the nine months ended 30 September 2014 (unaudited)
For the nine months,
ended 30 September
'000 RUB Note 2014 2013
Revenue 11,063,509 9,773,092
Cost of sales (7,883,221) (8,338,243)
Gross profit 3,180,288 1,434,849
Other operating income 364,415 42,981
Distribution costs (581,677) (525,690)
General and administrative expenses (689,467) (655,027)
Other operating expenses (245,316) (159,273)
Results from operating activities 2,028,243 137,840
Finance income 96,649 108,288
Finance expense (10,820) (53,059)
Foreign exchange loss (11,759) (16,072)
Profit before income tax 2,102,313 176,997
Income tax expense (465,346) (62,706)
Profit for the period 1,636,967 114,291
Other comprehensive income
Total items that are or may be
reclassified subsequently to profit or
loss:
Exchange differences on translation to 171,839 72,861
presentation currency
Total other comprehensive income 171 ,839 72 ,861
Total comprehensive income for the period 1,808,806 187,152
Profit is attributable to:
Shareholders of the Company 1,636,967 114,291
Total comprehensive income attributable 171,839 72,861
to:
Shareholders of the Company
Earnings per share - basic and diluted 30.2 2.1
(in RUB)
JSC CHELYABINSK ZINC PLANT
Consolidated Interim Condensed Statement of Cash Flows for the nine months
ended 30 September 2014 (unaudited)
For the nine months,
ended 30 September
'000 RUB 2014 2013
Cash flows from operating activities
Profit 1,636,967 114,291
Adjustments for:
Depreciation and amortisation 701,414 753,387
Loss on disposal of property, plant and 46,677 16,497
equipment
Impairment of loans issued, trade and other 2,065 2,465
receivables
Loss/(reversal) of inventory provision 2,695 (8,217)
Net finance income (85,829) (55,229)
Unrealized foreign exchange 13,932 1,592
Reversal of impairment of fixed assets and (318,423) (1,464)
assets under construction
Adjustment of the expenses for electricity (358,647) -
transmission services
Provision for ecological proceedings and 152,763 44,741
taxes
Other non-monetary operating income (3,752) (68,033)
Income tax expense 465,346 62,706
2,255,208 862,736
Changes in:
Trade and other receivables (1,246,098) (310,066)
Inventories 23,106 (373,546)
Trade and other payables (18,577) 221,345
Taxes payable 140,595 45,742
Restricted cash balance (226) (130)
Cash flows from operations 1,154,008 446,081
Interest paid - (733)
Income tax paid (157,301) (16,212)
Net cash from operating activities 996,707 429,136
Cash flows from investing activities
Acquisition of property, plant and (1,097,849) (684,675)
equipment and intangible assets
Capitalized stripping costs (145,183) (143,806)
Proceeds from sale of property, plant and 4,151 604
equipment
Loans issued (25,918) (944)
Proceeds from repayment of loans issued 25,845 3,218
Interest income received 3,083 60,252
Placement of bank deposits (1,051,000) (1,209,000)
Proceeds from bank deposits repayment 1,408,970 1,449,018
Net cash used in investing activities (877,901) (525,333)
Effect of currency translation and exchange (18,419) 9,430
rate fluctuations on cash and cash
equivalents
Net increase/(decrease) in cash and cash 100,387 (86,767)
equivalents
Cash and cash equivalents at the beginning 444,827 425,386
of the period
Cash and cash equivalents at the end of the 545,214 338,619
period
JSC CHELYABINSK ZINC PLANT
Consolidated Interim Condensed Statement of Changes in Equity for the nine
months ended 30 September 2014 (unaudited)
'000 RUB
Share Share Reserve Translation Retained Total
capital premium capital reserve earnings equity
Balance at 1 127,635 1,375,231 3,011 (162,680) 9,182,603 10,525,800
January 2013
Net loss for - - - - 114,291 114,291
the period
Other - - - 72,861 - 72,861
comprehensive
income for
the period
Total - - - 72,861 114,291 187,152
comprehensive
income for
the period
Balance at 30 127,635 1,375,231 3,011 (89,819) 9,296,894 10,712,952
September
2013
Balance at 1 127,635 1,375,231 3,011 (16,893) 8,974,372 10,463,356
January 2014
Net profit - - - - 1,636,967 1,636,967
for the
period
Other - - - 171,839 - 171,839
comprehensive
loss for the
period
Total - - - 171,839 1,636,967 1,808,806
comprehensive
income for
the period
Balance at 30 127,635 1,375,231 3,011 154,946 10,611,339 12,272,162
September
2014