3Q 2018 – Results Highlights

Stable production and sales results

Highlights

KGHM Polska Miedź S.A. reports higher copper and molybdenum prices and higher production of electrolytic copper in the third quarter of 2018. The results of the Group were strengthened by the higher revenues of KGHM International.

“The production and sales results are in line with our budget targets, and we continued initiatives aimed at the growth of the KGHM Group’s domestic and international companies. It’s worth pointing out that the key investments in Poland are on schedule,” said Radosław Stach, Vice President of the Management Board for Production.

Production of payable copper by the Group was at a similar level to that achieved in the third quarter of 2017 (171 thousand tonnes versus 170 thousand tonnes), mainly thanks to higher production of electrolytic copper by KGHM Polska Miedź S.A. after the maintenance shutdown at the Głogów II Copper Smelter and Refinery. The slightly lower production of payable copper in the third quarter by the assets of KGHM International was mainly due to a decrease in ore quality and to a decrease in ore extraction by the Robinson mine. After the first three quarters, production of payable copper by the Robinson mine as well as by all of KGHM International was at a similar level to that of the prior year. The furnace maintenance also had a negative impact on the production of associated metals, mainly metallic silver (-20% yoy). The drop in copper and molybdenum production by the Sierra Gorda mine in the first three quarters was due to the lower metals content in extracted ore.

The KGHM Group increased its revenues by PLN 590 million. (+12%), compared to the third quarter of 2017, mainly due to higher revenues earned by KGHM Polska Miedź S.A. (+PLN 396 million) and KGHM International (+PLN 137 million).

„The results of the Group are satisfactory. In Poland the increase in revenues was due to higher sales of copper. Our international assets meanwhile had higher revenues mainly due to an increase in revenue by DMC, related to a contract being advanced in the United Kingdom,” noted Katarzyna Kreczmańska-Gigol, Vice President of the Management Board for Finance,

Consolidated adjusted EBITDA[i] in the third quarter of 2018 was lower by 13 % compared to the corresponding prior year period (from PLN 1 414 million to PLN 1 225 million). The main reason was the increase in costs of operating activities after the first 9 months, including a higher minerals extraction tax due to higher metals prices (Cu, Ag).

Consolidated net profit in the third quarter amounted to PLN 365 million and was 40% lower than in the prior year. The difference was mainly due to the lower operating results of KGHM Polska Miedź S.A. and to higher income tax.

Net debt at the end of the third quarter amounted to PLN 7 439 million (USD 2 024 million), with net debt to adjusted EBITDA of 1.6.

In the third quarter of 2018 the KGHM Group pushed forward numerous development projects in its domestic Polish companies. In line with adopted targets, a number of solutions were implemented aimed at enhancing the value of the KGHM Polska Miedź S.A. Group. These comprised the coordination of key entities, their cooperation and the elimination of overlapping activities. The Group strengthened oversight of its portfolio of investment projects in key companies to maintain and support the core production business of KGHM Polska Miedź S.A. In terms of advancing the existing Strategy, emphasis was placed on improving and unifying the functioning of the organisational processes and management standards in force in the KGHM Polska Miedź S.A. Group.

In the third quarter of 2018 a review commenced of the international assets. Completion is planned at the end of 2018. With respect to implementation of the Strategy being advanced by KGHM Polska Miedź S.A. in the Group’s international companies, KGHM is working to develop coherent reporting principles and consistent internal regulations, as well as standardised solutions in individual functional areas of the international assets.

Basic financial data of the KGHM Polska Miedź S.A. Group in the third quarter and accrued for the first 9 months of 2018.:



i Adjusted EBITDA including 55% of EBITDA in Sierra Gorda, which is consolidated by using the equity method.

in mn PLN3rd quarter 20183rd quarter 2017Change
in mn PLN
Change
in %
Revenue 5 364 4 774 + 590 + 12.46%
Cost of goods sold - 4 717 - 3 910 + 807 + 20.6%
Adjusted EBITDA 1 225 1 414 - 189 - 13.4%
Net result on sales 647 864 - 217 - 25.1%
Profit for the period 365 605 - 240 - 39.7%


 

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