Q2 2020 – Results Highlights

High EBITDA, record results by Sierra Gorda and production maintained despite the crisis caused by the COVID-19 pandemic – these are the main achievements of the KGHM Polska Miedź S.A. Group in the second quarter of 2020

Highlights

Adjusted Group EBITDA in the second quarter of 2020 was a record PLN 1 522 million (higher by PLN 244 million, +19% q/q). The last time such a high result was achieved was in the first quarter of 2017, after a rapid rise in the copper price. The Group’s results were mainly supported by those of KGHM Polska Miedź S.A., which earned EBITDA of PLN 1 031 million. Sierra Gorda also recorded a high EBITDA (of PLN 324 million), nearly 150% that recorded in Q2 2019, the highest such result in the history of this mine. The only exception was KGHM International, which showed a 34% weaker EBITDA (PLN 110 million), though it was nearly twice as high as compared to the first quarter of 2020.

Consolidated net profit of the KGHM Group in Q2 2020 amounted to PLN 9 million, or a decrease by PLN 409 million compared to the second quarter of 2019. The change was mainly due to exchange differences (-PLN 237 million) and to a higher loss on the measurement of joint ventures accounted for using the equity method (-PLN 147 million).

Production by the KGHM Group, against the backdrop of the COVID-19 pandemic, remained at similar levels. Copper production amounted to 177 thousand tonnes, (or -1% vs Q2 2019), while 373 tonnes of silver was produced (-4% vs Q2 2019, higher by 11% after a weak first quarter of the current year).

The C1 cost of concentrate production in the Group was 1.58 USD/lb, or lower by 12% compared to the second quarter of the prior year, in the case of KGHM Polska Miedź S.A. mainly thanks to a weaker PLN vs the USD and a lower minerals extraction tax, and in the case of Sierra Gorda due to lower operating costs, alongside an increase in the copper sales volume.

Sales revenues earned by the KGHM Group in the second quarter of 2020 amounted to PLN 5 649 million and were lower by PLN 91 million (-2%) compared to the corresponding prior-year period. The decrease in revenues in all segments was mainly the result of less favourable macroeconomic conditions. Sales revenues earned by KGHM Polska Miedź S.A. in the second quarter of 2020 amounted to PLN 4 672 million and were higher by PLN 157 million (+3%) than in the corresponding period of 2019. The higher revenues earned by the Parent Entity were due to a more favourable USD/PLN exchange rate (+6%) and to higher prices of silver (+9%) and gold (+26%). The decrease in the copper price in the second quarter of 2020 by more than 12% compared to the corresponding prior-year period was slightly offset by the increase in the price of silver (+10%). The average price of copper in the second quarter of 2020 amounted to 5 356 USD/tonne and of silver, 16.38 USD/koz t. In the second quarter of 2020 the average USD exchange rate was stronger than in the prior year (4.0966 USD/PLN vs 3.8119 USD/PLN).

Adjusted EBITDA for the KGHM Group was higher in the segments KGHM Polska Miedź S.A. (+PLN 111 million, +12%), and Sierra Gorda (+PLN 193 million, +147%), while EBITDA recorded by KGHM International was lower (-PLN 56 million, -34%).



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

in mn PLN2nd quarter
2020
2nd quarter
2019
Change
in mn PLN
Change
in %
Revenue 5 649 5 740 -91 -2%
Cost of goods sold 5 004 5 074 -70 -1%
Adjusted EBITDA 1 522 1 278 244 19%
Net result on sales 645 666 -21 -3%
Profit for the period 9 418 -409 -98%


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