NEWS RELEASE
For Immediate Release - December 19, 2011
Chelyabinsk Zinc Plant Announces IFRS Results For the Nine Months Ended
September 30, 2011
Chelyabinsk, Russia - December 19, 2011 - Chelyabinsk Zinc Plant (LSE, MICEX: CHZN), Russia's largest producer of zinc and zinc alloys, is pleased to announce its IFRS financial results for the nine months ended September 30, 2011 (Unaudited).
NINE MONTHS 2011 HIGHLIGHTS
* Chelyabinsk Zinc Plant's (CZP) revenue for the nine months of 2011 totaled
RUB 9,749 mln compared to RUB 8,595 mln for the same period of previous
year.
* Nine months 2011 EBITDA amounted to RUB 2,049 mln or 21% of revenue
compared to nine months 2010 EBITDA of RUB 2,026 mln or 24% of revenue.
* Net profit for the nine months 2011 was RUB 1,141 mln compared to RUB 1,031
mln for the relevant period of 2010.Consolidated interim financial results for the nine months ended September 30
(in millions of Russian Roubles) 2011 2010 Change, %
Revenue 9,749 8,595 13%
Gross profit 2,453 2,443 0.4%
Gross margin, % 25% 28%
EBITDA (1) 2,049 2,026 1%
EBITDA margin, % 21% 24%
Profit before income tax 1,409 1,321 7%
Net profit 1,141 1,031 11%
Net margin, % 12% 12%
(1) EBITDA, for any relevant period, represents operating profit before interest, tax, depreciation and amortization.
EBITDA is not a measurement of CZP's operating performance under IFRS and should not be considered as an alternative to operating profit or any other performance measure derived in accordance with IFRS.
Revenue
Consolidated revenue for the nine months of 2011 increased by 13% as compared to the nine months of 2010 to RUB 9,749 mln.
The average LME zinc price for the period from January to September 2011increased by 8.7% as compared to the same period of the previous year, and amounted to US$ 2,289/tonne. The LME lead quotes increased by 22.8% to US$ 2,537/tonne. The beneficial effect of the LME prices growth was partly offset by the 5% decline of Russian Rouble/US Dollar exchange rate.
Revenue structure for the nine months ended September 30
(in millions of Russian Roubles) 2011 2010 Change, %
Zinc and zinc alloys 6,802 5,597 22%
CZP 5,251 4,179 26%
Brock Metal 1,551 1,418 9%
Zinc tolling 1,374 1,469 (6%)
Lead concentrate 341 516 (34%)
CZP 208 294 (29%)
Nova Zinc 133 222 (40%)
Other products 1,232 1,014 21%
Total revenue 9,749 8,595 13%
For the nine months of 2011, CZP's revenue from sale of zinc and zinc alloys increased by 26% to RUB 5,251 mln, as compared to the relevant period of 2010. Increase in revenue was due to 23% increase of sales on the domestic market and the growth of LME zinc price.
Revenue of The Brock Metal Company Limited in January-September 2011 amounted to RUB 1,551 mln, 9% higher than in January-September 2010. This increase was driven by 5.3%increase of zinc alloys sales.
CZP received revenue of RUB 1,374 mln under tolling agreement for the nine months 2011, which is 6% lower compared to the relevant period of 2010. The decrease of tolling's volume (nine months 2011: 50.9 thousand tonnes; nine months 2010: 61.1 thousand tonnes) was due to growth of zinc and zinc alloys demand on the domestic market. The decrease of revenue was partly compensated by the increase of fixed processing fee to RUB 27,000/tonne (2010: RUB 24,000/ tonne).
Revenue from sale of lead concentrate for the nine months of 2011 amounted to RUB 341 mln (nine months of 2010: RUB 516 mln). Amendments to the export control regulations of precious metals from the Custom Union countries resulted in the temporary decrease of Nova Zinc sales by 56% (nine months 2011: 1.3 thousand tonnes; nine months 2010: 3 thousand tonnes). The decrease of revenue was partially compensated by the growth of LME lead price.
For the nine months of 2011, revenue from CZP's other products increased by 21% to RUB 1,232 mln. It was mainly due to increase of volume sales and prices of sulphuric acid and precious metals in clinker.
Cost of Sales for the nine months ended September 30
(in millions of Russian Roubles) 2011 2010
Raw materials and consumables 4,103 3,132 used in production
Utilities and fuel 1,512 1,282
Depreciation and amortization 596 580
Staff cost 548 484
Repairs and maintenance 484 442
Cost of goods and material for 148 121
resale
Mineral extraction tax 135 111
Production overheads 72 67
Inventory provision 19 (4)
Impairment of assets under 10 13
construction
Precious metal revaluation (40) (64)Stock-take results adjustment (80) (55)
Change in work-in-progress (71) 71
Change in finished goods (140) (27)
Cost of sales 7,296 6,153
For the nine months of 2011, cost of sales amounted to RUB 7,296 mln, which is 19% higher compared to the same period of 2010.
Cost of materials and consumables used primarily comprises the cost of zinc concentrate, materials for alloys production, secondary raw materials and auxiliary materials used in the zinc production process. The increase by 31% was due to the growth of zinc and zinc alloys sales and increase of raw materials costs.
For the nine months 2011, costs of utilities and fuel increased by 18% to RUB 1,512 mln. This increase was driven by expansion of stripping activity (nine months 2011: 3,666 thousand cbm; nine months 2010: 3,052 thousand cbm) and by the growth of diesel fuel prices by 31% for Nova Zinc LLP. In addition, there was an increase of electricity tariffs (nine moths 2011: RUB 2.06 per kWh; nine months 2010: RUB 1.81 per kWh) and other fuel prices for CZP.
Staff costs increased by 13% as compared to the same period of the previous year, to RUB 548 mln. The increase was due to the growth of average salaries in the Russian Federation and the Republic of Kazakhstan and to the growth of social charges in the Russian Federation from January 01, 2011.
Net profit
Net profit for the nine months of 2011 totalled RUB 1,141 mln compared to RUB 1,031 mln for the nine months of 2010.
About Chelyabinsk Zinc Plant
Chelyabinsk Zinc Plant is the leading Russian zinc producer. In 2010 the plant produced 153,335 tonnes of salable SHG zinc.
According to consolidated IFRS accounts, revenue in 2010 was RUB 11,810 mln and EBITDA was RUB 2,806 mln.
Ordinary shares of CZP are traded on the MICEX exchange 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.
JSC CHELYABINSK ZINC PLANT
Consolidated Condensed Interim Statement of Financial Position (unaudited)
In thousands of Russian Roubles 30 September 31 December
2011 2010
ASSETS
Non-current assets
Property, plant and equipment 5,195,759 5,069,733
Advances for capital construction 157,560 133,992
Intangible assets 56,543 50,172
Other non-current assets 7,099 101,098
Total non-current assets 5,416,961 5,354,995
Current assets
Inventories 1,847,060 1,365,198
Trade and other receivables 2,445,757 1,515,462
Current income tax prepayments 37,741 36,353
Loans issued 1,021,450 1,474
Short-term financial assets - 24,115
Bank deposits - 1,057,300
Assets held for sale 20,000 20,000
Restricted cash 4,147 3,120
Cash and cash equivalents 689,083 748,718
Total current assets 6,065,238 4,771,740
TOTAL ASSETS 11,482,199 10,126,735
EQUITY
Share capital 127,635 127,635
Share premium 1,375,231 1,375,231
Legal reserve 3,011 3,011
Hedging reserve (22,840) -
Cumulative currency translation reserve (56,363) (142,828)
Retained earnings 8,639,529 7,498,556
TOTAL EQUITY 10,066,203 8,861,605
LIABILITIES
Non-current liabilities
Finance lease liabilities - 32,973
Provision for asset retirement obligations 75,537 60,761
Deferred income tax liabilities 230,034 291,114
Other non-current liabilities 57,481 55,042
Total non-current liabilities 363,052 439,890
Current liabilities
Finance lease liabilities - 18,087
Short-term financial liabilities 22,840 -
Accounts payable, accrued expenses and 763,300 534,930
advances from customers
Income tax payable 75,996 75,701
Other taxes payable 190,808 196,522
Total current liabilities 1,052,944 825,240
TOTAL LIABILITIES 1,415,996 1,265,130
TOTAL LIABILITIES AND EQUITY 11,482,199 10,126,735
JSC CHELYABINSK ZINC PLANT
Consolidated Condensed Interim Statement of Income (unaudited)
Nine months ended
In thousands of Russian Roubles 30 September 30 September 20
2011 10
Revenue 9,749,256 8,595,216
Cost of sales (7,296,352) (6,152,599)
Gross profit 2,452,904 2,442,617
Distribution costs (391,291) (427,248)
General and administrative expenses (549,853) (486,198)
Impairment of assets held for sale - (17,016)
Taxes other than income tax (86,516) (81,506)
Other operating (expenses) and income, net (35,748) (80,966)
Operating profit 1,389,496 1,349,683
Finance income 84,860 26,698
Finance costs (45,047) (15,450)
Foreign exchange gain 141,857 94,700
Foreign exchange loss (162,168) (134,216)
Profit before income tax 1,408,998 1,321,415
Income tax expense (268,025) (290,439)
Profit for the period 1,140,973 1,030,976
Profit is attributable to: 1,140,973 1,030,976
Shareholders of the Company
Profit for the period 1,140,973 1,030,976
Earning per share - basic and diluted (in 21 19
RUB)
JSC CHELYABINSK ZINC PLANT
Consolidated Condensed Interim Statement of Comprehensive Income (unaudited)
Nine months ended
In thousands of Russian Roubles 30 September 30 September
2011 2010
Profit for the period 1,140,973 1,030,976
Other comprehensive income/(loss) after tax
Exchange differences on translation to 86,465 (20,631)
presentation currency
Cash flow hedges, net of tax (22,840) 60,646
Total other comprehensive income/(loss) 63,625 40,015
Total comprehensive income for the period
1,204,598 1,070,991
Total comprehensive income attributable to:
Shareholders of the Company 1,204,598 1,070,991
JSC CHELYABINSK ZINC PLANT
Consolidated Condensed Interim Statement of Cash Flows (unaudited)
Nine months ended
In thousands of Russian Roubles 30 September 30 September
2011 2010
Cash flows from operating activities
Profit before income tax 1,408,998 1,321,415
Adjustments for:
Depreciation and amortisation 649,591 645,894Gain on disposal and liquidation of property, (39,110) (49,124) plant and equipment, net
Impairment of loans issued, trade and other 2,479 13,733
receivables
Increase/(decrease) of inventory provision 19,258 (3,567)
Finance (income)/costs, net (39,813) (11,248)
Stock-take results adjustment (80,089) (54,553)
Precious metals revaluation (39,824) (63,970)
Foreign exchange gain and loss, net (9,866) (6,021)
Impairment of assets under construction 9,518 12,504
Impairment of assets held for sale - 17,016
Other non-monetary operating (income)/expenses 18,875 71,412
Operating cash flows before changes in working 1,900,017 1,893,491 capital
(Increase)/decrease in trade and other (960,055) 246,173
receivables
Decrease in broker margin account - 7,596
(Increase)/decrease in inventory (350,889) 454,279
Increase/(decrease) in trade and other 256,420 (372,460)
payables
Increase in taxes payable 27,967 3,824
Increase in restricted cash balance (1,026) (10,518)
Cash generated from operations 872,434 2,222,385
Interest paid (1,437) (1,648)
Income taxes paid (363,879) (353,906)Net cash generated from operating activities 507,118 1,866,831
Cash flows from investing activities
Purchase of property, plant and equipment and (775,936) (678,696) intangible assets
Purchase of exploration and evaluation assets (5,947) (9,492)
Proceeds from sale of property, plant and 447 560
equipment
Loans issued (1,000,000) (12,452)
Proceeds from repayment of loans 488 3,061
Interest income received 49,401 10,306
Decrease/(increase) in short-term bank 1,057,300 (917,818)
deposits
Decrease in long-term bank deposits 100,000 -
Net cash used in investing activities 574,247 (1,604,531)
Cash flows from financing activities
Finance lease payments (52,356) (17,900)
Net cash used in financing activities (52,356) (17,900)
Effect of currency translation and exchange 59,848 (24,452)
rate fluctuations on cash and cash equivalents
Net (decrease)/increase in cash and cash (59,635) 219,948
equivalents
Cash and cash equivalents at the beginning of 748,718 470,437 the period
Cash and cash equivalents at the end of the 689,083 690,385
period
JSC CHELYABINSK ZINC PLANT
Consolidated Condensed Interim Statement of Changes in Equity (unaudited)
In thousands of Share Share Legal Hedging Cumulative Retained Total
Russian Roubles capital premium reserve reserve currency earnings equity
translation
reserve
Balance at 1 January 127,635 1,375,231 3,011 (51,780) (183,276) 6,084,988 7,355,809
2010
Comprehensive income
Net profit for the - - - - - 1,030,976 1,030,976
period
Other comprehensive
income
Exchange differences - - - - (20,631) (20,631)
on translation to
presentation currency
Cash flow hedges, net - - - 60,646 - - 60,646
of tax
Total other - - - 60,646 (20,631) - 40,015
comprehensive income
Total comprehensive ( - - - 60,646 (20,631) 1,030,976 1,070,991
expenses)/income
Balance at 30 - - - 8,866 (203,207) 7,115,964 8,426,800
September 2010
Balance at 1 January 127,635 1,375,231 3,011 - (142,828) 7,498,556 8,861,605
2011
Comprehensive income
Net profit for the - - - - - 1,140,973 1,140,973
period
Other comprehensive
expenses
Exchange differences - - - - 86,465 - 86,465
on translation to
presentation currency
Cash flow hedges, net - - - (20,840) (20,840)
of tax
Total other - - - (20,840) 86,465 - 63,625
comprehensive income
Total comprehensive ( - - - (20,840) 86,465 1,140,973 1,204,598
expenses)/incomeBalance at 30 127,635 1,375,231 3,011 (20,840) (56,363) 8,639,529 10,066,203 September 2011