PJSC KOKS International Financial Reporting Standards ... FS_english_30 06 2019.pdfAO...
Transcript of PJSC KOKS International Financial Reporting Standards ... FS_english_30 06 2019.pdfAO...
PJSC KOKS
International Financial Reporting Standards
Interim Condensed Consolidated Financial Information
(unaudited)
For the six months ended 30 June 2019
Contents
Report on review of interim condensed consolidated financial information
Interim Condensed Consolidated Statement of Financial Position as of 30 June 2019 (unaudited) .................... 1
Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the six
months ended 30 June 2019 (unaudited) .............................................................................................................. 2
Interim Consolidated Statement of Cash Flows for the six months ended 30 June 2019 (unaudited) .................. 3
Interim Consolidated Statement of Changes in Equity for the six months ended 30 June 2019 (unaudited) ....... 4
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited):
1 General information about PJSC KOKS and its subsidiaries ..................................................................... 5 2 Basis of preparation .................................................................................................................................... 6 3 Summary of significant accounting policies .............................................................................................. 6 4 Critical accounting estimates and judgements in applying accounting policies ......................................... 7 5 Segment information .................................................................................................................................. 8 6 Property, plant and equipment .................................................................................................................. 11 7 Intangible assets ....................................................................................................................................... 12 8 Non-current loans issued .......................................................................................................................... 12 9 Inventories ................................................................................................................................................ 12 10 Trade and other receivables and advances issued..................................................................................... 12 11 Current loans issued ................................................................................................................................. 13 12 Asset held for sale .................................................................................................................................... 13 13 Cash and cash equivalents ........................................................................................................................ 13 14 Share capital ............................................................................................................................................. 13 15 Retained earnings ..................................................................................................................................... 14 16 Borrowings and bonds .............................................................................................................................. 14 17 Trade and other payables .......................................................................................................................... 16 18 Other taxes payable .................................................................................................................................. 16 19 Revenue .................................................................................................................................................... 17 20 Cost of sales ............................................................................................................................................. 17 21 Taxes other than income tax ..................................................................................................................... 17 22 Distribution costs ...................................................................................................................................... 18 23 General and administrative expenses ....................................................................................................... 18 24 Other operating income/(expenses), net ................................................................................................... 18 25 Finance income ........................................................................................................................................ 18 26 Finance expenses ...................................................................................................................................... 18 27 Income tax expense .................................................................................................................................. 19 28 Balances and transactions with related parties ......................................................................................... 19 29 Fair value disclosures ............................................................................................................................... 20 30 Financial risks .......................................................................................................................................... 22 31 Contingencies, commitments and operating risks .................................................................................... 22 32 Earnings per share .................................................................................................................................... 23 33 Subsequent events .................................................................................................................................... 23
AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru
Report on Review of Interim Condensed Consolidated Financial Information
To the Shareholders and Board of Directors of PJSC Koks:
Introduction
We have reviewed the accompanying interim condensed consolidated statement of financial position of PJSC Koks and its subsidiaries (together – the “Group”) as at 30 June 2019 and the related interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six-month period then ended, and the related explanatory notes. Management is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with International Accounting Standard 34, “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim condensed consolidated financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim condensed consolidated financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
PJSC KOKS
Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the six months
ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)
The accompanying notes are an integral part of the interim condensed consolidated financial information.
2
Six months ended
Note 30 June 2019 30 June 2018
Revenue 19 46,448 43,184
Cost of sales 20 (35,194) (30,522)
Gross profit 11,254 12,662
Distribution costs 22 (2,425) (1,258)
General and administrative expenses 23 (3,185) (3,344)
Taxes other than income tax 21 (483) (523)
Net impairment losses on financial and contract assets reversed/(accrued) 42 (2)
Other operating (expenses)/income, net 24 (343) 397
Operating profit 4,860 7,932
Finance income 25 3,763 632
Finance expenses 26 (2,759) (5,986)
Loss on remeasurement of financial instruments 29 (282) -
Profit before income tax 5,582 2,578
Income tax expense 27 (1,116) (515)
Profit for the period 4,466 2,063
Profit/(Loss) is attributable to:
Equity holders of the Company 4,495 2,012
Non-controlling interest (29) 51
Profit for the period 4,466 2,063
Other comprehensive (loss)/income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the period (17) 25
Income tax relating to components of other comprehensive (loss)/income (9) 32
Total other comprehensive (loss)/income for the period (26) 57
Total comprehensive income for the period 4,440 2,120
Total comprehensive income/(loss) attributable to:
Equity holders of the Company 4,469 2,069
Non-controlling interest (29) 51
Total comprehensive income for the period 4,440 2,120
Earnings per ordinary share for profit attributable to the shareholders
of the Company, basic and diluted (in RR per share) 32 13.62 6.10
PJSC KOKS
Interim Condensed Consolidated Statement of Cash Flows for the six months ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)
The accompanying notes are an integral part of the interim condensed consolidated financial information.
3
Note
Six months ended
30 June 2019
Six months ended
30 June 2018
Cash flows from operating activities
Profit before income tax 5,582 2,578
Adjustments for:
Depreciation of property, plant and equipment 20, 23 1,774 1,578
Amortisation of intangible assets 20 73 73
Interest income 25 (915) (601)
Interest expenses 26 2,689 2,397
Loss on remeasurement of financial instruments 29 282 -
Accrual of vacation reserve 29 94
Reversal of obsolete stock provision 24 (3) (5)
Net impairment losses on financial and contract assets (reversed)/accrued (42) 2
Exchange (gain)/loss, net 24,25,26 (2,652) 2,999
Dividend income (6) (22)
Other effects (3) (8)
Operating cash flows before working capital changes 6,808 9,085
Changes in working capital
Decrease in trade and other receivables 1,775 1,190
Decrease/(Increase) in inventories 908 (307)
(Decrease)/Increase in trade and other payables (1,436) 1,594
Increase/(Decrease) in taxes other than income tax payable 66 (23)
Cash from operating activities 8,121 11,539
Income tax paid (1,083) (987)
Net cash from operating activities 7,038 10,552
Cash flows from investing activities
Purchase of property, plant and equipment (3,948) (4,706)
Payment of capitalized interest 6 (347) (347)
Proceeds from sale of property, plant and equipment 31 18
Acquisition of intangible assets (7) (10)
Loans issued (4,125) (5,166)
Repayment of loans issued 102 1,166
Interest received on loans issued and bank deposits 87 117
Dividend received 6 22
Net cash used in investing activities (8,201) (8,906)
Cash flows from financing activities
Proceeds from borrowings and bonds 16 6,000 5,220
Repayment of borrowings and bonds 16 (6,243) (2,043)
Interest paid on borrowings and bonds (2,645) (2,312)
Sale of treasury shares 14 353 100
Purchase of non-controlling interest in subsidiaries - (16)
Net cash (used in)/from financing activities (2,535) 949
Net (decrease)/increase in cash and cash equivalents (3,698) 2,595
Effects of exchange rate changes on cash and cash equivalents (220) 530
Net cash and cash equivalents at the beginning of the period, including 11,522 8,978
Cash and cash equivalents 11,522 8,978
Net cash and cash equivalents at the end of the period, including 7,604 12,103
Cash and cash equivalents 7,604 12,103
PJSC KOKS
Interim Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)
The accompanying notes are an integral part of the interim condensed consolidated financial information.
4
Share
capital
Treasury
shares
Currency
translation
reserve
Revaluation
reserve
Retained
earnings
Total attributable to
equity holders of the
Company
Non-controlling
interest
Total
equity
Balance at 31 December 2017 213 (11) (150) 476 25,619 26,147 711 26,858
Adjustment due to adoption of IFRS 9 - - - - (660) (660) - (660)
Balance at 1 January 2018 213 (11) (150) 476 24,959 25,487 711 26,198
Profit for the period - - - - 2,012 2,012 51 2,063
Other comprehensive income for the period - - 57 - - 57 - 57
Total comprehensive income for the period - - 57 - 2,012 2,069 51 2,120
Purchase of non-controlling interest in subsidiaries, net - - - - 410 410 (472) (62)
Revaluation reserve written-off to retained earning - - - (22) 22 - - -
- - - (22) 432 410 (472) (62)
Balance at 30 June 2018 213 (11) (93) 454 27,403 27,966 290 28,256
Balance at 31 December 2018 213 (11) (39) 432 26,650 27,245 290 27,535
Profit/(Loss) for the period - - - - 4,495 4,495 (29) 4,466
Other comprehensive loss for the period - - (26) - - (26) - (26)
Total comprehensive (loss)/income for the period - - (26) - 4,495 4,469 (29) 4,440
Revaluation reserve written-off to retained earning - - - (25) 25 - - -
- - - (25) 25 - - -
Balance at 30 June 2019 213 (11) (65) 407 31,170 31,714 261 31,975
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
5
1 General information about PJSC KOKS and its subsidiaries
PJSC KOKS (the “Company”) was established as state-owned enterprise Kemerovski Koksokhimicheski Kombinat in
1924. It was incorporated as an open joint stock company on 30 July 1993 as part of Russia’s privatisation programme.
The legal form was changed from open joint-stock company to public joint-stock company on 23 June 2016 in
accordance with the current legislation of the Russian Federation. The Company’s registered office is located at
1st Stakhanovskaya street, 6, Kemerovo, Russian Federation, 650021.
The principal activities of PJSC KOKS and its subsidiaries’ (jointly referred to as the “Group”) include coal mining and
the production of coke and coal concentrate, iron-ore concentrate, and pig iron, as well as the production of metal
powder (high-purity chrome products). The Group’s manufacturing facilities are primarily based in the city of
Kemerovo, Kemerovo Region, and in the city of Tula, Tula Region, in the Russian Federation. Its products are sold in
Russia as well as in other countries.
As at 30 June 2019 and at 31 December 2018 the Company’s beneficial controlling owner is Evgeny B. Zubitskiy.
The Group’s main subsidiaries are:
Name
Country of
incorporation Type of activity
Share in share capital / of
voting shares as at
Note
30 June
2019
31 December
2018
PJSC “CPP
“Berezovskaya” Russia Production of coal concentrate
98.7 % 98.7 %
LLC “Uchastok
“Koksoviy” Russia Coal mining
100.0% 100.0%
LLC “Butovskaya mine” Russia Coal mining 100.0% 100.0%
LLC “Tikhova mine” Russia Coal mining 100.0% 100.0%
PJSC
“TULACHERMET” Russia Pig-iron production
99.2% 99.2%
JSC “Kombinat
КМАruda” Russia Mining and concentration of iron-ore
100.0% 100.0%
JSC “POLEMA” Russia Production of chrome 100.0% 100.0%
JSC “SCHZ” Russia Production of cast-iron ware 100.0% 100.0%
PTW Ltd. China Sales activities 100.0% 100.0%
LLC “Consultinvest
2000” Russia Lease of property
100.0% 100.0%
MC “IMH” Russia Management services 100.0% 100.0%
LLC “BKF “Gorizont” Russia Transactions with securities 100.0% 100.0%
LLC “Koks-Mining” Russia Management services for coal mines 100.0% 100.0%
Koks Finance DAC Ireland Structured entity (1.1) - -
PKR Ltd Korea Sales activities 100.0% 100.0%
IMH Finance DAC Ireland Issue of euro-commercial papers 100.0% 100.0%
Polema (Qingdao)
Import&Export Co., LTD China Sales activities 100.0% 100.0%
1.1 In April 2011, Koks Finance Limited was incorporated in Dublin, Ireland. The main activity of Koks Finance
Limited is an issue of loan participation notes for the sole purpose of financing a loan to the Company (note 16). The
legal form was changed from Limited Liability Company to Designated Activity Company on 15 September 2016 in
accordance with the current legislation of Ireland. The Group has the current ability to direct the relevant activities of
this subsidiary through contractual arrangements. Activities of Koks Finance DAC is funded by the Group. Koks
Finance DAC is consolidated in the Group’s interim condensed consolidated financial information.
As at 30 June 2019 and 31 December 2018, the percentage of the Group’s ownership interest in its subsidiaries was
equal to the share in share capital / of its voting shares, with the exception of PJSC “TULACHERMET”, the percentage
of the Group’s ownership in which was 97.87% at 30 June 2019 and 97.87% at 31 December 2018.
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
6
2 Basis of preparation
This interim condensed consolidated financial information for the six months ended 30 June 2019 has been prepared in
accordance with IAS 34 “Interim financial reporting”. The interim condensed consolidated financial information should
be read in conjunction with the consolidated financial statements for the year ended 31 December 2018, which have
been prepared in accordance with International Financial Reporting Standards (IFRS).
Each company of the Group registered in Russia maintains its own accounting records and prepares financial statements
in accordance with the Russian accounting standards (“RAS”). The attached interim condensed consolidated financial
information have been prepared using RAS records and reports that have been adjusted and re-classified in compliance
with IFRS.
Each company of the Group registered outside Russia maintains its own accounting records and prepares financial
statements in accordance with the local GAAP. The financial statements of companies outside Russia have been
adjusted and reclassified in compliance with IFRS.
As at 30 June 2019, the official exchange rate set by the Central Bank of the Russian Federation for transactions
denominated in foreign currencies was RR 63.0756 per 1 US dollar (“USD”) (as at 31 December 2018: RR 69.4706 per
1 US dollar) and RR 71.8179 per 1 euro (“EUR”) (as at 31 December 2018: RR 79.4605 per 1 euro).
3 Summary of significant accounting policies
The principal accounting policies and methods of computation followed by the Group and the critical accounting
judgments in applying accounting policies are consistent with those disclosed in the consolidated financial statements
for the year ended 31 December 2018 with the exception of income tax expense, which is recognised based on
management’s best estimate of the annual effective income tax rate expected for the full financial year (which excludes
the impact of deferred tax asset impairment which was recorded for the six months ended 30 June 2019 and 30 June
2018, see note 27).
3.1 Adoption of new or revised standards and interpretations
In the year 2019 the Group has initially adopted IFRS 16 “Leases”. The new standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases. Under all lease contracts the lessee obtains the right to
use an asset at the inception of a lease and financing, if lease payments are made over time. Accordingly, IFRS 16
eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead,
introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets
separately from interest on lease liabilities in the statement of profit or loss and other comprehensive income. IFRS 16
substantially carries forward the lessor accounting requirements in IAS 17.
As at 1 January 2019 IFRS 16 “Leases” has not had any material impact on the Group’s financial position or operations
and accordingly, comparatives for the 2018 reporting period has not been restated.
Certain new or revised standards and interpretations have been issued that are mandatory for annual periods beginning
on or after 1 January 2019 or later, which have not had a material impact on the Group:
• IFRIC 23 “Uncertainty over Income Tax Treatments” (issued on 7 June 2017 and effective for annual periods
beginning on or after 1 January 2019.
• Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017 and
effective for annual periods beginning on or after 1 January 2019).
• Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” (issued on 12 October 2017 and
effective for annual periods beginning on or after 1 January 2019).
• Annual Improvements to IFRSs 2015-2017 cycle – amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued
on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019).
• Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” (issued on 7 February 2018 and effective
for annual periods beginning on or after 1 January 2019).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
7
3 Summary of significant accounting policies (continued)
3.2 Changes in presentation of Interim Condensed Consolidated Financial Information
During the year 2018, the Group has changed its classification of shipping and handling costs incurred by the Group in
respect of transportation services that represent a separate performance obligation in contracts with customers within the
interim condensed consolidated statement of profit or loss and other comprehensive income. Comparatives have been
changed accordingly.
The effect of reclassifications for presentation purposes was as follows on amounts for the six months ended 30 June
2018:
As originally presented Reclassification As reclassified for the six
months ended 30 June 2018
Cost of sales 28,470 2,052 30,522
Distribution costs 3,310 (2,052) 1,258
4 Critical accounting estimates and judgements in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next
financial period. Estimates and judgements are continually evaluated and are based on management’s experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving estimations, in the process of applying
accounting policies. Judgements that have the most significant effect on the amounts recognised in the interim
condensed consolidated financial information and estimates that could cause a significant adjustment to the carrying
amount of assets and liabilities within the next financial period include the following:
4.1 Going concern
As at 30 June 2019, the Group’s current liabilities exceeded current assets by RR 7,608 million. The Group had
undrawn borrowing facilities in the amount of RR 37,351 million (see note 16) as at 30 June 2019 (out of which
RR 36,381 million are long-term facilities).
Management believes that the Group can meet its liquidity position and accordingly a going concern basis for the
preparation of these interim condensed consolidated financial information is appropriate.
4.2 Estimated useful lives of property, plant, equipment and licences
The Group applies a range of useful lives to buildings, installations, plant and equipment, transport vehicles and other
assets classified as property, plant and equipment. Significant judgement is required in estimating the useful lives of
such assets. When determining useful life, assumptions that were valid at the time of estimation, may change when new
information becomes available. Factors that could affect estimation include:
• changes in environmental and other legislation applicable to the Group’s operations;
• development of new technologies and equipment; and
• changes in the terms of licences.
If management’s estimates of useful lives were to decrease by 10%, profit before income tax for the six months ended
30 June 2019 would decrease by RR 197 million (six months ended 30 June 2018: profit before income tax would
decrease by RR 175 million). An increase in useful lives by 10% would result in an increase of profit before income tax
for the six months ended 30 June 2019 by RR 161 million (six months ended 30 June 2018: increase of profit before
income tax by RR 143 million).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
8
4 Critical accounting estimates and judgements in applying accounting policies (continued)
Significant judgement is required in estimating the useful lives of intangible assets, which primarily include production
licences. When determining economic life, assumptions that were valid at the time of estimation, may change when new
information becomes available. Factors that could affect estimation include:
• changes in environmental and other legislation applicable to the Group’s operations;
• development of new technologies and equipment;
• changes in the terms of licences;
• plans and abilities of the Group to renew existing production licences at a low cost.
4.3 Fair value of loans issued measured at fair value through profit or loss
As of 30 June 2019 the Group recorded loans issued to LLC “TULACHERMET-STAL” carrying amount
RR 24,464 million (2018: RR 19,863 million). According to IFRS 9 they are measured at fair value through profit or
loss. For the purpose of fair value measurement following inputs were used: average interest rate for Group’s bank
loans and LLC “TULACHERMET-STAL”’s free cash flows projections.
Concerning interest rate management’s judgments are based on the assumption that terms of bank credit facilities for
LLC “TULACHERMET-STAL” will be similar to those for the Group. Sensitivity analysis of fair value measurement
model is disclosed in Note 29.
4.4 Expected credit losses measurement
Measurement of expected credit losses (ECL) is a significant estimate that involves determination methodology, models
and data inputs. ECL measurement methodology used as of 30 June 2019 is consistent with that disclosed in the
consolidated financial statements for the year ended 31 December 2018. The Group regularly reviews and validates the
model and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss
experience.
4.5 Estimated impairment of goodwill
The Group tests goodwill for impairment on an annual basis. The recoverable amount of cash generating units, defined
as the higher of fair value less costs of disposal and value in use. These calculations require the use of assumptions and
estimates, based on past performance and market expectations.
The Group got in 2016 100% share in the charter capital of LLC “Gorny otdykh” and classified as an acquisition of
assets and liabilities, rather than as a business combination in accordance with the definitions in IFRS 3 "Business
combinations". The Group's management does not consider the acquired assets as a cash generated unit in accordance
with the definition in IAS 36 “Impairment of assets” and includes the value of the assets acquired to the carrying value
of the Group’s existing cash generated units for the purposes of assessing impairment indicators and impairment testing
of the Group’s assets.
4.6 Recognition of deferred tax asset
The net deferred tax asset represents income taxes recoverable through future deductions from taxable profits. Deferred
tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is
probable that future taxable profit will be available against which the deductions can be utilised.
In determining future taxable profits and the amount of tax benefits that are probable in the future, management makes
judgements and applies estimates based on taxable profits of the previous three years and expectations of future income
that are believed to be reasonable under the circumstances.
5 Segment information
The Group operates as a vertically integrated business. The chief executive officer of MC “IMH” is considered to be the
chief operating decision-maker (“CODM”). The CODM is responsible for decision-making, estimating results and
distributing resources, relying on internal financial information prepared using IFRS principles. The Group’s
management has determined the following operating segments based on nature of production:
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
9
5 Segment information (continued)
• Coal – coal mining;
• Coke – coke production;
• Ore & Pig iron – production of iron ore concentrate, pig iron, crushed pig iron and cast iron ware;
• Polema – production of powder metallurgy articles (chrome articles);
• Unallocated – include subsidiaries: MC “IMH”, LLC “Consultinvest 2000”, LLC “BKF “Gorizont” and acquisition of asset LLC “Gorny otdykh”.
Inter-segment sales are generally composed of:
• Sales of coal to the Coke segment;
• Sales of coke to the Ore & Pig iron segment and;
• Management services rendered to the segments Coal, Coke, Ore & Pig iron and Polema segments.
Segment revenue and segment results include transfers between operating segments. Analysis of revenue generated from external sales by the products and services are included in Note 19.
The Group’s management assess the performance of operating segments based on revenue, adjusted EBITDA, assets and liabilities.
Coal Coke Ore & Pig
iron Polema Unallo-
cated Total
Six months ended 30 June 2019
Inter-segment revenue 2,509 9,792 102 (3) 1,263 13,663 External revenue 2,461 13,956 28,880 978 173 46,448
Segment revenue, total 4,970 23,748 28,982 975 1,436 60,111
Adjusted EBITDA 1,293 3,243 1,996 97 204 6,833
Six months ended 30 June 2018
Inter-segment revenue 2,801 9,857 94 1 1,305 14,058 External revenue 2,858 9,581 29,608 1,030 107 43,184
Segment revenue, total 5,659 19,438 29,702 1,031 1,412 57,242
Adjusted EBITDA 2,010 2,107 4,739 30 138 9,024
There are no reconciling items between external revenue of operating segments and total revenue in the interim condensed consolidated statement of profit or loss and other comprehensive income.
The reconciliation between profit/(loss) before income tax and adjusted EBITDA by segments is as follows:
Coal Coke Ore & Pig
iron Polema Unallo-
cated Total
Six months ended 30 June 2019
(Loss)/Profit before income tax (407) 4,604 1,239 124 22 5,582 Amortisation and depreciation 905 167 665 52 58 1,847 Interest income (2) (22) (863) (19) (9) (915) Inter-segment interest income - (772) (205) - - (977) Interest expense 32 1,779 859 19 - 2,689 Inter-segment interest expense 815 - 73 - 89 977 Exchange (gain)/loss, net (50) (2,513) (114) 24 1 (2,652) Loss/(gain) on remeasurement of financial instruments - - 342 (103) 43 282
Total adjusted EBITDA 1,293 3,243 1,996 97 204 6,833
Six months ended 30 June 2018
(Loss)/Profit before income tax (45) (1,733) 4,307 19 30 2,578 Amortisation and depreciation 837 170 565 29 50 1,651 Interest income (4) (36) (540) (10) (11) (601) Inter-segment interest income - (789) (202) (6) - (997) Interest expense 185 1,714 490 8 - 2,397 Inter-segment interest expense 568 - 360 - 69 997 Exchange loss/(gain), net 469 2,781 (241) (10) - 2,999
Total adjusted EBITDA 2,010 2,107 4,739 30 138 9,024
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
10
5 Segment information (continued)
Adjusted EBITDA analysed by the CODM is defined as profit before income tax adjusted for interest income, interest
expense, depreciation, amortisation and impairment, any extraordinary gains and losses, and foreign exchange gains and
losses.
Segment assets and liabilities
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, trade and other
receivables, advances issued, loans issued, VAT recoverable and cash and cash equivalents.
Segment liabilities include accounts payable arising during operating activities, borrowings and interest payable.
Capital expenditures comprise additions to property, plant and equipment and intangible assets.
Segment assets and liabilities and capital expenditures are presented below:
Coal Coke
Ore & Pig
iron Polema Unallocated Total
At 30 June 2019
Segment assets 33,324 38,654 73,072 2,947 5,552 153,549
Segment liabilities 30,369 45,345 45,797 947 3,296 125,754
Capital expenditures for the six months ended
30 June 2019 3,282 226 1,532 27 195 5,262
At 31 December 2018
Segment assets 31,092 38,295 71,302 2,992 5,370 149,051
Segment liabilities 27,760 49,120 44,603 1,107 3,128 125,718
Capital expenditures for the six months ended
30 June 2018 2,025 193 2,515 117 265 5,115
The Group’s corporate assets are included in the Unallocated.
The reconciliation between the assets of operating segments and total assets in the interim condensed consolidated
statement of financial position is presented below:
The reconciliation between the liabilities of operating segments and total liabilities in the interim condensed
consolidated statement of financial position is presented below:
At 30 June 2019 At 31 December 2018
Segment assets 153,549 149,051
Items not included in segment assets:
Goodwill 4,497 4,497
Deferred income tax asset 2,924 2,902
Other non-current assets 75 76
Elimination of inter-segment balances (36,858) (32,876)
Total assets 124,187 123,650
At 30 June 2019 At 31 December 2018
Segment liabilities 125,754 125,718
Items not included in segment liabilities:
Provision for restoration liability 64 61
Deferred income tax liability 1,748 1,882
Taxes payable 1,504 1,330
Elimination of inter-segment balances (36,858) (32,876)
Total liabilities 92,212 96,115
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
11
5 Segment information (continued)
Information about geographical areas
The following table presents revenues from external customers:
Six months ended
30 June 2019
Six months ended
30 June 2018
Total sales: 46,448 43,184
Russia 13,263 12,927
Switzerland 25,414 25,890
Singapore 3,320 780
Ukraine 1,820 162
Kyrgyz Republic 991 1,778
Belarus 588 351
Germany 299 253
Republic of Kazakhstan 124 16
Korea 97 110
Poland 89 308
China 57 120
Czech Republic 1 319
Other 385 170
For the six months ended 30 June 2019 revenue from the largest customer of the Group’s Ore & Pig Iron segment,
which is related party, represented RR 16,276 million of the Group’s total revenues (for the six months ended 30 June
2018: revenue from the largest customer of the Group’s Coke and Ore & Pig Iron segments, which is related party,
represented RR 25,755 million).
The Group’s non-current assets (different from financial instruments and deferred income tax asset) located in the
Russian Federation.
6 Property, plant and equipment
Six months ended
30 June 2019
Six months ended
30 June 2018
Cost at the beginning of the period 87,039 77,838
Additions 5,262 5,105
Disposals (353) (242)
Cost at the end of the period 91,948 82,701
Accumulated depreciation and impairment at the beginning of the period (24,634) (22,052)
Depreciation charges (2,104) (1,920)
Accumulated depreciation and impairment related to disposals 296 202
Accumulated depreciation and impairment at the end of the period (26,442) (23,770)
Net book value at the beginning of the period 62,405 55,786
Net book value at the end of the period 65,506 58,931
During the six months ended 30 June 2019 depreciation expense of RR 1,609 million (six months ended 30 June 2018:
RR 1,431 million) was included in cost of sales, a depreciation expense of RR 165 million (six months ended 30 June
2018: RR 147 million) was included in general and administrative expenses and depreciation expense of
RR 330 million (six months ended 30 June 2018: RR 342 million) was capitalised.
Additions to property, plant and equipment during the six months ended 30 June 2019 include capitalised interest of
RR 341 million (six months ended 30 June 2018: RR 326 million) and foreign exchange losses from financing activities
in the amount of RR 6 million (six months ended 30 June 2018: RR 21 million) directly attributable to the qualifying
assets. The capitalisation rate used to determine the amount of capitalised interest for the six months ended 30 June
2019 was 8.34% (six months ended 30 June 2018: 9.04%).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
12
7 Intangible assets
Movements of intangible assets are provided below:
Six months ended
30 June 2019
Six months ended
30 June 2018
Cost as at the beginning of the period 7,508 7,620
Accumulated amortisation and impairment (2,973) (2,961)
Net book value as at the beginning of the period 4,535 4,659
Additions - 10
Amortisation charge (73) (73)
Net book value at the end of the period 4,462 4,596
Cost as at the end of the period 7,508 7,630
Accumulated amortisation and impairment (3,046) (3,034)
8 Non-current loans issued
At 30 June 2019 Interest rate At 31 December 2018 Interest rate
Loans issued to related parties and
denominated in Russian roubles (note 28) 23,096 8.8% 16,381 8.9%
Loans issued and denominated in Russian
roubles 125 8.8 - 10.0% 52 10.0%
Total non-current loans issued 23,221 16,433
Non-current loans issued to related parties are measured at fair value through profit or loss.
As of 30 June 2019 non-current loans issued to third parties amounted to RR 119 million are measured at fair value
through profit or loss and at amortised cost, net of expected credit loss allowance, amounted to RR 6 million (31
December 2018: non-current loans issued to third parties measured at amortised cost amounted to RR 52 million).
As of 30 June 2019 and 31 December 2018 as the result of the management assessment of expected credit losses no
impairment loss was identified.
9 Inventories
At 30 June 2019 At 31 December 2018
Raw materials and supplies held for production purposes 5,164 5,298
Finished goods 1,710 2,434
Work in progress 519 555
Total inventories 7,393 8,287
Raw materials and supplies held for production purposes are recorded at net realisable value, net of obsolete stock
provision which amounted to RR 35 million as at 30 June 2019 (RR 38 million as at 31 December 2018).
10 Trade and other receivables and advances issued
At 30 June 2019 At 31 December 2018
Trade receivables (net of impairment amounting to RR 5 million as at 30 June
2019; RR 6 million as at 31 December 2018) 1,405 2,082
Trade receivables from related parties 1,897 1,337
Taxes receivable 113 204
Other accounts receivable (net of impairment amounting to RR 172 million as at
30 June 2019; RR 167 milion as at 31 December 2018) 221 221
Other accounts receivable from related parties (net of expected credit loss
amounting to RR 88 million as at 30 June 2019; RR 88 milion as at 31 December
2018) 100 772
Total trade and other receivables 3,736 4,616
Advances issued 727 839
Less impairment (7) (10)
Total advances issued 720 829
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
13
11 Current loans issued
At 30 June
2019 Interest
rate At 31 December
2018 Interest
rate
Loans issued to related parties and denominated in Russian roubles (note 28) 1,368 8.8% 3,692 0.0 - 9.50% Bank deposits denominated in Russian roubles 2 0.01 - 6.30% 8 0.01 - 6.30% Loans issued and denominated in Russian roubles 52 10.0% -
Total current loans issued 1,422 3,700
As of 30 June 2019 current loans issued to related parties amounted to RR 1,368 million are measured at fair value through profit or loss (31 December 2018: current loans issued to related parties measured at fair value through profit or loss amounted to RR 3,572 million and at amortised cost, net of expected credit loss allowance, amounted to RR 120 million).
As of 30 June 2019 current loans issued to third parties measured at amortised cost amounted to RR 52 million, net of expected credit loss allowance.
As at 30 June 2019 current loans issued expected credit loss allowance amounted to RR 33 million (31 December 2018: RR 77 million).
12 Asset held for sale
In December 2018 the Arbitration court of Tula region issued a decision to terminate the sale agreement of the stake in the authorized capital of LLC “TULACHERMET-STAL” (an entity under common control of the Group’s beneficial controlling owner), according to which PJSC “TULACHERMET” (a subsidiary of the Group) regained the stake in the authorized capital of LLC “TULACHERMET-STAL” in the amount of 33.3%. In accordance with the current plans of the Group’s management the stake in the authorized capital of LLC “TULACHERMET-STAL” is classified as asset held for sale.
The Group’s management plans to complete the sale of the stake in LLC “TULACHERMET-STAL” within twelve months since it was regained by the Group.
The summarized information about assets and liabilities of LLC ”TULACHERMET-STAL” is as follows:
At 30 June 2019 At 31 December 2018
Current assets, total 5,198 1,670 Non-current assets, including: Property, plant and equipment 51,522 46,344 Other non-current assets 5,058 5,359 Current liabilities, total (11,217) (11,527) Non-current liabilities, including: Borrowings (49,783) (41,845) Other non-current liabilities (2,069) (1,668)
Net assets (1,291) (1,667)
13 Cash and cash equivalents
At 30 June 2019 At 31 December 2018
RR bank deposits 1,055 6,105 RR-denominated cash in hand and bank balances 2,249 2,971 Bank deposits in foreign currencies 4,125 1,311 Bank balances denominated in foreign currencies 175 1,135
Total cash and cash equivalents 7,604 11,522
14 Share capital
As of 30 June 2019 and 31 December 2018 the Company’s share capital (authorised, issued and paid in) totalled RR 213 million. The share capital consisted of 330,046,400 ordinary shares with a par value of RR 0.10 per share as of 30 June 2019 and 31 December 2018. As of 30 June 2019 and 31 December 2018 share capital included hyperinflationary adjustment totaling RR 180 million, which was calculated in accordance with the requirements of IAS 29 “Financial Reporting in Hyperinflationary Economies” and relates to the reporting periods prior to 1 January 2003.
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
14
14 Share capital (continued)
In November 2017 Evgeny B. Zubitskiy purchased 27,012,353 of the Company’s shares from the subsidiary of the
Group for RR 2,828 million. The loss from this transaction in the amount of RR 3,205 million is included in the interim
condensed consolidated statement of changes in equity. As of 30 June 2019 other accounts receivable related to this
transaction were fully paid (31 December 2018: other accounts receivable related to this transaction equaled to RR 353)
(see note 28).
15 Retained earnings
The Company’s Russian statutory financial statements serve as the basis for its profit distribution and other
appropriations. Under Russian law, the basis of distribution is defined as a company’s net profit. The net profit
recognised in the Company’s published Russian statutory financial statements for the six months ended 30 June 2019
was RR 3,878 million (for the six months ended 30 June 2018: net loss equaled RR 1,412 million) and the accumulated
profit after dividends as at 30 June 2019 was equal to RR 13,896 million (31 December 2018: RR 10,017 million).
However, legislation and other statutory laws and regulations dealing with profit distribution are open to legal
interpretation and, accordingly, management believes that at present it would not be appropriate to disclose the amount
for distributable reserves in the interim condensed consolidated financial information.
During the six months ended 30 June 2019 and 30 June 2018 no dividends were declared and paid.
16 Borrowings and bonds
Short-term borrowings and current portion of long-term borrowings
At 30 June 2019 At 31 December 2018
RR denominated bank loans, fixed 6,894 2,985
RR denominated bank loans, variable - 523
USD-denominated bank loans, fixed 2,497 229
Total short term borrowings and current portion of long-term borrowings 9,391 3,737
Long-term borrowings
At 30 June 2019 At 31 December 2018
RR denominated bank loans, fixed 29,278 32,902
Other RR denominated borrowings, fixed - 770
USD denominated bank loans, fixed - 2,521
Total long-term borrowings 29,278 36,193
As at 30 June 2019 the loans totaling RR 3,267 million were collaterised by property, plant and equipment in the
carrying value of RR 1,521 million (at 31 December 2018: the loans totaling RR 3,020 million were collaterised by
property, plant and equipment in the carrying value of RR 1,506 million).
Borrowings of the Group are due for repayment as follows:
At 30 June 2019 At 31 December 2018
Borrowings to be repaid – within one year 9,391 3,737
– between one and five years 29,278 34,779
– after five years - 1,414
Total borrowings 38,669 39,930
As at 30 June 2019 the Group has the undrawn borrowing facilities in the amount of RR 37,351 million, including long-
term facilities in the amount of RR 36,381 million (as at 31 December 2018: RR 46,302 million, including long-term
RR 39,201 million).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
15
16 Borrowings and bonds (continued)
Long-term borrowings (continued)
Movements in borrowings are analysed as follows:
Six months ended
30 June 2019
Six months ended
30 June 2018
Short-term borrowings:
Balance at the beginning of the period 3,737 6,631
Borrowings received 6,000 -
Borrowings repaid (5,751) (1,387)
Reclassification of borrowings 5,426 1,920
Bank overdrafts received 1,705 1,648
Bank overdrafts repaid (1,705) (1,648)
Effect of changes in exchange rates (21) 128
Balance at the end of the period 9,391 7,292
Long-term borrowings:
Balance at the beginning of the period 36,193 20,251
Borrowings received - 5,220
Borrowings repaid (492) -
Other non-cash effects 5 (3)
Reclassification of borrowings (6,195) (1,920)
Effect of changes in exchange rates (233) 511
Balance at the end of the period 29,278 24,059
BO-05 series bonds
In August 2018 the Group issued five-year maturity bonds in the principal amount of RR 5 billion at a coupon rate of
9.2% payable semi-annually (series BO-05 bonds).
Movements in series BO-05 bonds are analysed as follows:
Six months ended
30 June 2019
Six months ended
30 June 2018
Short-term bonds:
Balance at the beginning of the period 165 -
Interest expense 229 -
Interest repaid (229) -
Balance at the end of the period 165 -
Long-term bonds:
Balance at the beginning of the period 4,986 -
Balance at the end of the period 4,986 -
Eurobonds
The table below sets out an analysis of Group’s eurobonds liabilities and their movements for each of the periods
presented:
Six months ended
30 June 2019
Six months ended
30 June 2018
Short-term bonds:
Balance at the beginning of the period 392 4,087
Interest expense 996 1,439
Bonds repaid - (149)
Interest repaid (965) (1,364)
Effect of changes in exchange rates (49) 417
Balance at the end of the period 374 4,430
Long-term bonds:
Balance at the beginning of the period 27,473 27,889
Bonds repaid - (507)
Effect of changes in exchange rates (2,529) 2,507
Balance at the end of the period 24,944 29,889
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
16
16 Borrowings and bonds (continued)
Eurobonds (continued)
As at 30 June 2019, the carrying value of 7.5% loan participation notes due 2022 amounted to RR 25,318 million
(including the current portion of the bonds, which is equal to RR 374 million), net of transaction costs (as at 31
December 2018: RR 27,865 million (including the current portion, which is equal to RR 392 million), net of transaction
costs).
Debt covenants
In relation to the first half of 2019, the lender one time has increased the threshold values of the covenants under the
terms of loan agreements, so the right of the lender to demand early repayment of long-term debt as of June 30, 2019
and at the date of approval of the interim condensed consolidated financial information has not occurred.
17 Trade and other payables
At 30 June 2019 At 31 December 2018
Financial liabilities
Trade accounts payables 7,906 8,416
Interest payable 88 100
Other accounts payable 212 225
Total financial liabilities 8,206 8,741
Non-financial liabilities
Wages and salaries payable 1,559 1,587
Advances received 8,942 9,281
Total non-financial liabilities 10,501 10,868
Total trade and other payables 18,707 19,609
18 Other taxes payable
At 30 June 2019 At 31 December 2018
VAT 724 637
Contributions to the state pension and social insurance funds 292 266
Property tax 146 157
Individual income tax 101 108
Other taxes 25 17
Total taxes other than income tax payable 1,288 1,185
The total statutory pension contributions for the six months ended 30 June 2019 included in all captions of the interim
condensed consolidated statement of profit or loss and other comprehensive income and capitalised to property, plant
and equipment amounted to RR 1,291 million (six months ended 30 June 2018: RR 1,332 million), including portion in
the amount of RR 38 million accrued on payment to key management (six months ended 30 June 2018: RR 38 million).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
17
19 Revenue
Six months ended
30 June 2019 30 June 2018
Sales in Russia:
Sales of pig iron 4,149 3,163
Sales of coke and coking products 3,903 4,308
Sales of coal and coal concentrate 1,893 2,322
Sales of services 1,288 1,259
Sales of cast-iron ware 823 787
Sales of powder metallurgy products 413 464
Sales of chrome 255 108
Sales of crushed pig iron 16 6
Sales of iron ore concentrate - 105
Other sales 523 405
Total sales in Russia 13,263 12,927
Sales to other countries:
Sales of pig iron 22,805 24,359
Sales of coke and coking products 10,052 5,391
Sales of powder metallurgy products 134 151
Sales of chrome 120 228
Sales of cast-iron ware 34 53
Other sales 40 75
Total sales to other countries 33,185 30,257
Total revenues 46,448 43,184
Timing of revenue recognition (for each revenue stream) is as follows:
Six months ended
30 June 2019 30 June 2018
At a point in time 44,176 41,132
Over time 2,272 2,052
Total revenue 46,448 43,184
20 Cost of sales
Six months ended
30 June 2019 30 June 2018
Raw materials and supplies 24,530 21,021
Wages and salaries including associated taxes 4,235 4,390
Transportation services 2,272 2,052
Depreciation of property, plant and equipment 1,609 1,431
Energy 749 704
Changes in finished goods and work in progress 734 37
Other services 167 155
Amortisation of intangible assets 73 73
Other expenses 825 659
Total of cost of sales 35,194 30,522
For the six months ended 30 June 2019 employee benefits expenses, included in cost of sales, general and
administrative expenses amounted to RR 6,445 million (for the six months ended 30 June 2018 : RR 6,654 million).
21 Taxes other than income tax
Six months ended
30 June 2019 30 June 2018
Property tax 300 292
Mineral resources extraction tax 86 124
Land tax 75 94
Accrual of other taxes 22 13
Total taxes other than income tax 483 523
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
18
22 Distribution costs
Six months ended
30 June 2019 30 June 2018
Transportation services 2,260 1,125
Other selling expenses 165 133
Total distribution costs 2,425 1,258
23 General and administrative expenses
Six months ended
30 June 2019 30 June 2018
Wages and salaries including associated taxes 2,210 2,264
Other purchased services 680 771
Depreciation of property, plant and equipment 165 147
Materials 108 126
Other 22 36
Total general and administrative expenses 3,185 3,344
24 Other operating income/(expenses), net
Six months ended
30 June 2019 30 June 2018
Exchange (loss)/gain, net (126) 559
Dividend income 6 22
Reversal of obsolete stock provision 3 5
Gain/(Loss) on disposal of property, plant and equipment 21 (15)
Charity payments (117) (75)
Other (130) (99)
Other operating (expenses)/income, net (343) 397
25 Finance income
Six months ended
30 June 2019 30 June 2018
Interest income on loans issued measured at FVTPL 826 503
Interest income on loans issued measured at AC 7 10
Interest income on bank deposits 82 88
Financial foreign exchange gain on loans issued and on interest accrued on loans
issued, net - 31
Financial foreign exchange gain on borrowings and interest accrued on
borrowings, net 260 -
Financial foreign exchange gain on bonds issued and interest accrued on bonds
issued, net 2,588 -
Total finance income 3,763 632
26 Finance expenses
Six months ended
30 June 2019 30 June 2018
Interest expense 2,689 2,397
Financial foreign exchange loss on bonds issued and on interest accrued on bonds
issued, net - 2,943
Financial foreign exchange gain on borrowings and interest accrued on
borrowings, net - 622
Financial foreign exchange loss on deposits, net 70 24
Total finance expenses 2,759 5,986
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
19
27 Income tax expense
Income tax expense recorded in the interim condensed consolidated statement of profit or loss and other comprehensive
income comprises the following:
Six months ended
30 June 2019 30 June 2018
Current income tax expense 1,281 793
Deferred income tax benefit (177) (287)
Impairment of deferred tax asset 12 9
Income tax expense 1,116 515
Income tax expense is accrued based on management’s best estimates of annual effective income tax rate. The
estimated effective income tax rate for the six months ended 30 June 2019 and 30 June 2018 is 20% (it excludes the
impact of deferred tax asset impairment recorded in the reporting period).
28 Balances and transactions with related parties
Parties are generally considered to be related if one party has the ability to control the other party, is under common
control, or can exercise significant influence over the other party in making financial and operational decisions. In
considering each possible related party relationship, attention is directed to the substance of the relationship, not merely
the legal form. Information about the parties who ultimately own and control the Company is disclosed in Note 1.
Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties
may not be affected on the same terms, conditions and amounts as transactions between unrelated parties.
Balances outstanding with related parties as of 30 June 2019:
Companies under
common control Associates
Ultimate
shareholders Total
Non-current loans issued 23,096 - - 23,096
Trade receivables 1,897 - - 1,897
Other accounts receivable 55 45 - 100
Advances issued - 316 - 316
Current loans issued 1,368 - - 1,368
Trade accounts payable (57) (100) - (157)
Other accounts payable (61) - - (61)
Advances received (5,673) - - (5,673)
Financial guarantee (88) - - (88)
Balances outstanding with related parties as of 31 December 2018:
Companies under
common control Associates
Ultimate
shareholders Total
Non-current loans issued 16,381 - - 16,381
Trade receivables 1,337 - - 1,337
Other accounts receivable 419 - 353 772
Advances issued - 297 - 297
Current loans issued 3,692 - - 3,692
Trade accounts payable (38) (7) - (45)
Other accounts payable - (34) - (34)
Advances received (7,305) - - (7,305)
Financial guarantee (88) - - (88)
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
20
28 Balances and transactions with related parties (continued)
Related party transactions for the six months ended 30 June 2019:
Companies under
common control Associates
Ultimate
shareholders Total
Sales in Russia:
Sales of coal and coal concentrate 1,884 - - 1,884
Sales of pig iron 1,066 - - 1,066
Sales of services 1,100 - - 1,100
Other sales 160 - - 160
Sales of coke and coking products 2 - - 2
Sales of cast-iron ware 1 - - 1
Sales to other countries:
Sales of pig iron 20,827 - - 20,827
Other income:
Interest income 830 - - 830
Dividends - 6 - 6
Net impairment losses on financial and contract assets
reversed - 1 - 1
Loss on remeasurement of financial instruments (342) - - (342)
Other operating income/(expenses), net 115 (20) - 95
Purchase of goods and services:
Transportation services - (1,933) - (1,933)
Purchase of raw materials and supplies (21) (1,947) - (1,968)
Related party transactions for the six months ended 30 June 2018:
Companies under
common control Associates
Ultimate
shareholders Total
Sales in Russia:
Sales of coal and coal concentrate 2,322 - - 2,322
Sales of services 1,141 - - 1,141
Other sales 208 - - 208
Sales of cast-iron ware 1 - - 1
Sales to other countries:
Sales of pig iron 24,047 - - 24,047
Sales of coke and coking products 1,708 - - 1,708
Other income:
Interest income 513 - - 513
Dividends - 22 - 22
Other operating income/(expenses), net 17 (7) - 10
Purchase of goods and services:
Transportation services - (2,018) - (2,018)
Purchase of raw materials and supplies (1) (751) - (752)
Payments to key management personnel
Payments to key management personnel included in general and administrative expenses amounted to RR 346 million
for the six months ended 30 June 2019 (for the six months ended 30 June 2018: RR 359 million). All these payments
are short-term employee benefits. The number of people to whom this compensation relates is 36 for the six months
ended 30 June 2019 (for the six months ended 30 June 2018: 35).
29 Fair value disclosures
Fair value measurements of Group’s financial instruments are analysed by their level in the fair value hierarchy as
follows:
(i) Level 1 covers measurements made at quoted prices (unadjusted) in active markets for identical assets or
liabilities;
(ii) Level 2 measurements are valuation techniques with all material inputs observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices); and
(iii) Level 3 measurements are valuations not based on observable market data (that is, unobservable inputs).
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
21
29 Fair value disclosures (continued)
Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value
measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement.
The significance of a valuation input is assessed against the fair value measurement in its entirety.
Financial assets and liabilities carried at fair value
The following table analyses Group’s financial instruments carried at fair value by the level of fair value hierarchy:
30 June 2019 31 December 2018
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Loans issued - - 24,583 - - 19,953
Other financial assets - - 38 - - 39
Asset held for sale - 39 - - 39 -
Liabilities
Other financial liability - - 666 - - -
Financial guarantee - - 88 - - 88
At 30 June 2019 the carrying amount of loans issued measured at FVTPL includes loans issued to
LLC “TULACHERMET-STAL”.
The following table analyses Group’s financial instruments carried at fair value movement for the reporting period:
Loans issued
Other financial
assets
Other financial
liability Financial guarantee
Fair value at 31 December 2018 19,953 39 - (88)
Loans issued 4,125 - - -
Interest income 826 - - -
Repayment of loans issued (99) - - -
Reclassification 163 - (769) -
Remeasurement at FVTPL (385) - 103 -
Disposal of other financial assets - (1) - -
Fair value at 30 June 2019 24,583 38 (666) (88)
Fair value measurement of loans issued to LLC “TULACHERMET-STAL” is determined using average interest rates
for long-term borrowings received by the Group and forecasted cash flows of LLC “TULACHERMET-STAL”. Due to
assumptions underlying fair value estimation, loans issued to LLC “TULACHERMET-STAL” are categorized as Level
3 in the fair value hierarchy, described above.
The fair value of the loans issued to LLC “TULACHERMET-STAL” is sensitive to interest rate changes and forecasted
cash flows changes. Forecasted cash flow of LLC “TULACHERMET-STAL” is mostly sensitive to production volume
changes, raw materials and finished goods prices dynamics, and working capital turnover.
The table below represents the effect on fair value of the loans issued that would occur from changes of the
unobservable for the reporting period:
Inputs used Range of inputs
Reasonable
changes
Sensitivity of fair
value measurement
Loans issued Interest rate 8.79%
+1% (948)
-1% 992
Production volume for 2019 year 885 th.tn +10% 167
-10% (52)
Finished goods prices dynamics
change -4.3%+4.5%
+3% 501
-3% (439)
Working capital turnover 15-70 d. +30 d. (635)
-30 d. 628
Raw materials prices dynamics
changes -6.7%+4.5%
+3% (287)
-3% 298
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
22
29 Fair value disclosures (continued)
Financial assets and liabilities carried at amortised cost
Group’s financial instruments except those carried at fair value are measured at amortised cost. Management believes that the carrying amount of cash and cash equivalents, accounts receivable and payable in the interim condensed consolidated statement of financial position approximates their fair value based on level 1 (cash), level 2 (cash equivalents) and level 3 (accounts receivable and payable) measurements.
The table below presents financial instruments measured at amortised cost for which carrying amount differs from fair value:
30 June 2019 31 December 2018
Carrying
amount Level 1 Level 2 Level 3 Carrying
amount Level 1 Level 2 Level 3
Assets Loans issued and bank deposits 60 - 57 - 180 - 178 - Liabilities Term loans (excluding overdrafts) 38,669 - 38,376 - 39,930 - 40,032 - Bonds 30,469 29,526 - - 33,016 36,264 - -
The fair value of loans issued carried at amortised cost was determined using valuation techniques based on Level 2 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity.
The fair values of long-term and short-term debt carried at amortised cost were determined using valuation techniques. The estimated fair value of fixed interest rate instruments with stated maturity was estimated based on Level 2 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity.
The fair value of the Group’s bonds was based on quoted market prices, which are Level 1 measurements.
30 Financial risks
The Group’s risk management is based on determining risks to which the Group is exposed in the course of ordinary operations. The Group is exposed to the following major risks: (а) credit risk, (b) market risk (including foreign currency risk, interest rate risk), and (с) liquidity risk. Management works proactively to control and manage all opportunities, threats and risks arising in connection with the Group’s operational objectives.
The interim condensed consolidated financial information do not include all the financial risk management information
and disclosures (other than the changes in the Group’s liquidity discussed in note 4) required in the annual financial
statements and should be read in conjunction with the consolidated financial statements for the year ended
31 December 2018. There have been no significant changes in the risk management policies since 2018 year end.
31 Contingencies, commitments and operating risks
There were no significant changes to the operating environment, in which the Group operates, legal and tax risks the Group is subject for, environmental matters, insurance policies, licences compared to those, disclosed in the annual consolidated financial statements for the year ended 31 December 2018.
Capital commitments
As at 30 June 2019 the amount of the Group’s capital commitments was RR 2,572 million (at 31 December 2018: RR 1,854 million).
Financial liability
In 2015-2019, LLC “TULACHERMET-STAL”, an entity under common control of the Group’s beneficial controlling owner, obtained bank loans under credit facilities with the outstanding balance as at 30 June 2019 in the amount of RR 27,039 million (at 31 December 2018: RR 25,790 million). The balance in the amount of RR 8,784 million roubles is payable by several instalments from October 2019 to June 2020, and the rest of loan balance is payable by instalments from October 2020 to April 2023.
PJSC KOKS
Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019
(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)
23
31 Contingencies, commitments and operating risks (continued)
PJSC “TULACHERMET” together with LLC “STAL” and Sipco B.V. (both companies are under common control of
the Group’s beneficial controlling owner) entered into a number of agreements in connection with LLC
“TULACHERMET-STAL” obligations under this loan facility agreement. As a result, under these agreements, these
entities have committed jointly and severally to finance LLC “TULACHERMET-STAL” project funding shortfall, if
any, in the amount of up to the outstanding debt under the loan facility.
As at 30 June 2019 the financial obligations under these agreements are recognised as other current financial liabilities
in the interim condensed consolidated statement of financial position with carrying amount of RR 88 million, measured
as expected credit loss allowance (at 31 December 2018: RR 88 million).
32 Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the period, excluding treasury shares.
The Company has no dilutive potential ordinary shares; therefore, the diluted earnings per share equal to the basic
earnings per share.
Earnings per share are calculated as follows:
Six months ended
Note 30 June 2019 30 June 2018
Profit for the period 4,495 2,012
Weighted average number of ordinary shares in issue (millions of shares) 14 329.91 329.91
Basic and diluted earnings per ordinary share (expressed in RR per share) 13.62 6.10
33 Subsequent events
In August 2019 the Group completed the sale of 33.3% stake in the authorized capital of LLC “TULACHERMET-
STAL”.