Financial results by operating segments
The Group presents information on operating segments in accordance with IFRS 8 "Operating Segments". The Group is organized and managed in segments by type of products offered and type of production activity.
After analyses of the aggregation criteria and quantitative thresholds, the following operating segments were established in the Group’s consolidated financial statements:
- Coal Segment – which includes extraction and sales of hard coal;
- Coke Segment – which includes production and sales of coke and hydrocarbons;
- Other Segments – include activities performed by the Group’s entities other than those covered by the Coal and Coke Segments.
The Management Board of the Parent Company has identified operating segments based on the financial reporting of the companies comprising the Group. Information originating from the reports is used for strategic decision-making in the Group.
Operating results of the coal segment*
| ITEM | 2017 | 2016 | GROWTH RATE 2016=100 |
|---|---|---|---|
| Sales revenues from external customers | 4925.9 | 3551.6 | 138.7 |
| Operating profit/(loss) | 3001.9 | 663.4 | 452.5 |
| Depreciation and amortization | 680.9 | 655.6 | 103.9 |
| EBITDA | 3682.8 | 1319.0 | 279.2 |
| Adjusted EBITDA* | 3192.7 | 1390.1 | 229.7 |
* EBITDA after excluding the impairment charge made as a result of the impairment tests carried out on the non-current assets of JSW’s units in 2017: PLN 759.1 million and in 2016: PLN 71.1 million, respectively, and dissolution of the provision for disputes concerning free coal allowance for old-age and disability pensioners in 2017: PLN 1,249.2 million.
In 2017, revenues on sales to external buyers were PLN 4,925.9 million, up by 38.7% compared to 2016. This increase results primarily from the significant increase in the average coal sales price by 56.0% (including coking coal by 65.3%).
In 2017, the share of revenues on sales of coal to five main external customers was 74.2% of total revenues in this segment (2016: 66.3%). Other buyers, whose individual share did not exceed 10% of the revenues, generated the remaining 25.8% of total revenues of the coal segment.
The Coal Segment’s EBITDA in 2017 was PLN 3,682.8 million. In the corresponding period of the previous year, EBITDA was PLN 1,319.1 million. The increase of this ratio results mainly from the operating result being PLN 2,338.5 million higher, driven by the 38.7% increase in sales revenues as well as the dissolution of the provision for disputes concerning free coal allowance for old-age and disability pensioners in the amount of PLN 1,249.2 million. After adjustments by impairment charges and the dissolution of the provision for disputes concerning free coal allowance for old-age and disability pensioners, EBITDA was PLN 3,192.7 million.
Operating results of the coke segment
| ITEM | 2017 | 2016 | GROWTH RATE 2016=100 |
|---|---|---|---|
| Sales revenues from external customers | 3688.1 | 2822.7 | 130.7 |
| Operating loss | (47.9) | (67.5) | 71.0 |
| Depreciation and amortization | 96.8 | 125.2 | 77.3 |
| EBITDA | 48.9 | 57.7 | 84.7 |
In 2017, revenues on sales to external buyers were PLN 3,688.1 million, up by 30.7% compared to 2016. The increase in revenues from sales in the coke segment was driven directly by a 60.4% higher average coke sales price.
The share of revenues on the sales in the coke segment to five top customers represented 65.9% (2016: 60.5%). Other buyers, whose individual share did not exceed 10% of revenues, generated the remaining 34.1% of total revenues of the coke segment.
The Coke Segment’s EBITDA in 2017 was PLN 48.9 million. The PLN 8.8 million decline in EBITDA in the analyzed segment compared to 2016, in spite of the financial result better by PLN 19.6 million, resulted mainly from a PLN 28.4 million drop in depreciation and amortization, which is associated with the fact that the data for the 9 months ended 30 September 2016 still included the results of WZK Victoria.
Operating results of other segments
| ITEM | 2017 | 2016 | GROWTH RATE 2016=100 |
|---|---|---|---|
| Sales revenues from external customers | 263.2 | 357.0 | 73.7 |
| Operating profit | 57.1 | 52.2 | 109.4 |
| Depreciation and amortization | 56.2 | 64.5 | 87.1 |
| EBITDA | 113.3 | 116.7 | 97.1 |
| Adjusted EBITDA* | 113.3 | 124.1 | 91.3 |
* EBITDA after excluding the impairment charge made as a result of the impairment tests carried out in 2016: PLN 7.4 million.
In 2017, revenues on sales to external buyers were PLN 263.2 million, down by 26.2% compared to the same period in 2016. This decrease is associated shaving down the Group’s composition removing companies from the segment during 2016 (i.e. SEJ, PEC, SEJ Serwis and epeKoks). EBITDA in the analyzed segment was PLN 113.3 million, down by PLN 2.9 million compared to 2016, mainly as a result of a PLN 8.3 million drop in depreciation and amortization.