Kghm Polska Miedz S.a. · GPW:KGH
Kghm Polska Miedz — FY2023 Earnings Presentation
64 slides from Kghm Polska Miedz's earnings presentation, Apr 25, 2024
Slide 1: Results of the KGHM Group for Q4 and full year 2023
Layers of possibilities Results of the KGHM Group for the fourth quarter and full year 2023 Warsaw, 25 April 2024
Slide 2: Cautionary Statement
Cautionary Statement This presentation was prepared by KGHM Polska Miedź S.A. (KGHM). The presentation is strictly of an informational nature and should not be construed as containing investment advice. The users of this presentation are solely responsible for their own analysis and assessment of th
Slide 3: Intellectual Property Rights
Intellectual Property Rights All rights reserved. All content on this presentation of the KGHM are protected by copyright and other protective laws. The presentation and the trademarks, service marks and logos on the presentation are owned by or licensed to KGHM, and are subject to copyright, tradem
Slide 4: Agenda
Agenda 1. Strategy of the KGHM Polska Miedź S.A. Group 2. Sustainable development – commitments and initiatives of KGHM Polska Miedź S.A. 3. Key issues and execution of main targets 4. Production results of the KGHM Group by segment 5. Advancement of development initiatives 6. Financial results of t
Slide 5: Strategy of the Group
Strategy of the KGHM Polska Miedź S.A. Group
Slide 6: Strategy of the KGHM Group to 2030 with an outlook to 2040
Pokłady Strategy możliwości of the KGHM Group to 2030 with an outlook to 2040 In 2023 the Company consistently advanced its mission and vision, based on the adopted development directions: Flexibility, Efficiency, Ecology, E-industry and Energy. MISSION To always have copper VISION To use our resour
Slide 7: Key action in individual areas of the Strategy in 2023
Key action in individual areas of the Strategy in 2023 FLEXIBILITY ECOLOGY, SAFETY AND SUSTAINABLE DEVELOPMENT • The Program to adapt the technological installations of the Company to the requirements of BAT conclusions for the non-ferrous • Continuation of the Strategic Program Hybrid Legnica Smelt
Slide 8: Advancement of key strategic performance indicators in 2023
Advancement of key strategic performance indicators in 2023 Strategy pillar Strategic measure 2020 (base year) Cel 2030 2023 of success (strategic KPI) Approx. 600 thousand tonnes of electrolytic copper approx. 560 kt Core business Domestic copper of electrolytic copper (including production based o
Slide 9: Advancement of key strategic performance indicators in 2023
Advancement of key strategic performance indicators in 2023 Strategy pillar Strategic measure 2020 (base year) Goal 2030 2023 of success (strategic KPI) Approx. 124 kt of 143.5 kt Supporting Recycling of scrap Approx. 350 kt of copper scrap copper scrap (dry weight) activities Revenues from sales Ba
Slide 10: Sustainable development – commitments and initiatives
Sustainable development – commitments and initiatives of KGHM Polska Miedź S.A.
Slide 11: Advancement of Sustainable Development Goals in 2023
Pokłady możliwości Advancement of Sustainable Development Goals in 2023 Business activities respecting the law and international standards within the supply chain and with business 16 3 Access to high quality subscriber healthcare. Health promotion campaigns. Promotion of sport activities and partne
Slide 12: Initiatives and awards
Pokłady możliwości Initiatives and awards ▪ Another metallurgical facility of ▪ Continued recognition as part KGHM Polska Miedź received The of the FTSE4Good Index Series 7.42 points (out of a possible 10) Copper Mark certificate, testifying to ▪ Training for management and KGHM Polska Miedź S.A. it
Slide 13: Program CSR ECO-Health – actions in 2023
Program CSR ECO-Health – actions in 2023 Swimming lessons for children ages 5 – 10, assuming systematic lessons in indor pools with qualified instructors. In 2023 around 550 children took part in the autumn edition took part in five local communities: Legnica, Lubin, Głogowie, Chojnów, Polkowice and
Slide 14: Pro-family action and CSR
Pro-family action and CSR Benefits of these campaigns: 458 We create a good climate KGHM employees joined the Over 8 000 beneficiaries of for families! CUdowni Rodzice (Wonderful Parents) of KGHM program preventive programs (students, teachers and parents) 75 Nearly 7 000 borrowings from the KGHM Bo
Slide 15: Actions by KGHM's employee volunteers
Actions by KGHM’s employee volunteers 310 actions involving volunteers Number of volunteer projects 310 2 635 employee volunteers took part in actions 20 nearly 11 000 hours dedicated to advancing volunteer projects 2022 2023 15
Slide 16: Actions by KGHM's employee volunteers
Actions by KGHM’s employee volunteers Variety of actions: 80 involving science and education 79 involving culture and traditions 43 involving health and safety 34 involving ecology 22 involving sport and recreation 52 other 16
Slide 17: Climate neutrality by 2050
Climate neutrality by 2050 Achieving climate neutrality by 2050 is the overriding goal of the Climate Policy of KGHM Polska Miedź S.A. Intermediate goal – the reduction of total Scope 1 and Scope 2 emissions by 2030 by 30%1) Emissions reduction by 30% 2030 versus the base year 2020 2050 Climate neut
Slide 18: Increase in RES share to reduce CO2 emissions by 2030
By 2030 the increase in share of RES will lead to a substantial reduction in CO2 emissions Share of power source in supplies to KGHM Polska Miedź S.A. 2020 – base year (2.9 TWh): 2023: Own generation sources, including RES, covered 18.36%1) of KGHM Polska Miedź S.A.’s total power needs. Natural Mark
Slide 19: Greenhouse gas emissions (Scope 1 and 2)
Pokłady możliwości Greenhouse gas emissions (Scope 1 and Scope 2) of KGHM Polska Miedź S.A. Greenhouse gas emissions in the producing assets of KGHM Polska Miedź S.A. in the years 2020-2023 (thousand tonnes of CO2e) pursuant to the location-based method 3 110 3 220 3 224 3 005 Scope 2 53% 60% 55% 53
Slide 20: Greenhouse gas emissions (Scope 1 and 2) by the Group
Greenhouse gas emissions (Scope 1 and Scope 2) Pokłady możliwości by the KGHM Polska Miedź S.A. Group Greenhouse gas emissions by the KGHM Polska Miedź S.A. Group in the years 2022-2023 (thousand tonnes of CO2e) pursuant to the location-based method In 2023, Scope 1 and 2 greenhouse gas emissions by
Slide 21: Employee safety as a strategic priority
Pokłady Employee możliwości safety as a strategic priority for the KGHM Group ▪ 2021 Safety and development Accident rates1) ▪ ISO 45001:2018 Change2) in LTIFR We hold an Occupational Health and Safety Management System Certificate. +18.5% in KGHM Polska Miedź S.A. +8.8% Change2) in TRIR 20.0 ▪ Lead
Slide 22: Key issues and execution of main targets
Key issues and execution of main targets
Slide 23: Macroeconomic environment: commodities and currencies prices
Macroeconomic environment Commodities and currencies prices Copper prices in 2023 ranged between 7 812 and 9 436 USD/t, Price (USD/t) Annual av. or YTD (USD/t) [USD/t] [PLN/t] remaining for most of the year in a sideways trend, 11 000 Price (PLN/t) Annual av. or YTD (PLN/t) 55 000 without clear impu
Slide 24: Precious metals prices in 2023
Precious metals prices in 2023 Precious metals were under pressure from expectations related to Fed monetary policy Gold prices began to rise in Q4 as a result of heightening In 2023 precious and base metals were substantially impacted global geopolitical tensions and hopes for reduced rates. by int
Slide 25: Crisis in Chinese real estate lowers copper demand
There continues to be a crisis in the Chinese real estate market, which is driving lower demand for copper in China Nevertheless, despite the lack of a clear price rise signal, the copper price stood out amongst other commodities. The Chinese property crisis continues, illustrated by the drop In 202
Slide 26: Purchasing managers' sentiment exceptionally low in 2023
Purchasing managers’ sentiment was exceptionally low in 2023 in the eurozone. Sentiment in the USA and China likewise remained pessimistic for most of the year. ▪ PMI indices began to deteriorate at the end of 2022, and in the second half of 2023 reached low levels. Readings for the eurozone were ne
Slide 27: IMF World Economic Outlook - January 2024
Pokłady IMF Worldmożliwości Economic Outlook - January 2024 Canada Eurozone Poland 2023: 1.1% 0.0 pp. 2023: 0.4% -0.1 pp. 2023: 0.2% -0.4 pp. 2024F: 1.2% -0.2 pp. 2024F: 0.8% -0.1 pp. 2024F: 3.1% +0.3 pp. 2025F: 2.3% 0.0 pp. 2025F: 1.5% -0.2 pp. 2025F: 3.5% +0.3 pp. World 2023: 3.2
Slide 28: Summation of 2023 in the KGHM Group
Summation of 2023 in the KGHM Group Main macroeconomic factors and aspects of the Group compared to 2022 Macroeconomic environment1) Operating results Indicators -4% -9% -0.3% +21% Copper price Copper price Increase in extraction of ore, Higher CAPEX execution in USD/t in PLN/t dry weight in KGHM Po
Slide 29: Basic measures of the 2023 results
Pokłady możliwości Summation of 2023 in the KGHM Group and KGHM Polska Miedź S.A. Basic measures of the 2023 results KGHM Group KGHM Polska Miedź S.A. PLN 33 467 mn PLN 29 084 mn Revenues Revenues PLN 5 362 mn PLN 3 563 mn Adjusted EBITDA Adjusted EBITDA -PLN 3 691 mn -PLN 1 153 mn Loss for the peri
Slide 30: Production results of the KGHM Group by segment
Production results of the KGHM Group by segment
Slide 31: Payable copper production by the KGHM Group
Key production indicators 2023 711 Payable copper production -3% y/y by the KGHM Group [kt] lower by 3% (y/y) Payable copper production Payable copper production -13% y/y KGHM Polska Miedź S.A. [kt] Sierra Gorda1) [kt] KGHM Polska Miedź – 91 ▪ +1% y/y 79 592 production slightly higher than in the pr
Slide 32: Metals production
Metals production KGHM Group ▪ Higher production by KGHM Polska Miedź S.A. from purchased materials and from Payable copper production Silver production own copper-bearing charges due to [t] [kt] +8% y/y higher availability of production lines, in 1 428 1 327 particular better use of working time of
Slide 33: Production results
Production results KGHM Polska Miedź S.A. Ore extraction -0.3% y/y Production of copper +0.7% y/y Electrolytic copper +1.0% y/y Metallic silver +8.1% y/y [mn t dry weight] in concentrate [kt] production [kt] production [t] 586 592 30.5 30.4 207 204 1 403 395.4 From 1 298 392.5 purchased 50.4 50.4 me
Slide 34: Production results: Sierra Gorda
Production results Sierra Gorda1) Payable copper production -13% y/y Silver production -16% y/y [kt] [t] ▪ The volume of precious metals production 26.7 22.3 derived from the 6.0 5.7 90.8 content of these metals 78.7 Q4 2022 Q4 2023 2022 2023 in mined ore ▪ The increase in TPM production -4% y/y mol
Slide 35: Production results: KGHM INTERNATIONAL LTD.
Production results KGHM INTERNATIONAL LTD. Payable copper production -29% y/y Silver production +35% y/y [kt] [t] ▪ Higher silver production 56.2 2.7 2.0 by the Sudbury Basin 0.6 0.5 due to higher silver 39.9 content in ore Q4 2022 Q4 2023 2022 2023 ▪ Lower gold production 15.8 by the Robinson mine
Slide 36: Advancement of development initiatives
Advancement of development initiatives
Slide 37: A rational and responsible investment program
A rationale and responsible investment program Capital expenditures by KGHM Polska Miedź S.A. in 2023 CAPEX execution in 2023, incl. borrowings by area by category Mining Replacement Metallurgy Maintaining mine production Other activities Development (incl. R&D) Leasing IFRS 16 Adaptation projects D
Slide 38: CAPEX execution in key investments
CAPEX execution in key investments Deposit Access Program Outfitting of Program to adapt the technological ▪ GG-1 shaft – For the transitional period, construction was completed on shaft heating facilities, the assembly of cable tracks and cables in Deposit Access the mines installations to BAT Conc
Slide 39: Role of Deep Głogów (GGP) in maintaining output in Poland
Role of Deep Głogów (GGP) in maintaining output in Poland Deposit access program in KGHM’s concessioned areas Share of production from GGP in total production Active concessions and in Poland future potential Ore extraction dry weight from GGP +29% y/y 5 461 [kt] 4 240 -3% Q4/Q3 1 441 1 391 18.7% 19
Slide 40: Execution of strategy by the Group's entities in Poland
Execution of strategy by the Group’s entities in Poland 2023 Advancement of the energy transformation strategy of KGHM Acquisition of target companies, being operators of solar power farms – Supporting ensuring coverage of part of the needs of KGHM for power actions Reorganisation of the Group Subse
Slide 41: Environmental Investments
2023 Pokłady możliwości Environmental Investments effluents tailings management management protection of air protection soil, underground PLN 470 and surface million water Concentrators - Replacement and climate construction of air protection water protection Legnica Copper management installations
Slide 42: The financial situation of the KGHM Group remains stable and safe
The financial situation of the KGHM Group remains stable and safe 2023 Budget Total unit production cost of electrolytic copper from own concentrate 33.3 36.3 of KGHM Polska Miedź S.A.1) [k PLN/t] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% Investments Capital expenditures 3 199 3 250 KGHM Pols
Slide 43: Group production and sales in 2023
Group production and sales in 2023 Execution of annual targets 2023 Budget Production Copper in concentrate [kt] 395.4 389.7 KGHM Polska Miedź S.A. Silver in concentrate [t] 1 319.9 1 261.5 Electrolytic copper, total [kt] 592.4 582.1 Electrolytic copper from own concentrate [kt] 385.5 385.3 Metallic
Slide 44: Energy Development Program, including RES: major events in Q4 2023
Energy Development Program, including RES| major events in Q4 2023 Ensuring energy security in KGHM M&A Development of wind energy ▪ The Natural Gas-Steam (CCGT) blocks of the Head Office ensured energy security for the Core ▪ On 12 September 2023 a preliminary contingent agreement was signed ▪ A si
Slide 45: Financial results of the Group
Financial results of the Group
Slide 46: Key financial indicators of the KGHM Group
Key financial indicators of the KGHM Group 2023 Group adjusted EBITDA2) Group revenues [PLN mn] [PLN mn] -1%y/y Adjusted EBITDA of the KGHM Group -41% y/y 33 847 33 467 5 362 Lower adjusted EBITDA compared to 2022 in all the main Group segments 8 151 7 819 9 024 Q4 2022 Q4 2023 2022 2023 5 362 Group
Slide 47: Group sales revenue
Group sales revenue 2023 Revenues from contracts with -1% y/y Revenues from contracts with customers customers [PLN mn] [PLN mn] +6 33 847 33 467 33 847 +656 +817 33 467 2 201 1 932 -1 818 -41 3 217 2 451 28 429 29 084 Revenues for Change in sales Change in prices Change in Adjustment of Other Reven
Slide 48: Expenses by nature
Expenses by nature KGHM Group Expenses by nature Expenses by nature in 2023 were higher mainly [PLN mn] due to recognition of impairment write-downs 36 540 +13% y/y 11 174 32 388 3 135 Impairments/reversals Impairments/reversals of impairments of impairments 99 9 119 Minerals extraction tax 3 496 3
Slide 49: C1 unit cost
C1 unit cost 1) ▪ KGHM Polska Miedź S.A. - the increase in C1 cost KGHM Group by 25% was mainly due to a higher minerals extraction tax charge, higher costs of materials, fuels and energy, and higher labour costs. C1 – Group C1 – KGHM Polska Miedź S.A. [USD/lb] [USD/lb] ▪ the rate of increase of C1
Slide 50: Financial results
Financial results KGHM Group Profit/loss for the period [PLN mn] The Group recorded a lower net result mainly due to: • impairment write-downs • a lower result on basic operating activities • the impact of exchange differences 4 774 -3 056 +1 624 -3 889 -757 -559 -3 691 -1 828 Profit for 2022 Change
Slide 51: Indications to conduct impairment testing
Indications to conduct impairment testing 35 000 30 000 ▪ The Company’s market capitalisation was below the carrying amount for 25 000 nearly the whole of 2023. 20 000 ▪ As at 29 December 2023 market capitalisation was approx. 79% of the 15 000 carrying amount of the net assets of KGHM Polska Miedź
Slide 52: Production assets in Poland (mining and metallurgical assets)
Production assets in Poland (mining and metallurgical assets) Standalone financial statements Consolidated financial statements PLN mn PLN mn 20 348 20 166 16 577 16 577 -3 771 -3 589 Carrying amount Write-down Recoverable amount Carrying amount Write-down Recoverable amount 31.12.2023 31.12.2023 31
Slide 53: Cash flow
Cash flow KGHM Group [PLN mn] +6 051 1 729 -4 798 1 200 - 378 - 200 - 81 - 65 Cash as at Net cash generated Net cash used in Proceeds Dividend paid Interest paid Other Cash as at 1 January 2023 from operating investing activities from/repayments 31 December activities of 2023 borrowings 53
Slide 54: Net debt of the KGHM Group
Net debt of the KGHM Group As at the end of Q4 2023 Main factors affecting net debt in 2023 Net debt / adjusted EBITDA 1.2 Increases in debt 1.1 0.8 0.9 0.9 ▪ Cash expenditures on property, plant and equipment (PLN 4 963 mn) 31-12-2022 31-03-2023 30-06-2023 30-09-2023 31-12-2023 ▪ The minerals extra
Slide 55: Revenues and EBITDA in Q4 2023
Revenues and EBITDA in Q4 2023 KGHM Group and operating segments Revenues from contracts with Adjusted EBITDA [PLN mn] customers [PLN mn] 8 151 7 819 Lower adjusted EBITDA compared to 1 949 552 32 Q4 2022 by PLN 822 million, mainly 953 441 764 due to the segments KGHM Polska 634 Miedź S.A. and Sierr
Slide 56: Operating results
Operating results KGHM Group Change in adjusted EBITDA1) -41% y/y Adjusted EBITDA [PLN mn] [PLN mn] 9 024 9 024 275 -1 907 +82 5 362 2 190 -1 231 -606 5 362 1 089 357 1 584 2022 KGHM Polska KGHM Sierra Other segments 2023 Miedź S.A. INTERNATIONAL Gorda and consolidation 5 470 LTD. adjustments 3 563
Slide 57: Sales revenue
Sales revenue KGHM Polska Miedź S.A. Higher revenues from contracts with customers by PLN Revenues from contracts with customers [PLN mn] 655 million (+2%) in 2023 compared to 2022, due to a +2% y/y higher volume of sales and a more favorable adjustment of revenues due to hedging transactions 28 429
Slide 58: Expenses by nature
Expenses by nature KGHM Polska Miedź S.A. Expenses by nature Expenses by nature in 2023 were higher mainly [PLN mn] due to recognition of impairment write-downs 9 368 29 859 +15% y/y Impairments/ reversals of 7 323 impairments Impairments/ 6 790 6 827 25 895 2 839 reversals of 6 341 Minerals extract
Slide 59: EBITDA and profit/loss for the period
EBITDA and profit/loss for the period KGHM Polska Miedź S.A. EBITDA and profit/loss for Adjusted EBITDA Profit/loss for the period [PLN mn] [PLN mn] the period -35% y/y 3 533 ▪ EBITDA lower versus 2022 mainly due to a less favourable 5 470 exchange rate and higher costs, 3 563 including labour costs
Slide 60: Profit/loss for the period
Profit/loss for the period KGHM Polska Miedź S.A. Profit/loss for the period [PLN mn] +655 3 538 -2 733 +1 340 +827 -276 -1 153 -3 771 -733 Profit for Increase in Increase in cost of Impairment write- Reversals of Impact of Decrease in Other Loss for 2022 revenues sales, selling costs downs on minin
Slide 61: Market risk management
Market risk management Hedged position on the copper, silver and currency markets (as at 31 December 2023) USD/PLN At the end of 2023 the Parent Entity recorded a [USD mn] result on derivatives* and hedges in the amount of PLN 380 million: − +PLN 635 mn adjusted revenues from contracts with customer
Slide 62: Cash flow to the Group in Q4 2023 and 2023
Cash flow to the Group in Q4 2023 and 2023 Pokłady możliwości Proceeds to KGHM Polska Miedź S.A. In 2023 the international assets paid USD 50.6 million* to KGHM Polska Miedź S.A. Q4 2023 2023 Sierra Gorda KGHM INTERNATIONAL LTD. Sierra Gorda KGHM INTERNATIONAL LTD. Total payment: Total payment: Tota
Slide 63: Impact of Russia's aggression against Ukraine
Information on the impact of Russia’s aggression against Ukraine on the functioning Pokłady możliwości of the Company and the KGHM Group ▪ The geopolitical situation related to the direct aggression of Russia against Ukraine and the implemented system of sanctions did not restrict the operations of
Slide 64: Thank you
Thank you Follow us on social media: Investor Relations Department https://kghm.com/en/investors ir@kghm.com +48 76 74 78 280