Kghm Polska Miedz S.a. · GPW:KGH
Kghm Polska Miedz — Q1 2022 Earnings Presentation
53 slides from Kghm Polska Miedz's earnings presentation, May 13, 2022
Slide 1: Results of the KGHM Group for the first quarter of 2022
Layers of possibilities Results of the KGHM Group for the first quarter of 2022 Warsaw, 12-13 May 2022
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. KGHM’s commitments towards the environment and climate 3. Key issues and execution of main targets 4. Production results of the KGHM Group by segment 5. Financial results of the KGHM Group 6. Advancement of development initiatives 7. Supporti
Slide 5: Summation of the first quarter in the KGHM Group
Summation of the first quarter in the KGHM Group Selected key statistics in Q1 20221) EBITDA2) Profit for the period [mn PLN] [mn PLN] +20% Q1/Q1 +39% Q1/Q1 3 133 1 899 2 608 1 365 Q1 2021 Q1 2022 Q1 2021 Q1 2022 C1 net Net debt/EBITDA Payable copper production [USD/lb] [ratio] [kt] +20% Q1/Q1 -63%
Slide 6: Aid for Ukraine
Pokłady możliwości Aid for Ukraine Housing Transport Material Help center support ▪ More than 250 refugees ▪ Transport of refugees to ▪ Free, warm meals for ▪ Medical, found a peaceful home housing points in the thousands of refugees psychological and legal aid in housing paid for by voivodeship and
Slide 7: Strategy of the Group
Strategy of the KGHM Polska Miedź S.A. Group
Slide 8: Key elements of the Strategy advanced in the first quarter of 2022
Key elements of the Strategy advanced in the first quarter of 2022 ▪ Continuation of the Strategic Program Hybrid Legnica Smelter and Refinery, ▪ Continuation of the Program to adapt the Company’s work on adaptation documentation for the Scrap Turnover Base production installations to BAT conclusion
Slide 9: Key performance indicators for the updated Strategy 2022-2030
Key performance indicators for the updated Strategy of the KGHM Group for the years 2022-2030 – advancement in the first quarter of 2022 2020 (base year) Q1 2022 2030 approx. 560 kt ~ 600 thousand tonnes of electrolytic Domestic copper copper (including production based on a of electrolytic ▪ 151.1
Slide 10: Key performance indicators for the updated Strategy 2022-2030
Key performance indicators for the updated Strategy of the KGHM Group for the years 2022-2030 – advancement in the first quarter of 2022 2020 (base year) Q1 2022 2030 Approx. 125 kt of ▪ 37.4 kt of copper scrap Recycling of scrap Approx. 350 kt of copper scrap copper scrap Supporting ▪ 128% vs base
Slide 11: Sustainable development – commitments of KGHM Polska Miedź S.A.
Sustainable development – commitments of KGHM Polska Miedź S.A.
Slide 12: 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 climate reduction by 30% 2030 versus the base year 2020 2050 neut
Slide 13: KGHM is a key element in global energy transformation
KGHM is a key element in global energy transformation Restrictive climate policy Access to copper and precious metals is a critical component if the plan to achieve climate neutrality by 2050 by the largest western economies is to succeed Rapid development of RES and EV markets Technologies used by
Slide 14: KGHM – substantial competitive advantages
KGHM – substantial competitive advantages Largest mined copper producer in Europe, A European leader in implementing efficient, largest silver mine in the world low-emissions energy technologies The highest corporate governance standards, Access to copper resources in Poland and Chile, in a safe jur
Slide 15: Key issues and execution of main targets
Key issues and execution of main targets
Slide 16: Summation of the first quarter of 2022 in the KGHM Group
Summation of the first quarter of 2022 in the KGHM Group Main macroeconomic factors and aspects of the Group compared to Q1 2021 Macroeconomic environment1) Production and C1 cost Financial results +18% +4% +33% Copper price Copper production increase in revenues to PLN 8 993 mn -8% +13% +20% Silver
Slide 17: Macroeconomic environment: commodities and currencies prices
Macroeconomic environment Commodities and currencies prices On 7th March, copper prices in Q1 2022 reached the historic Price (USD/t) [USD/t] Annual av. or YTD (USD/t) [PLN/t] record of 10 730 USD/t, with an average price of 9 997 USD/t. Price (PLN/t) 55 000 The greatest impact on the metal’s price
Slide 18: Precious metals prices in the first quarter of 2022
Precious metals prices in the first quarter of 2022 In the first quarter of 2022 precious metals prices were under pressure from Russia’s aggression against Ukraine The war’s first days saw investors flee from risky assets A counterpoint to the aversion to risk in the markets was the towards safer o
Slide 19: Copper inventories in Shanghai warehouses fell to another minimum
In official Shanghai warehouses, copper inventories fell to another minimum In the first quarter of 2022 the energy commodities index rose by 45%, and industrial metals by 23% In Q1 2022 copper inventories on the Shanghai market fell to Commodities prices shot up in Q1 2022, while share prices level
Slide 20: Investor sentiment in the first quarter of 2022 deteriorated
Investor sentiment in the first quarter of 2022 deteriorated as a result of Russia’s aggression against Ukraine and continued Covid-19 flare-ups in China ▪ In the United States and Europe the Purchasing Managers' Index (PMI) readings were only slightly lower compared to the end of 2021, compared to
Slide 21: Economic growth forecast of the IMF from April 2022
Pokłady Economic możliwości growth forecast of the IMF from April 2022 21 Forecast (F) of actual GDP growth – International Monetary Fund - World Economic Outlook – April 2022 compared to January 2022; for Chile, data from April 2022 compared to October 2021
Slide 22: Payable copper production by the KGHM Group
Key production indicators Q1 2022 193 Payable copper production +4% Q1/Q1 by the KGHM Group [kt] higher by 4% (Q/Q) Payable copper production Payable copper production +4.3% Q1/Q1 KGHM Polska Miedź [kt] Sierra Gorda1) [kt] 151 23 24 +3.4% Q1/Q1 ▪ KGHM Polska Miedź – higher availability of purchased
Slide 23: Key financial indicators of the KGHM Group
Key financial indicators of the KGHM Group Q1 2022 20% higher adjusted EBITDA of the Group adjusted EBITDA2) Group revenues KGHM Group vs Q1 2021 [mn PLN] [mn PLN] +33% Q1/Q1 8 993 +20% Q1/Q1 3 133 Higher adjusted EBITDA compared to Q1 2021 6 745 (+PLN 525 mn; +20%), of which by segment: ▪ KGHM Pols
Slide 24: The production of miners in Q1 2022
The production of miners in Q1 2022 Copper production by miners, Q1 2022 vs Q1 2021 (Y/Y) 20% 10% -6% -6% -7% -10% -13% -24% -26% -14% 0% 11% 4% 3% 0% -10% -20% -30% Freeport KGHM Group KGHM Polska Rio Tinto Codelco BHP Teck Southern Copper Anglo American Glencore Antofagasta Vale McMoran Miedź S.A.
Slide 25: The financial situation of the KGHM Group remains stable and safe
The financial situation of the KGHM Group remains stable and safe 2022 Budget Total unit production cost of electrolytic copper from own concentrate 22.0 26.5 KGHM Polska Miedź S.A.1) [k PLN/t] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% Investments Capital expenditures 486 2 835 KGHM Polska Mi
Slide 26: Group production and sales in Q1 2022
Group production and sales in Q1 2022 Execution of annual targets 2022 Budget Production Copper in concentrate [kt] 100.0 392.0 KGHM Polska Miedź S.A. Silver in concentrate [t] 330 1 280 Electrolytic copper, total [kt] 151.1 585.0 Electrolytic copper from own concentrate [kt] 96.6 393.6 Metallic sil
Slide 27: Production results of the KGHM Group by segment
Production results of the KGHM Group by segment
Slide 28: Metals production
Metals production KGHM Group Payable copper production Silver production [t] [kt] +13% Q1/Q1 ▪ Higher copper production: +4% Q1/Q1 307 348 − by KGHM Polska Miedź S.A. higher availability of purchased copper-bearing materials and higher availability of production lines Q1 2021 Q1 2022 − by KGHM INTER
Slide 29: Production results
Production results KGHM Polska Miedź S.A. Ore extraction +2.7% Q1/Q1 Production of copper +3.1% Q1/Q1 Electrolytic copper +3.4% Q1/Q1 Metallic silver +13.7% Q1/Q1 [mn t dry weight] in concentrate [kt] production [kt] production [t] 7.5 7.7 146 151 97 100 340 47 55 299 49.3 50.1 From purchased Ag gra
Slide 30: Production results: Sierra Gorda
Production results Sierra Gorda1) Payable copper production +4% Q1/Q1 Silver production -4% Q1/Q1 ▪ The volume of precious [kt] [t] metals production derived from the 7.8 7.5 content of these metals in mined ore 23.9 22.9 ▪ The decrease in Q1 2021 Q1 2022 molybdenum TPM production -/- Q1/Q1 producti
Slide 31: Production results: KGHM INTERNATIONAL LTD.
Production results KGHM INTERNATIONAL LTD. Payable copper production Silver production -50% Q1/Q1 [kt] [t] ▪ Higher silver production +12% Q1/Q1 by the Sudbury Basin due 0.6 to higher silver content 0.3 in ore 18.2 ▪ Higher gold production Q1 2021 Q1 2022 by the Robinson mine TPM production +24% Q1/
Slide 32: Financial results of the Group
Financial results of the Group
Slide 33: Group sales revenue
Group sales revenue Q1 2022 Revenues from contracts with customers +33% Q1/Q1 Revenues from contracts with [mn PLN] customers [mn PLN] 8 993 +637 +277 8 993 562 +50 +859 +425 876 6 745 6 745 426 750 7 555 Revenues for Change in sales Change in prices Change in Adjustment of Other Revenues for 5 569
Slide 34: C1 unit cost
C1 unit cost1) KGHM Group C1 – KGHM Polska Miedź S.A. C1 – Group [USD/lb] [USD/lb] incl. the +24% Q1/Q1 2.40 ▪ The increase in C1 cost in KGHM Polska minerals extraction 1.93 tax 0.95 Miedź by 24% versus Q1 2021 was due to +20% Q1/Q1 0.90 higher expenses by nature, a lower valuation 1.45 2.19 1.03 o
Slide 35: Operating results
Operating results KGHM Group Change in adjusted EBITDA1) Adjusted EBITDA [mn PLN] [mn PLN] 3 133 +20% Q1/Q1 27 2 608 +178 3 133 +249 +123 52 821 2 608 643 -25 361 238 Q1 2021 KGHM Polska KGHM Sierra Other Q1 2022 1 924 1 675 Miedź S.A. INTERNATIONAL Gorda Q1 2021 Q1 2022 Higher adjusted EBITDA versu
Slide 36: Financial results
Financial results KGHM Group 1 899 Profit for the period +39% Q1/Q1 consolidated net profit in the first quarter [mn PLN] Higher KGHM Group profit by PLN 534 mn (+39%) mainly due to a higher net result on sales and a higher result on the involvement in [mn PLN] joint ventures, a gain on the disposal
Slide 37: Cash flow
Cash flow KGHM Group [mn PLN] +2 508 + 45 - 181 + 151 3 355 - 647 + 330 + 431 - 43 - 31 - 28 -1 084 1 904 Cash as at 01-01-2022 Profit/loss before Exclusions of income Income tax paid Change in working Acquisition of property, Repayment of loans Proceeds from the Proceeds from the Proceeds Interest
Slide 38: Net debt of the KGHM Group
Net debt of the KGHM Group As at the end of Q1 2022 Main factors affecting net debt in 2022 Net debt / adjusted EBITDA -63% compared to 31 March 2021 Increases in debt 0.8 0.7 0.8 ▪ Cash expenditures on property, plant and equipment (PLN 1 084 mn) 0.6 0.3 ▪ The minerals extraction tax (PLN 844 mn) 3
Slide 39: Advancement of development initiatives
Advancement of development initiatives
Slide 40: A rationale and responsible investment program
A rationale and responsible investment program Capital expenditures by KGHM Polska Miedź S.A. in Q1 2022 CAPEX execution in Q1 2022 by area by category Mining Replacement Metallurgy Maintaining mine production Other activities Development (incl. R&D) Leasing IFRS 16 Adaptation Development - uncomple
Slide 41: 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 [kt] -0.3% Q1/Q4 -4% 945 942 982 942 13.1% 12.2% 13.2% 1
Slide 42: CAPEX execution in key projects
CAPEX execution in key projects Deposit Access Program Maintenance shutdown of the Głogów II Deposit Access Program Outfitting of the mines Copper Smelter and Refinery after four ▪ GG-1 shaft – sunk to 1 313.7 m years of operations ▪ GG-2 „Odra” shaft – work advanced on the shaft site Mine dewaterin
Slide 43: Energy Development Program, including RES
Energy Development Program, including RES Actions in Q1 2022 Development of energy generation, including RES: Energy security ▪ Actions are underway to obtain permits and administrative decisions along with design work to build the Obora Sandpit and HM Głogów I-III* sites, ▪ The CCGT gas-steam block
Slide 44: By 2030 the increase in share of RES will lead to a substantial reduction in CO2 emissions
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: 2021: 2020 Own generation sources covered 18.70% of KGHM’s 2.9 TWh total power needs in 2021. Natural Market Own sources gas 78% an
Slide 45: Supporting slides
Supporting slides – KGHM Polska Miedź S.A.
Slide 46: Sales revenue
Sales revenue KGHM Polska Miedź S.A. Higher revenues from contracts with customers by Revenues from contracts with customers PLN 1 986 million (+36%) in Q1 2022 compared to [mn PLN] +36% Q1/Q1 Q1 2021 due to higher metals prices, a more 7 555 favourable exchange rate and a higher sales 5 569 517 1 2
Slide 47: Expenses by nature
Expenses by nature KGHM Polska Miedź S.A. Expenses by nature higher by PLN 1 253 million Expenses by nature Q1/Q1 [mn PLN] (of which PLN 663 mn due to purchased metal-bearing materials and 6 207 +25% Q1/Q1 the minerals extraction tax) Minerals extraction tax 844 recognised in expenses 6 207 by natur
Slide 48: EBITDA and profit for the period
EBITDA and profit for the period KGHM Polska Miedź S.A. Adjusted EBITDA Profit for the period [mn PLN] [mn PLN] Higher EBITDA, +15% Q1/Q1 +36% Q1/Q1 higher net profit 1 325 1 924 975 ▪ EBITDA higher by 15% versus Q1 2021 1 675 ▪ Higher net profit by PLN 350 mn (+36%) versus Q1 2021 mainly due to mor
Slide 49: Profit for the period
Profit for the period KGHM Polska Miedź S.A. Profit for the period [mn PLN] +36% Q1/Q1 +1 986 +124 +56 1 325 +40 975 -1 743 -50 -63 Profit for Increase in Increase in cost of Impact of hedging Impact of exchange Fair value Increase in income Other Profit for Q1 2021 revenues from sales, selling cost
Slide 50: Market risk management
Pokłady Market riskmożliwości management Hedged position on the copper and silver markets (as at 31 March 2022) Copper Hedged position – open as at 31 December 2021 At the end of Q1 2022 the Parent Entity recorded [kt] a result on derivatives* and hedges in the Hedged position implemented in Q1 2022
Slide 51: Market risk management
Pokłady Market riskmożliwości management Hedged positions on the currency market (as at 31March 2022) In Q1 2022 transactions were implemented on the forward currency market: USD/PLN Hedged position – open as at 31 December 2021 − Put options were bought to hedge USD 135 million Hedged position impl
Slide 52: Revenues and EBITDA in Q1 2022
Revenues and EBITDA in Q1 2022 KGHM Group and operating segments Higher adjusted EBITDA compared to Revenues from contracts with Adjusted EBITDA [mn PLN] Q1 2021 by PLN 525 million, mainly customers 3 133 [mn PLN] 8 993 due to higher metals prices and a more 562 2 608 27 favourable USD/PLN exchange
Slide 53: Thank you
Thank you Follow us in social media: Investor Relations Department https://kghm.com/en/investors ir@kghm.com +48 76 74 78 280