KGHM Polska Miedź SA presented the financial results for the second quarter and the first half of 2020. Despite the pandemic and uncertainty on global markets, the copper giant's consolidated and standalone results are satisfactory. Thanks to the consistent implementation of the strategy and conscious management during the pandemic, the KGHM Group carries out production in line with the plan, the level of investments, maintains cost discipline, and the levels of quarterly operating results have been the highest in years.
Financial results
EBITDA in the second quarter of 2020 reached the level of PLN 1.5 billion. The last time the Group achieved a similar high result in the first quarter of 2017. The parent company also recorded the highest quarterly operating result of just over PLN 1 billion.
Sierra Gorda also recorded high EBITDA, which showed an almost 150% increase in the operating result compared to the second quarter of 2019 (up to PLN 324 million), which is the highest result in the history of this mine. Importantly, KGHM International's EBITDA in the second quarter was twice as high as in the first quarter of this year.
Consolidated net result of the KGHM Group in the second quarter of this year amounted to PLN 9 million, which means a decrease by PLN 409 million compared to the second quarter of 2019. The change in the result was mainly due to foreign exchange differences (PLN -237 million) and a higher loss on the valuation of joint ventures using the equity method (PLN -147 million).
The cost of producing copper in concentrate C1 in the KGHM Group in the second quarter was USD 1.58 / lb. It was as much as 12% lower compared to the second quarter of the previous year.
As a result of an increase in positive cash flows from operating activities and a change in the structure of financing liabilities, the Group maintained the assumed low level of the net debt to adjusted EBITDA ratio and a significant decrease in the Group's net debt expressed in dollars, from the beginning of 2020.
Production results
The production of the KGHM Group, despite the global crisis caused by the pandemic, was maintained at levels similar to last year's, which is important at the budgeted levels. The Group, as one of the three global leaders in the copper market, increased its production volume in the second quarter. Payable copper production in the first half of 2020 amounted to 351 thousand tonnes. tonnes (i.e. -0.3% vs the first half of 2019). Production at Sierra Gorda was record high. In the first half of the year, it reached the level of 39 thousand tonnes and was higher by 34%. Compared to the same period last year.
Investments
In the first half of 2020, KGHM Polska Miedź SA realized investments in the amount of PLN 1 024 million, with the budget assumptions for the entire year at the level of PLN 2 250 million. According to the plan, work in the Deposit Access Program, expansion of the Żelazny Most tailings pond and other strategic development programs of the company.
COVID - 19
In March, like many companies in Poland and around the world, the KGHM Group faced a crisis the scale of which surprised everyone. The company, in all its domestic and foreign assets, immediately began implementing procedures that were to protect it against production cuts, plant closures and deterioration of financial parameters.
Procedures, technology and education
Guided by the principles of integrated and effective management at the level of the entire Capital Group, a crisis team was established to monitor the situation with infections in the Group. In the next step, procedures for business trips, conferences, training and isolation of key employees were implemented.
Thermal imaging cameras were purchased to test the temperature of employees - today they are located at 30 entrance gates in KGHM branches and headquarters. Decontamination of passenger space in buses providing employee transport was introduced.
The number of people going down the mining departments at one time was limited. All departments introduced disinfection of common areas.
KGHM conducts an extensive information campaign based on posters, articles on the intranet, company newspaper, computer startup screens and company television. Non-standard tools were used so that employees could pay attention to safe behavior and consciously follow the procedures ensuring safety at work.
