Consolidated financial statement of JSW S.A. Capital Group for 2012

31. Operating segments

The corporate authority making key decisions within the Group is the Management Board of the Parent Company. The measure of the financial results generated by the Group’s distinct operating segments analyzed by the Management Board is the segment’s operating profit/loss determined according to the IFRS rules..

Segment-specific information for reporting purposes:

  Coal Coke Other segments Consoli-dation adjustments * Total
For the period ended 31 December 2011 restated          
Total sales revenues of the segment, including: 8,036.3 4,220.0 806 (3,685.5) 9,376.8
- Intersegment sales revenues 3,093.0 - 592.5 (3,685.5) -
- Sales revenues to external customers 4,943.3 4,220.0 213.5 - 9,376.8
      
Gross sales profit of the segment 3,149.6 452.1 89.2 (281.2) 3,409.7
 
Operating profit of the segment 2,736.3 171.4 20.4 (219.6) 2,708.5
 
Depreciation (685.8) (125.6) (36.6) 3.7 (844.3)
Disputed property tax on underground mine workings 359.7 - - - 359.7
Employee share ownership plan (223.4) (56.9) (12.7) - (293.0)
Revaluation charges established for non-current assets (14.7) - (0.1) - (14.8)
 
Total assets, including 8,945.2 4,071.7 887.1 (688.4) 13,215.6
Increases in non-current assets (other than financial instruments and deferred income tax assets) ** 1,294.1 1,112.4 249.3 (10.8) 2,645.0
 
For the period ended 31 December 2012          
Total sales revenues of the segment, including: 7,040.9 4,307.9 1,025.4 (3,553.2) 8,821.0
- Intersegment sales revenues 2,906.0 - 647.2 (3,553.2) -
- Sales revenues to external customers 4,134.9 4,307.9 378.2 - 8,821.0
 
Gross sales profit of the segment 1,973.0 251.9 151.3 59 2,435.2
 
Operating profit of the segment 1,268.6 (97.8) 73.7 63.7 1,308.2
 
Depreciation (806.0) (201.1) (65.3) 5.8 (1,066.6)
Disputed property tax on underground mine workings (48.5) - - - (48.5)
Dissolution of the property tax provision for coking furnace batteries - 21.2 - - 21.2
Revaluation charges established for non-current assets (9.3) (1.5) (0.7) - (11.5)
 
Total assets, including 8,512.8 3,643.1 974.9 (482.3) 12,648.5
Increases in non-current assets (other than financial instruments and deferred income tax assets) ** 1,564.8 213.3 148.7 (7.3) 1,919.5

* The “Consolidation adjustments” column eliminates the effects of intra-segment transactions within the Capital Group
** The increases in non-current assets also include increases resulting from mergers and acquisitions of businesses

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Revenues from transactions with external entities are measured in a manner consistent with the method applied for consolidated financial result.

Revenues from transactions between segment are eliminated in the consolidation process. Sales between segments are conducted on an arm’s length basis.

In 2011, JSW S.A. acquired subsidiaries KK Zabrze and WZK Victoria, the results of which are consolidated by JSW S.A. from 1 July 2011 and 1 January 2012, respectively. The Group's revenues on sales of coal to the aforementioned entities in H1 2011 and for the financial year ended 31 December 2011, respectively, are captured in this consolidated statement of comprehensive income (as comparative data) as revenues on sales to external buyers and presented in Segment 1 – Coal in the amount of PLN 465.5 million.

On the other hand, in the financial year ended 31 December 2012, financial data of those companies are consolidated for the entire reporting period. To enable comparison of data of the current reporting period with the benchmark period, it is announced that revenues on the sale of coke and hydrocarbons achieved by KK Zabrze in H1 2012 and by WZK Victoria in the financial year ended 31 December 2012 are captured in Segment 2 – Coke in the total amount of PLN 1,154.6 million. The sale of coal to those entities was recognized in the above periods accordingly as inter-segment revenues on sales in Segment 1 – Coal in the amount of PLN 528.4 million.

Presented below is reconciliation of the results (operating profit) generated by the segments with pre-tax profit.

  2012 2011
restated
Operating profit 1,308.2 2,708.5
Financial income 119.8 118.1
Financial costs (153.1) (152.7)
Share in profits of associates 2 1.1
Pre-tax profit 1,276.9 2,675.0

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The amounts of total assets are measured in a manner consistent with the method applied in the consolidated statement of financial position. These assets are allocated by segment's business and by physical location of the asset component.

Assets of the Group are located in Poland.

Presented below is reconciliation of the segment assets with the Group's all assets:

  31 Dec 2012 31 Dec 2011
Segment assets 12,648.5 13,215.6
Investments in associates 10.8 9.1
Deferred income tax assets 184.2 101.6
Other long-term assets 265.7 239.2
Income tax overpaid 4.2 22
Financial derivatives 3.9 4
Other short-term financial assets 948.9 24.6
Non-current assets available for sale 0.9 0.9
Total assets according to the consolidated statement of financial position 14,067.1 13,617.0

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Information on geographic structure of sales

Revenues on sales by the buyer's country of origin:

  2012 2011
Sales in Poland, of which:    
Coal 3,281.7 4,204.7
Coke 928.4 1,031.3
Other segments 378.1 210.7
Total 4,588.2 5,446.7
   
Sales abroad, including:    
EU states, of which: 3,533.4 3,531.6
Coal 851.2 734.5
Coke 2,682.2 2,794.3
Other segments - 2.8
Non-EU Europe, of which: 415.5 144.1
Coal 2 3.9
Coke 413.5 140.2
Other states, of which: 283.9 254.4
Coal - 0.2
Coke 283.9 254.2
Total, of which: 4,232.8 3,930.1
Coal 853.2 738.6
Coke 3,379.6 3,188.7
Other segments - 2.8
 
Total sales revenues 8,821.0 9,376.8

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In the period from 1 January 2012 to 31 December 2012, revenues on sales to two external buyers exceeded 10% of the Group's sales for each of them. Revenues on sales to one of them were PLN 2,916.5 million and to the other PLN 918.1 million. Revenues on sales to those buyers were included in the Coal segment and in the Coke segment.

In the period from 1 January 2011 to 31 December 2011, revenues on sales to one external buyer exceeded 10% of the Group's sales. Revenues on sales to that buyer were included in the Coal segment and in the Coke segment.