Financing of assets

In 2012, equity was the primary source of the Group’s asset financing, and its value increased by 1.5% compared to 2011. In the period under analysis, the Group used financing in the form of loans the balance of which as at the last day of the reporting period decreased in relation to the comparative period by 38.1%.

	31 Dec 2012	31 Dec 2011	Growth
Equity
Equity attributable to shareholders of the Parent Company
Share capital	1,251.9	1,260.9	99.3%
Share premium account	905.0	905.0	100.0%
Retained earnings	6,245.6	6,070.4	102.9%
	8,402.5	8,236.3	102.0%
Non-controlling interest	171.4	207.1	82.8%
Total equity	8,573.9	8,443.4	101.5%
Liabilities
Long-term liabilities
Loans and advances	189.9	241.2	78.7%
Deferred income tax liabilities	47.4	-	-
Employee benefit liabilities	2,084.7	1,774.3	117.5%
Provisions	502.9	436.6	115.2%
Trade liabilities and other liabilities	211.2	208.0	101.5%
	3,036.1	2,660.1	114.1%
Short-term liabilities
Loans and borrowings	75.7	187.6	40.4%
Financial derivatives	0.3	0.1	300.0%
Current income tax liabilities	40.4	3.6	1,122.2%
Employee benefit liabilities	269.7	239.7	112.5%
Provisions	286.7	246.4	116.4%
Trade liabilities and other liabilities	1,784.3	1,836.1	97.2%
	2,457.1	2,513.5	97.8%
Total liabilities	5,493.2	5,173.6	106.2%
TOTAL EQUITY AND LIABILITIES	14,067.1	13,617.0	103.3%

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As at the end of 2012 and 2011, the Group’s total equity amounted to PLN 8,573.9 million and PLN 8,443.4 million, respectively, which accounts for 61.0% and 62.0% of total equity and liabilities, respectively. An increase in equity attributable to shareholders of the Parent Company by PLN 166.2 million, i.e. by 2.0%, was associated primarily with an increase in retained earnings by PLN 175.2 million, i.e. 2.9% in relation to 31 December 2011. A decrease was recorded in share capital by PLN 9.0 million, which was related to the Shareholder Meeting’s decision to retire the surplus of series C shares. This event is described in Items 1.4.3 and 1.4.7 of Management Board Report on the activity of the JSW S.A. Capital Group for 2012.

As at the end of 2012, total liabilities constituted 39.0% of total equity and liabilities. The level of long-term liabilities increased during 2012 by PLN 376.0 million, i.e. 14.1%, to PLN 3,036.1 million, primarily due to the increase in employee benefit liabilities by PLN 310.4 million, i.e. 17.5%, the increase in liabilities on account of provisions by PLN 66.3 million, i.e. 15.2%, and the increases in deferred income tax liabilities of PLN 47.4 million and trade liabilities and other liabilities by PLN 3.2 million, i.e. 1.5%. In turn, a decrease was recorded in loans and borrowings by PLN 51.3 million, i.e. 21.3%.

Short-term liabilities in 2012 remained at a level similar to that of 31 December 2011 and amounted to PLN 2,457.1 million, down by only 2.2%. The following deviations occurred within the structure of short-term liabilities: current income tax liabilities increased by 1,022.2%, financial derivatives increased by 200.0%, employee benefit liabilities increased by 12.5% and liabilities on account of provisions increased by 16.4%. In turn, decreases were recorded in loans and advances (by 59.6%) and trade liabilities and other liabilities (by 2.8%).

The decrease in liabilities on account of loans and advances was caused, among other reasons, by a reduction in loan exposure of one of the Group’s companies, namely Polski Koks S.A., in relation to the exposure as at 31 December 2011. This situation was the result of changes in the Group’s organization of trade. Since 1 March 2012, JSW S.A. has been gradually taking over the rights and obligations of the seller (in respect of both coal and coke) and Polski Koks S.A. has been performing commercial contracts for and on behalf of JSW S.A.

In the structure of liabilities as at 31 December 2012, the biggest items were employee benefit liabilities (42.9% of the value of liabilities), including mainly liabilities on account of coal allowances for old age and disability pensioners (PLN 1,360.7 million), trade liabilities and other liabilities (36.3% of liabilities), including primarily trade liabilities (PLN 598.5 million), liabilities for social security and other taxes (PLN 440.6 million), investment liabilities (PLN 353.0 million) and liabilities for payroll (PLN 242.4 million).