Costs by type

	2012	2011 (restated data)	Growth rate
Depreciation	1,066.6	844.3	126.3%
Consumption of materials and energy	1,661.4	1,399.2	118.7%
Third party services	1,542.8	1,410.1	109.4%
Employee benefits	3,562.6	3,194.2	111.5%
Employee share ownership plan	-	293.0	-
Taxes and fees	203.9	228.0	89.4%
Other costs by type	65.5	13.0	503.8%
Value of materials and merchandise sold	121.4	203.7	59.6%
Total costs by type	8,224.2	7,585.5	108.4%
Cost of sales	(361.9)	(272.2)	133.0%
Administrative costs	(662.5)	(508.9)	130.2%
Disputed property tax on underground mine workings*	(36.6)	-	-
Employee share ownership plan	-	(293.0)	-
Value of performances and property, plant and equipment created for own needs	(644.3)	(468.4)	137.6%
Movement in products	(133.1)	(75.9)	175.4%
Cost of products, materials and merchandise sold	6,385.8	5,967.1	107.0%

* The difference of PLN 11.9 million between the amount of PLN 48.5 million presented in the consolidated statement of comprehensive income in the line item “Disputed property tax on underground mine workings” and the amount of PLN 36.6 million above results from interest on property tax liabilities calculated on an accrual basis.

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The level of costs incurred for production activity is largely determined by the specificity of conditions in which the Group's mines and coking plants operate. In the period from January to December 2012, the Group incurred costs by type of PLN 8,224.2 million compared to PLN 7,585.5 million in 2011, up by 8.4%.

The increase in all comparable cost items was affected by acquisitions conducted in 2011, i.e. incorporation of the following companies into the Group: KK Zabrze in Q3, WZK Victoria and PEC S.A in Q4. Due to the timing of the acquisition, the data in the consolidated statement of comprehensive income for 2011 do not include the figures from WZK Victoria or PEC, and KK Zabrze’s data are included only for the period from 1 July to 31 December 2011. However, the data for the current reporting period capture costs by type of these entities. Therefore, the costs for 2012 and 2011 are incomparable. The total amount of costs by type (after consolidation adjustments) of WZK Victoria and PEC for the financial year ended 31 December 2012 and KK Zabrze for the first half of 2012 was PLN 793.6 million, including the costs of consumption of materials and energy of PLN 428.4 million.

Benefits paid to employees constitute the largest share in the structure of costs by type, accounting for 43.3% of such costs. Their amount increased compared to 2011 by 11.5%, reflecting decisions made by the Management Boards of the Group companies regarding the level of employee compensation and headcount in the Group. These costs also include the amount of profit distribution for 2011 paid to JSW S.A.’s employees in the amount of PLN 130.0 million. Other significant items include: costs of consumed materials and merchandise – 20.2%, costs of third party services – 18.8% and depreciation – 13.0%. A decline was also recorded in the costs of taxes and fees, by PLN 24.1 million, in connection with obtaining a positive judgment in the proceedings concerning property tax on coking furnace batteries by Koksownia Przyjaźń, as a result of which in 2012 Koksownia Przyjaźń dissolved its provisions for property tax in a total amount of PLN 21.2 million, as described in Item 4.9.2 of Management Board Report on the activity of the JSW S.A. Capital Group for 2012.

After eliminating the effects of the non-recurring events that occurred in 2011 in the form of the employee share ownership plan of PLN 293.0 million and the profit sharing distribution to the Parent Company’s staff of PLN 160.0 million, and after eliminating the profit sharing distribution to the Parent Company’s staff in 2012 of PLN 130.0 PLN, the level of operating expenses in 2012 amounted to PLN 8,094.2 million, compared to PLN 7,132.5 million in 2011, meaning that operating expenses increased by PLN 961.7 million, i.e. 13.5%.
After adjusting costs by type by cost of sales, administrative costs, disputed property tax on underground mine workings and the value of performances and property, plant and equipment created for own needs and the change in the balance of products, the resulting cost of products, materials and merchandise sold in 2012 was PLN 6,385.8 million, up by 7.0% from 2011.