Management Board Report on the activity of the JSW S.A. for 2012

3.1.1. Assets

	31 Dec 2012	31 Dec 2011	Growth rate
Assets
Non-current assets
Property, plant and equipment	5,892.5	5,185.4	113.6%
Intangible assets	19.6	17.9	109.5%
Investment property	23.1	-	-
Investments in subsidiaries, co-subsidiaries and associates	2,249.0	2,245.2	100.2%
Deferred income tax assets	142.9	123.5	115.7%
Other long-term assets	408.2	379.3	107.6%
	8,735.3	7,951.3	109.9%
Current assets
Inventories	475.6	297.1	160.1%
Trade receivables and other receivables	1,005.2	1,020.5	98.5%
Income tax overpaid	-	14.8	-
Financial derivatives	3.9	3.2	121.9%
Other short-term financial assets	947.4	10.6	8,937.7%
Cash and cash equivalents	1,245.6	2,358.9	52.8%
	3,677.7	3,705.1	99.3%
TOTAL ASSETS	12,413.0	11,656.4	106.5%

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Total assets as at 31 December 2012 were PLN 12,413.0 million, up by PLN 756.6 (6,5%) from the end of 2011. The most important movement in assets occurred in the following items: property, plant and equipment (up by PLN 707.1 million), other short-term financial assets (up by PLN 936.8 million), inventories (up by PLN 178.5 million), cash and cash equivalents (down by PLN 1,113.3 million).

Non-current assets

As at 31 December 2012 and as at 31 December 2011, JSW S.A.’s non-current assets amounted to PLN 8,735.3 million and PLN 7,951.3 million, respectively, and accounted for 70,4% and 68,2% of total assets. The biggest non-current assets line item was property, plant and equipment which, as at the end of 2012, accounted for 67.5% of non-current assets. Its value increased during the year by PLN 707.1 million, mainly as a result of execution of the capex program. In 2012, the Company incurred expenditures on non-current assets (property, plant and equipment, intangible assets, investment property) in the amount of PLN 1,467.6 million, with depreciation of PLN 806.0 million. The structure of expenditures incurred is presented in Item 2.5.1 of this report.

The second largest non-current assets line item, with a share of 25.7%, were investments in subsidiaries, co-subsidiaries and associates. In comparison with the 2011 end-of-year balance, this line item increased slightly (by PLN 3.8 million), which was affected by a greater exposure to SEJ, JZR and Koksownia Przyjaźń.

In 2012, JSW S.A. reclassified USD 20.8 million worth of property, plant and equipment to investment property. Part of the investment property is the Różany Gaj hotel building, currently managed by a commercial operator. Further expenditures incurred in 2012 after the reclassification amounted to PLN 7.6 million. The property was commissioned for use in Q4 2012. The expected useful life of the property is 40 years. Valuation of the property by the Company is performed based on the purchase price model or the production cost model. Information on the methods and significant assumptions made by JSW S.A. in determining the fair value of investment property is described in Note 8 of the Financial Statements of Jastrzębska Spółka Węglowa S.A. for the financial year ended 31 December 2012. The Company’s investment property is owned by the Company.

Current assets

JSW S.A.’s current assets as at 31 December 2012 amounted to PLN 3,677.7 million, down by PLN 27.4 million from the end of 2011. Cash and cash equivalents were the biggest item in the current assets (33.9%). Cash and cash equivalents at the end of 2012 were lower by PLN 1,113.3 million (47,2%) than at the end of 2011. This change was due to the establishment of deposits with a maturity of 3 to 12 months, as a result of which at the end of 2012 other short-term financial assets increased significantly in relation to their value at the end of 2011 (up by PLN 936.8 million), and a decrease in cash flows from the core business.

Also inventories, whose share in the total current assets amounts to 12.9%, is an important item in current assets. They were at a level of PLN 475.6 million, i.e. 60.1% more than at the end of 2011. Finished products accounted for the biggest share in the value of inventories (90,2%). Their value during the year increased by PLN 171.6 million, which was the result of an increase in the volume of coal inventories by 772.8 thousand tons. The remaining part of inventories are materials (PLN 38.5 million) and goods (PLN 8.1 million).

The increase in current assets was also recorded in the financial derivatives line item – PLN 0.7 million, i.e. 21.9%. In turn, a decrease by PLN 14.8 million was recorded in the value of income tax overpaid and by PLN 15.3 million in trade receivables and other receivables, which remained close to the value recorded at the end of 2011.