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

3.1.3. Description of the structure of assets and liabilities from the standpoint of JSW S.A.’s liquidity

The positive cash flows on operating activity generated in 2012 covered the vast majority of expenditures on the Company’s non-current assets and expenditures of a financial nature (mainly on the dividend paid). Given the amount of funds invested in banks for a period longer than 3 months (investments in financial assets), the balance of available cash and cash equivalents together with investments as at the end of 2012 did not change significantly compared to the previous year.

The Company’s asset financing structure is correct. The structure of assets, including the amount of the most liquid assets, i.e. cash and short-term investments, secures the Company's ability to settle its liabilities in a timely manner. JSW S.A. maintains a safe level of liquidity.

The following table presents selected data from the cash flow statement for the financial year ended 31 December 2012 and 31 December 2011.

	2012	2011	Growth rate
Net cash flow on operating activity	1,885.3	2,678.9	70.4%
Net cash flow on investing activity	(2,351.3)	(1,764.5)	133.3%
Net cash flow on financing activity	(647.2)	(311.8)	207.6%
Change in the net balance of cash and cash equivalents	(1,113.2)	602.6	(184.7)%

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The Company’s cash flows from the distinct types of activity reflect the high profitability of its business, and the financial surpluses generated are spent on the development of the enterprise (investing activity) and repayment of liabilities.

Cash flow on operating activity

The value of cash flow on operating activity amounted to PLN 1,885.3 million in the period from January to December 2012, predominantly as a result of generated pre-tax profit of PLN 1,271.0 million adjusted for such factors such as:

• depreciation,
• change in the balance of trade liabilities and other liabilities, provisions and employee benefit liabilities,
• change in the balance of inventories,
• interest and profit-sharing,
• change in the balance of receivables.

The exact impact of changes in the above items is presented in Note 33 of the Financial Statements of Jastrzębska Spółka Węglowa S.A. for the financial year ended 31 December 2012.

Cash flow on investing activity

The value of cash used in investing activity amounted to PLN 2,351.3 million, compared to PLN 1,764.5 million in the previous period. The main components of net cash flow on investing activity were expenditures on the acquisition of property, plant and equipment in connection with the ongoing capital expenditure program (PLN 1,577.1 million) and the acquisition of financial assets (PLN 941.8 million), mainly related to the establishment of time deposits with a maturity of more than 3 months and the purchase of bonds issued by the subsidiary SEJ in the amount of PLN 10 million. At the same time, interest income was PLN 113.7 million and dividends received amounted to PLN 54.2 million.

Cash flow on financing activity

In 2012, net cash flow on financing activity amounted to PLN (647.2) million, compared to PLN (311.8) million in 2011, which resulted predominantly from the amount of dividends paid to the Company’s shareholders (in 2012: PLN 631.7 million, in 2011: PLN 298.0 million).

As a result of the aforedescribed events, having taken into account foreign exchange differences from the conversion of cash and cash equivalents (PLN 0.1 million), the balance of cash and cash equivalents decreased by PLN 1,113.3 million compared to the 2011 end-of-year balance and as at 31 December 2012 stood at PLN 1,245.6 million.