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PJSC KOKS

International Financial Reporting Standards

Interim Condensed Consolidated Financial Information

(unaudited)

For the six months ended 30 June 2019

Contents

Report on review of interim condensed consolidated financial information

Interim Condensed Consolidated Statement of Financial Position as of 30 June 2019 (unaudited) .................... 1

Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the six

months ended 30 June 2019 (unaudited) .............................................................................................................. 2

Interim Consolidated Statement of Cash Flows for the six months ended 30 June 2019 (unaudited) .................. 3

Interim Consolidated Statement of Changes in Equity for the six months ended 30 June 2019 (unaudited) ....... 4

Notes to the Interim Condensed Consolidated Financial Information for the six months ended 30 June 2019

(unaudited):

1 General information about PJSC KOKS and its subsidiaries ..................................................................... 5 2 Basis of preparation .................................................................................................................................... 6 3 Summary of significant accounting policies .............................................................................................. 6 4 Critical accounting estimates and judgements in applying accounting policies ......................................... 7 5 Segment information .................................................................................................................................. 8 6 Property, plant and equipment .................................................................................................................. 11 7 Intangible assets ....................................................................................................................................... 12 8 Non-current loans issued .......................................................................................................................... 12 9 Inventories ................................................................................................................................................ 12 10 Trade and other receivables and advances issued..................................................................................... 12 11 Current loans issued ................................................................................................................................. 13 12 Asset held for sale .................................................................................................................................... 13 13 Cash and cash equivalents ........................................................................................................................ 13 14 Share capital ............................................................................................................................................. 13 15 Retained earnings ..................................................................................................................................... 14 16 Borrowings and bonds .............................................................................................................................. 14 17 Trade and other payables .......................................................................................................................... 16 18 Other taxes payable .................................................................................................................................. 16 19 Revenue .................................................................................................................................................... 17 20 Cost of sales ............................................................................................................................................. 17 21 Taxes other than income tax ..................................................................................................................... 17 22 Distribution costs ...................................................................................................................................... 18 23 General and administrative expenses ....................................................................................................... 18 24 Other operating income/(expenses), net ................................................................................................... 18 25 Finance income ........................................................................................................................................ 18 26 Finance expenses ...................................................................................................................................... 18 27 Income tax expense .................................................................................................................................. 19 28 Balances and transactions with related parties ......................................................................................... 19 29 Fair value disclosures ............................................................................................................................... 20 30 Financial risks .......................................................................................................................................... 22 31 Contingencies, commitments and operating risks .................................................................................... 22 32 Earnings per share .................................................................................................................................... 23 33 Subsequent events .................................................................................................................................... 23

AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru

Report on Review of Interim Condensed Consolidated Financial Information

To the Shareholders and Board of Directors of PJSC Koks:

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of PJSC Koks and its subsidiaries (together – the “Group”) as at 30 June 2019 and the related interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six-month period then ended, and the related explanatory notes. Management is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with International Accounting Standard 34, “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim condensed consolidated financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim condensed consolidated financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

PJSC KOKS

Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income for the six months

ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)

The accompanying notes are an integral part of the interim condensed consolidated financial information.

2

Six months ended

Note 30 June 2019 30 June 2018

Revenue 19 46,448 43,184

Cost of sales 20 (35,194) (30,522)

Gross profit 11,254 12,662

Distribution costs 22 (2,425) (1,258)

General and administrative expenses 23 (3,185) (3,344)

Taxes other than income tax 21 (483) (523)

Net impairment losses on financial and contract assets reversed/(accrued) 42 (2)

Other operating (expenses)/income, net 24 (343) 397

Operating profit 4,860 7,932

Finance income 25 3,763 632

Finance expenses 26 (2,759) (5,986)

Loss on remeasurement of financial instruments 29 (282) -

Profit before income tax 5,582 2,578

Income tax expense 27 (1,116) (515)

Profit for the period 4,466 2,063

Profit/(Loss) is attributable to:

Equity holders of the Company 4,495 2,012

Non-controlling interest (29) 51


Other comprehensive (loss)/income:

Items that may be reclassified subsequently to profit or loss:

Exchange differences arising during the period (17) 25

Income tax relating to components of other comprehensive (loss)/income (9) 32

Total other comprehensive (loss)/income for the period (26) 57

Total comprehensive income for the period 4,440 2,120

Total comprehensive income/(loss) attributable to:

Equity holders of the Company 4,469 2,069

Non-controlling interest (29) 51

Total comprehensive income for the period 4,440 2,120

Earnings per ordinary share for profit attributable to the shareholders

of the Company, basic and diluted (in RR per share) 32 13.62 6.10

PJSC KOKS

Interim Condensed Consolidated Statement of Cash Flows for the six months ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)


3

Note

Six months ended

30 June 2019

Six months ended

30 June 2018

Cash flows from operating activities

Profit before income tax 5,582 2,578

Adjustments for:

Depreciation of property, plant and equipment 20, 23 1,774 1,578

Amortisation of intangible assets 20 73 73

Interest income 25 (915) (601)

Interest expenses 26 2,689 2,397

Loss on remeasurement of financial instruments 29 282 -

Accrual of vacation reserve 29 94

Reversal of obsolete stock provision 24 (3) (5)

Net impairment losses on financial and contract assets (reversed)/accrued (42) 2

Exchange (gain)/loss, net 24,25,26 (2,652) 2,999

Dividend income (6) (22)

Other effects (3) (8)

Operating cash flows before working capital changes 6,808 9,085

Changes in working capital

Decrease in trade and other receivables 1,775 1,190

Decrease/(Increase) in inventories 908 (307)

(Decrease)/Increase in trade and other payables (1,436) 1,594

Increase/(Decrease) in taxes other than income tax payable 66 (23)

Cash from operating activities 8,121 11,539

Income tax paid (1,083) (987)

Net cash from operating activities 7,038 10,552

Cash flows from investing activities

Purchase of property, plant and equipment (3,948) (4,706)

Payment of capitalized interest 6 (347) (347)

Proceeds from sale of property, plant and equipment 31 18

Acquisition of intangible assets (7) (10)

Loans issued (4,125) (5,166)

Repayment of loans issued 102 1,166

Interest received on loans issued and bank deposits 87 117

Dividend received 6 22

Net cash used in investing activities (8,201) (8,906)

Cash flows from financing activities

Proceeds from borrowings and bonds 16 6,000 5,220

Repayment of borrowings and bonds 16 (6,243) (2,043)

Interest paid on borrowings and bonds (2,645) (2,312)

Sale of treasury shares 14 353 100

Purchase of non-controlling interest in subsidiaries - (16)

Net cash (used in)/from financing activities (2,535) 949

Net (decrease)/increase in cash and cash equivalents (3,698) 2,595

Effects of exchange rate changes on cash and cash equivalents (220) 530

Net cash and cash equivalents at the beginning of the period, including 11,522 8,978

Cash and cash equivalents 11,522 8,978

Net cash and cash equivalents at the end of the period, including 7,604 12,103

Cash and cash equivalents 7,604 12,103

PJSC KOKS

Interim Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2019 (unaudited) (in million RR unless stated otherwise)


4

Share

capital

Treasury

shares

Currency

translation

reserve

Revaluation

reserve

Retained

earnings

Total attributable to

equity holders of the

Company

Non-controlling

interest

Total

equity

Balance at 31 December 2017 213 (11) (150) 476 25,619 26,147 711 26,858

Adjustment due to adoption of IFRS 9 - - - - (660) (660) - (660)

Balance at 1 January 2018 213 (11) (150) 476 24,959 25,487 711 26,198

Profit for the period - - - - 2,012 2,012 51 2,063

Other comprehensive income for the period - - 57 - - 57 - 57

Total comprehensive income for the period - - 57 - 2,012 2,069 51 2,120

Purchase of non-controlling interest in subsidiaries, net - - - - 410 410 (472) (62)

Revaluation reserve written-off to retained earning - - - (22) 22 - - -

- - - (22) 432 410 (472) (62)

Balance at 30 June 2018 213 (11) (93) 454 27,403 27,966 290 28,256

Balance at 31 December 2018 213 (11) (39) 432 26,650 27,245 290 27,535

Profit/(Loss) for the period - - - - 4,495 4,495 (29) 4,466

Other comprehensive loss for the period - - (26) - - (26) - (26)

Total comprehensive (loss)/income for the period - - (26) - 4,495 4,469 (29) 4,440

Revaluation reserve written-off to retained earning - - - (25) 25 - - -

- - - (25) 25 - - -

Balance at 30 June 2019 213 (11) (65) 407 31,170 31,714 261 31,975

PJSC KOKS


(unaudited) (in RR, tabular amounts in million RR unless stated otherwise)

5

1 General information about PJSC KOKS and its subsidiaries

PJSC KOKS (the “Company”) was established as state-owned enterprise Kemerovski Koksokhimicheski Kombinat in

1924. It was incorporated as an open joint stock company on 30 July 1993 as part of Russia’s privatisation programme.

The legal form was changed from open joint-stock company to public joint-stock company on 23 June 2016 in

accordance with the current legislation of the Russian Federation. The Company’s registered office is located at

1st Stakhanovskaya street, 6, Kemerovo, Russian Federation, 650021.

The principal activities of PJSC KOKS and its subsidiaries’ (jointly referred to as the “Group”) include coal mining and

the production of coke and coal concentrate, iron-ore concentrate, and pig iron, as well as the production of metal

powder (high-purity chrome products). The Group’s manufacturing facilities are primarily based in the city of

Kemerovo, Kemerovo Region, and in the city of Tula, Tula Region, in the Russian Federation. Its products are sold in

Russia as well as in other countries.

As at 30 June 2019 and at 31 December 2018 the Company’s beneficial controlling owner is Evgeny B. Zubitskiy.

The Group’s main subsidiaries are:

Name

Country of

incorporation Type of activity

Share in share capital / of

voting shares as at

Note

30 June

2019

31 December

2018

PJSC “CPP

“Berezovskaya” Russia Production of coal concentrate

98.7 % 98.7 %

LLC “Uchastok

“Koksoviy” Russia Coal mining

100.0% 100.0%

LLC “Butovskaya mine” Russia Coal mining 100.0% 100.0%

LLC “Tikhova mine” Russia Coal mining 100.0% 100.0%

PJSC

“TULACHERMET” Russia Pig-iron production

99.2% 99.2%

JSC “Kombinat

КМАruda” Russia Mining and concentration of iron-ore

100.0% 100.0%

JSC “POLEMA” Russia Production of chrome 100.0% 100.0%

JSC “SCHZ” Russia Production of cast-iron ware 100.0% 100.0%

PTW Ltd. China Sales activities 100.0% 100.0%

LLC “Consultinvest

2000” Russia Lease of property

100.0% 100.0%

MC “IMH” Russia Management services 100.0% 100.0%

LLC “BKF “Gorizont” Russia Transactions with securities 100.0% 100.0%

LLC “Koks-Mining” Russia Management services for coal mines 100.0% 100.0%

Koks Finance DAC Ireland Structured entity (1.1) - -

PKR Ltd Korea Sales activities 100.0% 100.0%

IMH Finance DAC Ireland Issue of euro-commercial papers 100.0% 100.0%

Polema (Qingdao)

Import&Export Co., LTD China Sales activities 100.0% 100.0%

1.1 In April 2011, Koks Finance Limited was incorporated in Dublin, Ireland. The main activity of Koks Finance

Limited is an issue of loan participation notes for the sole purpose of financing a loan to the Company (note 16). The

legal form was changed from Limited Liability Company to Designated Activity Company on 15 September 2016 in

accordance with the current legislation of Ireland. The Group has the current ability to direct the relevant activities of

this subsidiary through contractual arrangements. Activities of Koks Finance DAC is funded by the Group. Koks

Finance DAC is consolidated in the Group’s interim condensed consolidated financial information.

As at 30 June 2019 and 31 December 2018, the percentage of the Group’s ownership interest in its subsidiaries was

equal to the share in share capital / of its voting shares, with the exception of PJSC “TULACHERMET”, the percentage

of the Group’s ownership in which was 97.87% at 30 June 2019 and 97.87% at 31 December 2018.

PJSC KOKS



6

2 Basis of preparation

This interim condensed consolidated financial information for the six months ended 30 June 2019 has been prepared in

accordance with IAS 34 “Interim financial reporting”. The interim condensed consolidated financial information should

be read in conjunction with the consolidated financial statements for the year ended 31 December 2018, which have

been prepared in accordance with International Financial Reporting Standards (IFRS).

Each company of the Group registered in Russia maintains its own accounting records and prepares financial statements

in accordance with the Russian accounting standards (“RAS”). The attached interim condensed consolidated financial

information have been prepared using RAS records and reports that have been adjusted and re-classified in compliance

with IFRS.

Each company of the Group registered outside Russia maintains its own accounting records and prepares financial

statements in accordance with the local GAAP. The financial statements of companies outside Russia have been

adjusted and reclassified in compliance with IFRS.

As at 30 June 2019, the official exchange rate set by the Central Bank of the Russian Federation for transactions

denominated in foreign currencies was RR 63.0756 per 1 US dollar (“USD”) (as at 31 December 2018: RR 69.4706 per

1 US dollar) and RR 71.8179 per 1 euro (“EUR”) (as at 31 December 2018: RR 79.4605 per 1 euro).

3 Summary of significant accounting policies

The principal accounting policies and methods of computation followed by the Group and the critical accounting

judgments in applying accounting policies are consistent with those disclosed in the consolidated financial statements

for the year ended 31 December 2018 with the exception of income tax expense, which is recognised based on

management’s best estimate of the annual effective income tax rate expected for the full financial year (which excludes

the impact of deferred tax asset impairment which was recorded for the six months ended 30 June 2019 and 30 June

2018, see note 27).

3.1 Adoption of new or revised standards and interpretations

In the year 2019 the Group has initially adopted IFRS 16 “Leases”. The new standard sets out the principles for the

recognition, measurement, presentation and disclosure of leases. Under all lease contracts the lessee obtains the right to

use an asset at the inception of a lease and financing, if lease payments are made over time. Accordingly, IFRS 16

eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead,

introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases

with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets

separately from interest on lease liabilities in the statement of profit or loss and other comprehensive income. IFRS 16

substantially carries forward the lessor accounting requirements in IAS 17.

As at 1 January 2019 IFRS 16 “Leases” has not had any material impact on the Group’s financial position or operations

and accordingly, comparatives for the 2018 reporting period has not been restated.

Certain new or revised standards and interpretations have been issued that are mandatory for annual periods beginning

on or after 1 January 2019 or later, which have not had a material impact on the Group:

• IFRIC 23 “Uncertainty over Income Tax Treatments” (issued on 7 June 2017 and effective for annual periods

beginning on or after 1 January 2019.

• Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017 and

effective for annual periods beginning on or after 1 January 2019).

• Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” (issued on 12 October 2017 and

effective for annual periods beginning on or after 1 January 2019).

• Annual Improvements to IFRSs 2015-2017 cycle – amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued

on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019).

• Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” (issued on 7 February 2018 and effective

for annual periods beginning on or after 1 January 2019).

PJSC KOKS



7

3 Summary of significant accounting policies (continued)

3.2 Changes in presentation of Interim Condensed Consolidated Financial Information

During the year 2018, the Group has changed its classification of shipping and handling costs incurred by the Group in

respect of transportation services that represent a separate performance obligation in contracts with customers within the

interim condensed consolidated statement of profit or loss and other comprehensive income. Comparatives have been

changed accordingly.

The effect of reclassifications for presentation purposes was as follows on amounts for the six months ended 30 June

2018:

As originally presented Reclassification As reclassified for the six

months ended 30 June 2018

Cost of sales 28,470 2,052 30,522

Distribution costs 3,310 (2,052) 1,258

4 Critical accounting estimates and judgements in applying accounting policies

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next

financial period. Estimates and judgements are continually evaluated and are based on management’s experience and

other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Management also makes certain judgements, apart from those involving estimations, in the process of applying

accounting policies. Judgements that have the most significant effect on the amounts recognised in the interim

condensed consolidated financial information and estimates that could cause a significant adjustment to the carrying

amount of assets and liabilities within the next financial period include the following:

4.1 Going concern

As at 30 June 2019, the Group’s current liabilities exceeded current assets by RR 7,608 million. The Group had

undrawn borrowing facilities in the amount of RR 37,351 million (see note 16) as at 30 June 2019 (out of which

RR 36,381 million are long-term facilities).

Management believes that the Group can meet its liquidity position and accordingly a going concern basis for the

preparation of these interim condensed consolidated financial information is appropriate.

4.2 Estimated useful lives of property, plant, equipment and licences

The Group applies a range of useful lives to buildings, installations, plant and equipment, transport vehicles and other

assets classified as property, plant and equipment. Significant judgement is required in estimating the useful lives of

such assets. When determining useful life, assumptions that were valid at the time of estimation, may change when new

information becomes available. Factors that could affect estimation include:

• changes in environmental and other legislation applicable to the Group’s operations;

• development of new technologies and equipment; and

• changes in the terms of licences.

If management’s estimates of useful lives were to decrease by 10%, profit before income tax for the six months ended

30 June 2019 would decrease by RR 197 million (six months ended 30 June 2018: profit before income tax would

decrease by RR 175 million). An increase in useful lives by 10% would result in an increase of profit before income tax

for the six months ended 30 June 2019 by RR 161 million (six months ended 30 June 2018: increase of profit before

income tax by RR 143 million).

PJSC KOKS



8

4 Critical accounting estimates and judgements in applying accounting policies (continued)

Significant judgement is required in estimating the useful lives of intangible assets, which primarily include production

licences. When determining economic life, assumptions that were valid at the time of estimation, may change when new

information becomes available. Factors that could affect estimation include:

• changes in environmental and other legislation applicable to the Group’s operations;

• development of new technologies and equipment;

• changes in the terms of licences;

• plans and abilities of the Group to renew existing production licences at a low cost.

4.3 Fair value of loans issued measured at fair value through profit or loss

As of 30 June 2019 the Group recorded loans issued to LLC “TULACHERMET-STAL” carrying amount

RR 24,464 million (2018: RR 19,863 million). According to IFRS 9 they are measured at fair value through profit or

loss. For the purpose of fair value measurement following inputs were used: average interest rate for Group’s bank

loans and LLC “TULACHERMET-STAL”’s free cash flows projections.

Concerning interest rate management’s judgments are based on the assumption that terms of bank credit facilities for

LLC “TULACHERMET-STAL” will be similar to those for the Group. Sensitivity analysis of fair value measurement

model is disclosed in Note 29.

4.4 Expected credit losses measurement

Measurement of expected credit losses (ECL) is a significant estimate that involves determination methodology, models

and data inputs. ECL measurement methodology used as of 30 June 2019 is consistent with that disclosed in the

consolidated financial statements for the year ended 31 December 2018. The Group regularly reviews and validates the

model and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss

experience.

4.5 Estimated impairment of goodwill

The Group tests goodwill for impairment on an annual basis. The recoverable amount of cash generating units, defined

as the higher of fair value less costs of disposal and value in use. These calculations require the use of assumptions and

estimates, based on past performance and market expectations.

The Group got in 2016 100% share in the charter capital of LLC “Gorny otdykh” and classified as an acquisition of

assets and liabilities, rather than as a business combination in accordance with the definitions in IFRS 3 "Business

combinations". The Group's management does not consider the acquired assets as a cash generated unit in accordance

with the definition in IAS 36 “Impairment of assets” and includes the value of the assets acquired to the carrying value

of the Group’s existing cash generated units for the purposes of assessing impairment indicators and impairment testing

of the Group’s assets.

4.6 Recognition of deferred tax asset

The net deferred tax asset represents income taxes recoverable through future deductions from taxable profits. Deferred

tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is

probable that future taxable profit will be available against which the deductions can be utilised.

In determining future taxable profits and the amount of tax benefits that are probable in the future, management makes

judgements and applies estimates based on taxable profits of the previous three years and expectations of future income

that are believed to be reasonable under the circumstances.

5 Segment information

The Group operates as a vertically integrated business. The chief executive officer of MC “IMH” is considered to be the

chief operating decision-maker (“CODM”). The CODM is responsible for decision-making, estimating results and

distributing resources, relying on internal financial information prepared using IFRS principles. The Group’s

management has determined the following operating segments based on nature of production:

PJSC KOKS



9

5 Segment information (continued)

• Coal – coal mining;

• Coke – coke production;

• Ore & Pig iron – production of iron ore concentrate, pig iron, crushed pig iron and cast iron ware;

• Polema – production of powder metallurgy articles (chrome articles);

• Unallocated – include subsidiaries: MC “IMH”, LLC “Consultinvest 2000”, LLC “BKF “Gorizont” and acquisition of asset LLC “Gorny otdykh”.

Inter-segment sales are generally composed of:

• Sales of coal to the Coke segment;

• Sales of coke to the Ore & Pig iron segment and;

• Management services rendered to the segments Coal, Coke, Ore & Pig iron and Polema segments.

Segment revenue and segment results include transfers between operating segments. Analysis of revenue generated from external sales by the products and services are included in Note 19.

The Group’s management assess the performance of operating segments based on revenue, adjusted EBITDA, assets and liabilities.

Coal Coke Ore & Pig

iron Polema Unallo-

cated Total

Six months ended 30 June 2019

Inter-segment revenue 2,509 9,792 102 (3) 1,263 13,663 External revenue 2,461 13,956 28,880 978 173 46,448

Segment revenue, total 4,970 23,748 28,982 975 1,436 60,111

Adjusted EBITDA 1,293 3,243 1,996 97 204 6,833


Inter-segment revenue 2,801 9,857 94 1 1,305 14,058 External revenue 2,858 9,581 29,608 1,030 107 43,184

Segment revenue, total 5,659 19,438 29,702 1,031 1,412 57,242

Adjusted EBITDA 2,010 2,107 4,739 30 138 9,024

There are no reconciling items between external revenue of operating segments and total revenue in the interim condensed consolidated statement of profit or loss and other comprehensive income.

The reconciliation between profit/(loss) before income tax and adjusted EBITDA by segments is as follows:

Coal Coke Ore & Pig

iron Polema Unallo-

cated Total


(Loss)/Profit before income tax (407) 4,604 1,239 124 22 5,582 Amortisation and depreciation 905 167 665 52 58 1,847 Interest income (2) (22) (863) (19) (9) (915) Inter-segment interest income - (772) (205) - - (977) Interest expense 32 1,779 859 19 - 2,689 Inter-segment interest expense 815 - 73 - 89 977 Exchange (gain)/loss, net (50) (2,513) (114) 24 1 (2,652) Loss/(gain) on remeasurement of financial instruments - - 342 (103) 43 282

Total adjusted EBITDA 1,293 3,243 1,996 97 204 6,833


(Loss)/Profit before income tax (45) (1,733) 4,307 19 30 2,578 Amortisation and depreciation 837 170 565 29 50 1,651 Interest income (4) (36) (540) (10) (11) (601) Inter-segment interest income - (789) (202) (6) - (997) Interest expense 185 1,714 490 8 - 2,397 Inter-segment interest expense 568 - 360 - 69 997 Exchange loss/(gain), net 469 2,781 (241) (10) - 2,999

Total adjusted EBITDA 2,010 2,107 4,739 30 138 9,024

PJSC KOKS



10


Adjusted EBITDA analysed by the CODM is defined as profit before income tax adjusted for interest income, interest

expense, depreciation, amortisation and impairment, any extraordinary gains and losses, and foreign exchange gains and

losses.

Segment assets and liabilities

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, trade and other

receivables, advances issued, loans issued, VAT recoverable and cash and cash equivalents.

Segment liabilities include accounts payable arising during operating activities, borrowings and interest payable.

Capital expenditures comprise additions to property, plant and equipment and intangible assets.

Segment assets and liabilities and capital expenditures are presented below:

Coal Coke

Ore & Pig

iron Polema Unallocated Total

At 30 June 2019

Segment assets 33,324 38,654 73,072 2,947 5,552 153,549

Segment liabilities 30,369 45,345 45,797 947 3,296 125,754

Capital expenditures for the six months ended

30 June 2019 3,282 226 1,532 27 195 5,262

At 31 December 2018

Segment assets 31,092 38,295 71,302 2,992 5,370 149,051

Segment liabilities 27,760 49,120 44,603 1,107 3,128 125,718

Capital expenditures for the six months ended

30 June 2018 2,025 193 2,515 117 265 5,115

The Group’s corporate assets are included in the Unallocated.

The reconciliation between the assets of operating segments and total assets in the interim condensed consolidated

statement of financial position is presented below:

The reconciliation between the liabilities of operating segments and total liabilities in the interim condensed

consolidated statement of financial position is presented below:

At 30 June 2019 At 31 December 2018

Segment assets 153,549 149,051

Items not included in segment assets:

Goodwill 4,497 4,497

Deferred income tax asset 2,924 2,902

Other non-current assets 75 76

Elimination of inter-segment balances (36,858) (32,876)

Total assets 124,187 123,650


Segment liabilities 125,754 125,718

Items not included in segment liabilities:

Provision for restoration liability 64 61

Deferred income tax liability 1,748 1,882

Taxes payable 1,504 1,330

Elimination of inter-segment balances (36,858) (32,876)

Total liabilities 92,212 96,115

PJSC KOKS



11


Information about geographical areas

The following table presents revenues from external customers:

Six months ended

30 June 2019

Six months ended

30 June 2018

Total sales: 46,448 43,184

Russia 13,263 12,927

Switzerland 25,414 25,890

Singapore 3,320 780

Ukraine 1,820 162

Kyrgyz Republic 991 1,778

Belarus 588 351

Germany 299 253

Republic of Kazakhstan 124 16

Korea 97 110

Poland 89 308

China 57 120

Czech Republic 1 319

Other 385 170

For the six months ended 30 June 2019 revenue from the largest customer of the Group’s Ore & Pig Iron segment,

which is related party, represented RR 16,276 million of the Group’s total revenues (for the six months ended 30 June

2018: revenue from the largest customer of the Group’s Coke and Ore & Pig Iron segments, which is related party,

represented RR 25,755 million).

The Group’s non-current assets (different from financial instruments and deferred income tax asset) located in the

Russian Federation.

6 Property, plant and equipment

Six months ended

30 June 2019

Six months ended

30 June 2018

Cost at the beginning of the period 87,039 77,838

Additions 5,262 5,105

Disposals (353) (242)

Cost at the end of the period 91,948 82,701

Accumulated depreciation and impairment at the beginning of the period (24,634) (22,052)

Depreciation charges (2,104) (1,920)

Accumulated depreciation and impairment related to disposals 296 202

Accumulated depreciation and impairment at the end of the period (26,442) (23,770)

Net book value at the beginning of the period 62,405 55,786

Net book value at the end of the period 65,506 58,931

During the six months ended 30 June 2019 depreciation expense of RR 1,609 million (six months ended 30 June 2018:

RR 1,431 million) was included in cost of sales, a depreciation expense of RR 165 million (six months ended 30 June

2018: RR 147 million) was included in general and administrative expenses and depreciation expense of

RR 330 million (six months ended 30 June 2018: RR 342 million) was capitalised.

Additions to property, plant and equipment during the six months ended 30 June 2019 include capitalised interest of

RR 341 million (six months ended 30 June 2018: RR 326 million) and foreign exchange losses from financing activities

in the amount of RR 6 million (six months ended 30 June 2018: RR 21 million) directly attributable to the qualifying

assets. The capitalisation rate used to determine the amount of capitalised interest for the six months ended 30 June

2019 was 8.34% (six months ended 30 June 2018: 9.04%).

PJSC KOKS



12

7 Intangible assets

Movements of intangible assets are provided below:

Six months ended

30 June 2019

Six months ended

30 June 2018

Cost as at the beginning of the period 7,508 7,620

Accumulated amortisation and impairment (2,973) (2,961)

Net book value as at the beginning of the period 4,535 4,659

Additions - 10

Amortisation charge (73) (73)

Net book value at the end of the period 4,462 4,596

Cost as at the end of the period 7,508 7,630

Accumulated amortisation and impairment (3,046) (3,034)

8 Non-current loans issued

At 30 June 2019 Interest rate At 31 December 2018 Interest rate

Loans issued to related parties and

denominated in Russian roubles (note 28) 23,096 8.8% 16,381 8.9%

Loans issued and denominated in Russian

roubles 125 8.8 - 10.0% 52 10.0%

Total non-current loans issued 23,221 16,433

Non-current loans issued to related parties are measured at fair value through profit or loss.

As of 30 June 2019 non-current loans issued to third parties amounted to RR 119 million are measured at fair value

through profit or loss and at amortised cost, net of expected credit loss allowance, amounted to RR 6 million (31

December 2018: non-current loans issued to third parties measured at amortised cost amounted to RR 52 million).

As of 30 June 2019 and 31 December 2018 as the result of the management assessment of expected credit losses no

impairment loss was identified.

9 Inventories


Raw materials and supplies held for production purposes 5,164 5,298

Finished goods 1,710 2,434

Work in progress 519 555

Total inventories 7,393 8,287

Raw materials and supplies held for production purposes are recorded at net realisable value, net of obsolete stock

provision which amounted to RR 35 million as at 30 June 2019 (RR 38 million as at 31 December 2018).

10 Trade and other receivables and advances issued


Trade receivables (net of impairment amounting to RR 5 million as at 30 June

2019; RR 6 million as at 31 December 2018) 1,405 2,082

Trade receivables from related parties 1,897 1,337

Taxes receivable 113 204

Other accounts receivable (net of impairment amounting to RR 172 million as at

30 June 2019; RR 167 milion as at 31 December 2018) 221 221

Other accounts receivable from related parties (net of expected credit loss

amounting to RR 88 million as at 30 June 2019; RR 88 milion as at 31 December

2018) 100 772

Total trade and other receivables 3,736 4,616

Advances issued 727 839

Less impairment (7) (10)

Total advances issued 720 829

PJSC KOKS



13

11 Current loans issued

At 30 June

2019 Interest

rate At 31 December

2018 Interest

rate

Loans issued to related parties and denominated in Russian roubles (note 28) 1,368 8.8% 3,692 0.0 - 9.50% Bank deposits denominated in Russian roubles 2 0.01 - 6.30% 8 0.01 - 6.30% Loans issued and denominated in Russian roubles 52 10.0% -

Total current loans issued 1,422 3,700

As of 30 June 2019 current loans issued to related parties amounted to RR 1,368 million are measured at fair value through profit or loss (31 December 2018: current loans issued to related parties measured at fair value through profit or loss amounted to RR 3,572 million and at amortised cost, net of expected credit loss allowance, amounted to RR 120 million).

As of 30 June 2019 current loans issued to third parties measured at amortised cost amounted to RR 52 million, net of expected credit loss allowance.

As at 30 June 2019 current loans issued expected credit loss allowance amounted to RR 33 million (31 December 2018: RR 77 million).

12 Asset held for sale

In December 2018 the Arbitration court of Tula region issued a decision to terminate the sale agreement of the stake in the authorized capital of LLC “TULACHERMET-STAL” (an entity under common control of the Group’s beneficial controlling owner), according to which PJSC “TULACHERMET” (a subsidiary of the Group) regained the stake in the authorized capital of LLC “TULACHERMET-STAL” in the amount of 33.3%. In accordance with the current plans of the Group’s management the stake in the authorized capital of LLC “TULACHERMET-STAL” is classified as asset held for sale.

The Group’s management plans to complete the sale of the stake in LLC “TULACHERMET-STAL” within twelve months since it was regained by the Group.

The summarized information about assets and liabilities of LLC ”TULACHERMET-STAL” is as follows:


Current assets, total 5,198 1,670 Non-current assets, including: Property, plant and equipment 51,522 46,344 Other non-current assets 5,058 5,359 Current liabilities, total (11,217) (11,527) Non-current liabilities, including: Borrowings (49,783) (41,845) Other non-current liabilities (2,069) (1,668)

Net assets (1,291) (1,667)

13 Cash and cash equivalents


RR bank deposits 1,055 6,105 RR-denominated cash in hand and bank balances 2,249 2,971 Bank deposits in foreign currencies 4,125 1,311 Bank balances denominated in foreign currencies 175 1,135

Total cash and cash equivalents 7,604 11,522

14 Share capital

As of 30 June 2019 and 31 December 2018 the Company’s share capital (authorised, issued and paid in) totalled RR 213 million. The share capital consisted of 330,046,400 ordinary shares with a par value of RR 0.10 per share as of 30 June 2019 and 31 December 2018. As of 30 June 2019 and 31 December 2018 share capital included hyperinflationary adjustment totaling RR 180 million, which was calculated in accordance with the requirements of IAS 29 “Financial Reporting in Hyperinflationary Economies” and relates to the reporting periods prior to 1 January 2003.

PJSC KOKS



14

14 Share capital (continued)

In November 2017 Evgeny B. Zubitskiy purchased 27,012,353 of the Company’s shares from the subsidiary of the

Group for RR 2,828 million. The loss from this transaction in the amount of RR 3,205 million is included in the interim

condensed consolidated statement of changes in equity. As of 30 June 2019 other accounts receivable related to this

transaction were fully paid (31 December 2018: other accounts receivable related to this transaction equaled to RR 353)

(see note 28).

15 Retained earnings

The Company’s Russian statutory financial statements serve as the basis for its profit distribution and other

appropriations. Under Russian law, the basis of distribution is defined as a company’s net profit. The net profit

recognised in the Company’s published Russian statutory financial statements for the six months ended 30 June 2019

was RR 3,878 million (for the six months ended 30 June 2018: net loss equaled RR 1,412 million) and the accumulated

profit after dividends as at 30 June 2019 was equal to RR 13,896 million (31 December 2018: RR 10,017 million).

However, legislation and other statutory laws and regulations dealing with profit distribution are open to legal

interpretation and, accordingly, management believes that at present it would not be appropriate to disclose the amount

for distributable reserves in the interim condensed consolidated financial information.

During the six months ended 30 June 2019 and 30 June 2018 no dividends were declared and paid.

16 Borrowings and bonds

Short-term borrowings and current portion of long-term borrowings


RR denominated bank loans, fixed 6,894 2,985

RR denominated bank loans, variable - 523

USD-denominated bank loans, fixed 2,497 229

Total short term borrowings and current portion of long-term borrowings 9,391 3,737

Long-term borrowings


RR denominated bank loans, fixed 29,278 32,902

Other RR denominated borrowings, fixed - 770

USD denominated bank loans, fixed - 2,521

Total long-term borrowings 29,278 36,193

As at 30 June 2019 the loans totaling RR 3,267 million were collaterised by property, plant and equipment in the

carrying value of RR 1,521 million (at 31 December 2018: the loans totaling RR 3,020 million were collaterised by

property, plant and equipment in the carrying value of RR 1,506 million).

Borrowings of the Group are due for repayment as follows:


Borrowings to be repaid – within one year 9,391 3,737

– between one and five years 29,278 34,779

– after five years - 1,414

Total borrowings 38,669 39,930

As at 30 June 2019 the Group has the undrawn borrowing facilities in the amount of RR 37,351 million, including long-

term facilities in the amount of RR 36,381 million (as at 31 December 2018: RR 46,302 million, including long-term

RR 39,201 million).

PJSC KOKS



15

16 Borrowings and bonds (continued)

Long-term borrowings (continued)

Movements in borrowings are analysed as follows:

Six months ended

30 June 2019

Six months ended

30 June 2018

Short-term borrowings:

Balance at the beginning of the period 3,737 6,631

Borrowings received 6,000 -

Borrowings repaid (5,751) (1,387)

Reclassification of borrowings 5,426 1,920

Bank overdrafts received 1,705 1,648

Bank overdrafts repaid (1,705) (1,648)

Effect of changes in exchange rates (21) 128

Balance at the end of the period 9,391 7,292

Long-term borrowings:


Borrowings received - 5,220

Borrowings repaid (492) -

Other non-cash effects 5 (3)

Reclassification of borrowings (6,195) (1,920)



BO-05 series bonds

In August 2018 the Group issued five-year maturity bonds in the principal amount of RR 5 billion at a coupon rate of

9.2% payable semi-annually (series BO-05 bonds).

Movements in series BO-05 bonds are analysed as follows:

Six months ended

30 June 2019

Six months ended

30 June 2018

Short-term bonds:

Balance at the beginning of the period 165 -

Interest expense 229 -

Interest repaid (229) -

Balance at the end of the period 165 -

Long-term bonds:

Balance at the beginning of the period 4,986 -

Balance at the end of the period 4,986 -

Eurobonds

The table below sets out an analysis of Group’s eurobonds liabilities and their movements for each of the periods

presented:

Six months ended

30 June 2019

Six months ended

30 June 2018

Short-term bonds:

Balance at the beginning of the period 392 4,087

Interest expense 996 1,439

Bonds repaid - (149)

Interest repaid (965) (1,364)


Balance at the end of the period 374 4,430

Long-term bonds:


Bonds repaid - (507)

Effect of changes in exchange rates (2,529) 2,507


PJSC KOKS



16

16 Borrowings and bonds (continued)

Eurobonds (continued)

As at 30 June 2019, the carrying value of 7.5% loan participation notes due 2022 amounted to RR 25,318 million

(including the current portion of the bonds, which is equal to RR 374 million), net of transaction costs (as at 31

December 2018: RR 27,865 million (including the current portion, which is equal to RR 392 million), net of transaction

costs).

Debt covenants

In relation to the first half of 2019, the lender one time has increased the threshold values of the covenants under the

terms of loan agreements, so the right of the lender to demand early repayment of long-term debt as of June 30, 2019

and at the date of approval of the interim condensed consolidated financial information has not occurred.

17 Trade and other payables


Financial liabilities

Trade accounts payables 7,906 8,416

Interest payable 88 100

Other accounts payable 212 225

Total financial liabilities 8,206 8,741

Non-financial liabilities

Wages and salaries payable 1,559 1,587

Advances received 8,942 9,281

Total non-financial liabilities 10,501 10,868

Total trade and other payables 18,707 19,609

18 Other taxes payable


VAT 724 637

Contributions to the state pension and social insurance funds 292 266

Property tax 146 157

Individual income tax 101 108

Other taxes 25 17

Total taxes other than income tax payable 1,288 1,185

The total statutory pension contributions for the six months ended 30 June 2019 included in all captions of the interim

condensed consolidated statement of profit or loss and other comprehensive income and capitalised to property, plant

and equipment amounted to RR 1,291 million (six months ended 30 June 2018: RR 1,332 million), including portion in

the amount of RR 38 million accrued on payment to key management (six months ended 30 June 2018: RR 38 million).

PJSC KOKS



17

19 Revenue

Six months ended

30 June 2019 30 June 2018

Sales in Russia:

Sales of pig iron 4,149 3,163

Sales of coke and coking products 3,903 4,308

Sales of coal and coal concentrate 1,893 2,322

Sales of services 1,288 1,259

Sales of cast-iron ware 823 787

Sales of powder metallurgy products 413 464

Sales of chrome 255 108

Sales of crushed pig iron 16 6

Sales of iron ore concentrate - 105

Other sales 523 405

Total sales in Russia 13,263 12,927

Sales to other countries:

Sales of pig iron 22,805 24,359

Sales of coke and coking products 10,052 5,391

Sales of powder metallurgy products 134 151

Sales of chrome 120 228

Sales of cast-iron ware 34 53

Other sales 40 75

Total sales to other countries 33,185 30,257

Total revenues 46,448 43,184

Timing of revenue recognition (for each revenue stream) is as follows:

Six months ended

30 June 2019 30 June 2018

At a point in time 44,176 41,132

Over time 2,272 2,052

Total revenue 46,448 43,184

20 Cost of sales

Six months ended

30 June 2019 30 June 2018

Raw materials and supplies 24,530 21,021

Wages and salaries including associated taxes 4,235 4,390

Transportation services 2,272 2,052

Depreciation of property, plant and equipment 1,609 1,431

Energy 749 704

Changes in finished goods and work in progress 734 37

Other services 167 155

Amortisation of intangible assets 73 73

Other expenses 825 659

Total of cost of sales 35,194 30,522

For the six months ended 30 June 2019 employee benefits expenses, included in cost of sales, general and

administrative expenses amounted to RR 6,445 million (for the six months ended 30 June 2018 : RR 6,654 million).

21 Taxes other than income tax

Six months ended

30 June 2019 30 June 2018

Property tax 300 292

Mineral resources extraction tax 86 124

Land tax 75 94

Accrual of other taxes 22 13

Total taxes other than income tax 483 523

PJSC KOKS



18

22 Distribution costs

Six months ended

30 June 2019 30 June 2018

Transportation services 2,260 1,125

Other selling expenses 165 133

Total distribution costs 2,425 1,258

23 General and administrative expenses

Six months ended

30 June 2019 30 June 2018

Wages and salaries including associated taxes 2,210 2,264

Other purchased services 680 771

Depreciation of property, plant and equipment 165 147

Materials 108 126

Other 22 36

Total general and administrative expenses 3,185 3,344

24 Other operating income/(expenses), net

Six months ended

30 June 2019 30 June 2018

Exchange (loss)/gain, net (126) 559

Dividend income 6 22

Reversal of obsolete stock provision 3 5

Gain/(Loss) on disposal of property, plant and equipment 21 (15)

Charity payments (117) (75)

Other (130) (99)

Other operating (expenses)/income, net (343) 397

25 Finance income

Six months ended

30 June 2019 30 June 2018

Interest income on loans issued measured at FVTPL 826 503

Interest income on loans issued measured at AC 7 10

Interest income on bank deposits 82 88

Financial foreign exchange gain on loans issued and on interest accrued on loans

issued, net - 31

Financial foreign exchange gain on borrowings and interest accrued on

borrowings, net 260 -

Financial foreign exchange gain on bonds issued and interest accrued on bonds

issued, net 2,588 -

Total finance income 3,763 632

26 Finance expenses

Six months ended

30 June 2019 30 June 2018

Interest expense 2,689 2,397

Financial foreign exchange loss on bonds issued and on interest accrued on bonds

issued, net - 2,943

Financial foreign exchange gain on borrowings and interest accrued on

borrowings, net - 622

Financial foreign exchange loss on deposits, net 70 24

Total finance expenses 2,759 5,986

PJSC KOKS



19

27 Income tax expense

Income tax expense recorded in the interim condensed consolidated statement of profit or loss and other comprehensive

income comprises the following:

Six months ended

30 June 2019 30 June 2018

Current income tax expense 1,281 793

Deferred income tax benefit (177) (287)

Impairment of deferred tax asset 12 9

Income tax expense 1,116 515

Income tax expense is accrued based on management’s best estimates of annual effective income tax rate. The

estimated effective income tax rate for the six months ended 30 June 2019 and 30 June 2018 is 20% (it excludes the

impact of deferred tax asset impairment recorded in the reporting period).

28 Balances and transactions with related parties

Parties are generally considered to be related if one party has the ability to control the other party, is under common

control, or can exercise significant influence over the other party in making financial and operational decisions. In

considering each possible related party relationship, attention is directed to the substance of the relationship, not merely

the legal form. Information about the parties who ultimately own and control the Company is disclosed in Note 1.

Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties

may not be affected on the same terms, conditions and amounts as transactions between unrelated parties.

Balances outstanding with related parties as of 30 June 2019:

Companies under

common control Associates

Ultimate

shareholders Total

Non-current loans issued 23,096 - - 23,096

Trade receivables 1,897 - - 1,897

Other accounts receivable 55 45 - 100

Advances issued - 316 - 316

Current loans issued 1,368 - - 1,368

Trade accounts payable (57) (100) - (157)

Other accounts payable (61) - - (61)

Advances received (5,673) - - (5,673)

Financial guarantee (88) - - (88)

Balances outstanding with related parties as of 31 December 2018:

Companies under


Ultimate

shareholders Total

Non-current loans issued 16,381 - - 16,381

Trade receivables 1,337 - - 1,337

Other accounts receivable 419 - 353 772

Advances issued - 297 - 297

Current loans issued 3,692 - - 3,692

Trade accounts payable (38) (7) - (45)

Other accounts payable - (34) - (34)

Advances received (7,305) - - (7,305)

Financial guarantee (88) - - (88)

PJSC KOKS



20

28 Balances and transactions with related parties (continued)

Related party transactions for the six months ended 30 June 2019:

Companies under


Ultimate

shareholders Total

Sales in Russia:

Sales of coal and coal concentrate 1,884 - - 1,884

Sales of pig iron 1,066 - - 1,066

Sales of services 1,100 - - 1,100

Other sales 160 - - 160

Sales of coke and coking products 2 - - 2

Sales of cast-iron ware 1 - - 1



Other income:

Interest income 830 - - 830

Dividends - 6 - 6

Net impairment losses on financial and contract assets

reversed - 1 - 1

Loss on remeasurement of financial instruments (342) - - (342)

Other operating income/(expenses), net 115 (20) - 95

Purchase of goods and services:

Transportation services - (1,933) - (1,933)

Purchase of raw materials and supplies (21) (1,947) - (1,968)

Related party transactions for the six months ended 30 June 2018:

Companies under


Ultimate

shareholders Total

Sales in Russia:

Sales of coal and coal concentrate 2,322 - - 2,322

Sales of services 1,141 - - 1,141

Other sales 208 - - 208

Sales of cast-iron ware 1 - - 1



Sales of coke and coking products 1,708 - - 1,708

Other income:

Interest income 513 - - 513

Dividends - 22 - 22

Other operating income/(expenses), net 17 (7) - 10

Purchase of goods and services:

Transportation services - (2,018) - (2,018)

Purchase of raw materials and supplies (1) (751) - (752)

Payments to key management personnel

Payments to key management personnel included in general and administrative expenses amounted to RR 346 million

for the six months ended 30 June 2019 (for the six months ended 30 June 2018: RR 359 million). All these payments

are short-term employee benefits. The number of people to whom this compensation relates is 36 for the six months

ended 30 June 2019 (for the six months ended 30 June 2018: 35).

29 Fair value disclosures

Fair value measurements of Group’s financial instruments are analysed by their level in the fair value hierarchy as

follows:

(i) Level 1 covers measurements made at quoted prices (unadjusted) in active markets for identical assets or

liabilities;

(ii) Level 2 measurements are valuation techniques with all material inputs observable for the asset or liability, either

directly (that is, as prices) or indirectly (that is, derived from prices); and

(iii) Level 3 measurements are valuations not based on observable market data (that is, unobservable inputs).

PJSC KOKS



21

29 Fair value disclosures (continued)

Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value

measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement.

The significance of a valuation input is assessed against the fair value measurement in its entirety.

Financial assets and liabilities carried at fair value

The following table analyses Group’s financial instruments carried at fair value by the level of fair value hierarchy:

30 June 2019 31 December 2018

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Assets

Loans issued - - 24,583 - - 19,953

Other financial assets - - 38 - - 39

Asset held for sale - 39 - - 39 -

Liabilities

Other financial liability - - 666 - - -

Financial guarantee - - 88 - - 88

At 30 June 2019 the carrying amount of loans issued measured at FVTPL includes loans issued to

LLC “TULACHERMET-STAL”.

The following table analyses Group’s financial instruments carried at fair value movement for the reporting period:

Loans issued

Other financial

assets

Other financial

liability Financial guarantee

Fair value at 31 December 2018 19,953 39 - (88)

Loans issued 4,125 - - -

Interest income 826 - - -

Repayment of loans issued (99) - - -

Reclassification 163 - (769) -

Remeasurement at FVTPL (385) - 103 -

Disposal of other financial assets - (1) - -

Fair value at 30 June 2019 24,583 38 (666) (88)

Fair value measurement of loans issued to LLC “TULACHERMET-STAL” is determined using average interest rates

for long-term borrowings received by the Group and forecasted cash flows of LLC “TULACHERMET-STAL”. Due to

assumptions underlying fair value estimation, loans issued to LLC “TULACHERMET-STAL” are categorized as Level

3 in the fair value hierarchy, described above.

The fair value of the loans issued to LLC “TULACHERMET-STAL” is sensitive to interest rate changes and forecasted

cash flows changes. Forecasted cash flow of LLC “TULACHERMET-STAL” is mostly sensitive to production volume

changes, raw materials and finished goods prices dynamics, and working capital turnover.

The table below represents the effect on fair value of the loans issued that would occur from changes of the

unobservable for the reporting period:

Inputs used Range of inputs

Reasonable

changes

Sensitivity of fair

value measurement

Loans issued Interest rate 8.79%

+1% (948)

-1% 992

Production volume for 2019 year 885 th.tn +10% 167

-10% (52)

Finished goods prices dynamics

change -4.3%+4.5%

+3% 501

-3% (439)

Working capital turnover 15-70 d. +30 d. (635)

-30 d. 628

Raw materials prices dynamics

changes -6.7%+4.5%

+3% (287)

-3% 298

PJSC KOKS



22

29 Fair value disclosures (continued)

Financial assets and liabilities carried at amortised cost

Group’s financial instruments except those carried at fair value are measured at amortised cost. Management believes that the carrying amount of cash and cash equivalents, accounts receivable and payable in the interim condensed consolidated statement of financial position approximates their fair value based on level 1 (cash), level 2 (cash equivalents) and level 3 (accounts receivable and payable) measurements.

The table below presents financial instruments measured at amortised cost for which carrying amount differs from fair value:

30 June 2019 31 December 2018

Carrying

amount Level 1 Level 2 Level 3 Carrying

amount Level 1 Level 2 Level 3

Assets Loans issued and bank deposits 60 - 57 - 180 - 178 - Liabilities Term loans (excluding overdrafts) 38,669 - 38,376 - 39,930 - 40,032 - Bonds 30,469 29,526 - - 33,016 36,264 - -

The fair value of loans issued carried at amortised cost was determined using valuation techniques based on Level 2 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity.

The fair values of long-term and short-term debt carried at amortised cost were determined using valuation techniques. The estimated fair value of fixed interest rate instruments with stated maturity was estimated based on Level 2 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity.

The fair value of the Group’s bonds was based on quoted market prices, which are Level 1 measurements.

30 Financial risks

The Group’s risk management is based on determining risks to which the Group is exposed in the course of ordinary operations. The Group is exposed to the following major risks: (а) credit risk, (b) market risk (including foreign currency risk, interest rate risk), and (с) liquidity risk. Management works proactively to control and manage all opportunities, threats and risks arising in connection with the Group’s operational objectives.

The interim condensed consolidated financial information do not include all the financial risk management information

and disclosures (other than the changes in the Group’s liquidity discussed in note 4) required in the annual financial

statements and should be read in conjunction with the consolidated financial statements for the year ended

31 December 2018. There have been no significant changes in the risk management policies since 2018 year end.

31 Contingencies, commitments and operating risks

There were no significant changes to the operating environment, in which the Group operates, legal and tax risks the Group is subject for, environmental matters, insurance policies, licences compared to those, disclosed in the annual consolidated financial statements for the year ended 31 December 2018.

Capital commitments

As at 30 June 2019 the amount of the Group’s capital commitments was RR 2,572 million (at 31 December 2018: RR 1,854 million).

Financial liability

In 2015-2019, LLC “TULACHERMET-STAL”, an entity under common control of the Group’s beneficial controlling owner, obtained bank loans under credit facilities with the outstanding balance as at 30 June 2019 in the amount of RR 27,039 million (at 31 December 2018: RR 25,790 million). The balance in the amount of RR 8,784 million roubles is payable by several instalments from October 2019 to June 2020, and the rest of loan balance is payable by instalments from October 2020 to April 2023.

PJSC KOKS



23

31 Contingencies, commitments and operating risks (continued)

PJSC “TULACHERMET” together with LLC “STAL” and Sipco B.V. (both companies are under common control of

the Group’s beneficial controlling owner) entered into a number of agreements in connection with LLC

“TULACHERMET-STAL” obligations under this loan facility agreement. As a result, under these agreements, these

entities have committed jointly and severally to finance LLC “TULACHERMET-STAL” project funding shortfall, if

any, in the amount of up to the outstanding debt under the loan facility.

As at 30 June 2019 the financial obligations under these agreements are recognised as other current financial liabilities

in the interim condensed consolidated statement of financial position with carrying amount of RR 88 million, measured

as expected credit loss allowance (at 31 December 2018: RR 88 million).

32 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the

weighted average number of ordinary shares in issue during the period, excluding treasury shares.

The Company has no dilutive potential ordinary shares; therefore, the diluted earnings per share equal to the basic

earnings per share.

Earnings per share are calculated as follows:

Six months ended

Note 30 June 2019 30 June 2018


Weighted average number of ordinary shares in issue (millions of shares) 14 329.91 329.91

Basic and diluted earnings per ordinary share (expressed in RR per share) 13.62 6.10

33 Subsequent events

In August 2019 the Group completed the sale of 33.3% stake in the authorized capital of LLC “TULACHERMET-

STAL”.

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