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Annual Report 2011
The English version of the annual report and the consolidated financial statements 2011 of HMS Bergbau AG is a one-to-one translation of the annual report and the audited consolidated financial statements 2011 of HMS Bergbau AG. The English version is not audited; in the event of variances, the German version shall take precedence over the English translation.
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Expected
publication date
Start of the financial year 1 January 2012
Annual Report 2011 6 June 2012
Annual General Meeting August 2012
Interim Report 2012 September 2012
End of the financial year 31 December 2012
31.12.2011 31.12.2010 31.12.2009
Balance sheet figures EUR thousand EUR thousand EUR thousand
Total assets 14,591 26,456 28,117
Non-current assets 6,041 6,389 393
Current assets 8,490 20,028 27,621
Shareholders' equity 4,185 7,608 7,137
Provisions 1,728 1,476 1,549
Liabilities 8,678 17,373 19,432
2011 2010 2009
Cash flow figures EUR thousand EUR thousand EUR thousand
Cash flow from operating activities 4,002 8,069 -2,881
Cash flow from investment activities 67 -6,551 -46
Cash flow from financing activities -2,392 -1,420 80
Cash and cash equivalents at the end of
the period 3,963 2,286 2,279
2011 2010 2009
Income statement figures EUR thousand EUR thousand EUR thousand
Sales revenues 106,669 151,720 73,709
EBIT * -324 2,221 437
Net profit -1,038 364 103
Group Performance Indicators
Financial Calendar
* EBIT before extraordinary expenses and earnings
Group Performance Indicators
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
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Index
Letter to the Shareholders
Management Talk
Report of the Supervisory Board
Investor Relations
Highlights
Group Management Report
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Income Statement
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Shareholders‘ Equity
Statement of Changes in Non-Current Assets
Notes to the Consolidated Financial Statement
Auditors‘ Report
Imprint
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8
12
16
20
24
48
48
50
51
52
54
56
68
70
Index
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Letter to the Shareholders
Dear Shareholders,
HMS Bergbau AG used 2011 to continue implementing its vertical integration. For this
reason, our activities were constantly guided by our goal of achieving coverage of HMS
Bergbau AG’s entire value added chain, from mining to logistics to customer deliveries.
A strong trading business with long-term, stable relationships with suppliers and
customers as well as strong value contributions are necessary to reach this strategic goal.
To expand our trading business, for instance, we concluded exclusive agreements with two
Indonesian coal producers in June 2011. These long-term contracts secure sole marketing
rights for HMS for a considerable production quantity of industrial coal in Asia, a market of
the future.
It is equally our expressed goal to increase the competitive advantages resulting from
vertical integration in order to generate sustainable company growth. By further
expanding our international business activities in Asia, the key growth market for coal, we
have come one step closer to this goal in the past year. For instance, in addition to coal
handling on behalf of third parties, we conducted our first trading transactions on our own
behalf via our harbour operations in South Kalimantan. This included acquiring,
processing, mixing and selling quantities from local producers. Our objective is to expand
these transactions in the future. Additionally, we have continued to develop our harbour
operations, thereby improving our control over the logistics chain in this area.
Currently, HMS Bergbau AG takes on coal from well-known, reliable producers and sales
companies, primarily in Indonesia, South Africa, Russia and Poland. In addition, we
exclusively represent a number of international coal producers and take care of the
complete marketing of the coal in selected markets. As a complete provider, we guarantee
not only the in time supply of raw materials, we also accept responsibility for the entire
transport logistics process. Our team charters ships, if needed; organises inland transport
by ship, train or truck; and assumes the handling in ports, warehouse management, coal
beneficiation and, last but not least, technical monitoring.
The sale of our investments in Poland’s HMS Bergbau Polska Sp. z.o.o. and Germany’s
KGHM HMS Bergbau AG was consistent with our strategy, in order to pool our know-how
and switch our focus to secure, high-margin business.
To make use of HMS Bergbau AG’s potential, we are dedicated to a performance-oriented,
yet highly ethical company culture. This is necessary to continue to be appealing to
qualified employees in the face of competition. Well-trained, flexible and active employees
are more important today than ever before. After all, the international coal trade is guided
by business relationships to customers and suppliers based on trust.
With this in mind, our goal is to achieve significant growth in the next two financial years,
Letter to the Shareholders
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
5
Heinz Schernikau, CEO
Heinz Schernikau established HMD Bergbau AG in 1995 in Berlin. He has been in the
international coal trade for more than 35 years and his positions include advisor to the Board
of leading coal producers in Asia and Europe. He has established extensive international
contacts and places particular importance on achieving long-term business relationships,
mutual trust and reliability.
Sebastian Giese, CFO
Sebastian Giese was appointed as CFO of HMS Bergbau AG in mid-July 2009. The former
auditor and tax consultant has long-standing experience in business consultancy and financial
audits. Prior to taking up his position on the Management Board, he worked for auditing firm
Ernst & Young, where some of his duties included advising and auditing the financial
statements of globally operating corporate groups.
Rüdiger Lorentz, COO
Rüdiger Lorentz became the COO of HMS Bergbau AG in 2010. He has worked for the
company since 2005. He started his career in the international raw materials trade over 23
years ago and has gathered outstanding knowledge of trade in the European, Asian and US
markets.
following the decrease in sales by 30% to EUR 107 million and an annual result of EUR
-1,038 million. We continue to see considerable growth potential in Asia and we also look
forward to profitable business prospects resulting from the exclusive marketing agreement
with ICHOR Coal N.V., HMS Bergbau’s 81% majority shareholder, especially in terms of
procurement in South Africa. Together with rising sales, we also expect a higher gross
margin from our business transactions, due to the further expansion of vertical
integration.
We would like to thank all our employees and business partners for the trust they have
shown in us this past year and look forward to a continued positive and successful working
relationship.
Heinz Schernikau Sebastian Giese Rüdiger Lorentz
CEO CFO COO
Letter to the Shareholders
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Management Talk
Management Talk with the Board of Directors of HMS Bergbau AG, Heinz
Schernikau (CEO), Sebastian Giese (CFO) and Rüdiger Lorentz (COO)
Why was HMS Bergbau AG not able to match the positive development of the
previous year in 2011?
While in 2010 we more than doubled almost all sales and earnings key figures compared
to 2009 and profited from significantly higher trading volumes at the same time as coal
prices rose, sales revenues for 2011 fell by almost 30% to EUR 107 million. This full year
decline was mainly volume-driven and was due to the fact, that some agreements in
Europe expired and could not be compensated by the growth in Asia. The decline was also
due to significantly lower coal prices in the second half of 2011 compared to the
expectation of the beginning of the year.
Another reason for the decline were delivery delays that plagued Indonesian sourcing. This
was due to unexpected changes the legal situation for producers and exporters as well as
delays in those mines for which HMS holds exclusive marketing rights. The time lost here
could not be made up during the course of the year.
But despite all of this, our harbour operations in Indonesia significantly increased its
earnings contribution in 2011 and experienced a constant increase in trading volumes.
However, there is still considerable potential yet to be exploited.
Overall, the higher-margin exclusive marketing business in Asia as well as the high-margin
European business provided relatively lower earnings, thereby leading to a rise in the
materials usage ratio. As a consequence, the annual result amounted to EUR -1.0 million.
In December 2011, the former major shareholders of HMS Bergbau AG
contributed their shares to the Dutch company ICHOR Coal N.V., making ICHOR
Coal N.V. the new major shareholder of HMS Bergbau AG. What is the strategy
behind this deal and to what extent can HMS Bergbau AG profit from this?
The contribution of all HMS shares held by the former major shareholders – ERAG Energie
& Rohstoff AG, LaVo Verwaltungsgesellschaft mbH, Michaela und Heinz Schernikau – to
the newly formed ICHOR Coal N.V. led to the signing of a marketing agreement between
the two companies. Together with a financially strong commodities investor, the major
shareholder of HMS Bergbau AG’s and its new parent company, ICHOR Coal N.V., plans to
acquire coal deposits and coal mines in South Africa, and possibly also in Asia.
This marketing agreement allow HMS Bergbau AG to significantly increase its access to
new coal deposits also; the exclusive marketing agreement now enables the Company to
sustainably reinforce its future sourcing in South Africa.
Management Talk
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
The reasoning behind the international repositioning of HMS Bergbau AG is not just the
market expansion in Asia and South Africa, but above all a faster than expected cutback in
the European coal market. These market changes resulted in substantial declines in HMS
Bergbau AG’s market volumes in Europe in financial year 2011. Based on the future close
cooperation of both coal companies, which is also reinforced by having the same
executives sitting on both management boards, HMS Bergbau AG is taking an important
step in terms of having direct access to international coal deposits. The first significant
coal marketing activities are expected in the fourth quarter of 2012.
HMS Bergbau AG has an excellent international position with subsidiaries and
representative offices in Singapore, Indonesia, Pakistan and India as well as
exclusive marketing agreements in South Africa. Does this mean a simultaneous
withdrawal from the European business?
HMS Bergbau AG realised very early that a forward-looking company set up means having
to expand international business activities. As a result, we will focus primarily on the coal
growth market in Asia in order to benefit from rising coal exports in the region.
Indonesia will become one of the most important mining markets in the coming years as it
has excellent resources, favourable mining conditions and a central location in the Pacific
region which is experiencing quickly growing industrial demand. For this reason, we see
significant growth potential – particularly by securing large coal resources and developing
our own coal handling facilities. As increased prices are anticipated in the global market,
due to the rising demand of global energy consumption, securing our own resources, and
consequently the expansion along the value added chain, therefore plays an essential part
in strengthening our market position in the long term.
Despite this, we are concentrating our efforts on renewing contracts as well as signing
new long-term agreements with European power plant operators. In light of the decision
to phase out nuclear power and the current difficulties in implementing the move to
alternative energy sources, we expect the European demand for fossil fuels to be high. In
our opinion, coal power production will continue to be an important factor as a flexible
energy source in Europe.
At the same time, we are increasing our focus on expansion along the value added chain,
especially by signing and implementing exclusive marketing and cooperation agreements.
Management Talk
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Report of the Supervisory Board of HMS Bergbau AG for
financial year 2011
Dear Shareholders,
In financial year 2011, the Supervisory Board of HMS Bergbau AG carried out its tasks as
stipulated by law and its Articles of Association and continuously monitored and advised
the Management Board in its work. We regularly obtained comprehensive information on
the current economic and financial position of the group, its business performance,
financial, investment and personnel planning as well as its strategic development at our
regular meetings and through additional verbal and written reports submitted to us by the
Management Board. This report pertains to the current earning situation, opportunities
and risks and risk management. The Supervisory Board discussed all fundamentally
important decisions in depth with the Management Board. We assessed in detail any
business transactions requiring our approval. The Supervisory Board voted on proposals
put forward by the Management Board if and when required by law or the Articles of
Association.
Focal points of the meetings
In financial year 2011, the Supervisory Board of HMS Bergbau AG held four meetings.
Subjects that were regularly discussed included the current business performance of the
company and its subsidiaries as well as its liquidity, net assets and financial position. All
resolutions required by law and the Articles of Association were passed. The Management
Board informed the Supervisory Board promptly about important matters between
meetings. If necessary, resolutions were passed by circular resolution.
The strategic focus of the group, company planning and the organisational structure,
which has to be adjusted accordingly, including all resulting personnel changes in the
Company and its subsidiaries, were again at the centre of the Supervisory Board’s
meetings in financial year 2011. In particular the advancing internationalisation and the
drop in sales in the European market played a major role. Our discussions also focused on
the signing of a marketing agreement with Ichor Coal N.V., which is now the majority
shareholder of the company. In this context, we also discussed the expected effects from
the changes made to the shareholder structure. The Management Board regularly
informed us about the general market performance, price and earnings forecasts as well
Report of the Supervisory Board
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
9
as intended measures. The Management Board also presented to and discussed with us
potential future projects. Important transactions approved by the Supervisory Board are
described in the company and group management report. In addition, the Supervisory
Board confirmed the existing pension commitment for the CEO.
Personnel changes
The members of the Supervisory Board did not change in financial year 2011. The actions
of Dr. Hans-Dieter Harig, Dr. h. c. Michael Bärlein and Michaela Schernikau in financial
year 2010 were approved by the statutory shareholders’ meeting on 18 August 2011.
Annual financial statements 2011
The annual financial statements and consolidated financial statements of HMS Bergbau AG
for financial year 2011 were prepared in accordance with the German Commercial Code
(Handelsgesetzbuch – HGB). The company’s auditor in 2011, Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft, Berlin, was appointed to audit the annual financial
statements of HMS Bergbau AG and the consolidated financial statements, the company
and group management report and the report of the Management Board on relationships
with associated companies (“dependent company report”) in financial year 2011.
The auditor audited the annual financial statements of HMS Bergbau AG as well as the
consolidated financial statements and the company and group management report,
including the accounting system, in accordance with the generally accepted German
standards for auditing financial statements promulgated by the Institute of Public Auditors
in Germany (Institut der Wirtschaftsprüfer – IDW) and issued an unqualified audit opinion.
The internal control system was also deemed to be effective.
All Supervisory Board members were provided with the annual and consolidated financial
statements, the company and group management report, the dependent company report
and the corresponding audit reports in good time. We examined the documents and
discussed them in detail at our meeting on 23 May 2012. Both the Management Board and
auditor were present at the meeting and provided detailed answers to all questions placed
by the Supervisory Board. The auditor also reported on the key points of the audit. Our
own examination of the annual and consolidated financial statements as well as the
company and group management report did not lead to any objections and we approved
the audit results. After its final inspection of all documents, the Supervisory Board did not
Report of the Supervisory Board
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
raise any objections and approved the annual financial statements of HMS Bergbau AG as
of 31 December 2011 and the consolidated financial statements as of 31 December 2011,
as prepared by the Management Board, at its meeting on 23 May 2012. The 2011 annual
financial statements have therefore been prepared and approved in accordance with
Section 172 of the German Stock Corporation Act (AktG).
On 23 May 2012, the Management Board proposed to carry HMS Bergbau AG’s net profit
of EUR 1,321,679.28 forward to new account. We also examined and approved this
proposal.
The dependent company report prepared by the Management Board indicates that HMS
Bergbau AG did not incur any disadvantage from the legal transactions with associated
companies stated therein and received appropriate compensation. This report was also
audited by the auditor, who issued the following audit opinion:
“After dutifully examining and assessing the dependent company report, we confirm that
1. the actual information provided therein is correct, and
2. that the services provided by the company were appropriate for the legal
transactions stated therein.”
Our own audit of the dependent company report also did not lead to any objections and
we therefore approved the auditor’s audit. After finalising our own audit, we therefore did
not raise any objections against the Management Board’s declarations at the end of the
dependent company report.
There were no conflicts of interest between the members of the Supervisory Board during
the reporting period.
The Supervisory Board would like to thank the Management Board and all employees for
their commitment in financial year 2011.
Berlin, May 2012
Dr. Hans-Dieter Harig
Chairman of the Supervisory Board
Report of the Supervisory Board
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
11
Members of the Supervisory Board during the reporting period
Dr. Hans-Dieter Harig, chairman
Dr. h. c. Michael Bärlein, deputy
Michaela Schernikau, member
Report of the Supervisory Board
12
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Investor Relations
General developments in the capital markets
2011 was in the grip of pending sovereign bankruptcies in Europe. And it was not just the
share markets that were heavily influenced by this nightmare scenario in the second half
of the year in particular. The DAX, the German share index, fell by some 25% in just three
months over the summer. On 18 August 2011 alone, the lead index dropped 5.82%, its
greatest daily loss since November 2008. Apart from the significant decline in response to
the natural disaster in Japan, the DAX initially climbed by 6.7% at the end of the first half
of 2011 from 6,914 points to 7,376 points. Then the DAX started to drop at the end of July
due to concerns regarding the state of major European banks and fears of a global
economic slump. Until the end of the year the German index of the 30 most important
listed companies fell by 14.7%, closing the year at 5,898 points. In 2012, the DAX had a
very encouraging start, standing above 6,800 points in mid-February 2012.
The Entry Standard Index also lost considerable ground in 2011. The selection index
opened the year at 581 points, but fell by more than 33% by 31 December 2011, closing
the year at 387 points. Then again the Entry Standard Index mirrored the Dax by
performing well at the beginning of the year, standing above 400 points in February 2012.
The Daxsubsector All Industrial Products & Services Performance Index followed a similar
trend to the DAX in 2011. The special value index lost some 16% over the course of the
year. In a very friendly stock market climate at the beginning of 2012, the Daxsubsector
All Industrial as well came close to its value at the start of 2011.
Performance of selected indices since 2011
Source: Deutsche Börse AG; Ariva.de; HMS Bergbau AG
Investor Relations
0%
20%
40%
60%
80%
100%
120%
140%
Jan11
Feb11
Mar11
Apr11
May11
Jun11
Jul11
Aug11
Sep11
Oct11
Nov11
Dec11
Jan12
Feb12
Mar12
HMS Bergbau AG (Xetra)
Entry Standard Index
DAX Deutscher Aktien Index
Daxsubsector All Industrial Products & Services Performance Index
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
13
0
2
4
6
8
10
12
14
16
Jan11
Feb11
Mar11
Apr11
May11
Jun11
Jul11
Aug11
Sep11
Oct11
Nov11
Dec11
Jan12
Feb12
Mar12
HMS Bergbau AG (Xetra)
HMS share performance
The global negative effects from pending sovereign bankruptcies and the associated euro
crisis also affected the performance of HMS shares. After opening 2011 at EUR 12.00, the
share droped to some EUR 7.00 by mid-April 2011, recovering only slightly by the end of
June 2011. Over the course of the remaining year, the HMS share plotted a sideways
course, mostly between EUR 9.00 and EUR 10.00. The share of the international coal
supplier closed on 31 December 2011 at EUR 9.49, down 20.9% on the opening figure.
HMS share performance
Source: Deutsche Börse AG; Ariva.de; HMS Bergbau AG
EUR
Investor Relations
14
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
81%
19%
ICHOR Coal N.V. Free float
Shareholder structure
The share capital of HMS Bergbau AG is comprised of 4 million shares with a nominal
value of EUR 1.00 each and as such amounts to EUR 4.0 million.
The shareholder structure of HMS Bergbau AG was reorganised in December 2011. HMS
Bergbau AG’s known major shareholders – ERAG Energie & Rohstoff AG, LaVo
Verwaltungsgesellschaft mbH, Michaela and Heinz Schernikau – contributed their HMS
shares to ICHOR Coal N.V. as part of an exclusive marketing agreement. The fundamental
motive behind this transaction is to increase HMS Bergbau AG’s access to coal deposits in
South Africa. With this transaction ICHOR Coal N.V. now owns a majority stake in HMS
Bergbau AG, currently holding 81% of the shares and being the new parent company. The
free float therefore now amounts to less than 19%.
The share buy-back programme resolved at the shareholders’ meeting on 12 October
2009 to allow additional leeway, independently from the capital market, provides for the
buyback of up to 10% of the share capital. As of 31 December 2012 HMS Bergbau AG held
248,307 own shares.
Shareholder structure on 31 December 2011
Investor relations activities
HMS Bergbau AG once again far exceeded the requirements of the Entry Standards in
2011. All capital market-relevant communications were published in both German and
English. The Management Board of HMS Bergbau AG has regularly held talks with
institutional investors and industry analysts on the business model and the Company’s
future prospects as well as other capital market-relevant issues.
Source: HMS Bergbau AG
Investor Relations
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
15
Basic data
ISIN / WKN DE0006061104 / 606110
Share symbol HMU
Bloomberg ticker code HMU GY
Reuters code HMUG.DE
Market segment / transparency level Open Market / Entry Standard
Designated sponsor / listing partner Close Brothers Seydler Bank AG
Investor relations GFEI Aktiengesellschaft
Share capital in EUR 4,000,000
Number of outstanding shares 4,000,000
Free float 19%
Performance data as of 31.12.2011 (in EUR)
Share price on 31.12.2010 (Xetra) 12.00
Share price on 31.12.2011 (Xetra) 9.49
Highest price 2011 (04.02.2011) 14.00
Lowest price 2011 (12.04.2011) 7.00
Market capitalisation on 31 December 2011 37,960,000
Total performance 2011 (%)
HMS Bergbau AG -22.5
DAX -14.7
Daxsubsector All Industrial Products & Services -16.0
Entry All Share Performance Index -33.4
Key capital market data as of 31 December 2011
Statutory shareholders’ meeting
The 2011 statutory shareholders’ meeting was held on 18 August 2011 at the business
premises of HMS Bergbau AG in Berlin. All points on the agenda were approved with a
100% consent by the shareholders. Besides the appropriation of net profits, the approval
of the actions of the members of the Management Board and Supervisory Board and the
proposed appointment of the auditors for financial year 2011 was voted on.
The 2012 statutory shareholders’ meeting will likely take place in July 2012.
Investor Relations
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Highlights
Highlights during the reporting period
June 2011
Focus of HMS Bergbau AG on the Asian market
HMS Bergbau AG has focused on the growth market in Asia since June in order to profit
from rising coal exports in the region. The subsidiaries in Singapore, Indonesia, Pakistan
and India promise an optimal profile. At the same time, the HMS Group sold its investment
in Poland, to focus in Europe on secure and high-margin transactions.
June 2011
Conclusion of two long-term marketing agreements
HMS Bergbau AG concluded two long-term marketing agreements with Indonesian coal
producers. The cooperation agreement with Singapore-based Bencoolen Coal Pte Ltd.
secures the entire output of the Sumatra located coal mine exclusively for HMS Bergbau
AG. The agreement with a coal mine operator in East Kalimantan also guarantees the sale
of the mined coal to the Asian market since August 2011.
July 2011
HMS Bergbau AG publishes its figures for 2010
Financial year 2010 was closed with significant year-on-year sales and earnings increases:
Group sales revenues rose by 106%, Group EBIT by an above-average 409% and
consolidated profit by 253%.
September 2011
HMS Bergbau AG publishes figures for the first half of 2011
In the first six months of financial year 2011, HMS-Bergbau AG pursued its vertical
integration strategy and expanded its international business activities in the Asian growth
market. Key strategic goals were achieved despite the 21.9% year-on-year drop in sales
revenues and the EUR 1,278 thousand fall in EBIT.
December 2011
ICHOR Coal N.V. announces majority stake
In December, HMS Bergbau AG signed an exclusive agreement with ICHOR Coal N.V. that
specifies the contribution of all HMS shares held by major shareholders of HMS Bergbau
AG into the newly formed ICHOR Coal N.V. For HMS Bergbau AG, this close cooperation
with ICHOR Coal N.V. represents another important step towards direct access to
international coal producers. Both companies plan their sustainable expansion in an
international coal market that is constantly growing despite the change in the energy
market.
Highlights
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
17
After the reporting period
April 2012
HMS Bergbau AG decides on capital increase for further growth
With the Supervisory Board’s approval, the Management Board of HMS Bergbau AG deci-
ded to increase the Company’s share capital excluding subscription rights. The Company’s
share capital was increased by EUR 370,000 to EUR 4,370,000. Majority shareholder
ICHOR Coal N.V. was the applicant for the new shares.
Highlights
18
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Group Management Report
1. Overview
HMS Bergbau AG trades in coal and energy raw materials worldwide and supplies steam
coal, coking coal and coking coal products to major European and international power
plants, cement manufacturers and industrial consumers. HMS Bergbau AG focuses on
building long-term, profitable business relationships with international producers and
consumers, and is planning to further expand its international activities, particularly with
regard to the Asian market.
The following table shows the HMS Group structure as of 31 December 2011:
Berlin, Deutschland
Katowice, Polen
Jakarta, Indonesien
Berlin, Deutschland
Berlin, Deutschland
Berlin, Deutschland
100%
100%
51%
100%
100%
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
19
Our strategy of paying particular attention to long-term developments on the global
commodity markets without losing sight of current trends continues to be based on the
following factors:
Price developments: Highly volatile price developments can result in fluctuating
margins at all stages of the value added chain. Vertical integration of mining,
handling and transport can provide long-term competitive advantages, particularly
when taking into account current and expected future continued price increases.
This can also effectively counteract market fluctuations.
Internationalisation of the markets: The commodities markets are continuing to
grow closer together as a result of international trade and improved logistics. At the
same time, market transparency is increasing thanks to trading platforms and index
-based trading activities. This also increases competition.
Need for investment: Investing in our own resources is essential if we are to push
ahead with vertical integration within the value added chain and ensure that future
supply covers the growing demand for energy. In this context, it makes particular
sense for HMS to enter into exclusive marketing agreements financed by
prepayments.
Our long-term strategy of vertical integration, i.e. covering the entire value added chain
from mining to logistics to customer deliveries, therefore rests on the following basic
principles:
Strong trade business: The foundation for our future growth and success as a
business is the further expansion of our trade, with solid, long-term customer and
supplier relationships and stable contributions to value.
Growth: We aim to generate adequate growth, which will arise from sustainable
increases in earnings, by means of vertical integration and the competitive
advantages arising from it. A key element in this growth will be our entering into
exclusive marketing agreements.
Company culture: Our business embodies a performance-focused, international
corporate culture across all Group companies; this helps to increase our
attractiveness as an employer and hence our success in competition for qualified
international employees to put our strategies successfully into practice.
Group Management Report
20
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
2. Business and economic environment
Once again, developments in the industrialised and emerging nations varied this year.
While developing and emerging countries, as defined by the International Monetary Fund
(IMF), showed 6% growth in 2011, the industrialised nations grew by just 1.5%. The IMF’s
provisional forecast for global growth in 2011 comes to 4%.
In Germany, the economy once again showed strong growth in 2011, continuing economic
recovery in the second year after the financial and economic crisis. Provisional figures
issued by the German Federal Statistical Office put GDP, adjusted for prices, at 3.0%
above that seen in the previous year, with the economic upturn being at its strongest in
the first half of the year.
One of the factors driving growth was personal consumer spending, which increased by
1.5%, a rate last seen five years ago. Investments in equipment (up 8.3%) and buildings
(up 5.4%) demonstrated particularly notable increases. The German export industry again
delivered a high rate of growth, expanding by 8.2% in 2011, while imports of goods and
services climbed by 7.2%.
There was also good news in terms of productivity in 2011, with economic recovery taking
GDP per capita (economically active population), adjusted for price, up 1.6% year-on-
year.
The positive economic developments and the consequent increase in tax revenue saw the
public-sector budget deficit standing at EUR 26.7 billion, according to provisional
calculations. This results in a deficit ratio of 1.0% when measured against GDP − well
below the benchmark value of 3% defined in the Maastricht treaty, in contrast to 2009
and 2010, which saw the benchmark value exceeded.
Driving the global economy
The major factor driving global economic growth, worldwide energy consumption and the
related increase in CO2 emissions remains the rising global population, particularly in
developing countries. According to figures based on a range of public sources, the global
population continues to grow by an average of 1% to 1.2% annually, despite the economic
crisis that has affected the world; if this trend proceeds at the same rate, 8.2 billion
people will be living on the Earth by 2030.
However, energy consumption is increasing at a faster rate than population, as specific
consumption per person is rising along with the number of people. This trend is
attributable not only to the continuous rise in the urban population and the concomitant
increase in specific energy consumption, but also, and above all, to catch-up effects in
hitherto underdeveloped countries.
The International Energy Agency (IEA) estimates that more than 20% of the global
population does not have access to electricity. Approximately 40% of the world’s people
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
21
14,905
14,269 14,401 14,537
14,128
14,216
13,428
14,083
13,411
12,500
13,000
13,500
14,000
14,500
15,000
15,500
1990 1995 2000 2005 2010
still cook using traditional biomass (wood) and heat their homes with coal briquettes.
Emerging and developing countries have a correspondingly large amount of ground to
make up in terms of approaching the standards of living enjoyed in the industrialised
nations.
This is also why emerging and developing nations are currently unwilling to fall into line
with the demands of European industrialised countries on energy saving and cuts in
emissions; from their perspective, the priorities are to meet their populations’ basic needs
for food and water, provide them with access to electricity, and in this way increase their
standard of living.
Primary energy consumption in Germany
Despite an increasing demand for energy across the globe, energy consumption in
Germany fell by almost 5% in 2011, hitting the lowest level seen since the beginning of
the 1970s. Preliminary figures issued by the Working Group on Energy Balances
(Arbeitsgemeinschaft Energiebilanzen e. V.) indicate that energy consumption sank to
13,411 petajoules (PJ), or, expressed differently, 457.6 million tonnes HCU. Mild weather
was given as one reason for the decline. Adjusted for the effects of temperature, energy
consumption fell by just 1.0% in 2011. High energy prices and action to improve energy
efficiency prompted by these price levels are likely to be substantial factors affecting the
decrease.
Development of primary energy consumption in Germany
Source: Arbeitsgemeinschaft Energiebilanzen e.V.; HMS Bergbau AG
Group Management Report
22
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
33.8%
20.6%
12.6%
11.7%
8.8%
10.8% 1.7%
Mineral oil Natural gas Hard coal
Lignite Nuclear energy Renewable energies
Other
Last year’s consumption of mineral oil amounted to 4,549 PJ (155.2 million tons HCU), a
year-on-year reduction of 3% which took consumption to the lowest level seen since
1990. Consumption of natural gas declined more steeply still, with 2,780 PJ (94.2 million
tonnes HCU) of natural gas used in 2011, around 10% less than during the previous year.
Hard coal consumption saw only a slight decline in 2011, by 0.7%, with a total of 1,685 PJ
(57.5 million tonnes HCU) consumed. The use of hard coal in power plants, which
accounted for over two-thirds of total consumption, fell by approximately 2% in 2011. By
contrast, the steel industry’s demand for hard coal rose by around 4%. Consumption of
lignite increased likewise by almost 4%, to 1,568 PJ (53.5 million tonnes HCU). This
growth reflects the positive development in deliveries to power plants, which account for
around 90% of domestic lignite production. Nuclear energy’s share of Germany’s energy
balance fell by almost 23% in the wake of the countryʼs decision to exit nuclear power. By
contrast, renewable energies expanded by 4.1% and saw their share of the countryʼs
energy rise to almost 11%, which translated to 1,449 PJ (49.4 million tonnes HCU). On
balance, Germanyʼs trading of power with its European neighbours produced a slight
export surplus amounting to 5 billion kWh. Nevertheless, this development belies a
marked increase in electricity imports and decline in power exports; the export surplus in
2010 was 17 billion kWh.
Germany’s energy mix in 2011
Source: Arbeitsgemeinschaft Energiebilanzen e.V.; HMS Bergbau AG
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
23
80%
90%
100%
110%
120%
130%
140%
Jan11
Feb11
Mar11
Apr11
May11
Jun11
Jul11
Aug11
Sep11
Oct11
Nov11
Dec11
Jan12
WTI crude oil NYMEX Brent crude oil ICE
The decisions taken by policymakers in 2010 and 2011 on subsidies for renewables and
the nuclear switch-off have given rise to small changes in proportions in 2011ʼs primary
energy balance; for instance, hard coalʼs share in the energy mix rose from 12% to
12.6%, and lignite now makes up 11.7% of energy sources used in Germany, after 10.7%
in the previous year.
The decline in energy consumption has seen energy-related CO2 emissions fall by over
3%. Adjusted for the effects of temperatures, this means an increase in emissions of
around one per cent.
Developments in crude oil prices
Prices for the various types of crude oil showed varying trends in 2011. In the past, WTI
prices were traditionally slightly higher than those for Brent crude. This changed in 2011,
with WTI crude trading at USD 89.35 a barrel at the beginning of the year and USD 98.90
at its end, an increase of approximately 10.7%. Whereas Brent crude fetched USD 92.6 a
barrel at the start of the year, it had seen a rise of about 16.1% by the yearʼs conclusion,
with the price per barrel standing at USD 107.5. At times, the spread between the two
types of oil was as high as almost USD 30; the gap only began narrowing slightly again at
the end of October 2011.
Development of WTI and Brent crude prices
Source: Ariva.de; HMS Bergbau AG
Group Management Report
24
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
120 years’ worth of coal reserves
When it comes to how much longer coal reserves will last, it is important to differentiate
between resources and reserves. ‘Resources’ is the term used to refer to the total amount
of a mineral substance, i.e. in this case coal, in a deposit. 'Reserves’ are the part of these
resources which are demonstrably present and which it is currently technologically
possible and cost-effective to mine. In other words, if prices rise, parts of a deposit
previously considered resources might be counted as reserves, because the higher prices
mean higher mining and extraction costs can be absorbed. Conversely, a decline in prices
might render deposits no longer cost-effective to mine.
According to Germany’s Federal Institute for Geosciences and Natural Resources (BGR),
current knowledge of reserves that can be mined cost-effectively puts estimated global
hard coal reserves at 723 billion tonnes.
The BGR estimates that hard coal resources stand at 17,167 billion tonnes; the resource/
reserve ratio is approximately 23.7:1, and has improved notably since the BGR’s last
estimate (21:1). This is attributable to a substantial increase in the volume of resources.
These figures notwithstanding, estimates of global coal resources are nowhere near as
accurate as those in the case of oil and natural gas. The statistical reach of coal resources
is currently put at about 120 years (based on approximately 6.1 billion tonnes mined in
2009). At current rates of production, oil reserves will last 40 to 45 years and gas reserves
60 to 65 years.
Coal prices at moderate levels
Coal prices, which had been continuously on the rise since 2009, declined in 2011,
according to the two key coal price indexes. The API2 index recorded a fall in coal prices
from USD 131.81 per tonne at the beginning of the year to USD 112.40 per tonne at its
end, which translates to a decline of almost 15%. The downward trend was more apparent
still in the API 4 index, which opened the year 2011 at USD 129.16 per tonne and closed
about 18% lower, at USD 105.66 per tonne. Hereafter, API 4 saw a slight increase, while
API 2 continued to move south.
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
25
Trade
HMS Bergbau AG’s international trading in coal is characterised by relationships of trust
with customers and suppliers. HMS Bergbau AG’s principal customers include power plant
operators and cement manufacturers. We also supply coal to steel manufacturers and
industrial companies such as glassworks and paper factories.
HMS Bergbau AG serves both the private and public sectors.
We purchase coal from reliable major-name production and sales companies, largely
based in Indonesia, South Africa, Russia, Poland, and North and South America. In
addition to this, we represent some international coal production companies exclusively,
i.e. we handle all their coal marketing in particular markets.
Through the harbour operations in South Kalimantan, Indonesia, acquired in 2010 HMS
Bergbau AG commenced trading as well as handling coal for third parties. We purchased
volumes of coal from small local producers, processed, mixed and sold it. We plan to
continue developing this sector of our trading operations in the future and to expand it.
0,00
20,00
40,00
60,00
80,00
100,00
120,00
140,00
160,00
Jan. 11 Feb. 11 Mrz. 11 Apr. 11 Mai. 11 Jun. 11 Jul. 11 Aug. 11 Sep. 11 Okt. 11
USD/t
API-2 und API-4 weekly Jahr 2011
API2 API4 Source: Argusmedia.com; HMS Bergbau AG
API-2 und API-4 weekly year 2011
Group Management Report
160
140
120
100
80
60
40
20
Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11
26
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Raw materials production
We intend to secure a reliable supply for consumers in the long term by accessing our own
raw materials resources. Pushing ahead with this strategy in 2011, we continued to realise
and secure access to coal deposits through exclusive marketing largely by means of
exclusive marketing rights for smaller producers which do not have their own international
sales organisations.
We entered into two long-term exclusive marketing contracts with coal producers in
Indonesia in June 2011; these agreements secure us sole marketing rights to a significant
production volume of steam coal in the highly promising Asian market.
Logistics
As a one-stop provider, we not only ensure our customers are supplied with the raw
materials they need on time, but also take care of the complete transport and logistics
process. Our team charters shipping where required, organises intra-country transport by
water, rail or road, takes care of harbour procedures, warehousing management, coal
processing and technical monitoring. We continued in the past year to develop the harbour
operations in South Kalimantan, Indonesia, that we acquired in 2010; the acquisition has
constituted a considerable improvement to our control over the logistics chain in this field.
Research and development
The global environmental drive for reducing greenhouse gases continues to pose a long-
term challenge to the energy industry. We remain convinced that introducing a market-
ready form of CCS technology and adapting power plants accordingly could enable German
coal-fired power plants to cut CO2 emissions by approximately 80% by the year 2050 – a
course of action to which there will be no alternative in the long run. However, the
German federal government has once again failed to create the legal framework that
would allow this to happen. We do not believe the current legal environment offers us a
way of cost-effectively continuing the project embarked upon at HMS Bergbau AG Oil &
Gas Division for CO2 storage and investigation into a corresponding aquifer structure; we
do not anticipate this situation changing in the medium term.
Employees
HMS Group continues to participate intensively in international competition for qualified
employees. We therefore aim for long-term employment relationships between staff and
HMS Group. Company management continues to focus on ongoing employee
development
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
27
development – together with highly specialised and continuing training – to reach the
Company’s strategic goals. In keeping with this strategy, we have hired additional
employees, particularly in the Asian market, and are planning further hiring. Risks
resulting from employee fluctuation are accounted for with succession and substitute
planning. We conducted training for employees, particularly those new to the Company.
Group Management Report
28
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
3. Results of Group operations
Results of operations of HMS Group in financial year 2011 compared to the
previous year were as follows:
The decline in sales revenues is largely quantity-related; in this context, we have not seen
a continuation of the positive development registered in the previous year. Firstly, we
recorded decreases in volumes due to the expiry of some European contracts. A further
factor was the fact that, despite the unexpectedly steep rise in Indonesian trade
agreements, sourcing in Indonesia was subject to delivery delays arising from
unanticipated changes in the legal framework for producers and exporters and delays in
the mines for which HMS possesses exclusive marketing rights. Overall, the increase
recorded in Asia was unable to balance out the decline in our European business. This
development is also reflected in the materials usage ratio. The higher-margin exclusive
marketing business in Asia and high-margin European business contributed less, relatively
speaking, to our result. Furthermore, our cooperation with German Pellets has failed to
show a positive impact on our earnings position. Our harbour operations in Indonesia
generated a significantly greater share of earnings in 2011 than in the previous year,
showing continuous increases in volume; however, the performance continues to fall short
of expectations as of the time of acquisition. Personnel costs remained steady year-on-
EUR thousand % EUR thousand % EUR thousand %
Sales = Total performance 106,669 100 151,720 100 -45,051 -30
Cost of Materials 103,329 97 145,987 96 -42,657 -29
Personnel Costs 1,473 1 1,472 1 1 0
Depreciation 457 0 338 0 119 35
Other operating costs
/ other operating earnings 1,766 2 1,803 1 -37 -2
Taxes (excluding income taxes) 10 0 2 0 8 >100,0
Operating costs 107,035 100 149,601 99 -42,566 -29
Operating result -366 0 2,119 1 -2,484 <-100,0
Earnings from investments and financial result -450 -756 306 41
Earnings before income taxes -815 1,363 -2,178 <-100,0
Income taxes 0 776 -776 -100
Extraordinary expenses 223 223 0 0
Minority interests 4 7 -3 -43
Net profit -1,034 371 -1,405 <-100,0
2011 2010 Change
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
29
year, with new hires, particularly in the Asia Trade, offset by staff reductions in the
European Trade. Other operating costs, less other operating earnings, is primarily
attributable to HMS Bergbau AG, as the principal determinant of the results of Group
operations. Other expenditure less other earnings arises particularly from repair and
maintenance expenses for the harbour operations, one-off expenses relating to our
ongoing exploration of the Asian market, and selling costs, which are higher in our Asian
than in our European business. The decline in our financial result largely reflects the
reduced use, in line with the fall in sales, of our credit facilities. Further, the financial
result includes the net balance, amounting to EUR 219 thousand, of interest expenses on
pension obligations and income from the pledged plan assets. The previous year’s income
from investments arises primarily from the write-up of the investment in KGHM HMS
Bergbau AG, Berlin.
Group Management Report
30
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
4. Group net assets
Net assets of HMS Group compared to the previous year were as follows:
The decline in non-current assets is primarily due to normal depreciation and amortisation
on the Indonesian harbour operations. The inventories result entirely from prepayments
made on coal deliveries. HMS Group held no coal stocks of its own as of the balance sheet
date. Receivables relate to trade receivables from power plant operators in Germany and
customers in Asia. The year-on-year decline is substantially an effect of the balance sheet
date. Other assets are comprised principally of a receivable in the amount of EUR 516
thousand from securing the rights to key real estate for the NIWKA project. A share buy-
back programme saw the Company acquiring own shares. The principal concern here was
to provide acquisition capital for mining projects in Indonesia; acquisition via shares or in
a mixed form is intended to increase the seller’s commitment to the project and its
interest in the projectʼs long-term success to a level higher than that which would be seen
in a cash acquisition. The concrete projects whose potential acquisition would have been
financed by this have either not come to fruition after careful consideration or become
subject to delays. Non-current liabilities include pension obligations. The EUR 1,500
thousand promissory note loan included in the previous year matures at the end of 2012,
as such it is recorded in current liabilities. The Company also has current liabilities to
suppliers and banks for financing trade.
EUR thousand % EUR thousand % EUR thousand %
Assets
Fixed assets 6,041 41 6,389 24 -348 -5
Inventories 1,792 12 1,814 7 -22 -1
Receivables 2,052 14 15,153 57 -13,101 -87
Cash and cash equivalents 3,963 27 2,286 9 1,677 73
Other assets 743 5 814 3 -71 -9
14,591 100 26,456 100 -11,865 -45
Capital
Equity 6,577 45 7,608 29 -1,031 -14
Own shares -2,392 -16 0 0 -2,392
Non-current liabilities 1,079 7 1,991 8 -912 -46
Current liabilities 9,327 64 16,857 64 -7,530 -45
14,591 100 26,456 100 -11,865 -45
31.12.2011 31.12.2010 Change
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
31
2011
EUR
1. 4,001
2. 67
3. -2,392
4.
1,677
0
2,286
3,963
5.
3,963
Cash flow from current operating activities
Cash flow from investment activities
Cash and cash equivalents at the end of the period
Composition of cash and cash equivalents
Cash and cash equivalents
Cash flow from financing activities
Cash and cash equivalents at the end of the period
Changes in cash and cash equivalents affecting payment
Other changes in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
5. Group financial position
Cash and cash equivalents developed as follows in financial year 2011:
The positive cash flow from current operating activities is primarily a reflection of
developments in our working capital, while the positive cash flow from investment
activities arises from the sale of our investment in KGHM HMS Bergbau AG. The negative
cash flow from financing activities is the result of payouts for the buy-back of own shares.
In the context of the information given above, the financial year 2011 resulted in a loss of
EUR 1,034 thousand, which represents a year-on-year decline of EUR 1,405 thousand.
Further, the balance sheet total fell by EUR 11,865 thousand, due largely to a decrease in
receivables and liabilities from our trade business.
Group Management Report
32
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
6. Information on the consolidated financial statements
of HMS Bergbau AG
HMS Bergbau AG is the parent company of HMS Group. HMS Bergbau AG remains respon-
sible for the central control functions – strategy, finance, accounting/controlling – and all
important trading activities. The majority of trade agreements are conducted via this com-
pany; in other words, the activities of HMS Bergbau AG are a key factor for the situation of
the entire HMS Group. The annual financial statements of HMS Bergbau AG are prepared
in accordance with German Commercial Law (HGB) and the German Stock Corporation Act
(AktG). The following table provides an overview:
Net assets
As HMS Bergbau AG engages in trading activities, its net assets are mainly influenced by
receivables from customers as well as current trade payables and liabilities to banks.
Changes are largely due to balance sheet date effects. Further, net assets are influenced
by the pursuit of central control functions and strategic objectives, particularly by the issu-
ance of a loan in the amount of EUR 7,172 thousand to the Indonesian HMS company in
2010 to finance the acquisition of harbour operations. Inventories, amounting to EUR
1,078 thousand, are the result of prepayments made on future deliveries which in turn are
financed by prepayments of customers. Non-current liabilities relate to pension provisions.
Please refer to our discussion of Group net assets for information on our own shares.
TEUR % TEUR % TEUR %
Assets
Fixed assets 7,774 64 7,314 27 460 6
Inventories 1,078 9 1,811 7 -733 -41
Receivables 1,891 15 15,957 59 -14,066 -88
Cash and cash equivalents 797 7 2,050 8 -1,253 -61
Other assets 709 6 31 0 678 >100,0
12,249 100 27,163 100 -14,914 -55
Capital
Equity 8,127 66 8,431 31 -304 -4
Own shares -2,392 -20 0 0 -2,392
Non-current liabilities 1,079 9 1,991 7 -912 -46
Current liabilities 5,435 44 16,741 62 -11,306 -68
12,249 100 27,163 100 -14,914 -55
31.12.2011 31.12.2010 Change
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
33
Results of operations
Ordinary trading activities are a major influence on results of operations of HMS Bergbau
AG. The decline in sales revenues is largely quantity-related. Developments across the
Group are also reflected in HMS Bergbau AG's materials usage ratio, which has increased
on account of the relative decline in earnings generated by the higher-margin exclusive
marketing business in Asia and high-margin business in Europe. Personnel costs declined
slightly year-on-year, with staff reductions in Trade Europe offset by new hires, particu-
larly in the Asia Trade division; these new hires were employed directly by HMS Bergbau
Indonesia. The small rise in other expenditure less other earnings was due particularly to
an increase in one-off expenses related to our ongoing entry into the Asian market and a
rise in contract-related selling costs, which are higher in our Asian than in our European
business. The increase of the financial result is particularly a reflection of earnings from
intragroup loans and the reduced use, in line with the fall in sales, of trade finance credit
lines.
EUR thousand % EUR thousand % EUR thousand %
Sales = Total performance 101,354 100 147,329 100 -45,975 -31
Costs of Materials 98,775 98 142,042 96 -43,267 -31
Personnel Costs 1,238 1 1,312 1 -74 -6
Depreciation 27 0 31 0 -4 -13
Other operating costs
/ other operating earnings 1,582 2 1,609 1 -27 -2
Taxes (excluding income taxes) 2 0 2 0 0 18
Operating costs 101,625 100 144,996 98 -43,371 -30
Operating result -271 0 2,333 2 -2,604 <-100,0
Earnings from investments and financial result 190 -107 297 >100,0
Earnings before income taxes -81 2,226 -2,307 <-100,0
Income taxes 0 776 -776 -100
Extraordinary expenses 223 223 0 0
Net profit -304 1,227 -1,531 <-100,0
2011 2010 Change
Group Management Report
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Financial position
The financial position of HMS Bergbau AG also reflects the Company’s functions. Trade
financing as part of current operations amounted to EUR 2,224 thousand as of 31 Decem-
ber 2011. EUR 1,500 thousand of long-term base financing within the debt capital was
repaid in financial year 2010, leaving short-term financing in the amount of EUR 1,500
thousand which matures in November 2012. The Company has issued a long-term loan to
its Indonesian subsidiary to finance the acquisition of harbour operations in Indonesia. The
financial position of the HMS Group is significantly influenced by HMS Bergbau AG; please
refer to the details we have provided in this context.
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
35
7. Events after the balance sheet date
Making use of authorised capital pursuant to Section 4 (4) of the Articles of Association,
HMS Bergbau AG has increased the Company’s share capital of EUR 4,000,000.00 by EUR
370,000 to up to EUR 4,370,000 against cash deposits by issuing 370,000 new common
bearer shares. The new shares carry full entitlement to dividends for financial year 2012.
The gross proceeds of the issue, which amount to EUR 3.0 million, are to strengthen HMS
Bergbau AGʼs equity base and help finance further growth.
Group Management Report
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
8. Risks and opportunities
The Management Board of HMS Bergbau AG is responsible for Group risk management,
which is integrated into all operational processes at HMS Group. Future opportunities and
risks are identified, classified, evaluated, controlled and monitored as part of business
operations. It is and remains our policy to only enter into risks if they also bring with them
significant opportunities for generating earnings. If possible, risks should be minimised or
transferred to third parties. Opportunities are assessed for their earnings potential.
The following sections describe opportunities and risks that could have significant impact
on the Company’s net assets, financial position and results of operations:
Price fluctuations
In the HMS Group’s traditional business, trade in coal using back-to-back contracts and
index- or fixed-price-based purchasing and sales agreements, there are no effects on
contractually agreed margins for the individual transactions. Where the back-to-back
principle is deviated from, as is the case in relation to small numbers of spot trades
handled via our harbour operations or for individual business transactions in Asia which
might specify different base values on the purchase and sale side for heating value
calculation, price risks may arise. We evaluate such risks on a daily basis as part of our
risk management system, taking into account current forward prices and expected
volatility. In the context of the expansion of our trading activities in Asia, we continue to
hold to the principle of avoiding significant risk positions in purchasing and sales and
excluding these risks at contract stage. We will not alter our policy of aiming to realise
solely back-to-back transactions.
Financial risks
Exchange rate and interest rate fluctuations can have a significant impact on HMS Group’s
earnings. Our financial risk management therefore aims primarily to hedge currency risks
via currency forwards without entering into speculative transactions. Furthermore, we
attempt to eliminate currency differences in financing, purchasing and sales. All Group
companies are obliged to assess all exchange rate risks and hedge against those
identified. Changes to interest rates, in other words risks from interest-bearing liabilities,
as well as a risk premium and currency-specific differences are accounted for as financing
costs and included in the assessment of each transaction. If deemed appropriate in the
long term in a risk management context, and after evaluation of all possible scenarios, we
exchange variable interest rates for fixed interest rates. HMS continues to be liable for
bank liabilities to a third party; these amounted to EUR 3.1 million on the balance sheet
date. The risk that this liability will be called in is considered slight; further, the right of
recourse to the principal debtor remains in force.
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
37
Creditworthiness of business partners and counterparty risk
Credit risks arise from our business relationships with customers, and increase on account
of the ongoing growth in the proportion of our business partners located in Asia. In this
context, our risk management aims to obtain corresponding collaterals for vulnerable
transactions or to insure our receivables where financially practicable. Further, we secure
payment promises in advance of deliveries by using letters of credit. Failure or partial
failure to deliver on the part of suppliers may also give rise to risks which cannot be
transferred completely to the purchaser. Our risk management policies in respect to these
risks involve deploying staff on the ground, examining individual contract terms in detail
and paying specific attention to the content of contracts.
Political risks
The expansion of our business to the Asian market exposes us to a higher level of legal
and political risk from, for example, attempts to exert political influence, disruptions to the
supply chain, civil disturbances or deleterious strategies as part of economic policies. We
include risks from environmental and other geographical influences in this category.
Furthermore, uncertainties arise from the existing legal framework, which is and will
remain subject to ongoing change. In the Asian market in particular, the excellent
opportunities available to us go hand in hand with an increased level of risk. Our risk
management responds to individual risks by attempting to draw up corresponding
contractual arrangements or eliminate the risks by consulting with experienced local
partners. Unfortunately, it is never possible to completely eliminate such risks. In
Indonesia, for instance, the beginning of 2011 saw changes to mining regulations and
related laws on coal exports for which some suppliers were unprepared, leading to delays
in mining and delivery, some of which were significant.
Investment risks
The HMS Group’s investment in an Indonesian harbour operation continues to give rise to
risks relating to the investment’s cost-effectiveness and profitability, which are
substantially dependent on the investment strategy's implementation. Our risk
management attempts to identify potential negative impacts on our business at an early
stage by means of continuous monitoring of the marketing strategy and of the status of its
implementation in order to respond to such risks accordingly by adjustments to the
strategy.
Group Management Report
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Risks and opportunities resulting from Company strategy
Decisions on investments and acquisitions are made by employing an assessment and
approval process, as they carry considerable opportunities and risks. Experts are also
consulted in certain cases. The Management Board of HMS Bergbau AG makes the final
decision and, if necessary, obtains the approval of the Supervisory Board. We take
particular care to exhaustively investigate and weigh up risks and opportunities when
entering into long-term agreements. The main factors to examine are the size of the
reserve, logistics infrastructure, the financial situation, legal requirements, management
and the political landscape. Our risk management system implements measures such as
obtaining expert advice and reports. In the Trade division, we are able to identify
opportunities and risks at the earliest possible stage by intensively monitoring and
analysing markets and competitors. Overall, the risk management system places HMS
Group in a position to mitigate the above risks and utilise any resulting opportunities.
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
39
9. Forecast report
Compared to other energy sources, coal continues to have the largest reserves and
resources in the world. Figures compiled by the German Federal Institute for Geosciences
and Natural Resources (BGR) indicate that reserves are sufficient to last a further 120 to
200 years, depending on the type of coal and global economic developments. It is an
established fact that the remaining coal reserves are sufficient to cover expected demand
for many decades to come. Scientific and market analyses show that the percentage of
coal in global energy production will continue to rise at an above-average rate going
forward. According to the IEA (International Energy Agency), hard coal is set to remain
the most commonly used commodity for the production of electricity. The chart below
illustrates how the growth of industry in China and India is compensating the global
decline in coal-generated electricity. The largest driver of this development is the growing
world population, which is set to reach 8.2 billion by 2030 leading to, as rising energy
consumption. The share of coal in global power production will go up from 40% today to
45% in 2030. Over the next 50 years, a primary energy matrix without coal is
unimaginable.
Quelle: International Energy Agency „World Energy Outlook 2010“
1990 2000 2010 2020 2030 2035
12.000
10.000
8.000
6.000
4.000
2.000
0
TWh
OECD Other non-OECD China Indien
primary energy matrix
Quelle: International Energy Agency „World Energy Outlook 2010“
1990 2000 2010 2020 2030 2035
12.000
10.000
8.000
6.000
4.000
2.000
0
TWh
OECD Other non-OECD China Indien
Group Management Report
India
40
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
The steady rise in global energy consumption seen in recent years, with coal being the
fastest growing primary energy source, will continue in the years ahead. Coal prices are
likely to proceed on an upward trend, driven by the exponential growth in industrial
demand from the Asia Pacific region and current developments in public opinion on nuclear
power. We expect the Pacific region to continue growing in importance as the largest sales
market. HMS Group is therefore increasingly focusing its strategic orientation on Asia. In
our opinion, Indonesia will become one of the most important mining markets in the
coming years as it has excellent resources, favourable mining conditions and a central
location in the Pacific region. We can see significant growth potential – particularly for
securing large coal resources and developing our own transshipment centres. By securing
our own resources, we are aiming to guarantee supply in the long term for our end
customers in the Asian market. We anticipate rising prices in the global market. Securing
our own resources, and consequently the expansion of the value added chain to include all
steps from production to end customer sales, therefore both play an essential part in
strengthening our market position in the long term. The steep price increases we
anticipate taking place in the years to come find their expression in the future prices for
the API2 index (CIF ARA) at the European Energy Exchange’s Leipzig trading centre for
energy and energy-related products. One year ago, the price a tonne of coal was expected
to fetch in 2012 was between USD 95 and USD 102; it has now reached USD 104 to USD
112. We do not anticipate demand for fossil fuels to decline in Europe, particularly given
the German government’s decision to switch off the country’s nuclear power plants and
current difficulties in the realisation of the aimed-for shift to renewables. Coal-generated
electricity is a flexible form of energy supply and will retain its significance, in Europe and
elsewhere. We continue to focus our efforts on renewing expired agreements and entering
into new long-term contracts with European power plant operators. In financial years 2012
and 2013 in particular, our principal task remains to regain market share in Europe while
pushing ahead with the expansion of our business in Asia. At the same time, we need to
stick to our strategy of expanding the value added chain, particularly by means of entering
into and realising exclusive marketing and cooperation agreements.
The beginning of financial year 2012 has progressed with very little change from
developments in the last quarter of the previous year. As expected, incoming orders in the
European market were low; however, we were able to access opportunities with regard to
marketing American coking coal and expect deliveries to commence from the third quarter
of this year. Price volatility in Asia means customer markets are behaving with a high
degree of caution. We expect this trend to reverse in the second quarter on account of
demand. We continue to see considerable growth potential in Asia. In this context, we
anticipate that the next two financial years will represent a considerable improvement in
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
41
performance compared to 2011. We expect increases in sales revenues and also expect
our pursuit of vertical integration to provide us with increased gross margins. The
anticipated positive trend should also have a positive effect on Group EBITDA.
Group Management Report
42
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
10. Main features of the remuneration system
The Supervisory Board decides upon the remuneration system for the Management Board
of HMS Bergbau AG, including all material contractual elements, and reviews it regularly.
It also determines remuneration for individual Management Board members. Management
Board remuneration comprises fixed elements along with variable, performance-related
components. Fixed remuneration is paid as a monthly salary, regardless of performance.
Management Board members also receive additional non-cash benefits, which mainly
consist of the private use of a company car and are taxable. Performance-related
remuneration is dependent on the Company’s annual result and the personal performance
of the Management Board member in question. The remuneration of the Chief Executive
Officer also includes pension commitments.
11. Closing statement in accordance with Section 312 (3)
of the German Stock Corporation Act (AktG)
According to the knowledge available to HMS Bergbau AG at the time of carrying out a
legal transaction with an associated company, it received appropriate compensation for
each legal transaction and neither implemented measures nor refrained from
implementing measures neither on behalf of nor in the interest of the controlling company
or an associated company during the reporting period.
Group Management Report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
43
12. Forward-looking statements
The management report includes forward-looking statements that reflect the current
opinion of HMS Group’s management with regard to future events. Any statement
contained in this report reflecting or building upon intentions, assumptions, expectations,
forecasts and underlying assumptions is a forward-looking statement. These statements
are based upon plans, estimates and forecasts that are currently available to HMS Group’s
management. They therefore only refer to the point in time at which they were made.
Forward-looking statements are naturally subject to risks and uncertainties, which could
result in actual developments differing significantly from these forward-looking
statements or events implied or expressed therein. HMS Group does not assume any
responsibility for such statements and does not intend to update such statements in view
of new information or future events.
Berlin, April 2012
Heinz Schernikau Sebastian Giese Rüdiger Lorentz
CEO CFO COO
Group Management Report
44
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Consolidated Balance Sheet as of 31 December 2011
Assets 31.12.2011 31.12.2010
EUR EUR EUR
A. Non-current assets
I. Intangible
assets
1. Licences, industrial
property rights, similar
rights and values and
licences in such
rights and values
4,876,730.77 5,079,307.52
II. Property, plant and equipment
1. Technical equipment and
machinery 1,055,728.29 1,182,626.43
2. Other equipment, office and
factory equipment 105,126.65 123,069.81
3. Advance payments and
assets under construction 3,612.38 4,037.16
1,164,467.32 1,309,733.40
6,041,198.09 6,389,040.92
B. Current assets
I. Inventories
1. Advance payments 1,792,202.88 1,814,177.30
1,792,202.88 1,814,177.30
II. Receivables and
other assets
1. Trade
receivables 1,673,825.21 12,737,441.10
2. Receivables from
associates 0.00 2,414,989.86
3. Other
assets 1,060,545.54 775,338.21
2,734,370.75 15,927,769.18
III. Cash and cash
equivalents 3,962,959.58 2,286,291.79
8,489,533.21 20,028,238.27
C. Accruals and deferrals 60,480.64 39,133.67
14,591,211.94 26,456,412.86
Consolidated Balance Sheet
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
45
Shareholders' equity and liabilities 31.12.2011 31.12.2010
EUR EUR EUR
A. Shareholders' equity
I. Issued capital
1. Subscribed capital 4.000.000,00 4.000.000,00
2. Own shares -248.307,00 0,00
3.751.693,00 4.000.000,00
II. Capital reserve 748.014,97 1.991.800,00
III. Profit reserves
1. Statutory reserve 5.112,92 5.112,92
2. Other profit reserves 273.158,45 1.173.158,45
IV. Consolidated net loss
(pY: profit) -680.080,45 354.068,26
V. Difference in equity due to
currency conversion 40.025,18 32.408,27
VI. Minority
interests 47.370,92 51.312,76
4.185.294,99 7.607.860,66
B. Provisions
1. Pension provisions and similar
obligations 1.079.250,72 491.105,40
2. Tax provisions 407.858,00 561.858,00
3. Other provisions 240.607,98 422.735,28
1.727.716,70 1.475.698,68
C. Liabilities
1. Liabilities to
banks 6.980.300,11 7.026.975,86
2. Prepayments received
on orders 386.145,11 1.509.263,10
3. Trade
payables 742.283,94 7.746.840,86
4. Other liabilities 569.471,09 1.089.773,70
of which taxes EUR 44.222,66
(pY. EUR 1.044.662,50)
8.678.200,25 17.372.853,52
14.591.211,94 26.456.412,86
Consolidated Balance Sheet
46
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Consolidated Income Statement 2011
2011 2010
EUR EUR EUR
1. Sales 106.669.321,02 151.779.839,47
2. Other operating earnings 391.237,25 1.053.226,96
107.060.558,27 152.773.066,44
3. Cost of materials
a) Costs for raw materials and
supplies and for goods
purchased 102.654.017,89 145.814.659,33
b) Cost for services
purchased 675.072,02 171.849,60
103.329.089,91 145.986.508,92
4. Personnel costs
a) Wages and salaries 1.190.871,17 1.067.810,22
b) Social security
costs and pension
support costs 281.838,11 403.846,66
- of which for pensions
EUR 149.865,00
(py. EUR 283.072,00)
1.472.709,28 1.471.656,88
5.
456.933,81 337.834,48
6. Other operating expenses 2.157.404,40 2.856.479,05
7. Earnings from investments 0,00 11.527,49
8. Earnings from investments
in associates 31.381,87 88.881,62
9. Other interest and
similarearnings 34.933,61 90.267,79
10. Interest and similar expenses 516.056,48 947.100,89
-449.741,00 -756.424,00
11. Earnings from ordinary
activities -805.320,13 1.364.163,11
12. Extraordinary expenses 222.748,32 222.748,40
13. Income taxes 5,17 775.966,48
14. Other taxes 10.016,93 1.874,10
15. Net loss (previous year: profit) -1.038.090,55 363.574,13
16. Gain (pY: Loss) carried forward
from the previous year 354.068,26 -16.447,11
17. Loss attributable to
minority interests for the period 3.941,84 6.941,24
18. Consolidated net loss
(previous year: profit) -680.080,45 354.068,26
Amortisation of intangible
and equipment
non-current assets and
depreciation of property, plant
Consolidated Income Statement
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
47
Consolidated Cash Flow Statement 2011
2011 2010
EUR thousand EUR thousand
1. Cash flow from current operating activities
-1,038 364
457 338
252 -60
0 -12
-22 115
13,098 1,508
-8,694 5,816
-51 0
Cash flow from current operating activities 4,002 8,069
2. Cash flow from investment activities
-61 -1,297
0 -5,254
128 0
Cash outflow from investment activities 67 -6,551
3. Cash flow from financing activities
0 80
-2,392 0
Cash outflow from the repyment of other financial liabilities 0 -1,500
Cash flow from financing activities -2,392 -1,420
4. Cash and cash equivalents at the end of the period
1,677 98
0 -89
Cash and cash equivalents at the start of the period 2,286 2,279
Cash and cash equivalents at the end of the period 3,963 2,286
5. Composition of cash and cash equivalents
Cash and cash equivalents 3,963 2,286
Cash and cash equivalents at the end of the period 3,963 2,286
Changes of cash and cash equivalents affecting payment
(sub totals 1 to 3)
Changes of cash and cash equivalents from changes in
exchange rates, basis of consolidation and measurement
Decrease in inventories, trade receivables and other
assets
Decrease in trade payables and other liabilities
Cash outflow for investments in intangible assets
Cash outflow for investments in property, plant and
equipment
Other
Cash inflow from the sale of consolidated companies
Cash outflow from the purchase of own shares
Net earnings for the period (including minority interests)
before extraordinary items
Depreciation and amortisation on non-current assets
Decrease in provisions
Earnings from the disposal of consolidated subsidiaries
and other business units as well as non-current assets
Other non-payment related expenses (+)/earnings (-)
Cash inflow from additions to equity
Consolidated Cash Flow Statement
48
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Consolidated Statement of Changes
in Shareholders’ Equity 2011
Subscribed Capital Generated Accumulated Shareholders' Share-
capital reserve consolidated other equity acc. to holders'
common shares shareholders' consolidated consolidated equity
equity net earnings balance sheet
Balancing
item
from
currency
conver-
sion
EUR EUR EUR EUR EUR EUR
31.12.2009 4,000,000.00 1,951,000.00 1,161,824.26 4,634.16 7,117,458.42 7,117,458.42
40,625.52 40,625.52 40,625.52
40,800.00 -12,851.40 27,948.60 27,948.60
0.00 40,800.00 0.00 27,774.12 68,574.12 68,574.12
0.00 0.00 370,515.37 0.00 370,515.37 370,515.37
31.12.2010 4,000,000.00 1,991,800.00 1,532,339.63 32,408.28 7,556,547.91 7,556,547.91
-248,307.00 -1,243,785.03 -900,000.00 -2,392,092.03 -2,392,092.03
7,616.90 7,616.90 7,616.90
-248,307.00 -1,243,785.03 -900,000.00 7,616.90 -2,384,475.13 2,384,475.13
0.00 0.00 -1,034,148.71 0.00 -1,034,148.71 -1,034,148.71
31.12.2011 3,751,693.00 748,014.97 -401,809.08 40,025.18 4,137,924.07 4,137,924.07
Total consolidated
net earnings
Other Changes
Parent company
Purchase of treasury
shares
Changes in basis of
consolidation
Additions to capital
reserve
Total consolidated
net earnings
Consolidated Statement of Changes in Shareholders’ Equity
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
49
Minority Shareholders' Consolidated
interests equity shareholders'
equity
EUR EUR EUR
19,054.00 19,054.00 7,136,512.42
0.00 40,625.52
39,200.00 39,200.00 67,148.60
39,200.00 39,200.00 107,774.11
-6,941.24 -6,941.24 363,574.13
51,312.76 51,312.76 7,607,860.66
-2,392,092.03
7,616.90
-2,384,475.13
-3,941.84 -3,941.84 -1,038,090.55
47,370.92 47,370.92 4,185,294.99
Minority interests
common shares
31.12.2009
31.12.2010
31.12.2011
Total consolidated
net earnings
Other Changes
Purchase of treasury
shares
Changes in basis of
consolidation
Additions to capital
reserve
Total consolidated
net earnings
Consolidated Statement of Changes in Shareholders’ Equity
50
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Statement of Changes in Non-Current Assets
as of 31 December 2011
01.01.2011 Currency Additions Disposals 31.12.2011
conver-
sion
EUR EUR EUR EUR EUR
I. Intangible
assets
5.259.072,30 63.506,75 0,00 0,00 5.322.579,05
II. Property, plant and equipment
-3.539,54 0,00 0,00 0,00 -3.539,54
1.286.530,44 9.905,38 40.921,38 0,00 1.337.357,20
353.224,87 -2.926,08 19.662,82 22.077,99 347.883,62
4.037,16 -424,78 0,00 0,00 3.621,38
1.640.252,93 6.554,52 60.584,20 22.077,99 1.685.313,66
III. Financial assets
Investments 38.347,89 0,00 0,00 0,00 38.347,89
6.937.673,12 70.061,27 60.584,20 22.077,99 7.046.240,60
Licences, industrial
property rights, similar
rights and values and
licences in such rights and
Leasehold improvements
on third-party property
Technical equipment and
machinery
Other equipment, office
and factory equipment
Advance payments and
assets under construction
Historical costs
Statement of Changes in Non-Current Assets
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
51
01.01.2011 Currency Additions Disposals 31.12.2011 31.12.2011 31.12.2010
conver-
sion
EUR EUR EUR EUR EUR EUR EUR
179,764.78 11,547.27 254,536.23 0.00 445,848.28 4,876,730.77 5,079,307.52
-3,539.54 0.00 0.00 0.00 -3,539.54 0.00 0.00
103,904.01 7,715.08 170,009.82 0.00 281,628.91 1,055,728.29 1,182,626.43
230,155.06 285.14 32,387.76 20,070.99 242,756.97 105,126.65 123,069.81
0.00 0.00 0.00 0.00 0.00 3,612.38 4,037.16
330,519.53 8,000.22 202,397.58 20,070.99 520,846.34 1,164,467.32 1,309,733.40
38,347.89 0.00 0.00 0.00 38,347.89 0.00 0.00
548,632.20 19,547.49 456,933.81 20,070.99 1,005,042.51 6,041,198.09 6,389,040.92
Accumulated amortisation and depreciation Book values
Statement of Changes in Non-Current Assets
52
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Notes to the Consolidated Financial Statements
HMS Bergbau AG
Berlin
Financial Year 2011
I. General information
The consolidated financial statements of HMS Bergbau AG were prepared in accordance
with German commercial law and the additional regulations of the German Stock
Corporation Act (AktG), applying the relevant regulations of the German Accounting Law
Modernisation Act (BilMoG). The financial year of the Group and all companies included in
the consolidated financial statements corresponds to the calendar year.
In accordance with Section 292 (1) of the German Commercial Code (HGB), the balance
sheet, income statement, notes as well as cash flow statement and statement of changes
in shareholders‟ equity were presented separately.
The income statement was prepared using the total cost method.
Notes to the Consolidated Financial Statements
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
53
II. Basis of consolidation
1. Information on all Group companies
All German and foreign associated subsidiaries were included in the consolidated financial
statements.
2. Investments
The parent company holds shares in the following investments:
Carbo-KH, Kemrowo, Russia (inactive)
The company’s interest in KGHM HMS Bergbau AG was sold in 2011.
Name Headquarter Share Shareholders’ Last annual equity result
% EUR thousand EUR thousand
HMS Bergbau AG Coal Division Berlin 100 34 -2 HMS Bergbau AG Iron Ore & Metals Division Berlin 100 16 -2 HMS Bergbau AG Oil & Gas
Division Berlin 51 96 -9 HMS Niwka Coal Production
Company Sp. z o.o. Katowice 100 -362 -127 PT. HMS Bergbau Indonesia Jakarta 100 -824 -411
Notes to the Consolidated Financial Statements
54
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
III. Consolidation principles
The annual financial statements of the consolidated subsidiaries were prepared on
31 December 2011, the same balance sheet date as the parent company.
The annual financial statements of the German subsidiaries were all prepared in
accordance with German commercial law and the accounting and valuation principles of
HMS Bergbau AG.
The annual financial statements of the foreign subsidiaries were prepared in accordance
with the applicable laws of each country. They were reconciled with the financial reporting
standards of the parent company. The balance sheet and income statement structure was
adjusted to match that of the parent company.
The consolidated financial statements were prepared on the balance sheet date of the
parent company.
1. Capital consolidation method
Pursuant to Section 301 (1) no. 1 of the German Commercial Code (HGB) (old version),
the capital of the fully consolidated companies was consolidated on the date of acquisition
according to the book value method by offsetting acquisition costs with the subsidiary‟s
equity share at the time of acquisition or its initial consolidation. No new interests were
purchased during the financial year.
2. Date of initial consolidation
The date on which capital within the meaning of Section 301 (2) of the German
Commercial Code (HGB) must be consolidated is always the date of foundation by the
parent company. The capital of subsidiaries established before the financial year is
therefore also consolidated according to the value of the company at the time it was
founded. Any profit and loss generated by the subsidiaries before 1 January 2008 was
included in and offset against the profit reserve of the parent company. This did not result
in a difference within the meaning of Section 301 (1) of the German Commercial Code
(HGB).
3. Debt consolidation
Mutual receivables and liabilities between the consolidated companies are offset and
eliminated when consolidating the company’s debt.
Notes to the Consolidated Financial Statements
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
55
4. Consolidation of costs and earnings, elimination of intercompany profits
Intragroup sales are offset against corresponding intragroup expenses.
Expenses and earnings from other business transactions between consolidated companies
are also offset.
Intercompany profits from intragroup deliveries and services did not arise.
5. Consolidation principles for investments
Pursuant to Section 311 of the German Commercial Code (HGB), the 25.1% share in
KGHM HMS Bergbau AG, Berlin, was included in the consolidated financial statements at
equity according to the book value method. The investment in KGHM HMS Bergbau AG,
Berlin, was sold during the year under review. The positive difference arising from the
difference between purchase price and book value according to the at-equity method was
recorded as income in the income statement.
Notes to the Consolidated Financial Statements
56
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
IV. Currency conversion principles
The consolidated financial statements are prepared in euros, the functional and reporting
currency of the parent company.
In accordance with Section 308a sentence 1 of the German Commercial Code
(Handelsgesetzbuch –HGB), the balance sheets of foreign subsidiaries are converted at the
spot exchange rate prevailing on the balance sheet date and their income statements at
the average annual rate in accordance with Section 308a sentence 2 HGB. Shareholders‟
equity is converted at the historical rate.
Differences arising from currency conversion for assets and liabilities are recognised in
equity without affecting income.
Differences from the conversion of income statement items were reported under
consolidated net earnings as costs or earnings.
Notes to the Consolidated Financial Statements
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
57
V. Accounting and valuation principles
1. Accounting and valuation
The consolidated financial statements comply with the applicable regulations of Section
298 of the German Commercial Code (HGB).
Intangible assets are valued at cost less scheduled straight-line amortisation.
Property, plant and equipment were recognised at cost and subject to scheduled
depreciation if they had a finite useful life.
Please refer to III.5. “Consolidation principles for investments” for details on accounting
and valuation principles for investments.
Scheduled depreciation and amortisation was carried out according to the expected
useful lives of assets.
Prepayments made on inventories were recognised at cost subject to the strict
principle of lower of cost or market.
Receivables and other assets were recognised at nominal value or fair value as of the
balance sheet date.
Pension obligations were calculated according to the projected unit credit method, using
the „2005 G“ mortality tables compiled by Prof. Klaus Heubeck, assuming a fluctuation
and salary trend of 0% and a discount rate of 5.14% (previous year: 5.15%). In financial
year 2010, due to the first-time application of the German Accounting Law Modernisation
Act (BilMoG), the amount allocated for pension provisions, calculated in accordance with
actuarial principles, came to EUR 3,341 thousand, which will be spread over a period of 15
years pursuant to Article 67 (1), sentence 1, of the Introductory Act to the German
Commercial Code (EGHGB). EUR 446 thousand of this sum was allocated as of 31
December 2011. The remaining amount, which comes to EUR 2,895 thousand, will
recorded to pension obligations, in an annual amount of EUR 223 thousand until the year
2024.
Tax provisions include taxes for the financial year 2010 that have not yet been assessed.
Other provisions take into account all discernible risks and contingent liabilities and are
recognised to the amount of the settlement value, i. e. including expected increases in
prices and costs.
Liabilities are recognised at their settlement value.
The conversion of business transactions concluded in foreign currencies was carried
out using the spot exchange rate in accordance with Section 256a HGB.
Notes to the Consolidated Financial Statements
58
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
VI. Notes on the consolidated balance sheet
The statement of changes in non-current assets shows the development of individual
non-current assets, including details on amortisation and depreciation, during the financial
year.
As in the previous year, all receivables and liabilities have remaining terms of less than
one year. After offsetting against the claims from the reinsurance of pension obligations
(EUR 1,338 thousand), pension obligations amounted to EUR 1,079 thousand.
Other assets include receivables in the amount of EUR 516 thousand from securing the
rights to key real estate for the NIWKA project and prepayments on commissions in the
amount of EUR 65 thousand.
Deferred taxes arise largely from the difference in valuation of the provision for pensions
and from the valuation of the loss carry-forward assessed as utilizable in the future. The
calculation of the temporary differences uses the corporation and business tax rates for
the financial year (31.83%). Calculation of taxes as of 31 December 2011 once again, as
on the previous year’s balance sheet date, resulted in a deferred tax asset surplus. The
Company has exercised the option in Section 274 of the German Commercial Code (HGB)
not to capitalise the tax relief calculated.
The statutory shareholders’ meeting held on 12 October 2009 authorised the management
Board of HMS Bergbau AG to acquire up to 10% of own shares of the share capital in
existence at the time of the resolution, which amounted to EUR 4,000,000.00. The
Management Board made use of this authorisation and the Company acquired 248,307
common bearer shares at a nominal value of EUR 1.00 each during the financial year. In
accordance with Section 272 (1a) of the German Commercial Code (HGB), the difference
between the nominal value and the purchase price was offset against other profit
reserve to the amount of EUR 900 thousand and against the capital reserve to the
amount of EUR 1,244 thousand.
The Group’s contingent liabilities as of 31 December 2011 were as follows:
The Group is jointly liable for credit obligations of an external company up to a maximum
amount of EUR 3,300 thousand, which can be called upon in USD, EUR or Polish Zlotys.
These obligations were valued at USD 4,219 thousand as of 31 December 2011, while
bank deposits of the entity sharing joint and several liability were valued at PLN 800
thousand and EUR 20 thousand.
The risk of the joint liability being used has been classed as unlikely given the principal
debtor‟s financial situation and the regulations put in place when the shares were sold.
Notes to the Consolidated Financial Statements
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
59
On 31 December 2011, the group’s purchase obligations from traded contracts amounted
to EUR 19,993 thousand, all relating to 2011. Additional other financial liabilities largely
arise from rental and leasing agreements. The maturities of liabilities are as follows:
Up to 1 year EUR 127 thousand 127
Between 1 and 5 years EUR 62 thousand 62
More than 5 years EUR 0 thousand
Liabilities to banks amounted to EUR 6,980 thousand as of the balance sheet date;
entirely with terms of less than one year.
The pension provision in the amount of EUR 1,079 thousand was offset against pledged
plan assets exclusively to fulfil the pension obligations, which had a fair value of EUR
1,338 thousand as of the balance sheet date.
Notes to the Consolidated Financial Statements
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
VII. Notes on the consolidated income statement
Sales of EUR 106,669 thousand were generated in the financial year, mainly from trade in
coal products such as steam coal, coking coal and anthracite. Broken down by region,
sales revenues were generated in Europe (41%), Asia (42%) and Africa (17%).
Material costs are principally attributable to the global purchase of steam coal, coking
coal and anthracite.
Other operating earnings primarily encompass income from the reversal of provisions
(EUR 197 thousand), whose most significant component is from the reversal of tax
provisions for the financial year 2010 in the amount of EUR 154 thousand. Additionally,
other operating earnings include reimbursements of advanced costs (EUR 65 thousand), a
compensation payment (EUR 28 thousand) and currency conversion gains (EUR 23
thousand).
Other operating expenses result primarily from delivery costs (EUR 512 thousand),
vehicle and travel expenses (EUR 499 thousand), legal and consulting expenses (EUR 261
thousand), money transfer costs (EUR 198 thousand), occupancy costs (EUR 147
thousand) and currency conversion expenses (EUR 106 thousand).
Investment income contains the profit of the sale of the Company’s investment in KGHM
HMS Bergbau AG.
The financial result includes the net balance, amounting to EUR 219 thousand, of
interest expenses on pension obligations and income from the pledged plan assets.
Extraordinary expenses include 1/15th of the addition of pension provisions resulting
from the change in valuation pursuant to Section 253 (1) sentence 2 of the German
Commercial Code (HGB).
Notes to the Consolidated Financial Statements
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61
Notes to the Consolidated Financial Statements
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
VIII. Other information
1. Members of the Management Board and Supervisory Board
During the last financial year, the Company’s transactions were conducted by the
Management Board, whose members are as follows:
Herrn Heinz Schernikau, CEO,
Herrn Sebastian Giese, CFO,
Herrn Rüdiger Lorentz, COO.
The total remuneration of the Management Board in financial year 2011 – excluding
additions to pension provisions – was EUR 518 thousand (previous year: EUR 439
thousand).
During the financial year, the Supervisory Board was composed of the following
members:
Herr Dr. Hans-Dieter Harig; engineer, retired, Chairman,
Herr Dr. h.c. Michael Bärlein; lawyer, Berlin, Deputy Chairman,
Frau Michaela Schernikau; businesswoman, Managing Director, Berlin .
In the financial year, Dr. Hans-Dieter Harig was also a member of the Supervisory Boards
of the following companies: E.ON Energie AG, Munich; Rheinkalk GmbH, Wülfrath;
Bilfinger Berger Power Services GmbH, Oberhausen; and Möller Group GmbH & Co. KG,
Bielefeld.
In the financial year, Michaela Schemikau was also a member of the Supervisory Boards of
the following companies: HMS Bergbau AG Iron Ore & Metals Division, Berlin; HMS
Bergbau AG Coal Division, Berlin; and S+O Mineral Industries AG, Frankfurt am Main.
2. Remuneration of members of the Supervisory Board
Supervisory Board remuneration amounted to EUR 40 thousand (previous year: EUR 39
thousand).
3. Auditor’s fee
The fee for the audit of the annual financial statements was EUR 60 thousand (previous
year: EUR 65 thousand). The auditing firm did not carry out any other services for the
Company.
Notes to the Consolidated Financial Statements
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63
4. Annual average number of employees
The average number of people employed during the financial year was 23.
5. Types of shares
HMS Bergbau AG has share capital worth EUR 4,000,000.00, divided into:
4,000,000 common bearer shares at a nominal value of EUR 1.00 each.
6. Authorised capital
On the balance sheet date, HMS Bergbau AG still had EUR 2,000,000 in
authorised capital.
Berlin, 05. April 2012
Heinz Schernikau Sebastian Giese Rüdiger Lorentz
Vorstandsvorsitzender Finanzvorstand Handelsvorstand
Notes to the Consolidated Financial Statements
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Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Auditor’s report
We issued the following opinion on the consolidated financial statements and the group
management report:
”We have audited the consolidated financial statements prepared by HMS Bergbau AG,
Berlin, comprising the balance sheet, the income statement, the notes to the consolidated
financial statements, the cash flow statement, and the statement of changes in equity,
together with the group management report for the fiscal year from 1th January to 31th
December 2011. The preparation of the consolidated financial statements and the group
management report in accordance with German commercial law is the responsibility of the
company’s management. Our responsibility is to express an opinion on the consolidated
financial statements and the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with
Sec. 317 HGB (“Handelsgesetzbuch”: German Commercial Code) and German generally
accepted standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require
that we plan and perform the audit such that misstatements materially affecting the
presentation of the net assets, financial position and results of operations in the
consolidated financial statements in accordance with [German] principles of proper
accounting and in the group management report are detected with reasonable assurance.
Knowledge of the business activities and the economic and legal environment of the group
and expectations as to possible misstatements are taken into account in the determination
of audit procedures. The effectiveness of the accounting-related internal control system
and the evidence supporting the disclosures in the consolidated financial statements and
the group management report are examined primarily on a test basis within the
framework of the audit. The audit includes assessing the annual financial statements of
those entities included in consolidation, the determination of entities to be included in
consolidation, the accounting and consolidation principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated
financial statements and the group management report. We believe that our audit
provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements
comply with the legal requirements [and supplementary provisions of the partnership
agreement/articles of incorporation and bylaws] and give a true and fair view of the net
Auditor’s report
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
65
assets, financial position and results of operations of the group in accordance with
[German] principles of proper accounting. The group management report is consistent
with the consolidated financial statements and as a whole provides a suitable view of the
group’s position and suitably presents the opportunities and risks relating to future
development."
Berlin, 12. April 2012
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
Plett Ottenhus Wirtschaftsprüfer Wirtschaftsprüfer
Auditor’s report
66
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
Imprint
Publisher:
HMS Bergbau AG
An der Wuhlheide 232
12459 Berlin
Deutschland
Phone: +49 (30) 65 66 81-0
Fax: +49 (30) 65 66 81-15
E-mail: [email protected]
www.hms-ag.com
Concept, editorial, design:
GFEI Aktiengesellschaft
Am Hauptbahnhof 6
60329 Frankfurt
Deutschland
Phone: +49 (0) 69 / 743 037 00
Fax: +49 (0) 69 / 743 037 22
E-mail: [email protected]
www.gfei.de
Imprint
Annual Report 2011 of HMS Bergbau AG / www.hms-ag.com
67
HMS Bergbau AG
An der Wuhlheide 232
D - 12459 Berlin
Telefon: +49 (30) 65 66 81-0
Fax: +49 (30) 65 66 81-15
E-Mail: [email protected]
Internet: www.hms-ag.com