Lubelski Węgiel Bogdanka S.A., one of the largest and most advanced hard coal mines in Poland and one of the leaders of the domestic market for power coal producers, generated a net profit of PLN 106.92 million for the first half of 2010 (an 21.13% increase over in the first half of 2009) and an operating profit of PLN 126.64 million (an increase of more than 21% over H1/2010). Revenue on sales for the period increased by more than 11%, reaching PLN 578.1 million.

FINANCIAL RESULTS – DETAILS

Detailed financial results of the LW BOGDANKA Group after the first quarter of 2010 are presented in the table below:

In the first half of 2010, the LW BOGDANKA Group recorded a 21.13% increase in operating profits compared to the same period of the previous year.

An increase was seen in the most significant part of the Group’s revenue, i.e. revenue from the sale of coal, which was up by 12.04% compared to the same period of 2009. This increase was mostly the result of a 17.38% rise in the quantity of the coal sold. The revenue on sale of goods and materials increased in the period in question by 132.08%, from PLN 1,702,000 to PLN 3,950,000. Sales revenue from ceramics and from other activities were lower than in the first half of 2009. The largest decrease was recorded in sales of ceramics (-38.21%), resulting from seasonal economic slowdown in the construction market and from harsh winter conditions, which rendered construction work more difficult (the effects of Q1 are visible through the entire six months).

Dynamics of changes in product range with respect to revenue on sales of the LW BOGDANKA Group (PLN ‘000)

Item (in PLN '000)	6 months of 2010	6 months of 2009	Change (%) (2010/2009)
Sales of coal	559 914	499 737	+ 12,04
Sales of ceramics	3 535	5 721	- 38,21
Other activities	10 700	13 635	- 21,53
Sales of goods and materials	3 950	1 702	+ 132,08
Total revenue on sales	578 099	520 795	+ 11,00

The main source of sales revenue for the LW BOGDANKA Group in the first half of 2010 (as well as in the first half of 2009) was production and sale of power coal. From 1 January to 30 June 2010, sales of power coal accounted for 96.86% of the LW BOGDANKA Group's sales revenue (95.95% in the same period of 2009). Most (approx. 89%) coal sales realised in the above-mentioned period (as well as in the same period of the previous year) were carried out on the basis of long-term commercial agreements with regular key customers of the Parent Undertaking (primarily Elektrownia Kozienice S.A., GDF Suez Energia S.A., Zakłady Azotowe Puławy S.A. and Elektrownia Ostrołęka S.A.).

The share of other areas of the Group’s operations, including the operations of the subsidiary, Łęczyńska Energetyka Sp. z o.o. in Bogdanka, in the sales of the LW BOGDANKA Group was 1.85% in the first half of 2010 and 2.62% in the first half of 2009.

Structure by type of revenue on sales of the LW BOGDANKA Group (PLN ‘000)

Item	6 months of 2010	% share	6 months of 2009	% share
Sales of coal	559 914	96,86	499 737	95,95
Sales of ceramics	3 535	0,61	5 721	1,10
Other activities	10 700	1,85	13 635	2,62
Sales of goods and materials	3 950	0,68	1 702	0,33
Total revenue on sales	578 099	100,00	520 795	100,00

PRODUCTION (EXTRACTION) CAPACITY

    During the first half of 2010, production of commercial coal was 13% higher than in the same period of 2009 (with a gross extraction at the same level as in 1H 2009). This was attributable to introduction of longwall coal ploughing technology and to better geological characteristics of the deposit under mining and the development and improvement of solutions for initial separation of waste rock from the material underground.

Production capacity of LW BOGDANKA in 1H 2010 and 1H 2009 (in '000 tonnes)

6 months of 2010	6 months of 2009		Change (%) (2010/2009)
2 815,86	2 479,80		+ 13,55

Sale of coal of LW BOGDANKA for 1H 2010 and 1H 2009 (‘000 tonnes)

6 months of 2010	6 months of 2009		Change (%) (2010/2009)
2 731,57	2 327,15		+ 17,38

During the analysed six months of 2010, the profitability ratios for operations achieved higher values than in the same period of the previous year. The LW BOGDANKA Group’s gross margin achieved the level of 31.67% and was higher than in the analogous period of 2009 by more than 1 p.p. The increase in that ratio resulted from a higher cost dynamics of revenues relative to the dynamics of products, goods and materials sold.

The profitability of EBIT reached 21.91%, which means an increase by approx. 2 p.p. in comparison to the same period in the previous year. Gross margin amounted to 22.98%, while net margin reached the level of 18.50%. A slight decrease was recorded in the asset margin. This was related to the investment plans which will generate profit for the Group in the subsequent years.

Profitability ratios of the LW BOGDANKA Group

Item	6 months of 2010		6 months of 2009
Gross margin on sales	31,67		30,65
EBITDA	33,68		33,35
EBIT	21,91		20,07
Gross margin	22,98		20,01
Net margin	18,50		16,04
Return on Assets	4,16		4,63
Return on Equity	5,97		7,51

DEVELOPMENT STRATEGY

In the near future, measures aimed at implementing the planned development strategy of the LW BOGDANKA Group will primarily focus on the implementation of the Company’s investment tasks, including the development of the Mechanical Coal Processing Plant.
Enlarging the Stefanów Field will enable the production capacity of LW BOGDANKA S.A. to be doubled, as well as the annual quantity of hard coal extraction, starting from 2011 (from the present 5.3 million tonnes to 11.1 million tonnes per annum in 2014.)


FULFILMENT OF THE OBJECTIVES OF THE ISSUE

The table below contains details of key material investments of the LW BOGDANKA Group in the first half of 2010.

Key material investments of the LW BOGDANKA Group in the first half of 2010 (PLN ‘000)

Key material investments	Outlays incurred from 1 Jan. 2009 to 30 Jun. 2010
Construction and assembly work	158 213
Completion of deliveries and purchases of finished goods	192 118
Other	1 104
Advance payments for fixed assets under construction	39
Total	351 474