Financial Performance Commentary

REVENUES, COSTS AND EARNINGS

The information (including analyses) and commentary related thereto used in the editorial section of this Annual Report are based on the financial statements prepared according to Czech Accounting Standards, which are different from IAS. In 2001, the Company made an operating profit of CZK 1,008 million on total operating revenues of CZK 8,734 million; total operating costs amounted to CZK 7,726 million. The year-on-year rise in operating profit was CZK 490 million (94.6%). The Company was able almost to double its operating profit by imposing a strict cost-cutting programme which led to a year-on-year reduction in costs by CZK 619 million (i.e. 7.4%). Although operating revenues dipped CZK 129 million (1.5%), the Company still managed to keep to more or less the same levels in these items. The main saving, of CZK 183 million (0.7%), was made in material and energy consumption. Expenditure on repairs and maintenance also registered a year-on-year fall, of CZK 174 million. Personnel costs rose slightly, by CZK 24 million (1.6%), reflecting standard valorization and redundancy costs. The moderate rise in depreciation by CZK 23 million (1.8%) was connected with the renovation of individual parts of mining technology. The major cost-cutting results were backed by year-on-year growth of CZK 92 million (1.2%) in revenues from the Company's own goods. This increase was related to higher coal sales. There was a slight decline in revenues from sales of services, which were down CZK 13 million (3.8%) year on year. Revenues from sales of redundant and decommissioned assets and material amounted to CZK 120 million.

Operating revenues and costs (CZK'000)

In spite of the ongoing trend of interest-rate cuts, the Company still managed to post earnings from financial transactions of CZK 502 million, which is CZK 25 million (5.2%) more than in 2000. The Company drew on liquid financial instruments with quality ratings and adequate investment terms in accordance with its conservative risk policy to achieve this improvement in disposable financial assets, much of which is made up of provisions created to eliminate the consequences of mining activity. The significant year-on-year growth in revenues from sales of securities by CZK 9,105 million to CZK 18,587 million can be put down to a substantial rise of advantageous buy-sell operations, which were reflected by a corresponding rise in the cost of securities sold. Another notable area of financial costs was the year-on-year reduction in bank interest paid, down CZK 16 million to CZK 24 million. Net earnings amounted to CZK 1,113 million, i.e. CZK 286 million (34.6%) more than in 2000.

DISTRIBUTION OF COMPANY EARNINGS FOR 2001 (CZK'000)

Profit structure (CZK millions)