Body of the report:
The Management Board of Jastrzębska Spółka Węglowa S.A. ["Company", "JSW"] hereby reports that today, i.e. 25 November 2024, the Company's Supervisory Board adopted a resolution on giving consent to conclude an agreement with the contractor AT Kearney Sp. z o.o., to provide the service of supporting the JSW S.A. Management Board in the implementation of the “Strategic Transition Plan of JSW S.A. and its subsidiaries”, developed with the participation of AT Kearney Sp. z o.o. This decision begins the process of implementing the “Strategic Transition Plan of JSW S.A. and its subsidiaries”.
The foregoing information was delayed on 9 September 2024 pursuant to Article 17(1) and (4) of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market Abuse and Repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC [Market Abuse Regulation].
JSW's Supervisory Board has adopted the “Strategic Transition Plan of Jastrzębska Spółka Węglowa and its subsidiaries”. The Plan has been prepared by the Company's Management Board with the participation of external consultants and key employees. The Plan is a response to the company's situation, which is affected, among other things, by:
- declining coking coal prices,
- growing supply of low-cost coking coal from outside Europe,
- decreasing demand for coking coal in Europe due to declining blast furnace steel production and coking plant closures,
- JSW's declining coking coal output with rising costs and investment spending in 2021-2023.
The Plan calls for implementation of tasks in key blocks:
Efficient Mine is a group of initiatives grouped into areas, the implementation of which is aimed at extending the effective operating time of longwall shearers and increasing output.
- a new development work planning process for all mines,
- new processes for monitoring the progress of development work,
- changes in the procedures for acceptance of development works,
- establishing new key performance indicators (KPIs) for development works,
- optimization of closure works and decommissioning of equipment after completion of work in longwalls.
Planning and conducting mining work, including, among others:
- new longwall mining plans at the mines,
- optimization of roof control in longwalls,
- optimization of the selection of powered support sections according to the characteristics of the seam,
- ensuring the technical efficiency of powered supports,
- minimizing equipment relocation time,
- optimization of coal haulage.
Work time planning, including:
- optimization of the number of workers in crews and the number of longwall crews,
- optimization of transportation of crews and materials,
- optimization of material logistics,
- improvement of working conditions at elevated temperatures through changes in air conditioning systems.
Effective maintenance of production assets, including:
- changes in maintenance methods for machinery and equipment,
- improvement of the management of production inputs and materials,
- standardization of machinery and equipment used in JSW mines.
The effects of implementation of initiatives from the Efficient Mine area should result in coking coal production of 14.5 million tons by 2026. The estimated resulting additional mining margin should be approx. PLN 500 million in 2025, PLN 1.6 billion in 2026 and 2.1 billion in 2027.
The successful implementation of initiatives in the mining area depends on the successful execution of the implementation program and the implementation of supporting initiatives, i.e.: initiatives in the area of knowledge transfer and the learning organization.
Another block of initiatives, outside the mining area, includes savings in purchasing and capital expenditures. Initiatives in the area of purchasing include activities such as improving materials management, aggregating contracts, extending contract duration, using framework agreements, consolidating purchasing into a central purchasing function and conducting continuous supplier monitoring and evaluation. Aggregation of supplier contracts between units in both CAPEX and OPEX, extending the term of contracts and implementing framework agreements, changing the terms of bidding procedures, or updating the main purchasing tool, are just some of the initiatives that will ultimately save approx. PLN 600 million each year. These are measures that will have a multi-year, repeatable effect. In turn, reviewing and stopping unnecessary CAPEX spending and building a model for improving their supervision should have a one-off effect of PLN 1.5 billion in savings.
The next block of the adopted "Strategic Transformation Plan of Jastrzębska Spółka Węglowa and its subsidiaries” will be the optimization of support functions in all JSW Group companies. The positive effects will be achieved through synergies within the group and will amount to approx. PLN 100 million per year but will materialize only in 2027.
To implement the Plan, an Implementation Program Management Office will be established at the company to manage and provide substantive support for the transformation program, coordinate implementation teams, monitor and report on the impact and progress of the work, and manage risks.
With a view to adapting its operations to the current and forecast situation in the coking coal and coke market, the Company has also developed and adopted a Plan that includes initiatives and activities aimed at increasing production efficiency, reducing operating costs, and organizational and technical improvements. The initiatives and activities included in the Plan are aimed at improving the liquidity of the Company and the JSW Group. The Plan has been developed by an internal interdisciplinary team. The expected effects of implementing the adopted initiatives and measures in the JSW Group are estimated at approx. PLN 529 million in 2024 and in subsequent years are included in the totals presented in the description.
All activities in these areas, in accordance with the Strategic Transition Plan JSW and its subsidiaries, are to bring the Company in total an approx. PLN 8.5 billion of positive financial effects in 2025, 2026 and 2027.
Legal basis: Article 17(1) of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market Abuse and Repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.