Coal production in the first three months of the year was up 14.4% compared to the same period in 2011. It was also up 6% over Q4 2011. The production plans in Q1 2012 were exceeded by 246 thousand tons of coal, and the plans for completing corridor mining workings were exceeded by 1 696 meters. Similarly, coke production rose compared to Q4 2011 (incorporating KK Zabrze and WZK Victoria precipitated higher coke production in the JSW Group by approximately 42% and 20% compared to Q1 and Q4 2011, respectively).
„Q1 performance shows that JSW is generating robust results despite much more difficult market conditions. We improved the sales results of coking coal and coke to external customers compared to Q4 2011 by taking advantage of the slightly better circumstances on the steel market”, says Jarosław Zagórowski, CEO of JSW S.A. He adds: “The volatility risk on the steel market despite the positive information concerning higher production is still high. That is why continuing productivity enhancement processes is crucial for us; in Q1 they contributed to significant coal production growth Further sales integration in the JSW Group is also important.”
The outlook for the coke segment is improving. In March 2012 steel production was up 11% over February in the European Union and it was up 4% in Poland, while in Q1 2012 it grew by more than 4% in the European Union over Q4 2011 and by 6% in Poland. After the record-breaking prices seen last year, coking coal prices receded slightly in Q1 2012. Steam coal prices in the ARA ports fell primarily on account of the light winter and the poor economic conditions in Europe. Nevertheless the Company procured significant steam coal price growth in Q1 2012. The sales of coal and coke in Q1 2012 were higher than in Q4 2011. Incorporating KK Zabrze and WZK Victoria led to higher coke sales of approximately 15% and 23% compared to Q1 and Q4 2011, respectively.
Sales growth allows for moderate optimism in the upcoming quarters of 2012, especially since total sales revenues, after excluding WZK Victoria and PEC Jastrzębie-Zdrój, which were acquired in December 2012, fell merely by roughly 4.6% compared to Q4 2011, resulting from the ongoing price decline on the coking coal and coke markets. Including the effect of incorporating KK Zabrze, WZK Victoria and PEC Jastrzębie-Zdrój, sales revenues climbed by 3.9% and 6.3% compared to Q1 and Q4 2011, respectively. Higher production on a still difficult market led to higher inventories compared to Q4 2011.
„Seasonality and price fluctuations are nothing out of the ordinary in our industry”, says Grzegorz Czornik, Vice-President for Sales at JSW S.A. „We observe the markets constantly. In recent months price stabilization has been visible in the coal and coke segments. We also see steel production growth and moderate recovery on the metallurgical market. This may exert a positive impact on growing sales volumes and reducing inventories in the upcoming period.”
The decline in comparable sales revenues was compensated for with lower operating expenses (net of WZK Victoria and PEC Jastrzębie Zdrój).
Q1 2012 also meant further growth in JSW’s investments financed using its own funds amounting to a total of PLN 406.5 m, up by more than 115% than in the similar period last year. PLN 361.0 m was designated for investments in the coal segment compared to PLN 162.4 m in Q1 2011. Investments in the coke segment were PLN 25.3 m making them nearly 45% higher than in Q1 2011. Investments are being conducted in line with the accepted plan.
„Pursing the investment program will contribute to preparing the necessary mining capacities in our mines in upcoming years while upgrading their technical level. In turn, this has a material impact on optimizing the costs of production and maintaining the required level of work safety”, says Andrzej Tor, Vice-President of Production at JSW S.A.