The company achieved this financial result despite unfavorable economic circumstances and the low level of coal and coke prices. In addition, an agreement was signed with the trade unions to pay a PLN 90.5 million cash bonus to JSW SA employees from 2012 earnings. This contributed to deteriorating the result.
„In the second quarter we continued to implement measures to adapt the company to demanding external conditions. The dearth of reasons for the European economy, especially in the steel sector, to recover in the second half of the year means that we are engaged in scrutinizing our costs with particular meticulousness and adapting them to lower revenues”, says Jarosław Zagórowski, CEO of JSW S.A. „We are working on enhancing our productivity. We have an ambitious objective of not generating a loss in the full year of 2013 by cutting our operating expenses in the face of probable low coal and coke prices in the second half of the year.”
The company continues to pursue the subsequent stages of its productivity enhancement program on an unwavering basis. One of the outcomes of these efforts is optimizing the consumption of materials and employee benefits. By making its development policy more flexible, the company is able to align its capital expenditures to current market circumstances. All these measures, coupled with cost cutting in all business areas of the JSW Group, should enable us to minimize the adverse impact expected to be exerted by market circumstances in the second half of this year.
The Group’s coal output was 3,317.4 thousand tons in Q2 2013, down by 5.9% over the previous quarter. In the first half of 2013 coal output was 0.7% lower than in the first half of 2012. In Q2 2013 coal inventories fell by more than 280 thousand tons compared to Q1 2013.
As a consequence of sustained economic slowdown in the first half of 2013, the coal, coke and steel markets recorded further price declines. Although the Australian benchmark contract price for hard premium coking coal edged upward by USD 7 per ton in Q2 2013, i.e. by 4% over Q1, the spot price for this coal grade fell by roughly 17% between January and June 2013 to USD 137 per ton. Semi-soft coking coal prices followed a similar trend. JSW’s average coking coal price in Q2 2013 compared to Q1 2013 rose by 0.6%.
Steam coal prices have also been falling for some time. In the ARA ports the price of this coal grade fell by more than USD 20 per ton in Q2 compared to Q1 2013, i.e. by 20%. In turn, the price commanded by JSW’s steam coal fell by 15% in this same period, i.e. by roughly USD 17 per ton.
Coal sales to external customers were down by 8.8% in Q2 compared to Q1 at 2,260.4 thousand tons. In the first half of the year, coal sales were up 18.1% over the same period last year. Coal sales revenues to external customers were PLN 921.9 million in Q2 2013, down by 8.5% over Q1 2013.
In the coke segment Q2 2013 output was 1,043.2 thousand tons of coke, up 1.7% over Q1 2013. In the first half of this year coke output was 2,069.1 thousand tons, up 6.4% over the first six months of 2012.
Q2 2013 sales were 941.8 thousand tons, down 15.6% over Q1. In turn, in the first half of the year coke sales were 2,057.1 thousand tons, up 10.6% over the first six months of 2012.
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The JSW Group is the largest producer of high quality hard coking coal and a significant producer of coke in the European Union measured by production volume. JSW Group’s core business comprises the production and sale of coking coal and steam coal and the production and sale of coke and coal derivatives. Coal extracted by the JSW Group, mainly coking coal, is used in Central Europe by local steel mills owned by international steel producers and regional utilities. The high-quality coke produced by the Group is also sold on the global market. The main customers of the JSW Group’s products are from Poland, Germany, Austria, the Czech Republic, Slovakia, India and Brazil.