Overcoming geological problems and acquiring the Knurów-Szczygłowice Hard Coal Mine in August contributed to this outcome. Unit mining cash costs fell considerably, driven by higher production output; coal sales also rose significantly quarter to quarter. The prices of coking coal and steam coal remained flat in Q3 while coke prices fell insignificantly.
The Group recorded a positive financial result of nearly PLN 39 million compared to the second quarter, which ended with a loss.
„Q3’s results demonstrate that the company is steadily improving its operating efficiency. As we continue to face a challenging macroeconomic environment, we are not standing still with our arms crossed nor are we waiting for coal prices to rebound, but we are taking effective measures. In the current situation, in addition to ongoing cost rationalization, it is important for the management board to cut capital expenditures. We are implementing solutions whose purpose is to contribute to generating positive cash flow next year. We know that this cannot be done without cutting costs related to some employee privileges, which, in any event, all mining companies are implementing,” – says Jarosław Zagórowski, CEO of JSW.
The JSW Group’s operating profit plus depreciation and amortization (in other words EBITDA) was PLN 375 million in Q3 compared to a negative EBITDA of PLN 14 million one quarter ago. Two major factors contributed to such marked improvement in this ratio: the expected growth in the volume of coal sold and the accounting profit generated by the bargain purchase of Knurów-Szczygłowice KWK.
Coal production climbed steadily in Q3. Compared to Q2 when daily output was low following the overlap of exceptionally unfavorable geological conditions, it has now reached a satisfactory level. In September daily production topped 55 thousand tons (71 thousand tons including Knurów-Szczygłowice KWK). Coal sales to external customers surged by more than 38% quarter to quarter. Even though prices remain suppressed across the globe, the Group’s revenues on coal sales have risen and the company managed to sustain its average coal sales price at a similar level as in Q2.
„What is important to us is that coal production in our mines has returned to the appropriate levels. Next year will also be the first full year the Knurów-Szczygłowice mine will produce for JSW and I think that we can talk about mining approximately 17 million tons in 2015,” – the CEO of JSW emphasizes.
The coke sales volume in the coke segment edged up by 1% in Q3 compared to Q2 2014. However, coke prices fell by nearly 2%, which was the primary driver of our revenues being down by 2% in this segment. Nevertheless, the EBITDA generated by this area of JSW’s business improved slightly from quarter to quarter.