JSW, a European coal coke powerhouse, after extremely fat years, is now experiencing a painful landing.
JSW on the financial bottom? Costs out of control
In 2022 the company generated an impressive 7 billion PLN net profit largely thanks to a market fire and a spike in steel prices triggered by the war in Ukraine.
What happened to that money? Instead of investing in modern technology and greater automation of extraction, capital got stuck in fixed costs. The year 2024 brought a gigantic 7,1 billion PLN loss, and the previous year closed with a deficit of about 6,25 billion PLN.
The wage fund from 2021-2023 exploded from 4,6 billion PLN to 7,4 billion PLN.
As a result of these decisions JSW found itself on the brink of bankruptcy. Mine productivity drifts sharply away from private competitors. On average 500-600 tons of ore per employee compared to 1100 tons in Bogdan is a technological chasm.
By the end of May employment still stood at 19,492 people. To save the company’s market existence, the state budget had to launch an expensive social protection program.
Rescue plan envisions drastic, though costly, slimming of structures. By the end of the year JSW will lose 1,156 people from its benefits, of whom 526 have already received a one‑time severance of 170,000 PLN net lump sum.
Most interestingly, for these generous conditions equal to annual or even two‑year earnings, there is no need to hide underground.
State money will also go to staff, administration, security, and even executive secretaries. Criterion? Minimum three‑year work experience in a mining enterprise and at least one year before retirement. The cost to the budget this year is about 500 million PLN, and over five years, by 2031, this amount will exceed 2 billion PLN.
On top of that, mining holidays for over 3,000 people for 4-5 years before retirement with a retention of 80% of the monthly salary. Here a serious systemic risk emerges.
According to confidential information passed to Rzeczpospolita, the government urgently needs official approval from the European Commission.
Brussels must assess whether these transfers constitute unlawful state aid. For JSW shareholders, a veto would be a knockout. A similar reduction program is carried out by Polska Grupa Górnicza (PGG), where in 2026 employment will drop by 4,300 people.
See also: JSW shares go crazy! Coal prices hit the market after the tragedy in China
JSW shares. How the market reacts to the news?
From the shareholders’ perspective, the key is an absolute cut in non‑production structure costs. The symbol of Byzantine grandeur became the JSW Management Office.
Even at the end of last year, trade unions calculated that almost 500 people worked there, including as many as 100 managers and directors with salaries ranging from 25,000 PLN to 45,000 PLN.
Currently the administration has been reduced to about 300 people in the Management Office and 100 in the Shared Services Center.
This is a step in the right direction and it seems the market bought this promise. A positive impact on the price also came from the news that JSW SA obtained a concession for the “Dębińsko 1” deposit.
At the market close on June 15, JSW shares rose by 1,87% reaching a peak of 26,19 PLN.
Chart. JSW share price
Source: TradingView.
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Source: Rzeczpospolita.
