Jastrzebska Spólka Weglowa S.A. (JSW) Earnings Call Transcript & Summary

Good morning. I'd like to welcome you to the results conference of the JSW Group. The Management Board is present. We have the production and manager, Edward Pazdziorko. We have Sebastian Bartos heading up sales. Then we have Robert Ostrowski, the CFO. And my name is Tomasz Cudny, and I'm managing the Management Board as CEO and will present the results of the JSW Group in Q2 as well as for the full first half of the year, as I mentioned. And if we look at the results, myself and the entire Management Board have an ambivalent feeling because the results, the financial results, the economic results are very good. But the production and results like output and corridor works are on a much lower level than we had anticipated -- have assumed. And so Q1 showed us that we were in line with our concept of developing the company. And then we had April, which was a major drama, so we had those mining accidents in our mines. And for the upcoming years in terms of the run rate, the atmosphere and the approach to many things linked to those dramas with us to have a major impact, and so we wanted to calm things down. We wanted to regulate everything in terms of the [indiscernible]. The company was well prepared. We had the work prepared, and then we had -- and I have to mention this. So in August of this year, [ MG ], we were supposed to start mining operations. The preparatory work wasn't completed. And so the geological survey that we received from our predecessors is very bad, and I don't want to hide this word. So they left us with this, where there's no deposit, there's no coal. And so the plans what I said in -- we're supposed to start in August, we were supposed to start up a new longwall. So all of this has boiled down to nothing. We have to remodel that. We have to do a more professional approach and we have to do it more precisely in terms of documentation. So today, it's being analyzed by the management team. And by the end of the year, we should be able to regulate these matters. So let me go ahead and show you the results. As I said, coal production is down with respect to Q1 by nearly 9%. And so we can see in coking coal, which is our core business. And we have the contracts that we've signed, and so this is our fundamental goal to catch up here. If we look at the coke production, so we have a major increase, so we were working at full steam ahead in Q1 and Q2. We continue to operate were up by 1.2% in terms of coke production to 885,000 tons. That's a very good result. I mentioned corridor works were down by 5%. We're analyzing how this will affect our future quarter and next year. It's not something we can assess only from the point of view today. And so total coal sales down by 11.7%. This is a result of the previous elements. So if we look at production quarter works' previous quarters, we can see what the sales department did. We had good market conditions, and we were selling the inventories we had in the cold storage yards. So if we look at sales, we're up by 21%, almost at PLN 6 billion. And of course, we're looking versus Q1 2022. So we can say sales revenue is driven by higher prices for coke and coal. So it's up by some 40%, and coke is up by 35%. So as I mentioned, this has an impact, a knock on impact on the economic results. EBITDA in Q2, so PLN 3.88 billion. That's something this company hadn't achieved in the past, and that translates into the net result of PLN 2.35 billion. So if we sum up Q1 and Q2, so we have more than PLN 4 billion in that result. And so the various members of the Board will present the information about their areas of responsibility during the course of today's conference.

So welcome, ladies and gentlemen. My name is Edward Pazdziorko. Just as the CEO mentioned, I'll go ahead and walk us through the operating results of JSW Group. So coal and coke production. So in Q2, we had coal production in excess of 3.4 million tons. And it was down, as the CEO mentioned, by 9.7% with respect to Q1. What we can notice is that we had a great first quarter. However, those events, the mine accidents, as the CEO mentioned actually changed things. Then there's Pniówek and Zofiówka, we were at the preparatory work stage. And so the consequences will be noticed in upcoming quarters. What we have to do is analyze the future coal faces. We have to make sure that this impact is the smallest possible. So if we look at H1 '22, our total output was 7.16 million tons, and so this was up by 4.8% over H1 2021. So basically, in terms of production, coking coal. We had an increase of some 40,000. So we had an increase of steam coal production of some 230% -- 230,000 tons. So if you look at our production, we had -- so we had 23.7 active longwalls that shows that some longwalls had been completed and some were just starting. So we had nearly 24 active longwalls, which is down by nearly 4% over Q1, and that's why we can see that in April, we had one longwall that was down primarily because of that by an accident. So if we look at the full H1, we had 24.2 longwalls that were active, so production. So we had more -- the number of active longwalls was up by 8% over H1 2021. So we were in 5 mines, 7 sections. Well, each section can sort of be treated like a separate mine. If we look at corridor markets -- corridor works, so we had a number of crews, in-house crews, external crews. So we did 17,414.5 running meters. So this is down by 5.2% over Q1. As I mentioned, these events in Zofiówka, where we had 5 active longwall stopes, and then we had to narrow the zone where we had to do the rescue operation. So we have 3 are now waiting for a decision to be made by the commission that's investigating this accident as well as the Central Mining Authority to give a decision and recommendation in terms of the ability to continue operating there, both in Zofiówka as well as in Pniówek mine. If we look at corridor works in H1 2022, we did 35,793.5 meters. This was down from H1 of last year by more than 14%. As I said previously, these mining accidents had an impact, and they mobilized us, and we're looking at the technology of supporting the longwalls and the ability to support the shields. And so this impacts what sort of yields will be in place in new longwalls. So we have this ratio of 5.0. So we can say that we have -- we are preparing longwalls for future production. If we go on to coke production in Q2 of 2022, we did more than 885,000 tons. This production was more than 1% up over Q1, so by some 10,000 tons. So the first half of this year when we add -- the first half of the year's production was 1,760,000 tons, and this was down over H1 2021 by 4.5%. This was also linked to the fact that in the first half of the year, we had planned to do a number of renovations, especially in the Przyjazn coking plant. The -- we had 3 coking plants, Jadwiga, Przyjazn and Radlin, where we did coke production. And so the production capacity was in Jadwiga primarily. Przyjazn and Radlin had roughly 97% production utilization in this period. If we look at the type of coke we were producing. So 86% was basically industrial than we've had. We had metallurgic and foundry coke around 0.4%. So we had a split of the various types of coke that we are producing, so blast furnace coke, and as I said, down to industrial and foundry coke.

Thank you. Welcome, ladies and gentlemen. I would like to share some facts on data with you and share some commentary about the sales area we run. Which has generated revenue for our group. As you know, as we look back over the last 2 years, JSW is operating in a very volatile environment, more and more unpredictable. And we, as a company, have to find our way. And also along with our bundle of customers, this is not just the steel industry, but outside of the steel industry in having a volatile environment. And we have very fast-changing variables, and that means we have to find solutions fast for our production. These are not plans where we can stop producing. It's not the case that we can just suspend things and not realize certain contracts. We have commercial contracts, but this is also linked to the nature of our group. These plants cannot be stopped. They're continuous, running plants. And so we have to work together with our buyers, our customers. Some of our customers, as I said previously, this is not just the steel industry. We have clients from the sugar industry, the soda industry, and they operate in totally different market conditions, and they have totally different conditions to work in. And so it's our priority to provide products not only during good market terms, conditions, but for conditions that vary for all parties. During the first half of the year, where this was a special test for us in the entire environment, we were able to find solutions with our buyers, our customers. They enabled JSW to post unheard-of revenue and profit. And at the same time, this is the most important thing that we've been able to maintain our relations with our customers. We have good partnership relations as is the case. It has been the case for the entire past. These are not simple discussions and agreements as we operate on a market where the variability in raw materials changes quite a bit in the course of a quarter. So sometimes we have changes of 100% to 100%. So maybe a few bits of information about what's happened in the market in terms of prices and where we are here as a company or raw materials or commodities company. So if we look at the trends and what we've observed in the first half of the year, so as we compare Q1 to Q2 of this year, so steel production across the globe has grown from 456 million to 492 million. This is an increase of nearly 8% in Europe. We can say that it's around 37 million tons. This is a pretty high level of steel production as we look historically, and it's pretty stable. We can see the difference between the European market and the global market. This is the reason and the fact why we, as a group, strive to diversify our sales. We're not only talking about the EU. Our natural customers are located, of course, in Europe, but we want to offer our products outside of Europe. And that's why we continue to deliver products to India, Algeria, Nordic countries based on long-term contracts. And if we look at the sea-based deliveries, we were also working on the Chinese and Vietnamese market in the past. This gives us a certain amount of stability or equilibrium. The European market is subject to a special pressure in tests having in mind the geological -- geopolitical situation. The cost of electricity. This is something that's been happening since the 24th of February. And having diversified sales, we're able -- better able to move about safely in the market. So these are things, production that we're never going to be able to stop. We have to sell everything as we observe things are happening in the market and observing what's happening with our buyers. We don't live quarter-on-quarter. These are not spot deliveries or supplies based on what you read in comments in the information provided by us in the past during our quarterly presentations, but also in terms of our current reports. That's not why we enter into long-term contracts over few years and decades. This is something that should protect our clients and ourselves to ensure that short-term swings of short-term market conditions wouldn't affect us. I've been in the company for some 20 years. Our experience varies in terms of the volatility on the commodities market, but the return path is always different. Today's situation is extremely unpredictable, and the consequences for the future are not known, they're unknown. We should maximize our revenue and profits for our group. But this should be done in such a way that, over many years, the contracts we have, we should be able to cooperate with our clients. We're not integrated with any steel networks. Everything that we extract, we want to convert into coke and then sell on the marketplace. So coming back to these figures. If we look at spot prices on the market, what happened between Q1 and Q2. You watch these figures, of course. So you have $487, $445 in the second quarter coking coal spot prices. These are above-average high, unseen in the past. What's interesting what's happened in the last 6 months. And to illustrate this. In Q1, the average price you see is between $357 and $620 at the peak after the aggression against Ukraine [indiscernible], so there was a panic on the market as a result. But if we look at Q2, we still see a major spread from $302 to $530. So in such a marketplace, having long-term contracts with price mechanisms, we're able to cooperate with our customers. And some of you have learned about our philosophy that we work on free market negotiations. We take into consideration a certain price formulas based on the preceding quarter of the Nippon Steel method, where we use 1 quarter from -- sorry, 1 month from the previous quarter and 2 months from the current quarter to create the price. This gives us a buffer on such a highly volatile market. So we don't have an impact on the global market. At least here, as a result, we're able to regulate the level of revenue, and we're able to mitigate those major shifts because such major switches and changes in revenue. This leads to a lot of complications for buyers and sellers. So if in such a short period, these values grow or fall, we have to have this in mind, discrete problem in habit. If we look at steel prices on the European market, so you have $1,200 and $1,189 in Q2. So the volatility in the European market for flat goods is not very big. We can see that this is still a relatively high level. But if we look at the European market for long products runs, so we have an increase. Why is that happening? In terms of gross, this is primarily large infrastructural investments. Construction industry, this is something that operates and has a slightly different nature from flat goods. So we are going to the automotive industry with your products. So it's pretty complicated in terms of the nature of its operation. So sometimes, we have a shortage of components or semifinished products to manufacture vehicles. So with respect to -- the electronics side of thing is well known. But there are other shortages, which can inhibit full production. Let me mention here 2 numbers. In the first half of '21 -- or sorry, 2022 and 2021, if we look at the registration of new vehicles, it's down by 14% in June of this year alone. The decline is 15.4%. This shows that there are some problems being encountered by the automotive industry. And as I said, we see that the growth should not be as high. So if you look at coke prices, if you look at the European or the Chinese market, the growth is 4.2% from $636 to $663. In the Chinese market, it's $563, $593. So, the Chinese market, was always different from the European market. The European market, depending on the market conditions and cycles. Generally speaking, price was higher, higher margins, and this is something we observe. There's one additional element why these prices in Q2 are where they are, and this will continue in subsequent periods. The difference is so big for the following reason. We should know that GDP in China, the growth in Q2, of this year was 0.4%. And if I remember correctly, this is the worst growth result of GDP in China since 1993, so from the time with that data is collected and reported. This shows a problem that the Chinese economy might be facing, and this might influence why these values are lower. How does this compare to the prices for our products as we look against the backdrop? As I said, the value of our group, the relationships with our buyers, our customers are a key issue and should operate both during good and negative market conditions. So these relations are the most important. It doesn't mean we disregard the market. We have to look at each buyer, our customers separately. So if you look at some of the steel mills and we look at some of the ones from outside the steel industry, we're able to run negotiations and talks with them to achieve market conditions and retain these clients, not only in this period when we're on the other side of the table. And we have extraordinary profits, but we have to enable them to operate in order to be able to function together in subsequent periods. That's the top priority. Our philosophy, having in mind our distinct nature, is to be poised to a long-term cooperation. We know that practically speaking, we're the only producer of coking coal in this part of Europe, and that's why we have to operate in such a way to be able to work together with these clients for a much longer period both -- so also when the market conditions turn south. And this is something that will certainly help, and then JSW will be affected. So if we look at the prices of coal and what JSW was able to command in Q2. I'm talking about the first graph, and then you have the reference rates as a result of those 3 different price setting mechanisms. So the reference period is a 5-month period, and you can see the peak of the $667, which was the panic price after the breakout of the Ukraine conflict. This means that in Q2, our average coking coal price is $441, and what percentage does that represent of the prices. This is 91%. So it's higher than in Q1 of this year, and this is consistent with what we've commanded in other periods, where the market was much smaller than it is today. Why do we have these long-term contracts in these new price formulas, which are better than what JSW had in the past? Well, the difference between Q1 and Q3 is depending on different price setting methods. So the formulas were price negotiations, where we have different tons forming part of that. And now all customers don't have the exact same mechanisms. And so with such major shifts in prices, we can have deviations negative and positive versus the daily prices, quarterly prices. And that's why we can see that Q2 is much better than Q1, but it's consistent with what the company has been able to deliver in the past having in mind the quality of our coal. But this is happening in a period when we had extraordinarily high prices. And so our customers have asked for a variety of discussions, price reductions because it's an extraordinary situation. Despite that, the company was able to maintain this relationship. And this is a result of the arrangements we've made, and we've been able to profit from this period. So we have buyers, so we treat the steel industry differently from how we treat other smaller customers. So if you look at coke prices in relation to prices in the European market in Q2 of this year, we have a similar situation. So we have an average price $637 and $613. So this is 96% of that average price. So this is much higher than we saw in Q1 of this year. This is also a result of price arrangements with our customers. We should also have in mind that the growth that started in Q1, not all customers were ready for such a situation. What we could see on the previous graph we can say that if we look at Q1 and Q2, prices are at relatively high levels, very high levels. And so the company can be a little bit more aggressive as it negotiates coke supplies deliveries. So these are things that we utilize to take advantage of. And this happened in Q2, where we're able to improve our results. This is a result of certain shifts in terms of sea-bound transportation. So we were catching up for some of the shortfalls in Q4 of 2021. That's why we had the ratio that was a little bit lower in Q1. But in Q2, seeing that there were some opportunities and we had a good positive margin in the steel industry. We allowed ourselves to be slightly more aggressive in a specific segment to ensure that it was a win-win situation for all parties concerned. And we wanted them to take from maximum benefit, and we didn't want to distort and disrupt relations with our buyers. If we look at steam coal, I'd like to say a few words here. The situation is even more varied and volatile. So we have a price of $301 versus $308 in Q1. So you could think that the company had a lower price where the overall market is growing in a totally different direction. Well, this is the distinct factor of the entire national market. We're not the major player. So BGG is the major player, Tauron Bogdanka. These are mines to book a mines that offer steam coal above all. We have some steam coal, and we have production at 2.5 million, 2.7 million tons. We're just one of the additional suppliers. So let me remind you that we have annual contracts. So the contracts arranged for 2022 were put in place in December of 2021 prior to the conflict, prior to the shifts in the geopolitical situation. And these arrangements are in place for the entirety of 2022. But seeing what's happening and having certain inventories from the previous year and even some inventory from 2022 where the power companies didn't take receipt of all of the coal we had. So we did have some inventories, extra inventories. So on top of our annual contracts, our obligations, commitments to the commercial power sector. We had additional tons of coal, which we could sell at higher prices. And our approach was -- is that we had much higher prices for these additional inventories, and they were primarily sold in Q1. So above all, we wanted for the power companies, we wanted to get the higher prices for the first supplies. That's why the 106% in Q1, which is much higher than the index on the national market. So our prices were much higher than the rest of the players in the market. That was the result of that. What's the consequence after cashing in on that sales. After offloading most of the extra coal, we were only able to sell the core tons under contracts for 2022. In Q2, we also had the period in which Mr. Tomasz started with that, our production started to fall. And this was a decline of some 25% in Q2. So we didn't have inventories, which had been sold at higher prices in Q1. We only had our core contracts, and the tons we produced in Q2 were reduced. And that's why we have a difference between Q1 and Q2. And as you compare us to the domestic national index. So even so, the company approached the commercial power sector and so we're supplying almost entirely to the commercial power sector, very little is sold elsewhere. So we renegotiated -- point to renegotiate prices, and so we talk to everybody on the domestic market. And I can say that those renegotiations were completed, and we have reached arrangements, and so we have higher prices in every single line item. But since we're at a conference and we're talking about the results for Q1 and Q2 for the first half of the year, so today, we cannot betray the details, but this will be the subject of discussions at the results conference on the 18th of November when we present the results for Q3. I just wanted to give you this information in terms of our commercial policy and the amount of steam coal sold. So if you look at coal sales, so if you look at aggregated sales, so coking coal and steam coal. So we have coal sales to external customers. Outside of our own coking plants is down by 15% from 2.8 million, 2.39 million. This is the result of the fact that in Q1, the company got rid of its extra inventories. And so we had lower production for steam coal. And this is also the result of having those contracts and tons that we had to deliver. So if we compare H1 of this year and last year here. We can see stability is preserved. There were no changes essentially. The growth is 0.8%. So this is more or less in line with what we did in the first half of last year. So if we have coal sales to internal customers, we're thinking about the integrated coking plants, the 3 of them, Jadwiga, Przyjazn, Radlin. So we're down by 3.7%. This is internal regulation, so this is how we regulate or run our policy of inventories. So we incorporate other things that are driven by the technology. So we have a big investment in coking battery #4. And so for technical reasons, some of those -- some of that -- some of the chambers in that battery have to be emptied to have room and then we have to have the ability, the technical ability to continue doing the construction of battery #4, and that's why we're preparing our coal inventories. That's why we have a minor correction. If we compare this on the first half of the year of 2022 to 2021, we're down to tens of hundreds percentage points. So we're at a very stable level in terms of coal sales. So the priority of the group is for our coking plants to function at full capacity. The markets enable us to do that. The external market has allowed us to do that. Despite the volatility, we've been able to compile coke, maintain inventories in the ports or installation of coal storage charge. And so we have it ready for when the market was starting to consume, and so we had shipments ready. And so as a result, our priority is to deliver this coal to our own coking plants. So we can maintain our production capacity as close to 100% as possible in terms of its utilization. So now if we look at revenue on coal sales to external clients, this is a result of the tonnages. And if you look at the Q1 of this year and Q2 of this year, then making comparison, you can see this is up by 23%. This is a result of higher prices plus the tons we produce. But if we compare H1 2021 to H1 of this year, the increase is 222%, so the difference between revenue to external customers to PLN 1.857 billion to PLN 5.984 billion. This shows you how volatile the market is, how much has changed in the course of 1 year. The average selling price of coal to external customers. Here, we have the same situation. This is a result of market conditions, our arrangements in terms of long-term contracts, and this shows that in Q1 -- from Q1 this year to Q2 of this year, we were able to generate an increase of more than 40%. And if we look at H1 comparison, we can see that with respect to coal, the price is up by nearly 300%. These are 2 factors that have driven the value of the group through its results. I can only say this extraordinary result was achieved by selling coking coal and coke. This is where we own many mostly. The next slide is the sales of coke. So we have to say coke sales to external customers. So it went from 945,000 to 829,000. So in terms of tons, the decrease has been explained last year in terms of inventories, different shifts. We have product being loaded ownership with 75,000 tons. So we have started to sell certain things as of the 1st of January. That's why as a result of this time shift, we have a higher level of revenues. And if we look at Q2, this is a continuation of our policy. So the tons that we have at our disposal, we want to sell the maximum amount to the market. If we look at an H1 comparison, here, we can see a decline of 5.5%, and this is also a result solely and exclusively of the time shifts of these large ships that were loaded with products. And so we want to continue operating at full steam in terms of our production, and this is assured. If we look at the average coke sales price, this is what I said previously about coke. It's essentially the same where we've built our result. In Q2, we saw another increase of the coke price of 35%. It was already high, but it's up by another 35%. And if we compare this on the H1 basis, we can say that there's an increase of 127%. So it's much better and much higher compared to what happens between Q1 and Q2. There's one other thing that's worth mentioning here. So we had the increase on coal. We've had 200% and 300%, whereas the growth on coke is around 127%, let's say 130% rounding it off as we compare the first half of this year to the first half of last year. As you remember, when we announced the results for 2021, the group -- as a group, not just JSW, but the group had a profit of PLN 1 billion, and that was built on coke. This is the business model of the group, where I tell you it's basically something that defends itself. We have such a volatile market. Last year, coke drove the result. And the coke prices were high enough that when we compare to further price growth, it's not as spectacular as it is in the case in coal. But in 2021, we had low-priced coal that was the market, and so we've had a good positive result, thank solely to the coke segment. Now it's the opposite. Now the driver and the group is coal. We're benefiting from this market. And so even though we have the high levels of coal, we're able to generate a margin. We're diversifying the market, converting coal into coke, and we don't have to sell it then to Europe and deteriorate our position. And so this product in the form of cokes and to a variety of destinations as it leaves Europe, and this gives us a bigger field in which to operate. So if you look at revenues on the sales of coke and hydrocarbons to external customers, this is just a compilation of the figures and the price increases. So it's up 19% in Q2 over Q1, and it's up 115% from PLN 2.1 billion to PLN 4.5 billion. And so then the last slide, which is the inventory of coal and coke in our group. As you can see from the mid of 2021 and talk to now. Well, the inventory has fallen substantially. As of 30 June, we had roughly 480,000 tons in inventories. This explains everything. So we have the operational coal, which is in our coking yards, where we have 150,000, 160,000 tons. This is the inventory that coking plants have to have in order to prepare their mixtures, and the rest is at various mines. And if we look at this volume, we can say that the borderline is the minimum safety level that the company has. So in when we present results in upcoming quarters, this will continue to fall. But this shows you that the inventories have been essentially sold off. There are no extra inventories. We only have operating inventories for coal, and this applies to steam coal and coking coal. If we look at coke growth from 170,000 to 230,000 almost. This is a matter of ships for the sea going ships sometimes. At the end of the quarter, we have ships that are in the process of being loaded. And if it's not loaded by the end of the quarter, then that 75,000 ships to the next quarter. So we have 3.5 million tons in the group. So this is a safe level of inventory having in mind the ship sailing the seas, this gives us a safe level of inventory. That's it from my side.

Ladies and gentlemen, if we look at the investments of the JSW Group. So I would show you the investments the CapEx in the JSW Group. And we can show this on an accrual basis without consolidation effects eliminations. So it was more than PLN 495 million, and it was down by 3.5% in terms of the CapEx. If we look at the H1 basis, so we are above PLN 1 billion in CapEx, and the CapEx in the first half of the year is up over the first half of last year by nearly 33%. So it's by almost PLN 250 million. So the bulk of CapEx was in the coking segments. So here thinking primarily about the coking segment in the second quarter. Well, we have PLN 63 million, so down 7% and by some [ PLN 27 million ]. If we look at the first half of the year, we're at PLN 759 million, so this is up 19% over the first half of 2021. So it's an increase of nearly PLN 121 million. So if you look at this segment, the coal segment, we were buying finished goods, more than PLN 70 million, the modernization of mechanized yields from PLN 25 million. And then we've had winning genes transportation equipment, more than PLN 18 million and then other purchases of some PLN 10 million. We also saw more than PLN 37 million in our mining -- expensable mining pits. So PLN 5,000 per meter in terms of the tunneling works. So if you look at the second segment, if we look at JSW KOKS also on an accrual basis without taking into consideration that's why consolidation eliminations. The CapEx was PLN 104 million in Q2, up by nearly 10% over Q1. If we look at H1 2022, our CapEx was nearly PLN 200 million, and it was up over H1 '21 by more than 216%, it's more than 216%. This is linked to the modernization of the coking battery #4 in the Przyjazn coking plant and then also the Radlin power unit being constructed there. So there's PLN 16 million for the rest spent on the rest. If we look at the expenditures in the overall group, the capital expenditures in the group, having in mind the paydowns of lease payments and loans in Q2, this was more than PLN 605 million of CapEx compared to Q1, which was up by almost 12%, so some PLN 64 million. So if we do a comparison of the first half of this year over last year, we exceeded PLN 1.146 billion. This was up by more than 23%, which is more than PLN 215 million. So thank you very much for your attention.

Welcome, ladies and gentlemen. My name is Robert Ostrowski. I'm responsible for finance, and I can give you some information about the financial results of the group in the first half of the year. So after present -- after the information has been presented by my colleagues in terms of production and the market review. The question then is, what does this mean for our financial results? So the revenue for the first half of the year was PLN 10.9 billion. That's an increase over H1 of last year by 161%. And so this situation in Q1 and Q2 contributed to the H1 results. So in Q2 of this year, we had revenue of PLN 5.972 billion, and this was up by 21.1% over Q1. It's worth mentioning that comparing to Q1, so 1 quarter -- the second quarter of this year gave us higher revenue than in the first half of last year. So that's up by some 43%. So our revenue was up by some PLN 650 million for coal. So the price delivered an increase of PLN 850 million, but the volume actually reduced the revenue, lower volume by PLN 232 million, so the volume is down by 29% for steam coal, and for coking coal, it was down by 5.7%. In the coke segment, we had higher revenue by some 18% over Q1. Prices improved this by PLN 56 million. But -- the average price of coke was up by 35%. But the volume was down by 12 percentage points, and this reduced by -- revenue by some PLN [indiscernible] million. We also had an increase in revenue on hydrocarbons to some PLN 70 million. And so we had an increase by some PLN 51 million. So just hydrocarbons this usual for the sale of tar, coking gas and [indiscernible]. If we look at EBITDA of the group on a consolidated basis, in the first half of the year some PLN 5.8 billion, but we had quite a few nonrecurring events. And so without those nonrecurring events, it was PLN 6.48 billion. In the corresponding period of the previous year, it was PLN 339 million. So we see a huge progress in EBITDA. But due to net of one-offs -- the EBITDA was PLN 3.187 billion, basically up by 50% of the EBITDA of Q1. So the net result is PLN 4.2 billion in Q1 -- in H1 of last year, we had a loss of PLN 330 million. So we have an improvement in excess of PLN 4.5 billion for these 2 corresponding periods as we compare them. Q2 Delivered a net result of PLN 2.35 billion, and it was up over Q1 by 27.3%. Maybe a few words about our revenue in Q2 -- so the negative factors, I mentioned it previously. So we had the impact of coke sales volume, which was PLN 230 million almost. And then the second biggest impact or factor was the impact of coking coal sales volume decreasing to PLN 132 million. And then the third important element is the impact of steam coal sales volume and this was down by 29% and this meant a decrease of PLN 100 million. Everything else is price related. The biggest contributing factor was the impact of coking coal price change, and this translated into PLN 885 million almost in revenue. The second most important price-related factor, was the impact of coke price change. It was up by 35%. And this translated into an impact of PLN 576 million. And the third important factor was the impact of revenues from other sales primarily hydrocarbons. And this was an increase of more than PLN 50 million. And generally speaking, this category delivered an extra PLN 70 million almost. The next important factor to be discussed is our expenses by nature. A lot has -- much has happened here in Q -- sorry, in H1 of this year. Our cost base was PLN 5.9 billion last year, the costs were PLN 4.7 billion. So this is an increase of nearly 26%. Of course, the main category, contributing to higher costs or employee benefits, we reported information previously in terms of a one-off payment, which was posted as a Q2 cost. So PLN [ 48 ] million in JSW. So -- so employee benefits account for 52%. Last year, it was 49%, but this was a result of the additional bonus and that's an additional 8% of all costs. In Q2 of this year, we had cost of PLN 3.25 billion. And so this is a result of the one-off payment of a premium or a bonus in JSW. So this is [ PLN 3.215 ] billion. If we look at other costs, maybe I can say a few words about materials and energy. Well, they grew -- materials grew by PLN 69 million and by PLN 38 million in JSW alone. So this is a result of the materials for expendable mining [ pets ] as well as the shields. So these are really operating expenses. Then we have the renovation company. We had a larger number of renovation services, up by some PLN 27 million. Then we have a 2.5% difference in terms of the cost of energy. This is a result of lower heat prices as we didn't need that energy in Q2 because we had better weather conditions. If we look at external prices, they're up by PLN 25 million, so an increase of 6.3%, so PLN 29 million in JSW, so mostly renovation services and other mine services, getting rid of mining damages or other operating aspects. So the lower depreciation by almost PLN 29 million. So it is down in Q2 versus in JSW, where we had costs down by PLN 43 million in terms of depreciation of tunneling works -- it's a small technical break. Now we have to remember and we should have in the back of our head, that the level of costs by nature also relates to the magnitude of production. So in the first half of this year, was up by 4.8%. This also had an impact on the cost that were generated. If we look at coke, coke production was down by 4.5%. But as you remember, the ratio of coking coal or coal to coke is 1.4. And so in Q2, so we [ had to ] lower production and the production of coke was up by 1.2%. And so this also had an impact on the costs. Please remember that Q2 has this additional charge in the form of fee bonus paid to employees and that's why the costs are substantially higher. So if we look at this in a slightly different frame in the group, we had PLN 2.7 billion of costs in Q1, net of the one-off bonus is more or less similar to what we saw in Q2. It's up by 1.3% only. So having in mind, of course, the assumptions related to production volumes. So if we figure about the cash bonus, we have consumption of materials for tunneling roadways and doing renovations and we have more services up by PLN 28 million because we're doing more work. If we look at external services, we can say the costs are up by PLN 25 million. This is renovation services as well as to handle mining damages. The other things showed us lower costs -- contributed to lower costs. So we had depreciation and amortization down by PLN 29.2 million and then the employee benefits net of the cash bonus. So this is down by PLN 22.5 million. We should remember is 1 of January, we have an increase with employees pay rise of 10%, and this is affected H1 and will affect H2. So now if you look at the mining cash cost. In Q1, it was PLN 446 per tonne. In Q2 is above PLN 500 tonnes. Having in mind the falloff in production to run rate, so we can see the mining cash cost is up by some PLN 47 as a result of the decline in production. So this has a pretty major impact on the mining cash cost. The second factor, which had a negative impact, our external services. So this is a difference of PLN 14 per tonne. And so I talked about them previously. The same is true, we're talking about consumption of materials and energy, the costs are up. Mining cash cost is up by some PLN 12 as a result. And then we have employee benefits. Well, net of the cash bonus, this reduced. This reduced the mining cash cost by PLN 20.27 per tonne. So we also had a one-off bonus of a low amount of PLN [ 43.9 ] million. We had higher headcount by 165 persons. This also increased the cost of Q1, that's why we have a decrease in Q2. And we also had a higher provision for unused holidays, PLN 15 million. So the mining cash cost, if we take into consideration all of these factors as well as the cash flows, that's PLN 631 million. But the cash bonus, which is a one-off is very important when we analyze the mining cash cost. If we look at the cash conversion costs, it was below PLN 200 million -- sorry, PLN 200 in Q1. And now it's at PLN 215 in Q2. So the biggest factor was employee benefits as well as the bonus of more than PLN [ 16 ] million. Another negative factor [indiscernible] admin expenses, which were up by some PLN 4 million. So we had higher taxes and fees and employee benefits also for [ PFR ] and also to release our reserved provisions for real estate tax which was not charged in the first quarter. Another factor which makes a negative impact on the cash conversion cost, which is our external services net of transport costs of coal feedstock. And so the difference here is PLN 3.48. So the volume reduced the cost because we had an additional 10,000 tonnes of production. So this is PLN 2.28 million -- PLN 2.28. Then we had [indiscernible] effectiveness. So these are certificates, and we had lower licensing fees of some PLN [ 700,000,000 ]. And that's why the cost in Q2, despite the higher volume of coke production is higher than in Q1. So please remember we don't take into consideration the cost of the coal feedstock. And here we have a slide combining cash cost and the cash conversion cost on a compiled basis, then we should see this in -- for the first half of the year. So an absolute value is PLN 3.8 billion. In the first half of last year, it was a little over PLN 3 billion. So this is an increase of more than 21%. Q2 for mining cash cost, is PLN 2.147 billion, and this is up by some 41.3%. But here, of course, the one-off cash bonus is important. So we had 2 negative contributing factors in terms of the volume for [indiscernible] and overall expenses PLN 136 per tonne. So in the coke side, the cash conversion cost was PLN 320 million -- PLN 302 million versus PLN 362 million, so it's up by 25%. If you compare Q2 to Q1, it was up by 9.2%. And we had 1 positive element, which was volume. And -- this is PLN 2.28. But the other costs when totaled, which were higher, increased the cash conversion cost per tonne by more than PLN 21. Here, we have a graph illustrating our bridge. We can see the impact exerted by the major drivers between Q1 and Q2. Again, net of one-offs. With the total impact of those one-offs is PLN 697 million. The biggest impact to a driver is PLN [ 470-some ] million, which is the one-off cash bonus. We did some impairment tests for the assets and this is PLN 169 million also this is a one-off. It was PLN 80 million in Q1. As a result of what happened at Pniówek mine after the mining accident, we have a charge of PLN 21 million. And then we have the cost of these events at Pniówek and Zofiówka. It's more than PLN 30 million. So the total impact is PLN 697 million of one-offs in Q2. The volume and prices of coal had a positive impact of PLN 625 million. Then we had the impact of coke sales volume and price. This was an increase of PLN 346 million. So we had impact of changes in product inventory to PLN 117.6 million, and we had a negative impact. So we had the impact of cost by nature, PLN 513 million. Impact of impairment loss, PLN 110 million. And so if we net out the one-offs, the EBITDA in Q2 is PLN 3.187 billion. And then if we look at EBITDA in the operating segments. So the change in coal segment drove up EBITDA by PLN 669 million. In the coke segment, almost PLN 146 million is up. The other segment has a decline of PLN 10.4 million. Then we have consolidation eliminations as PLN 253 million, in red. And then we had the one-offs of PLN 697 million. I talked about that previously. Maybe now a little bit of information about our working capital. So the total assets is PLN 21.5 billion. If we look at the loans and borrowings on a short-term basis without provisions, and trade other liabilities and other current liabilities, we can see the total current liabilities is PLN 5.48 billion. That means our fixed capital is PLN 16 billion. And if we look at property, plant and equipment and other assets, we have the net working capital in the group, which is PLN 2.67 billion. Here's another way of calculating working capital, starting with inventory and trade receivables in overpaid income tax and cash which is PLN 4.5 billion. And this is the main ingredient you could say. Then we have PLN 8 million other current assets. And then if we look at our current liabilities, so is the trade liabilities. And then we come down to PLN 2.67 billion in net working capital. Two ratios, we regularly show you which just fixed capital to noncurrent assets ratio is at 1.08. So our fixed capital more than covers our noncurrent assets. So without incorporating any of our provisions. So at the end of June of last year, it was 0.83. So that was [indiscernible] situation. But if you look at net debt, net debt at the end of June of this year is negative, which means the company has a good standing. It's worth PLN 2.7 billion. So at the end of the period, we have more cash than the value of our loans and borrowings and lease contracts, which are in the balance sheet at the end of June. Now a few words about our cash flow. At the end of March, we were PLN 2.7 billion and went up to PLN 4.5 billion. What are the contributing factors. We have depreciation of PLN [ 297 ] million, we have profit before tax of PLN 2.9 billion. We have increased inventories by PLN 142 million. We don't have any problem with recovering our receivables, but we have an increase here of PLN [ 537 ] million. Increase in trade and other liabilities PLN 633 million. We're paying everything on a timely basis. Then we have investment expenditures, so investing cash flows. So this is PLN 1.2 billion. Well, this also includes PLN 700 million spent to buy investment certificates in our closed-end capital fund. So then we paid down loans and borrowings according to the schedule primarily PFR. So we had the liquidity loan. And so we paid down by some PLN [ 90 ] million for preferential loan. And so the repayment of loans and borrowings is almost PLN 114 million the negative and the PLN 49 million for lease payments. And then we have other financing flows and the FX difference of PLN 8 million. And that's why at the end of June, we had [ PLN 4,546.3 million ]. That's it in terms of finances and the capital group standard. Thank you for your attention.

So ESG was to be presented by the fifth Management Board member, Mr. Artur Wojtków, who is elected by the employees. He's responsible for other employee-related affairs. He's -- so I want to pass on some important information. This is in the strategy -- so I can show you the milestones that the company wants to achieve -- in our pro-environmental approach. On this slide, we've indicated the main things we want to be -- achieve climate neutrality by 2015 -- in 2030, we want to have reduced our carbon footprint. And then the last green box, this is our cooperation with business partners. They wanted us to the extent possible to define to disclose or divulge our commissions. We've been doing that since 2017 with respect to Scope 1 and Scope 2. Now we have Scope 3. So to those of you who are interested, we want to reduce Scope 3 emissions, which is the CO2 equivalent linked to the cars we use in the company. So the social [ sites ] of the employees' society. We know where we operate. We know where our role is. We know who we want to work with. This is supported by the company's foundation. It analyzes the needs, the applications that are submitted to the foundation. There's a lot of support that's needed. We also talk about what happened at the beginning of this year. So, a, for Ukraine, so we're providing assistance to the city in terms of transferring major amounts, for [indiscernible]. And we also get involved in assistance, not only financial aid, but organizational assistance and physical assistance. We had trips organized for children [indiscernible]. We could mention quite a few things here. So we had our social acceptance. Something [indiscernible] wrap this up. We continue to do this. We're coordinating our activities with this city for this to be treated as something that we're doing together. So the city and the biggest company here, I won't mention that [indiscernible] are traded as a type of presenting our brand to the external royalty world championships or the championships achieved by our hockey team or our volleyball team. And basically, the football players want to aspire to that level. And for us, this is a great source of pride that they wear our brands on their shoulders and [indiscernible] on the shirts. Then we have governance. The Investor Relations department always indicates what we should do, how we should act, and that's why we apply the code of best practices. They are well-received. I'm pleased that we've been able to secure the industrial security certificates, we're talking about how we work together and present ourselves to the outside world. I'm not sure what our labor affairs Management Board would say, I would talk about ESG as the CEO. So what we're doing in the field of ESG is very transparent. We show how much we want to spend. We show what we want to achieve in the short and long term, and then we do it. I do have comments in terms of how the local government is treating us, I'm talking about the local mayors of towns and cities, not very -- they don't accept everything. And it seems to me that what we're doing should be a source of satisfaction that they have a company that operates here that's listed in the WIG20 index, which brings splendor to the people who work here, but also splendor to the operating areas of these local governance. This is -- takes the form of decisions made that block our operations, the development of operations. There are certain decisions we need when we secure concessions or licenses and so sometimes their behavior, the conduct is quite odd. They say that they're taking their caring for the local population or they're talking about green energy generation. I know that our deposits can't be pushed anywhere else, they can't be moved anywhere else. And certain activities taken by the cities and communes in towns. Well, this -- the things that we do lead to some economic mining damages. We're spending PLN 100 million last year to repair these mining damages. This year, we've spent PLN [ 52 ] million. And we're not doing this just because of legal relations. We're doing this because we bear a full responsibility of working in this environment. But moving in the direction of renewable energy generation. To some extent, we look at our product differently. Our product is needed to develop renewable energy, low emission or 0 emissions. So without steel, you don't have [indiscernible]. But if you want to build 1 tonne of steel, you need 516 kilograms of our product. And if you look at the wind turbine. We need a lot of steel, so we can actually make these calculations. So I would like to ask the local governments to analyze the benefits that come from. Well, for employees to think about the people who work in our company. I think for the the city to think about the citizens who are working in our company's employees. So it's not only about low emissions, but it's also the product being needed to develop the civilization. So I'd like to thank all the people for attending today's conference. Now we can come on to the questions' session.

So we have a number of questions we received during the conference and prior to that. So -- if we have more questions than the IR department will clearly provide responses. So I'd now like to ask those questions to be [ post ]. Question number one. Could the management Board explain why with higher energy prices, the sales of raw materials in Q2 in JSW are lower on a Q-on-Q basis. So [indiscernible] is selling coal for more than PLN 30 per [ gigajoule ], where we're selling for PLN 12 per [ gigajoule ]. So our prices are lower than in Bogdanka. PGG in 2023 will sell coal between PLN 22 and PLN 27 per [ gigajoule ]. Is this time to revise the sales policy at JSW?

Ladies and gentlemen, this question is directed to me. I think I responded to this question to a great extent because I showed you the results and the prices that we've commanded. I could tell you about the achievements. I mean especially in Q1, where the company, to a large extent, sold off its inventories at prices that were much higher than the annual agreements. This took place and this was reflected in our first quarter results. So this is well above the Polish national coal price index. This situation did not exist in Q2. We only used the core prices. And this is a period in which we renegotiated contracts and so we were able to strike a compromise between ourselves and the commercial power sector. And these are things we'll present to you at subsequent earnings conferences, especially in -- for Q3 and Q4. So these are things that have been reviewed. And so what we're doing here is fully aligned to what's happening on the domestic coal market. When I heard the level of prices being quoted here, I don't think we can react on what other companies are doing. The coal we're selling to the commercial power sector and all the additional volumes outside of the core contracts prior to renegotiations well, are certainly above the level that was listed here. And the second part of the question, if I remember well, stating certain speculations about a price level that might be achieved in 2023. Please allow us not to comment on that because these talks are underway. These talks have not been completed. If they're done, we'll have the opportunity -- for us as a coal company to report to you what the market will look like and what's going to happen in 2023.

At present, steam coal prices in -- are higher than coking coal. So do you see changes in competitors. Is this a good time to sell more coking coal, semisoft as well as steam coal at [indiscernible] prices?

So I'll try to respond to this question. I think there are 3 elements, if I remember well. One thing the production, the change in the production profile by various competitors from coking coal to steam coal. Ladies and gentlemen, everybody makes different decisions depending on the philosophy of cooperation with its customers. Some producers from the U.S. are willing to operate on the spot markets. And I have the ability to produce typical steam coal, and they do that in Australia. They're much more reticent. That's a region they traditionally are famous for very high-quality coking coal to produce steel for the metallurgic industry and so their reticence, they don't want to do that at all. They do esteem long-term contracts with steel mills. We at JSW, we were showing you our strategy not to [indiscernible] up until 2030. We're a commodity company. It's priority in core business is to produce raw materials, we can't even call it coal. We say raw materials to produce steel. This is what Mr. Cudny, the CEO said a moment ago when talking about our ESG policy, what we produce and what percentage of that for where we are in terms of shifting in green programs and various environmental facilities. Any changes here would be very difficult to justify and they would be myopic or shortsighted. If we have certain shifts in winnings, in profits. And so if we have certain difficulties for unexpected geological reasons, so we have a short of coking coal, and we're able to use the northern mines to produce a little bit more steam coal. This is only being done to that purpose. We don't want to change our profile, and this is consistent with what I said to you during our sales presentation that we're interested in our long-term partners, the steel segment. This is a segment. This is part of the full-fledged energy transition in the EU. This is our core business, and those type of changes would be shortsighted. The second thing, let's remember, that our task and our position, the position we have here in Poland, some 90% or even more of our production of coal. For steam coal prices is sold here in Poland to the commercial power sector. So these -- we have different conditions from the ones we see in the global markets and JSW is not the main player. We're only a secondary player. The quality of coal we have determines 1 thing. The steam coal we have is not even fully fit to be used by commercial power sector. It has to be mixed with other coal grades. So these type of potential changes are not plausible from the point of view of the raw material we have, it would be fully [ odds ] with our strategy. That's not why we enter into long-term contracts. This would be at odds with our philosophy of cooperation. And the third thing, as I mentioned, is the Polish market is a bit different from what's happening else around the world. But look at 2021, look at 2022 and the results we've achieved. The record-breaking results are being generated, thanks to selling coking coal, coke as well as hydrocarbons. I think that's enough.

The next question is about 1 of the most recent reports in terms of impairment losses. What is the value in [indiscernible]?

Thank you for the question. Yes, we regularly take impairment losses. We're talking about cash generating units, CGUs. The problem is a result of the fact that the recoverable value, which was calculated based on the test at the end of the year had generated 0. And so -- the accounting value is higher than the recoverable value. And that means we have to keep on taking charges for the CGU.

So is this a result of having not enough volume as opposed to the official plan of the company? Should we anticipate more impairment losses in Q3 and Q4? When do you think that does impairment losses will stop?

So this is a pretty complicated question. I'll try to simplify in my response. Having in my response to the previous question. As long as the recoverable value is going to be lower or equal to 0. With respect to the book value of assets that's the reason why we're going to have to keep taking these impairment losses. So we'll assess this at every balance sheet date, and we'll make a decision in terms of either taking an impairment loss or reversing that. And I think we'll get to that moment in time.

The next question is about the dividend. There are more questions. So I think in response we'll allow others -- we'll respond to others. So the payment of a dividend is a necessary condition to improve the share price of JSW on the Warsaw Stock Exchange. Can't the Management Board declare that it will pay a dividend for 2022. Let's say, of 30%. Can it declare that it will do that?

This is a question that recurs at every conference. We understand that because as we look at the results quarter-by-quarter. This question is merited. As I explained to you, we have financial contracts in place with PFR. And these were loans that were taken out in previous periods, we have a condition where it says that no dividends can be paid. The loans from PFR are very attractive in terms of the cost of money and it wouldn't be sensible to pay down those loans in advance. So we are working together with financial institutions, including PFR to improve the financing structure. And so topics about changing these conditions with the PFR institution. This is something that's being discussed. I don't want to prejudge the outcome. So I think I'll be able to say more in some time in the future, a couple of quarters down the road.

So another question is about electricity. To what extent is -- does the company have electricity for 2023? What percentage is secured and at what average price? And what was the price and volume in Q1 2022 in JSW S.A.? And what is the security or how much security do you have in terms of the electricity purchases for next year? And how much has been purchased in '23, '24 and at what prices?

I'll try to respond to this question. Above all, JSW has a 2-year contract to purchase electricity. It's a framework contract, a master contract, and we can purchase energy from the wholesale market on the exchange and we enter into tranches and we use the indexes that are set by the Warsaw [ Mercantile ] Exchange. If we look at the volume, during the H1 of this year, we purchased nearly 500,000 megawatt hours in the first half of the year. We have spent PLN 292 million. So the price was PLN 585 for a megawatt hour. If we look at the forecast for the latter half of the year, since we have access to the Warsaw [ Mercantile ] Exchange, per commodity exchange and the wholesale market, we're tracking our needs, and we see how much we're producing ourselves, what we need using [indiscernible] generation as we utilize methane for commercial purposes, and we can then enter into various tranches. In terms of 2023, as I mentioned, this year is covered by this contract. And so we have some 65% of the energy is secured. So it's 510 gigawatt hours of electricity that's been purchased directly. So the average price is PLN 566 per megawatt hour. The rest of the volumes, as I mentioned previously, will depend on how much we actually need, how much we produce on our own, and it depends on what's going to happen with price hikes and then we'll be able to purchase more from the exchange -- power exchange. In 2024, just as in 2022 and 2023, there will also be a framework contract, which will enable us to get access to the power exchange at present, we can say we're wrapping up the process of selecting a supplier.

How many longwalls were operating in 2022? How many should be in operation in [ '22 in ] Q3 and Q4, what is the plan for production in 2022?

As I mentioned, when we discussed production and we compared this to last year, we'll have around 27 to 28 active longwalls. This will change depending on the phase in which they are. Generally, we want to have 24 active longwalls up to the end of this year. That's the plan subsequent to that.

Having in mind the lack of steam coal, has the company been asked or has it decided to ramp up the production of steam coal in the second quarter of this year?

So I'd like to refer to what Mr. Bob just mentioned. We're a company that produces above all coking coal. And this -- here, we have all of the various coking coal grades, 34, 35. But if we look at the flotation. So we have steam coal produced in that way. Mr. Bob just said, the steam coal coming as a result of the flotation process is only used for steam coal as a mixed [indiscernible] mixture. So the events from the accidents that took place in April mean that we have 7 sections. And this is where we're operating and focusing. So we had to reorganize our efforts and also reorganize the staff, and we have to catch up of almost 100% of what the mines in the South were producing because this Pniówek and Zofiówka [indiscernible] over there. And so basically, the northern mines of Budryk and [indiscernible] took over that production responsibility. So those 2 mines, 1 of Budryk as well as the combined mine according to our strategy and investments, they should be able to generate the bulk of the winnings of coal as is the case in the Southern mines. So at present, we're at 56%, 59%. Sometimes it's higher. And that's why moving back production. Well, this means that we have more steam coal than we had planned. This is a natural process, and this is something that's happening in these mines, but this is not stopping the process we had in the strategy where we would like to drive up the percentage of coking coal.

These are all the questions we have. So thank you very much.

So thank you very much for your participation in the conference. I'd like to thank all of the employees of the group for their activity and participation in achieving our production targets. I'd like to thank all of the people who are supporting our production. And I'd also like to thank all of you people who have been here today to prepare this conference and base of the substance as well as the technical matter -- technical affairs. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]