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

Good morning, ladies and gentlemen. My name is Ryszard Janta. I'm the CEO of JSW S.A. I'm very pleased to be able to welcome you to the results conference for JSW Group for Q3 and the first 9 months of 2024. So today, we would like to present to you the results along with our CFO Remigiusz Kryzanowski. Will also have the development Deputy CEO, which is Jaroslaw Kluczniok as well as our technical and operational Director, Mr. Adam Rozmus. Ladies and gentlemen, before we begin with the merits of the conference, I want to give you two pieces of information quite brief because Jolanta Gruszka is not present. So when we talk about the market environment, so Adam Rozmus will discuss that today. The second piece of information, as you certainly know a few days ago the company reported that it is beginning the process of a strategic transformation process. This is very important information about the directions of the company's operations for upcoming years. And so having in mind today's conference, we'd like to leverage an opportunity after we discuss the normal results slides. We want to talk with you about some of the information about our plan, what is the potential, what are the borderline conditions, how the results will be spread over time? And what are the major pillars and streams of activity. So let's go back then to the earnings conference, and we'll begin with the key highlights. And so when we talk about Coal production in Q3, so it was 3.053 million tonnes. This is an increase quarter-on-quarter of 6.4%. And Coke production in Q3 was also higher by more than 11.6%, and it came in at 812,500 tonnes in Q3. The average number of active longwalls was 25.3. This is also a number higher than the previous quarter by 16.6%. So our fundamental ratio, which is MCC is down -- so in Q3, the cost of extracting 1 tonne is PLN 782.83, which is down by 13.3% over the previous quarter. If we look at prices of Coke as well as Coal, they're down. So it's down by 9.6% in terms of Coal to PLN 854 per tonne while the coke price is down by 5.1% to PLN 1,305 per tonne, and that led to a diminishment in sales revenue to PLN 2.69 billion. EBITDA in Q3 was PLN 57.7 million. And our net result was negative at PLN 308.9 million. Now I'd like to ask my colleague, Adam Rozmus to talk about the operating results of the group.

So if you could give me the directional device. So ladies and gentlemen, as we compare the 9 months of 2023 with the 9 months of 2024, we can say that extraction is down. This is primarily a result of some fire, in Pniowek -- and we -- at the turn of '23 and 2024. And then we also had a fire in the Budryk mine. And so the measures we've taken in order to remodel those mines have led to a situation that if we compare extraction in Q2, which was much lower than Q3, we can say that we've noted a substantial increase. So basically, our measures are producing results. And so that means we have a higher number of active longwalls in Q3. And so this is similar to what we saw in 2023. So this is the proper direction. And so if we look at the quarter works, so we had some optimization done there. We had to do some more quarter works as opposed to the production in order -- should be able to open up long walls on a timely basis. So ladies and gentlemen, if we look at Coke production, if we look at the first 9 months of this year versus the first 9 months of last year. It's down because of some of the production related reasons. But if we look at Q3, we have an increase. So this is the expected positive direction as a result of leveling out our production. So ladies and gentlemen, having in mind the market environment, we have some slides about steel production. So global steel production, raw steel production. So it's down by 9.5% across the globe. And so it's down to around 440 million tonnes. In the EU, steel production in Q3 of this year is down versus Q2 of this year by 10.5% and so it's fallen to 30.6 million tonnes. If we look at steel prices, we can see that the amount of -- we have some stagnation in China and the crisis in terms of real estate, that means that Chinese steel producers have to export more steel goods. And so this major increase in exports, especially the Asian countries, that means they're sending more to European Union countries, and that means that the European steel milling industry has a negative impact. In Europe, so we can say that there's limited demand. So if we look at the European motor industry, automotive industry, which is the key consumer of flat rolled steel, and so it's particularly affected by this softer demand as well as the fiercer competition from electrical vehicles from China. So ladies and gentlemen, this topic in terms of the European market and the demand for flat steel, this is something flat-rolled products. That's something that I've already discussed. Now we can talk about Coke demand. In Q3, we saw -- so coking coal prices were down because there was an oversupply on the global market. So if we look at what's happened in this situation, we had basically less activity amongst the Indian buyers. So we had price down to $180 in September; the last time that we saw that was in the middle of 2021. At the end of September, we can say the coking coal market basically had started to move up because of greater demand and purchases by Chinese players. And so we consider premium global on the 30th of September was above -- higher than $204. So it was back -- came back up a little bit. Now if we look at the slide which depicts the relationship between our group's prices and global prices. So we have a price formula based on benchmark prices. And so basically, we're able to level out or equalize the pricing to ensure that there's less impact volatility impact. So if you look at the daily quotations, we have basically a reference price which is negotiated with the buyers and so we draw the average for hard premium volume. So we can say that the way in which these prices are averaged -- we use the average -- we use the reference prices, we use the quarterly prices based on the average prices from the previous quarter, and we have the monthly prices based on the averages from the previous month. And so this change will not change the reference period or the benchmark period, which is depicted on the graph. So we can see that we have the impact of 5 months from the previous quarter and the 2 first months of the current quarter. So ladies and gentlemen, in Q3 of 2024, we can say that the coking coal prices of JSW moved up by 10 percentage points with respect to the benchmark price because we've improved the mix of coal grades sold. So we have Pniowek, Borynia and Zofiowka grades being sold in the overall mix to a greater extent. If we look at the Coke with respect to the premium, the low vol, premium low vol, we can say that if we make the comparison to European blast furnaces, coke prices, So it's down to around 87%, that ratio. So it's more difficult in coke as opposed to coal to find a uniform benchmark, which you can reference. The price that's commanded by JSW. So we compare basically the average price of all the coke grades sold by JSW and we compare with or draw that comparison against the blast furnace because blast furnace coke sold to European markets. So we also have overseas markets where there was a decrease in prices and so the prices are set on that market, having in mind what's going on in the overall market. And so we can say that all of these things impact the coke prices. And so this is something that we've treated as the benchmark. So if you look at steam coal prices, so JSW with respect to PSCMI ratio, so basically, there is a large amount of surplus that's been imported in previous years of steam coal. Based on the data, we can say the production of electricity from January to September of this year is up by 3% compared to the previous year, comparable period of the previous year. And so basically, the amount of coal used to do that production is down by 10.7%. So we're basically -- and we have to compete with the typical suppliers of steam coal, and we're just one of the smaller players. And so the ratio that we achieved was 94%. So ladies and gentlemen, if you look at the sales of coal to external customers in Q3 versus Q2. So it's up by some 80,000 tonnes. That's up by 12%. But if you look at coking coal, it's not on the slide, it's by 34.6%. And this has made it possible to maintain the similar level of revenue as in Q2 despite the fact that coking coal prices were down by 10% and steam coal prices were down by 5%. If we look at the year-to-date figures of this year so it's down by some 34% compared to 2023. And so we had a lower volume of coal sold. So it's down by 17.7% and then the price is down by nearly 17% for coking coal and 36% by steam coal. So we can say from January to September, the overall decline was by some 55%. And so we have this in mind as we look at the supply of products. And so if you look at the sales of coke, Q-on-Q it was down by 3.2%. The average coke sales price is down by 5.1%. And so then basically, coke and hydrocarbons revenue sales were basically down by 7.5%. So if you look at January to September, so we had a similar level of sales of coke to external customers, but prices were down by nearly 13%, and that means that the revenue on the sales of coke and hydrocarbons to external customers was down by 16.3%. Now if you look at the inventories of coal and coke in the JSW Group. So sales were down by 3.2%. Prices were down by 5%. And so that we had that in the total impact down by 7.5%. So as I said, if we look at coal inventories, so coal inventories are up by 9%, and this is with respect to steam coal. So this was 868,000 tonnes. But if we look at coking coal inventory is down by some 27,000 tonnes but this also takes into consideration the technological and contingency supply within our group. So ladies and gentlemen, the next slide, is about our investments as part of the group. So if we make a comparison of Q3 2024 to Q2 2024, CapEx incurred in the group was down by 40.7%. This is PLN 562 million less. So in the coal segment, we had a decline of nearly 40%. And so investment in construction was down by PLN 44 million and purchase of [indiscernible] is down by PLN 72 million. And then to reinforce longwalls was also down and we're down by 3.8%. And we were down by minus PLN 357 million. So in the subsidiaries of the company the expenditures were down by 52%. And so we can say that the coke in battery #4 had a decline in its CapEx by 5.4%, also in Radlin and so it's down by 5.7% in terms of other investment tasks as well. So if we make that comparison, of the first 9 months of this year to the previous year, we can say that CapEx is higher by some 5.8%, and that's because we had more spent on investments than we had basically the [ IFRS ] and then we had the cost of external financing. And then we had a clear decline in terms of the purchases of readymade durable goods as well as the expensable mining bids. Under the Coke segment, we can say that investments were down in Radlin as well as [indiscernible] coking plants. So making these optimization efforts in terms of our investments, this is something that ensues from the position of JSW Group, but this does not impact our strategic investments for the functioning of our group. And we're fully aware of their level. And this will reference the production capacity of the group in the upcoming years. So thank you very much for your attention.

So welcome, ladies and gentlemen. As usual, as a matter of tradition, after having listened to the operating results and what's happening in the market environment, what's the market context, now we can take a look at the impact it exerts on the finances of JSW Group. Later, we'll make comparisons between Q3 2024 and Q2 of this year, as well as the 9 months year-to-date. If we look at the first slide, it shows us sales revenues. We see a slight decline of 2.6% in sales revenue to PLN 2.69 billion. If we look over the first 9 months year-to-date, sales revenue is down by 26.1% to nearly PLN 8.87 billion. What is the impact on EBITDA net of nonrecurring events in Q2 -- in Q3 2024. And if we make that comparison to Q2 of this year, we can say that it was PLN 57.5 million. And if we look at the first 9 months of the year, it was PLN 887 million. If we look at net working capital, including our closed-end investment funds, let me remind you that in long-term assets in the balance sheet, but it's something that's available on an ongoing basis to the company. And we tap into that when there is a need to do that, and since operating revenue is down, that means that we have some liquidity gaps. And so we compare this with 30 -- if we compare the two dates of 30 June of this year and 30 September of this year, so we can say that net working capital is down from PLN 5.1 million to PLN 4.1 billion, and this is a result of tapping into that fees. If we look at net result, Q3 of this year is a net loss of PLN 308.9 million. And year-to-date, we have PLN 6.37 billion minus. And the major impact is linked to write-downs of -- nonfinancial write-downs of noncurrent assets. So if we take a look at what contributed to this revenue change. So if we look at what happened in Q2 of this year, sales revenue was PLN 2.77 billion -- almost PLN 2.76 billion. And sales revenues in Q3 were PLN 2.69 billion. So the negative impact on sales revenue, we can say this was primarily the result of the impact exerted by coking coal price change. So if we look at the impact of the Coke segment, so this is a volume side impact as well as a price impact. So it's PLN 33 million and PLN 52 billion, in both cases those are negative impacts. If we look at some of the positive impacts, things that contributed to the sales results. So we can say the impact of coking coal sales volume. So we were increasing production quarter-on-quarter. And then we had the impact of steam coal sales volume also exerted a positive impact, made a positive contribution. And then we had the impact exerted by revenues on other sales, which was nearly PLN 22 million. So now if we look at expenses by nature, maybe this time, I would start with the 9 months year-to-date versus the 9 months year-to-date last year. So it's down by nearly 1%. And so I would start at the 11 months figure because it would be good to look at what's happening quarter-on-quarter where the change in cost is bigger. So it's down by 10.5% to PLN 3.7 billion, whereas it was down to PLN 11.7 billion for the first 9 months of the year. This somehow confirms a good trend. So the work that's being done to reduce fixed expenses. If we look at the bridge, one of the most important impacts of expenses by nature. So the negative impact is exerted by consumption of energy and other costs by nature, which is also PLN 10 million. The positive impacts are coming from depreciation and amortization indubitably because of some of these write-downs of assets and employee benefits are down by PLN 188 million. So this is something that's reduced expenses by nature. And remember, this is a matter of the one-off bonuses that were issued -- paid on an accrual basis in June. And then we had consumption of materials down by PLN 75 million. And so that means right now -- the costs in the quarter were PLN 3.7 billion in Q3 2024. So if we look at some of the parameters, that the company as well as the group are analyzing or tracking, we're talking here about the mining cash cost and the cash conversion cost. I'll begin with MCC. And so we've presented this information at one of the earlier slides, but if you look at the comparison of the first 9 months year-to-date, so we still have an increase of 13.7%. So it comes in at PLN 805 per tonne. But if we look at the quarter-on-quarter comparison, we can say that the trend is downward in MCC. And so this is something that we would consider to be a positive outcome. It's down by 13.3% to almost PLN 783 per tonne. If we look at the cash conversion cost, here we have insignificant changes within the framework -- within the range of roughly 1% over the first 9 months of the year-to-date as well as the last quarter. So we're around PLN 312 per tonne in terms of the cash conversion cost for Coke. If we look at the categories or classes that exerted the biggest impact below, you can see the mining cash costs, so what made a positive contribution? Basically the expense impact was positive in terms of PLN 65 million. So we reduced that mining cash cost. And also, there is a volume impact, which gave a PLN 55 million. If we look at the -- cash conversion cost for Coke, we had the expense impact, which was negative at PLN 33 million, and the volume impact was PLN 32 million. And that's why the cash conversion costs at the end of Q3 or in Q3 is PLN 312. And so here, we have a more detailed cascade approach. So we have consumption of materials, energy, external services, employee benefits. Basically, a number of these categories had a very minimal impact on our mining cash cost. But what exerted the biggest impact was employee benefits and the volume impact. They were up. They exerted a positive impact, and that's why the mining cash cost at the end in Q3 2024 was PLN 783 per tonne. And so we have a bridge also for the cash conversion cost of Coke. And here, we had a number of factors that were negative. And so employee benefits, taxes and charges -- so that's PLN 26 million and PLN 10 million, then we had admin expenses, which was PLN 3 million. Then we had a reduction of -- minus depreciation and amortization spent. Admin expense impact was PLN 3 million. Then we had the volume impact, which is positive, which is PLN 32 million (sic) PLN 32 and so that gave us an outcome of PLN 312 per tonne of coke produced. So if we think about the EBITDA drivers. So if we look at 2024 -- so the impact of impairment was PLN 6.27 billion. So the EBITDA at the end of Q3 is PLN 57.7 million. So this is the EBITDA that has been adjusted for one-offs. And as a result of the impairments of nonfinancial noncurrent assets that of course have had the biggest impact and the impact of cost by nature was PLN 435 million. If we look at EBITDA by segments, we can see the impact exerted by the Coal segment and the Coke segment. And so -- then we had the consolidation and eliminations within the group, which was a negative of PLN 1.25 billion. And that means at the end of Q3, we have the exact same EBITDA net of nonrecurring events of PLN 57.7 million. So if we look at the net working capital, including the investment fund. So we had basically a number -- we had inventories, trade and other receivables, cash and cash equivalents and then the investment front. And so at the -- we had a number of adjustments because we had trade liabilities and then we had loans and borrowings of PLN 520 million, then employee benefit liabilities, PLN 289 million, lease liabilities of nearly PLN 260 million. And at the end of the day, we end the quarter with a net working capital, including the money we have in the closed-end investment fund. So we have PLN 4.2 billion. So to wrap up the financial portion of the presentation, we can look at our cash flow. At the end of 30 June 2024, we had PLN 1.25 billion and so we ended 30 September 2024 with PLN 770 million in cash flow. The biggest impact was exerted on the negative side by the loss. So we had a loss of PLN 362 million. We had PLN 229 million as a result of cash flow and investing activity, then the payment of loans and borrowings was negative at PLN 209 million. And so then we had the change in inventory, which is PLN 118 million to the negative. On the positive side of things, we've already presented them; depreciation and amortization PLN 331 million, PLN 203 million is the change in trade and other receivables. So that means we've done quite a bit of work to ensure that we were able to recover our receivables more effectively. If you look at the -- we have a positive impact of PLN 27 million in terms of change in trade and other liabilities. So that had a good impact on our cash flow position. And that's why we're able to wrap up the quarter on the 30 of September 2024, with PLN 770 million.

Well, thank you very much. So that's all of the information about the earnings in Q3 2024. But having in mind what we said at the beginning of the conference, we want to share with you some of the key highlights about the transformation plan.

So thank you very much. The last 2 weeks were very important for the work of the management team as well as the future of JSW. And so we've made the plan or the decision to implement or approve a transformation plan and talk about its implementation. This is the long-term plan and the full management team has signed off on that and we're convinced of its implementation. And so this is something that's going to take place over the next 3 years. So on the first slide, we want to talk about the borderline conditions that the management team has identified for the implementation of this plan and based on what were the goals of this plan. So the key assumption is that -- this will be done in compliance with the safety regulations, mining law and labor law. The second goal the management has is that we would not reduce head count. So in terms of the mining segment, as well as the conversion segment, we would like to support our employees in terms of motivations as a management team. We looked at the transformation plan. We're looking at the core business, which is the production of coking coal. So according to the European Union, this is a critical raw material. And if we think about the steel industry, the future of coking coal is -- has a positive role to play in the upcoming period. And that's why the company will maximize the potential it holds in terms of delivering this product to the market. The next thing is to the ability to implement the transformation plan, utilizing internal regulations. We might have to modify and rebuild some of those internal regulations. And so we want the company to be able to operate in the new environment. So if you think about some of the priorities, this is a result of what we've said during today's conference about our financial results as well as having in mind information that we've provided in previous periods. So the goal of transformation is to stem the tide of negative cash flow, which has appeared in the recent period in JSW. And we also wanted to identity key initiatives to restore, regain profitability in the core business of JSW. So we're talking about the mining segment as soon as possible. So the ambition of this plan is to change the long-term position of the growth of the company. In the long term, this should enable us to launch the next phase of development. So we'd like to diversify the company's revenue by making investment decisions, enabling the company to generate positive cash flow and to be able to obtain debt funding. And so if we look at the details of the specifics, the transformation plan, there are 6 pillars. And so the key area is in the core business of our group. So this is the Mining segment. And when it comes to the production of coking coal, and we call this the efficient mine approach. We have a number of initiatives to improve quality, preparatory works to ensure that all of our production efforts would be done in a qualitative and efficient manner. And these initiatives should change the philosophy of all this work is done and how we will pay for that work. As we want to maximize the potential during this transformation plan execution period, so we want to minimize downtime and shorten the time between shifts. And this should enable us to utilize the assets we have where we've invested in those assets and we'll continue to invest as we've done over the last few years, this was one. And we want to avoid downtime, and we want to improve the maintenance at the same time and we want to optimize and utilize the metering and automation of what we've done in previous years. Another key element on top of us 4 key areas of the efficient mine. We want to take a holistic work and procurement and capital expenditure processes. And if we want to talk about the way in which we make investment decisions just as well. So this is an area that should generate a little bit less revenue in terms of the numbers and figures I'll show in a moment. but it's quite key in terms of tweaking the philosophy of our mindset and how we run the business and run our investments. And the sixth pillar is the change in the growth and change in support functions. This will take the longest amount of time. It will produce the least financial impacts. But it's key in terms of changing the culture of the organization and preparing it for the long-term development of -- which is basically revenue diversification. So on top of the core portion, which I just presented, the six pillars of that efficient mine. Then we have to support areas, and they're necessary in order to change the culture of the organization, to develop the culture of the organization and to change the philosophy of how we do business. And as we said previously, as a management team, we are profoundly convinced that JSW that produces a critical raw material in the EU, having in mind the decarbonization policy, we have a place to -- a role to play on this market. It's quite an important role. And it's important to be able to develop and deliver the critical raw material, which is for the production of steel, which is necessary for decarbonization, not only in Poland but across the European Union, but also in the industry. And this is a process that will continue to move forward. If we think about our goals for support, we want to identify and achieve synergy in terms of sharing knowledge, exchanging knowledge. So basically transfer of knowledge between the mines and the various sections of the mines. So the effects will be linked to rebuilding the motivation system. This will be integrated with the priorities identified for the transformation plan and the ambition of this management Board is that the communication with internal stakeholders. And of course, employees are the key players for this transformation. And then we have the financial institutions as well as our partners. We want that communication to be transparent and clear to ensure that there will be a good understanding, a good common understanding of the goals that we set out to achieve. In terms of the financial impact, so the total impact is estimated to be PLN 8.5 billion, and will maximize that impact in 2026 and 2027, when as a result of change in the philosophy of running extraction business, this is where we're going to have the greatest contribution. So the major contribution will be through investments and rebuilding the procurement process as i've indicated previously. So if we look at the details of these figures, we can say that the transformation doesn't anticipate that we're going to make changes by leaps and bounds rather this is a long-term approach. And that's why the effects of these changes should be equally distributed across each one of these years. So roughly PLN 3 billion impact in each 1 of the 3 years, 2025, 2026, 2027. So the cost of the transformation and the cost of preparatory works linked to extraction will be slightly higher. So on the next slide, we show you the impact of the various components broken down by year. As I said, in 2026 and 2027, we want to maximize the impact in terms of revenue generated by the efficient mine. We want to utilize the working time to a better extent. So we want to limit the time -- downtime between shifts. And so we want to have organ. You want to have -- make sure that the travel to the sections will be reduced. And so this will mean that we'll have a long-term change in the philosophy. So this is something that's going to happen in the section headed up by Mr. Rozmus. So if you look at the first year, subsequent years, so our net margin and additional margin, we anticipate that will be generating an additional PLN 0.5 billion in the first year and then PLN 1.6 billion in the subsequent year. So in total, around PLN 2 billion. And so the change in the philosophy of procurement is something that will make a contribution of PLN 0.6 billion. And so in the first year, it's PLN 0.3 billion in the first year because we need some time to make these changes. And the first results will show up more or less in the middle of the year. As I've indicated previously, our major goal is to improve the financial liquidity, cash position of the group. And so we want to rebuild or retool the philosophy of how we make decisions on CapEx or investments, generally speaking. So we want to have a PLN 1.5 billion impact in 2025. In terms of the other savings we want to make, which are smaller but we have identified them as we were preparing the transformation plan, so in subsequent years, we believe that other savings will be somewhere between PLN 0.4 billion and PLN 0.2 billion, almost PLN 0.3 billion and they will be distributed in terms of the culture of how we do our business and making sure that we have a rational approach where we're making our investment decisions. So as a result, the total impact of this transformation plan should be PLN 8.5 billion in effect. And according to the belief of the Management Board, this is something that should enable us to prepare the organization to a long-term change in its development position. So we'll be able to diversify our revenue. And that would mean that as a supplier of the critical raw material for the European Union is going to be able to have a stable foundation for its operations. So thank you very much for your attention.

So thank you very much, ladies and gentlemen. So that's the entirety of our presentation that we've prepared for you today. So I'd like to thank you very much for your attention. So you'll have the opportunity to review this presentation on our website.

Now as a matter of tradition, we can go on to the Q&A section. And then I'd like to ask you to post those questions. So ladies and gentlemen the first question is what percent of sales of coal and coke was purchased by the German and European Motor, automotive industry in 2023?

So I'll respond to that question. So ladies and gentlemen, the automotive industry does not make direct purchases of coal or coke from the JSW Group. We supply coking coal to coking plants that produce foundry coke as well as coking coal and coke to steel businesses that, in turn, supply products to the automotive industry. So we're not able to give you a response to the question of how much foundry coke and how much of the steel products of our buyers are ultimately used by the automotive industry. So we think this is probably going to be a commercial secret of our consumers.

It's worth mentioning here that if we look at the automotive industry, we can say that original steel is generally used. So it's a steel produced using blast furnace technology which means that our coke is used for that purpose. So as Mr. Rozmus said, it's very difficult for us to give you an absolute value, although we do have an impact on the automotive industry.

The second question 14.5 million tonnes of coking coal in 2026. And what is going to be your total output? What will be the level of total production and the production mix in 2025-2027? If you look at the volumes, what sort of level or run rate do you anticipate for 2025? Does the company target volume in excess of 14.5 million tonnes, like in 2027?

So ladies and gentlemen, well, as a result of implementing these initiatives in the scope of the effect of mine should lead us to having 14.5 million tonnes run rate in 2026. The optimization efforts we're taking would mean that less steam coal is going to be available. So we're ready to do that. So we want to make sure that we're going to be able to move into coking coal seams. So we're looking at doing some analysis in terms of what is the capacity of individual mines and individual sections in order to be able to produce that coking coal. So we assume that the mix will improve. So we're going to increase or drive up the coking coal. Right now, it's 79% is coking coal as opposed to 21% of steam coal production. So we want to optimize things to ensure that we're going to be able to ramp up the percentage of coking coal.

The next question. How soon will JSW be able to extract the first coal from the Debiensko deposit, if it were to receive a concession? And what level of -- what volume would be possible to be done without CapEx for new wells?

So if we're looking at the resource base for the future. This is a pretty theoretical approach, the process of obtaining or securing a concession, we have to start with a survey. And this is something we're going to apply for. Here, I would like to emphasize the terms of the concession. This is the sovereign decision and an attribute of individual member states. So we'll be talking about this in Poland. Our position as a producer of a critical raw material gives us the ability in the long run to obtain a concession, while the future of coking coal in the European Union is rather unthreatened.

Is the management Board capable of stating expectations for 2025 in terms of the production volume, CapEx at the group level, what the increase in labor cost will be and what will be the increase of total costs?

Well, the work on 2025 plans is still underway. I assume that when we meet up with you in the near future, we're going to be able to provide you with more detailed information. And I think this is something that has resounded in today's conference is that we're reducing total costs. So I think this is something that's a positive factor.

When will the restructuring program be rolled out or implemented?

Ladies and gentlemen, the implementation of the transformation program has already been launched a few days ago. So in 2025, we'll be able to see the first key effects of implementation. And as we've shown you during the presentation, Mr. Kluczniok showed you a slide in terms of what amounts we'd like to generate in -- what our expectations are in the individual years, so I think the first year, where we'll have the full year to review the impacts will be 2027. This is not something that's a one-off impact. These are things that would have recurring impacts.

Should we assume or can we count on PLN 5.7 billion of savings over the years?

Let me reiterate what I said on the slides, the full potential of the plan is PLN 8.5 billion. As I said previously, we showed you the distribution, but the biggest share is going to be in the effective mine. That's more than PLN 4 billion over the full 3-year period. The second most important area in terms of our holistic approach to this subject in terms of investments and procurement and the total impact over the 3-year period is PLN 3.2 billion.

Does the management team plans to reduce its CapEx in 2025, 2026. Or do you want to increase CapEx so as to be able to ramp up the run rate in subsequent years?

So I think the question already incorporates the response. We're already optimizing the CapEx. It depends on the level of extraction. So CapEx will be aligned to those plans -- in the transformation plan. And above all this should secure the long-term operations of the company, having in mind a specific production volume.

In the current report, you've talked about an additional margin as a result of higher output. What is the split into incremental income and costs in '25, '26 and '27?

So just a moment ago, Mr. Kluczniok talked about the revenue and costs linked to our transformation plan in the group. And this plan will be available on the website. We'd invite you to preview it there.

So using which price paths for coal and coke did you develop this plan?

So we've used the [ McCloskey ] forecast of September 2024 to prepare the price paths for coking coal and coke.

So the cost optimization of PLN 600 million, which the company has referenced, is that a real decrease versus the 2024 expectations? Or is it something that has reduced value versus the plans of the company?

So in 2025, the assumption is PLN 360 million and in '26 and '27 it's PLN 600 million. And those figures reference 2023 as the base year.

The PLN 600 million, does that figure include this incremental margin of extraction? Is there something more?

It doesn't include that. These are additional savings, which we identified in investments in procurement areas.

What level of fee does [indiscernible] received in 2024, 2027?

So ladies and gentlemen, the company does not give any comments on the details of contracts in place with business partners.

Okay. I don't understand what do the savings of PLN 550 million in 2024 mean? Do we already see the results, the effects which are exerting an impact on the group's results in Q3 and Q4 2024?

Well, the outcomes that are identified in the plan for 2024 follow primarily from the reduction of CapEx planned in JSW. This is for nonstrategic issues like the purchases of ready-made goods as well as investment construction. So this gives you a total figure of PLN 280 million. So if you look at the efforts undertaken in JSW KOKS, so this is in terms of cost production. And so we're doing a review of those investments and a large number of other initiatives. And so then basically optimizing the mix. And here, we're talking about savings of around PLN 200 million. The other effects stem from a number of other initiatives in terms of materials management, how we organize our business. We've introduced new practices, which means that we're buying already today. Of course, this is something that will have an impact over time. We're purchasing materials and products much less expensively. And we're able to contract services on much better terms.

So the next question, the savings of PLN 0.5 billion. This is something you stated. Is this something that will show up in Q4 or is this something that you've already partially achieved? Are these cost savings? Will there be an impact on profit? Or is this a cash impact that will affect your cash flow and the balance sheet?

So I think I gave the response just a moment ago to a large extent. Of course, this will have an impact on the cash flow position as well as the balance sheet. These measures enable us to reduce previously planned CapEx and OpEx.

There's also a question about the staff costs. So I'll read it out in one pluck. Why does the transformation plan not address the primary cost factors? So the payroll fund, does that mean that you need to get the consent of trade unions for its implementation? If so, to what extent does your program plan or did your program calls for head count reductions? Do you want to discontinue allowances for employees or no pay raises or free call allowances? And then, what is the level of costs?

So ladies and gentlemen, as we've said a moment ago And we give you the information on the slides, the priority of this program is to increase the output and our efficiency today, the management Board does see a reason to align the rules for paying. So we have more than one type of contracts, and this is an area which needs to be cleaned up. And so we're talking with the social party with the trade union. And this is something that's obviously necessary. We'll notify you of the results of these talks. But this is not part of the plan. Today, we are talking with the trade unions, but this is not at all part of the transformation plan. Thank you very much.

The next question. What will be cost by type be or by nature in 2025, 2027? And what's going to happen with the largest cost input, which are staff costs?

Well, just a moment ago. Our CEO, Mr. Janta responded to that. Work is underway in terms of the level of costs by -- in kind. So once we make any decisions, whatsoever, we'll advise the market of that through current reports.

Let me add. As a result of a decision made by the management board, we take a very restrictive approach to hirings which are taking place in JSW. As a result of natural attrition, 202 employees have left the company, and this has an impact on reducing the cost, and we want to maintain that level in the future. Thank you very much.

Let me have the final questions. So PLN 1.5 billion for one-off savings of CapEx. What's the reference, is in 2024? some sort of plan for 2025? And when will this CapEx reduction be visible?

So we're looking at the 2024 CapEx is the reference year. And this will be adjusted to the production plans in subsequent years, as I've stated previously. So thank you very much.

So there are no more questions now. We'd like to thank all of you for your attention and for you having stuck with us until this moment. We'd like to invite you to join us for the subsequent earnings call. And so thank you again for your attention and say goodbye to you, ladies and gentlemen. Thank you. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]