Letter from the President
Dear Stakeholders and Dear Shareholders, after the most recent two years that have been challenging for the company, 2017 was clearly a successful year. Following a downturn on the coal and coke market the company once again started to generate profits, thereby translating into the highest earnings JSW has reported since going public and totaling nearly PLN 2.5 billion.
Many factors contributed to JSW generating such a high result. Thanks to favorable pricing on the coal and steel market, ongoing optimization efforts and the unwavering execution of the restructuring program launched in 2016 involving the transfer of the Krupiński mine to the SRK Mine Restructuring Company in 2017, we have managed not only to preserve our group’s financial stability but also to strengthen it.
This improvement in our position has meant that we have rejoined the WIG20 index consisting of the largest and most highly-traded companies on the Warsaw Stock Exchange. This motivates us to continue building the company’s value. The company managed to survive the most challenging period, i.e. 2016 because the employees demonstrated their awareness and devotion and because they identified with the company by surrendering a portion of their wages and thereby contributing to savings that rescued JSW’s liquidity.
JSW’s robust performance in 2017 therefore made it possible to pay additional benefits to our employees and reinstate those components of their wages in 2018 that had been suspended during the downturn, as well as to amortize some of the bond-related debt ahead of schedule. Employees are our company’s key value. On behalf of the overall Management Board and on my own behalf I would like to extend my thanks once again to you for your profound commitment to JSW’s welfare, which you expressed by surrendering a portion of your wages to bail out our company and save jobs. I am proud to be able to work with you and that our company can count on you in the most dire of times. To meet the challenges we will face in subsequent years and harness our technological potential we have established JSW Innowacje as our research and development arm for the overall group. Its purpose is to cooperate closely with scientific communities in Poland and abroad and focus on the execution of innovative R&D work whose implementation will enable our group to make efficiency gains.
An important issue in 2017 was to devise and commence the execution of JSW S.A.’s new strategy including JSW Group’s subsidiaries for 2018-2030. Our group’s most important strategic objective is to strengthen our position as a leading producer and supplier of coking coal and coke in Europe and grow its overall value. Securing access to coking coal resources through development investments enabling the group to open up new deposits and mining levels is an important part of JSW’s strategy. The strategy calls for increasing the volume of coal output and sales to a net level above 18 million tons in 2030, stabilizing coke production and sales at above 3.4 million tons in 2018-2030 and ratcheting up coking coal production stated as a percentage of overall production to above 85% starting from 2020.
We are more than aware that the company is operating on a market characterized by high volatility risk when it comes to coal and coke prices; that is why we made the decision to set up a closed-end investment fund with the purpose of affording stabilization support to the Company’s ongoing liquidity and maintaining continuity of operational and investment processes during any possible market downturn. Because it espouses the principles of corporate social responsibility JSW actively participates in the region’s social and economic life. It takes actions for the sake of ensuring sustainable development, protecting the natural environment, upgrading work safety and employee qualifications. Our goal is to change our company’s image and how it is perceived by the environment. We intend to create not just a rock-solid foundation for our work in the future but also to modernize the mining industry while simultaneously adhering to the best in class standards of safety. Our efforts have been confirmed by JSW’s reappearance in the prestigious group of companies listed on the Warsaw Stock Exchange in the RESPECT index, i.e. companies managed in a sustainable fashion and in line with the principles of corporate social responsibility.
To summarize, last year was a particularly successful year for the company. We believe that over the next several years we will augment our operational efficiency and strengthen our position as the leading producer and supplier of coking coal and coke in a manner that will grow the Company's value taking into account shareholder expectations. At the outset of 2016 JSW’s share price on the Warsaw Stock Exchange hit the lowest trough in its history when it traded below PLN 9 per share. In turn, on account of the hard work done by JSW’s staff, the implementation of a challenging restructuring program that was successfully completed and favorable coal price evolution, JSW’s share price at the end of 2017 had rebounded to nearly PLN 100. The capital market has shown its appreciation for our hard work and effort. This is our joint success! At this time, I would like to extend my thanks once again to all our employees, but also to our shareholders, bondholders, investors and the trade unions for their commitment and support and the hard work they have done and the trust they have shown.
Respectfully,
Daniel Ozon
President of the JSW S.A. Management Board