Business model
In the area of research and development, at the end of Q4 2017, the Group adopted the JSW Group’s Strategy of developing innovation. The major recommendations of the above Strategy include defining objectives to improve efficiency, quality, sefety and environmental impact of JSW’s core business, covering the following areas: deposit exploitation, work organization, communication systems, production processes, ventilation in the mines, safety, waste and the environment, land reclamation and diversification.
In 2017, the process of gradual implementation of the Strategy’s major assumptions was commenced. At the same time, within the framework of the launched project portfolio, the Group prrepared a number of research and development and innovation initiatives to be performed.
To contribute to an acceleration of activities connected with seeking and implementing innovative solutions which bring both economic and environmental benefits, research competences were concentrated in one unit, which led to setting up the company named JSW Innowacje. According to assumptions, JSW Innowacje is intended to become a comprehensive research and development center for the whole Group. JSW Innowacje is to cover all the phases of the Group’s research and development activities: from research to projects, environmental impact assessments, feasibility studies and execution oversight.
The directions of the Group’s business development are focused on a number of issues that are closely related to the concepts of sustainable development and corporate business responsibility. The “JSW Group’s Sustainable Development Strategy for 2017-2020” adopted by the JSW Management Board bolsters the synergy between business objectives, sustainable development targets and the practical implementation of the responsible governance concept. The Sustainable Development Strategy for 2017-2020 has been designed to support and complement the business objectives defined in the JSW Strategy including subsidiaries of the JSW Group for 2018-2030, while taking into consideration key areas of social and environmental responsibility from the JSW Group’s point of view. The key word of reference, for both the entire Strategy for Sustainable Development at JSW for 2017-2020, and the general motive of sustainable development and responsible management is RESPECT
In periods of favorable economic conditions in the coal market, the Group generates high positive cash flows, while in a period of economic downturn, the Group needs financing for high negative cash flows at the FCF level, therefore responsible management of the capital structure becomes a major challenge. The major objectives of the strategy for financing the Group’s activity include:
- ensuring a stable financing structure, by achieving and maintaining at least 50% of the share in equity in the structure of liabilities, and covering the value of non-current assets with fixed capitals,
- attempting to match the average maturities of financing with the times of obtaining returns on the financed assets,
- taking actions to ensure the amount of financing which allows for maintaining continuity of processes of operating and investing activity at the assumed levels,
- seeking the most effective forms of financing at a given time, while ensuring the most appropriate maturities for the financing,
- aiming to maintain in the Group a cash buffer to ensure that the key liabilities may be covered, including in particular liabilities for salaries, with the buffer to be used in periods of dramatic decreases in sales revenues,
- maintaining a stabilization fund in the assets at a level of PLN 1.5 billion, in periods of favorable economic situation in the coal market so as to ensure an appropriate level of financial liquidity at the beginning of a possible downturn period in the coal market,
- effective financial risk management in the Group.
The greatest value of Jastrzębska Spółka Węglowa are people. The most valuable for us are those employees who identify with the company and its mission. The crew of the Jastrzębska Spółka Węglowa Capital Group currently has 26 465 employees, of which 20 887 are employed in JSW. The Strategy for JSW and the Subsidiaries of the JSW Group for 2018-2030 plays the most important role in defining the approach to human resources management. Approach employee issues was also defined and is included in the Strategy of sustainable development 2017-2020..
The company providing the IT services within the JSW Capital Group is the specialized entity Advicom Sp. z o.o.Advicom Sp. z o.o. provides comprehensive IT services and technologies to the entire JSW Group, encompassing designing, implementation and administration of IT systems.
The company's basic tasks include centralization of business support functions to achieve the economies of scale, optimization of processes through their standardization and automation, improving the quality of administration of JSW Capital Group's business cells, and optimization of costs associated with the processes through reduction of the amount of work required to carry them out. The comprehensive IT services ensure fast, reliable and secure exchange of information between the Group companies' IT systems from various segments and area.In order to ensure security of business operations, Advicom Sp. z o.o. conducts operations in the following areas: maintenance and support of IT services, technological services, business applications, systems integration, installation of LAN and WAN, supplies of computer hardware, IT audit services, web services and services related to IT training.
In each of the aforementioned areas the Company strengthens its position of an expert to ensure sales of solutions with significant added value and large growth potential.
The company also provides to the companies from outside of the JSW Capital Group the services related to supplies of computer hardware, consumables, software and LAN installation.
The technical and organizational solutions, which are constantly being implemented, ensure high standard of data security and availability of information at the request of the IT system's user.
The Group’s investment program assumes the execution of investment projects in 2018-2030 with a total value of roughly PLN 18.9 billion, assigning the highest priority to the following projects: developing mining activity, modernizing and optimizing the operation of the coke segment,ensuring energy self-sufficiency through the development of production capacities based on its own base of raw materials - byproducts of coal mining (methane) and producing coke (coke oven gas), improving the Group’s profitability and integrating its distinct business segments, implementing innovative technologies, growing operating efficiency in the core and auxiliary business. Endorsement has been given to the highest priority having investment projects offering the highest profitability and strategic projects in core business that are crucial to build the Group’s competitive edge and lead to optimizing operating expenses.
Planning, implementing, systematising the strategy, and adopting the best methods and market standards in order to achieve a competitive advantage. Effective project management and using information technology as a key factor in building an advantage.
The implementation of key assumptions contained in the Strategy assumes a series of actions aimed at achieving the objectives defined in the Strategy, through integration and activity in the areas of innovation, IT, logistics, and investment, repairs and CSR.
The JSW Group is the largest producer of high-quality hard (type 35) coking coal and a major producer of coke in the European Union.JSW’s coking coal is used predominantly in the production of coke which, in addition to iron ore, is an essential component of feedstock for the production of steel.In its coking plants, the JSW Group processes approximately 50% of the coking coal it produces, thus enabling the Group to offer a final product that is more processed and of a greater value.The Company is also a producer of steam coal, sold mainly to power plants and CHP plants.
The Development Plan defines primary assumptions for the Group’s long-term development. The plan calls for executing developmental processes chiefly based on the development of core business, without precluding development through acquisitions of attractive assets and entities.
The Group’s investment program assumes the execution of investment projects in 2018-2030 with a total value of roughly PLN 18.9 billion, assigning the highest priority to the following projects:
- developing mining activity,
- modernizing and optimizing the operation of the coke segment,
- ensuring energy self-sufficiency through the development of production capacities based on its own base of raw materials - byproducts of coal mining (methane) and producing coke (coke oven gas),
- improving the Group’s profitability and integrating its distinct business segments,
- implementing innovative technologies,
- growing operating efficiency in the core and auxiliary business.
A series of activities that optimize processes within production, supply and intermediation in key segments of the Group's operations.
Our coal has a low content of ash, moisture, sulphur, and phosphorus, while having good caking properties and high plasticity. Those parameters make our coal the core ingredient in the production of top-quality metallurgical coke, which can claim low CO2 reactivity and high mechanical endurance. Cooking coal – coal with specific quality parameters and characteristics, used for industrial production of coke.
The JSW Group’s mines produce semi-soft gas-coking coal (type 34 coal) and orthocoking hard coal (type 35 coal).
Hard coal (type 35 coal) – coal with excellent coking parameters, adequate as the main raw material for the production of top quality metallurgical coke with low CO reactivity levels and high mechanical strength; it is also used to produce high quality foundry coke.
Semi-soft coal (type 34 coal) - coal with worse coking parameters than type 35 coking coal; it is used for the production of metallurgical coke and fuel coke.
Coke - fuel produced in the coking process, which involves baking a mixture of special coal types in an airless furnace in the temperature of about 1000°C. The coking process removes volatile parts from coal in the form of gases and the material that remains is pure coke – high-calorie, slow-burning product with a high carbon content.
Blast-furnace coke – coke produced in the JSW Group mainly by JSW KOKS S.A. - used in the blast furnace process in steel mills, In the case of blast furnace coke, major parameters of key importance for the buyers are: reactivity (CRI) and strength after reaction (CSR). The choice of coke type depends mainly on the requirements of the technological process and the associated requirements regarding its parameters: granulation, mechanical strength, abrasion resistance and ballast (moisture and ash) content.
Building a stable partnership as a reliable supplier in the long-term horizon guarantees the position of the main external supplier with strategic clients in order to strengthen cooperation is one of the most important elements of the Strategy. The Company focuses on centralizing the decision-making and integration of the JSW Group product portfolio management in the field of: coal, coke and hydrocarbons; defining the product portfolio, the production volume of individual products and the volume of coal intended for the production of coke; verification of costs and revenues of subsidiaries in order to maintain financial liquidity. The company also focuses on defining the product portfolio, production volume of individual products and volume of coal intended for the production of coke, verification of costs and revenues of subsidiaries in order to maintain financial liquidity. The company also places great emphasis on partner, transparent and market negotiations as well as on ensuring timely deliveries and solving all logistic problems together.
In principle, more than 40% of the coking coal produced by the Group is processed by the Group’s coking plants into coke which, next to iron ore, is the key raw material used in steel production in steel mills. Furthermore, coke is used in foundries, in the non-ferrous metal industry, in the chemical industry and in the production of insulation materials.
All companies unrelated to contracts with the JSW Capital Group, in the case of which the purchase of JSW GK products is spot-on.
The Group is the largest producer of hard coking coal. For years, it has held the key position on the Polish and European markets for coking coal, due to the high quality of coal it produces and due to its location in the proximity to its main customers. The Group’s primary operation also includes mining and sales of steam coal. Furthermore, JSW is a sales hub for all coal-based products, i.e. coke and other hydrocarbons produced by the Group’s coking plants.
The main area of operation of Jastrzębska Spółka Węglowa S.A., the Parent Company of the Group, is hard coal mining taking place in separate organizational units, i.e. coal mines. JSW KOKS is responsible for coke production in the Group. Coal mining and coke production are the core operating activities of the Group. The Group also includes other auxiliary companies.
The Group companies operate in a complex social and economic environment, and the mining operations are carried out in difficult geological and mining conditions. In recent years, JSW and the Group have undergone a number of organizational transformations, designed primarily to optimize costs and increase the overall efficiency of company management.
The Group is an active participant of the coking coal-coke-steel supply chain, concentrating on coal mining and processing, as well as sales of the JSW Group’s products: coal, coke and other hydrocarbons. As such, it is the key element of the recommended operational model for the JSW Group. The model is based on a full integration of the value chain by increasing the scope of long-term cooperation with clients, in order to ensure an adequate level of production in the long-term. The model concentrates on four main segments: coal, coke, steam coal and support functions.