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ANNUAL
REPORT
2018

Segments

Tools

The Group is organised and managed on a segment basis, taking into account the type of goods and the type of production activity. The Group presents segment information in accordance with IFRS 8 Operating Segments, divided into:

In 2018, the Group focused on development and growth in productivity across all of its segments.

SEGMENT RESULTS
ITEM COAL SEGMENT COKE SEGMENT OTHER SEGMENTS
2018 2017 2018 2017 2018 2017
Sales revenues from external customers 5,08.46 4,925.9 4,451.5 3,688.1 273.4 263.2
Operating profit/(loss) 1,753.1 3,001.9 416.4 (47.9) 84.9 57.1
Depreciation and amortization 612.1 680.9 100.2 96.8 64.4 56.2
EBITDA 2,365.2 3,682.8 516.6 48.9 149.3 113.3
Adjusted EBITDA* 2,206.4 3,192.7 – – – –

* EBITDA after excluding the impairment charge made as a result of the impairment tests carried out on the non-current assets of JSW’s units in 2018: PLN 494.7 million and in 2017: PLN 759.1 million, respectively, and reversal of the provision for disputes concerning free coal allowance for old-age and disability pensioners in 2018: PLN 653.5 million and in 2017: PLN 1,249.2 million.

In 2018, revenues on sales of coal to external buyers were PLN 5,084.6 million, up 3.2% from 2017. This upward movement resulted primarily from the increase in the average coal sales price by 3.2% (of which coking coal by 20.7%). In the reporting period, revenues on sales of coke amounted to PLN 4,451.5 million, up by 20.7% compared to 2017. The increase in revenues from sales in the coke segment was driven directly by a 17.0% higher average coke sales price.

In the analyzed reporting period the share of revenues from 5 top external buyers in the Coal segment accounted for 72.9% of revenues in this segment (74.2% in the corresponding period of 2017). Other buyers whose unit share did not exceed 10.0% of revenues, generated the remaining 27.1% of total revenues of the coal segment.

The share of revenues from top five buyers in the coke segment accounted for 59.0% of revenues in this segment (65.9% in the period from 1 January to 31 December 2018). Other buyers whose unit share did not exceed 10.0% of revenues, generated the remaining 41.0% of total revenues of the coke segment.

Coal segment

The Group’s mining activities are performed at four hard coal mines. All of the mines operate within the geographic boundaries of their respective concession areas, with specified concession validity dates, surface areas and depths.

Hard coal deposits are mined within the area of the following poviats: Jastrzębie-Zdrój and Żory, municipalities: Świerklany, Mszana, Pawłowice, Gierałtowice, Ornontowice, Pilchowice, and towns: Mikołów, Czerwionka-Leszczyny, Gliwice, Knurów.

JSW’s hard coal mining areas cover 197.2 km2

Group’s coal production mix in 2018

Coal production and sales

Coal production volume in 2018 reached 15.0 million tonnes, i.e. 0.2 million tonnes more than in 2017. A total of 14.8 million tonnes of coal was sold in 2018 (10.8 million tonnes to customers outside the Group), of which – due to the purpose of the produced coal – coking coal accounted for 70.6% of the Group’s total deliveries, while the remaining 29.4% was high-calorific value coal for energy purposes, as required by customers.

The Borynia-Zofiówka-Jastrzębie and Pniówek mines offered coking coal characterised by lower ash, sulphur and volatile material content. Coal from the Budryk and Knurów-Szczygłowice mines is gas-and-coke coal with lower ash and sulphur content but higher volatile material content, characteristic of this type of coal.

Key quality parameters of coal produced by the Group in 2018 (mean values)

CATEGORY KWK BORYNIA – ZOFIÓWKA – JASTRZĘBIE KWK PNIÓWEK KWK KNURÓW-SZCZYGŁOWICE KWK BUDRYK
Section
Borynia		 Section
Zofiówka		 Section Knurów Section Szczygłowice
COKING COAL
Ash content Ad (%) 6.7 6.9 6.5 6.7 7.3 6.9
Humidity Wtr (%) 10.8 10.2 9.1 7.8 8.2 6.3
Sulfur content Std (%) 0,51 0.46 0.57 0.70 0.57 0.62
Volatile matter content (Vdaf %) 23.1 21.6 26.2 31.4 31.2 31.0
Sinterability (RI) 76 74 80 75 74 81
Coke strength after reaction (CSR %) 62.0 45.8 61.0 35.7 43.2 44.7
CO2 coke reactivity index (CRI %) 28.4 42.0 24.6 46.5 38.6 41.5
STEAM COAL
CATEGORY KWK BORYNIA – ZOFIÓWKA – JASTRZĘBIE KWK PNIÓWEK KWK KNURÓW-SZCZYGŁOWICE KWK BUDRYK
Section
Borynia		 Section
Zofiówka		 Section
Knurów		 Section
Szczygłowice
Ash content Ar (%) – 18.4 15.6 22.0 24.2 27.1
Humidity Wtr (%) – 12.2 3.1 9.2 11.2 8.9
Sulfur content Str (%) – 0.41 0.59 0.72 0.59 0.58
Calorific value (Qir MJ/kg) – 23.5 27.9 22.7 21.1 21.2

Coal production in the Group in 2015-2018 (million tons)

The total sales of coal produced by the Group’s mines, including intra-group and external deliveries, were 14.8 million tons, i.e. 0.2 million tons more than in 2017 (coking coal sales remained at the same level, while steam coal deliveries edged up by 0.2 million tons). The increase in the volume resulted from higher production level.

Coal sales to external offtakers in 2015-2018 (millions of tons)

In 2018, compared to the corresponding period of the previous year, external sales of coking coal increased by 0.1 million tons (1.7%) and internal sales dropped by 0.1 million tons (2.2%). In the period in question, the volume of sales of steam coal to external buyers rose by 0.2 million tons, compared to the previous year, which resulted from the increase in the production in this segment.

ITEM 2018 2017 2016 2015 GROWTH RATE
2017=100
Production (million tons) 15.0 14.8 16.8 16.3 101.4
Coking coal (million tons) 10.3 10.7 11.6 11.1 96.3
Steam coal (million tons) 4.7 4.1 5.2 5.2 114.6
Total volume of JSW’s sales (million tons)(1) 14.8 14,.6 17.2 16.6 101.4
Coking coal (million tons) 10.4 10.4 11.8 11.1 100.0
Steam coal (million tons) 4.4 4.2 5.4 5.5 104.8
Intra-group sales (million tons)(1) 4.4 4.5 5.5 5.4 97.8
Coking coal (million tons) 4.4 4.5 5.4 5.3 97.8
Steam coal (million tons) – (2) – 0.1 0.1 –
External sales volume (million tons)(1) 0.4 10.1 11.7 11.2 103.0
Coking coal (million tons) 6.0 5.9 6.4 5.8 101.7
Steam coal (million tons) 4.4 4.2 5.3 5.4 104.8
Revenues on sales of coal (in PLN millions)(3) 8,296.6 7,929.2 5,846.2 5,724.3 104.6
Inter-segment coal sales revenues (PLN million) 3,212.0 3,003.3 2,294.6 2,274.9 106.9
Coal sales revenues from external buyers (PLN million) 5,084.6 4,925.9 3,551.6 3,449.4 103.2

(1) sales volume of coal produced by the Group,
(2) because of the low volume (1.2 thous. tons) there is no impact on the figures expressed in millions of tons,
(3) this value takes into account the Group’s additional revenues in 2018, 2017, 2016, 2015 of PLN 225.2 million, PLN 245.0 million, PLN 99.0 million, PLN 302.9 million, respectively, from the sale of coal produced outside the Group.

External coal deliveries to domestic customers were 78.7% (by volume) and 71.2% (by revenue) and 21.3% and 28.8%, respectively, to international customers. For comparison, in 2017 these percentages were as follows: local buyers 79.3% (by volume) and 71.3% (by revenue); foreign buyers 20.7% (by volume) and 28.7% (by revenue).

In 2018, revenues on sales to external buyers in the coal segment hit PLN 5,084.6 million and were up PLN 158.7 million (+3.2%) than recorded in the corresponding period of 2017, which is attributable to the change of the coal sales structure and significantly higher prices, reflecting the trend in the global market.

Coke segment

The Group’s coking activity is conducted in Dąbrowa Górnicza, Zabrze, Radlin and Czerwonka-Leszczyna.

Compared to 2017, production of coke increased by 2.9% while sales remained at the same level. Revenues on sales of coke and hydrocarbons in the period under analysis reached PLN 4,451.5 million and were 20.7% higher than in 2017.

ITEM 2018 2017 2016 2015 GROWTH RATE
2017=100
Production (million tons)(1) 3.6 3.5 4.1 4.2 102.9
Coke sales volume (million tons) 3.5 3.5 4.1 4.0 100.0
Sales revenues (PLN million)(2) 4,451.5 3,688.1 2,822.7 3,051.8 120.7

(1) coke production from the Group’s coking plants,
(2) revenues on the sales of coke and hydrocarbons.

Other activity

The Group’s other activity includes various types of support activities, including in the areas of innovations, IT, logistics, repair and maintenance services, laboratory and insurance services.

The Group includes:

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    Centralne Laboratorium Pomiarowo-Badawcze Sp. z o.o.

    provides research services concerning coal, ash from coal, coke, slag, solid by-products from combustion of solid fuels, mining rock aggregate and mining waste, as well as services related to monitoring CO2 emission volumes and measuring oxidation rates. The company also provides inspection services concerning solid fuels, training activities and expert analyses consisting of comparing coal and ash from coal research between laboratories. The company has a leading role in consolidating the Group’s laboratory activities.

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    JSW IT SYSTEMS Sp. z o.o.

    provides services in the area of IT, production and assembly of electronic equipment, development and sale of software. The company is currently a supplier of modern and innovative solutions for the Group (on an outsourcing basis) and is implementing tasks related to the development and maintenance of a streamlined IT system for the entire Group.

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    JSW Innowacje S.A.

    the Group’s research and development arm. The company’s activities encompass all phases of the Group’s research and development work, including feasibility analyses and supervision of projects and implementations. JSW INNOWACJE’s strategy seeks to develop research and development activities, including the development of technologies and systems that increase the potential and capabilities of the Polish mining industry.

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    Jastrzębskie Zakłady Remontowe Sp. z o.o.

    provides services concerning machinery and equipment repairs, maintenance and servicing for JSW’s mines

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    Jastrzębska Spółka Kolejowa Sp. z o.o.

    operates railway lines, maintains railway infrastructure and equipment, builds and repairs rail systems and rail facilities, provides design services and expert opinions, forwarding services, road transport services, removal of mining damages as well as training, promotional and innovation activities.

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    JSW Logistics Sp. z o.o.

    provides comprehensive service for a rail siding owned by Koksownia Przyjaźń S.A. and ensures efficient flow of goods between the siding and the Dąbrowa Górnicza Towarowa railway station. It also provides technical maintenance services for the siding as well as domestic and international rail-based forwarding services based on contracts with carriers and through sub-contractors.

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    Przedsiębiorstwo Gospodarki Wodnej i Rekultywacji S.A.

    its activities include water abstraction, treatment and supply, collection and treatment of waste water, collection, processing, removal and utilisation of waste, services related to management of green areas.

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    Jastrzębska Spółka Ubezpieczeniowa Sp. z o.o.

    provides insurance agency services for the Group’s employees as regards life insurance, personal claim settlement services for accident insurance, as well as tourism, hotel, food and cultural services. The company is a member of the Polish Chamber of Tourism and an authorised host of tourist events.

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    JSW Szkolenie i Górnictwo Sp. .z o.o.

    provides support services for mining, service for changing rooms at JSW’s mines.

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    JSW Shipping Sp. z o.o.

    the main activity is comprehensive service for port forwarding at Polish sea ports in Gdańsk, Gdynia, Świnoujście, Szczecin. Aside from port forwarding services, it provides mainly for JSW Group and for others

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