Jastrzebska Spolka Weglowa SA

WSE:JSW

Q1-2025 Earnings Call

[Adam Rozmus, executive]

Ladies and gentlemen, I would like to welcome you cordially as participants to today's results conference of JSW. All of you are with us by monitors. I'd like to welcome you to the summary, the recap of the results of first quarter of 2025. My name is Adam Rozmus. So I'm the Vice President responsible for Technology and Operations. I'm joined today by Jolanta Gruszka, who's the Vice President responsible for Sales. And we also have Remigiusz Kryzanowski, who is the Vice President responsible for Economic Affairs to the CFO.

So recent months were a major challenge for our group, having in mind the unfavorable market conditions as well as extraordinary results, things that are independent of our -- outside of our control, which transpired during the first quarter of this year. So having such a challenging environment is something that is goes in parallel with the execution -- unwavering execution of our program to reduce costs as well as to increase the resilience of the company to external factors.

Today, we'd like to present the financials as well as the operational data in Q1, but also share information with you about the results of our savings programs and our investments. So I'd like to invite you to follow our presentation.

And once again, I'd like to thank you for your attendance. Ladies and gentlemen, during the first quarter of this year, we had production of 2.8 million tonnes. And then we had of coal, then we had 703,700 tons of Coke. And we had the average price of coking coal of 746. And Coke price was more than PLN 1,053. Then we had the net result of negative, which is PLN 1.3 billion, and the EBITDA was also negative PLN 545 million.

If we look at the operating results, we'll break that down in detail. So production of coal, as mentioned, the total production, the total output was a result of things that happened on the 22nd of January this year. So we had methane combustion in the Stribuva section with [indiscernible] Ubuiza mine and the outcome of that event. And then we also had the change in the decisions in terms of how the [indiscernible] was being run because we had very difficult mining and geological conditions in, and it wasn't economically viable to continue the operations in Ubuiza section.

So the corridor works in Q1 were more than 17,000 meters, so 17 kilometers. And so it's also worthwhile to talk about having 6 meters per tonne of coal -- so we had more than Coke production that was higher than 703,000 tonnes. It was higher than in Q4 2024. Then we can go on to the next slide, and I'll ask Jolanta Gruszka to take the floor to talk about the results on the next slide.

[Jolanta Gruszka, executive]

So ladies and gentlemen, let's begin with an analysis of the major factors that are affecting the economic results of the group in Q1. And so we can say that there was greater protectionism as growing as well as growing uncertainty. And so the steel market is very challenged. And so there are import tariffs in the United States on cars as well as in steel. So international talks are underway. And so there is a lot of volatility on the market. This is engendering greater uncertainty and at least uncertainty on the business community.

And then we have import quotas imposed by India. And this is primarily against Coke from Indonesia and the first and second quarters of 2025. And so this is 90% lower than what we saw in Q3 of last year. And this means that there's greater expansion by Indonesia and other markets. In terms of protecting their own markets in March of this year, India started to do antidumping proceedings against the prices of Coke.

And so these proceedings were initiated as result of imports at lower prices. And so we're one of the larger exporters to India, and we weren't part of these proceedings. And so if we look at the European steel market, we can say that the prices are still below the level that we had seen in the comparable period of last year. And so we have greater exports from China. And so Chinese producers of steel in Q1 2025 have exported more than 27 million tonnes of steel, which is an increase of some 6.8% compared to the comparable period of the previous year.

And so the export increases from China means that there was a slowdown in the construction market in China. And so the decline in demand for steel, while at the same time, there's a stable utilization of the production capacities of the Chinese manufacturers means that they could actually redirect more steel to the export markets. And this is primarily to Asian markets, and so they're able to compete effectively with the household production from those countries. And so then they're exporting to Europe.

Another major external factor is the decline in HCC coal prices and the movement in the U.S. dollar exchange rate. And so we still see unfavorable ratio of blast furnace coal prices to hard coking coal prices driven by the expansion of Indonesian coke.

Based on the data from McCloskey the export of Indonesian coke to Europe is growing steadily. And in the recent quarter, it was -- it reached its highest level ever. And so our main products are inputs for the production of steel. And this market is facing the fact that in Europe, people are turning away from these raw materials in the favor of the renewable energy sources.

And so this has an impact on the amount of production as well as the sales, both for coal in general as well as cooking coal and hydrocarbons and coke. And so if we have 2024, 2025 transformation based on the data that is published by the International Steel Market Association.

So we can say that there's an increase of 5.8% of production, but it's still lower than in Q1 of last year. So a difference of 4.5%. And so in the European Union countries, we can see that there's an increase of 2.5%. But if we compare to Q1 of the previous year, it's down by 2.5%. And so if we compare the distill steel production in Q1 2021, it's down by some 15%. And so steel prices in the European market in Q1 of 2025 were growing compared to Q4 of the previous year. So the average price for steel raws was up by 1.1% compared to Q4 2024, but it's still 5% lower than Q1 of the previous year.

So we also saw higher increases for flat goods, flat rolled goods. So quarter-on-quarter, this is an increase of 8%. But in comparison to Q1 of 2024, we see a decline of more than 16%. I think it's worth also mentioning that as of April of this year, we have limitations on steel imports into Europe in order to protect the steel industry in Europe. And so this took place when European producers are facing global glut of production capacity.

They're facing exports from China as well as barriers to key markets like the United States. And so this decision was made after doing a review set of proceedings.

And so 13 member states of the European Union participated in this review. So coking coal in Q1 of this year, we can say that there was a limited amount of demand and stable weather conditions in Australia meant that there was less risk of weather-related turbulence. And so we had many producers going below water. So the trend reversed at the end of March, but we were down to $166 per tonne in March.

As a result of growing uncertainty on the marketplace, the market participants on spot markets are waiting and waiting until the inventories dwindle, waiting to see what's going to happen with the marketplace. The number of resales was growing in terms of previously contracted coal, and that increased also supplies and that contributed to further price decline. So if you look at the Australian HCC in Q1 of 2025, we can say that the price was $185 on an FOB basis out of Australia.

And so it's down by 8.7% compared to Q4 of previous year, and it's down by 40% compared to Q1 of last year. During the first quarter of 2025, the average prices for semi-soft out of Australia was a little bit less than $118 per tonne on an FOB basis out of Australia. And this was down from Q4, and it was down by 21.5% compared to Q1 of 2024.

If we look at coke in turn, we can see that there's a lot of coke. And so we have the aggressive pricing policies of Asian producers. We can see that relationship or ratio between coke prices and coking coal is below what's considered to be equilibrium. And that means that coking plants were able to generate positive returns. And so if we look at the ratio, it was 1.25. That was the ratio between coking coal and Coke prices.

If we look at FOB prices out of China, it was $204 per tonne, $224, and it was down over the previous quarter by a little bit less than 14%. But if we compare this to Q1 of the previous year, the increase sorry, the decrease was 29%. According to McCloskey's data, if we look at the blast furnace cost -- blast furnace cost, if we look at the CIF,ARA so it's $280.

And so it was down over Q1 by 5.4% and if we compare it to Q1 of the previous year, this decline was some 27%. So it was down to $2.60 per Coke. And so on the next slide, we show you the relationship of JSW prices to the market prices. So if we look at Q1, so we can say that we look at prices from October 2024 to February of 2025. That affects the level of JSW prices. and we show you what happened with prices over that period. And so we had prices ranging from $2.21 to $2.86, and the average was $1.98. So 5% lower than the reference or benchmark price in Q4 of the previous year.

In Q1, we can see the relationship between coking coal prices to quotations on the market generally was 94%. And so it's an increase by 5 percentage points. Over Q4 2024, we've explained many times that when we're selling coking coal, we have long-term contracts where the prices are demarcated by price formulas. And the differences that we see with respect to average prices used by JSW and the market prices is a result of the distinct nature of these formulas.

So we have different periods for averaging prices and we use different FX rates. And so volatility has an impact. It contributes basically to deviation. Over the longer term, we can say that over the longer-term period, this averages out. So in Q1, of this year, we had higher quality coal and higher prices from [indiscernible] and this contributed to an improvement in the prices we achieved as well as the percentage of the benchmark that we are achieving.

If we look then at coke, we should take into consideration what's happening on the coke market where the company is operating. And we have greater geographic diversity and our buyers come from a larger number of countries. And so it's more difficult than with respect to what's happening with the coking coal buyers.

So looking at Q1 2025, we're starting to change the presentation of this ratio to coke prices because we're competing on the European market with imported coke. We should compare this our prices to the prices for imported coke using the CIF ARA port basis. So Antwerp as well as Amsterdam. And so the data concerning these ports comes from the customs agencies, and we believe that this is more credible data, and that's why we made this change. And so to maintain continuity, we wanted to show you the European market coke prices based on the same publications that we've been using up until now.

So we can say that the prices are set on an arm's length basis across the quarter. And we have in mind, of course, prices from the previous period as well. In Q1, the benchmark price quarter-on-quarter fell based on the quotations from the previous period. So this was a decline of some 10%. And so compared to ARA, we were at -- our prices were 96% of the market prices, whereas we were at 92% in the previous quarter.

Let me remind you that we are comparing blast furnace coke prices to all of the fractions of the coke that are offered by JSW. And the final aspect on this slide, this is steam coal prices. And we can say that on the domestic market, prices were falling steadily. And you can see that if you look at the PSCM1 index, so we can say that they were down by some 20-odd percent to [indiscernible]. And so in Q1, our ratio of the benchmark price was 86% and this is a result of where we are positioned on the domestic coal thermal coal market.

So if we think about the type of coal that we're producing that's used for steam coal that we're producing for the market, this is not the coal of first choice in the marketplace. We are treated as a supplementary provider of steam coal. We're primarily producing and supplying coking coal. And that means our coal has a variety of factors that make it less attractive. So it's a very small fractions and so we should compete as a result by utilizing a price policy, having in mind the quality parameters of the steam coal we're producing.

At the end of my presentation, I want to remind you that at the end of Q1 of this year, the inventory on the domestic market, if we're talking about the mine-based inventories, it was roughly 11 million tonnes.

On the next slide, we'll show you basically the revenue. So if you look at sales of coal to external customers, so we were up by 1.7% if we're talking about the revenue and sales of coal to external customers. And this was a result of higher sales. And so this basically allowed us to offset the decline in the quantity of coal sold. And so sales revenues were down by some 22%. And so in Q1, we had higher, we were up by some 4% in terms of the quantum of coal sold.

And this was also in comparison to Q1. The increase was because of selling higher coking coal versus Q4. So it was up by some 8% compared to Q1 of the previous year was some 10.6%. And so the sales of steam coal in Q1 versus Q4 was down by 5.3%. But with respect to Q1 of the previous year, it was up by 8.8%. So if you look at the average prices in Q1, we can say that they were more or less at the same level as in the previous quarter. But for steam coal, we saw the price was down by 24.3%, and it came down to PLN 311.75. And compared to Q1 of the previous year, for cooking coal, the price was down by 29.5%. And for steam coal, it was down by 35.8%.

If we look at the internal customers' sales levers, it was down by 13.1%. This was a result of having a lower production of coke in Q1. And so we were limiting a supply because of having these extraordinary conditions at the Krupinski mine, and we're optimizing, of course, our inventories at the same time.

On the next slide, we'll see the sales of coke. In Q1, we can say that there was not much difference in Q1 of this year to Q4. And so we were at 742,000 tonnes compared to Q1 of 2024, it was down by some 24%. The average price in Q1 was down by 7.1% in Q1 2025 versus Q4 2024. It was also lower than in Q1 of 2024. And so we also had a decrease in the revenue on the sales of coke and hydrocarbons by 6.7% in Q1 2025 versus Q4 2024.

And with respect to Q1 2024, the prices were down, the revenues were down by some 40%, and this was driven both by lower prices and lower production volume. And the final slide in terms of the review of sales in the market context, this is about inventories. And so coal inventory at the end of Q1, it was down versus the end of Q4 of 2024. It was down by 15.6% and this is primarily inventory consisting of steam coal.

This is an increase of some 3.8% versus the end of Q1 2024. And so have a decrease shares of 40%. We have an operational reserve for mines as well as the technology key reserve -- technological reserve and coking plants necessary for operation of Coke batteries. So if we look at -- we had an increase in inventories for steam coal. And so we have an increase of some 69%.

And then if we look at coking coal, we have a similar level with a slight increase of 1.4%. If we look at the Coke inventories, we are at the low level needed just for operational purposes. So it was a little bit less than 116,000 tonnes at the end of Q1 2025. So it was down by 21.3% versus Q4 2024, and it was down by 12.8% lower than the end of Q1. 2024. That's more or less it from my side. Thank you for your attention.

[Adam Rozmus, executive]

Ladies and gentlemen, if we talk about the investments of the JSW Group. So our policy is consistent in terms of our execution of the transformation plan, which has been adopted for operations. So we have lower CapEx versus Q4 2024, but also versus Q1 of last year. So we're down by nearly PLN 280 million. And this applies to the coal and the coke segments. I think it's also worth mentioning that in the coal segment, if we talk about construction investments, so it's down by some PLN 6 million. Purchase of finished goods are also down.

Then we have the CapEx but as a result of our policy that we have to lease machines for the production of coal. This is also down. Then we have the decline of some PLN 16 million for the workings. And this is -- all of these declines are a result of our policy changes. And then we have our key investments that are continuing to be run, which is the modernization of the coking battery #4 in coking plant to be able to continue building the [ Radlin ] power generation unit. So those are key CapEx projects. And then I'd like to ask Mr. [Suszowski] to continue the discussion of our investments here.

[Robert Ostrowski, executive]

Our financial highlights. And so my predecessors told you about everything that was important in terms of the market context, what's happening in terms of our investments. My role above all, is to show you in brief how all of this -- how these factors have affected the financial position of the group. And so in terms of the financial highlights, sales revenue quarter-on-quarter. So the move from Q4 2024 to Q1 2025, we were down by 0.9%.

So we had PLN 2.437 billion, that's the revenue in Q1 of this year. If we look at the EBITDA net of nonrecurring events in Q1 2025, we were in the negative at PLN 545 million. So the one-offs nonrecurring events were had a value of PLN 695 million. So the net result in Q1 is negative PLN 1.36 billion versus Q4 2024.

At that time, we were also in the red at PLN 914 million. If we look at net working capital, having in mind, of course, our investment fund, which is a closed-end investment fund, quarter-on-quarter, we had a decrease of 51.3%. So all of the events that we've talked about today impacted that. And so at the end of March 2025, we had PLN 1.2 billion of net working capital.

On the subsequent slide, which is a bridge, I'd like to show you the impact of those factors. Which had a big positive impact and a big negative impact basically on our sales revenue. So we started -- well, let's talk about the change in sales revenue from Q4 2024. So we began with PLN 2.459 billion in Q4 2024, and we ended Q1 2025 at PLN 2.438 billion what was the impact? Where did it come from? We had a positive impact from factors linked to the impact of coking coal sales volume it's an additional 117,000 tonnes.

And so that means the financial impact was PLN 87.4 million in the black. Then we had an increase of the coking coal price change, and that led to a PLN 2.6 million increase in sales revenue. This is from coking coal price changes. If we look at those factors that exerted a negative impact and the biggest negative impact came from the coal price change. So this is PLN 79 per tonne quarter-on-quarter. And that means we had a negative impact of PLN 59 million.

We also had a major impact coming from the change in steam coal sales prices of 24% quarter-on-quarter and that nearly PLN 100 per tonne and that contributed to PLN 51.5 million negative impact. If we look at other sales revenue and then we had hedge transactions, we had basically an PLN 11 million positive impact. Then we have the impact of steam coal sales volume. This is a negative factor. It's 5.9% quarter-on-quarter, which converts into PLN 13.3 million negative impact, and we see an impact of coke sales volume.

And so this is the final positive factor and that gave us PLN 1.7 million more in revenue. So now if I can go on to the cost or expenses by nature. We can see that the management team is consistently working on reducing costs quarter-by-quarter. So we're down by nearly 7%. So we're down from PLN 4 billion to PLN 3.7 billion. That's where we wrapped up Q1 2025. So if we look at the changes in these costs, I'll show you this in the waterfall.

In Q4 of last year, we had PLN 4 billion in costs. We ended at PLN 3.7 billion, PLN 2.7 billion. And so the biggest positive impact was consumption of materials. And so basically, we have a positive impact of savings of PLN 103.1 million. And we have external services down by 15.8%. And so that means JSW paid less, primarily for eliminating mining damages, transportation services. And so we had savings of nearly PLN 104 million. Then employee benefits, we are down by PLN 51.7 million, so we had a positive impact on our costs, and that was primarily PLN 26 million in JSW.

So we had one-offs and provisions for holidays and lower number of headcount and then [indiscernible]. So all those things led to a decrease. We also saw reductions in several other companies in the group. And in total, we had an impact -- overall impact of PLN 51.7 million. In terms of negative factors, we have other costs by nature that was PLN 20.9 million. But as I said, the total impact was PLN 97.3 million less costs.

Now if you look at our mining cash costs and our cash conversion costs, we can see the following results. Let me start with the mining cash cost. Quarter-on-quarter, we have a slight increase of 4.9%.

Let me talk about the impact of the costs. So volume was PLN 94 the final result for MCC, the cost reduced that. If we look at cash conversion cost, which is the cost to convert coking coal into coke, costs are up by 9.2%. Cost is PLN 36 million. This is primarily a result of making settlements for business partners where JSW was making payments and we had PLN 4.4 per tonne of coke positive. So we had the final price or final cash conversion cost of PLN 372.03 per tonne.

On the next slide, next graph. Once again, you see the mining cash cost. And so basically, what were the positive factors, consumption of materials and energy that gave us a positive impact of 25.76 and external services was 25.95. Employee benefits gave us a positive impact of PLN 7.7 million.

We also had a positive impact in other costs by nature, which was PLN 0.9 per tonne, almost a full. Then we had a negative impact, as I said, this was primarily because of volume reductions. So nearly PLN 94. So basically, the denominator was affected by that, and we ended up the quarter with an MCC of PLN 836.36 per tonne.

Let me also show you a bridge graph to illustrate what's happened with the cash conversion cost. In Q4, we had PLN 340.65 per tonne. So we had the impact of volume, which is PLN 4.41 million. Then we have taxes and charges of PLN 6.33 million negative impact and then we had consumption materials, feedstock was PLN 1.71.

I mean some other things that were positive. We had consumption of energy, external services, employee benefits of PLN 1.93. The other 2 were PLN 1.92 and PLN 1.4. Then had an impact that was positive of volume-related factors, which is PLN 4.41 per tonne.

So then if we look at the EBITDA drivers in the JSW Group. So one element that had the biggest impact was with our charges or impairments for what happened [indiscernible] on the mine because this is how we've captured it in our cash generation units in terms of the mines. So we have PLN 566 negative. Then we have other costs of PLN 245 million. Then we have the value of noncurrent assets, we have some positive impacts.

As I said previously, we had the positive impact second the slide switched on. So we have the impact of cost by nature, which is the costs are down by PLN 278 per tonne. Then we have other sales-related factors PLN 10.8 per ton. And then we have the impact of coal sales volume and price, PLN 25.2. And then the impact of the result of other activities, PLN 31. So EBITDA in Q1 of 2025 is negative at PLN 1.226 billion.

Then we had nonrecurring events of PLN 681 million. Then we have the EBITDA net of nonrecurring events Q1 2025 was negative PLN 546 almost million.

The next slide, as usual, shows us the impact of operating segments on what happened in terms of EBITDA in the JSW Group. This slide simply tells us that the coal segment had a negative impact of nearly PLN 664 million. This was affected by the change in the Coke segment EBITDA of PLN 24 million. This had a negative impact. Then we had a positive impact coming from the change in other segment, EBITDA PLN 41.5 million. Then we have the change in EBITDA of consolidation eliminations PLN 15.2 million.

So then the final EBITDA, as I said on the previous slide, it comes out on the net of nonrecurring events, it's negative at PLN 545.5 million. That's the result as of Q1 2025.

Now let's move on to net working capital, having in mind what's happening with our closed-end investment fund within the JSW Group. So we have those factors, including our inventories of PLN 140.7 million, and we have trade and other receivables of PLN 1.1 billion, and we have income tax overpayments of PLN 15 million and cash and cash equivalents of PLN 7.769 million. And we had the closed-end investment fund at PLN 2.5 billion. So this, as I said, is PLN 2.5 billion almost, and we had other current assets of PLN 35.6 million.

Then we have negative adjustments in terms of loans and borrowings of PLN 198 million. And we have employee benefit liabilities, PLN 328 million, then we have lease liabilities of PLN 251 million. Then we had our trade and other liabilities of PLN 3.08 billion. Then we have current provisions of PLN 285 million almost. Then we have other current liabilities of PLN 41.5 million. And so at the end of the day, our net working capital, including the closed-end investment fund at the end of the quarter was PLN 1.218 million.

Now if we look at cash flow in the group. I would put forward as illustrated on this slide, cash at the end of 31 December 2024, PLN 885 million. At the end of Q1 2025, we had PLN 769 million. What drove that result? So we had a net profit loss before tax of PLN 98 almost PLN 1 million that was negative. And we had depreciation and amortization of PLN 347 million. Change in inventories was PLN 256 million. We had the change in trade and other receivables of nearly PLN 240 million.

So we've reduced things here that have a positive impact. And we have a change in trade and other liabilities, so PLN 410 million. So this had a negative impact and so almost like PLN 411 million. Then we had other operating cash flows. So interest and things like that and profit sharing was PLN 45.1 million. Then we had a positive impact in terms of our investing cash flows where primarily we have basically the surrenders in the investment cash flow.

And then we have loan borrowings received PLN 44.3 million, repayment of loans and borrowings PLN 27.5 billion. So as I said, loan and borrowings received was PLN 44.3 million. We've repaid loans and borrowings down by nearly PLN 28 million. And then we have other financing cash flows and FX differences. It's almost PLN 89 million. And so at the end of March 2025, so on the 31st of March, we had almost PLN 769 million. That's it for me. Thank you very much.

[Unknown Executive]

Thank you very much. Now we have the final slide within the framework of our presentation. This is a little bit outside of the reporting period covered by today's meeting. We can talk about some of the positive actions in our transformation we have in 2 areas. One, we have the efficient mine. In April this year, we have 5 selected longwalls where we're doing a pilot. We have modified incentive system for the longwall crews. And as you can see on the graph, as a result of what we've done on these longwalls plus we have output up by 17%, and that means -- that we have a plus 5% increase in output across all of our mines longwalls.

So then we had savings -- so as of May, we've identified savings of more than PLN 300 million. So this is more than 85% of the savings we planned for this year. So the total savings of PLN 370 million. So we have a positive mindset in terms of our ability to outpace this. So that means we've completed the agenda for today's conference, and we can come on to the final item, which is the Q&A session.

[Operator]

And so go ahead and ask your questions. Ladies and gentlemen, the first question we have, what is the planned volume of production for coke and coking coal for 2025?

[Ryszard Janta, executive]

The trade unions and interviews are suggesting that production in JSW in 2025 should be around 12 million tonnes. The Management Board believes it to be closer to 14 million tonnes.

[Operator]

Why is there such a major difference in the forecast? Perhaps I will respond to that.

[Ryszard Janta, executive]

Ladies and gentlemen, yes, in fact, there are many stakeholders in the transformation period in terms of the plan that's been adopted by JSW. People are interested in defining what is the run rate without having fundamental knowledge about this level, this run rate has been defined. In Q1, we've achieved the target plus 5% in terms of the deviations that may show up.

Well, deviations may show up as a result of force majeure because of the fire at the Budryk mine, and we had to see all of the B4 longwall. And the fire was about the neighboring longwalls, not where the production was going on. Nevertheless, we're undertaking efforts. I can tell you up until now, our efforts have been effective to mitigate the subsequent effects.

[Operator]

Thank you very much. The next question, what level of CapEx in the whole group of JSW should we anticipate in 2025?

[Robert Ostrowski, executive]

Once again, I will respond to this question. So ladies and gentlemen, within the group, we have the strategic transformation plan, which has scaled back the level of CapEx in 2025. That was discussed on one of our slides. Up until the 30th of April of this year, we've reduced CapEx by PLN 1.2 billion. So the group in 2025 plans to continue scaling back CapEx both in the group as well as in the subsidiaries.

[Operator]

Thank you. What increase of costs should we anticipate in the group and in JSW in terms of cost. I'll ask Remigiusz Kryzanowski.

[Remigiusz Kryzanowski, executive]

So I'll talk about the costs. So in general, the company does not present any forecasts that go beyond the period covered by the earnings call. I won't portray any secrets. You can see the decline in costs. We're working hard to cut our costs. I'm convinced that the costs in 2025, generally speaking, by nature, we should be lower than we were in 2024.

[Operator]

Thank you very much. The next question, what's happening with your efforts to improve the liquidity of the group or so discontinuing the collective bargaining agreement as well as the tax. When could this take place?

[Unknown Executive]

The company has informed through current reports about the applications that were submitted to the Ministry of Climate and Environment in terms of recovering the solidarity tax for the windfall tax. And we also asked to defer the payment of social insurance premiums delay and spread over time. So these applications are being reviewed.

We have not yet finalized these issues. Once we have the next -- or achieve the next stages, then, of course, will issue a current report to notify the entire market of what's happening.

[Operator]

Thank you very much. The next question, is there a risk that JSW will stop paying benefits for mining damages?

[Unknown Executive]

Ladies and gentlemen, the damages for -- or the payments for mining damages, these are statutory requirements for miners, generally speaking. And so failing to make those payments means you could lose your mining license. That type of activity is not even being considered.

Maybe I'll violate the convention. I forgot to mention one thing, which we hadn't communicated in the current report. We have received an opinion, a legal opinion from Professor [Michel] and his team. He's an authority in the tax field. And this opinion doesn't leave any doubt whatsoever in terms of the justification for the submission of this application.

And so this information is available on our website.

[Operator]

Thank you very much. What the 345,000 tonnes of coal shortfall in terms of the Budryk mine, how will that be spread over the subsequent quarters?

[Unknown Executive]

So the mine fire in Budryk on the B4 longwall took place at the beginning of Q2 of this year, and it affected longwalls that were at the initial stage of operation. So the possible shortfall of volume will be spread evenly across the subsequent quarters of this year.

[Operator]

When does the Management Board plan to revise the impact of the transformation plan for 2025, your price assumptions and your volume assumptions? When you -- would you use to write this plan unless they become less than current.

[Ryszard Janta, executive]

Ladies and gentlemen, in terms of our strategic transformation plan, means that we want to optimize things across many, many years. It's not only about 2025. As a result, we're at the stage of introducing changes, and we're defining our production targets. We're also specifying our strategic efforts and measures. And that's why today, we're not talking about tweaking the plan. This is something that we will consider to look at in terms of future adjustments or tweaking to the strategy.

[Operator]

When does the management team anticipate to hear the result from the [indiscernible] company? Will it be a matter of refunds being made to the company or would just mean you will have to continue making payments?

[Unknown Executive]

In the previous quarter, we gave a response about our major steps in the subject matter to defer payments and to basically convert that into a payment plan. As I said right now, we have not received a decision yet. We will advise you in the form of current reports. We're not able to determine or state by when the [indiscernible] Security Company will make a decision on this application.

But as soon as we get that decision, we'll pass on that information to you.

[Operator]

Thank you. What are your assumptions in terms of the price levels in the near future?

[Robert Ostrowski, executive]

The benchmark seems to be coking coal price of $200 per tonne in order to sell coal at that price, the mining expenses have to be substantially lower.

[Operator]

What is your plan as a management team?

[Unknown Executive]

So perhaps I can react to the market side of the things. I can't comment on the hypothesis of the tenant that's expressed in the question. We do not publish forecasts we track all of the forecasts published in the market. We meet with our business partners in order to glean information, but also from what we meet with other market players. And we have our own internal research and analysis, but we have never published the results of that analysis.

[Unknown Executive]

Let me add, if we talk about efficiency, this is the essence of our strategic transformation plan. A lot of our activities are here to make the mines more efficient, more cost effective.

[Operator]

Thank you very much. Next question. When will headcount reductions take place? Perhaps you will speak to this.

[Ryszard Janta, executive]

As we said at the previous conference, the headcount reductions would be a last resort. In terms of our savings efforts to save money on employee benefits, we have to receive the buy-in from the social party. We've held a number of meetings, but no decisions have been made nor has an agreement reached. These talks will continue.

I think what's noteworthy here where a comment should be given, the headcount in JSW is consistently falling. I can use this data as of 31, 2024. So we've reduced the headcount by 647 employees so GSW. That's the headcount at the end of April, so the previous year.

[Operator]

So if we think about the money we have set aside for a rainy day has basically been used. What's going to happen? You have to liquidate the company?

[Ryszard Janta, executive]

Once again, let me respond to this question. Based on the current report published recently and nothing has changed in the meantime, money hasn't been used up because the company still has money in the closed-end investment fund of roughly PLN 1.3 billion, plus we have the current cash balance in the bank accounts of the company.

In order to counteract what's happening in the marketplace, -- we utilized the money in the stabilization fund, and that was the reason it was set up. But as a management team, we've also implemented the strategic transformation plan. We've talked about that many times and it's been presented.

[Operator]

That was the final question that was posed. So thank you very much. Thank you very much, ladies and gentlemen, for your attendance at today's conference call. Thank you very much, and goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]