JSW's Record Loss Shows Growing Pains for Polish Coal Miners

  • Coal producer reports $787 million net loss for 2015
  • Slumping coal prices are draining JSW's cash reserves

As the Polish government is struggling to stop the hemorrhage at its coal producers, the country’s biggest coking coal miner JSW SA posted a record annual loss of 3.14 billion zloty ($787 million).

The net loss widened from 657 million zloty a year earlier after the state-controlled company wrote down 2.7 billion zloty of its coal and coke assets, JSW said in a statement on Monday. Local coal producers are grappling with high legacy costs, many inherited from the pre-1989 communist era amid dropping global fuel prices and unions worrying about their jobs.

The ruling Law & Justice party created the Energy Ministry after it won the elections in October, making the rescue of the coal industry employing about 100,000 people its first task. JSW soon overtook the nation’s biggest thermal coal producer Kompania Weglowa SA as the cabinet’s top priority as it rushed to negotiate a deal with bank creditors in December. With the coking coal prices plummeting further in January, it turned out JSW requires another restructuring plan to shore up its balance sheet.

|JSW’s depleting cash reserves follow declines in coking coal prices.

“The company’s main concern remains liquidity risk as cash position was at a very low level at year-end,” Marcin Gatarz, an analyst at Pekao Investment Banking SA in Warsaw, wrote in a note. As demand for coal was “softer” in the fourth quarter, “the progress of restructuring process is likely to be in focus in the coming months,” he said.

JSW, which for the first time failed to organize a briefing for reporters or analysts since its 2011 listing, said in a regulatory filing that its cash situation is “difficult” with risk of losing the liquidity being still “high.” Poland won’t let the company collapse, the Energy Ministry said last month, echoing earlier pledges by the government to keep all coal mines open in defiance of EU attempts to lower carbon emissions.

The fourth-quarter cash position of “slightly above” 200 million zloty is enough for “less than two quarters of operations,” Andrzej Knigawka, an analyst at ING Securities SA in Warsaw, said in a note, advising his clients to sell JSW.

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