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Jastrzebska to scrap miners benefits as coal prices at 6-year low

Jastrzebska Spolka Weglowa SA, the European Union’s largest coking coal producer, plans to scale down communist-era benefits for employees to curb losses after the price for the fuel slumped to a six-year low.

JSW, as the Polish company is known, wants to cancel free coal benefits for its retired employees to save 65 million zloty ($20 million) annually and release 1.2 billion zloty of provisions, Chief Executive Officer Jaroslaw Zagorowski said at a news conference today. The state-controlled company may also suspend a second annual bonus to save a further 170 million zloty unless coal prices rebound.

Polish coal mines, which employ more than 100,000 people, are seeking ways to curb losses after the sluggish economic growth cut demand for the fuel. Kompania Weglowa SA, which produces a quarter of the EU’s coal output, last week canceled free coal benefits and plans to sell mines to boost liquidity. Coal unions plan protests in Warsaw on Oct. 1, when new Prime Minister Ewa Kopacz makes her government’s first policy speech.

“We need to act to avoid disaster and at these prices our situation is getting worse every day,” Zagorowski said. “The market has changed and union leaders try to preserve the status quo, which was agreed on more than 30 years ago.”
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JSW jumped as much as 5 percent to 32.73 zloty, gaining the most in a month, and traded higher 3.2 percent at 32.18 zloty as of 2:35 p.m. in Warsaw. The stock has slumped the most in Warsaw’s benchmark WIG20 Index this year, losing 39 percent.

The company may post a 572 million-zloty loss in 2014, its first annual loss since 2009, after the benchmark price of coal used by steelmakers fell to $120 ton, or the lowest level since 2008, according to the mean estimate in a Bloomberg survey of 11 analysts. Its first-half net loss was 343.2 million zloty.

JSW also plans to add a sixth working day at its Krupinski mine to avoid closing it and will cut its total investments to below 1.4 billion zloty in 2015 from about 1.8 billion zloty this year, Zagorowski said.

The previous cabinet of Prime Minister Donald Tusk said state-controlled power utilities including PGE SA should give up some of their profits and help coal producers. Last week state-controlled coal holding company Katowicki Holding Weglowy SA dismissed its CEO Roman Loj after miners started protests to prevent a mine closure.

Source: Bloomberg