Decline in Demand and Prices of Energy Coal Impact the Results of the Bumech Group

The Bumech Group, listed on the main market of the Warsaw Stock Exchange and engaged in the extraction of hard coal in the Silesia mine in Czechowice-Dziedzice, presented its results for the first half of 2024. In the first six months of this year, the Group achieved PLN 284.6 million in sales revenue, marking a 6% decrease compared to the same period in 2023. The reported result was significantly affected by a decline in demand and the price of energy coal on both domestic and global markets. Despite significant reductions in operating costs, Bumech reported a loss of PLN 65.4 million EBIT and PLN 55.8 million net loss for the first half of the year. The Group expects demand and coal prices to increase in the fall for heating purposes. In the fourth quarter, Bumech Group intends to continue its activities aimed at further reducing operating costs.

– Market conditions had the most significant impact on the presented results. In the first half of the year, we faced decreased demand for coal in all market segments and falling coal prices in international markets. Additional pressure on the prices was exerted by coal stockpiles held by state treasury companies and the discards from imported coal – said Andrzej Bukowczyk, Deputy Chairman of Bumech SA. – Despite these factors persisting in the near future, we traditionally observe increased demand for heating coal in the months following the half-year. Already at the beginning of October this year, we expect increased sales to distributors and to partner depots – he added.

In the first half of the year, the average selling price of coal on the European market was almost 19% lower compared to the previous year. As per the data from S&P Global Commodity Insights, the CIF ARA (6,000 kcal/kg NAR) index in the first half of 2024 averaged USD 108.80 per tonne compared to USD 134.15/t in the first half of 2023. Meanwhile, the decline in the average selling price of coal from PG Silesia in 2024 was 5% YoY.

Following the stabilization of the market situation in the first quarter, the Group implemented a series of actions resulting in adjustments to production volumes to match the reduced demand for coal and lowering production costs. Cost reductions are being achieved in many operational areas, including reducing employment without group layoffs, reducing orders from subcontractors, and reducing purchases of electricity – both due to the start of energy production in its own cogeneration plant and by optimizing its consumption. Furthermore, to optimize business processes and improve operational efficiency within the Group, a Shared Service Centre (SSC) was established this year. Bumech Group’s Shared Service Centre will be responsible for providing support services in key areas, for all companies within the Group.

– Thanks to the measures taken, we keep the technical cost of producing commercial coal lower than the average level last year. We have planned further actions aimed at reducing operating costs in the fourth quarter. The most important will be the launch of the third cogeneration engine in the mine with a power of 1.82 MW and a photovoltaic installation with a power of about 0.51 MW– says Andrzej Bukowczyk and adds – The aim of setting up the SSC is to integrate business processes and centralize support services for all Bumech Group units. This will improve operational efficiency, optimize costs and improve the quality of services provided – he concluded.