My name is Ryszard Janta, and I'm the CEO of JSW S.A. I'm very pleased to be able to welcome you to the earnings conference of JSW S.A. for Q1, 2024. I would like to thank you very much for your attendance and for your interest in the results of our company. Today, it is my pleasure to introduce you—to introduce the results to you, along with Madam Jolanta Gruszka, who's the Chief Sales Officer and Vice President. We also have Remigiusz Krzyżanowski, who's the CFO, as well as the Vice President. I also have Jarosław Kluczniok, who is Vice President and the Chief Development Officer, and we have Adam Rozmus, who is the Vice President and responsible for technology and production, as well as operational affairs.
So, ladies and gentlemen, I have the honor of being the CEO of JSW, and this has been my honor since the thirtieth of April. It's a mere two, three weeks, and we're working together as a very intensively, very arduously, and during such a short period of time, it's not the case that we have developed responses to all of the questions about the future of the company. I will not pretend that in such a short period of time, I've been able to master the process of mining coal any better than people who've been working here, miners and others who've been working here for years.
So during today's presentation, I wanna tell you that as a doctor of economics, as well as a mathematician, in my professional career, I've paid a lot of attention to the substantive factors, to data analysis, and that's why the ratios. I wanna make sure that the ratios of the company, financial ratios, are properly formulated. That's gonna be the case during my work here at JSW. So as we care for the results of the company and its profitability, and making sure the costs are under control, and ensuring that we have the financial foundations in place for the operation of the company, these are gonna be my priorities. The market where we operate is a very volatile market. It's a global market, and we, of course, are in interplay with global players.
We're gonna look for new opportunities, new activities and new areas where we can excel. I believe that along with Jolanta Gruszka, we're gonna be able to devise the best possible solutions. In terms of mining, we're focusing, along with Mr. Adam Rozmus, to ensure that we have the run rate restored, having in mind what has happened in recent quarters in terms of deteriorating that run rate. If we're looking about the mining model, we're thinking about Bzie, and we're waiting for the expert's opinions to raise opinions on that subject. We're looking at the ability to bump up the run rate by having additional investments to open up new seams. We're working on a new financial model and a new cost policy. I would like to assure you that jointly with the CFO, Mr.
Krzyżanowski, we're gonna look and scrutinize all of the numbers very closely. So today, as we look at the raw level of raw materials needed for energy transition is low, we are a key player for the sustainable development of the European Union. We do know that in the long run, the steel production business can change, can modify, and they might switch their focus to a more sustainable approach, and we're going to transition in parallel with that industry. So we have to be flexible, we have to actively look for new areas of development, and we're gonna work together with Mr. Jarosław Kluczniok on that subject. And one of our unchanging priorities is the safety of our crew, being of our staff, being a good neighbor, and having a transparent approach to our shareholders.
The fact that a dividend was not paid for 2023, after having made that recommendation and looking at the contract with PFR and, you know, having made a presentation to the supervisory board, this doesn't mean that we're deviating from our dividend policy. It's my idea and my hope that we're gonna be able to return to that dividend policy, and this will become the rule, that we're gonna be able to pay that dividend to the shareholders of JSW. And then we can go on to the presentation of the company's results, and we'll look at Q1 first. So if we look at coal production, we were at 3.13 million tons of coal. We had nearly 830,000 tons of coke. We had 21.3 active long walls.
And so MCC in the first quarter was 737 PLN per ton. If we look at sales revenue, we were at PLN 3.4 billion. The average coal price was 1,058 PLN, and if we look at coke, it was 1,317 PLN per ton, and our EBITDA was at PLN 532 million, and the net result was minus, was negative. In the red at PLN 9.7 million, and we'll have more information, more data, further color commentary about these numbers in the course of the subsequent slides, which we'll discuss. But now I'd like to give the floor to Jarosław Kluczniok, who's responsible for development.
So in the annual presentation, you can see basically where we are in terms of achieving the group goals and objectives.
Up until 2032, the new management team is in place as of the 6th of May, and we're now, the team, we're now analyzing the operational situation of the group, and we're taking efforts to ensure that we're gonna be able to achieve our short-term and long-term strategic objectives without any disruption all the way up until 2030. They have been defined in the strategy. So if we look at the strategy relating or so what's happening in the environmental side of things and what's happening in the macroeconomic sphere, is the challenge for us. So along with Mr. Rozmus and the whole management board, that our mining segment will return to what we have put in place in the strategy.
So we will analyze a variety of strategic areas that are of critical importance and what's for our group and looking for new opportunities and what's happening. So as a new development officer, along with the team, we want to think about the orientation of the old group, the reorientation to it being a green company and being broad-based. So I'll give the floor now to Mr. Rozmus, who will talk about the production results.
So ladies and gentlemen, in Q1 2024, JSW produced 3.3 million tons of coal, as opposed to 3.38 million tons of coal in Q4 2023. So this was a decline of basically 7.5%, so from 3.3 to 3.1.
This was a result of some of the geological difficulties we encountered because of the tectonics of the deposits in the Borynia-Zofiówka mine, and as a result of having to do some preventive work in terms of methane dangers in Pniówek. The level of production, which is down by 7.5%, is a result of how many number of long walls we have available for operation and what their production capacity is. In terms of one running meter of a long wall and to what extent we've made progress there. If we look at these numbers, they change over time, and they're constantly changing, moving from 19 up into 27, which is the plan for the end of the year.
This is strictly dependent upon, of course, the natural hazards, geological conditions, about the equipment we have, machinery, as well as the number of crews, long wall crews, that we need to have in operation in order to be able to do that mining work. Coming back to Q1 and the sum up, the recap. The fire that took place in Pniówek in December of last year was of significance, and so that meant that two of our long walls had to be shut down, and that means the Q1 production or output was lower. If we look then at the quarter works, we can see that in Q1, we're up to 19,750 running meters, and so this is an increase of 4.2% over Q4 2023.
This was due to achieving our key assumptions with respect to maintaining the current front, as well as looking at the strategic areas of the mine, mines. So if we look at coal production, we can see a decline of 5.1%, and this is linked to a decline in production in the corresponding period. Thank you very much. Now, I'd like to ask Jolanta Gruszka to tell us a little bit about what's happening in the market environment.
Ladies and gentlemen, so at the beginning, we'll talk about the trends that we've seen in this period. Steel production in Q1 was up by nearly 9% across the world. If we look at in comparison to Q4 2023, and so this was true also in the E.U. as well as across the world. So in Q1, there was a certain amount of optimism.
We saw steel prices were climbing, especially if you're looking at flat goods. This was supported by the closures of blast furnaces at the end of last year. There was also the filling in of inventories, and there was also some disruption on the Red Sea, as a result of the conflict in Israel. So if we look at the flat goods, the rods, we saw that prices were growing in a stable footing. If we look at the price increase, it was primarily up until the end of January, beginning of February. We saw oversupply, a bit of a glut as a result of blast furnaces coming back online, and as a result, prices started to dip.
At the beginning of March, if we look at the top quality coking coal, we had prices in excess of $300 per ton, but the increase of spot quantities, which showed up at the beginning of March, it led to a sharper decline in prices than had originally been seen. And so we saw prices drop back to about $240-$250. The primary source or cause of prices declining in March, well, this was because of what steel mills were doing. Well, oftentimes, they're the final users of coal, but as the steel market was growing soft... These entities were selling these deliveries that were booked in advance, and they basically added some additional supply to the market.
So if we look at hard and semi-soft coal, we can see that in Q1, the prices fell by more than 7.5% versus Q4. If we look at coke prices, in the last two quarters, things have happened differently than in China. So we had a coke price upswing of nearly 3%, whereas in China, the decline was below, I mean, it was bigger than 6%. And so we can say that the relationship or the ratio of coke prices to coal prices have, has improved, but that still makes it impossible for coking plants to generate a positive return. On the next slide, we can show you the comparison of our prices to market prices.
So we can see that if we look at the reference period, so which is October of last year and all the way through February of this year, and we can see this ratio is down to some 80-odd%. There are a number of reasons for that, and this was because of the change in the mix of sales. In Q1, we had a much smaller percentage of the top price products, so the higher quality coal, and this was a result of the events that transpired at a mine in JSW, where we had basically a decline in production or output. I think it's worthwhile to mention that we're comparing the average prices of our coking coal grades with the top quality coking coal in the market. So this Premium Low Vol, that's the top quality product.
If we compare that to Q4 of last year, the decline was some 12%. So it increased by 12%, and so it went up. It bumped up to 320 from 294, but we're not showing that here, but it's worthwhile to emphasize that the reference price of semi-soft coking coal fell by 5%. So these changes of prices, having in mind also the change in the mix, sales mix, meant that we had a bigger decline in the average price to the reference price. So if we look at the European market, we're up to 98%. That's our coke prices in relation to the prices of Western coke on the European market. It's worthwhile to mention, if we talk about coke, we don't have a clear market benchmark, such as the Australian coking coal benchmark.
There's a bit of a problem with the market quotations here, and that's primarily because we have different terms or times when coke is priced. We have some quarterly contracts, sometimes we have monthly contracts. I mean, the prices are set on a monthly or quarterly basis, and sometimes we have a product that's sold on a spot market. So if we look at steam coal price achieved by JSW, versus the index for the power industry, we're at 98% here. This indicates that our prices are pretty much on par with market. So if we look at the sales of coal produced in the group, it was down in Q1, and this is a result of sending out less coal to internal buyers and external buyers.
This is a direct consequence of the decline in production and the supply, therefore, of the top quality coking coal grades. So we have revenues on sales of coal to external customers. To external customers, it's down by nearly 11% at PLN 10.7, and this was primarily because of what was happening on the steam coal market. So we had a decline of in excess of 19%, where there was a decline in the volume of some 34%. So the revenue of just coking coal has not changed much at all. And we see that the price bumped up by more than 1%, but the sales revenue has been kept at the same level. So as I mentioned, it's primarily the sales mix that has been modified, and I mentioned that and explained that a moment ago.
So if you look at the sale of coke in the first quarter, and so we can say that it's up by some 25% in Q1 over Q4 2023. This is because of how overseas markets operate.... We have basically quantities that were in the port harbor in the end of last year and shipped at the beginning of this year, and that's why we have such a major upswing. The average coke sales price is up by less than 3%, and that means that we have higher coke revenue, and from hydrocarbon sales, it's up by 25.2%. We can see that we're far from the balanced market.
What we've seen in March, we can say that the relationship between coke prices and coal prices have improved, but we still cannot generate a positive financial return in the coke segment because of this imbalance in prices. And then the last slide from my area, this is inventory. So if we look at the coal produced in the JSW Group at the end of Q1, we see that our inventories were up by a little less than 11%. And this is primarily because of what's happening on the steam coal market. Because the steam coal inventory is 250,000 tons, we have less than 170,000 tons of coking coal inventory. So this level of inventory is also inclusive of the coal in the yards of our coking plants. So we have a very low level of inventory of coke.
We're down by some 54%, and so as I mentioned, these swings are primarily a result of the dispatching of product on the overseas markets. So I'd like to give the floor to Mr. Rozmus, who will tell you a little bit about our investments in Q1.
If we look at CapEx in the JSW Group, in Q1 2024, we spent PLN 1,067 million, and so this is down by 30.7% over Q4 2023 on an accrual basis. So we have the following items here. In the coal segment, we had PLN 861.3 million spent, and here we should mention investment construction works. And this was PLN 323 million.
We have these mining pits, and then we have the wash plants, which is PLN 37 million, then environmental protection, which is PLN 6 million, and then other investments of PLN 31.7 million. Then we have the purchases of finished goods, and so we have the purchase and modernization of mechanized shields. And so we also have winning machines. This is PLN 16.6 million, and then transportation equipment, PLN 32 million, and then other purchases of PLN 30.4 million. And so the CapEx for expansion maintenance were there. Then we also to shore up the long walls and then for leasing, so some PLN 52.4 million. So in the coke segment, we had CapEx, which is up by PLN 22 million over the last quarter of last year.
And the most important line item here, which contributed to this level, is the execution of some key tasks, so modernization of the coking battery, number four in Szczecin, as well as the construction of the Radlin power plant power generation unit. Thank you very much. Then we'd like to give the floor to Mr. Remigiusz Krzyżanowski, who will tell you about the financial highlights.
Today, I will try to walk through the most important financial highlights in Q1 2024 on an efficient basis, but during these subsequent meetings, we'll be able to talk a little bit at greater length, not only about the numbers, but also about our updated financial model, which Mr. Ryszard Janta, our CEO, mentioned, and we can also talk about our revised cost policy.
So as we compare Q1 2024 to Q4 2023, we can see our sales revenue is up from PLN 3.3 billion to PLN 3.4 billion, which is roughly a 2.3% uptick. The main factors that contributed to this increase in our sales revenue was the higher level of coke volumes, and they gave an additional PLN 268 million. And we also saw price increases for the coke that was sold, and that gave us a PLN 37 million additional upswing. And so if we look at coking coal and the differences there, and the price deviations were limited, and that's why they had a minor impact on the results. But amongst the most important factors that had a negative impact on sales, we should mention the decline of steam coal sales and the price decline.
So, EBITDA here in Q1 of this year was PLN 532 million, so it was down by nearly 24% over Q4 2023. So the major impact or the major contributing factor was the increase in inventories and the increase in materials. And so we can say this had a negative impact, and this was a result of the decline in sales prices and then the decline in sales generally of steam coal. So there were some positive factors contributing to EBITDA in Q1 2024 versus Q4 2023. That's higher price, higher volume of coke sales, and then costs were down by nature. So, if we include, look at net working capital, including our closed-end investment fund, we can say that the net working capital is down by 10%, but it's still at a positive level of PLN 5.5 billion, almost.
In the first quarter of this year, we had a net result, which was in the red of PLN 9.7 million, and the main reason was due to EBITDA decline. If we look at the costs by nature, we can see that the costs have moved down from PLN 4 billion-PLN 3.8 billion, and this is because of external services and materials. So these two declines, well, in external services, were down by PLN 99.5 billion, materials were down by PLN 91.9 billion. And so this was primarily linked to the lower decline, so the lower run rates. But you also had decreases in mining damages, corrections.
There was less done there, and some of the negative factors were as follows: we had higher employee benefits of nearly PLN 35 million, and that meant that we had to pay higher those resource insurance contributions. So basically, there were some other increases here. If we look at the mining cash cost, it grew by 8.6%, and it was PLN 738 per ton. The main factor that caused MCC to grow, well, that was because of the fact that we mined less coal. But if you think about some of the good information, if you look at the unit conversion cost, we were down to PLN 308, and so this was a result of basically reducing costs by some PLN 40.3 per ton.
We'd like to show you some of the main cash flows. If we look at cash flow, it was down primarily because of investment cash flows of investments of PLN 1.26 billion, plus repayment of loans and borrowings of PLN 216 billion. We can say that changes in inventories had a positive impact because we then had an improvement in cash flow of PLN 222 million. We had change in trade, and other receivables, PLN 172 million. That's it. Thank you very much.
Ladies and gentlemen, now you can look at our full presentation on our website in the tab called Investor Relations. We encourage you to take a look at that.
Now, we'd like to go to the Q&A session, and we'll try to respond to all of your questions that our IR department has collected. Let me read the first question: Will the new management board, has it managed to look at the current situation of the company, and what are the most important tasks for the management board? Can we ask you for a list of priorities? I think we responded to this question during the preface to our presentation. I'd like to go on to the next question. What's gonna happen with the pay raises in 2024? Have you had a meeting with the social party on this subject?
Right now, this subject is in progress in terms of mediation, and so basically, the first mediation meeting was held with the social party, and now the mediator will meet with the management, and then we'll have a meeting planned in the presence of the mediator. Okay, thank you very much. I'd like to ask you whether or not your optimization efforts will also pertain to CapEx. So having in mind the fact that we have falling output, is it justified to spend PLN 4 billion on that? So in this question, we talk about optimization. Well, optimization is something I will target multiple times. We're trying to optimize in terms of the functioning of JSW and the overall group. So this company is taking efforts to optimize its cost base as well as its in capital expenditures.
Every decision to make an investment is justified in detail, and it's analyzed, and the amount of spend should be linked to the current level of the run rate and the planned level of the run rate. So as we do our investment activity, we're focusing on ensuring that we can deliver the current output targets, but we also want to invest in the future. Ladies and gentlemen, without making investments in the deposit, it will not be possible to conduct mining activity in the future. The level of CapEx in individual years will have a direct impact on the run rate that is achievable. CapEx has to be aligned to our production plans, our output plans, and as they're optimized, then CapEx will be tweaked.
We are ready that if our production guidance changes, and if we look at our analysis of the expenditures that are being undertaken, it might be necessary to have an optimization of CapEx. That's one of the things that we might have to do. And so we will have to optimize some of these targets in the strategic documents. And so a question that keeps recurring in the chat: What is the recommendation of the dividend? What is your opinion on distributing a portion of the profits? I think we already responded to that. Perhaps, Mr. Krzyżanowski would like to add something.
Our recommendation in terms of distributing profits in 2023, primarily because of the loan agreement with PFR and the limitations that are there, and some certain restrictions, and so we don't have a dividend payout recommendation, but we do uphold the clauses of the dividend policy, and it's our hope that in upcoming years, we're gonna be able to give a different recommendation on this subject. Nevertheless, one should have in mind certain factors that the final decision on that subject matter is made by the shareholder meeting. That's the most important thing to remember. Thank you very much.
The next question, having regard for the current situation, are you thinking about retiring some of the certificates of the closed-end investment fund in 2024? Are you thinking about prepayment of PFR? This is another question about finance. I'd like to ask the CFO to respond.
Well, the financial position of the company is being analyzed. I mean, we've only been doing that for basically two weeks, with a little bit more time. Right now, having in mind the shortfall of production, so it might be, it seems quite probable that we'll retire a portion of these certificates, but the decision hasn't been made even so. In terms of prepayment, early payment of PFR, we don't anticipate that happening. We will follow the amortization schedule, and so the payments are made, amortization payments are made once a quarter. And then, your most important priorities in terms of mining in 2024. So Adam Rozmus, if you could respond.
Ladies and gentlemen, in the mines of JSW, we look at the highest hazards and how they're associated with one another, interlinked.
We want to ensure that the crews that work there are duly protected or have a safe working environment. And of course, then on top of that, we want to be able to reopen some of those production areas which we had to close in Pniówek, because of what happened at the end of last year, and then in April, we had something in Budryk. That's one thing. The second thing, we have efforts to open up remodeled fronts or long walls, and we want to use that to the greatest extent possible by having the proper mining equipment and then having in play, in play also the proper, you know, mining teams and crews.
The next question is about the global trends concerning the demand for steel and coking coal. So this is about the market and our market position. I'd like to ask Jolanta Gruszka, our Chief Sales Officer, to respond.
So ladies and gentlemen, so steel is and will continue to be a fundamental product used across the industry. Based on the opinions of analysts, up until 2050. The consensus opinion is that the demand for steel will grow by some 30%, while 60% of the global demand for steel will come from the production of steel utilizing iron ore. In the midterm, we believe that blast furnace technology is the least expensive technology, the most effective. It's the broadest-based type of production, and what's also important, and perhaps it's the most important, that it enables you to get the top quality steel products. If we look at the Green Deal, this question is appearing more and more frequently because of the Green Deal.
There has to be a broad base of infrastructural investments, and one of those products that make that possible is steel. That's why we believe that in the mid-term, as a coking coal producer, and of course, this is a critical raw material in the E.U., we believe that we will benefit from these changes.
In terms of the longer run, the question is: What type of technology will steel production employ?
So if you want to get rid of coke or iron ore, well, this is something that's still being developed, and so the global production of DRI, which is around 135 million tons, as opposed to almost 2 billion tons of steel being produced in general. Well, you have to have inexpensive gas or inexpensive electricity, especially from renewable sources.
In the E.U., several projects were announced recently where they were gonna use DRI installations. This is an additional production of production capabilities of 21.9 tons. You also have the electric arc furnaces, where you use scrap. The discussion about this subject is ongoing. There was a broad-based discussion during the European Economic Congress, where we talk about the future of the steel industry in Europe. The conclusion of this discussion was that there is not a good technological preparation, infrastructural preparation, cost or market preparation in order to address these changes transpiring on the steel market, especially in the European Union. The speakers highlighted many problems: the accessibility of scrap, hydrogen, cost of energy, and above all, they underscored their fears about European steel producers losing their ability to compete versus steel imported from Asian countries.
Let me remind you that in Asian countries, they're still expanding their production capacities using traditional blast furnaces. India is the main country, where up into 2030, the talking points suggest that there should be another 89 tons of new capacity added, with 66% of that new capacity using blast furnaces. So one of the topics that's been discussed quite extensively and something that was emphasized strongly, this was about the Antwerp Declaration, which was basically a request to the governments to be thoughtful as they make decisions relating to this subject matter. And there are 10 areas that are considered to be quite important to the European steel industry, and the idea being that the industry could be protected against basically relocation of that outside of the European Union.
One of the things that is emphasized here is to ensure that we have the raw materials secured for the E.U.'s needs. So we believe that guidelines have been set for reducing CO2 emissions, but it's a little too early to say what measures will be taken in order to achieve those guidelines, and it's not clear what the final impact on steel production and the utilization of coke in the long term would be. Thank you very much.
Now we have a question about the fire in the Pniówek mine. What is the current situation? Maybe I'll ask our colleague who's responsible for technology and production.
So this fire that took place in December of 2023 in Pniówek, in the N-10 longwall area, well, we had the passive firing, so the passive put out of that fire.
And so we're at present doing some analysis of the composition of gases there, and we're talking regularly with the teams that's responsible for this subject. And so on the 14th of May, we had the most recent meeting, and based on our analysis of the gases in this integrated mine, it's not possible yet to enter that area. We're trying to intensify our efforts to initiate that gas. And so basically, we want to reduce the temperature and to eliminate the risk of any type of fires taking place. Thank you very much.
The next question: Does the company plan to make any investments in the energy sector? And perhaps Mr. Kluczniok could speak.
In terms of energy in JSW, there are two aspects. One is the energy segment as part of our business, and the next thing is linked to our commitments to reduce emissions by 2030, by 30%. So we anticipate, in terms of investments, that efforts will be taken, so we'll be doing some analysis on sources of energy. We're thinking about solar panels, we're thinking about wind and other solutions. Something else that we're going to tap into, this is the REM Program, which is methane emissions reduction. So on one hand, there's safety with respect to methane. There's also the business aspect where we have access to this fuel. So we want to use this fuel to the greatest extent possible to maximize or the benefits we can extract from that.
So we have an investment program underway in Radlin, which is one of the last, one of the last investments in conventional energy production. As I said in one of my previous statements, the next steps linked to the energy sector will be for the purpose of making JSW a greener entity. So thank you very much.
So let me add a couple questions from the chat. One of the participants would like to ask, within the current management board, do you have any-- do you intend to do something in terms of how the shareholders were treated by your predecessors? So I'd like to ask if you'd like to speak.
So the current management team is aware of this problem. I think we already responded to this question previously. So let me add, as I said at the outset, we hope that next year we're gonna be able to revisit and start paying the dividends again. This is not something we want to deviate from, so it's our hope that by next year, we're going to be able to start paying a dividend every year, and this will become a rule of operating practice.
Does the management see overemployment, especially in the admin section of the business? And do you have a plan?
In terms of the optimization plan, it's a little too premature for that, but we're scrutinizing all costs, and so we're building our cost policy basically from the ground up. And so, of course, salaries are a part of that. And we're looking at that very strongly.
It's a little too early to draw any conclusions, but as soon as we have drawn some conclusions, we'll let you know.
So there's a lot of CapEx, which does not lead to a higher extraction or output, or nor does it increase the cash. What is your plan to optimize the CapEx?
Generally speaking, what we want to focus on are three areas. So it's CapEx, OpEx, and the level of production. So if we think about CapEx, some of that has already been kicked off, and that will be completed. At present, we are working intensively to ensure that we can optimize that CapEx. It's premature to draw any conclusions. As soon as we have some specific information on this subject, then we'll, of course, as a matter of natural course, advise you of that. Thank you. The next question.
The next question has already been responded to in terms of the European steel industry, as well as prices for in place. So that's it. Ladies and gentlemen, we'd like to thank you very much for all of your questions, especially the difficult questions. We can declare that we're gonna be open to interactions with the market. I hope that over the upcoming months, you'll be convinced of that. So I'd like to thank you very much for your attention, for your attendance, and thank you very much once again, and until next time.