Polish Coal Group to Sustain Output With 20,000 Fewer Jobs

Sep 01, 2014 5:41 am ET

(Updates with CEO comments in sixth paragraph.)

Sept. 1 (Bloomberg) -- Kompania Weglowa SA, the European Union’s biggest coal producer, needs to cut its workforce by more than a third while maintaining output to avoid bankruptcy, Chief Executive Officer Miroslaw Taras said.

State-owned Kompania, Poland’s third-biggest employer, plans to continue producing about 30 million metric tons of coal annually as its workforce will fall by 20,000 from 55,000 through retirements, voluntary departures and sales of mines, Taras said in a phone interview on Aug. 28.

“We want to do it as quickly as possible, but it won’t happen overnight, it may take years,” Taras said. “If we don’t cut jobs, Kompania will cease to exist.”

Polish mines, one of the few industries in state hands in central Europe’s biggest country, have struggled as global coal prices fall amid sluggish economic growth while production costs remain high. The industry lost 1.1 billion zloty ($344 million) on thermal-coal sales in the first half of 2014 while stockpiles jumped 26 percent, according to the Economy Ministry.

Revamp Plans

The government of Prime Minister Donald Tusk appointed Taras, a former head of the country’s most profitable coal producer Lubelski Wegiel Bogdanka SA, in April after Kompania’s losses on coal sales exceeded 1 billion zloty in 2013.

“You can’t cheat on the math, we have to balance Kompania’s operations,” Taras said.

Bogdanka, which went public in 2009, mines 1,950 tons of fuel per employee, compared with 545 tons at Kompania, according to data on the companies’ websites.

Kompania’s plan prepared by the new management last month includes selling four out of its 14 mines and reducing stockpiles by 5.9 million tons to help the Katowice, Poland- based company regain liquidity as the group “can’t afford” to safeguard all jobs, Taras said.

“Labor unions are aware that employment must decrease and we’ll talk to them” this week, Taras said. “They’d rather not cut jobs and we’d like to do it efficiently, so we need to meet somewhere in the middle.”

New Markets

Deputy Economy Minister Jerzy Pietrewicz told Bloomberg News on Aug. 28 the government has received Kompania’s plan.

“We need to understand that there’re different parties involved in the process and we’re analyzing whether this is the only solution for Kompania,” Pietrewicz said.

Kompania is also looking for new markets as domestic power producers accumulated a record 6.5 million tons of coal. The company is in talks to sell coal to Ukraine after the military conflict in Poland’s eastern neighbor cut supplies of the fuel to power plants from the Donbas area, Taras said.

“Donbas has practically stopped producing coal so there’s an opportunity for Polish mines,” he said. “The only issue is agreeing on the right price.”

DTEK Holdings BV, Ukraine’s biggest utility, said last week that three of its 31 mines in Ukraine have been shut down due to the fighting. Ukraine’s July coal output fell 27 percent from a year earlier to 3.88 million tons, the lowest since at least 2012, according to data from the country’s State Statistics Committee.

--With assistance from Konrad Krasuski in Warsaw.