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OKD continues its cost-cutting actions reducing the headcount of technical and administration staff and contractors

OKD continues its cost-cutting actions reducing the headcount of technical and administration staff and contractors

OSTRAVA (28 June 2013) – OKD further implements wide-spread cost-cutting measures that were announced in mid-May due to the adverse economic situation. Starting September 2013, the technical and administrative headcount will drop by approximately 250; contractor headcount, i.e. the number of contractor employees directly involved with coal mining will be reduced even more. Their headcount will drop down to approximately 2,700 in September which is ca. one-third less compared to the end-of-2012 headcount.

 

“It is a painful but inevitable step. In view of the coal pricing and the dramatic situation on world markets, we are losing money on every tonne produced. In the long-term, it is not sustainable. The only way for us to survive is a dramatic cost reduction implemented together with systemic changes in the company’s organization to make us mine the coal more efficiently,” said Ján Fabián, OKD CEO and Chairman of the Board of Directors.

 

The headcount reduction is related to the already announced cost-saving action package that should save some CZK 2.6 billion this year only. Besides headcount cuts, the actions include restricted capital expenditure, administration cost reduction, all mine management merger and move of the Headquarters to the Darkov Mine, optimization of payables and receivables, sell-down of thermal coal inventory and pay cuts. The changes also include a complex transformation of the company’s organization structure including centralized mine management and further steps that will ensure stability for OKD in the future.

 

Causes of the crisis in the mining industry

  • Miners all around the world face the declining demand for coal; approximately one quarter of coal mined does not have its customer nowadays. The recent boom in coal mining was caused by ambitious development projects (in Australia, USA, Indonesia and other); however, the demand for coal went down due to the economic crisis. Also, the European market has to face cheap coal imports from the USA or other overseas countries as the US energy market moves from coal to shale gas consumption. All these circumstances make the prices fall.
  • Metallurgical coal prices dropped down by more than 50 % over the last two years; a significant price drop was also seen in thermal coal.

Impacts on OKD

  • OKD belongs to the top 5% miners with the highest cost per tonne due to, in particular, difficult geological conditions and the recent vast investment to extend the lifetime of the mines. The sales price of especially thermal coal is currently lower than the company’s production and operating costs.

NWR’s plan to ensure a stable business

  • The only chance to survive lies in significant cost cutting and in regaining profitability. The company wants to achieve this goal by a combination of immediate saving measures, selective and flexible coal mining including a higher share of metallurgical coal and by establishing not only a new, lean organizational structure but an entire new business model.

 

 

Vladislav Sobol

Spokesperson of OKD, a.s.

 

Mobile:            725 595 417
E-mail:            vladislav.sobol@okd.cz

                        www.okd.cz

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