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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol
Benchmarking of mining companies extracting hard coal in the
Upper Silesian Coal Basin
Michal Vaněka,⁎
, Petr Boraa
, Ewa Wanda Maruszewskab
, Alena Kašparkováa
a
Institute of Economics and Control Systems, VSB-Technical University of Ostrava, 17. listopadu 15, 70833 Ostrava, Czech Republic
b
University of Economics in Katowice, ul. 1 Maja 50, 40-287 Katowice, Poland
A R T I C L E I N F O
Keywords:
Benchmarking
Hard coal mining
Financial analysis
Upper Silesian Coal Basin
A B S T R A C T
The article presents ﬁndings derived from the benchmarking comparison of four mining companies extracting
hard coal in the Upper Silesian Coal Basin located on the boarder of the Czech Republic and Poland: OKD a.s.
operating in the Czech Republic and three Polish entities Jastrzębska Spółka Węglowa S. A. (JSW), Katowicki
Holding Węglowy S. A., and Kompania Węglowa S. A. Although all companies extract the same mineral resource
in analogous mining-geological conditions, their economic results diﬀer signiﬁcantly. The article benchmarks
the mining companies in a 5-year period: from 2009 to 2014. Six ﬁnancial indicators were used in order to
achieve the goal: ROE, ROS, ROA, Debt to Equity Ratio, Assets Turnover, and Cash Flow Liquidity Ratio. In
addition, the standard variable method was used together with Fuller's method to determine the weights of the
diﬀerent criteria. The benchmarking results, based on the values of integral ratio, show JSW as the leading
company in 2009, while in 2014 Czech OKD gained the prime position. In general, during the 5-year
observation period, JSW achieved the best ﬁnancial results. The study presents JSW as the benchmarking leader
due to the best performance achieved among the four mining companies extracting hard coal in the Upper
Silesian Coal Basin positioned in Central-Eastern Europe.
1. Introduction
As quality exists by comparison, benchmarking has long been
popular and developed into many types. It is strongly related to quality
management (Zairi, 2011). Drucker (1999) describes benchmarking as
a tool to compare one's own eﬃciency with the best eﬃciency in the
branch. Pojasek (2010) interprets benchmarking so that it identiﬁes
diﬀerences in eﬃciency, helps to determine corporate strategy, maintains
stimulation for improvement and compares own processes to
other companies’ practices. Benchmarking also includes knowledge,
learning from other companies, and improvements to own production
programs (Pojasek, 2010). Benchmarking is usually applied throughout
the sectors, including the heavy industry and mining. For example, in
2013 Vaněk et al. compared the major limestone producers in the
Czech Republic. Pomykalski et al. (2014) benchmarked Polish metal
manufacturing companies, while Antošová et al. (2013) did benchmarking
of steel companies in Europe.
The subject of benchmarking herein is the mining enterprises in
the Upper Silesian Coal Basin. The Upper Silesian Coal Basin belongs
to important European territories where hard coal is being extracted.
The exploitation began in the second half of the 18th century. In the
past, the Upper Silesian Coal Basin belonged to one country – the
Austria-Hungarian Empire. The contemporary basin spreads in two
countries – the Czech Republic and Poland. Overall, the Upper
Silesian Coal Basin covers an area of about 7400 km2
in southern
Poland and Ostrava-Karviná Region in the north of the Czech
Republic (CR), with about 5800 km2
in Poland and 1600 km2
in the
CR. It is the most important coal basin in Poland and CR, and also one
of the largest in Europe. Up to 30% of the deposit have been extracted
within the recent mining operations. The reserve deposits amount to
23% of the area and the prospective areas cover about 27% of the
whole area. Over 80% of the Polish coal deposits are located in this
area (Paszcza, 2012).
OKD, a subsidiary company of NWR (New World Resources Plc.), is
the only mining company exploiting hard coal in the Czech Republic. In
Poland three mining companies extract hard coal in the Upper Silesian
Coal Basin. They are JSW (Jastrzębska Spółka Węglowa S. A.), KHW
(Katowicki Holding Węglowy S. A.), and KW (Kompania Węglowa S.
A.). More detailed information about the companies is presented in
Section 2 of the article. All four companies encompassed into benchmarking
do business in the same geographical territory under the
similar mining and geological conditions.
http://dx.doi.org/10.1016/j.resourpol.2017.07.010
Received 27 September 2016; Received in revised form 5 March 2017; Accepted 28 July 2017
⁎
Corresponding author.
E-mail address: michal.vanek@vsb.cz (M. Vaněk).
Resources Policy 53 (2017) 378–383
Available online 12 August 2017
0301-4207/ © 2017 Elsevier Ltd. All rights reserved.
MARK
The aim of benchmarking was to assess each company's overall
competitiveness, eﬃciency and show the ranges of ﬁnancial performance
by the chosen companies in hard coal mining industry between
2009 and 2014. The article contributes to the previous literature with a
description of the industry conditions and explanation how each
company compares to other companies in a selected group of hard
coal producers. This way, it may be interesting to observe how the
positions of the concerned mining companies have changed in the
market as a consequence of the economic turndown and the changes in
the hard coal sector as well.
2. Material and methods
The evaluation of data gathered in a benchmarking process is a
multifaceted process that combines qualitative and quantitative criteria.
Factors considered in the study generally fall under ﬁnancial data
and include, among others, the size of the company, performance
indicators, and measures describing the value of assets and liabilities.
The ﬁnancial data used in the study were derived from ﬁnancial
reports, governmental documents and from publicly available sources,
including newspaper articles.
Because of the comparison of four diﬀerent companies doing
business in hard coal mining sector in the Upper Silesian Coal Basin,
the benchmark conducted is of an external type. Due to the ﬁnancial
analysis used in the benchmarking process, the research study can be
called a ﬁnancial or performance benchmarking. Furthermore, based
on the methodology set out by Camp (1989), authors followed a twelvestage
approach to benchmarking and selected four hard coal companies
doing business in the Upper Silesian Coal Basin: OKD in the Czech
Republic and JSW, KHW, and KW in Poland. We identiﬁed the data
sources, collected data, determined the gap and established the process
diﬀerences.
The benchmark data were used not only to evaluate the four
selected companies, but also to assess the future earning potential of
each company and identify any weaknesses that need to be improved
by the enterprises (Camp, 1989, 1995). The period of analysis
encompasses ﬁnancial crisis years and a big decrease in world's hard
coal selling prices: 2009–2014. Particularly, the benchmarking process
analyses mining companies doing business in the same geographical
region and dealing with changing and diﬃcult economic turmoil.
Table 1 summarizes the main characteristics of the four hard coal
enterprises in the Upper Silesian Coal Basin.
As it is vital to engage relevant sources and data while performing
benchmarking process, annual ﬁnancial reports were used as main
source of ﬁnancial and non-ﬁnancial information. Besides using
ﬁnancial reports for external benchmarking, many companies carry
out their internal benchmarking built upon ﬁnancial data. Usually they
apply at least quarterly benchmarking that issues from quarterly
ﬁnancial documents, which thus become the key source of information
for the ﬁnancial managers’ decision-making. The popularity of quarterly
benchmarking may be conﬁrmed by a survey of the National
Investors Relations Institute. The research showed that as much as
95% of respondent companies made annual or quarterly earnings
forecasts in 2006, as opposed to 45% in 1999 (Brigham and Ehrhardt,
2014).
On the other hand, although it is advisable to combine internal and
external information in benchmarking process, authors used only data
from publicly available sources of ﬁnancial and non-ﬁnancial information
with regard to trade secrets. The above substantially inﬂuence the
benchmarking process making it an independent and objective analysis.
It is in accordance with the literature emphasizing the core role of
ﬁnancial reports (Bradford et al., 2014) as well as with the American
Securities and Exchange Commission that emphasizes “timely dissemination”
of ﬁnancial statements to the public. Opinions presented
above legitimize ﬁnancial analyses and benchmarking carried out based
on accounting data in order to compare companies’ eﬃciency.
For the purposes of benchmarking herein, suitable indicators
(ratios) were selected. Brigham and Ehrhardt (2014) deﬁnes ﬁnancial
ratios as to be designed to extract signiﬁcant data that need not be that
clear from mere reading the ﬁnancial reports. However, it is also
important to mention some limitations of ratios, such as (Lee, 2007):
1. ﬁnancial ratios are mainly based on accounting numbers disclosed in
corporate ﬁnancial reports; these numbers include the ﬂexibility and
subjectivity of accounting norms.
2. ﬁnancial ratios are essentially used in a comparative context over
time and between the companies although consistency under nowadays
accounting regulations is ambiguous.
Despite the limitations, ﬁnancial ratios are the most reliable source
of information for external inv`estors. Brealey et al. (2012) suggests
that ﬁnancial ratios are “no substitute for a crystal ball”, thus being a
useful design how high amounts of ﬁnancial data may be summarized
and company performance contrasted.
Among six ﬁnancial ratios chosen for the benchmarking analysis,
three are related to the proﬁt/loss of an entity. Proﬁt (or loss) is
Table 1
Main characteristics of hard coal enterprises in the Upper Silesian Coal Basin.
Source: Annual Reports of OKD, 2009; Consolidated Annual Report of Jastrzębska Spółka Węglowa S.A., 2011; Euracoal Market Report, 2013; Maruszewska et al., 2014; Prospekt
Emisyjny Jastrzębska Spółka Węglowa S.A., 2010, 2013; Restructuring of the Hard Coal Mining Sector during the Period, 2004
JSW KHW KW OKD
Name Jastrzębska Spółka Węglowa S.A. Katowicki Holding
Węglowy S.A.
Kompania Węglowa
S.A.
OKD a.s.
Country of business
operations
Republic of Poland Republic of Poland Republic of Poland Czech Republic
Owners’ structure
31.12.2015]
Publicly traded on Warsaw Stock
Exchange; 5.5% of shares belong to the
State Treasury of the Republic of Poland
State Treasury of the
Republic of Poland
State Treasury of the
Republic of Poland
The sole shareholder is New World Resources N.V.
registered in Amsterdam, the Kingdom of Netherlands. New
World Resources is publicly traded in Warsaw, London, and
Prague.
Number of mines
[31.12.2014]
5 11 4 4
Hard coal operational
reserves [Mt]
3 900 56.5
Employment [2014] 100,675 11,099
Production [Mt]
2014 72.5 8.3
2013 76.5 8.8
2012 79.2 11.2
2009 77.4 11.0
M. Vaněk et al. Resources Policy 53 (2017) 378–383
379
compared to equity (ROE), to sales (ROS), and to total assets (ROA).
Asset turnover ratio is based on the relation between revenues and total
assets, while debt to equity ratio compares the value of debt to the value
of total equity. The last ratio, cash ﬂow liquidity ratio, measures cash
generated from operating activity in relation to total current liabilities.
Due to the wide range of ratios included in the benchmarking process,
the analysis is a multi-factor study with the biggest weight attached to
ROE ratio. The next weight amounts to 23.81% and it is a characteristic
assigned to debt to equity ratio. ROA and assets turnover are the two
least important ratios in the benchmarking process.
A number of speciﬁc methods may be applied for the purposes of
benchmarking comparisons. In this study, we used a standard variable
method as described by Sedláček (2011) and already applied by Vaněk
et al. (2013) in benchmarking procedure.
The original ratios, xij, were transformed in accordance with the
standard variable theory to provide for standard variables, uij. Along,
the transformation of ratios, xij to uij, as regards ratio characteristics,
+1 (“plus two”), was executed by use of the formula (1).
u
x x
s
=
−
,ij
ij pj
xj (1)
where:
xij Ratio, j, of organization, i,
xpj Arithmetic average calculated from ratio, j,
sxj Standard deviation calculated from ratio, j.
The ratio, xij was transformed to a standard variable, uij, regarding
ratio characteristics, −1(“minus one”) by the formula, (2).
u
x x
s
=
−
,ij
pj ij
xj (2)
In the next step, the integral ratio, d4i, was calculated as a weighted
arithmetic mean by use of standard variables calculated for individual
ratios of the organization, i; see formula (3).
d
u p
p
=
∑ *
∑
i
j
m
ij j
j
m
j
4
=1
=1 (3)
Where:
pj Weight of ratio, j,
uijTransformed ratio.
The benchmarking information value can be increased if the ratios
of comparison are weighed. This can be done in many diﬀerent ways.
To determine the weights of criteria and risks in the decision-making
issues, the Fuller's method, the so-called Fuller's triangle, is often used.
Its application appears in a number of publications, for example in
selecting technological options of an energy mix (Černý et al., 2013).
The application of the above mentioned procedure enables a
comparison of mining companies in the diﬀerent years. However, it
does not oﬀer an overall conclusion on the eﬃciency of the discrete
mining companies. This may be answered by a value number (VN)
assessing each of the four mining companies between 2009 and 2014.
VN is obtained by means of the formula below (4):
∑VN d=
i
n
i
=1
4
(4)
Where:
d4i – The integral ratio calculated as a weighted arithmetic mean by
use of standard variables;
n – Total number of benchmarking mining enterprises.
3. Calculation
Based on the chosen methodology described above, we set the
weight of each ratio used in the analysis. The determined weight ratios
are presented in Table 2.
Applying the above, the four mining companies extracting hard coal
in the Upper Silesian Coal Basin were benchmarked. Tables 3–6 give
partial results for the ﬁrst and last years of the observed period,
particularly 2009 and 2014.
Tables 3 and 5 present starting matrices comparing the mining
companies in 2009 and in 2014, while Tables 4 and 6 demonstrate the
index values that arose via the transformation, using the method of a
standard variable, while the values are given at unitary weights and
diﬀerential weights. Applying the relation (3), the values of integral
ratio for each evaluated mining company were obtained. The values
were decisive for the ﬁnal ranking of the mining companies.
The evaluation of mining companies benchmarking is presented in
Table 7 and it aggregates the results for 2009–2014.
4. Results
The information gained from benchmarking process allows the
authors to determine how well each company performed in comparison
with other hard coal enterprises operating in the Upper Silesia Coal
Basin. The benchmarking produced very interesting ﬁndings (Table 8)
that – together with in-depth ﬁnancial analysis encompassing 5-year
period – show the leader entity among the four analyzed companies
and discrepancies between them in each year of analysis (Fig. 1).
The analysis of the amount of shareholders’ capital engaged in each
company shows that the largest one is KW, Polish state-owned
enterprise operating 11 mines. The other two Polish companies are
of a similar size (JSW is operating 5 mines, while KHW is operating 4).
JSW is a publicly traded company quoted on Warsaw Stock Exchange.
The only Czech company included in the analyzed group, OKD, is the
smallest one, judging by the amount of capital invested in the entity,
the amount of annual production volume and the number of employees.
Same as JSW, OKD is listed on the stock exchange (London-listed
as a subsidiary of NWR).1
The total value of KHW assets (EUR 1214 m)
is 2551 times bigger than the assets of the smallest company: OKD
(kEUR 476). The changes in the volume of assets among 4 mining
companies show that the greatest decrease in the assets occurred in
OKD. In 2009 the total assets amounted to kEUR 1913 while in 2014,
assets totaled only kEUR 476, which resulted in a 75% decrease of
assets. In contrast to OKD, two Polish companies’ total assets remained
constant (KW & KHW), while JSW invested, thus increasing the value
Table 2
Ratios used in the analysis with weights assigned to each ratio.
Preference of authors
Financial
ratios
ROE ROS ROA Debt to
equity
ratio
Assets
turnover
Cash Flow
Liquidity
Ratio
Weight 2/7 4/21 2/21 5/21 1/21 1/7
Weight in
[%]
28.57% 19.05% 9.52% 23.81% 4.76% 14.29%
Index of
charac-
ter
1 1 1 −1 1 1
Symbol pj1 pj2 pj3 pj3 pj5 pj6
1
NWR NEWS SERVICE (Amsterdam, 4 May 2016) – Further to the announcement on
3 May 2016 regarding the ﬁling of an insolvency petition on behalf of OKD with the
Czech court, the shares in NWR Plc have been suspended from the London Stock
Exchange with immediate eﬀect. Prague Stock Exchange and Warsaw Stock Exchange are
currently processing a request from NWR Plc to suspend the shares.
M. Vaněk et al. Resources Policy 53 (2017) 378–383
380
Table 3
Starting matrix to benchmark the mining companies in 2009.
Ratios
Proﬁtability Ratios Coverage ratios Turnover Ratios Liquidity Ratios
ROE ROS ROA Debt to equity ratio Assets turnover Cash Flow Liquidity Ratio
Company EAT/Total
Equity
EAT/Sales EBIT/
Assets
Total Liabilities/Total
equity
Sales or Revenues/Total
Assets
Cash generated from operating
activities/Total current liabilities
OKD 0.052 0.042 0.053 768.654 0.7 0.001
JSW −0.139 −0.15 −0.078 0.903 0.489 −0.029
KW 0.044 0.006 0.042 5.723 1.038 0.140
KHW 0.064 0.024 0.082 2.436 0.776 0.270
Index of character 1 1 1 −1 1 1
Weight 28.57% 19.05% 9.52% 23.81% 4.76% 14.29%
Table 4
Matrix of transformed values using the standard variable method in 2009.
Standard Variable Method
xpj 0.005 −0.020 0.025 194.429 0.751 0.096
sxj 0.097 0.088 0.071 382.822 0.227 0.138
Standard values uij
Unitary weight Sum Average Rank
OKD 0.4845 0.7045 0.3944 −1.5000 −0.2247 −0.6884 −0.8297 −0.1383 3.
JSW −1.4845 −1.4773 −1.4507 0.5055 −1.1542 −0.9058 −5.9670 −0.9945 4.
KW 0.4021 0.2955 0.2394 0.4929 1.2643 0.3188 3.0130 0.5022 2.
KHW 0.6082 0.5000 0.8028 0.5015 0.1101 1.2609 3.7835 0.6306 1.
Diﬀerential weight Sum Average Rank
OKD 0.1384 0.1342 0.0376 −0.3571 −0.0107 −0.0983 −0.1559 −0.1560 3.
JSW −0.4241 −0.2814 −0.1382 0.1204 −0.0550 −0.1294 −0.9077 −0.9077 4.
KW 0.1149 0.0563 0.0228 0.1174 0.0602 0.0455 0.4171 0.4171 2.
KHW 0.1738 0.0952 0.0765 0.1194 0.0052 0.1801 0.6502 0.6502 1.
Table 5
Starting matrix to benchmark the mining companies in 2014.
Ratios
Proﬁtability Ratios Coverage ratios Turnover Ratios Liquidity Ratios
ROE ROS ROA Debt to equity ratio Assets turnover Cash Flow Liquidity Ratio
Company EAT/Total
Equity
EAT/Sales EBIT/Assets Total Liabilities/Total
equity
Sales or Revenues/Total
Assets
Cash generated from operating activities/Total
current liabilities
OKD 5.279 −0.073 −0.645 −7815.896 10.584 0.000
JSW −0.090 −0.096 −0.050 1.115 0.443 0.157
KW 3.656 −0.143 −0.125 −31.254 0.836 0.009
KHW −0.781 −0.138 −0.041 7.658 0.655 0.402
Index of character 1 1 1 −1 1 1
Weight 28.57% 19.05% 9.52% 23.81% 4.76% 14.29%
Table 6
Matrix of transformed values using the standard variable method in 2014.
Standard Variable Method
xpj 2.016 −0.113 −0.215 −1959.594 3.130 0.142
sxj 2.921 0.034 0.289 3904.238 4.972 0.188
Standard values uij
Unitary weights Sum Average Rank
OKD 1.1171 1.1765 −1.4879 1.5000 1.4992 −0.7553 3.0496 0.5083 1.
JSW −0.7210 0.5000 0.5709 −0.5022 −0.5404 0.0798 −0.6129 −0.1022 2.
KW 0.5615 −0.8824 0.3114 −0.4939 −0.4614 −0.7074 −1.6722 −0.2787 4.
KHW −0.9575 −0.7353 0.6021 −0.5039 −0.4978 1.3830 −0.7094 −0.1182 3.
Diﬀerential weights Sum Average Rank
OKD 0.3192 0.2241 −0.1417 0.3571 0.0714 −0.1079 0.7222 0.7222 1.
JSW −0.2060 0.0952 0.0544 −0.1196 −0.0257 0.0114 −0.1903 −0.1903 2.
KW 0.1604 −0.1681 0.0297 −0.1176 −0.0220 −0.1011 −0.2187 −0.2186 3.
KHW −0.2736 −0.1401 0.0573 −0.1200 −0.0237 0.1976 −0.3025 −0.3024 4.
M. Vaněk et al. Resources Policy 53 (2017) 378–383
381
of total assets by 62% (total assets in 2014 amounted EUR 3 605 m).
A decreasing trend in revenues and EBIT can be observed among all
entities included in the benchmarking. Although there was a small
increase in revenues during 2009–2011, starting 2012 all four companies
struggled with a negative trend, resulting in losses reported in
2014. The negative trend came from decreasing coal prices on the
world hard coal market, the decline in production volume, and
reduction in the size of coal sale, which even exceeded the production
curtail. Despite the adverse trend in production volume and sales
numbers, the cost of production increased mainly due to the raise of
unit production cost.
Despite the fact that the amount of negative EBIT of OKD was the
lowest, its relation to equity, total assets or incomes indicate an
unfavorable ﬁnancial situation of OKD. Moreover, Polish hard coal
mines were granted governmental ﬁnancial supports each year, while
OKD, was a self-ﬁnancing entity during the years. All four entities
ended the accounting period of 2014 with a loss. Although the loss of
OKD was the smallest in volume, it exceeded ﬁve times the amount of
equity of OKD. The loss of KW was almost four times bigger than the
total equity of the company as of 31.12.2014.
The above indicators of business performance of four hard coal
mines of Upper Silesian Coal Basin reveal a risk of bankruptcy in the
near future. Negative structure of assets and capital, decrease in
revenues, increase in stock, unfavorable operational proﬁtability,
upturns in ﬁnancial liquidity, etc. mark insolvency problems as well
as a high danger of liquidation in prospective years. Granting all this,
the Czech OKD with no public support is most exposed to ﬁnancial
problems. Performance benchmarking described in the previous section
also shows that OKD is the feeblest entity among the Upper Silesia
hard coal enterprises. On the other hand, Polish JSW seems to be the
leader of ﬁnancial position of the four chosen companies. Based on the
ﬁnancial rating built on the past performance, the leader entity also has
the best prospects for the future earnings, i.e. the relation between
liabilities and total assets shows that external ﬁnancing amounts c. 50%
of total assets. In comparison, OKD's liabilities exceed their total assets,
thus resulting in negative equity.
5. Discussion
It is not easy to draw the benchmarking conclusion because the
ﬁndings are ambiguous. It is JSW that achieved the best ﬁnancial
results based on the chosen methodology and selected evaluation
indicators. KW company is the entity with the second best results.
Although OKD ranks third, the diﬀerence between OKD and the last
company, KHW, is insigniﬁcant (0.0173).
On the other hand, comparing the position of the companies
throughout the period under observation, JSW (−0.9077) had the
worst position in 2009 based on the value of integral ratio. The best
results were achieved by two Polish mining companies: KW (0.4171)
and KWH (0.6502). The Czech corporation OKD (−0.1560) ranked
within the average benchmarking results of the Polish companies’
eﬃciency.
In 2010 and 2012 all the hard coal mining companies experienced
price shocks followed by a decline in sales, which was caused by a fall in
energetic and coking coal spot prices on the world stock exchanges. It
may be stated that the new price level of hard coal is so low that further
mining executed by the four examined companies in the Upper Silesian
Coal Basin would not be cost-eﬀective under the existing cost intensity
of extraction. After the decrease in world hard coal prices, each
company began to reduce the cost of goods sold. As it is clear from
the further development of the companies’ eﬃciency, JSW was the
most successful, and its performance started to grow. Between 2010
and 2012 JSW was an undeniable economic leader among the observed
companies.
As for OKD, between 2009 and 2012 the economic development
was rather stable. The conducted analysis suggests that OKD managed
to reduce its production costs during the period. At that time, a new
and more eﬀective (hi-tech) mining technology helped in that respect,
Table 7
Summary of calculations.
Company 2009 2010 2011 2012 2013 2014
Average Rank Average Rank Average Rank Average Rank Average Rank Average Rank
Unitary weights
OKD −0.1383 3. 0.3183 2. −0.0373 2. 0.2944 1. −0.9135 4. 0.5083 1.
JSW −0.9945 4. 0.3968 1. 0.6341 1. 0.2883 2. 0.3911 1. −0.1022 2.
KW 0.5022 2. −0.3086 3. −0.1015 3. −0.1721 3. 0.1694 3. −0.2787 4.
KHW 0.6306 1. −0.4077 4. −0.5074 4. −0.4071 4. 0.3503 2. −0.1182 3.
Diﬀerential weights
OKD −0.1560 3. 0.0237 2. −0.1254 2. 0.3106 1. −1.2745 4. 0.7222 1.
JSW −0.9077 4. 0.8183 1. 0.8249 1. 0.2862 2. 0.5518 1. −0.1903 2.
KW 0.4171 2. −0.4355 4. −0.1757 3. −0.2129 3. 0.2619 3. −0.2186 3.
KHW 0.6502 1. −0.4074 3. −0.5355 4. −0.3810 4. 0.4594 2. −0.3024 4.
Table 8
Final results of benchmarking.
Results 2009 2010 2011 2012 2013 2014 Sum Rank
OKD −0.1560 0.0237 −0.1254 0.3106 −1.2745 0.7222 −0.4994 3.
JSW −0.9077 0.8183 0.8249 0.2862 0.5518 −0.1903 1.3832 1.
KW 0.4171 −0.4355 −0.1757 −0.2129 0.2619 −0.2186 −0.3637 2.
KHW 0.6502 −0.4074 −0.5355 −0.3810 0.4594 −0.3024 −0.5167 4.
Fig. 1. Development of mining company ranking between 2009 and 2014.
M. Vaněk et al. Resources Policy 53 (2017) 378–383
382
which was a result of massive investments between 2005 and 2008.
However, this positive trend set out by OKD management was in the
end followed by a ﬁnancial situation in 2013, when the company
experienced ﬁnancial liquidity problems caused by the high debt
ﬁnancing expenses. Furthermore, based on many publicly expressed
opinions, it is considered that failed management decisions taken by
the parent company NWR signiﬁcantly inﬂuenced the business of OKD.
As a consequence of the above mentioned issues, OKD dropped far
behind its Polish competitors in 2013. While the results of the Polish
mining companies ranged in the interval < 0.2616;0.5518 > , the
integral ratio of OKD was −1.2745. On the other hand, the deﬁcient
ﬁnancial situation of the parent company NWR commenced a collapse
of NWR stock prices on the trading markets. A decrease in stock prices
of NWR was intensiﬁed by the forthcoming maturity of NWR bonds
and exchange of bonds for NWR shares and dilution of equity capital.
In 2014, not only OKD, but also parent company NWR suﬀered from
ﬁnancial liquidity problems, which ended up with insolvency proceed-
ings.
The Polish companies did not encounter such dramatic situations
between 2012 and 2014. Nevertheless, the economies regarding
operating costs and payroll in Polish mines led to strikes. The last
big strike took place in 2015. Hence, the values of Polish shares have
also gone down. But still, the shareholders may take into account the
fact that the mines need not necessarily get in loss or suﬀer from
insolvency, as in case of OKD in 2016. Because the Polish coal sector is
parastatal, the Polish government helps the hard coal companies within
the limits of approved support, especially for the sake of employment in
the mining sector.
At 2014 the results of OKD are also very captivating from the
benchmarking point of view as OKD reached the best results in
extraction (integral ratio 0.7222). At the same time period, the position
of the Polish mining companies worsened and levelled oﬀ, which is
documented by the values of the integral ratio (JSW – 0.1903, KW –
0.2186, KHW −0.3024).
6. Conclusions
In conclusion, the hard coal mining sector in Europe is suﬀering
from serious problems that are diﬃcult to solve using only the forces of
free market economy. The ﬁndings suggest that in case of a controlled
phase-out of hard coal industry in Europe, identical or even higher
subsidies on the part of the state will be necessary as compared to the
situation in Western Europe in the 1970s to 1990s. However, this will
hold true under the condition that the Czech Republic and Poland do
not completely abandon their raw material policies that include hard
coal from national sources in the energy mix. Hence, on top of the
problem of hard coal mining in the Upper Silesian Coal Basin there is a
question about the future of hard coal in general. Hard coal is a stable
source of energy in that European region. On the other hand, safety
requirements together with diﬃcult geological and mining conditions
of hard coal extracting augment the production costs making hard coal
extraction non proﬁtable when compared to cheap exported coal and
decrease in world prices of coal. The above is an argument for
proponents of governmental help for hard-coal mining. The only
Czech's hard coal enterprise, which did not get any direct help from
government, ended up with insolvency procedure in May 2016. On the
contrary, Polish mining entities are granted with ﬁnancial help but
their ﬁnancial position is not satisfactory and opponents express the
opinion that they should be privatized and governmental help should
be ceased. The study is consistent with publicly expressed opinions that
hard coal mining in the region is a source of open-ended problems with
proﬁtability, liquidity and other social issues. Authors express an
opinion that OKD is the ﬁrst company in the region to suﬀer from
lack of coherent and thought-out strategy referring to the energy safety
in the region and describing business model of hard coal mining
entities. The benchmarking analysis revealed that mining companies
had been struggling with proﬁtability problems since the beginning of
the studied period. Too little was done to solve the problems or too late
were the solutions implemented, which turned out to OKD's bankruptcy
(published in the summer of 2016) and solvency problems of
Polish mines observed in 2015.
Paradoxically, the benchmarking leader JSW should learn its lesson
from bankruptcy of OKD, the second entity in the benchmarking. For
JSW it might be a chance to enter Czech local hard coal market due to
the close proximity. In-depth analysis of investments done by OKD in
the year prior to ﬁnancial problems might also be an exercise worth
doing in order to avoid the same managerial mistakes. Although we
indicated the leader that should serve as a model business, we also
stress that the leader should analyze deeply the management decisions
taken in the entity taking second place due to the speciﬁc situation on
the hard coal market and increasing amounts of liabilities observed in
ﬁnancial reports.
Because of the above, it will be interesting to analyze the ﬁnancial
and market position of Polish entities within few years in the absence of
OKD or when a new company takes over Czech hard coal deposits and
continues extracting them.
Funding
This research received no speciﬁc grant from any funding agency in
the public, commercial, or not-for-proﬁt sectors.
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