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Press Releases / 2012 / New World Resources Unaudited interim results for the first nine months of 2012 

New World Resources Unaudited interim results for the first nine months of 2012

14/11/2012

New World Resources Plc (‘NWR’ or the ‘Company’) today announces its financial results for the nine-month period ended 30 September 2012.

9M 2012 Highlights

  • Revenues of EUR 1,013 million, down 18%
  • Mining unit costs of EUR 79/t, down 2%
  • EBITDA of EUR 227 million, down 39%
  • Net profit of EUR 47 million
  • Earnings per A share of EUR 0.17
  • Net debt of EUR 481 million
  • Coal production of 8.6Mt, and external sales of 7.2Mt
  • External sales mix of 53% coking coal, and 47% thermal coal
  • Coke production of 525kt, and external sales of 432kt
  • LTIFR[1] at 7.48, an improvement of 6%

FY 2012 Outlook

  • Coal and coke production targets of 11.0-11.1Mt and 700kt, respectively
  • Coal and coke external sales targets of 10.2-10.3Mt and 600kt respectively
  • External coal sales expected to be split evenly between coking and thermal coal
  • Q4 coking coal and coke prices agreed at EUR 102/t and EUR 264/t respectively
  • Expected flat mining unit costs year-on-year at constant FX
  • Expected CAPEX of EUR 210-220 million

 

Marek Jelinek, Executive Director and CFO commented on the results: “Trading conditions remained challenging in the third quarter. In an environment where coking coal prices are 30 per cent down year-on-year, our focus will remain on cost containment and watchful management of capital spending in order to ensure we are well positioned for the future.

On the operational side, we are pleased to report an improvement in our already strong safety performance. Despite this overall safety improvement, we have lost four of our colleagues at work this year, which is a reminder of the hazardous conditions in which we operate and we continue to drive forward initiatives to reach our goal of zero fatalities.

Market conditions continue to be difficult. Although steel production in Central and Eastern Europe remains relatively resilient, demand for steel products has deteriorated, particularly in the car industry in Western Europe. This has forced some steel mills and foundries in our core markets to continue operating at reduced levels.

The weakness in the steel industry is having a knock-on effect on steelmaking input raw materials including coking coal. These weak market conditions have been reflected in our pricing for the final quarter of 2012. For the fourth quarter we settled our blended coking coal contracts at EUR 102/t, 20 per cent down on the previous quarter, and our average coke price at EUR 264/t down 8 per cent on the third quarter.

Looking ahead, despite some positive signs, we expect the situation in Europe to remain volatile next year and we therefore remain vigilant and are preparing a series of further efficiency measures at our current operations. Primarily, we plan to enhance our cost containment efforts in 2013 and our sustaining CAPEX will be optimised through a mixture of prudent cuts and deferrals.

In terms of our development projects, the review of the Polish Debiensko Mine is still underway to provide the Board with updated data on which it will base its decision about the future of the project early next year. On the Czech side of the border, the Karvina Mine expansion is progressing as planned.

Longer-term, we remain confident in the resilience of our business, which is underpinned by significant long-standing customer relationships, in a region with the highest proportion of industrial employment in Europe. Although economic growth in key emerging markets such as China or India has moderated, they remain robust as these countries progress with continuing investment in urbanisation, which underpins an improving sentiment towards raw materials for steel production in general.”


 

Selected consolidated financial and operational data

(EUR m, unless otherwise stated)

9M 2012

9M 2011

Chg

 

Revenues

1,013

1,241

(18%)

 

EBITDA

227

369

(39%)

 

Operating profit

97

235

(59%)

 

Profit for the period

47

121

(61%)

 

Basic earnings per A share (EUR)

0.17

0.45

(62%)

 

 

 

 

 

 

Total assets

2,373

2,289

4%

 

Cash and cash equivalents

444

445

0%

 

Net debt

481

400

20%

 

Net working capital

133

130

2%

 

 

 

 

 

 

Net cash flow from operations

106

210

(49%)

 

CAPEX

165

156

6%

 

 

 

 

 

 

Total headcount incl. contractors

17,786

18,031

(1%)

 

LTIFR

7.48

8.00

(6%)

 

 

NWR’s Revenues were EUR 1,013 million in 9M 2012, EUR 228 million lower than in 9M 2011 mainly due to lower coking coal prices. The lower volume of external coal sales was almost fully offset by an improved coal mix (a greater proportion of higher margin coking coal in the sales mix.)

Lower costs and an increase in the level of inventories in 9M 2012 partially offset the impact of lower coking coal and coke prices on EBITDA of EUR 227 million in 9M 2012, a EUR 142 million decrease compared to 9M 2011. Depreciation and amortisation charges remained flat in CZK terms year-on-year and Operating profit for the period was EUR 97 million.

Net financial expenses decreased due to a lower net foreign exchange loss, and a higher net profit on derivatives revaluation compared to 9M 2011. The profit before tax was EUR 68 million, EUR 98 million below 9M 2011.

The Company’s effective tax rate was 30% after 9M 2012 and NWR’s consolidated after-tax profit for the period was EUR 47 million, down EUR 74 million versus 9M 2011. The Basic earnings per A share for the nine-month period ended 30 September 2012 were EUR 0.17.

Operating cash flow before working capital changes was EUR 223 million, EUR 125 million lower than in 9M 2011, mainly reflecting lower revenues. Changes in working capital were negative EUR 43 million primarily due to an increase in inventories of thermal coal. As such Operating cash flow before interest and taxes was EUR 180 million. Net operating cash flow after interest (EUR 32 million) and income tax (EUR 42 million) for 9M 2012 was EUR 106 million, EUR 104 million lower than in 9M 2011.

NWR’s capital expenditure in 9M 2012 was EUR 165 million. This included maintenance CAPEX for both mining and coking segments, mining equipment renewal, vertical and horizontal mine development, safety and expenditure of EUR 5 million on the Debiensko project. No further CAPEX is planned for Debiensko for the rest of 2012 due to the project’s ongoing review. For the full year 2012 we continue to expect to allocate EUR 210-220 million on capital expenditures.

During 9M 2012, the Company paid out the final dividend for 2011 of EUR 19 million and 2012 interim dividend of EUR 16 million to its A shareholders and in line with the payment schedule repaid EUR 7 million of the ECA loan. Cash and cash equivalents were at EUR 444 million as at 30 September 2012 including EUR 100 million of proceeds from the RCF loan.

As at 30 September 2012, the Company’s Net debt stood at EUR 481 million. NWR has no significant debt maturities until 2015. We continue to monitor the markets closely so that we are able to take advantage of opportunities either to raise new financing or to refinance outstanding debt or portions thereof as they arise.

Coal segment

 

9M 2012

9M 2011

 Chg

Ex-FX

P&L (EUR m)

 

 

 

 

Revenues

916

1,143

(20%)

(18%)

EBITDA

228

382

(40%)

(41%)

Operating profit

103

255

(59%)

(62%)

Costs (EUR/t)

 

 

 

Mining unit costs[2]

79

81

(2%)

1%

Production & Sales (kt)

 

 

 

 

Coal production

8,608

8,641

0%

 

Sales to coke segment

395

417

(5%)

 

External sales

7,208

8,013

(10%)

 

Coking coal

3,835

3,541

8%

 

Thermal coal

3,373

4,472

(25%)

 

Period end inventory

1,314

457

188%

 

Average realised prices[3] (EUR/t)

 

 

 

Coking coal

131

181

(28%)

(26%)

Thermal coal

73

66

11%

12%







 

Total coal production in 9M 2012 was flat year-on-year, and external coal sales volumes were 10% lower due to lower sales volumes of thermal coal. External coking coal sales volumes increased 8% year-on-year. Total revenues for the coal segment decreased by 20%, mainly due to lower coking coal prices and lower thermal coal volumes.

External coking coal sales in 9M 2012 comprised approximately 47% mid-volatility hard coking coal, 46% semi-soft coking coal, and 7% PCI coking coal. Thermal coal sales mix in the period was approximately 80% thermal coal and 20% middlings.

Mining unit costs remained flat in CZK terms in the first nine months of 2012 compared to 9M 2011 in line with the Company’s guidance. All main cost categories remained well under control.

The coal segment generated EBITDA of EUR 228 million, a decrease of 40% compared to 9M 2011 due to lower revenues.

Coal segment outlook

As previously announced, the average agreed price of coking coal for delivery in the fourth calendar quarter of 2012 is EUR 102 per tonne, a 20% decrease compared to the third quarter realised price. This average price is based on the expectation that coking coal sales in Q4 2012 will be split approximately 47% mid-volatility hard coking coal, 45% semi-soft coking coal and 8% PCI coking coal. The average price agreed for thermal coal sales for the 2012 calendar year is EUR 74 per tonne, an 11% increase compared to the 2011 average realised price. This average price is based on an expected FY 2012 mix of 80% thermal coal and 20% middlings.

NWR expects production of between 11.0Mt and 11.1Mt of coal and external sales of between 10.2Mt and 10.3Mt of coal in FY 2012. The external coal sales split is expected to be approximately 50% coking coal and 50% thermal coal in FY 2012. NWR expects year-end coal inventories of 600-700kt.

NWR continues to expect its mining unit costs to remain broadly flat in FY 2012 in CZK terms.


 

Coke segment

 

9M 2012

9M 2011

 Chg

Ex-FX

P&L (EUR m)

 

 

 

 

Revenues

154

185

(17%)

(16%)

EBITDA

7

8

(16%)

(49%)

Operating profit

2

1

64%

(208%)

Costs

 

 

 

Conversion unit costs[4] (EUR/t)

64

62

3%

7%

Coal purchase charges[5]  (EUR m)

97

144

(33%)

 

Production & Sales (kt)

 

 

 

 

Coke production

525

584

(10%)

 

Coke sales

432

430

0%

 

Period end inventory

193

126

53%

 

Average realised prices[6]  (EUR/t)

 

 

 

Coke

299

370

(19%)

(19%)

 

Revenues for the coke segment decreased by 17% due to lower coke prices in 9M 2012. Coke sales in 9M 2012 were approximately 66% foundry coke, 17% blast furnace coke, and 17% other types.

Coke conversion unit costs increased by 7% on a constant currency basis as a result of 10% lower production. Together with the lower cost of inputted coal, both internal and external, the impact of lower revenues on the operating result was muted and the segment’s 9M 2012 EBITDA remained at a similar level to 9M 2011.

Coke segment outlook

As previously announced, the average price of coke agreed for delivery in the fourth calendar quarter of 2012 is EUR 264 per tonne, an 8% decrease compared to the third quarter realised price. This average price is based on the expectation of Q4 2012 sales of approximately 73% foundry coke, 9% blast furnace coke and 18% other types.

NWR continues to expect to produce 700kt and sell 600kt of coke in FY 2012.

Coke unit conversion costs on a constant currency basis are expected to increase in line with the expected decrease in production in FY 2012.


 

9M 2012 earnings call

NWR’s management will host an analyst and investor conference call on 14 November 2012 at 10:00 GMT (11:00 CET) to discuss the financial results for the period.

The presentation will be also made available via a live video webcast on www.newworldresources.eu and the webcast will be then archived on the Company’s website.

Dial in details:

UK & the rest of Europe                                +44 (0) 20 7136 2054

US                                                                 +1 212 444 0896

Czech Republic (Toll free)                              800 701 231

Poland (Toll free)                                            00 800 121 4330

The Netherlands                                            +31 (0) 20 713 2789

Access Code                                                 8843127

A replay of the conference call will be available for one week by dialling:

+44 (0) 20 7111 1244 (Access code: 8843127)

For further information:

Investor Relations                                                      Corporate Communications

Tel: +31 20 570 2244                                                Tel: +31 20 570 2229

Email: ir@nwrgroup.eu                                             Email: pr@nwrgroup.eu

 

Website:  www.newworldresources.eu

About NWR:

New World Resources Plc is one of Central Europe’s leading hard coal and coke producers. NWR produces quality coking and thermal coal for the steel and energy sectors in Central Europe through its subsidiary OKD, the largest hard coal mining company in the Czech Republic. NWR's coke subsidiary OKK, is Europe's largest producer of foundry coke. NWR currently has several development projects in Poland and the Czech Republic, which form part of NWR's regional growth strategy. NWR is a FTSE 250 company, with listings in London, Prague and Warsaw.


 

Disclaimer and cautionary note on forward looking statements and notes on certain other matters

Certain statements in this document are not historical facts and are or are deemed to be “forward-looking”. The Company’s prospects, plans, financial position and business strategy, and statements pertaining to the capital resources, future expenditure for development projects and results of operations, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology including, but not limited to; “may”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “will”, “could”, “may”, “might”, “believe” or “continue” or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.  These forward-looking statements involve a number of risks, uncertainties and other facts that may cause actual results to be materially different from those expressed or implied in these forward-looking statements because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond NWR’s ability to control or predict. Forward-looking statements are not guarantees of future performances.

Factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected include, but are not limited to, the following: risks relating to changes in political, economic and social conditions in the Czech Republic, Poland and the CEE region; future prices and demand for the Company's products, and demand for the Company's customers' products; coal mine reserves; remaining life of the Company's mines; coal production; trends in the coal industry and domestic and international coal market conditions; risks in coal mining operations; future expansion plans and capital expenditures; the Company's relationship with, and conditions affecting, the Company's customers; competition; railroad and other transportation performance and costs; availability of specialist and qualified workers; and weather conditions or catastrophic damage; risks relating to Czech or Polish law, regulations and taxation, including laws, regulations, decrees and decisions governing the coal mining industry, the environment and currency and exchange controls relating to Czech and Polish entities and their official interpretation by governmental and other regulatory bodies and by the courts; and risks relating to global economic conditions and the global economic environment. Additional risk factors are as described in the Company’s annual report.

Forward-looking statements are made only as of the date of this document.  The Company expressly disclaims any obligation or undertaking to release, publicly or otherwise, any updates or revisions to any forward-looking statement contained in this document to reflect any change in its expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based unless so required by applicable law.



[1] Lost Time Injury Frequency Rate represents the number of reportable injuries in NWR’s operations causing at least three days of absence per million hours worked including contractors.

[2] Mining costs per tonne reflect the operating costs incurred in mining both coking coal and thermal coal. They exclude transportation costs and D&A.

[3] Final realised prices can be influenced by a range of factors including, but not limited to, exchange rate fluctuations, quality mix, timing of the deliveries and flexible provisions in the individual agreements. Thus the actual realised price for the period may differ from the average agreed prices previously announced. All of the forward-looking price guidance for 2012 is based on an exchange rate of EUR/CZK of 25.00. Prices are expressed as a blended average between the different qualities of coal and are ex-works.

[4] Coke conversion costs per tonne reflect the operating costs incurred in producing all types of coke and exclude the costs of inputted coal, transportation costs, and D&A.

[5] Both internal and third party coal purchases.

[6] Final realised prices can be influenced by a range of factors including, but not limited to, exchange rate fluctuations, quality mix, timing of the deliveries and flexible provisions in the individual agreements. Thus the actual realised price for the period may differ from the average agreed prices previously announced. All of the forward-looking price guidance for 2012 is based on an exchange rate of EUR/CZK of 25.00. Prices are expressed as a blended average between the different types of coke and are ex-works.

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