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Press Releases / 2012 / Unaudited interim results for the first half 2012 

Unaudited interim results for the first half 2012

23/8/2012

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

H1 2012 Financial highlights

  • Revenues of EUR 694 million, down 17%
  • Mining unit costs at EUR 80/t, down 2%
  • EBITDA of EUR 158 million, down 37%
  • Net profit of EUR 35 million
  • Basic EPS of EUR 0.12
  • Interim dividend of EUR 0.06 per A share
  • Net debt of EUR 472 million
  • No significant short-term debt maturities

H1 2012 Operational highlights

  • Coal production of 5.8Mt, and external sales of 4.8Mt (55% coking coal)
  • Coke production of 349kt, and external sales of 303kt
  • LTIFR[1] at 7.56, down 1% on FY 2011
  • Karvina Mine expansion on track
  • Debiensko project review underway – outcome around year-end

FY 2012 Outlook

  • Coal production target slightly increased to 11.0-11.1Mt
  • Coke production target maintained at 700kt
  • Coal and coke external sales targets of 10.3-10.4Mt and 600kt respectively
  • Expected external coal sales split of 48% coking coal and 52% thermal coal
  • Q3 coking coal and coke prices agreed at EUR 129/t and EUR 294/t respectively
  • Expected flat mining unit costs year-on-year at constant FX
  • Expected CAPEX of EUR 210-220 million

Chairman’s statement

Despite a promising start to 2012, the regional market became increasingly challenging as the year progressed.  The prevailing structural problems in the Eurozone area have continued to impact business sentiment resulting in a slowdown in the regional steel market. Globally, the world has been facing an oversupplied coking coal market with falling spot prices.

Against this backdrop, NWR’s performance for the first six months of the year has been solid as we were able to counterbalance the challenging pricing environment with an improved coal mix, strong production and tight cost control. Halfway through the year, we are reporting flat operating costs in the local currency, which is a good result given both the increasing cost challenges facing the industry, and the increasing average depth of our mines.

Since the international premium hard coking coal benchmark price was set in June 2012, global spot coking coal prices have been on a decreasing trajectory, a trend, which has been compounded in our region by the abundance of semi-soft coking coal in the area. The gap between the premium hard coking coal benchmark and spot price developments of lower coking coal grades has therefore widened, partially decoupling the regional pricing from the reference to the quarterly international premium hard coking coal benchmark. And consequently, the recently announced blended coking coal price of EUR 129/t agreed for the third quarter was marginally above the second quarter average realised price of EUR 127/t.

Our thermal coal prices are locked in for the year at an average blended price of EUR 74/t, an 11 per cent increase on the previous year and we expect to increase thermal coal sales towards the year-end in line with the usual seasonal trends.

Our third quarter agreed coke prices remain broadly flat on the previous quarter at EUR 294/t with the continuing high proportion of foundry coke in the sales mix.  This is a good result for a merchant coke producer like NWR given the ongoing stagnation in the European coke market.

Our order books for the second half of 2012 remain full and in FY 2012 we now expect to produce 11.0 – 11.1Mt and externally sell 10.3 – 10.4Mt of coal, bringing year-end inventories down to the 500-600kt level. We are also well on track to deliver an improved coal mix with an expected 48% of external coking coal sales for FY 2012 against 44% last year.

A thorough review of the Debiensko project is underway which will take several months to complete.  As announced in May the review was triggered by the change in water management conditions and by inflationary pressures in mine development in Poland.  As the review is a complex process, we cannot comment on partial results and we expect to come back to the market around the end of the year.

 

At our current operations, the expansion projects at the Karvina Mine to unlock a further 30Mt of hard coking coal by 2017 are progressing to schedule.

Earlier this year we published our first Sustainability Report, underlining our continued commitment towards our goal of delivering coal and coke safely and in a sustainable manner, despite the many challenges posed by the ongoing economic downturn.

Our Lost Time Injury Frequency Rate continues to move down and now stands at 7.56 lost-time injuries per million hours worked and our focus is very much on the target of less than five by 2015. Despite our ongoing vigilance, the hazards of deep underground mining have, sadly, taken the lives of three of our colleagues since the beginning of the year. This serves to underline why safety is our number one priority.

While we are mindful of the near-term headwinds facing the region, the underlying medium to long-term fundamentals of our target market remain intact, and we remain confident in our business model.  NWR’s long-standing relationships with its customers in the region underpin our market position. Additionally, the increasing orientation of our customers towards high value-added, specialised steel products such as those used in the automotive industry, for building high-speed railways and for specialised mechanical engineering, is improving the competitiveness of the regional steel sector, our principal customer market.

Given our solid performance during the first half of the year and reasonable short-term visibility I am pleased on behalf of the Board to announce an interim dividend of 6 Eurocents per share, in line with NWR’s dividend policy of paying out 50 per cent of Net income over the course of the business cycle.

We previously announced that Gareth Penny will be joining NWR as Executive Chairman in October, and we are delighted to welcome him to the management team. I look forward to working with him in the coming weeks to ensure a smooth transition. The past five years have seen the Company’s transformation into a world-class underground coal miner and NWR is in good shape to continue with the next stage of its development under Gareth’s leadership.

Mike Salamon, Executive Chairman of NWR


 

Selected consolidated financial and operational data

(EUR m, unless otherwise stated)

H1 2012

H1 2011

Chg

 

Revenues

694

840

(17%)

 

EBITDA

158

250

(37%)

 

Operating profit

71

161

(56%)

 

Profit for the period

35

87

(60%)

 

Basic earnings per A share (EUR)

0.12

0.32

(62%)

 

 

 

 

 

 

Total assets

2,333

2,296

2%

 

Cash and cash equivalents

452

443

2%

 

Net debt

472

401

18%

 

Net working capital

131

112

17%

 

 

 

 

 

 

Net cash flow from operations

60

121

(50%)

 

CAPEX

123

105

17%

 

 

 

 

 

 

Total headcount incl. contractors

17,899

18,046

(1%)

 

LTIFR

7.56

7.20

5%

 

 

NWR’s Revenues were EUR 146 million lower in H1 2012 compared to H1 2011 mainly due to lower coking coal prices. The lower volume of external coal sales was offset by an improved coal mix (a higher proportion of coking coal in the sales mix.)

Lower costs and an increase in inventories in H1 2012 partially offset the impact of lower coal and coke prices on the Company’s EBITDA which was EUR 158 million in H1 2012, a EUR 92 million decrease compared to H1 2011. Depreciation and amortisation charges remained flat in CZK terms year-on-year leaving the Operating profit for the period at EUR 71 million.

Net financial expenses decreased due to a lower net foreign exchange loss, and a higher net profit on derivatives revaluation when compared to H1 2011. The profit before tax was EUR 48 million, EUR 72 million below H1 2011.

The Company’s effective tax rate remained stable at 29% and NWR’s consolidated after-tax profit for the period was EUR 35 million, down EUR 52 million versus H1 2011. The Basic earnings per A share for the six-month period ended 30 June 2012 amounted to EUR 0.12.

Operating cash flow before working capital changes was EUR 161 million, EUR 67 million lower than in H1 2011, mainly reflecting lower revenues. Changes in working capital were negative EUR 32 million mainly due to an increase in inventories. As such Operating cash flow before taxes and interest was EUR 129 million. Net operating cash flow after interest (EUR 32 million) and income tax (EUR 37 million) for H1 2012 was EUR 60 million, EUR 61 million lower than in H1 2011.

Total capital expenditure in H1 2012 was EUR 123 million. This included maintenance CAPEX for both mining and coking segments, mining equipment renewal, vertical and horizontal mine developments, safety CAPEX as well as EUR 5 million spent on the Debiensko project. There is no further CAPEX planned for Debiensko for the rest of 2012 due to the ongoing review of the project. For FY 2012 we have allocated EUR 210-220 million on capital expenditures.

The Company paid out the final dividend of EUR 19 million to its A shareholders in May 2012 and also repaid EUR 7 million of the ECA loan. The Cash and cash equivalents were at EUR 452 million as at 30 June 2012 including EUR 100 million of proceeds from the RCF loan.

As at 30 June 2012, the Company’s Net debt was EUR 472 million. NWR has no significant debt maturities until 2015. During 2012 we will 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.

Dividend

NWR’s dividend policy is to target distribution of approximately 50% of the Mining Division’s consolidated annual Net income over the course of the business cycle. Consistent with this policy, the Board of Directors has proposed an interim dividend for the six-month period ended 30 June 2012 of EUR 0.06 per share, which will be paid to A shareholders of the Company on 19 September 2012.

Subject to various exceptions and exemptions, shareholders are generally subject to Dutch dividend withholding tax at the rate of 15% on dividends distributed, which the Company is required to withhold and account for to the Dutch tax authorities. Shareholders should consult their own tax advisers as to their particular tax consequences for receiving dividends from NWR.

The dividend for NWR is declared in Euros. Shareholders may elect to receive this dividend in Pounds Sterling or Euros. The default election will be deemed to be Euros if a shareholder expresses no preference. The Pounds Sterling amount payable will be determined by reference to the exchange rate applicable to the Euro on 11 September 2012.

The timetable with respect to the interim dividend will be:

Ex-dividend London, Prague and Warsaw Stock Exchanges         5 September 2012

Record date (record time is close of market)                                              7 September 2012

Currency election closing date                                                         10 September 2012

Euro exchange rate fixed and announced                                       11 September 2012

Payment date                                                                                   19 September 2012

Further details regarding dividend payments, together with currency election and dividend mandate forms, are available for download from NWR’s website (www.newworldresources.eu) or from the Company’s registrars.

Coal segment

 

H1 2012

H1 2011

 Chg

Ex-FX

P&L (EUR m)

 

 

 

 

Revenues

625

767

(19%)

(17%)

EBITDA

158

259

(39%)

(40%)

Operating profit

75

175

(57%)

(60%)

Production & Sales (kt)

 

 

 

 

Coal production

5,779

5,832

(1%)

 

Sales to coke segment

273

302

(10%)

 

External sales

4,823

5,403

(11%)

 

Coking coal

2,671

2,394

12%

 

Thermal coal

2,152

3,009

(28%)

 

Period end inventory

996

374

166%

 

Average realised prices[2] (EUR/t)

 

 

 

Coking coal

134

180

(26%)

(24%)

Thermal coal

73

65

12%

14%

Costs (EUR/t)

 

 

 

Mining unit costs[3]

80

82

(2%)

1%

 

Total coal production in H1 2012 was 1% below the level in H1 2011, and external coal sales volumes were 11% lower due to reduced volumes of thermal coal. External coking coal sales volumes increased 12% year-on-year. Total revenues for the coal segment decreased by 19%, mainly due to lower coking coal prices and lower thermal coal volumes.

External coking coal sales in H1 2012 comprised of approximately 49% hard coking coal (mid-volatility), 44% semi-soft coking coal, and 7% PCI coking coal. Thermal coal sales in the period were approximately 78% thermal coal and 22% middlings.

Mining unit costs remained flat in CZK terms in the first six months of 2012 compared to H1 2011 in line with the Company’s guidance. All main cost categories remained well under control.

The coal segment generated EBITDA of EUR 158 million, a decrease of 39% compared to H1 2011 due to lower revenues.

Coal segment outlook

As previously announced, the average agreed price of coking coal for delivery in the third calendar quarter of 2012 is EUR 129 per tonne, an increase of 2% compared to the second quarter realised price. This average price is based on an expected Q3 2012 coking coal sales mix of approximately 48% hard coking coal (mid-volatility), 46% semi-soft coking coal, and 7% 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 82% thermal coal and 18% middlings.

NWR now expects production of between 11.0Mt and 11.1Mt of coal and external sales of between 10.3Mt and 10.4Mt of coal in FY 2012. As previously announced, the external sales split is expected to be approximately 48% coking coal and 52% thermal coal in FY 2012.

NWR continues to expect its mining unit costs to remain broadly flat in FY 2012, excluding any impact from foreign exchange fluctuations.

Coke segment

 

H1 2012

H1 2011

 Chg

Ex-FX

P&L (EUR m)

 

 

 

 

Revenues

109

135

(19%)

(19%)

EBITDA

6

9

(28%)

(51%)

Operating profit

3

4

(27%)

(84%)

Production & Sales (kt)

 

 

 

 

Coke production

349

400

(13%)

 

Coke sales

303

321

(6%)

 

Period end inventory

166

78

113%

 

Average realised prices[4]  (EUR/t)

 

 

 

Coke

304

361

(16%)

(15%)

Costs

 

 

 

Conversion unit costs[5] (EUR/t)

64

63

2%

5%

Coal purchase charges[6]  (EUR m)

65

95

(32%)

(30%)

 

Revenues for the coke segment decreased by 19% due to a decrease in both sales volumes and prices in H1 2012. Coke sales in H1 2012 were approximately 69% foundry coke, 19% blast furnace coke, and 12% other types.

Coke conversion unit costs increased by 5% on a constant currency basis as a result of the 13% drop in 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 EBITDA was EUR 6 million in H1 2012, which is only EUR 3 million lower than EBITDA in the comparable period of 2011.

Coke segment outlook

As previously announced, the average price of coke agreed for delivery in the third calendar quarter of 2012 is EUR 294 per tonne, a 1% decrease compared to the second quarter realised price. This average price is based on the expectation of Q3 2012 sales of approximately 67% foundry coke, 13% blast furnace coke and 20% 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.

H1 2012 earnings investor/analyst presentation

NWR’s management will host an analyst and investor presentation on 23 August 2012 at 10:00 BST (11:00 CET) to discuss the financial results for the period. The presentation will be held at the London Stock Exchange at 10 Paternoster Square.

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) 3364 5381

US                                                                  +1 646 254 3360

Czech Republic (Toll free)                              800 701 229

Poland (Toll free)                                            00 800 121 4330

The Netherlands                                            +31 (0) 20 713 2789

Access Code                                                 4072730

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

+44 (0) 20 3427 0598 (Access code: 4072730)

For further information:

Investor Relations                                          Corporate Communications

Radek Nemecek                                           Petra Masinova

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

Email: rnemecek@nwrgroup.eu                   Email: pmasinova@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, risk 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 Group's products, and demand for the Group's customers' products; coal mine reserves; remaining life of the Group'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 Group's relationship with, and conditions affecting, the Group'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 NWR’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 report 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.

This document does not contain or constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities in the United States or in any other jurisdiction.



[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] 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 CZK/EUR of 25.00. Prices are expressed as a blended average between the different qualities of coal and are ex works.

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

[4] 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 CZK/EUR of 25.00. Prices are expressed as a blended average between the different types of coke and are ex works.

[5] 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.

[6] Both internal and third party coal purchases.

Please download the file below for more information:

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