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Press Releases / 2013 / Unaudited interim results for the first half 2013 

Unaudited interim results for the first half 2013

22/8/2013

New World Resources Plc (‘NWR’ or the ‘Company’) today announces its unaudited financial results for the first half of 2013 and provides an update on NWR’s business optimisation steps.

H1 2013 Financial summary

  • Revenues of EUR 493 million, down 29%.
  • Cash mining unit costs[1] of EUR 84/t, up 22% on a 26% decline in production, down 10% on a stable production basis.
  • Mining administrative and selling expenses down 16% to EUR 93 million.
  • EBITDA of EUR (40) million.
  • Impairment of EUR 307 million on Company’s coal assets.
  • Underlying[2] basic loss per A share of EUR (0.56).
  • Net debt of EUR 653 million, and cash of EUR 176 million.

H1 2013 Operational summary

  • LTIFR[3] of 5.65, an improvement of 25% and the best result in NWR’s history.
  • Regrettably, two miners lost their lives in work related incidents this year.
  • Coal production of 4.3Mt, and external sales of 4.6Mt.
  • Coal sales mix of 49% coking and 51% thermal coal.[4]
  • Coke production of 340kt and external sales of 298kt.

Update on business optimisation steps

  1. EUR 60 million of cash-enhancing measures delivered.
  2. Business portfolio optimisation underway.
  3. FY 2013 production, sales, and cost targets reiterated.
  4. Fully optimised current operations by the end of 2014.

Chairman’s statement

It has become apparent since our last quarterly update that coal prices are gradually moving towards a new long-term normal. While we are seeing some initial signs of price stabilisation in the coking coal market, as well as positive news from Germany’s labour and manufacturing markets, we do not believe that there will be a repeat of the boom years of 2008 and 2011 any time soon.

The ongoing weak coal price environment led us to recognise a non-cash impairment charge of EUR 307 million on our mining assets and we continue to be conscious of the market volatility and risks as described further in the Operating and Financial Review.

This is the ‘new reality’ and NWR is taking action to adapt to it. This includes the implementation of the previously announced EUR 100 million of cash-enhancing measures, including sell-down of inventories and additional cost savings. Even more importantly, we have accelerated the execution of the first phase of our 2017 strategy, with NWR’s management team fully focused on our Czech mining operations. Our objective is to have a more efficient, leaner and more flexible mining business by the end of 2014.

What does this mean in terms of targets for 2014? Lower production of between eight and nine million tonnes, 60 per cent of coking coal in the sales mix, cash mining unit costs of EUR 60/t, lower overheads, less than EUR 100 million of CAPEX, and further improvements in our safety performance. These targets necessitate many difficult changes, including reducing our workforce. But I must stress that achieving these targets is absolutely essential for NWR to thrive, provide prosperity to the region and deliver on its strategic goal of becoming Europe’s leading miner and marketer of coking coal by 2017 in a safe and sustainable way. Our management team at OKD, led by Jan Fabian, has made huge progress in changing the nature of OKD, and although negotiations with our trade unions are still ongoing, there is a constructive dialogue as we progress discussions.

In line with our strategic targets, each mine is going to maximize its coking coal output. NWR’s new mining plan is intended to be more flexible and selective. Longer term we envisage leveraging our customer relationships to complement our coking coal deliveries with suitable coking coal qualities from overseas. Last but not least, health and safety of our workforce remains our highest priority.

Our core market of Central Europe is a region that is reinforcing its position as the manufacturing hub of Europe, a trend that we believe will continue. Our focus on coking coal therefore remains and despite all the short-term difficulties and challenges that we currently face, we continue to work towards positioning NWR to become Europe’s leading miner and marketer of coking coal by 2017.

 

Gareth Penny, Executive Chairman of NWR


Update on business optimisation

1. The following table breaks down the delivery of the cash-enhancing measures in H1 2013 and estimated delivery in H2 2013.

EUR million

H1 2013

H2 2013e

2013e

Cost savings

10

15

25

Personnel cash cost savings

8

7[5]

15

Contractors cost savings

1

4

5

Administrative and material cost savings

1

4

5

CAPEX savings and deferrals of selected gateroad development and non-critical maintenance

10

10

20

Active Working capital operations

40

15

55

Optimisation of receivables and payables

24

13

37

Inventory sell-down

16

2

18

Total

60

40

100

2. Good progress with business portfolio optimisation initiatives:

  • In line with NWR’s focus on coal mining, the divestment of NWR’s coke operations (OKK) is underway.
  • Following the stress-testing of our mining operations we have concluded that it is not possible to sustain operations at our high-cost Paskov mine in the new pricing environment. As a divestment of the Paskov mine currently appears unlikely, we are now evaluating other options including a potential temporary or permanent shutdown of the mine. There is no final decision as yet and we will provide further updates on Paskov in due course.
  • OKD’s headquarters is in the process of moving from the centre of Ostrava to NWR’s Darkov mine site. Administrative staff reductions are underway, including the previously announced decrease in administrative and technical headcount by 250 employees. The centralised mine structure is expected to be fully in place before the year-end.

3. 2013 Targets reiterated:

Production

  • Coal production of 9-10Mt.
  • Coke production of 700kt.

Sales

  • External sales of 8.5-9.5Mt of coal equally split between coking and thermal coal.
  • Sale of additional 500kt of middlings and lower grades of thermal coal inventories.
  • Coke sales of 600kt.

Prices[6]

  • EUR 60 per tonne applies to CY 2013 thermal coal deliveries.[7]
  • Coking coal Q3 2013 average price agreed at EUR 92/t.
  • Coke Q3 2013 average price agreed at EUR 232/t.

Costs

  • Stable Cash mining unit costs and Cash coke conversion unit costs at constant FX.[8]

CAPEX

  • EUR 100 million including EUR 10 million for the Debiensko project.
  1. Execution of the first phase of our 2017 strategy accelerated:
  • 1) Fully optimised current operations by the end of 2014:
  • Coal production between 8 – 9Mt;
  • Coking coal above 60 per cent of external coal sales;
  • Lower overheads and Cash mining unit cost of EUR 60/t ;
  • Annual maintenance CAPEX below EUR 100 million;
  • Further improvement in LTIFR.
    • 2) 10Mtpa of coking coal sales to Europe by 2017:
    • Combination of mining projects and new marketing initiatives;
    • Engage in the import market for seaborne coking coal.
      • 3) Become a ‘one-stop shop’ for European steel customers by 2017:
      • Build on marketing capabilities;
      • Supply full range of coking coal qualities throughout Europe.

Summary tables

For more detail and analysis please refer to the Operating and Financial Review further in this document.

 

Selected consolidated financial and operational data

(EUR m, unless otherwise stated)

H1 2013

H1 2012

Chg

 

Revenues

493

694

(29%)

 

Cost of sales

508

493

3%

 

   Excluding Change in inventories

 486

538

(10%

)

Gross (loss) / profit

(15)

201

-

 

Selling and administrative expenses

111

130

(14%)

 

EBITDA

(40)

158

-

 

Impairment on Company’s assets

307

-

-

 

Underlying Operating (loss) / profit

(126)

71

-

 

Underlying (Loss) / Profit for the period

(145)

35

-

 

Underlying Basic (loss) / earnings per A share (EUR)

(0.56)

0.12

-

 

 

 

 

 

 

Total assets

1,649

2,333

(27%)

 

Cash and cash equivalents

176

452

(61%)

 

Net debt

653

472

39%

 

Net working capital

46

131

(65%)

 

 

 

 

 

 

Net cash flow from operations

(6)

60

-

 

CAPEX

85

123

(31%)

 

 

 

 

 

 

Total headcount incl. contractors

16,937

17,899

(5%)

 

LTIFR

5.65

7.56

(25%)

 

Coal segment

 

H1 2013

H1 2012

 Chg

P&L (EUR m)

 

 

 

Revenues

434

625

(31%)

EBITDA

(44)

158

-

Impairment on PPE

307

-

-

Underlying Operating (loss) /profit

(127)

75

-

Costs

 

 

Cash mining unit costs (EUR/t)[9]

84

69

22%

   Adjusted for production decline (EUR/t)[10]

62

69

(10%)

Selling and administrative expenses (EUR m)

93

111

(16%)

Production & Sales (kt)

 

 

 

Coal production

4,281

5,779

(26%)

Sales to coke segment

259

273

(5%)

External sales

4,557

4,823

(6%)

Coking coal[11]

2,047

2,671

(23%)

Thermal coal[12]

2,510

2152

17%

Period end inventory

755

996

(24%)

Average realised prices (EUR/t)

 

 

Coking coal

100

134

(25%)

Thermal coal

5612

73

(23%)

Coke segment

 

H1 2013

H1 2012

 Chg

P&L (EUR m)

 

 

 

Revenues

88

109

(19%)

EBITDA

9

6

45%

Operating profit

5

3

101%

Costs

 

 

Cash conversion unit costs[13] (EUR/t)

53

53

(1%)

Selling and administrative expenses (EUR m)

13

13

6%

Coal purchase charges[14] (EUR m)

49

65

(25%)

Production & Sales (kt)

 

 

 

Coke production

340

349

(3%)

Coke sales[15]

298

303

(2%)

Period end inventory

208

166

25%

Average realised prices (EUR/t)

 

 

Coke

243

304

(20%)


 

H1 2013 earnings call and webcast:

NWR’s management will host an analyst and investor conference call on 22 August 2013 at 10:00 BST (11:00 CET). The presentation will be made available via a live audio webcast on www.newworldresources.eu and then archived on the Company’s website.

For those who would like to join the live call, dial in details are as follows:

UK and the rest of Europe                            +44 (0)20 3427 1900

USA                                                               +1 646 254 3388

The Netherlands                                            0800 020 2576

Czech Republic                                             800 701 229

Poland                                                           00 800 121 4330

 

Access code                                                  3729628

 

A replay of the conference call will be available for one week by dialling +44 20 3427 0598, and using access code 3729628.

Contacts:

Investor Relations                                                      Corporate Communications

Tel: +31 20 570 2244                                                Tel: +420 225 282 451

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

 

Website: www.newworldresources.eu

Notes to editors:

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.

In 2013 the Company announced a strategic outlook to reposition NWR into Europe's leading miner and marketer of coking coal by 2017.

NWR is listed in London, Prague and Warsaw. It is a constituent of FTSE Small Cap index.


[1] Cash mining costs per tonne reflect the operating costs incurred in production of both coking and thermal coal. They are calculated by deducting from the segmental Cost of sales the Change in inventories and D&A, and then divided by total coal production.

[2] Throughout this press release the underlying figures exclude the impact of the asset impairment charge. H1 2013 reported loss per A share was EUR (1.50).

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

[4] Excluding the sale of approximately 380kt of middlings and lower grades of thermal coal from inventories in Q2 2013.

[5] This is currently under negotiations with trade unions.

[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 the forward-looking price guidance for 2013 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.

[7] Excluding the impact of expected sales of 500kt of middlings and lower grades of thermal coal inventories. The majority of thermal coal sales are priced on a calendar year basis.

[8] Cash mining unit costs in FY 2012 were EUR 71/t. Cash coke conversion unit costs in FY 2012 were EUR 54/t.

[9] Cash mining costs per tonne reflect the operating costs incurred in production of both coking and thermal coal. They are calculated by deducting from the segmental Cost of sales the Change in inventories and D&A, and then divided by total coal production.

[10] H1 2013 rebased for H1 2012 production.

[11] In H1 2013 approx. 40% of coking coal sales were mid-volatility hard coking coal, 51% were semi-soft coking coal and 9% were PCI coking coal.

[12] In H1 2013 approx. 74% of thermal coal sales were thermal coal and 26% middlings. Includes 380kt of middlings and lower grades of thermal coal sales.

[13] Cash coke conversion costs per tonne reflect the operating costs incurred in production of all types of coke and are calculated by deducting from the segmental Cost of sales the Costs of inputted coal, the Change in inventories and D&A, and then divided by total coke production.

[14] Both internal and external coal charges.

[15] In H1 2013 approx. 71% of coke sales were foundry coke, 19% blast furnace coke and 10% other types of coke.

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