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Press Releases / 2013 / Unaudited interim results for the first nine months 2013 

Unaudited interim results for the first nine months 2013

6/11/2013

New World Resources Plc (‘NWR’ or the ‘Company’) today announces its unaudited financial results for the first nine months of 2013.

9M 2013 Financial summary

  • Revenues from continuing operations of EUR 634 million, down 31%.
  • Cash mining unit costs[1] of EUR 81/t, up 17% on a 25% decline in production, down 12% on a stable production basis.
  • Administrative & selling expenses from continuing operations down 20% to EUR 136 million.
  • EBITDA from continuing operations of EUR (50) million. EUR (1) million in Q3 2013.
  • Underlying[2] basic loss from continuing operations per A share of EUR (0.72).
  • Net debt of EUR 672 million, and cash of EUR 157 million[3].
  • EUR 85 million of cash-enhancing measures delivered; further EUR 16 million expected in Q4 2013.
  • Sale of OKK for gross proceeds of EUR 95 million; completion expected before year-end[4].
  • Waivers agreed for the Revolving Credit Facility.

9M 2013 Operational summary

  • LTIFR[5] of 6.83, an improvement of 9%.
  • Coal production of 6.5Mt, and coal sales of 7.2Mt.[6]
  • Coal sales mix of 48% coking and 52% thermal coal.
  • Coking coal Q4 2013 average price agreed at EUR 101/t[7].

Chairman’s statement

2013

First and foremost, it is very pleasing to report that despite the challenging market conditions and the difficult changes and adjustments that the company is undergoing, our health and safety metrics continue to improve. Our LTIFR of 6.83 is the best among the Central European peers, and we are on track to achieve our target LTIFR of 5 by 2015.

Earlier this year we conducted a thorough operational review in response to deteriorating market conditions, and as a result we began to take a range of business and portfolio optimisation steps, including the divestment process of our coke operations. On 27 September we agreed to sell our coke subsidiary, OKK to the METALIMEX group for a gross EUR 95 million. We currently expect to complete this transaction by the end of the year.

In October we announced, that we had reached agreement with the RCF lenders allowing us to keep the facility in place until it expires in February 2014. The current terms relating to draw downs however mean that it is highly unlikely that we will be able to make use of the RCF in the period prior to its expiry in February next year. Therefore, we aim to further assist our liquidity position through the renegotiation of our current bank facilities, the EUR 100 million undrawn RCF and the EUR 71 million ECA loan. We are in advanced negotiations with the ECA lenders about the prolongation of the covenant holiday and we intend to seek an extension of the RCF facility.

Part of the short-term business optimisation steps announced in May 2013, was a package of cash-enhancing measures amounting to EUR 100 million. The following table illustrates the delivery of these measures in 9M 2013 and expected delivery in Q4 2013.

EUR million

9M 2013

Q4 2013e

2013e

Cost savings

14

5

18

   Personnel cash cost savings

8

0

8

   Contractors cost savings

1

1

2

   Administrative and material cost savings

5

4

8

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

12

6

18

Active Working capital operations

59

5

64

   Optimisation of receivables and payables

43

5

48

   Inventory sell-down

16

0

16

Total

85

16

100

In terms of our FY 2013 targets, we expect coal production and sales of around 9Mt and 9.5Mt, respectively, with such coal sales equally split between coking and thermal coal[8]. Under this production guidance, the FY 2013 cash mining unit costs are now expected at EUR 75 – 80/t. And finally, capital expenditures in the mining operations, including the Debiensko project, should be around EUR 100 million.

2014 and beyond

With the difficult market conditions continuing into the second half of 2013, we have accelerated the execution of the first pillar of NWR’s strategy, to optimise our current mining operations. Our objective is to have a more efficient, leaner and more flexible mining business by the end of 2014. This includes our decision to discontinue the uncompetitive Paskov mine in order to significantly improve the overall cost profile of NWR’s mining operations. The phasing and terms of the Paskov’s closure will be determined after discussions with the Czech government and other stakeholders.

A new collective agreement for the period 2014 – 2018 is currently being negotiated. We propose to achieve the necessary savings in personnel costs mainly through the reduction of the system of above-standard benefits, while introducing a gain-sharing scheme that represents a much more sustainable way to pay out bonuses to employees at every level of the organisation. We believe that the agreement with the trade unions will be reached before the end of the current year.

To reaffirm, we are working towards attaining the following 2014 targets for our current mining operations – coal 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 per tonne by the end of the year, lower overheads, less than EUR 100 million of annual maintenance CAPEX, and continuing improvements in the safety performance.

Finally, we remain committed to our strategy to become Europe’s leading miner and marketer of coking coal by 2017, which is underpinned by three pillars. Firstly, optimise the current mining operations to ensure their sustainability. Secondly, increase the amount of coking coal supplied by NWR to the European market to 10 million tonnes per year by 2017 through a combination of mining projects and new marketing initiatives, including the importing of seaborne coking coal. And thirdly, offer a full range of coking coal qualities to our existing and expanded customer base, and evolve into a ‘one-stop shop’ for the coking coal needs of the European steel producers.

Gareth Penny

Executive Chairman of NWR


 

Summary tables[9]

Selected consolidated financial and operational data

(EUR m, unless otherwise stated)

9M 2013

9M 2012

Chg

 

Revenues from continuing operations

634

916

(31%)

 

Cost of sales from continuing operations

664

652

2%

 

   Excluding Change in inventories

623

718

(13%)

 

Gross (loss) / profit from continuing operations

(30)

264

-

 

Selling and administrative expenses from continuing operations

136

169

(20%)

 

EBITDA from continuing operations

(50)

220

-

 

Impairment on Company’s assets

310

-

-

 

Underlying Operating (loss) / profit from continuing operations

(173)

95

-

 

Underlying (Loss) / Profit for the period from continuing operations

(195)

46

-

 

Underlying Basic (loss) / earnings from continuing operations per A share (EUR)

(0.72)

0.17

-

 

Total assets

1,512

2,373

(36%)

 

Cash and cash equivalents

157[10]

444

(65%)

 

Net debt

672

481

40%

 

Net working capital

(16)

133

-

 

 

 

 

 

 

Net cash flow from operations

(14)

106

-

 

CAPEX

102[11]

165

(38%)

 

 

 

 

 

 

Total headcount incl. contractors

15,955

17,054

(6%)

 

LTIFR

6.83

7.48

(9%)

 

Coal segment

 

9M 2013

9M 2012

 Chg

P&L (EUR m)

 

 

 

Revenues

634

916

(31%)

EBITDA

(42)

228

-

Impairment on Company’s assets

310

-

-

Underlying Operating (loss) /profit

(158)

103

-

Costs

 

 

Cash mining unit costs (EUR/t)[12]

81

69

17%

   Adjusted for production decline (EUR/t)[13]

61

69

(12%)

Selling and administrative expenses (EUR m)

128

160

(20%)

Production & Sales (kt)

 

 

 

Coal production

6,452

8,608

(25%)

External sales

7,185

7,604

(6%)

Coking coal[14]

3,423

4,231

(19%)

Thermal coal[15]

3,762

3,373

12%

Period end inventory

564

1,314

(57%)

Average realised prices (EUR/t)

 

 

Coking coal

98

133

(26%)

Thermal coal

56

73

(23%)


Coke segment (Discontinued operations)

 

9M 2013

9M 2012

 Chg

P&L (EUR m)

 

 

 

Revenues

129

154

(16%)

EBITDA

11

7

61%

Operating profit

8

2

343%

Costs

 

 

Cash conversion unit costs[16] (EUR/t)

53

53

(1%)

Selling and administrative expenses (EUR m)

19

22

(13%)

Coal purchase charges (EUR m)

73

100

(27%)

Production & Sales (kt)

 

 

 

Coke production

503

525

(4%)

Coke sales[17]

440

432

2%

Period end inventory

213

193

10%

Average realised prices (EUR/t)

 

 

Coke

240

299

(20%)


 

9M 2013 earnings call and webcast:

NWR’s management will host an analyst and investor conference call on 6 November 2013 at 10:00 GMT (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 1903

USA                                                                +1 646 254 3361

The Netherlands                                               +31 (0)20 716 8256

Czech Republic                                                800 701 229

Poland                                                            00 800 121 4330

 

Access code                                                   3935363

 

A replay of the conference call will be available for one week by dialling +44 20 3427 0598, and using access code 3935363.

Contacts:

Investor Relations                                                        Media Relations

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.


 

Condensed consolidated interim financial information
for the nine-month period
ended 30 September 2013


New World Resources Plc

Consolidated statement of comprehensive income

Nine-month period

ended 30 September

 

Three-month period

ended 30 September

EUR thousand

2013

2012

(restated)

 

2013

2012

(restated)

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

Revenues

634,311

916,002

 

200,561

290,948

Cost of sales

(664,109)

(651,842)

 

(196,884)

(210,042)

 

 

 

 

 

Gross (loss) / profit

(29,798)

264,160

 

3,677

80,906

Selling expenses

(74,627)

(94,754)

 

(20,541)

(31,934)

Administrative expenses

(61,474)

(74,407)

 

(17,562)

(22,320)

Impairment loss on property, plant and equipment

(309,713)

-

 

(2,576)

-

(Loss) / gain from sale of property, plant and equipment

(7,379)

49

 

(7,380)

-

Other operating income

2,537

1,936

 

1,302

366

Other operating expenses

(2,213)

(2,329)

 

(686)

(876)

 

 

 

 

 

Operating (loss) / income

(482,667)

94,655

 

(43,766)

26,142

Financial income

12,711

33,265

 

(321)

15,361

Financial expense

(70,390)

(62,569)

 

(13,152)

(21,555)

 

 

 

 

 

(Loss) / profit before tax

(540,346)

65,351

 

(57,239)

19,948

Income tax benefit / (expense)

92,129

(19,206)

 

8,732

(5,811)

 

 

 

 

 

(Loss) / profit from continuing operations

(448,217)

46,145

 

(48,507)

14,137

Discontinued operations

 

 

 

 

 

(Loss) / profit from discontinued operations, net of tax

(79,729)

1,223

 

(83,708)

(1,292)

 

 

 

 

 

(Loss) / profit for the period

(527,946)

47,368

 

(132,215)

12,845

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

(32,007)

35,118

 

9,916

21,373

Foreign currency translation differences

(27,303)

25,974

 

10,631

19,025

Derivatives - change in fair value

(1,916)

1,364

 

1,107

2,726

Derivatives - transferred to profit and loss

(5,980)

7,673

 

(1,653)

461

Income tax relating to components of other comprehensive income

3,192

107

 

(169)

(839)

Items that will never be reclassified to profit or loss

-

-

 

-

-

 

 

 

 

 

Total other comprehensive income for the period, net of tax

(32,007)

35,118

 

9,916

21,373

 

 

 

 

 

 

Total comprehensive income for the period

(559,953)

82,486

 

(122,299)

34,218

 

(Loss) / profit attributable to:

 

 

 

 

 

Non-controlling interests

-

109

 

-

29

Shareholders of the Company

(527,946)

47,259

 

(132,215)

12,816

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

Non-controlling interests

-

186

 

-

75

Shareholders of the Company

(559,953)

82,300

 

(122,299)

34,143

 

 

 

 

 

 

(LOSS) / EARNINGS PER SHARE (EUR)

A share

 

 

 

 

 

Basic (loss) / earnings

(1.98)

0.17

 

(0.48)

0.05

Diluted (loss) / earnings

(1.97)

0.16

 

(0.48)

0.05

Basic (loss) / earnings from continuing operations

(1.68)

0.17

 

(0.16)

0.05

Diluted (loss) / earnings from continuing operations

(1.67)

0.16

 

(0.16)

0.05

Basic (loss) / earnings from discontinued operations

(0.30)

0.00

 

(0.32)

(0.00)

Diluted (loss) / earnings from discontinued operations

(0.30)

0.00

 

(0.32)

(0.00)

B share

 

 

 

 

 

Basic (loss) / earnings

(166.60)

267.60

 

(387.20)

69.40

Diluted (loss) / earnings

(166.60)

267.60

 

(387.20)

69.40

The notes on pages 14 to 31 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of financial position

30 September

31 December

30 September

EUR thousand

2013

2012

2012

 

 

 

 

ASSETS

 

 

 

Property, plant and equipment

1,087,098

1,476,570

1,413,865

Mining licences

-

143,020

145,135

Accounts receivable

5,780

7,949

9,567

Deferred tax

-

11,262

10,158

Restricted deposits

27,857

13,300

16,722

Derivatives

2

-

35

TOTAL NON-CURRENT ASSETS

1,120,737

1,652,101

1,595,482

 

 

 

 

Inventories

45,181

151,333

166,510

Accounts receivable and prepayments

96,361

130,046

166,884

Derivatives

-

760

349

Income tax receivable

2,391

9

5

Cash and cash equivalents

148,465

267,011

443,566

TOTAL CURRENT ASSETS

292,398

549,159

777,314

 

 

 

 

ASSETS HELD FOR SALE

98,717

-

-

 

 

 

TOTAL ASSETS

1,511,852

2,201,260

2,372,796

 

 

 

EQUITY

 

 

 

Share capital

105,863

105,863

105,863

Share premium

2,368

2,368

2,368

Foreign exchange translation reserve

59,136

81,735

77,114

Restricted reserve

129,706

132,691

132,454

Equity-settled share based payments

15,087

13,827

13,151

Hedging reserve

1,402

7,825

8,497

Merger reserve

(1,631,161)

(1,631,161)

(1,631,161)

Other distributable reserve

1,684,463

1,684,463

1,684,463

Retained earnings

(167,304)

360,642

410,268

EQUITY ATRIBUTABLE TO THE SHAREHOLDERS OF THE  COMPANY

199,560

758,253

803,017

 

 

 

 

Non-controlling interests

-

-

1,748

 

 

 

 

TOTAL EQUITY

199,560

758,253

804,765


New World Resources Plc

Consolidated statement of financial position (continued)

30 September

31 December

30 September

EUR thousand

2013

2012

2012

 

 

 

 

LIABILITIES

 

 

 

Provisions

171,503

179,824

175,154

Long-term loans

55,506

62,333

69,357

Bonds issued

760,253

741,805

740,999

Employee benefits

80,982

93,211

90,553

Deferred revenue

2,016

2,704

2,041

Deferred tax

14,184

111,064

115,615

Other long-term liabilities

681

979

964

Cash-settled share-based payments

1,286

2,018

1,315

Derivatives

6,831

10,398

11,771

TOTAL NON-CURRENT LIABILITIES

1,093,242

1,204,336

1,207,769

 

 

 

 

Provisions

3,957

5,681

4,506

Accounts payable and accruals

157,968

204,830

200,605

Accrued interest payable on bonds

20,978

8,937

23,530

Derivatives

3,423

4,691

7,367

Income tax payable

154

159

10,195

Current portion of long-term loans

13,851

13,852

13,851

Short-term loans

-

-

100,000

Cash-settled share-based payments

-

521

208

TOTAL CURRENT LIABILITIES

200,331

238,671

360,262

 

 

 

 

LIABILITIES CLASSIFIED AS HELD FOR SALE

18,719

-

-

 

 

 

 

TOTAL LIABILITIES

1,312,292

1,443,007

1,568,031

 

 

 

 

TOTAL EQUITY AND LIABILITIES

1,511,852

2,201,260

2,372,796

The notes on pages 14 to 31 are an integral part of this condensed consolidated financial information.


 

New World Resources Plc

Consolidated statement of cash flows

Nine-month period

ended 30 September

 

Three-month period

ended 30 September

EUR thousand

2013

2012

 

2013

2012

Cash flows from operating activities

 

 

 

 

 

(Loss) / profit before tax and non-controlling interest from continuing operations

(540,346)

65,351

 

(57,239)

19,948

(Loss) / profit before tax and non-controlling interest from discontinued operations

(77,870)

2,151

 

(83,493)

(822)

(Loss) / profit before tax and non-controlling interest

(618,216)

67,502

 

(140,732)

19,126

Adjustments for:

 

 

 

 

 

Depreciation and amortisation

119,113

129,972

 

32,757

43,724

Impairment loss on property, plant and equipment

309,713

-

 

2,576

-

Loss on re-measurement to fair value less costs to sell

86,269

 

 

86,269

 

Changes in provisions

(21,659)

(3,721)

 

(16,990)

(10,669)

Loss / (profit) on disposal of property, plant and equipment

7,081

(59)

 

7,075

(8)

Interest expense, net

43,626

50,762

 

13,574

16,615

Change in fair value of derivatives

(11,936)

(25,635)

 

(4,273)

(7,731)

Loss on early bond redemption

8,116

-

 

-

-

Equity-settled share-based payment transactions

1,260

4,161

 

340

1,088

Operating cash flows before working capital changes

(76,633)

222,982

 

(19,404)

62,145

 

 

 

 

 

 

Decrease / (increase) in inventories

60,751

(73,422)

 

22,942

(27,531)

Decrease in receivables

39,409

36,360

 

11,239

8,137

Increase in payables and deferred revenue

3,170

3,752

 

5,414

13,549

(Increase) / decrease in restricted cash and restricted deposits

(15,199)

2,668

 

(17,541)

6,134

Currency translation and other non-cash movements

13,733

(12,429)

 

258

(11,051)

Cash generated from operating activities

25,231

179,911

 

2,908

51,383

 

 

 

 

 

 

Interest paid

(37,100)

(32,120)

 

(10,931)

(474)

Corporate income tax (paid) / refunded

(2,295)

(41,560)

 

30

(4,525)

Net cash flows from operating activities

(14,164)

106,231

 

(7,993)

46,384

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Interest received

1,312

2,990

 

294

988

Purchase of land, property, plant and equipment

(102,368)

(165,427)

 

(17,459)

(42,741)

Proceeds from sale of property, plant and equipment

5,276

566

 

5,206

6

Net cash flows from investing activities

(95,780)

(161,871)

 

(11,959)

(41,747)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Senior Notes due 2015 redemption

(257,565)

-

 

-

-

Fees paid on Senior Notes due 2015 redemption

(4,749)

-

 

-

-

Repayments of other long term loans

(7,123)

(7,123)

 

-

-

Repayments of short-term borrowings

-

(100,054)

 

-

-

Proceeds from short-term borrowings

-

100,000

 

-

-

Proceeds from Senior Notes due 2021 issue

275,000

-

 

-

-

Transaction costs related to Senior Notes due 2021

(4,328)

-

 

-

-

Proceeds from exercise of share options

-

3

 

-

3

Dividends paid to A shareholders

-

(34,369)

 

-

(15,862)

Dividends paid to non-controlling interest

-

(75)

 

-

(34)

Net cash flows from financing activities

1,235

(41,618)

 

-

(15,893)

 

 

 

 

 

 

Net effect of currency translation

(1,146)

3,914

 

1,376

2,973

 

 

 

 

 

 

Net decrease in cash and cash equivalents

(109,855)

(93,344)

 

(18,576)

(8,283)

 

 

 

 

 

 

Cash and Cash Equivalents at the beginning of period classified

as Assets held for sale

-

-

 

-

-

Cash and Cash Equivalents at the beginning of period

267,011

536,910

 

175,732

451,849

Cash and Cash Equivalents classified as Assets held for sale

8,691

-

 

8,691

-

Cash and Cash Equivalents at the end of period

148,465

443,566

 

148,465

443,566

The notes on pages 14 to 31 are an integral part of this condensed consolidated financial information.


New World Resources Plc

Consolidated statement of changes in equity

EUR thousand

Share capital

Share premium

Foreign exchange translation reserve

Restricted reserve

Equity-settled share based payment

Hedging reserve

Merger reserve

Other distributable reserve

Retained earnings

Shareholders’ equity

Non-controlling interests

Consolidated group total

Balance at 1 January 2013

105,863

2,368

81,735

132,691

13,827

7,825

(1,631,161)

1,684,463

360,642

758,253

-

758,253

Loss for the period

-

-

-

-

-

-

-

-

(527,946)

(527,946)

-

(527,946)

Total other comprehensive income, net of tax

-

-

(22,599)

(2,985)

-

(6,423)

-

-

-

(32,007)

-

(32,007)

Total comprehensive income for the period

-

-

(22,599)

(2,985)

-

(6,423)

-

-

(527,946)

(559,953)

-

(559,953)

Transaction with owners recorded directly in equity

 

 

 

 

 

 

 

 

 

Share options for A Shares

-

-

-

-

1,260

-

-

-

-

1,260

-

1,260

Total transactions with owners

-

-

-

-

1,260

-

-

-

-

1,260

-

1,260

Balance at 30 September 2013

105,863

2,368

59,136

129,706

15,087

1,402

(1,631,161)

1,684,463

(167,304)

199,560

-

199,560

 

Balance at 1 January 2012

105,756

2,368

56,056

129,136

14,235

(2,168)

(1,631,161)

1,692,319

384,386

750,927

1,632

752,559

Profit for the period

-

-

-

-

-

-

-

-

47,259

47,259

109

47,368

Total other comprehensive income, net of tax

-

-

21,058

3,318

-

10,665

-

-

-

35,041

77

35,118

Total comprehensive income for the period

-

-

21,058

3,318

-

10,665

-

-

47,259

82,300

186

82,486

Transaction with owners recorded directly in equity

 

 

 

 

 

 

 

 

 

Share options exercised

107

-

-

-

(5,245)

-

-

-

5,141

3

-

3

Share options for A Shares

-

-

-

-

4,161

-

-

-

(5)

4,156

5

4,161

Dividends paid A Shares

-

-

-

-

-

-

-

(7,856)

(26,513)

(34,369)

-

(34,369)

Dividends paid to non-controlling interest

-

-

-

-

-

-

-

-

-

-

(75)

(75)

Total transactions with owners

107

-

-

-

(1,084)

-

-

(7,856)

(21,377)

(30,210)

(70)

(30,280)

Balance at 30 September 2012

105,863

2,368

77,114

132,454

13,151

8,497

(1,631,161)

1,684,463

410,268

803,017

1,748

804,765

The notes on pages 14 to 31 are an integral part of this condensed consolidated financial information.


New World Resources Plc
Operating and Financial Review
for the nine-month period ended 30 September 2013
(‘9M 2013’)

 

1.    Corporate Information

New World Resources Plc (‘NWR’ or the ‘Company’) is a public limited liability company with its registered office at One Silk Street, London EC2Y 8HQ, United Kingdom. The Company is the sole producer of hard coal in the Czech Republic and one of the leading hard coal and coke producers in Central Europe. NWR produces coking and thermal coal through its subsidiary OKD, a.s. (‘OKD’) and coke (classified as discontinued operations) through its subsidiary OKK Koksovny, a.s. (‘OKK’). NWR and its subsidiaries are collectively referred to as the ‘Group’.

  1. Financial Results Overview

Based on the decision of the Board of Directors of the Company (the ‘Board’) to sell the Coke segment, with effect from July 2013 the Group’s Coke segment has been classified as held for sale in the statement of financial position and its results have been presented as a discontinued operation for all periods presented.

Continuing Operations

Revenues. The Group’s revenues decreased by 31% (30% on a constant currency basis), from EUR 916 million in 9M 2012 to EUR 634 million in 9M 2013. This is mainly attributable to lower realised prices for coking coal as well as thermal coal and lower sales volumes of coking coal.

Cost of sales. Cost of sales increased from EUR 652 million to EUR 664 million or by 2% (4% on a constant currency basis) in 9M 2013 compared to 9M 2012. This is mainly attributable to the EUR 107 million difference in change in inventories driven by the Group selling higher volumes of low quality thermal coal in 9M 2013 compared to 9M 2012 when the Group was producing on stock. The inventory impact outweighs a cumulative EUR 95 million decline in other cost categories, namely as a result of decrease in:

  • production and development works, resulting in lower consumption of mining material and spare parts as well as in lower provision for mining damages;
  • number of shifts and contractors employed, resulting in lower service expenses; and
  • the number of employees, resulting in lower personnel expenses.

Selling expenses. Selling expenses decreased from EUR 95 million to EUR 75 million or by 21% in 9M 2013 attributable to:

  • lower sales volumes and a change in the geographic composition of sales resulting in a decrease in transport costs; partly offset by
  • the allowances for inventory on stock of EUR 8 million due to present lower market prices for coal.

Administrative expenses. Administrative expenses decreased from EUR 74 million to EUR 61 million or by 17% in 9M 2013 principally as a result of lower charitable donations made in 9M 2013 and lower personnel expenses by 17%.

EBITDA. 9M 2013 saw a negative EBITDA from continuing operations of EUR 50 million, a decrease of EUR 270 million from EUR 220 million achieved in 9M 2012, attributable mainly to the decrease in revenues. EBITDA was already influenced by temporary measures the Group put in place in order to mitigate the adverse market conditions. A positive impact of EUR 5 million relates to various costs savings, partly offset by losses realised on thermal coal inventory sales and severance payments (reflected within administrative expenses).

Impairment loss on property, plant and equipment. Current market environment and low prices of both coking coal and thermal coal resulted in the Company undertaking an impairment review of its cash generating units and subsequently recognised an impairment charge of EUR 310 million on the Group’s non-current assets to reflect its recoverable value. The impairment review was carried out per 30 June 2013.

Underlying loss. The reported loss from continuing operations for the period is EUR 448 million. Excluding the impact of impairment charges, the underlying loss for the period from continuing operations would have been EUR 195 million.

Discontinued operations

The loss of discontinued operations for the period of EUR 80 million consists of profit from discontinued operations of EUR 6 million (operating activities) and loss of EUR 86 million recognised on the re-measurement to fair value less cost to sell.

3.    Basis of Presentation

The condensed consolidated interim financial statements (the ‘financial statements’) presented in this document are prepared:

  • for the nine-month period ended 30 September 2013, with the nine-month period ended 30 September 2012 as the comparative period;
  • based on the recognition and measurement criteria of International Financial Reporting Standards as adopted by European Union (‘adopted IFRS’) and on the going concern basis that the Directors consider appropriate (see on the next page); and
  • in accordance with IAS 34 Interim Financial Reporting.

They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2012, which are contained within the 2012 Annual Report and Accounts of the Company, available on the Group’s website at www.newworldresources.eu.

Going concern basis of accounting

The Group manages its liquidity through cash of EUR 157 million (31 December 2012: EUR 267 million), of which EUR 9 million is classified as assets held for sale within Coke segment.

At the present market prices for coal, the Group is currently cash flow negative and the current low coal price environment has placed significant pressure on the Group’s liquidity position.

The Group has instituted a number of measures to improve its liquidity position, through a combination of:

  • seeking to increase or maintain the amount of funds available to the Group from external sources (principally our EUR 100 million Revolving Credit Facility (‘RCF’) and EUR 71 million Export Credit Agency facility (‘ECA’));
  • operational measures (in May 2013, we announced a programme of EUR 100 million of cost savings and cash enhancement measures to be delivered in 2013);
  • the sale of OKK (on 27 September 2013 we announced the proposed sale of OKK to the METALIMEX Group for EUR 95 million). The sale is subject to shareholder approval and, as the Directors have secured irrevocable undertakings from shareholders with more than 50% of the available votes to vote in favour of the disposal, is expected to complete in December 2013 resulting in a cash inflow of EUR 86 million (net of costs) at that time and EUR 7 million three months later; and
  • the closure of the Paskov mine (in September 2013, we announced the closure of the Paskov mine which will initially absorb cash and place greater pressure on the Group’s liquidity position, though it will eventually eliminate a drain on the retained Group's cash resources).

The Group intends to increase its liquidity through the renegotiation of its bank facilities, the EUR 100 million RCF and EUR 71 million ECA facility, and is in advanced negotiations with the ECA facility lenders and intends to seek to refinance the currently fully undrawn RCF prior to its expiry on 7 February 2014 in order to assist the Group’s liquidity position.

 

On 9 October 2013 the Group reached an agreement with the RCF lenders allowing the Group to keep the facility in place until it expires in February 2014; however the terms of this agreement make a drawdown of the RCF very unlikely prior to its expiry. We intend to enter into negotiations shortly to refinance the facility so that it is available to us as soon as it is agreed and in any event before February 2014.

Furthermore, on 28 March 2013, the Group agreed with the ECA lenders a suspension of its financial covenants between 1 January 2013 and 30 September 2013 (Q1 to Q3 2013) and for revised financial covenants to apply between 1 October 2013 and 31 December 2013 (Q4 2013). The Directors anticipate that NWR NV will not be able to meet the revised financial covenant requirements of the ECA facility at the end of Q4 2013 and absent reaching agreement with the ECA lenders this would require the Group to prepay the outstanding balance during Q1 2014. Accordingly the Group is currently in advanced negotiation with the ECA lenders with a view to extending the availability of the facility for at least a year from that date.

While we are confident that the Group’s lenders will be supportive and that we will be able to achieve both the refinancing of the RCF and the renegotiation of the ECA facility in the near term, there can be no guarantee that it will be possible to either agree a further suspension of covenant testing or to agree replacement facilities. In that event the ECA facility would have to be repaid and the RCF would not be available to the Group.

Even taking account of the repayment of the ECA, the Directors anticipate that the above initiatives and the proceeds from the disposal of the Coke segment will provide the Group with sufficient liquidity for the foreseeable future (that is at least until the end of October 2014).

However, further deterioration in coal prices, the inability to fully action our initiatives (in particular the proposed 10% reduction in employee costs for underground workers which is subject to an employee vote in the near future and threatened industrial action), any significant operational issues affecting revenue generation, the failure to receive and retain the proceeds from the disposal of OKK or a combination thereof would result in a reduction of funds which would require the Directors to take further cash preserving actions or to seek additional sources of funding. The Directors recognise that a combination of these circumstances represents a material uncertainty that may cast significant doubt as to the Group’s ability to continue as a going concern and that therefore the Group may be unable to realise all its assets and discharge all of its liabilities in the normal course of business.

Nevertheless, based on this analysis, the Directors are of the opinion that the Group has adequate financial resources to continue operating for the foreseeable future (that is at least until the end of October 2014) and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements.

  1. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are stated at fair value. 

The financial statements have been prepared on the basis of accounting policies and methods of compilation consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2012, with the exception described below.  

Change in classification and presentation

With effect from 1 January 2013, the Group has changed the basis on which it presents expenses in the income statement. While previously classified by their nature, expenses are now classified by their function (also known as a ‘Cost of Sales’ format). This change has been made to align better with current best reporting practice in the mining industry.

The reclassifications have no impact on the consolidated operating income or net profit. The main categories are as follows:

Cost of sales - comprise all operating costs incurred in production including depreciation and amortisation, or compensation of, and provisions for mining damages.

Selling expenses – comprise all operating costs involved in selling or distribution of products and include mainly transport costs incurred to deliver the Group’s products to customers.

Administrative expenses – comprise all other operating costs associated with general operation of the Group, which cannot be allocated to either cost of sales or selling expenses, and include mainly personnel costs, and advisory costs.

New standards and interpretations

The Group adopted the following amendments to standards and new interpretations, which are effective for its accounting period starting 1 January 2013:

  • Amendment to IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive Income (effective 1 July 2012)
  • Amendment to IAS 19 Employee Benefits (effective 1 January 2013)
  • Amendment to IFRS 7 Financial Instrument: Disclosures - Offsetting Financial Assets and Financial Liabilities (effective 1 January 2013)
  • IFRS 13 Fair Value Measurement (effective 1 January 2013)
  • IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013)

The amendments to IAS 1 and IFRS 13 impact the Group’s financial position and performance as follows:

  • Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants as the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures. 

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively.  Notwithstanding the above, the change has no significant impact on the measurement of the Group’s assets and liabilities.

  • Presentation of items of other comprehensive income

As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has been re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated financial statements, the significant judgements made by the management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements of the Company as at and for the year ended 31 December 2012.

 

  1. Non-IFRS Measures

The Company defines EBITDA as net profit before non-controlling interests, income tax, net financial costs, depreciation and amortisation, impairment of property, plant and equipment (‘PPE’) and gains/losses from the sale of PPE. While the amounts included in EBITDA are derived from the Group's financial information, it is not a financial measure determined in accordance with adopted IFRS. Accordingly, EBITDA should not be considered as an alternative to net income or operating income as a sole indication of the Group's performance or as an alternative to cash flows as a measure of the Group's liquidity. The Company currently uses EBITDA in its business operations to, among others, evaluate the performance of its operations, develop budgets, and measure its performance against those budgets. The Company considers EBITDA a useful tool to assist in evaluating performance because it excludes interest, taxes and the most significant non-cash charges.

The financial information shows the results from Coking operations as discontinued operations. To present comparable figures with previously published financial information, the Company presents Total EBITDA, which is defined as the total of EBITDA from continuing operations and EBITDA from discontinued operations. Discontinued operations are presented in note 12 of this document.

The Company defines net debt as total debt less cash and cash equivalents. Total debt includes issued bonds, long-term and short-term interest‑bearing loans and borrowings. Total debt is defined as gross amount of debt less related expenses. Interest‑bearing loans, bond issues, and borrowings are measured at amortised cost.

  1. Exchange Rates

(EUR/CZK)

9M 2013

9M 2012

y/y %

Average exchange rate

25.752

25.143

2%

End of period exchange rate

25.730

25.141

2%

Throughout this document, the financial results and performance in both the current and comparative periods are expressed in Euros. The financial information could differ considerably if the financial information was presented in CZK. The Company may where deemed relevant, present variances using constant foreign exchange rates (constant currency basis), marked ‘ex-FX’, excluding the estimated effect of currency translation differences. These are non-IFRS financial measures.

  1. Financial Performance of Continuing Operations

The Coke segment is classified as discontinued operations and is presented separately from continuing operations in section 12. Discontinued Operations of this document. The comparative period of 9M 2012 has been restated accordingly.

Revenues

The Group's largest source of revenue is the sale of coking coal, which accounted for 53% of total revenues in 9M 2013, and the sale of thermal coal (33%).

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

External coking coal sales (EXW)*

336,237

561,462

(225,225)

(40%)

(39%)

External thermal coal sales (EXW)*

210,776

245,490

(34,714)

(14%)

(13%)

Coal transport

57,496

79,584

(22,088)

(28%)

(27%)

Sale of coal by-products

13,844

17,606

(3,762)

(21%)

(20%)

Other revenues

15,958

11,860

4,098

35%

38%

Total revenues

634,311

916,002

(281,691)

(31%)

(30%)

*For the purpose of this analysis, where the Group sells products on an EXW or similar basis, the notional transport element is shown separately in order to separate the impact of changing transport revenues from changes in the underlying achieved price for the products sold.

Total revenues decreased by 31% mainly as a result of lower realised prices and lower sales volumes of coking coal (see table below), in line with lower prices and demand for steel making materials globally, as well as in our region. In addition, revenues decreased due to lower realised prices for thermal coal. Lower sales volumes also resulted in a decrease of transport revenues, with a similar decrease in transport costs, for no material impact on profitability. The increase in other revenues is attributable to impact of derivatives used to hedge the currency risk relating to sales denominated in currencies other than CZK in the comparative period.

Average realised sales prices

(EUR per tonne)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

Coking coal (EXW)

98

133

(35)

(26%)

(25%)

Thermal coal (EXW)

56

73

(17)

(23%)

(22%)

All of the Group’s coking coal sales are priced quarterly and the majority of thermal coal sales are priced on a calendar year basis.

Total production of coal in 9M 2013 decreased by 25% compared to production volume in 9M 2012. Coal volumes sold were lower by 6% as a result of lower coking coal sales, partially offset by increased sales of middlings and lower grades of thermal coal from inventories in 9M 2013.

Coal inventories decreased by 723kt in 9M 2013 compared to an increase by 1,005kt in 9M 2012.

Coal performance indicators (kt)

9M 2013

9M 2012 (restated)

y-y

y/y %

Coal production

6,452

8,608

(2,156)

(25%)

External coal sales

7,185

7,604

(419)

(6%)

Coking coal

3,423

4,231

(808)

(19%)

   - of which sales to discontinued Coke segment

389

395

(6)

(2%)

Thermal coal

3,762

3,373

389

12%

Period end inventory*

564

1,314

(750)

(57%)

* Inventory consists of coal available for immediate sale and coal that has to be converted from raw coal. Opening and closing inventory balances do not always reconcile due to various factors such as production losses.

Cost of Sales

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

Consumption of material and energy

195,421

227,405

(31,984)

(14%)

(12%)

  of which : mining material and spare parts

114,254

142,857

(28,603)

(20%)

(18%)

              : energy consumption

73,585

77,123

(3,538)

(5%)

(2%)

Service expenses

115,823

140,404

(24,581)

(18%)

(16%)

  of which : contractors

57,217

72,173

(14,956)

(21%)

(19%)

              : maintenance

24,681

28,572

(3,891)

(14%)

(12%)

Personnel expenses

195,851

216,513

(20,662)

(10%)

(7%)

Depreciation and amortisation

110,703

119,756

(9,053)

(8%)

(5%)

Net gain from material sold

(3,554)

(6,269)

2,715

(43%)

(42%)

Change in inventories of finished goods and work in progress

41,361

(66,043)

107,404

-

-

Other operating expenses/(income)

8,504

20,076

(11,572)

(58%)

(57%)

  of which : compensation of, and provision for mining damages

5,390

13,945

(8,555)

(61%)

(60%)

Total cost of sales

664,109

651,842

12,267

2%

4%

Excluding the change in inventories impact

622,748

717,885

(95,137)

(13%)

(11%)

A 2% increase in total cost of sales is mainly attributable to the EUR 107 million difference in change in inventories driven by the Group selling higher volumes of low quality thermal coal in 9M 2013 compared to 9M 2012 when the Group was producing on stock. This inventory impact outweighs a cumulative EUR 95 million decline in other cost categories, namely as a result of:

  • a decrease in production and development works influencing consumption of mining material and spare parts, as well as provision for mining damages;
  • a 14% decrease in the number of shifts and a 5% decrease in unit costs per shift ex-FX resulting in decrease of contractors’ cost (contractors headcount decreased by 14%);and
  • a 4% decrease in the number of employees resulting in lower personnel expenses.

Selling Expenses

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

Transport costs

55,488

81,882

(26,394)

(32%)

(31%)

Personnel expenses

2,381

2,430

(49)

(2%)

0%

Allowance for inventories on stock

8,181

-

8,181

-

-

Other expenses

8,577

10,442

(1,865)

(18%)

(16%)

Total selling expenses

74,627

94,754

(20,127)

(21%)

(20%)

Lower sales volumes together with a change in the geographic composition of sales resulted in a reduction in transport costs by 32%, with similar decrease in transport revenues, for no material impact on profitability. Current lower sales prices have resulted in allowances for inventory on stock of EUR 8 million.

Administrative Expenses

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

Personnel expenses

37,265

44,891

(7,626)

(17%)

(15%)

Service expenses

14,010

15,480

(1,470)

(9%)

(8%)

Other expenses

10,199

14,036

(3,837)

(27%)

(26%)

Total administrative expenses

61,474

74,407

(12,933)

(17%)

(16%)

Decrease in administrative expenses by 16% on a constant currency basis is principally attributable to lower personnel costs (15% on constant currency basis) and lower charitable donations paid in 9M 2013.

Total Personnel Expenses and Headcount

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

Personnel expenses

244,657

258,836

(14,179)

(5%)

(3%)

Employee benefit provision

(8,802)

382

(9,184)

-

-

Share-based payments

147

5,118

(4,971)

(97%)

(97%)

Total personnel expenses

236,002

264,336

(28,334)

(11%)

(9%)

 

9M 2013

9M 2012

y-y

y/y %

Employees headcount (average)

12,760

13,357

(597)

(4%)

 

   - of which Coal segment

12,733

13,330

(597)

(4%)

 

Contractors headcount (average)

3,195

3,697

(502)

(14%)

 

Total headcount (average)

15,955

17,054

(1,099)

(6%)

EBITDA

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

ex-FX

EBITDA from continuing operations

(49,868)

219,508

(269,376)

-

-

EBITDA from discontinued operations

11,457

7,298

4,159

57%

34%

Total EBITDA

(38,411)

226,806

(265,217)

-

-

The Group’s EBITDA from continuing operations decreased by EUR 269 million compared to 9M 2012 mainly as a result of lower revenues from all the Group’s products.

As EBITDA is a non-IFRS measure, the following table provides a reconciliation of EBITDA from continuing operations and net (loss)/profit after tax.

(EUR thousand)

9M 2013

9M 2012 (restated)

Net (loss) / profit after tax from continuing operations

(448,217)

46,145

Income tax

(92,129)

19,206

Net financial expenses

57,679

29,304

Depreciation and amortisation

115,707

124,902

Impairment loss on property, plant and equipment

309,713

-

Loss / (gain) from sale of PPE

7,379

(49)

EBITDA from continuing operations

(49,868)

219,508

 

Impairment Loss

Due to reduced price expectations for the Group’s products, the Group assessed the recoverable amount (per 30 June 2013) of both its continuing and discontinuing cash generating units (‘CGU’s).  As a result, an impairment loss of EUR 310 million (nine months ended 30 September 2012: nil) has been recognised. The impairment loss related entirely to the coal segment. This includes EUR 142 million in respect of the Paskov mine (see note 14) and EUR 9 million in relation to the Debiensko project with the balance relating to the coal business generally.

The recoverable amount of the CGUs was based on value in use. Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. Value in use as at 30 June 2013 was based on the following key assumptions;

  • cash flows were forecast based on past experience, actual operating results and the five year business plan. Cash flows for further years for the Coke segment and to the end of the life of mines for the Coal segment were extrapolated using a zero growth rate (reflecting the production capacity) and declining growth rate (reflecting slightly decreasing production towards the end of the life of the mines), respectively. In both cases it does not exceed the long-term average growth rate for the industry; 
  • revenue was forecast based on pre-agreed prices for the remainder of the current period.  The anticipated annual revenue movement included in the cash flow projects ranged from (3%) to 10 % for the years 2014 to 2017 and are based on the average of a range of publically available data;
  • a post-tax discount rate of 11.4% (2012: 10.6%) was applied in determining the recoverable amount of the group of CGUs.  The discount rate was estimated based on an industry average weighted-average cost of capital.

The impairment charges are particularly sensitive to the discount rate applied and the forecast sales prices of the Group’s products. Holding all other parameters constant a 1.25% increase in the discount rate would give rise to an additional impairment loss of EUR 105 million; a 2.50% increase in the discount rate would give rise to an additional impairment loss of EUR 204 million; and a 5% reduction in sales prices would give rise to an additional impairment loss of EUR 152 million.

Financial Income and Expense

(EUR thousand)

9M 2013

9M 2012 (restated)

y-y

y/y %

Financial income

(12,711)

(33,265)

20,554

(62%)

 

Financial expense

70,390

62,569

7,821

12%

 

Net financial expense

57,679

29,304

28,375

97%

The increase in net financial expense of EUR 28 million in 9M 2013 compared to 9M 2012 is mainly attributable to the loss on revaluation and settlement of derivatives for which hedge accounting is not applied compared to the gain realised in the comparative period (EUR 13 million) and to the loss recorded due to the repayment of the Senior Notes due 2015 (EUR 8 million), consisting of the write off of unamortised transaction costs (EUR 4 million) and the cost of early redemption (EUR 4 million).

Loss from Continuing Operations before Tax

The loss before tax in 9M 2013 was EUR 540 million, a decrease of EUR 605 million compared to a profit of EUR 65 million in 9M 2012.

Income Tax

The Group recorded a net income tax benefit of EUR 92 million in 9M 2013, compared to a net income tax expense of EUR 19 million in 9M 2012, as a result of the recognition of a deferred tax asset arising from tax losses incurred.

Loss from Continuing Operations

The Group recognised a loss from continuing operations of EUR 448 million in the 9M 2013, which represents a decrease of EUR 494 million compared to the profit of EUR 46 million in 9M 2012 and was materially influenced by the impairment loss on coal assets in the amount of EUR 253 million (after tax).

 

  1. (Loss) / Earnings per Share

(EUR)

9M 2013

9M 2012 (restated)

 

Continuing

operations

Discontinued

operations

Total

Continuing

operations

Discontinued

operations

Total

A share – basic (loss) / earnings

(1.68)

(0.30)

(1.98)

0.17

0.00

0.17

A share – diluted (loss) / earnings

(1.67)

(0.30)

(1.97)

0.16

0.00

0.16

B share – basic earnings

(166.60)

-

(166.60)

267.60

-

267.60

B share – diluted earnings

(166.60)

-

(166.60)

267.60

-

267.60

The calculation of earnings per share was based on profit attributable to the shareholders of the Company and a weighted average number of shares outstanding during the nine-month period ended 30 September:

(EUR thousand)

9M 2013

9M 2012 (restated)

 

Continuing

operations

Discontinued

operations

Total

Continuing

operations

Discontinued

operations

Total

(Loss) / profit for the period

(448,217)

(79,729)

(527,946)

46,036

1,223

47,259

(Loss) / profit attributable to A shares

(443,602)

(80,585)

(524,187)

43,725

858

44,583

Profit attributable to B shares

(1,666)

-

(1,666)

2,676

-

2,676

Eliminations between Mining and Real Estate divisions

(2,949)

856

(2,093)

(365)

365

-

9M 2013

9M 2012

Weighted average number of A shares (basic)

264,648,002

264,401,448

Weighted average number of A shares (diluted)

265,435,994

265,942,676

Weighted average number of B shares (basic)

10,000

10,000

Weighted average number of B shares (diluted)

10,000

10,000

(EUR thousand)

9M 2013

9M 2012

Net cash flows from operating activities

(14,164)

106,231

Net cash flows from investing activities

(95,780)

(161,871)

Net cash flows from financing activities

1,235

(41,618)

Net effect of currency translation

(1,146)

3,914

Total decrease in cash

(109,855)

(93,344)

Cash Flow from Operating Activities

The Group’s primary source of cash is its operating activities. Cash generated from operating activities, after working capital changes and before interest and tax payments in 9M 2013 was positive EUR 25 million, which was EUR 155 million lower than in 9M 2012. This follows lower EBITDA during the reporting period offset by positive effect of inventories sale of EUR 16 million and working capital optimisation of EUR 43 million.

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 102 million in 9M 2013, a decrease of EUR 63 million when compared to the same period of 2012. The capital expenditures consist principally of expenditure in the Coal segment, including the development of new mining areas.

Cash Flow from Financing Activities

Cash flow from financing activities was influenced by issuance of new EUR 275 million Senior Notes due 2021 (the ‘2021 Notes’) that were used to repay in full the outstanding amount of EUR 258 million under the Senior Notes due 2015 (the ‘2015 Notes’). Additional transaction costs of EUR 9 million were incurred in connection with the refinancing. The comparative period was influenced by dividend payment of EUR 34 million to A shareholders.   

10.  Borrowings, Liquidity and Capital Resources

The liquidity requirements of the Group arise primarily from working capital requirements, the need to fund capital expenditures and, on a selective basis, possible future acquisitions. The principal uses of cash are anticipated to fund planned operating expenditures, capital expenditures, scheduled principal and interest payments on Senior Notes and other borrowings, and other distributions. The Group continuously reviews its cash flow and operations in order to safeguard the business as a going concern.

Senior Notes Issuance

On 23 January 2013, New World Resources N.V. (‘NWR NV’) issued a EUR 275 million Senior Notes due 2021 with a 7.875% coupon. The net proceeds were used to repay in full the outstanding amounts of the 7.375% Senior Notes due 2015, which were repaid on 22 February 2013 in the total amount of EUR 267 million, including accrued interest and call premium.

Financial covenants

The Group agreed with its lenders to suspend and re-set certain financial covenants under the RCF and ECA loan agreements as follows:

  • for ECA (agreed on 28 March 2013), covenant testing is suspended for the period from 1 January 2013 until 30 September 2013. For the period from 1 October 2013 until 31 December 2013, the maximum gearing ratio has been increased from 3.25x to 5x and the minimum fixed cover ratio has been reduced from 3.50x to 2x;
  • in addition to the above suspension and re-set, the agreement with lenders includes a requirement of a minimum cash balance of EUR 110 million be maintained throughout the relevant period as well as limitations on dividends and limitations on incurring further senior debt;
  • we anticipate that we will not be able to meet the revised financial covenant requirements of the ECA facility for 1 October 2013 until 31 December 2013 when they are tested, and, accordingly, we have entered into discussions with our ECA facility lenders to obtain an extension of the existing financial covenant holiday;
  • for the RCF (agreed on 4 April and further on 9 October 2013), covenant testing is suspended for the remainder of the facility term, which expires on 7 February 2014. Further conditions that NWR NV needs to comply with during the remaining term of the RCF include: any borrowing of the RCF will be conditional upon consent of the requisite RCF lenders and upon the maximum gearing ratio being not in excess of 5x;
  • in addition to the above suspension and re-set, the agreement with lenders includes limitations on dividends and limitations on incurring further senior debt. There is no minimum cash balance requirement.

Indebtedness and liquidity

As at 30 September 2013, the Group held cash and cash equivalents of EUR 157 million, of which EUR 9 million is classified as assets held for sale within Coke segment, and had indebtedness of EUR 830 million, of which EUR 14 million is contractually repayable in the next 12 months. This results in a net debt position for the Group of EUR 672 million, 40% higher when compared to EUR 481 million as at 30 September 2012.

As a reaction to the continuation of difficult trading conditions and price pressures in 2013, immediate temporary measures are being put in place to safeguard the Group’s liquidity for the foreseeable future. These are described in more detail in section 3 under the Going concern basis of accounting. Based on this, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

11.  Segments and Divisions

NWR’s business is organised into three segments, Coal, Coke (discontinued operations), and Real Estate Division (‘RED’) segment, for which financial and other performance measures are separately available and regularly evaluated by the Chief Operating Decision Maker (‘CODM’). The CODM is the Company’s Board of Directors. These operational segments were identified based on the nature, performance and financial effects of key business activities of the Group.

The Group is further organised into two divisions: the Mining Division (‘MD’) and the Real Estate Division. The Company had A Shares and B Shares outstanding for the presented periods. The A Shares and B Shares are tracking stocks, which are designed to reflect the financial performance and economic value of the MD and RED, respectively. Due to the public listing of the Company’s A shares, the Group provides divisional reporting showing separately the performance of the MD and RED. The main rights, obligations and relations between the RED and MD are described in the Divisional Policy Statement, available at the Company’s website www.newworldresources.eu.

The divisional reporting, as such, is essential for the evaluation of the equity attributable for the listed part of the Group. As the operating segments form part of the divisions, and in order to provide understandable and transparent information, the Company decided to combine the segment and divisional disclosure into one table, with the Coal and Coke segments within the Mining division and the RED segment within Real Estate division. The Company’s headquarters is included in the Other information under the Mining division. The accounting principles of this segmental and divisional disclosure are further described in NWR’s 2012 Annual Report and Accounts.

 


Business Segments

1 January 2013 - 30 September 2013

Mining division

Real Estate division

Eliminations & adjustments2

Group continuing operations total

(EUR thousand)

 

Coal segment

 

Coke segment

 

Other

 

Eliminations & adjustments1

Mining division  - total

RED segment

 

Continuing operations

 

Discontinued operations

 

Continuing operations

 

Continuing operations

Continuing operations

 

 

 

 

Segment revenues

 

 

 

 

Sales to third parties

 

592,924

 

128,923

 

209

 

(128,923)

593,133

-

-

 

593,133

Sales to continuing segments

 

226

 

27

 

885

 

(1,138)

-

718

(718)

 

-

Sales to discontinued segments

 

41,178

 

-

 

-

 

-

41,178

-

-

 

41,178

 

 

 

 

 

 

 

 

 

 

 

Total revenues

634,328

 

128,950

 

1,094

 

(130,061)

 

634,311

 

718

 

(718)

 

634,311

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

(664,484)

 

(102,389)

 

(27)

 

102,310

(664,590)

4

477

 

(664,109)

 

 

 

 

 

 

 

 

 

 

 

Gross (loss) / profit

(30,156)

 

26,561

 

1,067

 

(27,751)

 

(30,279)

 

722

 

(241)

 

(29,798)

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

(74,626)

 

(16,469)

 

(1)

 

16,469

(74,627)

-

-

 

(74,627)

Administrative expenses

 

(53,220)

 

(2,682)

 

(9,257)

 

3,685

(61,474)

-

-

 

(61,474)

Impairment loss on property, plant and equipment

 

(309,713)

 

-

 

-

 

-

(309,713)

-

-

 

(309,713)

(Loss) / gain from sale of property, plant and equipment

 

(134)

 

11

 

-

 

(11)

(134)

(4,854)

(2,391)

 

(7,379)

Other operating income

 

2,535

 

282

 

-

 

(280)

2,537

226

(226)

 

2,537

Other operating expenses

 

(2,213)

 

(40)

 

-

 

40

(2,213)

(77)

77

 

(2,213)

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING (LOSS) / INCOME

(467,527)

 

7,663

 

(8,191)

 

(7,848)

 

(475,903)

 

(3,983)

 

(2,781)

 

(482,667)

 

 

 

 

 

 

 

 

 

 

EBITDA

(41,537)

 

11,296

 

(8,146)

 

(11,481)

 

(49,868)

 

881

 

(881)

 

(49,868)

 

 

 

 

 

 

 

 

 

 

Financial income

 

 

 

 

 

 

 

 

12,551

3,097

(2,937)

 

12,711

Financial expenses

 

 

 

 

 

 

 

 

(72,923)

(41)

2,574

 

(70,390)

Loss before tax

 

 

 

 

 

 

 

 

 

(536,275)

 

(927)

 

(3,144)

 

(540,346)

Income tax benefit / (expense)

 

 

 

 

 

 

 

 

92,673

(739)

195

 

92,129

LOSS FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

 

(443,602)

 

(1,666)

 

(2,949)

 

(448,217)

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

SHAREHOLDERS OF THE COMPANY

 

 

 

 

 

 

 

 

 

(443,602)

 

(1,666)

 

(2,949)

 

(448,217)

1 Elimination of discontinued operations and intercompany transactions within the Mining division (e.g. service fees)

2 Elimination of transactions between the divisions (e.g. lease charges, service fees, annual fees for providing real estates, unrealised profit)

Business Segments

1 January 2013 - 30 September 2013

Mining division

Real Estate division

Eliminations & adjustments2

Group operations total

(EUR thousand)

 

Coal segment

 

Coke segment

 

Other

 

Eliminations & adjustments1

Mining division  - total

RED segment

 

Continuing operations

 

Discontinued operations

 

Continuing operations

 

Continuing operations

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

Assets and liabilities as at 30 September 2013

 

 

 

 

 

 

 

 

 

 

Total segment assets 3

 

1,354,548

 

112,608

 

792,681

 

(763,196)

1,496,641

37,400

(22,189)

 

1,511,852

Total segment liabilities3

 

1,022,978

 

157,551

 

900,797

 

(763,196)

1,318,130

14,268

(20,106)

 

1,312,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other segment information:

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

96,267

 

5,979

 

122

 

-

102,368

-

-

 

102,368

Depreciation and amortisation

 

116,143

 

3,643

 

46

 

(3,643)

116,189

-

(482)

 

115,707

Interest income

 

674

 

-

 

28,922

 

(28,398)

1,198

1

-

 

1,199

Interest income - divisional CAP

 

-

 

-

 

-

 

-

-

2,832

(2,832)

 

-

Interest expense

 

28,222

 

-

 

45,010

 

(28,398)

44,834

-

-

 

44,834

Interest expense - divisional CAP

 

2,832

 

-

 

-

 

-

2,832

-

(2,832)

-

1 Elimination of discontinued operations and intercompany balances within the Mining division.

2 Elimination of transactions between the divisions (e.g. lease charges, service fees, annual fees for providing real estates).

3 The assets and liabilities associated with discontinued operations are presented gross of intra-group balances.

Business Segments

1 January 2012 - 30 September 2012 (restated)

Mining division

Real Estate division

Eliminations & adjustments2

Group operations total

(EUR thousand)

 

Coal segment

 

Coke segment

 

Other

 

Eliminations & adjustments1

Mining division  - total

RED segment

 

Continuing operations

 

Discontinued operations

 

Continuing operations

 

Continuing operations

Continuing operations

 

 

 

 

Segment revenues

 

 

 

 

Sales to third parties

 

858,749

 

153,919

 

196

 

(153,919)

858,945

-

-

 

858,945

Sales to continuing segments

 

1

 

67

 

954

 

(1,022)

-

578

(578)

 

-

Sales to discontinued segments

 

57,057

 

-

 

-

 

-

57,057

-

-

 

57,057

 

 

 

 

 

 

 

 

 

 

 

Total revenues

915,807

 

153,986

 

1,150

 

(154,941)

 

916,002

 

578

 

(578)

 

916,002

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

(652,015)

 

(130,579)

 

(117)

 

130,533

(652,178)

6

330

 

(651,842)

 

 

 

 

 

 

 

 

 

 

 

Gross profit / (loss)

263,792

 

23,407

 

1,033

 

(24,408)

 

263,824

 

584

 

(248)

 

264,160