Bloomberg News

NWR Sees Volatile Coal Market, Posts 30% Drop in Net Income

November 16, 2011

(Updates with company comment in second paragraph, analyst in sixth.)

Nov. 16 (Bloomberg) -- New World Resources Plc, the biggest Czech producer of coking coal, expects prices and volumes to fluctuate as Europe’s debt crisis and slowing economic growth erode demand for the steelmaking material.

“Given the ongoing sovereign debt crises and uncertain macroeconomic environment, we remain cautious on the short-term outlook,” NWR said today in a statement. “Although we have a good visibility for the remainder of the year, we believe there is a risk of near-term volatility in both prices and volumes.”

Coal producers are among commodity companies adjusting to a decline in customer demand as stagnating economies damp consumption of materials from metals to fuels. The Standard & Poor’s GSCI Spot Index of 24 raw materials has dropped 12 percent from this year’s April high amid slowing global growth.

“Our customers are exercising increased levels of prudence,” Amsterdam-registered NWR said in the statement. Uncertainty has increased as “markets impatiently await resolution of the various European sovereign-debt crises.”

NWR today reported a 30 percent slump in third-quarter net income to 34 million euros ($46 million) and a 26 percent decline in nine-month profit. Year-earlier results had been boosted by a one-time gain from the disposal of a subsidiary and a stronger Czech koruna. Nine-month operating profit rose 30 percent, while sales gained 10 percent, the company said.

Net Misses

“The net results were below our expectations but operating results surpassed the market consensus,” said Josef Nemy, an analyst at Komercni Banka AS, the Prague-based unit of Societe Generale SA.

NWR still expects to meet full-year targets to produce 11 million metric tons of coal and sell 10.3 million tons, the company said in the statement. The production mix is 44 percent coking coal, 52 percent thermal coal and 4 percent PCI, or pulverized, coal.

While the outlook for coking-coal prices is “difficult to predict,” there’s still potential to negotiate higher prices for thermal coal, used in power stations, Chief Financial Officer Marek Jelinek said today by telephone.

NWR rose 1.1 percent to 457.9 pence as of 10:13 a.m. in London trading, after earlier falling as much as 3.4 percent. In Prague, the shares advanced 0.7 percent to 137.69 koruna.

NWR’s board this year approved development of the Debiensko mine in Poland, with deposits of 190 million tons of hard coking coal. The company will “break ground” at the mine next month and start extracting coal in 2017, Jelinek said. NWR expects Debiensko to yield 2.5 million tons a year from 2018, he said.

Profitability at the mine will surpass NWR’s operations in the Czech Republic because the cost of extraction will be about 70 euros a ton, less than the current 81 euros a ton, he said.

--Editors: Amanda Jordan, Tony Barrett

To contact the reporter on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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