New World Resources Plc (NWR) slumped to the lowest level on record after Bank of America Merrill Lynch yesterday predicted the biggest Czech coking-coal producer’s stock will extend declines.
The shares fell 11 percent to 21.95 koruna by 12:39 p.m. in Prague, with volume at almost three times the three-month daily average. NWR tumbled 25 percent the past two days, bringing a year-to-date drop to 78 percent. The stock will be excluded from the FTSE 250 Index and FTSE 350 Index as of June 24 and moved to the FTSE Small Cap Index, the benchmark provider said June 12.
Basic resources companies led declines in European shares today after the U.S. Federal Reserve signaled readiness to curb economic stimulus measures. BofA-Merrill cut its price projection for NWR’s London-traded shares by 51 percent to 19 pence (5.7 koruna), citing lower estimates for coking coal and economic growth in China and Europe. Based on yesterday’s closing price of 80 pence, the bank forecasts a 76 percent drop.
“The NWR sell-off is a result of several factors, of which the most important is the reduced outlook for coking-coal prices by Bank of America and their very low target price for the Czech company’s shares,” Marek Hatlapatka, an analyst at Cyrrus AS brokerage in Brno, Czech Republic, wrote in e-mailed comments.
The Amsterdam-registered company re-domiciled in the U.K. in 2011 to attract investors who track the FTSE indexes.
NWR said last month it had a first-quarter net loss of 80.3 million euros ($106 million) as steelmaker demand for the commodity tumbled amid a recession in the Czech Republic and the euro area. The company has said it will curb investment, sell some assets and may shut down unprofitable mines.
Asian buyers will probably pay $155 a metric ton for hard coking coal in the third quarter, the lowest price since 2009, according to the median of nine analyst estimates compiled by Bloomberg. A survey in May estimated the contracts would be settled at $165 a ton.
Evraz Plc (EVR) will suspend steel production at its Czech unit for all of July and a part of August because of low demand, Aktualne.cz reported yesterday, citing trade union official Roman Durca.
“The Evraz situation is not exactly helping, although I don’t think it comes as a surprise to the market,” Cyrrus’s Hatlapatka said.
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