May 16 (Bloomberg) -- New World Resources NV, the largest producer of coking coal for steelmakers in the Czech Republic, rose in London after a surprise first-quarter profit on currency gains and cost cuts.
Net income increased to 6.2 million euros ($7.9 million) from 3.4 million euros a year earlier, the Amsterdam-registered company said in a statement today. The median estimate in a Bloomberg survey of 10 analysts was for a 4.3 million-euro loss.
NWR boosted sales from its more profitable coking-coal operations to 56 percent and reiterated it expects them to make up 48 percent of production this year. The company also produces thermal coal for power stations.
“We do see continued strong demand for coking coal,” Chief Financial Officer Marek Jelinek said in an interview. “The automotive industry, which is very important for us, continues to grow rapidly in the region,” spurring steel use.
While prices of coking coal negotiated for the current quarter declined by 8 percent from the prior three months, Jelinek said global demand may push rates higher again.
NWR was 1.6 percent higher at 336.8 pence as of 1:49 p.m. in London after earlier rising by as much as 5.7 percent. Its Prague-traded shares fell 2.6 percent.
The company owns four mines and two coking facilities in the Czech Republic and sells to customers including the Czech unit of ArcelorMittal, the world’s largest steelmaker. NWR said it will cut investment in its Debiensko mine in Poland to 5 million euros from the previously planned 50 million euros and review the operation’s future after the discovery of high volumes of water.
“We have to make sure that Debiensko still represents an attractive investment opportunity,” Jelinek said. The review will result in work delays of several months at the mine.
“It looks like the Debiensko project is stopped for now,” Petr Bartek, an analyst at Erste Group Bank AG’s Czech unit, said in a note. “It is the only growth project.”
NWR is planning to unlock 30 million metric tons of coking coal reserves at its Karvina mine in the Czech Republic.
Currency gains, the main driver of profit growth, advanced 68 percent, and earnings before interest, tax, depreciation and amortization slid 34 percent to 54 million euros in the quarter.
While revenue declined by 10 percent to 347 million euros, the company confirmed its annual production and sales targets.
NWR expects to produce 10.8 million to 11 million tons of coal and 700,000 tons of coke this year. Sales may reach 10.5 million tons of coal and 600,000 tons of coke, it said.
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