New World Resources Plc shares fell the most in 17 months after the largest Czech producer of coking coal posted a bigger loss than analysts expected.
The stock slid 6.7 percent today in Prague after Amsterdam-registered NWR said the net loss for October to December was 48.6 million euros ($64 million). That compares with an 8.8 million-euro profit a year earlier and the median estimate of nine analysts in a Bloomberg survey for a 35 million-euro loss.
Europe’s debt crisis and the economic slowdown in Asia damped demand from steelmakers last year, reducing the price of coking coal by 30 percent, NWR said today in the earnings statement. The company took a negative 15 million-euro inventory revaluation as a “temporary regional oversupply” increased its stock of thermal coal and curbed prices for 2013.
“The reported numbers are far below street consensus,” Bohumil Trampota, an analyst at Prague-based J&T Banka AS, wrote in an e-mail to clients today. J&T has a buy recommendation for NWR with a 110 koruna price estimate. “We see the substantial coking-coal prices decline as the reason behind lower numbers.”
The shares were the worst performer in the Czech Republic’s 13-member PX index, ending the day at 81.30 koruna. In London, NWR dropped 7.9 percent to 272.6 pence by 4:07 p.m. local time.
Fourth-quarter revenue fell 27 percent to 286.6 million euros and the miner posted an operating loss of 40.8 million euros, after a 40.7 million-euro profit a year earlier.
Coal output will decline to 10 million tons to 11 million tons this year from 11.2 million tons last year, with external sales “equally split” between thermal coal, used for heating, and the more profitable coking coal, NWR said today. Capital expenditure this year will drop to 120 million euros to 130 million euros as NWR will limit investment at Debiensko in southern Poland to 10 million euros, according to the statement.
“The targets for 2013 combined with compressed coal prices suggest a large loss for the whole years 2013,” Josef Nemy, an analyst at Komercni Banka AS in Prague, wrote in a report. He rates NWR a hold with a price projection of 86 koruna. “In the coming months the stock will struggle to find growth impulses.”
The price of coking coal will “undoubtedly” rise in the second half of this year from an average of 103 euros a metric ton the company agreed with customers for the first quarter, Gareth Penny, chairman at NWR, said in a phone interview today. The European economy is showing signs of recovery while production of coking coal worldwide has declined, he said.
“We think we’ve been through the bottom, we’re up about 3 percent from that point, and we would see a gradual rise, certainly in the second half of the year,” Penny said. “It’s just a fundamental supply-demand equation. A lot of the majors have closed mines or reduced production.”
NWR today announced plans to double coking-coal sales to 10 million tons a year by 2017 by boosting output, including at its Karvina mine, and engaging in the import of the commodity to Europe. This would help the company to become “Europe’s leading miner and marketer of coking coal,” according to the statement.
The company is considering potential acquisitions as part of its expansion plans, Chief Financial Officer Marek Jelinek said during a conference call for journalists today. “We’re really serious about it and we definitely plan to start to realize this strategy this year.”
NWR’s “new long-term strategy to introduce blending and marketing activities has a certain degree of logic, in our view, although the economics remains to be proved,” JPMorgan Chase & Co. analysts led by London-based Roger Bell wrote in a report to clients. They kept their underweight stance on the stock, citing “limited medium-term growth, a tepid near-term coal price outlook and unattractive valuation,” according to the note.