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NWR Slumps 30% in Two Days After Price Cut at BofA: Prague Mover

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June 20 (Bloomberg) -- New World Resources Plc slumped 30 percent in two days to the lowest level on record after Bank of America Merrill Lynch predicted the biggest Czech coking-coal producer’s stock will extend declines.

The shares fell 17 percent today to 20.40 koruna at the close in Prague, with volume at almost four times the three-month daily average. The stock, which has tumbled 79 percent this year, will be excluded from the FTSE 250 Index and FTSE 350 Index as of June 24, the benchmark provider said on June 12.

Basic resources companies were among the biggest decliners in European shares today after the U.S. Federal Reserve signaled readiness to curb economic-stimulus measures. Bank of America yesterday cut its price projection for NWR’s London-traded stock 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. Its secondary listing in London fell 18 percent today to 65.60 pence by 3:33 p.m. local time.

Quarterly Loss

The yield on NWR bonds maturing in May 2018 and callable in May 2014 rose 87 basis points, or 0.87 percentage point, today to a record 16.87 percent. The rate surged 190 basis points yesterday, according to data compiled by Bloomberg.

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 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.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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