July 24 (Bloomberg) -- New World Resources Plc declined to the lowest price ever after Moody’s Investors Service downgraded the unprofitable Czech miner on expectations its financial condition will worsen as coal prices struggle to recover.
The shares slumped 6.9 percent to 17.50 koruna in Prague, the lowest close since it started trading in May 2008 and the steepest drop in the PX index today. NWR slid 81 percent in six months, the most among 16 sector peers tracked by Bloomberg.
Moody’s cut the corporate family rating to Caa1, nine steps below investment grade, from B2, in a statement today. NWR is preparing asset sales to shore up finances after a decline in coking-coal prices triggered an 80.3 million-euro ($106 million) loss in the first quarter. The average price of the commodity agreed with customers for the third quarter declined 8 percent from the previous three months, NWR said on July 18.
“Today’s downgrade of NWR’s ratings follows further worsening in the coal price environment” and “our expectations that market conditions will remain challenging over the next 12 to 18 month,” Paolo Leschiutta, a Moody’s analyst in Milan, wrote in the statement. “Depressed market conditions will make it more challenging for the company to contain cash flow deterioration during the rest of 2013 and next year.”
The rating change affects about 775 million euros of NWR’s debt, Moody’s said. The miner’s debt will likely be more than 10 times its earnings before interest, taxes, depreciation and amortization by yearend, up from 6.2 times in March 2013 and 3.8 times at the end of 2012, according to the ratings company.
The number of shares traded today was more than 1.2 times the three-month daily average. The stock’s 14-day relative strength index dropped to 29, below the 30 level signalling in technical analysis the asset may be oversold and set for gains. The shares have been trading below their 50-day moving average since January.
Yields on NWR’s secured notes due in May 2018, which are callable in May 2014, jumped 34 basis points, or 0.34 percentage point, to 21.20 percent today. The rate reached an all-time high of 22.10 percent on July 18, up from 6.79 percent at the end of last year, according to data compiled by Bloomberg.
NWR said in May it was seeking a buyer for its OKK coking unit and that it may sell or close some mines as a recession in the Czech Republic and the euro area damped demand for coal from steelmakers. It may temporarily or permanently shut down its Paskov mine as its disposal is “unlikely at present,” the Amsterdam-registered company said on July 15.
While some of the business-revamp measures “might provide immediate benefit to the group’s cash generation, others might be more difficult to achieve,” Leschiutta said. “The rating agency will continue to closely monitor NWR’s ability to make progress in this respect.”
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