NWR Extends Weekly Decline After Erste Downgrade: Prague Mover

New World Resources Plc extended its drop this week after Erste Group Bank AG lowered the shares of the unprofitable Czech coking-coal company to reduce, citing declining prices for the commodity.

NWR tumbled 5.5 percent to 18.8 koruna in Prague, the steepest retreat in the benchmark PX index on a percentage basis. The stock is down 14 percent this week, bringing its loss in 2013 to 81 percent. Erste cut the shares from hold, according to an e-mailed note dated today.

Basic resources companies are the biggest decliners among 19 industry groups in the Stoxx Europe 600 Index this year as Europe’s recession and an economic slowdown in China curb demand for steel and fuels. NWR is preparing asset sales to shore up finances after a drop in coking-coal prices triggered an 80.3 million-euro ($105 million) loss in the first quarter.

“We believe that NWR has the means to survive the downturn, but that coking-coal prices would have to rise more than 20 percent above third-quarter levels to reach positive free cash flow in 2014,” Petr Bartek, a Prague-based analyst at Erste, wrote in the report to clients. “We are afraid that weak growth in China will not allow such a scenario.”

Bartek lowered his 12-month price estimate for NWR shares to 18 koruna from 94 koruna.

The Amsterdam-registered company said yesterday it agreed to deliver coking coal to its customers at an average price of 92 euros a metric ton in the third quarter, down 8 percent from the previous three months.

Benchmark contracts for the commodity delivered to China have tumbled 19 percent this year to $129.5 a ton, data compiled by Bloomberg show.

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