On 24 February 2011, NWR announced a strong set of results for the financial year 2010 on the back of improved operational efficiencies as well as improved market conditions. Demand and prices improved throughout the year, picking up significantly at the end of last year.
A major achievement of the year was to deliver our production targets while at the same time keeping costs under control. Notably, POP 2010 – the huge investment to renew NWR’s mining equipment – delivered its first full year of improved efficiencies. We also completed COP 2010, our capital investment programme focussed on improving our coking operations. In line with our stated strategy at listing in 2008, we continued to streamline our business with the disposal in 2010 of our energy assets, the last of our non-core operations.
Going forward we remain committed to stringent cost control, which should help to mitigate against the cost implications of mining deeper as well as the inflationary pressures on our inputs, such as steel and energy.
Mike Salamon, Executive Chairman of NWR, commented: “After a tough 2009, demand for coal and coke in our markets rebounded strongly in 2010 and we successfully increased our volumes in response to this demand.”
Globally, coking coal is in short supply as China and other emerging economies continue to drive world demand. Our move to bring the pricing of most of our coking coal in line with the Japanese Fiscal Year has given us greater exposure to the positive changes in global prices. Currently there is a notable trend towards quarterly pricing internationally and it is likely that the majority of our customers will look to price their coking coal contracts with us on this basis going forward.
We delivered on our total coal production targets and made significant progress on improving efficiency and maximising returns from our existing assets. In 2010 we continued to reap the benefits of our POP 2010 capital investment programme improving our cost and safety position.
We have also made good progress during 2010 in developing our investment projects in Poland, particularly Debiensko, where a world-class project team and group of advisors are now in place and undertaking a detailed feasibility study.
We continue to see the logic and benefits of being a regional consolidator. This would increase our scale and resources and deliver many synergies. As the first privatised, restructured and modernised coal business in the region and the first to access multiple capital markets, we are in a strong position to bring these credentials, combining both operational and financial expertise, to bear on any opportunities identified.
Whilst the broader European economic outlook remains uncertain, we expect demand for coking coal in the CEE region to remain robust, driven by a continuing recovery in the automotive and construction sectors. Recovery in Central Europe’s industrial sectors will also underpin demand for thermal coal, where we have already seen prices rise.
Last but not least, our plan to reincorporate the business in the United Kingdom and secure FTSE UK index inclusion will also extend our access to international capital markets.
There is much work still to do, but we are well positioned to deliver on our potential and we begin 2011 as a stronger, more resilient business.”
Efficiency gains & investment programmes
The Productivity Optimisation Programme (“POP 2010”), which was completed at the end of 2009, continues to deliver on its objectives.
The new equipment shows improved performance compared to existing equipment and OKD is able to maintain coal production output with 17 operating longwalls as opposed to 20 in 2009 and 32 in 2008. The new equipment delivered an average daily production per longwall of approximately 2,800t, an improvement of 72% in comparison to the previous technology, with some longwalls delivering daily average production as high as 6,000t.
Combining the performance of the new and existing equipment, overall longwall productivity in OKD rose by approximately 15% in 2010 to 1,743t/LW a day compared to 2009.
NWR’s Coking Optimisation Programme 2010 (“COP 2010”), an investment programme designed to improve the efficiency and productivity of the Company’s coke operations was successfully concluded on target by the end of 2010 and the newly constructed coke battery No.10 at OKK’s Svoboda plant is now running at full capacity. Its maximum capacity, together with that of the renovated battery No. 8 and the other two operating batteries in Svoboda, will be 850kt in total from 2011 onwards. Following the conclusion of COP 2010, NWR expects lower unit conversion costs, with an optimised personnel structure, as well as increased flexibility to produce different coke qualities as appropriate.
Polish development projects: Debiensko
NWR continues to execute a detailed development schedule for its Debiensko project in Poland. The Detailed Feasibility Study (“DFS”) that will map out the project scope, execution plan, budget and schedule as well as a significant proportion of the engineering for the project commenced in September 010, and completion of the first stage is expected in March 2011. This comprises the surface infrastructure and processing plant, as well as the access and coal conveying declines. The engineering contracts for these elements of the DFS have, in large measure, already been awarded to both Polish and international firms. The Company continues to make progress on the land and infrastructure elements of the project, with acquisitions of land planned for the near future. NWR expects to invest approximately EUR 50 million of CAPEX in its Debiensko project in 2011.
Subject to internal approval and final licenses, NWR expects to break ground in Debiensko during the course of 2011.
Consistent with NWR’s dividend policy, the NWR has declared a final dividend of EUR 0.22 per share, which will be paid to shareholders in the form of an interim dividend on 15 April 2011. Together with the dividend of EUR 0.21 per share paid in October 2010, this takes the full year dividend to EUR 0.43 per share for the full year 2010.
Outlook for 2011
Expected production of 11Mt of coal and 800kt of coke. External sales to reach approximately 10.3Mt of coal and 720kt of coke. Thermal coal average price agreed at EUR 71 per tonne. Most coking coal volumes expected to be priced and sold on a quarterly basis.