NWR in 2011: great performance in a challenging environment
01/2012
- 4/3/2012
In February NWR published its preliminary results for the financial year 2011, which were broadly in line with market expectations. With revenues of EUR 1.6 billion and EBITDA of EUR 454 million, NWR delivered one of its best financial performances ever in a period characterised by severe challenges in the global economy.
We achieved solid operational performance with both coal production and coal sales targets being exceeded, mainly due to higher volumes of thermal coal. And due to further improvements in safety, NWR has accomplished its lowest ever injury frequency rate.
Capitalising on previous investments
Throughout 2011 we continued to benefit from our considerable investments in our underground mining equipment, thus enabling us to partially mitigate the negative effects of cash cost inflation, as well as the geological challenges of mining ever deeper underground. Mining at around 1,000 metres below the surface poses significant challenges in terms of both safety and production. Hence being able to exceed our overall production targets for the year and further reducing our Lost Time Injury Frequency Rate underlines the benefits of those investments as well as the commitment and discipline of our dedicated workforce.
Growth
The most significant milestone for NWR during 2011 was the decision to commit to our organic growth strategy by starting work on opening the Debiensko Mine. This is a 190 million tonnes hard coal deposit (mostly coking coal) in southern Poland over which we have a 50-year mining license. Our decision was based on a detailed feasibility study of the proposed mine together with our assessment of the long-term market. During 2011 we assembled an experienced international project team and, in December, we broke ground and commenced excavation of the first of the two planned slopes. The project is advancing and we will invest up to EUR 50 million in 2012 as we work towards bringing the mine into production in 2017. Looking further to new opportunities, we announced our intention to explore the hard coal resource at the Frenstat Mine in the Czech Republic.
Reincorporation
A key milestone for the Company was the reincorporation of NWR in the United Kingdom and our subsequent inclusion in the FTSE 250 and FTSE 350 Mining indices. We continue to believe in the long-term rationale of this decision; one that allows NWR to increase its visibility amongst the international investment community.
Long-term fundamentals of our business
We strongly believe that the fundamentals for coking coal remain attractive, globally and in our region. Despite the difficult macroeconomic environment in 2011, car production in the region, one of the key drivers of local steel production, grew rapidly: up 12% in the Czech Republic and 13% in Slovakia. This reinforces our belief in the long-term prospects of the steel sector in CEE.
Similarly, with on-going strong demand from Poland and renewed investments in coal-fired power plants in countries such as Germany, thermal coal seems positioned to play an ever-increasing role in the regional energy mix.
Dividend
Given our strong performance in 2011 and in line with NWR's stated dividend policy of distributing 50 per cent of annual net income over the course of the business cycle, the board has proposed a final dividend of EUR 0.07 per share. If approved by the Annual General Meeting in April, this will bring our total dividend for 2011 to EUR 0.23 per share.
Summary
The market reacted positively to our results. On the day of the announcement our stock outperformed the FTSE 350 Mining index on the London Stock Exchange. Our cash cost containment, in particular, was well received, with one of the analysts covering NWR noting: “NWR’s guidance of flat mining cash costs in 2012 looks a tough task… having said that, the fact that costs came in in-line with expectations in 2011 lends credibility to this target.” The market also likes the fact that our coking coal pricing is fully aligned with the global pricing cycle, and that our stock offers unique exposure to the appealing CEE growth story.
| 2011 Highlights |
2012 Outlook |
- Revenues of EUR 1.6 billion
- EBITDA of EUR 454 million
- Net profit of EUR 130 million
- Less than 8 lost-time injuries per million hours worked
- Coal production of 11.2Mt, and external sales of 10.6Mt
- Broke ground at Debiensko Mine in southern Poland
- Intention to explore the hard coal resource at Frenstat Mine in the Czech Republic
- Reincorporation in the United Kingdom and inclusion in FTSE index series
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- Q1 2012 coking coal and coke prices agreed at EUR 142/t and EUR 311/t, respectively
- Thermal coal average prices for 2012 agreed at EUR 74/t , up 11% compared to 2011
- Coal production and sales targets of 10.8–11Mt and 10.25–10.5Mt, respectively
- Expected external coal sales split of 48% coking coal and 52% thermal coal
- Coke production and coke sales targets of 700kt and 600kt respectively
- Mining unit costs expected to stay broadly flat, in CZK terms
- Expected CAPEX of EUR 250 million of which EUR 40-50 million for the Debiensko project
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Radek Nemecek,
Head of Investor Relations
rnemecek@nwrgroup.eu
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