24th Feb 2016 08:46
LONDON (Alliance News) - New World Resources PLC shares dropped on Wednesday after it reported a huge loss in 2015 and reaffirmed the company is likely to struggle over the next few years as it continues progressing its strategic review and restructuring of the business.
New World shares were down 3.7% to 0.0650 pence per share on Wednesday morning.
New World had already warned back in December that it expected to incur losses between 2015 and 2018, as it continues to battle falling commodity prices. The company launched a strategic review, including a restructuring, late last year, the costs of which will contribute to those losses over the next several years.
For 2015, New World reported a pretax loss of EUR223.6 million, swinging from a EUR25.2 million profit in 2014 as revenue declined to EUR629.6 million from EUR676.6 million.
Although revenue fell in the year, mainly thanks to pressure on coal prices combined with a fall in production, New World's margin improved as its gross profit rose to EUR70.9 million from EUR59.9 million in 2014.
Operating costs, including impairments, were around EUR10.0 million higher in 2015 than in 2014.
The main cause for the substantial loss was a EUR342.3 million gain from a capital restructuring completed in the second half of 2014 not being repeated in the last financial year, but a EUR66.5 million gain from the change in fair value of its convertible loan notes in 2015 helped to partly offset that.
New World booked a loss before interest, tax, depreciation and amortisation of EUR4.0 million in 2015, swinging from a EUR11.0 million profit a year ago.
The company had already published its production results for the year, which revealed a 7% fall in coal production and a 4% fall in sales in 2015. Although production was down for the year, it was above the company's full-year guidance. Coking coal sales represented 54% of total sales in the year whilst thermal coal sales made up the balance.
Importantly, sales volume of thermal coal was up 4% year-on-year but prices were, on average, 7% lower in 2015 than in 2014, whilst coking coal sales fell 11% as the average price in the year rose 6% year-on-year.
As production outpaced sales, New World saw its coal inventory rise 11% during 2015, with 742,000 tonnes of coal currently stockpiled. New World has already stated it plans to increase coal sales by around 9% in 2016 to start to bring that inventory down.
New World slashed capital expenditure in 2015 by 42% to EUR34.0 million from EUR60.0 million in 2014, and the company reduced its headcount by 6%, with staff numbers currently totalling 13,816.
"Despite our cost saving efforts and our restructured balance sheet, it became increasingly clear as we entered the final quarter of 2015 and opened price negotiations with our customers for 2016 that the low price environment would continue, and quite possibly deteriorate still further, and that New World Resources could remain cash flow negative for several years to come," said Chairman Gareth Penny.
"In light of this and against this difficult backdrop, one of the key priorities for 2016 will be ensuring that the group has sufficient liquidity to finance operations on an ongoing basis," Penny added.
Despite cuts to its budgets, net debt still increased in the year, rising 6% to stand at EUR298.0 million at the end of 2015 as New World's cash balance fell 33% year-on-year to EUR86.0 million.
New World launched a strategic review of the entire business in November, and on Wednesday said discussions are ongoing about securing a "viable business with an appropriate capital structure" to make its operating subsidiary a sustainable business that can cope with lower coal prices.
Late last year, New World said it will close down two of its mines at a cost of around EUR100.0 million, initially closing the Paskov and Lazy mines in the Czech Republic by the end of 2017, leading to an "employee-restructuring", which will cost the company between EUR85.0 million and EUR100.0 million overall.
On Wednesday, Chairman Penny said: "Management's preliminary conclusion is that, absent a significant and near-term increase in coal prices, the group will need to reduce costs yet further across its entire portfolio and to secure substantial additional liquidity. Also, while a number of the group's mines clearly have potential, some do not. Therefore, as part of the strategic review process, the Group is evaluating its options for those low-potential mines."
By Joshua Warner; [email protected]; @JoshAlliance
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