20th Aug 2015 08:11
LONDON (Alliance News) - New World Resources PLC shares dropped on Thursday after it said it swung to a pretax profit in the first half of 2015 even though revenue was hit by lower production, falling commodity prices and higher costs.
New World shares were down 6.6% to 0.490 pence per share on Thursday morning.
The coal miner reported a EUR12.4 million pretax profit in the first half of 2015, swinging from a EUR66.3 million loss a year earlier, despite revenue declining to EUR286.2 million from EUR346.3 million.
The profit was mainly the result of a EUR55.9 million gain in finance income, caused by the EUR49.0 million decrease in fair value of its convertible notes.
Profit also was helped by lower selling and administrative expenses after New World slashed its headcount by 4% and finance costs dropped to EUR23.8 million from EUR35.7 million. Additionally, a EUR10.0 million restructuring cost in 2014 was not repeated.
Earnings before interest, tax, depreciation and amortisation was EUR3.0 million, falling from EUR19.0 million.
Net debt at the end of June was less than half what it was a year earlier, totalling USD286.0 million compared to USD688.0 million at the end of June 2014. However, New World's cash balance also was lower at USD89.0 million compared to USD122.0 million a year earlier.
Capital expenditure, like many of its peers, was cut 11% year-on-year to EUR22.0 million in the first half. For the full year, this will total between EUR30.0 to EUR40.0 million, New World said.
Revenue was hit by the 20% fall in production and 17% fall in sales. Production in the half totalled 3.6 million tonnes of coal, compared to 5.0 million tonnes a year earlier, whilst coal sales came in at 3.3 million tonnes compared to 4.0 million tonnes.
Of its total sales, New World sold 2.1 million tonnes of coking coal, used in the production of steel, down from 2.5 million tonnes a year earlier, whilst it sold 1.3 million tonnes of thermal coal, used in power generation, compared to 1.5 million tonnes a year earlier.
That pushed its coal inventory up to 938,000 tonnes at the end of the half compared to the 858,000 tonnes it had at the end of June 2014.
For the full year, New World is targeting production between 7.5 million and 8.0 million tonnes of coal with sales of 8.0 million tonnes, meaning it will have to produce and sell more in the second half of the year than it did in the first to hit its targets.
In terms of pricing, the company reported mixed results. Average coking coal prices were up 7% year-on-year to USD93 per tonne from USD87 per tonne, but thermal coal prices dropped 10% to USD52 per tonne from USD58.
New World also reported higher cash costs in the period as a result of lower production volumes, which rose 11% year-on-year to EUR71 per tonne, squeezing its margin. For the full year this should average around EUR65 per tonne and by the middle of 2016, it should fall to around EUR60 per tonne, it said.
By Joshua Warner; [email protected]; @JoshAlliance
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