Czech coal miner NWR said on Wednesday that it has agreed Q1 contracts with an 18 percent rise in coking coal prices and 29 percent rise in coke prices. The price of coking coal will rise to 103 euros under the new contracts. Coking coal makes up 60 per cent of NWR’s output.
The miner is targeting steady coal production in 2010 after hitting 11 million tonnes last year, having earlier estimated production at 10.5 million tonnes for the year. A recovery in the central European steel industry has led to an increase in demand for NWR’s coking coal products.
Showing posts with label Czech Republic. Show all posts
Showing posts with label Czech Republic. Show all posts
Wednesday, February 3, 2010
Wednesday, August 19, 2009
Losses Up At New World Resources
Mining group New World Resources swung to a bigger than expected loss
in the second quarter of 2009 and halted its first-half dividend
payment to keep cash as it pulls out of the worst of the
economic crisis. NWR, owner of the Czech Republic's largest hard coal mines,
showed a 39.3 million euro loss in April to June due to falling
sales and production after making a 71.3 million euros net
profit in the same period last year. Analysts had on average expected a loss of 18.3 million
euros. Shares in NWR fell more than 6 percent at the open and were
trading down 4.5 percent at 138.8 crowns by 0723 GMT. "Overall the numbers came out at the bottom range of the
consensus," said Bram Buring, an analyst with Wood & Co. "The
negative surprise is stemming primarily from depressed coke
prices in Q2." Revenue at the Prague, London and Warsaw-listed firm fell to
243.9 million euros from 463.1 million a year ago, missing a
forecast of 268 million. The results included discontinued operations, the company
said. "Market conditions were difficult for NWR throughout the
first half of this year. The steep decline in central European
steel production led to a contraction in demand for our coking
coal and coke," Mike Salamon, NWR's chairman, said. Coal production in the first half of the year fell 17
percent and coke production slumped 40 percent year-on-year. The economic downturn in central Europe has battered NWR's
steel customers, although Salamon said there were signs steel
production levels are rising. "Our inventories peaked in April and are coming down since
then. We expect a better second half than the first half," he
said, adding the group may be able to surpass its 10.5 million
tonnes coal production target for 2009, which it had cut in May. The mining group also said it had suspended dividend
payments to keep balance sheet flexibility. It had 392 million
euros in unrestricted cash in the first half.
Source: Reuters
in the second quarter of 2009 and halted its first-half dividend
payment to keep cash as it pulls out of the worst of the
economic crisis. NWR, owner of the Czech Republic's largest hard coal mines,
showed a 39.3 million euro loss in April to June due to falling
sales and production after making a 71.3 million euros net
profit in the same period last year. Analysts had on average expected a loss of 18.3 million
euros. Shares in NWR fell more than 6 percent at the open and were
trading down 4.5 percent at 138.8 crowns by 0723 GMT. "Overall the numbers came out at the bottom range of the
consensus," said Bram Buring, an analyst with Wood & Co. "The
negative surprise is stemming primarily from depressed coke
prices in Q2." Revenue at the Prague, London and Warsaw-listed firm fell to
243.9 million euros from 463.1 million a year ago, missing a
forecast of 268 million. The results included discontinued operations, the company
said. "Market conditions were difficult for NWR throughout the
first half of this year. The steep decline in central European
steel production led to a contraction in demand for our coking
coal and coke," Mike Salamon, NWR's chairman, said. Coal production in the first half of the year fell 17
percent and coke production slumped 40 percent year-on-year. The economic downturn in central Europe has battered NWR's
steel customers, although Salamon said there were signs steel
production levels are rising. "Our inventories peaked in April and are coming down since
then. We expect a better second half than the first half," he
said, adding the group may be able to surpass its 10.5 million
tonnes coal production target for 2009, which it had cut in May. The mining group also said it had suspended dividend
payments to keep balance sheet flexibility. It had 392 million
euros in unrestricted cash in the first half.
Source: Reuters
Monday, March 16, 2009
New World Resources To Put Ferrexpo Deal To Vote
New World Resources plans to call an extraordinary general meeting toward the end of April to present shareholders with a proposal to buy a 25% stake in Ukrainian iron ore producer Ferrexpo. With Ukraine's economy in a tailspin and global demand for iron ore depressed, the transaction is proving a hard sell. But NWR management insists it's good deal that makes strategic sense.
Like most things today, the proposed deal came about as a direct result of the financial crisis. As the world's stock markets went into freefall in September, the majority owner of Ferrexpo, Kostyantin Zhevago, suddenly found himself unable to meet margin calls on loans for which he had used his 75% stake in Ferrexpo as collateral. Zhevago was until a few months ago Ukraine's youngest billionaire, ranked 327 in Forbes 2008 rich list with a net worth of $3.4bn; in Forbes' 2009 list published on March 12, his name didn't appear at all.
The bank that had made the loans to Zhevago, JP Morgan Chase, asked another of its clients, NWR, whether it would be interested in buying the stake in Ferrexpo that was on offer. Given the rush that Zhevago needed the cash, the publicly listed NWR couldn't get the deal approved in time, so it turned to its parent RPG Industries, the private equity firm headed by Czech tycoon Zdenek Bakala which owns 64% of NWR, to help. RPG secured a 25%-plus-one-share stake in Ferrexpo at a total cost of £126.6m (€163.2m), or 86 pence per share.
Shareholders of NWR will now be asked to approve the purchase of the 147m Ferrexpo shares for the same amount from RPG. Because this is a related-party transaction, RPG won't be able to vote, so it will be left to NWR's institutional and retail investors to decide on, who make up about 36% of the shareholder base. Hence the current roadshow in Europe and the US by CFO Marek Jelinek and his team to convince investors about the wisdom of the deal ahead of the vote, which they insist will go ahead regardless of the reception they get over the next few weeks.
The trouble is that shareholders are in an ugly mood. The Dutch-based NWR, a holding company of several mines and coking facilities including the Czech Republic's giant coalmining firm OKD, went public only last May, pricing its shares at CZK425.83. The shares soared as high as CZK620 before falling back to earth as oil and commodity prices fell. By March, the shares were still plumbing new depths, down by about 85%. As such, shareholders will need a lot of convincing.
At the heart of management's pitch to the shareholders is that NWR is getting at a good price a piece of a global player, which will help it to expand its own activities in Ukraine.
With about 20bn tonnes of iron ore, Ferrexpo has the fourth-largest reserves and resources of the metal in the world after market leaders CVRD of Brazil, Rio Tinto and BHP Billiton. Other large mining firms have both coking coal and iron ore assets, so NWR believes it can benefit from selling its coking coal along with Ferrexpo's iron ore to global steelmakers, as there's a significant amount of customer overlap between the two.
Ferrexpo had been targeting a nearly four-fold increase in its production of approximately 9m tonnes per year by 2018 before the crisis struck and kyboshed those plans. "This target is not some sort of dream - the company has been around for about 30 years and have been there in production terms before things contracted after the fall of the Soviet Union, so you can see the potential there," says Jelinek. "On a global scale it's a very meaningful player, a huge asset, and we are trying to get exposure to that by buying a 25% stake."
The acquisition will also bring with it a natural Ukrainian partner for NWR. The Czech financier Bakala's whole rationale for establishing NWR in 2005 with the Czech coalmines at its heart was the idea that Central and Eastern Europe's coal industry - particularly in Poland, Ukraine and Russia - is ripe for consolidation and a well-managed outfit like NWR could take the lead on this. "We want to establish ourselves in Ukraine; to do that we need a strong local partner and feel that Ferrexpo is exactly that type of partner," says Jelinek.
Josef Nemy, an analyst with Komerční banka, agrees that this is an advantage of the deal. "A benefit from this deal in the future could be that it is opening doors in Ukraine to other acquisitions - of some coal mines perhaps. This might be easier if NWR would already be present on the market," he says.
Having a local partner is no doubt a good strategy when searching for acquisitions, yet some question why it's necessary to become financially entangled with them. "I see very little synergies between the two companies. I understand that Ferrexpo could be a local partner for NWR to explore opportunities in the coal mining business, but I don't think it's necessary to have an ownership stake in your partner," says Dan Karpisek of UniCredit Group.
Worse for those investors wary of getting too involved in a country that's teetering on the verge of bankruptcy is NWR's stated desire to deepen this relationship. "We are in the first step trying to acquire this 25% stake, but for us this is not the ultimate goal. We think there is a strategic logic for some sort of combination of the companies. We don’t have a detailed plan on how to get from 25% to some other combination, but we won't sit on 25% forever," says Jelinek.
Jelink stresses that while there may be legitimate investor concerns about Ukraine itself, the Swiss-based and London-listed Ferrexpo isn't even a Ukrainian company. In fact, while most of its assets may be in Ukraine, only 15% of its revenues are derived from there, the rest being in Asia and emerging Europe. "Ferrexpo is a completely transparent company, it has the right standards and systems of corporate governance. We have done our due diligence on this and we are satisfied," says Jelinek.
The cost of the acquisition looks cheap or expensive depending on where you stand. When RPG snapped up the stake in October, it did so at about a 30% discount to Ferrexpo's market value at the time. "The expected multiples show the offered price is relatively cheap at 3.7 times 2009 net profit," says Nemy.
The problem is that since then, Ferrexpo's shares have continued to fall along with the rest of the Ukrainian market and are now 40% below the acquisition price. "I doubt that minority shareholders would be happy to pay for Ferrexpo at a significant premium to current market price," says Semyon Mironov, an analyst at Credit Suisse.
Funding the deal shouldn't be a problem given NWR has some €700m sitting on its balance sheet. But some question whether this money might be better horded and spent elsewhere. "Although it is a good long-term investment, I think it would be better to keep cash for investments into its own mines or for the acquisition of troubled competitors," argues Petr Bartek, an analyst with Erste Group's Ceska Sporitelna. "If the situation does not improve in 2010, NWR could need the money spent on Ferrexpo."
In fact, this issue of the short term/long term is key to whether shareholders will approve or nix the deal. Many like Marek Hatlapatka, head of research at Cyrrus, regards the Ferrexpo acquisition as a very interesting opportunity in the long run, but that must be set against the drawbacks in the short term, such as the current price of Ferrexpo shares, arguably lower dividends to pay for it, and with difficult times ahead, a bad environment in which to make acquisitions. The trouble is that shareholders are in an even more short-term mood than they normally are; thinking long term is a luxury few can afford right now. "I feel some uncertainty about the result of shareholder vote. Shareholders may prefer the short-term view," says Hatlapatka.
Jelinek himself acknowledges this when he says that the one question he is always asked by shareholders is, "why now? Why not wait for six months to a year?"
Aside from anything else, Jelinek says RPG simply won’t wait for an indefinite period of time while NWR shareholders make up their minds. "I don’t have any insight into the financials of RPG, but it's very easy to figure out that they have already lost a significant amount of money because of the sterling/euro performance. Every shareholder that asks that question about sitting on the asset has already benefited from RPG's generosity - they've been financing the deal since October 2008, it's now March so we are talking seven, eight months of a free ride."
Source: Business New Europe
Like most things today, the proposed deal came about as a direct result of the financial crisis. As the world's stock markets went into freefall in September, the majority owner of Ferrexpo, Kostyantin Zhevago, suddenly found himself unable to meet margin calls on loans for which he had used his 75% stake in Ferrexpo as collateral. Zhevago was until a few months ago Ukraine's youngest billionaire, ranked 327 in Forbes 2008 rich list with a net worth of $3.4bn; in Forbes' 2009 list published on March 12, his name didn't appear at all.
The bank that had made the loans to Zhevago, JP Morgan Chase, asked another of its clients, NWR, whether it would be interested in buying the stake in Ferrexpo that was on offer. Given the rush that Zhevago needed the cash, the publicly listed NWR couldn't get the deal approved in time, so it turned to its parent RPG Industries, the private equity firm headed by Czech tycoon Zdenek Bakala which owns 64% of NWR, to help. RPG secured a 25%-plus-one-share stake in Ferrexpo at a total cost of £126.6m (€163.2m), or 86 pence per share.
Shareholders of NWR will now be asked to approve the purchase of the 147m Ferrexpo shares for the same amount from RPG. Because this is a related-party transaction, RPG won't be able to vote, so it will be left to NWR's institutional and retail investors to decide on, who make up about 36% of the shareholder base. Hence the current roadshow in Europe and the US by CFO Marek Jelinek and his team to convince investors about the wisdom of the deal ahead of the vote, which they insist will go ahead regardless of the reception they get over the next few weeks.
The trouble is that shareholders are in an ugly mood. The Dutch-based NWR, a holding company of several mines and coking facilities including the Czech Republic's giant coalmining firm OKD, went public only last May, pricing its shares at CZK425.83. The shares soared as high as CZK620 before falling back to earth as oil and commodity prices fell. By March, the shares were still plumbing new depths, down by about 85%. As such, shareholders will need a lot of convincing.
At the heart of management's pitch to the shareholders is that NWR is getting at a good price a piece of a global player, which will help it to expand its own activities in Ukraine.
With about 20bn tonnes of iron ore, Ferrexpo has the fourth-largest reserves and resources of the metal in the world after market leaders CVRD of Brazil, Rio Tinto and BHP Billiton. Other large mining firms have both coking coal and iron ore assets, so NWR believes it can benefit from selling its coking coal along with Ferrexpo's iron ore to global steelmakers, as there's a significant amount of customer overlap between the two.
Ferrexpo had been targeting a nearly four-fold increase in its production of approximately 9m tonnes per year by 2018 before the crisis struck and kyboshed those plans. "This target is not some sort of dream - the company has been around for about 30 years and have been there in production terms before things contracted after the fall of the Soviet Union, so you can see the potential there," says Jelinek. "On a global scale it's a very meaningful player, a huge asset, and we are trying to get exposure to that by buying a 25% stake."
The acquisition will also bring with it a natural Ukrainian partner for NWR. The Czech financier Bakala's whole rationale for establishing NWR in 2005 with the Czech coalmines at its heart was the idea that Central and Eastern Europe's coal industry - particularly in Poland, Ukraine and Russia - is ripe for consolidation and a well-managed outfit like NWR could take the lead on this. "We want to establish ourselves in Ukraine; to do that we need a strong local partner and feel that Ferrexpo is exactly that type of partner," says Jelinek.
Josef Nemy, an analyst with Komerční banka, agrees that this is an advantage of the deal. "A benefit from this deal in the future could be that it is opening doors in Ukraine to other acquisitions - of some coal mines perhaps. This might be easier if NWR would already be present on the market," he says.
Having a local partner is no doubt a good strategy when searching for acquisitions, yet some question why it's necessary to become financially entangled with them. "I see very little synergies between the two companies. I understand that Ferrexpo could be a local partner for NWR to explore opportunities in the coal mining business, but I don't think it's necessary to have an ownership stake in your partner," says Dan Karpisek of UniCredit Group.
Worse for those investors wary of getting too involved in a country that's teetering on the verge of bankruptcy is NWR's stated desire to deepen this relationship. "We are in the first step trying to acquire this 25% stake, but for us this is not the ultimate goal. We think there is a strategic logic for some sort of combination of the companies. We don’t have a detailed plan on how to get from 25% to some other combination, but we won't sit on 25% forever," says Jelinek.
Jelink stresses that while there may be legitimate investor concerns about Ukraine itself, the Swiss-based and London-listed Ferrexpo isn't even a Ukrainian company. In fact, while most of its assets may be in Ukraine, only 15% of its revenues are derived from there, the rest being in Asia and emerging Europe. "Ferrexpo is a completely transparent company, it has the right standards and systems of corporate governance. We have done our due diligence on this and we are satisfied," says Jelinek.
The cost of the acquisition looks cheap or expensive depending on where you stand. When RPG snapped up the stake in October, it did so at about a 30% discount to Ferrexpo's market value at the time. "The expected multiples show the offered price is relatively cheap at 3.7 times 2009 net profit," says Nemy.
The problem is that since then, Ferrexpo's shares have continued to fall along with the rest of the Ukrainian market and are now 40% below the acquisition price. "I doubt that minority shareholders would be happy to pay for Ferrexpo at a significant premium to current market price," says Semyon Mironov, an analyst at Credit Suisse.
Funding the deal shouldn't be a problem given NWR has some €700m sitting on its balance sheet. But some question whether this money might be better horded and spent elsewhere. "Although it is a good long-term investment, I think it would be better to keep cash for investments into its own mines or for the acquisition of troubled competitors," argues Petr Bartek, an analyst with Erste Group's Ceska Sporitelna. "If the situation does not improve in 2010, NWR could need the money spent on Ferrexpo."
In fact, this issue of the short term/long term is key to whether shareholders will approve or nix the deal. Many like Marek Hatlapatka, head of research at Cyrrus, regards the Ferrexpo acquisition as a very interesting opportunity in the long run, but that must be set against the drawbacks in the short term, such as the current price of Ferrexpo shares, arguably lower dividends to pay for it, and with difficult times ahead, a bad environment in which to make acquisitions. The trouble is that shareholders are in an even more short-term mood than they normally are; thinking long term is a luxury few can afford right now. "I feel some uncertainty about the result of shareholder vote. Shareholders may prefer the short-term view," says Hatlapatka.
Jelinek himself acknowledges this when he says that the one question he is always asked by shareholders is, "why now? Why not wait for six months to a year?"
Aside from anything else, Jelinek says RPG simply won’t wait for an indefinite period of time while NWR shareholders make up their minds. "I don’t have any insight into the financials of RPG, but it's very easy to figure out that they have already lost a significant amount of money because of the sterling/euro performance. Every shareholder that asks that question about sitting on the asset has already benefited from RPG's generosity - they've been financing the deal since October 2008, it's now March so we are talking seven, eight months of a free ride."
Source: Business New Europe
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