NWR - Unaudited H1 2014 Results
H1 2014 Financial summary
- Revenues from continuing operations of EUR 346 million, down 20%.
- Coking coal average realised price of EUR 87/t, down 15%; Thermal coal average realised price of EUR 58/t, up 4%.
- Cash mining unit costs of EUR 64/t, down 24% (19% on a constant currency basis) on 5% higher production.
- Selling and administrative expenses from continuing operations down 27% to EUR 71 million.
- EBITDA from continuing operations of EUR 19 million.
- Basic loss from continuing operations per A share of EUR (0.22).
- Net debt of EUR 688 million, including cash of EUR 122 million.
- Capital restructuring process continues with completion expected in October 2014.
- As at 30 June 2014, EUR 10 million of an anticipated EUR 30 million of associated costs have been incurred in relation to the process.
H1 2014 Operational summary
Safety is our number one priority and the drive for a fatality-free operation continues. Regrettably, four miners lost their lives this year. Safety metrics LTIFR of 7.16 in H1 2014, vs. 7.41 in FY 2013.
- Coal production of 4.5Mt, up 5% and coal sales of 4.0Mt, down 17%.
- Coal sales mix of 63% coking coal and 37% thermal coal.
- CAPEX of EUR 24 million, down 71%.
- Coal Inventory of 858kt, up 14% year on year.
- Total headcount from continuing operations including contractors down 10%.
FY 2014 Prices and targets
- Coking coal Q3 2014 average price agreed at EUR 85/t, up 1% on previous quarter.
- An average price of EUR 54/t has been agreed for thermal coal production in 2014.
- Production and sales volume targets of 9.0 - 9.5Mt.
- Target of 55% - 60% coking coal in the sales mix.
- CAPEX below EUR 100 million.
- Further improvement in LTIFR towards the 2015 target of below 5.
- Cash mining unit costs in the mid EUR 60's including the Paskov Mine.
Review of the Group's capital structure
- The Board initiated a review of the Group's capital structure on 22 January 2014.
- The Group has engaged in discussions with all its stakeholders with a view to developing and implementing a capital structure that recognises and respects their interests.
- On 2 June 2014, the Group announced that NWR NV had agreed the key terms of the restructuring of the capital structure with the Ad hoc Committee of noteholders and with the NWR Plc's majority shareholder, CERCL Mining B.V. (formerly known as BXR Mining B.V.).
- On 2 July 2014, the Group announced that NWR NV had agreed revised terms to the proposed capital restructuring announced on 2 June 2014. The revised terms entail an amended consensual restructuring transaction and (in case this transaction can not be implemented) an alternative restructuring transaction.
- Under the consensual restructuring transaction, EUR 185 million of additional capital is to be raised pursuant to a EUR 118 million rights issue to existing shareholders of NWR Plc, a EUR 32 million placing to existing noteholders and a EUR 35 million super senior credit facility to be provided by existing noteholders. CERCL Mining B.V. has irrevocably committed to invest new equity capital into the consensual restructuring transaction. The funds necessary to facilitate the transaction are fully committed by a group of certain existing noteholders and the majority shareholder.
- On 29 July 2014, following an order of the High Court of Justice of England and Wales, NWR NV has convened two creditor meetings on 29 August 2014. At their respective meetings each class of noteholders will consider and, if thought fit, approve the consensual restructuring transaction or in the case of the senior secured noteholders consider and, if thought fit, approve the alternative restructuring transaction, if the senior unsecured noteholders vote down the consensual restructuring transaction.
- On 30 July 2014, NWR announced that it had published the prospectus relating to, among other things, the proposed rights issue and placing in connection with the consensual restructuring transaction.
- On 20 August 2014, the Extraordinary General meeting of Shareholders of the NWR Plc have approved resolutions which are required to be passed in order to implement various aspects of the consensual restructuring transaction, including the rights issue.
- The capital restructuring process is on track to complete In October 2014.
Although we recorded a loss of almost EUR 57 million for the six months to the end of June 2014 (equivalent to a basic loss of EUR 0.22 per share), this is a big improvement on the result for the equivalent period in 2013 when we posted a basic loss from continuing operations of EUR 1.52 per share and an underlying loss of EUR 0.56 per share. The first six months of 2014 witnessed a positive EBITDA from continuing operations of EUR 19 million, an increase of EUR 68 million compared to the equivalent period last year when an EBITDA loss from continuing operations of EUR 49 million was incurred.
This is a testimony to our efforts to continue to drive down costs and streamline the business. Cash mining unit costs were down 24% at EUR 64 a tonne (down 19% on a constant currency basis), six months ahead of schedule of our objective of attaining a mid EUR 60s run rate (including Paskov) by the end of the year. We also continued to focus on optimising our capital expenditure which at EUR 24 million for the six months was down EUR 61 million compared to the same period in 2013; this puts us in very good stead to reach our target of less than EUR 100 million in maintenance CAPEX for the 12 months.
Furthermore, we maintain our coal production and sales targets of between 9 and 9.5 million tonnes for the full year, with 55 to 60 per cent in favour of coking coal.
Alongside measures to optimise the operational side of the business, we have been looking to restructure the balance sheet through a UK court-sanctioned settlement (the 'Scheme of Arrangement') whereby, under the proposed consensual restructuring transaction, the existing senior secured notes and senior unsecured notes of NWR NV will be released in exchange for cash and/or new debt instruments. In this context up to EUR 185 million of additional capital is to be raised pursuant to the rights issue to existing shareholders, the placing to existing noteholders and super senior credit facility to be provided by existing noteholders. I am pleased that the funds necessary to facilitate the transaction have been fully committed by a group of certain existing noteholders and our majority shareholder - this is a vote of confidence in the business and its management.
The restructuring process will strengthen our balance sheet as not only will there be a significant reduction in the levels of outstanding debt, and hence debt servicing costs, but will position NWR to benefit all stakeholders when there is an upturn in market conditions.
This consensual restructuring plan has so far progressed well with shareholder approval given on yesterday's EGM and lock-up agreements received, by value, from 85% of the senior secured noteholders and 65% from the unsecured noteholders. The threshold required for approval in value of each class of creditors is 75% of those present and voting. I am confident that we will gain the requisite majorities at the creditor meetings that are scheduled for 29 August 2014.
However, as announced on 2 July 2014, the Group has - as part of its contingency planning - agreed a proposed alternative restructuring plan with certain holders of the senior secured notes, in case the consensual restructuring plan is not capable of being implemented. This contingency planning is required to ensure the continuation of our operations in the Czech Republic and in Poland. This alternative restructuring transaction is delivered through an insolvency of NWR NV. Its stakeholders are being paid in accordance with their respective rankings and this could leave certain categories of stakeholders with minimal or no recoveries. In light of this consequence, both the Boards of NWR NV and the NWR Plc repeat their recommendation to support the consensual restructuring plan as it takes into account the interests of all stakeholders of the Group.
The past few years have undeniably been tough, not just for NWR but for the whole coal mining sector and related industries. However, I am confident that with the radical steps that we have taken, and are continuing to do so, NWR will emerge as a much stronger regional player and better positioned to capitalise on the opportunities that will be afforded when conditions recover.
RM-SYSTÉM, česká burza cenných papírů a.s.
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