UPDATE 2-Czech coal miner NWR makes record loss in fourth quarter

Thu Feb 13, 2014 7:17am EST

* Q4 net loss 466.1 mln euros, revenue down as expected

* Cuts saleable coal reserves by 65 pct because of weak market

* Capital structure review still at early stage

* Shares touch record low

By Jason Hovet

PRAGUE, Feb 13 (Reuters) - Czech coal miner New World Resources (NWR) reported a record 466.1 million-euro ($633 million) net loss in the fourth quarter, due to a big impairment charge related to a sharp fall in coal prices.

The miner is in the middle of a restructuring to sort out its finances that are under strain from the low coal prices and weak demand. It ended 2013 with net debt of 625 million euros.

NWR's loss for continuing operations was 12 times more than the average estimate in a Reuters poll. The company also cut its saleable coal reserves by around 65 percent to 64 million tonnes.

Its shares fell 9 percent in Prague to a record low of 15.80 crowns.

NWR runs four hard coal mines in the northeast of the Czech Republic and has fallen into deep losses because of sinking coal prices and slack demand from steel sector customers such as ArcelorMittal and United States Steel Corp.

The company began a review of its balance sheet structure in January and appointed Blackstone as an adviser. The group met 2013 cost savings goals and sold its coking business for 95 million euros in December. It also plans to shutter one mine at the end of the year.

"We have done a lot to try to counter the negative impact of the declining market but all this combined saves about 200 million euros and that doesn't fully outweigh the pricing development," Chief Financial Officer Marek Jelinek said.

"The market is still not in a good place."

Jelinek said the capital review was still at an early stage. NWR has met with shareholders and bondholders, which hold two bonds due in 2018 and 2021 worth 775 million euros.

He declined to say what form any deal could take. Analysts have said a debt-to-equity swap may be necessary. Majority shareholder BXR, a private investment group, has already said it was ready to invest new equity into a revamped capital structure.

TURNING POINT

NWR is not alone in its struggles. Polish miners are also suffering from record low coal prices as economic slowdown has forced customers to cut production.

But for NWR, some signs of a steel market recovery are appearing. Earlier this month, ArcelorMittal, the world's largest steelmaker, said it expected the European market to improve after two years of decline.

NWR aims for production and sales of 9-9.5 million tonnes in 2014 after 8.8 million and 9.7 million tonnes, respectively, in 2013. NWR also wants to cut its mining costs, which were 68 euros per tonne in the fourth quarter.

"We know this market will turn at some point," Executive Chairman Gareth Penny said. "At the point that it does turn, if we can get our cost down to 60 euros a tonne, get our CAPEX below 100 million ... and have a revised capital structure, I think the business will be in reasonable shape."

NWR said last month first-quarter average coking coal prices fell 7 percent to 91 euros a tonne - and are down around a third in two years - and 2014 thermal coal prices also fell.

NWR booked a 497.3 million-euro non-cash impairment in the fourth quarter, contributing to a fifth straight quarterly loss and bringing its total charge for 2013 to 807 million euros.

Revenue fell 18 percent to 216.1 million euros, in line with expectations in a Reuters poll.

NWR had cash of 184 million at the end of 2013, down 31 percent on the year. Jelinek said the cash position was a buffer for this year.

"Even if the market stays where it is, this year is not a problem," he said. "But clearly the market is not supportive at the moment and that is one of the reasons why the capital structure review is in progress."