New World Resources NV, the largest producer of coking coal in the Czech Republic, said increased demand from steelmakers in the second half is “significantly” reducing stockpiles and boosting the outlook for business.
“I wouldn’t say these are great times but they’re certainly improving,” Chief Financial Officer Marek Jelinek said in an interview in Prague yesterday. “We have seen an increase in demand in terms of tonnage, our inventories continue to go down, so the second half of the year is clearly going to be better unless there’s a sudden reversal of the market.”
Steelmakers are beginning to resume output from the U.S. to Russia and China as economies recover from a worldwide slump and customers rebuild inventories. The World Steel Association said Oct. 12 the market will grow 9.2 percent next year. Amsterdam- based NWR posted a first-half net loss of 41.4 million euros ($62 million) and didn’t pay a dividend after demand collapsed.
The company, which supplies so-called hard coal and coke to customers including the Czech unit of ArcelorMittal, may produce 11 million metric tons of coal in 2009, Jelinek said, up from a May 18 estimate of 10.5 million tons. Output in 2010 is unlikely to be lower, he added, declining to be more specific. NWR also supplies U.S. Steel Corp.’s division in Slovakia.
Demand for steel has been supported by government economic stimulus programs, including incentives for consumers to scrap older cars and public spending on infrastructure projects.
Restocking for Recovery
“Steel output has been rising since May,” Jelinek said. “Still, it’s unclear to what extent the recent growth is driven by the government programs, to what extent is it restocking as opposed to a real recovery.”
NWR may consider acquisitions in Ukraine and Poland, where the sale of state-owned mines is a “key” focus, he said.
“We’re sitting on a lot of cash and can come up with funding at short notice because it is advantageous to move quickly,” Jelinek said. NWR doesn’t have any immediate need to refinance debt and hasn’t any plans to buy back shares, he said.
The mine operator had net debt of 621 million euros and cash reserves of 392 million euros as of June 30.
NWR plans to expand its Debiensko mining facility in Poland and increase exploration of the Czech Republic’s estimated 19 billion tons of coal reserves, Jelinek said. The company will invest about 200 million euros to upgrade facilities in 2010.
The coal miner is also still in talks with an unidentified company to sell its NWR Energy AS unit, he added.
Source: Bloomberg