Shares in New World Resources (NWR) hardly stirred on news of a sharp decline in second-quarter profits and a commensurate fall in the half-year dividend, suggesting that the figures had been adequately foreshadowed in July's trading update.
The market value of the central European coal miner had already fallen substantially this year on the back of weak coking coal prices, but there's value on offer, given that NWR is being valued on a multiple of just 5.5 times annual cash profits to its enterprise value (market value plus debt), together with a swollen inventory that Citi Research believes could "assist sales volumes in the second half".
NWR suffered a 24 per cent fall in realised prices for coking coal to €134 a tonne (£106) during the first half and has settled for an average price of €129 with customers for the third quarter, although this was actually a slight improvement on the second quarter. The fall-away in prices was partially mitigated by a 12 per cent increase in external sales of higher-value coking coal.
The weak pricing environment fed through to a 56 per cent fall in operating profits to €71.5m, although, to its credit, NWR did manage to reduce unit cash costs by 2 per cent to €80 a tonne.
Concorde Research expects 2012 EPS of 14¢, recovering to 47¢ in 2013 (49¢ for 2011).
| NEW WORLD RESOURCES (NWR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 304p | MARKET VALUE: | £804m | |
| TOUCH: | 301-304p | 12-MONTH HIGH: | 625p | Low: 265p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 296¢ | NET DEBT: | 60% | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 840 | 120 | 32.0 | 16 |
| 2012 | 694 | 48 | 12.0 | 6 |
| % change | -17 | -60 | -63 | -63 |
Ex-div: 5 Sep Payment: 19 Sep £1:€1.26 | ||||
