nw h1 2008 results finallibrary.corporate-ir.net/library/22/221/221913/items... · ·...

1

FIRST HALF 2008 RESULTS PRESENTATION

28 August 2008

22

MIKE SALAMONExecutive Chairman

3

INTERIM RESULTS FINANCIAL HIGHLIGHTS

Consolidated revenues up 60% to EUR 1,037m

EBITDA increased by 93% to EUR 356m, significantly increasing EBITDA margin to 34%

63% of price increase captured in EBITDA*

Net earnings for the period up 340% to EUR 189m

Adjusted Earnings per ‘A‘ Share up 350% to EUR 0.71

Operating cash flow up 176% to EUR 240m

Interim dividend of EUR 0.28 per ‘A’ share

First Half 2008 Results Presentation

* EBITDA up from EUR 184m to EUR 356m, an increase of EUR 172m, and price increases of EUR 195m + EUR 78m = EUR 273m

4

OPERATIONAL HIGHLIGHTS

Stable external sales volumes; 5.9 Mt of coal and 0.6 Mt of coke

Excellent production performance in Q1

Q2 performance impacted by lower number of longwall production days and reduced average seam height as well as reduced longwallavailability

POP 2010 investment programme in Czech mines on schedule

Debiensko project in Poland making progress with 50-year mining licence received in June 2008

Lost Time Injury Frequency Rate improved by 23%


5

CAPITALISING ON STRONG GROWTH IN COAL PRICES

Coking coal prices up 54% in H1 2008 compared to H1 2007

Thermal coal prices up 35% in H1 2008 compared to H1 2007

Coke semi-annual contracts fixed at EUR 477 per tonne for H2 2008

Average coke prices for the year at EUR 320 per tonne, up 21%

Negotiations for 2009 contracts to start in the fourth quarter


Coke and Coal Price Development (EUR /t)

0

50

100

150

200

250

300

350

2005 2006 2007 2008

Thermal Coal Coking Coal Coke

Price (EUR /t) H1 2008 H1 2007 Change

Coking coal 129 84 54%

Thermal coal 65 48 35%

Coke 295 165 79%

6

REGIONAL GROWTH STRATEGY – DEBIENSKO

Mining licence for Debiensko granted in June 2008

190 Mt of coking coal reserves in well defined and predictable geology

Capex of EUR 600m to EUR 800m

Target production run-rate of > 4 Mt

– Lower unit operating cost than OKD

Feasibility study by JT Boyd in progress

Land acquisition by Karbonia progressing according to plan

Top tier management recruitment in progress


7

REGIONAL GROWTH STRATEGY – MORCINEK

Letter of intent signed with JSW in October 2007

Conceptual study commenced based on drilling results

Cross-border mining treaty signed by the Czech and Polish authorities on 20 August 2008

Legal framework now in place to enable the project to move forward

Next steps: completion of geological research and feasibility study


8

POSITIVE MARKET OUTLOOK

Fundamental outlook for global coal markets remains positive

Chinese coke and coking coal export tariff increases

Limited development of new supplies

Record coking coal contract prices announced by peers(6 Aug USD 362 per tonne)


0

2

4

6

2007 2008 2009 2010 2011

Supply & demand for coking coal (Mtpa)

Source: McCloskey estimates

130135140145150155160165170

2007 2008 2009 2010 2011

Demand

Supply

Unmet global demand for coking coal (Mtpa)

9

POSITIVE MARKET OUTLOOK

CEE region increasing industrial and manufacturing presence

GDP growth to continue driving coal demand

Transportation costs remain high

Local production likely to continue to be outweighed by demand


50

55

60

65

2008 2009 2010 2015

Central European Coking Coal Demand (Mtpa)

Source: McCloskey estimates

1010

KLAUS–DIETER BECKExecutive Director

Chairman & CEO of OKD

11

SALES & PRODUCTION

Coal and coke produced ('000 tonnes)H1 2008 H1 2007 Change

Coal 6,677 6,517 2%Coke 662 665 (0%)Total volume 7,339 7,182 2%

Coal and coke sold ('000 tonnes)H1 2008 H1 2007 Change

Coking coal* 4,017 3,900 3%Thermal coal 2,437 2,467 (1%)Coke 621 594 5%Total volume* 7,075 6,961 2%*of which coking coal sold internally 526 495 6%


12

SALES & PRODUCTION

OKD Operating PerformanceQ1 2008 Q2 2008

Underground production 3.55 Mt 2.91 MtLongwall production days 2058 1907Average seam thickness mined 2.74m 2.48mAverage longwall operational time per day (%) 31.5% 28.5%


13

POP 2010 OBJECTIVE

Maintain current levels of production

Improve safety and reliability

Increase reserve base

Estimated cost reductions1

– c.10% of labour costs

– c.20% of maintenance costs

– c. 4% of other operating and energy costs

1. Affecting OKD mining operating costs only


Productivity per Longwall Face

3,700

2,4001,417

0

1,000

2,000

3,000

4,000

5,000

NWR 2007 POP 2010 Target 2006 RAG/DSK(Germany)

Source: NWR estimates

14

POP 2010 PROGRESS

Programme on schedule; Phase I to be completed by the end of the year

– Four (out of five) longwalls delivered at different levels of completion

– Three (out of four) gateroad development equipment sets delivered and performing 40% better than old ones

– First longwall equipment was technically installed ahead of schedule, produced 2,500 tonnes per day already, however experienced geo-technical setback

Total investment of EUR 330m

– Phase I EUR 160m (in line)

– Phase II EUR 170m (higher due to FX movements and steel price increase)


15

HEALTH & SAFETY

The health and safety of our people is our key priority

We continue to work hard to improve safety


16.8

15.7

12.8

17.2

10

1112

13

14

1516

17

18

FY 2006 H1 2007 FY 2007 H1 2008

Lost time injury frequency rate

Source: NWR

1616

MAREK JELINEKExecutive Director

Chief Financial Officer

17

FINANCIAL HIGHLIGHTSFirst Half 2008 Results Presentation

EUR m H1 2008 FY 2007 H1 2007 H1 on H1 % chg

Revenues 1,037 1,367 648 60%

EBITDA 356 351 184 93%

Margin 34.3% 25.7% 28.4%

Operating Profit 271 208 105 159%

Margin 26.2% 15.2% 16.2%

Net Earnings 189 196 43 340%

Margin 18.2% 14.3% 6.6%

Net debt 415 612 466 (11%)

18

STRONG GROWTH IN EBITDAFirst Half 2008 Results Presentation

€356m

€184m

1778

195

(16)(74)

(13)(15) H1 2008 EBITDA

Coal price

H1 2007 EBITDA

Coke price

Volume & sales structure

Materials & spare parts Energy

Personnel Other

19

COSTSNet movements

– 11% currency appreciation , Koruna vs Euro

– 7% wage increase in CZK

– 4% head count reduction


EUR m H1 2008 H1 2007 % chgMaterials & energy

Electricity trading289104

17943

61%

Service expensesAdvisory costs

17011

1393

22%

Personnel expensesPerformance bonusesShare based payments

2271012

165--

38%

Total 686 483 42%Total (excluding specified items) 549 437 26%FX effects 59 -Total (excluding specified items & FX) 490 437 12%

20

DIVIDEND

Interim dividend of EUR 0.28

To be paid to shareholders on 23 October 2008

Dividend policy targeting distribution of 50% of the mining division’s consolidated annual net income over the course of the business cycle


Interim dividend timetableEx-dividend London Stock exchange (LSE) 17 September 2008

Ex-dividend Prague Stock exchange (PSE) 17 September 2008

Ex-dividend Warsaw Stock exchange (WSE) 17 September 2008

Record date 19 September 2008

Currency election closing date 26 September 2008

Euro exchange rate fixed and announced 03 October 2008

Payment date 23 October 2008

21

ONGOING RESTRUCTURING

Distribution of Real Estate assets to ‘B’ shareholders

– The first spin-off being currently prepared

– Expected to take place during the second half of 2008

Energy assets

– Consolidation of assets under two new entities (Poland & Czech Republic) in the second half of the year

– To be followed by strategic review of options for the stand-alone business


2222

MIKE SALAMONExecutive Chairman

23

POSITIONED FOR SUSTAINED PROFITABLE GROWTH

Attractive global market conditions

Critical supplier to regional steel and energy producers

Improving operational efficiencies and profitability

Enhancing lives of existing mines

Actively pursuing regional growth opportunities

Striving for improved health and safety


2424

Q&A

2525

APPENDIX

26

LEADING HARD COAL PRODUCER

NWR produces high quality coking coal, thermal coal and coke from assets in Poland and the Czech Republic for the steel and energy sectors in Central Europe

Principal subsidiary OKD is the Czech Republic’s largest hard coal mining company

Strategically located within CEE; supplies to a blue chip customer base in the region

419 Mt of JORC proven and probable reserves

Four active coal mines

13.1 Mt of total coal sold in 2007, including 7.8Mt1 of coking coal

Two coking plants producing blast furnace and foundry coke

1.3 Mt of coke sold in 2007


1. Including internal coking coal sales to OKK

27

PREFERRED SUPPLIER TO REGION

Long-term relationships with key customers supported by geographic proximity and governed by framework agreements

Customer production facilities configured for the company’s coal specifications

Ability to serve customer base efficiently supported by good logistic links to all customers

Regional blue chip customers, including Arcelor Mittal, US Steel, Voestalpine, Moravia Steel and Dalkia

Production of high quality coal products through existing reserves, timely delivery and knowledge of market trends


28

REVENUE BREAKDOWN as of 31 December 2007

Coking coal customers Thermal coal customers

Dalkia17.0%

Verbund16.0%

CEZ12.2%Arcelor

Mittal9.0%

Others35.4%

US Steel5.4%

SWM5.0%

US Steel25.6%

Voest Alpine12.7%

Moravia Steel

10.8%

Arcelor Mittal19.5%

Arcelor Mittal PL

9.0%

Other22.4%


29

Source: JT Boyd

Mine Country Reserves (mt) Coal Type

Karvina (Lazy & CSA) Czech Rep 95 Hard and semi-hard coking / ThermalDarkov Czech Rep 51 Semi-Hard Coking / ThermalPaskov Czech Rep 28 Hard CokingČSM Czech Rep 55 Hard CokingTotal 229

ACTIVE COAL MINE SITESFirst Half 2008 Results Presentation

30

19%

RPG Industries SE

RPG Group

Darkov

Paskov

ČSM

Frenštát

Svoboda

Morcinek

Debiensko

Šverma

Currently operatingDevelopment project

Karvina

Free Float

New World Resources N.V.

64%36%

81%First Reserve AMCI

SHAREHOLDER STRUCTURE

OKD, a.s.(Czech Coal Business)

KARBONIA PL Sp. z o.o.(Polish Coal Projects)

OKD, OKK, a.s.(Coke Production)


31

Miklos SalamonChairman

Zdeněk Bakala

Alex Krueger

Peter Kadas

Shareholder Representatives

Klaus-Dieter Beck

Marek Jelínek

Executive Directors Non-Executive Non-Independent Directors

Hans Mende

Audit and Risk Management CommitteeChairman:Bessel Kok

Remuneration CommitteeChairman:

Zdeněk Bakala

Finance and Investment Committee

Chairman: Peter Kadas

Health, Safety and Environment CommitteeChairman:

Paul Everard

Real EstateCommitteeChairman:

Barry Rourke

Non-ExecutiveIndependent Directors

Bessel Kok

Hans-Jörg Rudloff

Steven Schuit

Paul Everard

Barry Rourke

Milan Jelinek

Christiaan Norval

Pavel Telička

CORPORATE GOVERNANCE STRUCTUREFirst Half 2008 Results Presentation

32

RESPONSIBILITY TO SOCIETY

The main pillar of NWR's corporate social responsibility is the OKD Foundation, which received a grant of EUR 1 million

The projects receiving support are Johan Cruyff Foundation(Netherlands) and Mulunguzi Schoolin Malawi

EU program for non-profitorganisations

Education and society

program

Social andhealth care

program

EnvironmentalDevelopment

program


33

EXCHANGE RATES

H1 2008 FY 2007 H1 2007

Period average 25.191 28.150 27.762

At balance sheet date 23.893 28.718 26.620

Exchange rates are based on average official exchange rate of the Czech National Bank for the relevant period

CZK/EUR exchange rate

23

24

25

26

27

Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08


CZK/EUR exchange rate development

34

ECONOMIC OUTLOOK

0

2

4

6

8

10

12

2007 2008 2009 2010

Czech Republic

Poland

Central Europe & the Balkans(CEB)Emerging Europe (CIS+CEB)

World

OECD

0

1

2

3

4

5

6

7

8

2007 2008 2009 2010

GDP growth (%)

Source: Global Insight’s World Overview

Industrial production growth %


35

HISTORY

1782 Regular mining activities in the northeast region of today’s Czech Republic commenced

Prior to 1946, the hard coal mining business in the Ostrava Karviná region was under the control of several companies, including the Salomon Mayer Rothschild family.

1946 Government of the former Czechoslovakia nationalized the hard coal mining industry.

Early 1990’s State enterprises engaged in coal mining were converted into two joint stock companies OKD and ČMD, to prepare them for privatisation. Former OKD comprised most of the mining industry located in the Ostrava-Karviná region, while ČMD operated hard-coal mines in the Kladno region and Ostrava-Karvináregion (ČSM in Stonava).

1994-1997 40% of OKD shares and 45% of ČMD shares respectively were privatised through a voucher privatization program and purchased by individuals and investment funds.

1998-2004 Karbon Invest acquired controlling stakes in ČMD and OKD from minority shareholders. A majority stake in Metalimex, a commodities trader, was acquired by ČMD and K.O.P., a.s. In 1998, Former OKD purchased all of the outstanding shares of K.O.P., a.s., a majority shareholder of Metalimex.

2004 Karbon Invest purchased 46% of the shares of OKD from the National Property Fund of the Czech Republic. Shortly thereafter, Karbon Invest was acquired by the RPG Group.

2005 Minority shareholders bought out, consolidating RPG’s holdings in OKD, ČMD and Metalimex. New World Resources B.V. was incorporated as a Dutch private limited liability company to serve as the holding company for NWR’s coal mining operations, coking business and certain related businesses.

May 2008 New World Resources B.V. was converted to New World Resources N.V. and listed on the London, Warsaw and Prague Stock Exchanges.


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