NWR - 2Q09 results below consensus

NWR disclosed worse-than-expected earnings for 2Q09. IFRS consolidated net income arrived at € 39.2m loss for the period, versus € 2.1m net loss in 1Q09 and a profit of € 71.3m in 2Q08. The reported loss exceeds consensus estimate of €-19.8m (reported by Reuters) by 98.5% and comes 13.7% above our own estimate of €-34.6m. The primary reason behind the weaker-than-expected result is the depressed profitability of coke production. Quarterly EBIT also came in red at € -16.8m, 66.4% higher than market consensus of €-10.1m. Despite the weak set of 2Q09 figures we envisage a neutral to slightly negative trading impact to the results today as the management refers to improving market conditions in the report.

Sales arrived at € 243.9m, down 9.8% q/q and down 52.5% y/y. The figure came 6.4% lower than the consensus forecast of € 260.7m, and 5.0% below our own estimate of € 256.8m as we have overestimated the NWR’s average coking coal and coke sales price for the period. Total coal sales volume was 2,367kt in this quarter, 10.0% above our forecast of 2,130kt.

Operating profit of NWR came in at € 16.8m loss (versus € 20.m profit in 1Q09 and € 102.4 m profit in 2Q08), slightly below both the market consensus of €-10.1m and our own estimate of €-10.2m. The main reason for the poor performance was the lower than expected price and thus a weaker-than-forecast margin on coking coal and foundry coke sales. While coking coal sales volumes rose by 25.5% q/q, sales price dropped by 14% to € 89 per tons from € 95 per tons in 1Q09. Due to an average production at € 73 per tone, this has squeezed coking coal margins sharply. Coke sales also rebounded from 103kt in 1Q09 to 192kt in 2Q09, however, NWR hardly realized any margin on it given the sales price dropped from € 200 per tons in 1Q09 to € 135 per tons in 2Q09. As a positive surprise of the report, personnel expenses dropped to € -85.6m (down 11.8% q/q and down 33.7 y/y), below our own forecast of € 93.5m, due to extensive layoffs.

Net financial result stood at a loss of € 20.5m versus our forecast of a € -21.3m. The main reason behind the poor financial performance was the losses on foreign currency translation.

NWR: IFRS consolidated quarterly P&L

€ m, unless stated otherwise	2Q 2008A	1Q 2009A	2Q 2009F	2Q 2009A	var	q/q	y/y	Cons. Reuters
Net sales	513.1	270.3	256.8	243.9	-5.0%	-9.8%	-52.5%	260.7
COGS	-139.5	-106.7	-98.5	-68.4	-30.5%	-35.9%	-51.0%
Gross profit	373.6	163.5	158.3	175.5	10.9%	7.3%	-53.0%
Service expenses	-96.0	-64.2	-57.0	-64.4	13.0%	0.3%	-32.9%
Personnel expenses	-129.1	-97.1	-93.5	-85.6	-8.4%	-11.8%	-33.7%
Other operating income/expenses	-3.7	58.6	22.IV	-4.5	n/a	n/a	21.8%
EBITDA	144.7	60.8	30.2	20.IX	-30.6%	-65.6%	-85.5%	31.V
Depreciation and amortisation	42.4	40.8	40.4	37.8	-6.6%	-7.5%	-10.9%
EBIT	102.4	20.0	-10.2	-16.8	64.3%	n/a	n/a	-10.1
Mining	102.8	19.V	-10.2	-16.5	61.6%	n/a	n/a
Real Estate	-0.4	0.5	0.0	-0.3	n/a	n/a	-27.2%
Financial result	-2.4	-17.9	-21.3	-20.5	-3.5%	14.4%	770.8%
Pretax profit	100.0	2.0	-31.5	-37.3	18.5%	n/a	n/a
Income tax	-28.7	-4.2	-3.1	-2.6	-14.1%	-36.6%	-90.8%
Results from discontinued operations net of tax	0.0	0.0	0.0	0.7	n/a	n/a	n/a
Minorities	0.0	0.0	0.0	0.0	n/a	n/a	n/a
Net profit	71.3	-2.1	-34.6	-39.3	13.7%	1735.5%	n/a	-19.8
EPS (€)	0	0	0	0	13.7%	1735.5%	n/a
EBIT margin (%)	20.0	7.IV	-4.0	-6.9	-291bp	-2,685bp	-1,428bp
Effective tax rate (%)	28.7%	206.1%	-9.7%	-7.1%	3bp	-36bp	-213bp