New World Resources Regulatory News (NWR)

Amsterdam, 22 August 2013

New World Resources

Unaudited interim results for the first half 2013

New World Resources Plc ('NWR' or the 'Company') today announces its unaudited financial results for the first half of 2013 and provides an update on NWR's business optimisation steps.

H1 2013 Financial summary

§ Revenues of EUR 493 million, down 29%.

§ Cash mining unit costs[1] of EUR 84/t, up 22% on a 26% decline in production, down 10% on a stable production basis.

§ Mining administrative and selling expenses down 16% to EUR 93 million.

§ EBITDA of EUR (40) million.

§ Impairment of EUR 307 million on Company's coal assets.

§ Underlying[2] basic loss per A share of EUR (0.56).

§ Net debt of EUR 653 million, and cash of EUR 176 million.

H1 2013 Operational summary

§ LTIFR[3] of 5.65, an improvement of 25% and the best result in NWR's history.

§ Regrettably, two miners lost their lives in work related incidents this year.

§ Coal production of 4.3Mt, and external sales of 4.6Mt.

§ Coal sales mix of 49% coking and 51% thermal coal.[4]

§ Coke production of 340kt and external sales of 298kt.

Update on business optimisation steps

1. EUR 60 million of cash-enhancing measures delivered.

2. Business portfolio optimisation underway.

3. FY 2013 production, sales, and cost targets reiterated.

 4. Fully optimised current operations by the end of 2014.

Chairman's statement

It has become apparent since our last quarterly update that coal prices are gradually moving towards a new long-term normal. While we are seeing some initial signs of price stabilisation in the coking coal market, as well as positive news from Germany's labour and manufacturing markets, we do not believe that there will be a repeat of the boom years of 2008 and 2011 any time soon.

The ongoing weak coal price environment led us to recognise a non-cash impairment charge of EUR 307 million on our mining assets and we continue to be conscious of the market volatility and risks as described further in the Operating and Financial Review.

This is the 'new reality' and NWR is taking action to adapt to it. This includes the implementation of the previously announced EUR 100 million of cash-enhancing measures, including sell-down of inventories and additional cost savings. Even more importantly, we have accelerated the execution of the first phase of our 2017 strategy, with NWR's management team fully focused on our Czech mining operations. Our objective is to have a more efficient, leaner and more flexible mining business by the end of 2014.

What does this mean in terms of targets for 2014? Lower production of between eight and nine million tonnes, 60 per cent of coking coal in the sales mix, cash mining unit costs of EUR 60/t, lower overheads, less than EUR 100 million of CAPEX, and further improvements in our safety performance. These targets necessitate many difficult changes, including reducing our workforce. But I must stress that achieving these targets is absolutely essential for NWR to thrive, provide prosperity to the region and deliver on its strategic goal of becoming Europe's leading miner and marketer of coking coal by 2017 in a safe and sustainable way. Our management team at OKD, led by Jan Fabian, has made huge progress in changing the nature of OKD, and although negotiations with our trade unions are still ongoing, there is a constructive dialogue as we progress discussions.

In line with our strategic targets, each mine is going to maximize its coking coal output. NWR's new mining plan is intended to be more flexible and selective. Longer term we envisage leveraging our customer relationships to complement our coking coal deliveries with suitable coking coal qualities from overseas. Last but not least, health and safety of our workforce remains our highest priority.

Our core market of Central Europe is a region that is reinforcing its position as the manufacturing hub of Europe, a trend that we believe will continue. Our focus on coking coal therefore remains and despite all the short-term difficulties and challenges that we currently face, we continue to work towards positioning NWR to become Europe's leading miner and marketer of coking coal by 2017.

Gareth Penny, Executive Chairman of NWR

Update on business optimisation

1. The following table breaks down the delivery of the cash-enhancing measures in H1 2013 and estimated delivery in H2 2013.

2. Good progress with business portfolio optimisation initiatives:

§ In line with NWR's focus on coal mining, the divestment of NWR's coke operations (OKK) is underway.

§ Following the stress-testing of our mining operations we have concluded that it is not possible to sustain operations at our high-cost Paskov mine in the new pricing environment. As a divestment of the Paskov mine currently appears unlikely, we are now evaluating other options including a potential temporary or permanent shutdown of the mine. There is no final decision as yet and we will provide further updates on Paskov in due course.

§ OKD's headquarters is in the process of moving from the centre of Ostrava to NWR's Darkov mine site. Administrative staff reductions are underway, including the previously announced decrease in administrative and technical headcount by 250 employees. The centralised mine structure is expected to be fully in place before the year-end.

3. 2013 Targets reiterated:

Production

§ Coal production of 9-10Mt.

§ Coke production of 700kt.

Sales

§ External sales of 8.5-9.5Mt of coal equally split between coking and thermal coal.

§ Sale of additional 500kt of middlings and lower grades of thermal coal inventories.

§ Coke sales of 600kt.

Prices[6]

§ EUR 60 per tonne applies to CY 2013 thermal coal deliveries.[7]

§ Coking coal Q3 2013 average price agreed at EUR 92/t.

§ Coke Q3 2013 average price agreed at EUR 232/t.

Costs

§ Stable Cash mining unit costs and Cash coke conversion unit costs at constant FX.[8]

CAPEX

§ EUR 100 million including EUR 10 million for the Debiensko project.

4. Execution of the first phase of our 2017 strategy accelerated:

§ 1) Fully optimised current operations by the end of 2014:

o Coal production between 8 - 9Mt;

o Coking coal above 60 per cent of external coal sales;

o Lower overheads and Cash mining unit cost of EUR 60/t ;

o Annual maintenance CAPEX below EUR 100 million;

o Further improvement in LTIFR.

§ 2) 10Mtpa of coking coal sales to Europe by 2017:

o Combination of mining projects and new marketing initiatives;

o Engage in the import market for seaborne coking coal.

§ 3) Become a 'one-stop shop' for European steel customers by 2017:

o Build on marketing capabilities;

o Supply full range of coking coal qualities throughout Europe.

Summary tables

For more detail and analysis please refer to the Operating and Financial Review further in this document.

Selected consolidated financial and operational data

Coal segment

Coke segment

H1 2013 earnings call and webcast:

NWR's management will host an analyst and investor conference call on 22 August 2013 at 10:00 BST (11:00 CET). The presentation will be made available via a live audio webcast on www.newworldresources.eu and then archived on the Company's website.

For those who would like to join the live call, dial in details are as follows:

UK and the rest of Europe +44 (0)20 3427 1900

USA +1 646 254 3388

The Netherlands 0800 020 2576

Czech Republic 800 701 229

Poland 00 800 121 4330

Access code 3729628

A replay of the conference call will be available for one week by dialling +44 20 3427 0598, and using access code 3729628.

Contacts:

Investor Relations Corporate Communications

Tel: +31 20 570 2244 Tel: +420 225 282 451

Email: ir@nwrgroup.eu Email: pr@nwrgroup.eu

Website: www.newworldresources.eu

Notes to editors:

New World Resources Plc is one of Central Europe's leading hard coal and coke producers. NWR produces quality coking and thermal coal for the steel and energy sectors in Central Europe through its subsidiary OKD, the largest hard coal mining company in the Czech Republic. NWR's coke subsidiary OKK, is Europe's largest producer of foundry coke. NWR currently has several development projects in Poland and the Czech Republic, which form part of NWR's regional growth strategy.

In 2013 the Company announced a strategic outlook to reposition NWR into Europe's leading miner and marketer of coking coal by 2017.

NWR is listed in London, Prague and Warsaw. It is a constituent of FTSE Small Cap index. 

Condensed consolidated interim financial information

New World Resources Plc

Consolidated statement of comprehensive income

All activities were with respect to continuing operations.

The notes on pages 15 to 32 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of financial position

New World Resources Plc

Consolidated statement of financial position (continued)

The notes on pages 15 to 32 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of cash flows

The notes on pages 15 to 32 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of changes in equity

The notes on pages 15 to 32 are an integral part of this condensed consolidated financial information.

1. Corporate Information

New World Resources Plc ('NWR' or the 'Company') is a public limited liability company with its registered office at One Silk Street, London EC2Y 8HQ, United Kingdom. The Company is the sole producer of hard coal in the Czech Republic and one of the leading hard coal and coke producers in Central Europe. NWR produces coking and thermal coal through its subsidiary OKD, a.s. ('OKD') and coke through its subsidiary OKK Koksovny, a.s. ('OKK'). NWR and its subsidiaries are collectively referred to as the 'Group'.

2. Financial Results Overview

Revenues. The Group's revenues decreased by 29% (28% on a constant currency basis), from EUR 694 million in 6M 2012 to EUR 493 million in 6M 2013. This is mainly attributable to lower realised prices for coking coal, thermal coal as well as coke and lower sales volumes of coking coal.

Cost of sales. Cost of sales increased from EUR 493 million to EUR 508 million or by 3% (4% on a constant currency basis) in 6M 2013 compared to 6M 2012. This is mainly attributable to the EUR 68 million change in inventories driven by the Group selling higher volumes of low quality inventories in 6M 2013 compared to 6M 2012 when the Group was producing on stock. The inventory impact outweighs a cumulative EUR 53 million decline in other cost categories, namely decrease in:

§ production and development works, resulting in lower consumption of mining material and spare parts;

§ number of shifts and contractors, resulting in lower service expenses;

§ provision for mining damages; and

§ the number of employees, resulting in lower personnel expenses.

Selling expenses. Selling expenses decreased from EUR 76 million to EUR 66 million or by 14% in 6M 2013 attributable to:

§ lower sales volumes;

§ a change in the geographic composition of sales resulting in a decrease in transport costs; and

§ an increase in inventory allowances of EUR 9 million.

Administrative expenses. Administrative expenses decreased from EUR 54 million to EUR 46 million or by 16% in 6M 2013 principally as a result of lower charitable donations made in 6M 2013 and lower personnel expenses by 10%.

EBITDA. 6M 2013 saw a negative EBITDA of EUR 40 million, a decrease of EUR 198 million from EUR 158 million achieved in 6M 2012, attributable purely to the decrease in revenues. EBITDA was already influenced by temporary measures the Group put in place in order to respond to the adverse market environment it operates in. An adverse impact of EUR 3 million relates to losses realised on thermal coal inventory sales and severance payments (reflected within administrative expenses), partly offset by positive effect of various costs savings.

Impairment loss on property, plant and equipment. Current market environment and low prices of both coking coal and thermal coal resulted in the Company undertaking an impairment review of its cash generating units and subsequently recognised an impairment charge of EUR 307 million on the Group's non-current assets to reflect its recoverable value.

Underlying loss. The reported loss for the period is EUR 396 million. Excluding the impact of impairment charges, the loss for the period would have been EUR 145 million.

3. Basis of Presentation

The condensed consolidated interim financial statements (the 'financial statements') presented in this document are prepared:

§ for the six-month period ended 30 June 2013, with the six-month period ended 30 June 2012 as the comparative period;

§ based on the recognition and measurement criteria of International Financial Reporting Standards as adopted by European Union ('adopted IFRS') and on the going concern basis that the Directors consider appropriate (see on the next page); and

§ in accordance with IAS 34 Interim Financial Reporting.

They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2012, which are contained within the 2012 Annual Report and Accounts of the Company, available on the Group's website at www.newworldresources.eu.

Going concern basis of accounting

The Group manages its liquidity through cash (EUR 176 million (31 December 2012: EUR 267 million)) and a EUR 100 million Revolving Credit Facility (undrawn at 30 June 2013) which is available until February 2014, subject to compliance with certain covenants.

In March/April 2013, the Group agreed revised terms for both the Export Credit Agency loan ('ECA') (EUR 69 million at 30 June 2013) and Revolving Credit Facility ('RCF') which suspend testing of covenants until 30 September 2013 and 30 June 2013, respectively. Further information and requirements are described in section 10 Borrowings, Liquidity and Capital Resources.

As a reaction to the continuation of difficult trading conditions and price pressures in 2013, the Group has implemented immediate temporary measures to safeguard the Group's liquidity for the foreseeable future. These measures include:

§ reduction in budgeted operating expenses which will result in cash savings of between EUR 10 million and EUR 25 million by year-end, including:

ú across-the-board 10 per cent salary cut effective 1 May 2013 to save up to EUR 15 million by year-end. This is currently under negotiation with trade unions and so far affected administrative employees;

ú decrease in contractor costs saving EUR 5 million by year-end;

ú administrative and material cost cuts.

§ capital expenditure savings and deferrals of EUR 20 million in 2013 on selected coal panel developments and non-critical maintenance. This brings anticipated capital expenditure for the year to EUR 100 million, of which EUR 85 million was incurred in 6M 2013.

§ working capital optimisation saving cash up to EUR 55 million by year-end, including:

ú the sale of thermal coal inventories (mostly lower grades of thermal coal and middlings) to generate around EUR 15 million of cash before the year-end (of which EUR 13 million, excluding VAT, was achieved at 30 June 2013);

ú optimisation of receivables and payables to generate up to EUR 40 million of cash by year-end (of which EUR 24 million was achieved at 30 June 2013).

In addition the Group plans to sell OKK and to receive substantial proceeds from this sale. The sale may be subject to shareholder approval and the terms of the Senior Notes 2018 and 2021 require that any proceeds not reinvested in the business within twelve months must be used to prepay the bonds.

Irrespective of the above, the Directors anticipate that the Group will not be able to meet the revised requirements of the ECA and RCF agreements at the end of Q4/Q3 2013, respectively and will enter into further negotiation with its banks with a view to either agreeing a further deferral of covenant testing or to negotiating replacement facilities.

There can be no guarantee that it will be possible to either agree a further suspension of covenant testing or to agree replacement facilities. In that event the ECA loan would have to be repaid and the RCF would not be available to the Group. Even taking account of the repayment of the ECA, the Directors anticipate that these initiatives and receipt and retention of a significant cash sum from the disposal of OKK should result in the Group having sufficient liquidity for the foreseeable future (that is at least until the end of August 2014)

However, further deterioration in coal prices, the inability to fully action the initiatives (in particular the salary cut), any significant operational issues affecting revenue generation, the failure to receive and retain a significant cash sum from the disposal of OKK or a combination thereof could result in a shortfall of funds which would require the Directors to take further cash preserving actions or to seek additional sources of funding. The Directors recognise that the combination of these circumstances represents a material uncertainty that may cast significant doubt as to the Group's ability to continue as a going concern and that therefore the Group may be unable to realise all its assets and discharge all of its liabilities in the normal course of business.

Nevertheless, based on this analysis, the Directors are of the opinion that the Group has adequate financial resources to continue operating for the foreseeable future (that is at least until the end of August 2014) and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements.

4. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are stated at fair value.

The financial statements have been prepared on the basis of accounting policies and methods of compilation consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2012, with the exception described below.

Change in classification and presentation

With effect from 1 January 2013, the Group has changed the basis on which it presents expenses in the income statement. While previously classified by their nature, expenses are now classified by their function (also known as a 'Cost of Sales' format). This change has been made to align better with current best reporting practice in the mining industry.

The reclassifications have no impact on the consolidated operating income or net profit. In the table below, the comparative period (6M 2012) has been restated to conform to the current basis of presentation.

Cost of sales - comprise all operating costs incurred in production including depreciation and amortisation, or compensation of, and provisions for mining damages.

Selling expenses - comprise all operating costs involved in selling or distribution of products and include mainly transport costs incurred to deliver the coal and coke to customers.

Administrative expenses- comprise all other operating costs associated with general operation of the Group, which cannot be allocated to either cost of sales or selling expenses, and include mainly personnel costs, and advisory costs.

New standards and interpretations

The Group adopted the following amendments to standards and new interpretations, which are effective for its accounting period starting 1 January 2013:

§ Amendment to IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

§ Amendment to IAS 19 Employee Benefits (effective 1 January 2013)

§ Amendment to IFRS 7 Financial Instrument: Disclosures - Offsetting Financial Assets and Financial Liabilities (effective 1 January 2013)

§ IFRS 13 Fair Value Measurement (effective 1 January 2013)

§ IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013)

The amendments to IAS 1 and IFRS 13 impact the Group's financial position and performance as follows:

§ Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants as the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures. 

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively. Notwithstanding the above, the change has no significant impact on the measurement of the Group's assets and liabilities.

§ Presentation of items of other comprehensive income

As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has been re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements of the Company as at and for the year ended 31 December 2012. 

5. Non-IFRS Measures

The Company defines EBITDA as net profit before non-controlling interests, income tax, net financial costs, depreciation and amortisation, impairment of property, plant and equipment ('PPE') and gains/losses from the sale of PPE. While the amounts included in EBITDA are derived from the Group's financial information, it is not a financial measure determined in accordance with adopted IFRS. Accordingly, EBITDA should not be considered as an alternative to net income or operating income as a sole indication of the Group's performance or as an alternative to cash flows as a measure of the Group's liquidity. The Company currently uses EBITDA in its business operations to, among others, evaluate the performance of its operations, develop budgets, and measure its performance against those budgets. The Company considers EBITDA a useful tool to assist in evaluating performance because it excludes interest, taxes and the most significant non-cash charges.

The Company defines net debt as total debt less cash and cash equivalents. Total debt includes issued bonds, long-term and short-term interest‑bearing loans and borrowings. Total debt is defined as gross amount of debt less related expenses. Interest‑bearing loans, bond issues, and borrowings are measured at amortised cost.

6. Exchange Rates

Throughout this document, the financial results and performance in both the current and comparative periods are expressed in Euros. The financial information could differ considerably if the financial information was presented in CZK. The Company may where deemed relevant, present variances using constant foreign exchange rates (constant currency basis), marked 'ex-FX', excluding the estimated effect of currency translation differences. These are non-IFRS financial measures.

7. Financial Performance

Revenues

The Group's largest source of revenue is the sale of coking coal, which accounted for 42% of total revenues in 6M 2013, followed by the sale of thermal coal (29%) and the sale of coke (15%).

*For the purpose of this analysis, where the Group sells products on an EXW or similar basis, the notional transport element is shown separately in order to separate the impact of changing transport revenues from changes in the underlying achieved price for the products sold.

All of the Group's coking coal and coke sales are priced quarterly and the majority of thermal coal sales are priced on a calendar year basis.

Total production of coal in 6M 2013 decreased by 26% compared to production volume in 6M 2012, in line with planned production. Coal volumes sold to third parties were lower by 6% as a result of lower coking coal sales, partially offset by the sale of approximately 380kt of middlings and lower grades of thermal coal from inventories in Q2 2013.

Coal inventories decreased by 532kt in 6M 2013 compared to an increase by 687kt in 6M 2012.

* Inventory consists of coal available for immediate sale and coal that has to be converted from raw coal. Opening and closing inventory balances do not always reconcile due to various factors such as production losses. This balance excludes coking coal inventory held by OKK that will be used for coke production and amounted to 5kt (2012: 9kt).

Coke production decreased by 3% and coke sales by 2% in 6M 2013 compared to the same period in 2012.

Coke inventories increased by 1kt in 6M 2013 compared to an increase by 4kt in 6M 2012.

A 3% increase in total cost of sales is mainly attributable to the EUR 68 million change in inventories driven by the Group selling higher volumes of low quality inventories in 6M 2013 compared to 6M 2012 when the Group was producing on stock. This inventory impact outweighs a cumulative EUR 53 million decline in other cost categories, namely:

§ a decrease in production and development works influencing consumption of mining material and spare parts;

§ lower consumed volumes and lower prices of externally purchased coal needed for the coking operations resulting in decrease of the associated costs;

§ a 13% decrease in the number of shifts and a 4% decrease in unit costs per shift ex-FX resulting in decrease of contractors' cost (contractors headcount decreased by 12%);

§ a 3% decrease in the number of employees resulting in lower personnel expenses; and

§ a reduced provision for mining damages resulting from lower production and development works.

Selling Expenses

Lower sales volumes together with a change in the geographic composition of sales resulted in a reduction in transport costs by 29%, with similar decrease in transport revenues, thus EBITDA neutral. Further reductions in Q3 sales prices have resulted in inventory allowances of EUR 9 million.

Decrease in administrative expenses by 14% on a constant currency basis is principally attributable to lower personnel costs (9% on constant currency basis) and lower charitable donations paid in 6M 2013.

Total Personnel Expenses and Headcount

EBITDA

The Group's EBITDA decreased by EUR 198 million compared to 6M 2012 mainly as a result of lower revenues from all the Group's products.

As EBITDA is a non-IFRS measure, the following table provides a reconciliation of EBITDA and net (loss)/profit after tax.

Impairment loss

Due to reduced price expectations for the Group's products, the Group assessed the recoverable amount of its cash generating units ('CGU's). As a result, an impairment loss of EUR 307 million (six months ended 30 June 2012: nil) has been recognised. The impairment loss related entirely to the coal segment. This includes EUR 141 million in respect of the Paskov mine (see note 13) and EUR 9 million in relation to the Debiensko project with the balance relating to the coal business generally.

The recoverable amount of the CGUs was based on value in use. Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. Value in use as at 30 June 2013 was based on the following key assumptions;

§ cash flows were forecast based on past experience, actual operating results and the five year business plan. Cash flows for further years for the coke segment and to the end of the life of mines for the coal segment were extrapolated using a zero growth rate (reflecting the production capacity) and declining growth rate (reflecting slightly decreasing production towards the end of the life of the mines), respectively. In both cases it does not exceed the long-term average growth rate for the industry;

§ revenue was forecast based on pre-agreed prices for the remainder of the current period. The anticipated annual revenue movement included in the cash flow projects ranged from (3%) to 10 % for the years 2014 to 2017 and are based on the average of a range of publically available data;

§ a post-tax discount rate of 11.4% (2012: 10.6%) was applied in determining the recoverable amount of the group of CGUs. The discount rate was estimated based on an industry average weighted-average cost of capital.

Following the impairment loss, the recoverable amount is equal to the carrying amount, therefore, any adverse change in a key assumption may result in a further impairment.

The impairment charges are particularly sensitive to the discount rate applied and the forecast sales prices of the Group's products. Holding all other parameters constant a 1.25% increase in the discount rate would give rise to an additional impairment loss of EUR 105 million; a 2.50% increase in the discount rate would give rise to an additional impairmentloss of EUR 204 million; and a 5% reduction in sales prices would give rise to an additional impairment loss of EUR 152 million.

Financial Income and Expense

The increase in net financial expense of EUR 21 million in 6M 2013 compared to 6M 2012 is mainly attributable to the loss on revaluation of derivatives for which hedge accounting is not applied compared to the gain realised in the comparative period (EUR 9 million) and to the loss recorded due to the repayment of the Senior Notes due 2015 (EUR 8 million), consisting of the write off of unamortised transaction costs (EUR 4 million) and the fee charged on early redemption (EUR 4 million).

Loss before Tax

The loss before tax in 6M 2013 was EUR 477 million, a decrease of EUR 526 million compared to a profit of EUR 48 million in 6M 2012.

Income Tax

The Group recorded a net income tax benefit of EUR 82 million in 6M 2013, compared to a net income tax expense of EUR 14 million in 6M 2012, related to the recognition of a deferred tax asset arising from tax losses incurred. The effective tax rate is 17% in 6M 2013 compared to 29% in 6M 2012.

Loss for the Period

The Group recognised a loss of EUR 396 million in the 6M 2013, which represents a decrease of EUR 430 million compared to the profit of EUR 35 million in 6M 2012 and was materially influenced by the impairment loss on coal assets in the amount of EUR 251 million (after tax).

8. (Loss) / Earnings per Share

The calculation of earnings per share was based on profit attributable to the shareholders of the Company and a weighted average number of shares outstanding during the six-month period ended 30 June:

9. Cash Flow

Cash Flow from Operating Activities

The Group's primary source of cash is its operating activities. Cash generated from operating activities, after working capital changes and before interest and tax payments in 6M 2013 was positive EUR 22 million, which was EUR 106 millionlower than in 6M 2012. This follows lower EBITDA during the reporting period offset by positive effect of inventories sale of EUR 16 million and working capital optimisation of EUR 24 million.

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 85 million in 6M 2013, a decrease of EUR 38 million when compared to the same period of 2012. The capital expenditures consist principally of expenditure in the Coal segment, including the development of new mining areas. 

Cash Flow from Financing Activities

Cash flow from financing activities was influenced by issuance of new EUR 275 million Senior Notes due 2021 (the '2021 Notes') that were used to repay in full the outstanding amount of EUR 258 million under the Senior Notes due 2015 (the '2015 Notes'). Additional transaction costs of EUR 9 million were incurred with the refinancing. The comparative period was influenced by dividend payment of EUR 19 million to A shareholders.

10. Borrowings, Liquidity and Capital Resources

The liquidity requirements of the Group arise primarily from working capital requirements, the need to fund capital expenditures and, on a selective basis, possible future acquisitions. The principal uses of cash are anticipated to fund planned operating expenditures, capital expenditures, scheduled principal and interest payments on Senior Notes and other borrowings, and other distributions. The Group continuously reviews its cash flow and operations in order to safeguard the business as a going concern and believes that the cash generated from its operations and borrowing capacity shall be sufficient to meet its principal uses of cash.

Senior Notes Issuance

On 23 January 2013, New World Resources N.V. ('NWR NV') issued a EUR 275 million Senior Notes due 2021 with a 7.875% coupon. The net proceeds were used to repay in full the outstanding amounts of the 7.375% Senior Notes due 2015, which were repaid on 22 February 2013 in the total amount of EUR 267 million, including accrued interest and call premium.

Financial covenants

The Group agreed with its lenders to suspend and re-set certain financial covenants under the RCF and ECA loan agreements as follows:

§ for ECA (agreed on 28 March 2013), covenant testing is suspended for the period from 1 January 2013 until 30 September 2013. For the period from 1 October 2013 until 31 December 2013, the maximum gearing ratio has been increased from 3.25x to 5x and the minimum fixed cover ratio has been reduced from 3.50x to 2x;

§ for the RCF (agreed on 4 April 2013), covenant testing is suspended for the period from 1 January 2013 until 30 June 2013. For the period from 1 July 2013 until 30 September 2013, the maximum gearing ratio has been increased from 3.25x to 9x and the minimum fixed cover ratio of 3.50x has been reduced to 1x;and

§ in addition to the above suspension and re-set, the agreement with lenders includes a requirement of a minimum cash balance of EUR 110 million be maintained throughout the relevant period as well as limitations on dividends and limitations on incurring further senior debt.

Indebtedness and liquidity

As at 30 June 2013, the Group held cash and cash equivalents of EUR 176 million and had indebtedness of EUR 829 million, of which EUR 14 million is contractually repayable in the next 12 months. This results in a net debt position for the Group of EUR 653 million, 39% higher when compared to EUR 472 million as at 30 June 2012.

The Group has available a EUR 100 million RCF for future drawdowns until February 2014, provided the Group is in compliance with certain financial covenants.

As a reaction to the continuation of difficult trading conditions and price pressures in 2013, immediate temporary measures are being put in place to safeguard the Group's liquidity for the foreseeable future. These are described in more detail in section 3 under Going concern basis of accounting. Based on this, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

11. Segments and Divisions

NWR's business is organised into three segments, Coal, Coke, and Real Estate Division ('RED') segment, for which financial and other performance measures are separately available and regularly evaluated by the Chief Operating Decision Maker ('CODM'). The CODM is the Company's Board of Directors. These operational segments were identified based on the nature, performance and financial effects of key business activities of the Group.

The Group is further organised into two divisions: the Mining Division ('MD') and the Real Estate Division. The Company had A Shares and B Shares outstanding for the presented periods. The A Shares and B Shares are tracking stocks, which are designed to reflect the financial performance and economic value of the MD and RED, respectively. Due to the public listing of the Company's A shares, the Group provides divisional reporting showing separately the performance of the MD and RED. The main rights, obligations and relations between the RED and MD are described in the Divisional Policy Statement, available at the Company's website www.newworldresources.eu.

The divisional reporting, as such, is essential for the evaluation of the equity attributable for the listed part of the Group. As the operating segments form part of the divisions, and in order to provide understandable and transparent information, the Company decided to combine the segment and divisional disclosure into one table, with the Coal and Coke segments within the Mining division and the RED segment within Real Estate division. The Company's headquarters is included in the Other information under the Mining division. The accounting principles of this segmental and divisional disclosure are further described in NWR's 2012 Annual Report and Accounts.