(Adds CEO comments, share performance, more detail)
WARSAW (Thomson Financial) - Polish copper producer KGHM posted a 6 percent
rise in first-quarter earnings as sales of metal grew, but a retreat in copper
prices knocked it shares lower.
Unconsolidated net profit, which excludes earnings from KGHM's phone units,
rose to 982 million zlotys, or 34 percent of the full-year plan, and the
state-controlled company said it would revise 2008 guidance in the "next few
weeks".
The management will also present an amended dividend proposals next Friday,
the newly appointed Chief Executive Miroslaw Krutin told a news conference. He
declining to give further details.
Shares in KGHM slid 2.3 percent on Friday after touching a two-month high
earlier this week prompted by a fall in copper prices on the London Metal
Exchange due to rising stocks of the metal and worries over demand from Asia.
Analysts also said the results, that came in a touch above the expected 955
million zlotys, likely encouraged some investors to book profits amid a general
retreat in local stock.
"The results reflect the solid situation on the copper market," Erste
analysts Artur Iwanski wrote in a note to clients. "The revenue was driven by
very strong metal prices and the operating result was supported by slightly
lower than expected productions cost."
Revenues jumped 14 percent to 3 billion zlotys as KGHM benefited from a 31
percent rise in the average copper price, although the strength of the zloty
currency against the dollar cancelled out large chunk of those gains.
KGHM cut down losses on past hedging contracts, which forced the company to
sell copper below market prices, to 75,000 zlotys in the first quarter from 244
million a year earlier.
KGHM, the copper miner with largest European output, also raised its sales
volumes of copper by more than 2 percent to 132,070 tonnes in the first quarter.
Costs increased 12 percent because the company is spending more on wages for
its 18,250 workers and makes increased use of scrap metal in smelters to save
dwindling deposits before copper from deeper pits comes online next decade.
Krutin, who took over as CEO last month, said he would meet the supervisory
board on May 16 to present a new dividend proposal, but declined to say whether
it would be higher or lower than the 29 percent payout offered by the previous
management.
"It's highly likely that the proposal will change," he told a news
conference. "There is one factor that we have to consider, which is money set
aside to raise stake in Polkomtel."
The company plans to spend around 750 million zlotys to boosts its stake in
mobile phone company Polkomtel to 24 percent, but the deal has been held up for
two years by an ownership dispute.
KGHM paid the entire 3.4 billion zlotys net profit in 2006 as dividend.
Chief Financial Officer Maciej Tybura said that the company is reviewing its
2008 forecast after copper prices in the first quarter came in 9 percent higher
than the plan and the dollar, in which metal is priced, was 4 percent weaker.
KGHM expects to earn 2.9 billion zlotys on 11.2 billion in sales in 2008.
Shares in KGHM have gained 10 percent in the last three months and
outperformed the blue-chip WIG20 index by eight percent, according to Thomson
Datastream.
piotr.skolimowski@thomsonreuters.com +48 22 447 24 36
ps1/jlc
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