Dull finish for copper giant
Metals producer KGHM reported a weaker than expected fourth-quarter net profit despite high copper prices. Analysts suggest the concern's bottom line was hit again by risky hedging deals.
KGHM, the world's sixthlargest copper producer and number two in silver, reported a net profit of zł.172 million in the fourth quarter. The result was further inflated by a zł.106 million gain from its affiliates after the company changed accounting practices to consolidate its profitable mobile phone operator Polkomtel, in which it holds a minority stake.
"Looking at their results from revenue to operating level it is quite good, but when we start analyzing their financial results strange things turn up, which is probably due to their hedging," said Erste Securities analyst, Michal Mierzwa.
"Their net result does disappoint, particularly when we take into account that it was in large part boosted by minorities," he added.
Hedging transactions have long been seen as a key uncertainty in predicting KGHM results, diminishing transparency in the state-controlled group, which is one of Warsaw's biggest stocks.
"Investors will see this as yet another disappointing result. This could be due to either hedging or operational costs. But investors are getting simply lost in [KGHM's] financial operations," CA IB analyst, Flawiusz Pawluk, said.
The firm's fourth quarter sales were zł.1.57 billion, up from forecasts of zł.1.49 billion and above the zł.1.27 billion generated in the same quarter of 2003. Full-year sales rose to zł.6.16 billion from zł.4.74 billion in 2003.
Analysts said that even though the results show KGHM surpassing its 2004 profit target of zł.1.34 billion, they were still not good enough. Full-year net profits stood at just under zł.1.4 billion. "It's a disaster. These are very weak numbers," said an analyst at one Western bank. (Reuters)
KGHM, the world's sixthlargest copper producer and number two in silver, reported a net profit of zł.172 million in the fourth quarter. The result was further inflated by a zł.106 million gain from its affiliates after the company changed accounting practices to consolidate its profitable mobile phone operator Polkomtel, in which it holds a minority stake.
"Looking at their results from revenue to operating level it is quite good, but when we start analyzing their financial results strange things turn up, which is probably due to their hedging," said Erste Securities analyst, Michal Mierzwa.
"Their net result does disappoint, particularly when we take into account that it was in large part boosted by minorities," he added.
Hedging transactions have long been seen as a key uncertainty in predicting KGHM results, diminishing transparency in the state-controlled group, which is one of Warsaw's biggest stocks.
"Investors will see this as yet another disappointing result. This could be due to either hedging or operational costs. But investors are getting simply lost in [KGHM's] financial operations," CA IB analyst, Flawiusz Pawluk, said.
The firm's fourth quarter sales were zł.1.57 billion, up from forecasts of zł.1.49 billion and above the zł.1.27 billion generated in the same quarter of 2003. Full-year sales rose to zł.6.16 billion from zł.4.74 billion in 2003.
Analysts said that even though the results show KGHM surpassing its 2004 profit target of zł.1.34 billion, they were still not good enough. Full-year net profits stood at just under zł.1.4 billion. "It's a disaster. These are very weak numbers," said an analyst at one Western bank. (Reuters)
