Foreign investors to get seat on KGHM board of supervisors
The Treasury Ministry this week plans to give international investors a seat on KGHM Polska Miedz's board of supervisors, reversing a move by the former minister and helping to ease relations with foreign shareholders.
In December the treasury, which controlled five of nine positions on copper giant KGHM's supervisory board, added a sixth by taking the seat belonging to Global Depository Receipts (GDR) holders. International investors hold more than 20% of the company's shares, while the treasury holds just under half.
"The treasury has decided to bring back a representative of GDR holders to restore a normal attitude on the capital market," said Agnieszka Dluska, a Treasury Ministry press office employee. GDRs are certificates of share ownership, not actual shares, traded on the London Stock Exchange.
"I think this is a positive move," said Mike Hughes, director and global product manager for depository receipts at Deutsche Bank, which is the depository bank for the GDR shares. "I believe the company also feels that way." GDR holders have until the close of business Monday to choose a representative, he said.
KGHM expects the move to help investor confidence in the company and analysts note that it should help Poland's image abroad. Treasury Minister Aldona Kamela-Sowinska has reversed the policies of her predecessor toward several state-controlled companies as she has sought to mend relations with international investors since taking her post at the end of February.
The ouster of the international shareholders' representative by then-minister Andrzej Chronowski "simply destroyed investor confidence in the company," said a KGHM employee who asked not to be named. The reappointment will help restore that confidence, he added.
"I think that it is a return to a normal situation on the supervisory board," said Rafal Jankowski, an analyst with CDM Pekao Securities. "The representative of any important shareholder should be present."
According to the April 19 meeting agenda, one supervisor will be removed from KGHM's board and another added. Chronowski had replaced the five-person treasury contingent on the supervisory board in addition to nabbing a sixth seat.
KGHM, listed on the London and Warsaw stock exchanges since July 1997, is one of the world's biggest copper mining concerns and has a growing stake in the telecoms sector. The Lubin-based company posted zl. 4.98 billion ($1.22 billion) in revenue in 2000, an increase of 21% from 1999, the company said. But stock prices have fallen sharply. As of last week, shares had lost about one-third of their value in one year.
Jankowski said there are plenty of reasons for KGHM's decline on the stock market, especially negative sentiment about the company directly connected with the remaining three seats on the board, which are controlled by employees.
"Their influence on the management board and decision-making process are much too big, more than in normal Western-style economies," he said. "They are not shareholders and they have no right to decide."
Government and employee influence could diminish if the treasury moves ahead with privatization and sells its stake in the firm, he noted. KGHM is hoping that an additional 10% could be privatized this year, though it is not clear what the treasury will do and poor market conditions make a sell-off less attractive.
Another investor concern is relatively high wages, Jankowski said. The average monthly salary in 2000 was zl. 4,185 and this year will be zl. 4,650 for the company's 18,545 workers, according to KGHM. The average gross wage in the enterprise sector in February was zl. 2,075, according to the Central Statistical Office (GUS).
Other factors hurting the stock include weak copper prices and a strong zloty, which hampers exports, Jankowski said.
