Golden copper

Though analysts' predictions for KGHM's Q3 results were optimistic, they still underestimated the copper giant's actual figures for the period. On average, analysts expected KGHM to post a net profit of zł.560 million for the quarter, but in reality the figure came in at zł.691 million. For the nine months of this year, KGHM's net profit reached zł.1.7 billion, which exceeds last year's figure for the same period by some zł.400 million.

"There are three main reasons for this," Dariusz Wyborski, KGHM's spokesperson said. "First of all, copper and silver prices have reached their highest level in recent history. Second of all, we are very dependent on currency levels. Every change of one grosz on złoty-dollar relations translates into a zł.10 million fluctuation for us. If the złoty had not gone up so much, our results would have been even better."

KGHM posted record profits on consolidated sales - zł.5.56 billion, zł.850 million more than in 2004 - as well as on operational profit. According to the company's press office, the record-high results will allow KGHM to put more money into investments. Wyborski stated that KGHM will spend zł.800 million annually over the next few years in order to renew its machinery, introduce water-based logistics, build a brand new abyssal shaft (below the 1,250-meters level) and invest money abroad.

The company also revealed last week that it plans to start construction of a new 350,000 tonne-per-year capacity smelter at its Glogow II plant. According to KGHM's president, Marek Szczerbiak, the company has already spent zł.40 million on initial preparations, and will invest zł.700 million in the smelter next year.

"We will build one of the most modern metallurgical plants' in the world. In five years it will allow us to increase our production capacity and create savings from the cheaper, more efficient environmentally friendly technology," Szczerbiak said.

In a bid to shed non-core businesses and focus on copper and silver production, the metals group has also returned to the issue of selling Dialog, its fixed-line operator, company officials said. The deal has been delayed for three years due to several management changes, and may be pushed back again as during this year's election campaigns Law and Justice indicated that it wanted to shake up KGHM's leftist-appointed board.

KGHM's forecast for 2005 shows annual net profit will exceed zł.2 billion. The total amount of copper produced by the company should reach 550,000 tonnes. (Reuters)