KGHM profit disappoints analysts

State-controlled KGHM, the world's fourth-largest copper producer, had revenues of zł.3.34 billion in Q1, 13 percent more than in Q1 2007. At zł.877.34 million, the firm's net profit grew by 10.7 percent y/y, although the figure was below expectations.

According to the firm, its lower-than-expected results were caused by falling copper prices and rising labor costs. These factors also contributed to KGHM's falling share price.

"Their results didn't contain any positive surprises, so people are selling on the news," Pawel Puchalski, an analyst at BZ WBK, told Reuters. "Also, copper prices have been flat recently, the dollar has weakened [against the złoty] and labor costs are up." The strong local currency has also cut most of the gains from a 16-percent rise in copper prices, denominated in dollars, in Q1.

Although conditions on the market have worsened, UniCredit analysts changed their recommendation for KGHM to "buy." "Our positive assessment is based primarily on the optimistic outlook for copper prices," the firm explained in a statement.

The company plans to spend zł.700 million on increasing its stake in mobile operator Polkomtel. The Treasury Ministry has hinted, however, that it may ask KGHM to pay a larger-than-planned dividend of 29-percent and this move could scupper KGHM's Polkomtel plan.