KGHM shares drop with management board changes
The Treasury Ministry selects a geology professor to head up one of the nation's biggest listed firms - copper and telecoms conglomerate KGHM Polska Miedź - but investors are not impressed.
Investors and analysts were unimpressed with a new management team at KGHM Polska Miedź, as share prices sank last week after the government installed fresh leadership at the copper mining and telecom firm.
The executive-level changes were expected as the Democratic Left Alliance (SLD)-led government, in office since October, rearranges supervisory and management boards at state-controlled companies to align with political preferences. Oil refiner and retailer Polski Koncern Naftowy Orlen (PKN Orlen), another of Poland's largest publicly traded firms, is likely to feel the effect of autumn elections in February, when the supervisory board is scheduled to meet.
The Treasury Ministry last week recalled five members of KGHM's supervisory board and, with a majority on the nine-person panel, fired the old management team. Stanisław Speczik, a 54-year-old geology professor at the University of Warsaw, replaced Marian Krzemiński as the company's chief executive.
"I think it's not positive information for the company," said Michał Mierzwa, an analyst with Erste Bank. "I think KGHM needs an experienced manager as CEO, not a scientist or a professor from the university. That's why I think he's not a good candidate for CEO."
Speczik was on KGHM's supervisory board from 1994 to 1997 and has served on metals rolling company Łabędy's supervisory board since 1997, according to KGHM. He is also a Warsaw city councilman, elected under SLD's banner.
Stanisław Siewierski, KGHM's president from May 1995 to March 1999, was named first vice president. A full management board, with five to six people, should be in place this or next week, said Wojciech Marciniak, KGHM investor relations director.
With Speczik installed as president and Siewierski as his deputy, investors are now keen to hear the company's strategic plan for the next four years.
"We know the CEO so now we should wait for the publication of KGHM's new strategy," said Rafał Jankowski, an analyst at CDM Pekao Securities. "The most important event will be the publication of this strategy."
Uncertainty over the company's direction fueled a drop-off in share value for the week. Share prices slipped 8.1% to zł. 13.55 for the five days ending Thursday.
Marciniak said that once the new management board is fully installed it would work out a plan. "Probably there will be some change in the strategy, but the board needs some time to work on it," he said.
As a state-owned company, the strategic direction is likely to come from Treasury Minister Wiesław Kaczmarek.
"I think there is every likelihood that Kaczmarek will change something in the strategy of the company," Jankowski said.
Among analysts, KGHM's stake in the telecoms sector is a major concern, with some warning that proceeds from selling off one company could be used to buy into another, less attractive, sector such as coal mining and power generation. KGHM holds close to a 20% stake in cellular phone operator Polkomtel and is sole owner of fixed-line operator Telefonia Lokalna (TL).
Polkomtel is generally considered an attractive investment and KGHM's stake should be easy to sell, but TL has been a financial drain for the Lubin-based company and locating an investor has been a challenge.
The treasury owns about 44% of KGHM's stock and controls another 5% through Powszechna Kasa Oszczędności Bank Polski (PKO BP). KGHM lost zł. 124.7 million ($31.18 million) through the first three quarters of 2001, according to its consolidated financial report. Low copper prices and a strong złoty have hurt the company - around 90% of revenues are from copper and copper products sales and more than 40% of that is exported. But analysts also cite high salaries and some questionable investments as damaging the bottom line.
Jeff Sparshott
