KGHM, Europe’s second-biggest copper producer, posted a lower-than-expected consolidated net profit of zł.685 million in the second quarter of 2013, which was roughly a 60 percent drop year-on-year and significantly lower than the average market forecast of zł.819 million.
Analysts say the copper producer's loss on hedging was the biggest disappointment
Courtesy of KGHM
“Because of worsening macroeconomic conditions the company is in the process of verifying its results forecast,” Włodzimierz Kiciński, vice president of KGHM, said in a statement.
The company’s net profit in the first half of the year amounted to zł.1.4 billion, 53.8 percent of the forecast net profit for the full year.
In the first half of the year, KGHM paid a mineral tax (introduced last year) of over zł.1 billion compared to the zł.443 million it paid in the corresponding period of last year. So is the company’s slump in profits due to the new tax or rather the result of worsening macroeconomic conditions its vice president spoke of?
“Actually both played a part. However, the tax should not have had such a significant impact on its year-on-year comparisons because in Q2 of 2012, KGHM had already started paying this new mineral tax,” said Piotr Nawrocki, a sector analyst at Dom Inwestycyjny Investors.
Mr Nawrocki said analysts had already factored in the tax and lower metal prices in their forecasts.
“What disappointed the market more was KGHM’s loss of over zł.50 million on hedging. We had expected them to make a profit from that,” he said.
Mr Nawrocki also pointed to the fact that KGHM International, the company’s foreign subsidiary, had recorded a net profit of only zł.7 million. Furthermore, Mr Nawrocki also predicted that if, as some expect, the US Fed ceases its quantitative easing program in 2014, copper prices could fall further along with other commodities which have been a favorite of investors recently.
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