Europe’s largest copper miner’s shares jump as 3Q beats expectations

19 November 2008 | 03:09 Code : 18362 Geoscience events
Europe’s largest copper miner, reported a 38 percent drop in third-quarter net....

Europe’s largest copper miner, reported a 38 percent drop in third-quarter net profit on Friday, but beat expectations as a weaker zloty help to cushion the effects of tumbling copper prices.The state-controlled group’s unconsolidated net profit -- on which analysts focus as it indicates the performance of KGHM’s core operations -- fell to 718 million zlotys ($239 million) compared to an average 587 million seen in a Reuters poll.Revenue dropped by a fifth to 2.72 billion zlotys versus a market consensus of 2.65 billion.KGHM shares, which have been among Warsaw’s worst performance this year, jumped 8 percent to 26.99 zlotys in early trade, outperforming a 3.6 percent rise on Warsaw’s WIG20 index."Profit on currency differences helped the company, especially since it had receivables in foreign currency," said Pawel Puchalski, analyst at DM BZ WBK in Warsaw.KGHM sells its production denominated in dollars that have gained against the Polish currency since bottoming in August. The group also earned 158 million zlotys on hedging operations.KGHM maintained its 2008 guidance, saying it still expected a net profit of 2.9 billion zlotys on sales of 11.2 billion, as the zloty weakness against the dollar, in which copper MCU3 is denominated, offsets the tumble in the metal’s value.The group warned last month that falling copper prices, which lost more than half their value since record highs in July, had pushed it to the verge of profitability.The Polish miner is less flexible than most of its rivals because it is saddled with high costs of production and labour. Last month KGHM unions dropped demands for a second wage rise this year, having earlier threatened to strike.Shares in KGHM are among Warsaw’s worst performers this year, shedding three quarters of their value, underperforming Warsaw’s blue-chip WIG20 index .WIG20, which lost 51 percent.

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