KGHM raises net profit guidance by 15%

The announcement comes on the back of higher expectations for revenue and copper prices

WARSAW (Reuters) - 

Europe's No. 2 copper producer raised its 2009 net profit guidance by 15 percent on the back of higher expectations for revenue and average copper prices, and most analysts said the new target was still conservative.

The state-owned miner pegged its full-year bottom line at 2.25 billion zlotys ($816 million), expecting revenues of 10.8 billion, or 12 percent higher than the previous year.

KGHM shares rose as much as 3.5 percent to their highest level since May 2008 after the announcement and were up 1.3 percent by 1502 GMT at 108.20 zlotys.

"I expected a target revision, but I saw the full-year net profit at 2.9 billion zlotys," Deutsche Bank analyst Tomasz Krukowski said.

"We believe it's still 'worst-case scenario', assuming the highest possible losses at hedging," DM BZ WBK analyst Pawel Puchalski added. "We still see upside to full-year results, versus the newest official guidance."

KGHM, which is scheduled to publish its third-quarter results on Friday, also raised its expectations for this year's average copper price by 12 percent to $5,045 a tonne, with its average dollar rate forecast 1 percent higher at 3.13 zlotys.

It also notched up its unit production costs to 11,254 zlotys per tonne.

In August, KGHM hedged 108,000 tonnes, about a quarter of its annual production, for the rest of this year at an average price in a range of $4,500 to $4,700 a tonne.

"It's assumed that on a small part of our hedged production we may see a negative result if prices in this time period significantly exceed $6,000 per tonne, as we're seeing now," said Jaroslaw Romanowski, the head of KGHM's hedging and trading department.

"Since the hedge at $4,500-$4,700 per tonne is a right and not a requirement to sell it doesn't mean that at the price of $6,000 the company is losing on the difference."

The metal's price has more than doubled this year to over $6,500 a tonne, boosted mainly by Chinese buying and dollar weakness.

Last month, KGHM deputy chief told Reuters KGHM expected its third-quarter net profit to be below the second quarter's 845 million zlotys due to the negative effect of hedging and the absence of a 300 million dividend boost from mobile operator Polkomtel.

To see a Reuters earnings poll on KGHM third-quarter results, double click ($1=2.757 Zloty) (Reporting by Adrian Krajewski and Agnieszka Barteczko, editing by Will Waterman and Hans Peters)

© Thomson Reuters 2009 All rights reserved

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