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UPDATE 3-KGHM's Q2 profit fuels hopes of higher guidance

Published 08/14/2009, 07:54 AM
KBC
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HG
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* Q2 net at PLN 845 million, with H1 figure at PLN 1.47 bln

* Q2 sales down 10 percent yr-on-yr at PLN 2.72 bln

* In the course of revising 2009 guidance

* Hedged 108,000 tonnes of copper at $4,500-$4,700/tonne

* Shares up 4.0 percent

(Updates shares)

By Agnieszka Barteczko and Adrian Krajewski

WARSAW, Aug 14 (Reuters) - KGHM met forecasts with a 2 percent rise in second-quarter profit, cementing hopes Europe's second-biggest copper miner will raise guidance for 2009 and lifting its shares on Friday.

The Polish state-controlled group has now made around about three quarters of the 1.9 billion zlotys ($657 million) net profit it has predicted for all of 2009.

"We can expect that the management will increase this year's forecasts," said Robert Maj, analyst at KBC Securities in Warsaw. "The question is rather whether it will do it soon."

KGHM, which has already raised guidance once this year, said it was reviewing its 2009 budget.

A weaker zloty and a dividend from its stake in Poland's top mobile firm, Polkomtel, helped second-quarter net profit rise to 845 million zlotys. Revenue fell 10 percent to 2.72 billion zlotys, a touch below forecasts.

That left first-half earnings at 1.47 billion zlotys.

KGHM shares, which have tripled in price this year as the price of copper has risen, were up 4.0 percent at 1150 GMT, with Warsaw's main index up 1.3 percent and copper at an 11-month high.

Copper prices gained a third in the second quarter from the first three months of the year to $4,676 per tonne, but were still around a half of the record level set a year ago.

KGHM said it had hedged against the metal's price fall, a move analysts say could now cap profit if valuations stay at current levels or rise further.

"The company hedged mainly against a fall in copper prices," said Maj. "The risk is however that copper prices will remain high and the company might book losses on hegding."

The miner has hedged 108,000 tonnes of copper, or about a quarter of annual production, for the rest of this year at an average price in a range of $4,500-$4,700 a tonne.

"Admittedly, if copper prices are much higher than $6,000 a tonne, we will lose profits on part of our hedged sales," KGHM hedging department chief Marcin Mostowy told Reuters.

But he said the company expected any growth in dollar-denominated metal prices to be coupled with a stronger zloty. "In such a scenario, profits lost of copper hedging will be recompensated by currency hedging," Mostowy said.

Investors are awaiting comment on strategy from KGHM's recently appointed chief executive, Herbert Wirth, who has already said the group would scale down expansion plans after the government forced it to pay a large dividend. (Editing by John Stonestreet and Dan Lalor) ($1 = 02.883 zloty)

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