May 15, 2012 / 2:28 PM / 5 years ago

UPDATE 3-Copper miner KGHM's profit falls on forex loss

* Q1 net PLN 1.4 bln, in line with f‘casts

* 2012 net profit goal PLN 3.8 bln before Canada unit

* Proposes dividend of PLN 17/shr

* Shares down 1.2 pct

By Agnieszka Barteczko and Adrian Krajewski

WARSAW, May 15 (Reuters) - Europe’s No.2 copper producer KGHM, which recently bought Canadian rival Quadra, posted a 29 percent drop in first-quarter net profit, hit by exchange losses from the strength of the zloty.

The result was in line with analysts’ expectations, with earnings for the first three months of the year down to 1.4 billion zlotys ($417 million).

After high copper prices and telecom asset spinoffs boosted its 2011 profits to a record 11.3 billion zlotys ($3.4 billion), the state-controlled miner expects its net profit for 2012 to be down more than 60 percent at 3.8 billion zlotys.

Neither the first-quarter figure nor the full-year goal includes the impact of KGHM’s recent C$3 billion ($3 billion)purchase of Quadra FNX, which according to KGHM closed the quarter with a net profit of $33 million.

The miner finalised the deal in March, but secured dollars for the purchase last year. The appreciating zloty in the first quarter raised KGHM’s costs expressed in the local currency.

“I haven’t yet seen the new forecasts for the group,” KBC analyst Robert Maj said. “This is what the market is waiting for. Expectations have it that Quadra’s results mean additional 500-600 million zlotys on the net level for the whole year.”

“For now we are not presenting a consolidated forecast, it’s difficult because of a number of reasons,” Chief Financial Officer Maciej Tybura told a news conference. “We are not able to say when and if we will present consolidated forecasts at all.”

While full-year results will be boosted by the inclusion of Quadra, renamed KGHM International, the company will be hit with a new Polish mining tax on copper and silver.

KGHM will bear the brunt of the levy, expecting the hit on its side to equal 1.3 billion zlotys this year from the expected 1.8 billion zlotys the tax is to bring to state coffers in 2012.

CEO Herbet Wirth also said on Tuesday that the board was proposing to pay out a dividend from KGHM’s 2011 profits of 17 zlotys per share.

That, however, depends on shareholders’ approval. The Polish Treasury holds a 32 percent stake in the company.

KGHM has said it would be eyeing more takeover targets following the Quadra buy, as it plans to raise copper output by 66 percent to 700,000 tonnes a year by 2018. It said its first-quarter copper output fell by 5 percent to 134,000 tonnes.

KGHM shares underperformed the weakening market with a 1.2-percent decline at 1400 GMT. They have gained more than 15 percent this year, outperforming Warsaw’s nearly flat main index .

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