Poland’s KGHM on Wednesday reported a bigger-than-expected fall in net profit in the first half of 2016 on the back of losses on its foreign assets, driven by rising costs and falling copper prices.
The State-run miner, which is Europe’s No 2 copper producer, reported a 75% fall in its consolidated net profit to 296-million zlotys, while analysts had expected the result to come in at 406-million zlotys.
The group said in the half-year that the net loss of KGHM International, which includes KGHM’s foreign assets, rose to 533-million zlotys in the period from 295-million last year, mostly due to losses in its Chilean copper mine Sierra Gorda.
The Sierra Gorda mine, which KGHM co-owns with Japan’s Sumitomo, started commercial production last year, but KGHM had to write down its value significantly earlier this year due to the slump in copper prices.
On Wednesday the company signalled it may have to run further asset impairment tests.
“As part of the revision of the strategy, the financing models for individual assets will be updated,” KGHM said.
The company added that the average copper price fell by almost 21% in the first half of this year to $4 701/t.
KGHM did not publish a net profit figure for the second quarter but, according to Reuters calculations, it stood at 135-million zlotys and came in below analysts’ expectations of 245-million zlotys.
The company’s Polish business, on which KGHM’s dividends are based, booked a 49% fall in H1 net profit to 668-million zlotys, compared with 704-million zlotys seen in Reuters’ poll.
KGHM also said it booked a 57-million zlotys impairment loss related to a stake it owns in State-run utility Tauron.