Annual Shareholders Meeting will decide today on the dividend payout from 2006 earnings. The management proposal stands at PLN 7 per share (40% payout). KGHM deputy CEO Mr. Bylicki warned that the company would need to increase its borrowing to PLN 3-3.5bn over the next 4-5 years (right now it has no debt) in order to carry out its investment plans (PLN16.3bn over the next 10 years), assuming that copper price fall to USD/t 3000. Meanwhile, the State Treasury (holds 42.5% of shares), has still not made it clear, whether it would demand a higher dividend payout, similar to last year.
Our view: In our opinion, the deputy CEO statement strengthens the case for trimming a long term capex and maintaining high dividend payout in good years. We stick to our scenario of a 80% payout, considering i) similar payout ratio last year (87%), ii) pressure by State Treasury on dividends in other companies (Lotos).