Net attributable earnings of PLN 314m for 4Q05, down -55.3 y/y and -68.0% q/q came below the consensus estimate of PLN 480m and below our own estimate of PLN 538m. Operating profit at PLN 400m, down -28.7 y/y and -66.5% q/q, came below expectations as well. Sales revenues were in line with expectations at PLN 12 968m, up 54.4 y/y and down -0.8% q/q. The earnings weakening in 4Q05 has been widely anticipated due to drop in Urals / Brent price differential and higher provisioning levels. However, the actual earnings figure was lower due to slightly lower petrochemicals contribution (on BOP maintenance shut down), sharper drop in refining cracks on gasoline and diesel, and continued problems with company’s retail operations. While expecting a negative market reaction to the reported earnings, we reiterate our Buy rating for the stock with PLN 69 fair value estimate, based on expectation of improvement in company’s earnings in 2006 due to improvement in petrochemicals contribution.
The company will hold today an analyst meeting in Warsaw at 11.00 CET followed by conference call at 16.30 CET (15:30 GMT). Dial in number is +44 (0) 20 7162 0025.