KGHM will release its unconsolidated 4Q2005 financial statement on February 14th after the market closing. We expect KGHM to present a strong revenue line for 4Q05, which we estimate at PLN 2,242m, +43% y/y and +10% q/q, driven by the outstanding performance of copper prices, up 41% y/y and 17% q/q on average. Silver prices appreciated as well in 4Q05. Gains on rising metal prices should be offset somewhat by the negative effect of stronger zloty, which has gained 3% compared with 4Q04 and 2% versus previous quarter. We expect further net hedging losses, with hedging ratios close to 30% on copper, 40% on silver and 20% on the currency.
However, apart from strong revenues, KGHM's financial result is expected to include higher production costs, driven by higher materials and energy costs on rising scrap metals prices, as well as growing employment costs, following the payment of additional bonuses to the workforce. Therefore, we forecast a 4Q05 net attributable profit at PLN 554m, below the PLN 691m reported in the previous quarter. Our full-year expectation for 2005 net profit is PLN 2,263m, somewhat above the company's guidance for earnings of PLN 2,078m.
We reiterate our Sell rating for the stock with PLN 69.2 fair value estimate.