KGHM delivered net earnings of PLN 1,124m for 2Q06, up 127% y/y and up 29% q/q, coming almost in line with the consensus forecast of PLN 1,161m, and slightly above our estimate of PLN 1,069m. Operating profit of PLN 1,206m for 2Q06, up 136% y/y and up 27% q/q, came in below the consensus forecast of PLN 1,325m, but close to our estimate of PLN 1,280m. Revenues came in at PLN 3,142m up 70% y/y, above market consensus of PLN 2,983m, and our estimate of PLN 3,011m, driven by an increase of copper prices on the London Metal Exchange (LME) by 122% y/y. Unit production cost grew to PLN/t 8,984 in 1H06 driven by higher cost of scrap metals, other materials and employee bonus payment.
Our view: We view the results positively, as KGHM delivered its highest ever net profit in a quarter, in line with the market expectation. The company is on track to exceed its own profit guidance for 2006 and meet our own, higher profit forecast. However, we would expect some profit taking today, considering that the stock has gained in recent weeks in anticipation of good results.