Bloomberg News

KGHM Slumps After UBS Downgrades Stock on Copper Outlook

April 23, 2013

KGHM Polska Miedz SA (KGH), Poland’s sole copper and silver producer, headed for a seven-month low as UBS AG downgraded the stock on falling commodity prices.

The shares sank 3.9 percent to 140.05 zloty at 11:07 a.m. in Warsaw, poised to close at the lowest level since September and extending this year’s decline to 26 percent. Copper fell to an 18-month low in London today and touched levels not seen in Shanghai since 2009 as manufacturing growth in China, the world’s biggest user of metals and energy, missed estimates.

KGHM’s stock slump this year isn’t “exaggerated given that lower commodity prices not only will impact KGHM profits but also increase its cost profile due to lower silver credits,” Michal Potyra, an analyst at UBS in Warsaw, said in a research note today.

UBS cut its recommendation for the state-controlled producer to neutral from buy and lowered its price estimate to 150 zloty from 202 zloty.

The producer’s risk profile increased “significantly and its mid-term dividend payment capacity is reduced,” according to UBS, which expects next year’s dividend to drop to 9.6 zloty a share and from 2014 earnings to 6.3 zloty.

This year KGHM shareholders will probably demand a “high dividend” of 14.6 zloty per share, compared with 12 zloty a share seen in a Bloomberg forecast, according to UBS. The government, which faces a widening budget deficit, holds a 32 percent stake in KGHM.

To contact the reporter on this story: Piotr Bujnicki in Warsaw at

To contact the editor responsible for this story: Wojciech Moskwa at

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