Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KGHM Polska Miedz SA (XPRA:KGH, Financial) reported a 35% increase in adjusted EBITDA, reaching PLN 4.2 billion for the first half of 2024.
- Net profit surged by over 200%, from PLN 400 million in the first half of 2023 to PLN 1.74 billion in the first half of 2024.
- Copper prices increased by 4% in dollar terms, contributing positively to the company's revenue.
- The company successfully issued bonds worth PLN 1 billion, marking the cheapest post-COVID non-rated bond issue.
- KGHM Polska Miedz SA (XPRA:KGH) achieved a 7% reduction in C1 costs, reflecting improved operational efficiency.
Negative Points
- Revenue slightly decreased by 2%, ending at PLN 17.48 billion for the first half of 2024.
- Production of metallic silver fell by 4.7% compared to the first half of 2023.
- Gold production saw a significant decline of 22.4%, attributed to a high baseline and reduced processing of imported concentrate.
- CapEx increased by 50% compared to the same period last year, reaching PLN 1.75 billion.
- Sierra Gorda's performance was weaker, with a 10% decline in production, impacting overall results.
Q & A Highlights
Q: Employee-related costs grew by 1%-2% in the second quarter and first half of the year. Should we expect a strong increase in the second half?
A: Employee costs result from our collective bargaining agreement, which remains unchanged. The agreed increase is 9.2%. It’s difficult to make quarter-to-quarter comparisons due to various levels of annual bonuses linked to performance. The write-off of actuarial provision had a positive impact, reducing this item. No surprises are expected here. (Andrzej Szydlo, President of the Management Board)
Q: Has the company achieved its target level of output in Deep Glogow, and will there be no increase in output from this field?
A: The installations have achieved the optimum level of performance. If there is a new branch of operation, we will have an increase. However, we should not count branches of Deep Glogow as separate mines. (Zbigniew Bryja, Vice-President of the Management Board for Development)
Q: Will next year's CapEx be significantly higher due to investments in more shafts and desalination facilities?
A: CapEx will be on the increase if we want to keep the company growing and operational in the long term. We need to start certain capital expenditures early to sustain stable production and safe operations. (Andrzej Szydlo, President of the Management Board)
Q: What accounts for the additional PLN1 billion in CapEx for the next 6 months?
A: CapEx is not proportionate to time during the year. We don’t see any risk of not delivering CapEx in 2024. We are building a strategy and putting in place the hierarchy of projects. (Andrzej Szydlo, President of the Management Board)
Q: What is the status of the Victoria project, and will there be an acceleration of CapEx?
A: We are ahead of a major decision regarding the Victoria project. Over the next few weeks, we will make the decision and address various scenarios, including financial ones. (Piotr Krzyzewski, Vice-President of the Management Board for Finance)
Q: What benefits might arise from copper being added to the list of strategic commodities in the EU?
A: It’s not quite known what benefits may arise. We may look forward to some positive effects, but it’s more about the overall atmosphere around KGHM and copper rather than specific grants or support mechanisms. (Andrzej Szydlo, President of the Management Board)
Q: How lasting is the growth in profitability for KGHM International?
A: We are prepared for a long-term process and building regularity in performance. We focus on optimizing recovery and maintenance for long-term stability. (Piotr Krzyzewski, Vice-President of the Management Board for Finance)
Q: What is your evaluation of prospects for copper at the end of this year?
A: Forecasts are difficult. We expect the demand for copper to grow, and supply is likely to be limited. We take a long-term perspective, knowing that copper is a strategic element. (Piotr Krzyzewski, Vice-President of the Management Board for Finance)
Q: Can you comment on your hedging policy for metals, energy, and foreign currencies?
A: We are actively engaged in hedging policy. We have transactions for almost 30,000 tonnes of copper and 3 million ounces of silver. We are making careful preparations for future transactions. (Piotr Krzyzewski, Vice-President of the Management Board for Finance)
Q: When are you planning to complete the modernization of refinement in Legnica smelter, and what expenditures do you plan for this?
A: We need to have a close look at the planned CapEx because it seems very hard to maintain. We will address this question within a month or two after completing the analysis of the project. (Andrzej Szydlo, President of the Management Board)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
