Budget for 2005 - update

Friday, 21 October, 2005

The Management Board of KGHM Polska Miedź S.A. announces that at its meeting of 21 October 2005 the Supervisory Board approved the Forecast of the financial results for 2005 – Annex to the Budget. The Company announced a correction to the Budget in current reports on 30 August and 13 September 2005.

The updated Budget for 2005 assumes the achievement of revenues from the sale of products, goods for resale and materials in the amount of PLN 7 540 mln and net profit of PLN 2 078 mln. This means an increase in the forecast in relation to the adjusted Budget respectively by 4.5% and 8.2%.

The assumptions to the Annex to the Budget for 2005 subject to change are presented in the table below:

 UnitBudget 2005 *Annex to the Budget 2005 **Change
Revenues from the sale of products, goods for resale and materials mln PLN 7 217 7 540 323
Net profit mln PLN 1 920 2 078 158
Average annual electrolytic copper quotations USD/t 3 200 3 553 353
Average annual metallic silver quotations USD/kg 222 226 4
Average annual exchange rate PLN/USD 3.3 3.22 -0.08
Total unit cost of electrolytic copper production PLN/t 7 450 7 720 270
  USD/t 2 258 2 394 136

*   Approved by the Supervisory Board on 12 September 2005

** Approved by the Supervisory Board on 21 October 2005

The basis for reviewing the assumptions to the Budget were the results of:
  •  a decision by the Management Board of KGHM on the payment of a one-off special bonus, in accordance with an agreement entered into on 3 October 2005, „Agreement on postulates regarding wages submitted by the Trade Unions”, and
  •  updating of the forecasts of metal prices and exchange rates,
 
and of the financial results achieved during the period from January to the end of August 2005 and projected for September 2005 (excluding accounting by the equity method in the third quarter of 2005).
 
The payment of a special bonus in the amount of 100% of the average monthly wage causes an increase in the total unit cost of electrolytic copper production by 182 PLN/t Cu (impact on profit before tax -PLN 100 mln). Also affecting copper production costs were actual reflected copper prices and the exchange rate, causing an increase in the costs of consuming scrap, external concentrates and blister copper in the third quarter of 2005 (impact on unit cost +88 PLN/t Cu; on profit before tax -PLN 48 mln).