ROUNDUP Kazakhmys FY results miss hopes; dearth of acquisition news weighs

Kazakhmys PLC full year profits more than doubled on high copper prices but still came in below analysts expectations, keeping the shares volatile for most of the day, with the share price swings compounded by a lack of acquisition news.

At 1.08 pm shares had recovered from an earlier 25 pence slump to add 5 at 1094, but continued to underperform the mining sector, with BHP Billiton (nyse: BBL - news - people ) gaining 4.2 pct, or 42-1/2 to 1032, Antofagasta lifting 18.50 pence to 466-1/2 and Anglo American (nasdaq: AAUK - news - people ) adding 85 to 2439.

The Kazakh copper producer said pretax profit for the year-ended Dec 31 rose to 2.17 bln usd from 0.85 bln, on the back of revenues up 94 pct to 5.05 bln usd.

Earnings before interest, tax, depreciation and amortisation excluding special items rose to 2.3 bln usd from 1.07 bln, slightly below consensus forecasts of 2.4 bln usd.

Earnings per share also came in below expectations at 3.00 usd -- consensus forecasts had been for 3.07 usd, compared with last year's 1.31 usd.

Kazakhmys lifted its total dividend by 7 pct to 38.5 cents on a comparable post-Listing basis.

In reaction to the data, Credit Suisse said that one disappointing feature of the results was the lack of new deals.

It thought that last week's acquisition of acreage in the Caspian Sea -- through its buy of exploration company Dostan-Temir -- was a stepping stone in petroleum, but the broker was hoping to hear more on other potential deals in nickel, zinc, iron ore and copper.

The analyst added that this is in line with the company's mantra of becoming 'The BHP of Kazakhstan' - which so far is taking longer than it had anticipated, partly due to the rising costs of buying assets.

Chief executive Oleg Novachuk echoed this view, saying the company had almost bought a project 'in the oil sector' last year 'but we thought the price they were asking was too high.' He could not reveal the company or the price.

More than a year after its London listing, and with no major acquisitions under its belt, Novachuk said the company is still looking for a deal that would deliver good shareholder value, 'therefore we are trying to select and deliver one good deal rather than a few questionable ones.'

Without a substantial return to shareholders, which has been favoured by major mining companies like BHP Billliton and Rio Tinto benefiting from the commodity price boom, Kazakhmys accumulated free cash flow in 2006 of 1.3 bln usd with which to make acquisitions.

The company also has the option, exercisable this year, to buy Chairman Vladimir Kim's stake in fellow resources group Eurasian Natural Resources Corporation PLC.

The chairman owns a 25 pct stake in the holding company of ENRC, which translates to an 18.8 pct indirect stake in the integrated mining company, which is headquartered in London.

ENRC, which is currently mulling a London listing, today announced the appointment of a new finance director Miguel Perry.

Kazakhmys' Novachuk said it would be happy either way if the company listed or remained private, because 'we will have ways to co-operate.'

He explained that if they do list, 'our stake will be liquid, but we are very comfortable either way private or listed.'

Kazakhmys said its independent directors were in the advanced stages of performing a valuation of ENRC, and would make a recommendation to exercise the option 'when appropriate and in the best interest of the shareholders.'

An announcement on the conclusions will be made in due course, Kazakhmys said.

Looking ahead the company said it expects rising labour costs in Kazakhstan to continue to impact on costs but added it was confident of a successful 2007.

kathy.sandler@thomson.com

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