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Introduction & Market Context
KGHM Polska Miedź S.A. (WSE:KGH) presented its first quarter 2025 results on May 16, 2025, revealing a substantial boost in adjusted EBITDA despite facing production challenges. The Polish copper and silver producer benefited significantly from favorable commodity prices, with copper and silver prices rising 11% and 37% year-over-year, respectively.
The macroeconomic environment during Q1 2025 was characterized by strong precious metals prices, with copper averaging $9,340 per tonne and silver reaching $31.88 per ounce. These price increases occurred against a backdrop of slowing global economic growth, as projected by the IMF.
As shown in the following chart of key macroeconomic factors affecting KGHM’s performance:
Quarterly Performance Highlights
KGHM Group reported revenues of 8,942 million PLN in Q1 2025, representing an 8% increase compared to the same period last year. More impressively, adjusted EBITDA surged by 60% year-over-year to 2,489 million PLN, highlighting the company’s operational leverage to higher metal prices.
Despite these positive top-line results, profit for the period decreased by 22% to 330 million PLN, primarily due to unfavorable exchange differences totaling -654 million PLN, which offset operational gains.
The following chart illustrates these key financial indicators:
On the production front, KGHM faced some challenges with overall copper output declining by 6% year-over-year to 169,000 tonnes. This decrease was primarily driven by an 8% reduction in KGHM Polska Miedź S.A.’s production and a 10% drop in KGHM International’s output. However, Sierra Gorda S.C.M. provided a bright spot with a 22% increase in copper production.
The production results by segment are detailed in this chart:
Detailed Financial Analysis
The company’s financial performance was significantly influenced by higher commodity prices, which more than offset the impact of lower production volumes. Group revenues increased by 8% year-over-year, while operating costs rose by only 1%, creating substantial margin expansion.
The KGHM Group’s adjusted EBITDA of 2,489 million PLN (+60% year-over-year) was primarily driven by KGHM Polska Miedź S.A., which contributed the largest portion of the group’s earnings. The breakdown of financial indicators reveals the strong performance across most segments:
Cost control remained a focus area for the company, with the C1 unit cost for the KGHM Group decreasing by 7% year-over-year to 2.62 USD/lb. This improvement was particularly notable in international operations, with KGHM International’s C1 cost falling by 53% and Sierra Gorda’s decreasing by 38%. The parent company, however, saw a 5% increase in its C1 cost.
The following chart provides a detailed breakdown of C1 unit costs by segment:
Strategic Initiatives
KGHM continued to invest in its future growth, with capital expenditures of 692 million PLN in Q1 2025, representing a 6% increase compared to the same period last year. The majority of these investments were directed toward mining operations, with a focus on maintaining output and developing new shafts.
The capital expenditure allocation is illustrated in this chart:
A notable strategic development was the registration of KGHM’s HMG-S and HMG-B copper cathode brands on the CME Group Inc. (NASDAQ:CME) exchange. This registration confirms the high quality and stability of the company’s copper products and expands KGHM’s market reach, as its copper cathodes are now registered on the LME, SHFE, INE, and CME exchanges.
The company also maintained its focus on sustainable development, with significant initiatives in climate action and employee volunteering programs. KGHM’s climate goals include reducing emissions by 30% and increasing the use of renewable energy sources. The company reported that 76% of current actions relate to recovery, with only 24% focused on source reduction, indicating room for improvement in direct emissions control.
Forward-Looking Statements
Looking ahead, KGHM faces a mixed macroeconomic outlook. The IMF’s World Economic Outlook from April 2025 projects global growth to slow from 3.3% in 2024 to 2.8% in 2025, with similar slowdowns expected in most major economies. Poland’s GDP growth is projected at 2.9% in 2024 and 3.2% in 2025, providing a relatively stable domestic environment.
The company’s financial position remains solid, with net debt largely unchanged from March 31, 2024. Cash flow generation was strong in Q1 2025, with net cash generated from operating activities reaching 1,403 million PLN, which largely funded the investing activities of 1,319 million PLN.
KGHM’s EBITDA performance demonstrates the company’s ability to capitalize on favorable market conditions despite operational challenges. The 60% increase in adjusted EBITDA highlights the operational leverage inherent in the business model, where higher metal prices can significantly boost profitability even when production volumes decline.
As shown in this EBITDA and profit analysis:
The company continues to balance short-term operational performance with long-term strategic investments and sustainability goals. With planned CAPEX of 3,800 million PLN for the full year 2025, KGHM remains committed to maintaining its production capacity while also advancing its climate objectives and energy development program.
While production challenges persist, particularly in the parent company’s operations, the strong financial performance in Q1 2025 demonstrates KGHM’s resilience and ability to generate substantial cash flows in a favorable price environment. The company’s diversified asset base, with operations in Poland, Chile, and other international locations, provides some protection against regional operational challenges.
Full presentation:
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