Poland’s ZAT lost nearly €4m on currency hedging in ‘08

12 January 2009 13:42  [Source: ICIS news]

PRAGUE (ICIS news)--Poland’s Zaklady Azotowe Tarnow (ZAT) in 2008 lost up to zloty (Zl) 20m (€4.97m, $6.7m) on currency-hedging bets that turned sour amid the global economic crisis, the company said on Monday.

Despite the loss, ZAT would still achieve its 2008 bottom-line target of Zl73.9m, said CEO Jerzy Marciniak.

Marciniak said some foreign exchange option contracts placed by ZAT were due to mature in July this year, so the company would probably book some currency-hedging losses for 2009.

The 2009 losses would be smaller than those suffered in the previous year, Marciniak said.

The 2008 loss could be equivalent to 20% of ZAT's expected net profit for that year and approximately 5% of its market capitalisation, Wood & Company chemical industry analyst Barbara Zaleska said.

Last year, the company hedged half of its foreign exchange exposure by using a “zero-cost” strategy and purchasing two call options for every single put, Zaleska said.

She said ZAT stock would “likely come under pressure” given the level of the losses.

Several Polish chemical companies have suffered substantial losses on currency-hedging contracts that hit exporters after the zloty sank against the euro as a result of the financial turbulence.

In early November, Poland’s largest chemical company, Ciech, sunk to a third-quarter net loss of Zl28.5m after absorbing the effect of currency-derivative trading.

Chemical producers Zaklady Chemiczne Police and Zaklady Magnezytowe Ropczyce have also experienced currency-hedging losses.

ZAT produces fertilizer, caprolactam and polymers.

($1 = Zl2.99/€1 = Zl4.02)

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By: Will Conroy
+44 20 8652 3214

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