Korea Zinc Fourth-Quarter Profit Falls 6.5% (Update2)

Jan. 12 (Bloomberg) -- Korea Zinc Co., the world’s biggest producer of refined zinc, reported a worse-than-expected 6.5 percent drop in fourth-quarter profit.

Net income declined to 114.8 billion won ($102 million) in the three months ended Dec. 31, the Seoul-based company said today in a regulatory filing, without giving a reason for the decline. Profit fell short of the 123.3 billion won average of six analyst estimates compiled by Bloomberg. Sales gained 4.4 percent to 819.4 billion won

Earnings may improve this year as metal prices are likely to gain and the company’s sales may rise on capacity expansion, according to SK Securities Co. and Hanwha Securities Co. Commodities will move “broadly higher” this year on “robust” growth in emerging markets, Bank of America Merrill Lynch commodities strategist Sabine Schels said on Dec. 15.

“Korea Zinc’s earnings may advance pretty much this year,” said Lee Won Jae, an analyst with SK Securities. “They will get a double benefit from rising metal prices and increasing output after completing plant expansion.”

Korea Zinc rose on the full-year profit outlook. The shares gained 2.8 percent to close at 309,000 won in Seoul trading today, outperforming 0.3 percent advance in the benchmark Kospi index. The stock jumped 36 percent last year, compared with a 22 percent gain on the Kospi.

Full Year

Net income rose 16 percent to 477.7 billion won in 2010, the company said. It will probably climb to 616.1 billion won this year, according to the average of 23 analyst estimates compiled by Bloomberg.

Operating profit increased 6.4 percent to 120.1 billion won in the fourth quarter, compared with the 129.5 billion average of six analyst estimates. The worse-than-expected quarterly profit was probably because of an extended maintenance work at the company’s lead plant, SK’s Lee said, without providing details.

Zinc and lead make up about 60 percent of Korea Zinc’s sales, with by-products including copper, gold and silver accounting for the balance. Korea Zinc, which earns about 70 percent of its revenue from exports, processes zinc ore for a fee linked to London Metal Exchange metal prices.