Roman DominaDoes KGHM Polska Miedź S.A. should expandthe portfolio of metals mined or focus on itscore business, the extra...
2R = 0,952But there is a solution…But there is a solution…
Firstly, lets look at the metal marketsfrom an investor’s perspective...3
Modern portfolio theory• According to the portfolio theory, investor can minimizerisk for a given level of expected return...
Note: I have calculated the values above based on the LME andLBMA fixings. Due to limited availability of reliable histori...
Correlation Matrix6I have calculated Pearson product-moment correlationcoefficient between short-term rates of return of s...
Efficient PortfolioShort selling allowed Short selling not allowed7Note: Please see an attached Excel document fordetails ...
8Using portfolio analysis I reduced investmentrisk almost five hundred times (45435%)!!!Using portfolio analysis I reduced...
Strategic Portfolio Management• An important part of strategic management is portfolio analysis. Agrowth-share matrix deve...
Cu (2012) Cu (2020) Ag (2012) Ag (2020) Au (2012) Au (2020) Mo (2012) Mo (2020)Industry AttractivenessWeight Rating Mean R...
12
• On the basis of McKinsey matrix, the best resourceallocation recommendation for each unit is ‘grow’.• Metals, such as co...
15KGHMKGHMThank you for your attention!Thank you for your attention!
A strategy for KGHM Polska Miedź S.A.
A strategy for KGHM Polska Miedź S.A.
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A strategy for KGHM Polska Miedź S.A.

Published on: Mar 4, 2016
Published in: Business      Economy & Finance      
Source: www.slideshare.net


Transcripts - A strategy for KGHM Polska Miedź S.A.

  • 1. Roman DominaDoes KGHM Polska Miedź S.A. should expandthe portfolio of metals mined or focus on itscore business, the extraction of copper?
  • 2. 2R = 0,952But there is a solution…But there is a solution…
  • 3. Firstly, lets look at the metal marketsfrom an investor’s perspective...3
  • 4. Modern portfolio theory• According to the portfolio theory, investor can minimizerisk for a given level of expected return, by carefullychoosing the proportions of various assets. HarryMarkowitz, who devised the theory, won the Nobel Prize inEconomics.• Portfolio theory models an assets return as an ellipticallydistributed random variable, defines risk as the standarddeviation of return, and models a portfolio as a weightedcombination of assets.• I have selected the following metals to create a sampleefficient portfolio: copper, gold, silver and molybdenum(KGHM will produce 11 thousand tons of molybdenum peryear after running a mine in Sierra Gorda).4
  • 5. Note: I have calculated the values above based on the LME andLBMA fixings. Due to limited availability of reliable historicaldata, presented analysis has been done based on official closingprices from January 2013 to end of April 2013. Therefore, theyare relevant in the short term.5
  • 6. Correlation Matrix6I have calculated Pearson product-moment correlationcoefficient between short-term rates of return of selectedmetals. I have discovered the lowest and negativecorrelation between rates of copper and molybdenum.
  • 7. Efficient PortfolioShort selling allowed Short selling not allowed7Note: Please see an attached Excel document fordetails of the calculation.
  • 8. 8Using portfolio analysis I reduced investmentrisk almost five hundred times (45435%)!!!Using portfolio analysis I reduced investmentrisk almost five hundred times (45435%)!!!
  • 9. Strategic Portfolio Management• An important part of strategic management is portfolio analysis. Agrowth-share matrix developed by Boston Consulting Group is themost popular tool, but it has many disadvantages. For instance,BCG matrix is based on product lifecycle concept, which is notdirectly applicable for the metals market.• So, I have decided to create a personalized industry attractiveness-business strength matrix, which was originally developed byMcKinsey & Company for screening General Electric’s largeportfolio of strategic business units.• I have done detailed metal market and forecasts research. It hasallowed me to prepare a subjective list of important factors forrating industry attractiveness and business strength. I have put mypersonal weight and rating (1-9) of each factor for year 2012 andpredictions for 2020, having regard to the Sierra Gorda project.10
  • 10. Cu (2012) Cu (2020) Ag (2012) Ag (2020) Au (2012) Au (2020) Mo (2012) Mo (2020)Industry AttractivenessWeight Rating Mean Rating Mean Rating Mean Rating Mean Rating Mean Rating Mean Rating Mean Rating MeanMarket size0,2 8 1,6 9 1,8 5 1 6 1,2 2 0,4 3 0,6 5 1 5 1Pricing trends0,3 1 0,3 3 0,9 1 0,3 3 0,9 2 0,6 4 1,2 5 1,5 5 1,5Industry profitability0,3 6 1,8 5 1,5 6 1,8 6 1,8 6 1,8 7 2,1 6 1,8 6 1,8Entry barriers0,1 9 0,9 9 0,9 9 0,9 9 0,9 9 0,9 9 0,9 8 0,8 8 0,8Macroenvironmental factors0,1 7 0,7 8 0,8 7 0,7 8 0,8 7 0,7 8 0,8 7 0,7 8 0,85,3 5,9 4,7 5,6 4,4 5,6 5,8 5,9Business StrengthMarket share0,2 7 1,4 8 1,6 9 1,8 9 1,8 1 0,2 2 0,4 0 0 4 0,8Relative cost position0,3 2 0,6 6 1,8 6 1,8 6 1,8 5 1,5 5 1,5 0 0 8 2,4Relative profit margins0,2 6 1,2 7 1,4 6 1,2 7 1,4 6 1,2 6 1,2 0 0 7 1,4Production capacity0,2 8 1,6 9 1,8 9 1,8 9 1,8 2 0,4 3 0,6 0 0 7 1,4Management strength0,1 7 0,7 7 0,7 7 0,7 7 0,7 4 0,4 7 0,7 0 0 7 0,75,5 7,3 7,3 7,5 3,7 4,4 0 6,711
  • 11. 12
  • 12. • On the basis of McKinsey matrix, the best resourceallocation recommendation for each unit is ‘grow’.• Metals, such as copper, are standardized, sopricing tends to be similar among differentmanufacturers.• In this industry, the ability to increase revenues byimproving the product is very limited.• So, KGHM should look for opportunities to cutcosts and increase profit margins and, up to acertain point, diversify metal portfolio.13
  • 13. 15KGHMKGHMThank you for your attention!Thank you for your attention!

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