£10bn profits top forecasts for Gazprom

City A.M. Reporter
RUSSIAN gas export monopoly Gazprom’s quarterly profits beat analysts’ expectations yesterday as European buyers rushed to secure contracts at prices 21 per cent higher than a year ago.

The company posted a 42 per cent increase in first-quarter earnings to 478.5bn roubles (£10.2bn), exceeding market expectations of a 29 per cent gain.

The country’s largest company by market capitalisation boosted gas sales to Europe, its key market, as customers bought the fuel in anticipation of a price increase following a jump in oil prices.

Gazprom’s gas prices in long-term contracts are pegged to those of oil and oil products with a time lag of six to nine months. Analysts say the rest of the year may prove to be weaker for the company due to already high volumes of purchased gas in Europe.

“Results are fantastic, but these are peak results for the company this year. We expect sales to Europe to fall in the second half of the year,” said Chirvani Abdoullaev, an equity analyst at Wood & Company Financial Services.

“Besides, there are reports that a pipeline from Libya will start deliveries soon and the European economy is clearly slowing down,” he added.

Analysts also noted a 33 per cent rise in operational costs to 818bn roubles, which wiped out the cash flow in the quarter.

State-controlled Gazprom said revenues rose by 38 per cent to 1.317 trillion roubles, beating an average analyst forecast of 1.259 trillion.

Gazprom said that its results were driven by strong core natural gas sales and an average pricing improvement of 21 per cent year-on-year, while its diversification into power also boosted the bottom line.