Cold winter boosts Gazprom

City A.M. Reporter
RUSSIA’S Gazprom, the world’s biggest gas producer, beat forecasts for first-quarter sales and profit, as a surge in domestic revenues offset a sharp drop in prices to European customers.

Gazprom supplies a quarter of the European Union’s gas needs, but economic weakness has slashed demand, and some customers there have secured lower prices on long-term contracts, citing cheaper fuel on spot markets.

Gazprom’s total revenue increased 14 per cent to 956.8bn roubles (£20.2bn), compared with a Reuters poll estimate of 946.6bn, as domestic sales jumped 47 per cent.

Export sales, mostly to Europe, Gazprom’s biggest gas export market, declined by 22 per cent to 286.22bn roubles, as a 36 per cent drop in prices outweighed a rise in sales volumes of 37 per cent.

Gazprom said it did not expect any further contract revisions, but abandoned its previous projections for an increase in European sales to 145bn cubic metres this year from 142 bcm in 2009.

“We expect gas sales [volumes] to Europe in 2010 to be flat compared to 2009,” chief financial officer Andrei Kruglov said.

Gazprom’s free cash flow for the quarter hit a record 233bn roubles, nearly triple the amount for all of 2009, which put it in a more comfortable position to manage its 977bn roubles net debt, which it said it would continue to cut after having cut it by nearly 30 per cent in the three months.

Earnings before interests, taxes, depreciation and amortisation rose to 407bn roubles from 337bn roubles a year ago and 334bn roubles in the last quarter of 2009.