Gas monopoly Gazprom posts huge $16.4bn profit for quarter
Russian gas export monopoly Gazprom's quarterly profits of $16.4bn beat analysts' expectations yesterday as European buyers rushed to secure contracts at prices 21pc higher than a year ago.
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, equity analyst at WOOD & Co 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 33pc rise in operational costs to 818bn roubles (€19.6bn), which wiped out the cash flow in the quarter.
The company posted a 42pc increase in first-quarter earnings to 478.5bn roubles, exceeding market expectations of a 29pc gain.
Gazprom's Moscow-traded shares edged down 0.1pc yesterday, outperforming a 0.7pc decline in the broader market.
State-controlled Gazprom said revenues rose by 38pc to 1.317 trillion roubles, beating an average forecast by analysts of 1.259 trillion roubles.
Gazprom said in a statement that its results were driven by strong core natural gas sales and an average pricing improvement of 21pc, year-on-year, while its diversification into power also boosted the bottom line.
Total gas sales for the period rose by 10pc to 178.3 billion cubic metres (bcm). While sales in Russia were flat at 102.5 bcm, exports to Europe gained by 8.4pc to 46.6 bcm and to the former Soviet Union by 70.5pc to 29 bcm.