Gazprom Quarterly Net Drops 50% on Gas Price Discounts

OAO Gazprom, the world’s biggest natural gas producer, said second-quarter profit fell 50 percent, beating estimates, as the state-run company gave price discounts to European clients and the ruble weakened.

Net income declined to 150.8 billion rubles ($4.8 billion) from 303.7 billion rubles a year earlier, the Moscow-based company said in financial statements on its website today. That was higher than an average estimate of 140.3 billion rubles from nine analysts surveyed by Bloomberg. Revenue slid 2.4 percent to 1.01 trillion rubles.

Gazprom shares rose 1.2 percent, the biggest gain in 11 days, to 146.14 rubles at the close in Moscow. The stock has lost 15 percent so far this year.

“We remain cautious on the name, due to the company’s weak marketing policy in the EU, which is likely to jeopardize the company’s market share going forward, and continued value destruction from questionable investments,” UralSib Capital said today in a note.

Gazprom, Russia’s gas export monopoly, recognized 54.7 billion rubles in retroactive discounts to European customers in the second quarter, following 78.5 billion rubles in the previous three months, according to the statements.

Gas sales volumes fell by 11 percent in the first six months of the year, to 256 billion cubic meters, with declines across all three markets, Europe, former Soviet Union and Russia. Net revenue from gas sales dropped even as prices increased domestically and in other former Soviet republics.

Falling Exports

In January through October, exports to Europe dropped to 113.1 billion cubic meters from 123 billion cubic meters a year earlier, the company said yesterday.

A net foreign exchange loss of 143 billion rubles in the second quarter, compared with a gain of 7.3 billion rubles a year earlier, also hurt profit as the ruble depreciated.

“We doubt that the company will be able to achieve its 2012 Ebitda forecast of $58 billion,” IFC Metropol said in a research note yesterday, referring to earnings before interest, taxes, depreciation and amortization. “We anticipate no significant free cash flow in 2012.”

Gazprom had negative free cash flow of almost 147 billion rubles in the second quarter, compared with a positive 215 billion rubles in the previous three months, according to calculations based on the company’s first-half numbers.

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