NIS Profit Drops on Serbian Economic Slump, Higher Debt

Naftna Industrija Srbije AD, the Serbian oil and gas company controlled by OAO Gazprom Neft, said its first-half profit fell 5 percent from a year earlier as the domestic economy continued to shrink and taxes increased.

Net income fell to 17 billion dinars ($196 million) even as refining output rose 12 percent to 1.55 million tons and sales to large customers increased 6 percent, the Novi Sad, Serbia-based company said in an e-mail today. Earnings before interest, taxes, depreciation and amortization climbed 10 percent to 30.9 billion dinars.

“Beside the complex macroeconomic conditions, the deterioration in key financial indicators of the company -- profitability and operating cash flow -- was caused by an increase in tax burden and social contribution payments, including an increase in debt from large state-owned companies,” NIS said in the statement.

Serbia’s economy is facing a third recession in five years after the worst floods in a century in May caused damage of an estimated $2 billion, or 5 percent of gross domestic product.

Debt Burden

The company’s operating cash flow shrank 93 percent on higher taxes and extra spending to cover flood-related damage to its facilities. NIS’s debt to banks jumped 59 percent to $672 million even as capital investments fell 26 percent to 17.8 billion dinars.

The results are “below expectations,” Milos Bijanic, a Belgrade-based analyst at Sinteza Invest Group, said by phone. “It’s difficult to say how much the floods actually contributed to this but investors won’t like it.”

Debt from NIS clients, mainly large Serbian state-owned companies, fell 20 percent from a year earlier to 56 billion dinars.

NIS shares closed unchanged at 917 dinars in Belgrade trading today, valuing the company at 150 billion dinars.