Gazprom Profit Jumps as Kremlin Seeks Higher Dividendby
Profit rose to 787 billion rubles after FX losses in 2014
Government tells companies to distribute half of 2015 profit
Gazprom PJSC, the world’s biggest natural gas producer, said full-year profit jumped almost five-fold, signaling the possibility of a higher dividend payout just as the Russian government needs more funds to plug its budget gap.
Net income rose to 787 billion rubles ($12.2 billion) in 2015 from 159 billion rubles a year earlier, the state-controlled company said Thursday in a statement. That was more than an average estimate of 758 billion rubles by 10 analysts in a Bloomberg News survey. Gazprom’s 2014 profit was hurt by foreign currency losses after exceeding 1 trillion rubles in the previous three years.
The Russian government last week issued an order that state companies must pay out at least half their income under Russian or international accounting standards, whichever produces the higher figure. The move stoked appetite for the gas producer’s shares.
Gazprom gained 2.3 percent to close at 164.75 rubles a share in Moscow, the highest level since September 2012.
“Gazprom dividends is the main intrigue now,” said Elchin Mammadov, a London-based analyst at Bloomberg Intelligence. “Still, there’s no clarity how much the payments may increase.”
Gazprom’s management had recommended to increase the dividend payment by 2.8 percent to 7.4 rubles per share, or 175 billion rubles in total, before the state order was published. That would equal 50 percent of the company’s profit under Russian accounting standards after adjustments.
Under international financial reporting standards, half of net income would come out to 16.62 rubles a share, according to Bloomberg calculations.
The Moscow-based producer, which meets about 30 percent of Europe’s gas demand, will probably pay less than the state rule, as the plunge in oil dragged down the price for gas, according to eight of 11 analysts in a Bloomberg survey. The average forecast is 30 to 35 percent of international profit. That would be 9.97 rubles to 11.64 rubles a share.
Gazprom will make its dividend decision based on the government’s directive, Igor Shatalov, first deputy head of the company’s finance department, said today on a conference call. The board will review its dividend recommendation May 19, he said.
Dividend policies should “balance the interests” of a company and its shareholders, Shatalov said.
Gazprom’s domestic rival, state-run Rosneft OJSC, plans to pay out 35 percent of its profit after its board approved the recommendation on Friday, a decision seen as a compromise by analysts including Raiffeisen Bank and Aton LLC. The Economy Ministry sought half the profit, while the Energy Ministry demanded to keep 25 percent, citing risks to the company’s investment plans and production, Interfax reported last week.
Gazprom faces “deteriorating” earnings amid falling gas prices abroad, “potentially resulting in negative free cash flows in 2016,” Moody’s Investors Service said in a statement on Tuesday.
Free cash flow amounted to 390 billion rubles last year, according to calculations based on Gazprom’s financial report. The company doesn’t make it a goal to have positive free cash flow all the time, Shatalov said.
While Gazprom has been boosting gas exports to its most lucrative market, Europe and Turkey, its dollar-denominated revenue from the region may drop this year to lowest since 2004 as most of contracts linked to oil with a time lag of as much as nine months. Sales may slip more than 35 percent to about $25 billion, according to Bloomberg calculations based on price estimates from the Russian Economy Ministry.
Revenue climbed 8.6 percent last year to 6.07 trillion rubles, according to its report. Earnings before interest, taxes, depreciation and amortization fell 4.5 percent to 1.87 trillion rubles, in line with the analyst estimate of 1.89 trillion rubles.