Gazprom Profit Falls Less Than Expected as Ruble Strengthens

Updated on
  • Net income falls 17% to 244.9 billion rubles, beating estimate
  • Producer books 152 billion-ruble currency-related gain

Gazprom PJSC’s profit shank less than expected in the second quarter as a strengthening ruble helped ease the world’s biggest natural gas producer’s debt burden.

Net income fell 17 percent from a year earlier to 244.9 billion rubles ($3.8 billion), the Moscow-based company said in a statement late Monday. That compares with an estimated 186 billion rubles in an Interfax survey. Earnings before interest, taxes, depreciation and amortization, or Ebitda, also beat estimates. The producer booked a net gain related to the stronger currency of about 152 billion rubles.

“The second quarter was the worst for Gazprom this year, and the results are better than expected,” said Andrey Polischuk, an analyst at Raiffeisen Bank in Moscow. The company’s gas prices in its most lucrative markets, Europe and Turkey, are set to recover until the end of the year. “Gazprom even has a chance to see a positive cash flow -- close to zero but still positive -- if oil remains at about $50 a barrel and depending on the cold season.”

The Kremlin-backed exporter, which supplies about 30 percent of the European gas needs, has faced a drop in its dollar-denominated gas-export earnings to the lowest since at least 2005 as most of contracts are linked to crude prices with a time lag of six to nine months.

Even with oil hovering below $50 a barrel, the company expects positive free cash flow this year, deputy head Andrey Kruglov said in June, declining to elaborate on the outlook.

Revenue increased 4.9 percent to 1.33 trillion rubles. Net debt fell 15 percent from the start or the year to 1.76 trillion rubles, mostly because of the currency strengthening.