Page 12 - FSUOGM Week 48

FSUOGM PERFORMANCE FSUOGM

Gazprom suffers Q3 loss on forex effects,

but unlikely to change dividend plans

RUSSIA RUSSIA’S Gazprom suffered another net loss in it to boost non-CIS sales to 56.2bn cubic metres
the third quarter on foreign exchange effects and in Q3 2020, from 53.5 bcm a year earlier. Sales
Gapzrom suffer heavy weaker gas prices in Europe. But core earnings were still down in the first nine months of the
forex losses owing to saw a significant recovery quarter on quarter as year at 154.4 bcm, however, compared with
the revaluation of its international gas sales surpassed the levels seen 171.4 bcm in the same period of 2019.
debts. last year. Analysts also expect the company to Gazprom’s sales in Russia were also weaker
stick to its current dividend plan, despite the this year, declining to 33.5 bcm in Q3 2020 from
strain on its finances. 36.5 bcm a year earlier, and to 151.1 bcm in 9M
Gazprom booked a net loss of RUB251bn 2020 from 162.9 bcm.
($3.3bn) for Q3 2020, versus a RUB212bn net The company’s operating profit sagged
profit a year earlier. The state gas exporter also to RUB135.1bn in Q3 2020, down from
swung to a net loss of RUB116bn in Q1 2020, RUB191.9bn a year earlier. Its dollar-denomi-
but rebounded to a RUB154bn profit in Q2 nated EBITDA came in at $4.5bn, up 248% y/y
2020. but down 21% q/q. It beat BCS GM’s forecast by
The company blamed the weaker numbers on 13% and the consensus among analysts by 13%.
a RUB464.3bn foreign exchange loss it incurred, Gazprom’s free cash flow (FCF) totalled
compared with a RUB12.3bn forex gain it made $1.6bn in Q3 2020, representing a significant
a year earlier. The main cause was the revaluation improvement from negative $1.8bn in Q2 2020,
of the company’s foreign currency-denominated although BCS GM still considered it poor.
debt – a common contributor to net losses at The company’s net debt to EBITDA ratio on
Russian oil and gas firms this year. a four-quarter rolling basis increased q/q from
Revenues also fell 14% year on year to RUB1.4 2.7 to 3.0, BCS GM estimated. A ratio of any-
trillion, owing to a slump in prices in Europe. thing above 2.5 allows Gazprom to waive its new
The company sold its gas in countries outside dividend policy, under which it has pledged to
the Commonwealth of Independent States (CIS) increase payments to at least 40% of IFRS net
for only $117 per 1,000 cubic metres, down 32% profits in 2020 and 50% of them in 2021.
q/q and 45% y/y, and below expectations at BCS However, BCS GM believes that manage-
Global Markets (BCS GM). ment is unlikely to take such a step. After years
“We think the underperformance versus ris- of wrangling, Russia’s Finance Ministry finally
ing spot prices was almost certainly due to sales succeeded in getting Gazprom to hike its divi-
under oil-indexed contracts rising faster than we dends in May last year, resulting in a 30% rally
had forecast, the pricing on which would have in the firm's share price. It is unlikely to let the
dropped noticeably as the lagged drop in oil company renege on its commitments now after
prices fed through the formulas,” BCS GM said. that effort, especially given the strain that Rus-
The drop in Gazprom’s prices did make its gas sia’s federal budget is now under as a result of the
more competitive in Europe, however, allowing coronavirus (COVID-19) crisis.™

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