Page 17 - RusRPTJun24

2.5 Gazprom makes first loss in 25 years
Gazprom, having lost the opportunity to sell gas under lucrative contracts to Europe, reported its first annual losses in 25 years for 2023, The Bell reported on May 2.
The figure—629bn rubles—turned out to be noticeably higher than analysts’ forecasts. Gazprom's dividends are now under threat, and the future of the gas company will depend on Xi Jinping: in two years of “friendship without borders,” China has not approved the construction of the Power of Siberia gas pipeline, without which there is nowhere to sell gas that previously went to Europe .
At the end of 2023, Gazprom received a loss under IFRS in the amount of 629bn rubles, as follows from the company’s financial statements published today. A year earlier, the gas monopoly reported a profit of 1.23 trillion. This is the first unprofitable year for Gazprom since 1998–1999, when oil, to which gas prices are tied, cost less than $20 per barrel of Brent. In 2023, nothing like this was observed - the average annual price of Brent was quite a good $82.5.
Gazprom's revenue in 2023 decreased by 27% y/y (8.6 trillion rubles versus 11.6 trillion). First of all, due to the gas business, which fell by 43%. Revenue from the oil and power divisions grew by 4% and 9%, respectively.
Losses were predictable (although their size was significantly worse than analysts' expectations). At the end of the first half of the year, Gazprom already reported losses according to Russian reporting standards, but according to IFRS it still remained in the black due to the profit of Gazprom Neft.
The main reason for the losses is obvious - a decrease in revenues from gas sales to Europe, which has always been the most marginal segment of Gazprom’s business. Gazprom itself does not publish a breakdown by country, but, according to Kommersant calculations, in 2023 Gazprom reduced sales in the EU by 2.6 times - from 62 to 24bn cubic meters, which are transported via the Turkish Stream and through Ukraine. Marcel Salikhov from the Institute of Energy and Finance, at the request of the newspaper, estimated the negative effect of reduced sales in the EU and lower gas prices on Gazprom's revenue at $50–55bn, or 4.2–4.7 trillion rubles at the average annual rate of 2023 .
Formally, a net loss at the end of the year does not mean that Gazprom will have to refuse to pay dividends. The company's dividend policy, adopted several years ago with great fanfare, requires the company to pay out 50% of adjusted net income to shareholders (that is, excluding one-time losses). According to analysts, this figure will be in the black and amount to 600–700bn, and formally shareholders will be owed 13–15 rubles per share. But there is also a clause in the dividend policy that the company has the right to revise the size of dividends if its debt/EBITDA ratio exceeds 2.5 - and, judging by the reporting, at the end of 2023 this happened, although at the end of 2022 the ratio was 1 ,1. Analysts suggest that given the huge losses, the company will either refuse payments or make them symbolic.
17 RUSSIA Country Report June 2024 www.intellinews.com