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8 I Companies & Markets bne August 2020
Gazprom swings to first quarterly loss since 2015
bne IntelliNews
Russia’s state gas giant Gazprom has booked its first quarterly loss since 2015, as the coronavirus (COVID-19) pandemic caused its European sales to collapse, and ruble devaluation led to hefty foreign exchange losses.
The supplier reported a net loss of RUB116bn ($1.64bn) for the three months ending March 31, versus a net profit of RUB536bn a year earlier. However, Gazprom’s deputy chairman Famil Sadygov noted in an earnings call that this was only a loss “on paper”, owing to a 30% fall in the value of the ruble during the period and write-downs made to reflect lower oil prices.
“Under these conditions, the financial results that the company showed in the first quarter can be considered, to put it mildly, not bad,” he said, estimating that Gazprom would have achieved a RUB288bn net profit, excluding the forecast effect. It will use this figure to calculate its future dividends.
Even so, Gazprom’s profits after sales also slumped 36% to RUB293.5bn, on the back of a 24% drop in revenues to RUB1.74 trillion. Gas sales revenues from its highest-value market, Europe, plunged 45% to RUB459.5bn.
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European gas demand collapsed in March after countries began imposing travel restrictions to combat COVID-19’s spread. Compounding the virus’ impact, the continent experienced an unusually warm winter, and storage facilities were well-stocked, following the run-up to Ukraine and Russia signing a new gas transit deal in late December.
Gazprom delivered 51.6bn cubic metres of gas to Europe and other countries outside the former Soviet Union in the first quarter, which is 17% less than a year earlier. The average price at which it sold this gas also dropped 37% to RUB10,800 per 1,000 cubic metres, or around $152.
In a research note, the director of Moscow-based BCS Global Markets, Ronald Smith, warned that although the results were above expectations, Gazprom will face “rough seas ahead.”
“Under these conditions, the financial results that the company showed in the first quarter can be considered, to put it mildly, not bad”