In Q2 Gazprom demonstrates very good free cash flow

Alexander Kornilov

Alexander Kornilov, Alfa-Bank

Gazprom’s IFRS results in Q2 were close to our expectations in terms of proceeds and EBITDA and slightly worse than we had anticipated in terms of net profit due to the greatly rising loss from exchange differences. A rather strong free cash flow in Q2 was a nice surprise – it amounted to some RUB 142 billion as compared to the negative free cash flow of RUB 147 billion last year. This makes it reasonable to believe that the market will rate the Company’s financial statements quite positively.

In general, we think that this year will be strong for Gazprom, considering the dramatic increase in Q3 gas sales in Europe. No doubt that this fact will be reflected in Q3 financial statements.

Maxim Moshkov

Maxim Moshkov, UBS

We rate Gazprom’s Q2 statements as neutral: they met our expectations almost to the full, but with only one exception. The income tax rate was very low in the reporting period: only 14 per cent versus 20 per cent as we had forecast. A high free cash flow, which in H1 totaled some USD 7 billion, should also be pointed out. We believe that this year Gazprom will receive around USD 9 billion of a free cash flow. Therefore, in H2 the Company’s ability to generate free cash flows will be considerably lower than in H1. It is mostly due to the increase in capital investments in H2, the decline in oil and gas prices as well as the anticipated retroactive payments.

Ekaterina Rodina

Ekaterina Rodina, VTB Capital

In Q2 Gazprom demonstrated a very good free cash flow. I suppose it is one of the main positive aspects in the financial statements. All in all, some balance sheet items in Gazprom’s financial results turned out to be better than we had anticipated. However, close consideration shows that the high financial indicators were provided for by non-recurring items: the absence of retroactive payments, pay-offs in derivative operations, profit from exchange differences in operational costs, changes in the scope of construction in progress. All this either increased the proceeds or reduced the Company’s Q2 costs, but it does not guarantee that in the next reporting periods such a situation will happen again. This being said, it would be very encouraging if in Q3 and Q4 Gazprom showed the same free cash flow dynamics as in Q2.

The opinions expressed in this section may not necessarily coincide with the official position of Gazprom