Gazprom’s Q2 financial results were close to our expectations
Ilkin Karimli, Credit Suisse
We were agreeably surprised by Gazprom’s Q2 free cash flow, which was at the level of USD 2.1 billion, while the H1 free cash flow averaged USD 10.5 billion.
But I doubt that in H2 this free cash flow volume will be maintained due to the forecasted increase in capital expenditures and lower operational cash flow against the background of gas supply reduction both in Europe and the Russian market as well as halted gas supply to Ukraine. All these factors provide a ground for thinking that in H2 the free cash flow will be lower than in H1.
Generally speaking, Gazprom’s Q2 financial results were close to our expectations. The only difference was that the allowance for Ukraine’s debt was higher than we had expected. However, this difference was evened out by a higher profit from exchange differences than we had forecast.
Ivan Khromushin, Gazprombank
Gazprom’s Q2 statements showed us a slight and anticipated fall in financial results, caused by seasonal fluctuations, some rising operating costs and setting up of a reserve for Ukraine’s impaired debt. EBITDA turned out to be below the level of our expectations and consensus analysts’ forecast. Overall, net profit figures coincided both with our forecast and consensus.
Au contraire, good news is that Gazprom managed to preserve the positive free cash flow during this reporting period as well as to build a safety cushion of cash on balance sheets amounting to nearly USD 27 billion.
H2 results are already in focus of attention of marker players. Q3 may face more challenges because of a temporary downturn in gas sales in Europe and the CIS and the re-evaluation of the foreign currency debt resulted in a large non-monetary loss. We expect that performance indicators shall improve in Q4, supported by stronger gas sales and possible initiation of debt repayment by Naftogaz as well as the recovery of the reserve for impairment of the Ukrainian company payables to Gazprom in case the parties reach an agreement.
Ekaterina Rodina, VTB Capital
Positive cash flow generated by Gazprom through lowered capital investments was a good sign in Q2. However, we consider the cost-push inflation that is greater than we anticipated to be an adverse trend.
We hope that in H2 2014 Gazprom will re-establish the bad debt reserve fund, thus ensuring beneficial effect on the dividends.
The opinions expressed in this section may not necessarily coincide with the official position of Gazprom