Analysts: Results at Czech utility CEZ beat forecasts, but windfall tax hit net profit

Last year’s financial results at energy group CEZ exceeded analysts’ expectations. They pointed in particular to stronger-than-expected growth in operating profit. However, they said, this did not translate into net profit, which was negatively affected by asset impairments and the level of taxes paid, including the windfall tax.

CEZ Group’s net profit rose by almost three percent year on year to 30.5 billion crowns last year. Earnings before tax and depreciation (EBITDA) increased to 137.5 billion crowns, a year-on-year rise of 12.6 billion Kč. By contrast, adjusted net profit, which is key to the dividend amount, fell compared with the year before. It came to 31.8 billion crowns last year, down 3 billion year on year. Under the company’s current dividend policy, which provides for a payout of 60 to 80 percent of adjusted profit, this year’s dividend should therefore amount to 35 to 47 crowns per share.

„CEZ reported very strong results for the whole of last year, above both market expectations and those of management itself,“ said XTB analyst Tomáš Cverna.

The final quarter of last year followed the same pattern, he said, with CEZ Group’s operating profit, EBITDA, rising by a quarter year on year.

However, net profit was affected by the windfall tax, for which CEZ confirmed last year that it was the largest payer, according to Cverna. He noted that the tax brought 39 billion crowns into the state budget from all companies last year, with CEZ accounting for 30 billion. The energy group also paid a further 19.6 billion crowns in regular corporate tax.

CEZ Group’s strong operating profitability did not fully translate into net profit, Fio Bank analyst Jan Raška also said. „We see the impact of both higher-than-expected depreciation and higher tax payments than we had anticipated,“ he noted. The increase in operating profit was not reflected in the expected dividend either, he said.

Raška described the upper end of the company’s forecast range for EBITDA this year as very solid. The company expects it to be between 125 and 130 billion crowns. „However, given the more subdued trend in net profitability, we view today’s results report as only mildly positive,“ he added.