Analysts: Windfall tax continues to weigh on Czech energy group ČEZ, profit still beats expectations

The performance of energy group ČEZ is still significantly affected by the special windfall tax. Because of it, analysts expect the company’s net profit in the first half of the year to fall by a few percent year on year, to around 21 billion crowns. Even so, they say the company’s performance so far this year has exceeded expectations at the start of the year. A possible increase to ČEZ’s full-year outlook is therefore also on the table; it originally projected full-year 2024 net profit of 25 billion to 30 billion crowns. This is according to comments by analysts to the Czech News Agency.

In the first quarter of this year, majority state-owned ČEZ increased its net profit by a quarter year on year to 13.6 billion crowns. The company’s operating revenue, by contrast, fell by six percent to 87.4 billion crowns.

„The windfall tax will once again have a significant impact on the net profit figures. We expect an effective tax rate of 57 percent in the second quarter, significantly higher than in the same period last year (42 percent),“ said Milan Lávička, an analyst at J&T Bank.

He also pointed to the impact of higher costs and lower expected profits from commodity derivatives trading. Lávička therefore expects first-half net profit to reach 21.3 billion crowns.

Bohumil Trampota, an analyst at Komerční banka, also expects performance to decline compared with last year. He estimates that net profit fell by more than 46 percent year on year in the second quarter alone. „This will reflect the absence of above-average trading profits, which we are not expecting this year,“ he said. Trampota expects first-half profit to come to around 20 billion crowns overall.

Despite the expected year-on-year decline in profit, analysts say ČEZ’s performance so far this year is above the expectations set at the start of the year. „The results for the first half of this year could represent 57 percent of the full-year EBITDA outlook and 72 percent of the net profit outlook. Conservatively, we assume management will reiterate its full-year projections. At the same time, however, we see the possibility of an increase,“ Trampota said. Lávička also sees room to raise the full-year outlook. „However, given the continuing windfall tax and the expected higher effective tax rate in the second half of the year, we believe the likelihood of an increase to the net profit outlook is significantly lower than for EBITDA,“ he added.

ČEZ is one of the largest energy companies in Czechia. The state is its majority shareholder, holding about 70 percent of the shares through the Ministry of Finance.

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