CEZ's net profit falls by 60 pct yr/yr to Kc10.8bn in Q1

Prague, May 11 (CTK) - Energy group CEZ saw its net profit fall by 60 percent yr/yr to Kc10.8bn in Q1, while its operating revenues rose by some 23 percent to Kc93.4bn, according to information released by the company today.

CEZ's board is proposing to pay a record dividend of Kc117 per share from last year's profit, the company said. It will be decided by the general meeting on June 26.

The state is the majority shareholder in CEZ, holding about 70 percent of the company's shares through the Finance Ministry. If the dividend proposal is approved, shareholders would receive about Kc63bn, of which the state would receive Kc44bn.

The Finance Ministry will not submit a counter-proposal regarding the dividend amount, unlike last year, ministry spokeswoman Michaela Lagronova told CTK.

The state will use the dividend as well as the income from the extraordinary windfall tax and levy on electricity sales primarily to cover the budget expenditures related to compensating households and companies for high energy prices, said Finance Minister Zbynek Stanjura.

One of the reasons for this year's significant drop in profit and for the high dividend was CEZ's record profits last year, with net profit reaching Kc78.4bn.

"The (dividend) proposal corresponds to a payment of 80 percent of the consolidated CEZ Group profit for 2022 adjusted for extraordinary effects, thus the upper limit of the company's dividend policy," said CEZ board chairman and CEO Daniel Benes.

The previous highest dividends were only around Kc50 per share. The highest dividend to date was that from 2009, when it amounted to Kc53 per share and the company paid out Kc28.3bn to shareholders.

"Taking into account the extraordinary taxation of sales and profits of energy companies, we expect that CEZ Group will pay more than Kc100bn to the Czech state in dividends, income taxes and levies on production sales this year," Benes added.

Last year, the CEZ board proposed a dividend of Kc44 per share but the state required a higher payout, and at the general meeting the Finance Ministry pushed through its counter-proposal of Kc48 per share.

On Wednesday, CEZ shares hit their highest price in nearly 15 years amid the expectations of a high dividend. Their price added 1.83 percent to Kc1,222 apiece. The last time it was higher was in September 2008.

The decline in profits in Q1 was caused by extraordinary taxation in addition to the high comparative base from last year, CEZ said. Last year, the government introduced a tax on windfall profits and an extraordinary levy on excess income from electricity sales to cover the costs of measures related to the sharp rise in energy prices.

"The cost of levies on excessive production sales exceeded Kc10bn in Q1 and the tax on unexpected profits amounted to Kc9bn. For the entirety of 2023 we expect levies from these extraordinary measures to amount to Kc30bn to Kc40bn," said board member and CFO Martin Novak. In addition, the company will pay up to Kc30bn in regular income taxes, he said.

CEZ's Q1 profit was lower than analysts expected, and especially its EBITDA (earnings before interest, taxes, depreciation and amortisation), which fell by 26 percent yr/yr to Kc32.5bn, could have been as much as several billion higher, according to a CTK poll of analysts.

The results were negatively affected especially by the levy on excess sales, which was expected to be lower, said J&T Banka analyst Milan Vanicek.

The levy on excess sales almost completely erased the positive impact of high electricity prices, which brought CEZ Kc11.2bn, said Fio banka analyst Jan Raska. However, the levy's negative effect should be milder in the coming quarters, he said.

The dividend proposal could also be seen as slightly negative, as part of the market hoped that the board would propose to pay out 100 percent of the net profit, said Vanicek.

CEZ's total electricity production volume in Q1 decreased by 5 percent yr/yr to approximately 14.1 terawatt hours (TWh). Generation from coal-fired and combined-cycle power plants fell by 22 percent to 4.7 TWh due to lower use of these plants as well as rising prices of emission allowances and natural gas.

On the other hand, electricity production from renewable and nuclear sources increased by 6 percent to 9.4 TWh. CEZ's main source is nuclear power, which produced almost 8.5 TWh of electricity in the first three months of the year.

Electricity consumption in CEZ's distribution territory, which covers about 66 percent of the Czech Republic, fell by 5 percent yr/yr to 9.4 TWh in Q1. According to CEZ, the reason for the decline was mainly that customers reduced their energy consumption due to high prices.

The EBITDA of company CEZ Prodej, which supplies electricity and gas to end customers, amounted to a loss of Kc3.4bn in Q1. The loss increased by Kc3.2bn yr/yr. Both electricity and gas deliveries were lower than last year due to significantly warmer weather, CEZ said, and higher costs of energy purchases to cover fluctuations in customer consumption also contributed to the decline in earnings.

Given the decline in electricity market prices, CEZ has adjusted its financial outlook for this year. It expects EBITDA between Kc105bn and Kc115bn and a net profit adjusted for extraordinary effects between Kc33bn and Kc37bn. In its March forecast, the company expected EBITDA of up to Kc125bn and net profit of up to Kc40bn.

CEZ Group's expected payments to the state for 2023 (Kc bn):

Windfall tax	20 to 30
Levy on excess sales from electricity production	10 to 15
Regular income taxes	26 to 30
Dividend from 2022 profit	44
Total	100 to 119

Source: CEZ

hel/er

CZ0005112300