Results of CEZ for 1Q04 and year 2003

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Investiční bankovnictví KB

      CEZ announced unconsolidated results for 1Q04 according to CAS, which beat our as well as the most optimistic market expectations. Revenues went up by 23% y/y to CZK 17.1bn compared to CZK 13.9bn in 1Q03. The main drivers were higher domestic sales (CEZ’s market share rose to 62.8%) supported by higher electricity demand (+3.0% y/y) and sharply higher export price (+31.2% y/y). Operating profit increased by 48% y/y to cZK 4.5bn and EBITDA rose by 32% y/y to CZK 7.7bn. On the contrary, net profit lagged behind market consensus. It dropped by 28% to CZK 1.6bn due to changes in CAS to converge towards the IFRS. Revaluation of derivative contracts is currently reflected in income statements, while it was accounted for in balance sheet in the previous periods. This dragged the net profit down by CZK 1.1bn. EBITDA and EBIT margins improved with rising revenues. EBITDA margin rose from 34% to 45% and EBIT margin improved from 18% to 27%.

      

       unconsolidated, CZK m...............1Q04............1Q03............%ch

       Revenues................................17,060..........13,896...........22.8

       EBITDA.....................................7,657............5,795...........32.1

       EBIT.........................................4,535............3,071...........47.7

       Net profit...................................1,634............2,267.........-27.9

       Source: company data

      

       CEZ also announced consolidated results for 2003 according to IFRS. The figures are not directly comparable y/y, as the structure of CEZ Group changed. In 2003, CEZ sold 66% stake in CEPS and took over five distribution companies. Revenues reached CZK 84.8bn, which is more than we had been expecting. On the contrary, operating profit lagged behind our estimates. Operating profit reached CZK 7.5bn compared to our estimate of CZK 13.6bn. The main reason is extension of nuclear power plant operation from 30 to 40 years, which resulted in higher nuclear provisions. The company also changed accounting for gains of CZK 10.8bn from sale of its 66% stake in CEPS. The company booked this profit only in balance sheet and not in income statement, as it was the practice until 3Q2003.

      

       consolidated, CZK m.....................2003................2002............%ch

       Revenues..................................84,816..............55,578............53

       EBITDA......................................25,111..............22,975.............9

       EBIT...........................................7,500..............11,254...........-33

       Net profit.....................................5,932................8,421...........-30

       Source: company data

      

       We consider the result positive. Nevertheless, we do not expect the company to keep the dynamics of revenues and EBIT throughout the whole year. The major risk are exports, where the major risk is cross-border capacities. We keep our hold rating with fair value target of CZK 186.

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