Profit at Russia’s Gazprom rises 71% as weaker ruble offsets lower gas sales

By ELENA MAZNEVA and ANNA SHIRYAEVSKAYA
Bloomberg

Gazprom PJSC, the world’s biggest natural gas producer, said first-quarter profit rose 71% and beat analyst estimates, as a weaker ruble countered lower fuel prices and falling volumes.

Net income climbed to 382 billion rubles ($5.9 billion) from 223 billion rubles a year earlier, the Moscow-based company said Monday in a statement. That exceeded the average 353 billion-ruble estimate from eight analysts, according to data compiled by Bloomberg. Revenue rose 5.7% to 1.65 trillion rubles.

Profit at Gazprom, Russia’s biggest company by market value, rose even as oil’s slump weighed on export prices for its gas, which are linked to crude under most contracts. The company’s average June export price was the lowest since 2007, according to Bloomberg calculations based on Russian customs data. Gazprom may cut its production to a record this year as demand slows in Russia and Ukraine, the government said in July.

While gas prices in Europe, its key export market, dropped 24% to $284.2 per 1,000 cubic meters (35,315 cubic feet) during the quarter, the same figure in ruble terms rose 37%. Sales to Europe fell 16% to 39.1 billion cubic meters. Shipments have rebounded since the end of May as prices extend declines.

“The industry operating environment continues to be challenging,” Gazprom said by e-mail. Still, the company confirms its outlook for sales volume in Europe and Turkey, which are “likely to break” an all-time record this year, it said.

Brent oil slumped 48% last year, the most since 2008. Gas buyers are boosting purchases now as the decline in crude prices filters into gas contracts, linked to oil with a lag of six to nine months.

Gazprom plans to pay dividends on 2015 profit no lower than last year’s level even as its foreign-currency sales slip to the lowest in a decade, deputy CEO Andrey Kruglov said in June. The company benefits from a weaker ruble because most of its costs are in the Russian currency, while much of its revenue is in dollars and euros.

The ruble averaged 62.16 per dollar in the quarter, compared with 34.95 a year earlier, according to the Bank of Russia.

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