Gazprom Third Quarter Net Profit Down; Exports Fall

MOSCOW (Dow Jones Newswires), Feb. 10, 2011

Gazprom, the world's largest producer of natural gas, Thursday posted a 9% fall in net profit for the third quarter, hampered by a foreign exchange loss, rising costs, and weak European demand.

Gazprom is losing market share both at home and in the lucrative European export market. Russian Prime Minister Vladimir Putin on Wednesday criticized the behemoth for not giving independent gas producers enough access to its vast pipeline system.

The state-controlled firm said Thursday that net income attributable to shareholders for the July to September period totaled 159 billion rubles ($5.42 billion), compared with RUB175 billion during the same period a year earlier.

Net profit was in line with the RUB158.0 billion average forecast by seven analysts polled by Dow Jones Newswires.

The company posted a foreign exchange loss of RUB6.8 billion in the period, compared with RUB42.5 billion gain a year earlier.

Fourth-quarter financials may be better and the dividend payout could improve after an expected gain from the disposal of a 9.4% stake in rival gas producer Novatek, UniCredit SpA analyst Artem Konchin said.

Gazprom supplies around a quarter of Europe's gas needs, though its market share has dropped in the last two years due to the inflow of alternative energy sources.

European export volumes fell 21% in the quarter to 30.8 billion cubic meters from 38.9 billion in the third quarter of 2009. However, that fall was partly compensated by higher average selling prices to European customers.

Gazprom's sales in the third quarter rose 15%, helped by higher prices at home and in Europe. Sales for the July to September period totaled RUB786.5 billion, compared with RUB684.2 billion a year earlier, according to Dow Jones Newswires' calculations. Analysts had expected third-quarter sales of RUB753.6 billion.

Total operating expenses rose 12% to RUB592.0 billion, including a 29% rise in purchased oil and gas. Operating profit totaled RUB197.0 billion in the third quarter, up from RUB156.9 billion a year earlier.

Net debt stood at RUB971.8 billion as of Sept. 30, compared with RUB974.7 billion as of June 30.

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