Naftogaz group posted a UAH 24.7 billion net profit over the first six months of 2019, which is almost twice as much as for the same period during the previous year.
Total H1 2019 pre-tax profit was UAH 31.9 billion, which exceeds the 2018 result by more than 79%.
The Integrated Gas Business and Gas Transit segments-were major contributors to the increase in profit (the segment result is operating profit/loss adjusted to operating exchange differences).
H1 2018 pre-tax profits were reduced by UAH 4.8 billion VAT compensation arising from an arbitration award in the transit case with Russia’s Gazprom.
Click here to read the group’s consolidated financial statements for H1 2019.
On 30 September, Naftogaz management will hold an investor conference call to discuss Naftogaz group’s financial results for H1 2019.
Investors interested in participating in the conference call are welcome to register before close of business this Friday, 27 September via email: [email protected]
Integrated Gas Business
Gas sales under public service obligations (PSO), regulated supply
Total gas sales under PSO decreased by 1.2 bcm or 11% over the H1 2019 compared to the same period during the previous year, due primarily to warmer weather in Q1 2019 compared to Q1 2018.
Changes in the balance between imported and own gas, along with lower market gas prices in H1 2019 decreased the cost of gas sold under PSO by UAH 6.4 billion.
Gas sales beyond PSO, unregulated supply
Gas sales beyond PSO fell by 0.5 bcm over H1 2019 compared to the same period during the previous year, which reduced the segment’s result by UAH 3 billion.
Receivables arising from gas sales
Accounts receivable (without doubtful debt allowance) arising from gas sales increased by UAH 8.4 billion, or 14.9%, as of 30 June 2019 against the same period during the previous year. This debt grew primarily due to heat producers, as a result of the increase in regulated prices for this category of customers and their impaired payment discipline. The latter was also caused by amendments to the CMU Resolution #867 of 19 October 2018, which lowered the mandatory payment level for heat producers from 90% to 78% for the heating season 2018/2019. Thus the increase in revenue due to higher prices for heat producers servicing households had a positive effect on the segment’s overall result, while it failed to increase cash flows because of lower payment requirements as mentioned above.
Gas transit grew over H1 2019 against the same period during the previous year by 6% and equaled 45.1 bcm. Higher gas demand in Europe was one of key factors driving this growth.
The segment’s result increased from UAH 2.6 billion to UAH 12.5 billion over the first six months of 2019 compared to the same period of the previous year mostly due to higher gas transit tariffs, higher transit volumes and lower depreciation expenses in the cost of gas.
Domestic gas transmission
The result of the domestic gas transmission segment deteriorated by UAH 3.1 billion over the first six months of 2019 due to lower domestic transmission volumes and doubtful debt allowance arising from significant amounts of unpaid balancing services. Receivables from balancing services grew by UAH 13.8 billion or 49.5% as of 30 June 2019 compared to the same period during the previous year.
5.2 bcm of gas was withdrawn from underground gas storage (UGS) facilities over the first six months of 2019, which is 2.1 bcm or 29% less compared to the same period during the previous year. Significant offtakes from UGS facilities in 2018 were due to the growing gas demand at the end of the heating season 2017/2018 caused by cold weather and lower pressure in the gas transmission system from the Russian side. To ensure secure supply of gas during the heating season 2019/2020, Naftogaz and other traders have injected extra volumes of gas to its UGS facilities. Gas injection over the first six months of 2019 exceeded that of the same period during the previous year by 1 bcm or 26%.
The segment’s first-half result in 2019 was up by UAH 1 billion thanks to changes in the gas storage tariff, though it remains loss-generating as in the first half of 2018, with a negative result of UAH -0.1 billion.
Taxes and other payments to the state budget
Naftogaz group paid UAH 58.6 billion in taxes over the first six months of 2019, accounting for 15.9% of state budget revenues for this period.
NJSC Naftogaz of Ukraine