Net income reached increased by 10.7% y/y to CZK 10.9bn, which is 6.9% above the market’s forecast while only 1.9% above our projections. Sales increased by 8.6% y/y to CZK 33.8bn despite lower electricity sales (-3.9% y/y) due to higher domestic electricity prices (+10% y/y). The drop in total electricity sales was caused primarily by lower electricity exports while domestic sales remained relatively unchanged. The 1H2005 EBITDA margin stood at 52.3% vs. 44.1% in 1H2004. Nevertheless, the EBITDA margin in 2Q05 contracted to 45.8% compared to 58.3% in 1Q05. We expect the drop to be caused by NPP Temelin’s shutdowns in 2Q. CEZ increased its full year unconsolidated net income target to CZK 15.2bn from CZK 13.5bn and reiterated its dividend policy of increasing dividend payments by CZK 1/share a year to reach CZK 12 in 2007. As the results were above the market’s forecast there may be some upwards revisions. 1H05 figures were only slightly above our forecasts, nevertheless we will review our valuation model.
IFRS unconsolidated (CZK m) 1H05A 1H2004 % change 1h2005 Patria Consensus
Sales 33,770 31,099 8.6% 32,609 32,600
EBITDA 17,663 13,719 28.7% 17,520 17,160
EBIT 10,931 6,927 57.8% 10,836 10,560
Net income 10,866 5,171 110.1% 10,709 10,230
EPS (CZK, annualized) 37 17 112.6% 36.2 34.6
Also, the auction of 400MW of CEZ’s capacity based on the anti-monopoly decision (relating to the acquisition of Severoceske doly) starts on August 3. The 400MW capacity may generate around 3.2TWh of electricity. So far there are 17 parties interested. The auction should serve as an important signal for electricity prices going forward.