PGNiG reported a net profit of PLN 227m for 4Q05, down 71.5% y/y, due to the fact that tariff increases failed to keep up with rising prices of imported gas. Despite the market widely expecting narrowing margins, the net profit figure still came in 15.4% below the consensus estimate and 16.7% below our own forecast, mainly due to a surprisingly weak result on financial activity.
However, since the operating performance of the company was better-than-expected, we do not expect a negative reaction to the figures, especially after the recent weakening of the stock.
Please note that, due to the TSO unbundling earlier last year, PGNiG's direct and indirect cost lines for 4Q05 are not comparable with the 4Q04 figures. Although we feel that payments to the TSO are more direct than indirect costs, the company’s accounting treats them as external services and therefore books them to the other cost line in the IFRS P&L. This will likely lead us to change the structure of our forecast as well.
Please also note, that the company holds a conference call for analysts/investors today at 16.30pm CET (15.30pm GMT). Dial-in numbers are +44 20 7162 0125 for Europe and +1 334 323 6203 for the US.