Gazprom reports weak Q3 as Europe demand slumps
The world's largest gas firm Gazprom reported a 40-percent rise in nine-month net profits but the results were shadowed by a sharp drop in third quarter earnings resulting from poor European demand.
The state-controlled Russian company said in a statement that its net profits for the first nine months of 2010 had jumped 39.5 percent to 668.75 billion rubles ($22.82 billion).
But profits attributed to the company's shareholders dropped to 159.0 billion rubles ($5.43 billion) in the third quarter from 174.6 billion rubles ($5.96 billion) in Q3 2009 -- an 8.9-percent decline that sent the stock down 1.5 percent in afternoon trading.
The disappointing figure was released only a day after Prime Minister Vladimir Putin told the company to ease private producers' access to its vast pipeline network in what analysts interpreted as bad news for Gazprom.
The latest financial statements did not explain the performance figures. But they came on the heels of a senior executive's confirmation that the company's exports had slipped by 1.5 percent last year.
Thursday's statements confirmed that Gazprom's net profits from its sales to Europe and other countries outside the former Soviet Union fell by six percent between January and September.
It did not report an export figure for the third quarter but analysts said that only poor European demand could explain a nine percent third quarter reversal.
"Sales to the former Soviet Union are growing and prices have increased," said Renaissance Capital analyst Ildar Davletshin. "So really it's due to much lower volumes to Europe, which have the highest margin."
The company's performance within Russia itself continued to improve as it pursues its politically-sensitive policy of gradually lifting prices for domestic consumers to bring them closer in line with those seen in Europe.
The European Union still receives about 25 percent of its gas from the Russian monopoly.
But a series of brief supply interruptions that Russia blamed on Ukraine have promoted the European Union to plot a new diversification strategy that relies on liquefied natural gas (LNG) shipments from North Africa and Qatar.
Analysts said that this increased dependence on LNG -- whose prices were below those in Gazprom's long-term contracts -- hurt the Russian giant in the third quarter.
Gazprom has responded to Europe's diversification effort by putting a greater focus on Asia and plotting an LNG strategy that could see it extend shipments to Latin America.
But Gazprom's undisputed status as Russia's largest and most important firm was shaken Wednesday when it fell under a barrage of criticism from the country's former president and current de facto leader Putin.
The prime minister accused the company's of wasting Russia's natural gas pipelines -- which it controls in full -- by underproducing and shutting off access to more efficient firms.
Putin provided no timeline for when he expected to see fuller pipeline access but analysts interpreted the comments as a bad sign for Gazprom.
"For Gazprom itself, non-discriminatory access for independents could increase competition significantly," Alfa Bank said in a note to clients.
The bank noted that Gazprom could thus face stiff competition not only from private producers such as Novatek but also oil companies that produce natural gas as a bi-product that is currently simply burned off.
Gazprom grew out of the Soviet Union's Gas Industry Ministry in 1989 and was partially privatised in 1993 in the much-criticised sale of state assets.
The government still retains a controlling stake of just over 50 percent in Gazprom.
© 2011 AFP