CEZ Drops After Profit Slumps 51% on Nuclear Outages

(Bloomberg) -- CEZ AS fell the most in more than six weeks after its second-quarter profit missed all analyst estimates and the utility cut its full-year earnings guidance amid protracted nuclear-reactor outages.

Investors sold the stock as the biggest Czech electricity producer said Tuesday its net income dropped 51 percent from a year earlier because of low power prices and an asset writedown in Romania. The utility cut its projection for 2016 earnings before interest, taxes, depreciation and amortization to 58 billion koruna ($2.4 billion) from 60 billion koruna, while keeping its forecast for adjusted profit, the basis for dividend payout, at 18 billion koruna.

“The reported figures were below our and market estimates from top to bottom,” Erste Group Bank AG analyst Petr Bartek in Prague said by e-mail. “Still, the outlook for dividends is unchanged as adjusted net profit guidance was confirmed.”

CEZ shares slumped as much as 4.9 percent, the most since June 24, before trimming the loss to 2.6 percent at 439.10 koruna at 3:30 p.m. in Prague, valuing it at 236 billion koruna. The Czech company was the worst performer Tuesday on the 26-member Stoxx 600 Utilities Index.

‘Strongly Negative'

Like most other generators in Europe, state-controlled CEZ has been grappling with falling demand that has cut the price of electricity, slashing the Czech utility's profit to a 10-year low in 2015. The company has also lost output because of unplanned reactor outages at its Dukovany nuclear power station.

The impact of those protracted shutdowns on 2016 Ebitda will be 2.5 billion koruna more than CEZ previously estimated, Chief Financial Officer Martin Novak told reporters in Prague after the earnings were published. The utility cut its full-year projection for nuclear-power output to 26.4 terawatt-hours from an earlier forecast of 28.7 terawatt-hours and an original target of 30 terawatt-hours.

Novak said CEZ is keeping its policy of distributing 60 percent to 80 percent of its adjusted net income to shareholders. According to Bloomberg's dividend forecast, the dividend payout from this year's profit will drop to 30 koruna per share from 40 koruna in each of the previous four years.

The decline in net income for the April to June period to 3.75 billion koruna from 7.9 billion koruna a year earlier was aggravated by a 900 million-koruna asset writedown in Romania, CEZ said. The median estimate of 10 analysts polled by Bloomberg was 5.5 billion koruna.

CEZ quarterly earnings are “disappointing” and the reduction of the company's nuclear production plan is “strongly negative news,” Komercni Banka AS analyst Josef Nemy in Prague said in a report to clients.

--With assistance from Ladka Bauerova To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net. To contact the editors responsible for this story: Alex Nicholson at anicholson6@bloomberg.net, Lars Paulsson, Rob Verdonck