UPDATE 1-Czech CEZ eyes savings to hit 2007 target

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PRAGUE, July 25 (Reuters) - Czech utility CEZ reiterated its 2007 net profit forecast on Wednesday, saying the management was confident it would offset lower than expected revenue from distribution by saving costs.

CEZ, majority owned by the Czech government, said that meeting the 35.1 billion crown ($1.72 billion) group profit forecast from February posed "a challenge" to the company which it believes it will meet.

The company said warm weather and growing renewable resources output caused its distribution revenue to fall about 1 billion crowns behind the plan. Revenues at foreign distribution units were also lower than expected.

"We believe we will manage to compensate for the shortfall, particularly through cost savings," CEZ said in a statement.

CEZ is central Europe's biggest power company, with a market capitalisation of nearly $33 billion.

The firm's shares traded 1.3 percent higher at 1,113 crowns by 1330 GMT, leading gainers on the Prague stock exchange. The blue-chip PX index was up 0.5 percent.

The government holds a 67.6 percent stake in CEZ. It plans to sell up to 7 percent shares on the market. CEZ is simultaneously conducting an up to 10 percent share buy-back.