UPDATE 2-Czech CEZ Q2 net beats forecast, keeps outlook

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By Jan Korselt

Dominant Czech power company CEZ beat expectations with a 32 percent rise in second-quarter net attributable profit and maintained its full-year outlook.

The 7.82 billion crown ($379.6 million) net result was driven by expansion abroad and higher power prices and exceeded the average expectation of 7.05 billion crowns in a Reuters poll of nine analysts.

CEZ, the majority state-owned former monopoly, is central Europe's largest power utility and has a market capitalisation of $32 billion.

Revenues rose to 39.04 billion crowns from 33.76 billion a year ago, lagging the average forecast of 39.66 billion.

Operating profit (EBIT) rose 29 percent to 11.01 billion, beating the forecast of 10.48 billion.

The company maintained its full-year outlook for earnings before interest, tax, depreciation and amortisation (EBITDA) of 70.9 billion crowns and net profit of 35.1 billion crowns, before minorities.

Chief Finance Officer Petr Voboril said in a statement the company would make 1 billion crowns savings to compensate for sales erosion caused by warm weather in the winter.

"We want to confirm that the savings are realistic, therefore we expect that we will present a new profit outlook along with third-quarter results," he said.

The firm's shares dipped 0.18 percent to 1,096 crowns by 0940 GMT, outperforming the main PX index which lost 0.86 percent.

The stock trades at 18 times expected earnings in 2007, a premium to the average of the DJ Stoxx European utility index at nearly 12 times.

"The results are in line with expectations, better on the operating level, costs were lower than we expected," Patria Finance analyst Robert Keller said. He saw CEZ on track to reach a target price of 1,200 crowns.

He said the full year outlook could be met or slightly exceeded.

CEZ has grown by acquisitions of power stations in Poland and Bulgaria, which have boosted the bottom line along with a nearly 17 percent growth in wholesale power prices this year.

The price growth is expected to continue, as indicated by prices on the new Prague Energy Exchange, where CEZ aims to sell its output that is not delivered to its own distribution network.

CEZ, which has bought back 4 percent of its own stock in the past months under an up to 10 percent buyback plan, said it continued to seek acquisitions but saw no large deal coming soon. (Additional reporting by Jan Lopatka)

[PRAGUE/Reuters/Finance.cz]