UPDATE 2-Weaker-than-expected CEZ profit gain dents shares

(Writes through with analyst quotes, details)

By Marek Petrus and Jan Korselt

PRAGUE, Nov 15 (Reuters) - CEZ <CEZPsp.PR>, central Europe's largest utility group, posted a weaker-than-expected 51 percent rise in third-quarter net profit on Wednesday, leading investors to sell after the share's recent rise to record highs.

The Czech-based company's net profit, excluding minority interests, rose to 5.22 billion crowns ($238.5 million) for July-September, driven by foreign acquisitions and rising demand and electricity prices at home.

The figure lagged the average forecast of 5.59 billion crowns in a Reuters poll, which analysts attributed to a one-off depreciation charge on transfer of property between units.

CEZ, the EU member's most profitable company, has been on the acquisition trail in central and eastern Europe, buying power generation plants and distribution assets in Poland, Bulgaria and Romania.

CEZ shares were down 0.92 percent at 887.50 crowns by 1116 GMT, off an all-time high of 911 crowns on Monday. They earlier fell as low as 881.50 crowns. The stock trades at a multiple of more than 14 times forecast 2007 earnings.

But analysts said that after adjusting the results for one-off charges that did not impact CEZ's cash flow, they looked solid and roughly in line with market expectations, which should give little reason for any downgrade of the company's stock.

"The earnings news appeared to trigger some profit-taking, but I would not see the results as too negative. CEZ remains an interesting stock," said Barbara Seidlova, an analyst at ING in London, which maintained its "buy" rating and price target of 955 crowns.

"Revenues and EBITDA lines were in line, while the short-fall on net income was caused by one-off, non-cash items," she added.

GUIDANCE UPPED

The utility has been awash with cash thanks to a jump in wholesale electricity prices on its domestic Czech market.

CEZ's core profit, or earnings before interest, tax, amortisation and depreciations (EBITDA), rose nearly 30 percent year-on-year to 13.98 billion crowns in the third quarter, above the average forecast of 13.81 billion crowns.

Quarterly revenue rose 32 percent to 36.53 billion crowns, above the average forecast of 34.63 billion. CEZ's record power output partly reflected 4.3 percent growth in domestic consumption.

The company said sharp growth in Bulgaria and new acquisitions in Romania and Poland boosted its core profit by 2.3 billion crowns so far this year versus a year ago.

CEZ raised its forecast for 2006 headline net profit including minorities to 28.5 billion crowns from a previous 28 billion, after earning 22.0 billion in the first nine months.

CEZ said higher core profit and a 1.1 billion crown gain from the sale of excess CO2 permits would be only partly offset by a 1.7 billion crown charge on subsidiaries and other factors.

"We expect the very good trend to be maintained in the fourth quarter, driven mainly by a further growth in margins from production, sales as well as costs savings," Chief Executive Officer Martin Roman told a news conference. ((Reporting by Jan Korselt, writing by Marek Petrus, editing by Jane Baird; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477)) ($1=21.89 Czech Crown)

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Keywords: UTILITIES CZECH CEZ