Czech Equity Daily: 11/05/10; CEZ, Macro

...just released its 1Q2010 results. Overall, we see 1Q2010 results as fully in line with market expectation and ours expectation. Consolidated EBITDA in 1Q2010 reached CZK 27.3 bn (-9.6% y/y). The main reason for the fall of the operating performance was the fall in average wholesale electricity prices to 54 EUR/MW (baseload), from 62 EUR/MW in 1Q2009. On the other hand 1Q2010 results were positively affected by the rise in domestic demand and rise in nuclear power plants generation (+8.0% y/y). EBITDA margin decreased by 6.0 p.p. and reached 50.7%. Sales in 1Q2010 positively surprised us and the market and reached CZK 53.9 bn (-0.1% y/r). On the other hand operating cost were also higher than expected, so higher sales were fully compensated and operating level is fully in line with us and the market. As a results of fall on the operating level also bottom level decreased in y/y comparison and NI reached CZK 17.5 bn (-8.6% y/y). CEZ announced that its full year guidance for 2010 stay at the same level as in previous guidance announcement (so EBITDA CZK 88.7 bn, NI CZK 46.7 bn). We expect 2010 EBITDA to reach CZK 89.2 bn. CEZ also announced that CEZ´s board of directors propose gross dividend of CZK 53/share (5.7% div. yield, 55% payout ratio). We expected CEZ to payout CZK 54/share. Dividend record day is the date of AGM (so June 29). We do not expect any strong market reaction to 1Q2010 results, dividend proposal and guidance confirmation. On the other we expect fall of CEZ shares due to the expected market correction.   CZK m, consolidated (IFRS) 1Q2010 y/y 1Q2009 Market eAFT Sales 53,886 -0.1% 53,952 51,760 50,086 EBITDA 27,331 -9.6% 30,227 27,490 27,466    EBITDA margin 50.7% -6.0pps 56.7% 52.9% 54.8% EBIT 21,691 -12.5% 24,797 21,510 21,844    EBIT margin 40.3% -6.3pps 46.5% 41.9% 43.6% Net income 17,455 -8.6% 19,091 17,160 17,162 Source: CEZ, ATLANTIK FT   Rating – Moody‘s Moody’s warned the Czech Republic yesterday that if the new government after election (May 28-29) does not introduce a credible plan to stabilize the public finance the rating could be in threat. The Czech republic has rating at the level of A1 from Moody’s. The agency also called on pension reform and the overhaul of health care system. Rival S&P’s send a simile warning to the Czech republic early.   CPI - April Inflation in April accelerated to 1.1% y/y from 0.7% in April. In month-on-month comparison, the price level was up by 0.3% m/m. Fuel prices further rose by 2.2% m/m reaching the new 1.5-year high. This effect was added by the rise of natural gas prices (3.3% m/m). There was also seasonal effect – an increase of clothing prices (1.3%).Other price movements were only minor. Inflation pressures have remained low reflecting weaknesses of consumer demand. This year we expect the inflation of 1.5% on average. Unemployment - April The unemployment rate in April dropped by a half of percent to 9.2% beating expectations (AFT and market: 9.4%). There were sings in February-March that the labour market might be getting to the bottom. The April figures supported it and the unemployment rate fell beside seasonal effects. In April, the start of outdoor works reduces usually the unemployment by 4 tents while this year the rate dropped by 1 tents above seasonality.  The number of newly registered job seekers was still high (53 thousand) but lowering in year-on-year comparison third months in row. Further, the number of registered job seekers who found employment increased (65 thousand) and was even the highest in history of time series since 2004. This year we expect the unemployment rate to stay at 9.5% in average.