PGNiG Profits Slump on Lower Prices, Higher Costs
Profits at Poland's PGNiG plunged 57% in 2019, as a growth in gas sales revenues was outweighed by a rise in the cost of its gas purchases, according to a company report published on March 12.
Net income totalled zlotys 1.37bn ($357mn) for the year, down from zlotys 3.21bn in 2018. Core earnings (Ebitda) came to zlotys 5.5bn, versus zlotys 7.1bn in the year before.
PGNiG spent zlotys 26.7bn on gas purchases in 2019, constituting around 67% of its total operating expenses, down from zlotys 24.9bn in the year before. The company got around 60% of its gas from Russia last year under a long-term contract, with costs indexed to the price of crude. It expects a favourable Stockholm arbitration ruling this month, which could result in changes in the way its Russian gas is priced.
PGNiG also received around 23% of its gas in the form of LNG, up from 20% in the previous year, while its remaining purchases are made from its southern and western neighbours.
The company increased its gas sales volumes by 6% in 2019 to 30.7bn m3, but its revenues rose by only 2% to zlotys 42bn, as European gas prices were lower because of higher LNG imports. According to PGNiG CEO Jerzy Kwiecinski, the average price of gas traded at the Polish power exchange was 35% lower last year.
Revenues from PGNiG's trade and storage segment rose 5% to zlotys 33.25bn, but revenues from exploration and production fell 32% to zlotys 3.18bn. Turnover at its distribution services business was also down 5% at zlotys 4.21bn, while revenues from heat sales were up 1% at zlotys 1.33bn.
PGNiG also booked impairment losses in the fourth quarter, including a zlotys 212mn charge on its upstream oeprations, a zlotys 339mn charge on its trade and storage segment and a zlotys 272mn charge relating to its stake in the Polska Grupa Gornicza coal mining concern.
"All participants of the global gas market are currently facing the challenge of low prices. We should bear in mind, though, that demand for gas has been growing at a significant rate, as confirmed by forecasts from all around the world," Kwiecinski said in a statement. "Against this backdrop, we are consistently and actively diversifying our sources of natural gas imports with a view to ensuring Poland’s energy security."