RAPORT ANALIST March 28, 2017

Disappointing 2017 profit target

Romgaz pays dividend of RON 2.49 a share from its distributable profits including retained earnings from previous years as well. The total amount of dividend represents 93.7% of net income achieved in 2016 (vs. a pay-out ratio of 87% in 2015) and implies a DIVY of 8.7% based on the current share prices.
Romgaz has published its 2017 budget including net income of RON 1.07 bn, 17% lower than our previous estimate. As revenue guidance has remained broadly in line with our expectation of RON 3.7 bn, the difference between the company’s 2017 profit target and our estimate comes from higher-than-expected costs budgeted for 2017. In fact, Romgaz aims to increase wages more rapidly than we had projected, justifying it by the lack of wage increases in the previous years.
Also importantly, Romgaz intends to invest RON 1.14 bn in 2017 (vs RON 369 mn in 2016), focusing on exploration projects aimed at compensating for the natural decline in production, compared to our earlier estimate of RON 1 bn.