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UPDATE 3-PGNiG makes unexpected Q2 loss, shares at 7-wk low

Published 08/31/2009, 08:42 AM
Updated 08/31/2009, 08:45 AM
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* Q2 net loss 94 million zlotys

* Plans full-year net profit

* Shares drop 3.5 percent

(Adds company's comment, outlook, updates shares)

By Patryk Wasilewski

WARSAW, Aug 31 (Reuters) - Poland's gas monopoly, PGNiG, swung to an unexpected second-quarter net loss due to higher prices for Russian imports and one-off charges, dragging its shares to their lowest level in seven weeks.

PGNiG's management said on Monday it should make at least 500 million zlotys ($174 million) net profit in the second half to pull it back into black for 2009 as a whole.

"We had expected more positive results," chief executive Michal Szubski told reporters. "Unfortunately, global slowdown has affected our clients, hittin our sales and cash flows."

Slowing global economy took a heavy toll on Polish chemical makers Police, Pulawy and Anwil which suffered lower demand for fertilizers, ricocheting into PGNiG's natural gas sales.

Although Szubski expected gas sales to remain under pressure in the second half, its margins should benefit from a drop in imported gas prices.

PGNiG shares, which have underperformed Warsaw's main index by 13 percent this year, fell 3.5 percent by 1200 GMT, making them the index's worst performers on the day.

"These are surprisingly poor results across the board, coming well below our and market estimates," said Pawel Burzynski, analyst at BZ WB. "All segments reported operating loss, first such phenomenon since market debut."

The state-controlled gas supplier took an unexpected 162 million zlotys charge related to the lower value of its oil and extraction assets, dragging it to a net second-quarter loss of 94 million.

Analysts had expected a net profit of 178 million zlotys after the company previously indicated it would return to profit after two consecutive quarterly losses.

PGNiG was also hit by a 19 percent rise in the price of Russian gas imports, which make up about two thirds of the 14 billion cubic metres of gas it sells annually.

Its import prices are tied to the cost of oil with a nine-month delay. The prices it charges clients are set by the state regulator, who in April reduced tariffs by 9 percent.

BOND ISSUE PLANNED, CAPEX HELD

Despite lower-than-expected earnings the gas monopoly confirmed its plan to spend about 3.5 billion zlotys on capital expenditures this year and the next on a standalone level.

In order to refinance its existing bank loans and gather cash for extensive plans aimed at increasing domestic extraction levels and finance new pipelines PGNiG plans a 4.5 billion zloty bond issue for next year.

"First tranche, aimed at domestic investors would be issued in the first quarter of 2010, the other part in the second half," PGNiG's chief financial officer Slawomir Hinc told reporters.

Tranches would be of roughly equal sizes, Hinc said. (Reporting by Patryk Wasilewski; Editing by Mike Nesbit) ($1 = 2.870 zlotyz)

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