Naftogaz: Net profit down 70% in 2018

NJSC Naftogaz of Ukraine in 2018 received UAH 11.6 billion (US$0.4 billion) of net profit, which is 70% lower than the figures recorded for 2017, the company press service wrote with reference to independent auditors from Deloitte.

"In 2018, Naftogaz generated revenues of UAH 256.3 billion (US$9.3 billion), operating profit of UAH 26.4 billion and net profit of UAH 11.6 billion ($0.4 billion). The group's net profit has decreased by UAH 27.9 billion ($1.66 billion) compared to 2017, mostly due to the effects of reflecting the Stockholm arbitration decisions in both 2017 and 2018," the report says.

In 2017, Naftogaz recognized UAH 12.6 billion of net positive effect of the Stockholm arbitration decisions on the group`s operating profit. In March 2018, Naftogaz recognized expenses of UAH 4.8 billion ($183.3 million) related to the additional VAT paid by the group in relation to the awards.

The transit contract arbitration award resulted in UAH 43.9 billion ($1.68 billion) inflows (incl. dividends, profit tax and related VAT) from Naftogaz to the state budget of Ukraine in 2018.

In addition to the one-off effects of the arbitration awards, the following factors have influenced the group`s results for 2018. The allowance for impairment of receivables increased by UAH 7.0 billion ($267 million) compared to 2017 due to a weaker collection of payments for balancing services.

Read alsoEBRD may lend Naftogaz EUR 60 mln for gas purchase

The group has also recognized expenses amounting to UAH 10.6 billion ($405 million) related to the adoption of the IFRS 9 standard and to creation of a litigation reserve.

"The auditor made no qualifications regarding Naftogaz` financial data for 2018," the statement notes. "In 2018, the companies consolidated within Naftogaz group contributed UAH 138.6 billion ($5 billion) to the state budget, having accounted for nearly 19% of the Ukrainian budget revenues (UAH 110.0 billion, or $4.2 billion, and 15% in 2017, respectively)."

This amount includes UAH 29.5 billion ($1.12 billion) of dividends paid by Naftogaz as a 100% state-owned company (2017: UAH 13.3 billion, or $508 million).

As UNIAN reported earlier, Naftogaz of Ukraine in 2017 received UAH 39.4 billion ($1.5 billion) of net profit, which is 2.2 times more than the figure for 2016. The victory in the arbitration proceedings vs Gazprom became the main factor in the group's profitability in 2017.

Read alsoHow conflict between Cabinet and Naftogaz helps Russia tighten gas noose on Ukraine's neck

At the end of February 2018, the Russian energy monopoly, Gazprom, lost its gas dispute with Naftogaz in the Stockholm Arbitration over a gas transit contract. The Arbitration award ordered that Gazprom pay $4.6 billion to the Ukrainian side.

At the same time, taking into account the arbitration award on the gas supply contract, the final amount of settlements between the companies was set at $2.6 billion in favor of Naftogaz.

Against the background of the loss, Gazprom announced its intention to terminate the contract with Ukraine for the supply and transit of gas.

In March 2018, Gazprom officially notified Naftogaz that it refuses to comply with the arbitration award.

UNIAN memo. NJSC Naftogaz of Ukraine is the largest state-run vertically integrated oil and gas holding whose subsidiaries account for about 90% of oil and gas production in Ukraine. Naftogaz develops oil and gas fields, produces crude oil and natural gas. Its core business is also transportation and trade in fuel through its own network of filling stations.