CEZ shares rise 2.5% after Czech government calls for payout of entire 2022 profit

Shares in CEZ, the Czech power group, rose by 2.5% on June 19 after the Ministry of Finance, which owns a 70% stake, announced late on Friday that it would be seeking the payout of the company's entire 2022 profit in dividends.

CEZ management had proposed a dividend of CZK117 a share, some 80% of the net profit, a move initially supported by the ministry. On the last possible day before the annual general meeting on June 26, the ministry has now proposed a CZK145 a share dividend, boosting the prices of by far the most important stock on the Prague Stock Exchange.

The government’s change of heart surprised the market, though its initial approval of a lower dividend was the more surprising, given that it is struggling to close the budget deficit, which is forecast to hit 3.5% of GDP this year. Last month it announced a CZK94bn (€4bn) austerity package to cut next year’s deficit, and it is considering imposing emergency cuts to lower this year’s shortfall.

"In the context of the government's ongoing steps towards consolidating the state budget balance, the Ministry of Finance, taking into account the company's record profit and the positive outlook for its future management, proposes the payment of a dividend of 145 crowns per share," said the Ministry of Finance.

A CZK145 per share dividend will give the state a useful CZK78bn (€3.285bn), an increase of around CZK13bn on the previous proposal. The entire 2021 profit had also been released as dividends.

“Given the company’s very low indebtedness (net debt/EBITDA at 0.7x) and the condition of public finances, the proposed distribution of the entire profit from last year is the logical and right step,” brokers J&T said in a note.

In 2022 CEZ’s made a net income adjusted for one-offs of CZK78.4bn (CZK26.1bn in 2021). The profits were swollen by extraordinary trading revenues amid huge rises and volatility in commodity prices after Russia’s invasion of Ukraine.

The government is also extracting a windfall tax and a levy on excess revenues from CEZ, the only country in the EU to do both.

The company has said it expects to pay out CZK30bn to CZK40bn this year from these measures, as well as corporate tax of around CZK26bn to CZK30bn, making a total of CZK150bn (€6.3bn) including the 2022 dividend.

CEZ shares closed up CZK26 at CZ1,068 in Monday’s trading.