November 3, 2017 / 10:31 AM / 2 years ago

UPDATE 1-MOL Q3 net profit below forecast, flags dividend increase

(Updates with dividend outlook, share price, analyst)

* Third quarter below expectations on weaker downstream

* MOL says on track to deliver $2.3 bln in EBITDA in 2017

* Says to increase dividend by 10 pct in 2017

* Also flags potential for “special payout” in 2018

By Krisztina Than

BUDAPEST, Nov 3 (Reuters) - Hungarian oil and gas group MOL reported a 29 percent annual drop in quarterly net profit on Friday because of a weaker than expected performance by its downstream business.

Although its third-quarter result missed expectations, central Europe’s leading fuel retailer maintained its full-year 2017 EBITDA (earnings before interest, taxes, depreciation and amortization) guidance of $2.3 billion.

MOL operates refineries in Hungary, Slovakia and Croatia and has exploration and production assets in the North Sea and countries including Pakistan, Iraq, and Russia.

It also said a special dividend may be considered as a separate part of the annual dividend proposal process in early 2018, “provided all the necessary conditions exist.” It did not provide further detail.

MOL shares slipped 3 percent by 1005 GMT but are up by more than 20 percent this year.

Third-quarter net profit fell 29 percent year on year to 47.7 billion forints ($178.7 million)— down from 88.8 billion forints in the second quarter — and well below analysts’ forecast for 78.1 billion in survey of business website

However, Chairman and Chief Executive Zsolt Hernadi said that the trend was more positive over the year as a whole.

“After the first nine months of the year we are well on track to deliver on our upgraded USD 2.3 billion ... EBITDA guidance and on our MOL 2030 strategy,” Hernadi said in the earnings report.

As a silver lining, in a separate investor presentation, MOL said it planned a 10 percent increase in dividend for 2017 and also the “potential for a special payout in 2018.” Tamas Pletser, EMEA oil and gas analyst at Erste Investment in Budapest, said that downstream — which had been the main driver in the last few quarters — was the main disappointment. “MOL’s downstream was weaker than expected as strong refining margins were offset by softer sales margins, weaker petrochemical margins and other items,” he said.

“It seemed that inland wholesale margins were less resilient than investors hoped for, while competition heated up as well.”

Pletser said he rated MOL a “buy”, with a target price of 3,750 forints. MOL traded at 3,189 forints at 1015 GMT, down 3.4 percent.

In line with its new long-term strategy published last year, MOL said it was launching its downstream programme which would deliver $500 million in additional EBITDA with over $2 billion investments by 2022. ($1 = 266.8800 forints) (Reporting by Krisztina Than; Editing by Biju Dwarakanath/Keith Weir)

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