Hungary MVM closes the first half of this year with a significant profit

Detailed data from the first half of 2024 show that:

• Net sales decreased to HUF 2,156 billion from HUF 2,769 billion in the first half of last year, also due to lower energy prices and lower electricity and gas consumption in Hungary and the Czech Republic. This was substantially offset by a good performance of the wholesale segment in electricity and especially in gas, as shown in the table below.

  

• Material costs fell to HUF 1,823 billion from HUF 2,739 billion in the first half of last year. At the same time, financial expenses also fell significantly by HUF 180 billion to HUF 197 billion, as the interest rate environment eased and debt levels declined.
• Profit before tax also increased to HUF 298 billion, up from nearly HUF 273 billion in the first half of last year. First half EBITDA was HUF 450 billion, up from HUF 513 billion in the same period last year, and as the investor presentation points out, "The result close to H1 2023 was mainly driven by higher margins in wholesale gas markets and higher margins from nuclear and renewable generation. This increase was moderated by lower results in the natural gas universal service business and lower margins in the gas retail and Hungarian wholesale electricity markets." These helped EBITDA margin jump to 20.9% (!) from 18.5% in the first half of last year and 3.7% in the first half of 2022.
• Profit after tax was HUF 222 billion, compared to HUF 209 billion in the first half of last year. This, together with other dimensions of the strong financial situation, could again provide a basis for the state, as the sole shareholder, to initiate a dividend prepayment towards the end of the year, given the current fiscal situation.

• The cash-flow statement shows that, with a jump in trade receivables and a fall in payables, net cash flow from operating activities jumped to HUF 777 billion in the first half of this year from HUF 336 billion last year. Cash outflow from financial activities rose slightly to HUF 550 billion from HUF 467 billion last year. As a result, cash and cash equivalents in the company jumped to HUF 383 billion at the end of June from HUF 207 billion at the end of the first half of last year. Free cash flow stood at HUF 331 billion at the end of June, up from HUF 388 billion in the first half of last year.
• Net debt fell to HUF 832 billion at the end of June this year from HUF 1,417 billion at the end of June last year, due to lower stock financing levels. As a result, the net debt to EBITDA ratio fell to 0.95 from 1.56 last year and 2.3 in June 2022, meaning that the financial position has also improved significantly in this respect.

The MVM Group also highlighted the following in its press release:

• "Despite the geopolitical conflicts in the wider geographic region, the Group has consistently ensured uninterrupted energy supplies to the country. About 85% of the electricity generated by the MVM Group came from clean CO2 neutral energy sources. In addition to the expansion of generation capacity linked to the green transition, there is ongoing development in the transmission and distribution networks, which are essential due to the record-breaking and still dynamically growing renewable energy generation capacity in the first half of this year."
• "In line with our strategic objectives, we will continue to expand our renewable generation portfolio in 2024. The MVM Group has acquired a solar power plant with an installed capacity of 63 MW on the outskirts of Tázlár, and a further 249 MW of solar power will be added in the second half of the year." At the end of June, the combined size of the MVM Group's renewable electricity generation capacity was 629 MW, and while we don't know what projects may be behind this significant expansion, the 249 MW figure indicated is very close to the giant solar farm in Mezőcsát, which has a total installed capacity of 233.5 MW.
• "To support the reduction of the Hungarian economy's energy dependency, investments to increase domestic gas production have continued, and the search for road and resource alternatives, including new LNG supply opportunities, is ongoing. Future diversification of supply sources could be supported by the largest acquisition in the history of the MVM Group, the agreement signed to acquire a stake in the Shah Deniz offshore gas field in Azerbaijan." This acquisition was closed by the group at the end of August.
• "The Group continues to focus on sound and conservative financial management, which has been recognised by the S&P and Fitch rating agencies with the affirmation of MVM's investment grade credit rating in 2024."

Cover photo: MTI Photo/Róbert Hegedűs