LONDON (Dow Jones)--Call it the Kremlin premium. Gazprom shares rose about 5% Wednesday, to $14.10, despite a pretty awful set of first-half accounts.
No matter how poorly it performs, Gazprom can count on the rights to develop Russian gasfields and can count on the government giving it higher gas prices.
At least in the past, the company got better. In the four years before 2007, it boosted its net profit margin to 29% from 5%. ExxonMobil doubled its own margin to 12% in that time while StatoilHydro pushed it up to 10% from 7%.
Gazprom stock in turn outperformed competitors in the past year, rising about 18% or five percentage points faster than ExxonMobil and 12 percentage points faster than StatoilHydro.
But at the end of 2006, Gazprom was among the worst of 15 globally comparable companies in return on equity. That seems to have continued into 2007.
Return on assets and capital employed is no better. The latter was at 24% at Gazprom,far below the 59% at ExxonMobil and 51% at StatoilHydro according to the latest annual report. It's asset turnover was a mere 0.4X in 2007, one third the 1.2X at StatoilHydro
The good profit margins have offset some of the unfavorable comparisons with competitors. But rising costs and falling demand put those in jeopardy. Buying Gazprom for its Kremlin edge is one thing. Buying it for its management performance is less justified.
(Angelo Franchini, a Special Writer on Dow Jones Newswires' Skeptic team, has previously worked in research and development in the biotechnology and software sectors. He can be reached at +44 20 7842 9458 or by e-mail:
[email protected])
TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at
[email protected]. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments