Out of the leading listed companies in Hungary, only one was able to not only meet, but actually surpass its previous results for the same period of 2010, as business statements released after the first quarter indicated.
The four blue chips listed on the Budapest bourse, energy group MOL, Magyar Telekom, drug maker Richter and OTP Bank all reported profits after the first quarter, although complained how much a special tax introduced by the government may cut into their profits. Hungary’s government introduced the provision as a means of acquiring additional revenues to be paid by the telecommunications, energy, retail and finance sectors.
The only notable exception of the four is MOL, which still achieved a 6% year-on-year profit increase, as the company announced at the end of April. MOL had unconsolidated after-tax profit of HUF 103.2 billion, while paying HUF 80 billion as special items. These comprised HUF 25.8 billion paid to the state’s coffers in the form of the special tax and HUF 35.2 billion that the company was to pay as due mining royalties following a ruling by the European Commission.
Shareholders of MOL approved a proposal to place all of the company's 2010 profits into reserve, paying no dividend and following the trend started in 2008. Speaking at a press conference after the meeting, MOL chairman-CEO Zsolt Hernádi said the proposal not to pay a dividend was a difficult one to put to shareholders, especially for the third year in a row, but shareholders approved it along with a strategy for MOL to develop further organically, while following a conservative financial policy and implementing ambitious exploration and production plans.
MOL remains financially strong and could continue all of its planned investments in 2010, he said.
Pharmaceuticals firm Richter’s first-quarter net earnings edged down 3.2% to HUF 11.2 billion because of a jump in sales and marketing costs jumped 48% to HUF 18.7 billion.
Richter attributed the rise to “a substantial expansion of our sales network combined with increased promotional activities in the CIS countries” as well as “the establishment costs related to a Western European sales force for the marketing of our existing and future gynecological portfolio”.
First-quarter net income of Magyar Telekom, the market-leading telecommunications group, fell 7.8% to HUF 15.2 billion from the same period a year earlier. The drop came despite cost-cutting measures that were offset by the austerity tax. Magyar Telekom noted that it paid HUF 6.3 billion in Q1 as extraordinary levy. It also booked HUF 1.5 billion in severance payments and accruals as well as HUF 400 million in costs related to an investigation of questionable contracts at its foreign subsidiaries that has persevered for years.
Leading lender OTP reported HUF 109.0 billion in after-tax profit for the first quarter of the year. Calculating with the dividend on treasury shares to be divided among shareholders, the bank's owners will get about HUF 73 per share.
OTP Bank is not paying a larger dividend because the bank's management is cautious and because they would rather use existing liquidity to make acquisitions, chairman-CEO Sándor Csányi told journalists.
Excluding risk provisions, OTP Bank’s profit would have been 80% higher in 2010 and returns on earnings would have been over 20%, added deputy-CEO László Bencsik. Those provisions will be released sooner or later, which could cause the bank's profits to jump and “this could be of interest to investors”, he added.