The economy is set to remain resilient despite the energy shock We forecast economic growth to slow slightly to 2.3% this year, before picking up again next year to 2.8%. In both years, GDP growth is still likely to be driven mainly by domestic demand – including consumption and investment – and expansionary fiscal policy.

Inflation should gradually increase to 3% due to higher energy costs We expect inflation to average 2.2% this year, before rising to 2.7% next year as higher fuel and energy prices feed through to other areas of the economy. We see both headline and core inflation remaining in the upper half of the CNB’s tolerance band for most of 2026 and 2027.

The economy is set to remain resilient despite the energy shock We forecast economic growth to slow slightly to 2.3% this year, before picking up again next year to 2.8%. In both years, GDP growth is still likely to be driven mainly by domestic demand – including consumption and investment – and expansionary fiscal policy.

Inflation should gradually increase to 3% due to higher energy costs We expect inflation to average 2.2% this year, before rising to 2.7% next year as higher fuel and energy prices feed through to other areas of the economy. We see both headline and core inflation remaining in the upper half of the CNB’s tolerance band for most of 2026 and 2027.

The CNB looks set to stay on hold, but risks are tilted towards a hike The central bank is in a favourable position, with interest rates still slightly restrictive and the koruna remaining strong. However, in our scenario of robust domestic demand and strong fiscal expansion, alongside the impact of higher energy prices, there is a risk of higher inflation and CNB rate hikes.

Market rates are likely to remain elevated The short end of the koruna interest rate curve could be pushed down slightly if the CNB’s monetary policy stance remains unchanged, and the Middle East conflict gradually de-escalates – as we assume. The longer end of the curve should remain high due to accelerating inflation and the effects of fiscal policy easing.

The koruna holds firm, for now So far, the Czech currency has reacted only mildly to the Middle East conflict. However, we think downward pressure could return. This could be fuelled by increased uncertainty, a deterioration in the external balance of the economy, or a narrowing of the interest-rate differential amid ECB monetary policy tightening and stable CNB rates.

This morning, Philip Morris CR released its annual report. For the second half of last year, net profit reached CZK1.4bn. This figure represents a 4.2% yoy decline and falls short of our original estimate by 10.5%. PMCR proposes paying a dividend of CZK1,100 from last year's profits. This offers a gross yield of 5.7%.

This morning, Philip Morris CR released its annual report. For the second half of last year, net profit reached CZK1.4bn. This figure represents a 4.2% yoy decline and falls short of our original estimate by 10.5%. PMCR proposes paying a dividend of CZK1,100 from last year's profits. This offers a gross yield of 5.7%.

Half-Year Results: In the second half of 2025, total revenues fell by a modest 2.0% yoy to CZK11bn. This result is 5.1% weaker than our estimate. The Czech market generated CZK6.7bn, virtually unchanged from last year. In Slovakia, revenues decreased by 3.2% yoy to CZK3.1bn, likely due to a decline in units sold. Revenues from manufacturing services fell by 7.8% yoy to CZK1.2bn. This decline is due to adjustments in production related to the preparation of new production lines. Gross profit reached CZK4.6bn (-3.6% yoy). The decline is driven by lower sales and inflation in production costs. However, due to strict control of operating costs, particularly administrative costs (-12% yoy), operating profit remained nearly stable yoy at CZK1.8bn (-0.6% yoy). The margin increased by two-tenths of a percentage point to 16.6%. Net profit for 2H25 reached CZK1.4bn (-4.2% yoy).  

Full-Year 2025 Results: PMCR reported a net profit of CZK3.0bn for the past year, which represents a yoy decline of 9.2%. This translates to an EPS of CZK1,106. Its market share in the Czech Republic fell from 40.6% a year earlier to 39.5%. The share of heated products remained at 14.8%, while the share of conventional cigarettes declined to 24.7% from 25.8%. PMCR's market share also declined in Slovakia, falling to 50.1% from 52.6%. The share of cigarettes fell to 34.1% from 36.0%. However, contrary to our estimates, the market share of heated products also declined, falling to 16.0% from 16.6%.

Dividend: PMCR proposes paying shareholders a dividend of CZK1,100 per share from its 2025 profits. Compared to the current market price, this implies a gross yield of 5.7%. This dividend must be approved by shareholders at the Annual General Meeting on May 29, 2026. The last trading day with dividend rights is expected to be Thursday, June 4, 2026. Dividend payments will begin on July 13, 2026.