The Czech economy grew by 0.2% qoq in 1Q26, slowing from 0.7% qoq in 4Q25. The second GDP release thus confirmed the preliminary figure published by the Czech Statistical Office roughly a month ago. Economic growth in 1Q26 fell short of our estimate of +0.4% qoq, as well as the market consensus and the CNB forecast, which both anticipated +0.5% qoq. However, the structure of quarter-on-quarter developments broadly matched our expectations. Annual GDP growth then slowed from 2.7% in 4Q25 to 2.2% in 1Q26.

The Czech economy grew by 0.2% qoq in 1Q26, slowing from 0.7% qoq in 4Q25. The second GDP release thus confirmed the preliminary figure published by the Czech Statistical Office roughly a month ago. Economic growth in 1Q26 fell short of our estimate of +0.4% qoq, as well as the market consensus and the CNB forecast, which both anticipated +0.5% qoq. However, the structure of quarter-on-quarter developments broadly matched our expectations. Annual GDP growth then slowed from 2.7% in 4Q25 to 2.2% in 1Q26.

The slowdown in qoq economic growth was due to a highly negative contribution from net exports, though this was mainly driven by strong domestic demand. The contribution of net exports to qoq GDP growth in 1Q26 reached -1.1pp, while it was +0.1pp in 4Q25. Nevertheless, the growth momentum of exports and imports strengthened significantly. Export growth accelerated from 0.8% qoq in 4Q25 to 3.8% qoq in 1Q26, while import growth increased even more sharply from 0.6% to 5.8% qoq. Higher exports were seen in both goods (+3.6% qoq) and services (+5.0% qoq). Therefore, the 1Q26 data has not indicated lower foreign demand for domestic goods and services. However, the export-oriented manufacturing sector deteriorated, with gross value added falling by 0.9% qoq in 1Q26, following a strong 2.0% qoq increase in 4Q25. Industrial production followed a similar trend.

Strong domestic demand continued to drive Czech economic growth. Household consumption rose further, despite a slowdown from 1.2% qoq in 4Q25 to 0.6% qoq in 1Q26. In yoy terms, private spending was 3.4% higher in 1Q26. Fixed investment also posted another positive development. Although its growth slowed from 2.8% qoq in 4Q25 to 2.0% qoq in 1Q26, it remained strong, as it had been throughout last year. As a result, fixed investment was up by 7.3% yoy in 1Q26. In terms of structure, however, qoq growth was mainly driven by less productive investment in transport equipment, which rose by 26.5% qoq. Conversely, government consumption fell by 0.3% qoq in 1Q26 following stagnation in 4Q25. This subdued growth was most likely caused by the government change following the autumn 2025 general election and the provisional state budget.

Gross value added (GVA) increased by 0.2% qoq, driven by market services. These contributed 0.3pp to the qoq growth of GVA in 1Q26, with the financial and insurance sector contributing most significantly, as in the previous quarter. By contrast, growth momentum in information and communication services has weakened significantly over the last two quarters. The trade sector also contributed positively to qoq GVA growth in 1Q26, amounting to 0.1pp. Conversely, the manufacturing sector’s contribution was negative at -0.2pp.

The Czech economy stands on strong domestic foundations, which should support its resilience in the current situation of heightened geopolitical uncertainty. We therefore still consider GDP growth of around 2% this year to be realistic. Nevertheless, due to the conflict in the Middle East, risks remain skewed towards slower economic growth.

CEZ will hold its Annual General Meeting on Monday, June 1, 2026, starting at 9:00 a.m. In addition to the standard agenda items (e.g., personnel matters), investors will be particularly interested in two agenda items. The first is the traditional approval of a dividend of CZK42 per share. The second is the optimization of CEZ’s ownership structure. This involves spinning off non-production activities into a separate company that will be 100% controlled by CEZ. Since the state holds nearly 70% of all CEZ shares, which usually corresponds to about 90% of shareholders present at the General Meeting, we expect both items to be approved.

CEZ will hold its Annual General Meeting on Monday, June 1, 2026, starting at 9:00 a.m. In addition to the standard agenda items (e.g., personnel matters), investors will be particularly interested in two agenda items. The first is the traditional approval of a dividend of CZK42 per share. The second is the optimization of CEZ’s ownership structure. This involves spinning off non-production activities into a separate company that will be 100% controlled by CEZ. Since the state holds nearly 70% of all CEZ shares, which usually corresponds to about 90% of shareholders present at the General Meeting, we expect both items to be approved.

Dividend

The CEZ BoD has proposed paying a dividend of CZK42 from profits in 2025. This proposal aligns with expectations and with CEZ’s current dividend policy of distributing 60–80% of net profits. This dividend corresponds to an 80% payout ratio and offers a gross yield of 3.4%.

The record date is proposed for Friday, June 5. This means that CEZ shares will be traded for the last time with the right to this dividend on Wednesday, June 3. This is two days after the AGM. Distribution will begin on August 3, 2026.

Restructuring

Shareholders will approve the spinoff of CEZ’s non-production activities into a new company. The new company is expected to be named CSSC (Customer Segment Subsidiary Company) and will include distribution, sales, and trading of electricity and natural gas, as well as service and telecommunications businesses. The transaction is expected to be completed by the end of the first quarter of 2027.

Subsequently, up to 49% of CSSC is expected to be sold. CEZ plans to retain a 51% stake. The BoD will decide on the form of the sale. This could involve an IPO, a direct sale, or a combination of both, for example. Taking into account the valuations of companies in the same sector and corresponding debt, we estimate that CEZ could receive up to CZK250bn for its 49% stake in CSSC.

The next step will be the buyout of minority stakes in CEZ (the parent company). This is the reason why the transaction is being carried out in the first place. The buyout of minority stakes should be financed by CEZ itself. The funds CEZ obtains from selling its 49% stake in CSSC should be used for this purpose. The key factor will be the buyout price. We assume it should include a premium to the market price in the low-to-mid teens range.