Although industrial production grew yoy in March, it declined compared to the previous month. Following strong growth in February, the manufacturing sector also recorded a decline. This deterioration was significantly driven by a fall in the production of computers, electronic and optical equipment, as well as pharmaceutical products. On the other hand, foreign trade results were surprisingly robust.

Although industrial production grew yoy in March, it declined compared to the previous month. Following strong growth in February, the manufacturing sector also recorded a decline. This deterioration was significantly driven by a fall in the production of computers, electronic and optical equipment, as well as pharmaceutical products. On the other hand, foreign trade results were surprisingly robust. The construction sector also delivered solid results in March. The increase in output continued to be driven by building construction, while performance in civil engineering remained weak. However, the current conflict in the Middle East and the resulting high oil and gas prices pose a risk to all these indicators in the coming months. In March alone, this situation led to rising prices of construction materials, higher financing costs, and a widening trade deficit in coke and refined petroleum products.

In real terms, Czech industrial production rose by 0.9% yoy in March. However, the output was down 0.2% compared to February. Thanks to the cyclical recovery of the domestic industry, we remain positive about this year’s outlook. The current rise in energy prices poses a risk, however. Nevertheless, it should be noted that the energy intensity of Czech industry has fallen significantly in recent years, which should make the sector more resilient.

The manufacturing sector itself recorded a mom decline of 0.3% in March, following a strong increase of 1.9% in February. This decline was largely driven by the production of computers, electronic and optical equipment (-6.4% mom) and pharmaceutical products (-7.0% mom). This was likely a correction of the exceptionally strong growth seen in these categories in February, however. Declines were also reported in the production of motor vehicles (-2.7% mom) and the production and distribution of electricity, gas, and heat (-0.5% mom). Conversely, strong growth was recorded in the manufacture of leather and related products (up 24.1% mom) and chemicals and chemical products (up 10.4% mom). The manufacture of other transport equipment also grew (7.9% mom).

The value of new orders at current prices increased by 1.2% yoy in March. New orders from abroad increased by 2.5% yoy, while domestic new orders declined by 1.1% yoy. Compared to the previous month, the value of new orders increased by 0.9%. The value of new orders in industry increased notably in the manufacture of motor vehicles. The metalworking industry and the manufacture of electrical equipment also recorded increases.

In real terms, industrial production was 0.7% lower qoq for the entire first quarter. Yoy however, it increased by 1.6%. Nevertheless, the pace of yoy growth gradually slowed from 2.7% in January to 0.9% in March. The manufacturing industry was the only sector driving the modest yoy growth in production in the first quarter, with its output rising by 2.1%. Conversely, output in the mining and quarrying sector, as well as in electricity and gas production, decreased.

The foreign trade balance showed a surplus of CZK 31.9 billion in March, which is an improvement of CZK 3.8 billion yoy. This was significantly better than the market consensus forecast of CZK 19.1 billion.

This was mainly due to an increase in the surplus in trade with other transport equipment and machinery (CZK 3.4 billion) and motor vehicles (CZK 1.9 billion) yoy. The deficit in trade with computers, electronic and optical equipment also decreased by CZK 3.0 billion. However, the overall balance was negatively affected by the widening of the trade deficit in coke and refined petroleum products (by CZK 3.7 billion), base metals (by CZK 1.9 billion) and basic pharmaceutical products and preparations (by CZK 1.8 billion). Seasonally adjusted exports rose by 0.5% mom, while imports fell by 1.7%.

However, given the current oil shock, the deficit in oil and natural gas is likely to widen further in the coming months, which will be reflected in an overall worsening of foreign trade balance. On a positive note, the Czech economy is entering this difficult period in relatively good shape. It has also significantly reduced its energy intensity in recent years, and the rapid growth in exports of equipment and services linked to the AI technology boom is another positive factor.

The construction sector continues to recover, but higher financing and building material costs pose a risk

Czech construction output increased by 3% mom in March. This followed similarly strong growth of 3.6% mom in February. Adjusted for the impact of the different number of working days, yoy growth accelerated from 4.1% in February to 5.8% in March.

The increase in construction output continued to be driven by building construction, indicating a recovery in residential construction. In March, this sector posted mom growth of 4.8%, following an increase of 5.2% in February. Compared to March last year, its output was 10.8% higher.

In contrast, civil engineering performance remained weak. After growing by a modest 0.7% mom in February, its output fell by 0.4% mom in March. On a yoy basis, there was a significantly steeper decline of 5.8%. This was most likely related to developments in public investment in transport infrastructure. These may have been negatively affected at the beginning of this year by the change in government and the provisional budget. Furthermore, last year’s comparison base is relatively high.

Although the number of building permits issued is growing, the overall level remains low. The total number issued in March increased by 17.6% mom and by 13.4% yoy. The increase was even stronger in the case of permits intended solely for residential construction, reaching 20.5% mom and 18.8% yoy. However, this trend is largely due to seasonality and the fact that last year was the worst on record since 2002 in terms of building permits, as the permit issuing process was hindered by problems related to a failed digitalisation effort. When compared with March 2024, which was not a particularly strong month, the total number of building permits issued was still 8.6% lower, with a 1.2% decrease in those intended solely for residential construction.

While there is a certain revival in construction output, growth remains uneven and associated with negative risks. These mainly concern the consequences of the conflict in the Middle East. Due to fears of a significant rise in inflation, the conflict has led to an increase in market interest rates, raising financing costs and resulting in higher mortgage rates. At the same time, higher prices for certain commodities on global markets have put upward pressure on construction material prices once again. These prices increased by 0.8% mom in March, contributing to a significant acceleration in yoy growth, rising from 1.9% to 2.9%. Prices for construction work are also rising at a rate close to 3% yoy. The renewed increase in costs may therefore again cool demand in the construction sector.

For the first quarter, we estimate a 20% yoy decline in EBITDA to CZK34.4bn. Realized electricity prices will be lower this year, and we also expect operating costs to rise. However, net profit will rise by +10.5% yoy and, according to our estimates, will reach CZK14bn. Since the windfall tax is no longer in effect this year, the effective tax rate will drop significantly, positively impacting net profit.

Announcement date: Thursday, May 14, 2026, at 7:00 a.m. CET

For the first quarter, we estimate a 20% yoy decline in EBITDA to CZK34.4bn. Realized electricity prices will be lower this year, and we also expect operating costs to rise. However, net profit will rise by +10.5% yoy and, according to our estimates, will reach CZK14bn. Since the windfall tax is no longer in effect this year, the effective tax rate will drop significantly, positively impacting net profit.

The price of electricity sold has fallen significantly this year. While CEZ sold electricity for approximately EUR124/MWh last year, our estimate is that it will be around EUR105 this year. However, since the start of the conflict in the Middle East, electricity prices have been nearly EUR10/MWh higher. We do not expect this to significantly impact the average price this year. It could, however, partially increase selling prices for future years. Revenues for 1Q26 are estimated at CZK89.9bn (-3.7% yoy). EBITDA is expected to decline by 20.1% yoy, reaching CZK34.4bn. The Generation sector is expected to account for slightly more than half of this, while the Distribution is expected to account for about 36%. We estimate an increase in operating costs (personnel, services). We also expect a slight decline in depreciation and amortization. We estimate net profit for the first quarter of this year to be CZK14bn. This corresponds to yoy growth of +10.5%. The difference in this line compared to the same period last year is primarily due to the tax rate. The special tax (WFT) no longer applies this year. In Q1 of 2025, the effective tax rate was 49.7%, whereas we estimate a standard rate of 21% this year. 

2026 Guidance: On March 12, CEZ published its current targets, which project EBITDA of CZK103–108bn and net profit of CZK27–31bn. Our estimates are more optimistic. According to our model, EBITDA should be CZK112.5bn, while net profit should be CZK37.4bn. We acknowledge that projections are usually conservative at the beginning of the year. We view the release of quarterly results as an opportunity for an update. Our estimates for 1Q26 are approximately 33% and 48% of CEZ’s EBITDA and net profit targets, respectively.