Czech inflation slowed to 1.8% yoy in April, down from 2.7% yoy in March. The statistical office thus confirmed its preliminary estimate. April inflation was lower than expected, as the market consensus and our own forecast were for 2.1% yoy. The central bank assumed April inflation at 2.0% yoy in its recently published forecast.

Czech inflation slowed to 1.8% yoy in April, down from 2.7% yoy in March. The statistical office thus confirmed its preliminary estimate. April inflation was lower than expected, as the market consensus and our own forecast were for 2.1% yoy. The central bank assumed April inflation at 2.0% yoy in its recently published forecast.

The deviation from our forecast was mainly due to volatile food prices. The prices of food and non-alcoholic beverages fell by 0.3% mom in April, while those of alcohol and tobacco were down by 1.0% mom. Although prices were still higher than a year ago, their annual growth eased significantly. Growth in the prices of food and non-alcoholic beverages slowed from 6.1% to 4.1% yoy, while for alcohol and tobacco price growth slowed from 5.2% to 2.0% yoy. The higher comparative base of last year also had an impact. Food prices as a whole were the main driver of the decline in annual inflation in April.

The continued decline in fuel prices also contributed to the slowdown in inflation. Fuel prices fell by 2.7% mom in April, following a sharp 3.3% drop in March. This was driven by significantly lower crude oil prices, reflecting a more pessimistic outlook for the global economy and higher oil production, as well as by the continued appreciation of the Czech koruna against the US dollar. As a result, the annual decline in fuel prices accelerated from 8.4% to 13.3%. As with food prices, the higher base from last year contributed to this.

Regulated prices rose only slightly. They increased by 0.1% mom, with annual growth remaining well below the central bank’s 2% target, at 0.4% yoy in April. This was influenced by lower energy prices, which fell by an average of 3.3% yoy. However, the mom decline (-0.2% in April) continued at a slow pace, likely due to the significant proportion of fixed-price contracts. The decline in the energy component of regulated prices was offset by growth in the non-energy component, which includes services such as healthcare, education and transport.

Core inflation remains high. It accelerated slightly from 2.5% to 2.6% yoy in April, in line with the CNB’s forecast. According to our estimates, seasonally adjusted monthly growth also rose, from 0.2% to 0.3%. Core inflation remains elevated mainly due to stubborn growth in services prices, which increased from 4.5% to 4.7% yoy in April. This was influenced by a further acceleration in imputed rents, from 3.6% to 4.1% yoy, likely related to the strong recovery in the real estate market and the sharp increase in house prices. Meanwhile, growth in paid rents eased from 6.3% to 5.9% yoy. However, the abundant growth in services prices was offset by the subdued growth in goods prices, which slowed from 1.6% to 0.2% yoy.

We expect annual inflation to increase again over the next two months as the impact of the higher base fades. Nevertheless, inflation should remain below 3% yoy, i.e. within the central bank’s tolerance band. We expect annual inflation to gradually stabilise around the 2% target in 2H25. We estimate average inflation at 2.2% this year, declining to 1.8% next year. Restrictive monetary policy and a mild recession in the Czech economy, which we expect due to US tariffs, should gradually dampen inflation. We believe that favourable inflation developments and the deteriorating economic situation will lead to further interest rate cuts by the central bank. We therefore forecast the repo rate to fall to 3% by the end of the year. For more details, see our Czech Economic Outlook: https://bit.ly/CEO_2Q25_EN.

For 1Q25, CEZ reported an EBITDA of CZK43bn (a +7% yoy increase), with revenues of CZK93.4bn (a +7% yoy increase). The consolidation of GasNet and the Sales segment had a positive impact. Net profit for the first quarter decreased by 6% yoy to CZK12.7bn, which exceeded estimates by a significant +26%. The decline in net profit compared to the growth in EBITDA is due to higher depreciation resulting from the accelerated depreciation of coal assets. As expected, the Board of Directors is proposing a dividend of CZK47 per share. Additionally, CEZ raised its EBITDA target for this year to CZK127-132bn.

For 1Q25, CEZ reported an EBITDA of CZK43bn (a +7% yoy increase), with revenues of CZK93.4bn (a +7% yoy increase). The consolidation of GasNet and the Sales segment had a positive impact. Net profit for the first quarter decreased by 6% yoy to CZK12.7bn, which exceeded estimates by a significant +26%. The decline in net profit compared to the growth in EBITDA is due to higher depreciation resulting from the accelerated depreciation of coal assets. As expected, the Board of Directors is proposing a dividend of CZK47 per share. Additionally, CEZ raised its EBITDA target for this year to CZK127-132bn.

CEZ reported revenues of CZK93.4bn for 1Q25. This figure increased by 7% yoy. EBITDA increased by 7% yoy to CZK43bn in the first quarter. The margin remained almost unchanged at a high 46%. Production declined due to lower realized electricity prices. However, the Distribution sector grew significantly. This growth is due to the consolidation of GasNet, which CEZ acquired in September of last year. The Sales sector also performed better than expected due to lower commodity prices. Adjusted net profit was CZK12.7bn, down 6% yoy. Unlike the growth in EBITDA, the decline in net profit was due to higher depreciation (+66% yoy). This is related to the inclusion of GasNet in the consolidation unit and the accelerated depreciation of coal-fired power plants. Interest expenses were also higher (+52% yoy).

Leverage, measured by the net debt/EBITDA ratio, decreased slightly from 1.5x (2024) to 1.3x. Compared to 1Q24, when debt was very low at 1.0x, it increased following the acquisition of GasNet.

Dividend: As expected, CEZ adhered to its dividend policy of paying out 60-80% of its adjusted net profit. The Board of Directors is proposing a dividend of CZK47 per share for shareholder approval. This payout is at the upper end of the range. Compared to the market price, the proposal indicates a gross yield of 3.9%. The Annual General Meeting will be held on June 23, 2025. The last day of trading with the right to this payment should be June 25, and we estimate the record date to be June 27. We do not expect the Ministry of Finance (MinFin), the executor of shareholder rights for the Czech Republic (with an almost 70% stake), to request a higher dividend, as it has done in the past. This is because a special tax on unexpected profits is still in effect this year.

2025 Guidance: CEZ reiterated its full-year net profit goal of CZK25-29bn. However, the company increased its EBITDA forecast to CZK127-132bn, up from CZK125-130bn. The 1Q25 results represent 33% of the full-year EBITDA projection and 47% of the full-year net profit target. Please note that the first quarter is typically the strongest from a seasonal perspective.