Czech inflation accelerated significantly from 1.4% yoy in February to 1.9% yoy in March. This was slightly below the market consensus of 2.0% yoy, but above our estimate of 1.7% yoy. In its latest forecast from February, the central bank had expected March inflation to reach 1.6% yoy. The final CPI figures once again only confirmed the statistical office’s preliminary estimate of overall consumer price developments.

Czech inflation accelerated significantly from 1.4% yoy in February to 1.9% yoy in March. This was slightly below the market consensus of 2.0% yoy, but above our estimate of 1.7% yoy. In its latest forecast from February, the central bank had expected March inflation to reach 1.6% yoy. The final CPI figures once again only confirmed the statistical office’s preliminary estimate of overall consumer price developments.

Higher fuel prices were the main cause of inflation rising in March. Fuel prices rose sharply by 19.4% mom, driven by the conflict in the Middle East and the subsequent increase in oil prices. In yoy terms, fuel prices were 13% higher, following an 8.4% yoy decline in February. This significant shift in annual dynamics was also influenced by a lower comparison base, given that fuel prices had fallen strongly in March 2025. Consequently, we estimate that fuel prices contributed 0.6-0.7pp to headline inflation in March. The price increase at petrol stations was slightly higher than we forecast, accounting for roughly half of the deviation from our March inflation estimate. Regulated prices, on the other hand, rose by only 0.1% mom, in line with our forecast. Therefore, their development did not yet reflect the impact of the conflict in the Middle East. Regulated prices were 1.1% yoy lower in March, as the effect of transferring renewable energy payments to the state, which came into effect in January, continued to be felt.

Food prices continued to fall, helping to keep inflation below the CNB’s target. In March, food and non-alcoholic beverage prices declined by 0.7% mom and 1.1% yoy. Meanwhile, the prices of alcohol and tobacco fell by 0.3% mom, though they still saw a 3.3% yoy increase. The gradual spillover of the previous sharp fall in food and agricultural producer prices, combined with Easter discounts, likely contributed to the further decline in food prices for consumers. According to our calculations, the overall decline in the food price category reduced headline inflation by around 0.3pp in March, partially offsetting the impact of higher fuel prices.

Core inflation increased from 2.7% to 2.9% yoy in March, supported by an acceleration in imputed rent growth from 5.1% to 5.4% yoy. The mom increase in imputed rents of 0.5% was also significant, reflecting the continued strong growth in house prices. This pushed services inflation up from 4.5% to 4.7% yoy in March. However, annual growth in paid rents remained unchanged at 6.1%. Core inflation accelerated from 2.7% yoy in February to 2.9% yoy in March, which was slightly higher than the central bank’s (2.8% yoy) and our (2.7% yoy) expectations.

We forecast inflation to increase above the central bank’s 2% target in April and remain there until the end of the year. On a monthly average basis, fuel prices are likely to rise again in April, accelerating annual growth further. Additionally, the base effect will continue to be a factor given that fuel prices fell significantly last spring (from March to May). Food prices also fell mom in April 2025, likely supported by the later timing of the Easter holidays. Therefore, the fading of Easter discounts in March 2026, a lower comparison base and the partial reflection of higher fuel prices could cause a marked acceleration in annual food price growth this April. Consequently, we estimate a further increase in headline inflation to 2.5% yoy in April. We then expect inflation to remain near this level until the end of the year, averaging 2.2-2.3% in 2026. However, the path of future inflation will depend heavily on the intensity and duration of the conflict in the Middle East, which is associated with significant uncertainty. This will also be crucial for developments in non-energy inflation components.

We expect the government measures adopted in April, including reducing the diesel excise tax and capping fuel sellers’ margins, to have only a limited impact. Based on our calculations, the reduction in diesel excise tax will lower headline inflation by 0.06pp. Capping fuel sellers’ margins should not have a significant impact, as these were already below the approved ceiling, according to the Ministry of Finance’s latest available data from mid-March. However, some fuel sellers appear to have raised their margins to the level of the approved cap, which could temporarily have the opposite effect than expected. Nevertheless, the government caps could contribute to the faster transmission of wholesale oil prices to prices at petrol stations, in both directions.

The most important piece of information in Philip Morris CR’s report for 2H25/2025 will be the board of directors’ proposal to pay a dividend from last year’s profits. PMCR usually pays its entire net profit. According to our projections, the company's net profit for the full year of 2025 will reach CZK3.2bn.  With a standard payout ratio of 100%, this translates to a dividend of CZK1,170 per share. This would offer a gross yield of +5.9%. 

Announcement date: Tuesday, April 28, 2026  

The most important piece of information in Philip Morris CR’s report for 2H25/2025 will be the board of directors’ proposal to pay a dividend from last year’s profits. PMCR usually pays its entire net profit. According to our projections, the company's net profit for the full year of 2025 will reach CZK3.2bn.  With a standard payout ratio of 100%, this translates to a dividend of CZK1,170 per share. This would offer a gross yield of +5.9%.

Results: We expect a slight decline in classic cigarette sales and a slight increase in heated tobacco product sales. We estimate total revenue for the second half of last year to be CZK11.6bn. This represents yoy growth of +3.3%. We estimate the share of the Czech market revenue to be approximately 60%. Slovakia will contribute 28% by our estimates, and manufacturing services will contribute 12%. On the cost side, we estimate a slight yoy increase in COGS. The gross margin should reach nearly 43%. We also project a slight increase in distribution and administrative costs.  According to our model, operating profit for the second half of 2025 will increase by +5.8% yoy to CZK1.9bn. Net profit for the second half of 2025 should be CZK1.6bn (+7.0% yoy). This translates to EPS of CZK 583.

We expect the net profit for the full year to be CZK3.2bn, which is a 4.2% decrease yoy. This corresponds to CZK1,167 per share (EPS).

Dividend: Philip Morris CR traditionally pays out its entire net profit to shareholders. Reported earnings per share for 1H25 plus our projections for 2H25 suggest full-year EPS of the CZK1,167. In our view, this would correspond to a dividend of CZK1,170 per share. Compared to the market price, this dividend would indicate a gross yield of +5.9%.