Gazprom's 2007 Profit Grew 7.3%

Gazprom said Monday that profit increased 7.3 percent last year as higher energy prices more than compensated for lower demand in Europe.

Net income in 2007 increased to 658 billion rubles ($28.1 billion) from 613 billion rubles a year earlier under international financial reporting standards, Gazprom said in a statement. That beat the 621 billion ruble median estimate of eight analysts.

"Gazprom remains our top pick and a long-term favorite within the Russian oil and gas sector," Merrill Lynch said in a note to investors before the results.

The state-run company makes most of its profit from sales to Europe, where it has one-quarter of the market.

Full-year sales rose 11 percent to 2.39 trillion rubles as consumers both in Russia and abroad paid more for gas. At the same time, operating expenses increased 24 percent to 1.7 trillion rubles.

"I'm a little disappointed because at first glance it looks like cost control efforts weren't as good as we expected," said Ronald Smith, chief strategist at Alfa Bank. "But they're still an improvement from the previous year."

Gazprom posted a 36 percent jump in fourth-quarter profit. Net income climbed to 232 billion rubles ($9.9 billion) from 171 billion rubles a year earlier, according to Bloomberg calculations. Fourth-quarter revenue advanced 28 percent to 730 billion rubles.

"The story still holds that Gazprom is worth a lot more than it's trading today," Smith said.