UPDATE 1-Naturgy stock rises as Q1 profit beats expectations

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MADRID, April 28 (Reuters) - Spanish gas and electricity group Naturgy posted a 3.5% rise in net profit for the first three months of 2021 on Wednesday, beating market expectations as commodity prices gradually recovered from the impact of COVID-19.

Currency weakness and continued economic uncertainty in Latin America weighed on the results, but ordinary net profit still came in at 323 million euros ($389.6 million), the company said.

“Positive for the stock at first glance as figures came above consensus estimates,” Madrid-based broker CM Capital Markets said in a note to clients.

Shares climbed almost 2% in early trade on a Madrid stock exchange that was less than 0.1% higher on the day.

Energy demand showed signs of recovery and gas prices rose in the quarter, but the situation remained challenging, Naturgy said. It makes around 40% of core earnings from operating gas networks in Spain and Latin America.

Naturgy aims to invest more in renewable power sources like wind and solar, which can provide power without emitting planet-warming carbon, and took a hefty write-down on its gas plants in Spain last year.

The company is currently the target of a partial takeover offer by IFM Global Infrastructure Fund, backed by Australian pension investors, which wants to buy a 23% stake. ($1 = 0.8290 euros) (Reporting by Isla Binnie; editing by Philippa Fletcher)