** The original version that was published yesterday included multiple typos that were due to a glitch in copying text from a PDF document. **
During the period under review, the maximum amounts of export credits and export credit guarantees that Finnvera is authorised to grant were raised through legislative amendments. The main reasons behind the need to raise the authorisations were the steep rise in ship financing within the past few years and the increase in the volume of export projects undertaken for telecommunications and the forest industry. The Group’s performance for the first six months of the year was EUR 7 million in the red, owing to losses and provisions for losses in export credit guarantees. The negative result for the first six months of the year does not affect the realisation of the cumulative self-sustainability of Finnvera’s export credit guarantee activities.
The need for funding increased alongside the greater demand for export financing services. The fixed-rate bond of EUR one billion issued by Finnvera in April was the company’s first euro-denominated bond with a maturity of ten years.
In April, Finnvera and enterprise organisations launched a joint campaign to speed up transfers of ownership in SMEs. Various activation measures are applied to increase enterprises’ awareness of issues such as valuation and taxation. During the first half of the year, transfers of ownership financed by Finnvera showed a rise of 17 per cent when measured in euros.
In line with the Government Programme, Finnvera introduced a new debt-based mezzanine financing product onto the market: the Growth Loan. The new product is intended for financing SMEs and midcap companies in major growth and internationalisation projects.
Business operations and the financial trend
During the period under review, demand for Finnvera’s export and special guarantees and export credits rose steeply on the previous year: 50 per cent and 90 per cent, respectively. In contrast, demand for SME and midcap financing fell by 17 per cent on the previous year.
Although the demand for export and special guarantees rose, the offers given by Finnvera for export credit and special guarantees and for export credits fell by 76 per cent and 87 per cent, respectively. The reason for this was that some of the projects or their credit agreements were still being negotiated at the end of June. The amount of loans and guarantees granted to SMEs and midcap companies fell by 11 per cent when compared against the first half of 2015.
| Finnvera Group | 1 Jan-30 June 2016 | 1 Jan-30 June 2015 | Change % |
| Offered financing, MEUR | |||
| Loans and guarantees | 483 | 541 | -11 % |
| Export credit guarantees and special guarantees | 1 226 | 5 124 | -76 % |
| Export credits | 477 | 3 601 | -87 % |
| 30 June 2016 | 30 June 2015 | Change % | |
| Outstanding commitments, MEUR | |||
| Loans and guarantees | 2 322 | 2 285 | 2 % |
| Export credit guarantees and special guarantees | 16 896 | 17 436 | -3 % |
| Export credits | 4 718 | 4 240 | 11 % |
| 1 Jan-30 June 2016 | 1 Jan-30 June 2015 | Change % | |
| Net Interest income both fee and commission income and expenses, MEUR | 93 | 102 | -8 % |
| Operating profit, MEUR | -7 | 56 | -113 % |
| Profit for the period, MEUR | -7 | 55 | -113 % |
| 30 June 2016 | 30 June 2015 | Change % | |
| Balance sheet total, MEUR | 9 166 | 8 418 | 9 % |
| Equity; MEUR | 1 116 | 1 121 | 0 % |
| - of which non-restricted reserves, MEUR | 865 | 871 | -1 % |
| 30 June 2016 | 30 June 2015 | Change % points | |
| Equity ratio, % | 12,2 % | 13,3 % | -1,1 % |
| Capital adequacy, Tier 2, % | 18,9 % | 19,6 % | -0,7 % |
| Cost-income ratio, % | 30,6 % | 28,3 % | 2,3 % |
The Finnvera Group’s financial peformance for January–June showed a loss of EUR 7 million, as against a profit of EUR 55 million the year before. The result was EUR 62 million less than for the first six months of 2015.
The principal factors affecting the negative result during the first half of the year were the increased losses and provisions for losses recognised by the parent company, Finnvera plc, for export credit guarantees. Losses on export credit guarantees and provisions for losses together amounted to EUR 66 million (2 million). During the period under review it emerged that the Brazilian Oi S.A. Group poses a risk that, if realised, might cause a loss that is currently estimated at about EUR 55 million. In consequence, the provisions for losses were increased during the period. Provisions for losses are current estimates. Their amount may still change considerably as more detailed information is obtained.
The result of EUR -7 million recorded for the parent company, Finnvera plc, during the first half of the year (56 million), was broken down as follows: Large Corporates, EUR -17 million (48 million); SMEs, EUR 10 million (8 million).
During the 17 years that the company has been in operation, the Group’s performance has been positive for all financial periods and, since the early 2009, for all six-month periods, until the recently ended period of January–June 2016. The parent company’s export credit guarantee activities have also been cumulatively self-sustainable throughout the company’s operations, even considering the negative result for January–June.
| Finnvera Group | H1/2016 | H1/2015 | Change | Change | *2015 |
| MEUR | MEUR | MEUR | % | MEUR | |
| Net Interest income | 27 | 28 | -2 | -6 | 56 |
| Fee and commission income and expenses (net) | 67 | 73 | -7 | -9 | 141 |
| Gains/losses from items carried at fair value | -10 | -6 | 4 | 63 | -21 |
| Administrative expenses | -22 | -22 | 0 | 1 | -44 |
| Other operating expenses | -3 | -3 | 0 | -5 | -6 |
| Impairment losses, guarantee losses | -65 | -14 | 51 | 352 | -15 |
| Loans and domestic guarantees | -15 | -72 | -57 | -79 | -87 |
| Credit loss compensation from the State | 15 | 60 | -45 | -74 | 83 |
| Export credit guarantees and special guarantees | -66 | -2 | 64 | - | -10 |
| Operating profit | -7 | 56 | -63 | -113 | 114 |
| Profit for the period | -7 | 55 | -62 | -113 | 111 |
Outlook for financing
It is expected that demand for export credit guarantees and financing provided by Finnvera will continue to increase. Measured in euros, demand will probably continue to focus on cruise vessels, telecommunications and forestry. An internationally competitive export financing system plays an important role in these sectors, owing to the large scale of individual investments.
New export markets have opened up, for instance, in Iran and Argentina. With opening markets, public financing sources, such as Finnvera’s export credit guarantees, are important for the realisation of export transactions. Among countries where Finnvera is exposed to risk, the situation in Brazil, Turkey and Russia is expected to remain uncertain. This will pose challenges to enterprises operating in these countries. On the other hand, Brazil’s and Russia’s weakened local currencies reinforce the operating conditions of export companies active in these countries. This may boost interest in investments and may provide export opportunities for Finnish businesses. The result of the British referendum on exiting the EU is likely to cause uncertainty in Europe for several years.
During the first half of 2016, demand for Finnera’s SME financing was slower than a year ago. The financing granted was also at a lower level than the year before. During the first half of the year, Finnvera prepared the adoption of the Growth Loan, a new mezzanine financing product, and was getting ready to serve as an intermediary organisation for the European Fund for Strategic Investments. Together with the recently adopted programme on transfers of ownership, these developments are likely to increase the demand for and granting of financing in the latter half of the year.
According to the estimate made in early 2016, the financial peformance for the current year is likely to fall below that for 2015. The negative result for the first six months of the year does not affect the realisation of the cumulative self-sustainability of Finnvera’s export credit guarantee activities.
CEO Pauli Heikkilä:
“Finnvera’s exposure figures have risen higher than ever before, and it is expected that demand for export credit guarantees and financing provided by Finnvera will continue to increase. It is important to ensure the functioning of our export financing system so that Finnish companies can compete over export deals on equally good financing terms as their competitors.
With respect to SME financing, the growth in the volume of enterprise acquisitions has been gratifying. We shall continue our efforts to encourage transfers of ownership; the greater the number of companies that continue their operations, the better it is for the overall economy of Finland. New owners often bring development ideas and the wish to grow.
The Team Finland network is under intense development. Improvement of the joint domestic service model will continue for the rest of the year. So far the feedback from customers within the scope of the service has been positive. Team Finland cooperation will get a boost in practice with the impending move of Finnvera, Finpro, Tekes and Finnish Industry Investment to joint premises in Team Finland House, in the Ruoholahti district of Helsinki.
Finnvera’s statutory mission is to bear some of the credit risks that are inevitable in all export transactions. Some of these risks were realised during the first six months of the current year.”
Additional information:
Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400 Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458
