Finnvera’s Interim Report for 1 January-30 June 2005

Brisk demand continued for domestic financing, demand for export credit guarantees doubled

During the first six months of the year, domestic projects financed by Finnvera gave rise to 1,747 new enterprises (1,595) and over 6,000 new jobs (6,600). This financing contributed to the realisation of projects worth in total EUR 1.1 billion. Guarantees associated with the financing of exports amounted to EUR 2.3 billion (EUR 1.1 billion); these were chiefly granted for the shipyard and shipbuilding industry, for telecommunications and for the wood-processing sector. In terms of outstanding commitments, exports to Russia accounted for the greatest number of guarantees that came into effect.

Risk financing granted by Finnvera for projects in Finland totalled EUR 508.0 million, or nearly as much as during the corresponding period the year before (EUR 525.8 million). Compared against the first six months of 2004, guarantees associated with the financing of exports more than doubled, to EUR 2,320.8 million (EUR 1,072.9 million).

On 30 June 2005, Finnvera’s outstanding commitments totalled EUR 7.0 billion (EUR 6.0 billion). Out of total outstanding commitments, domestic loans and guarantees accounted for EUR 2.2 billion, while export credit guarantees and special guarantees accounted for EUR 4.8 billion.

At the end of the period under review, Finnvera had 27,100 clients. The number of clients increased by about three per cent during the first half of the year. In particular, the number of clients increased in the group of starting small enterprises.

More financing for starting and growing enterprises

Risk-taking was augmented in financing for starting enterprises and growth enterprises. During the first half of the year, financing was granted to 1,747 starting enterprises (1,595) and to 519 enterprises classified as growth enterprises. The target set for the whole year is to provide financing to about 1,000 growth enterprises and to 3,000 starting enterprises.

The continued high level of investments and company reorganisations among SMEs was reflected in the demand for domestic financing. The value of domestic investments financed among SMEs totalled over EUR 500 million. Clearly more than before, financing was granted for the internationalisation of SMEs, in total about EUR 10 million. One quarter of these projects involved China; nearly as many involved Russia.

Industry accounted for 58 per cent of all financing provided (65); trade and consumer services came next with 16 per cent (12).

In relation to the number of enterprises, the greatest volumes of Finnvera's risk financing were provided in the regions of Kainuu, Satakunta and Pirkanmaa.

In all, EUR 260.7 million was granted to areas eligible for support on regional policy grounds (EUR 255.8 million). This is 51 per cent of all financing granted (49), and a proportion that is clearly more than these areas' share of the population. Of the financing granted to areas eligible for regional support, interest-subsidised loans accounted for EUR 72.3 million (EUR 76.2 million).

Finnvera plays an important role as an intermediary for the European Union's financing programmes based on regional and SME policies. During the period under review, growth guarantees granted to SMEs and supported by the European Investment Fund (EIF) totalled EUR 37.8 million (EUR 54.0 million). Loans supported by the European Regional Development Fund (ERDF) amounted to EUR 63.6 million (EUR 61.9 million).

Exports to Russia awarded the greatest number of guarantees

During the first six months of the year, the total value of guarantees granted by Finnvera for the financing of exports came to EUR 2,320.8 million, or more than double the value during the corresponding period the year before (EUR 1,072.9 million). Industrialised countries accounted for 52 per cent of the guarantees granted, CIS countries for 20 per cent, and Latin American countries for 19 per cent.

In terms of their value, most guarantees were provided for export projects to the United States, Russia, Uruguay, Norway, Thailand and Mexico.

The total value of the export credit guarantees that came into effect during the first half of the year was EUR 678.0 million; this is nearly two thirds more than during the same period last year (EUR 414.0 million). Guarantees for exports to Russia, Sweden and the Philippines accounted for the greatest outstanding commitments. Of the guarantees that came into effect, telecommunications accounted for 61 per cent and the wood-processing sector for 16 per cent.

The export credit guarantees given for exports to Russia have been used, for instance, to finance the supplies of Nokia's networks, electric overhead travelling cranes by KCI Special Cranes, and a double-acting icebreaker and supply vessel delivered by Aker Finnyards.

Future prospects

'In the whole of Finland, investments by SMEs are expected to remain at least at the same level as during the first six months of the year. Banks and financing companies play an important role in the financing of investments, but Finnvera is needed very often to share the risks involved in projects,' says Pauli Heikkilä, President and CEO of Finnvera.

Finland's export prospects look rather promising at present, and many sectors have a fair number of orders on hand for exports. 'Finnvera’s export credit guarantees are likely to be needed especially in the case of exports to countries with political risks or when the transactions are unusually large. The most vibrant market is Russia, if the criterion is the number of guarantees,' Pauli Heikkilä says.

The goal set for self-sustainability is met

The Finnvera Group's profit for the period under review came to EUR 17.3 million (EUR 19.4 million). The most important change affecting the profit was an increase of EUR 8 million in specific credit loss provisions included in the parent company's credit and guarantee losses.

The profit of the parent company, Finnvera plc, stood at EUR 16.0 million (EUR 21.2 million). After imputed taxes, the separate result for export credit guarantee and special guarantee operations, as referred to in the Act on the State Guarantee Fund, was EUR 10 million. The profit from Finnvera plc's other operations, after imputed taxes, amounted to EUR 6 million.

On 30 June, the capital adequacy of the Finnvera Group was 15.8 per cent (17.0). The return on equity was 8.4 per cent (8.8).

Finnvera's Interim Report is available in its entirety at www.finnvera.fi-->Financial Info .

For further information:
Pauli Heikkilä, President and CEO , tel. +358 20 460 7321
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405 or +358 400 672 401 (Domestic financing)
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238 or +358 400 702 002 (Financing of exports)