Advance information about Finnvera Group’s operations in 2018: Demand for export financing at a high level – in SME and midcap financing, the share of investments increased
In 2018, financing granted to large corporates for export trade by Finnvera did not reach the level of the record-breaking year 2017, but demand for new export credit guarantees, special guarantees and export credits remained very high, as in the previous year. SME and midcap financing was nearly at the same level as in the previous year. The share of investments out of overall projects in SME and midcap financing grew, while financing for working capital decreased. The guarantees related to SMEs’ and midcap enterprises’ export activities accounted for nearly 20 per cent of all financing granted. The financing for transfers of ownership in euros grew by 6 per cent.
Demand for export credit guarantees, special guarantees and export credits still high
In 2018, demand for export financing was very high, as in the previous year. Demand is mainly focused on the United States and other industrialised Western countries. In 2018, EUR 3.0 billion (EUR 7.5 billion) was granted to large corporates for export trade in export credit guarantees and special guarantees and EUR 2.2 billion (EUR 6.6 billion) in export credits. The realisation of individual major export trade transactions has a major impact on the amount of financing granted, which also explains the annual variation in financing volumes.
As in the previous years, financing especially focused on shipbuilding, telecommunications and forestry sectors. In 2018, one of the largest individual financing projects was Meyer Turku’s latest cruise ship project, with Finnvera granting an export credit guarantee and export credit that amounted to more than EUR 500 million. The scheduled handover of the ship to the buyer is in 2023. In addition, Finnvera granted a more than EUR 1 billion guarantee for an export credit, with which AT&T, the second largest operator in the United States, buys network deliveries from Nokia. Furthermore, major financing and export projects have significant positive cascade effects through the added value created in the home country as a substantial impact on employment both for export companies and subcontracting networks.
The structure of the Finnish export industry is centred around capital goods, and financing solutions offered to buyers play a pivotal role in the export trade of capital goods sold by large corporates. Export credit financing has grown during the past few years, and two thirds of export credit guarantees also include export credit.
Roughly half of the total exposure for export credit guarantees is related to trade with the United States and slightly over half is associated with cruise ships. In the EUR 23.3 billion exposure for export credit guarantees and special guarantees, drawn guarantees and credits accounted for approximately EUR 10 billion. So, clearly more than half of the exposure relates to binding financing offers or agreements that are related to future deliveries by export companies, and thus they do not create any credit risks yet.
Financing focused increasingly on growth, internationalisation and transfers of ownership
In 2018, Finnvera offered EUR 943 million (EUR 963 million) in financing to SMEs and midcap enterprises, which was nearly the same amount as in the previous year. The key reasons behind the slightly lower financing volumes were the good availability of bank financing and the increase in the use of European guarantee instruments, which is an excellent example of corporate financing options becoming more versatile. The use of the European Fund for Strategic Investments (EFSI) became more common among banks, which partly reduced the need to use Finnvera’s guarantees.
The share of investments out of overall projects in SME and midcap financing grew to 38 per cent (34%). On the other hand, the share of financing granted for working capital out of overall projects decreased by 6 percentage points to 47 per cent (53%).
In line with our strategy, the focus of the financing granted to SMEs and midcap enterprises by us was increasingly on start-ups, enterprises seeking growth, internationalisation and change, and transfers of ownership.
In 2018, Finnvera granted a bit more than EUR 31 million (EUR 37 million) in Start Guarantees intended for start-ups and SMEs that have been in business for less than three years.
The amount of financing granted to enterprises seeking growth and internationalisation totalled EUR 389 million (EUR 385 million), which accounts for 41 per cent (40%) of SME and midcap financing granted. In these enterprises, the euro-denominated share of investments in the overall projects financed increased to 29 per cent (19%).
In 2018, Finnvera granted EUR 178 million (EUR 181 million) in guarantees related to SMEs’ and midcap enterprises’ export activities. One of the strategic goals is to increase the number of enterprises using export financing services by 30 per cent from the 2018 level by 2021. To promote the achievement of this goal, Finnvera launched, together with the Chamber of Commerce, banks and credit insurers, an export trade financing tour targeted at SMEs. The goal of the tour is to improve SMEs’ awareness of protection against export risks and of the use of financing in winning export contracts. Approximately 200 enterprises participated in the tour. In addition, Finnvera organised nearly 50 enterprise-specific financing workshops and intends to triple their number this year.
Finnvera granted EUR 129 million (EUR 121 million) in financing for transfers of ownership and was involved in 921 (984) transfers of ownership. The average size of corporate acquisitions financed increased slightly year on year.
SME and midcap financing exposure was EUR 2.3 billion at the end of 2018.
Finnvera Group’s report of the Board of Directors, financial statements and annual review for 2018 will be published on 26 February 2019.
Pauli Heikkilä, CEO, tel. +358 29 460 2400