Financial Statements of the Finnvera Group 1 January–31 December 2012
Growing and internationalising enterprises the core of the strategy
Early in 2012, Finnvera’s operations underwent an external and independent international evaluation. In the main, the company’s operations received excellent marks in the evaluation, especially when compared to corresponding organisations abroad. The evaluation also provided good material for developing Finnvera’s operations.
Finnvera’s revised strategy reflects the conclusions of the evaluation, as well as the issues recorded for Finnvera in the Government Programme. A central feature of the strategy is the increasingly strong support that Finnvera’s operations give to the industrial policy of the Government of Finland, where growing and internationalising enterprises are a core element.
Business operations and financial trend
The amount of export credit guarantees and special guarantees offered rose by 41 per cent on the previous year, to EUR 5,351 million. Demand for export credits was also brisk. In SME financing, the amount of credits and domestic guarantees shrank by 13 per cent, to EUR 853 million. The amount of direct equity investments increased on the previous year.
The Finnvera Group’s profit for the year 2012 was EUR 53 million, or 11 per cent less than the year before. The main reasons underlying the decline in profit were higher credit risks in Finnvera plc’s SME financing and the consequent write-downs and provisions for losses, and the decrease in profits for items carried at fair value.
Export financing accounted for EUR 62 million of the parent company’s profit of EUR 56 million, while SME financing accounted for EUR -6 million. The subsidiaries and associated companies had an impact of EUR -3 million on the Group’s profit.
The Group’s profit for October–December was EUR 23 million, or more than double the profit for the third quarter, EUR 11 million. The profit for the fourth quarter accounted for over 40 per cent of the profit for the whole year. During the fourth quarter, the impairment losses on receivables and guarantee losses were clearly smaller than during the previous quarter.
- At the end of December, the Finnvera Group’s capital adequacy ratio was 15.9 per cent, or 0.4 percentage points better than a year ago.
- The Group’s cost-to-income ratio improved by 1.6 percentage points on the previous year and was 27.6 per cent.
- The Group’s equity ratio declined by 4.4 percentage points and stood at 20.3 per cent at the end of December.
Future prospects and impending risks
Economic growth is expected to be slow in Finland this year. Sluggish growth and banks’ possibly even stricter criteria for lending may make the financial position of companies, in particular SMEs, more difficult. This may increase the demand for Finnvera’s services. On the other hand, the continued low level of investments will reduce the need for financing. Credit risks will remain high. Demand for export financing varies depending on individual major capital goods transactions. In the short term, losses arising from Finnvera’s outstanding export credit guarantees are estimated to be low, but because of risk concentrations, the situation may change rapidly.
The uncertainty factors associated with economic trends make it more difficult to predict Finnvera’s financial performance. According to the current estimate, the Finnvera Group’s financial performance for 2013 is likely to remain at the same level as in 2012. If materialised, individual risks may weaken the result considerably.
CEO Pauli Heikkilä:
The year 2012 was characterised by continued volatility in the world economy, which is why the uncertain economic trend persisted throughout the year.
In Finnvera’s view, the situation on the corporate finance market in Finland, as in the other Nordic countries, is better and more stable than in Southern and Central Europe. However, the measures already decided for regulating the operations of banks, and the issues still under discussion, had an impact on the availability of financing. Banks have the need to manage their balance sheets, which is why the arrangement of credits, especially new, large and long-term ones, became more cumbersome. For SMEs, in many cases this meant more expensive debt financing and more stringent requirements for collateral.
The operating environment is challenging for companies because of intense competition. It is likely that the unstable economic situation, particularly in the euro area, will continue. This may further delay the investment decisions of both domestic enterprises and their customers abroad.
Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 29 460 2458