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December 21, 2023

CFO insight into Q3 2023

Olli Sinnemaa

Finnfund’s investment portfolio continued to grow in the third quarter of 2023, reaching a value of EUR 729 million, which is an increase of EUR 31 million (+4%) from the year-end 2022. During the first nine months of the year, 28 new investment decisions were made worth EUR 221 million.

In the third quarter of the year, high interest rates contributed to the growth of the revenues. The total gross interest income increased by +41%, compared to Q3/2022 (EUR 24.3 million vs. EUR 17.3 million), whereas the interest expenses increased by +67% compared to Q3/2022 (EUR 9.0 million vs. EUR 5.4 million). As expected, the misbalance between the growth of interest income and interest expenses has improved, and we expect this positive development to continue.

The year to date shows a total net financial income of EUR 20.4 million, which is a 40% increase compared to last year (EUR 14.6 million in Q3/2022). This is driven by the increase in all income types.

The expenses for administration, depreciation, etc. have increased (+26%) compared to last year. However, this has been taken into account in our budget, and the costs remain at the planned level.

The profit before a reduction in the value of investments and sales gains and losses was EUR 6.8 million (EUR 3.9 million in Q3/2022). 

So far, the net value changes of the portfolio have been EUR -3.7 million during this year. 

The profit for Q3 2023 was EUR 3.1 million (EUR 3.6 million in Q3/2022). 

For the past several years, many developing countries had benefitted from low interests and improved access to foreign loans, private and public. More recently, the dramatic increase in external interest rates lead to plunging local currencies, higher margins and reduced access to external finance. In many countries, governments are now struggling to pay their bills and consumers are struggling to buy necessary goods. Not surprisingly, the profitability of some of our investees has deteriorated. Luckily, inflation has been tamed and many central banks are expected to cut interest rates in 2024.

The global turbulences are causing a significant number of challenges to Finnfund’s operating environment. Not only the inflation, high interest rates, and food crises but also the looming debt crisis in many developing countries keep affecting our operating environment.

What does this mean in practice? We must keep doing our homework well, as well as work with our partners, such as the European Commission, to maintain our portfolio risk at an acceptable level – while investing in where we are needed most

Olli Sinnemaa
Chief Financial Officer, Finnfund

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