CFO insight into Q2: Keeping up the speed

Olli Sinnemaa Chief Financial Officer (CFO) olli.sinnemaa@finnfund.fi

The second quarter of 2022 continued to be a good one for Finnfund.

Finnfund continued growing in the second quarter of 2022, reaching a portfolio value of 684 million euros, which is an increase of 26 million euros (+4%) from the year end 2021.

13 new investment decisions were made during the first two quarters, worth a total of 133 million euros.

The ongoing instabilities in the world have continued to raise the USD reference rates compared to the EUR. This has generated both higher interest income and higher interest expenses in the second quarter, resulting in only a minor increase of 0.4% in net interest income compared to Q2/2021. The total gross interest income increased by +9.6% compared to Q2/2021 (EUR 11.5 million vs. EUR 10.5 million), whereas interest expenses increased by +45.6% compared to Q2/2021 (EUR 3.1 million vs. EUR 2.1 million). As in the first quarter, we can see that interest expenses are impacted sooner than interest income by the rapid USD reference rate effects, but we continue to expect that this will be balanced later this year.

The two first quarters show total net financial income of EUR 11.7 million, which is a 63.1% increase compared to last year (EUR 7.2 million in Q2/2021). This is mainly driven by the net gain from exchange rates, which includes the valuation of interest rate derivatives at fair value.

A clear increase in administration, depreciation, and other operational expenses (+15.7%) compared to last year is mainly explained by higher staff costs due to new recruitment. We can also see a more normal cost structure, as operations are slowly returning to normal as the pandemic is wearing off. The expenses remain slightly below budget (-4%).

The profit before reduction in value of investments and sales gains and losses was 4.1 million euros (EUR 0.5 million).

The profit for Q2 2022 was 5.1 million euros (EUR -3.8 million).

During the first half of 2022, the total of net write-downs was a positive of 1 million euros. This is generated from both sales gains from one project and stronger performances within the portfolio companies, especially within the fund portfolio. The beginning of the year included extraordinary valuation activities due to two old projects, which, however, resulted in zero net result impact, as seen in Q1.

Despite the ongoing conflicts and crises in the world, we still expect the year 2022 to be a turnaround year for Finnfund, as we have previously stated.

The results of the two first quarters in 2022 support this view, and we anticipate similar developments to continue. The war in Ukraine will continue to affect the scenarios, and the economies that already suffered the most during the pandemic will, most likely, take a new hit. Increasing food and energy prices, as well as the monetary policy measures undertaken to fight inflation, will leave the poorest countries in a very difficult position.

Finnfund will continue to invest where it is needed the most.

Olli Sinnemaa
CFO, Finnfund

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