Result for the year better than expected

In 2007, Finnvera plc succeeded well in attaining the industrial and ownership policy goals set for the company. The company’s result for the year was higher than the budget figure. Losses were lower and the interest rate higher than had been anticipated, and operating expenses were below the budgeted amount. Outstanding commitments declined slightly.

The risk financing for domestic operations offered by the parent company, Finnvera plc, amounted to EUR 896.9 million (EUR 926.0 million). Offers for export credit guarantees, given to cover both domestic and foreign risks, totalled EUR 1,816.1 million (EUR 2,892.5 million).

Result for the year

The consolidated financial statements and the parent company’s financial statements for 2007 have been drawn up in accordance with the International Financial Reporting Standards (IFRS). The figures for the reference year 2006 have also been converted to correspond to the IFRS.

The Finnvera Group’s profit for the year 2007 rose to EUR 53.1 million (EUR 34.0 million). The Group companies and associated companies had an effect of EUR 7.1 million on the profit (EUR 3.8 million). The parent company’s profit was EUR 46.0 million, or EUR 15.8 million more than in 2006.

Factors contributing to the rise in profit included the increase in the interest rate and in commissions income, and the fact that operating expenses were lower than had been anticipated. Other factors augmenting the profit were the valuation of Finnvera’s subsidiaries engaged in venture capital investments at fair value, leading to a rise in the value of the shares, and an increase in net income from investments.

The decision on exempting Finnvera plc from income tax was made in December 2007. The tax exemption came into effect retroactively for the whole year 2007. This reduced the price of new financing immediately from the beginning of 2008.

Interest support received by the parent company from the State of Finland and the European Regional Development Fund (ERDF) totalled EUR 17.8 million (EUR 19.0 million). Of this sum, interest subsidy passed on directly to clients accounted for EUR 17.1 million.

The net interest income for the Group totalled EUR 60.7 million (EUR 51.1 million) and the commissions income was EUR 68.8 million (EUR 59.6 million). This was EUR 9.2 million more than in the previous year. The Group’s administrative expenses totalled EUR 42.1 million (EUR 42.1 million), of which personnel expenses accounted for 65 per cent.

At year’s end, the parent company’s total outstanding commitments were EUR 7,176.5 million (EUR 7,248.9 million). Outstanding credits declined slightly, to EUR 1,368.9 million (EUR 1,371.5 million), while outstanding guarantees rose to EUR 827.4 million (EUR 804.3 million). Total outstanding commitments arising from export credit guarantees and special guarantees (current commitments and offers given) totalled EUR 4,980.2 million (EUR 5,072.3 million).

A slight increase in credit losses

The parent company’s credit losses and claims paid totalled EUR 44.4 million (EUR 43.0 million) during the period under review, but were lower than had been anticipated. The amounts of non-performing claims and credit loss provisions in domestic financing rose during the year. In export financing, the claims paid are still at an exceptionally low level when seen over a longer time span.

“Owing to the decisions made in previous years and during the period under review, risk concentrations in export financing provided by Finnvera for shipbuilding reached a new record when all offers given are included. This calls for careful assessment and management of our risk position,” Managing Director Pauli Heikkilä stresses.

Additional investments in starting enterprises

Public venture capital investments in starting enterprises were concentrated in Finnvera as of the beginning of 2008. These activities have been assigned to Finnvera’s subsidiary Veraventure Ltd, which manages Aloitusrahasto Vera Oy, a fund investing in starting innovative enterprises. The objective is to boost the growth of the target companies and to develop their attractiveness as investment objects for further financing by other financiers as well.

During the year under review, Finnvera enhanced the opportunities available for the funds to increase their investments by making additional investments of EUR 24.3 million in Aloitusrahasto Vera Oy and Veraventure Ltd.

Capital adequacy and acquisition of funds

The parent company’s own assets were EUR 511.9 million, while the risk-weighted receivables, investments and commitments outside the balance sheet totalled EUR 2,521.5 million. At the end of 2007, Finnvera plc’s capital adequacy stood at 20.30 per cent (19.24)

The parent company’s long-term acquisition of funds totalled EUR 272.7 million.

Future prospects

The uncertainty factors of economic growth may affect the financing needs of SMEs in Finland. Continued disruption on the financial market may also cause a decline in the availability of financing for enterprises and a rise in financing costs. This would emphasise Finnvera’s role as a provider of risk financing and as a body supplementing the financial market.

Owing to the crisis on the financial market, the demand for Finnvera’s export credit guarantees is rising after a quieter period last year. Projects in the forest industry, power generation, mining and the basic metals industry account for an increasing number of guarantee applications.

It seems at present that the financial performance for the current year is likely to correspond to the calculations presented in the business plan and budget. However, if more risks materialise than has been anticipated, the situation may change considerably.

For further information: Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Ulla Hagman, Senior Vice President, Finances and IT, tel. +358 20 460 7409 or +358 40 715 9224