Fondul Proprietatea will continue cash distributions despite negative bottom line in 2020

Romania's biggest investment fund, Fondul Proprietatea (FP), reported RON 103 million (EUR 21 mln) losses in 2020 compared to a net profit of RON 3.1 billion (EUR 667 mln) in 2019.

The main driver for the sharp deterioration in FP's profitability was the net unrealized loss from equity investments at fair value - RON 1.1 billion (EUR 226 mln).

In 2019, FP posted a RON 2.26 bln (EUR 466 mln) net gain generated by the appreciation of the shares in its portfolio.

In 2020, the value of FP's stakes in several companies dropped sharply amid the corrections on the Bucharest Stock Exchange and the economic crisis triggered by the pandemic.

The value of the fund's stake in Aeroporturi Bucuresti dropped by RON 398.8 million as air traffic restrictions hit the company, and its bottom line slipped into the red.

The fund's stakes in OMV Petrom (SNP), in E-Distributie Banat, E-Distributie Muntenia, E-Distributie Dobrogea also dropped significantly.

On the upside, the value of the fund's stake in Hidroelectrica went up by RON 242 million due to its strong performance.

Fondul Proprietatea sold its whole stake in nuclear power producer Nuclearelectrica (SNN) and another 3% stake in OMV Petrom (SNP) to finance its share buyback programs.

It also cashed in dividends worth RON 1.22 bln (EUR 250 mln) from the portfolio companies, higher than in 2019, as some of these companies also paid special dividends last year.

Thus, despite the accounting loss, the fund's manager Franklin Templeton plans to propose to the shareholders a cash distribution of at least RON 0.05 per share this year, which could be operated by decreasing the shares' face value.

The fund's share price registered a strong performance in the second part of 2020, following global stock markets' rebound.

The FP shares are up 8% since the beginning of this year and 26% in the last six months. Thus, the discount between the share price and the net asset value (NAV) per share has dropped under 10%.

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