Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Income from property management increased by 16.3% year-over-year.
- Net leasing for the period is positive, indicating strong tenant demand.
- Direct property costs decreased by SEK105 million, mainly due to lower electricity costs.
- The company has a strong tenant base with low exposure to individual tenants, with the largest tenant representing only 2.4% of total contract value.
- Castellum AB (CWQXF, Financial) has been recognized as one of the world's most sustainable companies in 2024 by Time magazine.
Negative Points
- Total income increased by only 1.3%, affected negatively by property divestments.
- Property values have been written down by approximately SEK1.6 billion during the period.
- Occupancy rates have been trending down despite positive net leasing.
- The company has been holding back on new projects since 2022, affecting net leasing derived from new projects.
- Negative one-off effects in net finance costs amounted to SEK29 million in Q2.
Q & A Highlights
Q: Joacim, in your CEO statement, you're talking about growing optimism. Is that only referring to financing and transactions or does it include property management and rental demand?
A: Yes, in fact, the -- good morning Lars. I think it relates to a -- I wouldn't say all aspects of our business, but a quite of few, certainly on the financing side where markets and banks are keeping us way more favorable than they did 1-year or 1.5-year ago, but also in terms of our dialogues with the tenants. We have, as mentioned, more and larger dialogues ongoing now than we have had in quite a few quarters. We are still cautious, but we have a higher level of activity than in a long-time.
Q: You still had some negative value changes in the quarter, even though quite small. What's your picture here? Are we now at the bottom or is there still a bit more maybe to go?
A: Hi, Lars, Jens here. I mean, it's a bit tricky to answer, but [both] the gut feeling absolutely tells me that we have booked amount, and I think we've seen that over a couple of quarters that the value decrease has slowed down. And it feels very reasonable when we see underlying interest rates are starting to come down and is expected to come down further. So yes, it should be rather stable. But of course, we cannot give you any guarantees here.
Q: Second quarter of positive net letting still occupancy trending down a bit. Where we see that weakness coming from?
A: I think that there is -- we don't see that as a definite sign of weakness. This is something that we have predicted we've been quite vocal about this in earlier reports. So we have seen this coming. We have a very active dialogue with tenants, but there is a higher turnover in the contract [stock] so we have, we lease more, but we also get more notices on cancellation. And I think that it's fair to say that most companies have post COVID, our reviewing their future demand in terms of what they actually need with a lower interest rate and some macro figures pointing in a better direction. We do believe that the local companies will start to think about expansion rather than reducing. But this remains to be seen, of course, but we do not see the current market development necessarily as a sign of weakness, we have actively decided not to invest as much as we have done historically. And that, of course, affects the quality of our products and our ability to meet client demand.
Q: Your comment about the bringing in that investor going forward, do you foresee that most coming from the start-up of new projects investments in the existing portfolio rather than M&A?
A: We have started to scout for new investments. But so far, the figures have been quite clear that the investing in our existing portfolio, reducing vacancies and starting new projects as the fully let logistic project that we are building in investor was at the moment. It has by far outperformed buying existing properties from someone else. But we have been more active in reviewing opportunities and our transaction team is constantly monitoring opportunities. But so far, the balance has been towards developing our existing portfolio.
Q: I think you [Jens, did] you mentioned some negative one-offs in the net finance cost in itself will just repeat that. So I got there the amounts right?
A: Yes. I actually did. The increase in financial net quarter-on-quarter is partially explained by one-off effects relating to refinancing of loans and that was SEK14 million and expiring interest rate swaps at the end of the first quarter, plus-SEK15 million per quarter.
Q: So is that a total of SEK29 million?
A: That's SEK29 million but (multiple speakers) and there are some other explanations, smaller items that I cannot give you right now.
Q: Okay. But SEK29 million so negative in the net finance cost from Q2?
A: Among others, of the financial costs relating to repurchase of bonds, etc., etc.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
