Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rental income increased by 3% and net operating income rose by 9%, including a one-off insurance payout.
- Property values increased by EUR 4.4 million through acquisitions and FX rate movements.
- The company acquired six grocery stores in Western Sweden, enhancing their portfolio and increasing cash earnings per share.
- Cibus Nordic Real Estate AB (FRA:6N5, Financial) pays monthly dividends to shareholders, maintaining a stable dividend yield.
- Earnings capacity has increased for the fourth consecutive quarter, showing a 7% rise since Q2 2023.
Negative Points
- Unrealized change in property values resulted in a negative impact of EUR 8.3 million.
- Net financial items included a non-recurring expense of EUR 3.6 million for tender offers when buying back bonds.
- The company faces challenges with property valuation cycles, particularly in Finland and Denmark.
- Loan-to-value ratio remains high at 68.9%, operating in the lower part of their internal policy range.
- Interest coverage ratio is at 2.2 times, which, while stable, indicates potential vulnerability to higher interest rates.
Q & A Highlights
Q: Can you provide an update on the bank loan renegotiations and expected margins?
A: The margin is 1.6% credit margin bank accounts. We have very good discussions with the banks and new interest as well. We aim to finalize the refinancing in the second half of 2024. The bond market's strength also gives us negotiation power with the banks. (Pia-Lena Olofsson, CFO)
Q: What are your plans for hedging activities post-Q2?
A: We will continue to have a high degree of hedging to deliver stable cash flow. The recent bond refinancing provides a good platform for growth, and we will benefit from lower margins on callable bonds in September and December. (Pia-Lena Olofsson, CFO)
Q: How have the lease renegotiations been?
A: It is business as usual. We extend leases, get index growth, and maintain stable locations for tenants. We have a good cooperation with our tenants, ensuring beneficial negotiation points for everyone. (Christian Fredrixon, CEO)
Q: Can you comment on the property valuation cycle and differences between countries?
A: Valuations lag due to the need for transaction data. In Sweden, values have stabilized and are starting to grow. Other countries like Norway, Finland, and Denmark are still lagging. Falling interest rates should increase confidence and transaction volumes. (Christian Fredrixon, CEO)
Q: Have you disclosed the Occupancy Cost Ratio (OCR)?
A: We haven't disclosed it in the notes. Retailers don't usually share turnover data for individual stores. However, we assess OCR before acquisitions, and a low OCR indicates stability and potential for rent increases. (Christian Fredrixon, CEO)
Q: What markets are looking more attractive for acquisitions?
A: We look at all Nordic markets simultaneously for attractive yields and spreads. (Christian Fredrixon, CEO)
Q: Are you considering markets outside the Nordics for potential transactions?
A: Yes, we are looking at several European markets. The grocery and daily goods market dynamics are similar across Europe, making international expansion a natural growth story for us. (Christian Fredrixon, CEO)
Q: Can you provide details on the insurance compensation for the fire in Finland?
A: The realized change in value was very small, and the property was sold back to the original owner. (Pia-Lena Olofsson, CFO)
Q: Do you have ongoing discussions with Lydall regarding their growth plans?
A: We maintain contact with all major and smaller grocers. Lydall's growth plans seem to involve new construction, but we are not privy to their exact strategies. (Christian Fredrixon, CEO)
Q: Who do you view as the typical seller of your asset type?
A: The market is fragmented. Sellers include retailers themselves, private investors, smaller portfolio builders, and institutional players. (Christian Fredrixon, CEO)
Q: How do valuation yields in other markets like Germany compare to your reported yield?
A: Valuation yields are about the same across Northern Europe. (Christian Fredrixon, CEO)
Q: Are you considering obtaining a credit rating?
A: We are not aiming for a credit rating in the short to mid-term. The goal to achieve investment grade is no longer valid. (Pia-Lena Olofsson, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
