Fondul Proprietatea SA (FP) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Fondul Proprietatea 2025 Preliminary Annual Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Daniel Naftali, Portfolio Manager. Daniel, please go ahead.

Hello. Thank you. Good afternoon, and welcome, everyone, to our conference call to discuss the 2025 preliminary annual results and the December 2025 NAV development. Catalin Cadaru, Financial Reporting Manager, and I are pleased to host today's call. The 2025 Prelim annual results report can be found on the Fund's website in the Financial Results section and the presentation that will be discussed is available on our website at fondulproprietatea.ro in the Investor Relations Calls section. After the presentation, we will have a 30-minute Q&A session. As a reminder, this conference call is being recorded, and the recording will be available on the fund's website after the call. That being the agenda, I would like to start with Slide 2 of the presentation, where we highlight the key effect about the Fund. At the end of December, the Fund's NAV was around RON 2.34 billion, approximately $0.54 billion and an NAV per share of RON 0.7944 per share. On the right-hand side, you can see the evolution of the Fund's adjusted share price and the discount/premiums since the Fund's listing in January 2011. As at Friday's close, the fund was trading at a discount of 16.79% for the shares. On Slide 3, we present the Fund's shareholder structure as of end December 2025 with no major changes since our last results conference call in August 2025. On Slide 4, we show a summary of the NAV, share price and GDR performance since 2011 and the evolution of the Fund's average annual discount to BVB. Please note that the effective cancellation of the trading and delisting of the GDRs from the Specialist Fund Segment of the Main Market of LSE took place in April, on April 25, 2025. Fondul Proprietatea data did not hold any GDRs at the delisting day. The NAV per share total return in 2025 was 22.4%, while total return for the local shares were 94.7%. In the following section, we'd like to provide an update on the Fund's portfolio. On Slide 6, we showed a portfolio structure as at the end of December: 88.7% were in unlisted companies, 5.3% in listed equities, 6% in net cash and receivable. Net cash and receivable position as of end of December was RON 140.4 million. On Slide 7, we present the main portfolio companies as at the same date, representing 90.8% of the Fund's total NAV. On Slide 8, we show an overview of the NAV evolution during full year 2025. The Fund's total equity portfolio rose from RON 1.98 billion to RON 2.20 billion, driven mainly by Bucharest Airports, which posted strong growth, a plus of 32.2% year-on-year. Constanta Port was broadly stable, while Salrom and other holdings declined year-on-year. Overall, the strong performance of Bucharest Airports more than offset these drops, resulting in an overall 11.1% year-on-year increase in total equity portfolio. On Slide 9, we present the 9-month 2025 figures for Bucharest Airports. On the financial side, operating revenues up 20% year-on-year to RON 1.2 billion, operating results reaching RON 752.2 million from RON 600.5 million during the similar period last year. Traffic continued to rise by a steady 9% year-on-year at the end of September, reaching 13.3 million passengers. This trend was the main positive driver for the improved operational profitability, which was up 25.3%. Regarding the litigation, we note that on July 2025, the Ministry of Transport approved within a GSM resolution, to restart the valuation process for the share capital increase with the value of lands at Baneasa Airport. The Fund has challenged the GSM in court, before Ilfov Tribunal and the first hearing is set for February 5 this year. Regarding the GSM for approving the purchase of the minority stake held by the Fund in CNAB. We note on 5th of December, CNAB informed the Fund of the Convening Notice for 8th of January 2026. Regarding the intention to repurchase the minority stake held by the Fund, an initiative on which the Fund's Manager has not been consulted. On January 9, on the second hearing of the EGM, shareholders have approved the intention with an 80% majority. In light of this decision, the Fund Manager will engage with the company's management, its advisor and all other relevant stakeholders to ensure the best outcome for the Fund's shareholders. On the corporate governance front, the Board of the company has finalized the selection process for the CEO and CFO position. They appointed Mr. Bogdan Mindrescu, the former State Secretary of the Ministry of Transport, as CEO, and Mr. Madalina Rusu as CFO, who occupies a similar position as a subsidiary of Electrica Group. Their mandate will end in July '28. We remind shareholders that the Board itself was appointed in July 2024 for a 4-year mandate. Fondul has challenged the legality of these appointment in Court due to irregularities in the selection process and the outcomes, which in our view go against the provision of Ordinance 109. The next court hearing is scheduled for April 2026. On Slide 10, we show the 9-month results of Constanta Port, here, operating revenues decreased 8% year-on-year to RON 367.6 million. Operating profit was down to RON 118.3 million, while net income was RON 154.6 million, down compared to the previous year, 43.3%. We note that traffic reached 51.7 million tons to 14.4% lower in the continued -- in the context of a continued drop of volumes linked to Ukraine. Moving -- operating profit dropped significantly also, but after adjusting for the one-off reversal of provision from 2024, the operating profit declined by 22% year-on-year. For 9 months 2025, the net profit stands at RON 154.6 million versus RON 101.5 million budgeted for the full year. We note that on the corporate governance front, all board members have interim mandates. The selection process for a full 4-year Board has started, and we expect the process to be finalized in the coming months. Also a development and update on the Giurgiulesti Port. As you know, the Board of Constanta Port convened for 12th of February 2026 to seek shareholders' approval for the purchase for the acquisition of 100% of the shares in Giurgiulesti Port, in Moldova -- Republic of Moldova, as well as the share purchase agreement. We have previously informed shareholders that on June 19, 2025, the Ministry of Transport approved the company to submit a binding offer for the potential purchase of 100% of the shares in Giurgiulesti Port. And also somehow in connection to the same topic, there is a GSM decision approved in May 2025 by the Ministry of Transport for the company, the Constanta Port, naming, to procure external legal services to support a potential cash share capital increase of up to $99 million. On Slide 11, we provide the latest numbers on Salrom and update. So 9 months operating revenues decreased by 6% year-on-year to RON 329.5 million. Operating profit was down RON 20.8 million from RON 87.5 million in 2024. While also net income was down 71% to RON 23.9 million. Of course, this is result also of the impact of heavy -- of the flooding of salt mine in Praid. So just for everybody to be on the same page. In early May 2025, heavy rainfall in Harghita County caused major water infiltration into the Praid Salt mine galleries, prompting to Salrom to suspend mining and tourism from May 5. The company, of course, will mobilize technical teams and work with authorities on urgent measure, however, despite of the efforts end of June, the dam build underground by Salrom gave away under-pressure water that -- which entered beneath. Following the floating, the Praid Salt mine, both mining operation and tourist activity have ceased. Based on government decisions, 530 Salrom applied for state aid for a total amount of RON 76.5 million to offset some of the losses incurred. And as an update, the state aid was received by the company on 23rd of December. On the corporate governance side, we know that currently, the Salrom has an interim board. But at the same time, note that GSM was convened for the 26th of January, this year for the initiation of the selection procedure for candidates to fill in permanent position for the Board of Directors. So on Slide 12. We show key financials for the Fund's largest holding, including the 2024 figures, approved by shareholders. Moving to corporate actions on Slide 14, we outlined Fund distribution since we started managing the Fund. The 2025 amounts are based on buybacks executed, the finalized tender offer, the dividend distribution approved by shareholders during the April GSM and the 29th of September GSM, as well as on the number of paid shares excluding treasury shares up to the end of December. Total distribution made since 2010, included the amounts for 2025, reached RON 29.5 billion, that is $7.1 billion. On Slide 15, we outlined the latest updates on the Fund's buyback program. The 16th buyback program was finalized in December, and the cancellation of the share repurchase last year will be subject to shareholders' approval at the General Shareholders Meetings call for February 26 this year. In addition, the 17th buyback program, which aims to repurchase up to 294,868,717 shares is also included on the agenda of the GSM. On the next slide, we show the main details of the offer finalized tender 2025. I think, the offer was for 80 million share, and the purchase price was RON 0.6975 per share. On Slide 17, we include details on the Fund's annual dividend and dividend payout ratio for the largest portfolio company as at December, based on the figures approved by shareholders. The total amount for top holding is RON 155 million for the dividends approved in 2025 out of 2024 profit. On the following slide, we show a summary of total dividend income received from the portfolio companies in the last 5 -- 10 years. Total dividends approved, regular and special, received in 2025 amount to RON 155.6 million. On Slide 19, we show financial calendar from Fondul Proprietatea. On the following slide, we present the main points for the OGM and EGM agenda called for 26, 27 of February. On the EGM agenda, the main topics are: this first item added on the agenda by the Board of Nominees, presentation of the Board of Nominees on the outcome of shareholder questionnaire and engagement process carried out with shareholders. Items linked to this approval to mandate the Fund Manager to implement the conclusion of the shareholders' consultation in the Fund's Investment Policy Statement. The investment -- the IPS will be presented for approval to the Fund's shareholders in accordance with the Constitutive Act of Fondul Proprietatea. We have also proposed by shareholders holding more than 5%. The in-principle approval of the consolidation of the nominal value of a share of Fondul Proprietatea, by increasing the nominal value of the shares simultaneously with the reduction of the total number of shares. So 100 shares with a nominal value of RON 0.52 per share would be 1 share with a nominal value of RON 52 per share. Of course, if this is approved, we as Fund Manager will be mandated to implement in due course, this shareholder approval in-principle. The approval, of course, then we have the approval to decrease the subscriber and pay share capital of Fondul Proprietatea, which is related to the execution of the 16th buyback program. And of course, we have the point about the authorization of a new buyback program via trading on the regular margin on which the shares of -- okay, so basically, a new buyback program for 294.8 million shares. On the OGM agenda on Slide 21 and 22, the main topics are first point, approval, the appointment of Franklin Templeton International Services as sole Director of Fondul Proprietatea that acts as the alternative investment fund manager for Fondul Proprietatea, for a duration of 4 years starting with April 1, 2026 until April 2030. Together with the commercial terms and the execution of the new -- approval of the new management agreement between Fondul and Franklin Templeton. Next point. So this point was added on the agenda by the Board of Nominees at the request of the Board of Nominees. Another point, the appointment for a period of 3 years of one member of the Board of Nominees of Fondul Proprietatea. Then approval of the operating rules of the Audit and Valuation Committee, as adopted by the Board of Nominees, in accordance with previous resolution of the Fund shareholder of GSM. The approval of operating rules of the Board of Nominees in accordance with the resolution of also the November GSM. We have also several points added on the agenda at the request of the group of shareholding -- shareholders holding more than 5%, namely the approval of the implementation of a permanent market-making program to ensure deep and consistent liquidity for the Fund's share across the market. The Sole Director is hereby mandated to identify and implement relevant measures in relation to the market-making program in accordance with the regulatory framework and the legal responsibility of the Fund Manager. And also, at the request of a group of shareholders, we have the approval of the implementation of an enhanced transparency and disclosure standards, including clear strategic guidance on the company's future. The sole Director is mandated to identify and implement relevant measures in a reasonable time frame in accordance with the regulatory framework and legal responsibilities of the Fund Manager. Also, we have -- also point added by a shareholder representing more than -- by a group of shareholders representing more than 5%. Approval for the initiation of a full cost and fee structure review to ensure total alignment with shareholder value creation. As such to be implemented, so basically assuming this point is approved, the Sole Director is mandated to identify, implement relevant measure in a reasonable time frame in accordance with other resolution of the GSM, the regulatory framework and the legal responsibilities of the Fund Manager. The fund's financial results for the period are presented on the next slide, and I would like to invite my colleague, Catalin Cadaru, Head of Financial Reporting to comment. Catalin?

Thank you, Daniel. Hello, everybody. On Slide 24, we see the preliminary unaudited statement of comprehensive income. So the Fund, according to the preliminary results, the Fund ended 2025 with an unaudited profit of RON 448 million compared to RON 252 million in the previous calendar year. The main driver of this result is the unrealized fair value gain, arising on the revaluation of the portfolio holdings with the most significant change coming from Bucharest Airports, as already mentioned by Daniel earlier. As of date of the publication of the preliminary report, the audit -- the financial audit procedures are still ongoing, and they will include the various analysis, including a subsequent event analysis for the period between 31st of October 2025, which is the valuation date for the reports, including the NAV up to the date when the IFRS financial statements will be authorized for issuing. Any significant impact on valuation of the holdings that may arise under this analysis will be reflected in the final audited IFRS financial statements of the Fund for the year ended 31st December 2025 and in subsequent NAV as applicable. The dividend income during 2025 was higher by RON 10 million compared to the previous period, with two contributors being Bucharest Airports and Salrom. The total administration fees recognized in profit and loss are similar to the one in the prior period with an increase in the base fee driven by the market capitalization and a decrease of the dividend distribution fees. The distribution fees for buybacks are recognized directly in equity together with underlying shares, and there was a decrease during 2025 compared to 2024. Other operating expenses also decreased by RON 1.6 million during 2025. Moving to the next slide. We see the unaudited statement of financial position. The increase in the equity investment portfolio of approximately RON 300 million was mainly driven by the revaluation of Bucharest Airports, partially offset by Salrom with a fair value change -- decrease during the period. The most important cash inflows during 2025 were related to the dividends collected from the portfolio companies, RON 155 million, while the most important outflows related to net dividends paid RON 167 million, acquisition of treasury shares within the 16th buyback program, including the tender offer that was settled during September 2025 in amount of RON 118 million.

Thank you, Catalin. At this point, I would like to open it up for your questions.

[Operator Instructions] We have no phone questions at this time.

So I see in the chat, number of questions, let me -- Cadaru can you help me with first question. I see there is a question in Romanian. Why -- was there a discussion with Franklin Templeton for mandate expansion? Well, basically, we and Franklin Templeton have expressed and then we have made public and we informed the Board of Nominees that we are interested to continue for a 4-year mandate and through direct negotiation. And that's what we are doing currently. So yes, Franklin Templeton and we are discussing with the Board of Nominee for a new mandate for 4-year. And this is also in line with the approval in the September GSM, when there was a renewal in-principle by shareholders a renewal with a very large majority by shareholders for 4-year mandate for Franklin Templeton, the Board of Nominees being mandated to negotiate with Franklin, the duration and the exact terms. So I think this answers your questions. Another question refers to the amount coming from unclaimed dividends following the sale of Hidroelectrica and I guess the subsequent decision to distribute dividends. I think we are -- of course, there is this term of prescription, which our shareholders -- it's a 3-year prescription period. But at least as a general comment, there is always a legal discussion and a legal analysis when such amounts are prescribed. And this is carried out by legal team, by specialists in this field. But once they are prescribed, they are -- become part of the decision. Decision Itself is not -- it's based on a quite detailed legal analysis, taking in consideration of specific circumstances. That's it. Question number two, does the Fund Manager intend to commission and fund independent external market-based valuation for Constanta Port and Bucharest Airports. Before asking shareholders to approve any potential disposal. Well, I would make a general comment here. First of all, I mean, on the -- what we know for sure is Bucharest Airports. Constanta Port, we have this general information news. We have seen this potential intention from Ministry of Transport, however, there is no official communication. There's no discussion or official indication from the part of the government or the Ministry of Transport in this sense. On Bucharest Airports, we have this GSM resolution, which was taken without consulting us. Of course, we acknowledge it and our interest is really to act in the best interest of shareholders. And as we have noted also in our financial reports, we will and we are engaging with the company, with the ministry, with all the consultants or their advisors to understand the process and to put in and to come to the best conclusion for shareholders. As you have seen also in the case of Hidroelectrica transaction, of course, a transaction of such a proportion, we will pay very high attention. We may also engage on our site, consultants. It maybe -- they could be a range of consultants. But the exact details, I think it's best to be disclosed by us as the process advances and as there are relevant developments in the market. So we are sure that on our side, we are making all efforts to ensure that the interest of the Fund and shareholders are well represented. [ Henrique ], I have a question. Do you have any enough liquidity or earnings for the 17th buyback program? Of course, liquidity is also -- so we manage the Fund, of course, and we have to pay close attention to liquidity needs. And also, if we have made even some comments in our annual report about how we are looking at this. Of course, we are looking and we are expecting as a portfolio company, the main source of funding on an ongoing basis are the portfolio companies. So of course, we are very closely monitoring how they will be reporting the results and what dividends they were proposing. And based on this, we will make -- first, we had the dividend policy in place, which basically states that the cash flow and the dividend that is received from portfolio companies, we pass to our shareholders, regular dividend, of course, minus operating expenses. And of course, any other cash that we have for disposal from any others, we can use through other means, special dividends, buybacks and so on. So basically, of course, we have put on as always the buyback program on the AGM agenda to have in place the framework to be able to execute the buyback program. Profit for the year 2025 is RON 449 million, can total amount be paid to shareholders? First of all, I would -- and I think, Catalin, will agree with me, this is preliminary financial results. The final audited financial results are still in progress, so to say. But okay, I understand your question. The Fund doesn't have -- this is part of this result, as also was mentioned, comes from a change in the valuation of underlying holdings. So it's a noncash. So our proposal of dividend will take into account primarily the available cash coming from portfolio companies. I see a question from [ Peter Corbett ]. How much excess cash do you have today? So as I said, we are waiting to see exactly the dividends that the portfolio companies are going to pay. So really to make the proposal of dividends and to -- so basically, as we noted on the financials, everybody has noted that we had to balance even in 2025, we had to -- we didn't execute in full the buyback program. So also from taking into consideration cash management consideration. So I think this kind of answers your questions. So you just maybe to -- even in writing in the Fund's report, just everybody to note, we -- the Sole Director is managing the liquidity of the Fund, by prudent observing the cash required to cover ongoing DCM measures that is distribution, operating cost of the Fund for at least 12 months forward and other specific liquidity requirements that may arise such as. And we note here the portfolio companies may require share capital increases. And here we note, of course, CNAB, which is the ongoing discussion about the potential capital increase. When will you receive dividends from airports and other companies in 2026. And what is your estimate for dividend income in 2026? Good question. Well, as you know, generally state-owned companies in Romania are approved with their financial results in May. May of the year, and they are generally paid in June or July, depending also they have 60 days to approve from -- to pay it from the date of the approval. Sometimes they pay a bit earlier and so forth. But generally, this is the time frame. The main paying assets last year have been Bucharest Airports and Salrom. CNAB has had very, very good results. Of course, we will be fighting, and we're striving to obtain -- to continue the digital payout as high as possible, more than in excess of 90%. So we'll know there. With Salrom, of course, last year, they paid also a high dividend payout. We are also waiting to see the management proposal, the exact management proposal will be this year. In CNAB, for Constanta Port, we are always discussing this with the government, with the Ministry of Transport and Ministry of Finance. We haven't paid dividend for the past 2 years, although they are sitting on a massive amount of cash. So we -- and there, of course, as everybody knows, there is also this limitation through law, where the dividend is kept at 25% of net profit. Okay. [indiscernible] or for some of the questions, I think we have already answered. Can you -- I now move on to -- okay, some comments or -- so by and large, I think we have quite answered the questions. Okay, why did CNAB increase by 30% in last valuation? I think -- I mean, this is driven primarily by strong results. I mean, we note the strong increase in the result in 2025. Factors, of course, traffic, renegotiation of commercial terms of the commercial spaces. We really do hope that this is being confirmed. So yes, on CNAB, there is a 30% increase in valuation driven mainly by good results. Of course, I see a lot of questions around the valuation of CNAB, of airports. And I think we all understand where shareholders are coming from. First, we also -- if you go through our report, we have tried to provide a bit more color in the work that is done for the valuation of the state, which is, again, for financial purposes. And the valuation that we are seeing here was done not in the context of a transaction, was done at the financial statements at end of September and valuation at October. It does not incorporate latest news. So just bear in mind, this is why this. Catalin, maybe also you can -- our colleague Catalin -- and that, of course, maybe you can -- Catalin Cadaru has also -- from the reporting side has also providing a lot of input and valuable input, and please Catalin, if you can add also more color on the process itself.