The five SIF whose assets are worth 6.17 billion lei (EUR1.4 billion) would have posted about RON81 million and RON62 million losses in the last two years, had they not sold some of their valuable assets to boost profits by about RON2.1 billion in 2011 and 2012, ZF has calculated.
The SIFs started out owning 30% in most Romanian companies. Their managers did nothing to restructure them for years and invest in sectors to generate value for shareholders, living off the dividends collected from banks such as BCR and BRD instead.
The SIF bosses who had kept their positions for two decades advocated keeping the SIF stake cap at 0.1% and then 1%, to preserve their power and keep their positions and control over the regional investment funds.
As their managers sat idling by in the early years of the SIFs, the five funds have run out of companies to provide a steady flow of dividends and enable them to pay their managers’ salaries and other operating expenses. As a result, they are now forced to sell assets to come up with dividend money.
The SIF expenses in the last few years have increased in part because of the hefty bonuses some SIF managers took after selling major assets in their portfolios.
Most shareholders did not react to the SIF asset sales, enjoying the dividends, without taking the time to wonder where the SIF profits came from or how long they would be able to pay dividends from selling assts.
“Except for SIF Oltenia (SIF5.RO), the other SIF can’t even cover operating expenses with the interest and dividends they collect, which is a problem. The measure of the SIF management success is the amount of dividends collected, which show the quality of a SIF portfolio and, on the other hand, whether the decisions their managers made in the past were more or less well-advised,” says Mihai Caruntu, head of the capital market research department of BCR.
“As an analyst I cannot but wonder why for instance, SIF Oltenia collected twice the dividends of SIF Muntenia (SIF4.RO) or SIF Banat-Crisana (SIF1.RO).”
SIF Moldova (SIF2.RO) collected the highest dividends last year, RON28.2 million, but also had the highest operating expenses, RON30.3 million. Dividends and interests collected covered less of the operating expenses than they did at SIF Oltenia and SIF Banat-Crisana.
Asset sale excluded, SIF Moldova should have posted RON2.6 million gross profit instead of the RON109 million posted.
“SIF Moldova is not in the state you’re saying it is in. All SIF Moldova’s indicators are above the sector level. Of course, it’s not sustainable to sell assets under certain circumstances,” said Costel Ceocea, chairman of SIF Moldova.
“There is more to say here, it depends on when you sell and under what terms and what you do with the money. The dividend policy falls upon the management only up to a point and you can see what the vision of SIF Moldova management in this regard was in the past. To prevent such scenarios we requested in the general meeting of shareholders that the articles of incorporation be revised and a capital increase be conducted, and you know what happened,” he added.”
The other SIF bosses could not be reached for comment on Monday.
(English version by Loredana Fratila-Cristescu)