Earnings call transcript: Fondul Proprietatea Q2 2025 reveals mixed results

Fondul Proprietatea SA reported its Q2 2025 earnings call, highlighting a mix of positive and challenging developments. According to InvestingPro data, the company’s stock has delivered an impressive 50% year-to-date return, significantly outperforming expectations. Despite strong NAV per share total returns, the company faces hurdles with decreased revenues at Constanta Port and Salrom. The stock price saw a modest increase of 0.48%, reflecting a balanced market sentiment, though current analysis suggests the stock is fairly valued based on InvestingPro’s Fair Value model.

Key Takeaways

• Fondul Proprietatea’s NAV per share total return reached 6.5% for the first seven months of 2025.
• Bucharest Airport reported a 25% increase in operating revenues and a 9% rise in passenger traffic.
• Constanta Port faced an 11% decline in operating revenues, with traffic dropping by 23%.
• Salrom experienced significant losses due to flooding at the Pride salt mine.
• The company is exploring an IPO for Constanta Port and submitted a tender offer to repurchase shares.

Company Performance

Fondul Proprietatea’s overall performance in Q2 2025 reveals a strong NAV per share total return of 6.5% for the first seven months of the year. The company maintains robust financial health, with InvestingPro reporting a healthy current ratio of 4.68 and an attractive P/E ratio of 3.27. While navigating challenges with Constanta Port’s declining revenues and Salrom’s operational setbacks, the portfolio structure remains heavily invested in unlisted companies, accounting for 82.7% of its holdings. InvestingPro analysis reveals 8 additional key insights about the company’s performance and prospects, available to subscribers.

Financial Highlights

• NAV as of July 2025: 2.13 billion yron
• NAV per share: 0.7039
• Bucharest Airport operating revenues: 764.8 million ROM (up 25%)
• Constanta Port operating revenues: €238.8 million (down 11%)
• Salrom operating revenues: R236.2 million (down 2%)

Outlook & Guidance

Fondul Proprietatea’s forward guidance includes exploring a potential IPO for Constanta Port and ongoing corporate governance restructuring. InvestingPro data highlights the company’s strong dividend history, maintaining payments for 16 consecutive years, suggesting robust financial management. The company is preparing for an upcoming shareholders meeting on September 29, 2025, which may bring changes to the fund’s management structure. For detailed analysis and comprehensive insights into Fondul Proprietatea’s financial health and future prospects, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Benon, Portfolio Manager, noted, "We are constantly discussing with management... and hope that once there is stability at the level of company management, we can discuss more substantially on the strategy." This highlights the company’s focus on stabilizing management to drive future strategy.

Risks and Challenges

• Flooding at Salrom’s Pride salt mine has significantly impacted financial results.
• Constanta Port faces ongoing challenges with reduced port volumes, partly due to Ukraine’s volume drops.
• Potential changes in fund management structure may lead to uncertainty in strategic direction.

Fondul Proprietatea’s Q2 2025 earnings call presents a nuanced picture, with strong returns in some areas offset by challenges in others. The company remains focused on strategic initiatives to address these issues and enhance shareholder value.

Full transcript - Fondul Proprietatea SA (FP) Q2 2025:

Benon, Portfolio Manager, Fondo Proprietata: Afternoon and welcome to formal

Krista, Conference Operator: 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 everyone to the Fondal Proprietata First Half twenty twenty five Results Conference Call. Thank you. I would now like to turn the conference over to Benon, Portfolio Manager.

Benon, please go ahead.

Benon, Portfolio Manager, Fondo Proprietata: Thank you. Good afternoon, and welcome, everyone, to our conference call to discuss H1 twenty twenty five results and the July 2025 NAV developments. Kalim Metej, Portfolio Manager Irina Kostya, Fund Administration and Oversight Manager and myself are pleased to host today’s call. The H1 results report can be found on Fund’s website in the financial results section and presentation that will be discussed is available on our website in the Investor Relations call section. After the presentation, we will have a thirty minutes Q and A session.

As a reminder, this conference call is being recorded and the recording will be available on the funds website after the call. That being, being the agenda, I would like to start with slide two of the presentation where we highlight the key facts about the fund. At the July, the fund’s NAV was 2,130,000,000.00 yron and the NAV per share, reached around 0.7039 per share. On the right hand side, you can see the evolution of the funds adjusted share price and discount since the funds listing in January 2011. Had the yesterday’s closed, the fund was trading at a discount of 40.4% for the shares.

On Slide three, we present the fund shareholder structure as of 07/31/2025, with no major changes since our last results conference call in January 2025. On Slide four, we show a summary of the NAV share price and the GDR performance is twenty eleven and the evolution of the funds average discount to BVB and LSE. Please note that the effective cancellation of trading and delisting of the GDRs from the specialist fund segment of the main market in on LSE took place on 04/25/2025. Fundo Proprietata did not hold any GDRs at the delisting date. The NAV per share total return in h one was 5.6, while total return for the local share was 27.6.

For the first seven months of 2025, the NAV per share total return was 6.5, while the total return for the local share was 46.6. On Slide six, we show the portfolio structure as at July. 82.7% are in unlisted companies, 6.4% in listed equities and 10.9% in net cash and receivables. Net cash and receivable position as of July 31 was approximately 52,000,000 On Slide seven, we present the main portfolio companies as of July 31, representing 85.9% of the funds NAV. On slide eight, we present h one twenty twenty five figures for Bucharest Airport.

On the on the financial side, operating revenues increased by 25% compared to the similar period of previous year to 764,800,000.0 ROM. Operating results reached 394,400,000.0 from 302,500,000.0 in h one twenty twenty four. Traffic continued to rise by a steady 9%, reaching 8,500,000 passenger. This trend was the main positive driver for the improved operational profitability, which was up by nearly 30% year on year. For 02/2025, the manage management envisages a 5% increase in traffic to 16,800,000.

GSM regarding the share capital increase, on July 25, the Ministry of Transport approved within the GSM resolution number eight from 08/2025 to reinitiate the valuation process for the share capital increase with the value of lands at Benyasi Airport. The fund has challenged the GSM decision in court before Ilfov tribunal. At the publication date of this report, the first hearing date has not been set. On the corporate governance front, as you know, the board of members were appointing, on July 2024 for a four year period, and Fondo has challenged the legality of this appointment in court due to some with irregularities in the selection pro process. That also the litigation regarding the announcement of the GSM resolution will be judged on the merits in the next hearing set for 10/29/2025.

Notably, the same time, the Board of the company is running an active process for the selection of the CEO and CFO positions. The latest recruitment announcement for the two positions were published at the June year. On Slide six, we show H1 figures for constant support. On the financial side, operating revenues decreased by 11% to EUR 2 and 38,800,000.0, while operating profit was EUR 76,200,000.0, down for from EUR 227,500,000.0 in H one. Net income was 87,500,000.0.

Well, these these results were driven by lower traffic, which reached 31,100,000 tons, down 23% year on year in the on the context of a continued drop of volumes into Ukraine. Operating profit, as you have already seen, dropped significantly year on year year on year, but bear in mind, we have to adjust for the one off reversal of provision in H1 2024 of 112,900,000.0 ROM. Even with this adjustment, operating profit declined by 33,500,000 year on year. As we said now, net profit stands at EUR 87,500,000.0 versus a budgeted number of EUR 101,500,000.0 for the full year. On the corporate governance front, unfortunately, all board members still have an interim mandate, and there is an ongoing selection process for four year board member for for four year board members That it’s it’s live.

It’s a live process, and we expect this to be finalized in the coming month. As there is also we also are flagging on the presentation the developments about The Republic Of Moldova. So, during the shareholders meeting held in June 2025, the Ministry of Transport approved the company to submit a binding offer for the potential purchase of ICS Danube Logistics, basically the company operating Jyujulesh Port in, Moldova Republic. Previously, during this the GSM held on May 15, the Ministry of Transport approved the company to procure external legal services to support the potential share capital increase of up to $100,000,000 However, until the publication date of this report, there have been no further GSM decision taken regarding either to finalize the purchase of Danube Logistics or in connection to any financings to a share capital increase. On slide 10, Sadro.

On the financial side, operating revenues decreased by 2% to R236.2 million. Operating profit was down R12.9 million from 66,100,000 in h one, while net income was down 75% year on year to 15.6. So basically, the significant decrease of, of profitability is related to the loss of long term assets and inventory due to the floodings at Pride salt mine. Net profit, as said, declining to 15,600,000.0 Ron in h one. However, bear in mind that, based on the provision of government this of a certain government decisions and orders, the company, could have recourse to state it’s for, to to recover some of the losses it it suffered.

Also, we want to provide a bit more detail on flooding of Pride’s Salt Mine. So, basically, this happened in early May twenty twenty five. The intense rains in Hargitah County led to significant water infiltration in Pride’s salt mine underground galleries. So Starom made the immediate decision to suspend all mining and tourist activity starting May 5. In response to the emergency, the company mobilized its technical teams and coordinated closely with local regional authorities.

Together, they implemented a series of urgent intervention apt at mitigating the effects of the flooding. This including the constructive of draining system and the redirection of surface water flows to reduce hydrostatic pressure and the affected areas. In June 22, however, in June 2025, Sarom informed its shareholders that on, that the dam built underground by, by Sarom employees gave away and under the pressure of the water, the water entered beneath it. So, basically, the Telegi mining sector could not be safe from the water intrusion. The underground sold stocks were compromised, and the equipment and machinery can no longer be recovered.

So for the time being, the price sold mine and both mining and tourist activity are are stalled. On the corporate governance front, on July 22, Simona Bokian and Valvio Leonica resigned from the position of the as board members in Starom. So, basically, at the date of the report, only three out of the five position of the board of directors are filled. On as regards the IPO, of course, the the fund continues to engage with the majority shareholder and the company in relation to prepare a potential IPO. And of course, we have to take into account also recent developments.

On Slide 11, we show key financials for the Fund’s largest holdings, including the $20.24 figures approved by shareholders. Moving on to corporate action section, I’d like to invite Kaleem to comment. Kaleem, to you.

Kalim Metej, Portfolio Manager, Fondo Proprietata: Thank you, Daniel. On Slide 13, we outlined the fund distribution since we started managing the fund. The twenty twenty five amounts are estimations we’ve made based on the buybacks executed so far, the dividends distribution approved by the shareholders during the April annual GSM and the number of paid shares excluding treasury shares as of July 18. The daily execution of the 2016 buyback program is currently suspended due to the ongoing tender offer process. Please note that the funds submitted with the FSA, an application for the approval of a tender offer under which it intends to repurchase from its shareholders up to 80,000,000 shares.

Total distributions made since 2010, including the amounts for 2025, reached 29,100,000,000.0, which is approximately $7,100,000,000 On Slide 14, we outlined the latest updates on the funds buyback programs. The 15 buyback program was completed in October 2024. During the 12/02/2024, GSM, the funds shareholders approved the cancellation of shares bought back last year. The process was finalized on 08/13/2025. And starting with this date, the new value of the funds subscribed and paid up shares, capital is approximately 1,660,000,000.00 shares being divided into into approximately 3,200,000,000.0 shares, each having a face value of around 0.52 per share.

The 16 buyback program was approved by shareholders during the December 2 shareholders meeting. Our next slide, we include details on the Fund’s annual net dividends and dividend payout ratios for the largest portfolio companies as of July based on the figures approved by shareholders. Total amount for TOP Holdings is approximately 155,000,000 for the dividends approved this year from the profits of last year. On the following slide, in Slide 16, we show a summary of the total dividend income received from the portfolio companies in the last ten years. Total dividends approved received this year amount, as I mentioned before, to approximately 155,000,000 shares.

On Slide 17, we include the financial calendar for Fundo Proprietatia, including the shareholders meeting on the September 29, which is presented in the in the following slides. So on the slide 18, we have first agenda of the extraordinary general shareholders meeting. The only point on the agenda of this meeting refers to the approval of several amendments to the constitutive act of Fundo Proprietatia. Regarding the ordinary general shareholders meeting, we have more details in the three slides, number eighteen, nineteen, and 20. The main topics are number of points which have been added at the request of a group of shareholders holding more than 5% of the share capital, and these points refer to the approval of the cancellation of the current and sole director selection process.

Then the approval of the commencement of a new process by the board of nominees for the selection of an alternative investment fund manager as sole director of FP. Then we have the approval of mandating the Board of Nominees with the preparation of a detailed comparative report on the first three offers resulting from the new selection process, presentation of the report to the shareholders and submission for their vote of the candidates corresponding to the first three selected offers. And also another point added by the group of shareholders refer to the approval of the distribution of dividends in a gross aggregate amount equal to 37,200,000.0 from FB’s 2024 unallocated retained earnings, meaning a gross dividend per share of approximately ZAR 0.0122. Next on the on the meeting on the on the agenda of the shareholders meeting is the approval of subject to item one and or two of the OGM agenda not being approved. We have four, let’s say, sub points here.

One is the appointment of IRE, IFMA hub s r s r r as sole director of that acts also as the for duration of four years starting with the April 1. If appointed, the candidate will perform its mandate under an advisory model with impact management, a Romanian advisory firm as the adviser to the candidate for such purpose. Second is the objectives proposed for the new alternative alternative investment fund manager. Third is the main remuneration condition proposed for the new IFMA, which are structured into phases. And fourth are the terms of along with execution of the management agreement between Fodo Propetatia and and the candidate.

These four items that I just mentioned were added on the agenda at the request of the board of nominees. Following these points, we have on the agenda the approval of the appointment of the new sole director of FP that will act as alternative investment fund manager for a mandate of four years starting with 04/01/2026. Then we have the approval of the renewal of the mandate of Frank and Temple International Services, SARL, as sole director of FP that also acts as the IFMA of FP starting with 04/01/2026, subject to neither point six nor point sorry, neither 0.5 nor 0.6 of the OGM agenda being approved by shareholders. The renewal of the mandate of FTIS is conditional upon FTIS and the executing a management agreement covering the new mandate before the 04/01/2026. Also, on the agenda on the September 29, we have the appointment for a period of three years of one member of the Board of Nominees of Fond du Proprietatia.

Then we also have the appointment of Ernst and Young as the financial auditor of Fond du Proprietatia for the period starting for a period of three years from 09/01/2026 to 08/31/2029. Also, the the cost for these auditing services is €130,295 per year plus the inflatement adjustment. Now moving forward to the funds financials, the results for the period, these will be presented in the next few slides, and I would like to invite my colleague, Irina Costa, to comment. Irina?

Irina Kostya, Fund Administration and Oversight Manager, Fondo Proprietata: Thank you, Colleen. On Slide 22, statement of financial position. The liquid assets of the fund at the June included current accounts and term deposits with banks. The distribution bank accounts are presented separately as they can only be used for payments to shareholders for the ongoing distributions performed by fund. Dividend receivables at the June are mostly related to the amounts from my report of Bucharest and Salrom.

Most of these amounts amounts have been collected by the July. The net decrease in equity investments of 7,300,000.0 during the first semester was mainly generated by the valuation update at the June. Moving to slide 23, the statement of comprehensive income. Registered an unaudited profit for the six month ended 30 of June $20.25 of 140,600,000.0, was mainly driven by the dividend income. The gross dividend income was generated from my reported book raised 103,000,052 million.

The loss from equity investments at fair value through profit or loss during the first semester was a result as a result of the valuation update process in June for the largest unlisted holdings in the funds portfolio with iReportor Bucharest, an increase of 9,400,000.0 and Saldrom, a decrease in valuation of 36,900,000.0. With this, I would like to thank you. And Daniel?

Benon, Portfolio Manager, Fondo Proprietata: Thank you, Irina. At this point, I’d like to open it up for questions.

Krista, Conference Operator: Thank you. We will now begin the question and answer session. And press send to submit. And we have no phone questions at this time. Are there any web questions?

And we have no questions at this time. I will now turn the conference back over to Bannon for closing remarks.

Benon, Portfolio Manager, Fondo Proprietata: I think we have one question in the queue. Hi, Peter. We see you your message. I mean, we we want to type something, but we cannot see the question. Maybe if you can submit the the question.

Yes? We cannot see the exact question. Hi. Well, thank you, Peter. Now we we we can see your question.

So your question, my reading for everybody to to hear, is the proposed structure with Eray being the alternative investment fund manager, EU passport provider, legal since all the management will be done by the local adviser? Thank you. Thank you, Peter, for this question. But as you know, the selection process itself was carried out by the board of nominees. Franklin Templeton, as the current fund manager, we hasn’t been involved in the process, and we kept, and the board has kept the selection process totally separate from the from Franklin Templeton.

So, of course, at this point, mind the shareholders have to rely on the analysis made by the Board of Nominees. Thank you. Okay. I I do not see any other questions. If this is the case, then thank you again everyone for the time today.

For any additional questions, please do not hesitate to contact us.

Kalim Metej, Portfolio Manager, Fondo Proprietata: Oh,

Benon, Portfolio Manager, Fondo Proprietata: sorry. Oh, okay. I see additional questions coming from Peter.

Kalim Metej, Portfolio Manager, Fondo Proprietata: And

Benon, Portfolio Manager, Fondo Proprietata: the second question regards SalRon. This year, it paid million dividend. With the events of this year footing, what can we expect this year? Well, this is a very good, good question. At this moment, I think it’s very early to to say.

As we said, they reported half one half one results, which are much weaker compared to the same results last year because they incurred as losses on expenses, everything that is related to the loss of equipment and inventory. As management said, there is a procedure they could claim stated to recover these losses and as many other operating economic operator in the area that they are they can claim losses from the government of this naturally of this event. But I think we are following closely the financial situation of Sauron being such an important asset in our portfolio. But really, it’s really early to have any guidance or expectation about the dividend. Next question is when we expect volume at Constancia Port to recover?

Well, the strong increase in volume was strongly related to Ukraine. And what we are seeing now is rather a normalization of of the situation rather than a real than a significant drop compared to to averages. That said, we we are constantly discussing with management on these aspects, and we do hope that once also there is a stability at the level of company management, a board appointed for four year, a new CEO, we we can discuss more substantially on the strategy. And of course, as you know, in our view, constant support is one of the assets that could qualify for IPO in the next future. And this aspect we constantly remind the government.

Okay. I do not see more questions coming. So in this context, again, thank everyone for the time today. And if there are any additional questions, please do not hesitate to contact us.

Krista, Conference Operator: And ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation and you may now disconnect.

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