(Adds new CEO comments, updates share price, adds details on
By Peter Rudegeair and Tanya Agrawal
April 30 Private equity firm Carlyle Group LP
reported an 18 percent drop in quarterly profit on
Wednesday as strength in its main business of corporate buyouts
was offset by weaker performances in its credit and real-estate
First-quarter economic net income (ENI), a measure of
profitability that takes into account the market value of
assets, fell to $321.9 million from $393.9 million in the same
period a year earlier.
ENI was 85 cents per adjusted unit after taxes, below the
average analyst estimate of $1.01, according to Thomson Reuters
Meanwhile, distributable earnings, which includes both
management fees and performance fees and shows cash available to
pay dividends, rose 7.2 percent to $183.3 million before taxes.
Carlyle's quarterly distribution was 52 cents per unit after
taxes versus 48 cents in the first quarter of 2013.
The company's results varied significantly across its three
main business units. Carlyle's corporate buyout arm performed
well in the quarter, increasing its profit by 8 percent to $258
Meanwhile, its global markets strategies group, which
includes its credit funds, reported that profits had fallen by
nearly half to $56 million. The company's real assets unit,
which includes real-estate investments, recorded a $17 million
loss due to unrealized investment losses on Latin American and
European real estate, down from a $42 million profit a year
"I think we will see improvements (in the international real
estate portfolio) in the not-too-distant future but nothing
immediately," co-chief executive officer David Rubenstein said
on a conference call with analysts. Carlyle hired Adam Metz from
TPG Capital to lead that turnaround in September.
Carlyle's shares fell 5 percent to $32.50 in afternoon
trading on the Nasdaq on Tuesday. They have fallen 4 percent so
far this year, underperforming the broader S&P 500 Index,
which has risen 1.6 percent.
CARVING OUT GROWTH
Executives said that over the next three months the company
might take more of its portfolio companies public to boost gains
from asset sales. The company generated $3.1 billion from
selling assets in its portfolio during the quarter, or about 25
percent less than the $4.1 billion recorded a year earlier.
"Last year we did 15 IPOs and so far this year in the first
quarter we didn't do anything," co-chief executive officer Bill
Conway said on the call with analysts. "I think that will change
in the second quarter."
In the first three months of 2014, Carlyle sold stakes in a
number of companies it had already taken public, including
manufacturer Allison Transmission Holdings Inc,
information and measurement company Nielsen Holdings NV
, telecommunication equipment maker CommScope Holding
Company Inc, and consulting group Booz Allen Hamilton
Holding Corp. The company also sold its remaining stake
in BankUnited Inc.
There were signs that the company was looking to deploy some
of its $56.3 billion in dry powder. Carlyle invested or
committed to invest $4.2 billion in the quarter, or just over
half of the $8.2 billion it invested in all of 2013.
Carlyle identified the industrial and healthcare sectors as
places where it is focusing on, with an emphasis on buying out
certain divisions of large corporate conglomerates as it did
with its $4.15 billion deal in January for the ortho clinical
diagnostics unit of Johnson & Johnson.
"It is a tough, dirty job to take a big division out of a
giant big company and set it off on its own," Conway said. "We
are looking for opportunities in that space. It is a lot of hard
work but hopefully we can do it and earn attractive returns."
At quarter end, total assets under management rose 13
percent to $198.9 billion from $176.3 billion a year earlier.
That was helped by $5.5 billion in new fundraising, up 12
percent from the $4.9 billion in new capital a year earlier.
Total costs related to compensation and benefits were up 14
percent at $609.1 million. Much of the increase
was tied to compensation at AlpInvest Partners and Metropolitan
Real Estate Equity Management. Carlyle completed its acquisition
of the two firms between the first quarter of 2013 and the first
quarter of 2014.
Blackstone Group LP had a stronger quarter, with its
ENI up 30 percent on solid gains in its private equity arm,
which more than offset small declines in its real estate unit.
(Reporting by Peter Rudegeair in New York and Tanya Agrawal in
Bangalore; Editing by Sriraj Kalluvila, Jeffrey Benkoe and