(Updates with more comments from Solidium CEO on investments)
By Jussi Rosendahl
(For other news from Reuters Nordic Investment Summit, click here)
* Finnish state fund owns stakes in 11 listed companies
* It invested $425 million in Outokumpu share issue
* Fund CEO says investment decisions free from politics
By Jussi Rosendahl
HELSINKI, Sept 30 (Reuters) - Steel company Outokumpu should try to solve its own problems even though its heavy debts have raised the prospect it might need more money from shareholders at some stage, the head of Finland’s state investment fund Solidium said.
While Finland is often listed among the most innovative economies and remains triple-A rated, government funding is still badly needed in the country of 5.4 million people which has a limited pool of private capital.
Kari Jarvinen, Solidium’s managing director, told the Reuters Nordic Investment Summit that the fund was making its long-term investment decisions independent of political pressure to help out troubled Finnish companies.
“It is better that the company tries to sort out its problems by itself. The company already had a 1 billion (euros) rights issue only one-and-a-half years ago,” Jarvinen said when asked about Outokumpu’s finances. “It is paramount that these companies find ways to be profitable in the future.”
Solidium holds stakes worth in total 7.7 billion euros in 11 Finnish listed companies including paper maker Stora Enso and investment and insurance group Sampo.
Founded in 2009, its mandate is to invest government money in businesses deemed to be of national importance, while avoiding political interference.
Solidium invested 314 million euros ($425 million) in Outokumpu’s share issue last year when the company needed money to buy ThyssenKrupp’s stainless steel unit Inoxum. Solidium is now Outokumpu’s second-biggest shareholder with a stake of around 22 percent.
But Outokumpu might need more cash. The company, like other steelmakers in Europe, has faced weak demand as a result of customers holding back from purchases because of falling steel prices. At the end of the second quarter, Outokumpu’s debt-to-equity ratio was almost 121 percent, compared with 103 percent at the end of March.
Solidium earlier this year backstopped a share issue of Talvivaara , lifting its ownership in the troubled miner to 17 percent.
The move helped the company’s nickel mine to keep running, but raised questions among the public and the media over whether the fund should be keeping alive such a troubled business.
Jarvinen dismissed suggestions the fund was being driven by political objectives.
“We are looking for returns... any other angle into our portfolio would be wrong,” he said. “We took a calculated risk in Talvivaara, let’s see how it goes.”
However, he said Solidium was not a portfolio investor seeking quarterly returns, but rather a long-term owner.
“Our view is to look at companies in the longer term and if we see there is a potential to change the company and its performance, we will stay and work together with the company.”
Jarvinen noted that many large institutional investors had taken money out of Finland since the 1990s, and that pension funds’ investments would also start diminishing due to increasing payouts for an ageing population.
Jarvinen also commented on the Helsinki bourse’s poor record in attracting new listings. Once the hot-bed of technology listings, the exchange has in recent years only seen companies spun off from others or dual-listings, while its latest fully-fledged main-list initial public offering took place in 2007.
“It is a very worrisome development ... We should do all we can to make sure the Helsinki Stock Exchange remains vibrant and is attractive to new companies to be listed here.”
($1 = 0.7385 euros)
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For more summit stories, see ID:nL5N0HM3RK]) (Additional reporting by Terhi Kinnunen; Editing by Ritsuko Ando and Pravin Char)