Highlights Q3 and 9M 2018:
- Following is a summary of net profit (loss) by activity. Management evaluates the performance of main segments by their operational result. Further information that includes detailed segment analysis can be found further in this press release.
Q3 2018: € 12.9 million net loss to equity holders (Q3 2017: net profit of € 4.1 million), including € 3.6 million negative impact as a result of foreign exchange translation differences of the EUR versus the NIS and change in Israeli CPI on the Company’s debentures (Q3 2017 € 14.0 positive impact).
9M 2018: € 24 million net loss to equity holders (9M 2017: net loss of € 15.8 million), mainly due to heavy finance expenses and including net positive impact of foreign exchange differences and change in the Israeli CPI of € 1.2 million (9M 2017 € 7.7 million positive impact).
9M 2018: net loss to equity holders of € 11.5 million (9M 2017: net loss of € 9.5 million), mainly as a result of high interest expenses on the Europark Dalian project construction loan.
9M 2018: € 1.8 million net profit (9M 2017: net profit of € 2.3 million) impacted by several one-off expenses. The increase in gross profit is due to improved profitability of several projects.
Avis Ukraine continued to show good results of € 0.6 million in Q3 2018. However, following a management resolution to sell the investment in Avis Ukraine, the investment is presented as held-for-sale and therefore no equity earnings were recognized in the third quarter.
The February 2018 scheduled payment of principal and interest to the Company’s debenture holders (series A and B) amounting to approximately €110 million were not repaid up to and including today. Negotiations with the debenture holders B are still ongoing. The Company estimates it is close to completing the negotiations with the trustee to debenture holders series B. However, final settlement also depends on reaching consent with debenture holders A with whom negotiations have not yet commenced.
Ariel Hasson, CEO of Kardan NV:
“Our Real Estate activities in China showed progress in selling residential units in the Europark Dalian project. However, due to the construction cycle, a low number of apartments were delivered over the quarter, which impacted the operational results compared to 2017. Furthermore, the continuing high interest payment on the Dalian loan burdens the results of our real estate operations.
After two strong operational quarters, our water infrastructure activities Tahal reported somewhat lower results in Q3, partly due to lower performance of our engineering business in Israel and of projects in CEE. We have continued to expand our backlog with new projects in India and other markets and are working towards the financial closing of some of our large African projects.
Adverse foreign currency movements further negatively impacted the value of our assets and our interest expenses, deteriorating our equity position further.
In the third quarter Kardan has commenced discussions on divesting Avis Ukraine. Therefore, in line with IFRS, this activity is reported as held-for-sale. This intended divestment fits our strategy to divest assets in a manner that will allow us to maximize value and proceeds and to mitigate our negative equity position. The sales process for Tahal is still ongoing, however we do not expect to be able to conclude a sale before the end of the year.
Further to the update provided in October on the negotiations with our debenture holders, we further advanced these and are confident that we are close to completing the negotiations with the trustee to debenture holders series B. The structure of the settlement has been agreed. However it should be noted that final settlement also depends on its approval by both series bondholders (Series A and Series B). Negotiations have not yet commenced with bondholders A. We will keep the markets updated on these negotiations and we look forward to coming to an agreement to allow the company to continue and repay its debt in the interest of all stakeholders.”