Pandemic erodes equity in one out of three companies

The coronavirus pandemic has caused one out of three Belgian companies to lose their own funds. This is evident from the annual study into the value creation of companies by Value Square.

Of the 87 Belgian companies that the asset manager Value Square examined, 28 saw their equity decline in 2020. The year before, it was one in four. On average, equity fell by 11.7 percent among the 28.

In Solvay's 323 page annual report, the words “corona” and “covid” appear 150 times.
- Patrick Millecam

The pandemic caused the biggest havoc for the cinema operator Kinepolis. Due to the closed halls, there were 70 percent fewer visitors. After a net loss of 69 million euros, Kinepolis's book value plummeted 40 percent. “That's gigantic,” says chief strategist Patrick Millecam. “Nevertheless, management has managed the crisis well, especially compared to the largest two cinema operators in the world. The number one, AMC, saw its equity fall from $1.21 to -2.88 billion and added 355 million dollars. At number two, Cineworld, equity shrank by 92 percent. '

Solvay and its parent holding company Solvac were also hit. The chemical group recorded more than 1.5 billion euros in restructuring costs and depreciation, especially in the composite materials branch as sales in the aviation and automotive sectors took a hit. “In the 323 page annual report, the words' corona 'and' covid 'appear 150 times,” explains Millecam. “CEO Ilham Kadri even said that at one point she was no longer CEO, but CMO - Chief Mask Officer - because the safety of her employees was the priority.”

The brewers AB InBev and Co.Br.Ha. were struggling with the closure of the hospitality industry and the cancellation of festivals and folk festivals. Fountain was able to store less coffee or other hot drinks via its vending machines in the offices. It had to make a capital increase. The store owners also took a hit.

Despite the impact of the pandemic, all Belgian companies studied on the stock market were still able to increase their equity by an average of 8.5 percent. Based on that equity and the dividends paid, Value Square has been calculating the evolution of the “fundamental value” of the companies for 14 years. The asset manager states that stock prices should follow this evolution over time.

“Over the past ten years, Belgians have achieved an average fundamental increase in value of 5.3 percent per year,” says Millecam. 'The average stock price rose slightly more at 6.6 percent. '

Every year, Millecam also compares with the value investor par excellence: Warren Buffett. His holding company Berkshire Hathaway increased its fundamental value by an average of 12.7 percent over the past decade. Only seven Belgians do better: Picanol, Melexis, VGP, Lotus Bakeries, EVS, WDP and Telenet. Just like last year, the first three received prizes for their podium finishes at the Value Creation Awards this week. The top three remained unchanged.

Picanol owes its gold medal to the capital increase that Luc Tack made at the loom maker in 2009, giving Tack control. After four years of investing heavily and not paying dividends, the cash flows grew so large that he was able to look for diversification. In 2013, Picanol took over the 27.5 percent stake in the Tessenderlo chemical group from the French state and systematically increased that participation. Tack was also able to improve the situation spectacularly at Tessenderlo.

Picanol's fundamental value has risen by 736 percent, or 23.7 percent annually, since 2010. The share yielded a return of 19 percent per year. “I'd rather look through the windshield than in the rearview mirror,” Tack said at the digital awards ceremony. “The long-term growth looks good. The increase in the middle class in the developing countries will only increase the demand for textiles. With our weaving machines, we want to offer the best solutions for that. '

DISCLAIMER

• Source: De Tijd
• Author: Serge Mampaey
• Link: https://www.tijd.be/ondernemen/algemeen/pandemie-holt-bij-een-op-de-drie-bedrijven-eigen-vermogen-uit/10306165.html