Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NEPI Rockcastle NV (XAMS:NRP, Financial) reported a record year in 2024, surpassing the strong results of 2023.
- The company achieved a 13.2% growth in net rental income, driven by a 5.6% increase in distributable earnings per share.
- NEPI Rockcastle NV successfully acquired two major assets in Poland, Magnolia Park and Silesia, enhancing its portfolio with high-quality, core assets.
- The company maintained a low loan-to-value ratio of 32.1%, demonstrating financial stability and prudent management.
- NEPI Rockcastle NV's energy investments, particularly in photovoltaics, have already generated significant revenue and are expected to contribute more in the future.
Negative Points
- The company's guidance for distributable earnings per share growth in 2025 is only 1.5%, due to increased shares and rising funding costs.
- NEPI Rockcastle NV faces challenges with the Romanian tax authorities, leading to ongoing litigation and potential financial exposure.
- The cost of debt is expected to increase to 3.1%-3.2% in 2025, up from 2.7%, due to higher interest rates.
- The political situation in Romania and economic challenges in Hungary pose potential risks to the company's operations.
- Despite strong operational growth, the company's expansion plans require significant capital, with EUR600 million still needed for its development pipeline.
Q & A Highlights
Q: Can you provide a breakdown of the contribution of energy investments and capital injections for FY25 and '26?
A: The energy project will not generate income in 2025, as the focus will be on capital expenditure. The revenue from energy is expected to remain flat at approximately EUR9 to 10 million, similar to 2024. Half of the EUR110 million allocated for energy will be spent in 2025. (Eliza Predoiu, CFO)
Q: Who were the sellers of the two Polish assets you acquired?
A: Magnolia was purchased from Union Investment, a major player in European real estate. The second asset was acquired from a consortium of three owners, including [ish ish lesh cura]. (Rudiger Dany, CEO)
Q: What is the expected tax expense for FY25 and '26?
A: The tax expense is expected to be similar to this year, with a potential 10% increase. The taxation will likely contribute to a 1%-point decrease in the distributable earnings per share (DPS). (Eliza Predoiu, CFO)
Q: What are the main drags on growth for 2025 compared to 2024?
A: The main factors affecting growth in distributable earnings per share are the increase in the number of shares due to equity raises and higher financing costs due to rising interest rates. Operationally, the company is showing a 5% growth. (Rudiger Dany, CEO)
Q: How does the strengthening of the Polish zloty impact your portfolio, particularly in Poland?
A: The strengthening of the zloty is beneficial as tenants pay rent in euros, making operations cheaper for them. It also reduces the cost of goods sold, potentially leading to higher rentals. The currency stability reflects positively on Poland's economic outlook. (Marek Noetzel, COO)
Q: Can you discuss your capital allocation strategy given the EUR800 million development pipeline and LTV limits?
A: Out of the EUR800 million pipeline, EUR241 million has already been spent. The remaining EUR600 million will be funded through a combination of debt, secured bonds, and additional equity, while maintaining the self-imposed LTV threshold of 35%. (Eliza Predoiu, CFO)
Q: What are your views on the potential risks and opportunities related to the ongoing war near your borders?
A: The demographic shift due to the influx of people from Ukraine has had a positive impact. If peace were to occur, many may choose to stay due to integration and stability in their new locations. The conflict has not directly impacted operations, aside from initial energy cost increases. (Rudiger Dany, CEO)
Q: What is the current status of the issue with the Romanian tax authorities?
A: The issue is ongoing, with several entities under tax control. The company is litigating concluded controls and will continue to defend its position. The theoretical exposure is EUR12.5 million, and the company is confident in its legal standing. (Eliza Predoiu, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
