Investor AB, the investment vehicle of Sweden’s powerful Wallenberg family, is prepared to inject capital in its holdings and advises boards to be cautious when setting dividends.
The company, whose core holdings include stakes in telecom equipment maker Ericsson, engineering group ABB and bank SEB, said the net value of its holdings fell 23% last year to 115.3 billion Swedish crowns (US$13.98bn).
The fall in value of its holdings amid the sharp declines in stock markets last year translated into the investment company reporting a 36. bn crown net loss for the full year. This compared with a 367m loss in 2007.
Investor said that in the current economic downturn the companies in which it owns stakes may need to raise new equity, both to strengthen balance sheets and to seize business opportunities.
‘Each company is responsible for taking all necessary actions to secure an appropriate capital base,’ Chief Executive Borje Ekholm said in a statement.
‘However, we are prepared to support our holdings by injecting additional capital if we believe it is industrially sound and value-creating for our shareholders.’
Ekholm also said the sharp economic downturn experienced in the fourth quarter meant it was prudent to review dividend levels with extra care this year.
‘Lowering, or even cancelling, the dividend is a cheap way to shore up the balance sheet,’ he said.
The holding company, which cut its dividend for 2008 to 4 crowns per share from the 4.75 crowns in the preceding year, said the current economic downturn was likely to be more severe than anything experienced in recent decades.
‘Basically, there is a significant risk that the developed world will be challenged to grow in the medium term,’ Ekholm said.
But Investor’s financial position was solid, Ekholm said, leaving it able to make investments this year in its core holdings if their shares were traded below what it believed was their long-term fundamental value.
‘We do believe that current valuation levels offer potential for attractive investments measured over a 5-10 year period, assuming you can sustain some pain until the markets recover,’ he said.
(Reporting by Niklas Pollard)
Source: Thomson Merger News