Melran Projects today published the financial reports for 2022 and for the fourth quarter, when the bottom line is that the company ended the past year with a 46% increase in net profit, while the activity in the USA indicates stabilization contrary to expectations for deepening write-offs.
On the other hand, the activity in the USA is still loss-making, and an increase in expenses for credit losses was recorded along with the write-off of a goodwill value of approximately 11 million for the subsidiary in Israel.
The ratio of expenses for credit losses combined to the average portfolio balance increased from 0.4% in 2021 to 1.4% in 2022. The rate of expenses for credit losses of the total volume of transactions in 2022 was about 0.25% compared to about 0.07% in 2021. The balance of the provision for credit losses increased to 1.7% of the credit portfolio in 2022 compared to 0.6% in the corresponding period.
In its operations in the USA, in 2022 the company recorded a loss, according to its share, of approximately 6.9 million shekels, which was mainly due to an increase in expenses for predicted credit losses, as well as a revaluation of a decrease in the value of goodwill, and this by offsetting a revaluation of a financial obligation for contingent consideration. However, in Malran they say that Most of the loss is attributed to the third quarter of 2022, while in the fourth quarter of 2022 the loss in the US activity was reduced to approximately NIS 1.3 million, compared to a loss of 7.6 million shekels in the third quarter of 2022.
Financing revenues in 2022 more than doubled to approximately NIS 180.5 million, compared to approximately NIS 87.9 million in 2021. Financing revenues from operations in Israel climbed to approximately NIS 144 million, compared to approximately NIS 82.5 million in 2021, an increase attributed to the sharp growth in the volume of the average credit portfolio in the period, which was partially offset in light of a decrease in the average yield on the credit portfolio due to the improvement of the credit portfolio and an increase in the volume of credit backed by collateral rigid (characterized by a lower rate of return but also lower credit risks).
Financing revenues, net, in 2022 increased by approximately 102.6% to approximately NIS 135.8 million, compared to approximately NIS 67 million in 2021. The net financing income, minus expenses for predicted credit losses, amounted to approximately NIS 103.1 million, compared to NIS 65.1 million the previous year. The company recorded expenses for projected credit losses of NIS 32.7 million, compared to NIS 1.9 million the previous year. The increase in the provision is attributed, among other things, to the updating of the provision coefficients due to the macroeconomic situation, consolidation of the activity in the USA in full this year, and also in light of the fact that the rates of entry into failure and loss at failure are rising in a challenging macroeconomic environment.
In the fourth quarter, Maleren recorded a net profit of NIS 9.7 million compared to a profit of NIS 8.3 million in the corresponding quarter in 2021.
In 2022 as a whole, the net profit rose to NIS 43.6 million compared to a profit of NIS 29.8 million in 2021. The improvement is due to the sharp increase in financing income, net, and this is mainly partially offset by an increase in expenses for predicted credit losses in Israel, among other things due to the increase in the portfolio and the update of the provision due to the macro situation, and in the US, among other things, in light of the increase in the credit portfolio, the change in the portfolio mix and the changes in the macro environment in 2022.
Moand Ryan, CEO of Malran Projects, said in a conversation with Sponsor, that “the year 2022 was characterized by a challenging acro environment and negative headlines for the companies in the external bank credit sector. During 2022 we worked to strengthen the financial activity. The main increase in the credit portfolio is attributed to the increase in new products, such as real estate entrepreneurship, infrastructure and construction. We continued to streamline processes, continue to invest in information systems, and we had a return on capital of approximately 122% when growth is targeted, part of the core business. We leveraged our capabilities to sectors with Less risk. In other words, we grew where the business benefit was greater in relation to the risk.”
Regarding the activity in the USA, said Mowend, “It was important for us to clarify that we have the upper hand in managing the business in Israel. There is a very high-level team here, and it is not for nothing that our bonds are seen with such a yield. Everything is planned and as we planned before, even in the challenging period, also at the state level, unfortunately, this is something we took into account, and we tightened the parameters and were very conservative, also in our view, and we did not fear for a second. We made sure to go on the stricter side, to take into account the complex situation that meets us now. We acted with extreme conservatism and the shareholders and bondholders know that we act with great responsibility. In the US, we tightened the rope, cooled the portfolio, reduced the credit portfolio and streamlined processes until we recognized 100% that we are on the right track. The numbers we see is a light at the end of the tunnel. We see stabilization in activity and even beyond that and I think this is a trend that can have a positive effect. Both in the US and in Israel we behaved responsibly and maintained a very impressive security cushion of flow.”