Reconstruction Capital II says Ukraine war still hurting investments

Reconstruction Capital II Ltd on Wednesday said its net asset value continued to fall during the first half year, with multiple investees falling below budget as macroeconomic headwinds ‘continued to erode consumers’ purchasing power’.

The Cayman Islands-registered close-ended fund, which invests primarily in Romanian and Bulgarian securities, said its NAV at June 30 was €23.4 million or €0.1729 per share. This was down 1.6% from €23.8 million or €0.1757 per share at December 31 and down 12% from €26.5 million or €0.1955 per share at June 30, 2022.

The stock was untraded at €0.09 per share in London on Wednesday, having last traded the day before.

Reconstruction Capital II, or RC2, said its pretax loss for the first half of 2023 widened to €381,612 from €239,608 for the first half of 2022. The fund’s fair value loss on financial assets more than doubled to €261,845 from €102,597. Cash and cash equivalents, meanwhile, fell to €17,221 at June 30 from €46,438.

RC2 said that during the reporting period, ‘the macroeconomic challenges which started in 2022 due to the outbreak of war in neighbouring Ukraine continued to erode consumers’ purchasing power’. This affected all its investee companies, ‘although inflationary pressures which had been fuelled by the outbreak of war fell significantly in the second quarter’.

For example, the Mamaia Hotel made around €900,000 in revenue, 20% below its budget, and posted an approximate €520,000 loss before interest, tax, depreciation and amortisation. RC2 explained that ‘the cost-of-living crisis and the ongoing war in Ukraine across the Black Sea significantly impacted demand for the hotel in the second quarter’, as did ‘unseasonal bad weather’ in May and June.

The Policolor Group, meanwhile, made €37.6 million in revenue, but this was 22.7% below budget and down 16% compared with the previous year.

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