MVM has already accessed the Chinese credit line six times - was the dividend advance too much?

After the staggering gas prices in Europe in the summer of 2022 and the resulting financing challenges, the MVM Group announced in mid-October that it had signed a €250 million medium-term loan agreement with the Austrian subsidiary of the Industrial and Commercial Bank of China (ICBC Austria) for general corporate financing.

Now Benedek Jávor, a member of the opposition green party Párbeszéd Magyarországért [Dialogue for Hungary], has received a public data request to know when and how much of the Chinese credit line was used by MVM and when it was repaid. As the table in the politician's Facebook post shows, since autumn 2022 MVM has already drawn down between €100 million and €250 million six times, of which five have already been repaid. The most recent drawdown was on 7 December last year, when MVM drew down €250 million, around HUF 100 billion, which the company has not yet repaid, according to the information.

The MP recalls that MVM had to pay a HUF 309 billion dividend advance into the budget by 30 November last year, which was just HUF 100 billion more than the group's after-tax profit for the first half of last year.

The politician points out that it is a strange coincidence that MVM borrowed HUF 100 billion from the Chinese credit line just a few days after the dividend advance payment. This leads him to conclude that "the 309 billion payment was perhaps an overstretch on the part of the company, and MVM made up for the resulting shortfall with Chinese money. What it paid to the government was made up with Chinese loans, i.e. indirectly Chinese financing of a government seething with sovereignty fever."

In our view, the above line of thinking is not entirely correct, as under the Accounting Act, dividend advances cannot be paid out of profit after tax, but from the profit and loss reserve.

If we examine the consolidated financial statements of the MVM Group for the first half of 2023, published in mid-September last year, we find that the Group had a profit reserve of HUF 325.4 billion at the end of June 2023, which the Group has accumulated over many years (see the chart below). MVM therefore had the cover to pay the HUF 309 billion dividend advance into the budget by the end of November, as the profit reserve exceeded it by a good HUF 16 billion in mid-summer.

If we examine the consolidated financial statements of the MVM Group for the first half of 2023, published in mid-September last year, we find that the Group had a profit reserve of HUF 325.4 billion at the end of June 2023, which the Group has accumulated over many years (see the chart below). MVM therefore had the cover to pay the HUF 309 billion dividend advance into the budget by the end of November, as the profit reserve exceeded it by a good HUF 16 billion in mid-summer.

It is also worth noting that MVM CEO Károly Mátrai recently said in an interview, after the close of the 2023 year, that the group had a record profit last year. This suggests that the profit reserve, which was written down last November, could even quickly and substantially reappear in the accounting statement.

MVM's reply

On Wednesday, 31 January, the MVM Group issued a statement on the above subject, which is presented in full below:

"Benedek Jávor's claim is speculation without any professional basis, in reality there is no connection between the source of the loan agreement and the payment of the dividend advance.

In 2023, the MVM Group closed its most successful financial year ever, which allowed the owner to take advantage of the opportunity to take a dividend advance. MVM clearly communicated at the time of the dividend payment that the dividend advance paid out was mainly charged to the result from successful competitive activities abroad.

In response to the Párbeszéd's request for information, our company informed the Party of the details of the use of the loan in question. Quote from our reply: "The aim of the loan is general corporate financing." The loan will therefore be used by the MVM Group, like other international integrated energy companies such as the MVM Group, to finance its normal business activities in a smooth and efficient manner as part of the resources available as a result of its other borrowing activities in the debt and capital markets."

Cover photo: MTI Photo/Sándor Branstetter