April 30, 2020 / 10:35 AM / 24 days ago

Carlyle beats first-quarter profit estimates as distributable earnings surge

(Reuters) - Carlyle Group Inc (CG.O) said on Thursday its first-quarter distributable earnings rose 73% year-on-year, beating Wall Street’s expectations as asset sales in its private equity and credit investment divisions generated strong earnings ahead of the coronavirus-induced market turmoil.

Carlyle said distributable earnings (DE) - the cash available for paying dividends to shareholders - rose to $175 million from $100.8 million a year earlier. This resulted in DE per share of 48 cents, which surpassed the average analyst forecast of 40 cents, according to data from Refinitiv.

Global markets nosedived in the first quarter as the pandemic spread from China across the world, forcing Carlyle to mark down the value of its portfolio. Its corporate private equity funds depreciated by 8% in the quarter, while credit funds fell by 21%. Its real estate funds fell by only 1%, while its natural resources funds depreciated by 22% as energy prices plunged.

By comparison, Blackstone Group Inc (BX.N), the world’s largest private equity firm, said last week that its private equity portfolio fell by 21.6% in the first quarter, while opportunistic and core real estate funds fell by 8.8% and 3.9% respectively.

Blackstone reported a 4% rise in its first-quarter distributable earnings, though this was driven by a rise in management fees rather than asset sales.

“As the full impact of global shutdowns and an uncertain recovery becomes more evident, there could be additional pressure on fund valuations,” Carlyle Co-CEO Kewsong Lee said during a conference call with analysts and investors on Thursday.

Carlyle said it expected to see a short-term slowdown in fundraising, as fund investors, known as limited partners (LPs) pause to review the effect of the pandemic.

“LPs are assessing the impact of this crisis on their portfolios and evaluating the denominator impact, allocation targets and liquidity schedules in light of market volatility,” Lee said. “Our experience is that their pace of new commitments will slow down temporarily while they continue to fund their existing commitments.”

Carlyle’s shares were trading down 6.8% at $24.20 in New York on Thursday.

Carlyle reported a $612 million loss under generally accepted accounting principles (GAAP), compared to a $131 million profit a year earlier, due to the drop in the value of its funds.

The Washington, D.C.-based firm’s total assets under management stood at $217 billion at the end of the March, down 3% from the prior quarter. It had $74 billion of unspent capital at the end of the period.

Carlyle declared a quarterly dividend of 25 cents per share.

Reporting by Chibuike Oguh in New York; Editing by Christopher Cushing and Tom Brown

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