As of October 1, the French state’s portfolio managed by the Agence des participations de l’Etat (APE) saw a 3.6% increase in 2024, outperforming the CAC 40, which rose only 0.4%. The portfolio, valued at €51.983 billion, has declined from €85 billion in 2014. Key contributors to this growth include Safran, with a 31.95% rise, and Thales, which climbed 9%. However, Air France-KLM faced significant losses, dropping 38.1%, impacted by operational challenges and rising oil prices.
(BFM Bourse) – As of October 1, the most recent report shows that the French government’s portfolio of publicly traded shares increased by over 3.6% throughout 2024, a significant contrast to the CAC 40, which only rose by 0.4%. This robust performance is primarily attributed to Safran, with Thales also contributing to the positive results.
It’s easy to overlook, but the French State’s portfolio of listed shares still holds considerable value. As of the latest update from the Agence des participations de l’Etat (APE), this portfolio had a total market value of approximately 51.983 billion euros.
This figure has diminished in recent years due to several transactions, including the divestment of shares in Safran and Engie, as well as the removal of EDF from the listed holdings. To provide context, back in 2014, APE’s portfolio was valued at around 85 billion euros. Some members of parliament, like former Interior Minister Gérald Darmanin, have even suggested further divesting from public equity holdings.
In terms of performance in 2024, this portfolio has excelled based exclusively on stock market prices. As of October 1, it recorded an increase of 3.61% for the year, outpacing the CAC 40, which remained nearly unchanged (+0.4%) on the same date.
What accounts for this superior performance? The answer lies in the fact that the French government holds significant stakes in several companies that are enjoying a strong year, particularly Safran.
Safran Drives Performance
Of the ten companies in which the APE has interests, five experienced declines from January 1 to October 1, while five others recorded gains. Notably, Safran surged by 31.95% during this timeframe and stands as the second largest asset in the APE’s portfolio, valued at 10.32 billion euros, with the French State owning approximately 11.23% of its shares. In terms of value, only Airbus (11.05 billion euros with a 10.8% government stake) surpasses it.
As discussed previously, Safran has been instrumental in achieving the largest increase in the CAC 40 this year (though Schneider Electric has recently surpassed it slightly). The core of Safran’s growth stems from its after-sales services, including maintenance, repairs, and spare parts sales. These services are notably profitable, and their demand relies heavily on air traffic, which is linked to visits from airlines and lessors to Safran’s facilities.
In the first half of 2024, the civil engine services segment surged by 29.9%, with “exceptional growth of 32% in the second quarter,” according to Bank of America. While the company has not adjusted its guidance for 2024 upward, Deutsche Bank notes that the fundamentals remain solid and maintains a “hold” rating for valuation reasons. Jefferies anticipates that the after-sales momentum will continue into the third quarter, projecting a growth rate of 19%.
Air France-KLM Declines
In addition to Safran, Thales, in which the French state holds 26.1%, saw a 9% rise due to its strong performance, benefitting from current geopolitical dynamics. The Française des Jeux (FDJ), with a 21.1% state ownership, increased by 12.9% on October 1, driven by positive half-year results. However, since that date, its stock has faced pressure from concerns over potential tax hikes on gambling in France.
Conversely, Airbus is negatively impacting the overall portfolio with a 7.9% decline by October 1. Although better off than Boeing (which has dropped over 40% on Wall Street), the aerospace giant issued a stark earnings warning in June, leading analysts to fear a further reduction in its delivery forecast for 2024.
Air France-KLM is experiencing the steepest decline among the ten publicly traded companies owned by the French state, plummeting by 38.1% as of October 1. This fall can be attributed to operational and labor challenges along with a decrease in tourism to Paris amid the Olympic Games. It also faced rising oil prices and political uncertainties in France, culminating in disappointing financial results for the second quarter. Despite the French state’s 28.08% stake, valued at only 618 million euros now, following an 83% drop in share price over five years, this downturn has relatively limited impact on the overall portfolio valuation.
A Different Role for the State
It’s important to recognize that the state’s role as a shareholder