Carlyle Profit Falls on Slow Deal Environment -- Update

By Ryan Dezember 

Carlyle Group L.P. on Wednesday said its first-quarter profit fell, as the private-equity firm cashed out of fewer deals and slowed the pace at which it made new investments.

The Washington, D.C., firm reported first-quarter profit of $25 million, or 41 cents a share, down from $34 million, or 66 cents a share, in the same period last year.

Carlyle's first-quarter economic net income was $322 million, or 85 cents a share, down from $394 million, or $1.02 a share, in the same period a year ago. The results for that profitability measure, which includes unrealized gains as well as cash earnings, fell short of Wall Street's expectations. Analysts polled by Thomson Reuters anticipated $1.01 a share.

Carlyle's funds that can earn the firm a slice of profits rose in value by 6% in the first quarter. That increase was led by gains in its corporate buyout funds, which appreciated 8% during the period.

That in turn helped its distributable earnings, the portion of profits that can be paid out to shareholders, rise to $183 million in the first quarter, up from $168 million in the same period a year ago.

Still, deal making fell off significantly from the year-earlier period. Carlyle brought in $3.1 billion from first-quarter asset sales, versus $4.1 billion a year ago. And it invested $1.1 billion in new deals, less than half the $2.5 billion it put out a year ago.

"Although the investing environment has grown more challenging over the past few quarters, we have been successful in committing to several exciting investment opportunities, and we are executing sales at attractive prices around the world," said William Conway, Carlyle's co-founder and co-chief executive.

To be sure, Carlyle was among the most active private-equity buyers during the year's first three months, striking several multibillion-dollar buyouts. It agreed to pay about $1.9 billion for Tyco International Ltd.'s Korean home-security unit in March. In February, Carlyle said it would buy Johnson & Johnson's blood-testing unit for about $4.2 billion and an industrial-packaging business from Illinois Tool Works Inc. for $3.2 billion.

But those deals, complex carve-outs from large corporations, have yet to close and will be reflected in Carlyle's results in future quarters.

In fundraising, Carlyle brought in $5.5 billion during the quarter, 12% more than the same period a year earlier, pushing the firm's total assets under management to $198.9 billion. Of that, about $18 billion is held in shares of companies, such as construction supplier HD Supply Holdings Inc., that Carlyle has already helped take public.

Carlyle's own shares, which rose 36% last year, closed up 0.4%, or 13 cents, at $34.21 on Tuesday and were inactive premarket Wednesday. The stock is down 4% on the year.

Write to Ryan Dezember at [e-mail]

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