CEO’s greeting

CEO TOMMI KAJASOJA COMMENTS ON THE LATEST FINANCIAL STATEMENT

“Even though we achieved solid growth in the second quarter, our profitability fell behind the previous year’s level. The Industrial Cleaning Services segment’s performance was on a reasonable level, but the profitability suffered from resourcing challenges and related increased subcontracting costs during the shut-down period in the spring. The Group’s operating profit was further suppressed by the continued weak demand for the recycled fuel in the Recycling Services segment affecting the margins and the Demolition Services segment’s challenging project mix with fewer large projects.

As is typical for the Industrial Cleaning Services, the activity level in the second quarter increased considerably over the first quarter due to seasonality. Compared to the previous year, the net sales were fairly stable decreasing by -1% and organically4) by -3%. However, the operating profit of Industrial Cleaning Services was suppressed to some degree by challenges with resource planning and execution during the second quarter of 2019.

Demolition Services’ net sales increased by 16%. The growth was driven by the acquisitions made in 2018, which contributed 18%-points, while the organic growth was -2%. As expected, the second quarter sales and project mix were weaker than in the previous year. It comprised smaller assignments which were more tightly priced, hindered efficient resource utilisation and increased logistics costs, resulting in a clearly weakened operating profit. In terms of new orders, Demolition Services’ business has developed favourably since the challenging first half of the year, but we do not expect the operating profit to reach last year’s level for the full year.

Recycling Services’ net sales grew by 24% in the second quarter, all organically, but the profitability fell short of the previous year due to continued low demand for recycled fuel and increased processing costs for construction waste. We have recently taken pricing actions and invested in increased capacity and efficiency at our Rusko recycling plant. We expect these measures to improve the Recycling Services’ profitability gradually during the second half of 2019.

Our strategic focus areas are to grow our service offering and to expand geographically within Finland and Sweden. During 2019, we have been able to expand our renovation demolition offering towards turnkey solutions. We will also continue to improve our operations to drive gross margins in all our segments and realise synergies between our Finnish and Swedish operations. In the first six months of the year we have progressed with efficiency-enhancing measures across all segments, both in terms of cost structure and delivery efficiency. The measures are being implemented gradually in 2019, and their impact is expected to be partly reflected in the 2019 result.

The strategic assessment of options for the group and its businesses will continue during 2019. The results of the evaluation will be announced when the assessment has been completed.”