CEO’s greeting

CEO TOMMI KAJASOJA COMMENTS ON THE LATEST FINANCIAL STATEMENT

“Given the low expectations, the second quarter performance was reasonable. The COVID-19 pandemic challenges were well mitigated by internal efficiency actions partly reducing the impact of low sales on profitability. As anticipated, the main impact of the pandemic in the second quarter was that the scheduled Cleaning Services shutdowns were almost completely postponed to the second half of 2020, or to the first half of 2021. Further postponements of shutdowns are anticipated to elevate the customers’ production process risk.

Net sales of Cleaning Services deteriorated by 25% in Q2 2020 with the daily assignments and operations holding on a reasonably good level and exceeding the first quarter’s level. However, the postponements of the normal spring shutdowns left a clear gap in the sales compared to the previous year. As a result of well managed and executed resource planning and required temporary layoffs, the adverse effects on EBITDA were partially mitigated. Overall, the profitability declined slightly, due to the lack of shutdowns.

Recycling Services net sales declined by 26% in Q2 2020, mainly due to the pandemic related slowdown of incoming waste volumes and to some degree due to a key customer’s decision to insource waste processing, while the entry barrier for such activity remains high. However, Recycling Services’ profitability improved from the previous year in both absolute and especially in relative terms, enabled by improved production efficiency and steady exit quotas secured for recycled fuel.

Our cashflow clearly exceeded the previous year’s level, supported with the natural decline in working capital resulting from the lower sales and our tightly controlled investments. In addition to optimizing the operative resources, we also extended actions to the administrative functions to further improve our efficiency. Some of the impacts of these actions are not yet visible in the second quarter results. To further protect the cash flow some fleet investments have been deferred, while the fleet maintenance programs have continued on schedule to secure operational capabilities.

The Demolition Services divestment process is ongoing in Finland, and we expect that it will take more time to be completed given the current general market uncertainty. Delete’s Demolition Services business in Finland is in good shape and currently delivers positive cash flow. Since our self-standing incorporation of the business in late 2019, it has been executing its growth strategy well. In August 2020 we announced our plan to also assess the divestment of the Recycling Business, which would enable us to focus and allocate additional resources to the long-term development of the Cleaning Services business.

We will continue to enforce tight cost and cash flow controls and prepare ourselves for quick manoeuvring with the health and safety as well as efficiency aspects in mind, if a second wave of COVID-19 interferes with the planned second half assignments. We will continue to follow the health and safety precautions every day, protecting not only our employees, but also our customers and partners we are in contact with. Throughout the pandemic, we have sustained a fully operational team with the ability to execute all the tasks as usual.

Entering the third quarter, we have gained more visibility on the second half, but still with uncertainty related to a possible second wave of COVID-19. We are cautiously optimistic on the second half workload as the autumn shutdown season is commencing with several schedules confirmed by our customers. In the medium and long term, we believe that the megatrends supporting our business have not changed and remain supportive, while some uncertainty for the demand remains in the short term.”