CEO’s greeting

CEO TOMMI KAJASOJA COMMENTS ON THE LATEST FINANCIAL STATEMENT

“The first quarter was a somewhat typical slow winter period. After February we were on track to clearly improve over last year, but instead we ended up on a similar level as in 2019 due to the impacts of COVID-19 on our business in March. The main impact of the pandemic was that the scheduled start of the busy season in Cleaning Services with two sizable process industry maintenance shutdowns were postponed until the second half of the year. The COVID-19 situation had limited impact on Recycling Services.

Net sales of Cleaning Services grew organically by 3%, with the mild winter enabling sewer services to operate with less downtime. However, due to the lack of maintenance shutdowns in March, the sales mix and field productivity were not on a desired level, hence the profitability didn’t reach the previous year’s level.

Recycling Services net sales declined by -10%, mainly caused by a key customers’ decision to insource waste processing, resulting in lost volumes. Profitability improved however, from the previous year in both absolute and especially in relative terms, enabled by production efficiencies and secured steady exit quotas for recycled fuel.

In March, we successfully divested our underperforming Demolition Services businesses in Sweden and are well on our way in executing the focused strategy on developing the maintenance-oriented Cleaning Services offering and efficiencies, in the first phase in Sweden. For the Finnish Demolition Services, the divestment process is ongoing, and we expect that it will take more time to be completed given the current general market uncertainty. The Finnish Demolition business is in good shape delivering positive cash flow, and since our self-standing incorporation of the business in late 2019, executing its growth strategy well. In conjunction with the divestments in Sweden, we were able to streamline the operating model and management system, which already led to decreasing administration costs for the Group. There is further potential for streamlining operations after the planned divestments are completed in Finland.

On 3 April we withdrew our outlook for 2020 and we will publish it again once the implications of the COVID-19 become clearer. We can already now say that the second quarter will be clearly weaker than normally particularly within Cleaning Services, but the expectation for the moment is, that the second half should be better. We take some comfort from the current information, that the postponed shutdowns in Cleaning Services from the second quarter should take place after the summer, or latest in the spring of 2021. We believe that the megatrends supporting our business have not fundamentally changed, while some short-term uncertainty remains.

We took decisive actions in March to keep our employees and customers as safe as possible. We follow health and safety precautions every day, protecting not only our employees, but also our customers we are in contact with. We have sustained a fully operational team with the ability to execute all tasks as normal. We have prepared for the slower-than-normal spring season with temporary layoffs taking place as needed in both Finland and Sweden. This is the most efficient way to adjust our operational capacity. We are taking actions also in the administrative functions to gain more efficiency and will protect our cash flows with additional controls on working capital and investments.”