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Published: 2024-08-02 08:00:00 CEST
Tallinna Vesi
Quarterly report

Tallinna Vesi's second-quarter sales were €15.5 million

AS Tallinna Vesi’s sales in the second quarter of this year were €15.5 million, remaining at the level of the same period last year. The company’s operating profit for the second quarter was €4.46 million, an increase of 8%, and its net profit was €2.19 million, a decrease of 5.2%, mainly due to an increase in the interest cost on loans.

“The vital water services that Tallinna Vesi provide were at a high level throughout the quarter – drinking water met 100% of all the requirements in place. The quality of the treated effluent discharged to the Baltic Sea exceeded the standards set by law in all parameters. The company’s staff has been taking care of the day-to-day operation of the service, while continuing to prepare for the future – ensuring uninterrupted service is our common goal and requires ongoing investment in the water and wastewater network,” said Aleksandr Timofejev, CEO of Tallinna Vesi.

He pointed out that the positive impact of the investments made so far to ensure that consumers have access to vital water services at an affordable price can already be seen. “We have received confirmation that we are moving in the right direction with the investments in our business plan. We want to continue to be the leading water company in Estonia, both in terms of quality and providing water at an affordable price,” said Timofejev. In total, Tallinna Vesi plans to invest more than €60 million this year.

The company pumped 7 million m3 of clean water into the water network and treated nearly 12.5 million m3 of wastewater in the second quarter of 2024.  During the second quarter, 778 water samples were taken from the customers’ taps. According to Timofejev, clean tap water is ensured by an efficient water treatment process and regular monitoring of the water network, as well as ongoing preventive maintenance and timely investments.

Sales from water services sold to business customers in the second quarter of 2024 in the main service area of Tallinna Vesi were €4.50 million, which is 1.8% more than the year before. Sales from water services provided to private customers in the second quarter were at the same level as a year earlier and amounted to €6.18 million. 

The company’s operating profit for the second quarter was €4.46 million. Operating profit increased by 8% or €0.33 million compared to the year before. The company’s net profit was €2.19 million, which is €0.12 million less than in the same period of the previous year. The decrease in net profit was mainly driven by an increase in interest costs on loans.

In the second quarter of 2024, the proceedings regarding the application for a new price for water services were finalised and the price change was approved by the Competition Authority. The new prices in the Tallinn, Saue and Maardu areas took effect on 1 July 2024 and will affect the company’s sales starting from the third quarter.

In addition to the ongoing need to invest in the water and wastewater network and to reduce the environmental impact, the need for water price adjustments is also due to increases in a number of input costs, such as electricity, chemicals and maintenance. It also results from the obligation under the Public Water Supply and Sewerage Act to harmonise the price for water services for private and business customers.

More than half of the planned investment, or nearly €38 million, is intended for the development and rehabilitation of pipelines. The total investment in pipelines also includes up to €10 million for the construction of stormwater pipelines financed by the City of Tallinn. Planned investments in water and wastewater treatment plants amount up to €19 million. “We have set ourselves the goal of working together with the City of Tallinn and other partners as much as possible in planning and carrying out the pipeline works this year so as to disrupt city life and traffic as little as possible, save the environment and carry out the works in a cost-effective manner,” Aleksandr Timofejev explained.

For more than a year now, an innovative and effective ice pigging technology has been used to maintain the water mains. This is a technology in which an ice slurry is made of water and table salt and pumped through the mains. By the end of the second quarter, almost one fourth of the water network had been cleaned using the new technology, which helps to maintain high water quality. In addition, water quality has been supported by investments in water pumping stations in recent years to provide secondary chlorination in various parts of the city. Additional disinfection will ensure that the requirements set for tap water quality are met at various points across the city where chlorine levels in the water are normally very low, especially in summer when the water temperatures in the network get high.

One of the goals of the company’s customer service is to notify customers about water interruptions well in advance. In the second quarter, we notified our customers at least 1 hour before unplanned water interruption took place in 98% of cases and the average duration of a water interruption was 3 hours and 17 minutes. To reduce the inconvenience caused by water interruptions, we continue installing additional isolation valves on the water network.

In the second quarter of 2024, the effluent discharged from the Paljassaare Wastewater Treatment Plant met all the requirements in place. The high quality of the treated effluent is demonstrated by pollutant levels well below the limits set by law. During the second quarter of 2024, the company took out more than 163 tonnes of debris, 53 tonnes of grit, 481 tonnes of nitrogen and 63 tonnes of phosphorus from the wastewater.

Over the next three years, we will be investing nearly €9 million to enhance the biological treatment of wastewater by reconstructing the secondary clarifiers at the wastewater treatment plant. Other major multi-annual projects include the installation of mechanical screens at the headworks before the plant and the replacement of the screens at the treatment plant, which are important environmental projects designed to keep the Baltic Sea clean.

Timofejev also highlighted the cogeneration plant at the Paljassaare Wastewater Treatment Plant that was accepted at the end of the second quarter from the partner who carried out the construction. This plant will allow to use biogas to generate a significant part of the electricity needed for the wastewater treatment process, in addition to heat. Reconstructions are ongoing on the digesters and aeration tanks at the wastewater treatment plant. This year we will also start installing new, more efficient air blowers, expand our methanol tank fleet and begin preparations for the installation of a solar power plant.

Renovations are ongoing on high-speed filters at the water treatment plant. The designs are being prepared for upgrading the ozone production technology used in water treatment and for the reuse of backwash water from the filters in B building. There are also plans for the replacement of sedimentation technology used in the clarifiers with flotation technology. The aim of these projects is to reduce the plant’s own water and energy consumption and to increase its production capacity.

The rate of water loss in the water network remained low at 12.96% in the second quarter of the year. This is a better result than in the same period last year (13.62%). The low rate of water loss is ensured with the continuous on-line monitoring of the water network and the timely implementation of the network rehabilitation programme.

By the end of the second quarter, we had rehabilitated and constructed more than 17 kilometres of pipelines, of which over 9 kilometres were built using environmentally friendly no-dig techniques. Tallinna Vesi is working closely with the City of Tallinn and other partners, such as AS Utilitas Tallinn, to plan and carry out the work so that as much work as possible can be carried out at the same time, with as little disruption to city life and traffic as possible.

By the end of the second quarter, we had installed over 11,500 smart water meters, which means that more than 52% of our customers now have remote water meters. The aim is to increase the share of customers with smart meters to 60% in 2024, and to have all customers in our service area equipped with smart meters by the end of 2026 at the latest.

We strive to provide our customers and consumers with a reliable service, part of which is the availability of important information about the service and the speed at which the enquiries are answered. In the second quarter of 2024, we responded to written enquiries within 2 days in 99.7% of cases, thus maintaining a high level.

At the beginning of the second quarter, we opened nearly 60 public water taps in Tallinn, where residents can get free drinking water until the end of September. In addition, we supported community events by providing tanks with fresh water.

We signed a cooperation agreement with the Estonian Paralympic Committee to support the preparation of athletes participating in the Paris Paralympic Games from 28 August to 8 September. We also joined the Diversity Charter and received recognition from the Ministry of Defence for our outstanding contribution to national defence.

For several years now, we have taken part in the employer reputation survey conducted by Kantar Emor. As the results show, we have moved up from last year’s position, now ranking 20th in the top that was put together based on the survey conducted among working people.

AS Tallinna Vesi is the largest water utility in Estonia, providing services to nearly 25,000 private customers and businesses and 500,000 end consumers in Tallinn and its surrounding municipalities. Tallinna Vesi is listed on the main list of the Nasdaq Tallinn Stock Exchange. The largest shareholdings in the company are held by the City of Tallinn (55.06%) and the energy group Utilitas (20.36%). 24.58% of the company’s shares are freely floating on the Nasdaq Tallinn Stock Exchange.

MAIN FINANCIAL INDICATORS

€ million
except key ratios

2nd quarter2024/2023

6 months2024/2023

202420232022202420232022
Sales15.5515.4113.000.9%30.4930.0125.051.6%
Gross profit6.335.804.429.0%12.3911.528.807.6%
Gross profit margin %40.6837.6633.988.0%40.6338.3835.125.9%
Operating profit before depreciation and amortisation6.496.104.696.5%12.7212.119.345.0%
Operating profit before depreciation and amortisation margin %41.7439.5736.095.5%41.7040.3737.263.3%
Operating profit4.464.133.088.0%8.588.206.094.7%
Operating profit - main business4.173.812.839.3%8.337.735.747.9%
Operating profit margin %28.6626.7923.707.0%28.1527.3324.293.0%
Profit before taxes3.423.412.980.4%6.456.935.88-7.0%
Profit before taxes margin %21.9922.1222.88-0.6%21.1523.1123.48-8.5%
Net profit2.192.310.96-5.2%5.205.813.84-10.5%
Net profit margin %14.1015.027.36-6.1%17.0719.3715.31-11.9%
ROA %0.770.900.38-14.7%1.832.271.52-19.0%
Debt to total capital employed %60.7657.6657.095.4%60.7657.6657.095.4%
ROE %1.892.060.85-8.4%4.545.263.46-13.7%
Current ratio0.691.311.81-47.3%0.691.311.81-47.3%
Quick ratio0.631.241.75-49.2%0.631.241.75-49.2%
Investments into fixed assets11.395.774.9597.4%18.0410.447.7372.8%
Payout ratio %-79.4178.52 -79.4178.52 

Gross profit margin – Gross profit / Net sales
Operating profit margin – Operating profit / Net sales
Operating profit before depreciation and amortisation – Operating profit + depreciation and amortisation
Operating profit before depreciation and amortisation margin – Operating profit before depreciation and amortisation / Net sales
Net profit margin – Net profit / Net sales
ROA – Net profit / Average Total assets for the period
Debt to Total capital employed – Total liabilities / Total capital employed
ROE – Net profit / Average Total equity for the period
Current ratio – Current assets / Current liabilities
Quick ratio – (Current assets – Stocks) / Current liabilities
Payout ratio – Total Dividends per annum/ Total Net Income per annum
Main business – water services related activities, excl. connections profit and government grants, construction services, doubtful receivables

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

€ thousand                    
ASSETS   Noteas of 30 June 2024as of 31 December
2023
 
          
CURRENT ASSETS       
 Cash and cash equivalents  33,92314,736 
 Trade receivables, accrued income and prepaid expenses  8,9888,608 
 Inventories    1,2021,137 
TOTAL CURRENT ASSETS   14,11324,481 
          
NON-CURRENT ASSETS      
 Property, plant, and equipment  4269,839256,108 
 Intangible assets   51,3941,293 
TOTAL NON-CURRENT ASSETS   271,233257,401 
          
TOTAL ASSETS    285,346281,882 
          
LIABILITIES AND EQUITY       
          
CURRENT LIABILITIES      
 Current portion of long-term lease liabilities   1,011697 
 Current portion of long-term loans   3,5713,594 
 Trade and other payables   12,27510,886 
 Prepayments    3,7623,604 
TOTAL CURRENT LIABILITIES   20,61918,781 
          
NON-CURRENT LIABILITIES      
 Deferred income from connection fees   47,76144,653 
 Leases    2,5751,892 
 Loans    95,96392,835 
 Provision for possible third-party claims  66,0186,018 
 Deferred tax liability    242505 
 Other payables    94128 
TOTAL NON-CURRENT LIABILITIES   152,653146,031 
TOTAL LIABILITIES    173,272164,812 
          
EQUITY        
 Share capital    12,00012,000 
 Share premium    24,73424,734 
 Statutory legal reserve   1,2781,278 
 Retained earnings    74,06279,058 
TOTAL EQUITY     112,074117,070 
          
TOTAL LIABILITIES AND EQUITY    285,346281,882 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

€ thousand      
         
    NoteQuarter 2for the 6 months
ended 30 June
  
     2024202320242023  
Revenue 715,55215,40530,48930,005  
Cost of goods and services sold 9-9,2259,603-18,102-18,490  
GROSS PROFIT  6,3275,80212,38711,515  
           
Marketing expenses 9-241-205-475-419  
General administration expenses 9-1,531-1,317-3,025-2,620  
Other income (+)/ expenses (-) 10-98-153-303-275  
OPERATING PROFIT  4,4574,1278,5848,201  
           
Financial income 11672614936  
Financial expenses 11-1,104-747-2,285-1,302  
PROFIT BEFORE TAXES  3,4203,4066,4486,935  
           
Income tax  -1,226-1,093-1,244-1,121  
           
NET PROFIT FOR THE PERIOD 2,1942,3135,2045,814  
COMPREHENSIVE INCOME FOR THE PERIOD2,1942,3135,2045,814  
           
Attributable profit to:        
Equity holders of A-shares  2,1942,3135,2045,814  
Earnings per A share (in euros) 120.110.120.260.29  

CONSOLIDATED STATEMENT OF CASH FLOWS

€ thousand for the 6 months ended 30 June 
   Note20242023 
CASH FLOWS FROM OPERATING ACTIVITIES    
 Operating profit 8,5848,200 
  Adjustment for depreciation/amortisation9,104,1313,914 
  Adjustment for revenues from connection fees10-340-292 
  Other non-cash adjustments -91-157 
  Profit (-)/loss (+) from sale of property, plant and equipment, and intangible assets -55-22 
 Change in current assets involved in operating activities-446343 
 Change in liabilities involved in operating activities 351-526 
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES12,13411,460 
       
CASH FLOWS USED IN INVESTING ACTIVITIES    
 Acquisition of property, plant, and equipment,
and intangible assets
 -13,800-10,495 
 Compensations received for construction of pipelines, including connection fees 9521,724 
 Proceeds from sale of property, plant and equipment,
and intangible assets
9824 
 Interest received 14936 
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES-12,601-8,711 
       
CASH FLOWS USED IN FINANCING ACTIVITIES    
 Interest and loan financing costs paid-2,572-1,243 
 Lease payments -584-593 
 Received loans 5,00045,500 
 Repayment of loans -1,818-39,318 
 Dividends paid -10,069-6,515 
 Income tax paid on dividends -303-278 
TOTAL CASH FLOWS USED IN FINANCING ACTIVITIES-10,346-2,447 
       
CHANGE IN CASH AND CASH EQUIVALENTS -10,813302 
       
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD
314,73612,650 
       
CASH AND CASH EQUIVALENTS AT THE END
OF THE PERIOD
33,92312,952 

Additional information:

Taavi Gröön
Chief Financial Officer
AS Tallinna Vesi
(+372) 626 2200
taavi.groon@tvesi.ee

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Borsiaruanne Q224 Eng.pdf