Tallinna Vesi
Quarterly report

AS Tallinna Vesi's sales were boosted by consumption of commercial customers

In the second quarter of 2022, AS Tallinna Vesi's net sales grew to €13 million, the increase in net sales was mainly due to increased consumption of water services among commercial customers.

AS Tallinna Vesi’s sales from water services provided to commercial customers in the second quarter of this year was €4.24 million, which is about 23% more than last year. The consumption of water services among commercial customers mainly increased in the hospitality and entertainment sector, such as hotels and spas, restaurants, cultural institutions, and in the transport sector.

According to Aleksandr Timofejev, Chairman of the Board of AS Tallinna Vesi, hotels and spas were able to provide their services to customers in the second quarter of this year in a volume that is comparable to pre-COVID times. “Lifting of the COVID-19 related restrictions at the end of the first quarter had a strong positive impact on the consumption of commercial customers – water consumption in hotels and spas increased by more than 140% in the second quarter compared to a year ago,” Timofejev explained.

Sales from water services provided to private customers in the second quarter fell 1.2% to €4.99 million as a result of the decline in consumption of the largest private customer group - apartment buildings and private houses.

AS Tallinna Vesi’s gross profit for the second quarter of 2022 was €4.42 million. The Company's gross profit for six months fell by 15% due to an increase in operational costs. Rising costs of chemicals, electricity and gas had the biggest impact on cost growth. To minimise this impact, the Company seeks to reduce the amount of chemicals used in treatment processes and, if possible, consumes electricity smartly by monitoring the electricity exchange price and timing consumption accordingly.

The Company’s operating profit for the second quarter was €3.1 million. Operating profit fell by €2.12 million compared to the second quarter of last year. The operating profit for the six months of 2022 was €6.1 million, showing a decrease of €3.77 million compared to the previous year, and this is due to higher electricity costs and the retaining of the provision for potential third-party claims at the level of the third quarter of 2021. When eliminating the impact of the change in operating profit resulting from the provision for potential third-party claims, the Company’s operating profit would have been €4 million in the second quarter of 2021. Operating profit for the second quarter of 2022 would be 22.9% or €0.91 million lower compared to the same period last year.

The Company’s net profit for the second quarter of 2022 was €0.96 million, showing a decrease of €2.12 million compared to the same period last year. The decrease in net profit was affected by changes in operating profit and net financial costs.

In the first half of 2022, AS Tallinna Vesi renovated nearly 10,000 metres of pipelines. “The reconstruction of pipelines has been progressing as planned in the first six months and work will continue in the second half of the year,” Timofejev said.

In the second quarter, extensive reconstruction work was started and continued on Järvevana Road, Sõle, Kolde, Ehte and Sitsi Streets, Astangu area and Ussimäe Road. “On Järvevana Road, we are currently renovating 900 metres of a water supply pipeline, which is one of Tallinn's largest for its diameter and number of consumers and supplies water to the residents in Mustamäe, Haabersti and Kristiine city districts. Large-scale sewer system renovations are being done in Astangu area. Reconstruction works are carried out using eco-friendly no-dig methods that do not require digging up the roads and also cause less disturbance to residents and the traffic,” Timofejev pointed out.

In May, AS Tallinna Vesi signed a contract with Telia Eesti AS to install smart water meters for all its customers by 2026. According to Timofejev, the first 260 smart water meters have already been installed and a larger number of new meters will be delivered this August, after which these will be installed following the regular verification program. “Smart water meters have been long expected by our customers, which is why I am glad we have found the best way to deliver this solution and make monthly invoicing process more convenient. In addition, by installing smart meters, we will make our processes more digital, we will be able to monitor the water network more efficiently and faster identify any water leaks,” he said.

In order to ensure the continuity of the service provided by the Company and the sustainability of its processes, AS Tallinna Vesi continued with several large projects in the second quarter, including the renovation of the water pumping station in Rummu Road, which ensures high-quality drinking water to Lasnamäe and Pirita city districts, and the renovation of the filters that are part of the water treatment process. At the wastewater treatment plant, work continues on strategically important projects such as renovating the main pumping station shaft and the effluent outlet tower, the first of which plays an important role in receiving the wastewater at the treatment plant and the second in discharging treated effluent into the sea.

Over the six months of 2022, the Company has continued to provide reliable and high-quality water and wastewater services, as reflected in the very high level of quality indicators. In the first half of the year, the Company took 1,681 water samples. The quality of tap water was excellent, 100% in line with all quality requirements. According to Timofejev, excellent quality of tap water has been ensured with an effective water treatment process, ongoing preventative maintenance work on the water network and investments in water pumping stations made in recent years that created a secondary chlorination facility across the various city districts. This allows to keep the sanitary status of treated water in the water network and maintain the excellent quality of tap water with hot weather as well.

Also, the wastewater treated at the wastewater treatment plant and discharged to the Baltic Sea met all the strict requirements both in the second quarter and throughout the first half of 2022. “The quality of effluent directly affects the marine environment, which is why we monitor the amounts of pollutants in wastewater received at the treatment plant and in effluent leaving the treatment plant. Pollutant parameters that are significantly lower than the limits required by law is a proof of the excellent level of treated effluent,” Timofejev explained.

The level of water loss in the water network remained low in the second quarter – 14.3%, similarly to the previous year. In the half-year view, the level of water loss is somewhat higher than last year because of the snowy and cold winter that made it difficult to detect leaks and access pipelines in the first quarter.

AS Tallinna Vesi is the largest water utility in Estonia, providing services to more than 24,600 private customers and businesses and 470,000 end consumers in Tallinn and its surrounding municipalities: Cities of Maardu and Saue and Harku Municipality. Tallinna Vesi is listed on the main list of the Nasdaq Tallinn Stock Exchange.

Main financial indicators

Gross profit margin – Gross 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
Operating profit margin – Operating profit / 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

Laura Korjus
Head of Communications
AS Tallinna Vesi
(+372) 626 2271
laura.korjus@tvesi.ee

Attachment

• Börsiaruanne Q2'22 Eng