Tallinna Vesi increased its sales and profit in the second quarter

*AS Tallinna Vesi**’s **sales increased to **€**15.41 million and operating profit to **€**4.13 million* *in the second quarter**. **According to the **C**ompany's interim report for the second quarter of 2023, t**he increase in sales **resulted from* *price** increase** to cover** higher production costs**.*In the second quarter, sales from water services provided to both private and commercial customers increased. Sales revenue from water services sold to AS Tallinna Vesi’s commercial customers was €4.42 million in the second quarter, which is 4.1% more than last year. Sales from water services sold to private customers increased 23.2%t compared to the same period last year and totaled €6.15 million.

The Company’s operating profit was €4.13 million in the second quarter. Operating profit grew by €1.05 million compared to the second quarter of last year. The operating profit for the six months of 2023 was €8.20 million, showing an increase of €2.11 million from the previous year.

The Company’s net profit was €2.31 million in the second quarter of 2023, which is €1.36 million more than in the same period last year.

According to *Aleksandr Timofe**j**ev*, Chief Executive Officer of Tallinna Vesi, the increase in net profit is related to the change of price for water services that was applied from the fourth quarter of last year. “The recovery in net profit was driven by the increase in production costs being reflected in sales,” he explained.

The quality indicators remaining stable at high levels indicate that Tallinna Vesi provides reliable water and wastewater services – water samples taken during the six months of 2023 confirmed that tap water meets 100% of the high quality standards established for drinking water. “High quality drinking water is a valuable resource that cannot be taken for granted. Behind the excellent water quality, there are many people, a lot of strategic work and science,” Timofejev said.

Clean tap water has been ensured by an efficient water treatment process, regular monitoring and ongoing preventative maintenance work on the water network. “At the beginning of 2023, we introduced the ice pigging technique for the maintenance of water pipes, and in six months we have washed 73 km of water network with ice,” Timofejev pointed out. Ice pigging is a unique pipe cleaning technology in which an ice slurry made of water and table salt is pumped through the pipeline.

Early in July this year, Tallinna Vesi provided clean drinking water at the XIII Youth Song and Dance Festival “Püha on maa” (“Sacred is the land”), by taking more than 100,000 litres of pure drinking water to the festival rehearsals and performances. This way, Aleksandr Timofejev says, the singers, dancers and the audience together managed to avoid the spending of resources related to the production, transport and handling of more than 200 thousand plastic bottles. At the Song and Dance Festival, water was provided from water tanks, as well as from drinking water taps that were set up at the Tallinn Song Festival Grounds and Kalev Stadium. These taps are stationary and remain at the service of the people of Tallinn and its visitors.

Wastewater analyses confirmed that the wastewater treated in the second quarter contained significantly less pollutants than required by law. This indicator is important as the quality of treated effluent has a direct impact on the Baltic Sea and on the environment. “In the six months of 2023, we have taken 355 tons of debris, 89 tons of grit, 938 tons of nitrogen and 126 tons of phosphorus out of the wastewater,” Timofejev pointed out.

The level of water loss in the water network dropped in the second quarter. Ongoing rehabilitation of water pipes contribute to reducing water losses. In 2023, Tallinna Vesi has rehabilitated 14 kilometers of networks and extensive reconstruction works continue over the summer as planned.

The biggest project at the Wastewater Treatment Plant in 2023 is the reconstruction of digesters, which will result in Tallinna Vesi producing even more biogas from sludge generated during the wastewater treatment process. In parallel, construction works are currently underway at the Wastewater Treatment Plant at Paljassaare for the construction of a cogeneration plant, which will allow to produce not only the heat energy, but also most of the electricity needed for the wastewater treatment process from biogas in the future. The cogeneration plant is scheduled to be launched in the fourth quarter.

AS Tallinna Vesi entered into loan agreements totaling €131 million. The loan agreements concluded will facilitate AS Tallinna Vesi’s capital investment program during 2023-2025. In 2023, the Company will invest €35 million to meet the Company's strategy and the objectives set out in the Public Water Supply and Sewerage System Development Plan adopted by the City. The loan agreements will facilitate the following major projects: reconstruction of digesters and construction of a combined heat and power plant at the Wastewater Treatment Plant, reconstruction of filters and clarifiers at the Water Treatment Plant, and investments to the reconstruction and construction of networks.

On May 17-19, the very first ISO/IEC 27001:2013 certification took place and the certificate issued certifies that our information security management system meets the requirements of ISO/IEC 27001:2013. The certificate issued to AS Tallinna Vesi is valid until 26/06/2026.

AS Tallinna Vesi is the largest water utility in Estonia, providing services to more than 24,900 private customers and businesses and 470,000 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 free floating on the Nasdaq Tallinn stock exchange.

*Main financial indicators*

*€ million*
*except key ratios*

*Quarters **2* *Variance** 2023/ 2022*

*6 months* *Variance** 2023/ 2022**2023* *2022* *2021* *2023* *2022* *2021*
Sales 15.41 13.00 12.97 18.5% 30.01 25.05 24.75 19.8%
Gross profit 5.80 4.42 5.23 31.3% 11.52 8.80 10.41 30.8%
Gross profit margin % 37.66 33.98 40.34 10.8% 38.38 35.12 42.07 9.3%
Operating profit before depreciation and amortisation 6.10 4.69 6.80 29.9% 12.11 9.34 13.03 29.8%
Operating profit before depreciation and amortisation margin % 39.57 36.09 52.44 9.6% 40.37 37.26 52.63 8.4%
Operating profit 4.13 3.08 5.20 34.0% 8.20 6.09 9.86 34.7%
Operating profit - main business 3.81 2.83 4.96 34.9% 7.73 5.74 9.46 34.5%
Operating profit margin % 26.79 23.70 40.09 13.1% 27.33 24.29 39.83 12.5%
Profit before taxes 3.41 2.98 5.11 14.5% 6.93 5.88 9.68 17.9%
Profit before taxes margin % 22.12 22.88 39.40 -3.3% 23.11 23.48 39.10 -1.6%
Net profit 2.31 0.96 3.07 141.8% 5.81 3.84 7.62 51.6%
Net profit margin % 15.02 7.36 23.70 104.1% 19.37 15.31 30.80 26.6%
ROA % 0.90 0.38 1.21 137.4% 2.27 1.52 2.22 48.8%
Debt to total capital employed % 57.66 57.09 57.20 1.0% 57.66 57.09 57.20 1.0%
ROE % 2.06 0.85 2.75 142.0% 5.26 3.46 5.27 52.1%
Current ratio 1.31 1.81 2.75 -27.6% 1.31 1.81 2.75 -27.6%
Quick ratio 1.24 1.75 2.69 -29.1% 1.24 1.75 2.69 -29.1%
Investments into fixed assets 5.77 2.85 5.57 16.6% 10.44 7.73 5.63 35.1%
Payout ratio % - 78.52 80.42   - 78.52 80.42  

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                             *A**s of 30 June*   *A**s of 31 December *
*ASSETS*       *Note* *2023* *2022* *2022*                  
*CURRENT ASSETS*               Cash and cash equivalents     3 12,952 23,541 12,650 Trade receivables, accrued income and prepaid expenses     8,601 6,643 8,989 Inventories         1,246 982 1,197
*TOTAL CURRENT ASSETS*       *22,799* *31,166* *22,836*                  
*NON-CURRENT ASSETS*     * * * * * * * * Property, plant, and equipment     4 236,263 215,830 229,869 Intangible assets       5 817 637 688
*TOTAL NON-CURRENT ASSETS*       *237,080* *216,467* *230,557*                  
*TOTAL ASSETS*         *259,879* *247,633* *253,393*                  
*LIABILITIES AND EQUITY *                              
*CURRENT LIABILITIES*             Leases       955 662 883 Loans       3,615 3,630 3,630 Trade and other payables       9,555 9,665 10,225 Prepayments         3,313 3,296 3,749
*TOTAL CURRENT LIABILITIES*       *17,438* *17,253* *18,487*                  
*NON-CURRENT LIABILITIES* * * * *         Deferred income from connection fees       41,190 38,130 39,150 Leases         2,105 1,063 1,607 Loans         82,739 78,540 76,708 Provision for possible third-party claims     6 6,018 6,018 6,018 Deferred tax liability         264 303 496 Other payables         84 70 101
*TOTAL NON-CURRENT LIABILITIES* * * * *   *132,400* *124,124* *124,080*
*TOTAL LIABILITIES*         *149,838* *141,377* *142,567*                  
*EQUITY *               Share capital         12,000 12,000 12,000 Share premium         24,734 24,734 24,734 Statutory legal reserve       1,278 1,278 1,278 Retained earnings         72,029 68,244 72,814
*TOTAL EQUITY *         *110,041* *106,256* *110,826*                  
*TOTAL LIABILITIES AND EQUITY *       *259,879* *247,633* *253,393*

*
*

*CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME*

€ thousand       *Quarter 2* *6 months* *F**or the year ended 31 December*       *Note* *2023* *2022* *2023* *2022* *2022*                  
Revenue     7 15,405 13,002 30,005 25,054 54,558
Cost of goods and services sold 9 -9,603 -8,583 -18,490 -16,254 -37,660
*GROSS PROFIT*     *5,802* *4,419* *11,515* *8,80* *16,898*                  
Marketing expenses 9 -205 -189 -419 -388 -703
General administration 9 -1,317 -1,094 -2,620 -2,225 -4,399
Other income (+)/ expenses (-) 10 -153 -55 -275 -102 -476
*OPERATING PROFIT*   *4,127* *3,081* *8,201* *6,085* *11,320*                  
Financial income   11 26 1 36 3 8
Financial expenses   11 -747 -108 -1,302 -205 -682
*PROFIT BEFORE TAXES*   *3,406* *2,974* *6,935* *5,883* *10,646*                  
Income tax 12 -1,093 -2,017 -1,121 -2,047 -2,240                  
*NET PROFIT FOR THE PERIOD*   *2,313* *957* *5,814* *3,836* *8,406*
*COMPREHENSIVE INCOME FOR THE PERIOD*   *2,313* *957* *5,814* *3,836* *8,406*                  
Attributable profit to:            
Equity holders of A-shares   2,313 957 5,814 3,836 8,406                                    
Earnings per A-share (in euros) 13 0,12 0,05 0,29 0,19 0,42

*
**CONSOLIDATED STATEMENT OF CASH FLOWS*

€ thousand   *6 month**s* *F**or the year ended 31 December*     *Note* *2023* *2022* *2022*
*CASH FLOWS FROM OPERATING ACTIVITIES*         Operating profit   8,200 6,085 11,320   Adjustment for depreciation/amortisation 4,5,9,10 3,914 3,250 6,817   Adjustment for revenues from connection fees 10 -292 -269 -544   Other non-monetary adjustments 6 -157   Profit (-)/loss (+) from sale of property, plant and equipment, and intangible assets -22 -12 -32 Change in current assets involved in operating activities 343 -271 -2,841 Change in liabilities involved in operating activities   -526 -485 309
*TOTAL CASH FLOWS FROM OPERATING ACTIVITIES*   *11,460* *8,298* *15,029*            
*CASH FLOWS USED IN INVESTING ACTIVITIES*     * * * * Acquisition of property, plant, and equipment, and intangible assets -10,495 -7,351 -20,701 Compensations received for construction of pipelines, incl. connection fees   1,724 1,215 1,593 Proceeds from sale of property, plant and equipment, and intangible assets   24 13 53 Interest received   36 3 9
*TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES*   *-8,711* *-6,120* *-19,046*            
*CASH FLOWS USED IN FINANCING ACTIVITIES*         Interest paid and loan financing costs, incl. swap interests   -1,243 -218 -616 Lease payments   -593 -230 -524 Received loans   45,500 Repayment of loans   -39,318 -1,818 -3,636 Dividends paid 12 -6,515 -12,835 -12,835 Withheld income tax paid on dividends 12 -278 -95 -165 Income tax paid on dividends 12 -2116
*TOTAL CASH FLOWS USED IN FINANCING ACTIVITIES*   *-2,447* *-15,196* *-19,892*
*CHANGE IN CASH AND CASH EQUIVALENTS*   *302* *-13,018* *-23,909*
*CASH AND CASH EQUIVALENTS AT THE *
*BEGINNING OF THE PERIOD* * * *12,650* *36,559* *36,559*
*CASH AND CASH EQUIVALENTS AT THE END *
*OF THE PERIOD*   *12,952* *23,541* *12,650*

Marta Kuningas

Communications Specialist

AS Tallinna Vesi

(+372) 626 2200

marta.kuningas@tvesi.ee

*Attachment*

· Q2'23 Eng