AS Tallinna Vesi : Tallinna Vesi's first-quarter sales revenue increased to €14.94 million

Tallinna Vesi
Quarterly report Tallinna Vesi's first-quarter sales revenue increased to €14.94 million

AS Tallinna Vesi's sales revenue increased by 2% in the first quarter of this year compared to the same period last year, reaching €14.94 million. The increase in sales revenue was driven by the company's core business of providing water services, but this did not compensate for the rise in interest expenses and the company's net profit fell to €3.01 million.

According to Aleksandr Timofejev, CEO of Tallinna Vesi, the company provided high quality water and wastewater services in the first quarter of 2024 and continued large-scale reconstruction projects. "During the quarter, Tallinna Vesi pumped 6.49 million m³ of drinking water into the water network and treated nearly 13.77 million m³ of wastewater," Timofejev said.

Sales from water services sold to business customers in the first quarter of 2024 in the main service area of Tallinna Vesi were €4.28 million, which is in line with the year before. Sales from water services provided to private customers increased by 2.7% in the first quarter compared to the same period of the previous year and totalled €6.21 million.

Tallinna Vesi continues to work on investment projects to ensure continuity of its high quality water services. "One of the major projects in 2024 will be making improvements to the biological treatment process. The Paljassaare Wastewater Treatment Plant can operate at maximum efficiency if the mechanical, chemical as well as biological treatment stages are running efficiently. Over the next three years, we will be investing up to nearly €9 million to improve the biological treatment process. As a result, we will be able to remove even more nitrogen and phosphorus from wastewater and ensure that the effluent that goes back into the environment is clean," explained Timofejev.

A combined heat and power (CHP) plant is in the final stages of commissioning. It will enable the production of electricity and heat from the biogas generated in the digesters at the wastewater treatment plant. The heat and electricity that will be produced from biogas in the CHP plant will cover up to 40% of Tallinna Vesi's total energy consumption in the future.

Tallinna Vesi's operating profit for the first quarter was €4.13 million. Operating profit increased by 1.4% or €0.05 million compared to the year before.

The company's net profit for the first quarter of 2024 was €3.01 million, which is €0.49 million less than in the same period of 2023. Net profit was affected by the increase in net financial expenses due to the change in the base interest rate. According to Aleksandr Timofejev, maintaining profitability is challenging as the overall price increase is driving up operating costs and the rise in Euribor has increased interest costs. "We have submitted an application to the Competition Authority for the implementation of the new price for water services in September last year and hope to finalise the application process soon," he said.

During the first quarter of 2024, Tallinna Vesi continued to provide reliable water and wastewater services, as demonstrated by the consistently high quality indicators. The quality of tap water in the first quarter was excellent, meeting 100% of all drinking water quality requirements. During the first quarter, 774 water samples were taken from customers' taps. Clean tap water has been ensured by the efficient water treatment process and regular monitoring of the water network, as well as ongoing preventive maintenance and timely investments, Timofejev said.

"In 2024, we will mainly use innovative ice pigging technology to maintain water pipes. Using this method, we cleaned 20 km of water mains in the first quarter," said Timofejev. Ice pigging that is currently unique in the Nordic countries is a pipe cleaning technology in which an ice slurry made of water and table salt is pumped through the pipeline.

The water quality is also supported by the investments in water pumping stations made in recent years, enabling additional 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 Tallinn Vesi's aims is to notify its customers about water interruptions well in advance. In the first quarter of 2024, the company notified its customers at least 1 hour before unplanned water interruption took place in all cases. The average duration of a water interruption in the first quarter was 2 hours and 44 minutes, 37 minutes less than in the same period last year. To reduce the inconvenience caused by water interruptions, Tallinna Vesi continues installing additional isolation valves on the water network.

In the first quarter of 2024, the effluent from the Paljassaare Wastewater Treatment Plant met all the requirements. The high quality of the treated effluent is demonstrated by pollutant levels well below the limits set by law. "During the first quarter of 2024, we removed more than 155 tonnes of debris, 58 tonnes of grit, 480 tonnes of nitrogen and 64 tonnes of phosphorus from the wastewater," said Timofejev.

Investment projects at the treatment plants continued. These included the renovation of the high-speed filters at the Ülemiste Water Treatment Plant, renovation of the clarifiers at the Ülemiste Water Treatment Plant which was completed, and the replacement of the gear of water weir at the Kaunissaare dam which is in the final stages. Preparations are ongoing for several large-scale projects in the coming years. One of these involves upgrading the ozone production technology used in water treatment, which is currently at the design stage. Another project involves the reuse of backwash water from the filters, which is also being designed. The third project involves converting the floating bed clarifiers into flotators. These projects are designed to reduce the treatment plant's own need for water and energy and to increase its production capacity.

At the wastewater treatment plant, the reconstruction works on the digesters will continue, with the emptying of the digester to be reconstructed in 2024 being started at the end of the first quarter. The commissioning and final acceptance of the cogeneration plant is also in the final stages. New major projects at the treatment plant this year include launching a three-year project to reconstruct the secondary clarifiers, installing mechanical screens at the headworks and replacing the screens in the screen house at the plant. Tallinna Vesi will also start installing new, more efficient air blowers in 2024, increase its methanol tank fleet and start preparations for a solar power plant.

The rate of water loss in the water network remained low at 16.55% in the first quarter of the year. This is a better result than in the same period last year (16.67%). Low rates of water loss are ensured by the continuous online monitoring of the water network and timely implementation of the network rehabilitation programme.

"By the end of the first quarter of 2024, we had reconstructed and installed more than 5 kilometres of pipelines, of which over 4 kilometres were built using environmentally friendly no-dig methods," said Aleksandr Timofejev. The largest pipeline reconstructions are carried out on L. Koidula Street, the railway crossing on Tondi Street, Siili Street, Masina Street, and Härmatise and Räitsaka Street. In addition, work is underway on the pipeline to booster pumping station supplying water to Mustamäe, to increase the reliability of that pipeline.

By the end of the first quarter of 2024, Tallinna Vesi had installed smart water meters for 46.5% of its customers. The main advantages of a smart meter include the speed and accuracy of data transmission, but also security and reliability. In addition to consumption data, the smart meters also communicate information about any failures and water losses. This allows the company to monitor its water network more effectively and detect leaks, which in turn helps to save clean water and the resources it takes to treat the water. The company aims to replace water meters for all customers in its service area with smart meters by the end of 2026 at the latest. "Smart meters have proven to be an effective tool in detecting leaks - thanks to smart meters, we have detected a number of leaks in the customer's piping and prevented more extensive losses from water emergencies," Alexander Timofejev pointed out.

He also added that Tallinna Vesi strives to provide its 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 first quarter of 2024, the company responded to written enquiries within 2 days in 99.4% of cases, a significant improvement compared to a year before. "We will continue to focus on our speed of response," Timofejev assured, adding: "We consider as complaints any enquiries received from customers that indicate dissatisfaction with the company's activities or the quality of the services provided. The aim of this is to gain a better understanding of the causes of customer dissatisfaction and to prevent complaints more effectively." In the first quarter of 2024, the company received a total of 210 customer complaints, which is significantly less compared to the 348 complaints received in the same period a year ago.

In the first quarter, Tallinna Vesi highlighted the importance of clean drinking water as part of the International Water Day, signed a cooperation agreement with the Estonian Paralympic Committee, and introduced opportunities for working in the water sector by attending the Student Fair, the Engineering Career Day and the Key to the Future Career Fair.

On 21 September 2023, Tallinna Vesi submitted an application to the Competition Authority to change the prices for water services. This application concerns the price for water services in the main service area in Tallinn and Saue, in the service area in Maardu and for other water companies. The processing of price application is ongoing and the new prices will apply once the application has been approved by the Competition Authority. The need to adjust the water tariff is driven by the increase in justified costs and by the crucial need for investment to keep the vital service running, reduce environmental impacts and maintain a clean environment.

Tallinna Vesi aims to continue investing to increase the future-proofing of its infrastructure and to ensure the continuity of the vital service at prices that consumers can afford. The total amount of planned investments in 2024 is up to €62 million, of which more than half, or nearly €38 million, is intended for the development and reconstruction of networks. Planned investments in water and wastewater treatment plants amount up to €19 million.

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 freely floating on the Nasdaq Tallinn Stock Exchange.

MAIN FINANCIAL INDICATORS

€ million except key ratios	Quarter 1	Variance 2024/ 2023
2024	2023	2022
Sales	14.94	14.60	12.05	2.3%
Gross profit	6.06	5.71	4.38	6.1%
Gross profit margin %	40.57	39.13	36.36	3.7%
Operating profit before depreciation and amortisation	6.23	6.02	4.64	3.4%
Operating profit before depreciation and amortisation margin %	41.67	41.22	38.53	1.1%
Operating profit	4.13	4.07	3.00	1.4%
Operating profit - main business	4.17	3.91	2.92	6.5%
Operating profit margin %	27.63	27.89	24.92	-0.9%
Profit before taxes	3.03	3.53	2.91	-14.1%
Profit before taxes margin %	20.27	24.16	24.13	-16.1%
Net profit	3.01	3.50	2.88	-13.9%
Net profit margin %	20.16	23.97	23.88	-15.9%
ROA %	1.06	1.38	2.09	-23.0%
Debt to total capital employed %	58.11	55.19	54.17	5.3%
ROE %	2.54	3.11	4.70	-18.3%
Current ratio	1.44	1.46	3.20	-1.4%
Quick ratio	1.37	1.38	3.13	-0.7%
Investments into fixed assets	6.65	4.67	2.78	42.4%
Payout ratio %	na	na	na

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				Note	as of 31 March 2024	as of 31 December 2023
CURRENT ASSETS
	Cash and cash equivalents			3	14,494	14,736
	Trade receivables, accrued income and prepaid expenses			9,112	8,608
	Inventories					1,120	1,137
TOTAL CURRENT ASSETS				24,726	24,481
NON-CURRENT ASSETS
	Property, plant, and equipment			4	260,550	256,108
	Intangible assets				5	1,355	1,293
TOTAL NON-CURRENT ASSETS				261,905	257,401
TOTAL ASSETS					286,631	281,882
LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Current portion of long-term lease liabilities				1,004	697
	Current portion of long-term loans				3,600	3,594
	Trade and other payables				9,579	10,886
	Prepayments					3,039	3,604
TOTAL CURRENT LIABILITIES				17,222	18,781
NON-CURRENT LIABILITIES
	Deferred income from connection fees				47,530	44,653
	Leases					2,310	1,892
	Loans					92,852	92,835
	Provision for possible third-party claims			6	6,018	6,018
	Deferred tax liability					523	505
	Other payables					96	128
TOTAL NON-CURRENT LIABILITIES				149,329	146,031
TOTAL LIABILITIES					166,551	164,812
EQUITY
	Share capital					12,000	12,000
	Share premium					24,734	24,734
	Statutory legal reserve				1,278	1,278
	Retained earnings					82,068	79,058
TOTAL EQUITY					120,080	117,070
TOTAL LIABILITIES AND EQUITY				286,631	281,882

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

€ thousand			for the 3 months ended 31 March
				Note	2024	2023
Revenue		7	14,937	14,599
Cost of goods and services sold		9	-8,877	-8,887
GROSS PROFIT			6,060	5,712
Marketing expenses		9	-235	-215
General administration expenses		9	-1,494	-1,303
Other income (+)/ expenses (-)		10	-203	-122
OPERATING PROFIT			4,128	4,072
Financial income		11	82	10
Financial expenses		11	-1,182	-555
PROFIT BEFORE TAXES			3,028	3,527
Income tax			-18	-28
NET PROFIT FOR THE PERIOD		3,010	3,499
COMPREHENSIVE INCOME FOR THE PERIOD	3,010	3,499
Attributable profit to:
Equity holders of A-shares			3,010	3,499
Earnings per A share (in euros)		12	0.15	0.17

CONSOLIDATED STATEMENT OF CASH FLOWS

€ thousand		for the 3 months ended 31 March
			Note	2024	2023
CASH FLOWS FROM OPERATING ACTIVITIES
	Operating profit		4,128	4,072
		Adjustment for depreciation/amortisation	9,10	2,097	1,945
		Adjustment for revenues from connection fees	10	-168	-145
		Other non-cash adjustments		22	0
		Profit (-)/loss (+) from sale of property, plant and equipment, and intangible assets		-41	0
	Change in current assets involved in operating activities	-487	1,191
	Change in liabilities involved in operating activities		105	-1,357
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES	5,656	5,706
CASH FLOWS USED IN INVESTING ACTIVITIES
	Acquisition of property, plant, and equipment, and intangible assets		-6,176	-5 304
	Compensations received for construction of pipelines, incl connection fees		377	288
	Proceeds from sale of property, plant and equipment, and intangible assets	66	0
	Interest received		82	10
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES	-5,651	-5,006
CASH FLOWS USED IN FINANCING ACTIVITIES
	Interest and loan financing costs paid	-34	-258
	Lease payments		-213	-203
TOTAL CASH FLOWS USED IN FINANCING ACTIVITIES	-247	-461
CHANGE IN CASH AND CASH EQUIVALENTS		-242	239
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD	3	14,736	12,650
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	3	14,494	12,889

Additional information:

Taavi Gröön
Chief Financial Officer
AS Tallinna Vesi
([phone]
[e-mail]

Attachment

• Stock Exchange Report Q1'24 Eng

Attachments:
Stock Exchange Report Q124 Eng.pdf