Luotea Oyj

And welcome also on my behalf to this six months earnings release. Let's start with a few highlights from first half and second quarter. Our net sales in Q2 were 207 million compared to 219 a year ago. And this was mainly due to the fact that our renewable energy sources business is now reported below the operating profit. Also, Swedish crown weakened quite significantly compared to the previous year, and its impact was over 6 million euros to net sales. Our adjusted operating profit was 9.2 million euros compared to 11 million euros. And I'll get into the reasons behind that later during the presentation. Our facility services Finland and also industrial services continued their good performance in the first half and also in the second quarter as environmental services and facility services Sweden had a softer quarter and also for those I will get later during the presentation. Our net cash in the first six months was strong and our financial position is strong. We managed to release quite nicely capital from the networking capital and our plan is to continue on that path. Let's move on to net sales and as you can see pretty much all of our businesses were in line with previous year, excluding industrial services, which increased by 7.3 million euros. And as I already mentioned, in Sweden, the weakened Swedish crown had a negative impact by 6.6 million to the net sales. Renewable energy sources impact was 34.1 million euros during the first six months, and now after End of June, the comparable numbers are then the same as we started reporting the renewable energy sources below the operating profit 1st of July 2022. Adjusted operating profit for the first six months. 10.6 compared to 11 million euros adjusted operating profit. And here you can see that environmental... Excuse me. Environmental services was lower. than a year ago by some 900,000 euros as industrial services and facility services, Finland improved quite nicely. In facility services, Sweden, we had quite a bit weaker performance in the first six months. And I will go into the details as we go into the segment part of the presentation. We do have quite a bit of fluctuation quarter by quarter. And typically first quarter is the weakest and then slightly improving in the second quarter. And then the third quarter is the biggest quarter for us. And then the fourth quarter is approximately at the same level as the second quarter. And this year is no exception to this quarterly fluctuation. Let's move on to the segment part of the presentation. Let's start with environmental services. In environmental services, we saw a decline in demand, especially in the construction industry, and to some extent in retail as well. And also we saw that the price levels for recycled raw materials were lower level than they were a year ago. In the second half, the difference will be smaller as the price level started to decline last year already. In environmental services, we also did have higher costs in the second quarter. The collective agreement included a one-off, payment for the drivers. And that was visible in the numbers, as well as the heavy work that we did for our new operating system. And that will continue till the end of the year. And next year we will start the piloting and rollout phase. I will explain a little bit more about the IT development that we are doing in the group later during the presentation. Our new government has, in our view, some very positive intentions in their program. Especially the role of the municipal waste companies is going to be clarified. And their role will be focused on the household waste only, unlike the situation currently where the borders are somewhat vague where the municipal waste companies operate. Also, there is an intention to improve the conditions for the recycling industry in general and increase the use of recycled raw materials, and also the environmental permit process should be streamlined. And all of these changes, if implemented, and hopefully, when implemented, will be very positive for Lassila and Tikanoja's businesses. In industrial services, we did have a strong first six months of the year. Especially in the hazardous waste and environmental construction, the performance was good. In general, the environmental construction we did when quite a few demanding projects, and those projects have proceeded according to the plans. In process cleaning, so far in the first six months, the demand has been stable and expected, but obviously there is a risk in the second half that there might be changes in the planned maintenance breaks, either to the Let's say scope or timing of those maintenance breaks. But we have a very good dialogue with our customers and we expect that we can manage if there are changes in the second half of the year. In Sweden, the market situation is similar to Finland. Some of the process industries are suffering from lower demand and therefore we have had to work a little harder to find new customers, but so far it has continued quite well in Sweden. So overall in industrial services, our position is strong and performance is very solid. In facility services Finland, Our positive development continued in the second quarter, although the difference to the comparison period was a little smaller in the second quarter than it was in the first quarter. One reason for this is that also in facility services Finland, the new collective agreements came into force. Actually, they came into force already in May, and the salary increases were quite substantial. And our plan is to make price increases and focus on the efficiency to offset the impact of these pretty sizable salary increases. In Sweden, even though the numbers are not good for the first half of 2023, there is a lot of work that's been done behind the scenes, and actually our turnaround plans are largely progressing according to the plans, and we do expect quite a nice improvement also in the financials when it comes to the second half of the year. So overall, even though the numbers are not very good in the first half, we expect to see visible results of our turnaround in Sweden already this year. Obviously, the full impact will be visible by the end of 2024. Then, as I promised, I will go a little deeper into the let's say, renewal roadmap of our ICT systems. Our by far largest program is the new system for our environmental services. And we are currently in the build phase. And that phase was very intense in the first half of the year, and especially in the second quarter. And as you can see from these numbers below, our spend in the first half of 23 was pretty high, 5.1 million euros. This includes the capex and the actual cost that incurred in the first six months. But it gives you a good picture of how much we are investing to external work and also to the internal work to renew our systems. Also, we are renewing our HR master system and the go-live should be at the end of the year in November this year. Overall, these system renewals and these new operating models will obviously aim to increase our efficiency and improve our ability to use modern technology to improve the customer service, but also to make overall operations much more efficient. And we are confident that we will see very positive results from these system changes in the coming years. Then a few sustainability highlights. As I have said earlier, we have invested a lot in strengthening our organization, especially in environmental services, to bring expertise in circular economy to our company and our customers have found us and we have done many interesting projects with different sizes of customers. One example is a roadmap that was created together with Valmet Automotive car factory in Uusikaupunki, Finland. In this work, we helped our customer, in this case, Valvet Automotive, to find concrete ways how they can then reach their own sustainability targets by increasing recycling and reducing emissions. And the customer is very pleased with this work that we have done together with them. Also, we had a very positive development in work safety. We have invested quite a lot into this. We are training all of our personnel within, let's say, 12 months. We started with the management last year, and this year, we are rolling out the training to the rest of the personnel. As you can understand, this is a pretty sizable investment, but so far the results have been good, and our TRIFI levels have reached all-time low in the first six months of the year. Also, our own CO2 emissions continue to decline, and this was due to the very good actions that we have had, especially in industrial services and facility services. And you can see from these numbers that we are now quite a bit below last year's levels, even though the volumes in the large scale are approximately the same as they were previous year. Also, our emission intensity has declined quite substantially. Also one highlight from these numbers is the fact that our sick leave are finally getting down and they were now 5.3% compared to 5.8% a year ago. Obviously we are not yet at the levels we would like to be, which is below 5%. but certainly on our way there. And this will help us in staffing, especially in facility services, Finland and Sweden. In general, I would say that also the availability of workforce is better now than it was a year ago. And that also should help us in the second half in facility services, businesses both in Finland and in Sweden. So with that, I will now give floor to Valtteri, and he will go through some of the financial highlights. Go ahead, Valtteri.

Thank you, Eero, and good morning, everyone. I will dive into the numbers and financing, and I'll start with the key figures. Capital expenditure were 31.8 million euros less than a year ago, but in the comparison period we had acquisitions amounted of 20.5 million euros. Depreciations on the same level, 28 million euros, and then return on equity return on capital employee they both improved despite of the lower EBIT level we managed to decrease capital employed by 15 million euros And also our joint venture, Laania, this renewable energy sources company made a good result. 2.2 million euros was our share. And also we terminated interest swap and booked 1.3 million euros gain of that. So they are two items which explains the better And the same reasons, earnings per share, 24 cents are better than in the comparison period. Cash flow was 55 cents, no one of items. It was solid and strong compared in the previous year. There were acquisitions which causes that it was negative. Balance sheet ratios, equity ratio and gearing, they're both improved. Equity ratio is now 33.4% and gearing is also below 90%. Networking capital was minus 41.6 million euros. It improved 6 million euros from the comparison period, and also relatively it was minus 5.1%, so it was 1 percentage point better than a year ago. We have made actions to improve our payment terms, and also we have managed to improve other balance sheet items as well. Cash flow was 19.3 million euros. It was a strong no one of items and the investments cash flow was minus 19 million euros. Cash flow is predictable and solid. Interest bearing debt and liquidity is IFRS 16 leasing liabilities, consolidated leasing liabilities, which mainly consist the real estate premises and heavy fleet. was 76 million euros they are usually between 70 and 80 million euros then interest bearing debt 134 million euros it decreased by 30 million euros we refinanced the bank loan of 50 million euros by a 40 million euros loan. It's a sustainability-linked loan. There are two sustainability KPIs, accident frequency and carbon footprint. And after that now, all of our bank loans and bonds are sustainability-linked. In the comparison period, there were 20 million euros commercial papers in use, and now we didn't use them. And also on top of that, the revolving credit facility, 40 million euros is not utilized. And same goes with the bank overdraft limits. Cash balance, 30 million euros. So our liquidity position is pretty good. Then loan portfolio. This year we will pay back the rest of the old bond in September, 18 million euros. And in total, we will pay back loans almost 30 million euros this year, which also improves the balance sheet KPIs and also decreases the financial costs. When we refinance this bank loan in conjunction with that we terminated this interest swap 30 million euros booked 1.3 million euros gain of it and due to that 70 percent of our loans have now fixed rate and 30 is a variable Weighted average effective interest rate is 3.4% compared previous 2.4%. And then so the next refinancing is in 2026 this 40 million euros and in 28 will mature the bond of 75 million euros which we emitted last year. Good, and now I hand over to Eero.

Thank you, Valtteri. So, finally, the outlook for 2023. Our outlook is unchanged. As I said, we do have typically a quarterly fluctuation, and even though the second quarter was a little bit on the soft side, the outlook for the year is solid, and therefore we reiterate our outlook, which is that our net sales and adjusted operating profit are estimated to be at the same level as in the previous year, even though the comparison period includes net sales from the renewable energy sources. So that was our presentation and now we are ready for your questions.