Ekokem pursuing its circular economy strategy as planned – shutdowns and the price of electricity and raw materials taxed operating profit
Integration measures initiated after the acquisition made in January have proceeded as planned. Following the introduction of the Finnish environmental Ekokem brand in the Group's other operating countries at the beginning of September, the Swedish environmental management company Sakab, acquired in June 2012, and the Danish environmental management company NORD, acquired in January 2015, were renamed Ekokem AB and Ekokem A/S, respectively.
Construction of Circular Economy Village in Riihimäki is progressing on schedule. In September, an agreement was signed on the distribution in Gasum's gas network of biogas generated by the biorefinery to be built in the village. A joint operation between Gasum and Biotehdas will involve the construction of a biogas upgrading facility in the Ekokem Circular Economy Village located in Riihimäki, and a gas network connection and a gas pipeline section approximately 10 km long.
The quarter in brief:
Financial performance in the quarter ended on 30 September was disappointing. Scheduled maintenance shutdowns in Sweden, Finland and Denmark in September affected performance, as did the shutdown of one rotary kiln in Denmark, which limited production capacity from the end of June until the end of August. As a result, the Group's profitability fell from the comparison period a year earlier. Similarly, the low prices of electricity, district heating and recycled materials eroded profitability. One-off costs related to the planned integration and change projects also taxed the Group's profit.
Ekokem Group key financials Q3/2015 (Q3/2014):
- Net sales increased to EUR 67.1 (47.4) million following the acquisition
- EBITDA amounted to EUR 9.6 (14.4) million, EBITDA margin was 14.3% (30.4%)
- Equity ratio at the end of the reporting period was 37.4% (54.9%)
- Net debt totalled EUR 112.6 (45.3) million
CEO Kaitue: “Our result for the third quarter is disappointing. However, we will continue with our determined efforts to deploy our Nordic circular economy strategy. In October, as part of our Nordic integration scheme, we launched a Group-wide efficiency programme to ensure our long-term competitiveness. Our business focus is on continuous improvement of our profitability and further enhancement of our operations.”
Major events after the end of the period
An efficiency programme launched in October, which will be implemented in all business units and support functions in Finland, Denmark and Sweden, is designed to reorganise and streamline operations and to fully leverage the synergy benefits derived from the Nordic mergers and acquisitions.
The programme is expected to generate annual cost savings of approximately EUR 10 million. At least 50% of the savings and all personnel-related savings are expected to be achieved during 2016, 30% in 2017, and 20% from 2018 onwards, as part of the continuous improvement of business operations. As part of the programme, savings programmes affecting personnel were also initiated in all Group countries with the objective of achieving annual cost savings of about EUR 3 million at Group level.
The Market Court overturned a procurement decision made by a procurement pool consisting of municipal waste treatment plants in Southwest Finland, under which Ekokem was awarded a contract to build a waste-to-energy plant in Salo. Ekokem submitted this bid in response to a public call for tender covering municipal waste recovery service procurement over a period of 25 years. In its decision, the Market Court concluded that when organising the public call for tender, the procurement pool had failed to comply with the legal rules concerning public procurement. The Court also ordered the procurement pool to organise a new call for tenders for the recovery of municipal waste.