CEO’s Review

The challenging business environment burdened the result for the first half of the year – The company is preparing for the green transition through significant investments

“The first half of 2022 was exceptional in many ways. The Russian attack on Ukraine and its impacts have delayed the start of projects in the spring, and the high inflation rate and problems with the availability of materials have caused challenges worldwide. At the same time the company has invested significantly for the green transition, which demand has grown rapidly.

Energy self-sufficiency is increasing considerably in Europe because of the Russian attack on Ukraine, and the process to end dependence on Russian oil, gas and coal production is progressing rapidly in many sectors. This provides us with a great deal of new opportunities to implement zero-emission energy solutions through our extensive range of services, which has further increased as a result of corporate transactions this year.

Because of the global situation, we anticipated in our business review for the first quarter that the second quarter will be the weakest quarter of the year in terms of profitability. The strike in the ICT sector in the spring also affected our business operations, especially in Connectivity. In addition, the Smart Industry business reflects the completion of the Olkiluoto nuclear power plant project and the resulting decrease in volumes. The Power segment’s performance in the first half of the year was better than expected despite the cost increases caused by inflation, and its improved result reflects its investments in renewable energy projects.

However, our performance was reasonable in the first half of the year despite the difficult circumstances. We achieved EUR 113.6 million (114.9) in revenue and EUR 5.0 million (7.4) in adjusted EBITDA. Our operating profit was EUR 0.5 million (2.4), and our profit margin was 0.4% (2.1). The adjusted EBITDA includes EUR 2.4 million in investments in offshore wind power and a new ERP system.

With a gloomier global economic outlook, we issued our new financial guidance after the review period on 27 July 2022. Our adjusted EBITDA is expected to be EUR 6–12 million in 2022 (previously EUR 15–20 million), and our revenue is expected to be EUR 245–265 million in accordance with our previous guidance. Our order backlog has remained at a good level, but the company’s performance will continue to be burdened by global challenges during the second half of the year. We were able to negotiate the cost pressure caused by increased inflation to the new contracts and partially to the order backlog contracts during the first half of the year.

In May, Enersense organised its first ever Capital Markets Day event, during which we published our new long-term financial targets and described the company’s adjusted business model. Our new financial targets describe the company’s business model more accurately after the corporate transactions implemented earlier and our expansion in the value chain (Enersense Offshore Ltd, which specialises in offshore wind power; Megatuuli Oy, which develops onshore wind power project; and our investment in P2X Solutions, Finland’s first green hydrogen production company).

Our expansion in the value chain – from project design, implementation and maintenance to being a key producer, owner and project developer of zero-emission energy – makes our business operations more stable and profitable and reduces project risks. From here, we are seeking to achieve EUR 500 million in revenue and EUR 100 million in profitability by 2027.

In June, we signed a significant agreement on the acquisition of Voimatel Oy, a company specialising in critical infrastructure and energy services, from KPY Cooperative through an exchange of shares. KPY made an additional investment of EUR 2.2 million in Enersense in connection with signing the agreement. The execution of the share transaction is conditional on approval from the Finnish Competition and Consumer Authority.

The acquisition of Voimatel will make Enersense a more capable provider of information and energy network solutions and a partner in critical infrastructure and security of supply.

The acquisition will also substantially strengthen our offering of energy services such as solar energy and charging services for electric transport. Enersense sees good growth potential in solar power, and solar power projects support our role in implementing zero-emission energy projects. In the spring, we announced that we would explore opportunities to build a 20 MW solar power plant of our own in Mäntyluoto in Pori, on the same site where Enersense Offshore Ltd operates.

If the Voimatel transaction is implemented, Enersense’s revenue will increase to around EUR 370 million with the number of employees increasing to around 3,000. Highly competent and motivated employees will continue to be a key factor in enabling Enersense’s growth and development. We believe that we will continue to be able to provide our employees with interesting career paths and ensure that our understanding and expertise remain at a high international level.”

Jussi Holopainen
CEO