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Vapo Group Interim Report 1 May–31 August 2019

May–August 2019 (compared with May–August 2018): 

  • Group turnover in May–August was EUR 134.2 million (EUR 90.8 million)
  • The operating margin (EBITDA) was EUR 18.4 million (EUR 7.3 million), or 13.7% (8.1%) of turnover
  • The operating loss was EUR -5.3 million (EUR -10.6 million), or -4.0% (-11.6%) of turnover, including EUR 4.3 million (EUR -0.4 million) in non-recurring items 
  • Free cash flow before taxes was EUR 14.7 million (EUR -26.5 million).
  • Gross investments were EUR 11.2 million (EUR 10.6 million).
  • Earnings per share were EUR -267 (EUR -282)
  • The ratio of interest-bearing net debt to operating margin (net debt/EBITDA) was 3.5 (3.7)
  • The equity ratio was 48.8% (50.4%)
  • Return on invested capital % (ROIC, previous 12 months) 5.9 (4.3)

Good strategic growth and profitability improvement 

The Group’s turnover for the first third of the financial year amounted to EUR 134.2 million (EUR 90.8 million). The good development of sales was mainly attributable to the Grow&Care division, which nearly doubled its sales compared to the previous year, primarily due to the BVB Substrates acquisition. The Energy division also improved its sales slightly year-on-year in the first reporting period of the financial year, mainly due to increased heating deliveries. 

In terms of profit performance, the summer season was loss-making in the energy business, as expected. During the summer season, operations are focused on fuel production in a period when customers’ heating demand is at its lowest. The Grow&Care divisions operating result was also slightly below the comparison period due to the tighter competitive situation. The Group’s operating loss for the first third of the financial year was EUR -5.3 million (EUR -10.6 million). The comparable operating result showed a slight year-on-year improvement at EUR -9.6 million (EUR -10.2 million), and the reported operating result was improved by a significant positive recognition of revenue related to previous businesses. The operating margin also improved significantly, amounting to EUR 18.4 million (EUR 7.3 million). This includes a positive effect of EUR 2.5 million arising from the adoption of the new IFRS 16 standard effective from 1 May 2019. 

The Group’s cash flow during the reporting period amounted to EUR 14.7 million (EUR -26.5 million). The positive development of cash flow was mainly due to efficiency improvement measures with regard to the turnover of fixed assets as well as the improved operating margin. 

CEO Vesa Tempakka:

The progress of the new strategy is transforming Vapo into an international biomass conglomerate – as much as 2/3 of the Group’s turnover in the first third of the year came from the Grow&Care division 

Vapo’s new business strategy has now been successfully implemented for 16 months. The new strategy reduces the significance of energy peat to the Group and pursues growth in the international professional growing media markets while also creating new biomass-based higher added value products for new uses. 

Kekkilä-BVB, which started its operations at the beginning of 2019, is the leading European operator in the growing media market and its products are exported to more than 100 countries. This is aimed at increasingly transforming Vapo, which is known as an energy company, into a versatile international refiner of peat and other types of peatland biomass. 

The Kekkilä-BVB merger is already clearly reflected in Vapo Group’s figures for the first third of the financial year. Turnover was 48% higher than in the comparison period, operating margin increased by 152% and the reported operating result was EUR -5.3 million, compared to EUR -10.6 million in the corresponding period last year. The first third of the financial year is typically loss-making for Vapo due to the recognition of expenses for the production season during a time when energy and fuel sales volumes are at their lowest. The first third of the financial year is a high sales season for Kekkilä-BVB.

The first third of the financial year was strong in terms of cash flow, which increased by EUR 41.2 million year-on-year. The higher cash flow was particularly due to the improved operating margin and the measures already taken to increase the turnover of working capital. 

The transformation of the Group’s business is illustrated by the fact that the Grow&Care division’s turnover now represented 67% of the Group’s turnover, compared to 51% in the corresponding period last year. Another strategically significant event during the reporting period was the start of construction on Vapo’s first activated carbon production facility in Ilomantsi in July. Production at the plant is scheduled to begin in autumn 2020. 

The Group’s peat production went as planned in all of the production countries. We now have reserves of high-quality peat to satisfy the demand of nearly one and a half seasons, which means that we can meet our customers’ needs even under exceptional circumstances. 

Vapo is transforming in accordance with our strategy but, together with our customers, we need a sufficiently long transition period as we move toward a carbon-neutral Finland. The company supports the Finnish government’s energy and climate policy, according to which the use of energy peat should be halved by 2030. Vapo has set a target of halving the CO2 emissions of its own facilities by the same year. The rising price of emission rights effectively guides the use of peat in the direction targeted by the Finnish government. 

Energy peat generates approximately 20% of the Group’s annual turnover, but its significance is still more significant with regard to cash flow and the operating margin. The company’s goal is to make the New Businesses division a significant third source of positive cash flow and operating result for the Group. 

During the financial year, Vapo has continued to make significant investments in improving occupational safety in all of its operating locations in various countries. 

Outlook for the remainder of the financial year, to 31 December 2019 

Due to the upcoming change in the financial year, Vapo Group does not issue an outlook statement for this exceptionally short financial year of eight months, which will end on 31 December 2019, as previously announced. The information presented in this Interim Report is unaudited.


For further information, please contact: 

  • Vesa Tempakka, CEO, Vapo Oy, tel. +358 20 790 5999
  • Jarmo Santala, CFO, Vapo Oy, tel. +358 20 790 5991
  • Ahti Martikainen, Director, Communications and Public Affairs, Vapo Oy, tel. +358 20 790 5608