Stock exchange release

Fortum January-September 2020 Interim Report: Seasonally weak Uniper quarter burdened Fortum’s results – Generation segment stable on good hedges

17 November 2020, 09:00 EET

FORTUM CORPORATION JANUARY-SEPTEMBER 2020 INTERIM REPORT 17 NOVEMBER 2020 AT 9:00 EET

This release is a summary of Fortum’s January-September 2020 Interim Report. The complete report is attached to this release as a pdf file. It is also available on the company's website at www.fortum.com/investors

July-September 2020

  • Comparable EBITDA was EUR 132 (295) million
  • Comparable operating profit was EUR -176 (153) million due to Uniper’s negative result in the third quarter
  • Operating profit was EUR 60 (124) million, impacted by a EUR 291 million sales gain from the divestment of the Järvenpää district heating operations and EUR -242 (-27) million of fair value change of non-hedge-accounted derivatives
  • Share of profits of associates and joint ventures was EUR 23 (106) million, the decline mainly related to Uniper reported as an associated company until 31 March 2020
  • Earnings per share were EUR 0.23 (0.20), of which EUR 0.33 (‑0.02) related to items affecting comparability
  • Net cash from operating activities before change in net margin liabilities totalled EUR 820 (236) million
  • Cash flow from operating activities totalled EUR 363 (262) million

January-September 2020

  • Comparable EBITDA was EUR 1,187 (1,213) million
  • Comparable operating profit was EUR 424 (793) million
  • Operating profit was EUR 1,186 (666) million, impacted by a EUR 722 million sales gain from the divestment of the Joensuu and Järvenpää district heating operations and a one-time, non-cash income statement impact of EUR -222 million from Uniper becoming Fortum’s subsidiary
  • Share of profits of associates and joint ventures was EUR 540 (678) million, the decline mainly related to Uniper reported as an associated company until 31 March 2020
  • Earnings per share were EUR 1.63 (1.27), of which EUR 0.75 (‑0.11) related to items affecting comparability
  • Net cash from operating activities before change in net margin liabilities totalled EUR 1,840 (1,411) million
  • Cash flow from operating activities totalled EUR 1,424 (1,753) million
  • Adverse effects of Covid-19 mainly in the Group’s Russian operations
  • Total consideration from disclosed divestments EUR 1.2 billion, including divestment of district heating operations in Joensuu and Järvenpää, majority stake in Nordic wind, and majority stake in Nordic charging operator
  • In March, Fortum became the majority owner in Uniper, consolidated Uniper as a subsidiary

Summary of outlook

  • The Generation segment’s Nordic generation hedges: approximately 85% at EUR 34 per MWh for the remainder of 2020, approximately 75% at EUR 33 per MWh for 2021, and approximately 40% at EUR 32 per MWh for 2022
  • The Uniper segment’s Nordic generation hedges: approximately 90% at EUR 29 per MWh for the remainder of 2020, approximately 85% at EUR 28 per MWh for 2021, and approximately 55% at EUR 24 per MWh for 2022
  • Updated: Capital expenditure, including maintenance but excluding acquisitions, is expected to be approximately EUR 600 million in 2020 (previously EUR 700 million). This includes approximately EUR 150 million (previously EUR 200 million) of solar and wind investments, which are subject to the capital recycling business model. This guidance does not include capital expenditure for the Uniper segment

Key figures

EUR million III/2020 III/2019 I–III/2020 I–III/2019 2019 LTM
Sales 14,049 1,060 27,736 3,894 5,447 29,289
Comparable EBITDA 132 295 1,187 1,213 1,766 1,740
Comparable operating profit -176 153 424 793 1,191 822
Operating profit 60 124 1,186 666 1,110 1,630
Share of profit/loss of associates and joint ventures 23 106 540 678 744 606
Profit before income taxes 106 198 1,690 1,274 1,728 2,144
Earnings per share, EUR 0.23 0.20 1.63 1.27 1.67 2.03
Net cash from operating activities before change in net margin liabilities* 820 236 1,840 1,411 1,658 2,087
Net cash from operating activities 363 262 1,424 1,753 2,015 1,686
Shareholders’ equity per share, EUR     14.10 13.96 14.61  
Financial net debt (at period-end)**     7,130   4,833  
Adjusted net debt (at period-end)**     9,640   4,978  
Interest-bearing net debt (at period-end)**     - 5,367 5,260  

* New subtotal added in the second quarter of 2020. Margin receivables and liabilities are included in financial net debt.
** Following the consolidation of Uniper, Fortum has updated its definition of net debt and uses financial net debt and adjusted net debt.

Fortum’s President and CEO Markus Rauramo:

"Fortum’s operating environment in the third quarter of 2020 was characterised by continued uncertainty caused by Covid-19, low Nordic power prices due to high hydrology, and the seasonally weak third-quarter results of the Uniper segment. Thanks to our prudent hedging and portfolio rotation, we managed reasonably well. We are also continuing our determined work to align the strategies of Fortum and Uniper which we will present in more detail at our upcoming Capital Markets Day in December.

Nordic power prices continued to be depressed throughout the quarter as the Nordic hydro reservoirs stayed around historically high levels. Especially the Nordic system price and Norwegian area prices were low, whereas prices declined clearly less in the Swedish and Finnish price areas that are the most significant to Fortum. The strong CO2-price supported the central European power prices and the spread between the German and Nordic prices remained wide.

The Covid-19 pandemic continued to shake the world economy in the third quarter of 2020. As earlier this year, the impact on the Nordic power demand was limited. Out of Fortum’s businesses mainly our Russian operations continued to experience some adverse effects from lower power and heat demand.

The Generation segment’s results were burdened by longer nuclear maintenance outages that reduced the nuclear power generation. However, the impact was partly offset by the higher achieved power price and higher hydro volumes. Thanks to our higher hedge price and fairly high hedge level, we were able to counter the effect of the lower Nordic spot prices. The Consumer Solutions segment continued to improve and the results of the City Solutions segment were stable.

As highlighted already in previous quarters, Uniper’s strong first-quarter results were partly attributable to a shift between quarters. This further burdened the segment’s results in the third-quarter, which is typically a weaker quarter due to seasonal variations within the year. Uniper’s seasonally weaker third quarter did not affect its full year guidance as Uniper reiterated the outlook of an adjusted EBIT of EUR 800 to 1,000 million for 2020.

At Fortum, continuous portfolio optimisation is a mainstay. In August, Fortum closed the sale of the Järvenpää district heating business and recorded a tax-exempt capital gain of EUR 291 million. We have also proceeded with the strategic reviews of our Polish, Baltic, and Swedish district heating businesses as planned and are reviewing all alternatives, including possible divestments. We continue to put focus on our balance sheet and securing our overall financial strength. Equally, maintaining a credit rating of at least BBB continues to be a priority.

In September 2020, the EU Commission proposed to tighten the 2030 target for greenhouse gas emission reductions from the current 40% to 55% compared to 1990. This is a clear step in the right direction, even though it falls slightly short of the EU Parliament’s proposal of a 60% reduction. We fully support the Commission’s proposal and emphasise the necessity of extending the emission trading system to other sectors such as heating and transport, as an efficient tool for achieving the target.

Since I took office as CEO of Fortum, my main attention has been on the collaboration with Uniper and driving the strategy alignment. We are working on updating Fortum’s strategy and setting targets for the whole Group, and will present them at our upcoming Capital Markets Day on 3 December 2020."

Espoo, 16 November 2020

Fortum Corporation

Board of Directors

Live webcast

A combined live webcast and teleconference for media, investors, and analysts will be arranged online on 17 November at 11.00 EET. For the webcast, use the link on www.fortum.com/investors.

Questions can be asked live via Teams meeting app. A link to Teams is available in the webcast start window.

A recording of the webcast as well as the transcript will be published at www.fortum.com/investors after the event.

Further information:

Investor Relations and Financial Communications: Ingela Ulfves, tel. +358 40 515 1531, Måns Holmberg, tel. +358 44 518 1518, Rauno Tiihonen, tel. +358 10 453 6150, Pirjo Lifländer, tel. +358 40 643 3317, and investors@fortum.com

Media: Pauliina Vuosio, tel. +358 50 453 2383

The condensed Interim Report has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU. The interim financials have not been audited.

Fortum’s Capital Markets Day

Fortum’s Capital Markets Day 2020 webcast will be held on 3 December 2020. More information at www.fortum.com/cmd.

Financial calendar in 2021

Fortum Corporation’s Financial Statements Bulletin for the year 2020 will be published on 12 March 2021 at Approximately 9.00 EET.

Fortum will publish three interim reports in 2021:

  • January-March on 12 May 2021 at approximately 9.00 EEST
  • January-June on 17 August 2021 at approximately 9.00 EEST
  • January-September on 12 November 2021 at approximately 9.00 EET

Fortum’s Financial Statements and Operating and Financial Review for 2020 will be published in week 11 at the latest.

Fortum's Annual General Meeting 2021 is planned to take place on 28 April 2021 and the possible dividend-related dates are:

  • Ex-dividend date 29 April 2021
  • Record date for dividend payment 30 April 2021
  • Dividend payment date 7 May 2021

Uniper will publish its 2020 Annual Report on 4 March 2021.

Uniper will publish its interim reports in 2021:

  • Financial Results January-March 2021 on 6 May 2021
  • Financial Results January-June 2021 on 10 August 2021
  • Financial Results January-September 2021 on 5 November 2021

Distribution:

Nasdaq Helsinki
Key media
www.fortum.com

More information, including detailed quarterly information, is available on Fortum’s website at www.fortum.com/investors