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2019 Fortum improved its financial results substantially and reached long-term 10% target for ROCE

Fortum operates power plants, generates and sells electricity and heat, produces waste-to-energy and circular economy solutions, as well as energy-sector expert services and various consumer solutions. Fortum is one of the leading heat producers. Two thirds of Fortum's power production is hydro and nuclear. The company also provides waste services for the power generation industry and services for environmental construction.

The company has operations in 10 countries, with the key markets in the Nordic and Baltic countries, Russia, Poland and India, and is the largest power generator and the largest electricity retailer in the Nordic countries. Fortum employs more than 8,000 energy-sector professionals.

Fortum's business divisions are: Generation
responsible for Nordic power production, including nuclear, hydro and thermal power production, as well as the wind operations; City Solutions - responsible for heating and cooling, waste-to-energy, biomass and other circular economy solutions as well as the solar operation; Consumer Solutions which comprise electricity and gas retail businesses in the Nordics and Poland; the Russia segment which comprises power and heat generation and sales in Russia; Other Operations which includes M&A and Solar & Wind Development, Technology and New Ventures.

Closing the offer on Uniper shares in June 2018 was the most significant milestone during the year. At the end of 2018, Fortum held 49.99% of Uniper shares and voting rights. In 2019 Fortum acquired an additional minimum stake of 20.5% in Uniper and became the majority owner.

According to the Financial Statements Bulletin 2019, the total sales turnover of the Company increased by 4% in 2019 from EUR 5,242 million to EUR 5,477 million. The total sales turnover in 2017 amounted to EUR 4,520 million.

Comparable operating profit for 2019 increased by 21% or by more than EUR 200 million from EUR 1.0 billion in 2018 to EUR 1.2 billion in 2019, mainly driven by a clear result improvement in the Generation segment and also supported by improved results in the Consumer Solutions and Russia segments.

Comparable EBITDA increased by 16 % and amounted to EUR 1,766 million in 2019 compared to EUR 1,523 million in 2018. Operating profit decreased slightly by 2% and amounted to EUR 1,110 million in 2019 compared to EUR 1,138 million in 2018.

In addition, share of profits from associated companies and joint ventures increased to almost EUR 750 million in 2019 compared to EUR 38 million in 2018, mainly related to Fortum’s share of Uniper’s profit, largely thanks to its share of Uniper’s profits.

Cash flow increased to more than EUR 2 billion in 2019. Comparable net debt-to-EBITDA was 3.0 in 2019 compared to 3.6 in 2018.
Dividend value of EUR 1.10 per share for the calendar year 2019 remained unchanged. Earnings per share were EUR 1.67 in 2019 compared to EUR 0.95 in 2018.

Very strong cash flow from operating activities was achieved and amounted to EUR 2,015 million in 2019 compared to EUR 804 million in 2018. At the end of 2019 return on capital employed (ROCE) achieved the targeted 10%. Net cash from operating activities was strong and increased by EUR 1,211 million from EUR 804 million in 2018 to EUR 2,015 million in 2019, mainly impacted by a EUR 356 million change in settlements for futures on Nasdaq Commodities, the improved comparable EBITDA of EUR 1,766 million, dividends received EUR 239 million, and a EUR -33 million change in working capital. The impact of the change of realised foreign exchange gains and losses was EUR 14 million in 2019.

Net cash from investing activities was EUR -369 million in 2019, compared to EUR -4,398 million in 2018. The comparison period in 2018 included the acquisition of Uniper shares. Capital expenditure increased by EUR 116 million to EUR 695 million.

Cash flow before financing activities increased significantly to EUR 1,646 million in 2019, compared to EUR -3,594 million in 2018.
The net increase in liquid funds was EUR 806 million in 2019, compared to EUR-3,268 million in 2018.

Fortum plans to make divestment of the Joensuu district heat business in January 2020 and announced the sale of 80% share of Nordic wind portfolio. Thus, Fortum will achieve a long-term financial target of a comparable net debt-to-EBITDA ratio of around 2.5.
All operational segments improved their results. The sales turnover in Generation increased by 16% in 2019. In City Solutions the result recovered after a disappointing third quarter. The sales turnover reached EUR 1,200 million in 2019, representing an increase of 8% over the previous year.

Consumer Solutions continued to pay off with comparable EBITDA increasing for the ninth consecutive quarter and by 28% in 2019 compared to the prior year. In the Russia segment comparable EBITDA increased by 12% from EUR 417 million in 2018 to EUR 469 million in 2019, the improvement in the heat business supported the results.

In 2019, Fortum’s R&D expenditure was EUR 67 million, or 1.2% (1.1%) of sales. In 2018, Fortum’s R&D expenditure was EUR 56 million, or 1.1% of sales compared to EUR 53 million or 1.2% of sales in 2017.

Total goodwill in the balance sheet as of 31st December 2019 amounted to EUR 612 million, compared to EUR 588 million in 2018 and EUR 613 million in 2017.

As the majority owner, Fortum will focus on cooperation and strategic alignment with Uniper in the future. The two companies are already well-positioned to drive forward the European energy transition. Together, both companies can benefit from a further aligned strategic focus to enable a carbon-neutral Europe by 2050.