Dear Shareholders,
Lemminkäinen celebrated its centenary last year. Those hundred years have seen great successes and unfortunate setbacks, but above all determined efforts ensure continual development.
In November 2009, we began to implement our new strategy. Our strategy’s primary goal is profitable growth, which we will achieve by developing more unified working methods. Our vision – The best way to build – encapsulates our desire to be not only the most sought-after partner to our customers, but also the best employer in the construction industry and the most appealing investment.
Seeking growth after the recession
The impact of the recession in the construction industry was still evident during 2010. Already at the start of the year, we estimated that our net sales would remain at 2009 level.
We balance out economic fluctuations by spreading our construction operations over several sectors. 2010 was a good year for all areas of Infrastructure Construction in Finland, while only residential construction recovered in the Building Construction business sector. Situation remained difficult for Technical Building Services. Outside Finland, we achieved good results in Sweden, Denmark and Russia.
We decided to divest our roofing business which is one of our traditional fields. Developing this business would have required substantial investments. We decided to direct these resources elsewhere.
Strengthening our position in growth areas
In line with our strategy, we are seeking growth in Russian residential construction and Nordic infrastructure construction. We made three acquisitions in Norway, the last of which is awaiting approval from the Competition Authority. These acquisitions strengthened our position and competitiveness.
We have a good reserve of plots in central locations in St Petersburg. In February of this year, we announced a project to construct over 2,000 units at our newest site.
Profitability must be improved
Although our business operations have shown positive signs of improvement, we cannot be satisfied with our result. Some risks related to pre-recession projects realised. Our earnings were burdened by non-recurring expenses from investments in operational development. Weather conditions have also taken their toll: maintenance projects became more complicated and our productionseason was cut short.
We are expecting a definite improvement in our 2011 result. The markets are recovering and both our order book and its margin level are stronger than in the previous year. And the fruit of last year’s development and efficiency-boosting measures will already be evident in this year’s result.
We have overhauled operational processes so that resources can be directed to profitable areas. We’ve also enhanced project management. At Group level, we are seeking cost-effectiveness and best practices by standardising our working methods in, for example, support services and procurements.
A more solid financial footing
One of our major achievements of last year was stabilising our financial position. We carried out a directed share issue in early 2010 and floated a bond in the autumn. We also worked to improve cash flow management and, towards the end of the year, agreed on credit facilities that place us on a more solid footing to further develop the company.
Our year-end equity ratio – 35.2 per cent – was in line with our targets.
The best way to build
We will continue to work on renewing Lemminkäinen. We will improve efficient cooperation that combines all of our diverse construction expertise. We will be seeking cost-effectiveness by harmonising our operations. We will also develop our corporate responsibility themes. In 2010, we invested in improving personnel competence and occupational well-being in particular. This year, we will be focusing on environmental responsibility. Enhancing both our social and environmental responsibility also has a direct benefit for our customers.
Satisfied customers and competent personnel are the best path to profitable growth, which in turn creates value for our shareholders.
Timo Kohtamäki
President and CEO
Source: Lemminkäinen's Annual Report 2010