Review by the President and CEO

Dear Lemminkäinen shareholders,

We have completed the first phase of the strategy period launched in 2014. We now have a substantially stronger balance sheet structure and financial position. From March 2014, our operating capital has decreased from EUR 691 million to EUR 388 million and our interest-bearing net debt from EUR 364 million to EUR 81 million. In addition, we have reduced the nominal amount of outstanding hybrid bonds from EUR 140 million to EUR 35 million. During the past two years, we have also divested non-core businesses and shifted our focus in Russia from residential development to negotiated contracting in building construction.

In 2016, our operating profit improved year-on-year. The business segments that improved their result from the comparison year were Paving and Building construction, Finland. The majority of our profit improvement, EUR 27 million, resulted from reimbursements and lowered provisions related to the asphalt cartel decisions made by the Helsinki Court of Appeal in October 2016. We are satisfied that since the decisions were made we have reached settlement agreements with 17 municipalities and the State of Finland. The case may still continue in the Supreme Court with those 19 municipalities with whom we have not settled.

Going forward, we will focus on improving our result by developing the operational efficiency of our business operations. The construction industry is known for each work phase involving some period of waiting. We are actively seeking the means to eliminate this unnecessary waste and consequently achieve more efficient project completion. Paving and mineral aggregates production processes also consume a lot of energy. By adapting new, more energy-efficient processes, we can save both costs and natural resources.

For 2017, the outlook for our operating environment is stable. We continue to seek growth in infra projects, especially in Sweden and Norway where there are many planned or ongoing projects that are suitable for us. We have renewed our organisation and ways of working so that they support our growth targets better.

Unfortunately, our lost time accident rate rose in 2016. With this development we cannot be satisfied. We are working systematically to stop this negative trend and to see a fall in the lost time accident rate again.

Our result is made possible by satisfied customers and competent and motivated personnel. We need to look after the well-being of our personnel every day. Furthermore, we must see to it that the quality of our services and customer satisfaction remain high when we develop our operations. I would like to thank our employees, customers and other stakeholders for the good and constructive co-operation last year.

Casimir Lindholm
President and CEO


Updated 1 March 2017