Lemminkäinen´s Interim Report, 1 January - 30 June 2011

LEMMINKÄINEN CORPORATION       INTERIM REPORT        4 AUGUST 2011 AT 8:00 a.m.

 

LEMMINKÄINEN'S INTERIM REPORT, 1 JANUARY - 30 JUNE 2011: Order book at a record high, infrastructure construction in good swing

 

Highlights for April-June 2011, compared with the corresponding period of the previous year:

  

  • The order book at the end of the period grew by 21% and amounted to EUR 1,734.8 million (1,430.2).
  • Q2 net sales were up 19% and amounted to EUR 550.0 million (460.3).
  • Operating profit for Q2 was EUR 20.6 million (19.5). Operating margin was 3.8% (4.2).
  • Pre-tax profit amounted to EUR 16.1 million (14.6).
  • Earnings per share were EUR 0.63 (0.60).
  • The acquisition of the Norwegian company Mesta Industri AS was concluded at the end of May. Lemminkäinen has recognised negative goodwill of EUR 8.1 million from the acquisition in Q2 operating profit. The new orders entered into the order book due to the acquisitionamount to EUR 70 million.

Highlights for January-June 2011, compared with the corresponding period of the previous year:

 

  • Net sales in January-June were up 18% and amounted to EUR 866.3 million (736.7).
  • Operating profit was EUR -7.4 million (-7.3) and the operating margin -0.9% (-1.0).
  • Pre-tax profit amounted to EUR -13.9 million (-17.7).
  • Earnings per share were EUR 0.03 (-0.92).
  • At the end of the review period, Lemminkäinen’s interest-bearing net debt was EUR 501.7 million (409.5).
  • Operating profit and pre-tax profit for January-June do not account for the sale of the roofing business.

 

Profit guidance for 2011:

Lemminkäinen keeps its earlier profit guidance intact. The Company estimates that in 2011 its net sales will increase and that its pre-tax profit will clearly improve on 2010. The estimate is based on the growth in the order book and its margins.

 

Key figures, IFRS, EUR million 4-6/
2011
4-6/
2010
Change 1-6/
2011
1-6/
2010
Change 1-12/
2010
Net sales 550.0 460.3 19% 866.3 736.7 18% 1,829.6
- of which operations outside Finland
 

180.1

154.1

17%

252.0

218.1

16%

543.5
Operating profit 20.6 19.5 6% -7.4 -7.3 -1% 29.6
Operating margin, %
 
3.8 4.2   -0.9 -1.0   1.6
Pre-tax profit 16.1 14.6 10% -13.9 -17.7 -21% 7.6
Earnings from discontinued operations
 

0.0

0.3
 
11.3

-1.0
 
-0.6
Result for the period
 
12.3 9.8 26% 0.6 -16.6   1.2
Earnings per share, EUR 0.63 0.60 5% 0.03 -0.92   0.02
Cash flow from operations -96.7 -47.0 over 100 -135.0 -96.9 39% -37.2

 

  

Key figures, EUR million 30.6.2011 30.6.2010 Change 31.12.2010
Order book 1,734.8 1,430.2 21% 1,226.4
of which unsold
 
222.6 149.6 49% 135.3
of which operations outside Finland
 
563.2 338.6 66% 294.3
Balance sheet total 1,399.5 1,186.9 18% 1,065.3
Interest-bearing net debt
 
501.7 409.5 23% 349.2
Equity ratio, % 26.1 30.1   35.2
Gearing, %
 
156.2 128.7   104.7
Return on investment (rolling 12 months), % 6.4 2.0   7.0

  

President & CEO Timo Kohtamäki:

"At the end of June, Lemminkäinen's order book was at an all-time high. Housing construction in Finland, special infrastructure contracting and operations outside Finland were the primary drivers of growth in our order book. Now that the Mesta Industri AS acquisition has gone through, we are one of the largest paving contractors in Norway and a major builder of infrastructure in the Nordic countries, in line with our strategy," says Timo Kohtamäki, President and CEO of Lemminkäinen.

"The trend in our Infrastructure Construction business was favourable in the first part of the year, and its earnings measured up to our expectations. The earnings trend of Building Construction was impacted by the small amount of income recognised from our own housing development in the first part of 2011 and the weak profitability of contracting. We estimate that 75 per cent of our own housing development in 2011 will be completed and recognised as income in the second half of the year. We assume that housing sales will remain at a good level, on a par with early 2011. The earnings of Technical Building Services were unsatisfactory."

"Our interest-bearing net debt grew year-on-year, primarily due to net sales growth and the amount of capital committed to our own housing development. During the first half of the year, we started a total of 627 units in our own housing development - in other words, we have almost doubled our start-ups compared with the previous year."

"We are forging ahead with actions to improve profitability. A number of measures are ongoing to boost the efficiency of procurements, for example. In addition, we are enhancing project and resource management. I believe that we will achieve our financial objectives for 2011 thanks to our robust order book and our good operations in the first half of the year," says Kohtamäki.

 

Outlook for 2011

The European credit crisis has increased uncertainty in the markets. If this continues, it may impact on the availability of financing and weaken the economic business environment. Finland's GDP is expected to see further growth of about 3-4 per cent this year. However, growth is forecast to slacken somewhat in 2012-2013.

According to the forecasts of the Confederation of Finnish Construction Industries RT, construction will increase by about five per cent in Finland this year. It is estimated that the construction of 31,000 new residential units will be started up in 2011, slightly less than in the previous year. Terraced houses and apartment houses account for about 20,000 of these units. Market-financed residential construction remains strong, but state-supported housing production will be down on the previous year. Lemminkäinen estimates that in 2011 it will commence the construction of a total of about 1,200 units in its own housing production in Finland, 20% more than in 2010. In addition, about 400 contracted residential units were already started up in the first half of the year.

The construction of business premises will see moderate growth in 2011. Lemminkäinen will build three new office buildings in the centre of Helsinki, valued at a total of about EUR 150 million. Construction work on the first site has already begun. The next two will be started up in spring 2012. In addition, several individual projects for the construction of business premises are ongoing around Finland.

There is still a great need for new housing in Russia, and Lemminkäinen estimates that it will start building about 500 units in its own housing development in St Petersburg in 2011. The Company expects that the housing project kicked off last year - comprising about 150 residential units - will be completed in the latter part of the year.

According to the estimates of the Confederation of Finnish Construction Industries RT and Euroconstruct, the total volume of infrastructure construction in Finland will decline in 2011. In Northern Finland, the mining industry is keeping the market for rock engineering at a good level. The pickup in building construction increases the demand for geotechnical engineering works, concrete products and mineral aggregates. Lemminkäinen has a good workload in infrastructure construction. In the case of paving works, 2011 is turning out to be on a par with 2010.

The volume of infrastructure construction in the other Nordic countries is expected to grow by 3-6 per cent in both 2011 and 2012. Government allocations for infrastructure development are substantially greater in Norway and Sweden than in Finland, and are spread over several years. In Sweden and Norway, growth in the energy supply sector will increase demand for infrastructure construction in the next few years. Lemminkäinen currently has power plant contracts ongoing in Sweden and Norway. The total value of these contracts is about EUR 60 million. Lemminkäinen has a solid workload in paving works in Norway and Denmark. Infrastructure construction in the Baltic countries remains at a low level.

Demand for technical building contracting and services are rising gradually on the heels of the growth in new building construction. Lemminkäinen expects that the trend in technical building services will improve towards the end of the year.

Lemminkäinen will keep its earlier profit guidance intact. The Company estimates that in 2011 its net sales will increase and that its pre-tax profit will clearly improve on 2010. The estimate is based on the growth in the order book and its margins.

 

Briefing

A Finnish-language briefing for analysts and the media will be held at 2.00 p.m. on Thursday, 4 August at Lemminkäinen's head office. The street address is Salmisaarenaukio 2, Helsinki, Finland. The interim report will be presented by President and CEO Timo Kohtamäki. Presentation material will be available in Finnish and English on the Company's website at www.lemminkainen.com.

Lemminkäinen Corporation's interim report for January-June 2011 is attached in full to this stock exchange release.

 

LEMMINKÄINEN CORPORATION
Corporate Communications

 

MORE INFORMATION:

Timo Kohtamäki, President & CEO, tel.+358 2071 53263

Robert Öhman, CFO, tel.+358 2071 53515

Katri Sundström, Investor Relations, tel.+358 2071 54813

 

ATTACHMENTS:

Interim Report, 1 Jan. - 30 June 2011

Tabulated section of the interim report

 

DISTRIBUTION:

NASDAQ OMX Helsinki Ltd

Key media

www.lemminkainen.com

 

Lemminkäinen Group operates in all areas of the construction sector. The Group's business sectors are building construction, infrastructure construction and technical building services. Net sales in 2010 were about EUR 2.0 billion, of which international operations accounted for roughly a quarter. The Group employs an average of 8,000 people. Lemminkäinen Corporation's share is quoted on NASDAQ OMX Nordic Exchange Helsinki.