Lemminkäinen reviews its strategy for 2014-2016 and changes its reporting structure
LEMMINKÄINEN CORPORATION STOCK EXCHANGE RELEASE 30 JULY 2014 AT 08:01 A.M
LEMMINKÄINEN REVIEWS ITS STRATEGY FOR 2014–2016 AND CHANGES ITS REPORTING STRUCTURE
Lemminkäinen has reviewed its strategy and sharpens its strategic focus after the divestment of technical building services. To enable future profitable growth, the company will in the short term concentrate on improving its competitiveness, profitability and financial strength.
In the long term, the company seeks profitable growth by leveraging its strong market position in the infrastructure construction in Northern Europe. The company estimates that the outlook for infrastructure construction is good especially in Norway and Sweden. In building construction in Finland and Russia, where the market outlook continues to be uncertain, Lemminkäinen is focusing its operations on profitable customer segments and areas.
Short-term priorities: Strengthen the balance sheet and improve efficiency
Lemminkäinen is committed to strengthen its balance sheet by EUR 100 million. The company plans to continue divesting some of its operations and assets which are not directly linked to the above mentioned strategy. In addition, it is also planning an equity issue in autumn 2014. A project to release working capital is ongoing. Lemminkäinen will also renew its capital allocation principles and process and actively seek alternative financing models to construction projects.
Following the Deliver 2014 efficiency improvement programme, Lemminkäinen will start a new business excellence programme focusing initially on improved tendering process, project management, resource planning as well as rightsizing its machinery fleet. To enable efficient implementation of the business excellene initiatives, Lemminkäinen is in the process of reviewing its management model and streamlining its business segment organisation structures.
Long-term priorities: Profitable growth in infrastructure construction in Northern Europe and more focused building construction in Finland and Russia
Lemminkäinen aims to grow into one of the leading providers of demanding infrastructure solutions for both the public sector and selected industries in Northern Europe. In paving, where Lemminkäinen already has a leading position, the Company will continue measures to improve its competitiveness through enhanced operational and capital efficiency. The profitable growth in infrastructure projects will be based on Lemminkäinen’s technical know-how and versatile competences.
In building construction, Lemminkäinen will focus on the growing metropolitan areas of Helsinki and St Petersburg, competing with attractive sites and high technical quality. In both countries, the company continues to decrease the share of competitive contract-based construction. Due to the economic and political instability, Lemminkäinen does not expect that its net sales in Russia increase significantly in the next few years.
Lemminkäinen’s long-term financial targets are:
- Return on investment 18% over the cycle
- Equity ratio at least 35%
In addition, Lemminkänen has defined a short-term financial target of reaching return on investment of over 15% by the end of 2016.
On the long term, Lemminkäinen is aiming for a stable distribution of dividends, with at least 40 per cent of the profit for the financial year distributed to shareholders. The company will not pay any dividends for 2014 without the consent of certain lenders.
President and CEO Casimir Lindholm (as of 1 August 2014) comments:
“Within the past few months we have started Lemminkäinen’s turnaround. Thanks to the measures already taken during Q2/2014, our cost structure is lighter and our balance sheet is stronger. Our first priority for 2014 is to safeguard that we implement all the efficiency initiatives deriving from our Deliver 2014 efficiency improvement programme, and secure a firm foothold for Lemminkäinen’s future success.”
“The next step is to ensure that we can fully leverage our strong market position in infrastructure construction. This will require continuously more efficient internal operations, adapting the best practices globally, developing our know-how and improving customer relations. The same business excellence targets apply to our building construction business, where we will focus on the profitable customer segments and areas in Finland and Russia.”
New reporting structure
Lemminkäinen aligns its reporting structure with its updated strategy as of 1 August 2014. The interim report for January-September 2014 will be based on the new reporting structure.
The new reportable business segments will be:
- Infrastructure construction
- Building construction, Finland
- Russian operations
The previous Scandinavia business segment will be integrated into the Infrastructure segment. The building construction business in Sweden will be reported under Infrastructure construction. Russian operations will include both building construction and infrastructure construction activities.
Berndt Brunow, Chairman of the Board of Directors and interim President and CEO
Tel. +358 2071 54524
Katri Sundström, Head of Investor Relations
Tel. +358 2071 54813
NASDAQ OMX Helsinki
Together with our customers we create conditions that make living, working and travelling functional, safe and healthy. We operate in northern Europe and employ about 6,000 experts. In 2013, our net sales were about EUR 2.0 billion. Lemminkäinen Corporation's share is quoted on NASDAQ OMX Nordic Exchange Helsinki. www.lemminkainen.com