Lemminkäinen Half Year Financial Report 1 January - 30 June 2017
LEMMINKÄINEN CORPORATION STOCK EXCHANGE RELEASE 27 JULY 2017 AT 8:00 A.M.
LEMMINKÄINEN HALF YEAR FINANCIAL REPORT 1 JANUARY – 30 JUNE 2017
April‒June 2017 (4‒6/2016)
- On 19 June 2017, Lemminkäinen announced a plan to combine with YIT Corporation to create a platform to grow to one of the leading urban developers in the Northern European construction market. The combination is intended to be completed on either 1 November 2017 or 1 January 2018, as possible.
- Order inflow was EUR 426.1 million (382.8).
- Order book at the end of the period amounted to EUR 1,647.4 million (1,495.7).
- Net sales totalled EUR 466.0 million (457.1).
- Operating profit amounted to EUR 15.9 million (21.2), or 3.4% (4.6) of net sales. The operating profit includes EUR 1.8 million transaction costs related to the planned combination of Lemminkäinen and YIT.
- Profit for the period was EUR 9.4 million (12.3).
- Earnings per share were EUR 0.38 (0.48).
- Cash flow from operating activities totalled EUR 4.0 million (25.6).
- Equity ratio was 34.7% (33.8) and gearing 53.3% (52.2) at the end of the review period.
- Interest-bearing net debt at the end of the review period was EUR 156.8 million (165.2).
January‒June 2017 (1‒6/2016)
- Order inflow was EUR 850.4 million (783.3).
- Net sales totalled EUR 706.3 million (673.8).
- Operating profit amounted to EUR -17.0 million (-10.2), or -2.4% (-1.5) of net sales. The operating profit includes a EUR 3.4 million compensation paid by Lemminkäinen related to the Helsinki Court of Appeal’s decision regarding breach of the Finnish environmental protection law and EUR 1.8 million transaction costs related to the planned combination of Lemminkäinen and YIT.
- Profit for the period was EUR -21.0 million (-15.6).
- Earnings per share were EUR -0.96 (-0.83).
- Cash flow from operating activities totalled EUR -44.8 million (7.2).
Profit guidance for 2017
The profit guidance for 2017 remains intact. Lemminkäinen estimates that its net sales in 2017 will grow from 2016 (EUR 1,682.7 million). Operating profit (IFRS) in 2017 is expected to improve from EUR 45.1 million which reflects the operational performance in 2016.
 Operational performance EUR 45.1 million has been calculated by deducting from Group IFRS operating profit (EUR 67.6 million) reimbursements of EUR 19.4 million and lowered provisions of EUR 8.0 million related to asphalt cartel decisions made by Helsinki Court of Appeal and by adding write-offs of EUR 4.9 million related to non-core businesses.
|Key figures, IFRS||4-6/2017||4-6/2016||Change||1-6/2017||1-6/2016||Change||1-12/2016|
|Building construction, Finland||M€||155.8||141.0||14.8||269.6||254.1||15.5||581.2|
|Other operations and Group eliminations||M€||-9.3||-10.9||1.6||-15.2||-10.1||-5.1||-27.7|
|Building construction, Finland||M€||7.9||3.7||4.2||8.5||3.0||5.5||17.2|
|Building construction, Finland||%||5.0||2.6||3.1||1.2||3.0|
|Profit for the period||M€||9.4||12.3||-2.9||-21.0||-15.6||-5.4||38.0|
|Earnings per share for the period, basic||€||0.38||0.48||-0.10||-0.96||-0.83||-0.13||1.27|
|Earnings per share for the period, diluted||€||0.38||0.48||-0.10||-0.96||-0.83||-0.13||1.26|
|Cash flow from operating activities||M€||4.0||25.6||-21.6||-44.8||7.2||-52.0||131.7|
|Key figures, IFRS||30 June 2017||30 June 2016||Change 6/17 vs 6/16||31 March 2017||Change 6/17 vs 3/17||31 Dec 2016|
|Balance sheet total||M€||1,018.0||1,055.5||-37.5||931.0||87.0||968.0|
|Interest-bearing net debt||M€||156.8||165.2||-8.4||137.6||19.2||81.1|
|Return on capital employed, rolling 12 months||%||11.0||4.6||11.6||11.3|
1) Equity ratio, if hybrid bonds were treated as debt: 6/2017: 30.6%, 6/2016 26.4% and 12/2016: 35.4%.
2) Gearing, if hybrid bonds were treated as debt: 6/2017: 73.8%, 6/2016 95.0% and 12/2016: 38.8%.
President and CEO Casimir Lindholm:
“In the second quarter, our net sales grew slightly year-on-year,” says Casimir Lindholm, President and CEO. “Our operating profit decreased year-on-year. Operating profit includes EUR 1.8 million transaction costs related to the planned combination of Lemminkäinen and YIT. The decline was mainly driven by the Paving segment, where the season start was delayed due to exceptionally cold weather. In Infra projects, lower operating profit was mainly due to lower margins in the Baltic countries. Building construction, Finland improved its result, which was supported by higher volumes and margin improvements. In Russian operations, the result also improved due to higher volumes in building construction.”
“Our order book developed favourably during the second quarter. Of our segments, Building construction, Finland and Russian operations have strong order books. In Paving and Infra projects we are still seeking order book growth. The market outlook in our main market area remains positive, which should support our growth targets. We have also strengthened our organisation in Infra projects Sweden as planned.”
“On 19 June 2017, we and YIT Corporation announced a plan to combine the two companies. The combination is expected to create significant value for the shareholders of the combined company through decreased sensitivity to economic cycles and improved competitiveness providing a strong platform for growth. The combination is intended to be completed on either 1 November 2017 or 1 January 2018, as possible.”
“During 2017, we will continue to focus on improving our operational efficiency by improving our processes as well as material and energy efficiency.”
In Finland, the total volume of construction is expected to grow slightly in 2017. Residential construction overall is estimated to remain at a good level, although investor demand is expected to decline somewhat from the high levels witnessed in 2016. Demand for apartments will still be focused on small units in urban growth centres. Non-residential construction is estimated to remain stable, due to individual major projects and public sector works. Renovation is expected to grow moderately due to increasing urbanisation and public sector works.
Infrastructure construction is expected to grow approximately 2% in 2017. The Government's decisions regarding transport projects in the General Government Fiscal Plan as well as major cities’ investments in transportation infrastructure improve the outlook for both paving and infra projects. The rock engineering market is slowing down. The state's planned investments in basic road maintenance are expected to keep demand stable for paving in 2017. Demand for infra projects is maintained by complex projects in urban growth centres and industrial investments but the competition is intense.
In Norway and Sweden, infrastructure construction is boosted by multi-year, state-funded traffic infrastructure development programmes. In both countries, infrastructure construction is expected to grow in 2017. Large-scale road and railway projects are ongoing or planned near urban growth centres in Sweden and Norway, which will increase demand for infra projects and paving. In addition, especially Norway is investing in the development and renewal of energy production.
In Denmark, demand for paving is expected to decline as public investments in road infrastructure are decreasing.
In Russia, economic growth is estimated to remain at a low level. The fluctuations in the price of oil are reflected in the currency exchange rate. In negotiated contracting in building construction, price competition is high but the reliability of the builder has become a competitive advantage. Construction and repair projects on major roads are expected to maintain demand for paving.
In the Baltic countries, the volume of infrastructure construction has started to grow.
A Finnish-language briefing for analysts and the media will be held at 12:00 noon (EET) on Thursday 27 July 2017 at Lemminkäinen’s head office. The street address is Salmisaarenaukio 2, Helsinki, Finland. Lemminkäinen's President and CEO Casimir Lindholm will present the Half year financial report. The presentation material can be found in Finnish and English at the company’s website, www.lemminkainen.com/investors.
Financial reporting in 2017
In 2017, Lemminkäinen’s financial reports are published as follows:
|9 February 2017||Financial statements bulletin 2016|
|Week 9||Annual report 2016|
|27 April 2017||Interim report 1 Jan – 31 March 2017|
|27 July 2017||Half year financial report 1 Jan – 30 June 2017|
|26 October 2017||Interim report 1 Jan – 30 Sep 2017|
Casimir Lindholm, President and CEO, tel. +358 2071 53378
Ilkka Salonen, CFO, tel. +358 2071 53378
Nasdaq Helsinki Ltd
Lemminkäinen is an expert in complex infrastructure construction and building construction in Northern Europe and one of the largest paving companies in its market. Together with our customers and 4,700 professionals we employ, we build a sustainable society. In 2016, our net sales were EUR 1.7 billion. Lemminkäinen Corporation’s share is quoted on Nasdaq Helsinki Ltd. www.lemminkainen.com