LEMMINKÄINEN CORPORATION STOCK EXCHANGE BULLETIN 10 OCTOBER 2011 AT 09.00 A.M
Lemminkäinen specifies its strategic focus and launches an efficiency programme to improve profitability; international operations forms the fourth business sector
Lemminkäinen has specified its strategic focus for the strategic period ending in 2013. The company's main targets continue to be profitable growth and improving solvency. The focal point in businesses will be shifted to segments providing stronger profitability. In addition to this, Lemminkäinen launches an efficiency programme that is estimated to generate annual savings of EUR 50 million. Growth will be sought through international operations. In order to accelerate profitable growth and ensure Lemminkäinen's competitiveness in an international operating environment, the company is creating a new business sector – the company's fourth – out of its international operations.
Lemminkäinen is confirming its previous financial target levels for the strategic period ending in 2013:
• over 18 per cent return on investment
• equity ratio at least 35 per cent
• net sales growth at an average of 10 per cent
The dividend distribution policy stays intact and Lemminkäinen's goal is to distribute a minimum shareholders' dividend of 40 per cent of the company's profit for the financial year.
In its operations in Finland, Lemminkäinen will focus on competitiveness and improving profitability. In Building Construction the target is to increase the proportion of Lemminkäinen's own housing development to over 50 per cent (about 25% in 2010) and strengthen the company’s market share in residential construction. Another significant area for development is Technical Building Services' upkeep and maintenance services. The goal is to increase the share of service operations in the business sector's turnover to about 50 per cent (about 30% in 2010).
Profitable growth will be sought through international operations. The goal for residential construction in St Petersburg is to begin the construction of about 1,000 units every year. Further growth will be sought from the Norwegian, Danish and Swedish infrastructure markets; the target is increase the company's net sales by about EUR 100 million in years 2012-2013. In addition to paving operations, Lemminkäinen is also seeking growth in infrastructure construction through special contracting – where Lemminkäinen has gained a good competitive position in, for example, the growing Nordic markets for rock and foundation engineering. Growth can also be accelerated with acquisitions.
International operations forms fourth business sector
As of 1 January 2012, International Operations will become Lemminkäinen's fourth business sector. In addition to Finland, Lemminkäinen's main market area comprises neighboring regions in Russia, the other Nordic countries and the Baltic countries.
"International operations account for about a third of Lemminkäinen's net sales and we see the greatest potential for growth outside Finland. Our goal is for international operations to account for about 40 per cent of our net sales in the coming years. For example, since Lemminkäinen published its strategy in November 2009, the company's net sales in Scandinavian infrastructure market have risen by about EUR 100 million. By creating a separate business sector, these growing markets will be get more focus from management and in operational development," says Lemminkäinen's President & CEO, Timo Kohtamäki.
Efficiency programme to generate savings of EUR 50 million
Lemminkäinen is boosting profitability with an efficiency programme that seeks annual cost savings of EUR 50 million from 2013 onwards. The company estimates that it about half of these savings will be achived in 2012. The efficiency programme will cover all operations.
"Despite our strong order-book, we are not satisfied to our profitability. Also the general economic uncertainty in has increased. Efficiency will be sought by both improving our operations and cutting costs. We're, for example, evaluating the lightening of management and administrative structures. Boosting efficiency in procurements has a major role. Detailed plans will be drawn up the end of 2011. Unfortunately, we cannot most likely avoid personnel impact," says Kohtamäki.
Profit guidance for year 2011 intact
Though Lemminkäinen recognizes increase in general economic uncertainty, the company's earlier profit guidance remains intact. The Company estimates that in 2011 its net sales will increase and that its pre-tax profit will clearly improve on 2010.
President and CEO Timo Kohtamäki
Tel. +358 2071 53263
Robert Öhman, CFO
Tel. +358 2071 53515
NASDAQ OMX Helsinki
Lemminkäinen Group operates in all areas of the construction sector. The Group's business sectors are building construction, infrastructure construction and technical building services. From the beginning of 2012, international operations will become Lemminkäinen’s fourth business sector. 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. www.lemminkainen.com