CEO s review Annual General Meeting 28 March 2017

Transcription

1 CEO s review Annual General Meeting 28 March 2017

2 Year 2016 in brief Financial performance Outlook and guidance 2

3 Operating environment during 2016 Finland Infra projects were supported by large-scale projects in urban growth centres. Low oil price and state investments maintained demand for paving. Residential construction grew. Investors activity started to decline, but consumer sales picked up. Scandinavia Large-scale infra projects ongoing or planned. In Sweden paving market was solid. In Norway state investments stabilised. In Denmark price competition increased. Russia and Baltic countries In negotiated contracting in building construction, reliability of the builder is a competitive advantage. Construction on major roads maintained demand for paving in Russia. Stable market in infrastructure construction in the Baltic countries. 3

4 2016 in brief: Financial position strengthened, operating profit improved Improved financial position Operating capital 388 M (475) Interest-bearing net debt 81 M (127) The nominal amount of outstanding hybrid bonds reduced by 78 M Operating profit 67.6 M (37.3) Paving and Building construction, Finland improved Includes 19.4 M of reimbursements and 8.0 M of lowered provisions related to the Helsinki Court of Appeal s decisions regarding the asphalt cartel, and write-downs related to non-core businesses worth EUR 4.9 million. Without these items the operating profit would have been 45.1 M and operating margin 2.7%. 4

5 Damages related to the asphalt cartel On 20 October 2016, the Helsinki Court of Appeal gave its decisions concerning the damages related to the asphalt cartel. Regarding the 37 claims against Lemminkäinen, Lemminkäinen and other asphalt industry companies were entitled to receive reimbursements in total approx. 20 M (consisting of capital amount of approx. 14 M less as well as interest and legal expenses of approx. 6 M less than according to the decisions of the District Court). Of these reimbursements, Lemminkäinen was entitled to receive refunds in total approx. 19 M consisting of capital as well as interest and legal expenses. The reimbursements were recorded as income in the fourth-quarter result. Lemminkäinen has settled with 17 municipalities and the State of Finland. Lemminkäinen has as such deemed the claims for damages unfounded. Concerning Lemminkäinen, there are still 13 pending requests for leave to appeal submitted by Lemminkäinen as well as 19 requests for leave to appeal submitted by municipalities in the Supreme Court concerning the Helsinki Court of Appeal s decisions on 20 October 2016 regarding damages related to the asphalt cartel. In addition, Lemminkäinen has been served summons regarding 21 claims against Lemminkäinen and other asphalt companies for damages. The capital amount of these claims is approx. 26 M. For these claims, Lemminkäinen has made a provision worth 5.1 M based on the Court of Appeal s decisions. 5

6 Strategy Focus to operational efficiency and growth MISSION: Together we build a sustainable society. VALUES: We put people first. We respect and trust. We partner to succeed Strengthened balance sheet structure 2. Operational efficiency & cash flow generation 3. Profitable growth in focused areas Sustainable performance & shareholder value 6

7 Strategy progress Strengthened balance sheet structure Operational efficiency & cash flow generation Profitable growth in focused areas Q1/2014 Q4/2016 Cash 54 M 131 M Cash flow (rolling 12 months) -70 M 132 M Operating capital 691 M 388 M Interest-bearing net debt 364 M 81 M Outstanding hybrid bonds 140 M 35 M FY financial costs 50 M 29 M Actions in 2017 Streamline and unify processes within segments Elimination of excess waiting times Energy and material efficiency Better mobility of equipment and personnel Actions in 2017 Strengthen organisation in Sweden Capability development 7

8 Financial targets ROCE above 15% in 2019 EBIT margin above 4% in 2019 Equity ratio above 35% during Lemminkäinen aims for a stable distribution of dividends, with at least 40% of the profit for the financial year distributed to shareholders. The company will maintain a moderate risk level during the strategy period to reach our financial targets. Financial target Actual 2014 Actual 2015 Actual 2016 ROCE: above 15% in % 5.3% 11.3% 1) EBIT margin: above 4% in % 2.0% 4.0% 2) Equity ratio: above 35% during % 40.6% 39.5% 3) Dividend policy: At least 40% of the profit for the financial year 0.0% 38.5% 40.3% 4) 1) Return on capital employed 2016 without reimbursements (EUR 19.4 million) and lowered provisions (EUR 8.0 million) related to the asphalt cartel as well as write-downs related to non-core businesses worth EUR 4.9 million would be 7.7%. 2) Operating margin 2016 without reimbursements (EUR 19.4 million) and lowered provisions (EUR 8.0 million) related to the asphalt cartel as well as write-downs related to non-core businesses worth EUR 4.9 million would be 2.7%. 3) Equity ratio, if hybrid bonds were treated as debt: 12/2016: 35.4% 4) Board of Directors proposal for the AGM. 8

9 Major shareholders 31 Dec % 8% 7% Shareholder distribution 10% 9% 4% 53% Pentti family Corporations Financial and insurance institutions Public sector institutions Finnish private investors Peab AB Foreign and nominee registered owners 1) Information is based on a flagging notification received on 2 April ) Major shareholders 31 Dec 2016 Number of shares % of share capital Pnt Group Oy 4,231, Pentti Heikki Oskari Estate 2,253, Forstén Noora 1,415, Pentti Lauri 1,161, Varma Mutual Pension Insurance Company 1,091, Fideles Oy 882, Vimpu Intressenter Ab 779, Pentti Kristian 766, Pentti-Von Walzel Kristina 760, Pentti-Kortman Eva 751, Wipunen varainhallinta Oy 650, Mariatorp Oy 650, Mandatum Life Unit-Linked 511, Etera Mutual Pension Insurance Company 452, Fennia Life Insurance Company Ltd 385, major shareholders, total 16,742, Other owners 3,372, Nominee-registered shareholders 3,104, Total 23,219,

10 Year 2016 in brief Financial performance Outlook and guidance 10

11 Net sales decreased, operating profit improved Net sales, M Operating profit, M and operating margin, % * * Operating profit Operating margin *) Operating profit and margin without reimbursements and lowered provisions related to the asphalt cartel, and write-downs related to non-core businesses.

12 Order book grew year-on-year 1400 Order book at the end of the year, M Russian operations Infra projects Paving Building construction, Finland

13 Borrowings and financial position: Favourable development continued Equity ratio, % Operating capital, EUR million Note! If the hybrid bonds were recognised as debt: Equity ratio 12/16 would be 35% (12/15: 29%) 120 Gearing, % Interest-bearing debt, EUR million Note! If the hybrid bonds were recognised as debt: Gearing 12/16 would be 39% (12/15: 90%) IB net debt, M Liquid funds, M 13

14 Cash flow from operating activities Cash flow from operating activities, EUR million The company will continue to manage the balance sheet and cash flow, and its aim is to increase plot investments in growth centres in 132 building construction in Finland. 107 The Board of Directors proposes to the AGM that for the financial year that ended on 31 December 2016, Lemminkäinen will distribute a 58 per-share dividend of EUR 0.66 (0.12)

15 Year 2016 in brief Financial performance Outlook and guidance 15

16 Updated segment structure as of 1 January 2017 Paving Paving and mineral aggregates operations in Finland, Sweden, Norway and Denmark Infra projects Earthworks, civil and rock engineering in Finland, Sweden, Norway and infrastructure construction in the Baltic countries Building construction, Finland Residential and nonresidential construction, renovation, property development in Finland Russian operations Building construction and paving in Russia Key figures 2016, pro forma Paving Infra projects Building construction, Finland Russian operations Net sales M Operating profit M Operating margin % Order book M Operating capital M

17 Market outlook for 2017 Building construction Infrastructure construction Paving Finland Norway Sweden Russia Up Stable Down Denmark Baltic countries Sources: Euroconstruct, company s own estimate 17

18 In 2017, focus on improving operational result and competitiveness Operational efficiency & cash flow generation Streamline and unify processes within segments Elimination of excess waiting times Energy and material efficiency Better mobility of equipment and personnel Profitable growth in focused areas Strengthen organisation in Sweden Capability development 18

19 Profit guidance for 2017 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

20