Lemminkäinen Group Interim report

Transcription

1 Lemminkäinen Group Interim report

2 LEMMINKÄINEN CORPORATION STOCK EXCHANGE BULLETIN , 9:00 LEMMINKÄINEN S INTERIM FINANCIAL REVIEW : SIGNIFICANT IMPROVEMENT IN EARNINGS - Net sales rose 17.7% to EUR 1,535.6 million - International operations accounted for EUR million (399.8) of net sales - Operating profit grew 37.9% to EUR million. The ratio of operating profit to net sales rose to 6.7% (5.7) - The profit before taxes was 43.2% higher at EUR 91.5 million - Earnings per share were EUR 3.83 (2.57) - The company s order book at the end of the review period was up by 24.2% at EUR 1,524.3 million - International orders accounted for EUR million (283.1) of the order book FAVOURABLE TREND CONTINUES The net sales of Lemminkäinen Group in the January September period rose 17.7% to EUR 1,535.6 million (1,305.1). The order book rose 24.2% to EUR 1,524.3 million (1,227.7). The profit before taxes improved by EUR 27.6 million and was EUR 91.5 million (63.9). The results of most of the Group s business sectors were improved. The favourable development in the review period was mostly influenced by the earlier start of this year s asphalt paving season and the good profitability of Palmberg - the Group s building contractor. The Paving and Mineral Aggregates Division s business developed well. Net sales rose 11.5% to EUR million (421.3). The operating profit was EUR 34.4 million (22.1). The Division s order book grew. The net sales of the Building Materials Division rose 26.0% to EUR 99.2 million (78.7). Operating profit rose 91.5% to EUR 9.0 million (4.7). The order book grew and was good in all of the Division's business areas. Lemcon s net sales were EUR million (271.5). Operating profit was down 29.6% at EUR 8.1 million (11.5). The profitability of project management services in some contracts was unsatisfactory. The order book was good and has been growing in Russia in particular. The net sales of the Palmberg Group rose 33.8% to EUR million (426.5). Operating profit rose 46.0% to EUR 47.6 million (32.6). The order book rose to an all-time high. The net sales of Tekmanni Oy rose 19.6% to EUR million (135.4). Operating profit rose 39.7% to EUR 8.1 million (5.8). The order book grew and now stands at an all-time high for the company. MARKET GROWTH Lemminkäinen Group: Interim report

3 In Finland the construction market continues to grow, albeit at a slightly reduced rate. This year s growth is supported especially by the good level of activity in commercial, office and logistics construction. The volume of housing production will be slightly lower than last year. The continuing growth in infra construction is being sustained by major on-going projects. The costs of some building materials and products have risen due to factors independent of the Finnish construction industry. For example, vigorous construction activity in areas of Europe and Asia has driven up the prices of metal products, timber, cement and mineral wool insulation. Nevertheless, contract prices in Finland have been moderate. The development of international markets important to Lemminkäinen is expected to remain favourable. The economic outlook in the Nordic countries is still positive, and the total volume of construction is expected to grow. In the Baltic states GDP growth is faster than in the Nordic countries, and the road construction market is expected to remain active with the support of EU funding. Finnish industry has many on-going projects in Russia, China and India. Eastern Central Europe is also attracting foreign investments by Finnish industry. The construction of 3G networks is expected to grow, and the building of GSM networks in the developing countries will remain active. GOOD OUTLOOK FOR 2007 The outlook for construction is positive and Lemminkäinen s order book is strong. There are good prerequisites for the favourable development of Lemminkäinen s business operations. The Group s net sales will rise and the result will improve substantially. INTERIM FINANCIAL REVIEW MATERIAL Background material concerning the result for the period is available on the Group s website at LEMMINKÄINEN CORPORATION Juhani Sormaala Managing Director Additional information: Juhani Sormaala, Managing Director, tel Jukka Ovaska, Finance Director, tel APPENDICES: Interim Financial Review Tabulated Section of the Interim Financial Review DISTRIBUTION: Helsinki Stock Exchange Lemminkäinen Group: Interim report

4 Key media Lemminkäinen Group operates in all areas of the construction sector. Its main business areas are building contracting, infrastructure construction, technical building services and the building materials industry. Net sales in 2006 were EUR 1.8 billion, of which international operations accounted for about a third. The Group employs some 9,000 people. Lemminkäinen s main market area is the Baltic Rim region, where the Group has established a presence by setting up local subsidiaries. In specialist areas of construction the Group serves customers all over the world. Lemminkäinen Corporation s share is listed on Helsinki Stock Exchange. Lemminkäinen Group: Interim report

5 LEMMINKÄINEN CORPORATION S INTERIM FINANCIAL REVIEW CONSTRUCTION MARKET The Finnish construction market as a whole will continue to grow. According to an economic forecast by the Confederation of Finnish Construction Industries, the total volume of construction will grow 5% this year and 3% next year. Especially commercial and office construction will grow, but the good level of activity in industrial and logistics construction will continue as well. The growth in infrastructure construction is being sustained by major on-going projects. New highway projects are scheduled for start-up towards the end of the year. The volume of housing production is expected to be somewhat lower than last year. The Confederation of Finnish Construction Industries is forecasting some 32,000 (34,500) new housing starts in Finland this year. Refurbishment contracting will continue to grow steadily, and public-sector service construction will pick up as well. The costs of some building materials and products have risen due to factors independent of the Finnish construction industry. For example, vigorous construction activity in areas of Europe and Asia has driven up the prices of metal products, timber, cement and mineral wool insulation. Nevertheless, contract prices in Finland have been moderate. The development of international markets important to Lemminkäinen is expected to remain favourable. The economic outlook in the Nordic countries is still positive, and the total volume of construction is expected to grow. In Sweden the rock engineering market will remain good. In the Baltic states GDP growth is faster than in the Nordic countries, and the road construction market is expected to remain active with the support of EU funding. Finnish industry has many on-going projects in Russia, China and India. Eastern Central Europe is also attracting foreign investments by Finnish industry. The construction of 3G networks is expected to grow, and the building of GSM networks in the developing countries will remain active. GROUP S NET SALES, EARNINGS AND BALANCE SHEET The Q1-Q3 net sales of Lemminkäinen Group rose 17.7% to EUR 1,535.6 million (1,305.1). The Group generated 73.2% (69.4) of its net sales in Finland, 14.1% (14.0) in other Nordic countries, 8.6% (13.0) in Eastern Europe and the Baltic states, and 4.1% (3.6) in other countries. Lemminkäinen Group: Interim report

6 Net sales by business sector, EUR million 1-9/ /2006 change, % Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Other operations and intragroup eliminations Group, total 1, , The Q1-Q3 operating profit was EUR million (74.6) and the profit before taxes EUR 91.5 million (63.9). The profit for the accounting period was EUR 70.2 million (48.7), of which EUR 65.2 million (43.7) was attributable to shareholders of the parent company. Earnings per share were EUR 3.83 (2.57). Operating profit by business 1-9/ /2006 change, % sector, EUR million Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Others Group, total The company s cash funds at the end of the review period were EUR 60.1 million (50.6) and the net interest-bearing debt EUR million (370.7). The equity ratio was 29.5% (25.4) and net gearing 113.7% (152.2). The Group s order book grew 24.2% and at the end of the review period was EUR 1,524.3 million (1,227.7). The market breakdown of the order book was Finland 76.1% (76.9), other Nordic countries 12.1% (11.4), Eastern Europe and the Baltic states 9.6% (9.1), and other countries 2.2% (2.6). BUSINESS SECTORS Paving and Mineral Aggregates Division The Q1-Q3 net sales of the Paving and Mineral Aggregates Division rose 11.5% to EUR million (421.3). The Division generated 51.7% (52.8) of its net sales in Finland, 28.8% (28.5) in other Nordic countries, and 19.5% (18.7) in the Baltic states and Eastern Europe. The Division s operating profit was EUR 34.4 million (22.1). Volume growth in Norway, Denmark and Lithuania as well as good demand for mineral aggregates and ready-mix concrete in Finland improved the Division s result. The order book grew 4.2% and at the Lemminkäinen Group: Interim report

7 end of the review period was EUR million (196.7), of which operations abroad accounted for 51.8% (58.7). Lemminkäinen started construction work on an asphalt plant in the Sammonmäki industrial area of Tuusula. The new plant will replace two old plants when it becomes operational towards the end of The value of the investment is about EUR 12 million. In Finland the total volume of asphalt paving is likely to remain at least at the 2006 level, but intense competition is expected to continue. The sale of Lemminkäinen s Swedish subsidiary Kvalitetsasfalt i Mellansverige AB to Peab Asfalt AB was approved in the review period. The deal was completed on 7 August The transaction has no significant bearing on Lemminkäinen s result. In Denmark the reorganisation of local government delayed the municipal procurement of paving works this season. In Norway appropriations for roadkeeping have been increased. In the Baltic states EU funding is increasing the number of highway projects, but the contract tendering processes are long. On-going infrastructure projects and the continuing strength of building contracting are expected to sustain the good level of demand for stone crushing contracting and ready-mix concrete. Concrete deliveries belonging to the Talvivaara nickel mine projects are a multiyear contract. From time to time there have been local shortages of the cement required for concrete production. Building Materials Division The Q1-Q3 net sales of the Building Materials Division rose 26.0% to EUR 99.2 million (78.7). The Division generated 8.8% (7.5) of its net sales abroad, mainly in Sweden, Estonia and Eastern Europe. The Division s operating profit was EUR 9.0 million (4.7). The order book rose 59.9% and at the end of the review period was EUR 43.0 million (26.9). The factors contributing to the good result were strong demand, the acquisitions made this year and in 2006, and the efficiency improvement measures implemented in Lemminkäinen Betonituote Oy in 2006 and previous years. The order book is good in all of the Division s business areas. Demand for precast concrete staircase units and wall elements has increased in both office and residential construction. Exports of roofing materials to Eastern Europe and Russia in particular have been growing steadily. Demand for roofing contracting is good. Demand for urban environment products and their installation services has been growing steadily in recent years. Demand for Lemminkäinen Katto Oy s preventative roofing maintenance service for maximum lifespan utility has been good. The service includes the budgeting, planning and implementation of preventative maintenance, servicing and repair work. In roofing contracting there has been a shortage of skilled labour. Contracting has also been hampered periodically by long delivery times for mineral wool insulation in sheet Lemminkäinen Group: Interim report

8 form. There have been problems in the availability of cement for the production of precast concrete elements. The Division s order book for the remainder of the year is good and the business outlook favourable. Lemcon Ltd Lemcon s Q1-Q3 net sales were EUR million (271.5). The company generated 52.8% (42.7) of its net sales in Finland, 12.4% (9.2) in other Nordic countries, 12.0% (30.0) in Eastern Europe and the Baltic states, 12.2% (10.8) in North and South America, and 10.6% (7.3) in other countries. The company s operating profit was EUR 8.1 million (11.5) and the profit before taxes was EUR 6.6 million (11.0). The result was impacted by the unsatisfactory profitability of project management services in some projects. The order book grew 13.5% and at the end of the review period was EUR million (316.5), of which international business made up 63.0% (44.2). Lemcon s infrastructure order book is good and the contracts are of long duration. In Sweden the order book stands at an all-time high. Two railway tunnels are under construction on the Ådalsbana line and they will be completed by early spring In Finland, the E18 motorway between Muurla and Lohja, which is one of Lemcon s largest on-going contracts, will be completed in A road improvement contract on Highway 6 between Lappeenranta and Imatra will begin towards the end of this year. The road will be open to traffic at the end of Lemcon Networks has won new business not only in Europe but also in Asia, South America and Africa. Legal proceedings arising from IKEA s termination of the construction contract for the MEGA shopping centre in St. Petersburg are now underway in the court of arbitration in Stockholm. Demand for Lemcon s project management services in Finland continues to be reasonably good thanks to brisk commercial and office construction. Abroad, the emphasis is on industrial construction and the company is actively involved in Finnish industry s plantbuilding projects. Several major projects will be completed in the fourth quarter, e.g. the construction of Botnia s pulp mill in Uruguay and a hotel project in Tallinn. Some major forest industry investments of interest to Lemcon are currently being prepared in different parts of the world. In Russia, international industrial investments have increased and demand for residential and office buildings remains strong. Lemcon and Lemminkäinen subsidiary Oka Oy have started work on the construction of a 530-unit apartment building in St. Petersburg. An industrial park project in Vorotynsk in the province of Kaluga will get underway in the fourth quarter. Lemminkäinen Group: Interim report

9 Oy Alfred A. Palmberg Ab The Q1-Q3 net sales of the Palmberg Group, Lemminkäinen s specialist building contractor, grew 33.8% to EUR million (426.5). Business in Sweden accounted for 7.0% (7.1) of net sales. The company s operating profit grew 46.0% to EUR 47.6 million (32.6). The profit before taxes was EUR 44.0 million (27.4). The order book grew 30.3% to EUR million (613.2), of which international operations accounted for 3.3% (4.4). The good result was influenced especially by the sustained level of activity in the office construction sector, the favourable development of the commercial property market, increased interest in the Finnish property market among foreign investors and their lower requirements for investment returns. The Palmberg Group s order book at the end of the review period stood at an all-time high. The Palmberg Group made 770 new private-sector housing starts in Finland during the review period, which is considerably fewer than in the January September period of last year (1,029). The start-up of new housing production is hampered by the prolongation of permit processes and in some cases local demand factors. Palmberg does not expect to make starts on more than 1,000 housing units in Finland this year, compared with 1,558 units in Palmberg s private-sector housing production, units 1-9/ / /2006 Housing starts 770 1,029 1,558 Housing units sold ,156 Unsold completed units Completed ,173 Under construction at the end of the period 1,583 1,457 1,698 At the end of the review period Palmberg owned a total of 800,400 m 2 of unused building rights, of which about 570,000 m 2 were residential building rights. The company also has conditional co-operation and zoning agreements for a further 510,000 m 2, of which about 290,000 m 2 are residential building rights. Market conditions permitting, the company has the possibility to increase its housing production in Finland thanks to the good stock of building plots. At the present rate of production the company owns enough unused building rights to meet its needs for over four years. Palmberg acquired the business operations of the Imatra-based construction company Sulo Lipsanen Oy, which has long experience of residential building contracting in Russia, especially in Svetogorsk and St. Petersburg. Palmberg started work on the construction of a 530-unit apartment building in St. Petersburg in partnership with Lemminkäinen Group s Lemcon Ltd. The company s housing production is also growing in Sweden, where a 70- unit apartment building is being planned in Umeå. The favourable development of Palmberg s business is expected to continue. Lemminkäinen Group: Interim report

10 Tekmanni Oy Tekmanni s business areas are technical building services, technical facility services and industrial services. Tekmanni s Q1-Q3 net sales rose 19.6% to EUR million (135.4). The company generated 4.3% (6.0) of its net sales in Sweden and Russia. The company s operating profit was EUR 8.1 million (5.8) and the profit before taxes EUR 9.3 million (6.4). The order book grew 59.3% to EUR million (74.4), of which international business accounted for 4.1% (1.5). Brisk commercial and office construction has supported the good level of demand for Tekmanni s services. Tekmanni Service, which specialises in the servicing, maintenance and repair of technical building systems, has grown its business by about 40%. The favourable development is also due to the restructuring of the company, which involved corportising the operations of local units so as to improve the standard of regional service. During the review period Tekmanni acquired the Vantaa-based Jäähdytystaito Oy, which specialises in refrigeration technology. In Finland demand for servicing, maintenance and repair works in the technical building services sector is brisk. Tekmanni is taking its preventative servicing model to Russia, where the company believes there is demand for such services. The company has won the contract to carry out the regular servicing and necessary repair work on the technical building systems of three Sokos hotels in St. Petersburg. Demand for industrial maintenance services is expected to grow in Finland and abroad. A significant contract was completed for SCA Packaging in Sweden during the review period. The contract included air conditioning as well as building and process electrification work on the soda boiler facility. GROUP S ORDER BOOK Lemminkäinen Group s order book rose 24.2% compared the end of Q3 last year to reach an all-time high. The market breakdown of the order book was Finland 76.1% (76.9), other Nordic countries 12.1% (11.4), the Baltic states 3.1% (3.5), Eastern Europe 6.5% (5.6), and other countries 2.2% (2.6). Lemminkäinen Group: Interim report

11 Order book by business sector, EUR million 9/2007 9/2006 Change, % Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Group total, of which 1, , International orders Significant orders received A construction consortium formed by Lemcon Ltd and Kesälahden Maansiirto Oy will carry out the Highway 6 improvement contract for the Finnish Road Administration. The road will be widened to four lanes on the Kärki-Mattila and Mattila-Muukko sections of the Lappeenranta bypass. The contract is worth EUR 101 million in total. The asphalt paving works will be carried out by Lemminkäinen s Paving Unit. (Bulletin ). Lemminkäinen Group s Tekmanni Service Oy has made an agreement concerning the servicing of the technical building systems of three Sokos hotels in St. Petersburg. The company will carry out regular servicing and necessary repair work on the technical building systems of the hotels, which are currently under construction. The hotels will be open for business by the spring of (Bulletin ). Lemcon Ltd is to build a labelstock factory for UPM Raflatac in Poland. The total value of UPM Raflatac s investment is EUR 90 million. Construction work will be completed in December (Bulletin ). Lemminkäinen subsidiary Oka Oy is to build a 17-storey 530-unit apartment building and a 110-place parking facility in St. Petersburg. The total floor area is 36,600 m² and the contract is worth approx. EUR 50 million. The contract will be carried out in partnership with Lemcon Ltd. (Bulletin ). Significant orders received after the review period Lemminkäinen Group s Palmberg-Rakennus Oy and Lemcon Ltd are to build a shopping complex in Oulu. The building will house a Bauhaus hardware and home improvement store as well as a domestic appliance and interior design outlet. The total floor area will be 31,000 m² and the total value of the project EUR 40 million. Construction work will begin in Autumn 2007 and will be completed in December FINANCING According to the source and application of funds statement, the cash flow from operating activities was EUR -9.0 million (-93.5), the cash flow from investing activities EUR Lemminkäinen Group: Interim report

12 million (-20.2) and the cash flow from financing activities EUR 28.1 million (122.2). The cash flow for the review period includes dividends totalling EUR 27.4 million (18.1) for Interest-bearing liabilities at the end of the review period were EUR million (421.2) and liquid funds were EUR 60.1 million (50.6). Interest-bearing net debt was EUR million (370.7). The company is applying hedge accounting to interest rate swap agreements taken out to hedge variable-rate loans tied to the 6-month Euribor rate and nominally valued at EUR 80.0 million. The hedges have been made effective and the changes in fair value of the interest rate swap agreements are recognised in equity through the revaluation reserve in accordance with the accounting principles of the financial statements. Net financing expenses were EUR 12.0 million (11.4), representing 0.8% (0.9) of net sales. The equity ratio was 29.5% (25.4) and net gearing 113.7% (152.2). SHARES AND SHARE CAPITAL The listed price of Lemminkäinen Corporation s share was EUR (30.50) at the beginning and EUR (30.85) at the end of the review period. The market capitalisation at the end of the review period was EUR million (525.1). Altogether 4,052,265 shares (2,625,862) worth EUR million (88.1) were traded in the January September period of the year. At the end of the review period the company had 3,357 (3,381) shareholders. Lemminkäinen s share capital is EUR 34,042,500 and the share s nominal value is EUR 2. The company has one share series and the total number of issued shares is 17,021,250. INVESTMENTS Investments in the accounting period amounted to EUR 45.6 million (41.3). The investments were mainly purchases of paving, crushing and excavation equipment, production plant for building materials, and building construction equipment. The investments also include acquisitions of businesses and enterprises. PERSONNEL The average number of employees in the Group over the review period was 9,170 (8,385). Approx. 72% (74) of the employees were working in Finland, 11% (11) in other Nordic countries, 11% (10) in the Baltic states, and 6% (5) in other countries. Personnel 1-9/ /2006 Change, % Personnel, average Hourly paid employees 6,050 5, Salaried staff 3,120 2, Lemminkäinen Group: Interim report

13 Personnel, total, of whom 9,170 8, working abroad 2,597 2, Personnel at the end of the review period 9,810 9, Wages, salaries and other remuneration, EUR million GROUP STRUCTURE With effect from 1 January 2008, Lemminkäinen Group will be organised into four business sectors instead of the present five. These four business sectors will be building contracting, infrastructure construction, technical building and facility services, and the building materials industry. The names of these business sectors will be Lemminkäinen Talo Oy, Lemminkäinen Infra Oy, Tekmanni Oy and Lemminkainen Building Products. The new structure will support the business strategy approved for Lemminkäinen Group in February Lemminkäinen Infra Oy will comprise Lemminkäinen Corporation s Paving and Mineral Aggregates Division and Lemcon Ltd s infra business (Lemcon Infra). Lemminkäinen Talo Oy will consist of the Palmberg Group and all the operations of Lemcon Ltd except for Lemcon Infra. The managing director of Lemminkäinen Infra Oy with effect from 1 January 2008 will be Mr. Timo Kohtamäki, Lic.Tech. (b. 1963), who currently acts as the Head of Lemcon Infra. On the same date Mr. Juha Nurmi, M.Sc.(Eng.) (b. 1955), who is the Managing Director of Lemcon Networks Ltd, will take up the position of managing director of Lemminkäinen Talo Oy. The Managing Director of Oy Alfred A. Palmberg Ab, Mr. Risto Bono, and the Managing Director of Lemcon Ltd., Mr. Matti A. Mantere, will retire in accordance with their respective contracts. The reorganisation is described on the Group s website at FCA s ALLEGATIONS In March 2004 the Finnish Competition Authority (FCA) proposed to the Market Court that a sanction of EUR 68 million should be imposed on Lemminkäinen in connection with the operation of an alleged cartel in the asphalt paving industry. In its rejoinder submitted to the Market Court, Lemminkäinen denied the FCA s allegations as being unfounded in all respects and called for the Market Court to dismiss the FCA s sanction proposal in its entirety. The Market Court s decision is expected by the end of this year. The parties will have an opportunity to appeal the Market Court s decision to the Supreme Administrative Court. The FCA closed its investigation of the alleged prohibited exchanges of information in the bituminous roofing industry in the years The FCA dropped the case without proposing any sanctions against the companies of the industry. (Bulletin ) Lemminkäinen Group: Interim report

14 RISKS AND UNCERTAINTIES Lemminkäinen s business risks are divided into six categories: market risks, project risks, financing risks, credit loss risks, environmental risks, and accidents and damage. Lemminkäinen has specified the measures necessary to control its most significant known risks. Lemminkäinen s most significant risks and their management are described in greater detail in the 2006 year-end financial statements, the 2006 Annual Report and on the company s website. During the review period Lemminkäinen s management did not identify any new risks or uncertainties that, if realised, would have a significant bearing on the Group s business. ENVIRONMENT Lemminkäinen Group takes account of life cycle and environmental perspectives when developing its operations, products and services. The Group performs risk assessments on the environmental effects of its activities. The risks relate mainly to oil storage and handling, waste management and production plant emissions. The life time and environmental impacts of concrete and bitumen-based products are assessed in studies which clarify the environmental impacts of the products over their entire life cycles. During the review period Lemminkäinen Corporation made a donation of EUR 100,000 to John Nurminen Foundation s Clean Baltic Sea project. Additionally, Lemcon Ltd donated its project management skills to the project. The project involved chemically removing phosphorous at St. Petersburg s largest wastewater treatment plants, thereby reducing eutrophication of the Baltic Sea. (Bulletin ). ADMINISTRATION AND DECISIONS OF THE ANNUAL GENERAL MEETING On 16 March 2007 Lemminkäinen Corporation's Annual General Meeting adopted the company's final accounts for 2006 and granted the Managing Director and the members of the Board of Directors freedom from responsibility. The Annual General Meeting decided in accordance with the Board of Directors proposal to pay a dividend of EUR 1.50 per share, i.e. a total dividend pay-out of EUR 25,531, The dividend s record date was 21 March 2007 and the payment date was 28 March Messrs. Berndt Brunow, Heikki Pentti, Teppo Taberman and Sakari Tamminen were reelected to serve as members of the Board of Directors. Ms. Kristina Pentti, M.Sc. (Econ.) was newly elected to serve as a board member. The Board of Directors elected Heikki Pentti to serve as Chairman of the Board and Teppo Taberman to serve as Vice-chairman. PricewaterhouseCoopers Oy, a firm of authorised public accountants, was re-elected to serve as the company s auditor, with Jan Holmberg, APA acting as the chief auditor. FAVOURABLE OUTLOOK FOR 2007 Lemminkäinen Group: Interim report

15 The outlook for construction is positive and Lemminkäinen s order book is strong. There are good prerequisites for the favourable development of Lemminkäinen s business operations. The Group s net sales will rise and the result will improve substantially. Helsinki, 8 November 2007 LEMMINKÄINEN CORPORATION Board of Directors Lemminkäinen Group: Interim report

16 TABULATED SECTION OF THE INTERIM FINANCIAL REVIEW ACCOUNTING PRINCIPLES This interim financial review has been prepared in accordance with IFRS measurement and recognition principles, but not all of the requirements of the IAS 34 Interim Financial Reporting standard have been observed in its preparation. The same accounting principles used in the annual financial statements for 2006 have been observed in the preparation of this interim financial review. In the review period the Group has applied hedge accounting to interest rate swap agreements used to hedge specific variable-rate loans and also to financial instruments used to hedge net foreign investments. The change in fair value of interest rate swap agreements is recognised directly in equity through the revaluation reserve to the extent that the hedging relationship is effective. The ineffective part is recognised on the income statement under financial income and expenses. From the Group has adopted the following new standards and interpretations: - IAS 1 (Amendment) Capital Disclosures Capital disclosure in financial statements - IFRS 7 Financial Instruments; Disclosures - IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies - IFRIC 8 Scope of IFRS 2 - IFRIC 9 Reassessment of Embedded Derivatives - IFRIC 10 Interim Financial Reporting and Impairment The adoption of these new and revised standards and interpretations affects mainly the Notes to the Financial Statements. The information contained in the interim financial review has not been audited. Lemminkäinen Group: Interim report

17 FINANCIAL STATEMENTS AND OTHER TABULATED INFORMATION 1) Consolidated income statement 2) Consolidated balance sheet 3) Statement of source and application of funds 4) Statement of changes in equity 5) Consolidated income statement, quarterly 6) Net sales by business sector 7) Net sales by business sector, quarterly 8) Operating profit by business sector 9) Operating profit by business sector, quarterly 10) Economic trends and financial indicators 11) Share-specific indicators 12) Guarantees and contingent liabilities 1) CONSOLIDATED INCOME STATEMENT EUR mill. Net sales Other operating income Operating expenses Depreciation Operating profit Financial expenses Financial income Share of the results of affiliated companies Result before taxes Income taxes Result for the accounting period 09/ /2006 Change Change, 12/2006 % over Distribution of the result for the accounting period To shareholders of the parent company To minority interests EPS calculated from result attributable to parent company shareholders Earnings per share, EUR Earnings per share, EUR, diluted Lemminkäinen Group: Interim report

18 2) CONSOLIDATED BALANCE SHEET EUR mill. 09/ / /2006 Non-current assets Tangible assets Goodwill Other intangible assets Investments Deferred tax asset Other non-current receivables Total Current assets Inventories Trade and other receivables Cash funds Total Assets, total Shareholders equity and liabilities Equity attributable to shareholders of the parent company Share capital Share premium account Revaluation reserve Translation differences Retained earnings Result for the period Shareholders equity before minority interest Minority interest Shareholders equity, total Non-current liabilities Deferred tax liabilities Pension liabilities Provisions Interest-bearing liabilities Other liabilities Total Current liabilities Accounts payable and other liabilities Provisions Interest-bearing liabilities Total Shareholders equity andliabilities, total Lemminkäinen Group: Interim report

19 3) STATEMENT OF SOURCE AND APPLICATION OF FUNDS EUR mill. 09/ / /2006 Result before extraordinary items Depreciation according to plan Other adjustments Cash flow before change in working capital Change in working capital Financial items Direct taxes paid Cash flow from operating activities Cash flow provided by investing activities Cash flow used in investing activities Change in non-current receivables Drawings of loans Repayments of loans Dividends paid Cash flow from financing activities Change in cash funds Cash funds at beginning of period Translation difference of cash funds Cash funds at end of period Lemminkäinen Group: Interim report

20 4) STATEMENT OF CHANGES IN EQUITY Share Trans- Revalu- Share- EUR mill. Share premium lation ation Retained Minority holders' capital account difference reserve earnings interest equity total Shareholders' equity, Translation difference Hedging of net investment in foreign subsidiary Change in fair value Effect of sold shares Reversal of dividend liability Dividend distribution Result for the accounting period Change in minority interest Shareholders equity, Share Trans- Revalu- Share- EUR mill. Share premium lation ation Retained Minority holders' capital account difference reserve earnings interest equity total Shareholders' equity, Translation difference Hedging of net investment in foreign subsidiary Change in fair value Effect of sold shares Reversal of dividend liability Dividend distribution Result for the accounting period Change in minority interest Shareholders equity, Share Trans- Revalu- Share- EUR mill. Share premium lation ation Retained Minority holders' capital account difference reserve earnings interest equity total Shareholders' equity, Translation difference Hedging of net investment in foreign subsidiary Cash flow hedges Change in fair value Reversal of dividend liability Dividend distribution Result for the accounting period Change in minority interest Shareholders equity, Lemminkäinen Group: Interim report

21 5) CONSOLIDATED INCOME STATEMENT, QUARTERLY 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ EUR mill Net sales Other operating income Operating expenses Depreciation Operating profit/loss Financial expenses Financial income Share of the results of affiliated companies Result before taxes Income taxes Result for the accounting period Distribution of the result for the accounting period To shareholders of the parent company To minority interests EPS calculated from result attributable to parent company shareholders Earnings per share, EUR Earnings per share, EUR diluted ) NET SALES BY BUSINESS SECTOR EUR mill. 09/ /2006 Change Change,% 12/2006 Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Others Group total 1, ,305, ,795,9 Lemminkäinen Group: Interim report

22 7) NET SALES BY BUSINESS SECTOR, QUARTERLY 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ EUR mill Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Others Group total ) OPERATING PROFIT/LOSS BY BUSINESS SECTOR EUR mill. 09/ /2006 Change Change,% 12/2006 Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Others Group total over ) OPERATING PROFIT/LOSS BY BUSINESS SECTOR, QUARTERLY 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ EUR mill Paving and Mineral Aggregates Division Building Materials Division Lemcon Ltd Oy Alfred A. Palmberg Ab Tekmanni Oy Others Group total Lemminkäinen Group: Interim report

23 10) ECONOMIC TRENDS AND FINANCIAL INDICATORS 09/ / /2006 Return on equity, % Return on investment, % Operating profit, % of net sales Equity ratio, % Gearing, % Interest-bearing net debt, EUR million Gross investments, EUR million (incl. leasing purchases) Order book, EUR mill. - of which foreign orders, EUR mill. Average number of employees Employees at end of period Net sales, EUR mill. - of which operations abroad, EUR mill. % of net sales 11) SHARE-SPECIFIC INDICATORS Earnings per share, EUR Equity per share, EUR Dividend per share, EUR Dividend to earnings ratio, % Market capitalisation, EUR mill. Share price at end of period, EUR Trading volume during period, 1,000 shares Number of issued shares, 1,000 shares / / / Lemminkäinen Group: Interim report

24 12) GUARANTEES AND CONTINGENT LIABILITIES EUR mill. 09/ / /2006 Securities for own commitments Property mortgages Business mortgages Bonds pledged as security Total Guarantees On behalf of affiliated companies On behalf of others Minimum lease payments of irrevocable lease agreements Purchase commitments of investments Derivative contracts Forward foreign exchange contracts Nominal value Fair value Interest rate options, calls purchased Nominal value Fair value Interest rate options, puts written Nominal value Fair value Interest rate swap contracts Nominal value Fair value , The fair value of contracts is the gain or loss arising from closure of the contract based on the market price on the accounting date. Lemminkäinen Group: Interim report