Lemminkäinen Carnegie Construction seminar President and CEO Casimir Lindholm
Lemminkäinen in brief Strategy Segment overview Outlook and guidance 2 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Lemminkäinen - a strong infrastructure constructor in Northern Europe Lemminkäinen s business segments Net sales by market area and business type in 215 Paving Paving and mineral aggregates in the Nordics and the Baltic countries 1% Others Infra projects Rock engineering, earthworks and civil engineering in Finland, Sweden, Norway and the Baltic countries 27 % 6 % 7 % 6 % Building construction, Finland Residential and non-residential development, contracting, real estate management Infra projects 18 % 38 % Building construction Russian operations Building construction and paving in St Petersburg and Moscow regions Paving 44 % 3 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Lemminkäinen in 2-215 2 28: TIME OF FAST GROWTH 21 213: TOWARDS ONE LEMMINKÄINEN 214 TURNAROUND Major Acquisitions: 21: Icopal Roads (INFRA), NOR+DEN 2: Tekmanni (TBS*), FIN 211: Mesta Industri (INFRA), NOR Major Divestments: 25 2 15 1 5 5.2% 6.2% 4.5% 3.6% 4.5% 4.6% 6.1% 5.8% 965 1 117 1 256 1 359 1 431 1 62 1 796 2 174 2 477 1 966 1 83 2 184 2 268 4.7% 21: Roofing business, FIN 1.2% 1.6% 2.% 2.2% 212: Concrete business, FIN 213-214: Telecom network business, International -4.4% 2 2 214: Technical building services, FIN 1.8% 2.% 2 45 1 879 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 215: Building constuction SWE, road maintenance NOR 8, % 6, % 4, % 2, %, % -2, % -4, % -6, % Net sales, M EBIT margin, % 4 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Review of the last two years Stronger balance sheet and cash flow. Operating capital has decreased from EUR 697 million in June 214 to EUR 446 million in June 216. Reduced investments and fixed cost level. Improved debt structure and interest-bearing net debt has decreased from EUR 34 million in June 214 to EUR 165 million in June 216 despite the redemption of the first hybrid bond. Improved transparency and corporate governance by implementing the new organisation structure, internal processes and procedures. Streamlined business portfolio. Substantially decreased risk level in Russia. 5 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Key figures 25 2 15 1 5 2184 Net sales, EUR million 2268 22 244 1879 782 674 11 12 13 14 15 H1/15 H1/16 6 3-3 -6-9 Operating profit, EUR million and operating margin, % 44 5 2. 2.2-89 -4.4 36 37 1.8 2. 3 -.3-1.5-2 -1-3 -6 11 12 13 14 15 H1/15 H1/16 Operating profit Operating margin 6-9 2 15 1 5 1289 1336 Order book, EUR million 1733 1456 118 1352 1496 11 12 13 14 15 H1/15 H1/16 1) 1) Comparable figure 12 Cash flow from operating activities, EUR million 17 9 89 Operating capital, EUR million 45 41 Interest-bearing net debt, EUR million 9 6 3 58 8 26 7,2 6 3 59 475 547 446 3 15 277 327 214 127 212 165-3 -7-48 -6 11 12 13 14 15 H1/15 H1/16 13 14 15 H1/15 H1/16 11 12 13 14 15 H1/15 H1/16 6 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Lemminkäinen in brief Strategy Segment overview Outlook and guidance 7 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Strategy 216 219 Focus to operational efficiency and growth 8 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Financial targets ROCE above 15% in 219 EBIT margin above 4% in 219 Equity ratio above 35% during 216-219 Lemminkäinen aims for a stable distribution of dividends, with at least 4% 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 213 Actual 214 Actual 215 ROCE: above 15% in 219-1.8 4.5 5.3 EBIT margin: above 4% in 219-4.4 1.8 2. Equity ratio: above 35% during 216-219 Dividend policy: At least 4% of the profit for the financial year 27.3 37.1 4.6 38.5 9 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Lemminkäinen in brief Strategy Segment overview Outlook and guidance 1 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
M % M Paving: One of the largest paving companies in its market Market drivers The public sector's investments in road maintenance Oil price Urban growth centre development Poor condition of the road network Major road projects 35 3 25 2 15 1 5 Net sales and order inflow 32 24 24 225 181 187 22 56 126 15 66 36 Q115 Q215 Q315 Q415 Q116 Q216 Net sales Order inflow Competitive field Lemminkäinen holds a strong position in the Nordic and Baltic countries; it is one of the largest paving companies in its market The most significant competitors: NCC, Skanska, Veidekke, Peab, Colas Operating environment Finland: State investments increase demand Sweden: High level of activity in the market Norway and Denmark: Total asphalt volumes declining, especially in public sector Baltics: Market situation is stable. Growth expected to pick up 217 4 3 2 1-1 -2-3 -4 EBIT and EBIT margin 32.4 15. 17.9 6.2 1.1 7.9-1.6-2.8-43.9-24.7-28.2-78.8 Q115 Q215 Q315 Q415 Q116 Q216 EBIT EBIT-% 8 6 4 2-2 -4-6 -8 11 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
M % M Infra projects: An expert in versatile and complex infrastructure construction Market drivers Net sales and order inflow The public sector's and industry's investments in infrastructure Urbanisation Climate change Weak infrastructure in the Baltic countries 12 1 8 6 4 2 14 85 9 99 95 9 67 61 5 61 6 17 Q115 Q215 Q315 Q415 Q116 Q216 Net sales Order inflow Competitive field Price competition further intensified especially in Sweden The most significant competitors: NCC, Skanska, Veidekke, Peab, YIT, SRV and Destia Operating environment Finland: Large traffic and industrial projects support demand Sweden: Overall high market activity, both traffic and energy infrastructure Norway: Lot of public investments to traffic infrastructure Baltics: Opportunities driven by public sector traffic infrastructure investments (e.g. Rail Baltic) 6 4 2-2 -4 EBIT and EBIT margin 4.6 5.4 3.1 2.8 3.1 3. 1.5 1.7 -.9 -.6-1.5-2.2 Q115 Q215 Q315 Q415 Q116 Q216 EBIT EBIT-% 6 4 2-2 -4 12 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
M % M Building construction, Finland: Premises for living and working Market drivers Net sales and order inflow Urbanisation Apartments as a part of investment assets Demographic changes 25 2 15 1 5 154 131 127 11 211 176 13 95 113 98 141 82 Building stock's need for renovation Q115 Q215 Q315 Q415 Q116 Q216 Net sales Order inflow Competitive field Lemminkäinen is among the five largest builders in terms of net sales. In small and medium-size contracts many minor competitors (industry entry threshold is low) The most significant competitors: YIT, SRV, NCC, Skanska Operating environment Residential construction is expected to grow. Focus on small apartments in urban growth centres. Active investor sales. Non-residential construction increases due to major individual projects and public sector. Renovation is brisk but its growth will slow down. 12 9 6 3-3 -6 EBIT and EBIT margin 11.4 7.3 5.5 6.5 3.7 2.6 -.7-2.2-2.7-2.3 -.8-3.4 Q115 Q215 Q315 Q415 Q116 Q216 EBIT EBIT-% 12 9 6 3-3 -6 13 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
M % M Russian operations: Paving and building construction contracting in St Petersburg and Moscow areas Market drivers Urbanisation in St Petersburg and Moscow regions Weak infrastructure 8 6 4 2 Net sales and order inflow 7 37 31 19 17 2 9 8 12 2 3 6 Q115 Q215 Q315 Q415 Q116 Q216 Net sales Order inflow Competitive field In building construction contracting many local and smaller foreign competitors. In paving, Lemminkäinen operates mainly as a subcontractor and specialised work contractor. Competitors include major Russian players, such as Autobahn and VAD Operating environment Uncertainty in the market is likely to continue In residential contracting price competition is intense, but contractor reliability is getting more and more important Construction and repair projects on major roads maintain demand for paving 15 1 5-5 -1-15 EBIT and EBIT margin 1.9 2 6. 8.1 15.6 1 1.1 1.4-5.3-1.1-1 -.6 -.6-2 -3-34.5-1.6-4 Q115 Q215 Q315 Q415 Q116 Q216 EBIT EBIT-% 14 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Group performance Balance sheet, financing and cash flow Outlook and guidance 15 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Damages related to the asphalt cartel The oral hearing at the Helsinki Court of Appeal started in March 215 and ended in October 215. The Court has not yet confirmed when the verdicts will be given. According to a preliminary statement they will be given during 216. 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 approximately EUR 26 million. For these claims, Lemminkäinen has made a provision worth EUR 13.4 million 16 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Profit guidance for 216 Lemminkäinen estimates that its net sales in 216 will be on the level of EUR 1.8 billion. Operating profit (IFRS) in 216 is expected to improve as compared to 215 (EUR 37.3 million). 17 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
Summary: The company is in a good position to reach the financial targets for this year Financial position has strengthened significantly during the past two years Operating capital 446 M (697) Interest-bearing net debt 165 M (34) Q2 went as planned Operating profit improved Comparable order book increased Focus remains on improving the operational result and competitiveness in all operations and seeking profitable growth in complex infrastructure construction in Sweden and Norway while maintaining a moderate risk level. 18 24 August 216 Carnegie Construction seminar / CEO Casimir Lindholm
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