Lemminkäinen and YIT will complete the merger
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- Stock Exchange Releases
- 5/10/2006
INTERIM FINANCIAL REVIEW 1.1. ? 31.3.2006: NET SALES UP BY A THIRD
LEMMINKÄINEN CORPORATION STOCK EXCHANGE BULLETIN 10.5.2006, 10.05 INTERIM FINANCIAL REVIEW 1.1. 31.3.2006: NET SALES UP BY A THIRD Lemminkäinen Groups Q1 net sales rose 31.3 % to EUR 303.5 million (231.2). The customary first-quarter loss before taxes stemming from the seasonal nature of the companys business was EUR -9.1 million (-12.8). The order book grew 27 % to stand at EUR 1,155.7 million (909.8). Growing order book lays fair foundations for net sales growth and improved earn
LEMMINKÄINEN CORPORATION STOCK EXCHANGE BULLETIN 10.5.2006, 10.05
INTERIM FINANCIAL REVIEW 1.1. 31.3.2006: NET SALES UP BY A THIRD
Lemminkäinen Groups Q1 net sales rose 31.3 % to EUR 303.5 million
(231.2). The customary first-quarter loss before taxes stemming
from the seasonal nature of the companys business was EUR -9.1
million (-12.8). The order book grew 27 % to stand at EUR 1,155.7
million (909.8). Growing order book lays fair foundations for net
sales growth and improved earnings.
CONSTRUCTION MARKET
The outlook for the Finnish construction market remains
favourable. The volume of construction is forecast to grow 3 %
this year and is expected to match the annual growth rate of the
Scandinavian economies in 2007. Growth is being supported by good
demand for housing as well as brisk activity in industrial,
warehousing and commercial construction. The estimated number of
new housing units for this year is approx. 33,500 (33,701). A
recovery in office construction is evident this year, and the
volume of civil engineering contracting will continue to grow
supported by several major on-going projects.
The value of the Finnish construction companies international
business has also developed favourably. Russia, the Baltic states
and Scandinavia will continue to be the key international markets
for the Finnish construction industry.
Operations abroad accounted for most of the growth in
Lemminkäinens net sales. The company has retained its good market
position in the Baltic Rim region, in addition to which it has
expanded its operations into emerging economies. The growing
investments of Finnish industry in countries such as China and
India is increasing demand for Lemminkäinens services.
NET SALES AND EARNINGS
The Q1 net sales of Lemminkäinen Group rose 31.3 % to EUR 303.5
million (231.2). Operations abroad accounted for 30.0 % (23.4) of
net sales.
The Q1 operating result was EUR -6.8 million (-11.0) and the
result before taxes was EUR 9.1 million(-12.8). The result after
taxes was EUR 7.3 million (-9.6), and earnings per share were EUR
0.49 (-0.64). The first-quarter loss is customary and stems from
the seasonal nature of Lemminkäinens businesses.
BUSINESS SECTORS
Paving and Mineral Aggregates Division
The Q1 net sales of the Paving and Mineral Aggregates Division
rose to EUR 23.9 million (21.5). The operating result was EUR
20.6 million (-16.2). The first-quarter loss is customary and
stems from the seasonal nature of asphalt paving operations. The
Divisions order book was EUR 255.3 million (216.0), of which
operations abroad accounted for 51.7 % (46.4).
The exceptional length and heavy snowfalls of the 2005/2006 winter
in Scandinavia had an adverse impact on the Divisions Q1 result.
The total volume of asphalt paving works in Finland is slightly
down on last year. The price level of asphalt paving contracts has
developed favourably in Denmark and Norway, but remains weak in
Sweden and Finland. In Russia and the Baltic states the outlook
for asphalt paving is good.
The prices of raw materials, especially bitumen, have continued to
rise, but Lemminkäinen has been quite successful in hedging itself
against these price increases.
Brisk housing production and on-going infrastructure projects are
supporting the good level of demand for mineral aggregate and
ready-mix concrete.
Building Materials Division
The Q1 net sales of the Building Materials Division were EUR 11.6
million (13.2) and the operating result was EUR 2.6 million
(-3.4). The Divisions order book was EUR 23.6 million (21.2).
Demand for roofing and urban environment contracting has remained
good. The price level is also expected to rise.
Lemcon Ltd
The Q1 net sales of Lemcon Ltd rose to EUR 100.9 million (66.0)
and the profit before taxes rose to EUR 4.4 million (3.0). The
companys order book was EUR 368.3 million (234.3), of which
operations abroad accounted for 52.2 % (64.7).
Lemcons domestic order book for rock engineering contracting is
good. Also in Sweden the state of the market appears to remain
favourable. Construction work on the E18 motorway contract, in
which Lemcon is participating as a consortium partner, is
proceeding as planned.
Commercial construction is expected to remain brisk thanks to new
building works in downtown Helsinki, amongst other factors. In
Russia, demand for industrial and logistical facilities continues
to remain brisk. Demand for the expert services of the globally
operating Lemcon Networks appears to be still growing.
During the review period IKEA announced the termination of its
contract with Lemcon concerning the construction of the MEGA
shopping centre in St. Petersburg. The value of the contract was
approximately EUR 92 million. There are no legal grounds for the
contract termination, and the matter will proceed to the court of
arbitration. Termination of the half-completed contract will not
have any essential bearing on the Groups full-year result.
Oy Alfred A. Palmberg Ab
The Q1 net sales of the Groups building contractor, Oy Alfred A.
Palmberg Ab, was up on the previous year at EUR 129.7 million
(99.4). The companys result before taxes improved and was EUR 6.9
million (3.9). Palmbergs order book was EUR 441.5 million
(362.8).
The improving employment situation coupled with a rise in earned
incomes and increased borrowing are providing further support for
the demand for housing. The volume of building construction rose
5.4 % last year and is expected to grow 3.5 % in 2006. New housing
starts for this year are forecast at 33,500, of which 10,600 will
be private-sector housing units.
Palmbergs housing production is growing. The company made new
starts on 575 (375) private-sector housing units in the first
quarter. In 2005 the company made starts on 1,251 new housing
units, and has the capabilities to make starts on approx. 1,500
units this year. Palmbergs full-year outlook is good and its
order book stands at an all-time high.
Tekmanni Oy
The Q1 net sales of Tekmanni Oy were EUR 42.9 million (40.5) and
the profit before taxes EUR 2.5 million (1.6). The order book was
EUR 67.0 million (75.5).
The business adjustment and restructuring measures implemented
last year have improved Tekmannis competitiveness and
profitability. Industrial investments and the sustained level of
activity on the refurbishment market have boosted demand for
maintenance, upkeep and repair works in the technical services
sector. In particular, the volume of plumbing refurbishment works
in residential buildings is growing nationwide.
The growth potential of the technical services sector augers well
for Tekmanni in 2006.
GROUP STRUCTURE
At the beginning of 2006 the roofing and concrete products
businesses of the Building Materials Division were transferred to
two new subsidiaries: Lemminkäinen Katto Oy and Lemminkäinen
Betonituote Oy. The new companies together with Omni-Sica Oy still
constitute the Building Materials Division.
FINANCING
According to the source and application of funds statement, the
cash flow from operating activities was EUR 76.4 million (-32.1),
the cash flow from investing activities EUR 3.8 million
(-2.2) and the cash flow from financing activities EUR 76.4
million (32.3). The cash flow for the accounting period includes
dividends totalling EUR 18.0 million (9.9) for 2005.
Interest-bearing liabilities at the end of the accounting period
were EUR 360.9 million (325.3) and liquid funds were EUR 38.5
million (38.1). Interest-bearing net debt was EUR 322.4 million
(287.1). The change in interest-bearing net debt from the
comparative period was EUR 35.2 million.
The changes in cash flows and net debt compared with Q1 last year
stem from the larger dividend pay-out, the increase in business
volume, and changes in project financing.
Net financing expenses were EUR 1.9 million (1.8), representing
0.6 % (0.8) of net sales. The equity ratio was 25.4 % (25.0) and
gearing 171.8 % (178.0).
IFRS ACCOUNTING PRINCIPLES
Measurement and recognition principles
The Groups IFRS transition date was 1 January 2004. The annual
financial statements dated 31 December 2005 were prepared in
accordance with IFRS accounting principles. The 2005 interim
financial reviews were restated in accordance with IFRS and
published in December. This interim financial review has been
prepared in accordance with the same IFRS measurement and
recognition principles as those observed in the year-end financial
statements for 2005. In addition the Group has adopted the new
standards and interpretations listed below. The Group will publish
its interim financial reviews in accordance with all the
requirements of IAS 34, Interim Financial Reporting, after the
EUs Transparency Directive has been incorporated into Finnish
legislation at the beginning of 2007 and the level and content of
mandatory reporting has been clarified.
New IFRS standards
The Group adopted the following new standards and interpretations
with effect from 1 January 2006:
IAS 19 (Amendment), Employee benefits: actuarial gains and losses,
accounting procedures and additional disclosures for group
entities.
Amendment to IAS 21: Net investment in a foreign operation (The EU
has not yet approved the amendment for adoption. Approval is
expected by the end of the year.)
IAS 39 (Amendment), Financial Instruments: recognition and
measurement (The application of cash flow hedge accounting to
forecast intra-group transactions)
IFRIC 4, Determining whether an arrangement contains a lease.
The adoption of these standards did not result in any changes in
the accounting principles that would have affected the information
presented in this interim financial review.
The information contained in the interim financial review has not
been audited.
INVESTMENTS
Investments in the accounting period amounted to EUR 9.4 million
(10.8). The investments were mainly purchases of paving, crushing
and excavation equipment, production plant for building materials,
and building construction equipment
PERSONNEL
The average number of employees in the Group over the accounting
period was 7,187 (6,766), of whom 1,846 (1,516) were working
abroad. As of 31 March 2006, there were 7,354 (6,892) employees on
the payroll.
ORDER BOOK
The Groups order book rose 27% to stand at EUR 1,155.7 million
(909.8), of which foreign orders accounted for 30.3 % (30.1 %).
Order book by business sector
EUR mill. 3/06 3/05 Change, %
Paving and Mineral
Aggregates Division 255.3 216.0 18.2
Building Materials
Division 23.6 21.2 11.3
Lemcon Ltd 368.3 234.3 57.2
Oy Alfred A. Palmberg Ab 441.5 362.8 21.7
Tekmanni Oy 67.0 75.5 -11.3
Total 1,155.7 909.8 27.0
Of the new construction projects started after the accounting
period, the most important is a new office building complex to be
built by Oy Alfred Palmberg Ab in the Salmisaari district of
Helsinki. Lemminkäinens own head office will be relocated to the
new building in 2009. The premises will be leased from the
developer, Varma Mutual Pension Insurance Company. The project is
worth approx. EUR 100 million and construction work will begin in
summer 2006.
Oka Oy, a subsidiary of Palmberg, is building a shopping centre in
downtown Lappeenranta. The project also includes office space, a
parking facility and apartments. The total value of the project is
approx. EUR 41 million.
A contract for the construction of two office buildings in West
Pasila has been signed with Fennia Mutual Insurance Company. The
contract is worth about EUR 40 million.
A letter of intent has been signed with VR Group concerning the
site (approx. 8 hectares) of its railway engineering works in
Turku, where it is intended that 70,000 m2 of housing will be
built. Palmberg will purchase the building lots and construction
rights as soon as the site is officially zoned for housing
development. The project will be carried out in partnership with
Sato-Rakennuttajat Oy.
The above-mentioned projects are not included in the order book
for the review period.
DECISIONS OF THE ANNUAL GENERAL MEETING
The Annual General Meeting of Lemminkäinen Corporation held on 17
March 2006 adopted the 2005 annual financial statements and
granted the Board of Directors and the Managing Director freedom
from responsibility. In accordance with the Board of Directors
proposal, the Annual General Meeting decided to pay a dividend of
EUR 1.00 per share, i.e. a total dividend pay-out of
17,021,250.00. The record date of the dividend payment was 22
March 2006 and the date of dividend payment was 29 March 2006.
Messrs. Berndt Brunow, Erkki J. Pentti, Heikki Pentti, Teppo
Taberman and Sakari Tamminen were elected to serve as members of
the Company's Board of Directors. The Board of Directors elected
Heikki Pentti to serve as the Chairman and Teppo Taberman to serve
as the Vice Chairman.
PricewaterhouseCoopers Oy, a firm of authorised public
accountants, were elected to serve as the Companys auditors, with
Mr. Jan Holmberg, A.P.A. acting as the auditor in charge.
SHARES
The listed price of Lemminkäinen Corporations share was EUR 30.50
(15.74)at the beginning and EUR 34.86 (18.30) at the end of the
review period. The trading volume was 1,250,512 shares
(1,337,402). The market capitalisation at the end of the
accounting period was EUR 593.4 million (311.5).
FCAs ALLEGATIONS CONCERNING THE ASPHALT PAVING AND BITUMINOUS
ROOFING INDUSTRIES
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 has denied the FCAs
allegations as being unfounded in all respects and has called for
the Market Court to dismiss the FCAs sanction proposal in its
entirety. The case is pending in the Market Court.
In March 2006 the FCA sent companies of the bituminous roofing
industry a copy of its draft proposal to the Market Court for
comment. The draft proposal alleges that prohibited exchanges of
information took place on the bituminous roofing market during the
years 1996-2002. The amount of the fine sought by the FCA is not
specified in the document. Lemminkäinen is studying the draft
proposal and will give its response during the course of this
spring.
OUTLOOK FOR THE 2006 ACCOUNTING PERIOD
Lemminkäinens outlook for the year ahead is good. The Groups
housing production is growing and major infrastructure projects
will provide work in the coming years. The favourable development
of Lemminkäinens international business is expected to continue
in existing as well as new market areas. With an order book almost
30 % higher than last year, the prerequisites for net sales growth
and improved earnings are in place for 2006.
Helsinki, 10 May 2006
Lemminkäinen Corporation, Board of Directors
Lemminkäinen Corporation
Juhani Sormaala
Managing Director
CONSOLIDATED INCOME
STATEMENT
EUR mill. 3/2006 3/2005 Change Change, % 12/2005
Net sales 303.5 231.2 72.3 31.3 1,601.7
Operating income and
expenses -305.3 -237.2 -68.1 -28.7 -1,495.3
Depreciation -5.0 -5.0 0.0 0.0 -34.0
Operating
profit/loss -6.8 -11.0 4.2 38.2 72.5
Financial income -2.7 -2.6 -0.1 -3.8 -11.5
Financial expenses 0.8 0.9 -0.1 -11.1 3.8
Share of the results
of affiliated
undertakings -0.3 -0.1 -0.2 over 100 1.1
Profit/loss before
taxes -9.1 -12.8 3.7 28.9 65.9
Income taxes 1.7 3.2 -1.5 -46.9 -17.4
Profit/loss for the
accounting period -7.3 -9.6 2.3 24.0 48.5
Distribution of the result for
the accounting period
To shareholders of
the parent company -8.3 -10.9 2.6 23.9 43.7
To minority
interests 1.0 1.3 -0.3 -23.1 4.7
EPS calculated from profit/loss attributable to parent company
shareholders, EUR
Earnings per share,
EUR -0.49 -0.64 2.57
Earnings per share,
EUR, diluted -0.49 -0.64 2.57
NET SALES BY BUSINESS SECTOR
EUR mill. 03/2006 03/2005 Change Change, % 12/2005
Lemminkäinen
Corporation
Paving and Mineral
Aggregates Division 23.9 21.5 2.4 11.2 514.7
Building Materials
Division 11.6 13.2 -1.6 -12.1 100.3
Lemcon Ltd 100.9 66.0 34.9 52.9 328.8
Oy Alfred A.
Palmberg Ab 129.7 99.4 30.3 30.5 517.3
Tekmanni Oy 42.9 40.5 2.4 5.9 191.1
Others -5.6 -9.4 3.8 40.4 -50.4
Group total 303.5 231.2 72.3 31.3 1,601.7
OPERATING PROFIT/LOSS BY
BUSINESS SECTOR
EUR mill. 03/2006 03/2005 Change Change, % 12/2005
Lemminkäinen
Corporation
Paving and Mineral
Aggregates Division -20.6 -16.2 -4.4 -27.2 20.5
Building Materials
Division -2.6 -3.4 0.8 23.5 0.6
Lemcon Ltd 4.1 2.6 1.5 57.7 15.3
Oy Alfred A.
Palmberg Ab 7.5 4.6 2.9 63.0 28.3
Tekmanni Oy 2.2 1.5 0.7 46.7 6.8
Others 2.5 -0.1 2.6 over 100 1.0
Group total -6.8 -11.0 4.2 38.2 72.5
CONSOLIDATED
BALANCE SHEET
EUR mill. 03/2006 03/2005 12/2005
Non-current assets
Tangible assets 167.8 169.0 164.4
Goodwill on
consolidation 63.7 63.2 63.5
Other intangible
assets 2.5 3.0 2.5
Investments 8.6 10.5 10.9
Deferred tax asset 9.3 10.3 4.0
Other non-current
receivables 1.6 0.2 0.7
Total 253.5 256.2 245.9
Current assets
Inventories 240.0 223.4 223.7
Trade and other
receivables 298.3 191.1 263.4
Cash funds 38.5 38.1 42.4
Total 576.8 452.6 529.5
Assets, total 830.3 708.9 775.4
Shareholders equity and
liabilities
Equity attributable to shareholders of the
parent company
Share capital 34.0 34.0 34.0
Other shareholders
equity before
minority interest 140.2 111.7 166.9
Minority interest 13.3 15.5 14.6
Shareholders 187.6 161.3 215.5
equity, total
Non-current
liabilities
Deferred tax
liability 16.1 17.6 19.4
Pension liabilities 0.4 0.6 0.5
Provisions 3.4 4.4 4.9
Interest-bearing
liabilities 99.5 112.6 103.5
Other liabilities 3.0 1.1 2.5
Total 122.4 136.3 132.3
Current liabilities
Accounts payable
and other
liabilities 256.2 197.3 267.1
Provisions 2.7 1.3 1.5
Interest-bearing
liabilities 261.4 212.7 160.5
Total 520.3 411.3 427.6
Shareholders
equity and
liabilities, total 830.3 708.9 775.4
Statement of changes
in equity
EUR mill. Share Share Transla Revaluati Retain Minori Sharehold
capit premium tion on ed ty ers'
al account differe reserve earnin intere equity,
nce gs st total
reserve
Adjusted
shareholders
equity,
1.1.2005 34.0 5.8 -0.2 1.4 125.7 15.2 181.9
Translation
difference 0.8 0.8
Hedging of net
investment in
foreign
subsidiary -0.2 -0.2
Transfer from
revaluation
reserve -0.2 -0.2
Change in fair
value 0.2 0.2
Reversal of
dividend
liability 0.0 0.0
Dividend
distribution -10.2 -10.2
Result for the
accounting
period 43.7 4.7 48.5
Change in
minority
interest -5.3 -5.3
Shareholders
equity,
31.12.2005 34.0 5.8 0.4 1.5 159.2 14.6 215.5
Translation
difference -0.1 -0.1
Hedging of net
investment in
foreign
subsidiary 0.0 0.0
Change in fair
value 0.1 0.1
Effect of
shares sold -1.3 -1.3
Dividend
distribution -17.0 -17.0
Result for the
accounting
period -8.3 1.0 -7.3
Change in
minority
interest -2.2 -2.2
Shareholders
equity,
31.3.2006 34.0 5.8 0.3 0.3 133.9 13.3 187.6
STATEMENT OF SOURCE AND
APPLICATION OF FUNDS
EUR mill. 03/2006 03/2005 12/2005
Result before
extraordinary items -9.1 -12.8 65.9
Depreciation
according to plan 5.0 5.0 34.0
Other adjustments -2.0 -0.4 4.3
Cash flow before
change in working
capital -6.0 -8.2 104.2
Change in working
capital -63.0 -17.3 -17.6
Financial items -1.1 -1.4 -7.0
Direct taxes paid -6.3 -5.2 -20.1
Cash flow from
operating
activities -76.4 -32.1 59.5
Cash flow from
investing
activities -3.8 -2.2 -18.3
Change in loans 94.4 42.2 -28.1
Dividends paid -18.0 -9.9 -11.1
Cash flow from
financing
activities 76.4 32.3 -39.3
Change in cash
funds -3.8 -2.0 1.9
Cash funds at
beginning of period 42.4 39.9 39.9
Translation
difference of cash
funds -0.1 0.2 0.6
Cash funds at end
of period 38.5 38.1 42.4
ECONOMIC TRENDS AND 03/2006 03/2005 12/2005
FINANCIAL
INDICATORS
Return on equity,
% 1) -3.6 -5.6 24.5
Return on
investment, % 1) -1.2 -2.1 16.5
Operating result,
% of net sales -2.3 -4.8 4.5
Equity ratio, % 25.4 25.0 31.0
Gearing, % 171.8 178.0 102.9
Gross investments,
EUR million (incl.
leasing purchases) 9.4 10.8 37.4
Order book, EUR
mill. 1,155.7 909.8 1,011.3
- of which foreign
orders, EUR mill. 349.8 273.7 343.4
Average number of
employees 7,187 6,766 7,912
Employees at end of
period 7,354 6,892 7,112
Net sales, EUR
mill. 303.5 231.2 1,601.7
- of which
operations abroad,
EUR mill. 90.9 54.0 499.6
% of net sales 30.0 23.4 31.2
1)Only the result for the accounting period has been
included in the calculation of ROE and ROI.
SHARE-SPECIFIC 03/2006 03/2005 12/2005
INDICATORS
Earnings per share,
EUR -0.49 -0.64 2.57
Equity per share,
EUR 10.24 8.56 11.80
Dividend per share,
EUR 1.00
Dividend to
earnings ratio, % 38.9
Market
capitalisation, EUR
mill. 593.4 311.5 519.1
Share price at end
of period, EUR 34.86 18.30 30.50
Trading volume
during period,
1,000 shares 1,251 1,337 4,610
Number of issued
shares, 1,000
shares 17,021 17,021 17,021
GUARANTEES AND CONTINGENT LIABILITIES
EUR mill. 03/2006 03/2005 12/2005
Securities for own
commitments
Property mortgages 2.5 4.1 3.3
Business mortgages 98.7 98.1 99.2
Bonds pledged as
security 0.6 4.3 0.7
Total 101.8 106.5 103.3
Guarantees
On behalf of
affiliated
companies 0.5 0.3 0.4
On behalf of others 0.9 0.0 5.3
Leasing liabilities 26.0 22.1 27.7
Derivative
contracts
Forward foreign
exchange contracts
Nominal value 13.3 11.2 18.1
Current value 0.0 0.0 -0.2
Currency options,
calls purchased
Nominal value 1.7 3.1 1.7
Current value 0.0 0.0 0.0
Currency options,
puts written
Nominal value 0.8 3.1 1.7
Current value 0.0 -0.1 -0.2
Interest rate
options, calls
purchased
Nominal value 36.4 8.4 36.4
Current value 0.0 0.0 0.0
Interest rate
options, puts
written
Nominal value 7.0 8.4 6.9
Current value -0.4 -0.7 -0.4
Interest rate swap
contracts
Nominal value 12.1 14.6 12.1
Current value -0.1 -0.2 -0.1
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.