Lemminkäinen and YIT will complete the merger
LEMMINKÄINEN CORPORATION FINANCIAL STATEMENTS BULLETIN 12.2.2010, 9:00 LEMMINKÄINEN'S FINANCIAL STATEMENTS BULLETIN 2009: Business diversity supported Lemminkäinen. Cash flow was good and the balance sheet was strengthened. Summary for January-December 2009 (comparative figures 1-12/2008): - Net sales fell 21% to EUR 1,964.4 million (2,481.8) - Opera
LEMMINKÄINEN CORPORATION FINANCIAL STATEMENTS BULLETIN 12.2.2010, 9:00 LEMMINKÄINEN'S FINANCIAL STATEMENTS BULLETIN 2009: Business diversity supported Lemminkäinen. Cash flow was good and the balance sheet was strengthened. Summary for January-December 2009 (comparative figures 1-12/2008): - Net sales fell 21% to EUR 1,964.4 million (2,481.8) - Operations abroad accounted for 27% or EUR 527.1 million (676.7) of net sales. - The operating profit was EUR 23.3 million (123.2). The operating margin was 1.2% (5.0). The operating profit was impaired by recognition of the remaining EUR 54 million of the infringement fine imposed by the Supreme Administrative Court. Excluding the charge, operating profit would have been EUR 77.3 million, representing 3.9% of net sales. - The result before taxes was EUR -10.0 million (91.0) - Earnings per share were EUR -1.53 (3.28) - The return on investment was 5.4% (17.7) - Cash flow from operating activities was EUR 64.2 million (24.6) - The equity ratio was 31.4% (26.2) and gearing was 108.6% (98.4) - The order book at the end of the accounting period was EUR 958.4 million (1,064.5) - The Board of Directors proposes that no dividend be paid for the accounting period Summary for October-December 2009 (comparative figures 10-12/2008): - Net sales fell 30% to EUR 519.6 million (742.5) - The operating profit was down 67% to EUR 12.3 million (37.5) - Net financing expenses were EUR 8.0 million (14.5) - The result before taxes was EUR 4.3 million (23.0) - Earnings per share were EUR -0.02 (0.55) - Cash flow from operating activities was EUR 67.7 million (212.8) Highlights of Q4/2009: Housing sales in Finland continued at the brisk level of the previous three months, and a number of commercial property transactions were completed in the fourth quarter. The contracts for the Kuopio Life Cycle Project, which are altogether worth about EUR 93.5 million to Lemminkäinen, were also signed in the fourth quarter. The paving season continued to be brisk during the October-November period, but the onset of winter brought the infrastructure construction season to an end earlier than in previous years. In the fourth quarter Lemminkäinen won the contracts for the construction works on both the eastern mouth of the Ring Rail Line's tunnel and for the Töölönlahti parking facility. The combined value of the projects is approx. EUR 49 million. The net sales and result of the Technical Building Services business sector developed steadily and the order book grew cautiously in spite of intensified competition. Among other contracts won during the fourth quarter, Lemminkäinen and Ilmarinen Pension Insurance Company signed a major servicing and maintenance agreement. In the Building Products business sector, demand for roofing and waterproofing contracting continued to be satisfactory in the fourth quarter. The share of urban environment construction remained almost at the level of the previous year. The pick-up in residential construction boosted demand for pre-cast concrete elements towards the end of the year. In the fourth quarter of 2009 Lemminkäinen published its revised strategy, the main economic targets of which are profitable growth and strengthening of the Group's financial position. Profitability and financial position in 2009: Net sales in all of Lemminkäinen's business sectors were down on the previous year due to poor general economic conditions. The impact was strongest in building construction, which had a slow first half of the year. However, the pick-up in housing production in Finland and Russia towards the end of the year improved the situation. Also brisk demand for paving work in Norway and Denmark as well as good success on the Finnish market also had a positive effect on net sales. Lemminkäinen's order book at the end of the accounting period was 10% down on the previous year. The result for the 2009 accounting period was weakened by reduced volumes due to the general economic situation. The net sales from building construction in particular were well down on the previous year. The profitability of building construction was also affected by weaker housing sales in Finland and Russia especially during the first half of the year. The Group's result was also impacted by the EUR 68.0 million infringement fine imposed by the Supreme Administrative Court, of which EUR 54 million was recognised in the third quarter of the year. The personnel adjustment measures initiated at the end of 2008 continued, and at the end of the accounting period there were about 1,200 fewer employees than twelve months earlier. The adjustment measures are still continuing, in addition to which greater business efficiency is being sought by simplifying the Group's structure and reorganising the support functions, among other means. Lemminkäinen's equity ratio at the end of the accounting period was 31.4% (26.2), which was clearly higher than in the previous year. The Company's liquid funds at the end of the accounting period were EUR 74.4 million (250.1). The EUR 150 million line of credit made available to Lemminkäinen remained unused at the end of the accounting period. In addition to this credit facility, the Company has an unused TyEL pension premium loan allocation of approximately EUR 23 million. President & CEO Timo Kohtamäki: "The recession reduced the volume of construction both in Finland and around the world. The year began in an atmosphere of uncertainty but brightened up in the second half, and the pick-up in construction was reflected in all of Lemminkäinen's business sectors. The Group's result fell short of the level achieved in the previous year. Even though the year was challenging due to the weakened market situation, we did achieve some successes in all of our business sectors. In particular, the infrastructure markets of the Nordic countries kept Lemminkäinen's order book at a good level, and the pick-up in housing sales in the second half of the year boosted the volume of building construction, in both Lemminkäinen and the sector generally. The Technical Building Services and Building Products business sectors produced good results in challenging market conditions. Demand for servicing, maintenance and renovation construction rose slightly during the year, and their combined share in our overall business is already over a third. 2009 was also significant because the results of the strategy work done during the year were published in the fourth quarter. The revised strategy marks out the path for our business over the next four years, and its economic targets are profitable growth and strengthening of the Group's financial position. The strategic focus areas are renovation construction, technical building services, residential construction in Russia, and infrastructure construction in the Nordic countries. In addition, the Group's structure will be simplified and the entire Group unified under the Lemminkäinen brand. Lemminkäinen has responded to the situation of construction market by adjusting the personnel levels of its business sectors in accordance with the present demand. The impact has been greatest in the Building Construction business sector, which now employs about a thousand fewer people than it did a year ago. In 2010 we will be seeking greater flexibility and efficiency in our operations through structural changes and reorganisation of support functions, among other means, as we move towards our strategic goal of creating one unified Lemminkäinen." Outlook for 2010 According to economic forecasts, Finland's gross domestic product is expected to return to growth and construction activity is expected to increase slightly. Housing sales picked up towards the end of 2009, and they are expected to remain stable in 2010 as well. Non-residential building construction is likely to remain slower than in previous years. Renovation construction will probably continue to grow steadily and demand for technical building services is expected to increase slightly, too. In Russia, the pick-up in the housing market will continue and the volume of construction will probably grow in 2010. Even though there are no new major transport infrastructure projects in the bid preparation pipeline for 2010, projects already in progress will keep infrastructure builders busy. The pick-up in building construction will also provide work for infra builders. In Finland the government will be making further cuts in its spending on basic highway maintenance, and the weakened finances of the municipalities may also reduce the volume of infrastructure construction in future years. The additional spending budgeted for infrastructure development in the other Nordic countries will continue, which will keep the markets of those countries favourable in the years ahead. The situation in the Baltic Countries will continue to be uncertain. Demand for construction products closely follows the building construction cycle, and demand is expected to rise following the pick-up in residential construction in 2010. Lemminkäinen estimates that net sales and the result before taxes for the 2010 accounting period will be at the 2009 level, the infringement fine imposed by the SAC being excluded from the 2009 comparative figures. Briefing A Finnish-language briefing for analysts and the media will be held at 10.00 a.m. on 12 February at Lemminkäinen's head office. The street address is Salmisaarenaukio 2, Helsinki, Finland. Those wishing to attend are kindly asked to register in advance with the Investor Relations Officer, Merja Paulamäki, by phoning +358 2071 53367 or by e-mailing merja.paulamaki@lemminkainen.fi. Presentation material on the financial statements will be available on the Company's website at www.lemminkainen.com after the briefing. Annual General Meeting, dividend and financial information 2010 Lemminkäinen Corporation's Annual General Meeting will be held at 10.00 a.m. on 16 April 2010 at High Tech Center, HTC Helsinki, Tammasaarenkatu 1-5, Helsinki, Finland. The Board of Directors of Lemminkäinen Corporation will propose to the Annual General Meeting that no dividend be paid for the 2009 accounting period. The 2009 Financial Statements, the Report of the Board of Directors, and the Corporate Governance Statement will be published in Finnish and English during week 12/2010. The interim financial reviews will be published on 6 May, 5 August and 4 November 2010. Lemminkäinen Corporation's annual summary and stock exchange bulletins can be viewed in their entirety on the Company's website at www.lemminkainen.com. From 1 January 2010, Lemminkäinen will observe the interpretation IFRIC 15 - Agreements for the Construction of Real Estate, which was endorsed by the European Commission in July 2009. The interpretation provides guidance on when revenue stemming from the construction of real estate is to be recognised on the basis of delivery, and when percentage-of-completion can be used as the recognition principle. In Lemminkäinen Group the new interpretation will affect especially the income recognition practice for own housing production, the basis of which will change from percentage-of-completion to full completion and delivery. Comparative figures for 2009 conforming to the new accounting principles will be published before the release of the first interim financial review in 2010. LEMMINKÄINEN CORPORATION Corporate Communications Additional information: Timo Kohtamäki, President & CEO, tel. +358 2071 53263 Robert Öhman, CFO, tel. +358 2071 53515 Merja Paulamäki, Investor Relations, tel. +358 2071 53367 APPENDICES Board of Directors' Report 1.1.-31.12.2009 Tabulated Section of the Financial Statements Bulletin DISTRIBUTION NASDAQ OMX Helsinki Key media www.lemminkainen.com BOARD OF DIRECTORS' REPORT 2009 OPERATING ENVIRONTMENT Finland Demand for construction declined strongly in 2009, the contraction being most clearly evidenced in the number of new building starts, especially in the first half of the year. In Finland the emphasis in residential construction shifted, especially during the first half of the year, towards rental housing production, and new starts were made on some 14,000 state-subsidised rental housing units. Sales of dwellings in own housing developments picked up markedly from the level at the end of previous year, and the volume of own housing production started to grow cautiously towards the end of the year. Approximately 24,000 new housing starts were made in Finland during 2009, and that number is expected to be slightly higher in 2010. In non-residential building construction, demand for commercial and logistics buildings remained at a reasonable level, but there was a marked decline in the construction of office and industrial buildings during 2009. Finnish real estate investors continued to invest in properties around the country, and the real estate investment market show signs of recovery. Real estate developments by public-sector organisations also had a positive impact on the non-residential construction market. The volume of infrastructure construction fell from the good level of 2008, but it did not decline in the same way as the volume of other construction. The main reason for the contraction in infrastructure construction in Finland was the completion of several major infra projects at the end of 2008 and the beginning of 2009. The volume of municipal infrastructure construction remained at a reasonable level. The contraction in building construction was reflected especially in reduced demand for geotechnical engineering work, mineral aggregates and ready-mix concrete. With the slowing in new construction, the emphasis in the technical building services sector has switched to renovation construction, due in part to the grants and incentives offered by the government. The volume of renovation construction rose slightly during 2009 and is expected to continue growing in the coming years. Demand for servicing and maintenance of technical building systems remained stable. Operations abroad In Scandinavia, government stimulus measures aimed at major projects and basic road-keeping helped to support the infrastructure markets at good levels. In Norway and Denmark demand for paving works was especially brisk. In Sweden the development of the rail network continued, which offered some significant contracts to geotechnical and rock engineering contractors. In the Baltic Countries the construction market remained extremely challenging. A few EU-funded road projects helped to support the Baltic infrastructure markets. In Russia economic uncertainty continued and there was a marked decline in demand for construction from the level of the previous year. However, housing sales in Russia did pick up markedly towards the end of the year and they are expected to remain steady in 2010 as well. NET SALES, PROFIT AND FINANCIAL POSITION IN 2009 -------------------------------------------------------------------------------- | Key figures, EUR million | 2009 | 2008 | 2007 | -------------------------------------------------------------------------------- | Net sales | 1,964.4 | 2,481.8 | 2,174.1 | -------------------------------------------------------------------------------- | of which operations abroad | 527.1 | 676.7 | 581.6 | -------------------------------------------------------------------------------- | Operating profit | 23.3 | 123.2 | 127.2 | -------------------------------------------------------------------------------- | Operating margin, % | 1.2 | 5.0 | 5.8 | -------------------------------------------------------------------------------- | Profit before taxes | -10.0 | 91.0 | 111.2 | -------------------------------------------------------------------------------- | Profit for accounting period | -23.7 | 63.5 | 80.6 | -------------------------------------------------------------------------------- | of which profit share of parent | -26.1 | 55.9 | 72.9 | | company's shareholders | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings per share, EUR | -1.53 | 3.28 | 4.29 | -------------------------------------------------------------------------------- | Dividend per share, EUR | 0.0*) | 0.90 | 1.80 | -------------------------------------------------------------------------------- | Return on investment, % | 5.4 | 17.7 | 20.7 | -------------------------------------------------------------------------------- | Return on equity, % | -7.4 | 19.2 | 27.5 | -------------------------------------------------------------------------------- | Equity ratio, % | 31.4 | 26.2 | 32.7 | -------------------------------------------------------------------------------- | Gearing, % | 108.6 | 98.4 | 87.2 | -------------------------------------------------------------------------------- | Liquid funds | 74.4 | 250.1 | 78.5 | -------------------------------------------------------------------------------- | Interest-bearing liabilities | 399.1 | 586.5 | 357.0 | -------------------------------------------------------------------------------- *)Board of Directors' proposal to the AGM. Lemminkäinen Group's full-year net sales were EUR 1,964.4 million (2,481.8). Of that total, 73% (73) was generated in Finland, 17% (13) in other Nordic countries, 3% (4) in Russia, 4% (5) in the Baltic Countries and 3% (5) in other countries. The operating profit for the accounting period was EUR 23.3 million (123.2) and the operating margin was 1.2% (5.0). Net sales in all of Lemminkäinen's business sectors were down on the previous year due to poor general economic conditions. The impact was strongest in building construction, which had a slow first half of the year. However, the pick-up in housing production in Finland and Russia towards the end of the year improved the situation. Also brisk demand for paving work in Norway and Denmark as well as good success on the Finnish market also had a positive effect on net sales. Lemminkäinen's order book at the end of the accounting period was 10% down on the previous year. The result for the accounting period was EUR -23.7 million (63.5). The 2009 result was weakened by reduced volumes due to the general economic situation. Net sales from building construction in particular were well down on the previous year. The profitability of building construction was also affected by weaker housing sales in Finland and Russia especially during the first half of the year. The Group's result was also impacted by the EUR 68.0 million infringement fine imposed by the Supreme Administrative Court, of which EUR 54 million was recognised in the third quarter of the year. Excluding this charge, the Company's result before taxes would have been EUR 44 million (91.0). Financing expenses remained at almost the level of the previous year and were EUR 33.4 million (32.1). The personnel adjustment measures initiated at the end of 2008 continued, and at the end of the accounting period there were about 1,200 fewer employees than twelve months earlier. The adjustment measures are still continuing, in addition to which greater business efficiency is being sought by simplifying the Group's structure and reorganising the support functions, among other means. Lemminkäinen's equity ratio at the end of the accounting period was 31.4% (26.2), which was clearly higher than in the previous year. Cash flow from operating activities was up on the previous year at EUR 64.2 million (24.6). The Company's liquid funds at the end of the accounting period were EUR 74.4 million (250.1). The EUR 150 million line of credit made available to Lemminkäinen remained unused at the end of the accounting period. In addition to this credit facility, the Company has an unused TyEL pension premium loan allocation of approximately EUR 23 million. -------------------------------------------------------------------------------- | Net sales by business sector, EUR | 2009 | 2008**) | 2007 | | million | | | | -------------------------------------------------------------------------------- | Building Construction | 867.7 | 1,207.5 | 1,042.9*) | -------------------------------------------------------------------------------- | Infrastructure Construction | 789.6 | 920.3 | 820.3*) | -------------------------------------------------------------------------------- | Technical Building Services | 233.8 | 269.9 | 230.2 | -------------------------------------------------------------------------------- | Building Products | 132.7 | 156.0 | 133.8 | -------------------------------------------------------------------------------- | Other operations and Group | -42.2 | -52.2 | -53.0 | | eliminations | | | | -------------------------------------------------------------------------------- | Business sectors, total | 1,981.5 | 2,501.5 | 2,174.1 | -------------------------------------------------------------------------------- | Unallocated Items | -17.1 | -19.7 | | -------------------------------------------------------------------------------- | Group total (IFRS) | 1,964.4 | 2,481.8 | 2,174.1 | -------------------------------------------------------------------------------- | of which Operations abroad | 527.1 | 676.7 | 581.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating profit by business | 2009 | 2008**) | 2007 | | sector, EUR million | | | | -------------------------------------------------------------------------------- | Building Construction | 36.6 | 69.7 | 71.7*) | -------------------------------------------------------------------------------- | Infrastructure Construction | 25.9 | 26.2 | 39.3*) | -------------------------------------------------------------------------------- | Technical Building Services | 12.2 | 16.3 | 11.9 | -------------------------------------------------------------------------------- | Building Products | 6.5 | 10.5 | 11.1 | -------------------------------------------------------------------------------- | Other operations | -61,7***) | -3.3 | -6.7 | -------------------------------------------------------------------------------- | Business sectors, total | 19.5 | 119.4 | 127.2 | -------------------------------------------------------------------------------- | Unallocated Items | 3.8 | 3.8 | | -------------------------------------------------------------------------------- | Group total (IFRS) | 23.3 | 123.2 | 127.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating margin by business | 2009 | 2008**) | 2007 | | sector, % | | | | -------------------------------------------------------------------------------- | Building Construction | 4.2 | 5.8 | 6.9*) | -------------------------------------------------------------------------------- | Infrastructure Construction | 3.3 | 2.8 | 4.8*) | -------------------------------------------------------------------------------- | Technical Building Services | 5.2 | 6.1 | 5.2 | -------------------------------------------------------------------------------- | Building Products | 4.9 | 6.7 | 8.3 | -------------------------------------------------------------------------------- | Group total (IFRS) | 1.2 | 5.0 | 5.8 | -------------------------------------------------------------------------------- *) Pro forma **) The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. ***) includes a charge of EUR 54 million of the fine imposed by the Supreme Administrative Court. ORDER BOOK -------------------------------------------------------------------------------- | Order book by business sector, | 2009 | 2008 | 2007 | | EUR million | | | | -------------------------------------------------------------------------------- | Building Construction | 495.6 | 576.3 | 938.0 | -------------------------------------------------------------------------------- | Infrastructure Construction | 322.7 | 365.4 | 326.5 | -------------------------------------------------------------------------------- | Technical Building Services | 106.8 | 97.7 | 111.9 | -------------------------------------------------------------------------------- | Building Products | 33.3 | 25.2 | 37.7 | -------------------------------------------------------------------------------- | Group, total | 958.4 | 1,064.5 | 1,414.1 | -------------------------------------------------------------------------------- | of which international orders | 206.8 | 263.1 | 284.0 | -------------------------------------------------------------------------------- Lemminkäinen's order book at the end of the accounting period was down by tenth on the previous year. The market breakdown of the order book was Finland 78% (75), other Nordic countries 11% (16), Russia 2% (2), the Baltic Countries 5% (5) and other countries 4% (2). Significant orders received in 2009 In January Lemminkäinen and the Moldovan Road Administration agreed a highway upgrade contract worth EUR 13.5 million. In February an agreement was made with the Estonian Road Administration concerning a highway upgrade contract in Ida-Viru County. Lemminkäinen is the leading partner in the consortium and its share of the contracted works is about a third. The whole contract is worth approx. EUR 31 million. In March work began on the construction of Tammiston Tähti in Vantaa. The new commercial building has a total floor area of 4,900 m2 and will be completed in March 2010. The property was sold to Suomi Mutual Life Insurance Company in December 2009. In April an agreement was made with the Lithuanian Road Administration concerning basic improvement works to be carried out as a consortium project on the motorway between Vilnius and Klaipeda. The whole contract is worth approx. EUR 17 million. Lemminkäinen's share of the contracted works is over a third. In the summer an agreement was made concerning the project management contract for Cargotec's new multi-assembly unit (MAU) in Poland. The total value of the project for Lemminkäinen is approx. EUR 22 million. The works will be completed in summer 2010. In the summer, work began on the pedestrianisation of Keskuskatu street in downtown Helsinki. The total street area involved in the contract is about 10,000 m² and the work will be carried out in the years 2009-2013. The contract is worth approx. EUR 6.8 million. In the summer Lemminkäinen and Paulig Oy made an agreement on the phased purchase of Paulig's old roastery site in the Vuosaari district of the Helsinki. The site has been zoned as a residential area for about 2,000 residents. Planning work for the site is under way and construction is expected to start during 2010. In June Lemminkäinen made an agreement with IKEA concerning the construction of a new IKEA store in Tampere. The project is being carried out as a project management contract and will be completed in summer 2010. The contract is worth approx. EUR 18 million. In the summer Lemminkäinen won contracts for the construction of numerous non-residential buildings of various types. The buildings are located in different parts of Finland and their combined value is approx. EUR 40 million. In addition to these, work began on the construction of shopping centre in Imatra in August. The total floor area of the building is approx. 6,000 m². In July work began on the phase 1 construction of Åbo Akademi University's campus in Pietarsaari. The floor area to be built in phase 1 of the project is almost 10,000 m² and it is scheduled for completion by November 2010. In the summer Lemminkäinen won the excavation and reinforcement contract for the P-Hämppi underground parking facility in Tampere. The contract is worth approx. EUR 27 million and will be completed in spring 2011. In August Lemminkäinen won a significant geotechnical engineering contract in Sweden. The project involves improving the stability of two concrete dams for safety reasons. The dams were constructed at Storfinnefors and Ramsele in the 1950s.The contract is worth approx. EUR 10 million. In the autumn the development of the Jätkäsaari residential area in Helsinki began with an architectural competition. Lemminkäinen will build some 400 housing units in the Saukonpaasi district. Construction work will begin in autumn 2010. In September an agreement was made with Oy Teboil Ab to extend the contract to provide technical facility management and maintenance services to Teboil's 450 distribution points. In September, work began on the construction of new premises for the Finnish Agency for Rural Affairs in Seinäjoki. The property, which has a floor area of 6,400 m2 and will be completed in early 2011, was then sold to Etera Mutual Pension Insurance Company. In October Lemminkäinen and Ilmarinen Mutual Pension Insurance Company extended their comprehensive, long-term partnership agreement concerning real estate services. The agreement covers the servicing and maintenance of technical systems in office and commercial properties as well as management services related to their day-to-day operation. The 21 properties in question have a combined floor area of approx. 350,000 m². In October Lemminkäinen started work on the replumbing and bathroom refurbishment of 189 housing units in the Vuosaari district of Helsinki. The contract raised the total number of housing units in which Lemminkäinen was carrying out replumbing and bathroom refurbishments in the old Vuosaari district of Helsinki to 840. In November work began on the construction of the Western Metro in Helsinki. Lemminkäinen won the first contract of the project, which involves the excavation of track and access tunnels in Ruoholahti. The contract is worth approximately EUR 10 million and will be completed in May 2011. In December construction work began on a significant life-cycle project in Kuopio. The project entity encompasses the new construction and basic repair of four schools and one child day-care centre. Lemminkäinen will be responsible for the maintenance and upkeep of the buildings for a period of 25 years. The total value of the project is EUR 93.5 million. In December Lemminkäinen won the contract for the construction works of the Töölönlahti underground parking facility and civil defence shelter in Helsinki. The contract will be completed in summer 2012 and is worth approx. EUR 35 million. In December work began on the construction of the eastern mouth of the Ring Rail Line's tunnel section in Vantaa. The contract will be completed in spring 2012 and is worth approx. EUR 14 million. Lemminkäinen won two road construction contracts in Lithuania. Construction work will begin in spring 2010. The contracts are partly funded by the EU and their combined value is EUR 12.3 million. Significant orders received after the accounting period Lemminkäinen is to renew the track and field at Helsinki's Olympic Stadium. The contract will be completed at the end of July 2010 and is worth approx. EUR 4 million. BALANCE SHEET, CASH FLOW AND FINANCING The consolidated balance sheet total at 31 December 2009 was EUR 1,033.7 million (1,413.3). The return on investment was 5.4% (17.7) and the equity ratio 31.4% (26.2). Gearing was 108.6% (98.4). According to the cash flow statement, the cash flow from operating activities was EUR 64.2 million (24.6), the cash flow from investing activities EUR -18.5 million (-27.9) and the cash flow from financing activities EUR -220.2 million (177.3). The cash flow for the accounting period includes the payment of dividends totalling EUR 18.0 million (32.6) for the 2008 accounting period. Working capital declined 24% to EUR 660.6 million (874.6) and net working capital fell 15% to EUR 348.9 million (411.9). Liquid funds at the end of the accounting period were EUR 74.4 million (250.1). The amount of interest-bearing debt at the end of the review period was EUR 399.1 million (586.5), of which EUR 108.4 million was short-term debt and EUR 290.7 million long-term debt. Interest-bearing net debt was EUR 324.7 million (336.4). Net financing expenses were EUR 33.4 million (32.1), representing 1.7% (1.3) of net sales. Lemminkäinen's interest-bearing debt comprised loans from financial institutions 49%, commercial paper 1%, project loans related to own housing production and non-residential construction 11%, TyEL loans 22%, finance leasing liabilities 14% and other liabilities 3%. EUR 54 million of the EUR 68 million fine imposed by the Supreme Administrative Court was recognised on the income statement under “Other operating expenses” in the third quarter of the year, which resulted in a covenant contained in the loan terms being breached. Lemminkäinen entered into negotiations with its banking consortium and made a new agreement that continued the financing arrangements in accordance with the original maturity and on almost the original terms. The EUR 150 million line of credit made available to Lemminkäinen as part of the renegotiated financing arrangements remains unused at the end of the review period. In addition to this credit facility, the Company has an unused TyEL pension premium loan allocation of approximately EUR 23 million. BUSINESS SECTORS BUILDING CONSTRUCTION -------------------------------------------------------------------------------- | Key figures, EUR million | 2009 | 2008**) | 2007*) | -------------------------------------------------------------------------------- | Net sales | 867.7 | 1,207.5 | 1,042.9 | -------------------------------------------------------------------------------- | Operating profit | 36.6 | 69.7 | 71.7 | -------------------------------------------------------------------------------- | Operating margin, % | 4.2 | 5.8 | 6.9 | -------------------------------------------------------------------------------- | Profit before taxes | 24.7 | 56.7 | 64.6 | -------------------------------------------------------------------------------- | Order book at end of period | 495.6 | 576.3 | 938.0 | -------------------------------------------------------------------------------- | Personnel (average) | 2,356 | 3,159 | 3,055 | -------------------------------------------------------------------------------- *) Pro forma **) The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. The net sales of the Building Construction business sector fell 28% to EUR 867.7 million (1,207.5). The business sector generated 82% of its net sales in Finland, 7% in other Nordic countries, 5% in Russia, and 6% in other countries. Building Construction's operating profit was down 47% to EUR 36.6 million (69.7). The business sector's result was satisfactory given the market conditions. The pick-up in the housing market and the completion of several real estate deals in the fourth quarter improved the business sector's result at the end of the year. The business sector's order book fell 14% to EUR 495.6 million (576.3). Orders from abroad contributed EUR 82.3 million (89.4) to the order book. Operations in Finland: Sales of housing units were brisker than expected, and 771 (634) units in Lemminkäinen's own housing developments were sold during the accounting period. Lemminkäinen completed 533 (1,030) units in its own housing developments during the accounting period. As a consequence of the pick-up in the housing market, the Company resumed its own housing production during the third quarter, and new starts were made on a total of 351 (504) own housing units during the accounting period as a whole. At the end of the accounting period, 405 (587) housing units were under construction, of which 193 were unsold. The number of unsold completed housing units was 263 (496). There was a marked increase in the number of contracted housing starts, with new starts being made on 1,090 (507) rental housing units in 2009. The total number of residential housing starts made by Lemminkäinen in Finland during 2009 was 1,444 (901). -------------------------------------------------------------------------------- | Lemminkäinen's private-sector | 2009 | 2008 | 2007 | | housing production, Finland | | | | -------------------------------------------------------------------------------- | Housing starts | 351 | 504 | 852 | -------------------------------------------------------------------------------- | Housing units sold | 771 | 634 | 883 | -------------------------------------------------------------------------------- | Unsold completed units | 263 | 496 | 283 | -------------------------------------------------------------------------------- | Completed | 533 | 1,030 | 1,488 | -------------------------------------------------------------------------------- | Under construction at end of | 405 | 587 | 1,123 | | period | | | | -------------------------------------------------------------------------------- | of which unsold | 193 | 380 | 733 | -------------------------------------------------------------------------------- At the end of the accounting period Lemminkäinen owned a total of 877,000 m2 of unused building rights in Finland, of which approx. 388,000 m2 were residential building rights. The Company also had binding or conditional co-operation and zoning agreements for about 818,000 m², of which about 332,000 m² are residential building rights. The value of the building plots was approx. EUR 94.7 million (74.8). The volume of non-residential building construction was clearly down on the previous year and demand for office buildings in particular was limited during the accounting period. Demand for commercial and logistics buildings remained at a reasonable level. The real estate investment market showed signs of recovery towards the end of the year, but the threshold for builders to start new construction remained high. The renovation construction market remained stable and the near-term outlook is also favourable. Government stimulus measures aimed at renovation construction have boosted demand for building repair works to some extent. Renovation construction accounted for about 17% of Lemminkäinen's building construction during the accounting period, and the share is expected to rise in the future. Operations abroad: Operations abroad accounted for about 18% of the business sector's net sales in 2009. Almost a third of this international business was in Russia. As a result of the international financial crisis, demand for construction fell sharply in Russia, but housing sales picked up towards the end of the year and the number of housing units sold in 2009 was significantly higher than in the previous year. Economic uncertainty persists in Russia, but housing sales are expected to remain steady in 2010. The number of housing units sold in Lemminkäinen's own developments in Russia during the accounting period was 133 (61).Work halted on 264 housing units in St. Petersburg was resumed during the accounting period. At the end of the accounting period the Company had 479 (306) housing units under construction, of which 367 were unsold. The number of unsold completed units at the end of the accounting period was 22. The value of the inventories that Lemminkäinen had tied up in Russia at the end of the accounting period was EUR 36.5 million. In Sweden there were no housing units under construction in Lemminkäinen's own housing developments at the end of the accounting period. The number of unsold completed units was 11. The number of housing units sold during the accounting period was 27. Future growth in building construction abroad will be sought from Russian residential construction, without forgetting traditional contracting. The main focus of other operations abroad is on industrial construction in countries such as China, India and Poland. The volume of telecommunication network construction was well down on the previous year. INFRASTRUCTURE CONSTRUCTION -------------------------------------------------------------------------------- | Key figures, EUR million | 2009 | 2008**) | 2007*) | -------------------------------------------------------------------------------- | Net sales | 789.6 | 920.3 | 820.3 | -------------------------------------------------------------------------------- | Operating profit | 25.9 | 26.2 | 39.3 | -------------------------------------------------------------------------------- | Operating margin, % | 3.3 | 2.8 | 4.8 | -------------------------------------------------------------------------------- | Profit before taxes | 16.0 | 16.8 | 36.3 | -------------------------------------------------------------------------------- | Order book at end of period | 322.7 | 365.4 | 326.5 | -------------------------------------------------------------------------------- | Personnel (average) | 3,453 | 3,658 | 3,365 | -------------------------------------------------------------------------------- *) Pro forma **) The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. The net sales of the Infrastructure Construction business sector fell 14% to EUR 789.6 million (920.3). The business sector generated 54% of its net sales in Finland, 34% in the other Nordic countries, 10% in the Baltic Countries and 2% in Russia. In the Nordic countries the volumes of business remained at the level of 2008, but, the volumes in especially the Baltic Countries and of mineral aggregate and ready-mix concrete business were down on the previous year due to the generally reduced level of construction. Also contributing to the decline of net sales was the exceptionally early onset of winter, which shortened the infrastructure construction season. The business sector's operating profit was at the level of the previous year, and was EUR 25.9 million (26.2). The operating margin rose slightly thanks to good paving seasons in both Norway and Denmark. The result was impaired by poor market conditions in the Baltic Countries especially. The business sector's order book was about 12% down on the previous year. Operations in Finland: Lemminkäinen's paving operations were brisk all year and the effect of constrained municipal finances was less than expected. The Finnish paving market as whole contracted: a total of some 5.6 million tonnes of asphalt mix was produced in Finland, which was 10% less than in the previous year. Despite the intensification of competition, Lemminkäinen held on to its position as the most important actor in the industry. Competition in transport infrastructure construction is fierce and very few bids will be prepared for new projects in 2010. The rock and geotechnical engineering market improved. Lemminkäinen won the lead contract of the Western Metro construction project and, among others, the contracts for two underground parking caverns. The slowdown in building construction reduced demand for mineral aggregates and ready-mix concrete. Demand for crushing contracting was reasonable given the state of the market. Operations abroad: In Norway and Denmark demand for paving works was brisk during the review year and government stimulus measures in both countries will keep demand at a good level in 2010 as well. In Sweden, Lemminkäinen continued to work on several tunnel construction contracts, the last of which are due to be completed during 2010. The market for infrastructure in Sweden has remained good. Among other contracts won during the accounting period, Lemminkäinen won the contract to improve the stability of two concrete dams. The focus in tunnel construction is switching to the Stockholm area, where some significant infrastructure projects have been launched. The market situation in the Baltic Countries continued to be weak and Lemminkäinen adjusted its operations accordingly. The order book in Estonia and Lithuania remained at a satisfactory level, but the situation in Latvia was challenging. The Baltic infrastructure construction markets were supported by a few EU-funded highway projects. TECHNICAL BUILDING SERVICES -------------------------------------------------------------------------------- | Key figures, EUR million | 2009 | 2008*) | 2007 | -------------------------------------------------------------------------------- | Net sales | 233.8 | 269.9 | 230.2 | -------------------------------------------------------------------------------- | Operating profit | 12.2 | 16.3 | 11.9 | -------------------------------------------------------------------------------- | Operating margin, % | 5.2 | 6.1 | 5.2 | -------------------------------------------------------------------------------- | Profit before taxes | 12.8 | 18.5 | 13.6 | -------------------------------------------------------------------------------- | Order book at end of period | 106.8 | 97.7 | 111.9 | -------------------------------------------------------------------------------- | Personnel (average) | 1,941 | 2,013 | 1,918 | -------------------------------------------------------------------------------- *) The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. The net sales of the Technical Building Services business sector fell 13% to EUR 233.8 million (269.5). The operating profit was down by a quarter to EUR 12.2 million (16.3). The business sector's result was good considering the challenging market conditions. In spite of stiffening competition, the business sector's order book remained at the level of the previous year and even began to grow towards the end of the year. The business sector's order book at the end of the accounting period was EUR 106.8 million (97.7). Energy efficiency improvement and special expertise in areas such as refrigeration maintenance and installation have become significant competitive factors in the sector. The price level of materials rose moderately up until the autumn, at which point the prices of raw materials such as copper started to rise sharply. With the slowdown in new building construction, the emphasis in technical building services switched to renovation construction, serving and maintenance. Supported by government stimulus measures, the modernisation of piped systems in residential buildings increased during the year and that trend is expected to continue in the future, too. Demand for the business sector's industrial services fell during the accounting period as industry cut back on its investments and maintenance functions. The servicing, maintenance and repair of technical building systems already accounts for about a half of the business sector's net sales, and demand for such services is expected to remain good in the years ahead. In spite of the difficult market situation, the servicing business in Russia grew during the accounting period and Lemminkäinen carried out some significant technical building services contracts in the St. Petersburg area. BUILDING PRODUCTS -------------------------------------------------------------------------------- | Key figures, EUR million | 2009 | 2008*) | 2007 | -------------------------------------------------------------------------------- | Net sales | 132.7 | 156.0 | 133.8 | -------------------------------------------------------------------------------- | Operating profit | 6.5 | 10.5 | 11.1 | -------------------------------------------------------------------------------- | Operating margin, % | 4.9 | 6.7 | 8.3 | -------------------------------------------------------------------------------- | Profit before taxes | 5.8 | 9.9 | 10.5 | -------------------------------------------------------------------------------- | Order book at end of period | 33.3 | 25.2 | 37.7 | -------------------------------------------------------------------------------- | Personnel (average) | 762 | 839 | 749 | -------------------------------------------------------------------------------- *) The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. The net sales of the Building Products business sector fell 15% to EUR 132.7 million (156.0). The operating profit was down about 38% to EUR 6.5 million (10.5). The order book rose by a third and at the end of the accounting period was EUR 33.3 million (25.2). The year was a busy one as far as roofing and waterproofing contracting was concerned, and in spite of stiffening competition Lemminkäinen's market share rose. The change of emphasis in construction towards renovation construction increased the volume of yard and roofing repair works for housing companies. Sales and exports of roofing and waterproofing products fell during the accounting period. Increases in raw material costs were moderate and prices remained steady throughout the accounting period. The slowdown in residential and non-residential building construction reduced demand for pre-cast concrete staircase and wall elements in the first half of 2009, but the pick-up in construction activity was strongly reflected in demand for pre-cast concrete elements towards the end of the year. The market for sports and urban environment construction was good. SHARES AND SHARE CAPITAL The listed price of Lemminkäinen Corporation's share was EUR 13.05 (31.50) at the beginning of the accounting period and EUR 24.20 (13.05) at the end of the accounting period. The market capitalisation at the end of the accounting period was EUR 411.9 million (222.1). Altogether 1.918.039 shares (3.185.174) were traded during the accounting period. The total value of the turnover was EUR 41.0 million (87.3). At the end of the accounting period the Company had 5.017 (4.511) shareholders. Lemminkäinen's share capital is EUR 34,042,500. The Company has one share series and the total number of issued shares is 17,021,250. The Extraordinary General Meeting of Lemminkäinen Corporation, held on 12 November 2009, decided in accordance with the proposal of the Board of Directors, to authorise the Board of Directors to resolve on a share issue and/or an issue of special rights entitling their holders to shares as referred to in Chapter 10. Section 1 of the Finnish Companies Act. In addition, the Extraordinary General Meeting decided to authorise the Board of Directors to decide on the acquisition of treasury shares. INVESTMENTS Investments made during the accounting period amounted to EUR 41.5 million (60.2). The most significant single investment made during the accounting period was a new asphalt plant at Sammonmäki. The other investments were mainly replacement purchases of equipment for paving and mineral aggregate operations. PERSONNEL The average number of employees in the Group during the accounting period was 8,626 (9,776), of whom 70% (71) worked in Finland, 12% (11) in other Nordic countries, 11% (11) in the Baltic Countries and 7% (7) in other countries. In the second half of 2008 Lemminkäinen began adjusting its personnel strength to meet the requirements of the prevailing market situation. The personnel reduction measures have so far affected about 1,500 employees. The biggest personnel reductions have been made in the Building Construction and Building Products business sectors. The adjustment measures have been continued after the accounting period. -------------------------------------------------------------------------------- | Personnel, average | 2009 | 2008 | 2007 | -------------------------------------------------------------------------------- | Hourly paid employees | 5,559 | 6,490 | 6,084 | -------------------------------------------------------------------------------- | Salaried staff | 3,067 | 3,286 | 3,117 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Personnel, total | 8,626 | 9,776 | 9,201 | -------------------------------------------------------------------------------- | of whom working abroad | 2,607 | 2,836 | 2,565 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Personnel at the end of the | 7,759 | 8,910 | 8,718 | | accounting period | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total wages, salaries and other | 329.3 | 358.1 | 327.2 | | remuneration for the accounting | | | | | period, EUR million | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Personnel by business sector, | 2009 | 2008 | 2007 | | average | | | | -------------------------------------------------------------------------------- | Building Construction | 2,356 | 3,159 | 3,055 | -------------------------------------------------------------------------------- | Infrastructure Construction | 3,453 | 3,658 | 3,365 | -------------------------------------------------------------------------------- | Technical Building Services | 1,941 | 2,013 | 1,918 | -------------------------------------------------------------------------------- | Building Products | 762 | 839 | 749 | -------------------------------------------------------------------------------- | Parent company | 114 | 107 | 114 | -------------------------------------------------------------------------------- | Total | 8,626 | 9,776 | 9,201 | -------------------------------------------------------------------------------- ANNUAL GENERAL MEETING 2009 AND CORPORATE GOVERNANCE Lemminkäinen Corporation's Annual General Meeting held on 17 March 2009 adopted the Company's annual accounts and financial statements for 2008 and granted the CEO and the members of the Board of Directors discharge from liability. The Annual General Meeting decided, in accordance with the Board of Directors' proposal, to pay a dividend of EUR 0.90 per share, i.e. a total dividend of EUR 15,319,125. The dividend's record date was 20 March 2009 and the payment date was 27 March 2009. Messrs. Berndt Brunow, Teppo Taberman, Juhani Mäkinen and Ms. Kristiina Pentti-von Walzel were re-elected to serve as members of the Board of Directors. Messrs. Mikael Mäkinen, M.Sc.(Eng.) and Heikki Räty, M.Sc.(Econ.) were newly elected to serve as board members. PricewaterhouseCoopers Oy, a firm of authorised public accountants, were re-elected to serve as the Company's auditors, with Mr. Jan Holmberg, APA acting as the chief auditor. Lemminkäinen Corporation's Board of Directors held an organising meeting on 17 March 2009. Berndt Brunow continues to serve as the Chairman of the Board, and Juhani Mäkinen as the Vice Chairman. EXTRAORDINARY GENERAL MEETING The Extraordinary General Meeting of Lemminkäinen Corporation, held on 12 November 2009. decided in accordance with the proposal of the Board of Directors, to authorise the Board of Directors to resolve on a share issue and/or an issue of special rights entitling their holders to shares as referred to in Chapter 10. Section 1 of the Finnish Companies Act. The number of shares to be issued, including the shares to be received on the basis of special rights, shall not exceed 4,200,000 shares. The proposed maximum amount of the authorisation corresponds to approximately 25% of all the current shares of the Company. The Board of Directors may decide to issue either new shares or own shares that may be held by the company (treasury shares). In addition, the Extraordinary General Meeting decided to authorise the Board of Directors to decide on the acquisition of treasury shares, in one or more instalments, using the unrestricted shareholders' equity of the Company. The authorisation is proposed to cover a maximum of 1,700,000 treasury shares, subject to the regulations of the Finnish Companies Act concerning the maximum amount of own shares that may be held by a company. The proposed maximum amount of the authorisation corresponds to approximately 10% of all the current shares of the Company. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors chooses from among its members a Nomination Committee, an Audit Committee, and a Remuneration Committee. The committees assist the Board of Directors by preparing pertinent matters for the Board's consideration. All of the Board members can participate in meetings of the Audit Committee and the Remuneration Committee Lemminkäinen Corporation's Board of Directors held an organising meeting on 17 March 2009. The compositions of the Audit Committee, Nomination Committee and Remuneration Committee were decided at the meeting. The Board of Directors elected Heikki Räty to serve as the Chairman of the Audit Committee, with Juhani Mäkinen and Kristina Pentti-von Walzel serving as members. Berndt Brunow was elected to serve as the Chairman of the Nomination Committee, with Kristina Pentti-von Walzel and Teppo Taberman serving as members. Teppo Taberman was elected to serve as the Chairman of the Remuneration Committee, with Berndt Brunow and Mikael Mäkinen serving as members CHANGES IN THE COMPANY'S MANAGEMENT Tiina Mellas (nee. Kihlakaski), M.Sc. (Econ) was appointed to serve as Lemminkäinen Corporation's Executive Vice President, Human Resources and as a member of Lemminkäinen Group's Executive Board with effect from 7 January 2009. Robert Öhman, M.Sc. (Econ) was appointed to serve as Chief Financial Officer of Lemminkäinen Corporation and as a member of Lemminkäinen Group's Executive Board with effect from 9 May 2009. Marcus Karsten, M.Sc.(Econ.) was appointed to serve as Lemminkäinen Corporation's Executive Vice President, Technical Building Services and as a member of Lemminkäinen Group's Executive Board with effect from 1 January 2010. He was formerly the Managing Director of Tekmanni Service Oy, a company belonging to the Technical Building Services business sector. Jukka Terhonen, M.Sc. (Eng.) was appointed to serve as Lemminkäinen Corporation's Executive Vice President, Building Construction, and as a member of Lemminkäinen Group's Executive Board with effect from 10 December 2009. LEGAL PROCEEDINGS On 29 September 2009 the Supreme Administrative Court (SAC) ordered a number of Finnish asphalt industry companies to pay an infringement fine of EUR 82.55 million, of which Lemminkäinen's share was EUR 68 million. The decision concluded the Finnish Competition Authority's claim made in 2004 for the imposition of a fine concerning violations of the Act on Competition Restrictions on seven companies operating in the asphalt industry during the period 1994-2002. The Finnish Competition Authority initially sought that an aggregate competition infringement fine of EUR 97 million should be imposed on the asphalt companies and the Finnish Asphalt Association, of which Lemminkäinen was to pay EUR 68 million. The Market Court dismissed the Competition Authority's motion for the most part and in December 2007 ordered the asphalt companies to pay an infringement fine of EUR 19.4 million, of which Lemminkäinen was to pay EUR 14 million. The SAC approved the infringement fine proposed by the Finnish Competition Authority in its entirety. The difference between the infringement fine of EUR 68 million ordered by the SAC and the infringement fine of EUR 14 million ordered by the Market Court, i.e. EUR 54 million, was expensed in the third quarter of 2009. The infringement fine of EUR 14 million ordered by the Market Court was expensed in the fourth quarter of 2007. To date, 21 municipalities and the Finnish Road Administration have brought actions for the recovery of damages from Lemminkäinen and other asphalt companies in the District Court of Helsinki. The claimants contend that restrictions of competition have caused them damages. The Finnish Road Administration has claimed, in connection with work carried out for the Finnish State, at most EUR 10.5 million from Lemminkäinen and at most EUR 5.6 million jointly and severally with other asphalt companies. The claims presented in the statements of claim differ from each other as regards their amounts and grounds. The claimants have reserved the right to alter, modify or extend their claims, but most of the claimants have not yet filed their finalised statements of claim with the District Court. The decision rendered by the SAC as it stands does not mean that Lemminkäinen or the other asphalt industry companies actually caused the parties ordering asphalt works any damages. The SAC's decision does not concern the individual contracts that the claimants are citing in support of their claims. Neither does the decision concern the pricing of individual contracts. Lemminkäinen will examine the claims for damages and consider each claim separately. The Company's initial position is that the claims are without foundation. To the extent that the claimants eventually decide in their specified statements of claim to pursue their legal actions against Lemminkäinen, they will be considered separately before the District Court of Helsinki and heard in the order determined by the court. No provision for future expense has been made in respect of the statements of claims submitted so far to the district court by the municipalities and the Finnish Road Administration. It is likely that district court proceedings will continue into 2011. 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. The measures necessary to manage the most significant identified risks have been specified. Market risk poses the most significant threat to Lemminkäinen in the near future. The international financial crisis and economic downturn are creating uncertainty in key sectors of Lemminkäinen's operating environment and making it more difficult to foresee future changes. As a consequence of this, Lemminkäinen has set about making the necessary adjustments to its business operations. Although housing sales have developed favourably, the general economic situation is still unstable. For this reason new housing starts are being made only if a sufficiently high percentage of the units are reserved by buyers in advance. The aforementioned statements of claim submitted to the District Court of Helsinki by certain municipalities and the Finnish Road Administration pose a specific risk. Operating in a number of business sectors with differing cyclical behaviours is a cornerstone of Lemminkäinen's strategy. Fluctuating demand for new construction in Finland is counterbalanced by infrastructure construction. Building repair and maintenance account for more than a third of the Group's business. The Company's Annual Report and website provide more information on Lemminkäinen's risk management. RESEARCH AND DEVELOPMENT Lemminkäinen's research and development work focuses on the development of operational prerequisites as well as the development and quality assurance of products and services. Careful consideration of safety issues and environmental effects is an important principle in Lemminkäinen's development work. Products and services are developed in long-term collaboration with customers. The Group's business units and subsidiaries are responsible for their own research and development activities. Lemminkäinen's Central Laboratory carries out R&D at Group level. In 2009 the Group's research and development expenditure accounted for 0.7% of net sales. THE ENVIRONMENT Lemminkäinen Group takes life-cycle and environmental perspectives into account when developing its operations, products and services. The management of environmental affairs and the effects of the Group's operations on the environment are continuously monitored by means of internal monitoring and control programmes. The Company's Annual Report and website provide more information on Lemminkäinen's environmental issues. OUTLOOK FOR 2010 According to economic forecasts, Finland's gross domestic product is expected to return to growth and construction activity is expected to increase slightly. Housing sales picked up towards the end of 2009, and they are expected to remain stable in 2010 as well. Non-residential building construction is likely to remain slower than in previous years. Renovation construction will probably continue to grow steadily and demand for technical building services is expected to increase slightly, too. In Russia, the pick-up in the housing market will continue and the volume of construction will probably grow in 2010. Even though there are no new major transport infrastructure projects in the bid preparation pipeline for 2010, projects already in progress will keep infrastructure builders busy. The pick-up in building construction will also provide work for infra builders. In Finland the government will be making further cuts in its spending on basic highway maintenance, and the weakened finances of the municipalities may also reduce the volume of infrastructure construction in future years. The additional spending budgeted for infrastructure development in the other Nordic countries will continue, which will keep the markets of those countries favourable in the years ahead. The situation in the Baltic Countries will continue to be uncertain. Demand for construction products closely follows the building construction cycle, and demand is expected to rise following the pick-up in residential construction in 2010. Lemminkäinen estimates that net sales and the result before taxes for the 2010 accounting period will be at the 2009 level, the infringement fine imposed by the SAC being excluded from the 2009 comparative figures. BOARD OF DIRECTORS' PROPOSAL FOR THE DISTRIBUTION OF PROFITS The distributable shareholders' equity shown on the consolidated balance sheet as of 31 December 2009 amounts to EUR 217.772.976.72. The distributable shareholders' equity shown on the balance sheet of the parent company, Lemminkäinen Corporation, amounts to EUR 75,123,976.38 consisting of EUR 72,636,193.59 in retained earnings from previous years and EUR 2,487,782.79 in profit for the accounting period. The Board of Directors of Lemminkäinen Corporation proposes to the Annual General Meeting that the Company would not pay any dividend for the accounting period ending 31 December 2009, in which case retained earnings would amount to EUR 75,123,976.38. EVENTS AFTER THE ACCOUNTING PERIOD The areas of responsibility of Lemminkäinen's Executive Board members were redefined on 14 January 2010. The purpose of the changes is to streamline the management of central functions and achieve greater efficiency in the implementation of the new strategy. Significant orders received after the accounting period: Lemminkäinen is to renew the track and field at Helsinki's Olympic Stadium. The contract will be completed at the end of July 2010 and is worth approx. EUR 4 million. Helsinki, 12 February 2010 LEMMINKÄINEN CORPORATION Board of Directors TABULATED SECTION OF THE FINANCIAL STATEMENTS BULLETIN ACCOUNTING PRINCIPLES IFRS recognition and measurement principles have been observed in the preparation of the consolidated financial statements, which conform to IAS 34 - Interim Financial Reporting. The accounting principles of the 2009 annual financial statements have been applied when preparing the Financial Statements Bulletin. The information contained in the financial statements bulletin has not been audited. The standard governing operating segment reporting was adopted on 1.1.2009, and the comparative figures starting 1.1.2008 were also calculated in accordance with the provisions of the same standard. In addition, the figures for the financial year 2007 for the Building Construction and Infrastructure Construction business sectors are pro forma figures. Standards and interpretations adopted from the beginning of 2009 - IAS 1 (Revised), Presentation of Financial Statements. The aim of the standard is to improve users' ability to analyse and compare the information given in financial statements by separating changes in equity of an entity arising from transactions with owners from other changes in equity. Changes unrelated to owners are presented in the statement of comprehensive income. - IFRS 8 Operating Segments. The standard requires that reportable segment information be based on internal segment reports that are reviewed by management. Lemminkäinen is reporting its interim financial reviews from the beginning of the 2009 accounting period in compliance with IFRS 8 Operating Segments. Adoption of the standard has no effect on the number or composition of Lemminkäinen Group's operating segments, but it does change the content of the segment information. The standard has no effect on geographical segment information. The segment information reported to management is generally prepared according to the same principles as those applied in the consolidated financial statements. Imputed items are not considered in segment reporting. Such items include, among others, depreciation of assets acquired by finance leasing, interest separated from payments, warranty provisions, and unrealised gains or losses on derivatives. In segment reporting to management, finance leasing arrangements are treated as ordinary rental agreements, which deviates from the accounting principles of IFRS financial statements. Affiliated companies are combined in segment reporting in proportion to ownership share using the line-by-line method. In IFRS financial statements affiliated companies are combined by the equity method. In segment reporting, intersegment sales are not allocated to segments, owing to their minimal magnitude, and are not reported to management. Comparative figures for segment reporting have been published in a separate release on 5 May 2009. - IAS 23 (Revised) Borrowing Costs. The amended standard requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The immediate expensing of such borrowing costs is prohibited. Starting from 1 January 2009 the Group capitalises the borrowing costs in qualifying projects and in projects where income is recognised on the basis of percentage of completion. An assessment indicates that the following interpretations and standards have no essential bearing on Lemminkäinen Group's interim financial review: IAS 32 (Amendment), IFRS 7 (Amendment), IFRS 2, IFRIC 11, IFRIC 13, IFRIC 14 and IFRIC 16. Effects of new interpretations of IFRS standards in the future The standards and interpretations published by IASB and listed below will come into force in 2010 or thereafter. The Group has decided against their early adoption and will apply them in future accounting periods. - IFRIC 15. Agreements for the Construction of Real Estate. The interpretation clarifies whether an agreement for the construction of real estate falls within the scope of IAS 11 Construction Contracts or IAS 18 Revenue, and when income from such construction projects can be recognised on the basis of percentage of completion. In Lemminkäinen Group the new interpretation will affect especially the income recognition practice for own housing production, the basis of which will change from percentage-of-completion to full completion and delivery from 2010 onwards. The EU Commission endorsed the guidance in July 2009. The regulation will come into force from the beginning of the 2010 accounting period. The company estimates that the adoption of this interpretation will reduce shareholders' equity on the Company's opening balance sheet dated 1 January 2009 by about EUR 5 million. - IFRIC 12 Service Concession Arrangements. The interpretation applies to contractual arrangements whereby a private-sector operator participates in the development, financing, operation or maintenance of public services infrastructure. - IFRS 3 (Revised), Business combinations. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently remeasured at fair value through income. Goodwill may be calculated based on the parent company's share of net assets or it may include goodwill related to the minority interest. All transaction costs will be expensed. - IAS 27 (Revised), Consolidated and separate financial statements. The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control. Thus, transactions with non-controlling interests will no longer result in goodwill or the recognition of gains or losses through profit or loss. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised through profit or loss. An assessment indicates that the following interpretations and standards have no essential bearing on Lemminkäinen Group's financial statements: IAS 39 (Amendment), IFRS 5 (Amendment), IFRIC 17 and IFRIC 18 FINANCIAL STATEMENTS AND OTHER TABULATED INFORMATION 1) Consolidated income statement 2) Consolidated statement of comprehensive income 3) Consolidated balance sheet 4) Statement of source and application of funds 5) Statement of changes in equity 6) Consolidated income statement, quarterly 7) Segment information 8) Economic trends and financial indicators 9) Share-specific indicators 10) Tangible assets 11) Acquired and divested businesses 12) Related-party transactions 13) Guarantees and contingent liabilities 14) Legal proceedings 1) CONSOLIDATED INCOME STATEMENT -------------------------------------------------------------------------------- | | 10-12/ | 10-12/ | 1-12/ | 1-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net sales | 519.6 | 742.5 | 1,964.4 | 2,481.8 | -------------------------------------------------------------------------------- | Operating income and expenses | -500.1 | -697.7 | -1,908.4 | -2,325.0 | -------------------------------------------------------------------------------- | Depreciation | 7.6 | 7.2 | 34.3 | 34.9 | -------------------------------------------------------------------------------- | Share of the results of | 0.4 | -0.1 | 1.5 | 1.2 | | affiliated companies | | | | | -------------------------------------------------------------------------------- | Operating profit/loss | 12.3 | 37.5 | 23.3 | 123.2 | -------------------------------------------------------------------------------- | Financial expenses | 13.1 | 27.9 | 54.1 | 50.7 | -------------------------------------------------------------------------------- | Financial income | 5.2 | 13.4 | 20.7 | 18.5 | -------------------------------------------------------------------------------- | Profit/loss before taxes | 4.3 | 23.0 | -10.0 | 91.0 | -------------------------------------------------------------------------------- | Income taxes | -3.5 | -10.3 | -13.7 | -27.5 | -------------------------------------------------------------------------------- | Profit/loss for the accounting | 0.9 | 12.7 | -23.7 | 63.5 | | period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Distribution of profit/loss for | | | | | | the accounting period | | | | | -------------------------------------------------------------------------------- | To shareholders of the parent | -0.3 | 9.3 | -26.1 | 55.9 | | company | | | | | -------------------------------------------------------------------------------- | To minority interests | 1.1 | 3.4 | 2.4 | 7.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EPS calculated from profit/loss attributable to parent company | | | shareholders | | -------------------------------------------------------------------------------- | Earnings per share, diluted and | -0.02 | 0.55 | -1.53 | 3.28 | | undiluted, EUR | | | | | -------------------------------------------------------------------------------- 2) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME -------------------------------------------------------------------------------- | | 10-12/ | 10-12/ | 1-12/ | 1-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Profit/loss for the accounting | 0.9 | 12.7 | -23.7 | 63.5 | | period | | | | | -------------------------------------------------------------------------------- | Translation difference | 1.3 | -4.9 | 3.3 | -6.4 | -------------------------------------------------------------------------------- | Hedging of net investment in | | 0.9 | -0.4 | 1.6 | | foreign subsidiary | | | | | -------------------------------------------------------------------------------- | Cash flow hedge | 0.3 | -2.1 | -0.2 | -1.9 | -------------------------------------------------------------------------------- | Other comprehensive income, total | 1.5 | -6.1 | 2.7 | -6.7 | -------------------------------------------------------------------------------- | Comprehensive income for the | 2.4 | 6.6 | -21.0 | 56.8 | | accounting period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Distribution of comprehensive | 1.3 | 3.2 | -23.3 | 49.2 | | income for the accounting period | | | | | -------------------------------------------------------------------------------- | To shareholders of the parent | 1.1 | 3.4 | 2.4 | 7.6 | | company | | | | | -------------------------------------------------------------------------------- 3) CONSOLIDATED BALANCE SHEET -------------------------------------------------------------------------------- | EUR mill. | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Non-current assets | | | -------------------------------------------------------------------------------- | Tangible assets | 184.6 | 187.0 | -------------------------------------------------------------------------------- | Goodwill | 78.3 | 74.9 | -------------------------------------------------------------------------------- | Other intangible assets | 2.7 | 2.5 | -------------------------------------------------------------------------------- | Investments | 12.8 | 10.7 | -------------------------------------------------------------------------------- | Deferred tax asset | 12.8 | 7.2 | -------------------------------------------------------------------------------- | Other non-current receivables | 7.5 | 6.3 | -------------------------------------------------------------------------------- | Total | 298.7 | 288.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | -------------------------------------------------------------------------------- | Inventories | 355.4 | 398.2 | -------------------------------------------------------------------------------- | Trade and other receivables | 305.1 | 476.3 | -------------------------------------------------------------------------------- | Cash funds | 74.4 | 250.1 | -------------------------------------------------------------------------------- | Total | 735.0 | 1,124.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets, total | 1,033.7 | 1,413.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' equity and liabilities | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity attributable to shareholders of the | | | | parent company | | | -------------------------------------------------------------------------------- | Share capital | 34.0 | 34.0 | -------------------------------------------------------------------------------- | Share premium account | 5.8 | 5.8 | -------------------------------------------------------------------------------- | Hedging reserve | -2.0 | -1.7 | -------------------------------------------------------------------------------- | Translation differences | -1.7 | -4.7 | -------------------------------------------------------------------------------- | Retained earnings | 265.4 | 224.8 | -------------------------------------------------------------------------------- | Profit/loss for the period | -26.1 | 55.9 | -------------------------------------------------------------------------------- | Shareholders' equity before minority interest | 275.4 | 314.0 | -------------------------------------------------------------------------------- | Minority interest | 23.7 | 27.8 | -------------------------------------------------------------------------------- | Shareholders' equity, total | 299.0 | 341.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current liabilities | | | -------------------------------------------------------------------------------- | Deferred tax liabilities | 19.0 | 18.7 | -------------------------------------------------------------------------------- | Pension liabilities | 0.7 | 0.2 | -------------------------------------------------------------------------------- | Provisions | 1.8 | 2.2 | -------------------------------------------------------------------------------- | Financial liabilities | 290.7 | 118.8 | -------------------------------------------------------------------------------- | Other liabilities | 2.4 | 1.3 | -------------------------------------------------------------------------------- | Total | 314.6 | 141.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current liabilities | | | -------------------------------------------------------------------------------- | Accounts payable and other liabilities | 303.4 | 455.6 | -------------------------------------------------------------------------------- | Provisions | 8.3 | 7.1 | -------------------------------------------------------------------------------- | Financial liabilities | 108.4 | 467.7 | -------------------------------------------------------------------------------- | Total | 420.0 | 930.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' equity and liabilities, total | 1,033.7 | 1,413.3 | -------------------------------------------------------------------------------- 4) CONSOLIDATED STATEMENT OF CASH FLOWS -------------------------------------------------------------------------------- | | 1-12/ | 1-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2008 | -------------------------------------------------------------------------------- | Profit/loss before taxes | -10.0 | 91.0 | -------------------------------------------------------------------------------- | Depreciation | 34.3 | 34.9 | -------------------------------------------------------------------------------- | Other adjustments | 33.9 | 26.7 | -------------------------------------------------------------------------------- | Cash flow before change in working capital | 58.1 | 152.6 | -------------------------------------------------------------------------------- | Change in working capital | 52.3 | -45.3 | -------------------------------------------------------------------------------- | Financial items | -30.2 | -31.4 | -------------------------------------------------------------------------------- | Direct taxes paid | -16.0 | -51.2 | -------------------------------------------------------------------------------- | Cash flow from operating activities | 64.2 | 24.6 | -------------------------------------------------------------------------------- | Cash flow provided by investing activities | 11.9 | 15.2 | -------------------------------------------------------------------------------- | Cash flow used in investing activities | -30.5 | -43.2 | -------------------------------------------------------------------------------- | Change in non-current receivables | 0.0 | -1.6 | -------------------------------------------------------------------------------- | Drawings of loans | 562.3 | 1,740.4 | -------------------------------------------------------------------------------- | Repayments of loans | -764.6 | -1,528.9 | -------------------------------------------------------------------------------- | Dividends paid | -18.0 | -32.6 | -------------------------------------------------------------------------------- | Cash flow from financing activities | -220.2 | 177.3 | -------------------------------------------------------------------------------- | Change in cash funds | -174.6 | 174.0 | -------------------------------------------------------------------------------- | Cash funds at beginning of period | 250.1 | 78.5 | -------------------------------------------------------------------------------- | Translation difference of cash funds | -1.1 | -2.4 | -------------------------------------------------------------------------------- | Cash funds at end of period | 74.4 | 250.1 | -------------------------------------------------------------------------------- 5) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY A = Share capital B = Share premium account C = Translation difference D = Hedging reserve E = Retained earnings F = Minority interest G = Shareholders' equity total -------------------------------------------------------------------------------- | EUR mill. | A | B | C | D | E | F | G | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | 1.1.2008 | 34.0 | 5.8 | 0.1 | 0.2 | 255.4 | 23.7 | 319.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Reversal of | | | | | 0.0 | | 0.0 | | dividend | | | | | | | | | liability | | | | | | | | -------------------------------------------------------------------------------- | Dividend | | | | | -30.6 | -2.9 | -33.6 | | distribution | | | | | | | | -------------------------------------------------------------------------------- | Change in | | | | | | | | -------------------------------------------------------------------------------- | minority | | | | | | -0.6 | -0.6 | | interest | | | | | | | | -------------------------------------------------------------------------------- | Comprehensive | | | | | | | | | income for | | | | | | | | -------------------------------------------------------------------------------- | the accounting | | | -4.8 | -1.9 | 55.9 | 7.6 | 56.8 | | period | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | 31.12.2008 | 34.0 | 5.8 | -4.7 | -1.7 | 280.7 | 27.8 | 341.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR mill. | A | B | C | D | E | F | G | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | 1.1.2009 | 34.0 | 5.8 | -4.7 | -1.7 | 280.7 | 27.8 | 341.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Dividend | | | | | -15.3 | -2.0 | -17.3 | | distribution | | | | | | | | -------------------------------------------------------------------------------- | Change in | | | | | | | | -------------------------------------------------------------------------------- | minority | | | | | | -4.5 | -4.5 | | interest | | | | | | | | -------------------------------------------------------------------------------- | Comprehensive | | | | | | | | | income for | | | | | | | | -------------------------------------------------------------------------------- | the accounting | | | 3.0 | -0.2 | -26.1 | 2.4 | -21.0 | | period | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | 31.12.2009 | 34.0 | 5.8 | -1.7 | -2.0 | 239.3 | 23.7 | 299.0 | -------------------------------------------------------------------------------- 6) CONSOLIDATED INCOME STATEMENT, QUARTERLY -------------------------------------------------------------------------------- | | 10-12/ | 7-9/ | 4-6/ | 1-3/ | 10-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2009 | 2009 | 2009 | 2008 | -------------------------------------------------------------------------------- | Net sales | 519.6 | 563.2 | 544.6 | 336.9 | 742.5 | -------------------------------------------------------------------------------- | Operating income and expenses | -500.1 | -562.3 | -505.3 | -340.6 | -697.7 | -------------------------------------------------------------------------------- | Depreciation | 7.6 | 12.5 | 9.5 | 4.7 | 7.2 | -------------------------------------------------------------------------------- | Share of the results of | 0.4 | 1.1 | 0.3 | -0.2 | -0.1 | | affiliated companies | | | | | | -------------------------------------------------------------------------------- | Operating profit/loss | 12.3 | -10.5 | 30.1 | -8.6 | 37.5 | -------------------------------------------------------------------------------- | Financial expenses | 13.1 | 10.5 | 10.4 | 20.1 | 27.9 | -------------------------------------------------------------------------------- | Financial income | 5.2 | 4.1 | 1.2 | 10.3 | 13.4 | -------------------------------------------------------------------------------- | Profit/loss before taxes | 4.3 | -16.8 | 20.9 | -18.4 | 23.0 | -------------------------------------------------------------------------------- | Income taxes | -3.5 | -7.9 | -6.2 | 3.9 | -10.3 | -------------------------------------------------------------------------------- | Profit/loss for the accounting | 0.9 | -24.7 | 14.7 | -14.6 | 12.7 | | period | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Distribution of the profit/loss | | | | | | | for the accounting period | | | | | | -------------------------------------------------------------------------------- | To shareholders of the parent | -0.3 | -24.5 | 13.7 | -15.0 | 9.3 | | company | | | | | | -------------------------------------------------------------------------------- | To minority interests | 1.1 | -0.2 | 1.0 | 0.4 | 3.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EPS calculated from profit/loss attributable to parent | | | | company shareholders | | | -------------------------------------------------------------------------------- | Earnings per share, diluted and | | | | | | | undiluted, | | | | | | -------------------------------------------------------------------------------- | EUR | -0.02 | -1.44 | 0.80 | -0.88 | 0.55 | -------------------------------------------------------------------------------- 7) SEGMENT INFORMATION IFRS 8 Operating Segment Reporting requires that reported segment information be based on internal segment reporting to management, which in Lemminkäinen Group means the President of Lemminkäinen Corporation, who is the chief operative decision-maker. Internal segment reporting to management covers net sales, depreciation, operating profit, financial items, profit before taxes, non-current assets, inventories and trade receivables. The segment information reported to management is generally prepared according to the same principles as those applied in the consolidated financial statements. Imputed items are not considered in segment reporting. Such items include, among others, depreciation of assets acquired by finance leasing, interest separated from payments, warranty provisions, and unrealised gains or losses on derivatives. In segment reporting to management, finance leasing arrangements are treated as ordinary rental agreements, which deviate from the accounting principles of IFRS financial statements. Affiliated companies are combined in segment reporting in proportion to ownership share using the line-by-line method. In IFRS financial statements affiliated companies are combined by the equity method. In segment reporting, intersegment sales are not allocated to segments, owing to their minimal magnitude, and are not reported to management. BLDCO = Building Construction INFRA = Infrastructure Construction TECBS = Technical Building Services BLDPR = Building Products OTHER = Other operations ELIM = Group eliminations SEGM = Segments total RECON = Reconciling items TOTAL = Group total, IRFS -------------------------------------------------------------------------------- | EUR | | | | | | | | | | | mill. | | | | | | | | | | -------------------------------------------------------------------------------- | 1-12/20 | BLD | INFR | TEC | BLDP | OTHER | ELIM | SEGM | RECON | TOTAL | | 09 | CO | A | BS | R | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net | 867 | 789. | 233 | 132. | 10.3 | -52.5 | 1,981. | -17.1 | 1,964. | | sales | .7 | 6 | .8 | 7 | | | 5 | | 4 | -------------------------------------------------------------------------------- | Depreci | | | | | | | | | | | - | | | | | | | | | | -------------------------------------------------------------------------------- | ation | 2.6 | 31.5 | 0.8 | 2.4 | 0.8 | | 38.1 | -3.9 | 34.3 | -------------------------------------------------------------------------------- | Operati | | | | | | | | | | | ng | | | | | | | | | | -------------------------------------------------------------------------------- | profit/ | 36. | 25.9 | 12. | 6.5 | -61.7 | | 19.5 | 3.8 | 23.3 | | loss | 6 | | 2 | | | | | | | -------------------------------------------------------------------------------- | Financi | | | | | | | | | | | al | | | | | | | | | | -------------------------------------------------------------------------------- | items | -11 | -9.9 | 0.6 | -0.7 | -9.3 | | -31.2 | -2.1 | -33.4 | | | .9 | | | | | | | | | -------------------------------------------------------------------------------- | Profit/loss | | | | | | | | | -------------------------------------------------------------------------------- | before | 24. | 16.0 | 12. | 5.8 | -71.0 | | -11.7 | 1.6 | -10.0 | | taxes | 7 | | 8 | | | | | | | -------------------------------------------------------------------------------- The reconciling items for net sales comprise EUR -18.0 million from the equity share treatment of affiliated companies and the treatment difference between entries made to net sales and other income. The reconciling items for operating profit comprise EUR 1.3 million in personnel expenses, EUR 3.4 million from the IFRS treatment of finance leasing, EUR -0.2 million from the equity share treatment of affiliated companies and EUR -0.7 million in other closing entries. The reconciling items for financial items are EUR -1.7 million in finance leasing interest, as well as exchange rate differences, interest timing differences, and unrealised gains and losses on derivatives.. -------------------------------------------------------------------------------- | EUR | | | | | | | | | | | mill. | | | | | | | | | | -------------------------------------------------------------------------------- | 1-12/20 | BLDCO | INF | TEC | BLDP | OTHER | ELIM | SEGM | RECON | TOTAL | | 08 | | RA | BS | R | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net | 1,207 | 920 | 269 | 156. | 13.5 | -65.7 | 2,501. | -19.7 | 2,481. | | sales | .5 | .3 | .9 | 0 | | | 5 | | 8 | -------------------------------------------------------------------------------- | Depreci | | | | | | | | | | | - | | | | | | | | | | -------------------------------------------------------------------------------- | ation | 2.9 | 30. | 0.8 | 2.6 | 0.9 | | 37.9 | -3.0 | 34.9 | | | | 7 | | | | | | | | -------------------------------------------------------------------------------- | Operati | | | | | | | | | | | ng | | | | | | | | | | -------------------------------------------------------------------------------- | profit/ | 69.7 | 26. | 16. | 10.5 | -3.3 | | 119.4 | 3.8 | 123.2 | | loss | | 2 | 3 | | | | | | | -------------------------------------------------------------------------------- | Financi | | | | | | | | | | | al | | | | | | | | | | -------------------------------------------------------------------------------- | items | -13.0 | -9. | 2.2 | -0.5 | -7.0 | | -27.8 | -4.4 | -32.1 | | | | 4 | | | | | | | | -------------------------------------------------------------------------------- | Profit/ | | | | | | | | | | | loss | | | | | | | | | | -------------------------------------------------------------------------------- | before | 56.7 | 16. | 18. | 9.9 | -10.3 | | 91.6 | -0.6 | 91.0 | | taxes | | 8 | 5 | | | | | | | -------------------------------------------------------------------------------- The reconciling items for net sales stem from the equity share treatment of affiliated companies (EUR -17.5 million) and other operating income recognised as net sales in segment reporting. The reconciling items for operating profit comprise EUR 1.1 million in personnel expenses, EUR 0.8 million in gains from the sale of derivatives, EUR 3.3 million from the IFRS treatment of finance leasing, EUR -0.2 million from the equity share treatment of affiliated companies and EUR -1.2 million from the other closing entries. The reconciling items for financial items are finance leasing interest of EUR -1.5 million as well as exchange rate differences, interest timing differences, and unrealised gains and losses on derivatives. -------------------------------------------------------------------------------- | NET SALES | 10-12/ | 10-12/ | 1-12/ | 1-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Building Construction | 260.8 | 426.9 | 867.7 | 1 207.5 | -------------------------------------------------------------------------------- | Infrastructure Construction | 178.8 | 222.3 | 789.6 | 920.3 | -------------------------------------------------------------------------------- | Technical Building Services | 65.2 | 76.5 | 233.8 | 269.9 | -------------------------------------------------------------------------------- | Building Products | 33.6 | 34.2 | 132.7 | 156.0 | -------------------------------------------------------------------------------- | Other operations | 2.1 | 3.7 | 10.3 | 13.5 | -------------------------------------------------------------------------------- | Group eliminations | -19.2 | -17.2 | -52.5 | -65.7 | -------------------------------------------------------------------------------- | Segments total | 521.4 | 746.3 | 1,981.5 | 2,501.5 | -------------------------------------------------------------------------------- | Reconciling items | -1.8 | -3.8 | -17.1 | -19.7 | -------------------------------------------------------------------------------- | Group total, IFRS | 519.6 | 742.5 | 1,964.4 | 2,481.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OPERATING PROFIT/LOSS | 10-12/ | 10-12/ | 1-12/ | 1-12/ | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2008 | 2009 | 2008 | -------------------------------------------------------------------------------- | Building Construction | 15.0 | 35.5 | 36.6 | 69.7 | -------------------------------------------------------------------------------- | Infrastructure Construction | -5.1 | -4.8 | 25.9 | 26.2 | -------------------------------------------------------------------------------- | Technical Building Services | 3.2 | 3.7 | 12.2 | 16.3 | -------------------------------------------------------------------------------- | Building Products | 1.0 | 1.2 | 6.5 | 10.5 | -------------------------------------------------------------------------------- | Other operations | -3.4 | -0.1 | -61.7 | -3.3 | -------------------------------------------------------------------------------- | Segments total | 10.8 | 35.6 | 19.5 | 119.4 | -------------------------------------------------------------------------------- | Reconciling items | 1.5 | 1.9 | 3.8 | 3.8 | -------------------------------------------------------------------------------- | Group total, IFRS | 12.3 | 37.5 | 23.3 | 123.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | NET SALES, QUARTERLY | 10-12 | 7-9/ | 4-6/ | 1-3/ | 10-12/ | | | / | | | | | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2009 | 2009 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Building Construction | 260.8 | 174.7 | 233.4 | 198.7 | 426.9 | -------------------------------------------------------------------------------- | Infrastructure Construction | 178.8 | 310.5 | 228.3 | 71.9 | 222.3 | -------------------------------------------------------------------------------- | Technical Building Services | 65.2 | 52.6 | 60.6 | 55.3 | 76.5 | -------------------------------------------------------------------------------- | Building Products | 33.6 | 42.6 | 37.8 | 18.6 | 34.2 | -------------------------------------------------------------------------------- | Other operations | 2.1 | 2.9 | 2.9 | 2.5 | 3.7 | -------------------------------------------------------------------------------- | Group eliminations | -19.2 | -8.8 | -14.9 | -9.6 | -17.2 | -------------------------------------------------------------------------------- | Segments total | 521.4 | 574.5 | 548.0 | 337.5 | 746.3 | -------------------------------------------------------------------------------- | Reconciling items | -1.8 | -11.3 | -3.4 | -0.6 | -3.8 | -------------------------------------------------------------------------------- | Group total, IFRS | 519.6 | 563.2 | 544.6 | 336.9 | 742.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OPERATING PROFIT/LOSS, | 10-12 | 7-9/ | 4-6/ | 1-3/ | 10-12/ | | QUARTERLY | / | | | | | -------------------------------------------------------------------------------- | EUR mill. | 2009 | 2009 | 2009 | 2009 | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Building Construction | 15.0 | 0.5 | 11.4 | 9.7 | 35.5 | -------------------------------------------------------------------------------- | Infrastructure Construction | -5.1 | 34.6 | 14.1 | -17.8 | -4.8 | -------------------------------------------------------------------------------- | Technical Building Services | 3.2 | 3.8 | 2.6 | 2.5 | 3.7 | -------------------------------------------------------------------------------- | Building Products | 1.0 | 4.7 | 3.2 | -2.5 | 1.2 | -------------------------------------------------------------------------------- | Other operations | -3.4 | -56.0 | -2.1 | -0.2 | -0.1 | -------------------------------------------------------------------------------- | Segments total | 10.8 | -12.2 | 29.2 | -8.3 | 35.6 | -------------------------------------------------------------------------------- | Reconciling items | 1.5 | 1.7 | 0.9 | -0.4 | 1.9 | -------------------------------------------------------------------------------- | Group total, IFRS | 12.3 | -10.5 | 30.1 | -8.6 | 37.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS | | | -------------------------------------------------------------------------------- | EUR mill. | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Building Construction | 338.5 | 467.5 | -------------------------------------------------------------------------------- | Infrastructure Construction | 263.1 | 294.5 | -------------------------------------------------------------------------------- | Technical Building Services | 30.5 | 33.0 | -------------------------------------------------------------------------------- | Building Products | 46.1 | 46.3 | -------------------------------------------------------------------------------- | Other operations | 43.6 | 41.0 | -------------------------------------------------------------------------------- | Segments total | 721.7 | 882.2 | -------------------------------------------------------------------------------- | Assets unallocated to segments | | | -------------------------------------------------------------------------------- | and Group eliminations, total | 312.0 | 531.1 | -------------------------------------------------------------------------------- | Group total, IFRS | 1,033.7 | 1,413.3 | -------------------------------------------------------------------------------- 8) ECONOMIC TRENDS AND FINANCIAL INDICATORS -------------------------------------------------------------------------------- | | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Return on equity, % | -7.4 | 19.2 | -------------------------------------------------------------------------------- | Return on investment, % | 5.4 | 17.7 | -------------------------------------------------------------------------------- | Operating profit, % of net sales | 1.2 | 5.0 | -------------------------------------------------------------------------------- | Equity ratio, % | 31.4 | 26.2 | -------------------------------------------------------------------------------- | Gearing, % | 108.6 | 98.4 | -------------------------------------------------------------------------------- | Interest-bearing net debt, EUR million | 324.7 | 336.4 | -------------------------------------------------------------------------------- | Gross investments, EUR million | | | -------------------------------------------------------------------------------- | (incl. leasing purchases) | 41.5 | 60.2 | -------------------------------------------------------------------------------- | Order book, EUR mill. | 958.4 | 1,064.5 | -------------------------------------------------------------------------------- | - of which foreign orders, EUR mill. | | | -------------------------------------------------------------------------------- | Average number of employees | 206.8 | 263.1 | -------------------------------------------------------------------------------- | Employees at end of period | 8,626 | 9,776 | -------------------------------------------------------------------------------- | Net sales, EUR mill. | 7,759 | 8,910 | -------------------------------------------------------------------------------- | - of which operations abroad, EUR mill. | 1,964.4 | 2,481.8 | -------------------------------------------------------------------------------- | % of net sales | | | -------------------------------------------------------------------------------- | Return on equity, % | 527.1 | 676.7 | -------------------------------------------------------------------------------- | Return on investment, % | 26.8 | 27.3 | -------------------------------------------------------------------------------- 9) SHARE-SPECIFIC INDICATORS -------------------------------------------------------------------------------- | | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Earnings per share, EUR | -1.53 | 3.28 | -------------------------------------------------------------------------------- | Equity per share, EUR | 16.18 | 18.45 | -------------------------------------------------------------------------------- | Dividend per share, EUR | 0.00*) | 0.90 | -------------------------------------------------------------------------------- | Dividend to earnings ratio, % | 0.0 | 27.4 | -------------------------------------------------------------------------------- | Market capitalisation, EUR mill. | | | -------------------------------------------------------------------------------- | Share price at end of period, EUR | 411.9 | 222.1 | -------------------------------------------------------------------------------- | Trading volume during period, | 24.20 | 13.05 | -------------------------------------------------------------------------------- | 1,000 shares | 1,918 | 3,185 | -------------------------------------------------------------------------------- | Number of issued shares, 1,000 shares | 17,021 | 17,021 | -------------------------------------------------------------------------------- *) Hallituksen esitys yhtiökokoukselle 10) TANGIBLE ASSETS -------------------------------------------------------------------------------- | EUR mill. | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Acquisition cost at beginning of accounting | 444.8 | 411.5 | | period | | | -------------------------------------------------------------------------------- | Translation difference | 5.1 | -6.6 | -------------------------------------------------------------------------------- | Increases | 35.5 | 56.6 | -------------------------------------------------------------------------------- | Increases from acquired businesses | 3.9 | 2.3 | -------------------------------------------------------------------------------- | Decreases | -30.8 | -18.8 | -------------------------------------------------------------------------------- | Transfers between items | -0.1 | -0.3 | -------------------------------------------------------------------------------- | Accumulated depreciation | -273.7 | -257.8 | -------------------------------------------------------------------------------- | Carrying value at the end of accounting period | 184.6 | 187.0 | -------------------------------------------------------------------------------- 11) ACQUIRED AND DIVESTED BUSINESSES ACQUIRED BUSINESSES Description of acquired companies, businesses and shareholdings The business operations of EH-Tekno Oy, a company specialised in urban environment construction, were acquired on 1.1.2009. The company's business is metal and steel construction works as well as the design, construction and contracting of sports and outdoor areas. 100% of Lødingen Stenindustri AS was acquired on 1.9.2009. The company's business is stone quarrying and crushing. 100% of OÜ Magistraali was acquired on 16.10.2009. The company's business is asphalt production, road construction repair and maintenance, and road markings. Aggregated figures for the acquired businesses -------------------------------------------------------------------------------- | | Carrying | Fair values | | | amounts | recognised | -------------------------------------------------------------------------------- | | before merging | after merging | -------------------------------------------------------------------------------- | EUR mill. | 31.12.2009 | 31.12.2009 | -------------------------------------------------------------------------------- | Tangible and intangible assets | 1.4 | 2.7 | -------------------------------------------------------------------------------- | Inventories | 0.5 | 0.5 | -------------------------------------------------------------------------------- | Trade and other receivables | 0.3 | 0.3 | -------------------------------------------------------------------------------- | Cash and cash equivalents | 0.3 | 0.3 | -------------------------------------------------------------------------------- | Assets | 2.5 | 3.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deferred tax liabilities | | 0.4 | -------------------------------------------------------------------------------- | Interest-bearing liabilities | 0.5 | 0.5 | -------------------------------------------------------------------------------- | Other liabilities | 0.7 | 0.7 | -------------------------------------------------------------------------------- | Liabilities total | 1.2 | 1.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net assets | 1.3 | 2.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Acquisition cost, total | 3.2 | 3.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill, total | | 0.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Transaction price paid in cash | | 3.2 | -------------------------------------------------------------------------------- | Cash funds of acquired subsidiary | | -0.3 | -------------------------------------------------------------------------------- | Cash flow effect | | 2.9 | -------------------------------------------------------------------------------- The full-year net sales of the acquired businesses in 2009 was approx. EUR 1.3 million. The effect of the acquired businesses on the Group's operating profit for the accounting period was approx. EUR -0,3 million. DIVESTED BUSINESSES At the end of the accounting period the Group did not have any businesses classified as being held-for-sale under IFRS 5. There were no discontinued operations in the Group during the accounting period. 12) RELATED-PARTY TRANSACTIONS -------------------------------------------------------------------------------- | EUR mill. | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Sales of goods and services | | | -------------------------------------------------------------------------------- | To affiliates | 0.5 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Purchases of goods and services | | | -------------------------------------------------------------------------------- | From affiliates | 6.4 | 4.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Trade receivables | | | -------------------------------------------------------------------------------- | From affiliates | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Accounts payable | | | -------------------------------------------------------------------------------- | To affiliates | 0.0 | 0.0 | -------------------------------------------------------------------------------- 13) GUARANTEES AND CONTINGENT LIABILITIES -------------------------------------------------------------------------------- | EUR mill. | 12/2009 | 12/2008 | -------------------------------------------------------------------------------- | Securities for own commitments | | | -------------------------------------------------------------------------------- | Property mortgages | 80.0 | 1.5 | -------------------------------------------------------------------------------- | Business mortgages | 1,221.3 | 40.6 | -------------------------------------------------------------------------------- | Bonds pledged as security | 0.6 | 0.3 | -------------------------------------------------------------------------------- | Deposits | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Total | 1,302.0 | 42.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | | | -------------------------------------------------------------------------------- | On behalf of affiliated companies | 0.0 | 49.1 | -------------------------------------------------------------------------------- | On behalf of others | 34.7 | 19.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minimum lease payments of irrevocable lease | | | | agreements | | | -------------------------------------------------------------------------------- | One year or less | | | -------------------------------------------------------------------------------- | Over one year but no more | 11.1 | 9.9 | -------------------------------------------------------------------------------- | than five years | | | -------------------------------------------------------------------------------- | Over five years | 24.9 | 26.6 | -------------------------------------------------------------------------------- | Total | 20.7 | 18.9 | -------------------------------------------------------------------------------- | | 56.7 | 55.4 | -------------------------------------------------------------------------------- | Purchase commitments of investments | | | -------------------------------------------------------------------------------- | | 11.1 | 13.2 | -------------------------------------------------------------------------------- | Derivative contracts | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Forward foreign exchange contracts | | | -------------------------------------------------------------------------------- | Nominal value | | | -------------------------------------------------------------------------------- | Fair value | 36.6 | 81.2 | -------------------------------------------------------------------------------- | | -1.7 | 5.1 | -------------------------------------------------------------------------------- | Interest rate options, calls purchased | | | -------------------------------------------------------------------------------- | Nominal value | | | -------------------------------------------------------------------------------- | Fair value | 0.0 | 1.4 | -------------------------------------------------------------------------------- | | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Interest rate options, puts written | | | -------------------------------------------------------------------------------- | Nominal value | | | -------------------------------------------------------------------------------- | Fair value | 0.0 | 1.4 | -------------------------------------------------------------------------------- | | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Interest rate swap contracts | | | -------------------------------------------------------------------------------- | Nominal value | | | -------------------------------------------------------------------------------- | Fair value | 59.6 | 71.9 | -------------------------------------------------------------------------------- | Guarantees | -3.2 | -2.7 | -------------------------------------------------------------------------------- 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. 14) LEGAL PROCEEDINGS On 29 September 2009 the Supreme Administrative Court (SAC) ordered a number of Finnish asphalt industry companies to pay an infringement fine of EUR 82.55 million, of which Lemminkäinen's share was EUR 68 million. The decision concluded the Finnish Competition Authority's claim made in 2004 for the imposition of a fine concerning violations of the Act on Competition Restrictions on seven companies operating in the asphalt industry during the period 1994-2002. The Finnish Competition Authority initially sought that an aggregate competition infringement fine of EUR 97 million should be imposed on the asphalt companies and the Finnish Asphalt Association, of which Lemminkäinen was to pay EUR 68 million. The Market Court dismissed the Competition Authority's motion for the most part and in December 2007 ordered the asphalt companies to pay an infringement fine of EUR 19.4 million, of which Lemminkäinen was to pay EUR 14 million. The SAC approved the infringement fine proposed by the Finnish Competition Authority in its entirety. The difference between the infringement fine of EUR 68 million ordered by the SAC and the infringement fine of EUR 14 million ordered by the Market Court, i.e. EUR 54 million, was expensed in the third quarter of 2009. The infringement fine of EUR 14 million ordered by the Market Court was expensed in the fourth quarter of 2007. To date, 21 municipalities and the Finnish Road Administration have brought actions for the recovery of damages from Lemminkäinen and other asphalt companies in the District Court of Helsinki. The claimants contend that restrictions of competition have caused them damages. The Finnish Road Administration has claimed, in connection with work carried out for the Finnish State, at most EUR 10.5 million from Lemminkäinen and at most EUR 5.6 million jointly and severally with other asphalt companies. The claims presented in the statements of claim differ from each other as regards their amounts and grounds. The claimants have reserved the right to alter, modify or extend their claims, but most of the claimants have not yet filed their finalised statements of claim with the District Court. The decision rendered by the SAC as it stands does not mean that Lemminkäinen or the other asphalt industry companies actually caused the parties ordering asphalt works any damages. The SAC's decision does not concern the individual contracts that the claimants are citing in support of their claims. Neither does the decision concern the pricing of individual contracts. Lemminkäinen will examine the claims for damages and consider each claim separately. The Company's initial position is that the claims are without foundation. To the extent that the claimants eventually decide in their specified statements of claim to pursue their legal actions against Lemminkäinen, they will be considered separately before the District Court of Helsinki and heard in the order determined by the court. No provision for future expense has been made in respect of the statements of claims submitted so far to the district court by the municipalities and the Finnish Road Administration. It is likely that district court proceedings will continue into 2011.