Lemminkäinen reviews its strategy for 2016–2019: gradually moving from balance sheet strengthening to improved competitiveness and profitable growth

LEMMINKÄINEN CORPORATION STOCK EXCHANGE RELEASE 30 OCTOBER 2015 AT 8:05 A.M.

Lemminkäinen reviews its strategy for 2016–2019: gradually moving from balance sheet strengthening to improved competitiveness and profitable growth

Lemminkäinen has reviewed its strategy for 2016–2019. The company seeks to continuously improve its performance and increase shareholder value through focus on the balance sheet, more competitive operating models and profitable growth in Infra projects in Northern Europe.

The company estimates that the outlook for Infra projects is good especially in Norway and Sweden where there are long-term programmes extending over governmental election cycles.

In Paving, Lemminkäinen seeks to improve its operational efficiency in all markets through a more streamlined operating model and efficient processes.

In Building construction, Finland; the market outlook has weakened from the previous year. Lemminkäinen continues to focus its operations to urban growth centres.

In Russia, the economic situation remains unstable. In order to maintain its moderate risk level, Lemminkäinen has for the time being decided not to start new development projects in building construction in St Petersburg. Ongoing projects will be carried out as planned. Lemminkäinen continues negotiated contracting in building construction as well as paving operations. In paving, Lemminkäinen seeks growth in special works.

President and CEO Casimir Lindholm comments:

“We have fulfilled the requirements agreed with the financiers in May 2014 related to the strengthening of our balance sheet, which has improved our financial situation significantly. The company’s balance sheet and cash flow have improved and our operating capital has decreased from EUR 690 million to EUR 485 million in the past 18 months”, says Lemminkäinen’s President and CEO Casimir Lindholm.

“We have streamlined our business portfolio which has led to substantial write-downs. Going forward, we will continue to assess our business portfolio.”

“During the coming years, Lemminkäinen’s target is to improve its competitiveness in all business segments and to build a solid foundation to enable profitable growth. We will implement best practices across segments and country borders in order to utilise economies of scale.”

Strengthened balance sheet and improved competitiveness

The company will continue to strengthen its balance sheet structure and to further improve its capital efficiency by focusing investments, by boosting housing sales and releasing capital through improved internal processes and procedures.

In order to react faster to the changes in the market and to better utilise economies of scale, Lemminkäinen will renew the Paving segment‘s operating model. During the strategy period, the paving operations will move from a regional structure towards a more agile, customer and activity-oriented organisation model. Furthermore, the mineral aggregates business will be led as an individual business area. All project related infrastructure businesses, such as earthworks, will be transferred from the Paving segment to the Infra projects segment. All changes will be effective as of 1 January 2016.

The company will publish pro forma figures for 2015 according to the new reporting structure during the first quarter in 2016. The 2015 financial statement will be reported according to the current segment structure.

In building construction in Finland, Lemminkäinen continues to focus its operations to the Helsinki metropolitan area and other urban growth centres. Lemminkäinen aims to maintain a production volume that will enable profitable business and positive cash flow in the Helsinki Metropolitan Area, and areas around Turku, Tampere, Lappeenranta, Kuopio, Oulu, Lappeenranta and Vaasa.

Profitable growth

Urbanisation and investments to the energy sector increase the demand for complex infra projects. By utilising Lemminkäinen’s expertise gained in the Finnish market, the company aims to grow into one of the leading providers of selected infrastructure business areas in Northern Europe. The Infra projects segment seeks growth especially in Sweden and Norway where the market outlook is attractive, as governmental infrastructure development programmes will continue until 2020’s.

Lemminkäinen seeks growth especially in infra projects related to complex transport infrastructure, heavy industry and power plants as well as heavy city infra.

Financial targets

Lemminkäinen makes adjustments to its financial targets. Lemminkäinen aims at a ROCE above 15%, which is equivalent to the present target ROI 18%. In addition, an EBIT margin above 4% is a new target. The equity ratio target above 35% remains unchanged.

Lemminkäinen’s financial targets are:

• ROCE above 15% in 2019
• EBIT margin above 4% in 2019
• Equity ratio above 35% during 2016–2019

Lemminkäinen aims at a stable distribution of dividends, with at least 40 per cent of the profit for the financial year distributed to the shareholders.

LEMMINKÄINEN CORPORATION
Corporate Communications

ADDITIONAL INFORMATION:
Casimir Lindholm, President and CEO
Tel. +358 2071 53304
casimir.lindholm@lemminkainen.com

Ilkka Salonen, CFO
Tel. +358 2071 53304
ilkka.salonen@lemminkainen.com

DISTRIBUTION:
NASDAQ OMX Helsinki
Key media
www.lemminkainen.com

Together with our customers we create conditions that make living, working and travelling functional, safe and healthy. We operate in Northern Europe and employ about 5,600 professionals. In 2014, our net sales were about EUR 2.0 billion. Lemminkäinen Corporation's share is quoted on NASDAQ OMX Nordic Exchange Helsinki. www.lemminkainen.com