Earnings improve at Lemminkäinen

By Sandy Guthrie03 August 2012

An operating loss for the first half of the year was recorded at Finnish contractor Lemminkäinen, although the company said its earnings in the period improved on the previous year when non-recurring items were taken out.

And the company claimed to have seen a strong performance in infrastructure construction in Finland.

Its net sales in the January to June period were up 6% at €915.0 million, compared to €864.5 million a year ago. The order book grew by 11% to €1,931.2 million (€1,734.8 million in 2011) at the end of the period.

While there was a €9.8 million operating loss, compared to a loss of €7.2 million last year, the company said the operating profit for the period included negative goodwill of €8.1 million from an acquisition.

Pre-tax losses amounted to €18.1 million (a loss of €13.8 million in 2011), but this too included the negative goodwill of €8.1 million.

In the April to June 2012 period, net sales were up 7% and amounted to €587.8 million compared to €548.6 million in the corresponding period of 2011.

Lemminkäinen president & CEO Timo Kohtamäki said, "Lemminkäinen's earnings in the first half of the year improved on the previous year, when non-recurring items booked in the comparison period are not recognised."

He said, "All of our business operations in Finland picked up the pace. In particular, Infrastructure Construction and the paving business performed well. Infrastructure Construction's earnings improvement was driven by our new operating model, which has boosted the efficiency of our operations and improved customer service. In Building Construction and Technical Building Services, our profitability improved."

The company's earnings performance in Norway did not meet its expectations, he said.

"Our paving contracts focused mainly on northern Norway, where the work season starts later in the spring. The impact of seasonal variations on our earnings is now even more evident in our operations as our business volume in Norway has grown. That said, competitive contracting in building construction improved significantly in Russia."

Mr Kohtamäki said that Lemminkäinen's order book had become even stronger, with better margins, while the group's balance sheet was now stronger.

Concrete business

Last month, Lemminkäinen decided to sell its concrete business to Rudus for €55 million. Lemminkäinen will see capital gains of €20 million on the divestment, which still requires the approval of the Finnish competition authorities - expected to be granted in the third quarter.

Lemminkäinen said it would focus on its strategic key growth areas, which are infrastructure construction in the Nordic countries and residential construction in St Petersburg, Russia. Achieving substantial growth in the concrete business would have required sizeable investments, it added.

The company estimated that its 2012 net sales would remain at the same level as in 2011, and that its pre-tax profit would improve on 2011.

Lemminkäinen said that the total volume of construction in Finland was expected to fall in 2012. The greatest downswing would be seen in the construction of new housing, it said. It felt the market for infrastructure construction was expected to remain stable in all of the Nordic countries. Demand for infrastructure construction in Norway and Denmark would be increased by large-scale road projects and investments in energy production.

"There is still a great need for new housing in St Petersburg, Russia," the company said. "Residential construction in Russia is supported by lower interest rates and the increased availability of consumer mortgages."

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