Lemminkäinen streamlines as profits drop

A slow start to the paving season has dampened first half results for Finnish contractor Lemminkäinen.

The company reported a drop of 6% in net sales year-on-year for January to June 2013 to €828 million and an operating loss of €50.7 million - deeper than the operating loss of €13.9 million it reported the year before.

However, Lemminkäinen reported a small increase in backlog, which stood at €2.1 billion as at June 30, 2013, compared to €1.9 million the year before, fuelled by growth in international operations.

"Lemminkäinen's result for the first half of the year was poor across the group, but the main profitability challenges lie in our international operations," said Timo Kohtamäki, president and CEO.

"The single most significant reason behind the negative result was the delayed start of the season in paving and mineral aggregates by four to 12 weeks in all our operating countries. Our cost structure in the paving business, and above all labour cost, were too heavy for the H1 business volume. In residential development and construction, the number of housing units completed was exceptionally low."

The company launched a €50 million efficiency programme in 2011 focusing on its Finnish operations. It said it would continue to streamline in the future, with the aim of cutting the cost structure by €30 million.

Mr Kohtamäki said the group planned to reduce the number of regional units in Finland and Norway. He said this would lead to a loss of 500 personnel across the group.

Looking forward, Lemminkäinen said it would focus on international markets.

"Scandinavia and Russia have the biggest growth and profitability improvement potential for us. To ensure the successful implementation of the efficiency measures and to speed up profitable growth, we have strengthened the management of our international operations," Mr Kohtamäki said.