Lemminkäinen - Interim report (Q1 and Q3)

Lemminkäinen Interim Report 1 January - 30 September 2017

LEMMINKÄINEN CORPORATION      STOCK EXCHANGE RELEASE 26 OCTOBER 2017 AT 8:00
A.M.

LEMMINKÄINEN INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2017

July‒September 2017 (7‒9/2016)

  · Order inflow was EUR 362.2 million (351.4).
  · Order book at the end of the period amounted to EUR 1,454.8 million
    (1,406.6).
  · Net sales totalled EUR 625.8 million (531.6).
  · Operating profit amounted to EUR 48.7 million (42.8), or 7.8% (8.0) of
    net sales. The operating profit includes EUR 1.0 million transaction
    costs related to the planned combination of Lemminkäinen and YIT.
  · Adjusted operating profit 1) amounted to EUR 47.5 million (42.8), or
    7.6 % (8.1) of net sales.
  · Profit for the period was EUR 36.3 million (30.7).
  · Earnings per share were EUR 1.54 (1.27).
  · Cash flow from operating activities totalled EUR 51.6 million (86.0).
  · Equity ratio was 36.7% (34.3) and gearing 31.6% (23.7) at the end of
    the review period.
  · Interest-bearing net debt at the end of the review period was EUR 104.5
    million (82.0).
  · On 12 September 2017, the Extraordinary General Meeting of Lemminkäinen
    resolved on the merger of Lemminkäinen into YIT Corporation in
    accordance with the merger plan and approved the merger plan.

January‒September 2017 (1‒9/2016)

  · Order inflow was EUR 1,212.5 million (1,134.7).
  · Net sales totalled EUR 1,332.1 million (1,205.4).
  · Operating profit amounted to EUR 31.7 million (32.6), or 2.4% (2.7)
    of net sales. The operating profit includesa EUR 3.4 million
    compensation paid by Lemminkäinen related to the Helsinki Court of
    Appeal’s decision regarding breach of the Finnish environmental
    protection law and EUR 2.8 million transaction costs related to the
    planned combination of Lemminkäinen and YIT.
  · Adjusted operating profit 1) amounted to EUR 35.8 million (32.8), or
    2.7 % (2.7) of net sales.
  · Profit for the period was EUR 15.3 million (15.1).
  · Earnings per share were EUR 0.58 (0.44).
  · Cash flow from operating activities totalled EUR 6.8 million (93.2).

Profit guidance for 2017

Lemminkäinen updated its profit guidance for 2017 on 12 September 2017.
Lemminkäinen estimates that its net sales in 2017 will grow from 2016 (EUR
1,682.7 million). The adjusted operating profit in 2017 is expected to improve
from the adjusted operating profit in 2016 (EUR 45.1 million).1)

1) Operating profit is adjusted by material items affecting comparability
outside ordinary course of business such as transaction costs related to the
planned combination as well as costs, compensations and reimbursements related
to the court proceedings and write-downs related to non-core businesses.

+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Key figures, IFRS        |  | 7-9/| 7-9/|Change|   1-9/|   1-9/|Change|  1-12/|
|                         |  | 2017| 2016|      |   2017|   2016|      |   2016|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Net sales                |M€|625.8|531.6|  94.2|1,332.1|1,205.4| 126.7|1,682.7|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Paving                |M€|276.4|268.2|   8.2|  495.2|  498.5|  -3.3|  648.5|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Infra projects        |M€|138.5|126.7|  11.8|  340.2|  308.3|  31.9|  426.2|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Building construction,|M€|188.0|131.1|  56.9|  457.6|  385.1|  72.5|  581.2|
|   Finland               |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Russian operations    |M€| 31.9| 21.4|  10.5|   63.2|   39.3|  23.9|   54.5|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Other operations and  |M€| -9.0|-15.7|   6.7|  -24.1|  -25.8|   1.7|  -27.7|
|   Group eliminations    |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Operating profit         |M€| 48.7| 42.8|   5.9|   31.7|   32.6|  -0.9|   67.6|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Paving                |M€| 24.5| 30.6|  -6.1|    8.3|   20.9| -12.6|   20.8|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Infra projects        |M€|  4.6|  7.3|  -2.7|    2.8|    7.6|  -4.8|   12.5|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Building construction,|M€| 16.7|  3.5|  13.2|   25.2|    6.5|  18.7|   17.2|
|   Finland               |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Russian operations    |M€|  1.3|  1.8|  -0.5|    0.2|    0.6|  -0.4|   -3.8|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Other operations      |M€|  1.5| -0.5|   2.0|   -4.8|   -3.0|  -1.8|   20.9|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Operating margin         |% |  7.8|  8.0|      |    2.4|    2.7|      |    4.0|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Paving                |% |  8.9| 11.4|      |    1.7|    4.2|      |    3.2|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Infra projects        |% |  3.3|  5.7|      |    0.8|    2.5|      |    2.9|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Building construction,|% |  8.9|  2.7|      |    5.5|    1.7|      |    3.0|
|   Finland               |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|   Russian operations    |% |  4.2|  8.5|      |    0.4|    1.5|      |   -7.0|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Pre-tax profit           |M€| 45.0| 37.9|   7.1|   19.6|   19.0|   0.6|   49.2|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Profit for the period    |M€| 36.3| 30.7|   5.6|   15.3|   15.1|   0.2|   38.0|
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Earnings per share       |€ | 1.54| 1.27|  0.27|   0.58|   0.44|  0.14|   1.27|
|for the period, basic    |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Earnings per share       |€ | 1.53| 1.27|  0.26|   0.58|   0.44|  0.14|   1.26|
|for the period, diluted  |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+
|Cash flow from operating |M€|51.6 | 86.0| -34.4|    6.8|   93.2| -86.4|  131.7|
|activities               |  |     |     |      |       |       |      |       |
+-------------------------+--+-----+-----+------+-------+-------+------+-------+

+--------------------+--+-------+-------+--------+-------+--------+-------+
|Key figures, IFRS   |  | 30 Sep| 30 Sep|Change  |30 June|Change  | 31 Dec|
|                    |  |  2017 |  2016 | 9/17 vs|  2017 | 9/17 vs|  2016 |
|                    |  |       |       |   9/16 |       |   6/17 |       |
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Order book          |M€|1,454.8|1,406.6|    48.2|1,647.4|  -192.6|1,265.2|
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Operating capital   |M€|  404.5|  394.6|     9.9|  420.6|   -16.1|  388.2|
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Balance sheet total |M€|1,037.0|1,156.7|  -119.7|1,018.0|    19.0|  968.0|
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Interest-bearing net|M€|  104.5|   82.0|    22.5|  156.8|   -52.3|   81.1|
|debt                |  |       |       |        |       |        |       |
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Equity ratio1)      | %|   36.7|   34.3|        |   34.7|        |   39.5|
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Gearing2)           | %|   31.6|   23.7|        |   53.3|        |   24.3|
+--------------------+--+-------+-------+--------+-------+--------+-------+
|Return on capital   | %|   12.4|    8.3|        |   11.0|        |   11.3|
|employed, rolling 12|  |       |       |        |       |        |       |
|months              |  |       |       |        |       |        |       |
+--------------------+--+-------+-------+--------+-------+--------+-------+

1) Equity ratio, if hybrid bonds were treated as debt: 9/2017: 32.9%, 9/2016
27.4% and 12/2016: 35.4%.

2) Gearing, if hybrid bonds were treated as debt: 9/2017: 47.2%, 9/2016 54.6%
and 12/2016: 38.8%.

President and CEO Casimir Lindholm:

“In the third quarter, our net sales and operating profit grew year on year,
driven by the good performance of the Building Construction, Finland segment,”
says Casimir Lindholm, President and CEO. “In Infra projects, lower operating
profit was mainly due to the weaker margins in individual projects in Finland
and the Baltic countries. In Russian operations, our order book is on a
satisfactory level, but reaching our financial targets after the recent strategy
change will still take some time. In Paving, despite the good performance in
Finland, the segment suffered from poor profitability in Scandinavia caused by
intense price competition as well as our weak operative performance.”

“Our financial position improved year-on-year. Our interest-bearing debt is now
less than EUR 200 million. Our equity ratio is 32.9% and our gearing is 47.2%,
if hybrid bonds were treated as debt.”

“Our order book is relatively strong, and after the reporting period we signed a
new agreement with Stockholm Vatten AB worth approximately EUR 30 million for
the rock engineering work in Henriksdal wastewater treatment plant in Stockholm,
Sweden. The market outlook in our main market area remains positive, which
should support our growth targets.”

“On 12 September, the planned merger of Lemminkäinen and YIT took an important
step forward, as the Extraordinary General Meetings of Lemminkäinen and YIT
approved the plan to combine the two companies. The completion of the merger is
still subject to, inter alia, merger control approvals from competition
authorities. We have started to plan the integration together with YIT.”

Market outlook

In Finland, the total volume of construction is expected to grow in 2017.
Residential construction overall is estimated to remain at a good level,
although investor demand is expected to decline somewhat from the high levels
witnessed in 2016. Demand for apartments will still be focused on small units in
urban growth centres. Non-residential construction is estimated to remain
stable, due to individual major projects and public sector works. Renovation is
expected to grow moderately due to increasing urbanisation and public sector
works.

Infrastructure construction is expected to grow approximately 2% in 2017. The
Government's decisions regarding transport projects in the General Government
Fiscal Plan as well as major cities’ investments in infrastructure improve the
outlook for both paving and infra projects. The state's planned investments in
basic road maintenance are expected to keep demand stable for paving in 2017.
Demand for infra projects is maintained by complex projects in urban growth
centres and industrial investments but the competition is intense.

In Norway and Sweden, infrastructure construction is boosted by multi-year,
state-funded traffic infrastructure development programmes. In both countries,
infrastructure construction is expected to grow in 2017. Large-scale road and
railway projects are ongoing or planned near urban growth centres in Sweden and
Norway, which will increase demand for infra projects and paving. In addition,
especially Norway is investing in the development and renewal of energy
production.

In Denmark, demand for paving is expected to decline as public investments in
road infrastructure are decreasing.

In Russia, economic growth is at a low level. The fluctuations in the price of
oil are reflected in the currency exchange rate. In negotiated contracting in
building construction, price competition is high but the reliability of the
builder has become a competitive advantage. Construction and repair projects on
major roads are expected to maintain demand for paving.

In the Baltic countries, the volume of infrastructure construction has started
to grow.

Briefing

A Finnish-language briefing for analysts and the media will be held at 12:00
noon (EET) on Thursday 26 October 2017 at Lemminkäinen’s head office. The street
address is Salmisaarenaukio 2, Helsinki, Finland. Lemminkäinen's President and
CEO Casimir Lindholm will present the Interim report. The presentation material
can be found in Finnish and English at the company’s website,
www.lemminkainen.com/investors.

Financial reporting in 2017

In 2017, Lemminkäinen’s financial reports are published as follows:

9 February 2017  Financial statements bulletin 2016
Week 9           Annual report 2016
27 April 2017    Interim report 1 Jan – 31 March 2017
27 July 2017     Half year financial report 1 Jan – 30 June 2017
26 October 2017  Interim report 1 Jan – 30 Sep 2017

LEMMINKÄINEN CORPORATION
Corporate Communications

Additional information:
Casimir Lindholm, President and CEO, tel. +358 2071 53304
Ilkka Salonen, CFO, tel. +358 2071 53304

DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media
www.lemminkainen.com

Lemminkäinen is an expert in complex infrastructure construction and building
construction in Northern Europe and one of the largest paving companies in its
market. Together with our customers and 4,700 professionals we employ, we build
a sustainable society. In 2016, our net sales were EUR 1.7 billion. Lemminkäinen
Corporation’s share is quoted on Nasdaq Helsinki Ltd. www.lemminkainen.com

Viðhengi:

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