Financial performance by business segment
The net sales grew in building construction in Russia and Sweden and in infrastructure construction in Latvia and Lithuania. Of the net sales, 28% were generated in Sweden, 28% in Norway, 18% in Russia, 16% in the Baltic countries, 9% in Denmark, and 1% in other countries. By business operation, 73% were generated by infrastructure construction, 23% by building construction, and 4% by technical building services and project exports.
The operating profit of International operations was clearly negative, EUR -22.0 million (15.0). The long winter delayed the start of the paving season and increased costs in all operating countries. The result was also impaired by margin decreases from major projects in Norway, Sweden and Russia as well as costs related to the divestment of parts of telecommunications network business and efficiency improvement measures in Norway. In Norway, Lemminkäinen reduced its site network and closed 11 unprofitable sites or business units. The Norwegian management structure and model were also changed.
In Russia, Lemminkäinen’s residential development and construction picked up speed in 2013. In the summer, the company started the construction of a 757-apartment residential project in the centre of St Petersburg, estimated to be completed in phases by the end of 2015. The first phase (approximately 222 apartments) of another, approximately 450-apartment residential project, was completed. At the moment, Lemminkäinen has 946 residential units for sale in the centre of St Petersburg. In Q3 Lemminkäinen launched the planning and construction (contracting) of a 46-house residential area in the city of Istra in the Moscow region. The value of the contract is around EUR 100 million.
The amount of capital tied up in building construction in Russia at the end of the financial period was EUR 79.4 million (61.9).
The segment’s order book at the end of 2013 was clearly larger than in the previous year, amounting to EUR 729.9 million (574.6). The largest increase took place in building construction in Sweden and Russia.
Building construction’s net sales fell by 13%, and the operating profit was EUR 5.0 million (16.9). The operating profit includes write-downs worth EUR 14.1 million mainly related to commercial properties. Excluding the write-downs, the operating profit improved and was EUR 19.1 million (16.9). During the first half of the year, housing sales were boosted by changes in taxation. Housing sales remained active during the second half of the year, too, especially in urban growth centres, and new units were started at the same pace as in the previous year. Due to the uncertain market situation, Lemminkäinen increased the reservation levels required for starting the construction of new units and improved the sales efficiency of completed units. The number of completed housing units for sale at the end of the year decreased from last year´s level. In competitive contracting the company has deliberately reduced the volume due to unsatisfactory margin levels.
At the end of the financial period, Building construction’s order book was EUR 544.3 million (526.9). The order book increased in Lemminkäinen’s residential development and construction, whereas the order book in contracting was smaller than before.
In Infrastructure construction, net sales remained on par with last year but operating profit declined. The operating profit includes write-downs worth EUR 3 million related to mineral aggregates reserves. Losses caused by the delayed paving season could not be fully offset, despite the active late autumn. The demand for mineral aggregates weakened as building construction activity declined. In earthworks and rock engineering, too, the result was slightly weaker than in the previous year. The efficiency measures in Infrastructure construction sought to decrease the impact of seasonality and optimise resources.
At the end of the year, the order book was all-time-high, EUR 459.0 million (234.7). The order book was increased by the demanding specialised infrastructure construction work.
Technical building services
In Technical building services, 2013 was a challenging year. The segment’s result and volume of business was burdened by delayed and cancelled project start-ups and the clearly weakened market situation. The decline in building construction had a significant impact on technical building services contracting where the overall profitability was still weak. In addition, the costs related to efficiency improvement measures affected the segments' full year result. Demand for upkeep and maintenance services remained good.
The number of new orders received in 2013 declined, especially towards the end of the year. The order book in Technical building services was clearly below the previous year at EUR 88.1 million (107.7).