Strategy 2010–2013

Our main targets in the strategy period 2010–2013 were the development of business operations, the strengthening of our financial position, the clarification of our company structure and the standardisation of operating methods in order to form one united Lemminkäinen. Through these measures, we sought a return on investment exceeding 18 per cent, an equity ratio of at least 35 per cent and an annual net sales growth at an average of 10 per cent over the long term.

Background to the strategy period

The recession in the construction industry in 2008 and 2009 changed the Finnish market permanently. For example, commercial construction, the former cornerstone of Lemminkäinen’s building construction, has not returned to its pre-recession level. The economic situation of municipalities became more unstable, which decreased investments in construction.

Until 2009, Lemminkäinen was a holding company consisting of dozens of independent subsidiaries. This structure supported our growth during the economic boom that continued for an exceptionally long time. The financial crisis showed that our previous structure and way of operating were no longer competitive. Lemminkäinen’s development required the clarification of our company structure and more standardised operating methods.

Main financial targets for the strategy period 2010–2013

Target: net sales growth at an average of 10 per cent

  • During the strategy period, the total volume of construction in Finland developed more weakly than what we estimated in 2009.
  • Towards the end of the strategy period, we reduced the amount of competitive contracting in building construction.
  • We established prerequisites for net sales growth in Russia by acquiring plots in central locations for residential development and construction in St Petersburg. The permit process slowed construction activities.
  • We strengthened our infrastructure construction operations in Norway through corporate acquisitions. We returned to the Swedish paving market.
  • We divested our roofing and concrete business operations.

Target: return on investment more than 18 per cent

  • A return on investment of 18 per cent would have required an operating margin of approximately 5 per cent.
  • Our profitability was weakened by, for example, investments related to the establishment of a united Group, challenges in international project management due to fast growth and significant one-offs, the largest of them being the damages related to the asphalt cartel in the autumn 2013.
  • In order to lighten our cost structure, we launched two efficiency programmes:
    • The targets of the 2011 programme included savings of approximately EUR 30 million by improving the efficiency of procurement and the lightening of the cost structure by approximately EUR 20 million starting from 2014.
    • The target of the 2013 programme was savings of approximately EUR 30 million by the end of 2014.
  • The aim was to shift the focus of business operations to more profitable segments.

NET SALES, EUR million and CAGR, %

09 10 11 12 13
Net sales 1,965.5 1,829.6 2,183.9 2,267.6 2,218.2
CAGR: 3.1% 1,965.5 2,028.675 2,091.85 2,155.025 2,218.2


09 10 11 12 13
Return on investment 5.5 7.0 10.8 10.8 -9.4

Target: equity ratio more than 35 per cent

  • Our equity ratio developed favourably during the strategy period. During the last year of the strategy period, it was impaired by failures in project management and significant one-offs.
  • In spring 2012, a EUR 70 million domestic hybrid bond was issued.
  • The divestment of roof and concrete business operations strengthened our equity ratio.
  • We improved our working capital management.

Target: dividend distribution 40 per cent of net profit

  • For 2013, the Board of Directors proposes to the Annual General Meeting that no dividend be distributed due to the clearly negative result.


09 10 11 12 13
Equity ratio 30.7 35.0 30.8 37.2 27.3


09 10 11 12 13*
Earnings per share -1.54 0.02 1.77 2.04 -5.06
Dividend per share 0.00 0.50 0.50 0.60 0.00

* Board of Directors' proposal to the AGM


Development of business operations

During the strategy period, we sought growth in areas in which we had an opportunity to gain a significant position or which required special expertise. In addition, we wanted to strengthen our position in our core business operations. Consequently, we decided to divest business operations in which we had no prerequisites for profitable growth.

At the beginning of the strategy period, we defined infrastructure construction in Scandinavia, residential construction in Russia as well as renovation and technical building services as growth areas. Halfway through the strategy period, we further specified our strategy and defined residential development and construction and the upkeep and maintenance of technical building systems in Finland as new focus areas, alongside infrastructure construction in Scandinavia and residential construction in Russia.

We divested our roof and concrete business operations and much of our telecommunications network construction. The development of these operations would have required us to make extensive investments.

Infrastructure construction in Scandinavia

The States of Sweden and Norway have published extensive infrastructure development programmes. During the strategy period, we aimed to strengthen our position in the Scandinavian market, in part through acquisitions and in part by utilising the resources in Finland.

During the entire strategy period, our net sales in the Scandinavian infrastructure market increased by nearly EUR 300 million. A significant portion of this growth came from the corporate acquisition made in 2010 in which we acquired Mesta Industri, a company operating in the paving and mineral aggregates sector, from the State of Norway. The integration of Mesta into Lemminkäinen has been more demanding than we originally estimated. Regardless of efficiency measures, we have not yet been able to turn these operations profitable.

We have been granted many special infrastructure projects by the mining and energy industry, for example. In the future, we aim to grow into one of the leading providers of demanding infrastructure solutions in Northern Europe.

Infrastructure construction in Finland

Public investments in construction and maintenance of roads in Finland decreased during the strategy period. Therefore, we actively sought new business opportunities from special infrastructure projects in which we have strong competence. We won several major underground infrastructure construction projects in urban growth centres. For example, in the Helsinki metropolitan area, Tampere and Oulu, we built underground parking facilities and other premises such as technical spaces and service tunnels.

We are involved in the construction of the West Metro (the Metro line between Helsinki and Espoo) in several projects from excavation to construction of stations. In addition, we participated in the construction of the Kehärata railway line in two different projects. During the strategy period, we were also involved in several mining projects in Finland and northern Sweden.

In the paving business, we improved our operational efficiency and simplified our operating model. In spite of tightened competition, we retained our position as the market leader.

Residential construction in Russia

Our aim was to create prerequisites to start the residential development and construction of approximately 1,000 apartments each year in St Petersburg. During the strategy period, we acquired plots in central locations in the centre of the city. Business development has been more slow than estimated, as the permit process postponed the start of construction and the sales of apartments. Nevertheless, we started the residential development and construction of nearly 800 apartments in St Petersburg in 2013.

In the coming strategy period, we aim to extend the residential development and construction business from St Petersburg to other selected urban growth centres. We will also explore opportunities to increase our infrastructure construction offering in Russia.

Building construction in Finland

In order to improve our profitability, towards the end of the strategy period we focused especially in increasing the share of residential development and construction. Our aim was to increase the share of residential development and construction to more than 50 per cent of the net sales of building construction in Finland. In 2013, the share of residential development and construction was 40 per cent.

We reduced the amount of competitive contracting. In renovation, we were increasingly concentrating on demanding projects mainly in the Helsinki metropolitan area.

In the coming strategy period, we will continue to invest in residential development and construction. Instead of the former aim of nationwide coverage, we will focus on selected urban growth centres.

Technical building services in Finland

The smaller volume of building construction decreased the demand for contracting in technical building services. We strengthened our upkeep and maintenance services alongside contracting. At the end of the strategy period, the share of the upkeep and maintenance services was 30 per cent of the net sales of the technical building services business.

A united Lemminkäinen

In the strategy period, we harmonised our operations, clarified our Group structure and gathered our operations under the Lemminkäinen brand. The aim was to improve our customer service and operational flexibility and efficiency.

We standardised our business processes and information systems and improved customer relationship management and the customer experience. In addition, we developed support services and procurement, for example.

Since the beginning of the strategy period, sustainability was an essential part of Lemminkäinen’s development. We created reporting and monitoring channels for the sustainability themes that are the most significant for our operations, such as the Code of Conduct, occupational safety and energy efficiency.

Our new strategy shifts the focus of the development of a united Lemminkäinen to outside Finland.