A challenging year accelerated our turnaround

Dear Lemminkäinen shareholders,

We have a challenging year behind us, during which we managed to achieve a turnaround in our result. We focused on lightening our cost structure, strengthening our balance sheet and increasing our financial flexibility.

In the spring of 2014, we launched the Deliver 2014 cost-saving programme. In the programme, we concentrated on Norway, Russia and the streamlining of our cost structure, securing our result for 2014 in this manner. The programme was successful. In Norway, the result turned to positive, and, in Russia, a good result was achieved — thanks to the Deliver measures and to good housing sales. Unfortunately, the programme also resulted in personnel reductions involving nearly 500 employees. In 2015, we will ensure that the programme is completed and that our lighter cost structure is clearly reflected in our result.

In June 2014, we issued a EUR 100 million five-year bond. In September, we conducted an approximately EUR 30 million rights offering targeted at our shareholders. In addition, we divested our technical building services business in the summer. Thanks to these measures, we strengthened our balance sheet and extended our debt maturity.

The divestment of the technical building services business clarified our business portfolio and enabled us to concentrate on our core businesses: infrastructure construction and building construction. Following the divestment, we revised our strategy. In the short term, we will concentrate on building a solid foundation for future profitable growth by improving our competitiveness, profitability and financial position. We have launched development initiatives to improve our operational efficiency, to develop tendering processes and project management, and to release capital. These initiatives will continue in 2015 and 2016, too. In the long term, we will leverage our strong market position in infrastructure construction in Northern Europe. In building construction, we focus on selected customer segments and regions in Finland and in Russia.

At the beginning of 2015, we renewed our operating model, which supports the advancement of our strategy. Our business operations are organised into four business segments: Paving; Infra projects; Building construction, Finland; and Russian operations. We are concentrating on leveraging the potential of the new operating model: we harmonise our ways of working and share best practices across country borders and business boundaries. We pay attention to risk management as well as the quality of our products and services. We seek operational efficiency in paving, for instance, by increasing wintertime planning, energy-efficient production methods and the utilisation of recycled materials. In all infrastructure business, we invest in optimising our fleet and increasing utilisation rates.

I am pleased to note that our accident frequency rate decreased by 34.3 per cent in 2014, to 6.9 (10.5). In 2015, we will continue occupational safety improvement measures and promote common ways of working in all of our operating countries.

The renewal of our more-than-100-year-old company has only begun, but 2014 showed that we are heading in the right direction. We were forced to make and implement tough decisions, but we begin 2015 from a good starting point. When these efforts are combined with the skills and expertise of Lemminkäinen’s employees, I believe that this year we are an even more competitive player in the market. We want to retain the trust of our customers in the future, too, and generate added value for them through our joint projects. Our target is to improve our operations continuously, which translates to higher quality, better project management and new innovations for our customers.

I would like to thank our personnel for your support and a job well done. I thank our customers for the smooth cooperation in which we will also invest strongly in the future. A thank you also goes to our shareholders who have shown their support and their trust in our turnaround.

President and CEO
Casimir Lindholm

The renewal of our company has only begun, but 2014 showed that we are heading in the right direction.